-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GPaqwfmF+IWbTlwClp/OT0rAMBYyGJmCxr6hmr+MqpRw6dHuzgFa/To6HtBKEqD3 LgMNPUksot0/vJcxagdBBQ== 0000950123-96-003814.txt : 19960726 0000950123-96-003814.hdr.sgml : 19960726 ACCESSION NUMBER: 0000950123-96-003814 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960719 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960725 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANOVER DIRECT INC CENTRAL INDEX KEY: 0000320333 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 138053260 STATE OF INCORPORATION: NV FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08056 FILM NUMBER: 96599107 BUSINESS ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 BUSINESS PHONE: 2018653800 MAIL ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 FORMER COMPANY: FORMER CONFORMED NAME: HORN & HARDART CO /NV/ DATE OF NAME CHANGE: 19920703 8-K 1 HANOVER DIRECT, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) JULY 19, 1996 ----------------- HANOVER DIRECT, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) 1-12082 -------------------------- (Commission File Number) DELAWARE 13-0853260 ------------------------- -------------------- (State or other jurisdiction (I.R.S. Employer of incorporation) Identification Number) 1500 HARBOR BOULEVARD WEEHAWKEN, NEW JERSEY 07087 -------------------------- ----------- (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (201) 863-7300 -------------- -------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 Item 5. Other Events Hanover Direct, Inc., a Delaware corporation (the "Company"), commenced a distribution of transferable subscription rights (such rights, the "Rights" and such distribution, the "Rights Offering") to subscribe for and purchase additional shares of common stock, par value $.66-2/3 per share (the "Common Stock"), to the holders of record of its Common Stock, its 6% Series A Convertible Additional Preferred Stock, par value $.01 and stated value $10.00 per share (the "Series A Preferred Stock"), and its Series B Convertible Additional Preferred Stock, par value $.01 and stated value $10.00 per share (the "Series B Preferred Stock"), outstanding as of the close of business on Thursday, July 18, 1996 (the "Record Date"). In connection with the Rights Offering, the Company entered into a Subscription Agency Agreement with American Stock Transfer & Trust Company ("AST&T"), the Transfer Agent and Registrar of the Common Stock, pursuant to which AST&T was appointed as Subscription Agent for the Rights Offering. A copy of the Subscription Agency Agreement dated July 18, 1996 is attached hereto as Exhibit A. Also in connection with the Rights Offering, the Company entered into a Standby Purchase Agreement with NAR Group Limited ("NAR") providing for the purchase by NAR of all shares that are not purchased through the exercise of any non-exercised Rights if certain conditions are met. A copy of the Standby Purchase Agreement dated July 18, 1996 is attached hereto as Exhibit B. Rights have also been distributed to participants in the Company's 1994 Bonus Plan, 1995 Bonus Plan and All-Employee Equity Investment Plan with respect to the unvested shares granted to participants under each of these plans. Forms of correspondence pertaining to the Rights distributed to participants in each of the above plans are attached hereto as Exhibit C1, Exhibit C2 and Exhibit C3, respectively. Also attached hereto as Exhibit D is the form of Certification and Request For Additional Rights that allows broker-dealers registered with the Securities and Exchange Commission, commercial banks or trust companies, securities depositories or participants therein, or nominees therefor to request additional Rights on behalf of the beneficial owners thereof since, in connection with the Rights Offering, each holder of Common Stock will receive .51 Rights for each share of Common Stock held on the Record Date, each holder of Series A Preferred Stock will receive 3.72 Rights for each share of Series A Preferred Stock held on the Record Date and each holder of Series B Preferred Stock will receive .74 Rights for each share of Series B Preferred Stock held on the Record Date and any fractional Right will be rounded up to the nearest whole number. Finally, attached hereto as Exhibit E is a revised form of Subscription Certificate distributed in connection with the Rights Offering. Item 7. Exhibits. (c) Exhibits A. Subscription Agency Agreement dated as of July 18, 1996, by and between the Company and American Stock Transfer & Trust Company. B. Standby Purchase Agreement dated as of July 18, 1996, by and between the Company and NAR Group Limited. C1. Form of Letter to Participants in the Company's 1994 Bonus Plan. C2. Form of Letter to Participants in the Company's 1995 Bonus Plan. C3. Form of Letter to Participants in the Company's All-Employee Equity Investment Plan. D. Form of Certification and Request for Additional Rights. E. Form of Subscription Certificate. -2- 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HANOVER DIRECT, INC. ------------------------------------ (Registrant) July 25, 1996 By: /s/Wayne P. Garten ------------------------------------ Name: Wayne P. Garten Title: Executive Vice President & Chief Financial Officer -3- 4 EXHIBIT INDEX Exhibit A. Subscription Agency Agreement dated as of July 18, 1996, by and between the Company and American Stock Transfer & Trust Company. Exhibit B. Standby Purchase Agreement dated as of July 18, 1996, by and between the Company and NAR Group Limited. Exhibit C1. Form of Letter to Participants in the Company's 1994 Bonus Plan. Exhibit C2. Form of Letter to Participants in the Company's 1995 Bonus Plan. Exhibit C3. Form of Letter to Participants in the Company's All-Employee Equity Investment Plan. Exhibit D. Form of Certification and Request for Additional Rights. Exhibit E. Form of Subscription Certificate. -4- EX-99.A 2 SUBSCRIPTION AGREEMENT 1 Exhibit A SUBSCRIPTION AGENCY AGREEMENT SUBSCRIPTION AGENCY AGREEMENT (this "Agreement"), dated as of July 18, 1996, by and between Hanover Direct, Inc., a Delaware corporation (the "Company"), and American Stock Transfer and Trust Company, as Subscription Agent (the "Subscription Agent"). WHEREAS, the Company has caused a Registration Statement on Form S-3 (Registration No. 333-2743) under the Securities Act of 1933, as amended (the "Act"), to be filed with the Securities and Exchange Commission (the "Commission") relating to a proposed distribution by the Company of transferable subscription rights (the "Rights") and sale of newly issued shares of the Company's Common Stock, par value $.66 2/3 per share (the "Common Stock"), upon the exercise of such Rights (such Registration Statement, in the form in which it first becomes effective under the Act, and as it may thereafter be amended from time to time, is referred to herein as the "Registration Statement"; the distribution of the Rights and the sale of shares of Common Stock upon the exercise thereof as contemplated by the Registration Statement is referred to herein as the "Rights Offering"); WHEREAS, the Rights will be distributed to holders of record 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") as of the close of business on Thursday, July 18, 1996 (the "Record Date") at a rate of .51 Rights for each share of Common Stock, 3.72 Rights for each share of Series A Preferred Stock and .77 Rights for each share of Series B Preferred Stock held on the Record Date; WHEREAS, the Company has authorized the issuance of an aggregate number of authorized and unissued or treasury shares of Common Stock (the "Underlying Shares") equal to the aggregate number of rights to be distributed pursuant to the Rights Offering; WHEREAS, Rights holders will be entitled to subscribe to purchase at a per share price of $1.03 (the "Subscription Price") one Underlying Share for each Right held (the "Basic Subscription Privilege"); WHEREAS, NAR Group Limited ("NAR") will be entitled to subscribe to purchase any Underlying Shares that are not subscribed for through the Basic Subscription Privilege (the "Standby Purchase Commitment"); and WHEREAS, the Company desires the Subscription Agent to act on its behalf in connection with the Rights Offering as set forth herein, and the Subscription Agent is willing so to act; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto hereby agree as follows: -1- 2 SECTION 1. Appointment of Subscription Agent. The Company hereby appoints the Subscription Agent to act as agent for the Company in accordance with the instructions set forth in this Agreement, and the Subscription Agent hereby accepts such appointment. The Company may from time to time appoint such co-subscription agents as it may deem necessary or desirable. SECTION 2. Issue of Securities. (a) The Company has authorized the issuance of the Rights and, following the effectiveness of the Registration Statement and the Record Date, will issue such Rights to holders of record of shares of Common Stock as of the close of business on the Record Date as contemplated by the Registration Statement. The Company will promptly notify the Subscription Agent upon the effectiveness of the Registration Statement. As transfer agent and registrar for the shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock, the Subscription Agent shall provide such assistance as the Company may require in order to effect the distribution of the Rights to holders of record of shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock as of the close of business on the Record Date, including assistance in determining the number of Rights to be distributed to each such record holder and assistance in distributing the Subscription Certificates (as defined in Section 3(b) hereof) evidencing the Rights and all other ancillary documents. (b) The Company has authorized the issuance of and will hold in reserve the Underlying Shares, and upon the valid exercise of Rights, the Company will issue Underlying Shares to validly exercising Rights holders as set forth in the Prospectus. SECTION 3. Subscription Privileges; Form of Subscription Certificates. (a) Pursuant to the Basic Subscription Privilege, each Right grants to the holder thereof, upon the valid exercise of the Right pursuant to Section 7 hereof, the right to purchase from the Company one Underlying Share for the Subscription Price. (b) The Standby Purchase Commitment grants to NAR the right to purchase from the Company Underlying Shares to the extent that any Underlying Shares are not subscribed for through the Basic Subscription Privilege. (c) The Rights shall be evidenced by subscription certificates (the "Subscription Certificates"). The Subscription Certificates (and the form of election to exercise or transfer rights to be printed on the reverse thereof) shall be substantially in the form attached as Exhibit A hereto. The Subscription Certificates shall be fully transferable. SECTION 4. Signature and Registration. (a) The Subscription Certificates shall be executed on behalf of the Company by its President and Chief Executive Officer and by its Secretary by facsimile signature. Any Subscription Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Subscription Certificate, shall be a proper officer of the Company to sign such Subscription Certificate, even if at the date of the -2- 3 execution of this Agreement or the date of the actual issuance of such certificate any such person is not such an officer. (b) The Subscription Agent will keep or cause to be kept, at its principal offices in the State of New York, books for registration and transfer of the Rights issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights and the number of Rights evidenced by each outstanding Subscription Certificate. SECTION 5. Division, Combination and Exchange of Subscription Certificates; Mutilated, Destroyed, Lost or Stolen Subscription Certificates. (a) Subject to the provisions of Section 9 hereof, any Subscription Certificate, or any two or more Subscription Certificates, may be divided, combined or exchanged for any number of Subscription Certificates or for a single Subscription Certificate of different denomination; provided, however, that the aggregate number of Rights evidenced by the Subscription Certificate or Subscription Certificates so issued shall not exceed the aggregate number of Rights evidenced by the Subscription Certificate or Subscription Certificates surrendered in exchange therefor. The foregoing notwithstanding, a bank, trust company, securities dealer or broker holding shares of Common Stock on the Record Date for more than one beneficial owner may, by submitting a written request by 5:00 p.m., New York City time on August 1, 1996 and upon proper showing to the Subscription Agent, exchange its Subscription Certificate to obtain Subscription Certificates for the number of Rights which each such beneficial owner would have been entitled to receive pursuant to Section 9(a) hereof had each such beneficial owner been the holder of record of such beneficial owner's shares on the Record Date; provided, however, that the Company reserves the right to refuse to issue any such Subscription Certificate or Subscription Certificates if such issuance would be inconsistent with the principle that each beneficial owner's holding will be rounded up to the nearest whole Right. No Subscription Certificates evidencing fractional Rights will be issued upon division, combination or exchange of other Subscription Certificates, and any instructions to divide, combine or exchange Subscription Certificates which would result in the issuance of Subscription Certificates evidencing fractional Rights shall be rejected. (b) Any holder desiring to divide, combine or exchange any Subscription Certificate or Subscription Certificates shall make such requests in writing to the Subscription Agent, and shall surrender the Subscription Certificate or Subscription Certificates to be divided, combined or exchanged to the Subscription Agent. Thereupon the Subscription Agent shall deliver to the person entitled thereto a Subscription Certificate or Subscription Certificates, as the case may be, as so requested. In all cases of transfer by an attorney-in-fact, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Subscription Agent. In case of transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority satisfactory to the Subscription Agent shall be produced and may be required to be deposited and to remain with the Subscription Agent in its discretion. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any division, combination or exchange of Subscription Certificates. -3- 4 (c) Upon receipt by the Company and the Subscription Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Subscription Certificate, and, in case of loss, theft or destruction, of indemnity and/or security satisfactory to them, which may be in the form of an open penalty bond, and reimbursement to the Company and the Subscription Agent of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Subscription Certificate if mutilated, the Company will make and deliver a new Subscription Certificate of like tenor to the Subscription Agent for delivery to the registered owner in lieu of the Subscription Certificate so lost, stolen, destroyed or mutilated. If required by the Company or the Subscription Agent an indemnity bond must be sufficient in the judgment of both to protect the Company, the Subscription Agent or any agent thereof from any loss which any of them may suffer if a Subscription Certificate is replaced. SECTION 6. Subsequent Issue of Subscription Certificates. Subsequent to their original issuance, no Subscription Certificates shall be issued except (a) Subscription Certificates issued upon any transfer, combination, division or exchange of Rights pursuant to Section 5(a), Section 5(b) or Section 10 hereof, (b) Subscription Certificates issued in replacement of mutilated, destroyed, lost or stolen Subscription Certificates pursuant to Section 5(c) hereof and (c) Subscription Certificates issued pursuant to Section 7(g) hereof upon the partial exercise of any Subscription Certificate to evidence the unexercised portion of such Subscription Certificate. SECTION 7. Exercise of Rights; Exercise Price; Expiration Date. (a) The holder of any Subscription Certificate may exercise some or all of the Rights evidenced thereby (but not in amounts of less than one Right or an integral multiple thereof) by delivering to the Subscription Agent, on or prior to 5:00 p.m., New York City time, on Friday, August 16, 1996 (the "Expiration Date"), a properly completed and executed Subscription Certificate evidencing such Rights (with signatures guaranteed, if necessary, by a commercial bank or trust company having an office or correspondent in the United States or a member firm of a national securities exchange or a member of the National Association of Securities Dealers, Inc. (each, an "Eligible Institution")), together with payment of the Subscription Price (as hereinafter defined) for each Underlying Share subscribed for pursuant to the Basic Subscription Privilege and the Standby Purchase Commitment. In the case of holders of Rights that are held of record through The Depository Trust Company ("DTC"), exercises of the Basic Subscription Privilege may be effected by instructing DTC to transfer Rights from the DTC account of such holder to the DTC account of the Subscription Agent, together with payment of the Subscription Price for each Underlying Share subscribed for pursuant to the Basic Subscription Privilege. Alternatively, the holder of any Subscription Certificate may exercise the Rights evidenced thereby by effecting compliance with the procedures for guaranteed delivery set forth in Section 7(b) below. (b) If a holder wishes to exercise Rights, but time will not permit such holder to cause the Subscription Certificate or Subscription Certificates evidencing such Rights to reach the Subscription Agent on or prior to the Expiration Date, such Rights may nevertheless be exercised if all of the following conditions (the "Guaranteed Delivery Procedures") are met: -4- 5 (i) such holder has caused payment in full of the Subscription Price for each Underlying Share being subscribed for pursuant to the Basic Subscription Privilege to be received (in the manner set forth in Section 7(d) hereof) by the Subscription Agent on or prior to the Expiration Date; (ii) the Subscription Agent receives, on or prior to the Expiration Date, a guarantee notice (a "Notice of Guaranteed Delivery"), substantially in the form provided with the Instructions as to Use of Subscription Certificates (the "Instructions") distributed with the Subscription Certificates, from an Eligible Institution, stating the name of the exercising Rights holder, the number of Rights represented by the Subscription Certificate or Subscription Certificates held by such exercising Rights holder, the number of Underlying Shares being subscribed for pursuant to the Basic Subscription Privilege, and guaranteeing the delivery to the Subscription Agent of the Subscription Certificate evidencing such Rights at or prior to 5:00 p.m., New York City time, on the date three American Stock Exchange ("AMEX") trading days following the date of the Notice of Guaranteed Delivery; and (iii) the properly completed Subscription Certificate(s) evidencing the Rights being exercised, with any required signatures guaranteed, are received by the Subscription Agent, or such Rights are transferred into the DTC account of the Subscription Agent, at or prior to 5:00 p.m., New York City time, on the date three AMEX trading days following the date of the Notice of Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery may be delivered to the Subscription Agent in the same manner as Subscription Certificates at the addresses set forth above, or may be transmitted to the Subscription Agent by telegram or facsimile transmission (telecopy no. (718) 236-4588 or (718) 234-5001). (c) The Rights shall expire at 5:00 p.m., New York City time, on the Expiration Date. (d) The "Subscription Price" shall be $1.03 per share of Common Stock subscribed for pursuant to the Subscription Privilege payable (in United States dollars) (i) by check or bank draft drawn upon a U.S. bank or postal, telegraphic or express money order payable to the Subscription Agent, as Subscription Agent, or (ii) by wire transfer of funds to the account maintained by the Subscription Agent for such purpose at the Chase Manhattan Bank, Account No. 323053807; ABA No. 021000021 (the "Bank Account"). The Subscription Price shall be deemed to have been received by the Subscription Agent only upon (i) clearance of any uncertified check, (ii) receipt by the Subscription Agent of any certified check or bank draft or postal, telegraphic or express money order or (iii) receipt of good funds in the Subscription Agent's account designated above, in payment of the Subscription Price. (e) If an exercising Rights holder has not indicated the number of Rights being exercised, or if the Subscription Price payment forwarded by such holder to the Subscription Agent is not sufficient to purchase the number of shares subscribed for, the Rights holder will be deemed to have exercised the Basic Subscription Privilege with respect to the maximum number of whole Rights which may be exercised for the Subscription Price -5- 6 delivered to the Subscription Agent and, to the extent that the Subscription Price payment delivered by such holder exceeds the Subscription Price multiplied by the maximum number of whole Rights which may be exercised (such excess being the "Subscription Excess"), the Subscription Agent, as soon as practicable after such exercise of Rights, shall mail to such Rights holder the Subscription Excess paid by such holder without interest or deduction. (f) All the funds received by the Subscription Agent in payment of the Subscription Price for Underlying Shares subscribed for pursuant to the Basic Subscription Privilege shall be held by the Subscription Agent in escrow in the Bank Account. Upon receipt by the Subscription Agent of a notice of satisfaction or waiver of the conditions to the standby purchase commitment from the Company substantially in the form of Annex A hereto on or before the Expiration Date, the Subscription Agent shall and is hereby directed to withdraw from the Bank Account and pay to, credit to the account of or otherwise transfer to the Company all such funds on Friday, August 23, 1996 (the "Closing Date"). Upon receipt by the Subscription Agent of a notice of failure to satisfy or waive the conditions to the standby purchase commitment from the Company substantially in the form of Annex B hereto on or before the Expiration Date, the Subscription Agent shall and is hereby directed to withdraw from the Bank Account and return to exercising Rights holders all such funds as promptly as practicable following the Expiration Date. (g) In case the holder of any Subscription Certificate shall exercise less than all the Rights evidenced thereby, a new Subscription Certificate evidencing the number of Rights remaining unexercised shall be issued by the Subscription Agent to the registered holder of such Subscription Certificate or to his duly authorized assigns, subject to the provisions of Section 9 hereof. (h) The Subscription Agent is authorized to accept only Subscription Certificates (other than Subscription Certificates delivered in accordance with the procedure for guaranteed delivery set forth in Section 7(b)), or transfers of Rights to its account at DTC, received prior to 5:00 p.m., New York City time, on the Expiration Date. (i) Once a holder of Rights has exercised a Right, such exercise may not be revoked. (j) Unless a Subscription Certificate (i) provides that the Underlying Shares to be issued pursuant to the exercise of Rights represented thereby are to be delivered to the holders of such Rights or (ii) is submitted for the account of an Eligible Institution, signatures on such Subscription Certificate must be guaranteed by an Eligible Institution. SECTION 8. Delivery of Stock Certificates. (a) As soon as practicable after the Expiration Date, the Subscription Agent shall deliver to such exercising Rights holder certificates representing the shares of Common Stock purchased pursuant to the Basic Subscription Privilege. (b) As soon as practicable after the Expiration Date, the Subscription Agent shall deliver to NAR Certificates representing the shares of Common Stock purchased pursuant to the Standby Purchase Commitment. -6- 7 SECTION 9. Fractional Rights and Shares. (a) The Company shall not issue fractions of Rights nor shall the Subscription Agent distribute Subscription Certificates which evidence fractional Rights. The number of Rights issued to each holder will be rounded up to the nearest whole number. All questions as to the validity and eligibility of any rounding of fractional Rights shall be determined by the Company in its sole discretion, and its determination shall be final and binding. (b) The Company shall not issue fractional shares of Common Stock to exercising Rights holders upon exercise and acceptance of Rights. SECTION 10. Transfer of Rights. (a) Any holder may transfer (a) all of the Rights evidenced by a Subscription Certificate by properly endorsing the Subscription Certificate for transfer in accordance with the instructions accompanying the Subscription Certificate or (b) some of the Rights evidenced by a Subscription Certificate (but not fractional Rights) by delivering to the Subscription Agent such Subscription Certificate properly endorsed for transfer, with instructions to register the Rights to be transferred in the name of the transferee (and to issue a new Subscription Certificate to the transferee evidencing such transferred Rights). In such event, the Subscription Agent shall issue a new Subscription Certificate evidencing the balance of the Rights to the holder or, if so instructed, to an additional transferee. (b) Any holder may place an order with the Subscription Agent to sell all or some of the Rights evidenced by a Subscription Certificate by delivering to the Subscription Agent such Subscription Certificate properly executed for sale. If only a portion of the Rights evidenced by a single Subscription Certificate are to be sold, such Subscription Certificate must be accompanied by instructions setting forth the action to be taken with respect to the Rights that are not to be sold. Upon the timely receipt by the Subscription Agent of appropriate instructions to sell Rights, the Subscription Agent will use its best efforts to complete the sale and, promptly following the Expiration Date, the Subscription Agent will send the Rights holder a check for the net proceeds from the sale of any Rights sold. If the Rights can be sold, sales of such Rights will be deemed to have been effected at the weighted average price received on the day such Rights are sold, less any applicable commissions, taxes and other direct expenses of sale. The Subscription Agent will also attempt to sell all Rights which remain unclaimed as a result of Subscription Certificates being returned by the postal authorities to the Subscription Agent as undeliverable as of the fourth business day prior to the Expiration Date. Such sales will be made net of commissions on behalf of the nonclaiming Rights holders. The Subscription Agent will hold the proceeds from those sales for the benefit of such nonclaiming Rights holders until such proceeds are either claimed or escheat. The Subscription Agent's obligation to execute orders is subject to its ability to find buyers. There can be no assurance that the Subscription Agent will be able to sell any Rights or as to the prices the Subscription Agent may be able to obtain in such sales. In connection therewith, the Subscription Agent agrees that it (i) is acting solely on behalf and for the benefit of such holders who wish to sell their Rights and not as agent, or on behalf, of the Company, (ii) shall not accept any instructions from the Company with respect to the timing of such sales and (iii) shall effect all such sales in accordance with applicable law. -7- 8 SECTION 11. Foreign and Certain Other Stockholders. The Subscription Agent shall not mail Subscription Certificates to holders of Common Stock whose addresses are outside the U.S. The Subscription Agent shall hold such Subscription Certificates for the account of such holders and upon notice from such holders shall exercise the Rights on their behalf. To so exercise such Rights, such stockholders must notify the Subscription Agent not later than 11:00 a.m., New York City time, on Tuesday, August 13, 1996. If no instructions have been received, the Subscription Agent will use its best efforts to sell the Rights. The net proceeds, if any, from the sale of those Rights by the Subscription Agent will be remitted to such holders by the Subscription Agent. If the Rights can be sold, sales of such Rights will be deemed to have been effected at the weighted average price received by the Subscription Agent for the sale of all Rights through the Subscription Agent, less any applicable brokerage commissions, taxes and other expenses. In connection therewith, the Subscription Agent agrees that it (i) is acting solely on behalf and for the benefit of such holders who wish to sell their Rights and not as agent, or on behalf, of the Company, (ii) shall not accept any instructions from the Company with respect to the timing of such sales, and (iii) shall effect all such sales in accordance with applicable law. SECTION 12. Reports. The Subscription Agent shall notify both the Company and its designated representatives (including the Information Agent, Morrow & Co., Inc.) by telephone as requested during the period commencing with the mailing of Subscription Certificates and ending on the Expiration Date (and in the case of guaranteed deliveries pursuant to Section 7(b), the period ending three AMEX trading days after the Expiration Date), which notice shall thereafter be confirmed in writing, of (i) the number of Rights exercised on the day of such request, (ii) the number of Underlying Shares subscribed for pursuant to the Basic Subscription Privilege and the number of such Rights for which payment has been received, (iii) the number of Rights subject to guaranteed delivery pursuant to Section 7(b) on such day, (iv) the number of Rights for which defective exercises have been received on such day and (v) cumulative totals derived from the information set forth in clauses (i) through (iv) above. At or before noon p.m., New York City time, on the first AMEX trading day following the Expiration Date, the Subscription Agent shall certify in writing to the Company the cumulative totals through the Expiration Date derived from the information set forth in clauses (i) through (iv) above. The Subscription Agent shall also maintain and update a listing of holders who have fully or partially exercised their Rights, holders who have transferred their Rights and their transferees and holders who have not exercised their Rights. The Subscription Agent shall provide the Company or its designated representatives with the information compiled pursuant to this Section 12 as any of them shall request. The Subscription Agent hereby represents, warrants and agrees that the information contained in each notification referred to in this Section 12 shall be accurate in all material respects. SECTION 13. Future Instructions and Interpretation. (a) All questions as to the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Company, whose determinations shall be final and binding. The Company in its sole discretion may waive any defect or irregularity, permit a defect or irregularity to be corrected within such time as it may determine or reject the purported exercise of any Right. Subscriptions will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Company determines in its sole discretion. Neither the Company nor the Subscription Agent shall be -8- 9 under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Certificates or incur any liability for failure to give such notification. (b) The Subscription Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from an authorized officer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. SECTION 14. Payment of Taxes. The Company covenants and agrees that it will pay when due and payable all documentary, stamp and other taxes, if any, which may be payable in respect of the issuance or delivery of any Subscription Certificate or of the Underlying Shares; provided, however, that the Company shall not be liable for any tax liability arising out of any transaction which results in, or is deemed to be, an exchange of Rights or shares or a constructive dividend with respect to the Rights or shares and provided further that the Company shall not be required to pay any tax or other governmental charge which may be payable in respect of any transfer involved in the transfer or delivery of any Subscription Certificate or the issuance or delivery of certificates for shares of Common Stock in a name other than that of the registered holder of such Subscription Certificate evidencing the Rights exercised or transferred, and the Subscription Agent shall not register any such transfer or issue any such certificate until such tax or governmental charge, if required, shall have been paid. SECTION 15. Cancellation and Destruction of Subscription Certificates. All Subscription Certificates surrendered for the purpose of exercise, exchange, substitution or transfer shall be canceled by the Subscription Agent, and no Subscription Certificates shall be issued in lieu thereof except as expressly permitted by provisions of this Agreement. The Company shall deliver to the Subscription Agent for cancellation and retirement, and the Subscription Agent shall so cancel and return, any other Subscription Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Subscription Agent shall deliver all canceled Subscription Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Subscription Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. SECTION 16. Right of Action. All rights of action in respect of this Agreement are vested in the Company and the respective registered holders of the Subscription Certificates, and any registered holder of any Subscription Certificate, without the consent of the Subscription Agent or of the holder of any other Subscription Certificate, may, on his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Subscription Certificate in the manner provided in such Subscription Certificate and in this Agreement. -9- 10 SECTION 17. Concerning the Subscription Agent; Indemnification. (a) The Company agrees to pay to the Subscription Agent compensation in accordance with the fee letter attached hereto as Exhibit B for all services rendered by it hereunder and, from time to time, on demand of the Subscription Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. (b) The Company also agrees to indemnify and hold the Subscription Agent harmless against any losses, claims, damages, liabilities, costs or expenses (including reasonable fees and disbursements of legal counsel) which the Subscription Agent may incur or become subject to arising from or out of any claim or liability resulting from actions taken as Subscription Agent pursuant to this Agreement; provided, however, that such covenant and agreement does not extend to, and the Subscription Agent shall not be indemnified or held harmless with respect to, such losses, claims, damages, liabilities, costs or expenses incurred or suffered by the Subscription Agent as a result, or arising out, of the Subscription Agent's negligence, misconduct, bad faith or breach of this Agreement. In connection therewith: (i) in no case shall the Company be liable with respect to any claim against the Subscription Agent unless the Subscription Agent shall have notified the Company in writing of the assertion of a claim against it or of any action commenced against it, promptly after the Subscription Agent shall have notice of a claim or shall have been served with the summons or other legal process giving information as to the nature and basis of the claim; provided, however, that the failure of the Subscription Agent to notify the Company in the above manner will absolve the Company of liability only when such failure will result or has resulted in prejudice to the Company with respect to such claim or action; (ii) the Company shall be entitled to participate at its own expense in the defense of any suit brought to enforce any such claim and, if the Company so elects, it shall assume the defense of any such suit, in which event the Company shall not be liable for the fees and expenses of any additional counsel that the Subscription Agent may retain, so long as the Company shall retain counsel satisfactory to the Subscription Agent, in the exercise of the Subscription Agent's reasonable judgment, to defend such suit; and (iii) the Subscription Agent agrees not to settle any litigation in connection with any claim or liability with respect to which it may seek indemnification from the Company without the prior written consent of the Company. (c) The Subscription Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it without negligence and in good faith in connection with its administration of this Agreement in reliance upon any Subscription Certificate, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged by the proper person or persons. SECTION 18. Merger or Consolidation of Subscription Agent. Any corporation into which the Subscription Agent or any successor Subscription Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Subscription Agent or any successor Subscription Agent shall be a party, or any corporation succeeding to the corporate trust business of the Subscription Agent or any successor Subscription Agent shall be the successor to the Subscription Agent -10- 11 under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto. SECTION 19. Duties of Subscription Agent. The Subscription Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Subscription Certificates by their acceptance thereof shall be bound: (a) The Subscription Agent may consult with legal counsel (who may be, but is not required to be, legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Subscription Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Subscription Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President or a Vice President (including any Senior or Executive Vice President) and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company and delivered to the Subscription Agent; and such certificate shall be full authorization to the Subscription Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Subscription Agent shall be liable hereunder only for its own negligence or willful misconduct. (d) The Subscription Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Subscription Certificates or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Subscription Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Subscription Agent) or in respect of the validity or execution of any Subscription Certificate; nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Subscription Certificate; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Subscription Certificate or as to whether any shares of Common Stock will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by -11- 12 the Subscription Agent for the carrying out or performing by the Subscription Agent of the provisions of this Agreement. (g) Nothing herein shall preclude the Subscription Agent from acting in any other capacity for the Company. (h) The Subscription Agent shall comply with the information and backup withholding requirements of the Internal Revenue Code of 1986, as amended (the "Code"), including without limitation, where appropriate, on a timely basis, filing with the Internal Revenue Service and furnishing to holders of Rights duly completed Forms 1099B and 1099DIV. The Subscription Agent shall also collect and duly preserve Forms W-8 and W-9 and other forms or information necessary to comply with the backup withholding requirements of the Code. (i) The Subscription Agent shall withhold from payments made to record owners amounts sufficient to comply with the backup withholding requirements of the Code. For purposes of backup withholding that may be applicable in respect of Rights distributed to record owners other than foreign holders, the Subscription Agent shall withhold and sell Rights on behalf of such record owners in amounts necessary to satisfy such backup withholding requirements. SECTION 20. Notices to the Company, Holders and Subscription Agent. All notices and other communications provided for or permitted hereunder shall be made by hand delivery, prepaid first-class mail, or telecopier: (a) if to the Company, to: Hanover Direct, Inc. 1500 Harbor Boulevard Weehawken, New Jersey 07087 Attention: Edward J. O'Brien Telecopier: (201) 392-5005 (b) if to the Subscription Agent, to: American Stock Transfer & Trust Company 6201 Fifteenth Avenue Brooklyn, New York 11219 Attention: Donna Ansbro and Herbert Lemmer Telecopier: (718) 236-4588 or (718) 234-5001 (c) if to a registered holder, at the address shown on the registry books of the Company. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; two business days after being -12- 13 deposited in the mail, postage prepaid, if mailed as aforesaid; and when receipt is acknowledged, if telecopied. SECTION 21. Supplements and Amendments. The Company and the Subscription Agent may from time to time supplement or amend this Agreement without the approval of any holders of Subscription Certificates in order to cure any ambiguity or to correct or supplement any provision maintained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Subscription Agent may deem necessary or desirable and which shall not adversely affect the interests of the holders of the Subscription Certificates. SECTION 22. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Subscription Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 23. Termination. This Agreement shall terminate at 5:00 p.m., New York City time, on the thirtieth day following the Expiration Date. Upon termination of this Agreement, and provided that all shares of Common Stock for Rights accepted for execution prior to such termination are issued and delivered by the Company, the Company shall be discharged from all obligations under this Agreement except for its obligation to the Subscription Agent under Section 17 hereof and except with respect to the obligation of the Company to provide instruction and direction to the Subscription Agent as may be provided in this Agreement. SECTION 24. Governing Law. This Agreement and each Subscription Certificate shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal laws of said State. SECTION 25. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Subscription Agent and the holders of the Subscription Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Subscription Agent and the holders of the Subscription Certificates. SECTION 26. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. SECTION 27. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -13- 14 IN WITNESS WHEREOF, each of the parties hereto has caused the Agreement to be duly executed as of the date first above written. HANOVER DIRECT, INC. By: /s/ Edward J. O'Brien --------------------------------- Title: Senior Vice President, Treasurer and Secretary AMERICAN STOCK TRANSFER & TRUST COMPANY, Subscription Agent By:/s/ Herbert J. Lemmer --------------------------------- Title: Vice President -14- 15 EXHIBIT A FORM OF SUBSCRIPTION CERTIFICATE [Intentionally omitted] -15- 16 EXHIBIT B SUBSCRIPTION AGENT'S FEE LETTER [AMERICAN STOCK TRANSFER & TRUST COMPANY LETTERHEAD] JULY 18, 1996 Edward J. O'Brien Hanover Direct, Inc. 1500 Harbor Boulevard Weehawken, NJ 07087 Dear Mr. O'Brien: This is to confirm that American Stock Transfer & Trust Company will act as Hanover Direct, Inc.'s Subscription Agent and will perform the following services: - Mailing material to shareholders; - Issuing certificates to subscribing shareholders; - Curing all deficient items; - Collecting checks; - Remitting payments to the company; - Researching all problem items; - Communicating with shareholders; - Communicating with Depository Trust Company and all the brokers regarding their respective record date positions; - Changing addresses; and - Reporting to company on daily totals. Our fee will be $50,000.00 plus out-of-pocket expenses limited to postage, envelopes and 1099 forms. Payment will be due to us upon completion of the offering. Looking forward to working with you. Please rest assured that we will do everything in our power to merit your goodwill and confidence. Very truly yours, AMERICAN STOCK TRANSFER & TRUST COMPANY /s/ GEORGE KARFUNKEL ------------------ George Karfunkel GK/gg -16- 17 ANNEX A FORM OF NOTICE [Company's Letterhead] August __, 1996 Notice of Satisfaction/Waiver of Standby Purchase Conditions American Stock Transfer & Trust Company 6201 Fifteenth Avenue Brooklyn, New York 11219 Attention: Donna Ansbro and Herbert Lemmer Re: Disbursement of Funds Dear Sirs: Pursuant to Section 7(f) of the Subscription Agency Agreement, dated as of July 18, 1996 (the "Agreement"), by and between Hanover Direct, Inc., a Delaware corporation (the "Company"), and American Stock Transfer and Trust Company, as Subscription Agent (the "Subscription Agent"), you are hereby notified that all the conditions set forth in that certain Standby Purchase Agreement, dated July 18, 1996, between the Company and NAR Group Limited, a British Virgin Islands corporation ("NAR"), have been satisfied or otherwise waived by NAR. Capitalized terms used but not defined herein have the meanings set forth in the Agreement. Accordingly you are hereby directed to withdraw from the Bank Account and pay to, credit to the account of or otherwise transfer to the Company all the funds in the Bank Account on Friday, August 23, 1996 as provided in Section 7(f) of the Agreement. IN WITNESS WHEREOF, the Company has duly caused this Notice to be delivered to you in accordance with the terms of the Agreement. HANOVER DIRECT, INC. By:___________________________ Name: Title: -17- 18 ANNEX B FORM OF NOTICE [Company's Letterhead] August __, 1996 Notice of Failure to Satisfy or Waive Conditions of Standby Purchase American Stock Transfer & Trust Company 6201 Fifteenth Avenue Brooklyn, New York 11219 Attention: Donna Ansbro and Herbert Lemmer Re: Disbursement of Funds Dear Sirs: Pursuant to Section 7(f) of the Subscription Agency Agreement, dated as of July 18, 1996 (the "Agreement"), by and between Hanover Direct, Inc., a Delaware corporation (the "Company"), and American Stock Transfer and Trust Company, as Subscription Agent (the "Subscription Agent"), you are hereby notified that certain of the conditions set forth in that certain Standby Purchase Agreement, dated July 18, 1996, between the Company and NAR Group Limited, a British Virgin Islands corporation ("NAR"), have not been satisfied or otherwise waived by NAR. Capitalized terms used but not defined herein have the meanings set forth in the Agreement. Accordingly you are hereby directed to withdraw from the Bank Account and return to exercising Rights holders all such funds as promptly as practicable following the Expiration Date as provided in Section 7(f) of the Agreement. IN WITNESS WHEREOF, the Company has duly caused this Notice to be delivered to you in accordance with the terms of the Agreement. HANOVER DIRECT, INC. By: __________________________ Name: Title: -18- EX-99.B 3 PURCHASE AGREEMENT 1 Exhibit B Standby Purchase Agreement Hanover Direct, Inc. 48,554,000 Shares Common Stock ($.66 2/3 par value) Standby Purchase Agreement New York, New York July 18, 1996 NAR Group Limited 127 East 73rd Street New York, New York 10021 Ladies and Gentlemen: Hanover Direct, Inc., a Delaware corporation (the "Company"), proposes to offer approximately 48,544,000 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 Thursday, July 18, 1996 (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"). The Rights will expire at 5:00 P.M., New York City time, on Friday, August 16, 1996 (such date and time, the "Expiration Date"). The Company proposes to sell to NAR Group Limited, a British Virgin Islands corporation ("NAR"), or NAR's designee an aggregate of 100% of such number of Non-NAR 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 NAR or its affiliate by the exercise of Rights (the "Non-NAR Shares"). The Company's obligation to sell and deliver the Securities to NAR shall be contingent on NAR'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 and the subscription and purchase of Common Stock upon the terms described in the Prospectus (as hereinafter defined), including the purchase by NAR of the Securities pursuant to this Agreement, are herein collectively referred to as the "Rights Offering." -1- 2 1. Representations and Warranties. (a) The Company represents and warrants to, and agrees with, NAR as set forth below in this Section 1(a). Certain terms used in Section 1 are defined in paragraphs (i) and (xx) 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 has filed with the Securities and Exchange Commission (the "Commission") a registration statement (registration number 333-2743) 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 may have filed one or more amendments thereto, each of which has previously been furnished to NAR. The Company will next file with the Commission either (A) prior to effectiveness of such registration statement, a further 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 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, except to the extent NAR shall agree in writing to a modification, shall be in all substantive respects in the form furnished to NAR prior to the Execution Time or, to the extent not completed at the Execution Time, shall contain only such specific additional information and other changes as the Company has advised NAR, prior to the Execution Time, will be included or made therein. 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 did or 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 did not or 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 did -2- 3 not or 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 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 NAR or relating to NAR or its affiliates 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 NAR, 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) Arthur Andersen LLP, which has reported upon the audited financial statements and schedules incorporated by reference in the Registration Statement and the Prospectus, are 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 duly organized, validly existing and in good standing under the laws of the State of 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. -3- 4 (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 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 30, 1995, as amended. (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). (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) The Company has 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) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated or described therein or contemplated thereby, there has not been (i) any material adverse change in the condition (financial or otherwise), results of operations, earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business, or (ii) any dividend or distribution of any kind declared, paid or made by the Company on its capital stock other than regular periodic dividends and other than the Rights. -4- 5 (xiv) 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 such defaults that in the aggregate would not have a material adverse effect on the condition (financial or otherwise), results of operations, earnings, business affairs or business prospects 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 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, earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise). (xv) 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. (xvi) 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 are not described and filed as required. (xvii) 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. (xviii) The Rights are duly authorized for trading on a when-issued and, subject only to official notice of issuance, regular way basis on the American Stock Exchange. -5- 6 The Securities, when issued, will be authorized for listing on said Exchange, subject only to official notice of issuance. (xix) The proceeds of the Rights Offering will be applied as set forth in the Prospectus. (xx) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term "the 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 Execution Time (or, if not effective at the Execution Time, in the form 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) NAR represents and warrants to, and agrees with, the Company as set forth below in this Section 1(b). (i) NAR 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 NAR and, assuming due execution and delivery of this Agreement by the Company, constitutes a legal, valid and binding obligation of NAR, enforceable against NAR 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 laws and/or public policy. (ii) To the extent that the Registration Statement contains any information concerning NAR furnished in writing to the Company by or on behalf of NAR specifically for inclusion therein, on the Effective Date the Registration Statement did or 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 Exchange Act and the respective rules thereunder with respect to such information; to the extent that the Registration Statement contains any information concerning NAR furnished in writing to the Company by or on behalf of NAR specifically for inclusion therein, on the Effective Date, the Registration Statement did not or will not contain any untrue statement of a material fact or omit to state -6- 7 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 NAR furnished in writing to the Company by or on behalf of NAR specifically for inclusion therein, the Prospectus, if not required to be filed pursuant to Rule 424(b), did not or 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 NAR hereunder, the consummation by NAR of the transactions contemplated in this Agreement, the Registration Statement and the Prospectus and compliance by NAR with the terms of this Agreement do not and will not result in any violation of the memorandum or articles of association of NAR, 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 NAR or any of its subsidiaries under (A) any indenture, mortgage, loan agreement, note, lease or other agreement or instrument to which NAR 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 NAR 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, earnings, business affairs or business prospects of NAR and its subsidiaries considered as one enterprise). (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 Non-NAR Shares to be purchased by NAR hereunder as set forth in the Registration Statement and the Prospectus and the consummation by NAR 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 NAR, and NAR 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 Non-NAR Shares, if any. As compensation to NAR for its commitment hereunder, the Company agrees to pay to NAR, on the Closing Date (as hereinafter defined) or at such other time and date as NAR and the Company may agree in writing, an amount equal to 1% (the "Standby Fee") in respect of the aggregate offering price of the aggregate number of Non-NAR Shares issuable upon exercise of the Rights granted to holders of Common Stock plus an additional amount -7- 8 equal to 4% of the aggregate offering price (the "Take-Up Fee") in respect of all Non-NAR shares, if any, purchased by NAR pursuant to its commitment hereunder; provided, however, that the Company shall pay to NAR on the Closing Date (as hereinafter defined) the Standby Fee and, if any, the Take-Up Fee in cash or shares of the Company's Common Stock (with each such share being attributed a value of $1.03 by the parties hereto), or any combination of cash and shares of Common Stock as NAR shall decide in its sole discretion. NAR shall communicate its election to receive the Standby Fee and, if any, the Take-Up Fee in cash or shares of Common Stock or combinations of both by delivering a signed writing evidencing such election to the Company on the Closing Date (as hereinafter defined). Notwithstanding the foregoing, NAR 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 Theodore H. Kruttschnitt as of the date hereof if (i) at the date hereof, he furnishes to NAR an undertaking to exercise the Rights distributed to him with respect to such shares and (ii) upon the closing of the Rights Offering, Mr. Kruttschnitt purchases the shares which he undertakes to purchase. If the closing for the sale of the Non-NAR 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 (xiv), (xv) and (xvi) of Section 1(a)) 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 (xiv), (xv) and (xvi) of Section 1(a)), the Company shall pay NAR the entire amount of the Standby Fee. 3. Delivery and Payment. Delivery and payment for the Non-NAR Shares shall be made at 10:00 A.M., New York City time, on the fifth business day following the Expiration Date (or Friday, August 23, 1996), which date and time may be postponed (to a date not later than August 30, 1996) by agreement between NAR 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 NAR against payment by NAR of the aggregate purchase price of the Non-NAR Shares being sold by the Company, by certified or official bank check or checks drawn on or by a New York Clearing House bank or 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. Payment of all or part of the aggregate purchase price of the NON-NAR Shares may also be made by NAR by the surrender and cancellation of the Company's subordinated promissory note, dated May 31, 1996, in the amount of $25 million. Concurrently therewith, the Company shall pay to NAR interest on the principal amount outstanding under such note as provided therein. Delivery of the Non-NAR Shares shall be made at such location as NAR shall reasonably designate at least one business day in advance of the Closing Date and payment for such Non-NAR Shares shall be made at the office of Whitman Breed Abbott & Morgan, 200 Park Avenue, New York, New York 10166. Certificates for the Non-NAR Shares shall be registered in such names and in such denominations as NAR may request not less than forty-eight hours in advance of the Closing Date. -8- 9 The Company agrees to have the Non-NAR Shares available for inspection, checking and packaging by NAR in New York, New York, not later than 1:00 P.M. on the business day prior to the Closing Date. 4. No Offering by NAR. It is understood that NAR does not intend to offer the shares of Common Stock owned by it (including, but not limited to, the Non-NAR Shares) for sale to the public. 5. Agreements. (a) The Company agrees with NAR that: (i) The Company will use its best efforts to cause the Registration Statement, if not effective at the Execution Time, 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 NAR'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 NAR of such timely filing. The Company will promptly advise NAR (A) when the Registration Statement, if not effective at the Execution Time, 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 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. -9- 10 (iii) As soon as practicable, the Company will make generally available to its security holders and to NAR 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 NAR, without charge, signed copies of the Registration Statement (including exhibits thereto) and as many copies of the Prospectus and any supplement thereto as NAR 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 NAR 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. (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 NAR. (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 NAR. The obligations of NAR 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 Execution Time 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) If the Registration Statement has not become effective prior to the Execution Time, unless NAR agrees in writing to a later time, 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 Friday, July 19, 1996; 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 Execution Time and at the Closing Date, the Company shall have furnished to NAR certificates of the Company, dated respectively as of the Execution Time and the Closing Date and signed by any two executive officers of the Company, to the -10- 11 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 Execution Time or on and as of the Closing Date, as the case may be, with the same effect as if made at the Execution Time 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 Execution Time or Closing Date, as applicable; (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; and (iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto), there has been no material adverse change in the condition (financial or other), earnings, business, business prospects or properties of the Company and its subsidiaries, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto). (c) Intentionally omitted. (d) Subsequent to the Execution Time or, if earlier, the date as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not have been any change, or any development involving a prospective change, in or affecting the business (including the results of operations or management) or properties of the Company and its subsidiaries the effect of which is, in the reasonable judgment of NAR, so material and adverse as to make it impractical or inadvisable to proceed with the offering or the delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto). (e) The Company shall have commenced mailing the Subscription Certificates to record holders of the Common Stock not later than three days following the Record 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 Friday, August 16, 1996. The Company shall have advised NAR daily during the period when the Rights are exercisable of the number of shares of Common Stock subscribed for, and prior to 12:00 Noon, New York City time, on the business day following the Expiration Date, shall have advised NAR of the number of shares of Common Stock subscribed for and of the number of Non-NAR Shares. (f) Prior to the Closing Date, the Company shall have furnished to NAR such further information, certificates and documents as NAR may reasonably request. -11- 12 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, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to NAR and its counsel, this Agreement and all obligations of NAR hereunder may be canceled at, or at any time prior to, the Closing Date by NAR. Notice of such cancellation shall be given to the Company in writing or by telephone or telegraph confirmed in writing. 7. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless NAR, the directors, officers, partners, employees and agents of NAR and each person who controls NAR 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 NAR pursuant to, and the performance by NAR 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 NAR 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 NAR pursuant to, or the performance by NAR 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 bad faith or gross negligence or a breach by NAR of its obligations under this Agreement. (b) NAR 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 NAR, but only with reference to written information relating to NAR furnished to the Company by NAR specifically for inclusion in -12- 13 the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which NAR may otherwise have. The Company acknowledges that the statements set forth in the fifth paragraph under the heading "THE COMPANY" and in the first two sentences of the paragraph under the caption "Potential Conflicts of Interest" under the heading "RISK FACTORS" in the Prospectus constitute the only information furnished by or on behalf of NAR for inclusion in the Prospectus, and NAR confirms that such statements are correct. (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 indemnifying 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. -13- 14 (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 NAR 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 NAR, 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 NAR, on the other hand, from the purchase of the Securities; provided, however, that in no case shall NAR be responsible for any amount in excess of the aggregate compensation paid hereunder to NAR in respect of the Securities purchased by NAR hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company, on the one hand, and NAR, 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 NAR, 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 benefits received by NAR shall be deemed to be equal to the total compensation paid to NAR hereunder. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company or NAR. The Company and NAR 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 NAR within the meaning of either the Act or the Exchange Act and each director, officer, partner, employee and agent of NAR shall have the same rights to contribution as NAR, 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 NAR, by notice given to the Company prior to delivery of and payment for the Non-NAR 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 NAR 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 NAR 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 Non-NAR 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. -14- 15 10. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to NAR, will be mailed, delivered or telegraphed and confirmed to it at Integro Trust (BVI) Limited, Tropic Isle Building, Wickhams Cay, P.O. Box 438, Road Town, Tortola, British Virgin Islands, or at such other address as NAR may hereafter designate by notice to the Company, with a copy to Quadrant Management, Inc. at 127 East 73rd Street, New York, New York 10021, Attention: Thomas A. Huser, Esq., Facsimile Number 212-439-9450 or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 1500 Harbor Boulevard, Weehawken, New Jersey 07087, Attention: Secretary, Facsimile Number 201-392-5005, or at such other address as the Company may hereafter designate by notice to NAR, with a copy to Whitman Breed Abbott & Morgan, 200 Park Avenue, New York, New York 10166, Attention: Monte E. Wetzler, Esq., Facsimile Number 212-351-3131. 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 NAR may assign its rights hereunder to one or more direct or indirect wholly-owned subsidiaries of NAR, provided that NAR shall continue to be obligated to perform all the obligations to be performed by NAR 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. -15- 16 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/ Edward J. O'Brien --------------------------------- Name: Edward J. O'Brien Title: Senior Vice President, Treasurer and Secretary NAR GROUP LIMITED By: /s/ Thomas A. Huser --------------------------------- Name: Thomas A. Huser Title: Attorney-in-Fact -16- EX-99.C1 4 LETTER TO PARTICIPANTS IN 1994 BONUS PLAN 1 Exhibit C1 [Letterhead of Hanover Direct, Inc.] July 19, 1996 To Participants in the 1994 Bonus Plan Hanover Direct, Inc. is distributing to the holders of its outstanding Common Stock, at no cost, Rights to purchase additional shares of Common Stock in a Rights Offering. Shareholders will receive .51 Rights for each share of Common Stock held by them as of the close of business on July 18, 1996. Each whole right will entitle the holder thereof to a Subscription Privilege to purchase one share of Common Stock at $1.03 per share. Enclosed herewith is a Subscription Certificate evidencing .51 transferable Rights for each of the shares of Common Stock that were awarded to you under the 1994 Bonus Plan and that has not yet vested ("Nonvested Shares"). Your Rights may be exercised, transferred or sold as explained more fully in the accompanying Instructions. If you choose to exercise your Rights, you must submit payment in full of the Subscription Price and appropriate documentation to the Subscription Agent no later than 5:00 p.m., New York City time, on Friday, August 16, 1996. The enclosed Prospectus provides the details of the Rights Offering and important information concerning the Company and the Common Stock being offered. Please read it carefully. There are certain federal income tax consequences under current law of the distribution of Rights with respect to your Nonvested Shares. The following is a brief summary of such tax consequences. Please note that this summary is not intended to be exhaustive and does not describe state or local tax consequences. - You will be required to include in your gross income, as compensation, the fair market value of the Rights distributed to you with respect to your Nonvested Shares. The Company will include this amount in the taxable wages reported on your 1996 Form W-2. - The exercise of your Rights will not have any immediate tax consequences. Upon a subsequent sale or taxable exchange of the shares you acquire when you exercise your Rights, you will recognize long or short-term capital gain or loss equal to the difference between (i) the amount realized on the sale and (ii) the sum of the Subscription Price you paid to exercise the Rights and the amount that was includible in your gross income as a result of the distribution of the Rights to you. 2 - If you sell your Rights rather than exercise them, you will recognize short-term capital gain or loss equal to the difference between the amount realized on the sale and the amount includible in your gross income as a result of the distribution of the Rights to you. - The Company will be entitled to a deduction for the amount of compensation income that you recognize in connection with the distribution to you of Rights. The foregoing discussion does not apply to you if, at the time you acquired your nonvested shares, you made an election under Section 83(b) of the Internal Revenue Code to accelerate the recognition of income. If you made such an election, you should consult your tax advisor with regard to the tax consequences associated with the distribution to you of Rights. YOU ARE URGED TO ACT PROMPTLY. THE RIGHTS OFFERING AND THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, AUGUST 16, 1996. Very truly yours, ------------------------------------------- Rakesh K. Kaul President and Chief Executive Officer EX-99.C1 5 LETTER TO PARTICIPANTS IN 1995 BONUS PLAN 1 Exhibit C2 [Letterhead of Hanover Direct, Inc.] July 19, 1996 To Participants in the 1995 Bonus Plan Hanover Direct, Inc. is distributing to the holders of its outstanding Common Stock, at no cost, Rights to purchase additional shares of Common Stock in a Rights Offering. Shareholders will receive .51 Rights for each share of Common Stock held by them as of the close of business on July 18, 1996. Each whole right will entitle the holder thereof to a Subscription Privilege to purchase one share of Common Stock at $1.03 per share. Enclosed herewith is a Subscription Certificate evidencing .51 transferable Rights for each of the shares of Common Stock that were awarded to you under the 1995 Bonus Plan and that has not yet vested ("Nonvested Shares"). Your Rights may be exercised, transferred or sold as explained more fully in the accompanying Instructions. If you choose to exercise your Rights, you must submit payment in full of the Subscription Price and appropriate documentation to the Subscription Agent no later than 5:00 p.m., New York City time, on Friday, August 16, 1996. The enclosed Prospectus provides the details of the Rights Offering and important information concerning the Company and the Common Stock being offered. Please read it carefully. There are certain federal income tax consequences under current law of the distribution of Rights with respect to your Nonvested Shares. The following is a brief summary of such tax consequences. Please note that this summary is not intended to be exhaustive and does not describe state or local tax consequences. - You will be required to include in your gross income, as compensation, the fair market value of the Rights distributed to you with respect to your Nonvested Shares. The Company will include this amount in the taxable wages reported on your 1996 Form W-2. - The exercise of your Rights will not have any immediate tax consequences. Upon a subsequent sale or taxable exchange of the shares you acquire when you exercise your Rights, you will recognize long or short-term capital gain or loss equal to the difference between (i) the amount realized on the sale and (ii) the sum of the Subscription Price you paid to exercise the Rights and the amount that 2 was includible in your gross income as a result of the distribution of the Rights to you. - If you sell your Rights rather than exercise them, you will recognize short-term capital gain or loss equal to the difference between the amount realized on the sale and the amount includible in your gross income as a result of the distribution of the Rights to you. - The Company will be entitled to a deduction for the amount of compensation income that you recognize in connection with the distribution to you of Rights. The foregoing discussion does not apply to you if, at the time you acquired your nonvested shares, you made an election under Section 83(b) of the Internal Revenue Code to accelerate the recognition of income. If you made such an election, you should consult your tax advisor with regard to the tax consequences associated with the distribution to you of Rights. YOU ARE URGED TO ACT PROMPTLY. THE RIGHTS OFFERING AND THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, AUGUST 16, 1996. Very truly yours, -------------------------------------------- Rakesh K. Kaul President and Chief Executive Officer EX-99.C1 6 LETTER TO PARTICIPANTS IN EQUITY INVESTMENT PLAN 1 Exhibit C3 [Letterhead of Hanover Direct, Inc.] July 19, 1996 To Participants in the All-Employee Equity Investment Plan Hanover Direct, Inc. is distributing to the holders of its outstanding Common Stock, at no cost, Rights to purchase additional shares of Common Stock in a Rights Offering. Shareholders will receive .51 Rights for each share of Common Stock held by them as of the close of business on July 18, 1996. Each whole right will entitle the holder thereof to a Subscription Privilege to purchase one share of Common Stock at $1.03 per share. Enclosed herewith is a Subscription Certificate evidencing .51 transferable Rights for each of the shares of Common Stock that were awarded to you under the All Employee Equity Investment Plan and that has not yet vested ("Nonvested Shares"). Your Rights may be exercised, transferred or sold as explained more fully in the accompanying Instructions. If you choose to exercise your Rights, you must submit payment in full of the Subscription Price and appropriate documentation to the Subscription Agent no later than 5:00 p.m., New York City time, on Friday, August 16, 1996. The enclosed Prospectus provides the details of the Rights Offering and important information concerning the Company and the Common Stock being offered. Please read it carefully. There are certain federal income tax consequences under current law of the distribution of Rights with respect to your Nonvested Shares. The following is a brief summary of such tax consequences. Please note that this summary is not intended to be exhaustive and does not describe state or local tax consequences. - You will be required to include in your gross income, as compensation, the fair market value of the Rights distributed to you with respect to your Nonvested Shares. The Company will include this amount in the taxable wages reported on your 1996 Form W-2. - The exercise of your Rights will not have any immediate tax consequences. Upon a subsequent sale or taxable exchange of the shares you acquire when you exercise your Rights, you will recognize long or short-term capital gain or loss equal to the difference between (i) the amount realized on the sale and (ii) the sum of the Subscription Price you paid to exercise the Rights and the amount that 2 was includible in your gross income as a result of the distribution of the Rights to you. - If you sell your Rights rather than exercise them, you will recognize short-term capital gain or loss equal to the difference between the amount realized on the sale and the amount includible in your gross income as a result of the distribution of the Rights to you. - The Company will be entitled to a deduction for the amount of compensation income that you recognize in connection with the distribution to you of Rights. The foregoing discussion does not apply to you if, at the time you acquired your nonvested shares, you made an election under Section 83(b) of the Internal Revenue Code to accelerate the recognition of income. If you made such an election, you should consult your tax advisor with regard to the tax consequences associated with the distribution to you of Rights. YOU ARE URGED TO ACT PROMPTLY. THE RIGHTS OFFERING AND THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, AUGUST 16, 1996. Very truly yours, ------------------------------------------ Rakesh K. Kaul President and Chief Executive Officer EX-99.D 7 CERTIFICATE AND REQUEST FOR ADDITIONAL RIGHTS 1 Exhibit D CERTIFICATION AND REQUEST FOR ADDITIONAL RIGHTS To the Subscription Agent: The undersigned hereby certifies that it is a broker-dealer registered with the Securities and Exchange Commission, a commercial bank or trust company, a securities depository or a participant therein, or a nominee therefor, holding of record ______________ shares of Common Stock, par value $.66-2/3 per share (the "Common Stock"), of Hanover Direct, Inc. (the "Company") on behalf of ____________________ beneficial owners as of the close of business on July 18, 1996, the record date (the "Record Date") for the offering of up to 51,250,000 shares of Common Stock, all as described in a Prospectus dated July 19, 1996, a copy of which the undersigned has received. Such holders shall receive .51 Rights for each share of Common Stock held of record as of the close of business on the Record Date, and any fractional Right will be rounded up to the nearest whole number. The undersigned further certifies that _____________ shares of Common Stock registered in the name of the undersigned are entitled to an additional Right in accordance with the principle that any fractional Right to which a beneficial owner would otherwise be entitled should be rounded up to the nearest whole number. Accordingly, the undersigned requests that upon surrender of its Subscription Certificate evidencing ___________ Rights, a Subscription Certificate evidencing _____________ Rights (including __________ additional Rights) be issued. The undersigned further certifies that each such beneficial owner is a bona fide beneficial owner of Common Stock as of the close of business on the Record Date, that such beneficial ownership is reflected on the undersigned's records and that all shares of Common Stock which, to the undersigned's knowledge, are beneficially owned by any such beneficial owner through the undersigned have been aggregated in calculating the foregoing. The undersigned agrees to provide the Company or its designee with such additional information as the Company deems necessary to verify the foregoing. _____________________________ Name of Record Holder By: ________________________ Name: Title: Address: Telephone Number: Dated: _________________, 1996 NOTE: Deliver this form with your Subscription Certificate to: American Stock Transfer & Trust Company, 6201 Fifteenth Avenue, Brooklyn, New York 11219. EX-99.E 8 SUBSCRIPTION CERTIFICATE 1 EXHIBIT E SUBSCRIPTION CERTIFICATE NO. [HANOVER LOGO] SUBSCRIPTION CERTIFICATE FOR SHARES HANOVER DIRECT, INC. SUBSCRIPTION PRICE $1.03 PER SHARE THE TERMS AND CONDITIONS OF SUBSCRIPTION CERTIFICATE REPRESENTING RIGHTS THE RIGHTS OFFERING ARE SET TO PURCHASE SHARES OF THE COMMON STOCK OF CUSIP 410783 11 2 FORTH IN THE COMPANY'S HANOVER DIRECT, INC. THIS CERTIFICATE OR A PROSPECTUS DATED JULY 19, NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED 1996 (THE "PROSPECTUS") AND BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL ARE INCORPORATED HEREIN BY BY 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, REFERENCE. COPIES OF THE AUGUST 16, 1996 (THE "EXPIRATION DATE"). PROSPECTUS ARE AVAILABLE THIS SUBSCRIPTION CERTIFICATE IS TRANSFERABLE UPON REQUEST FROM THE AND MAY BE COMBINED OR DIVIDED (BUT ONLY INTO COMPANY AND THE SUBSCRIPTION CERTIFICATES EVIDENCING A WHOLE NUMBER OF AGENT. RIGHTS) AT THE OFFICE OF THE SUBSCRIPTION AGENT. NAME AND ADDRESS OF REGISTERED HOLDER: The registered owner whose name is inscribed hereon, or assigns, is entitled to subscribe for shares of Common Stock upon the terms and subject to the conditions set forth in the Prospectus and instructions relating thereto. The Rights represented by this Subscription Certificate may be exercised by duly completing Form 1; may be transferred, assigned, exercised or sold through a bank or broker by duly completing Form 2; and may be sold through the Subscription Agent by duly completing Form 3. Rights holders are advised to review the Prospectus and instructions, copies of which are available from the Subscription Agent, before exercising or selling their Rights. IMPORTANT -- Complete appropriate Form and, if applicable, delivery instructions, and SIGN on reverse side. Date: HANOVER DIRECT, INC. CORPORATE /s/ Rakesh K. Kaul SEAL /s/ Edward J. O'Brien ---------------------------------------- ----------------------------------------------- RAKESH K. KAUL 1993 EDWARD J. O'BRIEN PRESIDENT AND CHIEF EXECUTIVE OFFICER DELAWARE SENIOR VICE PRESIDENT, TREASURER AND SECRETARY
COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY (NEW YORK, N.Y.) TRANSFER AGENT AND REGISTRAR BY: /s/ George Karfunkel ----------------------------------- AUTHORIZED SIGNATURE 2 RIGHTS HOLDERS SHOULD BE AWARE THAT IF THEY CHOOSE TO EXERCISE OR TRANSFER LESS THAN ALL OF THE RIGHTS EVIDENCED HEREBY, THEY MAY NOT RECEIVE A NEW SUBSCRIPTION CERTIFICATE IN SUFFICIENT TIME TO EXERCISE THE REMAINING RIGHTS EVIDENCED THEREBY. FORM 1: EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably exercises one or more Rights to subscribe for shares of Common Stock as indicated below, on the terms and subject to the conditions specified in the Prospectus, receipt of which is hereby acknowledged. (a) Number of shares subscribed for pursuant to the Subscription Privilege (one Right needed to subscribe for each full share): ______________________________________ (b) Total Subscription Price (total number of shares subscribed for pursuant to the Subscription Privilege times the Subscription Price of $1.03): _________________________*. METHOD OF PAYMENT (CHECK ONE) / / CHECK, BANK DRAFT OR MONEY ORDER PAYABLE TO AMERICAN STOCK TRANSFER & TRUST COMPANY. / / WIRE TRANSFER DIRECTED TO THE CHASE MANHATTAN BANK ACCOUNT NO. 323053807; ABA NO. 021000021 (c) If the number of Rights being exercised pursuant to the Subscription Privilege is less than all of the Rights represented by this Subscription Certificate (check only one): / / DELIVER TO ME A NEW SUBSCRIPTION CERTIFICATE EVIDENCING THE REMAINING RIGHTS TO WHICH I AM ENTITLED. / / DELIVER A NEW SUBSCRIPTION CERTIFICATE EVIDENCING THE REMAINING RIGHTS IN ACCORDANCE WITH MY FORM 2 INSTRUCTIONS (which include any required signature guarantees). / / SELL THE REMAINING UNEXERCISED RIGHTS IN ACCORDANCE WITH MY FORM 3 INSTRUCTIONS. / / CHECK HERE IF RIGHTS ARE BEING EXERCISED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE SUBSCRIPTION AGENT PRIOR TO THE DATE HEREOF AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) ___________________________________ Window Ticket number (if any) ____________________________________ Date of Execution of Notice of Guaranteed Delivery _______________ Name of Institution which Guaranteed Delivery ____________________ FORM 2 - TO TRANSFER YOUR SUBSCRIPTION CERTIFICATE OR SOME OR ALL OF YOUR RIGHTS OR TO EXERCISE OR SELL RIGHTS THROUGH YOUR BANK OR BROKER. For value received, Rights represented by this Subscription Certificate are hereby assigned to (please print name and address and Social Security No. of transferee in full): Name___________________________________________ Address________________________________________ _______________________________________________ _______________________________________________ Social Security Number / / FORM 3 - CHECK HERE TO SELL YOUR UNEXERCISED RIGHTS THROUGH SUBSCRIPTION AGENT: Check box if the undersigned hereby authorizes the Subscription Agent to sell any Rights represented by this Subscription Certificate but not exercised hereby and to deliver to the undersigned a check for the net proceeds. FORM 4 - DELIVERY INSTRUCTIONS: Name and/or address for mailing any stock, new Subscription Certificate or cash payment if other than shown on the reverse hereof. Name:______________________________________ Address:___________________________________ ___________________________________________ (Including Zip Code) - -------------------------------------------------------------------------------- IMPORTANT RIGHTS HOLDER SIGN HERE AND, IF RIGHTS ARE BEING SOLD OR EXERCISED, COMPLETE SUBSTITUTE FORM W-8 OR W-9, AS APPLICABLE ________________________________________________________________________________ ________________________________________________________________________________ (Signature(s) of Holder(s)) Dated: ______________________________________________, 1996 (Must be signed by the registered holder(s) exactly as name(s) appear(s) on this Subscription Certificate. If signature is by trustee(s), executor(s), administrator(s), guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a corporation or another acting in a fiduciary or representative capacity, please provide the following information. See Instructions.) Name(s) ____________________________________________________________________ - -------------------------------------------------------------------------------- (Please Print) Capacity ____________________________________________________________________ Address ____________________________________________________________________ - -------------------------------------------------------------------------------- (Including Zip Code) Area Code and Telephone Number (Home) ____________________________________________________ - -------------------------------------------------------------------------------- (Business) Tax Identification or Social Security Number _____________________________________________________ (Complete Substitute Form W-9) GUARANTEE OF SIGNATURE(S) NOTE: SEE PARAGRAPH 5(c) OF INSTRUCTIONS Authorized Signature _____________________________________________ Name _____________________________________________ Title _____________________________________________ Name of Firm _____________________________________________ Address _____________________________________________ Area Code and Telephone Number _____________________________________________ Dated: _________________________________________________, 1996 - -------------------------------------------------------------------------------- * If the amount enclosed or transmitted is not sufficient to pay the Subscription Price for all shares that are stated to be subscribed for, or if the number of shares being subscribed for is not specified, the number of shares subscribed for will be assumed to be the maximum number that could be subscribed for upon payment of such amount. If the number of shares to be subscribed for pursuant to the Subscription Privilege is not specified and the amount enclosed or transmitted exceeds the Subscription Price for all shares represented by the Subscription Certificate (the "Subscription Excess"), the person subscribing pursuant hereto shall be entitled to the return of any such Subscription Excess remaining after such calculation without interest or deduction. -----END PRIVACY-ENHANCED MESSAGE-----