HILLS STORES CO /DE/
SC 13D/A, 1996-05-31
DEPARTMENT STORES
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                Amendment No. 21
                                       to
                                  SCHEDULE 13D


                 Under the Securities Exchange Act of 1934


                              Hills Stores Company
                                (Name of Issuer)


                          Common Stock, $.01 par value
                         (Title of Class of Securities)



                                431692102
                                 (CUSIP Number)



                              David P. Levin, Esq.
             Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
                                919 Third Avenue
                            New York, New York 10022
                                 (212) 715-9100
                  (Name, Address and Telephone Number of
                   Person Authorized to Receive Notices
                               and Communications)



                   (Date of Event which Requires Filing
                            of this Statement)


If the filing person has previously  filed a statement on Schedule 13G to report
the  acquisition  which is the subject of this  Schedule 13D, and is filing this
schedule because of Rule 13d- 1(b)(3) or (4), check the following box: /_/


Check the following box if a fee is being paid with this
statement:  /_/

                                 Page 1 of 17 pages

<PAGE>


<PAGE>



                        Amendment No. 21 to Schedule 13D

          This Statement  amends the Schedule 13D, dated May 6, 1994, as amended
on July 22, 1994, July 28, 1994,  August 11, 1994,  August 17, 1994,  August 30,
1994,  September 21, 1994, September 26, 1994, February 23, 1995, March 7, 1995,
April 27, 1995,  May 4, 1995,  May 5, 1995,  May 12, 1995, May 17, 1995, May 24,
1995,  June 6, 1995,  June 13, 1995,  June 15, 1995, July 20, 1995 and March 21,
1996  (the  "Schedule  13D"),   filed  by  Dickstein  &  Co.,  L.P.,   Dickstein
International  Limited,  Dickstein Focus Fund L.P.,  Dickstein  Partners,  L.P.,
Dickstein  Partners  Inc. and Mark  Dickstein  with respect to the Common Stock,
$.01 par value  (the  "Common  Stock"),  of Hills  Stores  Company,  a  Delaware
corporation (the "Company"). Notwithstanding this Amendment No. 21, the Schedule
13D speaks as of its date.  Capitalized  terms used without  definition have the
meanings ascribed to them in the Schedule 13D.

I.  Item 4 of the  Schedule  13D,  "Purpose of the  Transaction,"  is amended by
    adding the following:

     "On May 28, 1996,  the Company filed a registration  statement  pursuant to
the Securities Act of 1933 covering 925,000 shares of Common Stock  beneficially
owned by the Reporting Persons."


II. Item 6 of the Schedule  13D,  "Contracts,  Arrangements,  Understandings  or
    Relationships  With  Respect to  Securities  of the  Issuer,"  is amended by
    adding the following:

     "The  Company and certain of the  Reporting  Persons  have  entered  into a
Registration Rights Agreement,  pursuant to which the Company agreed to register
shares  of  Common  Stock  owned  by  the  Reporting  Persons.  A  copy  of  the
Registration  Rights Agreement is annexed as Exhibit 23 and incorporated  herein
by reference."

II. Item 7 of the Schedule  13D,  "Material to be Filed as Exhibits," is amended
    by adding the following Exhibit:

     "Exhibit 23 --    Registration  Rights Agreement,  made as of May 14, 1996,
                       among  Hills  Stores  Company,  Dickstein  &  Co.,  L.P.,
                       Dickstein  Focus Fund L.P.  and  Dickstein  International
                       Limited"



                                       -2-

<PAGE>


                                    SIGNATURE

           After reasonable  inquiry and to the best knowledge and belief of the
undersigned,  the  undersigned  certifies that the information set forth in this
Statement is true, complete and correct.

Date:  May 30, 1996

                             DICKSTEIN & CO., L.P.

                             By: Alan  Cooper,  as Vice  President  of Dickstein
                             Partners  Inc.,  the general  partner of  Dickstein
                             Partners,  L.P., the general partner of Dickstein &
                             Co., L.P.

                                 /s/ Alan Cooper
                                Name: Alan Cooper

                             DICKSTEIN INTERNATIONAL LIMITED

                             By: Alan  Cooper,  as Vice  President  of Dickstein
                             Partners Inc., the agent of Dickstein International
                             Limited

                                 /s/ Alan Cooper
                                Name: Alan Cooper

                             DICKSTEIN FOCUS FUND L.P.

                             By: Alan  Cooper,  as Vice  President  of Dickstein
                             Partners  Inc.,  the general  partner of  Dickstein
                             Partners,  L.P.,  the general  partner of Dickstein
                             Focus Fund L.P.

                                 /s/ Alan Cooper
                                Name: Alan Cooper

                             DICKSTEIN PARTNERS, L.P.

                             By: Alan  Cooper,  as Vice  President  of Dickstein
                             Partners  Inc.,  the general  partner of  Dickstein
                             Partners, L.P.

                                 /s/ Alan Cooper
                                Name: Alan Cooper

                                       -3-

<PAGE>


                             DICKSTEIN PARTNERS INC.

                             By:  Alan Cooper, as Vice President


                                 /s/ Alan Cooper
                                Name: Alan Cooper


                               /s/ Mark Dickstein
                             Name:   Mark Dickstein
















                                       -4-




                                                                      Exhibit 23

                          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

                                       -1-
<PAGE>



               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
                  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.



                                       -2-
<PAGE>




              (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.

          (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-
<PAGE>



          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 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.

                                       -4-
<PAGE>



          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



                                       -5-
<PAGE>


<PAGE>



               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.

          (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


                                       -6-
<PAGE>




               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 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



                                       -7-
<PAGE>



               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


                                       -8-
<PAGE>




               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 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 Statements, 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


                                       -9-
<PAGE>



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 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




                                      -10-
<PAGE>




               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  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.



                                      -11-
<PAGE>




          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



                              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




                                      -12-
<PAGE>



                                   SCHEDULE I

                                LIST OF INVESTORS



Investors                     Number of Registrable Securities


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










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