ORCHARD SUPPLY HARDWARE STORES CORP
8-A12B, 1996-03-26
BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY
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<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                          ---------------------------

                                    FORM 8-A

                          ---------------------------

                     FOR REGISTRATION OF CERTAIN CLASSES OF
                  SECURITIES PURSUANT TO SECTION 12(b) OR (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                          ---------------------------

                   Orchard Supply Hardware Stores Corporation
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                   95-4214109
- --------------------------------------------------------------------------------
(State of incorporation or organization)              (I.R.S. Employer
                                                     Identification No.)

    6450 Via Del Oro             San Jose, California        95119
- --------------------------------------------------------------------------------
(Address of principal executive offices)                   (Zip Code)

Securities to be registered pursuant to Section 12(b) of the Act:

    Title of each class                               Name of each exchange
    to be so registered                               on which each class is
                                                      to be registered

    Common Stock ($.01 par value)                     New York Stock Exchange
- ------------------------------------                  -----------------------

    If this Form relates to the registration of a class of debt securities and
is effective upon filing pursuant to General Instruction A.(c)(1), please check
the following box.  [ ]

    If this Form relates to the registration of a class of debt securities and
is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box.  [ ]

Securities to be registered pursuant to Section 12(g) of the Act:


                                      N/A
- --------------------------------------------------------------------------------
                                (Title of Class)

                        Exhibit Index Appears at Page 4.
                               Page 1 of 4 pages.
<PAGE>
 
Item 1.  Description of Registrant's Securities to be Registered.
         ------------------------------------------------------- 

         The description of Registrant's Common Stock, par value $.01 per share,
set forth in the "Description of Capital Stock" section of the Prospectus which
forms a part of Registrant's Registration Statement on Form S-3 (Registration
No. 333-1199) ("Form S-3"), filed with the Securities and Exchange Commission
(the "Commission") on February 26, 1996, is incorporated herein by this
reference.


Item 2.  Exhibits.
         -------- 

          The following Exhibits are filed as part of this Registration
Statement:

          1.   Registrant's Registration Statement on Form S-3;*

          2.   Not applicable;

          3.   Proxy Statement for the Company's 1995 Annual Meeting of
               Stockholders held May 19, 1995;

          4.1  Certificate of Incorporation of Registrant;**

          4.2  Bylaws of Registrant;+

          5.   Specimen of certificate evidencing Registrant's Common Stock, par
               value $.01 per share, registered hereunder; and ++

          6.   Registrant's 1995 Annual Report. +++



- -------------------------------- 
*   Filed with the Commission (Registration No. 333-1199) on February 26, 1996.
**  Filed as an exhibit to Quarterly Report on Form 10-Q (File No. 0-21182) on
    June 14, 1994 for the Company's quarter ended May 1, 1994.
+   Filed as an exhibit to Registration Statement on Form S-4 (Registration No.
    33-55190) on November 30, 1992.
++  Filed with the Commission on Form SE on March 26, 1996.
+++ Filed with the Commission on April 12,  1995 for the Company's fiscal year 
    ended January 29, 1995.

                              Page 2 of 4 pages.
<PAGE>
 
                                   SIGNATURE



          Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.


                                    ORCHARD SUPPLY HARDWARE STORES CORPORATION



Dated: March 26, 1996         By:   /s/ Stephen M. Hilberg
                                    ------------------------------------------
                                    Stephen M. Hilberg
                                    Senior Vice President and
                                    Chief Financial Officer

                              Page 3 of 4 pages.
<PAGE>
 
                                 EXHIBIT INDEX

Exhibit                                                                Page
Number                                                                Number
- ------                                                                ------

 1        Registrant's Registration Statement on Form S-3.*

 2        Not applicable.

 3        Proxy Statement for the Company's 1995 Annual Meeting
          of Stockholders held May 19, 1995.

4.1       Certificate of Incorporation of Registrant.**

4.2       Bylaws of Registrant.+

5         Specimen of certificate evidencing Registrant's Common 
          Stock, par value $.01 per share, registered hereunder.++

6         Registrant's 1995 Annual Report.+++



- ----------------------------- 
*         Filed with the Commission (Registration No. 333-1199) on February 26,
          1996.
**        Filed as an exhibit to Quarterly Report on Form 10-Q (File No. 0-
          21182) on June 14, 1994 for the Company's quarter ended May 1, 1994.
+         Filed as an exhibit to Registration Statement on Form S-4
          (Registration No. 33-55190) on November 30, 1992.
++        Filed with the Commission on Form SE on March 26, 1996.
+++       Filed with the Commission on April 12, 1995 for the Company's fiscal
          year ended January 29, 1995.

                              Page 4 of 4 pages.

<PAGE>
 
                                                                       EXHIBIT 3
                           SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                    Exchange Act of 1934 (Amendment No.  )
        
Filed by the Registrant [X]

Filed by a Party other than the Registrant [_] 

Check the appropriate box:

[_]  Preliminary Proxy Statement        [_]  Confidential, for Use of the 
                                             Commission Only (as permitted by
                                             Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement 

[_]  Definitive Additional Materials 

[_]  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

                  ORCHARD SUPPLY HARDWARE STORES CORPORATION
- --------------------------------------------------------------------------------
               (Name of Registrant as Specified In Its Charter)

                                 
- --------------------------------------------------------------------------------
   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   
Payment of Filing Fee (Check the appropriate box):

[X]  $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
     or Item 22(a)(2) of Schedule 14A.

[_]  $500 per each party to the controversy pursuant to Exchange Act Rule
     14a-6(i)(3).

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

   
     (1) Title of each class of securities to which transaction applies:

     -------------------------------------------------------------------------


     (2) Aggregate number of securities to which transaction applies:

     -------------------------------------------------------------------------


     (3) Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
         the filing fee is calculated and state how it was determined):

     -------------------------------------------------------------------------
      

     (4) Proposed maximum aggregate value of transaction:

     -------------------------------------------------------------------------


     (5) Total fee paid:

     -------------------------------------------------------------------------

[_]  Fee paid previously with preliminary materials.
     
[_]  Check box if any part of the fee is offset as provided by Exchange
     Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
     was paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.
     
     (1) Amount Previously Paid:
 
     -------------------------------------------------------------------------


     (2) Form, Schedule or Registration Statement No.:

     -------------------------------------------------------------------------


     (3) Filing Party:
      
     -------------------------------------------------------------------------


     (4) Date Filed:

     -------------------------------------------------------------------------

Notes:



<PAGE>

                 ORCHARD SUPPLY HARDWARE STORES CORPORATION
                               6450 Via Del Oro
                          San Jose, California 95119

                   NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                            To Be Held May 19, 1995

       TO THE STOCKHOLDERS OF ORCHARD SUPPLY HARDWARE STORES CORPORATION

        The 1995 Annual Meeting of Stockholders (the "1995 Annual Meeting") of
Orchard Supply Hardware Stores Corporation (the "Company") will be held at 2:00
p.m., Pacific Time, on Friday, May 19, 1995 at The Fairmont Hotel, 170 South
Market Street, San Jose, California 95113, for the following purposes :

        1. To elect eight Directors of the Company to serve during the ensuing
year and until their successors are elected and qualified.

        2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending January 28, 1996.

        3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

        The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the stockholders of record at the close
of business on April 6, 1995 will be entitled to notice of and to vote at the
1995 Annual Meeting or any adjournment or postponement thereof.

        A copy of the Company's Annual Report to Stockholders for the fiscal
year ended January 29, 1995 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.

By Order of the Board of Directors 
 
MICHAEL SEDA 
Secretary 
 

April 12, 1995
San Jose, California

<PAGE>

        YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.

IT IS IMPORTANT FOR YOU TO BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE
AT ANY TIME AND THE EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IF YOU ARE PRESENT AT THE MEETING.

         Requests for additional copies of proxy materials should be addressed
to Michael Seda, Corporate Secretary, at the offices of the Company, 6450 Via
Del Oro, San Jose, California 95119.
 
<PAGE>

                ORCHARD SUPPLY HARDWARE STORES CORPORATION
                               6450 Via Del Oro
                          San Jose, California 95119

                                PROXY STATEMENT

                       1995 ANNUAL MEETING OF STOCKHOLDERS
 
                            To Be Held May 19, 1995


                              GENERAL INFORMATION


        This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Orchard Supply Hardware
Stores Corporation, a Delaware corporation (the "Company"), for use at the
1995 Annual Meeting of Stockholders (the "1995 Annual Meeting") to be held on
Friday, May 19, 1995 at 2:00 p.m., Pacific Time, at The Fairmont Hotel, 170
South Market Street, San Jose, California 95113, and any adjournment or
postponement thereof. This Proxy Statement and the form of proxy to be utilized
at the 1995 Annual Meeting were mailed or delivered to the stockholders of the
Company on or about April 12, 1995.
 
 Matters to be Considered

        The 1995 Annual Meeting has been called to (1) elect eight Directors of
the Company to serve during the ensuing year and until their successors are
elected and qualified, (2) ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending January 28, 1996
("fiscal 1995") and (3) transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.

<PAGE>

Record Date and Voting

        The Board has fixed the close of business on April 6, 1995 as the record
date (the "Record Date") for the determination of stockholders entitled to
vote at the 1995 Annual Meeting and any adjournment or postponement thereof. As
of the Record Date, there were outstanding 6,983,400 shares of the Company's
Common Stock.

Quorum and Voting Requirements

        The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the 1995
Annual Meeting. As to all matters, each stockholder is entitled to one vote for
each share of Common Stock held. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. The Director nominees who receive the greatest number
of votes at the 1995 Annual Meeting will be elected to the Board of the Company.
Stockholders are not entitled to cumulate votes. Votes against a candidate and
votes withheld have no legal effect. In matters other than the election of
Directors, abstentions are counted as votes against in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.

        All proxies which are properly completed, signed and returned prior to
the 1995 Annual Meeting will be voted. Any proxy given by a stockholder may be
revoked at any time before it is exercised, by filing with the Secretary of the
Company an instrument revoking it, by delivering a duly executed proxy bearing a
later date or by the stockholder attending the 1995 Annual Meeting and
expressing a desire to vote his or her shares in person.

<PAGE>

        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


        The following table sets forth certain information regarding the
beneficial ownership of the Company's capital stock as of February 28, 1995 by
(i) each person who is known by the Company to be the beneficial owner of more
than 5% of any class of the Company's capital stock, (ii) each Director, nominee
and certain executive officers of the Company, individually, and (iii) all
Directors and executive officers as a group:

<TABLE> 
<CAPTION> 
                    Name of Beneficial           Amount Beneficially
  Title of Class          Owner(1)                     Owned          Percent of Class  
  --------------    --------------------------   -------------------  ----------------
<S>                 <C>                          <C>                  <C> 
Common Stock        Freeman Spogli & Co.(2)(3)    3,979,043                  48.2%

                    RCM General Corporation(4)      560,000                   8.0%

                    Maynard Jenkins(5)               50,192                     *

                    Stephen M. Hilberg(6)            21,472                     *

                    Bradford M. Freeman(2)(3)             #                     #

                    Morton Godlas(6)                  1,500                     *

                    J. Frederick Simmons(2)(3)            #                     #

                    Ronald P. Spogli(2)(3)                #                     #

                    William E. Walsh(6)               2,000                     *

                    William M. Wardlaw(2)(3)              #                     #

                    Matt L. Figel(7)                      #                     #
</TABLE> 
 
<PAGE>

<TABLE> 
<CAPTION> 
                    Name of Beneficial           Amount Beneficially
  Title of Class          Owner(1)                     Owned          Percent of Class  
  --------------    --------------------------   -------------------  ----------------
<S>                 <C>                          <C>                  <C> 
                    William A. Hall                       #                     #

                    Joseph A. DiRocco(6)              8,552                     *

                    Robert A. Lewis(6)               34,722                     *

                    Lee Nemechek(6)                   5,096                     *

                    Brad R. Tukey                         #                     #

Directors and Executive Officers 
as a Group (15 persons)(2)(3)(6)                  4,132,635                  49.7%
6% Cumulative       Freeman Spogli & Co.(3)         800,000                   100% 
Preferred 
Convertible 
Stock
</TABLE> 
         * Less than 1%
 
        (1) Except as otherwise indicated below, the persons named have sole
voting power and investment power with respect to all shares of capital stock
shown as beneficially owned by them, subject to community property laws where
applicable.

        (2) 2,699,043 shares of Common Stock are owned by FS Equity Partners II,
L.P. ("FSEP II"). As general partner of FSEP II, Freeman Spogli & Co.
("FS&Co.") has the sole power to vote and dispose of such shares. Messrs.
Freeman, Simmons, Spogli and Wardlaw and John M. Roth are general partners of
FS&Co., and as such may be deemed to be the beneficial owners of the shares of
the Company's capital stock indicated as beneficially owned by FS&Co. The
business address of FS&Co., its general partners and FSEP II is 11100 Santa
Monica Boulevard, Suite 1900, Los Angeles, California 90025.
 
        (3) 772,135 shares and 27,865 shares of 6% Cumulative Convertible
Preferred Stock, $.01 par value per share 
 
<PAGE>

("Convertible Preferred Stock"), are owned by FS Equity Partners III, L.P.
("FSEP III") and FS Equity Partners International, L.P. ("FSEP
International"), respectively, and are convertible into 1,235,416 shares and
44,584 shares of Common Stock, respectively. As general partner of FS Capital
Partners, L.P. ("FS Capital"), which is general partner of FSEP III, FS
Holdings, Inc. ("FSHI") has the sole power to vote and dispose of the shares
owned by FSEP III. As general partner of FS&Co. International, L.P. ("FS&Co.
International"), which is the general partner of FSEP International, FS
International Holdings Limited ("FS International Holdings") has the sole
power to vote and dispose of the shares owned by FSEP International. Messrs.
Freeman, Simmons, Spogli, Wardlaw and Roth and Charles P. Rullman are the sole
Directors, officers and shareholders of FSHI and FS International Holdings, and
as such may be deemed to be the beneficial owners of the shares of the Company's
capital stock owned by FSEP III and FSEP International. The business address of
FSEP III, FS Capital, FSHI and its sole Directors, officers and shareholders is
11100 Santa Monica Boulevard, Suite 1900, Los Angeles, California 90025 and the
business address of FSEP International, FS&Co. International and FS
International Holdings is c/o Paget-Brown & Company, Ltd., West Winds Building,
Third Floor, Grand Cayman, Cayman Islands, B.W.I.

        (4) As reported in a Schedule 13G dated February 9, 1995 filed jointly
with the Securities and Exchange Commission (the "Commission") by RCM Capital
Management ("RCM Capital"), RCM Limited L.P. ("RCM Limited") and RCM General
Corporation ("RCM General"), each has claimed sole voting power with respect
to 485,000 shares of Common Stock and sole dispositive power with respect to
560,000 shares. As the general partner of RCM Limited, which is the general
partner of RCM Capital, RCM General may be deemed to be the beneficial owner of
such shares. RCM Capital is an investment advisor registered under Section 203
of the Investment Advisors Act of 1940.
 
        (5) 35,920 shares of Common Stock are held by Maynard L. Jenkins, Jr.
and Susan M. Jenkins, Co-Trustees under the Living Trust dated November 10,
1988. The amount stated includes 4,272 shares of Common Stock covered by options
which are exercisable within 60 days following February 28, 1995.
 
        (6) The amounts stated include 7,512, 1,000, 1,000, 6,762, 2,552, 2,702
and 45,814 shares of Common Stock covered by options which are exercisable
within 60 days following February 28, 1995 with respect to 
 
<PAGE>

Messrs. Hilberg, Godlas, Walsh, Lewis, DiRocco and Nemechek and all Directors
and executive officers as a group, respectively.
 
        (7) Mr. Figel is an employee of an affiliate of FS&Co.

                PROPOSAL 1 # ELECTION OF DIRECTORS

        Eight Directors are to be elected at the 1995 Annual Meeting to serve
until the next Annual Meeting of stockholders and until their respective
successors have been elected and qualified. In the absence of instructions to
the contrary, proxies covering shares of Common Stock will be voted in favor of
the election of the persons listed below. In the event that any nominee for
election as Director should become unavailable to serve, it is intended that
votes will be cast, pursuant to the enclosed proxy, for such substitute nominee
as may be nominated by the Company. Management has no present knowledge that any
of the persons named will be unavailable to serve.

        No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
Director or nominee. None of the nominees has any family relationship to any
other nominee or to any executive officer of the Company.

 Information Concerning Incumbent Directors and Nominees to Board
of Directors.

        Information is set forth below concerning the incumbent Directors, all
of whom are also nominees for election as Directors, except Messrs. Freeman and
Walsh, who are not standing for re-election, and the year in which each
incumbent Director was first elected as a Director of the Company. Information
is also set forth concerning Messrs. Figel and Hall, the nominees to fill the
positions being vacated by Messrs. Freeman and Walsh. Each nominee has furnished
the information as to his beneficial ownership of Common Stock and Convertible
Preferred Stock as of February 28, 1995 and, if not employed by the Company, the
nominee's principal occupation. Each nominee has consented to being named in
this Proxy Statement as a nominee for Director and has agreed to serve as a
Director if elected.

<PAGE>

<TABLE> 
<CAPTION> 

      Name           Age     Position with the Company                  Director Since
      ----           ---     -------------------------                  --------------
<S>                  <C>     <C>                                        <C> 
Maynard Jenkins       52     President, Chief Executive Officer and
                             Director                                         1989

Stephen M. Hilberg    51     Vice President-Finance, Chief Financial
                             Officer and Director                             1989

Morton Godlas*#       72     Director                                         1993

J. Frederick Simmons* 40     Director                                         1989

Ronald P. Spogli*#    47     Director                                         1989

William M. Wardlaw#   48     Director                                         1989

Matt L. Figel         35     Nominee for Director                                #

William A. Hall       63     Nominee for Director                                #
</TABLE> 
 
* Member of the Compensation Committee.

# Member of the Audit Committee.

        Mr. Jenkins has served as President of the Company and a Director since
May 1989 and as Chief Executive Officer since 1986. Before joining the Company,
Mr. Jenkins served as the President and Chief Operating Officer of Pay 'n Save
Corp., a retail drug store chain.

        Mr. Hilberg has served as Chief Financial Officer and Vice President-
Finance of the Company since 1981. From 1978 to 1981, Mr. Hilberg served as the
Corporate Controller of Franklin Stores, a retail chain of discount department
and ladies' apparel stores.
 
<PAGE>

        Mr. Godlas is a management consultant with more than 45 years of retail
experience. Since 1982, Mr. Godlas has been President and Chief Executive
Officer of M. Godlas, Inc., a retail consulting firm. From 1978 to 1982, Mr.
Godlas was Corporate Senior Vice President-General Merchandise at Lucky Stores,
Inc., a retail supermarket chain.

        Mr. Simmons joined FS&Co., a private investment company, in 1986 and
became a general partner in January 1991. Mr. Simmons is also a member of the
Board of Directors of Buttrey Food and Drug Stores Company and EnviroSource,
Inc.

        Mr. Spogli is a founding partner of FS&Co., which was founded in 1983.
Mr. Spogli is the Chairman of the Board and a Director of EnviroSource, Inc. Mr.
Spogli also serves on the Board of Directors of Mac Frugal's Bargains # Close-
Outs Inc. and Buttrey Food and Drug Stores Company and on the Board of
Representatives of Brylane, L.P.

        Mr. Wardlaw joined FS&Co. in March 1988 and became a general partner in
January 1991. Mr. Wardlaw is also a member of the Board of Directors of Buttrey
Food and Drug Stores Company.

        Mr. Figel has been employed by FS&Co. (or its affiliates) since 1986.
Mr. Figel is also a member of the Board of Directors of Buttrey Food and Drug
Stores Company.

        Mr. Hall founded Sight & Sound Distributing Company, a media and
software distribution company, in 1984 and has served as President and Chief
Executive Officer since that time.


                            THE BOARD OF DIRECTORS

 Committees

        The standing committees of the Board are the Audit Committee (the
"Audit Committee") and the Compensation Committee (the "Compensation
Committee"). The Audit Committee, which presently consists of Messrs. Freeman,
Godlas, Spogli and Wardlaw, met once during the fiscal year ended January 29,
1995 ("fiscal 1994"). The Compensation Committee, which presently consists of
Messrs. Freeman, Godlas, Simmons and Spogli, met once during fiscal 1994.
 
<PAGE>

        The Audit Committee recommends to the Board the engagement or discharge
of the Company's independent auditors; reviews with the independent auditors the
scope, timing and plan for the annual audit, any non-audit services and the fees
for audit and other services; reviews outstanding accounting and auditing issues
with the independent auditors; and supervises or conducts such additional
projects as may be relevant to its duties. The Audit Committee is also
responsible for reviewing and making recommendations with respect to the
Company's financial condition, its financial controls and accounting practices
and procedures.

        The Compensation Committee recommends to the Board compensation policies
and guidelines for the Company's executives and oversees the granting of
incentive compensation, if any, to such persons. The Compensation Committee also
administers the Company's bonus and stock option plans. See "Report of the
Compensation Committee of the Board of Directors."

Meetings and Remuneration

        During fiscal 1994, the Board held four meetings and took various
actions by written consent. Each incumbent Director attended at least 75% of the
aggregate of (i) the total number of meetings held by the Board during fiscal
1994 and (ii) the total number of meetings held by all committees of the Board
during that period within which he was a Director or member of such committee of
the Board.


        Each Director is elected to hold office until the next annual meeting of
stockholders and until his respective successor is elected and qualified. Except
for non-employee Directors of the Company who are not affiliated with FS&Co.
("Outside Directors"), Directors do not receive compensation for service on
the Board or any committee of the Board. All Directors are reimbursed for their
out-of-pocket expenses in serving on the Board and any committee of the Board.
Outside Directors receive $2,500 for each regular Board meeting attended and
$1,500 for each special Board meeting attended. The Company has adopted a stock
option plan for Outside Directors. See "1993 Non-Employee Directors Stock
Option Plan."

1993 Non-Employee Directors Stock Option Plan

        Non-employee Directors of the Company, excluding Directors who are
affiliated with FS&Co., are eligible to participate in the 1993 Non-Employee
Directors Stock 
 
<PAGE>

Option Plan (the "Non-Employee Directors Plan"). Participants in the Non-
Employee Directors Plan may be granted options to purchase shares of the
Company's Common Stock at a purchase price determined by the Compensation
Committee. Options granted under the Non-Employee Directors Plan are not
intended to qualify for treatment as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). In no event shall
such purchase price be less than 85% of the fair market value of the underlying
shares at the time the option is granted, or less than 110% of the fair market
value in the case of any participant who owns capital stock possessing more than
10% of the total combined voting power or value of all classes of capital stock
of the Company or its subsidiaries. Up to 10,000 shares of the Company's Common
Stock may be issued under the Non-Employee Directors Plan upon the exercise of
options granted thereunder, which options vest and become exercisable in annual
installments of 20% per year over five years. As of February 28, 1995, options
covering 10,000 shares of Common Stock had been granted under the NonEmployee
Directors Plan, none of which had been exercised.
 
            EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION

 Executive Officers

        Set forth in the table below are the names, ages and current offices
held by all executive officers of the Company.
<TABLE> 
<CAPTION> 
                            
 Name                Age    Position with the Company                   Executive Officer Since  
 ----                ---    -------------------------                   -----------------------
<S>                  <C>    <C>                                         <C> 
Maynard Jenkins       52    President, Chief Executive Officer and
                            Director                                              1986

Robert J. Wittman     50    Executive Vice President and Chief
                            Operating Officer                                     1995

Stephen M. Hilberg    51    Vice President-Finance, Chief Financial
                            Officer and Director                                  1981

William G. Collard    57    Vice President-Distribution                           1986

Joseph A. DiRocco     45    Vice President-Marketing                              1986
</TABLE> 
 
<PAGE>

<TABLE> 
<CAPTION> 
                            
 Name                Age    Position with the Company                 Executive Officer Since  
 ----                ---    -------------------------                 -----------------------
<S>                  <C>    <C>   
Robert A. Lewis       49    Vice President-Merchandising and General
                            Merchandise Manager                                    1986

Carolyn J. McInnes    50    Vice President-Human Resources                         1986

Lee Nemechek          61    Vice President-Stores                                  1990
</TABLE> 
 
        Executive officers of the Company are elected by and serve at the
discretion of the Board. Other than Mr. Jenkins, no arrangement exists between
any executive officer and any other person or persons pursuant to which any
executive officer was or is to be selected as an executive officer. See
"Employment Agreement." None of the executive officers has any family
relationship to any nominee for Director or to any other executive officer of
the Company. Set forth below is a brief description of the business experience
for the previous five years of all executive officers except Messrs. Jenkins and
Hilberg. See "Information Concerning Incumbent Directors and Nominees to Board
of Directors."

        Mr. Wittman has served as Executive Vice President and Chief Operating
Officer of the Company since January 1995. Mr. Wittman served as Vice President-
Merchandising and Marketing for Aikenhead's Home Improvement Warehouse, a retail
home improvement warehouse chain, from 1991 to 1994 and as Regional Director of
Merchandising for Homequarters Warehouse, a retail home improvement warehouse
chain, from 1989 to 1991. Mr. Wittman has over 20 years of experience in the
retail industry, with particular emphasis in the home improvement segment.

        Mr. Collard has served as Vice President-Distribution of the Company
since 1986. Mr. Collard joined the Company in 1979 and has over 30 years of
warehousing and distribution experience. Prior to joining the Company, Mr.
Collard served for seven years as the Operations Supervisor for Fleming Foods, a
wholesale grocery distribution company, and for nine years as the Warehouse
Foreman for Louis Stores, a retail grocery chain. Mr. Collard is currently
responsible for the Company's warehouse and distribution activities.

        Mr. DiRocco has served as Vice President-Marketing of the Company since
1986. From 1983 to May 1986, Mr. DiRocco worked in the marketing and advertising
departments of the Company. Mr. DiRocco joined the Company in 1983 and has over
15 years of marketing experience in the retail industry.

        Mr. Lewis has served as Vice President-Merchandising and General
Merchandise Manager of the Company since 1986. Mr. Lewis began his career at the
Company in 1961 and is responsible for all aspects of the Company's
merchandising and buying program.
 
<PAGE>

        Ms. McInnes has served as Vice President-Human Resources of the Company
since 1986. Ms. McInnes joined the Company in 1979 as Director of Training. She
is responsible for all of the Company's training, personnel, wage and benefits
related matters.

        Mr. Nemechek joined the Company in March 1987 as a Regional Manager and
was promoted to Vice President-Stores in July 1990. Prior to joining the
Company, Mr. Nemechek had over 30 years of experience in grocery and general
merchandise retailing. Mr. Nemechek is responsible for all aspects of store
operations.

Compensation

        The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company paid or
accrued by the Company for each of the fiscal years in the three year period
ended January 29, 1995 to (i) the President and Chief Executive Officer, (ii)
each of the four other most highly compensated executive officers of the Company
and (iii) a former executive officer who would have been among the most highly
compensated executive officers had he not left the Company during fiscal 1994:

               SUMMARY COMPENSATION TABLE                       
<TABLE> 
<CAPTION> 
                                                  Annual Compensation  
                                ---------------------------------------------------------
                                                                                             Securities          
                                                                               Restricted    Underlying  
  Name and Principal                            Bonus         Other Annual       Stock       Options/    
      Positions        Year     Salary ($)    ($)(1)(2)(3)   Compensation ($)   Awards ($)   SARs (#)(4) 
 -------------------   ----     ---------     -----------    ----------------  -----------   ------------  
<S>                    <C>      <C>           <C>            <C>               <C>            <C>        
 Maynard Jenkins       1994      325,000         240,351             #                   0              #
 President and         1993      318,000         330,701             #                   0          7,500
 Chief Executive       1992      299,578         286,747             #                   0         12,045
 Officer                                                                                                 
                                                                                                         
 Stephen M. Hilberg    1994      123,031          21,752              #                   0             #
 Vice President-       1993      119,054          43,504              #                   0         4,500
 Finance and Chief     1992      117,484          39,287              #                   0             #
 Financial Officer                                                                                       
                                                                                                         
 Robert A. Lewis       1994      106,116          18,735              #                   0             #
 Vice President-       1993      102,319          37,470              #                   0         3,000
 Merchandising and     1992      101,923          34,623              #                   0             #
 General Merchandise                                                                                     
 Manager                                                                                                 
                                                                                                         
 Joseph A. DiRocco     1994       96,804          17,146              #                   0             #
 Vice President-       1993       93,692          34,292              #                   0         3,000
 Marketing             1992       92,704          31,860              #                   0             #
                                                                                                         
 Lee Nemechek          1994       89,654          15,538              #                   0             #
 Vice President-Stores 1993       84,384          31,075              #                   0         4,000
                       1992       81,654          28,770              #                   0             #
                                                                                                         
 Brad R. Tukey(6)      1994       70,654               #              #                   0             #
 Formerly Executive    1993       86,442          38,667              #                   0         5,500
 Vice President        1992            #               #              #                   0             #
<CAPTION>                                                                                                
                                 Long Term     
                                Compensation               All
  Name and Principal            Awards Payouts            Other
      Positions        Year     LTIP Payouts($)     Compensation($)(5)
 -------------------   ----    ----------------    --------------------
<S>                    <C>     <C>                  <C> 
 Maynard Jenkins       1994          0                  9,956        
 President and         1993          0                 18,795     
 Chief Executive       1992          0                 23,597     
 Officer                                                          
                                                                  
 Stephen M. Hilberg    1994          0                 10,028     
 Vice President-       1993          0                 13,353     
 Finance and Chief     1992          0                 10,741     
 Financial Officer                                                
                                                                  
 Robert A. Lewis       1994          0                  9,166     
 Vice President-       1993          0                 10,577     
 Merchandising and     1992          0                  8,959     
 General Merchandise                                              
 Manager                                                          
                                                                  
 Joseph A. DiRocco     1994           0                13,135     
 Vice President-       1993           0                14,989     
 Marketing             1992           0                12,839     
                                                                  
 Lee Nemechek          1994           0                 7,927     
 Vice President-Stores 1993           0                10,259     
                       1992           0                 8,172     
                                                                  
 Brad R. Tukey(6)      1994           0                79,542     
 Formerly Executive    1993           0                 3,567     
 Vice President        1992           0                     #     
</TABLE>                                                             
 
<PAGE>

        (1) Amounts shown include compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.

        (2) Represents payments made to executive officers pursuant to the
Company's Performance Bonus Plan (defined below) and bonuses paid to Maynard
Jenkins of $100,000 for each of fiscal 1992 and fiscal 1993 and $125,000 for
fiscal 1994 pursuant to his employment agreement. See "Employment Agreement."

        (3) The Company has instituted a bonus plan (the "Performance Bonus
Plan") covering senior management (the President and seven Vice Presidents)
which provides for annual bonus payments based upon the Company's performance
against annually established target levels. For fiscal 1993 and 1992, annual
bonus payments were based on the targets in effect for those years. For fiscal
1994, although no bonus was payable under the annually established targets, the
Compensation Committee concluded that senior management merited bonuses based on
its performance in managing the significant expansion undertaken during the
year. See "Report of the Compensation Committee of the Board of Directors."
 
<PAGE>

        (4) Represents options granted under the Company's 1993 Stock Option
Plan (the "1993 Plan") with the exception of options to purchase 12,045 shares
of Common Stock made outside any stock option plan to Maynard Jenkins on April
15, 1992 pursuant to a Nonqualified Stock Option Agreement. The options granted
under the 1993 Plan were granted at fair market value on the date of the grant
at an exercise price of $17.10 per share, were for a term of ten years and vest
in four equal annual installments commencing on November 19, 1993. The options
granted to Maynard Jenkins under the Nonqualified Stock Option Agreement were
granted at (fair market value# as of the date of the grant at an exercise price
of $8.33 per share, expire May 15, 2002 and are only exercisable upon the
occurrence of certain mergers, consolidations, business combinations, asset
sales, tender offers, exchange offers or liquidations involving the Company (an
"Extraordinary Corporate Event").

        (5) For Mr. Jenkins, amount listed for fiscal 1994 includes: (i) $2,250
matching contributions to the Company's 401(k) plan, (ii) $3,707 profit-sharing
payments, (iii) $3,000 supplemental income bonus, (iv) $621 automobile allowance
and (v) $378 in payments toward group life insurance plan. For Mr. Hilberg,
amount listed for fiscal 1994 includes: (i) $2,250 matching contributions to the
Company's 401(k) plan, (ii) $3,707 profit-sharing payments, (iii) $3,000
supplemental income bonus, (iv) $693 automobile allowance and (v) $378 in
payments toward group life insurance plan. For Mr. Lewis, amount listed for
fiscal 1994 includes: (i) $2,195 matching contributions to the Company's 401(k)
plan, (ii) $3,593 profit-sharing payments, (iii) $3,000 supplemental income
bonus and (iv) $378 in payments toward group life insurance plan. For Mr.
DiRocco, amount listed for fiscal 1994 includes: (i) $2,008 matching
contributions to the Company's 401(k) plan, (ii) $3,208 profit-sharing payments,
(iii) $3,000 supplemental income bonus, (iv) $4,550 automobile allowance and (v)
$368 in payments toward group life insurance plan. For Mr. Nemechek, amount
listed for fiscal 1994 includes: (i) $1,850 matching contributions to the
Company's 401(k) plan, (ii) $2,046 profit-sharing payments, (iii) $3,000
supplemental income bonus, (iv) $690 automobile allowance and (v) $340 in
payments toward group life insurance plan. For Mr. Tukey, amount listed for
fiscal 1994 includes: (i) $3,000 supplemental income bonus, (ii) $2,538
automobile allowance, (iii) $158 in payments toward group life insurance plan
and (iv) $73,846 in severance payments. Itemized disclosure of amounts of other
compensation in fiscal 1993 and fiscal 1992 is not required.

        (6) Mr. Tukey resigned from the Company in May 1994.

 Employment Agreement

        Mr. Jenkins is party to an employment agreement which provides for a
base annual salary of not less than $275,000 per year and bonuses and fringe
benefits determined from time to time by the Company. In April 1992, Mr.
Jenkins' employment agreement was amended to provide for an additional $100,000
bonus to be paid to him annually and in September 1994 Mr. Jenkins' employment
agreement was further amended to raise the additional bonus to $125,000 to be
paid to him annually. Except in the event of termination of employment for
cause, death or disability, the current term of Mr. Jenkins' employment
agreement will expire on December 31, 1995. The employment agreement shall
automatically renew for a two year term on each expiration date until notice of
termination is given by the Company. Upon termination of employment for death or
disability, Mr. Jenkins is entitled to a severance payment equal to six months
of his salary. Upon termination of employment other than for cause, death or
disability, Mr. Jenkins is entitled to a severance payment consisting of two
years' base salary, the target bonus applicable to the earning year in progress
at the date of termination and the $125,000 bonus for the year in progress at
the date of termination.

Stock Options

        No options were granted by the Company during fiscal 1994.

        The following table sets forth information concerning the aggregate
number of options exercised by each of the executive officers named in the
"Summary Compensation Table" during fiscal 1994 and outstanding options held
by each such officer as of January 29, 1995.
 
<PAGE>

                OPTION EXERCISES AND YEAR END VALUE TABLE
<TABLE> 
<CAPTION> 

                                                        Number of      
                                                        Securities        Value of        
                                                        Underlying        Unexercised     
                                                        Unexercised       In-the-Money    
                                                        Options/SARs      Options/SARs    
                                                        at January        at January 27,  
                                                        27, 1995(#)(1)    1995($)(2)      
                                                       ----------------   --------------
                      Shares Acquired     Value        Exercisable/       Exercisable/
   Name               on Exercise(#)    Realized($)    Unexercisable      Unexercisable  
   ----               ---------------   -----------    ----------------   --------------
<S>                   <C>               <C>            <C>                <C> 
 Maynard Jenkins                    #             #        14,272/15,795        # / #
 Stephen M. Hilberg                 #             #          7,512/2,250        # / #
 Robert A. Lewis                    #             #          6,762/1,500        # / #
 Joseph A. DiRocco                  #             #          2,552/1,500        # / #
 Lee Nemechek                       #             #          2,702/2,000        # / #
 Brad R. Tukey                      #             #              #/#            # / # 
</TABLE> 
 
        (1) Represents options granted under the 1993 Plan, under the Company's
Amended 1989 Nonqualified Stock Option Plan (the "1989 Plan") and to Maynard
Jenkins pursuant to a Nonqualified Stock Option Agreement. See "Summary
Compensation Table."
 
        (2) As of January 27, 1995 there were no options having positive 
"in-the-money" values.

<PAGE>

                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        On February 25, 1994 the Company sold to FSEP III, an affiliate of
FS&Co., 800,000 shares of Convertible Preferred Stock with an aggregate
liquidation preference of $20.0 million, resulting in proceeds to the Company of
$19.4 million (net of $150,000 of transaction costs). On March 16, 1994 FSEP III
sold 27,865 shares of Convertible Preferred Stock to FSEP International. See
"Security Ownership of Certain Beneficial Owners and Management."

        The Company, FSEP II, FSEP III and FSEP International have entered into
a Management Rights Agreement, effective as of January 1, 1995, pursuant to
which FSEP III can substantially participate in, or substantially influence the
conduct of, the management of the Company and its business.
 
        REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

        The Compensation Committee of the Board is comprised of Messrs. Freeman,
Godlas, Simmons and Spogli. The Compensation Committee establishes the general
compensation policies of the Company, establishes the compensation plans and
specific compensation levels for executive officers and administers the 1989
Plan, the Non-Employee Directors Plan and the 1993 Plan.


        The following is the Compensation Committee's report submitted to the
Board addressing the compensation of the Company's executive officers for fiscal
1994.
 
<PAGE>
 
Compensation Policy

        The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long term growth objectives and its ability to attract and
retain qualified executive officers. The Compensation Committee attempts to
achieve these goals by integrating competitive annual base salaries with (a)
bonuses based on corporate performance and on the achievement of specified
performance objectives through the Performance Bonus Plan and (b) stock options
through the 1989 Plan and the 1993 Plan. The Compensation Committee believes
that cash compensation in the form of salary and bonus provides company
executives with short term rewards for success in operations, and that long term
compensation through the award of stock options encourages growth in management
stock ownership which leads to expansion of management's stake in the long term
performance and success of the Company.

        Base Salary.  For fiscal 1994, the Compensation Committee approved the
base salaries of the executive officers based on (i) salaries paid to executive
officers with comparable responsibilities employed by companies with comparable
businesses, (ii) performance and profitability of the Company in fiscal 1993 and
(iii) individual performance reviews for fiscal 1993, which was the most
important factor. In its survey of comparable executive officer salaries, the
Compensation Committee relied on information regarding salaries paid to
executive officers in the Company's Peer Group Index (as defined below), where
such information was available, and to a lesser extent, salaries paid to
executive officers in the retail industry in general. The Compensation Committee
was able to obtain salary information for five of the seven companies in the
Peer 
<PAGE>
 
Group Index. See "Company Performance." The Compensation Committee adjusted the
salary information it collected to take into account varying sales volume and
geographic regions of the companies involved. For fiscal 1994, executive
officers generally received raises in their annual base salary, with the largest
raise of $5,000 going to each of Messrs. Tukey and Nemechek.

        Bonuses.  Annual incentives under the Performance Bonus Plan for the
President and Chief Executive Officer and the other named executive officers are
intended to reflect the Company's belief that management's contribution to
stockholder returns (via increasing stock price) comes from maximizing earnings
and the quality of those earnings. Awards under the Performance Bonus Plan are
based largely on the attainment of annually established target levels of
specified operating results, and the target bonus is determined as a percentage
of the recipient's base salary. For fiscal 1993 and 1992, targets were based on
"EBDIT" (earnings before depreciation, amortization of deferred charges, LIFO
adjustment, interest and income taxes) and "Free Cash Flow" (EBDIT minus
capital expenditures and plus or minus the change in working capital). For
fiscal 1994, the Compensation Committee based the targets on the Company's
operating income (earnings before interest, income taxes and extraordinary
items), reflecting the Compensation Committee's belief that an earnings-based
approach more appropriately reflects contributions to stockholder value for a
public company than a cashflow-based approach. For fiscal 1994, participants in
the Performance Bonus Plan were assigned target bonus amounts ranging from 20%
to 30% of the base salaries paid to such persons. The President and Chief
Executive Officer's target reflects the maximum of these percentages. The
varying percentages reflect the Compensation Committee's belief that, as an
executive officer's duties and responsibilities in the Company increase, he or
she will be increasingly responsible for the performance of the Company. If
performance exceeds the target levels, senior management receives a percentage
of the excess amount and if performance does not meet the specified performance
targets, bonuses are reduced accordingly. For fiscal 1994, the operating income
targets established by the Compensation Committee at the beginning of the year
were not met. However, the Compensation Committee determined that in retrospect
the targets were unrealistic in light of greater than expected competition from
the large warehouse home center chains and certain elements related to the
Company's expansion into the Southern California market. In light of the
performance by senior management in connection with its successful
implementation of the largest expansion program in the Company's history, in
which the Company's number of stores was increased by approximately 33% and the
Company expanded its operations into Southern California for the first time, the
Compensation Committee determined that partial bonuses were merited. See
"Summary Compensation Table."

<PAGE>
 
        Stock Options. Options under the Company's 1993 Plan were granted to the
executive officers of the Company, including the President and Chief Executive
Officer, as well as 100 other employees of the Company, in November 1993. The
number of options that each executive officer or employee was granted was based
primarily on the executive's or employee's ability to influence the Company's
long term growth and profitability. The Compensation Committee believes that
option grants afford a desirable long term compensation method because they
closely ally the interests of management with stockholder value and that grants
of options are the best way to directly link the financial interests of
management with those of stockholders. The vesting provisions of options granted
under the 1993 Plan are designed to encourage longevity of employment with the
Company. As the Compensation Committee shifted to an annual grant cycle in March
of each year, after the preparation of the Company's operating results for the
fiscal year, no options were granted in fiscal 1994.

Compensation of President and Chief Executive Officer

        The Compensation Committee believes that Mr. Jenkins, the Company's
President and Chief Executive Officer, provides valuable services to the Company
and that his compensation should therefore be competitive with that paid to
executives at comparable companies. In addition, the Compensation Committee
believes that an important portion of his compensation should be based on
Company performance. In fiscal 1994, Mr. Jenkins received no increase in his
annual base salary but did receive a $25,000 increase in his guaranteed bonus.
See "Employment Agreement." The increase was determined to be appropriate by
the Compensation Committee based on (i) comparable chief executive compensation
within the Company's Peer Group Index, where such information was available, and
to a lesser extent, within the retail industry in general, each as adjusted for
varying sales volumes and geographic region, (ii) improvements in the Company's
performance and profitability in fiscal 1993 and (iii) a review of his
individual performance in fiscal 1993. See "Company Performance." However, the
baseline target bonus payable to Mr. Jenkins under the Performance Bonus Plan
was not raised as a percentage of his base salary for fiscal 1994. Although
operating income targets under the Performance Bonus Plan were not met in fiscal
1994, for his leadership in connection with the successful implementation of the
Company's expansion program Mr. Jenkins was paid a bonus of $115,351.

Internal Revenue Code Section 162(m)

        Under Section 162 of the Code, the amount of compensation paid to
certain executives that is deductible with respect to the Company's corporate
taxes is limited to $1,000,000 annually. It is the current policy of the
Compensation Committee to maximize, to the extent reasonably possible, the
Company's ability to obtain a corporate tax deduction for compensation paid to
executive officers of the Company to the extent consistent with the best
interests of the Company and its stockholders.

        The foregoing report has been furnished by Messrs. Freeman, Godlas,
Simmons and Spogli.

<PAGE>
 
                              COMPANY PERFORMANCE

        The following graph shows a comparison of cumulative total returns for
the Company, the Nasdaq Market Index and a Company-constructed Peer Group Index
(as defined below) for the period during which the Company's Common Stock has
been registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company-constructed Peer Group Index
includes the following companies: Eagle Hardware & Garden, Inc., Grossman's
Inc., Hechinger Company, Home Depot, Inc., Lowe's Companies, Payless Cashways,
Inc., and Wolohan Lumber Company. Primary Standard Industrial Classification
("SIC") code was not a principal factor used in selecting the companies for
the Peer Group Index. The Company competes directly with the companies in its
Peer Group Index in substantially all product categories with the exception of
lumber and building materials. Because the other companies in the Peer Group
Index sell lumber and building materials, they are placed in a different primary
SIC code even though lumber and building materials comprise only approximately
one-third of those companies' businesses. Consequently, the Company believes
that the companies selected, although not from the Company's SIC code, operate
businesses comparable to the Company and provide the most accurate comparison to
the Company's performance. None of the other companies in the Company's primary
SIC code are substantial companies in the Company's market, with the exception
of Ernst Home Center, Inc., which operates a business comparable to the Company
but which has been excluded from the Peer Group Index because it has been
publicly traded for less than a full year. The Peer Group Index has been
weighted for market capitalization at each data point.

 
               COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
               AMONG ORCHARD SUPPLY HARDWARE, PEER GROUP INDEX 
                            AND NASDAQ MARKET INDEX
 
                        PERFORMANCE GRAPH APPEARS HERE

<TABLE> 
<CAPTION>      
                             ORCHARD        PEER          NASDAQ
Measurement Period           SUPPLY         GROUP         MARKET
(Fiscal Year Covered)        HARDWARE       INDEX         INDEX
- -------------------          ----------     ---------     ----------
<S>                          <C>            <C>          <C>  
Measurement Pt-  3/31/1993   $100           $100         $100
FYE   1/30/94                $100           $ 93.75      $120.75
FYE   1/29/95                $ 54.39        $110.39      $114.06
</TABLE> 

Assumes $100 invested on March 31, 1993.

* Total Return Assumes Reinvestment of Dividends.


<PAGE>

                PROPOSAL 2 # RATIFICATION OF THE APPOINTMENT OF

 
                ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS


        The Audit Committee of the Board has selected Arthur Andersen LLP as
independent public accountants to audit the consolidated financial statements of
the Company and its consolidated subsidiaries for 

the year ending January 28, 1996. Arthur Andersen LLP has audited the Company's
financial statements annually since 1986. A member of that firm is expected to
be present at the 1995 Annual Meeting, will have an opportunity to make a
statement if so desired, and will be available to respond to appropriate
questions. If the stockholders do not ratify the selection of Arthur Andersen
LLP, if it should decline to act or otherwise become incapable of acting, or if
its employment is discontinued, the Audit Committee will appoint independent
public accountants for fiscal 1995. Proxies solicited by the Board will be voted
in favor of ratification unless stockholders specify otherwise.


        THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR 1995.

     COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

        Section 16(a) of the Exchange Act ("Section 16(a)") requires the
Company's Directors and certain of its officers, and persons who own more than
10% of a registered class of the Company's equity securities (collectively,
"Insiders"), to file reports of ownership and changes in ownership with the
Commission. Insiders are required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.

        Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5s were
required for those persons, the Company believes that its Insiders complied with
all applicable Section 16(a) filing requirements for fiscal 1994, with the
exception of Mr. Wittman, who filed a late Form 3 to report his becoming an
executive officer of the Company. Mr. Wittman owns no securities of the Company
and has had no other transactions to report.


<PAGE>
 
                                OTHER BUSINESS

        The Company is not aware of any other business to be presented at the
1995 Annual Meeting. All shares represented by Company proxies will be voted in
favor of the proposals of the Company described herein 

unless otherwise indicated on the form of proxy. If any other matters properly
come before the meeting, Company proxy holders will vote thereon according to
their best judgment.

                      SUBMISSION OF STOCKHOLDER PROPOSALS

        Any stockholder who wishes to present a proposal for action at the 1996
Annual Meeting and who wishes to have it set forth in the corresponding proxy
statement and identified in the corresponding form of proxy prepared by
management must notify the Company no later than December 13, 1995 in such form
as required under the rules and regulations promulgated by the Commission.
 
                                ANNUAL REPORTS

         A copy of the 1995 Annual Report to Stockholders (which includes the
Company's Annual Report on Form 10-K) is being mailed to each stockholder of
record together with this Proxy Statement. The Company has also filed with the
Commission its Annual Report on Form 10-K for the fiscal year ended January 29,
1995. This Report contains information concerning the Company and its
operations. A COPY OF THIS REPORT WILL BE FURNISHED TO STOCKHOLDERS WITHOUT
CHARGE UPON REQUEST IN WRITING TO Kris McMullen at 6450 Via Del Oro, San Jose,
California 95119. Such reports are not a part of the Company's soliciting
material.
 


<PAGE>
 
                           PROXIES AND SOLICITATION

        Proxies for the 1995 Annual Meeting are being solicited by mail directly
and through brokerage and banking institutions. The Company will pay all
expenses in connection with the solicitation of proxies. In addition to the use
of mails, proxies may be solicited by Directors, officers and regular employees
of the Company personally or by telephone. The Company may reimburse brokers and
other persons holding stock in their names, or in the names of nominees, for
their expenses in sending proxy materials to principals and obtaining their
proxies (plus paying fees of up to $5,000 to Chemical Bank for soliciting such
proxies from brokers and other persons holding stock in their names or in the
names of nominees).

        All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
 
By Order of the Board of Directors 
 
MICHAEL SEDA
Secretary 
 

San Jose, California
April 12, 1995

<PAGE>

COMMON STOCK                        PROXY                     BOARD OF DIRECTORS

                   ORCHARD SUPPLY HARDWARE STORES CORPORATION

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                                OF THE COMPANY.

The undersigned hereby appoints Maynard Jenkins or Stephen M. Hilberg, or either
of them, the true and lawful attorneys and proxies of the undersigned, with full
power of substitution to vote all shares of the Common Stock, $.01 par value per
share ("Common Stock"), of ORCHARD SUPPLY HARDWARE STORES CORPORATION, which the
undersigned is entitled to vote at the Annual Meeting of the Stockholders of
ORCHARD SUPPLY HARDWARE STORES CORPORATION, to be held at 2:00 P.M., Pacific
Time, on May 19, 1995 at The Fairmont Hotel, 170 South Market Street, San Jose,
California and any and all adjournments thereof, on the proposals set forth
below and any other matters properly brought before the Meeting.

                                                                     SEE REVERSE
                                                                         SIDE


<PAGE>

              ------                                        /X/    Please mark
              COMMON                                               your choices
                                                                     like this

THE DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND
APPROVAL OF PROPOSAL 2.

1. ELECTION OF DIRECTORS      FOR ALL NOMINEES                 WITHHOLD
                            LISTED BELOW (EXCEPT               AUTHORITY
                              AS MARKED TO THE                TO VOTE FOR
                              CONTRARY BELOW)                 ALL NOMINEES

                                   [_]                            [_]

(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name below):

Matt L. Figel         Morton Godlas         William A. Hall
Stephen M. Hilberg    Maynard Jenkins       J. Frederick Simmons
Ronald P. Spogli      William M. Wardlaw


2. Proposal to ratify the appointment of Arthur     FOR    AGAINST    ABSTAIN
   Andersen LLP as the Company's independent        [_]     [_]         [_]
   auditors for the fiscal year ending
   January 28, 1996.


3. Such other matters as may properly come before the meeting.

                                       Unless a contrary direction is indicated,
                                    this Proxy will be voted FOR all nominees
                                    listed in Proposal 1 and FOR approval of
                                    Proposal 2; if specific instructions are
                                    indicated, this Proxy will be voted in
                                    accordance therewith.

                                       All Proxies to vote at said Meeting or
                                    any adjournment heretofore given by the
                                    undersigned are hereby revoked. Receipt of
                                    Notice of Annual Meeting and Proxy Statement
                                    dated April 12, 1995, is hereby
                                    acknowledged.

                                       Please mark, sign, date and return this
                                    Proxy in the accompanying prepaid envelope.



Signature(s)_____________________________________  Date__________________, 1995
Please sign exactly as your name(s) appears hereon. When signing as attorney,
executor, administrator, trustee, guardian, or corporate officer, please include
full title.

 


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