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HILLS STORES COMPANY,
ISSUER
AND
HILLS DEPARTMENT STORE COMPANY,
GUARANTOR
TO
FLEET BANK OF MASSACHUSETTS, N.A.,
TRUSTEE
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THIRD SUPPLEMENTAL INDENTURE
DATED AS OF JANUARY 15, 1996
SUPPLEMENTAL TO
INDENTURE DATED AS OF OCTOBER 1, 1993
AS AMENDED BY
FIRST SUPPLEMENTAL INDENTURE DATED AS OF JANUARY 1, 1995
AND
SECOND SUPPLEMENTAL INDENTURE DATED AS OF AUGUST 1, 1995
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10.25% SENIOR NOTES DUE 2003
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TABLE OF CONTENTS
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PARTIES .................................................................... 1
RECITALS ................................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Capitalized Terms ............................................ 1
Section 102. Effectiveness of Third Supplemental Indenture ................ 1
Section 103. Incorporation of Third Supplemental Indenture into Indenture . 1
Section 104. Effect of Headings and Table of Contents ..................... 2
Section 105. Governing Law ................................................ 2
Section 106. Counterparts ................................................. 2
ARTICLE TWO
AMENDMENTS TO PROVISIONS OF INDENTURE
Section 201. Definitions .................................................. 2
Section 202. Form of Note ................................................. 3
Section 203. Title and Terms .............................................. 3
Section 204. Events of Default ............................................ 3
Section 205. Supplemental Indentures with Consent of Holders .............. 4
Section 206. Limitation on Indebtedness ................................... 4
Section 207. Limitation on Restricted Payments ............................ 5
Section 208. Redemption at Option of Holders .............................. 5
TESTIMONIUM ................................................................ 7
SIGNATURES AND SEALS ....................................................... 7
ACKNOWLEDGMENTS ............................................................ 8
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THIRD SUPPLEMENTAL INDENTURE, dated as of January 15, 1996, among HILLS
STORES COMPANY (the "Company") and HILLS DEPARTMENT STORE COMPANY (the
"Guarantor"), each a corporation duly organized and existing under the laws of
the State of Delaware with its principal office at 00 Xxx Xxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000-0000, and FLEET BANK OF MASSACHUSETTS, N.A. (the "Trustee"),
a national banking association with its Corporate Trust Office at Fleet Center,
Mailstop MA BO F04B, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000-0000, as
trustee under the Indenture dated as of October 1, 1993, as amended by the First
Supplemental Indenture dated as of January 1, 1995 and the Second Supplemental
Indenture dated as of August 1, 1995, among the Company, the Guarantor and the
Trustee (as so amended, the "Indenture").
RECITALS
Section 902 of the Indenture provides that, except with respect to certain
specified provisions, the Indenture may be supplemented with the consent of the
Holders of not less than sixty percent in principal amount of the Outstanding
Notes for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the Holders under the Indenture.
The Company and the Guarantor wish to supplement the Indenture to change
certain provisions of the Indenture as set forth below, and the Holders of sixty
percent in principal amount of the Outstanding Notes as of January 9, 1996 have
consented to the execution of this Third Supplemental Indenture.
The Company and the Guarantor hereby covenant and represent that all things
necessary have been done to make this Third Supplemental Indenture a legal,
valid and binding agreement of the Company and the Guarantor in accordance with
the terms hereof and of the Indenture. The Trustee hereby covenants and
represents that it has power and authority to enter into this Third Supplemental
Indenture.
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted and
agreed as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Capitalized Terms.
Capitalized terms used herein and not otherwise defined herein are used
with the respective meanings ascribed to such terms in the Indenture.
SECTION 102. Effectiveness of Third Supplemental Indenture.
This Third Supplemental Indenture shall be effective upon its execution by
the Company, the Guarantor and the Trustee.
SECTION 103. Incorporation of Third Supplemental Indenture into Indenture.
This Third Supplemental Indenture is executed by the Company, the Guarantor
and the Trustee pursuant to the provisions of Section 902 of the Indenture, and
the terms and conditions hereof shall be deemed to be part of the Indenture for
all purposes upon the effectiveness of this Third Supplemental
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Indenture pursuant to Section 102 of this Third Supplemental Indenture. Subject
to the effectiveness of this Third Supplemental Indenture, the Indenture, as
supplemented by this Third Supplemental Indenture, is in all respects hereby
adopted, ratified and confirmed.
SECTION 104. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 105. Governing Law.
This Third Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York.
SECTION 106. Counterparts.
This Third Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
ARTICLE TWO
AMENDMENTS TO PROVISIONS OF INDENTURE
SECTION 201. Definitions.
Section 101 of the Indenture is hereby amended as follows:
(a) The following definition is inserted between the definitions of
"Interest Payment Date" and "Lien":
"`Interest Rate' means the rate at which interest accrues on
the Notes from time to time, which rate shall be 10.25% per annum
prior to January 13, 1996, 10.75% per annum from January 13, 1996
through March 31, 1997, 11.25% per annum from April 1, 1997
through March 31, 1998, and thereafter shall increase by 1.00% per
annum effective April 1 of each succeeding year."
(b) The definition of "Restricted Payments" is deleted in its
entirety.
(c) The following definitions are inserted immediately before the
definition of "Senior Principal Limitation":
"`Second Consent' means a consent validly delivered (and
not revoked) pursuant to, and in accordance with, the Company's
Consent Solicitation Statement dated December 7, 1995 (as
amended as of December 29, 1995), with respect to the Third
Supplemental Indenture to this Indenture.
"`Second Consent Fee' has the meaning specified in Section
1103(d)."
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SECTION 202. Form of Note.
Section 202 of the Indenture is hereby amended as follows:
(a) The phrase "at the rate of 10.25% per annum" in the first sentence
of the first paragraph under [Form of Face of Note] therein is hereby
deleted and the following is substituted therefor:
"at the Interest Rate (which shall be 10.25% per annum prior to January 13,
1996, 10.75% per annum from January 13, 1996 through March 31, 1997, 11.25%
per annum from April 1, 1997 through March 31, 1998, and thereafter shall
increase by 1.00% per annum effective April 1 of each succeeding year)"
(b) The first sentence of the fourth paragraph under [Form of Reverse
of Note] therein is hereby deleted and the following is substituted
therefor:
"The Company shall offer to redeem all (but not less than all) of
this Note, in accordance with the terms set forth in the Indenture, by
notice mailed to the Holder on or before April 3, 1996, provided that
the Company may elect, in accordance with the terms of the Indenture,
to defer the mailing of such notice until a date on or before April 5,
1997 or a date on or before June 8, 1998. In the event the Holder
elects to have this Note redeemed pursuant to such a notice, the
Company shall effect such redemption, in accordance with the terms of
the Indenture and such notice, at a Redemption Price equal to (i) if
such notice is mailed on or before December 31, 1996 and is not
validly revoked, 101% of the principal amount thereof plus interest
accrued to the Redemption Date, or (ii) if such notice is mailed on or
after January 1, 1997, 102% of the principal amount thereof plus
interest accrued to the Redemption Date."
SECTION 203. Title and Terms.
Section 301 of the Indenture is hereby amended by deleting the phrase
"at the rate of 10.25% per annum" in the second sentence of the second
paragraph therein and substituting therefor "at the Interest Rate".
SECTION 204. Events of Default.
Section 501 of the Indenture is hereby amended as follows:
(a) Clause (a) is deleted in its entirety and the following is
substituted therefor:
"(a) default in the payment of the principal of (or premium, if
any, on) any Note at its Maturity, including a Maturity established in
accordance with a notice delivered under Section 1103(b), or a default
in the payment of any Consent Fee that may be due under Section
1103(c)(ii) or any Second Consent Fee that may be due under Section
1103(d)(ii);"
(b) Clause (c) is deleted in its entirety and the following is
substituted therefor:
"(c) default in the performance, or breach, of Section 801,
Section 1007 or the notice provisions of Section 1103(b) (as the
obligations of the Company under such notice provisions may be
modified in accordance with Section 1103(c)or(d)), and
continuance of such default or breach for a period of 15 days after
there has been given, by registered or certified mail, to the
Company and the Guarantor by the Trustee or to the Company, the
Guarantor and the Trustee
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by any Holder, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder;" Section 205. Supplemental Indentures with Consent of
Holders.
SECTION 205. Supplemental Indentures with Consent of Holders.
Section 902 of the Indenture is hereby amended by deleting the provision of
Subsection (a)(i) following the penultimate semicolon therein (which provision
commences with the words "or change the Redemption Date") in its entirety and
substituting therefor the following:
"or change the Redemption Date or the Redemption Price for the redemption
of a Note pursuant to Section 1103 at any time after the date on which a
notice with respect to such redemption has been mailed to the Holder of
such Note pursuant to Section 1103(b) (including any notice for which
mailing was deferred in accordance with Section 1103(c) or (d), but in any
event excluding any notice that has been revoked in accordance with Section
1103(c) or (d)) and before the initial date (if any) on which such Holder
is no longer entitled to have, or to elect to have, such Note redeemed
pursuant to Section 1103;"
SECTION 206. Limitation on Indebtedness
Section 1006 of the Indenture is hereby amended as follows:
(a) Subsection (c)(i) is amended by adding the following proviso at the end
thereof:
"provided that (A) if such four fiscal quarters include the quarterly
period ended July 29, 1995, the amount otherwise determined by this
Subsection (i) shall be increased by $43,292,000, which represents the
amount of "Costs related to change in control" reflected in the
Consolidated Statement of Operations of the Company for the quarterly
period ended July 29, 1995 (the "Change in Control Costs"), (B) if such
four fiscal quarters include a fiscal quarter in which Aggregate
Consolidated Income reflects a credit on account of a correction,
adjustment or reversal of any of the Change in Control Costs, the amount
otherwise determined by this Clause (i) shall be decreased by the amount of
such credit, and (C) if such four fiscal quarters include a fiscal quarter
in which Aggregate Consolidated Income reflects a charge on account of a
correction, adjustment or reversal of any credit referred to in the
preceding clause (B), the amount otherwise determined by this Subsection
(i) shall be increased by the amount of such charge;"
(b) Clause (c) is amended by substituting a semicolon (";") for the period
(".") at the end thereof, and inserting the following sentence at the end
thereof:
"notwithstanding the foregoing, if any such date of determination occurs on
or after December 7, 1995 and before January 15, 1996, the "Consolidated
Fixed Charge Coverage Ratio" shall mean the ratio computed as of such date
of determination using the formula set forth above, rather than the ratio
computed using the formula contained in this Clause (c) as in effect on
such date of determination."
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SECTION 207. Limitations on Restricted Payments.
Section 1007 of the Indenture is hereby deleted in its entirety and the
following is substituted therefor:
"From and after January 15, 1996, the Company will not directly or
indirectly (i) declare or pay any dividend (other than a dividend payable
solely in Common Stock) or make any other distribution on its Capital Stock
whether in cash, property, securities or a combination thereof or (ii)
purchase, redeem or otherwise acquire or retire for value, or permit any
Subsidiary of the Company directly or indirectly to purchase, redeem or
otherwise acquire or retire for value, any shares of its Capital Stock,
other than in exchange for Common Stock or options, warrants or other
rights to purchase Common Stock or Capital Stock of the same class and
series or, if such Capital Stock is Redeemable Stock, in exchange for
Capital Stock of the Company that is not Redeemable Stock and is not
exchangeable for or convertible into Redeemable Stock or Indebtedness of
the Company or any of its Subsidiaries and other than as may be required by
or for the purpose of reissuing shares of Capital Stock pursuant to stock
option plans, stock purchase plans and the like."
SECTION 208. Redemption at Option of Holders.
Section 1103 of the Indenture is hereby amended as follows:
(a) The first sentence of Clause (a) is amended by deleting the word
"Upon" at the beginning thereof and substituting the phrase "Except as
provided in Clause (f) below, upon".
(b) Clause (b) is amended by deleting the parenthetical in the first
sentence thereof and substituting therefor the phrase "(other than a DPI
Change of Control Event and other than as provided in Clause (f) below)".
(c) Clause (c) is deleted in its entirety and the following is
substituted therefor:
"(c) On or before April 3, 1996 (or, in the event the Company
exercises its election pursuant to Section 1103(d), on or before April
5, 1997 or, in the event the Company exercises both its election
pursuant to Section 1103(d) and its election pursuant to Section
1103(e), on or before June 8, 1998), the Company shall mail to each
Holder of Notes, with a copy to the Trustee, a notice stating:
"(i) such Holder has the right to elect to have the Company
redeem all (but not less than all) of such Notes at a Redemption
Price equal to 101% or 102%, as the case may be, of the principal
amount thereof, plus accrued interest, if any, to the Redemption
Date;
"(ii) the circumstances and relevant facts regarding the DPI
Change of Control Event (including, to the extent the Company
determines to be appropriate, information with respect to pro
forma historical income, cash flow and capitalization after
giving effect to the DPI Change of Control Event);
"(iii)the Redemption Date, which shall be no earlier than 30
days and no later than 60 days from the date such notice is
mailed and which shall in any event be no later than May 3, 1996
(or, in the event the Company exercises its election pursuant to
Section 1103(d), no later than May 5, 1997, or, in the event the
Company exercises both its election pursuant to Section 1103(d)
and its election pursuant to Section 1103(e), no later than July
8, 1998); and
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"(iv) such other instructions as the Company may establish,
consistent with this Section, in order for such Holder to elect
to have such Notes redeemed, which instructions shall afford such
Holder at least 15 days from the date such notice is mailed to
provide written notice of such Holder's election to have such
Notes redeemed.
"Any notice mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the Holder receives the
notice. In any case, failure duly to give such notice by mail, or any
defect in such notice, to any Holder shall not affect the validity of the
proceedings for the redemption of any Notes held by other Holders."
(d) The following Clauses (e) and (f) are added to the end of Section 1103:
"(e) If (and only if) the Company makes the election set forth in
Section 1103(d), the Company may, but shall not be obligated to, elect to
defer the mailing of the notice contemplated by Section 1103(c) further,
such that the notice need not be mailed on or before April 5, 1997, and
shall instead be mailed on or before June 8, 1998. In order to make such
election the Company shall (i) mail to each Holder on or before April 21,
1997 a notice of election stating that the Company has elected to defer the
mailing of the notice contemplated by Section 1103(c) until on or before
June 8, 1998 and (ii) pay, on or before May 5, 1997, to each person who is
a Holder of Notes as of a date specified in such notice of election (which
date shall be selected by the Company in its discretion, but shall not be
earlier than the date on which such notice of election is mailed and shall
not be later than the date on which such payment is due) an amount equal to
5.5% of the principal amount of such Notes (the "Second Consent Fee"). In
the event that at the time of mailing of the notice of election by the
Company pursuant to this Section 1103(e), the Company has previously mailed
the notice contemplated by Section 1103(c), such notice of election
pursuant to this Section 1103(e) shall revoke and make null and void any
such notice mailed pursuant to Section 1103(c). No consent or other
approval of, or any action by, any Holder shall be required in order for
the Company to exercise the election set forth in this Section 1103(e).
"(f) Notwithstanding any other provision of this Section 1103, the
Company will not be obligated to offer to redeem the Notes held by each
Holder as contemplated by Clauses (a) and (b) of this Section 1103 in
connection with a Change of Control Event if:
"(i) in connection with such Change of Control Event, the Company
receives a gross amount in cash totalling at least $40,000,000, before
deducting fees or expenses attributable to any transaction in which
such amount was obtained (the net amount of such cash, after deducting
such fees and expenses, is referred to herein as the "New Net
Capital") in exchange for Capital Stock of the Company or options,
warrants or other rights to purchase Capital Stock of the Company; and
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"(ii) either:
"(A) not later than 90 days after the occurrence of
such Change of Control Event, the Company purchases Notes
(in the open market, in private transactions or otherwise)
and/or redeems Notes pursuant to Section 1101 for an
aggregate purchase and/or redemption price (including
payments for accrued interest) that is not less than 50% of
the New Net Capital, or
"(B) to the extent that the aggregate purchase and/or
redemption price described in paragraph (A) above is less
than 50% of the New Net Capital, then, not later than 95
days after the occurrence of such Change of Control Event,
the Company notifies the Trustee, pursuant to the last
sentence of Section 1101, that the Company will redeem Notes
in a principal amount such that the Redemption Prices
therefor and the accrued interest thereon, together with the
aggregate purchase and/or redemption price paid as described
in paragraph (A) above, will total at least 50% of the New
Net Capital."
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
HILLS STORES COMPANY
[CORPORATE SEAL]
By: /s/ Xxxxxxx X. Friend
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Attest: Vice President-Secretary
By: /s/ Xxxxxxx X. Xxxxx
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Assistant Secretary
HILLS DEPARTMENT STORE COMPANY
[CORPORATE SEAL]
By: /s/ Xxxxx X. Xxxxxxxx
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Attest: Vice President-Treasurer
By: /s/ Xxxxxxx X. Xxxxx
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Assistant Secretary
FLEET BANK OF MASSACHUSETTS, N.A.,
as Trustee
[CORPORATE SEAL]
By: /s/ Xxxxx Xxxxxxx
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Attest:
By: /s/ Xxxx X. Xxxxx
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THE COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF NORFOLK ) SS.:
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On the 17TH day of January, 1996, before me personally came XXXXXXX
X.FRIEND, residing at 00 XXX XXXX, XXXXXX, XX , to me known, who, being by me
duly sworn, did depose and say that he is VICE PRESIDENT-SECRETARY of Hills
Stores Company, one of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation, and that he signed
his name thereto by like authority.
[SEAL]
/s/ Xxxxx X. XxXxxxxx
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My Commission expires: 8/11/2000
THE COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF NORFOLK ) SS.:
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On the 17TH day of January, 1996, before me personally came XXXXX X.
XXXXXXXX,residing at 00 XXX XXXX, XXXXXX, XX, to me known, who, being by me
duly sworn, did depose and say that he is VICE PRESIDENT-TREASURER of Hills
Department Stores Company, one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
so affixed by authority of the Board of Directors of said corporation, and
that he signed his name thereto by like authority.
[SEAL]
/s/ Xxxxx X. XxXxxxxx
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My Commission expires: 8/11/2000
THE STATE OF RHODE ISLAND )
COUNTY OF PROVIDENCE ) SS.:
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On the 19TH day of January, 1996, before me personally came XXXXX
XXXXXXX, residing at CRANSTON, RI, to me known, who, being by me duly sworn,
did depose and say that he is VICE PRESIDENT, Corporate Trust of Fleet
Bank of Massachusetts, N.A., one of the corporations described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it
was so affixed by authority of the Board of Directors of said corporation, and
that he signed his name thereto by like authority.
[SEAL]
/s/ Xxxxxx X. Xxxxxxxxx
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My Commission expires: 8/24/1997
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