<PAGE>
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
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<TABLE>
<CAPTION>
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
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(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.
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- -------------------------------------------------------------------------------
<PAGE>
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:
<TABLE>
<S> <C>
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
===========
</TABLE>
- --------
* 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
<PAGE>
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.
<TABLE>
<CAPTION>
AMOUNT OF
COMMON STOCK PREFERRED SUBORDINATED
NAME SHARES ISSUED SHARES ISSUED INDEBTNESS
---- ------------- ------------- ------------
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
COMMON
STOCK PREFERRED
NAME ISSUED STOCK ISSUED
---- ------ ------------
<S> <C> <C>
Mark Brodsky............................................. 122.07 332.98
Samuel Katz.............................................. 244.14 665.96
</TABLE>
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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
***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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
***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.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
**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
</TABLE>
- --------
* 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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
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)
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
------- ---------------------- ----
<C> <S> <C>
***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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NO.
------- ---------------------- ----
<C> <S> <C>
***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.
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
*** Previously filed.
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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-
<PAGE>
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-
<PAGE>
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,
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<PAGE>
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.
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<PAGE>
(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
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<PAGE>
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.
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<PAGE>
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)
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<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
(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.
<PAGE>
(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
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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.
<PAGE>
(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.
<PAGE>
(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
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administration of the Plan shall continue in effect until all matters relating
to the payment of Awards previously granted have been settled.
<PAGE>
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.
<PAGE>
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:
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(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
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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
<PAGE>
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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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:
<PAGE>
"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
<PAGE>
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.
<PAGE>
(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.
<PAGE>
(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
<PAGE>
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
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
EXHIBIT 10.31
SC CORPORATION
BONUS DEFERRAL PLAN
Effective November 23, 1994
<PAGE>
ARTICLE PAGE
- ------- ----
1 Definitions................................. 1
2 Bonus Deferrals and Matching................ 5
3 Payment of Benefits......................... 8
4 Beneficiaries............................... 15
5 Aminstration................................ 17
<PAGE>
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
<PAGE>
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-
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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-
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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.
<PAGE>
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
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<PAGE>
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
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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
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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
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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
<PAGE>
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
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<PAGE>
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
<PAGE>
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.
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<PAGE>
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
<PAGE>
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
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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
<PAGE>
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
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<PAGE>
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
<PAGE>
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
<PAGE>
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
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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.
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(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
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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
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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
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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
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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.
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(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
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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
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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
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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
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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.
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(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
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<PAGE>
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.
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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
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EXHIBIT 21.01
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SUBSIDIARIES OF THE REGISTRANT
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SC Corporation (Delaware), doing business under the name of SC Direct
SC Publishing, Inc. (Delaware)
