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
-------------------
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14-a6(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.
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(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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined.):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
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 MAY 21, 1997
The Annual Meeting of Stockholders of Ames Department Stores,
Inc., a Delaware corporation (the "Company"), will be held at the Radisson
Hotel and Conference Center, Cromwell, Connecticut on Wednesday, May 21,
1997 at 10:00 a.m., to consider and act upon the following matters:
1. the election of seven (7) directors for a term of one year or
until their successor(s) have been elected and qualified;
2. the ratification and approval of the appointment of Arthur
Andersen LLP as independent certified public accountants and
auditors for the Company for the fiscal year ending January 31, 1998;
and
3. 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 March
28, 1997. 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 store located at 30 Waterchase Drive, Rocky Hill,
Connecticut 06067.
By Order of the Board of Directors
/s/ David H. Lissy
--------------------
Rocky Hill, Connecticut David H. Lissy
April 3, 1997 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 MAY 21, 1997
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 May 21, 1997 at 10:00 a.m.
(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
transmitted to stockholders of the Company, together with the Annual Report
on Form 10-K for the fiscal year ended January 25, 1997 ("fiscal year 1996"),
on or about April 9, 1997.
Holders of outstanding shares of Common Stock of record at the close of
business on March 28, 1997 (the "Record Date") are entitled to notice of
and to vote at the meeting. Stockholders representing a majority of the
outstanding shares must be present in person or represented by proxy at the
meeting for there to be a quorum for the conduct of business. For this
purpose, shares which are present or represented by a proxy will be counted
for quorum purposes regardless of whether the holder of the shares or proxy
fails to vote on, or whether a broker with discretionary authority fails to
exercise its discretionary voting authority with respect to, any particular
matter. Once a quorum of the stockholders is established, a plurality of
the votes represented by shares of Common Stock present in person or
represented by proxy at the meeting is necessary for the election of
directors; the remaining proposal requires approval by a majority of the
outstanding shares. For voting purposes on a particular matter (as opposed
to establishing a quorum), abstentions and broker non-votes will not be
counted. Broker non-votes occur when a broker nominee (which has voted on
one or more matters at the meeting) does not vote on one or more other
matters because it has not received instructions to so vote from the
beneficial owner and does not have discretionary authority to so vote. At
the close of business on the Record Date, there were 21,188,234 shares of
Common Stock, par value $.01 per share, of the Company issued and
outstanding, each of which is entitled to one vote on each matter to be
acted upon at the meeting.
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 seven (7) directors listed herein; and (2) 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 January 31, 1998.
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)
Seven directors are to be elected at the Annual Meeting of
Stockholders to hold office until the next annual meeting of stockholders
or until the election and qualification of their respective successors.
The Board of Directors has nominated the persons named in the table below,
all of whom are currently directors of the Company.
Unless otherwise specified in a duly executed and returned
proxy, the shares voted pursuant thereto will be cast for the nominees.
If, for any reason, any of the nominees should be unable to accept the
nomination or election, such proxy will be voted for the election of a
substitute nominee recommended by the Board of Directors. The Board of
Directors, however, has no reason to believe that any nominee will be
unable to serve as a director.
Set forth below is certain relevant information with respect to
each nominee as of March 1, 1997:
SHARES OF
FIRST COMMON STOCK
NAME, AGE, PRINCIPAL OCCUPATION, BECAME BENEFICIALLY
BUSINESS EXPERIENCE AND DIRECTORSHIPS DIRECTOR OWNED (1)
-------------------------------------- -------- ------------
JOSEPH R. ETTORE, age 57 ...................... 1994 185,000
President, Chief Executive Officer and Director since June, 1994.
Prior to joining Ames, he was President, Chief Executive Officer and
Director of Jamesway Corporation ("Jamesway") from July, 1993 to June,
1994; President, Chief Operating Officer and Director of Jamesway in June, 1993;
Chairman of the Board and Chief Executive Officer of Stuarts Department
Stores, Inc. ("Stuarts") from October, 1992 to June, 1993; and President,
Chief Operating Officer and Director of Stuarts from
October, 1989 to October, 1992. He remained a Director of Stuarts until
May, 1994. Jamesway filed for protection under Chapter 11 of the
Bankruptcy Code ("Chapter 11") in July, 1993 and emerged from the Chapter
11 case in January, 1995 and refiled for protection under Chapter 11 in
October, 1995. Stuarts filed under Chapter 11 in December, 1990 and
emerged from the Chapter 11 case in October, 1992 and re-filed for
protection under Chapter 11 in May, 1995.
SHARES OF
FIRST COMMON STOCK
NAME, AGE, PRINCIPAL OCCUPATION, BECAME BENEFICIALLY
BUSINESS EXPERIENCE AND DIRECTORSHIPS DIRECTOR OWNED (1)
------------------------------------- -------- ------------
FRANCIS X. BASILE, age 65...................... 1992 13,500
Chairman and Chief Executive Officer of the
CIT Group/Factoring, Inc. until his retirement in January, 1992. He was
appointed President and Chief Executive Officer of the CIT Group/
Factoring, Inc. in January, 1986. Prior to his retirement, he was
also a Director and the Chairman of the National Commercial Finance
Association and a member of its Executive Committee.
PAUL BUXBAUM, age 42 .......................... 1992* 13,500
President of Buxbaum, Ginsberg & Associates, a nationwide retail
consulting company. He is also a Director of Richmond
Gordman 1/2 Price Stores and formerly a
Director of Herbalife International, Inc.
ALAN COHEN, age 60 .................................... 1992 38,500
Chairman of Alco Capital Group, Inc., et al.,
a diversified financial service and investment company, since 1975, and
Chief Executive Officer of Russ Toggs, Inc., since November, 1993. He is
also Chairman of the Board of Marion Oil Corp. and Alco Cadillac-Pontiac
Sales Corp., and formerly served as court-appointed trustee of Tower
Financial Corporation and as Chief Executive Officer of Health-Tex, Inc.
RICHARD M. FELNER, age 61..................... 1994 16,000
Head of Richard M. Felner Associates, a consulting firm specializing
in retail and commercial real estate, since 1991. From 1985 to 1991, he
was Vice President of Real Estate and Corporate Development, and Director,
of Worths Stores Corporation, a subsidiary of Reitmans Ltd., Canada's
largest women's apparel retailer.
SIDNEY S. PEARLMAN, age 65...................... 1992 15,500
Currently retired. He was formerly Senior Vice President/General
Merchandise Manager of Younkers, Inc. from 1987 to March, 1991. He has
extensive retail experience, having served as president of three different
department store chains.
LAURIE M. SHAHON, age 45 ....................... 1995 6,000
President of Wilton Capital Group since January, 1994 which makes
principal investments in later-stage venture capital companies and medium-
sized management buyouts. She was previously Managing Director of '21'
International Holdings, Inc., a private holding company, from April, 1988
to December, 1993. She is also a Director of Arbor Drugs, Inc., One Price
Clothing Stores, Inc. and Homeland Holding Corporation.
<FN>
(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.
* Chairman of the Board of Directors since July, 1993.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THESE
NOMINEES. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
BOARD MEETINGS AND COMMITTEES
During fiscal year 1996, the Board of Directors held eight (8)
meetings. With the exception of Mr. Cohen, none of the directors attended
fewer than 75% of the total number of meetings of the Board of Directors
and committees of which they were members during fiscal year 1996.
During fiscal year 1996, the Board of Directors had an Audit
Committee comprised of Messrs. Basile (Chairman), Buxbaum, and Cohen, and a
Compensation Committee comprised of Messrs. Pearlman (Chairman), Basile,
and Buxbaum. Commencing with the start of fiscal year 1997, the Audit
Committee consists of Messrs. Cohen (Chairman), Basile and Buxbaum, and the
Compensation Committee consists of Ms. Shahon (Chairman) and Messrs.
Buxbaum and Pearlman. In addition, commencing with the start of fiscal
year 1997, the Board of Directors has established a Corporate Governance
Committee consisting of Messrs. Felner (Chairman), Pearlman and Ms. Shahon.
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. During fiscal year 1996, there were six (6)
formal meetings and numerous other conversations held by the Compensation
Committee. The Audit Committee met two (2) times during fiscal year 1996;
at each of these meetings, the Audit Committee was joined by other outside
directors.
COMPENSATION OF DIRECTORS
Ames' directors who are not full-time Ames employees receive
$40,000 in director's fees ($80,000 per year for the Chairman) 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 1996, Board activity and meetings exceeded the anticipated number of
regular meetings. The directors, however, determined to limit their
compensation for fiscal year 1996 to the base fee for meetings and to
forego any additional compensation for meetings in excess of the planned
schedule.
Pursuant to the Company's 1994 Non-Employee Directors Stock
Option Plan (the "Non-Employee Plan") which was approved by the Company's
stockholders on May 24, 1995, Ames' directors who are
not full-time Ames employees may be granted options to
purchase Common Stock of the Company. 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 25, 1997, Messrs. Basile,
Buxbaum, Cohen and Pearlman had been granted 12,500 options each and Mr.
Felner and Ms. Shahon had been granted 5,000 options each. Effective on
the date of each annual meeting of stockholders of the Company commencing
with the 1996 Annual Meeting, each non-employee director of the Company
then in office will be granted options to purchase 2,500 shares with the
date of grant to be the date of such meeting. All options terminate ten
years after date of grant.
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 25, 1997.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
------------------------------------
Annual Compensation Awards Payouts
-------------------------------------- ---------- --------- ------------
Name & Other Restricted (#) LTIP All
Principal Fiscal Annual Stocks Options/ Payouts Other
Position Year Salary Bonus(a) Comp. Awards(b) SARs(c) (d) Comp.(e)
- ---------------------------------------------------------------------------------------------------------------------
>
Joseph R. Ettore 1996 $815,385 $575,000 (f) $ -0- 300,000 (g) -0- $39,938
President & Chief 1995 750,000 -0- (f) 206,250 -0- -0- 36,530
Executive Officer 1994 (h) 481,731 450,000 (f) -0- 200,000 -0- 26,514
Denis T. Lemire 1996 324,038 140,000 (f) -0- 59,000 -0- 6,017
Executive Vice Presi- 1995 300,000 -0- 33,200 96,250 -0- -0- 1,507
dent, Merchandising 1994 (i) 132,692 50,000 (f) -0- 30,000 -0- 352
John F. Burtelow 1996 278,597 112,200 (f) -0- 9,000 -0- 4,456
Executive Vice Presi- 1995 263,462 -0- (f) 96,250 -0- -0- 1,219
dent Chief Financial 1994 (j) 125,000 -0- (f) -0- 30,000 -0- 422
Officer
Eugene E. Bankers 1996 224,473 90,853 (f) -0- 6,300 -0- 8,016
Senior Vice Presi- 1995 216,361 -0- (f) 68,750 -0- -0- 7,677
dent, Marketing 1994 202,500 -0- (f) -0- 21,000 -0- 2,398
David H. Lissy 1996 220,193 88,679 (f) -0- 6,300 -0- 6,881
Senior Vice Presi- 1995 214,947 -0- (f) 68,750 -0- -0- 6,445
dent, General Counsel 1994 210,000 -0- (f) -0- 21,000 -0- 6,241
and Corporate Secretary
<FN>
(a) Represents certain signing bonuses and bonuses earned under the Annual Incentive
Compensation Plan (see below).
(b) Pursuant to the 1995 Long Term Incentive Plan (the "Long Term Plan"; see below),
Restricted Stock has been awarded to the Chief Executive Officer and to each Executive
Vice President and each Senior Vice President. The dollar value of the Restricted Stock
award shown in the table is calculated by multiplying the share price of the Company's
Common Stock on the date of the award by the number of shares awarded. As of 1/25/97, a
total of 345,000 shares of Restricted Stock had been awarded under the Long Term Plan.
The total aggregate value of these shares was $2,199,375, based on a market price of the
Company's Common Stock of $6.375 as of 1/25/97.
(c) Stock Options were granted to certain members of management pursuant to the 1994
Management Stock Option Plan (see below).
(d) There were no payouts under the Long Term Plan discussed in (b) above.
(e) Represents the Company's matching contributions under the Retirement and Savings Plan
(see below), excess paid life insurance, and for J. Ettore, $31,943, $28,761 and $24,576
of paid disability and life insurance coverage in fiscal years 1996, 1995 and 1994,
respectively.
(f) Represents a car allowance and, for J. Ettore and D. Lemire, a living allowance that for
each executive except D. Lemire in fiscal year 1995 aggregated to less than the lesser of
$50,000 or 10% of the individual executive's total salary and bonus.
(g) Represents 300,000 options granted to J. Ettore pursuant to an employment contract which
is more fully described below. The grant is subject to stockholder approval. In the
event such approval is not obtained, the employment contract provides, with certain
restrictions, that Mr. Ettore will be entitled to 300,000 stock appreciation rights
units.
(h) Joined the Company on June 9, 1994 (see summary description of employment contract in
this proxy statement).
(i) Joined the Company on August 22, 1994 (see summary description of employment contract in
this proxy statement).
(j) Joined the Company on August 1, 1994.
OPTION GRANTS IN LAST FISCAL YEAR
The table below discloses information regarding grants of stock options
and stock appreciation rights (SARs) to the named officers during fiscal year
1996:
Option/SAR Grants in Last Fiscal Year
Individual Grants Potential
-------------------------------------------------------- Realizable Value
Number of % of at Assumed
Securities Total Rate of Stock
Underlying Options/SARs Exercise Price
Options Granted to or Base Appreciation
Granted Employees in Price Expiration for Option Term
Name # Fiscal 1996 ($/Sh) Date 5% 10%
-------- ----------- ------------ -------- ---------- ------ -------
Joseph R. Ettore 300,000 (a) 36.4% $2.13 (b) $177,000 $387,000
Denis T. Lemire 9,000 1.1% 2.81 5/21/2001 7,020 15,390
50,000 6.1% 2.32 8/01/2006 73,000 185,000
John F. Burtelow 9,000 1.1% 2.81 5/21/2001 7,020 15,390
Eugene E. Bankers 6,300 0.8% 2.81 5/21/2001 4,914 10,773
David H. Lissy 6,300 0.8% 2.81 5/21/2001 4,914 10,773
<FN>
(a) Represents 300,000 options granted to J. Ettore pursuant to an
employment contract which is more fully described below. The grant is
subject to stockholder approval. In the event such approval is not
obtained, the employment contract provides, with certain restrictions,
that Mr. Ettore will be entitled to 300,000 stock appreciation rights
units.
(b) For purposes of this calculation, assumed to be five years from
date of stockholder approval.
Pursuant to the 1994 Management Stock Option Plan (the "Option Plan"),
the Company may grant options with respect to an aggregate of up to 1,700,000
shares of Common Stock, with no individual optionee to receive in excess of
200,000 shares of Common Stock upon exercise of options granted under the Option
Plan. During fiscal year 1996, options with respect to a total of 523,350
shares of Common Stock were issued to certain members of management. After
certain terminations and exercises, options with respect to a total of
1,603,980 shares of Common Stock were outstanding as of January 25, 1997.
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 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 purchased annually for each of five years, beginning one year
after the grant date. For options granted to J. Ettore in July, 1996, once
stockholder approval has been obtained, the shares underlying the options
may be purchased immediately. For all options granted on May 21,
1996, 100% of the shares underlying the options may be purchased one year after
the grant date. The unexercised portion of the options granted under the 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 terminate
six years from grant date; and the options granted to D. Lemire in
August, 1996 terminate ten years from grant date.
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 ("FY")
1996 and stock options and SARs held by the named executive officers as of
January 25, 1997. There were no stock options or SARs repriced during FY 1996.
AGGREGATED 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 1/25/97 at 1/25/97($)
(#)Shares ($) Value Exercisable / Exercisable /
Name Exercised Received Unexercisable Unexercisable
------------------- --------- -------- --------------- ----------------------
Joseph R. Ettore -0 - $ -0- 80,000/420,000 (a) $210,000/$1,588,500 (a)
Denis T. Lemire -0- -0- 20,000/ 69,000 57,500/ 263,585
John F. Burtelow -0- -0- 20,000/ 19,000 51,240/ 57,705
Eugene E. Bankers -0- -0- 14,000/ 13,300 18,368/ 31,644
David H. Lissy -0- -0- 89,000/ 13,300 206,693/ 31,644
<FN>
(a) Includes 300,000 options granted to J. Ettore pursuant to an
employment contract which is more fully described below. The grant is
subject to stockholder approval. In the event such approval is not
obtained, the employment contract provides, with certain restrictions,
that Mr. Ettore will be entitled to 300,000 stock appreciation rights
units.
In connection with the plan of reorganization, SARs exercisable
only for cash, equivalent to 1.2 million shares of the new Common Stock were
granted to certain members of management and key employees as compensation
for their efforts in restructuring Ames and enabling it to emerge from
Chapter 11. After exercises and terminations, SARs equivalent to 166,683
shares (including 75,000 for D. Lissy) were fully vested and outstanding as
of January 25, 1997. Each SAR entitles the recipient upon exercise (which
may not be later than December 30, 1997) to receive in cash the excess of
(a) the average closing price of a share of Common Stock during the ten
trading days prior to the exercise date over
(b) $2.96. The average closing price for the last 10 trading days of fiscal
year 1996 was $5.47 per share. During fiscal year 1996, a total of 16,667
SARs were exercised.
LONG TERM INCENTIVE PLAN AWARDS
There were no awards of Restricted Stock (as defined below) to
the named executive officers during fiscal year 1996.
The Company's 1995 Long Term Incentive Plan (the "Long Term
Plan") was approved by the stockholders on May 24, 1995. The purpose of the
Long Term Plan is to promote the long term success of the Company by
affording certain officers with an opportunity to acquire an ownership
interest in the Company in order to incentivize such persons and to align
their financial interests with the
stockholders of the Company. Pursuant to the Long Term Plan, the Company
may make awards ("Awards") of an aggregate of up to 500,000 shares of Common
Stock that are subject to restrictions on transfer thereof ("Restricted
Stock") and a cash payment (a "Cash Payment") in an amount up to 50% of the
Fair Market Value (as defined in the Long Term 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 as an estimate of an
Award recipient's Federal income tax liability on the Award (including the
Cash Payment) in order to allow the recipient to receive the Restricted
Stock free and clear on the Vesting Date.
The Company officers eligible for Awards under the Long Term
Plan are the Chief Executive Officer, each Executive Vice President and
each Senior Vice President. The Compensation Committee administers the
Long Term Plan.
ANNUAL INCENTIVE COMPENSATION PLAN
The Company 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 the Company's
financial goals for the year (as well as customer service goals for store
and field management). Pursuant to the Annual Bonus Plan, bonuses for
fiscal year 1996 will be paid in May, 1997. Participants must be active
Ames employees at the time the bonus payments are made to earn a bonus.
RETIREMENT AND SAVINGS PLAN
The Company has a defined contribution retirement and savings
plan (the "Retirement and Savings Plan") that is qualified under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended.
Employees who have reached the age of 21 are eligible to participate after
one year of service provided they have completed at least 1,000 hours of
service in a 12-month period. 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
such contribution. A participant may contribute to the plan from 1% to 18%
of annual compensation on a pre-tax or after-tax basis, or a combination of
both. Participants who terminate their employment with the Company are
entitled to receive the full amount of their contributions and, depending
on the length of the participant's service to Ames, a portion of the
Company's matching contributions.
The following table sets forth as to the named executive
officers (those listed in the Summary Compensation Table), and all other
officers and employees of Ames as a group, the aggregate matching
contributions by Ames under the Retirement and Savings Plan during fiscal
year 1996:
Aggregate Matching
Contributions
-----------------
Joseph R. Ettore $ 4,846
Denis T. Lemire 4,798
John F. Burtelow 3,237
Eugene E. Bankers 4,867
David H. Lissy 4,861
All other employees and officers $2,680,789
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 the Company's 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
President, Chief Executive Officer and Director, potentially qualifies for
benefits under this plan. As of January 25, 1997, Mr. Ettore had completed
approximately thirty-two months of credited service as a full-time officer
and director of Ames. No payments were made under this plan in fiscal year
1996.
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 the Company and Joseph R. Ettore,
President and Chief Executive Officer, and Denis T. Lemire, Executive Vice
President-Merchandising.
The Company is party to an employment agreement with Joseph
Ettore dated June 1, 1996 and expiring May 31, 1999 (the "Ettore
Agreement"), pursuant to which Mr. Ettore serves as President and Chief
Executive Officer of the Company. Under the Ettore Agreement, Mr. Ettore
is entitled to a base salary of $850,000 per year; an annual bonus if
earned under the Company's Annual Bonus Plan; a signing bonus of $150,000
(paid in June 1996); an option to acquire 300,000 shares of Common Stock
(with an option date grant of July 11, 1996), such grant of options
is subject to approval by the Stockholders of the Company no later than
its annual meeting to be held in May 1998; in the event such approval
is not obtained, Mr. Ettore will receive a cash payment based on an
increase in the price of the Company's common stock from July 11, 1996
through the end of the Term of Employment (as such term is defined in
the Ettore Agreement); a bonus of $450,000 payable at the end of the Term of
Employment; a living allowance of $48,000 per year; and other compensation
and benefits in effect from time to time for the Company's senior
executive officers.
During the term of the Ettore Agreement, the Company is
required to reimburse Mr. Ettore $12,000 per year for the cost of
maintaining a policy insuring the life of Mr. Ettore with a face amount of
$500,000 and to provide additional life insurance in the face amount of
$500,000. During the term of the Ettore Agreement, the Company shall also
maintain a disability insurance policy which shall pay Mr. Ettore 60% of
his base salary during any period of disability up to age 65. In addition,
the Company shall maintain customary directors' and officers' liability
insurance for Mr. Ettore if such insurance is available to the Company at
reasonable costs.
In the event that Ames terminates the employment of Mr. Ettore
without cause (as such term is defined in the Ettore Agreement) Mr. Ettore
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 (or, if applicable, receipt of
the cash payment in lieu of options); and (d) coverage under the Company's
medical plan for one year after the date of termination. In the event that
the employment of Mr. Ettore is terminated by the Company for cause, or if
he terminates his agreement other than as specifically contemplated in the
Ettore Agreement in connection with a change in control (as such term is
defined in the Ettore Agreement) of the Company, he shall 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. In the event that there is a change of control and Mr. Ettore
terminates employment by providing three months' prior written notice
thereof to the Company (given within 30 days of the change in control), he
shall be entitled to the same termination entitlement as listed above for
termination without cause.
The Company is party to an employment agreement with Denis
Lemire dated August 1, 1996 expiring July 31, 1999 (the "Lemire
Agreement"), pursuant to which Mr. Lemire serves as Executive Vice
President, Merchandising of the Company. Under the Lemire Agreement, Mr.
Lemire is entitled to an initial base salary of $350,000 per year
increasing to $400,000 per year over the term of the contract; an annual
bonus under the Company's 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 Lemire Agreement); an option to acquire 50,000 shares of Common Stock
under the 1994 Plan; a living allowance of $18,000 per year; and other
compensation and benefits in effect from time to time for the Company's
senior executive officers.
In the event that Ames terminates the employment of Mr. Lemire
without cause (as such term is defined in the Lemire Agreement), Mr. Lemire
shall 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
Company's medical plan for one year after the date of termination. In the
event that the employment of Mr. Lemire is terminated by the Company for
cause, or if he terminates his agreement, 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.
INCOME CONTINUATION PLAN
The named executive officers of Ames (those listed in the
Summary Compensation Table), except for Mr. Ettore and Mr. Lemire who have
separate contracts (see above), participate in an Income Continuation Plan
("ICP"), which guarantees up to one year's salary in the event of
termination other than for cause. Certain other officers of Ames also
participate in the ICP.
KEY EMPLOYEE CONTINUITY BENEFIT PLAN
Ames has a Key Employee Continuity Benefit Plan (the
"Continuity Plan") that covers all officers (Vice President and above) and
certain other employees of Ames. If the employment of any participant in
the Continuity Plan is terminated by the Company other than for death,
disability, cause (as defined in the Continuity Plan) or by the participant
for good reason (as defined in the Continuity Plan) within 18 months after
a change of control of Ames, the participant will receive a lump sum cash
severance payment. The severance payment is 2.99 times Base Compensation
for the President and Executive Vice Presidents, 2 times Base Compensation
for Senior Vice Presidents and selected Vice Presidents, and 1 times Base
Compensation for other Vice Presidents. Base Compensation is defined
generally as the sum of the participant's annual base compensation in
effect immediately prior to the participant's termination plus one-third of
the value of the cash and stock bonuses paid to the participant during the
36 months ending on the date of termination. For purposes of the
Continuity Plan, a change of control includes, but is not limited to, the
acquisition by any person of beneficial ownership of 20% or more of the
Company's outstanding voting securities or the failure of the individuals
who constituted the Board of Directors at the beginning of any period of 12
consecutive months to continue to constitute a majority of the Board during
such period.
ADDITIONAL INFORMATION WITH RESPECT TO BOARD OF DIRECTORS INTERLOCKS
AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Joseph Ettore has been a member of the Board of Directors and
an executive officer of the Company since June, 1994. However, he did not
participate as a Board member in Board deliberations in fiscal year 1996
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 1994 Management Stock Option
Plan and the persons to whom shares of Restricted Stock should be awarded
by the Company under the Long Term Plan. As previously described, the
Company currently has employment contracts with Joseph R. Ettore, CEO, and
Denis T. Lemire, Executive Vice President, Merchandising. Set forth below
is a report submitted by the Committee regarding the compensation policies
for fiscal year 1996, 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 as a result of the executive officers'
performance, or whether the performance might have related to unforeseen
events or events not in the executives' control; and (2) the extent to
which an executive officer achieved certain objectives in his or her area
of primary responsibility that might have been set in the prior fiscal
year, or otherwise made a significant contribution to the Company. The
Committee believes that an important factor in attracting and motivating
Ames' 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 which it uses
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 1996 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 25, 1997 be adopted. The Committee also reviewed the
Company's employment contracts with Messrs. Ettore and Lemire, and the
compensation level for John F. Burtelow, Executive Vice President, Chief
Financial Officer.
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 in Fiscal 1995 the
Company had increased income before store closing charges and property
gains by $2.3 million and, in addition, had taken measures to enhance
profitability in future years.
The Committee approved the grants of stock options to certain
members of management in fiscal year 1996 pursuant to the 1994 Management
Stock Option Plan (the "Option Plan") that was approved by stockholders in
June, 1994. The purpose of the Option Plan is to provide certain key
employees of the Company an opportunity to acquire an ownership interest in
the Company and thereby create in such employees an increased interest in
and greater concern for the welfare of the Company, to retain their
continued employment, and to secure and retain the
services of persons capable of filling key positions with the Company.
Such options were granted during fiscal year 1996 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 Committee also approved the awards of Restricted Stock to
certain officers of the Company in fiscal year 1996 pursuant to the Long
Term Plan that was approved by stockholders in May, 1995. The purpose of
the Long Term Plan is to promote the long term success of the Company by
affording certain officers with an opportunity to acquire ownership
interest in the Company in order to incentivize such persons and to align
their financial interests with the stockholders of the Company.
The Compensation Committee
Laurie M. Shahon, Chairman
Paul Buxbaum
Sidney S. Pearlman
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 for the period commencing on
December 30, 1992 (the first day of trading in the Company's Common Stock)
and ending on January 30, 1993, and for the four subsequent fiscal years
ended January 29, 1994, January 28, 1995, January 27, 1996 and January 25,
1997. The graph assumes that the value of the investment in Ames
Department Stores, Inc. and each index was $100 on December 30, 1992 and
that any dividends were reinvested.
12/30/92 1/29/93 1/28/94 1/27/95 1/26/96 1/25/97
-------- -------- ------- ------- ------- -------
Ames Department Stores, Inc. 100 238 154 159 85 393
CRSP Index for NASDAQ Stock Market
(U.S. Companies) 100 104 119 114 158 208
CRSP Index for NASDAQ Retail
Companies 100 99 105 94 104 131
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Mr. Ettore's brother-in-law is principal and partner of Tri-
Star Apparel (f/k/a/ Four Star Apparel) a supplier to the Company. The
Company did business with Four Star Apparel prior to Mr. Ettore joining the
Company. In fiscal year 1996, in the normal course of business, the
Company purchased approximately $1.6 million of merchandise from Tri-Star
Apparel. To the knowledge of Ames, there were no other related
transactions or business relationships, with directors or executive
officers of Ames during fiscal year 1996, or any currently proposed, that
would require disclosure.
SECURITY OWNERSHIP OF MANAGEMENT
As of March 1, 1997, the Company's directors and officers as a
group were beneficial owners of 948,565 shares of the Common Stock. 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. To the knowledge of Ames, there
were no director or officer reporting delinquencies during fiscal year
1996.
The Company is not aware of any arrangements, including any
pledge by any person of securities of the Company, which may at a
subsequent date result in a change of control of the Company.
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
March 1, 1997:
Total
Shares of
Name of Shares of Exercisable Common Stock Percent
Beneficial Common Stock Stock Beneficially of
Owner Owned (a) Options (b) Owned Class
----------- ------------ ----------- ----------- -------
J. Ettore 105,000 80,000 185,000 (c) 0.9%
D. Lemire 40,000 20,000 60,000 0.3%
J. Burtelow 40,000 20,000 60,000 0.3%
E. Bankers 25,500 21,000 46,500 0.2%
D. Lissy 25,200 21,000 46,200 0.2%
Executive Group as
a whole, including
the above 392,800 214,500 607,300 2.8%
<FN>
(a) Each named executive, except for Mr.
Lissy who holds 200 of his shares jointly with his wife
and Mr. Burtelow who holds 5,000 of his shares jointly
with his wife, has sole voting and investment power in
the shares listed. Includes Restricted Stock awarded
under the Long Term Plan.
(b) Represents shares of Common Stock that
may be acquired within 60 days through
the exercise of stock options under
the 1994 Management Stock Option Plan.
(c) Excludes 300,000 options granted to J. Ettore pursuant to
an employment contract which is more fully described
herein. The grant is subject to stockholder approval.
In the event such approval is not obtained, the
employment contract provides, with certain restrictions,
that Mr. Ettore will be entitled to 300,000 stock
appreciation rights units.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Through March 31, 1997, Ames is aware of one public filing
reflecting beneficial ownership of more than 5% of the total outstanding
shares of the Common Stock on the Record Date. DDJ Capital Management, LLC
("DDJ") of 141 Linden Street, Wellesley, MA 02181, has filed a Schedule 13D
with the Securities and Exchange Commission indicating that DDJ through its
affiliates DDJ Copernicus, LLC, DDJ Galileo, LLC, DDJ Overseas Corp., The
Galileo Fund, L.P., The Copernicus Fund, L.P. and Kepler Overseas Corp. had
beneficial ownership of 1,301,750 shares of the Company's Common Stock, or
6.3% of the total shares of Common Stock.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 2)
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 January 31, 1998,
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 1998 ANNUAL MEETING
Stockholder proposals which are intended to be presented at the
1998 Annual Meeting of Stockholders must be received at the principal
executive offices of the Company on or before December 15, 1997. To be
eligible for inclusion in the Company's proxy statement and form of proxy
relating to such meeting, a proposal must conform to the requirements of
the Securities Exchange Act of 1934, as amended, and the applicable rules
and regulations promulgated thereunder. Any such proposal should be
submitted to the attention of David H. Lissy, Secretary, Ames Department
Stores, Inc., 2418 Main Street, Rocky Hill, CT 06067-2598.
FORM 10-K OR QUARTERLY REPORTS
To receive additional financial information about Ames, please
write to Margaret E. Wyrwas, Vice President, Corporate Communications &
Investor Relations, MS # 1030, 2418 Main Street, Rocky Hill, CT 06067-2598.
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, telegraph or telephone), but such persons will not be specifically
compensated for such services. The Company will reimburse banks, brokers,
nominees and other custodians and fiduciaries for their reasonable
out-of-pocket expenses in forwarding the proxy soliciting materials to
their principals.
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 judgement on such matters.
By order of the Board of Directors
/s/ David H. Lissy
-------------------------
April 3, 1997 David H. Lissy,
Secretary
PROXY
AMES DEPARTMENT STORES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Francis X. Basile, Paul M. Buxbaum,
Alan Cohen, Joseph R. Ettore, Richard M. Felner, Sidney S. Pearlman, Laurie
M. Shahon, or any of them, attorneys and proxies with full power of
substitution, to represent and to vote all of the shares of Common Stock of
Ames Department Stores, Inc. standing on the books of the Company in the
name of the undersigned at the Annual Meeting of Shareholders of the
Company to be held at the Radisson Hotel and Conference Center, Cromwell,
Connecticut, on Wednesday, May 21, 1997, at 10:00 a.m., local time, and at
any and all adjournments thereof, upon the matters set forth on the
reverse. A majority of said attorneys and proxies shall be present and
voting (or if only one shall be present and voting, then that one) in
person or by substitute or substitutes at said meeting, or at any
adjournments thereof, and shall have and may exercise all of the powers of
said attorneys and proxies hereunder. The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement dated April 3,
1997, and instructs said attorneys and proxies to vote as set forth on the
reverse side of this Proxy.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
(Continued, and to be signed and dated on the reverse side)
The Board of Directors recommends a vote FOR items 1 and 2.
- ------------------- Please mark
Common Shares X your votes
this way
Item 1 - The election of directors duly nominated:
WITHHELD
Francis X. Basile; Paul M. Buxbaum; Alan Cohen; FOR FOR ALL
Joseph R. Ettore; Richard M. Felner; Sidney S. [ ] [ ]
Pearlman; Laurie M. Shahon.
WITHHELD FOR: (Write that nominee's name in the space provided below.)
Item 2 - The ratification and approval of Arthur
Andersen LLP as independent certified public FOR AGAINST ABSTAIN
accountants and auditors for the fiscal year [ ] [ ] [ ]
ending January 31, 1998.
Item 3 - In their discretion, upon such other
matters as may properly come before the meeting.
The shares represented by
this Proxy will be voted as
specified. If no choice is
specified, the proxies will
be voted in favor of
proposals 1 and 2, and
pursuant to Item 3.
Please check this box if
you plan to attend the
Annual Meeting of
Stockholders. [ ]
Signatures(s) Date
---------------------- ----------------------
(Where shares are held jointly, each holder must sign. When signing as
attorney, executor, administrator, trustee or guardian, please add your
title as such. If signing as a corporation, please sign the full corporate
name by an authorized officer.) PLEASE SIGN, DATE AND RETURN IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.