Hanover Direct, Inc. (fka HNVD)

[futurecyborg]

Hanover Going Private? Not So Fast, Say Shareholders
Mar 8, 2006 3:25 PM , By Mark Del Franco



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Two shareholders have filed a class action lawsuit against the move to take multititle cataloger Hanover Direct private.

The suit, filed in the Court of Chancery of the State of Delaware in and for New Castle County, alleges that the defendants breached their fiduciary duty to Hanover shareholders and seeks class certification, an injunction of the going private transaction, rescission and rescissory damages if the transaction goes forward, and unspecified damages and costs.

The plaintiffs in the case, Glenn Freedman and L.I.S.T., named Hanover Direct, Chelsey Direct, Stuart Feldman, William B. Wachtel, Wayne B. Garten, Paul S. Goodman, Donald Hecht, David Brown, and Robert Masson as defendants in the suit. Patricia Weiser, the plaintiff's attorney, would not comment on pending litigation. In a March 7 company release, Hanover said it not yet been served with the lawsuit and believes it has no liability in the case.

The suit stems from the Feb. 27 announcement that Weehawken, NJ-based Hanover Direct received a proposal from Chelsey Direct, its largest shareholder, to take the company private—but at a far-from-premium price. Chelsey Direct offered to acquire all shares of company stock it doesn't already own for $1.25 a share. On Feb. 23, the day the offer letter from Chelsey was dated, the share price had opened at $2.10 and closed at $2.75.

Chelsey Direct already owns approximately 69% of Hanover Direct's common stock and 100% of the company's Series C preferred stock; it controls 91% of the voting shares of Hanover, according to documents filed with the Securities and Exchange Commission. In the offer letter, Chelsey says it wants to take Hanover private due to the financial drain and what it sees as limited benefits of remaining a public company. Hanover’s board of directors has not yet reviewed this proposal.

[futurecyborg]

Hanover Direct accused of aiding rival in takeover offer


Wednesday, March 8, 2006

By JOAN VERDON
STAFF WRITER



Direct-mail retailer Hanover Direct of Weehawken has been sued on behalf of shareholders who will lose money if a hedge fund is allowed to buy the company at what some investors call a deep discount.

Hanover Direct informed investors and the SEC Tuesday that a suit had been filed seeking class action certification. The company said in a statement that it believes it "has no liability" in the case. The company also announced that it has appointed a special committee composed of three independent board members to review the $1.25 a share offer from hedge fund Chelsey Direct, LLC, which already controls a majority stake in the company and several seats on Hanover's board.


Hanover also plans to use an independent counsel and an independent financial adviser to review the offer, the company said.

The suit, filed in Chancery Court in Delaware, accuses Chelsey of gaining control of Hanover and manipulating the company and its stock price to enable Chelsey to acquire the remaining shares of Hanover "at less than fair value from the company's public shareholders."

Hanover announced Feb. 27 that it had received a purchase offer from Chelsey for less that half the value of the stock on Feb. 24, the last day of trading before the offer was revealed. The stock closed at $2.55 on Feb. 24, but by the end of trading on the 27th was down to $1.50. It closed at $1.35 Tuesday.

The suit was filed by Glenn Freedman, a Long Island businessman, and his company, L.I.S.T. Inc. of Lake Success, N.Y. Freedman and L.I.S.T. own 57,000 shares of Hanover common stock, according to the suit. The suit asks that Hanover be prevented from closing the deal with Chelsey and that shareholders be compensated for damages.

Seven executives and board members of Hanover and Chelsey were named as individual defendants in the suit.

Individual shareholders who saw the value of their Hanover holding plunge the day the Chelsey offer was announced said Tuesday they were glad the suit had been filed.

"I feel like we're being robbed in broad daylight and I feel powerless to do anything about it," said Joe Macewirth, an individual investor in New Providence who said he owns 18,500 shares of Hanover and stands to lose $20,000 if the Chelsey offer is accepted.

"You hear about the Enrons and the WorldComs, and how we've tightened up things with Sarbanes-Oxley, but you've still got situations where a hedge fund can come in and take majority ownership of a company and not look out for all shareholders, but only care about their own interests," Macewirth said.

He remembers feeling "like somebody punched" him in the stomach the morning the Chelsey offer of $1.25 was revealed.

Mark Shepard of Denver, who bought 2,000 shares of Hanover Direct in January for about $2.40 a share, also feels misused by Hanover and Chelsey. He said he realized that Hanover -- which had failed to file SEC reports for more than a year -- was an investment risk, but he studied the financial statements and felt the company was worth anywhere from $4 to $10 a share.

"What I didn't realize was that there was a chance I would be a victim of a hostile takeover and that all of a sudden the stock price would be cut in half," Shepard said.

The suit accuses Hanover and Chelsey of putting a negative spin on financial results released Feb. 21 that, according to Freedman, showed the company was in pretty good financial health. The company, which sells merchandise through a network of catalogs and Web sites including International Male and The Company Store, said then that it expects to report net sales of $407 million for 2005, up from $403 million in 2004, and net income of $11.7 million, up from $4.9 million in 2004. The company also manufactures some home furnishing products and provides fulfillment services to third-party direct marketing businesses.

Chelsey Direct LLC owns approximately 69 percent of the issued and outstanding common stock of Hanover, and has been accumulating stock steadily since 2003.

E-mail: [e-mail]

http://www.northjersey.com/page.php?qstr=eXJpcnk3ZjcxN2Y3dnFlZUVFeXkyJmZnYmVsN2Y3dnFlZUVFeXk2ODkyODQ...

http://www.knobias.com/individual/public/news.htm?eid=3.1.92ef88c0389a142f7517a5e2d46a9f077b89eea592...

[futurecyborg]

Lawsuit Filed Against Hanover Direct and Chelsey Direct in Delaware Chancery Court

Board of Directors Appoints Special Committee to Evaluate Chelsey Proposal; Suit Filed Against Hanover Direct, Inc. in Delaware Chancery Court
Tuesday March 7, 10:07 am ET


WEEHAWKEN, N.J., March 7 /PRNewswire-FirstCall/ -- Hanover Direct, Inc. (PINK SHEETS: HNVD.PK - News) announced today that on February 28th its Board of Directors had appointed a Special Committee composed of the three independent directors to review and evaluate the previously announced proposal from Chelsey Direct, LLC, the Company's largest shareholder, to take the Company private. The Special Committee had met and selected its independent counsel and is now in the process of selecting an independent financial advisor.
ADVERTISEMENT


The Company also announced that it was apprised of the filing of a complaint by two of its shareholders on their behalf and others similarly situated in Delaware Chancery Court arising out of the Chelsey proposal. Chelsey was also named as a defendant in the suit as were the Company's individual directors. The suit alleges that the defendants breached their fiduciary duty to the Company's shareholders and seeks class certification, an injunction of the going private transaction, rescission and rescissory damages if the transaction goes forward and unspecified damages and costs.

The Company, which has not yet been served with the complaint, is analyzing the case but, based on the information available to it, believes it has no liability.

http://biz.yahoo.com/prnews/060307/nytu127.html?.v=45

[futurecyborg]

Action Class v Chelsey Direct LLC/Hanover Direct board

The attached complaint was filed this morning in the State of Delaware. Feel free to contact the attorneys. Emily Komlossy [phone] or Patricia Weiser [phone]

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
__________________________________________
Glenn Freedman and L.I.S.T., Inc., on behalf of :
themselves and all others similarly situated, ::
Civil Action No.
Plaintiffs, ::
v. ::
Hanover Direct, Inc., Chelsey Direct, LLC, Stuart :
Feldman, William B. Wachtel, Wayne B. Garten, :
Paul S. Goodman, Donald Hecht, David Brown and :
Robert Masson, ::
Defendants. :

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

[futurecyborg]

35. The consideration to be paid to Class members in connection with the Offer is unconscionable, unfair and grossly inadequate because, among other things, the Offer represents a significant discount to the recent trading value of Hanover’s common stock. Notably, Hanover’ common stock traded as high as $2.99 per share as recently as February 9, 2006 and was trading at $2.55 the day before the announcement of the Offer.

36. Because of its control over the Company and the Board, Chelsey is in a position to dictate the terms of any transaction. The directors are all beholden to Chelsey for their positions and the perquisites which they enjoy therefrom and cannot represent or protect the interests of the Company’s public shareholders with impartiality and vigor.

37. Chelsey has manipulated the Company, its financials, and its public statements about
Hanover’s current and potential future value which has depressed the Company’s stock price and ensured Chelsey’s ability to acquire the remaining shares of the Company that it does not already own at less than fair value from the Company’s public shareholders.

38. Chelsey has timed the proposal to freeze out Hanover’s public shareholders in order to capture for itself Hanover’s current value and future potential at a significant discount and without paying an adequate or fair price to the Company’s public shareholders.

39. Chelsey timed the announcement of the proposed buyout to place an artificial lid on
the market price of Hanover’s stock so that the market would not reflect Hanover’s actual value or improving potential, thereby purporting to justify an unreasonably low price.

40. Chelsey has access to internal financial information about Hanover, its true value. expected increase in true value and the benefits of 100% ownership of Hanover to which plaintiffs and the Class members are not privy. Chelsey is using such inside information to benefit itself in this transaction, to the detriment of the Hanover’ public stockholders.

41. Chelsey has clear and material conflicts of interest and is acting to better its own
interests at the expense of Hanover’s public shareholders. Chelsey, with the acquiescence of the rest of the directors of Hanover, a majority of whom they control, is engaging in self-dealing and not acting in good faith toward plaintiffs and the other members of the Class. By reason of the foregoing, Defendants have breached and are breaching their fiduciary duties to the members of the Class.


42. Unless the Offer is enjoined by the Court, defendants will continue to breach their
fiduciary duties owed to plaintiffs and the members of the Class to the irreparable harm of the members of the Class.

43. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs pray for judgment and relief as follows:

A. Ordering that this action may be maintained as a class action and certifying plaintiffs as Class representatives;

B. Preliminarily and permanently enjoining defendants and all persons acting in concert
with them, from proceeding with, consummating or closing the Offer;

C. In the event the Offer is consummated, rescinding it and setting it aside or awarding
rescissory damages to the Class;

D. Directing defendants to account to Class members for their damages sustained as a
result of the wrongs complained of herein;

E. Awarding plaintiffs the costs of this action, including reasonable allowance for
plaintiffs’ attorneys' and experts' fees;

F. Granting such other and further relief as this Court may deem just and proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.

By:

919 N. Market Street, Suite 1401
Mellon Bank Center
Wilmington, DE 19899
[phone]

Of Counsel:
GOODKIND LABATON RUDOFF
& SUCHAROW LLP
100 Park Avenue
New York, New York 10017

THE WEISER LAW FIRM, P.C.
121 N.

[futurecyborg]

31. In November 2004, the Company announced an internal audit that needed to be completed before they could file their Form10-K with the Securities and Exchange Commission (“SEC”). The American Stock Exchange then halted trading of Hanover shares because of the Company’s uncorrected accounting problems. Hanover shares were delisted from the American Stock Exchange. Without any word from the Company, the shares then started trading on the Pink Sheets, where they remain until this day.

32. The Company’s internal audit was not completed until February of 2006. On
February 21, 2006, the Company issued a press release announcing preliminary financial results for the fourth quarter and fiscal year 2005 and the completion of the 2004 audit and the filing of all past due SEC periodic reports.

33. Specifically, Hanover said it expects to report revenue of $407 million for 2005, compared with $403 million in the prior year. Net income for 2005, which includes some one-time sources, is expected to be $11.7 million, compared with $4.9 million for fiscal 2004. Despite the generally positive results, including the Company maintaining constant year-over year sales, as well as achieving a profit despite the costs associated with the year-long audit, the statements by the Company in the release accentuated only the negatives associated with the financials and the audit. Despite the negative tone of the Hanover press release concerning its 2005 results, the stock closed at $2.55 on Friday, February 24 . th

The Buyout Offer From Chelsey
34. On February 27, 2006, Hanover announced that it received a proposal from Chelsey
to acquire all of the Company’s outstanding stock that it does not already own for $1.25 per share in cash, a significant discount to its last trading price (the “Offer”). Chelsey has stated that it is only interested in pursuing the Offer and has no interest in selling its holdings in Hanover.

[futurecyborg]

27. In consideration for providing the Term Loan Facility to the Company, Chelsey
Finance received a closing fee of $200,000, which was paid in cash, and received a warrant (the "Common Stock Warrant") to purchase 30% of the fully diluted shares of Common Stock of the Company.

28. Also pursuant to the terms and conditions of the Recapitalization Agreement, the
Company, acting through its Board of Directors and in accordance with its charter and bylaws and applicable law, agreed to present to the Company's stockholders a proposal to amend its Certificate of Incorporation to effect a one-for-ten reverse split of the Company's Common Stock (the “Reverse Stock Split”).

29. The Reverse Stock Split was approved at Hanover's annual stockholder meeting on
August 12, 2004 and consummated on or about September 27, 2004, effectively increasing the voting power of the common stock held by Chelsey and decreasing the collective voting power of the common stock held by other shareholders.


Background of the Offer - Hanover’s Accounting Problems

30. On October 27, 2005, the Company issued a press release which contained, in part, the following:

Item 2.02 Results of Operations and Financial Condition.

As set forth in greater detail in Item 4.01 below, the Audit Committee of the Board of Directors of Hanover Direct, Inc. (the “Company”) has dismissed the Company’s current principal independent auditors, KPMG LLP (“KPMG”) prior to their completion of the audit of the Company’s financial statements for the 2004 fiscal year. Because the Company’s new auditors, once selected by the Audit Committee, will require an indeterminate period of time to audit the Company’s financial statements which will further delay the already delayed filing of the Company’s fiscal year 2004 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, the Company has included as exhibits to this Current Report a current draft of the Company’s fiscal year 2004 Annual Report on Form 10-K and a current draft of the Quarterly Report on Form 10-Q for the Quarterly Period ended June 25, 2005.

Management believes that the financial statements included in the draft of the Form 10-K are accurate and are in a form that management was prepared to file had the Company received an audit report from its independent auditors. Similarly, the financial statements included in the second quarter 2005 Form 10-Q have not been reviewed by an independent auditor. Accordingly, neither the draft Form 10-K nor the draft Form 10-Q comply with the requirements of the Securities Exchange Act of 1934.

Moreover and as described below, prior to KPMG’s dismissal, KPMG identified material weaknesses in internal controls and informed the Company in a September 22, 2005 letter (“September 22nd KPMG Letter”) that it would have to perform additional audit procedures before KPMG could issue a report on the Company’s financial statements. KPMG did not perform these additional audit procedures prior to its dismissal.
The Company’s new independent auditors may require revisions to the financial statements and/or disclosures included in the drafts of the 2004 Form 10-K and second quarter 2005 Form 10-Q. In addition because of external factors beyond the Company’s control and because of the passage of time before the filing of the Form 10-K and Form 10-Q, the drafts included as exhibits may require other changes. Consequently, it is probable that these documents will be modified before being filed.
Readers are cautioned that there can be no assurances that these modifications will not materially affect the financial results reported in and/or the disclosures contained in the draft filings

[futurecyborg]

22. Pursuant to the Recapitalization Agreement, Chelsey exchanged all of the 1,622,111 shares of Series B Preferred Stock held by it for the issuance to it of 564,819 shares of newly-created Series C Preferred Stock and 81,857,833 additional shares of Common Stock. The shares of Series C Preferred Stock are entitled to vote with the shares of Common Stock on all matters on which the Common Stock votes and are entitled to one hundred (100) votes per share plus that number of votes as shall equal the dollar value of any accrued, unpaid and compounded dividends with respect to such shares. The Series C Preferred Stock is also entitled to vote as a class on any matter that would adversely affect such Series C Preferred Stock.

23. The Board of Directors of the Company was reconstituted, simultaneously with the
execution of the Recapitalization Agreement on November 18, 2003, so that the number of directors comprising the Board of Directors of the Company was fixed at eight, four of whom were designated by Chelsey. Upon the closing of the Recapitalization, the number of directors comprising the Board of Directors of the Company was fixed at nine, five of whom were designated by Chelsey. The Committees of the Board of Directors were also reconstituted, simultaneously with the execution of the Recapitalization Agreement on November 18, 2003, and again on the closing of the Recapitalization. Upon the issuance of the Series C Preferred Stock and the additional shares of Common Stock to Chelsey pursuant to the Recapitalization Agreement, Chelsey became the owner of 111,304,721 shares of Common Stock constituting approximately 51% of the outstanding
Common Stock, and 564,819 shares of Series C Preferred Stock, constituting all of the outstanding shares of preferred stock and with its Common Stock collectively representing approximately 61% of the combined voting power of the Company.

24. Regan Partners continued to be the holder of 38,728,350 shares of Common Stock of the Company, but its interest, along with the interests of the Company’s other public stockholders, was diluted and reduced to approximately 17.2% of the outstanding common stock.

25. Upon the reconstitution of the Board of Directors pursuant to the Recapitalization
Agreement, Chelsey had the ability to designate a majority of the members of the Board of Directors and Regan had the ability to designate one member of the Board of Directors for a period of two years. The Recapitalization was a "change in control" of the Company.

26. On July 8, 2004, the Company closed and funded a $20 million junior secured term
loan facility (the "Term Loan Facility") with Chelsey Finance, LLC ("Chelsey Finance"), an affiliate of its controlling shareholder, Chelsey. The Term Loan Facility is for a three-year term, subject to earlier maturity upon the occurrence of a change in control or sale of the Company, and carries an interest rate of 5% above the prime rate publicly announced by Wachovia Bank, N.A., payable currently. The Term Loan Facility is secured by a second priority lien on the assets of the Company.

In connection therewith, Chelsey Finance concurrently entered into an intercreditor and subordination agreement with the Company's senior secured lender, Congress Financial Corporation ("Congress").

[futurecyborg]

17. The prosecution of separate actions by individual members of the Class would create
the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.

18. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate.

SUBSTANTIVE ALLEGATIONS
Background of the Offer - Chelsey Acquires Its Controlling Stake

19. On or about May 19, 2003, Chelsey purchased all of the Company’s common stock owned by Richemont Finance S.A., a Luxembourg company ("Richemont"), representing, at the time, approximately 21.3% of the Company's common stock outstanding and 100% of the Company's Series B Preferred Stock for a purchase price of $40,000,000. The Company was not a 5 party to such transaction. As a result of this transaction, on such date, Chelsey became the beneficial owner of 29,446,888 shares of Common Stock of the Company, or approximately 21.3% of the Common Stock, and 1,622,111 shares of the Company's Series B Participating Preferred Stock, having a par value of $0.01 per share and ten votes per share (the "Series B Preferred Stock"), consisting of all of the issued and outstanding shares of preferred stock of the Company, and with its Common Stock collectively representing approximately 29.6% of the combined voting power of the Company's securities.

20. On November 30, 2003, the Company effectuated a recapitalization pursuant to a
Recapitalization Agreement, dated as of November 18, 2003, with Chelsey (the "Recapitalization Agreement"), reconstituted the Board of Directors of the Company and settled certain outstanding litigation between the Company and Chelsey (the "Recapitalization").

21. Prior to the consummation of the Recapitalization, Regan Partners was the holder of
38,795,017 shares of Common Stock of the Company, or approximately 28.0% of the outstanding Common Stock.

[futurecyborg]

6. Defendant Wayne P. Garten (“Garten”) has, at all relevant times, been the President,
Chief Executive Officer and a director of Hanover. Garten is a Chelsey appointee on the board.

7. Defendant Paul S. Goodman (“Goodman”) was designated by Chelsey to fill a
vacancy on the board effective April 12, 2004.

8. Defendant Donald Hecht (“Hecht”) was elected a director of the Company effective
November 18, 2003, the date of the Recapitalization.

9. Defendants David Brown and Robert Masson are, and at all relevant times have been,
directors of Hanover.

10. The defendants referred to in paragraphs 4 through 9 are collectively referred to
herein as the "Individual Defendants."

11. The Individual Defendants are in a fiduciary relationship with plaintiffs and the other
public stockholders of Hanover, and owe them the highest obligations of good faith, fair dealing, due care, loyalty and full and candid and adequate disclosure.

CLASS ACTION ALLEGATIONS
12. Plaintiffs bring this action on their own behalf and as a class action, pursuant to Court
of Chancery Rule 23, on behalf of themselves and the public shareholders of Hanover common stock (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants.

13. This action is properly maintainable as a class action.

14. The Class is so numerous that joinder of all members is impracticable. As of
February 27, 2006, there were approximately 8 million publicly held shares of Hanover common stock outstanding.

15. There are questions of law and fact which are common to the Class including, inter
alia, the following:
(a) whether the offer described herein is grossly unfair to the Class;
(b) whether defendants have breached their fiduciary and other common law duties owed by them to plaintiffs and the other members of the Class; and
(c) whether plaintiffs and the other members of the Class would be irreparably damaged were the transactions complained of herein consummated.


16. Plaintiffs are committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiffs’ claims are typical of the claims of the other members of the Class and plaintiffs have the same interests as the other members of the Class.

Accordingly, plaintiffs are adequate representatives of the Class and will fairly and adequately protect the interests of the Class.

[futurecyborg]

Class Action Lawsuit v Chelsey Direct and HNVD board

The attached complaint was filed this morning in the State of Delaware. Feel free to contact the attorneys. Emily Komlossy [phone] or Patricia Weiser [phone]

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
__________________________________________
Glenn Freedman and L.I.S.T., Inc., on behalf of :
themselves and all others similarly situated, ::
Civil Action No.
Plaintiffs, ::
v. ::
Hanover Direct, Inc., Chelsey Direct, LLC, Stuart :
Feldman, William B. Wachtel, Wayne B. Garten, :
Paul S. Goodman, Donald Hecht, David Brown and :
Robert Masson, ::
Defendants. :
__________________________________________:

COMPLAINT
Plaintiffs, Glenn Freedman and L.I.S.T., Inc., by their attorneys, allege upon information and
belief, except as to paragraph 1 which is alleged upon personal knowledge, as follows:

THE PARTIES
1. Plaintiffs Glenn Freedman and L.I.S.T., Inc. ("plaintiffs") are the owners of in excess
of 57,000 shares of common stock of Hanover Direct, Inc. (“Hanover" or the "Company") and has been the owner of such shares continuously since prior to the wrongs complained of herein.

2. Hanover is a corporation duly existing and organized under the laws of the State of
Delaware, with its principal executive offices located in Weehawken, New Jersey. Hanover operates as a specialty direct marketer in the United States.

3. Chelsey Direct, LLC (“Chelsey”) is a private hedge fund which, with its affiliates,
beneficially owns approximately 69% of the issued and outstanding common stock and
approximately 75% of the common stock after giving effect to the exercise of all outstanding options and warrants to purchase common stock beneficially owned by Chelsey. In addition, Chelsey is holder of 100% of the Company’s Series C Participating Preferred Stock (“Series C Preferred”). Including the Series C Preferred and outstanding options and warrants beneficially owned by Chelsey, Chelsey controls approximately 91% of the voting rights of the Company. Chelsey is entitled to fill four seats on the Company’s board of directors. As the majority and controlling shareholder of Hanover, Chelsey owes fiduciary duties of good faith, fair dealing, loyalty, candor, and due care to plaintiffs and the other members of the Class.

4. Defendant Stuart Feldman (“Feldman”) is, and at all relevant times has been, a
director of Hanover. He also has been a principal of Chelsey Capital, LLC (“Chelsey Capital”), a private hedge fund and affiliate of Chelsey, for more than the past five years. Feldman is also the principal beneficiary of the Chelsey Capital Profit Sharing Plan, which is the sole member of Chelsey Capital. Feldman was elected a director of the Company by Chelsey effective November 18, 2003, the date of the Recapitalization (described below).

5. Defendant William B. Wachtel (“Wachtel”) is, and at all relevant times has been,
Chairman of the Board of Directors of Hanover. He also serves as the Manager of Chelsey and has been a managing partner of Wachtel & Masyr, LLP, or its predecessor law firm (Gold & Wachtel, LLP), since its founding in August 1984.

[futurecyborg]

Hanover Receives Offer To Go Private




Feb. 28, 2006

By: Chantal Todé
Senior Editor
[e-mail]









Hanover Direct, Inc. has received a proposal from its largest shareholder that would take the company private, the Weehawken, NJ-based Dmer announced yesterday.
The multichannel marketer sells home, apparel and gift items under brand names such as Domestications, The Company Store, Company Kids, Silhouettes, International Male and Scandia Down.

The proposal from Chelsey Direct LLC is for it to acquire the shares of common stock of Hanover that it does not already own for a cash purchase price of $1.25 per share. Chelsey currently maintains approximately 91 percent of the voting shares of the company through its various stock holdings.

In a letter dated Feb. 23, Chelsey indicates that it believes that Hanover should become privately owned due to the financial drain imposed by the company remaining public as well as the limited benefits to the company from maintaining that status.

Hanover’s Board of Directors has not yet reviewed this proposal.

As previously reported, Hanover was delisted by the American Stock Exchange in January 2005 because of its failure to report 2004 financial statements on time. It continued to have difficulty staying caught up with its filings over the course of the year.

On Feb. 21 of this year, Hanover announced the completion of its 2004 year-end audit and the release of its financial results for the third fiscal quarter of 2004, the 2004 fiscal year as well the first, second and third fiscal quarters of 2005. The company also reported that it had filed all its past due quarterly and annual reports with the Security and Exchange Commission for those periods.

Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

[futurecyborg]

Hanover to Be Taken Private?
Mar 1, 2006 4:30 PM


Just as it finally announced sales gains in some of its core catalog titles (see “Hanover Direct Releases Preliminary Sales Results”), Weehawken, NJ-based Hanover Direct received a proposal from Chelsey Direct, its largest shareholder, to take the company private—but at a far-from-premium price.

Chelsey Direct has offered to acquire all shares of company stock it doesn't already own for $1.25 a share. On Feb. 23, the day the offer letter from Chelsey was dated, the share price had opened at $2.10 and closed at $2.75.

Chelsey Direct already owns approximately 69% of Hanover Direct's common stock and 100% of the company's Series C preferred stock; it controls 91% of the voting shares of Hanover, according to documents filed with the Securities and Exchange Commission. In the offer letter, Chelsey says it wants to take Hanover private due to the financial drain and what it sees as limited benefits of remaining a public company.

Hanover’s board of directors has not yet reviewed this proposal.

For fiscal 2005, Hanover’s Company Store and Domestications decor titles, as well as its Silhouettes catalog of plus-size women’s apparel, enjoyed sales increases. But the International Male and Undergear catalogs, which sell men’s clothing, saw sales declines

http://multichannelmerchant.com/news/Hanover_private_03012006/

[futurecyborg]

Yahoo HNVD message board link

http://finance.messages.yahoo.com/bbs?.mm=FN&action=l&board=7082317&tid=hnv&sid=7082...

[SansSusie]

Well at least THE RECORD knew how to spell Chelsey, unlike NJBIZ:

Hanover Direct Looks to Go Private
Brian Quinlan
NJBIZ Staff
2/27/2006

Hanover Direct (Nasdaq OTC: HNVP), a Weehawken-based home fashion and apparel retailer, has received a proposal to go private from its largest private shareholder. Chelsea Direct, which owns nearly 70% of Hanover’s common stock, has offered to purchase the remaining Hanover shares for $1.25 a share.
Chelsea owns all of the company’s preferred stock and maintains about 91% of the voting rights in the company. Company owners believe the move will halt the “financial drain” caused by Hanover remaining public.

Once the cash transaction is complete, only Chelsea and its affiliates would own stock in the company. Hanover’s board has not yet reviewed the proposal. Company shares sank $1.05 to $1.50 in noon trading.


http://www.njbiz.com/article.asp?aID=39056208.797523.863993.2567652.6616922.536&aID2=66452

[futurecyborg]

Top shareholder's discounted offer sends Hanover Direct stock reeling

Tuesday , February 28, 2006 20:28 ET

By Joan Verdon
Feb 28, 2006 (The Record - Knight Ridder/Tribune Business News via COMTEX) -- Shares of Hanover Direct Inc. plummeted Monday when the Weehawken-based catalog retailer announced that its majority shareholder offered to buy the company at a deep discount from Friday's closing price.

Chelsey Direct LLC, a New York-based catalog and Internet retailer, has offered to acquire all shares of company stock it doesn't already own for $1.25 a share, or $1.30 per share less than Friday's closing price of $2.25. Hanover Direct's stock closed at $1.50 on Monday.

The deal, if completed, would take Hanover Direct private, but is not expected to greatly change the direction of the company, which has been selling assets and getting its financial house in order in recent years. Hanover Direct sells merchandise through catalogs and Web sites, including Domestications, The Company Store, Silhouettes and International Male. Within the past two years, it has sold its Improvements catalog division and Gumps, the San Francisco department store it operated.

Chelsey Direct already owns approximately 69 percent of Hanover Direct's common stock and 100 percent of the company's Series C preferred stock, and controls 91 percent of the voting shares of Hanover, according to documents filed with the Securities and Exchange Commission.

William Wachtel, a director of Hanover Direct, is listed in the Dun & Bradstreet directory as a principal at Chelsey Direct. He did not return a call Monday.

John Swatek, chief financial officer of Hanover Direct, said Monday that the offer by Chelsey Direct is being taken under advisement by Hanover Direct's board of directors. He said he could not discuss how many shares Chelsey Direct would be purchasing under the offer.

Last week, Hanover Direct released preliminary results for fiscal 2005, saying it expects to report revenue of $407 million, compared with $403 million in the prior year. Income for 2005, which includes some one-time sources, is expected to be $11.7 million, compared with $4.9 million for fiscal 2004.

Hanover Direct also said it has completed the financial reviews that forced it to delay filing its 2004 yearend report. It expects to file its yearend report for 2005 by March 31.

In November 2004, the American Stock Exchange halted trading of Hanover Direct shares because of ongoing accounting problems. The stock has since been listed on the pink sheets, which tracks over-the-counter stocks.

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http://www.NorthJersey.com.

Copyright (c) 2006, The Record, Hackensack, N.J.

[futurecyborg]

Letter to the SEC by: willieskinardo

I would like to bring to your attention a situation where retail shareholders are being taken advantage of by a hedge fund, Chelsey Direct. As you will see, this behavior is in direct violation of the code of ethics and fair play for all shareholders that your office works so hard to enforce.

Hanover Direct (HNVD) is majority owned by Chelsey Direct. There are approximately 22.5 million shares outstanding, about 15 million owned by Chelsey Direct. In December or 2004, the company announced an internal audit that needed to be completed before they could file their 10K with the SEC. As a result, HNVD shares were delisted from the AMEX. Without any word from the company, the shares then started trading on the Pink Sheets, where they remain until this day.

This audit was finally completed in February of 2006. The company released full year 2005 results as well as 2004 filings with the SEC. Generally, the results were positive, with the company maintaining constant year-over year sales, as well as acheiving a profit, despite the costs associated with the year-long audit. However, the statement from the company accentuated the negatives while not mentioning a single positive.

HNVD shares were trading in the $2.50-3.00 price range prior to and after the release of the 2005 results. This values the company at approximately $61 million. A review of comparable companies (either current market valuation or valuation obtained from recent M&A activity) values a company like Hanover anywhere from .5 to 2 time sales. At approximately $400 million in sales, this would value the company at somewhere between $200-400 million.

Despite the negative tone of the Hanover press release on 2005 results, the stock closed at $2.55 on Friday, February 24th. Today, Monday, February 27th, the company announced an offer from Chelsey Direct to take Hanover private. This offer was for $1.25 per share, less than one half of closing price on Friday. This offer values the company at approximately $28 million, or roughly 7% of sales.

In summary, I contend that Chelsey Direct has influenced the tone of the company press release on earnings, in a deliberate attempt to drive down the share price. This proceeded their offer to take the company private at an unfairly low valuation, based on both the market price at the time of the offer and peer valuations. With this offer, they have successfully managed to influence share price down another $1, in an attempt to force individual shareholders to tender their shares at a fraction of the true market value.

As I hope you will see, this is a classic example of the "rich and powerful" abusing their power and taking advantage of the "little guy" retail investor. I realize that you are overworked and understaffed and that this is a relatively small company in comparison to all that you govern. However, I urge you to insert your influence in this situation as there will seldom be such a blatant and shameless example of the retail investor being wronged by a hedge fund and company management that believe they can act with impunity when manipulating the market for their gain. I realize that individual shareholders like myself can pursue a class action shareholder lawsuit, but I believe that Chelsey / Hanover expects this and knows they will prevail because of their deep pockets and influence. At the very least, they have calculated that even with a small settlement, they will come out well ahead versus doing the just and honest thing.

It is comforting to the retail investor like myself that an organization such as yours exists to protect all investors in the market, regardless of size, wealth, and political influence. I thank you in advance

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=7082317&tid=hnv&sid=7082...

[futurecyborg]

Hanover Direct, Inc. Receives Going Private Proposal
Monday February 27, 8:57 am ET


WEEHAWKEN, N.J., Feb. 27 /PRNewswire-FirstCall/ -- Hanover Direct, Inc. (PINK SHEETS: HNVD.PK - News) announced today that it received a proposal from Chelsey Direct, LLC, the Company's largest shareholder, to acquire the shares of common stock of the Company that Chelsey does not already own for a cash purchase price of $1.25 per share in a letter dated February 23, 2006. Chelsey and its affiliates beneficially own approximately 69% of the issued and outstanding Common Stock and approximately 75% of the Common Stock after giving effect to the exercise of all outstanding options and warrants to purchase Common Stock beneficially owned by Chelsey. In addition, Chelsey is holder of 100% of the Company's Series C Participating Preferred Stock ("Series C Preferred"). Including the Series C Preferred and outstanding options and warrants beneficially owned by Chelsey, Chelsey maintains approximately 91% of the voting rights of the Company. The letter indicates Chelsey's belief that the Company should become privately owned due to the financial drain imposed by the Company remaining public as well as the limited benefits to the Company from maintaining that status. The letter states that Chelsey or an affiliate proposes to enter into a cash merger agreement with the Company and to commence a cash tender promptly after the execution of that agreement. The result of the proposed transaction would be that stockholders, other than Chelsey and its affiliates, would no longer own shares of the Company's common stock, and there would no longer be a public market for the Company's common stock.
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The Company's Board of Directors has not yet reviewed this proposal. It is anticipated that the proposal will be evaluated by a special committee of the Board consisting of independent directors.

This press release is not a solicitation of a proxy, an offer to purchase nor a solicitation of an offer to sell shares of the Company, and is not a substitute for any tender offer statement or other filing that may be required to be made with the Securities and Exchange Commission if the proposed transaction goes forward. If any such documents are filed with the SEC, investors are urged to read them because they will contain important information about the transaction. Any such documents, once filed, will be available, free of charge, at the SEC's website (www.sec.gov).

About Hanover Direct, Inc.

Hanover Direct, Inc. provides quality, branded merchandise through a portfolio of catalogs and e-commerce platforms to consumers. The Company's portfolio of home fashion and apparel catalogs and Internet websites include Domestications, The Company Store, Company Kids, Silhouettes, International Male and Undergear. The Company also manufactures Scandia Down branded comforters that sell through specialty retailers and provides product fulfillment, telemarketing, information technology and e-commerce services to third party direct marketing businesses. Information on Hanover Direct, Inc. can be accessed on the Internet at http://www.hanoverdirect.com.




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Source: Hanover Direct, Inc.