AMENDMENT NO. 1 TO THE
EMPLOYMENT AGREEMENT
Amendment No. 1, dated , 2001 ("Amendment No. 1"), to the
Employment Agreement (the "Agreement"), dated as of , 2000 between
Specialty Catalog Corp., a Delaware corporation (the "Employer" or the
"Company") and Joseph Grabowski (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company and the Executive are parties to the Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to them in the Agreement;
WHEREAS, the Company has entered into an Agreement and Plan of
Recapitalization and Merger with Specialty Acquisition Corp. ("Acquisition
Corp."), dated as of May 4, 2001, as amended from time to time in accordance
with its terms (the "Merger Agreement"), pursuant to which Acquisition Corp.
shall be merged with and into the Company (the "Acquisition"), in accordance
with the terms and conditions of the Merger Agreement and the relevant
provisions of the DGCL (as defined in the Merger Agreement), and the surviving
corporation shall be the Company;
WHEREAS, in connection with the consummation of the transactions
contemplated by the Merger Agreement, the Company and the Executive desire to
amend the Agreement, on the terms and subject to the conditions set forth in
this Amendment No. 1;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, the Company and the Executive hereby
agree as follows:
1. Section 2 of the Agreement is hereby amended by deleting
such section in its entirety and inserting the following new Section 2 in lieu
thereof:
"2. Term of Employment.
The term of this Agreement shall commence effective as of
May 8, 2000 (the "Commencement Date") and terminate on
December 31, 2004 (the "Initial Term"), subject to earlier
termination pursuant to the provisions of Section 4 hereof.
Notwithstanding the foregoing, upon the termination of the
Initial Term, this Agreement shall automatically renew for
successive one year periods unless either party gives the
other written notice of its election not to renew at least
90 days before the expiration of the Initial Term or any
renewal period. The Initial Term and any renewal period is
collectively referred to as the "Term.""
2. Section 3.b. of the Agreement is hereby amended by adding
the following new Section 3.b. (vi) to the end thereof:
"Year 2002, 2003 and 2004 Bonus. During the Company's
fiscal year ending December __, 2002 and for each
subsequent fiscal year during the Term, Executive's
entitlement to incentive compensation for any fiscal year
of the Company shall be predicated upon the successful
accomplishment of annual, business-related performance
goals (the "Performance Goals") for the Company prepared by
the Company's senior management and approved by the Board
of Directors of the Company in the Company's annual budget
or plan, as approved by the Board of Directors of the
Company (each such annual budget or plan being referred to,
for the relevant year, as the "Plan"). The Plan will
contain specific bonus awards to the Executive in respect
of the relevant fiscal year during the Term, which
correlate to the attainment of business related performance
goals, as contained in the Plan. For each such fiscal year,
the Executive shall earn incentive compensation equal to
the percentage of Executive's annual Base Salary set forth
in Exhibit 2. The incentive compensation payable hereunder
in respect of any period constituting less than an entire
fiscal year (a "Partial Year") shall be prorated for the
Partial Year and determined in the manner set forth in
Section 4(e)(v)(C) hereof."
3. Section 3.b.(C) of the Agreement is hereby amended by
deleting such section in its entirety and inserting the following new Section
3.b.(C) in lieu thereof:
"(C) For each fiscal year during the Term after Year 2004,
the Executive and the Company may mutually agree in
writing to restructure the terms of Executive's
incentive compensation entitlement hereunder."
4. Section 3.h. of the Agreement is hereby amended by deleting
such section in its entirety and inserting the following new Section 3.h. in
lieu thereof:
"h. Life Insurance. The Company shall obtain and maintain
in full force and effect at all times during the Term
a term life insurance policy on the life of
Executive, which will provide a death benefit to
Executive's designee (or, if none, Executive's
estate) of One Million Dollars ($1,000,000.00)."
5. Section 4.c.(iii) of the Agreement is hereby amended by
deleting such section in its entirety and inserting the following new Section
4.c.(iii) in lieu thereof:
"(iii) the sale of substantially all of the Company's
assets or a "Change of Control" (as defined below) of
the Company shall
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have occurred, other than a "Change of Control" which
may be triggered in connection with the transactions
contemplated by the Merger Agreement including the
Acquisition; and"
6. Section 4.e.(v) of the Agreement is hereby amended by
deleting such section in its entirety and inserting the following new Section
4.e.(v) in lieu thereof:
"(v) (a) Upon a termination of employment during the Term
by the Company without cause or by the Executive for
Good Reason, except as provided in Section 4.e.(v)(b)
below, the Term shall terminate on the date of such
termination and the Company's remaining obligations
to the Executive shall be as follows: (A) Accrued
Obligations; (B) payment to the Executive within
thirty (30) days of the date of termination of a lump
sum equal to the Executive's then current Base Salary
for the remainder of the Term; and (C) any earned
bonus for the pro-rated portion of the calendar year
in which Executive's employment is terminated through
the date of termination, to the extent and in the
manner accrued on the Company's financial statements.
(b) Upon a termination of employment during the Term
by the Company without cause or by the Executive for
Good Reason, which occurs in connection with or
within six months after a "Change of Control," the
Term shall terminate on the date of such termination
and the Company's remaining obligations to the
Executive shall be as follows: (A) Accrued
Obligations; (B) payment to the Executive within
thirty (30) days of the date of termination of a lump
sum equal to the Executive's then current Base Salary
for a period of one year or the period remaining in
the Term, whichever ends later; and (C) any earned
bonus for the pro-rated portion of the calendar year
in which Executive's employment is terminated through
the date of termination, to the extent and in the
manner accrued on the Company's financial statements.
For purposes of this paragraph, the term "Change in
Control" shall have the same meaning assigned to such
term in the Stockholders Agreement dated May 4, 2001
regarding the Company (and predecessor Specialty
Acquisition Corp.)."
7. Effectiveness of this Amendment No. 1. The parties hereto
understand and agree that the effectiveness of the entire Amendment No. 1 is
conditioned upon the consummation of each of (i) the Acquisition; (ii)
transactions contemplated by each of the Stock
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Option Exercise Agreement between the Company and the Executive; and (iii) the
Stock Option Agreement between the Company and the Executive relating to the
Company's 2001 Stock Incentive Plan.
8. Salary Increase. Effective July 1, 2001, the Executive's
annual Base Salary shall be increased to $312,500.
9. Additional Options. Immediately prior to and in connection
with the consummation of the Acquisition, the Company shall grant to the
Executive options to purchase 54,135 shares of common stock of the Company, at
an exercise price of $3.75 per share. Such options shall be subject to the terms
of the Company's 2001 Stock Incentive Plan (the "2001 Plan") approved by the
board of directors and the standard form of stock option agreement to be used
for employees under the 2001 Plan. All options granted to the Executive shall,
to the maximum extent permitted by law, be classified as incentive stock
options. Such options shall vest in three equal installments as follows: on the
first anniversary of the date of grant, on the second anniversary of the date of
grant, and on the third anniversary of the date of grant. In the event that the
Executive's employment is terminated by the Company without cause or by the
Executive for Good Reason, any options that have not vested as of the date of
such termination shall become immediately exercisable by the Executive on the
termination date, and shall be exercisable for a period of five years after the
termination date (or, if earlier, through the expiration date of such options).
In the event of a corporate transaction described in Section 18.1 of the 2001
Plan, any options that have not vested shall become fully vested prior to the
consummation of such transaction other than a "change of control" which may be
triggered in connection with the transactions contemplated by the Merger
Agreement including the Acquisition. In the event that the Executive's
employment is terminated by reason of the Executive's death or disability (as
such term is defined in Section 4(a) of the Agreement), any options, upon
vesting in accordance herewith, shall each be exercisable until the earlier of
(i) 6:00 p.m., Boston time, on the fifth anniversary of the date of death or
disability, (ii) the expiration date of such option or (iii) the occurrence of
any other event under the terms of the relevant plan or option agreement that
would accelerate the termination date of such option.
In the event that the Executive's employment is terminated for
"cause," any options shall be exercisable until the earlier of (i) 6:00 p.m.,
Boston time, on the thirtieth (30th ) day following the termination date and
(ii) the expiration date of such option.
10. Bonus Award. In addition to the Base Salary described in
Paragraph 3(a) of the Agreement, and incentive compensation described in
Paragraph 3(b) of the Agreement, the Executive shall be entitled to receive, in
cash, a bonus payment in the amount of $100,000, upon the effectiveness of this
Amendment No. 1.
11. Miscellaneous.
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a. This Amendment No. 1 to the Employment Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware applicable to agreements made and to be performed entirely in
Delaware.
b. Except as expressly amended by this Amendment No. 1 to
the Agreement, the Agreement shall remain in full force and effect as the same
was in effect immediately prior to the effectiveness of this Amendment No. 1 to
the Agreement.
c. This Amendment No. 1 to the Agreement shall be governed
and construed on the same basis as the Agreement, as set forth therein.
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 to the Employment Agreement as of the date first above written.
Specialty Catalog Corp.
By:
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Name:
Title:
THE EXECUTIVE:
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JOSEPH GRABOWSKI.
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