Exhibit 10.4
FIRST AMENDMENT TO
EMPLOYMENT LETTER
FIRST AMENDMENT, dated as of August 6, 2008 (this “ First Amendment”) to
EMPLOYMENT LETTER, dated as of November 28, 2007 ( the “Employment Letter”)
between A.C. Moore Arts & Crafts, Inc., a Pennsylvania corporation (“Company”),
and Joseph A. Jeffries (“Executive”). Capitalized terms used herein and not
defined herein shall have the respective meanings set forth for such terms in
the Employment Letter.
R E C I T A L S:
WHEREAS, Company and Executive have mutually agreed that certain provisions of
the Employment Letter be amended, as set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, it is agreed as follows:
Section 1. Addition of Appendix I. The Board of Directors of the Company (the
“Board”) has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined in Appendix I to the Employment Letter) of the Company.
The Board believes it is imperative to diminish the inevitable distraction of
the Executive by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the Executive’s full
attention and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the Executive with
compensation and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations. Therefore,
in order to accomplish these objectives if a Change of Control occurs,
paragraphs 1 through 11 of the Employment Letter (except paragraph 9 which shall
continue) shall be superseded by Appendix I.
Section 2. Title. The second sentence of paragraph 1 of the Employment Letter is
amended to read in its entirety as follows: “Your title will be Executive Vice
President and Chief Operating Officer.”
Section 3. Effectiveness. This Amendment shall be become effective as of the
date hereof.
Section 4. Status of Employment Letter. This Amendment is limited solely for the
purposes and to the extent expressly set forth herein, and, except as expressly
set forth herein all of the terms, provisions and conditions of the Employment
Letter shall continue in full force and effect and are not effected by this
Amendment.

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Employment Letter to be duly executed and delivered as of the date first written
above.

            /s/ Joseph A. Jeffries     Date: August 6, 2008  EXECUTIVE       
A.C. MOORE ARTS & CRAFTS, INC.
    Date: August 6, 2008  By:   /s/ Rick A. Lepley         Rick A. Lepley       
President and Chief Executive Officer   

 

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APPENDIX I
CHANGE OF CONTROL PROVISIONS
To Employment Letter of Joseph A. Jeffries
If a Change of Control (as defined in this Appendix I) of the Company occurs,
paragraphs 1 through 11 of the Employment Letter (except paragraph 9 which shall
continue) shall be superseded by this Appendix I.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date.
For the purpose of this Appendix I, the “Effective Date” shall mean the date on
which a Change of Control (as defined in Section 2 of this Appendix I) occurs.
Anything in the Employment Letter to the contrary notwithstanding, if a Change
of Control occurs and if the Executive’s employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment
(i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (ii) otherwise arose in connection
with or anticipation of a Change of Control, then for all purposes of the
Employment Letter and this Appendix I, the “Effective Date” shall mean the date
immediately prior to the date of such termination of employment.
2. Change of Control. For the purpose of this Appendix I and the Employment
Letter, a “Change of Control” shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either
(i) the then-outstanding shares of common stock of the Company (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

 

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(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, more than 50% of, respectively, the then-outstanding shares of
common stock of the corporation resulting from such Business Combination, or the
combined voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
3. Employment Term; Sign-on Bonus; Relocation Benefits. The Company hereby
agrees to continue the Executive in its employ, and the Executive hereby agrees
to remain in the employ of the Company subject to the terms and conditions of
the Employment Letter and this Appendix I, for the period commencing on the
Effective Date and ending on the twelfth month anniversary of such date (the
“Employment Term”). Such period may be extended in writing by the mutual
agreement of the Company and Executive at any time prior to such anniversary. On
the Effective Date Executive’s Sign-on Bonus and Relocation Benefits shall be
deemed completely earned.

 

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4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Term, (A) the Executive’s position, authority, duties
and responsibilities shall be at least commensurate in all material respects
with the most significant of those held, exercised and assigned to him at any
time during the 120-day period immediately preceding the Effective Date and
(B) the Executive’s services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Term, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
Executive’s best efforts and Executive’s full business time and attention to the
business and affairs of the Company and its subsidiaries. During the Employment
Term it shall not be a violation of this Appendix I or the Employment Letter for
the Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions, and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Appendix I and the Employment Letter. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive’s responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Term, the Executive shall receive an
annual base salary (“Annual Base Salary”), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base salary paid or
payable, including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Term, the Annual Base Salary shall be reviewed no
more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date. Any increase in Annual Base Salary shall not serve
to limit or reduce any other obligation to the Executive under the Employment
Letter and this Appendix I. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in the Employment
Letter and this Appendix I shall refer to Annual Base Salary as so increased. As
used in this Appendix I, the term “affiliated companies” shall include any
company controlled by, controlling or under common control with the Company.
(ii) Annual Bonus; Long-term incentive plan; Benefits. In addition to Annual
Base Salary, the Executive shall be awarded, for each calendar year ending
during the Employment Term, an annual bonus (the “Annual Bonus”) in cash at
least equal to the Executive’s bonus under the Company’s annual bonus plans or
any comparable bonus under any predecessor or successor plan or plans, for the
last full calendar year prior to the Effective Date (annualized in the event
that the Executive was not employed by the Company for the whole of such
calendar year). Each such Annual Bonus shall be paid no later than March 15th of
the calendar year next following the calendar year for which the Annual Bonus is
awarded. Executive will continue to be eligible to participate in the Company’s
long-term incentive plan as administered and determined by the Compensation
Committee of the Board of Directors and to be entitled to receive benefits
generally provided to officers of the Company consistent with the Company’s
practices.

 

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5. Termination of Employment.
(a) Death or Disability. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Term. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Term (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
this Appendix I and the Employment Letter of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment with the
Company shall terminate effective on the 30th day after receipt of such notice
by the Executive (the “Disability Effective Date”), provided that, within the
30 days after such receipt, the Executive shall not have returned to full-time
performance of the Executive’s duties. For purposes of this Appendix I and the
Employment Letter, “Disability” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for 90 consecutive days
as a result of incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Executive or the Executive’s legal representative.
(b) Cause. The Company may terminate the Executive’s employment during the
Employment Term for Cause. For purposes of this Appendix I and the Employment
Letter, “Cause” shall mean:
(i) the failure of the Executive to perform substantially the Executive’s duties
with the Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to the Executive by the Chief Executive
Officer which specifically identifies the manner in which the Chief Executive
Officer believes that the Executive has not substantially performed the
Executive’s duties; provided however, that Executive shall have one opportunity
to cure the failure so identified for sixty days from the written demand, or
(ii) the engaging by the Executive in illegal conduct or gross misconduct, in
either case, in violation of the Company’s Code of Ethical Business Conduct.
Any act, or failure to act, based upon authority given pursuant to a resolution
duty adopted by the Board or upon the instructions of the Chief Executive
Officer or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a written notice from the Chief
Executive Officer, a copy of which notice has been previously delivered to the
Board of Directors, finding that, in the good faith opinion of the Chief
Executive Officer, the Executive is guilty of the conduct described in
subsection 5 (b)(i) or (ii) above, and specifying the particulars thereof in
detail.

 

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(c) Good Reason. The Executive’s employment may be terminated by the Executive
for Good Reason. For purposes of this Appendix I and the Employment Letter,
“Good Reason” shall mean:
(i) the assignment to the Executive of any duties inconsistent in any respect
with the Executive’s position, authority, duties or responsibilities as
contemplated by Section 4(a) of this Appendix I, or any other action by the
Company which results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the provisions of Section
4(b) of this Appendix I, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company’s requiring the Executive to be based at any office or
location other than as provided in Section 4(a)(i)(B) of this Appendix I;
(iv) any purported termination by the Company of the Executive’s employment
otherwise than as expressly permitted by this Appendix I; or
(v) any failure by the Company to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform the this Appendix I and the Employment Letter in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
(d) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the notice of termination, (ii) if the
Executive’s employment is terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the Executive of such
termination and (iii) if the Executive’s employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.

 

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6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during the
Employment Term, the Company shall terminate the Executive’s employment other
than for Cause, death or Disability or the Executive shall terminate Executive’s
employment for Good Reason:
(i) the Company shall pay to the Executive in a single lump sum payment in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) the sum of (1) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid, plus (2) the product of (I) the
target Annual Bonus paid or payable, for the most recently completed calendar
year during the Employment Term and (II) a fraction, the numerator of which is
the number of days in the current calendar year through the Date of Termination,
and the denominator of which is 365 (“Pro Rata Bonus”), plus (3) any
compensation previously deferred by the Executive and not theretofore previously
paid shall be paid in accordance with the terms of the plan pursuant to which
deferral was made and (4) the amount equal to the Executive’s Annual Base Salary
through the twelfth month anniversary of the Date of Termination.
(ii) The Company shall provide all benefits as are, from time to time,
maintained for officers of the Company, including without limitation, medical
and other insurance plans to the Executive through the twelfth month anniversary
of the Date of the Termination of Executive’s employment pursuant to or, if not
pursuant to, which are substantially equal to the Company’s insurance programs
in effect and to the extent Executive participated immediately prior to the date
of such termination, provided that if the Consolidated Omnibus Reconciliation
Act of 1985 (“COBRA”) applies to the provision of health insurance benefits for
any part of the period of benefit continuation provided for by this paragraph,
Executive will make all necessary elections and such benefits will run
concurrently with and satisfy the continuation coverage requirements of this
paragraph for the period to which COBRA applies.
No payment of any sum nor the receipt of any benefit shall be due to Executive
under this Section 6(a) unless and until Executive shall have executed and
delivered to the Company a release of any and all claims against the Company and
its subsidiaries (and their respective present and former officers, directors,
employees and agents — collectively the “Released Parties”) and a covenant not
to sue the Released Parties, all in form and substance as provided by counsel to
the Company (the “Release”) and any waiting period or revocation period provided
by law for the effectiveness of such Release shall have expired without
Executive’s having revoked such Release. In the event Executive shall decline or
fail for any reason to execute and deliver such Release, the Executive shall be
entitled to receive only those amounts provided pursuant to Section 6(d)
provided for an Executive whose employment is terminated by the Company for
Cause or by Executive without Good Reason.
(b) Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Term, this Appendix I and the Employment
Letter shall terminate without further obligations to the Executive’s legal
representatives under this Appendix I and the Employment Letter, except that
Executive, or Executive’s estate if applicable, shall be entitled to receive the
sum of (i) Executive’s Annual Base Salary through the Date of Termination, (ii)
Executive’s Pro Rata Bonus (as defined in Section 6(a)(i)(A)(2)) and (iii) the
timely payment or provision of any other amounts or benefits required to be paid
or provided or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of the Company and its
affiliated companies. The amounts set forth in Section 6(b)(i) and (ii) shall be
paid to the Executive’s estate, as applicable, in a lump sum in cash within
30 days of the Date of Termination.

 

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(c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Term, this Appendix I and the
Employment Letter shall terminate without further obligations to the Executive,
except that Executive shall be entitled to receive the sum of (i) Executive’s
Annual Base Salary through the Disability Effective Date and (ii) Executive’s
Pro Rata Bonus (as defined in Section 6(a)(i)(A)(2)) and (iii) the timely
payment or provision of other benefits required to be paid or provided to
Executive or which Executive is eligible to receive under any plan, program,
practices or policies relating to disability of the Company and its affiliated
Companies. The amounts set forth in Section 6(c)(i) and (ii) shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) Cause; Other than for Good Reason. If the Executive’s employment shall be
terminated for Cause or Executive voluntarily terminates employment without Good
Reason during the Employment Term, this Appendix I and the Employment Letter
shall terminate without further obligations to the Executive other than for the
Executive’s Annual Base Salary through the Date of Termination and timely
payment or provision of any other applicable benefits, in each case to the
extent theretofore unpaid.
7. Options, SARs and Restricted Stock. All options to purchase and stock
appreciation rights in common stock in the Company and the grants of common
stock in the Company with vesting restrictions held by Executive on the date of
a Change of Control shall immediately be deemed vested and the options and stock
appreciation rights shall immediately become exercisable on the date of the
Change in Control and Executive shall have until the end of the applicable
original term of each such option and stock appreciation right to exercise such
option and stock appreciation right; provided, however, that if Executive’s
employment with the Company is terminated for any reason (other than Cause)
after the Change in Control, Executive shall have until the earlier of (1) the
end of the applicable original term of each such option and stock appreciation
right and (2) 18 months after the Date of Termination to exercise each such
option and stock appreciation right post-termination. In the event that
Executive’s employment with the Company is terminated for Cause, all options,
stock appreciation rights and unvested restricted stock held by Executive shall
terminate immediately.
8. Nonexclusivity of Rights. Nothing in this Appendix I or the Employment Letter
shall prevent or limit the Executive’s continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the date of termination of employment
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Appendix I and the
Employment Letter.
9. Section 409A. In the event that an amount becomes payable to the Executive
after his termination of employment, the Company shall determine whether such
payment is subject to the requirements of Section 409A (a) (2)(A)(i) and
Section 409A (a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended
(hereinafter referred to as the “Specified Employee Rule”). The Company shall
make such determination and provide written notice thereof to the Executive
prior to the earlier of the date that any such amounts would be paid to the
Executive without regard to Code Section 409A or within 30 days after his
termination of employment. Upon the request of the Executive, the Company agrees
to promptly provide to him such information that the Executive may reasonably
request with regard to its determination. In the event that the Company
determines that an amount payable to the Executive after his termination of
employment is subject to the Specified Employee Rule, then no distribution of
such amount shall be made to the Executive on account of his separation from
service before the date which is six (6) months after the date of his separation
from service (or if earlier, the date of death of the Executive). The aggregate
amount that would have been payable to the Executive but for the restrictions
imposed by Section 409A shall be paid to the Executive as soon as permitted by
Section 409A.

 

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