-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NmZC+rOh20rJGjj2uEvUYnJuW3i8kxq/mjnLRU6U1s5kVK9umNSWX+H8/TZAl4G/ 5IwP9KIM6BchhvzDiaY6Zg== 0000950123-94-000579.txt : 19940325 0000950123-94-000579.hdr.sgml : 19940325 ACCESSION NUMBER: 0000950123-94-000579 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19940324 GROUP MEMBERS: EDMUND R. MANWELL GROUP MEMBERS: J. DAVID HAKMAN GROUP MEMBERS: KRUTTSCHNITT THEODORE H SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HANOVER DIRECT INC /DE// CENTRAL INDEX KEY: 0000320333 STANDARD INDUSTRIAL CLASSIFICATION: 5961 IRS NUMBER: 138053260 STATE OF INCORPORATION: NV FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 34 SEC FILE NUMBER: 005-34082 FILM NUMBER: 94517571 BUSINESS ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 BUSINESS PHONE: 2018653800 FORMER COMPANY: FORMER CONFORMED NAME: HORN & HARDART CO /NV/ DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KRUTTSCHNITT THEODORE H CENTRAL INDEX KEY: 0000903484 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 BUSINESS PHONE: 415-348-7400 MAIL ADDRESS: STREET 1: 1350 BAYSHORE BLVD SUITE 850 CITY: BURLINGTON STATE: CA ZIP: 94010 SC 13D/A 1 AMENDMENT NO. 9 TO SC 13D, HANOVER DIRECT, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 9) HANOVER DIRECT, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.66-2/3 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 440506 10 3 - -------------------------------------------------------------------------------- (CUSIP Number) Theodore H. Kruttschnitt, III One Bay Plaza, Suite 850 1350 Bayshore Highway Burlingame, CA 94010 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 9, 1994 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ] . Check the following box if a fee is being paid with this statement [ ] . (Continued on following page(s)) Page 1 of 23 Pages Exhibit Index Appears on Page 9 2 CUSIP No. 440506 10 3 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Theodore H. Kruttschnitt, III - ----------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [x] OF A GROUP (b) [ ] - ----------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------- 4 SOURCE OF FUNDS - ----------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) - ----------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - ---------------------------------------------------------------- NUMBER 7 SOLE VOTING POWER 5,320,887* OF ------------------------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED -------------------------------------------------- BY EACH 9 SOLE DISPOSITIVE POWER 5,320,887* REPORTING -------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER - ----------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,320,887* - ----------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ] CERTAIN SHARES - ----------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.42% - ----------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - ----------------------------------------------------------------- - ---------------------------------- * See Item 5 hereof. -2- 3 CUSIP No. 440506 10 3 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON J. David Hakman - ----------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [x] OF A GROUP (b) [ ] - ----------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------- 4 SOURCE OF FUNDS - ----------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) - ----------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - ----------------------------------------------------------------- NUMBER 7 SOLE VOTING POWER 28,434* OF -------------------------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED -------------------------------------------------- BY EACH 9 SOLE DISPOSITIVE POWER 28,434* REPORTING -------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER - ----------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 28,434* - ----------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ] CERTAIN SHARES - ----------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) .03% - ----------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - ----------------------------------------------------------------- - ---------------------------------- * See Item 5 hereof. -3- 4 CUSIP No. 440506 10 3 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Edmund R. Manwell - ----------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [x] OF A GROUP (b) [ ] - ----------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------- 4 SOURCE OF FUNDS - ----------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ] IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) - ----------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION U.S.A. - ----------------------------------------------------------------- NUMBER 7 SOLE VOTING POWER 33,628* OF -------------------------------------------------- SHARES BENEFICIALLY 8 SHARED VOTING POWER OWNED -------------------------------------------------- BY EACH 9 SOLE DISPOSITIVE POWER 33,628* REPORTING -------------------------------------------------- PERSON WITH 10 SHARED DISPOSITIVE POWER - ----------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 33,628* - ----------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ] CERTAIN SHARES - ----------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) .04% - ----------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - ----------------------------------------------------------------- - ---------------------------------- * See Item 5 hereof. -4- 5 Item 1. Security and Issuer. This Amendment No. 9 to Statement on Schedule 13D relates to shares of Common Stock, par value $.66-2/3 per share (the "Common Stock"), of Hanover Direct, Inc., a Delaware corporation and the successor in interest to The Horn & Hardart Company (the "Company"), whose principal executive offices are located at 1500 Harbor Boulevard, Weehawken, New Jersey 07087. Item 2. Identity and Background. (a)-(c) Mr. Theodore H. Kruttschnitt, III's principal occupation is investing and his business address is One Bay Plaza, 1350 Bayshore Highway, Suite 850, Burlingame, California 94010. Mr. J. David Hakman's principal occupation is serving as Chief Executive Officer of Hakman Capital Corporation, an investment banking firm located at 1350 Bayshore Highway, One Bay Plaza, Suite 333, Burlingame, California 94010. Mr. Edmund R. Manwell's principal occupation is serving as Senior Partner of the law firm of Manwell & Milton, 101 California Street, Suite 3750, San Francisco, California 94111. (d)-(f) During the last five years, none of Messrs. Kruttschnitt, Hakman or Manwell has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such individual was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Messrs. Kruttschnitt, Hakman and Manwell are all United States citizens. Item 3. Source and Amount of Funds or other Consideration. Not Applicable. Item 4. Purpose of the Transaction. Pursuant to the Understandings Letter, dated March 8, 1994 (the "Understandings Letter"), which was executed on March 9, 1994, by and among Mr. Kruttschnitt, the Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Alex. Brown & Sons Incorporated (the "Underwriters"), Mr. Kruttschnitt and the Underwriters outlined certain arrangements which they intend -5- 6 to perform in connection with an offering of shares of Common Stock to the public (the "Offering"), including, among other things, that (i) the total size of the Offering is expected to be 10,000,000 shares of Common Stock, which will include 3,500,000 shares of Common Stock owned by Mr. Kruttschnitt, (ii) Mr. Kruttschnitt will provide (to the extent he owns sufficient shares to include in the Offering) for 37.45% (initially 525,000 shares) of an over-allotment option, to be exercised at the option of the Underwriters, (iii) subject to Mr. Kruttschnitt's approval (and to the extent Mr. Kruttschnitt owns sufficient shares to include in the Offering), if the amount of the shares in the Offering increases to an amount above 10,000,000 shares, then Mr. Kruttschnitt shall have the option to include additional shares in the Offering in an amount up to an amount equal to 37.45% of the increase over 10,000,000 shares, (iv) in the event that the size of the Offering is reduced to less than 10,000,000 shares, the portion of Mr. Kruttschnitt's shares included in the Offering shall be reduced by an amount equal to 37.45% of the amount of shares less than 10,000,000 that the Offering is reduced and (v) if Mr. Kruttschnitt sells any of his shares of Common Stock in the Offering, (x) at the effectiveness of the Company's Registration Statement relating to the Offering (the "Registration Statement"), he shall sign a Purchase Agreement among the Company, the shareholders participating in the Offering and the Underwriters (collectively the "Signatories") (making the representations and giving the indemnity in the form set forth in Annex A to the Understandings Letter), and (y) at the pricing, he shall sign a Price Determination Agreement among the Signatories in a form to be no more adverse to Mr. Kruttschnitt than the draft attached to the Understandings Letter as Annex B. The foregoing description of the Understandings Letter is a summary of certain of its terms and reference is made to a copy of such Understandings Letter which is attached hereto as Exhibit 1 and incorporated herein by reference for all of its terms and conditions. Pursuant to a Letter Agreement, dated February 18, 1994 (the "Lock-Up Letter"), which was executed on March 9, 1994, by and among Mr. Kruttschnitt and the Underwriters, Mr. Kruttschnitt agreed that from the date of the Lock-Up Letter until 180 days after the Registration Statement becomes effective, he will not, without the prior written consent of Merrill Lynch, directly or indirectly sell (or offer or contract to sell), transfer, pledge (subject to certain specified exceptions) or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock, except under certain circumstances outlined in the Lock-Up Letter. Under certain circumstances, which are described in the Lock-Up Letter, the Lock-Up Letter shall have no force and effect. -6- 7 The foregoing description of the Lock-Up Letter is a summary of certain of its terms and reference is made to a copy of such Lock-Up Letter which is attached hereto as Exhibit 2 and incorporated herein by reference for all of its terms and conditions. Pursuant to a Letter Agreement, dated as of February 18, 1994 (the "Resignation Agreement"), which was executed on March 9, 1994, by and among the Company and Messrs. Hakman, Manwell and Kruttschnitt, effective upon the date of the closing of the sale of at least 3,500,000 shares of Common Stock by Mr. Kruttschnitt (excluding any shares that may be sold pursuant to the exercise of the over-allotment option) pursuant to the Registration Statement, (i) Mr. Kruttschnitt agrees to resign as a director of the Company, (ii) the Letter Agreement dated May 5, 1989 (the "Letter Agreement") between Messrs. Kruttschnitt, Hakman and Manwell and The Horn & Hardart Company, a predecessor in interest to the Company, shall have no further force and effect, and (iii) each of Messrs. Hakman and Manwell shall continue to serve the unexpired portion of his respective term as a director unless he shall cease to qualify as a director or shall have resigned. In the event that at least 3,500,000 shares of Mr. Kruttschnitt's Common Stock (excluding any shares that may be sold pursuant to the exercise of the over-allotment option) have not been sold pursuant to the Registration Statement by May 1, 1994, or in the event the Company prior thereto shall have withdrawn the Registration Statement, the Resignation Agreement shall be void and of no further force and effect and the Letter Agreement shall remain in full force and effect. The foregoing description of the Resignation Agreement is a summary of certain of its terms and reference is made to a copy of such Resignation Agreement which is attached hereto as Exhibit 3 and incorporated herein by reference for all of its terms and conditions. Item 5. Interest in Securities of the Issuer. (a) Mr. Kruttschnitt is the beneficial owner of 5,320,887 shares of Common Stock of the Company as determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended ("Rule 13d-3"), 15,000 of which are options to purchase shares of Common Stock exercisable within 60 days. The 5,320,887 shares of Common Stock represent, in accordance with Rule 13d-3, approximately 6.42% of the 82,933,177 shares of Common Stock outstanding as of January 1, 1994. -7- 8 Mr. Hakman is the beneficial owner of 28,434 shares of Common Stock of the Company, as determined in accordance with Rule 13d-3, 15,000 of which are options to purchase shares of Common Stock exercisable within 60 days. The 28,434 shares of Common Stock represent, in accordance with Rule 13d-3, approximately .03% of the 82,933,177 shares of Common Stock outstanding as of January 1, 1994. Mr. Manwell is the beneficial owner of 33,628 shares of Common Stock of the Company, as determined in accordance with Rule 13d-3, 20,000 of which are options to purchase shares of Common Stock exercisable within 60 days. The 33,628 shares of Common Stock represent, in accordance with Rule 13d-3, approximately .04% of the 82,933,177 shares of Common Stock outstanding as of January 1, 1994. Messrs. Kruttschnitt, Hakman and Manwell as a group are the beneficial owners of 5,382,949 shares of Common Stock of the Company, as determined in accordance with Rule 13d-3. The 5,382,949 shares of Common Stock represent, in accordance with Rule 13d-3, approximately 6.49% of the 82,933,177 shares of Common Stock outstanding as of January 1, 1994. (b) Mr. Kruttschnitt has the sole power to vote and dispose of all his 5,320,887 shares of Common Stock except for 15,000, which represent options to purchase shares of Common Stock exercisable within 60 days. Mr. Hakman has the sole power to vote and dispose of all his 28,434 shares of Common Stock except for 15,000, which represent options to purchase shares of Common Stock exercisable within 60 days. Mr. Manwell has the sole power to vote and dispose of all his 33,628 shares of Common Stock except for 20,000, which represent options to purchase shares of Common Stock exercisable within 60 days. (c) and (d) Inapplicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Reference is hereby made to Item 4 hereof for a description of certain contracts, arrangements, understandings and relationships relating to the securities of the Company. Except as described therein, none of the Reporting Persons has any contract, arrangement, understanding or relations with one or more security holders of the Company or others, with respect to the purchase, holding, voting or disposition of shares of Common Stock or other securities of the Company which are convertible or -8- 9 exercisable into such shares. Each of such persons reserves the right to enter into any such contract, arrangement, understanding or relations in the future. Item 7. Material to be Filed as Exhibits. Page Exhibit 1: Understandings Letter by and among Mr. Kruttschnitt, the Company and the Underwriters. 13 Exhibit 2: Lock-Up Letter by and among Mr. Kruttschnitt and the Underwriters. 19 Exhibit 3: Resignation Agreement by and among the Company and Messrs. Hakman, 22 Manwell and Kruttschnitt. -9- 10 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: March 22, 1994 /s/ Theodore H. Kruttschnitt, III ---------------------------------- Theodore H. Kruttschnitt, III -10- 11 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: March 22, 1994 /s/ Edmund R. Manwell ---------------------- Edmund R. Manwell -11- 12 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: March 22, 1994 /s/ J. David Hakman --------------------- J. David Hakman -12- 13 Exhibit Index Exhibit 1: Understandings Letter by and among Mr. Kruttschnitt, the Company and the Underwriters. 13 Exhibit 2: Lock-Up Letter by and among Mr. Kruttschnitt and the Underwriters. 19 Exhibit 3: Resignation Agreement by and among the Company and Messrs. Hakman, 22 Manwell and Kruttschnitt. EX-99.1 2 UNDERTANDINGS LETTER 1 Exhibit 1 Theodore H. Kruttschnitt 1350 Bayshore Blvd., Suite 850 Burlingame, CA 94010 Phone: 415-348-7425 Fax: 415-348-0273 March 8, 1994 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Alex. Brown & Sons Incorporated c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower New York, New York 10281 Understandings Letter Ladies and Gentlemen: Theodore H. Kruttschnitt (the "undersigned") is a securityholder of Hanover Direct, Inc. (the "Company"). The undersigned understands that the Company and certain securityholders of the Company (including the undersigned) plan to sell shares of the Company's common stock, par value $.662/3 per share (the "Common Stock"), including shares subject to over-allotment options, to certain underwriters (the "Underwriters") represented by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Alex. Brown & Sons Incorporated (together with Merrill Lynch, the "Representatives"). The Underwriters propose to offer such shares of Common Stock to the public (the "Offering"). The letter agreement outlines and confirms certain arrangements which the Representatives and the undersigned intend to perform in connection with the Offering. The following is our understanding of such arrangements: 2 1. The total size of the Offering is expected to be 10,000,000 shares of Common Stock and it will include 3,500,000 shares of Common Stock owned by the undersigned. 2. The Offering will have an over-allotment option equal to 15% of the shares sold in the Offering. The undersigned will provide (to the extent the undersigned owns sufficient shares to include in the Offering) for 37.45% (initially 525,000 shares) of the over-allotment option. The over-allotment option will be exercised at the option of the Underwriters, except that if the Underwriters elect to purchase any of the over-allotment shares, then 37.45% of such shares purchased will be from the undersigned. 3. Subject to the undersigned's approval (and to the extent that the undersigned owns sufficient shares to include in the Offering), if the amount of shares in the Offering increase to an amount above 10,000,000 shares, then the undersigned will have the option to include additional shares in the Offering in amount up to an amount equal to 37.45% of the increase over 10,000,000 shares. On a day on which the American Stock Exchange is open, between the hours of 9:00 a.m. and 8:00 p.m. Eastern Standard Time, either the Company or the Representatives shall give the undersigned and his counsel prompt written notice (which shall be by facsimile) of any increase in the size of the Offering. Any such facsimile notice will be made to both the undersigned's office and his home. In addition, the Representatives agree to use their best efforts to notify the undersigned and his counsel by telephone at the same time written notice is given. The undersigned must notify the Representatives of the undersigned's intention to include additional shares in the Offering within three hours of the receipt of any notice from the Company or the Representatives. 4. In the event that the size of the Offering is reduced to less than 10,000,000 shares, the portion of undersigned's shares included in the Offering will be reduced by an amount equal to 37.45% of the amount of shares less than 10,000,000 that the Offering is reduced. 5. The Representatives agree to keep the undersigned informed of any material events occurring with respect to the Offering on the same basis and at the same time as the Representatives inform the Company between -2- 3 the filing of Amendment No. 1 (which will include the Company's 1993 year-end financial information and is scheduled to be filed around March 14, 1994) to the Registration Statement and the closing of the Offering. 6. If the undersigned is selling any of his shares of Common Stock in the Offering, at effectiveness of the Registration Statement with the Securities and Exchange Commission, the undersigned agrees to sign the Purchase Agreement among the Company, the shareholders of the Company participating in the Offering (including the undersigned) and the Underwriters (collectively, the "Signatories"). In the Purchase Agreement, the undersigned will make the representations and give the indemnity in the form set forth in Annex A hereto. With respect to other matters related to the undersigned in the Purchase Agreement, such matters shall be reasonably acceptable to the parties. The undersigned will have the opportunity to participate (either by phone or in person, at his option) in the meeting with the Representatives and the Company at which the price of the shares of Common Stock to be sold in the Offering is determined. At the pricing, if the undersigned is selling any of his shares of Common Stock in the Offering, the undersigned agrees to sign the Price Determination Agreement among the Signatories with the form of such Agreement to be no more adverse to the undersigned than the draft version thereof attached hereto as Annex B. 7. The undersigned will arrange with Bear, Stearns & Co., Inc. ("Bear Stearns") to release at pricing as described below the amount of the undersigned's shares of Common Stock that the undersigned is selling in the Offering (including shares the undersigned is selling if the Underwriters' overallotment option is exercised) (the "Offered Shares") from the undersigned's margin account at Bear Stearns and enter into an agreement with Merrill Lynch providing for a margin loan from Merrill Lynch as provided below. 8. To facilitate the transfer of all the Offered Shares from the undersigned's margin account at Bear Stearns to the undersigned's margin account at Merrill Lynch and to facilitate the delivery of the Offered Shares at the closing of the Offering, the following procedures will be arranged: -3- 4 a. The undersigned will enter into a margin loan agreement with Merrill Lynch with an initial amount equal to 45% of value with value based on the price to public of the Common Stock in the Offering but in no event in excess of $17 million, with an interest rate equal to the Bear Stearns Broker Call Rate plus 1% (at the date hereof 5-1/4%, all inclusive) with no further maintenance margin and with terms otherwise customary for such loans. b. Immediately prior to the signing of the Price Determination Agreement by the Signatories, Merrill Lynch will place the proceeds of the margin loan from Merrill Lynch in a designated bank account (the "Merrill Lynch Account") which shall be at a bank at which Bear Stearns maintains an account (the "Bear Stearns Account"). c. Immediately after signing the Price Determination Agreement by the Signatories, Merrill Lynch will deliver by wire transfer the funds in the Merrill Lynch Account to the Bear Stearns Account for the account of the undersigned and the undersigned will cause Bear Stearns to deliver immediately all of the Offered Shares in Bear Stearns' custody directly to Merrill Lynch as collateral for the undersigned's margin loan from Merrill Lynch. d. At the closing of the Offering, Merrill Lynch shall apply the proceeds of the sale of the Offered Shares to repay in full the margin loan extended by Merrill Lynch (with any proceeds from the sale of the Offered Shares in excess of the amount of the margin loan to be delivered to the undersigned or his designee on the closing date of the Offering in New York Clearing House Funds) in exchange for the Offered Shares which shall be delivered directly to Merrill Lynch without any additional action needed to be taken by the undersigned. e. Any Offered Shares not sold in the Offering will be returned to the undersigned immediately upon repayment in full of the margin loan from Merrill Lynch, other than any Offered Shares subject to the Underwriter's over-allotment option, which shares if not sold in the Offering will be promptly returned to the undersigned upon lapse of any unexercised over-allotment option. If the over- -4- 5 allotment option is exercised by the Underwriters, proceeds from the sale of any Offered Shares shall be delivered to the undersigned or his designees in New York Clearing House Funds on the closing of the sale of such over-allotment shares. All of the undersigned's unsold shares of Common Stock will be subject to the lock up restrictions contained in the letter agreement (the "Lock-Up Letter") between the Representatives and the undersigned, dated February 18, 1994. 9. Prior to the filing of Amendment No. 1 to the Registration Statement, the undersigned will use his reasonable best efforts to enter into an agreement with Bear Stearns which will require Bear Stearns to use securities other than the Common Stock to satisfy a margin call by Bear Stearns on the undersigned's margin account at Bear Stearns. Nonetheless, at all times the undersigned will use his reasonable best efforts to cause Bear Stearns to use securities other than the Common Stock to satisfy a margin call by Bear Stearns on the undersigned's margin account at Bear Stearns. Notices: a. All notices under this Letter Agreement shall be sent to the undersigned at: 1350 Bayshore Boulevard, Suite 850 Burlingame, California 94010 Telephone: (415) 348-7425 Fax: (415) 348-0273 and 735 Eucalyptus Avenue Hillsborough, California 94010 Telephone: (415) 348-4113 Fax: (415) 348-4123 and to the undersigned's counsel at: -5- 6 Hosie Wes, McLaughlin & Sacks One Sansome Street San Francisco, California 94104 Attention: Robert McLaughlin Telephone: (415) 781-3200 Fax: (415) 781-2525 Home Telephone: 510-658-6250 b. All notices under this Letter Agreement will be sent to Merrill Lynch at: Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated World Financial Center - North Tower 250 Vesey Street New York, New York 10281 Attention: Jerry Marcus Telephone: (212) 449-8516 Fax: (212) 449-9902 c. All notices under this Letter Agreement shall be sent to the Company at: 1500 Harbor Boulevard Weehawken, NJ 07087 Attention: Michael Sherman Telephone: (201) 319-3403 Fax: (201) 392-5005 -6- 7 This letter may be relied upon by the Company, the Underwriters and the undersigned. This letter shall terminate upon termination of the Lock-Up Letter or if the undersigned determines not to sell any of his shares of Common Stock in the Offering. Very truly yours, /s/ Theodore H. Kruttschnitt Theodore H. Kruttschnitt Confirmed and accepted as of the date first above written: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated ALEX. BROWN & SONS INCORPORATED By: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Jerry H. Marcus Name: Jerry H. Marcus Title: Director Confirmed and accepted as to paragraphs 1, 2, 3 and 4 as of the date first above written: HANOVER DIRECT, INC. By: /s/ Michael P. Sherman Name: Michael P. Sherman Title: Executive Vice President-Corporate Affairs, General Counsel and Secretary -7- EX-99.2 3 LOCK-UP LETTER 1 Exhibit 2 Theodore H. Kruttschnitt 1350 Bayshore Blvd., Suite 850 Burlingame, CA 94010 Phone: 415-348-7425 Fax: 415-348-0273 February 18, 1994 MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Alex. Brown & Sons Incorporated c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated Merrill Lynch World Headquarters North Tower New York, New York 10281 Ladies and Gentlemen: Theodore H. Kruttschnitt (the "undersigned") is a securityholder of Hanover Direct, Inc. (the "Company"). The undersigned understands that the Company and certain securityholders of the Company (including the undersigned) plan to sell shares of the Company's common stock, par value $.66 2/3 per share ("Common Stock"), including shares subject to over-allotment options, to certain underwriters (the "Underwriters") represented by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and Alex. Brown & Sons Incorporated. The Underwriters propose to offer such shares of Common Stock to the public (the "Offering"). In order to induce the Underwriters to participate in the Offering, the undersigned represents and agrees that from the date of this letter until 180 days after the Registration Statement on Form S-3 relating to the sale of 10,000,000 shares of the Common Stock (the "Shares") (excluding the shares of Common Stock to be sold upon exercise of the Underwriters' over-allotment options) filed by the Company with the Securities and Exchange Commission, as amended (the "Registration Statement"), becomes effective, the undersigned will not, without the prior written consent of Merrill Lynch, directly or 2 indirectly sell (or offer or contract to sell), transfer, pledge or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock, except that the undersigned may (i) pledge such securities as collateral in a "margin" account with Bear, Stearns & Co. Inc. until pricing of the shares or Merrill Lynch and (ii) transfer such securities to Bear, Stearns & Co. Inc. or Merrill Lynch as a result of a margin call in connection with such account (in which case the transferee shall not be bound in any respect by the terms of this letter as to the transferred shares). This letter agreement shall be of no further effect upon the earliest to occur of (i) May 31, 1994, if the Registration Statement is not declared effective by the Securities and Exchange Commission prior to such date; (ii) the withdrawal of the Registration Statement from the Securities and Exchange Commission by the Company; or (iii) upon the determination by Merrill Lynch prior to May 31, 1994 to postpone the Offering to a date after May 31, 1994. This letter agreement will have no force or effect past the date of the filing of Amendment No. 1 to the Registration Statement unless by such date Merrill Lynch has delivered to the undersigned letter agreements (the "Lock-up Letters") preventing other securityholders participating in the Offering, North American Resources Limited and each director and executive officer of the Company from selling any shares of Common Stock or any securities convertible into or exchangeable for any shares of Common Stock or any securities convertible into or exchangeable for any shares of Common Stock for a period beginning on the filing of Amendment No. 1 to the Registration Statement until 180 days after the effective date of the Registration Statement; provided, however, that in the case of Sun Life Insurance Company of America, such 180 day period shall be 90 days. This also confirms our understanding that in the event Merrill Lynch releases any of the Lock-up Letters in order to permit any other securityholder participating in the Offering, North American Resources Limited or any director or executive officer of the Company to sell any shares of Common Stock or any securities convertible into or exchangeable for any shares of Common Stock during the term of this letter agreement, this letter agreement shall be of no further effect on and as of the date Merrill Lynch grants such permission. Merrill Lynch agrees to immediately notify the undersigned if any such permission is granted. This letter will further confirm that the undersigned has not taken, and until 180 days after the effective date of the Registration Statement, will not take, directly or indirectly, any action which might result in the stabilization of the price of the Common Stock. -2- 3 This letter may be relied upon by the Company, the Underwriters and the undersigned. Very truly yours, /s/ Theodore H. Kruttschnitt ---------------------------- Theodore H. Kruttschnitt Confirmed and accepted as of the date first above written: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated ALEX. BROWN & SONS INCORPORATED By: MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated By: /s/ Jerry H. Marcus ------------------- Name: Jerry H. Marcus Title: Director On behalf of themselves and each of the Underwriters -3- EX-99.3 4 RESIGNATION AGREEMENT 1 Exhibit 3 February 18, 1994 Mr. Theodore H. Kruttschnitt One Bayshore Plaza, Suite 850 1350 Bayshore Boulevard Burlingame, CA 94010 Re: Board of Directors Dear Ted: Reference is made to the letter agreement dated May 5, 1989 (the "Letter Agreement") between you, The Horn & Hardart Company, a predecessor in interest of Hanover Direct, Inc. (the "Company"), J. David Hakman and Edmund R. Manwell relating to, among other things, certain obligations with respect to the Kruttschnitt Designees (as such term is defined therein). Concurrently with the execution of this letter agreement, the Company is filing a Registration Statement (the "Registration Statement") for the offering (exclusive of any "over-allotment" option) of 10,000,000 shares of the Company's Common Stock, par value $.66-2/3 per share (the "Common Stock"), of which 3,500,000 shares are intended to be offered by you (the "Registered Shares"). Effective upon the date of the closing of the sale by you of at least 3,500,000 shares of Common Stock (excluding any shares that may be sold pursuant to the exercise of the over-allotment option) pursuant to the Registration Statement, (i) you agree to resign as a director of the Company, (ii) the Letter Agreement shall have no further force or effect, and (iii) each of Messrs. Hakman and Manwell shall continue to serve the unexpired portion of his current term as a director unless he shall cease to qualify as a director or shall have resigned. Subject to the immediately following paragraph, until such time as the sale by you of at least 3,500,000 shares of Common Stock (excluding any shares that may be sold pursuant to the exercise of the over-allotment option) 2 pursuant to the Registration Statement has closed, notwithstanding anything to the contrary in the Letter Agreement, none of you or Messrs. Hakman and Manwell shall be required to resign as a director of the Company. Rather, each of you and Messrs. Hakman and Manwell will continue to serve as a director of the Company for the unexpired portion of his current term as a director unless he shall cease to qualify as a director or shall have resigned. In the event that the Registered Shares have not been sold pursuant to the Registration Statement by May 1, 1994 or in the event the Company, prior thereto shall have withdrawn the Registration Statement, this letter shall be void and of no further force and effect and the Letter Agreement shall remain in full force and effect. Except as modified hereby, the Letter Agreement shall remain in full force and effect in accordance with its terms. Very truly yours, HANOVER DIRECT, INC. By:/s/ Michael P. Sherman ---------------------- Michael P. Sherman Executive Vice President Accepted and agreed to as of the date first above written. /s/ Theodore H. Kruttschnitt - ---------------------------- Theodore H. Kruttschnitt /s/ J. David Hakman - ---------------------------- J. David Hakman /s/ Edmund R. Manwell - ---------------------------- Edmund R. Manwell -2- -----END PRIVACY-ENHANCED MESSAGE-----