HILLS STORES COMPANY
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12 1/2% Senior Notes Due 2003
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FIRST SUPPLEMENTAL INDENTURE
Dated as of December 24, 1998
to
INDENTURE
Dated as of April 19, 1996
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STATE STREET BANK AND TRUST COMPANY,
as Trustee
FIRST SUPPLEMENTAL INDENTURE
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HILLS STORES COMPANY
STATE STREET BANK AND TRUST COMPANY, Trustee
Dated as of December 24, 1998
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First Supplemental Indenture, dated as of December 24, 1998
among Hills Stores Company, a Delaware corporation (the "Company"), Hills
Department Store Company, a Delaware corporation, Canton Advertising, Inc., a
Massachusetts corporation, Corporate Vision, Inc., a Massachusetts corporation,
HDS Transport, Inc., an Ohio corporation, and Hills Distributing Company, a
Delaware corporation (collectively, the "Guarantors"), as guarantors, and State
Street Bank and Trust Company, successor to Fleet National Bank, as Trustee (the
"Trustee"), to the Indenture, dated as of April 19, 1996 among the Company, the
Guarantors, and the Trustee (the "Indenture") relating to the 12 1/2% Senior
Notes due 2003 of the Company (the "Notes"). Capitalized terms used herein and
not defined herein have the meanings set forth in the Indenture.
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as
of November 12, 1998 (the "Merger Agreement"), among Xxxx Department Stores,
Inc. ("Xxxx"), HSC Acquisition Corp. ("Purchaser") and the Company, Purchaser
has caused to be delivered to the holders of the Notes an offer to purchase the
Notes and solicited the consent of such holders to the amendments of the
Indenture set forth herein (such offer to purchase and consent solicitation
being collectively referred to as the "Note Tender Offer"); and
WHEREAS, Section 9.02 of the Indenture authorizes the Company,
the Guarantors and the Trustee to amend certain of the provisions of the
Indenture with the consent of the holders of at least a majority in principal
amount of the Notes outstanding; and
WHEREAS, Section 9.02 of the Indenture authorizes the Company,
the Guarantors and the Trustee to amend Sections 4.10 and 4.14 of the Indenture
with the consent of the holders of at least 66 2/3% in principal amount of the
Notes outstanding; and
WHEREAS, the holders of more than 66 2/3% in principal amount
of the Notes outstanding have consented to all of the amendments set forth
herein; and
WHEREAS, the Board of Directors of the Company and each of the
Guarantors has duly adopted resolutions authorizing the Company and the
Guarantors, respectively, to execute and deliver this Supplemental Indenture;
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NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Amendment of Indenture.
(a) The following defined terms and the definitions thereof in
Section 1.01 of the Indenture are deleted in their entirety: "Acquired Debt,"
"Asset Sale," "Attributable Debt," "Borrowing Base," "Capital Lease Obligation,"
"Cash Equivalents," "Change of Control," "Consolidated Cash Flow," "Consolidated
Net Income," "Equity Interests," "Existing Indebtedness," "Fixed Charges,"
"Fixed Charge Coverage Ratio," "Hedging Obligations," "Indebtedness,"
"Investments," "Lien," "Net Income," "Net Proceeds," "Permitted Investments,"
"Permitted Liens," "Permitted Refinancing Debt," "Restricted Investment,"
"Revolving Credit Facility," "Total Assets" and "Weighted Average Life to
Maturity."
(b) The following references to defined terms and the
definitions thereof set forth in Section 1.02 of the Indenture are deleted in
their entirety: "Affiliate Transaction," "Asset Sale Offer," "Change of Control
Offer," "Change of Control Payment," "Change of Control Payment Date," "Excess
Proceeds," "incur," "Offer Amount," "Offer Period," "Purchase Date," "Purchase
Money Debt" and "Restricted Payments."
(c) The definition of "Consolidated Net Worth" in Section 1.01
of the Indenture is amended in its entirety to read as follows:
"Consolidated Net Worth" means, with respect to any
Person as of any date, the sum of (i) the consolidated equity
of the common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock,
less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets
of a going concern business made within 12 months after the
acquisition of such business) subsequent to the date of this
Indenture in the book value of any asset owned by such Person
or a consolidated Subsidiary of such Person, and (y) all
unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in
accordance with GAAP.
(d) Subsection (c) of Section 6.01 of the Indenture is deleted
in its entirety and replaced by the following:
(c) [Text Intentionally Deleted]
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(e) Sections 3.10, 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12,
4.14, 4.15, 4.16 and 4.18 of the Indenture are deleted in their entirety and
replaced by the following:
Section 3.10. [Text Intentionally Deleted]
Section 4.03. [Text Intentionally Deleted]
Section 4.07. [Text Intentionally Deleted]
Section 4.08. [Text Intentionally Deleted]
Section 4.09. [Text Intentionally Deleted]
Section 4.10. [Text Intentionally Deleted]
Section 4.11. [Text Intentionally Deleted]
Section 4.12. [Text Intentionally Deleted]
Section 4.14. [Text Intentionally Deleted]
Section 4.15. [Text Intentionally Deleted]
Section 4.16. [Text Intentionally Deleted]
Section 4.18. [Text Intentionally Deleted]
(f) Section 5.01 of the Indenture is amended in its entirety
to read as follows:
Section 5.01. MERGER, CONSOLIDATION, OR SALE OF
ASSETS. (a) The Company shall not consolidate or merge with or
into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company
is the surviving entity or the entity or the Person formed by
or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the
entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made
assumes all the obligations of the Company under the Notes and
this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists;
and (iv) except in the case of a merger of the Company with or
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into a Wholly Owned Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made shall have Consolidated
Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company
immediately preceding the transaction.
(b) No Guarantor shall consolidate with or merge with
or into (whether or not such Guarantor is the surviving
Person), another corporation, Person or entity whether or not
affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or
surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor
pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Notes and
this Indenture and (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists;
provided that clause (ii) above shall not apply with respect
to a merger of one Guarantor with and into another Guarantor.
(c) In the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of
all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all
of the assets of such Guarantor) will be released and relieved
of any obligations under its Subsidiary Guarantee.
(d) The Company or the Guarantor, as the case may be,
shall deliver to the Trustee prior to the consummation of the
proposed transaction pursuant to the foregoing paragraphs (a)
and (b) an Officers' Certificate to the foregoing effect and
an Opinion of Counsel stating that the proposed transaction
and such supplemental indenture comply with this Indenture.
(g) Section 10.06 of the Indenture is amended in its entirety
to read as follows:
Section 10.06. RELEASES FOLLOWING SALE OF ASSETS.
Subject to Section 7.07 hereof, concurrently with any sale of
assets (including, if applicable, all of the capital stock of
any Guarantor) any liens in favor of the Trustee in the assets
sold thereby shall be released. In the event of a sale or
other disposition of all of the assets of any Guarantor, by
way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then
such Guarantor (in the event of a sale or other disposition,
by way of such a merger, consolidation or otherwise, of all of
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the capital stock of such Guarantor in accordance with the
provisions of this Indenture) or the corporation acquiring the
property (in the event of a sale or other disposition of all
of the assets of such Guarantor), shall be released and
relieved of its obligations under its Subsidiary Guarantee or
Section 10.03 hereof, as the case may be. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of this Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary
Guarantee. Any Guarantor not released from its obligations
under its Subsidiary Guarantee shall remain liable for the
full amount of principal of and interest on the Notes and for
the other obligations of any Guarantor under this Indenture as
provided in this Article 10. The release of any Guarantor
pursuant to this Section shall be effective whether or not
such release shall be noted on any Note then outstanding or
thereafter authenticated and delivered.
2. Confirmation. Except as expressly amended hereby, all of
the provisions of the Indenture and all guarantees thereof are in all respects
ratified and confirmed, and nothing herein shall affect the validity or
enforceability of the Indenture, as amended hereby, or of any guarantees
thereof.
3. Counterparts. This Supplemental Indenture may be executed
in any number of counterparts, each of which, when so executed, shall be deemed
to be an original, but all of which shall together constitute but one and the
same instrument.
4. Effectiveness. This Supplemental Indenture shall become
effective immediately upon (i) the execution and delivery hereof by the Company,
the Guarantors and the Trustee, (ii) the execution and delivery to the Trustee
by the Company of an Officer's Certificate and an opinion of counsel, in form
and substance acceptable to the Trustee, and (iii) the execution and delivery to
the Trustee by the Purchaser of an Officer's Certificate confirming that
consents to the amendments set forth herein from at least 66 2/3% of the
outstanding principal amount of the Notes have been delivered and have not been
withdrawn or revoked; provided however, that Article One shall not become
operative unless and until the Trustee receives an Officer's Certificate from
the Purchaser confirming that (i) the Minimum Note Condition (as defined in the
Merger Agreement) has been satisfied or waived as provided in the Merger
Agreement, (ii) all other conditions to the Note Tender Offer set forth in Annex
B to the Merger Agreement have been satisfied or waived by Xxxx and Purchaser
and (iii) Purchaser has accepted for purchase all Notes validly tendered
pursuant to the Note Tender Offer. In the event of any termination of the Note
Tender Offer prior to such acceptance for payment, Article One of this
Supplemental Indenture shall be null and void and of no force or effect.
5. Governing Law. This Supplemental Indenture shall be
governed by and construed in accordance with the law of the State of New York.
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IN WITNESS WHEREOF, the parties have caused this Supplemental
Indenture to be duly executed, all as of the date and year above first written.
HILLS STORES COMPANY
By: /s/ Xxxxx Xxxxxxxxx
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Name: Xxxxx Xxxxxxxxx
Title: Chairman and CEO
HILLS DEPARTMENT STORE COMPANY
By: /s/ Xxxxxxx X. Friend
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Name: Xxxxxxx X. Friend
Title: Sr. Vice President-Secretary
CANTON ADVERTISING, INC.
By: /s/ Xxxxxxx X. Friend
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Name: Xxxxxxx X. Friend
Title: Vice President-Secretary/Clerk
CORPORATE VISION, INC.
By: /s/ Xxxxxxx X. Friend
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Name: Xxxxxxx X. Friend
Title: Vice President-Secretary/Clerk
HDS TRANSPORT, INC.
By: /s/ Xxxxxxx X. Friend
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Name: Xxxxxxx X. Friend
Title: Vice President-Secretary
HILLS DISTRIBUTING COMPANY
By: /s/ Xxxxxxx X. Friend
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Name: Xxxxxxx X. Friend
Title: Vice President-Secretary
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
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