<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Filene's Basement Corp.
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
FILENE'S BASEMENT CORP.
40 WALNUT STREET
WELLESLEY, MASSACHUSETTS 02181
May 14, 1997
Dear Stockholder:
We cordially invite you to attend our 1997 Annual Meeting of Stockholders,
which will be held at 2:00 p.m. on Thursday, June 26, 1997 at BankBoston, N.A.,
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 Anthan, III
------------------------------------------------------
MONE ANATHAN, III
President and
Chief Operating Officer
/s/ Samuel J. Gerson
------------------------------------------------------
SAMUEL J. GERSON
Chairman and
Chief Executive Officer
<PAGE> 3
FILENE'S BASEMENT CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1997
Notice is hereby given that the Annual Meeting of Stockholders of Filene's
Basement Corp. will be held at BankBoston, N.A., 100 Federal Street, Boston,
Massachusetts, on Thursday, June 26, 1997 at 2:00 p.m. for the following
purposes:
1. To elect two Class III directors to serve until the year 2000
Annual Meeting of Stockholders.
2. To transact such other business as may properly come before the
meeting and any and all adjourned sessions thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
Only stockholders of record at the close of business on May 5, 1997 are
entitled to notice of and to vote at the Annual Meeting and any and all
adjourned sessions thereof.
A copy of the Company's Annual Report to Stockholders for the year ended
February 1, 1997, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By order of the Board of Directors,
/s/ Steven R. Siegel
STEVEN R. SIEGEL, Clerk
Wellesley, Massachusetts
May 14, 1997
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. NO POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED
IN THE UNITED STATES.
<PAGE> 4
FILENE'S BASEMENT CORP.
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 1997
------------------------
PROXY STATEMENT
The enclosed proxy is solicited on behalf of 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 BankBoston, N.A., 100 Federal
Street, Boston, Massachusetts, on June 26, 1997 at 2:00 p.m. and at any and all
adjourned sessions thereof. This Proxy Statement and the enclosed proxy are
first being mailed to stockholders on or about May 14, 1997. 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 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 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 May 5, 1997 are entitled to receive
notice of and to vote at the Annual Meeting. As of May 5, 1997, the Company had
issued and outstanding 20,664,188 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 affirmative vote of the holders of a plurality of the votes
cast by the stockholders entitled to vote at the Annual Meeting is required for
the election of 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 1, 1997, IS BEING MAILED TO THE COMPANY'S
STOCKHOLDERS WITH THIS PROXY STATEMENT. THE COMPANY WILL, UPON WRITTEN REQUEST
OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED FEBRUARY 1, 1997, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WITHOUT EXHIBITS. EXHIBITS WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE. PLEASE ADDRESS ALL SUCH
REQUESTS TO THE COMPANY, ATTENTION INVESTOR RELATIONS, 40 WALNUT STREET,
WELLESLEY, MASSACHUSETTS 02181.
1
<PAGE> 5
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors has fixed the number of directors at seven. 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 III
directors for a term of three years expiring at the year 2000 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 six (or
less if more than one nominee becomes unavailable). Management does not
anticipate that any nominee will become unavailable. The nominees as Class III
directors, and the incumbent Class I and Class II directors, are as follows:
NOMINEES AS CLASS III DIRECTORS
TERMS EXPIRE 2000
JOHN EYLER, 49
Director
John Eyler became a director of Filene's Basement Corp. in 1994. Mr. Eyler
has been Chairman and Chief Executive Officer of FAO Schwarz since June of 1992.
From 1989 to 1992, he served as Chief Executive Officer of the retail subsidiary
of Chicago-based Hartmarx. From 1983 to 1989, he was the Chairman/CEO of
MainStreet, a division of Federated Department Stores.
DORSEY R. GARDNER, 54
Director
Dorsey R. Gardner was elected to the Filene's Basement Corp. Board of
Directors on October 3, 1996. Mr. Gardner has been President of Kelso
Management, a Boston-based investment management firm, since 1980. Mr. Gardner
is also a director of Crane Company and Medusa Corporation.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR THE ELECTION OF THE TWO NOMINEES NAMED ABOVE AS DIRECTORS
OF THE COMPANY.
CLASS I DIRECTORS
TERMS EXPIRE 1998
SAMUEL J. GERSON, 55
Chairman, Chief Executive Officer and Director
Samuel J. Gerson became Chairman, Chief Executive Officer and a director of
the Company 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 ASAHI America, Inc. and Bon Ton Stores, Inc., as well as a
trustee associate of Boston College.
ROBERT P. HENDERSON, 66
Director
Robert P. Henderson is a general partner of Greylock Capital Limited
Partnership and a managing partner of Greylock Limited Partnership, both venture
capital partnerships. He has been associated with Greylock since 1983. Mr.
Henderson has been a director of the Company since 1988. He is also a director
of Allmerica Financial Corporation and Cabot Corporation.
2
<PAGE> 6
PAUL D. PAGANUCCI, 66
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 a director.
Mr. Paganucci became a director of the Company in 1992, and is also a director
of Allmerica Securities Trust and IGI Inc., and a trustee of HRE Properties.
CLASS II DIRECTORS
TERMS EXPIRE 1999
MONE ANATHAN, III, 58
President, Chief Operating Officer and Director
Mone Anathan, III became Chief Operating Officer, President and a director
of the Company in 1988, 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 Corporation, Brookstone Company, Inc. and Harvard
Pilgrim Health Care.
HAROLD LEPPO, 60
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 Napier and Co., Royce
Hosiery Mills, Inc. and Salant, Inc.
3
<PAGE> 7
BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, as of March 15, 1997, certain information
with respect to the beneficial ownership of shares of Common Stock owned by (i)
persons or groups which are known to be the beneficial owners of more than 5% of
the Company's Common Stock, (ii) each executive officer named in the Summary
Compensation Table below, (iii) each director and director nominee of the
Company and (iv) all executive officers and directors of the Company as a group.
Except as noted 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>
FMR Corp................................................. (3) 1,927,310 8.8%
82 Devonshire Street,
Boston, MA 02109
Merrill Lynch & Co., Inc................................. (4) 1,186,834 5.4%
World Financial Center,
North Tower,
250 Vesey Street,
New York, NY 10281
Samuel J. Gerson......................................... (5) 1,184,296 5.3%
Mone Anathan, III........................................ (6) 1,014,260 4.5%
John Eyler............................................... (7) 10,000 **
Dorsey R. Gardner........................................ 0 **
Robert P. Henderson...................................... (8) 121,732 **
Harold Leppo............................................. (9) 8,500 **
Paul D. Paganucci........................................ (10) 9,484 **
Steven R. Siegel......................................... 5,480 **
All executive officers and directors as a group (8
persons)............................................... (11) 2,353,752 10.2%
</TABLE>
- ---------------
** Less than one percent.
(1) Beneficial 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 15, 1997, pursuant to stock
options previously granted.
(2) Percentages are calculated on the basis of 21,783,309 shares of Common
Stock outstanding as of March 15, 1997, plus any shares of Common Stock
subject to stock options held by the individual exercisable within 60 days
of March 15, 1997.
(3) The information in the table and in this footnote is based on information
contained in a Schedule 13G dated February 14, 1997 filed by FMR Corp. as a
parent holding company. Fidelity Management & Research Company
("Fidelity"), 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 Value Fund, amounted to 1,927,310 shares of Common Stock.
Edward C. Johnson 3d, Chairman of
4
<PAGE> 8
FMR Corp., 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 Mr. Johnson 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. Mr. Johnson and members of his family and trusts for their
benefit form a controlling group with respect to FMR Corp.
(4) The information contained in the table and in this footnote is based upon
information contained in a Schedule 13G dated February 11, 1997 filed by
Merrill Lynch & Co. ("ML&Co.") and various related entities. ML&Co. has
shared dispositive and voting power with respect to 26,834 shares as a
result of being the parent holding company of Merrill Lynch, Pierce, Fenner
& Smith Incorporated, which holds such shares in proprietary trading
accounts. Merrill Lynch Asset Management L.P. d/b/a Merrill Lynch Asset
Management ("MLAM"), a wholly-owned subsidiary of ML&Co., is an investment
adviser registered under the Investment Advisers Act of 1940. ML&Co. and
MLAM share dispositive and voting power over 1,160,000 shares which are
held by investment companies registered under the Investment Company Act of
1940 in addition to certain private accounts for which MLAM acts as
investment adviser.
(5) Includes 586,000 shares issuable upon the exercise of stock options which
are exercisable or become exercisable within 60 days of March 15, 1997 and
300,000 shares owned by Mr. Gerson's wife.
(6) Includes 586,000 shares issuable upon the exercise of stock options which
are exercisable or become exercisable within 60 days of March 15, 1997.
(7) Includes 5,000 shares issuable upon the exercise of stock options which are
exercisable or become exercisable within 60 days of March 15, 1997.
(8) Includes 7,500 shares issuable upon the exercise of stock options which are
exercisable or become exercisable within 60 days of March 15, 1997.
(9) Includes 7,500 shares issuable upon the exercise of stock options which are
exercisable or become exercisable within 60 days of March 15, 1997.
(10) Includes 7,500 shares issuable upon the exercise of stock options which are
exercisable or become exercisable within 60 days of March 15, 1997.
(11) Includes 1,199,500 shares issuable upon the exercise of stock options which
are exercisable or become exercisable within 60 days of March 15, 1997.
BOARD OF DIRECTORS, DIRECTOR COMPENSATION, AND COMMITTEES
During the Company's fiscal year ended February 1, 1997, the Board of
Directors of the Company held six 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 (an "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 likewise be granted, on the date of
his or her appointment or election as a director, an option to acquire 12,500
shares of Common Stock. In accordance with this provision, Mr. Gardner received
an option to purchase 12,500 shares of Common Stock on October 3, 1996 at a per
share option price of $4.47. Each Eligible Director who receives an initial
grant as described above will be granted, on the date of the annual meeting that
follows by five years the date of his or her initial grant, an option to acquire
an additional 12,500 shares of Common Stock, provided the director is continuing
in office and the date of such later annual meeting occurs prior to April 6,
2003.
5
<PAGE> 9
The exercise price of all options granted to non-employee directors 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 grants
themselves. 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 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. In addition to stock option
grants made under the Director Option Plan, each non-employee director serving
on the Board on December 6, 1996 was granted an option to purchase 5,000 shares
of Common Stock at a price of $4.81 per share.
The Audit Committee, which held two meetings during fiscal 1996, 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, Paganucci
and Gardner served on the Audit Committee during fiscal 1996.
The Compensation Committee, which held three meetings during fiscal 1996,
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 served on the Compensation Committee during 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") has furnished the following report on executive compensation.
OVERVIEW
In fiscal 1996, 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 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. 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.
6
<PAGE> 10
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 controlling, consideration when structuring executive compensation. To
the extent desirable and feasible under the circumstances, executive
compensation will 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. In 1996, due to the Company's strong operating
results, actual cash compensation, including bonuses, to each of Messrs. Gerson
and Anathan marginally exceeded $1 million and such excess amounts over $1
million will not be deductible for federal tax purposes. Such excess amounts had
a de minimis effect on earnings for fiscal 1996.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's compensation program for executive officers named in the
Summary Compensation Table (in this report, the "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
Committee and Messrs. Gerson and Anathan periodically review proxy statement
compensation disclosures in addition to proprietary and other publicly available
compensation data in order to ensure the Company's compensation program remains
effective in achieving the goals outlined above (see "Overview").
Base Salary. The minimum levels of base salaries for the Executives were
established in employment agreements entered into in 1992, in the case of
Messrs. Gerson and Anathan, and in 1994, in the case of Mr. Siegel, and are
subject to upward adjustment by the Company. 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
pre-determined, 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 organization. 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 1996,
these objectives and their relative weights for Mr. Siegel varied based on the
judgment of Messrs. Gerson and Anathan as to the ability of Mr. Siegel, given
his position, to influence attainment of the particular objectives. For fiscal
1996, the Compensation Committee established the following predetermined
objectives and their relative weights for Messrs. Gerson and Anathan: 30% for
total sales, 40% for earnings per share and 30% for strategic repositioning.
Based upon the predetermined objectives and applicable matrices for fiscal 1995,
Mr. Siegel received an increase in his base salary for fiscal 1996. 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 base salary increases whether or not the predetermined objectives are
achieved.
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 1996 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 1996. Based upon the pre-determined objectives
and applicable matrices for fiscal 1996, bonuses of $575,000, $575,000 and
$100,000 were paid to Messrs. Gerson, Anathan and Siegel, respectively, for
fiscal 1996.
Long-Term Incentive. The Company maintains a Long Term Incentive Plan
which is designed to reward employees for performance over three-year periods.
The Compensation Committee has not yet chosen to set objectives for the next
three-year cycle under the plan. Accordingly, no payments were made under the
7
<PAGE> 11
plan in 1996. The Compensation Committee may choose to set objectives and make
awards under the plan in the future.
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 are
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 1996, the Company granted stock options to Messrs.
Gerson, Anathan and Siegel to purchase 93,400, 93,400 and 40,000 shares,
respectively. These options vest over four years, in equal annual installments.
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 1996. In addition, the Company's equity
incentive plans authorize other types of equity-related compensation such as
unrestricted stock, stock appreciation rights, deferred stock grants and
performance awards. The Compensation Committee to date has not used any such
methods 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 depend 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 the 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, the
Compensation Committee elected to make no change to Messrs. Gerson's or
Anathan's base compensation. The Compensation Committee awarded Messrs. Gerson
and Anathan bonuses in February, 1997 in recognition of their meeting the
established performance goals for the Company for 1996. These objectives, and
their relative weights, were 30% for total sales, 40% for earnings per share and
30% for strategic repositioning.
Robert P. Henderson
Chairman of the Committee
Paul D. Paganucci
Harold Leppo
8
<PAGE> 12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Henderson, Paganucci and
Leppo, directors who are not present or former officers or employees of the
Company. No executive officer of the Company, during fiscal 1996, has served as
a director or member of the compensation committee (or other committee serving
an equivalent function) of any other entity any of whose executive officers has
served as a director or member of the Compensation Committee of the Company.
SUMMARY COMPENSATION TABLE
The following table sets forth, for each of the last three fiscal years,
certain information concerning the compensation of the Company's Chief Executive
Officer and the Company's other executive officers (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
AWARDS
-------------------------- ALL
ANNUAL COMPENSATION OTHER RESTRICTED SECURITIES OTHER
---------------------------- ANNUAL STOCK UNDERLYING COMPEN-
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS SATION
PRINCIPAL POSITION YEAR ($) ($) ($)(A)(B) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Samuel J. Gerson................. 1996 $575,000 $575,000 $ 61,345 $ 0 93,400 $11,313(g)
Chairman, Chief 1995 $575,000 $ 0 $ 59,665 $ 0 252,500(d) $10,587
Executive Officer 1994 $572,916 $ 0 $ 75,212 $ 0 0 $8,636
and Director
Mone Anathan, III................ 1996 $550,000 $575,000 $ 0 $ 0 93,400 $11,074(h)
President, Chief 1995 $550,000 $ 0 $ 0 $ 0 252,500(d) $10,338
Operating Officer 1994 $547,916 $ 0 $ 0 $ 0 0 $8,776
and Director
Steven R. Siegel................. 1996 $243,700 $100,000 $ 0 $ 0 40,000 $1,910 (i)
Executive Vice 1995 $235,000 $ 50,000 $ 0 $ 0 75,000(e) $ 467
President, CFO, 1994 $118,012 $100,000 $ 0 $ 50,000(c) 75,000(f) $ 145
Treasurer and
General Counsel
</TABLE>
- ---------------
(a) In accordance with the rules of the Securities Exchange Commission, other
compensation in the form of perquisites and other personal benefits has been
omitted in those instances where the aggregate amount of such perquisites
and other personal benefits constituted less than the lesser of $50,000 or
10% of the total annual salary and bonus for the Named Executive Officer for
such year.
(b) Other annual compensation for Mr. Gerson includes $18,086, $26,469 and
$28,074 for financial consulting services provided by an outside party in
1996, 1995 and 1994, respectively, and $23,510, $17,271 and $26,508 for
supplemental medical insurance in 1996, 1995 and 1994, respectively.
(c) Consists of 5,480 shares of restricted stock, all of which are now vested,
which had a market value on the date of grant of $50,000.
(d) On February 7, 1995, the Compensation Committee repriced 252,500 of Mr.
Gerson's and 252,500 of Mr. Anathan's outstanding stock options. In
connection with this repricing, both Mr. Gerson and Mr. Anathan forfeited
options for 60,000 shares.
(e) On February 7, 1995, the Compensation Committee repriced 75,000 of Mr.
Siegel's outstanding stock options.
(f) Cancelled in connection with the February 7, 1995 stock option repricing
described in footnote (e).
(g) Includes contributions to the Filene's Basement, Inc. 401(k) Plan of $1,875.
$2,690 represents the dollar value of the insurance premiums paid by the
Company on behalf of Mr. Gerson with respect to term life insurance. The
remaining $6,748 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."
(h) Includes contributions to the Filene's Basement, Inc. 401(k) Plan of $1,875.
$2,825 represents the dollar value of the insurance premiums paid by the
Company on behalf of Mr. Anathan with respect to term life insurance. The
remaining $6,374 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."
(i) Includes contributions to the Filene's Basement, Inc. 401(k) Plan of $1,875.
$35 represents the dollar value of the insurance premiums paid by the
Company on behalf of Mr. Siegel with respect to term life insurance.
9
<PAGE> 13
The following table furnishes information concerning the value of
unexercised stock options held by each of the Named Executive Officers at fiscal
year end. None of the Named Executive Officers exercised any stock options in
fiscal 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END(A)
ACQUIRED VALUE --------------------------- ---------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- -------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Gerson................ 0 $ 0.00 487,250 209,650 $ 978,199 $ 293,566
Mone Anathan, III............... 0 $ 0.00 487,250 209,650 $ 967,129 $ 293,566
Steven R. Siegel................ 0 $ 0.00 0 115,000 $ 0 $ 172,938
</TABLE>
- ---------------
(a) Value of unexercised in-the-money options represents the difference between
the closing price of the Company's Common Stock on February 1, 1997
($5.5625) and the exercise price of the option, multiplied by the number of
shares subject to the option.
The following table furnishes information concerning stock options granted
during fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/ EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE(A)
NAME SARS GRANTED FISCAL YEAR ($/SH) DATE ($)
- --------------------- ------------ ---------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Samuel J. Gerson..... 93,400(b) 10.49% $4.75 June 26, 2006 $371,961
Mone Anathan, III.... 93,400(b) 10.49% $4.75 June 26, 2006 $371,961
Steven R. Siegel..... 40,000(b) 4.49% $4.75 June 26, 2006 $159,298
</TABLE>
- ---------------
(a) Calculated in accordance with the Black-Scholes option pricing model. This
model takes into account, in valuing an option, the volatility of the
Company's Common Stock as well as the current stock price, dividend rate,
current market interest rate, term of the option and exercise price. The
Black-Scholes model is generally used to value exchange traded options.
Stock options, which are long-term non-transferable and subject to vesting
restrictions, differ from exchange traded options, which are short-term and
can be exercised or sold immediately in a liquid market. In calculating the
grant date present values in the table, a factor of 73.20% has been assigned
to the volatility of the Common Stock based on stock market quotations
during fiscal 1996, the annual dividend rate has been set at $0 per share,
the risk free rates of return have been fixed at 7.84% for the June, 1996
grant date, based on ten year U.S. Treasury Note rates, and the actual term
of ten years for the options has been used.
(b) Options vest in four equal annual installments on each of the first four
anniversaries of the date of grant.
10
<PAGE> 14
PERFORMANCE GRAPH: JANUARY 1992 -- JANUARY 1997
The following graph shows a comparison of cumulative total return among
Filene's Basement Corp., Nasdaq Stock Market (U.S.) Index and Standard & Poor's
Retail Specialty Apparel Index. 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 January 31, 1992 and that all
dividends were reinvested. The total cumulative dollar returns depicted on the
graph represent the value that such investments would have had on January 30,
1993, January 29, 1994, January 28, 1995, February 3, 1996 and February 1, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG FILENE'S BASEMENT CORP., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE STANDARD & POOR'S RETAIL SPECIALTY APPAREL INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD FILENE'S BASEMENT S&P RETAIL NASDAQ STOCK
(FISCAL YEAR COVERED) CORP. (APPAREL) MARKET (U.S.)
<S> <C> <C> <C>
1/31/92 100 100 100
1/30/93 51 88 113
1/29/94 29 75 130
1/28/95 12 60 124
2/03/96 7 71 175
2/01/97 16 90 230
</TABLE>
* $100 INVESTED ON 1/31/92 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS
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 of 1986, as amended
(the "IRC").
11
<PAGE> 15
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 1996 at age 65 under the Pension Plan as supplemented
by the SERP for services performed and compensation earned through December 31,
1996 on a 100% straight-life annuity basis to persons in specified remuneration
and years-of-service classifications.
<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.......... $ 7,558 $ 15,117 $ 22,675 $ 30,234 $ 37,792 $ 45,350 $ 45,330
150,000.......... 9,246 18,492 27,738 36,984 46,229 55,475 55,475
175,000.......... 10,933 21,867 32,800 43,734 54,667 65,600 65,600
200,000.......... 12,621 25,242 37,863 50,484 63,104 75,725 75,725
250,000.......... 15,996 31,992 47,988 63,984 79,979 95,975 95,975
300,000.......... 19,371 38,742 58,113 77,484 96,854 116,225 116,225
400,000.......... 26,121 52,242 78,363 104,484 130,604 156,725 156,725
500,000.......... 32,871 65,742 98,613 131,484 164,354 197,225 197,225
600,000.......... 39,621 79,242 118,863 158,484 198,104 237,725 237,725
700,000.......... 46,371 92,742 139,113 185,484 231,854 278,225 278,225
800,000.......... 53,121 106,242 159,363 212,484 265,604 318,725 318,725
900,000.......... 59,871 119,742 179,613 239,484 299,354 359,225 359,225
1,000,000......... 66,621 133,242 199,863 266,484 333,104 399,725 399,725
1,100,000......... 73,371 146,742 220,113 293,484 366,854 440,225 440,225
1,200,000......... 80,121 160,242 240,363 320,484 400,604 480,725 480,725
</TABLE>
The amounts shown above are applicable to employees retiring in 1996 (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 years' compensation (total salary and bonus, including W-2 earnings and
deferred compensation) in the last ten years of his employment. For 1996, total
salary and bonus for Messrs. Gerson, Anathan and Siegel, all of whom 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 December 31, 1996, Messrs. Gerson, Anathan and
Siegel had 22, 21 and 5 years of credited service, respectively, under the
plans.
EMPLOYMENT AGREEMENTS
Messrs. Gerson and Anathan (each, an "Employee") entered into 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"), on June 5, 1992. Each Employment Agreement provides for employment
for a rolling three-year period (the "Employment Period"). Upon notice by the
Company that the Employment Period shall cease, the Employment Period will be
fixed and will end on the third anniversary of the date 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. The Employment Agreements provide for a minimum annual salary of
$550,000, in the case of Mr. Gerson, and $525,000, in the case of Mr. Anathan,
which amounts are subject to upward adjustment by the Board of Directors, but
not to reduction below any such increased amount. 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 coverage,
including, except in the case of health insurance coverage, compensation for
additional taxes resulting from such payments. The Employment Agreements
prohibit each Employee from competing with the Company for a period of six
months from the date of termination of his employment if due to incapacity (as
defined) or for cause (as defined), and prohibit disclosure of the
12
<PAGE> 16
Employers' confidential information and, generally until one year after
termination of employment, the hiring of non-clerical employees of the
Employers.
Upon termination for incapacity or death, by the Company other than for
cause 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 any accrued annual bonus or long-term bonus for prior years
and periods, plus an annualized bonus based on the average bonus paid in the
three preceding years and prorated according to the number of months worked in
the year of termination. In addition, the Employment Agreements provide for a
severance payment equal to the sum of (i) the product of (A) the sum of annual
salary at the termination date and such average bonus and (B) a fraction equal
to the number of months from the termination date to the end of the Employment
Period divided by twelve and (ii) a long-term bonus (the discounted present
value of dollar amounts earned for fully elapsed years of any 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, all stock options would fully vest as would all other
accrued benefits and awards. At the end of fiscal 1996, Messrs. Gerson and
Anathan each had 209,650 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 accrued
annual bonuses for prior years. Compensation earned in subsequent employment
does not reduce compensation payable under the Employment Agreements.
Mr. Siegel entered into an employment agreement (an "Agreement") with FBI
on July 11, 1994, pursuant to which he is employed at an annual salary of at
least $200,000, subject to increase by Messrs. Gerson and Anathan. Mr. Siegel
may receive increases in such compensation, bonuses or other additional
compensation. The Agreement provides for employment for a rolling two-year
period which commences anew each day Mr. Siegel's employment by FBI continues.
The agreement is subject to earlier termination upon the death of Mr. Siegel or
for disability or cause (each as defined). Upon termination for cause, Mr.
Siegel is entitled only to salary and benefits accrued through the termination
date. Mr. Siegel 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.
CHANGE-IN-CONTROL AGREEMENTS
Messrs. Gerson and Anathan have each entered into Change-in-Control
Agreements with the Company. Each Agreement provides for benefits in the event
of either a "qualified termination" of employment (any termination of employment
(i) by reason of the executive's death or incapacity, (ii) by the Company other
than for "cause" or (iii) 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. In such event, each of Mr. Gerson and Mr. Anathan would receive any
accrued and unpaid salary, 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 also would be obligated to such executive for an amount sufficient to
pay any excise tax under the IRC's rules governing changes in control. 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.
Mr. Siegel's employment agreement provides that, in the event a terminating
event (as defined) occurs within 12 months following a change in control of the
Company, Mr. Siegel will receive an amount equal to 24
13
<PAGE> 17
months' compensation (as defined) and continuation of benefits 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), 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.
SPLIT-DOLLAR INSURANCE POLICIES
The Company has, since 1994, paid premiums on split-dollar life insurance
policies (the "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
1996) is reflected in the Summary Compensation Table in the column "All Other
Compensation" for 1996. 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 Arthur Andersen LLP,
independent auditors, as auditors for the Company for the fiscal year ending
January 31, 1998. On December 6, 1996, the Company engaged Arthur Andersen LLP
as its independent public accountant and dismissed Coopers & Lybrand L.L.P. from
such position. The decision to change accountants was made by the Board of
Directors of the Company. The reports of Coopers & Lybrand L.L.P. on the
Company's financial statements for fiscal 1994 and 1995 did not contain any
adverse opinion, disclaimer of opinion or qualification or modification as to
uncertainty, audit scope or accounting principles.
During the fiscal years ended February 3, 1996 and January 28, 1995 and the
subsequent interim period immediately preceding the date of this change in
accountants, the Company had no disagreements with Coopers & Lybrand L.L.P. on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Coopers & Lybrand L.L.P., would have caused Coopers & Lybrand
L.L.P. to make a reference to the subject matter of the disagreement in
connection with its reports on the financial statements of the Company.
During the fiscal years ended February 3, 1996 and January 28, 1995 and the
subsequent interim period immediately preceding the date of the change in
accountants, neither the Company nor anyone on behalf of the Company consulted
Arthur Andersen LLP regarding either (i) the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements or
(ii) any matter that was either the subject of a disagreement with Coopers &
Lybrand L.L.P. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, or a reportable event
described in paragraph (a)(1)(v) of Item 304 of Regulation S-K under the
Securities Act of 1933, as amended.
A representative of Arthur Andersen LLP 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. No representative of Coopers & Lybrand
L.L.P. is expected to be present at the Annual Meeting.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Proposals of stockholders submitted for consideration at the 1998 annual
meeting of stockholders must be received by the Company not later than January
14, 1998 in order to be considered for inclusion in the Company's proxy material
for that meeting.
14
<PAGE> 18
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 or 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 Company's
Restated 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 1998 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 1998
Annual Meeting must comply with the timing and informational requirements
described above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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"). 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 Form 5 filing was
required for those persons, the Company believes that, during the fiscal year
ended February 1, 1997, all filings were timely made, except that on October 3,
1996, Mr. Dorsey R. Gardner was appointed to the Board of Directors and a Form 3
was filed with the SEC on October 25, 1996.
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 judgment seems advisable.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
By Order of the Board of Directors,
/s/ Steven R. Siegel
STEVEN R. SIEGEL,
Clerk
May 14, 1997
15
<PAGE> 19
FILENE'S BASEMENT CORP.
40 WALNUT STREET
WELLESLEY, MASSACHUSETTS 02181
ANNUAL MEETING OF SHAREHOLDERS -- JUNE 26, 1997
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Samuel Gerson and
Steven Siegel as Proxies, with full power of substitution to each, to vote for
and on behalf of the undersigned at the 1997 Annual Meeting of Shareholders of
FILENE'S BASEMENT CORP. (the "Company") to be held at BankBoston, N.A., 100
Federal Street, Boston, Massachusetts at 2:00 p.m. on Thursday, June 26, 1997,
and at any adjournment(s) thereof. The undersigned hereby directs the said
Proxies to vote in accordance with their judgment on any matters which may
properly come before the Annual Meeting, all as indicated in the Notice of
Annual Meeting, receipt of which is hereby acknowledged, and to act on the
following matters set forth in such Notice as specified by the undersigned.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" PROPOSAL ONE.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the books of the Company.
Joint owners should each sign personally. Trustee and other fiduciaries should
indicate the capacity in which they sign, and where more than one name appears,
a majority must sign. If the owner is 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?
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
<PAGE> 20
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -------------------------------------------------------------------------------
FILENE'S BASEMENT CORP.
- -------------------------------------------------------------------------------
RECORD DATE SHARES:
-------------------------
Please be sure to sign and date this Proxy. Date
- -------------------------------------------------------------------------------
- -----Shareholder sign here-------------------------Co-owner sign here----------
1. Election of Directors.
WITH- FOR ALL
FOR HOLD EXCEPT
John Elyer / / / / / /
Dorsey R. Gardner
NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the nominee's name.
Your shares will be voted for the remaining nominee.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR AT ANY ADJOURNMENT(S)
THEREOF.
Mark box at right if any address change or comment has been / /
noted on the reverse side of this card.
DETACH CARD DETACH CARD
FILENE'S BASEMENT CORP.
Dear Shareholder,
Please take note of the important information enclosed with this Proxy Ballot.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders to be
held at 2:00 p.m. on Thursday, June 26, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Filene's Basement Corp.
