1
Exhibit 1.1
Standby Purchase Agreement
Hanover Direct, Inc.
55,555,555 Shares
Common Stock
($.66 2/3 par value)
Standby Purchase Agreement
New York, New York
March 26, 1997
Richemont S.A.
00 Xxxxxxxxx Xxxxxx Xxxxx
X 0000 Xxxxxxxxxx
Attention: Xx. Xxxx Xxxxx
Ladies and Gentlemen:
Hanover Direct, Inc., a Delaware corporation (the "Company"),
proposes to offer approximately 55,555,555 shares (the "Shares") of Common
Stock, par value $.66 2/3 per share (the "Common Stock"), of the Company,
initially for subscription upon the exercise of rights (the "Rights") evidenced
by transferable subscription certificates (the "Subscription Certificates") to
be issued by the Company to holders of shares of Common Stock, the 6% Series A
Convertible Additional Preferred Stock, par value $.01 and stated value $10.00
per share (the "Series A Preferred Stock"), and the Series B Convertible
Preferred Stock, par value $.01 and stated value $10.00 per share (the "Series B
Preferred Stock"), of the Company of record at the close of business on a day
which shall not be less than three nor more than 30 days prior to the Effective
Date, as hereinafter defined (the "Record Date") (all shares issuable upon the
exercise of Rights by holders of Common Stock, Series A Preferred Stock and
Series B Preferred Stock shall be referred to as the "Securities") for a price
of $.90 per share. The number of Rights distributable for each share of Series A
Preferred Stock and Series B Preferred Stock held on the Record Date will be
calculated assuming such shares have been converted into Common Stock on the
Record Date in accordance with the terms thereof. Record Date stockholders who
fully exercise all Rights distributed to them will also be
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entitled to subscribe for shares of Common Stock that are not otherwise
purchased pursuant to the exercise of Rights, subject to proration by the
Company under certain circumstances. The Rights will expire at 5:00 P.M., New
York City time, on a date to be determined by the Company, but which shall not
be less than 20 nor more than 40 days following the Effective Date (such date
and time, the "Expiration Date"). The Company proposes to sell to Richemont
S.A., a Luxembourg corporation ("Richemont"), an aggregate of 100% of such
number of Shares which, as of the Expiration Date, have not been subscribed for
by the holders of Common Stock, Series A Preferred Stock or Series B Preferred
Stock other than the 11,111,111 shares of Common Stock to be subscribed for by
NAR Group Limited, a British Virgin Islands corporation ("NAR"), or its
affiliates (other than the Company) by the exercise of Rights either through the
basic subscription privilege or the oversubscription privilege (the
"Unsubscribed Shares"). The Company's obligation to sell and deliver the
Securities to Richemont shall be contingent on Richemont's performance of its
obligations under this Agreement. The issuance of the Rights, the offering of
the Common Stock to be issued by the Company upon exercise of the Rights either
through the basic subscription privilege or the oversubscription privilege and
the subscription and purchase of Common Stock upon the terms described in the
Prospectus (as hereinafter defined), including the purchase by Richemont of the
Securities pursuant to this Agreement, are herein collectively referred to as
the "Rights Offering."
1. Representations and Warranties. (a) The Company represents and
warrants to, and agrees with, Richemont as set forth below in this Section 1(a).
Certain terms used in Section 1 are defined in paragraphs (i) and (xix) of this
Section 1(a).
(i) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"), and will file with the
Securities and Exchange Commission (the "Commission") as soon as practicable a
registration statement on such Form for the registration under the Act of the
offering of the Rights and the offering and sale of the Securities. The Company
will file with the Commission either (A) prior to effectiveness of such
registration statement, an amendment to such registration statement (including
the form of a final prospectus) or (B) after effectiveness of such registration
statement, a final prospectus in accordance with Rule 424(b). In the case of
clause (B), the Company shall include in such registration statement, as amended
at the Effective Date, all information required by the Act and the rules
thereunder to be included in the Prospectus with respect to the Rights, the
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Securities and the offering thereof. As filed, such amendment and the form of
final prospectus, or such final prospectus, shall contain all required
information with respect to the Rights, the Securities and the offering thereof,
and shall be in form and substance reasonably acceptable to Richemont.
The form of prospectus to be used in connection with the offering of
the Rights and the offering and sale of the Securities as first filed pursuant
to Rule 424(b) or, if no filing pursuant to Rule 424(b) is required, such form
of prospectus included in the Registration Statement at the Effective Date, is
hereinafter called the "Prospectus." The Prospectus and any related letters from
the Company to record or beneficial owners of Common Stock or Rights, related
letters from the Company to securities dealers, commercial banks, trust
companies and other nominees and other offering materials, in each case
disseminated by the Company or by any of its agents with the Company's prior
consent, including, without limitation, the Subscription Certificates, the
Instructions for Subscription Certificates, the Notices of Guaranteed Delivery,
the Form of Letter to the Holders of Common Stock, and the Form of Letter to the
Holders of Common Stock whose addresses are outside the United States, and
information that the Company may use or authorize for use in connection with the
Rights Offering, are collectively referred to hereinafter as the "Offering
Materials." Capitalized terms used herein without definition have the meanings
assigned to them in the Prospectus.
(ii) On the Effective Date, the Registration Statement will, and
when the Prospectus is first filed (if required) in accordance with Rule 424(b)
and on the Closing Date (as hereinafter defined), the Prospectus (and any
supplements thereto) will, comply in all material respects with the applicable
requirements of the Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the respective rules thereunder; on the Effective Date, the
Registration Statement will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and on the Effective Date,
the Prospectus, if not required to be filed pursuant to Rule 424(b), and the
Offering Materials will not, and on the date of any filing pursuant to Rule
424(b) and on the Closing Date (as hereinafter defined), the Prospectus
(together with any supplement thereto) and the Offering Materials will not,
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to the
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information contained in or omitted from the Registration Statement or the
Prospectus (or any supplement thereto) in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of Richemont or
relating to Richemont or its affiliates (other than the Company) specifically
for inclusion in the Registration Statement or the Prospectus (or any supplement
thereto).
(iii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement; and this
Agreement has been duly authorized, executed and delivered by the Company and,
assuming due execution and delivery of this Agreement by Richemont, constitutes
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except (A) as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and (B) as rights to indemnity
and contribution hereunder may be limited by Federal or state securities law
and/or public policy.
(iv) Xxxxxx Xxxxxxxx LLP, which has reported upon the audited
financial statements and schedules incorporated by reference in the Registration
Statement and the Prospectus, are as to the Company independent public
accountants as required by the Act and the Exchange Act.
(v) The consolidated financial statements and the related notes of
the Company incorporated by reference in the Registration Statement and the
Prospectus present fairly in accordance with generally accepted accounting
principles the consolidated financial position of the Company as of the dates
indicated and the consolidated results of operations and cash flows of the
Company for the periods specified. Such financial statements have been prepared
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as otherwise noted
therein and subject, in the case of interim statements, to normal year-end audit
adjustments. The financial statement schedules incorporated by reference in the
Registration Statement and the Prospectus present fairly in accordance with
generally accepted accounting principles the information required to be stated
therein.
(vi) The Company is a corporation organized, validly existing and in
good standing under the laws of the State of
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Delaware with full corporate power and corporate authority under such laws to
own, lease and operate its properties and conduct its business as described in
the Registration Statement and the Prospectus; and the Company is duly qualified
to transact business as a foreign corporation and is in good standing in each
other jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, considered as one
enterprise.
(vii) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; no holder thereof is or will be subject to personal liability by
reason of being such a holder; and none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive rights of any
stockholder of the Company.
(viii) The outstanding shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock, the Rights, the Subscription Certificates and
the Securities will conform in all material respects to the descriptions thereof
contained or incorporated by reference in the Registration Statement and the
Prospectus.
(ix) The Company had, at the date indicated, the shareholders'
equity set forth in the Consolidated Balance Sheets contained in the Annual
Report on Form 10-K for the fiscal year ended December 28, 1996.
(x) Prior to or at the Effective Date, the Company will have entered
into a subscription agency agreement (the "Subscription Agency Agreement") with
a subscription agent (the "Subscription Agent"), which Subscription Agent shall
act on behalf of the Company in connection with, among other things, the
issuance, exercise, sale and transfer of Rights as part of the Rights Offering.
When executed by the Company, the Subscription Agency Agreement will have been
duly authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Subscription Agent, will constitute
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and except as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
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(xi) The Rights, when issued and delivered in accordance with the
terms of the Rights Offering, will be validly issued, and no holder thereof is
or will be subject to personal liability by reason of being such a holder; the
shares of Common Stock issuable upon the exercise of the Rights and the
Securities, when issued or delivered and paid for in accordance with the terms
of the Rights Offering, will be validly issued, fully paid and non-assessable,
and no holder thereof is or will be subject to personal liability by reason of
being such a holder; and the issuance of the shares of Common Stock issuable
upon the exercise of the Rights and the Securities will not be subject to the
preemptive rights of any stockholder of the Company.
(xii) Prior to the Effective Date, the Company will have taken all
valid corporate action to duly reserve such number of its authorized and
unissued shares of Common Stock as are deliverable upon consummation of
purchases pursuant to the Rights Offering.
(xiii) Except as otherwise stated in the Prospectus or contemplated
thereby, none of the Company or any of its subsidiaries is in violation of its
certificate of incorporation or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which it may be bound or to which any of
its properties may be subject, except for (a) such defaults under the Loan and
Security Agreement, dated as of November 14, 1995, as amended, with Congress
Financial Corporation, which defaults shall have been waived, and (b) such
defaults that in the aggregate would not have a material adverse effect on the
condition (financial or otherwise), results of operations or earnings of the
Company and its subsidiaries considered as one enterprise. The execution and
delivery of this Agreement, the issuance and delivery of the Rights and the
Securities, the consummation of the Rights Offering and the consummation by the
Company of the transaction contemplated in this Agreement, the Registration
Statement and the Prospectus, and compliance by the Company with terms of this
Agreement do not and will not result in any violation of the charter or by-laws
of the Company, and do not and will not conflict with, or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries under (i) any indenture,
mortgage, loan agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which each of them or
any of them may be bound or to
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which any of their respective properties may be subject or (ii) any existing
applicable law, rule, regulation, judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or any of their respective
properties (except, in the case of (i) and (ii) above, where such conflicts,
breaches or defaults or liens, charges or encumbrances in the aggregate would
not have a material adverse effect on the condition (financial or otherwise),
results of operations or earnings of the Company and its subsidiaries considered
as one enterprise).
(xiv) Except as otherwise disclosed in the Prospectus, no
authorization, approval, consent or license of any government, governmental
instrumentality or court, domestic or foreign (other than under the Act and the
securities or blue sky law of the various states), is required for the offer of
the Rights, the offer and sale by the Company of Securities, the consummation of
the Rights Offering as set forth in the Registration Statement and the
Prospectus or the consummation by the Company of the transactions contemplated
in this Agreement and in the Registration Statement and the Prospectus.
(xv) Except as disclosed in the Prospectus, there is no action, suit
or proceeding before or by any government, governmental instrumentality or
court, domestic or foreign, now pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries that is
required to be disclosed in the Registration Statement and the Prospectus. There
are no contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement or the Prospectus that will not be described and filed as
required.
(xvi) The Company has not taken and will not take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Rights or
the Common Stock.
(xvii) The Rights will be duly authorized for trading on a
when-issued and, subject only to official notice of issuance, regular way basis
on the American Stock Exchange. The Securities, when issued, will be authorized
for listing on said Exchange, subject only to official notice of issuance.
(xviii) The proceeds of the Rights Offering will be applied as set
forth in the Prospectus.
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(xix) The terms which follow, when used in this Agreement, shall
have the meanings indicated. The term "Effective Date" shall mean each date that
the Registration Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" shall mean the date and
time that this Agreement is executed and delivered by the parties hereto.
"Registration Statement" shall mean the registration statement referred to in
paragraph (i) above, including exhibits and financial statements, as amended at
the time in which it shall become effective) and, in the event any
post-effective amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so amended.
"Rule 424" refers to such rule under the Act. Any reference herein to the
Registration Statement or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein which were filed under the
Exchange Act on or before the Effective Date of the Registration Statement or
the issue date of the Prospectus and any reference herein to the terms "amend",
"amendment" or "supplement" with respect to the Registration Statement or the
Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the issue date of the Prospectus deemed to be
incorporated therein by reference.
(b) Richemont represents and warrants to, and agrees with, the
Company as set forth below in this Section 1(b).
(i) Richemont has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement; and this
Agreement has been duly authorized, executed and delivered by Richemont and,
assuming due execution and delivery of this Agreement by the Company,
constitutes a legal, valid and binding obligation of Richemont, enforceable
against Richemont in accordance with its terms except (A) as enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law), and (B) as
rights to indemnity and contribution hereunder may be limited by Federal or
other national or state or provincial securities laws and/or public policy.
(ii) To the extent that the Registration Statement contains any
information concerning Richemont furnished in writing to the Company by or on
behalf of Richemont specifically for inclusion therein, on the Effective Date
the Registration Statement will, and when the prospectus is first filed (if
required) in accordance with Rule 424(b) and on the Closing Date
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(as hereinafter defined), the Prospectus (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the Act and
the Exchange Act and the respective rules thereunder with respect to such
information; to the extent that the Registration Statement contains any
information concerning Richemont furnished in writing to the Company by or on
behalf of Richemont specifically for inclusion therein, on the Effective Date,
the Registration Statement will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading with respect to
such information; and on the Effective Date, to the extent that the Registration
Statement contains any information concerning Richemont furnished in writing to
the Company by or on behalf of Richemont specifically for inclusion therein, the
Prospectus, if not required to be filed pursuant to Rule 424(b), will not, and
on the date of any filing pursuant to Rule 424(b) and on the Closing Date (as
hereinafter defined), the Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading with respect to such
information.
(iii) The execution and delivery of this Agreement, the purchase of
the shares of Common Stock to be purchased by Richemont hereunder, the
consummation by Richemont of the transactions contemplated in this Agreement,
the Registration Statement and the Prospectus and compliance by Richemont with
the terms of this Agreement do not and will not result in any violation of the
Statuten of Richemont, and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of Richemont or any of its subsidiaries under (A) any
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which Richemont or any of its subsidiaries is a party or by which
each of them or any of them may be bound or to which any of their respective
properties may be subject or (B) any existing applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality or
court, domestic or foreign, having jurisdiction over Richemont or any of its
subsidiaries or any of their respective properties (except, in the case of (A)
and (B) above, where such conflicts, breaches or defaults or liens, charges or
encumbrances in the aggregate would not have a material adverse effect on the
condition (financial or otherwise), results of operations or earnings of
Richemont and its subsidiaries considered as one enterprise).
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(iv) Except as otherwise disclosed in the Prospectus, no
authorization, approval, consent or license of any government, governmental
instrumentality or court, domestic or foreign (other than under the Act and the
securities or blue sky laws of the various states) is required for the purchase
of the Unsubscribed Shares to be purchased by Richemont hereunder as set forth
in the Registration Statement and the Prospectus and the consummation by
Richemont of the transactions contemplated in this Agreement and in the
Registration Statement and the Prospectus.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to Richemont, and Richemont agrees to purchase from the Company
at a purchase price per share equal to the subscription price per share
specified in the Registration Statement 100% of the Unsubscribed Shares, if any.
As compensation to Richemont for its commitment hereunder, the
Company agrees to pay to Richemont, on the Closing Date (as hereinafter defined)
or at such other time and date as Richemont and the Company may agree in
writing, an amount equal to 1% in respect of the aggregate offering price of the
aggregate number of shares of Common Stock issuable upon exercise of the Rights
granted to holders of Common Stock, Series A Preferred Stock and Series B
Preferred Stock other than with respect to the shares of Common Stock held by
NAR Group Limited, a British Virgin Islands corporation ("NAR"), or its
affiliates plus an amount equal to one-half of 1% in respect of the aggregate
offering price of the aggregate number of shares of Common Stock issuable upon
exercise of the Rights granted to NAR or its affiliates less 11,111,111 shares
of Common Stock or such greater number of shares of Common Stock as NAR or its
affiliates shall acquire upon exercise of their Rights (collectively, the
"Standby Fee"), plus an additional amount equal to 4% of the aggregate offering
price (the "Take-Up Fee") in respect of all Unsubscribed Shares, if any,
purchased by Richemont pursuant to its commitment hereunder, each payable in
cash. Notwithstanding the foregoing, Richemont shall not be entitled to a
Standby Fee with respect to the shares of Common Stock issuable upon exercise of
the Rights with respect to the shares of Common Stock owned beneficially by
Xxxxxxxx X. Xxxxxxxxxxxx as of the date hereof if (i) at least five days prior
to the Effective Date, he furnishes to Richemont an undertaking to exercise the
Rights distributed to him with respect to such shares and (ii) upon the closing
of the Rights Offering, Xx. Xxxxxxxxxxxx purchases the shares which he
undertakes to purchase.
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If the closing for the sale of the Unsubscribed Shares shall not
occur as a result of (i) any termination of this Agreement pursuant to Section 8
or (ii) any cancellation of this Agreement pursuant to Section 6 if any such
cancellation pursuant to Section 6 is the result of any refusal, inability or
failure on the part of the Company to perform any material agreement herein or
to satisfy any material condition or other provision hereof (other than Section
6(b)(i) with respect to representations contained in paragraphs (xiii), (xiv)
and (xv) of Section 1(a) so long as the Company has made reasonable efforts to
comply with such sections) on its part to be satisfied or the material breach by
the Company of any of the representations and warranties contained in Section 1
hereof (other than the representations contained in paragraphs (xiii), (xiv) and
(xv) of Section 1(a) so long as the Company has made reasonable efforts to
comply with such sections), the Company shall pay Richemont the entire amount of
the Standby Fee.
3. Delivery and Payment. Delivery and payment for the Unsubscribed
Shares shall be made at 10:00 A.M., New York City time, on the fifth business
day following the Expiration Date (which date and time may be postponed to a
date not later than 10 business days thereafter by agreement between Richemont
and the Company) (such date and time of delivery and payment for the Securities
being herein called the "Closing Date"). Delivery of the Securities shall be
made to Richemont against payment by Richemont of the aggregate purchase price
of the Unsubscribed Shares being sold by the Company, by wire transfer and
payable in same day funds to an account or accounts designated in writing by the
Company at least two business days before the Closing Date. Delivery of the
Unsubscribed Shares shall be made at such location in the United States as
Richemont shall reasonably designate at least one business day in advance of the
Closing Date and payment for such Unsubscribed Shares shall be made at the
office of Xxxxx Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx LLP, 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000. Certificates for the Unsubscribed Shares shall be
registered in such names and in such denominations as Richemont may request not
less than forty-eight hours in advance of the Closing Date.
The Company agrees to have the Unsubscribed Shares available for
inspection, checking and packaging by Richemont in New York, New York, not later
than 1:00 P.M. on the business day prior to the Closing Date.
Should the Company so require, Richemont will advance up to $30
million from time to time upon the Company's request against its commitment to
purchase all of the Unsubscribed Shares. In return, the Company will execute a
subordinated
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promissory note in the amount of such advance which will be repayable on the
earlier of August 30, 1997 or the completion of the Rights Offering. Such note
will be subordinate to the Loan and Security Agreement, dated as of November 14,
1995, as amended, with Congress Financial Corporation. Should Richemont advance
any sums, payment of all or part of the aggregate purchase price of the
Unsubscribed Shares may also be made by Richemont by the surrender and
cancellation of the aforementioned note. Concurrently therewith, the Company
shall pay to Richemont interest on the principal amount outstanding under such
note as provided therein at a rate of 1.5% per annum in excess of the prime
commercial rate announced from time to time by CoreStates Bank, N.A.
4. No Offering by Richemont. It is understood that Richemont does
not intend to offer the shares of Common Stock owned by it (including, but not
limited to, the Unsubscribed Shares) for sale to the public.
5. Agreements. (a) The Company agrees with Richemont that:
(i) The Company will use its best efforts to cause the
Registration Statement, and any amendment thereof, including any
post-effective amendment, to become effective as soon as practicable.
Prior to the termination of the offering of the Rights and the Securities,
the Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without Richemont's prior consent, which
consent shall not be unreasonably withheld or delayed. Subject to the
foregoing sentence, if filing of the Prospectus is otherwise required
under Rule 424(b), the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to Richemont of such
timely filing. The Company will promptly advise Richemont (A) when the
Registration Statement, and any amendment thereto, shall have become
effective, (B) when the Prospectus, and any supplement thereto, shall have
been filed (if required) with the Commission pursuant to Rule 424(b), (C)
when, prior to termination of the Rights Offering, any amendment to the
Registration Statement shall have been filed or become effective, (D) of
any request by the Commission for any amendment of the Registration
Statement or supplement to the Prospectus or for any additional
information, (E) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
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institution or threatening of any proceeding for that purpose, (F) of the
receipt by the Company of any notification with respect to the suspension
of the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (G) if
any of the representations and warranties contained in Section 1 hereof
becomes inaccurate in any material respect subsequent to the date hereof.
The Company will use its best efforts to prevent the issuance of any such
stop order and, if issued, to obtain as soon as possible the withdrawal
thereof.
(ii) If, at any time when a prospectus relating to the Rights or the
Securities is required to be delivered under the Act, any event occurs as
a result of which the Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be necessary to
amend the Registration Statement or supplement the Prospectus to comply
with the Act or the rules thereunder (including to comply with Item 512(c)
of Regulation S-K under the Act), the Company promptly will prepare and
file with the Commission, subject to the second sentence of paragraph
(a)(i) of this Section 5, an amendment or supplement which will correct
such statement or omission or effect such compliance.
(iii) As soon as practicable, the Company will make generally
available to its security holders and to Richemont an earning statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(iv) The Company will furnish to Richemont without charge, signed
copies of the Registration Statement (including exhibits thereto) and as
many copies of the Prospectus and any supplement thereto as Richemont may
reasonably request. The Company will pay the expenses of printing or other
production of all documents relating to the Rights Offering.
(v) The Company will arrange for the qualification of the Rights for
distribution and offering and the Securities for distribution, offering
and sale under the laws of such jurisdictions as Richemont may designate,
and will maintain such qualifications in effect so long as required for
the distribution of the Rights or the Securities, as the case may be.
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(vi) Except as contemplated in the Registration Statement or the
Prospectus, the Company will not, within 90 days of the Effective Date,
sell or otherwise dispose of any shares of Common Stock or securities
convertible into or exchangeable or exercisable for shares of Common Stock
pursuant to a Registration Statement filed after the date hereof with the
Commission pursuant to the Act without the prior written consent of
Richemont which shall not be unreasonably withheld.
(vii) The Company shall at all times reserve and keep available for
issue upon the exercise of the Rights such number of authorized but
unissued shares of Common Stock deliverable upon the exercise of the
Rights as will be sufficient to permit the exercise in full of all Rights
issued.
6. Conditions to Obligations of Richemont. The obligations of
Richemont to purchase the Securities shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Effective Date and the Closing Date, to the accuracy of the statements of
the Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of their obligations hereunder and to the following
additional conditions:
(a) The Registration Statement shall have become effective not later
than 12:00 Noon, New York City time, or such later time as trading in the Common
Stock begins on the American Stock Exchange on the Effective Date; if filing of
the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b),
the Prospectus, and any such supplement, will be filed in the manner and within
the time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) At the Closing Date, the Company shall have furnished to
Richemont certificates of the Company, dated respectively as of the Effective
Date and the Closing Date and signed by any two executive officers of the
Company, to the effect that the signers of such certificates have carefully
examined the Registration Statement, the Prospectus, any supplements to the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects at and as of the
Effective Date or on and
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15
as of the Closing Date, as the case may be, with the same effect as if
made at the Effective Date or on the Closing Date, as the case may be, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Effective Date or the Closing Date, as applicable; and
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to the Company's knowledge, threatened.
(c) The Company shall have commenced mailing the Subscription
Certificates to record holders of the Common Stock not later than three days
following the Effective Date and shall have completed such mailing
expeditiously, and shall have offered the Common Stock for subscription in
accordance with the terms and under the conditions set forth in the Prospectus.
The Expiration Date shall have been not later than 5:00 P.M., New York City
time, on that day which shall not be less than 20 nor more than 40 days
following the Effective Date. Prior to 12:00 Noon, New York City time, on the
business day following the Expiration Date, the Company shall have advised
Richemont of the number of shares of Common Stock subscribed for and of the
number of Non-Richemont Shares.
(d) NAR shall have entered into an agreement with the Company
providing for the exercise of, and shall have exercised, its Rights for that
number of Shares having an aggregate purchase price of at least $10 million.
Payment of all or part of the aggregate purchase price of such Shares will be
made by NAR by the surrender and cancellation of the Company's subordinated
promissory note, dated as of September 11, 1996, in the principal amount of $10
million. Concurrently therewith, the Company shall pay to NAR interest on the
principal amount outstanding under such note as provided therein.
(e) Prior to the Closing Date, the Company shall have furnished to
Richemont such further information, certificates and documents as Richemont may
reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
this Agreement and all obligations of Richemont hereunder may be canceled at, or
at any time prior to, the Closing Date by Richemont. Notice of such cancellation
shall be given to the Company in writing or by telephone or telegraph confirmed
in writing.
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16
7. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless Richemont, the directors, officers, partners,
employees and agents of Richemont and each person who controls, or is in common
control with, Richemont within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement for
the registration of the Rights and the Securities as originally filed or in any
amendment thereof, or in the Prospectus or any of the Offering Materials, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Rights Offering or the engagement of Richemont pursuant to, and the
performance by Richemont of the services contemplated by, this Agreement, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability (A) arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by Richemont specifically for inclusion therein or (B)
in the case of clause (a)(ii) of this Section 7, is found in a final judgment by
a court of competent jurisdiction to have resulted from the bad faith or gross
negligence of such indemnified party or any party related to an indemnified
party or to have resulted from a violation of Rule 10b-6, 10b-7 or 10b-8 under
the Exchange Act by the indemnified party, other than actions performed at the
written request or with the consent of the Company. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.
The Company also agrees that no indemnified party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company or its security holders or creditors related to or arising out of the
engagement of Richemont pursuant to, or the performance by Richemont of the
services contemplated by, this Agreement, except to the extent that any loss,
claim, damage or liability is found in a final judgment by a court to have
resulted from the indemnified party's
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17
bad faith or gross negligence or a breach by Richemont of its obligations under
this Agreement.
(b) Richemont agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who signs the Registration
Statement, and each person who controls the Company within the meaning of the
Act or the Exchange Act, to the same extent as the foregoing indemnity from the
Company to Richemont, but only with reference to written information relating to
Richemont furnished to the Company by Richemont specifically for inclusion in
the documents referred to in the foregoing indemnity. This indemnity agreement
will be in addition to any liability which Richemont may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 7, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party (it being
understood, however, that in connection with such action the indem-
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18
nifying party shall not be liable for the expenses of more than one separate
counsel (in addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the same
general allegations or circumstances, representing the indemnified parties who
are parties to such action), (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless (x) such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding or (y) such
settlement, compromise or consent involves only the payment of money damages and
no other relief.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 7 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and Richemont agree to contribute
to the aggregate losses, claims, damages and liabilities (including legal or
other expenses reasonably incurred in connection with investigating or defending
same) (collectively "Losses") to which the Company, on the one hand, and
Richemont, on the other hand, may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and by Richemont, on the other hand, from the purchase of the Securities;
provided, however, that in no case shall Richemont be responsible for any amount
in excess of the aggregate compensation paid hereunder to Richemont in respect
of the Securities purchased by Richemont hereunder. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
Company, on the one hand, and Richemont, on the other hand, shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company, on the one hand, and of Richemont, on
the other hand, in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company shall be deemed to be equal to the total net proceeds
from the Rights Offering (before deducting expenses), as set forth on the cover
page of the Prospectus (assuming that all such Rights are exercised), and
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19
benefits received by Richemont shall be deemed to be equal to the total
compensation paid to Richemont hereunder. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Company or Richemont. The Company and Richemont
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, each person who controls
Richemont within the meaning of either the Act or the Exchange Act and each
director, officer, partner, employee and agent of Richemont shall have the same
rights to contribution as Richemont, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to the applicable terms and conditions of this paragraph (d).
8. Termination. This Agreement shall be subject to termination in
the absolute discretion of Richemont, by notice given to the Company prior to
delivery of and payment for the Unsubscribed Shares, if prior to such time
trading in the Common Stock shall have been suspended by the Commission or the
American Stock Exchange or trading in securities generally on such Exchange
shall have been suspended or limited or minimum prices shall have been
established on such Exchange.
9. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of Richemont set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of Richemont or the Company or any of the officers,
directors or controlling persons referred to in Section 7 hereof, and will
survive delivery of and payment for the Unsubscribed Shares. The provisions of
the third paragraph of Section 2 hereof and the provisions of Section 7 hereof
shall survive the termination or cancellation of this Agreement.
10. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to Richemont, will be mailed, delivered
or telegraphed and confirmed to it at 00 Xxxxxxxxx Xxxxxx Xxxxx, X 0000
Xxxxxxxxxx, Attention: Xx. Xxxx Xxxxx or at such other address as Richemont may
hereafter
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20
designate by notice to the Company, with a copy to Xxxxxxx Xxxxxxx & Xxxxxxxx
LLP, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X.
Xxxxxxx, Esq., Facsimile Number 000-000-0000 or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 0000 Xxxxxx Xxxxxxxxx,
Xxxxxxxxx, Xxx Xxxxxx 00000, Attention: Secretary, Facsimile Number
000-000-0000, or at such other address as the Company may hereafter designate by
notice to Richemont, with a copy to Xxxxx Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx
LLP, 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxx X. Xxxxxxx, Esq., Facsimile Number 000-000-0000.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7 hereof, and no
other person will have any right or obligation hereunder. No party to this
Agreement may assign its rights under this Agreement to any other person without
the prior written consent of the other party hereto, except that Richemont may
assign its rights hereunder to one or more direct or indirect wholly-owned
subsidiaries of Richemont, provided that Richemont shall continue to be
obligated to perform all the obligations to be performed by Richemont hereunder.
12. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
13. Business Day. For purposes of this Agreement, "business day"
means any day on which the American Stock Exchange is open for trading.
14. Counterparts. 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.
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21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first written above.
HANOVER DIRECT, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President, CFO
RICHEMONT S.A.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Director
By: /s/ Jan du Plessis
------------------------------
Name: Jan du Plessis
Title: Director
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