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                                                                  Exhibit 10.02
===============================================================================



                              THIRD AMENDMENT TO
                         CREDIT AND GUARANTY AGREEMENT



                                      AND

                              SECOND AMENDMENT TO
                               CREDIT AGREEMENT



                         Dated as of September 30 1998



                                    Between



                            SPECIALTY CATALOG CORP.
                        SC CORPORATION, d/b/a SC DIRECT
                              SC PUBLISHING, INC.

                        DAXBOURNE INTERNATIONAL LIMITED



                                      and



                               BANKBOSTON, N.A.



===============================================================================
<PAGE>
 
               THIRD AMENDMENT TO CREDIT AND GUARANTY AGREEMENT
                                      AND
                     SECOND AMENDMENT TO CREDIT AGREEMENT



     This THIRD AMENDMENT TO CREDIT AND GUARANTY AGREEMENT and SECOND AMENDMENT
TO CREDIT AGREEMENT is entered into as of September 30, 1998 by and among
SPECIALTY CATALOG CORP., a Delaware corporation (the "Company"), SC CORPORATION,
a Delaware corporation d/b/a SC DIRECT ("SC Direct"), and SC PUBLISHING, INC., a
Delaware corporation ("SC Publishing") (each a "U.S. Borrower" and collectively
the "U.S. Borrowers") and DAXBOURNE INTERNATIONAL LIMITED, (Registered No.
3369640), a private company limited by shares formed under the laws of England
and Wales (the "U.K. Borrower") (the U.S. Borrowers and U.K. Borrower each a
"Borrower" and collectively, the "Borrowers") and BANKBOSTON, N.A., a national
banking association (the "Bank").


                                 Recitals
                                 --------

     The Borrowers and the Bank are parties to a Credit and Guaranty Agreement
dated as of March 12, 1997 (as amended, the "U.S. Credit Agreement") and a
Credit Agreement dated as of October 3, 1997 (as amended, the "U.K. Credit
Agreement") (each a "Credit Agreement" and collectively, the "Credit
Agreements") and desire to amend the Credit Agreements in various respects.  All
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Credit Agreements.

     NOW, THEREFORE, the Borrowers and the Bank hereby amend the Credit
Agreements as follows:

     Section 1.  Definitions.  Section 1.1 of the Credit Agreements is hereby
                 -----------                                                 
amended as follows:

          (a)  The definition of "Consolidated EBITDA" is hereby deleted in its
     entirety and a new definition substituted therefor as follows:



                    "`Consolidated EBITDA' shall mean for any period the sum of
                      -------------------                                      
               (a) Consolidated Net Income plus (b) all amounts deducted in
                                           ----                            
               computing Consolidated Net Income in respect of (i) interest
               expense on Indebtedness, (ii) taxes based on or measured by
               income, and (iii) depreciation and amortization expense, in each
               case for the period under review; provided, however, that in
                                                 -----------------         
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               calculating Consolidated Net Income, the restructuring charge
               incurred by the Company and its Subsidiaries relating to
               severance packages for certain senior employees during the
               quarter ended September 30, 1998, in an aggregate amount not to
               exceed $500,000, shall not be treated as an expense during such
               quarter but shall be treated as an expense in future quarters as
               and when such severance amounts are paid in cash."

          (b)  The definition of "Consolidated Operating Cash Flow" is hereby
     deleted in its entirety and a new definition substituted therefor as
     follows:

               "`Consolidated Operating Cash Flow' shall mean (a) Consolidated
                 --------------------------------                             
               EBITDA less (b) the sum of (i) Capital Expenditures plus (ii)
               consolidated cash payments for taxes for the applicable period;
               provided, however, in calculating Consolidated Operating Cash
               --------  -------                                            
               Flow for any period, there shall not be deducted as a Capital
               Expenditure amounts expended for Excluded Capital Expenditures
               during such period."

          (c)  The definition of "1996 Financial Statements" is hereby deleted
     in its entirety and a new definition substituted therefor as follows:

               "`1997 Financial Statements' shall mean the Consolidated Balance
                 -------------------------                                     
               Sheet of the Company and its Subsidiaries as of January 3, 1998
               and the related Consolidated Statements of Operations,
               Stockholders" Equity (Deficit) and Cash Flows for the year then
               ended and notes to such financial statements, audited by Deloitte
               & Touche LLP."

          (d)  A new definition of Excluded Capital Expenditures shall be added
     in alphabetical order, as follows:

               "`Excluded Capital Expenditures' shall mean (a) Capital
                 -----------------------------                        
               Expenditures in the following amounts for the quarters indicated:

                Q4 97      Q1 98     Q2 98    Q3 98
                -----      -----     -----    -----

               $376,000  $358,000  $110,000  $56,000

               and (b) up to $400,000 in the aggregate for Capital Expenditures
               for MIS upgrades and telemarketing costs during the fourth
               quarter of fiscal 1998 and the first quarter of fiscal 1999."

                                       2
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     Section 2.  Representations and Warranties; No Default.  The U.S. Borrowers
                 ------------------------------------------                     
hereby confirm to the Bank the representations and warranties of the U.S.
Borrowers set forth in Article 5 of the U.S. Credit Agreement as amended as of
the date hereof, as if set forth herein in full (provided, however that
references therein to the 1996 Financial Statements shall be deemed to refer to
the 1997 Financial Statements).  The U.K. Borrower hereby confirms to the Bank
the representations and warranties of the U.K. Borrower set forth in Article 5
of the U.K. Credit Agreement as amended as of the date hereof, as if set forth
herein in full.  The Borrowers hereby certify that no Default exists under the
Credit Agreements.  The Borrowers hereby further certify that SC Licensing is
not a party to any agreement other than the SC Licensing Transfer Documents.

     Section 3.  Miscellaneous.  The Borrowers agree to pay on demand all the
                 -------------                                               
Bank's reasonable expenses in preparing, executing and delivering this Third
Amendment to Credit and Guaranty Agreement and Second Amendment to Credit
Agreement, and all related instruments and documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of the Bank's special
counsel, Goodwin, Procter & Hoar  LLP.  This Third Amendment to Credit and
Guaranty Agreement and Second Amendment to Credit Agreement shall be a Bank
Agreement under each of the Credit Agreements and shall be governed by and
construed and enforced under the laws of The Commonwealth of Massachusetts
(except to the extent it effects any amendment of the U.K. Credit Agreement, as
to which English law shall apply).

                                       3
<PAGE>
 
     IN WITNESS WHEREOF, the U.S. Borrowers, the U.K. Borrower and the Bank have
caused this Third Amendment to Credit and Guaranty Agreement and Second
Amendment to Credit Agreement to be executed by their duly authorized officers
as of the date first set forth above.



                              SPECIALTY CATALOG CORP.



                              By:  /s/ Steven L. Bock
                                   ------------------------------------
                                   Name:  Steven L. Bock
                                   Title:  CEO



                              SC CORPORATION d/b/a SC DIRECT

                              By:  /s/ Steven L. Bock
                                   ------------------------------------
                                   Name:  Steven L. Bock
                                   Title:  CEO



                              SC PUBLISHING, INC.



                              By:  /s/ Steven L. Bock
                                   ------------------------------------
                                   Name:  Steven L. Bock
                                   Title:  CEO



                              DAXBOURNE INTERNATIONAL LIMITED



                              By:  /s/ Steven L. Bock
                                   ------------------------------------
                                   Name:  Steven L. Bock
                                   Title:  Director



                              By:  /s/ Richard Lipton
                                   ------------------------------------
                                   Name:  Richard Lipton
                                   Title:  Director



                              BANKBOSTON, N.A.



                              By:  /s/ Barbara D. Searle
                                   ------------------------------------
                                   Name:  Barbara D. Searle
                                   Title:  Vice President

                                       4