Stuarts Department Stores Inc

STUARTS DEPARTMENT STORES, INC. PROXY STATEMENT

SPECIAL MEETING OF SHAREHOLDERS

May 18, 1993

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Stuarts Department Stores, Inc. for use at the Special Meeting of Shareholders to be held on May 18, 1993, or any adjournments thereof.

This Proxy Statement and the enclosed proxy card are being furnished to shareholders on or about April 7, 1993.

An Annual Meeting of Shareholders for the election of directors is not being held at this time because the Joint Plan of Reorganization (the “Reorganization Plan”) of the Company and its Official Committee of Unsecured Creditors (the “Creditors' Committee”) confirmed by the United States Bankruptcy Court for the District of Massachusetts (Western Division) (the “Bankruptcy Court”) on October 13, 1992 and the Company's Restated Certificate of Incorporation require that a meeting of the shareholders of the Company be convened on a date within 30 days before the expiration of the one-year period following consummation of the Reorganization Plan (the “Initial Year”) for the purpose of electing new directors. The Initial Year expires on October 18, 1993. Accordingly, the Company anticipates that an Annual Meeting of Shareholders will be held during late September or early October of 1993.

The Company had 17,058,636 shares of Common Stock outstanding as of the record date, April 6, 1993. Each share of Common Stock is entitled to one vote. The affirmative vote of two-thirds of the votes cast is required to approve the opening of the new store.

PROPOSAL 1 - APPROVAL OF NEW STORE OPENING

The Company generally pursues a strategy for new store sites which is founded upon entering into long-term leases for existing space previously occupied by other discount stores or mass merchandisers which the Company remodels into the Stuarts prototype.

The Company believes that new Company stores on sites previously occupied by other retailers generally require limited alterations. This enhances the Company's ability to establish stores in new locations within a relatively short period of time and at relatively low cost.

The Company also attempts to locate the new stores in areas having demographic and competitive profiles which are similar to existing store locations.

In selecting particular sites, the Company formulates volume and market penetration estimates based upon an analysis of the operating histories of other retailers in these locations, coupled with related demographic and competitive data and, thereby, attempts to identify locations in which the Company can favorably apply its merchandising format and operational and marketing strengths.

The Company believes that, by clustering new stores in communities contiguous to its present trading areas, the Company enhances its ability to build upon its market position, take advantage of an “advertising umbrella” and, over a longer term, obtain economies of scale by reducing its distribution and executive supervision costs.

The Board of Directors of the Company recommends the opening of a new store in . The proposed site was previously a location for Bradlee's Department Stores.

The new store would be square feet in size and located in the .

The Company believes that the proposed site has certain characteristics which are similar to the Lawrence and Haverhill stores that the Company opened last year.

Certain terms of the proposed lease which have been agreed upon, subject to the execution and delivery of a definitive lease agreement, include a free-rent period from the projected opening in until , a base rent of per square foot ...

The Company anticipates that approximately will be required in connection with fixtures, leasehold improvements and pre-opening expenses for the new store.

The Company is considering closing one of two existing stores located in Massachusetts.

The leases for these stores expire in .

Although the Company presently does not have specific plans to open any new stores other than the proposed Taunton store or to enter into any other material transactions during the balance of the Initial Year, the Company intends to be opportunistic in seeking new store locations and is aware that, due to retrenchment or contraction by other discount department store chains, opportunities may become available to obtain attractive locations at favorable prices.

In the event that such an opportunity arises, any necessary shareholder approval would be sought in respect thereof.

Management recommends the execution of the enclosed Proxy FOR the above proposal.

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth beneficial ownership of Stuarts Common Stock as of April 1, 1993 by (i) each person known or believed by the Company to own beneficially more than 5% of its outstanding Common Stock, (ii) each director who is a stockholder, and (iii) all officers and directors as a group.

* Less than 1%

(1) The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to the information contained in the notes to the table.

(2) Based upon a Schedule 13D and amendments thereto filed with the Securities and Exchange Commission, Shawmut Bank, N.A. and Shawmut National Corporation are the direct and indirect parent corporations, respectively, of SB Asset Recovery Incorporated, the transferee of certain of the Common Stock issued to Shawmut pursuant to the Reorganization Plan, and may be deemed to share voting and dispositive power in respect of such Common Stock.

(3) Based upon a Schedule 13D and amendments thereto filed with the Securities and Exchange Commission, KuwAm Corporation has sole voting power and sole dispositive power with respect to certain shares, as described in the document.

(4) Does not include shares of Common Stock issuable upon the exercise of options granted to Mr. Ettore pursuant to the Company's 1992 Employee Stock Option Plan.

(5) Does not include shares of Common Stock issuable upon the exercise of options granted to five executive officers of the Company, including Mr. Ettore, pursuant to the Company's 1992 Employee Stock Option Plan.

CERTAIN DEVELOPMENTS

On October 13, 1992, the Bankruptcy Court entered an order confirming the Reorganization Plan filed with the Bankruptcy Court by the Company and the Creditors' Committee on July 23, 1992.

The reorganization of the Company was consummated on October 19, 1992.

Pursuant to the Reorganization Plan, the general unsecured creditors of the Company are entitled to receive, in exchange for the cancellation of indebtedness aggregating approximately of allowed claims, cash payments of and shares of the Company's Common Stock equal to 80% of the total number of outstanding shares of Common Stock after giving effect to the issuance of such shares.

The cash payments are required to be deposited into an account established for deposit of funds for distribution to general unsecured creditors holding allowed claims in three installments.

As of April 1, 1993 shares, or of the outstanding Common Stock as of such date, had been issued to former unsecured creditors holding allowed claims.

Pursuant to rights provided to Shawmut under the Reorganization Plan, Shawmut caused the Company to file with the Securities and Exchange Commission on a Registration Statement on Form S-1 in respect of the shelf registration of shares of Common Stock held by SB Asset Recovery Incorporated and National Westminster Bank USA.

The Reorganization Plan also requires that, during the Initial Year the Company's Board of Directors be increased from three to seven members and that its membership be comprised of two individuals designated by Shawmut, two individuals designated by the trade and factor representatives on the Creditors' Committee, one outside director approved by the Creditors' Committee and two pre-Reorganization directors.

SHAREHOLDER PROPOSALS

In order to be considered for inclusion in the proxy materials for the Company's 1993 Annual Meeting of Shareholders, any shareholder proposal to take action at such meeting must be received at the Company's principal executive offices by .

OTHER MATTERS

Management does not know of any other matters which may come before the Meeting. However, if any other matters properly come before the Meeting, the persons named in the enclosed proxy will vote, or otherwise act, in accordance with their judgment on such matters.

Shares represented by proxies will be voted in accordance with the instructions contained thereon and, if no direction is given with respect to a particular proposal, will be voted in favor of such proposal.

A shareholder giving a proxy has the right to revoke it by giving notice to the Secretary of the Company before it has been voted.

The cost of the solicitation of proxies will be borne by the Company.