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_______________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 28, 1997
HILLS STORES COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-9505 31-1153510
(State or other juris- (Commission (I.R.S. employer
diction of incorporation) file number) identification number)
</TABLE>
15 Dan Road 02021
Canton, Massachusetts (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code:
(617) 821-1000
_______________________________________________________________________________
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Item 5. Other Events
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Hills Stores Company (the "Company"), through its wholly-owned subsidiary Hills
Department Store Company ("HDSC"), and C.R.H. International, Inc., a wholly-
owned subsidiary of HDSC, amended (the "Amendment") the Loan and Security
Agreement (the "Agreement") governing its $300 million secured revolving credit
facility (the "Facility") with BankAmerica Business Credit, Inc. ("BABC") as
agent for the group of lenders.
The Amendment extends the term of the Facility from September 30, 1999 to
January 31, 2000 and provides the Company with greater flexibility in meeting
the requirements of the two financial covenants contained in the Agreement.
As to the cash flow covenant (which requires that EBITDA not be less than cash
requirements for capital expenditures, taxes, and net interest/debt service),
for purposes of determining compliance throughout the fiscal year ending January
31, 1998, $10 million will be deducted from the aggregate amount of cash
requirements for capital expenditures. Second, compliance will be tested only
at the end of each fiscal quarter based on the accumulation of the previous four
fiscal quarters. The Amendment also clarifies that losses associated with
announced store closings will not reduce EBITDA.
With regard to the tangible net worth covenant, the Amendment reduces the
required tangible net worth by $20 million to $110 million at year-end, with
seasonally lower amounts at other times during the year, measured quarterly.
The Company paid a total fee of $250,000 to BABC and the lenders in connection
with the Amendment. A copy of the Amendment is filed as an Exhibit to this
Report and is incorporated by reference herein.
Item 7. Exhibits
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The following Exhibit is filed as part of this Report:
Exhibit
Number Title
- ------ -----
99.1 First Amendment dated as of February 28, 1997 to Loan and
Security Agreement dated as of September 30, 1996 among the
Financial Institutions named therein as the Lenders, BankAmerica
Business Credit, Inc. as the Agent, Hills Department Store
Company and C.R.H. International, Inc. as the Borrowers, and the
Other Loan Parties named therein.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized, on March 10, 1997.
HILLS STORES COMPANY
By: /s/ William K. Friend
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Name: William K. Friend
Title: Vice President-Secretary
3
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EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit
Number Title
- ------ -----
99.1 First Amendment dated as of February 28, 1997 to Loan and
Security Agreement dated as of September 30, 1996 among the
Financial Institutions named therein as the Lenders, BankAmerica
Business Credit, Inc. as the Agent, Hills Department Store
Company and C.R.H. International, Inc. as the Borrowers, and the
Other Loan Parties named therein.
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EXHIBIT 99.1
FIRST AMENDMENT
TO LOAN AND SECURITY AGREEMENT
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of February
28, 1997, among HILLS DEPARTMENT STORE COMPANY, a Delaware corporation
("HDSC"), C.R.H. INTERNATIONAL, INC., an Ohio corporation ("CRH" and together
with HDSC, the "Borrowers"), HILLS STORES COMPANY, a Delaware corporation
(the "Parent"), the other Loan Parties named herein and signatories hereto,
the financial institutions listed on the signature pages hereof (collectively,
the "Lenders") and BANKAMERICA BUSINESS CREDIT, INC., as Agent (the "Agent").
WHEREAS, the Borrowers, the Parent, the other Loan Parties, the Lenders
and the Agent are parties to that certain Loan and Security Agreement, dated as
of September 30, 1996, (such agreement being referred to herein as the "Loan and
Security Agreement");
WHEREAS, the Borrowers have requested certain modifications to the
financial covenants contained in the Loan and Security Agreement and an
extension of the maturity date of the credit facility provided under the Loan
and Security Agreement, and the Lenders and the Agent are agreeable to making
such changes, subject to the terms and conditions herein contained.
NOW, THEREFORE, the Borrowers, the Parent, the other Loan Parties, the
Lenders and the Agent hereby agree as follows:
SECTION 1. CAPITALIZED TERMS. Capitalized terms used but not defined
herein shall have the respective meanings set forth in the Loan and Security
Agreement.
SECTION 2. AMENDMENTS TO LOAN AND SECURITY AGREEMENT. The Loan and
Security Agreement shall be, and upon the fulfillment of the conditions set
forth in Section 3 hereof is, amended as follows:
2.1 The definition "EBITDA" in Section 1.1 of the Loan and Security
Agreement is amended by (i) adding the following phrase to the end of clause
(c) of such definition before the comma:
"(provided that for purposes of determining compliance with
SECTION 9.24 for any period for which EBITDA is being calculated
which ends on the last day of any fiscal quarter of the Parent
comprising part of the Parent's 1997 Fiscal Year, the fifty percent
(50%) figure in this clause (c) shall be increased to one hundred
percent (100%))"
and (ii) adding the following sentence to the end of such definition:
"Notwithstanding the foregoing, EBITDA shall not in any event
include any loss arising directly and solely from the closing of
store 227 located at 1072 W. Mercury Blvd., Hampton, VA 23666 and
those stores of HDSC described on Exhibit A to either of the
Waivers and Consents, dated as of January 29, 1997 and January 31,
1997, respectively, to the Loan and Security Agreement."
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2.2 The definition "Net Capex" in Section 1.1 of the Loan and
Security Agreement is amended by adding the following clause immediately
after the phrase "during such period" in clause (b) of such definition:
"(which aggregate amount of Capital Expenditures shall, for
purposes of determining compliance with SECTION 9.24 (and not
for the purpose of determining the Coverage Ratio) for each of
the twelve consecutive fiscal month periods of the Parent ending
on the last day of any fiscal quarter of the Parent comprising
part of the Parent's 1997 Fiscal Year (without duplication), be
reduced by $10,000,000)"
2.3 The definition "Stated Termination Date" in Section 1.1 of the
Loan and Security Agreement is amended by (i) deleting the phrase "the third
anniversary of the Closing Date" and (ii) substituting therefor the date
"January 31, 2000".
2.4 Section 9.23 of the Loan and Security Agreement is deleted in
its entirety and the following Section 9.23 shall be substituted therefor:
"9.23 ADJUSTED TANGIBLE NET WORTH. The Parent will
maintain Adjusted Tangible Net Worth, determined as of the last day
of each fiscal quarter of the Parent, of not less than the following:
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FISCAL QUARTER ENDING IN OR ABOUT AMOUNT
January of any year $110,000,000
April of any year $100,000,000
July of any year $ 90,000,000
October of any year $ 80,000,000"
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2.5 Section 9.24 of the Loan and Security Agreement is amended by
(i) deleting the phrases "twelve consecutive fiscal months" and "twelve
fiscal month" and substituting the phrases "four consecutive fiscal
quarters" and "four fiscal quarter", respectively, therefor and (ii)
deleting the phrase "(determined as of the last day of each fiscal month of
the Parent)" and substituting therefor the phrase "(determined as of the
last day of each fiscal quarter of the Parent)".
SECTION 3. EFFECTIVENESS. This Agreement and the amendments
contemplated hereby shall become effective when:
(a) counterparts hereof have been duly executed and delivered to the
Agent on behalf of the Borrowers, the Parent, the other Loan Parties, the
Lenders and the Agent;
(b) the Agent shall be satisfied that there exists no Default or
Event of Default; and
(c) the Agent shall have received for the benefit of the Lenders an
amendment fee in the amount of $250,000 (to be allocated among the Lenders based
upon each Lender's respective Commitment at the time such fee is received by the
Agent).
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SECTION 4. COUNTERPARTS. This First Amendment to Loan and Security
Agreement may be executed in counterparts, each of which shall be an original,
and all of which, taken together, shall constitute a single instrument. This
First Amendment to Loan and Security Agreement shall be governed by, and
construed in accordance with, the internal laws (as opposed to the conflicts of
laws provisions) of the State of New York. Delivery of an executed counterpart
of a signature page to this First Amendment to Loan and and Security Agreement
by telecopier shall be effective as delivery of a manually executed signature
page hereto.
SECTION 5. REFERENCES TO LOAN AND SECURITY AGREEMENT. From and after
the effectiveness of this First Amendment to Loan and Security Agreement and
the amendments contemplated hereby, all references in the Loan and Security
Agreement to "this Agreement", "hereof", "herein", and similar terms shall mean
and refer to the Loan and Security Agreement, as amended and modified by this
First Amendment to Loan and Security Agreement, and all references in other
documents to the Loan and Security Agreement shall mean such agreement as
amended and modified by this First Amendment to Loan and Security Agreement.
SECTION 6. RATIFICATION AND CONFIRMATION. The Loan and Security
Agreement is hereby ratified and confirmed and, except as herein agreed, remains
in full force and effect. Each of the Loan Parties represents and warrants that
on the date hereof (i) all representations and warranties made by any Loan Party
contained in Articles 6 and 8 of the Loan and Security Agreement are correct in
all material respects on and as of the date hereof, other than any such
representation or warranty which relates to a specified prior date and (ii)
there exists no Default or Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Loan and Security Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
"BORROWERS"
HILLS DEPARTMENT STORE COMPANY
By /s/ C. Scott Litten
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Name: C. Scott Litten
Title: Executive Vice President-
Chief Financial Officer
C.R.H. INTERNATIONAL, INC.
By /s/ William K. Friend
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Name: William K. Friend
Title: Vice President-Secretary
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"PARENT"
HILLS STORES COMPANY
By /s/ C. Scott Litten
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Name: C. Scott Litten
Title: Executive Vice President-
Chief Financial Officer
OTHER "LOAN PARTIES"
CANTON ADVERTISING, INC.
By /s/ William K. Friend
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Name: William K. Friend
Title: Vice President-Secretary/Clerk
HDS TRANSPORT, INC.
By /s/ William K. Friend
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Name: William K. Friend
Title: Vice President-Secretary
CORPORATE VISION, INC.
By /s/ William K. Friend
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Name: William K. Friend
Title: Vice President-Secretary/Clerk
HILLS DISTRIBUTING COMPANY
By /s/ William K. Friend
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Name: William K. Friend
Title: Vice President-Secretary
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"AGENT"
BANKAMERICA BUSINESS CREDIT, INC.,
as the Agent
By /s/ Michael Lemiszko
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Name: Michael Lemiszko
Title: Vice President
"LENDERS"
BANKAMERICA BUSINESS CREDIT, INC.,
as a Lender
By /s/ Michael Lemiszko
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Name: Michael Lemiszko
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By /s/ Janet G. O'Donnell
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Name: Janet G. O'Donnell
Title: Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By /s/ Jon Oldham
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Name: Jon Oldham
Title: Assistant Secretary
CONGRESS FINANCIAL CORPORATION,
as a Lender
By /s/ Josephine Norris
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Name: Josephine Norris
Title: Vice President
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HELLER FINANCIAL, INC., as a Lender
By /s/ Scott Ziemke
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Name: Scott Ziemke
Title: AVP-Account Manager
IBJ SCHRODER BANK & TRUST COMPANY,
as a Lender
By /s/ James M. Steffy
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Name: James M. Steffy
Title: Vice President
LASALLE BUSINESS CREDIT, INC.,
as a Lender
By /s/ Lawrence P. Garni
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Name: Lawrence P. Garni
Title: Vice President
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By /s/ Peter L. Skavla
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Name: Peter L. Skavla
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By /s/ Michael Burns
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Name: Michael Burns
Title: Vice President
