<PAGE> 1
FILENE'S BASEMENT CORP.
40 WALNUT STREET
WELLESLEY, MASSACHUSETTS 02181
May 20, 1996
Dear Stockholder:
We cordially invite you to attend our 1996 Annual Meeting of Stockholders,
which will be held at 2:00 p.m. on June 26, 1996, at Bank of Boston, 100 Federal
Street, Boston, Massachusetts.
We hope that you will join us on June 26, but we know that every
stockholder will not be able to do so. Whether or not you plan to attend, please
return your signed proxy as soon as possible.
Sincerely,
/s/ Mone Anathan, III /s/ Samuel J. Gerson
- - ----------------------- -----------------------
MONE ANATHAN, III SAMUEL J. GERSON
President and Chairman and
Chief Operating Officer Chief Executive Officer
<PAGE> 2
FILENE'S BASEMENT CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 26, 1996
Notice is hereby given that the Annual Meeting of Stockholders of Filene's
Basement Corp. will be held at Bank of Boston, 100 Federal Street, Boston,
Massachusetts, on June 26, 1996 at 2:00 p.m. for the following purposes:
1. To elect two Class II directors to serve until the 1999 Annual
Meeting of Stockholders.
2. To act upon a stockholder proposal which is set forth and described
in the attached Proxy Statement.
3. To transact such other business as may properly come before the
meeting and any and all adjourned sessions thereof.
Only stockholders of record at the close of business on April 29, 1996 are
entitled to notice of and to vote at the Annual Meeting and any and all
adjourned sessions thereof.
By order of the Board of Directors
/s/ Steven R. Siegel
-----------------------
STEVEN R. SIEGEL, Clerk
Wellesley, Massachusetts
May 20, 1996
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING. PLEASE SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING IN PERSON.
<PAGE> 3
FILENE'S BASEMENT CORP.
------------------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 26, 1996
------------------------
PROXY STATEMENT
The enclosed form of proxy is solicited on behalf of the Board of Directors
(the "Board of Directors") of Filene's Basement Corp. (the "Company") for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at Bank of
Boston, 100 Federal Street, Boston, Massachusetts, on June 26, 1996 at 2:00 p.m.
and at any and all adjourned sessions thereof. This Proxy Statement and the
enclosed form of proxy are first being mailed to stockholders on or about May
20, 1996. A proxy may be revoked by a stockholder, at any time before it is
voted, (i) by returning to the Company another properly signed proxy
representing such shares and bearing a later date, (ii) by otherwise delivering
a written revocation to the Clerk of the Company, or (iii) by attending the
Annual Meeting or any adjourned session thereof and voting the shares covered by
the proxy in person. Shares represented by the enclosed form of proxy properly
executed and returned, and not revoked, will be voted at the Annual Meeting.
The expense of soliciting proxies will be borne by the Company. Officers
and regular employees of the Company may solicit proxies but receive no
compensation for solicitation in addition to their regular salaries. In addition
to the solicitation of proxies by use of the mails, the Company may use the
services of its officers and regular employees to solicit proxies personally and
by mail, telephone and telegram from brokerage houses and other shareholders.
The Company has also elected to utilize the services of a Proxy Solicitor,
Georgeson and Company, Inc., for a fee of $12,500, plus expenses. The Company
will reimburse brokers and other persons for their reasonable costs and expenses
in forwarding soliciting materials to their principals.
In the absence of contrary instructions, the persons named as proxies will
vote in accordance with the intentions stated below. The holders of record of
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), as of the close of business on April 29, 1996 are entitled to receive
notice of and to vote at the Annual Meeting. As of April 29, 1996, the Company
had issued and outstanding 20,494,663 shares of Common Stock. Each such share of
Common Stock is entitled to one vote on each matter to come before the Annual
Meeting.
Consistent with the laws of the Commonwealth of Massachusetts and under the
Company's by-laws, a majority of the shares entitled to be cast on a particular
matter, present in person or represented by proxy, constitutes a quorum as to
such matter. Votes cast by proxy or in person at the Annual Meeting will be
counted by persons appointed by the Company to act as election inspectors for
the meeting. The two nominees for election as directors at the Annual Meeting
who receive the greatest number of votes, properly cast for the election of
directors, shall be elected directors. The election inspectors will count shares
represented by proxies that withhold authority to vote for a nominee for
election as a director or that reflect abstentions or "broker non-votes" (i.e.,
shares represented at the meeting held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) only as shares that are present and
entitled to vote on the matter for purposes of determining the presence of a
quorum, but neither abstentions nor broker non-votes have any effect on the
outcome of voting on the election of directors.
The Annual Report of the Company, including consolidated financial
statements for the year ended February 3, 1996, is being mailed to the Company's
stockholders with this Proxy Statement.
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<PAGE> 4
ELECTION OF DIRECTORS
The Board of Directors has voted to fix the number of directors at six,
effective upon the election of directors at the Annual Meeting. The Company's
Restated Certificate of Incorporation and by-Laws provide for the classification
of the Board of Directors into three classes with the term of office of one
class expiring each year. Unless otherwise instructed, the enclosed proxy will
be voted to elect the persons named below as Class II directors for a term of
three years expiring at the 1999 Annual Meeting of Stockholders or until their
respective successors are duly elected and qualified. If any nominee should
become unavailable, such proxy will be voted for a substitute nominee designated
by management, unless instructions are given to the contrary, or the directors
will fix the number of directors at five (or less if more than one nominee
becomes unavailable). Management does not anticipate that any nominee will
become unavailable. Mr. William W. Helman IV, a Class III director, resigned his
position during the past year. The nominees as Class II directors, and the
incumbent Class I and Class III directors, are as follows:
NOMINEES AS CLASS II DIRECTORS
TERMS EXPIRE 1999
MONE ANATHAN, III, 57
President, Chief Operating Officer, and Director
Mone Anathan, III became President, Treasurer and a director in 1988, and
Chief Operating Officer in 1992, having served as President of the Filene's
Basement division of Federated Department Stores, Inc. from February 1984 until
the acquisition of that division by the Company in 1988. Mr. Anathan is a
director of Crane Company, Medusa Corp., Brookstone Company, Inc., and Harvard
Pilgrim Health Care.
HAROLD LEPPO, 59
Director
Harold Leppo has been the Chief Executive Officer of Harold Leppo and
Company, a retail consulting firm in Stamford, Connecticut, since 1988. Prior to
that, he held a number of managerial positions at Lord & Taylor and Allied
Stores, Inc., including President and Chief Operating Officer of Lord & Taylor
(1987) and Executive Vice President of Allied Stores (1988). Mr. Leppo became a
director of the Company in 1992, and is also a director of Bradlees, Inc.,
Napier and Co., Royce Hosiery Mills, Inc., and Salant, Inc.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR THE ELECTION OF THE TWO NOMINEES OF THE BOARD OF DIRECTORS
AS DIRECTORS OF THE COMPANY.
CLASS I DIRECTORS
TERMS EXPIRE 1998
SAMUEL J. GERSON, 54
Chairman, Chief Executive Officer and Director
Samuel J. Gerson became Chairman, Chief Executive Officer and a director in
1988, having served as Chairman and Chief Executive Officer of the Filene's
Basement division of Federated Department Stores, Inc. from January 1984 until
the acquisition of that division by the Company in 1988. Mr. Gerson is a
director of BayBanks, Inc. and ASAHI America, as well as a trustee associate of
Boston College.
ROBERT P. HENDERSON, 65
Director
Robert P. Henderson has, since 1983, been a general partner of Greylock
Ventures Limited Partnership and Greylock Capital Limited Partnership, and a
managing partner of Greylock Investments Limited Partnership and Greylock
Limited Partnership, all venture capital partnerships. He has been a director
since 1988. Mr. Henderson is also a director of Structural Dynamics Research
Corporation and Cabot Corporation.
2
<PAGE> 5
PAUL D. PAGANUCCI, 65
Director
Paul D. Paganucci has been the Chairman of the Board of Ledyard National
Bank in Hanover, New Hampshire since 1991. From 1986 to 1991, he held a number
of managerial positions at W.R. Grace & Co., including Executive Vice President,
Vice Chairman and later, Chairman of the Executive Committee and Director. Mr.
Paganucci became a director in 1992, and is also a director of Allmerica
Securities Trust, Inc., and a trustee of HRE Properties.
CLASS III DIRECTOR
TERM EXPIRES 1997
JOHN EYLER, 48
Director
John Eyler was appointed to the Filene's Basement, Corp. Board of Directors
on June 30, 1994. Mr. Eyler has been President and Chief Executive Officer of
FAO Schwarz since June of 1992. From 1989-1992, he served as Chief Executive
Officer of the retail subsidiary of Chicago-based Hartmarx. Previously, he was
the Chairman/CEO of MainStreet, a division of Federated Department Stores
(1983-1989).
3
<PAGE> 6
<TABLE>
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth as of March 2, 1996, certain information
with respect to the persons or groups which are known to be the beneficial
owners of more than 5% of the Company's Common Stock.
<CAPTION>
NUMBER OF PERCENTAGE
NAME SHARES OUTSTANDING
---- --------- -----------
<S> <C> <C>
FMR Corp.(1)................................... 1,927,310 9.4%
Merrill Lynch & Co.(2)......................... 1,170,281 5.7%
<FN>
- - ---------------
(1) The information in the table and in this footnote is based on information
contained in the Schedule 13G dated February 14, 1996 filed by FMR Corp., 82
Devonshire Street, Boston, MA 02109, as a parent holding company. Fidelity
Management & Research Company ("Fidelity"), 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment adviser, is the beneficial owner of 1,927,310 shares of the
Company's Common Stock as a result of acting as investment adviser to
various investment companies registered under Section 8 of the Investment
Company Act of 1940, as amended (the "Funds"). The ownership of one
investment company, Fidelity Puritan Fund, amounted to 1,927,310 shares of
the Company's common stock. Fidelity Puritan Fund has its principal business
office at 82 Devonshire Street, Boston, Massachusetts 02109. Edward C.
Johnson 3d, FMR Corp., through its control of Fidelity, and the Funds each
has sole power to dispose of the 1,927,310 shares owned by the Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole power to vote or direct the voting of the shares owned directly by the
Funds, which power resides with the Funds' Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines established by
the Funds' Boards of Trustees. Edward C. Johnson 3d and members of his
family and trusts for their benefit form a controlling group with respect to
FMR Corp.
(2) The information in the table and in this footnote is based on information
contained in the Schedule 13G dated February 5, 1996 filed by Merrill Lynch
& Co. ("ML&Co."), World Financial Center, North Tower, 250 Vesey Street, New
York, NY 10281, Merrill Lynch Group, Inc. ("ML Group"), World Financial
Center, North Tower, 250 Vesey Street, New York, NY 10281, Princeton
Services, Inc. ("PSI"), 800 Scudders Mill Road, Plainsboro, NJ 08536,
Merrill Lynch Asset Management, L.P. d/b/a Merrill Lynch Asset Management
("MLAM"), 800 Scudders Mill Road, Plainsboro, NJ 08536, and Merrill Lynch
Global Allocation Fund, Inc. (the "Fund"), 800 Scudders Mill Road,
Plainsboro, NJ 08536. ML&Co. may be deemed to beneficially own 1,170,281
shares of the Company's Common Stock as a result of being the parent holding
company of Merrill Lynch Pierce, Fenner and Smith Incorporated, which holds
Common Stock of the Company in proprietary trading accounts. ML Group, a
wholly-owned subsidiary of ML&Co., may be deemed to be the beneficial owner
of 1,160,000 shares of the Company's Common Stock as a result of being the
parent holding company of PSI. PSI, a wholly-owned subsidiary of ML Group,
may be deemed to be the beneficial owner of 1,160,000 shares of the
Company's Common Stock as a result of being the general partner of MLAM and
Fund Asset Management, L.P. d/b/a Fund Asset Management ("FAM"). MLAM, an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, as amended, may be deemed to be the beneficial owner of
1,160,000 shares of the Company's Common Stock as a result of acting as
investment adviser to investment companies registered under Section 8 of the
Investment Company Act of 1940, as amended. The Fund, a registered
investment company under the Investment Company Act of 1940, as amended by
MLAM, is the beneficial owner of 1,110,000 shares of the Company's Common
Stock.
</TABLE>
The following table sets forth as of March 2, 1996, certain information
with respect to the beneficial ownership of shares of Common Stock owned (i)
individually by the chief executive officer and each of the four current most
highly paid executive officers of the Company in fiscal 1995 and each director
of the Company and (ii) by all current executive officers and directors of the
Company as a group. Except as noted
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<PAGE> 7
below, each of the persons listed has sole investment and voting power with
respect to the shares indicated and the address of each of the persons listed is
c/o the Company.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
---------------------------
NUMBER OF PERCENTAGE
SHARES(1) OUTSTANDING(2)
--------- --------------
<S> <C> <C> <C>
Samuel J. Gerson+*....................................... (3) 1,048,046 4.9%
Mone Anathan, III+*...................................... (4) 878,010 4.1%
Steven Siegel+........................................... (5) 5,480 **
Robert P. Henderson*..................................... (6) 119,232 **
Harold Leppo*............................................ (7) 6,000 **
Paul D. Paganucci*....................................... (8) 6,984 **
John Eyler*.............................................. (9) 7,500 **
All executive officers and directors as a group (7
persons)............................................... 2,071,252 9.7%
<FN>
- - ---------------
+ Executive Officer
* Director of the Company
** Less than one (1) percent.
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934. Accordingly, a beneficial owner of a
security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has or
shares the power to vote such security or the power to dispose of such
security. The amounts set forth above as beneficially owned include shares
owned, if any, by spouses and relatives living in the same home as to which
beneficial ownership may be disclaimed. The amounts set forth as
beneficially owned include shares of Common Stock which such persons had the
right to acquire within 60 days of March 2, 1996, pursuant to stock options
previously granted.
(2) Percentages are calculated on the basis of 21,411,939 shares of Common Stock
outstanding as of March 3, 1996, which includes 917,000 shares of Common
Stock subject to stock options exercisable within 60 days of March 2, 1996.
(3) Includes 449,750 shares issuable upon the exercise of stock options and
300,000 shares owned by Mr. Gerson's wife.
(4) Includes 449,750 shares issuable upon the exercise of stock options.
(5) Includes 5,480 shares of restricted stock over which Mr. Siegel has voting
power.
(6) Includes 5,000 shares issuable upon the exercise of stock options.
(7) Includes 5,000 shares issuable upon the exercise of stock options.
(8) Includes 5,000 shares issuable upon the exercise of stock options.
(9) Includes 2,500 shares issuable upon the exercise of stock options.
</TABLE>
BOARD OF DIRECTORS, DIRECTOR COMPENSATION, AND COMMITTEES
During the Company's fiscal year ended February 3, 1996, the Board of
Directors of the Company held ten meetings. Each director attended at least 75%
of the meetings of the Board and the Committees of which he is a member. Each
director who was not a full-time employee of the Company received an annual
retainer of $15,000 for his services as a director.
Pursuant to the Company's 1993 Stock Option Plan for Non-Employee Directors
(the "Director Option Plan"), each of the directors who is not an employee of
the Company and who served on the Board ("eligible director") on June 30, 1993,
received an option to purchase 12,500 shares of Common Stock at a per share
option price of $8.13, and each individual who thereafter becomes an eligible
director for the first time will
5
<PAGE> 8
likewise be granted, on the date of the Annual Meeting coinciding with or
following his or her election as a director, an option to acquire 12,500 shares
of Common Stock. In accordance with this provision, Mr. Eyler received an option
to purchase 12,500 shares of Common Stock on June 30, 1994 at a per share option
price of $9.69. Each eligible director who receives an initial grant as
described above will be granted an option to acquire an additional 12,500 shares
of Common Stock on the date of the annual meeting that follows by five years the
date of his initial grant provided the director is continuing in office and the
date of such later annual meeting occurs prior to April 6, 2003.
The exercise price of options granted under the Director Option Plan is the
fair market value of the Common Stock on the date of the grant. The Company
receives no consideration for the grant itself. The exercise price may be paid
in cash, by tendering shares of Common Stock, by delivering an undertaking by a
broker to deliver promptly sufficient funds to pay the exercise price, or by any
combination of the foregoing. Each option will be non-transferable except upon
death, will expire 10 years after the date of grant and will become exercisable
on a cumulative basis as to one fifth of the shares covered by the option on
each of the first, second, third, fourth and fifth anniversaries of the date of
grant. A total of 250,000 shares of Common Stock has been reserved for issuance
under the Director Option Plan, subject to adjustment for stock splits and
similar events.
The Audit Committee, which held two meetings during fiscal 1995, reviews
with management and the independent public accountants the Company's financial
statements, the accounting principles applied in their preparation, the scope of
the audit, any comments made by the independent public accountants upon the
financial condition of the Company and its accounting controls and procedures,
and such other matters as the Committee deems appropriate. In addition, the
Committee reviews with management such matters relating to compliance with
corporate policies as the Committee deems appropriate. Messrs. Eyler, Helman,
and Paganucci, none of whom is an executive officer or employee of the Company,
served on the Audit Committee during fiscal 1995. Messrs. Paganucci and Eyler
will serve on the Audit Committee in fiscal 1996.
The Compensation Committee, which held one meeting during fiscal 1995,
reviews the operation of the Company's 1988 Stock Option Plan (the "1988 Plan"),
1990 Equity Incentive Plan (the "1990 Plan") and 1990 Employee Stock Purchase
Plan (the "Stock Purchase Plan"), retirement benefit programs, and related
programs of the Company and reviews the cash compensation and employment
arrangements of the Company's executive officers. Messrs. Henderson, Paganucci
and Leppo, none of whom is an executive officer or employee of the Company,
served on the Compensation Committee during fiscal 1995. Messrs. Henderson,
Leppo and Paganucci will continue to serve in fiscal 1996.
The Company does not have a nominating committee.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") and Messrs. Gerson and Anathan have furnished the following report
on executive compensation.
OVERVIEW
In fiscal 1995, the Compensation Committee consisted of Messrs. Henderson,
Paganucci and Leppo, all of whom are outside directors of the Company. The
Compensation Committee is generally responsible for developing the Company's
executive compensation policies, including awards of equity-based compensation.
The Compensation Committee also determines the extent to which the
performance-based criteria for salary increases, annual bonuses and long-term
incentives have been achieved, except that salary increases and bonus
compensation of executives other than Messrs. Gerson and Anathan are generally
determined by Messrs. Gerson and Anathan and then reviewed with the Compensation
Committee.
The Company's executive compensation program has been designed to
accomplish two principal goals. The first goal is to provide direct and
quantifiable links between executives' compensation and the
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<PAGE> 9
performance of the Company, thereby aligning the interests of the Company's
executives with those of its shareholders. The second goal is to provide a
competitive compensation package that will enable the Company to attract and
retain the executives needed to achieve such performance. Because of the
critical importance of the second goal, the Compensation Committee (and Messrs.
Gerson and Anathan in the case of compensation determined by them) retain the
ultimate discretion to award any element of compensation even if specified
criteria for such compensation are not met. In implementing the goals, the
Compensation Committee uses, among other things, outside compensation
consultants on a periodic basis. Where applicable, the Compensation Committee
also takes into account employment agreements between an executive officer and
the Company. See "Employment Agreements" below. The Compensation Committee
expects to review the executive compensation program from time to time and to
make changes where appropriate.
Section 162(m) of the Internal Revenue Code limits the tax deductibility of
compensation paid to certain executive officers to $1 million annually, unless
certain requirements are met. The Compensation Committee's policy is to consider
the net cost to the Company when making all compensation decisions; accordingly,
the deductibility of executive compensation for tax purposes is a significant,
but not a controlling, consideration when structuring executive compensation. To
the extent desirable and feasible under the circumstances, executive
compensation should be structured to be deductible; other considerations,
however, including the need to attract and retain highly qualified executives
and competitive compensation practices, may make the payment of non-deductible
compensation appropriate.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's compensation program for executive officers named in the
Summary Compensation Table (in this report, "Executives") consists primarily of
annual cash compensation (including increments to base salary and an annual cash
bonus), a long-term cash bonus and equity incentives. The compensation program
was designed in the Fall of 1991 with the assistance of an independent
compensation consulting firm ("Consultant"), which surveyed executive
compensation levels and practices. At that time compensation was generally
established at levels above the median of the Consultant's survey. The
Compensation Committee and Messrs. Gerson and Anathan have periodically reviewed
proxy statement compensation disclosure by other public companies and other
publicly available compensation data, although there has been since 1991 no
formal comparison of the Company's executive compensation against that of other
companies.
The Consultant's survey focused principally on ten comparable retailing
companies originally selected by investment bankers in connection with the
Company's valuation for purposes of its initial public offering in 1991, along
with thirteen major publicly-held retailers. Such companies are not necessarily
the same as the companies in the Standard & Poors Retail Specialty Apparel Index
shown in the Stock Performance Graph included elsewhere in the proxy statement.
The Consultant's survey also considered broader marketplace compensation
information, including published national competitive compensation surveys, the
consultant's proprietary data bank and published proxy statement data.
Base Salary. The minimum level of base salaries for the Executives was
established in employment agreements entered into in 1992, in the case of
Messrs. Gerson and Anathan, and 1994, in the case of Mr. Siegel, and subject to
upward adjustment by the Company. Those minimum base salaries were set at levels
above the median of the Consultant's survey. See "Employment Agreements" below.
Increases in Base Salary. The amount of any annual increase in an
Executive's base salary depends primarily on the extent of the achievement of
predetermined, quantifiable objectives during the preceding fiscal year. A
secondary consideration for salary increases is to insure that the Company
provides competitive compensation packages required to retain the quality of
executives needed. Any salary increases will be prospective only. At the
beginning of each fiscal year, these objectives, together with a pre-determined
matrix of salary increases payable at various levels of performance, are
determined by the Compensation Committee for each of Messrs. Gerson and Anathan.
Messrs. Gerson and Anathan determine the objectives and the matrix for the
balance of the Company. Generally, such objectives include goals related to
sales (including, in the case of some Executives, both total sales and
improvement in comparable store sales), profitability and success in
implementation of changes in the Company's business strategy. For fiscal 1995,
these objectives and their relative weights for Executives other than Messrs.
Gerson and Anathan varied based on the judgment of
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<PAGE> 10
Messrs. Gerson and Anathan as to the ability of such Executive, given his
position, to influence attainment of the particular objectives. For fiscal 1995,
the Compensation Committee established the following predetermined objectives
and their relative weights for Messrs. Gerson and Anathan: 15% for total sales,
25% for comparable store sales, 45% for earnings per share, 15% for strategic
repositioning. The Compensation Committee, in the case of Messrs. Gerson and
Anathan, and Messrs. Gerson and Anathan, in the case of the other Executives,
have discretion to vary the amounts of base salary increases whether or not the
predetermined objectives are achieved.
Based upon the predetermined objectives and applicable matrices for fiscal
1995, no Executive received an increase in his base salary for fiscal 1996. In
addition, the Compensation Committee, in the case of Messrs. Gerson and Anathan,
and Messrs. Gerson and Anathan, in the case of the other Executive, exercised
their discretion not to increase base salaries for fiscal 1996 based on the
performance of the Company in fiscal 1995.
Annual Bonus. The amount of annual bonuses for Executives reflects the
extent of achievement, during the fiscal year to which the bonus relates, of
predetermined, quantifiable objectives. At the beginning of each fiscal year,
these objectives are determined, together with a matrix of bonus levels payable
at various levels of performance, by the Compensation Committee for each of
Messrs. Gerson and Anathan. Messrs. Gerson and Anathan determine the objectives
for Mr. Siegel. The objectives initially established for determination of
bonuses for fiscal 1995 were generally similar in type, and developed for each
Executive in a similar manner, to the objectives for determining whether to
increase base salaries for fiscal 1995. Based upon the predetermined objectives
and applicable matrices for fiscal 1995, no bonuses were paid to any Executives
for fiscal 1995. In addition, the Compensation Committee, in the case of Messrs.
Gerson and Anathan, and Messrs. Gerson and Anathan, in the case of Mr. Siegel,
have discretion to vary the amounts of bonuses and to award bonuses whether or
not the predetermined objectives are achieved. This discretion was exercised not
to award any bonuses for fiscal 1995.
Long-Term Incentive. The Compensation Committee has not, as yet, set
objectives for the next three year cycle, 1996-1998, under the Plan. The last
three year cycle, 1993-1995, concluded at the end of fiscal 1995. No awards were
due from the 1993-1995 cycle as none of the established targets were met.
Equity Incentive. Stock options are the principal equity incentive of the
Company and are designed to attract and retain executives who can make
significant contributions to the Company's success; reward executives for such
significant contributions; and give executives a longer-term incentive to
increase shareholder value. The size and frequency of option grants is
determined by the Compensation Committee at its discretion, taking into account
individual performance and responsibilities (but without any specific
performance measures), retention considerations, and general industry practice.
The Compensation Committee considers the size of the equity positions of
grantees in making awards, but there are no specific goals with respect to this
factor. All outstanding options have been granted with a ten-year term and an
exercise price equal to 100% of the fair market value of the Company's Common
Stock on the grant date. In most cases, stock options have become exercisable in
equal annual installments over a four-year period, beginning with the second
anniversary of the grant, although exercisability can be accelerated at the
discretion of the Compensation Committee or upon certain extraordinary events.
On February 7, 1995, the Compensation Committee considered the options held
by executive officers and employees and the fact that a significant number of
the outstanding options granted since 1991 had exercise prices well above the
recent historical trading prices for the Company's Common Stock. The
Compensation Committee believed that it was important to provide equity
incentives to employees and executive officers for retention purposes and to
reincentivize employees and executive officers to improve Company performance
and stockholder value. Accordingly, on February 7, 1995, the Compensation
Committee repriced the non-vested portion of certain outstanding options granted
to employees and executive officers under the Company's 1988 Stock Option Plan
and 1990 Equity Incentive Plan. All such options were repriced at an exercise
price equal to the market value of one share of the Company's Common Stock as of
February 7, 1995. In addition, the Compensation Committee established new
vesting periods for all such repriced options which lengthened the vesting
periods previously in place. As a result, no part of any repriced option vested
during fiscal 1995. In
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<PAGE> 11
addition, as part of the repricing, 25% of Messrs. Anathan and Gerson's 1991
grant under the 1990 Equity Incentive Plan were canceled (60,000 shares each).
As a general rule, the Compensation Committee reserves restricted stock for
special circumstances, including, but not limited to, executive retention
purposes and reward of high levels of executive performance. No restricted stock
was awarded to any executive in 1995. In addition, the Company's equity
incentive plans also authorize other types of equity-related compensation such
as unrestricted stock, stock appreciation rights, deferred stock grants and
performance awards. The Compensation Committee has, to date, not used any such
methods of equity based compensation but may do so in the future.
Any value received by an executive from an option grant and any increase in
the value of a stock award depends entirely on increases in the price of the
Company's stock.
Other Compensation. The Company provides executive officers with medical,
pension, thrift incentive and other benefits under plans that are generally
available to the Company's employees, supplemented by a Supplementary Executive
Retirement Plan described elsewhere in the proxy statement and various welfare
and fringe benefits.
Chief Executive Officer Compensation. Both Mr. Gerson, the Chief Executive
Officer of the Company and Mr. Anathan, the President and Chief Operating
Officer of the Company, have responsibilities typically associated with the
position of Chief Executive Officer. The Compensation Committee reviewed Messrs.
Gerson's and Anathan's compensation in January of 1996. At that time, because
fiscal 1995 performance objectives were not met, the Compensation Committee made
no change to Messrs. Gerson's or Anathan's compensation. These objectives, and
their relative weights, were 15% for total sales, 25% for comparable store
sales, 45% for earnings per share, 15% for strategic repositioning. Messrs.
Gerson and Anathan were not credited with points for 1995 under the Company's
long-term incentive program. No awards were paid to them under this program for
the fiscal 1993-1995 performance cycle. See "Executive Officer Compensation
Program -- Long-Term Incentive" above.
/s/ Samuel J. Gerson /s/ Robert P. Henderson
- - -------------------- --------------------------------------
Samuel J. Gerson Robert P. Henderson
Chairman of the Compensation Committee
/s/ Mone Anathan, III /s/ Paul D. Paganucci
- - --------------------- --------------------------------------
Mone Anathan, III Paul D. Paganucci
Member of the Compensation Committee
/s/ Harold Leppo
--------------------------------------
Harold Leppo
Member of the Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gerson, Chairman and Chief Executive Officer, and Mr. Anathan,
President and Chief Operating Officer, generally determine and review with the
Compensation Committee salary increases and bonus compensation of executives
other than themselves. The Compensation Committee itself consists of Messrs.
Henderson, Paganucci and Leppo, directors who are not present or former officers
or employees of the Company.
9
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
The following table sets forth annual compensation information for the
Company's Chief Executive Officer, the two highest paid executive officers, and
two executive officers who departed during fiscal 1995 and whose salary and
bonus for such year otherwise would have placed them among the four most highly
paid executive officers (collectively, the "named executive officers").
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------
AWARDS
-------------------------- PAYOUTS ALL
ANNUAL COMPENSATION OTHER RESTRICTED SECURITIES ------- OTHER
---------------------------- ANNUAL STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#)(m) ($) ($)
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Samuel J. Gerson...... 1995 $575,000 $ 0 $59,665(a) $ 0 252,500(n) $ 0 $ 10,587(s)
Chairman, Chief 1994 $572,916 $ 0 $75,212(b) $ 0 0 $ 0 $ 8,636
Executive 1993 $550,000 $ 0(e) $68,544(c) $ 0 35,000 $ 0 $ 6,730
Officer and
Director
Mone Anathan, III..... 1995 $550,000 $ 0 N/A(d) $ 0 252,500(o) $ 0 $ 10,338(t)
President, Chief...... 1994 $547,916 $ 0 N/A(d) $ 0 0 $ 0 $ 8,776
Operating Officer,.... 1993 $525,000 $ 0(e) $64,033(f) $ 0 35,000 $ 0 $ 6,816
and Director
Steven R. Siegel...... 1995 $235,000 N/A N/A(g) $ 0 75,000(p) $ 0 $ 467(u)
Executive Vice 1994 $118,012 $100,000 N/A $50,000(l) 75,000 $ 0 $ 145
President, CFO, 1993 N/A N/A N/A N/A N/A N/A N/A
Treasurer and
General Counsel
Mark Lisnow(j)........ 1995 $169,872 $ 0 $17,394(h) $ 0 60,500(q) $ 0 $ 86,394(v)
Former Executive 1994 $247,500 $ 0 N/A $ 0 0 $ 0 $ 2,040
Vice President, 1993 $230,000 $ 0 N/A $ 0 20,000 $ 0 $ 2,740
Merchandising and
General Merchandise
Manager
Samuel
DePhillippo(k)........ 1995 $158,462 $ 0 N/A(i) $ 0 47,000(r) $ 0 $109,918(w)
Former Executive 1994 $205,833 $ 0 N/A $ 0 0 $ 0 $ 1,934
Vice President, 1993 $187,072 $ 0 N/A $ 0 20,000 $ 0 $ 2,310
Stores
<FN>
- - ---------------
(a) Includes financial consulting services provided by an outside party for the
executive of $26,469 and supplemental medical insurance of $17,271.
(b) Includes financial consulting services provided by an outside party for the
executive of $28,074 and supplemental medical insurance of $26,508.
(c) Includes financial consulting services provided by an outside party for the
executive of $26,660 and executive merchandise discounts of $18,205.
(d) Other annual compensation for Mr. Anathan is less than 10% of his total
annual salary and bonus.
(e) The Compensation Committee determined that Messrs. Gerson and Anathan each
earned a $200,000 bonus for fiscal 1993; each of them declined the bonus.
(f) Includes financial consulting services provided by an outside party for the
executive of $32,520.
(g) Other annual compensation for Mr. Siegel is less than 10% of his total
annual salary and bonus.
(h) Includes group health premiums of $16,082.
(i) Other annual compensation for Mr. DePhillippo is less than 10% of his total
annual salary and bonus.
(j) Mr. Lisnow resigned in July of 1995.
(k) Mr. DePhillippo resigned in August of 1995.
(l) Consists of 5,480 shares of restricted stock which had a market value on the
date of grant of $50,000. 2,740 shares vested on July 11, 1995 and the
remaining 2,740 vest on July 11, 1996. The shares had a market value of
$14,029 on the last day of fiscal 1995.
(m) The Corporation has not granted stock appreciation rights to any of its
executive officers for such periods.
(n) On February 7, 1995, the Compensation Committee repriced 252,500 of Mr.
Gerson's outstanding stock options. In connection with this repricing, Mr.
Gerson forfeited options for 60,000 shares. See "Ten Year Option/SAR
Repricings."
(o) On February 7, 1995, the Compensation Committee repriced 252,500 of Mr.
Anathan's outstanding stock options. In connection with this repricing, Mr.
Anathan forfeited options for 60,000 shares. See "Ten Year Option/SAR
Repricings."
(p) On February 7, 1995, the Compensation Committee repriced 75,000 of Mr.
Siegel's outstanding stock options. See "Ten Year Option/SAR Repricings."
</TABLE>
10
<PAGE> 13
(q) On February 7, 1995, the Compensation Committee repriced 60,500 of Mr.
Lisnow's outstanding stock options. In connection with this repricing, Mr.
Lisnow forfeited options for 4,500 shares. At the time of his departure, Mr.
Lisnow forfeited all non-vested options. See "Ten Year Option/SAR
Repricings."
(r) On February 7, 1995, the Compensation Committee repriced 47,000 of Mr.
DePhillippo's outstanding stock options. In connection with this repricing,
Mr.DePhillippo forfeited options for 3,000 shares. At the time of his
departure, Mr. DePhillippo forfeited all non-vested outstanding options. See
"Ten Year Option/SAR Repricings."
(s) Includes contributions to the Filene's Basement, Inc. 401(k) Plan of $1,500.
$2,840 represents the dollar value of the insurance premium paid by the
Company on behalf of Mr. Gerson with respect to term life insurance. The
remaining $6,247 represents the value of the Term Insurance Component, as
defined below, on a split dollar life insurance policy on Mr. Gerson. See
"Split Dollar Insurance Policies."
(t) Includes contributions to the Filene's Basement, Inc. 401(k) Plan of $1,500.
$2,975 represents the dollar value of the insurance premium paid by the
Company on behalf of Mr. Anathan with respect to term life insurance. The
remaining $5,863 represents the value of the Term Insurance Component, as
defined below, on a split dollar life insurance policy on Mr. Anathan. See
"Split Dollar Insurance Policies."
(u) Represents the dollar value of the insurance premium paid by the Company on
behalf of Mr. Siegel with respect to term life insurance.
(v) $311 represents the value of the Term Insurance Component, as defined below,
on a split dollar life insurance policy on Mr. Lisnow. See "Split Dollar
Insurance Policies." $64,000 represents benefits paid to Mr. Lisnow under
the Company's Supplemental Executive Retirement Plan, as defined below. See
"Retirement Benefits." The remaining $22,083 represents salary continuation
paid to Mr. Lisnow under the terms of his termination agreement.
(w) $403 represents the dollar value of the insurance premium paid by the
Company on behalf of Mr. DePhillippo with respect to term life insurance.
$267 represents the value of the Term Insurance Component, as defined below,
on a split dollar life insurance policy on Mr. DePhillippo. See "Split
Dollar Insurance Policies." $38,000 represents benefits paid to Mr.
DePhillippo under the Company's Supplemental Executive Retirement Plan, as
defined below. See "Retirement Benefits." The remaining $71,248 represents
salary continuation paid to Mr. DePhillippo under the terms of his
termination agreement. Pursuant to the terms of this agreement, Mr.
DePhillippo is entitled to receive up to $150,000 in salary continuation and
was entitled to receive benefits comparable to those he received while
employed through January 31, 1996.
<TABLE>
The following table furnishes information concerning options exercised
during fiscal 1995 and presents the value of unexercised options held by the
named executives at fiscal year end:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (a)
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END(b)
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED (#) (#) ($) ($)
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Gerson............... -- $0.00 351,000 252,500 -- --
Mone Anathan, III.............. -- $0.00 351,000 252,500 -- --
Steven R. Siegel............... -- $0.00 -- 75,000 -- --
Mark Lisnow(c)................. -- -- -- -- -- --
Samuel DePhillippo(d).......... -- -- -- -- -- --
<FN>
- - ---------------
(a) Neither the Chief Executive Officer nor any of the four other most highly
compensated executive officers have any stock appreciation rights at
February 3, 1996.
(b) For all unexercised in-the-money options, the difference between the fair
market value at fiscal 1995 year-end and the various exercise prices.
(c) All non-vested options were canceled upon Mr. Lisnow's departure in July,
1995.
(d) All non-vested options were canceled upon Mr. DePhillippo's departure in
August, 1995.
</TABLE>
The table below sets forth information pertaining to all repricings of
options held by any named executive officer during all fiscal years since the
Company's initial public offering (for discussion on option repricing, see
"Executive Officer Compensation Program -- Equity Incentive"). Options are
considered to be repriced whenever the Company adjusts or amends the exercise
price of stock options previously granted to any executive officer, whether
through amendment, cancellation or replacement grants, or other means.
11
<PAGE> 14
<TABLE>
TEN-YEAR OPTION/SAR REPRICINGS (a)
1995
<CAPTION>
LENTH OF
ORIGINAL
NUMBER OF MARKET OPTION TERM
SECURITIES PRICE OF EXERCISE REMAINING AT
UNDERLYING STOCK AT PRICE AT NEW DATE OF
REPRICED TIME OF TIME OF EXERCISE REPRICING
OPTIONS REPRICING REPRICING PRICE (APPROX.
NAME DATE (#) ($) ($) ($) YEARS)
---- ---- ---------- --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Gerson.......... February 7, 1995 180,000(b) $3.69 $ 9.00 $3.69 6
Chairman, Chief 37,500 $3.69 $ 6.17 $3.69 5
Executive Officer 27,500 $3.69 $10.25 $3.69 8
and Director 7,500 $3.69 $10.25 $3.69 8
Mone Anathan, III......... February 7, 1995 180,000(b) $3.69 $ 9.00 $3.69 6
President, Chief 37,500 $3.69 $ 6.17 $3.69 5
Operating Officer 27,500 $3.69 $10.25 $3.69 8
and Director 7,500 $3.69 $10.25 $3.69 8
Steven R. Siegel.......... February 7, 1995 75,000 $3.69 $ 9.25 $3.69 9
Executive Vice President,
CFO, Treasurer and General
Counsel
Mark Lisnow(c)............ February 7, 1995 40,500(b) $3.69 $ 9.00 $3.69 6
Former Executive Vice 20,000 $3.69 $10.25 $3.69 8
President, Merchandising
and General Merchandise
Manager
Samuel DePhillippo(d)..... February 7, 1995 27,000(b) $3.69 $ 9.00 $3.69 6
Former Executive Vice 20,000 $3.69 $10.25 $3.69 8
President, Stores
<FN>
- - ---------------
(a) No stock appreciation rights were repriced for the Corporation's executive
officers or other employees during 1995.
(b) Messrs. Gerson and Anathan each forfeited options for 60,000 shares in
connection with the February 7, 1995 repricing; Mr. Lisnow forfeited 4,500
shares; Mr DePhillippo forfeited 3,000 shares.
(c) All non-vested options were canceled upon Mr. Lisnow's departure in July,
1995.
(d) All non-vested options were canceled upon Mr. DePhillippo's departure in
August, 1995.
</TABLE>
PERFORMANCE GRAPH: MAY 1991 -- JANUARY 1996
Comparison of Cumulative Total Return among Filene's Basement Corp., Nasdaq
Market Index and Standard & Poor's Retail Specialty Apparel Index.
The Company completed its initial public offering in May 1991. The annual
changes for the period shown in the following graph are based on the assumption
that $100 had been invested in Filene's Basement Corp. stock and each index on
May 1, 1991 and that all dividends for the broad market and peer group indexes
were reinvested. The total cumulative dollar returns depicted on the graph
represent the value that such investments would have had on February 1, 1992,
January 30, 1993, January 29, 1994, January 28, 1995, and February 3, 1996.
12
<PAGE> 15
<TABLE>
COMPARISON OF 57 MONTH CUMULATIVE TOTAL RETURN*
AMONG FILENE'S BASEMENT, INC., THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE S&P RETAIL STORES (SPECIALTY APPAREL) INDEX
<CAPTION>
FILENE'S S&P RETAIL
MEASUREMENT PERIOD BASEMENT, STORES - NASDAQ STOCK
(FISCAL YEAR COVERED) INC. APPAREL MARKET - US
<S> <C> <C> <C>
5/1/91 100 100 100
2/1/92 212 134 130
1/30/93 108 118 147
1/29/94 62 101 169
1/28/95 25 81 161
2/3/96 16 96 228
<FN>
* $100 INVESTED ON 05/01/91 IN STOCK OR
ON 04/30/91 IN INDEX -- INCLUDING REINVESTMENT OF DIVIDENDS.
</TABLE>
RETIREMENT BENEFITS
The Company has a non-contributory defined benefit pension plan (the
"Pension Plan"), which covers substantially all of its employees, and a
Supplementary Executive Retirement Plan (the "SERP") to preserve certain
benefits for employees whose retirement benefits under the Pension Plan are
affected by limitations imposed by the Internal Revenue Code (the "IRC").
The following table shows estimated annual benefits payable (before
deduction of any amounts payable from the Federated Department Stores, Inc.
Pension Plan because of the recognition of credited service prior to August 1,
1988) upon retirement in 1995 at age 65 under the Pension Plan as supplemented
by the SERP for services performed and compensation earned through December 31,
1995 on a 100% straight-life annuity
13
<PAGE> 16
basis to persons in specified remuneration and years-of-service classifications.
The straight-life annuity is approximately 100% of the 10-year certain benefit.
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35
------------------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
125,000.......... $ 7,610 $ 15,220 $ 22,831 $ 30,441 $ 38,051 $ 45,661 $ 45,661
150,000.......... 9,298 18,595 27,893 37,191 46,489 55,786 55,786
175,000.......... 10,985 21,970 32,956 43,941 54,926 65,911 65,911
200,000.......... 12,673 25,345 38,018 50,691 63,364 76,036 76,036
250,000.......... 16,048 32,095 48,143 64,191 80,239 96,286 96,286
300,000.......... 19,423 38,845 58,268 77,691 97,114 116,536 116,536
400,000.......... 26,173 52,345 78,518 104,691 130,864 157,036 157,036
500,000.......... 32,923 65,845 98,768 131,691 164,614 197,536 197,536
600,000.......... 39,673 79,345 119,018 158,691 198,364 238,036 238,036
700,000.......... 46,423 92,845 139,268 185,691 232,114 278,536 278,536
800,000.......... 53,173 106,345 159,518 212,691 265,864 319,036 319,036
900,000.......... 59,923 119,845 179,768 239,691 299,614 359,536 359,536
1,000,000.......... 66,673 133,845 200,018 266,691 333,364 400,036 400,036
</TABLE>
The amounts shown above are applicable to employees retiring in 1995 (at
age 65), and are payable in single-life annuity form. Amounts shown as "Final
Average Annual Compensation" represent the average of a participant's highest
five consecutive years' compensation (total salary and bonus, including W-2
earnings and deferred compensation) in the last ten years of his employment. For
1995, total salary and bonus for Messrs. Gerson and Anathan, who participate in
both pension plans, is the same for purposes of calculating their aggregate
benefits under those plans as their respective salary and bonus shown in the
Summary Compensation Table. As of February 4, 1996, Mr. Gerson had 21 years of
credited service under the plans and Mr. Anathan had 19 years. The benefits
listed in the table above are subject to offset for social security amounts
received by participants.
EMPLOYMENT AGREEMENTS
Messrs. Gerson and Anathan have employment agreements (the "Employment
Agreements") with the Company and its wholly-owned subsidiary, Filene's
Basement, Inc. ("FBI," and together with the Company, the "Employers"). Each
Employment Agreement provides for employment for a period (the "Employment
Period") commencing June 5, 1992 and ending at the conclusion of a three-year
period that is automatically extended each day to that day's third anniversary,
except that upon notice by the Company, the Employment Period will end on such
third anniversary of such notice. Although employment under an Employment
Agreement can be terminated before the end of the Employment Period by the
Employers or by Messrs. Gerson or Anathan, as the case may be, such termination
will not shorten the Employment Period for purposes of calculating the severance
payments and fringe benefit continuation described below. Each Employment
Agreement provides for annual compensation of at least $525,000, subject to
upward adjustment by the Board of Directors, but not to reduction below any such
increased rate. The Employment Agreements also provide for annual and long-term
bonuses in accordance with the Employers' compensation programs, fringe benefits
generally available to executives, other benefits noted in the Summary
Compensation Table, and payments by the Employers to compensate for any
diminution during the Employment Period in benefits under the pension and
retirement plans, 401(k) plans and health insurance, including, except in the
case of the latter, compensation for additional taxes resulting from such
payments. The Employment Agreements prohibit disclosure of the Employers'
confidential information, and, generally until one year after termination of
employment, the hiring of non-clerical employees of the Employers.
14
<PAGE> 17
Upon termination for incapacity (as defined) or death, by the Company other
than for cause (as defined) or by Mr. Gerson or Mr. Anathan for good reason (as
defined), the Employment Agreements provide for lump sum payment of accrued
salary through the termination date and annual and long-term bonus for prior
years and periods (to the extent not yet paid), plus an annualized bonus based
on the average bonus paid in the three preceding years, prorated according to
the number of months worked in the year of termination. In addition, the
Employment Agreements provide for a severance payment based on salary and annual
bonus (the product of (i) the sum of annual salary at the termination date and
such average bonus, and (ii) a fraction equal to the number of months from the
termination date to the end of the Employment Period divided by twelve) and
long-term bonus (the discounted present value of dollar amounts earned for fully
elapsed years of each long-term bonus period unexpired at the termination date).
The Employment Agreements also provide for fringe benefit continuation until the
end of the Employment Period on terms at least as favorable as those in effect
at the date of such termination. In addition, stock options would fully vest as
would all other accrued benefits and awards. At the end of fiscal 1995, Messrs.
Gerson and Anathan each had 252,500 non-vested stock options. In the event of
termination for cause, the Employment Agreements provide only for payment of
salary and prorated annualized bonus, each to the date of termination, and any
annual bonuses for prior years. Compensation earned in subsequent employment
does not reduce compensation payable under the Employment Agreements.
Mr. Siegel (referred to in this paragraph as the "Executive") has an
employment agreement (referred to in this paragraph as an "Agreement") with FBI,
pursuant to which he is employed for total annual compensation equal to his
fiscal 1995 salary as shown in the Summary Compensation Table. The Executive may
receive increases in such compensation, bonuses or other additional compensation
(see Summary Compensation Table). The Agreement covers a period commencing July
11, 1994 and expiring July 10, 1997, except that the Agreement will be extended
one day for each day the Executive works beyond July 10, 1995, subject to
earlier termination upon death of the Executive or for disability or cause (each
as defined). Upon termination for cause, the Executive is entitled only to
salary and benefits accrued through the termination date. The Executive has
agreed not to disclose FBI's confidential information, not to violate the
conflict of interest statement that he has signed, not to have an investment of
$100,000 or more in a competing business (as defined) or render personal service
thereto, and, until two years after termination of his employment, not to hire
FBI's employees.
Messrs. Lisnow and DePhillippo (referred to in this paragraph as the
"Executives") each had an employment agreement (referred to in this paragraph as
an "Agreement") with FBI, pursuant to which each Executive was employed for
total annual compensation equal to fiscal 1994 as shown in the Summary
Compensation Table. The Executives' Agreements covered a period commencing
September 1, 1993 and expiring August 31, 1995 and the Executives' contracts
would have been extended one day for each day they worked beyond August 31,
1995, subject to earlier termination upon the death of the Executive or for
disability or cause (each as defined). However, Mr. Lisnow resigned in July,
1995 and Mr. DePhillippo resigned in August, 1995. See "Summary Compensation
Table." Upon termination for cause, the Executives would have been entitled only
to salary and benefits accrued through the termination date. The Executives have
agreed not to disclose FBI's confidential information, not to violate the
conflict of interest statement that both have signed, not to have an investment
of $100,000 or more in a competing business (as defined) or render personal
service thereto, and, until two years after termination of employment, not to
hire FBI's employees.
CHANGE-IN-CONTROL AGREEMENTS
Messrs. Gerson and Anathan (referred to in this paragraph as the
"Executives") have each entered into Change-in-Control Agreements (referred to
in this paragraph as the "Agreements") with the Company. Each Agreement provides
that in the event of "qualified termination" of employment (any termination of
employment (a) by reason of the executive's death or incapacity, (b) by the
Company other than for "cause," or (c) by the executive for "good reason," each
as defined in the Agreements) within 36 months following a change in control or
a termination for any reason (whether by the Company or the executive) during
the one month period beginning on the first day of the twelfth month following a
change in control, the following
15
<PAGE> 18
benefits will be provided: a lump-sum cash payment equal to three times the sum
of the executive's highest annual base salary in the calendar year during which
the change in control occurred plus his average annual earned bonus over the
three previous years; continued medical and life insurance benefits during the
36-month period following termination; and payment of reasonable legal fees and
expenses incurred in enforcing rights to benefits under the Agreement. A change
in control is deemed to have occurred if 35% or more of the voting stock of the
Company is acquired by any one person (as defined) or in the event of certain
mergers, consolidations or other transactions in which the Company is acquired
or in the event of certain changes in the Company's Board membership. The
Company would also be obligated to pay an amount sufficient to make the covered
executive whole for any excise tax under the IRC's rules governing changes in
control.
In fiscal 1995, Mr. Siegel entered into a Change-in-Control Agreement
(referred to in this paragraph as the "Agreement") with the Company. The
Agreement provides that in the event a "terminating event" (as defined) occurs
within 12 months following a change in control, the following benefits will be
provided: an amount equal to 24 months' compensation (as defined) and
continuation of benefits similar to those he received under his Employment
Agreement for 24 months following the "terminating event." For purposes of the
Agreement, a change in control is deemed to have occurred if 30% or more of the
voting stock of the Company is acquired by any one person (as defined) or in the
event of certain mergers, consolidations or other transactions in which the
Company is acquired or in the event of certain changes in the Company's Board
membership.
Payments under each of these change-in-control agreements are due only to
the extent they exceed payments to be made to the covered executive under any
other agreement with the Company, including his Employment Agreement.
SPLIT DOLLAR INSURANCE POLICIES
The Company has, since 1994, paid premiums on split dollar life insurance
policies ("Policies") on Messrs. Gerson and Anathan (for purposes of this
paragraph, the "Executives"). Each policy has two components: (1) the cash
surrender value ("Cash Surrender Component") and (2) the face value in excess of
the Cash Surrender Component ("Term Insurance Component"). The value of the Term
Insurance Component (which is reflected in the Executives' taxable income for
1995) is reflected in the Summary Compensation Table in the column "All Other
Compensation" for 1995. See "Summary Compensation Table." The remainder of the
premiums does not provide any incremental benefit to the Executives because the
Cash Surrender Component is used to fund the SERP and no Executive has any
residual equity interest in the Cash Surrender Component over and above the
amounts necessary to fund the SERP. See "Retirement Benefits."
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Coopers & Lybrand,
independent auditors, as auditors for the Company for the fiscal year ending
February 1, 1997. A representative of Coopers & Lybrand is expected to be
present at the Annual Meeting with the opportunity to make a statement if he or
she desires and to respond to appropriate questions.
STOCKHOLDER PROPOSAL
Mr. William Steiner, 4 Radcliff Drive, Great Neck, New York 11024, who owns
300 shares of the Company's Common Stock, has stated his intention to present
the following proposal at the Annual Meeting:
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected."
16
<PAGE> 19
SUPPORTING STATEMENT OF PROPONENT
The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
The Board of Directors of the Company is divided into three classes serving
staggered three-year terms. I believe that the Company's classified Board of
Directors maintains the incumbency of the current Board and therefore of current
management, which in turn limits management's accountability to stockholders.
The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
I am a founding member of the Investors Rights Association of America and I
believe that concerns expressed by companies with classified boards that the
annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
I urge your support, vote for this resolution.
STATEMENT IN OPPOSITION TO PROPOSAL
Since 1991, the Board of Directors of the Company has been divided into
three classes, with one class to be elected each year for a three-year term. The
Board of Directors, in concurrence with the stockholders of nearly half of the
Fortune 500 companies, believes a classified Board structure is in the best
interests of our stockholders. For the reasons specified below, the Board of
Directors is against the proposal to de-classify.
First, a classified Board provides continuity and stability to the Company
and its business and operational strategies. Under a classified Board structure,
at least two-thirds of the Board remains intact each year, thereby allowing the
Board to more effectively carry out its long-term strategies. In addition, a
classified Board structure guarantees that the Board will have experienced
members who are familiar with the Company and its business and are working to
improve long-term stockholder value. Your Board of Directors believes that
continuity, stability and experience are fundamental to good corporate
governance and that de-classifying the Board will jeopardize these attributes.
Second, a classified Board structure is more likely to encourage a
potential acquiror to negotiate a transaction with your Board of Directors. This
would afford the Board of Directors the opportunity to carefully review and
evaluate any acquisition proposal to take steps to help maximize the price and
terms to be obtained for stockholders. In the absence of a staggered Board, a
bidder can attempt to simply replace the Board with persons supporting its bid
and this inhibits the ability of the Board to review the various strategic
alternatives to such a bid and negotiate a transaction in the best interests of
stockholders. Thus, with a staggered Board, any person seeking to acquire
control of the Company is, therefore, directed to engage in arm's length
negotiations with management and the Board which are more likely to maximize
value for all stockholders of the Company.
Approval of this advisory proposal requires a favorable vote of the holders
of a majority of the voting power represented at the meeting. If approved, the
proposal would merely constitute a non-binding recommendation to the Board of
Directors in support of declassification. It would not, in itself, establish a
new Board structure.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
17
<PAGE> 20
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Proposals of stockholders submitted for consideration at the 1997 annual
meeting of stockholders must be received by the Company not later than January
21, 1997 in order to be considered for inclusion in the Company's proxy material
for that meeting.
The Company's Restated By-Laws also establish an advance notice procedure
with respect to stockholder nomination of candidates for election as directors.
A notice regarding stockholder nominations for director must be accompanied by a
petition signed by at least 100 record holders representing in aggregate at
least 1% of the outstanding shares entitled to vote for directors. Such notice
must be received by the Company not less than 60 days nor more than 90 days
prior to the applicable stockholder meeting, provided, however, that in the
event the date of the meeting is not publicly announced by the Company by mail,
press release or otherwise more than 70 days prior to the meeting, the notice
must be received by the Company not later than the tenth day following the day
on which such announcement of the date of the meeting is made. Any such notice
must contain certain specified information concerning the persons to be
nominated and the stockholder submitting the nomination, all as set forth in the
By-Laws. The presiding officer of the meeting may refuse to acknowledge any
director nomination not made in compliance with such advance notice
requirements. The Company has not publicly announced the date of the 1996 Annual
Meeting prior to the mailing of the accompanying Notice of Annual Meeting and
this Proxy Statement. Nominations for Director to be acted upon at the 1997
Annual Meeting must comply with the timing and informational requirements
described above.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of the Company's
outstanding shares of Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC") and NASDAQ.
Officers, directors and greater than ten percent stockholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Section 16(a)
reports were required for those persons, the Company believes that during the
fiscal year ended February 3, 1996, all filing requirements were complied with.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before the Annual
Meeting which is not referred to in the accompanying Notice of Annual Meeting.
Should any such matters be presented, the persons named in the proxy intend to
take such action in regard to such matters as in their judgement seems
advisable.
18
<PAGE> 21
PROXY PROXY
FILENE'S BASEMENT CORP.
The undersigned hereby appoints Samuel J. Gerson and Steven R. Siegel, and each
of them, as attorneys and proxies of the undersigned with full power of
substitution, to represent the undersigned and to vote at the Annual Meeting of
Stockholders of Filene's Basement Corp. (the "Company") to be held at Bank of
Boston, 100 Federal Street, Boston, Massachusetts, on June 26, 1996 at 2:00
p.m., and at any and all adjourned sessions thereof, hereby revoking any proxy
heretofore given, all shares of Common Stock of the Company which the
undersigned could vote, if present, as specified on the reverse and in such a
manner as they determine on any other matters which may properly come before
the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF PROPERLY EXECUTED, BUT NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES
(PROPOSAL #1) AND AGAINST THE SHAREHOLDER PROPOSAL (PROPOSAL #2).
THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ADJOURNMENTS THEREOF.
- - -------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND
RETURN PROMPTLY IN ENCLOSED ENVELOPE
Please sign this proxy exactly as your name appears on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more
than one name appears, a majority must sign. If a corporation, this signature
should be that of an authorized officer who should state his or her title.
- - -------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ ____________________________________
____________________________________ ____________________________________
(THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF FILENE'S BASEMENT CORPORATION.)
DETACH CARD
<PAGE> 22
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
WITH- FOR ALL
FOR HOLD EXCEPT
1.) Election of Director. / / / / / /
MONE ANATHAN, III AND HAROLD LEPPO
To withhold authority for either nominee, mark the "For All Except" box
and strike a line through the nominee's name.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS.
RECORD DATE SHARES:
----------------------------
Please to sure to sign and date this Proxy. Date
- - ------------------------------------------------------------------------------
- - ---------Shareholder sign here---------------Co-owner sign here--------------
FOR AGAINST ABSTAIN
2.) Shareholder Proposal to Declassify / / / / / /
the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Mark box at right if comments or address change have / /
been noted on the reverse side of this card.
DETACH CARD DETACH CARD
FILENE'S BASEMENT CORP.
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the box on the proxy card to indicate how your shares shall be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, June
26, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Filene's Basement Corp.
