-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CSS9TPgTiFCpWFTOXqdJQT/0AjIhUL0B5hFK2Wbs4vG4yWq8YMTCJhxfIFi3jTTu n6EuIVlPhn+R1V6r68NqKQ== 0000950123-03-008172.txt : 20030715 0000950123-03-008172.hdr.sgml : 20030715 20030715080437 ACCESSION NUMBER: 0000950123-03-008172 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030714 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030715 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANOVER DIRECT INC CENTRAL INDEX KEY: 0000320333 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 138053260 STATE OF INCORPORATION: DE FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08056 FILM NUMBER: 03786199 BUSINESS ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 BUSINESS PHONE: 2018653800 MAIL ADDRESS: STREET 1: 1500 HARBOR BLVD CITY: WEEHAWKEN STATE: NJ ZIP: 07087 FORMER COMPANY: FORMER CONFORMED NAME: HORN & HARDART CO /NV/ DATE OF NAME CHANGE: 19920703 8-K 1 y88407e8vk.txt HANOVER DIRECT, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 14, 2003 -------------------------------------------------------------- HANOVER DIRECT, INC. ------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) 1-12082 ---------------------------------- (COMMISSION FILE NUMBER) DELAWARE 13-0853260 ----------------------------------- ----------------------------- (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION) IDENTIFICATION NUMBER) 115 RIVER ROAD EDGEWATER, NEW JERSEY 07020 ----------------------------------- -------------- (ADDRESS OF PRINCIPAL (ZIP CODE) EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 863-7300 ------------------- - -------------------------------------------------------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) ITEM 5. OTHER EVENTS. As reported by the filing of Amendment No. 1 to Schedule 13D made by Chelsey Direct, LLC, a Delaware limited liability company ("Chelsey"), and certain related parties with the Securities and Exchange Commission on July 14, 2003, Hanover Direct, Inc. (the "Company") sent a letter to Chelsey and Richemont Finance S.A., a Luxembourg company, dated July 7, 2003, a copy of which is annexed hereto as Exhibit 99.1. Chelsey responded to the Company's July 7, 2003 letter by letter dated July 11, 2003, a copy of which is annexed hereto as Exhibit 99.2. The Company responded to Chelsey's July 11, 2003 letter by letter dated July 14, 2003, a copy of which is annexed hereto as Exhibit 99.3. The Company makes reference to these letters for a complete description of their contents. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits: 99.1 Letter, dated July 7, 2003 from the Company to Chelsey Direct, LLC and Richemont Finance S.A. 99.2 Letter dated July 11, 2003 from Chelsey Direct, LLC to the Company 99.3 Letter, dated July 14, 2003 from the Company to Chelsey Direct, LLC SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HANOVER DIRECT, INC. ----------------------------------- (Registrant) July 14, 2003 By: /s/ Edward M. Lambert ----------------------------------- Name: Edward M. Lambert Title: Executive Vice President and Chief Financial Officer EX-99.1 3 y88407exv99w1.txt LETTER DATED JULY 7, 2003 Exhibit 99.1 July 7, 2003 Mr. Johann Rupert Chief Executive Richemont Finance S.A. Rigistrasse 2 6300 Zug Switzerland Mr. Stuart Feldman President Chelsey Capital 712 Fifth Avenue, 45th Floor New York, New York 10019 Re: Hanover Direct, Inc. Gentlemen: As indicated in our Current Report on Form 8-K filed with the United States Securities and Exchange Commission on May 27, 2003, the Company believes that Richemont Finance S.A.'s reported sale of its interest in Hanover Direct, Inc. to Chelsey Capital occurred while Richemont was in possession of material, non-public information and, therefore, an insider. We have been advised that a transfer under these circumstances was improper under both federal and state law. The Company has made the American Stock Exchange aware of the Company's belief that Richemont reportedly sold its position to Chelsey Capital while in the possession of material, non-public information concerning the Company. Additionally, a senior official of the Securities and Exchange Commission has been briefed on the Company's position. We are writing to both of you to offer a proposal that could benefit all parties and preclude a potentially protracted and costly dispute between us and any burdens of the indemnification provisions in the Purchase and Sale Agreement between Richemont and Chelsey Capital. As indicated in the Company's Current Report on Form 8 K filed with the SEC on May 22, 2003, Hanover made a proposal to Richemont on May 13, 2003 to purchase all the Common Shares and Series B Preferred Shares held by it for a purchase price of US $45 million. This proposal was subject to a number of material contingencies, including the consummation of the sale of certain assets of Hanover to a third party or parties within 120 days and the consent of Hanover's Board of Directors, shareholders and its secured lender to such transactions. Since this offer, we have continued to investigate value creation opportunities, and now are in a position to make a definitive proposal to Chelsey and Richemont to purchase all the Series B Preferred Shares and 29,446,888 common shares for a purchase price of US $45 million. This proposal is subject to a number of material contingencies, including the consummation of the sale of certain of the Company's assets to a third party within 60 days and the consent of Hanover's Board of Directors and its secured lender, as well as Hanover's shareholders, if necessary, to such transactions. Our proposed transaction may require an additional cash outlay from the Company due to transaction costs, tax liabilities and necessary payments to creditors. Despite this, we believe this transaction will produce a fair and reasonable outcome for the Company's creditors, Richemont, Chelsey, and Hanover's common shareholders. For Richemont, this outcome would be wholly consistent with the spirit and intent of Jan du Plessis' comments at our annual shareholders' meeting on May 4, 2000 and with the desire you expressed directly to me in my visit to your company in Zug in June 2001 to effect an honorable exit from your investment in our Company. For Hanover's common shareholders, it retires the Series B Preferred Stock and 29,446,888 common shares. Please let me assure you that Hanover Direct, Inc. and its Board of Directors are firmly committed to effecting the outcome outlined in this proposal and look forward to working with Chelsey and Richemont in its consummation. I look forward to our continued dialogue and progress in this endeavor. We would deeply appreciate a response to this correspondence by the close of business on July 11, 2003. Sincerely, /s/ Tom Thomas C. Shull cc: Board of Directors Eloy Michotte Jan du Plessis Morris Kramer William B. Wachtel Sarah Hewitt EX-99.2 4 y88407exv99w2.txt LETTER DATED JULY 11, 2003 Exhibit 99.2 Chelsey Direct, LLC 712 Fifth Avenue, 45th Floor New York, NY 10019 July 11, 2003 Mr. Thomas C. Shull Hanover Direct, Inc. 115 River Road Edgewater, NJ 07020 Re: Hanover Direct, Inc. Dear Mr. Shull, As you requested, we are replying to your letters of July 7, 2003 and July 10, 2003. Because of the importance of this matter and the potential consequences of the course of conduct you are pursuing, we have taken the liberty of forwarding copies of this letter and your July 7th letter (copy attached) to your Board of Directors. In light of the fact that we agreed that the substance of our meeting on July 9th would be held in confidence and in light of the fact that your July 10th letter summarizes (incorrectly) that meeting, we have not enclosed a copy of that letter. We gather from your July 7th letter's references to the need for the approval of your shareholders, that the Company is pursuing the sale of all or substantially all of its assets, or merging with another entity. Following such a transaction, the Series B Preferred Shares which we own will be entitled to receive all of the net proceeds following the repayment of senior debt up to the current accreted liquidation preference of approximately $105MM. Based on normal multiples of EBITDA, we believe that all of the equity value of the Company resides in the Series B Preferred Stock. Accordingly, since we ascribe no value to the Common Shares, your $45MM offer for our securities of the Company (the "Securities") grossly undervalues our Preferred Shares. The coercive context in which you have made this offer is even more disturbing, however. As you will recall, prior to our acquisition of the Securities from Richemont, we discussed with you our interest in the Securities and offered to work cooperatively with you to align the interests of the different classes of equity. At that time you did not indicate that there was any impediment to the transfer of the Securities, and indicated to us that we should not offer more than $35MM for the Securities. From your subsequent filings, we have discovered that while advising us to pay no more than $35MM, you were secretly negotiating with Richemont to purchase the Securities for $45MM, albeit in a transaction replete with uncertainties. Your letter of July 10th confirms that you were seeking to conclude a deal with Richemont while speaking to us. Mr. Shull July 11, 2003 P.2 of 2 After failing in this stratagem, you have complained to the Securities and Exchange Commission and the American Stock Exchange about the behavior of the seller. Although Chelsey, the buyer, would have been the party injured by the inappropriate behavior on the part of Richemont that you allege, you are attempting to use a law intended to protect Chelsey as a sword to deprive it of the property for which we have paid a substantial sum. In light of your inadequate and grossly undervalued offer, we trust that the regulatory authorities will recognize your efforts for what we believe them to be--an attempt to pressure us to sell our property for less than its fair value, using your corporate office and the resources of the Company to do so. We will reserve for another occasion a response to the mischaracterizations in your July 10th letter of our assertions with respect to your duties. Suffice it to say, your pursuit of a transaction requiring shareholder approval is a recognition on your part and the part of the Board that such a transaction would be in the best interests of the Company. It would be curious, to say the least, to determine that such a transaction should not be pursued merely because we have refused to forfeit valuable rights. We remind you that you owe a duty to us, as the owners of all, or at worst, virtually all of the Company's equity value. We remind you of your duty to us to complete the ministerial act of recording an ownership of the Securities which have properly been presented for transfer and with respect to which no adverse claim has been asserted. We trust you will continue to pursue a transaction to realize benefit for your equity holders. It goes without saying that you will be held strictly accountable for any breach of these duties. Very truly yours, Chelsey Direct, LLC By: s/William Wachtel -------------------------------------------- William Wachtel cc: Board of Directors EX-99.3 5 y88407exv99w3.txt LETTER DATED JULY 14, 2003 Exhibit 99.3 Hanover Direct, Inc. 115 River Road Edgewater, New Jersey 07020 July 14, 2003 BY FACSIMILE AND/OR BY HAND Mr. Stuart Feldman Chelsey Capital 712 Fifth Avenue, 45th Floor New York, New York 10019 William B. Wachtel, Esq. Wachtel & Masyr, LLP 110 East 59th Street New York, New York 10022 Re: Hanover Direct, Inc. Gentlemen: We are in receipt today of your letter dated July 11, 2003 referencing our letter to you of July 7, 2003 by which Hanover Direct, Inc. (the "Company" or "Hanover") made a definitive proposal to Chelsey Direct, LLC ("Chelsey") and Richemont Finance S.A. ("Richemont") to purchase all of the outstanding shares of Series B Preferred Stock of the Company (the "Series B Preferred Shares") and 29,446,888 shares of the Common Stock of the Company (the "Common Shares" and, collectively, the "Securities") for a purchase price of US $45 million, subject to a number of material contingencies, including the consummation of the sale of certain of the Company's assets to a third party within 60 days and the consent of Hanover's Board of Directors and its secured lender, as well as Hanover's shareholders, if necessary, to such transactions (the "Offer"). This letter is not intended to respond to all the points that were raised in your letter and the Company reserves all its rights with respect to all issues, particularly the characterization and communication with respect to the meeting of July 9, 2003. Your July 11, 2003 letter includes a number of mistakes of fact, misstatements and mistaken assumptions. First, the Company is not actively promoting the sale of all or substantially all of its assets or merging with another entity as you have assumed but is responding to indications of interest for certain assets of the Company. Please note that our July 7, 2003 correspondence refers to "the sale of certain of the Company's assets" (emphasis added) requiring "the consent of ... Hanover's shareholders, if necessary, to such transactions" (emphasis added). Further, the Company informed Chelsey that some of these possible transactions would not require shareholder approval. Please note further that the holder of the Series B Preferred Stock is not necessarily entitled to receive any proceeds following such an asset sale transaction. Second, we categorically reject your assertion that the Company should consider a transaction that redeems the Series B Preferred Shares and yields little if any value to the common shareholders at the present time. The officers and Board of Directors of the Company have an obligation to ALL shareholders. We firmly believe that significant potential exists for additional value creation that would benefit all shareholders and will view any offers for the Company's assets in that light. Third, we strongly object to your characterization of the Offer as "coercive." Contrary to your assertion, the Company's stratagem is to ensure the US securities and other laws are followed as they apply to transactions in the Company's securities. The Company has repeatedly informed Chelsey and Richemont that it believed that Richemont's proposed sale and its reported sale of its interest in Hanover occurred while Richemont was in possession of material, non-public information in violation of both federal and state law starting as early as April 7, 2003. In fact, the Purchase and Sale Agreement between Richemont and Chelsey contains in Section 3(d)(vi) thereof a specific acknowledgement on that subject. Further, we wish to point out that Chelsey has acted to protect itself from potential harm through the indemnification provisions in the Purchase and Sale Agreement. To say that Chelsey was unaware of the Company's position prior to allegedly purchasing the Securities is inaccurate. Fourth, we believe that it is misleading to suggest that Chelsey offered to work cooperatively with the Company to align the interests of the different classes of equity. We are certain that the Chairman of the Company's Transactions Committee told you that the Committee had met and that Chelsey's recapitalization proposal lacked sufficient specificity for the Transactions Committee to consider or pass on it. However, the Company continued to urge Chelsey to make a more specific offer should one exist. We note that Chelsey, itself, concedes in its Statement on Schedule 13D filed with the Securities and Exchange Commission on May 29, 2003 that it has "no specific proposal or plan currently to present to management and the shareholders of the [Company]" and this point was reiterated in the amendment to Chelsey's Schedule 13D filed today. Fifth, you mischaracterize our discussion as our influencing in some way Chelsey's proposed offering terms. We would not presume to guide Chelsey's investment approach nor did we. We made the observation, however, that after considering the Company's obligations under its credit facility, other liabilities and the market value of the Company's common stock, the Series B Preferred Shares on that date would, in that context, appear to have a likely value of approximately $35 million. Furthermore, please note that the Company's May 13, 2003 proposal to Richemont and the Offer to you and Richemont at a price of $45 million was for both the Series B Preferred Shares and the Common Shares. Sixth, as you should be aware as a result of the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 21, 2002 and in subsequent Exchange Act filings, the Company made an alternative proposal to Richemont for the redemption of the Series B Preferred Stock on or about October 30, 2002 which Richemont rejected and the Company represented it would continue to explore all reasonable opportunities to redeem and retire the Series B Preferred Stock thereafter. Its pursuit of further opportunities to redeem and retire the Series B Preferred Stock culminated in the May 13, 2003 proposal to Richemont, which the Company reported in a Current Report on Form 8-K, dated May 27, 2003. The Company believes that it is party to a confidentiality agreement with Richemont that would preclude making known the substance of its discussions with Richemont with third parties such as Chelsey. Further, the Company has no obligation to Chelsey to disclose its activities with Richemont. However, we did share with you at our April 9, 2003 meeting that we were continuing to work with Richemont, and to suggest otherwise is grossly misleading. Seventh, we note with interest that, in your own words, Chelsey has paid a "substantial sum" for the Securities but you characterize the Company's Offer, which represents an estimated 37% annualized return on Chelsey's alleged investment, as "inadequate" and "grossly undervalued." The Company stated in its July 7, 2003 letter that it believed its Offer "could benefit all parties." Clearly, the Company is aware that Richemont and Chelsey have the right to accept or reject that Offer as they see fit. Eighth, we wish to point out that Delaware law governs the situations in which the Company is required to seek shareholder approval of proposed business transactions. We disagree with your view that just because Delaware law requires shareholder approval of a proposed business transaction, it does not mean that the merits of a particular transaction are in the best interests of the Company and its shareholders. Please be advised that the Company is aware of its duties to all constituents. Further, please be advised that the Company continues to believe, as stated above, that Richemont's sale of the Securities to Chelsey was made while Richemont was in possession of material, non-public information concerning the Company in violation of federal and state law. Lastly, please be assured that the Company will continue to consider value creation opportunities, whether through the sale of its assets and/or the operation of its business, to the benefit of all of its shareholders. Very truly yours, /s/ Thomas C. Shull Thomas C. Shull cc: Board of Directors -----END PRIVACY-ENHANCED MESSAGE-----