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