<PAGE> 1
As filed with the Securities and Exchange Commission on October 2, 1995
REGISTRATION NO. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
HILLS STORES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 31-1153510
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
15 DAN ROAD
CANTON, MASSACHUSETTS 02021
(617) 821-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
____________________
WILLIAM K. FRIEND, ESQ.
VICE PRESIDENT-SECRETARY AND CORPORATE COUNSEL
HILLS STORES COMPANY
15 DAN ROAD
CANTON, MASSACHUSETTS 02021
(617) 821-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
____________________
COPY TO:
BARRY B. WHITE, ESQ.
FOLEY, HOAG & ELIOT
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class of Proposed maximum offering Proposed maximum Amount of
securities to be registered Amount to be registered price per unit(1) aggregate offering price(1) registration fee
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 198,272 $10.875 $2,156,208.00 $744.00
- - ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the
Securities Act of 1933, as amended, based upon the average of the high and low prices of the Common Stock on
September 27, 1995, as reported by the New York Stock Exchange.
</TABLE>
____________________
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
HILLS STORES COMPANY
198,272 SHARES OF COMMON STOCK
____________________
The 198,272 shares (the "Shares") of common stock, par value $.01 per
share (the "Common Stock"), of Hills Stores Company ("Hills" or the "Company")
covered by this Prospectus are being offered by certain stockholders of the
Company (the "Selling Stockholders") on a delayed or continuous basis, pursuant
to the exercise of registration rights. See "Selling Stockholders."
The Company will not receive any proceeds from the offering. The Company
will bear the costs relating to the registration of the Shares offered hereby
(other than selling commissions).
The Selling Stockholders may offer the Shares, from time to time during
the effectiveness of this registration, for sale through the New York Stock
Exchange, The Boston Stock Exchange, in the over-the-counter market, in one or
more negotiated transactions, or through a combination of methods of sale, at
prices and on terms then prevailing or at negotiated prices. Sales may be
effected to or through broker-dealers, who may receive compensation in the form
of discounts, concessions or commissions in connection therewith. See "Plan of
Distribution."
The Common Stock is traded on the New York Stock Exchange and the Boston
Stock Exchange under the symbol "HDS." On September 29, 1995, the closing
price for the Common Stock, as reported on the New York Stock Exchange, was
$11.375 per share.
____________________
FOR A DESCRIPTION OF CERTAIN RISKS ASSOCIATED WITH THE COMMON STOCK
OFFERED HEREBY, SEE "RISK FACTORS."
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.
____________________
ALL SECURITIES TO BE REGISTERED HEREBY ARE TO BE OFFERED BY CERTAIN OF
THE COMPANY'S STOCKHOLDERS.
THE DATE OF THIS PROSPECTUS IS __________, 1995.
<PAGE> 3
RISK FACTORS
In addition to the other information in this Prospectus, the following
should be considered carefully in evaluating the Company and its business before
purchasing the Common Stock offered by this Prospectus.
RECENT OPERATING LOSS
In the first two quarters of the fiscal year, the Company has incurred net
operating losses. Although it is not unusual for participants in the discount
general merchandise business to sustain losses in the first six months of the
calendar year and to generate profits in the second six months, with the
majority of such profits being derived from the quarterly period containing the
Christmas selling season, the Company believes that during the fiscal quarter
ended July 29, 1995 the Company sustained a larger net loss than it otherwise
would have due to non-recurring costs incurred in connection with the July 5,
1995 change in control described below. Of the approximately $50.2 million
operating loss for such quarterly period, non-recurring costs related to the
change in control comprised $43.3 million; $33.8 million of such change in
control costs were severance and retirement payments, including certain taxes
attributable thereto, to six senior executives, a consultant to the Company and
approximately twenty associates and $6.0 million of such change in control
costs was a payment to holders of the 10.25% Senior Notes due 2003 of the
Company (the "Senior Notes") in connection with the amendment of the Indenture
governing the Senior Notes dated October 1, 1993, as amended (the "Indenture"),
to permit the Company to defer the redemption of the Senior Notes following the
change in control. The Company's quarterly and annual operating results have
in the past varied and may in the future vary significantly due to a number of
factors, including: national and regional economic conditions, the Company's
ability to compete with national and regional discount department store chains
and the Company's ability to continue to finance its operations on terms
favorable to the Company. Any unfavorable changes in these or other factors
could have a material adverse effect on the Company's operating results.
CHANGE OF COMPOSITION OF MANAGEMENT
On June 23, 1995 the Company held its Annual Meeting of Stockholders, and
on July 5, 1995 an independent inspector of elections certified as the new
Board of Directors the nominees proposed by Dickstein Partners Inc. Following
this change in control of the Board, certain officers of the Company resigned.
Although the Board of Directors believes that the management of the Company,
including officers promoted to fill the vacancies created by such resignations,
is highly qualified, there can be no assurance that these changes in the
management of the Company will not have an adverse effect on the operations of
the Company.
COMPETITION
The discount general merchandise business is highly competitive. The
Company considers price, merchandise presentation, product selection and
merchandise quality, together with store location, to be the most significant
competitive factors. Hills' primary competitors are regional and national
discount department store chains, some of which, such as Wal-Mart and K Mart,
are larger and better capitalized than Hills. Wal-Mart's expansion has brought
and is bringing more of its stores into the Company's market areas. Management
believes that the Company's store remodeling program and its strength in
certain merchandising lines allows it to defend its competitive position, even
with Wal-Mart's presence in most of the Company's markets. The Company
believes it was the 8th largest general merchandise discount retailer in the
United States in 1994 as measured by sales revenue.
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<PAGE> 4
RESTRICTIONS IMPOSED UNDER OUTSTANDING INDEBTEDNESS
The Company's credit agreement with its senior lenders contains
significant financial and operating covenants, including, among other things,
requirements that the Company maintain certain financial ratios and
restrictions on the ability of the Company to incur indebtedness, to make
capital expenditures, to create or permit liens, to pay dividends or to take
certain other corporate actions. In addition, the Indenture contains certain
covenants, including, among other things, limitations on indebtedness,
dividends, liens and transactions with stockholders and affiliates of the
Company. The financing of the Company's anticipated capital expenditures may
be funded through internally generated funds, joint ventures or leases.
Although the Company believes that its current operating plans will not be
restricted by the credit agreement or the Indenture, changes in economic or
business conditions, results of operations or other factors may in the future
result in circumstances in which such covenants may restrict the Company's
plans or business operations.
SHARES ELIGIBLE FOR FUTURE SALE
As of August 31, 1995, 8,430,115 shares of Common Stock may be freely
traded by public stockholders who are not affiliates of the Company. In
addition, as of August 31, 1995, approximately 1,129,696 shares of the
Company's Series A Convertible Preferred Stock, par value $.10 per share,
convertible into 1,129,696 shares of Common Stock, may be freely traded by
public stockholders who are not affiliates of the Company. The market price of
the Common Stock could be adversely affected by the availability for sale of
additional shares of Common Stock. As of the date of this Prospectus, 381,000
additional shares of the Common Stock are issuable upon the exercise of
outstanding options with exercise prices ranging from $16.375 to $19.50.
ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS, BY-LAWS AND STOCK RIGHTS PLAN
Although the current Board of Directors has expressed its intention to
explore opportunities to maximize shareholder value, certain provisions of the
Company's Certificate of Incorporation, By-Laws, and Stockholder Rights Plan,
each of which was adopted prior to the election of the current Board, could
discourage a proxy contest or make more difficult the acquisition of a
substantial block of the Company's Common Stock. Such provisions could limit
the price that investors might be willing to pay in the future for shares of
the Company's Common Stock. In addition, the Board of Directors is authorized
to issue, without stockholder approval, Preferred Stock with voting, conversion
and other rights and preferences that could adversely affect the voting power
or other rights of the holders of Common Stock. The issuance of Preferred
Stock or of rights to purchase Preferred Stock could be used to discourage an
unsolicited acquisition proposal.
THE COMPANY
The Company was incorporated in Delaware in 1985. The Company's executive
offices are located at 15 Dan Road, Canton, Massachusetts 02021. Its telephone
number is (617) 821-1000.
AVAILABLE INFORMATION
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
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and be
copied, at the prescribed rates, at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661.
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<PAGE> 5
Hills' Common Stock, Senior Notes and Series A Convertible Exchange. Hills
Common Stock and Series 1993 Warrants to Purchase Common Stock are traded on the
Boston Stock Exchange. Reports and other information concerning the Company may
be inspected at the New York Stock Exchange, 20 Broad Street, New York, New York
10005 or at the Boston Stock Exchange, One Boston Place, Boston, Massachusetts
02108.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement and
the exhibits and schedules thereto, as certain items are omitted in accordance
with the rules and regulations of the Commission. For further information
concerning the Company and the Common Stock offered hereby, reference is hereby
made to the Registration Statement and the exhibits and schedules filed
therewith, which may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of
which may be obtained from the Commission at prescribed rates. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such
documents filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is qualified in its entirety by such
reference.
INFORMATION INCORPORATED BY REFERENCE
(a) the Annual Report of Hills Stores Company on Form 10-K for the
fiscal year ended January 28, 1995;
(b) the Amendment on form 10-K/A to the Annual Report of Hills Stores
Company on Form 10-K for the fiscal year ended January 28, 1995;
(c) the Quarterly Report of Hills Stores Company on Form 10-Q for the
fiscal quarter ended April 29, 1995;
(d) the Current Report of Hills Stores Company on Form 8-K dated July 5,
1995;
(e) the Quarterly Report of Hills Stores Company on Form 10-Q for the
fiscal quarter ended July 29, 1995; and
(f) the description of the predecessor to the Common Stock contained
in the Registration Statement on Form 8-A filed with the Securities and Exchange
Commission on May 4, 1987, as amended by (i) amendments on Form 8 filed with the
Securities and Exchange Commission on July 6, 1987 and July 8, 1987, (ii) the
description of the Common Stock contained in the Current Report on Form 8- K
dated October 4, 1993 and (iii) the description of the Rights to Purchase Series
B Participating Cumulative Preferred stock of Hills Stores Company associated
with the Common Stock contained in the Current Report on Form 8-K dated August
23, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing such documents. Any statement or
information contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed modified or superseded for the purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference modifies or supersedes such statement.
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<PAGE> 6
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom a Prospectus
is delivered, on written or oral request of such person, a copy of any or all
of the documents incorporated herein by reference (other than exhibits and
schedules to such documents). Requests should be directed to: William K.
Friend, Esq., Vice President - Secretary and Corporate Counsel, Hills Stores
Company, 15 Dan Road, Canton, Massachusetts 02021, (617) 821-1000 extension
1956.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
offered hereby by the Selling Stockholders.
<TABLE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock has been traded on the New York Stock Exchange and Boston
Stock Exchange under the symbol "HDS" since the Company's emergence from
bankruptcy on October 4, 1993. The following table sets forth the quarterly
high and low sale prices per share reported on the New York Stock Exchange:
<CAPTION>
1994-1995 High Low
- - ----------------------- ------- -------
<S> <C> <C>
Third Quarter 1994 $23.000 $20.125
Fourth Quarter 1994 $21.625 $19.375
First Quarter 1995 $22.750 $18.250
Second Quarter 1995 $24.875 $18.125
Third Quarter 1995 (Through
September 29, 1995 $18.250 $10.625
</TABLE>
The Company has never paid cash dividends on its Common Stock. However,
the Company did, as part of a plan to enhance stockholder value, repurchase
approximately three million of its issued and outstanding shares of Common
Stock pursuant to a tender offer statement of the Company dated January 24,
1995 (the "Offer"). In connection with the Offer, the Company also amended the
Indenture so that cash dividends or distributions or other purchases,
redemptions or acquisitions for value by the Company (other than any such
transaction related to the Offer) could be made only if the Company is not in
default under the Indenture and the aggregate amount of all such payments since
the date of the consummation of the Offer would not exceed the sum of (i)
twenty-five (25%) percent of the consolidated net income of the Company with
respect to the period from October 30, 1994, through the earlier of (x) the end
of the Company's most recently completed fiscal quarter and (y) November 2,
1996, (ii) fifty (50%) percent of the consolidated net income of the Company
and its subsidiaries, if any, determined on a cumulative basis, with respect to
the period from November 3, 1996, through the end of the Company's most
recently completed fiscal quarter and (iii) the aggregate net proceeds received
by the Company through the issuance or sale of capital stock of the Company
after the consummation of the Offer.
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<PAGE> 7
BUSINESS
The Company is a leading regional discount retailer offering a broad range
of brand name and other first quality general merchandise. The Company's
pricing strategy is to offer every day low prices on all items. The Company
emphasizes product lines designed to appeal to its predominantly female
customer base, such as apparel, footwear, domestics and home furnishings,
jewelry, housewares, toys and other family-oriented items. Management's
business strategy stresses every day low prices, depth and breadth of products
in selected merchandise categories, remodeled facilities and strict operating
controls.
Hills stores are located in cities and towns of varying sizes, with some
of the larger cities being Pittsburgh, Buffalo, Cleveland and Richmond. The
Company concentrates its stores in selected markets within a geographic region
in order to reinforce marketing programs, enhance name recognition, achieve
market penetration, and gain economies of scale in management, advertising and
distribution.
The Company has remodeled substantially all of its stores within the last
three years. The remodeling program is designed to make the Company's stores
more visually appealing to customers and to take full advantage of the most
profitable merchandise categories.
The Company believes that its customer base consists primarily of female
customers shopping for family needs. Accordingly, Hills emphasizes merchandise
in its softlines departments and selected hardware departments such as
housewares, toys and seasonal merchandise which appeal to Hills' targeted
female customer. The Company considers the depth of its merchandise in these
departments to be an important factor in attracting and retaining female
customers, and accordingly emphasizes the availability of a wide selection of
sizes, styles and colors of items in these departments.
Hills carries a diverse line of products, all first quality, including a
full line of clothing and footwear for women, men and children, toys, health
and beauty aids, small household appliances and housewares, home entertainment
equipment, hardware, stationery and greeting cards, automotive supplies, lawn
and garden products and jewelry. Hills offers a broad range of brand name
apparel and other products for the family and supplements brand name goods with
manufacturers' private brands (brands made by major manufacturers but not
nationally advertised) and Hills' private label program. The Company accepts
all major consumer credit cards and offers a year-round layaway program for
those customers who do not rely on credit cards.
As part of its merchandise strategy, Hills primarily endeavors to purchase
goods that are made in the U.S.A. and has developed a special merchandise
program using its "American Spirit" trademark to help market that concept to
customers. Imported goods are purchased by Hills from an importing subsidiary
and from unaffiliated sources. In fiscal year 1994, the subsidiary, CRH
International, Inc., imported products that accounted for approximately 6.0% of
total purchases of the Hills Department Stores chain.
Hills uses a centralized buying organization staffed by merchandise
managers, buyers and a support staff organized along the Company's product
lines. Most of Hills' buying organization is located at its Canton,
Massachusetts headquarters. Hills also maintains an important fashion buying
office in the garment district of New York City to purchase and merchandise
women's fashion and basic apparel.
Hills' merchandise managers and buyers develop detailed merchandising
plans for each selling season. These plans include sales, inventory and
initial mark-up and mark-down budgets for each buyer. Sales performance
reports are received both daily and weekly and assist management in making
related merchandising decisions. The formats of these plans are programmed
into computer planning systems for each department.
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<PAGE> 8
The Company's central distribution facilities are located in Columbus,
Ohio. These facilities provide central stocking of inventory and flow-through
allocation of inventory for delivery to the stores, resulting in efficient
inventory management. Significant reductions in store receiving expense are
achieved by performing many product handling functions at the central
facilities.
In recent years, the Company has instituted several significant changes in
its store operations and management structure to enhance expense control,
flexibility and competitive responsiveness. Computerized scheduling of work
hours based upon forecasted sales levels, productivity standards and freight
activity allocates more payroll dollars to sales generating positions, while
reducing overall payroll expense. The Company has also given renewed attention
to evaluating the sales and profit potential of licensing space within the
Company's stores to specialty businesses.
Store managers report to a district manager, who reports to a regional
vice president. The 16 district managers and two regional vice presidents
visit their stores on a regular basis to oversee operations. Store managers
and associates are empowered to respond directly to the needs of the customers.
The Company maintains a strategic field office near Pittsburgh to facilitate
store visitations and reduce travel expenses, particularly by those associates
with greater responsibilities for store performance.
To support Hills' strategy of centralized management control, the Company
relies extensively on computerized information systems. Hills operates its
principal data processing center at its headquarters in Canton, Massachusetts.
All Hills stores and administrative locations are tied to the data center's
mainframe computer by means of an on-line leased telephone network.
Hills' merchandising systems are designed to integrate the key retailing
functions of seasonal merchandise planning, purchase order management,
merchandise distribution, receiving, sales capture, inventory control,
open-to-buy and replenishment. Unit sales data is recorded via the
point-of-sale register systems in each store. The point of sale registers and
bar code readers in all stores eliminate labor intensive price marking and
price changes. The sales data is transmitted nightly to the Company's
mainframe computer where it is processed to produce a wide range of daily and
weekly management reports. Each Hills buyer also has on-line access to
information via a workstation located in the buyer's office. The merchandising
systems allow Hills to distribute specific categories and styles of merchandise
to each store based upon the sales patterns of the stores.
Store operations are supported by a number of additional on-line systems
including electronic correspondence among all locations, payroll and labor
scheduling systems, accounts payable, price change management and layaway
control. The purpose of these systems is to promote timely and accurate
communication among all Hills locations and to allow personnel at the Company's
headquarters to monitor and control key store activity.
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<PAGE> 9
SELLING STOCKHOLDERS
The Shares are being offered for sale from time to time during the period
of effectiveness of the Registration Statement for the accounts of the Selling
Stockholders set forth below. Each of the Selling Stockholders has exchanged
Series 1993 Stock Rights of the Company for the Shares being offered hereunder.
The Series 1993 Stock Rights were issued in connection with the Company's
emergence from bankruptcy and pursuant to its plan of reorganization.
<TABLE>
Based on the information supplied by each Selling Stockholder to the
Company, the following table sets forth, as of August 31, 1995, certain
information regarding the beneficial ownership of each Selling Stockholder and
any material relationship of such Selling Stockholder during the last three
years with the Company or any of its predecessors or affiliates.
<CAPTION>
Shares of Common Percent of
Shares of Common Number of Shares Stock Beneficially Voting Stock
Stock Beneficially of Common Stock Owned After Offering Beneficially
Owned Which May Be ------------------------ Owned After
Name Before the Offering Offered Hereunder Number Percent of Class Offering ***
- - --------------------------- ------------------- ----------------- ------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Westinghouse Electric 99,013 99,013 0 * *
Corporation
ML-LEE Acquisition Fund 521,048 62,616 458,432 4.7% 4.2%
II, L.P.**
ML-LEE Acquisition Fund 278,245 33,427 244,818 2.5% 2.2%
(Retirement Accounts) II,
L.P.**
Kimco Realty Corporation 2,970 2,970 0 * *
Four other 246 246 0 * *
stockholders ****
<FN>
________________________
* Less than 1%.
** ML-Lee Acquisition Fund II, L.P. owns beneficially 458,432 shares of
Common Stock, and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. owns
beneficially 244,818 shares of Common Stock. Under the Stock Purchase and
Exchange Agreement dated as of August 21, 1995 by and among the Company,
Westinghouse Electric Corporation, ML-LEE Acquisition Fund II, L.P., ML-LEE
Acquisition Fund (Retirement Accounts) II, L.P. and Kimco Realty Corporation,
ML- LEE Acquisition Fund II, L.P. and ML-LEE Acquisition Fund (Retirement
Accounts) II, L.P. were issued 62,616 and 33,427 shares of Common Stock,
respectively, in exchange for their Series 1993 Stock Rights. Thomas H. Lee
Advisors II, L.P., as the investment advisor to both Funds, shares the power
to vote and to direct the disposition of securities held by the Funds and
therefore may be deemed to own beneficially the 799,293 shares of Common Stock
owned beneficially in the aggregate by the Funds. Thomas H. Lee, the former
Chairman of the Board of the Company is a General Partner of both Funds.
*** Represents the percentage beneficially owned relative to the aggregate of 9,793,574
shares of Common Stock and 1,129,696 shares of Series A Preferred Stock, which
has coextensive voting rights with the Common Stock.
**** Information as to these stockholders will be filed by amendment.
</TABLE>
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<PAGE> 10
Thomas H. Lee, the former Chairman of the Board of Directors of the
Company, may be deemed under the rules and regulations promulgated pursuant to
the Exchange Act of 1934, as amended, to be the beneficial owner of the shares
of Common Stock held by the ML-LEE Acquisition Fund II, L.P. and the ML-LEE
Acquisition Fund (Retirement Accounts) II, L.P. Mr. Lee, while the Chairman of
the Board of Directors, was retained to serve as a financial consultant to the
Company for which services he was paid a fee of $250,000 per year. No further
payments have been made to Mr. Lee since the change in control.
Hills Department Store Company, a Delaware Corporation ("HDS"), a
wholly-owned subsidiary of the Company, leases 24 stores from Kimco Realty
Corporation, its subsidiaries, affiliates and a joint venture in which Kimco
has an interest (together, referred to as "Kimco"). In addition, prior to, and
during the pendency of, its bankruptcy the Company cancelled or otherwise
terminated its obligations under leases with respect to 29 other stores leased
from Kimco. As a result of such cancellations and terminations or as a result
of other transactions with the Company, and pursuant to the plan of
reorganization of the Company, Kimco received certain securities of the Company
including the securities converted into the Common Stock offered by Kimco
hereby and approximately $523,000 in principal amount of Senior Notes currently
held by Kimco. The Company believes that the leases from Kimco are, and the
issuances of securities to Kimco pursuant to the plan of reorganization were,
on no less favorable terms to the Company than could have been obtained from
any other unrelated third party.
PLAN OF DISTRIBUTION
The sale of the Common Stock by the Selling Stockholders hereby may be
effected from time to time in transactions in the over-the-counter market,
through the New York Stock Exchange or the Boston Stock Exchange, in one or
more negotiated transactions, or through a combination of such methods of sale,
at fixed 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. The Selling Stockholders may effect such transactions by selling the
Common Stock to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
Selling Stockholders and/or the purchasers of the Common Stock for which such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary compensation). Any broker- dealer may act as broker-dealer on behalf
of one or more of the Selling Stockholders in connection with the offering of
certain of the shares of Common Stock by the Selling Stockholders.
The Selling Stockholders and any broker-dealers who act in connection with
the sale of the Common Stock hereby may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, and any commissions
received by them and profit on any resale of the Common Stock as principal
might be deemed to be underwriting discounts and commissions under the
Securities Act.
The Company will file during any period in which offers and sales are
being made hereunder one or more post-effective amendments to the Registration
Statement of which this prospectus is a part to describe any material
information with respect to the plan of distribution not previously disclosed
in this prospectus or any material change to such information in this
prospectus.
The Company has agreed to pay the expenses incurred in connection with
preparing and filing the Registration Statement and this prospectus (other than
selling commissions). The Company has agreed
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<PAGE> 11
to indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Foley, Hoag & Eliot, Boston, Massachusetts.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report
on Form 10-K for the year ended January 28, 1995 have been audited by Coopers &
Lybrand L.L.P., independent auditors, as stated in their reports which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing. With respect to the unaudited interim financial
information which is incorporated herein by reference, Coopers & Lybrand L.L.P.
have applied limited procedures in accordance with professional standards for a
review of such information. However, as stated in their reports included in
the Company's quarterly reports on Forms 10-Q and incorporated by reference
herein, they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their reports on
such information should be restricted in light of the limited nature of the
review procedures applied. Coopers & Lybrand L.L.P. are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the Registration Statement prepared or certified by an
accountant within the meaning of Section 7 and 11 of the Securities Act.
CERTAIN LEGAL PROCEEDINGS
On September 11, 1995, in a complaint filed in the Court of Chancery of
the State of Delaware, the Company and Hills Department Store Company, a
Delaware Corporation ("HDS"), filed a suit against Michael Bozic, Susan E.
Engel, Thomas H. Lee, Richard B. Loynd, Norman S. Matthews, James L. Moody,
Jr., and John G. Reen (the "Former Directors"). The Company and HDS allege
that the Former Directors breached their fiduciary duties toward the Company
and HDS, acted in bad faith and engaged in wrongdoing by prematurely,
improperly and needlessly paying amounts ostensibly pursuant to certain
employment and severance agreements thereby benefitting certain Former
Directors as well as certain officers of the Company. The Company and HDS seek
the imposition of a $30.4 million constructive trust on payments allegedly made
under such employment and severance agreements, disgorgement of the funds
received by certain Former Directors, a bar to such Former Directors' receipt
of any further benefits under such employment and severance agreements and an
award of damages flowing from the breach of the Former Directors' fiduciary
duty.
Following the change in control of the Company resulting from the election
of seven new directors, the parties to the two previously-reported lawsuits
filed in May, 1995 (which have been dismissed by stipulation) filed a joint
class-action lawsuit on August 7, 1995 in the Court of Chancery of the State of
Delaware, under the names of Gayle Dolowicz, Ivan J. Dolowicz and Joseph Weiss,
as plaintiffs, against those seven new directors of the Company, Dickstein
Partners Inc. and the Company. The plaintiffs
10
<PAGE> 12
claim that in connection with Dickstein Partners Inc.'s effort to solicit
proxies in support of the election of its nominees to be directors of the
Company, Dickstein Partners Inc. issued a number of false and misleading
statements regarding its offer to acquire all of the Company's shares it did not
already own. The plaintiffs seek an order nullifying the election of directors,
declaring there has been no "change of control" of the Company and directing
that Dickstein Partners Inc. pay damages resulting from the dissemination of
allegedly false and misleading statements.
On August 2, 1995, in a complaint filed in the U.S. District Court for
Massachusetts, Mitchell Dobies and Leslie Susser filed a class action lawsuit
against Dickstein Partners Inc. and Mark Dickstein as defendants, and Leslie
Susser individually filed a derivative action against the seven former
directors of the Company, with the Company named a "nominal defendant." The
plaintiffs allege that Dickstein Partners Inc. and Mark Dickstein issued false
and misleading statements and omitted to state material facts in response to an
intended acquisition of or sale of the Company. Plaintiff Susser,
derivatively, claims the former directors breached their fiduciary duties by
not approving the change in control resulting from the election of the
Dickstein Partners Inc. nominees to the Board of Directors, thus allowing
"golden parachute" severance payments to be made to a director and six senior
officers (two of whom were also directors) of the Company. The plaintiffs seek
compensatory money damages for themselves and the class, an order that each
former director account for damages to the Company caused by an alleged breach
of fiduciary duties, and an award of pre-and-post-judgment interest along with
attorneys' fees and expenses, including experts' fees.
Jeffrey B. Cross and Nancy Cross also filed a class action lawsuit against
Dickstein Partners Inc. and Mark Dickstein as defendants and a derivative
action suit against the former directors, with the Company named as a nominal
defendant in the derivative action. The dual complaint was filed in the U.S.
District Court for the Southern District of New York and seeks the same or
similar relief being sought in the Massachusetts lawsuit described in the
preceding paragraph.
11
<PAGE> 13
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or any Selling Shareholder. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the securities to which it relates or an offer to sell or
the solicitation of an offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. 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 or the information contained herein is correct as of any
time subsequent to its date.
================================================================================
========================================
198,272 Shares
HILLS STORES COMPANY
Common Stock
(par value $.01 per share)
_____________________
PROSPECTUS
_____________________
========================================
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
<TABLE>
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an itemized statement of all expenses in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts:
<CAPTION>
Selling
Company Stockholders
------- -------------
<S> <C> <C>
Registration fee (Securities and
Exchange Commission) $ 744 $-0-
Legal fees and expenses* $20,000 $-0-
Accounting fees and expenses* $ 2,000 $-0-
------- ----
Total* $22,744 $-0-
======= ====
<FN>
______________
* Estimated
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law affords a Delaware
corporation the power to indemnify its present and former directors and
officers under certain conditions. Article Seventh of the Company's Amended
and Restated Certificate of Incorporation provides that the Company shall
indemnify each person, who, at any time, is, or shall have been, a director or
officer of the Company and was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement incurred in connection with any such action,suit or
proceeding, to the maximum extent permitted by the General Corporation Law of
the State of Delaware, as the same exists or may hereafter be amended.
Section 102(b)(7) of the Delaware General Corporation Law gives a Delaware
corporation the power to adopt a charter provision eliminating or limiting the
personal liability of the directors to the corporation or its stockholders
provided that such provision may not eliminate or limit the liability of
directors for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) any acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
any payment of a dividend or approval of a stock purchase that is illegal under
Section 174 of the Delaware Corporation Law or (iv) any transaction from which
the director derived an improper personal benefit. Article Ninth of the
Company's Amended and Restated Certificate of Incorporation provides that no
director of the company shall be personally liable to the Company or to any of
its stockholders for monetary damages arising out of such director's breach of
fiduciary duty as a director of the Company, except to the extent that the
elimination or limitation of such liability is not permitted by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter
be amended.
<PAGE> 15
The effect of these provisions would be to permit indemnification by the
Company for, among other liabilities, liabilities arising out of the Securities
Act of 1933, as amended.
Section 145 of the Delaware General Corporation law also affords a
Delaware corporation the power to obtain insurance on behalf of its directors
and officers against liabilities incurred by them in those capacities. The
Company has procured a directors' and officers' liability and company
reimbursement liability insurance policy that (a) insures directors and
officers of the company against losses (above a deductible amount) arising from
certain claims made against them by reason of certain acts done or attempted by
such directors and officers and (b) insures the Company against losses (above a
deductible amount) arising from any such claims, but only if the Company is
required or permitted to indemnify such directors or officers for such losses
under statutory or common law or under provisions of the Company's Certificate
of Incorporation or By-Laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
4.1 Specimen Certificate representing Common Stock of the Company
(filed as Exhibit 4.3 to the Company's Current Report on Form 8-K, dated
October 4, 1993, and incorporated herein by reference)
4.2 Rights Agreement between the Company and Chemical Bank, as Rights
Agent (filed as Exhibit 4(a) to the Company's Current Report on form 8-K,
dated August 16, 1994, and incorporated herein by reference)
4.3 Registration Rights Agreement dated as of August 21, 1995 by and
among the Company, Westinghouse Electric Corporation, ML-LEE Acquisition
Fund II, L.P., ML-LEE Acquisition Fund (Retirement Accounts) II, L.P. and
Kimco Realty Corporation)
5.1 Opinion of Foley, Hoag & Eliot
23.1 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Foley, Hoag & Eliot (included on Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page of this
Registration Statement)
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post- effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price present no more than a twenty
percent change in the maximum aggegate offering price set forth in the
"Calculations of Registration Fee" table upon effectiveness hereof;
II-II
<PAGE> 16
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration, by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-III
<PAGE> 17
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE TOWN OF CANTON, MASSACHUSETTS, ON OCTOBER 2, 1995.
HILLS STORES COMPANY
By: /s/ E. Jackson Smailes
. . . . . . . . . . . . . . . . . . .
E. Jackson Smailes
Director, President and Acting Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints E. Jackson Smailes, William K. Friend,
Bruce A. Caldwell and Richard C. Doran, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post- effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing which they, or any of
them, may deem necessary or advisable to be done in connection with this
Registration Statement, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or any substitutes for any or all
of them, may lawfully do or cause to be done by virtue hereof.
<TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mark Dickstein Chairman of the Board October 2, 1995
. . . . . . . . . . . . . . . . .
Mark Dickstein
/s/ E. Jackson Smailes Director, President and October 2, 1995
. . . . . . . . . . . . . . . . . Acting Chief Executive Officer
E. Jackson Smailes (Principal Executive Officer)
/s/ Stanton Bluestone Director October 2, 1995
. . . . . . . . . . . . . . . . .
Stanton Bluestone
</TABLE>
II-IV
<PAGE> 18
<TABLE>
<S> <C> <C>
/s/ David Brail Director October 2, 1995
. . . . . . . . . . . . . . . . .
David Brail
/s/ Mark D. Brodsky Director October 2, 1995
. . . . . . . . . . . . . . . . .
Mark D. Brodsky
/s/ John W. Burden, III Director October 2, 1995
. . . . . . . . . . . . . . . . .
John W. Burden, III
/s/ Chaim Y. Edelstein Director October 2, 1995
. . . . . . . . . . . . . . . . .
Chaim Y. Edelstein
/s/ Mark L. Kaufman Director October 2, 1995
. . . . . . . . . . . . . . . . .
Mark L. Kaufman
/s/ Samuel L. Katz Director October 2, 1995
. . . . . . . . . . . . . . . . .
Samuel L. Katz
/s/ Kim D. Ahlholm Vice President - Controller October 2, 1995
. . . . . . . . . . . . . . . . . (Principal Financial and
Kim D. Ahlholm Accounting Officer)
</TABLE>
II-V
<PAGE> 1
Exhibit 4.3
-----------
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made and entered into as of this
21st day of August, 1995, by and among Hills Stores Company, a Delaware
corporation (the "Company"), and the investors listed on Schedule I hereto (the
"Investors").
WHEREAS, as a condition to their purchase of shares of the Company's
common stock, par value $.01 per share (including the associated preferred stock
purchase rights, the "Common Stock"), in a Stock Purchase and Exchange Agreement
dated as of August 21, 1995 (the "Purchase Agreement"), the Investors have
required that the Company execute this Agreement to provide the Investors rights
to register the Registrable Securities (as defined below);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Company and the Investors hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
(a) "1933 Act" shall mean the Securities Act of 1933, as amended.
(b) "1934 Act" shall mean the Securities Exchange Act of 1934,
as amended.
(c) "Closing Date" shall mean the date on which the closing of the
transactions contemplated by the Purchase Agreement occurs.
(d) "Holder" shall mean (1) any Investor and (2) any other person
or entity holding Registrable Securities to whom the
registration rights granted in this Agreement have been
transferred pursuant to Section 8 hereof.
(e) "Person" shall mean any natural person, corporation, business
trust, joint venture, association, company or partnership.
(f) "Purchase Agreement" shall mean the Stock Purchase and Exchange
Agreement dated as of August 21, 1995 by and among the
Company and the Investors.
(g) "Register," "registered," and "registration" shall refer to a
registration effected by preparing and filing a registration
statement in compliance with the 1933 Act and the declaration
or ordering of effectiveness of such registration statement.
(h) "Registrable Securities" shall mean the Common Stock issued
pursuant to the Purchase Agreement and any Common Stock of
the Company issued as a dividend or other distribution with
respect to, or in exchange or in replacement of, the foregoing.
<PAGE> 2
2. REGISTRATION PROCEDURES. The Company shall, as expeditiously
as reasonably possible:
(a) As soon as practicable following the Closing Date but in no
event later than twenty (20) business days thereafter,
prepare and file with the Securities and Exchange Commission
(the "SEC") a registration statement on Form S-3 or any
comparable or successor form thereto for the registration and
sale of the Registrable Securities by the Holders from time to
time (the "Registration Statement").
(b) Use its best efforts, subject to receipt of necessary
information from the Holders, to cause the Registration
Statement to become effective as soon as practicable after it
has been filed with the SEC.
(c) Subject to receipt of necessary information from the Holders,
prepare and file with the SEC with all reasonable speed under
the circumstances such amendments and supplements to the
Registration Statement and the prospectus used in connection
therewith and such reports as may be required to be filed
pursuant to the 1934 Act to keep the Registration Statement
effective until the earlier of (i) the time all the
Registrable Securities have been sold pursuant thereto or
otherwise; or (ii) one year from the date on which the
Registration Statement becomes effective, subject to extension
pursuant to the last sentence of Section 3.
(d) Furnish to the Holders such numbers of copies of a prospectus
and, if applicable, a prospectus supplement or supplements, in
conformity with the requirements of the 1933 Act, and such
other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by
them.
(e) Use its best efforts to register and qualify the securities
covered by the Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall
be reasonably appropriate for the distribution of the
Registrable Securities covered by the Registration Statement,
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such
states or jurisdictions, and further provided that (anything in
this Agreement to the contrary notwithstanding with respect to
the bearing of expenses) if any jurisdiction in which the
securities shall be qualified shall require that expenses
incurred in connection with the qualifica tion of the securities
in that jurisdiction be borne by selling Holders, then such
expenses shall be payable by selling Holders in proportion to
the amount of Registrable Securities held by each such selling
Holder and included in such registration, to the extent required
by such jurisdiction.
(f) Notify each Holder of Registrable Securities covered by the
Registration Statement, at any time when a prospectus relating
thereto covered by the Registration Statement is required to be
delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a
-2-
<PAGE> 3
material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the
circumstances then existing and promptly file such amendments
and supplements (or periodic or current reports pursuant to
Section 13 or 15(d) of the 1934 Act) which may be required
pursuant to subparagraph (c) of this Section 2 on account of
such event and, if applicable, use its best efforts to cause
each such amendment and supplement to become effective.
(g) Apply for listing and use its best efforts to list the
Registrable Securities being registered on any national
securities exchange on which a class of the Company's equity
securities is listed or, if the Company does not have a class of
equity securities listed on a national securities exchange,
apply for qualification and use its best efforts to qualify the
Registrable Securities being registered for inclusion on the
automated quotation system of the National Association of
Securities Dealers, Inc.
3. TRANSFER OF SHARES AFTER REGISTRATION. Each Holder agrees that it
will not effect any disposition of the Registrable Securities that would
constitute a sale within the meaning of the 1933 Act except in compliance with
the 1933 Act. In addition, each Holder hereby severally covenants with the
Company not to make any sale of the Registrable Securities without effectively
causing the prospectus delivery requirement under the 1933 Act to be satisfied
and to promptly advise the Company of any changes in the information concerning
the Holder contained in the Registration Statement. Each Holder acknowledges
that occasionally there may be times when the Company must suspend the use of
the prospectus forming a part of the Registration Statement until such time as
an amendment to the Registration Statement has been filed by the Company and
declared effective by the SEC, or until such time as the Company has filed an
appropriate periodic or current report with the SEC pursuant to the 1934 Act.
Each Holder hereby covenants that it will not offer or sell any Registrable
Securities pursuant to any prospectus during the period commencing at the time
at which the Company gives the Holder notice of the suspension of the use of
said prospectus and ending at the time the Company gives the Holder notice that
the Holder may thereafter effect sales pursuant to said prospectus. In the
event that any such period (a "Blackout Period") extends for more than 90 days,
the Company shall extend the one-year period of time referred to in Section
2(c)(ii) during which the Registration Statement shall remain effective by the
number of days in such Blackout Period.
4. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
5. REGISTRATION EXPENSES. All expenses (excluding underwriting
discounts and selling commissions and fees and expenses of any legal counsel for
the selling Holders) incurred in connection with the registration pursuant to
Section 2, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or Blue Sky laws, fees of the
National
-3-
<PAGE> 4
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, costs of insurance and fees and any additional registration and
qualification fees shall be borne by the Company. All underwriting discounts
and selling commissions applicable to the sale of Registrable Securities shall
be borne by the selling Holders in proportion to the amount of Registrable
Securities held by each selling Holder and included in such registration.
6. DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
7. INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder (including its officers, directors,
affiliates and partners) joining in a registration, any
underwriter (as defined in the 1933 Act) for it or him, and each
person, if any, who controls such Holder, or such underwriter
within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any untrue or alleged
untrue statement of any material fact contained in such
registration statement, including, without limitation, any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to
make the statements therein not misleading, or arise out of any
violation by the Company of any rule or regulation promulgated
under the 1933 Act applicable to the Company and relating to
action or inaction required of the Company in connection with
any such registration; and will reimburse each such Holder
(including such officers, directors, affiliates and partners),
such underwriter, or controlling person for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability, or action, provided, however, that the indemnity
agreement contained in this Section 7(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably
withheld or delayed) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to
the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in connection with such registration statement,
preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection
with such registration by any such Holder (including such
officers, directors, affiliates and partners), underwriter or
controlling person.
-4-
<PAGE> 5
(b) To the extent permitted by law, each Holder joining in a
registration will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the
registration statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act, and any underwriter
for the Company (within the meaning of the 1933 Act) against any
losses, claims, damages or liabilities to which the Company or
any such director, officer, controlling person or underwriter
may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was
made in such registration statement, preliminary prospectus or
final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with
such registration; and will reimburse the Company or any such
director, officer, controlling Person or underwriter for any
legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 7(b) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of such Holder (which consent shall not be
unreasonably withheld) and provided further that no Holder shall
have any liability under this Section 7(b) in excess of the net
proceeds actually received by it or him in the relevant public
offering.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to
the parties; provided that, if and to the extent that a conflict
of interest exists between the indemnifying party and the
indemnified party, the indemnified party shall be permitted to
retain (at the indemnifying party's expense if such expense is
otherwise required to be assumed by it under this Section 7)
counsel of its choice with respect to such action. In no event
shall the indemnifying party be liable for the fees and expenses
of more than one counsel, separate from its own counsel, for all
indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction
arising out of the same allegations or circumstances. The
failure to notify an indemnifying party promptly of the
commencement of any such action, to the extent prejudicial to
his ability to defend
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<PAGE> 6
such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 7, but the
omission so to notify the indemnifying party will not relieve
such indemnifying party of any liability to any indemnified
party otherwise than under this Section 7.
(d) If the indemnification provided for in this Section 7 is
unavailable to a party that would have been an indemnified party
under such Section in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each party that would have
been an indemnifying party thereunder shall, in lieu of
indemnifying such indemnified party and to the extent permitted
by law, contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative fault
of such indemnifying party on the one hand and such indemnified
party on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof). The
relative fault shall be determined by reference to, among other
things, whether the violation of law related to information
supplied by such indemnifying party or such indemnified party
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such violation
of law. The parties agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the preceding sentence. The
amount paid or payable by a contributing party as a result of
the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this
Section 7(d) shall include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The liability of any Holder of
Registrable Securities in respect of any contribution obligation
of such Holder (after deduction of all underwriters' discounts
and commissions and all other expenses paid by such Holder in
connection with the registration in question) arising under this
Section 7(d) shall not in any event exceed an amount equal to
the net proceeds to such Holder from the disposition of the
Registrable Securities disposed of by such Holder pursuant to
such registration.
8. TRANSFER OF REGISTRATION RIGHTS. The registration rights of any
Holder (and of any permitted transferee thereof or its permitted transferees)
under this Agreement with respect to any shares of Registrable Securities may be
transferred to any transferee who acquires (otherwise than in a registered
public offering) such shares of Registrable Securities, provided, however, that
the transferee acquires either (i) not less than 5,000 shares of Registrable
Securities or (ii) all of the Registrable Securities of (x) an Investor that
holds as of the date hereof less than 5,000 shares of Registrable Securities or
(y) a transferee of all of the Registrable Securities of such an Investor
holding less than 5,000 shares, and provided, further, that the Company is given
written
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<PAGE> 7
notice by the Holder at the time of such transfer stating the name and address
of the transferee and identifying the securities with respect to which the
rights under this Agreement are being assigned.
9. MERGERS, ETC. The Company shall not, directly or indirectly,
enter into any merger, consolidation or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation or reorganization, agree in writing
to assume the obligations of the Company under this Agreement, and for that
purpose references hereunder to "Registrable Securities" shall be deemed to be
references to the securities which the Holders would be entitled to receive in
exchange for Registrable Securities under any such merger, consolidation or
reorganization; provided, however, that the provisions of this Agreement shall
not apply in the event of any merger, consolidation or reorganization in which
the Company is not the surviving corporation if the Holders of Registrable
Securities are entitled to receive in exchange therefor (i) cash, or (ii)
securities of the acquiring corporation which may be immediately sold to the
public without registration under the 1933 Act.
10. MISCELLANEOUS.
(a) This Agreement states the entire agreement of the parties
concerning the subject matter hereof, and supersedes all
prior agreements, written or oral, between or among them
concerning such subject matter.
(b) This Agreement may be amended and compliance and any provision
of this Agreement may be omitted or waived only by the
written agreement of (i) the Company and (ii) the Holders of at
least 80% of the Registrable Securities.
(c) This Agreement shall be governed by, and construed and enforced
in accordance with, the substantive laws of The Commonwealth of
Massachusetts without regard to its principles of conflicts of
laws. Each of the parties hereto agrees that any suit for the
enforcement of this Agreement may be brought in the courts
of The Commonwealth of Massachusetts or any Federal Court
sitting therein and consents to the nonexclusive jurisdiction of
such court and to service of process in any such suit be made
upon such party by mail, the address provided in accordance with
Section 10(d). Each party hereby waives any objection that it
may now or hereafter have to venue of any such suit or any such
court or that such suit was brought in an inconvenient court.
(d) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered by hand or
mailed by certified or registered mail, return receipt
requested, postage prepaid, or by telecopier addressed as
follows:
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<PAGE> 8
if to the Company: Hills Stores Company
15 Dan Road
Canton, MA 02021
Attention: Vice President-Secretary
Telecopier: (617) 821-6966
with a copy to: Barry B. White, Esq.
Foley, Hoag & Eliot
One Post Office Square
Boston, MA 02109
Telecopier: (617) 832-7000
if to any Investor at the address set forth on Schedule I;
if to any subsequent Holder to it at such address as may
have been furnished to the Company in writing by such Holder;
or, in any case, at such other address or addresses as shall
have been furnished in writing to the Company (in the case of a
Holder of Registrable Securities) or to the Holders of
Registrable Securities (in the case of the Company) in
accordance with the provisions of this paragraph.
(e) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall
not in any manner affect or render illegal, invalid or
unenforceable any other provision of this Agreement, and this
Agreement shall be carried out as if any such illegal, invalid
or unenforceable provision were not contained herein.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as an agreement under seal, as of the day and year first above
written.
THE COMPANY:
HILLS STORES COMPANY
[SEAL]
By: ____________________________________
Its
THE INVESTORS:
WESTINGHOUSE ELECTRIC CORPORATION
[SEAL]
By: ____________________________________
Its
ML-LEE ACQUISITION FUND II, L.P.
[SEAL]
By: ____________________________________
Its
ML-LEE ACQUISITION FUND (RETIREMENT
ACCOUNTS) II, L.P.
[SEAL]
By: ____________________________________
Its
KIMCO DEVELOPMENT CORPORATION
[SEAL]
By: ____________________________________
Its
-9-
<PAGE> 10
<TABLE>
SCHEDULE OF INVESTORS
<CAPTION>
Investors Number of Registrable Securities
- - --------- --------------------------------
<S> <C>
WESTINGHOUSE ELECTRIC CORPORATION 99,013
Address: Westinghouse Electric Corporation
11 Stanwyx Street
Pittsburgh, Pennsylvania 15222
Attention: Mr. Lawrence Hall
Telecopier: (412) 642-3821
ML-LEE ACQUISITION FUND II, L.P. 62,616
Address: Merrill Lynch Pierce Fenner & Smith
225 Liberty Street
World Financial Center
South Tower - 23rd Floor
New York, New York 10080-6123
Attention: Ms. Audrey L. Bommer
Telecopier: (212) 236-7360
ML-LEE ACQUISITION FUND 33,427
(RETIREMENT ACCOUNTS) II, L.P.
Address: Merrill Lynch Pierce Fenner & Smith
225 Liberty Street
World Financial Center
South Tower - 23rd Floor
New York, New York 10080-6123
Attention: Ms. Audrey L. Bommer
Telecopier: (212) 236-7360
KIMCO DEVELOPMENT CORPORATION 2,970
Address: Kimco Realty Corporation
333 New Hyde Park Road
Suite 100
New Hyde Park, New York 11042
Attention: Mr. Louis J. Petra
Telecopier: (516) 869-9001
</TABLE>
-10-
<PAGE> 1
EXHIBIT 5.1
October 2, 1995
Hills Stores Company
15 Dan Road
Canton, Massachusetts 02021
Gentlemen:
We are familiar with the Registration Statement on Form S-3 (the
"Registration Statement") filed today with the Securities and Exchange
Commission by Hills Stores Company a Delaware corporation (the "Company"). The
Registration Statement relates to the proposed public offering by certain
stockholders of the Company of an aggregate of 198,272 shares of the Company's
common stock, $.01 par value per share (the "Common Stock"), of which 198,026
shares are now issued and outstanding and 246 shares are issuable and to be
issued upon the exchange of 858 Series 1993 Stock Rights of the Company (the
"Stock Rights").
We are familiar with the Company's Restated Certificate of
Incorporation, as amended, its By-Laws, as amended, the records of all meetings
and consents of its Board of Directors and of its stockholders, and its stock
records. We have examined such other records and documents as we deemed
necessary or appropriate for purposes of rendering this opinion. In addition,
we have made such investigations of law, as we have deemed appropriate as a
basis for the opinions expressed below.
Based upon the foregoing, we are of the opinion that (a) the Company
has corporate power sufficient for the issuance in the manner set forth in the
S-3 Registration Statement of the shares of its Common Stock issued or to be
issued pursuant to the exchange of the Stock Rights and offered pursuant to the
S-3 Registration Statement, (b) the Company has taken all necessary corporate
action required to authorize the issuance and sale of such 198,272 shares, (c)
198,026 of such shares have been validly and legally issued and are fully paid
and non-assessable, and (d) when certificates for such shares have been duly
executed and countersigned, and delivered against due receipt of the Stock
rights, the remaining 246 of such shares will be validly and legally issued,
fully paid and non-assessable.
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Hills Stores Company on Form S-3 of our reports dated March 10, 1995, on our
audits of the consolidated financial statements and the financial statement
schedule of Hills Stores Company as of January 28, 1995 and January 29, 1994,
and for the year ended January 28, 1995, the seventeen week period ended
January 29, 1994, the thirty-five week period ended October 2, 1993 and the
year ended January 30, 1993, which reports are included in the Company's Annual
Report on Form 10-K. We also consent to the reference to our firm under the
caption "Experts".
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 1, 1995
