Court Approves Employment Contract Rejection
NEW YORK (AP) _ Ames Department Stores Inc. won approval from a federal bankruptcy judge on Tuesday to reject employment contracts totaling about $3.3 million for three former executives.
The ruling by Judge Howard C. Buschman means the three, who stepped down after the troubled retailer filed for protection from its creditors, will have to line up with other unsecured creditors if they want to collect anything they say is due them under the contracts.
They would recover the same percentage of what is owed them as other unsecured creditors when a bankruptcy reorganization plan is approved by the court.
The former executives include former chief executive officer Peter Hollis, whose contract guaranteed him a salary of $700,000 a year through Jan. 31, 1993.
The others are Leslie Dietzman, former executive vice president of merchandising, whose contract was for $325,000 a year through 1992, and Jeffrey Dentz, former executive vice president of operations, whose contract provides for $200,000 a year through Jan. 31, 1993.
Federal law allows a company in bankruptcy to assume or reject any contract it entered into before its bankruptcy filing. The law is intended to help a company reorganize by removing obligations it considers burdensome or no longer appropriate for its ongoing business.
Ames, based in Rocky Hill, Conn., filed for protection under Chapter 11 of the U.S. Bankruptcy Code on April 25, largely because of problems stemming from its $788 million acquisition of the Zayre discount store chain in 1988.
Hollis resigned a few days after the company filed for protection. Dietzman and Dentz resigned their positions but have remained with Ames, said Ames spokesman Doug Ewing.
Ames had already stopped making payments to the executives and none received severance payments, said another Ames spokesman, William Roberts.
Hollis was replaced by Stephen L. Pistner, a specialist in turning around troubled retail companies who is being paid $1.5 million a year.
Last month, Buschman approved the closing of more than 200 stores and authorized the company to pay $24 million to 18,000 workers who will lose their jobs.
During Tuesday’s hearing, the judge called the Ames case troubling because of the store closings and impending layoffs. Buschman also said the company’s unsettled finances have left 38,000 remaining employees with jobs ″dependent upon factors of which they have very little control.″
Ames, the nation’s fourth-largest discounter, has 679 stores in the eastern United States and two distribution centers.