<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 0-19149
----------------------------------
FILENE'S BASEMENT CORP.
--------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3016733
------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Walnut Street, Wellesley, MA 02181
-------------------------------------
(Address of principal executive offices)
(Zip Code)
(617) 348-7000
--------------
(Registrant's telephone number, including area code)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
The number of shares of common stock outstanding as of August 30, 1997 was
20,864,044 shares.
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------- --------
Item 1 - Financial Statements
Consolidated Balance Sheets as of 3
August 2, 1997, February 1, 1997
and August 3, 1996
Consolidated Statements of Operations 4
for the thirteen weeks ended
August 2, 1997 and August 3, 1996
Consolidated Statements of Operations 5
for the twenty-six weeks ended
August 2, 1997 and August 3, 1996
Consolidated Statements of Cash Flows 6
for the twenty-six weeks ended
August 2, 1997 and August 3, 1996
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
- ---------------------------
Item 4 - Submission of Matters to a Vote 13
of Security Holders
Item 6 - Exhibits and Reports on Form 8-K 13
2
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FILENE'S BASEMENT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
August 2, February 1, August3,
1997 1997 1996
--------- --------- ---------
ASSETS (unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 475 $ 462 $ 513
Inventories 104,114 88,763 100,962
Other current assets 10,734 9,363 10,514
--------- --------- ---------
Total current assets 115,323 98,588 111,989
Property, plant and equipment, net 54,355 53,305 61,131
Beneficial operating lease rights, net 14,155 14,811 15,468
Assets held for sale 7,962 7,962 --
Intangible assets, net and other 8,250 8,247 11,824
--------- --------- ---------
$ 200,045 $ 182,913 $ 200,412
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,093 $ 46,934 $ 40,804
Accrued expenses 26,920 29,375 27,682
Short-term debt 23,600 1,000 28,600
Current portion of long-term debt 2,000 2,500 --
Obligations under capital leases 390 437 494
--------- --------- ---------
Total current liabilities 101,003 80,246 97,580
Reserve for store closings 2,492 2,492 4,663
Deferred revenue 1,916 1,999 2,082
Long-term debt 2,000 7,500 10,000
Obligations under capital leases 2,989 3,191 3,384
Stockholders' equity:
Common stock, $.01 par value,
70,000,000 shares authorized,
20,844,190, 20,658,533 and
20,607,119 shares issued 208 207 206
Additional paid-in capital 86,603 86,195 86,102
Retained earnings(deficit) 2,850 1,099 (3,589)
Treasury stock, 75,000 shares (16) (16) (16)
--------- --------- ---------
Total stockholders' equity 89,645 87,485 82,703
--------- --------- ---------
$ 200,045 $ 182,913 $ 200,412
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended
(Unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
August 2, August 3,
1997 1996
-------- --------
<S> <C> <C>
Net sales $126,329 $120,101
Cost of sales, including buying,
receiving and occupancy costs 96,907 91,084
-------- --------
Gross profit 29,422 29,017
Selling, general and administrative
expenses 26,853 25,810
Amortization of intangible assets and
beneficial operating lease rights 367 367
-------- --------
Operating income 2,202 2,840
Interest expense, net 632 911
-------- --------
Income before income taxes 1,570 1,929
Income tax provision(Note 3) 377 714
-------- --------
Net income $ 1,193 $ 1,215
======== ========
Net income per common share:
Primary $ 0.06 $ 0.06
======== ========
Fully diluted $ 0.06 $ 0.06
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Twenty-six Weeks Ended
(Unaudited)
(dollars in thousands, except per share amounts)
August 2, August 3,
1997 1996
-------- --------
Net sales $246,780 $244,133
Cost of sales, including buying,
receiving and occupancy costs 188,116 184,294
-------- --------
Gross profit 58,664 59,839
Selling, general and administrative
expenses 54,451 54,058
Amortization of intangible assets and
beneficial operating lease rights 734 734
-------- --------
Operating income 3,479 5,047
Interest expense, net 1,176 2,178
-------- --------
Income before income taxes 2,303 2,869
Income tax provision(Note3) 553 1,090
-------- --------
Net income $ 1,750 $ 1,779
======== ========
Net income per common share:
Primary $ 0.08 $ 0.09
======== ========
Fully diluted $ 0.08 $ 0.08
======== ========
See Notes to Consolidated Financial Statements.
5
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-six Weeks Ended
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
August 2, August 3,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,750 $ 1,779
Adjustments to reconcile net income
to net cash provided by(used in)
operations:
Depreciation and amortization 5,787 6,098
Deferred income taxes (385) --
Increase in inventories (15,351) (15,185)
Decrease(increase) in other current (3,477) 18,237
assets
Increase in accounts payable 1,159 4,159
Decrease in accrued expenses (2,455) (2,901)
Other (83) (72)
-------- --------
Net cash provided by(used in)
operating activities (13,055) 12,115
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,104) (2,036)
Sale of leasehold interests 2,106 283
Other 306 (528)
-------- --------
Net cash used in investing activities (3,692) (2,281)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings,net 22,600 15,400
Payments of capital lease obligations (249) (239)
Long-term debt payments (6,000) (25,000)
Employee stock purchase plan 409 54
-------- --------
Net cash provided by(used in)
financing activities 16,760 (9,785)
-------- --------
Net increase in cash and cash equivalents 13 49
Cash and cash equivalents:
Beginning of period 462 464
-------- --------
End of period $ 475 $ 513
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
6
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements are presented in
accordance with the requirements of Form 10-Q and consequently do not include
all the disclosures normally required by generally accepted accounting
principles nor those normally made in the Company's annual Form 10-K filing.
Reference should be made to the Company's Annual Report on Form 10-K for
additional disclosures, including a summary of the Company's accounting
policies. Certain prior year amounts have been reclassified to conform to the
current year presentation. The results of the periods ended August 2, 1997 and
August 3, 1996 are not necessarily indicative of the results for a full fiscal
year, because the Company's business, in common with the businesses of retailers
generally, is subject to seasonal influences, with higher levels of sales and
income generally realized in the fall season. The information furnished, in the
opinion of management, includes all normal recurring adjustments necessary for a
fair presentation of the results of operations for the periods reported.
2. NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" and SFAS No.
129, "Disclosure Information about Capital Structure" effective for fiscal years
ending after December 15, 1997. Earlier adoption was not permitted. The Company
believes that its adoption of SFAS No. 128 for fiscal 1997 will not materially
impact its earnings per share calculations and the adoption of SFAS No. 129 will
have no impact on the Company's current disclosures.
3. INCOME TAXES
------------
The Company is using an effective tax rate of 24% to compute taxes for the
current fiscal year, reflecting the realization of certain deferred tax assets
which were not realized in prior years.
4. COMMITMENTS
-----------
On June 2, 1997, the Company entered into an employment agreement with its new
President and Chief Operating Officer. The agreement extends through January
31, 2001 and provides for a base salary of $560,000 plus an annual bonus up to
75% of base salary. In the event of a change in control, as defined therein,
the term of the agreement would be automatically extended to a date which is
three years from the date of such change in control.
7
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. COMMITMENTS(CONTINUED)
----------------------
On August 22, 1997, the Company amended an employment agreement with its former
President and Chief Operating Officer(the "Executive"). Under the agreement, as
amended, the Executive is required to devote 75%, 50%, and 50% of his working
time to the Company during years 1-3 of a three year period, respectively. His
annual base salary and incentive bonus is set at 75%, 50% and 50% of the Chief
Executive Officer's salary and bonus for years one, two and three, respectively.
In addition, the amendment provides for certain benefits to be paid subsequent
to termination of his employment. In the event that a change of control, as
defined therein, occurs prior to termination of his employment, for purposes of
the Executive's change in control benefits, his Executive's salary and bonus
will be deemed to be 100% of the Chief Executive's salary and bonus. On
September 22, 1999, all of the Executive's then non-vested stock options will
vest and become immediately exercisable.
8
<PAGE> 9
FILENE'S BASEMENT CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
For the quarter ended August 2, 1997 net sales were $126.3 million, up 5% from
last year's second quarter sales of $120.1 million. Comparable store sales for
the second quarter were down 1% versus the comparable thirteen week period last
year. Net sales for the twenty-six week period of $246.8 million were up 1% from
last year's sales of $244.1 million. Comparable store sales for the six month
period ended August 2, 1997 were down 3% versus the comparable period last year.
The increase in net sales for the thirteen and twenty-six week periods was due
to the opening of two new stores during the first quarter of 1997. The total
number of stores in operation on August 2, 1997 and August 3, 1996 were 45 and
43, respectively. The decrease in comparable store sales resulted primarily from
decreases in sales of children's apparel and dresses, offset by gains in home
goods and suits.
Cost of sales as a percentage of sales was 76.7% and 76.2% for the thirteen and
twenty-six week periods ended August 2, 1997, respectively, compared to 75.8%
and 75.5% for the same periods in the prior year. The increase in cost of sales
as a percentage of sales was primarily attributable to an increase in markdowns.
Selling, general and administrative expenses for the second quarter of 1997 were
$26.9 million, or 21.3% of sales, compared to $25.8 million, or 21.5% of sales,
for the same period last year. For the twenty-six weeks ended August 2, 1997,
selling, general and administrative expenses were $54.5 million, or 22.1% of
sales, compared to $54.1 million, or 22.1% of sales, for the comparable period
last year. The increase in selling, general and administrative expenses for the
thirteen week period was primarily related to the opening of two new stores in
the first quarter of 1997.
Interest expense for the thirteen and twenty-six week periods ended August 2,
1997 was $0.6 million and $1.2 million, respectively, compared to $0.9 million
and $2.2 million, respectively, last year. The decrease in interest expense is
related to the Revolving Credit and Term Loan Agreement entered into in May
1996, which replaced the Amended and Restated Credit and Override Agreement in
existence during the first quarter of 1996. Lower effective interest rates under
the new agreement, combined with lower average outstanding borrowings, resulted
in the decline in interest expense (see Financial Condition, Liquidity and
Capital Resources).
9
<PAGE> 10
FILENE'S BASEMENT CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS(CONTINUED)
- --------------------------------
The Company's effective tax rate for the first half of 1997 was 24% compared to
38% for 1996. The decline in the effective tax rate reflects the realization of
certain tax assets which were not previously expected to be realized.
Net income for the quarter ended August 2, 1997 was $1.2 million, or $.06 per
share, on 21.4 million weighted average shares outstanding, compared to net
income of $1.2 million, or $.06 per share, on 21.0 million weighted average
shares outstanding for the quarter ended August 3, 1996. For the six month
period ended August 2, 1997, net income was $1.8 million, or $.08 per share, on
21.4 million weighted average shares outstanding compared to net income of $1.8
million, or $.08 per share, on 21.0 million weighted average shares outstanding
for the same period last year.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------------------------
On May 23, 1996, the Company entered into a Revolving Credit and Term Loan
Agreement (the "Agreement") as amended June 28, 1996. The Agreement expires on
June 30, 1999 and includes a $65.0 million revolving credit facility and a $10.0
million term loan.
During the six months ended August 2, 1997 average borrowings under the
Agreement were approximately $23.2 million at an average interest rate of 7.95%.
During the same period last year, average borrowings were $39.8 million at an
average interest rate of 9.5%. Excess credit availability at August 2, 1997 was
approximately $24.2 million compared to approximately $13.9 million at August 3,
1996.
The Agreement contains new financial covenants which are less restrictive than
the previous requirements, thereby providing the Company with greater operating
flexibility. The most restrictive covenants of the new agreement mandate minimum
earnings before interest, taxes, depreciation and amortization and a minimum
cash flow to interest ratio for specified periods during the term of the
Agreement. During the twenty-six week period ended August 2, 1997, the Company
was in compliance with all covenants of the Agreement.
10
<PAGE> 11
FILENE'S BASEMENT CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
- ---------------------------------------------------------------
Net cash used in operating activities was $13.1 million for the six months
ended August 2, 1997 versus cash provided of $12.2 million during the same
period last year. The $25.3 million decrease was primarily due to the receipt
of a $9.6 million federal income tax refund during the second quarter of fiscal
1996, $10.5 million of cash received from factors in exchange for standby
letters of credit during the first half of fiscal 1996 and an increase in
merchandise accounts payable in fiscal 1997. Net cash used in investing
activities during fiscal 1997 increased $1.4 million over the comparable period
in fiscal 1996 as a result of increased capital expenditures for the two new
stores, offset by cash proceeds from the sale of leasehold interests. Net cash
provided by financing activities during fiscal 1997 was $16.8 million as
compared to cash used during fiscal 1996 of $9.8 million. The $26.6 million
increase is due to a $19.0 million decrease in long term debt repayments over
last year and a $7.2 million increase in borrowings under the revolving credit
facility.
Short-term trade credit represents a significant source of financing for
inventory purchases and arises from the willingness of vendors to grant extended
payment terms. Merchandise inventories are financed either by the vendors or
third party factors. To date, the Company has experienced an increased level of
trade credit versus the same time last year.
The Company believes that internally generated working capital, existing vendor
and third party factor arrangements and funds available under the Agreement will
be adequate to meet its merchandise inventory and normal operating expense
needs, as well as presently anticipated capital expenditure requirements for the
remainder of the fiscal year. However, the Company's operating results and the
adequacy of its working capital could be adversely affected if, for any reason,
the Company's borrowing base was to become impaired, or otherwise be deemed
ineligible, thereby diminishing the level of available funds. During fiscal
1997, capital expenditures are expected to approximate $15.5 million.
The Company's business is seasonal, reflecting increased consumer demand in the
fall season. The second half of each fiscal year provides a greater portion of
the Company's annual sales and operating profit.
11
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FILENE'S BASEMENT CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
- ---------------------------------------------------------------
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects" and similar
expressions are intended to identify forward-looking statements. Factors which
may cause actual results to differ materially from those indicated by such
forward-looking statements include: (i) economic and weather conditions which
affect the buying patterns of the Company's customers, (ii) actions of the
Company's competitors and the Company's ability to respond to such actions (iii)
the continued support of the Company's numerous providers of goods and services
(iv) the continued success of the Company's efforts to implement planned
strategic initiatives and (v) other factors described in the Company's reports
filed with the Securities and Exchange Commission from time to time.
12
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PART II - OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------ ---------------------------------------------------
The Annual Meeting of Stockholders of Filene's Basement Corp. was held on June
26, 1997, for the purpose of the election of two Class III Directors of the
Company to serve until the year 2000 Annual Meeting of Stockholders or until
their successors are duly elected and qualified. The following sets forth the
results of shareholder votes:
Election of Class III Directors:
Votes in Votes
Favor Withheld
---------- --------
Election of John Eyler 18,464,521 96,600
as Class III Director
Election of Dorsey R. Gardner 18,442,633 118,488
as Class III Director
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits
10.1 Employment Agreement made as of June 2, 1997 with William J.
Carothers.
10.2 Amendment to Employment Agreement made as of August 22, 1997 with Mone
Anathan, III.
11 Statements Re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
A current report on Form 8-K dated June 2, 1997 was filed by the Company
concerning the appointment of W. Jay Carothers as President and Chief
Operating Officer and Mone Anathan, III as Vice Chairman of the Board of
Directors and Chairman of the Executive Committee.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, being also its principal financial
officer.
FILENE'S BASEMENT CORP.
/s/ Steven Siegel
---------------------
Steven Siegel
Executive Vice President
& Chief Financial Officer
DATE: September 12, 1997
14
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EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit Title
- ------- -----
10.1 Employment Agreement made as of June 2, 1997 with William J.
Carothers.
10.2 Amendment to Employment Agreement made as of August 22, 1997 with
Mone Anathan,III
11 Statements Re Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made as of the 2nd day of June, 1997, between Filene's
Basement, Inc. (hereinafter called the "Employer"), and William J. Carothers
(hereinafter called the "Employee").
In consideration of the employment to be provided and the payments to be
made as set forth in this Agreement, it is agreed by and between the parties
hereto as follows:
ARTICLE 1
EMPLOYMENT
1.1 TERM AND DUTIES. The Employer shall employ the Employee, and the Employee
shall serve the Employer, as President and Chief Operating Officer of the
Employer for the Term (as hereinafter defined). During the Term, the Employee
shall perform and discharge, faithfully, diligently and to the best of his
ability, the duties and responsibilities as President and Chief Operating
Officer and in conformity with the directions of the Board of Directors of the
Employer (the "Board") or its designee and shall devote to the performance of
such duties and responsibilities his full time and attention. The Employee shall
be excused from performing any services hereunder during periods of temporary
disability and during vacations in accordance with the Employer's disability and
vacation policies. (See Exhibit A for Vacation Policy). For purposes of this
Agreement, "Term" means the period commencing on July 1, 1997 and ending on
January 31, 2001. Notwithstanding the foregoing, the Employer may, by written
notice to the Employee, elect to extend the Term beyond January 31, 2001, and if
the Employer so elects, the Term shall be extended on the date of such election
and on each day thereafter ("Renewal Date") to the third anniversary of such
Renewal Date unless on or before any Renewal Date the Employer shall give notice
to the Employee that the Term shall not be so extended. (Therefore, if the
Employer, prior to January 31, 2000, shall give notice to the Employee that the
Term shall not be extended, the expiration date of the Term shall remain January
31, 2001. If, however, the Employer gives notice to the Employee on or after
January 31, 2000 that the expiration date of the Term shall not be extended, the
expiration date of the Term shall be the third anniversary of the date such
notice is given.) References to the Term shall be deemed to refer the Term as
extended from time to time. The Employer shall also, acting through the Board,
seek to obtain the Board's nomination of the Employee as a member of the Board,
but the failure of the Employee to be elected as a director by the stockholders
shall not constitute a breach of this Agreement by the Employer.
1.2 COMPENSATION. In consideration the Employee's services during the Term, the
Employer shall pay the Employee cash compensation at an annual rate not less
than
<PAGE> 2
the greater of his current base salary as set forth on EXHIBIT A hereto or the
base salary of the Employee most recently approved by the Board or its designee
("Base Compensation"). The Employee's Base Compensation shall be subject to such
increases as may be approved by the Board or its designee.
1.3 PAYMENT SCHEDULE. The Base Compensation specified in Section 1.2 hereof
shall be payable as current salary, in installments not less frequently than
monthly, and at the same rate for any fraction of a month unexpired at the end
of the Term. Any bonus compensation shall be payable at such time as the
Employer pays bonus compensation to its other senior executives.
1.4 EXPENSES. During the Term the Employer shall be allowed reasonable traveling
expenses commensurate with his position and shall be furnished office space,
assistance and accommodations to the character of his position with the employer
and adequate for the performance of his duties hereunder.
1.5 TERMINATION IN CASE OF DISABILITY. The Employee shall not be in breach of
this Agreement if he shall fail to perform his duties hereunder because of
physical or mental disability. If for a continuous period of 12 months during
the Term the Employee fails to render services to the Employer because of the
Employee's physical or mental disability, the Board or its designee may end the
Term prior to its stated termination date. If there should be any dispute
between the parties as to the Employee's physical or mental disability at any
time, such question shall be settled by the opinion of an impartial reputable
physician agreed upon in writing for the purpose by the parties or their
representatives, or failing agreement within 10 days of a written request
therefor by either party to the other, then one designated by the then Chief
Executive Officer of Massachusetts General Hospital, Boston, Massachusetts. All
expenses related to and including any medical, psychological, or physical test
performed or recommended by such physician shall be borne by Employer. The
written opinion of such physician as to the matter in dispute shall be final
and binding on the parties. In the event of the termination of the Employee's
employment by reason of disability, the Company shall pay the Employee (a) an
amount equal to any Base Compensation through the termination date which is
unpaid as of such termination date, (b) an amount equal to the sum of any
annual bonus unpaid as of such termination date for any year ending prior to
the year in which the termination occurs, and (c) for the year in which such
termination date occurs, an amount equal to the "Prorated Annual Bonus" (which
shall mean that portion of the annual bonus that the Employee would have
earned, if he had remained employed for the entire year, multiplied by a
fraction of which the numerator is the number of days during which the Employee
remained employed in such year and the denominator is 365) .
1.6 TERMINATION IN CASE OF DEATH. The Employee's employment shall terminate upon
his death. In such event the Company shall pay to such person as the Employee
2
<PAGE> 3
shall have designated in a notice filed with the Company, or, if no such person
shall have been designated, to his estate, (a) an amount equal to any Base
Compensation through the termination date which is unpaid as of such termination
date, (b) an amount equal to the sum of any annual bonus unpaid as of such
termination date for any year ending prior to the year in which the termination
occurs, and (c) for the year in which such termination date occurs, an amount
equal to the Prorated Annual Bonus.
1.7 TERMINATION OF EMPLOYMENT WITHOUT CAUSE. If the Employer terminates the
Employee without "Cause" (as defined below) because his services will no longer
be required during the remainder of the Term, the Company shall pay the
Employee (a) if such notice of termination is given prior to January 31, 2000,
the greater of (x) $180,000 or (y) an amount equal to the Base Compensation
payable from the date of Termination through the end of the Term, and (b) if
such termination occurs after January 31, 2000, an amount equal to the Base
Compensation payable from the date of termination through the end of the Term,
such payments to be made in monthly installments by the Company until paid in
full. In addition, the Company shall cause all of the Employee's stock options
to vest and become immediately exercisable in full.
1.8 MITIGATION. If the Employee receives notice from the Employer pursuant to
Section 1.7 hereof, the Employer shall acknowledge by notice to the Employee
that the Employee offered to continue to render services to the Employer in
accordance with the terms hereof and that such offer was rejected, and the
Employee (subject to Section 2.2 and Section 2.3 hereof) shall be free to become
actively engaged with another business and shall use his best efforts to find
other comparable employment. Upon the payment to the Employee of compensation
for employment or other services by any unaffiliated third party, the Employee
shall automatically cease to be an employee of the Employer. The Employee shall
promptly notify the Employer of any such employment or other services and of the
compensation received, to be received or receivable from this subsequent
employer or any such third party. Any amounts received or receivable by the
Employee during the remainder of the Term as a result of his employment by or
services to another employer or third party shall be applied to mitigate and
thereby reduce the amounts payable to the Employee under the provisions of
Section 1.7.
1.9 TERMINATION FOR CAUSE. The Employer may terminate the employment of the
Employee and this Agreement and all of its obligations hereunder, except for
obligations accrued but unpaid to the effective date of termination, for Cause
upon notice given pursuant to this Section. As used in this Agreement, the term
"Cause" shall mean:
3
<PAGE> 4
(a) an intentional act of fraud, embezzlement, theft or any other material
violation of law whether or not in connection with the Employee's duties
or in the course of his employment with the Employer;
(b) intentional wrongful damage to material assets of the Employer;
(c) intentional wrongful disclosure of material confidential information of
the Employer;
(d) intentional wrongful engagement in any competitive activity which would
constitute a material breach of the duty of loyalty; or
(e) intentional breach of any of the Employee's covenants contained in this
Agreement or any stated material employment policy of the Employer.
No act, or failure to act, on the part of an Employee shall be deemed
"intentional" if it was due primarily to an error in judgement or negligence,
but shall be deemed "intentional" only if done, or omitted to be done, (a) by
reason of gross negligence or (b) by the Employee not in good faith and without
reasonable belief that his action or omission was in or not opposed to the best
interest of the Employer. Failure to meet performance standards or objectives of
the Employer, other than by reason of gross negligence, shall not constitute
Cause for purposes hereof.
ARTICLE II
CERTAIN OBLIGATIONS OF THE EMPLOYEE
-----------------------------------
2.1 NO PARTICIPATION IN OTHER BUSINESSES During the Term (except as otherwise
expressly provided in Section 1.8 hereof) the Employee shall not, without the
consent of the Board or its designee, become actively associated with or engaged
in any business other than that of the Employer or a division or affiliate of
the Employer, and he shall do nothing inconsistent with his duties to the
Employer. If the Employee shall breach his obligations under this Section, he
shall promptly reimburse the Employer for any monies paid by the Employer in
connection with his relocation during the Term or in contemplation of the
signing of this Agreement, including, without limitation, any bonus or
relocation expenses paid for or incurred by the Employer, including, without
limitation, carrying costs for property purchased from or on behalf of the
Employee. Any such reimbursement shall be in addition to any other remedy for
breach of this Agreement that the Employer may be entitled to at law or in
equity.
2.2 TRADE SECRETS AND CONFIDENTIAL INFORMATION. Employee agrees to execute and
deliver to the Company the Confidentiality Agreement attached as EXHIBIT B and
further agrees that he shall not (either during the Term or thereafter) without
the consent of the Employer disclose to anyone outside of the Employer, or use
in other than the Employer's business, trade secrets or confidential information
relating to the Employer's business in any way obtained by him while employed by
the Employer
4
<PAGE> 5
2.3 NONCOMPETITION. It is recognized by the Employee and the Employer that
Employee's duties hereunder will entail the receipt of trade secrets and
confidential information, which include not only information concerning the
Employer's current operations, procedures, suppliers and other contacts, but
also its short-range and long-range plans, and that such trade secrets and
confidential information have been developed by the Employer and its affiliates
at substantial cost and constitute valuable and unique property of the Employer.
Accordingly, the Employee acknowledges that the foregoing makes it reasonably
necessary for the protection of the Employer's business interests that the
Employee not compete with the Employer or any of its affiliates during the Term
and during any period in which the Employee is being paid post-termination
compensation (hereinafter the "Noncompete Period"). The Employee shall not,
during his employment by Employer and during the Non Compete Period, have an
investment of $100,000 or more in a Competing Business (as hereinafter defined)
and shall not render any services or assistance to any such Competing Business
in any manner, including, without limitation, as owner, partner, director,
trustee, officer, employee, consultant or in any other capacity. If the Employee
shall breach the covenants contained in this Section 2.3 or in Section 2.2
hereof, the Employer shall have no further obligation to make any payment to the
Employee pursuant to this Agreement and may recover from the Employee all such
damages as it may be entitled to at law or in equity. In addition, the Employee
recognizes that any such breach could cause irreparable injury to the Employer
for which money damages may be inadequate, and therefore consents to Employer's
institution of injunctive relief or other equitable proceedings to protect
Employer's rights.
(a) As used in this Agreement, the Term "affiliate" shall mean, with
respect to a particular person, a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, such person, and a person shall be
"unaffiliated" with another person if such persons are not affiliates with
respect to one another.
(b) As used in this Agreement, the term "Competing Business" shall mean
any business which:
(i) at the time of determination, is substantially
similar to the whole or in a substantial part of the
business conducted by the Employer or any of its divisions
or affiliates;
(ii) at the time of determination, is operating a
store or stores which, during its or their fiscal year
preceding the determination, had aggregate net sales,
including sales in leased and licensed departments, in
excess of $10,000,000, if such store or any of such stores
is or are located in a city or within a radius of 25 miles
from the outer limits of a city where the Employer, or any
of its division's or affiliates, is operating a store or
stores which, during its or their fiscal year preceding the
determination,
5
<PAGE> 6
had aggregate net sales, including sales in leased and
licensed department, in excess of $10,000,000; and
(iii) had aggregate net sales at all its
locations, including sales in leased and licensed
departments and sales by its divisions and affiliates,
during its fiscal year preceding that in which the Employee
made such an investment therein, or first rendered personal
services thereto, in excess of $25,000,000.
2.4 CONFLICTS OF INTEREST. The Employee shall not engage in any activity that
would violate the Employer's Conflict of Interest, Business Ethics Statement or
Code of Conduct applicable to employees of the Employer.
ARTICLE III
CHANGE IN CONTROL
3.1 EFFECT OF CHANGE IN CONTROL. If a Change in Control (as hereinafter defined)
shall occur on or prior to the expiration date of the Term or during any period
in which the Employer was an affiliate of Filene's Basement Corp. (the
"Company"), the Term shall be automatically extended to a date which is three
years from the date on which such Change in Control is consummated, unless the
Employer has given notice to the Employee pursuant to Section 1.7 hereof prior
to such Change in Control. As used in this Agreement, "Change in Control" shall
have the meaning set forth in EXHIBIT C.
3.2 PARACHUTE LIMITATION. Notwithstanding any other provision of this Agreement,
if the aggregate present value of the "parachute payments" to the Employee,
determined under Section 280G(b) of the Internal Revenue Code of 1986, as
amended (the "Code"), is at least three times the "base amount" determined under
such Section 280G, then the Base Compensation otherwise payable under this
Agreement and any other amounts payable hereunder or any other severance plan,
program, policy or obligation of the Employer or any other affiliate thereof
shall be reduced so that the aggregate present value of the parachute payments
to the Employee, determined under such Section 280G, does not exceed 2.99 times
the base amount. In no event, however, shall any benefit provided hereunder be
reduced to the extent such benefit is specifically excluded by Section 280G(b)
of the Code as a "parachute payment" or as an "excess parachute payment." Any
decisions regarding the requirement or implementation of such reductions shall
be made by such tax counsel as may be selected by the Employer at its cost as
acceptable to the Employee.
ARTICLE IV
MISCELLANEOUS
6
<PAGE> 7
4.1 ASSIGNMENT. This Agreement may be assigned by the Employer to any of its
affiliates. This Agreement shall not otherwise be assignable by the Employer
without the consent of the Employee, except that if the Employer shall merge or
consolidate with, or transfer all or any substantial portion of its assets,
including goodwill, to another corporation or other form of business
organization, this Agreement shall (or, in the case of any such transfer, may)
be assigned to and shall bind and run to the benefit of the successor of the
Employer resulting from such merger, consolidation or transfer. The Employee may
not assign, pledge or encumber his interests in this Agreement or any part
hereof.
4.2 GOVERNING LAW. This Agreement has been executed on behalf of the Employer by
an officer of the Employer located in the Commonwealth of Massachusetts. This
Agreement and all questions arising in connection herewith shall be governed by
the internal substantive laws of the Commonwealth of Massachusetts. The Employer
and the Employee each consent to the jurisdiction of, and agree that any
controversy between them arising out of this Agreement shall be brought in, the
United States District Court for the District of Massachusetts, or such other
court venued within Massachusetts as may have subject matter jurisdiction over
the controversy. If both parties agree any dispute may be submitted to
arbitration under rules established by The American Arbitration Association.
4.3 SEVERABILITY. If any portion of this Agreement is held to be invalid or
unenforceable, such holding shall not affect or invalidate any other portion of
this Agreement.
4.4 ENTIRE AGREEMENT. This Agreement (together with the Exhibits hereto)
comprises the entire agreement between the parties hereto and, as of the date
hereof, supersedes, cancels and annuls any and all prior agreements between the
parties hereto. This Agreement may not be modified, renewed or extended orally,
but only by a written instrument referring to this Agreement and executed by the
parties hereto.
4.5 GENDER AND NUMBER. Words in the masculine herein may be interpreted as
feminine or neuter, and words in the singular as plural, and vice versa, where
the sense requires.
4.6 NOTICES. Any notice or consent required or permitted to be given under this
Agreement shall be in writing and shall be effective when given by personal
delivery or five business days after being sent by certified U.S. mail, return
receipt requested, to the Secretary of Filene's Basement, Inc. at its principal
place of business in Wellesley, Massachusetts or to the Employee at his last
known address as shown on the records of the Employer.
7
<PAGE> 8
4.7 WITHHOLDING TAXES. the Employer may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes
as shall be required pursuant to any law or governmental regulation
or ruling.
IN WITNESS WHEREOF, the parties hereto have hereunto and to a duplicate hereof
set their signatures as of the day and year first above written.
FILENE'S BASEMENT, INC.
By: /s/ Mone Anathan, III
-------------------------------------
President
-------------------------------------
Title
EMPLOYEE
/s/William J. Carothers
-------------------------------------
William J. Carothers
8
<PAGE> 9
EXHIBIT A
---------
- - BASE SALARY: $560,000
- - CASH ANNUAL BONUS: Up to 75% of Base Salary in accordance with the
Employer's bonus program and based on performance against quantifiable and
non-quantifiable goals as agreed upon by the parties in writing prior to each
performance period.
- - LIFE INSURANCE: Same coverage as provided for the Employer's CEO to be
provided by and paid for by Employer.
- - EQUITY: 300,000 stock options with four year vesting.
- - RELOCATION: The Employer shall pay the Employee a one-time, lump-sum
relocation amount of $100,000 and shall also pay for all reasonable and
customary moving and relocation expenses in accordance with Employer's moving
policy set forth in EXHIBIT A-1. The Employer recognizes that it may take
considerable time to sell Employee's current residence and purchase future
residence and shall provide Employee with either temporary housing or a
temporary housing allowance agreed upon by both parties. Further, Employer
understands that a bridge loan may be needed to facilitate the purchase of a new
residence and shall provide such loan or make reasonable accommodations with
local lenders to provide such loan in an amount not to exceed $500,000.
- - BENEFITS/PERKS: Employer shall provide health, welfare and retirement
benefits during the Term. The health benefits are to be substantially similar to
Employee's current coverage (21/75 Club, Metrolife number 33575 and Empire State
Blue Cross/Blue Shield major medical policy #33575) as set forth in EXHIBIT A-2.
The Employer shall also provide short and long term disability plans providing
benefits and compensation commensurate with Employee's position and compensation
level.
- - COUNTRY CLUB: It is understood and incumbent upon the Employer to provide
Employee with the financial means necessary to allow Employee to join and become
an active full member of a local country club of his choice. Expenses covered
include initiation, membership, capital charges and all other fees assessments,
deposits, etc., up to a maximum of $25,000.
- - VACATION: Notwithstanding any Employer policy or precedent, the Employee
shall be entitled to four weeks vacation each year of the contract.
<PAGE> 10
- - RELOCATION: Without Employee's consent, Employee shall not be relocated
outside a twenty-five mile radius of the workplace to which Employee was
assigned.
- - SEVERANCE POLICY GUIDELINES:
If Employee's employment is terminated by the Employer pursuant to Section 1.7:
Employer-paid COBRA: 12 months
For a period of 12 months, the Employer shall continue to pay the
premium for the agreed upon Life Insurance amount as well as any
supplemental short term and long term disability insurance.
<PAGE> 11
EXHIBIT B
Initial Compliance Statement
----------------------------
Conflict of Interest Policy
---------------------------
Policy Against Trading on Inside Information
--------------------------------------------
Software Code of Ethics
-----------------------
Annual Compliance Statement to be submitted to the Vice President of Human
Resources of the Corporation each year by the employee as defined by such
Policy(s).
To: Executive Vice President Administration and General Counsel
I hereby certify that I have reviewed the Filene's Basement, Inc. Policy
regarding Conflict of Interests, and Policy Against Inside Trading, that I am
personally in compliance therewith and that I have no knowledge that any other
employee of the Corporation is not in
compliance therewith.
In addition, I have read Filene's Basement, Inc.'s Software Code of Ethics. I am
fully aware of the Corporation's software policies and agree to abide by those
policies.
Name: W. Jay Carothers /s/ William J. Carothers
---------------------- -------------------------------
Please Print Signature
Location: 29 - Corporate Office 6/23/97
---------------------- -------------------------------
Date
<PAGE> 12
EXHIBIT C
---------
Definition of Change in Control
-------------------------------
"Company," as used herein, shall mean Filene's Basement Corp. (or any
successor), which is the parent of the Employer.
"Change in Control" shall mean the occurrence of any one of the following
events:
(a) any 'person' as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "1934 Act") (other than (i) the
Company, (ii) any subsidiary of the Company, (iii) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or of any subsidiary of the Company, or (iv) any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the
'beneficial owner' (as defined in Section 13(d) of the 1934 Act), together
with all Affiliates and Associates (as such terms are used in Rule 12b-2 of
the General Rules and Regulations under the 1934 Act) of such person,
directly or indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding
securities;
(b) the stockholders of the Company approve a merger or consolidation
of the Company with any other company, other than (1) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any subsidiary of the Company, at least 65% of the combined
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no 'person' (with the exception given and the
method of determining 'beneficial ownership' used in clause (a) of this
definition) acquires more than 50% of the combined voting power of the
Company's then outstanding securities;
(c) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (b) or
(d) of this definition) whose election by the Company's stockholders was
approved by a
<PAGE> 13
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved cease for any reason to
constitute at least a majority thereof; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
For purposes of this Exhibit C, the term "Board" means the Board of
Directors of the Company and the term "Stock" means the common stock of the
Company.
<PAGE> 1
EXHIBIT 10.2
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
Amendment dated this 22nd day of August, 1997 to the Amended and Restated
Agreement made as of the 5th day of June 1992 by and among Filene's Basement
Corp., a Massachusetts corporation ("FBC"), Filene's Basement, Inc., a
Massachusetts corporation ("FBI"; each of FBC and FBI are sometimes referred to
herein as the "Employer" or the "Company"), and Mone Anathan, III (the
"Executive").
Recitals
--------
WHEREAS, the Executive and the Employer entered into the Amended and
Restated Agreement referenced above (the "Employment Agreement"), pursuant to
which the Executive served as President and Chief Operating Officer of the
Company, and
WHEREAS, the executive and the Employer desire to amend the Employment
Agreement so as to continue the Executive's employment on a less than full-time
basis and in a different capacity,
NOW THEREFORE, the parties hereto agree as follows:
1. SECTION 1 is hereby deleted and the following inserted in lieu thereof:
"1. EMPLOYMENT. The Employer shall employ the Executive and the Executive shall
perform services for and continue in the employment of the Employer for the
period (the "Employment Period") commencing on September 1, 1997 and ending
August 31, 2000 (the "Expiration Date"), unless such employment shall have been
sooner terminated as hereinafter set forth."
2. SECTION 2 is hereby deleted and the following inserted in lieu thereof:
"POSITION AND DUTIES" The Executive shall serve as Vice Chairman of the Board of
Directors and Chairman of the Executive Committee of FBC and FBI. In such
positions, the Executive shall assist and advise the chief Executive Officer and
the Board of Directors with respect to acquisitions, divestitures, new concept
developments, real estate policies and short-term and long-term strategies and
shall be accountable to, and shall have such other powers, duties and
responsibilities, consistent with his positions, as may from time to time be
prescribed by the Board of Directors of the Company. The Executive shall perform
and discharge, faithfully, diligently and to the best of his ability, such
duties and responsibilities. The Executive shall not be a full-time employee of
the Company, but shall during each year of the Employment Period devote up to
the following percentage of his working time and efforts to the business
<PAGE> 2
and affairs of the Company:
Annual Period Percentage
------------- ----------
September 1, 1997 through August 31, 1998 ("Year") 75%
September 1, 1998 through August 31, 1999 ("Year") 50%
September 1, 1999 through August 31, 2000 ("Year") 50%
Notwithstanding the foregoing, nothing herein contained shall be deemed to
prevent or limit the right of the Executive (a) to make, without prior approval
of the Board of Directors of the Company, any investments in any company or
business, PROVIDED, HOWEVER, that no investment may be made, without prior
approval of the Board of Directors, in any competitor of the Company unless such
investment (i) is a passive investment and does not exceed 3% of the outstanding
capital stock of such competitor corporation (or interests of another competitor
entity), or (ii) such stock (or interests) does not exceed $1,000,000, whichever
is less, and in connection with which investments in such competitor the
Executive is not obligated or required to, and shall not in fact, devote any
managerial efforts or (b) to serve as a director (or in a similar capacity) of
any business entity or participate in charitable or community activities or in
trade or professional organizations, except that the Board of Directors of the
Company shall have the right to prohibit the Executive from serving as a
director of any competitor business entity and shall have the right to limit
such participation whenever the Board shall reasonably believe that the time
spent on such activities infringes upon the time required by the Executive for
the performance of his duties under this Employment Agreement.
3. SUBSECTIONS (a) AND (b) OF SECTION 3 are hereby deleted and the
following inserted in lieu thereof:
"(a) SALARY. During Year 1 of the Employment Period, the Executive shall receive
an annual salary ("Salary") equal to 75% of the annual salary payable to the
Chief Executive Officer of the Company ("CEO's Annual Salary") for that year and
during each of Year 2 and Year 3, the Executive shall receive a Salary equal to
50% of the CEO's Annual Salary for each of such years, payable monthly in
advance. Except as otherwise provided in this Employment Agreement, the Salary
shall be pro-rated for any period of service less than a full year.
(b) INCENTIVE BONUS. In accordance with the Company's long-term and annual bonus
programs, the Executive shall receive for Year 1 bonuses equal to 75% of the
bonuses payable to the Chief Executive Officer of the Company ("CEO's Bonuses")
for that year, and for each of Year 2 and Year 3 bonuses equal to 50% of the
CEO's Bonuses for each of such years.
<PAGE> 3
4. SUBSECTION (c) OF SECTION 5 is hereby amended by deleting the words "on
a full-time basis" and inserting in lieu thereof the following: "on a part-time
basis as provided in Section 2 of this Agreement."
5. SUBSECTION (e)(i)(a)(II) OF SECTION 5 is hereby amended by deleting the
second and third paragraphs of subclause II and inserting in lieu thereof the
following:
"The amount of the Annualized Bonus shall be the product of (x) the amount
of the annual bonus paid in respect of the last year for which an annual bonus
was paid ("Last Bonus Year Amount") preceding the year in which the Termination
Date occurs (or 75% of the Last Bonus Year Amount if the Termination Date occurs
in Year 1 or 50% of the Last Bonus Year Amount if the Termination Date occurs in
Year 2 or Year 3) and (y) a fraction, the numerator of which is the number of
months in the year in which the Termination Date occurs that have elapsed prior
to the Termination Date (counting partial months as full months) and the
denominator of which is twelve."
6. SUBSECTION (e)(i)(b)(I) OF SECTION 5 is hereby amended by deleting the
first paragraph of subclause I and inserting in lieu thereof the following:
"(I) SALARY AND ANNUAL BONUS. An amount equal to the sum of (x) the
Executive's Termination Salary (as defined below), multiplied by a fraction, the
numerator of which is the number of months (counting partial months as full
months) from the Termination Date through the Expiration Date and the
denominator of which is twelve, and (y) his Annualized Bonus."
7. SUBSECTION (e) OF SECTION 5 is hereby amended by inserting at the end of
subsection (e) after clause (iii) thereof two new paragraphs, as follows:
"In addition, after termination of the Executive's employment (x) prior to
the Expiration Date by reason of termination (i) by the Company other than for
cause, (ii) because of his incapacity as set forth in subsection (c) of this
Section 5, or (iii) by the Executive for Good Reason, or (y) because of the
occurrence of the Expiration Date, whichever occurs earlier, the Company shall
provide the Executive with the following termination benefits commencing
immediately after the Termination Date:
(A) An office at the Company's facilities and secretarial assistance until the
earlier of the date the Executive reaches age 65 (or such later date as the
Company and the Executive determine);
(B) Discounts equivalent to the customary discounts provided for principal
executive officers of the Company for purchases made by the Executive at the
<PAGE> 4
Company's retail stores for the remainder of the Executive's life;
(C) Life insurance coverage of $1,000,000 on the life of the Executive under the
Company's contributory life insurance program, at the Company's expense, for the
remainder of the Executive's life;
(D) Health insurance benefits for the remainder of the Executive's life, at the
Company's expense, reasonably equivalent to the health insurance benefits
required to be provided during the Employment Period pursuant to Section
3(d)(vi) of this Employment Agreement; and
(E) In measuring the Executive's compensation for purposes of determining his
supplemental retirement benefits under the Company's supplemental executive
retirement plan ("SERP"), the Company shall include as credited service the
employment of the Executive pursuant to this Amendment during the Employment
Period and shall base such benefits on the five years of highest compensation
(rather than the five consecutive years of highest compensation) during the ten
years prior to the Termination Date, and the Company shall cause the SERP to be
so amended to reflect the foregoing.
"Notwithstanding anything herein to the contrary, in the event that, after
termination of his employment for any of the reasons set forth in the preceding
paragraph, the Executive is employed by any other employer or employers
("Subsequent Employers") which provide life insurance coverage and/or health
insurance benefits to the Executive as an employee, the benefits and/or the
amounts payable pursuant to subparagraphs (C) and (D) of the preceding paragraph
shall be reduced by the life insurance benefits and health insurance benefits,
as the case may be, which are provided by such Subsequent Employers and only so
long as they are so provided; except that nothing herein shall require the
Executive to seek other employment or mitigation as set forth in Section 8 of
this Employment Agreement."
8. SECTION 6 is hereby amended by adding a new sentence at the end of
Section 6, as follows:
"Notwithstanding anything herein to the contrary, the Company shall cause all of
Executive's stock options to vest and become exercisable in full on September
22, 1999."
9. In the event that a Change of Control (as defined in the "Change in
Control" described in Section 10 of this Employment Agreement) occurs at any
time prior to September 1, 2000, for purposes of determining payments to be made
pursuant to Section 1(a) of the Change in Control Agreement, the Executive's
"base salary" and the Executive's "Average Salary" shall be equal to the base
salary and Average Salary of
<PAGE> 5
the Chief Executive Officer of the Company, rather than the salary payable to
the Executive as a part-time employee pursuant to Section 3(a) of this
Employment Agreement.
10. Section 11 is hereby deleted and the following inserted in lieu
thereof:
"11. NOTICES. All notices and other
communications hereunder shall be in
writing and shall be deemed given when
delivered personally or three days after
being mailed by registered or certified
mail (return receipt requested) to the
parties at the following addresses (or at
such other address for a party as shall be
specified by like notice):
(a) if to either FBC or FBI:
Filene's Basement Corp.
40 Walnut Street
Wellesley, MA 02181
Attention: Vice President and General Counsel
with copies to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Paul P. Brountas
(b) if to the Executive,
39 Linden Square
Wellesley, MA 02181
with copies to:
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109-2887
Attention: Richard E. Floor, Esq.
<PAGE> 6
11. Except as specifically amended in this Amendment, the Employment
Agreement and the Change in Control Agreement shall continue to remain in full
force and effect and are hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of this date first above written.
FILENE'S BASEMENT CORP.
By: /s/ Samuel J. Gerson
-------------------------------
Title: Chief Executive Officer
FILENE'S BASEMENT, INC.
By: /s/ Samuel J. Gerson
-------------------------------
Title: Chief Executive Officer
MONE ANATHAN, III
/s/ Mone Anathan, III
-----------------------------------
<PAGE> 1
Exhibit 11
FILENE'S BASEMENT CORP. AND SUBSIDIARIES
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended Thirteen Weeks Ended
------------------------ ------------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number
of common shares
outstanding 20,674,946 20,507,120 20,727,311 20,513,651
Assumed exercise of stock
options net of treasury
shares deemed to have
been repurchased at
average market price
for the period 713,190 129,599 641,927 448,042
---------- ---------- ---------- ----------
Weighted average
primary shares
outstanding 21,388,136 20,636,719 21,369,238 20,961,693
Assumed exercise of
stock options net of
treasury shares deemed to
have been repurchased
at the end of the
period market price -- 314,043 -- 20,014
---------- ---------- ---------- ----------
Weighted average shares
outstanding 21,388,136 20,950,762 21,369,238 20,981,707
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> FILENE'S BASEMENT CORP. AND SUBSIDIARIES FINANCIAL DATA SCHEDULE FOR
THE TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-2-1997
<PERIOD-END> AUG-2-1997
<CASH> 475
<SECURITIES> 0
<RECEIVABLES> 5,355
<ALLOWANCES> 0
<INVENTORY> 104,114
<CURRENT-ASSETS> 115,323
<PP&E> 135,251
<DEPRECIATION> (72,934)
<TOTAL-ASSETS> 200,045
<CURRENT-LIABILITIES> 101,003
<BONDS> 4,989
0
0
<COMMON> 208
<OTHER-SE> 89,437
<TOTAL-LIABILITY-AND-EQUITY> 200,045
<SALES> 246,780
<TOTAL-REVENUES> 246,780
<CGS> 188,116
<TOTAL-COSTS> 188,116
<OTHER-EXPENSES> 55,185
<LOSS-PROVISION> 92
<INTEREST-EXPENSE> 1,176
<INCOME-PRETAX> 2,303
<INCOME-TAX> 553
<INCOME-CONTINUING> 1,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,750
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
