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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. . . . .)*
SPECIALTY CATALOG CORP.
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
84748Q103
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(CUSIP Number)
STEVEN L. BOCK
21 Bristol Drive
South Easton, MA 02375
(508) 238-0199
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
October 17, 1996
----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 52 Pages
The Exhibit Index appears on Page 8.
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CUSIP No. 84748Q103
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1) Names of Reporting Persons
S. S. or I. R. S. Identification Nos. of Above Persons
Steven L. Bock
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2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
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3) SEC Use Only
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4) Source of Funds*
OO, PF
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5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
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6) Citizenship or Place of Organization
United States of America
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Number of (7) Sole Voting Power
Shares 409,160
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Beneficially (8) Shared Voting Power
Owned by 1,000
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Each (9) Sole Dispositive Power
Reporting 409,160
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Person (10) Shared Dispositive Power
With 1,000
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11) Aggregate Amount Beneficially Owned by Each Reporting Person
410,160
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12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares* [ ]
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13) Percent of Class Represented by Amount in Row (11)
8.2%
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14) Type of Reporting Person*
IN
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Item 1. Security and Issuer.
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This statement relates to shares of the common stock, $.01 par value per
share (the "Common Stock"), of Specialty Catalog Corp., a Delaware corporation
(the "Issuer"). The principal executive offices of the Issuer are located at 21
Bristol Drive, South Easton, Massachusetts 02375.
Item 2. Identity and Background.
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(a) The person filing this statement is Steven L. Bock.
(b) The principal business address of Mr. Bock is 21 Bristol Drive, South
Easton, Massachusetts 02375.
(c) Mr. Bock's principal occupation is Chairman of the Board and Chief
Executive Officer of the Issuer.
(d) Mr. Bock has not, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) Mr. Bock has not, during the last five years, been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
(f) Mr. Bock is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration.
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(a) Mr. Bock beneficially owns 98,934 shares of Common Stock, which Mr.
Bock purchased for an aggregate purchase price of $30,393 in connection with the
November 1994 consummation of the Issuer's plan of reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code. Of the funds used to purchase
such shares, $15,196.50 was borrowed from Viking Holdings Limited, a British
Virgin Islands corporation, and $15,196.50 was borrowed from Dickstein & Co.
L.P., a Delaware limited partnership. Mr. Bock's obligations to repay such
loans are represented by two promissory notes, one to each creditor, dated
November 23, 1994, copies of which are annexed hereto as Exhibits 1 and 2.
(b) Mr. Bock, together with his wife, Dawn Williams Bock, purchased 1,000
shares of Common Stock for a purchase price of $6.50 per share in the initial
public offering of the Issuer on October 17, 1996. The funds used for this
purchase were Mr. and Mrs. Bock's personal funds.
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(c) Mr. Bock beneficially owns 310,226 shares of Common Stock issuable
upon the exercise of presently exercisable stock options (the "1994 Options") of
the Issuer. These 1994 Options were granted to Mr. Bock in November 1994 as
compensation and without other consideration.
Item 4. Purpose of Transaction.
----------------------
The 1994 Options were granted to Mr. Bock by the Issuer to provide Mr. Bock
an additional incentive to perform his duties as Chairman and Chief Executive of
the Issuer and to further promote the success of the Issuer. Mr. Bock's purpose
in acquiring the other shares of Common Stock beneficially owned by him was for
investment. Although Mr. Bock has no present plans or intentions respecting the
acquisition or disposition of securities of the Issuer, Mr. Bock may purchase or
sell shares of Common Stock, and/or exercise any or all of his options, from
time to time under circumstances which he deems appropriate.
Item 5. Interest in Securities of the Issuer.
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(a) Mr. Bock beneficially owns 410,160 shares of the Common Stock of the
Issuer, representing 8.2% of such class of securities (based upon 4,701,666
shares of Common Stock outstanding as of October 17, 1996, as reflected in the
Issuer's Prospectus filed pursuant to Rule 424(b) of the Securities Act of 1933,
as amended, with the Securities and Exchange Commission).
(b) Mr. Bock has sole voting and dispositive power with respect to 98,934
shares of Common Stock, and shares with his wife, Dawn Williams Bock, voting and
dispositive power with respect to an additional 1,000 shares of Common Stock.
Mr. Bock has sole dispositive power with respect to currently exercisable
options respecting 310,226 shares of Common Stock, although such shares may not
be voted unless and until such options are exercised.
(c) The only transactions effected by Mr. Bock in the shares of Common
Stock of the Issuer during the past sixty (60) days are as follows:
(i) The purchase by Mr. Bock, jointly with his wife, Dawn Williams Bock,
of 1,000 shares of Common Stock in the Issuer's initial public offering on
October 17, 1996 at the offering price of $6.50 per share.
(ii) Effective October 22, 1996, 310,226 options previously granted to Mr.
Bock, which are exercisable at an exercise price of $.3072 per share were,
to the extent not previously vested, automatically vested and any
restrictions against exercising such options lapsed.
(iii) Effective October 17, 1996, the Corporation granted to Mr. Bock: (A)
options, qualifying as incentive stock options pursuant to the
Corporation's 1996 Stock Option Plan, to purchase 75,000 shares of Common
Stock at an exercise price of
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$6.50 per share, exercisable for a period of ten years from the date of
grant; and (B) non-qualified options, not granted pursuant to such Plan,
to purchase 75,000 shares of Common Stock underlying such options at a
purchase price of $5.33 per share, exercisable for a period of ten years
from the date of grant.
(d) Other than Mr. Bock and, with respect to 1,000 shares of Common Stock,
Mr. Bock and his wife, Dawn Williams Bock, no person is known to have the right
to receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, any of the securities described herein as beneficially owned
by Mr. Bock.
Item 6. Contracts, Arrangements, Understanding or Relationships with Respect
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to Securities of the Issuer.
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(a) All shares of Common Stock beneficially owned by Mr. Bock, as well as
all shares of Common Stock underlying options beneficially owned by him, are
subject to an agreement, dated October 9, 1996, between Mr. Bock and GKN
Securities Corp. ("GKN"), the underwriter of the Issuer's initial public
offering, pursuant to which Mr. Bock has agreed (subject to certain limited
exceptions), until October 17, 1997, to refrain from selling or otherwise
disposing of or encumbering such shares of Common Stock without the prior
written consent of GKN. A copy of the Agreement dated October 9, 1996 between
Steven L. Bock and GKN is annexed hereto as Exhibit 3.
(b) Options to purchase 310,226 shares of Common Stock at an exercise
price of $.3072 per share were granted to Mr. Bock by the Issuer pursuant to a
Stock Option Agreement dated November 30, 1994. Such Stock Option Agreement was
amended effective October 22, 1996 to automatically vest all such options, to
the extent not previously vested, and to cause any restrictions against
exercising such options to lapse immediately. A copy of the amended Stock
Option Agreement dated as of November 30, 1994 is annexed hereto as Exhibit 4.
(c) Effective October 17, 1996, the Corporation granted to Mr. Bock: (A)
options, qualifying as incentive stock options pursuant to the Corporation's
1996 Stock Option Plan, to purchase 75,000 shares of Common Stock at an exercise
price of $6.50 per share, exercisable for a period of ten years from the date of
grant; and (B) non-qualified options, not granted pursuant to such Plan, to
purchase 75,000 shares of Common Stock underlying such options at a purchase
price of $5.33 per share, exercisable for a period of ten years from the date
of grant. A copy of the Incentive Stock Option Agreement dated October 17, 1996
respecting the incentive stock options is annexed hereto as Exhibit 5. A copy
of the Stock Option Agreement dated August 13, 1996 respecting the non-qualified
options is annexed hereto as Exhibit 6.
(d) On October 15, 1996, Mr. Bock entered into an employment agreement
with the Issuer providing, with respect to the shares of Common Stock of the
Corporation, as follows:
(i) Effective October 22, 1996, 310,226 options previously granted to Mr.
Bock, which are exercisable at an exercise price of $.3072 per share were,
to the extent
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not previously vested, automatically vested and any restrictions against
exercising such options lapsed.
(ii) Effective October 17, 1996, the Corporation granted to Mr. Bock: (A)
options, qualifying as incentive stock options pursuant to the
Corporation's 1996 Stock Option Plan, to purchase 75,000 shares of Common
Stock at an exercise price of $6.50 per share, exercisable for a period of
ten years from the date of grant; and (B) non-qualified options, not
granted pursuant to such Plan, to purchase 75,000 shares of Common Stock
underlying such options at a purchase price of $5.33 per share, exercisable
for a period of ten years from the date of grant.
(iii) Subject to possible earlier vesting or forfeiture, each option
described at Item 6 shall vest at the rate of 15,000 shares per year on
each of the first five anniversaries of the date of grant.
(iv) In the event of certain sales constituting a change in control of the
Issuer, Mr. Bock may sell his stock on the same terms as other shares of
the same class in such transaction, and Mr. Bock may exercise his options
and participate in the sale as a holder of stock; provided, however, that,
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if practicable, Mr. Bock may participate in such sales on a "cashless
exercise" basis.
A copy of the Employment Agreement, dated as of October 15, 1996, between Steven
L. Bock and the Issuer is annexed hereto as Exhibit 7.
Except as set forth in this Item 6, Mr. Bock has no contracts,
arrangements, understandings or relationships with respect to the securities of
the Issuer.
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Item 7. Material to be Filed as Exhibits.
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(a) Copy of Non-Negotiable Promissory Note, dated November 23, 1994, of Steven
L. Bock to Viking Holdings Limited.
(b) Copy of Non-Negotiable Promissory Note, dated November 23, 1994, of Steven
L. Bock to Dickstein & Co. L.P.
(c) Copy of Agreement dated October 9, 1996 between Steven L. Bock and GKN.
(d) Copy of Amended Stock Option Agreement dated as of November 30, 1994.
(e) Copy of Incentive Stock Option Agreement dated as of October 17, 1996.
(f) Copy of Non-Qualified Stock Option Agreement dated as of August 13, 1996.
(g) Copy of Employment Agreement, dated as of October 15, 1996, between Steven
L. Bock and the Issuer.
Signature.
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 25, 1996
/s/ Steven L. Bock
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Steven L. Bock
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EXHIBIT INDEX
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1. Copy of Non-Negotiable Promissory Note, dated November 23, 1994, of Steven
L. Bock to Viking Holdings Limited.
2. Copy of Non-Negotiable Promissory Note, dated November 23, 1994, of Steven
L. Bock to Dickstein & Co. L.P.
3. Copy of Agreement dated October 9, 1996 between Steven L. Bock and GKN.
4. Copy of Amended Stock Option Agreement dated as of November 30, 1994.
5. Copy of Incentive Stock Option Agreement dated as of October 17, 1996.
6. Copy of Non-Qualified Stock Option Agreement dated as of August 13, 1996.
7. Copy of Employment Agreement, dated as of October 15, 1996, between Steven
L. Bock and the Issuer.
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EXHIBIT 1
NON-NEGOTIABLE PROMISSORY NOTE
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$15,196.50 Weston, Connecticut November 23, 1994
FOR VALUE RECEIVED, the undersigned, STEVEN L. BOCK, an individual
("Maker") residing at 31 Joanne Lane, Weston, Connecticut 06883 hereby promises
to pay to VIKING HOLDINGS LIMITED, a British Virgin Islands corporation
("Holder") having an address c/o Abacus Secretaries (Jersey) Limited, La Motte
Chambers, St. Helier, Jersey JE1 1BJ, Channel Islands, in lawful money of the
United States of America, the principal sum of $15,196.50 on November 23, 2000.
Interest on this Note shall accrue from the date hereof at the rate of 7.45% per
annum simple interest, based on a year of 365 days, and be payable in a single
annual payment, in arrears, on the 23nd day of November of each year that this
Note shall remain outstanding.
Maker may, at its option, prepay in whole or in part the principal of
and/or accrued interest on this Note at any time and from time to time without
notice, premium or penalty; provided that any such optional prepayment shall be
pro rata with prepayments on Maker's note of even date to Dickstein & Co., L.P.
Maker shall apply as a mandatory prepayment of this Note fifty percent of the
after tax proceeds received by Maker (i) with respect to the shares of common
stock of SC Corporation, a Delaware corporation ("SC"), owned by Maker, and (ii)
of the bonus described in Section 1 of the Bonus Agreement dated November 23,
1994 between SC and Maker. Such mandatory prepayments shall be made as soon as
practicable on or after (but in any event within five days after) the receipt of
such proceeds.
If Holder expends any effort or expense in an attempt to collect
payment of any sum due Holder hereunder, Maker will bear and pay reasonable fees
and expenses of counsel incurred by Holder in connection therewith.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to laws
governing conflict of laws. Maker hereby consents to the jurisdiction of the
State and Federal courts sitting in the County of New York and State of New York
in any action arising out of or connected with this Promissory Note.
Any and all notices or other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given when received by the party to whom such notice is given at the addresses
set forth above (or at such other address as any party may specify by notice to
the other party given as aforesaid).
This Note shall not be negotiable, and may not be changed, modified or
terminated orally. This Note may be transferred by Holder together with any
securities Holder may own in Specialty Catalog Corp.
Holder has represented to Maker, acknowledging that Maker is relying
thereon, that Holder is not a United States person.
__________________
Steven L. Bock
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Any United States person who holds this obligation will be subject to
limitations under the United States income tax laws, including the limitations
provided in Section 165(j) and 1287(a) of the Internal Revenue Code.
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EXHIBIT 2
NON-NEGOTIABLE PROMISSORY NOTE
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$15,196.50 Weston, Connecticut November 23, 1994
FOR VALUE RECEIVED, the undersigned, STEVEN L. BOCK, an individual
("Maker") residing at 31 Joanne Lane, Weston, Connecticut 06883 hereby promises
to pay to DICKSTEIN & CO. L.P., a Delaware limited partnership ("Holder") having
an address at 9 West 57th Street, New York, New York 10019, in lawful money of
the United States of America, the principal sum of $15,196.50 on November 23,
2000. Interest on this Note shall accrue from the date hereof at the rate of
7.45% per annum simple interest, based on a year of 365 days, and be payable in
a single annual payment, in arrears, on the 23nd day of November of each year
that this Note shall remain outstanding.
Maker may, at its option, prepay in whole or in part the principal of
and/or accrued interest on this Note at any time and from time to time without
notice, premium or penalty; provided that any such optional prepayment shall be
pro rata with prepayments on Maker's note of even date to Viking Holdings
Limited. Maker shall apply as a mandatory prepayment of this Note fifty percent
of the after tax proceeds received by Maker (i) with respect to the shares of
common stock of SC Corporation, a Delaware corporation ("SC"), owned by Maker,
and (ii) of the bonus described in Section 1 of the Bonus Agreement dated
November 23, 1994 between SC and Maker. Such mandatory prepayments shall be
made as soon as practicable on or after (but in any event within five days
after) the receipt of such proceeds.
If Holder expends any effort or expense in an attempt to collect
payment of any sum due Holder hereunder, Maker will bear and pay reasonable fees
and expenses of counsel incurred by Holder in connection therewith.
This Note shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to laws
governing conflict of laws. Maker hereby consents to the jurisdiction of the
State and Federal courts sitting in the County of New York and State of New York
in any action arising out of or connected with this Promissory Note.
Any and all notices or other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given when received by the party to whom such notice is given at the addresses
set forth above (or at such other address as any party may specify by notice to
the other party given as aforesaid).
This Note shall not be negotiable, and may not be changed, modified or
terminated orally. This Note may be transferred by Holder together with any
securities Holder may own in Specialty Catalog Corp.
____________________________
Steven L. Bock
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EXHIBIT 3
October 9, 1996
GKN Securities Corp.
61 Broadway, 12/th/ Floor
New York, New York 10006
Specialty Catalog Corp.
21 Bristol Drive
South Easton, Massachusetts 02375
Gentlemen:
The undersigned shareholder and/or securityholder, officer and/or director
of Specialty Catalog Corp. ("Company"), in consideration of the underwriting of
a public offering ("Offering") of securities of the Company by GKN Securities
Corp. ("GKN"), hereby agrees that, without the prior written consent of GKN, for
a period of twelve (12) months (the "Lock-up Period") from the effective date
("Effective Date") of the Company's Registration Statement on Form S-1 (File No.
333-10793) ("Registration Statement") which relates to the Offering of its
securities to be underwritten by GKN, the undersigned will not offer, sell,
transfer or otherwise dispose of any shares of Common Stock of the Company now
owned or hereafter acquired, whether beneficially/1/ or of record, by the
undersigned, including, but not limited to, shares of Common Stock acquired upon
exercise of options or warrants or acquired upon conversion of any other
securities owned by the undersigned (collectively, the "Securities"), except by
means of a private transaction in connection with which the proposed transferee
agrees in writing to be bound by all of the provisions of this agreement prior
to the consummation of such private transaction; provided that (i) the foregoing
shall not apply to shares of Common Stock acquired by the undersigned in the
Offering or to Securities acquired by the undersigned in the after market after
the closing date of the Offering and (ii) the Lockup Period applicable to any
shares of Common Stock acquired upon conversion of any shares of the Company's
13% Preferred Stock held by the undersigned shall terminate six (6) months after
the Effective Date.
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/1/It is agreed that, for purposes of this letter, the undersigned beneficially
owns, among other shares, any shares owned by (i) if the undersigned is an
individual, members of his or her family and (ii) any person or entity
controlled by the undersigned or under common control with the undersigned.
<PAGE>
GKN Securities Corp. October 9, 1996
Specialty Catalog Corp. Page 2
The undersigned acknowledges that it will cause:
1. A copy of this Agreement to be available from the Company or the
Company's transfer agent upon request and without charge;
2. A notice to be placed on the face of each certificate for the
Securities stating that the transfer of the Securities is restricted in
accordance with the conditions set forth on the reverse side of the certificate;
and
3. A typed legend to be placed on the reverse side of each certificate
representing Securities which states that the sale or transfer of the Securities
is subject to certain restrictions pursuant to an agreement between the security
holder, the Company and GKN, which agreement is on file with the Company and the
stock transfer agent, from which a copy is available upon request and without
charge.
In addition, the undersigned hereby waives any and all rights to request or
demand the registration pursuant to the Securities Act of 1933, as amended
("Act"), of any Securities of the Company which are held in the name of, or
beneficially owned by the undersigned (x) in connection with or pursuant to the
Registration Statement and (y) for a period of twelve months from the Effective
Date.
During the three-year period following the Effective Date, GKN shall have
the right to purchase for its account or to sell for the account of the
undersigned any Securities sold on any United States securities market or
exchange, including, but not limited to, open market sales or sales pursuant to
Rule 144 under the Act. The undersigned agrees to consult with GKN with regard
to any such sales and will offer GKN the exclusive opportunity to purchase or
sell such Securities on terms at least as favorable to the undersigned as the
undersigned can secure elsewhere. If GKN fails to accept in writing any such
proposal for sale by the undersigned within four business hours after receipt of
a notice containing such proposal, then GKN shall have no claim or right with
respect to any such proposal (without affecting its rights to other sales). If,
thereafter, such proposal is modified in any material respect, the undersigned
shall adopt the same procedure as with respect to the original proposal.
Very truly yours,
/s/ Steven L. Bock
<PAGE>
EXHIBIT 4
SPECIALTY CATALOG CORP.
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STOCK OPTION AGREEMENT
Grant made as of this 30th day of November, 1994, by SPECIALTY CATALOG
CORP., a Delaware corporation, having its office at 21 Bristol Drive, South
Easton, Massachusetts 02795, (hereinafter called the "Corporation") to STEVEN L.
BOCK (the "Employee").
WHEREAS, the Employee is a valuable and trusted employee and the
Corporation considers it desirable and in its best interests that it provide
Employee with an inducement to acquire further proprietary interests in the
Corporation;
NOW, THEREFORE, in consideration of the premises, it is agreed between the
parties as follows:
FIRST: Subject to all of the provisions hereinafter set forth, the
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Corporation grants to Employee the right and option (hereinafter called the
"Option") to purchase all or any part of an aggregate of 310,226 shares of
common stock of the Corporation, par value $.01 per share (the "Shares") (after
giving effect to a 325.51 to 1 stock split scheduled to occur prior to the
initial public offering of the Corporation's Common Stock), at a price of
$0.3072 per share ("Option Price") (such number being subject to adjustment as
provided in Paragraph Fifth hereof) upon such terms and conditions as
hereinafter set forth.
SECOND: The Option is fully vested and as of October 17, 1996 exercisable.
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<PAGE>
THIRD: The term of the Option shall be for a period of ten years and
-----
shall expire at 12:01 a.m., November 30, 2004. The Option may be exercised as
to any part or all of the Shares, provided, however, that the Option may not be
exercised as to less than one hundred (100) shares at any one time (or the
remaining shares then purchasable under the Option if the same be less than one
hundred (100) shares). The Option is subject to the terms and conditions,
including without limitation the acceleration and forfeiture provisions of Mr.
Bock's Employment Agreement dated October 11, 1996 (the "Employment Agreement").
To the extent any provision contained herein is inconsistent with the Employment
Agreement, the Employment Agreement is controlling.
FOURTH: The Option herein granted may not be assigned, transferred,
------
pledged or hypothecated in any way, and shall not be subject to execution,
attachment or similar process, whether by operation of law or otherwise, except
under and pursuant to the last will and testament of employee or the applicable
laws of descent and distribution. The Option may be exercised during the
lifetime of the Employee only by him or her except as otherwise provided in
Paragraph SIXTH hereof. The granting of the Option herein granted to Employee
-----
shall not in any way be deemed to confer upon him or her any right to
continuation of employment by the Corporation, or any subsidiary of the
Corporation, nor shall it in any way interfere with or affect the right of the
Corporation or any subsidiary of the Corporation who shall be the employer of
Employee, to terminate Employee's employment.
FIFTH: (a) If all or any portion of the Option shall be exercised
-----
subsequent to any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange
2
<PAGE>
of shares, separation, reorganization or liquidation or other like change in the
capital structure of the Corporation, occurring after the date hereof, the Board
of Directors shall make such adjustment to each outstanding Option that it, in
its sole discretion, deems appropriate; provided, however, that no fractional
share will be issued upon any such exercise, and the aggregate price paid shall
be appropriately reduced on account of any fractional share not issued. No
adjustment shall be made in the minimum number of shares which may be purchased
at any one time.
(b) Any Employee, who is subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
shall comply with all applicable requirements of the Exchange Act and all other
applicable securities laws.
SIXTH: The granting of this Option is subject to Employee's agreement that
-----
any purchase of the shares which are the subject hereof shall be for investment
and not with any view to or present intention to resell the same. Employee
acknowledges that unless and until the Shares underlying the Option are
registered under the Securities Act of 1933, as amended (the "1933 Act"),
pursuant to a registration statement on a form which is applicable for the
resale of the Shares by the Employee or proper exemption from the 1933 Act, the
Shares issued on exercise of this Option may not be sold or otherwise
transferred, except pursuant to an applicable exemption from the registration
requirements of the 1933 Act, and, if requested by the Corporation pursuant to
an opinion of counsel reasonably satisfactory to the Corporation. The Employee
further agrees that certificates evidencing shares purchased upon exercise of
the option shall bear a legend, in form satisfactory to counsel for the
Corporation, referring to the restrictions on disposition of the Shares under
the 1933 Act.
3
<PAGE>
SEVENTH: The Option may be exercised by the delivery of written notice of
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such exercise to the Corporation, at 21 Bristol Drive, South Easton,
Massachusetts 02375, or such other address as designated by the Corporation.
Such notice shall state an intention to exercise the Option, the number of
shares in respect of which it is being exercised, and shall be signed by the
person or persons exercising the Option. Such notice shall be accompanied by
the full purchase price of such shares, which payment shall be in cash,
certified check, the tender of shares of the Corporation's stock (valued at the
fair market value of the stock as of the date of tender) or the tender of vested
but unexercised options (valued at the difference between the Option Price and
the fair market value of the shares underlying the tendered options). The
Corporation shall deliver a certificate or certificates representing such shares
as soon as practicable after the notice is received. The certificates for the
shares as to which the Option shall have been exercised shall be registered in
the name of the person or persons exercising the Option and shall be delivered
as provided above to or upon the written order of such person and the
Corporation shall deliver to the Employee a replacement Option for any remaining
Options, if any.
EIGHTH: Upon exercise of the Options granted hereby, or upon sale of the
------
shares purchased upon exercise of the Options, as the case may be, the
Corporation shall have the right to require the Employee to remit to the
Corporation or, in lieu thereof, the Corporation may deduct, an amount of shares
or cash sufficient to satisfy federal, state or local withholding tax
requirements, if any, prior to the delivery of any certificate for such shares
or thereafter, as appropriate.
4
<PAGE>
NINTH: As used herein, the terms "subsidiary" or "subsidiaries" shall mean
-----
any present or future corporation which would be a "subsidiary corporation" of
the Corporation as that term is defined in Section 424(f) of the Internal
Revenue Code of 1954, as now or hereafter amended.
TENTH: This Agreement contains the sole and entire Option Grant and may
-----
not be changed, varied, amended or modified, except by an instrument in writing
duly executed by the Corporation.
SPECIALTY CATALOG CORP.:
BY:_________________________________
NAME:
TITLE: DIRECTOR
5
<PAGE>
I hereby accept the Option granted above in accordance with and
subject to the terms and conditions of the Option Agreement set forth above, and
agree to be bound thereby.
Date Accepted: _____________, 199___
_______________________________
Employee
Social Security Number:_________________________
6
<PAGE>
EXHIBIT 5
SPECIALTY CATALOG CORP.
-----------------------
STOCK OPTION AGREEMENT
Grant made as of this 17th day of October, 1996, by SPECIALTY CATALOG
CORP., a Delaware corporation, having its office at 21 Bristol Drive, South
Easton, Massachusetts 02795, (hereinafter called the "Corporation") to Steven L.
Bock, (hereinafter called the "Optionee").
Whereas, the Corporation has heretofore adopted the SPECIALTY CATALOG CORP.
1996 STOCK OPTION PLAN, as amended (the "1996 Stock Plan"), for the benefit of
certain of its directors, employees and consultants and employees and
consultants of any subsidiary corporation of the Corporation, which 1996 Stock
Plan has been approved by the Corporation's stockholders; and
Whereas, the Optionee is a valuable and trusted employee and the
Corporation considers it desirable and in its best interests that it provide
Optionee with an inducement to acquire further proprietary interests in the
Corporation;
NOW, Therefore, in consideration of the premises, it is agreed between the
parties as follows:
First: Subject to all of the provisions hereinafter set forth and the
terms and provisions of the 1996 Stock Plan (a copy of which the Optionee hereby
acknowledges he/she has reviewed and has received all requested information in
connection therewith), the Corporation grants to Optionee the right and option
(hereinafter called the "Option") to purchase all or any part of an aggregate of
75,000 shares of common stock of the Corporation, par value
<PAGE>
$.01 per share (the "Shares"), at a price of $6.50 per share ("Option Price")
(such number being subject to adjustment as provided in Paragraph Seventh
hereof) upon such terms and conditions as hereinafter set forth.
Second: The Option may be exercised by the Optionee with respect to the
------
Shares as follows:
<TABLE>
<CAPTION>
Percentage
Exercisable of Exercise
Vesting Date: Total Option Grant Price Per Share
- ----------------------- ------------------- ---------------
<S> <C> <C>
October 17, 1997 20% (15,000) Shares $6.50
October 17, 1998 20% (15,000) Shares $6.50
October 17, 1999 20% (15,000) Shares $6.50
October 17, 2000 20% (15,000) Shares $6.50
October 17, 2001 20% (15,000) Shares $6.50
</TABLE>
Third: The term of the Option shall be for a period of 10 years and shall
-----
expire at 6:00 p.m., October 17, 2006, subject to earlier termination as
provided in Paragraphs Fifth and Sixth hereof. The Option may be exercised as
----- -----
to any part or all of the Shares which shall have vested in accordance with
Paragraph Second, provided, however, that the Option may not be exercised as to
------
less than one hundred (100) shares at any one time (or the remaining shares then
purchasable under the Option if the same be less than one hundred (100) shares),
and, further provided, that except as otherwise provided in Paragraphs Fifth and
-----
Sixth hereof, Optionee, at the time of his/her exercise of the Option, shall
- -----
then be an employee of the Corporation or its subsidiaries and shall have been
continuously employed by the Corporation, or one of its subsidiaries, for a
period of one (1) year from the date hereof. (Absence on leave
2
<PAGE>
approved by or on behalf of the Corporation shall not be considered an
interruption of employment for the purpose hereof).
The holder of the Option shall not have any of the rights of a stockholder
with respect to the shares covered by the Option, except to the extent that any
such shares shall be actually delivered to him/her upon the due exercise of the
Option.
Fourth: The Option herein granted may not be assigned, transferred,
------
pledged or hypothecated in any way, and shall not be subject to execution,
attachment or similar process whether by operation of law or otherwise, except
under and pursuant to the last will and testament of Optionee or the applicable
laws of descent and distribution. The Option may be exercised during the
lifetime of the Optionee only by him or her except as otherwise provided in
Paragraph Sixth hereof. The granting of the Option herein granted to Optionee
-----
shall not in any way be deemed to confer upon him or her any right to
continuation of employment by the Corporation, or any subsidiary of the
Corporation, nor shall it in any way interfere or affect the right of the
Corporation or any subsidiary of the Corporation who shall be the employer of
Optionee, to terminate Optionee's employment hereunder.
Fifth: If Optionee shall retire from full employment by the Corporation
-----
upon attaining his/her sixty-fifth (65th) birthday or his/her employment is
terminated involuntarily by the Corporation without cause (other than by reason
of death or disability) he/she may, but only within three (3) months next
succeeding such cessation of employment, exercise the Option herein granted to
him to the extent that he/she shall be entitled to exercise it at the date of
such cessation of employment. If Optionee shall be discharged "for cause", as
described in Section
3
<PAGE>
2(d) of the 1996 Stock Plan or resign from his/her employment by the
Corporation, the Option herein granted to him/her shall terminate on the date of
such discharge or resignation and he/she shall forthwith forfeit any and all
rights which may have accrued prior thereto. Any reasonable determination by or
on behalf of the Corporation that Optionee was discharged for cause or resigned
shall be final and absolute and shall not be subject to any question by the
Optionee.
For the purposes of this Agreement, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code. If an individual is on military or sick leave or
other bona fide leave of absence, such individual shall be considered an
"employee" for purposes of the exercise of an Option or Right and shall be
entitled to exercise such Option during such leave if the period of such leave
does not exceed ninety (90) days, or, if longer, so long as the individual's
right to reemployment with the corporation granting the option (or a related
corporation) is guaranteed either by statute or by contract. If the period of
leave exceeds ninety (90) days, the employment relationship shall be deemed to
have terminated on the ninety-first (91st) day of such leave, unless the
individual's right to reemployment is guaranteed by statute or contract.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of an employee from employment by the Corporation to employment by
a subsidiary corporation or a parent corporation of the Corporation, or (ii) the
transfer of an employee from employment by a subsidiary corporation or a parent
corporation of the Corporation to
4
<PAGE>
employment by the Corporation or by another subsidiary corporation or parent
corporation of the Corporation.
In the event of the complete liquidation or dissolution of a subsidiary
corporation, or in the event that such corporation ceases to be a subsidiary
corporation, any unexercised Options granted to any person employed by such
subsidiary corporation will be deemed cancelled unless such person is employed
by the Corporation or by any parent corporation or another subsidiary
corporation after the occurrence of such event. In the event an Option is to be
cancelled pursuant to the provisions of the previous sentence, notice of such
cancellation will be given to each Optionee holding unexercised Options and such
holder of vested options will have the right to exercise such vested Options in
full during the 30-day period following notice of such cancellation.
Sixth: (a) In the event of death of Optionee while in the employ of
-----
Corporation or any of its subsidiaries, the Option herein granted to him/her
shall be exercisable only within one (1) year following the date of his/her
death by the person or persons to whom the rights under the Option shall pass by
the Optionee's will or by the applicable law of descent and distribution, or
within six (6) months after the date of the appointment of an administrator or
executor of the estate of the Optionee, whichever date shall sooner occur, and
then only if and to the extent that Optionee was entitled to exercise the Option
at the date of his/her death.
(b) In the event that Optionee becomes permanently and totally disabled
while in the employ of the Corporation (or its subsidiaries), the Optionee may,
but only within one (1) year after the date of termination of employment in the
case of such disability, exercise his/her
5
<PAGE>
option to the extent he/she or his/her lawful agent, is then entitled to
exercise it, but in no event after the expiration of the Option. For this
purpose, Optionee shall be considered permanently and totally disabled if he/she
is unable to engage in any substantial gainful activity by reason of any
medically determinable mental or physical impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of more than twelve (12) months. Optionee shall not be considered to be
permanently or totally disabled unless he/she furnishes proof of the existence
thereof in such form and manner and at such times as the Stock Option Committee
of the Board of Directors may require. The Stock Option Committee's
determination of whether Optionee is permanently or totally disabled shall be
final and absolute and shall not be questioned by the Optionee, a representative
of the Optionee or the Corporation.
Seventh: (a) If all or any portion of the Option shall be exercised
-------
subsequent to any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, separation, reorganization or
liquidation or other like change in the capital structure of the Corporation,
occurring after the date hereof, the Board of Directors or the Stock Option
Committee, as the case may be, shall make such adjustment to each outstanding
Option that it, in its sole discretion, deems appropriate; provided, however,
that no fractional share will be issued upon any such exercise, and the
aggregate price paid shall be appropriately reduced on account of any fractional
share not issued. No adjustment shall be made in the minimum number of shares
which may be purchased at any one time.
6
<PAGE>
(b) Any Optionee, who is subject to the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
shall comply with all applicable requirements of the Exchange Act and all other
applicable securities laws.
Eighth: The granting of this Option is subject to Optionee's agreement
------
that he/she or any successor to him/her will purchase the shares which are the
subject hereof for investment and not with any view to or present intention to
resell the same, and to the further agreement that he/she or such successor will
confirm such intention by appropriate certificate at the time of exercising the
Option, the form of such certificate to be satisfactory to counsel for the
Corporation, and no shares will be issued pursuant to the Option unless and
until such appropriate certificate shall be executed, signed and delivered by
the Optionee or any successor. Optionee acknowledges that unless and until the
Shares underlying the Option are registered under the Securities Act of 1933, as
amended (the "1933 Act"), pursuant to a registration statement on a form which
is applicable for the resale of the Shares by the Optionee, the Shares issued on
exercise of this Option may not be sold or otherwise transferred, except
pursuant to an applicable exemption from the registration requirements of the
1933 Act, pursuant to an opinion of counsel satisfactory to the Corporation. The
Optionee further agrees that certificates evidencing shares purchased upon
exercise of the option shall bear a legend, in form satisfactory to counsel for
the Corporation, referring to the restrictions on disposition of the Shares
under the 1933 Act.
Ninth: The Option may be exercised by the delivery of written notice of
-----
such exercise to the Corporation, at 21 Bristol Drive, South Easton,
Massachusetts 02375, or such
7
<PAGE>
other address as designated by the Corporation. Such notice shall state an
intention to exercise the Option, the number of shares in respect of which it is
being exercised, and shall be signed by the person or persons exercising the
Option. Such notice shall be accompanied by the full purchase price of such
shares, which payment shall be in cash, certified check, the tender of shares of
the Corporation's stock (valued at the fair market price of the stock as of the
date of tender) or the tender of vested but unexercised options (valued at the
difference between the Option Price and the market value of the shares
underlying the tendered options). The Corporation shall deliver a certificate
or certificates representing such shares as soon as practicable after the notice
is received.
The certificates for the shares as to which the Option shall have been
exercised shall be registered in the name of the person or persons exercising
the Option and shall be delivered as provided above to or upon the written order
of such person. In the event that the Option is exercised by any person or
persons other than the Optionee, as may be permitted by the terms of the 1992
Stock Plan, such notice shall be accompanied by appropriate proof of the right
of such person or persons to exercise the Option, which proof shall be
satisfactory to counsel to the Corporation.
Tenth: Upon exercise of the Options granted hereby, or upon sale of the
-----
shares purchased upon exercise of the Options, as the case may be, the
Corporation shall have the right to require the Optionee to remit the
Corporation or in lieu thereof, the Corporation may deduct an amount of shares
or cash sufficient to satisfy federal, state or local withholding tax
8
<PAGE>
requirements, if any, prior to the delivery of any certificate for such shares
or thereafter, as appropriate.
Eleventh: As used herein, the terms "subsidiary" or "subsidiaries" shall
--------
mean any present or future corporation which would be a "subsidiary corporation"
of the Corporation as that term is defined in Section 424(f) of the Internal
Revenue Code of 1954, as now or hereafter amended.
Twelfth: This Agreement contains the sole and entire Option Grant and may
-------
not be changed, varied, amended or modified, except by an instrument in writing
duly executed by the Corporation.
SPECIALTY CATALOG CORP.:
BY:
-----------------------------------------
MARTIN E. FRANKLIN,
DIRECTOR
9
<PAGE>
I hereby accept the Option granted above in accordance with and subject to
the terms and conditions of (i) the SPECIALTY CATALOG CORP. STOCK OPTION PLAN,
as may be amended from time to time, and (ii) the Option Agreement set forth
above, and agree to be bound thereby.
Date Accepted: _____________, 199___
Steven L. Bock
- ---------------------------
Optionee
Social Security Number:_________________________
10
<PAGE>
EXHIBIT 6
SPECIALTY CATALOG CORP.
-----------------------
STOCK OPTION AGREEMENT
Grant made as of this 13th day of August, 1996, by SPECIALTY CATALOG
CORP., a Delaware corporation, having its office at 21 Bristol Drive, South
Easton, Massachusetts 02795 (hereinafter called the "Corporation") to STEVEN L.
BOCK (the "Employee").
WHEREAS, the Employee is a valuable and trusted employee and the
Corporation considers it desirable and in its best interests that it provide
Employee with an inducement to acquire further proprietary interests in the
Corporation;
NOW, THEREFORE, in consideration of the premises, it is agreed between
the parties as follows:
FIRST: Subject to all of the provisions hereinafter set forth, the
-----
Corporation grants to Employee the right and option (hereinafter called the
"Option") to purchase all or any part of an aggregate of 75,000 shares of common
stock of the Corporation, par value $.01 per share (the "Shares") (after giving
effect to a 325.51 to 1 stock split scheduled to occur prior to the initial
public offering of the Corporation's Common Stock), at a price of $5.33 per
share ("Option Price") (such number being subject to adjustment as provided in
Paragraph Fifth hereof) upon such terms and conditions as hereinafter set forth.
SECOND: The Option may be exercised by the Employee with respect to
------
the Shares as follows, subject to Mr. Bock's Employment Agreement dated October
11, 1996, and to the acceleration provisions and the forfeiture provisions as
provided therein (the "Employment Agreement"):
<PAGE>
<TABLE>
<CAPTION>
Percentage
Exercisable of Exercise
Vesting Date: Total Option Grant Price Per Share
- ------------- ------------------- ---------------
<S> <C> <C>
October 17, 1997 20% (15,000 Shares) $5.33
October 17, 1998 20% (15,000 Shares) $5.33
October 17, 1999 20% (15,000 Shares) $5.33
October 17, 2000 20% (15,000 Shares) $5.33
October 17, 2001 20% (15,000 Shares) $5.33
</TABLE>
THIRD: The term of the Option shall be for a period of ten years and
-----
shall expire at 12:01 a.m., August 13, 2006. The Option may be exercised as to
any part or all of the Shares which shall have vested in accordance with
Paragraph SECOND, provided, however, that the Option may not be exercised as to
------
less than one hundred (100) shares at any one time (or the remaining shares then
purchasable under the Option if the same be less than one hundred (100) shares).
The Option is subject to the terms and conditions of the Employment Agreement
and to the extent anything herein shall be inconsistent with the Employment
Agreement, the Employment Agreement shall be controlling.
FOURTH: The Option herein granted may not be assigned, transferred,
------
pledged or hypothecated in any way, and shall not be subject to execution,
attachment or similar process, whether by operation of law or otherwise, except
under and pursuant to the last will and testament of employee or the applicable
laws of descent and distribution. The Option may be exercised during the
lifetime of the Employee only by him or her except as otherwise provided in
Paragraph SIXTH hereof. The granting of the Option herein granted to Employee
-----
shall not in any way be deemed to confer upon him or her any right to
continuation of employment by the Corporation, or any subsidiary of the
Corporation, nor shall it in any way interfere with or
2
<PAGE>
affect the right of the Corporation or any subsidiary of the Corporation who
shall be the employer of Employee, to terminate Employee's employment.
FIFTH: (a) If all or any portion of the Option shall be exercised
-----
subsequent to any stock dividend, split-up, recapitalization, merger,
consolidation, combination or exchange of shares, separation, reorganization or
liquidation or other like change in the capital structure of the Corporation,
occurring after the date hereof, the Board of Directors shall make such
adjustment to each outstanding Option that it, in its sole discretion, deems
appropriate; provided, however, that no fractional share will be issued upon any
such exercise, and the aggregate price paid shall be appropriately reduced on
account of any fractional share not issued. No adjustment shall be made in the
minimum number of shares which may be purchased at any one time.
(b) Any Employee, who is subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the "Exchange
Act"), shall comply with all applicable requirements of the Exchange Act and all
other applicable securities laws.
SIXTH: The granting of this Option is subject to Employee's agreement
-----
that any purchase of the shares which are the subject hereof shall be for
investment and not with any view to or present intention to resell the same,
except pursuant to a registered public offering. Employee acknowledges that
unless and until the Shares underlying the Option are registered under the
Securities Act of 1933, as amended (the "1933 Act"), pursuant to a registration
statement on a form which is applicable for the resale of the Shares by the
Employee or proper exemption from the 1933 Act, the Shares issued on exercise of
this Option may not be sold or otherwise transferred, except pursuant to an
applicable exemption from the registration
3
<PAGE>
requirements of the 1933 Act, and, if requested by the Corporation, pursuant to
an opinion of counsel reasonably satisfactory to the Corporation. The Employee
further agrees that certificates evidencing shares purchased upon exercise of
the option shall bear a legend, in form satisfactory to counsel for the
Corporation, referring to the restrictions on disposition of the Shares under
the 1933 Act.
SEVENTH: The Option may be exercised by the delivery of written
-------
notice of such exercise to the Corporation, at 21 Bristol Drive, South Easton,
Massachusetts 02375, or such other address as designated by the Corporation.
Such notice shall state an intention to exercise the Option, the number of
shares in respect of which it is being exercised, and shall be signed by the
person or persons exercising the Option. Such notice shall be accompanied by
the full purchase price of such shares, which payment shall be in cash,
certified check, the tender of shares of the Corporation's stock (valued at the
fair market value of the stock as of the date of tender) or the tender of vested
but unexercised options (valued at the difference between the Option Price and
the fair market value of the shares underlying the tendered options). The
Corporation shall deliver a certificate or certificates representing such shares
as soon as practicable after the notice is received. The certificates for the
shares as to which the Option shall have been exercised shall be registered in
the name of the person or persons exercising the Option and shall be delivered
as provided above to or upon the written order of such person and the
Corporation shall deliver to the Employee a replacement Option for any remaining
Options, if any.
4
<PAGE>
EIGHTH: Upon exercise of the Options granted hereby, or upon sale of
------
the shares purchased upon exercise of the Options, as the case may be, the
Corporation shall have the right to require the Employee to remit to the
Corporation or, in lieu thereof, the Corporation may deduct, an amount of shares
or cash sufficient to satisfy federal, state or local withholding tax
requirements, if any, prior to the delivery of any certificate for such shares
or thereafter, as appropriate.
NINTH: As used herein, the terms "subsidiary" or "subsidiaries" shall
-----
mean any present or future corporation which would be a "subsidiary corporation"
of the Corporation as that term is defined in Section 424(f) of the Internal
Revenue Code of 1986, as now or hereafter amended.
TENTH: This Agreement contains the sole and entire Option Grant and
-----
may not be changed, varied, amended or modified, except by an instrument in
writing duly executed by the Corporation.
SPECIALTY CATALOG CORP.:
BY: -------------------------------
NAME:
TITLE: DIRECTOR
5
<PAGE>
I hereby accept the Option granted above in accordance with and
subject to the terms and conditions of the Option Agreement set forth above, and
agree to be bound thereby.
Date Accepted: _____________, 199___
_______________________________
Employee
Social Security Number:_________________________
6
<PAGE>
EXHIBIT 7
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of October 15, 1996 (the "Agreement") by and
between SPECIALTY CATALOG CORP., a Delaware corporation ("Specialty") having its
offices at 21 Bristol Drive, South Easton, Massachusetts, SC CORPORATION, a
Delaware corporation ("SC"; together with Specialty, sometimes referred to as
the "Corporation") having its offices at 21 Bristol Drive, South Easton,
Massachusetts, and STEVEN L. BOCK, an individual having an address at 10
Graystone Lane, Weston, Massachusetts 02193 ("Executive").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Corporation entered into an Employment Agreement (the "Prior
Employment Agreement"), Bonus Agreement and Stock Option Agreement with
Executive as of November 30, 1994 (as heretofore amended, taken together, the
"Prior Employment Agreements");
WHEREAS, the Corporation intends in the immediate future to engage in an
initial public offering in which it will offer its common stock to the public
pursuant to a Registration Statement on Form S-1 (which was filed with
Securities and Exchange Commission on August 26, 1996), the effective date of
such registration statement being referred to herein as the "Effective Date" and
the date of closing of such initial public offering being referred to herein as
the "Closing Date";
WHEREAS, the parties hereto wish to consolidate the Prior Employment
Agreements and to amend certain provisions thereof, substantially effective upon
the Effective Date;
WHEREAS, the Corporation desires to continue to employ Executive in an
executive capacity and to be assured of his services as such on the terms and
conditions hereinafter set forth; and
WHEREAS, Executive is willing to accept such employment on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, and intending to be legally bound hereby,
the Corporation and Executive hereby covenant and agree as follows:
1. Term.
----
(a) On the terms and subject to the conditions set forth in this
Agreement, the Corporation offers and Executive accepts employment with the
Corporation, effective as of the Effective Date. The terms of this Agreement
shall become effective on and as of the Effective Date, excepting only the terms
of Section 1.(b), which become effective as therein provided, and the Prior
Employment Agreements shall on the Effective Date be superseded hereby and be
and be deemed null and void for all purposes.
<PAGE>
(b) Until the Effective Date, Executive's employment shall continue
pursuant to the Prior Employment Agreements. Anything contained herein to the
contrary notwithstanding, if the Effective Date shall not have occurred on or
before November 4, 1996, this Agreement (other than this Section 1.(b), which
shall be effective immediately upon execution and delivery of this Agreement)
shall be null and void, and Executive's employment shall continue pursuant to
the Prior Employment Agreements, provided, however, that, effective at the time
-------- -------
(the "Execution Date") of execution and delivery of this Agreement, Section
8(a)(vii) of the Prior Employment Agreement is hereby amended by deleting the
date "June 30, 1996" on the first line thereof and replacing the same with the
date "March 31, 1998." This modification shall take effect on the Execution Date
regardless whether the remaining provisions of this Agreement ever become
effective .
(c) Subject to earlier termination as hereinafter provided, the term of
this Agreement shall commence on the Effective Date and shall end (unless notice
of expiration shall not have been timely given by the Corporation or Executive,
as hereinafter provided in this Section 1.(c)) at the close of business on
December 31, 1999 (as such term may be extended or earlier terminated, the
"Term"). Either the Corporation or Executive may cause the Term to expire at the
end of any calendar year ending on or after December 31, 1999 by giving not less
than six months' notice of expiration in writing to the other party. For
purposes of this Employment Agreement, a "Term Year" shall be a period during
the Employment Term commencing on January 1, 1997 (or any anniversary thereof)
and ending on the date immediately preceding the next anniversary of such date,
it being understood that, for purposes of this Agreement, the portion of any
calendar year following the last full calendar year of the Term shall be deemed
a Term Year, except that vacation pursuant to Section 2.(d) for any Term Year of
less than a full calendar year in duration shall be prorated.
2. Employment.
----------
(a) Effective upon the Effective Date, the Corporation hereby employs
Executive, and Executive agrees to serve, as Chief Executive Officer and
Chairman of the Board of Directors of the Corporation and of the Corporation's
subsidiary, SC PUBLISHING, INC., a Delaware corporation ("Publishing").
(b) Subject to the control of the Board of Directors of the Corporation,
Executive shall exercise general direction and control over all of the business,
operations and affairs of the Corporation and Publishing and have such powers
and duties as generally pertain to a chief executive officer.
(c) Executive shall be responsible for duties consistent with his
executive position and of such nature as are usually associated with his office
as may be designated from time to time by the Board of Directors, but neither
the Board of Directors nor the Corporation will assign Executive any duties
inconsistent with his status as Chief Executive Officer and Chairman of the
Board of Directors of the Corporation or will substantially alter the nature or
status of his responsibilities. Such duties shall be performed primarily in the
Corporation's facility in South
-2-
<PAGE>
Easton, Massachusetts, subject to reasonable travel outside of this area as may
be necessary for Executive to perform his duties.
(d) Executive shall faithfully and diligently discharge his duties
hereunder and use his best efforts to implement the policies established by the
Board of Directors of the Corporation. Executive agrees to devote substantially
all of his time and attention exclusively to the rendering of services
hereunder, subject to four weeks vacation per Term Year and reasonable time to
engage in other business, charitable and professional activities which are not
inconsistent with his duties hereunder (including but not limited to his
covenant under Section 10), including but not limited to participation on the
boards of directors of one or more companies.
3. Base Salary. During the Term of Executive's employment hereunder, the
-----------
Corporation shall cause Executive to receive a base salary at the rate set forth
in Exhibit 1. Such base salary in effect at any given time is referred to
herein as the "Base Salary." The Base Salary shall be payable in accordance
with the present payroll practices of the Corporation. In addition, Executive
may receive such additional compensation (in the form of bonuses and the like)
that the Corporation's Board of Directors shall, in the exercise of its good
faith and reasonable discretion, determine (including, but not limited to, the
Bonus Compensation described at Section 4).
4. Bonus Compensation. In addition to the Base Salary payable to Executive
------------------
pursuant to Section 3, the Corporation shall cause Executive to receive the
following additional compensation:
(a) Deferred Bonus. The Corporation shall pay or cause Executive to
--------------
receive a bonus (the "Deferred Bonus") in the aggregate amount of $187,500,
payable in three (3) equal installments of $62,500 each on January 1, 1997, June
30,1997 and January 1, 1998.
(b) Performance Bonus. For each fiscal year (a "Fiscal Year") of the
-----------------
Corporation during the Term hereof, Executive shall be entitled to receive
incentive compensation (as described below) to be paid on or before the 90th day
following the end of the Corporation's Fiscal Year. The incentive compensation
payable hereunder in respect of the 1996 Fiscal Year shall be at the discretion
of the Board of Directors. Commencing with the Fiscal Year beginning January 1,
1997, Executive's entitlement to incentive compensation for any Fiscal Year of
the Corporation shall be predicated upon the successful accomplishment of
annual, business-related performance goals for the Corporation established by
the Board of Directors of the Corporation in Management's annual budget or plan,
as approved by the Board of Directors of the Corporation (each such annual
budget or plan being referred to, for the relevant year, as the "Plan"). For
each such year, Executive shall earn a Performance Bonus equal to the percentage
of Base Salary set forth in Exhibit 2. The incentive compensation payable
hereunder in respect of any period constituting less than an entire Fiscal Year
(a "Partial Year") shall be based upon the Corporation's actual level of
performance for the full Fiscal Year in which the date of termination occurred,
measured against the Plan, and prorated for the Partial Year by
-3-
<PAGE>
multiplying the full incentive bonus by a fraction, the numerator of which shall
be the number of days in such Partial Year and the denominator of which shall be
365.
(c) Certain Adjustments. In the event that the Corporation shall acquire
-------------------
one or more additional businesses during any year, the parties acknowledge that
the Plan must be adjusted, either upward or downward, to set the formula so that
Management may be compensated for improvements in performance after giving
effect to the pertinent transaction. Similar adjustments shall be necessitated
by one or more dispositions of businesses by the Corporation. Therefore, the
Plan shall be appropriately adjusted, in light of the facts and circumstances of
the particular situation, for acquisitions and dispositions by the Corporation
of businesses. In the event that Executive and the Corporation shall dispute
the computation of the calculation of the Performance Bonus or appropriate
adjustments to the Plan for acquisitions or dispositions, such dispute shall be
resolved by arbitration as provided in Section 20, except that the arbitrator
shall be one certified public accountant acceptable to both the Corporation and
Executive.
(d) Certain Bonuses under Prior Employment Agreements. Except as provided
-------------------------------------------------
herein, as of the Effective Date, all bonuses to which Executive was entitled
under the Prior Agreements, whether earned or unearned, accrued or otherwise,
are hereby waived and are of no further force or effect.
5. Working Facilities and Benefits.
-------------------------------
(a) Working Facilities. The Corporation shall furnish or cause to be
------------------
furnished to Executive a suitable office, and such other facilities, equipment
and secretarial and other services, as are suitable to his position and are
adequate for the performance of his duties hereunder.
(b) Reimbursement of Expenses. The Corporation shall promptly reimburse
-------------------------
to Executive, or cause Executive to be reimbursed for, all reasonable expenses
paid or incurred by Executive in connection with the performance of his duties
hereunder, including but not limited to the reasonable costs and expenses of his
business travel and entertainment incurred on behalf of or in connection with
the providing of services for the Corporation.
(c) Memberships. The Corporation shall reimburse Executive annual dues
-----------
and reasonable out-of-pocket expenses attributable to Executive's membership in
the "Young President's Organization," annual dues and reasonable out-of-pocket
expenses attributable to Executive's membership in the "Association for
Corporate Growth," and annual dues and reasonable out-of-pocket expenses
attributable to Executive's membership in such other professional organizations
and associations as may be appropriate.
(d) Fringe Benefits. Executive shall be entitled to receive such fringe
---------------
benefits normally provided by the Corporation to executives in his position
(including life insurance and disability coverage, vacation, sick leave, medical
and dental insurance, travel and accident insurance, participation in the
Corporation's 401(k) Plan, and stock options). During the Term, the
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<PAGE>
Corporation will retain, maintain and not terminate any compensation plan or
benefit program (including but not limited to certain life and disability
insurance policies in effect on the date of this Agreement) in which Executive
participates, and will not terminate Executive's participation in any such plan
or program, unless an equitable agreement embodied in an ongoing substitute or
alternative plan or program has been made.
(e) Life Insurance and Death Benefit. The Corporation shall obtain and
--------------------------------
maintain in full force and effect at all times during the Term (and for any
period thereafter during which the Corporation is obligated to pay severance) a
life insurance policy on the life of Executive, which will provide a death
benefit to Executive's designee (or, if none, Executive's estate) of One Million
Dollars ($1,000,000.00). In the event that the Corporation shall for any reason
whatsoever fail to maintain such an insurance policy on Executive's life at all
such times as provided under this Section 5.(e), then the Corporation shall be
obligated, upon Executive's death during any such time, to pay to Executive's
designee (or, if none, Executive's estate) a death benefit of One Million
Dollars ($1,000,000.00)
6. Stock Options.
-------------
(a) Effective upon the Closing Date, all 310,226 options granted to
Executive pursuant to the Prior Employment Agreements, which are exercisable at
an exercise price of $.3072 per share,/1/ shall automatically vest and all
restrictions against exercising such options (except such as may be required by
law) shall thereupon lapse.
(b) Prior to the Effective Date, the Corporation shall grant to Executive:
(i) options, qualifying as incentive stock options ("ISO Options") pursuant to
the Corporation's 1996 Stock Option Plan (the "1996 Stock Option Plan"), to
purchase 75,000 shares of Common Stock at an exercise price equal to the price
at which the Corporation's Common Stock will be offered in its initial public
offering, exercisable for a period of ten (10) years from the date of grant, and
(ii) non-qualified options ("NQS Options"), which shall not be granted pursuant
to the Plan, to purchase 75,000 shares of Common Stock underlying such options
at a purchase price of $5.33 per share, exercisable for a period of ten (10)
years from the date of grant, such options to be granted pursuant to option
agreements in the forms of Exhibits 3 and 4. If the Effective Date shall not
have occurred on or before November 4, 1996, all such ISO Options and NQS
Options shall lapse and terminate immediately, without further action on the
part of the Corporation.
(c) Subject to possible earlier vesting or forfeiture as may otherwise be
provided in this Agreement, each option granted under Section 6.(b) shall vest
at the rate of 15,000 shares per year for five years commencing on the date of
grant, after which time all such options shall be fully vested in Executive.
Executive shall remain eligible to receive additional options at the discretion
of the Board of Directors and/or the administrators of the Plan.
- ---------------------
/1/After the stock split contemplated in connection with the intended initial
public offering.
-5-
<PAGE>
7. Termination. Any other provision of this Agreement to the contrary
-----------
notwithstanding, Executive's employment may be terminated only as follows:
(a) At the option of the Corporation, only in the event of:
(i) the death of Executive.
(ii) Executive's permanent disability, which shall mean Executive's
inability for a period of six consecutive months, because of a physical or
mental condition, to render the services required hereunder (all as
certified by either Executive's attending physician or a licensed physician
retained by the Corporation for the purposes of making such determination).
In the event of any disagreement between Executive's attending physician
and such physician retained by the Corporation, the matter shall be
resolved by arbitration as hereinafter provided, except that the arbitrator
shall be one licensed physician acceptable to both the Corporation and
Executive.
(iii) (A) The commission by Executive of a fraud or serious crime or
(B) Executive's knowing and chronic violation of law that results in the
Corporation's having (1) material risk of substantial damages or (2) actual
and substantial liability or loss from such damages.
(iv) any material breach by Executive of the terms hereof, which
Executive shall not have cured after reasonable notice and a reasonable
opportunity to cure.
(v) Executive chronically abuses alcohol during business hours or
chronically conducts business under the undue influence of alcohol or his
abuse of alcohol chronically and adversely affects his ability to perform
his duties, which Executive shall not have cured after reasonable notice
and a reasonable opportunity to cure.
(vi) Executive chronically abuses drugs during business hours or
chronically conducts business under the undue influence of such drugs or
his abuse of such drugs chronically affects his ability to perform his
duties, which Executive shall not have cured after reasonable notice and a
reasonable opportunity to cure.
(vii) upon notice given prior to the release by the Corporation of
its EBITDA on a consolidated quarterly basis for the next succeeding fiscal
quarter, if both:
----
(A) EBITDA for the period of six consecutive fiscal
quarters (the first such quarter being the three months ended
-6-
<PAGE>
December 31, 1996) for which quarterly results have been reported
immediately preceding the giving of such notice shall be less than 75%
of the amount of EBITDA projected by the Corporation for such period
in the annual budgets of the Corporation as approved by or amended
with the approval of the Board of Directors of the Corporation, and
---
(B) EBITDA on a cumulative basis for the period from October 1,
1996 through the end of the quarter for which quarterly results have
been reported immediately preceding the giving of such notice shall be
less than 85% of the amount of EBITDA projected by the Corporation for
such period in the annual budgets of the Corporation as approved by or
amended with the approval of the Board of Directors of the
Corporation.
For all purposes of this Agreement, "EBITDA" for any period shall mean
the aggregate earnings of the Corporation, on a consolidated basis, for the
relevant period, before interest, taxes, depreciation and amortization, all
as determined in accordance with generally accepted accounting principles
applied on a basis consistent with the manner in which such principles have
heretofore been applied by the independent public accountants of the
Corporation, except that: (1) charges, if any, against income arising
------
from the existence of outstanding executive options shall not be taken into
account; (2) gains and losses on acquisitions and dispositions of capital
assets outside the ordinary course of business shall not be taken into
account; (3) extraordinary items of income, gain, loss or expense (as so
characterized by generally accepted accounting principles applied on a
consistent basis) shall not be taken into account; and (4) changes in
accounting principles adopted by the Corporation which differ from those
accounting principles used in preparing the Plan shall not be taken into
account.
(viii)(A) all or substantially all of the capital stock or assets of
the Corporation are sold, transferred or otherwise conveyed in an arm's-
length transaction, or (B) a "Change of Control" (as hereinafter defined)
shall have occurred. For purposes of this Agreement, a "Change of Control"
of the Corporation shall be deemed to have occurred if i) any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other
than Dickstein & Co., L.P., any entity controlling, under common control
with or controlled by Dickstein & Co., L.P. or Viking Holdings, Limited, or
any entity controlling, under common control with or controlled by Viking
Holdings, Limited) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
Specialty, SC or the Corporation representing more than fifty per cent
(50%) of the combined voting power of the Corporation's then outstanding
securities; or ii) a slate of directors other than a slate proposed or
supported by management of the Corporation has been elected
-7-
<PAGE>
or designated to the Board of Directors of the Corporation by any "Person"
(including, without limitation, any persons or entities affiliated with
such persons, other than Dickstein & Co., L.P., any entity controlling,
under common control with or controlled by Dickstein & Co., L.P. or Viking
Holdings, Limited, or any entity controlling, under common control with or
controlled by Viking Holdings, Limited).
(b) At the option of Executive, only in the event of:
(i) any material breach by the Corporation of the terms hereof
(including, without limitation, termination by the Corporation of
Executive's employment for any reason not expressly set forth in Section
7.(a)), which the Corporation shall not have cured after reasonable notice
and a reasonable opportunity to cure; or
(ii) any material reduction or diminution of Executive's
responsibilities or authority (including but not limited to relieving him
of the title of Chief Executive Officer or Chairman of the Board of
Directors of Specialty, SC or the Corporation) for overall management of
the Corporation, which the Corporation shall not have cured after
reasonable notice and a reasonable opportunity to cure.
8. Certain Effects of Termination.
------------------------------
(a) In addition to any amounts payable under any other Section of this
Agreement, and subject to certain qualifications and limitations set forth in
other subsections of this Section 8, termination of Executive's employment with
the Corporation for any reason at any time shall have the following
consequences:
(i) Executive or his designee (or, if none, Executive's estate) shall
receive any Base Salary accrued to the effective date of such termination;
(ii) Executive shall receive severance in an amount equal to Base Salary
for two years or such lesser period remaining until the expiration of the
Term (but in any event not less than one year) at the then current Base
Salary rate as set forth at Exhibit 1.;
(iii) Executive or his designee (or, if none, Executive's estate) shall
receive or retain, as the case may be, all options, including but not
limited to ISO Options and NQS Options granted pursuant to Section 6.(b),
which shall accelerate and vest in their entirety as of the termination
date;
-8-
<PAGE>
(iv) Executive shall receive a pro rata portion of any Performance Bonus
based upon the Corporation's performance through the effective date of such
termination;/2/
(v) Executive shall receive the unpaid balance, if any, of the entire
Deferred Bonus, as provided by Section 4.(a), without regard to such
termination; and
(vi) Executive and his family shall receive health benefits for two years
or such lesser period remaining until the expiration of the Term (but in
any event not less than one year), as provided (or required to be provided)
pursuant to this Agreement.
In each case, all payments pursuant to Sections 8.(a)(i) (salary),
8.(a)(ii) (severance) and 8.(a)(v) (deferred bonus) shall be paid at the times
and in the fashion the same would have been paid if Executive's employment had
continued pursuant to this Agree ment.
(b) In the event that Executive's employment shall be terminated by the
Corporation during any Term Year as permitted by Section 7.(a)(i), Executive's
designee (or, if none, Executive's estate) shall be entitled to receive the
payments and benefits set forth in Section 8.(a)(v), except that:
(i) the amount specified under Section 8.(a)(i) (severance) shall be
forfeited;
(ii) any Performance Bonus otherwise afforded under Section 8.(a)(iv) shall
be forfeited; and
(iii) any Deferred Bonus otherwise afforded under Section 8.(a)(v) shall be
forfeited.
- ---------------------------
/2/ For purposes of this Agreement, the "pro rata portion" of any bonus shall
mean a. the actual amount of a full bonus based upon the Corporation's
actual EBITDA for the fiscal year in which termination occurred, multiplied
by b. a fraction, the numerator of which shall be the whole number of full
or partial days during such year in which Executive was employed by the
Corporation and the denominator of which shall be the number of days in
such fiscal year. For example:
if Executive were to die on the 26th of January in any fiscal year (other
than a leap year) otherwise expiring on December 31, the "pro rata portion"
of Executive's Performance Bonus for such year would be (a) an amount equal
to the entire Performance Bonus amount, based upon actual EBITDA for the
entire year, multiplied by (b) 26/365, or .07.
-9-
<PAGE>
(c) In the event that Executive's employment shall be terminated by the
Corporation during any Term Year as permitted by Section 7.(a)(iii), 7.(a)(iv),
7.(a)(v), or 7.(a)(vi), Executive shall be entitled to receive the payments and
benefits set forth in Section 8.(a), except that:
(i) the amount specified under Section 8.(a)(ii) (severance) shall be
forfeited;
(ii) of the options specified under Section 8.(a)(iii), Executive shall
receive or retain, as the case may be, only those options, including but
not limited to ISO Options and NQS Options, which shall have vested prior
to the effective date of termination; provided, however, that 50% of such
-------- -------
vested options shall expire if unexercised within six months after the
date of termination, and the remaining 50% of such vested options shall
expire if unexercised within one year after the date of termination;
(iii) any Performance Bonus otherwise afforded under Section 8.(a)(iv)
shall be forfeited; and
(iv) the provisions of Section 8.(a)(vi) to the contrary notwithstanding,
neither Executive nor his family shall receive any health benefits.
(d) In the event that Executive's employment shall be terminated by the
Corporation during any Term Year as permitted by Section 7.(a)(vii), Executive
shall be entitled to receive the payments and benefits set forth in Section
8.(a), except that:
(i) of the options specified under Section 8.(a)(iii), Executive shall
receive or retain, as the case may be, only those options, including but
not limited to ISO Options and NQS Options, which shall have vested prior
to the effective date of termination; provided, however, that 50% of such
-------- -------
vested options shall expire if unexercised within six months after the date
of termination, and the remaining 50% of such vested options shall expire
if unexercised within one year after the date of termination; and
(ii) any Performance Bonus otherwise afforded under Section 8.(a)(iv) shall
be forfeited.
(e) In the event that Executive's employment shall be terminated by the
Corporation during any Term Year as permitted by Section 7.(a)(viii), Executive
shall be entitled to receive the payments and benefits set forth in Section
8.(a), except that:
(i) Executive or his designee shall receive severance in an amount equal
to Base Salary for two years at the then current Base Salary rate as set
forth at Exhibit 1.; and
-10-
<PAGE>
(ii) Executive and his family shall receive health benefits for two years,
as provided (or required to be provided) pursuant to this Agreement; and
(iii) all payments pursuant to Sections 8.(a)(i) (salary), 8.(a)(ii)
(severance) (as modified hereby) and 8.(a)(v) (deferred bonus) shall be
paid promptly upon termination and all other payments shall be paid and
benefits provided at the times and in the fashion the same would have been
paid or provided if Executive's employment had continued pursuant to this
Agreement.
Executive's stock shall be sold in any such sale on the same terms as other
shares of the same class sold in such transaction, and Executive may exercise
Executive's options and participate in the sale as a holder of stock; provided,
--------
however, that, to the extent that, in the good faith judgment of the Board of
- -------
Directors of the Corporation, it is practicable for Executive to participate in
the sale (with respect to Executive's options) on a "cashless exercise" basis
(as if shares of Stock were issued solely in respect of the gain underlying the
options, and then such shares participated in the sale/3/), the Corporation
shall afford Executive the opportunity to participate in that fashion.
(f) Upon termination of Executive's employment with the Corporation by
reason of expiration of the Term without renewal, or expiration of any extension
of the Term without subsequent renewal, Executive shall be entitled to receive
the payments and benefits set forth in Section 8.(a), except that:
(i) the amount specified under Section 8.(a)(ii) (severance) shall be
limited to Base Salary for one year at the then current Base Salary rate,
as set forth at Exhibit 1.; and
(ii) the health benefits specified under Section 8.(a)(vi) shall be limited
to one year's health benefits, as provided (or required to be provided)
pursuant to this Agreement.
(g) In the event that any amounts or other benefits are payable hereunder
to or for Executive (or to Executive's designee or, if none, his estate) in
respect of any period following the termination of his employment hereunder,
such amounts or other benefits shall not be reduced in any manner by reason of
any other earnings, income or benefits of or to Executive from any other source.
- -------------------------
/3/For purposes of this provision, the shares of stock "issued solely in respect
of the gain underlying an option" shall mean that number of shares having a
value (based on the selling price per share in the sale) equal to the total
number of shares covered by the option, multiplied by the excess of 1. the
selling price per share in the sale, over 2. the exercise (or purchase) price
per share under the option.
-11-
<PAGE>
9. Intellectual Property Rights. All rights in inventions, designs and
----------------------------
intellectual property (including without limitation in patents, copyright, trade
mark, registered designs, design rights and know-how) to which Executive may
become entitled by reason of activities in the course of Executive's employment
shall vest automatically in the Corporation and Executive shall, at the request
and expense of the Corporation, provide the Corporation with all information,
drawings and documents requested by the Corporation and execute such documents
and do such things as may be reasonably required by the Corporation to evidence
such vesting. The provisions of this Section 9 shall survive the termination
of this Agreement.
10. Non-Competition Covenant.
------------------------
(a) During the Term, and (subject to the terms of Section 10.(b)) for a
period of twenty-four months thereafter, Executive shall not, directly or
indirectly, (i) engage or become interested in (as owner, stockholder, partner,
director, officer, employee, consultant or otherwise) the business, in the
United States or anywhere else in the world, of marketing, manufacturing,
importing, producing or selling, by direct mail solicitation including but not
limited to catalogs (provided, in each case, that the Corporation derives 5% or
--------
more of its revenues at the time from such products or business), wigs, wiglets,
ladies' fashion hats, continuing education courses and any other products or
businesses in which the Corporation may then be engaged, or (ii) directly or
indirectly, engage, employ, recruit, or solicit to engage, employ or recruit,
any person who was employed by the Corporation at any time during the nine-month
period immediately preceding such engagement, employment, recruitment or
solicitation; except that Executive shall not be precluded or prevented from (A)
------
owning not more than 2% of the common stock of one or more public companies
engaging in any such business, or (B) engaging or becoming interested in or
employed by a company which includes such a business so long as (1) such
----------
business does not generate more than 5% of the revenues of such company, and (2)
such business does not generate more than $5,000,000 in revenues for such
company, and (3) Executive is not involved in starting, managing or increasing
any such business in other than an insubstantial way.
(b) Anything contained in Section 10 to the contrary notwithstanding, the
terms of Section 10 shall be of no force or effect after termination of the
Term unless:
------
(i) Executive's employment shall have been properly terminated pursuant to
and in accordance with Section 7.(a)(ii), 7.(a)(iii), 7.(a)(iv), 7.(a)(v)
or 7.(a)(vi) and
(ii) the Corporation shall be and remain, in all material respects, in
compliance with all of its obligations under this Agreement;
provided that, in the event of termination of Executive's employment with
-------- ----
the Corporation by reason of expiration of the Term without renewal, or
expiration of any extension of the Term without subsequent renewal, or pursuant
to Section 7.(a)(vii), the duration of the covenant set forth in this Section 10
shall be limited to the Term and a period of twelve months thereafter.
-12-
<PAGE>
11. Confidential Information. Executive acknowledges that, as a result of his
------------------------
employment by the Corporation, Executive has obtained and will obtain secret and
confidential information concerning the business of the Corporation, including
without limitation the identity of customers and sources of supply, their needs
and requirements, the nature and extent of the Corporation's arrangements with
them, and related cost, price and sales information. Executive also
acknowledges that the Corporation would suffer substantial damage if, during the
period of his employment with the Corporation or thereafter, Executive should
divulge secret and confidential information relating to the business of the
Corporation acquired by him in the course of his employment. Therefore,
Executive agrees that he will not at any time, whether during the Term of this
Agreement or thereafter, disclose or divulge at any time to any person, firm or
corporation, any secret or confidential information obtained by Executive while
employed by the Corporation, including but not limited to operational,
financial, business or other affairs of the Corporation, trade "know how" or
secrets, customer lists, sources of supply, pricing policies, operational
methods or technical processes, except (a) in the course of performing his
duties for the Corporation; (b) with the Corporation's consent; (c) to the
extent that any such information is in the public domain other than as a result
of Executive's breach of his obligation hereunder; (d) where required to be
disclosed by court order, subpoena or other government process; or (e) where
otherwise required to be disclosed by law or administrative rule or regulation.
In the event that Executive shall be required to make disclosure pursuant to the
provisions of Section 11.(d) or 11.(e), above, Executive shall promptly notify
the Corporation thereof and shall, in each case at the Corporation's expense,
(A) take all reasonable necessary steps requested by the Corporation to defend
against the enforcement of such subpoena, court order or other government
process, and (B) permit the Corporation, at its expense, to intervene and
participate with counsel of its choice in any proceeding relating to the
enforcement thereof. Upon termination of his employment with the Corporation, or
at any time the Corporation may so request, Executive will promptly deliver to
the Corporation all memoranda, notes, records, reports, manuals, drawings,
blueprints and other documents (and all copies thereof) relating to the business
of the Corporation which he may then possess or maintain under his control.
12. Specific Performance. The Executive acknowledges that in the event of a
--------------------
breach by him of any of the covenants contained in Section 10 or Section 11,
the Corporation shall be entitled to immediate relief enjoining such violations
in any court or before any judicial body having jurisdiction over such a claim.
13. Successors; Binding Agreement.
-----------------------------
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation expressly to
assume and agree to perform this Agreement in the manner and to the same extent
that the Corporation would be required to perform it if no such succession had
taken place. Failure of the Corporation to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement, and for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. As
used in this Agreement, "the Corporation" shall mean the
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<PAGE>
Corporation as hereinbefore defined and any successor to its business and/or
assets, as aforesaid, which assumes and agrees to perform this Agreement by
operation of law or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Corporation, its successors and assigns, and by Executive, his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
14. Indemnification. The Corporation hereby undertakes and agrees to indemnify
---------------
and hold Executive harmless, to the fullest extent permitted under applicable
law, from, against and in respect of (and shall on demand reimburse Executive
for) any and all loss, liability, cost, expense or damage (and any and all
actions, suits, proceedings, claims, demands, assessments, judgments, costs and
expenses, including, without limitation, legal fees and expenses, incident to
any of the foregoing) suffered or incurred by Executive arising out of or in
connection with (a) his performance of his duties with or for the Corporation or
Publishing, (b) his holding any office, title or capacity with the Corporation
or Publishing at any time, or (c) by reason of any act or omission of the
Corporation or Publishing; provided that Executive did not act in bad faith or
--------
in a manner he reasonably believed to be opposed to the best interests of the
Corporation.
15. Notices. For purposes of this Agreement, all notices and other
-------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopied (receipt
acknowledged) or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt, and
provided that all notices to the Corporation shall be directed to the attention
- --------
of the Board with a copy to the Secretary of the Corporation, and that copies of
all notices to Executive shall be given to Jack M. Platt, Esq., One Rockefeller
Plaza, New York, New York 10020 (telecopier: (212) 332-3315).
16. Miscellaneous. No provision of this Agreement may be modified, waived or
-------------
discharged unless such waiver, modification or discharge is agreed to, in
writing, and signed by Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. Each party
acknowledges that the services to be rendered under this Agreement are unique
and of extraordinary character, and in the event of a breach by either party of
any of the terms of this Agreement, the other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either at law or in equity, to obtain damages for any breach of
the terms and provisions hereunder, to require and obtain specific performance
by the breaching party of its obligations hereunder, and to enjoin the breaching
party from acting in violation of this Agreement. Such remedies are in addition
to those
-14-
<PAGE>
otherwise available at law or in equity to the Corporation. The validity,
interpretation, construction and performance of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
Commonwealth of Massachusetts (other than the choice of law principles thereof).
References in this Agreement to Sections and Exhibits are to Sections of and
Exhibits to this Agreement unless otherwise specified or unless the context
otherwise requires.
17. Severability; Validity. If any term or provision of this Agreement is
----------------------
invalid or unenforceable in any jurisdiction, (a) the remaining terms and
provisions hereof shall be unimpaired; (b) any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction; and (c) the invalid or
unenforceable term shall, for purposes of such jurisdiction, be deemed replaced
by a term or provision, as determined by a court or pursuant to an arbitration
proceeding, that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision (but such
replacement shall not in any event be more restrictive or burdensome upon
Executive).
18. Counterparts. This Agreement may be executed in two or more counterparts,
------------
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
19. Prior Employment Agreements. Upon the effectiveness of this Agreement, the
---------------------------
Prior Employment Agreements will be superseded, terminated and of no further
force or effect, and Executive thereupon shall have released, and be deemed to
have released, such claims as he may have thereunder.
20. Arbitration; Certain Expenses. Any and all disputes which may arise under
-----------------------------
Section 4.(c) or 7.(a)(ii) of this Agreement (but no other Section hereof), to
the extent set forth in such sections, shall be submitted to and settled by
arbitration in Boston, Massachusetts in accordance with the procedural rules
then obtaining of the American Arbitration Association and any successor
thereto, except as may be specifically set forth in the relevant Sections of
this Agreement. The decision of the arbitrator or arbitrators (whether
accountants or physicians, as the case may be) shall be final, conclusive and
binding upon the parties, and a judgment may be obtained thereon in any court
having jurisdiction.
21. Legal and Other Costs.
---------------------
(a) In the event that (i) the Corporation defaults materially in any
obligation under this Agreement and fails to cure such default within thirty
days after notice by or on behalf of Executive, and Executive seeks legally to
enforce his rights hereunder, or (ii) the Corporation seeks to enforce any
rights hereunder but shall fail to prevail in the proceeding in which such
rights are sought to be enforced, then, in either such event, in addition to all
damages and other remedies to which Executive is or may be entitled hereunder,
the Corporation shall promptly pay to Executive an amount equal to all costs and
expenses (including but not limited to reasonable
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<PAGE>
fees and expenses of counsel) paid or incurred by Executive in connection with
such enforcement or proceeding.
(b) In the event that (i) Executive defaults materially in any obligation
under this Agreement and fails to cure such default within thirty days after
notice by or on behalf of the Corporation, and the Corporation seeks legally to
enforce its rights hereunder, or (ii) Executive seeks to enforce any rights
hereunder but shall fail to prevail in the proceeding in which such rights are
sought to be enforced, and, in either such case, claims or defenses asserted by
---
Executive shall have been finally determined by a court having jurisdiction in
the matter to be "frivolous" under applicable law, rule or regulation, then, in
----
either such event, in addition to all damages and other remedies to which the
Corporation is or may be entitled hereunder, Executive shall promptly pay to the
Corporation an amount equal to all costs and expenses (including but not limited
to reasonable fees and expenses of counsel) paid or incurred by the Corporation
in connection with such enforcement or proceeding.
IN WITNESS WHEREOF, the Corporation and Executive have executed and
delivered this Employment Agreement as of the date first above written.
SPECIALTY CATALOG CORP.
By:__________________________
Name:
Title:
SC CORPORATION
By:__________________________
Name:
Title:
___________________________
Steven L. Bock
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<PAGE>
EXHIBIT 1.
BASE SALARY
-----------
<TABLE>
<CAPTION>
Year Base Salary
- ------------ -----------
<S> <C>
1996 $280,000
1997 $290,000
1998 $300,000
1999 $310,000
Thereafter $310,000
</TABLE>
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<PAGE>
EXHIBIT 2.
PERFORMANCE BONUS
-----------------
<TABLE>
<CAPTION>
For periods commencing January 1, 1997:
Corporation's Actual EBITDA Percentage Of Base Salary To Be
As A Percentage Of Plan EBITDA Awarded As A Performance Bonus
- -------------------------------- --------------------------------
<S> <C>
90% 10.0%
100% 25.0%
115% 50.0%
130% 75.0%
150% 100.0%
</TABLE>
In the event that the Corporation's Actual EBITDA as a percentage of Plan
EBITDA is greater than 90% but falls between any percentages set forth in the
left column, then the percentage of Base Salary to be awarded as a Performance
Bonus shall be prorated between the immediately lower and immediately higher
entries in the right column. For example, if actual EBITDA is exactly 95% of
Plan EBITDA, or halfway between 90% and 100% in the left column, then the
Performance Bonus would be exactly halfway between the corresponding percentages
in the right column, or 17.5% of Base Salary.
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