-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EWytHOqFnO6C6FdGqA0kPIGzFoARZ4LGMYWi0AiEifwxxI6PmEZHPVLIFtSfKvvJ YlOn0U3708Iir1M4fbuLbQ== 0000950130-96-003839.txt : 19961009 0000950130-96-003839.hdr.sgml : 19961009 ACCESSION NUMBER: 0000950130-96-003839 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19961008 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPECIALTY CATALOG CORP CENTRAL INDEX KEY: 0001020897 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 043253301 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-10793 FILM NUMBER: 96640794 BUSINESS ADDRESS: STREET 1: 21 BRISTOL DRIVE CITY: SOUTH EASTON STATE: MA ZIP: 02375 BUSINESS PHONE: 5082380199 MAIL ADDRESS: STREET 1: 21 BRISTOL DRIVE CITY: SOUTH EASTON STATE: MA ZIP: 02375 S-1/A 1 AMENDMENT NO. 3 TO S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996 REGISTRATION NO. 333-10793 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO. 3 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- SPECIALTY CATALOG CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 5961 04-3253301 (PRIMARY STANDARD (I.R.S. EMPLOYER (STATE OR OTHER INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.) JURISDICTION OF CODE NUMBER) INCORPORATION OR ORGANIZATION) 21 BRISTOL DRIVE SOUTH EASTON, MA 02375 (508) 238-0199 (ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS) STEVEN L. BOCK, CHAIRMAN AND CHIEF EXECUTIVE OFFICER 21 BRISTOL DRIVE SOUTH EASTON, MA 02375 (508) 238-0199 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ---------------- COPIES TO: ROBERT L. LAWRENCE, ESQ. JEFFREY S. DAVID A. MILLER, ESQ. GRAUBARD TULLMAN, ESQ. KANE KESSLER, P.C. MOLLEN & MILLER 600 THIRD AVENUE NEW 1350 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10016 TELEPHONE NO.: YORK, NEW YORK 10019 TELEPHONE NO.: (212) 818-8800 FACSIMILE NO.: (212) (212) 541-6222 FACSIMILE NO.: (212) 818-8881 245-3009 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE - -------------------------------------------------------------------------------- Common Stock $.01 par value.................. 1,725,000(2) $ 7.50 $12,937,500 $4,461.21 - -------------------------------------------------------------------------------- Underwriter's Purchase Option................. 1 $100.00 $ 100 (3) - -------------------------------------------------------------------------------- Common Stock Underlying Underwriter's Purchase Option................. 150,000 $ 8.25 $ 1,237,500 $ 426.72 - -------------------------------------------------------------------------------- Total................... -- -- $14,175,100 $4,887.93
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purposes of calculating the registration fee. (2) Includes 225,000 shares which may be issued upon exercise of a 45-day option granted to the Underwriter to cover over-allotments, if any. See "Underwriting." (3) Pursuant to Rule 457(g), no registration fee is payable. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the Company's estimates of the expenses to be incurred by it in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions: Securities and Exchange Commission registration fee............. $ 4,887.93 NASD registration fee........................................... 1,996.25 Nasdaq listing fee.............................................. 1,000.00 Printing registration statement and other documents............. 100,000.00* Fees and expenses of Registrant's counsel....................... 200,000.00* Underwriter's expense allowance................................. 262,500.00* Accounting fees and expenses.................................... 100,000.00* Blue Sky expenses and counsel fees.............................. 25,000.00* Engraving....................................................... 5,000.00* Miscellaneous................................................... 49,615.82 ----------- Total......................................................... $750,000.00 ===========
- -------- * Estimated ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of Delaware, as amended ("DGCL"), authorizes a Delaware corporation to indemnify its officers, directors, employees and agents against expenses and liabilities incurred in legal proceedings involving such persons because of their holding or having held such positions with the corporation and to purchase and maintain insurance for such indemnification. The Company's By-Laws and Article Seventh of its Certificate of Incorporation, as amended, substantively provide that the Company indemnify its officers, directors, employees and agents to the fullest extent permitted by Section 145 of the DGCL. In accordance with Section 102(b)(7) of the DGCL, Article 8 of the Company's Certificate of Incorporation, as amended, eliminates the personal liability of directors to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director with certain limited exceptions set forth in Section 102(b)(7). The Underwriting Agreement provides for reciprocal indemnification between the Company and its controlling persons on the one hand and the Underwriters and their respective controlling persons on the other hand against certain liabilities in connection with this Offering, including liabilities under the Securities Act of 1933, as amended ("Securities Act"). The Company has also entered into indemnification agreements with each of its directors and executive officers. The indemnification agreements provide that the directors and executive officers will be indemnified to the fullest extent permitted by applicable law against all expenses (including attorneys' fees), judgments, fines and amounts reasonably paid or incurred by them for settlement in any threatened, pending or completed action, suit or proceeding, including any derivative action, on account of their services as a director or officer of the Company or of any subsidiary of the Company or of any other company or enterprise in which they are serving at the request of the Company. No indemnification will be provided under the indemnification agreements, however, to any director or executive officer in certain limited circumstances, including on account of knowingly fraudulent, deliberately dishonest or willful misconduct. To the extent the provisions of the indemnification agreements exceed the indemnification permitted by applicable law, such provisions may be unenforceable or may be limited to the extent they are found by a court of competent jurisdiction to be contrary to public policy. II-1 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Described below is information regarding all securities that have been issued by the Company in the past three years. 1. On November 23, 1994, SC Corporation, a predecessor of the Company, pursuant to the First Amended and Restated Joint Plan of Reorganization of SC Corporation, Wigs by Paula, Inc., and SC Publishing, undertook a reorganization ("Reorganization") and left the protection of the bankruptcy court. As part of the Reorganization: (i) Mr. Bock acquired for $30,000 98,934 shares of the Company's Common Stock; (ii) Dickstein & Co. acquired for $2,184,000 867,786 shares of the Company's Common Stock, 7,272 shares of the Company's 13% Preferred Stock and subordinated indebtedness ("Subordinated Indebtedness") in the principal amount of $1,190,000; (iii) Dickstein International acquired for $1,092,000 433,893 shares of the Company's Common Stock, 3,636 shares of the Company's 13% Preferred Stock and Subordinated Indebtedness in the principal amount of $595,000; and (iv) Viking Holdings Limited acquired for $2,626,000 and the forgiveness of a $650,000 note receivable 1,301,680 shares of the Company's Common Stock, 10,908 shares of the Company's 13% Preferred Stock and Subordinated Indebtedness in the principal amount of $1,785,000. All of the Subordinated Indebtedness was transferred to SC Holdings L.L.C. shortly after completion of the Plan of Reorganization. The owners of SC Holdings L.L.C. control the majority of the outstanding Common Stock. The Subordinated Indebtness bears interest at 11.5% per annum and is due on December 1, 2002. The issuance of the shares and the Subordinated Indebtness was exempt from the registration provisions of the Securities Act pursuant to Section 3(a)(7) of the Securities Act. 2. On November 30, 1994, all of the outstanding shares of SC Corporation common stock were exchanged for shares of Common Stock and 13% Preferred Stock at the rate of 1/100 share of the Company's common stock for each outstanding share of SC Corporation common stock. The forgoing transactions were exempt from the registration provisions of the Securities Act pursuant to Section 4(2)(a) of the Securities Act. The following table sets forth the number of shares of the Company's Common Stock and the amount of subordinated indebtness each stockholder received pursuant to the Reorganization. The numbers of shares owned and the conversion of the 13% Preferred Stock into Common Stock reflect a recapitalization of the Company whereby each share of Preferred Stock was converted into 16.67 shares of Common Stock.
AMOUNT OF COMMON STOCK PREFERRED SUBORDINATED NAME SHARES ISSUED SHARES ISSUED INDEBTNESS ---- ------------- ------------- ------------ Steven L. Bock.................... 303.93 0 -- Bruce Pollack..................... 121.57 0 -- Wigs, L.P......................... 260.51 675 $ 110,406 Dickstein & Co., L.P.............. 2,665.88 7,272 $1,189,926 9 West 57th Street New York, NY 10019 Dickstein International Limited... 1,332.94 3,636 $ 594,964 9 West 57th Street New York, NY 10019 Viking Holdings Limited........... 3,998.82 10,908 $1,784,890 c/o Abacus Secretaries (Jersey) Limited La Motte Chambers St. Helier, Jersey JE1 1BS Channel Islands
3. Mark Brodsky and Samuel Katz acquired their shares of Common Stock and 13% Preferred Stock as set forth in the following table in February 1996 from Dickstein International. The transaction was exempt from the II-2 registration requirements of the Securities Act pursuant to the so-called "Section 4 (1 1/2)" exemption. The following table sets forth the number of shares of common stock and 13% Preferred each stockholder received. The numbers of shares owned and the conversion of the 13% Preferred Stock into Common Stock reflect a recapitalization of the Company whereby each share of Preferred Stock was converted into 16.67 shares of Common Stock.
COMMON STOCK PREFERRED NAME ISSUED STOCK ISSUED ---- ------ ------------ Mark Brodsky............................................. 122.07 332.98 Samuel Katz.............................................. 244.14 665.96
4. On June 1, 1996, the Company entered into an agreement with Martin Franklin, a director of the Company, and two associates of Mr. Franklin, pursuant to which Mr. Franklin and his associates loaned the Company $495,000 in junior subordinated indebtedness. This loan was made on August 9, 1996, bears interest at 11.5%, and is due August 9, 1999, provided that this loan will not be repaid prior to the repayment of the Subordinated Indebtedness. In connection with this loan, the Company has issued for $5,000 to Mr. Franklin and his associates warrants to purchase 265,335 shares of Common Stock. The warrants are exercisable until September 30, 1999 at an exercise price of $1.88 per share. The above transactions were private transactions not involving a public offering and were exempt from the registration provisions of the Securities Act pursuant to Section 4(2) thereof. 5. On August 1, 1996, Dickstein Focus Fund acquired 999.08 shares of 13% Preferred Stock and 366.26 shares of Common Stock from Dickstein & Co. L.P. The transaction was exempt from the registration requirements of the Securities Act pursuant to the so-called "Section 4(1 1/2)" exemption. No underwriter was engaged in connection with the foregoing sales of securities. The Company has reason to believe that all of the foregoing purchasers were familiar with or had access to information concerning the operations and financial conditions of the Company, and all of those individuals purchasing securities represented that they were accredited investors, acquiring the shares for investment and without a view to the distribution thereof. At the time of issuance, all of the foregoing securities were deemed to be restricted securities for purposes of the Securities Act and the certificates representing such securities bore legends to that effect. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- ***1.01 --Preliminary form of Underwriting Agreement. ***1.03 --Form of Selected Dealer Agreement. ***1.04 --Underwriter's Purchase Option. ***3.01 --Certificate of Incorporation of the Registrant, as amended. *3.02 --By-Laws of the Registrant, as amended. **4.01 --Specimen Certificate representing the Common Stock, par value $0.01 per share. *5.01 --Opinion of Kane Kessler, P.C. *10.01 --1996 Stock Option Plan. **10.02 --Employment Agreement dated as of October 4, 1996 between the Registrant and Steven L. Bock. **10.03 --Employment Agreement dated as of October 4, 1996 between the Registrant and Steven M. O'Hara. ***10.04 --Credit Agreement dated , 1994 between Bank Nationale de Paris ("BNP") Wigs By Paula, Inc., predecessor to the Registrant ("Wigs"). ***10.05 --First Amendment, Waiver and Consent to the Credit Agreement dated August 16, 1995 between BNP and the Registrant. ***10.06 --Second Amendment, Waiver and Consent to the Credit Agreement dated August 14, 1996 between BNP and the Registrant.
II-3
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- ***10.07 --Security Agreement dated as of November 23, 1994 between Wigs and BNP. ***10.08 --Trademark and Copyright Security Agreement dated as of November 23, 1994 between WIGS, BNP and other guarantors named therein. ***10.09 --Pledge Agreement dated as of November 23, 1994 between SC Corporation and BNP. ***10.10 --Pledge Agreement dated as of November 23, 1994 between the Registrant, SC Holdings, L.L.C. and BNP. ***10.11 --Guaranty dated November 23, 1994 between the Registrant, Western Schools, Inc., Royal Advertising & Marketing, Inc., BNP and the Hedge Banks. ***10.12 --Guaranty dated November 23, 1994 between SC Corporation, BNP, and the Hedge Banks. ***10.13 --Guaranty dated November 30, 1994 between the Registrant, SC Holdings L.L.C., BNP, and the Hedge Banks. ***10.14 --Agreement dated June 1, 1996 between SC Direct, Inc., the Registrant and Martin Franklin. ***10.15 --Debtor Securities Purchase Agreement dated November 23, 1994 between WIGS, L.P. and SC Corporation. ***10.16 --Pledge and Security Agreement dated November 30, 1994 between WIGS, L.P. and SC Corporation. ***10.17 --Promissory Note dated November 23, 1994 in the principal amount of $147,583 from WIGS, L.P. to SC Corporation. ***10.18 --Lease dated July 10, 1985 between Simon D. Young, Trustee of the Sandpy Realty Trust, ("Trustee"), and Wigs for premises located at 21 Bristol Drive, South Easton, MA. ***10.19 --First Amendment of Lease, dated March 15, 1986, between the Trustee and Wigs. ***10.20 --Second Amendment to Lease, dated March 1, 1989 between the Trustee and Wigs By Paula, Inc. ***10.21 --Third Amendment to Lease, dated October 22, 1993 between the Trustee and Wigs By Paula, Inc. ***10.22 --Letter Agreement, dated February 21, 1995 between the Trustee and SC Corporation. ***10.23 --Lease, dated October 20, 1995 between Fredric Snyderman as Trustee of JV Realty Trust and SC Direct Inc. for the premises at 23 Norfolk Avenue. ***10.24 --Printing Agreement, dated January 1, 1995 between Quebecor Printing (USA) Corp. and the Registrant, as amended. *10.25 --Amended and Restated Registration Rights Agreement, dated October 3, 1996 between the Registrant and certain of the Registrant's stockholders, as amended. ***10.26 --First Amended and Restated Joint Plan of Reorganization of SC Corporation, Western Schools, Inc. and Wigs by Paula dated September 21, 1994. ***10.27 --AT&T Contract Tariff Order dated February 9, 1995 between AT&T and the Registrant. ***10.28 --Shareholders' Agreement dated as of November 30, 1994 between the Registrant, SC Holdings L.L.C., SC Corporation and certain shareholders. ("Shareholders' Agreement"). ***10.29 --Amendment No. 1 to Shareholders' Agreement. ***10.30 --SC Holdings L.L.C. Limited Liability Company Agreement, dated as of . *10.31 --Supplemental Defined Contribution Plan. *10.32 --Form of Indemnification Agreement of Directors. *10.33 --Form of Warrant. *10.34 --Form of Subordinated Note. ***11.01 --Statement Regarding Computation of per share earnings. *21.01 --Subsidiaries of the Registrant.
II-4
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- **23.01 --Consent of Kane Kessler, P.C. (included in Exhibit 5) ***23.02 --Consent of Deloitte and Touche ***24.01 --Power of Attorney (contained on page II-7) ***27.01 --Financial Data Schedule
- -------- * Filed herewith ** To be filed by amendment. *** Previously filed. ITEM 17. UNDERTAKINGS. The Company hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) and to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) to provide to the Underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser; (5) insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue; II-5 (6) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; (7) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON OCTOBER 8, 1996. Specialty Catalog Corp. /s/ Steven L. Bock By: _________________________________ Steven L. Bock, Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Steven Bock and Stephen O'Hara, jointly and severally, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post- effective amendments) to this registration statement and all documents relating thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ Steven L. Bock Director and Chief - ------------------------------------- Executive Officer October 8, 1996 /s/ Steven L. Bock (Principal Executive Officer) /s/ Steven L. Bock, as Attorney-in- President Fact October 8, 1996 - ------------------------------------- /s/ Stephen M. O'Hara /s/ Steven L. Bock, as Attorney-in- Chief Financial Fact Officer (Principal October 8, 1996 - ------------------------------------- Financial and /s/ J. William Heise Accounting Officer) /s/ Steven L. Bock, as Attorney-in- Director Fact October 8, 1996 - ------------------------------------- /s/ Alan S. Cooper II-7 SIGNATURE TITLE DATE /s/ Steven L. Bock, as Attorney-in- Director Fact October 8, 1996 - ------------------------------------- /s/ Martin Franklin /s/ Steven L. Bock, as Attorney-in- Director Fact October 8, 1996 - ------------------------------------- /s/ Samuel L. Katz /s/ Steven L. Bock, as Attorney-in- Director Fact October 8, 1996 - ------------------------------------- /s/ Guy Naggar II-8 EXHIBIT SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, DECEMBER 30, 1994 1995 ------------ ------------ Reserve Allowance: Balance at beginning of period................ (847,000) (997,299) Charges to net sales.......................... (8,617,427) (8,298,427) Deductions--Refunds........................... 8,467,128 8,654,460 Balance at end of period...................... (997,299) (641,266) Allowance for Doubtful Accounts: Balance at beginning of period................ (20,500) (42,068) Charges to bad debt expense................... (34,112) (146,004) Deductions--Write-offs........................ 12,612 28,072 Balance at end of period...................... (42,000) (160,000)
S-1 EXHIBIT INDEX
EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBIT NO. ------- ---------------------- ---- ***1.01 --Preliminary form of Underwriting Agreement. ***1.03 --Form of Selected Dealer Agreement. ***1.04 --Underwriter's Purchase Option. ***3.01 --Certificate of Incorporation of the Registrant, as amended. *3.02 --By-Laws of the Registrant, as amended. **4.01 --Specimen Certificate representing the Common Stock, par value $0.01 per share. *5.01 --Opinion of Kane Kessler, P.C. *10.01 --1996 Stock Option Plan. **10.02 --Employment Agreement dated as of October 4, 1996 between the Registrant and Steven L. Bock. **10.03 --Employment Agreement dated as of October 4, 1996 between the Registrant and Steven M. O'Hara. ***10.04 --Credit Agreement dated , 1994 between Bank Nationale de Paris ("BNP") Wigs By Paula, Inc., predecessor to the Registrant ("Wigs"). ***10.05 --First Amendment, Waiver and Consent to the Credit Agreement dated August 16, 1995 between BNP and the Registrant. ***10.06 --Second Amendment, Waiver and Consent to the Credit Agreement dated August 14, 1996 between BNP and the Registrant. ***10.07 --Security Agreement dated as of November 23, 1994 between Wigs and BNP. ***10.08 --Trademark and Copyright Security Agreement dated as of November 23, 1994 between WIGS, BNP and other guarantors named therein. ***10.09 --Pledge Agreement dated as of November 23, 1994 between SC Corporation and BNP. ***10.10 --Pledge Agreement dated as of November 23, 1994 between the Registrant, SC Holdings, L.L.C. and BNP. ***10.11 --Guaranty dated November 23, 1994 between the Registrant, Western Schools, Inc., Royal Advertising & Marketing, Inc., BNP and the Hedge Banks. ***10.12 --Guaranty dated November 23, 1994 between SC Corporation, BNP, and the Hedge Banks. ***10.13 --Guaranty dated November 30, 1994 between the Registrant, SC Holdings L.L.C., BNP, and the Hedge Banks. ***10.14 --Agreement dated June 1, 1996 between SC Direct, Inc., the Registrant and Martin Franklin. ***10.15 --Debtor Securities Purchase Agreement dated November 23, 1994 between WIGS, L.P. and SC Corporation. ***10.16 --Pledge and Security Agreement dated November 30, 1994 between WIGS, L.P. and SC Corporation. ***10.17 --Promissory Note dated November 23, 1994 in the principal amount of $147,583 from WIGS, L.P. to SC Corporation. ***10.18 --Lease dated July 10, 1985 between Simon D. Young, Trustee of the Sandpy Realty Trust, ("Trustee"), and Wigs for premises located at 21 Bristol Drive, South Easton, MA. ***10.19 --First Amendment of Lease, dated March 15, 1986, between the Trustee and Wigs. ***10.20 --Second Amendment to Lease, dated March 1, 1989 between the Trustee and Wigs By Paula, Inc.
EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBIT NO. ------- ---------------------- ---- ***10.21 --Third Amendment to Lease, dated October 22, 1993 between the Trustee and Wigs By Paula, Inc. ***10.22 --Letter Agreement, dated February 21, 1995 between the Trustee and SC Corporation. ***10.23 --Lease, dated October 20, 1995 between Fredric Snyderman as Trustee of JV Realty Trust and SC Direct Inc. for the premises at 23 Norfolk Avenue. ***10.24 --Printing Agreement, dated January 1, 1995 between Quebecor Printing (USA) Corp. and the Registrant, as amended. *10.25 --Amended and Restated Registration Rights Agreement, dated October 3, 1996 between the Registrant and certain of the Registrant's stockholders, as amended. ***10.26 --First Amended and Restated Joint Plan of Reorganization of SC Corporation, Western Schools, Inc. and Wigs by Paula dated September 21, 1994. ***10.27 --AT&T Contract Tariff Order dated February 9, 1995 between AT&T and the Registrant. ***10.28 --Shareholders' Agreement dated as of November 30, 1994 between the Registrant, SC Holdings L.L.C., SC Corporation and certain shareholders. ("Shareholders' Agreement"). ***10.29 --Amendment No. 1 to Shareholders' Agreement. ***10.30 --SC Holdings L.L.C. Limited Liability Company Agreement, dated as of . *10.31 --Supplemental Defined Contribution Plan. *10.32 --Form of Indemnification Agreement of Directors. *10.33 --Form of Warrant, dated August 12, 1996. *10.34 --Form of Subordinated Note, dated August 12, 1996. ***11.01 --Statement Regarding Computation of Per Share Earnings. *21.01 --Subsidiaries of the Registrant. **23.01 --Consent of Kane Kessler, P.C. (included in Exhibit 5). ***23.02 --Consent of Deloitte & Touche LLP. ***24.01 --Power of Attorney (contained on page II-7). ***27.01 --Financial Data Schedule.
- -------- * Filed herewith. ** To be filed by amendment. *** Previously filed. EX-3.02 2 AMENDED AND RESTATED BY-LAWS EXHIBIT 3.02 AMENDED AND RESTATED BY-LAWS OF SPECIALTY CATALOG CORP. A DELAWARE CORPORATION ARTICLE I STOCKHOLDERS ------------ SECTION 1. Annual Meetings. Subject to change by resolution of the ---------------- Board of Directors, the annual meeting of the Stockholders of the Corporation for the purpose of electing directors and for the transaction of such other business as may be brought before the meeting shall be held on a date fixed, from time to time, by the directors of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. The meeting may be held at such time and such place within or without the State of Delaware as shall be fixed by the Board of Directors and stated in the notice of the meeting. SECTION 2. Special Meetings. Special meetings of the stockholders may ----------------- be called at any time by the Chief Executive Officer, Chairman of the Board, a majority of the Board of Directors or by a majority of the stockholders of record of all shares entitled to vote. Special meetings shall be held on the date and at the time and place either within or without the State of Delaware as specified in the notice thereof. SECTION 3. Notice of Meetings. Except as otherwise expressly required ------------------- by law or the Certificate of Incorporation, written notice stating the place and time of the meeting and the purpose or purposes of such meeting, shall be given by the Secretary to each stockholder entitled to vote thereat at his address as it appears on the records of the Corporation not less than ten (10) nor more than sixty (60) days prior to the meeting. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy; and if any stockholder shall, in person or by attorney thereunto duly authorized, waive notice of any meeting, in writing or by telephone or facsimile, whether before or after such meeting be held, the notice thereof need not be given to him. The attendance of any stockholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. Notice of any adjourned meeting of stockholders need not be given except as provided in SECTION 5 of this Article I. SECTION 4. Quorum. Subject to the provisions of law in respect of the ------- vote that shall be required for a specific action, the number of shares the holders of which shall be present or represented by proxy at any meeting of stockholders in order to constitute a quorum for the transaction of any business shall be at least thirty three and one-third (33-1/3) percent of the total number of shares issued and outstanding and entitled to vote at such meeting. Where a separate vote by a class or classes is required, thirty three and one- third (33-1/3) of the total names of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter and the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class. SECTION 5. Adjournment. At any meeting of stockholders, whether or not ------------ there shall be a quorum present, the holders of a majority of the shares voting at the meeting, whether present in person at the meeting or represented by proxy at the meeting, may adjourn the meeting from time to time. Except as provided by law, notice of such adjourned meeting need not be given otherwise than by announcement of the time and place of such adjourned meeting at the meeting at which the adjournment is taken. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. SECTION 6. Organization. The Chairman of the Board or, in his absence ------------- or non-election, the Vice Chairman or, in his absence or non-election, the President or, in the absence of the foregoing officers, a Vice President shall call meetings of the stockholders to order and shall act as Chairman of such meetings. In the absence of all of the foregoing officers, holders of a majority in number of the shares of the capital stock of the Corporation present in person or represented by proxy and entitled to vote at such meeting shall elect a Chairman, who may be the Secretary of the Corporation. The Secretary of the Corporation shall act as secretary of all meetings of the stockholders; but in the absence of the Secretary, the Chairman may appoint any person to act as secretary of the meeting. SECTION 7. Voting. Each stockholder shall, except as otherwise ------- provided by law or by the Certificate of Incorporation, at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital stock entitled to vote held by such stockholder, but no proxy shall be voted on after three years from its date, unless said proxy provides for a longer period. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of -2- directors. Any other action shall be authorized by a vote of a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the Certificate of Incorporation and these By-laws. In the election of directors, and for any other action, voting need not be by ballot, unless the Board of Directors in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot. SECTION 8. Stockholders List. The officer of the Corporation who has ------------------ charge of the stock ledger of the Corporation shall prepare and make a complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order with the address of each and the number of shares held by each, which list shall be open to the examination of any stockholder, for any purpose germane to the meeting during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole thereof and may be inspected by any stockholder who is present. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the ledger, the list required by this Section 8 of Article I or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 9. Address of Stockholders. Each stockholder shall designate ------------------------ to the Secretary of the Corporation an address at which notices of meetings and all other corporate notices may be served upon or mailed to him, and if any stockholder shall fail to designate such address, corporate notices may be served upon him by mail directed to him at his last known post office address. SECTION 10. Inspectors of Election. The Board of Directors may at any ----------------------- time appoint one or more persons to serve as Inspectors of Election at the next succeeding annual meeting of stockholders or at any other meeting or meetings and the Board of Directors may at any time fill any vacancy in the office of Inspector. If the Board of Directors fails to appoint Inspectors, and this office becomes vacant and is not be filled by the Board of Directors, the Chairman of any meeting of the stockholders may appoint one or more temporary Inspectors for such meeting. All proxies shall be filed with the Inspectors for such meeting. All proxies shall be filed with the Inspectors of Election of the meeting before being voted upon. SECTION 11. Action by Consent. Unless otherwise provided in the ------------------ Certificate of Incorporation, any action required to be taken at any meeting of stockholders, or any action which may be taken at any meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote if a consent in writing, setting forth the action so taken, shall be signed by the holders of all of the outstanding voting stock of the Corporation. In -3- addition, any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Action taken pursuant to this paragraph shall be subject to the provisions of Section 228 of the General Corporation Law. SECTION 12. Advance Notice of Stockholder Business. Notwithstanding any --------------------------------------- other provision of these By-Laws, for business to be properly brought before an annual or special meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be received at the principal executive offices of the corporation, not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in these By-Laws to the contrary, no business brought by a stockholder shall be conducted at any meeting except in accordance with the procedures set forth in this ARTICLE I, SECTION 12. The Chairman of the meting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. -4- ARTICLE II Board of Directors ------------------ SECTION 1. General Powers. The property, affairs and business of the --------------- Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors shall have the power and authority to authorize the officers of the Corporation to enter into such agreements as the Board of Directors shall deem appropriate including the power and authority to authorize the seal of the Corporation to be affixed to all papers that may require it. SECTION 2. Number, Qualification and Term of Office. The number of ----------------------------------------- directors shall be at least two and not more than twelve, as may be determined by the Board of Directors or as otherwise be provided in the Certificate of Incorporation of the Corporation. Directors need not be stockholders. Each director shall hold office for the term for which he is appointed or elected and until his successor shall have been elected and shall qualify, or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Directors need not be elected by ballot, except upon demand of any stockholder. The Chairman of the Board, if one be elected, and the Vice Chairman of the Board, if one be elected, shall be chosen from among the directors. The number of directors may be increased or decreased by action of the directors not exceeding the number of directors authorized by the Certificate of Incorporation or these By-laws. SECTION 3. Quorum and Manner of Action. Except as otherwise provided ---------------------------- by law or these By-laws, a majority of the entire Board of Directors shall be required to constitute a quorum for the transaction of business at any meeting, and the act of a majority of the entire Board of Directors shall be the act of the Board of Directors. In the absence of a quorum, a majority of the directors present may adjourn any meeting from time to time until a quorum be had. Notice of any adjourned meeting need not be given. The directors shall act only as a board and individual directors shall have no power as such. In the event that the Board of Directors shall be unable to take action on any matter because of a deadlock, upon the motion of any director the matter shall be submitted to a vote of the stockholders. Any action so approved by a majority vote of the stockholders shall be the action of the Board of Directors, however, any director who voted against the action taken by the stockholders prior to the submission of such matter to the stockholders may, within 10 days following such stockholder vote, dissent in writing to such action to the Secretary of the Corporation, who shall enter such dissent in the minutes of the Corporation. SECTION 4. Place of Meeting, etc. The Board of Directors may hold ---------------------- its meetings, have one or more offices and keep the books and records of the Corporation at such -5- place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 5. Regular Meetings. A regular meeting of the Board of ----------------- Directors shall be held for the election of officers and the transaction of other business as soon as practicable after each annual meeting of stockholders, and other regular meetings of said Board shall be held at times and places as said Board shall direct. No notice shall be required for any regular meeting of the Board of Directors but a copy of every resolution fixing or changing the time or place of regular meetings shall be mailed to every director at least three days before the first meeting held in pursuance thereof. SECTION 6. Special Meetings. Special meetings of the Board of ----------------- Directors may be called by the Chairman of the Board, the Chief Executive Officer, or any one Director. The Secretary or any Assistant Secretary shall give notice of the time and place of each special meeting by mailing a written notice of the same to each director at his last known post office address at least three (3) business days before the meeting or by causing the same to be delivered personally or to be transmitted by telecopies, overnight mail, telegraph, cable, wireless, telephone or orally at least twenty-four hours before the meeting to each director. In the event the Secretary or Assistant Secretary shall fail to give the notice of a Special Meeting called in accordance with this Section, the person who called such meeting shall be empowered to give notice of such meeting in accordance with the immediately preceding sentence. SECTION 7. Action by Consent. Any action required or permitted to ------------------ be taken at any meeting of the Board of any committee thereof may be taken without a meeting, if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 8. Organization. At each meeting of the Board of Directors, ------------- the Chairman of the Board or in his absence,the Vice Chairman of the Board, or in his absence, the President, or in his absence or non-election, a director chosen by a majority of the directors present shall act as Chairman. The Secretary or, in his absence, an Assistant Secretary or, in the absence of both the Secretary and an Assistant Secretary, any person appointed by the Chairman shall act as Secretary of the meeting. SECTION 9. Resignations. Any director of the Corporation may resign at ------------- any time by giving written notice to the Board of Directors, the President or the Secretary of the Corporation. The resignation of any director shall take effect at the time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. -6- SECTION 10. Removal of Directors. Except as otherwise provided by law, --------------------- any director may be removed for cause, by the affirmative vote of a majority of the Board of Directors. Except as may be otherwise provided by law, cause for removal shall be construed to exist only if the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to a right of appeal, or has been adjudged by a court of competent jurisdiction to be liable for gross negligence, or willful misconduct, in the performance of his duty to the Corporation in a matter of substantial importance to the Corporation and such adjudication is no longer subject to a right of appeal. This Section 10 may not be amended or rescinded except by the affirmative vote of the holders of at least a majority of all the outstanding shares of capital stock of the Corporation issued and outstanding and entitled to vote at any regular or special meeting of the stockholders and only if notice of the proposed alteration or amendment be contained in the notice of the meeting in accordance with the provisions of these By-Laws. SECTION 11. Vacancies. Any vacancy in the Board of Directors caused --------- by death, resignation, removal, disqualification, an increase in the number of directors or any other cause shall be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election of directors and until their successors are duly elected and qualified, or until their earlier resignation or removal. SECTION 12. Compensation of Directors. Directors may receive such -------------------------- reasonable compensation for their services and expenses as may be directed by resolution of the Board; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may also be allowed like compensation for their services and expenses. SECTION 13. Committees. By resolution or resolutions passed by a ---------- majority of the whole Board at any meeting of the Board of Directors, the directors may designate one or more committees of the Board of Directors, each committee to consist of two or more directors. To the extent provided in said resolution or resolutions, unless otherwise provided by law, such committee or committees shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, including the power and authority to authorize the seal of the Corporation to be affixed to all papers that may require it. No committee, however, shall have the power to declare dividends or to authorize the issuance of shares of capital stock of the Corporation. Further, the Board of Directors may designate one or more directors as alternate members of a committee who may replace an absent or disqualified member at any meeting. If an alterative member of a committee is not selected by the Board of Directors, and in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. A committee may -7- make such rules for the conduct of its business and may appoint such committees and assistants as it shall from time to time deem necessary. A majority of the members of a committee shall constitute a quorum for the transaction of business of such committee. Regular meetings of a committee shall be held at such times as such committee shall from time to time by resolution determine. No notice shall be required for any regular meeting of a committee but a copy of every resolution fixing or changing the time or place of at least three days before the first meeting held in pursuance thereof. Special meetings of a committee may be called by the Chairman of such committee or the Secretary of such committee, or any two members thereof. The Secretary of the Corporation or the Secretary of such committee shall give notice of the time and place of each special meeting by mail at least two days before such meeting or by telegraph, cable, wireless, telephone or orally at least twenty-four hours before the meeting to each member of such committee. SECTION 14. Participation in Meetings. Members of the Board of -------------------------- Directors or of any committee may participate in any meeting of the Board or committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 15. Interested Directors or Officers. No contract or --------------------------------- transaction between the Corporation and one or more of its directors of officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participate in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted by such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. SECTION 16. Advanced Notification of Stockholder Nominations. Only ------------------------------------------------ persons who are nominated in accordance with the procedures set forth in this ARTICLE II, shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board -8- of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section. Such nominations, other than those made by or, at the direction of, the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such persons' written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE III Officers -------- SECTION 1. Number. The officers of the Corporation shall be a Chairman ------- of the Board, a Chief Executive Officer, a President, a Chief Financial Officer, a Treasurer and a Secretary. In addition, the Board may elect one or more Vice Presidents and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article III. Any number of offices may be held by the same person, as the directors may determine. -9- SECTION 2. Election, Term of Office and Qualification. The officers ------------------------------------------- shall be elected annually by the Board of Directors at their first meeting after each annual meeting of the stockholders of the Corporation. Each officer, except such officers as may be appointed in accordance with the provisions of Section 3 of this Article, shall hold office until his successor shall have been duly elected and qualified, or until his death or until he shall have resigned or shall have become disqualified or shall have been removed in the manner hereinafter provided. SECTION 3. Subordinate Officers. The Board of Directors or the Chief --------------------- Executive Officer may from time to time appoint such other officers, including a Vice Chairman of the Board, one or more Assistant Treasurers and one or more Assistant Secretaries, and such agents and employees of the Corporation as may be deemed necessary or desirable. Such officers, agents and employees shall hold office for such period and upon such terms and conditions, have such authority and perform such duties as in these By-laws provided or as the Board of Directors or the Chief Executive Officer may from time to time prescribe. The Board of Directors or the Chief Executive Officer may from time to time authorize any officer to appoint and remove agents and employees and to prescribe the powers and duties thereof. SECTION 4. Removal. Any officer may be removed, either with or without -------- cause, by the affirmative vote of a majority of the Board of Directors. SECTION 5. Resignations. Any officer may resign at any time by giving ------------ written notice to the Board of Directors, the Chief Executive Officer or the Secretary. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6. Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed in these By-laws for regular selection or appointment to such office. SECTION 7. Chairman of the Board. The Chairman of the Board shall be --------------------- the Chief Executive Officer of the Corporation and shall preside, if present, at all meetings of the stockholders and at all meetings of the Board of Directors and shall perform such other duties and have such other powers as from time to time may be assigned by the Board of Directors or prescribed by these By-laws. SECTION 8. Vice Chairman of the Board. The Vice Chairman of the Board -------------------------- shall, at the request of the Chairman of the Board or in his absence or disability, perform the duties of the Chairman of the Board and when so acting shall, have all the powers of, and be subject to all restrictions upon, the Chairman of the Board and shall perform such other duties and have such other powers as from time to time may be assigned to him by the Chairman of the Board or prescribed by these By-laws. -10- SECTION 9. Chief Executive Officer. The Chief Executive Officer shall ----------------------- preside, if present, at all meetings of the Stockholders, and shall perform such other duties and have such other powers as from time to time may be assigned by the Board of Directors or prescribed by this By-law. SECTION 10. President. The President shall have general direction of --------- the affairs of the Corporation and general supervision over its several officers, subject, however, to the control of the Board of Directors and the Chief Executive Officer, and in general shall perform such duties and, subject to the other provisions of these By-laws, have such powers incident to the office of President and perform such other duties and have such other powers as from time to time may be assigned to him by the Board of Directors or the Chief Executive Officer. SECTION 11. Vice President. A Vice President may sign with the -------------- Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary certificates of stock of the Corporation and shall have such other powers and shall perform such other duties as from time to time may be assigned to him by the Board of Directors, the Chief Executive Officer or the President or prescribed by these By-laws. SECTION 12. Secretary. The Secretary shall keep or cause to be kept, --------- in books provided for the purpose, the minutes of the meetings of the stockholders, the Board of Directors and any committee when so required, shall see that all notices are duly given in accordance with the provisions of these By-laws and as required by law, shall be custodian of the records and the seal of the Corporation and see that the seal is affixed to all documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these By-laws, shall keep or cause to be kept a register of the post office address of each stockholder, may sign with the Chairman of the Board, the Chief Executive Officer, the President or any Vice President certificates of stock of the Corporation, and in general shall perform such duties and have such powers incident to the office of Secretary and shall perform such other duties and have such other powers as from time to time may be assigned to him by the Board of Directors, the Chief Executive Officer or the President or prescribed by these By-laws. SECTION 13. Assistant Secretary. Any Assistant Secretary shall, at the ------------------- request of the Secretary or in his absence or disability, perform the duties of the Secretary and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Secretary and shall perform such other duties and have such other powers as from time to time may be assigned to him by the Chief Executive Officer, the President, the Secretary or the Board of Directors or prescribed by these By-laws. SECTION 14. Chief Financial Officer. The Chief Financial Officer shall ----------------------- be responsible to the Board of Directors and the Chief Executive Officer for all financial controls and internal audits of the Corporation and its subsidiaries. He shall perform such other duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or prescribed -11- by these By-laws, and shall be responsible to the President or a designated Vice President only for the routine administrative matters pertaining to the duties of his office. SECTION 15. Treasurer. The Treasurer shall have charge and custody of, --------- and be responsible for, all funds and securities of the Corporation, and deposit all such funds in the name of the Corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of these By-laws, shall at all reasonable times exhibit his books of account and records, and cause to be exhibited the books of account and records of any corporation controlled by the Corporation, to any of the directors of the Corporation upon application during business hours at the office of the corporation, or such other corporation, where such books and records are kept, shall, if called upon to do so, receive and give receipts for monies due and payable to the Corporation from any source whatsoever, may sign with the Chairman of the Board, the Chief Executive Officer, the President or any Vice President certificates of stock of the Corporation, and in general shall perform such duties and have such powers incident to the office of Treasurer and such other duties and such other powers as from time to time may be assigned to him by the Board of Directors, Chief Executive Officer or the President or prescribed by these By-laws. SECTION 16. Assistant Treasurer. Any Assistant Treasurer shall, at the ------------------- request of the Treasurer or in his absence or disability, perform the duties of the Treasurer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Treasurer and shall perform such duties and have such other powers as from time to time may be assigned to him by the Chief Executive Officer, the President, the Treasurer or the Board of Directors or prescribed by these By-laws. SECTION 17. Other Officers. Such officers as the Board of Directors -------------- may choose shall perform such duties and have such powers as may be appropriate to such officer or as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. SECTION 18. Salaries. The salaries of the officers shall be fixed from -------- time to time by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation. SECTION 19. Authority of Officers. The officers of the Corporation --------------------- shall have such duties and authority as set forth in these By-laws and as shall be determined from time to time by the Board of Directors. -12- ARTICLE IV Shares and their Transfer ------------------------- SECTION 1. Certificates of Stock. Certificates for shares of the --------------------- capital stock of the Corporation shall be in such form not inconsistent with law as shall be approved by the Board of Directors. They shall be numbered in order of their issue and shall be signed by the Chairman of the Board or the Chief Executive Officer or the President or any Vice President and the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Corporation, and the seal of the Corporation is not required to be affixed thereto. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature shall have been placed upon any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers of the Corporation. SECTION 2. Transfer of Stock. Transfer of shares of the capital stock ----------------- of the Corporation shall be made only on the books of the Corporation by the holder thereof, or by his attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary of the Corporation, or a transfer agent of the Corporation, if any, on surrender of the certificate or certificates for such shares properly endorsed. A person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof as regards the Corporation, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. SECTION 3. Lost Destroyed and Mutilated Certificates. The holder of ----------------------------------------- any stock issued by the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of the certificate therefor or the failure to receive a certificate of stock issued by the Corporation, and the Board of Directors or the Secretary of the Corporation may, in its or his discretion, cause to be issued to such holder a new certificate or certificates of stock, upon compliance with such rules, regulations and/or procedures as may be prescribed or have been prescribed by the Board of Directors with respect to the issuance of new certificates in lieu of such lost, destroyed or mutilated certificate or certificates of stock issued by the Corporation which are not received, including reasonable indemnification to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. -13- SECTION 4. Transfer Agent and Registrar; Regulations. The Corporation ----------------------------------------- shall, if and whenever the Board of Directors shall so determine, maintain one or more transfer offices or agencies, each in the charge of a transfer agent designated by the Board of Directors, where the shares of the capital stock of the Corporation shall be directly transferable, and also one or more registry offices, each in the charge of a registrar designated by the Board of Directors, where such shares of stock shall be registered, and no certificate for shares of the capital stock of the Corporation, in respect of which a Registrar and/or Transfer Agent shall have been designated, shall be valid unless countersigned by such Transfer Agent and registered by such Registrar, if any. The Board of Directors shall also make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. SECTION 5. Fixing Date for Determination of Stockholders of Record. ------------------------------------------------------- In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, to express consent to corporate action in writing without a meeting, to receive payment of any dividend or other distribution or allotment of any rights, to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action, and only such stockholders as shall be stockholders of record of the date so fixed shall be entitled to such notice of and to vote at such meeting and any adjournment thereof, to express consent to any such corporate action, to receive payment of such dividend or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. If the stock transfer books are to be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting in the case of a merger or consolidation, the books shall be closed at least twenty days before such meeting. SECTION 6. Beneficial Owners. The Corporation shall be entitled to ----------------- recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to (whether or not it shall have express or other notice thereof), except as otherwise provided by law. -14- ARTICLE V General Provisions ------------------ SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end ----------- on such date of each year as shall be determined by the Board of Directors of the Corporation. SECTION 2. Waivers of Notice. Whenever any notice of any nature is ----------------- required by law, the provisions of the Certificate of Incorporation or these By- laws to be given, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. SECTION 3. Qualifying in Foreign Jurisdiction. The Board of Directors ---------------------------------- shall have the power at any time and from time to time to take or cause to be taken any and all measures which they may deem necessary for qualification to do business as a foreign corporation in any one or more foreign jurisdictions and for withdrawal therefrom. SECTION 4. Registered Office. The registered office of the Corporation ----------------- in the State of Delaware shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 5. Other Offices. The Corporation may also have offices at ------------- such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine. SECTION 6. Proxies. Except as otherwise provided in these By-laws or ------- in the Certificate of Incorporation of the Corporation, and unless otherwise provided by resolution of the Board of Directors, the Chairman of the Board or Chief Executive Officer may appoint from time to time an attorney or attorneys, or agent or agents, of the Corporation, on behalf and in the name of the Corporation, to cast the votes which the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other corporation, or to consent in writing to any action by such other corporation, and may instruct the person or person so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf and in the name of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises. SECTION 7. Seal. The Board of Directors shall provide a suitable seal ---- containing the name of the Corporation, which seal shall be in the charge of the Secretary and which may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. If and when so directed by the Board of Directors, a duplicate of the seal may be kept and be used by an officer of the Corporation designated by the Board. -15- SECTION 8. Dividends. Dividends upon the capital stock of the --------- Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. SECTION 9. Disbursements. All checks or demands for money and notes of ------------- the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. ARTICLE VI Indemnification --------------- SECTION 1. Power to Indemnify in Actions, Suits or Proceedings other --------------------------------------------------------- than those by or in the Right of the Corporation. Subject to Section 3 of this - ------------------------------------------------ Article VI, the Corporation shall indemnify any person (to the full extent permitted by the laws of the State of Delaware, as amended from time to time) who was or is a party or is threatened to be made a party to any threatened, pending or contemplated action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a ---- ---------- presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, has reasonable cause to believe that his conduct was unlawful. SECTION 2. Power to Indemnify in Actions, Suits or Proceedings by or in ------------------------------------------------------------ the Right of the Corporation. Subject to Section 3 of this Article VI, the - ---------------------------- Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit, proceeding or claim by or in the right of the Corporation to procure -16- a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprises against expenses (including attorney's fees and expenses) actually and reasonably incurred by him and to the extent permitted by applicable law in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses and amounts which the Court of Chancery or such other court shall deem proper. SECTION 3. Authorization of Indemnification. Any indemnification -------------------------------- under this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VI, as the case may be. Such determination and determinations under Section 5 or 6 of this Article VI shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director or officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney's fees and expenses) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. SECTION 4. Good Faith Defined. ------------------ (a) For purposes of any determination under Section 3 of this Article VI, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public account or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, -17- employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, agent or employee. (b) References in this Article VI to "penalties" include any excise taxes assessed on a person with respect to an employee benefit plan; references in this Article VI to "serving at the request of the Corporation" include any service as a director or officer (or if appropriate an employee or agent) or former director or officer (or if appropriate a former employee or agent) of the Corporation which imposes duties on, or involves services by, such person with respect to an employee benefit plan or its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the participants or beneficiaries of such an employee benefit plan shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation. (c) The provisions of this Section 4 shall not be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Sections 1 or 2 of this Article VI, as the case may be. SECTION 5. Indemnification upon Application; Procedure Upon ------------------------------------------------ Application; Etc. Except as otherwise provided in the proviso to Section 2 of - ---------------- this Article VI: (a) Any indemnification under Section 1 and 2 of this Article VI shall be made no later than 45 days after receipt by the Corporation of the written request by the director, officer, employee or agent or the former director, officer, employee or agent, unless a determination is made within said 45-day period in accordance with Section 3 of this Article VI that such person has not met the applicable standard of conduct set forth in Section 1 or 2 of this Article VI. (b) The right to indemnification under Section 1 or 2 of this Article VI or advances under Section 6 of this Article VI shall be enforceable by the director, officer, employee or agent or former director, officer, employee or agent in any court of competent jurisdiction. The burden of proving that indemnification is not appropriate shall be on the Corporation. Neither the absence of any prior determination that indemnification is proper in the circumstances, nor a prior determination that indemnification is not proper in the circumstances, shall be a defense to the action or create a presumption that the director or officer, or former director or officer, has not met the applicable standard of conduct. The expenses (including attorneys' fees and expenses) incurred by the director, officer, employee or agent in connection with successfully establishing his right to indemnification, in whole or in part, in any such action (or in any action or claim brought by him to recover under any insurance policy or policies referred to in Section 9 of this Article VI) shall also be indemnified by the Corporation. -18- (c) If any person is entitled under any provision of this Article VI to indemnification by the Corporation for some or a portion of expenses, judgments, fines, penalties or amounts paid in settlement incurred by him, but not, however, for the total amount thereof, the corporation shall nevertheless indemnify such person for the portion of such expense, judgments, fines, penalties and amounts to which he is entitled. SECTION 6. Expenses Payable in Advance. Expenses (including attorneys' --------------------------- fees and expenses) incurred by an officer, director, employee or agent or a former officer, director, employee or agent in defending a civil or criminal action or investigating a threatened or pending action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article VI; provided, however, that if he seeks to enforce his rights in a court of competent jurisdiction pursuant to section 5(b) of this Article VI, said understanding to repay shall not be applicable or enforceable unless and until there is a final court determination that he is not entitled to indemnification as to which all rights of appeal have been exhausted or have expired. SECTION 7. Certain Person Not Entitled to Indemnification. ---------------------------------------------- Notwithstanding any other provision of this Article VI, no person shall be entitled to indemnification under this Article VI or to advances under Section 6 of this Article VI with respect to any action, suit, proceeding or claim as brought or made by him against the Corporation, other than an action, suit, proceeding or claim seeking, or defending such person's right to, indemnification and/or expense advances pursuant to this Article VI or otherwise. SECTION 8. Non-exclusivity and Survival of Indemnification. The ----------------------------------------------- indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By- law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding office, it being the policy of the Corporation that indemnification and expense advances to the persons specified in Section 1 and 2 of this Article VI shall be made to the fullest extent permitted by law and, accordingly, in the event of any change in law, by legislation or otherwise, permitting greater indemnification and/or expense advances to any such person, the provision of this Article VI shall be construed so as to require such greater indemnification and/or expense advances. The provisions of this Article VI shall not be deemed to preclude the indemnification of any person who is not specified in Sections 1 or 2 of this Article VI but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. The indemnification and advancement of expenses provided by or granted pursuant to this Article VI -19- shall continue as to a person who has ceased to be a director or officer (or if appropriate an employee or agent) and shall inure to the benefit of the heirs, executors and administrator of such person. SECTION 9. Insurance. The Corporation may purchase and maintain --------- insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VI or the provisions of Section 145 of the General Corporation Law of the State of Delaware. The Corporation shall not be obligated under this Article VI to make any payment in connection with any claim made against any person if and to the extent that such person has actually received payment therefore under any insurance policy or policies. SECTION 10. Meaning of "Corporation" for Purposes of Article VI. For --------------------------------------------------- purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. SECTION 11. Limitation on Actions. No legal action shall be brought --------------------- and no cause of action shall be asserted by or on behalf of the Corporation or any affiliate of the Corporation against any person who is or was a director or officer of the Corporation after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Corporation or its affiliates shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable, such shorter period shall govern. SECTION 12. Severability. The provisions of this Article VI shall be ------------ severable in the event that any provision hereof (including any provision within a single section, subsection, clause, paragraph or sentence) is held invalid, void or otherwise unenforceable on any ground by any court of competent jurisdiction. In the event of any such holding, the remaining provisions of this Article VI shall continue in effect and be enforceable to the fullest extent permitted by law. -20- ARTICLE VII Amendments ---------- These By-laws may be altered, amended or repealed, in whole or in part, or new By-laws may be adopted by either the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new By-laws be contained in the notice of such meeting of stockholders or Board of Directors, as the case may be. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office. I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the Bylaws of Specialty Catalog Corp., a Delaware corporation, as in effect on the date hereof. Dated: _______________________________________ Secretary of Specialty Catalog Corp. (SEAL) -21- EX-5.01 3 OPINION OF KANE KESSLER, P.C. EXHIBIT 5.01 October 7, 1996 Securities and Exchange Commission 450 Fifth Street N.W. Washington, D.C. 20549 Re: Specialty Catalog Corp. Registration No. 333-10793 -------------------------- Ladies and Gentlemen: We refer to the registration statement on Form S-1, Registration No. 333-10793 (as amended, the "Registration Statement") filed by Specialty Catalog Corp., a Delaware corporation (the "Company"), with the Securities and Exchange Commission (the "Commission"), relating to the offer and sale of a maximum of 1,725,000 shares of Common Stock, par value $.01 per share (the "Common Stock"), of the Company. We have examined copies of the Certificate of Incorporation, as amended through the date hereof and as proposed to be amended by the Certificate of Amendment to the Certificate of Incorporation approved by the Board of Directors on August 13, 1996 and by the Stockholders by Unanimous Written Consent dated October 3, 1996 ("Certificate of Amendment") and By-Laws of the Company, the Registration Statement, records of certain of the Company's corporate proceedings as reflected in the Company's minute books and other records and documents that we have deemed necessary for the purposes of this opinion. We have also examined such other documents, papers, authorities and statutes as we have deemed necessary to form the basis of the opinion hereinafter set forth. Securities and Exchange Commission October 7, 1996 Page 2 In our review, we have assumed the genuineness of all signatures and the conformity to original documents of all copies submitted to us. As to various questions of fact material to our opinion, we have relied on statements and certificates of officers and representatives of the Company and public officials. Based upon the foregoing, it is our opinion that the Common Stock proposed to be sold by the Company, upon filing of the Certificate of Amendment with the Secretary of State of Delaware when duly sold, issued and paid for pursuant to, and in the manner contemplated by, the Underwriting Agreement and the Registration Statement, will be validly issued, fully paid and non- assessable. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Legal Matters" in the prospectus which forms a part thereof. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. We are qualified to practice law in the State of New York and do not purport to be experts on, or to express any opinion herein concerning any law, other than the laws of the State of New York and the General Corporation Law of the State of Delaware. Very truly yours, KANE KESSLER, P.C. SEC/fpc EX-10.01 4 1996 STOCK OPTION PLAN EXHIBIT 10.01 SPECIALTY CATALOG CORP. 1996 STOCK INCENTIVE PLAN 1. PURPOSE The purpose of the Specialty Catalog Corp. 1996 Stock Incentive Plan (the "Plan") is to provide a means through which the Company and its Subsidiaries and Affiliates may attract able persons to enter and remain in the employ of the Company and its Subsidiaries and Affiliates and to provide a means whereby employees, directors and consultants of the Company and its Subsidiaries and Affiliates can acquire and maintain Common Stock ownership, or be paid incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Subsidiaries and Affiliates and promoting an identity of interest between stockholders and these employees. So that the appropriate incentive can be provided, the Plan provides for granting Incentive Stock Options, Nonqualified Stock Options and Restricted Stock Awards, or any combination of the foregoing. 2. DEFINITIONS The following definitions shall be applicable throughout the Plan. (a) "Affiliate" means any affiliate of the Company within the meaning of 17 CFR (S) 230.405. (b) "Award" means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option or Restricted Stock Award. (c) "Board" means the Board of Directors of the Company. (d) "Cause" means the Company, a Subsidiary or Affiliate having cause to terminate a Participant's employment or service under any existing employment, consulting or any other agreement between the Participant and the Company or a Subsidiary or Affiliate or, in the absence of such an employment, consulting or other agreement, upon (i) the determination by the Committee that the Participant has ceased to perform his duties to the Company, a Subsidiary or Affiliate (other than as a result of his incapacity due to physical or mental illness or injury), which failure amounts to an intentional and extended neglect of his duties to such party, (ii) the Committee's determination that the Participant has engaged or is about to engage in conduct materially injurious to the Company, a Subsidiary or Affiliate or (iii) the Participant having been convicted of a felony. (e) "Change in Control" shall be deemed to have occurred upon: (i) any "person" as such term is used in Section 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), is or becomes the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities; (ii) At any time that a majority of the Board of Directors is comprised of members who have not been recommended or elected by a majority of the Board of Directors then serving. (iii) the stockholders of the Company approve 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 prior thereto 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; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person or persons acting as a group acquires directly or indirectly more than forty percent (40%) of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control of the Company; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the assets of the Company. Notwithstanding anything above to the contrary, a change in control shall not be deemed to have occurred in the event of a merger of the Company with any of its subsidiaries, so long as the Company is the surviving entity in such merger. (f) "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section. (g) "Committee" means the stock option committee or such other committee appointed by the Board in any case consisting of two or more Outside Directors (as hereinafter defined) or the Board. (h) "Common Stock" means the common stock par value $0.01 per share, of the Company. (i) "Company" means Specialty Catalog Corp., a Delaware corporation. (k) "Date of Grant" means the date on which the granting of an Award is authorized or such other date as may be specified in such authorization. (l) "Disability" or "Disabled" means the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or served when such disability commenced as determined by the Committee based upon medical evidence acceptable to it. (m) "Eligible Person" means any (i) person regularly employed by the Company, a Subsidiary or Affiliate; provided, however, that no such employee -------- ------- covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director of the Company, a Subsidiary or Affiliate including a director that is serving on the Committee; or (iii) consultant to the Company, a Subsidiary or Affiliate. (n) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and as may be amended from time to time. (o) "Fair Market Value" on a given date means (i) if the Stock is listed on a national securities exchange, the mean between the highest and lowest sale prices reported as having occurred on the primary exchange with which the Stock is listed and traded on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Stock is not listed on any national securities exchange but is quoted in the National Association of Securities Dealers Automated Quotation System on a last sale basis, the average between the high bid price and low ask price reported on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; (iii) if the Stock is not listed on a national securities exchange nor quoted in the National Association of Securities Dealers Automated Quotation System on a last sale basis, the amount determined by the Committee to be the fair market value based upon a good faith attempt to value the Stock accurately and computed in accordance with applicable regulations of the Internal Revenue Service. (p) "Holder" means a Participant who has been granted an Award. (q) "Incentive Stock Option" means an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an Incentive Stock Option pursuant to Section 422 of the Code. (r) "Nonqualified Stock Option" means an Option granted by the Committee to a Participant under the Plan which is not designated by the Committee as an Incentive Stock Option. (s) "Normal Termination" means termination of employment or service with the Company and all Subsidiaries and Affiliates: (i) Upon retirement pursuant to the retirement plan of the Company, a Subsidiary or Affiliate, as may be applicable at the time to the Participant in question; (ii) With the written approval of the Committee; or (iii) By the Company, a Subsidiary or Affiliate without Cause. (t) "Option" means an Award granted under Section 7 of the Plan. (u) "Option Period" means the period described in Section 7(c). (aa) "Option Price" means the exercise price set for an Option described in Section 7(a). (ab) "Outside Director" means a person who is (i) a "nonemployee director" within the meaning of Rule 16b-3 under the Exchange Act, or any successor rule or regulation and (ii) an "outside director" within the meaning of Section 162(m) of the Code. (ac) "Participant" means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to Section 6. (ad) "Performance Goals" means the performance objectives of the Company, a Subsidiary or Affiliate during a Restricted Period established for the purpose of determining whether, and to what extent, Awards will be earned for a Restricted Period. (ae) "Plan" means the Company's 1996 Stock Incentive Plan. (af) "Restricted Period" means, with respect to any share of Restricted Stock, the period of time determined by the Committee during which such Award is subject to the restrictions set forth in Section 8. (ag) "Restricted Stock" means shares of Stock issued or transferred to a Participant subject to forfeiture and the other restrictions set forth in Section 8. (ah) "Restricted Stock Award" means an Award of Restricted Stock granted under Section 8 of the Plan. (ai) "Securities Act" means the Securities Act of 1933, as amended. (aj) "Stock" means the Common Stock or such other authorized shares of stock of the Company as the Committee may from time to time authorize for use under the Plan (ak) "Stock Option Agreement" means the agreement between the Company and a Participant who has been granted an Option pursuant to Section 7 which defines the rights and obligations of the parties as required in Section 7(d). (al) "Subsidiary" means any subsidiary of the Company as defined in Section 424(f) of the Code 3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL The Plan shall be effective ("Plan Effective Date") as of the time immediately prior to the date and time immediately prior to the date and time the Company's Registration Statement on FormS-1 filed with Securities and Exchange Commission ("S.E.C.") on August, 1996 with respect to an initial public offering ("Offering") of the Company's Common Stock is declared effective by the S.E.C. The effectiveness of the Plan and the validity of any and all Awards granted pursuant to the Plan is contingent upon approval of the Plan by the stockholders of the Company in a manner which complies with Rule 16b-3 promulgated pursuant to the Exchange Act and Section 422(b)(1) of the Code. Unless and until the stockholders approve the Plan in compliance therewith, no Award granted under the Plan shall be effective. See Section 14 for the applicability of the stockholder approval requirements of Section 162(m) of the Code. The expiration date of the Plan, after which no Awards may be granted hereunder, shall be September 30, 2006; provided, however, that the -------- ------- administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled. 4. ADMINISTRATION The Committee shall administer the Plan. The majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee. Subject to the provisions of the Plan, the Committee shall have exclusive power to: (a) Select the Eligible Persons to participate in the Plan; (b) Determine the nature and extent of the Awards to be made to each Participant; (c) Determine the time or times when Awards will be made; (d) Determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder (including, but not limited to, the Option Price, any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture or other restrictions, or any waiver thereof, regarding any Award, and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion; (e) Determine the duration of each Award Period and Restricted Period; (f) Determine the conditions to which the payment of Awards may be subject; (g) Prescribe the form of Stock Option Agreement or other form or forms evidencing Awards; and (h) Cause records to be established in which there shall be entered, from time to time as Awards are made to Participants, the date of each Award, the number of Incentive Stock Options, Nonqualified Stock Options and shares of Restricted Stock awarded to each Participant, the expiration date and the duration of any applicable Restricted Period. The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee's interpretation of the Plan or any documents evidencing Awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties unless otherwise determined by the Board. 5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN The Committee may, from time to time, grant Awards of Options, and/or Restricted Stock, to one or more Participants; provided, however, that: -------- ------- (a) Subject to Section 13, the aggregate number of shares of Stock made subject to all Awards may not exceed 500,000 (subject to increase or decrease pursuant to Section 10); (b) The aggregate number of shares of Stock made subject to all Awards under the Plan during the twelve (12) month period ending on the first anniversary of the Plan Effective Date may not exceed 252,150, except (i) in the case of Awards granted to persons who become Participants after the Plan Effective Date as a result of an acquisition, merger or other business combination between the Company and/or one or more of its Subsidiaries, on the one hand, and a person that is not an Affiliate of the Company, on the other or (ii) in the case of Awards granted to Persons who become Participants of the Plan after the Plan Effective Date for reasons other than as set forth in subsection (i) above, provided that the aggregate total of Shares underlying options granted pursuant to this subsection (ii) shall not exceed 50,000 shares. (c) Such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash. In the event any Option or Restricted Stock shall be surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan to the fullest extent permitted by Rule 16b-3 under the Exchange Act (if applicable at the time); and (d) Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of the Company or may be purchased on the open market or by private purchase. 6. ELIGIBILITY Participation shall be limited to Eligible Persons who have received notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan. 7. DISCRETIONARY GRANT OF STOCK OPTIONS The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Eligible Person; provided, however, that no -------- ------- Incentive Stock Options shall be granted to any Eligible Person who is not an employee of the Company or a Subsidiary. Each Option so granted shall be subject to the following conditions, or to such other conditions as may be reflected in the applicable Stock Option Agreement. (a) OPTION PRICE. The exercise price ("Option Price") per share of Stock for each Option shall be set by the Committee at the time of grant as the Committee, in its sole discretion, determines but shall not be less than the greater of (x) (subject to Section 7(e) in the case of an Incentive Stock Option), the Fair Market Value of a share of Common Stock at the Date of Grant, and (y) the initial price per share to the public in the Offering. (b) MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become exercisable may be exercised by delivery of written notice of exercise to the Committee accompanied by payment of the Option Price. The Option Price shall be payable in cash and/or shares of Stock valued at the Fair Market Value at the time the Option is exercised or, in the discretion of the Committee: (i) in other property having a fair market value on the date of exercise equal to the Option Price; (ii) by delivering to the Committee a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the Option Price; and (iii) the surrender and cancellation of Options, which Options will be valued and credited toward the total Option Price due the Company for the exercise of additional Options exercised, valued at the difference between the Option Price and the Fair Market Value of the Common Stock underlying such surrendered Options on the date of exercise. (c) OPTION PERIOD AND EXPIRATION. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the "Option Period"); provided, however, that notwithstanding any -------- ------- vesting dates set by the Committee, the Committee may in its sole discretion accelerate the exercisability of any Option, which acceleration shall not affect the terms and conditions of any such Option other than with respect to exercisability. If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires. Unless otherwise stated in the applicable Option Agreement, the Option shall expire earlier than the end of the Option Period in the following circumstances: (i) If prior to the end of the Option Period, the Holder shall undergo a Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is three months after the date of such Normal Termination. In such event, the Option shall remain exercisable by the Holder until its expiration, only to the extent the Option was exercisable at the time of such Normal Termination. (ii) If the Holder dies or becomes Disabled prior to the end of the Option Period and while still in the employ or service of the Company, a Subsidiary or Affiliate, or within three months of a Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is twelve months after the date of death or Disability of the Holder. In such event, the Option shall remain exercisable by the person or persons to whom the Holder's rights under the Option pass by will or the applicable laws of descent and distribution until its expiration, only to the extent the Option was exercisable by the Holder at the time of death or Disability, as the case may be. (iii) If the Holder ceases employment or service with the Company and all Subsidiaries and Affiliates for reasons other than Normal Termination, death or Disability, the Option shall expire immediately upon such cessation of employment or service. (d) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option granted under the Plan shall be evidenced by a Stock Option Agreement, which shall contain such provisions as may be determined by the Committee and, except as may be specifically stated otherwise in such Stock Option Agreement, which shall be subject to the following terms and conditions: (i) Each Option or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof. (ii) Each share of Stock purchased through the exercise of an Option shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or when the Option expires . (iii) Subject to Section 10(k), Options shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder's lifetime only by him. (iv) Each Option shall vest and become exercisable by the Holder in accordance with the vesting schedule established by the Committee and set forth in the Stock Option Agreement. (v) Each Stock Option Agreement may contain a provision that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option shall be a condition precedent to the right of the Holder or such other person to purchase any shares. In the event certificates for Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws. (vi) Each Incentive Stock Option Agreement shall contain a provision requiring the Holder to notify the Company in writing immediately after the Holder makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option or (b) one year after the date the Holder acquired the Stock by exercising the Incentive Stock Option. (e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Holder who owns Stock representing more than ten (10%) percent of the voting power of all classes of stock of the Company or of a Subsidiary (as determined in accordance with the Code and the Regulations promulgated thereunder, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option. (f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the extent the aggregate Fair Market Value (determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options. (g) VOLUNTARY SURRENDER. The Committee may permit the voluntary surrender of all or any portion of any Nonqualified Stock Option granted under the Plan to be conditioned upon the granting to the Holder of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, Option Period, or any other terms and conditions of the Nonqualified Stock option surrendered. 8. DISCRETIONARY RESTRICTED STOCK AWARDS (a) AWARD OF RESTRICTED STOCK (i) The Committee shall have the authority to grant Restricted Stock Awards to Eligible Persons, (2) to issue or transfer Restricted Stock to Participants, and (3) to establish terms, conditions and restrictions applicable to such Restricted Stock including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock shall be granted or become vested and the number of shares or units to be covered by each grant. (ii) The Holder of a Restricted Stock Award shall execute and deliver to the Company an Award agreement with respect to the Restricted Stock setting forth the restrictions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held in escrow rather than delivered to the Holder pending the release of the applicable restrictions, the Holder additionally shall execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, and (ii) the appropriate blank stock powers with respect to the Restricted Stock covered by such agreements. If a Participant shall fail to execute a Restricted Stock agreement and, if applicable, an escrow agreement and stock powers, the Award shall be null and void. Subject to the restrictions set forth in Section 8(b), the Holder shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock. At the discretion of the Committee, cash dividends and stock dividends with respect to the Restricted Stock may be either currently paid to the Holder or withheld by the Company and held in escrow pursuant to the escrow agreement subject to the restrictions set forth in Section 8(b) below, and interest may be paid on the amount of cash dividends withheld at a rate and subject to such terms as determined by the Committee. Cash dividends or stock dividends so withheld by the Committee shall not be subject to forfeiture. (iii) Upon the Award of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Holder to be issued and, if it so determines, deposited together with the stock powers with an escrow agent designated by the Committee. If an escrow arrangement is used, the Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any stock certificate held by it registered in the name of the Holder. (b) RESTRICTIONS. (i) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award agreement: (1) if an escrow arrangement is used, the Holder shall not be entitled to delivery of the stock certificate; (2) the shares shall be subject to the restrictions on transferability set forth in the Award agreement; (3) the shares shall be subject to forfeiture to the extent provided in subparagraph (d) and the Award Agreement and, to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Holder to such shares (including all rights to dividends and interest thereon) and as a shareholder shall terminate without further obligation on the part of the Company. (ii) The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award such action is appropriate. (c) RESTRICTED PERIOD. The Restricted Period of Restricted Stock shall commence on the Date of Grant and shall expire from time to time as to that part of the Restricted Stock indicated in a schedule established by the Committee. (d) FORFEITURE PROVISIONS. Except to the extent determined by the Committee and reflected in the underlying Award agreement, in the event a Holder terminates employment with the Company and all Subsidiaries and Affiliates during a Restricted Period, that portion of the Award with respect to which restrictions have not expired ("Non-Vested Portion") will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter. (e) DELIVERY OF RESTRICTED STOCK. Upon the expiration of the Restricted Period with respect to any shares of Stock covered by a Restricted Stock Award, the restrictions set forth in Section 8(b) and the Award agreement shall be of no further force or effect with respect to shares of Restricted Stock which have not then been forfeited. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Holder, or his beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Holder's account with respect to such Restricted Stock and the interest thereon, if any. (f) STOCK RESTRICTIONS. Each certificate representing Restricted Stock awarded under the Plan shall bear the following legend until the lapse of all restrictions with respect to such Stock: "Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of a Restricted Stock Agreement, dated as of _______, between Specialty Catalog Corp. and ____________. A copy of such Agreement is on file at the offices of the Company at 21 Bristol Drive, South Easton, Massachusetts 02375." Stop transfer orders shall be entered with the Company's transfer agent and registrar against the transfer of legended securities. 9. GENERAL (a) ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may be subject to such other provisions (whether or not applicable to the benefit awarded to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Stock upon the exercise of Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Stock acquired under any Award, provisions giving the Company the right to repurchase shares of Stock acquired under any Award in the event the Participant elects to dispose of such shares, and provisions to comply with Federal and state securities laws and Federal and state tax withholding requirements. Any such provisions shall be reflected in the applicable Award agreement. (b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of stock ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person. (c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption. (d) TAX WITHHOLDING. Notwithstanding any other provision of the Plan, the Company, a Subsidiary or an Affiliate, as appropriate, shall have the right to deduct from all Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect to such Awards and, in the case of Awards paid in Stock, the Holder or other person receiving such Stock may be required to pay to the Company or a Subsidiary, as appropriate, prior to delivery of such Stock, the amount of any such taxes which the Company or Subsidiary is required to withhold, if any, with respect to such Stock. Subject in particular cases to the approval of the Committee, the Company may accept shares of Stock of equivalent Fair Market Value in payment of such withholding tax obligations if the Holder of the Award elects to make payment in such manner. (e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee or other person shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company, a Subsidiary or an Affiliate. (f) DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant shall file with the Committee a written designation of one or more persons as the beneficiary who shall be entitled to receive the amounts payable with respect to an Award of Restricted Stock, if any, due under the Plan upon his death. A Participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall - -------- ------- be effective unless received by the Committee prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by the Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. (g) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. (h) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the -------- ------- payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-Laws, as a matter of law, under contract, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. (i) GOVERNING LAW. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof. (j) FUNDING. Except as provided under Section 7, no provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Holders shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law. (k) NONTRANSFERABILITY. A person's rights and interest under the Plan, including amounts payable, may not be sold, assigned, donated, or transferred or otherwise disposed of, mortgaged, pledged or encumbered except, in the event of a Holder's death, to a designated beneficiary to the extent permitted by the Plan, or in the absence of such designation, by will or the laws of descent and distribution; provided, however, the Committee may, in its sole discretion, -------- ------- allow for transfer of Awards other than Incentive Stock Options to other persons or entities, subject to such conditions or limitations as it may establish to ensure that Awards intended to be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act continue to be so exempt or for other purposes. (l) RELIANCE ON REPORTS. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Subsidiaries and Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than himself. (m) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Subsidiary except as otherwise specifically provided in such other plan. (n) EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries and Affiliates. (o) PRONOUNS. Masculine pronouns and other words of masculine gender shall refer to both men and women. (p) TITLES AND HEADINGS. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. (q) TERMINATION OF EMPLOYMENT. For all purposes herein, a person who transfers from employment or service with the Company to employment or service with a Subsidiary or Affiliate or vice versa shall not be deemed to have terminated employment or service with the Company, a Subsidiary or Affiliate. 10. CHANGES IN CAPITAL STRUCTURE Subject to any limitations set forth herein, the Committee, in its sole discretion, shall determine the type of Awards granted under the Plan and any agreements evidencing such Awards, the maximum number of shares of Stock subject to all Awards and the maximum number of shares of Stock with respect to which any one person may be granted Options during any year shall be subject to adjustment or substitution as to the number, price or kind of a share of Stock or other consideration subject to such Awards or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. In addition, in the event of any such adjustments or substitution, the aggregate number of shares of Stock available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. Any adjustment in Incentive Stock Options under this Section 10 shall be made only to the extent that such adjustment does not cause a loss of Incentive Stock Option treatment to such options, and any adjustments under this Section 10 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, following the date that the exemption from the application of Section 162(m) of the Code described in Section 14 (or any other exemption having similar effect) ceases to apply to Awards, with respect to Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, such adjustments or substitutions shall be made only to the extent that the Committee determines that such adjustments or substitutions may be made without a loss of deductibility for Awards under Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes. Notwithstanding the above, in the event of any of the following: A. The Company is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by shareholders of the Company in a form other than stock or other equity interests of the surviving entity; B. All or substantially all of the assets of the Company are acquired by another person; C. The reorganization or liquidation of the Company; or D. The Company shall enter into a written agreement to undergo an event described in clauses A, B or C above; then the Committee may, in its discretion and upon at least 10 days advance notice to the affected persons, cancel any outstanding Awards and pay to the Holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. The terms of this Section 10 may be varied by the Committee in any particular Award agreement. 11. EFFECT OF CHANGE IN CONTROL Except to the extent reflected in a particular Award agreement: (a) In the event of a Change in Control, notwithstanding any vesting schedule with respect to an Award of Options or Restricted Stock, such Option shall become immediately exercisable with respect to 100 percent of the shares subject to such Option, and the Restricted Period shall expire immediately with respect to 100 percent of such shares of Restricted Stock. (b) In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days' advance notice to the affected persons, cancel any outstanding Awards and pay to the Holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. (c) The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company. The Company agrees that it will make appropriate provisions for the preservation of Participant's rights under the Plan in any agreement or plan which it may enter into or adopt to effect any such merger, consolidation, reorganization or transfer of assets (d) Notwithstanding anything to the contrary herein, unless the Committee provides otherwise at the time an Option is granted to a participant hereunder, no acceleration of exercisability shall occur with respect to such Option if the Committee reasonably determines in good faith, prior to the occurrence of the Change in Control, that the Options shall be honored or assumed, or new rights substituted therefor (each such honored, assumed or substituted option hereinafter called an "Alternative Option"), by a Participant's employer (or the parent or a subsidiary of such employer) immediately following the Change in Control, provided that any such Alternative Option must meet the following criteria: (i) the Alternative Option must be based on stock which is traded on an established securities market, or which will be so traded within thirty (30) days of the Change in Control; (ii) the Alternative Option must provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Option, including, but not limited to, an identical or better exercise schedule; and (iii) the Alternative Option must have economic value substantially equivalent to the value of such Option (determined at the time of the Change in Control). 12. NONEXCLUSIVITY OF THE PLAN Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases. 13. AMENDMENTS AND TERMINATION The Board may at any time terminate the Plan. Subject to Section 10, with the express written consent of an individual Participant, the Board or the Committee may cancel or reduce or otherwise alter outstanding Awards if, in its judgment, the tax, accounting, or other effects of the Plan or potential payouts thereunder would not be in the best interest of the Company. The Board or the Committee may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in part; provided, however, that -------- ------- without further stockholder approval neither the Board nor the Committee shall make any amendment to the Plan which would materially alter the Plan or which would specifically: (a) Materially increase the maximum number of shares of Stock which may be issued pursuant to Awards, except as provided in Section 10; (b) Change the minimum Option Price; (c) Extend the maximum Option Period; (d) Extend the termination date of the Plan; or (e) Change the class of persons eligible to receive Awards under the Plan. 14. EFFECT OF SECTION 162(M) OF THE CODE The Plan, and all Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year. The exemption is based on Treasury Regulation Section 1.162-27(f) as in effect on the effective date of the Plan, with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held. The Committee may, without stockholder approval (unless otherwise required to comply with Rule 16b- 3 under the Exchange Act), amend the Plan retroactively and/or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Section 162(m) of the Code required to preserve the Company's Federal income tax deduction for compensation paid pursuant to the Plan. To the extent that the Committee determines as of the Date of Grant of an Award that (i) the Award is intended to comply with Section 162(m) of the Code and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any stockholder approval required under Section 162(m) of the Code has been obtained. As adopted by the Board of Directors of Specialty Catalog Corp. as of August 13, 1996. EX-10.25 5 AMENDED AND RESTATED REGISTRATION RIGHTS AGMT. EXHIBIT 10.25 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is made and entered into as of September, 1996, among Specialty Catalog Corp., Delaware corporation (the "Company"), Dickstein & Co. L.P., a Delaware limited partnership ("Dickstein"), Viking Holdings Limited, a British Virgin Islands corporation ("Viking"), and each of the other securityholders which are signatories hereto (collectively, "Securityholders" and individually, a "Securityholder"). WHEREAS, the Company and the certain of the Securityholders ("Original Securityholders") entered into a Registration Rights Agreement dated November 30, 1994 as amended by an Amendment to Registration Rights Agreement dated as of August 16, 1995 (collectively, the "Prior Registration Rights Agreement"); and WHEREAS, the Original Securityholders thereto wish to amend and restate their Prior Registration Rights Agreement and; WHEREAS, each Securityholder is the beneficial owner of certain Registrable Securities (as defined below) issued by the Company. The Company and the Securityholders deem it to be in their respective best interests to set forth the rights of the Securityholders in connection with public offerings and sales of the Registrable Securities. NOW, THEREFORE, in consideration of the premises and mutual covenants and obligations hereinafter set forth, the Company and the Securityholders, intending legally to be bound, hereby covenant and agree that the Prior Registration Rights Agreement is hereby amended and replaced in its entirety with this Amended and Restated Registration Rights Agreement, as follows: SECTION 1. DEFINITIONS. As used in this Agreement, the following terms ----------- shall have the following meanings: "Affiliate" of any person shall mean any other person who either directly or indirectly is in control of, is controlled by, or is under common control with such person, and "Affiliated" shall have the corresponding meaning; provided, that for purposes of this definition, an investment entity shall be - -------- deemed to be controlled by each of its investment manager, investment advisor and general partner. "Common Stock" shall mean the common stock, par value $.01 per share, of the Company. "Company" shall mean Specialty Catalog Corp., a Delaware corporation. "Dickstein Group" shall mean (i) Dickstein, (ii) Dickstein International Limited, (iii) Dickstein Focus Fund, L.P., (iv) any investment fund for which Dickstein or any Affiliate of Dickstein acts as investment manager, and (iv) any partnership or other entity for which any of the foregoing acts directly or indirectly as general partner or controlling stockholder, and any other Person otherwise Affiliated with any of the foregoing, or successors holding more than 50% of the voting control of any such entity. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "GKN" shall mean GKN Securities Corp. "Holder" shall mean any Person that owns Registrable Securities, including such successors and assigns as acquire Registrable Securities, directly or indirectly, from such Person. For purposes of this Agreement, the Company may deem the registered holder of a Registrable Security as the Holder thereof. "Other Approved Holders" shall mean Martin Franklin, Jonathan E. Franklin, and Ian G. H.Ashken and such other holders of Common Stock or options or warrants exercisable for shares of Common Stock having registration rights with respect to the Common Stock, other than under this Agreement, which registration rights have been consented to in writing by the Principal Holders. Nothing in this Agreement shall be construed to classify or characterize GKN as an Other Approved Holder. "Person" shall mean an individual, partnership, limited partnership, corporation, limited liability company, joint venture, trust or unincorporated organization, a government or agency or political subdivision thereof or any other entity. "Principal Holders" shall mean (i) the Dickstein Group and (ii) the Viking Group, and "Principal Holder" shall mean either of such groups individually. "Prospectus" shall mean the prospectus included in any Registration Statement, as amended or supplemented by a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including but not limited to post-effective amendments and all material incorporated by reference in such prospectus. "Registrable Securities" shall mean (i) the Common Stock held by the Securityholders on the date hereof; (ii) any other securities issued or issuable as a result of or in connection with any combination of shares, recapitalization, reclassification, merger or consolidation, exchange or distribution in respect of the securities referred to in clause (i) above; and (iii) shares of Common Stock issuable upon exercise of any options or warrants granted to any Securityholder. For purposes of this Agreement, a Registrable Security ceases to be a Registrable Security when either it has been (x) registered under the Securities Act and sold or distributed to any Person pursuant to an effective Registration Statement covering it or (y) sold or distributed to any Person pursuant to Rule 144 or Rule 145(d). -2- "Registration Expenses" shall have the definition set forth in Section 5. "Registration Statement" shall mean any Registration Statement which covers any of the Registrable Securities and shares of Common Stock to be registered by Other Approved Holders pursuant to the provisions of this Agreement, including the Prospectus included therein, all amendments and supplements to such Registration Statement, including but not limited to post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. "Rule 144" and "Rule 145" shall mean, respectively, Rule 144 and Rule 145, each promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto that may be promulgated by the SEC. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Securityholder" shall have the meaning set forth in the first paragraph. "Viking Group" shall mean Viking and any Affiliate thereof, and any partnership or other entity for which Viking or any entity controlled by Viking acts directly or indirectly as general partner or controlling stockholder or successors holding more than 50% of the voting control of Viking. SECTION 2. REGISTRATION RIGHTS. ------------------- (a) Demand Registration. At any time after the completion of the initial ------------------- public offering of the Common Stock, subject to such lock up agreements that may be entered into by the Principal Holders upon request by the underwriter of an initial Public Offering, upon written notice to the Company from either Principal Holder requesting that the Company effect, pursuant to this Section 2, the registration of Registrable Securities owned by such Principal Holder which constitutes on the date of such notice an aggregate of at least 5% of the Common Stock outstanding on such date or, if less than such percentage, all of the Registrable Securities then owned by such Principal Holder (which notice shall specify (A) the proposed amounts of Registrable Securities for which registration is requested, and (B) the intended method or methods of disposition by such Principal Holder (including whether or not the proposed offering is to be underwritten)), the Company shall promptly (but in any event within 20 days) give written notice of such requested registration to all other Holders and all Other Approved Holders, and thereupon the Company shall, as expeditiously as possible, use its best efforts to effect the registration under the Securities Act of: (x) the Registrable Securities that the Principal Holder has requested the Company to register, for disposition in accordance with the intended method of disposition stated in its notice to the Company; and -3- (y) all other Registrable Securities ("Non-Principal Securities"), the Holders of which shall have made a written request to the Company for registration thereof (which request shall specify the proposed amounts thereof) within thirty (30) days after the receipt of such written notice from the Company; and (z) all shares of Common Stock, the Other Approved Holders of which shall have made a written request to the Company for registration thereof (which request shall specify the proposed amounts thereof) within thirty (30) days after the receipt of such written notice from the Company. all to the extent requisite to permit the disposition (in accordance with the method of disposition specified in the notice given to the Company by the selling Principal Holders) by Holders of the securities then constituting Registrable Securities and by Other Approved Holders of shares of Common Stock so to be registered; provided, however, that the Company shall not be obligated -------- ------- to (x) file a Registration Statement pursuant to this Section 2(a) within the period commencing on the filing of any registration statement of the Company which related solely to the registration of Common Stock and ending one hundred eighty (180) days after, the effective date of such registration statement; or (y) effect more than one (1) demand registration pursuant to this Section 2(a) on behalf of each of the Dickstein Group and the Viking Group. (b) "Piggyback" Registration Rights. The Company shall, at least ------------------------------- thirty (30) days prior to the filing of any Registration Statement under the Securities Act (other than a Registration Statement on Form S-4 or S-8 or any successor forms) relating to the public offering of any class of its equity securities by the Company or any Holder or any Other Approved Holder, give written notice of such proposed filing and of the proposed date thereof to each Holder and to all Other Approved Holders, and if, on or before the tenth (l0th) day following the date on which such notice is given, the Company shall receive a written request from any Holder or any Other Approved Holder, requesting that the Company include among the securities covered by such Registration Statement some or all of the Registrable Securities owned by such Holder or shares of Common Stock owned by Other Approved Holders, the Company shall include such Registrable Securities and shares of Common Stock owned by Other Approved Holders in such Registration Statement, if filed. Except as may otherwise be provided in this Agreement, Registrable Securities and shares of Common Stock owned by Other Approved Holders with respect to which a request for registration has been received will be registered by the Company and offered to the public on the same terms and subject to the same conditions applicable to the piggyback registration to be sold by the Company or by the other Persons selling under such piggyback registration. The Company shall be under no obligation to complete any offering of its securities it proposes to make under this subparagraph (b) and shall incur no liability to any Holder or any Other Approved Holder for its failure to do so, notwithstanding the request of any such Holder or any Other Approved Holder to participate therein in accordance with this Section 2(b). In connection with any registration covered by this subparagraph (b) involving any underwriting of securities, the Company shall not be required to include any Holder's Registrable Securities or shares of -4- Common Stock owned by other Approved Holders in such registration unless such Holder or other Approved Holder accepts the terms of the underwriting as agreed upon between the Company (or other persons who have the right to agree upon the underwriting terms relating to such offering) and the underwriters. (c) Each Security Holder hereby waives all of its registration rights under the Prior Registration Rights Agreement with respect to Registrable Securities, all of which are hereby terminated, except as set forth herein. (d) The Security Holders hereby consent to the registration rights granted to Messrs. Martin Franklin, Jonathan Franklin and Ian Ashken pursuant to certain Warrants dated August 12, 1996 to purchase an aggregate of 265,335 shares of Common Stock ("Franklin Warrants"). SECTION 3. REGISTRATION PROCEDURES. ----------------------- In connection with any Registration Statement filed pursuant to this Agreement, the following provisions shall apply: (a) If such Registration Statement shall be filed pursuant to Paragraph 2(a) or (b) hereof, all Holders owning Registrable Securities and all Other Approved Holders owning Common Stock shall, if requested by the managing underwriter, agree not to sell publicly any Registrable Securities (other than the Registrable Securities so registered) or shares of Common Stock, as the case may be, for the same period as may be agreed to by the Company, or by the Holders selling Registrable Securities and Other Approved Holders selling shares of Common Stock pursuant to the Registration Statement, following the effective date of the Registration Statement relating to such offering. (b) If such Registration Statement shall be filed pursuant to Paragraph 2(a) or (b) hereof and if the managing underwriter advises that the inclusion in such registration of some or all of the Registrable Securities sought to be registered by the Securityholders or Other Approved Holders seeking to register shares of Common Stock pursuant to Paragraph 2(a) or (b), creates a substantial risk that the proceeds or price per share to be derived from such registration by the party initiating the filing of such Registration Statement will be reduced or that the number of shares sought to be registered is too large a number to be reasonably sold, the number of shares of Registrable Securities and Common Stock sought to be registered for the accounts of all Holders and all Other Approved Holders shall be reduced, pro rata in proportion to the number of shares of Registrable Securities and Common Stock sought to be registered by all such persons, to the extent necessary to reduce the number of all such shares to be registered for the accounts of all Holders and all Other Approved Holders to the number recommended by the managing underwriter (which amount may be zero), subject to GKN's piggyback registration rights pursuant to the Underwriter's Purchase Option to be entered into between GKN and the Company in connection with the Company's initial public offering; provided, however, in no event shall the number of shares -5- of Common Stock sought to be registered by the Company be reduced pursuant to any provision of this Section 3. (c) If such Registration Statement shall be filed pursuant to paragraph 2(a), hereof and covers only securities to be sold by the Company and Registrable Securities and if the managing underwriter advises that the inclusion in such registration of some or all of the Registrable Securities creates a substantial risk that the proceeds or price per share to be derived from such registration by the Company, will be reduced or that the number of shares sought to be registered is too large a number to be reasonably sold, the number of shares of Registrable Securities sought to be registered by the Holders shall be reduced, pro rata to the extent necessary to reduce the number of all shares of Registrable Securities to be registered to the number (which may be zero) recommended by the managing underwriter, subject to GKN's piggyback registration rights pursuant to the Underwriter's Purchase Option to be entered into between GKN and the Company in connection with the Company's initial public offering. (d) It shall be a condition to the Company's obligations under this Agreement that Holders seeking to register Registrable Securities and other Approved Holders seeking to register Common Stock will promptly provide the Company with such information as it shall reasonably request in order to prepare such Registration Statement. (e) Following the effective date of any Registration Statement hereunder, the Company shall, upon the request of any Holder seeking to register Registrable Securities and other Approved Holders seeking to register Common Stock, forthwith supply such number of prospectuses (including preliminary prospectuses and amendments and supplements thereto) meeting the requirements of the Securities Act and such other documents as are referred to in the prospectus as shall be reasonably requested by any such Holder or Other Approved Holder to permit such Holder or Other Approved Holder to make a public distribution of its Registrable Securities or Common Stock, as the case may be, provided that such Holder or Other Approved Holder furnishes the Company with such appropriate information relating to such Person's intentions in connection therewith as the Company shall reasonably request. (f) The Company shall prepare and file such amendments and supplements to such Registration Statement filed hereunder as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act and applicable "Blue Sky" laws with respect to the offer and sale or other disposition of the Registrable Securities or Common Stock, as the case may be, covered by such Registration Statement during the period required for distribution of the Registrable Securities or Common Stock, as the case may be, (except in the case of a Demand Registration pursuant to Paragraph 2(a) hereof, for the period specified in such paragraph), and shall promptly as practicable after filing same with the Commission, deliver copies of such documents to each Holder holding Registrable Securities for Other Approved Holder holding Common Stock covered by such Registration Statement. -6- (g) The Principal Holders seeking to register Registrable Securities to be included in a Registration Statement filed under the provisions of Paragraph 2(a), shall select the underwriter or underwriters, if any, who are to undertake the offering and distribution of the Registrable Securities, to be included in a Registration Statement filed under the provisions of Paragraph 2(a),subject to the Company's prior approval of the underwriter, which approval shall not be unreasonably withheld, but the Company alone shall make such selection with respect to a Registration Statement as to which Holders may have registration rights pursuant to Paragraph 2(b). (h) If a request for registration is made pursuant to Paragraph 2(a), the Company may postpone the filing of a Registration Statement if, based on the good faith judgment of the Company's Board of Directors, (A) for up to 90 days from the date of request if such postponement is necessary in order to avoid premature disclosure of a matter involving a material transaction then undertaken by the Company that the Board has determined would not be in the best interest of the Company to disclose prematurely or (B) for a period of up to 90 days from the end of the Company's fiscal year if the filing of a Registration Statement at the time of such request would require duplicative year-end audit and accounting expenses, provided that in no event shall the Company be permitted to postpone the filing of a Registration Statement pursuant to this subparagraph (h) more than once in any twelve month period. (i) The Company shall use its best efforts to register the Registrable Securities of the Principal Holders seeking to register Registrable Securities covered by any such Registration Statement under such securities or Blue Sky laws in such jurisdictions as the Principal Holder may reasonably request; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (i) or (B) consent to general service of process or subject itself to taxation in any such jurisdiction. (j) The Company shall cooperate with the Holders holding Registrable Securities and the Other Approved Holders holding Common stock covered by any Registration Statement hereunder and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be sold under such Registration Statement and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or selling Persons may request; (k) The Company, any Holder seeking to register Registrable Shares and any Other Approved Holders seeking to register Common Stock pursuant to section 2 shall enter into such customary agreements (including an underwriting agreement in customary form) and take all such other actions as the Principal Holders of the Registrable Securities being sold or the underwriters retained by Holders participating in an underwritten public offering, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities or Common Stock, as the case may be. -7- (l) At the Company's option, the Company may register (on a pro rata -------- basis) any of the Registrable Securities and any shares of Common Stock held by Other Approved Holders in any Registration Statement filed by the Company, provided, however, while such Registration Statement is effective, the Demand Registration Right pursuant to section 2(a) and the Piggyback Registration right pursuant to Paragraph 2(b) shall be inapplicable with respect to the Registrable Securities covered by such Registration Statement. Except as herein provided, such registration shall not limit or diminish any of the Holders' rights under this Agreement. (m) In connection with any offering of Registrable Securities and any shares of Common Stock held by Other Approved Holders to be registered under this Agreement, each Holder of Registrable Securities and each Other Approved Holder of Common Stock included or to be included in such registration shall: (A) If such registration is being made pursuant to any underwritten offering, enter into and perform its obligations under any underwriting agreement to which it is a party. (B) Upon receipt of any notice from the Company of the happening of any event as a result of which the prospectus included in the Registration Statement as then in effect includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, forthwith discontinue its disposition of Registrable Securities pursuant to the Registration Statement relating thereof until its receipt of the copies of the supplemented or amended prospectus and, if so directed by the Company, deliver to the Company all copies then in its possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. (C) At the end of any period during which the Company is obligated to keep any Registration Statement current and effective, discontinue sales of shares pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such Registration Statement which remain unsold, and notify the Company of the number of shares registered which remain unsold promptly after receipt of such notice from the Company. (n) In connection with the Company's registration obligations pursuant to Section 2 hereof, except as otherwise expressly provided herein, the Company will prepare and file and/or use its best efforts to cause to become effective, a Registration Statement with respect to applicable Registrable Securities and Common Stock and to keep effective the Registration Statement to permit the sale of such Registrable Securities and Common Stock in accordance with the intended method or methods of distribution thereof. SECTION 4. HOLDBACK AGREEMENT. ------------------ -8- (a) Restrictions on Public Sales by Holders and Other Approved ---------------------------------------------------------- Holders. To the extent not inconsistent with applicable law, each Holder and Other Approved Holders that is timely notified in writing by the Company or the managing underwriter or underwriters, shall not effect any public sale or distribution (including a sale pursuant to Rule 144) of any issue being registered in an underwritten offering (other than pursuant to an employee stock option, stock purchase, stock bonus or similar plan, or pursuant to a merger, exchange offer or a transaction of the type specified in Rule 145(a), or pursuant to a "shelf" registration), any securities of the Company similar to any such issue or any securities of the Company convertible into or exchangeable or exercisable for any such issue, during the period commencing on the filing of the Registration Statement and ending one hundred eighty (180) days after the effective date of the applicable Registration Statement, except as part of such registration. SECTION 5. REGISTRATION EXPENSES. --------------------- All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees (excluding the registration and filing fees applicable to the Registrable Securities sought to be registered by Holders or common stock sought to be registered by Other Approved Holders), fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel to the Company or the underwriter in connection with blue sky qualifications or registrations (or the obtaining of exemptions therefrom) of the Registrable Securities or Common Stock), printing expenses (including expenses of printing Prospectuses), messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of the Company's officers and employees performing legal or accounting duties), fees and disbursements of the Company's counsel and its independent certified public accountants (including the expenses of any special audit or "comfort" letters required by or incident to such performance or compliance), securities acts liability insurance (if the Company elects to obtain such insurance), reasonable fees and expenses of any special experts retained by the Company in connection with any registration hereunder, reasonable fees and expenses of other Persons retained by the Company, and reasonable out-of-pocket expenses of the Holders (excluding (i) salaries of officers and/or employees of the Holders and Other Approved Holders, (ii) any travel costs, unless incurred in connection with travel requested by the Company and (iii) any professional fees incurred by the Holders and Other Approved Holders) (all such expenses being referred to as "Registration Expenses"), shall be borne by the Company; provided, that -------- Registration Expenses shall not include any underwriting discounts, commissions or fees attributable to the sale of the Registrable Securities or Common Stock sold by Other Approved Holders. SECTION 6. INDEMNIFICATION; CONTRIBUTION. ----------------------------- (a) Indemnification by the Company. In connection with any ------------------------------ Registration Statement, the Company shall indemnify, to the full extent permitted by law, each Holder and Other Approved Holder, its officers, directors, employees, general partners, limited partners, representatives and agents, each Person who controls such Holder and Other Approved -9- Holder, (within the meaning of the Securities Act) and any investment adviser thereof or agent therefor, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal fees and expenses) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any related Prospectus or preliminary prospectus, or any amendment or supplement thereto, or any omission or alleged omission to state in any thereof a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in light of the circumstances under which they were made) not misleading, except in each case insofar, but only insofar, as the same arises out of or is based upon an untrue statement or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact in such Registration Statement, Prospectus, preliminary prospectus, amendment or supplement, as the case may be, made or omitted, as the case may be, in reliance upon and in conformity with written information furnished to the Company by such Holder and Other Approved Holder, expressly for use therein. This indemnity is in addition to any liability that the Company may otherwise have. The Company shall also indemnify any underwriters of the Registrable Securities and Common Stock, selling brokers, dealer managers and similar securities industries professionals participating in the distribution and their officers, directors, employees, general partners, limited partners, representatives and agents, and each Person who controls such underwriters or other Persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of Holders and Other Approved Holders and other specified Persons. (b) Indemnification by Holders and Other Approved Holders. In ----------------------------------------------------- connection with any Registration Statement, each Holder and Other Approved Holders any of whose Registrable Securities or Common Stock are covered thereby shall furnish to the Company in writing such information and affidavits with respect to such Holder and Other Approved Holders as the Company reasonably requests for use in connection with such Registration Statement, any related Prospectus or preliminary prospectus, or any amendment or supplement thereto, and shall indemnify, to the full extent permitted by law, the Company, the Company's directors, officers, employees and agents, each Person who controls the Company (within the meaning of the Securities Act) and any investment adviser thereof or agent therefor, against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any related Prospectus or preliminary prospectus, or any amendment or supplement thereto, or any omission or alleged omission to state in any thereof a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, in light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that the same arises out of or is based upon an untrue statement or alleged untrue statement of a material fact or an omission or alleged omission to state a material fact in such Registration Statement or in such related Prospectus, preliminary prospectus, amendment or supplement, as the case may be, made or omitted, as the case may be, in reliance upon and in conformity with written information furnished to the Company by such Holder or Other Approved Holder expressly for use therein. This indemnity is in addition to any liability that a Holder or Other Approved Holder may otherwise have. Each Holder or Other Approved Holder participating -10- in an offering of Registrable Securities or Common Stock shall, if requested by the managing underwriter or underwriters of such offering, also indemnify any underwriters of such Registrable Securities or Common Stock, selling brokers, dealer managers and similar securities industries professionals participating in the distribution of such Registrable Securities or Common Stock and their officers and directors and each Person who controls such underwriters or other Persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Company and other specified Persons. Notwithstanding any other provision hereof, in no event shall the indemnification obligation of any Holder or Other Approved Holder be greater in amount than the dollar amount of the net proceeds received by such Holder or Other Approved Holder upon the sale of the Registrable Securities or Common Stock giving rise to such obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement. (c) Conduct of Indemnification Proceedings. Any Person entitled to -------------------------------------- indemnification under this Section 6 agrees to give prompt written notice to the indemnifying party after the receipt by such Person of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such Person will claim indemnification or contribution pursuant to this Agreement and, unless in the written opinion of counsel to such indemnified party a conflict of interest exists between such indemnified party and the indemnifying party with respect to such claim, permit the indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to such indemnified party (which may be regular counsel to the Company). If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it shall not be obligated to pay the fees and expenses of more than one counsel with respect to such claim, unless in the written opinion of counsel such indemnified party, a conflict of interest exists between such indemnified party and any other indemnified party with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels (which shall be limited to one counsel per indemnified party). The indemnifying party shall not be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld or delayed. (d) Contribution. ------------ (i) If the indemnification provided for in this Section 6 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by -11- reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 6(c), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding; (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata --- ---- allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding any other provision hereof, in no event shall the contribution obligation of any Holder be greater in amount than the excess of (A) the dollar amount of the net proceeds received by such Holder or Other Approved Holder upon the sale of the Registrable Securities or Common Stock giving rise to such contribution obligation over (B) the dollar amount of any damages that such Holder or Other approved Holder has otherwise been required to pay by reason of the untrue or alleged untrue statement or omission or alleged omission giving rise to such obligation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and (iii) If indemnification is available under this Section 6, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Sections 6(a) and 6(b) without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 6(d). -12- SECTION 7. COOPERATION WITH THE COMPANY. ---------------------------- The offering and sale of Registrable Securities by any Holder or Common Stock by any Other Approved Holder shall comply in all respects with the applicable terms, provisions and requirements set forth in this Agreement, and such Holder and Other Approved Holder shall cooperate with the Company in respect thereof. Without limiting the generality of the foregoing, such Holder and Other Approved Holder shall promptly and timely provide the Company with all information and materials required to be included in a Registration Statement that (a) relate to the offering, (b) are in possession of such Holder and Other Approved Holder, and (c) relate to such Holder and Other Approved Holder, and shall take all such action as may be required in order not to delay the registration and offering of securities by the Company. The Company shall have no obligation to include in any Registration Statement, Registrable Securities of a Holder or Common Stock by any Other Approved Holder that has failed to furnish such information which, in the reasonable opinion of the Company, is required in order for the Registration Statement to comply in all material respects with the requirements of the Securities Act or any applicable state securities or "blue sky" laws. SECTION 8. NO INCONSISTENT AGREEMENTS. The Company (i) has not -------------------------- previously entered into any agreement that is still in effect on the date of this Agreement pursuant to which it has granted registration rights to any Person who holds any of its securities, other than the Franklin Warrants and (ii) shall not enter into any other agreement with respect to its securities which is inconsistent with the rights granted to the Holders and the Other Approved Holders, from time to time, in this Agreement or otherwise conflicts with the provisions hereof; except (x) as may be provided in any agreement with commercial lenders presently in effect or hereinafter entered into; or (y) with GKN pursuant to the Underwriting Agreement and the Underwriter's Purchase Option to be entered into in connection with the Company's Registration Statement on Form S-1, File No. 333-10793. Nothing contained in this Agreement shall be construed to reduce or limit in any way the rights of GKN pursuant to such Underwriting Agreement and Underwriter's Purchase Option. SECTION 9. AMENDMENTS AND WAIVERS. The provisions of this Agreement, ---------------------- including the provisions of this Section 9, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the prior written consent of (i) the Principal Holders and (ii) any other party who may be adversely affected by any such amendment, modification, supplement, waiver or consent. SECTION 10. REMEDIES. Each Holder and Other Approved Holder having -------- rights under any provision of this Agreement shall be entitled to enforce such rights specifically or to recover damages or to exercise any other remedy available to it at law or in equity. The foregoing rights and remedies shall be cumulative and the exercise of any right or remedy provided herein shall not preclude any Person from exercising any other right or remedy provided herein. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. -13- SECTION 11. NOTICES. All notices, requests and other communications ------- provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or air-courier guaranteeing overnight delivery and shall be effective upon receipt: (a) If to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 11, which address initially is, with respect to each Securityholder, the address set forth on Schedule I of this Agreement. (b) If to the Company, initially at its address set forth on Schedule I of this Agreement and thereafter at such other address as may be designated from time to time by notice given in accordance with the provisions of this Section 11. SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the ---------------------- benefit of and be binding upon the parties hereto, the successors and assigns of each of the parties hereto, including any successors by merger to the Company, and Other Approved Holders registering shares of Common Stock in accordance with the terms hereof. Nothing contained in this Agreement shall be construed to reduce or limit in anyway the rights of GKN pursuant to such Underwriting Agreement and Underwriter's Purchase Option. SECTION 13. COUNTERPARTS. This Agreement may be executed in any ------------ number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 14. HEADINGS; CONSTRUCTION. The headings in this Agreement ---------------------- are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context otherwise requires, all references to Sections are to Sections of this Agreement, "or" is inclusively disjunctive, and words in the singular include the plural and vice versa. In computing any ---- ----- period of time specified in this Agreement or in any notices, the date of the act or event from which such period of time is to be measured shall be included, any such period shall expire at 5:00 p.m., New York City time, on the last day of such period, and any such period denominated in months shall expire on the date in the last month of such period that has the same numerical designation as the date of the act or event from which such period is to be measured; provided, -------- however, that if there is no date in the last month of such period that has the - ------- same numerical designation as the date of such act or event, such period shall expire on the last day of the last month of such period. SECTION 15. GOVERNING LAW. This Agreement shall be governed by and ------------- construed in accordance with the internal laws of the State of New York, without regard to the principles of the conflict of laws thereof. -14- SECTION 16. JURISDICTION; FORUM. ------------------- (a) Each party hereto consents and submits to the jurisdiction of any state court sitting in the County of New York or federal court sitting in the Southern District of the State of New York in connection with any dispute arising out of or relating to this Agreement. Each party hereto waives any objection to the laying of venue in such courts and any claim that any such action has been brought in an inconvenient forum. To the extent permitted by law, any judgment in respect of a dispute arising out of or relating to this Agreement may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of such judgment being conclusive evidence of the fact and amount of such judgment. (b) Each party hereto agrees that personal service of process may be effected by any of the means specified in Section 11, addressed to such party. The foregoing shall not limit the rights of any party to serve process in any other manner permitted by law. SECTION 17. SEVERABILITY. If one or more of the provisions hereof, ------------ or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect, for any reason, the validity, legality and enforceability of the remaining provisions hereof shall not be in any way affected or impaired thereby, and the provision held to be invalid, illegal or unenforceable shall be reformed to the minimum extent necessary, and in a manner as consistent with the purposes thereof as is practicable, so as to render it valid, legal and enforceable, it being intended that all of the rights and privileges of the Holders hereunder shall be enforceable to the fullest extent permitted by law. SECTION 18. ENTIRE AGREEMENT. This Agreement is intended by the ---------------- parties hereto as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. -15- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. SPECIALTY CATALOG CORP. By: ___________________________________ Name: Title: SECURITYHOLDERS: DICKSTEIN & CO., L.P. By: DICKSTEIN PARTNERS, L.P., ITS GENERAL PARTNER By: DICKSTEIN PARTNERS INC., its general partner By: ____________________________________ Vice President DICKSTEIN INTERNATIONAL LIMITED By: DICKSTEIN PARTNERS INC., its agent By: ____________________________________ Vice President DICKSTEIN FOCUS FUND, L.P. By: DICKSTEIN PARTNERS INC., its agent By:_____________________________________ Vice President -16- VIKING HOLDINGS LIMITED By:___________________________________ Name: Title: WIGS, L.P. By:____________________________________ Name: Arthur Kowaloff Title: General Partner _______________________________________ Steven L. Bock _______________________________________ Bruce Pollack HFS INCORPORATED By:___________________________________ Samuel L. Katza ______________________________________ Mark Brodsky -17- Schedule I Addresses Specialty Catalog Corp. 21 Bristol Drive South Easton, Massachusetts 02375 Dickstein & Co., L.P. 9 West 57th Street Dickstein International Limited New York, NY 10019 and Dickstein Focus Fund, L.P. Wigs, L.P. 445 Park Avenue 11th Floor New York, NY 10022 Steven L. Bock c/o 21 Bristol Drive South Easton, Massachusetts 02375 Bruce Pollack c/o Centre Partners 30 Rockefeller Plaza Suite 5050 New York, NY 10020 Viking Holdings Limited La Motte Chambers La Motte Street St. Helier Jersey JE1 1BJ Channel Islands Samuel L. Katz HFS Incorporated 339 Jefferson Road Parsippany, New Jersey 07054 Mark Brodsky [ADDRESS] -18- FORM OF REGISTRATION RIGHTS WAIVER ---------------------------------- September ___, 1996 Specialty Catalog Corp. 21 Bristol Drive South Easton, Massachusetts 02375 Ladies and Gentlemen: Reference is hereby made to that certain Amended and Restated Registration Rights Agreement (the "Registration Rights Agreement"), dated as of September ___, 1996, by and between the undersigned and Specialty Catalog Corp., (the "Company"). The undersigned hereby waives its registration rights under Section 2 of the Registration Rights Agreement arising in connection with the proposed underwritten public offering of 1,500,000 shares of the Company's Common Stock, par value $.01 per share. Very truly yours, By:________________________ -19- EX-10.31 6 SUPP. DEFINED CONTRIBUTION PLAN EXHIBIT 10.31 SC CORPORATION BONUS DEFERRAL PLAN Effective November 23, 1994 ARTICLE PAGE - ------- ---- 1 Definitions................................. 1 2 Bonus Deferrals and Matching................ 5 3 Payment of Benefits......................... 8 4 Beneficiaries............................... 15 5 Aminstration................................ 17 ARTICLE 1 DEFINITIONS ----------- The following terms when used in this Plan have the designated meanings unless a different meaning is clearly required by the context. 1.1 Beneficiary means the person or persons designated pursuant to ----------- Article 4 to receive a benefit pursuant to Section 3.3.1 in the event of a Participant's death before his benefit under this Plan has been paid. 1.2 Bonus is a Participant's Regular Bonus in respect of a Year ----- or his Reorganization Bonus. 1.3 Bonus Date is December 31 of a Year in which a Bonus is earned ---------- and for which it is paid. 1.4 Cause means, with respect to a Participant's Termination of ----- Employment, the definition given that term in any written employment agreement existing between the Participant and an Employer; absent such an agreement, or absent a definition in such an agreement, Cause is: conviction of a felony; or fraud on, misappropriation from, or intentional material damage to the property or business of, the Company or any subsidiary; or continued wilful or grossly negligent failure to perform assigned duties. Without regard to the existence of any written employment agreement between the Participant and an Employer, Cause also means engaging in any activity directly competitive with the business of the Company in the importation, the retail or the direct mail marketing or wigs, including but not limited to any such activity involving one of the entities listed from time to time in Schedule B hereto or their affiliates. 1.5 Change in Control has the meaning set forth in Section 3.6. ----------------- 1.6 Company means SC Corporation, a Delaware corporation, except that ------- for purposes of Section 3.6.1 Company means Specialty Catalog Corp., a Delaware Corporation. 1.7 Company Matching Amount means an amount credited to a ----------------------- Participant's Matching Account pursuant to Section 2.5. 1.8 Deferred Bonus Account means the record maintained on the books ---------------------- of an Employer to reflect deferral of the Reorganization Bonus pursuant to Section 2.2 and deferrals by a Participant of Regular Bonuses pursuant to Section 2.3. 1.9 Eligible Employee means an employee of an Employer designated by ----------------- the Employer as eligible to make Bonus deferrals under this Plan. 1.10 Employer means the Company and any subsidiary of the Company that -------- adopts this Plan. -2- 4. PRINCIPAL OFFICE - The principal office of the Company shall be located at such location as the Members shall from time to time decide. ARTICLE III RIGHTS AND DUTIES OF MEMBERS 1. MANAGEMENT RIGHTS - All Members shall be entitled to vote on any matter submitted to a vote of the Members. Unless the Members otherwise agree, all actions of the Company shall be taken only upon the approval of the Members. All matters submitted for the approval of the Members shall require the affirmative vote of Members then owning an aggregate percentage interest in the Company of at least 70%; provided, however, that after Viking Holdings Limited ("Viking") and Dickstein & Co., L.P., Dickstein International Limited and their respective Related Transferees (as defined in the Shareholders' Agreement) (collectively, "Dickstein") shall no longer be Members, such approval shall require the affirmative vote of Members then owning an aggregate percentage interest in the Company of at least 50%. Any action which may be taken at a meeting of the Members may be taken without a meeting if Members casting votes sufficient to approve such action consent thereto in writing. 2. AUTHORITY TO BIND THE COMPANY - Unless the Members otherwise agree, no agreement, undertaking, instrument, written obligation, certificate or other commitment shall be made by or on behalf of the Company unless made in an instrument signed by Members then owning the requisite aggregate percentage interest in the Company as provided in Section 1 of this Article III. Any third party dealing with the Company shall be entitled to rely (unless such third party has actual notice to the contrary) on any such instrument as being fully authorized under the terms of this Agreement if the same has been executed on behalf of the Company by (x) Dickstein or its duly authorized representative and (y) Viking or its duly authorized representative. Each Member hereby approves the execution and delivery by any single Member on behalf of the Company of (x) the Pledge Agreement, dated as of November 30, 1994, among Specialty Catalog Corp. ("Specialty"), the Company and Banque Nationale de Paris, New York Branch, as Agent (the "Agent"), (y) the Guaranty, dated November 30, 1994, among Specialty, the Company and the Agent and (z) all certificates, instruments and other agreements and undertakings contemplated by such Pledge Agreement or Guaranty to be executed and delivered by the Company contemporaneously with the execution and delivery of such Pledge Agreement and Guaranty. 3. COMPANY INTERESTS - The interest in the Company of each Member shall be based on such Member's contribution to the Company of such Member's ownership of Subordinated Notes issued by SC Corporation in connection with the consummation of its plan of reorganization on November 23, 1994 ("Subordinated Notes") as 3 set forth in Schedule A. Each Member's percentage interest in the Company shall be determined by dividing the principal amount of Subordinated Notes so contributed by such Member by the aggregate principal amount of all Subordinated Notes so contributed by all Members. 4. LIABILITY OF MEMBERS - No Member shall be liable as such for the liabilities of the Company. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under this Agreement or the Act shall not be grounds for imposing personal liability on any Member for the liabilities of the Company. 5. CONFLICTS OF INTEREST 5.1 A Member shall be entitled to enter into transactions that may be considered to be competitive with, or enter into business opportunities that may be beneficial to, the Company, without any liability or obligation to the Company or any other Member. A Member does not violate a duty or obligation to the Company merely because the Member's conduct furthers the Member's own interest. 5.2 No transaction with the Company shall be voidable solely because a Member has a direct or indirect interest in the transaction if the other Members, knowing the material facts of the transaction and the Member's interest, authorize, approve or ratify the transaction, or the interested Member establishes that the transaction was fair and reasonable as to the Company. ARTICLE IV CONTRIBUTIONS 1. CONTRIBUTIONS - On or prior to its execution of this Agreement, each of the Members shall have contributed to the capital of the Company the principal amount of Subordinated Notes set forth next to its name on Exhibit A hereto. No interest shall accrue on any such contribution, and no Member shall have the right to withdraw or be repaid any such contribution, except as provided in this Agreement. 2. ADDITIONAL CONTRIBUTIONS - No additional capital contributions shall be required of, or may be made by, any Member except upon the approval of all Members. 4 ARTICLE V DISTRIBUTIONS Distributions of cash and other property of the Company (including Subordinated Notes and any other securities or property received as a distribution in respect of or in exchange for Subordinated Notes) shall be made at such times, in such manner and in such amounts as the Members may determine; provided, however, that each such distribution shall be made to the Members in accordance with their respective percentage interests in the Company. ARTICLE VI TAXES 1. TAX MATTERS PARTNER - Dickstein & Co., L.P. shall act as tax matters partner of the Company pursuant to section 6231(a)(7) of the Code . 2. TAXES OF TAXING JURISDICTIONS - To the extent that the laws of any Taxing Jurisdiction require, the Company may withhold and pay over to such Taxing Jurisdiction the amount of tax, penalty and interest determined under the laws of the Taxing Jurisdiction with respect to a Member's share of the Company's income. Any such payments with respect to the income of a Member shall be treated as a distribution for purposes of Article V hereof. ARTICLE VII DISPOSITION OF MEMBERSHIP INTERESTS 1. DISPOSITION - Except in accordance with the Shareholders' Agreement, no Member may resign from the Company or Dispose of all or any portion of such Member's interest in the Company prior to the dissolution and winding up of the Company. 2. DISPOSITIONS NOT IN COMPLIANCE WITH THIS ARTICLE VOID -Any attempted Disposition of a Member's interest in the Company, or any part thereof, not in compliance with this Article VII and the applicable provisions of the Shareholders' Agreement is null and void ab initio. 3. SHAREHOLDERS' AGREEMENT OBLIGATIONS - Each Member and the Company acknowledge and agree to be bound by all applicable provisions of the Shareholders' Agreement including without limitation the provisions thereof relating to certain required purchases or sales of, and certain rights of first refusal with respect to, a Member's interest in the Company. For the avoidance of doubt, each Member agrees that if any provision 5 one-half of such Regular Bonus. A deferral direction pursuant to this Section 2.3 shall be given in writing before December 31 of the Year for which such Bonus is paid, in such manner as the Plan Administrator shall prescribe, and shall be irrevocable. 2.4 Designation of Payment Date. --------------------------- 2.4.1 Reorganization Bonus. At such time and in such manner as -------------------- the Plan Administrator shall prescribe, each Participant for whom a Reorganization Bonus is deferred pursuant to Section 2.2 shall designate a Payment Date for such Bonus and income thereon. Such Payment Date shall be the first business day of January 1999 or any subsequent month, subject to the limitation set forth in Section 2.4.3. 2.4.2 Regular Bonus. Each deferral direction given pursuant to ------------- Section 2.3 shall include designation of the Payment Date for the amount deferred and income thereon. Such Payment Date shall be the first business day of any month subsequent to the fifth anniversary of the Bonus Date applicable to the deferred Bonus, subject to the limitation set forth in Section 2.4.3. 2.4.3 Limitation. A date may not be selected as a Payment Date ---------- if it is subsequent to the earlier of (a) the January 1 immediately following the fifteenth anniversary of the Bonus Date applicable to the deferred Bonus for which the Payment Date is designated or (b) the Participant's sixtieth birthday; provided, however, that if a Participant's sixtieth birthday occurs on or -6- Members and the Company with respect to the subject matter hereof. This Agreement may be amended only by a written instrument adopted by the Company as provided in this Agreement. 2. RIGHTS OF CREDITORS AND THIRD PARTIES UNDER LIMITED LIABILITY COMPANY AGREEMENT - This Agreement is entered into among the Company and the Members for the exclusive benefit of the Company, the Members and their successors. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other Person. Except and only to the extent provided by applicable statute, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and any Member with respect to any capital contribution, any Member's interest in the Company or otherwise. 3. INDEMNIFICATION - The Company shall indemnify and hold harmless, and advance expenses to, any Member, from and against any and all claims and demands whatsoever relating to, or arising out of, actions taken or not taken by such Member in its capacity as such; provided, however, that no indemnification may be made to or on behalf of any Member if a judgment or other final adjudication adverse to such Member establishes (a) that its acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated or (b) that it personally gained in fact a financial profit or other advantage to which he or she was not legally entitled. 4. COUNTERPARTS - This Agreement may be executed in two or more counterparts, all of which taken together shall be deemed one agreement. 5. NOTICE - Notice shall be in writing. Notice to the Company shall be addressed to the Company at the address of its principal office established as provided in Section 4 of Article II. Notice to a Member shall be addressed to the Member at the address of such Member reflected in the records of the Company. Notice shall be considered duly given (i) on the day when delivered personally, (ii) on the Business Day when sent by facsimile provided receipt of such transmission is confirmed, (iii) on the Business Day immediately succeeding the day on which Notice is sent by recognized overnight courier, and (iv) when received if mailed by first class mail postage prepaid. 7 IN WITNESS WHEREOF, we have hereunto set our hands on the date set forth beside our names. DICKSTEIN & CO., L.P. By: DICKSTEIN PARTNERS, L.P., its general partner By: DICKSTEIN PARTNERS, INC., its general partner By____________________________________ Vice President DICKSTEIN INTERNATIONAL LIMITED By: DICKSTEIN PARTNERS, INC., its agent By__________________________________________ Vice President VIKING HOLDINGS LIMITED By: ---------------------------------------------- Name: Title: WIGS, L.P. By: ----------------------------------------------- Name: Arthur Kowaloff Title: General Partner 8 EXHIBIT A --------- Principal Amount of Member Subordinated Notes - ------ ------------------ Dickstein & Co., L.P. $1,189,926 Dickstein International Limited $ 594,964 Viking Holdings Limited $1,784,890 Wigs, L.P. $ 110,406 single sum in cash; all non-vested balances shall be forfeited. Notwithstanding the foregoing, if, subsequent to Termination of Employment and prior to the time of such payment, the Participant engages in any activity directly competitive with the business of the Company in the importation, the retail or the direct mail marketing of wigs, including but not limited to any such activity involving one of the entities listed from time to time in Schedule B hereto or their affiliates, his Accounts shall be treated as though his Termination had been for Cause and he shall be paid only the amount of his Regular Bonus deferrals (and income credited thereon). 3.4 Withdrawal for Emergency Need. ----------------------------- 3.4.1 Authorization. The Company may permit a Participant who ------------- demonstrates an emergency need to withdraw from the Plan an amount no greater than the amount determined by the Plan Administrator to be reasonably necessary to satisfy such emergency need. Such withdrawal shall be funded by first reducing the vested portion of the Participant's Deferred Bonus Account, drawing on deferred Bonus amounts (and income thereon) in the order in which such amounts were originally credited to the Deferred Bonus Account, except that amounts attributable to the Reorganization Bonus (and income thereon) shall be deemed to be withdrawn last (and only to the extent vested). If such Account is not adequate to fund the withdrawal, the vested portion of the Participant's Matching Account shall be reduced by drawing on Company Matching -10- Amounts (and income thereon) in the order in which such amounts were originally credited to the Matching Account. No invested portion may be withdrawn. 3.4.2 Emergency Need. For purposes of this Section 3.4, an emergency -------------- need is a severe financial hardship of a Participant resulting from (a) a sudden and unexpected illness of or accident to the Participant or a dependent within the meaning of section 152 (a) of the Internal Revenue Code, or (b) a casualty loss of the Participant's property or (c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. A need is not an emergency need to the extent that it is or may be relieved by reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant's assets insofar as such liquidation would not cause severe financial hardship, or by cessation of deferrals under the plan. 3.5 Source of Payment. Any benefit under the Plan shall be the obligation ----------------- of the Employer by whom the Participant is employed at the time of Bonus deferral, and shall be a general liability of such Employer. The claim of a Participant of Beneficiary to a benefit shall at all times be merely the claim of an unsecured creditor of the applicable Employer. No trust, security, escrow, or similar account need be established for the purpose of paying benefits hereunder. However, the Company may in its discretion establish a custodial account or "rabbit trust" (or other -11- arrangement having equivalent taxation characteristics under the Internal Revenue Code) to hold assets of the Company and other Employers, subject to the claims of creditors in the event of insolvency, for the purpose of paying benefits hereunder. If the Company establishes such an account or trust, amounts paid therefrom shall discharge the obligations hereunder to the extent of the payments so made. 3.6 Change in Control. ----------------- 3.6.1 Definition. For purposes of this Section 3.6, a "Change in ---------- Control" shall have occurred if, subsequent to January 1, 1995: (a) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than any person listed in Schedule A hereto (and their affiliates or family members), the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company), becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or (b) the stockholders of the Company approve a merger or consolidation of the Company with any other company, other than (i) a merger or consolidation which would result in the -12- voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) together with any additional voting securities held by persons listed in Schedule A hereto (and their affiliates or family members) 50% or more of the combined voting power of voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation of the Company (or similar transaction) in which the Company is the surviving entity and no "person" (as defined above) (other than a person listed in Schedule A or their affiliates or family members) acquires 50% or more of the combined voting power of the Company's then outstanding securities; or (c) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect, including, without limitation, a sale of substantially all of the assets of SC Corporation) and such plan of liquidation is implemented, or such sale or other similar transaction is consummated. In the event of a public offering of the common stock of the Company, neither such offering, nor any event described in paragraph (a) of this Section 3.6.1 that is a direct consequence of -13- such offering, shall be treated as a Change in Control for purposes of this Plan. 3.6.2 Vesting and Payment. If a Participant incurs a Termination ------------------- of Employment on account of a discharge by the Employer within one year following a Change in Control, unless such discharge is for Cause, such Participant shall be paid the entire balance standing credited to his Deferred Bonus Account and Marching Account as a single sum in cash within six months following the Termination. Notwithstanding the foregoing, if, subsequent to Termination of Employment and prior to the time of such payment, the Participant engages in any activity directly competitive with the business of the Company in the importation, the retail or the direct mail marketing of wigs, including but not limited to any such activity involving one of the entities listed from time to time in Schedule B hereto or their affiliates, his Accounts shall be treated as though his Termination had been for Cause and he shall be paid only the amount of his Regular Bonus deferrals (and income credited thereon). 3.7 Withholding. All amounts credited to Participants' Accounts pursuant ----------- to this Plan and all payments under the Plan shall be subject to any applicable withholding requirements imposed by any tax (including without limitation FICA) or other law. The Employers shall have the right to require as a condition of any crediting to a Participant's Accounts or of any payment hereunder -14- that the payee remit to the applicable Employer an amount sufficient in its opinion to satisfy all applicable withholding requirements. With respect to withholding applicable to any payment made hereunder, a payee may discharge such obligation by directing the Employer to withhold amounts payable under the Plan. 3.8 Right of Offset. Any amount payable pursuant to this Plan shall --------------- be reduced at the discretion of the Plan Administrator to take account of any amount due, and not paid, by the Participant to the Employer at the time payment is to be made hereunder. -15- ARTICLE 4 BENEFICIARIES ------------- 4.1 Beneficiary Designation. ----------------------- 4.1.1 Designation. A Participant may from time to time designate, in ----------- the manner specified by the Plan Administrator, a Beneficiary to receive payment pursuant to Section 3.2.1 in the event of his death. 4.1.2 Absence of Beneficiary. In the event that there is no properly ---------------------- designated Beneficiary living at the time of a Participant's death, his benefit hereunder shall be paid to his estate. 4.2 Payment to Incompetent. If any person entitled to benefits under this ---------------------- Plan shall be a minor or shall be physically or mentally incompetent in the judgment of the Plan Administrator, such benefits may be paid in any one or more of the following ways, as the Plan Administrator in his sole discretion shall determine: 4.2.1 To the legal representatives of such minor or other legally incompetent person; 4.2.2 Directly to such minor or other legally incompetent person; or 4.2.3 To a parent or guardian of such minor or other legally incompetent person, to the person with whom such -16- minor or other legally incompetent person resides, or to a custodian for such minor under the Uniform Gifts to Minors Act (or similar statute) of any jurisdiction. Payment to any person in accordance with the foregoing provisions of this Section 4.2 shall to that extent discharge the applicable Employer and the Plan Administrator, who shall not be required to see to the proper application of any such payment. -17- ARTICLE 5 ADMINISTRATION -------------- 5.1 Plan Administrator. Authority to administer the Plan shall be ------------------ vested in the Plan Administrator, who shall have the power and discretion to: (a) make and enforce rules and regulations and prescribe the use of forms he deems appropriate for the administration of the Plan; (b) construe all terms, provisions, conditions and limitations of the Plan and resolve ambiguities, inconsistencies and omissions; (c) determine all questions arising out of or in connection with the provisions of the Plan or its administration in any and all cases in which he deems such a determination advisable, such determinations to be final and conclusive on all persons; (d) delegate authority to agents and other persons to act on his behalf in carrying out the provisions and administration of the Plan, and to take or direct any action required or advisable with respect to the administration of the Plan. -18- 5.2 Claims Procedure. If the Plan Administrator denies any ---------------- Participant's or Beneficiary's claim for benefits under the Plan: (a) the Plan Administrator shall notify such Participant or Beneficiary of such denial by written notice which shall set forth the specific reasons for such denial; and (b) the Participant or Beneficiary shall be afforded a reasonable opportunity for a full and fair review by the Company of the decision to deny his claim for Plan benefits. 5.3 Indemnity. The Company shall indemnify and save the Plan --------- Administrator and each employee, officer or director of the Company harmless against any and all loss, liability, claim, damage, cost and expense which may arise by reason of, or be based upon, any matter connected with or related to the Plan or the administration of the Plan (including, but not limited to, any and all expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or in settlement of any such claim) to the fullest extent permitted under applicable law, except when the same is judicially determined to be due to the gross negligence or willful misconduct of the Plan Administrator or such employee, officer or director. -19- 5.4 Payment of Expenses. The Plan Administrator shall serve without ------------------- special compensation. All expenses of Plan administration shall be paid by the Company. 5.5 Right to Amend or Terminate. The Company may at any time amend --------------------------- the Plan, retroactively or otherwise, in any respect, or terminate the Plan. However, no such amendment or termination shall reduce the amount standing credited to any Participant's Deferred Bonus Account or Matching Account as of the date of such amendment or termination. In the event of the termination of the Plan, the Company, in its sole discretion, may choose to pay out Participants' Accounts prior to the designated Payment Date. In the event the Company determines to pay out Participants' Accounts upon termination of the Plan or at any later date prior to the designated Payment Dates, all Account balances shall become fully vested and nonforfeitable immediately prior to such payout. Otherwise, following a termination of the Plan, income shall continue to be credited to each Deferred Bonus and Matching Account and Account balances shall continue to vest, in accordance with the provisions of this Plan, until the time such Accounts are paid out. 5.6 Doubt as to Right to Payment. If any doubt exists as to the ---------------------------- right of any person to any benefits under this Plan or the amount or time of payment of such benefits (including, without limitation, any case of doubt as to identity, or any case in which any notice has been received from any other person claiming any interest in amounts payable hereunder, or any case in which a claim -20- from other persons may exist by reason of community property or similar laws), the Plan Administrator may, in his discretion, direct that payment of such benefits be deferred until such right or amount or time is determined, or until a court of competent jurisdiction orders that such benefits be paid into court in accordance with appropriate rules of law, or the Plan Administrator may direct that payment be made only upon receipt of a bond or similar indemnification (in such amount and in such form as is satisfactory to him). 5.7 Spendthrift Clause. No benefit, distribution or payment under ------------------ the Plan may be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process whether pursuant to a "qualified domestic relations order" as defined in section 414(p) of the Code or otherwise. 5.8 Usage. Whenever applicable, the masculine gender, when used in ----- the Plan, includes the feminine gender, and the singular includes the plural. 5.9 Separability. If any provision of the Plan is held invalid or ------------ unenforceable, its invalidity or unenforceability shall not affect any other provisions of the Plan, and the Plan shall be construed and enforced as if such provision had not been included therein. -21- 5.10 Captions. The captions in this document and in the table of -------- contents prefixed hereto are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of the Plan and shall in no way affect the Plan or the construction of any provision thereof. 5.11 Right of Discharge Reserved. The establishment of the Plan shall --------------------------- not be construed to confer upon any employee any legal right to be retained in the employ of an Employer or give any employee or any other person any right to benefits, except to the extent expressly provided for hereunder. All employees shall remain subject to discharge to the same extent as if the Plan had never been adopted, and may be treated without regard to the effect such treatment may have upon them under the Plan. 5.12 Governing Law. The Plan is intended to constitute an unfunded, ------------- nonqualified deferred compensation arrangement. All rights under the plan shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of choice of laws. No action (whether at law, in equity or otherwise) shall be brought by or on behalf of any Participant or Beneficiary for or with respect to benefits due under this Plan unless the person bringing such actions has timely exhausted the Plan's claim review procedure. Any such action (whether at law, in equity or otherwise) must be commenced within three years. This three-year period shall be computed from the earlier of (a) the date a final determination denying such benefit, in whole or in -22- part, is issued under the Plan's claim review procedure or (b) the date such individual's cause of action first accured. Any dispute, controversy or claim arising out of or in connection with this Plan (including the applicability of this arbitration provision) and not resolved pursuant to the Plan's claim review procedure shall be determined and settled by arbitration conducted by the American Arbitration Association ("AAA") in the County and State of the Employer's principal place of business and in accordance with the then existing rules, regulations, practices and procedures of the AAA. Any decision in such arbitration shall be final, conclusive and binding upon the parties to the arbitration. Each party to the arbitration will bear its own costs and fees (including attorney's fees). IN WITNESS WHEREOF, SC Corporation has caused this instrument to be executed by its duly authorized officer this ____ day of _____________, 1994. SC CORPORATION By:____________________________________ Title: -23- Schedule A Steven Bock David Cicurel Dickstein & Co., L.P. Dickstein International Limited Dickstein Partners Inc. and affiliates (including any managed fund) or officers Arthur Kowaloff Robert Machinist Guy Naggar Stephen O'Hara Patricof and Company Bruce Pollack SC Holdings Corp. Kimberley Stallvik Viking Holdings Limited Wigs, L.P. -24- Schedule B Amekor Ben Chez Black is Beautiful Carla Corsini Franklin Fashions Eva Gabor International General Wig Hair Fashion Renee of Paris Revlon (General Wigs Beauty Trend) Naomi Sims The Wig Company -25- EX-10.32 7 FORM OF INDEMNIFICATION AGMT. OF DIRECTORS EXHIBIT 10.32 INDEMNIFICATION AGREEMENT ------------------------- AGREEMENT made as of this _____day of ___, 1996, between Specialty Catalog Corp., a Delaware corporation (the "Company"), and __________________ (the "Indemnitee"). WHEREAS, it is essential to the Company and its stockholders to attract and retain qualified and capable directors and officers; WHEREAS, the Certificate of Incorporation of the Company (the "Certificate of Incorporation") and the By-laws of the Company (the "By-laws") allow the Company to indemnify and advance expenses to its directors and officers; WHEREAS, in recognition of Indemnitee's need for protection against personal liability in order to induce Indemnitee to serve the Company in an effective manner, and to supplement or replace the Company's directors' and officers' liability insurance coverage, and, in part, to provide Indemnitee with specific contractual assurance that the protection provided by the Certificate of Incorporation and the By-laws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of the Certificate of Incorporation and the By-laws), the Company wishes to provide the Indemnitee with the benefits contemplated by this Agreement; and WHEREAS, as a result of the provision of such benefits Indemnitee has agreed to continue to serve the Company as a director and/or officer; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Definitions. The following terms, as used herein, shall have the ----------- following respective meanings: a. AFFILIATE: of a specified Person is a Person who directly, or --------- indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified. The term ASSOCIATE used to --------- indicate a relationship with any Person shall mean (i) any corporation or organization (other than the Company or a Subsidiary) of which such Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of ten (10) percent or more of any class of Equity Securities; (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity (other than an Employee Plan Trustee), (iii) any Relative of such Person, or (iv) any officer or director of any corporation controlling or controlled by such Person. b. BENEFICIAL OWNERSHIP: shall be determined, and a Person shall be -------------------- the BENEFICIAL OWNER of all securities which such Person is deemed to own ---------------- beneficially, pursuant to Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (or any successor rule or statutory provision), or, if such Rule 13d-3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to such Rule 13d-3 as in effect on the date hereof; provided, however, that a Person shall, in any -------- ------- event, also be deemed to be the Beneficial Owner of any Voting Shares: (A) of which such Person or any of its Affiliates or Associates is, directly or indirectly, the Beneficial Owner; or (B) of which such Person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, and (ii) sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement, understanding, relationship or otherwise (but shall not be deemed to be the Beneficial Owner of any Voting Shares solely by reason of a revocable proxy granted for a particular meeting of stockholders, pursuant to a public solicitation of proxies for such meeting, with respect to shares of which neither such Person nor any such Affiliate or Associate is otherwise deemed the Beneficial Owner), or (C) of which another Person is, directly or indirectly, the Beneficial Owner if such first mentioned Person or any of its Affiliates or Associates acts with such other Person as a partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Company; and provided further, however, that (i) -------- ------- ------- no director or officer of the Company, nor any Associate or Affiliate of any such director or officer, shall, solely by reason of any or all of such directors and officers acting in their capacities as such, be deemed for any purpose hereof, to be the Beneficial Owner of any Voting Shares of which any other such director or officer (or any Associate or Affiliate thereof) is the Beneficial Owner and (ii) no trustee of an employee stock ownership or similar plan of the Company or any Subsidiary ("Employee Plan Trustee") or any Associate or Affiliate of any such Trustee, shall, solely by reason of being an Employee Plan Trustee or Associate or Affiliate of an Employee Plan Trustee, be deemed for any purposes hereof to be the Beneficial Owner of any Voting Shares held by or under any such plan. (c) A CHANGE IN CONTROL: shall be deemed to have occurred if (A) any ----------------- Person (other than (a) the Company or any subsidiary, (b) any pension, profit sharing, employee stock ownership or other employee benefit plan of the Company or any subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity, (c) Dickstein & Co., L.P. and including any subsidiary or affiliate or (d) Viking Holdings Limited) is or becomes, after the date of this Agreement, the Beneficial Owners of 30% or more of the total voting power of the Voting Shares, (B) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election or appointment by the Board of Directors or nomination or recommendation for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (C) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Shares of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Shares of the surviving entity) at least 60% of the total voting power represented by the Voting Shares of the Company or such surviving entity outstanding, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, provided however, that a change in controll shall not be deemed to occur if Viking Holdings Limited, Dickstein & Co., L.P., Dickstein International, or Dickstein Focus Fund and their respective affiliates, either individually or collectively, is the entity that, either directly or indirectly, by virtue of its stockownership or otherwise, triggers the change in control as set forth in (A), (B) and (C) above. -2- (d) CLAIM: means any threatened, pending or completed action, suit, ----- arbitration or proceeding, or any inquiry or investigation, whether brought by or in the right of the Company or otherwise, that Indemnitee in good faith reasonably believes might lead to the institution of any such action, suit, arbitration or proceeding, whether civil, criminal, administrative, investigative or other, or any appeal therefrom. (e) EQUITY SECURITY: shall have the meaning given to such term under --------------- Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date hereof. (f) D&O INSURANCE: means any valid directors' and officers' liability ------------- insurance policy maintained by the Company for the benefit of the Indemnitee, if any. (g) DETERMINATION: means a determination, and DETERMINED means a ------------- ---------- matter which has been determined based on the facts known at the time, by: (i) a majority vote of a quorum of disinterested directors, or (ii) if such a quorum is not obtainable, or even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or, in the event there has been a Change in Control, by the Special Independent Counsel (in a written opinion) selected by Indemnitee as set forth in Section 6, or (iii) a majority of the disinterested stockholders of the Company, or (iv) a final adjudication by a court of competent jurisdiction. (h) EXCLUDED CLAIM: means any payment for Losses or Expenses in -------------- connection with any Claim: (i) based or attributable to Indemnitee gaining in fact any personal profit or advantage to which Indemnitee is not entitled; or (ii) for the return by Indemnitee of any remuneration paid to Indemnitee without the previous approval of the Board or stockholders of the Company which, but for such approval, would be illegal; or (iii) for an accounting of profits in fact made from the purchase or sale by Indemnitee of securities of the Company within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, or similar provisions of any state law; or (iv) resulting from Indemnitee's knowingly fraudulent, dishonest or willful misconduct; or (v) the payment of which by the Company is not permitted by applicable law. (i) EXPENSES: means any reasonable expenses incurred by Indemnitee as -------- a result of a Claim or Claims made against Indemnitee for an Indemnifiable Event including, without limitation, reasonable attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (j) FINES: means any fine, penalty or, with respect to an employee ----- benefit plan, any excise tax or penalty assessed with respect thereto. (k) INDEMNIFIABLE EVENT: means any event or occurrence, occurring ------------------- prior to or after the date of this Agreement, related to the fact that Indemnitee is, was or has agreed to serve as, a director, officer, employee, trustee, agent or adminitrator or fiduciary of any pension or benefit plan, including but not limited to a 401(k) trustee, of the Company, or is or was serving at the request of the Company as a director, officer, employee, trustee, agent or -3- fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, and by reason of anything done or not done by Indemnitee in any such capacity, including, but not limited to, any breach of duty, neglect, error, misstatement, misleading statement, omission, or other act done or wrongfully attempted by Indemnitee, or any of the foregoing alleged by any claimant. (l) LOSSES: means any amounts or sums which Indemnitee is legally ------ obligated to pay as a result of a Claim or Claims made against Indemnitee for Indemnifiable Events including, without limitation, damages, judgments and sums or amounts paid in settlement of a Claim or Claims, and Fines. (m) PERSON: means any individual, partnership, corporation, business ------ trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. (n) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if --------------------------- (A) the Company, enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; or (B) the Board of Directors adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (o) RELATIVE: means a Person's spouse, parents, children, siblings, -------- mother-and father-in-law, sons- and daughters-in-law, and brothers- and sisters- in-law. (p) REVIEWING PARTY: means any appropriate person or body consisting --------------- of a member or members of the Company's Board of Directors or any other person or body appointed by the Board (including the Special Independent Counsel referred to in Section 6) who is not a party to the particular Claim for which Indemnitee is seeking indemnification. (q) SUBSIDIARY: means any corporation of which a majority of any ---------- class of Equity Security is owned, directly or indirectly, by the Company. (r) TRUST: means the trust established pursuant to Section 7 hereof. ----- (s) VOTING SHARES: means any issued and outstanding shares of capital ------------- stock of the Company entitled to vote generally in the election of directors. 2. Basic Indemnification Agreement. In consideration of, and as an ------------------------------- inducement to, the Indemnitee rendering valuable services to the Company, the Company agrees that in the event Indemnitee is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company will indemnify Indemnitee to the fullest extent authorized by law, against any and all Losses and Expenses (including all interest, assessments and other charges paid or payable in connection with or in respect of such Losses and Expenses) of such Claim, whether or not such Claim proceeds to judgment or is settled or otherwise is brought to a final disposition, subject in each case, to the further provisions of this Agreement. -4- 3. Limitations on Indemnification. Notwithstanding the provisions of ------------------------------ Section 2, Indemnitee shall not be indemnified and held harmless from any Losses or Expenses (a) which have been Determined, as provided herein, to constitute an Excluded Claim; (b) indemnifiable hereunder if and to the extent that Indemnitee has actually received payment in connection with such Losses and Expenses pursuant to the Certificate of Incorporation, By-laws, D&O Insurance or otherwise; or (c) other than pursuant to the last sentence of Section 4(d) or Section 14, in connection with any claim or proceeding initiated by Indemnitee against the Company or any director or officer of the Company, unless the Company has joined in or the Board of Directors has authorized such claim or proceeding. 4. Indemnification Procedures. -------------------------- (a) Promptly after receipt by Indemnitee of notice of any Claim, Indemnitee shall, if indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement thereof; provided, however, that the failure to give such notice promptly shall not - -------- ------- affect or limit the Company's obligations with respect to the matters described in the notice of such Claim, except to the extent that the Company is prejudiced thereby. Indemnitee agrees, further, not to make any admission or effect any settlement with respect to such Claim without the consent of the Company, except any Claim with respect to which the Indemnitee has undertaken the defense in accordance with the third sentence of Section 4(d). (b) If, at the time of the receipt of such notice, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of any Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all Losses and Expenses payable as a result of such Claim. (c) The Company shall be obligated to pay the Expenses of any Claim in advance of the final disposition thereof and the Company, if appropriate, shall be entitled to assume the defense of such Claim, with counsel reasonably satisfactory to Indemnitee, upon the delivery to Indemnitee of reasonable written notice of its election to do so. After delivery of such notice, the Company will not be liable to Indemnitee under this Agreement for any legal or other Expenses subsequently incurred by Indemnitee in connection with such defense other than reasonable Expenses of investigation; provided that -------- ---- Indemnitee shall have the right to employ its counsel in such Claim but the fees and expenses of such counsel incurred after delivery of notice from the Company of its assumption of such defense shall be at the Indemnitee's expense; provided -------- further that if: (i) the employment of counsel by Indemnitee has been - ------- previously authorized by the Company, (ii) Indemnitee shall have reasonably concluded that there will be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (iii) the Company shall not, in fact, have employed counsel to assume the defense of such action, the reasonable fees and expenses of counsel shall be at the expense of the Company. (d) All payments on account of the Company's indemnification obligations under this Agreement shall be made within sixty (60) days of Indemnitee's written request therefor unless a Determination is made that the Claims giving rise to Indemnitee's request are Excluded Claims or otherwise not payable under this Agreement, provided that all payments on -------- ---- -5- account of the Company's obligation to pay Expenses under Section 4(c) of this Agreement prior to the final disposition of any Claim shall be made within 30 days of Indemnitee's written request therefor and such obligation shall not be subject to any such Determination but shall be subject to Section 4(e) of this Agreement. Notwithstanding the foregoing, such sixty (60) day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the Person or Persons making the Determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto. In the event the Company takes the position that Indemnitee is not entitled to indemnification in connection with the proposed settlement of any Claim, Indemnitee shall have the right at his own expense to undertake defense of any such Claim, insofar as such proceeding involves a Claim against the Indemnitee, by written notice given to the Company within 10 days after the Company has notified Indemnitee in writing of its contention that Indemnitee is not entitled to indemnification; provided, however, that the failure to give such -------- ------- notice within such 10-day period shall not affect or limit the Company's obligations with respect to any such Claim if such Claim is subsequently determined not to be an Excluded Claim or otherwise to be payable under this Agreement, except to the extent that the Company is prejudiced thereby. If it is subsequently determined in connection with such proceeding that the Indemnifiable Events are not Excluded Claims and that Indemnitee, therefore, is entitled to be indemnified under the provisions of Section 2 hereof, the Company shall promptly indemnify Indemnitee and pay to Indemnitee on account the amount of Expenses or Losses set forth in Indemnitee's written request. (e) Indemnitee hereby expressly undertakes and agrees to reimburse the Company for all Losses and Expenses paid by the Company in connection with any Claim against Indemnitee in the event and only to the extent that a Determination shall have been made by a court of competent jurisdiction in a decision from which there is no further right to appeal that Indemnitee is not entitled to be indemnified by the Company for such Losses and Expenses because the Claim is an Excluded Claim or because Indemnitee is otherwise not entitled to payment under this Agreement. (f) In connection with any Determination as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (g) Indemnitee hereby expressly undertakes and agrees to (i) notify (and deliver to, as applicable) the Company in writing of any and all information or documents relating to any Claim or matter which may entitle Indemnitee to indemnification for Losses or Expenses under this Agreement; and (ii) to notify the Company in writing of any and all developments relating to any Claim to which the Company has notified Indemnitee in writing pursuant to the terms of Section 4(d) herein of its contention that Indemnitee is not entitled to indemnification under this Agreement. 5. Settlement. The Company shall have no obligation to indemnify ---------- Indemnitee under this Agreement for any amounts paid by Indemnitee in settlement of any Claim effected without the Company's prior written consent. The Company shall not settle any Claim in which it takes the position that Indemnitee is not entitled to indemnification in connection with such settlement without the prior written consent of Indemnitee, nor shall the Company settle any Claim in any manner which would impose any Fine or any obligation on Indemnitee, -6- without Indemnitee's written consent. Neither the Company nor Indemnitee shall unreasonably withhold its or his consent to any proposed settlement. 6. Change in Control; Extraordinary Transactions. The Company and --------------------------------------------- Indemnitee agree that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then all Determinations thereafter with respect to the rights of Indemnitee to be paid Losses and Expenses under this Agreement shall be made only by a special independent counsel (the "Special Independent Counsel") selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld) or by a court of competent jurisdiction. The Company shall pay the reasonable fees of such Special Independent Counsel and shall indemnify such Special Independent Counsel against any and all reasonable expenses (including reasonable attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. The Company covenants and agrees that, in the event of a Change in Control of the type described in clause (C) of Section 1(c), the Company will use its best efforts (a) to have the obligations of the Company under this Agreement including, but not limited to, those under Section 7, expressly assumed by the surviving, purchasing or succeeding entity, or (b) otherwise adequately to provide for the satisfaction of the Company's obligations under this Agreement, in a manner reasonably acceptable to the Indemnitee. 7. Establishment of Trust. In the event of a Potential Change in ---------------------- Control, the Company shall, upon written request by Indemnitee, create a trust (the "Trust") for the benefit of Indemnitee and from time to time upon written request of Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all Losses and Expenses which are actually paid or which Indemnitee reasonably determines from time to time may be payable by the Company under this Agreement. The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Special Independent Counsel, in any case in which the Special Independent Counsel is involved. The terms of the Trust shall provide that upon a Change in Control: (i) the Trust shall not be revoked or the principal thereof invaded without the written consent of Indemnitee; (ii) the trustee of the Trust shall advance, within 20 days of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust under the circumstances under which Indemnitee would be required to reimburse the Company under Section 4(e) of this Agreement); (iii) the Company shall continue to fund the Trust from time to time in accordance with the funding obligations set forth herein; (iv) the trustee of the Trust shall promptly pay to Indemnitee all Losses and Expenses for which Indemnitee shall be entitled to indemnification pursuant to this Agreement; and (v) all unexpended funds in the Trust shall revert to the Company upon a final determination by a court of competent jurisdiction in a final decision from which there is no further right of appeal that Indemnitee has been fully indemnified under the terms of this Agreement. The trustee of the Trust shall be chosen by Indemnitee and shall be approved by the Company, which approval shall not be unreasonably withheld. 8. No Presumption. For purposes of this Agreement, the termination -------------- of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, ---- ---------- shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that -7- a court has determined that indemnification is not permitted by applicable law. 9. Non-exclusivity, Etc. The rights of Indemnitee hereunder shall be --------------------- in addition to any other rights Indemnitee may have under the Certificate of Incorporation, the By-laws, the Delaware General Corporation Law, any vote of stockholders or disinterested directors or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity by holding such office, and shall continue after Indemnitee ceases to serve the Company as a director or an officer for so long as Indemnitee shall be subject to any Claim by reason of (or arising in part out of) an Indemnifiable Event. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Certificate of Incorporation, the By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. Nothing contained herein shall, or be construed to, limit or diminish the indemnification of Indemnitee, as provided by the laws of the State of Delaware, the Company's Certificate of Incorporation and/or By-laws, to the maximum extent provided therein. 10. Liability Insurance. To the extent the Company currently or in ------------------- the future maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be and continue to be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director of the Company. 11. Subrogation. In the event of payment under this Agreement, the ----------- Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 12. Partial Indemnity, Etc. If Indemnitee is entitled under any ----------------------- provision of this Agreement to indemnification by the Company for some or a portion of the Losses and Expenses of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to any Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 13. Liability of Company. Indemnitee agrees that neither the -------------------- stockholders nor the directors nor any officer, employee, representative or agent of the Company shall be personally liable for the satisfaction of the Company's obligations under this Agreement and Indemnitee shall look solely to the assets of the Company for satisfaction of any claims hereunder. -8- 14. Enforcement. ----------- (a) Indemnitee's right to indemnification and other rights under this Agreement shall be specifically enforceable by Indemnitee only in the state or Federal courts of the States of Delaware and Massachusetts and shall be enforceable notwithstanding any adverse Determination by the Company's Board of Directors, independent legal counsel, the Special Independent Counsel or the Company's stockholders and no such Determination shall create a presumption that Indemnitee is not entitled to be indemnified hereunder. In any such action the Company shall have the burden of proving that indemnification is not required under this Agreement. (b) In the event that any action is instituted by Indemnitee under this Agreement, or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and reasonable expenses, including reasonable counsel fees, incurred by Indemnitee with respect to such action, unless the court determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous. 15. Severability. In the event that any provision of this Agreement ------------ is determined by a court to require the Company to do or to fail to do an act which is in violation of applicable law, such provision (including any provision within a single section, paragraph or sentence) shall be limited or modified in its application to the minimum extent necessary to avoid a violation of law, and, as so limited or modified, such provision and the balance of this Agreement shall be enforceable in accordance with their terms to the fullest extent permitted by law. 16. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of Delaware applicable to agreements made and to be performed entirely within such State. 17. Consent to Jurisdiction. The Company and Indemnitee each hereby ----------------------- irrevocably consents to the jurisdiction of the courts of the States of Delaware and Massachusetts for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agrees that any action instituted under this Agreement shall be brought only in the state and Federal courts of the States of Delaware and Massachusetts. 18. Notices. All notices or other communications required or ------- permitted hereunder shall be sufficiently given for all purposes if in writing and personally delivered or sent by registered or certified mail, return receipt requested, with postage prepaid addressed as follows, or to such other address as the parties shall have given notice of pursuant hereto: (a) If to the Company, to: Specialty Catalog Corp. 21 Bristol Drive South Easton, Massachusetts 02375 -9- With a copy to: Kane Kessler, P.C., 1350 Avenue of the Americas New York, New York 10019 Attn: Robert L. Lawrence, Esq. (b) If to Indemnitee, to: ____________________________________ ____________________________________ ____________________________________ ____________________________________ 19. Counterparts. This Agreement may be signed in counterparts, each ------------ of which shall be an original and all of which, when taken together, shall constitute one and the same instrument. 20. Successors and Assigns. This Agreement shall be (i) binding upon ---------------------- all successors and assigns of the Company, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, and (ii) binding upon and inure to the benefit of the Indemnitee and any successors and assigns, heirs, and personal or legal representatives of Indemnitee. 21. Amendment; Waiver. No amendment, modification, termination or ----------------- cancellation of this Agreement shall be effective unless made in a writing signed by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. -10- IN WITNESS WHEREOF, the Company and Indemnitee have executed this Agreement as of the day and year first above written. ______________________________ Name: SPECIALTY CATALOG CORP. By:___________________________ Name: Title: ATTEST: By:___________________________ Name: Title: -11- EX-10.33 8 FORM OF WARRANT, DATED AUGUST 12, 1996 EXHIBIT 10.33 WARRANT ------- NEITHER THIS WARRANT NOR THE SECURITIES UNDERLYING THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS AND EACH OF THIS WARRANT AND SUCH SECURITIES ARE OFFERED IN RELIANCE UPON EXEMPTIONS THEREFROM. NEITHER THIS WARRANT NOR THE SECURITIES UNDERLYING THIS WARRANT MAY BE RESOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. WARRANT TO PURCHASE 701 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE SPECIALTY CATALOG CORP. A Delaware Corporation VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER 30, 1999 This certifies that, for value received, Martin E. Franklin (the "Warrant Holder"), is entitled, subject to the terms and conditions hereof, to purchase from Specialty Catalog Corp. (the "Company"), at any time or from time to time, but in any event, on or before September 30, 1999, up to Two Hundred Twenty-Eight Thousand One Hundred Eighty-Eight (228,188) fully paid and non- assessable shares (the "Shares") of common stock, par value $0.01 per share, of the Company (the "Common Stock"), and to receive a certificate or certificates for the Common Stock so purchased pursuant to and subject to the terms and conditions set forth below. This Warrant is one of a series of Warrants ("Warrants") to purchase an aggregate of 815.12 shares of Common Stock. 1. This Warrant may be exercised in whole or in part at any time starting upon the closing of an initial public offering of the Company's common stock, or the common stock of SC Corporation, a wholly-owned subsidiary of the Company (the "Closing Date"), and ending on the earlier of (x) the third anniversary of the Closing Date or (y) September 30, 1999, ("Expiration Date"), by delivery and surrender to the Company at the offices of the Company at 21 Bristol Drive, South Easton, Massachusetts 02375, subject to Section 3 below, of this Warrant and a subscription form substantially similar to that attached to this Warrant as Exhibit A duly executed by the Warrant Holder accompanied by payment in full, in lawful money of the United States, or by certified or bank check, wire transfer or postal or express money order payable in United States dollars to the order of the Company, of the Exercise Price (as defined in Section 2 herein) for each share of Common Stock as to which this Warrant is being exercised on or before 5:00 P.M. Eastern time on the Expiration Date, after which time this Warrant shall be void. Notwithstanding anything to the contrary contained herein, should the Closing Date not have occurred on or prior to June 30, 1999, this Warrant shall be void. 2. Subject to adjustment as hereinafter provided, the purchase price per Share of Common Stock as to which this Warrant is exercised (the "Exercise Price") shall be $1.88. 3. (a) Upon the exercise of this Warrant, in full, the Company shall, or shall direct its transfer agent to, issue to the Warrant Holder certificates for the total number of Shares of Common Stock issuable on the date of such exercise pursuant to the terms of this Warrant in such denominations as are required by the Warrant Holder, and the Company shall, or shall direct its transfer agent to, thereupon deliver such certificates to or in accordance with the instructions of the Warrant Holder. (b) In the event that the Warrant Holder shall exercise this Warrant with respect to less than all of the Shares of Common Stock that may be purchased under the terms hereof, the Company shall, or shall direct its transfer agent to, issue to the Warrant Holder certificates for the Shares of Common Stock for which this Warrant is being exercised in such denominations as are required for delivery to the Warrant Holder, and the Company shall, or shall direct its transfer agent to, thereupon deliver such certificates to or in accordance with the instructions of the Warrant Holder, and the Company shall issue to the Warrant Holder a new Warrant, duly executed by the Company, in form and substance identical to this Warrant for the balance of Shares of Common Stock then issuable pursuant to the terms of this Warrant. (c) Notwithstanding anything to the contrary contained herein, neither the Company nor its transfer agent shall be required to issue any fraction of a Share of Common Stock in connection with the exercise of this Warrant, and the Company shall, upon exercise of this Warrant in whole or in part, issue the largest number of whole Shares of Common Stock to which this Warrant is entitled upon such full or partial exercise and shall return to the Warrant Holder the amount of the Exercise Price paid by the Warrant Holder in respect of any fractional Share. 4. The Warrant Holder, as such, shall not be entitled to vote or receive dividends or be deemed the holder of Shares of Common Stock for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Warrant Holder, as such, any of the rights of a shareholder of the Company including, without limitation, any right to vote, give or withhold consent to any action by the Company (whether upon the recapitalization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings or other action affecting shareholders, receive dividends or subscription rights, or otherwise, until this Warrant shall have been exercised; provided, however, that any exercise of this Warrant, in -------- ------- whole or in part, on any date when the stock transfer books of the Company shall be closed shall constitute the person or persons in whose name or names the certificate or certificates for such shares of Common Stock are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open, and this Warrant shall not be deemed to have been exercised, in whole or in part, as the case may be, until that date for the purpose of determining entitlement 2 to dividends on the Common Stock, and that exercise shall be at the actual Exercise Price in effect at such date. 5. The Exercise Price shall be subject to adjustment as follows: (a) In case the Company shall, after the date hereof, (i) pay a stock dividend or make a distribution in shares of its capital stock in respect of the Common Stock (whether shares of its Common Stock or of capital stock of any other class), (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, the Exercise Price in effect immediately prior to such action shall be adjusted so that the holder of this Warrant thereafter surrendered for exercise shall be entitled to receive an equivalent number of shares of capital stock of the Company which he would have owned immediately following such action had this Warrant been exercised immediately prior thereto. Any adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (b) No adjustment in the Exercise Price shall be required to be made unless such adjustment would require an increase or decrease of at least one percent (1%) in such price; provided, however, that any adjustments which by -------- ------- reason of this subsection (b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent. (c) Whenever the Exercise Price is adjusted as provided in Section 5(a) herein, the Company will promptly mail to the Warrant Holder a certificate of the Company's Treasurer or Chief Financial Officer setting forth the Exercise Price as so adjusted and a brief statement of facts accounting for such adjustment. (d) Irrespective of any adjustment or change in the Exercise Price and the number of Shares actually purchasable under this Warrant, this Warrant may continue to express the Exercise Price per Share and the number of Shares purchasable hereunder as the Exercise Price per Share and the number of Shares purchasable as expressed upon this Warrant when initially issued. 6. If the Company or SC Corporation, shall at any time consolidate or merge with or into another corporation, (a) the Company shall give at least twenty (20) days prior written notice to the Warrant Holder of such consolidation or merger and the terms thereof, and (b) the Warrant Holder shall at his exclusive option: (i) exercise his warrant in whole or in part irrespective if the condition precedent for the exercise of this Warrant in Paragraph 1(a) has been met; or (ii) thereafter be entitled to receive, upon the exercise thereof, the securities or property 3 to which a holder of the number of Shares then deliverable upon the exercise thereof would have been entitled upon such consolidation or merger, and the Company shall take such steps in connection with such consolidation or merger as may be necessary to assure the Warrant Holder that the provisions of this Warrant shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or property thereafter deliverable upon the exercise of this Warrant including, but not limited to, obtaining a written acknowledgement from the continuing corporation or other appropriate corporation of its obligation to supply such securities or property upon such exercise. A sale of all or substantially all the assets of the Company or its wholly owned subsidiary, SC Direct Inc., shall be deemed a consolidation or merger for the foregoing purposes. 7. Following the Closing Date the Company will permit any authorized representatives designated by the Warrant Holder, so long as this Warrant is outstanding, without expense to the Company, to visit and inspect the properties of the Company or any of its subsidiaries, and to discuss its and their affairs and finances with its and their officers at such reasonable times as may be reasonably requested. The Warrant Holder agrees to keep all of such information confidential and not to divulge it to any third party without the prior written consent of the Company unless and until such information becomes generally known to the public from a source other than the Warrant Holder or the holder of any of the other Warrants. 8. The Company and each subsidiary will maintain its books and records in accordance with generally accepted accounting principles, and so long as this Warrant shall remain outstanding, the Company will deliver to the Warrant Holder: (a) as soon as practicable, and in any event within 90 days after the close of each fiscal year of the Company, (i) a consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal year-end (ii) consolidated statements of income, cash flow and common stock and other stockholders' equity of the Company and its subsidiaries for such fiscal year, in each case setting forth in comparative form the corresponding figures for the preceding fiscal year and to be in reasonable detail and certified without material exception by the Company's independent public accountants; provided, -------- however, that in the event the Company becomes a public company, ------- delivery pursuant to clause (c) below of copies of the Annual Report on Form 10-K or Form 10-KSB of the Company for such fiscal year timely filed with the Securities and Exchange Commission (together with copies of the financial statements required to be included therein) shall be deemed to satisfy the requirements of this clause (a); (b) as soon as practicable, and in any event within 45 days after the close of each of the first three fiscal quarters of the Company during such fiscal year (i) a consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal quarter and (ii) consolidated statements of income, cash flow and 4 common stock and other stockholders' equity of the Company and its subsidiaries for the portion of the fiscal year ended with the end of such quarter, in each case setting forth in comparative form the corresponding figures for the comparable period of the preceding fiscal year; provided, however, that in the event the Company becomes -------- ------- a public company, delivery pursuant to clause (c) below of copies of the Quarterly Report on Form 10-Q or Form 10-QSB of the Company for such quarterly period timely filed with the Securities and Commission shall be deemed to satisfy the requirements of this clause (b); (c) as soon as practicable, copies of all financial statements, proxy materials or reports sent to the Company's stockholders and of all reports or final registration statements filed with the Securities and Exchange Commission pursuant to the Securities Act of 1993, as amended ("Act"), or the Securities Exchange Act of 1934, as amended ("Exchange Act"), if applicable. 9. If this Warrant is lost, stolen or destroyed, the Company shall, subject to such reasonable terms as to indemnity as are commonly imposed in respect of warrants which are not registered pursuant to the Act, issue a new Warrant of like denomination and tenor as, and in substitution for, the Warrant so lost, stolen or destroyed, and in the event this Warrant shall be mutilated, the Company shall, upon the surrender hereof, issue a new Warrant of like denomination and tenor as, and in substitution for, the Warrant so mutilated. 10. (a) The Warrant Holder acknowledges that this Warrant and the Shares issuable upon exercise of the Warrant have not been registered under the Act and shall bear a conspicuous legend in customary form restricting their transfer until registered under the Act or, in the opinion of counsel satisfactory to the Company, an exemption from such registration is available. The Warrant Holder agrees that this Warrant and the Shares of Common Stock underlying this Warrant may not be sold, assigned or transferred at any time, in any manner or by any person or entity unless the Warrant and/or the Shares, as the case may be, are registered pursuant to the Act and under applicable state securities laws or, in the opinion of counsel satisfactory to the Company, an exemption from the Act and such state securities laws is available in respect of the Warrant and the Shares for such sale, assignment or transfer, as the case may be. The Warrant Holder agrees that, unless and until the Warrant and the Shares issuable upon exercise of the Warrant have been registered under the Act and applicable state securities laws, no sale, assignment or transfer shall occur without obtaining the prior written consent of the Company. (b) The Company shall, at least thirty (30) days prior to the filing of any Registration Statement under the Act (other than a Registration Statement on Form S-4 or S-8 or any successor forms) relating to the public offering of any class of its equity securities by the Company, give written notice of such proposed filing and of the proposed date thereof to the Warrant Holder and if, on or before the tenth (10th) day following the date on which such notice 5 is given, the Company shall receive a written request from the Warrant Holder requesting that the Company include among the securities covered by such Registration Statement some or all of the Shares issuable upon exercise of the Warrant, the Company shall include such Shares in such Registration Statement, if filed. Shares issuable upon exercise of the Warrant will be registered by the Company and offered to the public on the same terms and subject to the same conditions applicable to the piggyback registration of shares of Common Stock to be sold by the Company or by other persons registering shares of Common Stock in such registration statement pursuant to piggyback rights granted to such persons pursuant to a certain Registration Rights Agreement dated November 30, 1994, as amended by Registration Rights Agreement dated as of August 16, 1995, or as may be further amended or superseded from time to time by the Company and the parties thereto (including without limitation, an Amended and Restated Registration Rights Agreement substantially in the form of draft dated October 3, 1996 (collectively as so amended from time to time, the "Registration Rights Agreement"). The Warrant Holder agrees to be bound by the terms and provisions of the Registration Rights Agreement as though he were a signatory thereto with respect to the piggyback rights granted to the Warrant Holder hereunder. The Company shall be under no obligation to complete any offering of its securities it proposes to make under this subparagraph (b) and shall incur no liability to the Warrant Holder to participate therein in accordance with this Section. In connection with any registration covered by this subparagraph (b) involving any underwriting of securities, the Company shall not be required to include the Warrant Holder's Shares in such registration unless such Warrant Holder accepts the terms of the underwriting as agreed upon between the Company (or other persons who have the right to agree upon the underwriting terms relating to such offering) and the underwriters, provided, however, that nothing contained herein shall be construed to give the Warrant Holder less piggy back rights than are granted to the persons signing the amended and Restated Registration Rights agreement. 11. The validity, interpretation and performance of this Warrant shall be governed by the laws of the State of Delaware. 12. This Warrant cannot be amended, supplemented or changed, and no provision hereof can be waived, except by a written instrument making specific reference to this Warrant and signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. The Exhibit to this Warrant is incorporated herein by reference to the same extent as if set forth herein in full. A waiver of any right derived hereunder by the Warrant Holder shall not be deemed a waiver of any other right derived hereunder. 6 13. This Warrant shall be binding upon and shall inure to the benefit of the Company and the Warrant Holder, and their respective heirs, successors and permitted assigns. 14. All notices to the Warrant Holder shall be sent to: BEC Group 555 Theodore Fremd Avenue Suite B302 Rye, New York 10580 (914) 967-9400 Dated: August 12, 1996. SPECIALTY CATALOG CORP. By:______________________________ Steven L. Bock Chief Executive Officer 7 EXHIBIT A SUBSCRIPTION FORM ----------------- (To be executed by the Warrant Holder to exercise the Warrant in whole or in part) TO: SPECIALTY CATALOG CORP. The undersigned, whose Social Security or Tax Identification Number is ________________, hereby irrevocably elects the right of purchase represented by the within Warrant for, and to purchase thereunder, shares of Common Stock provided for therein and tenders payment herewith to the order of Specialty Catalog Corp. in the amount of $____________________________. The undersigned requests that certificates for such shares of Common Stock be issued in the name of the undersigned Warrant Holder as follows: Name: Address: Deliver to: Address: and, if said number of shares of Common Stock shall not be all the shares of the Common Stock purchasable thereunder, then a new Warrant for the balance of the remaining shares of Common Stock purchasable under the within Warrant be registered in the name of, and delivered to, the undersigned at the address stated below. Address: Dated: Warrant Holder: Signature Guaranteed: By:_______________________ _________________________ 8 EX-10.34 9 FORM OF SUBORDINATED NOTE, DATED AUG. 12, 1996 EXHIBIT 10.34 SC DIRECT, INC. SUBORDINATED NOTE No. 1 August 12, 1996 $425,700 New York, New York FOR VALUE RECEIVED, SC DIRECT, INC., a Delaware corporation (the "Company"), HEREBY PROMISES TO PAY to the order of MARTIN E. FRANKLIN, or his registered assigns (the "Payee"), the principal sum of FOUR HUNDRED TWENTY-FIVE THOUSAND SEVEN HUNDRED ($425,700) DOLLARS, which shall be due and payable as hereinafter provided. 1. The entire unpaid principal amount of this Note shall be due and payable on the third anniversary of the date hereof (the "Maturity Date") subject to the subordination provisions hereof. 2. This Note shall bear interest from the date hereof on the unpaid principal balance at the rate of 11.5% per annum, payable semi-annually, on June 1 and December 1, of each year, commencing December 1, 1996. Interest shall be computed on the basis of twelve 30-day months and a 360 day year. Any interest accrued on this Note may, at the 1 election of the Company, be paid by issuing to the holder hereof additional Notes, having terms identical to this Note ("PIK Notes"), with an aggregate principal amount equal to the amount of interest then payable on this Note in respect of the interest period most recently ended. 3. This Note is one of a series of one or more Notes issued in an aggregate principal amount of $495,000, each dated as of the date hereof and otherwise identical to this Note in all respects, except with respect to the Payee and the principal amount thereof. This Note is a registered Note and, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the Payee or the Payee's attorney duly authorized in writing, a new Note for a like principal amount will be issued, to, and registered in the name of, the transferee. Prior to due presentment for registration and transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company shall not be affected by any notice to the contrary. 4. The Company shall make each payment hereunder not later than 5:00 p.m. (New York City time) on the day when due in lawful money of the United States of America to the holder of this Note by delivery of a certified or bank cashier's check in the amount of such payment, or, subject to Section 2, in the form of PIK Notes as permitted hereby. 2 5. When any payment to be made hereunder shall be stated to be due on a Saturday, Sunday or a public or bank holiday or the equivalent for banks generally under the laws of the State of New York (any other day being a "Business Day"), such payment may be made on the next succeeding Business Day. 6. (a) Subject to its obligations in respect of indebtedness under the Senior Agreements and the Subordinated Indebtedness, the Company shall have the right to prepay the principal amount of this Note, in whole or in part, at any time or from time to time, without premium or penalty, but with interest on the portion of the principal amount so prepaid accrued to the date of prepayment. (b) In the event that the Company shall at any time sell, transfer or otherwise dispose of any assets other than in the ordinary course of business whether in a single transaction or a series of related transactions, for net proceeds in excess of $1 million during any twelve month period, then, in such event, the Company shall apply such net proceeds: (i) first, to the permanent repayment in full in cash of all outstanding indebtedness under the Senior Agreements; (ii) second, to the permanent repayment of all outstanding Subordinated Indebtedness; and (iii) thereafter (provided that all commitments under the Senior Agreements and the Subordinated Indebtedness have been terminated), to the repurchase of Notes having an aggregate principal amount equal to 100% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. 3 7. In case one or more of the following events of default shall have occurred and be continuing: (a) the Company fails to pay (1) the principal of this Note when due or (2) any installment of interest when due and such failure to pay interest continues for a period of five days thereafter, or (b) a court having jurisdiction in the premises shall have entered a decree or order for relief against the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for all or any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and such decree or order shall have remained unstayed and in effect for a period of ninety consecutive days; or (c) the Company shall have commenced a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall have consented to the entry of an order for relief in an involuntary case under any such law, or shall have consented to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of the Company or for all or any substantial part of its property, or shall have made an assignment for the benefit of creditors, or shall have taken any corporate action in furtherance of any of the foregoing; 4 then, in the case of an event specified in clause (a), unless the principal of this Note shall have already become due and payable, the holders of more than 60% of the aggregate principal amount of Notes of this series outstanding at the time, by notice to the Company in writing may, subject to Section 8, hereof, at their option declare the principal amount and accrued interest to the date of declaration of this Note and all other Notes then outstanding to be due and payable immediately. Upon any such declaration, the same shall become and shall be immediately due and payable, subject to Section 8 of this Note. If an event specified in clause (b) or (c) above occurs, such amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of any holder of Notes, but subject to Section 8 of this Note. 8. (a) By acceptance of this Note, the holder hereof agrees that this Note shall be subordinate and junior in right of payment and priority, to the extent and in the manner set forth in this Section 8, to the prior payment of Senior Indebtedness and the Subordinated Indebtedness of the Company. If at any time loans outstanding under any Senior Indebtedness or Subordinated Indebtedness of the Company shall be refinanced or paid in full without terminating the commitments thereunder, subsequent borrowings thereunder shall constitute Senior Indebtedness or Subordinated Indebtedness, as the case may be, of the Company for purposes of this Note. (b) Except as provided in Section 8(d)(ii) hereof, prior to the Designated Senior Agreement Payment Date and the repayment of the Subordinated 5 Indebtedness the Company will not, and will not permit any subsidiary to, directly or indirectly, make or agree to make, and neither the holder of this Note nor any assignee or successor holder of this Note will demand, accept or receive, any payment (in cash, property or non-equity securities, by set-off or otherwise), direct or indirect, under or in respect of this Note or for the purpose of any redemption, purchase or other acquisition of this Note; provided -------- that the Company may make and the holder of this Note may accept (i) payments of interest when due hereunder in the form of PIK Notes, (ii) other payments in the form of equity securities of the Company or any entity controlling the Company and (iii) after the Maturity Date, payments (in cash, property or securities) of interest and principal under or in respect of this Note, unless such payments are expressly prohibited by Section 8(d)(ii) or 8(g) hereof. (c) Except as provided in Section 8(d)(ii) hereof, (i) prior to the Designated Senior Agreement Payment Date and the repayment of the Subordinated Indebtedness, the holder of this Note will not collect or enforce this Note or any part thereof or take any action to foreclose or realize upon this Note or any part thereof; and (ii) until all obligations of the Company under the Senior Agreements and the Subordinated Indebtedness have been indefeasibly paid in full in cash and all commitments thereunder terminated, the holder of this Note shall not have any right of subrogation, reimbursement, restitution, contribution or indemnity whatsoever from any assets of the Company or any guarantor of or provider of collateral security for the obligations of the Company under the Senior Agreements, and waives any and all rights with respect to marshalling. Upon and subject to 6 the indefeasible payment in full in cash of the obligations of the Company under the Senior Agreements and the Subordinated Indebtedness and the termination of all commitments thereunder, the holders of this Note shall be subrogated to rights of the holders of the Senior Indebtedness and the Subordinated Indebtedness of the Company which have received payments or distributions in respect of this Note to receive payments or distributions applicable to the Senior Indebtedness and the Subordinated Indebtedness of the Company until this Note shall be paid in full. (d) (i) Prior to the Designated Senior Agreement Payment Date or the repayment of the Subordinated Indebtedness, the holder of this Note will not commence or joining with any other creditor or creditors in commencing any bankruptcy, reorganization, insolvency or similar proceedings against the Company. (ii) Until all obligations of the Company under the Senior Agreements and the Subordinated Indebtedness have been indefeasibly paid in full in cash and all commitments thereunder terminated, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company's property, any proceeding for the liquidation, dissolution or other winding-up of the Company, voluntary or involuntary, and whether or not involving insolvency or bankruptcy proceedings, any general assignment by the Company for the benefit of creditors, or any distribution, division, marshalling or application of any of 7 the properties or assets of the Company or the proceeds thereof to creditors, voluntary or involuntary, and whether or not involving legal proceedings, then and in any such event; (A) all Senior Indebtedness and the Subordinated Indebtedness of the Company shall first be paid in full and all commitments thereunder terminated before any payment or distribution of any character, whether in cash, securities or other property (other than securities of the Company provided for by a plan of reorganization or readjustment or similar plan, the payment of which is subordinated, at least to the extent provided in this Note, to the payment of all Senior Indebtedness and the Subordinated Indebtedness of the Company at the time outstanding and to any securities issued in respect thereof under any such plan), shall be made in respect of this Note; (B) any payment or distribution of any character, whether in cash, securities or other property (other than securities of the Company provided for by a plan of reorganization or readjustment or similar plan, the payment of which is subordinated, at least to the extent provided in this Note, to the payment of all Senior Indebtedness and the Subordinated Indebtedness of the Company at the time outstanding and to any securities issued in respect thereof under any such plan), which would otherwise (but for the terms hereof) be payable or deliverable in respect of this Note, shall be paid or delivered directly to the holders of the Senior Indebtedness and if such amount is sufficient to repay the holders of Senior Indebtedness in full, then any remainder to 8 the holders of the Subordinated Indebtedness of the Company, until all Senior Indebtedness and the Subordinated Indebtedness of the Company shall have been paid in full and all commitments thereunder terminated, and the holders of this Note at the time outstanding irrevocably authorize, empower and direct all receivers trustees, liquidators, conservators, fiscal agents and others having authority in the premises to effect all such payments and deliveries; and (C) if the holder of this Note shall not have filed a proper claim or proof of debt in the form required (or shall have filed an insufficient claim or proof of debt) in any such proceeding prior to 30 days before the expiration of the time to file such claim or proof of debt, the Senior Lenders and/or the holders of the Subordinated Indebtedness are hereby authorized to file an appropriate claim or proof of debt for or on behalf of the holder of this Note. (e) For all purposes of this Note, Senior Indebtedness and Subordinated Indebtedness of the Company shall not be deemed to have been paid in full unless (i) in the case of the Senior Lenders, such lenders shall have received cash and (ii) in the case of other holders of Senior Indebtedness and holders of Subordinated Indebtedness of the Company, such holders have received cash or securities (taken at their fair value), in each case equal to the amount of such Senior Indebtedness or Subordinated Indebtedness of the Company at the time outstanding and in case there are two or more holders of Senior Indebtedness or Subordinated Indebtedness of the Company any payment or distribution 9 required to be paid or delivered to the holders of Senior Indebtedness or Subordinated Indebtedness of the Company shall be paid or delivered to such holders ratably according to the respective aggregate amounts remaining unpaid on the Senior Indebtedness or Subordinated Indebtedness of the Company of such holders, provided that the holders of Senior Indebtedness must be repaid in full prior to any payments being made to the holders of the Subordinated Indebtedness. (f) No present or future holder of Senior Indebtedness or Subordinated Indebtedness of the Company shall be prejudiced in the right to enforce subordination of this Note by any act or failure to act on the part of the Company or the holder of this Note. (g) On and after the earlier of (i) the Designated Senior Agreement Payment Date, (ii) the Maturity Date; and (iii) the repayment date of the Subordinated Indebtedness and until all obligations of the Company under the Senior Agreements and Subordinated Indebtedness shall have been indefeasibly paid in full in cash and all commitments thereunder terminated, the Company will not, and will not permit any subsidiary to, directly or indirectly, make any payment (in cash, property or non-equity securities) under or in respect of this Note or for the purpose of any redemption, purchase or other acquisition, direct or indirect, of this Note, if at the time of such payment there exists a payment default or any other event of default on the part of the Company under the Senior Agreements or the Subordinated Indebtedness and such payment default or other event of default shall not have been cured or waived in writing by the Senior Lenders or the holders 10 of the Subordinated Indebtedness provided that the Company may make (a) payments -------- of interest when due hereunder in the form of PIK Notes and (B) other payments in the form of equity securities of the Company or any entity controlling the Company. (h) If any payment or distribution of any character (whether in cash securities or other property) or any security shall be received by any holder of this Note in contravention of any of the terms of this Note, such payment or distribution or security shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Indebtedness or Subordinated Indebtedness of the Company for application to the payment of all Senior Indebtedness of the Company in full in cash and to the extent there is any payment remaining to repay the holders of the Subordinated Indebtedness. In the event of the failure of any holder of this Note to endorse or assign any such payment, distribution or security, any holder of the Senior Indebtedness or the holders of the Subordinated Indebtedness of the Company or such holder's representative is hereby irrevocably authorized to endorse or assign the same. (i) If the holder of this Note, in contravention of the terms of this Note, shall commence, prosecute or participate in any suit, action or proceeding against the Company or otherwise attempt to collect or enforce any provisions of this Note, then the Company may interpose as a defense or plea the making of this Note, and the Senior Lenders or the holders of the Subordinated Indebtedness may intervene and interpose such defense or plea in its name or in the name of the Company. 11 (j) The holder of this Note acknowledges and agrees that the security interests in and liens on the Company's assets granted to the Senior Lenders and the holders of the Subordinated Indebtedness are valid, perfected, enforceable and senior to any security interest and lien granted by the Company to the holder of this Note and that any such security interest or lien granted or claimed to be granted by the Company to the holder of this Note is subordinate to the security interests and liens granted to the Senior Lenders and the holders of the Subordinated Indebtedness regardless of the perfection or non- perfection thereof, notwithstanding any provision of applicable law relating to perfection or priority to the contrary. The holder of this Note hereby agrees, upon request of the Senior Lenders or the holders of the Subordinated Indebtedness or their respective representatives at any time and from time to time, to execute such other documents or instruments as may be requested by the Senior Lenders or the holders of the Subordinated Indebtedness or such representative further to evidence of public record or otherwise the senior priority of the Senior Agreements and the Subordinated Indebtedness as contemplated by this Note. The holder of this Note further agrees to maintain on its books and records such notations as the Senior Lenders or the holders of the Subordinated Indebtedness may reasonable request to reflect the subordination contemplated by this Note and to perfect or preserve the rights of the Senior Lenders or the holders of the Subordinated Indebtedness hereunder. A copy of this Note may be filed as a financing statement in any Uniform Commercial Code recording office. (k) The holder of this Note agrees, with respect to the Senior Indebtedness and Subordinated Indebtedness of the Company and any and all collateral 12 therefor and guaranties thereof, that the Company and the holders thereof may agree to modify the terms of any of the Senior Indebtedness and Subordinated Indebtedness of the Company or the Senior Agreements, and such holders may grant extensions of the time of payment or performance to and make compromises, including releases of collateral or guarantees, and settlements with the Company and all other persons, in each case without the consent of the holder of this Note or the Company and without affecting the agreements of the holder of this Note or the Company contained in this Note; provided, however, that nothing -------- ------- contained in this Section shall constitute a waiver of any right the Company itself may have to agree or consent to a settlement or compromise of a claim which any holder of Senior Indebtedness or holder of Subordinated Indebtedness of the Company may have against the Company. Without the necessity of any reservation of rights against or any notice to or assent by the holder of this Note, any demand for payment of any Senior Indebtedness and Subordinated Indebtedness of the Company may be rescinded in whole or in part and any Senior Indebtedness or holder of Subordinated Indebtedness of the Company may be continued, and the holders of any Senior Indebtedness or holder of Subordinated Indebtedness of the Company may exercise or refrain from exercising any rights and remedies against the Company and others and the collateral securing the Senior Indebtedness and Subordinated Indebtedness of the Company, all without impairing, abridging, releasing or affecting the subordination provided for herein. Nothing in this Note shall be construed to create or impose upon the holders of Senior Indebtedness or the holders of Subordinated Indebtedness of the Company any fiduciary duty to the holder of this Note or any other implied obligation to act or refrain from acting with respect to the Company or the Senior 13 Indebtedness and Subordinated Indebtedness of the Company or the collateral securing the Senior Indebtedness and Subordinated Indebtedness of the Company in any manner contrary to what the holders of Senior Indebtedness or the holders of the Subordinated Indebtedness of the Company may determine is in their own best interests. The holder of this Note waives any and all notice of the creation or modification of any Senior Indebtedness of the Company and notice of or proof of reliance by the holders of Senior Indebtedness of the Company upon the subordination provided for herein. All rights and interests of the Senior Lenders or the holders of the Subordinated Indebtedness hereunder, and all agreements and obligations of the holder of this Note and the Company hereunder, shall remain in full force and effect notwithstanding any lack of validity or enforceability of any indebtedness outstanding under the Senior Agreements or the Subordinated Indebtedness or any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or the holder of this Note. (l) The terms of this Note, the subordination effected hereby and the rights of the holders of Senior Indebtedness or the holders of the Subordinated Indebtedness of the Company shall not be affected by any amendment of or addition or supplement to any Senior Indebtedness of the Company or any instrument or agreement relating thereto, any exercise or non-exercise of any right, power or remedy under or in respect of any Senior Indebtedness or the Subordinated Indebtedness of the Company or any instrument or agreement relating thereto, or any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission, in respect of any Senior 14 Indebtedness or the Subordinated Indebtedness of the Company or any instrument or agreement relating thereto or any security therefor or guaranty thereof, whether or not the holder of this Note shall have had notice or knowledge of any of the foregoing. (m) The holder of this Note will not, without the prior written consent of the Subordinated Holders or Senior Lenders or any successor agent under the Credit Agreement or any agent under a Refinancing Facility, in each case if outstanding at the relevant time, (a) modify any of the terms this Note or (b) sell, transfer, pledge, assign, hypothecate or otherwise dispose of any or all of this Note to any person other than a person who agrees in writing to succeed to the rights and to be bound by all of the obligations of the holder of this Note hereunder provided, that such modification or transfer, sale, pledge, assignment or hypothecation shall not modify the subordination provisions of this Note. (n) Nothing contained in this Note shall impair, as between the Company and the holder of this Note, the obligation of the Company, to pay to the holder of this Note all amounts payable in respect of this Note as and when the same shall become due and payable in accordance with the terms thereof, all, however, subject to the restrictions on the holder of this Note set forth in this Section 8. The provisions of this Note shall apply to the holder hereof only in such capacity and such provisions shall not prevent or otherwise restrict the ability of such holder to act, or otherwise affect the ability of such holder to act, in any other capacity, including in the capacity as an equity holder of the Company or as a director of the Company or any subsidiary of the Company. 15 (o) (i) The subordination provisions of this Section 8 shall continue in full force and effect, and the obligations and agreements of the holder of this Note and the Company hereunder shall continue to be fully operative, until all of the obligations of the Company under the Senior Agreements and the Subordinated Indebtedness shall have been indefeasibly paid in full in cash and all commitments under the Senior Agreements and the Subordinated Indebtedness shall have terminated. Notwithstanding anything to the contrary contained in this Note, (x) following such payment and termination of commitments, the provisions of this Section 8 shall be terminated and the holders of Senior Indebtedness and the holders of the Subordinated Indebtedness of the Company shall have no further rights whatsoever under or in respect of this Note and (y) the holders of this Note and the Company, with the written consent of the Senior Lenders and the holders of the Subordinated Indebtedness may, at any time, attend, modify or terminate the provisions of this Section 8, and the Senior Lenders and the holders of the Subordinated Indebtedness may waive any provision hereof, and any such amendment, modification, termination or waiver shall be binding on all holders of Senior Indebtedness and the holders of the Subordinated Indebtedness of the Company. (ii) Until all obligations of the Company under the Senior Agreements and the Subordinated Indebtedness shall have been indefeasibly paid in full in cash and all commitments thereunder terminated, (a) to the extent that the Company or any guarantor of or provider of collateral for the Senior Indebtedness and the Subordinated Indebtedness of the Company makes any payment on the Senior Indebtedness and the 16 Subordinated Indebtedness of the company that is subsequently invalidated, declared to be fraudulent or preferential or set aside or is required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or reorganization act, state or federal law, common law or equitable cause (such payment being hereinafter referred to as a "Voided Payment'), then to the extent of such Voided Payment, that portion of Senior Indebtedness and the Subordinated Indebtedness of the Company that had been previously satisfied by such Voided Payment shall be revised and continue in full force and effect as if such Voided Payment had never been made; and (b) to the extent that the holder of this Note shall have received any payments with respect to this Note subsequent to the date of the initial receipt by the holder of Senior Indebtedness or the holder of the Subordinated Indebtedness of the Company of such Voided payment and such payments have not been invalidated, declared to be fraudulent or preferential or set aside or are required to be repaid to a trustee, receiver, or any other party under any bankruptcy act, state or federal law, common law or equitable cause, the holder of this Note shall be obligated and hereby agrees that any such payment so made or received shall be deemed to have been received in trust for the benefit of the holders of Senior Indebtedness and the holders of the Subordinated Indebtedness of the Company, and the holder of this Note hereby agrees to pay to such holders of Senior Indebtedness and the holders of the Subordinated Indebtedness of the Company, upon demand, the full amount so received by the holders of this Note during such period of time, but only if and to the extent that the holder of this Note would otherwise have been required, under the provisions of this Section 8 to pay over the amount so received to such holders of Senior Indebtedness and the holders of the Subordinated Indebtedness of the Company had such Voided Payment 17 never been made and then only to the extent necessary fully to restore to such holders of Senior Indebtedness and Subordinated Indebtedness of the Company the amount of such Voided Payment. (p) The term "Senior Indebtedness of the Company" shall mean (i) all obligations consisting of principal, premium (if any) and accrued and unpaid interest in respect of indebtedness of the Company for borrowed money, (ii) all unmatured reimbursement obligations of the Company with respect to letters of credit or guarantees issued for the account of or on behalf of the Company or any of its subsidiaries, (iii) all obligations of the Company evidenced by bonds, notes, debentures or other similar instruments, (iv) that portion of obligations arising under capital leases that is required to be capitalized on the balance sheet of the Company or any of its subsidiaries,,(v) all guarantees of obligations of others of the type described in clauses (i) - (iv) made by the Company, and (vi) all indebtedness and other obligations of the Company under or in respect of the Senior Agreements,including all "Obligations" under and as defined in the Senior Agreements and all principal, interest, fees, costs, enforcement expenses (including legal fees and disbursements), collateral protection expenses and other reimbursement or indemnity obligations created or evidence by the Senior Agreements. Without limiting the generality of the foregoing, Senior Indebtedness of the Company shall expressly include any and all interest accruing and out of pocket costs and expenses incurred under or in respect of the Senior Agreements after the date of any filing by or against the Company of any petition under the Federal Bankruptcy Code or any other bankruptcy, insolvency or reorganization act 18 regardless of whether the Senior Lenders' claim therefor is allowed or allowable in the case or proceeding relating thereto. Without limiting the generality of the foregoing, Senior Indebtedness shall expressly not include the Subordinated Indebtedness. (q) The term "Credit Agreement" shall mean the New Financing Facility referred to in the First Amended and Restated Joint Plan of Reorganization of SC corporation, Western Schools, Inc. and Wigs by Paula, Inc. dated September 21, 1994 (and amended by the Bankruptcy Court on October 26, 1994), filed in the United States Bankruptcy Court for the District of Connecticut, Bridgeport division (Case No. 92-54262), including all extensions, renewals or restructuring thereof. (r) The term "Refinancing Facility" shall mean any credit facility or similar agreement pursuant to which the Company refinances, replaces or refunds indebtedness outstanding under the Credit Agreement or any other Refinancing Facility, including all extensions, renewals or restructuring of any such credit facility or similar agreement. (s) The term "Designated Senior Agreement" shall mean the Credit Agreement, any Refinancing Facility in which the lender(s) thereunder require that the benefits and projections of Sections 8(b), (c)(i) and (d)(i) hereof inure to such lender(s), and all other instruments, notes, agreements and documents evidencing, guaranteeing or securing 19 obligations of the Company under the Credit Agreement or any such Refinancing Facility, as the same may be amended, restated, supplemental or modified from time to time. (t) The term "Designed Senior Agreement Payment Date" means the first date following the date hereof on which all obligations of the Company under the Designated Senior Agreements shall have been indefeasibly paid in full in cash and all commitments thereunder terminated. (u) The term "Senior Agreements" shall mean the Credit Agreement, any Refinancing Facility and all other instruments, notes, agreements and documents evidencing, guaranteeing or securing obligations of the Company under the Credit Agreement or any Refinancing Facility, as the same may be amended, restated, supplemented or modified from time to time. (v) The term "Senior Lenders" shall mean Banque National de Paris, any other person that becomes a "Lender" under and as defined in the Credit Agreement and any person who is a lender under any Refinancing Facility. (w) The term "Subordinated Indebtedness" shall mean that series of Notes totaling $3,680,186 issued on November 30, 1994 to the holders thereto. 20 (x) The term "Subordinated Holders" shall mean the holders of the Subordinated Indebtedness. Wherever the consent of the holders of the Subordinated Indebtedness is required hereto the consent of 90% of the Subordinated Holders is requested. 9. All powers and remedies given to the holder of this Note shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the holder of this Note, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Note, and no delay or omission of the holder of this Note to exercise any right or power accruing upon any default hereunder shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein. 10. This Note shall be binding upon the Company and its successors and assigns, and the terms and provisions of this Note shall insure to the benefit of Payee, the holders of Senior Indebtedness and Subordinated Indebtedness of the Company and their respective successors and assigns, including subsequent holders hereof. 11. The terms and provisions of this Note are severable, and if any term or provision shall be determined to be superseded, illegal, invalid or otherwise unenforceable in whole or in part pursuant to applicable law by a governmental authority having jurisdiction, such determination shall not in any manner impair or otherwise affect the validity, legality or 21 enforceability of that term or provision in any other jurisdiction or any of the remaining terms and provisions of this Note in any jurisdiction. 12. Presentment for payments, notice of dishonor, protect, notice of protest and any other notice are hereby waived. This Note shall be governed by, and construed in accordance with, the internal laws of the State of Massachusetts, without regard to the principles of the conflict of laws thereof. 13. No amendment, modification or waiver of any term or provision of this Note, nor consent to any departure by the Company here from, shall be effective unless the same shall be in writing and signed by the holder of this Note, and then such waiver, modification or consent shall be effective only in the specific instance and for the specific purpose for which given. 14. Nothing in this Note expressed or implied, shall give or be construed to give any person, firm or corporation, other than the parties hereto and the Senior Lenders and holders of the Subordinated Indebtedness, any legal or equitable right, remedy or claim under or in respect of this Note, or under any covenant, condition or provision herein contained; all its covenants, conditions and provisions being for the sole benefit of the Company, the holder of this Note and the Senior Lenders and the holders of the Subordinated Indebtedness. 22 15. The Senior Lenders and the holders of the Subordinated Indebtedness are hereby authorized to demand specific performance of this Note, whether or not the Company shall have complied with any of the provisions hereof applicable to it, at any time when the holder of this Note shall have failed to comply with any of the provisions of Section 8 of this Note applicable to such holder. The holder of this Note hereby waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered to the Payee on the date and year first above written. SC DIRECT, INC. By: ______________________________ Name: Steven L. Bock Title: Chief Executive Officer 23 EX-21.01 10 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.01 - ------------- SUBSIDIARIES OF THE REGISTRANT ------------------------------ SC Corporation (Delaware), doing business under the name of SC Direct SC Publishing, Inc. (Delaware) -----END PRIVACY-ENHANCED MESSAGE-----