SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 30, 2003
HANOVER DIRECT, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1-12082
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(COMMISSION FILE NUMBER)
DELAWARE 13-0853260
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
115 RIVER ROAD
EDGEWATER, NEW JERSEY 07020
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201) 863-7300
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
ITEM 5. OTHER EVENTS.
On July 17, 2003, Hanover Direct, Inc., a Delaware corporation
("Hanover"), filed an action (Index No. 03/602269) in the Supreme Court of the
State of New York, County of New York (the "Court") against Richemont Finance
S.A., a Luxembourg company ("Richemont"), and Chelsey Direct, LLC, a Delaware
limited liability company ("Chelsey"), seeking a declaratory judgment as to
whether Richemont improperly transferred all of Richemont's securities in
Hanover consisting of 29,446,888 shares of Common Stock of Hanover and 1,622,111
shares of Series B Participating Preferred Stock of Hanover (collectively, the
"Shares") to Chelsey on or about May 19, 2003 and whether Hanover can properly
recognize the transfer of those Shares from Richemont to Chelsey under federal
and/or state law.
Hanover believes that Richemont sold the Shares to Chelsey while in the
possession of confidential, material non-public information concerning Hanover
that it had received from Hanover pursuant to a confidentiality agreement that
barred it from using the information other than in connection with Richemont's
relationship or business with Hanover. Hanover further believes that Richemont
improperly used this information in connection with its sale of the Shares to
Chelsey and that it would be improper, based on pertinent case law, for it to
register the transfer of the Shares to Chelsey without a court first deciding
the issue.
On July 29, 2003, Chelsey answered Hanover's complaint, alleged certain
affirmative defenses and raised three counterclaims against Hanover, including
Delaware law requiring the registration of the Shares, damages, including
attorney's fees, for the failure to register the Shares, and tortious
interference with contract. Chelsey also moved for a preliminary injunction
directing Hanover to register the ownership of the Shares in Chelsey's name.
The parties appeared before the Court on July 29 and July 30, 2003. On
July 30, 2003, an agreement was reached between the parties and read into the
Court record and midday on July 31, 2003 the agreement reached between the
parties and read into the Court record was ordered by the Court. Also, on July
31, 2003, Chelsey filed an Amendment No. 2 to its Schedule 13D (the "13D
Amendment") with the Securities and Exchange Commission purporting to report the
order of the Court reflecting the agreement of the parties. That 13D Amendment
is incomplete and/or inaccurate in several material respects including, without
limitation, the following.
1. The 13D Amendment suggests that the Court on July 30, 2003 dictated
the terms of the "interim order" when, in fact, the Court's order on July 31,
2003 merely approved the agreement independently reached by the parties on July
30, 2003.
2. It is inaccurate to say that Hanover has taken the position that it
"need not transfer record ownership" of the Shares to Chelsey. Rather, Hanover
believes that it would be improper for it to register the transfer of the Shares
to Chelsey without a court first deciding the issue.
3. Hanover will register ownership of the Shares in Chelsey's name on a
temporary basis, subject to final resolution of the rights of the parties in the
litigation. The registration of the Shares in Chelsey's name may not be
permanent, as Chelsey's 13D Amendment implies, but will be decided by the Court
in the litigation.
4. Chelsey will have the right to elect as a class two directors of
Hanover, after August 31, 2003, on a temporary basis, subject to final
resolution of the rights of the parties in the litigation, if Hanover does not
redeem one-half of the Preferred Shares on or prior to that date, as called for
by the Certificate of Designations, Powers, Preferences and Rights of the Series
B Participating Preferred Stock of Hanover (the "Certificate of Designations").
Chesley's right to elect as a class two directors may not be permanent, as
Chelsey's 13D Amendment implies, but will be decided by the Court in the
litigation.
5. Chelsey will be entitled to select immediately, on a temporary
basis, subject to final resolution of the rights of the parties in the
litigation, an individual reasonably acceptable to Hanover to attend all meeting
of the Board of Directors of Hanover and any committee thereof as a non-voting
observer (the "Observer"), subject to certain limitations set forth in the
Certificate of Designations. Both Chelsey and the Observer are required by the
Certificate of Designations to execute and deliver to Hanover a confidentiality
agreement in form and substance reasonably satisfactory to the Company whereby
each agrees to hold confidential all information learned as a result of the
attendance by the Observer at the Board of Director and committee meetings.
Hanover provided a form of such confidentiality agreement to Chelsey on July 30,
2003 substantially identical to Hanover's confidentiality agreement with
Richemont that includes (1) an agreement by each of the Observer and Chelsey not
to use any Confidential Information (as defined therein) disclosed to him or it
for any purpose other than in connection with Chelsey's relationship or business
with the Company, (2) an acknowledgement by each of Chelsey and the Observer
that each understands that the securities laws of the United States under
certain circumstances prohibit persons in possession of material, nonpublic
information about an issuer from purchasing or selling securities of that issuer
in breach of a duty of trust or confidence that is owned to that issuer or any
other person and (3) a provision for the survival of the commitments contained
in the agreement for a period terminating on the later to occur of the date
which is (i) three (3) years from the date of the agreement or (ii) two (2)
years from the date on which Confidential Information is last disclosed under
the agreement. Chelsey's right to select an Observer may not be permanent, as
Chelsey's 13D Amendment implies, but will be decided by the Court in the
litigation.
The parties further agreed that:
1. Hanover and Chelsey will use their reasonable best efforts to
prosecute and defend the pending declaratory judgment action as expeditiously as
possible. Hanover is serving Richemont with the complaint pursuant to the Hague
Convention and the complaint has been delivered to the Central Authority in the
Grand Duchy of Luxembourg. It cannot know how soon service of the complaint on
Richemont will be effected by the Central Authority. Richemont will have 30 days
to respond to the complaint after service on it under the Hague Convention.
Discovery is to be concluded 60 days following Richemont's responsive pleadings
and a trial to be held as soon as may be practicable, subject to the calendar of
the Justice.
2. Until the Justice in the pending action renders a decision in the
litigation, if Chelsey has a good faith intention to sell the Shares, it has
agreed to give Hanover at least two business days' prior notice before
consummating such a sale.
The parties agreed that none of the foregoing agreements shall give
rise to an adverse inference with respect to the positions of the parties in the
underlying litigation.
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.
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(Registrant)
July 31, 2003 By: /s/ Edward M. Lambert
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Name: Edward M. Lambert
Title: Executive Vice President and
Chief Financial Officer