HILLS STORES COMPANY
00 XXX XXXX
XXXXXX, XXXXXXXXXXXXX 00000
December 16, 1998
Xxxx Department Stores, Inc.
HSC Acquisition Corp.
0000 Xxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxxx 00000
Gentlemen:
Reference is made to the Agreement and Plan of Merger, by and among
Xxxx Department Stores, Inc. ("Parent"), HSC Acquisition Corp. ("Purchaser"),
and Hills Stores Company (the "Company"), dated as of November 12, 1998 (the
"Merger Agreement"). Capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the Merger Agreement.
The Company hereby consents, pursuant to Section 1.02(a) of the
Merger Agreement, in connection with the increase by Parent and Purchaser of the
aggregate cash consideration payable to each holder of Notes pursuant to the
Note Offer to Purchase and the related Consent Solicitation from 55% to 70% of
the principal amount of the Notes, to the increase by Purchaser of the
percentage in aggregate principal amount of outstanding Notes needed to satisfy
the Minimum Note Condition from at least 66 2/3% in aggregate principal amount
of the then outstanding Notes to at least 85% in aggregate principal amount of
the then outstanding Notes.
In addition, each of Parent, Purchaser and the Company hereby agree
that (i) Section 9.03(j) of the Merger Agreement is hereby amended to add after
the words "prior to the consummation of the Offer" the words "or, if not so
designated prior to the consummation of the Offer, by a majority of those
persons serving as directors of the Company on the date of consummation of the
Offer as promptly as practicable thereafter but in no event later than January
31, 1999," and (ii) paragraph 15 of the Disclosure Schedule is hereby amended as
provided on Schedule 1 hereto.
NYFS10...:\79\15079\0022\1219\LTRD158V.53B
Except as amended hereby, the Merger Agreement shall continue in
full force and effect.
Very truly yours,
HILLS STORES COMPANY
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chairman and Chief
Executive Officer
Accepted and Agreed to:
XXXX DEPARTMENT STORES, INC.
By: /s/ Xxxxxxx xx Xxxxxx
----------------------------------
Name: Xxxxxxx xx Xxxxxx
Title: Executive Vice President
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Schedule 1
Paragraph 15 of Schedule 5.01 is amended by deleting such paragraph as it now
exists and inserting in lieu thereof the following:
"15. The Company may defer making interest payments on the Notes, rental
payments on leases and payments of accounts payable and other liabilities."
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