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PROSPECTUS SUPPLEMENT Filed pursuant to Rule 424(b)(3)
(To Prospectus dated October 27, 1994) Registration No. 33-66394
189,818 Shares
HANOVER DIRECT, INC.
COMMON STOCK
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This Prospectus Supplement relates to the offering from time
to time of up to 189,818 shares (the "Shares") of Common Stock, par value
$.66-2/3 per share, of the Company (the "Common Stock") by Caslon Incorporated,
a Delaware corporation (the "Selling Shareholder"). The Shares were acquired
by the Selling Shareholder upon conversion of 78,300 of the 234,900 shares of
Series A Convertible Additional Preferred Stock, par value $.01 and stated
value $10.00 per share, of the Company (the "Series A Preferred") issued by the
Company to the Selling Shareholder on January 21, 1994 in exchange for an
installment note in connection with the acquisition by the Company of all of
the issued and outstanding shares of the common stock and the preferred stock
of Tweeds, Inc. The Company will not receive any proceeds from the sales of
the Shares by the Selling Shareholder. The Company is paying the expenses for
the registration of the Shares.
The Selling Shareholder has not advised the Company of any
specific plans for the distribution of the Shares, but it is anticipated that
the Shares may be sold from time to time in transactions (which may include
block transactions) on the American Stock Exchange at the market prices then
prevailing. Sales of the Shares may also be made through negotiated
transactions or otherwise. The Selling Shareholder and the brokers and dealers
through which the sales of the Shares may be made may be deemed to be
"underwriters" within the meaning set forth in the Securities Act of 1933, as
amended (the "Securities Act"), and their commissions and discounts and other
compensation may be regarded as underwriters' compensation. The period of
distribution of the Shares may occur over an extended period of time, but which
will not in any event be longer than nine months from the effective date of
this Prospectus Supplement. The Selling Shareholder will pay agency or
brokerage commissions incurred in the sale of the Shares. See "PLAN OF
DISTRIBUTION OF THE SELLING SHAREHOLDER."
The Common Stock is traded on the American Stock Exchange
under the symbol HNV. The last reported sales price of the Common Stock on the
American Stock Exchange on October 26, 1994 was $4.25 per share.
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THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 27, 1994.
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THE SELLING SHAREHOLDER
The Shares to which this Prospectus Supplement relates are
owned by, and are offered for the account of the Selling Shareholder, Caslon
Incorporated, a Delaware corporation whose address is 1105 North Market Street,
Suite 1300, Wilmington, Delaware 19899. The Selling Shareholder acquired the
Shares upon conversion of 78,300 of the 234,900 shares of Series A Preferred
issued by the Company to the Selling Shareholder on January 21, 1994 in
exchange for an installment note in connection with the acquisition by the
Company of all of the issued and outstanding shares of the common stock and the
preferred stock of Tweeds, Inc. The Selling Shareholder has indicated that it
wishes to be in a position to sell all of the Shares offered hereby. Following
completion of this offering, the Selling Shareholder would own no shares of
Common Stock but would own 156,600 shares of Series A Preferred.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale
of the Shares offered hereby.
PLAN OF DISTRIBUTION OF THE SELLING SHAREHOLDER
The Shares offered hereby are being sold by the Selling
Shareholder acting as principal for its own account. The Selling Shareholder,
directly or through brokers, dealers, underwriters or agents may sell some or
all of the Shares. Any broker, dealer, underwriter or agent participating in a
transaction involving the Shares may receive a commission from the Selling
Shareholder. The broker, dealer or underwriter may agree to sell a specified
number of the Shares at a stipulated price per Share and, to the extent that
such person is unable to do so acting as an agent for the Selling Shareholder,
to purchase as principal any of the Shares remaining unsold at a price per
Share required to fulfill the person's commitment to the Selling Shareholder.
A broker, dealer or underwriter who acquires the Shares from
the Selling Shareholder as a principal for its own account may thereafter
resell such Shares from time to time in transactions (which may involve block
transactions and which may also involve sales to or through another broker,
dealer, underwriter or agent, including transactions of the nature described
above) on the American Stock Exchange, in negotiated transactions or otherwise,
at market prices prevailing at the time of the sale or at negotiated prices.
In connection with such resales, the broker, dealer, underwriter or agent may
pay commissions to or receive commissions from the purchasers of the Shares.
The Selling Shareholder also may sell some or all of the Shares directly to
purchasers without the assistance of a broker, dealer, underwriter or agent and
without the payment of any commissions.
The Company is bearing all of the costs relating to the
registration of the Shares. Any commissions, discounts or other fees payable
to a broker, dealer, underwriter or agent in connection with the sale of any of
the Shares will be borne by the Selling Shareholder or other persons selling
the Shares.
Any commissions paid or any discounts or concessions allowed
to any broker, dealer or underwriter and, if any such broker, dealer or
underwriter purchases any of the Shares as principal, any profits received on
the resale of such Shares, may be deemed to be underwriting commissions or
discounts under the Securities Act.
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PROSPECTUS
3,750,000 SHARES
HANOVER DIRECT, INC.
COMMON STOCK
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This Prospectus relates to the public offering from time to time of up
to an aggregate of 3,750,000 shares of common stock, par value $.66-2/3 per
share (the "Common Stock"), of Hanover Direct, Inc., a Delaware corporation
(the "Company"), by certain persons who become shareholders of the Company as a
result of business combination transactions consummated with the Company
subsequent to the effective date of the Registration Statement of which this
Prospectus constitutes a part (the "Selling Shareholders"). Approximately
3,109,369 shares of Common Stock have been issued by the Company as a result of
such transactions prior to the date hereof.
For each offering of Common Stock for which this Prospectus is being
delivered, there will be an accompanying Prospectus Supplement (each such
Prospectus Supplement, a "Prospectus Supplement") that shall set forth the
description of the business combination, certain information concerning the
Selling Shareholders, the number of shares of Common Stock being offered and
any other specific terms of the offering in respect of which this Prospectus is
being delivered.
The Company will not receive any of the proceeds from the sale of the
Common Stock hereunder.
REFERENCE IS MADE TO "RISK FACTORS" WHICH CONTAINS MATERIAL
INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE SECURITIES BEING
OFFERED HEREBY.
The Selling Shareholders may sell the Common Stock through
underwriters, through dealers, directly to one or more institutional purchasers
or through agents or in brokerage transactions through registered or licensed
brokers or dealers or in negotiated transactions. The Prospectus Supplement
shall set forth the plan of distribution contemplated by any Selling
Shareholder. See "PLAN OF DISTRIBUTION."
The Common Stock is traded on the American Stock Exchange under the
symbol HNV. The last reported sales price of the Common Stock on the American
Stock Exchange on October 26, 1994 was $4.25 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 27, 1994.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
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AVAILABLE INFORMATION
The Company is successor-in-interest to The Horn & Hardart Company, a
Nevada corporation ("H&H"), pursuant to a merger effected on September 7, 1993
for purposes of simplifying its corporate structure and changing its state of
incorporation from Nevada to Delaware (the "Merger"). H&H filed with the
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form S-3 (together with any amendments thereto, the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to its common stock. The Company, as successor-in-interest
to H&H, has filed with the Commission a Post-Effective Amendment No. 1 to the
Registration Statement, whereby it adopted the Registration Statement of which
this Prospectus constitutes a part as its own. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
items of which may be contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission and to
which reference is hereby made for further information with respect to H&H, the
Company and the Common Stock. Items of information omitted from this Prospectus
but contained in the Registration Statement may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison, Suite 1400, Chicago, Illinois
60621-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities maintained by the
Commission referred to above. In addition, copies of such reports, proxy
statements and other information concerning the Company may also be inspected
and copied at the offices of the American Stock Exchange at 86 Trinity Place,
New York, New York 10006 on which exchange the Common Stock is listed and
traded.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference: (a) the Annual Report on Form 10-K for the
fiscal year ended January 1, 1994; (b) the Quarterly Reports on Form 10-Q for
the quarterly periods ended April 2, 1994 and July 2, 1994; and (c) the Current
Reports on Form 8-K dated February 17, 1994, March 9, 1994 and October 26,
1994.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Common Stock shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the respective date of filing of
each such document. Any statement contained in a document incorporated or
deemed
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to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is, or
is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or suspended shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference herein, other than certain exhibits to
such documents. Requests for such documents should be directed to Michael P.
Sherman, Esq., Secretary, Hanover Direct, Inc., 1500 Harbor Boulevard,
Weehawken, New Jersey 07087.
THE COMPANY
The Company is a leading direct specialty retailer that publishes a
portfolio of branded catalogs offering home furnishings, specialty hardlines
and apparel. The Company's catalogs include Domestications, the nation's
leading specialty home textile catalog, which has grown rapidly with revenues
increasing from approximately $30 million in 1987 to approximately $311 million
in 1993; Gump's, the well-known San Francisco retailer and a leading upscale
catalog marketer of exclusive gifts; The Company Store, an upscale direct
marketer of down comforters and other down and related products for the home;
Colonial Garden Kitchens, a leading specialty catalog featuring worksaving and
lifestyle enhancing items for the kitchen and home; and Tweeds, the European
inspired women's fashion catalog. The Company also has a licensing arrangement
with Sears Roebuck and Co. ("Sears") in which it mails several of its catalogs
under the names Showplace, Great Kitchens, Right Touch and Beautiful Style to
the 23 million customers of the discontinued Sears catalog. During 1993, the
Company mailed approximately 322 million catalogs and had total revenues of
approximately $643 million.
The Company is incorporated in Delaware with its principal executive
office at 1500 Harbor Boulevard, Weehawken, New Jersey 07087. The Company's
telephone number is (201) 863-7300.
RISK FACTORS
In addition to all the other information contained in this Prospectus
and the documents incorporated by reference, prospective purchasers should
consider the risk factors set forth below prior to deciding whether to invest
in the Common Stock offered hereby.
FUTURE OPERATING RESULTS
The Company's continued revenue growth and positive net income will
depend on its ability to increase catalog sales and to effectively monitor and
control costs. There can be no assurance that the Company's future operations
will generate net income. Furthermore, future operating results depend upon
many factors, including general economic conditions, the ability of the Company
to continue to attract and retain customers successfully, the level of
competition and its ability to successfully identify, forecast and respond to
customer preferences and fashion trends.
The Company's Domestications catalog is the nation's leading specialty
home textile catalog with revenues of approximately $311 million in 1993, which
constitute approximately 48% of the Company's revenues in 1993. A decrease in
profitability of Domestications would have a material adverse effect upon the
Company's financial position and results of operations.
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RECENT ACQUISITIONS AND NEW BUSINESS DEVELOPMENTS
The Company acquired three businesses during 1993: (i) in May, the
Company acquired the assets of Gump's, the well known San Francisco retailer
and a leading upscale catalog marketer of exclusive gifts; (ii) in August, the
Company acquired the assets of The Company Store, an upscale direct marketer of
down comforters and other down and related products for the home; and (iii) in
September, the Company acquired the stock of Tweeds, the European inspired
women's fashion catalog. None of these companies was profitable at the time of
its acquisition by the Company. In addition, these acquisitions present
relatively new market niches for the Company and the Company must successfully
integrate and develop these newly acquired companies. There can be no
assurance that the Company will be able to successfully integrate or develop
these new businesses or improve their profitability.
In addition, in January 1994, the Company entered into an agreement
(the "Sears Agreement") with Sears to produce specialty catalogs for the 23
million customers of the recently discontinued Sears catalog. The Sears
Agreement represents the culmination of successful test marketing by Sears and
the Company during 1993. The Sears Agreement contains increasing performance
standards which must be met by the Company and which allow Sears to terminate
the Sears Agreement upon noncompliance. There can be no assurance that the
Company will be able to meet such performance standards.
COMPUTER SYSTEMS CONVERSION
The Company is currently in the process of upgrading its management
information systems by implementing new integrated software and migrating from
a centralized mainframe to mid-range mini-computers. The Company currently
estimates that the total cost to install and implement the new systems,
including the cost of dedicated internal personnel, will be approximately $13
to $15 million. The Company brought the new system on-line for two of its
catalogs in the third quarter of 1994 (during which time it maintained its
existing systems for its other catalogs) and plans to bring the balance of its
catalogs on-line in 1995. There can be no assurance that the new systems will
be implemented as currently scheduled or that they will achieve the goals
established by the Company, in which case the Company's financial position or
results of operations may be adversely affected.
NEW FULFILLMENT FACILITY
The Company owns an interest in the Roanoke, Virginia fulfillment
center which services its Tweeds catalog. The Company plans to consolidate
additional Apparel Group catalogs into this facility and is in the process of
constructing an additional 530,000 square foot state-of-the-art facility on a
separate site in Roanoke which, upon its completion, will handle all of
Domestications fulfillment needs. The Company estimates that the total cost of
this consolidation effort and the construction of the new facility will be
approximately $18 million. Although the Company has carefully planned the
transition to these facilities in phases, significant delays or serious
unanticipated difficulties arising from the transition could adversely effect
the Company's financial position or results of operations.
FOREIGN SOURCING
Approximately 10% of the Company's merchandise is purchased directly
from foreign suppliers. Although the Company believes that it has established
close relationships with its principal manufacturing sources, the Company's
future success will depend in some measure upon its ability to maintain such
relationships.
The Company's business is subject to the risks generally associated
with conducting business abroad, including adverse fluctuations in currency
exchange rates (particularly those of the U.S. dollar against certain foreign
currencies), changes in import duties or quotas, the imposition of taxes or
other
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charges on imports, disruptions or delays in shipments and transportation,
labor disputes and strikes. The occurrence of any one or more of the foregoing
could adversely affect the Company's financial position or results of
operations. To date, these factors have not caused any material disruption of
the Company's operations. Also, the Company conducts business with most of its
vendors in United States currency and has not experienced any material
difficulties as a result of any foreign, political, economic or social
liabilities.
INCREASES IN COSTS OF MAILING, PAPER AND PRINTING
Postal rate increases and paper and printing costs affect the cost of
the Company's order fulfillment and catalog and promotional mailings. In 1993,
the Company mailed approximately 322 million catalogs and the aggregate cost of
mailing catalogs and other promotional materials, including printing and paper
costs, totalled approximately $158 million. The Company has contracted for its
paper needs through the end of 1994 and believes its paper costs are
competitive at the present time. However, no assurance can be given that the
Company will not be subject to a significant increase in paper costs in 1995.
The Company anticipates a postal rate increase in 1995. Increases in postal
rates or paper and printing costs could have a material negative impact on the
Company's financial position and results of operations to the extent that the
Company is unable to pass such increase directly on to customers or to offset
such increase by raising selling prices or by implementing more efficient
printing, mailing, delivery and order fulfillment systems.
CONSUMER SPENDING
The success of the Company's operations depends upon a number of
factors relating to consumer spending, including future economic conditions
affecting disposable consumer income such as employment, business conditions,
interest rates and taxation. There can be no assurance that weak economic
conditions or changes in the retail environment or other economic factors that
impact the level of consumer spending would not have a material adverse impact
on the Company.
COMPETITION
The mail order catalog business is highly competitive. The Company's
catalogs compete with other mail order catalogs and retail stores, including
department stores, specialty stores and discount stores. A number of the
Company's competitors have substantially greater financial, distribution and
marketing resources than the Company. The recent substantial sales growth in
the direct marketing industry has encouraged the entry of many new competitors
and an increase in competition from established companies.
RELATIONSHIP WITH NAR
NAR Group Limited, a British Virgin Islands corporation or its
affiliates ("NAR"), currently owns approximately 51% of the Company's
outstanding Common Stock. Although pursuant to a stock purchase agreement
between the Company and NAR, NAR has agreed to nominate only six of the
Company's 11 Directors until 1996, NAR will have the power to elect the entire
Board of Directors and, except as otherwise provided by law of the Company's
Certificate of Incorporation, to approve any action requiring shareholder
approval without a shareholders meeting.
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SHARES ELIGIBLE FOR FUTURE SALE
In the future, NAR will be able to sell shares of Common Stock owned
by it in the open market pursuant to an exemption from registration under the
Securities Act or by causing the Company to file a registration statement with
respect to such shares. NAR has "piggyback" and demand registration rights as
provided in a Registration Rights Agreement between it and H&H, which have been
assumed by the Company in the Merger. Sales of substantial amounts of Common
Stock in the public market could adversely affect the market price. NAR has
advised the Company that it does not currently intend to sell any shares of
voting stock of the Company owned by it.
RESTRICTIONS ON DIVIDENDS
The Company is limited in its ability to pay dividends on the Common
Stock by certain covenants contained in debt agreements to which the Company is
a party. Under its most restrictive covenants, there are no retained earnings
available for payment by the Company of cash dividends on any of the Company's
capital stock.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Common Stock offered by the Selling Shareholders.
PLAN OF DISTRIBUTION
Selling Shareholders may sell the Common Stock from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Such sales may be made
through underwriters, through dealers, directly to one or more institutional
purchasers, or through agents or in brokerage transactions through registered
or licensed brokers or dealers or in negotiated transactions. The Prospectus
Supplement shall set forth the plan of distribution contemplated by each
Selling Shareholder.
If underwriters are used, the names of the managing underwriter or
underwriters and any other underwriters, and the terms of the transaction,
including compensation of the underwriters and dealers, if any, will be set
forth in the Prospectus Supplement relating to such offering. Only underwriters
named in a Prospectus Supplement will be deemed to be underwriters. Firms not
so named will have no direct or indirect participation in the underwriting, if
any, although such a firm may participate in the distribution under
circumstances entitling it to a dealer's commission.
Selling Shareholders also may sell Common Stock to a dealer as
principal. In such event, the dealer may then resell such Common Stock to the
public at varying prices to be determined by such dealer at the time of resale.
The name of the dealer, if any, and the terms of the transaction will be set
forth in a Prospectus Supplement.
Common Stock also may be offered through agents designated from time
to time. Any such agent will be named, and the terms of any such agency will be
set forth, in a Prospectus Supplement. Unless otherwise indicated in such
Prospectus Supplement, any such agent will act on a best efforts basis for the
period of its appointment.
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EXPERTS
The consolidated balance sheets of Hanover Direct, Inc. (successor to
The Horn & Hardart Company) and subsidiaries as of January 1, 1994 and December
26, 1992, and the related consolidated statements of income (loss),
shareholders' (deficit) equity and cash flows for each of the three fiscal
years in the period ended January 1, 1994 and schedules incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen & Co., independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports. Reference is made to said reports, which include an
explanatory paragraph with respect to the change in its method of accounting
for income taxes as discussed in Notes 1 and 10 to the consolidated financial
statements.
The consolidated balance sheets of Company Store Holdings, Inc. and
subsidiaries (Debtors-in-Possession) as of August 1, 1992 and July 27, 1991,
and the related consolidated statements of operations, shareholders' investment
(deficit) and cash flows for each of the three years in the period ended August
1, 1992 incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen & Co., independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports. Reference is made to said
reports which include an explanatory paragraph that describes Company Store
Holdings, Inc.'s filing for bankruptcy and its ability to continue as a going
concern, as discussed in Note 2 to the consolidated financial statements.
The financial statements of Tweeds, Inc. as of and for the years ended
June 30, 1991 and July 30, 1990 which are incorporated herein by reference,
have been so included in reliance upon the report of Deloitte & Touche,
independent auditors (of which the report contains explanatory language with
respect to the substantial doubt about the entity's ability to continue as a
going concern), incorporated herein by reference, given upon the authority of
said firm as experts in auditing and accounting.
The balance sheets of Tweeds, Inc. as of January 31, 1993 and February
2, 1992, and the related statements of operations, stockholders' equity and
cash flows for the year ended January 31, 1993, and the period from July 1,
1991 to February 2, 1992 incorporated by reference in this Prospectus and
elsewhere in the Registration Statement have been audited by KPMG Peat Marwick,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Gump's Inc. at February 27,
1993 and February 29, 1992 and February 23, 1991 and for each of the three
years in the period ended February 27, 1993, incorporated by reference in this
Prospectus and Registration Statement have been audited by Ernst & Young,
independent auditors, as set forth in their reports thereon (which contain an
explanatory paragraph with respect to the Company's ability to continue as a
going concern) appearing elsewhere herein are incorporated by reference. Such
consolidated financial statements are included in reliance upon the authority
of such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Common Stock offered hereby has been passed upon
for H&H (as predecessor-in-interest to the Company) by Whitman Breed Abbott &
Morgan, New York, New York. As to certain legal matters with respect to Nevada
law, Whitman Breed Abbott & Morgan has relied on the opinion of McDonald,
Carano, Wilson, McCure, Bergin, Frankovich & Hicks, Reno, Nevada.
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