EX-99.1 3 y90069exv99w1.txt RECAPITALIZATION- SUMMARY OF COUNTEROFFER TERMS . . . Exhibit 99.1 RECAPITALIZATION OF HANOVER DIRECT, INC. SUMMARY OF COUNTER OFFER TERMS SUMMARY TERM SHEETS:
CHELSEY RECAP PROPOSAL TRANSACTIONS COMMITTEE COUNTER OFFER ---------------------- ------------------------------------ New Common Stock 81,857,833 shares 40,000,000 shares. Amount of Issue That number of shares as will have $46.0 million. an aggregate liquidation preference equal to 1/2 of the accreted liquidation preference of the Series B Preferred Shares at the closing date. Estimated at $56,481,905. Liquidation $1.00 per share. $1.00 per share. Preference Dividend Commencing January 1, 2006 Commencing at closing and dividends shall be payable through and ending on March 31, quarterly at the rate of 6% per 2005, the dividends shall be annum, with the preferred dividend payable quarterly at the rate of rate increasing at by 1 1/2% per 12% per annum, non-compounding, annum on each anniversary of the and shall be payable in HNV dividend commencement date until Common Stock at a rate of five redeemed. At HNV's election, shares per dollar ($0.20).* dividends may be paid in kind at a Commencing January 1, 2006, rate equal to 1% higher than the dividends shall be payable applicable cash dividend rate. quarterly at the rate of 6% per annum, with the preferred The Series C Preferred Shares will dividend rate increasing by 1 be entitled to participate ratably 1/2% per annum on each with the Common Stock on a share anniversary of the dividend for share basis in any dividends or commencement date until redeemed distributions paid to or with payable at HNV's option in cash respect to the Common Stock. The or HNV Common Stock. right to participate shall have anti-dilution protection. The New Preferred Shares will be entitled to participate ratably with the Common Stock on a share for share basis in any dividends or distributions paid to or with respect
*Note that the Company would offer the economic equivalent if it were determined that the issuance of Common shares for consideration of $0.20 would not be valid.
CHELSEY RECAP PROPOSAL TRANSACTIONS COMMITTEE COUNTER OFFER ---------------------- ------------------------------------ to the Common Stock. The right to participate shall have anti-dilution protection. Redemption The Series C Preferred Shares may The New Preferred Shares may be be redeemed in whole and not in redeemed in whole or in part at part, at the option of HNV at any the option of HNV at any time time for the liquidation preference for the liquidation preference. and any accrued and unpaid dividends (the "Redemption The New Preferred Shares shall Price"). The Series C Preferred be redeemed by the Company on shares shall be redeemed by the March 31, 2005 (the "Mandatory Company on January 1, 2009 (the Redemption Date") for the "Mandatory Redemption Date") for Redemption Price. If the New the Redemption Price. If the Preferred Shares are not Series C Preferred Shares are not redeemed on or before the redeemed on or before the Mandatory Mandatory Redemption Date, after Redemption Date, the Series C the Mandatory Redemption Date, Preferred Shares shall be entitled the New Preferred Shares shall to elect one half of the Company's be entitled to elect one half of Board of Directors. the Company's Board of Directors. The New Preferred Shares shall be subject to redemption in whole or in part for the liquidation preference per share from time to time in connection with a Specified Asset Disposition, based on the provisions relating thereto in the Certificate of Designations for the Series B Preferred Stock, and subject to the provisions contained in the Nineteenth Amendment to the Congress Financial Loan and Security Agreement. Voting The Series C Preferred Shares shall The New Preferred Shares shall be entitled to one vote per share, not be entitled to vote prior to and shall vote as a class with the March 31, 2005, thereafter they Common Stock on any matter shall be entitled to one vote submitted to a vote of the Common per share, and shall vote as a Stockholders. The Series C class with the Common Stock on Preferred shares shall be any matter submitted to a vote of the Common
CHELSEY RECAP PROPOSAL TRANSACTIONS COMMITTEE COUNTER OFFER ---------------------- ------------------------------------ entitled to vote as a class on any Stockholders. The New Preferred Shares matter that would adversely affect the shall be entitled to vote as a Series. class on any matter that would adversely affect the Series at any time. Covenants and Rights The Series C Preferred Shares shall The New Preferred Shares shall have such additional covenants and have such additional covenants rights as are customary or and rights as are customary or necessary to give effect to the necessary to give effect to the foregoing. foregoing. Standstill Chelsey would be precluded from purchasing additional Common Stock until March 31, 2005. If HNV shall have redeemed the New Preferred Shares in full on or before March 31, 2005, Chelsey would be indefinitely precluded from purchasing additional Common Stock. Other material terms The agreements governing the The agreements governing the and conditions: transaction shall, among other transaction shall, among other things, provide for a things, provide for a reconstitution of HNV's board to reconstitution of HNV's board to permit Chelsey to designate a permit Chelsey to designate a majority of directors, corporate two directors so long as it governance guarantees to assure holds at least 35% of the Common that there shall be continuing Stock (in a manner consistent directors of HNV who are not with the provisions contained in affiliated with Chelsey (who shall the Certificate of Designations have their own counsel and of the Series B Preferred financial advisor at HNV's Stock), corporate governance expense), the assent of the guarantees to assure that there unaffiliated directors shall be shall be continuing directors of required for the approval of any HNV who are not affiliated with transaction with Chelsey Chelsey, the assent of the (including, a determination of unaffiliated directors shall be whether or not to redeem the Series required for the approval of any C Preferred shares), demand and transaction with Chelsey piggy back registration rights with (including, a determination of respect to the resale by Chelsey of whether or not to redeem the New the Preferred Shares), demand and piggy back registration rights with
CHELSEY RECAP PROPOSAL TRANSACTIONS COMMITTEE COUNTER OFFER ---------------------- ------------------------------------ shares of Common Stock owned by respect to the resale by Chelsey of the it, the discontinuance, with shares of Common Stock owned by it, the prejudice, of the pending discontinuance, with prejudice, of the litigation, releases from Chelsey pending litigation, releases from to HNV and its officers and Chelsey to HNV and its officers and directors from claims of breach of directors from claims of breach of fiduciary duty, releases from HNV fiduciary duty, and releases from HNV and its officers and directors from and its officers and directors from claims against Chelsey. claims against Chelsey. This proposal is subject to the approval of the Transactions Committee and the Board of Directors (and their receipt of an appropriate opinion of the Transactions Committee's financial advisors), and the consent of Congress Financial. Shareholder approval likely not required. Sale of Assets HNV will hire an investment bank, acceptable to HNV and Chelsey, and will publicly announce its intention to sell some or all of HNV's non-core assets by March 31, 2005 to effect a complete redemption of the New Preferred Shares The proceeds of the sale of non-core assets will be used to redeem the New Preferred Shares subject to the provisions contained in the Nineteenth Amendment to the Congress Financial Loan and Security Agreement. 2004 Annual Meeting HNV will put to the of Shareholders shareholders, at the May 2004 Annual Meeting of Shareholders, a proposal or proposals, for example to effect a reverse stock split, which would, to
CHELSEY RECAP PROPOSAL TRANSACTIONS COMMITTEE COUNTER OFFER ---------------------- ------------------------------------ the extent permissible, create surplus within the meaning of the Delaware General Corporation Law such that the proceeds of the sale of non-core assets could be used to redeem the New Preferred Shares.