<PAGE>
Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, CT 06067-2598
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 15, 1994
The Annual Meeting of Stockholders of Ames Department Stores,
Inc., a Delaware corporation (the "Company"), will be held at the
Radisson Hotel and Conference Center, Cromwell, Connecticut on
Wednesday, June 15, 1994 at 10:00 a.m., to consider and act upon the
following matters:
1.the election of five (5) directors for a term of one year or
until their successor(s) have been elected and qualified;
2.the ratification and approval of the appointment of Arthur
Andersen & Co. as independent certified public accountants and auditors
for the Company for the fiscal year ending January 28, 1995;
3.the approval of the Ames Department Stores, Inc. 1994
Management Stock Option Plan, as described in the Proxy
Statement dated May 5, 1994 accompanying this Notice of Annual
Meeting; and
4.the transaction of such other business as may properly
come before the meeting or any adjournment(s) thereof.
Pursuant to the By-Laws of the Company, the Board of Directors
has fixed the time and date for the determination of stockholders
entitled to notice of and to vote at the meeting as of the close of
business on April 29, 1994. The stock transfer books of the Company
will not be closed. Accordingly, only holders of record of issued
and outstanding shares of Priority Common Stock and Common Stock of
the Company at such time and on such date will be entitled to notice
of and to vote at the Annual Meeting notwithstanding any transfer of
any stock on the books of the Company thereafter. A complete list of
the stockholders entitled to vote will be available for inspection by
any stockholder during the meeting. In addition, the list will be
open for examination by any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting at the Ames store located at 30
Waterchase Drive, Rocky Hill, Connecticut 06067.
By Order of the Board of Directors
Rocky Hill, Connecticut David H. Lissy
May 5, 1994 Secretary
EVEN IF YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE. A RETURN ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED
FOR YOUR CONVENIENCE. IF FOR ANY REASON YOU DESIRE TO REVOKE YOUR
PROXY, YOU MAY DO SO IN THE MANNER SET FORTH IN THE ACCOMPANYING
PROXY STATEMENT AT ANY TIME PRIOR TO THE CLOSE OF BALLOTING.
<PAGE>
<PAGE>
Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, CT 06067-2598
=====================================================================
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE
15, 1994
- ---------------------------------------------------------------------
GENERAL INFORMATION
This proxy statement is furnished to holders of record of the
Priority Common Stock and Common Stock of Ames Department Stores,
Inc. ("Ames" or the "Company") in connection with the solicitation of
proxies by the Board of Directors for use at the Annual Meeting of
Stockholders to be held on June 15, 1994 at 10:00 a.m., and at all
adjournments or postponements thereof, for the purposes set forth in
the accompanying notice of meeting.
The mailing address of the principal executive offices of the
Company is 2418 Main Street, Rocky Hill, Connecticut 06067-2598
(telephone number 203/257-2000). The enclosed proxy and this proxy
statement are first being transmitted to stockholders of the Company,
together with the Annual Report on Form 10-K for the fiscal year
ended January 29, 1994 ("fiscal year 1994"), on or about May 6, 1994.
Holders of outstanding shares of Priority Common Stock and Common
Stock of record at the close of business on April 29, 1994 (the
"Record Date") are entitled to notice of and to vote at the meeting.
Stockholders representing a majority of the outstanding shares must
be present in person or represented by proxy at the meeting for there
to be a quorum for the conduct of business. For this purpose, shares
which are present or represented by a proxy will be counted for
quorum purposes, regardless of whether the holder of the shares or
proxy fails to vote on, or whether a broker with discretionary
authority fails to exercise its discretionary voting authority with
respect to, any particular matter. Once a quorum of the stockholders
is established, a plurality of the votes represented by shares of
Priority Common Stock and Common Stock present in person or
represented by proxy at the meeting is necessary for the election of
directors; the remaining proposals require approval by a majority of
the outstanding shares. For voting purposes on a particular matter
(as opposed to establishing a quorum), abstentions and broker
non-votes will not be counted. Broker non-votes occur when a broker
nominee (which has voted on one or more matters at the meeting) does
not vote on one or more other matters because it has not received
instructions to so vote from the beneficial owner and does not have
discretionary authority to so vote. At the close of business on the
Record Date, there were 2,597,919 shares of Priority Common Stock and
17,529,350 shares of Common Stock, par value $.01 per share, of the
Company issued and outstanding, each of which is entitled to one vote
on each matter to be acted upon at the meeting. The Priority Common
Stock and Common Stock are considered one class of stock for voting
purposes.
<PAGE>
<PAGE>
=====================================================================
PROXIES
- ---------------------------------------------------------------------
SOLICITATION: Proxies in the form enclosed are solicited by and on
behalf of the Board of Directors of the Company. The persons named
in the proxy have been designated as proxies by the Board of
Directors.
ACTIONS TO BE TAKEN UNDER PROXY: Shares represented by properly
executed proxies received by the Company will be voted at the meeting
in the manner specified therein or, if no specification is made, will
be voted FOR: (1) election of the five (5) directors listed herein;
(2) the ratification and approval of the appointment of Arthur
Andersen & Co. as the independent certified public accountants and auditors
for the Company for the fiscal year ending January 28, 1995; and (3)
the approval of the 1994 Management Stock Option Plan. Proxies will
also be voted FOR or AGAINST such other matters as may properly come
before the meeting in the discretion of the persons named in the
proxy. The management of the Company is not aware of any other
matters to be presented for action at the meeting.
EXECUTION: If stock is registered in the names of two or more
persons, the proxy must be signed by each of them. If stock is
registered in the name of a decedent, the proxy must be signed by an
executor or administrator whose title must follow his or her
signature. If a stockholder is a corporation, the proxy must be
signed by an executive officer whose title must be indicated.
REVOCATION: Any proxy given by a stockholder pursuant to this
solicitation may be revoked by the stockholder at any time before it
is exercised by written notification delivered to the Company,
addressed to David H. Lissy, Secretary, Ames Department Stores, Inc.,
2418 Main Street, Rocky Hill, CT 06067-2598, or by executing another
proxy bearing a later date or by voting in person at the meeting.
=====================================================================
ELECTION OF DIRECTORS
(Proposal No. 1)
- ---------------------------------------------------------------------
The Board of Directors of the Company is currently comprised of
five (5) members who were selected pursuant to the Third Amended and
Restated Joint Plan of Reorganization dated October 23, 1992,
pursuant to which Ames emerged from Chapter 11 (the "plan of
reorganization"). The Company's bylaws were amended during fiscal
year 1994 to change the number of directors constituting the entire
board to five members. The five directors are to be elected at the
annual meeting of stockholders to hold office until the next annual
meeting of stockholders or until the election and qualification of
their respective successors. The Board of Directors has nominated
the persons named in the table below, all of whom are currently
directors of the Company.
<PAGE>
<PAGE>
Unless otherwise specified in a duly executed and returned proxy,
the shares voted pursuant thereto will be cast for the nominees. If,
for any reason, any of the nominees should be unable to accept the
nomination or election, such proxy will be voted for the election of
a substitute nominee recommended by the Board of Directors. The
Board of Directors, however, has no reason to believe that any
nominee will be unable to serve as a director.
Set forth below is certain relevant information with respect to
each nominee as of March 15, 1994:
<TABLE>
<CAPTION>
FIRST
NAME, AGE, PRINCIPAL OCCUPATION, BECAME
BUSINESS EXPERIENCE AND DIRECTORSHIPS DIRECTOR
<S> <C>
PETER THORNER, age 50 1991
President and Chief Operating Officer since February, 1993;
Executive Vice President, Chief Operating Officer and Chief
Financial Officer from December, 1992 to February, 1993;
Executive Vice President and Chief Financial Officer from
May, 1990 to December, 1992. Prior to joining Ames, he was
Managing Director, Senior Vice President and Chief Financial
Officer of Wheelabrator Technologies, Inc. from 1987 to
March, 1990.
FRANCIS X. BASILE, age 62 1992
Chairman and Chief Executive Officer of the CIT Group/
Factoring, Inc. until his retirement in January, 1992.
He was appointed President and Chief Executive Officer
of the CIT Group/Factoring, Inc. in January, 1986. Prior
to his retirement, he was a Director and Chairman of the
National Commercial Finance Association and a member of
its Executive Committee.
PAUL BUXBAUM, age 39 1992*
Executive Vice President of Buxbaum, Ginsberg & Associates,
a nationwide retail consulting company, since 1984. He is
also a Director of Richmond Gordman 1/2 Price Stores and
Herbalife International, Inc., and serves on the Audit,
Stock Option, Finance and Compensation Committees of
Herbalife International, Inc.
ALAN COHEN, age 57 1992
Chairman of Alco Capital Group, Inc., et al., a diversified
financial service and investment company, since 1975, and
Chief Executive Officer of Russ Toggs, Inc., since November,
1993. He is also Chairman of the Board of Marion Oil Corp.
and Alco Cadillac-Pontiac Sales Corp., and the current court-
appointed trustee of Tower Financial Corporation. He formerly
served as Chief Executive Officer of Health-Tex, Inc.
<PAGE>
<PAGE>
SIDNEY S. PEARLMAN, age 62 1992
Currently retired. He was formerly Senior Vice President/
Director of Stores to General Merchandise Manager of Younkers,
Inc. from 1987 to March, 1991.
<FN>
*Chairman of the Board of Directors since July, 1993.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.
YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
</TABLE>
=====================================================================
BOARD MEETINGS AND COMMITTEES
- ---------------------------------------------------------------------
During fiscal year 1994, the Board of Directors held twelve (12)
meetings. Each incumbent director attended at least 75% of the
directors' meetings.
There were no committees of the Board of Directors in fiscal year
1994. The Board of Directors chose to act as a whole on all matters.
On March 1, 1994, an Audit Committee was created comprised of Messrs.
Basile (Chairman), Buxbaum, and Cohen, and a Compensation Committee
was created comprised of Messrs. Pearlman (Chairman), Basile, and
Buxbaum.
=====================================================================
EXECUTIVE COMPENSATION
- ---------------------------------------------------------------------
The following table sets forth each item of compensation paid,
earned or awarded to the President and the four other most highly
paid executive officers serving at January 29, 1994, and to any
terminated executive officers who would qualify for such disclosure
if they had not been terminated, over each of the preceding three
years. Anthony Lumbrazo, former Senior Vice President - Stores, left
the Company on May 21, 1993.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------
ANNUAL COMPENSATION | AWARDS |PAYOUTS|
------------------------------------------------------
NAME & OTHER |RESTRICEDd (#) | LTIP | All
PRINCIPAL FISCAL ANNUAL | STOCKS OPTIONS/|PAYOUTS| OTHER
POSITION YEAR SALARY BONUS* COMP. | AWARDS SARS (b)| (c) | COMP.**
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> | <C> <C> |<C> | <C>
Peter Thorner 1994 $457,362 $80,595 (a) | $-0- -0- | $-0- | $6,479
President & Chief 1993 365,365 -0- (a) | -0- 200,000 | -0- | 7,894
Operating Officer 1992 344,000 -0- (a) | -0- -0- | -0- | 5,437
| | |
William N. Anderson 1994 304,038 42,544 (a) | -0- -0- | -0- | 1,909
Senior Vice President, 1993(d) 173,077 50,000 (a) | -0- -0- | -0- | 406
General Manager, Hardlines 1992 | | |
| | |
Anthony M. Lumbrazo 1994(e) 73,846 -0- (a) | -0- -0- | -0- | 188,302(e)
Former Senior Vice 1993 206,154 -0- (a) | -0- 50,000 | -0- | 147,187(f)
President, Stores 1992 126,399 9,331 (a) | -0- -0- | -0- | 4,883
| | |
Donald E. Norman 1994 245,654 39,332 (a) | -0- -0- | -0- | 9,548
Senior Vice President, 1993 231,731 -0- (a) | -0- 100,000 | -0- | 8,156
Logistics 1992 227,115 43,335 (a) | -0- -0- | -0- | 2,016
| | |
Paul G. Leonard 1994 217,019 23,511 (a) | -0- -0- | -0- | 5,819
Senior Vice President, 1993 150,577 13,000 (a) | -0- 50,000 | -0- | 2,578
General Manager, Softlines 1992(g) 97,500 20,000 (h) | -0- -0- | -0- | 159
| | |
David H. Lissy 1994 210,000 24,331 (a) | -0- -0- | -0- | 3,412
Senior Vice President, 1993 190,575 18,000 (a) | -0- 125,000 | -0- | 2,880
General Counsel and 1992 177,058 41,250 (a) | -0- -0- | -0- | 1,026
Corporate Secretary | | |
<FN>
*Represents certain sign-on and mortgage bonuses and bonuses earned under the Annual Incentive
Compensation Plan (see below). For fiscal year 1994, amounts represent earned bonuses to be paid in
May, 1994.
**Represents the Company's matching contributions under the Retirement and Savings Plan (see below)
and excess paid life insurance.
(a)Represents a car allowance that was below the lesser of $50,000 or 10% of the individual
executive's total salary and bonus.
(b)Stock Appreciation Rights (SARs) were granted to certain members of management and key employees
in connection with the plan of reorganization (see below). There were no options granted to the
named executives during the past three fiscal years.
(c)Ames did not have a long-term incentive plan (LTIP) or pension plan during the covered periods.
(d)Joined the Company on July 6, 1992.
(e)Left the Company on May 21, 1993 and was paid $185,538 in severance and vacation pay during
fiscal year 1994 (included in "All Other Compensation").
(f)Includes retroactive pay of $139,114.
(g)Joined the Company on April 29, 1991.
(h)Mr. Leonard received a tax reimbursement of $7,643 in fiscal year 1992. He also received a car
allowance that was below the lesser of $50,000 or 10% of Mr. Leonard's total salary and bonus.
</TABLE>
<PAGE>
<PAGE>
=====================================================================
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR AND FY-END SAR VALUES
The table below discloses unexercised Stock Appreciation Rights
(SARs) held by the named executive officers as of January 29, 1994.
There were no stock options or SARs granted and none of the SARs were
exercised by the named executive officers or repriced during fiscal
year ("FY") 1994.
<TABLE>
<CAPTION>
AGGREGATED SAR EXERCISES IN LAST FISCAL YEAR AND FY-END SAR VALUES
# OF SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SARs AT SARs AT
1/29/94 1/29/94 ($)
(#) SHARES ($) Value EXERCISABLE / EXERCISABLE /
NAME EXERCISED RECEIVED UNEXERCISABLE UNEXERCISABLE
------------------- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Peter Thorner -0- $ -0- 133,333/66,667 $ -0- / -0-
William N. Anderson -0- -0- -0- / -0- -0- / -0-
Anthony M. Lumbrazo -0- -0- 16,667/ -0- -0- / -0-
Donald E. Norman -0- -0- 66,667/33,333 -0- / -0-
Paul G. Leonard -0- -0- 33,333/16,667 -0- / -0-
David H. Lissy -0- -0- 83,333/41,667 -0- / -0-
</TABLE>
In connection with the plan of reorganization, SARs exercisable
only for cash, equivalent to 1.2 million shares of the new Common
Stock were granted to certain members of management and key employees
as compensation for their efforts in restructuring Ames and enabling
it to emerge from Chapter 11. After certain exercises and
forfeitures (related to terminated officers), SARs equivalent to
approximately 1.0 million shares were outstanding as of January 29,
1994. One-third of these SARs vested on December 30, 1992 (the
"Consummation Date" of Ames' plan of reorganization); one-third
vested on December 30, 1993; and the remaining one-third will vest on
December 30, 1994. Each SAR entitles the recipient upon exercise
(which may not be later than five years after the Consummation Date),
to receive in cash the excess of the average closing price of a share
of Common Stock during the ten trading days prior to the exercise
date, over the average closing price of a share of Common Stock
during the 60 trading days after the Consummation Date. The average
closing price for the 60 trading days after the Consummation Date was
$2.96 per share. During fiscal year 1994, 16,667 SARs were
exercised.
<PAGE>
<PAGE>
Subsequent to fiscal year-end 1994, and through April 30, 1994,
the following named executive officers (those listed in the Summary
Compensation Table) exercised the following amounts of SARs: Anthony
Lumbrazo (16,667), Donald Norman (66,665) and David Lissy (50,000).
=====================================================================
ANNUAL INCENTIVE COMPENSATION PLAN
The Company has an Annual Incentive Compensation Plan (the
"Annual Bonus Plan") that is subject to annual review by the Board of
Directors. The Annual Bonus Plan provides annual incentive cash
bonuses based on the achievement of the Company's financial goals for
the year (and customer service goals for store and field management
beginning in fiscal year 1994). Pursuant to the Annual Bonus Plan,
bonuses for fiscal year 1994 will not be paid until May, 1994.
Participants must be active Ames' employees at the time the bonus
payments are made to earn a bonus. No bonus payments were made to
the named executive officers (those listed in the Summary
Compensation Table) during fiscal year 1994.
RETIREMENT AND SAVINGS PLAN
The Retirement and Savings Plan is qualified under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended.
Employees who have reached the age of 21 are eligible to participate
after one year of service provided they have completed at least 1,000
hours of service in a 12-month period. Participants may generally
reduce their taxable income by up to 18%, less after-tax
contributions (of up to 18% of compensation), and have Ames
contribute such amounts to the Retirement and Savings Plan on a
pre-tax basis. Ames matches 50% of a participant's contributions, up
to 5% of such participant's compensation. Participants who terminate
their employment with Ames are generally entitled to receive the full
amount of their contributions and, depending on the length of the
participant's service to Ames, a portion of the Company's matching
contributions.
The following table sets forth as to the named executive officers
(those listed in the Summary Compensation Table) and all other
officers and employees of Ames as a group the aggregate matching
contributions by Ames under the Retirement and Savings Plan during
fiscal year 1994:
AGGREGATE MATCHING
CONTRIBUTIONS
------------------
Peter Thorner $4,974
William N. Anderson 588
Anthony M. Lumbrazo 1,962
Donald E. Norman 6,137
Paul G. Leonard 5,409
David H. Lissy 2,100
All other employees and officers $2,289,469
<PAGE>
<PAGE>
RETIREMENT PLAN
Ames has an unfunded Retirement Plan for Officers/Directors (the
"Retirement Plan"). Every person who is employed by Ames as an
officer or director when he or she retires, dies or becomes disabled
and who (i) served as both a full-time officer and a director of Ames
and has completed five years of service in both of these capacities,
or (ii) served as a director of Ames and has completed 10 years, not
necessarily consecutive, of service to Ames, is eligible for benefits
under the Retirement Plan.
Benefits are payable upon termination of employment due to
retirement, death or disability. The annual benefit is equal to
two-thirds of the participant's average annual base salary during the
five-year period immediately preceding such termination of
employment. The maximum annual benefit under the Retirement Plan is
$100,000 ($150,000 in the case of a participant who served as
President and Chief Operating Officer). The annual benefit is
reduced by an amount equal to such participant's annual Social
Security benefits. Each participant in the Retirement Plan is
entitled to benefits for a period of 10 years. Upon the earlier
death of the participant, the then present value of all unpaid
benefits will be paid to the participant's estate. Peter Thorner,
current President, Chief Operating Officer and director, is currently
projected as the only individual who may qualify for benefits under
this plan. As of January 29, 1994, Mr. Thorner had completed two
years and ten months of credited service as a full-time officer and
director of Ames. No payments have been made under this plan
subsequent to April 25, 1990, the Company's Chapter 11 filing date.
=====================================================================
COMPENSATION OF DIRECTORS
- ---------------------------------------------------------------------
Ames' directors who were not full-time Ames employees received
$35,000 for fiscal year 1994 in director's fees ($70,000 per year for
the Chairman) and were reimbursed for their expenses. An additional
payment of $8,750 was made during the first quarter of fiscal year
1995 to each outside director for services rendered during fiscal
year 1994. In addition, Sidney S. Pearlman was paid $20,625 in the
fiscal year ended January 29, 1994 for consulting services.
For fiscal year 1995, outside directors' compensation has been
increased to $40,000 in director's fees ($80,000 for the Chairman)
for six regular meetings and $3,000 for each additional Board
meeting. Directors will also be compensated at the rate of $10,000
per year for up to four meetings for each committee on which they
serve and $2,500 for each additional committee meeting.
<PAGE>
<PAGE>
=====================================================================
EMPLOYMENT CONTRACTS, TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL
ARRANGEMENTS
- ---------------------------------------------------------------------
INCOME CONTINUATION PLAN
The named executive officers of Ames participate in an Income
Continuation Plan ("ICP"), which guarantees up to one year's salary
in the event of termination other than for cause. Certain other
officers of Ames also participate in the ICP.
=====================================================================
KEY EMPLOYEE CONTINUITY BENEFIT PLAN
Ames has a Key Employee Continuity Benefit Plan (the "Continuity
Plan") that covers all officers (Vice President and above) and
certain other employees of Ames. If the employment of any
participant in the Continuity Plan is terminated by the Company other
than for death, disability, cause (as defined in the Continuity Plan)
or by the participant for good reason (as defined in the Continuity
Plan) within 18 months after a change of control of Ames, the
participant will receive a lump sum cash severance payment. The
severance payment is 2.99 times Base Compensation for the President
and Executive Vice Presidents, 2 times Base Compensation for Senior
Vice Presidents and selected Vice Presidents, and 1 times Base
Compensation for other Vice Presidents. Base Compensation is defined
generally as the sum of the participant's annual base compensation in
effect immediately prior to the participant's termination plus
one-third of the value of the cash and stock bonuses paid to the
participant during the 36 months ending on the date of termination.
For purposes of the Continuity Plan, a change of control includes,
but is not limited to, the acquisition by any person of beneficial
ownership of 20% or more of the Company's outstanding voting
securities or the failure of the individuals who constituted the
Board of Directors at the beginning of any period of 12 consecutive
months to continue to constitute a majority of the Board during such
period.
On September 2, 1992, pursuant to applicable provisions of the
Continuity Plan, the Board of Directors of Ames adopted a resolution
providing that none of the events to occur in connection with the
consummation of the plan of reorganization constituted a change of
control for purposes of the Continuity Plan.
<PAGE>
<PAGE>
=====================================================================
ADDITIONAL INFORMATION WITH RESPECT TO BOARD OF DIRECTORS INTERLOCKS
AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
- ---------------------------------------------------------------------
Peter Thorner, a member of the Board of Directors of the Company,
is, and was during fiscal year 1994, an executive officer of the
Company. However, he did not participate in Board deliberations in
fiscal year 1994 relating to his own executive compensation.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, that
would otherwise incorporate future filings, including this Proxy
Statement, in whole or in part, the Board of Directors Report on
Executive Compensation and the Performance Graph that follow below
shall not be incorporated by reference into any such filings.
=====================================================================
THE BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
- ---------------------------------------------------------------------
The Company's Board of Directors (the "Board") is responsible
for approving the compensation to be paid to the Company's principal
executive officers, including the President. There were no
committees of the Board during fiscal year 1994. The Board chose to
act as a whole on all matters. As previously noted, a Compensation
Committee was created on March 1, 1994. Set forth below is a report
submitted by the Board regarding the compensation policies for fiscal
year 1994, as they related to the Company's principal executive
officers, including the President.
=====================================================================
COMPENSATION POLICIES
In April of each year, the Board generally reviews management's
proposed annual salaries for principal executive officers for the
remainder of the new fiscal year and the beginning of the next fiscal
year. In determining whether to accept management's proposed
salaries, or recommend different salaries, the Board considers a
number of factors, including but not limited to the following: (1)
the Company's financial performance for the prior fiscal year,
including whether the Company had a net profit or loss, the amount
thereof, the reasons for such performance, and whether such
performance was primarily as a result of the executive officers'
performance, or whether the performance might have related to
unforeseen events or events not in the executives' control; and (2)
the extent to which an executive officer achieved certain objectives
in his or her area of primary responsibility that might have been set
in the prior fiscal year, or otherwise made a significant
contribution to the Company. In its review of management's proposed
bonuses under the Annual Bonus Plan for a fiscal year, the Board
utilizes criteria similar to that which it uses in reviewing annual
salaries.
<PAGE>
<PAGE>
FISCAL YEAR 1994 EXECUTIVE COMPENSATION
The Board was selected pursuant to the terms of the plan of
reorganization and the Company emerged from Chapter 11 bankruptcy on
December 30, 1992. The Board met twice prior to the start of fiscal
year 1994 and was informed at that time of the Company's recent
financial performance and management's plan designed to return the
Company to profitability. The Board subsequently accepted
management's salary recommendations for fiscal year 1994, and the
recommendations for eligible participants in, and the Company's goals
for, the Annual Bonus Plan for fiscal year 1994. Pursuant to the
ICP, Anthony Lumbrazo's severance pay was equal to one year's salary.
FISCAL YEAR 1994 PRESIDENT COMPENSATION
In approving Peter Thorner's compensation for fiscal year 1994,
the Board reviewed the same factors that it utilized in accepting
management's recommendations of the compensation for the Company's
other principal executive officers (see above). In addition, the
Board recognized that Mr. Thorner would be entitled to a higher
compensation level in fiscal year 1994 as compared to the prior year
upon assuming the responsibilities of President and Chief Operating
Officer.
The Board of Directors
Francis X. Basile
Paul Buxbaum
Alan Cohen
Sidney S. Pearlman
Peter Thorner
<PAGE>
<PAGE>
=====================================================================
PERFORMANCE GRAPH
- ---------------------------------------------------------------------
The following chart compares the changes in the cumulative total
return on the Company's Common Stock with the cumulative total return
of the NASDAQ Stock Market Index (U.S. Companies) and the cumulative
total return of the NASDAQ Retail Stock Index for the period
commencing on December 30, 1992 (the first day of trading in the
Company's Common Stock) and ending on January 30, 1993 and for the
quarterly periods during the fiscal year ended January 29, 1994. The
chart assumes that the value of the investment in Ames Department
Stores, Inc. and each index was $100 on December 30, 1992 and that
all dividends were reinvested.
<TABLE>
Performance Graph Chart
<CAPTION>
12/30/92 1/29/93 4/30/93 7/30/93 10/30/93 1/28/94
<S> <C> <C> <C> <C> <C> <C>
Ames Department Stores, Inc. $100 $238 $192 $131 $104 $154
CRSP Index for NASDAQ Stock Market 100 104 98 105 115 118
(U.S. Companies)
CRSP Index for NASDAQ Retail Companies 100 99 90 96 109 106
</TABLE>
<PAGE>
<PAGE>
=====================================================================
TRANSACTIONS WITH MANAGEMENT
- ---------------------------------------------------------------------
To the knowledge of Ames, there were no related transactions or
business relationships, with directors or executive officers of Ames
during fiscal year 1994, or any currently proposed, that would
require disclosure.
=====================================================================
SECURITY OWNERSHIP OF MANAGEMENT
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As of March 15, 1994, the Company's directors and officers as a
group were beneficial owners of 86 shares of the Common Stock. As
used herein, "beneficial ownership" means the sole or shared power to
vote or invest either Priority Common Stock, Common Stock, or
Warrants. James J. Aglio, Jr. and David Covitz, both Vice Presidents
and officers of the Company, had inadvertent untimely reportings on
Forms 4 regarding the receipt of the above 86 shares under Ames' plan
of reorganization. To the knowledge of Ames, there were no other
director or officer reporting delinquencies.
The Company is not aware of any arrangements, including any
pledge by any person of securities of the Company, which may at a
subsequent date result in a change of control of the Company.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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Through May 4, 1994, Ames is not aware of any public filings
reflecting any beneficial ownership of more than 5% of the combined
total outstanding shares of the Priority Common Stock and Common
Stock on the Record Date.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)
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The Board of Directors has appointed Arthur Andersen & Co., independent
public accountants, as auditors of the Company for the fiscal year
ending January 28, 1995, subject to ratification by stockholders at
the Annual Meeting. It is intended that, unless otherwise directed
by the stockholders, proxies will be voted for the ratification and
approval of this appointment. A representative of the firm of Arthur
Andersen & Co. will be present at the meeting to make such statements as
that firm may desire and to answer questions by stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPOINTMENT OF THE NAMED AUDITORS. YOUR PROXY WILL BE SO VOTED
UNLESS YOU SPECIFY OTHERWISE.
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APPROVAL OF 1994 MANAGEMENT STOCK OPTION PLAN
(PROPOSAL NO. 3)
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The Board of Directors of the Company has approved the 1994
Management Stock Option Plan (the "Plan"), subject to the approval by
the Company's shareholders at this Annual Meeting. A description of
the material features of the Plan are set forth below.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ADOPTION OF THE PLAN. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
GENERAL
The Board of Directors of the Company and its Compensation
Committee have approved the Plan, subject to stockholder approval.
The purpose of the Plan is to provide certain key employees of the
Company and its subsidiaries an opportunity to acquire an ownership
interest in the Company and thereby create in such employees an
increased interest in and greater concern for the welfare of the
Company, to retain their continued employment, and to secure and
retain the services of persons capable of filling key positions with
the Company and its subsidiaries. Pursuant to the Plan, the Company
may grant options with respect to an aggregate of up to 1,700,000
shares of Common Stock, with no individual optionee to receive in
excess of 200,000 shares of Common Stock upon exercise of options
granted under the Plan. Options granted pursuant to the Plan may be
either incentive stock options ("ISOs") or non-qualified stock
options ("NQSOs"). Shares of Common Stock subject to options may be
either authorized but unissued shares, or previously issued shares
acquired or to be acquired by the Company and held in its treasury,
or both, at the discretion of the Company.
SUMMARY OF THE PLAN
ADMINISTRATION: The Plan will be administered by the
Compensation Committee of the Board of Directors of the Company,
which is comprised of no fewer than three "disinterested persons"
within the meaning of Rule 16b-3 under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
each of whom shall also be "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder. The members of
the Compensation Committee are: Sidney Pearlman, Francis Basile, and
Paul Buxbaum. Any or all powers and functions of the Compensation
Committee may be exercised at any time and from time to time by the
Board of Directors or an executive committee of the Board of
Directors (the "Executive Committee"), provided all of the members of
the Board or the Executive Committee are "disinterested persons"
within the meaning of Rule 16b-3.
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(References in this discussion to the "Committee" include the
Compensation Committee, the Board of Directors and the Executive
Committee to the extent any of the foregoing administers the Plan.)
The authority of the Committee includes, among other things,
determining the persons to whom options are granted, the timing of
any grants, the number of shares subject to each option, the purchase
price of each share which shall be subject to each option, the period
of exercisability and the other terms and provisions thereof.
Officers subject to Section 16(a) of the Exchange Act may not,
and the Committee also has the authority to require, as a condition
to any grant, that any other grantee also may not, sell or otherwise
dispose of shares acquired pursuant to the exercise of an option
within six months of the date an option is granted.
ELIGIBILITY: Options may be granted to salaried key employees of
the Company or any subsidiary or parent corporation of the Company
now existing or subsequently formed or acquired.
GRANT, TERMS AND CONDITIONS OF OPTIONS: The Company will not
receive any monetary consideration for granting options.
The exercise price for each share subject to an option will be an
amount that the Committee determines, in its good faith judgement, to
be not less than 100% of the fair market value of the Common Stock on
the date the option is granted. In the case of ISOs, however, the
exercise price per share of ISOs granted to any holder of capital
stock of the Company (or any subsidiary or parent corporation)
representing 10% or more of the voting power of the Company (or any
subsidiary parent corporation) will be in an amount that the
Committee determines, in its good faith judgement, to be not less
than 110% of the fair market value of the Common Stock on the date
the ISO is granted.
Under the Plan, fair market value per share means:
(1) if the shares are listed on a national securities
exchange or reported on the NASDAQ Stock Market--National Market
("NASDAQ-NMS"), the last reported sale price per share on such
exchange or such system on the date the option is granted or, if
the shares are not traded or reported on such date, then on the
closest preceding date on which such shares were traded or
reported; or
(2) if the shares are not listed on a national securities
exchange or reported on NASDAQ-NMS but are quoted in the
over-the-counter market, the average of the closing bid and ask
quotations in such market for such shares on the date the option
is granted or, if there are no such quotations on such date, then
on the closest preceding date on which such quotations are
available; PROVIDED, HOWEVER, that if, in the judgment of the
Committee, there is not a regular, active public market for the
shares, fair market value per share shall be determined by the
Committee in its good faith judgment. The determination by the
Committee of fair market value will be conclusive and binding.
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Payment for shares purchased upon the exercise of options may be
in cash or, if the terms of an option so provide, with other shares
of Common Stock or an executed promissory note on such terms and
conditions as the Committee shall determine.
Options granted under the Plan are exercisable at such times, in
such amounts and during such period or periods as the Committee may
determine at the date the option is granted. ISOs, however, are not
exercisable after ten years from the date of grant and, in the case
of a person who at the date of grant owns capital stock of the
Company (or any subsidiary or parent corporation) representing 10% or
more of the voting power of the Company (or any subsidiary or parent
corporation), are not exercisable after five years from the date of
grant. Except as otherwise provided under the Code, if the aggregate
fair market value of shares subject to ISOs (under any plan of the
Company or any subsidiary or parent corporation of the Company)
exercisable for the
first time in any calendar year exceeds $100,000, such options will
be treated as NQSOs.
In addition, the Committee has the right to accelerate, in whole
or in part, from time to time, conditionally or unconditionally, the
right to exercise any option granted under the Plan.
In the event of retirement, termination by the Company of
employment with or without cause, termination of employment by an
optionee with or without good reason or upon death or disability,
special rules will apply regarding the exercisability of options.
Options may not be transferred except by will or the laws of
descent or distribution.
If the terms of an option so provide, in the event of a "change
in control" of the Company, all such options shall immediately become
exercisable. The Committee, in its sole discretion, may determine
that, upon the occurrence of a "change in control," each option
outstanding under the Plan shall terminate within a specified number
of days after notice to the holder, and such holder shall receive,
with respect to each share subject to such option, an amount in cash
or other property, or any combination thereof, equal to the excess of
the aggregate fair market value at the time of such transaction of
the shares subject to such option over the aggregate exercise price
therefor. The foregoing provision does not apply to options granted
to officers subject to Section 16(a) of the Exchange Act within six
months prior to a change in control, unless an exemption from
liability under Section 16(b) of the Exchange Act is otherwise
available.
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EFFECT OF CHANGE IN COMMON STOCK: In the event of any change in
the Common Stock through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, or other like
change in capital structure of the Company, an adjustment will be
made to each outstanding option so that such option thereafter is
exercisable for such securities, cash and/or property as would have
been received had such option been exercised in full immediately
prior to such transaction and been exchanged in such transaction. An
adjustment will be made successively each time any such change
occurs.
AMENDMENT OR TERMINATION: The Board of Directors of the Company
may at any time amend or terminate the Plan, provided that no such
action affects or impairs the rights of an optionee under any
previously granted option. Notwithstanding the foregoing, without
the approval of the Company's stockholders, no amendment or change
may be made (a) increasing the total number of shares of Common Stock
reserved for options under the Plan (other than an increase resulting
from an adjustment), (b) reducing the exercise price of any ISO, (c)
modifying the provisions of the Plan relating to eligibility or (d)
materially increasing the benefits accruing to participants under the
Plan.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The statements in the following paragraphs are based on federal
income tax law and interpretational authorities as of the date of
this Proxy Statement, which are subject to change at any time. The
law is technical and complex and the statements represent only a
general summary of some of the applicable provisions.
INCENTIVE OPTIONS
ISOs under the Plan are intended to meet the definitional
requirements of Section 422(b) of the Code for "incentive stock
options."
Under the Code, the grantee of an ISO generally is not subject to
regular income tax upon the receipt or exercise of such ISO (except
that the alternative minimum tax may apply). If after exercising an
ISO, an employee disposes of the shares of Common Stock so acquired
after the longer of two years from the date of grant or one year from
the date of transfer of shares of Common Stock pursuant to the
exercise of such ISO (the "applicable holding period"), the employee
will normally recognize a long-term capital gain or loss equal to the
excess, if any, of the amount received for the shares of Common Stock
over the exercise price. If, however, an employee does not hold the
shares of Common Stock so acquired for the applicable holding period,
the disposition is normally a "disqualifying disposition," and the
employee would recognize income in the year of the disqualifying
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disposition equal to the excess of the amount received for the shares
of Common Stock over the exercise price. Of that income, the portion
equal to the excess of the fair market value of the shares at the
time the ISO was exercised over the exercise price will be ordinary
income and the balance, if any, will be long-term or short-term
capital gain depending on whether the holding period for the shares
of Common Stock exceeded one year and provided that the employee held
such shares as a capital asset at such time.
If, in a disqualifying disposition, the employee sells the shares
of Common Stock at a price that is below the fair market value of the
shares of Common Stock at the time the ISO was exercised, the amount
of ordinary income will be limited to the amount by which the amount
realized on the sale exceeds the exercise price.
An employee who exercises an ISO by delivering shares previously
acquired pursuant to the exercise of an ISO is treated as making a
"disqualifying disposition" of such shares if the employee delivers
such shares before the expiration of the applicable holding period
with respect to such shares. Upon the exercise of an ISO with
previously acquired shares as to which no disqualifying disposition
occurs, it would appear that the employee would not recognize gain or
loss with respect to such previously acquired shares.
A deduction will not be allowed to the Company for federal income
tax purposes with respect to the grant or exercise of an ISO or the
disposition, after the applicable holding period, of the shares of
Common Stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, a federal income tax deduction will be
allowed to the Company in an amount equal to the ordinary income to
be recognized by the optionee, provided that such amount constitutes
an ordinary and necessary business expense to the Company, is
reasonable and the Company satisfies its withholding obligation, if
any, with respect to such income.
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NON-QUALIFIED OPTIONS
A NQSO is an option that does not qualify as an "incentive stock
option" under Section 422(b) of the Code. An individual who receives
a NQSO will not recognize any taxable income upon the grant of such
NQSO. Generally, upon exercise of a NQSO, an individual will be
treated as having received ordinary income in an amount equal to the
excess of the fair market value of the shares of Common Stock at the
time of exercise over the exercise price.
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Any optionee who is an officer of the Company or a beneficial
owner of more than ten percent (10%) of any class of registered
equity securities of the Company should consult with his or her tax
advisor as to whether, as a result of Section 16(b) of the Exchange
Act and the rules and regulations thereunder that are related
thereto, the timing of income recognition is deferred for any period
following the exercise of a NQSO (i.e., the "Deferral Period"). If
there is a Deferral Period, absent a written election (pursuant to
Section 83(b) of the Code) filed with the Internal Revenue Service
within 30 days after the date of transfer of the shares of Common
Stock pursuant to the exercise of the option to include in income, as
of the transfer date, the excess (on such date) of the fair market
value of such shares of Common Stock over their exercise price,
recognition of income by the individual will be deferred until the
expiration of the Deferral Period, if any.
The ordinary income recognized with respect to the transfer of
shares of Common Stock or receipt of cash upon exercise of a NQSO
under the Plan will be subject to both wage withholding and
employment taxes. In addition to the customary methods of satisfying
the withholding tax liabilities that arise upon the exercise of a
NQSO, an individual may satisfy the liability in whole or in part by
directing its Company to withhold shares of Common Stock from those
that would otherwise be issuable to the individual or by tendering
other shares of Common Stock owned by the individual. The withheld
shares of Common Stock and other tendered shares will be valued at
their fair market value as of the date that the tax obligation
arises. Individuals who, by virtue of their positions with the
Company, are subject to Section 16(b) of the Exchange Act may elect
this method of satisfying the withholding obligation only during
certain restricted periods.
An individual's tax basis in the shares of Common Stock received
on exercise of a NQSO will be equal to the amount of any cash paid on
exercise, plus the amount of ordinary income recognized by such
individual as a result of the receipt of such shares of Common Stock.
The holding period for such shares would begin just after the
transfer of shares of Common Stock or, in the case of an officer or
beneficial owner of more than 10% of any class of registered equity
securities of the Company who does not elect to be taxed as of the
exercise date, just after the expiration of the Deferral Period, if
any. A deduction for federal income tax purposes will be allowed to
the Company in an amount equal to the ordinary income taxable to the
individual, provided that such amount constitutes an ordinary and
necessary business expense, is reasonable and the Company satisfies
its withholding obligation with respect to such income.
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If an individual exercises a NQSO by delivering shares to the
Company, other than shares previously acquired pursuant to the
exercise of an ISO which is treated as a "disqualifying disposition"
as described above, the individual will not recognize gain or loss
with respect to the exchange of such shares, even if their then fair
market value is different from the individual's tax basis. The
individual, however, will be taxed as described above with respect to
the exercise of the NQSO as if he or she had paid the exercise price
in cash, and the Company likewise generally will be entitled to an
equivalent tax deduction. So long as the individual receives a
separate identifiable stock certificate therefor, the tax basis and
the holding period for that number of shares of Common Stock received
on such exercise that is equal to the number of shares surrendered on
such exercise will be equal to the tax basis and include the holding
period of those shares surrendered. The individual's tax basis and
holding period for the additional shares received on exercise of a
NQSO paid for, in whole or in part, with shares will be the same as
if the individual had exercised the NQSO solely for cash.
CHANGE IN CONTROL
As described above, if the terms of an option so provide, upon a
"change in control" of the Company, all such options shall
immediately become exercisable. In general, if the total amount of
payments to optionees that are contingent upon a "change of control"
of the Company (as defined in Section 280G of the Code), including
payments upon the exercise of options under the Plan that vest upon a
"change in control," equals or exceeds three times the recipient's
"base amount" (generally, such recipient's average annual
compensation for the five years preceding the change in control),
then, subject to certain exceptions, the payments may be treated as
"parachute payments" under the Code, in which case a portion of such
payments would be non-deductible to the Company and the recipient
would be subject to a 20% excise tax on such portion of the payments.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
With certain exceptions, Section 162(m) of the Code limits the
Company's deduction for compensation paid to certain executive
officers in excess of $1 million per executive per taxable year
(including any deduction with respect to the exercise of a NQSO or
the disqualifying disposition of stock purchased pursuant to an ISO).
This limitation may apply to options granted under the Plan.
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STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
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Stockholder proposals which are intended to be presented at the
1995 Annual Meeting of Stockholders must be received at the principal
executive offices of the Company on or before January 5, 1995. To be
eligible for inclusion in the Company's proxy statement and form of
proxy relating to such meeting, a proposal must conform to the
requirements of the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations promulgated thereunder. Any
such proposal should be submitted to the attention of David H. Lissy,
Secretary, Ames Department Stores, Inc., 2418 Main Street, Rocky
Hill, CT 06067-2598.
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FORM 10-K OR QUARTERLY REPORTS
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To receive additional financial information about Ames, please
write to Margaret E. Wyrwas, Vice President, Corporate Communications &
Investor Relations, MS # 1030, 2418 Main Street, Rocky Hill, CT
06067-2598.
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EXPENSES OF SOLICITATION
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The expenses of solicitation of proxies hereunder will be paid by
the Company. Proxies will be solicited by mail. They may also be
solicited by directors, officers and employees of the Company
(personally, by mail, telegraph or telephone), but such persons will
not be specifically compensated for such services. The Company will
reimburse banks, brokers, nominees and other custodians and
fiduciaries for their reasonable out-of-pocket expenses in forwarding
the proxy soliciting materials to their principals.
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OTHER MATTERS
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The Board of Directors does not intend to present any other
business at the meeting and knows of no other matter which will be
properly presented. If, however, any other matter calling for a vote
of stockholders is properly presented at the meeting, it is the
intention of the persons named in the accompanying proxy to vote in
accordance with their judgement on such matters.
By order of the Board of Directors
May 5, 1994 David H. Lissy,
Secretary
