1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
HANOVER DIRECT, INC.
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Hanover Direct, Inc.
SECOND: The Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business and purposes to be conducted or
promoted are to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 163,172,403 shares, of which
40,000 shares shall be class B 8% cumulative preferred stock, par value $.01
per share and stated value of $1,000 per share (the "Class B Preferred"),
861,900 shares shall be shares of 7.5% cumulative convertible preferred stock,
par value $.01 and stated value of $20.00 per share (the "7.5% Preferred"),
150,000,000 shares shall be shares of common stock, par value $.66-2/3 per
share (the "Common Stock"), and 12,270,503 shares shall be shares of class B
common stock, par value $.01 per share (the "Class B Common Stock").
The designation and the powers, preferences and rights, and the
qualifications, limitations or restrictions of each class of shares of the
Corporation which are fixed by this Certificate of Incorporation, and the
express grant of authority to the Board of Directors of the Corporation to fix
by resolution or resolutions certain designations and powers, preferences and
rights of such shares, and the qualifications, limitations or restrictions
thereof, are as follows:
1. Class B Preferred.
(a) Dividends. The holders of record of shares of the Class B
Preferred shall be entitled to receive preferential cumulative dividends, when
and as declared by the Board of Directors out of funds legally available
therefor, at a rate of 8% of the stated value per annum.
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Dividends on the Class B Preferred shall commence to accrue on March 18, 1993,
and shall accrue cumulatively on a daily basis whether or not earned or
expressly declared by the Board of Directors. Until June 30, 1993, all such
dividends shall be payable in cash or in Common Stock at the option of the
Corporation (an "8% Stock Dividend"). From July 1, 1993 through December 31,
1996, all such dividends shall be payable in cash or in Common Stock upon the
written request of the holders of record of 51% of the shares of the Class B
Preferred delivered to the Corporation within 20 days after service of written
notice by the Corporation upon the holders of the Class B Preferred of the
record date for such dividend. From January 1, 1997, all such dividends shall
be payable in cash only. If any dividend is paid in Common Stock, (i) no
fractional shares shall be issued, but a cash payment in an amount equal to the
value of such fractional share shall be made in lieu thereof, and (ii) such
stock shall be valued at the average per-share closing price (regular way) for
a round lot of the Common Stock during the 20 consecutive trading days
immediately preceding the date on which the dividend is paid if such stock is
listed for trading on the American Stock Exchange, the New York Stock Exchange
or the National Association of Securities Dealers, Inc. National Market System
(if not so listed, the stock shall be valued by an appraiser selected by mutual
agreement of the parties, or, if they cannot agree, selected by the American
Arbitration Association); provided, however, that, for this purpose, the Common
Stock shall never be valued at less than $2.00 or more than $5.00 per share.
In case the Corporation shall have taken any of the steps described in Section
2(g)(i) of this Article Fourth, then such dollar amount per share shall be
adjusted to equal (x) such dollar amount per share multiplied by the number of
shares of Common Stock to which the holder would have been entitled upon
exchange immediately prior to the taking of such step divided by (y) the number
of shares of Common Stock to which the holder shall be entitled upon exchange
immediately after the taking of any such step.
Dividends on the Class B Preferred shall be payable each year in
equal semi-annual installments on the 23rd day of September and March (the "8%
Dividend Payment Dates") when and as declared by the Board of Directors to
holders of record as they appear on the records of the Corporation on such
respective dates (not exceeding 60 days preceding such 8% Dividend Payment
Dates) as may be determined by the Board of Directors in advance of the payment
of each particular dividend. Dividends in arrears may be declared by the Board
and paid at any time out of funds legally available therefor, without reference
to any regular 8% Dividend Payment Date, to holders of record on such date (not
exceeding 60 days preceding the payment date thereof) as may be fixed by the
Board of Directors.
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Dividends payable on the Class B Preferred shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
No dividends shall be declared or paid or set aside for payment or
distribution on any stock or warrants of the Corporation (other than the 7.5%
Preferred) for any period unless full cumulative dividends through and
including the most recent 8% Dividend Payment Date in respect of the Class B
Preferred have been or contemporaneously are declared and either paid in cash
or Common Stock or a sum of money (or shares) sufficient for payment has been
set apart therefor. Additionally, commencing June 30, 1993, no Common Stock or
other stock of the Corporation (other than the 7.5% Preferred) or securities of
the Corporation convertible or exchangeable into Common Stock shall be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Corporation.
(b) Liquidation Preference. In the event of any distribution of
assets upon any liquidation, dissolution or winding- up of the Corporation,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the Corporation, the holder of each share of the
then outstanding Class B Preferred shall be entitled to receive out of the
assets of the Corporation, whether such assets are capital, surplus or
earnings, before any payments or distributions are made to, or set aside for,
the holders of the Common Stock or any other equity security of the Corporation
other than the holders of the then outstanding 7.5% Preferred, an amount equal
to the sum of (x) $710.14 and (y) all cumulative dividends accrued on such
share of Class B Preferred since April 7, 1992, which have not been paid. If
the assets of the Corporation are insufficient to pay such amounts in full,
then the entire assets of the Corporation shall be distributed pro rata to the
holders of shares of the Class B Preferred.
(c) Voting Rights. The holders of shares of Class B Preferred
shall not be entitled to any voting rights, except as hereinafter provided or
as otherwise required by law.
Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least a
majority of all of the shares of the Class B Preferred, at the time
outstanding, given in person or by proxy either in writing or by a vote at a
meeting called for such purpose at which the holders of such shares shall vote
as a separate class without regard to
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shares of any other class or series, shall be necessary for (i) the creation by
the Corporation of any series or class of preferred stock of the Corporation
which is on a parity with the Class B Preferred as to dividends or upon
liquidation, dissolution or winding-up or which provides that any shares of
such preferred stock of the Corporation be mandatorily redeemed on the
redemption of the Class B Preferred, (ii) the Corporation to increase the
number of authorized shares of the Class B Preferred, and (iii) the Corporation
directly or indirectly to redeem, purchase or otherwise acquire for value any
preferred stock of any series, or stock of any other class, ranking, as to
dividends or on liquidation, dissolution or winding up, junior to the Class B
Preferred.
Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of the Class B Preferred at the time outstanding,
given in person or by proxy, either in writing or by a vote at a meeting called
for the purpose at which the holders of such shares shall vote as a separate
class without regard to any shares of any other class or series, shall be
necessary for (i) authorizing, effecting or validating the amendment,
alteration or repeal of any of the provisions of the Certificate of
Incorporation or of any amendatory certificate thereto so as to amend the
rights, preferences, privileges or voting power of shares of the Class B
Preferred and (ii) authorizing or increasing the authorized amount of any class
of stock, or establishing or designating any series of stock, or the issuing or
selling of any obligation, security or instrument convertible into,
exchangeable for, or evidencing the right to purchase, acquire or subscribe for
shares of a class or series of stock of the Corporation, if, in any such case,
such class or series of stock ranks prior to the Class B Preferred as to
dividends or distribution of assets upon liquidation, dissolution or winding up
or which provides that any shares of such class or series of stock be
mandatorily redeemed prior to the redemption of the Class B Preferred.
(d) Redemption of the Class B Preferred. The Corporation shall
have the right to redeem the Class B Preferred at any time and from time to
time after December 31, 1996 at the liquidation value of such shares payable in
cash together with any accrued but unpaid dividends accrued on the Class B
Preferred since March 18, 1993, which have not been paid. In the event the
Corporation shall redeem the Class B Preferred, notice of such redemption shall
be given by first-class mail, postage prepaid, mailed not less than 30 days nor
more than 60 days prior to the redemption date (the "Redemption Date"), to each
holder of record of the shares to be redeemed at such
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holder's address as the same appears on the stock register of the Corporation;
provided, however, that no failure to mail such notice nor any defect therein
shall affect the validity of the proceeding for the redemption of the Class B
Preferred to be redeemed except as to the holder to whom the Corporation has
failed to mail said notice or except as to the holder whose notice was
defective. Each such notice shall state: (i) the Redemption Date, (ii) the
redemption price (including accrued but unpaid dividends), (iii) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price, and (iv) that dividends on the shares to be redeemed will
cease to accrue on the day following the Redemption Date unless the Corporation
defaults in making such payment.
Upon the Redemption Date, the holders of the Class B Preferred
shares which are to be redeemed (the "Redemption Shares") shall deliver
certificates for their shares to the Corporation against payment of the
redemption price. Unless the Corporation shall default in the making of such
payment, dividends shall cease to accrue on the Redemption Shares on the day
following the Redemption Date whether or not the certificates therefor are
delivered to the Corporation. During any period in which any shares of the
7.5% Preferred are then outstanding, the Corporation shall not redeem any
shares of the Class B Preferred unless simultaneously therewith or prior
thereto, it redeems that number of shares of 7.5% Preferred at the
consideration provided for in Section 2(h) of this Article Fourth, such that
the aggregate consideration paid by the Corporation for the shares of Class B
Preferred to be redeemed by it, pursuant to this Section 1(d), is no greater
than the aggregate consideration paid or to be paid by the Corporation for the
redemption of shares of 7.5% Preferred (unless the shares of 7.5% Preferred
redeemed by the Corporation constitute all of the then outstanding shares of
7.5% Preferred).
2. 7.5% Preferred.
(a) Dividends. The holders of record of shares of the 7.5%
Preferred shall be entitled to receive preferential cumulative dividends, when
and as declared by the Board of Directors out of funds legally available
therefor, at a rate of 7.5% of the stated value per annum. Dividends on the
7.5% Preferred shall commence to accrue on March 18, 1993, and shall accrue
cumulatively on a daily basis whether or not earned or expressly declared by
the Board of Directors. For one 360-day year from September 23, 1992, at the
option of the Corporation, the dividends may be paid in shares of 7.5%
Preferred (a "7.5% Stock Dividend"); provided, however, that the Corporation
shall not declare or pay a 7.5% Stock Dividend during any period with respect
to which dividends on the Class B Preferred shall have been
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paid in cash; and provided further, however, that no fractional shares shall be
issued, but a cash payment in an amount equal to the value of such fractional
share shall be made in lieu thereof. At all times thereafter, as well as
during any period in which the Corporation is prohibited (pursuant to the
provisions of the preceding sentence) from declaring or paying a 7.5% Stock
Dividend, all dividends shall be payable in cash only. If any dividend is paid
in 7.5% Preferred, such stock shall be valued at its stated value.
Dividends on the 7.5% Preferred shall be payable each year in equal
semi-annual installments on the 23rd day of March and September (the "7.5%
Dividend Payment Dates") when and as declared by the Board of Directors to
holders of record as they appear on the records of the Corporation on such
respective dates (not exceeding 60 days preceding such 7.5% Dividend Payment
Dates) as may be determined by the Board of Directors in advance of the payment
of each particular dividend. Dividends in arrears may be declared by the Board
and paid at any time out of funds legally available therefor, without reference
to any regular 7.5% Dividend Payment Date, to holders of record on such date
(not exceeding 60 days preceding the payment date thereof) as may be fixed by
the Board of Directors. Dividends payable on the 7.5% Preferred shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
No payments shall be declared or paid or set apart for payment or
distribution on any stock or warrant of the Corporation for any period unless
full cumulative dividends through and including the most recent 7.5% Dividend
Payment Date in respect of the 7.5% Preferred have been or contemporaneously
are declared and paid.
As soon as practicable after the declaration of a 7.5% Stock
Dividend, the Corporation shall issue and register stock certificates
evidencing the shares of 7.5% Preferred (the "Dividend Shares") to which the
holders of the 7.5% Preferred are entitled. The Corporation shall pay all
documentary stamp taxes that are attributable to the issuance of the Dividend
Shares. The Corporation shall reserve and keep available a sufficient number
of authorized but unissued shares of 7.5% Preferred to enable the Board of
Directors to issue the Dividend Shares.
(b) Liquidation Preference. In the event of any distribution of
assets upon any liquidation, dissolution or winding- up of the Corporation,
whether voluntary or involuntary, after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of the then
outstanding 7.5% Preferred shall be entitled to receive out of the assets of
the Corporation, whether such
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assets are capital, surplus or earnings, before any payments or distributions
are made to, or set aside for, the holders of the Common Stock, or any other
equity security of the Corporation, an amount equal to the sum of (x) the
stated value of such shares and (y) all cumulative, accrued but unpaid
dividends. If the assets of the Corporation are insufficient to pay such
amounts in full, then the entire assets of the Corporation shall be distributed
pro rata to the holders of shares of the 7.5% Preferred.
(c) Voting Rights. The holders of shares of 7.5% Preferred shall
not be entitled to any voting rights, except as hereinafter provided or as
otherwise required by law.
Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least a
majority of all of the shares of the 7.5% Preferred, at the time outstanding,
given in person or by proxy either in writing or by a vote at a meeting called
for such purpose at which the holders of such shares shall vote as a separate
class without regard to shares of any other class or series, shall be necessary
for (i) the creation by the Corporation of any series or class of preferred
stock of the Corporation which is on a parity with the 7.5% Preferred as to
dividends or upon liquidation, dissolution or winding-up or which provides that
any shares of such preferred stock of the Corporation be mandatorily redeemed
on the redemption of the 7.5% Preferred, (ii) the Corporation to increase the
number of authorized shares of the 7.5% Preferred, and (iii) the Corporation
directly or indirectly to redeem, purchase or otherwise acquire for value any
preferred stock of any series (other than with respect to the Class B Preferred
as provided in Section 1(d) of this Article Fourth), or stock of any other
class, ranking, as to dividends or on liquidation, dissolution or winding up,
junior to the 7.5% Preferred.
If and whenever at any time or times dividends payable on the 7.5%
Preferred pursuant to Section 2(a) of this Article Fourth shall have been in
arrears and unpaid in an aggregate amount equal to or exceeding the amount of
dividends payable thereon for any four quarterly periods (whether or not
consecutive), then the number of directors constituting the Board of Directors
shall, without further action, be increased by two and the holders of the 7.5%
Preferred shall have the exclusive right, voting separately as a class, to
elect directors of the Corporation to fill such newly created directorships,
the remaining directors to be elected by the other class or classes of stock
entitled to vote therefor, at each meeting of stockholders held for the purpose
of electing directors.
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Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of the 7.5%
Preferred, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at such
annual meetings or by the written consent of the holders of the 7.5% Preferred
pursuant to Section 228 of the Delaware General Corporation Law. Such voting
right shall continue until such time as all cumulative dividends accumulated on
the 7.5% Preferred together with additional dividends accrued thereon, if any,
shall have been paid in full, at which time such voting right of the holders of
the 7.5% Preferred shall terminate, subject to re-vesting in the event of each
and every subsequent event of default of the character indicated above.
At any time when such voting right shall have vested in the holders
of the 7.5% Preferred, and if such right shall not already have been initially
exercised, a proper officer of the Corporation shall, upon the written request
of holders of record of 25% of the shares of the 7.5% Preferred then
outstanding, addressed to the Secretary of the Corporation, call a special
meeting of holders of the 7.5% Preferred and of any other class or classes of
stock having voting power with respect thereto for the purpose of electing
directors. Such meeting shall be held at the earliest practicable date upon
the notice required for annual meetings of stockholders at the place for
holding annual meetings of stockholders of the Corporation or, if none, at a
place in the City of New York designated by the Secretary of the Corporation.
If such meeting shall not be called by the proper officers of the Corporation
within 30 days after the personal service of such written request upon the
Secretary of the Corporation, or within 30 days after mailing the same within
the United States, by registered mail, addressed to the Secretary of the
Corporation at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of record
of 25% of the shares of the 7.5% Preferred then outstanding may designate in
writing a holder of the 7.5% Preferred to call such meeting at the expense of
the Corporation, and such meeting may be called by such person so designated
upon the notice required for annual meetings of stockholders and shall be held
at the same place as is elsewhere provided in this Section 2(c). Any holder of
the 7.5% Preferred entitled to vote at such meeting shall have access to the
stock books of the Corporation for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this Section 2(c).
Notwithstanding the provisions of this Section 2(c), however, no such special
meeting shall be called during a period within 60 days immediately preceding
the date fixed for the next annual meeting of stockholders.
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At any meeting held for the purpose of electing directors at which
the holders of the 7.5% Preferred shall have the right to elect directors as
provided herein, the presence in person or by proxy of the holders of a
majority of the then outstanding shares of the 7.5% Preferred shall be required
and be sufficient to constitute a quorum of such class for the election of
directors by such class. At any such meeting or adjournment thereof (i) the
absence of a quorum of the holders of the 7.5% Preferred having such right
shall not prevent the election of directors other than those to be elected by
the holders of the 7.5% Preferred and the absence of a quorum or quorums of the
holders of capital stock entitled to elect such other directors shall not
prevent the election of directors to be elected by the holders of the 7.5%
Preferred entitled to elect such directors and (ii) in the absence of a quorum
of the holders of any class of stock entitled to vote for the election of
directors, a majority of the holders of such class present in person or by
proxy shall have the power to adjourn the meeting for the election of directors
which the holders of such class are entitled to elect, from time to time,
without notice (except as required by law) other than announcement at the
meeting, until a quorum shall be present.
The term of office of all directors elected by the holders of the
7.5% Preferred pursuant to this Section 2(c) in office at any time when the
aforesaid voting rights are vested in the holders of the 7.5% Preferred shall
terminate upon the election of their successors at any meeting of stockholders
for the purpose of electing directors (it being understood that such successors
shall be elected by the holders of the 7.5% Preferred). Upon any termination
of the aforesaid voting rights, the term of office of all directors elected by
the holders of the 7.5% Preferred pursuant to this Section 2(c) then in office
shall thereupon terminate and upon such termination the number of directors
constituting the Board of Directors shall, without further action, be reduced
by two, subject always to the increase of the number of directors pursuant to
this Section 2(c) in case of the future right of the holders of the 7.5%
Preferred to elect directors.
For the purposes of this Section 2(c) no shares of the 7.5%
Preferred held by the Corporation or a subsidiary of the Corporation shall be
deemed to be outstanding shares of the 7.5% Preferred.
Unless the vote or consent of the holders of a greater number of
shares shall then be required by law, the consent of the holders of at least
66-2/3% of all of the shares of the 7.5% Preferred at the time outstanding,
given in person or by proxy, either in writing or by a vote at a meeting called
for the purpose at which the holders of such
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shares shall vote as a separate class without regard to any shares of any other
class or series, shall be necessary for (i) authorizing, effecting or
validating the amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation or of any amendatory certificate thereto so as to
amend the rights, preferences, privileges or voting power of shares of the 7.5%
Preferred and (ii) authorizing or increasing the authorized amount of any class
of stock, or establishing or designating any series of stock, or the issuing or
selling of any obligation, security or instrument convertible into,
exchangeable for, or evidencing the right to purchase, acquire or subscribe for
shares of a class or series of stock of the Corporation, if, in any such case,
such class or series of stock ranks prior to the 7.5% Preferred as to dividends
or distribution of assets upon liquidation, dissolution or winding up or which
provides that any shares of such class or series of stock be mandatorily
redeemed prior to the redemption of the 7.5% Preferred.
(d) Conversion at the Option of the Holder. Subject to the
provisions of Section 2(f) of this Article Fourth, the holders of the 7.5%
Preferred shall be entitled at any time and from time to time to convert the
7.5% Preferred into shares of Common Stock.
(e) Conversion at the Option of the Corporation. At any time
subsequent to the date upon which the per-share closing price (regular way) for
a round lot of the Common Stock on the American Stock Exchange (or such other
exchange or system on which the Common Stock shall from time to time be traded)
has been greater than $6.00 for 20 trading days in a 30 consecutive trading
day period, the Corporation shall have the right to require the conversion of
the 7.5% Preferred subject to the provisions of Section 2(f) of this Article
Fourth. In case the Corporation shall have taken any of the steps described in
Section 2(g) of this Article Fourth during such period, then such price shall
be adjusted as provided for in, or as may be appropriate pursuant to the
provisions of, such Section. The Corporation shall provide holders of the 7.5%
Preferred with at least 30 days written notice of the date upon which
conversion of the 7.5% Preferred is required by the Corporation pursuant to
this Section 2(e) (the "7.5% Conversion Date"). Upon the 7.5% Conversion Date,
the holders of the 7.5% Preferred shares which are to be converted (the "7.5%
Conversion Shares") shall deliver certificates for their shares to the
Corporation against delivery of appropriate documentation for the securities
into which they are to be converted. Dividends shall cease to accrue on the
7.5% Conversion Shares on the day following the 7.5% Conversion Date whether or
not the certificates therefor are delivered to the Corporation.
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(f) Conversion Terms and Procedures. Each share of 7.5%
Preferred shall be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share, into a number of shares of
Common Stock determined by dividing the stated value of the share by the
Conversion Price.
The "Conversion Price" shall be $5.00 at all times except during the
Conversion Window (as defined hereafter), if one should occur, and shall be
subject to adjustment from time to time as provided herein. During the
Conversion Window, the Conversion Price shall be an amount equal to the average
per-share closing price (regular way) for a round lot of the Common Stock on
the American Stock Exchange (or such other exchange or system on which the
Common Stock shall from time to time be traded) on each of the 20 trading days
immediately preceding the Conversion Window; provided, however, that the
Conversion Price shall not be less than $2.50, subject to adjustment from time
to time as provided for in the next sentence. In case the Corporation shall
have taken any of the steps described in Section 2(g) of this Article Fourth
during such period, then such Conversion Price shall be adjusted as provided
for in, or as may be appropriate pursuant to the provisions of, such Section.
The "Conversion Window" shall occur only if the per-share closing
price (regular way) for a round lot of the Common Stock on the American Stock
Exchange (or such other exchange or system on which the Common Stock shall from
to time be traded) has never been $5.00 or more on 20 trading days during any
30 consecutive trading day period occurring prior to September 24, 1998. The
Conversion Window shall be a 60-calendar-day period beginning on September 24,
1998.
The conversion of the 7.5% Preferred shall be effected by the
surrender to the Corporation of the certificates representing the shares of the
7.5% Preferred to be converted at the principal office of the Corporation's
transfer agent at any time during its usual business hours, together with
written notice by the holder specifying the number of shares represented by
such certificate or certificates to be so converted. The notice shall also
state the name or names (and addresses) and denominations in which the
certificate or certificates shall be issued for the shares of Common Stock to
be delivered upon such conversion and shall include instructions for delivery
thereof.
Surrender of such certificates together with such notice shall
obligate the Corporation to deliver, in accordance with such instructions, the
certificate or certificates for the Common Stock deliverable upon such
conversion and, in the event that only a part of the shares
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of the 7.5% Preferred evidenced by such certificate or certificates are
converted, the Corporation shall deliver a certificate evidencing the number of
shares of the 7.5% Preferred that are not converted. The Corporation shall
make such deliveries as soon as practicable after the surrender of the
certificate or certificates evidencing shares of the 7.5% Preferred for
conversion and shall pay all accrued but unpaid dividends on the 7.5%
Preferred. To the extent permitted by law, such conversion shall be deemed to
have been effected as of the close of business on the date on which such
certificates shall have been surrendered and such notice shall have been
received by the Corporation, and at such time the person or persons in whose
name or names any certificate or certificates for such shares are issuable upon
such conversion shall be deemed to have become the holder or holders of record
thereof.
(g) Anti-dilution Provisions. The Conversion Price shall be
subject to adjustment from time to time as set forth in this Section 2(g), and
as so adjusted or readjusted, shall remain in effect until a further adjustment
or readjustment thereof is required hereby.
(i) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In case, at
any time or from time to time, the Corporation shall
- take a record of the holders of the Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Common Stock or other securities convertible into
or exchangeable for Common Stock (in which latter event the number of
shares of Common Stock issuable upon the conversion or exchange of
such securities shall be deemed to be distributed) (collectively, a
"Dividend") or
- subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock (a "Subdivision"), or
- combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock (a "Combination"),
then the Conversion Price in effect immediately prior to such Subdivision or at
the record date of such Dividend shall, simultaneously with the effectiveness
of such Subdivision or immediately after the record date of such Dividend, be
proportionately reduced, and conversely, in the case of a Combination, the
Conversion Price in effect immediately prior to such Combination shall
simultaneously
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with the effectiveness of such Combination, be proportionately increased.
Any adjustment to the Conversion Price under this Section 2(g)(i)
shall become effective at the close of business on the record date for such
Dividend or on the date such Subdivision or Combination referred to herein
becomes effective, as the case may be.
(ii) CERTAIN OTHER DIVIDENDS AND DISTRIBUTIONS. In case, at any
time or from time to time, the Corporation shall make or issue, or take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of
- any evidence of its indebtedness, any shares of its stock
(other than Common Stock) or any other securities or property of any
nature whatsoever (other than cash), or
- any warrants or other rights to subscribe for or purchase any
evidence of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever,
then, and in each such event, the holder shall be entitled to receive upon
conversion of the shares of 7.5% Preferred such evidence of indebtedness,
shares of stock, warrants or other rights or any other securities or property
of any nature whatsoever as the holder would have actually been entitled to as
a holder of Common Stock if the holder had exercised the conversion rights
immediately prior thereto. Such evidence of indebtedness, shares of stock,
warrants or other rights or any other securities or other property shall be
paid to the holder at the time of delivery by the Corporation of the
certificate or certificates for the Common Stock deliverable upon conversion of
the 7.5% Preferred. A reclassification of the Common Stock into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Corporation to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section and, if
the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
this shall be deemed a Subdivision or Combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 2(g)(i) of
this Article Fourth.
(iii) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provision shall be applicable to the making of
adjustments of the number of
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shares of Common Stock to which the holder shall be entitled upon conversion as
provided for in this Section 2(g):
- When Adjustments to be Made. The adjustments required shall
be made whenever and as often as required. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
- Fractional Interests. In computing adjustments under this
Section 2(g), fractional interests in Common Stock shall be taken into
account to the nearest one-tenth of a share.
- When Adjustment Not Required. If the Corporation shall take
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution and shall,
thereafter and before the distribution thereof to stockholders,
abandon its plan to pay or deliver such dividend or distribution under
circumstances such that it shall not have become (or shall no longer
remain) obligated under applicable law to pay or deliver the same,
then no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(iv) CHANGES IN CAPITAL STOCK. In case at any time the
Corporation shall be a party to any transaction (including, without limitation,
a merger, consolidation, sale or other disposition of all or substantially all
of the Corporation's assets or capital reorganization), in which previously
outstanding Common Stock shall be changed into or exchanged for common stock or
other securities of another corporation or interests in a non-corporate entity
or other property (including cash) or any combination of any of the foregoing
(each such transaction being hereinafter referred to as a "Transaction") then,
as a condition to the consummation of the Transaction, lawful and adequate
provision shall be made so that the holder, upon conversion at any time on or
after the consummation of the Transaction, shall be entitled to receive the
highest amount of securities, cash or other property to which the holder would
actually have been entitled as a holder of Common Stock upon the consummation
of the Transaction if the holder had converted immediately prior thereto
(subject to adjustments from and after the consummation of the Transaction as
nearly equivalent as possible to the adjustment provided for in this Section
2(g) (including, without limitation, provisions for adjustments of the
Conversion Price)).
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(v) SALE OF ADDITIONAL SHARES. If at any time or from time to
time the Corporation shall issue or sell Additional Shares of Common Stock (as
hereinafter defined) other than as a dividend or other distribution on any
class of stock and other than as a subdivision or combination of shares of
Common Stock as provided in Section 2(g)(i) of this Article Fourth, for a
consideration per share less than the Then Existing Market Price (as
hereinafter defined), then, and in each such case, the then existing Conversion
Price shall be reduced, as of the opening of business on the date of such
issuance or sale, to a price determined by dividing (A) an amount equal to the
sum of (1) the Conversion Price immediately prior to such issue or sale
multiplied by the number of shares of Common Stock outstanding at the close of
business on the day next preceding the date of such issue or sale, plus (2) the
aggregate consideration, if any, received or to be received by the Corporation
upon such issue or sale, by (B) the number of shares of Common Stock
outstanding at the close of business on the date of such issue or sale after
giving effect to the issuance of such Additional Shares of Common Stock.
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Corporation, whether or not subsequently reacquired or retired by
the Corporation, other than shares of Common Stock issued upon the conversion
of the 7.5% Preferred. "Then Existing Market Price" as used in this Section
shall mean the per-share closing price (regular way) for a round lot of the
Common Stock on the American Stock Exchange (or such other exchange or system
on which the Common Stock shall from time to time be traded) on the day next
preceding the date of such issue or sale of Additional Shares of Common Stock.
For the purpose of making any adjustment in the Conversion Price or
number of shares of Common Stock to be issued upon conversion of the 7.5%
Preferred, as provided above, the consideration received by the Corporation for
any issue or sale of any securities shall:
- To the extent it consists of cash, be computed at the net
amount of cash received by the Corporation after deduction of any
expenses payable directly or indirectly by the Corporation and any
underwriting or similar commissions, compensations, discounts or
concessions paid or allowed by the Corporation in connection with such
issue or sale;
- To the extent it consists of property other than cash, the
consideration other than cash shall be computed at the fair market
value thereof as determined in good faith by the Board of Directors of
the Corporation, at or about, but as
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of, the date of the adoption of the resolution specifically
authorizing such issuance or sale, irrespective of any accounting
treatment thereof; provided, however, that such fair market value as
determined by such Board of Directors, when added to any cash
consideration received in connection with such issuance or sale, shall
not exceed the aggregate market price of the Additional Shares of
Common Stock being issued, as of the date of the adoption of such
resolution; and
- If Additional Shares of Common Stock, Convertible Securities
(as hereinafter defined) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued
or sold together with other stock or securities or other assets of the
Corporation for consideration which covers both, the consideration
received for the Additional Shares of Common Stock, Convertible
Securities or rights or options shall be computed as that portion of
the consideration so received which is reasonably determined in good
faith by the Board of Directors of the Corporation to be allocable to
such Additional Shares of Common Stock, Convertible Securities or
rights or options.
For the purpose of making any adjustment in the Conversion Price
provided in this Section, if at any time, or from time to time, the Corporation
issues any stock or other securities convertible into Additional Shares of
Common Stock (such stock or other securities being hereinafter referred to as
"Convertible Securities") or issues any rights or options to purchase
Additional Shares of Common Stock or Convertible Securities (such rights or
options being hereinafter referred to as "Rights"), then, and in each such
case, if the Effective Conversion Price (as hereinafter defined) of such Rights
or Convertible Securities shall be less than the Conversion Price immediately
prior to the issuance of such Rights or Convertible Securities, the Corporation
shall be deemed to have issued at the time of the issuance of such Rights or
Convertible Securities the maximum number of Additional Shares of Common Stock
issuable upon exercise or conversion thereof and to have received in
consideration for the issuance of such shares an amount equal to the aggregate
Effective Conversion Price of such Rights or Convertible Securities. For the
purposes of this Section, "Effective Conversion Price" shall mean an amount
equal to the sum of the lowest amount of consideration, if any, received or
receivable by the Corporation with respect to any one Additional Share of
Common Stock upon issuance of the Rights or Convertible Securities and upon
their exercise or
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conversion, respectively. No further adjustment of the Conversion Price
adjusted upon the issuance of such Rights or Convertible Securities shall be
made as a result of the actual issuance of Additional Shares of Common Stock on
the exercise of any such Rights or the conversion of any such Convertible
Securities.
(vi) OTHER DILUTING EVENTS. In case any event shall occur as to
which the provisions of this Section 2(g) are not strictly applicable but the
failure to make any adjustment would not in the opinion of the holders fairly
protect the rights of the holders in accordance with the essential intent and
principles of this Section, then, in each such case, upon the written request
of the holders of at least 25% of all of the shares of the 7.5% Preferred at
the time outstanding, the Corporation shall appoint a firm of independent
certified public accountants of recognized national standing (which may be the
regular auditors of the Corporation), which shall give their opinion upon the
adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section, necessary to preserve, without dilution
of the rights of the holders. Upon receipt of such opinion, the Corporation
will promptly mail a copy thereof to the holders and shall make the adjustments
described therein.
(vii) NO DILUTION OR IMPAIRMENT. The Corporation shall not, by
amendment of this Certificate of Incorporation or through any consolidation,
merger, reorganization, recapitalization, transfer of assets, dissolution,
issuance or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Section 2(g),
but shall at all times in good faith use its best efforts to assist in carrying
out all of such terms and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the holders against dilution
or other impairment.
(viii) COMMON STOCK. "Common Stock" as used in this Section 2(g)
shall mean any shares of any class of the Corporation's capital stock other
than the Corporation's preferred stock; provided that such class of preferred
stock has a fixed limit on dividends and a fixed amount payable in the event of
a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation. The Common Stock issuable upon conversion of the 7.5% Preferred,
however, shall be the Common Stock of the Corporation as constituted on the
date hereof, except as otherwise provided in this Section 2(g).
(ix) ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Price or the number of shares of
Common Stock or other
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securities issuable upon conversion of the 7.5% Preferred, the Corporation, at
its expense, shall cause the independent public accountants then auditing the
books of the Corporation to compute such adjustment or readjustment in
accordance with this Article and prepare a certificate showing such adjustment
or readjustment, and shall mail such certificate, by first-class mail, postage
prepaid, to each registered holder of the 7.5% Preferred at the holder's
address as shown on the Corporation's stock transfer books. The certificate
shall set forth such adjustment or readjustment, showing in detail the facts
upon which such adjustment or readjustment is based, including a statement of
(A) the consideration received or to be received by the Corporation for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (B) the Conversion Price at the time in effect for the 7.5% Preferred,
and (C) the number of Additional Shares of Common Stock and the type and
amount, if any, of other property which at the time would be received upon
conversion of the 7.5% Preferred. Such notice may be given in advance of such
adjustment or readjustment and may be included as part of a notice required to
be given pursuant to Section 2(g)(x) of this Article Fourth.
(x) NOTICES OF RECORD DATE. In the event the Corporation shall
propose to take any action of the type or types requiring an adjustment to the
Conversion Price or the number or character of the 7.5% Preferred as set forth
herein, the Corporation shall give notice to the holders of the 7.5% Preferred
in the manner set forth in Section 2(g)(ix) of this Article Fourth, which
notice shall specify the record date, if any, with respect to any such action
and the date on which such action is to take place. Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the number, kind or class
of shares or other securities or property which shall be deliverable upon the
occurrence of such action or deliverable upon the conversion of the 7.5%
Preferred. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 20 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 30
days prior to the taking of such proposed action.
(xi) PAYMENT OF TAXES. The Corporation shall pay all documentary
stamp taxes that are attributable to the issuance of shares of Common Stock or
other securities or property upon conversion of shares of the 7.5% Preferred.
(xii) SURRENDERED SHARES. All certificates representing the 7.5%
Preferred surrendered for conversion
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or redemption shall be appropriately canceled on the books of the Corporation,
and the shares so converted represented by such certificates shall be restored
to the status of authorized but unissued shares of the 7.5% Preferred of the
Corporation, but may not be reissued as part of the 7.5% Preferred.
(xiii) CLOSING OF BOOKS. The Corporation will not close its
transfer books against the transfer of any shares of the 7.5% Preferred or of
any shares of Common Stock issued or issuable upon the conversion of any shares
of the 7.5% Preferred in any manner that interferes with the timely conversion
of such 7.5% Preferred, except as may otherwise be required to comply with
applicable securities laws.
(h) Redemption of the 7.5% Preferred. The Corporation shall have
the right to redeem any or all of the outstanding shares of the 7.5% Preferred
at any time and from time to time at the stated value of such shares payable in
cash together with any accrued but unpaid dividends thereon. In the event the
Corporation shall redeem shares of the 7.5% Preferred, notice of such
redemption shall be given by first-class mail, postage prepaid, mailed not less
than 30 days nor more than 60 days prior to the redemption date (the "7.5%
Redemption Date"), to each holder of record of the shares to be redeemed at
such holder's address as the same appears on the stock register of the
Corporation; provided, however, that no failure to mail such notice nor any
defect therein shall affect the validity of the proceeding for the redemption
of any shares of the 7.5% Preferred to be redeemed except as to the holder to
whom the Corporation has failed to mail said notice or except as to the holder
whose notice was defective. Each such notice shall state: (i) the 7.5%
Redemption Date, (ii) the number of shares of the 7.5% Preferred to be redeemed
and, if less than all the shares held by such holder are to be redeemed from
such holder, the number of shares to be redeemed from such holder, (iii) the
redemption price (including accrued but unpaid dividends), (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price, and (v) that dividends on the shares to be redeemed will
cease to accrue on the day following the 7.5% Redemption Date unless the
Corporation defaults in making such payment.
Upon the 7.5% Redemption Date, the holders of the 7.5% Preferred
shares which are to be redeemed (the "7.5% Redemption Shares") shall deliver
certificates for those shares to the Corporation against payment of the
redemption price. Unless the Corporation shall default in the making of such
payment, dividends shall cease to accrue on the 7.5% Redemption Shares on the
day following the 7.5% Redemption
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Date whether or not the certificates therefor are delivered to the Corporation.
If less than all of the shares of the 7.5% Preferred are to be
redeemed, the Corporation shall select the shares of the 7.5% Preferred to be
redeemed in whole shares on a pro rata basis (or as close thereto as
practical).
3. Common Stock and Class B Common Stock.
(a) Except as otherwise provided in this Section 3, all shares of
common stock of whatever class or series shall be identical and shall entitle
the holders thereof to the same rights and privileges.
(b) Holders of shares of Common Stock shall be entitled to one
vote per share registered on the books of the Corporation on matters submitted
to stockholders. Holders of shares of Class B Common Stock shall be entitled
to one vote per share registered on the books of the Corporation on matters
submitted to stockholders. Except as otherwise required by law, holders of
Common Stock and Class B Common Stock shall vote together as one class on all
matters submitted to stockholders.
(c) In the event of a liquidation, dissolution or winding-up of
the Corporation whether voluntary or involuntary, subject to the proviso below
and subject to the rights of the holders of the Class A Preferred, the Class B
Preferred, the 7.5% Preferred and any other class or series of stock ranking
senior to the Common Stock or the Class B Common Stock as to liquidation
preferences, the holders of shares of Common Stock and Class B Common Stock
then outstanding shall be entitled to share ratably, according to the number of
shares held, in the distribution of assets; provided, however, that any such
distribution of assets to holders of shares of Class B Common Stock shall be
limited to an amount equal to $.01 per share.
FIFTH: The name and mailing address of the sole incorporator is
Monte E. Wetzler, Breed, Abbott & Morgan, 153 East 53rd Street, New York, New
York 10022.
SIXTH: The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less than
three nor more than twelve directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-
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third of the total number of directors constituting the entire Board of
Directors. Initially, the Class I director shall be Alan G. Quasha, Hanover
Direct, Inc., 1500 Harbor Boulevard, Weehawken, New Jersey 07087, the Class II
director shall be Jack E. Rosenfeld, Hanover Direct, Inc., 1500 Harbor
Boulevard, Weehawken, New Jersey 07087 and the Class III directors shall be
Michael P. Sherman and Wayne P. Garten, both at Hanover Direct, Inc., 1500
Harbor Boulevard, Weehawken, New Jersey 07087. From the date of
incorporation, Class III directors shall serve for a one-year term, Class II
directors for a two-year term and Class I directors for a three-year term. At
each annual meeting of stockholders beginning in 1994, successors to the class
of directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional
director of any class elected to fill a vacancy resulting from an increase in
each class shall hold office for a term that shall coincide with the remaining
term of that class, but in no case will a decrease in the number of directors
shorten the term of any incumbent director. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior death,
registration, retirement, disqualification or removal from office. Any vacancy
on the Board of Directors that results from an increase in the number of
directors may be filled by a majority of the Board of Directors then in office,
and any other vacancy occurring in the Board of Directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same remaining term
as that of his predecessors.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of preferred stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
Sixth unless expressly provided by such terms.
The election of directors of the Corporation need not be by ballot
unless the Bylaws so require. The Board of Directors and stockholders may hold
their meetings and have
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an office or offices outside the State of Delaware, if the Bylaws so provide.
Notwithstanding any other provision of this Certificate of
Incorporation, no amendment of this Certificate of Incorporation shall amend,
alter or repeal any provision of this Article Sixth unless such amendment shall
be approved by the holders of shares of stock of the Corporation representing
at least 75% of the votes entitled to be cast thereon at a meeting of the
stockholders duly called for the consideration of such amendment.
SEVENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional, misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
Indemnification. Except as prohibited by Section 145 of the
Delaware General Corporation Law, every director and officer of the Corporation
shall be entitled as a matter of right to be indemnified by the Corporation
against reasonable expense and any liability paid or incurred by such person in
connection with any actual or threatened claim, action, suit or proceeding,
civil, criminal, administrative, investigative or other, whether brought by or
in the right of the Corporation or otherwise, in which he or she may be
involved, as a party or otherwise, by reason of such person being or having
been a director or officer of the Corporation or by reason of the fact that
such person is or was serving at the request of the Corporation as a director,
officer, employee, fiduciary or other representative of the Corporation or
another corporation, partnership, joint venture, trust, employee benefit plan
or other entity (such claim, action, suit or proceeding hereinafter being
referred to as an "action"); provided, however, that no such right of
indemnification shall exist with respect to an action brought by a director or
officer against the Corporation other than in a suit for indemnification as
provided hereunder. Such indemnification shall include the right to have
expenses incurred by such person in connection with an action paid in advance
by the Corporation prior to final disposition of such action, subject to such
conditions as may be prescribed by law. As used herein, "expense" shall
include, among other things, fees and expenses of counsel selected by such
person, and "liability" shall include amounts of judgments, excise taxes, fines
and penalties, and amounts paid in settlement.
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Insurance; Other Funding. The Corporation may purchase and maintain
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense asserted or incurred by such person in
connection with any action, whether or not the Corporation would have the power
to indemnify such person against such liability or expense by law or under the
provisions of this Article Seventh. The Corporation may make other financial
arrangements, which may include, among other things, a trust fund, program of
self-insurance, grant of a security interest or other lien on any assets of the
Corporation, or establishment of a letter of credit, guaranty or surety, to
ensure the payment of such sums as may become necessary to effect
indemnification as provided herein.
Non-Exclusive; Nature and Extent of Rights. The right of
indemnification provided for herein (i) shall not be deemed exclusive of any
other rights, whether now existing or hereafter created, to which those seeking
indemnification hereunder may be entitled under any agreement, by-law or
article provision, vote of the stockholders or directors or otherwise, (ii)
shall be deemed to create contractual rights in favor of persons entitled to
indemnification hereunder, (iii) shall continue as to persons who have ceased
to have the status pursuant to which they were entitled or were designated as
entitled to indemnification hereunder and shall inure to the benefit of the
heirs and legal representatives of persons entitled to indemnification
hereunder and (iv) shall be applicable to actions, suits or proceedings
commenced after the adoption of this Article Seventh, whether arising from acts
or omissions occurring before or after the adoption hereof. The right of
indemnification provided for herein may not be amended, modified or repealed so
as to limit in any way the indemnification provided for herein with respect to
any acts or omissions occurring prior to the adoption of any such amendment or
repeal.
The undersigned, being the sole incorporator, for the purposes of
forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate and does hereby declare and certify that
it is his act and deed and the facts stated herein are true, and accordingly
does hereunto set his hand this 14th day of April, 1993.
/s/ Monte E. Wetzler
--------------------------
Monte E. Wetzler
Sole Incorporator
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