<PAGE> 1
As filed with the Securities and Exchange Commission on May ___, 1996
REGISTRATION NO. 333-
================================================================================
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)
-----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective, as determined by
market conditions.
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 a post-effective amendment filed 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>
<CAPTION>
Proposed
Title of each Proposed maximum
class of maximum aggregate Amount of
securities to Amount to be offering price offering registration
be registered registered per unit(1) price(1) fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common
Stock 925,000 $11.4375 $10,579,688 $3,649
- -----------------------------------------------------------------------------------------------------
<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 May 23, 1996, as reported on 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
925,000 SHARES OF COMMON STOCK
--------------------
The 925,000 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. 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 May 23, 1996, the closing price for
the Common Stock, as reported on the New York Stock Exchange, was $11.75 per
share.
--------------------
FOR A DESCRIPTION OF CERTAIN RISKS ASSOCIATED WITH THE
COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS"
BEGINNING ON PAGE 2.
--------------------
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 ________ __, 1996.
<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.
HIGH LEVERAGE; ABILITY TO SERVICE OUTSTANDING INDEBTEDNESS
The Company is highly leveraged. On April 19, 1996, the Company announced
that it completed the sale of $195 million principal amount of its 12 1/2%
Senior Notes due 2003 (the "New Senior Notes"). The primary use of proceeds from
the sale of the New Senior Notes was to redeem the 10.25% Senior Notes due 2003
of the Company (the "Old Senior Notes") pursuant to an offer by the Company to
redeem such Old Senior Notes. This offer resulted in the redemption of
$154,984,000 principal amount (over 98% of the amount outstanding) of the Old
Senior Notes. The Company announced on May 24, 1996 that it will call for
mandatory redemption all remaining Old Senior Notes at the indenture-specified
price of 104% of principal amount, plus accrued interest. As a result of these
transactions, in its second fiscal quarter the Company will recognize an
after-tax extraordinary loss of $1.5 million on the extinguishment of this debt.
The amount includes the premiums paid on the Old Senior Notes redeemed and the
write-off of related deferred financing costs. At February 3, 1996, on a pro
forma basis after giving effect to the recent offering of New Senior Notes and
the application of the net proceeds thereof, the Company's total debt (including
current maturities) would have been $344.7 million, its preferred stock would
have been $24.6 million and its total common shareholders' equity would have
been $251.1 million, resulting in a total capitalization of $620.4 million and
total debt as a percentage of total capitalization of 55.6%. The Company's
operating results have been and will continue to be affected by significant
fixed charges related to its indebtedness. The Company's fixed charges in fiscal
1995, on a pro forma basis after giving effect to such debt offering and the
application of the net proceeds thereof, would have exceeded its earnings in
that year by $16.3 million (such earnings include $45.5 million of change in
control costs).
The Company's ability to make scheduled payments of principal of, or to pay
the interest or other amounts (if any) on, or to refinance, its indebtedness
will depend on its future performance, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. The Company believes that amounts available under
the revolving credit facility with its senior lenders, together with cash from
operations, will enable the Company to fund its current liquidity and capital
expenditure requirements, including scheduled payments of interest on the Senior
Notes and other indebtedness of the Company. There can be no assurance that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available under the revolving credit facility in an
amount sufficient to enable the Company to service its indebtedness, including
the New Senior Notes, or make anticipated capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Financial Condition, Liquidity and Capital Resources" in the Annual
Report of the Company on Form 10-K for the fiscal year ended February 3, 1996.
Any or all of the restrictions, limitations or contingencies under the
revolving credit facility and the indenture for the New Senior Notes, as well
as the Company's leverage, could adversely affect the Company's ability to
obtain additional financing in the future, to make capital expenditures, to
effect store expansions, to make acquisitions, to take advantage of business
opportunities that may arise, and to withstand adverse general economic and
retailing industry conditions and increased competitive pressures. Retail
suppliers and their factors monitor carefully the financial performance of
retail companies such as the Company, and may reduce credit availability
quickly upon learning of actual or perceived deterioration in the financial
condition or results of operations of a retail company.
RECENT OPERATING RESULTS
Although Hills' net sales increased by 1.5% to $1.90 billion for the
fifty-three weeks ended February 3, 1996 from $1.87 billion for the fifty-two
weeks ended January 28, 1995, same store net sales, excluding the fifty-third
week of fiscal 1995, declined by 3.9% to $1.78 billion from $1.85 billion.
Operating earnings (before interest and taxes but including costs related to the
change in control) decreased by 70.5% for the same periods, to $31.2 million in
fiscal 1995 from $105.8 million in fiscal 1994. After eliminating the effects
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<PAGE> 4
of change in control payments in fiscal 1995 and a one-time pension gain of $4.5
million in fiscal 1994, operating earnings decreased by 24.3% for these periods,
to $76.7 million in fiscal 1995 from $101.3 million in fiscal 1994. On May 24,
1996, Hills announced its financial results for the first quarter of fiscal
1996, which ended on May 4. The Company reported a net loss of $14.7 million,
compared with a net loss of $4.3 million in the first quarter last year. The
net loss was $1.45 per share in this year's quarter compared with a $0.42 loss
per share in the first quarter last year. Net sales for the thirteen-week
period ended May 4, 1996 increased by 2.0% to $370.2 million from $362.9
million for the comparable period in fiscal 1995 and same store net sales
(which represent net sales for stores which reported sales throughout both
periods) decreased by 1.7% for those periods. Gross profit margin decreased to
$99.3 million from $101.3 million and declined as a percentage of sales to
26.8% from 27.9%. The margin rate decrease resulted primarily from competitive
pricing pressures across all lines of business, and also from soft sales of
apparel which shifted the sales mix more towards lower margin hardlines.
Selling and administrative expenses increased as a percentage of sales to
25.4% from 25.0%. This rate increase reflected the relatively flat sales in
existing stores and additional operating expenses from new stores opened during
mid-1995. This year's first quarter loss included a pre-tax, non-cash charge of
$11.7 million ($6.8 million after tax, or $0.67 per share) for the impairment
of long-lived assets. Net interest expense in the most recent quarter increased
to $13.3 million from $9.5 million last year, primarily due to the net effect
of lower interest income and increased borrowings under the Company's revolving
credit line. Earnings before interest, taxes, depreciation and amortization for
the most recent quarter decreased to $5.4 million compared with $10.7 million
in the first quarter last year.
The Company's charge for impairment of long-lived assets resulted from the
required adoption of the new Statement of Financial Accounting Standards No.
121: "Accounting for the Impairment of Long-Lived Assets." This non-cash charge
reduced the current tangible and intangible book value of certain
under-performing stores to an estimate of those assets' fair market value
pursuant to the provisions of the Standard.
Hills merchandising strategy emphasizes higher margin products located in
"headquarters" departments. These products consist of softlines and selected
hardlines. Softlines generally provide higher margins than hardlines. The
percentage of Hills' net sales represented by softlines has decreased, to 48.4%
in fiscal 1995 from 50.6% in fiscal 1994, and Hills expects that this percentage
may decline further in fiscal 1996. As a result, Hills' margins have decreased
and may continue to decrease in the foreseeable future. Hills has experienced
further pressure on its margins as a result of the consolidation of companies in
the discount retailing industry, as well as competitive pricing pressures from
market leaders. Any further decrease in Hills' margins could have a material
adverse effect on Hills' financial condition and results of operations.
Hills' quarterly and annual operating results have varied significantly in
the past, and may vary significantly in the future. In recent months, Hills and
other companies in the discount retailing industry have experienced significant
volatility in sales levels. Hills' operating results have also varied
historically due to a number of factors, including national and regional
economic conditions, Hills' ability to compete with national and regional
discount department store chains and specialty retailers, and Hills' ability to
finance its operations on terms favorable to Hills. Any unfavorable changes in
these or other factors could have a material adverse effect on Hills' financial
condition and results of operations.
COMPETITION
The discount general merchandise retail business is highly competitive.
Hills considers price, merchandise presentation, product selection, merchandise
quality and store location to be the most significant competitive factors. There
can be no assurance that Hills will be able to compete successfully with respect
to any of such factors. Hills' principal competitors are national and regional
discount department store chains such as Wal-Mart Stores, Inc., Kmart Corp. and
Target Stores (a subsidiary of Dayton Hudson Corp.), as well as specialty
retailers of apparel and toys, such as Toys "R" Us, Inc. Hills currently
competes against Wal-Mart in approximately two-thirds of its markets, and
expects this percentage to increase as a result of continuing expansion by
Wal-Mart. Certain of Hills' competitors, including Wal-Mart, Kmart and Target,
have greater financial and other resources than Hills and may be able to
initiate and withstand significant price decreases more effectively than Hills.
The discount general merchandise industry has been the subject of significant
consolidation during the past several years, and it is likely that this trend
will continue for the foreseeable future as a result of the overall weakness in
the retail market, continuing competitive pricing pressures from market leaders,
and national and regional economic conditions. Hills is not presently able to
predict what effect any further industry consolidation will have upon its
competitive position, and there can be no assurance that future acquisitions or
mergers in the industry will not have a material adverse effect upon Hills'
financial condition and results of operation.
CONTROL OF THE COMPANY
On July 5, 1995, following a proxy contest in connection with the annual
meeting of stockholders held on June 23, 1995, seven nominees of Dickstein
Partners Inc. ("Dickstein Partners") became directors of the Company, replacing
the former Board of Directors and effecting a change of control of the Company.
Since July 5, 1995, the Board of Directors of the Company has consisted entirely
of individuals who were nominated by Dickstein Partners or who were nominated by
the Board at a time when it was comprised entirely of
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<PAGE> 5
individuals nominated by Dickstein Partners. There can be no assurance that
these circumstances will not have an effect on Hills or on the market price of
the Common Stock. At March 29, 1996, Dickstein Partners and its affiliates
beneficially owned approximately 10.9% of the Company's outstanding voting
stock. The shares offered hereby are being offered by affiliates of Dickstein
Partners, and no assurance can be given that a sufficient number of shares will
be sold hereunder such that these circumstances mentioned above will not
continue to have an effect on Hills or on the market price of the Common Stock.
RECENT MANAGEMENT CHANGES
Following the 1995 Change in Control, the Company's President and Chief
Executive Officer, its Executive Vice President-Chief Financial Officer, its
Executive Vice President-Store Operations and its Executive Vice President-Human
Resources resigned. On July 6, 1995, the Company's former Executive Vice
President-General Merchandise Manager was hired as the Company's President and
acting Chief Executive Officer. On February 7, 1996, he resigned and Gregory K.
Raven was appointed as the Company's new President and Chief Executive Officer.
On February 12, 1996, the Treasurer of the Company resigned. C. Scott Litten was
appointed as the Executive Vice President-Chief Financial Officer on April 23,
1996. As of May 1, 1996, the Company had not appointed a Treasurer or Executive
Vice President-Store Operations. These management changes may have an ongoing
disruptive effect on the business and operations of the Company. The further
loss of the services of any of the Company's executive officers or other key
personnel could have a material adverse effect on the Company's financial
condition and results of operations. The Company's ability to manage its
business will require it to attract, motivate and retain additional skilled
managerial and marketing personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting,
motivating and retaining the personnel required to maintain and improve its
business and results of operations.
GEOGRAPHIC CONDITIONS; SEASONALITY
Substantially all of Hills' stores are located in the Mid-Western and
Mid-Atlantic regions of the United States. As a result, Hills' operations are
affected by local and regional economic, weather and other conditions, which are
beyond Hills' control. Adverse developments in those conditions could have a
material adverse effect on Hills' financial condition and results of operations.
Hills business is highly seasonal due to increased consumer buying for
back-to-school needs and Christmas. The second half of each year provides the
major portion of Hills' sales and operating earnings, both of which are
particularly concentrated in the Christmas selling season. As a result, Hills'
working capital requirements and cash flow vary substantially throughout the
year. Any substantial decrease in sales or profitability for the second half of
the fiscal year would have a material adverse effect on Hills' financial
condition and results of operations.
RESTRICTIONS IMPOSED UNDER OUTSTANDING INDEBTEDNESS
The Company's revolving credit facility 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 indentures between the Company and the
Trustees of the Senior Notes and the New Senior Notes contain certain covenants,
including, among other things, limitations on indebtedness, dividends, liens and
transactions with stockholders and affiliates of the Company. Although the
Company believes that its current operating plans will not be restricted by the
credit agreement or such indentures, changes in economic or business conditions,
results of
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<PAGE> 6
operations or other factors may in the future result in circumstances in which
such covenants may restrict the Company's plans or business operations.
ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS, BY-LAWS AND STOCK RIGHTS PLAN
Certain provisions of the Company's Certificate of Incorporation, By-Laws,
and a 1994 stockholders rights agreement, as amended, 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, additional 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
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. Hills' Common Stock, Senior Notes and
Series A Convertible Preferred Stock are listed on the New York Stock 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.
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<PAGE> 7
INFORMATION INCORPORATED BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus:
(a) the Annual Report of Hills Stores Company on Form 10-K for the fiscal
year ended February 3, 1996;
(b) the Current Report of Hills Stores Company on Form 8-K dated April 5,
1996;
(c) 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 Reports on Form 8-K dated August
23, 1994 and October 18, 1995.
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. 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.
BUSINESS
The Company is a leading regional discount retailer offering a broad range
of brand name and other first quality general merchandise. 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. The
Company operates 164 stores in 12 Mid-Western and Mid-Atlantic states.
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<PAGE> 8
SELLING STOCKHOLDERS
The following table provides certain information with respect to the Shares
held by the Selling Stockholders as of the date of this Prospectus.
<TABLE>
<CAPTION>
Shares of Common Stock to be
Number of Shares Beneficially Owned After the Offering
Shares of Common Stock of Common Stock -----------------------------------------
Beneficially Owned Which May Be Percent of
Name Before the Offering Offered Hereunder Amount Percent Voting Stock*
- ---------------------------- ---------------------- ----------------- ------ ------- ------------
<S> <C> <C> <C> <C> <C>
Dickstein & Co., L.P. 758,456 593,756 164,700 1.65% 1.47%
Dickstein Focus Fund L.P. 86,095 66,595 19,500 .19% .17%
Dickstein International Limited 364,619 264,649 99,970 1.00% .89%
</TABLE>
- ---------------
* Based on 10,189,355 shares of Common Stock and 1,016,096 shares of Series A
Convertible Preferred Stock, outstanding on April 26, 1996. The two classes of
stock have co-extensive voting rights.
- ---------------------
Mark Dickstein has been a director of Hills since July 5, 1995 and was the
Chairman of the Board of Directors from July 1995 to February 1996. He serves as
Chairman of the Compensation Committee and the Executive Committee of the Board
of Directors of Hills. Mr. Dickstein is the sole shareholder, sole Director and
President of Dickstein Partners Inc. Dickstein Partners Inc. serves as the
general partner of Dickstein Partners, L.P., which serves as the sole general
partner of Dickstein & Co., L.P. and Dickstein Focus Fund L.P. In addition,
Dickstein Partners Inc. is the advisor for Dickstein International Limited and
makes all investment and voting decisions for that entity. Except as otherwise
noted herein, Mr. Dickstein has not held any position, office, or other material
relationship with Hills or any of its predecessors or affiliates within the past
three years other than as a result of the holding of pre-petition trade claims
and the ownership of shares of its common and preferred stock. Alan S. Cooper,
Vice President-General Counsel of Dickstein Partners Inc., has been a director
of Hills since December 1995. Mr. Dickstein and Mr. Cooper each hold options to
acquire 4,000 shares of Common Stock awarded pursuant to the Company's 1996
Directors Stock Option Plan for Non-Employee Directors, which Plan is subject to
approval of the shareholders.
In August 1994, Dickstein Partners Inc. commenced a stockholder consent
solicitation to replace four members of the Company's then Board of Directors
with four Dickstein Partners Inc. nominees. In September 1994, the Company and
Dickstein Partners Inc. entered into a settlement agreement whereby, among other
things, Dickstein Partners Inc. agreed to cease its consent solicitation and the
Company agreed to make a self-tender offer for 3,000,000 shares of its Common
Stock at a price of $25 per share, which tender offer was consummated in
February 1995. The Company reimbursed Dickstein Partners Inc. and its affiliates
for $600,000 of expenses incurred in connection with the consent solicitation.
At the June 1995 Annual Meeting, following a proxy contest, the nominees of
Dickstein Partners Inc. (the "Dickstein Nominees") were elected to the Board of
Directors. The Company reimbursed Dickstein Partners for, or directly paid,
approximately $1.9 million in third-party fees and expenses incurred or
committed to by Dickstein Partners in connection with the proxy contest and the
related acquisition proposal of Dickstein Partners. This amount includes $1.0
million paid by the Company to NatWest Bank, N.A.("NatWest"), the financial
advisor of Dickstein Partners, in respect of NatWest's proposal to refinance the
indebtedness of the Company accelerated as a result of the election of the
Dickstein Nominees. In its proxy solicitation materials, Dickstein Partners
declared its intention to seek reimbursement or payment of such fees and
expenses, upon the election of the Dickstein Nominees.
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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 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 schedule for
the year ended February 3, 1996, incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended February 3,
1996, have been audited by Deloitte & Touche LLP, 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.
The financial statements and the related financial statement schedules for
the year ended January 28, 1995, the seventeen weeks ended January 29, 1994 and
the thirty-five weeks ended October 2, 1993, incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
February 3, 1996, 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
8
<PAGE> 10
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
As previously reported by the Company in the Current Report on Form 8-K
dated November 8, 1995, Deloitte & Touche LLP have replaced Coopers & Lybrand
L.L.P. ("Coopers & Lybrand") as the Company's auditors. The Company has agreed
to hold Coopers & Lybrand harmless against legal costs and expenses incurred in
a successful defense of a legal action or proceeding related to the inclusion
of its report in this registration statement, whereby Coopers & Lybrand is not
found culpable nor pays any part of the Plaintiff's damages, legal costs or
expenses as a result of a judgment or a settlement of a claim against it. In
addition, the Company and the Selling Shareholders have released Coopers &
Lybrand from any and all claims, demands and liabilities whatsoever on account
of professional services that Coopers & Lybrand performed, as independent
auditors, for either of or both of Hills Stores Company and Hills Department
Store Company through November 8, 1995. The Company has further agreed to
reimburse Coopers & Lybrand for its professional time and expenses, including
reasonable attorney's fees, incurred in responding to subpoena or other legal
process to produce its documents relating to the Company in a legal action or
proceeding in which Coopers & Lybrand is not a party.
9
<PAGE> 11
================================================================================
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 Stockholder. 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.
-----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors............................. 2
The Company.............................. 5
Available Information.................... 5
Incorporation of Certain
Documents by Reference................. 6
Use of Proceeds.......................... 6
Business................................. 6
Selling Stockholders..................... 7
Plan of Distribution..................... 8
Legal Matters............................ 8
Experts.................................. 8
</TABLE>
================================================================================
HILLS STORES COMPANY
925,000 Shares
of Common Stock
(par value $.01 per share)
---------------------
PROSPECTUS
---------------------
================================================================================
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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:
<TABLE>
<CAPTION>
Selling
Company Stockholders
------- ------------
<S> <C> <C>
Registration fee (Securities and
Exchange Commission) $ 3,649 $-0-
Legal fees and expenses* $ 10,000 $-0-
Accounting fees and expenses* $ 5,000 $-0-
Total* $ 18,649 $-0-
====
</TABLE>
- ---------------
* Estimated
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
II-I
<PAGE> 13
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.
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)
5.1 Opinion of Foley, Hoag & Eliot (to be filed with effective
date amendment)
10.1 Registration Rights Agreement dated May 14, 1996 by and among
the Company and Dickstein & Co., L.P., Dickstein Focus Fund
L.P. and Dickstein International Limited
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Foley, Hoag & Eliot (contained in Exhibit 5.1)
24.1 Power of Attorney (included in the signature page hereof)
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
II-II
<PAGE> 14
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 a 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 aggregate offering price set forth
in the "Calculation of Registration Fee" table upon effectiveness hereof;
(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> 15
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 MAY 16, 1996.
HILLS STORES COMPANY
By: /s/ William K. Friend
---------------------
William K. Friend
Vice President-Secretary
and Corporate Counsel
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Gregory K. Raven, William K. Friend and Joseph E.
Andres, 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.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Chaim Y. Edelstein Chairman of the May 16 , 1996
- --------------------------- Board of Directors ----------
Chaim Y. Edelstein
/s/ Gregory K. Raven Director, President and May 16 , 1996
- --------------------------- Chief Executive Officer ----------
Gregory K. Raven (Principal Executive Officer)
/s/ Stanton Bluestone Director May 16 , 1996
- --------------------------- ----------
Stanton Bluestone
</TABLE>
II-IV
<PAGE> 16
<TABLE>
<S> <C> <C>
/s/ John W. Burden, III Director May 16 , 1996
- --------------------------- ----------
John W. Burden, III
/s/ Alan Cooper Director May 16 , 1996
- --------------------------- ----------
Alan Cooper
/s/ Mark Dickstein Director May 16 , 1996
- --------------------------- ----------
Mark Dickstein
/s/ Samuel L. Katz Director May 16 , 1996
- --------------------------- ----------
Samuel L. Katz
/s/ Kim D. Ahlholm Vice President - Controller
- --------------------------- (Principal Accounting Officer) May 16 , 1996
Kim D. Ahlholm ----------
/s/ C. Scott Litten Executive Vice President -
- --------------------------- Chief Financial Officer May 16 , 1996
C. Scott Litten (Principal Financial Officer) ----------
</TABLE>
II-V
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS: PAGE
- --------- ----
<S> <C> <C>
5.1 Opinion of Foley, Hoag & Eliot (to be filed with effective
date amendment)
10.1 Registration Rights Agreement dated May 14, 1996 by and among
the Company and Dickstein & Co., L.P., Dickstein Focus Fund
L.P. and Dickstein International Limited
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Foley, Hoag & Eliot (contained in Exhibit 5.1)
24.1 Power of Attorney (included in the signature page hereof)
</TABLE>
II-VI
<PAGE> 1
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made and entered into as of this
14th day of May, 1996, by and among Hills Stores Company, a Delaware corporation
(the "Company"), and the investors listed on Schedule I hereto (the
"Investors").
WHEREAS, the Investors as a group beneficially own in excess of ten
percent (10%) of the Company's outstanding Common Stock, par value $.01 per
share (the "Common Stock") and desire to sell all or a lesser amount of the
shares of Common Stock held by the Investors pursuant to not more than three
registration statements to be filed by the Company with the Securities and
Exchange Commission.
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) "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.
(d) "Person" shall mean any natural person, corporation, business
trust, joint venture, association, company or partnership.
(e) "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.
(f) "Registrable Securities" shall mean the Common Stock owned by
the Investors, as shown on Schedule I hereto, 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.
2. Registration Procedures. The Company shall:
(a)(i) As soon as practicable and provided the Company is eligible to
do so, 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
<PAGE> 2
registration and sale of 925,000 shares of the Registrable
Securities by the Holders from time to time (the "Registration
Statement").
(ii) Upon demand, and in accordance with Section 9 hereof, prepare
and file with the SEC not more than two additional registration
statements (also, "Registration Statements") for Registrable
Securities.
(b) Use its best efforts, subject to receipt of necessary
information from the Holders, to cause each 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 each
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)
two years from the date on which the Registration Statement
becomes effective, subject to extension pursuant to the last
sentence of Section 3.
(d)(i) 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.
(ii) Furnish to the New York Stock Exchange such number of copies of
the prospectus and, if applicable, the prospectus supplement(s),
as it may require for posting or other availability in its
reference library.
(e) Use its best efforts to register and qualify the securities
covered by each 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 qualification 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 particular Registrable Securities being sold by each such
selling Holder and included in such registration, to the extent
required by such jurisdiction.
2
<PAGE> 3
(f) Notify each Holder of Registrable Securities covered by each
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 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.
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 any Registrable Securities included in a
Registration Statement 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
such a 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 two-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 each 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
3
<PAGE> 4
connection with complying with state securities or Blue Sky laws, fees of the
National 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
particular Registrable Securities shall be borne by the Holders selling such
securities.
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 or delayed) 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 satisfactory to the
indemnified party and shall pay as incurred the fees and
disbursements of such counsel related to the action; provided
that, (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and the indemnified party shall have
reasonably concluded that there may be legal defenses available
to it and or other indemnified parties which are different from
or additional to those available to the indemnifying party or
that representation of both parties by the same counsel would
5
<PAGE> 6
be inappropriate due to actual or potential differing interests
between them, 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 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 or insufficient to hold harmless 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
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<PAGE> 7
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 or pursuant to Rule 144 promulgated under the 1933 Act) such
shares of Registrable Securities, provided, however, that the transferee
acquires not less than 50,000 shares of Registrable Securities and provided,
further, that the Company is given written 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. Notwithstanding the foregoing, the Company shall not be obligated to
prepare and file more than three Registration Statement, as provided in Section
2 hereof.
9. Upon demand on or before May 13, 1999 by a Holder or Holders of not
less than 50,000 shares of Registrable Securities for the registration of at
least 50,000 shares of Registrable Securities, the Company agrees to prepare and
file a second registration statement, or a third registration statement if the
second one has been theretofore filed, in addition to the Registration Statement
referred to in Section 2(a)(i) hereof, as soon as reasonably practicable after
the availability of its appropriate audited financial statements and notice to
and opportunity of other Holders, if any, to have their Registrable Securities
included in such registration. All the terms and provisions hereof referring to
a "Registration Statement" other than Section 2(a)(i) shall apply to each of
such additional registration statements.
If such demand is made for the additional registration statement, the
Company will give written notice thereof to all other Holder(s) of outstanding
Registrable Securities at least 15 days before the filing with the SEC of such
Registration Statement, which notice shall set forth the intended method of
disposition of the securities proposed to be registered by the Holder(s) making
the demand. The notice shall offer to include in such filing the amount of
Registrable Securities as such other Holder(s) may request. Each Holder of any
such Registrable Securities desiring to have Registrable Securities registered
under this subsection shall (i) advise the Company in writing within 10 days
after the date of receipt of such offer from the Company, setting forth the
amount of Registrable Securities for which registration is requested and (ii)
deliver to the Company a letter from counsel to such holder to the effect that
registration under the Securities Act is or may be required for the sale of
Registrable Securities.
10. 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
7
<PAGE> 8
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.
11. 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 with 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:
if to the Company: Hills Stores Company
15 Dan Road
Canton, MA 02021
Attention: Vice President-Secretary
Telecopier: (617) 821-6966
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
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<PAGE> 9
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.
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: /s/ Gregory K. Raven
-----------------------------------------
Its President and Chief Executive Officer
THE INVESTORS:
DICKSTEIN & CO., L.P.
By: Dickstein Partners L.P.
By: Dickstein Partners Inc.
By: /s/ Alan S. Cooper
-----------------------------------------
Its Vice President
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<PAGE> 10
DICKSTEIN FOCUS FUND L.P.
By: Dickstein Partners L.P.
By: Dickstein Partners Inc.
By: /s/ Alan S. Cooper
-----------------------------------------
Its Vice President
DICKSTEIN INTERNATIONAL LIMITED
By: Dickstein Partners Inc., its agent
[SEAL]
By: /s/ Alan S. Cooper
-----------------------------------------
Its Vice President
10
<PAGE> 11
SCHEDULE I
LIST OF INVESTORS
<TABLE>
<CAPTION>
Investors Number of Registrable Securities
- --------- --------------------------------
<S> <C>
Dickstein & Co., L.P. 758,456
9 West 57th Street
Suite 4630
New York, NY 10019
Telecopier: 212-754-5825
Dickstein Focus Fund L.P. 86,095
9 West 57th Street
Suite 4630
New York, NY 10019
Telecopier: 212-754-5825
Dickstein International Limited 364,619
129 Front Street
Hamilton HM12 Bermuda
</TABLE>
11
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Hills Stores Company on Form S-3 (File No. 333- ) of our report dated
March 10, 1995 on our audits of the Consolidated Financial Statements and
Financial Statement Schedules 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 and the thirty-five week period ended
October 2, 1993, which report is included in the Hills Stores Company Annual
Report on Form 10-K for the year ended February 3, 1996. We also consent to
the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 24, 1996
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Hills Stores Company on Form S-3 of our reports dated March 14, 1996 (April
5, 1996 with respect to the fifth paragraph of Note 8), included in the Annual
Report on Form 10-K of Hills Stores Company for the year ended February 3, 1996
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Boston, Massachusetts
May 28, 1996
