Document:

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                                                                   Exhibit 10.20
                                                                   -------------

                                 Exhibit 10.20
                                 -------------
                      EIGHTH LOAN MODIFICATION AGREEMENT

This EIGHTH LOAN MODIFICATION AGREEMENT is entered into as of July 14, 2000, by
and between SILICON VALLEY BANK, a California-chartered bank with its principal
place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan
production office located at Wellesley Office Park, 40 William Street, Suite
350, Wellesley, MA 02181, doing business under the name Silicon Valley East
("Bank"), and TRANSWITCH CORPORATION, a Delaware corporation with its principal
place of business at 3 Enterprise Drive, Shelton, Connecticut 06484
("Borrower").

                                   RECITALS

Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows:

                                   AGREEMENT

1. DESCRIPTION OF EXISTING LOAN DOCUMENTS. Reference is hereby made to that
certain Commitment Letter dated as of July 1, 1993 between Bank and Borrower, as
amended by letter amendments dated as of September 1, 1994 and March 21, 1995,
as further amended by Loan Modification Agreements dated April 8, 1994, April
19, 1995, January 5, 1996, December 31, 1996, July 11, 1997, July 16, 1998 and
July 15, 1999 between Borrower and Bank, and as such Commitment Letter may
be further amended from time to time (the "Commitment Letter"), providing for
certain financing from Bank to Borrower, such financing to be evidenced by
promissory notes as referenced herein. Hereinafter, all indebtedness owing by
Borrower to Bank pursuant to the Commitment Letter and any promissory notes
shall be referred to as the "Indebtedness." Repayment of the Indebtedness is
secured pursuant to a Security Agreement dated as of July 1, 1993 between
Borrower and Bank, as amended (the "Security Agreement"). Hereinafter, the
Commitment Letter, Security Agreement, and any promissory notes, together with
all other documents securing payment of the Indebtedness, shall be referred to
as the "Existing Loan Documents." Unless otherwise defined herein, capitalized
terms used in this Agreement shall have the same respective meanings as set
forth in the Commitment Letter.

2. DESCRIPTION OF CHANGES IN TERMS.

<PAGE>

2.1 Numbered paragraph 2 of the Commitment Letter, as heretofore amended, is
hereby replaced in its entirety as follows:

    The Working Capital Commitment will commence July 14, 2000 and will expire
on July 13, 2001 (the "Working Capital Expiry Date"). The Equipment Commitment
will commence July 14, 2000 and will expire on July 13, 2001 (the "Equipment
Expiry Date").

2.2 The first three sentences of numbered paragraph 3 of the Commitment
Letter, as heretofore amended, are hereby replaced in their entirety as follows:

Advances under the Working Capital Commitment shall bear interest at a
fluctuating per annum rate of interest equal to the Bank's Prime Rate (as
defined below) or the Interest Rate for LIBOR Rate Loans as set forth on the
attached LIBOR Supplement Agreement, as applicable and advances under the
Equipment Line of Credit Commitment shall bear interest at a fluctuating rate of
interest equal to the Bank's Prime Rate per annum. Borrower shall make payments
of interest in respect of advances under the Working Capital Commitment monthly
on the thirteenth (13th) day of each month and on the Working Capital Expiry
Date. Borrower shall make payments of interest in respect of advances under the
Equipment Commitment monthly on the thirteenth (13th) day of each month and on
the Equipment Expiry Date. Nothwithstanding an Event of Default, Advances under
the Commitments shall bear interest at a rate of 5% per annum plus the rate
otherwise in effect.

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2.3 Numbered paragraph 4 of Schedule II to the Commitment Letter, as
heretofore amended, is hereby replaced in its entirety as follows:
4. Financial Statements, Etc. Borrower will furnish to Bank:

(a) prior to any Advances under the Working Capital Commitment, as soon as
available but in any event within forty five (45) days after the end of each
fiscal quarter in which any Advances under the Working Capital Commitment are
outstanding, commencing with the quarter ending June 30, 2000, consolidated
financial statements of Borrower on Form 10-Q;

(b) as soon as available, but in any event within one hundred twenty
(120) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower on Form 10-K;

(c) within five (5) days of filing, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
(to the extent not previously provided to Bank) filed with the Securities and
Exchange Commission;

(d) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in a
Material Adverse Effect;

(e) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time.

(f) prior to any Advances under the Working Capital Commitment, and within
thirty (30) days after the last day of each month in which any Advances under
the Working Capital Commitment are outstanding, an aged listing of accounts
receivable.

(g) prior to any Advances under the Working Capital Commitment and as soon as
available but in any event within forty-five (45) days after the end of each
fiscal quarter in which any Advances under the Working Capital Commitment are
outstanding, commencing with the quarter ending June 30, 2000, a Compliance
Certificate signed by the Chief Financial Officer or the President of Borrower
in a form acceptable to Bank and appropriately completed.

                                       3
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2.4 Numbered paragraph 24 of Schedule II to the Commitment Letter, as heretofore
amended, is hereby replaced in its entirety as follows:

24. Tangible Net Worth. The Borrower will not permit Tangible Net Worth at the
end of any calendar quarter, commencing with the quarter ending June 30, 2000,
to be less than $150,000,000.

2.5 The Compliance Certificate referred to in numbered subparagraph 4(c) of
Schedule II to the Commitment Letter, as heretofore amended, is hereby deleted
and replaced with the Compliance Certificate attached hereto as Exhibit A.

2.6 The definition. of "Eligible Equipment' in Schedule III of the Commitment
Letter, as heretofore amended, is hereby amended by deleting the date July 15,
1999 appearing in the last line of subparagraph (b) thereof and substituting the
date July 14, 2000

3. FACILITY FEE. Borrower shall pay to Bank a Working Capital Commitment
facility fee of TWENTY-FOUR THOUSAND AND NO/100THS Dollars ($24,000) and an
Equipment Commitment facility fee of SIX THOUSAND AND NO/100THS Dollars ($6,000)
as well as any out-of-pocket expenses incurred by the Bank through the date
hereof, including reasonable attorneys' fees and expenses, and after the date
hereof, all Bank

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Expenses, including reasonable attorneys' fees and expenses, as and when they
become due.

4. CONDITIONS PRECEDENT TO FURTHER ADVANCES. The obligation of Bank to make
further advances to Borrower under this line is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

(a) this Eighth Loan Modification Agreement (in duplicate), the Working Capital
Note and the Equipment Note, each duly executed by Borrower;

(b) a certificate of the Secretary of Borrower with respect to resolutions
authorizing the execution and delivery of this Sixth Loan Modification Agreement
and the Loan Documents;

(c) payment of the fees and Bank Expenses then due specified in
Section 3 hereof; and

(d) such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.

5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described in this Eighth Loan Modification
Agreement.

6. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has no
defenses against any of the obligations to pay any amounts under the
Indebtedness.

7. CONTINUING VALIDITY. Borrower understands and agrees that (i) in modifying
the Existing Loan Documents, Bank is relying upon Borrower's representations,
warranties and agreements, as set forth in the Existing Loan Documents, (ii)
except as expressly modified pursuant to this Eighth Loan Modification Agreement
(including the effects of Section 5 hereof), the Existing Loan Documents remain
unchanged and in full force and effect, (iii) Bank's agreement to modify the
Existing Loan Documents pursuant to this Eighth Loan Modification Agreement
shall in no way obligate Bank to make any future modifications to the Existing
Loan Documents, (iv) it is the intention of Bank and Borrower to retain as
liable parties all makers and endorsers of the Existing Loan Documents, unless a
party is expressly released by Bank in writing, (v) no maker, endorser or
guarantor will be released by virtue of this Eighth Loan Modification Agreement,
and (vi) the terms of this Section 7 apply not only to this Eighth Loan
Modification Agreement but also to all subsequent loan modification agreements,
if any.

8. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. The laws of the Commonwealth of
Massachusetts shall apply to this Agreement. BORROWER ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON- EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF
MASSACHUSETTS IN ANY ACTION, SUIT, OR

                                       5
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PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWER AND BANK
EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

9. EFFECTIVENESS. This Agreement shall become effective only when it shall have
been executed by Borrower and Bank (provided, however, in no event shall this
Agreement become effective until signed by an officer of Bank in California).

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as a sealed instrument as of the date first set forth above.

"Borrower"                      "Bank"

TRANSWITCH CORPORATION          SILICON VALLEY BANK, doing business as
                                SILICON VALLEY EAST

By: /s/ Michael F. Stauff       By: /s/ William R. Howell
-------------------------       -------------------------
Michael F. Stauff, SVP          William R. Howell, AVP
& Treasurer

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<PAGE>

                                   Exhibit A

                         FORM OF COMPLIANCE CERTIFICATE

Borrower                                           Bank
TranSwitch Corporation                             Silicon Valley Bank
3 Enterprise Drive                                 3003 Tasman Drive
Shelton, CT  06484                                 Santa Clara, CA 95054

     The undersigned authorized officer of TRANSWITCH CORPORATION hereby
certifies that in accordance with the terms and conditions of the Commitment
Letter dated as of July 1, 1993, as amended, between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
____________ of all required conditions and terms except as noted below and (ii)
all representations and warranties of Borrower stated in the Agreement are true,
accurate and complete in all material respects as of the date hereof.  Attached
herewith are the required documents supporting the above certificate.  The
Officer further certifies that there are prepared in accordance with Generally
Accepted Accounting Principals (GAAP) and are consistent from one period to the
next except as explained in an accompanying letter or footnotes.  The Officer
further expressly acknowledges Borrower may not request any borrowings at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that such compliance is determined not just at the
date this certificate if delivered.

     Please indicate compliance by circling Yes/No under "Complies" column

        REPORTING CONVENANT                        REQUIRED          COMPLIES
Quarterly financial statements & CC       Quarterly within 45 days*  Yes   No
Annual (CPA Audited)                      FYE within 120 days        Yes   No
A/R Agings                                Monthly within 30 days*    Yes   No
A/R Audit                                 Initial and Annual         Yes   No

         FINANCIAL COVENANT               REQUIRED        Actual     COMPLIES
Maintain on a quarterly basis:
Minimum Adjusted Quick Ratio              2.00:1.0       ______:1.0  Yes   No
Minimum Tangible Net Worth                $150,000,000  $______      Yes   No
Maximum Leverage                          1.25:1.0       ______:1.0  Yes   No

required only immediately prior to any initial Advances under the Working
Capital Commitment and while Advances under the Working Capital Commitment are
outstanding.

Comments Regarding Exceptions:

On behalf of the Borrower, the Officer further acknowledges that at any such
time as Borrower is out of compliance with any of the terms set forth in the
Agreement, including, without limitation, any of the financial covenants,
Borrower cannot receive any advances.

Sincerely,

_______________________________
Signature

TITLE:  _______________________

DATE:    ______________________

                                       7
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                         LIBOR SUPPLEMENT TO AGREEMENT

  This LIBOR Supplement to Agreement (the "Supplement") is a supplement to the
Commitment Letter dated as of July 1, 1993, as amended (the "Loan Agreement")
between Silicon Valley Bank ("Bank") and TRANSWITCH CORPORATION ("Borrower"),
and forms a part of and is incorporated into the Loan Agreement.

1.  DEFINITIONS

     "Business Day" means a day of the year (a) that is not a Sunday or other
day on which banks in the State of California or the City of London are
authorized or required to close and (b) on which dealings are carried on in the
interbank market in which Bank customarily participates.

     "Interest Period" means for each LIBOR Rate Loan, a period of approximately
three months, provided that the last day of an Interest Period for a LIBOR Rate
Loan shall be determined in accordance with the practices of the LIBOR interbank
market as from time to time in effect, provided, further, in all cases such
period shall expire not later than the applicable Maturity Date.

     "Interest Rate" shall mean as to: (a) Prime Rate Loans, an annual rate
equal to the Prime Rate; and (b) LIBOR Rate Loans, an annual rate of 2.5% in
excess of the LIBOR Rate (based on the LIBOR Rate applicable for the Interest
Period).

     "LIBOR Base Rate" means, for any Interest Period for a LIBOR Rate Loan, the
rate of interest per annum determined by Bank to be the per annum rate of
interest at which deposits in United States Dollars are offered to Bank in the
London interbank market in which Bank customarily participates at 11:00 A.M.
(local time in such interbank market) two (2) Business Days before the first day
of such Interest Period for a period approximately equal to such Interest Period
and in an amount approximately equal to the amount of such Loan.

     "LIBOR Rate" shall mean, for any Interest Period for a LIBOR Rate Loan, a
rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal
to (i) the LIBOR Base Rate for such Interest Period divided by (ii) 1 minus the
Reserve Requirement for such Interest Period.

     "LIBOR Rate Loans" means any Loans made or a portion thereof on which
interest is payable based on the LIBOR Rate in accordance with the terms hereof.

     "Prime Rate" means the variable rate of interest per annum, most recently
announced by Bank as its "prime rate," whether or not such announced rate is the
lowest rate available from Bank.  The Interest rate applicable to the Prime Rate
Loans shall change on each date there is a change in the Prime Rate.

     "Prime Rate Loans" means any Loans made or a portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms hereof.

     "Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as the same may be amended or supplemented from time to time.

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     "Regulatory Change" means, with respect to Bank, any change on or after the
date of this Loan Agreement in United States federal, state or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives or requests applying to a class of
lenders including Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

     "Reserve Requirement" means, for any Interest Period, the average maximum
rate at which reserves (including any marginal, supplemental or emergency
reserves) are required to be maintained during such Interest Period under
Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System.  Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by Bank by reason of any Regulatory Change
against (i) any category of liabilities which includes deposits by reference to
which the LIBOR Rate is to be determined as provided in the definition of "LIBOR
Base Rate" or (ii) any category of extensions of credit or other assets which
include Loans.

2.  REQUESTS FOR LOANS: CONFIRMATION OF INITIAL LOANS.

          (a) Each LIBOR Rate Loan shall be made upon the irrevocable written
request of Borrower received by Bank not later than 11:00 a.m. (Santa Clara,
California time) on the Business Day three (3) Business Days prior to the such
date Loan is to be made.  Each such notice shall specify the date such Loan is
to made, which day shall be a Business Day, the amount of such Loan, and comply
with such other requirements as Bank determines are reasonable or desirable in
connection therewith.

          (b) Each written request for a LIBOR Rate Loan shall be in the form of
a LIBOR Rate Loan Borrowing Certificate as set forth on Schedule A, which shall
be duly executed by the Borrower.

          (c) Each Prime Rate Loan shall be made upon the irrevocable written
request of Borrower received by Bank not later than 11:00 a.m. (Santa Clara,
California time) on the Business Day one (1) Business days prior to the date
such Loan is to be made.  Each such notice shall specify the date such Loan is
to be made, which day shall be a Business Day and the amount of such Loan, and
comply with such other requirements as Bank determines are reasonable or
desirable in connection therewith.

3.  CONVERSION/CONTINUATION OF LOANS.

          (a) Borrower may from time to time submit in writing a request that
Prime Rate Loans be converted to LIBOR Rate Loans or that any existing LIBOR
Rate Loans continue for an additional Interest Period.  Such request shall
specify the amount of the Prime Rate Loans which will constitute LIBOR Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such LIBOR Rate Loans.  Each written request for a conversion to
LIBOR Rate Conversion/Continuation Certificate as set forth on Schedule B, which
shall be duly executed by the Borrower.  Subject to the terms and conditions
contained herein, three (3) Business Days after Bank's receipt of such a request
from Borrower, such Prime Rate Loans shall be converted to LIBOR Rate Loans or
such LIBOR Rate Loans shall continue, as the case may be, provided that:

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              (i) no Event of Default, or event which with notice or passage of
          time or both would constitute an Event of Default, exists;

              (ii) no party hereto shall have sent any notice of termination of
          this Supplement or of the Loan Agreement;

              (ii) Borrower shall have complied with such customary procedures
          as Bank has established from time to time for Borrower's requests for
          LIBOR Rate Loans;

              (iv) the amount of a LIBOR Rate Loan shall be $500,000 or such
          greater amount which is an integral multiple of $50,000; and

              (v) Bank shall have determined that the Interest Period or LIBOR
          Rate is available to Bank which can be readily determined as of the
          date of the request for such LIBOR Rate Loan.

     Any request by Borrower to convert Prime Rate Loans to LIBOR Rate Loans or
continue any existing LIBOR Rate Loans shall be irrevocable.  Notwithstanding
anything to the contrary contained herein, Bank shall not be required to
purchase United States Dollar deposits in the London interbank market or other
applicable LIBOR Rate market to fund any LIBOR Rate Loans, but the provisions
hereof shall be deemed to apply as if Bank had purchased such deposits to fund
the LIBOR Rate Loans.

          (b) Any LIBOR Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Bank has
received and approved a complete and proper request to continue such LIBOR Rate
Loan at least three (3) Business Days prior to such last day in accordance with
the terms hereof.  Any LIBOR Rate Loans shall, at Bank's option, convert to
Prime Rate Loans in the event that (i) an Event of Default, or event which with
the notice or passage of time or both would constitute an Event of Default,
shall exist, (ii) this Supplement or the Loan Agreement shall terminate, or
(iii) the aggregate principal amount of the Prime Rate Loans which have
previously been converted to LIBOR Rate Loans, or the aggregate principal amount
of existing LIBOR Rate Loans continued, as the case may be, at the beginning of
an interest Period shall at any time during such Interest Period exceeds the
Working Capital Commitment.  Borrower agrees to pay to Bank, upon demand by Bank
(or Bank may, at its option, charge Borrower's loan account) any amounts
required to compensate Bank for any loss (including loss of anticipated
profits), cost or expense Incurred by such person, as a result of the conversion
of LIBOR Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

          (c) On all Loans, Interest shall be payable by Borrower to Bank, at
the applicable Interest Rate, monthly in arrears not later than the thirteenth
(13th) day of each calendar month.

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<PAGE>

4.   ADDITIONAL REQUIREMENTS/PROVISIONS REGARDING LIBOR RATE LOANS: ETC.

          (a) If for any reason (including voluntary or mandatory prepayment of
acceleration), Bank receives all or part of the principal amount of a LIBOR Rate
Loan prior to the last day of the Interest Period for such Loan, Borrower shall
immediately notify Borrower's account officer at Bank and, on demand by Bank,
pay Bank the amount (if any) by which (i) the additional interest which would
have been payable on the amount so received had it not been received until the
last day of such Interest Period exceeds (ii) the interest which would have been
recoverable by Bank by placing the amount so received on deposit in the
certificate of deposit markets or the offshore currency interbank markets or
United States Treasury investment products, as the case may be, for a period
starting on the date on which it was so received and ending on the last day of
such Interest Period at the Interest rate determined by Ban in its reasonable
discretion.  Bank's determination as to such amount shall be conclusive absent
manifest effort.

          (b) Borrower shall pay to Bank, upon demand by Bank, from time to time
such amounts as Bank may determine to be necessary to compensate it for any
costs incurred by Bank that Bank determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any Loans
relating thereto (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), in each case resulting from any
Regulatory Change which:

              (i) changes the basis of taxation of any amounts payable to Bank
          under this Supplement in respect of any Loans (other than changes
          which affect taxes measured by or imposed on the overall net income of
          Bank by the jurisdiction in which such Bank has its principal office);
          or

              (ii) imposes or modifies any reserve, special deposit or similar
         requirements relating to any extensions of credit or other assets of,
         or any deposits with or other liabilities of Bank (including any Loans
         or any deposits referred to in the definition of "LIBOR Base Rate"); or

              (iii)  imposes any other condition affecting this Supplement (or
          any of such extensions of credit or liabilities).

     Bank will notify Borrower of any event which will entitle Bank to
compensation pursuant to this section as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.  Bank
will furnish Borrower with a statement setting forth the basis and amount of
each request by Bank for compensation under this Section 4.  Determinations and
allocations by Bank for purposes of this Section 4 of the effect of any
Regulatory Change on its costs of maintaining its obligations to make Loans or
of making or maintaining Loans or on amounts receivable by it in respect of
Loans, and of the additional amounts required to compensate Bank in respect of
any Additional Costs, shall be conclusive absent manifest error.

          (c) Borrower shall pay to Bank, upon the request of Bank, such amount
or amounts as shall be sufficient (in the sole good faith opinion of such Bank)
to compensate it for any loss, costs or expense incurred by it as a result of
any failure by Borrower to borrow a Loan on the date for such borrowing
specified in the relevant notice of borrowing hereunder.

                                       11
<PAGE>

          (d) If Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation or treaty regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with respect to any directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity controlling Bank (a "Parent")
as a consequence of its obligations hereunder to a level below that which Bank
(or its Parent) could have achieved but for such adoption, change or compliance
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within 15 days
after demand by Bank, Borrower shall pay to Bank such additional amount or
amounts as will compensate Bank for such reduction.  A statement of Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive absent manifest error.

          (e) If at any time Bank, in its sole and absolute discretion,
determines that (i) the amount of the LIBOR Rate Loans for periods equal to the
corresponding interest Periods are not available to Bank in the offshore
currency interbank markets, or (ii) the LIBOR Rate does not accurately reflect
the cost to Bank of lending the LIBOR Rate Loan, then Bank shall promptly give
notice thereof to Borrower, and upon the giving of such notice Bank's obligation
to make the LIBOR Rate Loans shall terminate, unless Bank and Borrower agree in
writing to a different interest rate applicable to LIBOR Rate Loans.  If it
shall become unlawful for Bank to continue to fund or maintain any Loans, or to
perform its obligations hereunder, upon demand by Bank, Borrower shall prepay
the Loans in full with accrued interest thereon and all other amounts payable by
Borrower hereunder (including, without limitation, any amount payable in
connection with such prepayment pursuant to Section 4(a)).

5.  CONFLICTS.

          If there is any conflict between the terms and conditions of this
LIBOR Supplement to Loan Agreement and the terms and conditions of the Loan
Agreement, the terms and conditions of this LIBOR Supplement to Loan Agreement
shall control.

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<PAGE>

                         SCHEDULE A TO LIBOR SUPPLEMENT
                     LIBOR RATE LOAN BORROWING CERTIFICATE

              The undersigned hereby certifies as follows:

              I, __________________, am the duly elected and acting
________________ of TRANSWITCH CORPORATION ("Borrower").

          This certificate is delivered pursuant to Section 2 of that certain
LIBOR Supplement to Agreement together with the Commitment Letter dates as of
JULY 1, 1993, as amended, by and between Borrower and Silicon Valley Bank
("Bank") (the "Loan Agreement").  The terms used in this Borrowing Certificate
which are defined in the Loan Agreement have the same meaning herein as ascribed
to them therein.

              Borrower hereby requests on __________, 20__ a LIBOR Rate Loan
(the "Loan") as follows:

(a)  The date on which the Loan is to be made is ___________, 20__.

(b)  The amount of the Loan is to be _____________ ($_________), for an Interest
     Period of three (3) months.

     All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of this
request for a loan; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.

     IN WITNESS WHEREOF, this Borrowing Certificate is executed by the
undersigned as of this _________ day of _________, 20__.

                                    TRANSWITCH CORPORATION

                                    By:
                                    Title:

     Internal Bank Use Only

LIBOR Pricing Date      LIBOR Rate      LIBOR Rate Variance    Maturity Date
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

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                         SCHEDULE B TO LIBOR SUPPLEMENT
                 LIBOR RATE CONVERSION/CONTINUATION CERTIFICATE

         The undersigned hereby certifies as follows:

                                                            I,
__________________, am the duly elected and acting _____________ of TRANSWITCH
CORPORATION ("Borrower").

          This certificate is delivered pursuant to Section 2 of that certain
LIBOR Supplement to Agreement together with the Commitment Letter dates as of
July 1, 1993, as amended, by and between Borrower and Silicon Valley Bank
("Bank") (the "Loan Agreement").  The terms used in this LIBOR Rate
Conversion/Continuation Certificate which are defined in the Loan Agreement have
the same meaning herein as ascribed to them therein,

                                                            Borrower hereby
requests on ___________, 20__ a LIBOR Rate Loan (the "Loan") as follows:

     (a) _______ (i) A rate conversion of an existing Prime Rate Loan from a
Prime Rate Loan to a LIBOR Rate Loan; or

         _______ (ii) A continuation of an existing LIBOR Rate Loan as a LIBOR
Rate Loan;

         [Check (i) or (ii) above]

     (b) The date on which the Loan is to be made is ___________, 20__.

     (c) The amount of the Loan is to be ___________ ($________), for an
Interest Period of three (3) months.

     All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of this
request for a loan; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.

     IN WITNESS WHEREOF, this LIBOR Rate Conversion/Continuation Certificate is
executed by the undersigned as of this _________ day of _________, 20__.

                                    TRANSWITCH CORPORATION

                                    By:
                                    Title:

     Internal Bank Use Only

LIBOR Pricing Date      LIBOR Rate      LIBOR Rate Variance    Maturity Date
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

                                       14<PAGE>

                                                                    EXHIBIT 10.3
================================================================================

                      AMENDED AND RESTATED CREDIT AGREEMENT

                          Dated as of December 27, 2000

                                      Among

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

                                       and

                               FLEET NATIONAL BANK
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS....................................1
      Section 1.1.  Definitions................................................1
      Section 1.2.  Accounting Terms..........................................13

ARTICLE 2. THE CREDITS........................................................13
      Section 2.1.  The Revolving Credit......................................13
      Section 2.1A. Sterling Overdraft Facility...............................14
      Section 2.2.  Requests for Revolving Credit Advances....................14
      Section 2.3.  Interest on Revolving Credit Advances.....................14
      Section 2.4.  The Term Loan.............................................15
      Section 2.5.  Election of LIBOR Pricing Options.........................15
      Section 2.6.  Additional Payments.......................................16
      Section 2.7.  Set-Off; Computation of Interest; Etc.....................16
      Section 2.8.  Commitment Fee............................................17
      Section 2.9.  Increased Costs, Etc......................................17
      Section 2.10. Changed Circumstances.....................................19
      Section 2.11. Use of Proceeds...........................................20
      Section 2.12. Termination...............................................20
      Section 2.13. Letter of Credit Fee......................................20

ARTICLE 3. CONDITIONS OF THE CREDITS..........................................20
      Section 3.1.  Conditions to Term Loan and First Revolving
                      Credit Advance..........................................20
      Section 3.2.  Conditions to All Revolving Credit Advances...............21

ARTICLE 4. PAYMENT AND REPAYMENT..............................................22
      Section 4.1.  Mandatory Prepayments.....................................22
      Section 4.2.  Voluntary Prepayments.....................................22
      Section 4.3.  Payment and Interest Cutoff...............................23
      Section 4.4.  Payments Not at End of Interest Period....................23
      Section 4.5.  Method and Application of Payments........................24

ARTICLE 5. REPRESENTATIONS AND WARRANTIES.....................................24
      Section 5.1.  Corporate Existence, Charter Documents, Etc...............24
      Section 5.2.  Principal Place of Business; Location of Records..........25
      Section 5.3.  Qualification.............................................25
      Section 5.4.  Subsidiaries..............................................25
      Section 5.5.  Corporate Power...........................................25
      Section 5.6.  Valid and Binding Obligations.............................26
      Section 5.7.  Other Agreements..........................................26
      Section 5.8.  Payment of Taxes..........................................27
      Section 5.9.  Financial Statements......................................27
      Section 5.10. Other Materials Furnished.................................27
      Section 5.11. Stock.  ..................................................27
      Section 5.12. Changes in Condition......................................28

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

                                      (i)
<PAGE>

      Section 5.13. Assets, Licenses, Etc.....................................28
      Section 5.14. Litigation................................................28
      Section 5.15. Pension Plans.............................................29
      Section 5.16. Outstanding Indebtedness..................................29
      Section 5.17. Environmental Matters.....................................29
      Section 5.18. Foreign Trade Regulations.................................30
      Section 5.19. Governmental Regulations..................................31
      Section 5.20. Margin Stock..............................................31
      Section 5.21. Operation of Business on Consolidated Basis...............31

ARTICLE 6. REPORTS AND INFORMATION............................................31
      Section 6.1.  Interim Financial Statements and Reports..................31
      Section 6.2.  Annual Financial Statements...............................31
      Section 6.3.  Notice of Defaults........................................32
      Section 6.4.  Notice of Litigation......................................32
      Section 6.5.  Communications with Others................................32
      Section 6.6.  Reportable Events.........................................32
      Section 6.7.  Reports to other Creditors................................32
      Section 6.8.  Communications with Independent Public Accountants;
                      Management Letter.......................................33
      Section 6.9.  Environmental Reports.....................................33
      Section 6.10. Annual Projections........................................33
      Section 6.11. Miscellaneous.............................................33

ARTICLE 7. FINANCIAL COVENANTS................................................34
      Section 7.1.  Ratio of Consolidated Senior Funded Debt to
                      Consolidated EBITDA.....................................34
      Section 7.2.  Ratio of Consolidated Operating Cash Flow to
                      Consolidated Total Debt Service.........................34
      Section 7.3.  Minimum Consolidated EBITDA...............................34
      Section 7.4.  Consolidated Capital Expenditures.........................34

ARTICLE 8. AFFIRMATIVE COVENANTS..............................................34
      Section 8.1.  Existence and Business....................................35
      Section 8.2.  Taxes and Other Obligations...............................35
      Section 8.3.  Maintenance of Properties and Leases......................35
      Section 8.4.  Insurance.................................................36
      Section 8.5.  Records, Accounts and Places of Business..................36
      Section 8.6.  Inspection................................................36
      Section 8.7.  Maintenance of Accounts...................................36
      Section 8.8.  Interest Rate Protection..................................36
      Section 8.9.  Delivery of Closing Documents.............................36

ARTICLE 9. NEGATIVE COVENANTS.................................................37
      Section 9.1.  Restrictions on Indebtedness..............................37
      Section 9.2.  Restriction on Liens......................................38
      Section 9.3.  Restrictions on Asset Acquisition.........................39
      Section 9.4.  Investments...............................................40

                                      (ii)
<PAGE>

      Section 9.6.  Assumptions, Guaranties, Etc. of Indebtedness
                      of Other Persons........................................40
      Section 9.7.  Mergers, Etc..............................................41
      Section 9.8.  ERISA.....................................................41
      Section 9.9.  Distributions.............................................41
      Section 9.10. Sale and Leaseback........................................41
      Section 9.11. Transactions with Affiliates..............................41

ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES....................................42
      Section 10.1. Events of Default.........................................42
      Section 10.2. Remedies..................................................44

ARTICLE 11. WAIVERS; AMENDMENTS; REMEDIES.....................................45

ARTICLE 12. INDEMNIFICATION...................................................45

ARTICLE 13. MISCELLANEOUS.....................................................46
      Section 13.1. Successors and Assigns....................................46
      Section 13.2. Notices...................................................47
      Section 13.3. Integration...............................................48
      Section 13.4. Governing Law.............................................48
      Section 13.5. Counterparts..............................................48
      Section 13.6. Expenses..................................................49
      Section 13.7. Joint and Several Obligations.............................49
      Section 13.8. Reliance on Representations and Actions of the
                      Company.................................................49
      Section 13.9. WAIVER OF JURY TRIAL......................................49
      Section 13.10. Replacement of Promissory Notes..........................50
      Section 13.11. Currency Equivalents.....................................50

                                     (iii)
<PAGE>

LIST OF EXHIBITS AND SCHEDULES

Exhibit A                   Revolving Credit Note
Exhibit B                   Term Note
Exhibit C                   Compliance Certificate
Exhibit D                   Pricing Notice
Exhibit E                   SC Licensing Guaranty
Exhibit F                   SC(UK) Resolution

Schedule 1                  Schedule of Existing Letters of Credit
Schedule 5.4                Schedule of Subsidiaries
Schedule 5.8                Schedule of Payment of Taxes
Schedule 5.9                Schedule of Financial Statements
Schedule 5.11               Schedule of Issued and Outstanding Stock
Schedule 5.12               Schedule of Changes in Condition
Schedule 5.13(a)(i)         Schedule of Liens, Charges and Encumbrances
Schedule 5.13(a)(ii)        Schedule of Assets of the Company
Schedule 5.13(b)            Schedule of Intellectual Property
Schedule 5.14               Schedule of Litigation
Schedule 5.15               Schedule of Pension Plans
Schedule 5.16               Schedule of Outstanding Indebtedness
Schedule 5.17               Schedule of Environmental Matters
Schedule 8.4                Schedule of Insurance

                                      (iv)
<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

      This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of December
27, 2000 by and among SPECIALTY CATALOG CORP., a Delaware corporation (the
"Company"), SC CORPORATION, a Delaware corporation d/b/a SC Direct ("SC
Direct"), SC PUBLISHING, INC., a Delaware corporation ("SC Publishing") and
DAXBOURNE INTERNATIONAL LIMITED (Registered No. 3369640), a private company
limited by shares incorporated in England and Wales ("SC(UK)") (each, a
"Borrower" and collectively, the "Borrowers"), and FLEET NATIONAL BANK, a
national banking association organized and existing under the laws of the United
States of America (the "Bank").

                                    Recitals

      WHEREAS, the Company, SC Direct, SC Publishing and the Bank are parties to
a Credit and Guaranty Agreement dated as of March 12, 1997 (as amended through
the date hereof, the "U.S. Credit Agreement") and SC(UK), the Company, SC
Direct, SC Publishing and the Bank are parties to a Credit Agreement dated as of
October 3, 1997 (as amended through the date hereof, the "U.K. Credit
Agreement", and together with the U.S. Credit Agreement, the "Original Credit
Agreements"); and

      WHEREAS, the Borrowers and the Bank desire to amend and restate the
Original Credit Agreements in their entirety to, among other things, establish
new credit facilities in favor of the Borrowers, jointly and severally, to
refinance existing Indebtedness outstanding under the Original Credit
Agreements, and to integrate the provisions of the Original Credit Agreements
into one agreement provided for herein;

      NOW, THEREFORE, for good and valuable consideration, the Borrowers,
jointly and severally, and the Bank hereby amend and restate the Original Credit
Agreements in their entirety and hereby agree as follows:

                  ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS

      Section 1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, agreement, certificate, report or other document
made or delivered in connection with this Agreement:

            "Affiliate" shall mean (a) any director or officer of the Company or
      any Subsidiary, (b) any Person owning 10% or more of any class of capital
      stock of the Company or any Subsidiary and (c) any Person that controls,
      is controlled by or is under common control with the Company or any
      Subsidiary. For purposes of this definition, "control" of a Person shall
      mean the possession, directly or indirectly, of the power to

                                       1
<PAGE>

      direct or cause the direction of its management or policies, whether
      through the ownership of voting securities, by contract or otherwise.

            "Agreement" shall mean this Amended and Restated Credit Agreement,
      as amended or supplemented from time to time. References to Articles,
      Sections, Exhibits, Schedules and the like refer to the Articles,
      Sections, Exhibits, Schedules and the like of this Agreement unless
      otherwise indicated, as amended and supplemented from time to time.

            "Applicable Commitment Fee Rate" shall mean 0.375% per annum.

            "Applicable LIBOR Rate" shall mean the LIBOR Rate plus the
      Applicable LIBOR Rate Margin.

            "Applicable LIBOR Rate Margin" shall mean with respect to LIBOR Rate
      Loans, provided that no Default has occurred and is outstanding, (a) from
      the Closing Date to the Applicable Margin Determination Date with respect
      to the fiscal year ending December 31, 2000, 2.25% per annum and (b)
      thereafter, the Applicable LIBOR Rate Margin as set forth below based on
      the Consolidated Leverage Ratio as of the end of the previous quarter and
      determined and adjusted on each Applicable Margin Determination Date:

                                                                Applicable LIBOR
      Level                 Consolidated Leverage Ratio           Rate Margin
      -----                 ---------------------------           -----------

        I                Greater than 3.00-to-1.00                   2.75%

       II         Greater than 2.50-to-1.00 but less than            2.50%
                          or equal to 3.00-to-1.00

       III        Greater than 2.00-to-1.00 but less than            2.25%
                           or equal to 2.50-to-1.00

       IV        Greater than 1.50-to-1.00 but less than or          2.00%
                           equal to 2.00-to-1.00
        V            Less than or equal to 1.50-to-1.00              1.75%

      provided, however, that if a Default shall have occurred and is
      outstanding, the "Applicable LIBOR Rate Margin" shall mean 2.75% per annum
      at all times during the existence and continuance of any such Default.

            "Applicable Margin Determination Date" shall mean the date that the
      Borrowers deliver a Compliance Certificate to the Bank in accordance with
      the requirements of

                                       2
<PAGE>

      Section 6.1 or 6.2, as applicable.

            "Applicable Prime Rate" shall mean the Prime Rate plus the
      Applicable Prime Rate Margin.

            "Applicable Prime Rate Margin" shall mean, with respect to Prime
      Rate Loans, provided that no Default has occurred and is outstanding, (a)
      from the Closing Date to the Applicable Margin Determination Date with
      respect to the fiscal year ending December 31, 2000, 0.25% per annum and
      (b) thereafter, the Applicable Prime Rate Margin as set forth below based
      on the Consolidated Leverage Ratio as of the end of the previous quarter
      and determined and adjusted on each Applicable Margin Determination Date:

       Level       Consolidated Leverage Ratio      Applicable Prime Rate Margin
       ----        ---------------------------      ----------------------------

         I          Greater than 3.00-to-1.00                  0.75%

               Greater than 2.50-to-1.00 but less
        II        than or equal to 3.00-to-1.00                0.50%

               Greater than 2.00-to-1.00 but less
        III       than or equal to 2.50-to-1.00                0.25%

        IV     Less than or equal to 2.00-to-1.00              0.00%

            provided, however, that if a Default shall have occurred and is
      outstanding, the "Applicable Prime Rate Margin" shall mean 0.75% per annum
      at all times during the existence and continuance of any such Default.

            "Bank Agreement" shall mean this Agreement, the Revolving Credit
      Note, the Term Note, the Security Agreements, the Pledge Agreements, the
      SC Licensing Guaranty, any Letter of Credit and application therefor and
      any other present or future agreement from time to time entered into
      between any Borrower or any Subsidiary and the Bank, each as from time to
      time amended or supplemented, and all statements, reports and certificates
      delivered by the Borrowers or any Subsidiary to the Bank in connection
      therewith.

            "Bank Obligations" shall mean all present and future obligations and
      Indebtedness of the Borrowers and their Subsidiaries owing to the Bank
      under this 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 and the Term Note, LC Obligations
      and obligations to pay interest, commitment fees, balance deficiency fees,
      charges, expenses and indemnification from time to time owed under any
      Bank Agreement.

            "Business Day" shall mean any day other than a Saturday, Sunday or
      other day on which commercial banks in The Commonwealth of Massachusetts
      are authorized or

                                       3
<PAGE>

      required to close under the laws of The Commonwealth of Massachusetts,
      and, if the applicable day relates to a LIBOR Rate Loan or an Interest
      Period for a LIBOR Rate Loan, the day on which dealings in dollar deposits
      are also carried on in the London interbank market and banks are open for
      business in London.

            "Capital Assets" shall mean fixed assets, both tangible (such as
      land, buildings, fixtures, machinery and equipment) and intangible (such
      as patents, copyrights, trademarks, franchises and goodwill); provided,
      however, that Capital Assets shall not include any item customarily
      charged directly as an expense or depreciated over a useful life of twelve
      (12) months or less in accordance with Generally Accepted Accounting
      Principles.

            "Capital Expenditures" shall mean amounts paid or incurred,
      including Indebtedness incurred, by any Borrower or any of their
      Subsidiaries in connection with the purchase or lease by any Borrower or
      any of their Subsidiaries of Capital Assets that would be required to be
      capitalized and shown on the balance sheet of such Borrower or Subsidiary
      in accordance with Generally Accepted Accounting Principles.

            "Capitalized Lease" shall mean any lease which is or should be
      capitalized on the balance sheet of the lessee in accordance with
      Generally Accepted Accounting Principles and Statement of Financial
      Accounting Standards No. 13.

            "Capitalized Lease Obligations" shall mean the amount of the
      liability reflecting the aggregate discounted amount of future payments
      under all Capitalized Leases calculated in accordance with Generally
      Accepted Accounting Principles and Statement of Financial Accounting
      Standards No. 13.

            "Change of Control" shall be deemed to have occurred when (a) the
      individuals who at the Closing Date constituted the Board of Directors of
      the Company (together with any new directors whose election by such Board
      of Directors, or whose nomination for election by the stockholders of the
      Company, was approved by a vote of a majority of the directors still in
      office who were directors on the Closing Date or whose election or
      nomination for election was previously so approved) cease for any reason
      to constitute a majority of the Board of Directors of the Company then
      still in office, (b) more than 16% of the outstanding shares of common
      stock of the Company is owned of record or beneficially by any Person or
      group of Persons within the meaning of Sections 13 or 14 of the Securities
      Exchange Act of 1934, as amended or (c) Joseph Grabowski shall cease to
      serve as the chief executive officer of the Company, SC Direct and SC
      Publishing, whether by reason of death, disability, resignation, action by
      the Board of Directors, or otherwise and one hundred and twenty (120) days
      shall have passed without express written waiver by the Bank of any such
      event pursuant to this paragraph (c).

            "Closing Date" shall mean the date on which all of the conditions
      set forth in Section 3.1 have been satisfied.

                                       4
<PAGE>

            "Collateral" shall mean all accounts receivable, inventory,
      equipment, Pledged Shares and Related Collateral and all other property of
      the Borrowers and SC Licensing Corp. or another Person, now owned or
      hereafter acquired which is designated as collateral and in which the Bank
      is granted a lien to secure any of the Bank Obligations pursuant to the
      Security Agreements or otherwise (whether or not such agreement makes
      reference to this Agreement or the Bank Obligations).

            "Compliance Certificate" shall mean a certificate in the form of
      Exhibit C hereto and executed by the chief executive officer or chief
      financial officer of the Company.

            "Consolidated" and "Consolidating," and "consolidated" and
      "consolidating" when used with reference to any term, shall mean that term
      as applied to the accounts of the Company (or other specified Person) and
      all of its Subsidiaries (or other specified Persons), or such of its
      Subsidiaries as may be specified, consolidated in accordance with
      Generally Accepted Accounting Principles and with appropriate deductions
      for minority interests (if any) in Subsidiaries, as required by Generally
      Accepted Accounting Principles.

            "Consolidated Current Liabilities" shall mean, at any date as of
      which the amount thereof shall be determined, all liabilities of the
      Company and its Subsidiaries which should properly be classified as
      current in accordance with Generally Accepted Accounting Principles
      consistently applied, including, without limitation, all fixed prepayments
      of, and sinking fund payments with respect to, Indebtedness and all
      estimated taxes of the Company and its Subsidiaries required to be made
      within one year from the date of determination.

            "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.

            "Consolidated Excess Cash Flow" shall mean, for any period,
      Consolidated Operating Cash Flow less Consolidated Total Debt Service,
      each determined for such period.

            "Consolidated Net Income" shall mean the net income (or deficit)
      from operations of the Company and its Subsidiaries, after taxes,
      determined in accordance with Generally Accepted Accounting Principles
      consistently applied.

            "Consolidated Operating Cash Flow" shall mean (a) Consolidated
      EBITDA less (b) the sum of (i) unfinanced Capital Expenditures plus (ii)
      Consolidated net cash payments for taxes for the applicable period.

            "Consolidated Senior Funded Debt" shall mean (a) all Indebtedness of
      the Company and its Subsidiaries for borrowed money (including Capitalized
      Lease

                                       5
<PAGE>

      Obligations but excluding trade accounts payable and contingent
      obligations) less (b) all Subordinated Indebtedness of the Company and its
      Subsidiaries.

            "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.

            "Debenture" shall mean the Debenture from SC(UK) to the Bank dated
      as of October 3, 1997, as amended or supplemented from time to time.

            "Default" shall mean an Event of Default or an event or condition
      which with the passage of time or giving of notice, or both, would become
      such an Event of Default.

            "Distribution" shall mean as to any Person: (a) the declaration or
      payment of any dividend on or in respect of any shares of any class of
      capital stock of such Person, other than dividends payable solely in
      shares of common stock of such Person, (b) the purchase, redemption, or
      other acquisition or retirement of any shares of any class of capital
      stock of such Person directly or indirectly, (c) any other distribution on
      or in respect of any shares of any class of capital stock of such Person,
      (d) any setting apart or allocating any sum for the payment of any
      dividend or distribution, or for the purchase, redemption or retirement of
      any shares of capital stock of such Person, and (e) any payment of
      principal of any Subordinated Indebtedness.

            "Environmental Law" means any judgment, decree, order, law, license,
      rule or regulation pertaining to environmental matters, or any federal,
      state, county or local statute, regulation, ordinance, order or decree
      relating to public health, welfare, the environment, or to the storage,
      handling, use or generation of hazardous substances in or at the
      workplace, worker health or safety, whether now existing or hereafter
      enacted.

            "ERISA" shall mean the Employee Retirement Income Security Act of
      1974, as amended from time to time.

            "Event of Default" shall have the meaning set forth in Section 10.1
      hereof.

            "Federal Funds Effective Rate" shall mean for any one day, a
      fluctuating interest rate per annum equal to the weighted average of the
      rates on overnight Federal funds transactions with members of the Federal
      Reserve System arranged by Federal funds brokers, as published for such
      day (or, if such day is not a Business Day, for the next preceding
      Business Day) by the Federal Reserve Bank of New York, or, if such rate is
      not so published for any day that is a Business Day, the average of the
      quotations for such day on such transactions received by the Bank from
      three Federal funds brokers of recognized standing selected by the Bank.

            "Generally Accepted Accounting Principles" shall mean generally
      accepted accounting principles as defined by controlling pronouncements of
      the Financial

                                       6
<PAGE>

      Accounting Standards Board, as from time to time supplemented and amended,
      or in the case of SC(UK), as generally accepted in the United Kingdom.

            "Governmental Authority" shall mean any nation or government, any
      state or other political subdivision thereof and any entity exercising
      executive, legislative, judicial, regulatory or administrative functions
      of or pertaining to government.

            "Guaranty" or "Guarantee" or "Guaranties" shall include any
      arrangement whereby a Person is or becomes liable in respect of any
      Indebtedness or other obligation of another and any other arrangement
      whereby credit is extended to another obligor on the basis of any promise
      of a guarantor, whether that promise is expressed in terms of an
      obligation to pay the Indebtedness of such obligor, or to purchase or
      lease assets under circumstances that would enable such obligor to
      discharge one or more of its obligations, or to maintain the capital, the
      working capital, solvency or general financial condition of such obligor,
      whether or not such arrangement is listed in the balance sheet of the
      guarantor or referred to in a footnote thereto.

            "Indebtedness" shall mean, as to any Person, all obligations,
      contingent and otherwise, which in accordance with Generally Accepted
      Accounting Principles consistently applied should be classified upon such
      Person's balance sheet as liabilities, but in any event including
      liabilities secured by any mortgage, pledge, security interest, lien,
      charge or other encumbrance existing on property owned or acquired by such
      Person whether or not the liability secured thereby shall have been
      assumed, letters of credit open for account, obligations under acceptance
      facilities, Capitalized Lease Obligations and all obligations on account
      of Guaranties, endorsements and any other contingent obligations in
      respect of the Indebtedness of others whether or not reflected on such
      balance sheet or in a footnote thereto.

            "Interest Period" shall mean with respect to each LIBOR Rate Loan
      the period commencing on the date of such LIBOR Rate Loan and ending one,
      two or three months thereafter, as the Company may request in a Pricing
      Notice, provided that:

                  (i) any Interest Period (other than an Interest Period
      determined pursuant to clause (ii) below) that would otherwise end on a
      day that is not a Business Day shall be extended to the next succeeding
      Business Day unless such Business Day falls in the next calendar month, in
      which case such Interest Period shall end on the immediately preceding
      Business Day;

                  (ii) any Interest Period that would otherwise end (a) after
      the Term Loan Maturity Date with respect to a LIBOR Rate Loan representing
      all or a portion of the Term Loan shall end on the Term Loan Maturity Date
      and (b) after the Revolving Credit Termination Date with respect to a
      LIBOR Rate Loan representing a Revolving Credit Advance shall end on the
      Revolving Credit Termination Date; and

                                       7
<PAGE>

                  (iii) notwithstanding clause (ii) above, no Interest Period
      shall have a duration of less than one month, and if any Interest Period
      applicable to any LIBOR Rate Loan would be for a shorter period, such
      Interest Period shall not be available hereunder.

            "Interest Rate Protection Agreement" shall mean any interest rate
      swap agreement, interest rate cap agreement, interest rate collar
      agreement, interest rate hedging agreement, interest rate floor agreement,
      swaption or other similar agreement or arrangement.

            "Investment" shall mean (a) any stock, evidence of Indebtedness or
      other security of another Person, (b) any loan, advance, contribution to
      capital or extension of credit (except for current trade and customer
      accounts receivable for inventory sold or services rendered in the
      ordinary course of business and payable in accordance with customary trade
      terms) to another Person, and (c) any purchase of (i) stock or other
      securities of another Person or (ii) any business or undertaking of
      another Person (whether by purchase of assets or securities), any
      commitment or option to make any such purchase if, in the case of an
      option, the aggregate consideration paid for such option was in excess of
      $100 or (d) any other investment, in all cases whether existing on the
      date of this Agreement or thereafter made.

            "LC Obligations" shall mean all present and future obligations of
      the Borrowers to reimburse the Bank for any amounts drawn under any Letter
      of Credit, to pay certain fees to the Bank relating to any Letter of
      Credit, including without limitation, the Letter of Credit Fee, and to pay
      any and all amounts and to perform any obligations under any agreement
      pursuant to which a Letter of Credit has been issued, including all
      reimbursement and indemnification obligations.

            "Legal Charge" shall mean the Legal Charge from SC(UK) to the Bank
      dated as of October 3, 1997, as amended or supplemented from time to time.

            "Letter of Credit" shall mean a standby or documentary letter of
      credit issued by the Bank for the account of any of the Borrowers,
      including without limitation each letter of credit described on Schedule 1
      hereto which has been issued by the Bank as of the date hereof.

            "Letter of Credit Fee" shall have the meaning ascribed to it in
      Section 2.13 herein.

            "LIBOR Pricing Option" shall mean the option granted to the
      Borrowers pursuant to Section 2.5 hereof to have interest on all or a
      portion of the Revolving Credit Advances or all or a portion of the Term
      Loan computed on the basis of the Applicable LIBOR Rate for an applicable
      Interest Period.

            "LIBOR Rate" shall mean as applicable to any LIBOR Rate Loan, the
      rate per annum as determined on the basis of the offered rates for
      deposits in U.S. dollars, for a period of time comparable to such LIBOR
      Rate Loan which appears on the Telerate page 3750 as of 11:00 a.m. London
      time on the day that is two Business Days preceding the

                                       8
<PAGE>

      first day of such LIBOR Rate Loan; provided, however, if the rate
      described above does not appear on the Telerate System on any applicable
      interest determination date, the LIBOR Rate shall be the rate (rounded
      upward, if necessary, to the nearest one hundred-thousandth of a
      percentage point), determined on the basis of the offered rates for
      deposits in U.S. dollars for a period of time comparable to such LIBOR
      Rate Loan which are offered by four major banks in the London interbank
      market at approximately 11:00 a.m. London time, on the day that is two (2)
      Business Days preceding the first day of such LIBOR Rate Loan as selected
      by the Bank. The principal London office of each of the four major London
      banks will be requested to provide a quotation of its U.S. dollar deposit
      offered rate. If at least two such quotations are provided, the rate for
      that date will be the arithmetic mean of the quotations. If fewer than two
      quotations are provided as requested, the rate for that date will be
      determined on the basis of the rates quoted for loans in U.S. dollars to
      leading European banks for a period of time comparable to such LIBOR Rate
      Loan offered by major banks in New York City at approximately 11:00 a.m.
      New York City time, on the day that is two Business Days preceding the
      first day of such LIBOR Rate Loan. In the event that the Bank is unable to
      obtain any such quotation as provided above, it will be deemed that LIBOR
      pursuant to a LIBOR Rate Loan cannot be determined. In the event that the
      Board of Governors of the Federal Reserve System shall impose a Reserve
      Percentage with respect to LIBOR deposits of the Bank, then for any period
      during which such Reserve Percentage shall apply, LIBOR shall be equal to
      the amount determined above divided by an amount equal to 1 minus the
      Reserve Percentage. "Reserve Percentage" shall mean the maximum aggregate
      reserve requirement (including all basic, supplemental, marginal and other
      reserves) which is imposed on member banks of the Federal Reserve System
      against "Euro-currency Liabilities" as defined in Regulation D.

            "LIBOR Rate Fixing Day" shall mean, in the case of any LIBOR Rate
      Loan, the second Business Day preceding the Business Day on which an
      Interest Period begins.

            "LIBOR Rate Loan" shall mean any Revolving Credit Advance or portion
      of the Term Loan upon which interest will accrue on the basis of a formula
      including as a component thereof the LIBOR Rate. The expiration date of
      any LIBOR Rate Loan shall be the last day of the Interest Period
      applicable to such LIBOR Rate Loan.

            "Maximum Revolving Credit Amount" shall mean (a) from the Closing
      Date through December 31, 2000, $3,250,000, (b) from January 1, 2001
      through December 31, 2001, an amount equal to the sum of (1) $3,250,000
      plus (2) the aggregate amount of all quarterly principal installment
      payments made by the Borrowers on the Term Loan pursuant to Section 2.4
      herein and (c) from January 1, 2002 through December 31, 2002, (i)
      provided that no Default shall have occurred and be continuing and that
      the Borrowers are in compliance with all terms, conditions and covenants
      set forth in this Agreement and all other Bank Agreements, including
      without limitation those covenants set forth in Section 7 herein, an
      amount equal to (1) the lesser of (x) $13,000,000 or (y) two (2) times
      Consolidated EBITDA for the fiscal year ended December 31, 2001 as set
      forth in the Company's Consolidated financial statements delivered
      pursuant to Section 6.2 hereof less (2) $9,000,000 plus (3) the aggregate
      amount of all quarterly principal installment

                                       9
<PAGE>

      payments made by the Borrowers on the Term Loan pursuant to Section 2.4
      herein or (ii) if the conditions set forth in clause (i) above shall not
      have been met, an amount equal to the sum of (1) $3,250,000 plus (2) the
      aggregate amount of all quarterly principal installment payments made by
      the Borrowers on the Term Loan pursuant to Section 2.4 herein; provided
      that, if a Default has occurred, the Borrowers nevertheless shall be
      subject to the provisions of Section 3.2(b) herein, and provided further
      that if the obligation of the Bank to make further Revolving Credit
      Advances is terminated upon the occurrence of an Event of Default or
      pursuant to the terms of Section 2.12 herein, the Maximum Revolving Credit
      Amount as of any date of determination thereafter shall be deemed $0.

            "Net Cash Proceeds" means, with respect to (a) any sale, lease,
      transfer or other disposition of any asset or (b) the incurrence or
      issuance of any Indebtedness for borrowed money except for the Bank
      Obligations hereunder, including Capitalized Lease Obligations or (c) the
      sale or issuance of any capital stock or other ownership or profit
      interest, any equity securities convertible into or exchangeable for
      capital stock or other ownership or profit interest or any warrants,
      rights, options or other securities to acquire capital stock or other
      ownership or profit interest by any Person, the aggregate amount of cash
      received from time to time (whether as initial consideration or through
      payment or disposition of deferred consideration) by or on behalf of such
      Person in connection with such transaction after deducting therefrom only
      (without duplication) (i) brokerage commissions, underwriting fees and
      discounts, legal fees, finder's fees and other similar transaction fees
      and commissions, (ii) the amount of taxes payable in connection with or as
      a result of such transaction and (iii) the amount of any Indebtedness
      secured by a lien on such asset that, by the terms of such transaction, is
      required to be repaid upon such disposition, in each case to the extent,
      but only to the extent, that the amounts so deducted are properly
      attributable to such transaction or to the asset that is the subject
      thereof and are, in the case of clauses (i) and (iii), at the time of
      receipt of such cash, actually paid to a Person that is not the Company,
      any Subsidiary or any Affiliate and, in the case of clause (ii), on the
      earlier of the dates on which the tax return covering such taxes is filed
      or required to be filed, actually paid to a Person that is not the
      Company, any Subsidiary or any Affiliate.

            "Pension Plan" shall mean an employee benefit plan or other plan
      maintained for the employees of the Company or any Subsidiary as described
      in Section 4021(a) of ERISA.

            "Permitted Acquisition" shall mean any acquisition by the Company or
      any Subsidiary of, or any merger by the Company or any Subsidiary with,
      another Person pursuant to which (a) the Company or such Subsidiary
      acquires all of the capital stock of such Person, or all or substantially
      all of the assets or a line of business conducted by such Person, provided
      that (a) such Person is engaged in, or the assets or line of business so
      acquired will be used in, the women's wig or the hairpiece retailing or
      the direct marketing business and (b) the sum of (i) the aggregate
      purchase price for any such acquisition or merger including cash, property
      or stock, plus (ii) the aggregate of all Indebtedness of such Person
      assumed by the Company or such Subsidiary in connection

                                       10
<PAGE>

      with such acquisition or merger (other than trade payables incurred in the
      ordinary course of business), does not exceed $300,000; and provided
      further that, immediately after and giving effect thereto, no event shall
      have occurred and be continuing which constitutes a Default (including
      under Section 8.1 and Article 7, assuming that the financial restrictions
      set forth in Article 7 are applied immediately after and giving effect to
      such acquisition or merger) and that the Company or such Subsidiary is the
      surviving corporation to any such merger.

            "Person" shall mean an individual, corporation, partnership, limited
      liability company, joint venture, association, estate, joint stock
      company, trust, organization, business, or a government or agency or
      political subdivision thereof.

            "Pledge Agreements" shall mean (a) the Stock Pledge Agreement from
      the Company to the Bank dated as of March 12, 1997 and (b) the Stock
      Pledge Agreement from SC Direct to the Bank dated as of March 12, 1997, as
      each may be amended or supplemented from time to time.

            "Pledged Shares" shall mean the shares of capital stock and other
      interests and rights pledged to the Bank under the Pledge Agreements.

            "Pricing Notice" shall have the meaning set forth in Section 2.5.

            "Prime Rate" shall mean the variable per annum rate of interest so
      designated from time to time by the Bank as its prime rate. The Prime Rate
      is a reference rate and does not necessarily represent the lowest or best
      rate charged to any customer. Changes in the rate of interest resulting
      from changes in the Prime Rate shall take place immediately without notice
      or demand of any kind.

            "Prime Rate Loans" shall mean any Revolving Credit Advance or
      portion of the Term Loan upon which interest will accrue on the basis of a
      formula including as a component thereof the Prime Rate.

            "Related Collateral" shall mean all general intangibles; keyman life
      insurance policies owned by the Borrowers and payable to the Borrowers;
      trade names, trademarks and trade secrets; patents, copyrights and other
      intellectual property; customers lists; mailing lists; goodwill; cash;
      deposit accounts; tax refunds; claims under insurance policies (whether or
      not proceeds of other Collateral); rights of set-off; rights under
      judgments; tort claims and choses in action; computer programs and
      software; books and records (including without limitation all
      electronically recorded data); contract rights; and all contracts and
      agreements to which any Person is a party or beneficiary, whether any of
      the foregoing be now existing or hereafter arising, now or hereafter
      received by or belonging to any Person.

            "Reportable Event" shall mean an event reportable to the Pension
      Benefit Guaranty Corporation under Section 4043 of Title IV of ERISA.

                                       11
<PAGE>

            "Revolving Credit Advance" shall mean any loan or advance from the
      Bank to the Borrowers pursuant to Section 2.1 of this Agreement.

            "Revolving Credit Note" shall mean the Revolving Credit Note
      executed by the Borrowers, jointly and severally, in connection herewith
      substantially in the form of Exhibit A hereto.

            "Revolving Credit Termination Date" shall mean December 31, 2002.

            "SC Licensing" shall mean SC Licensing Corp., a Massachusetts
      corporation.

            "SC Licensing Guaranty" shall mean the Unlimited Guaranty dated as
      of the date hereof by SC Licensing in favor of the Bank in the form of
      Exhibit E hereto.

            "SC Licensing Note" shall mean the Note dated as of December 30,
      1997 by SC Licensing in favor of SC Direct in the principal amount of
      $7,300,000.

            "SC Licensing Security Agreement" shall mean the Security Agreement
      from SC Licensing Corp. to the Bank dated as of December 30, 1997, as
      amended or supplemented from time to time.

            "SC Licensing Transfer" shall mean the transfer of certain assets
      from SC Direct to SC Licensing pursuant to and in accordance with the SC
      Licensing Transfer Documents.

            "SC Licensing Transfer Documents" shall mean (a) the Purchase and
      Sale Agreement dated as of December 30, 1997 by and among SC Direct and SC
      Licensing, (b) the SC Licensing Note, (c) the Assignment of Trademarks
      dated December 30, 1997 by SC Direct in favor of SC Licensing, (d) the
      Management Services Agreement dated as of December 30, 1997 by and between
      SC Direct and SC Licensing, (e) the Trademark License Agreement dated as
      of December 30, 1997 by and between SC Direct and SC Licensing and (f) all
      related documents and instruments.

            "Security Agreements" shall mean (a) the U.S. Subsidiary Security
      Agreement, (b) the Trademark Assignments, (c) the SC Licensing Security
      Agreement, (d) the Pledge Agreements, (e) the Debenture and (f) the Legal
      Charge.

            "Subordinated Indebtedness" shall mean Indebtedness of the Borrowers
      which is subordinated to the Indebtedness of the Borrowers hereunder and
      under the Revolving Credit Note and the Term Note and to all other Bank
      Obligations, on terms and conditions approved in writing by the Bank.

            "Subsidiary" shall mean any Person of which the Company or other
      specified parent shall now or hereafter at the time own, directly or
      indirectly through one or more Subsidiaries or otherwise, sufficient
      voting stock (or other beneficial interest) to entitle it to elect at
      least a majority of the board of directors or trustees or similar managing
      body,

                                       12
<PAGE>

      or in the case of any Person registered in England and Wales, a subsidiary
      within the meaning of Section 736 of the Companies Act 1985 of that
      jurisdiction.

            "Term Loan" shall mean the term loan made by the Bank to the
      Borrowers under Section 2.4 hereof.

            "Term Loan Maturity Date" shall mean December 31, 2005.

            "Term Note" shall mean the Term Note executed by the Borrowers,
      jointly and severally, in connection herewith substantially in the form of
      Exhibit B hereto.

            "Termination Fee" shall have the meaning ascribed to it in Section
      2.12.

            "Termination Notice" shall have the meaning ascribed to it in
      Section 2.12.

            "Trademark Assignments" shall mean (a) the Assignment of Trademarks
      and Service Marks (U.S.) from the Company, SC Direct and SC Publishing to
      the Bank, as amended or supplemented from time to time and (b) the
      Assignment of Trademarks and Service Marks (U.S.) from SC Licensing Corp.
      to the Bank, as amended or supplemented from time to time.

            "2000 Financial Statements" shall mean the Consolidated balance
      sheet of the Company and its Subsidiaries as of the last day of the fiscal
      quarter ended September, 2000 and the related Consolidated statements of
      operations, stockholders' deficit and cash flow for the three quarter
      period ended September, 2000 and notes to such financial statements.

            "U.S. Subsidiary Security Agreement" shall mean the Security
      Agreement from SC Direct and SC Publishing to the Bank dated as of March
      12, 1997, as amended or supplemented from time to time.

      Section 1.2.  Accounting Terms. All accounting terms used and not
defined in this Agreement shall be construed in accordance with Generally
Accepted Accounting Principles consistently applied, and all financial data
required to be delivered hereunder shall be prepared in accordance with such
principles.

                             ARTICLE 2. THE CREDITS

      Section 2.1. The Revolving Credit. Subject to the terms and conditions
hereof and so long as there is no Default, the Bank will make Revolving Credit
Advances to the Borrowers, from time to time, until the Revolving Credit
Termination Date, as requested by the Company, as agent for the Borrowers in
accordance with Section 2.2; provided that the aggregate principal amount of all
Revolving Credit Advances at any time outstanding hereunder plus the aggregate
stated amount of all Letters of Credit outstanding at any time shall not exceed
the Maximum Revolving Credit Amount. The Borrowers, jointly and severally, shall
execute and deliver to the Bank the Revolving Credit Note to evidence the
Revolving Credit Advances. Subject to the

                                       13
<PAGE>

foregoing limitations and the provisions of Section 4.1 below, the Borrowers may
borrow, repay pursuant to Section 4.2 and reborrow Revolving Credit Advances
hereunder from the date of this Agreement to the Revolving Credit Termination
Date. Any Revolving Credit Advances not repaid by the Revolving Credit
Termination Date shall be due and payable in full on the Revolving Credit
Termination Date.

      Section 2.1A. Sterling Overdraft Facility. Until the Revolving Credit
Termination Date, SC(UK) shall be able to overdraw on its current account at the
Bank's London branch up to an amount equivalent to the lesser of (a) the
difference between (i) the Maximum Revolving Credit Amount and (ii) the amount
of all then outstanding Revolving Credit Advances and the stated amount of all
then outstanding Letters of Credit and (b) (pound)200,000, provided that the
amount of any outstanding overdraft shall be treated as a Revolving Credit
Advance to the Borrowers, jointly and severally, shall reduce the Maximum
Revolving Credit Amount by the amount overdrawn (converted to U.S. dollars), and
shall be secured by all of the Security Agreements, and provided further that,
notwithstanding the provisions of Sections 2.3 and 2.5 herein, any such
Revolving Credit Advance representing an outstanding overdraft shall bear
interest at a rate determined by the Bank from time to time pursuant to an
agreement entered into between the Bank and SC(UK).

      Section 2.2. Requests for Revolving Credit Advances. Each Revolving Credit
Advance shall be made on notice given by the Company to the Bank not later than
12:00 noon (Boston time) on the date of the proposed borrowing (a "Notice of
Revolving Credit Borrowing"); provided, however that if the Company elects a
LIBOR Pricing Option with respect to any Revolving Credit Advance in accordance
with Section 2.5 hereof, such Notice of Revolving Credit Borrowing shall be
given by the Company contemporaneously with a Pricing Notice in the manner and
within the time specified in Section 2.5. Each such Notice of Revolving Credit
Borrowing shall be by telephone or telecopy, and if by telephone confirmed
promptly in writing by the Company, specifying therein (a) the requested date of
such Revolving Credit Advance and (b) the amount of such Revolving Credit
Advance (which must be a minimum of $500,000 and increments of $100,000 in the
case of requests for LIBOR Rate Loans). The Borrowers agree, jointly and
severally, to indemnify and hold the Bank harmless for any action, including the
making of any Revolving Credit Advances hereunder, or loss or expense, taken or
incurred by the Bank in good faith reliance upon any such telephone request. At
the time of the initial request for a Revolving Credit Advance made under this
Section 2.2, the Borrowers shall have provided the Bank with a Compliance
Certificate. The Borrowers hereby agree (i) that the Bank shall be entitled to
rely upon the Compliance Certificate most recently delivered to the Bank until
it is superseded by a more recent Compliance Certificate and (ii) that each
request for a Revolving Credit Advance, whether by telephone or in writing or
otherwise, shall constitute a confirmation of the representations and warranties
contained herein and in all other Bank Agreements. Notwithstanding the
foregoing, the first Revolving Credit Advance hereunder in the amount of
$___________ shall be deemed made automatically upon execution and delivery
hereof and cancellation of the notes under the Original Credit Agreements.

      Section 2.3. Interest on Revolving Credit Advances. Subject to the terms
of Section 2.5 relating to LIBOR Pricing Options, the Borrowers, jointly and
severally, shall pay interest on the

                                       14
<PAGE>

unpaid balance of the Revolving Credit Advances from time to time outstanding at
a per annum rate equal to the Applicable Prime Rate. Interest on the Revolving
Credit Advances shall be payable monthly in arrears on the first day of each
month, commencing January 1, 2001 and continuing until all of the Indebtedness
of the Borrowers to the Bank under the Revolving Credit Note shall have been
paid in full.

      Section 2.4. The Term Loan.

            (a) On the Closing Date, the Bank will make a term loan to the
Borrowers in the principal amount of $9,000,000, which Term Loan shall be deemed
made automatically upon the execution and delivery hereof and the cancellation
of the notes under the Original Credit Agreements. The Borrowers, jointly and
severally, will execute and deliver to the Bank the Term Note to evidence the
Term Loan. The principal amount of the Term Loan will be repaid in twenty (20)
equal quarterly installments of $450,000 each, payable on the first day of each
quarter (i.e. January, April, July and October), commencing January 1, 2001,
with the final payment together with all unpaid interest and other amounts due
and payable with respect thereto due on the Term Loan Maturity Date.

            (b) Subject to the terms of Section 2.5 relating to LIBOR Pricing
Options, the Borrowers shall pay interest on the unpaid balance of the Term Loan
from time to time outstanding at a per annum rate equal to the Applicable Prime
Rate. Interest shall be payable in arrears on the first day of each month,
commencing January 1, 2001 and continuing until the Term Note shall have been
paid in full.

      Section 2.5. Election of LIBOR Pricing Options. Subject to all the terms
and conditions hereof and so long as there exists no Default, the Borrowers may,
by delivering a notice (a "Pricing Notice") to the Bank received at or before
10:00 a.m. Boston time on the date two Business Days prior to the commencement
of the Interest Period selected in such Pricing Notice, elect to have all or a
portion of the outstanding Revolving Credit Advances or all or a portion of the
Term Loan, as the Company may specify in such Pricing Notice, accrue and bear
daily interest during the Interest Period so selected at a per annum rate equal
to the Applicable LIBOR Rate for such Interest Period; provided, however, that
any such election made with respect to the Revolving Credit Advances or Term
Loan shall be in an amount not less than $500,000 and in increments of $100,000;
and provided further that no such election will be made if it would result in
there being more than four (4) LIBOR Pricing Options in the aggregate
outstanding at any one time. Interest on Revolving Credit Advances or portions
of the Term Loan bearing interest at the Applicable LIBOR Rate shall be paid for
the applicable Interest Period on the last day thereof, on every third month
during any Interest Period longer than three months and when such LIBOR Rate
Loan is due (whether at maturity, by reason of acceleration or otherwise). Each
Pricing Notice shall be substantially in the form of Exhibit D attached hereto
and shall specify: (i) the selection of a LIBOR Pricing Option; (ii) the
effective date and amount of Revolving Credit Advances or portions of the Term
Loan subject to such LIBOR Pricing Option, subject to the limitations set forth
herein; and (iii) the duration of the applicable Interest Period. Each Pricing
Notice may only be revoked subject to Section 4.4.

                                       15
<PAGE>

      Section 2.6. Additional Payments.

            (a) Upon Default (whether or not the Bank has accelerated payment
hereunder or under the Revolving Credit Note or the Term Note), or after
maturity or after judgment has been rendered hereunder or on the Revolving
Credit Note or the Term Note, the Borrowers' right to select the LIBOR Pricing
Option shall cease and the unpaid principal of all Revolving Credit Advances and
the Term Loan shall, at the option of the Bank, bear interest at a rate which is
four (4) percentage points per annum greater than that which would otherwise be
applicable.

            (b) If the entire amount of any required principal and/or interest
is not paid in full within ten (10) days after the same is due, the Borrowers,
jointly and severally, shall pay to the Bank a late fee equal to five percent
(5%) of the required payment.

      Section 2.7. Set-Off; Computation of Interest; Etc.

            (a) The Borrowers and SC Licensing and any other guarantor hereby
grant to the Bank, a continuing lien, security interest and right of setoff as
security for all liabilities and obligations to the Bank, whether now existing
or hereafter arising, upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
the Bank or any entity under the control of FleetBoston Financial Corporation
and its successors and assigns or in transit to any of them. At any time,
without demand or notice (any such notice being expressly waived by the
Borrowers and SC Licensing and any other guarantor), the Bank may setoff the
same or any part thereof and apply the same to any liability or obligation of
the Borrowers or SC Licensing or any other guarantor even though unmatured and
regardless of the adequacy of any other collateral securing the Bank
Obligations. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE BANK OBLIGATIONS
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE BORROWERS OR SC LICENSING OR ANY OTHER GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

            (b) All computations of interest shall be made on the basis of a
three hundred sixty (360) day year and the actual number of days elapsed.
Changes in the rate of interest resulting from changes in the Prime Rate shall
take place immediately without notice or demand of any kind.

            (c) All agreements between the Borrowers and SC Licensing and any
other guarantor and the Bank are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of acceleration of maturity
of the Indebtedness evidenced hereby or otherwise, shall the amount paid or
agreed to be paid to the Bank for the use or the forbearance of the Indebtedness
evidenced hereby exceed the maximum permissible under applicable law. As used
herein, the term "applicable law" shall mean the law in effect as of the date
hereof; provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest, then this Agreement and the
Revolving Credit Note and the Term Note shall be governed by such new law as of
its effective date. In this regard, it is expressly agreed that it is the intent
of Borrowers and the Bank in the execution, delivery and

                                       16
<PAGE>

acceptance of this Agreement and the Revolving Credit Note and the Term Note to
contract in strict compliance with the laws of The Commonwealth of Massachusetts
from time to time in effect. If, under or from any circumstances whatsoever,
fulfillment of any provision hereof or of any of the Bank Agreements at the time
of performance of such provision shall be due, shall involve transcending the
limit of such validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such validity, and if
under or from circumstances whatsoever the Bank should ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced hereby and not to the payment of interest. This provision shall
control every other provision of all agreements between the Borrowers and SC
Licensing and any other guarantor and the Bank.

            (d) If the due date for any payment of principal is extended by
operation of law, interest shall be payable for such extended time. If the
Revolving Credit Note or the Term Note or any payment thereunder becomes due on
a day which is not a Business Day, the due date of the Revolving Credit Note or
the Term Note or payment, as applicable, shall be extended to the next
succeeding Business Day, and such extension of time shall be included in
computing interest and fees in connection with such payment.

            (e) The outstanding amount of the Revolving Credit Advances and the
Term Note as reflected on the Bank's records from time to time shall be
considered correct and binding on the Borrowers and SC Licensing and any other
guarantor (absent manifest error) unless within 30 days after receipt of any
notice by the Bank of such outstanding amount, the Company notifies the Bank in
writing to the contrary.

      Section 2.8. Commitment Fee. The Borrowers, jointly and severally, shall
pay to the Bank a commitment fee equal to the product of the Applicable
Commitment Fee Rate multiplied by the amount by which the Maximum Revolving
Credit Amount exceeds the daily average principal amount of the Revolving Credit
Advances plus the aggregate stated amount of all Letters of Credit, as each may
be outstanding from time to time. The commitment fee shall be payable quarterly
in arrears on the first day of each January, April, July and October, commencing
January 1, 2001.

      Section 2.9. Increased Costs, Etc.

            (a) Anything herein to the contrary notwithstanding, if any changes
in present or future applicable law (which term "applicable law," as used in
this Section 2.9, includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time heretofore or hereafter made upon or otherwise issued
to the Bank by any central bank or other fiscal, regulatory, monetary or other
authority, whether or not having the force of law), including without limitation
any change according to a prescribed schedule of increasing requirements,
whether or not known or in effect as of the date hereof, shall (i) subject the
Bank

                                       17
<PAGE>

to any tax, levy, impost, duty, charge, fee, deduction or withholding of any
nature with respect to this Agreement or the payment to the Bank of any amounts
due to it hereunder, or (ii) materially change the basis of taxation of payments
to the Bank of the principal of or the interest on the Revolving Credit Advances
or the Term Loan or any other amounts payable to the Bank hereunder, or (iii)
impose or increase or render applicable any special or supplemental deposit or
reserve or similar requirements or assessment against assets held by, or
deposits in or for the account of, or any liabilities of, or loans by an office
of the Bank in respect of the transactions contemplated herein, or (iv) impose
on the Bank any other condition or requirement with respect to this Agreement or
any Revolving Credit Advance or the Term Loan, and the result of any of the
foregoing is (A) to increase the cost to the Bank of making, funding or
maintaining all or any part of the Revolving Credit Advances or Term Loan or its
commitment hereunder, or (B) to reduce the amount of principal, interest or
other amount payable to the Bank hereunder, or (C) to require the Bank to make
any payment or to forego any interest or other sum payable hereunder, the amount
of which payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by the Bank from the
Borrowers hereunder, then, and in each such case not otherwise provided for
hereunder, the Borrowers, jointly and severally, will upon demand made by the
Bank promptly following the Bank's receipt of notice pertaining to such matters
accompanied by calculations thereof in reasonable detail, pay to the Bank such
additional amounts as will be sufficient to compensate the Bank for such
additional cost, reduction, payment or foregone interest or other sum; provided
that the foregoing provisions of this sentence shall not apply in the case of
any additional cost, reduction, payment or foregone interest or other sum
resulting from any taxes charged upon or by reference to the overall net income,
profits or gains of the Bank.

            (b) Anything herein to the contrary notwithstanding, if, after the
date hereof, the Bank shall have determined that any present or future
applicable law, rule, regulation, guideline, directive or request (whether or
not having force of law), including without limitation any change according to a
prescribed schedule of increasing requirements, whether or not known or in
effect as of the date hereof, regarding capital requirements for banks or bank
holding companies generally, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any of the foregoing, either imposes a requirement upon the
Bank to allocate additional capital resources or increases the Bank's
requirement to allocate capital resources or the Bank's commitment to make, or
to the Bank's maintenance of, the Revolving Credit Advances or the Term Loan
hereunder, which has or would have the effect of reducing the return on the
Bank's capital to a level below that which the Bank could have achieved (taking
into consideration the Bank's then existing policies with respect to capital
adequacy and assuming full utilization of the Bank's capital) but for such
applicability, change, interpretation, administration or compliance, by any
amount deemed by the Bank to be material, the Bank shall promptly after its
determination of such occurrence give notice thereof to the Borrowers. The
Borrowers and the Bank shall thereafter attempt to negotiate in good faith an
adjustment to the compensation payable hereunder which will adequately
compensate the Bank for such

                                       18
<PAGE>

reduction. If the Borrowers and the Bank are unable to agree to such adjustment
within thirty (30) days of the day on which the Borrowers receive such notice,
the Bank shall notify the Borrowers that the fees payable hereunder shall
increase at the end of 90 days by an amount which will, in the Bank's reasonable
determination, evidenced by calculations in reasonable detail furnished to the
Borrowers, compensate the Bank for such reduction with effect from the date of
the Bank's original notice (but not earlier than the effective date of any such
applicability, change, interpretation, administration or compliance), the Bank's
determination of such amount to be conclusive and binding upon the Borrowers,
absent manifest error. The Borrowers may, within such 90-day period, refinance
the Bank Obligations without premium or penalty but subject to payment of any
amounts due under Section 4.4.

            (c) In determining the additional amounts payable under this Section
2.9, the Bank may use any reasonable method of averaging, allocating or
attributing such additional costs, reductions, payments, foregone interest or
other sums among its customers in good faith and on an equitable basis. This
Section 2.9 shall only apply if and to the extent that the additional amounts
payable hereunder are not already reflected in the calculation of the Reserve
Requirement.

      Section 2.10. Changed Circumstances. In the event that:

            (a) on any date on which the Applicable LIBOR Rate would otherwise
be set the Bank shall have determined in good faith (which determination shall
be final and conclusive) that adequate and fair means do not exist for
ascertaining the LIBOR Rate; or

            (b) at any time the Bank shall have determined in good faith (which
determination shall be final and conclusive) that

                  (i) the implementation of a LIBOR Pricing Option has been made
      impracticable or unlawful by (A) the occurrence of a contingency that
      materially and adversely affects the London interbank market or (B)
      compliance by the Bank in good faith with any applicable law or
      governmental or other applicable regulation, guideline or order or
      interpretation or change thereof by any governmental or other authority
      charged with the interpretation or administration thereof or with any
      request or directive of any such governmental or other authority (whether
      or not having the force of law); or

                  (ii) the LIBOR Rate shall no longer represent the effective
      cost to the Bank for U.S. dollar deposits in the London interbank market,
      as applicable for deposits in which it regularly participates;

then, and in such event, the Bank shall forthwith so notify the Company thereof.
Until the Bank notifies the Company that the circumstances giving rise to such
notice no longer apply, the obligation of the Bank to allow election by the
Borrowers of a LIBOR Pricing Option shall be suspended. If at the time the Bank
so notifies the Company, the Company has previously given the Bank a Pricing
Notice with respect to a LIBOR Pricing Option, but the LIBOR Pricing Option
requested therein has not yet gone into effect, such Pricing Notice shall
automatically be deemed to be withdrawn and be of no force or effect. If
circumstances described in clause (b)(i)(B) arise, then upon such date as shall
be specified in such notice (which shall not be earlier than the date such
notice is given), the LIBOR Pricing Option with respect to any new requests for
LIBOR Rate Loans shall be terminated, but any existing LIBOR Rate Loans may
continue to be maintained through the end of the applicable Interest Period.

                                       19
<PAGE>

      Section 2.11. Use of Proceeds. The proceeds of the initial Revolving
Credit Advance and the Term Loan shall be used by the Borrowers to repay in full
the Indebtedness outstanding under the Original Credit Agreements as of the
Closing Date. The proceeds of all future Revolving Credit Advances and any
amounts remaining under the Term Loan after payment in full of the Indebtedness
under the Original Credit Agreements shall be used by the Borrowers for working
capital and for other general corporate purposes and for Permitted Acquisitions
and for any other acquisitions approved by the Bank pursuant to the terms of
Section 9.7(b) herein, so long as no Default exists or would result from any
such use. No portion of the proceeds shall be used, in whole or in part, for the
purpose of purchasing or carrying any "margin stock" as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System.

      Section 2.12. Termination. The Borrowers may terminate this Agreement at
any time on not less than five (5) Business Days' prior written notice (the
"Termination Notice") to the Bank, provided that the Borrowers shall have made
payment in full of any and all outstanding Revolving Credit Advances and any
outstanding amounts on the Term Loan, and all accrued and unpaid interest on
such Revolving Credit Advances and Term Loan, and all other fees, expenses and
amounts owing with respect thereto, including without limitation any and all
amounts due pursuant to Sections 2.8, 4.4, Article 12 and Section 13.6 herein,
which payment shall be due and payable within five (5) Business Days after the
date of such Termination Notice, and provided, further that if the Borrowers
should exercise their termination rights as provided above, the Borrowers,
jointly and severally, shall pay to the Bank a termination fee (the "Termination
Fee") in the amount of (a) $50,000 if such termination right is exercised any
time during fiscal year 2001 and (b) $25,000 if such termination right is
exercised at any time during fiscal year 2002, which Termination Fee shall be
due and payable in full within five (5) Business Days after the date of the
Termination Notice. This Agreement shall not be subject to reinstatement after
termination as provided herein.

      Section 2.13. Letter of Credit Fee. The Borrowers, jointly and severally,
shall pay, quarterly in arrears on the first day of each quarter, commencing on
January 1, 2001, a fee (in each case, a "Letter of Credit Fee") to the Bank in
respect of each Letter of Credit issued for the account of any Borrower
(including those described on Schedule 1 hereto) equal to 1.5% per annum of the
amount available to be drawn under such Letter of Credit.

                      ARTICLE 3. CONDITIONS OF THE CREDITS

      Section 3.1. Conditions to Term Loan and First Revolving Credit Advance.
The Bank's obligation to make the Term Loan and first Revolving Credit Advance
shall be subject to compliance by the Borrowers with their agreements contained
in this Agreement, and to the condition precedent that the Bank shall have
received each of the following, in form and substance satisfactory to the Bank
and its counsel or in the form attached hereto as an Exhibit, as the case may
be:

            (a) This Agreement duly executed by the Borrowers.

                                       20
<PAGE>

            (b) The Revolving Credit Note and the Term Note duly executed by the
Borrowers.

            (c) The Confirmation of Security Agreement duly executed by SC
Direct and SC Publishing, confirming that the U.S. Subsidiary Security Agreement
and the Collateral described therein secure the Bank Obligations as amended and
restated hereby.

            (d) The Confirmation of Security Agreement duly executed by SC
Licensing, confirming that the SC Licensing Security Agreement and the
Collateral described therein secure the Bank Obligations as amended and restated
hereby.

            (e) The Confirmations of Stock Pledge Agreement duly executed by
each of the Company and SC Direct, confirming that each of the Pledge Agreements
and the Pledged Shares described therein secure the Bank Obligations as amended
and restated hereby.

            (f) The SC Licensing Guaranty duly executed by SC Licensing.

            (g) Such other documents, certificates and opinions as the Bank may
reasonably request.

      Section 3.2. Conditions to All Revolving Credit Advances. The Bank's
obligation to make any Revolving Credit Advance pursuant to this Agreement shall
be subject to compliance by the Borrowers with their agreements contained in
this Agreement and each other Bank Agreement, and to the satisfaction, at or
before the making of each Revolving Credit Advance, of all of the following
conditions precedent:

            (a) The representations and warranties herein and those made by or
on behalf of the Borrowers in any other Bank Agreement shall be correct as of
the date on which any Revolving Credit Advance is made, with the same effect as
if made at and as of such time (except that the references in Article 5 to the
2000 Financial Statements shall be deemed to refer to the most recent annual
audited Consolidated financial statements of the Company and its Subsidiaries
furnished to the Bank.)

            (b) On the date of any Revolving Credit Advance hereunder, there
shall exist no Default.

            (c) The Borrowers shall have paid the balance of all fees then due
and payable to the Bank as referenced herein.

            (d) The making of the requested Revolving Credit Advance shall not
be prohibited by any law or governmental or other order or regulation applicable
to the Bank or to any Borrower, and all necessary consents, approvals and
authorizations of any Person for any such Revolving Credit Advance shall have
been obtained.

                                       21
<PAGE>

                        ARTICLE 4. PAYMENT AND REPAYMENT

      Section 4.1. Mandatory Prepayments.

            (a) If at any time the aggregate outstanding principal balance of
all Revolving Credit Advances made hereunder plus the aggregate stated amount of
all Letters of Credit outstanding exceeds the Maximum Revolving Credit Amount,
the Borrowers shall immediately repay to the Bank an amount equal to such
excess.

            (b) The Borrowers will make all required principal payments on the
Term Loan on the dates when due.

            (c) The Borrowers shall, on the date of receipt of the Net Cash
Proceeds by any Borrower or any of their Subsidiaries 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 the Bank
Obligations, (iii) the sale or issuance by any Borrower or any of 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 Permitted Acquisition or any other acquisition
permitted under Section 9.7(b) 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(c) shall be applied to the scheduled principal
payments on the Term Loan in inverse order of maturity and shall be applied
first to portions of the Term Loan which are outstanding as Prime Rate Loans.

            (d) The Borrowers shall, within ninety (90) days after the end of
each fiscal year, commencing with the fiscal year ending on December 31, 2001,
prepay an aggregate principal amount of the Term Loan equal to 25% of
Consolidated Excess Cash Flow for such fiscal year up to a maximum of $500,000
per annum (excluding any amounts included in Consolidated Excess Cash Flow which
are used to finance any Permitted Acquisition or any other acquisition permitted
under Section 9.7(b) within 90 days of such fiscal year end). Partial
prepayments of the Term Loan under this Section 4.1(d) shall be applied to the
scheduled principal payments on the Term Loan in inverse order of maturity and
shall be applied first to portions of the Term Loan which are outstanding as
Prime Rate Loans.

      Section 4.2. Voluntary Prepayments.

            (a) The Borrowers may make prepayments to the Bank of any
outstanding principal amount of the Revolving Credit Advances which are Prime
Rate Loans and of any outstanding principal amount of the Term Loan equal to
$100,000 or an integral multiple thereof

                                       22
<PAGE>

which are Prime Rate Loans in accordance with Section 4.3 at any time prior to
12:00 noon (Boston time) on any Business Day without premium or penalty.

            (b) The Borrowers may make prepayments to the Bank of any
outstanding principal amount of the Revolving Credit Advances or of the Term
Loan equal in either case to $100,000 or an integral multiple thereof which are
LIBOR Rate Loans in accordance with Section 4.3 at any time prior to 12:00 noon
(Boston time) on any Business Day subject, however, to payment of the amounts
set forth in Section 4.4.

            (c) Partial prepayments of the Term Loan made under this Section 4.2
shall be applied to reduce the remaining scheduled principal payments of the
Term Loan ratably, and such partial prepayments shall be applied first to reduce
that portion of the Term Loan which is a Prime Rate Loan.

      Section 4.3. Payment and Interest Cutoff. Notice of each prepayment
pursuant to Section 4.2 shall be given to the Bank (a) in the case of prepayment
of Prime Rate Loans, not later than 12:00 noon (Boston time) on the date of
payment and (b) in the case of prepayment of LIBOR Rate Loans on any day other
than the last day of the Interest Period applicable thereto, not later than
12:00 noon (Boston time) three (3) Business Days prior to the proposed date of
payment, and shall specify the total principal amount of the Revolving Credit
Advances or Term Loan to be paid on such date. Notice of prepayment having been
given in compliance with this Section 4.3, the amount specified to be prepaid
shall become due and payable on the date specified for prepayment and from and
after said date (unless the Borrowers shall default in the payment thereof)
interest thereon shall cease to accrue. Unpaid interest on the principal amount
of any Revolving Credit Advances or portions of the Term Loan so prepaid accrued
to the date of prepayment shall be due on the date of prepayment.

      Section 4.4. Payments Not at End of Interest Period. The Borrowers may
prepay a LIBOR Rate Loan only upon at least three (3) Business Days prior
written notice to the Bank (which notice shall be irrevocable), and any such
prepayment shall occur only on the last day of the Interest Period for such
LIBOR Rate Loan. The Borrowers, jointly and severally, shall pay to the Bank,
upon request of the Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost, or expense
incurred as a result of: (i) any payment of a LIBOR Rate Loan on a date other
than the last day of the Interest Period for such LIBOR Rate Loan for any
reason, including without limitation, as a result of the provisions of Sections
4.1(c), 4.1(d), 4.2 and 10.2; (ii) any failure by any Borrower to borrow a LIBOR
Rate Loan on the date specified by the Borrower's written notice; (iii) any
failure by any Borrower to pay a LIBOR Rate Loan on the date for payment
specified in the Borrower's written notice. Without limiting the foregoing, the
Borrowers, jointly and severally, shall pay to the Bank a "yield maintenance
fee" in an amount computed as follows: The current rate for United States
Treasury securities (bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the term chosen pursuant to the
LIBOR Rate Election as to which the prepayment is made, shall be subtracted from
the LIBOR Rate in effect at the time of prepayment. If the result is zero or a
negative number, there shall be no yield maintenance fee.

                                       23
<PAGE>

If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining in
the term chosen pursuant to the LIBOR Rate Election as to which the prepayment
is made. Said amount shall be reduced to present value calculated by using the
above referenced United States' Treasury securities rate and the number of days
remaining in the term chosen pursuant to the LIBOR Rate Election as to which
prepayment is made. The resulting amount shall be the yield maintenance fee due
to the Bank upon the prepayment of a LIBOR Rate Loan. Each reference in this
paragraph to "LIBOR Rate Election" shall mean the election by any Borrower of
the LIBOR Rate. If by reason of an Event of Default, the Bank elects to declare
the obligations due hereunder or under the Revolving Credit Note or Term Note to
be immediately due and payable, then any yield maintenance fee with respect to a
LIBOR Rate Loan shall become due and payable in the same manner as though the
Borrowers had exercised such right of prepayment.

      Section 4.5. Method and Application of Payments.

            (a) Method of Payment. All payments shall be made by the Borrowers
to the Bank at 100 Federal Street, Boston, MA 02110, or such other place as the
Bank may from time to time specify in writing in lawful currency of the United
States of America in immediately available funds, without counterclaim or setoff
and free and clear of, and without any deduction or withholding for, any taxes
or other payments.

            (b) Application of Payments. All payments shall be applied first to
the payment of all fees, expenses and other amounts due to the Bank (excluding
principal and interest), then to accrued interest, and the balance on account of
outstanding principal; provided, however, that after Default, payments will be
applied to the obligations of the Borrowers to the Bank as the Bank determines
in its sole discretion.

                   ARTICLE 5. REPRESENTATIONS AND WARRANTIES

      In order to induce the Bank to enter into this Agreement and make the
Revolving Credit Advances and the Term Loan as contemplated hereby, the
Borrowers hereby make the following representations and warranties:

      Section 5.1. Corporate Existence, Charter Documents, Etc. The Company and
each domestic Subsidiary is a corporation validly organized, legally existing
and in good standing under the laws of the jurisdiction in which it is organized
and has corporate power to own its properties and conduct its business as now
conducted and as proposed to be conducted by it. SC(UK) is a private company
limited by shares formed under the laws of England and Wales and is in good
standing under such laws and has the power under such laws to own its properties
and conduct its business as now conducted and as proposed to be conducted by it.
Certified copies of the charter documents and By-Laws or other similar governing
documents of the Company and

                                       24
<PAGE>

each Subsidiary have been delivered to the Bank and are true, accurate and
complete as of the date hereof.

      Section 5.2. Principal Place of Business; Location of Records. The
Company's, SC Direct's and SC Publishing's principal place of business is
located at 21 Bristol Drive, South Easton, Massachusetts, and SC(UK)'s
registered office is located at 9 Fenning Street, London SE1 3QR ENGLAND. The
Borrowers have had no other principal place of business or registered office
during the last six months. All of the books and records or true and complete
copies thereof relating to the accounts and contracts of the Borrowers and each
Subsidiary are and will be kept at such locations.

      Section 5.3. Qualification. The Company and each Subsidiary is duly
qualified, licensed and authorized to do business and is in good standing as a
foreign corporation in each jurisdiction where its failure to be so qualified
would have a material adverse effect on the business, assets or condition,
financial or otherwise, of the Company or any Subsidiary.

      Section 5.4. Subsidiaries. The Borrowers have no 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. Except as provided on
Schedule 5.13(a)(ii) hereto, the Company has no assets other than the capital
stock of its Subsidiaries.

      Section 5.5. Corporate Power. The execution, delivery and performance of
this Agreement, the Revolving Credit Note, the Term Note, the SC Licensing
Guaranty and all other Bank Agreements and other documents delivered or to be
delivered by the Company or any Subsidiary to the Bank in connection herewith,
and the incurrence of Indebtedness to the Bank hereunder or thereunder, now or
hereafter owing,

            (a) are within the corporate powers of the Company and each
Subsidiary, as the case may be, having been duly authorized by its Board of
Directors or other similar governing body, and, if required by law, by its
charter documents or by its By-Laws or other similar governing document, by its
stockholders;

            (b) do not require any approval or consent of, or filing with, any
governmental agency or other Person (or such approvals and consents have been
obtained and delivered to the Bank) and are not in contravention of law or the
terms of the charter documents or By-Laws or other similar governing document of
the Company and each Subsidiary or any amendment thereof;

            (c) do not and will not

                  (ii) result in a breach of or constitute a default under any
      indenture or loan or credit agreement or any other agreement, lease or
      instrument to which the

                                       25
<PAGE>

      Company or any Subsidiary is a party or by which the Company, any
      Subsidiary or any of their respective properties are bound or affected,

                  (iii) result in, or require, the creation or imposition of any
      mortgage, deed of trust, pledge, lien, security interest or other charge
      or encumbrance of any nature on any property of the Company or any
      Subsidiary, except as provided in the Bank Agreements, or

                  (iv) result in a violation of or default under any law, rule,
      regulation, order, writ, judgment, injunction, decree, determination or
      award, now in effect having applicability to the Company or any
      Subsidiary, or to any of their respective properties.

      Section 5.6. Valid and Binding Obligations. This Agreement, the Revolving
Credit Note, the Term Note, the SC Licensing Guaranty and all the other Bank
Agreements executed in connection herewith and therewith constitute, or will
constitute when delivered, the valid and binding obligations of the Company and
its Subsidiaries, as the case may be, enforceable in accordance with their
respective terms, except as the enforceability thereof may be subject to
bankruptcy, insolvency, moratorium and other laws affecting the rights and
remedies of creditors and secured parties and to the exercise of judicial
discretion in accordance with general equitable principles.

      Section 5.7. Other Agreements. Neither the Company nor any Subsidiary is a
party to any indenture, loan or credit agreement, or any lease or other
agreement or instrument, or subject to any charter or corporate restriction,
which is likely to have a material adverse effect on the business, properties,
assets, operations or financial condition of the Company or any Subsidiary, or
which restricts the ability of the Company or any Subsidiary to carry out any of
the provisions of this Agreement, the Revolving Credit Note, the Term Note, the
Security Agreements, the SC Licensing Guaranty or any of the Bank Agreements
executed in connection herewith and therewith.

                                       26
<PAGE>

      Section 5.8. Payment of Taxes. Except as described on Schedule 5.8, the
Company and its Subsidiaries have filed all tax returns which are required to be
filed by them and have paid, or made adequate provision for the payment of, all
taxes which have or may become due pursuant to said returns or to assessments
received. All federal tax returns of the Company and its Subsidiaries (other
than SC(UK)) through their fiscal year ended in 1992 have been audited by the
Internal Revenue Service or are not subject to such audit by virtue of the
expiration of the applicable period of limitation. The Company and its
Subsidiaries know of no material additional assessments since such date for
which adequate reserves appearing in the balance sheet contained in the 2000
Financial Statements have not been established. The Company and its Subsidiaries
have made adequate provisions for all current taxes, and to the best of the
Company's knowledge there will not be any additional assessments for any fiscal
periods prior to and including that which ended on the date of said balance
sheet in excess of the amounts reserved therefor.

      Section 5.9. Financial Statements. All balance sheets, statements of
operations and cash flow and other financial information furnished to the Bank
in connection with this Agreement and the transactions contemplated hereby (each
of which is listed on Schedule 5.9), including, without limitation, the 2000
Financial Statements, have been prepared in accordance with Generally Accepted
Accounting Principles consistently applied throughout the periods involved
(except for the absence of footnotes with interim statements) and present fairly
the Consolidated financial condition of the Company and its Subsidiaries and all
such information so furnished was true, correct and complete as of the date
thereof.

      Section 5.10. Other Materials Furnished. The written information,
exhibits, memoranda or reports furnished to the Bank by or on behalf of the
Company or any Subsidiary in connection with the negotiation of this Agreement,
taken as a whole, do not contain any material misstatement of fact or omit to
state a material fact or any fact necessary to make the statements contained
therein not misleading.

      Section 5.11. Stock. There are presently issued by the Company and its
Subsidiaries and outstanding the shares of capital stock indicated on Schedule
5.11. The Company and its Subsidiaries have received the consideration for which
such stock was authorized to be issued and have otherwise complied with all
legal requirements relating to the authorization and issuance of shares of stock
and all such shares are validly issued, fully paid and non-assessable. The
Company and its Subsidiaries have no other capital stock of any class
outstanding.

                                       27
<PAGE>

      Section 5.12. Changes in Condition. Except as described on Schedule 5.12,
since the date of the balance sheet contained in the 2000 Financial Statements,
there has been no material adverse change in the business or assets or in the
financial condition of the Company or any Subsidiary, and neither the Company
nor any Subsidiary has entered into any transaction outside of the ordinary
course of business which is material to the Company or any Subsidiary. Neither
the Company nor any Subsidiary has any contingent liabilities of any material
amount which are not referred to in the 2000 Financial Statements.

      Section 5.13. Assets, Licenses, Etc.

            (a) The Company and its Subsidiaries have good and marketable title
to, or valid leasehold interests in, all of their assets, real and personal,
including the assets carried on their books and reflected in the 2000 Financial
Statements, subject to no liens, charges or encumbrances, except for liens,
charges and encumbrances described in Schedule 5.13(a)(i) and permitted by
Section 9.2 hereof and assets sold, abandoned or otherwise disposed of in the
ordinary course of business. Except as provided on Schedule 5.13(a)(ii), the
Company owns no assets or properties other than the capital stock of its
Subsidiaries.

            (b) The Company and its Subsidiaries own all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct their business as
heretofore conducted by them and as now conducted by them each of which is
listed, together with Patent and Trademark Office and Copyright Office
application or registration numbers, where applicable, on Schedule 5.13(b)
hereto. The Company and its Subsidiaries conduct their respective businesses
without infringement and, to knowledge of the Company or any Subsidiary, without
claim of infringement of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
others. To the best knowledge of the Company and its Subsidiaries, there is no
infringement or claim of infringement by others of any material license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of the Company and its Subsidiaries.

      Section 5.14. Litigation. Except as described on Schedule 5.14, there is
no litigation, at law or in equity, or any proceeding before any federal, state,
provincial or municipal board or other governmental or administrative agency
pending or, to the knowledge of the Company or any Subsidiary, threatened, or
any basis therefor, which involves a material risk of any judgment or liability
which could, if adversely determined, result in any material adverse change in
the business or assets or in the financial condition of the Company or any
Subsidiary, and no judgment, decree, or order of any federal, state, provincial
or municipal court, board or other governmental or administrative agency has
been issued against the Company or any Subsidiary which has or may have a
material adverse effect on the business or assets or on the financial condition
of the Company or any Subsidiary.

                                       28
<PAGE>

      Section 5.15. Pension Plans. No employee benefit plan established or
maintained by the Company or any Subsidiary or any other Person which is a
member of the same "control group," as the Company or any Subsidiary (a "Pension
Affiliate"), within the meaning of Section 302(f)(6)(b) of ERISA, (including any
multi-employer plan to which the Company or any Subsidiary contributes) which is
subject to Part 3 of Subtitle B of Title I of the ERISA, had a material
accumulated funding deficiency (as such term is defined in Section 302 of ERISA)
as of the last day of the most recent fiscal year of such plan ended prior to
the date hereof, or would have had a material accumulated funding deficiency (as
so defined) on such day if such year were the first year of such plan to which
Part 3 of Subtitle B of Title I of ERISA applied, and no material liability
under Title IV of ERISA has been, or is expected by the Company or any
Subsidiary to be, incurred with respect to any such plan by the Company or any
Subsidiary or any Pension Affiliate. The execution and delivery by the Company
of this Agreement and the other Bank Agreements executed on the date hereof will
not involve any prohibited transaction within the meaning of ERISA or Section
4975 of the Code. The Company and its Subsidiaries have no Pension Plans other
than those described on Schedule 5.15.

      Section 5.16. Outstanding Indebtedness. The outstanding amount of
Indebtedness for borrowed money (including Capitalized Lease Obligations, but
excluding any Indebtedness outstanding under the Original Credit Agreements) of
the Company and its Subsidiaries as of the date hereof is correctly set forth in
Schedule 5.16 hereto, and said schedule correctly describes the credit
agreements, guaranties, leases and other instruments pursuant to which such
Indebtedness has been incurred and all security interests securing such
Indebtedness. Said schedule also describes all agreements and other arrangements
pursuant to which the Company or any Subsidiary may borrow any money.

      Section 5.17. Environmental Matters. Except as set forth in Schedule 5.17,

            (a) None of the Company, any Subsidiary or any operator of any of
their respective properties is in violation, or to the Company's or any
Subsidiary's knowledge is in alleged violation, of any Environmental Law, which
violation would have a material adverse effect on the business, assets or
financial condition of the Company or any Subsidiary.

            (b) None of the Company, any Subsidiary or any operator of any of
their respective properties has received notice from any third party, including
without limitation any federal, state, county, or local governmental authority,
(i) that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended ("CERCLA") or any equivalent state law, with respect to any site or
location; (ii) that any hazardous waste, as defined in 42 U.S.C. ss. 6903(5),
any hazardous substances, as defined in 42 U.S.C. ss. 9601(14), any pollutant or
contaminant, as defined in 42 U.S.C. ss. 9601(33), or any toxic substance, oil
or hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which it has generated, transported
or disposed of, has been found at any site at which a federal, state, county, or
local agency or other third party has conducted or has ordered the Company, any
Subsidiary or another third party or parties (e.g. a committee of potentially
responsible parties) to

                                       29
<PAGE>

conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint (contingent or otherwise) or legal or
administrative proceeding arising out of any actual or alleged release or
threatened release of Hazardous Substances. For purposes of this Agreement,
"release" means any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping of Hazardous Substances into the environment.

            (c) (i) The Company, each Subsidiary and, to the best of the
Company's and each Subsidiary's knowledge, each operator of any real property
owned or operated by the Company or any Subsidiary is in compliance, in all
material respects, with all provisions of the Environmental Laws relating to the
handling, manufacturing, processing, generation, storage or disposal of any
Hazardous Substances; (ii) to the best of the Company's and each Subsidiary's
knowledge, no portion of property owned, operated or controlled by the Company
or any Subsidiary has been used for the handling, manufacturing, processing,
generation, storage or disposal of Hazardous Substances except in accordance
with applicable Environmental Laws; (iii) to the best of the Company's and each
Subsidiary's knowledge, there have been no releases or threatened releases of
Hazardous Substances on, upon, into or from any property owned, operated or
controlled by the Company or any Subsidiary, which releases could have a
material adverse effect on the value of such properties or adjacent properties
or the environment; (iv) to the best of the Company's and each Subsidiary's
knowledge, there have been no releases of Hazardous Substances on, upon, from or
into any real property in the vicinity of the real properties owned, operated or
controlled by the Company or any Subsidiary which, through soil or groundwater
contamination, may have come to be located on the properties of the Company or
any Subsidiary; (v) to the best of the Company's and each Subsidiary's
knowledge, there have been no releases of Hazardous Substances on, upon, from or
into any real property formerly but no longer owned, operated or controlled by
the Company or any Subsidiary.

            (d) None of the properties of the Company or any Subsidiary is or
shall be subject to any applicable environmental cleanup responsibility law or
environmental restrictive transfer law or regulation by virtue of the
transactions set forth herein and contemplated hereby.

      Section 5.18. Foreign Trade Regulations. Neither the Company nor any
Subsidiary is (a) a person included within the definition of "designated foreign
country" or "national" of a "designated foreign country" in Executive Order No.
8389, as amended, in Executive Order No. 9193, as amended, in the Foreign Assets
Control Regulations (31 C.F.R., Chapter V, Part 500, as amended), in the Cuban
Assets Control Regulations of the United States Treasury Department (31 C.F.R.,
Chapter V, Part 515, as amended) or in the Regulations of the Office of Alien
Property, Department of Justice (8 C.F.R., Chapter II, Part 507, as amended) or
within the meanings of any of the said Orders or Regulations, or of any
regulations, interpretations, or rulings issued thereunder, or in violation of
said Orders or Regulations or of any regulations, interpretations or rulings
issued thereunder or (b) an entity listed in Section 520.101 of the Foreign
Funds Control Regulations (31 C.F.R., Chapter V, Part 520, as amended).

                                       30
<PAGE>

      Section 5.19. Governmental Regulations. None of the Borrowers or any
Subsidiary of any Borrower is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940, or is a common carrier under the Interstate Commerce Act, or is engaged
in a business or activity subject to any statute or regulation which regulates
the incurring by the Borrowers of Indebtedness for borrowed money, including
statutes or regulations relating to common or contract carriers or to the sale
of electricity, gas, steam, water, telephone or telegraph or other public
utility services.

      Section 5.20. Margin Stock. Neither the Company nor any Subsidiary owns
any "margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System, or any regulations, interpretations or rulings
thereunder, nor is the Company or any Subsidiary engaged principally or as one
of its important activities in extending credit which is used for the purpose of
purchasing or carrying margin stock.

      Section 5.21. Operation of Business on Consolidated Basis. The Company and
its Subsidiaries conduct a substantial portion of 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.

                       ARTICLE 6. REPORTS AND INFORMATION

      Section 6.1. Interim Financial Statements and Reports. As soon as
available, and in any event within fifty (50) days after the end of each of the
first three quarters of each fiscal year of the Company, the Borrowers shall
furnish to the Bank (a) unaudited consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the end of such quarter and unaudited
consolidated and consolidating statements of income, shareholders' equity and
cash flow of the Company and its Subsidiaries for such quarter and for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all prepared in reasonable detail and in accordance with Generally Accepted
Accounting Principles consistently applied and certified by the Chief Financial
Officer of the Company and (b) a Compliance Certificate.

      Section 6.2. Annual Financial Statements. As soon as available, but in any
event within one hundred and twenty (120) days after the end of each fiscal year
of the Company, the Borrowers shall furnish to the Bank (a) consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such fiscal year and consolidated and consolidating statements of income,
shareholders' equity and cash flow of the Company and its Subsidiaries for such
fiscal year, together with all notes thereto, prepared in reasonable detail and
in accordance with Generally Accepted Accounting Principles consistently
applied, in each case

                                       31
<PAGE>

(other than the consolidating statements) reported on by Deloitte & Touche LLP
(or Deloitte & Touche in the case of SC(UK)), any other of the "Big 5"
accounting firms, or other independent certified public accountants of
recognized national standing reasonably acceptable to the Bank, which report
shall express, without reliance upon others, an opinion regarding the fairness
of the presentation of such financial statements in accordance with Generally
Accepted Accounting Principles consistently applied, said report to be without
qualification, except in cases of unresolved litigation and accounting changes
with which such accountants concur, together with the statement of such
accountants that they have caused the provisions of this Agreement to be
reviewed and that nothing has come to their attention to lead them to believe
that any Default exists hereunder or specifying any Default and the nature
thereof and (b) a Compliance Certificate.

      Section 6.3. Notice of Defaults. As soon as possible, and in any event
within five (5) Business Days after any Borrower becomes aware of the occurrence
of each Default, the Borrowers shall furnish to the Bank a statement of their
chief executive officer or chief financial officer setting forth details of such
Default and the action which such Borrower has taken or proposes to take with
respect thereto.

      Section 6.4. Notice of Litigation. Promptly after the commencement
thereof, the Borrowers shall furnish the Bank written notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, affecting the
Company or any Subsidiary, which, if adversely determined, would have a material
adverse affect on the business, assets, or financial condition of the Company or
any Subsidiary.

      Section 6.5. Communications with Others. At all times while the stock of
any Borrower is traded publicly, the Borrowers shall furnish the Bank with
copies of all regular, periodic and special reports and all registration
statements which any Borrower files with the Securities and Exchange Commission
or any governmental or regulatory authority which may be substituted therefor,
or with any national or regional securities exchange.

      Section 6.6. Reportable Events. At any time that the Company or any
Subsidiary has a Pension Plan, the Borrowers shall furnish to the Bank, as soon
as possible, but in any event within thirty (30) days after any Borrower knows
or has reason to know that any Reportable Event with respect to any Pension Plan
has occurred, the statement of its chief executive officer or chief financial
officer setting forth the details of such Reportable Event and the action which
the Company or any Subsidiary has taken or proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation.

      Section 6.7. Reports to other Creditors. Promptly after filing the same,
the Borrowers shall furnish to the Bank copies of any compliance certificate and
other information furnished to any other holder of the securities (including
debt obligations) of the Company or any Subsidiary

                                       32
<PAGE>

pursuant to the terms of any indenture, loan or credit or similar agreement and
not otherwise required to be furnished to the Bank pursuant to any other
provision of this Agreement.

      Section 6.8. Communications with Independent Public Accountants;
Management Letter. At any reasonable time and from time to time, the Borrowers
shall provide the Bank and any agents or representatives of the Bank access to
the independent public accountants of the Borrowers to discuss the Borrowers'
financial condition, including, without limitation any recommendations of such
independent public accountants concerning the management, finances, financial
controls or operations of the Company and its Subsidiaries, and the Borrowers
shall reasonably cooperate with the Bank and such accountants to facilitate any
such discussion. Promptly after the receipt thereof, but in any event within one
hundred and twenty (120) days after the end of each fiscal year of the Company,
the Borrowers shall furnish to the Bank copies of any written recommendations
concerning the management, finances, financial controls, or operations of the
Company or any Subsidiary received from the Borrowers' independent public
accountants.

      Section 6.9. Environmental Reports. The Borrowers shall furnish to the
Bank: (a) not later than thirty (30) days after notice thereof, notice of any
enforcement actions, or, to the knowledge of the Borrowers, threatened
enforcement actions affecting the Company or any Subsidiary by any Governmental
Authority related to Environmental Laws; (b) copies, promptly after they are
received, of all orders, notices of responsibility, notices of violation,
notices of enforcement actions, and assessments, and other written
communications pertaining to any such orders, notices, claims and assessments
received by the Company or any Subsidiary from any Governmental Authority; (c)
not later than thirty (30) days after notice thereof, notice of any civil claims
or threatened civil claims affecting the Company or any Subsidiary by any third
party alleging any violation of Environmental Laws or harm to human health or
the environment; (d) copies of all cleanup plans, site assessment reports,
response plans, remedial proposals, or other submissions of the Company or any
Subsidiary, other third party (e.g., committee of potentially responsible
parties at a Superfund site), or any combination of same, submitted to a
Governmental Authority in response to any communication referenced in
subsections (a) and (b) herein simultaneously with their submission to such
Governmental Authority; and (e) from time to time, on request of the Bank,
evidence of the Company's and any Subsidiaries' insurance coverage, if any, for
any environmental liabilities.

      Section 6.10. Annual Projections. Within forty-five (45) days after the
end of each fiscal year of the Company, the Borrowers shall furnish to the Bank
Consolidated financial projections and business plan for the Company and its
Subsidiaries for the then current fiscal year, in form and substance reasonably
satisfactory to the Bank.

      Section 6.11. Miscellaneous. The Borrowers shall provide the Bank with
such other information that is reasonably available to the Borrowers as the Bank
may from time to time reasonably request respecting the business, properties,
prospects, condition or operations, financial or otherwise, of the Company and
any Subsidiaries.

                                       33
<PAGE>

                         ARTICLE 7. FINANCIAL COVENANTS

      On and after the date hereof, until all of the Bank Obligations shall have
been unconditionally and irrevocably paid in full and the Bank shall have no
commitment hereunder, the Borrowers agree that the Company and its Subsidiaries
shall observe the following covenants:

      Section 7.1. Ratio of Consolidated Senior Funded Debt to Consolidated
EBITDA. The Company and its Subsidiaries shall not permit the ratio of
Consolidated Senior Funded Debt on any date to Consolidated EBITDA for the most
recent four quarter period for which financial statements have been delivered
pursuant to Sections 6.1 or 6.2 to be greater than (a) 2.75-to-1.00 through
fiscal year end 2001 and (b) 2.50-to-1.00 thereafter.

      Section 7.2. Ratio of Consolidated Operating Cash Flow to Consolidated
Total Debt Service. The Company and its Subsidiaries shall not permit for any
period of four consecutive fiscal quarters, commencing with the period ending
March, 2001, the ratio of (a) Consolidated Operating Cash Flow to (b)
Consolidated Total Debt Service, to be less than 1.25-to-1.00.

      Section 7.3. Minimum Consolidated EBITDA.

            (a) The Company and its Subsidiaries shall earn Consolidated EBITDA
for each period of four consecutive fiscal quarters, commencing with the period
ending March, 2001, of not less than $4,500,000.

            (b) The Company and its Subsidiaries shall earn Consolidated EBITDA
of not less than (i) $825,000 in each first fiscal quarter, commencing with the
first fiscal quarter of 2001, (ii) $1,580,000 in each second fiscal quarter,
commencing with the second fiscal quarter of 2001, (iii) $785,000 in each third
fiscal quarter, commencing with the third fiscal quarter of 2001 and (iv)
$1,385,000 in each fourth fiscal quarter, commencing with the fourth fiscal
quarter of 2001; provided, however, that so long as there is no other Default,
the failure of the Company and its Subsidiaries to earn Consolidated EBITDA as
required hereunder for any fiscal quarter shall not constitute a Default if as
of the end of the following fiscal quarter, the Company and its Subsidiaries
earn Consolidated EBITDA for the two (2) quarter period ending on such date of
not less than the sum of the required Consolidated EBITDA for each such period
set forth above.

      Section 7.4. Consolidated Capital Expenditures. The Company and its
Subsidiaries shall not make or incur any Capital Expenditures if, after giving
effect thereto, the aggregate of all Capital Expenditures made by the Company
and its Subsidiaries would exceed (a) $600,000 in fiscal year 2001 and in any
fiscal year thereafter (except as otherwise provided in paragraph (b)) and (b)
$1,500,000 in fiscal year 2002, provided that the Company and its Subsidiaries
shall have earned Consolidated EBITDA in excess of $5,500,000 for fiscal year
2001.

                        ARTICLE 8. AFFIRMATIVE COVENANTS

                                       34
<PAGE>

      On and after the date hereof, until all of the Bank Obligations shall have
been unconditionally and irrevocably paid in full and the Bank shall have no
commitment hereunder, the Borrowers covenant that they will, and will cause each
of their Subsidiaries to, comply with the following covenants and provisions:

      Section 8.1. Existence and Business. The Company and each Subsidiary will
(a) subject to Section 9.7, preserve and maintain their corporate existence and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required, except where the failure to be so
qualified would not have a material adverse effect on the Company or any
Subsidiary, (b) preserve and maintain in full force and effect all material
rights, licenses, patents and franchises, (c) comply in all material respects
with all valid and applicable statutes, rules and regulations necessary for the
conduct of business, and (d) engage only in (i) the businesses in which they are
currently engaged as of the Closing Date and (ii) businesses reasonably related
to the businesses in which they are currently engaged as of the Closing Date;
provided that (A) such reasonably related businesses do not involve direct
retail operations and do not require significant expenditures or commitments and
(B) the addition of such reasonably related businesses does not materially
change the nature of the Borrowers' business.

      Section 8.2. Taxes and Other Obligations. The Company and each Subsidiary
(a) will duly pay and discharge, or cause to be paid and discharged, before the
same shall become in arrears, all material taxes, assessments and other
governmental charges, imposed upon them and their properties, sales and
activities, or upon the income or profits therefrom, as well as the claims for
labor, materials, or supplies which if unpaid might by law result in a lien or
charge upon any of their properties; provided, however, that the Company and any
Subsidiary may contest any such charges or claims in good faith so long as (i)
an adequate reserve therefor has been established and is maintained if and as
required by Generally Accepted Accounting Principles and (ii) no action to
foreclose any such lien has been commenced, and (b) will promptly pay or cause
to be paid when due, or in conformance with customary trade terms (but not later
than 60 days from the due date in the case of trade debt), all lease
obligations, trade debt and all other Indebtedness incident to their operations.
The Borrowers and each Subsidiary shall cause all applicable tax returns and all
amounts due thereunder to be filed and paid, as the case may be, in order to
maintain their good standing with the Internal Revenue Service and state, local
and foreign tax authorities, unless any such amounts are being contested in good
faith by the Company or any Subsidiary, provided that the Company or any such
Subsidiary shall have complied with the provisions set forth in clauses (i) and
(ii) above.

      Section 8.3. Maintenance of Properties and Leases. The Company and each
Subsidiary shall maintain, keep and preserve all of their properties (tangible
and intangible) in good repair and working order, ordinary wear and tear
excepted. The Company and each Subsidiary shall replace and improve their
properties as necessary for the conduct of their business. The Company and each
Subsidiary shall comply in all material respects with all leases naming any of
them as lessees.

                                       35
<PAGE>

      Section 8.4. Insurance. The Company and each Subsidiary (a) will keep
their principal assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion or hazards, by extended coverage in an amount sufficient to avoid
co-insurance liability and (b) will maintain with financially sound and
reputable insurers insurance against other hazards and risks and liability to
persons and property to the extent and in a manner reasonably satisfactory to
the Bank, and in any event as customary for companies in similar businesses
similarly situated; provided, however, that on prior notice to the Bank they may
effect workmen's compensation insurance through an insurance fund operated by
such state or jurisdiction and may also be a self-insurer with respect to
workmen's compensation and with respect to group medical benefits under any
medical benefit plan. The provisions of the Security Agreements relating to
insurance shall not be limited by the provisions of this Section 8.4. On request
of the Bank from time to time, the Borrowers will render to the Bank a statement
in reasonable detail as to all insurance coverage required by this Section. A
description of the material elements of insurance coverage of the Company and
its Subsidiaries as of the date hereof is set forth on Schedule 8.4.

      Section 8.5. Records, Accounts and Places of Business. The Company and
each Subsidiary shall maintain comprehensive and accurate records and accounts
in accordance with Generally Accepted Accounting Principles consistently
applied. The Company and each Subsidiary shall maintain adequate and proper
reserves. The Company and each Subsidiary will promptly notify the Bank of (a)
any changes in the places of business of the Company and any Subsidiary and (b)
any additional places of business which may arise hereafter.

      Section 8.6. Inspection. At any reasonable time and from time to time and
upon reasonable notice to the Company provided that no Event of Default has
occurred and is continuing, the Borrowers shall permit the Bank and any of the
Bank's agents or representatives to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Company and its Subsidiaries and to discuss the affairs, finances and accounts
of the Borrowers and their Subsidiaries with any of their officers or directors.

      Section 8.7. Maintenance of Accounts. The Company and its Subsidiaries
shall maintain the Bank as their depository for their operating, concentration,
investment and disbursement accounts, and the Bank shall charge reasonable and
customary fees in connection with the operation and maintenance of all such
accounts.

      Section 8.8. Interest Rate Protection. The Company and its Subsidiaries
will maintain Interest Rate Protection Agreements on amounts of not less than
$4,500,000 at a rate and on terms reasonably satisfactory to the Bank.

      Section 8.9. Delivery of Closing Documents. The Borrowers shall deliver
the following documents to the Bank, in form and substance reasonably
satisfactory to the Bank and its counsel on or before January 22, 2001: (a)
resolutions of the Board of Directors of each Borrower and SC Licensing (or in
the case of SC(UK), a certified copy of a resolution in the form of Exhibit F

                                       36
<PAGE>

hereto), authorizing the execution, delivery and performance of this Agreement,
the Revolving Credit Note, the Term Note, the SC Licensing Guaranty and any
other Bank Agreements to which such Borrower or SC Licensing is a party,
certified by the Secretary or an Assistant Secretary (or Clerk or Assistant
Clerk) of each such Borrower and SC Licensing (which certificate shall state
that such resolutions are in full force and effect); (b) a certificate of the
Secretary or an Assistant Secretary (or Clerk or Assistant Clerk) of each
Borrower and SC Licensing, certifying (i) the name and signatures of the
officers of such Borrower and SC Licensing authorized to sign this Agreement,
the Revolving Credit Note, the Term Note and the other Bank Agreements to which
such Borrower or SC Licensing is a party and the other documents to be delivered
by the Borrowers and SC Licensing hereunder and (ii) there have been no changes
in the charter documents or by-laws or other similar governing documents of each
Borrower and SC Licensing previously delivered to the Bank; and (c) a legal
opinion of Kane Kessler, P.C., counsel to the Borrowers, dated as of the date of
execution of this Agreement, in form and substance reasonably satisfactory to
the Bank.

                         ARTICLE 9. NEGATIVE COVENANTS

      On and after the date hereof, until all of the Bank Obligations shall have
been unconditionally and irrevocably paid in full and the Bank shall have no
further commitment hereunder, the Borrowers covenant that none of them nor any
of their Subsidiaries will, without the prior express written consent or waiver
of the Bank:

      Section 9.1. Restrictions on Indebtedness. Create, incur, suffer or permit
to exist, or assume or guarantee, either directly or indirectly, or otherwise
become or remain liable with respect to, any Indebtedness, except the following:

            (a) Indebtedness on account of Consolidated Current Liabilities
(other than for money borrowed) incurred in the normal and ordinary course of
business.

            (b) Indebtedness in respect of (i) taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment thereof shall not at the time be required to be made in accordance
with the provisions of Section 8.2 hereof, (ii) judgments or awards which have
been in force for less than the applicable appeal period so long as execution is
not levied thereunder or in respect of which the Company or any Subsidiary shall
at the time in good faith be prosecuting an appeal or proceedings for review in
a manner reasonably satisfactory to the Bank and in respect of which a stay of
execution shall have been obtained pending such appeal or review and for which
adequate reserves have been established in accordance with Generally Accepted
Accounting Principles, and (iii) endorsements made in connection with the
deposit of items for credit or collection in the ordinary course of business.

            (c) Indebtedness in an amount not to exceed in the aggregate
$100,000 in respect of purchase money security interests permitted under Section
9.2(b) hereof.

            (d) Indebtedness to the Bank.

                                       37
<PAGE>

            (e) Indebtedness under Interest Rate Protection Agreements upon
terms satisfactory to the Bank.

            (f) Indebtedness reflected in the SC Licensing Note.

      Section 9.2. Restriction on Liens. Create or incur or suffer to be created
or incurred or to exist any encumbrance, mortgage, pledge, lien, charge or other
security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement (including Capitalized Leases) or suffer to exist for a
period of more than 30 days after the same shall have been incurred any
Indebtedness against it which if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors, or sell, assign, pledge or otherwise transfer for security any of its
accounts, contract rights, general intangibles, or chattel paper (as those terms
are defined in the Massachusetts Uniform Commercial Code) with or without
recourse; provided, however, that the Company or any Subsidiary may create or
incur or suffer to be created or incurred or to exist:

            (a) Liens and security interests in favor of the Bank securing the
Bank Obligations.

            (b) Purchase money security interests (which term shall include
mortgages, conditional sale contracts, Capitalized Leases and all other title
retention or deferred purchase devices) to secure the purchase price of property
acquired hereafter by the Borrowers, or to secure Indebtedness incurred solely
for the purpose of financing such acquisitions; provided, however, that no such
purchase money security interests shall extend to or cover any property other
than the property the purchase price of which is secured by it, and that the
principal amount of Indebtedness (whether or not assumed) with respect to each
item of property subject to such a security interest shall not exceed the fair
value of such item on the date of its acquisition.

            (c) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgments or awards to the extent
such judgments or awards are permitted as Indebtedness by the provisions of
Section 9.1(b); and liens for taxes, assessments or governmental charges or
levies and liens to secure claims for labor, material or supplies to the extent
that payment thereof shall not at the time be required to be made in accordance
with Section 8.2.

            (d) Encumbrances in the nature of zoning restrictions, easements,
and rights or restrictions of record on the use of real property which do not
materially detract from the value of such property or impair its use in the
business of the owner or lessee.

                                       38
<PAGE>

            (e) Liens (other than judgments and awards) created by or resulting
from any litigation or legal proceeding, provided the execution or other
enforcement thereof is effectively stayed and the claims secured thereby are
being actively contested in good faith by appropriate proceedings satisfactory
to the Bank.

            (f) Liens arising by operation of law to secure landlords, lessors
or renters under leases or rental agreements made in the ordinary course of
business and confined to the premises or property rented.

      Nothing contained in this Section 9.2 shall permit the Borrowers or any
Subsidiary to incur any Indebtedness or take any other action or permit to exist
any other condition which would be in contravention of any other provision of
this Agreement.

      Section 9.3. Restrictions on Asset Acquisition. In the case of the
Company, acquire any assets other than capital stock in its Subsidiaries and the
assets listed on Schedule 5.13(a)(ii) hereto. All of the capital stock held by
the Company in its Subsidiaries is pledged to the Bank pursuant to the Stock
Pledge Agreement from the Company to the Bank dated as of March 12, 1997, as
amended or supplemented from time to time.

      Section 9.4. Investments. Have outstanding or hold or acquire or make or
commit itself to acquire or make any Investment except the following:

            (a) Investments having a maturity of less than one year from the
date thereof by the Borrowers in: (i) obligations of the Bank; (ii) obligations
of the United States of America or any agency or instrumentality thereof; (iii)
repurchase agreements involving securities described in clauses (i) and (ii)
with the Bank; and (iv) commercial paper which is rated not less than prime-one
or A-1 or their equivalents by Moody's Investor Service, Inc. or Standard &
Poor's Corporation, respectively, or their successors;

            (b) Existing Investments of the Company and SC Direct in their
respective Subsidiaries, as described on Schedule 5.4;

            (c) Investments of the Company or any of its Subsidiaries in new
wholly-owned Subsidiaries incorporated under the laws of any state of the United
States formed or acquired after the date hereof, provided that on or prior to
the date of formation or acquisition thereof:

                  (i) such Subsidiary becomes a Borrower hereunder, jointly and
      severally, or, at the Bank's option, guaranties the payment and
      performance of the Bank Obligations to the Bank, all on terms and
      conditions as reasonably requested by the Bank;

                  (ii) such Subsidiary becomes a party to the Security
      Agreements, or executes supplemental security agreements similar in form
      and scope, pursuant to which such Subsidiary grants to the Bank a security
      interest in and lien on all assets of such Subsidiary;

                                       39
<PAGE>

                  (iii) the owner of such Subsidiary's capital stock executes a
      pledge agreement in favor of the Bank, pursuant to which all of the
      capital stock of such Subsidiary is pledged to the Bank and certificates
      for such shares together with stock powers executed in blank are delivered
      to the Bank;

                  (iv) the Company delivers to the Bank lien searches
      demonstrating that the assets of such Subsidiary are not subject to any
      liens or encumbrances of record except such as would be permitted under
      Section 9.2;

                  (v) the Company delivers to the Bank an opinion of counsel, in
      form and substance reasonably satisfactory to the Bank, as to such
      Subsidiary, the execution, delivery and performance of the documents
      executed by such Subsidiary and the Company referred to above, and such
      other matters as reasonably requested by the Bank;

                  (vi) the Company and such Subsidiary deliver to the Bank such
      additional instruments, certificates, and documents as the Bank may
      reasonably request relating to the requirements set forth above; and

                  (vii) The Bank shall have approved in writing in its sole
      discretion the acquisition of the capital stock or other ownership
      interests of such Subsidiary pursuant to the terms of Section 9.7(b),
      unless such acquisition is a Permitted Acquisition;

            (d) Investments consisting of normal travel and similar advances to
employees of the Company and its Subsidiaries not exceeding $50,000 in the
aggregate at any one time outstanding; and

            (e) Investments consisting of advances to Royal Advertising &
Marketing, Inc. ("Royal") to pay for advertising and marketing expenses
contracted by Royal for the benefit of the Borrowers;

            (f) Investments consisting of Interest Rate Protection Agreements to
the extent permitted under Section 9.1(e); and

            (g) The Investment by SC Direct in SC Licensing as reflected in the
SC Licensing Note.

      Section 9.5. Dispositions of Assets. Sell, lease or otherwise dispose of
any assets except for the sale, lease or other disposition of inventory or other
property (not including receivables) in the ordinary course of business.

      Section 9.6. Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise be or become directly or
contingently liable (including, without limitation, by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds to
or otherwise invest in any Person or otherwise assure the creditors of any such
Person against loss) in connection with any Indebtedness of any other Person,
except

                                       40
<PAGE>

for (a) Guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business and (b)
Guaranties in favor of the Bank.

      Section 9.7. Mergers, Etc. Enter into any merger or consolidation with or
acquire all or substantially all of the assets or capital stock of any Person,
or sell, assign, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person, except that (a) any Subsidiary may
merge into the Company or any other Subsidiary, (b) the Company and any
Subsidiary may effect Permitted Acquisitions and (c) the Company and any
Subsidiary may consummate any other acquisition or enter into any other merger
with another Person, provided that the terms and conditions of any such
acquisition or merger shall have been approved in writing by the Bank in its
sole discretion prior to such acquisition or merger and, provided further that
immediately after and giving effect thereto, no event shall have occurred and be
continuing which constitutes a Default (including under Section 8.1 and Article
7, assuming that the financial restrictions set forth in Article 7 are applied
immediately after and giving effect to such acquisition or merger) and that the
Company or such Subsidiary is the surviving corporation to any such merger.

      Section 9.8. ERISA. At any time while the Company or any Subsidiary has a
Pension Plan, permit any accumulated funding deficiency to occur with respect to
any Pension Plan or other employee benefit plans established or maintained by
the Company or any Subsidiary or to which contributions are made by the Company
or any Subsidiary (the "Plans"), and which are subject to the "Pension Reform
Act" and the rules and regulations thereunder or to Section 412 of the Code, and
at all times comply in all material respects with the provisions of the Act and
Code which are applicable to the Plans. The Company will not permit the Pension
Benefit Guaranty Corporation to cause the termination of any Pension Plan under
circumstances which would cause the lien provided for in Section 4068 of the
Pension Reform Act to attach to the assets of the Company or any Subsidiary.

      Section 9.9. Distributions. Make any Distribution or make any other
payment on account of the purchase, acquisition, redemption, or other retirement
of any shares of stock, whether now or hereafter outstanding, except that any
Subsidiary may make a Distribution to the Company or to its direct parent,
provided that such direct parent shall be a Borrower or a Subsidiary of any
Borrower hereunder.

      Section 9.10. Sale and Leaseback. Sell or transfer any of its properties
with the intention of taking back a lease of the same property or leasing other
property for substantially the same use as the property being sold or
transferred.

      Section 9.11. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except (a) for arm's length
transactions in the ordinary course of business on terms no more favorable to
such Affiliate than could be obtained from an unaffiliated third party and (b)

                                       41
<PAGE>

that the Company and its Subsidiaries may pay salaries, fees and bonuses to its
directors, officers and employees as are usual and customary in the Company's or
its Subsidiaries' business.

                   ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES

      Section 10.1. Events of Default. Each of the following events shall be
deemed to be Events of Default hereunder:

            (a) The Borrowers shall fail to make any payment in respect of (i)
the principal of any of the Bank Obligations as the same shall become due,
whether at the stated payment dates or by acceleration or otherwise, or (ii)
interest or commitment fees on or in respect of any of the Bank Obligations as
the same shall become due, and such failure shall continue for a period of five
(5) days.

            (b) The Company or any Subsidiary shall fail to perform or observe
any of the terms, covenants, conditions or provisions of Sections 6.1, 6.2, 6.3,
6.4, 6.8, Article 7, Sections 8.1, 8.2, 8.6 and 8.9 and Article 9 hereof.

            (c) The Company or any Subsidiary shall fail to perform or observe
any other covenant, agreement or provision to be performed or observed by the
Company or such Subsidiary under this Agreement or any other Bank Agreement, and
such failure shall not be rectified or cured to the Bank's satisfaction within
thirty (30) days after the occurrence thereof.

            (d) The Bank shall determine that any representation or warranty of
the Company or any Subsidiary herein or in any other Bank Agreement or any
amendment to any thereof shall have been materially adversely false or
misleading at the time made or intended to be effective.

            (e) The Company or any Subsidiary shall fail to make any payment of
Indebtedness for money borrowed by the Company or any such Subsidiary when such
payment is due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) or shall fail to perform or observe any
provision of any agreement or instrument relating to such Indebtedness, and such
failure shall permit the holder thereof to accelerate an aggregate amount in
excess of $100,000 of such Indebtedness.

            (f) The Company or any Subsidiary shall be involved in financial
difficulties as evidenced:

                                       42
<PAGE>

                  (1) by its commencement of a voluntary case under Title 11 of
      the United States Code as from time to time in effect, or by its
      authorizing, by appropriate proceedings of its board of directors or other
      governing body, the commencement of such a voluntary case;

                  (2) by its filing an answer or other pleading admitting or
      failing to deny the material allegations of a petition filed against it
      commencing an involuntary case under said Title 11, or seeking, consenting
      to or acquiescing in the relief therein provided, or by its failing to
      controvert timely the material allegations of any such petition;

                  (3) by the entry of an order for relief in any involuntary
      case commenced under said Title 11;

                  (4) by its seeking relief as a debtor under any applicable
      law, other than said Title 11, of any jurisdiction relating to the
      liquidation or reorganization of debtors or to the modification or
      alteration of the rights of creditors, or by its consenting to or
      acquiescing in such relief;

                  (5) by the entry of an order by a court of competent
      jurisdiction (1) by finding it to be bankrupt or insolvent, (2) ordering
      or approving its liquidation, reorganization or any modification or
      alteration of the rights of its creditors, or (3) assuming custody of, or
      appointing a receiver or other custodian for all or a substantial part of
      its property and such order shall not be vacated or stayed on appeal or
      otherwise stayed within 30 days;

                  (6) by the filing of a petition against the Company or any
      Subsidiary under said Title 11 which shall not be vacated within 60 days;

                  (7) by its making an assignment for the benefit of, or
      entering into a composition with, its creditors, or appointing or
      consenting to the appointment of a receiver or other custodian for all or
      a substantial part of its property;

                  (8) In relation to SC(UK), by any corporate action, any legal
      proceedings or other corporate procedure or step which is taken in
      relation to:

                        (a) the suspension of payments, a moratorium of any
                        Indebtedness, winding-up, dissolution, administration or
                        reorganization (by way of voluntary arrangement, scheme
                        of arrangement or otherwise);

                        (b) a composition, assignment or arrangement with any
                        creditor;

                        (c) the appointment of a liquidator, receiver,
                        administrator, administrative receiver, compulsory
                        manager or other similar officer; or

                                       43
<PAGE>

                        (d) enforcement of any encumbrance over any of its
                        assets; or

                  (9) by it being deemed to be "insolvent" as defined in Section
      101(32) of said Title 11 or, in the case of SC(UK), as defined in any
      similar insolvency or bankruptcy code.

            (g) There shall have occurred a judgment against the Company or any
Subsidiary in any court (i) for an amount in excess of $100,000 and from which
no appeal has been taken or with respect to which all appeal periods have
expired, unless such judgment is, to the Bank's reasonable satisfaction, insured
against in full or (ii) which shall have a materially adverse effect upon the
assets, properties or financial condition of the Company or any such Subsidiary.

            (h) There shall have occurred a Change of Control.

            (i) It shall become unlawful for any Borrower to perform any of its
obligations under this Agreement or any other Bank Agreement.

            (j) Any Borrower shall disaffirm or otherwise repudiate any of its
obligations under this Agreement or any other Bank Agreement.

            (k) SC Licensing shall have given notice to the Bank of its
intention to discontinue its Guaranty pursuant to Section 9 of the SC Licensing
Guaranty.

            (l) Any "Event of Default" under any other Bank Agreement shall have
occurred.

      Section 10.2. Remedies. Upon the occurrence of an Event of Default, in
each and every case, the Bank may proceed to protect and enforce its rights by
suit in equity, action at law and/or other appropriate proceeding either for
specific performance of any covenant or condition contained in this Agreement or
any other Bank Agreement or in any instrument delivered to the Bank pursuant
hereto or thereto, or in aid of the exercise of any power granted in this
Agreement, any Bank Agreement or any such instrument, and (unless there shall
have occurred an Event of Default under Section 10.1(f), in which case the
unpaid balance of Bank Obligations shall automatically become due and payable)
may, by notice in writing to the Borrowers declare (a) its obligation to make
Revolving Credit Advances to be terminated, whereupon such obligation shall be
terminated and/or (b) declare all or any part of the unpaid balance of the Bank
Obligations then outstanding to be forthwith due and payable, whereupon such
unpaid balance or part thereof shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of which are
hereby expressly waived. In such event, the Bank may proceed to enforce payment
of such balance or part thereof in such manner as it may elect, and the Bank may
offset and apply toward the payment of such balance or part thereof any
Indebtedness of it to the Company or any Subsidiary, or to any obligor on the
Bank Obligations, including any Indebtedness represented by deposits in any
general or special account maintained with the Bank or with any other bank
controlling, controlled by or under common control with the Bank.

                                       44
<PAGE>

                   ARTICLE 11. WAIVERS; AMENDMENTS; REMEDIES

      No delay or omission on the part of the Bank in exercising its rights and
remedies against the Borrowers or any other interested party shall constitute a
waiver of any rights or remedies of the Bank. A breach by the Borrowers of their
obligations under this Agreement may be waived only by a written waiver executed
by the Bank. The Bank's waiver of a breach by the Borrowers in one or more
instances shall not constitute or otherwise be an implicit waiver of subsequent
breaches. To the extent permitted by applicable law, the Borrowers hereby agree
to waive, and do hereby absolutely and irrevocably waive (a) all presentments,
demands for performance, notices of nonperformance, protests, notices of protest
and notices of dishonor in connection with any of the Indebtedness evidenced by
the Revolving Credit Note and the Term Note, (b) any requirement of diligence or
promptness on the Bank's part in the enforcement of its rights under the
provisions of this Agreement or any Bank Agreement, and (c) any and all notices
of every kind and description which may be required to be given by any statute
or rule of law with respect to the Borrowers' liability (i) under this Agreement
or in respect of the Indebtedness evidenced by the Revolving Credit Note, the
Term Note or any other Bank Obligation or (ii) under any other Bank Agreement.
No course of dealing between the Borrowers and the Bank shall operate as a
waiver of any of the Bank's rights under this Agreement or any Bank Agreement or
with respect to any of the Bank Obligations. This Agreement shall be amended
only by a written instrument executed by the parties hereto making explicit
reference to this Agreement. The Bank's rights and remedies under this Agreement
and under all other Bank Agreements and under all subsequent agreements between
the Bank and the Borrowers shall be cumulative and any rights and remedies
expressly set forth herein shall be in addition to, and not in limitation of,
any other rights and remedies which may be available to the Bank in law or at
equity.

                          ARTICLE 12. INDEMNIFICATION

      Without limitation of any other obligation or liability of the Borrowers
or right or remedy of the Bank contained herein, the Borrowers, jointly and
severally, hereby covenant and agree to indemnify and hold the Bank, and the
shareholders, directors, agents, officers, subsidiaries and affiliates of the
Bank, harmless from and against any and all damages, losses, settlement
payments, obligations, liabilities, claims, including, without limitation,
claims for finder's or broker's fees, actions or causes of action, and
reasonable costs and expenses incurred, suffered, sustained or required to be
paid by an indemnified party in each case by reason of or resulting from any
claim relating to the transactions contemplated hereby other than any such
claims which are determined by a final, non-appealable order of a court to be
the result of the Bank's or such indemnified party's gross negligence or willful
misconduct. Promptly upon receipt by any indemnified party hereunder of notice
of the commencement of any action against such indemnified party for which a
claim is to be made against the Borrowers hereunder, such indemnified party
shall notify the Borrowers in writing of the commencement thereof, although the
failure to provide such notice shall not affect the indemnification rights of

                                       45
<PAGE>

any such indemnified party hereunder unless the Borrowers demonstrate to the
reasonable satisfaction of such indemnified party that such failure to provide
notice prejudiced the Borrowers in their defense of such claim. The Borrowers
shall have the right, at their option upon notice to the indemnified parties, to
defend any such matter at their own expense and with their own counsel, except
as provided below, which counsel must be reasonably acceptable to the
indemnified parties. The indemnified party shall cooperate with the Borrowers in
the defense of such matter. The indemnified party shall have the right to employ
separate counsel and to participate in the defense of such matter at its own
expense. In the event that (a) the employment of separate counsel by an
indemnified party has been authorized in writing by the Borrowers, (b) the
Borrowers have failed to assume the defense of such matter or (c) the named
parties to any such action (including impleaded parties) include any indemnified
party who has been advised by counsel that there may be one or more legal
defenses available to it or prospective bases for liability against it, which
are different from those available to or against the Borrowers, then the
Borrowers shall not have the right to assume the defense of such matter with
respect to such indemnified party. The Borrowers shall not be liable for any
compromise or settlement of any such matter effected without its written
consent, provided that any such consent or refusal to consent may not be
unreasonably delayed. The Borrowers shall not compromise or settle any such
matter against an indemnified party without the written consent of the
indemnified party, provided that any such consent or refusal to consent may not
be unreasonably withheld or delayed; provided that the Borrowers' shall not be
liable for any damages in excess of those for which they would have been liable
had the indemnified party accepted such compromise or settlement offer.

                           ARTICLE 13. MISCELLANEOUS

      Section 13.1. Successors and Assigns.

            (a) General. This Agreement shall bind and shall be enforceable by
the parties hereto and their respective successors and assigns; provided,
however that, the Borrowers may not assign their rights or obligations under
this Agreement or any other Bank Agreement. The representations and warranties
made by the Borrowers in this Agreement shall bind the Borrowers' successors and
assigns.

            (b) Assignments. The Bank shall have the unrestricted right at any
time or from time to time, and without the Borrowers' or any guarantor's
consent, to assign all or any portion of its rights and obligations hereunder to
one or more banks or other financial institutions (each, an "Assignee"), and the
Borrowers and each guarantor agree that they shall execute, or cause to be
executed, such documents, including without limitation, amendments to this
Agreement and to any other documents, instruments and agreements executed in
connection herewith as the Bank shall deem necessary to effect the foregoing. In
addition, at the request of the Bank and any such Assignee, the Borrowers shall
issue one or more new promissory notes, as applicable, to any such Assignee and,
if the Bank has retained any of its rights and obligations hereunder following
such assignment, to the Bank, which new promissory notes shall be issued in
replacement of, but not in discharge of, the liability evidenced by the
Revolving Credit Note

                                       46
<PAGE>

and Term Note held by the Bank prior to such assignment and shall reflect the
amount of the respective commitments and loans held by such the Assignee and the
Bank after giving effect to such assignment. Upon the execution and delivery of
appropriate assignment documentation, amendments and any other documentation
required by the Bank in connection with such assignment, and the payment by the
Assignee of the purchase price agreed to by the Bank and such Assignee, such
Assignee shall be a party to this Agreement and shall have all of the rights and
obligations of the Bank hereunder (and under any and all other guaranties,
documents, instruments and agreements executed in connection herewith) to the
extent that such rights and obligations have been assigned by the Bank pursuant
to the assignment documentation between the Bank and such Assignee, and the Bank
shall be released from its obligations hereunder and thereunder to a
corresponding extent. The Bank may furnish any information concerning the
Borrowers in its possession from time to time to prospective Assignees, provided
that the Bank shall require any such prospective Assignees to agree in writing
to maintain the confidentiality of such information.

            (c) Assignments to Federal Reserve Bank. The Bank may at any time
pledge or assign all or any portion of its rights under the Bank Agreements,
including any portion of the Revolving Credit Note and Term Note, to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or assignment or enforcement
thereof shall release the Bank from its obligations under any of the Bank
Agreements.

            (d) Participations. The Bank shall have the unrestricted right at
any time and from time to time, and without the consent of or notice to the
Borrowers or any guarantor, to grant to one or more banks or other financial
institutions (each, a "Participant") participating interests in the Bank's
obligation to lend hereunder and/or any or all of the loans held by the Bank
hereunder. In the event of any such grant by the Bank of a participating
interest to a Participant, whether or not upon notice to the Borrowers, the Bank
shall remain responsible for the performance of its obligations hereunder and
the Borrowers shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations hereunder. The Bank may
furnish any information concerning the Borrowers in its possession from time to
time to prospective Participants, provided that the Bank shall require any such
prospective Participant to agree in writing to maintain the confidentiality of
such information.

      Section 13.2. Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
nationally-recognized overnight carrier service, addressed as follows:

            (a) If to the Bank, at 100 Federal Street, Boston, MA 02110,
Attention: John M. Sharry, Vice President and at 39 Victoria Street, London SW1H
OED ENGLAND, Attn: Michael Rowe, Corporate Banking, with a copy to Goodwin,
Procter & Hoar LLP, Exchange Place, Boston, MA 02109, Attn: Edward Matson
Sibble, Jr., P.C., and to Pinsent Curtis, One Park Row, Leeds LS1 5AB ENGLAND,
Attn: Andrew Gosnay, or at such other address(es) or to the attention of such
other Person(s) as the Bank shall from time to time designate in writing to the
Borrowers.

                                       47
<PAGE>

            (b) If to the Borrowers, c/o Specialty Catalog Corp., 21 Bristol
Drive, South Easton, MA 02375, Attention: Thomas McCain, Chief Financial
Officer, with a copy to Kane Kessler, P.C., 1350 Avenue of the Americas, New
York, NY 10019, Attn; Robert L. Lawrence, or at such other address(es) or to the
attention of such other Person(s) as the Borrowers shall from time to time
designate in writing to the Bank.

      Any notice so addressed and mailed by registered or certified mail shall
be deemed to have been given when mailed.

      Section 13.3. Integration. This Agreement is intended by the parties as
the final, complete and exclusive statement of the transactions evidenced by
this Agreement. All prior or contemporaneous promises, agreements and
understandings, whether oral or written, are deemed to be superseded by this
Agreement, and no party is relying on any promise, agreement or understanding
not set forth in this Agreement. This Agreement may not be amended or modified
except by a written instrument describing such amendment or modification
executed by the Borrowers and the Bank.

      Section 13.4. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the laws of The Commonwealth of Massachusetts (excluding the laws applicable to
conflicts or choice of law). THE BORROWERS AGREE THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER BANK AGREEMENTS MAY BE BROUGHT
IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING
THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE
OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWERS BY MAIL AT THE
ADDRESS(ES) SET FORTH IN THIS AGREEMENT. THE BORROWERS HEREBY WAIVE ANY
OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.

      Section 13.5. Counterparts. This Agreement and all amendments to this
Agreement may be executed in several counterparts, each of which shall be an
original. The several counterparts shall constitute a single Agreement.

                                       48
<PAGE>

      Section 13.6. Expenses. The Borrowers, jointly and severally, shall pay on
demand all expenses of the Bank in connection with the preparation,
administration, default, collection, waiver or amendment of loan terms, or in
connection with the Bank's exercise, preservation or enforcement of any of its
rights, remedies or options hereunder, including, without limitation, reasonable
fees of outside legal counsel or the allocated costs of in-house legal counsel,
accounting, consulting, brokerage or other similar professional fees or
expenses, and any reasonable fees or expenses associated with travel or other
costs relating to any appraisals or examinations conducted in connection with
the loan or any collateral therefor, and the amount of all such expenses shall,
until paid, bear interest at the rate applicable to principal hereunder
(including any default rate) and be an obligation secured by any Collateral.

      Section 13.7. Joint and Several Obligations. All obligations of the
Borrowers hereunder and under the Revolving Credit Note and the Term Note shall
be joint and several obligations of the Borrowers.

      Section 13.8. Reliance on Representations and Actions of the Company. The
Borrowers hereby appoint the Company as the Borrowers' agent to execute, deliver
and perform, on behalf of the Borrowers, any and all notices, certificates,
documents and actions to be executed, delivered or performed hereunder or under
any Bank Agreement, and the Borrowers hereby agree that the Bank may rely upon
any representation, warranty, certificate, notice, document or telephone request
which purports to be executed or made or which the Bank in good faith believes
to have been executed or made by the Company or any of its executive officers,
and the Borrowers hereby further, jointly and severally, agree to indemnify and
hold the Bank harmless for any action, including the making of Revolving Credit
Advances hereunder, and any loss or expense, taken or incurred by the Bank as a
result of its good faith reliance upon any such representation, warranty,
certificate, notice, document or telephone request.

      Section 13.9. WAIVER OF JURY TRIAL. THE BORROWERS AND THE BANK (BY
ACCEPTANCE OF THIS AGREEMENT) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
BANK AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE BANK, RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE BANK AGREEMENTS, AND AGREE THAT
NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE BORROWERS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM
OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
BORROWERS CERTIFY THAT NO REPRESENTATIVE,

                                       49
<PAGE>

AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT
THIS AGREEMENT AND MAKE THE REVOLVING CREDIT ADVANCES AND TERM LOAN.

      Section 13.10. Replacement of Promissory Notes. Upon receipt of an
affidavit of an officer of the Bank as to the loss, theft, destruction or
mutilation of the Revolving Credit Note and/or Term Note or any other security
document which is not of public record, and, in the case of any such loss,
theft, destruction or mutilation, upon cancellation of such Revolving Credit
Note and/or Term Note or other security document, the Borrowers will issue, in
lieu thereof, a replacement note(s) or other security document(s) in the same
principal amount thereof and otherwise of like tenor.

      Section 13.11. Currency Equivalents. In any instance under this Agreement
when a covenant is dependent on a calculation made by reference to U.S. dollars,
if there is a need to convert amounts from another currency, such conversion
shall be made by reference to the applicable exchange rates generally in effect
at the Bank for its customers.

                                       50
<PAGE>

      IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Amended
and Restated Credit Agreement to be executed by their duly authorized officers
as of the date set forth above.

                                    SPECIALTY CATALOG CORP.

                                    By: /s/ Thomas McCain
                                        Name:  Thomas McCain
                                        Title: SVP

                                    SC CORPORATION d/b/a SC Direct

                                    By: /s/ Thomas McCain
                                        Name:  Thomas McCain
                                        Title: SVP

                                    SC PUBLISHING, INC.

                                    By: /s/ Thomas McCain
                                        Name:  Thomas McCain
                                        Title: SVP

                                    DAXBOURNE INTERNATIONAL LIMITED

                                    By: /s/ Thomas McCain
                                        Name:  Thomas McCain
                                        Title: Director

                                    FLEET NATIONAL BANK

                                    By: /s/ John M. Sharry
                                        Name:  John M. Sharry
                                        Title: Vice President

                                       51
<PAGE>

                                    EXHIBIT A

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

                              REVOLVING CREDIT NOTE

$7,600,000                                                 December 27, 2000
                                                           Boston, Massachusetts

      For value received, the undersigned, jointly and severally, hereby promise
to pay to FLEET NATIONAL BANK (the "Bank"), or order, at the head office of the
Bank at 100 Federal Street, Boston, Massachusetts, the principal amount of SEVEN
MILLION AND SIX HUNDRED THOUSAND DOLLARS ($7,600,000) or such lesser amount as
shall equal the aggregate principal amount of all Revolving Credit Advances
outstanding hereunder on December 31, 2002 (the "Revolving Credit Termination
Date"), in lawful money of the United States of America and in immediately
available funds, and to pay interest on the unpaid principal balance hereof from
time to time outstanding, at said office and in like money and funds, at a rate
or rates per annum and on the dates provided in the Agreement (as defined
below), beginning on the first such date after the date hereof and when the
principal balance hereof is due (whether at maturity, by reason of acceleration
or otherwise). All principal remaining unpaid and any accrued but unpaid
interest shall in any event be due and payable in full on the Revolving Credit
Termination Date.

      Upon Default (as defined in the Agreement) (whether or not the Bank has
accelerated payment hereunder or under the Agreement), or after maturity or
after judgment has been rendered on this Note or under the Agreement, the unpaid
principal of all Revolving Credit Advances shall, at the option of the Bank,
bear interest at a rate which is four (4) percentage points per annum greater
than that which would otherwise be applicable.

      If the entire amount of any required principal and/or interest due
hereunder or under the Agreement is not paid in full within ten (10) days after
the same is due, the undersigned, jointly and severally, shall pay to the Bank a
late fee equal to five percent (5%) of the required payment. Notwithstanding the
above, nothing shall affect the Bank's right to exercise any of its rights or
remedies provided in the Agreement if a Default has occurred.

                                       52
<PAGE>

This Note is issued pursuant to, and entitled to the benefits of, and is subject
to, the provisions of a certain Amended and Restated Credit Agreement dated as
of December 27, 2000, by and between the undersigned and the Bank (herein, as
the same may from time to time be amended or extended, referred to as the
"Agreement"), but neither this reference to the Agreement nor any provision
thereof shall affect or impair the absolute and unconditional obligation of the
undersigned makers of this Note to pay the principal of and interest on this
Note as herein provided.

      As provided in the Agreement, this Note is secured by certain real and
personal property of the undersigned and is subject to mandatory prepayment in
certain circumstances.

      In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of and accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.

      The undersigned may at their option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Agreement.

      The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.

      Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Agreement.

      THE UNDERSIGNED AND THE BANK (BY ACCEPTANCE OF THIS NOTE) MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR THE AGREEMENT OR ANY OTHER BANK AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION THEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE BANK, RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT
OF THE BANK AGREEMENTS, AND AGREE THAT NONE OF THE PARTIES WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE UNDERSIGNED HEREBY
WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE UNDERSIGNED CERTIFY THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER

                                       53
<PAGE>

CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE
REVOLVING CREDIT ADVANCES.

                  [remainder of page intentionally left blank]

                                       54
<PAGE>

      This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).

                                               SPECIALTY CATALOG CORP.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               SC CORPORATION d/b/a SC Direct

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               SC PUBLISHING, INC.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               DAXBOURNE INTERNATIONAL
                                               LIMITED

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: Director

                                       55
<PAGE>

                          SCHEDULE I TO PROMISSORY NOTE

              AMOUNT OF          AMOUNT          NOTATION
DATE            LOAN              PAID           MADE BY
---------------------------------------------------------

                                       56
<PAGE>

                                    EXHIBIT B

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

                                    TERM NOTE

$9,000,000                                                 December 27, 2000
                                                           Boston, Massachusetts

      For value received, the undersigned, jointly and severally, hereby promise
to pay to FLEET NATIONAL BANK (the "Bank"), or order, at the head office of the
Bank at 100 Federal Street, Boston, Massachusetts, the principal amount of NINE
MILLION DOLLARS ($9,000,000) in lawful money of the United States of America and
in immediately available funds, and to pay interest on the unpaid principal
balance hereof from time to time outstanding, at said office and in like money
and funds, at a rate or rates per annum and on the dates provided in the
Agreement (as defined below), beginning on the first such date after the date
hereof and when the principal balance hereof is due (whether at maturity, by
reason of acceleration or otherwise). The principal hereof shall be repaid at
the times, in the amounts and on the conditions set forth in the Agreement. All
principal remaining unpaid and any accrued but unpaid interest shall in any
event be due and payable in full on December 31, 2005.

      Upon Default (as defined in the Agreement) (whether or not the Bank has
accelerated payment hereunder or under the Agreement), or after maturity or
after judgment has been rendered on this Note or under the Agreement, the unpaid
principal of the Term Loan shall, at the option of the Bank, bear interest at a
rate which is four (4) percentage points per annum greater than that which would
otherwise be applicable.

      If the entire amount of any required principal and/or interest due
hereunder or under the Agreement is not paid in full within ten (10) days after
the same is due, the undersigned, jointly and severally, shall pay to the Bank a
late fee equal to five percent (5%) of the required payment. Notwithstanding the
above, nothing shall affect the Bank's right to exercise any of its rights or
remedies provided in the Agreement if a Default has occurred.

                                       57
<PAGE>

This Note is issued pursuant to, and entitled to the benefits of, and is subject
to, the provisions of a certain Amended and Restated Credit Agreement dated as
of December 27, 2000 by and between the undersigned and the Bank (herein, as the
same may from time to time be amended or extended, referred to as the
"Agreement"), but neither this reference to the Agreement nor any provision
thereof shall affect or impair the absolute and unconditional obligation of the
undersigned makers of this Note to pay the principal of and interest on this
Note as herein provided.

      As provided in the Agreement, this Note is secured by certain real and
personal property of the undersigned and is subject to mandatory prepayment in
certain circumstances.

      In case an Event of Default (as defined in the Agreement) shall occur, the
aggregate unpaid principal of and accrued interest on this Note shall become or
may be declared to be due and payable in the manner and with the effect provided
in the Agreement.

      The undersigned may at their option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Agreement.

      The undersigned makers hereby waive presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.

      Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Agreement.

      THE UNDERSIGNED AND THE BANK (BY ACCEPTANCE OF THIS NOTE) MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR THE AGREEMENT OR ANY OTHER BANK AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONNECTION THEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING,
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR
ACTIONS OF THE BANK, RELATING TO THE ADMINISTRATION OF THE LOAN OR ENFORCEMENT
OF THE BANK AGREEMENTS, AND AGREE THAT NONE OF THE PARTIES WILL SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE UNDERSIGNED HEREBY
WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE UNDERSIGNED CERTIFY THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER

                                       58
<PAGE>

CONSTITUTES A MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS NOTE AND MAKE THE
TERM LOAN.

                  [remainder of page intentionally left blank]

                                       59
<PAGE>

      This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).

                                               SPECIALTY CATALOG CORP.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               SC CORPORATION d/b/a SC Direct

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               SC PUBLISHING, INC.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               DAXBOURNE INTERNATIONAL
                                               LIMITED

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: Director

                                       60
<PAGE>

                          SCHEDULE I TO PROMISSORY NOTE

              AMOUNT OF          AMOUNT          NOTATION
DATE            LOAN              PAID           MADE BY
---------------------------------------------------------

                                       61
<PAGE>

                                    EXHIBIT E

                               UNLIMITED GUARANTY

      GUARANTY (the "Guaranty"), dated as of December 27, 2000, by SC LICENSING
CORP., a Massachusetts corporation (the "Guarantor"), in favor of FLEET NATIONAL
BANK, a national banking association organized and existing under the laws of
the United States of America (the "Bank").

                                    Recitals

      WHEREAS, the Guarantor is a wholly-owned subsidiary of the Company (as
defined below); and

      WHEREAS, the Borrowers (as defined below), the Guarantor and their
Subsidiaries conduct a substantial portion of their business on a Consolidated
basis, including, but not limited to shared management, accounting, marketing
and operations. Any credit obtained by the Borrowers, the Guarantor or any of
their Subsidiaries benefits the Borrowers, the Guarantor and their Subsidiaries
on a Consolidated basis; and

      WHEREAS, Specialty Catalog Corp., a Delaware corporation (the "Company"),
SC Corporation d/b/a SC Direct, a Delaware corporation ("SC Direct"), SC
Publishing, Inc., a Delaware corporation ("SC Publishing") and the Bank are
parties to a Credit and Guaranty Agreement dated as of March 12, 1997 (as
amended through the date hereof, the "U.S. Credit Agreement"), and Daxbourne
International Limited (Registered No. 3369640), a private company limited by
shares incorporated in England and Wales ("SC(UK)"), and together with the
Company, SC Direct and SC Publishing, the "Borrowers"), the Company, SC Direct
and SC Publishing and the Bank are parties to a Credit Agreement dated as of
October 3, 1997 (the "U.K. Credit Agreement", and together with the U.S. Credit
Agreement, the "Original Credit Agreements"); and

      WHEREAS, the Guarantor has guaranteed payment and performance in full of
all liabilities, agreements and obligations of the Borrowers to the Bank under
the Original Credit Agreements pursuant to the terms of that certain Unlimited
Guaranty (the "Original Guaranty") executed by the Guarantor in favor of the
Bank dated as of December 30, 1997; and

      WHEREAS, as of the date hereof, the Original Credit Agreements have been
amended and restated in their entirety pursuant to the terms of that certain
Amended and Restated Credit Agreement (as amended or modified from time to time,
the "Amended and Restated Credit Agreement") dated as of December 27, 2000 by
and among the Company, SC Direct, SC Publishing, SC(UK) and the Bank, pursuant
to which the Bank has agreed to make Revolving Credit Advances and a Term Loan
to the Borrowers, the proceeds of which shall be used for the benefit of the
Borrowers and their Subsidiaries, including without limitation, the Guarantor;
and

                                       62
<PAGE>

      WHEREAS, as a condition to the Bank's establishment of the amended and
restated credit facilities pursuant to the Amended and Restated Credit Agreement
and in connection with the extension of credit by the Bank thereunder, the Bank
is requiring that the Guarantor execute and deliver this Guaranty, pursuant to
which the Guarantor shall guaranty payment and performance of all Bank
Obligations as defined in the Amended and Restated Credit Agreement, and which
Guaranty shall be issued in replacement, but not in discharge, of the Original
Guaranty; and

         WHEREAS, all of the obligations of the Guarantor under this Guaranty
will be secured by a first perfected security interest in all tangible and
intangible assets, now owned or hereafter acquired, by the Guarantor.

                                       63
<PAGE>

      NOW, THEREFORE, for good and valuable consideration, the Guarantor agrees
as follows:

      Section 13.12. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
guarantees to the Bank the full and punctual payment when due (whether at
maturity, by acceleration or otherwise), and the performance, of all Bank
Obligations, including without limitation payment and performance in full of the
Revolving Credit Note and Term Note, and all other liabilities, agreements and
other obligations of the Borrowers to the Bank, whether direct or indirect,
absolute or contingent, due or to become due, secured or unsecured, now existing
or hereafter arising or acquired (whether by way of discount, letter of credit,
lease, loan, overdraft or otherwise) (the "Guaranteed Obligations"); provided,
however, that the Guarantor's liability for its guaranty hereunder shall be
limited to an aggregate amount equal to the largest amount that would not render
its obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provision(s) of any applicable state
law. This Guaranty is an absolute, unconditional and continuing guaranty of the
full and punctual payment and performance of the Guaranteed Obligations and not
of their collectibility only and is in no way conditioned upon any requirement
that the Bank first attempt to collect any of the Guaranteed Obligations from
the Borrowers or resort to any security or other means of obtaining their
payment. Should the Borrowers default in the payment or performance of any of
the Guaranteed Obligations, the obligations of the Guarantor hereunder shall
become immediately due and payable to the Bank, without demand or notice of any
nature, all of which are expressly waived by the Guarantor. Payments by the
Guarantor hereunder may be required by the Bank on any number of occasions.

      Section 13.13. GUARANTOR'S AGREEMENT TO PAY. The Guarantor further agrees,
as the principal obligor and not as a guarantor only, to pay to the Bank, on
demand, all costs and expenses (including court costs and legal expenses)
incurred or expended by the Bank in connection with the Guaranteed Obligations,
this Guaranty and the enforcement thereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts become due until
payment, at the rate per annum equal to the Applicable Prime Rate in effect at
such time plus 4%; provided that if such interest exceeds the maximum amount
permitted to be paid under applicable law, then such interest shall be reduced
to such maximum permitted amount.

      Section 13.14. UNLIMITED GUARANTY. Except as otherwise provided in Section
1 hereof, the liability of the Guarantor hereunder shall be unlimited.

      Section 13.15. WAIVERS BY GUARANTOR; BANK'S FREEDOM TO ACT. The Guarantor
agrees that the Guaranteed Obligations will be paid and performed strictly in
accordance with their respective terms regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Bank with respect thereto. The Guarantor waives
presentment, demand, protest, notice of

                                       64
<PAGE>

acceptance, notice of Guaranteed Obligations incurred and all other notices of
any kind, all defenses which may be available by virtue of any valuation, stay,
moratorium law or other similar law now or hereafter in effect, any right to
require the marshalling of assets of the Borrowers, and all suretyship defenses
generally. Without limiting the generality of the foregoing, the Guarantor
agrees to the provisions of any instrument evidencing, securing or otherwise
executed in connection with any Guaranteed Obligation and agrees that the
obligations of the Guarantor hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (i) the failure of the Bank to assert
any claim or demand or to enforce any right or remedy against the Borrowers;
(ii) any extensions or renewals of any Guaranteed Obligation; (iii) any
rescissions, waivers, amendments or modifications of any of the terms or
provisions of any agreement evidencing, securing or otherwise executed in
connection with any Guaranteed Obligation; (iv) the substitution or release of
any entity primarily or secondarily liable for any Guaranteed Obligation; (v)
the adequacy of any rights the Bank may have against any collateral or other
means of obtaining repayment of the Guaranteed Obligations; (vi) the impairment
of any collateral securing the Guaranteed Obligations, including without
limitation the failure to perfect or preserve any rights the Bank might have in
such collateral or the substitution, exchange, surrender, release, loss or
destruction of any such collateral; or (vii) any other act or omission which
might in any manner or to any extent vary the risk of the Guarantor or otherwise
operate as a release or discharge of the Guarantor, all of which may be done
without notice to the Guarantor.

      Section 13.16. UNENFORCEABILITY OF GUARANTEED OBLIGATIONS AGAINST
BORROWERS. If for any reason the Borrowers have no legal existence or are under
no legal obligation to discharge any of the Guaranteed Obligations, or if any of
the Guaranteed Obligations have become irrecoverable from the Borrowers by
operation of law or for any other reason, this Guaranty shall nevertheless be
binding on the Guarantor to the same extent as if the Guarantor at all times had
been the principal obligor on all such Guaranteed Obligations. In the event that
acceleration of the time for payment of the Guaranteed Obligations is stayed
upon the insolvency, bankruptcy or reorganization of the Borrowers, or for any
other reason, all such amounts otherwise subject to acceleration under the terms
of any agreement evidencing, securing or otherwise executed in connection with
any Guaranteed Obligation shall be immediately due and payable by the Guarantor.

      Section 13.17. SUBROGATION; SUBORDINATION. Until the payment and
performance in full of all Guaranteed Obligations and any and all obligations of
the Borrowers to any affiliate of the Bank, the Guarantor shall not exercise any
rights against the Borrowers arising as a result of payment by the Guarantor
hereunder, by way of subrogation or otherwise, and will not prove any claim in
competition with the Bank or its affiliates in respect of any payment hereunder
in bankruptcy or insolvency proceedings of any nature; the Guarantor will not
claim any set-off or counterclaim against the Borrowers in respect of any
liability of the Guarantor to the Borrowers; and the Guarantor waives any
benefit of and any right to participate in any collateral which may be held by
the Bank or any such affiliate. The payment of any amounts due with respect to
any indebtedness of the Borrowers now or hereafter held by the Guarantor is
hereby subordinated to the prior payment in full of the Guaranteed Obligations.
The Guarantor agrees that after the occurrence of any default in the

                                       65
<PAGE>

payment or performance of the Guaranteed Obligations, the Guarantor will not
demand, sue for or otherwise attempt to collect any such indebtedness of the
Borrowers to the Guarantor until the Guaranteed Obligations shall have been paid
in full. If, notwithstanding the foregoing sentence, the Guarantor shall
collect, enforce or receive any amounts in respect of such indebtedness, such
amounts shall be collected, enforced and received by the Guarantor as trustee
for the Bank and be paid over to the Bank on account of the Guaranteed
Obligations without affecting in any manner the liability of the Guarantor under
the other provisions of this Guaranty.

      Section 13.18. SECURITY; SET-OFF. The Guarantor hereby grants to the Bank
a continuing lien, security interest and right of setoff as security for all
liabilities and obligations to the Bank, whether now existing or hereafter
arising, including without limitation, the Guarantor's liabilities and
obligations to the Bank hereunder, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Bank or any entity under the control of
FleetBoston Financial Corporation and its successors and assigns or in transit
to any of them. At any time, without demand or notice (any such notice being
expressly waived by the Guarantor), the Bank may setoff the same or any part
thereof and apply the same to any liability or obligation of the Guarantor even
though unmatured and regardless of the adequacy of any other collateral securing
the Guaranteed Obligations. ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE
ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
GUARANTEED OBLIGATIONS PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GUARANTOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.

      Section 13.19. FURTHER ASSURANCES. The Guarantor agrees that it will, from
time to time at the request of the Bank, provide to the Bank such information
relating to the business and affairs of the Guarantor as the Bank may reasonably
request. The Guarantor authorizes the Bank to file any financing statement
deemed by the Bank to be necessary or desirable to perfect any security interest
granted by the Guarantor to the Bank, and as agent for the Guarantor, to sign
the name of the Guarantor thereto. The Guarantor also agrees to do all such
things and execute all such documents, including financing statements as the
Bank may consider necessary or desirable to give full effect to this Guaranty
and the SC Licensing Security Agreement and to perfect and preserve the rights
and powers of the Bank hereunder and thereunder.

      Section 13.20. TERMINATION; REINSTATEMENT. This Guaranty shall remain in
full force and effect until the earlier of (a) all Guaranteed Obligations shall
have been unconditionally and irrevocably paid in full in cash and the Bank
shall have no further commitment to make advances under the Amended and Restated
Credit Agreement or (b) the Bank is given written notice of the Guarantor's
intention to discontinue this Guaranty, notwithstanding any intermediate or
temporary payment or settlement of the whole or any part

                                       66
<PAGE>

of the Guaranteed Obligations. No such notice shall be effective unless received
and acknowledged by an officer of the Bank at its head office or at the branch
of the Bank where this Guaranty is given. No such notice shall affect any rights
of the Bank or of any affiliate hereunder including, without limitation, the
rights set forth in Sections 4 and 6, with respect to Guaranteed Obligations
incurred prior to the receipt of such notice and not extinguished at such time
or Guaranteed Obligations incurred pursuant to any contract or commitment in
existence prior to such receipt and not extinguished at such time, and all
checks, drafts, notes, instruments (negotiable or otherwise) and writings made
by or for the account of the Borrowers and drawn on the Bank or any of its
agents purporting to be dated on or before the date of receipt of such notice,
although presented to and paid or accepted by the Bank after that date, shall
form part of the Guaranteed Obligations. This Guaranty shall continue to be
effective or be reinstated, notwithstanding any prior termination or any such
notice, if at any time any payment made or value received with respect to a
Guaranteed Obligation is rescinded or must otherwise be returned by the Bank
upon the insolvency, bankruptcy or reorganization of the Borrowers, or
otherwise, all as though such payment had not been made or value received.

      Section 13.21. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon
the Guarantor, its successors and assigns, and shall insure to the benefit of
and be enforceable by the Bank and its successors, transferees and assigns.
Without limiting the generality of the foregoing, subject to the terms and
conditions of the Amended and Restated Credit Agreement, the Bank may assign or
otherwise transfer any agreement or any note held by it evidencing, securing or
otherwise executed in connection with the Guaranteed Obligations, or sell
participations in any interest therein, to any other person or entity, and such
other person or entity shall thereupon become vested, to the extent set forth in
the agreement evidencing such assignment, transfer or participation, with all
the rights in respect thereof granted to the Bank herein.

      Section 13.22. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by the Guarantor
therefrom shall be effective unless the same shall be in writing and signed by
the Bank. No failure on the part of the Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.

--------------------------------------------------------------------------------

                                       67
<PAGE>

      Section 13.23. NOTICES. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise specifically provided
herein, shall be deemed to have been duly made or given when delivered by hand
or mailed first class mail postage prepaid or, in the case of telegraphic or
telexed notice, when transmitted, answer back received, addressed as follows: if
to the Guarantor, at the address set forth beneath its signature hereto, and if
to the Bank, at 100 Federal Street, Boston, Massachusetts 02110, Attention: John
M. Sharry, Vice President, or at such other address as either party may
designate in writing.

      Section 13.24. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is
intended to take effect as a sealed instrument and shall be governed by, and
construed in accordance with, the laws of The Commonwealth of Massachusetts. The
Guarantor agrees that any suit for the enforcement of this Guaranty may be
brought in the courts of The Commonwealth of Massachusetts or any federal court
sitting therein and consents to the non-exclusive jurisdiction of such court and
to service of process in any such suit being made upon the Guarantor by mail at
the address specified in Section 12 hereof. The Guarantor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit was brought in an inconvenient forum.

      Section 13.25. WAIVER OF JURY TRIAL. THE GUARANTOR AND THE BANK (BY
ACCEPTANCE OF THIS GUARANTY) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY OTHER
BANK AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE BANK, RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE BANK AGREEMENTS, AND AGREE THAT
NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS
PROHIBITED BY LAW, THE GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
GUARANTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE BANK HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT THIS GUARANTY AND MAKE THE REVOLVING
CREDIT ADVANCES AND TERM LOAN.

      Section 13.26. MISCELLANEOUS. This Guaranty constitutes the entire
agreement of the Guarantor and the Bank with respect to the matters set forth
herein. The rights and

                                       68
<PAGE>

remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of the Guaranteed Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for the
ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined. All
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Amended and Restated Credit Agreement.

                                       69
<PAGE>

      IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered by its duly authorized officer as of the date appearing on page
one.

                                               SC LICENSING CORP.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: VP

                                               Address:
                                               21 Bristol Drive
                                               South Easton, MA 02375

                                       70
<PAGE>

                                   CERTIFICATE

      The undersigned certifies to Fleet National Bank that:

      1. He is the clerk of the Guarantor which executed the foregoing Guaranty
and in that capacity has the authority to make this certificate on behalf of the
Guarantor.

      2. The Guarantor is a corporation validly organized or formed and existing
in good standing and in the full enjoyment of its powers and franchises under
The laws of the Commonwealth of Massachusetts.

      3. The foregoing Guaranty has been duly executed and delivered on behalf
of the Guarantor, such actions have been duly authorized by all necessary
corporate or other action, and the execution, delivery and performance of the
Guaranty by the Guarantor will not contravene any existing law, rule or
regulation, or any provision of its Certificate of Incorporation or Bylaws or
other document or documents evidencing its establishment or governing the
conduct of its affairs or any agreement to which it is a party or by which it is
bound.

      IN WITNESS WHEREOF, the undersigned has made this certificate on behalf of
the Guarantor this 27th day of December, 2000.

                                               Jeffrey H. Brown, Clerk

                                       71
<PAGE>

                       Confirmation of Security Agreement

                                               December 27, 2000

Fleet National Bank
100 Federal Street
Boston, MA  02110

RE:   Amended and Restated Credit Facilities by and among Specialty Catalog
      Corp., SC Corporation d/b/a SC Direct, SC Publishing, Inc., Daxbourne
      International Limited and Fleet National Bank

Ladies and Gentlemen:

      Reference is hereby made to (a) that certain Security Agreement (as
amended or supplemented from time to time, the "Security Agreement") dated as of
March 12, 1997 by and among SC Corporation d/b/a SC Direct, a Delaware
corporation, and SC Publishing, Inc., a Delaware corporation, as debtors
(collectively, the "Debtors") and Fleet National Bank (f/k/a The First National
Bank of Boston), as secured party (the "Bank"), (b) that certain Credit and
Guaranty Agreement (as amended through the date hereof, the "U.S. Credit
Agreement") dated as of March 12, 1997 by and among Specialty Catalog Corp., a
Delaware corporation (the "Company") and the Debtors, as borrowers, and the
Bank, as lender and (c) that certain Credit Agreement (as amended through the
date hereof, the "U.K. Credit Agreement," and together with the U.S. Credit
Agreement, the "Original Credit Agreements") dated as of October 3, 1997 by and
among Daxbourne International Limited (Registered No. 3369640), a private
company limited by shares incorporated in England and Wales ("SC(UK)"), as
borrower, the Company and the Debtors, as guarantors, and the Bank, as lender.
As of the date hereof, the Original Credit Agreements have been amended and
restated in their entirety pursuant to the terms of that certain Amended and
Restated Credit Agreement (as amended or modified from time to time, the
"Amended and Restated Credit Agreement") dated as of December 27, 2000 by and
among the Company, the Debtors and SC(UK), as borrowers, and the Bank, as
lender. Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Security Agreement and the Amended and Restated Credit
Agreement, as applicable.

      The Debtors hereby confirm (a) their representations and warranties set
forth in Article 2 of the Security Agreement as of the date hereof and (b) that
the Security Agreement and the Security Interest granted pursuant thereto shall
secure all Bank Obligations as defined in the Amended and Restated Credit
Agreement, including without limitation payment and performance in full of the
Revolving Credit Note and Term Note (as defined therein), and all other
liabilities and obligations of the Company, the Debtors and SC(UK) to the Bank
of every kind and description, direct or indirect, absolute or contingent, due
or to become due, regardless of how they arose or were acquired, now existing or
hereafter arising.

                                       72
<PAGE>

                                               SC CORPORATION d/b/a SC DIRECT

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

                                               SC PUBLISHING, INC.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

ACKNOWLEDGED AND AGREED:

FLEET NATIONAL BANK

By: /s/ John M. Sharry
    Name:  John M. Sharry
    Title: Vice President

                                       73
<PAGE>

                     Confirmation of Stock Pledge Agreement

                                               December 27, 2000

Fleet National Bank
100 Federal Street
Boston, MA  02110

RE:   Amended and Restated Credit Facilities by and among Specialty Catalog
      Corp., SC Corporation d/b/a SC Direct, SC Publishing, Inc., Daxbourne
      International Limited and Fleet National Bank

Ladies and Gentlemen:

      Reference is hereby made to (a) that certain Stock Pledge Agreement (as
amended or supplemented from time to time, the "Pledge Agreement") dated as of
March 12, 1997 by and between Specialty Catalog Corp., a Delaware corporation,
as pledgor (the "Company") and Fleet National Bank (f/k/a The First National
Bank of Boston), as pledgee (the "Bank"), (b) that certain Credit and Guaranty
Agreement (as amended through the date hereof, the "U.S. Credit Agreement")
dated as of March 12, 1997 by and among the Company, SC Corporation d/b/a SC
Direct, a Delaware corporation ("SC Direct") and SC Publishing, Inc., a Delaware
corporation ("SC Publishing"), as borrowers, and the Bank, as lender and (c)
that certain Credit Agreement (as amended through the date hereof, the "U.K.
Credit Agreement," and together with the U.S. Credit Agreement, the "Original
Credit Agreements") dated as of October 3, 1997 by and among Daxbourne
International Limited (Registered No. 3369640), a private company limited by
shares incorporated in England and Wales ("SC(UK)"), as borrower, the Company,
SC Direct and SC Publishing, as guarantors, and the Bank, as lender. As of the
date hereof, the Original Credit Agreements have been amended and restated in
their entirety pursuant to the terms of that certain Amended and Restated Credit
Agreement (as amended or modified from time to time, the "Amended and Restated
Credit Agreement") dated as of December 27, 2000 by and among the Company, SC
Direct, SC Publishing and SC(UK), as borrowers, and the Bank, as lender.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Pledge Agreement and the Amended and Restated Credit Agreement,
as applicable.

      The Company hereby confirms (a) its representations and warranties set
forth in Section 5 of the Pledge Agreement as of the date hereof and (b) that
the Pledge Agreement and the Pledged Collateral pledged pursuant thereto shall
secure all Bank Obligations as defined in the Amended and Restated Credit
Agreement, including without limitation payment and performance in full of the
Revolving Credit Note and Term Note (as defined therein), and all other
liabilities and obligations of the Company, SC Direct, SC Publishing and SC(UK)
to the Bank of every kind and description, direct or indirect, absolute or
contingent, due or to become due, regardless of how they arose or were acquired,
now existing or hereafter arising.

                                       74
<PAGE>

                                               SPECIALTY CATALOG CORP.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

ACKNOWLEDGED AND AGREED:

FLEET NATIONAL BANK

By: /s/ John M. Sharry
    Name:  John M. Sharry
    Title: Vice President

                                       75
<PAGE>

                     Confirmation of Stock Pledge Agreement

                                               December 27, 2000

Fleet National Bank
100 Federal Street
Boston, MA  02110

RE:   Amended and Restated Credit Facilities by and among Specialty Catalog
      Corp., SC Corporation d/b/a SC Direct, SC Publishing, Inc., Daxbourne
      International Limited and Fleet National Bank

Ladies and Gentlemen:

      Reference is hereby made to (a) that certain Stock Pledge Agreement (as
amended or supplemented from time to time, the "Pledge Agreement") dated as of
March 12, 1997 by and between SC Corporation d/b/a SC Direct, a Delaware
corporation, as pledgor ("SC Direct") and Fleet National Bank (f/k/a The First
National Bank of Boston), as pledgee (the "Bank"), (b) that certain Credit and
Guaranty Agreement (as amended through the date hereof, the "U.S. Credit
Agreement") dated as of March 12, 1997 by and among Specialty Catalog Corp., a
Delaware corporation (the "Company"), SC Direct and SC Publishing, Inc., a
Delaware corporation ("SC Publishing"), as borrowers, and the Bank, as lender
and (c) that certain Credit Agreement (as amended through the date hereof, the
"U.K. Credit Agreement," and together with the U.S. Credit Agreement, the
"Original Credit Agreements") dated as of October 3, 1997 by and among Daxbourne
International Limited (Registered No. 3369640), a private company limited by
shares incorporated in England and Wales ("SC(UK)"), as borrower, the Company,
SC Direct and SC Publishing, as guarantors, and the Bank, as lender. As of the
date hereof, the Original Credit Agreements have been amended and restated in
their entirety pursuant to the terms of that certain Amended and Restated Credit
Agreement (as amended or modified from time to time, the "Amended and Restated
Credit Agreement") dated as of December 27, 2000 by and among the Company, SC
Direct, SC Publishing and SC(UK), as borrowers, and the Bank, as lender.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Pledge Agreement and the Amended and Restated Credit Agreement,
as applicable.

      SC Direct hereby confirms (a) its representations and warranties set forth
in Section 5 of the Pledge Agreement as of the date hereof and (b) that the
Pledge Agreement and the Pledged Collateral pledged pursuant thereto shall
secure all Bank Obligations as defined in the Amended and Restated Credit
Agreement, including without limitation payment and performance in full of the
Revolving Credit Note and Term Note (as defined therein), and all other
liabilities and obligations of the Company, SC Direct, SC Publishing and SC(UK)
to the Bank of every kind and description, direct or indirect, absolute or
contingent, due or to become due, regardless of how they arose or were acquired,
now existing or hereafter arising.

                                       76
<PAGE>

                                               SC CORPORATION d/b/a SC DIRECT

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: SVP

ACKNOWLEDGED AND AGREED:

FLEET NATIONAL BANK

By: John M. Sharry
    Name:  John M. Sharry
    Title: Vice President

                                       77
<PAGE>

                       Confirmation of Security Agreement

                                               December 27, 2000

Fleet National Bank
100 Federal Street
Boston, MA  02110

RE:   Amended and Restated Credit Facilities by and among Specialty Catalog
      Corp., SC Corporation d/b/a SC Direct, SC Publishing, Inc., Daxbourne
      International Limited and Fleet National Bank

Ladies and Gentlemen:

      Reference is hereby made to (a) that certain Security Agreement (as
amended or supplemented from time to time, the "Security Agreement") dated as of
December 30, 1997 by and between SC Licensing Corp., a Massachusetts
corporation, as debtor ("SC Licensing") and Fleet National Bank (f/k/a
BankBoston, N.A.), as secured party (the "Bank"), (b) that certain Credit and
Guaranty Agreement (as amended through the date hereof, the "U.S. Credit
Agreement") dated as of March 12, 1997 by and among Specialty Catalog Corp., a
Delaware corporation (the "Company"), SC Corporation d/b/a SC Direct, a Delaware
corporation ("SC Direct") and SC Publishing, Inc., a Delaware corporation ("SC
Publishing"), as borrowers, and the Bank, as lender, (c) that certain Credit
Agreement (as amended through the date hereof, the "U.K. Credit Agreement," and
together with the U.S. Credit Agreement, the "Original Credit Agreements") dated
as of October 3, 1997 by and among Daxbourne International Limited (Registered
No. 3369640), a private company limited by shares incorporated in England and
Wales ("SC(UK)"), as borrower, the Company, SC Direct and SC Publishing, as
guarantors, and the Bank, as lender and (d) that certain Unlimited Guaranty
dated as of December 30, 1997 by SC Licensing, as guarantor, in favor of the
Bank (the "Original Guaranty"). As of the date hereof, (a) the Original Credit
Agreements have been amended and restated in their entirety pursuant to the
terms of that certain Amended and Restated Credit Agreement (as amended or
modified from time to time, the "Amended and Restated Credit Agreement") dated
as of December 27, 2000 by and among the Company, SC Direct, SC Publishing and
SC(UK), as borrowers, and the Bank, as lender and (b) the Original Guaranty has
been replaced, but not discharged, by that certain Unlimited Guaranty (the "SC
Licensing Guaranty") dated as of December 27, 2000 by SC Licensing, as
guarantor, in favor of the Bank, pursuant to which SC Licensing has guaranteed
payment and performance in full of all Bank Obligations as defined in the
Amended and Restated Credit Agreement, including without limitation payment and
performance in full of the Revolving Credit Note and Term Note (as defined
therein), and all other liabilities, agreements and obligations of the Company,
SC Direct, SC Publishing and SC(UK) to the Bank, whether direct or indirect,
absolute or contingent, due or to become due, secured or unsecured, now existing
or hereafter arising or acquired. Capitalized terms used

                                       78
<PAGE>

herein and not otherwise defined shall have the meanings set forth in the SC
Licensing Guaranty and the Amended and Restated Credit Agreement, as applicable.

      SC Licensing hereby confirms (a) its representations and warranties set
forth in Article 2 of the Security Agreement as of the date hereof and (b) that
the Security Agreement and the Security Interest granted pursuant thereto shall
secure all of its obligations pursuant to the SC Licensing Guaranty and all
other obligations and liabilities of SC Licensing, the Company, SC Direct, SC
Publishing and SC(UK) to the Bank, of every kind and description, direct or
indirect, absolute or contingent, due or to become due, regardless of how they
arose or were acquired, now existing or hereafter arising, including without
limitation the Bank Obligations as defined in the Amended and Restated Credit
Agreement.

                                               SC LICENSING CORP.

                                               By: /s/ Thomas McCain
                                                   Name:  Thomas McCain
                                                   Title: VP

ACKNOWLEDGED AND AGREED:

FLEET NATIONAL BANK

By: /s/ John M. Sharry
    Name:  John M. Sharry
    Title: Vice President

                                       79

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