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EXHIBIT 4.1
HANOVER DIRECT, INC.
STOCK OPTION AGREEMENT
Agreement made as of the 9th day of February, 1996 between HANOVER
DIRECT, INC. (the "Company"), a Delaware corporation, and Xxxxx Xxxxxxx (the
"Optionee"), residing at 000 Xxxxxx Xxxxxxx Xxxxx, Xxx. 00X, Xxx Xxxx, Xxx Xxxx
00000.
The Optionee has served as a director of the Company since 1991. In
consideration of Optionee's serving on the Search Committee of Directors to find
a replacement for the President and Chief Executive Officer of the Company, the
Company has agreed to grant to the Optionee a five-year option to purchase 5,000
shares of Common Stock, par value 66 2/3 cents per share, of the Company (the
"Shares"), subject to and upon the terms and conditions set forth herein (the
"Option").
Therefore, in consideration of the premises and for other good and
valuable consideration, the parties hereto have agreed as follows:
1. (a) The price at which the Optionee shall have the right to purchase
Shares under this Agreement is $1.4375 per share, subject to adjustment as
provided in Paragraph 4.
(b) Subject to Paragraph 4, unless the Option is previously terminated
pursuant to this Agreement, the Option shall be exercisable in whole or in part
with respect to all 5,000 Shares beginning on the date hereof through February
8, 2001; provided, however, that the Option shall cease to be exercisable on the
date which is thirty (30) days from the termination of the Optionee's status as
a director of the Company; and provided, however, that the Company shall have
the option, in its sole discretion, to extend the period that the Option shall
be exercisable to February 8, 2002, upon written notice to the Optionee prior to
November 8, 2000.
(c) If the Optionee's status as a director of the Company terminates
due to disability or to death, the Option shall be exercisable as provided in
this subparagraph. The Optionee or, in the event of his/her disability, duly
appointed guardian or conservator or, in the event of his/her death, his/her
appointed executor or administrator, shall have the privilege of exercising the
unexercised portion of the Option which the Optionee could have exercised on the
day on which his/her status as a director of the Company terminated, provided,
however, that such exercise must be in accordance with the terms of this
Agreement and within one (1) year of the Optionee's disability or death, as the
case may be. In no event, however, shall the Optionee or his/her duly appointed
guardian or conservator or his/her duly appointed executor or administrator, as
the case may be, exercise the Option after February 8, 2001, unless the period
during which the Option is exercisable was extended pursuant to Paragraph 1(b).
2. Nothing contained herein shall be construed (a) to confer on the
Optionee any right to continue to serve as a director of the Company or (b) to
obligate the Company (including its shareholders, directors and officers) to
either re-nominate the Optionee for election or re-elect the nominee to serve as
a director or (c) to derogate from any right of the Company (including its
shareholders, director and officers) to remove or request the resignation of the
Optionee from the Company's Board of Directors.
3. (a) The Option shall not be sold, pledged, assigned or transferred
in any manner except (i) to the extent that the Option may be exercised as
provided in Paragraph 1(c) or (ii) as provided in Paragraph 3(b).
(b) The Option may be transferred to any living spouse, child or parent
of the Optionee (a "Permitted Transferee"), provided that (i) such transferee
executes an instrument, satisfactory in form and substance to the Company,
stating that such transferee is bound by all the terms and conditions of this
Agreement, including,
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without limitation, Paragraph 1(c), and (ii) the Option may not be sold, pledged
assigned or transferred in any manner by such transferee, except to another
Permitted Transferee pursuant to this Paragraph 3(b).
(c) For all purposes of this Agreement except the Preamble and
Paragraph 1(b), the term "Optionee" shall include any Permitted Transferee or
any person entitled to exercise the Option pursuant to Paragraph 1(c).
4. (a) If the outstanding Shares of the Company are subdivided,
consolidated, increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company through reorganization,
merger, recapitalization, reclassification, capital adjustment or in a similar
transaction, or if the Company shall issue Shares as a dividend or upon a stock
split, then the number and kind of shares subject to the unexercised portion of
the Option and the exercise price of the Option shall be adjusted to prevent the
inequitable enlargement or dilution of any rights hereunder, provided, however,
that any such adjustment shall be made without change in the total exercise
price applicable to the unexercised portion of the Option. Adjustments under
this paragraph shall be made by the Board of Directors, whose determination
shall be final, binding and conclusive. In computing any adjustment under this
paragraph, any fractional shares shall be eliminated. Nothing contained in this
Agreement shall be construed to affect in any way the right or power of the
Company to make any adjustment, reclassification, reorganization or changes to
its capital or business structure or to merge or to consolidate or to dissolve,
liquidate or transfer all or any part of its business or assets.
(b) If in the event of the dissolution or liquidation of the Company,
or in the event of a merger or consolidation in which (1) the Company is not the
surviving corporation, and (2) the agreements governing such merger or
consolidation do not provide for the issuance to the Optionee of a Substitute
Option (as hereinafter defined) or the express assumption of this Option, the
Company will make or cause to be mailed to the Optionee a notice specifying the
date on which holders of Shares shall be entitled to exchange their shares for
securities or other property deliverable in connection with such merger,
consolidation, dissolution or liquidation. Such notice shall be mailed at least
ten (10) days prior to the date therein specified to the address of the Optionee
specified on page 1 of this Agreement or to such other address as the Optionee
delivers or transmits by registered or certified mail to the Secretary of the
Company at its principal office. In the event the Option is not exercised on or
prior to the date specified herein, the Option and any rights hereunder shall
terminate as of said date. For purposes of this Paragraph 4, a Substitute Option
shall mean an option under which the Optionee has the right to purchase on
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substantially equivalent terms (as hereinafter defined) (in lieu of Shares), the
stock, securities or other property he/she would have been entitled to receive
upon the consummation of such merger or consolidation had he/she exercised the
Option immediately prior thereto. For purposes of the preceding sentence,
substantially equivalent terms shall be those terms given approval by the Board
of Directors in its sole discretion.
5. The Option shall be exercised when written notice of such exercise,
signed by the Optionee, has been delivered or transmitted by registered or
certified mail, to the Secretary of the Company at its principal office. Said
written notice shall specify the number of Shares purchasable under the Option
which the Optionee then wishes to purchase and shall be accompanied by (i) such
documentation, if any, as may be required by the Company as provided in
Paragraphs 6 or 8 and (ii) payment of the aggregate option price. The Option
shall be exercised only with respect to full shares of Common Stock; no
fractional Shares shall be issued. Such payment shall be in the form of (i) cash
or a certified check (unless such certification is waived by the Company)
payable to the order of the Company in the amount of the aggregate option price
for such number of Shares, (ii) certificates duly endorsed for transfer (with
all transfer taxes paid or provided for) evidencing a number of Shares of which
the aggregate fair market value on the date of exercise is equal to the
aggregate option exercise price of the Shares being purchased, or (iii) a
combination of these methods of payment. Delivery of said notice and such
documentation shall constitute an irrevocable election to purchase the Shares
specified in said notice, and the date on which the Company received said notice
and documentation shall, subject to the provisions of Paragraphs 6 and 8, be the
date as of which the Shares so purchased shall be deemed to have been issued.
The Optionee shall not have the right or status as a holder of the Shares to
which such exercise relates prior to receipt by the Company of such payment,
notice and documentation. For purposes of this Agreement, the fair market value
per Share on a given date shall be: (i) if the Shares are listed on a registered
securities exchange or included on the American Stock Exchange, the closing
price per Share on such date, (or, if there was not trading in the Shares on
such date, on the next preceding day on which there was trading); (ii) if the
Shares are not listed on a registered securities exchange or included on the
American Stock Exchange, but the bid and asked prices per Share are provided by
NASDAQ, the National Quotation Bureau Incorporated or any similar organization,
the average of the highest reported bid and lowest reported asked price as
furnished by NASDAQ, the National Quotation Bureau Incorporated or any similar
organization. In the absence of one or more quotations, the Board of Directors
of the Company shall in good faith determine the fair market value per share.
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6. Anything in this Agreement to the contrary notwithstanding, in no
event may the Option be exercisable if the Company shall determine in good faith
that (i) the listing, registration or qualification of any Shares otherwise
deliverable upon such exercise, upon any securities exchange or under any state
or federal law, or (ii) the consent or approval of any regulatory body or the
satisfaction of withholding tax or other withholding liabilities is necessary or
desirable in connection with such exercise. In such event, such exercise shall
be held in abeyance and shall not be effective unless and until such
withholding, listing, registration, qualification or approval shall have been
effected or obtained free of any conditions not reasonably acceptable by the
Company.
7. (a) The Optionee agrees that there will be no disposition of all or
any part of the Shares acquired pursuant to any exercise of the Option or any
interest or interests therein, unless and until such disposition has been
registered under the Securities Act of 1933, as amended (the "Act"), or the
Company receives an opinion of its counsel that registration under the Act is
not required in connection with such disposition.
(b) The Optionee agrees that upon the exercise of the Option, unless
the Shares acquired pursuant to such exercise have been registered under the
Act, the transfer agent for the Shares acquired pursuant to such exercise will
be instructed to place appropriate stop orders against the transfer of the
Shares and that the certificate or certificates to be issued representing the
Shares will conspicuously bear a legend substantially as follows:
The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares have been acquired for
investment and may not be sold, transferred, pledged, hypothecated or
otherwise disposed of in the absence of an effective registration
statement for the shares under the Securities Act of 1933 or an opinion
of counsel to the Company that registration is not required under said
Act.
(c) The Optionee acknowledges that he/she is presently familiar with
the Company's business, operations and financial condition. In this connection,
the Company agrees that, upon the request of the Optionee, it will provide the
Optionee with a copy of its then most recent Annual Report to Shareholders, its
then most recently definitive Proxy Statement in connection with a meeting of
its shareholders for the election of directors, its then most recent Annual
Report of Form 10-K, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the Company with the Securities and Exchange Commission
subsequent to the filing of its then most recent Annual Report on Form 10-K. The
Optionee also acknowledges that he/she has received a description of the Shares
as contained in the Company's most recent Prospectus. In addition, the principal
officers of the Company will be reasonably available to discuss with the
Optionee the information contained in these
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documents, this Agreement, or any other issues. To arrange such discussions
he/she should contact Xxxxx X. Xxxxxxx, Esq., counsel to the Company, at (201)
272-3434.
8. The Company covenants and agrees with the Optionee that in the event
the Company proposes to file a registration statement under the Act with respect
to any class of security (other than in connection with an exchange offer or a
registration statement on Form X-0, X-0, or S-18 or other unsuitable
registration statement) which becomes or which the Company believes will become
effective at any time after the date hereof, then the Company shall in each case
give written notice of such proposed filing to the Optionee at least twenty-five
(25) days before the earlier of the anticipated and the actual effective date of
the registration statement and (unless the Board of Directors determines in a
duly adopted resolution that for reasons of confidentiality notice prior to such
filing is likely to adversely affect the Company) at least seven (7) business
days before the initial filing of such registration statement (and, if
requested, the Optionee shall maintain the confidentiality of such information)
and such notice shall offer to Optionee the opportunity to include in such
registration statement such number of Shares as he/she may request, unless, in
the opinion of counsel to the Company reasonably acceptable to the Optionee,
registration under the Act is not required for the transfer of such Shares in
the manner proposed by the Optionee. The Company shall have no obligation to
honor any such request (i) to register fewer than 2,500 Shares, (ii) to register
Shares on more than one occasion, (iii) to register Shares if the Company is not
notified in writing of any such request pursuant to this Paragraph 8 at least
three (3) business days prior to a proposed initial filing and (iv) to register
any Shares which at the time of the filing of such registration statement are
covered by or included in any other Statement theretofore filed by the Company
under the Act. The Company shall permit, or shall cause the managing underwriter
of a proposed offering to permit, the Optionee to include the Shares requested
to be included in the registration (the "Piggy-back Shares") in the proposed
offering on the same terms and conditions as are applicable to securities of the
Company, if any, included therein for the account of any person other than the
Company and the Optionee, provided, however, that the Company need not register
Shares pursuant to such registration statement in the event the Company abandons
such filing prior to the effective date thereof. Notwithstanding the foregoing,
if any such managing underwriter shall advise the Company that it believes that
the distribution of all or a portion of the Piggy-back Shares requested to be
included in the registration statement concurrently with the securities being
registered by the Company would adversely affect the distribution of such
securities by the Company for its own account, then the Optionee shall delay the
offering and sale of Piggy-back Shares (or the portions thereof so
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designated by such managing underwriter) for such period, not to exceed ninety
(90) days, as the managing underwriter shall request provided that no such delay
shall be required as to Piggy-back Shares if any securities of the Company are
included in such registration statement for the account of any person other than
the Company and the Optionee. In the event of such delay, the Company shall
file, at its option, such supplements, post-effective amendments or separate
registration statement, take any such other steps as may be necessary to permit
the Optionee to make the proposed offering and sale for the period of ninety
(90) days immediately following the end of such period of delay (the "Piggy-back
Termination Date"); provided, however, that if any of the Piggy-back Shares are
covered by a registration statement which is or will be required to remain in
effect beyond the Piggy-back Termination Date, the Company shall maintain in
effect the registration statement as it relates to the Piggy-back Shares for so
long as such registration statement remains or is required to remain in effect
for any of such other securities. All expenses of registration pursuant to this
Paragraph 8 shall be borne by the Company, except that underwriting commission,
discounts, fees and expenses attributable to the Piggy-back Shares and fees and
disbursements of counsel (if any) to the Optionee will be borne by the Optionee.
9. This Agreement is not subject to any provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Section 401(a)
of the Internal Revenue Code. Any Shares purchased pursuant to this Agreement
shall be purchased directly from the Company out of its authorized but unissued
Shares.
10. This Agreement shall be construed and enforced in accordance with
the laws of the State of Delaware.
11. Subject to Paragraphs 1(c) and 3(b), this Agreement shall be
binding upon that shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors or assigns, as the case
may be.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HANOVER DIRECT, INC.
By: /s/ Xxxxx Xxxxx
_____________________________
Name: Xxxxx Xxxxx
Title: Senior Vice President
/s/ XXXXX XXXXXXX
_________________________________
Xxxxx Xxxxxxx
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