**Exhibit 10.1**

 

**AMENDED AND RESTATED EMPLOYMENT AGREEMENT**

 

**THIS AMENDED AND RESTATED EMPLOYMENTAGREEMENT** (this “Agreement”) is being made asof this 14th day of May, 2004 between iPARTY CORP., a Delaware corporation (the“Company”) and SAL PERISANO, an individual residing at 288 Huron Avenue,Cambridge, Massachusetts (the  “Executive”).

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**W I T N E S S E T H:**

 

**WHEREAS**,the Company and the Executivepreviously entered into an employment agreement dated as of March 26, 2002(the “Prior Employment Agreement”); and

 

**WHEREAS**,the Company and the Executivedesire to amend and restate the Prior Employment Agreement in its entirety asset forth herein.

 

**NOW, THEREFORE**, in consideration of the mutual premises andagreements contained herein, and intending to be legally bound hereby, theparties hereto agree as follows:

 

# **1.**                                       Term of Employment.

 

## **(a)**                                  Except for earlier termination as provided in Section 11hereof, the Executive’s employment under this Agreement shall be for a three(3) year term (the “Employment Term”) commencing as of April 1,2004.

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## **(b)**                                 On or about September 30, 2006 the Companyshall provide the Executive with written notice regarding whether or not theCompany intends to seek to extend the Employment Term.  A notice which states that the Companyintends to seek to the extend the Employment Term is referred to herein as a “RenewalNotice” and a notice which states that the Company does not intend to seekto extend the Employment Term is referred to herein as a “Non-renewal Notice.”  If the Company delivers a Non-renewalNotice, the period of time from the date of the delivery of the Non-renewalNotice to the expiration of the Employment Term is referred to herein as the “TransitionPeriod.”  If the Company delivers aRenewal Notice to the Executive (i) the Employment Term shall automatically beextended for a period of six (6) months and (ii) the Company and the Executiveshall seek to negotiate the terms of a new, mutually agreeable employmentagreement.  Such six (6) month extensionperiod, if (and only if) applicable, is referred to herein as the “ExtensionPeriod,” and during the Extension Period, if (and only if) applicable, allreferences herein to the Employment Term shall include the Extension Period.

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# **2.**                                       Duties, Responsibilities andPositions.

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## **(a)**                                  During theEmployment Term, the Executive shall serve as the Chief Executive Officer ofthe Company.  In addition, during theEmployment Term, the Company shall use its best efforts to (i) cause theExecutive to be nominated for election to the Board of Directors of the Company(the “Board”) and (ii) subject to a Permitted Change (as defined below)to be appointed as Chairman of the Board. During the Employment Term, the Executive shall perform all duties andaccept all responsibilities incidental to such positions or as may be assignedto him by the Board, or any committee thereof, from time to time and which are

 

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## **normally associated with thepositions of Chief Executive Officer and (subject to a Permitted Change)Chairman of the Board.  All employees ofthe Company shall report to the Executive; provided, however,that the Board or any committee thereof may direct employees of the Company toreport directly to the Board or any committee thereof in connection with anyinternal investigations or reviews commenced by the Board or any committeethereof.  The Executive shall be subjectat all times to the general supervision, orders, advice and direction of theBoard.  The Executive shall alsocooperate fully with the Board and other executive officers of the Company.**

 

## **As used herein, a “PermittedChange” shall mean the appointment of a person reasonably acceptable to theExecutive (which such acceptance shall not be unreasonably withheld or delayed)as Chairman of the Board (i) in connection with any material acquisition,financing or similar transaction which increases the size and scope of theCompany’s business or (ii) in order to comply with general corporate governancepractices then being followed by companies of similar size and scope.**

 

## **(b)**                                 Upon terminationof the Executive’s employment for any reason, the Executive shall immediatelyresign as a member of the Board and resign from any other office or officeswithin the Company and any subsidiary of the Company that the Executive maythen hold.

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## **(c)**                                  During theEmployment Term, the Executive shall devote substantially all his full workingtime, energy and efforts to the business of the Company; provided, however,that the Executive shall be allowed, to the extent that such activities do notmaterially interfere with the performance of his duties and responsibilitieshereunder, to manage his personal and family financial and legal affairs and toserve on civic, not-for-profit and charitable industry boards and advisorycommittees.  The Executive shall only serveon for-profit corporate boards of directors and advisory committees if approvedin advance, in writing, by the Board.

 

## **(d)**                                 The Executiverepresents to the Company that (i) theExecutive has the legal capacity to execute and perform this Agreement and (ii)that he is not currently subject to or bound by any employmentagreement, non-competition covenant, non-disclosure agreement or otheragreement, covenant, understanding or restriction of any nature whatsoeverwhich would prohibit the Executive from executing this Agreement and performingfully his duties and responsibilities hereunder, or which would in any manner,directly or indirectly, materially limit the duties and responsibilities whichit is now reasonably foreseeable may now or in the future be assigned to theExecutive by the Board.

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## **(e)**                                  The Executiveshall at all times comply in all material respects with policies and proceduresadopted by the Company applicable to executives of the Company, includingwithout limitation, procedures and policies regarding conflicts of interest.

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# **3.**                                       Compensation.  For all services rendered by the Executivein any capacity during the Employment Term, including without limitation,services as an officer, director, or member of any committee of the Company, orany subsidiary, affiliate or division thereof, the Executive shall becompensated as follows (subject, in each case, to the provisions of

 

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# **Section 11** below):

 

## **(a)**                                  Base Salary.  During the Employment Term, the Companyshall pay to the Executive a base salary on an annualized basis (the “BaseSalary”) as follows: (i) for the period from April 1, 2004 throughMarch 31, 2005, $275,000;  (ii) forthe period from April 1, 2005 through March 31, 2006, $287,500; and(iii) for the period from April 1, 2006 through March 31, 2007,$300,000.  The term “Base Salary” asused in this Agreement shall refer to Base Salary in effect for the applicableperiod set forth in the immediately preceding sentence.  The Base Salary shall be payable inaccordance with the customary payroll practices of the Company. The Base Salarypaid to the Executive shall at all times be the highest salary paid or payableby the Company to any of its employees.  If, during the Employment Term, the Company consummates any materialacquisitions or similar transactions which increase the size and scope of theCompany’s business, the Compensation Committee of the Board shall convene aspromptly as reasonably practicable for the purpose of discussing whether or notit is appropriate to increase the Executive’s Base Salary; provided, however,that no such increase shall be required.

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## **(b)**                                 Bonus.  In addition to the Base Salary providedherein, the Executive shall be entitled to participate in, and may receiveperformance bonus payments under, such annual bonus plan or plans as theCompensation Committee of the Board may establish from time to time for seniorexecutive officers of the Company.  Anysuch performance bonus or bonuses shall be determined in the sole discretion ofthe Compensation Committee of the Board. Without limiting the generality of theforegoing, such performance bonus or bonuses, if paid, may be paid in stock,stock options, restricted stock, cash, or any combination thereof.

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## **(c)**                                  Benefits.  During the Employment Term, the Executiveshall be entitled to participate in all employee benefit and equity plans andfringe benefits and prerequisites generally provided to senior executives ofthe Company, in each case subject to the eligibility requirements and otherterms and provisions of such plans and programs.  The Company may amend, modify or rescind any employee benefitplan or program and change employee contribution amounts or benefit costswithout notice in its discretion.

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# **4.**                                       Stock Options Matters.  OnMay 6, 2004, the Executive was granted stock options (the “Options”) foran aggregate of 460,000 shares of common stock of the Company, at an exerciseprice of $0.95 per share (the closing price of the common stock on such date),pursuant to the Company’s Amended and Restated 1998 Incentive andNonqualified Stock Option Plan (the “Plan”).  The Options shall vest as follows:  provided the Executive remains continuouslyemployed by the Company through March 31, 2005, options for 153,334 sharesshall vest on March 31, 2005; provided the Executive remains continuouslyemployed by the Company through March 31, 2006, options for an additional153,333 shares shall vest on March 31, 2006; and provided the Executiveremains continuously employed by the Company through March 31, 2007,options for the final 153,333 shares shall vest on March 31, 2007.  The Options shall be subject to the terms ofthe Plan and shall be evidenced by a Stock Option Grant Agreement between theCompany and the Executive.

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# **5.**                                       Expenses; Vacations.  The Executive shall be entitled toreimbursement for reasonable travel and other out-of-pocket expensesnecessarily incurred in the performance of

 

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# **his duties hereunder, uponsubmission and approval of written statements and bills in accordance with thethen regular procedures of the Company. The Executive shall be entitled to four weeks paid vacation per calendaryear, with such vacation to be scheduled and taken in accordance with theCompany’s standard vacation policies. Up to two (2) weeks accrued but unused vacation time may be carriedforward from year to year; provided, however, in no event shallmore than an aggregate of six (6) weeks of unused vacation time be accruedduring the Employment Term.**

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# **6.**                                       Representations and Warrantiesof the Company.  The Companyrepresents and warrants to, and agrees with, the Executive that (i) pursuant tothe Delaware General Corporation Law, the Company’s Certificate ofIncorporation, as amended to date (the “Charter”), provides forindemnification of officers and directors of the Company and that so long asthe Executive serves as an executive officer of the Company, unless required byapplicable law the Charter will not be amended to limit such indemnificationwithout the written consent of the Executive and (ii) the Company maintains anofficers and directors liability insurance policy which insures the Executive(subject to the limitations contained therein) and will maintain such a policyfor so long as the Executive serves as an executive officer of the Company.

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# **7.**                                       Developments.  All developments, including inventions,whether patentable or otherwise, trade secrets, discoveries, improvements,ideas and writings which relate to or may be useful in the business of theCompany, and which the Executive, either by himself or in conjunction with anyother person or persons, has conceived, made, developed, acquired or acquiredknowledge of while engaged in any activity on behalf of or while acting for theCompany during the course of his employment by the Company (the “Developments”),shall, on and after the start of the Employment Term, become the sole andexclusive property of the Company.  TheExecutive hereby assigns, transfers and conveys, and agrees to so assign,transfer and convey to the Company, all of his right, title and interest in andto any and all such Developments and to disclose in writing to the Board, assoon as practicable, all Developments that he believes in his good faith judgmentmay be of material significance to the Company, and to reduce any suchDevelopments to writing at the request of Board if he has not already doneso.  At any time, and from time to time,upon the request and at the expense of the Company, the Executive will executeand deliver any and all instruments, documents and papers, give evidence and doany and all other acts which, in the reasonable opinion of counsel for theCompany, are or may reasonably be necessary or desirable to document suchtransfer or to enable the Company to file and prosecute applications for and toacquire, maintain and enforce any and all patents, trademark registrations orcopyrights under United States or foreign law with respect to any suchDevelopments or to obtain any extension, validation, reissue, continuance orrenewal of any such patent, trademark or copyrights; provided only that anysuch actions requested following termination of employment shall notunreasonably interfere with Executive’s then employment, business or other activities.  The Company will be responsible for thepreparation of any such instruments, documents and papers and for theprosecution of any such proceedings and will reimburse the Executive for allreasonable expenses incurred by him in compliance with the provisions of this Section 7.  The Developments shall not include anyknowledge or information of any kind acquired by or disclosed to the Executivewhile serving in his capacity as a member of the board of directors of anynon-Company entity, in his capacity as a private investor, or in any othercircumstance during which the Executive is not or was not engaged in anyactivity on behalf of or acting for the Company.  Furthermore, nothing herein shall preclude Executive from

 

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# **utilizing Developmentsapplicable to retailing generally (whether from stores, via catalog, viae-commerce or otherwise) following termination of employment, subject always tothe provisions of Section 8 below.**

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# **8.**                                       Non-Competition andNon-Solicitation.

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## **(a)**                                  Non-Competition.  The Executive agrees that theExecutive will not, during the “Restrictive Period”, as defined below, engagein, or otherwise directly or indirectly be employed by, or act as a consultantor lender to, or be a director, officer, employee, owner, co-venturer, memberor partner of, or use or expressly permit the Executive’s name to be used by(collectively an “Engagement With”), any business, entity ororganization which has a primary line of business (i.e. representing more than4.9% of its revenue) involving the sale at retail, whether from storelocations, and/or by or from direct mail, catalogues and/or websites, of partygoods and/or supplies anywhere in the United States (a “Competing Entity”);provided, however, that in each case the provisions of this Section 8(a)will not be deemed breached merely because the Executive owns not more thanfive percent (5.0%) of the outstanding common stock of a Competing Entity, if,at the time of its acquisition by the Executive, such stock is listed on anational securities exchange, is reported on NASDAQ, or is regularly traded inthe over-the-counter market by a member of a national securities exchange; and provided,further, however, that, subject to the provisions of Section 8(b),nothing herein shall prevent the Executive from working for a business segmentor department of a Competing Entity, or a subsidiary, division or other entitythat controls or is controlled by a Competing Entity if (and only if), thebusiness segment or department of the Competing Entity for which the Executiveprovides services, or the subsidiary, division or other entity by which theExecutive has an Engagement With (as the case may be), (1) does not itselfcompete with the Company, and (2) the Executive does not provide any services,advice, assistance and/or guidance to any business segment or department,subsidiary, division, or other entity of the Competing Entity which competeswith the Company.  As used in thisSection the “Restrictive Period” shall be (i) the period theExecutive is employed by the Company and (ii) the period of one (1) year afterthe Executive ceases to be employed by the Company for any reason, or, in thecase of the Executive’s Engagement With any Competing Entity that operatesretail stores which are located in any states where the Company has retailstores on the date of the Executive’s cessation of employment, the period ofeighteen (18) months period after the Executive ceases to be employed by theCompany for any reason.

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## **(b)**                                 Non-Solicitation. During theRestrictive Period, the Executive will not, either directly or indirectly, (i)call on or solicit (for the purpose of diverting business from the Company) anyperson, firm, corporation or other entity who or which at the time of suchtermination was, or within one (1) year prior thereto had been, a customer ofthe Company or (ii) solicit the employment of any person (other than any familymember) who was employed the Company on a full or part-time basis at any timeduring the six (6) months prior to the termination of Executive’s employment,unless such person prior to such solicitation of employment was involuntarilydischarged by the Company.

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# **9.**                                       Confidential Information.  The Executive recognizes and acknowledgesthat by reason of his employment by and service to the Company, he has had andwill have access to confidential information of the Company and its affiliates,including without limitation,

 

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# **information and knowledgepertaining to products and services offered, ideas, plans, trade secrets,proprietary information, advertising, distribution and sales methods andsystems, sales and profit figures, customer and client lists, and relationshipsbetween the Company and its customers, clients, suppliers and others who havebusiness dealings with the Company (collectively, “Confidential Information”).  The Executive acknowledges that suchConfidential Information is a valuable and unique asset and covenants that hewill not, either during or at any time after the end of the Employment Term,use or disclose any such Confidential Information to any person or entity forany reason whatsoever (except as his duties described herein may require)without the prior authorization of the Board, unless such information is in orenters the public domain through no fault of the Executive or is otherwiselawfully known by third parties.  In theevent the Executive becomes or may become legally compelled to disclose anyConfidential Information (whether by deposition, interrogatory, request fordocuments, subpoena, civil investigative demand or other process or otherwise),the Executive shall provide to the Board prompt prior written notice of suchrequirement so that the Company may seek a protective order or otherappropriate remedy and/or waive compliance with the terms of this Section 9.  In the event that such protective order orother remedy is not obtained, or that the Company waives compliance with theprovisions this Section 9, the Executive shall furnish only thatportion of the Confidential Information which it is advised by counsel islegally required to be disclosed, and shall use his best efforts to insure thatconfidential treatment shall be afforded such disclosed portion of theConfidential Information.**

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# **10.**                                 Equitable Relief.

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## **(a)**                                  The Executiveacknowledges that the restrictions contained in Sections 7, 8, and 9hereof are reasonable and necessary to protect the legitimate interests of theCompany, that the Company would not have entered into this Agreement in theabsence of such restrictions, and that any violation of any provision of thoseSections will result in irreparable injury to the Company.  The Executive represents that his experienceand capabilities are such that the restrictions contained in Section 8  hereof will not prevent the Executive fromobtaining employment or otherwise earning a living at the same general level ofeconomic benefit as is anticipated by this Agreement.  THE EXECUTIVE FURTHER REPRESENTS AND ACKNOWLEDGES THAT (i) HE HASBEEN ADVISED BY THE COMPANY TO CONSULT HIS OWN LEGAL COUNSEL IN RESPECT OF THISAGREEMENT, (ii) THAT HE HAS HAD FULL OPPORTUNITY, PRIOR TO EXECUTION OF THISAGREEMENT, TO REVIEW THOROUGHLY THIS AGREEMENT WITH HIS COUNSEL, AND (iii) HEHAS READ AND FULLY UNDERSTANDS THE TERMS AND PROVISIONS OF THIS AGREEMENT.

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## **(b)**                                 The Executiveagrees that the Company shall be entitled to preliminary and permanentinjunctive relief, without the necessity of proving actual damages, as well asan equitable accounting of all earnings, profits and other benefits arisingfrom any violation of Sections 7, 8, or 9 hereof, which rights shall becumulative and in addition to any other rights or remedies to which the Companymay be entitled.  In the event that anyof the provisions of Sections 7, 8, or 9 hereof should ever beadjudicated to exceed the time, geographic, product or service, or otherlimitations permitted by applicable law in any jurisdiction, then suchprovisions shall be deemed reformed in such jurisdiction to the maximum time,geographic, product or service, or other limitations permitted by applicablelaw.

 

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## **(c)**                                  The Companyand the Executive each irrevocably and unconditionally (i) agree that any suit,action or other legal proceeding arising out of this Agreement, includingwithout limitation, any action for preliminary or permanent injunctive reliefor other equitable relief, may be brought in the United States District Courtfor the Eastern District of Massachusetts, or if such court does not havejurisdiction or will not accept jurisdiction, in any court of generaljurisdiction in the Commonwealth of Massachusetts, (ii) consent to thenon-exclusive jurisdiction of any such court in any such suit, action orproceeding, and (iii) waive any objection which such party may have to thelaying of venue of any such suit, action or proceeding in any such court.  The Company and the Executive each alsoirrevocably and unconditionally consent to the service of any process,pleadings, notices or other papers in a manner permitted by the noticeprovisions of Section 15 hereof.

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## **(d)**                                 The Executiveagrees that he will provide a copy of Sections 7, 8, and 9 of thisAgreement to any for-profit business or enterprise (i) which he may directly orindirectly own, manage, operate, finance, join, participate in the ownership,management, operation, financing, control or control of, or (ii) with which hemay be connected with as an officer, director, employee, partner, principal,agent, representative, or consultant, or in connection with which he may use orexpressly permit his name to be used; provided, however, thatthis provision shall not apply in respect of Section 8 of thisAgreement after expiration of the time periods set forth therein.

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# **11.**                                 Termination.

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## **(a)**                                  Cause.  Notwithstanding anything herein contained,if on or after the date hereof and prior to the end of the Employment Term, theExecutive is terminated “For Cause” (as defined below) then the Company shallhave the right to give notice of termination of the Executive’s serviceshereunder as of a date to be specified in such notice, and the Employment Termshall terminate on the date so specified. Termination “For Cause” shall mean the Executive shall (i) becharged with the commission of a felony crime; (ii) commit any act or omit totake any action in bad faith and to the detriment of the Company; (iii)intentionally fail to follow any commercially reasonable and lawful directionof the Board and continue to fail to follow such direction within ten (10) daysof written notification of same; (iv) commit an act of fraud against theCompany; (v) knowingly provide materially false information concerning theCompany to the Board, any governmental body, any regulatory agency, any lenderor other financing source of the Company, or any shareholder of the Company; or(vi) breach any term of this Agreement and fail to correct such breach withinten (10) days after written notice of commission thereof.  In the event that this Agreement isterminated “For Cause” pursuant to this Section 11(a), then theExecutive shall be entitled to receive only the Base Salary at the rateprovided in Section 3(a) to the date on which termination shalltake effect, any accrued vacation and unpaid expenses as contemplated under Section 5,and (iii) any performance bonus earned and unpaid for any prior plan periodsand, if applicable under any performance bonus plan for the year oftermination, the amount, if any, earned thereunder to the date of termination(collectively, “Accrued Bonus Payments”).

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## **(b)**                                 Disability.  In the event that the Executive shall bephysically or mentally incapacitated or disabled or otherwise unable fully todischarge his duties hereunder, with reasonable accommodation, for more than180 days during any rolling 12-month period,

 

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## **then the Company may terminatethe Executive’s employment hereunder for “Disability” upon thirty (30)days’ written notice to the Executive, and no further compensation shall bepayable to the Executive, except for any accrued and unpaid Base Salary ascontemplated under Section 3(a), any accrued vacation and unpaidexpenses as contemplated under Section 5, any Accrued BonusPayments and as may otherwise be provided under any disability insurancepolicy, if any.**

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## **(c)**                                  Death.  In the event that the Executive shall die,then his employment shall terminate on the date of his death, and no furthercompensation shall be payable to the Executive, except for any accrued andunpaid Base Salary as contemplated under Section 3(a), any accruedvacation and unpaid expenses as contemplated under Section 5, anyAccrued Bonus Payments and as may otherwise be provided under any insurancepolicy or similar instrument.

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## **(d)**                                 Expiration.  This Agreement shall automatically terminateupon the expiration of the Employment Term and upon such expiration, thefollowing payment provisions shall apply:

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## **(i)**                                     In the eventthat the Company delivers a Non-renewal Notice, upon expiration of theEmployment Term, no further compensation shall be payable to the Executive,except for (1) any accrued and unpaid Base Salary though the effective date ofsuch termination as contemplated under Section 3(a), (2) anyaccrued vacation and unpaid expenses as contemplated under Section 5,and (3) any Accrued Bonus Payments.  Inaddition, subject to the provisions of Section 11(i) hereof and theExecutive’s compliance (and continued compliance) with the provisions of Sections7, 8 and 9 hereof, (Y) the Company shall pay to the Executive a severancepayment equal to six (6) months salary at the Base Salary then in effect,payable in six (6) equal monthly installments and (Z) for such six (6) monthperiod, the Executive shall be entitled to continue to receive his then currenthealth, life and disability insurance benefits or, in the case of healthinsurance benefits, payment by the Company of applicable “COBRA” payments.

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## **(ii)**                                  In the event that the Company delivers a RenewalNotice, upon expiration of the Extension Period no further compensation shallbe payable to the Executive, except for (1) any accrued and unpaid Base Salarythough the effective date of such termination as contemplated under Section 3(a),(2) any accrued vacation and unpaid expenses as contemplated under Section 5,and (3) any Accrued Bonus Payments.  Forthe avoidance of doubt, the termination of this Agreement upon the expirationof the Extension Period shall not be deemed a termination without causepursuant to Section 11(e) and the Executive shall not be entitledto receive any severance or similar payment or benefit provided for in Section 11(e)upon expiration of the Extension Period.

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## **(e)**                                  TerminationWithout Cause.  In the event thatthe Company terminates the Executive for any reason other than as providedunder Section 11(a), 11(b), 11(c) or 11(d), then the Executive’semployment shall terminate upon thirty (30) days’ written notice to theExecutive and, the Company shall be obligated to pay to the Executive Base Salaryearned, but not yet paid to the Executive, prior to the date of suchtermination in accordance with Section 3(a), and reimburse theExecutive for any accrued vacation and unpaid expenses incurred by the

 

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## **Executive through the date oftermination in accordance with Section 5, and any Accrued BonusPayments.  In addition, subject to theprovisions of Section 11(i) hereof and the Executive’s compliance(and continued compliance) with the provisions of Sections 7, 8 and 9hereof, (i) the Company shall pay to the Executive a severance payment equal totwelve (12) months salary at the Base Salary then in effect, payable in twelve(12) equal monthly installments and (ii) for such twelve (12) month period, theExecutive shall be entitled to continue to receive his then current health,life and disability insurance benefits or, in the case of health insurancebenefits, payment by the Company of applicable “COBRA” payments (collectively(i) and (ii) are called the “Severance Payments”).**

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## **(f)**                                    Change ofControl. Subject to the provisions of Sections 11(i) and 11(j),in the event that Company shall terminate this Agreement and the Executive’semployment hereunder pursuant to the provisions of Section 11(e)within six (6) months following a Change in Control (as defined below) or theExecutive shall terminate this Agreement and the Executive’s employmenthereunder for Good Reason (as defined in Section 11(h)) within six(6) months following a Change in Control, then, in lieu of (and not in additionto) the amounts to be paid (and benefits to be provided) by the Companypursuant to Section 11(e) or Section 11(h), the Companyshall have no further obligations under this Agreement to the Executive otherthan the obligation to: (i) pay to the Executive Base Salary earned, but notyet paid to the Executive, prior to the date of such termination in accordancewith Section 3(a), (ii) reimburse the Executive for any accruedvacation and unpaid expenses incurred by the Executive through the date oftermination in accordance with Section 5, and pay any Accrued BonusPayments and (iii) subject to the provisions of Sections 11(i) and 11(j),pay to the Executive a lump sum amount equal to the product of (1) theExecutive’s Base Salary then in effect and (2) a fraction, the numerator ofwhich is the number of days remaining from the date the termination occurredthrough the end of the Employment Term, but, subject to the provisions of Section 11(j),in no event less than 912, and the denominator of which is 365. In addition,for the twelve (12) month period following the date of such termination, theExecutive shall be entitled to continue to receive his then current health,life and disability insurance benefits or, in the case of health insurancebenefits, payment by the Company of applicable “COBRA” payments.

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As used in this Agreement, “Change in Control” shall mean theoccurrence of any one of the following events:

 

(i)                                     any Person otherthan an employee benefit plan of the Company or of any wholly-owned subsidiaryof the Company becomes the owner of 40% or more of the combined voting power ofthe Company’s then outstanding voting securities and thereafter individuals whowere not directors of the Company prior to the date such Person became a 40%owner are elected as directors pursuant to an arrangement or understandingwith, or upon the request of or nomination by, such Person and constitute atleast 1/2 of the Board; provided, however, such acquisition ofownership shall not constitute a Change of Control if the Executive or anExecutive Related Party is the Person or a member of a group constituting thePerson acquiring such ownership; or

 

(ii)                                  there occurs anysolicitation or series of solicitations of proxies by or on behalf of anyPerson other than the Board and thereafter individuals who were not directorsof the Company prior to the commencement of such solicitation or series ofsolicitations are

 

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elected as directors pursuant to an arrangement or understanding with,or upon the request of or nomination by, such Person and constitute at least1/2 of the Board of Directors; or

 

(iii)                               the Company executes anagreement of sale, merger or consolidation which contemplates that (x) afterthe effective date provided for in such agreement, all or substantially all ofthe business and/or assets of the Company shall be owned, leased or otherwisecontrolled by another Person and (y) individuals who are directors of theCompany when such agreement is executed shall not constitute at least 1⁄2 of theboard of directors of the survivor or successor entity immediately after theeffective date provided for in such agreement; provided, however,that for purposes of this paragraph (iii), if such agreement requires as acondition precedent approval by the Company’s shareholders of the agreement ortransaction, a Change of Control shall not be deemed to have taken place unlessand until such approval is secured (but upon any such approval, a Change of Controlshall be deemed to have occurred on the effective date of such agreement).

 

**“Executive Related Party”shall mean any Affiliate or Associate of the Executive other than the Companyor a Subsidiary of the Company.  Theterms “Affiliate” and “Associate” shall have the meanings ascribed thereto inRule 12b-2 under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”) (the term “registrant” in the definition of “Associate” meaning, inthis case, the Company).**

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**“Person” shall have themeaning used in Section 13(d) of the Exchange Act, as in effect on thedate hereof.**

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## **(g)**                                 Terminationby Executive.  In the event thatthe Executive desires to resign voluntarily as Chief Executive Officer, theExecutive covenants to provide the Company with not less than ninety (90) dayswritten notice of any such voluntary resignation; and further the Executivecovenants to cooperate in good faith in order to facilitate a smooth transferof authority during the period from notice of resignation to the date of termination.  In the event that the Executive’s employmentis terminated by the Executive pursuant to this Section 11(g), thenthe Executive shall be entitled to receive an amount payable in a lump sumwithin ten (10) business days following the date of termination, equal to thesum of any accrued and unpaid Base Salary as contemplated by Section 3(a),any accrued and unpaid expenses as contemplated by Section 5 andany Accrued Bonus Payments.

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## **(h)**                                 Good Reason.  The Executive may, upon thirty (30) dayswritten notice, terminate his employment with the Company for “GoodReason”.  “Good Reason” shallmean any material breach by the Company of its obligations hereunder which arenot cured within ten (10) days following receipt of written notice from theExecutive detailing such breach.  Theparties agree that a material breach shall mean, (x) any material reduction inthe Executive’s duties, authority, reporting relationships or responsibilities(whether or not accompanied by a title change) not consented to by theExecutive, other than a Permitted Change, and (y) the relocation of theprincipal executive offices of the Company a distance of more than 35 milesfrom its current location no consented to by the Executive.  Notwithstanding the foregoing or anything tothe contrary contained herein, the Executive shall not be entitled to terminatehis employment for “Good Reason” (1) in connection with a Permitted Change, or(2) at any time during the Extension Period or the Transition Period, for anyreason.  In the event that the

 

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## **Executive terminates thisAgreement for Good Reason, the Company shall be obligated to pay to theExecutive Base Salary earned, but not yet paid to the Executive, prior to thedate of such termination in accordance with Section 3(a), reimbursethe Executive for any accrued vacation and unpaid expenses incurred by theExecutive through the date of termination in accordance with Section 5and pay any Accrued Bonus Payments.  Inaddition, subject to the provisions of Section 11(i) hereof, andthe Executive’s compliance (and continued compliance) with the provisions of Sections7, 8 and 9 hereof, the Company shall pay and provide to the Executive theSeverance Payments.**

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## **(i)**                                     Release.  Notwithstanding anything to the contrarycontained in this Agreement, the Executive (or his estate) shall not beentitled to receive the payments and benefits set forth in this Section 11(other than Base Salary through the effective date of termination in accordancewith Section 3(a) hereof and reimbursement of expenses inaccordance with Section 5) prior to (i) the execution and deliveryby the Executive to the Company of a valid and fully effective general release and nondisparagement agreement(in form and substance reasonably satisfactory to the Company) of all claims,including but not limited to the Age Discrimination in Employment Act, TitleVII of the Civil Rights Act of 1964, which the Executive might have at suchtime against the Company and (ii) the resignation of the Executive from allpositions of any nature which the Executive may then have held with the Companyand any subsidiary of the Company.

## ** **

## **(j)**                                     Limitation asto Amounts Payable.  Notwithstandingany provision of this Agreement to the contrary (including without limitationthe provisions of Section 11(f)), if all or any portion of theamounts to be paid to the Executive under this Agreement otherwise would be a“parachute payment,” as defined in section 280G(b)(2) of the InternalRevenue Code of 1986, as amended (the “Code”) and the TreasuryRegulations thereunder, the aggregate present value of the total amounts to bepaid to the Executive under this Agreement shall be limited to an amount thatis less than three times the Executive’s “annualized includible compensationfor the base period,” as defined in section 280G(d) of the Code and anyTreasury Regulations thereunder; provided, however, that in noevent shall the amount payable under this Agreement be reduced pursuant to thisSection 11(j) to less than the maximum amount that may be paid tothe Executive without causing any portion of such amount to becomenondeductible under section 280G of the Code and subject to the excise taximposed by section 4999 of the Code. The determination of the Executive’s “annualized includible compensationfor the base period” and the deductibility of payments made pursuant to thisAgreement shall be made by the independent outside accounting firm regularlyretained by the Company.  For purposesof this Section 11(j), “present value” shall be determined inaccordance with section 280G of the Code and the Treasury Regulationsthereunder.

## ** **

# **12.**                                 Survival. Except asotherwise provided in this Agreement, notwithstanding the termination of thisAgreement or the Executive’s employment for any reason, the Executive’sobligations under Sections 2(b), 7, 8, and 9 hereof shall survive andremain in full force and effect for the periods therein provided, and theprovisions for equitable relief against the Executive in Section 10hereof shall continue in force, along with the provisions of Sections 12through 20 hereof.  In addition, theobligations of the Company set forth in Section 11 shall surviveany termination (as applicable) and shall remain in full force and effect untilsuch obligations are satisfied in full (subject,as applicable, to the Executive’s

 

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compliance with the provisions of Section11(i)).

# ** **

# **13.**                                 Assignment.  All of the terms and provisions of thisAgreement shall be binding upon and inure to the benefit of and be enforceableby the respective heirs, executors, administrators, legal representatives,successors and assigns of the parties hereto, except that the duties andresponsibilities of the Executive hereunder are of a personal nature and shallnot be assignable or delegatable in whole or in part by the Executive.

# ** **

# **14.**                                 Modification.  This Agreement sets forth the entireunderstanding of the parties with respect to the subject matter hereof,supersedes all existing agreements between them concerning such subject matter,and may be modified only by a written instrument duly executed by each party.

# ** **

# **15.**                                 Notices.  All notices and other communicationsrequired or permitted hereunder or necessary or convenient in connectionherewith shall be in writing and shall be deemed to have been given when handdelivered or three (3) days after being mailed by registered or certified mail,as follows (provided that notice of change of address shall be deemed givenonly when received):

# ** **

If to the Company:

 

iParty Corp.

270 Bridge Street

Suite 301

Dedham, MA 02026

Attn: Corporate Secretary

 

With a required copy to:

 

Lowenstein Sandler PC

65 Livingston Avenue

Roseland, NJ 07068

Attn:  Douglas N. Bernstein,Esq.

Fax:  973-597-2400

 

If to the Executive:

 

Sal Perisano

288 Huron Avenue

Cambridge, MA 02138

 

# **16.**                                 Remedies Cumulative; No Waiver.  No remedy conferred upon the Company by thisAgreement is intended to be exclusive of any other remedy, and each and everysuch remedy shall be cumulative and shall be in addition to any other remedygiven hereunder or now or hereafter existing at law or in equity.  No delay or omission by the Company inexercising any right, remedy or power hereunder or existing at law or in equityshall be construed as a waiver thereof, and any such right, remedy or power maybe exercised by the

 

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# **Company from time to time andas often as may be deemed expedient or necessary by the Company in its solediscretion.**

# ** **

# **17.**                                 Binding Effect.  The Executive’s rights and obligations underthis Agreement shall not be transferable by assignment or otherwise, suchrights shall not be subject to encumbrance or the claims of the Executive’screditors, and any attempt to do any of the foregoing shall be void.  The provisions of this Agreement shall bebinding upon and inure to the benefit of the Executive and his heirs andpersonal representatives, and shall be binding upon and inure to the benefit ofthe Company and its successors and those who are its assigns under Section 13.

# ** **

# **18.**                                 Entire Agreement; Contents ofAgreement.

# ** **

## **(a)**                                  ThisAgreement supersedes all prior agreements in their entirety, including withoutlimitation the Prior Employment Agreement, effective as of April 1, 2004,and sets forth the entire understanding among the parties hereto with respectto the subject matter hereof and cannot be changed, modified, extended orterminated except upon written amendment executed by the Executive and approvedby the Board and executed on behalf of the Company by a duly authorizedofficer.  The Executive acknowledgesthat the effect of this provision is that no oral modifications of any naturewhatsoever to this Agreement shall be permitted.

## ** **

## **(b)**                                 The Executiveacknowledges that from time to time, the Company may establish, maintain anddistribute manuals or handbooks or personnel policy manuals, and officers orother representatives of the Company may make written or oral statementsrelating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for generalguidance.  No policies, procedures orstatements of any nature by or on behalf of the Company (whether written ororal, and whether or not contained in any manual or handbook or personnelpolicy manual), and no acts or practices of any nature, shall be construed tomodify this Agreement or to create express or implied obligations of any natureto the Executive.

## ** **

# **19.**                                 Headings.  The headings in this Agreement are solelyfor the convenience of reference and shall be given no effect in theconstruction or interpretation of this Agreement.

# ** **

# **20.**                                 Counterparts; Governing Law.  This Agreement may be executed in any numberof counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.  It shall be governed by, and construed inaccordance with, the laws of The Commonwealth of Massachusetts, without givingeffect to the rules governing the conflicts of laws.

# ** **

IN WITNESS WHEREOF, the parties have duly executed this Agreement as ofthe date first written above.

 

iPARTY CORP.

 
| By:                                                 |  /s/ PATRICK FARRELL |   | /s/ SAL PERISANO |   |
|-----------------------------------------------------|---------------------------|--------|------------------|--------|
| Name:  Patrick Farrell                         | Sal Perisano              |
| Title:  President and Chief  Financial Officer |                      |

 

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