EX-10 4 exhkesp.txt 2004 KEY EMPLOYEE SEVERANCE PLAN Exhibit 10.28 Factory 2-U Stores, Inc. 2004 Key Employee Severance Plan On January 13, 2004, in order to implement an operational and financial restructuring, Factory 2-U Stores, Inc. (the "Company") voluntarily filed a petition under chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court in the District of Delaware (the "Bankruptcy Court"). In order to maintain consistently effective, high quality management at a number of critical levels during the reorganization of the Company, the Board of Directors of the Company has determined that it is in the best interest of the estate to develop and implement a key employee severance plan (the "Severance Plan"). The Severance Plan is in lieu of any severance benefits that may be available under any pre-petition agreement between any participating employee and the Company. The Severance Plan is subject to Bankruptcy Court approval. 1. Potential Participants in the Severance Plan -------------------------------------------- Approximately 150 employees, including the following, or their successors: (i) the members of the Company's Executive Committee, comprised of (a) Norman G. Plotkin, Chief Executive Officer (the "CEO"), (b) the person to fill the position of Executive Vice President and Chief Operating Officer (the "COO"), if any, (c) A.J. Nepa, Executive Vice President, Merchandising (the "EVP," and together with the COO, the "EVPs"), and (d) Norman Dowling, Chief Financial Officer (the "CFO"); (ii) the vice presidents set forth in the attached Exhibit A; (iii) the directors set forth in the attached Exhibit A; and (iv) all other exempt employees (other than Store Managers), as more particularly set forth in the attached Exhibit A. The members of the Executive Committee and the vice presidents shall be referred to collectively as "Company Officers." 2. Potential Benefits Available Under the Severance Plan ----------------------------------------------------- A. Members of the Executive Committee One year's salary B. Vice Presidents Four month's salary C. Directors Three month's salary D. Other Exempt Employees One week's salary for each year of employment (in any capacity) with the Company, with a two week minimum and an eight week maximum. 3. Conditions for Payments Under the Severance Plan ------------------------------------------------ The affected employee shall not receive payments under the Severance Plan unless each of the following conditions have been satisfied. A. The affected employee is employed by the Company on the date of entry of the order by the Bankruptcy Court approving the Severance Plan or thereafter fills a vacancy in an eligible position. B. If the affected employee is not a Company Officer, the affected employee is employed by the Company on a continued uninterrupted full time basis through the date of termination. C. If the affected employee is a Company Officer, the affected employee is employed by the Company on a continued uninterrupted full time basis through the date of termination, unless the Company Officer resigns for Good Reason (as defined below). D. The employment of the affected employee has been terminated without Good Cause (as defined below), or the affected employee is a Company Officer who has resigned for Good Reason. E. The affected employee has executed and delivered the "Release of All Claims" substantially in the form attached hereto as Exhibit B (the "Release"). F. The affected employee has executed and delivered the "Non-Competition, Non-Solicitation, Confidentiality and Non-Disparagement Agreement" substantially in the form attached hereto as Exhibit C (the "Non-compete Agreement"). G. Payments shall be made net of (i) any and all loans and advances from the Company to the affected employee and any and all other amounts due to the Company from the affected employee, and (ii) all required federal and state withholding taxes and similar required withholdings, as applicable. 4. Definition of "Good Reason" --------------------------- For the purpose of the Severance Plan, "Good Reason" shall mean that without the affected employee's written consent, the occurrence of one or more of the following: (i) a material and permanent diminution of the affected employee's title, authority, duties or responsibilities; (ii) the affected employee's rate of base salary is reduced; (iii) the affected employee is required to relocate permanently to any office or location other than one within a 30 mile radius of the location at which the affected employee is based at the time the change is required; (iv) a Change in Control (as defined below) of the Company or its business operations that (A) is solely as a result of the occurrence of the effective date of a confirmed chapter 11 plan (the "Effective Date") that includes, among its provisions, the issuance of voting securities of the Company to holders of pre-petition general unsecured claims, which securities evidence more than fifty percent of the voting securities of the Company immediately after the Effective Date, with or without any change in the composition of the Board of Directors as a result thereof (a "Creditor Stock Change"), and (B) the termination of the affected employee within one year following that Change in Control; or (v) a Change in Control of the Company or its business operations other than a Creditor Stock Change. 5. Definition of "Good Cause" -------------------------- For the purpose of the Severance Plan, "Good Cause" shall mean the occurrence of one or more of the following: (i) commission by the employee of any act of willful fraud or gross misconduct in the course of his or her employment, which, in the case of gross misconduct, has a material adverse effect on the business or financial condition of the Company; (ii) willful or deliberate failure by the employee to perform the duties of his or her position, other than on account of a disability; (iii) the employee's conviction or entering a plea of guilty (or nolo contendere) to any felony under the laws of the United States or any state thereof or any foreign country to which the affected employee may be subject; (iv) the engagement by the employee in gross misconduct, such as theft or embezzlement, or a comparable crime involving moral turpitude, which crime reflects poorly on the image or reputation of the Company; (v) a material misrepresentation by the employee at any time to the Company; or (vi) failure by the employee to comply with a reasonable and lawful instruction of the Chief Executive Officer (or the Board of Directors if the affected employee is the Chief Executive Officer) of the Company, which continues for a period of five days after the employee's receipt of written notice from the Chief Executive Officer (or the Board of Directors if the affected employee is the Chief Executive Officer) of the Company identifying the objectionable action or inaction by the employee. 6. Definition of Change of Control ------------------------------- For the purpose of the Severance Plan, "Change of Control" shall mean the occurrence of one or more of the following: (i) a sale of all or substantially all of the Company's assets, whether under section 363 of the Bankruptcy Code or pursuant to confirmation of a chapter 11 plan; (ii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately before the merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (iii) at any time the current members of the Company's Board of Directors or members appointed by a majority of the current members of the Board of Directors cease to comprise a majority of the Board of Directors; and (iv) the occurrence of the Effective Date of a confirmed chapter 11 plan that provides, among other things, for the issuance and distribution (other than to holders of the pre-petition equity interests in the Company of record as of the petition date) of voting securities of the Company that evidence more than fifty percent (50%) of the voting securities of the Company immediately after the Effective Date. 7. Credit for Retention Payments ----------------------------- To the extent a participant receives any payments under the Company's 2004 Key Employee Retention Plan, such payments shall offset dollar for dollar any payment to be received under the Severance Plan. 8. Time of Payment --------------- All severance payments made pursuant to the Severance Plan are to be made in full on the later of: (i) the last day of employment for the affected employee; and (ii) seven days after delivery by the affected employee to the Company of (a) the Release, and (b) the Non-compete Agreement, provided that the affected employee has not revoked either the Release or the Non-compete Agreement during that seven-day period. 9. Priority of Payment Obligations ------------------------------- Payments to be made under this Severance Plan shall be entitled to priority under section 503(b) of the Bankruptcy Code as an administrative priority, and shall be due and owing no later than the Effective Date, except as otherwise provided for in the Severance Plan. If any payment under the Severance Plan to be made after the Effective Date is not made as and when due, and the affected employee employs counsel in order to assert his or her rights with respect to the payment, then, in addition to the payment under the Severance Plan, the Company, and any successor obligated to perform under the Severance Plan, shall reimburse the affected employee all reasonable attorneys fees and costs incurred in successfully asserting any such rights. 10. Miscellaneous ------------- All rights under the Severance Plan shall at all times be entirely unfunded, and no provision shall at any time be made with respect to segregating any assets of the Company for payment of any amounts due under the Severance Plan. Any payments under the Severance Plan shall be made from the general assets of the Company as and when due. No member of the Board of Directors of the Company, nor any officer or employee of the Company, shall be personally liable if the Company is unable to make any of the payments provided for in the Severance Plan for any reason, including, without limitation, lack of funding or financing, legal prohibition, or failure to obtain required consents. Nothing contained in this Severance Plan shall be construed to be an employment contract between a participant in the Severance Plan and the Company. No interest of any participant in the Severance Plan, or any right to receive any payment hereunder, shall be subject to any manner of sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind, nor may such interest or right to receive a payment be taken, voluntarily or involuntarily, for the satisfaction of the obligation of, or other claims against, any participant, including claims for alimony, support, separate maintenance, and claims in bankruptcy cases. The Board of Directors of the Company shall have the right to amend the Severance Plan from time to time and may terminate the Severance Plan at any time; provided, however, that no amendment may be made to the Severance Plan and no termination of the Severance Plan may be effective until after (i) the effective date of a confirmed plan of reorganization for the Company, and (ii) fifteen (15) months after that effective date as to Company Officers, if there is a Change in Control. Approved by the Board of Directors of the Company on March 16, 2004 By: /s/Susan M. Skrokov ------------------- Susan M. Skrokov, Secretary Assumptions: 1. Executive Commmittee: 1 year of severance 2. Vice-Presidents: 4 months of severance 3. Directors: 3 months of severance 4. All other Exempt level Store Support Center Employees: 1 week per each full year of service to a maximum of 8 weeks, 2 week minimum Tenure Rounded Down to Months DEPT Full of EMP NO. NO. DOH TITLE DATE Year Severance ------ ---- --- ----- ---- ------- --------- EXECUTIVE COMMITTEE: 1 YEAR 9145 01/06/03 EVPSTD - Exec-VP Store Operati 3/25/04 1 12 213717 9103 07/27/98 XCEO - CEO 3/25/04 5 12 253298 9106 03/22/04 XVPCFO - EVP,CFO 3/25/04 0 12 251005 9133 11/10/03 EVPGMM - EVP, Gen Merch Mgr 3/25/04 0 12 VICE-PRESIDENTS: 4 MONTHS 253144 9137 02/21/04 Vice-President Merchandising 3/25/04 0 4 246589 9139 02/17/03 Vice-President Merchandising 3/25/04 1 4 253277 9135 03/15/04 Vice-President Merchandising 3/25/04 0 4 211014 9141 10/29/97 Vice-President Merchandising 3/25/04 6 4 222394 9105 12/13/99 VP, Controller 3/25/04 4 4 9107 03/22/04 VP, ITS 3/25/04 0 4 9143 03/22/04 VP, Planning/Allocation 3/25/04 0 4 247678 9159 05/12/03 Vice-President Division 2 3/25/04 0 4 246588 9161 02/17/03 Vice-President Division 1 3/25/04 1 4 224937 9449 05/15/00 VPTDC1 - VP - Transportation/D 3/25/04 3 4 212540 9119 04/06/98 VPLP1 - VP - Loss Prevention 3/25/04 5 4 201402 9145 03/04/94 FMDRSO -VP, Store Ops 3/25/04 10 4 222728 9109 01/05/00 HRDRCB - VP, Human Resources 3/25/04 4 4 DIRECTORS: 3 MONTHS 225204 9106 05/29/00 FIDRFR-Dir, Fin Anal & Rptg 3/25/04 3 3 247538 9107 05/12/03 ITDRSD - Dir, System Developme 3/25/04 0 3 216500 9111 02/01/99 REDIR1 - Director - Real Estat 3/25/04 5 3 115322 9131 04/27/92 ADDIRMK - Director, Marketing 3/25/04 11 3 113799 9115 09/03/91 FCDIRC - Director - Constructi 3/25/04 12 3 209938 9143 08/18/97 PLADIR - Director of Plng 3/25/04 6 3 239427 9143 11/30/01 PLADIR - Director of Plng 3/25/04 2 3 216572 9106 02/16/99 FINAGC - Asst Gen Counsel 3/25/04 5 3 222927 9119 02/07/00 LPDRRM - Dir. Risk Management 3/25/04 4 3 215923 9153 04/17/00 HRDRTW - Dir, Train. & WF Plan 3/25/04 3 3 205825 9144 11/23/96 DIRALL - Director, Allocation 3/25/04 7 3 212925 9107 05/11/98 ITDRSA-Director, System Admin 3/25/04 5 3 225815 9119 07/05/00 LPRMG1 - RM - LP 3/25/04 3 3 116776 9121 01/27/97 LPRMG1 - RM - LP 3/25/04 7 3 217312 9123 04/12/99 LPRMG1 - RM - LP 3/25/04 4 3 Weeks of Severance --------- ALL OTHER EXEMPT LEVEL: 1 WEEK PER YEAR TO A MAXIMUM OF 8 WEEKS, 2 WEEK MINIMUM 247716 9103 05/19/03 XEXAST - Executive Assistant 3/25/04 0 2 250336 9105 09/22/03 FIAMFR-Mgr, Financial Reportin 3/25/04 0 2 248382 9105 06/23/03 FIASR1 - Senior Accountant 3/25/04 0 2 216370 9105 01/04/99 FISUP1 - Supervisor - Accts Pa 3/25/04 5 5 202519 9105 04/01/96 FISUC1 - Supervisor - Cash Mgm 3/25/04 7 7 207953 9105 04/28/97 FISUP1 - Supervisor - Accts Pa 3/25/04 6 6 120151 9105 08/29/94 FIMGI1 - Manager - Inv Control 3/25/04 9 8 249982 9105 09/03/03 FIASTA-Staff Accountant 3/25/04 0 2 237511 9105 09/24/01 FIACPA - Accountant - P/A 3/25/04 2 2 237831 9105 06/09/03 FILSPA - Lease Acctg Spec 3/25/04 0 2 207809 9105 04/21/97 FISUA1 - Supervisor - Sales Au 3/25/04 6 6 223468 9106 03/13/00 FIMGP1 - Manager - Financial P 3/25/04 4 4 218229 9107 06/06/99 MISPM1 - Sr Project Manager 3/25/04 4 4 250067 9107 09/08/03 ITSODB-Sr Oracle DBA 3/25/04 0 2 208329 9107 05/12/97 MISPM1 - Sr Project Manager 3/25/04 6 6 211282 9107 11/16/97 ITMPOS - Manager, POS Systems 3/25/04 6 6 251823 9107 11/17/03 MINAP2 - Sr Program Analyst 3/25/04 0 2 224730 9107 05/08/00 MISPC1 - Programmer - Analyst 3/25/04 3 3 225509 9109 06/15/00 HRSRAN - Senior HR Analyst 3/25/04 3 3 251152 9109 10/31/03 HRREPR - HR Representative 3/25/04 0 2 219836 9111 01/07/03 RELEMG - Manager - Lease Admin 3/25/04 1 2 232499 9113 02/05/01 PMMGR1 - Manager - Property Mg 3/25/04 3 3 230042 9113 10/23/00 PMAMG1 - Asst Property Manager 3/25/04 3 3 102611 9115 04/12/88 FCCLD1 - Crew Leader 3/25/04 15 8 200618 9115 09/03/95 FPRJC1 - Coordinator-Field Pro 3/25/04 8 8 253037 9119 01/28/04 LPWCGL - WC & GL Analyst 3/25/04 0 2 247069 9119 04/16/03 LPMGC - Manager - Loss Prevent 3/25/04 0 2 218154 9121 02/25/02 LPDMR1 - DM - LP 3/25/04 2 2 206827 9121 11/06/03 LPDMR1 - DM - LP 3/25/04 0 2 207052 9121 03/04/97 LPDMR1 - DM - LP 3/25/04 7 7 253111 9121 02/29/04 LPDMR1 - DM - LP 3/25/04 0 2 243965 9121 09/17/02 LPDMR1 - DM - LP 3/25/04 1 2 225326 9123 08/19/02 LPDMR1 - DM - LP 3/25/04 1 2 230043 9123 10/23/00 LPDMR1 - DM - LP 3/25/04 3 3 234764 9123 06/05/01 LPDMR1 - DM - LP 3/25/04 2 2 251395 9123 11/10/03 LPDMR1 - DM - LP 3/25/04 0 2 213198 9123 06/08/98 LPDMR1 - DM - LP 3/25/04 5 5 243925 9123 09/09/02 LPDMR1 - DM - LP 3/25/04 1 2 113716 9131 04/07/03 ADMMGR - Marketing Manager 3/25/04 0 2 217018 9131 12/15/03 ADMGP1 - Manager - Print Produ 3/25/04 0 2 252927 9135 01/07/04 MEBUY1 - Buyer - Merchandising 3/25/04 0 2 120825 9135 08/15/94 MEBUY1 - Buyer - Merchandising 3/25/04 9 8 214562 9135 09/28/98 MEBUY1 - Buyer - Merchandising 3/25/04 5 5 246394 9135 12/30/02 MEASB1 - Assistant Buyer 3/25/04 1 2 244403 9135 10/14/02 MEASB1 - Assistant Buyer 3/25/04 1 2 248917 9135 07/21/03 MEASB1 - Assistant Buyer 3/25/04 0 2 231164 9135 11/27/00 MEASB1 - Assistant Buyer 3/25/04 3 3 253257 9137 03/03/04 MEBUY1 - Buyer - Merchandising 3/25/04 0 2 238502 9137 11/12/01 MEBUY1 - Buyer - Merchandising 3/25/04 2 2 220659 9137 10/11/99 MEBUY1 - Buyer - Merchandising 3/25/04 4 4 249093 9137 07/28/03 MEABY1 - Associate Buyer 3/25/04 0 2 234889 9137 06/11/01 MEABY1 - Associate Buyer 3/25/04 2 2 240386 9137 02/20/02 MEASB1 - Assistant Buyer 3/25/04 2 2 236151 9137 08/06/01 MEASB1 - Assistant Buyer 3/25/04 2 2 118763 9137 06/30/89 MEASB1 - Assistant Buyer 3/25/04 14 8 222766 9139 01/12/00 MEBUY1 - Buyer - Merchandising 3/25/04 4 4 204732 9139 09/23/96 MEBUY1 - Buyer - Merchandising 3/25/04 7 7 107115 9139 10/04/93 MEBUY1 - Buyer - Merchandising 3/25/04 10 8 201155 9139 11/06/95 MEASB1 - Assistant Buyer 3/25/04 8 8 240485 9139 02/27/02 MEABY1 - Associate Buyer 3/25/04 2 2 223834 9139 03/27/00 MEASB1 - Assistant Buyer 3/25/04 3 3 249680 9141 08/18/03 MEBUY1 - Buyer - Merchandising 3/25/04 0 2 241276 9141 05/06/02 MEBUY1 - Buyer - Merchandising 3/25/04 1 2 233503 9141 04/09/01 MEBUY1 - Buyer - Merchandising 3/25/04 2 2 212729 9141 04/27/98 MEASB1 - Assistant Buyer 3/25/04 5 5 246889 9141 03/24/03 MEASB1 - Assistant Buyer 3/25/04 1 2 251771 9141 11/17/03 MEASB1 - Assistant Buyer 3/25/04 0 2 203193 9141 06/03/96 MEASB1 - Assistant Buyer 3/25/04 7 7 239104 9143 11/26/01 PLSRMG - Senior Planning Mgr 3/25/04 2 2 202244 9143 03/14/96 PLSRMG - Senior Planning Mgr 3/25/04 8 8 242397 9143 06/25/02 PLMPSR - Senior Planner 3/25/04 1 2 224594 9143 05/03/00 PLMGP1 - Manager - Planning 3/25/04 3 3 212268 9143 03/09/98 PLPMA - Price Management Analy 3/25/04 6 6 216392 9144 01/11/99 PLALMGR - Allocation Manager 3/25/04 5 5 218441 9144 06/21/99 PLMALL1 - Allocator 3/25/04 4 4 108969 9144 12/18/89 PLMALL1 - Allocator 3/25/04 14 8 118481 9144 01/03/94 PLMALL1 - Allocator 3/25/04 10 8 109742 9144 10/06/03 PLMALL1 - Allocator 3/25/04 0 2 208017 9144 04/03/00 PLMALL1 - Allocator 3/25/04 3 3 213317 9144 06/15/98 PLMALL1 - Allocator 3/25/04 5 5 109139 9144 02/26/90 PLMALL1 - Allocator 3/25/04 14 8 224090 9145 04/14/00 FMMSP - Mgr, Special Projects 3/25/04 3 3 250811 9145 11/03/03 OPSAST - Asst. to EVP, Ops 3/25/04 0 2 232004 9145 12/18/00 FMSPSS-Supervisor,Store Suppor 3/25/04 3 3 222926 9153 02/07/00 HRDMF - Divisional HR Manager 3/25/04 4 4 230138 9153 10/30/00 HRDMF - Divisional HR Manager 3/25/04 3 3 225492 9153 06/14/00 HRARTR - Area Trainer 3/25/04 3 3 217311 9153 04/12/99 HRTCRP - Trng & Comm Rep 3/25/04 4 4 246888 9158 03/25/03 FMDMF1 - District Manager 3/25/04 1 2 201400 9158 04/11/94 FMDMF1 - District Manager 3/25/04 9 8 247493 9158 05/06/03 FMDMF1 - District Manager 3/25/04 0 2 205313 9158 10/27/96 FMDMF1 - District Manager 3/25/04 7 7 214177 9158 08/17/98 FMDMF1 - District Manager 3/25/04 5 5 248913 9158 07/21/03 FMDMF1 - District Manager 3/25/04 0 2 227399 9158 08/31/00 FMDMF1 - District Manager 3/25/04 3 3 115385 9158 05/03/92 FMDMF1 - District Manager 3/25/04 11 8 101455 9158 11/07/88 FMDMF1 - District Manager 3/25/04 15 8 249257 9158 08/04/03 FMDMF1 - District Manager 3/25/04 0 2 125032 9160 02/18/85 FMDMF1 - District Manager 3/25/04 19 8 112529 9160 10/10/90 FMDMF1 - District Manager 3/25/04 13 8 246412 9160 01/06/03 FMDMF1 - District Manager 3/25/04 1 2 237755 9160 10/09/01 FMDMF1 - District Manager 3/25/04 2 2 236873 9160 08/27/01 FMDMF1 - District Manager 3/25/04 2 2 217592 9160 05/03/99 FMDMF1 - District Manager 3/25/04 4 4 215573 9160 11/15/98 FMDMF1 - District Manager 3/25/04 5 5 227234 9160 09/05/00 FMDMF1 - District Manager 3/25/04 3 3 235323 9160 06/26/01 FMDMF1 - District Manager 3/25/04 2 2 119231 9160 05/03/96 FMDMF1 - District Manager 3/25/04 7 7 197902 9449 05/20/85 WHMG1 - Manager - Warehouse 3/25/04 18 8 119429 9449 06/13/94 RDCSUP - DC Supervisor 3/25/04 9 8 142528 9449 10/07/85 RDCSM - Marking Supervisor 3/25/04 18 8 234404 9449 05/21/01 RDCSR - Rec'ing Supervisor 3/25/04 2 2 218305 9449 06/14/99 MDCSR - Rec'ing Supervisor 3/25/04 4 4 209940 9449 08/18/97 MDCSS - Shipping Supervisor 3/25/04 6 6 100128 9449 06/03/87 RDCSR - Rec'ing Supervisor 3/25/04 16 8 209915 9449 08/18/97 RDCSM - Marking Supervisor 3/25/04 6 6 100226 9449 10/03/88 RDCSM - Marking Supervisor 3/25/04 15 8 211104 9449 11/03/97 RDCSH - Hanging Supervisor 3/25/04 6 6 124839 9449 03/17/86 RDCSH - Hanging Supervisor 3/25/04 18 8 203453 9451 02/07/94 WHMGTR - Manager - Traffic 3/25/04 10 8 207585 9451 04/02/97 RDCSIC - Supervisor DC Inv Con 3/25/04 6 6 216996 9451 03/22/99 RDCSRT - Routing Supervisor 3/25/04 5 5