EXHIBIT 99.3
VOTING AGREEMENT
VOTING AGREEMENT, dated as of November 30, 2003 (this "Agreement"),
between XXXXXXX DIRECT, LLC, a Delaware limited liability company ("Xxxxxxx"),
Xxxxxx Xxxxxxx, an individual ("Xxxxxxx"), XXXXX PARTNERS, L.P., a New Jersey
limited partnership ("Xxxxx Partners"), XXXXX INTERNATIONAL FUND LIMITED, a
corporation organized under the laws of the British Virgin Islands (the "Fund"),
and Xxxxx X. Xxxxx, an individual ("Xxxxx").
R E C I T A L S:
A. On the date hereof, Xxxxxxx and Hanover Direct, Inc.,
a Delaware corporation (the "Company"), entered into a binding agreement (the
"Recapitalization Agreement"), pursuant to which, among other things, the
Company shall issue to Xxxxxxx (i) 564,819 shares of Series C Cumulative
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Series C Preferred Stock"), and (ii) 81,857,833 shares of common stock, par
value $.66-2/3 per share, of the Company ("Common Stock"). Upon the closing of
the transactions contemplated in the Recapitalization Agreement, the Series C
Preferred Stock issued to Xxxxxxx shall consist of all of the issued and
outstanding shares of Series C Preferred Stock, and the shares of Common Stock
held by Xxxxxxx will represent 50.5% of the issued and outstanding shares of
Common Stock. The number and percentage of shares of stock owned by Xxxxxxx upon
consummation of the Recapitalization as set forth in this recital are subject to
adjustment as set forth in the Recapitalization Agreement.
B. As of the date hereof, Xxxxxxx is the record owner of
29,446,888 shares of Common Stock and 1,622,111 shares of Series B Cumulative
Participating Preferred Stock, par value $.01 per share, of the Company (the
"Series B Preferred Stock"), consisting of all of the issued and outstanding
shares of Series B Preferred Stock, and representing as of the date hereof 21.3%
of the issued and outstanding shares of Common Stock.
C. Upon the closing of the transactions contemplated in
the Recapitalization Agreement (the "Closing"), Xxxxxxx shall transfer the
Series B Preferred Stock to the Company in exchange for the Series C Preferred
Stock and Common Stock set forth in recital A.
D. Xxxxxxx is an affiliate of Xxxxxxx, and as of the
date hereof is the record owner of 160,900 shares of Common Stock, representing
[.1%] of the issued and outstanding shares of Common Stock.
X. Xxxxx is the general partner of Xxxxx Partners, and
the principal of Xxxxx Fund Management Ltd., and is as of the date hereof the
beneficial owner of approximately 38,838,350
shares of Common Stock, representing in the aggregate 28% of the issued and
outstanding shares of Common Stock.
F. As a condition precedent to the execution and
delivery of the Recapitalization Agreement, the parties hereto have agreed to
enter into this Agreement in order to provide each other with certain assurances
that the parties hereto will vote all of the shares of capital stock or other
equity securities of the Company beneficially owned, or owned of record, by
them, or over which they have voting control, to effectuate the transactions
contemplated by, or otherwise referenced in, the Recapitalization Agreement.
A G R E E M E N T:
In consideration of $10.00 and other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties agree as
follows:
1. Voting Agreement. Each of the parties hereto agrees
to vote all shares of Common Stock, Series B Preferred Stock, Series C Preferred
Stock or any shares of capital stock or other equity securities of the Company
held by such party (or its affiliates) at all annual or special meetings, or to
take all actions by written consent in lieu of such a meeting, in favor of:
(a) the consummation of the transactions
contemplated by the Recapitalization Agreement, if such vote is required or
submitted to the stockholders of the Company for consideration;
(b) the adoption and approval of an amendment to
the Certificate of Incorporation of the Company, which would (i) reduce the par
value of the Company's Common Stock from $.66-2/3 per share to $.01 per share;
(ii) effectuate a reverse stock split of the Common Stock in a ratio of 10 to 1;
and (iii) increase the number of authorized shares of the Company's blank check
preferred stock by ten million (10,000,000) shares;
(c) the Company maintaining a nine (9) member
board of directors; and
(d) the election as members of the board of
directors of the Company (the "Board") of those individuals nominated in the
proxy statement for each annual or special meeting of the stockholders of the
Company at which directors shall be elected, and which shall be designated by
Xxxxxxx and Xxxxx Partners, so that five (5) members of the Board will be
designated by Xxxxxxx (four (4) members of the Board during such time as the
number of directors on the Board is fixed at eight (8) as set forth in the
Recapitalization Agreement) and one (1) member of the Board will be designated
by Xxxxx Partners (the "Xxxxx Designee"), at all times for a period of two (2)
years following the Closing. It is understood and agreed that for a period of
two (2) years after the Closing, so long as the Board consists of a majority of
members designated by Chelsey, Chelsey will not seek to nominate or propose for
nomination or elect any individuals to serve as a member of the Board if the
effect thereof would be to cause
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individuals affiliated or associated with Xxxxxxx (excluding any individuals
appointed to the Board solely by the holders of the Series C Preferred Stock
pursuant to the terms thereof) to constitute more than five (5) directors of the
Board, except that the foregoing limitation shall not apply and Xxxxxxx may
nominate or propose for nomination or elect any individuals to serve as members
of the Board upon the redemption in full of the Series C Preferred Stock.
In addition, each party hereto agrees to vote the shares of Common Stock, Series
B Preferred Stock, Series C Preferred Stock or any shares of capital stock or
other equity securities of the Company over which such party has voting control,
upon any matter arising under this Agreement submitted to a vote of stockholders
of the Company in a manner so as to implement the terms of this Agreement.
2. Right of First Offer. For so long as there is a Xxxxx
Designee on the Board, each of Xxxxx Partners, the Fund and Xxxxx (collectively,
for purposes of this Section 2, the "Xxxxx Group") hereby covenants and agrees
to provide Xxxxxxx with no less than twenty-four (24) hours notice prior to any
sale, transfer or other disposition (each a "Transfer") (or the execution of any
agreement with respect to a Transfer), of any shares of capital stock of the
Company (the "Stock") held by the Xxxxx Group in the aggregate (the "First Offer
Notice"). Such notice shall include the terms of such sale, transfer or other
disposition, including the proposed purchase price. Xxxxxxx will have a
non-assignable right, for a period of 24 hours commencing on the effective date
of the First Offer Notice, to purchase such shares of Stock (the "Right of First
Offer") prior to the consummation of the Transfer of such Stock to a third party
on terms no less favorable to the Xxxxx Group than otherwise available to it
from such third party. If Xxxxxxx fails to deliver a binding written agreement
to the applicable member of the Xxxxx Group within such 24-hour period
obligating Xxxxxxx to purchase such shares and to deliver payment therefore
within one business day thereafter (the "Acceptance Agreement"), the Xxxxx Group
may thereafter sell the offered shares of Stock at a price no lower and on terms
no more favorable to the purchaser than such price and terms contained in the
First Offer Notice. If the Xxxxx Group has not sold such shares within thirty
(30) days of Xxxxxxx declining to purchase such shares of Stock (or failing to
timely deliver an Acceptance Agreement), any Transfer of Stock by the Xxxxx
Group shall again be subject to a Right of First Offer to Xxxxxxx. The Right of
First Offer granted hereunder shall apply to all Transfers by any member or
members of the Xxxxx Group, other than any fund balancing transactions entered
into among members of the Xxxxx Group, or any of their respective affiliates.
3. No Voting Trusts. Each of the parties hereto agrees
that it will not, nor will it permit any affiliate to, deposit any shares of
Common Stock, Series B Preferred Stock, Series C Preferred Stock or any shares
of capital stock or other equity securities of the Company held by such party
(or its affiliates) in a voting trust or subject any of such shares to any
arrangement with respect to the voting of such shares which voting trust or
arrangement is inconsistent with the terms of this Agreement.
4. Limitation on Sales. Each of the parties hereto
agrees not to sell, assign, transfer, donate, give, or otherwise dispose of to
any of its affiliates (as such term is defined in Rule 144 promulgated under the
Securities Act of 1933, as amended) (collectively, a "Transfer") any shares of
Common Stock, Series B Preferred Stock, Series C Preferred Stock or any shares
of capital stock or other equity securities of the Company held by such party
(or its affiliates), unless the proposed
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transferee, donee or pledgee, as the case may be, agrees in writing to be bound
by the terms of this Agreement, and any pledge or other encumbrance of such
shares shall at all times include a retention of the voting rights with respect
thereto.
5. Specific Performance. The parties hereto stipulate
that the remedies at law available to the parties in the event of any default or
threatened default in the performance of or compliance with any of the terms of
this Agreement are not and will not be adequate, and that, to the extent
permitted by applicable law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
6. Termination. This Agreement shall terminate upon the
earlier of (a) a Transfer by Xxxxx Partners, the Fund and/or Xxxxx of shares of
Common Stock representing in excess of 25% of the outstanding shares of Common
Stock owned in the aggregate by Xxxxx Partners, the Fund and/or Xxxxx as of
November 10, 2003 (9,705,588 shares of Common Stock) (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) excluding the transfer of shares in any fund balancing transaction
described in the last sentence of Section 2 hereof, or (b) the second
anniversary of the Closing, or (c) a written agreement signed by all of the
parties hereto.
7. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile)
and shall be given:
In the case of Xxxxx Partners, the Fund and Xxxxx:
Xxxxx Partners, L.P.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
In the case of Xxxxxxx and Xxxxxxx:
Xxxxxxx Direct, LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
or such other address or facsimile number as such party (or transferee) may
hereafter specify for such purpose by notice to the other parties in the manner
specified herein. Each such notice, request or other communication shall be
effective (a) if given by facsimile, when such facsimile is transmitted to the
facsimile number specified in this Section and the appropriate facsimile
confirmation is received or (b) if given by mail, at the earliest of its receipt
or five days after the same has been deposited in a regularly maintained
receptacle for the deposit of U.S. mail, addressed and postage paid as aforesaid
or (c) if given by any other means, when delivered at the address specified in
this Section.
8. No Waivers. No failure or delay by any party in
exercising any right, power or privilege hereunder or seeking any remedy with
respect to a breach hereof shall operate as a waiver thereof or of any other
right, power or privilege nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
9. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective, heirs, executors, administrators, successors and assigns.
10. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York, without regard
to principles of conflicts of law (other than Section 5-1401 of the General
Obligations Law of the State of New York).
11. Jurisdiction. Any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal or state court located in the Southern District of New
York, and each of the parties hereby consents to the jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 7 shall be deemed
effective service of process on such party.
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12. Waiver of Jury Trial. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
13. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument provided no party shall be bound unless and until the parties hereto
have each signed a counterpart hereof. Facsimile transmissions of any executed
original documents and/or retransmission of any executed facsimile transmission
shall be deemed to be the same as the delivery of an executed original. At the
written request of any party hereto, the other parties hereto shall confirm
facsimile transmissions by executing duplicate original documents and delivering
the same to the requesting party or parties.
14. Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, between the parties with respect to the transactions contemplated
herein. No provision of this Agreement or any other agreement contemplated
hereby is intended to confer on any person or entity other than the parties
hereto any rights or remedies.
15. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
16. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable (a "Determination"), the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such a Determination, the parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
17. Amendments. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the prior written consent of the parties hereto.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
XXXXXXX DIRECT, LLC
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title:
/s/ Xxxxxx Xxxxxxx
--------------------------------------
Xxxxxx Xxxxxxx
XXXXX PARTNERS, L.P.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: General Partner
XXXXX INTERNATIONAL FUND LIMITED
By: Xxxxx Fund Management Ltd.
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Xxxxx
Title: President
/s/ Xxxxx X. Xxxxx
-------------------------------------
Xxxxx X. Xxxxx
