<PAGE>
 
                                                                    EXHIBIT 10.4

================================================================================







                               FIRST AMENDMENT TO
                                CREDIT AGREEMENT


                          Dated as of October 3, 1997


                                    Between

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

                                      and

                                BANKBOSTON, N.A.



================================================================================
<PAGE>
 
                      FIRST AMENDMENT TO CREDIT AGREEMENT



     This FIRST AMENDMENT TO CREDIT AGREEMENT is entered into as of October 3,
1997 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 "Borrower" and collectively the "Borrowers"), and DAXBOURNE
INTERNATIONAL LIMITED, (Registered No. 3369640), a private company limited by
shares formed under the laws of England and Wales ("SC (UK)") and BANKBOSTON,
N.A. (f/k/a The First National Bank of Boston), a national banking association
(the "Bank").


                                    Recitals
                                    --------

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

     NOW, THEREFORE, subject to the satisfaction of the conditions to
effectiveness specified in Section 12, the Borrowers and the Bank hereby amend
the Credit Agreement as follows:


     Section 1.     Title.  The title of the Credit Agreement on the front
                    -----                                                 
cover, on page one and in any other instance is hereby deleted in its entirety
and a new title substituted therefor as follows:

                   "Credit and Guaranty Agreement"


     Section 2.     Definitions.  Section 1.1 of the Credit Agreement is hereby
                    -----------                                                
amended as follows:

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

               "'Bank Agreement' shall mean this Agreement, as amended, the
                 --------------                                            
               Revolving Credit Note, the Term Note, the Security Agreements,
               the Pledge Agreements, the U.K. Credit Agreement and any other
               present or future agreement from time to time entered into
               between the Company or any Subsidiary and the Bank, each as
<PAGE>
 
              from time to time amended or supplemented, and all statements,
              reports and certificates delivered by the Company or any
              Subsidiary to the Bank in connection therewith."

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

              "'Bank Obligations' shall mean all present and future obligations
                ----------------                                               
              and Indebtedness of the Company and its Subsidiaries owing to the
              Bank under this Agreement, the U.K. Credit Agreement or any other
              Bank Agreement, including, without limitation, the obligations to
              pay the Indebtedness from time to time evidenced by the Revolving
              Credit Note, the Term Note, the obligations under the U.K. Credit
              Agreement and obligations to pay interest, commitment fees,
              balance deficiency fees, charges, expenses and indemnification
              from time to time owed under any Bank Agreement."

          (c) 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 (A) in
                                                -----------------             
              calculating EBITDA of the Borrowers for periods that include
              results through the fiscal quarter ending in December, 1996, the
              following assumed amounts shall be used in place of actual
              amounts:

<TABLE>
<CAPTION>
              Quarter Ending              Assumed EBITDA (000s)
              --------------              ---------------------
<S>                                       <C>
              September, 1996                   $1,226
              December, 1996                    $1,998
</TABLE>

              and (B) in calculating EBITDA for the U.K. Subsidiary for periods
              that include results through the fiscal quarter ending in
              September, 1997, $260,000 per quarter shall be used in place of
              actual amounts.

                                       2
<PAGE>
 
          (d) 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 including any fiscal quarter ending on or
               before October 3, 1998, there shall not be deducted as a Capital
               Expenditure amounts expended for certain computer equipment under
               the Master Lease described in Schedule 5.13(a) up to an aggregate
                                             ----------------                   
               of $500,000."

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

               "'Consolidated Total Debt Service'shall mean for any period the
                 -------------------------------                              
               sum of (a) interest expense for such period, plus (b) principal
                                                            ----              
               payments on Indebtedness required to be made during such period;
                                                                               
               provided, however, that with respect to periods prior to the
               -----------------                                           
               Closing, Consolidated Total Debt Service shall be calculated on
               the assumption that (i) there were principal payments in the
               third and fourth quarter of fiscal 1996 of $250,000 and $500,000,
               respectively, and principal payments in the third and fourth
               quarter of fiscal 1997 of $250,000 and $500,000, respectively,
               (ii) interest on the amount of indebtedness paid down at Closing
               (less cash balances of $2,699,790 on hand at Closing) accrued at
               a rate equal to 8.06% and (iii) interest expense for Daxbourne
               and its Subsidiaries for periods prior to September 30, 1997 is
               assumed to be $83,000 per quarter."

          (f) New definitions of "Daxbourne", "Daxbourne Acquisition",
     "Daxbourne Acquisition Documents", and "Daxbourne Disclosure Letter" shall
     be added in alphabetical order, as follows:

               "'Daxbourne' shall mean Daxbourne Limited (Registered No.
                 ---------                                              
               1320298), a private company limited by shares formed under the
               laws of England and Wales ("Daxbourne Limited"), together with
               its wholly-owned Subsidiaries, including Postinstant Limited
               (Registered No. 1559076), a private company limited by shares
               formed under the laws of England and Wales ("Postinstant"), and
               M.C. Hairways Limited (Registered No. 2758010), a private company
               limited by shares formed under the laws of England and Wales
               ("M.C. Hairways")."

                                       3
<PAGE>
 
               "'Daxbourne Acquisition' shall mean the acquisition by SC (UK) of
                 ---------------------                                          
               all of the assets of Daxbourne pursuant to the Daxbourne
               Acquisition Documents."

               "'Daxbourne Acquisition Documents' shall mean (a) the asset
                 -------------------------------                          
               purchase agreement dated as of October 3, 1997 by and among SC
               (UK), Daxbourne Limited, Postinstant and M.C. Hairways (the
               "Daxbourne Asset Purchase Agreement"), (b) the Daxbourne
               Disclosure Letter, and (c) all related documents and
               instruments."

               "'Daxbourne Disclosure Letter' shall mean that certain Disclosure
                 ---------------------------                                    
               Letter dated October 3, 1997, from Curry Ch Hausmann Popeck,
               solicitors for Daxbourne, addressed to [Dibb Lupton Alsop,
               solicitors acting for the Borrower in connection with the
               Daxbourne Acquisition], together with the Schedules thereto and
               the documents comprised in the Agreed Bundle referred to
               therein."

          (g) The definition of "Maximum Revolving Credit Amount" is hereby
     deleted in its entirety and a new definition substituted therefor as
     follows:

               "'Maximum Revolving Credit Amount' shall mean as of any date of
                 -------------------------------                              
               determination $6,000,000 less any U.K. Credit Reserve established
               from time to time; provided that if the obligation of the Bank to
               make further Revolving Credit Advances is terminated upon the
               occurrence of an Event of Default, the Maximum Revolving Credit
               Amount as of any date of determination thereafter shall be deemed
               to be $0."

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

               "'1996 Financial Statements' shall mean (a) the Consolidated
                 -------------------------                                 
               Balance Sheet of the Company and its Subsidiaries as of December
               28, 1996 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 and (b) the balance sheets of Daxbourne and each of
               its Subsidiaries, as of April 30, 1997 and the related statements
               of operations for each of them for the year then ended and notes
               to such financial statements, audited by F.L.R. Linington FAPA,
               ATII."

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

                                       4
<PAGE>
 
               "'Pledge Agreements' shall mean the Pledge Agreement from the
                 -----------------                                          
               Company to the Bank of even date herewith substantially in the
               form of Exhibit D-1 hereto, as amended or supplemented from time
                       -----------                                             
               to time, and the Pledge Agreement from SC Corporation to the Bank
               of even date herewith substantially in the form of Exhibit D-2
                                                                  -----------
               hereto, as amended or supplemented from time to time."

          (j) The definition of "Revolving Credit Termination Date" is hereby
     deleted in its entirety and a new definition substituted therefor as
     follows:

               "'Revolving Credit Termination Date' shall mean October 3, 2001."
                 ---------------------------------                              

          (k) The definition of "SC Publishing Disposition" is hereby amended by
     deleting the clause "March 12, 1998" appearing in the last two lines
     thereof and substituting therefor the following:

               "June 30, 1998"

          (l) A new definition of "SC (UK)" shall be added in alphabetical
     order, as follows:

               "'SC (UK)' shall mean Daxbourne International Limited,
                 -------                                             
               (Registered No. 3369640), a private company limited by shares
               formed under the laws of England and Wales."

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

               "'Security Agreements' shall mean (a) the Security Agreement from
                 -------------------                                            
               the Borrowers to the Bank of even date herewith substantially in
               the form of Exhibit C hereto, as amended or supplemented from
                           ---------                                        
               time to time, (b) the Assignment of Trademarks and Service Marks
               (U.S.) from the Borrowers to the Bank of even date herewith
               substantially in the form of Exhibit E hereto, as amended or
                                            ---------                      
               supplemented from time to time, (c) the Assignment of Keyman Life
               Insurance Policies from the Borrowers to the Bank of even date
               herewith substantially in the form of Exhibit F hereto, as
                                                     ---------           
               amended or supplemented from time to time, and (d) the Pledge
               Agreements, as amended or supplemented from time to time."

          (n) The definition of "Term Loan Maturity Date"is hereby deleted in
     its entirety and a new definition substituted therefor as follows:

                                       5
<PAGE>
 
               "'Term Loan Maturity Date' shall mean October 3, 2001."
                 -----------------------                              

          (o) A new definition of "U.K. Credit Agreement" shall be added in
     alphabetical order, as follows:

               "'U.K. Credit Agreement' shall mean the Credit Agreement, dated
                 ---------------------                                        
               as of October 3, 1997, by and among SC (UK), the Company, SC
               Direct, SC Publishing and the Bank."

          (p) A new definition of "U.K. Subsidiary" shall be added in
     alphabetical order, as follows:

               "'U.K. Subsidiary' shall mean SC (UK) and any of its future
                 ---------------                                          
               wholly-owned Subsidiaries."


     Section 3.     Revised Revolving Credit Note.  The Bank and the Borrowers
                    -----------------------------                             
hereby agree that the Borrowers shall execute and deliver to the Bank the
Revolving Credit Note in the form of Exhibit A hereto to evidence the Revolving
                                     ---------                                 
Credit Advances, which note, from and after the date hereof, shall be deemed to
be the Revolving Credit Note under the Credit Agreement.  Accrued interest on
the Borrowers' Revolving Credit Note dated March 12, 1997 through the date
hereof shall be paid on October 3, 1997.  Promptly following the execution and
delivery hereof, the Bank shall return to the Borrowers the Revolving Credit
Note dated March 12, 1997, marked paid in full and cancelled.


     Section 4.     Revised Term Note.  The Bank and the Borrowers hereby agree
                    -----------------                                          
that the Borrowers shall execute and deliver to the Bank the Term Note in the
form of Exhibit B hereto to evidence the Term Loan, which note, from and after
        ---------                                                             
the date hereof, shall be deemed to be the Term Note under the Credit Agreement.
Accrued interest on the Borrowers' Term Note dated March 12, 1997 through the
date hereof shall be paid on October 3, 1997.  Promptly following the execution
and delivery hereof, the Bank shall return to the Borrowers the Term Note dated
March 12, 1997, marked paid in full and cancelled.


     Section 5.     Amendment of Article 2.
                    ---------------------- 

          (a) Article 2 of the Credit Agreement is hereby amended by deleting
     the third sentence of Section 2.4(a) in its entirety and substituting
     therefor the following:

               "The principal amount of the Term Loan will be repaid in
               quarterly installments, payable on the first day of each quarter
               (i.e., April, July, October and January), as follows:

                                       6
<PAGE>
 
<TABLE> 
<CAPTION> 
               Quarterly Payment Date     Amount

<S>                                       <C>
               January 1, 1998            $ 250,000
               July 1, 1998-2000          $ 250,000
               October 1, 1998-2000       $ 500,000
               January 1, 1999-2001       $ 500,000
               July 1, 2001               $ 500,000
               Term Loan Maturity Date    $ 500,000
</TABLE>

          (b) Article 2 of the Credit Agreement is hereby amended by adding
     Section 2.12 as follows:

               "Section 2.12.  Guaranty of SC (UK).
                               ------------------- 

               (a) SC (UK) hereby unconditionally guaranties to the Bank the
               prompt payment and performance of (a) all liabilities and
               obligations and Indebtedness, direct and indirect, matured and
               unmatured, primary or secondary, certain or contingent, of the
               Borrowers to the Bank (including without limitation, costs and
               expenses incurred by the Bank in attempting to collect or enforce
               any of the foregoing), accrued in each case to the date of
               payment, and (b) the performance of all other agreements,
               covenants and conditions of the Borrowers with respect thereto
               set forth in this Agreement and all other Bank Agreements.  The
               responsibilities and obligations of the Borrowers to the Bank
               described in the preceding sentence are hereinafter referred to
               collectively as the 'Guaranteed U.S. Obligations'.  The guaranty
               pursuant to this Section 2.12 is an absolute, unconditional and
               continuing joint and several guarantee of the full and punctual
               performance by the Borrowers of the Guaranteed U.S. Obligations
               and not of collectability of the Guaranteed U.S. Obligations, and
               is in no way conditioned upon any requirement that the Bank first
               attempt to collect any of the Guaranteed U.S. Obligations from
               the Borrowers or resort to any security or other means of
               obtaining payment of any of the Guaranteed U.S. Obligations which
               the Bank now has or may acquire after the date hereof, or upon
               any other contingency whatsoever.  Upon any default by the
               Borrowers in the full and punctual payment and performance of the
               Guaranteed U.S. Obligations, the liabilities and obligations of
               SC (UK) hereunder shall, at the option of the Bank, become
               forthwith due and payable to the Bank without demand or notice of
               any nature, all of which are expressly waived by SC (UK).
               Payments by SC (UK) under this Section 2.12 may be required by
               the Bank on any number of occasions.

                                       7
<PAGE>
 
               (b) Additionally,SC (UK) unconditionally and irrevocably
               guaranties the payment of any and all of its Guaranteed U.S.
               Obligations to the Bank whether or not then due or payable by the
               Borrowers upon the occurrence in respect of the Borrowers of any
               of the events specified in Section 10.1(f), and unconditionally
               and irrevocably promises to pay upon the occurrence and during
               the continuance of any such Event of Default such Guaranteed U.S.
               Obligations to the Bank on demand, in lawful money of the United
               States.

               (c) The obligations of SC (UK) hereunder are independent of the
               obligations of the Borrowers, and a separate action or actions
               may be brought and prosecuted against SC (UK) whether or not
               action is brought against the Borrowers and whether or not the
               Borrowers be joined in any such action or actions.  SC (UK)
               waives, to the fullest extent permitted by law, the benefit of
               any statute of limitations affecting its liability hereunder or
               the enforcement thereof.  Any payment by the Borrowers or other
               circumstance which operates to toll any statute of limitations as
               to the Borrowers shall operate to toll the statute of limitations
               as to SC (UK).

               (d) SC (UK) authorizes the Bank without notice, demand or consent
               (except as shall be required under the Bank Agreements or as
               required by applicable statute and cannot be waived), and without
               affecting or impairing its liability hereunder, from time to time
               to:

                    (i) change the manner, place or terms of payment of, and/or
                    change or extend the time of payment of, renew, increase,
                    accelerate or alter, any of the Bank Obligations of the
                    Borrowers (including any increase or decrease in the rate of
                    interest thereon), any security therefor, or any liability
                    incurred directly or indirectly in respect thereof, and the
                    guaranty made in this Section 2.12 shall apply to such Bank
                    Obligations of the Borrowers as so changed, extended,
                    renewed or altered;

                    (ii) take and hold security for the payment of the Bank
                    Obligations of the Borrowers and sell, exchange, release,
                    surrender, realize upon or otherwise deal with in any manner
                    and in any order any property by whomsoever at any time
                    pledged or mortgaged to secure, or howsoever securing, such
                    Bank Obligations of the Borrowers or any

                                       8
<PAGE>
 
                    liabilities (including any of those hereunder) incurred
                    directly or indirectly in respect thereof or hereof, and/or
                    any offset thereagainst;

                    (iii)  exercise or refrain from exercising any rights
                    against the Borrowers or others or otherwise act or refrain
                    from acting;

                    (iv) release or substitute any one or more endorsers,
                    guarantors, the Borrowers or other obligors;

                    (v) settle or compromise any of the Bank Obligations of the
                    Borrowers, any security therefor or any liability (including
                    those hereunder) incurred directly or indirectly in respect
                    thereof or hereof, and may subordinate the payment of all or
                    any part thereof to the payment of any liability (whether
                    due or not) of the Borrowers to its creditors other than the
                    Bank;

                    (vi) apply any sums by whomsoever paid or howsoever realized
                    to any liability or liabilities of the Borrowers to the Bank
                    regardless of what liability or liabilities of the Company
                    or its Subsidiaries remain unpaid;

                    (vii)  consent to waive any breach of, or any act, omission
                    or default under, these guaranties in this Section 2.12 or
                    any of the Bank Agreements, or otherwise amend, modify or
                    supplement these guaranties in this Section 2.12 or any of
                    the Bank Agreements; and/or

                    (viii)  take any other action which would, under otherwise
                    applicable principles of common law, give rise to a legal or
                    equitable discharge of the U.K. Subsidiary from its
                    liabilities under this Section 2.12.

               (e) SC (UK) waives any right (except as shall be required by
               applicable statute and cannot be waived) to require the Bank (i)
               to proceed against the Borrowers, (ii) to proceed against or
               exhaust any security held from the Borrowers, (iii) to pursue any
               other remedy in the Bank's power whatsoever. SC (UK) waives any
               defense based on or arising out of any defense of the Borrowers
               other than payment in full of the Bank Obligations.  The Bank
               may, at its election, foreclose on any security held by the Bank
               by one or more judicial or nonjudicial sales, whether or not
               every

                                       9
<PAGE>
 
               aspect of any such sale is commercially reasonable (to the extent
               such sale is permitted by applicable law), or exercise any other
               right or remedy the Bank may have against the Borrowers, without
               affecting or impairing in any way the liability of SC (UK)
               hereunder except to the extent the Bank Obligations of the
               Borrowers have been paid.

               (f) SC (UK) waives all presentments, demands for performance,
               protests and notices, including, without limitation, notices of
               nonperformance, notices of protest, notices of dishonor, notices
               of acceptance of these guaranties in this Section 2.12, and
               notices of the existence, creation or incurring of new or
               additional Bank Obligations of the Company or its Subsidiaries.
               SC (UK) assumes all responsibility for being and keeping itself
               informed of the Borrowers' financial conditions and assets, and
               of all other circumstances bearing upon the risk of nonpayment of
               the Bank Obligations and the nature, scope and extent of the
               risks which SC (UK) assumes and incurs hereunder, and agree that
               the Bank shall have no duty to advise SC (UK) of information
               known to them regarding such circumstances or risks."


          (c)  Article 2 of the Credit Agreement is hereby amended by adding
     Section 2.13 as follows:

               "Section 2.13.  Guaranty of U.K. Credit Agreement.
                               --------------------------------- 

               (a) The Borrowers hereby unconditionally guaranty to the Bank the
               prompt payment and performance of (a) all liabilities and
               obligations and Indebtedness, direct and indirect, matured and
               unmatured, primary or secondary, certain or contingent, of the
               U.K. Subsidiary to the Bank (including without limitation, costs
               and expenses incurred by the Bank in attempting to collect or
               enforce any of the foregoing), accrued in each case to the date
               of payment, and (b) the performance of all other agreements,
               covenants and conditions of the U.K. Subsidiary with respect
               thereto set forth in the U.K. Credit Agreement and all other Bank
               Agreements.  The responsibilities and obligations of the U.K.
               Subsidiary to the Bank described in the preceding sentence are
               hereinafter referred to collectively as the 'Guaranteed U.K.
               Obligations'.  The guaranty pursuant to this Section 2.13 is an
               absolute, unconditional and continuing joint and several
               guarantee of the full and punctual performance by the U.K.
               Subsidiary of the Guaranteed U.K. Obligations and not of
               collectability of the

                                       10
<PAGE>
 
               Guaranteed U.K. Obligations, and is in no way conditioned upon
               any requirement that the Bank first attempt to collect any of the
               Guaranteed U.K. Obligations from the U.K. Subsidiary or resort to
               any security or other means of obtaining payment of any of the
               Guaranteed U.K. Obligations which the Bank now has or may acquire
               after the date hereof, or upon any other contingency whatsoever.
               Upon any default by the U.K. Subsidiary in the full and punctual
               payment and performance of the Guaranteed U.K. Obligations, the
               liabilities and obligations of the Borrowers hereunder shall, at
               the option of the Bank, become forthwith due and payable to the
               Bank without demand or notice of any nature, all of which are
               expressly waived by the Borrowers. Payments by the Borrowers
               under this Section 2.13 may be required by the Bank on any number
               of occasions.

               (b) Additionally, the Borrowers unconditionally and irrevocably
               guaranty the payment of any and all of its Guaranteed U.K.
               Obligations to the Bank whether or not then due or payable by the
               U.K. Subsidiary upon the occurrence in respect of the U.K.
               Subsidiary of any of the events specified in Section 10.1(f), and
               unconditionally and irrevocably promise to pay upon the
               occurrence and during the continuance of any such Event of
               Default such Guaranteed U.K. Obligations to the Bank on demand,
               in lawful money of the United States.

               (c) The obligations of the Borrowers hereunder are independent of
               the obligations of the U.K. Subsidiary, and a separate action or
               actions may be brought and prosecuted against the Borrowers
               whether or not action is brought against the U.K. Subsidiary and
               whether or not the U.K. Subsidiary is joined in any such action
               or actions.  The Borrowers waive, to the fullest extent permitted
               by law, the benefit of any statute of limitations affecting its
               liability hereunder or the enforcement thereof.  Any payment by
               the U.K. Subsidiary or other circumstance which operates to toll
               any statute of limitations as to the U.K. Subsidiary shall
               operate to toll the statute of limitations as to the Borrowers.

               (d) The Borrowers authorize the Bank without notice, demand or
               consent (except as shall be required under the Bank Agreements or
               as required by applicable statute and cannot be waived), and
               without affecting or impairing their liability hereunder, from
               time to time to:

                                       11
<PAGE>
 
                    (i) change the manner, place or terms of payment of, and/or
                    change or extend the time of payment of, renew, increase,
                    accelerate or alter, any of the Bank Obligations of the U.K.
                    Subsidiary (including any increase or decrease in the rate
                    of interest thereon), any security therefor, or any
                    liability incurred directly or indirectly in respect
                    thereof, and the guaranty made in this Section 2.13 shall
                    apply to such Bank Obligations of the U.K. Subsidiary as so
                    changed, extended, renewed or altered;

                    (ii) take and hold security for the payment of the Bank
                    Obligations of the U.K. Subsidiary and sell, exchange,
                    release, surrender, realize upon or otherwise deal with in
                    any manner and in any order any property by whomsoever at
                    any time pledged or mortgaged to secure, or howsoever
                    securing, such Bank Obligations of the U.K. Subsidiary or
                    any liabilities (including any of those hereunder) incurred
                    directly or indirectly in respect thereof or hereof, and/or
                    any offset thereagainst;

                    (iii)  exercise or refrain from exercising any rights
                    against the U.K. Subsidiary or others or otherwise act or
                    refrain from acting;

                    (iv) release or substitute any one or more endorsers,
                    guarantors, the U.K. Subsidiary or other obligors;

                    (v) settle or compromise any of the Bank Obligations of the
                    U.K. Subsidiary, any security therefor or any liability
                    (including those hereunder) incurred directly or indirectly
                    in respect thereof or hereof, and may subordinate the
                    payment of all or any part thereof to the payment of any
                    liability (whether due or not) of the U.K. Subsidiary to its
                    creditors other than the Bank;

                    (vi) apply any sums by whomsoever paid or howsoever realized
                    to any liability or liabilities of the U.K. Subsidiary to
                    the Bank regardless of what liability or liabilities of the
                    Company or its Subsidiaries remain unpaid;

                    (vii)  consent to waive any breach of, or any act, omission
                    or default under, these guaranties in this Section 2.13 or
                    any of the Bank Agreements, or otherwise amend,

                                       12
<PAGE>
 
                    modify or supplement these guaranties in this Section 2.13
                    or any of the Bank Agreements; and/or

                    (viii)  take any other action which would, under otherwise
                    applicable principles of common law, give rise to a legal or
                    equitable discharge of the Borrowers from their liabilities
                    under this Section 2.13.

               (e) The Borrowers waive any right (except as shall be required by
               applicable statute and cannot be waived) to require the Bank (i)
               to proceed against the U.K. Subsidiary, (ii) to proceed against
               or exhaust any security held from the U.K. Subsidiary, (iii) to
               pursue any other remedy in the Bank's power whatsoever.  The
               Borrowers waive any defense based on or arising out of any
               defense of the U.K. Subsidiary other than payment in full of the
               Bank Obligations.  The Bank may, at its election, foreclose on
               any security held by the Bank by one or more judicial or
               nonjudicial sales, whether or not every aspect of any such sale
               is commercially reasonable (to the extent such sale is permitted
               by applicable law), or exercise any other right or remedy the
               Bank may have against the U.K. Subsidiary, without affecting or
               impairing in any way the liability of the Borrowers hereunder
               except to the extent the Bank Obligations of the U.K. Subsidiary
               have been paid.

               (f) The Borrowers waive all presentments, demands for
               performance, protests and notices, including, without limitation,
               notices of nonperformance, notices of protest, notices of
               dishonor, notices of acceptance of these guaranties in this
               Section 2.13, and notices of the existence, creation or incurring
               of new or additional Bank Obligations of the Company or its
               Subsidiaries. The Borrowers assume all responsibility for being
               and keeping themselves informed of the U.K. Subsidiary's
               financial conditions and assets, and of all other circumstances
               bearing upon the risk of nonpayment of the Bank Obligations and
               the nature, scope and extent of the risks which the Borrowers
               assume and incur hereunder, and agree that the Bank shall have no
               duty to advise the Borrowers of information known to them
               regarding such circumstances or risks.

               (g) Upon the occurrence of a material adverse change (i) to the
               projected or actual financial performance of SC (UK), (ii) in the
               title to the Collateral of SC (UK), or (iii) in the Bank's
               security interest in the Collateral of SC (UK), the Bank, in its

                                       13
<PAGE>
 
               sole judgment and upon at least 10 days notice to the Company,
               may require the Borrowers to immediately establish and maintain,
               until the Bank in its sole judgment determines such material
               adverse change is eliminated, a special reserve (the "U.K. Credit
               Reserve") equal to all obligations and Indebtedness from time to
               time owed by SC (UK) under the U.K. Credit Agreement.  "


     Section 6. Amendment of Payment and Repayment.  Article 4 of the Credit
                ----------------------------------                          
Agreement is hereby amended by deleting Section 4.1(d) in its entirety and
substituting therefor the following:

               "The Borrowers shall, on the date of receipt of the Net Cash
               Proceeds by any Borrower or any of their Subsidiaries, except for
               Net Cash Proceeds received by any U.K. Subsidiary to which the
               provisions of Section 4.1(d) of the U.K. Credit Agreement apply,
               from (i) the sale, lease, transfer or other disposition of any
               assets of any Borrower or any of their Subsidiaries (other than
               Net Cash Proceeds from a transaction permitted under Section
               9.5), (ii) the incurrence or issuance by any Borrower or any of
               their Subsidiaries of any Indebtedness for borrowed money, except
               for Bank Obligations, (iii) the sale or issuance by any Borrower
               or any or their Subsidiaries of any capital stock or other
               ownership or profit interest or any warrants, options or rights
               to acquire capital stock or other ownership or profits interest
               (other than net Cash Proceeds from any such sale or issuance
               which described as one of its purposes undertaking acquisitions
               if such Net Cash Proceeds are used to finance any transaction
               permitted under Section 9.7 within ninety (90) days of the
               receipt thereof by such Borrower or Subsidiary), prepay an
               aggregate principal amount of the Term Loan equal to the amount
               of such Net Cash Proceeds.  Partial prepayments of the Term Loan
               under this Section 4.1(d) shall be applied to the scheduled
               principal payments in inverse order of maturity and shall be
               applied first to portions of the Term Loan which are outstanding
               as Base Rate Loans."


     Section 7. Representations and Warranties.
                ------------------------------ 

          (a) Article 5 of the Credit Agreement is hereby amended by deleting
     Section 5.4 in its entirety and substituting therefor the following:

                                       14
<PAGE>
 
               "Section 5.4  Subsidiaries.  Neither the Borrowers nor SC (UK)
                             ------------                                    
               have any Subsidiaries except for those listed in Schedule 5.4.
                                                                ------------  
               All of the issued and outstanding capital stock of each
               Subsidiary listed on Schedule 5.4 is owned of record and
                                    ------------                       
               beneficially by the Company or SC Direct as set forth on Schedule
                                                                        --------
               5.4.  The Company does not have any assets except capital stock
               ---                                                            
               of its Subsidiaries.

          (b) Schedule 5.4 to the Credit Agreement is hereby deleted in its
              ------------                                                 
     entirety and the new Schedule 5.4 attached hereto is substituted therefor.
                          ------------                                         

          (c) Schedule 5.9 to the Credit Agreement is hereby deleted in its
              ------------                                                 
     entirety and the new Schedule 5.9 attached hereto is substituted therefor.
                          ------------                                         

          (d) Schedule 5.11 to the Credit Agreement is hereby deleted in its
              -------------                                                 
     entirety and the new Schedule 5.11 attached hereto is substituted therefor.
                          -------------                                         

          (e) Section 5.12 of the Credit Agreement is hereby amended by adding
     the following at the end of the first sentence thereof:

               ", except as described on Schedule 5.12."
                                         -------------  

          (f) Schedule 5.13(a) to the Credit Agreement is hereby deleted in its
              ----------------                                                 
     entirety and the new Schedule 5.13(a) attached hereto is substituted
                          ----------------                               
     therefor.

          (g) Schedule 5.13(b) to the Credit Agreement is hereby deleted in its
              ----------------                                                 
     entirety and the new Schedule 5.13(b) attached hereto is substituted
                          ----------------                               
     therefor.

          (h) Schedule 5.16 to the Credit Agreement is hereby deleted in its
              -------------                                                 
     entirety and the new Schedule 5.16 attached hereto is substituted therefor.
                          -------------                                         

          (i) Article 5 of the Credit Agreement is hereby further amended by
     adding the following new Section 5.21 at the end thereof:

               "Section 5.21.  Confirmation of Representations and Warranties.
                               ---------------------------------------------- 
               The Borrowers and Guarantors hereby confirm and restate to the
               Bank as if set forth herein in full the representations and
               warranties set forth in Article 5 of the U.K. Credit Agreement."

          (j) Article 5 of the Credit Agreement is hereby further amended by
     adding the following new Section 5.22 at the end thereof:

               "Section 5.22.  Operation of Business on Consolidated Basis. The
                               -------------------------------------------     
               Company and its Subsidiaries conduct a substantial portion of

                                       15
<PAGE>
 
               their business on a consolidated basis, including, but not
               limited to, shared management, accounting, marketing and
               operations. Any credit obtained by the Company or any Subsidiary
               benefits the Company and all Subsidiaries on a consolidated
               basis."

          (k) Article 5 of the Credit Agreement is hereby further amended by
     adding the following new Section 5.23 at the end thereof:

               "Section 5.23.  Daxbourne Acquisition.  Simultaneously with the
                               ---------------------                          
               execution and delivery of the First Amendment to Credit Agreement
               dated October 3, 1997, the Daxbourne Acquisition shall be
               consummated in accordance with the terms of the Daxbourne
               Acquisition Documents.  The Company has provided the Bank with
               true, correct and complete copies of the Daxbourne Acquisition
               Documents and such documents have not been modified, amended or
               supplemented and are in full force and effect."


     Section 8. Amendment of Reports and Information.
                ------------------------------------ 

          (a) Exhibit I to the Credit Agreement is hereby deleted in its
              ---------                                                 
     entirety and the new Exhibit I attached hereto is substituted therefor.
                          ---------                                         

          (b) Article 6 of the Credit Agreement is hereby amended by adding
     Section 6.11 as follows:

               "Section 6.11.  Notice of Notice under Daxbourne Acquisition
                               --------------------------------------------
               Documents.  As soon as possible, and in any event within five (5)
               ---------                                                        
               Business Days after the Company or any Subsidiary gives or
               receives any notice under the Daxbourne Acquisition Documents,
               the Company shall furnish to the Bank a copy of such notice and a
               statement of its chief executive officer or chief financial
               officer setting forth the action which the Company or any
               Subsidiary has taken or proposes to take with respect thereto.

                                       16
<PAGE>
 
     Section 9. Amendment of Covenants.
                ---------------------- 

          (a)   Section 7.1 of the Credit Agreement is hereby amended by
     deleting the clause "to be greater than" appearing in the third line
     thereof and deleting subsections (a) and (b) in their entirety and
     substituting therefor the following:

               "(the "Consolidated Leverage Ratio") to be greater than (a) 3.00-
               to-1.00 on June 28, 1997 (the first date such ratio is to be
               tested) and at any time thereafter but prior to October 3, 1998,
               (b) 2.50-to-1.00 at October 3, 1998 and at any time thereafter
               but prior to January 2, 1999."

          (b)  Section 7.3 of the Credit Agreement is hereby amended by deleting
     the amount "$3,000,000" appearing in the last line thereof and substituting
     therefor "$3,800,000."

          (c)  Schedule 8.4 to the Credit Agreement is hereby deleted in its
               ------------                                                 
     entirety and the new Schedule 8.4 attached hereto is substituted therefor.
                          ------------                                         

          (d)  Section 9.1 of the Credit Agreement is hereby amended by adding a
     new clause (f) as follows:

               "(f)  Indebtedness under the U.K. Credit Agreement to the Bank."

          (e)  Section 9.2 of the Credit Agreement is hereby amended by adding a
     new clause (g) as follows:

               "(g)  Liens, pledges or guarantees in favor of the Bank securing
               obligations under the U.K. Credit Agreement."

          (f) Section 9.6 of the Credit Agreement is hereby amended by adding
     the following clause at the end thereof:

               "and except for guaranties in favor of the Bank under Sections
               2.12 and 2.13 hereof and under the U.K. Credit Agreement."

          (g) Section 9.7 of the Credit Agreement is hereby amended by deleting
     the "and" preceding clause (c) thereof, inserting a comma in its place and
     adding the following clause (d) at the end thereof:

               "and (d) SC (UK) may acquire all of the assets of Daxbourne,
               provided that immediately after and giving effect thereto, no
               event shall occur and be continuing which constitutes a Default

                                       17
<PAGE>
 
               (including under Section 8.1 and including under Article 7,
               assuming that the financial restrictions set forth in Article 7
               are applied immediately after and giving effect to such
               acquisition) and provided further that SC (UK) becomes a
               guarantor of the Bank Obligations under this Agreement."


     Section 10.    Amendment of Events of Default.
                    ------------------------------ 

          (a) Section 10.1(g) of the Credit Agreement is hereby amended by
     deleting the clause $100,000 appearing in the second line thereof and
     substituting therefor the following:

               "$200,000"

          (b) Section 10.1 of the Credit Agreement is hereby amended by deleting
     clause (i) thereof in its entirety and substituting therefor the following:

               "(i)  Any 'Event of Default' under the U.K. Credit Agreement or
               any other Bank Agreement shall have occurred."


     Section 11.    Amendment of Notices.  Section 13.2(a) of the Credit
                    --------------------                                
Agreement is hereby amended by deleting the clause "Margaret Ronan Stack, Vice
President" appearing in the second line thereof and substituting therefor the
following:

               "Andrew D. Stickney, Assistant Vice President"


     Section 12.    Effectiveness; Conditions to Effectiveness.  This First
                    ------------------------------------------             
Amendment to Credit Agreement shall become effective as of October 3, 1997 upon
execution hereof by the Borrowers, the U.K. Subsidiary and the Bank and
satisfaction of the following conditions:

          (a) Revolving Credit Note.  The Borrowers shall have delivered to the
              ---------------------                                            
     Bank an Amended and Restated Revolving Credit Note in the form of Exhibit A
                                                                       ---------
     hereto.

          (b) Term Note.  The Borrowers shall have delivered to the Bank an
              ---------                                                    
     Amended and Restated Term Note in the form of Exhibit B hereto.
                                                   ---------        

          (c) Security Documents.  SC Direct and SC Publishing shall have
              ------------------                                         
     delivered to the Bank an amendment to the Security Agreement, dated as of
     March 12, 1997, in the form of Exhibit C hereto.
                                    ---------        

                                       18
<PAGE>
 
          (d) Officers' Certificate.  The Borrowers shall have delivered to the
              ---------------------                                            
     Bank an Officers' Certificate in the form of Exhibit D hereto.
                                                  ---------        

          (e) Opinion of Counsel.  The Borrowers shall have delivered to the
              ------------------                                            
     Bank an opinion of Bingham Dana LLP, counsel to the Borrowers, in form and
     substance satisfactory to the Bank.

          (f) Pledge Agreement.  The Company shall have delivered to the Bank an
              ----------------                                                  
     amendment to the Stock Pledge Agreement, dated as of March 12, 1997, in the
     form of Exhibit E hereto.
             ---------        

          (f) Pledge Agreement.  SC Direct shall have delivered to the Bank an
              ----------------                                                
     amendment to the Stock Pledge Agreement, dated as of March 12, 1997, in the
     form of Exhibit F hereto.
             ---------        

          (g) U.K. Credit Agreement.  The Borrowers and SC (UK) shall have
              ---------------------                                       
     simultaneously entered into the U.K. Credit Agreement with the Bank.

          (h) Daxbourne Acquisition.  All conditions precedent to the
              ---------------------                                  
     consummation of the Daxbourne Acquisition, except for payment of the
     purchase price, shall have been satisfied without waiver.


     Section 13.    Representations and Warranties; No Default.  The Borrowers
                    ------------------------------------------                
hereby confirm to the Bank the representations and warranties of the Borrowers
set forth in Article 5 of the Credit Agreement (as amended hereby) as of the
date hereof, as if set forth herein in full.  The Borrowers hereby certify that
no Default exists under the Credit Agreement.


     Section 14.    Miscellaneous.  The Borrowers agree to pay on demand all the
                    -------------                                               
Bank's reasonable expenses in preparing, executing and delivering this First
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 First Amendment
to Credit Agreement shall be a Bank Agreement and shall be governed by and
construed and enforced under the laws of The Commonwealth of Massachusetts.

                                       19
<PAGE>
 
     IN WITNESS WHEREOF, the Borrowers, SC (UK) and the Bank have caused this
First 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


                    BANKBOSTON, N.A.


                    By:          /s/ Kenneth S. Struglia
                       --------------------------------------------- 
                              Name:  Kenneth S. Struglia
                              Title: Vice President

                                       20