<PAGE>

                                                                   Exhibit 10.16

February 16, 2001

The Board of Directors
Specialty Catalog Corp.

Attn: Joe Grabowski
      Chief Executive Officer

Dear Sirs:

Marlin Holdings, LLC ("Marlin") understands that management and some members of
the Board of Directors of Specialty Catalog Corp. and its affiliates,
subsidiaries and connected entities ("SC") may be seeking to undertake a
privatization transaction and that SC wishes to engage Marlin's services to help
arrange the transaction and the related financing. This letter outlines the
terms and objectives of the fee for services engagement (the "Engagement") that
Marlin will undertake for SC.

Marlin's primary focus will be to assist with the structuring and coordinating
of a Management Buy Out or other privatization transaction of SC approved by
SC's Board of Directors (the "Transaction"). The scope of our work will include
advising the company on the best way to approach the transaction, assisting SC
in obtaining necessary debt and/or equity financing for the Transaction
("Financing") actively participating in the negotiation and execution of the
documents relating to the Transaction, including any public filings, helping
with discussions with financing sources and other relevant third parties and the
documentation of such financing and assisting the independent directors in
arranging for the provision of a fairness opinion if one is required, ("Fairness
Opinion") that the Transaction is fair, from a financial point of view, to the
stockholders of SC. Such fairness opinion may be used by SC in its publicly
filed documents in connection with the Transaction.

In order to be successful with the engagement, Marlin will require the full
assistance of the management of SC. SC agrees to pay Marlin a success fee upon
the completion of a Transaction of $250,000, to be paid in cash at the Closing.
Marlin agrees to assist SC in finding an investment bank to give a Fairness
Opinion on the Transaction if the board of directors of SC determine a fairness
opinion is required. If the Fairness Opinion costs more than $50,000, the excess
over this amount up to a maximum of $50,000, will reduce Marlin's fee
accordingly. In no event will Marlin's success fee be less than $200,000. In
addition, all reasonable travel and related expenses will be reimbursed to
Marlin by SC, upon presentation of receipts or vouchers, up to an aggregate of
$25,000, after which additional expenses shall require SC's approval. Upon
acceptance of this letter agreement, SC shall pay a non-refundable advance of
$15,000 to Marlin for expenses to be incurred in undertaking this Engagement.



<PAGE>

Specialty Catalog Corp.
February 16, 2001
Page 2

Any information supplied by SC to Marlin pursuant to this agreement will be kept
confidential by Marlin and its advisors and representatives. SC acknowledges
that Marlin will rely on this information in performing the services
contemplated by this Engagement and confirms that SC is solely responsible for
the accuracy or completeness of such information. Marlin, including any
affiliated individuals and/or companies, will be fully indemnified by SC for its
services and advice related to this Engagement, as per the attached indemnity
agreement.

This letter agreement shall terminate on the earlier of the completion of the
Engagement or December 31, 2001. This letter is renewable upon the mutual
written agreement of the parties. For six (6) months following the terms of this
agreement, the success fee will be payable to Marlin if a Transaction closes
with a buyer or financing party with which Marlin had meaningful discussions
during the term of the agreement. Marlin understands and acknowledges that SC
may not enter into or complete a Transaction for any reason whatsoever, in which
event no success fee shall be payable.

Marlin is uniquely placed to assist SC in its strategic reorganization and we
look forward to working together to achieve SC's objective in a timely and
effective manner. This letter agreement may not be amended or terminated except
by written agreement of the parties and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict of
laws principles. If this letter accurately sets forth your understanding of the
terms of our agreement, please sign and date where indicated below.

Yours sincerely,

/s/ Ian Ashken

Ian Ashken
Managing Member


Agreed and accepted:                                         Date:
Specialty Catalog Corp.


By: /s/ Joe Grabowski                                         February 23, 2001
   -----------------------------
   Joe Grabowski
   Chief Executive Officer

<PAGE>

                                 ATTACHMENT A

                             MARLIN HOLDINGS, LLC
                       INDEMNIFICATION, CONTRIBUTION AND
                      LIMITATION OF LIABILITY PROVISIONS

(a)  Specialty Catalog Corp., (the "Company") agrees to indemnify and hold
     harmless Marlin Holdings, LLC ("Marlin") and its affiliates and their
     respective officers, directors, employees and agents, and any persons
     controlling Marlin or any of its affiliates within the meaning of Section
     15 of the Securities Act of 1933 or Section 20 of the Securities Exchange
     Act of 1934 (Marlin and each such other person or entity being referred to
     herein as an "Indemnified Person"), from and against all claims,
     liabilities, losses or damages (or actions in respect thereof) or other
     expenses which (A) are related to or arise out of (i) actions taken or
     omitted to be taken (including any untrue statements made or any statements
     omitted to be made) by the Company or its affiliates or (ii) actions taken
     or omitted to be taken by an Indemnified Person with the consent or in
     conformity with the actions or omissions of the Company or its affiliates
     or (B) are otherwise related to or arise out of Marlin's activities on
     behalf of the Company. The Company will not be responsible, however, for
     any losses, claims, damages, liabilities or expenses pursuant to clause
     (A)(ii) or (B) of the preceding sentence to the extent they are finally
     judicially determined to have resulted from such Indemnified Person's gross
     negligence, bad faith or willful misconduct. In addition, the Company
     agrees to reimburse each Indemnified Person for all reasonable out-of-
     pocket expenses (including reasonable fees and expenses of counsel) as they
     are incurred by such Indemnified Person (and substantiated) in connection
     with investigating, preparing, conducting or defending any such action or
     claim, whether or not in connection with litigation in which any
     Indemnified Person is a named party, or in connection with enforcing the
     rights of such Indemnified Person under this Agreement; provided that the
     Company shall not be obligated to make such reimbursement, and shall be
     refunded reimbursements previously made, to the extent that the action or
     claim for which such reimbursement is made is finally judicially determined
     to have resulted from the gross negligence, bad faith or willful misconduct
     of an Indemnified Person.

(b)  If for any reason the foregoing indemnity is unavailable to the Indemnified
     Person or insufficient to hold an Indemnified Person harmless, then the
     Company shall contribute to the amount paid or payable by such Indemnified
     person as a result of such claim, liability, loss, damage or expense in
     such proportion as is appropriate to reflect not only the relative benefits
     received by the Company on the one hand and Marlin on the other, but also
     the relative fault of the Company and Marlin, as well as any relevant
     equitable considerations, subject to the limitation that in any event the
     aggregate contribution of all Indemnified Persons to all losses, claims,
     liabilities, damages and expenses shall not exceed the amount of fees
     actually received by Marlin pursuant to this Agreement. It is hereby
     further agreed that the relative benefits to the Company on one hand and
     Marlin on the other with respect to any transaction or proposed transaction
     contemplated by this Agreement shall be deemed to be in the same proportion
     as (i) the total value the transaction or proposed transaction bears to
     (ii) the fees paid to Marlin with respect to such transaction.

(c)  No Indemnified person shall have any liability to the Company or any other
     person in connection with the services rendered pursuant to this Agreement,
     except for any liability for losses, claims, damages or liabilities finally
     judicially determined to have resulted solely from such Indemnified
     Person's gross negligence, bad faith or willful misconduct.

(d)  The Company agrees that it will not settle or compromise or consent to the
     entry of any judgment in any pending or threatened claim, action, suit or
     proceeding in respect of which indemnification may be sought from the
     Company by any Indemnified Person (to which any Indemnified Person is an
     actual or threatened party) unless such settlement, compromise or consent
     includes an unconditional release of Indemnified Persons hereunder from all
     liability arising out of such claim, action, suit or proceeding.

<PAGE>

(e)  The Company waives any right to a trial by jury with respect to any claim
     or action arising out of this Agreement or the actions of Marlin, and
     consents to personal jurisdiction, service of process and venue in any
     court in which any claim covered by the provisions of this Attachment A may
     be brought against an Indemnified Person.

(f)  The provisions of this Attachment A shall be in addition to any liability
     the Company may have to any Indemnified Person at common law or otherwise,
     and shall survive the expiration of the term of this Agreement and the
     closing or consummation of any transaction or proposed transaction
     contemplated by this Agreement.