<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY REGISTRANT [X] FILED BY A PARTY OTHER THAN
REGISTRANT [_]
----------------
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definite Proxy Statement
[_] Definite Additional Materials
[_] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
----------------
SPECIALTY CATALOG CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of the filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>
SPECIALTY CATALOG CORP.
21 BRISTOL DRIVE, SOUTH EASTON, MASSACHUSETTS 02375
(508) 238-0199
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders of Specialty Catalog Corp. (the
"Company"), a Delaware corporation, will be held at Patricof & Co. Capital
Corp., 445 Park Avenue, New York, New York, at 11:00 a.m. on Tuesday, May 13,
1997 for the following purposes:
1. To elect directors of the Company;
2. To consider and vote upon a proposal to ratify the selection by the
Board of Directors of the firm of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending January 3, 1998;
and
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed March 31, 1997 as the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting of Shareholders. Accordingly, only shareholders of record at the close
of business on March 31, 1997 will be entitled to notice of and to vote at
such meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE YOUR PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOUR
PROXY WILL NOT BE USED.
By order of the Board of Directors,
/s/ Stephen M. O'Hara
Secretary
Dated: April 7, 1997
<PAGE>
SPECIALTY CATALOG CORP.
21 BRISTOL DRIVE, SOUTH EASTON, MASSACHUSETTS 02375
(508) 238-0199
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the Board of Directors of
Specialty Catalog Corp. (the "Company") for use at the Annual Meeting of
Shareholders to be held on Tuesday, May 13, 1997, and at any adjournments
thereof (the "Meeting").
The Company's principal executive office is located at 21 Bristol Drive,
South Easton, Massachusetts 02375.
The cost of soliciting proxies by mail, telephone, telegraph or in person
will be borne by the Company. The Company has retained the services of
Continental Stock Transfer and Trust Company, the Company's transfer agent
based in New York, to whom the Company will pay a fee plus reimbursement for
mailing and out-of-pocket expenses. In addition to solicitation by mail, the
Company will reimburse brokerage houses and other nominees for their expenses
incurred in sending proxies and proxy material to the beneficial owners of
shares held by them.
You may revoke your proxy at any time prior to its use by giving written
notice to the Secretary of the Company, by executing a revised proxy at a
later date or by attending the Meeting and voting in person. Proxies in the
form enclosed, unless previously revoked, will be voted at the Meeting in
accordance with the specifications made by you thereon or, in the absence of
such specifications, in favor of the election of the nominees for directors
listed herein and in favor of the proposal to ratify the selection of Deloitte
& Touche LLP as independent auditors for the fiscal year ending January 3,
1998, and with respect to any other business which may properly come before
the Meeting, in the discretion of the named proxies. If, in a proxy submitted
on your behalf by a person acting solely in a representative capacity, the
proxy is marked clearly to indicate that the shares represented thereby are
not being voted with respect to one or more proposals, then your proxy will
not be counted as present at the Meeting with respect to such proposals.
Proxies submitted with abstentions as to one or more proposals will be counted
as present for purposes of establishing a quorum for such proposals.
Only shareholders of record at the close of business on March 31, 1997, are
entitled to notice of, and to vote, at the Meeting or any adjournment or
postponement thereof. The Company had outstanding on March 31, 1997, 4,701,666
shares of Common Stock, each of which is entitled to one vote upon the matters
to be presented at the Meeting. The presence, in person or by proxy, of a
majority of the issued and outstanding shares of Common Stock will constitute
a quorum for the transaction of business at the Meeting. Votes withheld from
any nominee, abstentions and broker "non-votes" are counted as present or
represented for the purposes of determining the presence or absence of a
quorum for the Meeting. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner. Abstentions are
included in the number of shares present or represented and voting on each
matter. Broker "non-votes" are not so included.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table and footnotes sets forth certain information regarding
the beneficial ownership of the Company's Common Stock as of March 26, 1997 by
(i) each person known by the Company to own beneficially five percent or more
of the Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Officers and (iv) all directors and executive officers as a group. The
Company believes that each of the beneficial owners of the Common Stock listed
in the table, based on information furnished by such owner, has sole
investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
NAME OWNED PERCENTAGE (1)
- - ---- ------------ --------------
<S> <C> <C>
Steven L. Bock................................. 410,160(2) 8.2%
Stephen M. O'Hara.............................. 219,218(3) 4.5%
J. William Heise............................... -- --
Jerral R. Pulley............................... -- --
Alan S. Cooper................................. 2,500(4) *
Dickstein Partners
9 West 57th Street
New York, New York 10019
Guy Naggar..................................... 2,500(4) *
Dawnay, Day & Co., Ltd
15 Grosvenor Gardens
London, England SW1W09D
Samuel L. Katz................................. 93,075(4) 2.0%
HFS, Incorporated
6 Sylvan Way
Parsippany, New Jersey 07054
Andrea Pomerantz Lustig........................ 2,500(5) *
Cosmopolitan Magazine
224 West 57th Street, 8th Floor
New York, New York 10019
Martin E. Franklin............................. 230,688(6) 4.7%
555 Theodore Fremd Avenue
Rye, New York 10580
Dickstein Partners L.P. ....................... 1,347,689(7) 28.7%
Dickstein & Co., L.P.
9 West 57th Street
New York, New York 10019
Dickstein International Limited
129 Front Street
Hamilton, Bermuda
Dickstein Focus Fund L.P.
9 West 57th Street
New York, New York 10019
Viking Holdings Limited........................ 1,483,553(8) 31.6%
c/o Abacus Secretaries (Jersey Limited)
Limited
La Motte Chambers
St. Helier, Jersey
JE1 1BS Channel Islands
All executive officers and directors as a group 960,641(9) 17.6%
(8 persons)...................................
</TABLE>
- - --------
* Indicates less than 1%
2
<PAGE>
(1) Applicable percentage of ownership is based upon 4,701,666 shares
outstanding. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission ("Commission") and
generally includes voting and investment power with respect to securities.
Shares of Common Stock issued upon the exercise of options and warrants
currently exercisable or exercisable within 60 days are deemed outstanding
for computing the percentage ownership of the person holding such options
or warrants, but are not deemed outstanding for computing the percentage
ownership of any other person.
(2) Includes 310,226 shares of Common Stock underlying stock options which
became exercisable upon the consummation of the Company's initial public
offering at a price of $0.31 per share.
(3) Includes 218,218 shares of Common Stock underlying stock options which
became exercisable upon the consummation of the Company's initial public
offering at a price of $0.31 per share.
(4) Includes 2,500 shares of Common Stock underlying stock options issued
under the 1996 Stock Option Plan (the "Plan") which are exercisable at an
exercise price of $6.50 per share.
(5) Includes 2,500 shares of Common Stock underlying stock options issued
under the Plan which are exercisable at an exercise price of $6.88 per
share.
(6) Includes 228,188 shares of Common Stock issuable upon exercise of warrants
which are exercisable at an exercise price of $1.88 per share and 2,500
shares of Common Stock underlying stock options issued under the Plan
which are exercisable at an exercise price of $6.50 per share. Does not
include 37,147 shares of Common Stock issuable upon the exercise of
warrants held by Mr. Franklin's associates.
(7) Of the 1,347,689 total shares reported, Dickstein & Co., L.P. owns
beneficially 853,153 of such shares, Dickstein Focus Fund L.P. owns
beneficially 135,881 of such shares and Dickstein International owns
beneficially 358,655 of such shares. Dickstein & Co., L.P. disclaims
beneficial ownership of 135,881 shares owned by Dickstein Focus Fund L.P.
and 358,655 shares owned by Dickstein International Limited. Dickstein
Focus Fund L.P. disclaims beneficial ownership of 853,153 shares owned by
Dickstein & Co., L.P. and 358,655 shares owned by Dickstein International
Limited. Dickstein International Limited disclaims beneficial ownership of
853,153 shares owned by Dickstein & Co., L.P. and 135,881 shares owned by
Dickstein Focus Fund L.P. Dickstein & Co., L.P., Dickstein International
Limited and Dickstein Focus Fund L.P. manage investment funds. Dickstein
Partners, L.P. is the general partner of Dickstein & Co., L.P. and
Dickstein Focus Fund L.P. Dickstein Partners Inc. is the general partner
of Dickstein Partners, L.P. and is the advisor to Dickstein International
Limited. Mark B. Dickstein is the President and sole director of Dickstein
Partners Inc.
(8) Viking is a private investment company. The principal beneficial owners of
Viking are Guy Naggar (who holds less than 35% of the outstanding voting
securities of Viking) and a trust established solely for the benefit of
Mr. Naggar's adult children. Mr. Naggar has no voting or investment
control with respect to such trust.
(9) Includes 768,944 shares of Common Stock underlying stock options which are
currently exercisable and warrants that are held by Martin E. Franklin but
excludes 266,702 shares underlying options which are not currently
exercisable and warrants which are held by Mr. Franklin's associates.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has set the number of Board members at six for the
upcoming year. Each director is elected to hold office until the next annual
meeting of shareholders, or special meeting in lieu thereof, and until their
respective successors are duly elected and qualified. The Board has nominated
all of the current members of the Board for reelection. The affirmative vote
of a plurality of the shares of Common Stock present at the Meeting, in person
or by proxy, is required for the reelection of the members of the Board.
Unless authority to do so is withheld, the persons named in each proxy
(and/or their substitutes) will vote the shares represented thereby "FOR" the
election of the director nominees named below. If for any reason any nominee
is not a candidate (which is not now expected), a new nominee will be
designated by the Board to fill such vacancy, unless the Board of Directors
shall reduce the number of directors in accordance with the By-Laws of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTORS NAMED
BELOW.
INFORMATION AS TO DIRECTORS AND NOMINEES FOR DIRECTOR
There is shown below for each director and nominee for director, as reported
to the Company, the name, age and family relationship, if any, with any other
director or officer, the principal occupation and employment over at least the
last five years, the position, in any, with the Company, the period of service
as a director of the Company, and certain other directorships held.
<TABLE>
<CAPTION>
NAME AGE OFFICE HELD DIRECTOR SINCE
---- --- ----------- --------------
<S> <C> <C> <C>
Steven L. Bock................. 43 Chairman of the Board and December 1990
Chief Executive Officer
Alan S. Cooper................. 38 Director February 1996
Martin E. Franklin............. 31 Director November 1994
Samuel L. Katz................. 31 Director November 1994
Andrea Pomerantz Lustig........ 32 Director March 1997
Guy Naggar..................... 56 Director November 1994
</TABLE>
Steven L. Bock has been a director of the Company (or its predecessor
company) since December 1990. He has been a director of SC Direct and SC
Publishing (including the years when these companies were under bankruptcy
protection of the courts) since March 1989. SC Direct was formed by RSG
Partners, a private investment and management firm founded by Mr. Bock and two
partners in 1988. Mr. Bock was a partner in RSG Partners from 1988 to 1990.
From October 1986 to October 1988, Mr. Bock was a vice president of TSG
Holdings, Inc., the investment advisor to Transcontinental Services Group, a
U.K. listed investment holding company, where he was responsible for
initiating, financing and managing business investments. Mr. Bock is a
director of Xetex Corporation, a technology development company. Part of
Xetex's business is conducted through SOLI.FLOsm, a 4 50/50 joint venture with
Fluor Daniel Inc., a publicly held engineering and construction company. Mr.
Bock is a Member of SOLI.FLO's Members Committee. Mr. Bock is a member of the
Young Presidents Organization. He graduated (summa cum laude) with a B.A.
degree from SUNY at Albany and received his J.D. degree (cum laude) from
Harvard Law School.
Alan S. Cooper has been general counsel of Dickstein Partners Inc., a
private investment firm, since March 1992. Prior to joining Dickstein Partners
Inc., he was an attorney with Rosenman & Colin in New York City from August
1983 to February 1992. Mr. Cooper is a director of Hills Stores Company. Mr.
Cooper received his B.S. and J.D. degrees from the University of Pennsylvania.
Martin E. Franklin is currently Chairman and Chief Executive Officer of BEC
Group, Inc., a NYSE company, and non-executive Chairman of Eyecare Products
plc, a London Stock Exchange Company. Mr. Franklin was Chairman and Chief
Executive Officer of Benson Eyecare Corporation, the predecessor company
4
<PAGE>
to BEC Group, from October 1992 through May 1996. Mr. Franklin has been the
Chairman of the Board and Chief Executive Officer of Pembridge Holdings, Inc.
since 1990 and sits on various other private company boards. From 1988 to
1990, Mr. Franklin was Managing Director of Pembridge Associates, Inc. Both
Pembridge Associates, Inc. and Pembridge Holdings specialize in merchant
banking and related services. Mr. Franklin received a B.A. in Political
Science from the University of Pennsylvania.
Samuel L. Katz has been the Senior Vice President-Acquisitions of HFS
Incorporated, a public corporation engaged primarily in the lodging and real
estate franchising businesses, since January 1996. From June 1993 to December
1995, Mr. Katz was a Vice President of Dickstein Partners Inc. From February
1992 to June 1993, Mr. Katz was the Co-Chairman of Saber Capital Inc., a
private investment firm. From February 1988 to January 1992, Mr. Katz served
as an Associate and then a Vice President of the Blackstone Group, an
investment and merchant bank, where he focused on leveraged buy-out
transactions. Mr. Katz is a director of Hills Stores Company. Mr. Katz
received his B.A. in Economics from Columbia University in 1986.
Andrea Pomerantz Lustig has been the beauty and fitness director of
Cosmopolitan Magazine since 1991. Prior to that she was Cosmopolitan's beauty
editor since March 1990. Ms. Pomerantz Lustig also acts as a spokesperson for
Cosmopolitan Magazine, representing the magazine's philosophy on beauty,
fitness and relationship issues. Prior to Cosmopolitan Magazine, she was with
Conde Nast where she was a beauty writer for Glamour Magazine since 1989. Ms.
Pomerantz Lustig began her career in beauty journalism in 1988 at Mademoiselle
where she was a beauty researcher. Ms. Pomerantz Lustig is a foundation board
member of Cosmetic Executive Women and a board member of Fragrance Foundation
Long-Range Planning Committee. Ms. Pomerantz Lustig received her B.A. in
History from the University of Pennsylvania.
Guy Naggar has been Chairman of Dawnay, Day & Co. Limited, a U.K. investment
bank founded in 1928, which is a member of the London Investment Banking
Association, since 1981. Immediately prior to becoming Chairman of Dawnay, Day
& Co. Limited, Mr. Naggar was a Director of the Charterhouse Group Limited and
of its subsidiary, Charterhouse Japhet Limited.
As compensation for service as director, each non-employee director receives
cash compensation and discretionary stock option grants. The Company pays to
each non-employee director annual cash compensation of $7,500, payable
quarterly. In addition, pursuant to the Company's 1996 Stock Option Plan,
discretionary stock options grants can be made by the Compensation Committee.
During fiscal 1996, each of the existing non-employee directors received a
grant of options under the 1996 Stock Option Plan to purchase 2,500 shares of
the Common Stock at the initial public offering price ($6.50 per share), and
such options were immediately exercisable. During fiscal 1997, Ms. Andrea
Pomerantz Lustig recieved a grant of options under the Plan to purchase 2,500
shares of the Common Stock at a price of $6.88 per share, and such options
were immediately exercisable. The Board of Directors held six meetings during
1996, and each director attended at least 80% of the aggregate of such
meetings of the Board and all committees of the Board on which he served.
COMMITTEES
The Board of Directors has established an Audit Committee comprised of
Messrs. Samuel L. Katz, Alan S. Cooper and Martin E. Franklin. Mr. Katz serves
as the chairman of the committee. The Audit Committee is responsible for
recommending to the Board of Directors the appointment of the Company's
outside auditors, examining the results of audits, reviewing internal
accounting controls and reviewing related party transactions. The Board of
Directors has also established a Compensation Committee consisting of Messrs.
Cooper and Franklin. Mr. Cooper serves as chairman of the committee. Each of
these committees held one meeting during early 1997.
5
<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth certain compensation information for the fiscal
years ended December 28, 1996, December 30, 1995 and December 31, 1994 with
respect to the Company's Chief Executive Officer and those three other
executive officers of the Company who were the most highly paid for fiscal
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
FISCAL -------------------- NUMBER OF
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS
---------------------------- ------ ---------- --------- ------------
<S> <C> <C> <C> <C>
Steven L. Bock..................... 1996 $ 285,662 $ -- 150,000
Chairman and Chief Executive Offi-
cer 1995 270,294 65,960 --
1994 212,116 100,000 310,226(1)
Stephen M. O'Hara.................. 1996 $ 208,862 $ -- 25,000
President 1995 194,718 35,000 --
1994 166,424 81,850 272,773(2)
J. William Heise................... 1996(3) $ 99,948 $ -- 30,000
Senior Vice President/Chief
Financial Officer
Jerral R. Pulley................... 1996 $ 128,457 $ -- 12,500
Senior Vice President 1995(4) 25,962 5,000 --
</TABLE>
- - --------
(1) Represents options granted in 1994 at an exercise price of $0.31 per
share, all of which became exercisable upon the completion of the
Company's initial public offering.
(2) Represents options granted in 1994 at an exercise price of $0.31 per
share, of which options to purchase 218,218 shares became exercisable upon
the completion of the Company's initial public offering, and options to
purchase 54,555 shares will become exercisable one year from the date of
the completion of the Company's initial public offering.
(3) Mr. Heise became acting chief financial officer in March 1996 and on
August 1, 1996, he was hired permanently at an annual salary of $130,000.
(4) Mr. Pulley was hired in October 1995 at an annual salary of $125,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table discloses information regarding stock options granted
during the fiscal year ended December 28, 1996. In accordance with Securities
and Exchange Commission rules, also shown are the hypothetical gains or
"option spreads" on a pre-tax basis, that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 0%, 5% and 10% from the date the options were granted over the
full option term of ten (10) years.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SHARES OPTIONS ASSUMED ANNUAL
UNDERLYING GRANTED TO RATES OF STOCK PRICE
OPTIONS EMPLOYEES EXERCISE APPRECIATION FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -------------------------------
NAME (#) 1996 ($/SHARE) DATE 0%($) 5%($) 10%($)
- - ---- ---------- ---------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Steven L. Bock.......... 75,000 23.65% $5.33 10/17/06 $ 87,750 $ 394,336 $ 864,699
75,000 23.65% $6.50 10/17/06 $ 0 $ 306,586 $ 776,949
Stephen M. O'Hara....... 25,000 7.88% $6.50 10/17/06 $ 0 $ 102,195 $ 258,983
J. William Heise........ 30,000 9.46% $6.50 10/17/06 $ 0 $ 122,634 $ 310,780
Jerral R. Pulley........ 12,500 3.94% $6.50 10/17/06 $ 0 $ 51,098 $ 129,492
</TABLE>
6
<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR END OPTION VALUES
The following table sets forth information as to options exercised during
the fiscal year ended December 28, 1996, and unexercised options held at the
end of such fiscal year, by the individuals listed in the Summary Compensation
Table.
AGGREGATED OPTION VALUES FOR FISCAL YEAR ENDED
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT DECEMBER 28,
NAME AT DECEMBER 28, 1996 1996($)(1)
- - ---- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Steven L. Bock.............. 310,226 150,000 $2,038,185 $144,750
Stephen M. O'Hara........... 218,218 79,555 $1,433,692 $367,926
J. William Heise............ -- 30,000 -- $ 11,400
Jerral R. Pulley............ -- 12,500 -- $ 4,750
</TABLE>
- - --------
(1) Value is based on the closing sale price of $6.88 per share of the Common
Stock as of December 27, 1996 (the last trading date during fiscal 1996)
minus the exercise price.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Steven L. Bock
pursuant to which Mr. Bock will serve as the Chairman of the Board and Chief
Executive Officer of the Company for a term expiring on December 31, 1999, at
a salary of $280,000 for 1996, subject to annual increases which will bring
the annual salary in the last year of the term to $310,000. Mr. Bock will be
eligible for a performance bonus ranging between 0% to 100% of his base
salary, based upon the Company's performance against its annual plan approved
by the Board. Upon executing the employment agreement, Mr. Bock was granted
options under the Plan to purchase 75,000 shares of Common Stock at the
initial public offering price of $6.50 per share and options to purchase
75,000 shares of Common Stock at a price of $5.33 per share, granted outside
of the Plan. Options to purchase 15,000 shares of Common Stock under each of
these grants will vest and become exercisable each year for five years,
subject to accelerated vesting under certain circumstances. Mr. Bock will
receive deferred bonus compensation of $187,500 accrued under his prior
employment agreement with the Company which will be paid in three equal
installments on January 1, 1997, June 30, 1997 and January 1, 1998. The
Company currently maintains an $4 million key person life insurance policy on
Mr. Bock.
The Company has entered into an employment agreement with Stephen M. O'Hara
pursuant to which Mr. O'Hara will serve as President of the Company for a term
expiring on December 31, 1999 at a salary of $205,000 for 1996, subject to
annual increases which will bring the annual salary in the last year of the
term to $235,000. Mr. O'Hara will be eligible for a performance bonus ranging
between 0% to 100% of his base salary, based upon the Company's performance
against its annual plan approved by the Board. Upon executing the employment
agreement, Mr. O'Hara was granted options under the Plan to purchase 25,000
shares of Common Stock at the initial public offering price of $6.50 per share
. Options to purchase 5,000 shares of Common Stock will vest and be
exercisable each year for five years, subject to accelerated vesting under
certain circumstances. Mr. O'Hara will receive deferred bonus compensation of
$35,000 accrued under his prior employment agreement with the Company which
will be paid in three equal installments on January 1, 1997, June 30, 1997 and
January 1, 1998. The Company currently maintains a $3 million key person life
insurance policy on Mr. O'Hara.
The Company may terminate Mr. Bock's employment: (i) upon his death or
permanent disability; (ii) if he engages in conduct that constitutes "cause;"
(iii) if the Company fails to meet certain financial targets; or (iv) upon a
change of control. Mr. Bock may terminate his agreement if there is a material
reduction of his responsibilities or a material breach of the agreement by the
Company. Mr. O'Hara or the Company may terminate his employment agreement at
any time, with notice. In the event Mr. Bock's employment is terminated
7
<PAGE>
for any reason other than "cause" or death, Mr. Bock will receive a severance
payment of from one year to two years of base salary. In the event Mr.
O'Hara's employment is terminated for any reason other than "cause" or death,
Mr. O'Hara will receive a severance payment of from six months to one year of
base salary. Both employment agreements contain noncompetition restrictions
effective during the term of employment and for a period of two years
thereafter. For the term of the employment agreements, and for any period
thereafter during which the Company is obligated to pay severance, the Company
must provide $1 million of life insurance for the benefit of each of Messrs.
Bock and O'Hara. In the event the Company fails to maintain such insurance,
upon the death of Mr. Bock or Mr. O'Hara, the Company must pay such officer's
estate a death benefit of $1 million.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE OFFICER COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's executive officer compensation consists of three primary
components: base salary, annual bonuses and grants of stock options. Each
component is intended to further the Company's overall compensation
philosophy, and to achieve the compensation objectives of the Company. The
Company's compensation philosophy is that executive compensation should
reflect the value created and protected for shareholders, while furthering the
Company's short and long-term strategic goals and values by aligning
compensation with business objectives and individual performance. Short and
long-term compensation should motivate and reward high levels of performance
and is geared to attract and retain qualified executive officers.
The Company's executive officer compensation program is based on the
following principles and objectives:
. Competitive, Fair and Balanced Compensation
The Company is committed to providing an executive officer compensation
program that helps attract and retain highly qualified executive officers. The
Company seeks to achieve a balance of compensation paid to a particular
individual and compensation paid to other executive officers inside the
Company, and strives to achieve a balance between the fixed and variable
components, and between the short and long-term components, of each executive
officer's compensation.
. Performance
Other than the Bonus Plan (as defined below), the Company has no specific
performance criteria. Generally, however, executive officers are rewarded
based upon both corporate and individual performance. Corporate performance is
evaluated by reviewing the extent to which strategic and business plan goals
are met. Individual performance is evaluated by reviewing the achievement of
specified individual objectives and the degree to which the executive officer
contributed to the overall success of the Company and management team.
COMPENSATION FOR FISCAL 1996
Salary
As described above, the Compensation Committee sets the base salary for
executive officers after reviewing the Chief Executive Officer's
recommendations and evaluations of performance, compensation for competitive
positions in the market and the historical compensation levels of the
executive officers. Under their current Employment Agreements, Steven Bock's
and Stephen O'Hara's annual increase in base salary is set by their
agreements.
Bonus
For fiscal 1996, the Company's executive officers were eligible to receive
bonuses pursuant to the terms of the Specialty Catalog Bonus Plan (the "Bonus
Plan") which was approved by the Board of Directors early in fiscal 1996.
Under the terms of the Plan, executive officer bonuses are paid from a bonus
pool which is funded based upon a formula tied to the Company's consolidated
earnings before interest, tax, depreciation and amortization ("EBITDA") for
the year. Based upon the Company's actual EBITDA, there were no bonuses earned
in fiscal 1996.
Stock Option Grants
The Compensation Committee believes that stock options, granted from time to
time throughout the year, are an excellent vehicle for compensating employees.
Because the option exercise price for the employee is generally the fair
market value of the stock on the date of grant, employees recognize a gain
only if the value of the stock increases. Thus, employees with stock options
are rewarded for their efforts to improve the long-term
9
<PAGE>
performance of the Company's stock. The size of stock option grants is
generally intended by the Compensation Committee to reflect the executive
officer's position with the Company and his other contributions to the
Company, while at the same time considering his other prior equity holdings in
the Company and the stock option awards made to other executive officers of
the Company, however, the Company has no specific target for percentage
ownership for directors or executive officers. Grants to executive officers
under the stock option program typically involve a five-year vesting period
(subject to accelerated vesting upon a change in control of the Company) to
encourage key employees to continue in the employ of the Company. At its
August 1996 meeting, the Compensation Committee granted stock options, which
became effective on the effective date of the Company's initial public
offering, to the named officers as follows: Mr. Bock, 150,000 shares; Mr.
O'Hara, 25,000 shares, Mr. Heise, 30,000 shares, and Mr. Pulley, 12,500
shares.
Conclusion
The Compensation Committee believes that the total fiscal 1996 compensation
of the Chief Executive Officer and each of the other named officers, as
described above, including the stock option grants made in August 1996 is
fair, and is within the range of compensation for executive officers in
similar positions.
Compensation Committee
Alan S. Cooper
Martin E. Franklin
10
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following Graph compares the performance of the Company's Common Stock
to the S&P 500 Index and the Small Cap Catalog Index since October 17, 1996,
the effective date of the Company's initial public offering. The graph assumes
that the value of an investment in the Company's Common Stock and each index
was $100 at October 17, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN
LOGO
11
<PAGE>
CERTAIN TRANSACTIONS
On June 1, 1996, the Company entered into an agreement with Martin E.
Franklin, a director of the Company, and two associates of Mr. Franklin,
pursuant to which Mr. Franklin and his associates loaned the Company $495,000
in junior subordinated indebtedness. The junior subordinated indebtedness has
the same interest rate as the Company's subordinated indebtedness, 11.5% per
annum, and is junior in priority to the subordinated indebtedness. The junior
subordinated indebtedness is due on August 12, 1999.
In connection with the junior subordinated indebtedness, the Company has
issued for $5,000 to Mr. Franklin and his associates warrants to purchase
265,335 shares of Common Stock. The warrants are exercisable until September
30, 1999 to purchase Common Stock at a price of $1.88 per share.
On October 3, 1996, the Company converted all of the outstanding 13%
Preferred Stock into 375,000 shares of Common Stock. The holders of the 13%
Preferred Stock, Dickstein & Co., L.P., Dickstein International, Dickstein
Focus Fund, Viking, Mark Brodsky, Samuel Katz and Wigs L.P., received 104,593,
43,969, 16,655, 181,873, 5,552, 11,104 and 11,254 shares of Common Stock,
respectively.
In August 1996, Messrs. Bock, O'Hara, Heise and Pulley received stock
options pursuant to the Plan to purchase 75,000, 25,000, 30,000 and 12,500
shares of Common Stock, respectively, at a price equal to the initial public
offering price of $6.50.
In August 1996, each of the non-employee directors received stock options
pursuant to the Plan to purchase 2,500 shares of Common Stock at a price equal
to the initial public offering price of $6.50.
On October 17, 1996, Mr. Bock received non-qualified options to purchase
75,000 shares of Common Stock at a price of $5.33 per share.
In March 1997, Ms. Andrea Pomerantz Lustig received stock options pursuant
to the Plan to purchase 2,500 shares of Common Stock at a price of $6.88 per
share.
On March 18, 1997, the Company repaid $1,896,913 of principal and accrued
interest on the subordinated indebtedness, consisting of the following
payments; Dickstein & Co., L.P. $1,330,162; Wigs L.P. $143,074; Mark Brodsky
$70,608; Samuel Katz $141,216 and; Dickstein Focus Fund L.P. $211,852.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors and certain of its officers and persons holding more than
ten percent of the Company's Common Stock are required to report their
ownership of the Common Stock and any changes in such ownership to the
Securities and Exchange Commission and the Company. Based on the Company's
review of copies of such reports, no untimely reports were made during the
fiscal year ended December 28, 1996.
INFORMATION CONCERNING AUDITORS
Based upon the recommendation of its Audit Committee, the Board of Directors
has selected the firm of Deloitte & Touche LLP as the independent auditors of
the Company for the fiscal year ending January 3, 1998. Deloitte & Touche LLP
has acted in such capacity for the Company since the 1989 fiscal year. The
Board will propose at the Meeting that the shareholders ratify this selection.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting and will be afforded the opportunity to make a statement if they so
desire and to respond to appropriate questions.
The affirmative vote of a majority of the shares of Common Stock present at
the Meeting, in person or by proxy, is required for the ratification of the
appointment of Deloitte & Touche LLP as the Company's auditors. If the
proposal to ratify the appointment of Deloitte & Touche LLP is not approved,
the Board of Directors will select and appoint an independent accounting firm
for the fiscal year ending January 3, 1998 without further shareholder action.
12
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
SELECTION OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY
FOR THE FISCAL YEAR ENDING JANUARY 3, 1998, AND PROXIES SOLICITED BY THE BOARD
WILL BE VOTED IN FAVOR THEREOF UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE ON
THE PROXY.
MISCELLANEOUS
DEADLINE FOR STOCKHOLDER PROPOSALS
In order for shareholder proposals to be presented at the Company's 1998
annual meeting of shareholders, such proposals must be received by the
Secretary of the Company at the Company's principal office in South Easton,
Massachusetts not later than December 1, 1997 for inclusion in the proxy
statement for that meeting, subject to the applicable rules of the Securities
and Exchange Commission. Delivery of such proposals should be by Certified
Mail, Return Receipt Requested.
OTHER MATTERS
The Board of Directors does not know of any other matters that may be
presented at the Meeting, except for routine matters. If other business does
properly come before the Meeting, however, the persons named on the
accompanying proxy intend to vote on such matters in accordance with their
best judgement.
ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K IS INCLUDED IN THE COMPANY'S ANNUAL
REPORT TO SHAREHOLDERS, AND IS BEING FURNISHED TO SHAREHOLDERS OF RECORD
TOGETHER WITH THIS PROXY STATEMENT. REQUESTS FOR ADDITIONAL COPIES SHOULD BE
DIRECTED TO: SPECIALTY CATALOG CORP., 21 BRISTOL DRIVE, SOUTH EASTON,
MASSACHUSETTS 02375.
April 7, 1997
13
<PAGE>
LOGO
PROXY SPECIALTY CATALOG CORP. PROXY
ANNUAL MEETING OF SHAREHOLDERS, MAY 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Steven L. Bock and Stephen M. O'Hara, as
proxies, each with full power of substitution, and hereby authorizes them to
appear and vote as designated below, all shares of Common Stock of Specialty
Catalog Corp. held on record by the undersigned on March 31, 1997, at the
Annual Meeting of Shareholders to be held May 13, 1997, and any adjournments
thereof.
The undersigned hereby directs this Proxy to be voted:
1. Election of directors:
[_] FOR the election as directors of all nominees listed
below (except as market to the contrary below)
or
[_] WITHHOLD AUTHORITY
to vote for all nominees listed below
STEVEN L. BOCK ALAN S. COOPER MARTIN E. FRANKLIN
SAMUEL L. KATZ GUY NAGGAR ANDREA POMERANTZ LUSTIG
(Instructions: To withhold authority to vote for any of the above listed
nominees, please strike a line through that individual's name)
2. Proposal to approve the appointment of Deloitte & Touche LLP as
independent auditors for the Company for the fiscal year ending January 3,
1998.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the named proxies may vote on such other business as
may properly come before the Annual Meeting, or any adjournments or
postponements thereof.
<PAGE>
LOGO
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THE PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE
MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
Date: , 1997
----------------------
---------------------------------
Signature of stockholder
---------------------------------
Signature if held jointly
NOTE: PLEASE MARK, DATE, SIGN
AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. IF
SIGNING AUTHORITY, EXECUTOR AD-
MINISTRATOR, TRUSTEE OR GUARD-
IAN, PLEASE GIVE FULL TITLE. IF
A CORPORATION OR PARTNERSHIP,
PLEASE SIGN IN CORPORATE OR
PARTNERSHIP NAME BY AN AUTHO-
RIZED PERSON.
