<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996
REGISTRATION NO. 333-05003
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933>
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HILLS STORES COMPANY
HILLS DEPARTMENT STORE COMPANY
CANTON ADVERTISING, INC.
CORPORATE VISION, INC.
C.R.H. INTERNATIONAL, INC.
HDS TRANSPORT, INC.
HILLS DISTRIBUTING COMPANY
(Exact Names of Registrants as Specified in Their Charters)
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DELAWARE 5311 31-1153510
DELAWARE 5311 04-3201920
MASSACHUSETTS 7311 31-1110263
MASSACHUSETTS 5311 04-3033031
OHIO 5311 31-0843874
OHIO 4730 31-0799137
DELAWARE 5311 04-3078935
(States or Other Jurisdictions of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Numbers) Identification Numbers)
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15 DAN ROAD
CANTON, MASSACHUSETTS 02021
(617) 821-1000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants' 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)
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COPY TO:
BARRY B. WHITE, ESQ.
FOLEY, HOAG & ELIOT LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
(617) 832-1000
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Approximate date of commencement of proposed sale to the public: As
promptly as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, check the following box. /X/
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A>
MAY DETERMINE.
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HILLS STORES COMPANY
HILLS DEPARTMENT STORE COMPANY
CANTON ADVERTISING, INC.
CORPORATE VISION, INC.
C.R.H. INTERNATIONAL, INC.
HDS TRANSPORT, INC.
HILLS DISTRIBUTING COMPANY
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K
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FORM S-4
ITEM NO. LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Available Information; Information Incorporated by
Pages of Prospectus Reference; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Prospectus Summary; Risk Factors; The Company;
Fixed Charges and Other Information Selected Consolidated Financial and Operating Data
4. Terms of the Transaction Outside Front Cover Page; Prospectus Summary; The
Exchange Offer; Description of Series B Notes;
Certain Federal Income Tax Considerations
5. Pro Forma Financial Information [Not Applicable]
6. Material Contacts with the Company [Not Applicable]
Being Acquired
7. Additional Information Required for [Not Applicable]
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on [Not Applicable]
Indemnification for Securities Act
Liabilities
10. Information with Respect to S-3 Prospectus Summary; Risk Factors; The Company;
Registrants Selected Consolidated Financial and Operating Data
11. Incorporation of Certain Information by Information Incorporated by Reference
Reference
12. Information with Respect to S-2 or S-3 [Not Applicable]
Registrants
13. Incorporation of Certain Information by [Not Applicable]
Reference
14. Information with Respect to Registrants [Not Applicable]
Other than S-3 or S-2 Registrants
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(i)
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FORM S-4
ITEM NO. LOCATION IN PROSPECTUS
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15. Information with Respect to S-3 [Not Applicable]
Companies
16. Information with Respect to S-2 or S-3 [Not Applicable]
Companies
17. Information with Respect to Companies [Not Applicable]
Other than S-2 or S-3 Companies
18. Information if Proxies, Consents or [Not Applicable]
Authorizations are to be Solicited
19. Information if Proxies, Consents or [Not Applicable]
Authorizations are not to be Solicited
or in an Exchange Offer
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(ii)
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE ISSUED NOR MAY
OFFERS TO EXCHANGE BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO ISSUE OR THE
SOLICITATION OF AN OFFER TO EXCHANGE NOR SHALL THERE BE ANY ISSUANCE OR EXCHANGE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 13, 1996.
PROSPECTUS
HILLS STORES COMPANY
OFFER TO EXCHANGE
12 1/2% SENIOR NOTES DUE 2003, SERIES B
FOR
12 1/2% SENIOR NOTES DUE 2003
Hills Stores Company (the "Company" and, together with its wholly-owned
subsidiaries Hills Department Store Company, Canton Advertising, Inc., Corporate
Vision, Inc., C.R.H. International, Inc., HDS Transport, Inc., and Hills
Distributing Company, "Hills") hereby offers (the "Exchange Offer"), upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of its 12 1/2% Senior Notes due 2003, Series B ("Series
B Notes"), for each $1,000 principal amount of its outstanding 12 1/2% Senior
Notes due 2003 ("Series A Notes"), of which $195,000,000 in aggregate principal
amount are outstanding as of the date hereof. See "The Exchange Offer."
The Exchange Offer has been registered under the Securities Act of 1933, as
amended (the "Securities Act"). The terms of the Series B Notes (including the
terms of the guarantees thereof by each of the subsidiaries of the Company) will
be identical to those of the Series A Notes, except that the Series B Notes will
not bear transfer restrictive legends. The Series A Notes were sold to certain
qualified institutional buyers on April 19, 1996 in transactions not registered
under the Securities Act in reliance upon Rule 144A under the Securities Act.
SERIES A NOTES THAT ARE NOT TENDERED OR ARE TENDERED BUT NOT ACCEPTED WILL,
FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, REMAIN RESTRICTED SECURITIES AND
MAY NOT BE REOFFERED, RESOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER
THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT IS AVAILABLE.
Series B Notes will evidence the same debt as the Series A Notes that they
replace and will be issued under, and will be entitled to the benefits of, the
indenture dated as of April 19, 1996 governing the Series A Notes and the Series
B Notes (the "Indenture"). Series B Notes will bear interest from July 1, 1996
(the most recent date as of which interest will not have been paid on the Series
A Notes as of the date of issuance of the Series B Notes), and holders whose
Series A Notes are accepted for exchange will be deemed to have waived the right
to receive any interest accrued on the Series A Notes on or after July 1, 1996.
See "Description of Series B Notes."
THE EXCHANGE OFFER WILL EXPIRE AT 5 P.M., NEW YORK CITY TIME, ON ,
1996 UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (as extended, the
"Expiration Time"). Subject to the conditions described herein and in the Letter
of Transmittal, the Company will accept for exchange any and all validly
tendered Series A Notes not withdrawn prior to the Expiration Time. Tenders of
Series A Notes may be withdrawn at any time prior to the Expiration Time. Series
A Notes may be tendered only in integral multiples of $1,000. See "The Exchange
Offer."
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Series B Notes
received in exchange for Series A Notes that were acquired by such broker-dealer
as a result of market-making or other trading activities. The Company has
agreed that for a period of one year from the date of this Prospectus, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH THE EXCHANGE OFFER AND AN INVESTMENT IN SERIES B NOTES, SEE "RISK FACTORS"
ON PAGE 10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996
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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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copies may be obtained (at prescribed rates) at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and the Commission's Regional Offices at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Reports and other information
concerning the Company also may be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a Registration Statement on Form S-4
(the "Registration Statement") filed by the Company and the Guarantors (as
defined hereinafter) with the Commission under the Securities Act. This
Prospectus does not contain all of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and
related exhibits and schedules for further information with respect to the
Company, the Guarantors and the Series B Notes. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
such instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in all respects by such reference.
The Company is required under the Indenture to furnish certain documents
and information to holders of Series B Notes. See "Description of Series B
Notes--Certain Covenants--Reports."
INFORMATION INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference: (1) the
Company's Annual Report on Form 10-K for the fiscal year ended February 3, 1996
(the "Form 10-K"); (2) the Company's Current Report on Form 8-K dated April 5,
1996; (3) the Company's definitive Proxy Statement dated May 10, 1996; and (4)
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended May 4,
1996 (the "Form 10-Q"). All reports and other 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 made
hereby shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
herein by reference modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.
The financial statements contained in the foregoing reports and documents
do not contain separate financial statements of the Guarantors because (1) the
Guarantors constitute all of the Company's direct and indirect subsidiaries,
(2) they have fully and unconditionally guaranteed the Series B Notes on a
joint and several basis, (3) their aggregate assets, liabilities, earnings and
equity are substantiontially equivalent to those of the Company on a
consolidated basis, and (4) separate financial statements are not deemed to be
material to investors.
ANY PERSON TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED MAY OBTAIN,
WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS
(OTHER THAN EXHIBITS EXPRESSLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
REQUESTS FOR SUCH DOCUMENTS SHOULD BE MADE IN WRITING TO WILLIAM K. FRIEND, VICE
PRESIDENT-SECRETARY AND CORPORATE COUNSEL, HILLS STORES COMPANY, 15 DAN ROAD,
CANTON, MASSACHUSETTS 02021, OR BY TELEPHONE TO MR. FRIEND AT TELEPHONE NUMBER
(617) 821-1000.
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The Series B Notes will be available initially only in book-entry form. The
Company expects that all Series B Notes issued pursuant to this Exchange Offer
will be issued in the form of a fully registered global note (the "Global Note")
that will be deposited with, or on behalf of, The Depositary Trust Company (the
"Depositary") and registered in the name of the Depositary or in the name of
Cede & Co., as nominee of the Depositary. Beneficial interests in the Global
Note representing the Series B Notes will be shown on, and transfers thereof
will be effected through, records maintained by the Depositary and its
participants. After the initial issuance of the Global Note, Series B Notes in
certificated form will be issued in exchange for the Global Note only as set
forth in the Indenture. See "Description of Series B Notes--Book Entry, Delivery
and Form."
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
found elsewhere in this Prospectus and documents incorporated by reference
herein.
THE COMPANY
Hills is a leading regional discount retailer offering a broad range of
brand name and other first-quality general merchandise. Hills 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 everyday
low prices, depth and breadth of products in selected merchandise categories,
remodeled facilities and strict operating controls. Hills operates 164 stores in
12 Mid-Western and Mid-Atlantic states.
The Company's predecessor and five of the predecessor's subsidiaries
(including the Company, which was then the principal operating company) filed
for protection under Chapter 11 of the United States Bankruptcy Code in February
1991. The bankruptcy reorganization was completed in October 1993. Pursuant to
the bankruptcy plan of reorganization, the predecessor company was dissolved and
the assets of the Company were transferred to Hills Department Store Company
("HDSC"), a newly formed subsidiary of the Company. The Company became a holding
company at that time, and its operations are currently conducted solely through
HDSC.
On July 5, 1995, following a proxy contest in connection with the annual
meeting of stockholders of the Company held on June 23, 1995, seven nominees of
Dickstein Partners Inc. ("Dickstein Partners") became directors of the Company,
replacing the former Board of Directors. The executive officers of the Company
resigned following the election of the new Board. As a result of the change in
control effected by the election of the new Board, the Company became obligated
to offer to redeem (the "Redemption Offer") all of its outstanding 10.25% Senior
Notes due 2003 (the "1993 Notes") at a redemption price equal to 101% of the
principal amount thereof. The Company subsequently obtained the consent of the
holders of the 1993 Notes to defer its obligation to initiate the Redemption
Offer for the 1993 Notes until April 1996.
In April 1996, the Company offered and sold the Series A Notes in order to
finance the redemption of 1993 Notes tendered pursuant to the Redemption Offer.
The Company made the Redemption Offer in April and May 1996, and in connection
therewith redeemed $154,984,000 in aggregate principal amount of the 1993 Notes
for an aggregate redemption price of $158,801,086 consisting of principal,
premium and accrued interest. In May 1996, the Company announced that, in
accordance with the terms of the indenture governing the 1993 Notes (the "1993
Note Indenture"), it would (i) effect a mandatory redemption on July 1, 1996,
at a redemption price equal to 104% of principal amount plus accrued interest,
of all outstanding 1993 Notes not tendered pursuant to the Redemption Offer and
(ii) deposit in trust with Fleet National Bank, as trustee under the 1993 Note
Indenture, funds sufficient to redeem upon issuance, at a redemption price equal
to 104% of principal amount plus accrued interest, approximately $2.5 million of
1993 Notes remaining subject to issuance under the Company's plan of
reorganization relating to its emergence from bankruptcy. Upon the completion of
these and certain related actions, the 1993 Note Indenture shall cease to be of
further effect (except as to rights of registration of transfer or exchange of
1993 Notes expressly provided for and rights to receive payments of principal
thereof and premium and interest thereon). See "Description of Other
Indebtedness--1993 Notes."
The Series B Notes are being offered hereby in order to satisfy obligations
of the Company under the registration rights agreement dated as of April 19,
1996 entered into in connection with the issuance and sale of the Series A Notes
(the "Registration Rights Agreement").
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THE EXCHANGE OFFER
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Exchange Offer . . . . . . . . . . The Company is offering to exchange $1,000 principal amount of Series B Notes for each $1,000
principal amount of Series A Notes that are properly tendered and accepted. The Company will
issue Series B Notes on the earliest practicable date following the Expiration Time. As of
the date of this Prospectus, an aggregate of $195,000,000 in principal amount of Series A
Notes are outstanding. See "The Exchange Offer."
The terms of the Series B Notes (including the terms of the guarantees thereof by each of the
Guarantors) will be identical to those of the Series A Notes, except that the Exchange Offer
has been registered under the Securities Act and therefore Series B Notes will not bear
transfer restrictive legends.
Based on interpretations by the staff of the Commission set forth in no-action letters issued
to third parties, the Company believes that a holder (other than (i) a broker-dealer who
purchased Series A Notes directly from the Company for resale pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) that exchanges Series A Notes for
Series B Notes in the ordinary course of business and that is not engaged in, does not intend
to engage in, and had no arrangement or understanding with any person to engage in a
distribution of Series B Notes, will be allowed to resell Series B Notes to the public without
compliance with the registration and prospectus delivery provisions of the Securities Act.
Holders of Series A Notes wishing to accept the Exchange Offer must represent to the Company
that such conditions have been met. Each broker-dealer that receives Series B Notes for its
own account in exchange for Series A Notes that were acquired by such broker-dealer as a
result of market-making or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of the Series B Notes.
Expiration Time . . . . . . . . . . The Exchange Offer will expire at 5 P.M., New York City time, on , 1996, unless the
Exchange Offer is extended by the Company in its sole discretion, in which case the term
"Expiration Time" shall mean the latest date and time to which the Exchange Offer is extended.
Accrued Interest on Series B Notes
and Series A Notes . . . . . . . Series B Notes will bear interest from July 1, 1996, the most recent date as of which interest
will not have been paid on the Series A Notes as of the Expiration Time. Holders whose
Series A Notes are accepted for exchange will be deemed to have waived the right to receive
any interest accrued on the Series A Notes on or after July 1, 1996.
Procedures for Tendering
Series A Notes . . . . . . . . . Each holder of Series A Notes wishing to accept the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Series A Notes and any other required documentation to
Fleet National Bank, as exchange agent (the "Exchange Agent"), at the address set forth
herein. By executing the Letter of Transmittal, a holder of Series A Notes will represent and
agree that, among other things, (i) Series B Notes to be
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4
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acquired by the holder in the Exchange Offer are being acquired in the ordinary course of
business of the holder, (ii) the holder is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company, (iii) the holder has no arrangement or understanding with any
person to engage in any distribution of Series B Notes and if the holder is not a broker-dealer,
it is not engaged in, and does not intend to engage in, a distribution of Series B Notes,
(iv) any person who is a broker or dealer registered under the Exchange Act or is participating
in the Exchange Offer for purposes of distributing Series B Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Series B Notes, and (v) any secondary resale transaction
described in clause (iv) above and any resale of Series B Notes obtained by such holder in
exchange for Series A Notes acquired by such holder directly from the Company should be covered
by an effective registration statement containing the selling securityholder information
required by Item 507 or 508, as applicable, of Regulation S-K of the Commission. If the holder
is a broker-dealer that will receive Series B Notes for its own account in exchange for Series A
Notes that were acquired as a result of market-making or other trading activities, the holder
will be required to acknowledge in the Letter of Transmittal that it will deliver a prospectus
in connection with any resale of such Series B Notes; by so acknowledging and by delivering a
prospectus, however, the holder will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "The Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners . . . . . . . . Any beneficial owner whose Series A Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender the Series A Notes in
the Exchange Offer should contact the registered holder of the Series A Notes promptly and
instruct such registered holder to tender the Series A Notes on the beneficial owner's behalf.
See "The Exchange Offer--Procedures for Tendering." If the beneficial owner wishes to tender
on its own behalf, it must, prior to completing and executing the Letter of Transmittal and
delivering its Series A Notes, either make appropriate arrangements to register ownership of
the Series A Notes in its name or obtain a properly completed bond power from the registered
holder. A transfer of registered ownership may take considerable time and may not be able to
be completed prior to the Expiration Time.
Guaranteed Delivery Procedures . . Holders of Series A Notes who wish to tender their Series A Notes and whose Series A Notes are
not immediately available, who cannot deliver their Series A Notes, the Letter of Transmittal
or any other documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Time, or who are unable to complete the procedure for book-entry transfer on a
timely basis, must tender their Series A Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed Delivery Procedures."
Conditions to Exchange Offer . . . The Exchange Offer is subject to certain procedures and conditions that may be waived by the
Company in its discretion. The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Series A Notes being tendered for exchange.
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Acceptance of Series A Notes
and Delivery of Series B Notes . Subject to the satisfaction or waiver of the conditions to the Exchange Offer, the Company
will accept for exchange any and all Series A Notes properly tendered in the Exchange Offer
prior to the Expiration Time. The Series B Notes issued pursuant to the Exchange Offer will
be delivered on the earliest practicable date following the Expiration Time. See "The
Exchange Offer--Terms of the Exchange Offer."
Withdrawal Rights . . . . . . . . . Tenders of Series A Notes may be withdrawn at any time prior to the Expiration Time. See "The
Exchange Offer--Withdrawal of Tenders."
Certain Federal Income
Tax Considerations . . . . . . . For a discussion of certain federal income tax considerations relating to exchanges of
Series B Notes for Series A Notes, see "Certain Federal Income Tax Considerations."
Exchange Agent . . . . . . . . . . Fleet National Bank is serving as the Exchange Agent in connection with the Exchange Offer.
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CONSEQUENCES OF FAILURE TO EXCHANGE SERIES A NOTES
The Series B Notes will be issued in exchange for Series A Notes only after
timely receipt by the Exchange Agent of the Series A Notes, together with a
properly completed and duly executed Letter of Transmittal and all other
required documents. Neither the Exchange Agent nor the Company is under any duty
to give notification of defects or irregularities with respect to tenders of
Series A Notes for exchange. Series A Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
remain restricted securities. Accordingly, such Series A Notes could be resold
only (i) to a person whom the seller reasonably believes is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, (ii) in a transaction meeting
the requirements of Rule 144 under the Securities Act, (iii) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, (iv) in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel if the Company so requests), (v) to the Company, or (vi) pursuant to an
effective registration statement and, in each case, in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction. See "The Exchange Offer--Consequences of Failure to
Exchange Series A Notes."
REQUIREMENTS FOR AFFILIATES AND CERTAIN BROKER-DEALERS
Any holder of Series A Notes who is (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) a broker or dealer
within the meaning of Rule 144A under the Securities Act or (iii) participating
in the Exchange Offer for the purposes of distributing the Series B Notes, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the Series B
Notes acquired by such holder pursuant to the Exchange Offer. Secondary resale
transactions of the Series B Notes acquired by such holders and resales of
Series B Notes obtained by such holders in exchange for Series A Notes acquired
by such holders directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or 508, as applicable, of Regulation S-K. See "The
Exchange Offer--Resale of Series B Notes."
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<PAGE> 10
THE SERIES B NOTES
The Exchange Offer applies to $195,000,000 aggregate principal amount of
the Series A Notes. The terms of the Series B Notes (including the terms of the
guarantees thereof by each of the Guarantors) will be identical to the terms of
the Series A Notes, except that the Series B Notes will not bear legends
restricting their transfer pursuant to the Securities Act. Series B Notes will
evidence the same debt as the Series A Notes that they replace and will be
issued under, and will be entitled to the benefits of, the Indenture. See
"Description of Series B Notes."
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Maturity . . . . . . . . . . . . . July 1, 2003.
Interest . . . . . . . . . . . . . Series B Notes will bear interest at the rate of 12 1/2% per annum, payable semiannually on
January 1 and July 1, commencing January 1, 1997. See "The Exchange Offer--Interest on
Series B Notes."
Sinking Fund Provisions . . . . . . None.
Optional Redemption . . . . . . . . Series B Notes will not be redeemable at the option of the Company, in whole or in part, at
any time.
Change of Control . . . . . . . . . In the event of a Change of Control (as defined hereinafter), holders of Series B Notes will
have the right to require the Company to redeem the Series B Notes at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages (as defined hereinafter), if any, to the redemption date.
Series B Guarantees . . . . . . . . Pursuant to the Series B Guarantees (as defined hereinafter), the Series B Notes will be
guaranteed by the Guarantors, which will include each existing and future Subsidiary (as
defined hereinafter) of the Company. As of the date of issuance of the Series B Notes, the
Guarantors will consist of HDSC, Canton Advertising, Inc., Corporate Vision, Inc., C.R.H.
International, Inc., HDS Transport, Inc. and Hills Distributing Company. The Series B
Guarantees will rank pari passu in right of payment with all existing and future senior
Indebtedness (as defined hereinafter) of the Guarantors (including obligations under the
Series A Guarantees, as defined hereinafter), except that the Series B Guarantees will be
contractually subordinated to all of the Guarantors' current and future obligations under the
Revolving Credit Facility (as defined hereinafter) and any successor credit facility.
Ranking . . . . . . . . . . . . . . Series B Notes will be general obligations of the Company and will be unsecured. Series B
Notes will rank pari passu in right of payment with all existing and future senior
Indebtedness of the Company and senior in right of payment to all future subordinated
Indebtedness of the Company. The Company conducts all of its operations through HDSC and the
Company's other subsidiaries and has no material assets of any kind other than the stock of
HDSC. As a result of the Company's status as a holding company and the contractual
subordination provisions of the Series B Guarantees, the Series B Notes will be subordinated
to all obligations of the Company and the Guarantors under the Revolving Credit Facility and
any successor credit facility. At May 31, 1996, an aggregate of $35.0 million in direct
borrowings was outstanding under the Revolving Credit Facility, all of which was secured by
all of the stock and assets of the Guarantors and guaranteed by the Company. The Indenture
permits the Guarantors to borrow additional Indebtedness pursuant to the Revolving Credit
Facility and any successor facility.
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C>
Covenants . . . . . . . . . . . . . The Indenture contains certain covenants that, among other things, limit the ability of the
Company and the Guarantors to incur additional Indebtedness and issue preferred stock, pay
dividends or make other distributions, repurchase Equity Interests (as defined hereinafter) or
subordinated Indebtedness, engage in sale and leaseback transactions, create certain liens,
enter into certain transactions with affiliates, sell assets of the Company or the Guarantors,
issue or sell Equity Interests of the Guarantors, or enter into certain mergers and
consolidations. In addition, under certain circumstances the Company will be required to
offer to redeem Series B Notes at a price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the
proceeds of certain Asset Sales (as defined hereinafter). See "Description of Series B
Notes--Redemption at Option of Holders--Asset Sales."
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary data should be read in conjunction with the
information set forth in "Selected Consolidated Financial and Operating Data"
below, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the Form 10-K and the Form 10-Q and the consolidated
financial statements (including the notes thereto) included in the Form 10-K
and the Form 10-Q.
<TABLE>
<CAPTION>
Successor Company(1)
--------------------------------------------------------------
Quarter Ended
------------------ Fifty-Three Fifty-Two Seventeen
May 4, April 29, Weeks Ended Weeks Ended Weeks Ended
1996 1995 Feb. 3, 1996 Jan. 28, 1995 Jan. 29, 1994
------ --------- ----------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales .............................. $370,248 $362,862 $1,900,104 $ 1,872,021 $ 772,685 |
Cost of sales .......................... 270,985 261,552 1,384,421 1,340,221 549,651 |
Operating earnings (loss)............... (16,674) 1,476 32,266 106,963 75,354 |
Interest expense ....................... 13,665 10,971 49,497 38,712 13,141 |
Net earnings (loss)(2) ................. (14,738) (4,337) (16,666) 40,431 36,235 |
Ratio of earnings to fixed charges(3) .. -- -- -- 2.33x 4.16x |
OPERATING AND OTHER FINANCIAL DATA:
Gross margin ........................... 26.8 % 27.9 % 27.1 % 28.4% 28.9% |
Comparable store sales growth(4) ....... (1.7)% (3.9)% (3.9)% 5.1% N/A |
Number of stores open at end of period . 164 156 164 154 151 |
Number of stores remodeled in period ... 4 10 33 38 -- |
Capital expenditures(5) ................ 6,573 16,316 $ 56,714 $ 38,458 $ 3,070 |
EBITDA(6) .............................. 5,385 10,662 119,344 138,133 86,682 |
Pro forma cash interest expense(7) ..... 12,516 52,354
Pro forma ratio of EBITDA
to cash interest expense(7) .......... .43x 2.28x
Predecessor Company(1)
- -------------------------------------------
Thirty-Five Fifty-Two Fifty-Two
Weeks Ended Weeks Ended Weeks Ended
Oct. 2, 1993 Jan. 30, 1993 Feb. 1, 1992
------------ ------------- ------------
<C> <C> <C>
$ 992,848 $ 1,750,266 $ 1,679,866
710,299 1,249,812 1,214,090
14,805 78,549 53,192
13,648 22,016 25,551
250,154 49,696 22,512
-- 2.17x 1.46x
28.5% 28.6% 27.7 %
N/A 4.2% (1.8)%
151 154 154
32 40 6
$ 27,162 $ 40,066 $ 11,487
42,803 117,578 89,485
</TABLE>
<TABLE>
<CAPTION>
At May 4, 1996
-----------------------------
Actual Pro Forma(8)
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $ 174,421 $174,116
Total assets 1,079,808 919,573
Total debt, including current portion 540,774 386,049
Preferred stock 21,498 21,498
Total common shareholders' equity 243,172 241,174
</TABLE>
(footnotes appear on following page)
8
<PAGE> 12
- -----------
(1) The Company adopted fresh-start accounting upon its emergence from
bankruptcy proceedings in October 1993. Financial statements for periods
prior to the Company's adoption of fresh-start accounting are designated as
those of the Predecessor Company. Under fresh-start accounting, a new
reporting entity is created and the recorded amounts of assets and
liabilities are adjusted to reflect estimated fair market values. As a
result, the financial statements of the Successor Company have been
prepared on a basis that is not comparable with the financial statements of
the Predecessor Company. See Notes 1 and 2 to the consolidated financial
statements included in the Form 10-K.
(2) Net earnings for the thirty-five weeks ended October 2, 1993 include the
effect of an extraordinary gain of $258.2 million resulting from the
discharge of prepetition debt in bankruptcy proceedings.
(3) Calculated by dividing income from continuing operations before income
taxes plus fixed charges by fixed charges. Fixed charges consist of
interest expense, including amortization of financing costs, the pre-tax
equivalent of preferred stock dividend requirements and that portion of
rental expense deemed to be representative of the interest component of
rental expense. The deficit of earnings to fixed charges was $29.9 million
for the quarter ended May 4, 1996, $8.0 million for the quarter ended April
29, 1995, $13.5 million for fiscal 1995 and $0.5 million for the
thirty-five weeks ended October 2, 1993. On a pro forma basis after giving
effect to the issuance of the Series A Notes and the application of the net
proceeds thereof (see "Use of Proceeds"), earnings were insufficient to
cover fixed charges by $30.7 million for the quarter ended May 4, 1996 and
$16.3 million for fiscal 1995.
(4) Comparable store sales growth for fiscal 1993 was 1.8%. Net sales for
stores which reported sales for every month in fiscal 1995 and fiscal 1994,
excluding net sales from such stores in the fifty-third week of fiscal
1995, totalled $1.78 billion in fiscal 1995 and $1.85 billion in fiscal
1994.
(5) Capital expenditures during fiscal 1995 consisted principally of costs
associated with the opening of ten new stores and the remodeling of 33
stores.
(6) Represents net earnings before interest, taxes, depreciation, amortization,
change in control costs, impairment of long-lived assets, extraordinary
gains, reorganization items and, with respect to fiscal 1994, certain other
income items totalling $9.7 million ("EBITDA"). During the quarter ended
May 4, 1996, the Company recorded a charge for the impairment of long-lived
assets totalling $11.7 million. During fiscal 1995, the Company recognized
change in control costs totalling $45.5 million. While EBITDA should not be
construed as a substitute for operating income or as a better indicator of
liquidity than cash flows from operating activities, which are determined
in accordance with generally accepted accounting principles, it is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditure and working
capital requirements. EBITDA is not necessarily a measure of the Company's
ability to fund its cash needs. See the consolidated statements of cash
flows (including the notes relating thereto) in the Form 10-K and the Form
10-Q. EBITDA is included herein because the Company believes that certain
investors find it to be a useful tool for measuring the ability to service
debt.
(7) Gives effect to the issuance of the Series A Notes and the application of
the net proceeds thereof as if they had occurred on January 29, 1995. See
"Use of Proceeds." Excludes approximately $1.9 million and $6.0 million of
non-cash deferred financing costs for the quarter ended May 4, 1996 and the
fifty-three weeks ended February 3, 1996, respectively, associated with
such issuance and application, the establishment of the Revolving Credit
Facility and a sale/leaseback financing.
(8) Gives effect to the issuance of the Series A Notes and the application of
the net proceeds thereof as if they had occurred on May 4, 1996. See
"Capitalization" for long-term debt and common shareholders' equity pro
forma adjustments. See also "Use of Proceeds."
9
<PAGE> 13
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. The
Company's actual results could differ materially from the results contemplated
in the forward-looking statements as a result of a number of factors, including
the risk factors set forth below. In addition to the other information in this
Prospectus, the following risk factors should be considered in evaluating the
Company in connection with the offering made hereby.
HIGH LEVERAGE; ABILITY TO SERVICE OUTSTANDING INDEBTEDNESS
The Company is highly leveraged. At May 4, 1996, on a pro forma basis
after giving effect to the issuance of Series A Notes, the application of the
net proceeds thereof, and the exchange of all outstanding Series A Notes for
Series B Notes, the Company's total debt (including current maturities) would
have been $386.0 million, its preferred stock would have been $21.5 million and
its total common shareholders' equity would have been $241.2 million, resulting
in a total capitalization of $648.7 million and total debt as a percentage of
total capitalization of 59.5%. 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 the quarter ended May 4, 1996 and
fiscal 1995, respectively, on a pro forma basis after giving effect to the
issuance of the Series A Notes and the application of the net proceeds thereof,
would have exceeded its earnings in that quarter by $30.7 million and in that
year by $16.3 million (including the $11.7 million impairment of long-lived
assets charge in the quarter and the effect of $45.5 million of change in
control costs for the year).
The Revolving Credit Facility 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. The Indenture contains
certain covenants including, among other things, limitations on indebtedness,
dividends, liens and transactions with stockholders and affiliates of the
Company. A breach of one or more of certain covenants under the Revolving Credit
Facility or the Indenture could result in acceleration of the Company's payment
obligations thereunder. See "Capitalization," "Selected Consolidated Financial
and Operating Data," "Description of Other Indebtedness--Revolving Credit
Facility" and "Description of Series B Notes."
The Company's ability to make scheduled payments of principal of, or to pay
interest or Liquidated Damages, if any, on, or to refinance, its indebtedness
(including the Series B Notes) 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, 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 Series B 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 Series B 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 Form 10-K and the Form 10-Q. The Company may need to refinance all or a
portion of the principal of the Series B Notes on or prior to maturity or in
the event of a Change of Control, and there can be no assurance that the
Company will be able to effect any such refinancing on commercially reasonable
terms or at all.
Any or all of the restrictions, limitations or contingencies under the
Revolving Credit Facility and the Indenture, 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.
10
<PAGE> 14
HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW; SUBORDINATION OF
SERIES B GUARANTEES
The Company is a holding company that conducts its operations solely
through HDSC and the Company's other subsidiaries, and has no material assets of
any kind other than the stock of HDSC. Consequently, the Company will depend on
dividends or distributions from HDSC for the funds necessary to, among other
things, pay principal of, and interest and Liquidated Damages (if any) on, the
Series B Notes. HDSC is a direct borrower under the Revolving Credit Facility,
and the Company is a guarantor thereunder. The Revolving Credit Facility
prohibits the payment of cash dividends from HDSC to the Company, except to the
extent necessary for the Company to make interest payments on the Series A Notes
and the Series B Notes and certain other limited payments. In the event of a
default under the Revolving Credit Facility, HDSC would be prohibited from
paying such dividends without the consent of its creditors under the Revolving
Credit Facility. In addition, the ability of HDSC to pay dividends to the
Company is subject to applicable provisions of the Delaware General Corporation
Law. No assurance can be given that HDSC will have sufficient funds to pay
principal of, and interest and Liquidated Damages (if any) on, the Series B
Notes or that, if such funds are available, HDSC will be permitted to make such
payments under the terms of the Revolving Credit Facility or applicable law.
The Series B Guarantees will rank pari passu in right of payment with all
existing and future senior Indebtedness of the Guarantors (including obligations
of the Guarantors under the Series A Guarantees), except that the Series B
Guarantees, like the Series A Guarantees, will be contractually subordinated to
the prior payment in full of the principal of and interest on indebtedness out-
standing under the Revolving Credit Facility and any successor credit facility.
In the event of a bankruptcy, liquidation or reorganization of any Guarantor,
the assets of such Guarantor will be available to pay obligations on the Series
B Notes only after all indebtedness under the Revolving Credit Facility (and
any successor credit facility) has been paid in full. No assurance can be given
that, in such an event, sufficient assets will be available to pay amounts due
on any or all of the Series B Notes. At May 31, 1996, an aggregate of $35.0
million in direct borrowings was outstanding under the Revolving Credit
Facility.
See "--Fraudulent Conveyance; Possible Invalidity of Series B Guarantees"
and "Description of Series B Notes."
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 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 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Form 10-K.
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 of fiscal 1995. 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 decreased by 1.7%
for the quarter. The loss in the first quarter of fiscal 1996 included a
pre-tax, non-cash charge of $11.7 million ($6.8 million after tax) for the
impairment of long-lived assets. 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 and for Long-Lived Assets to be Disposed Of." 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 decreased to 48.4% in
fiscal 1995 from 50.6% in fiscal 1994 and decreased to 48.6% in the first
quarter of fiscal 1996 from 49.9% in the comparable period of fiscal 1995. Hills
expects that this percentage may decline further in the last three quarters of
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 and could have a
material adverse effect on the Company's ability to make scheduled interest
payments on the Series B Notes and to repay the Series B Notes at maturity.
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
11
<PAGE> 15
significant volatility in sales levels. Hills' operating results have also
varied historically due to a number of factors, including national and regional
economic conditions, its ability to compete with national and regional discount
department store chains and specialty retailers, and its 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 and could have a material adverse effect on the
Company's ability to make scheduled interest payments on the Series B Notes and
to repay the Series B Notes at maturity.
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 the 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 operations.
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 individuals
nominated by Dickstein Partners. There can be no assurance that these
circumstances will not have an adverse effect on Hills or on the market price of
the Series B Notes. At March 29, 1996, affiliates of Dickstein Partners
beneficially owned approximately 10.9% of the Company's outstanding voting
stock. On May 28, 1996, the Company filed a registration statement with the
Commission to permit the resale from time to time of substantially all of
the shares of the Company's common stock owned by affiliates of Dickstein
Partners. No assurance can be given, however, that a sufficient number of such
shares will be sold such that the ownership of common stock by affiliates of
Dickstein Partners will not have an adverse effect on Hills or on the market
price of the Series B Notes. As described under "Legal Proceedings" in the Form
10-K, the Company and HDSC are parties to certain litigation arising out of the
change in control effected by the election of the new Board in July 1995.
RECENT MANAGEMENT CHANGES
Following the election of the new Board of Directors of the Company in July
1995, 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. On April 23, 1996, C. Scott Litten was appointed as the
Company's new Chief Financial Officer. As of June 13, 1996, the Company had not
appointed an Executive Vice President-Store Operations or a Treasurer. 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.
12
<PAGE> 16
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 that 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 and could have a material adverse effect on
the Company's ability to make scheduled interest payments on the Series B Notes
and to repay the Series B Notes at maturity.
FUTURE CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of any Change of Control,
the Company will be required to make an offer (a "Change of Control Offer") to
redeem all of the Series A Notes and the Series B Notes (collectively, the
"Senior Notes") issued and then outstanding under the Indenture, at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to the redemption date. Any
Change of Control under the Indenture would constitute a default under the
Revolving Credit Facility. Therefore, upon the occurrence of a Change of
Control, the lenders under the Revolving Credit Facility would have the right to
accelerate their loans and holders of the Senior Notes would have the right to
require the Company to purchase their Senior Notes. Upon such event, such
lenders would be entitled to receive payment of all outstanding obligations
under the Revolving Credit Facility before the Company may purchase any of the
Senior Notes tendered pursuant to a Change of Control Offer. See "Description of
Other Indebtedness--Revolving Credit Facility" and "Description of Series B
Notes." If a Change of Control were to occur, it is unlikely that the Company
would be able to repay all of its obligations under the Revolving Credit
Facility and the Indenture unless it could obtain alternate financing. There can
be no assurance that the Company would be able to obtain any such financing on
commercially reasonable terms or at all, and consequently no assurance can be
given that the Company would be able to purchase any of the Senior Notes
tendered pursuant to a Change of Control Offer.
FRAUDULENT CONVEYANCE; POSSIBLE INVALIDITY OF SERIES B GUARANTEES
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance laws, if the
Company, at the time it issues the Series B Notes (or the Series A Notes for
which the Series B Notes have been exchanged), or any of the Guarantors, at the
time it issues its Series B Guarantee (or its Series A guarantee), (i) incurs
such indebtedness with the intent to hinder, delay or defraud creditors, or
(ii)(a) receives less than reasonably equivalent value or fair consideration for
incurring such indebtedness and (b)(1) is insolvent at the time of the
incurrence, (2) is rendered insolvent by reason of such incurrence, (3) is
engaged or is about to engage in a business or transaction for which the assets
that will remain with the Company or such Guarantor constitute unreasonably
small capital to carry on its business, or (4) intends to incur, or believes
that it will incur, debts beyond its ability to pay such debts as they mature,
then, in each such case, a court of competent jurisdiction could avoid, in whole
or in part, the Series B Notes or such Series B Guarantee.
Among other things, a legal challenge of a Series B Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the Guarantor
as a result of the issuance by the Company of the Series B Notes or the Series
A Notes. To the extent any Series B Guarantee were to be avoided as a
fraudulent conveyance or held unenforceable for any other reason, holders of
the Series B Notes would cease to have any claim in respect of such Guarantor
and would be creditors solely of the Company and any Guarantor whose Series B
Guarantee was not avoided or held unenforceable. In such event, the claims of
the holders of the Series B Notes against the issuer of an invalid Series B
Guarantee would be subject to the prior payment of all other liabilities of
such Guarantor. There can be no assurance that, after providing for all prior
claims, there would be sufficient assets to satisfy the claims of the holders
of the Series B Notes relating to any avoided Series B Guarantee.
13
<PAGE> 17
The measure of insolvency for purposes of the foregoing will vary depending
upon the law applied in such case. Generally, however, the Company or any
Guarantor would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at fair valuation or
if the present fair saleable value of its assets was less than the amount that
would be required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and matured.
Based upon financial and other information currently available to it, the
Company believes that, for purposes of the United States Bankruptcy Code and
state fraudulent transfer or conveyance laws, (i) the Series B Notes and the
Series B Guarantees will be issued (and the Series A Notes and the Series A
Guarantees were) without the intent to hinder, delay or defraud creditors and
for proper purposes and in good faith, (ii) the Company and the Guarantors will
receive reasonably equivalent value or fair consideration for incurring such
indebtedness and (iii) the Company and the Guarantors, after the issuance of
the Series B Notes and the Series B Guarantees (and after the issuance of the
Series A Notes and the Series A Guarantees) will be (and were) solvent, will
have (and had) sufficient capital for carrying on their respective businesses
and will be (and were) able to pay their respective debts as they mature. There
can be no assurance, however, that a court passing on such questions would
agree with the Company's view. See "--High Leverage; Ability to Service
Outstanding Indebtedness," "Description of Other Indebtedness" and
"Description of Series B Notes."
LIMITED PUBLIC MARKET
The Series B Notes constitute a new class of securities with no established
trading market. While the Company intends to cause the Series B Notes to be
listed on the New York Stock Exchange, no assurance can be given that an active
public or other market will develop for the Series B Notes. If a trading market
does not develop or is not maintained, holders of the Series B Notes may
experience difficulty in reselling the Series B Notes or may be unable to sell
them at all. If a market for the Series B Notes develops, any such market may be
discontinued at any time. If a public trading market develops for the Series B
Notes, future trading prices of such Series B Notes will depend on many factors,
including, among other things, prevailing interest rates, Hills' financial
condition and results of operations, and the market for similar notes. Depending
on these and other factors, the Series B Notes may trade at a discount from
their principal amount.
14
<PAGE> 18
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.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. There will be no cash
proceeds to the Company from exchanges made pursuant to the Exchange Offer. In
consideration for issuing the Series B Notes, the Company will receive Series A
Notes in like principal amount, the terms of which are identical to the terms of
the Series B Notes that they replace, except as otherwise described herein.
Series A Notes surrendered in exchange for Series B Notes will be canceled and
will not be reissued. Accordingly, the issuance of Series B Notes in the
Exchange Offer will not result in any increase or decrease in the total
indebtedness of the Company.
The Company received net proceeds of $186.4 million from the issuance and
sale of the Series A Notes (after deduction of fees and estimated offering
expenses), of which (i) $156.5 million was used to pay the redemption prices of
1993 Notes redeemed pursuant to the Redemption Offer, (ii) $20.0 million was
used to reduce the amount outstanding under the Revolving Credit Facility, (iii)
$2.6 million will be used on July 1, 1996 to pay the redemption prices of 1993
Notes redeemed pursuant to a mandatory redemption, at a redemption price equal
to 104% of principal amount, of all outstanding 1993 Notes not tendered pursuant
to the Redemption Offer and (iv) $2.6 million will be deposited in trust with
Fleet National Bank, as trustee under the 1993 Note Indenture, for the
redemption approximately 30 days after issuance, at a redemption price equal to
104% of principal amount, of approximately $2.5 million of 1993 Notes remaining
subject to issuance as of the date hereof under the Company's plan of
reorganization relating to its emergence from
15
<PAGE> 19
bankruptcy. See "Prospectus Summary--The Company," "Capitalization" and
"Description of Other Indebtedness--1993 Notes." The remaining net proceeds
are available for working capital and other general corporate purposes.
16
<PAGE> 20
CAPITALIZATION
The following table sets forth as of May 4, 1996 the actual
capitalization of the Company and the capitalization of the Company as adjusted
to give effect to the issuance of the Series A Notes, the application of the net
proceeds thereof and the exchange of all or a portion of the Series A Notes for
Series B Notes in the Exchange Offer. The following information should be read
in conjunction with the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Form 10-K and
the Form 10-Q and the consolidated financial statements (including the notes
thereto) included in the Form 10-K and the Form 10-Q.
<TABLE>
<CAPTION>
May 4, 1996
----------------------
Actual As Adjusted
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt, including current portion:
Revolving Credit Facility(1) ............................................... $ 43,000 $ 43,000
12 1/2% Senior Notes due 2003 and 12 1/2% Senior Notes due 2003, Series B .. 195,000 195,000
10.25% Senior Notes due 2003 ............................................... 154,725 --
Obligations under capital leases ........................................... 122,880 122,880
Financing obligation - sale/leaseback ...................................... 25,169 25,169
-------- --------
Total debt .............................................................. 540,774 386,049
-------- --------
Series A convertible preferred stock, $0.10 par value;
15,000,000 shares authorized; 1,231,795 shares
issued and outstanding ...................................................... 21,498 21,498
-------- --------
Common shareholders' equity(2) 243,172 241,174
-------- -------
Total capitalization .............................................. $805,444 $648,721
======== ========
</TABLE>
(1) The Revolving Credit Facility provides for seasonal borrowings of up to
$300.0 million (subject to certain borrowing base requirements) for working
capital and other general corporate purposes. As of May 31, 1996, an
aggregate of $35.0 million in direct borrowings was outstanding under the
Revolving Credit Facility. See "Description of Other Indebtedness--
Revolving Credit Facility."
(2) Common shareholders' equity, as adjusted, reflects the after-tax effect of
the elimination of deferred financing costs associated with the 1993 Notes,
a one percent premium payable in connection with the redemption of the 1993
Notes pursuant to the Redemption Offer and a four percent premium payable
in connection with the mandatory redemption of all of the 1993 Notes not
purchased in the Redemption Offer, including $2.5 million in principal
amount of 1993 Notes remaining subject to issuance as of the date hereof.
17
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following statement of operations data for the fifty-three weeks
ended February 3, 1996 and the balance sheet data at February 3, 1996 have been
derived from the Company's consolidated financial statements, which have been
audited by Deloitte & Touche LLP, independent auditors, not included herein.
The statement of operations and balance sheet data for other periods, excluding
the quarterly financial data, have been derived from the Company's consolidated
financial statements, which have been audited by Coopers & Lybrand L.L.P.,
independent auditors, not included herein. The statement of operations data for
the quarters ended May 4, 1996 and April 29, 1995 and the balance sheet data as
of May 4, 1996 and as of April 29, 1995 have been derived from the Company's
unaudited consolidated financial statements, which have been prepared on a
basis substantially consistent with the audited consolidated financial
statements, and in the opinion of the Company's management reflect all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations and financial position for these
periods. The results for the quarter ended May 4, 1996 are not necessarily
indicative of results for any future period. The following should be read in
conjunction with the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements (including the notes thereto) included in the Form 10-K and
the Form 10-Q.
<TABLE>
<CAPTION>
Successor Company(1)
-------------------------------------------------------------------------
Quarter Ended Fifty-Three Fifty-Two Seventeen
--------------------------- Weeks Ended Weeks Ended Weeks Ended
May 4, 1996 April 29, 1995 Feb. 3, 1996 Jan. 28, 1995 Jan. 29, 1994
------------ -------------- ------------ ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> |
STATEMENT OF OPERATIONS DATA: |
Net sales ................................ $ 370,248 $362,862 $1,900,104 $1,872,021 $ 772,685 |
Cost of sales ............................ 270,985 261,552 1,384,421 1,340,221 549,651 |
Selling and administrative expenses ...... 94,118 90,734 398,836 389,189 136,352 |
Depreciation and amortization ............ 10,113 9,100 39,052 35,648 11,328 |
Impairment of long-lived assets........... 11,706 -- -- -- -- |
Operating earnings (loss) ................ (16,674) 1,476 32,266 106,963 75,354 |
Interest expense ......................... 13,665 10,971 49,497 38,712 13,141 |
Income tax provision (benefit)............ (15,202) (3,679) 3,187 35,853 26,609 |
Earnings (loss) before extraordinary items (14,738) (4,337) (16,666) 40,431 36,235 |
Net earnings (loss)(2) ................... (14,738) (4,337) (16,666) 40,431 36,235 |
Ratio of earnings to fixed charges(3) .... -- -- -- 2.33x 4.16x |
|
OPERATING AND OTHER FINANCIAL DATA: |
Gross margin ............................. 26.8% 27.9% 27.1 % 28.4% 28.9% |
Comparable store sales growth(4) ......... (1.7)% (3.9)% (3.9)% 5.1% N/A |
Number of stores open at end of period ... 164 156 164 154 151 |
Number of stores remodeled in period ..... 4 10 33 38 -- |
Capital expenditures(5) .................. 6,573 16,316 $ 56,714 $ 38,458 $ 3,070 |
EBITDA(6) ................................ 5,385 10,662 119,344 138,133 86,682 |
Pro forma cash interest expense(7) ....... 12,516 52,354 |
Pro forma ratio of EBITDA |
to cash interest expense(7) .......... .43x 2.28x |
|
BALANCE SHEET DATA (AT END OF PERIOD): |
Working capital .......................... $ 174,421 $154,729 $ 147,090 $ 241,486 $ 171,440 |
Total assets ............................. 1,079,808 916,591 858,723 992,378 907,621 |
Total debt, including current portion(8) . 540,774 314,327 309,677 315,798 296,158 |
Preferred stock .......................... 21,498 27,482 24,636 64,144 100,000 |
Total common shareholders' |
equity (deficiency) ................... 243,172 264,139 254,663 306,741 230,235 |
Predecessor Company(1)
----------------------------------------------------------------
Thirty-Five Fifty-Two Fifty-Two
Weeks Ended Weeks Ended Weeks Ended
Oct. 2, 1993 Jan. 30, 1993 Feb. 1, 1992
------------ ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ................................ $ 992,848 $1,750,266 $1,679,866
Cost of sales ............................ 710,299 1,249,812 1,214,090
Selling and administrative expenses ...... 239,766 382,946 376,361
Depreciation and amortization ............ 27,978 38,959 36,223
Operating earnings (loss) ................ 14,805 78,549 53,192
Interest expense ......................... 13,648 22,016 25,551
Income tax provision ..................... -- 26,588 12,537
Earnings (loss) before extraordinary items (8,085) 26,817 10,032
Net earnings (loss)(2) ................... 250,154 49,696 22,512
Ratio of earnings to fixed charges(3) .... -- 2.17x 1.46x
OPERATING AND OTHER FINANCIAL DATA:
Gross margin ............................. 28.5% 28.6% 27.7 %
Comparable store sales growth(4) ......... N/A 4.2% (1.8)%
Number of stores open at end of period ... 151 154 154
Number of stores remodeled in period ..... 32 40 6
Capital expenditures(5) .................. $ 27,162 $ 40,066 $ 11,487
EBITDA(6) ................................ 42,803 117,578 89,485
Pro forma cash interest expense(7) .......
Pro forma ratio of EBITDA
to cash interest expense(7) ..........
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital .......................... $ 301,980 $ 299,927 $ 261,007
Total assets ............................. 972,838 922,745 846,906
Total debt, including current portion(8) . 127,590 138,686 142,504
Preferred stock .......................... 33,143 31,481 29,049
Total common shareholders'
equity (deficiency) ................... (186,934) (183,172) (230,446)
</TABLE>
- -------------
(1) The Company adopted fresh-start accounting upon its emergence from
bankruptcy proceedings in October 1993. Financial statements for periods
prior to the Company's adoption of fresh-start accounting are designated as
those of the Predecessor Company. Under fresh-start accounting, a new
reporting entity is created and the recorded amounts of assets and
liabilities are adjusted to reflect estimated fair market values. As a
result, the financial statements of the Successor Company have been
prepared on a basis that is not comparable with the financial statements of
the Predecessor Company. See Notes 1 and 2 to the consolidated financial
statements included in the Form 10-K.
(2) Net earnings for the thirty-five weeks ended October 2, 1993 include the
effect of an extraordinary gain of $258.2 million resulting from the
discharge of prepetition debt in bankruptcy proceedings.
(footnotes continued on following page)
18
<PAGE> 22
(3) Calculated by dividing income from continuing operations before income
taxes plus fixed charges by fixed charges. Fixed charges consist of
interest expense, including amortization of financing costs, the pre-tax
equivalent of preferred stock dividend requirements and that portion of
rental expense deemed to be representative of the interest component of
rental expense. The deficit of earnings to fixed charges was $29.9
million for the quarter ended May 4, 1996, $8.0 million for the quarter
ended April 29, 1995, $13.5 million for fiscal 1995 and $0.5 million for
the thirty-five weeks ended October 2, 1993. On a pro forma basis after
giving effect to the issuance of the Series A Notes and the application of
the net proceeds thereof, earnings were insufficient to cover fixed charges
by $30.7 million for the quarter ended May 4, 1996 and $16.3 million for
fiscal 1995.
(4) Comparable store sales growth for fiscal 1993 was 1.8%. Net sales for
stores which reported sales for every month in fiscal 1995 and fiscal 1994,
excluding net sales from such stores in the fifty-third week of fiscal
1995, totalled $1.78 billion in fiscal 1995 and $1.85 billion in fiscal
1994.
(5) Capital expenditures during fiscal 1995 consisted principally of costs
associated with the opening of ten new stores and the remodeling of 33
stores.
(6) Represents net earnings before interest, taxes, depreciation,
amortization, change in control costs, impairment of long-lived assets,
extraordinary gains, reorganization items and, with respect to fiscal
1994, certain other income items totalling $9.7 million. During the
quarter ended May 4, 1996, the Company recorded a charge for the
impairment of long-lived assets totalling $11.7 million. During fiscal
1995, the Company recognized change in control costs totalling $45.5
million.While EBITDA should not be construed as a substitute for operating
income or as a better indicator of liquidity than cash flows from
operating activities, which are determined in accordance with generally
accepted accounting principles, it is included herein to provide
additional information with respect to the ability of the Company to meet
its future debt service, capital expenditure and working capital
requirements. EBITDA is not necessarily a measure of the Company's ability
to fund its cash needs. See the consolidated statements of cash flows
(including the notes relating thereto) in the Form 10-K and the Form 10-Q.
EBITDA is included herein because the Company believes that certain
investors find it to be a useful tool for measuring the ability to service
debt.
(7) Gives effect to the issuance of the Series A Notes and the application of
the net proceeds thereof as if they had occurred on January 29, 1995. See
"Use of Proceeds." Excludes approximately $1.9 million and $6.0 million of
non-cash deferred financing costs for the quarter ended May 4, 1996 and the
fifty-three weeks ended February 3, 1996, respectively, associated with
such issuance and application, the establishment of the Revolving Credit
Facility and a sale/leaseback financing.
(8) Excludes liabilities subject to compromise of the Predecessor Company.
19
<PAGE> 23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Series A Notes were sold by the Company on April 19, 1996 (the "Closing
Date") to Lehman Brothers, Inc., which subsequently placed the Series A Notes
with qualified institutional buyers in reliance on Rule 144A under the
Securities Act. As a condition to the sale of the Series A Notes, the Company,
the Guarantors and Lehman Brothers, Inc. entered into the Registration Rights
Agreement under which the Company and the Guarantors agreed that, unless the
Exchange Offer is not permitted by applicable law or Commission policy (after
compliance with certain procedures contained in the Registration Rights), they
would (i) cause the Registration Statement to be filed with the Commission, (ii)
cause all necessary filings in connection with the registration and
qualification of the Senior Notes to be made under the "blue sky" laws of such
jurisdictions of the United States as are necessary to permit the Exchange Offer
to be consummated, and (iii) upon effectiveness of the Registration Statement,
to commence the Exchange Offer, maintain the effectiveness of the Registration
Statement for at least 20 business days (or a longer period if required by law)
and deliver Series B Notes to the Exchange Agent in the same aggregate principal
amount as the Series A Notes properly tendered pursuant to the Exchange Offer. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
RESALE OF SERIES B NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to Morgan Stanley & Co., Incorporated (dated June 5,
1991) and Exxon Capital Holdings Corporation (dated May 13, 1988) and similar
no-action letters issued with respect to other third parties, the Company
believes that a holder that exchanges Series A Notes for Series B Notes in the
ordinary course of business and that is not engaged in, does not intend to
engage in, and has no arrangement with any person to engage in a distribution of
Series B Notes, will be allowed to resell the Series B Notes to the public
without further registration under the Securities Act and without delivering to
the purchasers of the Series B Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act, except that the foregoing will
not apply to a holder that is (i) a broker-dealer who purchased Series A Notes
directly from the Company for resale pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, . If any holder
acquires Series B Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of Series B Notes or is a broker- dealer,
however, such holder cannot rely on the position of the staff of the Commission
enumerated in those no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Each broker-dealer that receives Series B Notes for its own account
in exchange for Series A Notes, that were acquired by such broker-dealer as a
result of market-making or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Series B Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Series B Notes received in exchange for Series A
Notes that were acquired by such broker-dealer as a result of market-making or
other trading activities. Pursuant to the Registration Rights Agreement, the
Company has agreed that for a period of one year from the date of this
Prospectus, it will make this Prospectus, as amended or supplemented, available
to broker-dealers for use in connection with any resale. See "Plan of
Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes properly tendered and not withdrawn prior to the Expiration Time. The
Company will issue $1,000 principal amount of Series B Notes in exchange for
each $1,000 principal amount of outstanding Series A Notes surrendered pursuant
to the Exchange Offer. Series A Notes may be tendered only in integral multiples
of $1,000.
20
<PAGE> 24
The terms of the Series B Notes will be identical to the terms of the
Series A Notes, except that the Exchange Offer has been registered under the
Securities Act and therefore the Series B Notes will not bear legends
restricting the transfer thereof. Series B Notes will evidence the same debt as
the Series A Notes that they replace and will be issued under, and be entitled
to the benefits of, the Indenture. The Indenture also governs the Series A
Notes, such that the Series A Notes and the Series B Notes will be treated as a
single class of debt securities under the Indenture.
As of the date of this Prospectus, $195,000,000 aggregate principal amount
of Series A Notes are outstanding and registered in the name of Cede & Co., as
nominee for the Depository. Only a registered holder of the Series A Notes (or
such holder's legal representative or attorney-in-fact) as reflected on the
records of the Trustee under the Indenture may participate in the Exchange
Offer. There is no fixed record date for determining registered holders of the
Series A Notes entitled to participate in the Exchange Offer.
Holders of the Series A Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted properly tendered Series A
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Series A Notes for the purposes of receiving the Series B Notes from
the Company.
Holders who tender Series A Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
A Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION TIME; EXTENSIONS; AMENDMENTS
The term "Expiration Time" shall mean 5 P.M., New York City time, on
, 1996 unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Time" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) provide written
or oral notice of the extension to the Exchange Agent, (ii) mail notice of the
extension to the registered holders of the Series A Notes, (iii) issue a press
release or other public announcement that includes a statement as to the
approximate number of Series A Notes deposited to date. All such actions shall
be taken by no later than 9 A.M., New York City time, on the business day
immediately following the previously scheduled Expiration Time. Without limiting
the manner in which the Company may choose to make a public announcement of any
delay, extension, amendment or termination of the Exchange Offer, the Company
shall have no obligation to publish, advertise, or otherwise communicate any
such public announcement, other than by making a timely release to an
appropriate news agency.
The Company reserves the right, in its sole discretion, to delay accepting
any Series A Notes, to extend the Exchange Offer, or if any conditions set forth
below under "--Procedures for Tendering" shall not have been satisfied, to
terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Series A Notes, and the Company will extend the Exchange Offer for a period of
five to ten business days, depending upon the significance of the amendment and
the manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period.
21
<PAGE> 25
INTEREST ON SERIES B NOTES
The Series B Notes bear interest at a rate equal to 12 1/2% per annum.
Interest on Series B Notes is payable semi-annually on each January 1 and July
1, commencing on January 1, 1997. Holders of Series B Notes will receive
interest on January 1, 1997 from the date of initial issuance of the Series B
Notes, plus an amount equal to the accrued interest on the Series A Notes from
July 1, 1996, the most recent date as of which interest will not have been paid
on the Series A Notes as of the Expiration Time. Holders whose Series A Notes
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Series A Notes on or after July 1, 1996.
PROCEDURES FOR TENDERING
Only a registered holder may tender Series A Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent at
the address set forth below under "--Exchange Agent" for receipt prior to the
Expiration Time. In addition, either (i) certificates for the Series A Notes
must be received by the Exchange Agent along with the Letter of Transmittal,
(ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of the Series A Notes, if such procedure is available, into the
Exchange Agent's account at the Depositary pursuant to the procedure described
under "--Book-Entry Transfer" below, must be received by the Exchange Agent
prior to the Expiration Time, or (iii) the holder must comply with the
procedures described under "--Guaranteed Delivery Procedures" below.
A tender of Series A Notes by a holder that is not withdrawn prior to the
Expiration Time will constitute an agreement between the holder and the Company
in accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION TIME. NO SERIES A NOTES OR LETTER OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS ON BEHALF OF
SUCH HOLDERS.
Any beneficial owner of Series A Notes whose Series A Notes are registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender Series A Notes should contact the registered holder
promptly and instruct such registered holder to tender the Series A Notes on
such beneficial owner's behalf. If such beneficial owner wishes to tender on its
own behalf, it must, prior to completing and executing the Letter of Transmittal
and delivering its Series A Notes, either make appropriate arrangements to
register ownership of the Series A Notes in its name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders" below), as the case may be, must be
guaranteed by an Eligible Institution (as defined below) unless the Series A
Notes tendered pursuant thereto are tendered (i) by a registered holder that has
not completed the box entitled "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, the signature guarantee must be made by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act that is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
22
<PAGE> 26
If the Letter of Transmittal is signed by a person other than the
registered holder of any Series A Notes listed therein, the Series A Notes must
be endorsed or accompanied by an appropriate power of attorney, which power of
attorney shall be signed by such registered holder as such registered holder's
name appears on the Series A Notes. Signatures on Series A Notes or powers of
attorney must be guaranteed by an Eligible Institution.
If the Letter of Transmittal, any Series A Notes or any powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, should submit with the Letter of Transmittal proper evidence
satisfactory to the Company of their authority to so act.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Series A Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Series A Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Series A Notes not properly tendered or any Series A Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Series A Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Series A Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Series A Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Series A Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Series A Notes that
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Series A Notes that are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Series A Notes that remain outstanding
subsequent to the Expiration Time or, as set forth under "--Conditions" below,
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Series A Notes in the open market, in privately negotiated transactions
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, a holder will represent and agree that, among other things,
(i) the Series B Notes to be acquired by the holder in the Exchange Offer are
being acquired in the ordinary course of business of the holder, (ii) the holder
is not an "affiliate," as defined in Rule 405 of the Securities Act, of the
Company, (iii) the holder has no arrangement or understanding with any person to
engage in any distribution of Series B Notes and if the holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, a
distribution of the Series B Notes, (iv) any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
purposes of distributing Series B Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Series B Notes acquired by such person and
cannot rely on the position of the staff of the Commission set forth in certain
no-action letters (see "--Resale of Series B Notes" below), and (v) any
secondary resale transaction described in clause (iv) above and any resale of
Series B Notes obtained by such holder in exchange for Series A Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or 508, as applicable, of Regulation S-K of the Commission.
If the holder is a broker-dealer that will receive Series B Notes for its own
account in exchange for Series A Notes that were acquired as a result of
market-making or other trading activities, the holder is required to acknowledge
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such Series B Notes; by so acknowledging and by delivering a
prospectus, however, the holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
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RETURN OF SERIES A NOTES
If any tendered Series A Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer, are withdrawn or are submitted
for a greater principal amount than the holder desires to exchange, the
unaccepted, withdrawn or non- exchanged Series A Notes will be returned without
expense to the tendering holder thereof (or, in the case of Series A Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Depositary pursuant to the procedures described under "--Book-Entry Transfer"
below, will be credited to an account maintained with the Depositary) as
promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Series A Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make
book-entry delivery of Series A Notes by causing the Depositary to transfer such
Series A Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. Although delivery of Series A
Notes may be effected through book-entry transfer at the Depositary, the Letter
of Transmittal (or a facsimile thereof), with any required signature guarantees
and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at the address set forth below under "--Exchange
Agent" on or prior to the Expiration Time or pursuant to the procedures
described under "--Guaranteed Delivery Procedures" below.
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender Series A Notes (i) whose Series A Notes are
not immediately available, (ii) who cannot deliver its Series A Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Time or (iii) who is unable to complete the procedures
for book-entry transfer on a timely basis, may effect a tender if:
(a) the tender is made by or through an Eligible Institution;
(b) prior to the Expiration Time, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery) (1) setting
forth the name and address of the holder, the certificate number or numbers
of such Series A Notes and the principal amount of Series A Notes tendered,
(2) stating that the tender is being made thereby and (3) guaranteeing
that, within five New York Stock Exchange trading days after the Expiration
Time, the Letter of Transmittal (or a facsimile thereof), together with the
certificate or certificates representing the Series A Notes in proper form
for transfer or a confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as the case may be, and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly executed Letter of Transmittal (or a facsimile
thereof), together with the certificate or certificates representing all
tendered Series A Notes in proper form for transfer or a Book-Entry
Confirmation, together with any other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Time.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to the Expiration Time.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received prior to the
Expiration Time by the Exchange Agent at its address under "--Exchange
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Agent" below. Any notice of withdrawal must (i) specify the name of the person
having tendered the Series A Notes to be withdrawn, (ii) identify the Series A
Notes to be withdrawn (including the certificate number or numbers and aggregate
principal amount), and (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which the Series A Notes were
tendered (including any required signature guarantees). All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company in its sole discretion, whose determination shall
be final and binding on all parties. Any Series A Notes so withdrawn will be
deemed not to have been properly tendered for purposes of the Exchange Offer and
no Series B Notes will be issued with respect thereto unless the Series A Notes
so withdrawn are properly re-tendered. Properly withdrawn Series A Notes may be
re-tendered by following one of the procedures described under "--Procedures for
Tendering" above at any time prior to the Expiration Time.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or to exchange the Series B Notes for, any
Series A Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Series A Notes, if the Exchange Offer violates any
applicable law, rule or regulation or any applicable interpretation of the staff
of the Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Series A
Notes and return all tendered Series A Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Series A Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Series A Notes (see "--Withdrawal of Tenders" above) or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all properly tendered Series A Notes that have not been withdrawn. If any such
waiver constitutes a material change to the Exchange Offer, the Company will
promptly disclose the terms of the waiver by means of a prospectus supplement
that will be distributed to registered holders of Series A Notes, and the
Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All benefits under the Registration Rights Agreement of holders of Series A
Notes eligible to participate in this Exchange Offer will cease to exist upon
consummation of the Exchange Offer except with respect to the Company's
continuing obligations (i) to indemnify holders (including broker-dealers) and
certain parties related to the holders against certain liabilities, including
liabilities under the Securities Act, (ii) to provide, upon the request of any
holder of Series A Notes, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Series A Notes pursuant to
Rule 144A and (iii) to use its best efforts to keep the Registration Statement
effective to the extent necessary to ensure that it is available for resales of
transfer-restricted Series A Notes by broker-dealers for a period of one year
from the date of this Prospectus and, in connection therewith, to provide copies
of the latest version of the Prospectus to broker-dealers upon their request
during such one-year period.
LIQUIDATED DAMAGES
Under the Registration Rights Agreement, if (i) the Exchange Offer is not
consummated by August 29, 1996 or (ii) subject to certain exceptions, the
Registration Statement ceases to be effective or fails to be used for its
intended purposes without being succeeded within seven business days by a
post-effective amendment that cures such failure and that is immediately
declared effective, the Company is required to pay liquidated damages to each
holder of Transfer Restricted Securities (as defined below), during the first
90-day period immediately following the occurrence of such Registration Default
in an amount equal to $0.05 per week per $1,000 principal amount of Transfer
Restricted Securities held by such holder. "Transfer Restricted Securities" mean
each Series A Note until the earliest to occur of (i) the date on which such
Series A Note is exchanged in the Exchange Offer and entitled to be resold to
the public by the holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) the date on which such Series A Note
has been effectively registered under the Securities Act and disposed of in
accordance with a Shelf Registration Statement (as defined in the Registration
Rights Agreement) or (iii) the date on which such Series A Note is distributed
to the public pursuant to Rule 144 under the Securities Act or by a
broker-dealer as
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described under "Plan of Distribution" below. The amount of the liquidated
damages will increase by an additional $0.05 per week per $1,000 principal
amount of Transfer Restricted Securities for each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $0.50 per week per $1,000 principal amount of Transfer Restricted
Securities. Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of liquidated damages
with respect to such Transfer Restricted Securities will cease.
EXCHANGE AGENT
Fleet National Bank has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or the Letter of Transmittal, and requests for copies of the
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
By Registered or Certified Mail: By Hand Delivery:
By Overnight Delivery: By Facsimile:
Confirm by Telephone:
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail. Additional solicitation may be
made by telecopier, telephone or in person by officers, employees or agents of
Hills.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$500,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees, and printing costs.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Series A Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Series A Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURES TO EXCHANGE
PARTICIPATION IN THE EXCHANGE OFFER IS VOLUNTARY. HOLDERS OF THE SERIES A
NOTES ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING THEIR OWN
DECISIONS ON WHAT ACTION TO TAKE.
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The Series A Notes which are not exchanged for the Series B Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Series A Notes may be resold only (i) to a person whom the seller reasonably
believes is a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (ii) in
a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act or (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Series B Notes.
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DESCRIPTION OF OTHER INDEBTEDNESS
REVOLVING CREDIT FACILITY
HDSC, as borrower, and the Company, as guarantor, have entered into a
Credit Agreement dated August 21, 1995, with the lenders named therein and
Chemical Bank, as administrative agent and fronting bank (the "Credit
Agreement"). The Credit Agreement replaced a credit agreement dated October 4,
1993, among HDSC, the Company, the lenders named therein and Chemical Bank, as
administrative agent and fronting bank (the "Old Credit Agreement"). The Credit
Agreement provides for a $300.0 million secured revolving credit facility (the
"Revolving Credit Facility"), of which up to $100.0 million is available as a
letter of credit facility. The Old Credit Agreement provided a $225.0 million
partially secured facility, of which up to $75.0 million was available as a
letter of credit facility.
Proceeds from the Revolving Credit Facility are to be used for (i) working
capital for HDSC and the other Guarantors, (ii) other general corporate purposes
in the ordinary course of business and (iii) payment of certain costs in
connection with the 1995 Change in Control. See "The Company." The maturity date
of the Revolving Credit Facility is April 30, 1998.
Borrowings under the Revolving Credit Facility are limited by a borrowing
base approximately equal to the sum of 55% of Eligible Inventory and up to 55%
of Purchase Accrual Inventory (each as defined in the Credit Agreement) and bear
interest, at the option of HDSC, at either (1) the Adjusted London Interbank
Offered Rate plus 2.75%, or (2) the highest of (a) Chase Manhattan Bank's Prime
Rate plus 1.75%, (b) the Federal Funds Effective Rate plus 2.25% and (c) the
Base CD Rate plus 2.75% (each such rate as defined in the Credit Agreement).
HDSC pays commitment fees at an annual rate of 0.50% of the average daily unused
portion of the commitment. HDSC also pays letter of credit fees on the aggregate
face amount of outstanding standby letters of credit at an annual rate equal to
2.75%, and on the face amount of outstanding trade letters of credit at an
annual rate of 2.25%.
The Revolving Credit Facility is secured by a pledge of all of the capital
stock of HDSC and each of its direct or indirect subsidiaries and a security
interest in all tangible and intangible assets of HDSC. The Revolving Credit
Facility is guaranteed by the Company and each of the direct and indirect
subsidiaries of HDSC. The Revolving Credit Facility provides that, on a date
determined at the discretion of HDSC between December 1 and April 1 of each year
(the "Clean-Up Date"), HDSC is to pay or prepay all of the outstanding loans.
For a period of at least thirty consecutive days following the Clean-Up Date
(the "Clean-Up Period"), HDSC shall have no direct borrowings outstanding under
the Revolving Credit Facility.
At February 3, 1996, HDSC had maintained a Clean-Up Period of at least
thirty days, had no direct borrowing outstanding under the Revolving Credit
Facility and had outstanding letters of credit totalling $32.1 million. At May
31, 1996, an aggregate of $35.0 million in direct borrowings was outstanding
under the Revolving Credit Facility.
The Credit Agreement contains significant covenants. Under the Credit
Agreement, Hills may not:
(i) incur indebtedness other than under (a) the Credit Agreement, (b)
the 1993 Notes, (c) the Senior Notes, (d) intercompany obligations, (e)
capital lease obligations up to $165.0 million, (f) sale and leaseback
transactions completed during the term of the Old Credit Agreement, (g)
additional sale and leaseback transactions involving an aggregate maximum
of $45.0 million of indebtedness, (h) certain other types of indebtedness
and (i) up to $25.0 million of indebtedness otherwise not permitted; after
May 31, 1996, the aggregate principal amount of 1993 Notes and Senior Notes
outstanding may not exceed $200 million;
(ii) permit any liens on Hills' properties, subject to several
exceptions, including exceptions for liens securing indebtedness otherwise
permitted under the Credit Agreement (such as obligations under capital
leases and associated with sale and leaseback transactions);
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(iii) enter into any sale and leaseback transactions other than the
transactions entered into by HDSC during the term of the Old Credit
Agreement and additional sale and leaseback transactions that do not, in
the aggregate, result in more than $45.0 million of additional
indebtedness;
(iv) make loans or investments or purchase any stock, subject to
several exceptions, including exceptions for individual store deposit
accounts, loans to officers and employees in the ordinary course not to
exceed $1.0 million in the aggregate, and certain intercompany loans;
(v) acquire any business or properties or merge or consolidate with
any other entity, subject to exceptions, including intercompany mergers and
consolidations and acquisitions of inventory, equipment or real estate in
the ordinary course of HDSC's business even where the acquired property
constitutes a substantial part of the assets or business of the seller;
(vi) sell, assign, lease or otherwise dispose of assets outside the
ordinary course of business, subject to exceptions, including sales of
assets in connection with permitted sale and leaseback transactions and up
to $6.0 million of other asset sales outside the ordinary course of
business;
(vii) pay cash dividends from HDSC to the Company or from the Company
to its shareholders, except that HDSC may make dividend payments to the
Company to make interest payments on the 1993 Notes and the Senior Notes,
to pay taxes, to pay reasonable fees and expenses of directors of the
Company, to pay reasonable legal fees of up to $2.0 million in connection
with the 1995 Change in Control and to pay various filing, listing and
other fees;
(viii) engage in transactions with affiliates except on an
arm's-length basis;
(ix) materially alter or modify the nature of their respective
businesses;
(x) optionally prepay debt other than indebtedness under the Revolving
Credit Facility and the redemption of the 1993 Notes with proceeds from the
Senior Notes;
(xi) make cash capital expenditures in excess of $43.0 million in the
fiscal year ending February 1, 1997 and $38.0 million in any subsequent
fiscal year (subject to a permitted carryforward of up to $10.0 million of
unused capital expenditures permitted in the preceding year);
(xii) permit modification of the Indenture, the charter documents,
sale and leaseback documents or agreements with management without the
consent of a majority of the holders of certain of the debt under the
Revolving Credit Facility or permit entry into certain new agreements with
management without following certain specified procedures, including having
certain findings made by the Board of Directors; or
(xiii) contribute to a multiemployer employee pension plan.
The Credit Agreement also provides that Hills, on a consolidated basis,
must meet the following financial ratios and tests:
(i) Interest Expense and Consolidated Rental Expense Coverage Ratio.
The ratio of (1) EBITDA plus consolidated rental expense to (2) interest
expense plus consolidated rental expense for any period of four consecutive
fiscal quarters shall not be less than 1.5:1 for the period ended November
1, 1997, and 1.6:1 thereafter.
(ii) Consolidated Fixed Charge Coverage Ratio. The ratio of (1) EBITDA
minus capital expenditures to (2) interest expense for any period of four
consecutive fiscal quarters shall not be less than 1.25:1 for period ended
May 4, 1996; 1.35:1 for the period from May 5, 1996 to August 3, 1996;
1.45:1 for the period from August 4, 1996 to May 3, 1997; 1.55:1 for the
period from May 4, 1997 to August 2, 1997 and 1.65:1 thereafter.
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(iii) Leverage Ratio. The ratio of (1) consolidated funded debt
(including the indebtedness under the Credit Agreement and the 1993 Notes,
the Senior Notes, sale and leaseback indebtedness and capital lease
obligations) to (2) the sum of consolidated net worth and consolidated
funded debt, shall not be more than .70 for the period ended January 30,
1997 and .65 thereafter.
(iv) Consolidated Net Worth. Consolidated net worth shall not be less
than $275.0 million on any date through November 1, 1996; $285.0 million
between November 2, 1996 and January 31, 1997; $300.0 million between
February 1, 1997 and January 30, 1998; and $320.0 million thereafter.
(v) Limitation of Consolidated Rental Expense. The consolidated rental
expense shall not exceed $60.0 million in the fiscal year ending February
1, 1997; $63.0 million in the fiscal year ending January 31, 1998; and
$16.0 million during the three-month period ending April 30, 1998.
The Credit Agreement provides that each of the following constitutes an
Event of Default: (i) breach of any representation or warranty in any material
respect; (ii) default in payment of any principal payment due under the
Revolving Credit Facility; (iii) default of any interest or fee due under the
Revolving Credit Facility, which default is unremedied for a period of five
business days following the due date thereof; (iv) default in the due observance
or performance of covenants, conditions or agreements, subject to cure periods
in certain circumstances of up to thirty days; (v) payment defaults with respect
to other indebtedness of Hills in aggregate principal amount in excess of $2.5
million; (vi) non-payment defaults with respect to other indebtedness of Hills
in excess of $2.5 million which result in the acceleration of such indebtedness;
(vii) certain events of bankruptcy or insolvency with respect to Hills; (viii)
an entry of a judgment for payment of money in an amount in excess of $2.5
million which is not covered by insurance or which remains undischarged for a
period of sixty consecutive days during which execution shall not be effectively
stayed; (ix) a reportable event shall have occurred with respect to Hills'
pension plans resulting in a liability to Hills or the applicable pension plan
in an aggregate amount exceeding $5.0 million, subject to a thirty- day cure
period; (x) a change of control (as defined in the Credit Agreement) occurs with
respect to the Company or HDSC; (xi) the security interest granted with respect
to the Credit Agreement ceases to be a valid, perfected first-priority security
interest in the collateral covered thereby; (xii) the related guaranty
agreements, whereby the subsidiaries of HDSC guarantee HDSC's obligations under
the Credit Agreement, shall not be in full force or effect and enforceable under
the terms thereof; and (xiii) the obligations of HDSC cease to constitute senior
indebtedness under the subordination provisions of the subordinated guarantees
granted by HDSC and its subsidiaries in connection with the 1993 Notes. If any
such Event of Default occurs and is continuing, the administrative agent or the
holders of a majority of the commitments under the terms of the Revolving Credit
Facility may terminate the Revolving Credit Facility, declare the loans that are
outstanding to be forthwith due and payable, foreclose on the collateral, or
otherwise execute remedies available under the Credit Agreement and the Uniform
Commercial Code.
Based upon its current operating plan, HDSC does not expect to default on
or exceed any covenant limitation in its Credit Agreement. Actual results of
future operations, however, may vary from the expected results contained in its
operating plan. If HDSC were to default on any of its covenants, the lenders
under the Credit Agreement would have recourse to a number of remedies including
acceleration of amounts owed and foreclosure on collateral.
1993 NOTES
In connection with its emergence from bankruptcy in October 1993, the
Company entered into an indenture (the "1993 Note Indenture"), dated as of
October 1, 1993, with HDSC, as guarantor, and Fleet Bank of Massachusetts, N.A.,
as trustee, pursuant to which the Company has authorized for issuance $160.0
million of unsecured, redeemable 1993 Notes due October 1, 2003. An aggregate of
approximately $155.0 million in principal amount of 1993 Notes were redeemed on
or before May 20, 1996 in connection with the Redemption Offer. As of the date
hereof, an aggregate principal amount of $2.5 million of the 1993 Notes was
outstanding and an aggregate principal amount of $2.5 million of the 1993 Notes
remained subject to issuance in accordance with the Company's plan of
reorganization relating to its emergence from bankruptcy in October 1993. See
Note 8 to the consolidated financial statements included in the Form 10-K. All
of the outstanding 1993 Notes will be redeemed under the 1993 Note Indenture
pursuant to a mandatory redemption at a redemption price equal to 104% of
principal amount plus accrued interest. In addition, the Company will deposit
in trust with Fleet National Bank, as trustee under the 1993 Note Indenture,
funds for the
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redemption approximately 30 days after issuance, at a redemption price equal to
104% of principal amount plus accrued interest, of the $2.5 million in principal
amount of 1993 Notes remaining subject to issuance as of the date hereof. Upon
the completion of these and certain related actions, the 1993 Note Indenture
shall cease to be of further effect (except as to rights of registration of
transfer or exchange of 1993 Notes expressly provided for and rights to receive
payments of principal thereof and premium, if any, and interest thereon).
SERIES A NOTES
The terms of the Series A Notes are identical in all respects (including
principal amount, interest rate and maturity and the terms of the guarantees
thereof) to the terms of the Series B Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the Series A Notes are not freely
transferable by holders thereof. See "Description of Series B Notes."
CAPITAL LEASES
HDSC has entered into various capital leases, primarily for department
store properties. At May 4, 1996, obligations under these capital leases
totalled $117.1 million, net of the current portion of $5.7 million. HDSC's
minimum future lease commitments, including interest, under all capital leases
in effect at May 4, 1996 totalled $261.8 million, of which $14.1 million is
payable in fiscal 1996. None of HDSC's capital leases contains any limitation
upon its ability to pay dividends or distributions to the Company.
SALE/LEASEBACK FINANCINGS
During fiscal 1994, HDSC obtained $25.2 million of financing, which
includes transaction costs, for certain of its real properties through
sale/leaseback arrangements. All of the leases have terms of ten years. HDSC's
minimum rental commitments under the leases at May 4, 1996 totalled $41.5
million, of which $4.3 million is payable in fiscal 1996. The lease terms
include options to purchase some or all of the properties, either at the end of
the initial lease terms or renewal periods, for amounts not greater than the
then-current fair market values of the respective properties. See Note 10 to
the consolidated financial statements included in the Form 10-K.
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DESCRIPTION OF SERIES B NOTES
GENERAL
The Series B Notes will be issued as a separate series of notes pursuant to
the Indenture dated April 19, 1996 (the "Indenture") between the Company and
Fleet National Bank, as trustee (the "Trustee") pursuant to which the Series A
Notes have been issued by the Company. The terms of the Series B Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Series B
Notes are subject to all such terms, and holders of Series B Notes considering
whether to participate in the Exchange Offer are referred to the Indenture and
the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. Copies of the proposed form of
Indenture are available as set forth under "--Additional Information" below. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions" below.
RANKING; SUBORDINATION OF GUARANTEES
The Series B Notes are general obligations of the Company and rank pari
passu in right of payment with all current and future senior Indebtedness of the
Company, including the Series A Notes. The Series B Notes will rank senior in
right of payment to all subordinated Indebtedness of the Company issued in the
future, if any. However, the Company and its Subsidiaries are parties to the
Revolving Credit Facility and all borrowings under the Revolving Credit
Facility are secured by a first priority Lien on substantially all of the
assets of the Company and its Subsidiaries. The Subsidiaries have guaranteed
the Company's obligations with respect to the Series B Notes, but the
obligations under such Guarantees are contractually subordinated to the prior
payment in full of all obligations under the Revolving Credit Facility and any
successor credit facility or facilities. See "Risk Factors--Holding Company
Structure; Limitations on Access to Cash Flow; Subordination of Series B
Guarantees."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Series B Notes. Any
right of the Company to receive assets of any of its Subsidiaries upon a
Subsidiary's liquidation or reorganization will be effectively subordinated to
the claims of that Subsidiary's creditors, except to the extent that the Company
is itself recognized as a creditor of such Subsidiary, in which case the claims
of the Company would still be subordinate to any security in the assets of such
Subsidiary and any Indebtedness of such Subsidiary senior to that held by the
Company. In addition, the terms of the Revolving Credit Facility restrict the
ability of the Company to obtain access to the cash flow of its Subsidiaries.
See "Description of Other Indebtedness."
SERIES B GUARANTEES
The Company's payment obligations under the Series B Notes are jointly and
severally guaranteed (the "Series B Guarantees") by the Guarantors. The terms of
the Series B Guarantees will be identical to those of joint and several
guarantees of the Series A Notes (the "Series A Guarantees") issued by the
Guarantors. The Series B Guarantees will rank pari passu in right of payment
with all existing and future senior Indebtedness (as defined hereinafter) of the
Guarantors (including obligations under the Series A Guarantees), except that
the Series B Guarantees will be contractually subordinated to all of the
Guarantors' current and future obligations under the Revolving Credit Facility
(as defined hereinafter) and any successor credit facility ("Senior Debt"). As
of May 31, 1996, Senior Debt consisted of approximately $35.0 million in direct
borrowings outstanding under the Revolving Credit Facility. The obligations of
each Guarantor under its Series B Guarantee are limited so as not to constitute
a fraudulent conveyance under applicable law. See "Risk Factors--Fraudulent
Conveyance; Possible Invalidity of Series B Guarantees."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions described in the following paragraph, the
Person formed by or surviving any such consolidation or merger (if other than
such Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Series B Notes and
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the Indenture, (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; and (iii) the Company would be permitted by
virtue of its pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock;" provided that clauses (ii) and
(iii) above do not apply with respect to a merger of one Guarantor with and into
another Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Series B Guarantee; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Redemption at
Option of Holders--Asset Sales."
SUBORDINATION OF SERIES B GUARANTEES
The payment of principal of, and premium (if any), interest and Liquidated
Damages (if any) on, the Series B Notes pursuant to the Series B Guarantees will
be subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt of the Guarantors, whether outstanding on the
date of the Indenture or thereafter incurred.
Upon any distribution to creditors of any Guarantor in a liquidation or
dissolution of any Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to any Guarantor or its property, an
assignment for the benefit of creditors or any marshalling of any Guarantor's
assets and liabilities, the holders of Senior Debt of such Guarantor will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders of Series B
Notes will be entitled to receive any payment with respect to any Series B
Guarantee, and until all Obligations with respect to all Senior Debt of such
Guarantor are paid in full, any distribution to which the Holders of Series B
Notes would be entitled shall be made to the holders of Senior Debt of such
Guarantor (except that Holders of Series B Notes may receive securities that are
subordinated at least to the same extent as the Series B Guarantees of the
Series B Notes to Senior Debt of such Guarantor and any securities issued in
exchange for Senior Debt of such Guarantor).
In addition, no Guarantor may make any payment upon or in respect of the
Series B Notes (except in such subordinated securities) if (i) a default in the
payment of the principal of, premium, if any, or interest on Senior Debt of such
Guarantor occurs and is continuing beyond any applicable period of grace or (ii)
any other default occurs and is continuing with respect to Senior Debt of such
Guarantor that permits holders of such Senior Debt to accelerate its maturity
and the Trustee receives a notice of such default (a "Payment Blockage Notice")
from such Guarantor or the holders of any Senior Debt of such Guarantor.
Payments in respect of any Series B Guarantee may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Senior Debt of such Guarantor has been accelerated. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice unless such default shall have been cured or waived for
a period of not less than 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt of the Guarantors if payment of the Series B Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency of any of the Guarantors, Holders of Series B
Notes may recover less ratably than creditors of the Company or the
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Guarantors who are holders of Senior Debt of such Guarantors. The principal
amount of Senior Debt of the Guarantors outstanding at May 31, 1996 was
approximately $35.0 million. The Indenture limits, subject to certain financial
tests, the amount of additional Indebtedness, including Senior Debt of the
Guarantors, that the Company and its Subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
PRINCIPAL, MATURITY AND INTEREST
The Series A Notes and Series B Notes are collectively limited in aggregate
principal amount to $195,000,000 and will mature on July 1, 2003. Interest on
Series B Notes will accrue at the rate of 12 1/2% per annum and will be payable
semi-annually in arrears on January 1 and July 1, commencing on January 1, 1997,
to Holders of record on the immediately preceding December 15 and June 15.
Interest on Series B Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from July 1, 1996.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal of, and premium (if any), interest and Liquidated
Damages (if any) on, the Series B Notes will be payable at the office or agency
of the Company maintained for such purpose in New York City or, at the option of
the Company, payment of interest and Liquidated Damages (if any) may be made by
check mailed to the Holders of the Series B Notes at their respective addresses
set forth in the register of Holders of Series B Notes; provided that all
payments with respect to Series B Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, the Company's office or
agency in New York City will be the office of the Trustee maintained for such
purpose. The Series B Notes will be issued in denominations of $1,000 and
integral multiples thereof.
OPTIONAL REDEMPTION
The Series B Notes will not be redeemable at the Company's option prior to
maturity.
MANDATORY REDEMPTION
Except as set forth below under "--Redemption at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Series B Notes.
REDEMPTION AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Series B Notes
will have the right to require the Company to redeem all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Series B Notes pursuant
to the offer described below (the "Change of Control Offer") at an offer price
in cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages (if any) thereon to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to redeem Series B Notes pursuant to the procedures required by the Indenture
and described in such notice. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the redemption of the Series B Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Series B Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Series
B Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Series B Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Series B Notes or portions
thereof being redeemed by the Company. The Paying Agent will promptly mail to
each Holder of Series B Notes so tendered the Change of Control Payment for such
Series B Notes, and the Trustee will promptly authenticate and mail (or cause to
be
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transferred by book entry) to each Holder a new Series B Note equal in principal
amount to any unredeemed portion of the Series B Notes surrendered, if any;
provided that each such new Series B Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control covenant provides that prior to redeeming the Series
B Notes in compliance with the terms thereof, but in any event within 60 days of
a Change of Control, the Company will either (i) repay in full all Indebtedness
under the Revolving Credit Facility and any successor credit facility or
facilities or (ii) obtain the requisite consents of the lenders party to the
Revolving Credit Facility and any successor credit facility or facilities to
permit the offer to redeem the Series B Notes required by the Change of Control
covenant.
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Series B Notes to require that the
Company repurchase or redeem the Series B Notes in the event of a takeover,
recapitalization or similar transaction.
The Revolving Credit Facility contains provisions limiting the ability of
the Company's Subsidiaries to pay dividends and successor facilities may contain
similar provisions. As a result, the Company may not be permitted by the terms
of the Revolving Credit Facility to obtain funds from its Subsidiaries in the
event of a Change of Control. The subordination provisions of the Series B
Guarantees will restrict payments by the Guarantors in respect of the Series B
Notes in certain circumstances. See "Risk Factors--Holding Company Structure;
Limitations on Access to Cash Flow; Subordination of Series B Guarantees."
Further, the exercise by the Holders of Series B Notes of their right to require
the Company to redeem Series B Notes could cause a default under the Revolving
Credit Facility. Finally, the Company's ability to pay cash to the Holders of
Series B Notes upon a repurchase may be limited by the Company's then existing
financial resources.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Series B Notes validly tendered and not withdrawn under such
Change of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the filing by any "person" (as defined above) with the Commission of
a report under or in response to Schedule 13D or 14D-1 (or any successor
schedule, form or report) and the delivery of such report to the Company, which
report discloses that such "person" (as defined above) has become the beneficial
owner (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act) of more than 50% of the voting stock of the Company, or the Company
otherwise becomes aware that any "person" (as defined above) has become the
beneficial owner (as defined above) of more than 50% of the voting stock of the
Company, (iii) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors or (iv) the first day on
which the Company ceases to own 100% of the outstanding Equity Interests of
HDSC.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Series B Notes to require the
Company to repurchase such Series B Notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for
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election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, engage in an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee, provided that such Officers' Certificate shall be delivered only in the
event of any Asset Sale involving $10 million or more of consideration) of the
assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 85% of the consideration therefor received by the Company or such
Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Company's or such Subsidiary's most
recent balance sheet), of the Company or any Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Senior
Notes or any guarantee thereof) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the Company or
such Subsidiary from further liability and (y) any notes or other obligations
received by the Company or any such Subsidiary from such transferee that are
immediately converted by the Company or such Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Subsidiary may apply such Net Proceeds, at its
option, (a) to reduce Indebtedness under the Revolving Credit Facility, (b) to
permanently reduce Existing Indebtedness or (c) to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other long-term assets, in each case, in the same or a
similar line of business as the Company and its Subsidiaries were engaged in on
the date of such Asset Sale. Pending the final application of any such Net
Proceeds, the Company or the applicable Subsidiary may temporarily reduce
Indebtedness under the Revolving Credit Facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
be required to make an offer to all Holders of Senior Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Senior Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages (if any) thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Senior Notes tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company or the applicable Subsidiary may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Senior Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Senior Notes to be purchased on a
pro rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
The Revolving Credit Facility restricts the sale of substantial assets
outside of the ordinary course of business and restricts the ability of the
Company to obtain access to the cash flows of its Subsidiaries, including net
proceeds of Asset Sales. The subordination provisions of the Series B Guarantees
will restrict payments by the Guarantors in respect of the Series B Notes in
certain circumstances. As a result, the Company may not be able to elect to
offer to redeem Series B Notes with the Net Proceeds of an Asset Sale. See "Risk
Factors--Holding Company Structure; Limitations on Access to Cash Flow;
Subordination of Series B Guarantees."
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution to the holders of the Company's Equity
Interests in their capacity as such (including, without limitation, any payment
in connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's Equity Interests in their capacity
as such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of
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the Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent or other
Affiliate of the Company; (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Series B Notes; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company or the relevant Subsidiary would, at the time of such
Restricted Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of the Indenture (excluding Restricted Payments permitted by clauses (x)
and (y) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company from
the issue or sale since the date of the Indenture of Equity Interests of
the Company or of debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or convertible
debt securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) $5.0 million.
The foregoing provisions do not prohibit (w) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (x) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(ii) of the preceding paragraph; (y) the defeasance, redemption
or repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Debt or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the Company
(other than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; and (z) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement entered into in the ordinary course of business; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $750,000 in any twelve-month period plus, to
the extent not included in clause (c)(ii) of the immediately preceding
paragraph, the aggregate cash proceeds received by the Company during such
twelve- month period from any reissuance of Equity Interests by the Company to
members of management of the Company and its Subsidiaries; and no Default or
Event of Default shall have occurred and be continuing immediately after such
transaction.
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The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later
than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
the covenant "Restricted Payments" were computed, which calculations may be
based upon the Company's latest available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and any of its Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.5 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provision does not apply to the incurrence of the following
Indebtedness:
(i) the incurrence by the Company and its Subsidiaries of Indebtedness
and letters of credit pursuant to the Revolving Credit Facility (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries
thereunder); provided that the aggregate principal amount of all
Indebtedness outstanding under the Revolving Credit Facility does not
exceed the amount of the Borrowing Base as of any date of incurrence;
(ii) the incurrence by the Company and its Subsidiaries of Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Senior Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing or refinancing all or any part of the purchase price
or cost of construction or improvement of property, plant or equipment used
in the business of the Company or such Subsidiary (collectively, "Purchase
Money Debt"), in an aggregate principal amount at any time outstanding
(excluding Existing Indebtedness) not to exceed 10% of Total Assets;
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness (other than Indebtedness incurred pursuant to clause (i) of
this paragraph) that was permitted by the Indenture to be incurred;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; provided, however, that (i) if the Company is
the obligor of such Indebtedness, such Indebtedness is expressly
subordinate to the payment in full of all Obligations with respect to the
Senior Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than the Company or a Wholly Owned Subsidiary and (B) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
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(vii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(viii) Guarantees by the Guarantors of Indebtedness of the Company
permitted by the Indenture to be incurred;
(ix) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $25.0 million;
(x) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from Guarantees to suppliers, lessors, licensees,
contractors, franchisees or customers, in each case incurred in the
ordinary course of business;
(xi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of performance bonds provided in the ordinary
course of business, and refinancings thereof; and
(xii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of standby letters of credit incurred in the
ordinary course of business.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company or any of its Subsidiaries may enter into a sale and leaseback
transaction if (i) the Company or the relevant Subsidiary could have incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction either pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" or
pursuant to subparagraph (iv) or (ix) of the covenants described above under
such caption, (ii) the total consideration received in such sale and leaseback
transaction is at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee, provided that such Officers' Certificate shall be
delivered only in the event of any sale and leaseback transaction involving
consideration in excess of $10.0 million) of the property that is the subject of
such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company or the
applicable Subsidiary applies the proceeds of such transaction in compliance
with, the covenant described above under the caption "--Redemption at the Option
of Holders--Asset Sales."
Liens
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries, directly or indirectly, to create, incur, assume or suffer
to exist any Lien securing Indebtedness on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
No Senior Subordinated Debt of Guarantors
The Indenture provides that no Guarantor will incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any other Indebtedness of such Guarantor and
senior in any respect in right of payment to any Series B Guarantee or any
Series A Guarantee.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
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ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Revolving Credit Facility as in effect from time to time,
provided that such provisions are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Revolving
Credit Facility as in effect on the date of the Indenture, (c) the Indenture and
the Senior Notes, (d) applicable law, (e) any instrument governing Indebtedness
or Capital Stock of a Person acquired by the Company or any of its Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, or (h) Permitted Refinancing Debt,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
Additional Series A Guarantees and Series B Guarantees
The Indenture provides that if the Company shall, after the date of the
Indenture, create or acquire any new Subsidiary, then such newly created or
acquired Subsidiary shall execute a Series A Guarantee and a Series B Guarantee
and deliver an opinion of counsel in accordance with the terms of the Indenture.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Senior Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee
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with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person and (ii) the Company delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $3.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing experienced in the appraisal or
similar review of similar types of transactions (or if an opinion is unavailable
as to the fairness from a financial point of view of any transaction for which a
fairness opinion is not customarily rendered, then an opinion that such
transaction meets the requirements of clause (i) above); provided that (x) any
employment or consulting agreement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Subsidiary, (y) transactions between or among
the Company and/or its Subsidiaries and (z) Restricted Payments and Permitted
Investments that are permitted by the provisions of the Indenture described
above under the caption "--Restricted Payments," in each case, shall not be
deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Wholly Owned Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "--Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company. The Capital Stock of the Company's Wholly Owned Subsidiaries is
currently pledged as collateral under the Credit Agreement.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Series B Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Series B Notes unless such consideration is
offered to be paid or is paid to all Holders of the Series B Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Company will furnish to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in filings with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to annual consolidated financial
statements and schedules only, a report thereon by the independent auditors of
the Company, and (ii) all information that would be required to be contained in
filings with the Commission on Form 8-K if the Company were required to file
such form. In addition, whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, the Company has agreed
that, for so long as any Senior Notes remain outstanding, it will furnish to the
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Holders, and to securities analysts and prospective investors upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages on the Senior Notes; (ii) default in payment when due of the
principal of or premium, if any, on the Senior Notes; (iii) failure by the
Company to comply with the provisions described under the captions "--Asset
Sales," "--Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock;" (iv) failure by the Company for 60 days after notice to comply
with any of its other agreements in the Indenture or the Senior Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness
or guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $15.0 million or more; (vi) failure by the Company or
any of its Subsidiaries to pay final judgments aggregating in excess of $15.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) the Series A Guarantee or Series B Guarantee of any Guarantor is
held in a judicial proceeding to be unenforceable or invalid, the Series A
Guarantee or Series B Guarantee of any Guarantor that constitutes a Significant
Subsidiary ceases to be in full force and effect or any Guarantor disavows any
of its obligations under its Series A Guarantee or Series B Guarantee; and
(viii) certain events of bankruptcy or insolvency with respect to the Company
or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without further action or notice. Holders of the Senior Notes
may not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest or Liquidated Damages on, or the principal of, the
Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Series B Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Series B Notes by
accepting a Series B Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Series B Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Senior Notes to
receive payments in respect of the principal of, and premium (if any), interest
and Liquidated Damages (if any) on, such Senior Notes when such payments are due
from the trust referred to below, (ii) the Company's obligations with respect to
the Senior Notes concerning issuing temporary Senior Notes, registration of
Senior Notes, mutilated, destroyed, lost or stolen Senior Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company and the
Guarantors released with respect to certain covenants that are described in the
Indenture ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the Senior Notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default and Remedies" will no
longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, and premium (if any), interest and
Liquidated Damages (if any) on, the outstanding Senior Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Senior Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the ninety-first day
after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will
not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the ninety-first day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Senior Notes may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of the Senior Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or
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<PAGE> 47
exchange offer for, Senior Notes), and any existing default or compliance with
any provision of the Indenture or the Senior Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Senior Notes (including consents obtained in connection with a tender offer or
exchange offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non- consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "--Redemption at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest or Liquidated Damages on or
with respect to any Senior Note, (iv) waive a Default or Event of Default in the
payment of principal of, or premium (if any), interest or Liquidated Damages (if
any) on, the Senior Notes (except a rescission of acceleration of the Senior
Notes by the Holders of at least a majority in aggregate principal amount of the
Senior Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Senior Note payable in money other than that stated
in the Senior Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Senior Notes to
receive payments of principal of, or premium (if any), interest or Liquidated
Damages (if any) on, the Senior Notes, (vii) waive a redemption payment with
respect to any Senior Note (other than a payment required by one of the
covenants described above under the caption "--Redemption at the Option of
Holders") or (viii) make any change in the foregoing amendment and waiver
provisions. Without the consent of the Holders of at least 66 2/3% in principal
amount of the Senior Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for Senior Notes), no waiver or
amendment to the Indenture may make any change in the provisions described above
under the captions "--Change of Control" and "--Assets Sales" that adversely
affect the rights of any Holder of Senior Notes.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Senior Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of the Company's obligations to Holders of
Senior Notes in the case of a merger or consolidation, to make any change that
would provide any additional rights or benefits to the Holders of Senior Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it will be
required to eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture or
the Registration Rights Agreement without charge by writing to William K.
Friend, Vice President-Secretary and Corporate Counsel, Hills Stores Company, 15
Dan Road, Canton, Massachusetts, 02021.
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BOOK-ENTRY, DELIVERY AND FORM
All of the Series B Notes offered pursuant to the Exchange Offer will
initially be issued in the form of a fully registered global note (the "Global
Note"). The Global Note will be deposited with, or on behalf of, the Depositary
and registered in the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, "Depositary
Participants") and to facilitate the clearance and settlement of transactions in
such securities between Depositary Participants through electronic book-entry
changes in accounts of Depositary Participants. Depositary Participants include
securities brokers and dealers, banks and trust companies, clearing corporations
and certain other organizations. Access to the Depositary's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, "Depositary Indirect Participants") that clear through or
maintain a custodial relationship with a Depositary Participant, either directly
or indirectly. Persons who are not Depositary Participants may beneficially own
securities held by or on behalf of the Depositary only thorough Depositary
Participants or Depositary Indirect Participants.
The Company expects that, pursuant to procedures established by the
Depositary, (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Depositary Participants with portions of the principal amount of the
Global Note and (ii) ownership of the Series B Notes evidenced by the Global
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depositary (with respect to the
interests of Depositary Participants), Depositary Participants and Depositary
Indirect Participants. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer Series B Notes evidenced by the Global Note will be
limited to such extent.
So long as the Global Note Holder is the registered owner of any Series B
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Series B Notes evidenced by the Global Note. Beneficial owners
of Series B Notes evidenced by the Global Note will not be considered the owners
or Holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Series B
Notes.
Payments in respect of the principal of, and premium (if any), interest and
Liquidated Damages (if any) on, any Series B Notes registered in the name of the
Global Note Holder on the applicable record date will be payable by the Trustee
to or at the direction of the Global Note Holder in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee may treat the persons in whose names Series B Notes,
including the Global Note, are registered as the owners thereof for the purpose
of receiving such payments. Consequently, neither the Company nor the Trustee
has or will have any responsibility or liability for the payment of such amounts
to beneficial owners of Series B Notes. The Company believes, however, that it
is currently the policy of the Depositary to immediately credit the accounts of
the relevant Depositary Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by
Depositary Participants and Depositary Indirect Participants to the beneficial
owners of Series B Notes will be governed by standing instructions and customary
practice and will be the responsibility of Depositary Participants or Depositary
Indirect Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Series B Notes in the form of a definitive registered certificate
("Certificated Securities"). Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). In
addition, if (i) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Series B
Notes in the form of Certificated
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Securities under the Indenture, then, upon surrender by the Global Note Holder
of its Global Note, Series B Notes in such form will be issued to each person
that the Global Note Holder and the Depositary identify as being the beneficial
owner of the related Series B Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Series B Notes and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Series B Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to Certificated Securities, the Company will make all payments of
principal, premium (if any), interest and Liquidated Damages (if any) by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address. The Company expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale (other than sales of inventory), lease,
conveyance or other disposition of any assets (including, without limitation, by
way of a sale and leaseback) other than in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "Redemption at the Option of
Holders--Change of Control" and/or the provisions described above under the
caption "--Merger, Consolidation or Sale of Assets" and not by the provisions of
the Asset Sale covenant), and (ii) the issue or sale by the Company or any of
its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$2.5 million or (b) for net proceeds in excess of $2.5 million. Notwithstanding
the foregoing: (i) a transfer of assets by the Company to a Wholly Owned
Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly
Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Subsidiary to the Company or to another Wholly Owned Subsidiary, and (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "Certain Covenants--Restricted Payments" will not be deemed to be Asset
Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP)
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of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
75% of all accounts receivable of the Company and its Subsidiaries as of such
date that are not more than 45 days past due (including accounts receivable
relating to any layaway or similar plan), plus (ii) 75% of the book value of all
inventory owned by the Company and its Subsidiaries as of such date, in each
case calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thomson Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
(a) an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income) or (b) the disposition of any securities or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries,
plus (ii) provision for taxes based on income or profits of such Person and its
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash charges (excluding any such non-cash charge to
the extent that it represents an accrual of or reserve for cash charges in any
future period) of such Person and its Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, plus (v) with respect to any quarter of
the Company ending on or prior to the date of the Indenture, all expenses shown
on the Company's income statement under the caption "Costs related to change of
control," in each case, on a consolidated basis and determined in accordance
with GAAP.
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"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iii) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the Holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Senior Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Revolving Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Subsidiaries or secured by a
Lien on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Subsidiary) on any series of preferred stock of such Person, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed
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Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions involving consideration in excess of $1.0 million that have
been made by the Company or any of its Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (ii) of the
proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of on or prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) HDSC, HDS Transport, Inc., C.R.H.
International, Inc., Canton Advertising, Inc., Corporate Vision, Inc. and Hills
Distributing Company and (ii) any other Subsidiary of the Company that executes
a Series A Guarantee or Series B Guarantee in accordance with the provisions of
the Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade or other payable,
if and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company
for consideration consisting of common equity securities of the Company shall
not be deemed to be an Investment. If the Company or any of its Subsidiaries
sells or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a
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Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Subsidiary of the Company in a Person,
if as a result of such Investment (i) such Person becomes a Wholly Owned
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company; (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--Repurchase at
the Option of Holders--Asset Sales;" (e) any obligations or shares of Capital
Stock received in connection with or as a result of a bankruptcy, workout or
reorganization of the issuer of such obligations or shares of Capital Stock; (f)
any Investment received involuntarily; and (g) other Investments in any Person
(other than an Affiliate of the Company that is not also a Subsidiary of the
Company) having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (g)
that are at the time outstanding, not to exceed $10.0 million.
"Permitted Liens" means (i) Liens on assets of the Company or any of its
Subsidiaries securing Indebtedness under the Revolving Credit Facility that was
permitted by the terms of the Indenture to be incurred; (ii) Liens securing
Existing Indebtedness; (iii) Liens in favor of the Company or any of its
Subsidiaries; (iv) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or any Subsidiary of
the Company; (v) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company, provided that such Liens were
in existence prior to the contemplation of such acquisition and do not extend to
any assets other than those so acquired by the Company or any Subsidiary of the
Company; (vi) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature and
mechanics', carriers', warehousemen's, materialmen's and vendors' Liens, in each
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case incurred in the ordinary course of business; (vii) Liens to secure Purchase
Money Debt permitted to be incurred by any provision of the covenant entitled
"Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the
assets constructed, improved upon or acquired with such Indebtedness and only to
the extent that such Liens attach to the assets so constructed, improved upon or
acquired within 180 days of construction, improvement or acquisition or, in the
case of refinanced property, within 180 days of refinancing; (viii) Liens
existing on the date of the Indenture; (ix) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (x)
Liens on manufactured products as security for any drafts or bills of exchange
drawn in connection with the importation of such product in the ordinary course
of business and Liens incurred in connection with agreements with customs
brokers in the ordinary course of business; (xi) Liens representing interests of
retail buyers in layaway goods being sold in the ordinary course of business;
(xii) Liens in favor of credit card processing companies in the ordinary course
of business; (xiii) leases, subleases and license agreements arising in the
ordinary course of business and not otherwise prohibited by the Indenture and
(xiv) Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of the Company or any of its Subsidiaries; provided that: (i) the principal
amount (or accreted value, if applicable), of such Permitted Refinancing Debt
does not exceed the principal amount (or accreted value, if applicable), of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable premiums and expenses incurred in connection
therewith); (ii) such Permitted Refinancing Debt has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Senior
Notes, such Permitted Refinancing Debt has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Senior
Notes on terms at least as favorable to the Holders of Senior Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means, for purposes of this "Description of
Senior Notes," that certain Credit Agreement, dated as of August 21, 1995, among
the Company, HDSC, the lenders named therein and Chemical Bank, as
administrative agent and as fronting bank, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith and, in each case, any amendment thereof, restatement
thereof, supplement thereto or other modification thereof or any superseding or
other replacement credit agreement or agreements entered into from time to time,
including any credit agreement or agreements extending the maturity of,
refinancing, modifying, increasing, substituting for or otherwise restructuring
(including the addition of one or more Subsidiaries as borrowers thereunder or
the inclusion of additional or substitute lenders or agents thereunder) all or
any portion of the Indebtedness, including changing the borrowing limits, under
any such agreement or any successor or replacement credit agreement or
agreements.
"Senior Debt" means, with respect to any Guarantor, all borrowings by such
Guarantor under the Revolving Credit Facility or any successor credit facility
or facilities. Notwithstanding the foregoing, Senior Debt will not include trade
payables or any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
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"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Total Assets" means, as of any date, the Company's total consolidated
assets as of such date, as determined in accordance with GAAP.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is the opinion of Foley, Hoag & Eliot LLP, counsel to the Company, that
the material federal income tax consequences to holders whose Series A Notes are
exchanged for Series B Notes in the Exchange Offer are as described herein,
subject to the limitations and qualifications set forth below. Because the
Series B Notes should not be considered to differ materially either in kind or
in extent from the Series A Notes, the exchange of the Series B Notes for the
Series A Notes pursuant to the Exchange Offer should not be treated as an
"exchange" for federal income tax purposes pursuant to Section 1001 of the
Internal Revenue Code of 1986, as amended (the "Code"), and proposed Treasury
Regulation Section 1.1001-3. As a result, no material federal income tax
consequences should result to holders exchanging Series A Notes for Series B
Notes. If, however, the exchange of Series A Notes for Series B Notes were
treated as an "exchange" for federal income tax purposes, such transaction
should constitute a recapitalization for federal income tax purposes and
holders should not recognize any gain or loss upon such transaction.
The foregoing opinion is based upon the current provisions of the Code,
applicable existing and proposed Treasury Regulations promulgated thereunder,
judicial authority and current administrative rulings and practice. There can be
no assurance that the final Treasury Regulations will not differ materially from
those which are presently proposed nor that the Internal Revenue Service will
not take a contrary view. No ruling from the Internal Revenue Service has been
or will be sought. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements or
conclusions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and individuals who are not
citizens or residents of the United States) may be subject to special rules not
discussed herein. AS A RESULT, EACH HOLDER OF SERIES A NOTES SHOULD CONSULT
SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF
EXCHANGING SUCH HOLDER'S SERIES A NOTES FOR SERIES B NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resales of Series B Notes received in
exchange for Series A Notes acquired by such broker-dealer as a result of
market-making or other trading activities. The Company has agreed that for a
period of one year from the date of this Prospectus, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of Series B Notes
by broker-dealers or any other persons. Series B Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Series B Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such Series
B Notes. Any broker-dealer that resells Series B Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Series B Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company and the Guarantors have agreed to pay all expenses incident to
the Company's performance of, or compliance with, the Registration Rights
Agreement and will indemnify the holders and certain parties related to the
holders against certain liabilities, including liabilities under the Securities
Act.
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LEGAL MATTERS
Legal matters in connection with the issuance of the Series B Notes will be
passed upon for the Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company at February 3, 1996
and for the fifty-three weeks then ended incorporated in this Prospectus by
reference to the Form 10-K have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report with respect thereto, and are so
incorporated herein in reliance upon such reports given upon the authority of
that firm as experts in accounting and auditing. The consolidated financial
statements of the Company at January 28, 1995 and for the year then ended, the
seventeen weeks ended January 29, 1994 and the thirty-five weeks ended October
2, 1993, incorporated in this Prospectus by reference to the Form 10-K have been
audited by Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), independent auditors
and are so incorporated herein in reliance upon the authority of that firm 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 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 the
Registration Statement, whereby Coopers & Lybrand is not found culpable nor pays
any part of the plaintiff's damages, legal costs and expenses as a result of a
judgment or a settlement of a claim against it. The Company has deposited a
total of $500,000 in escrow to fund payments under this indemnification
arrangement. In addition, the Company and the affiliates of Dickstein Partners
who own shares of the Company's common stock 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.
54
<PAGE> 58
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL IN CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR
WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES A NOTES
IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD
NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE OR SALE MADE HEREUNDER, SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
-----------------
TABLE OF CONTENTS
-----------------
Page
----
Available Information ..................................................... 2
Information Incorporated by Reference ..................................... 2
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 10
The Company ............................................................... 15
Use of Proceeds ........................................................... 15
Capitalization ............................................................ 16
Selected Consolidated Financial and Operating Data ........................ 17
The Exchange Offer ........................................................ 19
Description of Other Indebtedness ......................................... 27
Description of Series B Notes ............................................. 31
Certain Federal Income Tax Considerations ................................. 51
Plan of Distribution ...................................................... 52
Legal Matters ............................................................. 52
Experts ................................................................... 52
================================================================================
================================================================================
HILLS STORES COMPANY
OFFER TO EXCHANGE
12 1/2% SENIOR NOTES DUE 2003, SERIES B
FOR
12 1/2% SENIOR NOTES DUE 2003
----------
PROSPECTUS
----------
, 1996
================================================================================
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 Amended and Restated
Certificate of Incorporation of Hills Stores Company (the "Company") provides
that the Company shall indemnify each person, who, at any time, is, or shall
have been, a director or officer of the Company and was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he or she is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred in connection
with any such action, suit or proceeding, to the maximum extent permitted by
the General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended.
Section 102(b)(7) of the Delaware General Corporation Law gives a Delaware
corporation the power to adopt a charter provision eliminating or limiting the
personal liability of the directors to the corporation or its stockholders
provided that such provision may not eliminate or limit the liability of
directors for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) any acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) any
payment of a dividend or approval of a stock purchase that is illegal under
Section 174 of the Delaware Corporation Law, or (iv) any transaction from which
the director derived an improper personal benefit. Article Ninth of the
Company's Amended and Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company or to any of
its stockholders for monetary damages arising out of such director's breach of
fiduciary duty as a director of the Company, except to the extent that the
elimination or limitation of such liability is not permitted by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended.
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 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. Certain of the exhibits listed hereunder have previously been
filed with the Commission as exhibits to certain registration statements and
periodic reports set forth in the footnotes following this exhibit list and are
hereby incorporated by reference pursuant to Rule 411 promulgated under the
Securities Act and Rule 24 of the Commission's Rules of Practice. The location
of such document, so incorporated by reference, is indicated by footnote (the
number in parentheses).
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1(1) Amended and Restated Certificate of Incorporation of Hills
Stores Company.
1.2(2) Amended and Restated By-Laws of Hills Stores Company.
1.3 Certificate of Incorporation of Hills Department Store Company.
1.4 By-Laws of Hills Department Store Company.
II-1
<PAGE> 60
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.5 Articles of Organization of Canton Advertising, Inc.
1.6 By Laws of Canton Advertising, Inc.
1.7 Articles of Organization of Corporate Vision, Inc.
1.8 By Laws of Corporate Vision, Inc.
1.9 Articles of Incorporation of C.R.H. International, Inc.
1.10 By-Laws of C.R.H. International, Inc.
1.11 Articles of Incorporation of HDS Transport, Inc.
1.12 Code of Regulations of HDS Transport, Inc.
1.13 Certificate of Incorporation of Hills Distributing Company.
1.14 By-Laws of Hills Distributing Company.
4.1(3) Indenture dated as of April 19, 1996 among Hills Stores Company,
as issuer, Hills Department Store Company, C.R.H. International,
Inc., Canton Advertising, Inc., Corporate Vision, Inc., HDS
Transport, Inc. and Hills Distributing Company, as guarantors,
and Fleet National Bank, as trustee, relating to the 12 1/2%
Senior Notes due 2003 of the Hills Stores Company (including
form of note).
4.2(3) Registration Rights Agreement, dated as of April 19, 1996, by
and among Hills Stores Company, Hills Department Store Company,
C.R.H. International, Inc., Canton Advertising, Inc., Corporate
Vision, Inc., HDS Transport, Inc., Hills Distributing Company
and Lehman Brothers Inc.
4.3(3) Purchase Agreement, dated April 17, 1996 by and among Hills
Stores Company, Hills Department Store Company, HDS Transport,
Inc., C.R.H. International, Inc., Canton Advertising, Inc.,
Corporate Vision, Inc., Hills Distributing Company and Lehman
Brothers Inc.
5.1 Opinion of Foley, Hoag & Eliot LLP.
8.1 Opinion of Foley, Hoag & Eliot LLP as to certain tax matters.
12.1 Statement re computation of ratio of earnings to fixed charges.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Foley, Hoag & Eliot LLP (included in opinion filed as
Exhibit 5.1).
24.1* Powers of Attorney of directors and officers of Hills Stores
Company (included on signature page at page II-5).
24.2* Powers of Attorney of directors and officers of Hills Department
Store Company (included on signature page at page II-7).
24.3* Powers of Attorney of directors and officers of Canton
Advertising, Inc. (included on signature page at page II-9).
II-2
<PAGE> 61
EXHIBIT NO. DESCRIPTION
- ----------- -----------
24.4* Powers of Attorney of directors and officers of Corporate
Vision, Inc. (included on signature page at page II-10).
24.5* Powers of Attorney of directors and officers of C.R.H.
International, Inc. (included on signature page at page II- 11).
24.6* Powers of Attorney of directors and officers of HDS Transport,
Inc. (included on signature page at page II-12).
24.7* Powers of Attorney of directors and officers of Hills
Distributing Company (included on signature page at page II-
13).
25 Statement of Eligibility of Fleet National Bank, as trustee.
99.1(4) Indenture dated October 4, 1993 among Hills Stores Company, as
issuer, Hills Department Store Company, as guarantor, and Fleet
National Bank, as trustee, governing 10.25% Senior Notes due
2003 of Hills Stores Company (including form of note).
99.2(5) First Supplemental Indenture dated as of January 1, 1995 to
Indenture included as Exhibit 99.1.
99.3(5) Second Supplemental Indenture dated as of August 1, 1995 to
Indenture included as Exhibit 99.1.
99.4(6) Third Supplemental Indenture dated as of January 15, 1996 to
Indenture included as Exhibit 99.1.
99.5 Form of Letter of Transmittal.
- ---------
* Filed previously.
(1) Incorporated by reference from the Annual Report on Form 10-K of the
Company for the fiscal year ended January 28, 1995.
(2) Incorporated by reference from the Current Report on Form 8-K of the
Company dated January 18, 1996.
(3) Incorporated by reference from the Quarterly Report on Form 10-Q
of the Company for the fiscal quarter ended May 4, 1996.
(4) Incorporated by reference from the Registration Statement on Form 8-A of
the Company filed on October 5, 1993.
(5) Incorporated by reference from the Quarterly Report on Form 10-Q
of the Company for the fiscal quarter ended July 29, 1995.
(6) Incorporated by reference from the Current Report on Form 8-K of the
Company January 15, 1996.
(b) Financial Statement Schedules.
All required financial statement schedules are incorporated by
reference from the Annual Report on Form 10-K of the Company for the fiscal
year ended February 3, 1996.
ITEM 22. 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 to Section 10(a)(3) of
the Securities Act of 1933;
II-3
<PAGE> 62
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in 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 and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the charges in volume and price represent no more than 20
percent charge in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(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.
(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 to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became
effective.
(d) 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.
(e) 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
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 in 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.
II-4
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hills Stores
Company, one of the Registrants, has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of Canton, Commonwealth of Massachusetts, on June 13, 1996.
HILLS STORES COMPANY
By: /s/ Gregory K. Raven
_____________________________________
Gregory K. Raven
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven,
C. Scott Litten and William K. Friend and each of them severally, acting alone
and without the other, his true and lawful attorney-in-fact with the authority
to execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement necessary or advisable to enable
Hills Stores Company, one of the registrants, to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, with amendments may make
such other changes in the registration statement as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
CHAIM Y. EDELSTEIN*
_________________________________ Chairman of the Board June 13, 1996
CHAIM Y. EDELSTEIN
GREGORY K. RAVEN
_________________________________ Director, President and Chief June 13, 1996
GREGORY K. RAVEN Executive Officer
(Principal Executive Officer)
C. SCOTT LITTEN*
_________________________________ Chief Financial Officer June 13, 1996
C. SCOTT LITTEN (Principal Financial Officer)
KIM D. AHLHOLM*
_________________________________ Vice President-Controller June 13, 1996
KIM D. AHLHOLM (Principal Accounting Officer)
MARK B. DICKSTEIN*
_________________________________ Director June 13, 1996
MARK B. DICKSTEIN
STANTON J. BLUESTONE*
_________________________________ Director June 13, 1996
STANTON J. BLUESTONE
II-5
<PAGE> 64
SAMUEL L. KATZ*
_________________________________ Director June 13, 1996
SAMUEL L. KATZ
JOHN W. BURDEN III*
_________________________________ Director June 13, 1996
JOHN W. BURDEN III
ALAN S. COOPER*
_________________________________ Director June 13, 1996
ALAN S. COOPER
*By: GREGORY K. RAVEN
----------------------------
ATTORNEY-IN-FACT
II-6
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hills
Department Store Company, one of the Registrants, has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Canton, Commonwealth of Massachusetts, on
June 13, 1996.
HILLS DEPARTMENT STORE COMPANY
/s/ Gregory K. Raven
By:________________________________________
Gregory K. Raven
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven,
C. Scott Litten and William K. Friend and each of them severally, acting alone
and without the other, his true and lawful attorney-in-fact with the authority
to execute in the name of each such person, and to file with the Securities and
Exchange Commission, together with any exhibits thereto and other documents
therewith, any and all amendments (including without limitation post-effective
amendments) to this registration statement necessary or advisable to enable
Hills Department Store Company, one of the registrants, to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission in respect thereof, with amendments
may make such other changes in the registration statement as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
CHAIM Y. EDELSTEIN*
_________________________________ Chairman of the Board June 13, 1996
CHAIM Y. EDELSTEIN
GREGORY K. RAVEN
_________________________________ Director, President and Chief June 13, 1996
GREGORY K. RAVEN Executive Officer
(Principal Executive Officer)
C. SCOTT LITTEN*
_________________________________ Chief Financial Officer June 13, 1996
C. SCOTT LITTEN (Principal Financial Officer)
KIM D. AHLHOLM*
_________________________________ Vice President-Controller June 13, 1996
KIM D. AHLHOLM (Principal Accounting Officer)
MARK B. DICKSTEIN*
_________________________________ Director June 13, 1996
MARK B. DICKSTEIN
II-7
<PAGE> 66
STANTON J. BLUESTONE*
_________________________________ Director June 13, 1996
STANTON J. BLUESTONE
SAMUEL L. KATZ*
_________________________________ Director June 13, 1996
SAMUEL L. KATZ
JOHN W. BURDEN III*
_________________________________ Director June 13, 1996
JOHN W. BURDEN III
ALAN S. COOPER*
_________________________________ Director June 13, 1996
ALAN S. COOPER
* By GREGORY K. RAVEN
____________________________
Attorney-in-fact
II-8
<PAGE> 67
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Canton
Advertising, Inc., one of the Registrants, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Canton, Commonwealth of Massachusetts, on June 13,
1996.
CANTON ADVERTISING, INC.
/s/ Gregory K. Raven
By:________________________________________
Gregory K. Raven
President
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven
and William K. Friend and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with the authority to execute in the
name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this registration statement necessary or advisable to enable Canton
Advertising, Inc., one of the registrants, to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, with amendments may make such other
changes in the registration statement as the aforesaid attorney-in-fact
executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
GREGORY K. RAVEN
______________________________ Director and President June 13, 1996
GREGORY K. RAVEN (Principal Executive Officer and
Principal Financial Officer)
WILLIAM K. FRIEND
______________________________ Director and June 13, 1996
WILLIAM K. FRIEND Vice President-Secretary/Clerk
KIM D. AHLHOLM*
______________________________ Vice President-Controller June 13, 1996
KIM D. AHLHOLM (Principal Accounting Officer)
* By GREGORY K. RAVEN
____________________________
Attorney-in-fact
II-9
<PAGE> 68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Corporate
Vision, Inc., one of the Registrants, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Canton, Commonwealth of Massachusetts, on June 13,
1996.
CORPORATE VISION, INC.
By: /s/ GREGORY K. RAVEN
________________________________________
Gregory K. Raven
President
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven
and William K. Friend and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with the authority to execute in the
name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this registration statement necessary or advisable to enable Corporate
Vision, Inc., one of the registrants, to comply with the Securities Act of 1933,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, with amendments may make such other
changes in the registration statement as the aforesaid attorney-in-fact
executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ GREGORY L. RAVEN Director and President June 13, 1996
______________________________ (Principal Executive Officer and
GREGORY K. RAVEN Principal Financial Officer)
/s/ WILLIAM K. FRIEND Director and June 13, 1996
______________________________ Vice President-Secretary/Clerk
WILLIAM K. FRIEND
/s/ KIM D. AHLHOLM* Vice President-Controller June 13, 1996
______________________________ (Principal Accounting Officer)
KIM D. AHLHOLM
* By GREGORY K. RAVEN
____________________________
Attorney-in-fact
II-10
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, C.R.H.
International, Inc., one of the Registrants, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Canton, Commonwealth of Massachusetts, on June 13,
1996.
C.R.H. INTERNATIONAL, INC.
By: /s/ Gregory K. Raven
________________________________________
Gregory K. Raven
President
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven
and William K. Friend and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with the authority to execute in the
name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this registration statement necessary or advisable to enable C.R.H.
International, Inc., one of the registrants, to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, with amendments may make
such other changes in the registration statement as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Gregory K. Raven
______________________________ Director and President June 13, 1996
GREGORY K. RAVEN (Principal Executive Officer and
Principal Financial Officer)
/s/ William K. Friend
______________________________ Director and June 13, 1996
WILLIAM K. FRIEND Vice President-Secretary/Clerk
/s/ Kim D. Ahlholm*
______________________________ Vice President-Controller June 13, 1996
KIM D. AHLHOLM (Principal Accounting Officer)
* By GREGORY K. RAVEN
____________________________
Attorney-in-fact
II-11
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, HDS Transport,
Inc., one of the Registrants, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the Town
of Canton, Commonwealth of Massachusetts, on June 13, 1996.
HDS TRANSPORT, INC.
By: /s/ Gregory K. Raven
________________________________________
Gregory K. Raven
President
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven
and William K. Friend and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with the authority to execute in the
name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this registration statement necessary or advisable to enable HDS Transport,
Inc., one of the registrants, to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission in respect thereof, with amendments may make such other
changes in the registration statement as the aforesaid attorney-in-fact
executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Gregory K. Raven
______________________________ Director and President June 13, 1996
GREGORY K. RAVEN (Principal Executive Officer and
Principal Financial Officer)
/s/ William K. Friend
______________________________ Director and June 13, 1996
WILLIAM K. FRIEND Vice President-Secretary/Clerk
/s/ Kim D. Ahlholm*
______________________________ Vice President-Controller June 13, 1996
KIM D. AHLHOLM (Principal Accounting Officer)
* By GREGORY K. RAVEN
____________________________
Attorney-in-fact
II-12
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hills
Distributing Company, one of the Registrants, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Canton, Commonwealth of Massachusetts, on June 13,
1996.
HILLS DISTRIBUTING COMPANY
By: /s/ GREGORY K. RAVEN
________________________________________
Gregory K. Raven
President
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Gregory K. Raven
and William K. Friend and each of them severally, acting alone and without the
other, his true and lawful attorney-in-fact with the authority to execute in the
name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this registration statement necessary or advisable to enable Hills
Distributing Company, one of the registrants, to comply with the Securities Act
of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, with amendments may make
such other changes in the registration statement as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ GREGORY K. RAVEN Director and President June 13, 1996
- --------------------------- (Principal Executive Officer and
GREGORY K. RAVEN Principal Financial Officer)
/s/ WILLIAM K. FRIEND Director and June 13, 1996
- --------------------------- Vice President-Secretary/Clerk
WILLIAM K. FRIEND
/s/ KIM D. AHLHOLM* Vice President-Controller June 13, 1996
- --------------------------- (Principal Accounting Officer)
KIM D. AHLHOLM
* By GREGORY K. RAVEN
____________________________
Attorney-in-fact
</TABLE>
II-13
<PAGE> 72
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.1(1) Amended and Restated Certificate of Incorporation of
Hills Stores Company.
1.2(2) Amended and Restated By-Laws of Hills Stores Company.
1.3 Certificate of Incorporation of Hills Department Store Company.
1.4 By-Laws of Hills Department Store Company.
1.5 Articles of Organization of Canton Advertising, Inc.
1.6 By Laws of Canton Advertising, Inc.
1.7 Articles of Organization of Corporate Vision, Inc.
1.8 By Laws of Corporate Vision, Inc.
1.9 Articles of Incorporation of C.R.H. International, Inc.
1.10 By-Laws of C.R.H. International, Inc.
1.11 Articles of Incorporation of HDS Transport, Inc.
1.12 Code of Regulations of HDS Transport, Inc.
1.13 Certificate of Incorporation of Hills Distributing Company.
1.14 By-Laws of Hills Distributing Company.
4.1(3) Indenture dated as of April 19, 1996 among Hills Stores Company,
as issuer, Hills Department Store Company, C.R.H. International,
Inc., Canton Advertising, Inc., Corporate Vision, Inc., HDS
Transport, Inc. and Hills Distributing Company, as guarantors,
and Fleet National Bank, as trustee, relating to the 12 1/2%
Senior Notes due 2003 of the Hills Stores Company (including
form of note).
4.2(3) Registration Rights Agreement, dated as of April 19, 1996, by
and among Hills Stores Company, Hills Department Store Company,
C.R.H. International, Inc., Canton Advertising, Inc., Corporate
Vision, Inc., HDS Transport, Inc., Hills Distributing Company
and Lehman Brothers Inc.
4.3(3) Purchase Agreement, dated April 17, 1996 by and among Hills
Stores Company, Hills Department Store Company, HDS Transport,
Inc., C.R.H. International, Inc., Canton Advertising, Inc.,
Corporate Vision, Inc., Hills Distributing Company and Lehman
Brothers Inc.
5.1 Opinion of Foley, Hoag & Eliot LLP.
8.1 Opinion of Foley, Hoag & Eliot LLP as to certain tax matters.
12.1 Statement re computation of ratio of earnings to fixed charges.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Foley, Hoag & Eliot LLP (included in opinion filed as
Exhibit 5.1).
24.1* Powers of Attorney of directors and officers of Hills Stores
Company (included on signature page at page II-5).
24.2* Powers of Attorney of directors and officers of Hills Department
Store Company (included on signature page at page II-7).
24.3* Powers of Attorney of directors and officers of Canton
Advertising, Inc. (included on signature page at page II-9).
<PAGE> 73
EXHIBIT NO. DESCRIPTION
- ----------- -----------
24.4* Powers of Attorney of directors and officers of Corporate
Vision, Inc. (included on signature page at page II-10).
24.5* Powers of Attorney of directors and officers of C.R.H.
International, Inc. (included on signature page at page II- 11).
24.6* Powers of Attorney of directors and officers of HDS Transport,
Inc. (included on signature page at page II-12).
24.7* Powers of Attorney of directors and officers of Hills
Distributing Company (included on signature page at page II-
13).
25 Statement of Eligibility of Fleet National Bank, as trustee.
99.1(4) Indenture dated October 4, 1993 among Hills Stores Company, as
issuer, Hills Department Store Company, as guarantor, and Fleet
National Bank, as trustee, governing 10.25% Senior Notes due
2003 of Hills Stores Company (including form of note).
99.2(5) First Supplemental Indenture dated as of January 1, 1995 to
Indenture included as Exhibit 99.1.
99.3(5) Second Supplemental Indenture dated as of August 1, 1995 to
Indenture included as Exhibit 99.1.
99.4(6) Third Supplemental Indenture dated as of January 15, 1996 to
Indenture included as Exhibit 99.1.
99.5 Form of Transmittal Letter.
- ---------
* Filed previously.
(1) Incorporated by reference from the Annual Report on Form 10-K of the
Company for the fiscal year ended January 28, 1995.
(2) Incorporated by reference from the Current Report on Form 8-K of the
Company dated January 18, 1996.
(3) Incorporated by reference from the Quarterly Report on Form 10-Q of th>
Company for the fiscal quarter ended May 4, 1996.
(4) Incorporated by reference from the Registration Statement on Form 8-A of
the Company filed on October 5, 1993.
(5) Incorporated by reference from the Quarterly Report on Form 10-Q of the
Company for the fiscal quarter ended July 29, 1995.
(6) Incorporated by reference from the Current Report on Form 8-K of the
Company January 15, 1996
<PAGE> 1
EXHIBIT 1.3
CERTIFICATE OF INCORPORATION
OF
HILLS DEPARTMENT STORE COMPANY
FIRST: The name of the corporation (the "Corporation") is:
Hills Department Store Company
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New
Castle, and the name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock that the
Corporation shall have the authority to issue is 1,000 shares of common stock
having a par value of $.01 per share.
FIFTH: In furtherance of and not in limitation of powers
conferred by statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any,
contained in the by-laws of the Corporation, the by-laws may be adopted,
amended or repealed by the Board of Directors of the Corporation; and
(b) Elections of directors need not be by written ballot
unless, and only to the extent, otherwise provided in the by-laws.
SIXTH: The Corporation shall indemnify each person who, at any
time, is, or shall have been, a director or officer of the Corporation 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. The foregoing right of indemnification
shall in no way be exclusive of any other rights of indemnification to
<PAGE> 2
which any such director or officer may be entitled, under any by-law, agreement,
vote of directors or stockholders or otherwise. No amendment to or repeal of the
provisions of this Article SIXTH shall deprive a director or officer of the
benefit hereof with respect to any act or failure to act occurring prior to
such amendment or repeal.
SEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
EIGHTH: No director of the Corporation shall be personally
liable to the Corporation or to any of its stockholders for monetary damages
arising out of such director's breach of fiduciary duty as a director of the
Corporation, 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. No amendment to or
repeal of the provisions of this Article EIGHTH shall deprive any director of
the Corporation of the benefit hereof with respect to any act or failure to act
of such director occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation in
the manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
TENTH: The name and the mailing address of the sole
incorporator of the Corporation is:
NAME MAILING ADDRESS
William K. Friend c/o Hills Stores Company
15 Dan Road
Canton, Massachusetts 02021
<PAGE> 3
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of
August, 1993.
/s/ William K. Friend
-------------------------
William K. Friend
Sole Incorporator
<PAGE> 1
EXHIBIT 1.4
HILLS DEPARTMENT STORE COMPANY
BY-LAWS
ARTICLE I - OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be at
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place on such date and at such time as the board of
directors shall each year fix, which date shall be within thirteen months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes prescribed in the notice of the meeting, may be
called by the board of directors, the chairman of the board or the president and
shall be held at such place, date and time as the board of directors, the
chairman of the board or the president shall fix.
SECTION 3. NOTICE OF MEETINGS. Written notice of stockholder meetings
stating the place, date and time of the meeting, and, in the case of special
meetings, the general nature of the business to be considered, shall be given to
each stockholder entitled to vote at such meeting not less than ten (10) nor
more than sixty (60) days before the date of the meeting.
SECTION 4. VOTING. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder on the record date for the meeting,
but no proxy shall be voted after three years from its date unless such proxy
provides for a longer period.
All elections for directors shall be decided by a plurality
of the votes cast. All other questions shall be decided by
1
<PAGE> 2
majority vote except as otherwise provided by the certificate of
incorporation or by statute.
SECTION 5. STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produce and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
SECTION 6. QUORUM. At any meeting of the stockholder, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by statute or the certificate of incorporation. In case a quorum shall
not be present or represented at any meeting, a majority in interest of the
stockholders entitled to vote thereat, present in person or by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
any such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally noticed.
SECTION 7. BUSINESS TRANSACTED. No business other than that stated in
the notice shall be transacted at any meeting without consent of the holders of
66-2/3% of the outstanding shares of the corporation's common stock.
SECTION 8. ACTION BY WRITTEN CONSENT. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon
2
<PAGE> 3
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III - DIRECTORS
SECTION 1. NUMBER AND TERM. Except as otherwise provided in the
certificate of incorporation, the number of directors which shall constitute the
whole board shall be no less than three, the exact number to be determined by
the board of directors. Election of directors shall be by written ballot. The
directors shall be elected at the annual meeting of the stockholders (or at the
time of the taking of action by written consent in lieu thereof) and each
director elected shall hold office for a term of one year or until such
director's successor is elected and qualified, except as otherwise provided
herein or in the certificate of incorporation or as required by law.
SECTION 2. VACANCIES. Any vacancies on the board of directors resulting
from death, resignation, removal or other cause shall only be filled by the
board of directors by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the board of
directors, or by a sole remaining director, and newly created directorships
resulting from an increase in the number of directors shall be filled by the
board of directors, or if not so filled, by the stockholders at the next annual
meeting thereof or at a special meeting called for that purpose in accordance
with Section 2 of Article II of these by-laws or by action taken by written
consent in lieu thereof). Any director elected in accordance with the preceding
sentence of this Section 2 shall hold office until the next annual election (or
action taken by written consent in lieu thereof) and until such director's
successor shall have been elected and qualified.
SECTION 3. POWERS. The business of the corporation shall be managed by
or under the direction of the board of directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
SECTION 4. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the board of directors and publicized
among all directors. A notice of each regular meeting shall not be required.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by one-third of the directors then in office or by the chairman of
the board and shall be held at such place, on such date, and at such time as
such directors or the chairman of the board shall fix. Notice of the place,
date, and
3
<PAGE> 4
time of each such special meeting shall be sent by overnight delivery service,
mail, telegraph, facsimile transmission, telex or similar means, or be
personally delivered, to each director not later than 48 hours prior to the time
at which the meeting is to be held, but notice need not be given to any director
who shall, either before or after the meeting, submit a signed waiver of such
notice or who shall attend such meeting without protesting, prior to or at its
commencement, the lack of such notice to such director. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
SECTION 7. QUORUM AND ACTION. At any meeting of the board of directors,
one-third of the total number of the whole board, but not less than two, shall
constitute a quorum for all purposes. The vote of a majority of those directors
present at any meeting at which a quorum is present shall be necessary for the
passage of any resolution or act of the board of directors, unless as otherwise
required by law, the certificate of incorporation or these by-laws. In the
absence of a quorum for any such meeting, a majority of the directors present
thereat may adjourn such meeting from time to time, without notice other than
announcement at such meeting, until a quorum shall be present. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
noticed.
SECTION 8. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the board of directors may be taken
without a meeting, if all members of the board consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the board
of directors.
SECTION 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the board of directors may participate in a meeting of such board by means of
conference telephone or similar communications equipment that enables all
persons participating in the meeting to hear each other. Such participation
shall constitute presence in person at such meeting.
SECTION 10. CONDUCT OF BUSINESS. At any meeting of the board of
directors, business shall be transacted in such order and manner as the board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law.
SECTION 11. REMOVAL OF DIRECTORS. Any director or the entire board of
directors may be removed, either for or without
4
<PAGE> 5
cause, at any time by the affirmative vote of the holders of a majority of all
the shares of stock outstanding and entitled to vote in the election of
directors at a special meeting of the stockholders called for the purposes (or
by action taken by written consent in lieu thereof), and the vacancy or
vacancies thus created may be filled, at the meeting held for the purpose of
removal, by the affirmative vote of a majority of the shares so entitled to
vote.
SECTION 12. COMPENSATION. The board of directors shall have the
authority to fix the compensation, if any, of the directors.
SECTION 13. CHAIRMAN OF THE BOARD. The chairman of the board of
directors, if one is elected, shall, if present, preside at meetings of the
board of directors and, if present, preside at meetings of the stockholders. The
chairman of the board shall, when requested, counsel with and advise the
officers of the corporation and shall perform such other duties as may from time
to time be determined by the board of directors.
ARTICLE IV - COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. ESTABLISHMENT OF COMMITTEES OF THE BOARD OF DIRECTORS. The
board of directors may, in accordance with and subject to the General
Corporation Law of the State of Delaware, from time to time establish committees
of the board of directors to exercise such powers and authorities of the board
of directors and to perform such other functions, as the board of directors may
from time to time determine.
SECTION 2. PROCEDURE; MEETINGS; QUORUM. Regular meetings of committees
of the board of directors, of which no notice shall be necessary, may be held at
such times and places as shall be fixed by resolution adopted by a majority of
the members of such committee. Special meetings of any committee of the board of
directors shall be called at the request of any member of such committee. Notice
of each special meeting of any committee of the board of directors shall be sent
by overnight delivery service, mail, telegraph, facsimile transmission, telex or
telephone, or be delivered personally, to each member thereof not later than 48
hours prior to the time at which the meeting is to be held, but notice need not
be given to any member who shall, either before or after the meeting, submit a
signed waiver of such notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of such notice to such
member. Any special meeting of any committee of the board of directors shall be
a legal meeting without any notice thereof having been given, if all the members
thereof shall be present thereat. Notice of any adjourned meeting of any
committee of the board of directors need not be given. Any committee of the
board of directors may adopt such rules and regulations not
5
<PAGE> 6
inconsistent with the provisions of law, the certificate of incorporation, these
by-laws or the resolutions of the board of directors establishing such committee
for the conduct of its meetings as such committee of the board of directors may
deem proper. A majority of the members of any committee of the board of
directors shall constitute a quorum for the transaction of business at any
meeting, and the vote of a majority of the members thereof present at any
meeting at which a quorum is present shall be the act of such committee. Each
committee of the board of directors shall keep written minutes of its
proceedings and shall report on such proceedings to the board of directors.
ARTICLE V - OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall consist of a
president, one or more vice presidents (any of whom may be designated as an
executive vice president, senior vice president or assistant vice president and
any of whom may be designated as a vice president with particular functions or
responsibilities), a treasurer, a secretary and such other officers as may from
time to time be elected or appointed by the board of directors or pursuant to
its delegated power. Officers shall hold office until their successors are
elected and qualified or until their earlier resignation or removal. None of the
officers of the corporation need be directors. The officers shall be elected at
the first meeting of the board of directors after each annual meeting. Any
number of offices may be held by the same person. The salaries of all officers
of the corporation shall be fixed by the board of directors.
SECTION 2. OTHER OFFICERS AND AGENTS. The board of directors may
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such power and perform such
duties as shall be determined from time to time by the board of directors.
SECTION 3. DELEGATED POWERS. The board of directors may
delegate to the president the power to grant titles of office in
the corporation to employees holding responsible positions in the
corporation.
SECTION 4. PRESIDENT. The president shall have the general powers and
duties of supervision and management usually vested in the office of president
of a corporation. The president shall, if present and in the absence of the
chairman of the board, preside at all meetings of the stockholders and, if a
director and present, and in the absence of the chairman of the board, preside
at meetings of the board of directors. The president shall have general
supervision, direction and control of all of the other officers and agents of
the corporation and of the business of the corporation. The president shall have
the power
6
<PAGE> 7
to sign and execute in the name of the corporation deeds, mortgages, bonds,
stock certificates, contracts and other instruments of the corporation as
authorized by the board of directors.
SECTION 5. VICE-PRESIDENT. Each vice-president shall have such powers
and shall perform such duties as shall be assigned to him by the board of
directors.
SECTION 6. TREASURER. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. The treasurer
shall deposit all moneys and other valuables in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
The treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements. The treasurer shall render to the president and board of
directors at the regular meetings of the board of directors, or whenever they
may request it, an account of all his transactions as treasurer and of the
financial condition of the corporation. If required by the board of directors,
the treasurer shall give the corporation a bond for the faithful discharge of
his duties in such amount and with such surety as the board of directors shall
prescribe.
SECTION 7. SECRETARY. The secretary shall issue all authorized notices
for, and shall attend and keep minutes of, all meetings of the stockholders and
of the board of directors. The secretary shall have charge of the corporate
books and shall have custody of the corporate seal.
SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES. Assistant
treasurers and assistant secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the board of directors.
ARTICLE VI - STOCK
SECTION 1. CERTIFICATES OF STOCK. The shares of the corporate shall be
represented by a certificate or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the chairman of the board of
directors, or the president or any vice-president of the corporation, and the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the corporation.
Any of or all the signatures on a certificate may be facsimile. In case
any officer, transfer agent or registrar who
7
<PAGE> 8
has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if the signatory were such officer, transfer agent or registrar at the date
of issue.
SECTION 2. TRANSFER OF STOCK. Transfers of stock shall be made only
upon the transfer books of the corporation kept at an office of the corporation
or by transfer agents designated to transfer shares of the stock of the
corporation. Except where a certificate is issued in accordance with Section 4
of Article VI of these by-laws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
SECTION 3. RECORD DATE. The board of directors may fix a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for any other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to vote at any
meeting of stockholders or any adjournment thereof; to express consent to
corporate action in writing without a meeting; to receive payment of any
dividend or other distribution or allotment of any rights; or to exercise any
rights with respect to any change, conversion or exchange of stock or with
respect to any other lawful action.
SECTION 4. LOST CERTIFICATES. In the event of the loss, theft or
destruction of any certificate of stock, another may be issued in its place
pursuant to such regulations as the board of directors may establish concerning
proof of such loss, theft or destruction and concerning the giving of a
satisfactory bond or bonds of indemnity.
SECTION 5. REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the board of directors may establish.
SECTION 6. DIVIDENDS. Subject to the provisions of the certificate of
incorporation, the board of directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Dividends may be paid
in cash, in property, or in shares of capital stock.
ARTICLE VII - GENERAL PROVISIONS
SECTION 1. SEAL. The board of directors may provide a suitable seal.
The corporate seal shall have inscribed thereon the name of the corporation, the
year of its creation and the words "CORPORATE SEAL DELAWARE". Said seal may be
used by
8
<PAGE> 9
causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.
SECTION 2. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the board of directors.
SECTION 3. CHECKS. All checks, drafts, or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officers or such other person or person and
in such manner as shall be determined from time to time by resolution of the
board of directors.
SECTION 4. NOTICE AND WAIVER OF NOTICE. Whenever notice is required to
be given to any stockholder, director, officer or agent, such requirement shall
not be construed to mean personal notice. Any notice so required may in every
instance be effectively given by depositing the same in the United States mail,
postage prepaid, or by sending the same by overnight delivery service,
telegraph, facsimile transmission, telex or personal delivery, addressed to the
person entitled there to at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing, delivery or transmission. Stockholders not entitled to vote shall
not be entitled to receive notice of any meetings except as otherwise provided
by statute.
Whenever any notice is required to be given under the provisions of any
law, or under the provisions of the certificate of incorporation of the
corporation or these by-laws, a written waiver thereof signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed proper notice. Neither the business nor the purpose of
any meeting need be specified in such a waiver.
SECTION 5. INDEMNIFICATION. (a) The corporation shall indemnify any
person who 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 (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent 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 actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding,had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or
9
<PAGE> 10
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent 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) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b) of this
Section 5, or in defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, he shall, without limiting the
provisions of paragraph (a) above, be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under paragraphs (a) and (b) of this
Section 5 (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in paragraphs (a) and (b)
of this Section 5. Such determination shall be made (i) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceedings or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
10
<PAGE> 11
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation pursuant to this Section 5 or as otherwise
authorized by law. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 5 shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The corporation, at its expense, may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent 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 any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Section 5 or under the
provisions of the General Corporation Law of the State of Delaware.
(h) The indemnification and advancement of expenses provided
by, or granted pursuant to,this Section 5 shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(i) All rights to indemnification and advancement of expenses
under this Section 5 shall be deemed to be provided by contract between the
corporation and the director, officer, employee or agent who serves in such
capacity at any time while these by-laws and other relevant provisions of the
General Corporation Law of the State of Delaware and other applicable law, if
any, are in effect.
(j) Any repeal or modification of the foregoing
11
<PAGE> 12
paragraphs by the stockholders of the corporation shall not adversely affect any
right or protection of a director, officer, employee or agent of the corporation
existing at the time of such repeal or modification.
(k) If the General Corporation Law of the State of Delaware is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, officers, employees or agents, then such
person, in addition to the circumstances in which he is not now personally
liable, shall be free of liability to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended.
(l) For purposes of this Section 5, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if is separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Section 5 with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(m) For purposes of this Section 5, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent by the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation", as referred to in
this Section 5.
(n) If this Section 5 or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each person as provided above as to
expenses (including attorneys' fees), judgments,fines and amounts paid in
settlement with respect to any action, suit or proceedings, whether civil,
criminal, administrative or investigative, including a grand jury proceeding and
an action by the corporation, to the full extent
12
<PAGE> 13
permitted by any applicable portion of this Section 5 that shall not have been
invalidated or by any other applicable law.
ARTICLE VIII - AMENDMENTS
These by-laws may be amended or repealed by the board of directors at
any meeting or by the stockholders at any meeting.
13
<PAGE> 1
EXHIBIT 1.5
DO NOT USE PHOTOCOPIES - ONLY ORIGINALS WILL
BE ACCEPTED FOR FILING NOTE: ONCE DOCUMENT IS ACCEPTED AND
FILED, CHANGES MUST BE BY AMENDMENT OR CERTIFICATE OF CHANGE ONLY!
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, SECRETARY
- ---------- ONE ASHBURTON PLACE, BOSTON, MASS. 02108
Examiner ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
Incorporators
NAME POST OFFICE ADDRESS
Include given name in full in case of natural persons; in case
of corporation, give state of incorporation.
CHR International, Inc. 33 North High Street
Columbus, Ohio 43215
State of incorporation - Ohio
The above-named incorporator(s) do hereby associate
(themselves) with the intention of forming a corporation under the provisions of
General Laws, Chapter 156B and hereby state(s):
- ------------ 1. The name by which the corporation shall be known is:
Name
Approved
Canton Advertising, Inc.
2. The purpose for which the corporation is formed is as
follows:
a. To establish, maintain, conduct and carry on an
advertising business and to engage in any other
business permitted by law.
b. To do all acts requisite or proper under the laws
of domicile to qualify the Corporation in and to
do business in, any other state, territory, the
District of Columbia or dependency.
c. In general to have and exercise any lawful act or
activity and/or any rights, powers or privileges
which are now or may hereafter be conferred upon
corporations under the laws of the Commonwealth of
Massachusetts.
C / /
P / /
M / /
RA / /
Note: If the space provided under any article or item of this
form is insufficient, additions shall be set forth on separate 8 1/2 x
11 sheets of paper leaving a left hand margin at least 1 inch for
binding. Additions to more than one article may be continued on a
single sheet so long as each article concerning each such addition is
clearly indicated.
- -------------
PC
<PAGE> 2
3. The total number of shares and part value, if any, of each class of
stock within the corporation is authorized as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE
-------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES PAR AMOUNT
VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred $
Common 1,000
------------------------------------------------------------------------------------------------------------------
</TABLE>
4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as to
each class thereof and any series now established.
NONE
5. The restriction, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are as follows:
NONE
6. Other lawful provisions, if any, for the conduct and regulation of
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or its directors or stockholders, or of any class of stockholders.
NONE
<PAGE> 3
7. By laws of the corporation have been duly adopted and the initial
directors, president, treasurer and clerk, whose names are set out
below have been duly elected.
8. The effective date of organization of the corporation shall be the date
of filing with the Secretary of the Commonwealth or if later date is
desired, specify date (not more than 30 days after the date of the
filing). The desired effective date of organization is the date of
filing hereof with the Secretary of the Commonwealth.
9. The following information shall not for any purpose be treated as a
permanent part of the Articles of Organization of the corporation:
a. The post office address of the initial principal office of the
corporation in Massachusetts is:
15 Dan Road
Canton, Massachusetts 02021
b. The name, residence, and post office address of each of the
initial directors and following officers of the corporation
are as follows:
<TABLE>
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Wes McDonough 15 Dan Road, Canton, MA 02021
Treasurer: David R. May 33 North High Street, Columbus, Ohio 43215
Clerk: William K. Friend 33 North High Street, Columbus, Ohio 43215
Directors: Herbert H. Schiff 33 North High Street, Columbus, Ohio 43215
George R. Friese 33 North High Street, Columbus, Ohio 43215
Stephen A. Goldberger 33 North High Street, Columbus, Ohio 43215
Larry Voelker 33 North High Street, Columbus, Ohio 43215
</TABLE>
c. The date initially adopted on which the corporation's fiscal
year ends is:
The last Saturday in January of each year.
d. The date initially fixed in the by-laws for the annual meeting
of stockholders of the corporation is:
The first Friday in May of each year.
e. The name and business address of the resident agent, if any,
of the corporation is:
Wes McDonough 15 Dan Road, Canton, MA 02021
IN WITNESS WHEREOF and under the penalties of perjury the INCORPORATOR(S)
sign(s) these Articles of Organization this day of 19
CRH INTERNATIONAL, INC.
----------------------------------------------
BY: /s/ William K. Friend, Secretary
----------------------------------------------
----------------------------------------------
The signature of each incorporator which is not a natural person must be an
individual who shall show the capacity in which he acts and by signing shall
represent under the penalties of perjury that he is duly authorized on its
behalf to sign these Articles of Organization.
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 12
-----------------------------------------------------------------
I hereby certify that, upon an examination of the
within written articles of organization, duly submitted to me,
it appears that the provisions of the General Laws relative to
the organization of corporations have been complied with, and
I hereby approve said articles; and the filing fee in the
amount of $150.00 having been paid, said articles are deemed
to have been filed with me this 27th day of July 1984.
Effective date
MICHAEL JOSEPH CONNOLLY
Secretary of State
PHOTO COPY OF ARTICLES OF ORGANIZATION TO BE
SENT TO BE FILLED IN BY CORPORATION
TO:
Richard C. Doran
Assistant Corporate Counsel
SCOA Industries, Inc.
33 North High Street
Columbus, Ohio 43215
Telephone: (614) 221-7261
FILING FEE: 1/20 of 1% of the total amount of the
authorized capital stock with par value, and one
cent a share for all authorized shares without par
value, but not less than $150. General Laws,
Chapter 156B. Shares of stock with a par value of
less than one dollar shall be deemed to have par
value of one dollar per share.
<PAGE> 1
EXHIBIT 1.6
CANTON ADVERTISING, INC.
******************************
BY LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Canton,
Massachusetts.
Section 2. The corporation may also have offices at such other places
both within and without the Commonwealth of Massachusetts as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
ANNUAL MEETINGS OF STOCKHOLDERS
Section 1. All meetings of stockholders for the election of directors
shall be held at 33 North High Street, Columbus, State of Ohio. The time and
place for the election of directors shall not be changed within sixty days next
preceding the date on which such elections are to be held. If such change is
made, a notice of the change must be given to stockholders at least twenty days
before the election of directors.
Section 2. Annual meetings of stockholders, commencing with the year
1985, shall be held on the first Friday in May, if not a legal holiday, and if a
legal holiday, then on the secular day following, at 10:00 AM, at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting. The election of
directors need not be by ballot.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be given to each stockholder entitled
to vote thereat not less than seven days before the date of the meeting.
ARTICLE III
SPECIAL MEETINGS OF STOCKHOLDERS
Section 1. Special meetings of stockholders for any purpose other than
the election of directors may be held at such time and
<PAGE> 2
place within or without the Commonwealth of Massachusetts as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the President, the Board of Directors, or the
holders of not less than one-tenth of all the shares of stock entitled to vote
at the meeting.
Section 3. Written or printed notice of a special meeting of
stockholders, stating the time, place and purpose or purposes thereof, shall be
given to each stockholder entitled to vote thereat, at least seven days before
the date fixed for the meeting.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders present or represented by
proxy shall have the power to adjourn the meeting from time to time, without
notice, other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority
of the shares of stock represented at the meeting shall be the act of the
stockholders unless the vote of a greater number of shares of stock is required
by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. A stockholder may vote either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact.
In all elections for directors, every stockholder entitled to vote
shall have the right to vote, in person or by proxy, the number of shares of
stock owned by him, for as many persons as there are directors to be elected, or
to cumulate the vote of said shares, and give one candidate as many votes as the
number of directors multiplied by the number of his shares of stock
2
<PAGE> 3
shall equal, or to distribute the votes on the same principle among as many
candidates as he may see fit.
ARTICLE V
DIRECTORS
Section 1. Directors need not be residents of the Commonwealth of
Massachusetts nor stockholders of the corporation. The directors, other than the
first Board of Directors, shall be elected at the annual meeting of the
stockholders and each director elected shall serve until the next succeeding
annual meeting of stockholders. The number of directors shall be not less than
three nor more than twelve and shall be fixed or changed by resolution adopted
by the holders of a majority of the shares present in person or by proxy at the
Annual Meeting or any meeting called for the purpose of electing directors. The
President of the Corporation need not be a Director.
Section 2. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
Section 3. The business affairs of the corporation shall be managed by
its Board of Directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by laws directed or required to be exercised or done
by the stockholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the
Commonwealth of Massachusetts, at such place or places as they may from time to
time determine.
Section 5. The Board of Directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers, or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the Board of Directors, regular or special, may
be held either within or without the Commonwealth of Massachusetts.
3
<PAGE> 4
Section 2. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the Board of Directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the Board.
Section 4. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the Vice Chairman of the Board, the President or any
Vice President on three (3) days' notice to each director, either personally or
by mail or by telegram; special meetings shall be called by the President or the
Secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The Board of Directors, by resolution adopted by a majority
of the number of directors fixed by the by laws or otherwise, may designate two
or more directors to constitute an executive committee, which committee, to the
extent provided in such resolution, shall have and exercise all of the authority
of the Board of Directors in the management of the corporation, except as
otherwise required by law. Vacancies in the membership of the committee shall be
filled by the Board of Directors at a regular or special meeting of the Board of
Directors. The
4
<PAGE> 5
executive committee shall keep regular minutes of its proceedings and report the
same to the Board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by laws, notice is required to be given to
any director of stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice whatsoever is required to be given under
the provisions of the statutes or under the provisions of the articles of
incorporation or these by laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The general officers of the corporation shall consist of a
Chairman of the Board, a Vice Chairman of the Board, a President, an Executive
Vice President, one or more other Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such
other officers as may from time to time be determined by the Board of Directors,
all of whom shall have such duties and authority as may be prescribed by the by
laws and such, not inconsistent with the by laws, as may be prescribed by the
Board of Directors. The Board of Directors need not fill the offices of Chairman
of the Board, Vice Chairman of the Board, and Executive Vice President. Any two
or more of such offices, other than those of Secretary and Assistant Secretary
or Treasurer and Assistant Treasurer, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument on behalf of the
Corporation in more than one capacity. The officers of the Corporation shall
hold office for one year and until their successors are chosen and shall
qualify.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, who need not be
director, and shall choose one or more vice-presidents, a secretary and a
treasurer, none of whom need be a member of the Board.
5
<PAGE> 6
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors, is
authorized to execute and deliver on behalf of the corporation contracts, leases
and other agreements and certificates for shares, and shall have such other
powers and duties as may be prescribed by the Board of Directors.
Section 7. Vice Chairman of the Board. The Vice Chairman of the Board,
in the absence of the Chairman of the Board, or in the event that office is
vacant, shall preside at meetings of the stockholders and of the Board of
Directors. He is authorized to execute and deliver on behalf of this corporation
contracts, leases and other agreements and certificates for shares, and shall
have such other powers and duties as may be prescribed by the Board of
Directors.
Section 8. The President. The President, in the absence of the Chairman
of the Board and Vice Chairman of the Board, or in the event those offices are
vacant, shall preside at meetings of the stockholders and of the Board of
Directors. However, the President need not be a Director. He shall have general
supervisory control over the affairs of the corporation, subject, however, to
the direction of the Chairman of the Board and the Vice Chairman of the Board,
when those offices are not vacant, and to the control of the Board of Directors.
If the office of Executive Vice President is vacant, the President shall also
perform the duties and be vested with the authority of that office. The
President is authorized to execute and deliver on behalf of the corporation
contracts, leases and other agreements, and certificates for shares.
Section 9. The Executive Vice President. The Executive Vice President,
if one be elected by the Board of Directors, shall be the acting operating
executive officer of the corporation. He shall have general supervision,
direction and active management of the business of the corporation, subject,
however, to the supervision of the President and the control of the Board of
Directors. He shall see that all orders and resolutions of the Board of
Directors are carried into effect. He is authorized
6
<PAGE> 7
to execute and deliver on behalf of the corporation contracts, leases and other
agreements and certificates of shares. He shall submit a complete and detailed
report of the operations of the corporation for the fiscal year and of its
financial condition to the Board of Directors at its first regular meeting held
after such report becomes available and to the stockholders at their annual
meetings, and shall, from time to time, report to the Board of Directors all
matters within his knowledge which the interests of the corporation may require
to be brought to its notice.
Section 10. The Vice President. The Vice President shall perform such
duties, not inconsistent with these by laws as may be conferred upon them by
these by laws or as may, from time to time, be assigned to them by the Board of
Directors or the President. Each vice president is authorized to execute and
deliver on behalf of the corporation all contracts, leases, extensions of leases
and other agreements and certificates and certificates for shares. In the
absence of the President or Executive Vice President, the Vice President
designated by the President or Executive Vice President, as the case may be (or
in the absence of such designation, the Vice President designated by the Board
of Directors), shall perform the duties of the President or the Executive Vice
President, and when so acting, shall have in addition to the powers herein
specifically conferred, all the powers of the President or the Executive Vice
President, for whom he is acting. The authority of Vice Presidents to sign in
the name of the corporation all contracts, leases, extension of leases, and
other agreements and certificates for shares shall be coordinate with like
authority of the President and Executive Vice President.
Section 11. The Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders, in books provided by
the corporation for such purpose. He shall give notice of meetings of the Board
of Directors and stockholders. He shall prepare all lists of stockholders and
their addresses required to be prepared by the provisions of any present or
future status of the Commonwealth of Massachusetts. He is authorized to execute
and deliver on behalf of the corporation, all contracts, leases, certificates
for shares and other instruments, and may affix thereto the seal of the
corporation. He shall have charge of such books and papers as the Board of
Directors may direct. He shall file all reports to states and to the Federal
Government, and in general, perform all the duties which are incident to the
office of Secretary of the corporation, subject at all times to the direction
and control of the Board of Directors or the President or Executive Vice
President.
Section 12. The Treasurer. The Treasurer shall receive and have the
custody of all the funds and securities of the corporation. When necessary and
proper, he shall endorse on behalf of this corporation all checks, notes or
other obligations and evidences of the payment of money payable to the
corporation
7
<PAGE> 8
or coming into his possession, and shall deposit the funds arising therefrom,
together with all other funds of the corporation or coming into his possession,
in such banks as may be selected as depositories of the corporation or properly
care for them in such other manner as the Board of Directors may direct. He
shall be authorized to execute and deliver for and on behalf of the corporation
all bills, notes and other evidences of indebtedness of the corporation and
contracts, leases and agreements. Whenever required by the Board of Directors to
do so, he shall exhibit a complete and true statement of his cash account, and
of the securities and other property in his possession, custody or control.
He shall cause to be entered regularly in books belonging to the
corporation and to be kept for such purpose, a full and accurate account of all
money received and paid by him on account of the corporation, together with all
other business transactions. He shall at all reasonable times, within the hours
of business, exhibit the books and accounts to any director. He is authorized to
sign with other officers certificates for shares of said corporation and may
affix thereto the seal of the corporation. He shall perform all duties which are
incident to the office of Treasurer of a corporation subject, however, at all
times to the direction and control of the Board of Directors. If the Board of
Directors shall so require, he shall give bond, in such sum and with such
sureties as the Board of Directors may direct for the faithful performance of
his duties and for the safe custody of the funds and property of the corporation
coming into his possession.
Section 13. Assistant Treasurers and Assistant Secretary. The Assistant
Treasurers and Assistant Secretaries shall perform such duties as may be
prescribed hereunder or by the Board of Directors or by the President or
Executive Vice President.
In the absence or disability of the Treasurer, his duties may be
performed by an Assistant Treasurer.
In the absence or disability of the Secretary, his duties may be
performed by an Assistant Secretary.
Section 14. Statutory Duties. Each respective officer shall discharge
any and every duty appertaining to his respective office, which is imposed on
such officer by the provisions of any present of future statute of the
Commonwealth of Massachusetts.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the President or a Vice President and the Treasurer or an
Assistant Treasurer of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof.
8
<PAGE> 9
When the corporation is authorized to issue shares of more than one
class, every certificate shall set forth upon the face or back of such
certificate a statement of the designations, preferences, limitations and
relative rights of the shares of each class authorized to be issued, as required
by the laws of the Commonwealth of Massachusetts.
Section 2. The signatures of the officers upon a certificate may be
facsimile if the certificate is counter-signed by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be an officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that maybe made against it with respect
to any such certificate alleged to have been lost or destroyed.
TRANSFER OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders, or any adjournment thereof
or entitled to receive payment of a dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period, but not to exceed, in any case, sixty days. If the stock transfer books
shall be closed for the purpose of determining stockholders entitled to notice
of or to vote at a meeting of stockholders, such books shall be closed for at
least ten days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of stockholders, such date
9
<PAGE> 10
in any case to be not more than sixty days and, in case of a meeting of
stockholders, not less than seven days prior to the date on which the particular
action, requiring such determination of stockholders, is to be taken. If the
stock transfer books are not closed and no record date is fixed for the
determination of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
Commonwealth of Massachusetts.
LIST OF STOCKHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least seven days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of seven days prior to such meeting, shall be
kept open at the place where said election is to be held and shall be subject to
inspection by any stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting. The original stock ledger or transfer books, or a duplicate
thereof, shall be prima facie evidence as to who are the stockholders entitled
to examine such list or stock ledger or transfer book or to vote at any meeting
of the stockholders.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Subject to the provisions of the articles of organization
relating thereto, if any, dividends may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or
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<PAGE> 11
in shares of the capital stock, subject to any provisions of the articles of
organization.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall begin on the day
following the last Saturday in January of each year and end on the last Saturday
in January in the following year.
ARTICLE XlI
AMENDMENTS
Section 1. These by laws may be altered, amended or repealed, or new by
laws may be adopted at any regular or special meeting of stockholders at which a
quorum is present or represented, by the affirmative vote of a majority of the
stock entitled to vote, provided notice of the proposed alteration, amendment or
repeal be contained in the notice of such meeting.
11
<PAGE> 1
EXHIBIT 1.7
DO NOT USE PHOTOCOPIES - ONLY ORIGINALS WILL BE ACCEPTED FOR FILING
NOTE: ONCE DOCUMENT IS ACCEPTED AND FILED, CHANGES MUST BE BY AMENDMENT OR
CERTIFICATE OF CHANGE ONLY!
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, SECRETARY
- ----------- ONE ASHBURTON PLACE, BOSTON, MASS. 02108
Examiner ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
Incorporators
NAME POST OFFICE ADDRESS
Include given name in full in case of natural persons; in case of
corporation, give state of incorporation.
Hills Stores Company 15 Dan Road
Canton, Massachusetts
02021-9128
State of incorporation: Delaware
The above-named incorporator(s) do hereby associate (themselves) with
the intention of forming a corporation under the provisions of General Laws,
Chapter 156B and hereby state(s):
- ----------- 1. The name by which the corporation shall be known is:
Name
Approved
Corporate Vision, Inc.
2. The purpose for which the corporation is formed is as
follows:
See Continuation Sheet 2A
C / /
P / /
M / /
RA / /
Note: If the space provided under any article or item of this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper leaving a left hand margin at least 1 inch for binding. Additions to more
than one article may be continued on a single sheet so long as each article
concerning each such addition is clearly indicated.
- -----------
PC
<PAGE> 2
3. The total number of shares and par value, if any, of each class of
stock within the corporation is authorized as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
CLASS OF STOCK WITHOUT PAR VALUE WITH PAR VALUE
-------------------------------------------------------------------------------------------
NUMBER OF SHARES NUMBER OF SHARES PAR AMOUNT
VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred $
Common 15,000
------------------------------------------------------------------------------------------------------------------
</TABLE>
4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as to
each class thereof and any series now established.
NONE
5. The restriction, if any, imposed by the Articles of Organization upon
the transfer of shares of stock of any class are as follows:
NONE
6. Other lawful provisions, if any, for the conduct and regulation of
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or its directors or stockholders, or of any class of stockholders.
See Continuation Sheet 6A.
<PAGE> 3
7. By laws of the corporation have been duly adopted and the initial
directors, president, treasurer and clerk, whose names are set out
below have been duly elected.
8. The effective date of organization of the corporation shall be the date
of filing with the Secretary of the Commonwealth or if later date is
desired, specify date (not more than 30 days after the date of the
filing).
9. The following information shall not for any purpose be treated as a
permanent part of the Articles of Organization of the corporation:
a. The post office address of the initial principal office of the
corporation of Massachusetts is:
15 Dan Road, Canton, Massachusetts 02021-9128
b. The name, residence, and post office address of each of the
initial directors and following officers of the corporation
are as follows:
<TABLE>
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
<S> <C> <C>
President: Lawrence H. Miller 15 Dan Road, Canton, MA 02021-9128
Treasurer: Stephen A. Feldman 15 Dan Road, Canton, MA 02021-9128
Clerk: William K. Friend 15 Dan Road, Canton, MA 02021-9128
Directors: Stephen A. Goldberger 15 Dan Road, Canton, MA 02021-9128
William K. Friend 15 Dan Road, Canton, MA 02021-9128
George R. Friese 15 Dan Road, Canton, MA 02021-9128
</TABLE>
c. The date initially adopted on which the corporation's fiscal
year ends is:
The last Saturday in January of each year.
d. The date initially fixed in the by-laws for the annual meeting
of stockholders of the corporation is:
The first Friday in May of each year.
e. The name and business address of the resident agent, if any,
of the corporation is:
William K. Friend 15 Dan Road, Canton, MA
02021-9128
IN WITNESS WHEREOF and under the penalties of perjury the INCORPORATOR(S)
sign(s) these Articles of Organization this 31 day of October 1988
Hills Stores Company
-----------------------------------------------
BY: /s/ William K. Friend
-----------------------------------------------
William K. Friend
Vice President-Secretary
-----------------------------------------------
The signature of each incorporator which is not a natural person must be
an individual who shall show the capacity in which he acts and by signing shall
represent under the penalties of perjury that he is duly authorized on its
behalf to sign these Articles of Organization.
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 12
-----------------------------------------------------------------
I hereby certify that, upon an examination of the
within written articles of organization, duly submitted to me,
it appears that the provisions of the General Laws relative to
the organization of corporations have been complied with, and
I hereby approve said articles; and the filing fee in the
amount of $150.00 having been paid, said articles are deemed
to have been filed with me this 1st day of November 1988.
Effective date
MICHAEL JOSEPH CONNOLLY
Secretary of State
PHOTO COPY OF ARTICLES OF ORGANIZATION TO BE
SENT TO BE FILLED IN BY CORPORATION
TO:
Stewart M. Hirsch, Esquire
Hills Stores Company (Legal Department)
15 Dan Road
Canton, MA 02021-9128
Telephone: (617) 821-1000 Ext. 1934
FILING FEE: 1/20 of 1% of the total amount of the
authorized capital stock with par value, and one
cent a share for all authorized shares without par
value, but not less than $150. General Laws,
Chapter 156B. Shares of stock with a par value of
less than one dollar shall be deemed to have par
value of one dollar per share.
<PAGE> 5
CONTINUATION SHEET 2A
To make and produce and edit all types of films, video and electronic motion
pictures, commercials and films.
To make and perform contracts of every kind and description without limit as to
amount, with any person, firm, association, private or public foundation or
corporation, and with any municipality, town, city, county, state, territory,
government or any subdivsion thereof.
To draw, make, accept, endorse, execute and issue promissory notes, drafts,
bills of exchange, warrants, debentures or other negotiable or transferable
instruments.
To hire, lease, purchase, buy or otherwise acquire, to hold, own, insure,
mortgage, convey, deed, sell, encumber, exchange, transfer, or otherwise deal in
real or personal property or any right or interest therein wheresoever situated
as may be consistent with the purposes of this corporation.
To acquire all or any part of the good will rights, property, and assets of, and
to assume all or any part of the business liabilities and commitments of any
person, firm, association or corporation.
To have, hold, acquire, purchase, sell, lease, all rights or leaseholds and
leases.
To do all acts requisite or proper to qualify under the laws of domicile the
corporation in, and to do business in any other state, territory, District of
Columbia or dependency.
To do every act and thing necessary or appropriate for the accomplishment of the
purpose or for the carrying on of the business or the corporation, and to
exercise all the powers conferred by the laws of the Commonwealth of
Massachusetts upon business corporations.
<PAGE> 6
CONTINUATION SHEET 6A
The corporation may enter into contracts or transact business with one or
more of its Directors, officers or stockholders, or with any corporation,
association, trust, organization or other concern in which any one or more of
the Directors, officers or stockholders are Directors, officers, stockholders,
shareholders or beneficiaries or otherwise interested, and in the absence of
fraud no such contract or transaction shall be invalidated or in any way
affected by the fact that such Directors, officers or stockholders of the
Corporation have or may have interests of the Corporation even though the vote
or action of the Directors, officers or stockholders having such adverse
interest may have been necessary to obligate the Corporation upon such contracts
or transactions. At any meeting of the Board of Directors of the Corporation or
any duly authorized committee thereof which shall authorize or ratify any such
contracts or transactions, any such Director may vote or act thereat with like
force and effect as if he had no such interest, provided in such case the nature
of such interest shall be disclosed or shall have been known to the Directors.
Any person serving as a director of the corporation shall be immune from
personal liability to the corporation or its shareholders for monetary damages
resulting from the director's breach of his fiduciary duty in carrying out his
responsibility to the corporation. Notwithstanding anything in this provision to
the contrary, no director shall be immune from liability arising from (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the law, (iii) distributions to stockholders leaving or
rendering the corporation insolvent, or (iv) any transaction from which the
director derived an improper personal benefit.
<PAGE> 1
EXHIBIT 1.8
CORPORATE VISION, INC.
* * * * * * * * * * * *
BY LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Canton,
Massachusetts.
Section 2. The corporation may also have offices at such other places
both within and without the Commonwealth of Massachusetts as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
ANNUAL MEETING OF STOCKHOLDERS
Section 1. All meetings of stockholders for the election of directors
shall be held at 15 Dan Road, Canton, Commonwealth of Massachusetts. The time
and place for the election of directors shall not be changed within sixty days
next preceding the date on which such elections are to be held. If such change
is made, a notice of the change must be given to stockholders at least twenty
days before the election of directors.
Section 2. Annual meetings of stockholders, commencing with the year
1989, shall be held on the first Friday in May, if not a legal holiday, and if a
legal holiday, then on the secular day following, at 10:00 AM, at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting. The election of
directors need not be by ballot.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be given to each stockholder entitled
to vote thereat not less than seven days before the date of the meeting.
ARTICLE III
SPECIAL MEETING OF THE STOCKHOLDERS
Section 1. Special meetings of stockholders for any purpose other than
the election of directors may be held at such time and place within or without
the Commonwealth of Massachusetts as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the President, the Board of Directors, or the
holders of not less than one-tenth of all the shares of stock entitled to vote
at the meeting.
Section 3. Written or printed notice of a special meeting of
stockholders, stating the time, place and purpose or purposes thereof, shall be
given to each stockholder entitled to vote thereat, at least seven days before
the date fixed for the meeting.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented by
proxy shall have the power to adjourn the meeting from time to time, without
notice, other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority
of the shares of stock represented at the meeting shall be the act of the
stockholders unless the vote of a greater number of shares of stock is required
by law or the articles to incorporation.
Section 3. Each outstanding share of stock, having voting power, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. A stockholder may vote either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact.
In all elections for directors, every stockholder entitled to vote
shall have the right to vote, in person or by proxy, the number of shares of
stock owned by him, for as many persons as there are directors to be elected, or
to cumulate the vote of said shares, and give one candidate as many votes as the
number of directors multiplied by the number of his shares of stock- shall
equal, or to distribute the votes on the same principle among as many candidates
as he may see fit.
2
<PAGE> 3
ARTICLE V
DIRECTORS
Section 1. Directors need not be residents of the Commonwealth of
Massachusetts nor stockholders of the. corporation. The directors, other than
the first Board of Directors, shall be elected at the annual meeting of the
stockholders and each director elected shall serve until the next succeeding
annual meeting of stockholders. The number of directors shall be not less than
three nor more than twelve and shall be fixed or changed by resolution adopted
by the holders of a majority of the shares present in person or by proxy at the
Annual Meeting or at any meeting called for the purpose of electing directors.
Section 2. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
Section 3. The business affairs of the corporation shall be managed by
its Board of Directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation of by these by laws directed or required to be exercised or done
by the stockholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the
Commonwealth of Massachusetts, at such place or places as they may from time to
time determine.
Section 5. The Board of Directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers, or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the Board of Directors, regular or special, may
be held either within or without the Commonwealth of Massachusetts.
Section 2. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed
3
<PAGE> 4
by the vote of the stockholders at the annual meeting and not notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a quorum shall be present, or it may convene at
such place and time as shall be fixed by the consent in writing to all the
directors.
Section 3. Regular meetings of the Board of Directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the Board.
Section 4. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the Vice Chairman of the Board, the President or any
Vice President on three (3) days' notice to each director, either personally or
by mail or by telegram; special meetings shall be called by the President or the
Clerk in like manner and on like notice on the written request of two directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice of waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the act of a greater number is required by statute or by the articles of
incorporation. If a quorum shall not be present at any meeting of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The Board of Directors, by resolution adopted by a majority
of the number of directors fixed by the by laws or otherwise, may designate two
or more directors to constitute an executive committee, which committee, to the
extent provided in such resolution, shall have and exercise all of the authority
of the Board of Directors in the management of the corporation, except as
otherwise required by law. Vacancies in the membership of the committee shall be
filled by the Board of Directors at a regular or special meeting of the Board of
Directors. The
4
<PAGE> 5
executive committee shall keep regular minutes of its proceedings and report the
same to the Board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by laws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice whatsoever is required to be given under
the provisions of the statutes or under the provisions of the articles of
incorporation or these by laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The general officers of the corporation shall consist of a
Chairman of the Board, a Vice Chairman of the Board, a President, an Executive
Vice President, one or more other Vice Presidents, a Clerk, one or more
Assistant Clerks, a Treasurer, one or more Assistant Treasurers, and such other
officers as may from time to time be determined by the Board of Directors, all
of whom shall have such duties and authority as may be prescribed by the Board
of Directors. The Board of Directors need not fill the offices of Chairman of
the Board, Vice Chairman of the Board, and Executive Vice President. Any two or
more of such offices, other than those of clerk and Assistant Clerk or Treasurer
and Assistant Treasurer, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument on behalf of the Corporation in
more than one capacity. The officers shall hold office for one year and until
their successors are chosen and shall qualify.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, who need not be
director, and shall choose one or more vice-presidents, a secretary and a
treasurer, none of whom need be a member of the Board.
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Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The Officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors, is
authorized to execute and deliver on behalf of the corporation contracts, leases
and other agreements, and shall have such other powers and duties as may be
prescribed by the Board of Directors.
Section 7. Vice Chairman of the Board. The Vice Chairman of the Board
in the absence of the Chairman of the Board, or in the event that office is
vacant, shall preside at meetings of the stockholders and of the Board of
Directors. He is authorized to execute and deliver on behalf of this corporation
contracts, leases and other agreements, and shall have such other powers and
duties as may be prescribed by the Board of Directors.
Section 8. The President. The President, in the absence of the Chairman
of the Board and Vice Chairman of the Board, or in the event those offices are
vacant, shall preside at meetings of the stockholders and of the Board of
Directors. He shall have general supervisory control over the affairs of the
corporation, subject, however, to the direction of the Chairman of the Board and
the Vice Chairman of the Board, when those offices are not vacant, and to the
control of the Board of Directors. If the office of Executive Vice President is
vacant, the President shall also perform the duties and be vested with the
authority of that office. The President is authorized to execute and deliver on
behalf of the corporation contracts, leases and other agreements, and
certificates for shares.
Section 9. The Executive vice President. The Executive Vice President,
if one be elected by the Board of Directors, shall be the active operating
executive officer of the corporation. He shall have general supervision,
direction and active management of the business of the corporation, subject,
however, to the supervision of the President and the control of the Board of
Directors. He shall see that all orders and resolutions of the
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Board of Directors are carried into effect. He is authorized to execute and
deliver on behalf of the corporation contracts, leases and other agreements and
certificates for shares. He shall submit a complete and detailed report of the
operations of the corporation for the fiscal year and of its financial condition
to the Board of Directors at its first regular meeting held after such report
becomes available and to the stockholders at their annual meetings, and shall
from time to time, report to the Board of Directors all matters within his
knowledge which the interests of the corporation may require to be brought to
its notice.
Section 10. The Vice President. These Vice Presidents shall perform
such duties, not inconsistent with these by laws as may be conferred upon them
by these by laws or as may, from time to time, be assigned to them by the Board
of Directors or the President. Each vice president is authorized to execute and
deliver on behalf of the corporation all contracts, leases, extensions of leases
and other agreements and certificates and certificates for shares. In the
absence of the President or Executive Vice President, the Vice President
designated by the President or Executive Vice President, as the case may be (or
in the absence of such designation, the Vice President designated by the Board
of Directors), shall perform the duties of the President or the Executive Vice
President, and when so acting, shall have in addition to the powers herein
specifically conferred, all the powers of the President or the Executive Vice
President, for whom he is acting. The authority of Vice Presidents to sign in
the name of the corporation all contracts, leases, extension of lease, and other
agreements and certificates for shares shall be coordinate with like authority
of the President and Executive Vice President.
Section 11. The Clerk. The Clerk shall keep the minutes of all meetings
of the Board of Directors and of the stockholders, in books provided by the
corporation for such purpose. He shall give notice of meetings of the Board of
Directors and stockholders. He shall prepare all lists of stockholders and their
addresses required to be prepared by the provisions of any present or future
status of the Commonwealth of Massachusetts. He is authorized to execute and
deliver on behalf of the corporation, all contracts, leases, certificates for
shares and other instruments, and may affix thereto the seal of the corporation.
He shall have charges of such books and papers as the Board of Directors may
direct. He shall file all reports to states and to the Federal Government, and
in general, perform all duties which are incident to the office of Clerk of the
corporation, subject at all times to the direction and control of the Board of
Directors of the President or Executive Vice President.
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Section 12. The Treasurer. The Treasurer shall receive and have the
custody of all the funds and securities of the corporation. When necessary and
proper, he shall endorse on behalf of this corporation all checks, notes or
other obligations and evidences of the payment of money payable to the
corporation or coming into this possession, and shall deposit the funds arising
therefrom, together with all other funds of the corporation coming into his
possession, in such banks as may be selected as deposing into his possession, in
such banks as may be selected as depositories of the corporation or properly
care for them in such other manner as the Board of Directors may direct. He
shall be authorized to execute and deliver for and on behalf of the corporation
all bills, notes and other evidences of indebtedness of the corporation and
contracts, leases and agreements. Whenever required by the Board of Directors to
do so, he shall exhibit a complete and true statement of his cash account, and
of the securities and other property in his possession, custody or control.
He shall cause to be entered regularly in books belonging to the
corporation and to be kept for such purpose, a full and accurate amount of all
money received and paid by him on account of the corporation, together with all
other business transactions. He shall at all reasonable times, within the hours
of business, exhibit the books and accounts to any director. He is authorized to
sign with other officers certificates for shares of said corporation any may
affix thereto the seal of the corporation. He shall perform all duties which are
incident to the office of Treasurer of a corporation subject, however, at all
times to the direction and control of the Board of Directors. If the Board of
Directors shall so require, he shall give bond, in such sum and with such
sureties as the Board of Directors may direct for the faithful performance of
his duties and for the safe custody of the funds and property of the corporation
coming into his possession.
Section 13. Assistant Treasurers and Assistant Clerks. The Assistant
Treasurers and Assistant Clerks shall perform such duties as may be prescribed
hereunder or by the Board of Directors or by the President or Executive Vice
President.
In the absence or disability of the Treasurer, his duties may be
performed by an Assistant Treasurer.
In the absence or disability of the Clerk, his duties may be performed
by an Assistant Clerk.
Section 14. Statutory Duties. Each respective officer shall discharge
any and every duty appertaining to his respective office, which is imposed on
such officer by the provisions of any present or future statute of the
Commonwealth of Massachusetts.
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ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the President or a Vice President and the Treasurer or an
Assistant Treasurer of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof.
When the corporation is authorized to issue shares of more than one
class, every certificate shall set forth upon the face or back of such
certificate a statement of the designations, preferences, limitations and
relative rights of the shares of each class authorized to be issued, as required
by the laws of the Commonwealth of Massachusetts.
Section 2. The signatures of the officers upon a certificate may be
facsimile if the certificate is counter-signed by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
TRANSFER OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
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CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders, or any adjournment thereof
or entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a stated
period, but not to exceed, in any case, sixty days. If the stock transfer books
shall be closed for a stated period, but not to exceed, in any case, sixty days.
If the stock transfer books shall be closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than sixty days and, in case of a meeting
of stockholders, not less than seven days prior to the date on which the
particular action, requiring such determination of stockholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
stockholders. When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
Commonwealth of Massachusetts.
LIST OF STOCKHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least seven days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of seven days prior to such meeting,
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shall be kept open at the place where said election is to be held and shall be
subject to inspection by any stockholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting. The original stock ledger or transfer books, or a
duplicate thereof, shall be prima facie evidence as to who are the stockholders
entitled to examine such list or stock ledger or transfer book or to vote at any
meeting of the stockholders.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Subject to the provisions of the articles of organization
relating thereto, if any, dividends may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
articles of organization.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers of such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall begin on the day
following the last Saturday in January of each year and end on the last Saturday
in January in the following year.
ARTICLE XII
AMENDMENTS
Section 1. These by laws may be altered, amended or repealed, or new by
laws may be adopted at any regular or special meeting of stockholders at which a
quorum is present or
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represented, by the affirmative vote of a majority of the stock entitled to
vote, provided notice of the proposed alteration, amendment or repeal be
contained in the notice of such meeting.
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EXHIBIT 1.9
ARTICLES OF INCORPORATION
OF
C. R. H. INTERNATIONAL, INC.
The undersigned, a citizen, of the United States of America, desiring
to form a corporation for profit under the General Corporation Law of Ohio does
hereby certify:
FIRST: The name of the said corporation shall be
C.R.H. INTERNATIONAL, INC.
SECOND: The place in Ohio where its principal office is to be located
is Columbus, in Franklin County.
THIRD: The purpose or purposes for which it is formed are:
1. To establish, maintain, conduct and carry on a general merchandising
business; and in conjunction therewith to manufacture, produce, buy, import and
otherwise acquire, own, store, hold, use, sell, export, distribute, lease and
otherwise dispose of and generally deal in and with, at wholesale or retail, as
principal and/or agent for others, upon commission, consignment or otherwise,
goods, wares, commodities, merchandise and personal property of every class,
name, nature, and description.
2. To do all acts requisite or proper to qualify under the laws of,
domicile the Corporation in, and to do business in any other state, territory,
District of Columbia, or dependency.
3. In general to have and exercise any lawful act or activity or any
rights, powers and privileges which are now or may hereafter be conferred upon
corporations by the State of Ohio under Section 1701.01 to 1701.98, inclusive of
the Revised Code.
<PAGE> 2
FOURTH: The authorized number of shares of the Corporation is Five
Hundred (500) ------------------------------------------------------ all of
which shall be common shares without par value.
FIFTH: The amount of capital with which the Corporation will begin
business is Five Hundred and no/100 Dollars ($500.00).
SIXTH: In addition to any rights conferred upon it by statute, the
Corporation shall have the right to amend these Articles so as to change the
purpose or purposes for which it is formed and/or to add thereto.
IN WITNESS WHEREOF, I have hereunto subscribed my name, this 27th day
of March, 1974.
/s/ MARTIN N. GOLDSMITH
--------------------------------------
Martin N. Goldsmith
<PAGE> 3
ORIGINAL APPOINTMENT OF AGENT
KNOW ALL MEN BY THESE PRESENTS, That Joseph E. Andres of 35 North
Fourth Street, in Columbus, Franklin County, Ohio 43215, a natural person and
resident of said county, being the county in which the principal office of C. R.
H. INTERNATIONAL, INC. is located, is hereby appointed as the person on whom
process, tax notices and demands against said C. R. H. INTERNATIONAL, INC., may
be served.
C. R. H. INTERNATIONAL, INC.
/s/ Martin N. Goldsmith
----------------------------------
Martin N. Goldsmith
Columbus, Ohio 43215
March 27, 1974
C. R. H. INTERNATIONAL, INC.
Columbus, Ohio 43215
Gentlemen: I hereby accept the appointment as representative of your
Company upon whom process, tax notices, or demands may be served.
/s/ Joseph E. Andres
----------------------------------
Joseph E. Andres
<PAGE> 1
EXHIBIT 1.10
C.R.H INTERNATIONAL, INC.
*********************
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Columbus, Ohio.
Section 2. The corporation may also have offices at such other places
both within and without the State of Ohio as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF STOCKHOLDERS
Section 1. All meetings of stockholders for the election of directors
shall be held at 35 North Fourth Street, Columbus, State of Ohio. The time and
place for the election of directors shall not be changed within sixty days next
preceding the date on which such elections are to be held. If such change is
made, a notice of the change must be given to stockholders at least twenty days
before the election of directors.
Section 2. Annual meetings of stockholders, commencing with the year
1974, shall be held on the first Friday in May, if not a legal holiday, and if a
legal holiday, then on the secular day following at 10:00 A.M., at which they
shall elect by a plurality vote a board of directors, and transact such other
<PAGE> 2
business as may properly be brought before the meeting. The election of
directors need not be by ballot.
Section 3. Written or printed notice of the annual meeting stating the
place, day and hour of the meeting shall be given to each stockholder entitled
to vote thereat not less than seven days before the date of the meeting.
ARTICLE III
SPECIAL MEETINGS OF STOCKHOLDERS
Section 1. Special meetings of stockholders for any purpose other than
the election of directors may be held at such time and place within or without
the State of Ohio as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president, the board of directors, or the
holders of not less than one-tenth of all the shares of stock entitled to vote
at the meeting.
Section 3. Written or printed notice of a special meeting of
stockholders, stating the time, place and purpose or purposes thereof, shall be
given to each stockholder entitled to vote thereat, at least seven days before
the dated fixed for the meeting.
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ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued and
outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders present or represented by
proxy shall have the power to adjourn the meeting from time to time, without
notice, other than the announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2. If a quorum is present, the affirmative vote of a majority
of the shares of stock represented at the meeting shall be the act of the
stockholders unless the vote of a greater number of shares of stock is required
by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. A stockholder may vote either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact.
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In all elections for directors, every stockholder entitled to vote
shall have the right to vote, in person or by proxy, the number of shares of
stock owned by him, for as many persons as there are directors to be elected, or
to cumulate the vote of said shares, and give one candidate as many votes as the
number of directors multiplied by the number of his shares of stock shall equal,
or to distribute the votes on the same principle among as many candidates as he
may see fit.
ARTICLE V
DIRECTORS
Section 1. Directors need not be residents of the State of Ohio nor
stockholders of the corporation. The directors, other than the first board of
directors, shall be elected at the annual meeting of the stockholders and each
director elected shall serve until the next succeeding annual meeting of
stockholders. The number of directors shall be not less than three nor more than
twelve and shall be fixed or changed by resolution adopted by the holders of a
majority of the shares present in person or by proxy at the Annual Meeting or at
any meeting called for the purpose of electing directors.
Section 2. Any vacancy occurring in the board of directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the board of directors. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
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Section 3. The business affairs of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
Section 4. The directors may keep the books of the corporation, except
such as are required by law to be kept within the state, outside of the State of
Ohio, at such place or places as they may from time to time determine.
Section 5. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special, may
be held either within or without the State of Ohio.
Section 2. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a
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quorum shall be present, or it may convene at such place and time as shall be
fixed by the consent in writing to all the directors.
Section 3. Regular meetings of the board of directors may be held upon
such notice, or without notice, and at such time and at such place as shall from
time to time be determined by the board.
Section 4. Special meetings of the board of directors may be called by
the chairman of the board, the vice chairman of the board, the president or any
vice president on three (3) days' notice to each director, either personally or
by mail or by telegram; special meetings shall be called by the president or the
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is now lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice of a waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by the
articles of incorporation. The act of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the board of directors,
unless the act of a greater number is required by the statute or
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by the articles of incorporation. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
ARTICLE VII
EXECUTIVE COMMITTEE
Section 1. The board of directors, by resolution adopted by a majority
of the number of directors fixed by the by-laws or otherwise, may designate two
or more directors to constitute an executive committee, which committee, to the
extent provided in such resolution, shall have and exercise all of the authority
of the board of directors in the management of the corporation, except as
otherwise required by law. Vacancies in the membership of the committee shall be
filled by the board of directors at a regular or special meeting of the board of
directors. The executive committee shall keep regular minutes of its proceedings
and report the same to the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these by-laws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
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stockholder, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice whatsoever is required to be given under
the provisions of the statutes or under the provisions of the articles of
incorporation or these by-laws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The general officers of the Corporation shall consist of a
Chairman of the Board, a Vice Chairman of the Board, a President, an Executive
Vice President, one or more other Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such
other officers as may from time to time be determined by the Board of Directors,
all of whom shall have such duties and authority as may be prescribed by the
by-laws and such, not inconsistent with the by-laws, as may be prescribed by the
Board of Directors. The Board of Directors need not fill the offices of Chairman
of the Board, Vice Chairman of the Board, and Executive Vice President. Any two
or more of such offices, other than those of Secretary and Assistant Secretary
or Treasurer and Assistant Treasurer, may
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be held by the same person, but no officer shall execute, acknowledge or verify
any instrument on behalf of the Corporation in more than one capacity. The
officers of the Corporation shall hold office for one year and until their
successors are chosen and shall qualify.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, who need not be
director, and shall choose one or more vice-presidents, a Secretary and a
treasurer, none of whom need be a member of the Board.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors, is
authorized to execute and deliver on behalf of the Corporation contracts, leases
and other agreements,
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and shall have such other powers and duties as may be prescribed by the Board of
Directors.
Section 7. Vice Chairman of the Board. The Vice Chairman of the Board
in the absence of the Chairman of the Board, or in the event that office is
vacant, shall preside at meetings of the stockholders and of the Board of
Directors. He is authorized to execute and deliver on behalf of this Corporation
contracts, leases and other agreements, and shall have such other powers and
duties as may be prescribed by the Board of Directors.
Section 8. The President. The President, in the absence of the Chairman
of the Board and Vice Chairman of the Board, or in the event those offices are
vacant, shall preside at meetings of the stockholders and of the Board of
Directors. He shall have general supervisory control over the affairs of the
Corporation, subject, however, to the direction of the Chairman of the Board and
the Vice Chairman of the Board, when those offices are not vacant, and to the
control of the Board of Directors. If the office of Executive Vice President is
vacant, the President shall also perform the duties and be vested with the
authority of that office. The President is authorized to execute and deliver on
behalf of the Corporation contracts, leases and other agreements, and
certificates for shares.
Section 9. The Executive Vice President. The Executive Vice
President, if one be elected by the Board of Directors, shall be the active
operating executive officer of the corporation. He shall have general
supervision, direction and active management of the business of the corporation,
subject,
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however, to the supervision of the President and the control of the Board of
Directors. He shall see that all orders and resolutions of the Board of
Directors are carried into effect. He is authorized to execute and deliver on
behalf of the corporation contracts, leases and other agreements and
certificates for shares. He shall submit a complete and detailed report of the
operations of the corporation for the fiscal year and of its financial condition
to the Board of Directors at its first regular meeting held after such report
becomes available and to the stockholders at their annual meetings, and shall,
from time to time, report to the Board of Directors all matters within his
knowledge which the interests of the corporation may require to be brought to
its notice.
Section 10. The Vice President. The Vice Presidents shall perform such
duties, not inconsistent with these by-laws as may be conferred upon them by
these by-laws or as may, from time to time, be assigned to them by the Board of
Directors or the President. Each vice president is authorized to execute and
deliver on behalf of the corporation all contracts, leases, extensions of leases
and other agreements and certificates and certificates for shares. In the
absence of the President or Executive Vice President, the Vice President
designated by the President or Executive Vice President, as the case may be (or
in the absence of such designation, the Vice President designated by the Board
of Directors), shall perform the duties of the President or the Executive Vice
President, and when so acting, shall have in addition to the powers herein
specifically
-11-
<PAGE> 12
conferred, all the powers of the President or the Executive Vice President, for
whom he is acting. The authority of Vice Presidents to sign in the name of the
corporation all contracts, leases, extension of lease and other agreements and
certificates for shares shall be coordinate with like authority of the President
and Executive Vice President.
Section 11. The Secretary. The Secretary shall keep the minutes of all
meetings of the board of directors and of the stockholders, in books provided by
the corporation for such purpose. He shall give notice of meetings of the board
of directors and stockholders. He shall prepare all lists of stockholders and
their addresses required to be prepared by the provisions of any present or
future status of the State of Ohio. He is authorized to execute and deliver on
behalf of the corporation, all contracts, leases, certificates for shares and
other instruments, and may affix thereto the seal of the corporation. He shall
have charge of such books and papers as the board of directors may direct. He
shall file all reports to states and to the Federal Government, and in general
perform all the duties which are incident to the office of Secretary of the
corporation, subject at all times to the direction and control of the board of
directors or the President or Executive Vice President.
Section 12. The Treasurer. The Treasurer shall receive and have the
custody of all the funds and securities of the corporation. When necessary and
proper, he shall endorse on behalf of this corporation all checks, notes or
other obligations
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<PAGE> 13
and evidences of the payment of money payable to the corporation or coming into
his possession, and shall deposit the funds arising therefrom, together with all
other funds of the corporation coming into his possession, in such banks as may
be selected as depositories of the corporation or properly care for them in such
other manner as the board of directors may direct. He shall be authorized to
execute and deliver for and on behalf of the corporation all bills, notes and
other evidences of indebtedness of the corporation and contracts, leases and
agreements. Whenever required by the board of directors to do so, he shall
exhibit a complete and true statement of his cash account, and of the securities
and other property in his possession, custody or control.
He shall cause to be entered regularly in books belonging to the
corporation and to be kept for such purpose, a full and accurate account of all
money received and paid by him on account of the corporation, together with all
other business transactions. He shall at all reasonable times, within the hours
of business, exhibit his books and accounts to any director. He is authorized to
sign with other officers certificates for shares of said corporation and may
affix thereto the seal of the corporation. He shall perform all duties which are
incident to the office of treasurer of a corporation subject, however, at all
times to the direction and control of the board of directors. If the board of
directors shall so require, he shall give bond, in such sum and with such
sureties as the board of directors may direct for the faithful performance of
his duties and for the
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<PAGE> 14
safe custody of the funds and property of the corporation coming into his
possession.
Section 13. Assistant Treasurers and Assistant Secretary. The Assistant
Treasurers and Assistant Secretaries shall perform such duties as may be
prescribed hereunder or by the board of directors or by the President or
Executive Vice President.
In the absence or disability of the Treasurer, his duties may be
performed by an Assistant Treasurer.
In the absence or disability of the Secretary, his duties may be
performed by an Assistant Secretary.
Section 14. Statutory Duties. Each respective officer shall discharge
any and every duty appertaining to his respective office, which is imposed on
such officer by the provisions of any present or future statute of the State of
Ohio.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the president or a vice president and the treasurer or an
assistant treasurer of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof.
When the corporation is authorized to issue shares of more than one
class, every certificate shall set forth upon the face or back of such
certificate a statement of the designations, preferences, limitations and
relative rights of the shares of each class authorized to be issued, as required
by the laws of the State of Ohio.
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<PAGE> 15
Section 2. The signatures of the officers upon a certificate may be
facsimile if the certificate is counter-signed by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be an officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation alleged
to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
TRANSFER OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto,
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<PAGE> 16
and the old certificate cancelled and the transaction recorded upon the books of
the corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders, or any adjournment thereof
or entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the board of
directors may provide that the stock transfer books shall be closed for a stated
period, but not to exceed, in any case, sixty days. If the stock transfer books
shall be closed for the purpose of determining stockholders entitled to notice
of or to vote at a meeting of stockholders, such books shall be closed for at
least ten days immediately preceding such meeting. In lieu of closing the stock
transfer books, the board of directors may fix in advance a date as the record
date for any such determination of stockholders, such date in any case to be not
more than sixty days and, in case of a meeting of stockholders, not less than
seven days prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders, or
stockholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the board of
directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of stockholders. When a determination of
stockholders entitled to vote at any meeting of
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<PAGE> 17
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Ohio.
LIST OF STOCKHOLDERS
Section 7. The officer or agent having charge of the transfer books for
shares shall make, at least seven days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of seven days prior to such meeting, shall be
kept open at the place where said election is to be held and shall be subject to
inspection by any stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting. The original stock ledger or transfer books, or a duplicate
thereof, shall be prima facie evidence as to who are the stockholders entitled
to examine such list or
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<PAGE> 18
stock ledger or transfer book or to vote at any meeting of the stockholders.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Subject to the provisions of the articles of organization
relating thereto, if any, dividends may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be paid in cash,
in property or in shares of the capital stock, subject to any provisions of the
articles of organization.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
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<PAGE> 19
FISCAL YEAR
Section 4. The fiscal year of the corporation shall begin on the day
following the last Saturday in January of each year and end on the last Saturday
in January in the following year.
ARTICLE XII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed, or new
by-laws may be adopted at any regular or special meeting of stockholders at
which a quorum is present or represented, by the affirmative vote of a majority
of the stock entitled to vote, provided a notice of the proposed alteration,
amendment or repeal be contained in the notice of such meeting.
-19-
<PAGE> 1
EXHIBIT 1.11
ARTICLES OF INCORPORATION
of
SHOE CORPORATION OF AMERICA
The undersigned, a majority of whom are citizens of the United States
of America, desiring to form a corporation for profit under the General
Corporation Law of Ohio do hereby certify:
FIRST: The name of said corporation shall be
SHOE CORPORATION OF AMERICA
SECOND: The place in Ohio where its principal office is to be
located is Columbus, in Franklin County, 43215.
THIRD: The purpose or purposes for which it is formed are:
1. To buy, sell and otherwise deal in all kinds of footwear,
hosiery, gloves, handbags, leather and rubber goods and related articles and
accessories and like products of every kind and description.
2. To do all acts requisite or proper to qualify under the laws of,
domicile the Corporation in, and to do business in any other state, territory,
District of Columbia, or dependency.
3. In general to have and exercise all rights, powers and privileges
which are now or may hereafter be conferred upon corporations by the State of
Ohio.
It is the intention that the purposes specified in the foregoing
clauses shall be, and shall be construed as, powers as well as purposes.
FOURTH: The authorized number of shares of the Corporation is One
Hundred (100) all of which shall be common shares without par value.
<PAGE> 2
FIFTH: The amount of capital with which the Corporation will begin
business is Five Hundred and no/100 Dollars ($500.00).
SIXTH: In addition to any rights conferred upon it by statute, the
Corporation shall have the right to amend these Articles to the extent permitted
by law.
IN WITNESS WHEREOF, we have hereunto subscribed our names, this 26th
day of May, 1969.
/s/ Cletus J. Corbett
-----------------------------------
Cletus J. Corbett
/s/ Stephen J. Jelin
-----------------------------------
Stephen J. Jelin
/s/ Joseph E. Andres
-----------------------------------
Joseph E. Andres
<PAGE> 3
ORIGINAL APPOINTMENT OF AGENT
KNOW ALL MAN BY THESE PRESENTS, That Joseph E. Andres of 35 North
Fourth Street, in Columbus, Franklin County, Ohio 43215, a natural person and
resident of said county, being the county in which the principal office of SHOE
CORPORATION OF AMERICA is located, is hereby appointed as the person on whom
process, tax notices and demands against said SHOE CORPORATION OF AMERICA may be
served.
SHOE CORPORATION OF AMERICA
/s/ Cletus J. Corbett
--------------------------------------
Cletus J. Corbett
/s/ Stephen J. Jelin
--------------------------------------
Stephen J. Jelin
/s/ Joseph E. Andres
--------------------------------------
Joseph E. Andres
Columbus, Ohio 43215
May 26, 1969
SHOE CORPORATION OF AMERICA
Columbus, Ohio 43215
Gentlemen: I hereby accept the appointment as the representative of
your Company upon whom process, tax notices, or demands may be served.
/s/ Joseph E. Andres
-----------------------------------
Joseph E. Andres
<PAGE> 4
Charter # 384575
---------
Approved by AT
---------
Date 5-3-86
---------
Fee $ 35
---------
CERTIFICATE OF AMENDMENT
(BY SHAREHOLDERS)
TO THE ARTICLES OF INCORPORATION OF
Shoe Corporation of America
- --------------------------------------------------------------------------------
(Name of Corporation)
() Chairman of the Board
Stephen A. Feldman , who is () President (check one),
- ---------------------------- (x) Vice President
and William K. Friend , who is (x) Secretary (check one)
------------------------ () Assistant Secretary
of the above named Ohio corporation for profit with its principal location at
Columbus, Ohio do hereby certify that: (check the appropriate box and complete
the appropriate statements)
a meeting of the shareholders was duly called and held on ,
--- 19 , at which meeting a quorum of the shareholders was present in
person or by proxy, and by the affirmative vote of the holders of
shares entitling them to exercise % of the voting power of the
corporation,
x in a writing signed by all of the shareholders who would be
---
entitled to a notice of a meeting held for that purpose,
---
the following resolution was adopted to amend the articles:
"RESOLVED that Article First of the Articles of Incorporation be amended to
read:
"FIRST: The name of said corporation shall be FRANDO CORP."
IN WITNESS WHEREOF, the above named officers, acting for and on behalf of
the corporation, have subscribed their names this 29th day of April 1986.
x /s/ Stephen A. Feldman
-------------------------------------------------------
(Vice President)
x /s/ William K. Friend
-------------------------------------------------------
(Secretary)
NOTE: Ohio law does not permit one officer to sign in two capacities. Two
separate signatures are required, even if this necessitates the
election of a second officer before the filing can be made.
<PAGE> 5
CERTIFICATE OF AMENDMENT
BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF
FRANDO CORP.
- --------------------------------------------------------------------------------
Name of Corporation
William K. Friend
- --------------------------------------------------------------------------------
/ / Chairman of the Board / / President /X/ Vice President
and Joseph E. Andres
----------------------------------------------------------------------------
/ / Secretary /X/ Assistant Secretary (Please check one)
of the above named Ohio corporation organized for profit does hereby certify
that: Please check the appropriate box and complete the appropriate statements.
/ / a meeting of the shareholders was duly called for the purpose of
accepting this amendment and held on , 19 at which
meeting a quorum of the shareholders was present in person or by
proxy, and by the affirmative vote of the holders of shares entitling
them to exercise % of the voting power of the corporation.
/X/ in a writing signed by all of the shareholders who would be entitled to
notice of a meeting held for that purpose, the following resolution to
amend the articles was adopted:
RESOLVED that Article First of the Articles of Incorporation
be amended to read:
"FIRST: The name of said corporation shall be
HDS TRANSPORT, INC."
IN WITNESS WHEREOF, the above named officers, acting for and on the behalf of
the corporation, have hereto subscribed their names this 30th day of March,
1994.
<PAGE> 6
By /s/ William K. Friend By /s/ Joseph E. Andres
----------------------------------- -------------------------------
Chairman, President, Vice President Secretary, Assistant Secretary
NOTE: OHIO LAW DOES NOT PERMIT ONE OFFICER TO SIGN IN TWO CAPACITIES, TWO
SEPARATE SIGNATURES ARE REQUIRED, EVEN IF THIS NECESSITATES THE ELECTION OF A
SECOND OFFICER BEFORE THE FILING CAN BE MADE
<PAGE> 1
EXHIBIT 1.12
HDS TRANSPORT, INC.
CODE OF REGULATIONS
ARTICLE I
MEETING SHAREHOLDERS
Section A. Annual Meetings. The annual meeting of the shareholders of
this Corporation for the purpose of electing directors and transacting such
other business as may come before the meeting shall be held at 9:00 o'clock.
A.M. on the first Friday in May of each year if not a legal holiday, but if a
legal holiday, then on the next business day following. The shareholders present
at such annual meeting or a special meeting called for the purpose and entitled
to vote shall elect the directors.
Section B. Special Meetings. Special meetings of shareholders may be
called by the President or a Vice President or by a majority of the members of
the Board of Directors acting with or without a meeting, or by the holders of
twenty-five per cent of all the shares outstanding and entitled to vote thereat.
Upon the request in writing delivered to the President or Secretary by
any person entitled to call a meeting of shareholders, it shall be the duty of
the President or Secretary to give notice to shareholders and if such request
refused, then the persons making such request may call a meeting by giving
notice in the manner provided by law or by the Regulations.
Section C. Place of Meeting. Annual and special meetings of
shareholders shall be held at the office of the Corporation in the City of
Columbus, Ohio, or at such other place or places as the Board of Directors may
from time to time designate, or as may be specified in the call and notice of
the meeting or otherwise.
Section D. Notices of Meetings. Unless waived, a written, printed or
typewritten notice of each annual or special meeting of the shareholders
starting the day, hour and place and the purpose or purposes thereof, shall be
served upon or mailed to each shareholder of record entitled to vote or to
notice not more than sixty (60) days nor less than seven (7) days before such
meeting. Such notice shall be given by the Secretary or an Assistant Secretary,
or in case of his refusal by the shareholders, person or persons entitled to
call such meeting. If mailed, the postage shall be prepaid and it shall be
directed to a shareholder at his address as it appears upon the records of the
Corporation.
Every person who by operation of law, transfer, or otherwise shall
become entitled to any share or right or interest therein, shall be bound by
every notice in respect of such share, which prior to his name and address being
entered upon the books of the
<PAGE> 2
Corporation as registered holder of such share, shall be given to the person in
whose name such share appeared of record.
Section E. Waiver of Notice. Any shareholder, either before or after
any meeting, may waive any notice required to be given by law or under the
Regulations.
Section F. Voting Quorum. Shareholders present in person or by proxy at
any meeting for the determination of the number of directors and for the
election of directors to be elected by them or for consideration and action upon
reports required to be laid before such meeting shall constitute a quorum.
At any meeting called for any other purpose the holders of record of
shares present in person or represented by proxy entitling them to exercise a
majority of the voting power of the Corporation shall constitute a quorum.
Every shareholder of record entitled to vote at any meeting shall be
entitled at such meeting of shareholders, to one vote for each share outstanding
in his name on the books of the Corporation.
At all elections of directors, a plurality of the votes cast for the
directors to be elected shall be necessary for a choice.
If notice in writing shall be given by any shareholder to the President
or a Vice President of the Corporation not less than twenty-four hours before
the time fixed for holding a meeting for the election of directors that he
intends to cumulate his votes at such election, and if an announcement of the
giving of such notice is made upon the convening of the meeting, each
shareholder shall have the right to cumulate his shares and to give one
candidate as many votes as the number of directors to be elected multiplied by
the number of his votes equals, or to distribute his votes on the same principle
among two or more candidates as he sees fit.
Section G. List of Shareholders. The Secretary shall, at least seven
(7) days before any election, prepare a complete alphabetical list of the
shareholders entitled to vote, showing the number of shares held by each on the
date fixed for closing the books against transfers or the record date fixed as
herein after provided and the address of each respective shareholder as shown by
the books of the Corporation. Such list of shareholders shall be on file at the
principal office and open to inspection thereat.
2
<PAGE> 3
ARTICLE II
BOARD OF DIRECTORS
Section A. Number, Term of Office and Vacancies. All the capacity of
the Corporation shall be vested in and all its authority, except as otherwise
provided by statue or in the Articles in regard to action required to be taken,
authorized or approved by shareholders, shall be exercised by a Board of
Directors. The number of directors shall be not less than three nor more than
twelve and shall be fixed or changed by resolution adopted by the holders of a
majority of the shares present in person or by proxy at the Annual Meeting or at
any meeting called for the purpose of electing directors.
Each director of each Board of Directors shall hold office for one year
and/or until his successor shall have qualified. If the office of any director
elected by the holders of the shares becomes vacant by reason of death,
resignation, failure to qualify, removal, disqualification or inability to act,
the remaining directors of those elected by the holders of the shares may by a
majority vote of the remaining directors elect a successor who shall hold office
for the unexpired term and/or until his successors shall have been elected and
shall have qualified.
Section B. Meeting of Directors.
1. First and Annual Meeting. A meeting of the newly elected Board of
Directors shall be held immediately following the adjournment of each
shareholders' meeting, at which directors are elected, at the office of the
Corporation or at such other place or places as the Board of Directors may from
time to time designate and notice of such meeting need not be given.
2. Regular Meetings. Regular meetings of the Board of Directors
shall be held from time to time as the Board of Directors may by resolution
determine.
3. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board, if any, the President, a Vice President
or by a majority of the Board on not less than three (3) days, notice to each
director either personally, by mail or by telegraph.
4. Place of Meetings. All meetings of the Board of Directors shall
be held at the office of the Corporation in the City of Columbus, Ohio, or at
such other place within or without the State of Ohio, as the Board may determine
from time to time or as may be specified in the call and notice thereof.
3
<PAGE> 4
5. Notice of Meetings. Notice of regular meetings shall be mailed to
each director at his last known post office address by the Secretary not less
than five (5) days prior to the date of said meeting. Notice of special meetings
shall be given to each director personally, by mail or telegraph, not less than
three (3) days prior to the date of such meeting. But any meeting of the Board
of Directors at which all of the directors shall be present or shall have waived
notice of the time and place of such meeting in writing, shall be as valid as if
called pursuant to proper notice.
6. Quorum. A majority of the duly elected and qualified members of
the Board of Directors shall constitute a quorum for the transaction of
business. The act of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section C. Statutory Duties. The Board of Directors shall discharge or
cause to be discharged, each and every duty imposed on the Board of Directors by
any present or future statute of the State of Ohio.
Section D. Compensation. The directors of the Corporation with the
exception of those who are officers or employees of the Corporation, may each
receive and be paid for their attendance at meetings of the directors, such
reasonable sum as may be fixed by the Board of Directors from time to time and
their necessary traveling expense in attending said meeting.
ARTICLE III
COMMITTEES
Section A. The Board of Directors may by resolution provide for such
standing committees or special committees to consist of not less than three (3)
directors as it deems desirable, and discontinue the same at pleasure. Each such
committee shall have such powers and perform such duties, not inconsistent with
law, as may be delegated to it by the Board of Directors. Vacancies in such
committees shall be filled by the Board of Directors or as it may provide.
ARTICLE IV
OFFICERS AND DEFINITIONS OF DUTIES
Section A. Officers. The general officers of the Corporation shall
consist of a Chairman of the Board, a Vice Chairman of the Board, a President,
an Executive Vice President, one or more other Vice Presidents, a Secretary, one
or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers,
and such other officers as may from time to time be
4
<PAGE> 5
determined by the Board of Directors, all of whom shall be chosen by the Board
of Directors, and who shall respectively have such duties and authority as may
be prescribed by the Regulations and such, not inconsistent with the
Regulations, as may be prescribed by the Board of Directors. The Board of
Directors need not fill the offices of Chairman of the Board, Vice Chairman of
the Board, and Executive Vice President, and if it does not, the President shall
perform the duties and be vested with the authority of the Executive Vice
President. Any two or more of such offices other than those of Secretary and
Assistant Secretary or Treasurer and Assistant Treasurer, may be held by the
same person, but no officer shall execute, acknowledge or verify any instrument
on behalf of the Corporation in more than one capacity. The officers of the
Corporation shall hold office for one year and until their successors are chosen
and shall qualify.
Section B. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and of the Board of Directors, is
authorized to execute and deliver on behalf of the Corporation contracts, leases
and other agreements, and shall have such other powers and duties as may be
prescribed by the Board of Directors.
Section C. Vice Chairman of the Board. The Vice Chairman of the Board,
in the absence of the Chairman of the Board, or in the event that office is
vacant, shall preside at meetings of the shareholders and of the Board of
Directors. He is authorized to execute and deliver on behalf of the Corporation
contracts, leases and other agreements, and shall have such other powers and
duties as may be prescribed by the Board of Directors.
Section D. The President. The President, in the absence of the Chairman
of the Board and the Vice Chairman of the Board, or in the event those offices
are vacant, shall preside at meetings of the shareholders and of the Board of
Directors. He shall have general supervisory control over the affairs of the
Corporation, subject, however, to the direction of the Chairman of the Board and
the Vice Chairman of the Board, when those offices are not vacant, and to the
control of the Board of Directors. If the office of Executive Vice President is
vacant, the President shall also perform the duties and be vested with the
authority of that office. The President is authorized to execute and deliver on
behalf of the Corporation contracts, leases and other agreements and
certificates for shares.
Section E. The Executive Vice President. The Executive Vice President
shall be the active operating executive officer of the Corporation. He shall
have general supervision, direction and active management of the business of the
Corporation subject, however, to the supervision of the President and the
control of the Board of Directors. He shall see that all orders and resolutions
of the Board of Directors are carried into effect.
5
<PAGE> 6
He is authorized to execute and deliver on behalf of the Corporate contracts,
leases and other agreements and certificates for shares. He shall submit a
complete and detailed report of the operations of the Corporation for the fiscal
year and of its financial condition to the Board of Directors at its first
regular meeting held after such report becomes available and to the shareholders
at their annual meetings, and shall from time to time, report to the Board of
Directors all matters within his knowledge which the interests of the
Corporation may require to be brought to its notice.
Section F. The Vice Presidents. The Vice Presidents shall perform such
duties, not inconsistent with these Regulations, as may be conferred upon them
by these Regulations or as may, from time to time, be assigned to them by the
Board of Directors or the President. Each Vice President is authorized to
execute and deliver on behalf of the Corporation all contracts, leases,
extensions of leases and other agreements and certificates for shares. In the
absence of the President or Executive Vice President, the Vice President
designated by the President or Executive Vice President, as the case may be, (or
in the absence of such designation, the Vice President designated by the Board)
shall perform the duties of the President or the Executive Vice President, and
when so acting, shall have in addition to the powers herein specifically
conferred, all the powers of the President or Executive Vice President for whom
he is acting. The authority of Vice Presidents to sign in the name of the
Corporation all contracts, leases, extensions of lease and other agreements and
certificates for shares shall be coordinate with like authority of the President
and Executive Vice President.
Section G. The Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the shareholders, in books provided by
the Corporation for such purpose. He shall give notice of meetings of the Board
of Directors and shareholders. He shall prepare all lists of shareholders and
their addresses required to be prepared by the provisions of any present or
future statute of the State of Ohio. He is authorized to execute and deliver on
behalf of the Corporation, all contracts, leases, certificates for shares and
other instruments, and may affix thereto the seal of the Corporation, if any
such seal shall have been adopted by the Board of Directors. He shall have
charge of such books and papers as the Board of Directors may direct. He shall
file all reports to states and to the Federal Government, and in general perform
all the duties which are incident to the office of secretary of the corporation,
subject at all times to the direction and control of the Board of Directors or
the President or Executive Vice President.
6
<PAGE> 7
Section H. The Treasurer. The Treasurer shall receive and have the
custody of all the funds and securities of the Corporation. When necessary and
proper, he shall endorse on behalf of the Corporation all checks, notes or other
obligations and evidences of the payment of money payable to the Corporation or
coming into his possession, and shall deposit the funds arising therefrom
together with all other funds of the Corporation coming into his possession in
such banks as may be selected as depositories of the Corporation, or properly
care for them in such other manner as the Board of Directors may direct. He
shall be authorized to execute and deliver for and on behalf of the Corporation
all bills, notes and other evidences of indebtedness of the Corporation and
contracts, leases and agreements. Whenever required by the Board of Directors so
to do, he shall exhibit a complete and true statement of his cash account, and
of the securities and other property in his possession, custody or control.
He shall cause to be entered regularly in books belonging to the
Corporation and to be kept for such purpose, a full and accurate account of all
money received and paid by him on account of the Corporation, together with all
other business transactions. He shall at all reasonable times, within the hours
of business, exhibit his books and accounts to any director. He is authorized to
sign with other officers certificates for shares of said Corporation and may
affix thereto the seal of the Corporation, if any such seal shall have been
adopted by the Board of Directors. He shall perform all duties which are
incident to the office of treasurer of a corporation subject, however, at all
times to the direction and control of the Board of Directors. If the Board of
Directors shall so require, he shall give bond, in such sum and with such
sureties as the Board of Directors may direct for the faithful performance of
his duties and for the safe custody of the funds and property of the Corporation
coming into his possession.
Section I. Assistant Treasurers and Assistant Secretaries. The
Assistant Treasurers and Assistant Secretaries shall perform such duties as may
be prescribed hereunder or by the Board of Directors or by the President or
Executive Vice President.
In the absence or disability of the Treasurer, his duties may be
performed by an Assistant Treasurer.
In the absence or disability of the Secretary, his duties may be
performed by an Assistant Secretary.
Section J. Statutory Duties. Each respective officer shall discharge
any and every duty appertaining to his respective office, which is imposed on
such officer by the provisions of any present or future statute of the State of
Ohio.
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Section K. Salaries. The officers of the Corporation shall receive and
be paid for the services that they each may render as such officers, for and in
behalf of the Corporation, such salary as the Board of Directors may by
resolution determine.
ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section A. Form of Certificates. The Corporation shall cause to be
issued to each shareholder a certificate or certificates representing the number
of shares owned in the Corporation. The certificates shall be in such form, not
inconsistent with the laws of the State of Ohio, as may be adopted by the Board
of Directors. The certificates shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer of the Corporation. No certificate for a share will be
delivered until it is fully paid.
Every certificate for shares of the Corporation shall state that the
Corporation is organized under the laws of the State of Ohio, the name of the
person to whom issued; the number and the par value of each share represented
thereby or a statement that the shares are without par value.
Section B. Transfer of Certificates. The shares of the Corporation
shall be transferable only on the books of the Corporation by the owner in
person or by the legal representative of such person, and, upon such transfer
being made, the old certificate shall be surrendered to the person in charge of
the share and transfer books and ledgers or such other person as the Board of
Directors may designate, who shall cancel the same, thereupon issuing a new
certificate or certificates therefor.
Section C. Transfer Books. Shares shall be transferable at
the principal office of the Corporation in Columbus, Ohio and the
record of the names and addresses of all shareholders and all
transfers of shares kept thereat.
Section D. Record Date. The day, fifteen (15) days preceding the date
of any meeting of shareholders, annual or special, or any dividend payment date,
or any date for the allotment of rights, shall constitute and be the record date
for the determination of the shareholders entitled to notice of such meeting or
to vote thereat or to receive such dividends or rights. Only such shareholders
of record of such date shall be entitled to notice of such meeting or to vote
thereat or to receive such dividends or rights as the case may be.
Section E. Rules of Transfer. The Board of Directors shall have the
power and authority to make all such rules and regulations as it may deem
expedient concerning the issue,
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transfer and registration of the certificates for the shares of the Corporation.
Section F. Lost Certificates. Any person claiming a certificate for
shares of this Corporation to be lost, stolen or destroyed shall make affidavit
of the fact and lodge the same with the Secretary of the Corporation accompanied
by a signed application for a new certificate. Such person shall also advertise
such lost or destroyed certificate in such manner as the Board of Directors may
direct, and shall give the Corporation a bond of indemnity with a surety company
satisfactory to the Board of Directors and in an amount which, in its judgment
shall be sufficient to save the Corporation from loss and in any event, at the
option of the Board of Directors, at least twice the market or par value of the
shares represented by such lost, stolen or destroyed certificate, and thereupon
the proper officers may cause to be issued a new certificate of like tenor with
the one alleged to be lost or destroyed. But the Board of Directors may refuse
the issuance of such new certificate, unless otherwise provided by law.
ARTICLE VI
PROXIES
Any shareholder of record who shall be entitled to attend a
shareholders' meeting or to vote thereat or to assent or give consents in
writing shall be entitled to be represented at such meeting or to vote thereat
or to assent or give consents in writing, as the case may be, or to exercise any
other of his rights, by proxy or proxies appointed by a writing signed by such
shareholder(s).
A telegram, cablegram, wireless message, or photogram appearing to have
been transmitted by a shareholder or a photograph, photostatic or equivalent
reproduction of a writing appointing a proxy or proxies shall be a sufficient
writing.
No appointment of a proxy hereafter made shall be valid after
the expiration of eleven months after it is made, unless the writing specifies
the date on which it is to expire or the length of time it is to continue in
force.
ARTICLE VII
AMENDMENTS
The Code of Regulations may be amended at any meeting of the
shareholders by the affirmative vote of the holders of record of shares
entitling them to exercise a majority of the voting power on such proposal, or
without a meeting, by the written consent of the holder of record of all shares
outstanding.
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ARTICLE VIII
SEAL
The Corporation shall have no seal unless the Board of Directors shall
determine that a seal is required to comply with the laws of any state,
territory, Districts of Columbia or dependency, or is otherwise desirable, in
which event the Board of Directors may adopt a seal.
ARTICLE IX
FISCAL YEAR
The fiscal year shall begin on the day following the last Saturday in
January of each year and end on the last Saturday in January in each of the next
succeeding years.
ARTICLE X
DIVIDENDS
(a) The Board of Directors may declare and, upon such declaration the
Corporation may pay dividends in accordance with the provisions of the Articles
and the General Corporation Law of the State of Ohio now in effect or hereafter
enacted.
(b) Before the dedication of any assets to the payments of dividends,
there may be set apart out of the excess of assets available for dividends; such
sum or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves for any proper purpose, or
said Board of Directors may in its absolute discretion abolish any such reserve.
And the Board of Directors may increase, diminish or vary said dividends,
provided, however, that nothing herein contained shall be construed to compel
the declaration as dividends of any excess of assets over and above the amount
so reserved and which may, at any time remain undedicated to any express purpose
or purposes.
ARTICLE XI
CHECKS, DRAFTS, ETC.
Section A. Authority and Form of Signature. All checks, drafts or
orders for the payment of money shall be signed by the President, the Treasurer
or Assistant Treasurer or Secretary or by such other officer or employee as the
Board of Directors may designate. No checks, drafts or orders for payment of
money shall be executed in blank.
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ARTICLE XII
BOOKS AND RECORDS
Section A. Location. The stock transfer books shall be kept at the
principal office of the Corporation, and books of account and the records of the
Corporation shall be kept at the principal office of the Corporation in the City
of Columbus, Ohio.
Section B. Inspection. The books of account, list of shareholders and
their addressees records of the issuance and transfer of shares, voting trust
agreements, if any are filed, and the minutes of meetings of the Corporation
shall be open to the inspection of every shareholder at all reasonable times,
save and except for unreasonable and improper purposes.
ARTICLE XIII
ORDER OF BUSINESS
At the shareholders' meetings the order of business shall be as
follows:
1. Call to order.
2. Determination of a quorum.
3. Organization of the meeting.
4. Proof of notice of meeting.
5. Reading minutes of previous meeting and acting thereon.
6. Financial report or statement.
7. Reports of President or other officers.
8. Report of directors and committees.
9. Unfinished business.
10. Election of Directors.
11. New or miscellaneous business.
12. Adjournment.
This order may be changed by affirmative vote of a majority in interest
of the shareholders present at any meeting.
The matter of the approval of an Employees, Retirement Plan for the
eligible employees of the Corporation was discussed and a
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copy of the SCA Employees' Retirement Plan, together with all amendments
thereto, and the "Amended Trust" entered into with The Bank of New York, New
York City, pursuant to the provisions of said Plan were submitted to the
meeting.
Thereupon on motion duly made, seconded and unanimously carried, the
following resolution was adopted:
RESOLVED, THAT WHEREAS, SCOA Industries Inc. (hereafter called
"SCOA") has an Employees' Retirement Plan known as SCA Employees'
Retirement Plan heretofore approved by the shareholders of Shoe
Corporation of America and adopted by its Board of Directors, (Shoe
Corporation of America being a premerger predecessor of "SCOA") and
WHEREAS, the said Plan had been amended from time to time by
the Board of Directors of Shoe Corporation of America, herein referred
to as the "Amended Plan", and
WHEREAS, Shoe Corporation of America, by action of its Board
of Directors, provided that any company which then was or thereafter
became a direct or indirect subsidiary or affiliate of said Shoe
Corporation of America might upon appropriate action by the Board of
Directors of such affiliate or subsidiary include the employees of such
subsidiary or affiliate as participants in the Plan and that as a
condition precedent to becoming a Participating Subsidiary or Affiliate
such subsidiary or affiliate should become a party to the Amended SCA
Employees' Retirement Trust adopting the provisions of the Plan and
assuming and agreeing to pay its equitable share of the operating costs
of and contributing to the Trust Fund, and
WHEREAS, Shoe Corporation of America has agreed that its act
in executing said Amended Trust Agreement shall be deemed to be also
the act of any and all of its wholly-owned retail subsidiaries which
adopt such execution as its or their own act, and
WHEREAS, by Agreement of Merger between Shoe Corporation of
America and SCOA Industries Inc., effective as of the close of business
on May 23, 1969, all corporate acts, plans, policies, agreements,
arrangements, approvals and authorizations of Shoe Corporation of
America which were valid and effective immediately prior to the
effective date of the merger are taken for all purposes as the acts,
plans, policies, agreements, arrangements, approvals and authorizations
of "SCOA" and are as effective and binding thereon as the same were
with respect to Shoe Corporation of America, and
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WHEREAS, this Corporation is a wholly-owned retail subsidiary
of "SCOA,"
NOW, THEREFORE, BE IT RESOLVED, that the "Amended Plan" be and
the same hereby is approved as the Employees' Retirement Plan of this
Corporation.
RESOLVED FURTHER, that this Corporation shall forthwith become
a party to said "Amended Plan" and assume and agree to pay its
equitable share of the costs of operation of the "Amended Plan" and
make the necessary contributions to the Trust Fund established and
existing under the "Amended Plan",
RESOLVED FURTHER, that the Board of Directors of this
Corporation be and it hereby is authorized for and on behalf of this
Corporation, to adopt, as the Employees' Retirement Plan of this
Corporation, said "Amended Plan" and to adopt the action of Shoe
Corporation of America in executing the Amended Trust Agreement as the
act of this Corporation in the execution of said Amended Trust
Agreement, and to authorize and instruct the President or Vice
President of this Corporation to execute any and all other agreements
and documents and to make such other arrangements as or which may be
necessary, proper or convenient to effectuate the provisions of this
Resolution and said Plan, and to authorize and instruct the Secretary
or the Assistant Secretary of this Corporation to attest each and all
of such other aforesaid documents, and
RESOLVED FURTHER, that the Board of Directors be and it hereby
is authorized to empower the Treasurer or Assistant Treasurer of this
Corporation to make, from time to time, the payments and disbursements
required by the "Amended Plan" and the "Amended Trust" established
pursuant thereto to be made, out of the funds of this Corporation, and
BE IT FURTHER RESOLVED, that the Board of Directors take all
appropriate steps to qualify the said "Amended Plan" as and for the
Plan of this Corporation under the Internal Revenue Code.
The Chairman announced that the matter of fixing the number of
directors to be elected at the meeting was next in order. Upon motion duly made,
seconded and unanimously carried, it was
RESOLVED, that the Board of Directors, for the ensuing year, consist of
four (4) members.
The Chairman declared the election of directors next in order. The
names of Herbert H. Schiff, S. Joseph Blatt, Cletus
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J. Corbett and Edmund Klein were placed in nomination as candidates for the
office of director. No other names being proposed, upon motion duly made,
seconded and unanimously carried, they were duly elected and declared by the
Chairman to be duly elected to serve until the next annual meeting of the
shareholders and until their successors shall be elected and shall qualify.
There was no further business, and, upon motion duly made, seconded and
unanimously carried, the meeting adjourned.
/s/ Cletus J. Corbett
----------------------------------------
Secretary of the Meeting
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<PAGE> 1
EXHIBIT 1.13
CERTIFICATE OF INCORPORATION
OF
HILLS DISTRIBUTING COMPANY
FIRST: The name of the corporation is Hills Distributing Company.
SECOND: The address of the corporation's registered office in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle. The name of the corporation's registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes of the corporation is
to engage in any lawful acts or activities for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1,000 shares, consisting of 1,000
shares of Common Stock of the par value of $1 per share.
FIFTH: The Board of Directors shall have the power, without the
assent or vote of the stockholders, to make, amend, change or repeal the By-laws
of the Corporation.
<PAGE> 2
SIXTH: The name and mailing address of the incorporator is as
follows:
Joseph E. Andres, Esq.
15 Dan Road
Canton, MA 02021
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: The Corporation reserves at any time and from time to time
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and other provisions authorized by the laws of Delaware at the
time in force may be added or inserted, in the manner now or hereinafter
prescribed by law; and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other persons whosoever by
and pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article.
IN WITNESS WHEREOF, I, the undersigned, being the Incorporator
hereinabove named, have executed this Certificate of Incorporation this 10th day
of October, 1989.
/s/ Joseph E. Andres
----------------------------------------
<PAGE> 3
COMMONWEALTH OF MASSACHUSETTS :
: SS.
COUNTY OF NORFOLK :
BE IT REMEMBERED that on this 10th day of October, 1989,
personally came before me, the subscriber, a Notary Public for the Commonwealth
and County aforesaid, JOSEPH E. ANDRES, known to me personally to be such, and
acknowledged the said Certificate of Incorporation to be his act and deed and
that the facts therein stated are truly set forth.
GIVEN under my hand and seal of office the day and year
aforesaid.
/s/ Kelly D. McCarthy
-----------------------------------
Notary Public
<PAGE> 4
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
Hills Distributing Company, a corporation organized under the laws of
Delaware, the charter of which was voided for non-payment of taxes, now desires
to procure a corporation, renewal and revival of this charter, and hereby
certifies as follows.
1. The name of this corporation is Hills Distributing Company.
2. Its registered office in the State of Delaware is located at
1209 Orange Street, City of Wilmington Zip Code 19801 County of New Castle the
name and address of its registered agent is The Corporation Trust Company.
3. The date of filing of the original Certificate of
Incorporation in Delaware was 10/12/1989.
4. The date when restoration, renewal, and revival of the charter
of this company is to commence is the 29th day of February 1992, same being
prior to the date of the expiration of the charter. This renewal and revival of
the charter of this corporation is to be perpetual.
5. This corporation was duly organized and carried on the
business authorized by its charter until the 1st day of March A.D. 1992 at which
time its charter became inoperative and void for non-payment of taxes and this
certificate for renewal and revival is filed by authority of the duly elected
directors of the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions of Section
312 of the General Corporation Law of the State of Delaware, as amended,
providing for the renewal, extension and restoration of charters Michael Bozic
the last and acting President and William K. Friend, the last and acting
Secretary of Hills Distributing Company, have hereunto set their hands to this
certificate this 27th day of January, 1993.
/s/ Michael Bozic
-----------------------------------
Michael Bozic
ATTEST:
/s/ William K. Friend
-----------------------------------
William K. Friend
<PAGE> 1
EXHIBIT 1.14
BY-LAWS OF HILLS DISTRIBUTING COMPANY
ARTICLE I --OFFICES
Section A. Registered Office. The registered office shall be 1209
Orange Street in the City of Wilmington, County of New Castle, State of
Delaware.
Section B. Other Offices. The Corporation may also have offices,
including its principal office, at such other places both within and without the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
ARTICLE II -- MEETING OF STOCKHOLDERS
Section A. Annual Meetings. The annual meeting of the stockholders of
this Corporation for the purpose of electing directors and transacting such
other business as may come before the meeting shall be held on the first Tuesday
in June of each year, or at such other time as the Board of Directors may from
time to time designate.
Section B. Special Meetings. Special meetings of stockholders may be
called by the President.
Section C. Place of Meeting. All annual and special meetings of the
stockholders may be held at the principal office of the Corporation or at such
other place either within or without the State of Delaware as the Board of
Directors may from time to time designate and state in the notice of the
meeting.
Section D. Notice of Meeting. Unless waived, a written, printed or
typewritten notice of each annual or special meeting of the stockholders stating
the day, hour and place and the purpose or purposes thereof, shall be served
upon or mailed to each stockholder or record entitled to notice not more than
sixty (60) days nor less than ten (10) days before the date of the meeting.
If mailed, the postage shall be prepaid and it shall be directed to a
stockholder at his address as it appears upon the records of the Corporation.
Notice of adjournment need not be given if the same time and place to
which it is adjourned are fixed and announced at such meeting, except that, if
the adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
<PAGE> 2
Every person who by operation of law, transfer, or otherwise shall
become entitled to any share or right or interest therein shall be bound by
every notice in respect of such share, which, prior to his name and address
being entered upon the books of the Corporation as the registered holder of such
share, shall be given to the person in whose name such share appeared of record.
Section E. Waiver of Notice. Any stockholder, either before or after
any meeting, may waive any notice required to be given by law or under these
By-Laws.
The attendance of any stockholder at any meeting, either in person or
by proxy, without protesting, prior to or at the commencement of the meeting,
the lack of proper notice, shall be deemed to be a waiver by him of notice of
such meeting.
Section F. Voting Quorum. Such holders of Common Stock as shall be
present in person or by proxy and entitled to vote at any meeting held for the
purpose of electing directors, for consideration and action upon reports
required to be laid before such meeting, or for any other purpose whatsoever
shall constitute a quorum for such purposes.
The vote of the holders of the majority of the stock having power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of the statutes or the Certificate of Incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
The holders of record of a majority of shares present in person or by
proxy at any meeting, may adjourn such meeting from time to time.
Except to the extent that the voting rights of the shares are
increased, limited or denied by the express terms of such shares, each
outstanding share shall entitle the holder thereof to one vote on each matter
properly submitted to the stockholders for their vote, consent, waiver, release
or other action.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the
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notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section G. Record of Stockholders.
1. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
2. The directors may close the share transfer books against transfers
of shares during the whole or in any part of the period provided for in
subsection 1 above, including the date of the meeting of the stockholders and
the period ending date, if any to which adjourned.
ARTICLE III -- DIRECTORS
Section A. Election of Directors.
1. At any meeting of stockholders at which directors are to be elected,
only persons nominated as candidates shall be eligible for election as
directors.
2. At all elections of directors, the candidates receiving the greatest
number of votes cast for directors shall be elected.
Section B. Capacity, Number, Term of Office and Vacancies.
1. All of the capacity of the Corporation shall be vested in and all
its authority, except as otherwise provided by statute or in the Certificate of
Incorporation in regard to action required to be taken, authorized or approved
by stockholders, shall be exercised by a Board of Directors.
2. The Board of Directors shall consist of three (3) members. The
number of directors shall be determined from time to time by resolution of the
Board of Directors. The directors shall be elected at the annual meeting of the
shareholders, except as provided in Section (3) of this Article, and each
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director elected shall hold office until his successor is elected and qualified.
3. Vacancies and newly created directorships from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director; and the
directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced.
4. The offices of a director becomes vacant if he dies or resigns,
which resignation shall take effect immediately, or at any time as the director
may specify therein.
The directors may remove any director and thereby create a vacancy on
the Board:
(a) If by order of a court he has been found to be of unsound
mind, or has requested the appointment of a guardian to manage
his affairs, or if he is adjudicated a bankrupt; or if he has
been convicted of a felony; or if he fails to disclose to the
Board of Directors an interest improperly adverse to that of
the Corporation in any transaction in which the Corporation is
involved.
(b) If within sixty (60) days from the date of his election he
does not qualify by accepting in writing his election to such
office or by acting at a meeting of the directors.
(c) If he fails to attend three consecutive meetings of the Board
of Directors without good cause, the determination of which
shall be made by the directors.
(d) If, in the judgment of the Board, continuing physical
incompetency prevents his serving as a Board member.
Section C. Meeting of Directors.
1. Annual Meeting. The annual meeting of the Board of Directors shall
be held upon the day of their election, or as soon thereafter as convenient, and
prior notice thereof need not be given, provided a quorum shall be present.
2. Regular Meetings. Regular meetings of the Board of Directors shall
be held from time to time as the Board of Directors may by resolution determine.
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3. Special Meetings. Special Meetings of the Board of Directors may be
called by the President, or if there is no President, by not less than 50% of
the members of the Board.
4. Place of Meetings. All meetings of the Board of Directors shall be
held at the principal office of the Corporation or at such other place as the
President may determine from time to time.
5. Notice of Meetings. Written notice of regular meetings shall be
mailed to each director at his last known post office address by the Secretary
not less than five (5) days prior to the date of said meeting. Written notice of
special meetings shall be given to each director personally, by mail or
telegraph, not less than two (2) days prior to the date of such meeting. Notice
of special meetings may also be given by telephone not less than two (2) days
prior to the date of the meeting. An affidavit of the President or the Secretary
that the notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. Such written or telephone notice need not
specify the purpose of the meeting. But any meeting of the Board of Directors at
which all of the directors shall be present or shall have waived notice of the
time and place of such meeting, in writing, shall be as valid as if called
pursuant to proper notice.
6. Quorum. One half of the directors in office, unless the total number
of directors in office is not divisible by two, in which case the number shall
be the next highest whole number, shall be necessary and sufficient to
constitute a quorum for the transaction of business including the filling of a
vacancy or vacancies on the Board of Directors.
The act of a majority of the directors present at a meeting at which
quorum is present shall be the act of the Board of Directors.
Section D. Compensation. The directors of the Corporation, with the
exception of those who are also officers or employees of the Corporation, shall
each receive and be paid for their attendance at meetings of the directors and
for such other services as they may render to the Corporation, such reasonable
sum as may be fixed by the Board of Directors from time to time and their
necessary traveling expenses.
ARTICLE IV -- BOARD COMMITTEES
Section A. Executive Committee. The Board of Directors shall, by
resolution or resolutions passed by a majority of the Board, designate three or
more of their number, which shall include the President, to constitute an
Executive Committee to serve during the pleasure of the Board of Directors. The
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<PAGE> 6
President shall be the Chairman of the Executive Committee. The Board of
Directors is authorized to remove at any time, without notice, any member of the
Executive Committee, except the President, and elect another member in his place
and stead.
The Board of Directors may appoint one or more directors as alternate
members of the Executive Committee who may take the place of any absent member
or members at any meeting of the Executive Committee.
Except as otherwise provided herein and in the Certificate of
Incorporation and in the resolution creating an Executive Committee, such
committee shall during an interval between meetings of the Board of Directors,
possess and may exercise all of the power of the Board of Directors in the
management of the business and affairs of the Corporation.
The Executive Committee shall keep full and fair records and account of
its proceedings and transactions. All action by Executive Committee shall be
reported to the Board of Directors at its meeting next succeeding such action
and shall be subject to control, revision and alteration by the Board of
Directors; provided that no rights of third person shall be prejudicially
affected thereby.
Vacancies on the Executive Committee shall be filled by the Board of
Directors.
Section B. Meeting of the Executive Committee. Subject to the
provisions of these By-Laws, the Executive committee shall fix its own rules of
procedure and shall meet as provided by such rules or by resolutions of the
Board of Directors, and it shall also meet at the call of the President of the
Corporation, or if there is no President, of any two members of the Committee. A
majority of the Executive Committee shall be necessary to constitute a quorum.
The Executive Committee may act in writing, or by cable or telegraph or by
telephone with written confirmation, without a meeting; but no action of the
Executive Committee shall be effective unless concurred in by a majority of the
members of the Committee.
Section C. Other Committees. The Board of Directors may by resolution
provide for such other standing committees or special committees as it deems
desirable, and discontinue the same at pleasure. Each such committee shall have
such powers and perform such duties, not inconsistent with law, as may be
delegated to it by the Board of Directors. The President shall appoint the
members of any and all such committees and shall designate the Chairman of each
such committee, unless otherwise provided by the Board.
6
<PAGE> 7
ARTICLE V -- OFFICERS
Section A. Officers. The general officers of the Corporation shall
consist of a President, a Secretary and a Treasurer, and such other officers
including but not limited to, one or more Vice Presidents, one or more Assistant
Secretaries and Assistant Treasurers, as may, from time to time, be determined
by the Board of Directors, all of whom shall be elected by the Board of
Directors and who shall respectively have such duties and authority as may be
prescribed by the By-Laws and such, not inconsistent with the By-Laws, as may be
prescribed by the Board of Directors. Any two or more of such officers other
than those of President and Vice President, or Secretary and Assistant
Secretary, or Treasurer and Assistant Treasurer, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity. The officers of the Corporation shall hold office for one year and
until their successors are chosen.
Section B. The President. The President shall be the Chief Executive
and the Chief Operating Officer of the Corporation. He shall preside at all
meetings of the Board of Directors and of the Executive Committee. He shall have
general supervision, direction and active management of the business of the
Corporation subject, however, to the control of the Board,of Directors. On
behalf of the Corporation, he may execute long and short term notes, bonds,
mortgages, other financial instruments, all contracts and agreements and sign
all certificates for shares. He shall submit a complete and detailed report of
the operation of the Corporation for the fiscal year of its financial condition
to the Board at its first regular meeting held after such reports become
available and to the stockholders at their Annual Meeting, and shall from time
to time report to the Board of Directors all matters within his knowledge which
the interest of the Corporation may require to be brought to its notice. He
shall have the general power and duties of supervision and management usually
vested in the office of the President of a corporation. He shall be a member of
the Executive Committee and of the Board of Directors.
Section C. Vice President. The Board of Directors, in its discretion,
shall have the right to name such Vice Presidents as it shall deem necessary and
shall prescribed the duties of such Vice Presidents in accordance with its
designation.
Section D. The Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders, in books provided by
the Corporation for such purpose. He shall give notice of meetings of the Board
of Directors and stockholders. He shall prepare or cause to be prepared all
lists of stockholders and their addresses required to be prepared by the
provisions of any present or future statute
7
<PAGE> 8
of the State of Delaware. He may sign in the name of the Corporation all
contracts and agreements and certificates for shares and may affix the seal to
such documents requiring the seal. He shall have charge of such books and papers
as the Board of Directors may direct. He shall in general perform all duties
which are incident to the office of secretary of a corporation, subject at all
times to the direction and control of the Board of Directors or the President.
Section E. The Treasurer. The Treasurer is responsible for the
development, interpretation, coordination and administration of the
Corporation's policies and practices relating to banking, cash flow, and
relations with banking institutions. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts in book
belonging to the Corporation and shall deposit moneys and other valuable effects
in the name and to the credit of the Corporation in such depositories as may be
designated by the board of Directors or pursuant to its authorization. He shall,
when required, render an account of all his transactions as Treasurer.
If required by the Board of Directors, he shall give the Corporation a
bond in such sum and with such sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation. He shall generally perform all the duties which are incident to the
office of the Treasurer of a company, subject at all times to the direction and
control of the Board of Directors or the President.
Section F. Assistant Treasurer and Assistant Secretaries. The Assistant
Treasurers and Assistant Secretaries shall perform such duties as may be
prescribed hereunder or by the Board of Directors or by the President.
In the absence or disability of the Treasurer, his duties may be
performed by an Assistant Treasurer.
In absence or disability of the Secretary, his duties may be performed
by an Assistant Secretary.
Section G. Removal. Any officer may be removed, with or without cause,
by the directors without prejudice to the contract rights of such officer. The
election or appointment of an officer for a given term, or a general provision
in the Certificate of Incorporation or these By-Laws, with respect to term to
office, shall be deemed to create contractual rights.
8
<PAGE> 9
Section H. Salaries. The officers of the Corporation shall receive and
be paid for the service that they may render as such officers, for and in behalf
of the Corporation, such salary as the Board of Directors may by resolution
determine.
ARTICLE --- CERTIFICATE FOR SHARES AND THEIR TRANSFER
Section A. Form of Certificates. The Corporation shall cause to be
issued to each stockholder a certificate representing the number of shares owned
in the Corporation. The certificates shall be in such form, not inconsistent
with the laws of the State of Delaware, as may be adopted by the Board of
Directors. The certificates shall be signed by the President and the Secretary
or the Treasurer or by such other officers of the Corporation as the Board of
Directors may designate in accordance with the laws of the State of Delaware,
which signatures may be facsimiles to the extent and under the circumstances
permitted by law, but no certificate for shares shall be executed or delivered
until such shares are fully paid.
Every new certificate for the shares of the Corporation shall state
that the Corporation is organized under the laws of the State of Delaware; the
name of the person to whom issued; the number and the par value of each share
represented thereby or a statement that the shares are without par value; shall
have on the face or back thereof a statement of the express terms, if any, of
the shares represented thereby or a summary thereof or a reference thereto.
Section B. Transfer of Certificates. The shares of the Corporation
shall be transferable only on the books of the Corporation by the owner in
person or by the legal representative of such person, and, upon such transfer
being made, the old certificate shall be surrendered to the person in charge of
the share and transfer books and ledgers or such other person as the Board of
Directors may designate, who shall cancel the same, thereupon issuing a new
certificate or certificate therefor.
Section C. Transfer Agent. The Board of Directors may appoint transfer
agents and registrars of transfers and thereafter may require all share
certificates to bear the signature of such transfer agents and such registrars
of transfers.
Section D. Rules of Transfer. The Board of Directors also shall have
the power and authority to make all such rules and regulations as they may deem
expedient concerning the issue, transfer and registration of the certificates
for the shares of the Corporation.
9
<PAGE> 10
Section E. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates, or
his legal representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation or its
transfer agent with respect to the certificate alleged to have been lost, stolen
or destroyed.
ARTICLE VII -- PROXIES
Any stockholder of record who shall be entitled to attend a
stockholders' meeting or to vote thereat or to execute consents, waivers or
releases, shall be entitled to be represented at such meeting, or to vote
thereat, or to execute consents, waivers and releases, as the case may be, or to
exercise any other of his rights, by proxy or proxies appointed by a writing
signed by such stockholder.
A telegram, cablegram, wireless message, or photogram appearing to the
inspectors of election to have been transmitted by a stockholder, or a
photograph, photostatic ,or equivalent reproduction of a writing appointing a
proxy or proxies may be treated by the Corporation as a sufficient writing.
Unless the writing appointing a proxy otherwise provides:
1. Each proxy has the power of substituting and, when three or more
proxies are appointed, a majority of them, or of their substitutes, may appoint
one or more substitutes to act for all;
2. If more than one proxy is appointed, then (a) with respect to voting
or executing consents, waivers or releases or objections to consents at a
stockholders' meeting, a majority of such proxies as attend the meeting or if
only one attends than that one, may exercise all the voting and consenting
authority thereat; and, if one or more attend and a majority does not agree on
any particular issue, each proxy so attending shall be entitled to exercise such
authority with respect to an equal number of shares; (b) with respect to
exercising any other authority, a majority may act for all;
10
<PAGE> 11
3. The presence at a meeting of the person appointing a proxy does not
revoke the appointment. Without affecting any vote previously taken, the person
appointing a proxy may revoke the appointment not otherwise revoked by giving
notice to the Corporation in writing or in open meeting.
ARTICLE VIII -- AMENDMENTS
The By-Laws may be amended at any meeting of the directors by the
affirmative vote of a majority of the Board of Directors.
ARTICLE IX -- SEAL
The Board of Directors may provide a suitable seal. The seal of the
Corporation shall be circular, one and one-half inches in diameter, with the
name of the Corporation engraved around the margin and the word "Seal" engraved
across the center.
ARTICLE X -- FISCAL YEAR
The fiscal year shall begin on the day following the last Saturday in
January of each year and end on the last Saturday in January in each of the next
succeeding years. The fiscal year may be changed from time to time by resolution
of the Board of Directors.
ARTICLE XI -- ORDER OF BUSINESS
At the stockholders' meetings the order of business shall be as
follows:
1. Call to order.
2. Determination of a quorum.
3. Organization of the meeting.
4. Proof of giving notice of meeting.
5. Reading of minutes of previous meeting and acting thereon.
6. Presentation of financial report or statement.
7. Reports of President or other officers.
8. Report of directors and committees.
11
<PAGE> 12
9. Unfinished business
10. Election of Directors.
11. New or miscellaneous business.
12. Adjournment.
This order may be changed by the Chairman of the meeting.
ARTICLE XII -- DIRECTORS EMERITUS
The Board of Directors may, from time to time, designate a retired
member of the Board of Directors as a Director Emeritus, which status shall
entitle the holder for the duration of his tenure, to attend meetings of the
Board of Directors but not vote.
ARTICLE XIII -- MANDATORY RETIREMENT
For all officers who are also directors of the Corporation, retirement
from both his officership(s) and from the Board of Directors shall be mandatory
on such person's sixty-fifth birthday.
For all directors who are not also officers of the Corporation,
retirement from the Board shall be mandatory on such person's seventy-second
birthday.
These mandatory retirement provisions may be waived, as to any
particular individual, by resolution of the Board.
ARTICLE XIV -- OFFICER AND DIRECTOR INDEMNIFICATION
Each person who is or was a director or officer of the Corporation
(including the heirs, executors, administrators or estate of such person) shall
be indemnified by the Corporation as of right to the full extent permitted or
authorized by the General Corporation Law of Delaware against any liability,
cost or expense asserted against him and incurred by him and incurred by him in
his capacity as a director or officer, or arising out of his status as a
director or officer. The Corporation may, but shall not be obligated to,
maintain, insurance, at its expense, to protect itself and any such person
against any such liability, cost or expense, to the fullest extent available and
permissible.
12
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF FOLEY, HOAG & ELIOT LLP]
June 13, 1996
HILLS STORES COMPANY
15 Dan Road
Canton, Massachusetts 02021
Gentlemen:
We have acted as special counsel to Hills Stores Company, a Delaware
corporation (the "Company"), and its subsidiaries, Hills Department Store
Company, a Delaware corporation, Canton Advertising, Inc., a Massachusetts
corporation, Corporate Vision, Inc., a Massachusetts corporation, C.R.H.
International, Inc., an Ohio corporation, HDS Transport, Inc., an Ohio
corporation, and Hills Distributing Company, a Delaware corporation
(collectively, the "Guarantors"), in connection with the preparation and filing
of their Registration Statement on Form S-4 (File No. 333-05003), as amended by
Amendment No. 1 thereto (the "Registration Statement"), under the Securities Act
of 1933, as amended (the "Act"), with respect to the offering by the Company of
up to $195,000,000 aggregate principal amount of its 12 1/2% Senior Notes due
2003, Series B (the "Series B Notes") and the related guarantees of the Notes by
the Guarantors (the "Subsidiary Guarantees"). The Series B Notes and the
Subsidiary Guarantees will be issued under an Indenture dated as of April 19,
1996 (the "Indenture") among the Company, as issuer, and Hills Department Store
Company, Canton Advertising, Inc., Corporate Vision, Inc., C.R.H. International,
Inc., HDS Transport, Inc., and Hills Distributing Company, as guarantors, and
Fleet National Bank, as trustee, which has been filed as an exhibit to the
Registration Statement.
For purposes of this opinion we have reviewed the charters and by-laws
of the Company and the Guarantors, each as amended to date. We have also
examined records of corporate proceedings of the Company and the Guarantors,
certificates of public officials and such other documents as we have deemed
necessary to enable us to render this opinion.
In such examination, we have assumed that the signatures of persons
signing documents are genuine and authorized (other than persons signing on
behalf of the Company), the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to us
as certified or photostatic copies.
<PAGE> 2
HILLS STORES COMPANY
June 13, 1996
Page 2
To the extent that the obligations of the Company and the Guarantors
under the Indenture may be dependent upon such matters, we assume for purposes
of this opinion that Fleet National Bank, as trustee under the Indenture (the
"Trustee"), is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legally valid, binding and enforceable obligation of the Trustee enforceable
against the Trustee in accordance with its terms; that the Trustee is in
compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite organizational and legal power and authority to perform its
obligations under the Indenture.
The opinions expressed below are qualified to the extent that (A) the
legality, validity or enforceability of any provisions of any of the Series B
Notes or the Subsidiary Guarantees or of any agreement or instrument or of any
right granted thereunder may be subject to or affected by any bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance or similar law of
general application from time to time in effect and relating to or affecting the
rights or remedies of creditors generally, (B) the remedy of specific
performance or any other equitable remedy may be unavailable in any jurisdiction
or may be withheld as a matter of judicial discretion, and (C) equitable
principles may be applied in construing or enforcing the provisions of the
Series B Notes or the Subsidiary Guarantees or of any other instrument or
document (regardless of whether enforcement is sought in a proceeding in equity
or at law).
The opinions hereinafter expressed in paragraph 2 are further qualified
in that we express no opinion as to the enforceability of the Subsidiary
Guarantees to the extent that (A) any Guarantor has not itself received value as
a result of entering into its Subsidiary Guarantee or (B) any Subsidiary
Guarantee or payment by a Guarantor pursuant thereto may be considered a
distribution under Massachusetts General Laws, c. 156B, Section 45, a dividend
or distribution under Ohio General Corporation Law Section 1701.33, or a
dividend or other distribution under Delaware common law.
We have assumed that each of the Company and the Guarantors (A) is not,
and following completion of the transactions contemplated by the Registration
Statement will not be, "insolvent" as such term is defined in Section 101 of the
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"), and in Section 2 of
the Uniform Fraudulent Conveyances Act of Massachusetts (Massachusetts General
Laws, c. 109A) (the "Fraudulent Conveyances Act"), (B) is not, and following
completion of the transactions contemplated by the Registration Statement will
not be, left with unreasonably small capital within the meaning of Section 548
of the Bankruptcy Code and in Section 5 of the Fraudulent Conveyances Act, and
(C) in entering into and carrying out its obligations under the Indenture and
all other documents relating to its or their indebtedness, does not intend to
incur, and does not believe that it will incur, debts beyond its ability to pay
such debts as they mature within the meaning of Section 548 of the Bankruptcy
Code and Section 6 of the Fraudulent Conveyance Act.
<PAGE> 3
HILLS STORES COMPANY
June 13, 1996
Page 3
Our opinion regarding the corporate power or authority or due
authorization of HDS Transport, Inc. or C.R.H. International, Inc. to execute,
deliver or carry out the terms of any of the Subsidiary Guarantees is based on
our review of a compilation prepared by Prentice Hall Legal & Financial Services
of the corporate law of Ohio and not upon any special expertise in the laws of
such jurisdiction.
We express no opinion other than as to the federal laws of the United
States of America, the laws of the Commonwealth of Massachusetts and the General
Corporation Law of the State of Delaware. To the extent that the opinions
expressed below may require application of any other laws of any other state, we
have assumed that the applicable laws of such state are the same as the laws of
the Commonwealth of Massachusetts.
Based upon and subject to the foregoing, it is our opinion that:
1. The Series B Notes have been duly authorized for issuance by all
necessary corporate action on the part of the Company and, (i) when the
Registration Statement has become effective under the Act, and (ii) when duly
executed and authenticated as provided in the Indenture and upon delivery in
exchange for currently outstanding securities of the Company as contemplated by
the Registration Statement, will constitute the legal, valid and binding
obligations of the Company, entitled to the benefits of the Indenture.
2. The Subsidiary Guarantees to be endorsed on the Series B Notes have
been duly authorized for issuance by all necessary corporate action on the part
of the Guarantor party thereto and, (i) when the Registration Statement has
become effective under the Act, and (ii) when duly executed and authenticated as
provided in the Indenture and upon delivery in exchange for currently
outstanding securities of each of the Guarantors as contemplated by the
Registration Statement, will constitute the legal, valid and binding obligations
of each of the Guarantors, entitled to the benefits of the Indenture, and
enforceable against the Guarantors in accordance with their terms.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus contained in such Registration Statement. This
opinion may not be relied upon by, or furnished to, any other person, firm or
corporation.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: /s/ Mark L. Johnson
---------------------
A Partner
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF FOLEY, HOAG & ELIOT LLP]
June 13, 1996
HILLS STORES COMPANY
15 Dan Road
Canton, Massachusetts 02021
Re: Hills Stores Company
Registration Statement on Form S-4
Registration Number 333-05003
Ladies and Gentlemen:
We have acted as counsel to Hills Stores Company, a Delaware
corporation (the "Company"), in connection with its preparation and issuance of
a Registration Statement on Form S-4 (Registration No. 333-05003), as amended by
Amendment No. 1 thereto, under the Securities Act of 1933, with respect to
$195,000,000 aggregate principal amount of its 12 1/2% Senior Notes due 2003,
Series B (the "Series B Notes"). The Company has offered (the "Exchange Offer")
to exchange $1,000 principal amount of Series B Notes for each $1,000 principal
amount of its 12 1/2% Senior Notes due 2003 (the "Series A Notes") sold by the
Company on April 19, 1996. Such Registration Statement is referred to herein as
the "Registration Statement" and the Prospectus forming a part of the
Registration Statement is referred to as the "Prospectus."
In arriving at the opinion expressed below, we have examined and relied
on copies of the Registration Statement and the Prospectus, as well as originals
or copies certified or otherwise identified to our satisfaction of all such
corporate records of the Company and such other instruments and other
certificates of officers and representatives of the Company and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinion expressed below.
Based on the foregoing, we are of the opinion that the statements made
in the Prospectus under the caption "Certain Federal Income Tax Considerations"
accurately reflect the material United States federal income tax consequences,
to a holder of Series A Notes, of the exchange of the Series B Notes for the
Series A Notes pursuant to the Exchange Offer.
<PAGE> 2
HILLS STORES COMPANY
June 13, 1996
Page 2
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the Prospectus. This letter is not to be used, circulated, quoted or
otherwise referred to for any other purpose.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: /s/ Richard Schaul-Yoder
------------------------
A Partner
<PAGE> 1
EXHIBIT 12.1
Statement re Computation of
Ratio of Earnings to Fixed Charges
The following table sets forth the ratio of earnings to fixed charges
for the Company for the periods shown. These ratios were computed by dividing
earnings from continuing operations, before income taxes and fixed charges, by
fixed charges. Fixed charges consist of interest expense, approximately 45% of
rent expense (estimated by management to be the interest component of such rent
expense) and preferred stock dividends.
<TABLE>
<CAPTION>
Seventeen Thirty-five Year ended
Quarter ended Quarter ended Year ended Year ended weeks ended weeks ended ---------------------------
May 4, April 29, February 3, January 28, January 29, October 2, January 30, February 1,
1996 1995 1996 1995 1994 1993 1993 1992
- ------------- ------------- ----------- ----------- ----------- || ----------- ----------- -----------
<S> <C> <C> <C> <C> || <C> <C> <C>
||
-- -- -- 2.33x 4.16x || -- 2.17x 1.46x
</TABLE>
For the quarters ended May 4, 1996 and April 29, 1995, the deficiency of
earnings to cover fixed charges was $29.9 million and $8.0 million,
respectively. For the year ended February 3, 1996, the deficiency of earnings to
cover fixed charges was $13.5 million and for the thirty-five weeks ended
October 2, 1993, the deficiency was $0.5 million.
Pursuant to the Plan of Reorganization, the Company adopted
"fresh-start" reporting as of October 2, 1993. As a result, the Company's
consolidated financial statements for the periods subsequent to the adoption of
fresh-start reporting have been prepared on a basis not comparable to prior
periods. Black lines have been drawn to separate the Company's post-emergence
financial statements from those prior to October 3, 1993 since they have not
been prepared on a comparable basis.
<PAGE> 2
Hills Stores Company and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Seventeen
Quarter Quarter Year ended Year ended weeks ended
ended ended February 3, January 28, January 29,
May 4, 1996 April 29, 1995 1996 1995 1994
----------- -------------- ----------- ----------- -----------
||
<S> <C> <C> <C> <C> <C> ||
Earnings (loss) from continuing ||
operations before income taxes $(29,940) $ (8,016) $(13,479) $ 76,284 $62,844 ||
Add: Fixed charges deducted from ||
earnings (loss) 18,570 15,778 69,180 57,286 19,899 ||
Less: Pre-tax equivalent of preferred ||
stock dividend requirements -- -- -- -- -- ||
-------- -------- -------- -------- ------- ||
Earnings available for payment of ||
fixed charges $(11,370) $ 7,762 $ 55,701 $133,570 $82,743 ||
======== ======== ======== ======== ======= ||
||
Fixed charges: ||
Capital lease interest $ 3,409 $ 3,579 $ 14,066 $ 14,707 $ 5,029 ||
Other interest 10,256 7,392 35,431 24,005 8,112 ||
Portion of operating lease rentals ||
deemed to represent interest(1) 4,905 4,807 19,683 18,574 6,758 ||
Pre-tax equivalent of preferred ||
stock dividend requirements -- -- -- -- -- ||
-------- -------- -------- -------- ------- ||
Total fixed charges $ 18,570 $ 15,778 $ 69,180 $ 57,286 $19,899 ||
======== ======== ======== ======== ======= ||
Ratio of earnings to fixed charges -- -- -- 2.33x 4.16x ||
Deficiency of earnings available to ||
cover fixed charges $ 29,940 $ 8,016 $ 13,479 ||
<CAPTION>
Thirty-five Year ended
weeks ended -------------------------
October 2, January 30, February 1,
1993 1993 1992
----------- ---------- -----------
<S> <C> <C> <C>
Earnings (loss) from continuing
operations before income taxes $ 1,157 $56,533 $27,641
Add: Fixed charges deducted from
earnings (loss) 27,604 44,043 48,102
Less: Pre-tax equivalent of preferred
stock dividend requirements (1,662) (4,843) (5,388)
------- ------- -------
Earnings available for payment of
fixed charges $27,099 $95,733 $70,355
======= ======= =======
Fixed charges:
Capital lease interest $10,284 $16,151 $16,395
Other interest 3,364 5,865 9,156
Portion of operating lease rentals
deemed to represent interest(1) 12,294 17,184 17,163
Pre-tax equivalent of preferred
stock dividend requirements 1,662 4,843 5,388
------- ------- -------
Total fixed charges $27,604 $44,043 $48,102
======= ======= =======
Ratio of earnings to fixed charges -- 2.17x 1.46x
Deficiency of earnings available to
cover fixed charges $ 505
</TABLE>
- -------------------------------------------------
(1) Management has estimated that approximately 45% of rent expense could be
considered interest if the Company's operating leases were considered debt
obligations.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
-----------------------------
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-05003 of Hills Stores Company, Hills Department
Store Company, Canton Advertising, Inc., Corporate Vision, Inc., C.R.H.
International, Inc., HDS Transport, Inc. and Hills Distributing Company on Form
S-4 of our reports dated March 14, 1996 (April 5, 1996 with respect to the fifth
paragraph of Note 8), appearing 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 such
Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 12, 1996
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT ACCOUNTANT'S CONSENT
We consent to the incorporation by reference in Amendment No. 1 to the
Registration Statement of Hills Stores Company, Hills Department Store Company,
Canton Advertising, Inc., Corporate Vision, Inc., C.R.H. International, Inc.,
HDS Transport, Inc. and Hills Distributing Company on Form S-4 (File No.
333-05003) 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."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 12, 1996
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
----------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
----------
/ / CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
---------------------------------------------------------
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Not applicable 04-317415
- ------------------------------- -----------------------------
(State of incorporation (I.R.S. Employer
if not a national bank) Identification No.)
One Monarch Place, Springfield, MA 01102
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Pat Beaudry, 777 Main Street, Hartford, CT 06115 (203) 728-2065
--------------------------------------------------------------
(Name, address and telephone number of agent for service)
HILLS STORES COMPANY
---------------------------------------------------
(Exact name of obligor as specified in its charter)
Hills Department Store Company
Canton Advertising, Inc.
Corporate Vision, Inc.
C.R.H. International, Inc.
HDS Transport, Inc.
Hills Distributing Company
------------------------------------------------------
(Exact name of guarantors as specified in its charter)
<TABLE>
<S> <C>
Delaware 31-1153510
Delaware 04-3201920
Massachusetts 31-1110263
Massachusetts 04-3033031
Ohio 31-0843874
Ohio 31-0799137
Delaware 04-3078935
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 Dan Road, Canton, Massachusetts 02021
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
12 1/2% Senior Notes due 2003, Series B
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(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
The Comptroller of the Currency
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of
eligibility and qualification.
(1) A copy of the Articles of Association of the trustee as
now in effect. (See Exhibit 25, of Registration Statement
No. 333-01843)
(2) A copy of the Certificate of Authority of the trustee
to do business. (See Exhibit 25, Registration Statement
No. 333-01843)
(3) The authorization of the Trustee to exercise corporate
trust powers is referenced in Exhibit 1 of this Item 16.
(4) A copy of the By-Laws of the trustee as now in effect.
(See Exhibit 25, Registration Statement No. 333-01843)
(5) Consent of the trustee required by Section 321(b)
of the Act is reiterated in Exhibit 2 of this item 16.
(6) A copy of the latest Report of Condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority as now in effect. (See
Exhibit 25 of Registration Statement No. 333-02183).
*The Exhibits thus designated are incorporated herein by
reference. Following the description of such Exhibits is
a reference to the copy of the Exhibit heretofore filed
with the Securities and Exchange Commission to which
there have been no amendments or changes.
<PAGE> 3
NOTES
In as much as this Form T-1 is filed prior to the ascertainment by the trustee
of all facts on which to base answers to Item 2, the answers to said Items are
based upon incomplete information.
Item 2 may, however, be considered correct unless amended by an amendment to
this Form T-1.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the 12th day of June, 1996.
FLEET NATIONAL BANK,
AS TRUSTEE
By: /s/ FRANK KIMBALL
-------------------------
Frank Kimball
Its Vice President
<PAGE> 5
EXHIBIT 1
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under the Indenture to be entered into between
Hills Stores Company and Fleet National Bank, as Trustee, does
hereby consent that, pursuant to Section 321(b) of the Trust Indenture Act of
1939, reports of examinations with respect to the undersigned by Federal,
State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
AS TRUSTEE
By /s/ FRANK KIMBALL
-------------------------------
Frank Kimball
Its Vice President
Dated: June 12, 1996
<PAGE> 6
EXHIBIT 2
[LOGO]
- --------------------------------------------------------------------------------
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- --------------------------------------------------------------------------------
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
the records in this Office evidence "Fleet National Bank of Connecticut",
Hartford, Connecticut, (Charter No. 1338), was granted, under the hand
and seal of the Comptroller, the right to act in all fiduciary capacities
authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the
authority so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
Office of the Comptroller of the Currency
to be affixed to these presents at the
Treasury Department, in the City of
Washington and District of Columbia, this
4th day of April, 1996.
/s/ EUGENE A. LUDWIG
----------------------------------
Comptroller of the Currency
<PAGE> 1
EXHIBIT 99.5
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
12 1/2% SENIOR NOTES DUE 2003
OF
HILLS STORES COMPANY
Pursuant to Prospectus dated , 1996
HILLS STORES COMPANY WILL ACCEPT ALL 12 1/2% SENIOR NOTES DUE 2003 TENDERED AND
NOT WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON , 1996
(AS SUCH DATE AND TIME MAY BE EXTENDED BY HILLS STORES COMPANY IN ITS SOLE
DISCRETION, THE "EXPIRATION TIME"). TENDERS OF SUCH NOTES MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION TIME.
The Exchange Agent is:
Fleet National Bank
By Registered or By Hand Delivery:
Certified Mail:
By Overnight Delivery: By Facsimile:
Confirm by Telephone:
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus") of Hills Stores Company (the "Company") and this Letter
of Transmittal (the "Letter of Transmittal"), which together with the Prospectus
constitutes the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 12 1/2% Senior Notes due 2003, Series B ("Series B
Notes"), for each $1,000 principal amount of its outstanding 12 1/2% Senior
Notes due 2003 ("Series A Notes"). Recipients of the Prospectus should read the
requirements described in such Prospectus with respect to eligibility to
participate in the Exchange Offer. Capitalized terms used but not defined herein
have the meanings given to them in the Prospectus.
The undersigned hereby tenders the Series A Notes described in the box
entitled "Description of Series A Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Series A Notes and the
undersigned represents that it has received from each beneficial owner of Series
A Notes (each a "Beneficial Owner") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action described
in this Letter of Transmittal.
This Letter of Transmittal is to be used only by a holder of Series A
Notes (i) if certificates representing Series A Notes are to be forwarded
herewith or (ii) if delivery of Series A Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company (the
"Depositary"), pursuant to the procedures set forth in the section of the
Prospectus entitled "The Exchange Offer--Procedures for Tendering." [IF DELIVERY
OF THE SERIES A NOTES IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT AT THE DEPOSITARY, THIS LETTER OF TRANSMITTAL
NEED NOT BE MANUALLY EXECUTED]; provided, however, that tenders of the Series A
Notes must be effected in accordance with the procedures mandated by the
Depositary's Automated Tender Offer Program and the procedures set forth in the
Prospectus under the caption "The Exchange Offer--Book-Entry Transfer."
The undersigned hereby represents and warrants that the information set
forth in the box entitled "Beneficial Owner(s)" is true and correct.
Any beneficial owner of Series A Notes whose Series A Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender Series A Notes should contact the
registered holder promptly and instruct such registered holder to tender the
Series A Notes on such beneficial owner's behalf. If such beneficial owner
wishes to tender on its own behalf, it must, prior to completing and executing
this Letter of Transmittal and delivering its Series A Notes, either make
appropriate arrangements to register ownership of the Series A Notes in its name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
In order to properly complete this Letter of Transmittal, a holder of
Series A Notes must (i) complete the box entitled "Description of Series A
Notes," (ii) if appropriate, check and complete the boxes relating to book-entry
transfer, guaranteed delivery, Special Issuance Instructions and Special
Delivery Instructions, (iii) sign the Letter of Transmittal by completing the
box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder
of Series A Notes should carefully read the detailed instructions below prior to
completing this Letter of Transmittal.
A holder who wishes to tender Series A Notes (i) whose Series A Notes
are not immediately available, (ii) who cannot deliver its Series A Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Time or (iii) who is unable to complete the procedure
for book-entry transfer on a timely basis, may effect a tender pursuant to the
guaranteed delivery procedures set forth in the section of the Prospectus
entitled "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction
2.
A holder who wishes to tender Series A Notes must, at a minimum,
complete columns (1) through (3) in the box below entitled "Description of
Series A Notes" and sign the box below entitled "Sign Here." If only those
columns are completed, such holder of Series A Notes will have tendered for
exchange all Series A Notes listed in column (3) below. If the holder of Series
A Notes wishes to tender for exchange less than all of such Series A
-2-
<PAGE> 3
Notes, column (4) must be completed in full. In such case, such holder of Series
A Notes should refer to Instruction 5.
<TABLE>
<CAPTION>
=============================================================================================================================
DESCRIPTION OF SERIES A NOTES
=============================================================================================================================
(1) (2) (3) (4)
Principal
Amount
Tendered For
Exchange
(only if
different
amount from
Name(s) and Address(es) of Registered Series A Note column (3))
Holder(s) of Series A Note(s), exactly as Number(s)(1) (must be in
name(s) appear(s) on Series A Note (Attach Aggregate integral
Certificate(s) signed List if Principal multiples
(Please fill in, if blank) necessary) Amount of $1,000)(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
=============================================================================================================================
</TABLE>
(1) Column (2) need not be completed by holders of Series A Notes tendering
Series A Notes for exchange by book-entry transfer. Please check the
appropriate box below and provide the requested information.
(2) Column (4) need not be completed by holders of Series A Notes who wish
to tender for exchange the principal amount of Series A Notes listed in
Column (3). Completion of column (4) will indicate that the holder of
Series A Notes wishes to tender for exchange only the principal amount
of Series A Notes indicated in column (4).
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITARY AND COMPLETE THE FOLLOWING (FOR USE ONLY BY ELIGIBLE
INSTITUTIONS, AS HEREINAFTER DEFINED):
Name of Tendering Institution
------------------------------------------
Account Number
---------------------------------------------------------
Transaction Code Number
------------------------------------------------
-3-
<PAGE> 4
/ / CHECK HERE IF TENDERED Series A Notes ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE ONLY BY ELIGIBLE INSTITUTIONS):
Name of Registered Holder of Series A Note(s)
--------------------------
Date of Execution of Notice of Guaranteed Delivery
---------------------
Window Ticket Number (if available)
------------------------------------
Name of Institution which Guaranteed Delivery
--------------------------
Account Number (if delivered by book-entry transfer)
-------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------------------------
Address:
---------------------------------------------------------------
================================================================================
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if the Series B Notes issued in exchange for
Series A Notes, certificates for Series A Notes in a principal amount not
exchanged for Series B Notes or Series A Notes (if any) not tendered for
exchange, are to be issued in the name of someone other than the undersigned, or
(ii) if Series A Notes tendered by book-entry transfer which are not exchanged
are to be returned by credit to an account maintained at the Depositary.
Issue to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
Credit Series A Notes not exchanged and delivered by book-entry
transfer to the Depositary account set forth below:
- --------------------------------------------------------------------------------
(Account Number)
================================================================================
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if the Series B Notes issued in exchange for
Series A Notes, certificates for Series A Notes in a principal amount not
exchanged for Series B Notes or Series A Notes (if any) not tendered for
exchange, are to be mailed or delivered to someone other than the undersigned,
or to the undersigned at an address other than the address shown below the
undersigned's signature.
Mail or delivered to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Tax Identification or Social Security No.)
================================================================================
-4-
<PAGE> 5
================================================================================
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF SERIES A NOTES
BENEFICIAL OWNER OF SERIES A NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
If delivery of Series A Notes is to be made by book-entry transfer to
the account maintained by the Exchange Agent at the Depositary, then tenders of
Series A Notes must be effected in accordance with the procedures mandated by
the Depositary's Automated Tender Offer Program and the procedures set forth in
the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer."
-5-
<PAGE> 6
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the offer by Hills Stores Company (the "Company"), upon the
terms and subject to the conditions set forth in the Prospectus dated ,
1996 (the "Prospectus") and this Letter of Transmittal (the "Letter of
Transmittal"), which together with the Prospectus constitutes the Company's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 12 1/2%
Senior Notes Due 2003, Series B (the "Series B Notes") for each $1,000
principal amount of its outstanding 12 1/2% Senior Notes Due 2003 (the
"Series A Notes"), the undersigned hereby tenders to the Company for exchange
the Series A Notes indicated above.
By executing this Letter of Transmittal and subject to and effective
upon acceptance for exchange of the Series A Notes tendered for exchange
herewith, the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Company, all right, title and interest in, to and under all of
the Series A Notes tendered for exchange hereby, and hereby appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as agent of the Company) of such
holder of Series A Notes with respect to such Series A Notes, with full power of
substitution, to (i) deliver certificates representing such Series A Notes, or
transfer ownership of such Series A Notes on the account books maintained by the
Depositary (together, in any such case, with all accompanying evidences of
transfer and authenticity), to the Company, (ii) present and deliver such Series
A Notes for transfer on the books of the Company, and (iii) receive all benefits
and otherwise exercise all rights and incidents of beneficial ownership with
respect to such Series A Notes, all in accordance with the terms of the Exchange
Offer. The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants to the Company that (i)
the undersigned is the owner; (ii) has a net long position within the meaning of
Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4")
equal to or greater than the principal amount of Series A Notes tendered hereby;
(iii) tender of such Series A Notes complies with Rule 14e-4 (to the extent that
Rule 14e-4 is applicable to such exchange); (iv) the undersigned has full power
and authority to tender, exchange, assign and transfer the Series A Notes and
(v) that when such Series A Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Series A
Notes tendered for exchange hereby.
The undersigned hereby further represents and warrants to the Company
that (i) the Series B Notes to be acquired by the undersigned in exchange for
the Series A Notes tendered hereby and any beneficial owner(s) of such Series A
Notes in connection with the Exchange Offer will be acquired by the undersigned
and such beneficial owner(s) in the ordinary course of business of the
undersigned and such beneficial owner(s), (ii) neither the undersigned nor any
beneficial owner is an "affiliate," as defined in Rule 405 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Company, (iii) the
undersigned has no arrangement or understanding with any person to engage in any
distribution of the Series B Notes and if the undersigned is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, a
distribution of the Series B Notes, (iv) the undersigned and each beneficial
owner acknowledge and agree that any person who is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, or any person
participating in the Exchange Offer for purposes of distributing Series B Notes
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction of the Series
B Notes acquired by such person and cannot rely on the position of the staff of
the Securities and Exchange Commission (the "Commission") set forth in certain
no-action letters (see the section of the Prospectus entitled "The Exchange
Offer-Resale of Series B Notes"), and (v) the undersigned and each beneficial
owner understand that any secondary resale transaction described in clause (iv)
above and any resale of Series B Notes obtained by the undersigned and each
beneficial owner in exchange for Series A Notes acquired by the undersigned and
each beneficial owner directly from the Company should be covered
-6-
<PAGE> 7
by an effective registration statement containing the selling securityholder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC. If the undersigned is a broker-dealer that will receive Series B
Notes for its own account in exchange for Series A Notes that were acquired as a
result of market-making or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Series B Notes received in respect of such
Series A Notes pursuant to the Exchange Offer; by so acknowledging and by
delivering a prospectus, however, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Series A Notes,
if, as and when the Company gives oral or written notice thereof to the Exchange
Agent. Tenders of Series A Notes for exchange may be withdrawn at any time prior
to the Expiration Time. See "The Exchange Offer--Withdrawal of Tenders" in the
Prospectus. Any Series A Notes tendered by the undersigned and not accepted for
exchange will be returned to the undersigned at the address set forth above
unless otherwise indicated in the box above entitled "Special Delivery
Instructions."
The undersigned acknowledges that the Company's acceptance of Series A
Notes validly tendered for exchange pursuant to any one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer" and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Series A Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Series A Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Series B Notes issued in exchange for the Series A Notes
accepted for exchange in the name(s) of, and return any Series A Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Series A Notes from the name of the holder of Series A Note(s) thereof if
the Company does not accept for exchange any of the Series A Notes so tendered
for exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Series A Note(s).
IN ORDER TO VALIDLY TENDER SERIES A NOTES FOR EXCHANGE, HOLDERS OF
SERIES A NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned,
and any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
otherwise stated in the Prospectus, this tender for exchange of Series A Notes
is irrevocable.
-7-
<PAGE> 8
SIGN HERE
- --------------------------------------------------------------------------------
(Signature(s) of (Owners(s))
Date: , 1996
----------------
Must be signed by the registered holder(s) of Series A Notes exactly as
name(s) appear(s) on certificate(s) representing the Series A Notes or on a
security position listing or by person(s) authorized to become registered Series
A Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title)
-----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. ( )
----- --------------------------------------------
Tax Identification or Social Security Nos.
--------------------------------------
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature
------------------------------------------------------------
Dated
---------------------------------------------------------------------------
Name and Title
------------------------------------------------------------------
(Please Print)
Name of Firm
--------------------------------------------------------------------
-8-
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP);
b. The New York Stock Exchange Medallion Signature Program (MSP); or
c. The Stock Exchange Medallion Program (SEMP).
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Series A
Notes tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Series A Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND SERIES A NOTES;
GUARANTEED DELIVERY PROCEDURE. This Letter of Transmittal is to be completed by
holders of Series A Notes (i) if certificates are to be forwarded herewith or
(ii) if tenders are to be made pursuant to the procedures for tender by
book-entry transfer or guaranteed delivery set forth in the section of the
Prospectus entitled "The Exchange Offer." Certificates for all physically
tendered Series A Notes or any confirmation of a book-entry transfer (a
"Book-Entry Confirmation"), as well as a properly completed and duly executed
copy of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the cover of this Letter of Transmittal prior to the
Expiration Time. A holder who elects to tender Series A Notes (i) whose Series A
Notes are not immediately available, (ii) who cannot deliver its Series A Notes
or other required documents to the Exchange Agent prior to the Expiration Time
or (iii) who is unable to complete the procedures for book-entry transfer on a
timely basis, may effect a tender if: (a) the tender is made by or through an
Eligible Institution; (b) prior to the Expiration Time, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by telegram, telex, facsimile transmission, mail
or hand delivery) (1) setting forth the name and address of the holder of such
Series A Notes, the certificate number or numbers of such Series A Notes and the
principal amount of Series A Notes tendered for exchange, (2) stating that the
tender is being made thereby and (3) guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Time, the Letter of Transmittal
(or a facsimile thereof) together with the certificate or certificates
representing the Series A Notes in proper form for transfer or a confirmation of
a book-entry transfer (a "Book- Entry Confirmation"), as the case may be, and
any other documents required by this Letter of Transmittal, will be deposited by
such Eligible Institution with the Exchange Agent; and (c) such properly
executed Letter to Transmittal (or a facsimile thereof), together with a
certificate or certificates representing all tendered Series A Notes in proper
form for transfer or a Book-Entry Confirmation, together with any other
documents required by this Letter of Transmittal are received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Time.
THE METHOD OF DELIVERY OF SERIES A NOTES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE TENDERING HOLDER OF SERIES A NOTES. EXCEPT AS OTHERWISE PROVIDED
BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED
BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
TENDERING HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
-9-
<PAGE> 10
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION TIME. NO SERIES A
NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Series A Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Series A Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Series A Notes" above is inadequate, the certificate numbers and
principal amounts of the Series A Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Series A Notes may be withdrawn at any time
prior to the Expiration Time by delivery of written notice of withdrawal to the
Exchange Agent at the address set forth on the cover of this Letter of
Transmittal. To be effective, a notice of withdrawal of Series A Notes must (i)
specify the name of the person having tendered the Series A Notes to be
withdrawn, (ii) identify the Series A Notes to be withdrawn (including the
certificate number or numbers and aggregate principal amount), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Series A Notes were tendered (including any required
signature guarantees). Any Series A Notes so withdrawn will be deemed not to
have been properly tendered for purposes of the Exchange Offer and no Series B
Notes will be issued with respect thereto unless the Series A Notes so withdrawn
are properly re-tendered. Properly withdrawn Series A Notes may be re-tendered
by following one of the procedures described in the section of the Prospectus
entitled "The Exchange Offer -- Procedures for Tendering" at any time prior to
the Expiration Time.
5. PARTIAL TENDERS. (Not applicable to holders of Series A Notes who
tender Series A Notes by book-entry transfer). Tenders of Series A Notes will be
accepted only in integral multiples of $1,000 principal amount. If a tender for
exchange is to be made with respect to less than the entire principal amount of
any Series A Notes, fill in the principal amount of Series A Notes which are
tendered for exchange in column (4) of the box entitled "Description of Series A
Notes," as more fully described in the footnotes thereto. In case of a partial
tender for exchange, a new certificate, in fully registered form, for the
remainder of the principal amount of the Series A Notes, will be sent to the
holders of Series A Notes unless otherwise indicated in the appropriate box on
this Letter of Transmittal as promptly as practicable after the expiration or
termination of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND
ENDORSEMENTS.
(a) The signature(s) of the holder of Series A Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Series A Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Series A Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Series A Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the
Series A Notes listed and transmitted hereby, no endorsements of Series A Notes
or separate powers of attorney are required. If, however, Series A Notes not
tendered, or not accepted, are to be issued or returned in the name of a person
other than the holder of Series A Notes, then the Series A Notes transmitted
hereby must be endorsed or accompanied by an appropriate power of attorney in a
form satisfactory to the Company, which power of attorney shall be signed by
such holder as such holder's name appears on the Series A Notes. Signatures on
such Series A Notes or powers of attorney must be guaranteed by an Eligible
Institution (unless signed by an Eligible Institution).
-10-
<PAGE> 11
(e) If this Letter of Transmittal or Series A Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of their authority so to act must be
submitted.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of any Series A Notes listed, the Series A Notes must be
endorsed or accompanied by an appropriate power of attorney, which power of
attorney shall be by such holder as such holder's name appears on the Series A
Notes. Signatures on such Series A Notes or powers of attorney must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the
Company will pay all transfer taxes, if any, applicable to the transfer and
exchange of Series A Notes pursuant to the Exchange Offer. If, however, issuance
of Series B Notes is to be made to, or Series A Notes not tendered for exchange
are to be issued or returned in the name of, any person other than the holder of
Series A Notes, and satisfactory evidence of payment of such taxes or exemptions
from taxes therefrom is not submitted with this Letter of Transmittal, the
amount of any transfer taxes payable on account of the transfer to such person
will be imposed on and payable by the holder of Series A Notes tendering Series
A Notes for exchange prior to the issuance of the Series B Notes.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Series B Notes
are to be issued, or if any Series A Notes not tendered for exchange are to be
issued or sent to someone other than the holder of Series A Notes or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be complete. Holders of Series A Notes tendering Series A
Notes by book-entry transfer may request that Series A Notes not accepted be
credited to such account maintained at the Depositary as such holder of Series A
Notes may designate.
9. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt), acceptance and withdrawal of
Series A Notes will be determined by the Company, in its sole discretion, whose
determination shall be final and binding. The Company reserves the absolute
right to reject any or all Series A Notes not properly tendered or any Series A
Notes the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions as to any particular Series A Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions herein) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Series A Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Series A Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Series A Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Time.
10. WAIVER OF CONDITIONS. The Company reserves the right in its sole
discretion to waive, amend or modify certain of the specified conditions as
described under "The Exchange Offer--Procedures for Tendering" in the Prospectus
in the case of any Series A Notes tendered (except as otherwise provided in the
Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES. If a holder of
Series A Notes desires to tender Series A Notes pursuant to the Exchange Offer,
but any of such Series A Notes has been mutilated, lost, stolen or destroyed,
such holder of Series A Notes should write to or telephone the Trustee at the
address listed below, concerning the procedures for obtaining replacement
certificates for such Series A Notes, arranging for indemnification or any other
matter that requires handling by the Trustee:
-11-
<PAGE> 12
Fleet National Bank
[Address]
[Telephone Number]
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION TIME.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Series A Notes whose
tendered Series A Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Series A
Notes is awaiting a TIN) and that (A) the holder of Series A Notes has not been
notified by the Internal Revenue Service that it is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Series A Notes that it
is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Series A Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Series A Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Series A Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Series A Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold
[31%] of any payment made to the holder of Series A Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Series A Notes is required to give the Exchange Agent the
TIN (e.g., social security number or employer identification number) of the
record owner of the Series A Notes. If the Series A Notes are held in more than
one name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
-12-
<PAGE> 13
<TABLE>
PAYER'S NAME:
--------------------------------------------
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 - PLEASE PROVIDE
YOUR TIN IN THE BOX AT -----------------------------------
FORM W-9 RIGHT AND CERTIFY BY Social Security Number
SIGNING AND DATING BELOW
Department of the Treasury OR
Internal Revenue Service
-----------------------------------
Payer's Request for Taxpayer Employer Identification Number
Identification Number (TIN)
-------------------------------------------------------------------
PART 2 - PART 3 -
Certification Under Penalties of Perjury, I
certify that:
Awaiting
(1) The number shown on this form is my current TIN / /
taxpayer identification number (or I am
waiting for a number to be issued to me) and
(2) I am not subject to backup withholding
either because I have not been
notified by the Internal Revenue
Service (the "IRS") that I am subject
to backup withholding as a result of a
failure to report all interest or
dividends, or the IRS has notified me
that I am no longer subject to backup
withholding.
-------------------------------------------------------------------
Certificate instructions - You must cross out item (2) in Part 2
above if you have been notified by the IRS that you are subject to
backup withholding because of underreporting interest or dividends
on your tax return. However, if after being notified by the IRS
that you are subject to backup withholding you receive another
notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
SIGNATURE DATE
------------------------------------------- --------
NAME
--------------------------------------------------------------
ADDRESS
-----------------------------------------------------------
CITY STATE ZIP CODE
------------------------------- ------ --------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF [31%] OF ANY PAYMENT MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
-13-
<PAGE> 14
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver such an application in the near future. I understand
that if I do not provide a taxpayer identification number with sixty (60) days,
[31%] of all reportable payments made to me thereafter will be withheld until I
provide such a number.
- --------------------------------------------------------------------------------
Signature Date
-14-
<PAGE> 15
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER OF
HILLS STORES COMPANY
12 1/2% SENIOR NOTES DUE 2003
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1996 (the "Prospectus") of Hills Stores Company (the "Company")
and the accompanying Letter of Transmittal (the "Letter of Transmittal"),
which together constitute the Company's offer (the "Exchange Offer") to
exchange $1,000 principal amount of its 12 1/2% Senior Notes due 2003,
Series B ("Series B Notes"), for each $1,000 principal amount of its
outstanding 12 1/2% Senior Notes due 2003 ("Series A Notes"). Capitalized
terms used but not defined herein have the meanings given to them in the
Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the Series A Notes
held by you for the account of the undersigned:
The aggregate face amount of the Series A Notes held by you for the
account of the undersigned is $_______.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
/ / TO TENDER the following Series A Notes held by you for the account
of the undersigned (insert principal amount of Series A Notes to be tendered, if
any): $__________ of the Series A Notes.
/ / NOT TO TENDER any Series A Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Series A Notes held by
you for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Series A Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the State
of (fill in state) ____________________, (ii) the undersigned is acquiring the
Series B Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act"), of the Company, (iv) the
undersigned has no arrangement or understanding with any person to engage in a
distribution of Series B Notes and if the undersigned is not a broker-dealer
that it is not engaged in, and does not intend to engage in, a distribution of
the Series B Notes, (v) the undersigned acknowledges and agrees that any person
who is a broker-dealer registered under the Securities Exchange Act of 1934, as
amended, and any person participating in the Exchange Offer for purposes of
distributing Series B Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction of the Series B Notes acquired by such person and cannot rely
on the position of the staff of the Commission set forth in certain no-action
letters (see the section of the Prospectus entitled "The Exchange Offer--Resales
of the Series B Notes"), (vi) the undersigned understands that any secondary
resale transaction described in clause (v) above and any resale of Series B
Notes obtained by the undersigned in exchange for Series A Notes acquired by the
undersigned directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Securities and Exchange Commission, and (vii) if the undersigned is a
broker-dealer that will receive Series B Notes for its own account in exchange
for Series A Notes that were acquired as a result of market-making activities or
other trading activities, the undersigned acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Series B Notes received in respect of such Series A Notes
pursuant to the Exchange Offer; by so acknowledging and by delivering a
prospectus, however, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act; (b) to agree, on behalf
of the undersigned, as set forth in the Letter of Transmittal; and (c) to take
such other action as necessary under the Prospectus or the Letter of Transmittal
to effect the valid tender of Series A Notes.
SIGN HERE
Name of Beneficial Owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name(s) (please print):_________________________________________________________
Address:________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
-15-
