<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 1994
Commission file number 1-12082
HANOVER DIRECT, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-0853260
- ------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1500 HARBOR BOULEVARD, WEEHAWKEN, NEW JERSEY 07087
- -------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 863-7300
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- --------------------------------------- ------------------------
Common Stock, $.66 2/3 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
As of March 9, 1993, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $200.2 million (based on the closing price
of the Common Stock on the American Stock Exchange on March 9, 1994).
As of March 9, 1994, the registrant had 82,933,177 shares of Common Stock
outstanding, and 234,900 shares of 6% Series A Preferred Stock.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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EXPLANATORY NOTE
This Form 10-K/A1 is being filed as an amendment to the Form 10-K
for the fiscal year ended January 1, 1994 of Hanover Direct, Inc., a Delaware
corporation (the "Company"), to include the information required by Part III
of Form 10-K. Part III had previously been omited due to its proposed
incorporation by reference in the Company's Proxy Statement for the 1994
Annual Meeting of Shareholders.
<PAGE> 3
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Directors and executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Alan G. Quasha . . . . . . . . . . . . . . . . 44 Chairman of the Board and Director
Jack E. Rosenfeld. . . . . . . . . . . . . . . 55 President, Chief Executive Officer and Director
Michael P. Sherman . . . . . . . . . . . . . . 41 Executive Vice President-Corporate Affairs, General
Counsel and Secretary
Wayne P. Garten. . . . . . . . . . . . . . . . 41 Executive Vice President and Chief Financial Officer
Edward J. O'Brien. . . . . . . . . . . . . . . 50 Senior Vice President and Treasurer
David E. Ullman . . . . . . . . . . . . . . . . 36 Vice President-Controller
Ralph Destino. . . . . . . . . . . . . . . . . 57 Director
J. David Hakman. . . . . . . . . . . . . . . . 52 Director
S. Lee Kling . . . . . . . . . . . . . . . . . 65 Director
Theodore H. Kruttschnitt . . . . . . . . . . . 51 Director
Jeffrey Laikind . . . . . . . . . . . . . . . . 58 Director
Elizabeth Valk Long. . . . . . . . . . . . . . 43 Director
Edmund R. Manwell. . . . . . . . . . . . . . . 51 Director
Geraldine Stutz. . . . . . . . . . . . . . . . 65 Director
Robert F. Wright . . . . . . . . . . . . . . . 68 Director
</TABLE>
Alan G. Quasha has been President of Quadrant Management, Inc.
("Quadrant"), an indirect wholly-owned subsidiary of NAR which manages NAR's
U.S. assets, since its formation in early 1988. From 1980 to September 1991,
he was a partner in the New York City law firm of Quasha, Wessley & Schneider.
In addition to his directorship at the Company, Mr. Quasha serves as a director
of Harken Energy Corporation, an oil and gas exploration and production
company, E-Z Serve Corporation, a convenience store company, Tejas Power
Corporation, a natural gas company, and NAR. Mr. Quasha is also a director of
Compagnie Financiere Richemont A.G. ("Richemont"), a Swiss public company
engaged in the tobacco, luxury goods and other businesses and an affiliate of
NAR. Mr. Quasha, a designee of NAR, was elected a Director of the Company and
Chairman of the Board in October 1991. Mr. Quasha is a Class II Director
whose term expires in 1994.
Jack E. Rosenfeld has served as President and Chief Executive Officer of
the Company since October 1990. Mr. Rosenfeld previously served as Executive
Vice President of the Company from May 1988 until October 1990. From 1987
through April 1988, Mr. Rosenfeld was President of Rosenfeld & Co., a
consulting firm and provided consulting services to the Company. Mr. Rosenfeld
is also a director of PSC, Inc., a manufacturer of bar code equipment, and
Electric Fuel, Ltd., a developer and manufacturer of electronic batteries and
fueling systems for motor vehicles. Mr. Rosenfeld was elected a Director of
the Company in 1974. Mr. Rosenfeld is a Class III Director whose term expires
in 1995.
3
<PAGE> 4
Michael P. Sherman has served as Executive Vice President-Corporate
Affairs of the Company since 1990 and as General Counsel and Secretary of the
Company since 1986. Mr. Sherman also served as Senior Vice President of the
Company from 1986 through 1990. Mr. Sherman joined the Company in 1983 and was
elected Vice President and Assistant Secretary of the Company in the same year.
Wayne P. Garten has served as Executive Vice President of the Company
since October 1990 and as Chief Financial Officer of the Company since 1989.
Mr. Garten also served as Senior Vice President of the Company from 1989
through 1990. Mr. Garten joined the Company in 1983 and was elected Vice
President of the Company in 1984. Mr. Garten was elected Vice
President-Finance of the Company in 1989.
Edward J. O'Brien has served as Senior Vice President and Treasurer of
the Company since 1991. Mr. O'Brien joined the Company in 1986 and was elected
Vice President of the Company in 1988.
David E. Ullman joined the Company in August 1991 and was elected Vice
President-Controller in December 1992. Prior to joining the Company, Mr.
Ullman was with Arthur Andersen & Co. for ten years, most recently as a manager
in the Audit and Business Advisory Group.
Ralph Destino has been the Chairman of Cartier, Inc., a luxury goods
store, since 1985. Cartier, Inc. is a subsidiary of Richemont, an affiliate of
NAR. Mr. Destino also serves as a director of The Leslie Fay Companies, a
manufacturer of dresses, suits, coats and sportswear which filed for protection
under Chapter 11 of the U.S. Code in March 1993. Mr. Destino, a designee of
NAR, was elected a Director of the Company in October 1991. Mr. Destino is a
Class III Director whose term expires in 1995.
J. David Hakman has been the Chief Executive Officer of Hakman Capital
Corporation, Burlingame, California, an investment and merchant banking firm,
since 1980. Mr. Hakman also serves as a director of Concord Camera Corp., a
firm which manufactures and distributes cameras. Mr. Hakman is also the
Chairman and a director of AFD Acquisition Corp., a food distribution company,
which filed for protection under Chapter 11 of the U.S. Code in June 1991 and
emerged from Chapter 11 in September 1993. Mr. Hakman, a designee of Mr.
Kruttschnitt, was appointed a Director of the Company in May 1989 and was
elected a Director of the Company in October 1991. Mr. Hakman is a Class I
Director whose term expires in 1996.
S. Lee Kling is Chairman of the Board of Kling Rechter & Co., a merchant
banking company. He served as Chairman and a director of Landmark Bancshares
Corporation, a bank holding company in St. Louis, Missouri, from 1974 through
1991, when it merged with Magna Group Inc. He served as Landmark's Chief
Executive Officer from 1974 through 1990. Mr. Kling serves on the Boards of
Directors of E-Systems, Inc., a diversified electronics company, Falcon
Products, Inc., a manufacturer of commercial furniture, Bernard Chaus Inc., a
sportswear manufacturer and distributor, Top Air Manufacturing Co., a
manufacturer of agricultural equipment, Lewis Galoob Toys, Inc. a toy company,
Magna Group, Inc., a multi-bank holding company, National Beverage Corp., a
specialized beverage company, and NationsMart Corp., a dry cleaning, laundry
and shoe repair company, Mr. Kling was elected a Director of the Company in
1983. Mr. Kling is a Class I Director whose term expires in 1996.
Theodore H. Kruttschnitt has been the owner and sole proprietor of
California Innkeepers, Burlingame, California, an owner/operator of hotels and
motor hotels, since May 1970. Mr. Kruttschnitt is also Chairman of the Board
of Burlingame Bancorp, a commercial bank holding company, and serves on the
Board of Directors of Cooper Development Company, a firm which invests in
personal care products businesses. Mr. Kruttschnitt was appointed a Director
of the Company in May 1989 and was elected a Director of the Company in October
1991. Mr. Kruttschnitt is a Class III Director whose term expires in 1995.
Jeffrey Laikind has been a Managing Director of Prudential Securities
Investment Management (formerly Prudential Bache Securities Inc.), a money
management firm, since 1985. Mr. Laikind is also a director of NAR and a
member of the advisory board of Quadrant. Mr. Laikind, a designee of NAR, was
elected a Director of the Company in October 1991. Mr. Laikind is a Class III
Director whose term expires in 1995.
4
<PAGE> 5
Elizabeth Valk Long has been the President of TIME Magazine since July
1991 and a Senior Vice President of Time Inc., periodical and book publishers,
since April 1989. She served as the publisher of TIME from July 1991 until
September 1993; the publisher of PEOPLE from November 1988 until July 1991;
and the publisher of LIFE Magazine from December 1986 until November 1988.
Ms. Long, a designee of NAR, was elected a Director of the Company in
October 1991. Ms. Long is a Class I Director whose term expires in 1996.
Edmund R. Manwell is senior partner at the law firm of Manwell & Milton,
San Francisco, California. Mr. Manwell has been associated with this firm
since 1982. Mr. Manwell also serves as a director of Dreyer's Grand Ice Cream,
Inc., an ice cream company. Mr. Manwell, a designee of Mr. Kruttschnitt, was
appointed a Director of the Company in May 1989 and was elected a Director of
the Company in October 1991. Mr. Manwell is a Class II Director whose term
expires in 1994.
Geraldine Stutz has been the President and Publisher of Panache Press at
Random House Inc., a publishing company, since 1986. She was previously the
Chief Executive Officer and Managing Partner of Henri Bendel, a New York
specialty store. Ms. Stutz also serves as a director of Tiffany & Co., a
retail luxury jewerly store, and the Jones Apparel Group, a clothing
manufacturer. Ms. Stutz, a designee of NAR, was elected a Director of the
Company in October 1991. Ms. Stutz is a Class II Director whose term expires in
1994.
Robert F. Wright has been the President of Robert F. Wright Associates,
Inc., business consultants, since 1988. Prior thereto, he was a senior partner
of the accounting firm Arthur Andersen & Co. Mr. Wright is a director of
Reliance Standard Life Insurance Company, a life insurance company, and
affiliates, Williams Real Estate Co., Inc., a real estate company, and The
Navigator Group, Inc., a property insurance company. Mr. Wright also serves on
the advisory board of Quadrant, a NAR affiliate. Mr. Wright, a designee of
NAR, was elected a Director of the Company in October 1991. Mr. Wright is a
Class II Director whose term expires in 1994.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires officers, directors and beneficial owners of more than 10% of the
Company's Common Stock to file reports of ownership and changes in their
ownership of the equity securities of the Company with the Securities and
Exchange Commission ("Commission") and the American Stock Exchange. Based
solely on a review of the reports and representations furnished to the Company
during the last fiscal year by such persons, the Company believes that each of
these persons is in compliance with all applicable filing requirements.
AGREEMENTS WITH RESPECT TO NOMINATION OF DIRECTORS
As a result of the commencement of a proxy contest in 1989 by Theodore
H. Kruttschnitt, J. David Hakman and Edmund R. Manwell, the Company entered
into an agreement on May 5, 1989 with Messrs. Kruttschnitt, Hakman and Manwell
(the "Nomination and Standstill Agreement"). Pursuant to the Nomination and
Standstill Agreement, the Board was expanded to 11 members and Mr.
Kruttschnitt was appointed as a Class III Director, Mr. Hakman as a Class I
Director and Mr. Manwell as a Class II Director. The Company also agreed to
nominate each of Messrs. Kruttschnitt, Hakman and Manwell for election upon the
expiration of their respective terms provided Mr. Kruttschnitt continues to own
certain specified levels of the Company's Common Stock. See Item 13.
Pursuant to the Stock Purchase Agreement, dated October 25, 1991,
between the Company and NAR (the "Stock Purchase Agreement"), the Company
agreed to recommend in its proxy statement for each annual or special meeting
of Shareholders at which Directors are to be elected during the five year
period from October 25, 1991, and at each such Shareholders' meeting, as part
of the management slate for election to the Board of Directors, such number of
persons designated by NAR as will result in the Board's including six persons
designated by NAR. In addition, NAR agreed that for a period of five years
from October 25, 1991, so long as the Board of Directors of the Company
consists of 11 persons of whom six are designees of NAR, it will not nominate
or propose for nomination or elect persons to the Board if as a result more
than six persons designated by it would be on the Board at any one time except
following an acquisition by a third party of 20% or more of the voting stock or
total assets of the Company. Messrs. Destino, Laikind, Quasha and Wright and
Ms. Long and Ms. Stutz were designated pursuant to such agreement and were
nominated and elected to serve as Directors of the Company at the Company's
1991 Special Meeting of Shareholders. See Item 13.
5
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ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION OF THE COMPANY
The following table sets forth certain information with respect to
compensation awarded to, earned by or paid to the Company's Chief Executive
Officer and each of the four most highly compensated executive officers of the
Company other than the Chief Executive Officer whose total annual salary and
bonus exceeded $100,000 for each of the Company's last three fiscal years
(collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
----------------------------------------------- --------------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted All
Name and Annual Stock Options/ LTIP Other
Principal Fiscal Compen- Award(s) SARs Payouts Compen-
Position Year Salary ($) Bonus sation ($) ($) (#) ($) sation
---------- ------ ---------- ($)(1) (2) --------- ----- ------- ($)(3)
------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack E. Rosenfeld 1993 $500,000 - - - 150,000(4) - $35,523(8)
President and Chief 1992 $499,770 $150,469 - - 2,427,210(5) - $31,598(9)
Executive Officer 1991 $519,326 - - - 2,921,884(6) - -
Michael P. Sherman 1993 $223,942 - - - 80,000(4) - $19,314(10)
Executive Vice 1992 $215,019 $75,618 - - - - $13,470(11)
President - Corporate 1991 $207,827 - - - - - -
Affairs, General
Counsel and Secretary
Wayne P. Garten 1993 $225,144 - - - 80,000(4) - $10,160(12)
Executive Vice 1992 $212,496 $72,016 - - - - $3,162(13)
President and Chief 1991 $189,538 - - - - - -
Financial Officer
Edward J. O'Brien 1993 $138,027 - - - 40,000(4) - $11,849(14)
Senior Vice President 1992 $126,998 $34,707 - - - - $7,131(15)
and Treasurer 1991 $120,082 $12,500 - - - - -
David E. Ullman 1993 $110,962 - - - 10,000(4) - $647(16)
Vice President- 1992 $84,135 $9,577 - - - - -
Controller 1991 $32,923(7) - - - - - -
</TABLE>
______________
(1) In fiscal 1992, the Named Executives, except for Mr. Rosenfeld, deferred
25% of their bonuses and are entitled to receive such deferred amounts in
stock over a three year period pursuant to the Company's Incentive
Compensation Plan.
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<PAGE> 7
(2) The aggregate amount of all perquisites and other personal benefits paid
to any Named Executive is not greater than either $50,000 or 10% of the
total annual salary and bonus reported for such Named Executive.
(3) Commission rules do not require disclosure regarding items in this
column for fiscal 1991.
(4) Issued pursuant to the Company's 1993 Executive Equity Incentive Plan.
(5) Includes the right to purchase 1,213,605 shares of Common Stock granted to
Mr. Rosenfeld by NAR on May 28,1993 pursuant to a letter agreement dated
September 23, 1992 at a price per share of $2.00 (subject to adjustment)
plus 10% per year (including fractions of a year) from October 25, 1991
through the exercise period and up to 1,213,605 shares of Common Stock at
a price per share of $1.50 (subject to adjustment) plus 10% per year
(including fractions of a year) from September 16, 1992 through the
exercise period.
(6) Includes the right to purchase, which was conditioned on the occurrence of
certain events, 1,213,605 shares of Common Stock granted to Mr. Rosenfeld
on October 25, 1991 at a price per share of $3.00 (subject to adjustment)
plus 10% per year (including fractions of a year) from October 25, 1991
through the exercise period and the right to purchase, pursuant to a
rights offering which was conditioned on the occurrence of certain events,
a maximum of 1,508,279 shares of Common Stock at a price per share to be
determined at a later date (but not less than $2.00). Mr. Rosenfeld was
not able to acquire any of these shares because the events upon which the
exercise of such rights were conditioned never occurred. The right to
acquire these shares expired on September 23, 1992.
(7) Mr. Ullman was hired by the Company in August 1991.
(8) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. Rosenfeld under the Company's 401(k) Savings Plan, $26,216 of matching
contributions made by the Company on behalf of Mr. Rosenfeld under the
Company's Supplemental Retirement Plan, $1,388 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Rosenfeld, and the distribution of 2,316 shares of the Company's Common
Stock, resulting from the Company's termination of its Employee Stock
Ownership Plan, valued at $2.125 per share on the date of such plan's
termination.
(9) Includes $2,910 of matching contributions made by the Company on behalf of
Mr. Rosenfeld under the Company's 401(k) Savings Plan, $27,300 of matching
contributions made by the Company on behalf of Mr. Rosenfeld under the
Company's Supplemental Retirement Plan, and $1,388 of life insurance
premiums paid on term life insurance policies by the Company on behalf of
Mr. Rosenfeld.
(10) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. Sherman under the Company's 401(k) Savings Plan, $ 11,492 of matching
contributions made by the Company on behalf of Mr. Sherman under the
Company's Supplemental Retirement Plan, $344 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Sherman, and the distribution of 2,108 shares of the Company's Common
Stock, resulting from the Company's termination of its Employee Stock
Ownership Plan, valued at $2.125 per share on the date of such plan's
termination.
(11) Includes $2,910 of matching contributions made by the Company on behalf of
Mr. Sherman under the Company's 401(k) Savings Plan, $10,215 of matching
contributions made by the Company on behalf of Mr. Sherman under the
Company's Supplemental Retirement Plan, and $344 of life insurance
premiums paid on term life insurance policies by the Company on behalf of
Mr. Sherman.
(12) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. Garten under the Company's 401(k) Savings Plan, $2,724 of matching
contributions made by the Company on behalf of Mr. Garten under the
Company's Supplemental Retirement Plan, $252 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
Garten, and the distribution of 1,970 shares of the Company's Common
Stock, resulting from the Company's termination of its Employee Stock
Ownership Plan, valued at $2.125 per share on the date of such plan's
termination.
(13) Includes $2,910 of matching contributions made by the Company on behalf of
Mr. Garten under the Company's 401(k) Savings Plan, and $252 of life
insurance premiums paid on term life insurance policies by the Company on
behalf of Mr. Garten.
(14) Includes $2,998 of matching contributions made by the Company on behalf of
Mr. O'Brien under the Company's 401(k) Savings Plan, $5,864 of matching
contributions made by the Company on behalf of Mr. O'Brien under the
Company's Supplemental Retirement Plan, $300 of life insurance premiums
paid on term life insurance policies by the Company on behalf of Mr.
O'Brien, and the distribution of 1,265 of the Company's Common Stock,
resulting from the Company's termination of its Employee Stock Ownership
Plan, valued at $2.125 per share on the date of such plan's termination.
(15) Includes $1,907 of matching contributions made by the Company on behalf of
Mr. O'Brien under the Company's 401(k) Savings Plan, $4,924 of matching
contributions made by the Company on behalf of Mr. O'Brien under the
Company's Supplemental Retirement Plan, and $300 of life insurance
premiums paid on term life insurance policies by the Company on behalf of
Mr. O'Brien.
(16) Includes $93 of matching contributions made by the Company on behalf of
Mr. Ullman under the Company's 401(k) Savings Plan, and $554 of matching
contributions made by the Company on behalf of Mr. Ullman under the
Company's Supplemental Retirement Plan.
7
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STOCK OPTIONS
During fiscal 1993, no stock options were granted to, nor were any
exercised by, any of the Named Executives pursuant to the Stock Option Plan.
The following table contains information concerning options granted to
each of the Named Executives during fiscal 1993 pursuant to the 1993 Executive
Equity Incentive Plan.
OPTION GRANTS IN FISCAL 1993
<TABLE>
<CAPTION>
Percent of
Total
Options
Granted to Grant
Options Employees Date
Granted in Fiscal Exercise Expiration Present
Name (#) Year Price Date(1) Value(2)
(a) (b) (c) (d) (e) (h)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jack E. Rosenfeld 150,000 10.7% $2.50 3/2/99 $325,293
Michael P. Sherman 80,000 5.7% $2.50 3/2/99 $173,489
Wayne P. Garten 80,000 5.7% $2.50 3/2/99 $173,489
Edward J. O'Brien 40,000 2.8% $2.50 3/2/99 $ 86,745
David E. Ullman 10,000 .7% $2.50 3/2/99 $ 21,686
</TABLE>
______________
(1) Options granted under the 1993 Executive Equity Incentive Plan
become exercisable three years after the date of grant and expire
six years from the date of grant.
(2) Grant date option values are determined using the Black-Scholes
Model. The Black-Scholes Model is a formula widely used to value
exchange traded options. However, stock options granted by the
Company to its executives differ from exchange traded options in
three key respects: options granted by the Company to its
executives are long-term, non- transferable and subject to vesting
restrictions, while exchange traded options are short-term and can
be exercised or sold immediately in a liquid market. The
Black-Scholes Model relies on several key assumptions to estimate
the present value of options, including the volatility of the
security underlying the option, the risk-free rate of return on
the date of grant and the term of the option. In calculating the
grant date option values set forth in the table, a factor of
61.96% has been assigned to the volatility of the Common Stock,
based on monthly stock market quotations for the three years
preceding the date of grant; the risk-free rate of return has been
fixed at 7.54% based upon the average of the Intermediate Term
Government Bond Yields (Iobottson Associates SBBI 1994 Yearbook
Exhibit A-13) for the six years preceding the date of grant; and
the actual option term of six years has been used. Consequently,
the grant date option values set forth in the table are only
theoretical values and may not accurately determine present value.
The actual value, if any, an optionee will realize will depend on
the excess of the market value of the Common Stock over the
exercise price on the date the option is exercised.
8
<PAGE> 9
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS RELATING TO CHANGE IN CONTROL
In connection with the consummation of the transactions contemplated by
the Stock Purchase Agreement between the Company and NAR and as a condition
thereto, the Company entered into an Executive Employment Agreement, dated as
of October 25, 1991, with Jack E. Rosenfeld, the President and Chief Executive
Officer of the Company (the "Employment Agreement"). The Employment Agreement
provides for a five-year term commencing on October 25, 1991, at a base salary
of $500,000 per year; an annual bonus of between 25% and 100% of Mr.
Rosenfeld's base salary, depending on the attainment of various performance
objectives and payable only if the Company achieves at least 101% of the
results forecast in its approved budget; a payment to a trust on behalf of Mr.
Rosenfeld of 916,667 shares of Common Stock in lieu of a cash payment of
$1,564,000 to which he was previously entitled in connection with a change in
control of the Company, 666,667 of such shares being fully vested and the
remaining 250,000 of such shares to vest in equal annual installments over
three years (such unvested shares to be forfeitable if Mr. Rosenfeld's
employment is terminated by the Company with cause or by him without good
reason), with the vested shares distributable to Mr. Rosenfeld at the end of
the employment term or the earlier termination of his employment; and the grant
of registration rights under the Securities Act of 1933, as amended,
("Securities Act"), for shares of Common Stock owned by Mr. Rosenfeld. On
October 25, 1991, NAR entered into an agreement with Mr. Rosenfeld pursuant to
which he may purchase from NAR prior to October 25, 1996, 1,213,605 shares of
Common Stock at a price per share of $2.00 (subject to adjustment) plus 10% of
$2.00 per year through the date on which Mr. Rosenfeld effects such purchase.
This agreement was amended on September 23, 1992 to provide that NAR would
grant to Mr. Rosenfeld in March 1993 (which it did) the right to purchase an
additional 1,213,605 shares of Common Stock at a price share of $1.50 (subject
to adjustment) plus 10% per year from September 1992 through the exercise
period.
In connection with the Stock Purchase Agreement, on October 14, 1991, the
Company entered into Executive Employment Agreements with each of Messrs.
Michael P. Sherman, Wayne P. Garten and Edward J. O'Brien. These Executive
Employment Agreements were essentially the same as such officers' existing
employment agreements except that they provide for cash payments on October 25,
1991 to Messrs. Sherman, Garten and O'Brien of $281,714, $221,621 and $90,000,
respectively, and contributions to a trust on behalf of such officers of
156,979 shares, 147,812 shares and 60,000 shares of the Company's Common Stock,
respectively, in connection with the change in control effected by NAR pursuant
to the Stock Purchase Agreement and in lieu of their right to receive a cash
change in control payment. Pursuant to the terms of the trust, such Common
Stock was distributed to each such officer during fiscal 1993. Messrs.
Sherman, Garten and O'Brien were also granted certain registration rights under
the Securities Act with respect to the shares of Common Stock granted to each
of them. In 1993, Messrs. Sherman and Garten's employment agreements were
renewed for one year renewable terms.
COMPENSATION OF DIRECTORS
During 1993, Directors who were not employees of the Company or its
subsidiaries were paid a retainer at an annual rate of $30,000, plus an
additional $1,000 for each Board meeting and $500 for each committee meeting
attended. Officers and employees of the Company or its subsidiaries receive no
remuneration for their services as Directors. During fiscal 1993, the Company
provided $50,000 of term life insurance for each Director of the Company. In
addition, the Company issues stock options for 20,000 shares to new Directors
of the Company pursuant to the 1993 Directors Option Plan, and indemnifies its
Directors to the extent permitted by applicable law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 1, 1994, the Compensation Committee
of the Board of Directors of the Company consisted of Jeffrey Laikind
(Chairman), Ralph Destino, Elizabeth Valk Long, Alan G. Quasha and Geraldine
Stutz. None of such persons was, during such fiscal year or formerly, an
officer or employee of the Company or any of its subsidiaries or had any
relationship with the Company other than serving as a Director of the Company.
In addition, during the fiscal year ended January 1, 1994, no executive officer
of the Company served as a director or a member of the compensation committee
of another entity, one of whose executive officers served as a Director or on
the Compensation Committee of the Company.
9
<PAGE> 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE COMPANY
The following table sets forth information concerning each person or group
of affiliated persons known by management to own beneficially more than five
percent (5%) of the Company's Common Stock as of April 25, 1994. The
information given is based on information furnished to the Company by such
persons or groups and statements filed with the Commission.
<TABLE>
<CAPTION>
SHARES OF PERCENT
COMMON OF
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK CLASS(1)
- -------------------------------------- -------------- -----
<S> <C> <C>
Alan G. Quasha(2) . . . . . . . . . . . . . . . . . 51,895,263(3)(7) 53.2%
c/o Quadrant Management, Inc.
127 East 73rd Street
New York, New York 10021
NAR Group Limited(2) . . . . . . . . . . . . . . . 51,875,263(3) 53.2%
c/o P.M.M. Services
(B.V.I.) Limited
P.O. Box 438
Road Town, Tortola,
British Virgin Islands
Theodore H. Kruttschnitt(4) . . . . . . . . . . . . 5,320,887(5) 5.8%
1350 Bayshore Boulevard
Suite 850
Burlingame, CA 94010
Jack E. Rosenfeld . . . . . . . . . . . . . . . . . 3,849,598(6) 4.2%
c/o Hanover Direct, Inc.
1500 Harbor Boulevard
Weehawken, NJ 07087
</TABLE>
____________________
(1) Includes in each case shares of Common Stock issuable upon exercise of
options exercisable within 60 days for the subject individual only.
Percentages computed on the basis of 92,437,720 shares of Common Stock
outstanding as of April 25, 1994.
(2) Information concerning the number of shares beneficially owned has been
taken from Amendment No. 15 to the Statement on Schedule 13D filed by NAR
on March 8, 1994 with the Commission (the "NAR Schedule 13D"). All of
the shares beneficially owned by NAR could also be deemed to be owned
beneficially by certain other persons including Alan G. Quasha,
Intercontinental Mining & Resources Incorporated, QCC and Richemont, each
of which disclaims beneficial ownership of securities of the Company
owned of record by any of the others.
(3) Includes warrants to purchase 5,033,735 shares exercisable within 60 days
granted to NAR or its affiliates.
(4) Information concerning the number of shares beneficially owned has been
taken from Amendment No. 10 to the Statement on Schedule 13D filed by Mr.
Kruttschnitt on April 19, 1994 with the Commission. Such statement sets
forth the number of shares beneficially owned by Mr. Kruttschnitt and, of
such shares, the number as to which he holds sole voting power, shared
voting power, sole dispositive power or shared dispositive power. The
amended Schedule 13D also indicates that Mr. Kruttschnitt is a member of
a group which includes Mr. J. David Hakman, who beneficially owns 13,434
shares, and Mr. Edmund R. Manwell, who beneficially owns 13,628 shares.
In addition, Messrs. Hakman and Manwell have been granted options to
10
<PAGE> 11
purchase 15,000 and 20,000 shares, respectively, of Common Stock, which
options are exercisable within 60 days.
(5) Includes options to purchase 15,000 shares exercisable within 60 days.
(6) Includes options to purchase 2,627,210 shares exercisable within 60 days.
(7) Includes options to purchase 20,000 shares exercisable within 60 days
by Mr. Quasha.
11
<PAGE> 12
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth information concerning the beneficial
ownership of the Company's Common Stock by each Director, nominee for Director
and executive officer and by all executive officers and Directors as a group as
of April 25, 1994. The information given is based on information furnished to
the Company by such persons and statements filed with the Commission.
<TABLE>
<CAPTION>
SHARES OF PERCENT
COMMON OF
STOCK CLASS(1)
--------- --------
<S> <C> <C>
Ralph Destino . . . . . . . . . . . . . . . . . 20,000(4) *
J. David Hakman (2) . . . . . . . . . . . . . . 28,434(5) *
S. Lee Kling . . . . . . . . . . . . . . . . . 18,511 5.8%
Theodore H. Kruttschnitt (2) . . . . . . . . . 5,320,887(5) *
Jeffrey Laikind . . . . . . . . . . . . . . . . 82,000(4) *
Elizabeth Valk Long . . . . . . . . . . . . . . 30,000(4) *
Edmund R. Manwell (2) . . . . . . . . . . . . 33,628(4) *
Alan G. Quasha (3) . . . . . . . . . . . . . . 51,895,263(4) 53.2%
Jack E. Rosenfeld . . . . . . . . . . . . . . 3,849,598(6) 4.2%
Geraldine Stutz . . . . . . . . . . . . . . . . 59,649(4) *
Robert F. Wright . . . . . . . . . . . . . . . 70,000(4) *
Michael P. Sherman . . . . . . . . . . . . . . 236,798(7) *
Wayne P. Garten . . . . . . . . . . . . . . . . 227,976(8) *
Edward J. O'Brien . . . . . . . . . . . . . . . 84,060 *
David E. Ullman . . . . . . . . . . . . . . . . 5,253 *
Directors and executive officers as group (15 persons) 10,086,794(9) 11.4%
- ---------------
* Less than 1%
</TABLE>
(1) Includes in each case shares of Common Stock issuable upon exercise of
options or warrants exercisable within 60 days for the subject
individual only. Percentages computed on the basis of 92,437,720 shares
of Common Stock outstanding as of April 25, 1994.
(2) See Note (4) under "PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE
COMPANY."
(3) See Note (2) under "PRINCIPAL HOLDERS OF VOTING SECURITIES OF THE
COMPANY." All of the shares beneficially owned by NAR could also be
deemed to be beneficially owned by Alan G. Quasha, due to his shared
investment and voting power with NAR.
(4) Includes options to purchase 20,000 shares exercisable within 60 days.
(5) Includes options to purchase 15,000 shares exercisable within 60 days.
(6) Includes options to purchase 2,627,210 shares exercisable within 60
days.
(7) Includes options to purchase 31,500 shares exercisable within 60 days.
(8) Includes options to purchase 32,150 shares exercisable within 60 days.
(9) Excludes 46,841,528 shares and warrants and options for 5,053,735 shares
beneficially owned by NAR which could also be deemed to be beneficially
owned by Alan G. Quasha. Includes options to purchase 20,000 shares
exercisable within 60 days by Alan G. Quasha.
12
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Nomination and Standstill Agreement, Messrs.
Kruttschnitt, Hakman and Manwell agreed that if at any time Mr. Kruttschnitt
ceases to own at least 2,262,000 shares of Common Stock (representing 83% of
the shares owned by Mr. Kruttschnitt on the date of the Nomination and
Standstill Agreement), at least one of them will resign as a Director; if at
any time Mr. Kruttschnitt ceases to own at least 1,907,710 shares of Common
Stock (representing 70% of the shares owned by Mr. Kruttschnitt on the date of
the Nomination and Standstill Agreement), at least two of them will resign as
Directors; and if at any time Mr. Kruttschnitt owns less than 5% of the
outstanding shares of Common Stock, all of them will resign as Directors;
except no Director shall be obligated to resign if such resignation would
constitute a breach of the Director's fiduciary duties as a Director. See
Item 10 - Agreements with Respect to Nomination of Directors.
On October 25, 1991, the Company and NAR consummated the transactions
contemplated by the Stock Purchase Agreement and NAR acquired 49.8% of the
voting securities of the Company. Pursuant to the Stock Purchase Agreement,
NAR and its affiliates also agreed not to increase their beneficial ownership
to more than 50.1% of the voting stock outstanding of the Company for a period
of three years following October 25, 1991 without the approval of at least a
majority of the Directors of the Company unaffiliated and unassociated with and
not designated by NAR. However, NAR may exceed such percentage limitation
under certain circumstances, including as a result of acquisitions (i) in
certain circumstances, through the conversion or exercise of warrants or other
securities; (ii) directly from the Company or any subsidiary of the Company or
from any holder of at least five percent of the Common Stock; and (iii) after
certain Third Party Acquisitions (as defined in the Stock Purchase Agreement).
See Item 10 - Agreements with Respect to Nomination of Directors.
Since January 1993, pursuant to a consulting arrangement, Quadrant, an
affiliate of NAR, renders management consulting, business advisory and
investment banking services to the Company for an annual fee of $750,000 per
year.
Approximately $85,000 was paid by the Company during fiscal 1993 for
the rental of property pursuant to an operating lease to a partnership in
which the wife of the Chief Executive Officer and President of the Company,
Jack E. Rosenfeld, is a partner. Mr. Rosenfeld is also a Director of the
Company.
In May 1993, the Company refinanced its revolving credit facility that
had been previously provided by a subsidiary of NAR with a new three-year $40
million facility with an independent financial institution. In October 1993,
the Company increased the maximum credit available to $52.5 million. A
subsidiary of NAR provided a secured limited guarantee of $10 million which
allowed the Company to borrow in excess of its availability based on a formula,
up to the facility's limit. This limited guarantee was reduced by
approximately $5.1 million during the fourth quarter of 1993. The guarantee
was eliminated in the first quarter of 1994 based on the Company's 1993
operating results.
The foregoing relationships and transactions have been approved by the
Board or a committee of the Board or by the Shareholders and, to the extent
that such arrangements are available from non-affiliated parties, are on terms
no less favorable to the Company than those available from non-affiliated
parties.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HANOVER DIRECT, INC.
Date: April 28, 1994 By: /s/ Jack E. Rosenfeld
-------------------------------
Jack E. Rosenfeld
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Principal Financial Officer:
/s/ Wayne P. Garten
- ---------------------
Wayne P. Garten
Executive Vice President and
Chief Financial Officer
Board of Directors:
/s/ Ralph Destino
- ------------------- --------------------
Ralph Destino Edmund R. Manwell
/s/ Alan G. Quasha
- -------------------- -------------------
J. David Hakman Alan G. Quasha
- ----------------- ---------------------
S. Lee Kling Geraldine Stutz
/s/ Jeffrey Laikind
- ----------------------------- ----------------------
Theodore H. Knuttschnitt Jeffrey Laikind
/s/ Elizabeth Valk Long /s/ Robert F. Wright
- ----------------------- ---------------------
Elizabeth Valk Long Robert F. Wright
/s/ Jack E. Rosenfeld
--------------------
Jack E. Rosenfeld
Date: April 28, 1994
14
