SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
______________________
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Ames Department Stores, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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4) Date Filed:
Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, CT 06067-2598
Notice of Annual Meeting of Stockholders To Be Held on June 21, 2000
The Annual Meeting of Stockholders of Ames Department Stores, Inc., a
Delaware corporation (the "Company"), will be held at the Ames Corporate
Headquarters, 2418 Main Street, Rocky Hill, Connecticut on Wednesday, June 21,
2000 at 10:00 a.m. local time, to consider and act upon the following matters:
1. the election of six (6) directors for a term of one year or
until their successor(s) have been elected and qualified;
2. the ratification and approval of the Associate Stock Purchase
Plan that will allow employees to purchase the Company's shares
at a discount from market price through payroll deduction;
3. the ratification and approval of the amended and restated
1998 Management Stock Incentive Plan (as amended and
restated, the "1998 Incentive Plan") to increase the number
of shares the Company may issue under the 1998 Incentive
Plan from 1,800,000 to 3,800,000 and to increase the maximum
number of shares that may be issued to one person under
the 1998 Incentive Plan from 300,000 to 600,000;
4. the ratification and approval of the appointment of Arthur
Andersen LLP as independent certified public accountants
and auditors for the Company for the fiscal year ending
February 03, 2001; and
5. 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 26, 2000. The
stock transfer books of the Company will not be closed. Accordingly, only
holders of record of issued and outstanding shares of 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 Corporate Headquarters located
at 2418 Main Street, Rocky Hill, Connecticut 06067, at the office of the
Corporate Secretary.
By Order of the Board of Directors
/s/David H. Lissy
Rocky Hill, Connecticut David H. Lissy
May 15, 2000 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.
Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, CT 06067-2598
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 21, 2000
General Information
This proxy statement is furnished to holders of record of the 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 21, 2000 at 10:00 a.m. local time (the
"Annual Meeting"), 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
860/257-2000). The enclosed proxy and this proxy statement are first being
mailed to stockholders of the Company, together with the Annual Report for the
fiscal year ended January 29, 2000 ("fiscal year 1999"), on or about May 17,
2000.
Holders of outstanding shares of Common Stock of record at the close of
business on April 26, 2000 (the "Record Date") are entitled to notice of and to
vote at the meeting. Each holder of shares of Common Stock outstanding at the
Record Date will be entitled to one vote for each share of Common Stock held. At
the close of business on the Record Date, there were 29,402,487 shares of Common
Stock, par value $.01 per share, of the Company issued and outstanding.
Members of the Board of Directors shall be elected by a plurality of the
votes cast. All other matters require the affirmative vote of a majority of the
shares present at the meeting in person or by proxy. The presence in person or
by proxy of holders of a majority of the outstanding shares of Common Stock is
necessary to establish a quorum at the Annual Meeting. 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.
Abstentions are counted for purposes of determining the presence or absence of a
quorum, but since they are not affirmative votes for the particular matter, they
have the same effect as a vote against the matter. Broker non-votes are not
considered present at the meeting for the particular matter as to which the vote
is withheld. Consequently, broker non-votes are not counted in respect of such
matter, but they do have the practical effect of reducing the number of
affirmative votes required to achieve a majority for such matter. 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.
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 six (6) directors listed herein; (2) ratification and approval
of the Associate Stock Purchase Plan; (3) ratification and approval of the
amended and restated 1998 Management Stock Incentive Plan; and (4) ratification
and approval of the appointment of Arthur Andersen LLP as the independent
certified public accountants and auditors for the Company for the fiscal year
ending February 03, 2001 ("fiscal year 2000").
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)
Six 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. All persons who currently
serve as directors are named in the table below and have been nominated to serve
as directors for the coming year.
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 April 1, 2000:
Shares of
First Common Stock
Name, Age, Principal Occupation, Became Beneficially
Business Experience and Directorships Director Owned (1)
------------------------------------- -------- ---------
Joseph R. Ettore, age 60 ....................................................... 1994 360,200
Chief Executive Officer and a director of Ames since he
joined our company in June 1994. He became Chairman of the
Board in November 1999. Mr. Ettore was also President of Ames
from June 1994 to February 2000. Mr. Ettore has served as a
Director of Home Place of America, Inc. and Modell's Sporting
Goods since October 1999 and July 1997, respectively. Mr. Ettore
has over 35 years of experience in the retail industry.
From July 1993 to June 1994, he was President, Chief Executive
Officer and a Director of Jamesway Corp., a regional discount
store chain based in Secaucus, New Jersey, where he had
previously served in various merchandise management positions
from 1982 to 1989. Jamesway filed for protection under chapter 11
of the Bankruptcy Code in July 1993, emerged from the
chapter 11 case in January 1995 and re-filed for protection under
chapter 11 in October 1995.
Francis X. Basile, age 67 ...................................................... 1992 30,500
From 1986 to his retirement in January 1992, he served as Chairman
and Chief Executive Officer of the CIT Group/Factoring,
Inc. He also served as a director and Chairman of the National
Commercial Finance Association and a member of its Executive
Committee.
Paul Buxbaum, age 45 ........................................................... 1992 38,000
Chairman of the Board of Directors of Ames from
July 1993 to November 1999. Mr. Buxbaum is currently Chairman
of the Executive Committee. He has been President of
Buxbaum Group & Associates, Inc., a nationwide retail
consulting company, since 1984, and since 1998 has been Chief
Executive Officer of Global Health Sciences, Inc., a developer,
manufacturer and packager of vitamins, herbs, dietary
supplements and protein powders. He was formerly a director
of Lamonts Apparel, Inc., Herbalife International, Inc. and
Richman Gordman 1/2 Price Stores.
Alan Cohen, age 63 ............................................................. 1992 33,500
Chairman of Alco Capital Group, Inc., a diversified
Financial service and investment company, since 1975, and Chief
Executive Officer of Russ Toggs, Inc., since November 1993. He
also serves as Chairman of the Board of Alco Cadillac-Pontiac
Sales Corp., court-appointed trustee of County Seat Stores, and
formerly served as court-appointed trustee of Tower Financial
Corporation and as Chief Executive Officer of Health-Tex, Inc.
Richard M. Felner, age 64 ...................................................... 1994 35,000
Since 1991, he has been the head of Richard M. Felner
Associates, a consulting firm specializing in retail
and commercial real estate. From 1985 to 1991, he was
Vice President of Real Estate and Corporate Development,
and a director of Worths Stores Corporation, a subsidiary
of Reitmans Ltd., Canada's largest women's apparel retailer.
Sidney S. Pearlman, age 68 ..................................................... 1992 33,000
He has been retired since May 1991, after 40 years in the
retailing industry, including service as President of three
department store chains and as Senior Vice President/General
Merchandise Manager of Younkers, Inc. from 1987 to March 1991.
(1) As used herein, "beneficial ownership" means the sole or shared power
to vote or invest either Common Stock or Warrants, or the right to
acquire Common Stock or Warrants within sixty (60) days (e.g., through
the exercise of stock options). Each director has sole voting and
investment power in the shares listed.
The Board of Directors unanimously recommends a vote FOR each of these
nominees. Your proxy will be so voted unless you specify otherwise.
Board Meetings and Committees
During fiscal year 1999, the Board of Directors held ten (10) meetings.
Each of the directors attended at least 75% of the total number of meetings of
the Board of Directors and any committee of which he was a member during fiscal
year 1999.
During fiscal year 1999, the Board of Directors had an Audit Committee
comprised of Messrs. Buxbaum (Chairman), Basile and Cohen, a Compensation
Committee comprised of Messrs. Cohen (Chairman), Buxbaum and Pearlman, a
Corporate Governance Committee comprised of Messrs. Felner (Chairman), Cohen and
Pearlman, and an Executive Committee comprised of Messrs. Buxbaum (Chairman),
Cohen and Ettore. Commencing with the start of fiscal year 2000, the Audit
Committee consists of Messrs. Buxbaum (Chairman), Basile and Felner, the
Compensation Committee consists of Messrs. Cohen (Chairman), Buxbaum and
Pearlman, the Corporate Governance Committee consists of Messrs. Felner
(Chairman), Basile and Pearlman, and the Executive Committee consists of Messrs.
Buxbaum (Chairman), Cohen and Ettore. The Audit Committee is responsible for
recommending the appointment of independent accountants and for reviewing the
audit reports and fees of the Company's independent public accountants. The
Compensation Committee is responsible for recommending the compensation to be
paid to the Company's executive officers, and the amount of and the persons to
whom stock options should be granted by the Company. The Corporate Governance
Committee is responsible for reviewing board structure and process in order to
facilitate board oversight of management, representation of stockholder
interests, and the performance of other self-determined board functions and
duties under applicable law. The Executive Committee acts on behalf of the Board
in certain matters and reviews certain plans prior to full review by the Board.
The Executive Committee was formed in December 1999 and held no formal meetings
in fiscal year 1999. During fiscal year 1999, there were three formal meetings,
and other conversations, held by the Compensation Committee. The Audit Committee
met three times during fiscal year 1999. The Corporate Governance Committee met
formally two times, and had other conversations, during fiscal year 1999.
Compensation of Directors
Ames directors who are not full-time Ames employees receive a base fee of
$40,000 in director's fees ($80,000 per year for the Chairman of the Executive
Committee) for six regular meetings and $3,000 for each additional Board
meeting, and are reimbursed for their expenses. Directors are also 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. For fiscal
year 1999, Board activity and meetings exceeded the anticipated number of
regular meetings. The directors, however, determined to limit their compensation
for fiscal year 1999 to the base fee, and to forego any additional compensation
for additional meetings.
Pursuant to Ames' 1994 Non-Employee Directors Stock Option Plan, as amended
(the "Amended Non-Employee Plan"), directors who are not full-time Ames
employees are granted options to purchase Common Stock of Ames on the date of
each annual meeting of stockholders of the Company. Commencing with the May 27,
1998 Annual Meeting, the number of shares granted on the date of each annual
meeting is 7,500. All options terminate ten years after date of grant. The
exercise prices of the options are equal to the fair market value of the Common
Stock on the date of grant. The options become exercisable in full six months
after date of grant. As of January 29, 2000, Messrs. Basile, Buxbaum, Cohen and
Pearlman had been granted 30,000 options each and Mr. Felner had been granted
22,500 options.
In November 1999, the Board of Directors approved the issuance of stock
grants to non-employee Directors as of that date, with 1,500 shares each granted
to Messrs. Felner, Pearlman and Basile and 3,500 shares each granted to Messrs.
Buxbaum and Cohen.
Executives of the Registrant
Name Age Position
- ---- --- --------
Joseph R. Ettore 60 Chief Executive Officer, Chairman of the Board
Denis T. Lemire 52 President, Chief Operating Officer
Rolando de Aguiar 51 Senior Executive Vice President, Chief Financial and Administrative Officer
Grant C. Sanborn 48 Executive Vice President, Operations
James J. Aglio, Jr. 47 Senior Vice President & General Merchandise Manager, Home Lines
Lisa Bachmann 38 Senior Vice President, Allocation and Planning
Eugene E. Bankers 60 Senior Vice President, Marketing
Catherine A. Berey 37 Senior Vice President, Human Resources
David S. Covitz 58 Senior Vice President & General Merchandise Manager, Hardlines
Paul C. Lanham 42 Senior Vice President, Chief Information Officer
David H. Lissy 56 Senior Vice President, General Counsel and Corporate Secretary
Alfred B. Petrillo, Jr. 57 Senior Vice President, Store Planning
Sanford H. Sansavera 51 Senior Vice President & General Merchandise Manager, Softlines
John Tempesta 51 Senior Vice President, Logistics
James A. Varhol 44 Senior Vice President, Asset Protection
Denis T. Lemire joined Ames in August 1994 as Executive Vice President,
Merchandising and was promoted to Executive Vice President and Chief Operating
Officer in March 1999. In February 2000, he was named President and Chief
Operating Officer of Ames. Mr. Lemire has over 30 years of retailing experience.
He served as President and Chief Operating Officer of Stuarts from November 1993
to August 1994 and Senior Vice President, Merchandising of Stuarts from April
1990 to November 1993. From 1989 to 1990, Mr. Lemire was a General Merchandise
Manager at American Eagle Outfitters, Inc., a subsidiary of Retail Ventures,
Inc. From 1987 to 1989, he served as President of the Buying Network. Prior to
that, Mr. Lemire served for twelve years with Marshalls, then a division of
Melville Corp., as Vice President and General Merchandise Manager, Women's
Apparel, from 1983 to 1987 and as Merchandising Manager from 1978 to 1983.
Stuarts filed under Chapter 11 in December 1990, emerged from the Chapter 11
case in October 1992 and re-filed for protection under Chapter 11 in May 1995.
Rolando de Aguiar joined Ames as Executive Vice President and Chief
Financial Officer in April 1998 and was promoted to Executive Vice President and
Chief Financial and Administrative Officer in March 1999. Mr. de Aguiar was
named Senior Executive Vice President and Chief Financial and Administrative
Officer in March 2000. From March 1997 to March 1998, he was President of Aguiar
Associates, a retailing consulting firm. From October 1994 to January 1997, he
served as Executive Vice President and Chief Administrative Officer of Gruma
S.A. de C.V., a leading packaged food producer in Mexico, and from September
1991 to August 1994, he held senior financial positions at Sears, Roebuck & Co.,
including Vice President and Controller - Merchandising Group for Sears' U.S.
operations and, prior thereto, Vice President, Planning and Development at Sears
in Mexico. Mr. de Aguiar previously served for ten years at Occidental Petroleum
Corporation in various management positions, including Manager of Mergers and
Acquisitions, Chief Financial Officer of the Minerals Division and Director of
Internal Audit for Occidental Petroleum's worldwide operations.
Grant C. Sanborn became Executive Vice President, Operations in February
2000. Mr. Sanborn joined Ames in April 1971 as an assistant manager and has held
a wide variety of field store operations positions, including Store Manager at
seven locations, District Manager in both Northern Maine and Syracuse, New York,
Assistant Regional Director and Regional Operations Director. In July 1991, Mr.
Sanborn joined Ames' corporate headquarters as Director of Operations, with
responsibility for remodeling, merchandise presentation and store planning,
construction and facilities. In October 1993 he was promoted to Vice President,
Store Operations. In January 1995 he became responsible for Ames' entire field
organization as Senior Vice President, Store Operations.
James J. Aglio, Jr. became Senior Vice President, General Merchandise
Manager, of Ames' Home Lines Division in June 1998. Since joining Ames in July
1974, he has served in various merchandising positions, including buyer,
Divisional Merchandise Manager, Assistant Vice President, and Vice President of
the Home Lines Division.
Lisa Bachmann joined Ames in August 1997 as Vice President, Allocation and
Planning, and was named Senior Vice President, Allocation and Planning, in
December 1998, when she also assumed responsibility for the Merchandising
Information Office. From 1983 to 1997, she held several management positions
with the Casual Corner Group, Inc., including Senior Merchandise Planner at Ups
N' Downs, Director - Planning & Allocation at the Capezio Division, Vice
President - Planning & Allocation, Casual Corner Division, and Vice President -
Planning & Allocation for the Casual Corner and Petite Sophisticate Divisions.
Eugene E. Bankers joined Ames as Senior Vice President, Marketing, in
January 1994. Prior to joining Ames, he served for nearly 14 years in several
capacities at ShopKo Stores, Inc., including Vice President, Communications and
Investor Relations from 1991 to 1993, Vice President of Advertising, Public
Relations and Sales Promotion from 1986 to 1990, Vice President Planning and
Real Estate from 1984 to 1986 and Divisional Merchandise Manager from 1981 to
1984.
Catherine A. Berey joined Ames in September 1999 as Senior Vice President,
Human Resources. She had previously been with Ames from 1993 to February 1999
during which time she served in a variety of administrative positions,
including: Vice President, Human Resources Services, Vice President,
Organizational Development and Director, Recruiting/Human Resources
Administration. From February 1999 to August 1999, she was a human resources
consultant to IKON with responsibility for all Human Resources functions in the
Hartford and Springfield markets. From 1984 to 1992, Ms. Berey served in a
number of Human Resource and Merchandising positions at G. Fox & Co., including:
Director, Training and Development; Manager, Compensation and Benefits; Manager,
Executive Development and Placement; Manager, Merchant Development; Assistant
Buyer, Women's Sportswear and Area Sales Manager, Intimate Apparel.
David S. Covitz joined Ames in November 1989 as Divisional Merchandise
Manager and subsequently was promoted to the position of Vice President, General
Merchandise Manager, Hardlines. Mr. Covitz was named to his current position as
Senior Vice President and General Merchandise Manager, Hardlines, in June 1998.
Prior to joining Ames, he held positions in the buying division at Filene's and
as Vice President/Divisional Merchandise Manager at Gold Circle Stores.
Paul Lanham joined Ames in October 1994 as Vice President, Planning &
Allocation. He was named Senior Vice President, Management Information Systems,
in March 1995, and assumed his current position as Senior Vice President and
Chief Information Officer in March 1996. Prior to joining Ames, Mr. Lanham held
a variety of positions in the retailing industry including Director of Inventory
Management at Brookstone, Inc., Distribution Manager and Regional Merchandise
Manager at Payless Shoesource, Inc., and Systems Analyst, Distributor and Store
Manager at the Gap Inc.
David H. Lissy joined Ames in June 1990 and was named Senior Vice
President, General Counsel and Corporate Secretary in December 1992. Prior to
joining Ames, Mr. Lissy served in senior positions in a number of other major
corporations, including United Brands and Gulf & Western, and in the federal
government, where from 1969 to 1977 he held positions including Special
Assistant to the President, Special Assistant to the Secretary of State and
Executive Secretary of the Department of Health Education and Welfare. Mr. Lissy
has also owned Samuel Lehrer & Co., Inc., a wholesaler of fine quality fabrics,
since 1988.
Alfred B. Petrillo, Jr. joined Ames as Senior Vice President, Store
Planning in October 1995. Prior to joining Ames, Mr. Petrillo was Senior Vice
President, Store Planning, Construction, Visual Merchandising, Planogramming,
Maintenance and Energy at Jamesway. He joined Jamesway in 1969 as Director of
Store Planning and Construction. He was promoted to Assistant Vice President,
Store Planning and Construction in 1973 and served as Vice President, Store
Planning, Construction, Maintenance and Energy from 1976 to 1995. Mr. Petrillo
began his career in 1962 as an architectural designer and draftsman at the firm
of John Scacchetti, AIA. Jamesway filed for protection under chapter 11 of the
Bankruptcy Code in July 1993, emerged from the chapter 11 case in January 1995
and re-filed for protection under chapter 11 in October 1995.
Sanford H. Sansavera joined Ames in May 1993 as Divisional Merchandise
Manager - Jewelry and assumed additional responsibility for Accessories in
August 1994. He was promoted to Senior Vice President, General Merchandise
Manager - Softlines, in June 1998. Prior to joining Ames, Mr. Sansavera spent 21
years with the May Department Stores Company in a variety of positions,
including General Manager - Merchandise, Branch Store Divisional Manager,
Department Manager and Store Manager.
John Tempesta joined Ames in February 1999 as Senior Vice President,
Logistics, and is responsible for all aspects of Ames' logistics and
distribution network. From 1993 to 1999, Mr. Tempesta was with Caldor
Corporation, most recently as Senior Vice President, Distribution/Logistics.
From 1988 to 1993, Mr. Tempesta was a Senior Vice President, Catalogue
Operations, at Chadwick's of Boston, a division of TJX Companies, Inc. From 1983
to 1988, he was Senior Vice President, Operations, at Filene's Basement. He also
has held management positions at Hit or Miss and Zayre Corporation. Caldor filed
for protection under chapter 11 in September 1995.
James A. Varhol joined Ames in August 1995 as Senior Vice President, Asset
Protection, and is responsible for all aspects of corporate, store and
distribution center loss prevention and safety initiatives. From 1977 to 1995,
Mr. Varhol was employed at Jamesway Corp., where he served in various positions,
including eight years as Vice President of Loss Prevention. Jamesway filed for
protection under chapter 11 of the Bankruptcy Code in July 1993, emerged from
the chapter 11 case in January 1995 and re-filed for protection under chapter 11
in October 1995.
Executive Compensation
The following table sets forth each item of compensation paid, earned or
awarded over each of the preceding three years to the Chief Executive Officer
and the four other most highly paid executive officers serving at January 29,
2000.
Summary Compensation Table
Long-Term Compensation
------------------------------------------
Annual Compensation Awards
------------------------------------- -----------
(#) Securities
Other Restricted Underlying All
Fiscal Annual Stock Options Other
Name & Principal Position Year Salary Bonus (a) Comp. (g) Awards (b) SARs (c) Comp. (d)
- ------------------------- ---- ------ --------- --------- ---------- -------- ---------
Joseph R. Ettore ......... 1999 $1,105,769 $2,170,000 $4,524,725 $ 0 0 $24,557
Chairman & Chief 1998 939,423 750,000 $2,311,675 (f) 0 325,000 (f) $2,840,538(f)
Executive Officer 1997 866,344 425,000 (e) 0 0 39,589
Rolando de Aguiar
Senior Executive Vice 1999 399,231 620,000 (e) 0 75,000 202,056
President, Chief Financial & 1998 228,308 118,333 (e) 739,550 45,000 67,626
Administrative Officer 1997 0 0 0 0 0 0
Denis T. Lemire ......... 1999 496,154 475,000 (e) 0 100,000 6,920
President & Chief 1998 387,500 160,000 387,575 695,700 15,000 6,900
Operating Officer 1997 369,712 150,000 (e) 0 0 7,860
David H. Lissy ........ 1999 257,210 303,000 (e) 0 10,000 6,795
Senior Vice President, 1998 234,844 94,995 268,325 347,850 7,500 7,222
General Counsel & 1997 231,183 91,783 (e) 0 0 6,559
Corporate Secretary
Alfred B. Petrillo, Jr....... 1999 241,927 244,000 (e) 0 10,000 6,809
Senior Vice President, Store 1998 220,065 89,010 244,888 275,700 7,500 7,849
Planning 1997 215,327 86,000 (e) 0 0 6,922
____________________
(a) Includes certain signing bonuses, bonuses earned under the Annual Incentive Compensation Plan (see below), bonuses associated
with the Hills acquisition, and, for Mr. Ettore, bonuses as defined under his employment agreement (see below).
(b) Pursuant to the 1998 Management Stock Incentive Plan (the "1998 Incentive Plan"; see below) and the 1995 Long Term Incentive
Plan (the "1995 Incentive Plan"; see below), a total of 215,000 shares of Restricted Stock in the aggregate were awarded in
fiscal year 1998. The awards were made to each Executive Vice President and each Senior Vice President. The dollar value of
the Restricted Stock award shown in the table was calculated by multiplying the share price of Ames' Common Stock on the date
of the award by the number of shares awarded. As of January 29, 2000, a total of 245,000 shares of the Restricted Stock that
had been awarded under the 1998 Incentive Plan and the 1995 Incentive Plan remained outstanding and unvested. The total
aggregate value of these shares was $5,175,625 based on a market price of Ames' Common Stock of $21.125 as of January 29,
2000.
(c) Stock Options were granted to certain members of management pursuant to the 1998 Incentive Plan and the 1994
Option Plan (see below).
(d) Includes Ames' matching contributions under the Retirement and Savings Plan (see below), excess paid life insurance; and for
J. Ettore, $24,033, $40,112 and $31,629 of paid disability and life insurance coverage in fiscal years 1999, 1998 and 1997,
respectively. R. de Aguiar's amounts include $187,186 and $66,752 for fiscal years 1999 and 1998, respectively, for
reimbursement of relocation expenses inclusive of gross up for tax consequences consistent with the Company's moving expense
reimbursement practices.
(e) Includes a car allowance (and, for 1997, a living allowance for J. Ettore and D. Lemire) that aggregated to the lesser of
$50,000 or 10% of the individual executive's total salary and bonus.
(f) Pursuant to the terms of an employment agreement entered into between Ames and Mr. Ettore on June 1, 1998, Mr. Ettore
surrendered rights with regard to 300,000 shares of Common Stock. In consideration therefore, Mr. Ettore received (i) 70,200
shares of Common Stock, (ii) 125,000 stock appreciation rights, and (iii) $2,666,100 in cash (including $1,514,700 for the
payment of taxes by Mr. Ettore on the 70,200 shares of Common Stock). See "Employment Contracts" below.
(g) Amounts shown for fiscal year 1998 represent primarily the Cash Payment made on the Vesting Date for the Restricted Stock (as
each such term is defined below) awarded pursuant to the 1995 Incentive Plan: Mr. Ettore ($759,375), Mr. Lemire ($354,375),
Mr. Lissy ($253,125) and Mr. Petrillo ($229,688). In addition, Mr. Ettore's fiscal year 1999 amount includes $4,503,125 from
the exercise of 125,000 stock appreciation rights. Mr. Ettore's fiscal year 1998 amount includes $1,514,700 for the payment
of taxes referenced in (f) above.
Option and SAR Grants in Last Fiscal Year
The table below discloses information regarding grants of stock options and
stock appreciation rights (SARs) to the named executive officers during fiscal
year 1999:
Potential
Realizable Value
Individual Grants at Assumed
----------------------------------------------------------
Number of % of Annual
Securities Total Rate of Stock
Underlying Options/SARs Exercise Price
Options/SARs Granted to or Base Appreciation
Granted Employees in Price Expiration for Option Term
-----------------------------------
Name (#) Fiscal 1999 ($/Sh) Date 5% 10%
---- --- ----------- ------ ---- -- ---
Joseph R. Ettore - 0% $ - - -
Rolando de Aguiar 75,000 10.15% $29.00 3/23/09 $1,367,846 $3,466,390
Denis T. Lemire 100,000 13.53% $29.00 3/23/09 $1,823,794 $4,621,853
David H. Lissy 10,000 1.35% $34.813 4/28/04 $96,182 $212,537
Alfred B. Petrillo, Jr 10,000 1.35% $34.813 4/28/04 $96,182 $212,537
Pursuant to the 1994 Management Stock Option Plan (the "1994 Option Plan"),
Ames may grant options with respect to an aggregate of up to 1,700,000 shares of
Common Stock, provided that no individual optionee may receive in excess of
200,000 shares of Common Stock upon exercise of options granted under the 1994
Option Plan. During fiscal year 1999, options with respect to a total of 40,700
shares of Common Stock were issued under the 1994 Option Plan to members of
management. After adjusting for options forfeited and exercised, as of January
29, 2000, options with respect to a total of 412,010 shares that had been
granted pursuant to the 1994 Option Plan were outstanding, of which 345,000 had
vested. The exercise prices of the options are equal to the fair market value of
the Common Stock on the date the options were granted.
Except as noted below, one-third of the shares underlying the options under
the 1994 Option Plan may be purchased annually for each of three years,
beginning one year from the grant date. For options granted to J. Ettore in June
1994, one-fifth of the shares underlying the options may be exercised annually
for each of five years, beginning one year after the grant date. Except as noted
below, all options granted on May 21, 1996 and all options granted after May 1,
1997, may be exercised one year after the grant date. For options granted to R.
de Aguiar (Senior Executive Vice President and Chief Financial and
Administrative Officer) in April 1998, one-third of the shares underlying
options may be exercised annually for each of three years, beginning one year
after the grant date. The unexercised portion of the options granted under the
1994 Option Plan will terminate upon the expiration of five years from the grant
date, except as follows: the options granted to J. Ettore in June 1994 and D.
Lemire in August 1996 terminate ten years from grant date.
The 1998 Incentive Plan provides for the grant of Awards (as defined in the
1998 Incentive Plan) and makes available for Awards an aggregate amount of
1,800,000 shares of Common Stock. The maximum number of shares of Common Stock
with respect to which Awards may be granted (or measured) to any individual
participant may not exceed 300,000. During fiscal year 1999, options with
respect to a total of 660,750 shares of Common Stock were issued under the 1998
Incentive Plan to members of management bringing the total of such issuances as
of January 29, 2000 to 1,157,400. As of January 29, 2000, options with respect
to 76,915 shares had been forfeited and the remaining 1,080,485 were unvested.
The exercise prices are equal to the fair market value of the Common Stock on
the date the stock option is granted. Awards issued under the 1998 Incentive
Plan may be exercised as determined by the Compensation Committee of the Board
of Directors upon the grant thereof. The Board of Directors has approved an
amendment and restatement of the Plan, which, subject to stockholder approval at
the Annual Meeting, would increase the number of shares that the Company may
issue under the 1998 Incentive Plan from 1,800,000 to 3,800,000 and increase the
maximum number of shares that may be issued to one person under the 1998
Incentive Plan from 300,000 to 600,000.
Aggregated SAR Exercises in Last Fiscal Year and FY-End SAR/Option Values
The table below discloses information regarding aggregated exercises of
stock options and SARs by the named executive officers during fiscal year 1999
and stock options and SARs held by the named executive officers as of January
29, 2000. There were no stock options or SARs re-priced during fiscal year 1999.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End SAR/Option Values
# of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
SARs/Options SARs/Options
at 1/29/00 at 1/29/00($)
# Shares ($) Value Exercisable / Exercisable /
Name Exercised Realized(a) Unexercisable Unexercisable
---- --------- ----------- ------------- -------------
Joseph R. Ettore 125,000(b) $4,503,125(b) 200,000/200,000 $ 3,475,000/$0
Denis T. Lemire 0 0 55,000/110,000 971,225/61,250
Rolando de Aguiar 0 0 15,000/105,000 30,625/61,250
David H. Lissy 0 0 2,500/15,000 15,313/30,625
Alfred B. Petrillo, Jr. 20,300 527,037 2,500/15,000 15,313/30,625
(a) Dollar value realized represents the number of options exercised multiplied by the difference between the market
price of Ames' Common Stock at date of exercise and the strike price of the options.
(b) Represents the exercise of SARs granted to J. Ettore pursuant to an employment contract which is more fully
described below.
Long-Term Incentive Plan Awards
There were 45,000 shares of Restricted Stock (pursuant to the 1998
Incentive Plan as defined previously) awarded to certain executive officers
during fiscal year 1999. In addition, 15,000 shares, previously granted, were
forfeited.
Ames' 1995 Incentive Plan was approved by the stockholders in May 1995. The
purpose of the 1995 Incentive Plan is to promote Ames' long-term success by
affording certain officers with an opportunity to acquire an ownership interest
in Ames in order to incentivize such persons and to align their financial
interests with Ames' stockholders. Pursuant to the 1995 Incentive Plan, Ames may
make awards ("Awards") of an aggregate of up to 500,000 shares of Common Stock
that are subject to restrictions on transfer ("Restricted Stock") and a cash
payment (a "Cash Payment") in an amount up to 50% of the Fair Market Value (as
defined in the 1995 Incentive Plan) of the Restricted Stock determined as of,
and paid on, the third anniversary of the date of grant (the "Vesting Date").
The Cash Payment is intended to defray a substantial portion of an Award
recipient's federal and state income tax liabilities on the Award (including the
Cash Payment) in order to allow the recipient to receive the Restricted Stock
substantially free and clear on the Vesting Date.
Officers eligible for Awards under the 1995 Incentive Plan are the Chief
Executive Officer, each Executive Vice President and each Senior Vice President.
The Compensation Committee administers the 1995 Incentive Plan. During 1999,
there were no shares of Restricted Stock issued pursuant to the 1995 Incentive
Plan. As of April 1, 2000, 320,000 shares in the aggregate had vested, and
35,000 shares remain unvested.
The 1998 Incentive Plan (as defined) was approved by the stockholders in
May 1998. The purpose of the 1998 Incentive Plan is to provide incentives which
will attract, retain and motivate highly competent persons as key employees by
providing them opportunities to (i) acquire shares of Common Stock; (ii) receive
monetary payments based on the value of such shares; and (iii) receive grants of
options to purchase shares of Common Stock (as more fully described below). The
1998 Incentive Plan makes available for Awards (as defined in the 1998 Incentive
Plan) an aggregate amount of 1,800,000 shares of Common Stock. The maximum
number of shares of Common Stock with respect to which Awards (as defined in the
1998 Incentive Plan) may be granted (or measured) to any individual participant
may not exceed 300,000.
Officers eligible for Awards under the 1998 Incentive Plan are such key
employees of Ames as the Board of Directors, in its sole discretion, determines
to be significantly responsible for the success, future growth and profitability
of Ames. As of April 1, 2000, 235,000 shares of Restricted Stock have been
awarded, 15,000 shares were forfeited, and 220, 000 shares remain unvested.
As noted above, the Board of Directors has approved an amendment and
restatement of the 1998 Incentive Plan, which, subject to stockholder approval
at the Annual Meeting, would increase the number of shares that the Company may
issue under the 1998 Incentive Plan from 1,800,000 to 3,800,000 and increase the
maximum number of shares that may be issued to one person under the 1998
Incentive Plan from 300,000 to 600,000.
Annual Incentive Compensation Plan
Ames has an Annual Incentive Compensation Plan (the "Annual Bonus Plan")
that is subject to annual review by the Compensation Committee and the Board of
Directors. The Annual Bonus Plan provides annual incentive cash bonuses based on
the achievement of Ames' financial goals for the year (as well as individual
performance goals and customer service goals for store and field management).
Pursuant to the Annual Bonus Plan, bonuses for fiscal year 1999 were paid in May
2000. Participants must be active Ames' employees, at the time the bonus
payments are made, to earn a bonus.
Retirement and Savings Plan
Ames Plan
Ames has a defined contribution retirement and savings plan (the "Ames
Retirement and Savings Plan") that is qualified under Sections 401(a) and 401(k)
of the Internal Revenue Code of 1986, as amended, for employees who are
classified as full-time and have at least 60 days of service, or who are
part-time and have one year of service, and have completed at least 1,000 hours
of service in a 12-month period. For each participant's contribution (up to a
maximum of 5% of such participant's total compensation), the Company contributes
to the Retirement and Savings Plan an amount equal to 50% of the first 4% and
100% of the next 1% contribution. Ames funds all administrative costs incurred
by the plan. Ames' expense associated with this plan amounted to approximately
$3.4 million, $3.3 million, and $3.0 million, in 1999, 1998 and 1997,
respectively.
Hills Plan
As of December 30, 1998, the Company acquired Hills Stores Company
("Hills"). Hills has a defined contribution retirement and savings plan (the
"Hills Retirement and Savings Plan ") that is qualified under Sections 401(a)
and 401(k) of the Internal Revenue Code of 1986, as amended, for employees who
are classified as full-time and have at least 60 days of service, or who are
part-time and have one year of service and have completed at least 1,000 hours
of service in a 12-month period. For each participant's contribution (up to a
maximum of 5% of such participant's total compensation) Ames contributes an
amount equal to 50% of the first 4% and 100% of the next 1% of contribution.
Ames funds all administrative costs incurred by the plan. The expenses
associated with this plan were $2.6 million for fiscal year 1999 and $0.3
million for fiscal year 1998.
The Company intends to merge the Ames and Hills retirement and savings
plans at some point in the future.
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 matching contributions by Ames under the Retirement and
Savings Plan during fiscal year 1999:
Matching
Contributions
-------------
Joseph R. Ettore...................... $ 7,539
Rolando de Aguiar..................... 5,934
Denis T. Lemire........................ 6,154
David H. Lissy......................... 5,540
Alfred B. Petrillo, Jr................. 5,554
All other employees and officers....... $4,929,677
Retirement Plan
Ames has an unfunded Retirement Plan for officers/directors (the
"Retirement Plan"). It provides that every person, who is employed by Ames when
he or she retires, dies or becomes disabled and who serves as both a full-time
officer and a director of Ames and has completed five years of service, not
necessarily consecutive, in both of these capacities, is eligible for benefits
under the Retirement Plan.
Benefits under the Retirement Plan 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 of highest compensation preceding such termination of
employment. The maximum annual benefit under the Retirement Plan is $100,000,
reduced by an amount equal to certain of 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, at
Ames' option, the future payments as scheduled or the then present value of all
unpaid benefits would be paid to the participant's estate. Joseph Ettore,
current Chief Executive Officer and Chairman, potentially qualifies for benefits
under this plan. As of January 29, 2000, Mr. Ettore had completed approximately
sixty-eight months of credited service as a full-time officer and director of
Ames. No payments were made under this plan in fiscal year 1999.
Employment Contracts, Termination, Severance and Change-in-Control Arrangements
Employment Contracts
Set forth below are descriptions of the material features of the employment
contracts between Ames and Joseph R. Ettore, Chairman and Chief Executive
Officer, Denis T. Lemire, President and Chief Operating Officer, Rolando de
Aguiar, Senior Executive Vice President and Chief Financial and Administrative
Officer, and Grant C. Sanborn, Executive Vice President, Operations.
Ames is party to an employment agreement with Joseph Ettore dated June 1,
1998 and expiring May 31, 2004 (the "Ettore Agreement"), pursuant to which Mr.
Ettore serves as Chief Executive Officer of Ames. Under the Ettore Agreement,
Mr. Ettore is entitled to a base salary of $1,000,000 per year through May 31,
2002 (increased to $1,100,000 as of April 1999), and $1,250,000 thereafter; an
annual bonus as determined by the Board of Directors; an option to acquire up to
200,000 shares of Common Stock, which will vest and become exercisable on May
31, 2003; a bonus of $450,000 and $550,000, payable on June 30, 1999, and at the
end of the term of Mr. Ettore's employment, respectively; and an annual
automobile allowance, payable in equal monthly installments of not less than
$1,800 per month.
In addition, in consideration of Mr. Ettore's surrender of options to
purchase an aggregate of 300,000 shares of Common Stock, which right was granted
to Mr. Ettore pursuant to his prior employment agreement, Mr. Ettore received
(a) a stock award of 70,200 shares of Common Stock in accordance with Ames' 1998
Incentive Plan, (b) $2,666,100 in cash and (c) 125,000 fully vested stock
appreciation rights ("SARs"), which entitle Mr. Ettore to receive, in the
aggregate, an amount equal to (x) the number of SARs Mr. Ettore elects to
exercise on or after May 31, 1999 multiplied by (y) the difference between (i)
$2.00 (representing the exercise price of certain rights surrendered by Mr.
Ettore in connection with the Ettore Agreement) and (ii) the Average Stock Price
(as defined in the Ettore Agreement) as of the date of such election. Mr. Ettore
had exercised all of his SARs as of January 29, 2000.
During the term of the Ettore Agreement, Ames is required to reimburse Mr.
Ettore $12,000 per year for the cost of maintaining a policy insuring his life
with a face amount of $500,000; provide additional life insurance in the face
amount of $500,000 and maintain a disability insurance policy that will pay Mr.
Ettore 60% of his base salary during any period of disability up to age 65. In
addition, Ames will maintain customary directors' and officers' liability
insurance for him, if such insurance is available to Ames at reasonable cost.
In the event that Ames terminates the employment of Mr. Ettore without
Cause (as such term is defined in the Ettore Agreement), or if Mr. Ettore
terminates his employment for Good Reason (as such term is defined in the Ettore
Agreement), he will be entitled to (a) his base salary for the remaining term of
the Ettore Agreement when it would otherwise be payable; (b) any annual bonus
prorated to the effective date of termination; (c) immediate vesting of his
stock options as of the date of termination; and (d) coverage under Ames'
medical plan for one year after the date of termination. If Mr. Ettore's
employment is terminated by Ames for Cause or if Mr. Ettore terminates his
employment without Good Reason, he will receive no further compensation or other
benefits under the Ettore Agreement except for any amounts to which he was
entitled prorated to the effective date of termination. If Mr. Ettore terminates
his employment upon a Change in Control of the Company (as such term is defined
in the Continuity Plan referred to below or any successor or replacement plan),
he will be entitled to the greater of the benefits provided by (x) the
Continuity Plan, and (y) any such successor or replacement plan and (z) the
benefits provided by the Ettore Agreement.
Ames is party to an employment agreement with Denis Lemire dated as of
March 23, 1999 and expiring May 31, 2003 (the "Lemire Agreement"), pursuant to
which Mr. Lemire serves as Executive Vice President and Chief Operating Officer
of Ames. Under the Lemire Agreement, Mr. Lemire is entitled to an initial base
salary of $500,000 per year through March 31, 2002, and $600,000 thereafter; an
annual bonus under the Ames' Annual Bonus Plan; a sign-on bonus of $100,000
payable at the end of the Term of Employment (as such term is defined in the
Lemire Agreement); an option to acquire 100,000 shares of Common Stock under the
1998 Incentive Plan; an annual automobile allowance; and other compensation and
benefits in effect from time to time for Ames' senior executive officers.
During the term of the Lemire Agreement, Ames is required to provide a
policy insuring the life of Mr. Lemire in the face amount of his base salary
then in effect, and maintain a disability insurance policy that will pay him 60%
of his base salary during any period of disability up to age 65.
In the event that Ames terminates the employment of Mr. Lemire without
Cause (as such term is defined in the Lemire Agreement), or if Mr. Lemire
terminates his employment for Good Reason (as such term is defined in the Lemire
Agreement), he would be entitled to (a) his base salary for the remaining term
of the Lemire Agreement when it would otherwise be payable; (b) any annual bonus
prorated to the effective date of termination; (c) immediate vesting of his
stock options as of the date of termination; and (d) coverage under the Ames'
medical plan for one year after the date of termination. If Mr. Lemire's
employment is terminated by Ames for Cause, or if he terminates his employment
without Good Reason, he shall receive no further compensation or other benefits
under the Lemire Agreement except for any amounts to which he was entitled
prorated to the effective date of termination. If Mr.Lemire terminates his
employment upon a Change in Control of the Company (as such term is defined in
the Continuity Plan referred to below or any successor or replacement plan), he
will be entitled to the greater of the benefits provided by (x) the Continuity
Plan (as defined below), and (y) any such successor or replacement plan and (z)
the benefits provided by the Lemire Agreement.
Ames is party to an employment agreement with Rolando de Aguiar dated as of
March 23, 1999 and expiring May 31, 2003 (the "de Aguiar Agreement"), pursuant
to which Mr. de Aguiar serves as Senior Executive Vice President and Chief
Financial and Administrative Officer of Ames. Under the de Aguiar Agreement, Mr.
de Aguiar is entitled to an initial base salary of $400,000 per year through
March 31, 2002, and $500,000 thereafter; an annual bonus under Ames' Annual
Bonus Plan; a sign-on bonus of $75,000 payable at the end of the Term of
Employment (as such term is defined in the de Aguiar Agreement); an option to
acquire 75,000 shares of Common Stock under the 1998 Incentive Plan; an annual
automobile allowance; and other compensation and benefits in effect from time to
time for Ames' senior executive officers.
During the term of the de Aguiar Agreement, Ames is required to provide a
policy insuring the life of Mr. de Aguiar in the face amount of his base salary
then in effect, and maintain a disability insurance policy that will pay Mr. de
Aguiar 60% of his base salary during any period of disability up to age 65.
In the event that Ames terminates the employment of Mr. de Aguiar without
Cause (as such term is defined in the de Aguiar Agreement), or if Mr. de Aguiar
terminates his employment for Good Reason (as such term is defined in the de
Aguiar Agreement), he would be entitled to (a) his base salary for the remaining
term of the de Aguiar Agreement when it would otherwise be payable; (b) any
annual bonus prorated to the effective date of termination; (c) immediate
vesting of his stock options as of the date of termination; and (d) coverage
under Ames' medical plan for one year after the date of termination. If Mr. de
Aguiar's employment is terminated by Ames for Cause, or if he terminates his
employment without Good Reason, he shall receive no further compensation or
other benefits under the de Aguiar Agreement except for any amounts to which he
was entitled prorated to the effective date of termination. If Mr. de Aguiar
terminates his employment upon a Change in Control of Ames (as such term is
defined in the Continuity Plan referred to below or any successor or replacement
plan), he will be entitled to the greater of the benefits provided by (x) the
Continuity Plan, and (y) any such successor or replacement plan and (z) the
benefits provided by the de Aguiar Agreement.
Ames is party to an employment agreement with Grant C. Sanborn dated as of
February 28, 2000 and expiring February 28, 2003 (the "Sanborn Agreement"),
pursuant to which Mr. Sanborn serves as Executive Vice President, Operations of
Ames. Under the Sanborn Agreement, Mr. Sanborn is entitled to a base salary of
$300,000 per year; an annual bonus under Ames' Annual Bonus Plan; an option to
acquire 25,000 shares of Common Stock under the 1998 Incentive Plan; a grant of
10,000 shares of restricted stock under the 1998 Incentive Plan; an annual
automobile allowance; and other compensation and benefits in effect from time to
time for Ames' senior executive officers.
During the term of the Sanborn Agreement, Ames is required to provide a
policy insuring the life of Mr. Sanborn in the face amount of his base salary
then in effect, and maintain a disability insurance policy that will pay Mr.
Sanborn 60% of his base salary during any period of disability up to age 65.
In the event that Ames terminates the employment of Mr. Sanborn without
Cause (as such term is defined in the Sanborn Agreement), or if Mr. Sanborn
terminates his employment for Good Reason (as such term is defined in the
Sanborn Agreement), he would be entitled to (a) his base salary for the
remaining term of the Sanborn Agreement when it would otherwise be payable; (b)
any annual bonus prorated to the effective date of termination; (c) immediate
vesting of his stock options as of the date of termination; and (d) coverage
under Ames' medical plan for one year after the date of termination. If Mr.
Sanborn's employment is terminated by Ames for Cause, or if he terminates his
employment without Good Reason, he shall receive no further compensation or
other benefits under the Sanborn Agreement except for any amounts to which he
was entitled prorated to the effective date of termination. If Mr. Sanborn
terminates his employment upon a Change in Control of Ames (as such term is
defined in the Continuity Plan referred to below or any successor or replacement
plan), he will be entitled to the greater of the benefits provided by (x) the
Continuity Plan, and (y) any such successor or replacement plan and (z) the
benefits provided by the Sanborn Agreement.
Employment Agreement for Senior Vice Presidents
Ames is party to an employment agreement with each of its Senior Vice
Presidents (each such employment agreement, an "Employment Agreement"), each
with a term of two years. Under each Employment Agreement, a Senior Vice
President is entitled to a base salary; is eligible for an annual bonus under
the Company's Annual Bonus Plan; is eligible for stock options, stock grants or
other awards pursuant to the 1998 Incentive Plan; and receives an annual
automobile allowance and other benefits in effect from time to time for Ames'
Senior Vice Presidents.
In the event that Ames terminates or fails to renew the employment of a
Senior Vice President without Cause (as such term is defined in each Employment
Agreement), the Senior Vice President would be entitled to receive as severance
an amount equal to (a) his or her base salary for the greater of one year or the
period until the end of the term of employment plus an amount equal to any bonus
payment received in the preceding one year period pursuant to the Annual Bonus
Plan and (b) continuation of coverage under Ames' medical plan for the greater
of one year or the period until the end of the term of employment. If a Senior
Vice President's employment is terminated by Ames for Cause, or if the officer
terminates his or her employment, he or she shall receive no further
compensation or other benefits under such Employment Agreement, except for any
amounts that had vested under the terms of any benefit plan maintained by the
Company. If a Senior Vice President terminates his or her employment upon a
Change in Control of Ames (as such term is defined in each Employment
Agreement), he or she will be entitled to participate in the Company's Key
Employee Continuity Plan (or other successor or replacement plan).
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.
Additional Information with Respect to Board of Directors Interlocks
and Insider Participation in Compensation Decisions
During fiscal year 1999, the Board of Directors had a Compensation
Committee comprised of Messrs. Cohen (Chairman), Buxbaum and Pearlman, none of
whom has served as an officer or employee of Ames or any of its subsidiaries.
Joseph Ettore has been a member of the Board of Directors and an executive
officer of Ames since June 1994. However, he did not participate as a Board
member in Board deliberations in fiscal year 1999 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
Compensation Committee's Report on Executive Compensation and the Performance
Graph that follow below shall not be incorporated by reference into any such
filings.
The Compensation Committee's Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors (the
"Committee") is responsible for recommending to the full Board of Directors (the
"Board") the compensation to be paid to the Company's principal executive
officers, including the Chief Executive Officer ("CEO"), the persons to whom and
the amount in which stock options should be granted by the Company under the
Company's 1998 Incentive Plan and the 1994 Option Plan and the persons to whom
shares of Restricted Stock should be awarded by the Company under the 1998
Incentive Plan and the 1995 Incentive Plan. As previously described, the Company
currently has employment contracts with Joseph R. Ettore, CEO, Denis T. Lemire,
President and Chief Operating Officer, Rolando de Aguiar, Senior Executive Vice
President and Chief Financial and Administrative Officer, and Grant C. Sanborn,
Executive Vice President, Operations. During March 1999, the Company entered
into new employment agreements with Mr. Lemire and Mr. de Aguiar. During
February 2000, the Company entered into an employment agreement with Mr.
Sanborn. Set forth below is a report submitted by the Committee regarding the
compensation policies for fiscal year 1999, as they related to the Company's
principal executive officers, including the CEO.
Compensation Policies
In April of each year, the Committee 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 Committee
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 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. The Committee
believes that an important factor in attracting, motivating, and retaining key
executive officers is to insure that the compensation paid to such individuals
is competitive with that paid by comparable companies. In its review of
management's proposed goals under the Annual Bonus Plan for a fiscal year, the
Committee utilizes criteria similar to that used in reviewing annual salaries.
In considering the grant of stock options to employees, including the
Company's principal executive officers, the Committee considers the
responsibility level of the position, job performance and salary level, and
reviews the long-term objectives of management and the Board.
Fiscal Year 1999 Executive Compensation
Employing its compensation review factors described above, the Committee
recommended to the Board that management's salary recommendations for its senior
executives and the recommendations for eligible participants in, and the
Company's goals for, the Annual Bonus Plan for the fiscal year ending January
29, 2000 be adopted.
In accepting the salary recommendations for those executive officers who
had served in the prior year, the Committee noted that management's recommended
salaries were, for the principal executive officers, slightly higher in the
aggregate than the previous year's salaries. The Committee specifically
considered that the Company's core business experienced a 39% increase in net
income from $34.5 million in fiscal year 1997 to $48.1 million in fiscal year
1998, and, in addition, continued to take extensive measures to enhance
profitability in future years.
The Committee approved the grants of stock options to certain members of
management in fiscal year 1999 pursuant to the 1998 Incentive Plan, approved by
stockholders in May 1998, and the 1994 Option Plan, approved by stockholders in
June 1994. The purpose of the 1998 Incentive Plan and the 1994 Option Plan is to
provide incentives to motivate highly competent persons as key employees of the
Company by providing them the opportunity to acquire an ownership interest in
the Company and thereby aligning the interests of such employees with those of
its stockholders. Such options were granted during fiscal year 1999 with an
exercise price equal to the market price of the Common Stock on the date of
grant, so that individuals receiving such grants benefit only if stockholders
benefit through appreciation in the post-grant value of Ames shares.
The Compensation Committee,
Alan Cohen, Chairman
Paul Buxbaum
Sidney S. Pearlman
Stock Performance Graph
The following graph 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 during the preceding five fiscal years ended January 30,
1999. The comparison assumes $100 was invested on January 27, 1995 in the
Company's Common Stock and in each of the foregoing indices.
1/27/95 1/26/96 1/25/97 1/31/98 1/30/99 1/29/00
------- ------- ------- --------------- -------
Ames Department Stores, Inc.............. $100 $56 $246 $555 $1,187 $948
CRSP Index for NASDAQ U.S. Companies..... $100 $138 $182 $218 $341 $524
CRSP Index for NASDAQ Retail Companies... $100 $110 $139 $161 $197 $158
Security Ownership of Certain Beneficial Owners
Set forth below is certain information regarding the beneficial ownership
of Ames' Common Stock by any person known by Ames to beneficially own more than
5% of the Common Stock. As used herein, "beneficial ownership" means the sole or
shared power to vote or invest either Common Stock or warrants of Ames, or the
right to acquire Common Stock or warrants within sixty days.
Name and Address of Percent
Beneficial Owner Amount and Nature of Beneficial Ownership Of Class
- ---------------- ----------------------------------------- --------
Fidelity Management & Each of FMR Corp., Edward C. Johnson 3d. and Abigail P. Johnson is the (a) 11.356%
Research Company (FMR), beneficial owner 3,308,720 shares of Common Stock. Of such shares, FMR
82 Devonshire Street Corp. has sole voting power with respect to 499,300 shares and sole
Boston, MA 02109 dispositive power with respect to 2,078,800 shares, and Edward C.
Johnson 3d. has sole dispositive power with respect to 1,568,400
shares. FMR is the beneficial owner of 1,568,400 shares of Common
Stock, of which it has sole voting power with respect to 499,300 shares
and sole dispositive power with respect to 510,400 shares. Fidelity
International Limited is the beneficial owner of 1,229,920 shares of
Common Stock and has sole voting power with respect to all of such
shares.
Gardner Lewis Asset 1,545,075 shares beneficially owned by Gardner Lewis Asset Management, (b) 5.30%
Management, L.P., Inc. ("Gardner Lewis"). Gardner Lewis has sole voting power as to
285 Wilmington West 1,431,600 shares, shared voting power as to 13,000 shares, and sole
Chester Pike, Chadds dispositive power as to 1,545,075 shares.
Ford, PA 19317
Putnam Investment 1,478,100 shares beneficially owned by Putnam Investment Management, (c) 5.1%
Management, Inc., Inc. ("PIM"), Putnam Investments, Inc. ("PI"), and The Putnam Advisory
One Post Office Square Company, Inc. ("PAC"). PI, PIM and PAC have shared dispositive powers
Boston, MA 02100 as to 1,478,100, 1,471,100 and 7,000 shares, respectively. None of the
companies have any voting power.
- --------------------------------
(a) Based on information contained in Amendment No. 2 to Schedule 13G filed on May 4, 2000 by FMR Corp., Edward C. Johnson 3d. and
Abigail P. Johnson.
(b) Based on information contained in Schedule 13G filed on February 11, 2000 by Gardner Lewis Asset Management, L.P.
(c) Based on information contained in Schedule 13G filed on February 17, 2000 by Putnam Investments, Inc. on behalf of itself and:
Marsh & McLennan Companies, Inc., Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc.
Security Ownership of Management
As of April 1, 2000, Ames' directors and officers as a group were
beneficial owners of 1,212,389 shares of its Common Stock. As used herein,
"beneficial ownership" means the sole or shared power to vote or invest either
Common Stock or warrants of Ames, or the right to acquire Common Stock or
warrants within sixty days.
Ames is not aware of any arrangements, including any pledge by any person
of securities of Ames, which may at a subsequent date result in a change of
control of Ames.
Listed below are the number of shares of Common Stock beneficially owned by
the named executive officers (those listed in the Summary Compensation Table)
and all executive officers as a group as of April 1, 2000:
Total
Shares of
Shares of Exercisable Common Stock Percent
Common Stock Stock Beneficially of
Name of Beneficial Owner Owned (a) Options (b) Owned Class
- ------------------------ --------- ----------- ----- -----
J. Ettore 290,200 70,000 360,200 1.2%
R. de Aguiar 35,000 43,750 78,750 *
D. Lemire 99,000 80,000 179,000 *
D. Lissy 44,264 2,500 46,764 *
A. Petrillo 35,300 2,500 37,800 *
All executive officers
as a group 779,255 234,550 1,013,805 3.5%
(a) The shares listed include 220,000 shares of outstanding Restricted Stock awarded under the 1998 Incentive
Plan and 35,000 shares under the 1995 Incentive Plan. With the exception of 45,000 shares that vest on the
third anniversary of the date of grant, these shares vest 50% each on the fourth and fifth anniversaries of
the date of grant. Except as noted in the following sentence, each named executive has sole voting and
investment power in the shares listed. Mr. Lemire holds 40,000 of his shares jointly with his wife and Mr.
Lissy holds 29,264 of his shares jointly with his wife.
(b) Represents shares of Common Stock that may be acquired within 60 days through the exercise of stock options
under the 1994 Option Plan and 1998 Incentive Plan.
* Percentage is less than 1%
Transactions with Management and Others
Mr. Ettore's brother-in-law is principal and partner of Tri-Star
Connection, Inc., a supplier to the Company. The Company did business with
Tri-Star prior to Mr. Ettore's joining the Company. In fiscal year 1999, in the
normal course of business, the company purchased approximately $1.3 million of
merchandise from Tri-Star Connection, Inc.
Since 1996, Mr. Buxbaum has owned a 50% equity interest in Dealco, Inc., an
entity that has assisted Ames in identifying opportunities for closeout and
other off price purchases. In fiscal year 1999, Ames paid approximately $304,000
to Dealco, Inc. for direct purchases.
As of April 1, 2000, the Company had the following outstanding loans with
certain officers:
Principal
Date of Balance as of Interest
Officer Loan April 1, 2000 Rate
------- ---- ------------- ----
Grant Sanborn, Executive Vice President, Operations 3/13/98 $111,484 5.51%
Eugene Bankers, Senior Vice President, Marketing 4/9/99 $182,637 5.21%
David Lissy, Senior Vice President, General
Rolando de Aguiar, Senior Executive Vice
Loan 1 6/4/99 $51,325 5.30%
Loan 2 9/3/99 $41,102 5.89%
To the knowledge of Ames, there were no other related transactions or
business relationships with directors or executive officers of Ames during
fiscal year 1999, or any currently proposed, that would require disclosure.
Compliance with Section 16 (a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Ames'
officers and directors and persons, who own more than ten percent of Ames'
Common Stock, to file initial reports of ownership and changes in ownership with
the Securities and Exchange Commission and NASDAQ. Additionally, Item 405 of
Regulation S-K under the Exchange Act requires Ames to identify in its proxy
statement those individuals for whom one of the above referenced reports was not
filed on a timely basis during the most recent fiscal year or prior fiscal
years.
To the knowledge of Ames, there were no director or officer reporting
delinquencies, except for a filing of Form 3 by Catherine Berey regarding her
initial statement of beneficial ownership and Form 4 filings by Sanford
Sansavera and Francis Basile. Mr. Basile disposed of Common Stock shares and
converted options to Common Stock. Mr. Sansavera converted options to Common
Stock.
Changes in and Disagreements with Accountants
There were no changes in or disagreements with the Company's outside
accountants on accounting and financial disclosure matters during fiscal years
1999 and 1998.
RATIFICATION OF THE ASSOCIATE STOCK PURCHASE PLAN
(Proposal No. 2)
Our Board of Directors has adopted an employee stock purchase plan. The
stock purchase plan is intended to be qualified under Internal Revenue Code
Section 423. If a plan is qualified under Section 423, our Associates (as such
term is defined in the Associate Stock Purchase Plan) who participate in the
plan enjoy certain tax advantages, as described below. In order for the plan to
be qualified, our stockholders must approve the plan. The following discussion
is qualified in its entirety by reference to the text of the proposed plan, a
copy of which is attached to this proxy statement as Annex A.
The stock purchase plan allows our Associates to purchase our common stock
at a discount, without being subject to tax on the discount until they sell the
stock, and without having to pay any brokerage commissions with respect to the
purchases. We plan to implement the stock purchase plan on October 1, 2000,
provided we receive stockholder approval.
The purpose of the stock purchase plan is to encourage the purchase of
common stock by our Associates, to provide Associates with a personal stake in
Ames and to help us retain our Associates.
The stock purchase plan will be administered by our Board of Directors, by
the Compensation Committee of the Board of Directors, or by their designated
representatives.
Description of the Stock Purchase Plan
The stock purchase plan provides Associates with the right to purchase
shares of our common stock through after-tax payroll deduction. A total of
300,000 shares of our common stock will be available for purchase under the
stock purchase plan, subject to adjustment in the number and price of shares
available for purchase in the event the outstanding shares of common stock are
increased or decreased through stock dividends, recapitalizations,
reorganizations or similar changes.
The stock purchase plan will be administered by our Board of Directors,
which may delegate responsibility for administration to the Compensation
Committee of the Board or to designated representatives. Subject to the terms of
the stock purchase plan, the Board or the Committee has authority to interpret,
amend and/or terminate the stock purchase plan, and to prescribe, amend and
rescind rules and regulations relating to it and make all other determinations
deemed necessary or advisable in administering the stock purchase plan.
An Associate is eligible to participate in the stock purchase plan if he or
she is employed on the first trading day of an offering period and worked at
least 20 hours per week in the immediately preceding Purchase Period, and at
least five months out of the previous twelve. As of April 1, 2000 approximately
19,500 Associates, including our executive officers, would have been eligible to
participate in the stock purchase plan.
Any Associate who, after purchasing our common stock under the stock
purchase plan, would own 5% or more of the total combined voting power or value
of all classes of our stock or any subsidiary corporation is not eligible to
participate. Ownership of stock is determined in accordance with the provisions
of Section 424(d) of the Internal Revenue Code. In addition, an Associate is not
permitted to purchase more than 500 shares of stock in an offering period or
stock worth more than $25,000 in fair market value for each calendar year.
Stock will be available to be purchased every six months. Eligible
employees may elect to participate in the stock purchase plan during an offering
period which starts on each April 1 and October 1 and ends on each March 31 and
September 30, respectively. The Board or the Committee has the authority to
extend or reduce offering periods or to make additional offering periods
available, provided that no offering period may exceed twenty-seven (27) months.
Shares of common stock will be deemed to have been purchased on March 31 or
November 30, as applicable. The purchase price per share will be 85 percent of
the lesser of:
- the fair market value per share of our common stock as of the
commencement date of the offering period, on April 1 or October
1, as applicable; or
- the fair market value per share of our common stock as of the closing
date of the offering period, on March 31 or November
30, as applicable.
If any of these dates is not a trading day, then fair market value will be
determined on the next trading day after such date.
An eligible Associate who wishes to participate in the stock purchase plan
must file an enrollment agreement authorizing payroll deductions with the
designated representative of the Board or Committee prior to the applicable
April 1 or October 1. Each participant will have after-tax payroll deductions
made from his or her compensation on each regular payday during the time he or
she is a participant in the stock purchase plan. All payroll deductions will be
credited to the participant's account under the stock purchase plan. A
participant may discontinue his or her participation in the stock purchase plan
at any time. A participant's enrollment agreement shall remain in effect for
successive offering periods unless otherwise terminated.
If the total number of shares of common stock for which purchase rights are
exercised at the end of an offering period exceeds the maximum number of shares
of common stock available, the Board or Committee will make a pro rata
allocation of shares available for delivery and distribution. The unapplied
account balances will be credited to participants' accounts for the next
succeeding offering or, at the participant's election, returned to the
participant, without interest, as soon as practicable following the end of the
offering period.
A participant may elect to withdraw all, but not less than all, of the
balance credited to the participant's account by filing a termination form with
the designated representative at any time before the end of the offering period.
All amounts credited to such participant's account shall be paid, without
interest, as soon as practicable following receipt of the participant's
termination form, and no further payroll deductions will be made with respect to
the participant.
If a participant's employment terminates for any reason other than death,
all amounts credited to such participant's account will be returned to the
participant. If a participant's employment terminates due to death or the
participant dies after termination of employment but before the participant's
account has been returned, all amounts credited to such participant's account
will be returned to the participant's successor-in-interest.
All funds held or received by us under the stock purchase plan may be used
for any corporate purpose until applied to the purchase of shares of our common
stock or refunded to Associates and will not be segregated from our general
assets. Shares of our common stock purchased under the stock purchase plan will
be issued from our authorized but unissued shares.
An Associate's rights under the stock purchase plan belong to the Associate
alone and may not be transferred or assigned to any other person during the
Associate's lifetime.
Federal income tax consequences relating to the stock purchase plan
The stock purchase plan is not qualified under Section 401(a) of the
Internal Revenue Code. We generally will not be entitled to a deduction with
respect to stock purchased under the stock purchase plan, unless the stock is
disposed of less than one year after it is purchased by the Associate, or less
than two years after the start of the offering period pursuant to which the
stock was purchased.
The stock purchase plan is intended to comply with Sections 421 and 423 of
the Internal Revenue Code. Under those provisions, generally, no income will be
taxable to the participants at the time options are issued under the plan or at
the time stock is purchased under the plan. However, a participant may become
liable for tax upon the disposition of shares acquired under the stock purchase
plan (or if he or she dies while holding such shares), and the tax consequences
will depend upon how long the participant has held the stock prior to
disposition.
Upon a disposition of shares (including transfer by gift), the participant
will receive compensation taxable as ordinary income for the taxable year in
which the disposition occurs in an amount equal to the lesser of:
- the excess of the purchase price over the fair market value of the
shares at the beginning of the offering period, or
- the excess over the purchase price of (a) the amount actually
received for the shares if sold or exchanged or (b) the fair
market value of the shares on the date of any other termination of his
or her ownership (such as by gift).
The amount of such ordinary income is then added to the participant's basis
in his or her shares for purposes of determining capital gain or loss. This tax
treatment only applies if the following holding period requirement is satisfied:
- the participant does not dispose of the shares for at least one year
after the date of purchase, and
- the participant does not dispose of the shares for at least two years
after the beginning of the offering period during which
the shares were purchased.
If a participant disposes of shares of common stock purchased under the
stock purchase plan before the holding period is satisfied, he or she will
receive compensation taxable as ordinary income in the amount of the difference
between the amount paid for the shares and the fair market value of the shares
at the time of purchase, even if there is no gain realized on the disposition.
If the shares are sold or exchanged, the amount of such ordinary income is added
to the participant's basis in his or her shares for purposes of determining
capital gain or loss. In the event of this kind of early disposition, we will be
allowed a deduction for our federal income taxes equal to the amount of ordinary
income realized by the participant.
If a participant dies before disposing of the shares purchased under the
stock purchase plan, he or she will be deemed to have realized compensation
income taxable as ordinary income in the taxable year closing with his or her
death in an amount equal to the lesser of:
- the excess of the purchase price over the fair market value of the
shares at the beginning of the offering period, or
- the excess over the purchase price of the fair market value of the
shares on the date of death.
The participant is deemed not to have realized any capital gain or loss
because of death, and we will receive no deduction.
The Board or the Committee has the right to amend, modify or terminate the
stock purchase plan at any time without notice, provided that upon any
termination, all shares or unapplied payroll deductions will be distributed to
participants, and provided further, that no amendment will affect the right of a
participant to receive his or her proportionate interest in the shares or
unapplied payroll deductions. Upon any amendment of the stock purchase plan,
stockholder approval will be obtained if required by law.
The above description is a partial summary of material provisions of our
stock purchase plan. This summary is qualified in its entirety by reference to
the full text of the plan which appears as Annex A attached to this proxy
statement.
The Board of Directors unanimously recommends a vote FOR approval of the
Associate Stock Purchase Plan as described in this proposal No. 2. Your proxy
will be so voted unless you specify otherwise.
RATIFICATION OF AMENDMENT AND RESTATEMENT OF 1998 MANAGEMENT STOCK INCENTIVE
PLAN
(Proposal No. 3)
Our Board of Directors has approved an amendment and restatement of the
1998 Management Stock Incentive Plan (as amended and restated, the "1998
Incentive Plan"), to be effective upon approval by the Company's stockholders,
to increase the number of shares reserved for issuance under the 1998 Incentive
Plan from 1,800,000 to 3,800,000 and to increase the maximum number of shares
that could be issued to one person under the 1998 Incentive Plan from 300,000 to
600,000.
The following summary of the 1998 Incentive Plan, as amended and restated,
is not intended to be complete and is qualified in its entirety by reference to
the 1998 Incentive Plan, a copy of which is attached as Annex B to this proxy
statement.
Shares Available. The 1998 Incentive Plan provides for the grant of any or
all of the following types of benefits: 1) stock options including incentive
stock options and non-qualified stock options; 2) stock awards, including
restricted stock; 3) performance awards; and 4) stock units (collectively,
"Awards") and currently makes available for Awards an aggregate amount of
1,800,000 shares of Common Stock, subject to certain adjustments. As of April 1,
2000, 396,848 shares remained available for grants under the 1998 Incentive
Plan. The Board of Directors has approved an amendment and restatement of the
1998 Incentive Plan to increase the number of shares of Common Stock available
for Awards under the 1998 Incentive Plan to 3,800,000. The Board of Directors
believes that stock options are important to attract and to encourage the
continued employment and service of officers, key employees and other key
individuals by facilitating their purchase of an equity interest in the Company.
In order to ensure that there are adequate shares of Common Stock available for
future grants to support broad-based participation, the Board of Directors
believes that the number of shares of Common Stock available for Awards under
the 1998 Incentive Plan should be increased to 3,800,000.
Currently under the 1998 Incentive Plan, the maximum number of shares of
Common Stock with respect to which Awards may be granted (or measured) to any
individual participant may not exceed 300,000. The proposed amendment and
restatement of the 1998 Incentive Plan would increase to 600,000 the maximum
number of shares underlying options awarded to any individual. Any shares of
Common Stock subject to a stock option which for any reason is cancelled or
terminated without having been exercised, and subject to limited exceptions, any
shares subject to stock awards, performance awards or stock units which are
forfeited, any shares subject to performance awards settled in cash or any
shares delivered to the Company as part or full payment for the exercise of a
stock option shall again be available for Awards under the 1998 Incentive Plan.
Administration. The 1998 Incentive Plan provides for administration by a
committee (the "Administration Committee") appointed by the Board of Directors
from among its members (which will be the Committee), which shall be, unless
otherwise determined by the Board of Directors, comprised solely of not less
than two members who shall be (i) "Non-Employee Directors" within the meaning of
Rule l6b-3 (b) (3) (or any successor rule) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and (ii) "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder. The Administration
Committee is authorized, subject to the provisions of the 1998 Incentive Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the 1998 Incentive Plan and to make such determinations and
interpretations and to take such action in connection with the 1998 Incentive
Plan and any Awards granted thereunder as it deems necessary or advisable. Thus,
among the Administration Committee's powers are the authority to select officers
and other key employees of the Company and its subsidiaries to receive Awards,
and determine the form, amount and other terms and conditions of Awards. The
Administration Committee also has the power to modify or waive restrictions on
Awards, to amend Awards and to grant extensions and accelerations of Awards.
Eligibility for Participation. Key employees of the Company or any of its
subsidiaries are eligible to participate in the 1998 Incentive Plan. The
selection of participants from eligible key employees is within the discretion
of the Administration Committee. All employees are currently eligible to
participate in the 1998 Incentive Plan.
Types of Awards. The 1998 Incentive Plan provides for the grant of any or
all types of Awards. Awards may be granted singly, in combination, or in tandem
as determined by the Administration Committee. Stock awards, performance awards
and stock units may, as determined by the Administration Committee in its
discretion, constitute Performance-Based Awards, as described below.
Stock Options. Under the 1998 Incentive Plan, the Administration Committee
may grant awards in the form of options to purchase shares of Common Stock.
Options may be either incentive stock options, qualifying for special tax
treatment, or non-qualified options. The Administration Committee will
determine, with regard to each stock option, the number of shares subject to the
option, the manner and time of the option's exercise and vesting, and the
exercise price per share of stock subject to the option; provided, however, that
the exercise price shall not be less than 100% of the fair market value of the
Common Stock on the date the stock option is granted. In the case of incentive
stock options 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 or parent corporation), the exercise price
shall not be less than 110% of the fair market value of the Common Stock on the
date the stock option is granted and the exercise of such option will be
prohibited after the expiration of five years from the date of grant. The
exercise price may be paid in cash or, in the discretion of the Administration
Committee, by the delivery of shares of Common Stock of the Company then owned
by the participant, by the withholding of shares of Common Stock for which a
stock option is exercisable, or by a combination of these methods. In the
discretion of the Administration Committee, payment may also be made by
delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. The
Administration Committee may prescribe any other method of paying the exercise
price that it determines to be consistent with applicable law and the purpose of
the 1998 Incentive Plan. In determining which methods a participant may utilize
to pay the exercise price, the Administration Committee may consider such
factors as it determines are appropriate.
Stock Awards. The 1998 Incentive Plan authorizes the Administration
Committee to grant awards in the form of restricted or unrestricted shares of
Common Stock ("Stock Awards"). Such awards will be subject to such terms,
conditions, restrictions, and/or limitations, if any, as the Administration
Committee deems appropriate including, but not by way of limitation,
restrictions on transferability, continued employment and performance goals
established by the Administration Committee over a designated period of time.
Performance Awards. The 1998 Incentive Plan allows for the grant of
performance awards which may take the form of shares of Common Stock or Stock
Units, or any combination thereof and which may constitute Performance-Based
Awards. Such awards will be contingent upon the attainment over a period to be
determined by the Administration Committee of certain performance goals. The
length of the performance period, the performance goals to be achieved and the
measure of whether and to what degree such goals have been achieved will be
determined by the Administration Committee. Payment of earned performance awards
will be made in accordance with terms and conditions prescribed or authorized by
the Administration Committee. The participant may elect to defer, or the
Administration Committee may require the deferral of, the receipt of performance
awards upon such terms as the Administration Committee deems appropriate.
Stock Units. The Administration Committee may, in its discretion, grant
Stock Units to participants. A "Stock Unit" means a notional account
representing one share of Common Stock. The Administration Committee determines
the criteria for the vesting of Stock Units and whether a participant granted a
Stock Unit shall be entitled to Dividend Equivalent Rights (as defined in the
1998 Incentive Plan). Upon vesting of a Stock Unit, unless the Administration
Committee has determined to defer payment with respect to such unit or a
participant has elected to defer payment, shares of Common Stock representing
the Stock Units will be distributed to the participant unless the Administration
Committee, with the consent of the participant, provides for the payment of the
Stock Units in cash, or partly in cash and partly in shares of Common Stock,
equal to the value of the shares of Common Stock which would otherwise be
distributed to the participant.
Performance-based Awards. Certain Awards granted under the 1998 Incentive
Plan may be granted in a manner such that the compensation attributable to such
Award qualifies for the performance-based compensation exemption to Section
162(m) of the Code ("Performance-Based Awards"). As determined by the
Administration Committee in its sole discretion, either the granting or vesting
of such Performance-Based Awards will be based upon one of more of the following
factors: net sales, pretax income before allocation of corporate overhead and
bonus, budget, earnings per share, net income, division, group or corporate
financial goals, return on stockholders' equity, return on assets, attainment of
strategic and operational initiatives, appreciation in and/or maintenance of the
price of the Common Stock or any other publicly-traded securities of the
Company, market share, gross profits, earnings before interest and taxes,
earnings before interest, taxes, depreciation and amortization, economic
value-added models and comparisons with various stock market indices, reductions
in costs, or any combination of the foregoing.
With respect to Performance-Based Awards, the Administration Committee
shall establish in writing, (x) the objective performance-based goals applicable
to a given period and (y) the individual employees or class of employees to
which such performance-based goals apply no later than 90 days after the
commencement of such period (but in no event after 25% of such period has
elapsed). No Performance-Based Award shall be payable to, or vest with respect
to, as the case may be, any participant for a given period until the
Administration Committee certifies in writing that the objective performance
goals (and any other material terms) applicable to such period have been
satisfied.
Other Terms of Awards. The 1998 Incentive Plan provides that Awards shall
not be transferable other than by will or the laws of descent and distribution.
The Administration Committee shall determine the treatment to be afforded to a
participant in the event of termination of employment for any reason including
death, disability or retirement. Notwithstanding the foregoing, other than with
respect to incentive stock options, the Administration Committee may permit the
transferability of an award by a participant to members of the participant's
immediate family or trusts for the benefit of such person or family
partnerships. Upon the grant of any Award under the 1998 Incentive Plan, the
Administration Committee may, by way of an agreement with the participant,
establish such other terms, conditions, restrictions and/or limitations covering
the grant of the Award as are not inconsistent with the 1998 Incentive Plan. No
Award shall be granted under the 1998 Incentive Plan after February 20, 2008.
The Board of Directors reserves the right to amend, suspend or terminate the
1998 Incentive Plan at any time, subject to the rights of participants with
respect to any outstanding Awards.
The 1998 Incentive Plan contains provisions for equitable adjustment of
Awards in the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock split, split up,
spinoff, combination of shares, exchange of shares, dividend in kind or other
like change in capital structure or distribution (other than normal cash
dividends) to stockholders of the Company.
Certain Federal Income Tax Consequences. The statements in the following
paragraphs regarding the principal federal income tax consequences of Awards
under the 1998 Incentive Plan are based on statutory authority and judicial and
administrative interpretations, as of the date of this Proxy Statement, which
are subject to change at any time (possibly with retroactive effect). The law is
technical and complex and the discussion below represents only a general
summary.
Incentive Stock Options. Incentive stock options ("ISOs") granted under the
1998 Incentive Plan are intended to meet the definitional requirements of
Section 422(b) of the Code for "incentive stock options."
An employee who receives an ISO does not recognize any taxable income upon
the grant of such ISO. Similarly, the exercise of an ISO generally does not give
rise to federal income tax to the employee, provided that (i) the federal
"alternative minimum tax," which depends on the employee's particular tax
situation, does not apply and (ii) the employee is employed by the Company from
the date of grant of the option until three months prior to the exercise
thereof, except where such employment terminates by reason of disability (where
the three month period is extended to one year) or death (where this requirement
does not apply).
Further, if after exercising an ISO, an employee disposes of the Common
Stock so acquired more than two years from the date of grant and more than one
year from the date of transfer of the 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 difference, if any, between the
amount received for the shares and the exercise price. If, however, an employee
does not hold the shares so acquired for the applicable holding period - thereby
making a "disqualifying disposition" - the employee would realize ordinary
income on the excess of the fair market value of the shares at the time the ISO
was exercised over the exercise price and the balance, if any, would be
long-term capital gain (provided the holding period for the shares exceeded one
year and the employee held such shares as a capital asset at such time). If an
employee exercises an ISO before these requisite periods, the ISO will be
treated as an NSO (as defined below) and will be subject to the rules set forth
below under the caption "Non-Qualified Stock Options."
An employee who exercises an ISO by delivering Common Stock previously
acquired pursuant to the exercise of another ISO is treated as making a
"disqualifying disposition" of such Common Stock if such shares are delivered
before the expiration of their applicable holding period. Upon the exercise of
an ISO with previously acquired shares as to which no disqualifying disposition
occurs, despite some uncertainty, it appears that the employee would not
recognize gain or loss with respect to such previously acquired shares.
The Company will not be allowed a federal income tax deduction upon the
grant or exercise of an ISO or the disposition, after the applicable holding
period, of the Common Stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, the Company generally will be entitled to a deduction
in an amount equal to the ordinary income included by the employee, provided
that such amount constitutes an ordinary and necessary business expense to the
Company and is reasonable and the limitations of Sections 280G and 162(m) of the
Code (discussed below) do not apply.
Non-Qualified Stock Options. Non-qualified stock options ("NSOs") granted
under the 1998 Incentive Plan are options that do not qualify as ISOs. An
employee who receives an NSO will not recognize any taxable income upon the
grant of such NSO. However, the employee generally will recognize ordinary
income upon exercise of an NSO in an amount equal to the excess of (i) the fair
market value of the shares of Common Stock at the time of exercise over (ii) the
exercise price.
As a result of Section 16(b) of the Exchange Act, under certain
circumstances, the timing of income recognition may be deferred (generally for
up to six months following the exercise of an NSO (i.e., the "Deferral Period"))
for any individual who is an officer or director of the Company or a beneficial
owner of more than ten percent (10%) of any class of equity securities of the
Company. Absent a Section 83(b) election (as described below under "Other
Awards"), 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 receipt of shares or
cash upon exercise of a NSO will be subject to both wage withholding and other
employment taxes. In addition to the customary methods of satisfying the
withholding tax liabilities that arise upon the exercise of an NSO, the Company
may satisfy the liability in whole or in part by withholding shares of Common
Stock from those that otherwise would be issuable to the individual or by the
employee tendering other shares owned by him or her, valued at their fair market
value as of the date that the tax withholding obligation arises.
A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the individual with respect
to his or her NSO, provided that such amount constitutes an ordinary and
necessary business expense to the Company and is reasonable and the limitations
of Sections 280G and 162(m) of the Code do not apply.
If an individual exercises an NSO by delivering shares of Common Stock 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 NSO 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.
Other Awards. With respect to other Awards under the 1998 Incentive Plan
that are settled either in cash or in shares of Common Stock that are either
transferable or not subject to a substantial risk of forfeiture (as defined in
the Code and the regulations thereunder), employees generally will recognize
ordinary income equal to the amount of cash or the fair market value of the
Common Stock received.
With respect to Awards under the 1998 Incentive Plan that are settled in
shares of Common Stock that are restricted to transferability or subject to a
substantial risk of forfeiture - 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 such shares pursuant to the award (a "Section 83(b)
election") - an individual will recognize ordinary income at the earlier of the
time at which (i) the shares become transferable or (ii) the restrictions that
impose a substantial risk of forfeiture of such shares (the "Restrictions")
lapse, in an amount equal to the excess of the fair market value (on such date)
of such shares over the price paid for the award, if any. If a Section 83(b)
election is made, the individual will recognize ordinary income, as of the
transfer date, in an amount equal to the excess of the fair market value of the
Common Stock as of that date over the price paid for such award, if any.
The ordinary income recognized with respect to the receipt of cash, shares
of Common Stock or other property under the 1998 Incentive Plan will be subject
to both wage withholding and other employment taxes.
The Company generally will be allowed a deduction for federal income tax
purposes in an amount equal to the ordinary income recognized by the employee,
provided that such amount constitutes an ordinary and necessary business expense
and is reasonable and the limitations of Sections 280G and 162(m) of the Code do
not apply.
Dividends and Dividend Equivalents. To the extent Awards under the 1998
Incentive Plan earn dividend or dividend equivalents, whether paid currently or
credited to an account established under the 1998 Incentive Plan, an individual
generally will recognize ordinary income with respect to such dividend or
dividend equivalents.
Change in Control. In general, if the total amount of payments to an
individual that are contingent upon a "change of control" of the Company (as
defined in Section 280G of the Code), including payments under the 1998
Incentive Plan that vest upon a "change in control," equals or exceeds three
times the individual's "base amount" (generally, such individual's average
annual compensation for the five calendar 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 individual 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 denies a deduction to publicly
held corporations 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 an NSO or the disqualifying disposition of stock
purchased pursuant to an ISO). One such exception applies to certain
performance-based compensation provided that such compensation has been approved
by stockholders in a separate vote and certain other requirements are met. The
Company believes that Stock Options and Performance-Based Awards granted under
the 1998 Incentive Plan should qualify for the performance-based compensation
exception to Section 162(m).
The Board of Directors unanimously recommends a vote FOR the adoption of
the amended and restated 1998 Incentive Plan. Your proxy will be so voted unless
you specify otherwise.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal No. 4)
Upon recommendation of the Audit Committee, the Board of Directors has
selected Arthur Andersen LLP, independent public accountants, as auditors of the
Company for the fiscal year ending February 03, 2001, 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 member of the firm of Arthur Andersen LLP 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.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy statement
and form of proxy relating to the 2001 annual meeting of stockholders,
stockholder proposals which are intended to be presented at the meeting must be
received at the principal executive offices of the Company, marked for the
attention of the Secretary, on or before January 15, 2001. Under the Company's
By-laws, notice of any other matter intended to be presented by a stockholder
for action at the 2001 annual meeting of stockholders must be addressed to the
principal executive offices of the Company, marked for the attention of the
Secretary, and must contain the information required by the By-laws. The notice
must be received at the principal executive offices during the period from March
23, 2001 through April 22, 2001, unless the 2001 annual meeting of stockholders
is called for a date prior to May 22, 2001 or subsequent to August 20, 2001, in
which case, notice must be received not earlier than the ninetieth day prior to
such annual meeting and not later than the close of business on the later of (i)
the sixtieth day prior to such annual meeting and (ii) the tenth day following
the day on which public announcement of the date of such meeting is first made.
If a stockholder wishes to present a proposal for consideration at the 2001
annual meeting of stockholders without having such matter included in the
Company's proxy statement and form of proxy relating to such annual meeting, but
does not give the Company notice of such matter by April 2, 2001, then the
proxies solicited by the Board of Directors for such annual meeting may confer
discretionary authority on the persons holding such proxies to vote on such
matter in accordance with their judgment. Any proposals, referred to above,
should be submitted to the attention of David H. Lissy, Secretary, Ames
Department Stores, Inc., 2418 Main Street, Rocky Hill, CT 06067-2598.
FORM 10-K OR QUARTERLY REPORTS
To receive, without charge, additional financial information as reported in
the Company's fiscal year 1999 annual report on Form 10-K, please write to
Carolyn M. Skahill, Investor Relations Department, Ames Department Stores, Inc.,
MS # 1030, 2418 Main Street, Rocky Hill, CT 06067-2598.
EXPENSES OF SOLICITATION
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 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.
OTHER MATTERS
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 judgment on such matters.
By order of the Board of Directors
May 15, 2000 David H. Lissy,
Secretary
Annex A
AMES DEPARTMENT STORES, INC.
ASSOCIATE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Ames Department Stores, Inc., Associate
Stock Purchase Plan (the "Plan") is to provide employees of the Company and its
Participating Subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated after-tax payroll deductions. The Company intends
for the Plan to qualify as an "Employee Stock Purchase Plan" under Section 423
of the Internal Revenue Code of 1986, as amended. The provisions of the Plan,
accordingly, shall be construed so as to meet the requirements of that section
of the Code. The Company does not intend for the Plan to qualify under Section
401(a) of the Code or the Employee Retirement Income Security Act of 1974, as
amended.
2. Definitions.
(a) "Account" shall mean the Participant accounts established under the
Plan pursuant to Section 7 hereof.
(b) "Associate" shall mean any individual who is an employee of the Company
for federal employment tax purposes as of the Enrollment Date, and who
worked at least twenty hours per week in the preceding Purchase Period
and five months in the previous twelve. For purposes of the Plan, the
employment relationship shall be treated as continuing while an
individual is on a Company approved leave of absence. Where the period
of leave exceeds 90 days and an individual's right to reemployment is
not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such
leave.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the Compensation Committee of the Board.
(f) "Common Stock" shall mean the common stock of the Company, par value
$.01.
(g) "Company" shall mean Ames Department Stores, Inc., and any
Participating Subsidiary of the Company.
(h) "Compensation" shall mean all base salary, straight time gross
earnings, commissions, overtime, and shift premiums, but exclusive of
any other compensation.
(i) "Enrollment Date" shall mean the first Trading Day of each Purchase
Period.
(j) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
(k) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the Common Stock is listed on an established stock exchange
or a national market system, including without limitation the
National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the
last market trading day on the date of such determination, as
reported in The Wall Street Journal or such other source as the
Committee deems reliable;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean of the closing bid and
asked prices for the Common Stock on the date of such
determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable; or
(3) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by
the Committee.
(l) "Option" shall mean an option to purchase Common Stock granted to a
Participant, pursuant to Section 8 of the Plan.
(m) "Participant" shall mean an Employee who has met, and continues to
meet, the requirements of Sections 3 and 5 of the Plan.
(n) "Participating Subsidiary" shall mean any Subsidiary of the Company
which has been designated, on Exhibit C hereto, by the Committee from
time to time in its sole discretion as eligible to participate in the
Plan, including, as of the Effective Date, Ames Merchandising
Corporation.
(o) "Plan" shall mean the Ames Department Stores, Inc. Associate Stock
Purchase Plan.
(p) "Purchase Period" shall mean the period of six (6) months beginning
each April 1 and October 1, or such other period as determined by the
Committee, not to exceed twenty-seven (27) months. The first Purchase
Period under the Plan shall commence on October 1, 2000.
(q) "Purchase Price" shall mean eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock on the Enrollment Date
or on the Exercise Date, whichever is lower; provided, however, that
the Purchase Price may be adjusted by the Committee in its sole
discretion.
(r) "Reserves" shall mean the number of shares of Common Stock covered by
each Option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under Option.
(s) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(t) "Trading Day" shall mean a day on which national stock exchanges and
the NASDAQ System are open for trading.
3. Eligibility.
(a) Any Associate, as defined under section 2(b), who shall be employed by
the Company on a given Enrollment Date shall be eligible to
participate in the Plan, provided that such Associate shall have met
the definition of Associate during the immediately preceding Purchase
Period.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Participant shall be granted an Option under the Plan to the extent
that: (i) immediately after the grant, such Participant (or any other
person whose stock would be attributed to such Participant pursuant to
Section 424(d) of the Code) would own capital stock of the Company or a
Subsidiary, and/or hold outstanding options to purchase such stock,
possessing five percent (5%) or more of the total combined voting
power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) his or her rights to purchase stock under all
employee stock purchase plans of the Company and its Subsidiaries
would accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the
shares at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Purchase Periods. The Plan shall be implemented by the commencement of a
Purchase Period on the first Trading Day of the calendar quarter
beginning on or after the Effective Date, with a new Purchase Period
commencing on the first Trading Day on or after April 1 and October 1
of each year, or on such other date as the Committee shall
determine, and continuing thereafter until terminated in accordance
with Section 19 hereof. The Committee shall have the power to change
the duration of Purchase Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval
if such change is announced prior to the scheduled beginning of the
first Purchase Period to be affected thereafter.
5. Participation. An eligible Associate may become a Participant in the
Plan by completing an Enrollment Agreement authorizing payroll
deductions in the form of Exhibit A to this Plan and filing it with
the Company's designated representative prior to the applicable
Enrollment Date. Associates shall be enrolled as soon as
practicable following the receipt of the completed Enrollment
Agreement.
6. Payroll Deductions.
(a) At the time a Participant files his or her Enrollment Agreement, he or
she shall elect to have payroll deductions made on each pay day
during the Purchase Period, in whole percentages, in an amount not
exceeding ten percent (10%), or such other percentage or dollar amount
as the Committee may determine from time to time, of the Compensation
which the Participant receives on each pay day during the Purchase
Period.
(b) Payroll deductions for a Participant shall commence on the first
payroll following the Enrollment Date and shall end on the last
payroll in the Purchase Period to which such authorization is
applicable, unless sooner terminated by the Participant as provided in
Section 10 hereof.
(c) All Participant payroll deductions shall be credited to his or her
Account under the Plan and shall be withheld in whole percentages
only. A Participant may not make any additional payments into such
account.
(d) A Participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof. A Participant's Enrollment Agreement
shall remain in effect for successive Purchase Periods unless
terminated as provided in Section 10 hereof. A Participant may
re-enroll for subsequent Purchase Periods by completing or filing with
the Company a new Enrollment Agreement.
(e) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423 of the Code and Section 3(b) of the Plan, the Company may
decrease a Participant's payroll deductions to zero percent (0%) at
any time during a Purchase Period. Payroll deductions shall
recommence at the rate provided in such Participant's Enrollment
Agreement at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year, unless terminated
by the Participant as provided in Section 10 hereof.
(f) At the time the Option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is
disposed of, the Participant must make adequate provision for the
Company's Federal, state, or other tax withholding obligations, if
any, which arise upon the exercise of the Option or the disposition
of the Common Stock. At any time, the Company may, but shall not be
obligated to, withhold from the Participant's compensation the
amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Associate.
7. Accounts.
(a) The Committee shall cause to be maintained a separate Account for each
Participant to record the amount of payroll deductions, the Purchase
Price for shares acquired under the Plan and the number of shares
credited to such Participant.
(b) No interest or other earnings shall be credited to any Account or
contributions under the Plan.
(c) The Committee shall select a broker ("Broker") who shall hold and act
as custodian of shares purchased pursuant to the Plan. Absent
instructions to the contrary from a Participant, certificates for
shares purchased will not be issued by the Broker to a participant.
(d) Participants shall direct the Broker as to how to vote the full shares
credited to their Account.
(e) Cash dividends paid on shares credited to a Participant's Account shall
be automatically reinvested in additional shares at no charge
to the Participant. Cash dividends will be paid directly to any
Participant if such participant has had the shares registered in his or
her name.
8. Grant of Option. On the Enrollment Date of each Purchase Period, each
Participant who is eligible to participate in the Purchase Period shall be
granted an Option to purchase on each Exercise Date during such Purchase Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Associate's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided that
in no event shall an Associate be permitted to purchase more than 500 shares of
the Company's Common Stock (subject to any adjustment pursuant to Section 18
hereof) during each Purchase Period, and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 11 hereof.
The Committee may, in its absolute discretion, increase or decrease the maximum
number of shares of the Company's Common Stock an Associate may purchase during
each Purchase Period for any future Purchase Periods. Exercise of the Option
shall occur as provided in Section 9 hereof, unless the Participant has
withdrawn pursuant to Section 10 hereof. The Option shall expire on the last day
of the Purchase Period.
9. Exercise of Option.
(a) Unless a Participant withdraws from the Plan as provided in Section 10
hereof, his or her Option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum
number of full shares subject to Option shall be purchased for such
Participant at the applicable Purchase Price with the accumulated
payroll deductions in his or her Account. No fractional shares shall be
purchased; any payroll deductions accumulated in a Participant's
Account which are not sufficient to purchase a full share, and any other
monies left over in a participant's Account after the Exercise Date,
shall be retained in the Participant's account for the subsequent
Purchase Period. During a Participant's lifetime, a Participant's
Option to purchase shares hereunder is exercisable only by him or her.
(b) If the Committee determines that, on a given Exercise Date, the number
of shares with respect to which Options are to be exercised may
exceed the number of shares of Common Stock that were available for
issuance under the Plan (i) on the Enrollment Date of the applicable
Purchase Period, or (ii) on such Exercise Date, the Committee may in
its sole discretion provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on
such Enrollment Date or Exercise Date, as applicable, in as uniform a
manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all Participants exercising
Options under the Plan to purchase Common Stock on such Exercise Date,
and continue all Purchase Periods then in effect, or terminate any or
all Purchase Periods then in effect pursuant to Section 19 hereof. The
Company may make pro rata allocation of the shares available on the
Enrollment Date of any applicable Purchase Period pursuant to the
preceding sentence, notwithstanding any authorization of additional
shares for issuance under the Plan by the Company's stockholders
subsequent to such Enrollment Date.
10. Withdrawal.
(a) A Participant may withdraw all but not less than all of the payroll
deductions credited to his or her Account and not yet used to exercise
his or her Option under the Plan at any time prior to an Exercise
Date by giving written notice to the Company in the form of Exhibit B
to this Plan. All of the Participant's payroll deductions credited to
his or her Account shall be paid to such Participant as soon as
practicable after receipt of notice of withdrawal and such
Participant's Option for the Purchase Period shall be automatically
terminated, and no further payroll deductions for the purchase of
shares shall be made for such Purchase Period. If a Participant
withdraws from an Purchase Period, payroll deductions shall not resume
at the beginning of any succeeding Purchase Period unless the
Participant delivers to the Company a new Enrollment Agreement.
(b) A Participant's withdrawal from an Purchase Period shall not have any
effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding
Purchase Periods which commence after the termination of the Purchase
Period from which the Participant withdrew.
11. Termination of Employment. Upon a Participant's ceasing to be an
Associate, for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such Participant's Account
during the Purchase Period but not yet used to exercise the Option shall be
returned to such Participant or, in the case of his or her death, to the person
or persons entitled thereto under Sections 14 or 15 hereof, and such
Participant's Option shall be automatically terminated.
12. Stock.
(a) Subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for issuance under
the Plan shall be three hundred thousand (300,000) shares.
(b) Participants shall have no interest or voting rights in shares covered
by their Options until such Options are exercised.
(c) Shares to be delivered to a Participant under the Plan shall be
registered in the name of the Participant or in the name of the
Participant and his or her spouse.
13. Administration.
(a) The Plan shall be administered by the Committee. In the event that the
Board has no Committee, then the Board shall act as the Committee. The
Committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the
Plan. Every finding, decision and determination made by the Committee
shall, to the full extent permitted by law, be final and binding upon
all parties.
(b) The Committee shall have the authority to delegate any of its
responsibilities under the Plan to management of the Company and agents
that it deems necessary or desirable to retain for the operation and
administration of the Plan.
14. Designation of Beneficiary. Each Participant shall designate a person
or persons to receive the value of his or her Account under the Plan in the
event of the Participant's death, in the form of Exhibit A to the Plan. A
Participant may, by written notice to the Committee during employment, alter or
revoke such designation, subject to any applicable law governing the designation
of beneficiaries. Such written notice shall be in the form of Exhibit A to the
Plan. If upon the death of a Participant, the Participant has not designated a
beneficiary under the Plan or if a designated beneficiary does not survive the
Participant, shares and/or cash representing the value of the Participant's
Account under the Plan shall be paid to the Participant's estate.
15. Transferability. Neither payroll deductions credited to a Participant's
account nor any rights with regard to the exercise of an Option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way by the Participant (other than by will, the laws of
descent and distribution or as provided in Section 14 hereof) by the
Participant. Any such attempt at assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds from an Purchase Period in accordance with
Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions from its
general corporate assets.
17. Reports. Individual Accounts shall be maintained for each participant
in the Plan. Statements of Account shall be given to participating Associates at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price and number of shares purchased on behalf of the
Participant, and, if any, the remaining cash balance.
18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of
shares each Participant may purchase during each Purchase Period, as
well as the price per share and the number of shares of Common Stock
covered by each Option under the Plan which has not yet been exercised
shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason
thereof shall be made, with respect to the number or price of shares of
Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Purchase Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise
Date"), and shall terminate immediately prior to the consummation of
such proposed dissolution or liquidation, unless provided otherwise
by the Committee. The Committee shall notify each Participant in
writing, at least ten (10) business days prior to the New Exercise Date,
that the Exercise Date for the Participant's Option has been changed to
the New Exercise Date and that the Participant's Option shall be
exercised automatically on the New Exercise Date, unless prior to such
date the Participant has withdrawn from the Purchase Period as
provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding Option
shall be assumed by, or an equivalent option substituted by, the
successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, any Purchase Periods then in
progress shall be shortened by setting a New Exercise Date, upon which
any Purchase Periods then in progress shall end. The New Exercise Date
shall be before the date of the Company's proposed sale or merger. The
Board shall notify each Participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date
for the Participant's Option has been changed to the New Exercise
Date and that the Participant's Option shall be exercised
automatically on the New Exercise Date, unless prior to such date the
Participant has withdrawn from the Purchase Period as provided in
Section 10 hereof.
19. Amendment or Termination.
(a) The Committee may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 19 hereof, no such termination
can affect options previously granted, provided that any Purchase
Period may be terminated by the Committee on any Exercise Date if the
Committee determines that the termination of the Purchase Period or
the Plan is in the best interests of the Company and its stockholders.
Except as provided in Section 18 and this Section 19 hereof, no
amendment may make any change in any Option theretofore granted which
adversely affects the rights of any Participant. To the extent
necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval of any
amendment to the Plan in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
Participant rights may be considered to have been "adversely
affected," the Committee shall be entitled to change the Purchase
Periods, limit the frequency and/or number of changes in the amount
withheld during an Purchase Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a
Participant in order to adjust for delays or mistakes in the
Company's processing of properly completed withholding elections,
establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's compensation,
and establish such other limitations or procedures as the
Committee determines in its sole discretion are advisable and
which are consistent with the Plan.
(c) In the event the Committee determines that the ongoing operation of the
Plan may result in unfavorable financial accounting consequences, the
Committee may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such
accounting consequence including, but not limited to:
(1) altering the Purchase Price for any Purchase Period
including a Purchase Period underway at the time of the change
in Purchase Price;
(2) shortening any Purchase Period so that Purchase Period ends on a
New Exercise Date, including a Purchase Period underway at
the time of the Board action; and
(3) allocating shares. Such modifications or amendments shall not
require stockholder approval or the consent of any Participants.
20. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation: (i) the
Securities Act of 1933, as amended, (ii) the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, and (iii) the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall be effective as of July 1, 2000, (the
"Effective Date"), provided that the Plan is approved by the stockholders of the
Company at an annual meeting or any special meeting of stockholders of the
Company within 12 months of the Effective Date. This Plan shall terminate on
June 30, 2010, unless sooner terminated under Section 19 hereof.
EXHIBIT A
AMES DEPARTMENT STORES, INC.
ASSOCIATE STOCK PURCHASE PLAN
ENROLLMENT AGREEMENT
[ ] Original Application Enrollment Date:___________
[ ] Change of Beneficiary(ies)
1. I, __________________________ hereby elect to participate in the Ames
Department Stores, Inc. Associate Stock Purchase Plan (the "Plan") and subscribe
to purchase shares of the Company's Common Stock in accordance with this
Enrollment Agreement and the Plan.
2. I hereby authorize after-tax payroll deductions from each of my
paychecks in the amount of ____% of my Compensation on each payday (not to
exceed ten percent (10%)) during the Purchase Period in accordance with the
Plan. (Note: no fractional percentages are permitted.)
3. I understand that my payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Plan. I understand that if I do not withdraw from a
Purchase Period, any accumulated payroll deductions will be used automatically
to exercise my Option.
4. I have received a complete copy of the Plan. I understand that my
participation in the Plan is subject to the terms of the Plan in all respects.
5. I understand that if I dispose of any shares received by me pursuant to
the Plan before the later of: (i) 2 years after the date on which the option to
acquire such stock was issued (i.e., the first day of the Purchase Period during
which I purchased such shares) or (ii) one year after the date the stock was
issued to me (i.e., the Exercise Date), (collectively, (i) and (ii) are referred
to as the "Holding Period") I will be treated for Federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
equal to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares.
6. I hereby agree to notify the Company in writing within 30 days after the
date of any disposition of my shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which arise upon
the disposition of the Common Stock.
7. I understand that the Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or
disposition of Common Stock by me prior to the end of the Holding Period. If I
dispose of such shares at any time after the expiration of the Holding Period, I
understand that I will be treated for Federal income tax purposes as having
received income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the lesser
of: (1) the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15% of
the fair market value of the shares on the first day of the Purchase Period. I
understand that the remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
8. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Enrollment Agreement is dependent upon my continuing eligibility to
participate in the Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME: (Please Print)___________________________________________________
(First) (Middle) (Last)
Percentage of Account: ___%
_________________________ ____________________________________
Relationship ____________________________________
Address
NAME: (Please Print)___________________________________________________
(First) (Middle) (Last)
Percentage of Account: ___%
_________________________ ____________________________________
Relationship ____________________________________
Address
NOTE: IF YOU ARE MARRIED AND YOU DO NOT NAME YOUR SPOUSE AS THE PRIMARY
BENEFICIARY OF YOUR ACCOUNT UNDER THE PLAN, YOUR SPOUSE MUST CONSENT TO YOUR
BENEFICIARY DESIGNATION BY SIGNING BELOW. FAILING TO ACQUIRE SPOUSAL CONSENT
WILL RENDER YOUR BENEFICIARY DESIGNATION NULL AND VOID.
Associate's Social
Security Number: ______________________________
Associate's Address: _______________________________
_______________________________
_______________________________
I UNDERSTAND THAT THIS ENROLLMENT AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE PURCHASE PERIODS UNLESS TERMINATED BY ME.
Dated:_____________ ___________________________________________
Signature of Associate
Dated:_____________ ____________________________________________
Spouse's Signature
(If above beneficiary designation is other than spouse)
EXHIBIT B
AMES DEPARTMENT STORES, INC.
ASSOCIATE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned Participant in the Purchase Period of the Ames Department
Stores, Inc. Associate Stock Purchase Plan (the "Plan") which began on
_______________, 20__ (the "Enrollment Date") hereby notifies the Company that
he or she hereby withdraws from the Purchase Period. He or she hereby directs
the Company to pay to the undersigned, as soon as practicable, all the payroll
deductions credited to his or her Account with respect to such Purchase Period.
The undersigned understands and agrees that his or her Option for such Purchase
Period will be automatically terminated. The undersigned understands that no
further payroll deductions will be made for the purchase of shares in the
current Purchase Period and the undersigned shall be eligible to participate in
succeeding Purchase Periods only by delivering to the Company a new completed
Enrollment Agreement.
Name and Address of Participant:
______________________
______________________
______________________
Signature:
______________________
Date: ______
EXHIBIT C
AMES DEPARTMENT STORES, INC.
ASSOCIATE STOCK PURCHASE PLAN
PARTICIPATING SUBSIDIARIES
(Dated as of July 1, 2000)
Ames Department Stores, Inc.,
Ames Merchandising Corporation
Annex B
AMES DEPARTMENT STORES, INC.
AMENDED AND RESTATED
1998 MANAGEMENT STOCK INCENTIVE PLAN
1. Purpose.
The Ames Department Stores, Inc. Amended and Restated 1998 Management Stock
Incentive Plan (the "Plan") is intended to provide incentives which will
attract, retain and motivate highly competent persons as key employees of Ames
Department Stores, Inc. (the "Company") and of any of its subsidiary
corporations now existing or hereafter formed or acquired, by providing them
opportunities to acquire shares of the common stock of the Company, par value
$.01 per share ("Common Stock"), or to receive monetary payments based on the
value of such shares pursuant to the Awards (as defined in Section 4 below)
described herein. Furthermore, the Plan is intended to assist in aligning the
interests of the Company's key employees with those of its stockholders. The
1998 Management Stock Incentive Plan was originally adopted effective February
20, 1998, and approved by the shareholders on May 27, 1998.
2. Administration.
(a) The Plan shall be administered by a committee (the "Committee"), which
shall be the Board of Directors of the Company (the "Board"), or, once
established, a committee or subcommittee of the Board of Directors appointed by
the Board from among its members. The Committee may be the Board's Compensation
Committee. Unless the Board determines otherwise, the Committee shall be
comprised solely of not less than two members who each shall qualify as a (i)
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or any successor
rule) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and (ii) an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder. The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it deems necessary for the proper
administration of the Plan and to make such determinations and interpretations
and to take such action in connection with the Plan and any Awards granted
hereunder as it deems necessary or advisable. All determinations and
interpretations made by the Committee shall be binding and conclusive on all
participants and their legal representatives. No member of the Board, no member
of the Committee and no employee of the Company shall be liable for any act or
failure to act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated. The Company
shall indemnify members of the Committee and any agent of the Committee who is
an employee of the Company, against any and all liabilities or expenses to which
they may be subjected by reason of any act or failure to act with respect to
their duties on behalf of the Plan, except in circumstances involving such
person's bad faith, gross negligence or willful misconduct.
(b) The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees have benefited
from the Plan, as determined by the Committee.
3. Participants.
Participants shall consist of such key employees of the Company and any of
its subsidiaries as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Committee may designate from time to time to receive
Awards under the Plan. Designation of a participant in any year shall not
require the Committee to designate such person to receive an Award in any other
year or, once designated, to receive the same type or amount of Award as granted
to the participant in any other year. The Committee shall consider such factors
as it deems pertinent in selecting participants and in determining the type and
amount of their respective Awards.
4. Type of Awards.
Awards under the Plan may be granted in any one or a combination of (a)
Stock Options, (b) Stock Awards, (c) Performance Awards and (d) Stock Units
(each as described below, and collectively, the "Awards"). Stock Awards,
Performance Awards and Stock Units may, as determined by the Committee in its
discretion, constitute Performance-Based Awards, as described in Section 10
below. Awards shall be evidenced by agreements (which need not be identical) in
such forms as the Committee may from time to time approve; provided, however,
that in the event of any conflict between the provisions of the Plan and any
such agreements, the provisions of the Plan shall prevail.
5. Common Stock Available Under the Plan.
(a) Shares Available. The aggregate number of shares of Common Stock that
may be subject to Awards, including Stock Options, granted under this Plan shall
be 3,800,000 shares of Common Stock, which may be authorized and unissued or
treasury shares, subject to any adjustments made in accordance with Section 11
below.
(b) Maximum Individual Limit. The maximum number of shares of Common Stock
with respect to which Awards may be granted or measured to any individual
participant under the Plan during the term of the Plan shall not exceed 600,000
shares.
(c) Shares Underlying Awards That Again Become Available. Any shares of
Common Stock subject to a Stock Option, Stock Award, Performance Award, or Stock
Unit which for any reason are cancelled, terminated without having been
exercised, forfeited, settled in cash or delivered to the Company as part or
full payment for the exercise of a Stock Option, shall again be available for
Awards under the Plan. The preceding sentence shall apply only for purposes of
determining the aggregate number of shares of Common Stock subject to Awards but
shall not apply for purposes of determining the maximum number of shares of
Common Stock subject to Awards (including the maximum number of shares of Common
Stock subject to Stock Options) that any individual participant may receive.
6. Stock Options.
(a) In General. The Committee is authorized to grant Stock Options to key
employees of the Company and any of its subsidiaries and shall, in its sole
discretion, determine the key employees who will receive Stock Options and the
number of shares of Common Stock underlying each Stock Option. Stock Options may
be (i) "incentive stock options" ("Incentive Stock Options"), within the meaning
of Section 422 of the Code, or (ii) Stock Options which do not qualify as
Incentive Stock Options ("Nonqualified Stock Options"). The Committee may grant
to any participant one or more Incentive Stock Options, Nonqualified Stock
Options, or both types of Stock Options. Each Stock Option shall be subject to
such terms and conditions consistent with the Plan as the Committee may impose
from time to time. In addition, each Stock Option shall be subject to the
following limitations set forth in this Section 6.
(b) Exercise Price. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine on the date of grant;
provided, however, subject to Section 6(e) below, that the per-share exercise
price shall not be less than 100 percent of the Fair Market Value (as defined in
Section 16 below) of the Common Stock on the date the option is granted.
(c) Payment of Exercise Price. The Stock Option exercise price may be paid
in cash or, in the discretion of the Committee, by the delivery of shares of
Common Stock then owned by the participant, by the withholding of shares of
Common Stock for which a Stock Option is exercisable, or by a combination of
these methods. In the discretion of the Committee, payment may also be made by
delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms. The Committee may prescribe any other method of
paying the exercise price that it determines to be consistent with applicable
law and the purpose of the Plan, including, without limitation, in lieu of the
exercise of a Stock Option by delivery of shares of Common Stock then owned by a
participant, providing the Company with a notarized statement attesting to the
number of shares owned, where upon verification by the Company, the Company
would issue to the participant only the number of incremental shares to which
the participant is entitled upon exercise of the Stock Option. In determining
which methods a participant may utilize to pay the exercise price, the Committee
may consider such factors as it determines are appropriate; provided, however,
that with respect to Incentive Stock Options, all such discretionary
determinations by the Committee shall be made at the time of grant and specified
in the Stock Option agreement.
(d) Exercise Period. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock Option
shall be exercisable later than ten years after the date it is granted. All
Stock Options shall terminate at such earlier times and upon such conditions or
circumstances as the Committee shall in its discretion set forth in such option
agreement on the date of grant, or as otherwise provided herein.
(e) Limitations on Incentive Stock Options. Incentive Stock Options may be
granted only to participants who are key employees of the Company or any of its
subsidiaries on the date of grant. The aggregate market value (determined as of
the time the Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options (under all option plans of the Company) are exercisable
for the first time by a participant during any calendar year shall not exceed
the maximum permitted by law. For purposes of the preceding sentence, (i)
Incentive Stock Options shall be taken into account in the order in which they
are granted and (ii) Incentive Stock Options granted before 1987 shall not be
taken into account. Incentive Stock Options may not be granted to any
participant who, at the time of grant, owns stock possessing (after the
application of the attribution rules of Section 424(d) of the Code) more than 10
percent of the total combined voting power of all outstanding classes of stock
of the Company or any of its subsidiaries, unless the option price is fixed at
not less than 110 percent of the Fair Market Value of the Common Stock on the
date of grant and the exercise of such option is prohibited by its terms after
the expiration of 5 years from the date of grant of such option. In addition, no
Incentive Stock Option shall be issued to a participant in tandem with a
Nonqualified Stock Option.
7. Stock Awards.
The Committee is authorized to grant Stock Awards to key employees of the
Company and any of its subsidiaries and shall, in its sole discretion, determine
the key employees who will receive Stock Awards and the number of shares of
Common Stock underlying each Stock Award. Stock Awards may be subject to such
terms and conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, and
the right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such Stock Award
and/or that the stock certificates evidencing such shares be held in custody or
bear restrictive legends until the restrictions thereon shall have lapsed. The
Stock Award agreement shall specify whether the participant shall have, with
respect to the shares of Common Stock subject to a Stock Award, all of the
rights of a holder of shares of Common Stock, including the right to receive
dividends and to vote the shares.
8. Performance Awards.
(a) In General. The Committee is authorized to grant Performance Awards to
key employees of the Company and any of its subsidiaries and shall, in its sole
discretion, determine the key employees who will receive Performance Awards and
the number of shares of Common Stock or Stock Units (as described in Section 10
below) that may be subject to each Performance Award. Each Performance Award
shall be subject to such terms and conditions consistent with the Plan as the
Committee may impose from time to time. The Committee shall set performance
targets at its discretion which, depending on the extent to which they are met,
will determine the number and/or value of Performance Awards that will be paid
out to the participants, and may attach to such Performance Awards one or more
restrictions. Performance targets may be based upon, without limitation,
Company-wide, divisional and/or individual performance.
(b) Adjustment of Performance Targets. With respect to those Performance
Awards that are not intended to qualify as Performance-Based Awards (as
described in Section 10 below), the Committee shall have the authority at any
time to make adjustments to performance targets for any outstanding Performance
Awards which the Committee deems necessary or desirable unless at the time of
establishment of goals the Committee shall have precluded its authority to make
such adjustments.
(c) Payout. Payment of earned Performance Awards may be made in shares of
Common Stock or in cash and shall be made in accordance with the terms and
conditions prescribed or authorized by the Committee. The participant may elect
to defer, or the Committee may require or permit the deferral of, the receipt of
Performance Awards upon such terms as the Committee deems appropriate.
9. Stock Units.
(a) In General. The Committee is authorized to grant Stock Units to key
employees of the Company and any of its subsidiaries and shall, in its sole
discretion, determine the key employees who will receive Stock Units and the
number of shares of Common Stock with respect to each Stock Unit. The Committee
shall determine the criteria for the vesting of Stock Units. A Stock Unit
granted by the Committee shall provide payment in shares of Common Stock at such
time as the award agreement shall specify. Shares of Common Stock issued
pursuant to this Section 9 may be issued with or without other payments
therefore as may be required by applicable law or such other consideration as
may be determined by the Committee. The Committee shall determine whether a
participant granted a Stock Unit shall be entitled to a Dividend Equivalent
Right (as defined below).
(b) Payout. Upon vesting of a Stock Unit, unless the Committee has
determined to defer payment with respect to such unit or a Participant has
elected to defer payment under Section 9(c) below, shares of Common Stock
representing the Stock Units shall be distributed to the participant unless the
Committee, with the consent of the participant, provides for the payment of the
Stock Units in cash or partly in cash and partly in shares of Common Stock equal
to the value of the shares of Common Stock which would otherwise be distributed
to the participant.
(c) Deferral. Prior to the year with respect to which a Stock Unit may
vest, the participant may elect not to receive Common Stock upon the vesting of
such Stock Unit and for the Company to continue to maintain the Stock Unit on
its books of account. In such event, the value of a Stock Unit shall be payable
in shares of Common Stock pursuant to the agreement of deferral.
(d) Definitions. A "Stock Unit" shall mean a notional account representing
one share of Common Stock. A "Dividend Equivalent Right" shall mean the right to
receive the amount of any dividend paid on the share of Common Stock underlying
a Stock Unit, which shall be payable in cash or in the form of additional Stock
Units.
10. Performance-Based Awards.
(a) In General. All Stock Options granted under the Plan, and certain Stock
Awards, Performance Awards, and Stock Units granted under the Plan, and the
compensation attributable to such Awards, are intended to (i) qualify as
Performance-Based Awards (as described in the next sentence) or (ii) be
otherwise exempt from the deduction limitation imposed by Section 162(m) of the
Code. Certain Awards granted under the Plan may be granted in a manner such that
the Awards qualify as "performance-based compensation" (as such term is used in
Section 162(m) of the Code and the regulations thereunder) and thus be exempt
from the deduction limitation imposed by Section 162(m) of the Code
("Performance-Based Awards"). Awards shall only qualify as Performance-Based
Awards if at the time of grant the Committee is comprised solely of two or more
"outside directors" (as such term is used in Section 162(m) of the Code and the
regulations thereunder).
(b) Stock Options. Stock Options granted under the Plan with an exercise
price at or above the Fair Market Value of the Common Stock on the date of grant
should qualify as Performance-Based Awards.
(c) Other Awards. Stock Awards, Performance Awards, and Stock Units granted
under the Plan should qualify as Performance-Based Awards if, as determined by
the Committee in its sole discretion, either the granting or vesting of such
Award is subject to the achievement of a performance target or targets based on
one or more of the performance measures specified in Section 10(d) below. With
respect to such Awards intended to qualify as Performance-Based Awards:
(1) the Committee shall establish in writing (A) the objective
performance-based goals applicable to a given period and (B) the individual
employees or class of employees to which such performance-based goals apply no
later than 90 days after the commencement of such period (but in no event after
25 percent of such period has elapsed);
(2) no Performance-Based Awards shall be payable to or vest with respect
to, as the case may be, any participant for a given period until the Committee
certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied; and
(3) after the establishment of a performance goal, the Committee shall not
revise such performance goal or increase the amount of compensation payable
thereunder (as determined in accordance with Section 162(m) of the Code) upon
the attainment of such performance goal.
(d) Performance Measures. The Committee may use the following performance
measures (either individually or in any combination) to set performance targets
with respect to Awards intended to qualify as Performance-Based Awards: net
sales; pretax income before allocation of corporate overhead and bonus; budget;
earnings per share; net income; division, group or corporate financial goals;
return on stockholders' equity; return on assets; attainment of strategic and
operational initiatives; appreciation in and/or maintenance of the price of the
Common Stock or any other publicly-traded securities of the Company; market
share; gross profits; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; economic value-added models;
comparisons with various stock market indices; and/or reductions in costs.
11. Adjustment Provisions.
If there shall be any change in the Common Stock of the Company, through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, reverse stock split, split up, spinoff, combination of shares, exchange
of shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to stockholders of the Company,
an adjustment shall be made to each outstanding Stock Option such that each such
Stock Option shall thereafter be exercisable for such securities, cash and/or
other property as would have been received in respect of the Common Stock
subject to such Stock Option had such Stock Option been exercised in full
immediately prior to such change or distribution, and such an adjustment shall
be made successively each time any such change shall occur. In addition, in the
event of any such change or distribution, in order to prevent dilution or
enlargement of participants' rights under the Plan, the Committee shall have the
authority to adjust, in an equitable manner, the number and kind of shares that
may be issued under the Plan, the number and kind of shares subject to
outstanding Awards, the exercise price applicable to outstanding Awards, and the
Fair Market Value of the Common Stock and other value determinations applicable
to outstanding Awards. Appropriate adjustments may also be made by the Committee
in the terms of any Awards under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards on an
equitable basis, including modifications of performance targets and changes in
the length of performance periods. In addition, other than with respect to Stock
Options and other awards intended to constitute Performance-Based Awards, the
Committee is authorized to make adjustments to the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or nonrecurring
events affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (A) any adjustment with respect to an Incentive
Stock Option shall comply with the rules of Section 424(a) of the Code, and (B)
in no event shall any adjustment be made which would render any Incentive Stock
Option granted hereunder other than an incentive stock option for purposes of
Section 422 of the Code.
12. Change in Control.
(a.) Accelerated Vesting. Notwithstanding any other provision of this Plan,
if there is a Change in Control of the Company (as defined in Section 12(b)
below), the Committee, in its discretion, may take such actions as it deems
appropriate with respect to outstanding Awards, including, without limitation,
accelerating the exercisability, vesting and/or payout of such Awards.
(b.) Definition. For purposes of this Section 12, (i) if there is an
employment agreement or a change-in-control agreement between the participant
and the Company or any of its subsidiaries in effect, "Change in Control" shall
have the same definition as the definition of "change in control" contained in
such employment agreement or change-in-control agreement, or (ii) if "Change in
Control" is not defined in such employment agreement or change-in-control
agreement, or if there is no employment agreement or change-in-control agreement
between the participant and the Company or any of its subsidiaries in effect, a
"Change in Control" of the Company shall be deemed to have occurred upon any of
the following events:
(1.)any person or other entity (other than any of the Company's
subsidiaries or any employee benefit plan sponsored by the Company or any of its
subsidiaries) including any person as defined in Section 13(d)(3) of the
Exchange Act, becomes the beneficial owner, as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of more than 35 percent of the total
combined voting power of all classes of capital stock of the Company normally
entitled to vote for the election of directors of the Company (the "Voting
Stock");
(2.)the stockholders of the Company approve the sale of all or
substantially all of the property or assets of the Company and such sale occurs;
(3.)the Company's Common Stock shall cease to be publicly traded (other
than a suspension of trading that lasts for a short period of time);
(4.)the stockholders of the Company approve a consolidation or merger of
the Company with another corporation (other than with any of the Company's
subsidiaries), the consummation of which would result in the shareholders of the
Company immediately before the occurrence of the consolidation or merger owning,
in the aggregate, less than 60 percent of the Voting Stock of the surviving
entity, and such consolidation or merger occurs; or
(5.)a change in the Company's Board occurs with the result that the members
of the Board on the Effective Date (as defined in Section 23(a) below) of the
Plan (the "Incumbent Directors") no longer constitute a majority of such Board,
provided that any person becoming a director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest or the settlement thereof, including but not limited to a
consent solicitation, relating to the election of directors of the Company)
whose election or nomination for election was supported by two-thirds (2/3) of
the then Incumbent Directors shall be considered an Incumbent Director for
purposes hereof. Notwithstanding anything contained in the Plan to the contrary,
a Change in Control of the Company shall not include an initial or subsequent
public offering of the Company.
(c.) Cashout. The Committee, in its discretion, may determine that, upon
the occurrence of a Change in Control of the Company, each Stock Option
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each share
of Common Stock subject to such Stock Option, an amount equal to the excess of
the Fair Market Value of such shares of Common Stock immediately prior to the
occurrence of such Change in Control over the exercise price per share of such
Stock Option; such amount to be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction) or in a
combination thereof, as the Committee, in its discretion, shall determine.
13. Termination of Employment.
(a.) Subject to any written agreement between the participant and the
Company or any of its subsidiaries, if a participant's employment is terminated
due to death or disability:
(1.)all unvested Stock Awards and all unvested Stock Units held by the
participant on the date of the participant's death or the date of the
termination of his or her employment, as the case may be, shall immediately
become vested as of such date;
(2.)all unexercisable Stock Options held by the participant on the date of
the participant's death or the date of the termination of his or her employment,
as the case may be, shall immediately become exercisable as of such date and
shall remain exercisable until the earlier of (A) the end of the one-year period
following the date of the participant's death or the date of the termination of
his or her employment, as the case may be, or (B) the date the Stock Option
would otherwise expire;
(3.)all exercisable Stock Options held by the participant on the date of
the participant's death or the date of the termination of his or her employment,
as the case may be, shall remain exercisable until the earlier of (A) the end of
the one-year period following the date of the participant's death or the date of
the termination of his or her employment, as the case may be, or (B) the date
the Stock Option would otherwise expire; and
(4.)all unearned and/or unvested Performance Awards held by the participant
on the date of the participant's death or the date of the termination of his or
her employment, as the case may be, shall immediately be forfeited by such
participant as of such date.
(b.) Subject to any written agreement between the participant and the
Company or any of its subsidiaries, if a participant's employment is terminated
by the Company for Cause (as defined in Section 13(f) below), all exercisable
and all unexercisable Stock Options, all unvested Stock Awards, all unearned
and/or unvested Performance Units, and all unvested Stock Units held by the
participant on the date of the termination of his or her employment for Cause
shall immediately be forfeited by such participant as of such date.
(c.) Subject to any written agreement between the participant and the
Company or any of its subsidiaries, if a participant's employment is terminated
for any reason other than for Cause or other than due to death or disability:
(1.)all unexercisable Stock Options, all unvested Stock Awards, all
unearned and/or unvested Performance Units, and all unvested Stock Units held by
the participant on the date of the termination of his or her employment shall
immediately be forfeited by such participant as of such date; and
(2.)all exercisable Stock Options held by the participant on the date of
the termination of his or her employment shall remain exercisable until the
earlier of (A) the end of the 90-day period following the date of the
termination of the participant's employment or (B) the date the Stock Option
would otherwise expire.
(d.) Notwithstanding anything contained in the Plan to the contrary, the
Committee may, in its sole discretion, provide that:
(1.)any or all unvested Stock Awards and/or any or all unvested Stock Units
held by the participant on the date of the participant's death and/or the date
of the termination of the participant's employment shall immediately become
vested as of such date;
(2.)any or all unexercisable Stock Options held by the participant on the
date of the participant's death and/or the date of the termination of his or her
employment shall immediately become exercisable as of such date and shall remain
exercisable until a date that occurs on or prior to the date the Stock Option is
scheduled to expire, provided, however, that Incentive Stock Options shall
remain exercisable not longer than the end of the 90-day period following the
date of the termination of the participant's employment;
(3.)any or all exercisable Stock Options held by the participant on the
date of the participant's death and/or the date of the termination of his or her
employment shall remain exercisable until a date that occurs on or prior to the
date the Stock Option is scheduled to expire, provided, however, that Incentive
Stock Options shall remain exercisable not longer than the end of the 90-day
period following the date of the termination of the participant's employment;
and/or
(4.)a participant shall immediately become vested in all or a portion of
any earned Performance Unit held by such participant on the date of the
termination of the participant's employment, and such vested Performance Unit
(or portion thereof) and/or any unearned Performance Unit (or portion thereof)
held by such participant on the date of the termination of his or her employment
shall immediately become payable to such participant as if all performance goals
had been met as of the date of the termination of his or her employment.
(e.) Notwithstanding anything contained in the Plan to the contrary, (i)
the provisions contained in this Section 13 shall be applied to an Incentive
Stock Option only if the application of such provision maintains the treatment
of such Incentive Stock Option as an Incentive Stock Option and (ii) the
exercise period of an Incentive Stock Option in the event of a termination due
to disability provided in Section 12(a)(3) above shall only apply if the
participant's disability satisfies the requirement of "permanent and total
disability" as defined in Section 22(e)(3) of the Code.
(f.) For purposes of this Section 13, if there is an employment agreement
between the participant and the Company or any of its subsidiaries in effect,
"Cause" shall have the same definition as the definition of "Cause" contained in
such employment agreement, or if "Cause" is not defined in such employment
agreement or if there is no employment agreement between the participant and the
Company or any of its subsidiaries in effect, "Cause" shall include, but is not
limited to:
(1.)any willful and continuous neglect of or refusal to perform the
employee's duties or responsibilities with respect to the Company or any of its
subsidiaries, insubordination, dishonesty, gross neglect or willful malfeasance
by the participant in the performance of such duties and responsibilities, or
the willful taking of actions which materially impair the participant's ability
to perform such duties and responsibilities, or any serious violation of the
rules or regulations of the Company;
(2.)the violation of any local, state or federal criminal statute,
including, without limitation, an act of dishonesty such as embezzlement, theft
or larceny;
(3.)intentional provision of services in competition with the Company or
any of its subsidiaries, or intentional disclosure to a competitor of the
Company or any of its subsidiaries of any confidential or proprietary
information of the Company or any of its subsidiaries; or
(4.)any similar conduct by the participant with respect to which the
Company determines in its discretion that the participant has terminated
employment under circumstances such that the payment of any compensation
attributable to any Award granted under the Plan would not be in the best
interest of the Company or any of its subsidiaries.
14. Transferability.
Each Award granted under the Plan to a participant which is subject to
restrictions on transferability and/or exercisability shall not be transferable
other than by will or the laws of descent and distribution, and/or shall be
exercisable, during the participant's lifetime, only by the participant. In the
event of the death of a participant, each Stock Option theretofore granted to
him or her shall be exercisable during such period after his or her death as the
Committee shall in its discretion set forth in such option or right on the date
of grant and then only by the executor or administrator of the estate of the
deceased participant or the person or persons to whom the deceased participant's
rights under the Stock Option shall pass by will or the laws of descent and
distribution. Notwithstanding the foregoing, at the discretion of the Committee,
an Award (other than an Incentive Stock Option) may permit the transferability
of such Award by a participant solely to members of the participant's immediate
family or trusts or family partnerships for the benefit of such persons, subject
to any restriction included in the Award agreement.
15. Other Provisions.
Awards granted under the Plan may also be subject to such other provisions
(whether or not applicable to the Award granted to any other participant) as the
Committee determines on the date of grant to be appropriate, including, without
limitation, for the installment purchase of Common Stock under Stock Options, to
assist the participant in financing the acquisition of Common Stock, for the
forfeiture of, or restrictions on resale or other disposition of, Common Stock
acquired under any form of Award, for the acceleration of exercisability or
vesting of Awards in the event of a Change in Control of the Company, for the
payment of the value of Awards to participants in the event of a Change in
Control of the Company, or to comply with federal and state securities laws, or
understandings or conditions as to the participant's employment in addition to
those specifically provided for under the Plan.
16. Fair Market Value.
For purposes of this Plan and any Awards granted hereunder, Fair Market
Value shall be (i) the closing price of the Common Stock on the date of
calculation (or on the last preceding trading date if Common Stock was not
traded on such date) if the Common Stock is readily tradable on a national
securities exchange or other market system or (ii) if the Common Stock is not
readily tradable, the amount determined in good faith by the Committee as the
fair market value of the Common Stock.
17. Withholding.
All payments or distributions of Awards made pursuant to the Plan shall be
net of any amounts required to be withheld pursuant to applicable federal, state
and local tax withholding requirements. If the Company proposes or is required
to distribute Common Stock pursuant to the Plan, it may require the recipient to
remit to it or to the corporation that employs such recipient an amount
sufficient to satisfy such tax withholding requirements prior to the delivery of
any certificates for such Common Stock. In lieu thereof, the Company or the
employing corporation shall have the right to withhold the amount of such taxes
from any other sums due or to become due from such corporation to the recipient
as the Committee shall prescribe. The Committee may, in its discretion and
subject to such rules as it may adopt (including any as may be required to
satisfy applicable tax and/or non-tax regulatory requirements), permit an
optionee or Award or right holder to pay all or a portion of the federal, state
and local withholding taxes arising in connection with any Award consisting of
shares of Common Stock by electing to have the Company withhold shares of Common
Stock having a Fair Market Value equal to the amount of tax to be withheld, such
tax calculated at rates required by statute or regulation.
18. Tenure.
A participant's right, if any, to continue to serve the Company as a
director, officer, employee, or otherwise, shall not be enlarged or otherwise
affected by his or her designation as a participant under the Plan.
19. Unfunded Plan.
Participants shall have no right, title, or interest whatsoever in or to
any investments which the Company may make to aid it in meeting its obligations
under the Plan. Nothing contained in the Plan, and no action taken pursuant to
its provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any participant, beneficiary,
legal representative or any other person. To the extent that any person acquires
a right to receive payments from the Company under the Plan, such right shall be
no greater than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of such amounts except as expressly
set forth in the Plan. The Plan is not intended to be subject to the Employee
Retirement Income Security Act of 1974, as amended.
20. No Fractional Shares.
No fractional shares of Common Stock shall be issued or delivered pursuant
to the Plan or any Award. The Committee shall determine whether cash, or Awards,
or other property shall be issued or paid in lieu of fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
21. Duration, Amendment and Termination.
No Award shall be granted more than ten years after the Effective Date;
provided, however, that the terms and conditions applicable to any Award granted
prior to such date may thereafter be amended or modified by mutual agreement
between the Company and the participant or such other persons as may then have
an interest therein. Also, by mutual agreement between the Company and a
participant hereunder, under this Plan or under any other present or future plan
of the Company, Awards may be granted to such participant in substitution and
exchange for, and in cancellation of, any Awards previously granted such
participant under this Plan, or any other present or future plan of the Company.
The Board may amend the Plan from time to time or suspend or terminate the Plan
at any time. However, no action authorized by this Section 21 shall reduce the
amount of any existing Award or change the terms and conditions thereof without
the participant's consent. No amendment of the Plan shall, without approval of
the stockholders of the Company, (a) increase the total number of shares which
may be issued under the Plan or the maximum number of shares with respect to
Stock Options and other Awards that may be granted to any individual under the
Plan or (b) modify the requirements as to eligibility for Awards under the Plan;
provided, however, that no amendment may be made without approval of the
stockholders of the Company if the amendment would disqualify any Incentive
Stock Options granted hereunder.
22. Governing Law.
This Plan, Awards granted hereunder and actions taken in connection
herewith shall be governed and construed in accordance with the laws of the
State of New York (regardless of the law that might otherwise govern under
applicable New York principles of conflict of laws).
23. Effective Date.
(a.) The Plan shall be effective as of the date on which it is approved by
the stockholders.
(b.) This Plan shall terminate on February 19, 2008 (unless sooner
terminated by the Board).