SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-190D
CARTER HAWLEY HALE STORES, INC.
3880 North Mission Road
Los Angeles, California 90031
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Carter Hawley Hale Stores, Inc . (the “Company”)
to be used at the Special Meeting of Stockholders on Friday, February 25, 1994 (the “Special Me eting”). This Proxy
Statement and the enclosed form of proxy are being sent to stockholders on or about February 5, 1994.
At the Special Meeting, stockholders will be asked to consider and Vote upon a proposal t o approve the issuance of
up to 11,792,453 shares (the “Conversion Shares”) of the Company’s common stock, par value $.01 per share (“Common
Stock”), issuable upon conversion of $143,750,000 of the Company’s 6¼% Convertible Senior Subordinated Notes due
2000 (the “Notes”), for purposes of listing such shares on the New York Stock Exchange (the “Proposal”).
Any stockholder giving a proxy may revoke it at any time prior to its exercise at the Spe cial Meeting by giving notice
of such revocation either personally or in writing to the Secretary of the Company at t he Company’s executive offices, by
subsequently executing and delivering another proxy or by voting in person at the Special Meeting.
The Board of Directors of the Company believes that the approval of the Proposal is in the best interests of the Company
and its stockholders and recommends that the stockholders approve the Proposal.
VOTING
Shares represented by duly executed and unrevoked proxies in the enclosed form received by the B oard of Directors
will be voted at the Special Meeting in accordance with the specifications made therein by the stockholders, unless
authority to do so is withheld. If no specification is made, shares represented by duly exe cuted and unrevoked proxies in
the enclosed form will be voted FOR the approval of the Proposal.
The cost of preparing, assembling and mailing the proxy materials will be borne by the C ompany. The Company has
not retained any firm to solicit proxies.
Only holders of record at the close of business on February 3, 1994 (the “Record Date”) of the Common Stock, which
is listed on the New York Stock Exchange, and the Company’s Series A Exchangeable Preferred Stock, $.01 par value
(the “Preferred Stock”), Which has not been admitted or listed for trading on any national securities exchange or on any
national automated dealer quotation system, will be entitled to vote at t he Special Meeting. As of the Record Date, there
were 45,582,865 shares of Common Stock and 870,861 shares of Preferred Stock outstanding. As provided in the
Company’s Amended and Restated Certificatc of Incorporation (the “Certificate of Incorpora tion”), and the Certificate of
Designation, Preferences and Rights of Series A Exchangeable Preferred Stock, the shares of Comm on Stock and
Preferred Stock will votc together as a single class. Each share of Common Stock and each share of Preferred Stock is
entitled to one vote on all matters presented at the Special Meeting.
Vote Required
The approval of the Proposal requires a majority of the votes cast in person or by proxy at the Spe cial Meeting,
provided that the total vote cast on the Proposal represents over 50% in interest of all outstanding Common Stock and
Preferred Stock, voting as a single class. Under Delaware law, the Company’s Certificate of Incorporation and the
Company’s By-laws, shares as to which a stockholder abstains or withholds from voting and shares as t o which a broker
indicates that it does not have discretionary authority to vote (“broker non-votes”) will not be counted as voting thereon.
The stockholders of the Company have no dissenters’ or appraisal rights in connection with the Proposal.
§4.201 PROXY STATEMENTS: STRATEGY & FORMS
4-190E© 1997 Jefren Publishing Company, Inc.
The Company has been informed that Zell/Chilmark Fund, L.P., a Delaware limit ed partnership (“Zell/Chilmark”), a
holder of approximately 54.4% of the shares entitled to vote, and First Plaza Group Trust (“First Plaza”) a holder of
approximately 5.5% of the shares entitled to vote, each intend to vote FOR the approval of the Proposal. If Zell/Chilmark
and First Plaza do in fact so vote their shares, the approval of the Proposal is assured, irre spective of the votes of other
stockholders. See “Principal Stockholders and Management Ownership—Principal Stockholders.”
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
Principal Stockholders The table below sets forth certain information as to those persons known to the Company t o be beneficial owners (as
determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of more than 5% of the outstanding Common Stock as of the Record Date. T he percentage ownership
figures set forth in the table are calculated on the basis of the number of shares of Common Stock outstanding as of the
Record Date. As to Preferred Stock, as of the Record Date, Bankers Trust held 573,285 shares of Preferre d Stock, or
65.8% of the outstanding Preferred Stock, on behalf of the participants in the Company’s 401 (k) Savings and Inve stment
Plan (the “401 (k) Plan”) in its capacity as trustee of the 401(k) Plan.
Name and Address of Beneficial Owner Amount and Nature ofBeneficial Ownership Percent
of Class
Zell/Chilmark Fund, L.P. ........................................................................ 24,800,866(1) 54.4%
Two North Riverside Plaza, Suite 1500
Chicago, IL 60606
Mellon Bank, N.A., as Trustee for ......................................................... 2,500,000(2) 5.5%
First Plaza Group Trust
One Mellon Center
Pittsburgh, PA 15258__________________
(1) The sole general partner of Zell/Chilmark is ZC Limited Partnership, an Ill inois limited partnership (“ZC Limited”).
The sole general partner of ZC Limited is ZC Partnership, a Delaware general pa rtnership (“ZC”). The general
partners of ZC are ZC, Inc., an Illinois corporation (“ZCI”), and CZ, Inc., a Delaware corporation (“CZI”). The
Samuel Zell Revocable Trust dated January 17, 1990 (the “SZ Trust”) is the sole stockhol der of ZCI. Mr. Samuel
Zell is trustee and the beneficiary of the SZ Trust. Mr. David M. Schulte is the sol e stockholder of CZI. One of the
limited partners of ZC Limited is COP General Partnership, an Illinois general pa rtnership (“COP”). One of the
general partners of COP is COP Seniors General Partnership, an Illinois general partnership (“COP Seniors”). One
of the general partners of COP Seniors is Sanford Shkolnik. Messrs. Zell, Schulte and Shkolnik, eac h of whom are
directors of the Company, may each be deemed to share beneficial ownership of the sha res referenced, but each
disclaims beneficial ownership of such shares.
(2) Mellon Bank, N.A., acts as the trustee (the “Trustee”) of First Plaza Group Trust (“First Plaza”), a trust under and
for the benefit of certain employee benefit plans of General Motors Corporation (“GM”) and it s subsidiaries. First
Plaza may be deemed to beneficially own the shares referenced. Additionally, General Motors Investment
Management Corporation, a Delaware corporation and a wholly-owned subsidiary of GM, may be deemed t o
beneficially own these shares because it serves as investment manager for First Plaz a with respect to such shares
and has the power to direct the Trustee as to voting and disposition of such share. The Pe nsion Investment
Committee of GM may also be deemed to beneficially own such shares by virtue of its authority to select the
investment manager of such shares.
Management Ownership The table on the following page indicates the total number of equity securities of the Company beneficially owned by
each of the Company’s directors, by the named executive officers and by all directors
SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-190F
and executive officers as a group as of the Record Date. Beneficial ownership has been calculated in accordance with Rule
13d-3 promulgated under the Exchange Act. Unless otherwise indicated in the footnotes, the numbers listed below reflect
holdings of Common Stock. Additionally, unless otherwise indicated, all shares are owned direc tly and the owner has sole
voting and investment power with respect thereto.
Name of Beneficial Owner
Amount and Nature of Beneficial Ownership Percent of Class
Beneficially Owned
Directors:
Leobardo F. Estrada .............................................................. 10,000(1) *
Sidney R. Petersen ................................................................ 10,825(1)(2) *
Terry Savage ......................................................................... 11,000(1)(3) *
David M. Schulte .................................................................. 24,800,866(4) 54.4%(4)
Sanford Shkolnik .................................................................. 24,920,866(5) 54.7%(5)
Robert M. Solow ................................................................... 10,000(1) *
Dennis C. Stanfill.................................................................. 12,710(1)(6) *
James D. Woods ................................................................... 13,000(1) *
Samuel Zell ........................................................................... 24,800.866(7) 54.4%(7)
Named Executive Officers:
David L. Dworkin ................................................................. 666,666(8) *
Philip M. Hawley .................................................................. 480,000(9) 1.1%
William Podany .................................................................... 36,666(10) *
Patricia A. Warren ................................................................ 0 *
Janet Grove ........................................................................... 13,333(11) *
James Rosenthal ................................................................... 13,333(11) *
Edwin J. Holman .................................................................. 5,293(12) *
Larry G. Peterson ................................................................. 3,722(13) *
All Directors and Executive Officers as a Group
(20 persons) .......................................................................... 25,758,548(4)(5)(7)(14) 56.5% ________________
* Less than 1 percent.
(1) Includes currently exercisable options to purchase 10,000 shares of Common Stock.
(2) Includes 405 shares of Common Stock and warrants to purchase 420 shares of Common Stock, all of which a re held
by Mr. Petersen and his wife as trustees for the Petersen Family Trust.
(3) Includes 1,000 shares of Common Stock held by Ms. Savage as trustee for Terry Savage Productions Limi ted,
Retirement Plan and Trust dated June 1, 1982.
(4) The shares listed for Mr. Schulte are held of record by Zell/Chilmark. Mr. Schulte ma y be deemed to share, with
others, voting and dispositive power with respect to the shares owned by Zell/Chilmark. Mr. Schul te disclaims
beneficial ownership of all of such shares. See footnote I to the table under the heading “Pri ncipal Stockholders and
Management Ownership—Principal Stockholders.”
(5) Includes currently exercisable options to purchase 110,000 shares of Common Stock. 24,800,866 of the shares li sted
for Mr. Shkolnik are held of record by Zell/Chilmark. The sole general partner of Zell/ C hilmark is ZC Limited.
One of the limited partners of ZC Limited is COP General Partnership, an Illinoi s general partnership (“COP”). One
of the general partners of COP is COP Seniors General Partnership, an Illinois general partne rship (“COP Seniors”).
One of the general partners of COP Seniors is Mr. Shkolnik. Mr. Shkolnik may be deemed to share, wit h others,
voting and dispositive power with respect to the shares owned by Zell/Chilmark. Mr. Shkolnik di sclaims beneficial
ownership of all shares held by Zell/Chilmark. See footnote I to the table under the he ading “Principal Stockholders
and Management Ownership — Principal Stockholders.”
(6) Includes warrants to purchase 210 shares of Common Stock.
§4.201 PROXY STATEMENTS: STRATEGY & FORMS
4-190G© 1997 Jefren Publishing Company, Inc.
(7) The shares listed for Mr. Zell are held of record by Zell/Chilmark. Mr. Zell may be deemed to share, with others,
voting and dispositive power with respect to the shares owned by Zell/Chilmark. Mr. Zell disclaims beneficial
ownership of all of such shares. See footnote I to the table under the heading “Principal Stoc kholders and
Management Ownership—Principal Stockholders.”
(8) Includes currently exercisable options to purchase 666,666 shares of Common Stock. Mr. Dworkin was named t he
President and Chief Executive Officer of the Company on March 24, 1993.
(9) Includes currently exercisable options to purchase 480,000 shares of Common Stock. Mr. Hawley resigned as Chief
Executive Officer effective February 1993 and resigned as a director in June 1993.
(10) Includes currently exercisable options to purchase 36,666 shares of Common Stock.
(11) Includes currently exercisable options to purchase 13,333 shares of Common Stock.
(12) Includes warrants to purchase 840 shares of Common Stock and 1,855 shares of Preferred Stock which are current ly
exchangeable for warrants to purchase 1,855 shares of Common Stock. Mr. Holman left the employ of the
Company in October 1993.
(13) Includes warrants to purchase 840 shares of Common Stock and 1,055 shares of Preferred Stock which are current ly
exchangeable for warrants to purchase 1,055 shares of Common Stock. Mr. Petersen left the employ of t he
Company in October 1993.
(14) Includes currently exercisable options to purchase 934,663 shares of Common Stock, warrants to purchase 2,310 shares of Common Stock and 859 shares of Preferred Stock that are currently exchangeable for wa rrants to purchase
859 shares of Common Stock.
Recapitalization On February 11, 1991, the Company filed a voluntary petition for relief under chapter 11 of the Unite d State
Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Cent ral District of California
(the “Bankruptcy Court”). During the bankruptcy proceedings, the Company managed its affairs and ope rated its business
as debtor in possession under the supervision of the Bankruptcy Court while it developed a reorganiza tion plan to
restructure the Company. On October 8, 1992 (the “Emergence Date”), the Company emerged from bankruptcy pursuant
to a plan of reorganization (the “POR”). Since the Emergence Date, the Company ha s operated independently, although
the Bankruptcy Court has retained jurisdiction over certain claims and other matters relating to t he POR.
Pursuant to the POR, as of the Emergence Date, the Company’s largest secured creditors and certain other secured
creditors agreed to extend the maturities and adjust the prospective interest and paym ent terms for loans totaling $451.8
million and capitalize $66.1 million of interest accrued thereon during the chapt er 11 proceedings. In addition, the
Company negotiated significant reductions in lease payments and common area charges unde r its equipment and real
property leases. While the bankruptcy proceedings were pending, Zell/ Chilmark acquired via tender offer approximately
$461.0 of the $600.0 million in unsecured claims against the Company, making Zell/Chilma rk the Company’s largest
unsecured creditor. Pursuant to the POR, these unsecured claims were converted into equity. In a ddition Zell/Chilmark
and First Plaza were each issued 2,500,000 shares of Common Stock in exchange for a cash equity infusion totaling $50.0
million. As a result, Zell/Chilmark held approximately 70% of the shares of Common Stoc k outstanding as of the
Emergence Date.
Pursuant to the POR, holders of the Company’s common stock, $.01 par value, outstanding prior to the Em ergence
Date (“Old Common Stock”) received .081 shares of Common Stock and .084 Warrants (or, in the ca se of participants in
the profit sharing plan in effect prior to the Emergence Date with respect to shares
SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-190H
of Old Common Stock held by such plan and other holders of Old Common Stock who so elected, .081 shares of
Common Stock and .084 shares of Preferred Stock).
THE PROPOSAL
Background The Company entered into a Purchase Agreement, dated as of December 14, 1993 (the “Agree ment”), with Salomon
Brothers Inc (the “Initial Purchaser”) under which the Company issued the Notes on December 21, 1993 in a private
placement. The Notes were sold by the Initial Purchaser to qualified institutional buyers and other institutional accredited
investors. The Notes are convertible at the option of the holders thereof at any time after 90 days following the date of
initial issuance thereof and prior to maturity, at an initial conversion price of $12.19 per share, subject to adjustment from
time to time upon the occurrence of certain events. The closing market price of the Common Stock on December 21, 1993
was $9.375 per share. The net proceeds from the private placement of the Notes (S137.9 million), wi ll be used to make
capital available to fund the Company’s business strategy, including the modernization of the Company’s stores, and, until
such capital expenditures are made, to repay certain amounts outstanding under the Company’s credit faciliti es.
The Company’s ability to fund its capital expenditures program and to implement it s business strategy will depend on
cash flow from operations and the continued availability of borrowings under its credit facil ities. Operating cash flow will
be affected by, among other things, the timing of results from the Company’s business strategy a nd general competitive
and economic conditions. The management of the Company believes that operating cash flow and amounts available
under the Company’s credit facilities, together with the proceeds from the private placement of the Notes, will bc
sufficient to fund the major elements of the Company’s business strategy. However, the Company c ontinuously evaluates
increasing or decreasing the number of stores, the terms of the Company’s credit faciliti es, receivables facilities and other
operating and financing alternatives.
The New York Stock Exchange
The Notes were issued in accordance with Delaware law and pursuant to the authority conferre d upon the Board of
Directors of the Company (the “Board”) by the Company’s stockholders in Article Sixth of the C ompany’s Certificate of
Incorporation. The Board approved the issuance of the Notes because the Board believed such issua nce would provide the
Company with needed additional capital to fund the Company’s business strategy at a rea sonable cost while minimizing
the dilutive effect of the issuance of the Notes on the Company’s existing stockholders (as reflected in the premium
represented by the conversion price ($12.19 per share) over the closing market price ($9.375 per share) on December 21,
1994, the date the Notes were issued).
It is the policy of The New York Stock Exchange, Inc. (the “Exchange”), which lists the Company’s outstanding
Common Stock, to require stockholder approval of the issuance, other than in a public offering, of c ommon stock or
securities convertible into common stock if such common stock has or would have upon issuance voting power equal to or
in excess of 20% of the voting power outstanding before such issuance. If all of the shares issuable upon c onversion of the
Notes were outstanding on December 20, 1993 such shares would represent approximately 25.4% of the voting powe r
outstanding immediately prior to such issuance.
The stockholders are being asked to approve the Proposal in response to the policy of the Exchange . Approval by a
majority of the votes cast will be required to approve the Proposal, provided that the tota l vote cast on the Proposal
represents over 50% in interest of all outstanding Common Stock and Preferred Stock, voting as a single class. If the
required affirmative vote by the shareholders is not obtained, the Notes will remain out standing in accordance with their
terms. Those terms provide that the Notes will be convertible into Common Stock begi nning on March 21, 1994. Because
of the importance of maintaining a market for the trading of the Company’s Common Stock or the Exchange, the Board
recommends that the stockholders vote FOR the Proposal.
Although Zell/Chilmark, which owned approximately 54.4% of the shares entitled to vote as of the Record Date and
First Plaza, which owned approximately 5.5% of the shares entitled to vote as of the Record
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§4.201 PROXY STATEMENTS: STRATEGY & FORMS
4-191A© 1997 Jefren Publishing Company, Inc.
Date, have informed the Company that they intend to vote their shares for the Proposal, if the required stockholder
approval were not obtained, the Exchange could commence delisting proceedings. In such an event , the Company intends
to seek another exchange or market for the trading of its Common Stock.
Description of the Notes
The statements under this caption relating to the Notes, the indenture dated a s of December 21, 1993, between the
Company and Continental Bank, National Association, as trustee (the “Trustee”) under which the Notes were issued (the
“Indenture”) and the Registration Agreement dated as of December 21, 1993 between the C ompany and the Initial
Purchaser for the benefit of holders of the Notes (the “Registration Agreement”), are summari es and do not purport to be
complete. Such summaries make use of certain terms defined in the Indenture or the R egistration Agreement, as
applicable, and are qualified in their entirety by express reference to the Indenture or Registration Agreement, which are
available from the Company upon request. As used under this caption, the term “Company” re fers only to Carter Hawley
Hale Stores, Inc. and not to its subsidiaries or affiliates.
General. The Notes were issued under the Indenture, and the terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effec t on the date of the
Indenture (the “Trust Indenture Act”). The Notes will bear interest from the date of origina l issuance at the rate of 6¼%
(unless such rate has been temporarily or permanently increased under the circumstances de scribed in “Registration
Rights” below), payable semiannually on December 31 and June 30 of each year, commencing June 30, 1994, to holders
of record at the close of business on the 15th day of the month of such interest payment date (whether or not a business
day). The Notes are due on December 31, 2000 and are issuable only in registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.
The Notes are unsecured obligations of the Company. The Indenture does not contain any financia l covenants or
restrictions.
Registration Rights. Pursuant to the Registration Agreement the Company agreed for the benefit of the holders of the
Notes, that (i) it would, at its cost, within 45 days after the closing of the sale of the Notes (the “Closing”), file a shelf
registration statement (the “Shelf Registration Statement”) with the Securit ies and Exchange Commission (the
“Commission”) with respect to resales of the Notes and the Common Stock issuable upon conve rsion thereof, (ii) within
90 days after the closing of the sale of the Notes, such Shelf Registration Statement woul d be declared effective by the
Commission and (iii) the Company would maintain such Shelf Registration Statement continuously effective under the
Securities Act until the third anniversary of the date of the closing of the sale of the Notes or such earlier date as of which
all the Notes or the Conversion Shares have been sold pursuant to such Shelf Registration St atement. If the Company fails
to comply with clause (i) above then, at such time, the per annum interest rate on the Notes will increase by 25 basis
points. Such increase will remain in effect until the date on which such Shelf Regi stration Statement is filed, on which
date the interest rate on the Notes will revert to the interest rate original ly borne by the Notes plus an increase in such
interest rate pursuant to the following sentence. If the Shelf Registration Statement is not declared effective as provided in
clause (ii) above, then, at such time and on each date that would have been t he successive 30th day following such time,
the per annum interest rate on the Notes (which interest rate will be the original interest rate on the Notes plus any
increase or increases in such interest rate pursuant to the preceding sentence and thi s sentence) will increase by an
additional 25 basis points; provided that the interest rate will not increase by more than 50 basis points pursuant to this
sentence. Such increase or increases will remain in effect until the date on whi ch such Shelf Registration Statement is
declared effective, on which date the interest rate on the Notes will revert t o the interest rate originally home by the Notes.
Pursuant to clause (iii) above, however, if the Company fails to keep the Shelf Regi stration Statement continuously
effective for the period specified above, then at such time as the Shelf Registrat ion Statement is no longer effective and on
each date thereafter that is the successive 30th day subsequent to such time and unt il the earlier of (i) the date that the
Shelf Registration Statement is again deemed effective or (ii) the date that is the third anniversary of the Closing or (iii)
the date as of which all of the Notes and/or the Common Stock issuable upon conversion t hereof are sold pursuant to the
Shelf Registration Statement, the per annum
SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-191B
interest rate on the Notes will increase by an additional 25 basis points; provided, however, that the interest rate wi ll not
increase by more than 50 basis points pursuant to this sentence.
The Company will provide to each holder of the Notes, or the Common Stock issuable upon conve rsion of the Notes,
copies of the prospectus, which will be a part of such Shelf Registration Statement, not ify each such holder when such
Shelf Registration Statement for the Notes or the Common Stock issuable upon conversion of the Notes has become
effective and take certain other actions as are required to permit unrestricted resales of the Notes or the Common Stock
issuable upon conversion of the Notes.
Conversion. The holder of any Note has the right, exercisable at any time after 90 days following t he date of original
issuance thereof and prior to maturity, to convert the principal amount thereof (or any portion thereof that is an integral
multiple of $1,000) into shares of Common Stock at $12.19, subject to adjustment as described bel ow (the “Conversion
Price”), except that if a Note is called for redemption, the conversion right will terminate at the close of business on the
tenth business day immediately preceding the date fixed for redemption. Upon conversion, no adj ustment or payment will
be made for interest or dividends, but if any holder surrenders a Note for conversion after the close of business on the
record date for the payment of an installment of interest and prior to the opening of busine ss on the next interest payment
date, then, notwithstanding such conversion, the interest payable on such interest payment date will be paid to the
registered holder of such Note on such record date. In such event, Such Note, when surrendered for conversion, must be
accompanied by payment of an amount equal to the interest payable on such interest pa yment date on the portion so
converted. No fractional shares will be issued upon conversion, but a cash adjustment will be made for any fractional
interest.
The Conversion Price is subject to adjustment upon the occurrence of certain events, incl uding (i) the issuance of
shares of Common Stock as a dividend or distribution on the Common Stock; (ii) the subdivision or combination of the
outstanding Common Stock; (iii) the issuance to substantially all holders of Common Stock of rights or warrants to
subscribe for or purchase Common Stock (or securities convertible into Common Stock) at a price per share less than the
then current market price per share, as defined; (iv) the distribution of shares of capita l stock of the Company (other than
Common Stock) to all holders of Common Stock, evidences of indebtedness or other assets (excluding di vidends in cash);
and (v) the distribution to substantially all holders of Common Stock of rights or warrants to subscri be for securities (other
than those referred to in clause (iii) above). In the event of a distribution to substantia lly all holders of Common Stock of
rights to subscribe for additional shares of the Company’s capital stock (other than those refe rred to in clause (iii) above),
the Company may, instead of making any adjustment in the Conversion Price, make proper provi sion so that each holder
of a Note who converts such Note after the record date for such distribution and prior to the e xpiration or redemption of
such rights shall be entitled to receive upon such conversion, in addition to shares of Common Stock, an appropriate
number of such rights. No adjustment of the Conversion Price will be made until cumulative adjustments amount to one
percent or more of the Conversion Price as last adjusted. No adjustment of the Conversion Price will be made for cash
dividends.
If the Company reclassifies or changes its outstanding Common Stock, or consolidates with or m erges into or
transfers or leases all or substantially all its assets to any person, or is a party t o a merger that reclassifies or changes its
outstanding Common Stock, the Notes will become convertible into the kind and amount of se curities, cash or other assets
which the holders of the Notes would have owned immediately after the transaction if the holders have converted the
Notes immediately before the effective date of the transaction.
Optional Redemption. The Notes may be redeemed at the option of the Company, in whole or from time t o time in
part, on and after December 31, 1998, on not less than 15 nor more than 60 days’ notice by first c lass mail, at a
redemption price of 100% of the principal amount thereof together with accrued and unpaid interest. If less than all the
Notes are to be redeemed, the Trustee will select Notes for redemption pro rata or by lot. If any Note is to be redeemed in
part only, a new Note or Notes in principal amount equal to the unredeemed principal portion thereof will be issued.
Change in Control. In the event of a Change in Control (as defined below), each holder of Notes will have t he right, at
the holder’s option, subject to the terms and conditions of the Indenture, to require the
§4.201 PROXY STATEMENTS: STRATEGY & FORMS
4-191C© 1997 Jefren Publishing Company, Inc.
Company to purchase all or any part (provided that the principal amount must be $1,000 or an int egral multiple thereof) of
the holder’s Notes on the date that is the later of (i) 20 business days after the date of mailing of the Notice referred to
below, and (ii) 40 business days after the occurrence of such Change in Control (the “Purchase Dat e”) for a purchase price
equal to the principal amount thereof, plus accrued and unpaid interest to the Purchase Date.
Within 20 business days after the occurrence of the Change in Control, the Company shall ma il to the Trustee and to
each holder (and to beneficial owners as required by law) a notice of the occurrence of the Change in Control, setting
forth, among other things, the terms and conditions of, and the procedures required for exercise of the holder’s right to
require the purchase of such holder’s Notes. The Company shall cause a copy of such notice to be published in a daily
newspaper of national circulation, which shall be The Wall Street Journal unless it is not then so circulated.
To exercise the purchase fight, a holder must deliver written notice of such exerc ise to the Paying Agent prior to the
close of business on the Purchase Date, specifying the Notes with respect to which the right of purchase is being
exercised. Such notice of exercise may be withdrawn by the holder by a written notice of wi thdrawal delivered to the
Paying Agent at any time prior to the close of business on the Purchase Date.
Under the Indenture, a “Change in Control” means any event by which (i) an Acquiring Person has become such or
(ii) Continuing Directors cease to comprise a majority of the Board of Directors, provided that a Change in Control shall
not be deemed to have occurred if either (i) the last sale price of the Comm on Stock for any five trading days during the
ten trading days immediately preceding the Change in Control is at least equal to 105% of the Conversion Price in effect
on such day or (ii) the consideration, in the transaction giving rise to such Change in Control, to the holders of Common
Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or
quoted on the NASDAQ National Market System, or a combination of cash and such securities, a nd the aggregate fair
market value of such consideration (which, in the case of such securities, shall be equal to the average of the last sale
prices of such securities during the ten consecutive trading days commencing with the sixt h trading day following
consummation of such transaction) is at least 105% of the Conversion Price in effect on the date immediately preceding
the closing date of such transaction.
“Acquiring Person ,” as defined in the Indenture, means any Person or group (as defined in Section 13(d)(3) of the
Exchange Act) who or which, together with all affiliates and associates (as defined in Rule 12b-2 under the Exchange
Act), becomes the beneficial owner of shares of Common Stock of the Company having more tha n 50% of the total
number of votes that may be cast for the election of directors of the Company; provided, however, that an Acquiring
Person shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any empl oyee benefit plan of the
Company or any Subsidiary of the Company or any entity holding Common Stock of the Company for or pursuant to the
terms of any such plan; (iv) Zell/Chilmark Fund, L.P., or (v) any limited partner or Affiliat e of Zell/Chilmark Fund, L.P.
Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result of an a cquisition of Common
Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate num ber of shares
beneficially owned by such Person to 50% or more of the Common Stock of the Company then outsta nding; provided,
however, that if a Person shall become the beneficial owner of 50% or more of the Common Stock of t he Company then
outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become
the beneficial owner of any additional shares of Common Stock of the Company, then such Person sha ll be deemed to be
an “Acquiring Person.”
“Affiliate of Zell/Chilmark Fund, L.P .,” as defined in the Indenture, means (i) any person which, directly or indirectly,
is in control of, is controlled by or is under common control with Zell/Chilmark Fund, L.P. or (ii) any other person who is
a director or officer (A) of Zell/Chilmark Fund, L.P., (B) of any subsidiary of Zell/Chilmark Fund, L.P., or (C) of any
person described in clause (i) above. For purposes of this definition, control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of suc h person whether by contract or otherwise;
and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-191D
”Continuing Director ,” as defined in the Indenture, means any member of the Board of Directors, while such person
is a member of such Board of Directors, who is not an Acquiring Person, or an affiliate or associa te of an Acquiring
Person or a representative of an Acquiring Person or of any such affiliate or associate and who (a) was a member of the
Board of Directors prior to the date of the Indenture, or (b) subsequently becomes a member of such Board of Directors
and whose nomination for re-election or election to such Board of Directors is recommende d or approved by resolution of
a majority of the Continuing Directors or who is included as a nominee in a proxy stat ement of the Company distributed
when a majority of such Board of Directors consists of Continuing Directors.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the
Exchange Act which may then be applicable, and will file Schedule 13E-4 or any othe r schedule required thereunder in
connection with any offer by the Company to purchase Notes at the option of the holders upon a Change in Control.
Subordination of Notes . The Notes are (i) subordinate in right of payment to all existing and future Senior Debt,
including the indebtedness under the Company’s credit facilities and real-property-secured financ ings, and (ii) pari passu
in right of payment to all existing and future Senior Subordinated Indebtedness. The Indenture does not restrict the
amount of Senior Debt or other indebtedness of the Company or any subsidiary of the Company. On January 1, 1994, the
Company had approximately $901.7 million of Senior Debt outstanding. The Indenture prohibits the Com pany from
incurring any debt subsequent to the date of the Indenture which is subordinate in right of payment to Senior Indebtedness
of the Company and which is not expressly made by the terms of the instrument creat ing such indebtedness pari passu
with, or subordinate and junior in right of payment to, the Notes.
The payment of the principal of, interest on or any other amounts due on the Notes is subordinate d in right of payment
to the prior payment in full of all Senior Debt of the Company. No payment on account of pri ncipal of, redemption of,
interest on or any other amounts due on the Notes and no redemption, purchase or other acqui sition of the Notes may be
made unless (i) full payment of amounts then due on all Senior Debt have been made or duly provided for pursuant to the
terms of the instrument governing such Senior Debt, and (ii) at the time for, or immediat ely after giving effect to, any
such payment, redemption, purchase or other acquisition, there shall not exist under any Senior Debt or any agreement
pursuant to which any Senior Debt has been issued, any default which shall not have been cure d or waived and which
shall have resulted in the full amount of such Senior Debt being declared due and payable. In addition, the Indenture
provides that if the holders of any Senior Debt notify the Company and the Trustee that a default has occurred giving the
holders of such Senior Debt the right to accelerate the maturity thereof, no payment on a ccount of principal, redemption,
interest or any other amounts due on the Notes and no purchase, redemption or other acquisition of t he Notes will be made
for the period (the “Payment Blockage Period”) commencing on the date notice is rece ived and ending on the earlier of
(A) the date on which such event of default shall have been cured or waived or (B) 180 days from the date notice is
received. Notwithstanding the foregoing, only one payment blockage notice with respect to the same event of default or
any other events of default existing and known to the person giving such notice at the time of such notice on the same
issue of Senior Debt may be given during any period of 360 consecutive days. No new Payment Blockage Period may be
commenced by the holders of Senior Debt during any period of 360 consecutive days unless all eve nts of default which
triggered the preceding Payment Blockage Period have been cured or waived. Upon any distribut ion of its assets in
connection with any dissolution, winding-up, liquidation or reorganization of the Company or acce leration of the principal
amount due on the Notes because of an Event of Default, all Senior Debt must be paid i n full before the holders of the
Notes are entitled to any payments whatsoever.
The payment of the principal of, interest on or any other amounts due on Junior Subordinated Indebtedne ss are
subordinated in right of payment to the prior payment in full of the Notes.
“Senior Debt,” as defined in the Indenture, means the principal of, interest on and other amounts due on (i)
indebtedness of the Company, whether outstanding on the date of the indenture or thereafter cre ated, incurred, assumed or
guaranteed by the Company in compliance with the Indenture, for money borrowed from banks or other fina ncial
institutions, including, without limitation, money borrowed under the Credit Facility
§4.201 PROXY STATEMENTS: STRATEGY & FORMS
4-191E© 1997 Jefren Publishing Company, Inc.
and any refinancings or refundings thereof; (ii) indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed by the Company in complianc e with the Indenture, which
is not Senior Subordinated Indebtedness or Junior Subordinated Indebtedness; and (iii) indebtedness of the Compa ny
under interest rate swaps, caps or similar hedging agreements and foreign exchange contracts, currency swaps or similar
agreements. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include : (a) Indebtedness of
or amounts owed by the Company for compensation to employees, or for goods or materials purchased i n the ordinary
course of business, or for services; or (b) Indebtedness of the Company to a subsidiary of the Company.
“Indebtedness,” as defined in the Indenture, means, with respect to any person, (i) any obligation of such person to
pay the principal of, premium of, if any, interest on (including interest accruing on or afte r the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not a claim for such post-pet ition interest is allowed
in such proceeding), penalties, reimbursement or indemnification amounts, fees, expenses or othe r amounts relating to any
indebtedness and any other liability, contingent or otherwise, of such person (A) for borrowed money (includi ng instances
where the recourse of the lender is to the whole of the assets of such person or to a portion thereof), (B) evidenced by a
note, debenture or similar instrument (including a purchase money obligation), including securi ties, (c) for any letter of
credit or performance bond in favor of such person, or (D) for the payment of money relating to a C apitalized Lease
Obligation; (ii) any liability of others of the kind described in the preceding clause (i), which the person has guaranteed or
which is otherwise its legal liability; (iii) any obligation secured by a Lie n to which the property or assets of such person
are subject, whether or not the obligations secured thereby shall have been assumed by or sha ll otherwise be such person’s
legal liability, and (iv) any and all deferrals, renewals, extensions and refunding of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding clauses (i), (i i) or (iii). The amount of
indebtedness of any person at any date shall be the outstanding balance at such date of all unconditional obligations as
described above, plus the maximum amount of any contingent obligations as described above, in each case at such date.
“Senior Subordinated Indebtedness,” as defined in the Indenture, means Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed by the Company) which,
pursuant to the terms of the instrument creating or evidencing the same, is subordinate t o the Senior Debt and senior in
right of payment to the Junior Subordinated Indebtedness in right of payment or in rights upon liquidation.
“Junior Subordinated Indebtedness,” as defined in the Indenture, means Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed by the Company), which,
pursuant to the terms of the instrument creating or evidencing the same, is subordinate to the Senior Debt and the Senior
Subordinated Indebtedness in right of payment or in rights upon liquidation.
Events of Default and Notice Thereof. The term “Event of Default” when used in the Indenture means any one of the
following: (i) failure of the Company to pay interest for 30 days or principal when due; (ii) fa ilure of the Company to
perform any other covenant in the Indenture for 60 days after notice; (iii) default by the Com pany with respect to its
obligation to pay within any applicable grace period principal of or interest on certa in other Indebtedness aggregating
more than $10,000,000, or the acceleration of such Indebtedness under the terms of the instruments evi dencing such
Indebtedness; (iv) one or more judgements or decrees are entered against the Company invoking, individually or in the
aggregate, a liability of $10,000,000 or more and such judgements or decrees are not vacated, di scharged, satisfied or
stayed pending appeal within 60 days so as to bring the aggregate liability in respec t thereof below the $10,000,000
threshold; and (v) certain events of bankruptcy or reorganization of the Company or any subsidiary.
The Indenture provides that the Trustee shall, within 90 days after the occurrence of any defa ult (the term “default” to
include the events specified above without grace or notice) known to it, give to the holde rs of Notes notice of such
default; provided that, except in the case of a default in the payment of principa l of or interest on any of the Notes, the
Trustee shall be protected in withholding such notice if it in good faith determi nes that the withholding of such notice is in
the interest of the holders of Notes. The Indenture will require the Company to certify t o the Trustee annually as to
whether any default occurred during such year.
SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-191F
In case an Event of Default (other than an Event of Default resulting from bankruptcy, insolvency or reorganization)
shall occur and be continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice in writing to the Company (and to the Trustee if given by the holders of the Notes), may, and the
Trustee shall, upon the request of such holders, declare all unpaid principal and accrued int erest on the Notes then
outstanding to be due and payable immediately. In case an Event of Default resulti ng from certain events of bankruptcy,
insolvency or reorganization shall occur, all unpaid principal of and accrued interest on the Notes then outstanding shall
be due and payable immediately without declaration or other act on the part of the Trustee or the holders of the Notes.
Such acceleration may be annulled and past defaults (except, unless theretofore cured, a default in payment of principal of
or interest on the Notes) may be waived by the holders of a majority in principal amount of the Notes then outstanding,
upon the conditions provided in the Indenture.
The Indenture provides that no holder of Notes may pursue any remedy under the Indenture unless the Trustee shall
have failed to act after notice of an Event of Default and request by holders of at least 25% in principal amount of the
Notes and the offer to the Trustee of indemnity satisfactory to it, provided, however, that suc h provision does not affect
the right to sue for enforcement of any overdue payment on the Notes.
Modification and Waiver. The Indenture (including the terms and conditions of the Notes) may be modified or
amended by the Company and the Trustee, without the consent of the holder of any Notes, for the purposes of (i) adding
to the covenants of the Company for the benefit of the holders of Notes; (it) surrendering any right or power conferred
upon the Company; (iii) providing for conversion rights of holders of Notes in the event of consolidation, merger or sale
of all or substantially all of the assets of the Company; (iv) evidencing the succession of another corporation to the
Company and the assumption by such successor of the covenants and obligations of the Company the reunder and in the
Notes as permitted by the Indenture; (v) reducing the Conversion Price, provided that such re duction will not adversely
affect the interests of holders of Notes in any material respect; or (vi) curing any ambiguity or correcting or supplementing
any defective provision contained in the Indenture, or making any other provisions which the Company and the Trustee
may deem necessary or desirable and which will not adversely affect the interests of the holders of Notes in any material
respect.
Modification and amendment of the Indenture may be made by the Company and the Trustee with the consent of the
holders of not less than a majority in principal amount of the outstanding Notes, provided that no such modification or
amendment may, without the consent of the holder of each Note affected thereby, (i) cha nge the stated maturity of the
principal of or any installment of interest on, or alter the redemption provisions with re spect to, any Note, (ii) reduce the
principal of, or rate of interest on, any Note, (iii) impair the right to institute sui t for the enforcement of any payment on or
with respect to any Note, (iv) modify the conversion or subordination provisions of the Indenture in a manner adverse to
the holders of the Notes, (v) reduce the above-stated percentage of holders of Notes necessary to modify or amend the
Indenture or (vi) modify any of the foregoing provisions or reduce the percentage of outstanding Notes necessa ry to waive
any covenant or past default. Holders of not less than a majority in principal amount of the outstanding Notes may waive
certain past defaults. See “Events of Default and Notice Thereof.” An amendment to t he Indenture may not adversely
affect the rights under the subordination provisions of the holders of any issue of Senior Debt without the consent of such
holders.
Satisfaction and Discharge. The Indenture will be discharged and cancelled upon payment of all the Notes. The
Company may terminate all of its obligations under the Indenture, other than its obliga tion to pay the principal of and
interest on the Notes and certain other obligations (including its obligation to delive r shares of Common Stock upon
conversion of Notes), at any time, by depositing with the Trustee or a paying agent other than the Company, money or
noncallable U.S. Government Obligations (as defined in the Indenture) sufficient to pay all remaining indebtedness on the
Notes.
Merger and Consolidation. The Company may consolidate or merge with any other corporation and the Company
may transfer its property and assets substantially as an entirety to any person; provided that (i) the Company is the
resulting or surviving corporation, or the successor corporation is a domestic corporation and it assum es, by supplemental
indenture, payment of the principal of and interest on the Notes and performance
§4.201 PROXY STATEMENTS: STRATEGY & FORMS
4-191G© 1997 Jefren Publishing Company, Inc.
and observance of every covenant of the Indenture, and (ii) immediately before and immedi ately after giving effect to
such transaction, no default or Event of Default shall have occurred and be continuing. There after, all obligations of the
Company under the Indenture and the Notes will terminate.
Description of Capital Stock
The authorized capital stock of the Company consists of 100 million shares of Common Stoc k, par value $0.01 per
share and 25 million shares of preferred stock, par value $.01 per share. As of February 3, 1994, there were 45,582,855
shares of Common Stock and 870,861 shares of Preferred Stock outstanding.
Common Stock. The holders of the Common Stock are entitled to one vote for each share held of record, voting
together with holders of Preferred Stock as one class, on all matters submitted to a vot e of stockholders. The Common
Stock does not have cumulative voting rights. Holders of Common Stock are entitled to rece ive ratably such dividends as
may be declared by the Board out of funds legally available therefor. In the event of a liquidation, dissolution or winding
up of the Company, holders of Common Stock will be entitled to share ratably in any a ssets remaining after satisfaction in
full of the prior fights of creditors of the Company and the aggregate liquidation preference of any preferred stock of the
Company. Holders of Common Stock have no preemptive fights and have no rights to convert their Com mon Stock into
any other securities and there are no redemption provisions with respect to such shares. There generally exist no
restrictions on alienability of shares of Common Stock other than those imposed by law on certain holders.
The Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the trading
symbol “CHH.”
Preferred Stock. The Company’s Board of Directors has the authority to issue various classes or series of preferred
stock having such voting powers, and such preferences and relative, participating, optional or other special fights and such
qualifications, limitations or restrictions thereof, as shall be determined by the B oard of Directors, all in accordance with
the laws of the State of Delaware. Each presently outstanding share of Preferred Stock enti tles each holder thereof to one
vote per share, voting together with holders of Common Stock as one class, and a liquidation pre ference (together with
shares of preferred stock which are entitled to a preference in liquidation but subsequent to the satisfaction of liquidation
preferences ranking senior thereto, if any) of $0.25 per share in any assets remaining after t he satisfaction in full of the
prior rights of creditors of the Company. Holders of presently outstanding Preferred Stock will be ent itled to a dividend of
$0.05 per share per year on a non-cumulative basis when, as and if declared by the Company Board of Directors out of
assets legally available therefor. The Company does not ever expect to pay dividends with respect to the Preferred Stock.
In addition, restrictions on the Company’s ability to pay dividends are imposed pursuant to the terms of the Credit Facility
and the Group Two Loan documents and additional restrictions may be imposed by the term s of any preferred stock which
may be issued in the future by the Company. The Preferred Stock will be redeemable by the Company at the Company’s
option at $0.25 per share after the expiration of the Warrants as described below. Until October 8, 1999 (subject to earlier
termination under certain circumstances), each share of Preferred Stock is exchangeable at the option of the holder for one
Warrant. See “Description of Capital Stock — Warrants.” The Preferred Stock is not list ed for trading on any national
securities exchange or other national automated quotation system.
Warrants. Each Warrant entitles the holder to purchase one share of Common Stock at any time during the period
through and including 5:00 p.m. New York City time on October 8, 1999 (the “Exercise Period”) at a purchase price (the
“Warrant Price”) equal to $17 per share, subject to adjustment from time to time . In the event the market price of the
Common Stock equals or exceeds $25.50 for thirty consecutive trading days, the Board of Directors, after April 8, 1995,
may, upon 75 days’ notice, shorten the Exercise Period to end on a date earlier than October 8, 1999.
The Warrant Price is subject to adjustment upon the occurrence of certain events, i ncluding, among other things, the
payment of a stock dividend with respect to Common Stock, the subdivision, combination or recl assification of Common
Stock, the merger or consolidation of the Company and the issuance of fights, options, or warrants (ot her than fights to
purchase Common Stock issued to stockholders generally) to acquire Common Stock. No adjustment nee d be made unless
such adjustment would require an increase or
SALE OR PURCHASE OF CAPITAL STOCK §4.201
December 19974-191H
decrease of at least 1% in the Warrant Price, provided that any such adjustment which is not made shall
be carried forward and taken into account in computing the next Warrant Price adjustm ent. No holder of
Warrants, as such, is entitled to any rights as a stockholder of the Company, including t he right to vote or
to receive dividends or other distributions with respect to the shares of Common Stock, until such holder
has properly exercised the Warrants. The Warrants are listed for trading on the New York Stoc k
Exchange and the Pacific Stock Exchange.
Possible Dilutive Effect
Conversion of the Notes into shares of Common Stock would result in an increase in the number of
shares of Common Stock outstanding. An issuance of Common Stock at a price below the book val ue per
share (for example, if the conversion price of the Notes were below the book value per share at the time
of conversion) would have a dilutive effect on the book value of outstanding shares of Common Stock;
such issuances may also have a dilutive effect on earnings per share and the relat ive voting power of
present stockholders. The initial conversion price of the Notes is $12.19 per share. The book value of the
Common Stock as of January 1, 1994 was $10.28 per share and the closing market price of the Common
Stock at February 3, 1994 was $9.625 per share.
The Board of Directors unanimously recommends that the stockholders vote “FOR” the Proposal.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at the mee ting. If any other
matters should properly come before the meeting, the persons named in the proxy will vote t he proxies
according to their best judgment.
STOCKHOLDER PROPOSALS
As stated in the Company’s Proxy Statement for the 1993 Annual Meeting, the date by which
stockholder proposals must have been received by the Company to be considered for inclusion in the
Company’s proxy materials for the 1994 Annual Meeting was December 30, 1993.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are incorporated into this
Proxy Statement by reference:
(a) The Company’s Annual Report on Form 10-K for the fifty-two week period ended January
30, 1993, as amended by the Company’s Annual Report on Form 10-K/A No. 1 dated May 14, 1993;
and
(b) The Company’s Quarterly Reports on Form 10-Q for the thirteen-week period ended May
1, 1993, the thirteen-week period ended July 31, 1993, and the thirteen-week period ended October 30, 1993.
Any statement contained in a document incorporated by reference in this Proxy Statement shall be
deemed to be modified or superseded for purposes of this Proxy Statement to the extent that a statement
contained in this Proxy Statement modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Proxy
Statement.
Carter Hawley Hale Stores, Inc. 2/4/94
§4.201 P
