Document:

<PAGE>

                                                                   Exhibit 10.31

Mr. William E. Freeman, President & CEO
Factory Card Outlet Corp.
2727 Diehl Road
Naperville, IL. 60563

Re:  FACTORY CARD OUTLET CORP. - Emergence Financing (Creditor's Plan)
     -----------------------------------------------------------------

Dear Bill,

It was nice speaking with you today. In accordance with our conversation today
as well as our prior review of your Emergence Business Plan and Plan of
Reorganization Term Sheet, dated 12/5/01, as supported by the Official Committee
of Unsecured Creditors, Wells Fargo Retail Finance, LLC ("WFRF"), ("Lender") is
pleased to provide Factory Card Outlet Corporation and subsidiaries
(collectively "Borrower"), this revised proposal for emergence financing. This
letter is to demonstrate the Lender's interest in providing emergence financing
and should not be construed as a commitment to finance. Any commitment to
finance is subject to satisfactory due diligence, Senior Credit Committee
approval, satisfactory documentation and other traditional closing items. The
proposed financing arrangement would be as follows:

1.   Maximum Credit Facility: $40,000,000
     -----------------------

          a.   Working Capital Revolving Line (the "Line"): An amount up to the
               Maximum Credit Facility (less the amounts outstanding under the
               L/C Sub-Line), subject to the borrowing base formula as outlined
               below.

          b.   Inventory Borrowing Base: The lesser of; i) 65% of the cost of
               eligible inventory net of customary reserves or ii) 85% of the
               Net Retail Liquidation Value ("NRLV") as updated periodically by
               WFRF or an appraiser satisfactory to Lender.

          c.   Seasonal Advance Rate Increase: During the period August 1st
               through December 15th (Annually) and so long as no event of
               default exists, the advance rate on eligible inventory will
               increase to 70%, not to exceed 90% of NRLV.

          d.   Letter of Credit Subline: Up to $10,000,000 would be available
               for the issuance and/or guaranty of Letters of Credit. All such
               Letters of Credit and/or guaranties issued on a "commercial"
               basis for the purchase of eligible inventory will be reserved on
               a 50% basis under the Line. All such Letters of Credit issued on
               a "stand-by" basis will be reserved on a 100% basis.

          e.   Credit Card Receivables Subline: 85% of eligible Third Party
               Merchant Credit Card Receivables, capped at $500,000.

<PAGE>

Page 2

2.   Purpose:
     -------

          Loan proceeds would be used for the re-payment of the existing DIP
          facility and for post emergence general corporate purposes, including
          the financing of working capital needs and payment of amounts due
          under the Borrower's Plan of Re-organization.

3.   Interest Rate:
     -------------

          The initial rate of interest charged on the Line would be one-half of
          one percent (0.50%) above the present and future Reference Rate
          publicly announced from time to time by Wells Fargo Bank or at the
          Borrower's option, LIBOR + 2.50%. Interest would be calculated on the
          basis of a three hundred sixty (360) day year on actual days elapsed
          and would be payable monthly in arrears. At no time would interest
          charged on the Line be less than five percent (5.00%).

          The default rate of interest would be the current accruing rate +
          2.0%.

          The rate of interest charged under the Line would be adjusted based on
          the Borrower achieving and maintaining the following EBITDA
          requirements, to be measured annually upon receipt of FYE Audited
          Financial Statements.

          Pricing Grid:

          .    If EBITDA is greater than or equal to $12,000,001; Reference Rate
               (RR) or (LIBOR + 2.00%).

          .    If EBITDA is greater than or equal to $9,000,000 but less than
               $12,000,001; (RR + 0.25%) or (LIBOR + 2.25%).

          .    If EBITDA is less than $9,000,000; (RR + 0.50%) or (LIBOR +
               2.50%).

4.   Facility/Maintenance Fees:
     -------------------------

               a)   Emergence Financing Fee: A fee of $200,000 shall be earned
                    in full and payable at the date of closing.

               b)   Annual Facility Fee: A fee of one-quarter of one percent
                    (0.25%) of the Maximum Credit Line would be payable upon and
                    earned at the first and second anniversary of the loan
                    closing. The fee would be waived should certain FYE EBITDA
                    levels be achieved as follows;

                    .    Year 1: If EBITDA greater than or equal to $9,000,000

                    .    Year 2: If EBITDA greater than or equal to $10,000,000

<PAGE>

Page 3

               c)   Unused Line Fee: A fee of one-quarter of one percent (0.25%)
                    per annum, payable monthly would be charged for the average
                    daily-unused portion of the Line up to the Maximum Credit
                    Facility.

               d)   Letter of Credit Guaranty Fee: A fee equal to one percent
                    (1.00%) per annum of the actual amount of guaranties issued,
                    plus issuing bank charges, would be payable monthly in
                    arrears.

               e)   Collateral Management Fee: A monthly Collateral Management
                    fee of $5,000 would be earned and payable monthly, in
                    arrears.

               f)   Seasonal Advance Rate Increase Fee: An additional fee of
                    $10,000 will be charged to the loan each August 1st for the
                    seasonal increase in the inventory advance rate.

5.   Collections / Receipts:
     ----------------------

          Collections would be remitted to one or more lockboxes that would be
          assigned to and in form satisfactory to Lender. All collections would
          be subject to a one (1)-business day clearance charge. Such clearance
          charge would be for interest calculation purposes only and there would
          be no delay in the crediting of such collections for the purpose of
          calculating borrowing availability.

6.   Term; Automatic Renewal:
     -----------------------

          The Credit Facility would expire three (3) years ("Maturity") from the
          loan closing date and automatically shall be renewed for successive
          two-year periods thereafter, unless sooner terminated pursuant to the
          terms hereof. Either Borrowers or Agent (on behalf of Lender's) may
          terminate this agreement effective on the renewal date or on any
          one-year anniversary of the renewal date by giving the other party at
          least 90 days prior written notice.

7.   Early Termination:
     -----------------

          Termination of the loan prior to Maturity would result in the payment
          of an early termination premium equal to a percentage of the Maximum
          Credit Line as follows; year one (1.75%), year two (1.50%), plus 102%
          of all undrawn Letters of Credit.

8.   Security:
     --------

          As collateral for this financing agreement, Lender would have a first
          priority perfected security interest in all of Borrower's assets
          including, but not limited to: accounts receivable; inventory;
          trademarks and trade names; fixed assets;

<PAGE>

Page 4

          leasehold interests and real property and such other assets, tangible
          or intangible, real or personal as Lender designates.

9.   Covenants:
     ---------

          Borrower would be required to maintain financial and collateral
          covenants that are typically used by Lender in similar retail
          transactions and may include, minimum and maximum inventory levels,
          gross margin test, purchases test, maximum capital expenditures,
          EBITDA as well as other such tests. The covenants would be developed
          as a result of Lenders due diligence process and will be based off a
          discount of Borrower's, historic and projected operating performance.

10.  Closing Date:
     ------------

          If the transaction contemplated by this letter is not consummated on
          or before May 15, 2002, then the terms and conditions set forth herein
          shall expire, without further notice or act of any kind by Lender or
          any other party.

11.  Conditions Precedent:
     --------------------

          The following are some, but obviously not all, of the conditions
          precedent to any loan approval by Lender to Borrower:

               a)   Borrower and any subsidiaries and affiliates shall be a
                    corporation in good standing in the state of their
                    incorporation and qualified to do business in other states
                    where they have collateral.

               b)   The UCC financing statements, fixture filings, deeds of
                    trust or mortgages and related documents regarding the
                    collateral (as applicable) shall have been recorded in all
                    appropriate jurisdictions. Lender shall have received
                    written notification reflecting same.

               c)   Loan origination costs including, but not limited to, audit
                    fees, attorneys' fees, search fees, appraisals,
                    documentation and filings, shall be paid by Borrower.

               d)   Satisfactory completion of all due diligence including but
                    not limited to; updated field exam by Lender's examiners,
                    updated appraisal, which results are to be acceptable to
                    Lender.

               e)   Borrower shall have executed and delivered such documents,
                    instruments, security agreements, insurance, financing
                    statements, corporate guarantees, verifications, non-offset
                    letters, tax lien and litigation searches, good standing
                    certificates, copies of building

<PAGE>

Page 5

          leases, landlord's waivers, trust deeds or mortgages, opinions of
          counsel and done such other acts a Lender may request in order to
          obtain Lender's legal approval to effect the completion of the
          financing arrangements herein contemplated. All of the foregoing must
          be in a form satisfactory to Lender and Lender's counsel, all loans
          and advances shall be made pursuant to, and subject to, the terms of
          financing documents executed at the closing.

               f)   Approval of Wells Fargo Retail Finance Senior Credit
                    Committee and Wells Fargo Bank.

               g)   No material adverse change in the business, operations,
                    profits or prospects of Borrower shall have occurred since
                    the date of the Commitment.

               h)   Borrower shall, at loan closing, have minimum unused loan
                    availability of $4,000,000.

               i)   The Bankruptcy Court must confirm borrower's Plan of
                    Re-organization on terms acceptable to Lender.

               j)   Disclosure of any anticipated changes to Senior Management,
                    inclusive of; Chief Executive Officer, Chief Financial
                    Officer, Chief Operating Officer, EVP and General
                    Merchandising Manager and SVP of Retail Store Operations.

12.  Periodic Loan Maintenance Charges:
     ---------------------------------

          Borrower would be periodically charged for due diligence, loan
          maintenance, audit and appraisal costs & expenses.

13.      Loan Origination Costs:
         ----------------------

          In connection with the request for financing, Borrower understands
          that it will be necessary for Lender to make certain financial, legal
          and collateral investigations and determinations. Borrower agrees to
          pay for all of Lender's reasonably incurred costs and expenses
          incurred in connection with the proposed financing transaction
          including costs and expenses incurred by auditors and appraisers in
          verifying Borrower's records, Lender's reasonable legal expenses for
          advice in preparing documents in connection with the proposed loan,
          and any filing and search fees.

14.  Minimum Availability Requirement:
     --------------------------------

<PAGE>

Page 6

          Borrower would be required to maintain a minimum of $3,000,000 of
          excess availability under the formula based line of credit at all
          times.

This proposal letter is for your benefit only and shall not create rights in
favor of any other person or entity. Please confirm your Acknowledgement and
Acceptance of the proposed terms by executing below. Upon receipt of your
Acknowledgement and Acceptance, approval of the proposed financing terms will be
sought from the Senior Credit Committee of Wells Fargo Retail Finance, LLC.

Sincerely,

WELLS FARGO RETAIL FINANCE, LLC.

/s/ Thomas F. Morgan
--------------------
Thomas F. Morgan
Vice President

Acknowledged and Accepted,
This 18th Day of February 2002.

/s/ William E. Freeman
----------------------
William Freeman
CEO, Factory Card Outlet Corporation<PAGE>

                                                                Exhibit Ex 10.32

                              SEPARATION AGREEMENT

     This Separation Agreement ("Agreement") between FACTORY CARD OUTLET CORP.
(FCO), a Delaware corporation (the "Company"), and William E Freeman (the
"Executive") dated as of April 5, 2002.

                                    RECITALS

     The Company and Executive desire to provide an orderly and amicable
arrangement with respect to the cessation of Executive's employment as President
and Chief Executive Officer, and service as a director of the Company, and to
resolve claims between parties relating to his employment, the cessation of his
employment and the Company's Management Severance Plan (the "Severance Plan")(a
copy of which is attached hereto as Exhibit A).

                                    AGREEMENT

     In consideration of the foregoing recitals, the agreements set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and Executive agree as follows:

     1.   Resignation.
          -----------

          (a) Executive confirms his resignation as of the effective date of the
          Company's Amended Plan of Reorganization dated February 5, 2002, as it
          may be modified and amended (the "Separation Date") as President and
          Chief Executive Officer, as a director of the Company, as a director
          and officer of each subsidiary, if any for which Executive served in
          such capacity, and any other position or office with respect to the
          Company or any of its subsidiaries, including as a legal
          representative or trustee of any employee benefit plan or trust of any
          capacity, including that of an employee, independent contractor or
          otherwise, for the Company or any of its subsidiaries.

          (b) As a result of his voluntary resignation and the cessation of his
          employment, effective on the Separation Date, Executive has ceased to
          perform any duties or be entitled to or eligible for any compensation
          or benefits except as expressly provided in this Agreement. As
          outlined below, the Company offers and Executive accepts the following
          severance package.

     2.   Severance Package.
          -----------------

          (a) The Company shall pay the Executive severance in the amount of
          four hundred twenty seven thousand five hundred dollars ($427,500.00),
          less applicable payroll deductions and tax withholdings ("Severance
          Pay"). This amount is equal to eighteen months salary of the
          Executives current base annual salary. The Severance Pay shall be
          payable to the Executive within eight (8) business days after the
          Effective Date of this Agreement, as the Effective Date is defined
          below in Paragraph 8 of this Agreement.

                                     - 1 -

<PAGE>

(b)   Management Bonuses

      (i)   Executive shall be entitled to the receipt of his remaining
            Management Bonus for fiscal year 2001 (as set forth in and
            calculated pursuant to the Incentive Plan, which is attached hereto
            and incorporated herein as Exhibit B). Executive acknowledges and
            affirms that, pursuant to the Incentive Plan, he has already
            received thirty five thousand six hundred twenty five dollars
            ($35,625.00), less applicable payroll deductions and tax
            withholdings, of his Management Bonus for fiscal year 2001, which
            was paid to his in or around August 2001. Executive further agrees
            that the amount of his remaining Management Bonus for fiscal 2001
            will be paid to him, less applicable payroll deductions and tax
            withholdings, at the same time and in the same manner as payments
            are made to other participants in the Incentive Plan, as dictated by
            and provided for in the Incentive Plan, attached hereto as Exhibit
            B.

      (ii)  If Executive would have otherwise been be entitled to the receipt of
            a Management Incentive Bonus for fiscal year 2002 ending February 1,
            2003, (as set forth in and calculated pursuant to the Management
            Incentive Plan, which is attached hereto and incorporated herein as
            Exhibit C) Executive shall receive a lump sum payment equal to that
            amount prorated in accordance with the provision set forth in the
            Severance Plan. (Such pro-ration shall be calculated in an amount
            equal to two twelve's which is equal to the number of months of
            completed service in the fiscal period). Executive further agrees
            that the amount of his Management Bonus for fiscal 2002 will be paid
            to him, less applicable payroll deductions and tax withholdings, at
            the same time and in the same manner as payments are made to other
            participants in the Incentive Plan, as dictated by and provided for
            in the Incentive Plan, attached hereto as Exhibit C.

      (iii) The Company will pay the Executive an Emergence Bonus in the amount
            of two hundred thirty five thousand dollars ($235,000), less
            applicable payroll deductions and tax withholdings, upon final
            emergence from Chapter 11.

(c)   Executive shall be paid the full amount of vacation pay to which he would
      be entitled during 2002, less applicable payroll deductions and tax
      withholdings. Employee acknowledges and affirms that in 2002 he would have
      been entitled to four (4) weeks paid vacation and that the appropriate and
      accurate compensation for that vacation pay is twenty one thousand nine
      hundred twenty three dollars and seven cents ($21,923.07), less applicable
      payroll deductions and tax withholdings.

(d)   Executive shall be entitled to receive the outstanding portion of his
      retention Bonus pursuant to the Company's "Retention Bonus Program(s) that
      were in effect from February 1, 1999 through November 1, 2001 that become
      payable upon the Company's receipt of Confirmation of a Plan of
      Reorganization. Executive acknowledges and affirms that the amount of this
      retention bonus, to which he is entitled under the Retention Bonus
      Program(s), is fifty seven thousand one hundred and seventy dollars and
      fifty cents ($57,170.50), less applicable payroll deductions and tax
      withholdings. Executive further acknowledges and affirms that he will not
      be

                                     - 2 -

<PAGE>

      paid the final portion of his Fall 2001 Retention Bonus until
      approximately ninety (90) days after the Bankruptcy Court's confirmation
      of a Plan of Reorganization for the Company, at which time Executive will
      be paid the remainder of his/her Retention Bonus at the same time and in
      the same manner as the active participants in the Company's Fall 2001
      Retention Bonus Program. Executive acknowledges that the amount of the
      final Retention Bonus to which he is entitled is seven thousand nine
      hundred sixteen dollars ($7,916.00).

(e)   The Company shall continue Executive's medical, dental and basic term life
      insurance coverage (as in effect immediately prior to the Separation Date)
      until the earlier of (i) eighteen (18) months or (ii) the first date on
      which Executive becomes covered under any other group health plan (as an
      employee or otherwise) which does not contain any exclusion or limitation
      with respect to any preexisting condition of Executive; provided that
      Executive's Severance Pay shall be reduced by an amount equal to the
      portion of the periodic cost for such coverage that was payable by
      Executive immediately prior to the Separation Date consistent with the
      Company's ordinary payroll practices. As and to the extent provided by the
      Consolidated Omnibus Reconciliation Act of 1985 ("COBRA"), Executive will
      be eligible to continue his/her health insurance benefits at his/her own
      expense for up to 18 months following the end of the 18 month Severance
      Period and, later, to convert such benefits to an individual policy
      pursuant to and consistent with COBRA. Executive will be provided with a
      separate notice of his/her COBRA rights at the end of the Severance Period
      consistent with and to the extent required by COBRA.

(f)   The Company will reimburse Executive for any unreimbursed reasonable
      business expenses incurred and paid for by Executive prior to the
      Separation Date consistent with the Company's policies in effect with
      respect to travel, entertainment and other business expenses, and upon
      Executive's providing to the Company reasonably acceptable documentation
      of such expenses within sixty (60) days after the Separation Date.

(g)   The Company will reimburse Executive for actual expenses incurred for
      relocation of his personal possessions, plus two cars from the Naperville,
      IL apartment to his New York residence up to a maximum dollar amount of
      three thousand five hundred dollars ($3,500.00).

(h)   The Company will reimburse the Executive's reasonable expenses incurred to
      consult with legal council regarding this Agreement, up to a maximum of
      five thousand dollars ($5,000.00).

(i)   Except as expressly provided in this Agreement or in an employee benefit
      plan of the Company, Executive shall not be entitled to receive any
      severance payments or any other benefits or compensation from the Company.

(j)   Nothing in this Agreement shall preclude the Company from amending or
      eliminating any employee benefit plan, program or practice at any time in
      compliance with applicable law.

                                     - 3 -

<PAGE>

3.    Restrictive Covenants.

      (a)  Executive hereby agrees that during the term of his employment with
           the Company and for a period of six months thereafter (the
           "Restriction Period"), the Executive will not, singly, jointly, or as
           a partner, member, consultant, or agent of any partnership, or as an
           agent, consultant, or stockholder of any other corporation or entity,
           or as an investor of more than five percent (5%) of the voting stock
           of any entity, or in any other capacity, directly, indirectly or
           otherwise beneficially:

               (i)   Own, manage, operate, join in, control or participate in
                     the ownership, management, operation, or control of, or
                     work for (as an employee, consultant, independent
                     contractor or otherwise), or permit the use of his name by,
                     or provide financial, sales, marketing or other assistance
                     to, or be connected in any manner with, any of the
                     following (each a "Competitive Business"): (1) any retailer
                     located anywhere in the Restricted Area (as herinafter
                     defined) which generates thirty-five percent (35%) or more
                     of its gross revenues from the sale, anywhere in the
                     Restricted Area, of greeting cards, party goods, gift wrap
                     accessories, stationery and/or any other products or
                     services which materially reproduce, incorporate or copy
                     any of the products or services which are offered or
                     developed for marketing by the Company during the term of
                     the Employee's employment with the Company ("Competitive
                     Products") or which offers greeting cards for sale in the
                     Restricted Area under a "one price" strategy at a price per
                     card of $.49 or less or under a "half-off" strategy at a
                     price per card of 2/$1.00 or less, or (2) any retailer
                     which generates thirty-five percent (35%) or more of its
                     gross revenue from the sale of Competitive Products
                     anywhere in the restricted Area;

               (ii)  Induce or attempt to induce any person who, during the term
                     of Executive's employment with the Company, is an employee,
                     representative, consultant, agent or supplier of the
                     Company, to terminate his, her or its employment or
                     relationship with the Company or to violate the terms of
                     any agreement between said representative, agent,
                     consultant, employee or supplier and the Company, or hire
                     or attempt to hire any employee of the Company who has left
                     the employment of the Company within sixty (60) days after
                     the termination of such employee's employment with the
                     Company; or

               (iii) Induce or attempt to induce any person, business or entity
                     which is or was a customer of the Company at any time
                     during the term preceding the effective date of this
                     Agreement to terminate any written or oral agreement or
                     understanding with the Corporation or to become a customer
                     of any person, corporation, partnership or other entity
                     which engages in any Competitive business.

      (b) For purposes of Section 3(a) hereof, "Restricted Area" means the
          United States (and any of its territories), Canada and Mexico.

      (c) If the Employee violates any of the restrictions contained in Section
          3(a) above, the Restriction Period automatically shall be increased by
          the period of time

                                     - 4 -

<PAGE>

           from the commencement of any such violation until such time as the
           Executive has cured such violation.

      (d)  Executive acknowledges and agrees that his employment by the Company
           under this Agreement necessarily involves his understanding and
           having access to certain trade secrets and other confidential
           pertaining to the business of the Company and any affiliates.
           Accordingly, Executive agrees that for a period of one six months
           following the Separation Date, Executive shall not, without the
           express written consent of the Board or a person authorized thereby,
           directly or indirectly, disclose to any person, corporation or entity
           or use or knowingly permit to be so disclosed or used, for the
           benefit of any person, corporation or entity, or himself, any
           material confidential information obtained by the Executive while in
           the employ of the Company with respect to any of the Company or any
           of the affiliates' products, customers, or current or future plans,
           the disclosure of which the Executive knows or should reasonably
           believe will be damaging to the Company, provided that such
           confidential information shall not include any information known or
           available generally to the public (other than as a result of
           unauthorized disclosure by the Executive). This provision is intended
           only to prevent unauthorized disclosure of material confidential
           information and is not intended to preclude the Executive from
           securing other employment following the Separation Date except as
           subject to such restrictions on such other employment as set forth in
           subparagraph (a) of this section.

      (d)  Upon the Separation Date:

               (i)   to the extent within his possession or control, the
                     Executive shall surrender and deliver to the Company or its
                     authorized representative all files, figures, calculations,
                     letters, papers, records, proposals, listings, brochures,
                     manuals, instruments, drawings, designs, programs, plans or
                     statistics, or any copies thereof, any information or
                     instruments derived therefrom, or any other similar
                     documents or information of any type or description,
                     however such information might be obtained or recorded and
                     on whatever medium such information may be contained,
                     arising out of or in any way relating to the business of
                     affairs of the Company or any affiliate or obtained as a
                     result of or in connection with the Executive's employment
                     by the Company or any affiliate; and

               (ii)  the Executive shall not be entitled to retain a copy of any
                     document or information referred to in section (i) above;
                     and

               (iii) Executive shall cease to represent himself as being in any
                     way connected with, or interested in the business of, the
                     Company or any affiliate.

      (e)  Executive agrees and acknowledges that the Company does not have any
           adequate remedy at law for the breach or threatened breach by the
           Executive of any of the provisions of this Section 3 and agrees that
           the Company will be entitled to injunctive relief (without proof of
           monetary or immediate damage and without any bond or other security
           being required) to bar Executive from such breach or threatened
           breach in addition to any other remedies which might be available to
           the Company at

                                     - 5 -

<PAGE>

     law or in equity. If, at any time, Executive violates, to any material
     extent, any of the covenants or agreements set forth in this Section 3, the
     Company shall have the right to immediately terminate all of its
     obligations to make any further payments under Section 2.

4.   Releases and Covenants Not To Sue.
     ---------------------------------

     (a)  Executive, for himself, his legal representatives, assigns, heirs,
          distributees, devisees, legatees, administrators, personal
          representatives and executors (collectively, the "Executive Releasing
          Parties"), releases and forever discharges the Company, its present or
          past subsidiaries and affiliates, and their respective successors and
          assigns, and their respective present or past officers, trustees,
          directors, shareholders, employees and agents of each of them
          (collectively, the "Executive Released Parties"), 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 Agreement, including
          without limitation those arising out of or relating to Executive's
          employment or cessation and termination of employment, the Severance
          Plan or any other written or oral agreement, any change in Executive's
          employment status, any benefits or compensation, any tortuous 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 Illinois Human Rights Act, the Illinois Wage
          Payment and Collection Act, the Employee Retirement Income Security
          Act of 1974, or any other federal, state or local stature, law,
          ordinance, regulation, rule or executive order, any tort or contract
          or contract claims, and any of the claims, matters and issues which
          could have been asserted by Executive against the Company or its
          subsidiaries in any legal, administrative or other proceeding;
          provided, however, that the foregoing release does not apply to (i)
          any Claim under or based on this Agreement or (ii) any vested benefit
          Executive may have as of the Separation Date under any applicable
          employee benefit plan of the Company.

     (b)  Executive further agrees on behalf of himself and the Executive
          Releasing Parties (i) not to assert any Claim against the Executive
          Released Parties which Claim has been released pursuant to Section
          4(a) and (ii) not to file or commence any proceeding in any forum in
          pursuit of any such released Claim. Executive agrees to indemnify and
          hold harmless each of the Executive Released Parties with respect to
          any such Claim or proceeding. If Executive files or commences any
          proceeding in pursuit of such claim, Executive shall forthwith return
          to the Company all payment and benefit amounts previously made to him
          pursuant to this Agreement.

     (c)  The Company, for itself and each of its subsidiaries and their
          respective assigns, and to the extent it is legally able to do so, for
          their respective present or past officers, trustees, directors,
          shareholders, employees and agents (in each case solely

                                     - 6 -

<PAGE>

          relating to the scope of their employment or in their corporate
          capacities and to the extent such person is making a claim on behalf
          of the company) (the "Company Releasing Parties") hereby releases and
          forever discharges Executive from any and all Claims arising or which
          could have arisen up to and including the date of the execution of
          this Agreement, out of or relating to Executive's employment,
          cessation of employment or change in employment status, the
          termination of prior agreements with his or the performance of his
          duties on behalf of the Company; including any act, omission,
          occurrence, or other matters related to such employment, and any of
          the claims, matters and issues which could have been asserted by the
          Company against Executive in any legal, administrative, or other
          proceeding; provided, however, that the foregoing release does not
          apply to (i) any Claim under or based on this Agreement, (ii) any act
          or omission involving fraud; intentional tort; willful, reckless or
          grossly negligent misconduct; criminal activity; or the receipt by
          Executive, directly or indirectly, of any financial or other personal
          benefit to which she is not entitled, or (iii) any obligation of
          Executive with respect to Section 3 of this Agreement.

     (d)  The Company further agrees on behalf of itself and the Company
          Releasing Parties (i) not to assert any Claim against Executive which
          Claim has been released pursuant to Section 4(c) and (ii) not to file
          or commence any proceeding in any forum in pursuit of any such
          released Claim. The Company agrees to indemnify and hold harmless
          Executive in respect of any such Claim or proceeding.

5.   No Detrimental Communication.
     ----------------------------

     (a)  Executive will not disclose or cause to be disclosed any negative,
          adverse or derogatory comments or information about the Company, about
          any product or service provided by the Company, or about the Company's
          prospects for the future, except as may be required by legal process.

     (b)  The Company will not disclose or cause to be disclosed any negative,
          adverse or derogatory comments or information about Executive, except
          as may be required by legal process; provided, however, that the
          Company may (i) provide factual information regarding the beginning
          and ending dates of Executive's employment by the Company and the
          positions which she held during such employment and (ii) make all
          disclosures which, based on the advice of legal counsel, the Company
          reasonably believes to be required by securities or other law.

6.   Further Assistance. For a period of three years after the Separation Date,
     Executive shall from time to time provide the Company with such assistance
     and cooperation as the Company may from time to time request in connection
     with any investigation, claim, dispute, judicial, legislative,
     administrative or arbitral proceeding, or litigation (any of the foregoing,
     a "Proceeding") arising out of matters within the knowledge of Executive
     and related to his position as an employee of the Company. Such assistance
     and cooperation shall include providing information, declarations or
     statements to the Company, meeting with attorneys or other representatives
     of the Company, and preparing for and giving truthful testimony in
     connection with any Proceeding or related deposition. In any such instance,
     Executive shall provide such assistance and cooperation at times and in
     places mutually convenient for the Company and Executive and which do not
     unreasonable interfere with

                                     - 7 -

<PAGE>

Executive's business or personal activities. The Company shall (i) pay
Executive's reasonable out-of-pocket costs and expenses in connection with such
assistance and cooperation, whenever provided, and (ii) if the Company shall
require Executive to provide more than three days of assistance or cooperation
pursuant to this Section during any calendar month, the Company shall pay
Executive a consulting fee equal to one thousand one hundred dollars ($1,100.00)
for each such day in excess of three days.

     7. Voluntary Agreement. Executive acknowledges and represents that he (i)
has read this Agreement, (ii) has had the opportunity to consult with legal
counsel prior to executing this Agreement, (iii) understands the legal effect
and binding nature of this Agreement; and (iv) is acting voluntarily and with
full knowledge of his actions in executing this Agreement. Further, Executive
acknowledges that he has been given at least twenty-one (21) days to fully
consider entering into this Agreement before its execution.

     8. Revocation. Executive is advised that he has seven (7) days following
his execution of the document to revoke it. Any such revocation must be in
writing and delivered by the close of business on the seventh day, to William
Beyerl, Vice President of Human Resources for the Company, 2727 Diehl Road,
Naperville, Illinois 60563. In the event Executive exercises his right of
revocation within seven (7) days, this Agreement shall be null and void.
Executive and the Company further agree that this Agreement does not become
effective or enforceable until the day after the revocation period has expired
("Effective Date"). Executive therefore shall not be entitled to Severance Pay
until the expiration of the revocation period.

     9. No Charges or Complaints Filed. Executive represents that he has not
filed any complaints or charges against the Company with any local, state or
federal agency or court. If any such complaint or charge was or is filed on her
behalf, Executive shall take all reasonable steps necessary to effectuate
withdrawal of such complaint or charge.

     10. Executive has no knowledge of any symptoms, events, or facts which
could form the basis of a claim by him against the Company before the Illinois
Industrial Commission or any similar agency or tribunal administering and/or
adjudicating worker's compensation claims or suits in any other state.

     11. Executive acknowledges that he has received from the Company all wages,
compensation, bonuses, severance monies, accrued vacation pay, and other
benefits (including incentive compensation and stock options) to which he is
entitled, except for the Severance Pay expressly set forth on Paragraph 2.

     12. Confidentiality. Executive shall keep confidential the existence of
this Agreement, as well as all of its terms and conditions, and shall not
disclose the existence, terms or conditions of this Agreement to any person,
except to his attorney, or accountant, who have agreed to keep confidential the
existence, terms and conditions of this Agreement; and except that Executive may
inform any prospective employer that the reason for his separation from
employment with the Company was to pursue other opportunities. In the event that
Executive believes he is compelled by law to divulge the existence, terms or
conditions of this Agreement, he will notify the Company in writing of the basis
for that belief before actually divulging the information, in order to permit
the Company to take steps to protect its interests. Executive affirmatively
represents and avows that, as of the date of this Agreement, he has not
disclosed the existence, terms or conditions of this

                                     - 8 -

<PAGE>

Agreement, except as permitted by this Section. The Company shall not disclose
the existence, terms or conditions of this Agreement, except to the extent
necessary to further the Company's legitimate business interests or as may be
required by legal process or by applicable law, rule or regulation.

     13. Governing Law: Disputes. This Agreement shall be governed by, and
construed and enforced in accordance with the Employee Retirement Income
Security Act of 1974 ("ERISA") to the extent applicable and, the laws of the
State of Illinois, without giving effect to its conflict or choice of law
provisions. Any action brought to enforce this Agreement may be brought in a
state court of competent jurisdiction located in DuPage County, Illinois, or a
federal court of competent jurisdiction located in the Northern District of
Illinois. Executive submits to the jurisdiction of any state court located in
DuPage Count, Illinois or any federal court located in the Northern District of
Illinois and waives the defense of an inconvenient forum to the maintenance of
any action in such jurisdiction. Each party agrees that, if any action is
brought to enforce this Agreement in a state court outside of DuPage County,
Illinois or any federal court outside of the Northern District of Illinois, such
party consents to a transfer to a state court located in DuPage County, Illinois
or a federal court located in the Northern District of Illinois, and will accept
service of process and other papers by any method permitted by the rules of the
court to which such action is transferred.

     14. Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
delivered personally, sent by certified, registered or express mail, postage
prepaid, or by overnight delivery service and shall be deemed to have been duly
given when delivered or three days after mailing (in the case of communications
sent by mail), as follows:

If to the Company:

                Factory Card Outlet Corp.
                2727 Diehl Road
                Naperville, Illinois 60563
                Attention:  Chairman of the Board or
                            V.P. of Human Resources

with a copy to:

                Fisher & Phillips LLP
                420 Marquette Building
                140 S. Dearborn Street, Suite 420
                Chicago, Illinois 60603
                Attention:  Jane M. McFetridge

If to Executive:

                William E Freeman
                254 Beacon Light Road
                Califon, NJ 07830

                                     - 9 -

<PAGE>

Notice may also be given at such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.

     15. Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by Executive and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.

     16. Counterparts. This Agreement may be executed in separate counterparts,
each of which when so executed shall be deemed to be an original but both of
which together will constitute one and the same instrument.

     17. Withholding. The Company shall withhold from all benefits and other
amounts due or otherwise payable to Executive hereunder in order to comply with
any federal, state, local or other income or other tax laws requiring
withholding with respect to compensation and benefits provided to Executive
pursuant to this Agreement, or to comply with any personal or voluntary
deduction, including without limitation the employee contribution for any
insurance plan in which Executive participates, or other deductions authorized
by law or that have been requested by Executive during the course of his/her
employment.

     18. Non-Admission. Nothing contained in this Agreement, nor any actions
taken by any party hereto in connection herewith, shall constitute, be construed
as, or be deemed to be, an admission of fault, liability, or wrongdoing of any
kind whatsoever on the part of any party hereto. The Company asserts that at all
times its treatment of Executive is, was and has been fully consistent with the
requirements of the law and the Company's policies and Executive acknowledges
the Company's assertion.

     19. Validity. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, covenants and
restrictions of this Agreement shall remain in full force and effect and in no
way shall affect, impair or invalidate this Agreement. If any court determines
that any provision of Paragraph 3 of this Agreement is unenforceable because of
the duration or geographical scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.

     20. Entire Agreement. Except as otherwise expressly provided in this
Agreement, this Agreement contains the entire agreement between the parties
hereto with respect to the transactions contemplated hereby and supercedes all
previous oral and written agreements and all prior or contemporaneous oral
negotiations, commitments and understandings. Neither party has made, and
neither party has relied upon, any representation or warranty in connection with
this Agreement except as expressly set forth herein.

     21. Assignment of Interests. Executive warrants that he has not assigned,
transferred or purported to assign or transfer any claim of Executive against
the Company.

                                     - 10 -

<PAGE>

     22. Sections or Paragraphs. Except where otherwise indicated by the
context, any reference to a "Section" or "Paragraph" shall be to a section or
paragraph of this Agreement.

                                     - 11 -

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date set forth above.

                                     FACTORY CARD OUTLET CORP.

                                     By: /s/ William A. Beyerl
                                         -------------------------------
                                             William A. Beyerl
                                             Vice President Human Resources

                                     EXECUTIVE:

                                     By: /s/ William E. Freeman
                                         -------------------------------
                                             William E. Freeman

                                     Acknowledged and Approved by
                                     Factory Card Outlet Severance Pay Plan
                                     Administrative Committee:

                                     By: /s/ Gerald L. Gitner
                                         -------------------------------
                                             Gerald L. Gitner

                                         /s/ Laurie M. Shahon
                                         -------------------------------
                                             Laurie M. Shahon

                                     - 12 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00037-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00037-of-00352.parquet"}]]