Document:

exv10w1

 

Exhibit - 10.1

FACTORY CARD & PARTY OUTLET CORP.

AMENDED AND RESTATED EXECUTIVE

SEVERANCE PLAN

 

 

FACTORY CARD & PARTY OUTLET CORP.

Amended and Restated Executive Severance Plan

Effective
September 17, 2007

ARTICLE 1

PURPOSE AND DEFINITIONS

     1.1. Purpose. The Factory Card & Party Outlet Corp. Amended and Restated Management
Severance Plan (“Plan”), effective as of July 1, 2004 (“Effective Date”) and amended and restated
effective September 17, 2007, protects key executives of Factory Card & Party Outlet Corp.
(“Factory Card & Party Outlet”) and its subsidiaries (collectively with Factory Card & Party
Outlet, the “Company”) against an involuntary loss of employment so as to attract and retain such
employees, and motivate them to enhance the value of the Company. The Plan is intended to qualify
as an unfunded welfare plan subject to the Employee Retirement Income Security Act (ERISA) of 1974,
as amended.

     1.2. Definitions. The following words and phrases as used herein shall have the
following meanings, unless a different meaning is required by the context:

“Board of Directors” means the Board of Directors of Factory Card & Party Outlet.

“Cause” means any act or any failure to act on the part of a Participant which constitutes:

	 	(a)	 	fraud, embezzlement, theft or dishonesty against the Company or
any of its affiliates, or the Board of Directors of the Company or any of its
affiliates;
	 
	 	(b)	 	material violation of law in connection with or in the course
of the Participant’s duties or employment with the Company or any of its
affiliates;
	 
	 	(c)	 	a felony for which the Participant is convicted or pleads
guilty or nolo contendere;
	 
	 	(d)	 	engagement in any activity competitive with the business of the
Company as to which the Company has notified the Participant in writing and the
Participant has not ceased (other than for reasons beyond the control of the
Participant) within 3 business days following such notice of his or her
participation in such activity;
	 
	 	(e)	 	a willful failure to follow reasonable directions or
instructions of a more senior officer (or, in the case of the Chief Executive
Officer, the Board of Directors of the Company) which are consistent with the
Participant’s position and responsibilities (as such position and
responsibilities may be changed from time to time), and such failure shall have
continued (other than for reasons beyond the control of the Participant) for a
period of 3 business days after receipt of written notice thereof from the
Company;

 

 

	 	(f)	 	gross negligence, as determined by the Board of Directors, in
connection with his or her employment which has not been cured within 3
business days after receipt of written notice thereof from the Company;
	 
	 	(g)	 	material breach of any written employment policy of the
Company; or
	 
	 	(h)	 	willful and wrongful damage to material property of the Company
or any of its affiliates.

“Change in Control” means the first to occur of the following events with respect to Factory
Card & Party Outlet, the Company, or any successor:

	 	(a)	 	the sale or other divestiture of all or substantially all of
the assets (excluding the sale of inventory or other assets in the ordinary
course of business);
	 
	 	(b)	 	during any period of two consecutive years, the individuals who
at the beginning of such period constitute the Board or any individuals who
would be “Continuing Directors” (as hereinafter defined) cease for any reason
to constitute at least a majority thereof; or
	 
	 	(c)	 	the acquisition by any person or affiliated group of persons of
more than 30% of any common stock of Factory Card & Party Outlet or any
successor thereof that is outstanding at any time.

“Committee” means the Compensation Committee of the Board of Directors of Factory Card &
Party Outlet.

“Continuing Directors” means (i) the members of the Board of Directors in office on the
Effective Date and (ii) any successor to any such director and any additional director who
after the Effective Date was nominated or selected by a majority of the Continuing Directors
in office at the time of his or her nomination or selection.

“Good Reason” shall mean with respect to a Participant (i) a reduction in the Participant’s
annual base salary (other than any reduction applicable to management employees generally
and not exceeding 5% during any 24-month period), (ii) a material diminution in the
Participant’s authority, duties or responsibilities as an employee of the Company, (iii) a
material reduction in the Participant’s bonus opportunity (taking into consideration, among
other factors, the amount reasonably expected to be earned) unless such reduction is part
of, and proportionally consistent with, a broad based change in the Company’s bonus plans
for officers of the Company, or (iv) within two years after a Change in Control a change in
the Participant’s principal work location by more than 50 miles and more than 50 miles from
the Participant’s principal place of abode as of the date of such change in job location.

“Participant” means any person who is entitled to participate in the Plan in accordance with
Section 2.1 and has not had such participation terminated pursuant to Section 2.2.

“Plan Year” means the calendar year.

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“Severance Period” means a period of six months following a Participant’s termination of
employment; provided that if such termination of employment occurs upon or within two years
after a Change in Control, the “Severance Period” shall mean a period of eighteen months
following such termination of employment.

ARTICLE 2

ELIGIBILITY AND PARTICIPATION

     2.1. Eligibility. Each individual who has completed at least 120 days of employment
with the Company as an officer not under contract (as an employee and not as a member of any board
of directors, all as reflected in the Company’s employment records) shall participate in the Plan.
Any officer with an employment contract with Factory Card & Party Outlet shall not be a Participant
in this Plan and the provisions of said contract shall govern such officer’s severance pay, if any.
The Committee may waive the employment period requirement in its sole discretion. The Committee
may, in writing, set forth any additional terms and conditions of participation (beyond the
provisions of the Plan) as the Committee may, in its sole discretion, determine to be applicable to
any Participant.

     2.2. Termination of Participation. A Participant’s participation in the Plan shall
automatically terminate, without notice to or consent of the Participant, and the Participant shall
not be treated as a Participant, upon the earlier to occur of the following events:

	 	(a)	 	the Participant’s termination of employment by the Company for
Cause,
	 
	 	(b)	 	the Participant’s resignation other than for Good Reason, or
	 
	 	(c)	 	the Participant’s failure to be employed in an eligible
position described in Section 2.1 (unless such failure constitutes Good
Reason).

ARTICLE 3

SEVERANCE BENEFITS

     3.1. Involuntary Termination. Subject to the execution and delivery of a valid waiver
and release substantially in the form of Exhibit A hereto and other conditions set forth
below, each Participant who is terminated by the Company without Cause or terminates his or her own
employment with the Company for Good Reason shall be entitled to severance pay and other benefits
under the Plan in the amount set forth in Sections 3.2 and 3.3 below. To the fullest extent
permitted by law, a Participant’s eligibility for severance pay and other benefits under the Plan
shall be reasonably determined by the Committee.

     3.2. Amount of Severance Pay.

	 	(a)	 	The amount of cash severance pay to which any Participant is
entitled under the Plan shall be equal to:

	 	(i)	 	the Participant’s Monthly Pay Rate (as defined
below) multiplied by six; provided, however, that if termination of
employment

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occurs upon or within two years after a Change in Control the
Participant’s Monthly Pay Rate shall be multiplied by eighteen; plus

	 	(ii)	 	the bonus amount, if any, that the Participant
would have been entitled to under the bonus arrangements applicable to
the Participant had the Participant remained employed until the end of
the calendar year multiplied by a fraction the numerator of which shall
be the number of full months of employment during the calendar year and
the denominator of which shall be 12;

	 	 	 	Notwithstanding the foregoing, the amount of severance pay shall be subject
to customary payroll deductions and shall be reduced by any other payments
in the nature of severance pay to which the Participant is otherwise
entitled from the Company pursuant to any other contract, policy or
agreement with the Company or any Federal, state or local law including but
not limited to payments under the Federal Worker Adjustment and Retraining
Notification Act (WARN).

	 	(b)	 	Compensation otherwise payable to a Participant upon a
termination of employment without regard to the reason for such termination
shall not be deemed to be in the nature of severance pay and shall not be an
offset to any payments under the Plan.
	 
	 	(c)	 	“Monthly Pay Rate” means one twelfth of the greater of (i) the
Participant’s annual salary rate in effect on the date of termination, or (ii)
the Participant’s actual regular salary paid for the twelve months immediately
preceding his or her date of termination of employment for all services
rendered to the Company.
	 
	 	(d)	 	There shall be no duplication of severance benefits in any
manner. In this regard, no Participant shall be entitled to severance pay
hereunder for more than one position with the Company.
	 
	 	(e)	 	A Participant shall not be obligated to secure new employment,
and severance payments under the Plan shall not be subject to mitigation except
as provided in Section 3.2 (a) hereof for other severance pay by the Company
and by Section 3.3 for determining continuing eligibility for health benefits
coverage, but shall be obligated to report promptly any actual employment
obtained to the Company during the period of severance.

     3.3. Other Benefits. Participants shall be entitled to continue their participation
in the Company’s health and life insurance benefit plans (but not any disability plans or qualified
retirement plans) during the Severance Period, except such coverage shall expire if the Participant
becomes eligible for coverage under a substantially comparable plan of a successor employer or an
employer of a family member or domestic partner of the Participant. In the case of any health and
life insurance benefit plans, nothing herein shall be deemed to restrict the right

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of the Company from amending or terminating any such plan in a manner generally applicable to
active employees, and Participants shall be entitled to participate on the same basis (including
payment of applicable contributions) as active employees. Participants shall be entitled to
outplacement counseling with an outplacement firm of the Company’s selection, for a period not to
exceed six months after termination of employment.

     3.4. Payment.

	 	(a)	 	Except as provided in Section 3.4(b), and subject to Section
3.4(d), the Company shall commence payment of severance pay in the aggregate
amount set forth in Section 3.2(a)(i) not later than the eighth day following
the later of the Participant’s termination of employment or the Company’s
receipt of the Participant’s duly executed and unrevoked waiver and release.
Such payment shall be made in equal installments payable over the period of 6
months in accordance with the Company’s payroll practices.
	 
	 	(b)	 	Notwithstanding Section 3.4(a), and subject to Section 3.4(d),
in the event that termination of employment occurs upon or within two years
after a Change in Control, then the Company shall pay the aggregate amount set
forth in Section 3.2(a)(i) in a single lump payment not later than the eighth
day following the later of the Participant’s termination of employment or the
Company’s receipt of the Participant’s duly executed and unrevoked waiver and
release.
	 
	 	(c)	 	Subject to Section 3.4(d), the Company shall pay the amount set
forth in Section 3.2(a)(ii) at the same time as the applicable bonus
arrangement is paid to other employees of the Company.
	 
	 	(d)	 	Notwithstanding Section 3.4(a), (b) or (c), to the extent
required by Section 409A of the Internal Revenue Code of 1986 (the Code”),
payment to a Participant who is a “specified employee” (as defined in Section
1.409A-1(i) of the Treasury regulations under Section 409A of the Code) shall
not be made before the date which is six months after the date of the
Participant’s separation from service (within the meaning of Section
409A(a)(2)(B)(i) of the Code) or, if earlier, the date of death of the
Participant; except to the extent the payments are made by reason of
involuntary termination of employment by the Company without Cause or a
termination of the Participant’s own employment with the Company for Strong
Good Reason (defined below), and do not exceed the Basic Severance Limitation
(defined below). For this purpose:

	 	(i)	 	“Strong Good Reason” means an event described
in clause (ii) or (iv) of the definition of Good Reason, or an event
described in clause (i) of the definition of Good Reason where the
reduction in annual base salary is material; and

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	 	(ii)	 	“Basic Severance Limitation” means two times
the lesser of (A) the sum of the Participant’s annualized compensation
based on the annual rate of pay for services provided to the Company
for the taxable year of the Participant preceding the taxable year in
which the Participant’s employment terminated (adjusted for any
increase during that taxable year that was expected to continue
indefinitely if the Participant had not incurred a termination of
employment); or (B) the maximum amount that may be taken into account
under a qualified plan pursuant to Section 401(a)(17) of the Code for
the year of the Participant’s termination of employment (which is
$225,000 for 2007).

	 	 	 	In the event payment in accordance with Section 3.4(a) or (c) is delayed
under this Section 3.4(d), payment of the accumulated amounts which would
have been paid prior thereto in accordance with Section 3.4(a) or (c) shall
be made in a lump sum (without interest) as soon as permitted by this
Section 3.4(d). In the event payment in accordance with Section 3.4(b) is
delayed under this Section 3.4(d), the Company shall, no later than the
eighth day following the later of the Participant’s termination of
employment or the Company’s receipt of the Participant’s duly executed and
unrevoked waiver and release: (i) create a trust of the type commonly
referred to as a “rabbi” trust with terms substantially similar (but not
identical) to the terms of the model trust published by the Internal Revenue
Service in Rev. Proc. 92-64 and the other terms specified below (a “Trust”);
and (ii) deposit into the Trust the aggregate amount set forth in Section
3.2(a)(i) for which payment is delayed under this Section 3.4(d). The
terms of the Trust shall provide: (i) for a trustee acceptable to the
Participant; (ii) that the funds held by the Trust shall remain the general
assets of the Company, which is the grantor of the Trust; (iii) that the
rights of the Participant under the Trust shall be exclusively unsecured
contractual rights; (iv) that the funds deposited in the trust shall be
invested in a money market fund or account insured by the FDIC; (v) that all
income earned on the funds held by the Trust shall be reported as income by
the Company for federal, state, local and foreign tax purposes; (vi) that
the Company shall pay all costs of establishing and maintaining the Trust
and shall indemnify the Trustee against any and all expenses, including
attorney fees, claims, liabilities, loss and damages arising out of or
relating to the establishment and maintenance of the Trust; (vii) that the
Trust shall not be revoked or the principal invaded by the Company unless
the Company is “insolvent” as defined for purposes of Rev. Proc. 92-64; and
(viii) that the funds deposited in the Trust and all income earned on such
funds shall be paid to the Participant as soon as permitted by this Section
3.4(d).

     3.5. Equity Awards. In the event of a termination of employment upon or within two
years after a Change of Control: (a) the Participant’s equity awards (e.g., stock options,
restricted stock, etc.) under either the 2002 Factory Card & Party Outlet Stock Option Plan or the
2003 Factory Card & Party Outlet Corp. Equity Incentive Plan shall become fully exercisable,

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vested, and nonforfeitable as of such termination of employment; and (b) the Participant’s
restricted stock awards granted as contemplated by the Company’s Amended Plan of Reorganization
shall become fully exercisable, vested, and nonforfeitable as of such termination of employment.

     3.6. Waiver and Release. In order to receive benefits under the Plan, a Participant
must submit a signed Waiver and Release Agreement to the Company on or within forty-five (45) days
of his or her date of termination of employment substantially in the form of the Waiver and Release
Agreement attached hereto as Exhibit A, with any changes thereto approved by Company’s counsel
prior to execution. A Participant may revoke his or her signed Waiver and Release Agreement within
seven (7) days of his or her signing the Waiver and Release Agreement.

     Any such revocation must be made in writing and must be received by the Company within such
seven (7) day period. A Participant who fails to timely submit or who revokes his or her Waiver
and Release Agreement shall not be eligible to receive any severance pay under the Plan. A
Participant who timely submits a signed Waiver and Release Agreement and who does not exercise his
or her right of revocation shall be eligible to receive severance pay under the Plan.

     3.7. Non-Competition. No severance pay shall be paid during any period in which the
Participant engages in a Competing Business or in Solicitation or after the Participant has
disclosed Confidential Information, and in consideration of severance pay the Participant will not,
during the Severance Period, engage in a Competing Business or in Solicitation or disclose
Confidential Information.

	 	(a)	 	The prohibition on engaging in a Competing Business set forth
in this Section 3.7 shall mean participating, directly or indirectly, in any
manner whatsoever including, without limitation, either individually, or in
partnership, jointly or in conjunction with any other person, firm or
corporation, or as employee, principal, agent, director, officer, investor,
lender, consultant or shareholder (other than by way of less than five percent
(5%) ownership of stock in a publicly traded company or limited partnership);
provided, however, that such participation shall not include any activity
engaged in with the prior written approval of the Committee. For purposes of
this Plan, “Competing Business” shall mean any entity or business: (i) engaged
in the operation of retail stores for the primary purpose of selling greeting
cards, gift wrap and party supplies and which operates such retail stores in
any market in which the Company is operating a retail store at the time of the
Participant’s termination of employment, or a market into which the Participant
knows the Company is intending to enter; or (ii) is engaged in the primary
business of the manufacture and distribution of greeting cards, gift wrap and
party supplies.
	 
	 	(b)	 	For purposes of this Plan, “Solicitation” shall mean
recruiting, soliciting or inducing, directly or indirectly, any non-clerical
employee or employees of the Company or any advisor or consultant to the
Company to terminate

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	 	 	 	their employment, or otherwise cease their relationship with the Company or
hiring, retaining or assisting another person or entity to hire or retain
any employee of the Company or any advisor or consultant to the Company or
any person who within six (6) months before had been a non-clerical
employee, advisor or consultant of the Company or any of its Affiliates.
	 
	 	(c)	 	The Company owns and has developed, and will develop, certain
proprietary techniques and confidential information which have great value to
its business (referred to for purposes of this Section 3.7 as collectively as
“Confidential Information”). Confidential Information includes not only
information disclosed by the Company to the Participant, but also information
developed or learned by the Participant during the course or as a result of
employment with the Company, which information is the property of the Company.
Confidential Information includes all information that has or could have
commercial value or other utility in the business in which the Company is
engaged or in any business in which the Participant is aware the Company is
contemplating engaging, and all information of which the unauthorized
disclosure could be detrimental to the interests of the Company, whether or not
such information is specifically labeled as Confidential Information by the
Company. By way of example and without limitation, Confidential Information
includes any and all information developed, obtained or owned by the Company
concerning trade secrets, techniques, know-how, business plans, strategies,
forecasts, unpublished financial information, orders, agreements and other
forms of documents, price and cost information, merchandising opportunities,
expansion plans, store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and salary, staffing
and employment information, Notwithstanding the foregoing, Confidential
Information shall not include any information which (i) was in the public
domain at the time of receipt by the Participant or thereafter without breach
or violation of this Section 3.7, or (ii) was furnished to the Participant by a
third party lawfully entitled to do so and not known to the Participant to be
bound by a confidentiality agreement to the Company. The Participant shall
not, directly or indirectly, use, make available, sell, disclose or otherwise
communicate to any corporation, partnership, individual or other third party,
other than in the course of the Participant’s assigned duties and for the
benefit of the Company, any Confidential Information. In the event that the
Participant is requested (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, the Participant agrees to
notify the Company promptly of such request(s) and the documents requested
thereby so that the Company may seek an appropriate protective order and/or
waive in writing the Participant’s compliance with the provisions of this Plan.
It is further agreed that, if in the absence of a protective order or the
receipt of a waiver hereunder the Participant is nonetheless, in the opinion of
the Participant’s counsel,

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	 	 	 	compelled to disclose such Confidential Information or else stand liable for
contempt or suffer other censure or penalty from the tribunal or
governmental or similar authority, the Participant may disclose such
information without liability hereunder, provided, however, that the
Participant shall give the Company written notice of the information to be
so disclosed as far in advance of its disclosure as is practicable and shall
use the Participant’s best efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of
the information required to be disclosed at the Company designates. In the
event the Participant’s employment with the Company ceases for any reason,
the Participant will not remove from the Company’s premises without its
prior written consent any records, files, drawings, documents, equipment,
materials and writings received from, created for or belonging to the
Company, including those which relate to or contain Confidential
Information, or any copies thereof. When employment with the Company
terminates, the Participant will immediately deliver the same to the
Company.

ARTICLE 4

CLAIMS

     4.1. Good Reason Determination. Any Participant believing he or she has a right to
resign for Good Reason may apply to the Committee for written confirmation that an event
constituting Good Reason has occurred with respect to such Participant. The Committee shall
confirm or deny in writing that Good Reason exists within 21 days following receipt of any such
application. Any confirmation of Good Reason by the Committee shall be binding on the Company.

     4.2. Claims Procedure. If any Participant has a claim for benefits which are not
being paid, such claimant may file with the Committee a written claim setting forth the amount and
nature of the claim, supporting facts, and the claimant’s address. The Committee shall notify each
claimant of its decision in writing by registered or certified mail within 30 days after its
receipt of a claim, unless otherwise agreed by the claimant. If a claim is denied, the written
notice of denial shall set forth the reasons for such denial, refer to pertinent Plan provisions on
which the denial is based, describe any additional material or information necessary for the
claimant to realize the claim, and explain the claim review procedure under the Plan.

     4.3. Claims Review Procedure. A claimant whose claim has been denied or such
claimant’s duly authorized representative may file, within 60 days after notice of such denial is
received by the claimant, a written request for review of such claim by the Committee. If a
request is so filed, the Committee shall review the claim and notify the claimant in writing of its
decision within 30 days after receipt of such request. In special circumstances, the Committee may
extend for up to 30 additional days the deadline for its decision. The notice of the final
decision of the Committee shall include the reasons for its decision and specific references to the
Plan provisions on which the decision is based. The decision of the Committee shall be final and
binding on all parties; provided, however, that if a claim relates to benefits due following a
Change in Control, the Committee’s determination shall not be final and binding if the party

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challenging the Committee’s determination establishes by a preponderance of the evidence that
he or she is entitled to the benefits in dispute.

     4.4. Enforcement. In the event that a Participant reasonably incurs any professional
fees (including but not limited to attorneys’ fees and related costs) in enforcing his or her
rights arising under, or preserved by, this Plan following a Change in Control, the Company shall
reimburse the Participant for such attorneys’ and other professional fees, and for any other
reasonable expenses related thereto, provided that the Participant prevails in any material respect
in protecting or enforcing such rights. Such reimbursement shall be made within thirty (30) days
following the later of (i) final resolution of the dispute or occurrence giving rise to such fees
and expenses and (ii) presentation to the Company of appropriate invoices or other documentation
for the amount of such fees and expenses.

ARTICLE 5

ADMINISTRATION

     5.1. Plan Administrator. The Company shall be the plan administrator and shall
administer the Plan through the Committee.

     5.2. Duties. The Committee shall have the power and duty in its sole and absolute
discretion to do all things necessary or convenient to effect the intent and purposes of the Plan,
whether or not such powers and duties are specifically set forth herein, and, by way of
amplification and not limitation of the foregoing, the Committee shall have the power in its sole
and absolute discretion to:

	 	(a)	 	provide rules for the management, operation and administration
of the Plan, and, from time to time, amend or supplement such rules;
	 
	 	(b)	 	reasonably construe the Plan in its sole and absolute
discretion to the fullest extent permitted by law, which shall be final and
conclusive upon all persons;
	 
	 	(c)	 	correct any defect, supply any omission, or reconcile any
inconsistency in the Plan in such manner and to such extent as it shall deem
appropriate in its sole discretion to carry the same into effect;
	 
	 	(d)	 	make reasonable determinations as to a Participant’s
eligibility for benefits under the Plan, including determinations as to Cause
and Good Reason.

     5.3. Binding Authority. The decisions of the Committee or its duly authorized
delegate within the powers conferred by the Plan shall be final and conclusive for all purposes of
the Plan, and shall not be subject to any appeal or review other than pursuant to Section 4.2 and
Section 4.3.

     5.4. Exculpation. No member of the Committee shall be directly or indirectly
responsible or otherwise liable by reason of any action or default as a member of that committee,
or by reason of the exercise of or failure to exercise any power or discretion as such member,
except for any action, default, exercise or failure to exercise resulting from such member’s gross

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negligence or willful misconduct. No member of the Committee shall be liable in any way for
the acts or defaults of any other member of the Committee, or any of its advisors, agents or
representatives.

     5.5. Indemnification. The Company shall indemnify and hold harmless each member of
the Committee against any and all expenses and liabilities arising out of his or her own membership
on the Committee, except for expenses and liabilities arising out of a member’s gross negligence or
willful misconduct.

     5.6. Information. The Company shall furnish to the Committee in writing all
information the Committee may deem appropriate for the exercise of their powers and duties in the
administration of the Plan. Such information may include, but shall not be limited to, the names
of all Participants, their earnings and their dates of birth, employment, retirement or death.
Such information shall be conclusive for all purposes of the Plan, and the Committee shall be
entitled to rely thereon without any investigation thereof.

ARTICLE 6

GENERAL PROVISIONS

     6.1. Non-Property Interest. The Plan is unfunded. Severance pay shall be paid from
the general assets of the Company and any liability of the Company to any person with respect to
benefits payable under the Plan shall give rise to a claim as an unsecured creditor against the
general assets of the Company. Any Participant who may have or claim any interest in or right to
any compensation, payment or benefit payable hereunder, shall rely solely upon the unsecured
promise of the Company for the payment thereof, and nothing herein contained shall be construed to
give to or vest in the Participant or any other person now or at any time in the future, any right,
title, interest or claim in or to any specific asset, fund, reserve, account, insurance or annuity
policy or contract, or other property of any kind whatsoever owned by the Company, or in which the
Company may have any right, title or interest now or at any time in the future.

     6.2. Other Rights. The Plan shall not affect or impair the rights or obligations of
the Company or a Participant under any other written plan, contract, arrangement, or pension,
profit sharing or other compensation plan.

     6.3. Amendment or Termination. The Plan may be amended, modified, suspended, or
terminated by the Company at any time; provided, however, that prior to July 1, 2009 or, in the
event the Offer (as defined by the Agreement and Plan of Merger dated September ___, 2007 by and
among Amscan Holdings, Inc., Amscan Acquisition, Inc. and the Company) is consummated, December 31,
2011: (i) no such amendment, modification, suspension or termination shall adversely affect the
rights of any Participant without his or her written approval unless required by law (including the
Code or other revenue law); and (ii) no amendment or modification may be made to Article 5 or the
definition of “Committee”.

     6.4. Severability. If any term or condition of the Plan shall be invalid or
unenforceable to any extent or in any application, then the remainder of the Plan, with the
exception of such invalid or unenforceable provision, shall not be affected thereby and shall

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continue in effect and application to its fullest extent. If, however, the Committee
determines in its sole discretion that any term or condition of the Plan which is invalid or
unenforceable is material to the interests of the Company, the Committee may declare the Plan null
and void in its entirety.

     6.5. No Employment Rights. Neither the establishment of the Plan, any provisions of
the Plan, nor any action of the Committee shall be held or construed to confer upon any employee
the right to a continuation of employment by the Company. Subject to any applicable employment
agreement, the Company reserves the right to dismiss any employee, or otherwise deal with any
employee to the same extent as though the Plan had not been adopted.

     6.6. Transferability of Rights. This Plan shall inure to the benefit of, and shall be
binding upon, the Company and its successors and permitted assigns and upon the Participants and
their respective heirs, executors, and legal representatives. The Company shall have the
unrestricted right to transfer its obligations under the Plan with respect to one or more
Participants to any person, including, but not limited to, any purchaser of all or any part of the
Company’s business. No Participant shall have any right to commute, encumber, transfer or
otherwise dispose of or alienate any present or future right or expectancy which the Participant
may have at any time to receive payments of benefits hereunder, which benefits and the right
thereto are expressly declared to be non-assignable and nontransferable, except to the extent
required by law. Any attempt to transfer or assign a benefit, or any rights granted hereunder, by
a Participant shall, in the sole discretion of the Committee (after consideration of such facts as
it deems pertinent), be grounds for terminating any rights of the Participant to any portion of the
Plan benefits not previously paid.

     6.7. Entire Document. The Plan, as set forth herein, supersedes any and all prior
practices, understandings, agreements, descriptions or other non-written arrangements respecting
severance, including but not limited to the Factory Card & Party Outlet Corporation Amended
Management Severance Plan (effective July 1, 2004), except for written employment or severance
contracts signed by the Company.

     6.8. Plan Year. The fiscal records of the Plan shall be kept on the basis of a plan
year which is the calendar year.

     6.9. Governing Law. The Plan shall be construed, administered, and enforced according
to the laws of the State of Illinois, except to the extent that such laws are preempted by the
federal laws of the United States of America.

EXECUTED
this 17th day of September, 2007.

FACTORY CARD & PARTY OUTLET CORP.

	 	 	 	 	 
	 	 	 
	 	By:  	/s/  Gary W. Rada	 
	 	 	Gary W. Rada 	 
	 	 	President & CEO 	 

-12-

 

	 	 	 	 	 

EXHIBIT A

WAIVER AND RELEASE

This is a Waiver and Release (“Release”) between                                          (“Executive”) and Factory Card &
Party Outlet Corp. (“Factory Card & Party Outlet”) and its subsidiaries (collectively with Factory
Card & Party Outlet, the “Company”). The Company and the Executive agree that they have entered
into this Release voluntarily, and that it is intended to be a legally binding commitment between
them. The parties agree that their employment relationship is and has been “at will,” and that
either has the right to end the employment relationship at any time, with or without notice or
cause.

	1.	 	In consideration for the promises made herein by the Executive, the Company hereby agrees as
follows:

	 	(a)	 	Severance Pay. The Company will pay to the Executive severance pay in
the gross amount of $                      , minus customary payroll deductions, in accordance with
Section 3.2(a)(i) of the Factory Card Outlet Executive Severance Plan (the “Severance
Plan”). This payment shall be made in accordance with Section 3.4 of the Severance
Plan. The Company will also pay Executive accrued but unused vacation pay in the
amount of $                      representing days of accrued but unused vacation.
	 
	 	(b)	 	The Executive will be eligible to receive the bonus amount, if any, in
accordance with Section 3.2(a)(ii) of the Severance Plan, such amount to be paid in
accordance with Section 3.4 of the Severance Plan.
	 
	 	(c)	 	Other Benefits. The Executive will be eligible to receive other
benefits as described in the Severance Plan.
	 
	 	(d)	 	Unemployment Compensation. The Company will not contest the decision
of the appropriate regulatory commission regarding unemployment compensation that may
be due to the Executive.

	2.	 	In consideration for the Executive’s right to receive the severance pay and other benefits
described in the Plan and this Release, Executive hereby agrees as follows:

	 	(a)	 	Waiver. Executive and any person acting through or under the Executive
hereby release, waive and forever discharge the Company, its past subsidiaries and its
past and present affiliates, and their respective successors and assigns, and their
respective present or past officers, trustees, directors, shareholders, Executives and
agents of each of them, from any and all claims, demands, actions, liabilities and
other claims for relief and remuneration whatsoever (including without limitation
attorneys’ fees and expenses), whether known or unknown, absolute, contingent or
otherwise (each, a “Claim”), arising or which could have arisen up to and including the
date of his execution of this Release, including without limitation those arising out
of or relating to Executive’s employment or cessation and termination of employment, or
any other written or oral agreement, any change in Executive’s employment status, any
benefits or compensation, any

 

 

	 	 	 	tortious injury, breach of contract, wrongful discharge (including any Claim for
constructive discharge), infliction of emotional distress, slander, libel or
defamation of character, and any Claims arising under Title VII of the Civil Rights
Act of 1964 (as amended by the Civil Rights Act of 1991), the Americans With
Disabilities Act, the Rehabilitation Act of 1973, the Equal Pay Act, the Fair Labor
Standards Act, the Older Workers Benefits Protection Act, the Age Discrimination in
Employment Act, the Executive Retirement Income Security Act of 1974, or any other
federal, state or local statute, law, ordinance, regulation, rule or executive
order, any tort or contract claims, and any of the claims, matters and issues which
could have been asserted by Executive against the Company or its subsidiaries and
affiliates in any legal, administrative or other proceeding. Executive agrees that
if any action is brought in his or her name before any court or administrative body,
Executive will not accept any payment of monies in connection therewith.

	 	(b)	 	Nondisparagement. Executive agrees that he or she will not, nor will
he or she cause or assist any other person to, make any statement to a third party or
take any action which is intended to or would reasonably have the effect of disparaging
or harming the Company or the Company’s employees, officers and managers.
	 
	 	(c)	 	Miscellaneous. Executive agrees that this Release specifies payment
from the Company to himself or herself, the total of which meets or exceeds any and all
funds due him or her by the Company, and that he or she will not seek to obtain any
additional funds from the Company with the exception of non-reimbursed business
expenses. (This covenant does not preclude the Executive from seeking workers
compensation, unemployment compensation, or benefit payments from Company’s insurance
carriers that could be due him or her.)
	 
	 	(d)	 	Non-Competition, Non-Solicitation and Confidential Information.

	 	(i)	 	No severance pay shall be paid during any period in which the
Executive engages in a Competing Business (defined below) or in Solicitation
(defined below) or after the Executive has disclosed Confidential Information
(defined below), and in consideration of severance pay the Executive will not
during the [six] [eighteen] month period following the Executive’s termination
of employment (the “Severance Period”) engage in a Competing Business or in
Solicitation or disclose Confidential Information.
	 
	 	(ii)	 	The prohibition on engaging in a Competing Business set forth
in Section 2(d) of this Release shall mean participating, directly or
indirectly, in any manner whatsoever including, without limitation, either
individually, or in partnership, jointly or in conjunction with any person,
firm or corporation, or as employee, principal, agent, director, officer,
investor, lender, consultant or shareholder (other than by way of less than
five percent (5%) ownership of stock in a publicly traded Company or limited
partnership); provided, however, that such participation shall not include any
activity engaged in with the prior written approval of the Compensation

-2-

 

	 	 	 	Committee of Factory Card Outlet. For purposes of this Release, “Competing
Business” shall mean any entity or business; (a) engaged in the operation of
retail stores for the primary purpose of selling greeting cards, gift wrap
and party supplies and which operates such retail stores in any market in
which the Company is operating a retail store at the time of the executive’s
termination of employment, or a market into which the Executive knows the
Company is intending to enter; or (b) is engaged in the primary business of
the manufacture and distribution of greeting cards, gift wrap and party
supplies.
	 
	 	(iii)	 	For purposes of this Release, “Solicitation” shall mean
recruiting, soliciting or inducing, directly or indirectly, any non-clerical
employee or employees of the Company or any advisor or consultant to the
Company to terminate their employment, or otherwise cease their relationship
with the Company or hiring, retaining or assisting another person or entity to
hire or retain any employee of the Company or any advisor or consultant to the
Company or any person who within six (6) months before such Solicitation had
been a non-clerical employee, advisor or consultant of the Company or any of
its affiliates.
	 
	 	(iv)	 	The Company owns and has developed, and will develop, certain
proprietary techniques and confidential information which have great value to
its business (referred to for purposes of Section 2(d) of this Release as
collectively as “Confidential Information”). Confidential Information includes
not only information disclosed by the Company to the Executive, but also
information developed or learned by the Executive during the course or as a
result of employment with the Company, which information is the property of the
Company. Confidential Information includes all information that has or could
have commercial value or other utility in the business in which the Company is
engaged or in any business in which the Executive is aware the Company is
contemplating engaging, and all information of which the unauthorized
disclosure could be detrimental to the interests of the Company, whether or not
such information is specifically labeled as Confidential Information by the
Company. By way of example and without limitation, Confidential Information
includes any and all information developed, obtained or owned by the Company
concerning trade secrets, techniques, know-how, business plans, strategies,
forecasts, unpublished financial information, orders, agreements and other
forms of documents, price and cost information, merchandising opportunities,
expansion plans, store plans, budgets, projections, customer, supplier and
subcontractor identities, characteristics and agreements, and salary, staffing
and employment information. Notwithstanding the foregoing, Confidential
Information shall not include any information which (a) was in the public
domain at the time of receipt by the Executive or thereafter without breach or
violation of Section 2(d) of this Release, or (b) was furnished the Executive
by a third party lawfully entitled to do so and not known to the Executive to
be bound by a confidentiality agreement to the Company.

-3-

 

	 	 	 	The Executive shall not, directly or indirectly, use, make available, sell,
disclose or otherwise communicate to any corporation, partnership,
individual or other third party, other than in the course of the Executive’s
assigned duties and for the benefit of the Company, any Confidential
Information. In the event that the Participant is requested (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any Confidential
Information, the Participant agrees to notify the Company promptly of such
request(s) and the documents requested thereby so that the Company may seek
an appropriate protective order and/or waive in writing the Participant’s
compliance with the provisions of this Plan. It is further agreed that, if
in the absence of a protective order or the receipt of a waiver hereunder
the Participant is nonetheless, in the opinion of the Participant’s counsel,
compelled to disclose such Confidential Information or else stand liable for
contempt or suffer other censure or penalty from the tribunal or
governmental or similar authority, the Participant may disclose such
information without liability hereunder, provided, however, that the
Participant shall give the Company written notice of the information to be
so disclosed as far in advance of its disclosure as is practicable and shall
use the Participant’s best efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such portion of
the information required to be disclosed at the Company designates. In the
event the Executive’s employment with the Company ceases for any reason, the
Executive will not remove from the Company’s premises without its prior
written consent any records, files, drawings, documents, equipment,
materials and writings received from, created for or belonging to the
Company, including those which relate to or contain Confidential
Information, or any copies thereof. When employment with the Company
terminates, the Executive will immediately deliver the same to the Company.
	 
	 	(v)	 	In the event the Executive violates any requirement of Section
2(d) of this Release the Company may, in addition to any other rights or
remedies which the Company may have at law, in equity, or under this Release or
any other agreement, recover immediately upon notice and demand all severance
pay theretofore paid to the Executive.
	 
	 	(vi)	 	If any restriction set forth in this Release is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or over too broad
a geographic area (as applicable), it shall be interpreted to extend over a
maximum period of time, range of activities or geographic area to which it may
be enforceable.
	 
	 	(vii)	 	Executive acknowledges and agrees that the remedy at law
available to the Company for breach of any of provision of Section 2(d) of this
Release would be inadequate, and that damages flowing from such a breach may
not readily be susceptible to being measured in monetary terms.

-4-

 

	 	 	 	Accordingly, Executive acknowledges, consents and agrees that, in addition
to any other rights or remedies which the Company may have at law, in equity
or under this Agreement, upon adequate proof of violation of any provision
of Section 2(d) of this Release, the Company shall be entitled to immediate
injunctive relief and may obtain a temporary order restraining any
threatened or further breach, without the necessity of proof of actual
damage.

	 	(e)	 	THE COMPANY AND THE EXECUTIVE AGREE THAT THE SEVERANCE PAY AND BENEFITS
DESCRIBED IN THIS RELEASE AND THE SEVERANCE PLAN ARE CONTINGENT UPON THE EXECUTIVE
SIGNING THIS RELEASE. The Executive understands and agrees that if he or she
revokes this Release, that he or she will immediately refund to the Company any and all
severance payments and other benefits he or she may have already received.
	 
	 	(f)	 	The waiver contained in Section 2(a) above does not apply to any Claims with
respect to:

	 	(i)	 	Any unreimbursed claims for medical services rendered on or
before the date of execution of this Release in accordance with the terms of
the applicable Executive benefit plan,
	 
	 	(ii)	 	Any Claim under or based on a breach of this Release,
	 
	 	(iii)	 	Rights or Claims that may arise under the Age Discrimination
in Employment Act after the date that Executive signs this Release,
	 
	 	(iv)	 	Any right to indemnification in accordance with the Company’s
articles or by-laws.

	 	(g)	 	Executive acknowledges that he or she has read and is voluntarily signing this
Release. Executive also acknowledges that he or she is hereby advised to consult with
an attorney, he or she has been given at least [21 days] [45 days] to consider this
Release before the deadline for signing it, and he or she understands that he or she
may revoke the Release within seven (7) days of signing it. This Release accordingly
is not effective until the eighth (8) day after it is signed by Executive.

BY SIGNING BELOW, BOTH THE COMPANY AND EXECUTIVE AGREE THAT THEY UNDERSTAND AND ACCEPT EACH PART OF
THIS RELEASE.

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	(Executive)
	 	 	 	DATE
	 
	 	 	 	 	 	 
	FACTORY CARD & PARTY OUTLET CORP.	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	DATE

-5-exv10w2

 

Exhibit - 10.2

SENIOR EXECUTIVE AGREEMENT

          WHEREAS, Gary Rada (the “Executive”) is the President and Chief Executive Officer of Factory
Card & Party Outlet Corp., a Delaware corporation (the “Company”);

          WHEREAS, the Executive entered into an employment agreement with Factory Card Outlet of
America, Ltd., which is a wholly-owned subsidiary of the Company, dated as of December 23, 2004, as
amended on December 9, 2005, which remains in effect on the date hereof (the “Employment
Agreement”);

          WHEREAS, the Executive may, under certain circumstances, become a participant in the Company’s
Amended and Restated Executive Severance Plan (the “Executive Severance Plan”) (it being understood
that, in no event will the Executive become such a participant for as long as the Executive is also
a party to the Employment Agreement);

          WHEREAS, in connection with the proposed acquisition (the “Merger”) of the Company pursuant to
an Agreement and Plan of Merger (the “Merger Agreement”)
dated as of September 17, 2007, by and
among Amscan Holdings, Inc., a Delaware corporation (“Parent”), Amscan Acquisition, Inc., a
Delaware corporation and a direct wholly owned subsidiary of Parent (“Newco”) and the Company, the
Company shall become a wholly owned subsidiary of Parent; and

          WHEREAS, the Employment Agreement and the Executive Severance Plan shall remain in effect on
and after the consummation of the transactions contemplated by the Merger Agreement, with such
changes as may be effected by this Agreement, and, in connection therewith, the Executive shall
continue to serve as President and Chief Executive Officer of the Company and as a member of its
Board of Directors.

          NOW THEREFORE, in consideration of the mutual promises contained herein, the Executive, Parent
and the Company agree as follows:

          1. The Executive shall continue employment with the Company in accordance with the terms and
conditions of the Employment Agreement following the closing of the Merger (the “Closing”), it
being understood that the Company shall thereupon be a direct or indirect subsidiary of Parent
and/or AAH Holdings Corporation (“Holdings”). The Executive shall report to the President and
Chief Executive Officer of Holdings (“Holdings’ CEO”). During the term of this Agreement, the
Executive shall serve as a member of the Board of Directors of the Company. The Executive hereby
agrees that changes to his duties, responsibilities and authorities caused solely and as a direct
and proximate result of the Company becoming a privately held subsidiary of Parent and/or Holdings
will not in and of itself constitute “Good Reason” within the meaning of Section 10(b) of the
Employment Agreement or within the meaning of Section 1.2 of the Executive Severance Plan. The
Executive will have such duties, responsibilities and authorities which are customary and normally
associated with those of chief executive officers of retail businesses of similar size in the
United States. For the avoidance of doubt, Executive’s duties, responsibilities and authority
will include, but not be limited to: (i)

 

 

preparation, development and recommendation to Holdings’ CEO of budgets of the Company, (ii)
preparation, development and recommendation to Holdings’ CEO of business and staffing plans of the
Company, (iii) implementation of budgets, business plans and staffing plans, (iv) selection,
retention and termination of Company employees, including officers following consultation with
Holdings’ CEO, and (v) selection, retention and termination of outside consultants, contractors,
professionals and service providers to the Company. The Executive agrees that the material
employee benefit plans, programs and arrangements listed on Exhibit A to be provided by the
Company, Parent or Holdings to the Executive are reasonably acceptable to the Executive; provided,
however, amendments or modifications to the material employee benefit plans, programs and
arrangements listed on Exhibit A that apply to senior executives of the Company, Parent and
Holdings generally (whether or not they also apply to other participants) shall not result in a
breach of this Agreement or constitute “Good Reason” under the Employment Agreement.

          2. On the date of the Closing, Parent shall cause to be granted to the Executive nonqualified
stock options to purchase 30 shares of common stock of Holdings (such options, the “New Options”),
at an exercise price equal to the fair market value of a share of common stock at the date of
grant, which is expected to be $17,500 per share. One-half (50%) of the New Options shall be
subject to vesting in equal annual installments over a period of 5 years following the date of
grant, and the remaining one-half (50%) of the New Options shall be subject to performance vesting,
in each case on the terms set forth in the attached form of Option Agreements (attached as
Exhibit B-1 and Exhibit B-2). Such Option Agreements shall be granted under and
pursuant to the terms of the AAH Holdings Corporation 2004 Equity Incentive Plan (the “AAH Option
Plan”), in or substantially in the form of the attached options certificates. Notwithstanding
anything else in the Executive Severance Plan (including Section 3.5 thereof) or in any other
agreement, the New Options shall vest on such terms as provided in such Option Agreements.

          3. The Executive’s Employment Agreement is hereby amended as follows:

          (i) Section 2 of the Employment Agreement is hereby amended by substituting “April 7, 2010”
for “April 7, 2009”;

          (ii) Section 10(a) of the Employment Agreement is hereby amended by replacing the
parenthetical:

          “(the ‘Severance Period’; provided that if the Executive’s employment hereunder is terminated
during the Term (i) by the Corporation other than for Cause, or (ii) by the Executive for Good
Reason pursuant to a Notice of Termination and, in the case of clause (i) or (ii), such termination
occurs after a Change of Control, then the ‘Severance Period’ shall be thirty-six (36) months)”

          with the following parenthetical:

          “(the ‘Severance Period’; provided that if the Executive’s employment hereunder is terminated
during the Term but prior to April 8, 2009 (i) by the Corporation other than for

-2-

 

Cause, or (ii) by the Executive for Good Reason pursuant to a Notice of Termination and, in
the case of clause (i) or (ii), such termination occurs after a Change of Control, then the
‘Severance Period’ shall be thirty-six (36) months)”;

          and

          (iii) The characters “(a)” in Section 7(a) of the Employment Agreement are hereby deleted and
Section 7(b) of the Employment Agreement is hereby deleted in its entirety.

          4. Contemporaneous with the execution of this Agreement, the Company shall amend the Amended
and Restated Executive Severance Plan to be in the form attached hereto as Exhibit C (subject to
the terms of this Agreement, including the last sentence of Section 2).

          5. The parties hereto acknowledge and agree that in the event the Executive is given a Notice
of Non-Renewal (as defined in the Employment Agreement), then, on and after expiration of the Term
(as defined in the Employment Agreement), the Executive shall participate in the Executive
Severance Plan as in effect on the date hereof in accordance with the terms thereof (subject to the
terms of this Agreement, including the last sentence of Section 2) and shall not be entitled to
benefits pursuant to the Employment Agreement. For the avoidance of doubt, the giving of a Notice
of Non-Renewal is neither (i) a no Cause termination or (ii) a termination for Good Reason for
purposes of the Employment Agreement; provided, however, the Executive shall be entitled to
severance pay and benefits under the Executive Severance Plan in the event of the Company’s
decision not to continue Executive’s employment upon the expiration of the Term.

          6. This Agreement shall become effective on the Closing (as defined in the Merger Agreement)
and shall be of no force or effective if the Merger Agreement is terminated in accordance with its
terms.

[Remainder of page intentionally left blank]

-3-

 

          IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of this 17th day of
September, 2007.

	 	 	 	 	 
	 	Amscan Holdings, Inc.

 	 
	 	By:  	/s/ Robert J. Small
 	 
	 	 	Name:  	Robert J. Small  	 
	 	 	Title:  	Chairman of the Board 	 
	 
	 	Factory Card and Party Outlet Corp.

 	 
	 	By:  	/s/
Timothy J. Benson
 	 
	 	 	Name:  	Timothy J. Benson 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	Factory Card Outlet of America, Ltd.

 	 
	 	By:  	/s/
Timothy J. Benson
 	 
	 	 	Name:  	Timothy J. Benson 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	Executive

 	 
	 	       /s/
Gary Rada
 	 
	 	 	 
	 	 	 
	 

-4-

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