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                July 31, 1999
                               ------------------------------------------------


[   ]      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 offices)                  (Zip Code)


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
                                       ---  ---


     29,170,909 shares of Common Stock were outstanding on August 17, 1999.


                            Exhibit Index on page 16

                        Page 1 of 31 (including exhibits)

                                      -1-
<PAGE>

                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JULY 31, 1999




                                    I N D E X




                                                                         Page

Part I:  Financial Information

           Consolidated Condensed Statements of Operations                 3
              for the Thirteen and Twenty-Six Weeks ended July 31,
              1999 and August 1, 1998

           Consolidated Condensed Balance Sheets as of                     4
              July 31, 1999, January 30, 1999, and August 1,
              1998

          Consolidated Condensed Statements of Cash Flows                  5
              for the Twenty-Six Weeks ended July 31, 1999
              and August 1, 1998

          Notes to Consolidated Condensed Financial Statements             6

          Management's Discussion and Analysis of Financial               11
              Condition and Results of Operations


Part II: Other Information

          Submission of Matters to a Vote of Security Holders             16

          Exhibits and Reports on Form 8-K                                16

                                      -2-

<PAGE>
<TABLE>


                                     PART I
                              FINANCIAL INFORMATION


                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                    (In Thousands, Except Per Share Amounts)



                                                                             (Unaudited)                       (Unaudited)
                                                                          For the Thirteen                  For the Twenty-Six
                                                                             Weeks Ended                        Weeks Ended
                                                                    ------------------------------    ------------------------------
<CAPTION>
                                                                     July 31,        August 1,          July 31,        August 1,
                                                                       1999             1998              1999             1998
                                                                    ------------    ------------      -------------   --------------
<S>                                                                 <C>             <C>                <C>             <C>
Ames net sales                                                         $728,023         $535,047       $1,309,625       $1,032,092
Hills net sales                                                         128,175                -          375,642                -
                                                                    ------------    ------------    -------------   --------------
     Total net sales                                                    856,198          535,047        1,685,267        1,032,092

Costs, expenses and (income):
     Ames cost of merchandise sold                                      514,584          378,211          934,089          736,822
     Hills cost of merchandise sold                                      83,762                -          251,212                -
     Ames selling, general and administrative expenses                  221,371          145,490          397,575          290,762
     Hills operating expenses and agency fees                            52,790                -          142,047                -
     Leased department and other income                                 (11,590)          (7,489)         (20,012)         (13,675)
     Depreciation and amortization expense, net                          16,304            2,257           30,687            4,178
     Interest and debt expense, net                                      13,621            3,192           25,543            5,246
                                                                    ------------    ------------    -------------   --------------

Income (loss) before income taxes                                       (34,644)          13,386          (75,874)           8,759
Income tax benefit (provision)                                           12,471           (5,000)          27,313           (3,316)
                                                                    ------------    ------------    -------------   --------------

Net income (loss)                                                      ($22,173)          $8,386         ($48,561)          $5,443
                                                                    ============    =============    =============   ==============



Basic net income (loss) per common share                                $ (0.80)          $ 0.37          $ (1.87)          $ 0.24
                                                                    ============    =============    =============   ==============

Weighted average number of common shares outstanding                     27,706           22,950           25,914           22,800
                                                                    ============    =============    =============   ==============


Diluted net income (loss) per common share                              $ (0.80)          $ 0.35          $ (1.87)          $ 0.23
                                                                    ============    =============    =============   ==============


Weighted average number of common and common
     equivalent shares outstanding                                       27,706           24,272           25,914           24,171
                                                                    ============    =============    =============   ==============

<FN>
 (The accompanying notes are an integral part of these consolidated condensed financial statements.)
</FN>
</TABLE>
                                      -3-

<PAGE>
<TABLE>


                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)
<CAPTION>
                                                                          (Unaudited)                         (Unaudited)
                                                                            July 31,        January 30,        August 1,
                                                                              1999             1999               1998
                                                                         ---------------   --------------     -------------
<S>                                                                      <C>               <C>                <C>
                                                          ASSETS
Current Assets:
      Cash and short-term investments                                           $36,404          $35,744           $20,859
      Receivables                                                                47,038           30,244            22,662
      Merchandise inventories                                                   795,440          621,509           502,157
      Prepaid expenses and other current assets                                  57,173           16,075            11,776
                                                                         ---------------   --------------     -------------
             Total current assets                                               936,055          703,572           557,454

Fixed Assets                                                                    527,345          437,834           165,692
      Less - Accumulated depreciation and amortization                          (95,737)         (66,205)          (53,283)
                                                                         ---------------   --------------     -------------
             Net fixed assets                                                   431,608          371,629           112,409

Other assets and deferred charges                                                63,232           16,447             5,900
Deferred taxes, net                                                             102,406          102,406             7,406
Beneficial lease rights, net                                                     57,507           58,885                 -
Goodwill, net                                                                   197,471          230,454                 -
                                                                         ---------------   --------------     -------------
                                                                             $1,788,279       $1,483,393          $683,169
                                                                         ===============   ==============     =============



                                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
      Accounts payable:
         Trade                                                                 $343,981         $313,280          $176,147
         Other                                                                   67,557           83,485            43,060
                                                                         ---------------   --------------     -------------
             Total accounts payable                                             411,538          396,765           219,207

      Short-term debt                                                                 -                -            70,525
      Current portion of long-term debt, capital lease and financing obligations 19,801           17,799             4,638
      Self-insurance reserves                                                    29,085           29,115            14,584
      Accrued expenses and other current liabilities                            215,638          211,827            74,581
      Store closing reserves                                                     56,130           59,768            10,301
                                                                         ---------------   --------------     -------------
         Total current liabilities                                              732,192          715,274           393,836

Long-term debt                                                                  257,085           95,810                 -
Capital lease and financing obligations                                         183,559          191,904            37,378
Other long-term liabilities                                                     130,766          132,376            38,995
Excess of revalued net assets over equity under fresh-start reporting            20,944           24,021            27,097
Commitments and contingencies

Stockholders' Equity:
      Preferred  stock  (3,000,000  shares  authorized;   no  shares  issued  or
         outstanding at July 31, 1999, January 30, 1999 and August 1, 1998,
         par value per share $.01)                                                    -                -                 -
      Common stock (40,000,000 shares authorized; 29,166,639, 23,921,545
         and 23,096,554 shares outstanding at July 31, 1999, January 30, 1999
         and August 1, 1998, respectively; par value per share $.01)                292              239               233
      Additional paid-in capital                                                424,900          236,667           126,001
      Retained earnings                                                          39,455           88,016            59,629
      Treasury stock (79,495 shares, at cost)                                      (914)            (914)                -
                                                                         ---------------   --------------     -------------
         Total stockholders' equity                                             463,733          324,008           185,863
                                                                         ---------------   --------------     -------------
                                                                             $1,788,279       $1,483,393          $683,169
                                                                         ===============   ==============     =============

<FN>
 (The accompanying notes are an integral part of these consolidated condensed financial statements.)
</FN>
</TABLE>
                                      -4-
<PAGE>
<TABLE>


                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In Thousands)


                                                                                             (Unaudited)
                                                                                         For the Twenty-Six
                                                                                             Weeks Ended
                                                                                -------------------------------------
                                                                                   July 31,              August 1,
                                                                                    1999                   1998
                                                                                --------------        ---------------
<CAPTION>
<S>                                                                             <C>                   <C>
Cash flows from operating activities:
        Net income (loss)                                                            ($48,561)                $5,443
        Adjustments to reconcile net income (loss) to net cash
            used for operating activities:
        Income tax (benefit) provision                                                (27,313)                 3,316
        Depreciation and amortization of fixed and other assets                        34,618                  5,291
        Increase in accounts receivable                                               (16,794)                (3,740)
        Increase in merchandise inventories                                          (173,931)               (78,321)
        Increase (decrease) in accounts payable                                        14,773                 (3,949)
        Increase (decrease) in accrued expenses and other current liabilities           3,781                   (326)
        Increase (decrease) in other working capital and other, net                    13,927                 (1,957)
                                                                                --------------        ---------------
Cash used for operations before store closing items                                  (199,500)               (74,243)
Payments of store closing costs                                                        (3,386)                (1,355)
                                                                                --------------        ---------------
Net cash used for operating activities                                               (202,886)               (75,598)
                                                                                --------------        ---------------
Cash flows from investing activities:
        Purchases of fixed assets                                                     (83,614)               (22,615)
        Purchase of leases                                                            (42,835)                     -
                                                                                --------------        ---------------
Net cash used for investing activities                                               (126,449)               (22,615)
                                                                                --------------        ---------------
Cash flows from financing activities:
        Payments of debt, capital lease and financing obligations                     (12,854)               (13,003)
        Borrowings (payments) under the revolver, net                                 (38,725)                70,525
        Proceeds from the issuance of senior notes                                    200,000                      -
        Proceeds from the issuance of common stock, net                               187,484                      -
        Payments of deferred financing costs                                           (6,712)                     -
        Proceeds from the exercise of options and warrants                                802                  3,722
                                                                                --------------        ---------------

Net cash provided by financing activities                                             329,995                 61,244
                                                                                --------------        ---------------

Increase (decrease) in cash and short-term investments                                    660                (36,969)
Cash and short-term investments, beginning of period                                   35,744                 57,828
                                                                                --------------        ---------------
Cash and short-term investments, end of period                                        $36,404                $20,859
                                                                                ==============        ===============


Supplemental  disclosures of cash flow information:
   Cash paid during the period for:
        Interest and debt fees not capitalized                                         $9,234                 $4,043
        Income taxes                                                                    1,735                      5




<FN>
 (The accompanying notes are an integral part of these consolidated condensed financial statements.)
</FN>
</TABLE>
                                      -5-

<PAGE>

                  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 July 31, 1999 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 30, 1999 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 30,  1999  (the "1998 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 1998 Form
       10-K.

              In the fourth  quarter of the year ended January 30, 1999 ("Fiscal
       1998"),  the Company adopted SOP 98-5 "Reporting on the Costs of Start-Up
       Activities"  retroactively effective to the first quarter of Fiscal 1998.
       Therefore,  the  consolidated  condensed  financial  statements  for  the
       thirteen and  twenty-six  weeks ended  August 1, 1998 have been  adjusted
       accordingly.  Reference can be made to the 1998 Form 10-K for  additional
       discussion of the adoption of SOP 98-5 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.

              Total  cash  consideration for the  acquisition of  Hills was $130
       million.   Reference can  be  made  to the  1998  Form 10-K  for  further
       discussion of the Hills acquisition.

              The  acquisition  has been recorded  under the purchase  method of
       accounting and,  accordingly,  the results of operations of Hills for the
       quarter ended July 31, 1999 are included in the accompanying consolidated
       condensed  financial  statements.  The aggregate  purchase  price of $130
       million has been  allocated to assets  acquired and  liabilities  assumed
       based on a preliminary  determination of respective fair market values at
       the date of acquisition  and is subject to adjustment.  The fair value of
       tangible  assets  acquired and  liabilities  assumed was $477 million and
       $637  million,  respectively.  The balance of the  purchase  price,  $290
       million,  was  recorded  as two  components:  an  excess of cost over net
       assets acquired (goodwill) of $231 million, which is being amortized over
       25 years on a  straight-line  basis,  and beneficial  lease rights of $59
       million,  which is being amortized over the life of the respective leases
       (which average approximately 25 years). As of July 31, 1999, goodwill was
       reduced by $28 million due to the  completion  of  inventory  liquidation
       sales at the Hills store locations.

              At the  time  of the  acquisition,  Hills  operated  155  discount
       department  stores.  In 1999, the Company will remodel and convert 151 of
       the Hills stores to Ames stores.  The four  remaining  Hills stores along
       with seven other Ames stores will be closed because they are in locations
       that are either competitive with, or are underperforming,  other Hills or
       Ames stores.  The remodeling and conversion process is being 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 is scheduled
       to be completed in September 1999.

       Agency Agreement Overview

              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 initial  ticketed  selling price of the merchandise  (the  "Guaranteed
       Return"). Accordingly, the Company valued the acquired Hills inventory at
       an amount equal to the Guaranteed  Return.  An additional  payment may be
       made to the Company if proceeds of sale exceed a target percentage of the
       initial retail value. The Agency  Agreement  further entitled the Company
       to  reimbursement  of certain store operating  expenses  (e.g.,  payroll,
       rent,  advertising,  etc.) out of the sale  proceeds  during  the  agency
       period.

              The Agent will be paid a fee (the  "Agency  Fee") for its services
       pursuant to the Agency Agreement.  The Agency Fee will be an amount equal
       to the proceeds from the sales of Hills  merchandise less a deduction for
       the reimbursement of store operating expenses and the Guaranteed Return.

       Agency Agreement Accounting

              As discussed  earlier,  the results of operations of Hills for the
       thirteen and  twenty-six  weeks ended July 31, 1999 have been included in
       the accompanying consolidated condensed financial statements.  During the
       thirteen  and  twenty-six  weeks  ended  July  31,  1999,  the  following
       accounting  treatment  has been applied to  recognize  the results of the
       Hills stores prior to their conversion to Ames stores during fiscal 1999.
       Hills net sales have been recorded as "Hills Net Sales" and represent net
       sales  achieved by the Hills  stores  prior to their  conversion  to Ames
       stores.   "Hills  Cost  of  Merchandise  Sold"  represents  the  cost  of
       merchandise  sold in  connection  with  the  above  referenced  sales  as
       adjusted  for  the  Guaranteed  Return  amount  mentioned  above.  "Hills
       Operating Expenses and Agency Fees" include the following: the associated
       store expenses  incurred while  operating the Hills stores prior to their
       conversion to Ames stores,  which are  reimbursable to the Company out of
       the proceeds of Hills  merchandise  sales per the Agency  Agreement;  the
       Agency Fee due to the Agent for the period presented;  and other expenses
       (e.g.,   non-store   payroll,   non-store  rent,  etc.)  associated  with
       supporting  the Hills  stores prior to their  conversion  to Ames stores,
       which are not reimbursable under the Agency Agreement.

              The Agency Fee recorded  for the second  quarter and first half of
       1999 was $13.1 million and $39.3 million respectively, and was determined
       based upon the Hills sales  results for the period,  less the  Guaranteed
       Return, reimbursable Hills store expenses and an allocation to Ames based
       on sale proceeds in excess of specified levels.  The Agency Fee will only
       be  determined  after a final  accounting  for all  revenues and expenses
       earned/incurred  during the entire agency  period.  The final  accounting
       will be completed during the third quarter of fiscal 1999.

              During the quarter ended July 31, 1999, the inventory  liquidation
       sales at the Hills stores were completed.  Proceeds from the sales during
       the entire  agency  period  exceeded the targeted  percentage  referenced
       above.  The Company  will share in the excess and thereby will realize in
       excess of the  Guaranteed  Return for the acquired Hills  inventory.  The
       $28.3 million adjustment,  recorded as of July 31, 1999, to recognize the
       increase  in  inventory  valuation   concurrently  reduced  the  original
       estimate of the excess of cost over net assets acquired (goodwill).

       Acquisition of Caldor Sites

              During March 1999, the Company  entered into two  agreements  with
       Caldor  Corporation to purchase seven of its stores in  Connecticut,  two
       stores in Massachusetts and a 649,000 square foot distribution  center in
       Westfield,  MA, for a total cash purchase price of $42.8  million.  Under
       the terms of the agreements,  the Company assumed Caldor's leases for the
       nine stores and the  distribution  center and  acquired  all of the store
       fixtures  in eight of the stores and all  racking,  sorting  systems  and
       materials handling equipment in the distribution center. During March and
       April 1999, the United States  Bankruptcy Court for the Southern District
       of New York approved the  Company's  right to purchase the leases for the
       stores and the distribution center. All of the transactions  subsequently
       closed.


3.     Net Income (Loss) Per Common Share:
      ---------------------------------
              Net  income  (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 July
       31, 1999, 28,690 options were exercised.  During the quarter ended August
       1,  1998,  74,210  options  were  exercised  and  190,723  warrants  were
       converted.


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 Hills  Acquisition,
       certain of the  Company's  subsidiaries  entered into an  agreement  (the
       "Credit  Agreement")  with a  syndicate  of  other  banks  and  financial
       institutions  for whom Bank of America  NT&SA is  serving  as agent.  The
       Credit Agreement  provides for a secured  revolving credit facility of up
       to $650  million,  with a sublimit of $150 million for letters of credit.
       The Credit  Agreement  replaced a $320 million secured  revolving  credit
       facility.

              The  Credit  Agreement  is in effect  until  June 30,  2002 and is
       secured by substantially all of the assets of the Company.  Reference can
       be made to the 1998 Form 10-K for  additional  discussion  of the  Credit
       Agreement and for  descriptions  of the Company's  other  obligations not
       discussed herein.

              As of July 31, 1999,  borrowings of $6.2 million were  outstanding
       under the Credit  Agreement.  These  borrowings are included in long-term
       debt in the accompanying  consolidated condensed balance sheet as of July
       31,  1999.  In  addition,  $28.1 and $13.4  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
       thirteen  and  twenty-six  weeks  ended July 31, 1999 were 7.9% and 7.7%,
       respectively.  The peak borrowing  level through July 31, 1999 was $281.8
       million and occurred in April 1999,  prior to the sale of the Ames Senior
       Notes.

       Ames Senior Notes

                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.  Prior to April 15, 2002,  the Company may
       redeem up to 35% of the Ames  Senior  Notes with the  proceeds  of one or
       more  public  equity  offerings  at a  redemption  price  of  110% of the
       principal  amount  thereof.  On or after April 15, 2003,  the Company may
       redeem some or all of the Ames Senior Notes  outstanding  at a redemption
       price equal,  initially, to 105% of the principal amount thereof. In both
       cases,  the accrued and unpaid  interest will be added to the  redemption
       price on the applicable redemption date.

           The Ames Senior Notes were issued under an indenture  among Ames, its
       existing  subsidiaries  and  The  Chase  Manhattan  Bank.  The  financial
       covenants in the indenture  restrict Ames' ability to: borrow money;  pay
       dividends on or purchase  Ames' stock;  make  investments;  use assets as
       security in other  transactions;  sell certain assets or merge with other
       companies;  and enter into transactions  with affiliates.  If a Change of
       Control  occurs,  each holder of the Ames  Senior  Notes has the right to
       require  the Company to purchase  all or any part of that  holder's  Ames
       Senior  Notes  for a  payment  in cash  equal  to  101% of the  aggregate
       principal  amount of Ames Senior Notes  purchased plus accrued and unpaid
       interest.


6.     Stock Options:
      ---------------
              The Company has three stock option plans (the "Option Plans"): the
       1994 Management  Stock Option Plan, the 1998 Stock Incentive Plan and the
       1994 Non-Employee Directors Stock Option Plan.

              In October 1995,  the Financial Accounting Standards Board  issued
       SFAS  No. 123 "Accounting for  Stock-Based  Compensation."  SFAS  No. 123
       established a  fair-value  based  method of  accounting  for  stock-based
       compensation; however,  it allowed  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 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
       income (loss) and  net income (loss) per diluted  common share would have
       approximated the pro forma amounts indicated below:
<TABLE>

                                       For the Thirteen                 For the Twenty-Six
                                          Weeks Ended                      Weeks Ended
                                    July 31,         August 1,       July 31,          August 1,
                                      1999             1998            1999              1998
                                    --------        ----------       --------         ----------
<CAPTION>
<S>                                 <C>             <C>              <C>              <C>
       Net Income (Loss) (in thousands)
         As reported                ($22,173)         $8,386         ($48,561)          $5,443
         Pro forma                  ($24,507)         $7,672         ($52,278)          $4,597

       Diluted Net Income (Loss)
       Per Common Share
         As reported                 ($0.80)(a)        $0.35          ($1.87)(a)         $0.23
         Pro forma                   ($0.88)(a)        $0.32          ($2.02)(a)         $0.19
<FN>
 (a) Common stock equivalent shares have not been included because the effect would be anti-dilutive.
</FN>
</TABLE>


              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 at 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.


 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
       twenty-six  weeks  ended July 31,  1999 and to the income  before  income
       taxes for the  thirteen  and  twenty-six  weeks  ended  August 1, 1998 to
       compute a non-cash  income tax benefit in 1999 and provision in 1998. The
       income  tax  benefit  is  included  in  other   current   assets  in  the
       accompanying  consolidated  condensed  balance sheet as of July 31, 1999.
       The income tax provision is included as an addition to paid-in capital in
       the  accompanying  consolidated  condensed  balance sheet as of August 1,
       1998.


 8.    Commitments and Contingencies:
      -------------------------------
              Reference  can be  made  to the  1998  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 1998 Form
       10-K except as follows:

              With  regard  to  the  Gould  matter,  the  Court  has  entered  a
       Preliminary  Order of Approval and set September 15, 1999 as the date for
       a Final Settlement Hearing.


9.       Equity Offering:
        -----------------
              On May 24, 1999, the Company  completed the public offering of 5.1
       million  shares  of  Common  Stock at a  price of  $38.75 per share.  The
       proceeds, net of underwriting discounts, of approximately $187.9 million,
       were used to reduce borrowings under the Credit Agreement and for general
       corporate purposes.


10.      Subsequent Events:
        -------------------
              On August 2, 1999,  the Company  opened a new 649,000  square foot
       distribution  center  in  Westfield,  MA.  The  distribution  center  was
       purchased from Caldor during the first quarter of 1999.


<PAGE>

                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
                       FISCAL QUARTER ENDED JULY 31, 1999
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



       Results of Operations
      -----------------------
              On  December  31,  1998,  we  acquired  in  excess  of  80% of the
       outstanding  voting  stock  of Hills  Stores  Company.  Accordingly,  the
       operations of Hills and its subsidiaries  during the quarter are included
       in our consolidated results of operations for the thirteen and twenty-six
       weeks ended July 31,  1999.  Immediately  following  our  acquisition  of
       Hills,  we began  implementing a series of initiatives to prepare for the
       conversion  of 151 of the Hills stores into Ames stores and the permanent
       closure of the four remaining Hills stores.  These  initiatives  included
       the termination of most of Hills' corporate and administrative operations
       and  personnel,  the  announced  closure  of seven  Ames  stores  that we
       considered to be directly  competitive with acquired Hills stores and the
       engagement of two experienced  liquidation firms,  Gordon Brothers Retail
       Partners  and The Nassi  Group,  to operate the Hills  stores until their
       closure and to liquidate Hills' merchandise inventories.

              In May 1999, Gordon Brothers  and The  Nassi Group  completed  the
       merchandise liquidation sales in 56 of the Hills stores. Of these stores,
       2 were  closed  permanently  and 54 were  remodeled  during an eight week
       period and were  re-opened in July 1999,  as Ames  stores.  In July 1999,
       Gordon Brothers and The Nassi Group completed the merchandise liquidation
       sales in the  final 47 Hills  stores,  all of which  are  expected  to be
       re-opened as Ames stores in late September.

              Under our agreement with Gordon Brothers and The Nassi  Group,  we
       are  entitled to  retain from the  proceeds of the merchandise  inventory
       sales, as a minimum guaranteed amount, 40% of the initial ticketed retail
       price of the inventory being sold,  irrespective  of the  actual price at
       which it is sold.  The remaining  sale  proceeds,  net of the expenses of
       operating the stores, are payable to the liquidators as compensation  for
       their  services,  subject  to  additional  allocations  to  Ames  to  the
       extent the proceeds  exceed  specified  levels.  For financial  reporting
       purposes,  Hills' net  sales  represent  the  actual  sale proceeds  from
       merchandise liquidation  sales,  its cost of merchandise  sold represents
       the  minimum  guaranteed  amount  adjusted  for  proceeds  in  excess  of
       specified  targets, and its selling,  general and administrative expenses
       include  the portion of  those proceeds  that are to be  paid over to the
       liquidators.

<PAGE>


<TABLE>
        The following table illustrates the separate contribution of Ames' and Hills' operations to various components of the
   consolidated results of operations, as described below, for the thirteen and twenty-six weeks ended July 31, 1999, as
   well as the impact on these consolidated results of the other costs described below:
<CAPTION>

                                                     For the Thirteen
                                                        Weeks Ended               For the Thirteen Weeks Ended July 31, 1999
                                                       August 1, 1998         ------------------------------------------------------
                                                    -------------------       Ames           Hills         Other          Total
                                                                            --------       --------      ---------       --------
<S>                                                 <C>                     <C>            <C>           <C>             <C>
TOTAL NET SALES                                            $535,047         $728,023       $128,175          $ -         $856,198

COSTS, EXPENSES AND (INCOME):
   Cost of merchandise sold                                 378,211          514,584         83,762            -          598,346
   Selling, general and administrative expenses             145,490          191,271         52,790       30,100          274,161
   Leased department and other income                        (7,489)         (10,248)        (1,342)           -          (11,590)
   Depreciation and amortization expense, net                 2,257           10,606          3,813        1,885           16,304
   Interest and debt expense, net                             3,192           11,439          1,388          794           13,621

                                                     ---------------   --------------  -------------  -----------  ---------------
   INCOME (LOSS) BEFORE INCOME TAXES                         13,386           10,371        (12,236)     (32,779)         (34,644)
   Income tax benefit (provision)                            (5,000)          (3,733)         4,404       11,800           12,471
                                                     ---------------   --------------  -------------  -----------  ---------------
    NET INCOME (LOSS)                                        $8,386           $6,638        ($7,832)    ($20,979)        ($22,173)
                                                     ===============   ==============  =============  ===========  ===============

   Weighted average number of common shares                  22,950           27,706         27,706       27,706           27,706
     outstanding                                     ===============   ==============  =============  ===========  ===============

   Net income (loss) per share                               $ 0.37           $ 0.24         ($0.28)      ($0.76)          ($0.80)
                                                     ===============   ==============  =============  ===========  ===============

   Weighted average number of common and
      common equivalent shares outstanding                   24,272
                                                     ===============


   Diluted net income per share                              $ 0.35
                                                     ===============

<CAPTION>

                                                    For the Twenty-Six
                                                        Weeks Ended           For the Twenty-Six Weeks Ended July 31, 1999
                                                      August 1, 1998   -----------------------------------------------------------
                                                    ------------------      Ames           Hills         Other          Total
                                                                        --------------  -------------  -----------  ---------------
<S>                                                 <C>                 <C>             <C>            <C>          <C>
TOTAL NET SALES                                          $1,032,092       $1,309,625       $375,642          $ -       $1,685,267

COSTS, EXPENSES AND (INCOME):
   Cost of merchandise sold                                 736,822          934,089        251,212            -        1,185,301
   Selling, general and administrative expenses             290,762          350,903        142,047       46,672          539,622
   Leased department and other income                       (13,675)         (16,644)        (3,368)           -          (20,012)
   Depreciation and amortization expense, net                 4,178           16,523         10,393        3,771           30,687
   Interest and debt expense, net                             5,246           19,417          4,162        1,964           25,543

                                                     ---------------   --------------  -------------  -----------  ---------------
   INCOME (LOSS) BEFORE INCOME TAXES                          8,759            5,337        (28,804)     (52,407)         (75,874)
   Income tax benefit (provision)                            (3,316)          (1,921)        10,368       18,866           27,313
                                                     ---------------   --------------  -------------  -----------  ---------------
    NET INCOME (LOSS)                                        $5,443           $3,416       ($18,436)    ($33,541)        ($48,561)
                                                     ===============   ==============  =============  ===========  ===============

   Weighted average number of common shares                  22,800           25,914         25,914       25,914           25,914
     outstanding                                     ===============   ==============  =============  ===========  ===============


   Net income (loss) per share                               $ 0.24           $ 0.13         ($0.71)      ($1.29)          ($1.87)
                                                     ===============   ==============  =============  ===========  ===============

   Weighted average number of common and
      common equivalent shares outstanding                   24,171
                                                     ===============


   Diluted net income per share                              $ 0.23
                                                     ===============


</TABLE>
<PAGE>

              For the thirteen  and  twenty-six  weeks ended July 31, 1999,  the
       Ames results  reflect (a) the results of the pre-Hills  acquisition  Ames
       base, (b) the post  re-opening  results of the 104 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  results  represent  (a) the results of
       operations  for the Hills stores during the period that these stores were
       operated  pursuant to the  agreement  with Gordon  Brothers and The Nassi
       Group,  including the fee due Gordon and Nassi and the  depreciation  and
       interest  expense  directly  associated  with such  stores  and (b) Hills
       corporate  overhead  expenses,   principally  the  Canton,  MA  corporate
       facility.  The other costs  represent  the expenses  incurred  during the
       period of remodeling the 54 Hills stores that re-opened as Ames stores on
       July 19, 1999.

              The unique circumstances under which Hills' operations  have  been
       conducted  through  the  second  quarter  ended  July  31,  1999  and the
       accounting  treatment  accorded those  operations as a consequence of our
       agreement  with Gordon  Brothers  and The Nassi Group  distort any direct
       comparison of the principal  components of Ames' consolidated results for
       the thirteen and twenty-six weeks ended July 31, 1999 and August 1, 1998.
       In the  discussion  that  follows,  Ames' net sales,  gross  margin,  and
       selling,  general  and  administrative  expenses  for  the  thirteen  and
       twenty-six weeks ended July 31, 1999 are presented and compared exclusive
       of the Hills results.  The impact of the Hills acquisition is included in
       the comparison of depreciation and amortization  expense and interest and
       debt expense.

              Ames'  net  sales for  the  thirteen  weeks  ended  July 31,  1999
       increased $193.0 million or  36.1% from the  prior-year's  second quarter
       and comparable-store sales increased 9.5%.  These  sales  increases  were
       attributable, in part, to the Grand Openings of 54 converted Hills stores
       on July 22, 1999 along with the openings of 50 converted Hills stores and
       1 other new Ames store in April 1999.  Ames' net sales for the twenty-six
       weeks ended July 31, 1999 increased $277.5 million or 26.9% from the same
       prior-year period and comparable-store  sales increased 9.3%. These sales
       increases  were  attributable,  in part, to the openings of 104 converted
       Hills  stores and 1 other new Ames  store  during the first half of 1999.
       Net  sales for last year have been  restated  to  reflect  the  effect of
       recording promotional coupons issued by Ames as markdowns, which conforms
       to the current year treatment.

              Ames' gross margin  increased $56.6  million in the second quarter
       of 1999 compared to the second quarter of 1998,  but  remained  unchanged
       as  a  percentage  of net  sales at  29.3%.   Ames'  gross margin for the
       twenty-six weeks ended July 31, 1999 increased $80.3 million or .07% as a
       percentage of net sales compared to the same prior-year period. The year-
       to-date gross margin rate benefited from a favorable purchase mark-up.

              Ames' selling, general and administrative expenses increased $45.8
       million for the thirteen  weeks ended July 31, 1999  compared to the same
       prior-year  period, but decreased as a percentage of net sales from 27.2%
       in  1998  to  26.3%  in  1999.  The  percentage  decrease  was  primarily
       attributable to a reduction in store related and advertising  expenses as
       a percentage of sales. Ames' selling, general and administrative expenses
       increased  $60.1  million  for the  twenty-six  weeks ended July 31, 1999
       compared to the same prior-year  period, but decreased as a percentage of
       net sales from 28.2% in 1998 to 26.8% in 1999.  The  percentage  decrease
       was  primarily   attributable   to  a  reduction  in  store  related  and
       advertising expenses as a percentage of sales.

              Depreciation and amortization  expense increased  by $14.0 million
       for the thirteen weeks ended July 31,  1999  compared to the same  prior-
       year period.  For the twenty-six weeks ended July 31, 1999,  depreciation
       and amortization expense increased by $26.5 million  compared to the same
       prior-year  period.  The Hills  acquisition  added $3.8 million and $10.4
       million of  depreciation  and  amortization  expense for the thirteen and
       twenty-six weeks ended July 31, 1999, respectively.  The increase was due
       to the additional depreciation and amortization of the Hills fixed assets
       and beneficial lease rights and the amortization of goodwill  relating to
       the excess of the Hills  acquisition  cost over the value of the acquired
       assets.

              Interest expense increased by $10.4 million and $20.3  million for
       the  thirteen  and  twenty-six  weeks ended  July 31, 1999, respectively,
       compared  to  the  same  prior-year periods.  The  increase was primarily
       attributable to the interest expense incurred for the Ames senior  notes,
       the Hills senior notes, the Hills capital lease and financing obligations
       and,  for the year-to-date period,  to the  increased  interest  on  bank
       borrowings.

              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 or provision.  The income tax benefits are
       included in other  current  assets  in the  balance  sheet as of July 31,
       1999 and  the income tax provision is  included as an addition to paid-in
       capital in the balance sheet as of August 1, 1998.

       Liquidity and Capital Resources
      ---------------------------------
              Our principal  sources of liquidity are our bank credit  facility,
       cash from  operations and cash on hand. Our current bank credit  facility
       consists of a revolving  credit facility of up to $650.0 million,  with a
       sublimit of $150.0 million for letters of credit,  which expires June 30,
       2002.   Borrowings   under  the  bank  credit  facility  are  secured  by
       substantially  all of our assets and after February 2000, we are required
       to meet certain  financial  covenants.  In  addition,  we are required to
       maintain a minimum  availability  of at least  $100.0  million.  Our peak
       borrowing  level  during the quarter  ended July 31, 1999 under this bank
       credit  facility was $88.1  million.  We believe we will have  sufficient
       liquidity to meet our financial obligations for the foreseeable future.

              On April 27, 1999,  we completed  the sale of $200 million of 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 our bank  credit  facility.  The Ames  senior  notes  pay  interest
       semi-annually in April and October and mature April 2006.

              On May 24, 1999,  we completed  the public offering of 5.1 million
       shares of Common  Stock at a price of $38.75  per  share.  The  proceeds,
       net of underwriting discounts, of approximately $187.9  million were used
       to reduce our  borrowings under the bank credit facility  and for general
       corporate purposes.

              Merchandise  inventories  increased  $293.3 million from August 1,
       1998 to July 31,  1999 due to  planned  increases  for the opening of the
       converted  Hills stores.  Our  merchandise  inventories  increased $173.9
       million  from  January 30,  1999  to July 31,  1999  due primarily to the
       planned  increases  for  the opening of  the  converted  Hills and Caldor
       stores along with the normal seasonal build-up of inventories.

              Trade  accounts  payable  increased  $167.8 million from August 1,
       1998  to  July  31,  1999  primarily  due to  the  merchandise  inventory
       increases referenced  above.  The increase of  $30.7 million from January
       30, 1999 to July 31, 1999 was principally  the result of the  merchandise
       inventory increases  referenced  above,  partially offset by the seasonal
       dating of inventories in effect as of January 30, 1999.

              Capital expenditures for the twenty-six weeks ended July 31,  1999
       totaled $83.6 million and for the balance of the year are estimated to be
       approximately  $135.0  million.  We  adjust  our plans  for  making  such
       expenditures depending on the amount of internally generated funds.

              Net fixed assets  increased by $319.2 million from  August 1, 1998
       to July 31, 1999 due primarily to the inclusion of $226.4  million in net
       fixed assets of Hills.  Our net fixed assets increased $60.0 million from
       January  30,  1999  to  July  31,  1999  due  primarily  to  the  capital
       expenditures associated with the newly converted Hills stores.

              Beneficial  lease  rights  represent the excess of the fair market
       value of the acquired Hills leases over contract  value of those  leases.
       We are  amortizing  this  amount  over the  terms of the  related  leases
       (which  average  approximately  25 years) using the straight-line method.
       Goodwill is being amortized over 25 years using the straight-line method.

              Long-term  debt  as of July 31, 1999 consisted of borrowings under
       our bank   credit  facility of  $6.2 million,  $200.0 million of the Ames
       senior notes issued in April 1999,  and $50.9 million of the Hills senior
       notes that remained  outstanding after the acquisition.  The Hills senior
       notes  became direct obligations of  Ames as a  result of  the  merger of
       Hills into Ames.

              Capital lease and financing obligations increased  $146.2  million
       from  August 1, 1998 to July 31, 1999  due  primarily to the inclusion of
       $144.5  million of  capital  lease and  financing  obligations  of Hills.
       Capital lease and  financing  obligations  decreased by $8.4 million from
       January 30,  1999 to  July  31,  1999 due to  payments  made  on  capital
       lease obligations.

              The net  operating  loss carryovers  remaining  after  fiscal year
       1998, subject to any limitations  pursuant to Internal  Revenue Code Sec.
       382, should  offset  income on which taxes would otherwise  be payable in
       the next several years.

       Year 2000 Readiness
      ---------------------
              In  operating  our  business,  we  are  dependent  on  information
       technology and process control  systems that employ  computers as well as
       embedded microprocessors. We also depend on the proper functioning of the
       business  systems  of third  parties,  particularly  the more than  3,200
       vendors from whom we purchase the  merchandise  sold in our stores.  Many
       computer systems and  microprocessors can only process dates in which the
       year is represented by two digits. As a result, some of these systems and
       processors may interpret "00" incorrectly as the year 1900 instead of the
       year 2000,  in which event they could  malfunction  or become  inoperable
       after  December  31,  1999.  Systems  and  processors  that can  properly
       recognize the year 2000 are referred to as "year 2000 compliant."

              As previously reported,  we initiated a  comprehensive  program to
       prepare our computer  systems and applications for the year 2000. We have
       spent  approximately  $5.1 million on this program through the end of the
       second  quarter of fiscal 1999 and expect that full implementation of the
       program   will  involve  an  additional  $1.0  million  to $1.5  million,
       including   expenditures    for   software   and   consulting   services.
       Additionally,  we  estimate the  allocated  costs of  our internal system
       development staff who are implementing  our year 2000  initiatives  to be
       $3.5 million to $4.0 million over the life of the project.




<PAGE>



                                     Part II

                                OTHER INFORMATION


Item 1.        Legal Proceedings
              -------------------
                      Reference  can  be  made  to  Item 3 -  Legal  Proceedings
               included in the 1998 Form 10-K for various  litigation  involving
               the Company,  for which there were no material  changes since the
               filing date of the 1998 Form 10-K except as set forth in Note 8.


Item 4.        Submission of Matters to a Vote of Security Holders
              -----------------------------------------------------
                      The Annual  Meeting of  Shareholders  was held  Wednesday,
               June 16, 1999, to consider and act upon the following matters:

(a)                   The  shareholders  elected for one-year  terms all persons
                      nominated  for  directors  as set  forth in the  Company's
                      proxy  statement  filed May 12,  1999.  Each  nominee  for
                      director was elected as follows:

<TABLE>
<CAPTION>
                                                                    For                    Withheld
                                                                ----------                 ---------
<S>                                                             <C>                        <C>
                         Election of Directors as a Slate       20,614,789                  55,351
                          Francis X. Basile                     20,614,139                  56,001
                          Paul Buxbaum                          20,613,508                  56,632
                          Alan Cohen                            20,613,575                  56,565
                          Joseph R. Ettore                      20,611,614                  58,526
                          Richard M. Felner                     20,614,358                  55,782
                          Sidney S. Pearlman                    20,613,158                  56,982
</TABLE>

(b)                   The shareholders  ratified and approved the appointment of
                      Arthur  Andersen  LLP  as  independent   certified  public
                      accountants  and  auditors  for the Company for the fiscal
                      year ending January 29, 2000.

                            For               Withheld             Abstentions
                         ----------           --------            -------------
                         20,631,638            29,393                 9,109


Item 5.        Other Information
              -------------------
                      On August 31, 1999,  the Board of Directors of the Company
               adopted Amended and Restated By-Laws, a copy of which is filed as
               Exhibit 3.3 hereto.


Item 6.        Exhibits and Reports on Form 8-K
              ----------------------------------

    (a)        Index to Exhibits
              -------------------

               Exhibit No.                  Exhibit                    Page No.
              ------------     -----------------------------------    ---------
                  3.3          Form of By-laws of Ames Department         19
                               Stores, Inc. as amended and restated
                               August 31, 1999

                  11           Schedule of computation of basic           31
                               and diluted net income (loss) per
                               share

    (b)        Reports on Form 8-K:
              ---------------------
               There were no reports on Form 8-K filed with the  Securities  and
               Exchange Commission during the second quarter:








<PAGE>



                                   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:     September 10, 1999        /s/ Joseph R. Ettore
                                          --------------------------------------
                                          Joseph R. Ettore, President, Director,
                                          and Chief Executive Officer






     Dated:     September 10, 1999        /s/ Rolando de Aguiar
                                          --------------------------------------
                                          Rolando de Aguiar, Executive Vice
                                          President and Chief Financial and
                                          Administrative Officer

<PAGE>

                                                                     Exhibit 3.3
                                                            Amended and Restated
                                                           as of August 31, 1999



                              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.

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  II or  (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.

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 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,  and the writing or writings are filed with the minutes of  proceedings
of the Board of Directors or committee.

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.

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
therefor.  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.

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.

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.

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 therefor, 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.

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

                                 INDEMNIFICATION

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.

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.

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.

Section 2. 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>
<TABLE>

                                                                                                                         Exhibit 11



                  AMES DEPARTMENT STORES, INC. AND SUBSIDIARIES
         SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
                 (Amounts in thousands except per share amounts)


<CAPTION>
                                                                        For the Thirteen                For the Twenty-Six
                                                                          Weeks Ended                      Weeks Ended
                                                                   ---------------------------      --------------------------
<S>                                                                <C>              <C>               <C>           <C>
                                                                   July 31,         August 1,         July 31,      August 1,
                                                                     1999             1998              1999           1998
                                                                  ------------    ------------      -----------   ------------

Net income (loss)                                                   ($22,173)        $8,386          ($48,561)       $5,443
                                                                  ============   ============       ===========   ============




For Basic Net Income (Loss) Per Common Share

   Weighted average number of common shares
          outstanding during the period                               27,706         22,950           25,914          22,800
                                                                   ============   ============      ===========   =============


          Basic net income (loss) per common share                    ($0.80)         $0.37           ($1.87)          $0.24
                                                                   ============   ============      ===========   =============





For Diluted Net Income (Loss) Per Common Share

   Weighted average number of common shares
          outstanding during the period                               27,706         22,950           25,914          22,800

  Add:   Common stock equivalent shares represented by
        - Series B Warrants                                             (a)            116              (a)             127
        - Series C Warrants                                             (a)            458              (a)             520
        - Options under 1994 Management Stock Option Plan &
                1998 Stock Incentive Plan                               (a)            680              (a)             661
        - Options under 1994 Non-Employee Directors
                Stock Option Plan                                       (a)             68              (a)              63
                                                                   ------------   ------------      -----------   -------------
   Weighted average number of common and common equivalent
          shares used in the calculation of diluted net
          income (loss) per share                                     27,706         24,272           25,914          24,171
                                                                   ============   ============      ===========   =============

          Diluted net income (loss) per common share                 ($0.80)         $0.35           ($1.87)          $0.23
                                                                   ============   ============      ===========   =============



<FN>
          (a) Common stock equivalents have not been included because the effect would be anti-dilutive.
</FN>
</TABLE>