-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I4OQEoNnVykXdFdGtrD8Bnk3ID1U6mMt7jsrBZCJx8hFdF3x2aTWIv5ra0LYfkfw jaxW3vKmg8TBS2sGZirHsw== 0000006071-00-000016.txt : 20001214 0000006071-00-000016.hdr.sgml : 20001214 ACCESSION NUMBER: 0000006071-00-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001028 FILED AS OF DATE: 20001212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMES DEPARTMENT STORES INC CENTRAL INDEX KEY: 0000006071 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 042269444 STATE OF INCORPORATION: DE FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05380 FILM NUMBER: 787825 BUSINESS ADDRESS: STREET 1: 2418 MAIN ST CITY: ROCKY HILL STATE: CT ZIP: 06067 BUSINESS PHONE: 8602572000 MAIL ADDRESS: STREET 1: 2418 MAIN STREET CITY: ROCKY HILL STATE: CT ZIP: 06067 10-Q 1 0001.txt FORM 10-Q 12 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 28, 2000 ------------------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- -------------- Commission File Number 1-05380 AMES DEPARTMENT STORES, INC. (Exact name of registrant as specified in its charter) Delaware 04-2269444 -------- ---------- (State or other jurisdiction of (I.R.S.Employer Identification Number) incorporation or organization) 2418 Main Street, Rocky Hill, Connecticut 06067 - ----------------------------------------- ----- (Address of principal executive (Zip Code) offices) Registrant's telephone number including area code: (860)257-2000 ------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- 29,408,057 shares of Common Stock were outstanding on November 24, 2000. Exhibit Index on page 14 Page 1 of 39 (including exhibits) AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED OCTOBER 28, 2000 I N D E X Page Part I: FINANCIAL INFORMATION Item 1. Consolidated Condensed Statements of Operations 3 for the Thirteen and Thirty-Nine Weeks ended October 28, 2000 and October 30, 1999 Consolidated Condensed Balance Sheets as of 4 October 28, 2000, January 29, 2000, and October 30, 1999 Consolidated Condensed Statements of Cash Flows 5 for the Thirty-Nine Weeks ended October 28, 2000 and October 30, 1999 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 10 Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 Part II: OTHER INFORMATION Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14
Page - 2 PART I Item 1. FINANCIAL INFORMATION AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) For the Thirteen For the Thirty-Nine Weeks Ended Weeks Ended ----------------------------- ------------------------------ October 28, October 30, October 28, October 30, 2000 1999 2000 1999 -------------- -------------- ------------- ---------------- Total net sales $ 920,321 $ 883,500 $2,623,012 $2,559,634 Leased department and other income 14,588 9,274 34,391 29,244 -------------- -------------- -------------- --------------- Total revenue 934,909 892,774 2,657,403 2,588,878 Costs and expenses: Cost of merchandise sold 689,762 638,455 1,923,567 1,817,050 Selling, general and administrative expenses 261,856 262,349 757,437 801,933 Depreciation and amortization expense, net 19,252 17,516 54,189 48,203 Interest and debt expense, net 24,098 17,736 64,843 43,279 -------------- -------------- -------------- --------------- Loss before income taxes (60,059) (43,282) (142,633) (121,587) Income tax benefit 22,823 15,582 54,201 43,770 -------------- -------------- -------------- --------------- Loss before cumulative effect adjustment ($37,236) ($27,700) ($88,432) ($77,817) Cumulative effect adjustment, net of tax - - - (1,107) -------------- -------------- -------------- --------------- Net Loss ($37,236) ($27,700) ($88,432) ($78,924) ============== ============== ============== =============== Basic net loss per common share: Before cumulative effect adjustment $ (1.27) $ (0.95) $ (3.01) $ (2.88) Cumulative effect adjustment - - - (0.04) -------------- -------------- -------------- --------------- Net Loss per share $ (1.27) $ (0.95) $ (3.01) $ (2.92) ============== ============== ============== =============== Basic weighted average number of common shares outstanding 29,407 29,109 29,378 27,027 ============== ============== ============== =============== (The accompanying Notes are an integral part of these consolidated condensed financial statements.)
Page - 3 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In Thousands, Except Per Share Amounts) (Unaudited) (Unaudited) ---------------- ----------------- ----------------- October 28, January 29, October 30, 2000 2000 1999 ---------------- ----------------- ----------------- ASSETS Current Assets: Cash and short-term investments $ 41,876 $ 30,612 $ 42,383 Receivables 58,814 25,302 51,172 Merchandise inventories 1,045,847 831,387 1,126,598 Deferred taxes, net 83,055 28,854 43,770 Prepaid expenses and other current assets 40,360 36,772 25,651 ---------------- --------------- ------------- Total current assets 1,269,952 952,927 1,289,574 Fixed Assets 739,723 629,979 615,379 Less - Accumulated depreciation and amortization (188,188) (128,229) (110,957) ---------------- --------------- ------------- Net fixed assets 551,535 501,750 504,422 ---------------- --------------- ------------- Other assets and deferred charges 59,835 57,256 59,451 Deferred taxes, net 346,055 346,055 102,406 Beneficial lease rights, net 54,209 56,280 56,817 Goodwill, net 59,113 61,026 195,449 ---------------- --------------- ------------- $2,340,699 $ 1,975,294 $ 2,208,119 ================ =============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable: Trade $ 420,730 $ 325,356 $ 433,991 Other 84,881 96,224 73,142 -------------- --------------- ------------- Total accounts payable 505,611 421,580 507,133 -------------- --------------- ------------- Current portion of capital lease and financing obligations 22,057 22,086 20,999 Self-insurance reserves 28,063 29,827 28,385 Accrued expenses and other current liabilities 135,474 133,110 221,520 Store closing reserves 51,242 55,468 53,516 -------------- --------------- ------------- Total current liabilities 742,447 662,071 831,553 -------------- --------------- ------------- Long-term debt 820,068 421,769 615,696 Capital lease and financing obligations 166,095 180,404 184,039 Other long-term liabilities 50,874 57,916 124,100 Excess of revalued net assets over equity under fresh-start reporting 13,253 17,868 19,406 Commitments and contingencies (see Note 8) Stockholders' Equity: Preferred stock (3,000,000 shares authorized; no shares issued or outstanding at October 28, 2000, January 29, 2000 and October 30, 1999; par value per share $.01) - - - Common stock (40,000,000 shares authorized; 29,408,057, 29,233,650 and 29,210,662 shares outstanding at October 28, 2000, January 29, 2000 and October 30, 1999, respectively; par value per share $.01) 296 293 292 Additional paid-in capital 531,879 530,744 424,855 Retained earnings 16,709 105,143 9,092 Treasury stock, at cost (922) (914) (914) -------------- --------------- ------------- Total stockholders' equity 547,962 635,266 433,325 -------------- --------------- ------------- $2,340,699 $1,975,294 $ 2,208,119 ============== =============== ============= (The accompanying Notes are an integral part of these consolidated condensed financial statements.)
Page - 4 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) For the Thirty-Nine Weeks Ended ---------------------------------------- October 28, October 30, 2000 1999 ------------------ -------------------- Cash flows from operating activities: Net loss $ (88,432) $ (78,924) Expenses not requiring the outlay of cash: Income tax benefit (54,201) (43,770) Depreciation and amortization of fixed and other assets 60,195 51,119 Amortization of debt discounts and deferred financing costs 3,589 3,585 ------------------ -------------------- Cash used by operations before changes in working capital and store closing activities (78,849) (67,990) Changes in working capital: Increase in receivables (33,512) (20,928) Increase in merchandise inventories (214,460) (476,730) Increase in accounts payable 84,031 106,376 Increase (decrease) in accrued expenses and other current liabilities 600 (4,499) (Increase) decrease in other working capital and other, net (9,318) 3,477 Changes due to store closing activities: Payments of store closing costs (4,226) (4,773) ------------------ -------------------- Net cash used for operating activities (255,734) (465,067) ------------------ -------------------- Cash flows from investing activities: Purchases of fixed assets (110,317) (169,345) Purchases of leases (7,054) (42,835) ------------------ -------------------- Net cash used for investing activities (117,371) (212,180) ------------------ -------------------- Cash flows from financing activities: Borrowings under the revolving credit facility, net 401,151 319,886 Payments on debt and capital lease obligations (14,338) (17,026) Repurchase of Hills Senior Notes (2,852) - Purchase of treasury stock (8) - Proceeds from the issuance of senior notes - 200,000 Proceeds from the issuance of common stock, net - 187,216 Payments of deferred financing costs (723) (7,215) Proceeds from the exercise of options and warrants 1,139 1,025 ------------------ -------------------- Net cash provided by financing activities 384,369 683,886 ------------------ -------------------- Increase in cash and short-term investments 11,264 6,639 Cash and short-term investments, beginning of period 30,612 35,744 ------------------ -------------------- Cash and short-term investments, end of period $ 41,876 $ 42,383 ================== ==================== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest and debt fees not capitalized $ 61,234 $ 34,571 Income taxes 1,711 172 (The accompanying Notes are an integral part of these consolidated condensed financial statements.)
Page - 5 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation : --------------------- In the opinion of management, the accompanying unaudited consolidated condensed financial statements of Ames Department Stores, Inc. (a Delaware corporation) and subsidiaries (collectively "Ames" or the "Company") contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of such financial statements for the interim periods. Due to the seasonality of the Company's operations, the results of its operations for the interim period ended October 28, 2000 may not be indicative of total results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "SEC"). Certain prior year amounts have been reclassified to conform to the presentation used for the current year. Pursuant to the indenture governing the Ames Senior Notes (as defined in Note 5), all of Ames' subsidiaries have jointly and severally guaranteed the Ames Senior Notes on a full and unconditional basis. Separate financial statements of those subsidiaries have not been included herein because management has determined that they are not material to investors. The consolidated condensed balance sheet at January 29, 2000 was obtained from audited financial statements previously filed with the SEC in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2000 (the "1999 Form 10-K"). The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and Notes thereto included in the 1999 Form 10-K. In the fourth quarter of the year ended January 29, 2000 ("Fiscal 1999"), the Company adopted Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition" as promulgated by the staff of the SEC, effective retroactively to the first quarter of Fiscal 1999. Therefore, the consolidated condensed financial statements for the thirteen and thirty-nine weeks ended October 30, 1999 have been adjusted accordingly. Reference can be made to the 1999 Form 10-K for additional discussion of the adoption of SAB No. 101 by the Company. 2. Acquisition and Agency Agreement: -------------------------------- Acquisition of Hills Stores Company On December 31, 1998, HSC Acquisition Corp. ("HSC"), a wholly owned subsidiary of the Company, acquired in excess of 80% of the outstanding voting stock of Hills Stores Company ("Hills") and approximately 74% of the outstanding Hills 12 1/2% senior notes. Subsequently, Hills was merged with HSC and became a wholly owned subsidiary of Ames Department Stores, Inc. In April 1999, Hills was merged with and into Ames Department Stores, Inc. The acquisition has been recorded under the purchase method of accounting. Total cash consideration for the acquisition of Hills was $129 million. Reference can be made to the 1999 Form 10-K for further discussion of the Hills acquisition. At the time of the acquisition, Hills operated 155 discount department stores. During 1999, the Company remodeled and converted 151 of the Hills stores to Ames stores. The four remaining Hills stores, along with seven other Ames stores, were closed because they were in locations that were either competitive with or were under-performing other Hills or Ames stores. The remodeling and conversion process was conducted in three stages, each stage involving approximately one third of the Hills stores. The first stage was completed in late April 1999; the second stage was completed in late July 1999; and the third stage was completed in late September 1999. Page - 6 Concurrent with the Hills acquisition, the Company entered into a transition and agency agreement (the "Agency Agreement") with Gordon Brothers Retail Partners, LLC and The Nassi Group, LLC (collectively the "Agent"), which provided that the Agent serve for a period of time to operate all of the acquired Hills stores and to conduct inventory liquidation sales at each of those stores prior to its scheduled remodeling or final closure. Accordingly, the Agent managed the sale of the inventory acquired in the Hills acquisition as well as certain other inventory identified in the Agency Agreement. The Agency Agreement entitled the Company to receive out of the sale proceeds a minimum amount equal to 40% of the initial retail value or ticketed selling price of the merchandise (the "Guaranteed Return"), with the possibility of a greater return if the sale proceeds exceeded a target percentage of initial retail value. The results of operations of the former Hills stores prior to their conversion to Ames stores for the thirteen and thirty-nine weeks ended October 30, 1999 have been included in the accompanying consolidated condensed financial statements. Acquisition of Goldblatt's Leases In April 2000, the Company consummated its purchase of the leases for seven stores from Goldblatt's Department Stores, Inc. for a cash purchase price of $7.0 million. Reference can be made to the 1999 Form 10-K for additional discussion of the Hills acquisition and the acquisition of the Goldblatt's leases. 3. Net Loss Per Common Share: ------------------------- Net loss per share was determined using the weighted average number of common shares outstanding. Diluted net loss per share was equal to basic net loss per share because inclusion of common stock equivalents would have been anti-dilutive. During the quarter ended October 28, 2000, options representing 3,470 shares were exercised. During the quarter ended October 30, 1999, 29,023 options were exercised. 4. Inventories: ----------- Inventories are valued at the lower of cost, using the first-in, first-out (FIFO) method, or market and include the capitalization of transportation and distribution center costs. 5. Debt: ---- Credit Agreement On December 31, 1998, in connection with the acquisition of Hills, certain of the Company's subsidiaries entered into an agreement (the "Credit Agreement") with a syndicate of banks and financial institutions for which Bank of America, N.A. is serving as agent. The Credit Agreement is in effect until June 30, 2002 and is secured by substantially all of the assets of the Company. As of November 8, 2000, the Company entered into an Eighth Amendment and Waiver Agreement (the "Eighth Amendment") with its lenders. The Eighth Amendment reduced our fixed charge coverage ratio requirements and permitted the Company to record restructuring charges associated with the closing of up to thirty-three stores. The Eighth Amendment also provided that covenants will be tested quarterly rather than monthly, as long as the Company's availability remains above a specified level, and any non-compliance events prior to November 8, 2000 were waived. The Eighth Amendment also provided for certain changes to the interest rate margins. Reference can be made to the 1999 Form 10-K, the Company's quarterly report on Form 10-Q for the thirteen weeks ended July 29, 2000 and Part II, Item 5 of this Form 10-Q for additional discussion of the Credit Agreement, applicable amendments and descriptions of the Company's other obligations not discussed herein. As of October 28, 2000, borrowings of $575.7 million were outstanding under the Credit Agreement. These borrowings are included in long-term debt in the accompanying consolidated condensed balance sheet as of October 28, 2000. In addition, $23.7 and $0.6 million of standby and trade letters of credit, respectively, were outstanding under the Credit Agreement. The weighted average interest rate on the borrowings for the thirty-nine weeks ended October 28, 2000 was 8.13%. The peak borrowing level through October 28, 2000 was $611.1 million and occurred in October 2000. Page - 7 Senior Notes due 2006 On April 27, 1999, the Company completed the sale of $200 million of its 10% seven-year senior notes (the "Ames Senior Notes"). The net proceeds from the sale of the Ames Senior Notes, approximately $193.4 million, were used to reduce outstanding borrowings under the Credit Agreement. The Ames Senior Notes pay interest semi-annually in April and October and mature April 2006. Senior Notes due 2003 The 12.5% Senior Notes due 2003 (the "Hills Senior Notes") were, at the time of the acquisition of Hills, an unsecured obligation of Hills. The Hills Senior Notes pay interest in January and June and mature July 2003. Reference can be made to the 1999 Form 10-K for additional discussion of the Ames Senior Notes and Hills Senior Notes. 6. Stock Options: ------------- The Company has four stock option plans (the "Option Plans"): the 1994 Management Stock Option Plan, the 1994 Non-Employee Directors Stock Option Plan, the 1998 Management Stock Incentive Plan, as amended and restated, and the 2000 Store Manager Stock Option Plan. In October 1995, the Financial Accounting Standard Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123 "Accounting for Stock Based Compensation," which established a fair-value based method of accounting for stock-based compensation. SFAS No. 123 did, however, allow entities to continue accounting for employee stock based compensation under the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company elected to account for the Option Plans under APB Opinion No. 25, under which no compensation cost has been recognized, and to adopt SFAS No. 123 through disclosure. If the Company had elected to recognize compensation cost for the Option Plans based on the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS No. 123, net loss and basic net loss per common share would have approximated the pro forma amounts indicated below: For the Thirteen For the Thirty-Nine Weeks Ended Weeks Ended ----------------------------------- ---------------------------------- (In Thousands) October 28, October 30, October 28, October 30, 2000 1999 2000 1999 --------------- ---------------- ---------------- --------------- Net loss: As reported $(37,236) $(27,700) $(88,432) $(78,924) Pro forma $(39,830) $(29,916) $(95,586) $(84,695) Basic net loss per common share: (a) As reported $(1.27) $(0.95) $(3.01) $(2.92) Pro forma $(1.35) $(1.03) $(3.25) $(3.13) (a) Common stock equivalent shares have not been included because the effect would be anti-dilutive.
The fair value of stock options used to compute pro forma net income and net income per diluted common share is the estimated present value as of the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions: no dividend yield, expected option volatilities, a risk-free interest rate equal to U.S. Treasury securities with a maturity equal to the expected life of the option and an expected life from date of grant until option expiration date. Page - 8 7. Income Taxes: ------------ The Company's estimated annual effective income tax rate for each year was applied to the loss before income taxes for the thirteen and thirty-nine weeks ended October 28, 2000 and October 30, 1999 to compute a non-cash income tax benefit. The income tax benefit is included in current deferred taxes in the accompanying consolidated condensed balance sheet as of October 28, 2000 and October 30, 1999. In Note 8 to the Notes to Consolidated Financial Statements in the 1999 Form 10-K, the Company reported it had filed a $20 million refund claim under Section 172 (f) of the Internal Revenue Code and that the claim was under review by the Internal Revenue Service ("IRS"). The Company has recently received from the IRS an adverse Technical Advice Memorandum ("TAM"). The positions set forth in the TAM would have the effect of denying all or virtually all of the refund claim. The Company is presently considering what further action to take. 8. Commitments and Contingencies: ----------------------------- Reference can be made to the 1999 Form 10-K (Item 3 - Legal Proceedings) for various litigation involving the Company, for which there were no material changes since the filing date of the 1999 Form 10-K, except as follows: With regard to the Smoot matter, on November 14, 2000, the Court gave preliminary approval to a class action settlement that had been reached by the parties. Notice of the settlement and Fairness Hearing for final approval of the settlement will be mailed to class members on or about December 14, 2000. The deadline for filing objections to the class action settlement is January 28, 2001. The Fairness Hearing will be held on February 12, 2001. The settlement, if approved, will require an evidentiary hearing on the proper classification of the Assistant Manager positions. The total cost of the settlement to the Company will depend upon the outcome of the evidentiary hearing. In the event the Company prevails, the total cost to the Company will be $1 million, inclusive of attorney's fees. If the plaintiffs prevail at the evidentiary hearing, the cost to the Company of the settlement will be $3 million, exclusive of attorney's fees. A date has not been set for the evidentiary hearing. 9. Recently Issued Accounting Pronouncements: ----------------------------------------- In June 1998, the FASB issued SFAS No. 133, "Accounting for derivative instruments and Hedging Activities." In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an amendment of SFAS No. 133. These statements establish accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statements also require that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The statements are effective, prospectively, for all fiscal quarters of all fiscal years beginning after June 15, 2000. Management is currently analyzing the impact of this new pronouncement on the Company's financial position and results of operations. 10. Subsequent Events: ----------------- On November 9, 2000, the Company announced the planned closing of thirty-two stores. All but one of the stores are under-performing stores that were acquired in the Hills acquisition in December 1998. The other store will be closed as a result of the expiration of its lease. Management estimates that a restructuring charge of up to $140 million will be recorded in the fourth quarter of this year. The restructuring charge will include provisions for inventory impairment costs, severance related costs, lease liability payments over a number of years, asset impairment write-downs and other related charges. In addition, the Company announced plans to curtail purchases of property, equipment and other capital items in fiscal 2001 and initiate programs to further reduce its selling, general and administrative expenses. Page - 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated condensed financial statements and footnotes presented in this report. Results of Operations - --------------------- The consolidated results of operations, as reported in our Consolidated Condensed Statement of Operations, for the thirty-nine weeks ended October 30, 1999 include the results of the former Hills stores during the period they were operated by Gordon Brothers, LLC and The Nassi Group, LLC under an agency agreement. These firms were engaged to operate the Hills stores until their closure and to liquidate the merchandise inventories. As of the quarter ended October 30, 1999, Gordon Brothers, LLC and The Nassi Group, LLC completed the merchandise liquidation sales in all 155 Hills stores. Subsequent to the liquidation sales, we closed four of the stores and remodeled the remaining 151 stores. The remodeled stores were re-opened as Ames stores in three phases: 50 stores in April 1999, 54 stores in July 1999, and 47 stores in September 1999. The following tables illustrate the results of Ames' operations for the thirteen and thirty-nine weeks ended October 28, 2000, as compared to the separate contributions of Ames' and Hills' operations and the other costs described below to the consolidated results of operations for the thirteen and thirty-nine weeks ended October 30, 1999. For the Thirteen Weeks Ended For The Thirteen Weeks Ended October 28, 2000 October 30, 1999 ---------------- ------------------------------------------------ (In Thousands) Consolidated Ames Hills Other Total ------------ ---- ----- ----- ----- Net sales $920,321 $883,500 $ - $ - $883,500 Leased department and other income 14,588 10,065 (791) - 9,274 -------------------------------------------------------------------- Total revenue 934,909 893,565 (791) - 892,774 Costs and expenses: Cost of merchandise sold 689,762 638,455 - - 638,455 Selling, general and administrative expenses 261,856 227,404 7,385 27,560 262,349 Depreciation and amortization expense, net 19,252 15,309 643 1,564 17,516 Interest and debt expense, net 24,098 17,114 17 605 17,736 -------------------------------------------------------------------- Loss before income taxes (60,059) (4,717) (8,836) (29,729) (43,282) Income tax benefit 22,823 1,698 3,181 10,703 15,582 -------------------------------------------------------------------- Net loss ($ 37,236) ($ 3,019) ($ 5,655) ($19,026) ($27,700) ====================================================================
Page - 10 For the Thirty-Nine Weeks Ended For The Thirty-Nine Weeks Ended October 28, 2000 October 30, 1999 ---------------- ------------------------------------------------ (In Thousands) Consolidated Ames Hills Other Total ------------ ---- ----- ----- ----- Net sales $2,623,012 $2,182,517 $377,117 $ - $2,559,634 Leased department and other income 34,391 26,667 2,577 - 29,244 -------------------------------------------------------------------- Total revenue 2,657,403 2,209,184 379,694 - 2,588,878 Costs and expenses: Cost of merchandise sold 1,923,567 1,564,965 252,085 - 1,817,050 Selling, general and administrative expenses 757,437 578,269 149,432 74,232 801,933 Depreciation and amortization expense, net 54,189 31,832 11,036 5,335 48,203 Interest and debt expense, net 64,843 36,531 4,179 2,569 43,279 -------------------------------------------------------------------- Loss before income taxes and cumulative effect adjustment (142,633) (2,413) (37,038) (82,136) (121,587) Income tax benefit 54,201 869 13,332 29,569 43,770 -------------------------------------------------------------------- Loss before cumulative effect adjustment (88,432) (1,544) (23,706) (52,567) (77,817) Cumulative effect adjustment, net of tax - - - (1,107) (1,107) -------------------------------------------------------------------- Net loss ($88,432) ($1,544) ($23,706) ($53,674) ($78,924) ====================================================================
The Ames column, represents (a) the results of the Ames store base, (b) the results of the converted Hills stores and (c) certain expenses associated with the acquisition of Hills, including the interest expense on the acquired Hills senior notes and a pro-rata share of the amortization of the goodwill recorded in connection with the acquisition. The Hills column represents (a) the results of operations for the Hills stores during the period that these stores were operated pursuant to the Gordon Brothers/Nassi agency agreement, including depreciation and interest expense directly associated with such stores and (b) Hills corporate overhead expenses, principally the Canton, MA facility. The Other column represents the expenses incurred during the period of remodeling the Hills stores (for example, pre-opening expenses incurred during the conversion or "dark" period) as well as certain other expenses. The unique circumstances under which Hills operations were conducted through the thirteen and thirty-nine weeks ended October 30, 1999 distort any direct comparison of the principal components of Ames consolidated results for the thirteen and thirty-nine weeks ended October 28, 2000 and October 30, 1999. In the discussion that follows, the Ames net sales; leased department and other income; gross margin; and selling, general and administrative expenses for the thirteen and thirty-nine weeks ended October 28, 2000 are compared to the Ames results for the thirteen and thirty-nine weeks ended October 30, 1999, exclusive of the Hills results and other expenses. The comparison of depreciation and amortization expense and interest and debt expense is on a consolidated basis. Ames' net sales increased 4.2% during the third quarter of 2000 compared to the third quarter of 1999. Ames' net sales for the thirty-nine weeks ending October 28, 2000 increased 20.2% compared to the thirty-nine weeks ended October 30, 1999. Both increases are primarily the result of the inclusion of all 151 of the converted Hills stores in the Ames store base for the periods in fiscal 2000 compared to 105 stores for the entire third quarter in fiscal 1999 and an additional 46 stores for a portion of the quarter. These increases are partially offset by decreases in comparable store sales of 2.6% and 1.6% for the thirteen and thirty-nine weeks ended October 28, 2000. Leased department and other income increased $4.5 million and $7.7 million for the thirteen and thirty-nine weeks ended October 28, 2000 compared to the same period in 1999. The increase is primarily attributable to the inclusion of all 151 Hills stores as previously discussed and the inclusion of a $2.8 million gain in the third quarter on the disposal of a store lease. Page - 11 Gross margin as a percentage of sales declined from 27.7% to 25.1% during the third quarter and from 28.3% to 26.7% for the year-to-date period compared to the same period in 1999. The decrease is the result of increased promotional and clearance markdowns as well as a lower markup on sales resulting from increased logistical costs and changes in merchandise mix. Selling, general and administrative expenses increased by $34.5 million and $179.2 million for the thirteen and thirty-nine weeks ended October 28, 2000, compared to the same period in 1999, primarily as a result of the expanded Ames store base. Excluding the pre-opening expenses included in the fiscal 2000 selling, general and administrative expenses, expenses as a percentage of sales increased from 25.7% to 27.4% and 26.5% to 28.0% for those periods. The percentage increase was primarily a result of lower than expected sales. Depreciation and amortization expense increased $1.7 million and $6.0 million for the thirteen and thirty-nine weeks ended October 28, 2000, compared to the same periods in 1999, primarily as a result of additional depreciation associated with the remodeling expenditures incurred during the conversion of the former Hills stores. The increase in interest expense of $6.4 million and $21.6 million for the thirteen and thirty-nine weeks ended October 28, 2000, compared to the same periods in 1999, is mainly attributable to a higher level of borrowings under our revolving credit facility as well as interest expense associated with the Ames senior notes issued in April 1999. Our estimated annual effective income tax rate for each year was applied to the loss before income taxes for each period to compute a non-cash income tax benefit. The income tax benefits are included in current assets in the consolidated condensed balance sheet as of October 28, 2000 and October 30, 1999. Liquidity and Capital Resources - ------------------------------- Merchandise inventories increased 25.8% from January 29, 2000 due to a seasonal merchandise build-up. Merchandise inventories decreased 7.2% from October 30, 1999 while the number of open stores increased by a net of twenty-four. The decrease was primarily a result of inventory control initiatives. Trade accounts payable increased 29.3% from January 29, 2000 and decreased 3.1% from October 30, 1999. The increase from the beginning of the year is due to the holiday season inventory buildup. The decrease from the same period last year is primarily a result of efforts to control merchandise inventory levels as previously discussed. Federal income tax law allows taxpayers, including corporations, to use net operating losses in future years to reduce taxable income ("net operating loss carryovers"). Our net operating loss carryovers remaining after fiscal 1999 should offset income on which taxes would otherwise be payable in the next several years, subject to any limitations imposed by federal income tax law. Purchases of property and equipment for the thirteen and thirty-nine weeks ended October 28, 2000 totaled $33.8 million and $117.4 million, respectively. Such purchases for the balance of the year are expected to be approximately $25 million. Long-term debt as of October 28, 2000 consisted of borrowings under our bank credit facility of $575.7 million, $200.0 million of the Ames senior notes issued in April 1999 and $44.4 million of the Hills senior notes. The Ames senior notes and the Hills senior notes are due April 2006 and July 2003, respectively. Sources of liquidity - -------------------- Our principal sources of operating funds are our bank credit facility, cash from operations and cash on hand. We have a bank credit facility revolving line of credit that provided up to $705 million during the period from July 1, 2000 through November 30, 2000 and, at all other times, provides for up to $650 million. Borrowings under the bank credit facility are secured by substantially all of our assets. The credit facility expires on June 30, 2002. Our borrowing rates for the credit facility are based on either the London Interbank Offered Rate or a reference rate announced by Bank of America, San Francisco, and may include an additional percentage margin added to both. During the quarter ended October 28, 2000, our borrowings increased under the credit facility by approximately $67.3 million. The bank credit facility was amended on November 8, 2000 to modify our minimum fixed charge coverage ratio covenant requirement and permit the restructuring charges associated with the closing of up to thirty-three stores. Any non-compliance event prior to November 8, 2000 was waived and covenants were amended. The peak borrowing level under the credit facility during the quarter was $611.1 million. We believe the company will have sufficient sources of cash to meet our financial obligations for the foreseeable future. Page - 12 Lease Commitments - ----------------- We are committed under long-term leases for various retail stores, warehouses and equipment expiring at various dates through 2026 with varying renewal options and escalating rent clauses. Some leases are classified as capital leases in accordance with generally accepted accounting principles. We generally pay for real estate taxes, insurance, and specified maintenance costs under real property leases. Most leases also provide for contingent rent payments, in addition to fixed lease payments, based on a percentage of sales in excess of specified amounts. Subsequent Events - ----------------- On November 9, 2000, we announced the planned closing of thirty-two stores. All but one of the stores are under-performing stores that we acquired in the Hills acquisition in December 1998. The other store will be closed as a result of the expiration of its lease. We estimate a restructuring charge of up to $140 million will be taken in the fourth quarter of this year. The restructuring charge will include provisions for inventory impairment costs, severance related costs, lease liability payments over a number of years, asset impairment write-downs and other related charges. In addition, we announced plans to curtail purchases of property, equipment and other capital items in fiscal 2001 and to initiate programs to further reduce selling, general and administrative expenses. Note Concerning Forward-looking Statements - ------------------------------------------ Statements other than those based on historical facts which address activities, events, or developments that we expect or anticipate may occur in the future are forward-looking statements which are based upon a number of assumptions concerning further conditions that may ultimately prove to be inaccurate. Actual events and results may differ materially from anticipated results described in any forward-looking statements. Our ability to achieve such results is subject to risks and uncertainties which may include, but are not limited to, the competitive environment in which the Company operates, the ability of the Company to maintain and improve its sales and gross margins, regional weather conditions, and the general economic conditions in the geographic areas in which the Company operates. Consequently, these cautionary statements qualify all of the forward-looking statements and there can be no assurance that the results or developments anticipated by us will be realized or that they will have the expected effects on Ames or its business or operations. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------- ---------------------------------------------------------- We have exposure to interest rate volatility primarily relating to interest rate changes applicable to revolving loans under our bank credit facility. These loans bear interest at rates which vary with changes in (i) the London Interbank Offered Rate (LIBOR) or (ii) a rate of interest announced publicly by Bank of America, N.A. We do not speculate on the future direction of interest rates. As of October 28, 2000, approximately $575.7 million of our debt bore interest at variable rates. We believe that the effect, if any, of reasonably possible near term changes in interest rates on our consolidated financial position, results of operations or cash flows would not be significant. Page - 13 PART II OTHER INFORMATION Item 1. Legal Proceedings. Reference can be made to Item 3 - Legal Proceedings included in the Company's most recent Form 10-K for various litigation involving the Company, for which there were no material changes since the filing date of the Form 10-K, except as set forth in Note 8 to the above Consolidated Condensed Financial Statements. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of security holders during the third quarter ended October 28, 2000, through the solicitation of proxies or otherwise. Item 5. Other Information. On October 23, 2000, the Board of Directors of the Company adopted an amendment to the Amended and Restated Bylaws of the Company which provides the Board of Directors with the ability to act without a meeting through the use of electronic transmission. A copy of the Amended and Restated Bylaws of the Company, as amended, is filed as Exhibit 3 to this Form 10-Q. As of November 8, 2000, the Company amended the Credit Agreement (the "Eighth Amendment") with Bank of America, N.A., as agent, and a syndicate consisting of nineteen other banks and financial institutions, a copy of which is filed as an Exhibit hereto. On November 9, 2000, the Company announced the planned closing of thirty-two stores and its intention to record an associated restructuring charge of up to $140 million. Item 6. Exhibits and Reports on Form 8-K. (a) Index to Exhibits Exhibit No. Exhibit Page No. ----------- ------- -------- 3 Form of Amended and Restated By-Laws of Ames Department 16 Stores, Inc., as amended on October 23, 2000. 10 Eighth Amendment and Waiver, dated as of November 8, 2000, 27 among certain lenders, Bank of America, N.A., as agent, and Ames Merchandising Corporation, and other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement. 11 Schedule of computation of basic and diluted net income (loss) 38 per share 12 Ratio of Earnings to Fixed Charges 39
(b) Reports on Form 8-K There were no reports on Form 8-K filed with the Securities and Exchange Commission during the third quarter. Page - 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMES DEPARTMENT STORES, INC. (Registrant) Dated: December 11, 2000 /s/ Joseph R. Ettore ---------------------------------------------------- Joseph R. Ettore, Chairman, Chief Executive Officer, and Director Dated: December 11, 2000 /s/ Rolando de Aguiar ---------------------------------------------------- Rolando de Aguiar, Senior Executive Vice President, Chief Financial and Administrative Officer
Page - 15 EX-3 2 0002.txt AMENDED AND RESTATED BY-LAWS Exhibit 3 AMENDED AND RESTATED BY-LAWS OF AMES DEPARTMENT STORES, INC. (hereinafter called the "Corporation") ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. The annual meeting of stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. At the Annual Meeting the stockholders shall elect by a plurality vote the Board of Directors, and transact such other business as may properly be brought before the meeting. Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than 10 nor more than 60 days before the date of the meeting. Section 3. Special Meetings. Except as otherwise required by law or the Certificate of Incorporation, special meetings of stockholders for any purpose or purposes may be called by the Chairman of the Board of Directors or a majority of the entire Board of Directors. Only such business as is specified in the notice of any special meeting of stockholders shall come before such meeting. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 4. Quorum. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting. Page - 16 Section 5. Order of Business. (a) At each meeting of stockholders, the Chairman of the Board of Directors or, in the absence of the Chairman of the Board of Directors, such person as shall be selected by the Board of Directors shall act as chairman of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof, and the opening and closing of the voting polls. (b) At any annual meeting of stockholders, only such business shall be conducted as shall have been brought before the annual meeting (i) by or at the direction of the chairman of the meeting, (ii) pursuant to the notice provided for in Section 2 of this Article IIor (iii) by any stockholder who is a holder of record at the time of the giving of such notice provided for in this Section 5, who is entitled to vote at the meeting and who complies with the procedures set forth in this Section 5. (c) For business properly to be brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation (the "Secretary") and such business must be a proper matter for stockholder action under the General Corporation Law of the State of Delaware. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. To be in proper written form, a stockholder's notice to the Secretary shall set forth in writing as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address of the stockholder proposing such business and all persons or entities acting in concert with the stockholder; (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and all persons or entities acting in concert with such stockholder; and (iv) any material interest of the stockholder in such business. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting and such stockholder's proposal has been included in a proxy statement that has been prepared by management of the Corporation to solicit proxies for such annual meeting; provided, however, that if such stockholder does not appear or send a qualified representative to present such proposal at such annual meeting, the Corporation need not present such proposal for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 5. The chairman of an annual meeting shall, if the facts warrant, determine that business was not properly brought before the annual meeting in accordance with the provisions of this Section 5 and, if the chairman should so determine, the chairman shall so declare to the annual meeting and any such business not properly brought before the annual meeting shall not be transacted. Section 6. Voting. Unless otherwise required by law, the Certificate of Incorporation or these By-Laws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy, but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 7. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Page - 17 Section 8. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of 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, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 9. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 8 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. ARTICLE III DIRECTORS Section 1. Number and Election of Directors. The Board of Directors shall consist of seven members. Except as provided in Section 2 of this Article, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders, and each director so elected shall hold office until his successor is elected and qualified or until his earlier death or resignation. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders. Section 2. Vacancies. Vacancies occurring on the Board of Directors for any reason may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier resignation or removal. Section 3. Notification of Nomination. Subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or by any stockholder of record at the time of giving of the notice of nomination provided for in this Section 3 of this Article III and who is entitled to vote for the election of directors. Any stockholder of record entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if timely written notice of such stockholder's intent to make such nomination is given, by either personal delivery or United States mail, postage prepaid, to the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at an annual meeting of stockholders, not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be selected at such meeting. Each such notice shall set forth: (i) the name and address of the stockholder who intends to make the nomination, of all persons or entities acting in concert with the stockholder, and of the person or persons to be nominated; (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or entity acting in concert with the stockholder (naming such person or entity) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by the stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Page - 18 Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board of Directors; (v) the class and number of shares of the Corporation that are beneficially owned by the stockholder and all persons or entities acting in concert with the stockholder; and (vi) the consent of each nominee to being named in a proxy statement as nominee and to serve as a director of the Corporation if so elected. Only persons nominated in accordance with this Section shall be qualified to serve as directors. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. Only such persons who are nominated in accordance with the procedures set forth in this Section 3 of this Article III shall be eligible to serve as directors of the Corporation. Notwithstanding anything in the third sentence of this Section 3 of Article III to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by these By-Laws shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. For purposes of the By-Laws, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. Section 4. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. Section 5. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special Meetings of the Board of Directors may be called by the Chairman, if there be one, the President, or any directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than 48 hours before the date of the meeting, by telephone or telegram on 24 hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Notice of a meeting of the Board of Directors need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. A notice, or waiver of notice, need not specify the business to be transacted at or purpose of any meeting of the Board of Directors. Section 6. Quorum. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 7. Actions of Board by Written Consent. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, prior notice, or a vote, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Section 8. Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these By-Laws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 8 shall constitute presence in person at such meeting. Page - 19 Section 9. Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when so requested by the Board of Directors. Section 10. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and for the performance of their duties as directors and may be paid a fixed sum, determined by the Board of Directors, for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 11. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or violable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof that authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. Section 2. Election. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. Page - 20 Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. Section 4. Chairman of the Board of Directors. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors. Unless some other person is so designated by the Board of Directors, he shall be the Chief Executive Officer of the Corporation, and except where by law the signature of the President is required, the Chairman of the Board of Directors shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors. Section 5. President. The President shall, subject to the control of the Board of Directors and, if there be one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and the Board of Directors. If there be no Chairman of the Board of Directors, the President shall be the Chief Executive Officer of the Corporation. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors. Section 6. Vice Presidents. At the request of the President or in his absence or in the event of his inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors and no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions placed upon the President. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Page - 21 Section 8. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requests, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 9. Assistant Secretaries. Except as may be otherwise provided in these By-Laws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 10. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 11. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. Section 2. Signatures. Where a certificate is countersigned by (i) a transfer agent other than the Corporation or its employee, or (ii) a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Page - 22 Section 4. Transfers. Except as otherwise provided in the Certificate of Incorporation, stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefore, which shall be cancelled before a new certificate shall be issued Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VI NOTICES Section 1. Notices. Except as otherwise specifically provided herein, whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, telex or cable. Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a stockholder at a meeting in person or by proxy shall constitute a waiver of notice of such meeting, except when such stockholder attends such meeting for the express purpose of objecting at the beginning of such meeting, to the transaction of any business on the grounds that notice of such meeting was inadequate or improperly given. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Page - 23 Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors and may be changed from time to time in the same manner. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII IMDEMNIFICATION Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case. Page - 24 Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be. Section 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. Section 6. Expenses Payable in Advance. Expenses (including attorneys' fees) incurred by a director or officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, By-Law, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII. Page - 25 Section 9. Certain Definitions. For purposes of this Article VIII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VIII. Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 11. Limitation of Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation. ARTICLE IX AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such meeting of stockholders or Board of Directors, as the case may be. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office. Entire Board of Directors. As used in this Article IX and in these By-Laws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. Page - 26 EX-10 3 0003.txt CREDIT AGREEMENT AMENDMENT Exhibit 10 EIGHTH AMENDMENT EIGHTH AMENDMENT AND WAIVER, dated as of November 8, 2000 (the "Eighth Amendment"), among the financial institutions named in the Credit Agreement (as defined below) (such financial institutions, together with their respective successors and assigns, are referred to hereinafter each individually as a "Lender" and collectively as the "Lenders"), Bank of America, N.A. as administrative agent for the Lenders (in its capacity as administrative agent, together with any successor in such capacity, the "Administrative Agent"), Ames Merchandising Corporation ("AMC" and "Borrower"), and the other Credit Parties named in and signatory to the Second Amended and Restated Credit Agreement, dated as of December 31, 1998, and amended as of April 16, 1999, as of June 1, 1999, as of October 15, 1999, as of January 18, 2000, as of January 27, 2000, as of May 8, 2000, and as of July 25, 2000 (as previously amended, the "Original Agreement", and as further amended, restated, modified and supplemented from time to time, the "Credit Agreement") among the Lenders, the Administrative Agent, the Borrower, and the other Credit Parties named therein and signatories thereto. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Original Agreement. WHEREAS, the Credit Parties wish to waive and amend certain provisions of the Original Agreement; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the fulfillment of the conditions set forth below, the parties hereto agree hereby as follows: AGREEMENTS OF THE PARTIES HERETO Waiver. (1) Subject to the satisfaction of all the conditions set forth in Section 3 below, the Lenders hereby waive compliance by the Borrower with Section 9.26 Fixed Charge Coverage Ratio of the Original Agreement through the date hereof and any Event of Default under clause (c) of Section 11.1 of the Original Agreement resulting solely from such failure to comply. Except as expressly waived hereby, all of the representations, warranties, terms, covenants and conditions of the Original Agreement shall remain in full force and effect in accordance with their respective terms. The waiver set forth herein shall be limited precisely as provided for herein and shall not be deemed to be waivers of, amendments of, consents to or modifications of any term or provision of the Credit Agreement or any other document or instrument referred to therein or of any transaction or further or future action on the part of the Borrower requiring the consent of the Lenders except to the extent specifically provided for herein. Except as expressly set forth herein, the Lenders have not and shall not be deemed to have waived any of their rights and remedies against the Borrower for any existing or future Events of Default. AMENDMENTS TO THE ORIGINAL AGREEMENT Section 1.1 is hereby amended by adding the following new definitions in the proper alphabetical order therein: "Eighth Amendment" means that certain Eighth Amendment dated as of November 8, 2000 among the Borrower, the Majority Lenders, the Administrative Agent and the other Credit Parties. The definition of "Applicable Margin" in Section 1.1 is hereby amended by replacing it in its entirety with the following new definition: "Applicable Margin" means, with respect to any Loan, the amount set forth below which corresponds to the Fixed Charge Coverage Ratio set forth below for the twelve consecutive fiscal months of the Parent ended with the most recent fiscal month of the Parent for which the Administrative Agent receives the financial statements and Fixed Charge Coverage Ratio Certificate required below, determined and adjusted as provided herein. On the "Effective Date" of the Eighth Amendment (as defined therein) and thereafter until the first day of the first full calendar month after the delivery to the Administrative Agent of the financial statements of the Parent and its Subsidiaries required pursuant to Section 7.2(b) as at the end of and for the fiscal month of the Parent ended October 28, 2000, together with the corresponding Fixed Charge Coverage Ratio Certificate for the twelve consecutive fiscal months ended on such date, the Applicable Margin for LIBOR Rate Loans shall be 2.25% and the Applicable Margin for Base Rate Loans shall be 0.625% and each shall thereafter be adjusted after each delivery to the Administrative Agent of the monthly financial statements of the Parent and its Subsidiaries required pursuant to Section 7.2(b) for each fiscal month of the Parent, together with the corresponding Fixed Charge Coverage Ratio Certificate for the twelve fiscal months ending on the last day of such fiscal month, which Fixed Charge Coverage Ratio Certificate demonstrates that the Fixed Charge Coverage Ratio indicated below for any such adjustment has been achieved, each such adjustment to be effective on the first day of the first full calendar month after the latest date on which each such delivery is required hereunder. Page - 27 Fixed Charge Applicable Margin Coverage Applicable Margin for for Ratio LIBOR Rate Loans Base Rate Loans ----- ---------------- --------------- Equal to or greater than 1.50 to 1.00 1.50% Zero (0) Equal to or greater than 1.20 to 1.00 but less 1.75% .125% than 1.50 to 1.00 Equal to or greater than 1.00 to 1.00 but less 2.00% .375% than 1.20 to 1.00 Less than 1.00 to 1.00 2.25% .625%
Notwithstanding anything in this definition to the contrary, (i) in the event that the Administrative Agent shall fail to receive any such financial statements and the related Fixed Charge Coverage Ratio Certificate for any fiscal month of the Parent within thirty (30) days following the end of such fiscal month (within forty-five (45) days following the end of such fiscal month if such fiscal month is the last fiscal month of any fiscal quarter), then the Applicable Margin shall, at the end of such thirtieth or forty-fifth day, as appropriate, immediately and without notice or further action be the highest Applicable Margin provided herein (such Applicable Margin to be in effect until the first day of the first full calendar month after the Administrative Agent receives the financial statements of the Parent and its Subsidiaries required under Section 7.2(b) for the most recent fiscal month of the Parent, and the related Fixed Charge Coverage Ratio Certificate); and (ii) in the event that, with respect to any twelve consecutive fiscal months of the Parent which shall be a Fiscal Year, the audited financial statements of the Parent and its Subsidiaries required under Section 7.2(a) for such Fiscal Year shall indicate the Fixed Charge Coverage Ratio for such twelve consecutive fiscal months (as determined by the Administrative Agent) was less than that reflected in the Fixed Charge Coverage Ratio Certificate delivered to the Administrative Agent for such twelve consecutive fiscal months, the Applicable Margin shall be adjusted retroactively (to the effective date of the Applicable Margin which was determined based upon the delivery of such Fixed Charge Coverage Ratio Certificate and the related monthly financial statements of the Parent and its Subsidiaries delivered pursuant to Section 7.2(b) for the twelfth month of such twelve consecutive fiscal months) to reflect an Applicable Margin based upon the Fixed Charge Coverage Ratio determined from the audited financial statements and the Borrower shall make payments to the Administrative Agent on behalf of the Lenders to reflect such adjustment. The definition of "EBITDA" in Section 1.1 is hereby amended by adding at the very end of (ii)(E) therein the following: and, for the Fiscal Year ending February 3, 2001, an amount not to exceed $140,000,000 in respect of non-recurring restructuring charges and incremental inventory markdowns in connection with the closing of up to thirty-three stores as previously disclosed to the Administrative Agent; Paragraph (b) of Section 7.2 is hereby amended by deleting therein the words "or forty-five (45) days in the case of a fiscal month that is the last month of a fiscal quarter" from the first sentence thereof. Paragraph (c) of Section 7.2 is hereby amended by deleting therein the words starting with "either (x)" through and including "or (y)" and deleting the word "month" as the last word of such paragraph and replacing it with the words "relevant period." Clause (ii) of Section 9.9 is hereby amended by (1) deleting the word "and" before clause (h) and (2) adding the following immediately prior to the period at the end of Section 9.9: ; and, (i) the closure of up to thirty-three stores in the last fiscal quarter of the Fiscal Year ending February 3, 2001 and, so long as the proceeds thereof are paid to the Administrative Agent to be applied in accordance with Section 4.6, the sales of the leaseholds of those thirty-three stores. Section 9.26 is hereby amended by replacing it in its entirety with the following new Section 9.26: Fixed Charge Coverage Ratio. (a) Quarterly Test. (i) At the end of each fiscal quarter set forth below, the Parent shall maintain a Fixed Charge Coverage Ratio of not less than the respective amount set forth below for the four consecutive fiscal quarter period ending on the last day of the applicable fiscal quarter: Fiscal Quarter End Fixed Charge Coverage Ratio ------------------ --------------------------- February 3, 2001 .40:1.00 May 5, 2001 .50:1.00 August 4, 2001 .70:1.00 November 3, 2001 1.00:1.00 and each fiscal quarter thereafter 1.00:1.00
Page - 28 (ii) The above covenant shall be tested as follows: The Credit Parties shall deliver to the Administrative Agent not later than (x) 30 days following the end of each of the first three fiscal quarters of each fiscal year and (y) 40 days following the fiscal year end a calculation of the Fixed Charge Coverage Ratio in such detail as shall be acceptable to the Administrative Agent together with an officer's certificate of the chief financial officer or the treasurer of the Parent stating whether the Parent is in compliance with the Fixed Charge Coverage Ratio for the applicable four fiscal quarter period, provided that in the event the calculation and the certificate set forth in this Section 9.26(a)(ii) demonstrates compliance with the Fixed Charge Coverage Ratio, but the financial statements delivered pursuant to Section 7.2(c) demonstrate that the Parent was not in compliance with the Fixed Charge Coverage Ratio for the relevant four fiscal quarter period, then the Credit Parties shall be in default of this Section 9.26. (b) Monthly Test. At any time Individual Availability is less than $65,000,000, the Parent shall maintain a Fixed Charge Coverage Ratio of not less than the respective amount set forth below for the appropriate time period for the most recently ended twelve month period for which financial statements were required to be submitted to the Administrative Agent pursuant to Section 7.2 hereunder: Time Period Fixed Charge Coverage Ratio ----------- --------------------------- 11/08/00 - 03/03/01 .40:1.00 03/04/01 - 06/02/01 .50:1.00 06/03/01 - 09/01/01 .70:1.00 09/02/01 - 02/02/02 1.00:1.00 and thereafter 1.00:1.00
CONDITIONS PRECEDENT TO EFFECTIVE DATE This Eighth Amendment shall be deemed effective as of the date hereof on such date (the "Effective Date") that the following conditions have been satisfied in full or waived by the Administrative Agent in writing: This Eighth Amendment shall have been executed by the Credit Parties, the Administrative Agent and the Majority Lenders, and the Credit Parties shall have performed and shall be in compliance with all covenants, agreements and conditions contained herein, in the Original Agreement and in the other Loan Documents each as amended hereby. The Administrative Agent shall have received: Such opinions of counsel for the Parent and the other Credit Parties as the Administrative Agent or any Lender shall request, each such opinion to be in a form, scope, and substance satisfactory to the Administrative Agent, the Lenders, and their respective counsel; (x) a certificate of the Secretary or Assistant Secretary of each Credit Party certifying that (A) the copy of its By-laws attached to the certificate of its Secretary or Assistant Secretary delivered on the Closing Date, or in the case of AmesPlace.com as delivered in connection with the Sixth Amendment, is a true and complete copy of its By-laws as in effect on the date of the certificate delivered pursuant to this subsection and such By-laws have not been amended since the Closing Date, (B) all required corporate actions in connection with the execution, delivery and performance of this Eighth Amendment have been taken and, if resolutions have been adopted by its Board of Directors or shareholders, that attached thereto is a true and complete copy of such resolutions and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) its certificate or articles of incorporation has not been amended since the date of the last amendment thereto shown on the certificate of good standing from the Secretary of State of the state of its incorporation delivered on the Closing Date and in the case of AmesPlace.com, the date of the good standing certificate delivered in connection with the Sixth Amendment and (D) the officers executing this Eighth Amendment or any other document to which it is a party delivered in connection herewith or therewith are the incumbent officers and their signatures are as set forth thereto; and (y) a certificate of another officer thereof attesting to the incumbency and signature of its Secretary or Assistant Secretary, as the case may be; Such other approvals, opinions or documents as the Administrative Agent may reasonably request; and Such amendments and modifications to the other Loan Documents as the Administrative Agent may reasonably request. To the extent invoiced, the Borrower shall have paid all fees and expenses of the Administrative Agent and the Attorney Costs incurred in connection with this Eighth Amendment and the transactions contemplated hereby. All proceedings taken in connection with the execution of this Eighth Amendment and all documents and papers relating hereto and thereto shall be satisfactory in form, scope, and substance to the Administrative Agent. All representations and warranties contained in this Eighth Amendment or otherwise made in writing to the Administrative Agent or the Lenders in connection herewith shall be true and correct in all material respects. After the effectiveness of this Eighth Amendment, no unwaived event has occurred and is continuing which constitutes a Default or an Event of Default under the Credit Agreement. Page - 29 The execution and delivery to the Administrative Agent by the Credit Parties of a counterpart of this Eighth Amendment shall be deemed to be a representation and warranty made by each Credit Party to the effect that the conditions precedent to the Effective Date set forth in 3.5 and 3.6 above have been satisfied, with the same effect as delivery to the Administrative Agent and the Lenders of a certificate signed by a Responsible Officer of each Credit Party, dated the Effective Date, to such effect. MISCELLANEOUS Each Credit Party affirms, reaffirms and restates the representations and warranties set forth in Articles 6 and 8 of the Original Agreement, as amended by this Eighth Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date. Each Credit Party represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: _ It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Eighth Amendment and the transactions contemplated hereby and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Eighth Amendment and the transactions contemplated hereby; _ No consent of any other person (including, without limitation, shareholders or creditors of any Credit Party), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Eighth Amendment and the other instruments and documents contemplated hereby; _ This Eighth Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and _ The execution, delivery and performance of this Eighth Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. Other than as expressly set forth herein, nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Original Agreement, and each Credit Party hereby agrees that all of the covenants and agreements contained in the Original Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. Each Credit Party affirms its prior grant under the Original Agreement of a continuing first priority security interest in, lien on, and right of set-off against, all of the Collateral of such Credit Party, whether now owned or existing or hereafter acquired or arising, regardless of where located, and each of them shall enter into any confirmatory documentation requested by the Administrative Agent. All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. Page - 30 This Eighth Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. This Eighth Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. The parties hereto shall, at any time and from time to time following the execution of this Eighth Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Eighth Amendment. IN WITNESS WHEREOF, the Borrower, the Majority Lenders, the Administrative Agent and the other Credit Parties have caused this Eighth Amendment to be duly executed by their respective authorized officers as of the day and year first above written. BANK OF AMERICA, N.A., as the Administrative Agent By: ----------------------------------------- Name: William J. Wilson Title: Vice President Address: 335 Madison Avenue New York, New York 10017 Attn: Division Manager Telecopy No.: (212) 836-5169 BORROWER: AMES MERCHANDISING CORPORATION By: ----------------------------------------- Name: Sheila Reinken Title: Treasurer Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES DEPARTMENT STORES, INC., as a Guarantor By: ----------------------------------------- Name: Sheila Reinken Title: Treasurer Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 Page - 31 AMESPLACE.COM, INC., as a Guarantor By: ----------------------------------------- Name: Sheila Reinken Title: Assistant Treasurer Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES REALTY II, INC., as a Guarantor By: ----------------------------------------- Name: Sheila Reinken Title: Treasurer Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 AMES TRANSPORTATION SYSTEMS, INC., as a Guarantor By: ----------------------------------------- Name: Sheila Reinken Title: Treasurer Address: 2418 Main Street Rocky Hill, Connecticut 06067 Attn: Rolando de Aguiar Telecopy No.: (860) 563-8560 BANK OF AMERICA, N.A., as a Lender By: ----------------------------------------- Name: William J. Wilson Title: Vice President Address: 335 Madison Avenue New York, New York 10017 Attn: Division Manager Telecopy No.: (212) 836-5169 CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Cindy B. Dennbaum Title: Vice President Address: 1133 Avenue of the Americas New York, New York 10036 Attn: Ms. Cindy Dennbaum Telecopy No.: (212) 545-4283 Page - 32 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Charles Chiodo Title: Authorized Signatory Address: 800 Connecticut Avenue, 2 North Norwalk, Connecticut 06854 Attn: Vice President - Portfolio Telecopy No.: (203) 316-7893 TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Christopher J. Norrito Title: Vice President Address: 555 Theodore Fremd Avenue, Suite 301 Rye, New York 10580 Attn: Mr. Jon Oldham Telecopy No.: (914) 921-0110 THE CHASE MANHATTAN BANK, as a Lender By: ----------------------------------------- Name: James M. Dailey Title: Vice President Address: One Chase Square C-S 5 Rochester, New York 14626 Attn: James M. Dailey Telecopy No.: (716) 258-7440 FLEET CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: John P. Masotti Title: Vice President Address: 200 Glastonbury Blvd. Glastonbury, CT 06033 Attn: Mr. John Masotti Telecopy No.: (860) 657-7759 Page - 33 LASALLE BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Lawrence P. Garni Title: First Vice President Address: 477 Madison Avenue, 12th Floor New York, New York 10022 Attn: Mr. Corey Sclar Telecopy No.: (212) 371-2966 FLEET NATIONAL BANK, as a Lender By: ----------------------------------------- Name: Lori Greenberg Title: Assistant Vice President Address: 777 Main Street MSN 240 Hartford, Connecticut 06115 Attn: Lori Greenberg Telecopy No.: (860) 368-6029 NATIONAL CITY COMMERCIAL FINANCE, INC., as a Lender By: ----------------------------------------- Name: Elizabeth M. Lynch Title: Senior Vice President Address: 1965 East 6th Street, Suite 400 Cleveland, Ohio 44114 Attn: Ms. Carla Kehres Telecopy No.: (216) 575-9486 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: ----------------------------------------- Name: O Theodore Kuber, Jr Title: Vice President Address: 1600 Market Street, 31st Floor F2-F070-31-2 Philadelphia, Pennsylvania 19103 Attn: Ms. Celeste DiGeorge Telecopy No.: (215) 585-4749 Page - 34 CITIZENS BUSINESS CREDIT COMPANY, as a Lender By: ----------------------------------------- Name: Michael Lavoie Title: Assistant Vice President Address: 40 Court Street Boston, Massachusetts 02108 Attn: Mr. Michael Lavoie Telecopy No.: (617) 227-7995 FOOTHILL CAPITAL CORPORATION, as a Lender By: ----------------------------------------- Name: Todd Nakamoto Title: Vice President Address: 11111 Santa Monica Blvd. Los Angeles, California 90025 Attn: Mr. Todd Nakamoto Telecopy No.: (310) 479-8952 AMSOUTH BANK, as a Lender By: ----------------------------------------- Name: Kevin R. Rogers Title: Attorney in Fact Address: c/o AmSouth Capital Corp. 350 Park Avenue, 19th Floor New York, New York 10022 Attn: Mr. Joseph B. Huston Telecopy No.: (212) 935-7548 IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as a Lender By: ----------------------------------------- Name: Andrew Sepe Title: Vice President Address: One State Street New York, New York 10004 Attn: Mr. Andrew Sepe Telecopy No.: (212) 858-2151 Page - 35 FLEET RETAIL FINANCE INC., as a Lender By: ----------------------------------------- Name: Betsy Ratto Title: Managing Director Address: 40 Broad Street, 11th Floor Boston, Massachusetts 02109 Attn: Ms. Betsy Ratto Telecopy No.: (617) 434-4339 CIT GROUP/BUSINESS CREDIT, INC., as a Lender By: ----------------------------------------- Name: Evelyn Kusold Title: Assistant Vice President Address: 1211 Avenue of the Americas New York, New York 10036 Attn: Ms. Evelyn Kusold Telecopy No.: (212) 536-1295 TEXTRON FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: George Yourick Title: Vice President Address: 4550 North Point, Suite 400 Alpharetta, Georgia 30022 Attn: Mr. Todd Runge Telecopy No.: (770) 360-1672 HELLER FINANCIAL, INC., as a Lender By: ----------------------------------------- Name: Thomas Bukowski Title: Senior Vice President Address: 150 East 42nd Street, 7th Floor New York, New York 10017 Attn: Mr. Thomas Bukowski Telecopy No.: (212) 880-2960 Page - 36 FINOVA FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Bruce Mettle Title: Portfolio Administrator Address: 311 South Wacker Drive, Suite 4400 Chicago, IL 60606 Attn: Mr. Bruce Mettle Telecopy No.: (312) 322-7250 GMAC COMMERCIAL CREDIT LLC, as a Lender By: ----------------------------------------- Name: Frank Inperato Title: Senior Vice President Address: 1290 Avenue of the Americas, 3rd Floor New York, New York 10004 Attn: Mr. Robert E. Nuytkens Telecopy No.: (212) 408-4317 Page - 37 EX-11 4 0004.txt EARNINGS PER SHARE Exhibit 11 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE (In Thousands, Except Per Share Amounts) For the Thirteen For the Thirty-Nine Weeks Ended Weeks Ended --------------------------- ----------------------------- Oct. 28, Oct. 30, Oct. 28, Oct. 30, 2000 1999 2000 1999 ----------- ------------ ------------- ------------ Loss before Cumulative Effect adjustment $(37,236) $(27,700) $(88,432) $(77,817) Cumulative Effect adjustment, net of tax - - - (1,107) ----------- ------------ ------------- ------------ Net loss (37,236) (27,700) (88,432) (78,924) =========== ============ ============= ============ For Basic Earnings Per Share: Weighted average number of common shares outstanding during the period (b) 29,407 29,109 29,378 27,027 Basic net loss per share: Basic net loss per share before Cumulative Effect adjustment (1.27) (0.95) (3.01) (2.88) Cumulative Effect Adjustment, net of tax - - - (0.04) ----------- ------------ ------------- ------------ Basic net loss per share $(1.27) $(0.95) $(3.01) $(2.92) =========== ============ ============= ============ For Diluted Earnings Per Share: Weighted average number of common shares outstanding during the period (b) 29,407 29,109 29,378 27,027 Add common stock equivalent shares represented by: Series B Warrants (a) (a) (a) (a) Series C Warrants (a) (a) (a) (a) Options under 1994 Management Stock Option Plan, 1998 Stock Incentive Plan, 1994 Non- Employee Director Stock Option Plan and 2000 Store Manager Stock Option Plan (a) (a) (a) (a) ----------- ------------ ------------- ------------ Weighted average number of common and common equivalent shares (b) 29,407 29,109 29,378 27,027 =========== ============ ============= ============ Diluted net loss per share before Cumulative Effect adjustment (1.27) (0.95) (3.01) (2.88) Cumulative Effect Adjustment, net of tax - - - (0.04) ----------- ------------ ------------- ------------ Diluted net loss per share $(1.27) $(0.95) $(3.01) $(2.92) =========== ============ ============= ============ (a) Common stock equivalents have not been included, because the effect would be anti-dilutive. (b) The weighted average number of common shares outstanding is net of treasury stock.
Page - 38 EX-12 5 0005.txt RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (In Thousands, Except Ratio Data) Thirty-Nine Weeks Ended Fiscal Year Ended ------------- ------------------------------------------------------------------------- Oct. 28, January 29, January 30, January 31, January 25, January 27, 2000 2000 1999 1998 1997 1996 ------------- ------------ ------------ ------------- ------------ ------------ Income (loss) before income taxes, extraordinary item and cumulative effect adjustment (88,432) (31,355) 52,605 53,633 26,804 (1,618) Add: Interest expense 64,843 60,843 15,253 11,600 19,043 24,116 Interest component of rental expense 32,944 29,253 21,121 18,409 16,541 16,208 ------------- ------------ ------------ ------------- ------------ ------------ Earnings available for fixed charges 9,355 58,741 88,979 83,642 62,388 38,706 Fixed Charges: Interest expense 64,843 60,843 15,253 11,600 19,043 24,116 Interest component of rental expense 32,944 29,253 21,121 18,409 16,541 16,208 ------------- ------------ ------------ ------------- ------------ ------------ Total fixed charges 97,787 90,096 36,374 30,009 35,584 40,324 Ratio of earnings to fixed charges 0.1x 0.7x 2.4x 2.8x 1.8x 1.0x For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of income before income taxes, extraordinary item and cumulative effect adjustment plus fixed charges (net of capitalized interest). Fixed charges consist of interest expense on all indebtedness and capitalized interest, amortized premiums, discounts and capitalized expenses related to indebtedness, and one-third of rent expense on operating leases representing that portion of rent expense deemed by us to be attributable to interest. For the thirty-nine weeks ended October 28, 2000 and the fiscal year ended January 29, 2000, the amount of additional earnings that would have been required to cover fixed charges for these periods was $88.4 million and $31.4 million, respectively.
Page - 39 EX-27 6 0006.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS FEB-03-2000 JUL-30-2000 OCT-28-2000 41,876 0 58,814 0 1,045,847 1,269,952 739,723 188,188 2,340,699 742,447 244,373 0 0 296 547,666 2,340,699 920,321 934,909 689,762 689,762 281,108 0 24,098 (60,059) 22,823 (37,236) 0 0 0 (37,236) (1.27) (1.27)
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