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 October 30, 1999
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 02481
(Address of principal executive offices)
(Zip Code)
(617) 348-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No_____
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No Not yet applicable X
(The Company and its subsidiary filed voluntary petitions pursuant to
provisions of Chapter 11 of the United States Bankruptcy Code on August
23, 1999. No plan has been filed with the court.)
The number of shares of common stock outstanding as of November 30,
1999 was 21,000,256 shares.
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FILENE'S BASEMENT CORP.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets as of 3
October 30, 1999, January 30, 1999
and October 31, 1998
Consolidated Statements of Operations 4
for the thirteen weeks ended
October 30, 1999 and October 31, 1998
Consolidated Statements of Operations 5
for the thirty-nine weeks ended
October 30, 1999 and October 31, 1998
Consolidated Statements of Cash Flows 6
for the thirty-nine weeks ended
October 30, 1999 and October 31, 1998
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of 12
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 18
Item 6 - Exhibits and Reports on Form 8-K 18
2
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FILENE'S BASEMENT CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
October 30, January 30, October 31,
1999 1999 1998
---------- ---------- ----------
ASSETS (unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 621 $ 830 $ 920
Inventories 74,032 105,773 128,281
Other current assets 16,451 11,529 14,461
------- ------- -------
Total current assets 91,104 118,132 143,662
Property, plant and equipment, net 54,271 61,279 54,804
Beneficial operating lease rights, net 11,197 12,183 12,512
Intangible assets, net and other 13,794 11,107 9,963
------- ------- -------
$170,366 $202,701 $220,941
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,282 $ 56,090 $ 48,718
Accrued expenses 40,683 27,539 27,278
Short-term debt 45,107 38,561 42,400
Current portion of long-term debt - - 2,000
Obligations under capital leases 10 553 445
------- ------- -------
Total current liabilities 114,082 122,743 120,841
Reserve for store closings - 2,857 2,875
Deferred revenue 1,973 1,665 1,707
Long-term debt - - 10,500
Obligations under capital leases 372 2,648 2,439
Liabilities subject to compromise(Note 3) 54,382 - -
Stockholders' equity:
Common stock, $.01 par value,
70,000,000 shares authorized,
21,075,256, 21,047,244 and
21,011,880 shares issued 211 211 210
Additional paid-in capital 87,147 87,141 87,063
Accumulated deficit (87,396) (14,159) (4,678)
Accumulated other comprehensive income (389) (389) -
Treasury stock, 75,000 shares (16) (16) (16)
------- ------- -------
Total stockholders' equity (deficit) (443) 72,788 82,579
------- ------- -------
$170,366 $202,701 $220,941
======= ======= =======
See Notes to Consolidated Financial Statements.
3
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FILENE'S BASEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended
(Unaudited)
(in thousands, except per share amounts)
October 30, October 31,
1999 1998
---------- ----------
Net sales $128,912 $154,772
Cost of sales, including buying,
receiving and occupancy costs 105,897 116,905
------- -------
Gross profit 23,015 37,867
Selling, general and administrative
expenses 37,500 36,620
Interest expense, net 4,711 1,226
Amortization of intangible assets and
beneficial operating lease rights 367 367
------- -------
Loss before reorganization items
and income taxes (19,563) (346)
Reorganization items (Note 4) 32,280 -
------- -------
Loss before income taxes (51,843) (346)
Income tax benefit (Note 5) - (74)
------- -------
Net loss $(51,843) $ (272)
======= =======
Basic and diluted loss $ (2.47) $ (0.01)
per share (Note 6) ======= =======
Weighted average number of common shares
outstanding:
Basic and fully diluted 21,001 20,937
======= ========
See Notes to Consolidated Financial Statements.
4
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FILENE'S BASEMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirty-nine Weeks Ended
(Unaudited)
(in thousands, except per share amounts)
October 30, October 31,
1999 1998
---------- ----------
Net sales $409,712 $413,815
Cost of sales, including buying,
receiving and occupancy costs 327,214 313,281
------- -------
Gross profit 82,498 100,534
Selling, general and administrative
expenses 113,403 96,717
Interest expense, net 8,951 2,739
Amortization of intangible assets and
beneficial operating lease rights 1,100 1,100
------- -------
Loss before reorganization items
and income taxes (40,956) (22)
Reorganization items (Note 4) 32,280 -
------- -------
Loss before income taxes (73,236) (22)
Income tax benefit (Note 5) - (5)
------- -------
Net loss $(73,236) $ (17)
======= =======
Basic and diluted loss $ (3.49) $ 0.00
per share (Note 6) ======= =======
Weighted average number of common shares
outstanding:
Basic and fully diluted 20,993 20,916
======= ========
See Notes to Consolidated Financial Statements.
5
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FILENE'S BASEMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-nine Weeks Ended
(Unaudited)
(in thousands)
October 30, October 31,
1999 1998
---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(73,236) $ (17)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Reorganization items 32,280 -
Depreciation and amortization 10,879 10,308
Decrease (increase) in inventories 5,937 (35,260)
Increase in other current assets (4,922) (3,299)
Increase in accounts payable 17,763 6,020
Increase in accrued expenses
and other liabilities 7,036 602
Other 308 (125)
-------- --------
Net cash used in operating
activities before reorganization items (3,955) (21,771)
Reorganization items:
Professional fees paid (182) -
Proceeds from inventory liquidation 15,374 -
-------- --------
Net cash provided by (used in) operating
activities 11,237 (21,771)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,817) (15,671)
Other (2,801) (1,236)
------- -------
Net cash used in investing activities (17,618) (16,907)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings, net 6,546 39,300
Payments of capital lease obligation (380) (307)
Proceeds from common stock issuance 6 130
------- -------
Net cash provided by
financing activities 6,172 39,123
------- -------
Net increase (decrease) in cash
and cash equivalents (209) 445
Cash and cash equivalents:
Beginning of period 830 475
------- -------
End of period $ 621 $ 920
======= =======
See Notes to Consolidated Financial Statements.
6
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Filene's Basement Corp. have been prepared in accordance with the
American Institute of Certified Public Accountants Statement of
Position 90-7: "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code" ("SOP 90-7") and generally accepted accounting
principles applicable to a going concern, which principles, except as
otherwise disclosed, assume that assets will be realized and
liabilities will be discharged in the normal course of business. The
Company and its subsidiary filed petitions for relief under Chapter 11
of the United States Bankruptcy Code ("Chapter 11") on August 23, 1999
(the "Filing"). The Company is presently operating its business as a
debtor-in-possession subject to the jurisdiction of the United States
Bankruptcy Court for the Eastern District of Massachusetts (the
"Bankruptcy Court")
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 or those normally made in the
Company's 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. The results of the
periods ended October 30,1999 and October 31, 1998 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.
The Company's ability to continue as a going concern is dependent upon
confirmation of the Company's plan of reorganization by the Bankruptcy
Court, the ability to maintain compliance with debt covenants under the
DIP Facility, achievement of profitable operations, maintenance of
adequate financing, and the resolution of the uncertainties of the
reorganization case discussed in Note 2. The Company experienced
significant operating losses in 1999.
7
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. REORGANIZATION CASE
In the Chapter 11 case, substantially all liabilities as of the date of
the Filing are subject to resolution under a plan of reorganization to
be voted upon by the Debtors' creditors and stockholders and confirmed
by the Bankruptcy Court. Schedules have been filed by the Debtors with
the Bankruptcy Court setting forth the assets and liabilities of the
Debtors as of the date of the Filing as shown by the Debtors'
accounting records. Differences between amounts shown by the Debtors
and claims filed by creditors will be investigated and reconciled. The
amount and settlement terms for such disputed liabilities are subject
to allowance by the Bankruptcy Court. Ultimately the adjustment of the
total liabilities of the Debtors remains subject to a Bankruptcy Court
approved plan of reorganization, and, accordingly, the amount of such
liabilities is not presently determinable. Pursuant to the Bankruptcy
Code, the Debtors presently possess the exclusive right to file a plan
of reorganization during the period through April 30, 2000.
Under the Bankruptcy Code, the Debtors may elect to assume or reject
real estate leases, employment contracts, personal property leases,
service contracts and other executory pre-petition contracts, subject
to Bankruptcy Court approval.
The Company intends to operate its business during the reorganization
process and entered into a $135 million debtor-in-possession financing
facility on August 23, 1999. The Bankruptcy Court approved the
financing facility on September 15, 1999. The Company believes this new
facility will allow it 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.
Accordingly, the accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a going
concern. However, the Company's operating results and adequacy of its
working capital could be adversely affected if, for any reason, the
Company's borrowing base was to become impaired, or portions thereof
were otherwise deemed ineligible, thereby diminishing the level of
available funds. The Company is subject to various covenants under the
new financing facility including minimum eligible inventory levels and
maximum loans outstanding to eligible inventory ratios.
8
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. REORGANIZATION CASE (continued)
The Company accounts for long-lived and intangible assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of." The Company reviews its intangible assets
for events or changes in circumstances that might indicate the carrying
amount of the assets may not be recoverable. The Company assesses the
recoverability of the assets by determining whether the amortization of
such long-lived and intangible assets can be recovered over their
remaining lives through projected undiscounted future cash flows. The
amount of impairment, if any, is measured based on projected discounted
future cash flows using a discount rate reflecting the Company's
average cost of funds.
The Company is currently developing a plan of reorganization to submit
to the Bankruptcy Court. As no plan has yet been submitted, the
Company is unable to accurately estimate its future cash flows and,
therefore, has not applied SFAS No. 121 as of October 30, 1999. Future
strategic actions could result in additional store closings and
material restructuring charges and impairment losses.
As the result of the bankruptcy filing, the Company's stock has been
delisted from the NASDAQ National Market System and now trades on the
Electronic Bulletin Board. The Company is appealing the delisting.
3. LIABILITIES SUBJECT TO COMPROMISE
Liabilities subject to compromise are subject to future adjustments
depending on Bankruptcy Court actions and further developments with
respect to disputed claims. Liabilities subject to compromise were as
follows (in 000's):
Accounts payable $45,572
Accrued expenses 8,810
-------
$54,382
=======
4. REORGANIZATION ITEMS
The Company provided for or incurred the following expense items during
the period ended October 30, 1999 directly associated with the Chapter
11 reorganization proceedings and the resulting restructuring of its
operations (in 000's):
9
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. REORGANIZATION ITEMS (continued)
Write-down of inventory $10,430
Write-off of leasehold improvements
& fixtures 11,423
Obligations for leased properties 6,030
Retention costs 2,259
Employee severance and other closing costs 1,956
Professional fees 182
-------
$32,280
=======
Included in accrued expenses at October 30, 1999 are reorganization
items of $18.2 million incurred related to the nineteen stores closed
in the third quarter, of which $7.9 million represent expenses that had
previously been accrued.
5. INCOME TAXES
The Fiscal 1999 income tax benefit was reduced to zero by an increase
in the income tax valuation allowance necessary to bring the deferred
tax asset to a level, that would more likely than not, be realized.
6. EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share", basic earnings per share is computed
using the weighted average number of shares outstanding during each
period.
Diluted earnings per share is computed using the weighted number of
outstanding shares plus the weighted average number of dilutive common
equivalent shares outstanding during each period. During the thirty-
nine and thirteen week periods ended October 30, 1999 and October 31,
1998, there were no dilutive common equivalent shares included in
diluted earnings per share. Options for the thirteen and thirty-nine
weeks ended October 30, 1999 to purchase shares of 3,107,738 and
3,054,215, respectively, and options for the thirteen and thirty-nine
weeks ended October 31, 1998 to purchase shares of 3,016,147 and
2,933,255, respectively, are not included in the computation of diluted
earnings per share because to do so would have been antidilutive for
those periods.
7. SEGMENT INFORMATION
In Fiscal 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which establishes
standards for reporting information about operating segments in annual
financial statements and requires selected information about segments
in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and
services, and
10
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FILENE'S BASEMENT CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SEGMENT INFORMATION (continued)
geographic areas. Operating segments are defined as components of an
enterprise about which separate financial information is available that
is evaluated regularly by the chief operating decision-maker or
decision making group, in deciding how to allocate its resources and in
assessing performance. Based on the standards applied in SFAS No. 131,
the Company has only one reportable segment.
11
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company and its subsidiary filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code ("Chapter 11") on
August 23, 1999 (the "Filing"). The Company is presently
operating its business as a debtor-in-possession subject to the
jurisdiction of the United States Bankruptcy Court for the
Eastern District of Massachusetts (the "Bankruptcy Court").
RESULTS OF OPERATIONS
For the quarter ended October 30, 1999 net sales were $128.9
million, down 16.7% from last year's third quarter sales of
$154.8 million. Comparable store sales for the third quarter were
down 23.0% versus last year. Net sales for the thirty-nine week
period ended October 30, 1999 were down 1.0% versus last year
while comparable store sales were down 11.3%. The comparable
store decreases were primarily attributable to disappointing
sales, which were mostly due to insufficient quantities of
inventory resulting from vendor concerns regarding the financial
position of the Company. The decrease in net sales for the
thirteen and thirty-nine week periods ended October 30, 1999 was
also due to the closing of two stores in September 1999 and
seventeen stores in October 1999. These decreases were partially
offset by an increase in net sales due to the opening of eight
new "Aisle 3" stores, four in both the first and third quarters
of 1999. As of October 30, 1999, the Company operated 32
traditional Filene's Basement stores and eight Aisle 3 weekend
warehouse stores, primarily in the Northeast and Midwest, versus
51 traditional Filene's Basement stores at October 31, 1998.
Cost of sales as a percentage of sales was 82.1% and 79.9% for
the thirteen and thirty-nine week periods ended October 30, 1999
compared to 75.5% and 75.7% for the corresponding periods in the
prior year. These increases were primarily attributable to an
increase in markdowns associated with the liquidation and closing
of the 19 stores in the third quarter of 1999. In addition, the
increase was due to an increase in buying, selling and occupancy
costs, as a percentage of sales, due to the decline in same store
sales. (See Outlook)
Selling, general and administrative expenses for the third
quarter of 1999 were $37.5 million, or 29.1% of sales, compared
to $36.6 million, or 23.7% of sales, for the same period last
year. The increase in selling, general and administrative
expenses, in absolute terms, was primarily the result of opening
four new "Aisle 3" stores in the first quarter of 1999 and an
additional four new "Aisle 3" stores in the third quarter of
1999. As a percentage of sales, the increase was primarily
related to the decrease in
12
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
comparable sales noted above combined with an increase in
depreciation expense from the new stores and capital expenditures
related to Year 2000 compliance. In addition, there was an
increase of approximately $0.8 million in pre-opening costs
relating to the new "Aisle 3" stores in the third quarter of
1999. The Company adopted Statement of Position 98-5, "Accounting
for Start-Up Activities", in fiscal 1998 which requires the
Company to expense the costs of all start-up activities as
incurred. The Company had historically amortized these costs
over the remainder of the fiscal year. These increases were
offset by decreases in advertising expense in markets effected by
the closing of stores and as a result of strategic elimination of
promotional events. Selling, general and administrative expenses
for the thirty-nine weeks ended October 30, 1999 were $113.4
million, or 27.7% of sales, compared to $96.7 million, or 23.4%
of sales, in the prior year period.
Net interest expense for the quarter ended October 30, 1999 was
$4.7 million compared to $1.2 million last year. Net interest
expense for the thirty-nine weeks ended October 30, 1999 was $9.0
million, compared to $2.7 million last year. The increase in net
interest expense for the third quarter was primarily due to a
$2.6 million write-off of deferred financing costs relating to
the Company's old financing agreement. The remaining increase was
due to both higher average outstanding borrowings and higher
interest rates in the third quarter of 1999. (See Financial
Condition, Liquidity and Capital Resources.)
Reorganization items of $32.3 million incurred in the third
quarter of 1999 relate to the Chapter 11 proceedings and related
restructuring and are discussed in Note 4.
Net loss for the quarter ended October 30, 1999 was $51.8
million, or $2.47 per share, on 21.0 million weighted average
shares outstanding, compared to a net loss of $0.3 million, or
$0.01 per share, on 20.9 million weighted average shares
outstanding for the quarter ended October 31, 1998. Net loss for
the thirty-nine weeks ended October 30, 1999 was $73.2 million,
or $3.49 per share, on 21.0 million weighted average shares
outstanding, compared to a net loss of $17,000 on 20.9 million
weighted average shares outstanding for the thirty-nine weeks
ended October 31, 1998.
13
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
On August 23, 1999, the Company entered into the Debtor-In-
Possession Credit Agreement (the "DIP Agreement") with GE Capital
as agent and Paragon Capital LLC as oversight agent. The DIP
Agreement consists of two Tranches, Tranche A of $85 million
which bears interest at a rate, at the Company's option, of prime
plus 1.25% or LIBOR plus 2.75%, and Tranche B of $50 million,
which bears interest at a rate of 14.25%, and to the extent
advances are made against real estate collateral, 18%. The DIP
Agreement expires on the earlier of February 23, 2001 or the
first effective date of any plan of reorganization. The DIP
Agreement contains covenants which require maximum capital
expenditures for specified periods during the term, minimum
eligible inventory levels and maximum loans outstanding to
eligible inventory ratios. In December 1999, the DIP
Agreement was amended to include changes resulting from the
Bankruptcy Court's final approval, to revise the definition of
"change of control", and to postpone until fiscal year 2000 the
requirement to have an earnings before interest, taxes,
depreciation and amortization covenant.
During the thirty-nine weeks ended October 30, 1999, average
borrowings under the DIP Agreement and prior agreements were
approximately $44.3 million at an average interest rate of 8.97%.
During the same period last year, average borrowings were $35.7
million at an average interest rate of 7.88%. Excess credit
availability at October 30, 1999 was approximately $37.6 million
compared to $14.7 million at October 31, 1998.
Net cash used in operating activities before reorganization items
was $4.0 million for the thirty-nine weeks ended October 30, 1999
versus cash used of $21.8 million during the same period last
year. The $17.8 million decrease in cash used in operations was
primarily due to the Company's inventories decreasing $5.9
million in 1999 compared with an increase in 1998 of $35.3
million. The decrease in inventories was the result of reduced
purchases of inventory as the result of the tightening of vendor
credit. In addition, accounts payable and accrued expenses
increased $18.2 million due to the Chapter 11 proceeding. While
under the protection of the Bankruptcy Code, most claims against
the Company existing at the time of the Bankruptcy filing are
stayed pending reorganization of the Company. These increases in
cash provided by operations were offset by the $40.3 million
decrease in earnings (loss) before taxes, depreciation, and
amortization from $10.3 million for the thirty-nine weeks ended
October 31, 1998 to $(30.0) million for the thirty-nine weeks
ended October 30, 1999.
14
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
Net cash used in investing activities during 1999 increased $0.7
million over the comparable period in 1998 primarily as a result
of deferred financing costs incurred in connection with the DIP
Agreement entered into on August 23, 1999. During fiscal 1999,
capital expenditures are expected to approximate $19 million.
Net cash provided by financing activities during the nine months
ended October 30, 1999 was $6.2 million as compared to $39.1
million in the same period of the prior year. The $32.9 million
decrease was primarily due to paydown of the line of credit with
proceeds from the sale of inventories in the stores closed during
the third quarter of 1999.
The Company believes it will be able 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. In addition,
because of uncertainty regarding the outcome of the bankruptcy
case and the effect of any bankruptcy reorganization plan on the
interest of the Company's creditors and stockholders, the
ultimate impact on the Company's results of operations and
financial position cannot be determined.
YEAR 2000
The Company utilizes software and related technologies throughout
its business that will be affected by the "Year 2000" problem,
which is common to most corporations, and concerns the inability
of information systems, primarily computer software programs, to
properly recognize and process date sensitive information as the
year 2000 approaches.
While it is not possible at this time to predict the total cost
of this effort, the investment, whether leased, purchased or
expensed, in new software and equipment needed to achieve "Year
2000" compliance and enhance existing systems, was originally
estimated at approximately $31.0 million, of which $21.2 million
had been incurred through October 30, 1999. This estimate is
expected to be
15
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES(CONTINUED)
revised as a result of the Chapter 11 filing and the closing of
stores. The expense portion of the total project is estimated at
$11.9 million of which $2.2 million and $2.9 million is expected
to be incurred in fiscal 1998 and fiscal 1999, respectively.
Through October 30, 1999, $4.4 million has been expensed. Funding
requirements have been incorporated into the Company's capital
and operating plans and are not expected to have a material
adverse impact on the Company's financial condition or liquidity.
The Company will complete it's Year 2000 testing in mid-December
and believes its Year 2000 program will effectively minimize
disruption to the Company's operations, however, there can be no
assurance that the Company will be successful in this respect.
OUTLOOK
As noted above, on August 23, 1999, the Company filed a voluntary
petition with the United States Bankruptcy Court for the Eastern
District of Massachusetts in Boston, MA seeking relief under
Chapter 11 of the United States Bankruptcy Code. The filing was
principally due to a lack of trade support and an interruption in
the receipt of inventories. The Company intends to operate its
business during the reorganization process and has entered into a
$135 million debtor in possession financing facility. The Company
believes this facility will provide sufficient funding for a
timely flow of merchandise during the reorganization process.
During the third quarter, as part of its reorganization process,
the Company announced the closing of sixteen stores in addition
to the three previously announced during the second quarter of
1999. Of these closed stores, two stores were closed in
September 1999 and seventeen were turned over to the liquidation
company in October 1999. At October 30, 1999, the Company had
recorded a charge for reorganization items of $32.1 million
relating to the stores turned over to the liquidation company in
October 1999.
In November 1999, the Company announced the closing of an
additional eighteen stores, which were turned over to the
liquidation company in November 1999. The Company expects to
record an additional charge for reorganization items in the
fourth quarter of 1999 of approximately $21.7 million principally
relating to the stores turned over to the liquidation company in
November 1999.
The Company has an exclusive period to file a reorganization plan
that expires on April 30, 2000.
16
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FILENE'S BASEMENT CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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, among
others: (i) Bankruptcy Court actions or proceedings related to
the bankruptcy, (ii) economic and weather conditions which affect
the buying patterns of the Company's customers, (iii) actions of
the Company's competitors and the Company's ability to respond to
such actions, (iv) the continued support of the Company's
numerous vendors and third party factors in the form of short-
term trade credit through extended payment terms and letters of
credit, (v) a decrease in the Company's available funds due to
the impairment or ineligibility of a significant portion of its
borrowing base, (vi) the continued success of the Company's
efforts to implement planned strategic initiatives, (vii)
unexpected store closings and the related higher markdowns
associated with inventory liquidations, (viii) any unanticipated
impact of the "Year 2000" problem and (ix) the extent to which
the Aisle 3 concept is successful.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
As reported in its report on Form 8-K dated August 26, 1999, Filene's
Basement Corp. and its subsidiary filed voluntary petitions for relief
under Chapter 11 of the United States Bankruptcy Code on August 23,
1999.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 First Amendment to Debtor in Possession Credit Agreement, among
Filene's Basement Inc., debtor and debtor in possession, as borrower,
the other parties signatory hereto, as credit parties, the lenders
signatory hereto from time to time, as lenders, Paragon Capital LLC,
as oversight agent, and General Electric Capital Corporation, as
agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
On August 10, 1999, the Company filed an 8-K announcing the
closing of a $125 million credit facility.
On August 26, 1999, the Company filed an 8-K announcing the
voluntary filing of a petition for reorganization under Chapter 11 of
the United States Bankruptcy Code.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, being also its
principal financial officer.
FILENE'S BASEMENT CORP.
/s/ Steven Siegel
--------------------------
Steven Siegel
Executive Vice President
& Chief Financial Officer
DATE: December 14, 1999
19
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit Title
4.1 First Amendment to Debtor in Possession Credit Agreement, among Filene's
Basement Inc., debtor and debtor in possession, as borrower, the
other parties signatory hereto, as credit parties, the lenders
signatory hereto from time to time, as lenders, Paragon Capital
LLC, as oversight agent, and General Electric Capital Corporation,
as agent.
27 Financial Data Schedule
EXHIBIT 4.1
FIRST AMENDMENT
TO DEBTOR IN POSSESSION CREDIT AGREEMENT
FIRST AMENDMENT, dated as of December __, 1999 (this
"Amendment"), to the Credit Agreement referred to below among
FILENE'S BASEMENT, INC., a Massachusetts corporation, as debtor
and debtor in possession ("Borrower"), the other Credit Parties
signatory thereto, GENERAL ELECTRIC CAPITAL CORPORATION, a New
York corporation, as Agent ("Agent") and as Lender, PARAGON
CAPITAL LLC, a Delaware limited liability company, as oversight
agent ("Oversight Agent") and as Lender, and the other Lenders
party thereto.
W I T N E S S E T H
WHEREAS, Borrower, FILENE'S BASEMENT CORP., a
Massachusetts corporation, as debtor and debtor in possession
("Holdings"), Agent, Oversight Agent, and Lenders are parties to
that certain Debtor in Possession Credit Agreement, dated as of
August 23, 1999 (including all annexes, exhibits and schedules
thereto, and as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, pursuant to the Final Order, dated
September 16, 1999, the Credit Parties, Agent, Oversight Agent
and Lenders have agreed to amend certain provisions of the Credit
Agreement in the manner, and on the terms and conditions,
provided for herein;
NOW THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1
1 Definitions. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the
Credit Agreement or Annex A thereto.
2 Recitals. The first recital of the Credit
Agreement is hereby amended by deleting the phrase "Chapter 11
Case No. ___-_________" and inserting in lieu thereof the phrase
"Chapter 11 Case Nos. 99-16984 through 16985 - WCH."
3 Amendment to Section 1.5 of the Credit
Agreement. Section 1.5 of the Credit Agreement is hereby amended
by deleting the percentage "0.5%" appearing as the Applicable
Unused Facility Margin and inserting in lieu thereof the
percentage ".375%".
4 Amendment to Section 1.9(c) of the Credit
Agreement. Section 1.9(c) of the Credit Agreement is hereby
amended by adding the following sentences after the second
sentence thereof:
Notwithstanding the preceding sentence, the
Applicable Percentage shall be: (a) one percent
(1%) in the case of a prepayment in connection with
a sale or liquidation of all or substantially all of
the Credit Parties' assets within one hundred eighty
(180) days of the Closing Date; and (b) one-half
percent (0.5%) in the case of a prepayment in
connection with a sale or liquidation of all or
substantially all of the Credit Parties' assets
which occurs more than one hundred eighty (180) days
after the Closing Date. Additionally, no prepayment
fee shall be due under this Section 1.9(c) if the
Obligations are being refinanced by "exit financing"
provided by the Lenders in connection with the
Credit Parties' reorganization and emergence from
bankruptcy; provided, however, if the Lenders are
repaid under this Agreement after failing to match a
reasonably competitive offer for a refinancing of
the Obligations received in writing by the Credit
Parties and forwarded to Agent, the Applicable
Percentage shall be (aa) one percent (1%) in the
case of a prepayment within one hundred eighty (180)
days of the Closing Date, and (bb) one-half percent
(.5%) in the case of a prepayment which occurs more
than one hundred eighty (180) days after the Closing
Date. The Credit Parties agree to use good faith
efforts to negotiate first with the Lenders (as
opposed to any other prospective lenders) an exit
financing facility in connection with the Credit
Parties emergence from bankruptcy, and further agree
that any or all of the Lenders shall have fifteen
(15) days from the date of the Lenders' receipt of
any written offer delivered to the Credit Parties to
make a good faith proposal to match or better such
offer.
5 Amendment to Section 1.11(a) of the Credit
Agreement. Section 1.11(a) of the Credit Agreement is hereby
amended by deleting the first sentence thereof and inserting in
lieu thereof the following sentences:
So long as no Default or Event of Default shall have
occurred and be continuing, (i) payments consisting
of proceeds of Accounts received in the ordinary
course of business shall be applied to first, the
Swing Line Loan, second to interest on the Tranche A
Revolving Loan, third to principal on the Tranche A
Revolving Loan, fourth to interest on the Tranche B
Revolving Loan, fifth to principal on the Tranche B
Revolving Loan; (ii) payments consisting of proceeds
of Inventory received in the ordinary course of
business shall be applied to first, the Swing Line
Loan, second, ratably to interest on the Tranche A
Revolving Loan and the Tranche B Revolving Loan and
last, ratably to principal on the Tranche A
Revolving Loan and the Tranche B Revolving Loan;
(iii) voluntary prepayments shall be applied as
determined by Borrower, subject to the provisions of
Section 1.3(a); and (iv) mandatory prepayments shall
be applied as set forth in Sections 1.3(c).
6 Amendment to Section 1.11(c) of the Credit
Agreement. Section 1.11(c) of the Credit Agreement is hereby
amended by (i) deleting the word "and" appearing at the end of
clause (ii) thereof, (ii) inserting a semi-colon at the end of
clause (iii) thereof and (iii) adding the following subsection at
the end of such Section 1.11(c):
(iv) at any time, Tranche A Revolving Lenders shall
be entitled to recover first from any proceeds as a
result of the collection of Borrower's Accounts.
7 Amendment to Section 1.18 of the Credit
Agreement. Section 1.18 of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
1.18. Priority of Obligations and Lenders' Liens.
(a) The priority of Lenders' Liens on the Collateral
shall be as set forth in the Interim Order and the Final
Order.
(b) All Obligations shall constitute administrative
expenses of Borrower in the Chapter 11 Case, with
administrative priority and senior secured status under
Sections 364(c)(1)and 364(d) of the Bankruptcy Code.
Subject to the Senior Claims and the Professional Fee
Carve-Out up to the Professional Fee Carve-Out Amount (as
such terms are defined below), such administrative claim
shall have priority over any and all administrative
expenses, including, without limitation, the kinds
specified in, or ordered pursuant to, Sections 105, 326,
330, 331, 503(b), 507(a), 507(b), 726 or any other
provision of the Bankruptcy Code and shall be pari passu
with any allowed Administrative Rent Claim (as defined in
the Final Order) provided that nothing hereunder shall be
read to subordinate the various liens and security
interests granted to the Agents and the Lenders pursuant
to the Final Order to any Administrative Rent Claim. The
liens and security interests granted to Agents and
Lenders, and the priorities accorded to the Obligations
shall have the priority and senior secured status
afforded by Section 364(d)(1) of the Bankruptcy Code (all
as more fully set forth in the Final Order) senior to all
claims and interests other than the Senior Claims and the
Professional Fee Carve-Out up to the Professional Fee
Carve-Out Amount (as such terms are defined herein).
(c) Notwithstanding anything herein to the contrary,
so long as an Event of Default shall not have occurred
and be continuing, the Credit Parties shall be permitted
to pay administrative expenses of the kind specified in
Section 503(b) of the Bankruptcy Code incurred in the
ordinary course of business of the Credit Parties and
court-approved administrative expenses for compensation
and reimbursement of expenses allowed and payable under
Sections 330 and 331 of the Bankruptcy Code, as the same
may be due and payable, within the parameters of the
Final Order and the amounts to be advanced pursuant to
this Agreement, and further provided such amounts are
included in the Budget. As used in the preceding
sentence, "court-approved administrative expenses" shall
include payments made pursuant to any Court-approved
procedure for monthly or other payment of administrative
expenses of professionals and Committee members. Other
than the Senior Claims, no lien or priority status
greater than that given to the Agents and the Lenders
under the Final Order shall be granted while any portion
of the Loans, the Letters of Credit or the Commitments
under this Agreement remains outstanding, absent the
consent of the Agents. The liens and priority claims
granted to the Agents and the Lenders pursuant to
Sections 363(e), 364(c)(1) and 364(d) of the Bankruptcy
Code shall be subject to unpaid allowed fees and expenses
incurred on and after the Petition Date (net of any
available retainer) by any examiner or Chapter 7 or
Chapter 11 trustee appointed or elected in the Chapter
11 Case, and professionals retained under Section 327 or
1103 of the Bankruptcy Code by the Credit Parties, any
examiner or Chapter 7 or Chapter 11 trustee appointed or
elected in the Chapter 11 Case or the Committee (the
"Bankruptcy Professionals"), allowed reasonable and
necessary expenses of the Committee, and any statutorily
mandated costs and fees of the United States Trustee and
the Clerk of the Bankruptcy Court including, without
limitation, those pursuant to 28 U.S.C. 1930(a) with
respect to the Chapter 11 Case (collectively, the
"Professional Fee Carve-Out") up to a maximum aggregated
amount not exceeding $1,000,000 (the "Professional Fee
Carve-Out Amount"). For purposes of this Section
1.18(c), the Professional Fee Carve-Out shall not include
(i) any other claims that are or may be senior to or pari
passu with any claims upon the Professional Fee Carve-
Out, and (ii) any fees and/or expenses of the Bankruptcy
Professionals incurred in connection with the
commencement or continuation of any suit, motion, action
or other proceeding challenging the extent, validity,
perfection, enforceability or priority of the Agents' or
Lenders' claims or liens arising under or in connection
with the Pre-Petition Loan Agreement.
8 Amendment to Section 2.1(h) of the Credit
Agreement. Section 2.1(h) of the Credit Agreement is hereby
amended by deleting the phrase "the Carve-Out Expenses up to" and
inserting in lieu thereof the phrase "allowed claims with respect
to."
9 Amendment to Section 6.7 of the Credit
Agreement. Section 6.7 of the Credit Agreement is hereby amended
by deleting in the last sentence thereof the phrase "Carve out
Expenses up to the Reserve Amount" and inserting in lieu thereof
the phrase "Professional Fee Carve-Out up to the Professional Fee
Carve-Out Amount."
10 Amendment to Section 6.8 of the Credit
Agreement. Section 6.8 of the Credit Agreement is hereby amended
by (i) deleting in clause (c) thereof the phrase Disclosure
Schedule 6.8 and inserting in lieu thereof the phrase "Disclosure
Schedule 6.8(a)", (ii) deleting the text of clause (f) and
inserting in lieu thereof the phrase "the closing of those Stores
identified on Disclosure Schedule 6.8(b) and the disposition of
all leasehold interests related thereto and assets located
therein", (iii) deleting the text of clause (g) and inserting in
lieu thereof the phrase the closing of additional Stores and the
disposition of all leasehold interests related thereto and assets
located therein upon ten (10) Business Days' notice to Agents,
provided however that from the Amendment Effective Date through
and including December 15, 1999 such notice period shall be five
(5) Business Days, and (iv) deleting in clause (h) the phrase
"(and with respect to leases subject to a leasehold mortgage in
favor of Agent" and further deleting in clause (h) the last
parenthetical in such clause (h) and inserting in lieu thereof
the phrase "as such NLV is reasonably determined by Agents".
11 Amendment to Section 9.1(d) of the Credit
Agreement. Section 9.1(d) of the Credit Agreement is hereby
amended by deleting in the last sentence thereof the phrase "in
compliance with the representations contained in Section 3.4(c)"
and inserting in lieu thereof the phrase "in a manner consistent
with the provisions of Sections (r) and (s) of Annex E of the
Credit Agreement."
12 Amendment to Section 11.3 of the Credit
Agreement. Section 11.3 of the Credit Agreement is hereby
amended by (i) inserting in the first sentence thereof after the
term "Agents" the phrase "and all Lenders party hereto on the
Closing Date," and (ii) inserting in the second sentence thereof
after the term"Agents" the phrase "and all Lenders party hereto
on the Closing Date."
13 Definition of Carve-Out Expenses. The
definition of the term "Carve-Out Expenses" appearing in Annex A
of the Credit Agreement is hereby deleted.
14 Definition of Material Adverse Effect. The
definition of the term "Material Adverse Effect" appearing in
Annex A of the Credit Agreement is hereby amended by (i) deleting
in clause (a) thereof the phrase "as compared to the Projections
attached hereto as Schedule 3.4(C)" and inserting in lieu thereof
the phrase "as compared to the Short Term Projections and the
Long Term Projections required to be delivered pursuant to
Sections (r) and (s) of Annex E of the Credit Agreement," and
(ii) deleting in the second sentence thereof the phrase
"Projections attached hereto as Disclosure Schedule 3.4(B)" and
inserting in lieu thereof the phrase "Short Term Projections and
the Long Term Projections required to be delivered pursuant to
Sections (r) and (s) of Annex E of the Credit Agreement."
15 Definition of Tranche B Borrowing Base. The
definition of the term "Tranche B Borrowing Base" appearing in
Annex A of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
"Tranche B Borrowing Base" shall mean, as of any
date of determination by Agents, from time to time, an amount
equal to the sum at such time of:
(a) up to the greater of (i) eighty-five percent
(85%) of Borrower's Eligible Inventory valued on a
first-in, first-out basis (at the lower of cost or
market), or (ii) one hundred percent (100%) of the
Net Retail Liquidation Value of Borrower's Eligible
Inventory, plus (b) fifty percent (50%) of the
aggregate amount of Documentary Letters of Credit
issued and outstanding in connection with the
purchase of otherwise Eligible Inventory, plus (c)
eighty five (85%) of the book value of Borrower's
Eligible Accounts, plus, (d) up to the lesser of (i)
$15,000,000 or (ii) fifty percent (50%) of the NLV
of Eligible Leasehold Real Estate, minus (e) the
Tranche A Borrowing Base, minus any Reserves
established by Agents at such time, provided
however, that with respect to Advances on Eligible
Inventory, at no time shall such Advances exceed one
hundred percent (100%) of the Net Retail Liquidation
Value of Borrower's Eligible Inventory
16 Definition of Change of Control. The definition
of the term "Change of Control" appearing in Annex A of the
Credit Agreement is hereby amended by deleting the text of clause
(e) thereof and inserting in lieu thereof the following: Samuel
Gerson or Steven Siegel shall cease to act under any
circumstances as officers of Borrower performing duties
essentially the same as those performed on the Closing Date.
17 Amendment of Maximum Capital Expenditures
covenant. The Maximum Capital Expenditures covenant set forth in
Annex G to the Credit Agreement is hereby amended by deleting the
parenthetical contained therein and inserting in lieu thereof the
following new parenthetical:
(or with respect of the Fiscal Months ending on or
before November 30, 1999, the period commencing on
August 1, 1999 and ending on the last day of such
Fiscal Month).
18 Amendment to Minimum EBITDA Covenant. The
Minimum EBITDA covenant set forth in Annex G to the Credit
Agreement is hereby amended in its entirety to read as follows:
Borrower shall deliver to Agents on or before
December 15, 1999 a business operating plan which reflects the
closing of additional Stores and Borrower's operating plan with
respect to Stores which shall continue to remain open. Borrower
and Agents shall use their reasonable best efforts to establish
monthly Minimum EBITDA levels on or before December 27, 1999.
The Minimum EBITDA levels to be tested shall commence with the
Fiscal Month ending on or about February 26, 2000. Borrower and
Agents shall act reasonably and in good faith in establishing
such levels. Upon such levels being agreed to in writing by
Borrower and Agents, they shall be deemed to be incorporated by
reference herein as part of this document as if fully stated
herein.
19 Amendment to Fee Letters to the Credit
Agreement. Exhibit B-1 (the Form of GE Fee Letter) and Exhibit B-
2 (the Form of Paragon Fee Letter) are hereby amended by
replacing such Exhibits with Exhibit B-1 and Exhibit B-2 in the
form attached hereto.
20 Amendment to Disclosure Schedule 6.8 to the
Credit Agreement. Disclosure Schedule 6.8 is hereby amended by
replacing such Disclosure Schedule 6.8 with Disclosure Schedule
6.8(a) and Disclosure Schedule 6.8(b) in the form attached
hereto.
21 Representations and Warranties. To induce
Agents and Lenders to enter into this Amendment, the Credit
Parties make the following representations and warranties to
Agents and Lenders:
(a) The execution, delivery and performance of this
Amendment and the performance of the Credit Agreement, as amended
by this Amendment (the "Amended Credit Agreement"), by each
Credit Party: (a) are within such Person's corporate power; (b)
have been duly authorized by all necessary or proper corporate
and shareholder action; (c) do not contravene any provision of
such Person's charter or bylaws; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental
Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or
permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such
Person or any of its property is bound; (f) do not result in the
creation or imposition of any Lien upon any of the property of
such Person other than those in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; and (g) do
not require the consent or approval of any Governmental Authority
or any other Person.
(b) This Amendment has been duly executed and
delivered by or on behalf of each Credit Party.
(c) Each of this Amendment and the Amended Credit
Agreement constitutes a legal, valid and binding obligation of
such Credit Party, enforceable against each Credit Party in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditor's rights generally
and general equitable principles.
(d) No Default or Event of Default has occurred and
is continuing.
(e) The representations and warranties of the
Credit Parties contained in the Credit Agreement and each other
Loan Document shall be true and correct on and as of the
Amendment Effective Date with the same effect as if such
representations and warranties had been made on and as of such
date, except that any such representation or warranty which is
expressly made only as of a specified date need be true only as
of such date.
22 No Other Amendments. Except as expressly
amended herein, the Credit Agreement and the other Loan Documents
shall be unmodified and shall continue to be in full force and
effect in accordance with their terms. In addition, except as
specifically provided herein, this Amendment shall not be deemed
a waiver of any term or condition of any Loan Document and shall
not be deemed to prejudice any right or rights which Agent, for
itself and Lenders, may now have or may have in the future under
or in connection with any Loan Document or any of the instruments
or agreements referred to therein, as the same may be amended
from time to time.
23 Outstanding Indebtedness; Waiver of Claims.
Each of the Credit Parties hereby acknowledges and agrees that as
of December 19, 1999 the aggregate outstanding principal amounts
of the Tranche A Revolving Loan and the Tranche B Revolving Loan
are $29,966,573 and $10,015,771, respectively, and that such
principal amounts are payable pursuant to the Credit Agreement
without defense, offset, withholding, counterclaim or deduction
of any kind. Each Credit Party hereby waives, releases, remises
and forever discharges Agents, Lenders and each other Indemnified
Person from any and all claims, suits, actions, investigations,
proceedings or demands, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute
or common law of any kind or character, known or unknown, which
any Credit Party ever had, now has or might hereafter have
against Agents or Lenders which relates, directly or indirectly,
to any acts or omissions of Agents, Lenders or any other
Indemnified Person on or prior to the Amendment Effective Date.
24 Expenses. Each Credit Party hereby reconfirms
its respective obligations pursuant to Sections 1.9 and 11.3 of
the Credit Agreement and the Amended Credit Agreement and
pursuant to the GE Capital Fee Letter and the Paragon Fee Letter,
as the case may be, to pay and reimburse the Agents and the
Lenders party to the Credit Agreement on the Closing Date, for
all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred in connection with the
negotiation, preparation, execution and delivery of this
Amendment and all other documents and instruments delivered in
connection herewith.
25 Effectiveness. This Amendment shall become
effective (the "Amendment Effective Date") only upon satisfaction
in full in the reasonable judgment of Agents of each of the
following conditions:
(a) Amendment. Agent shall have received facsimile
copies of this Amendment duly executed and delivered by Lenders
and each Credit Party with six (6) original signature pages of
this Amendment to be delivered by Lenders and each Credit Party
within one week of the date hereof.
(b) Representations and Warranties. The
representations and warranties of or on behalf of the Credit
Parties in this Amendment shall be shall be true and correct on
and as of the Amendment Effective Date.
(c) Court Approval. The Bankruptcy Court shall have
entered an order approving this Amendment, in form and substance
satisfactory to the Lenders, and from which no appeal has been
timely filed or if timely filed, no stay pending appeal shall
have been granted.
26 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
27 Counterparts. This Amendment may be executed by
the parties hereto on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute
one and the same instrument.
28 Entire Agreement. This First Amendment to
Debtor-in-Possession Credit Agreement sets forth the entire
agreement of the parties with respect to the transactions
contemplated hereby. No prior negotiations or discussions shall
limit, modify or otherwise affect the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed and delivered as of the day
and year first above written.
FILENE'S BASEMENT, INC.,
Debtor and Debtor in Possession
By: /s/ Steven R. Siegel
Steven R. Siegel,
Executive Vice President
and Chief Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ James P. Hogan
Name: James P. Hogan
Title: Duly Authorized Signatory
PARAGON CAPITAL LLC, as
Oversight Agent and Lender
By: /s/ Andrew Moser
Name: Andrew Moser
Title: President and CEO
B III CAPITAL PARTNERS, L.P., as
Lender
By: DDJ CAPITAL III, LLC, its general
partner
By: DDJ CAPITAL MANAGEMENT LLC,
Manager
By: /s/ Judy K. Mencher
Name: Judy K Mencher
Title: Member
The undersigned Credit Party
hereby (i) acknowledges and
consents to the amendment to
the Credit Agreement effected
by this Amendment and
(ii) confirms and agrees that
its obligations under its
Guaranty shall continue
without any diminution thereof
and shall remain in full force
and effect on and after the
effectiveness of this
Amendment.
ACKNOWLEDGED, CONSENTED and
AGREED to as of the date first
written above.
FILENE'S BASEMENT CORP.,
Debtor and Debtor in
Possession
By:/s/ Steven R. Siegel________
Name:__Steven R. Siegel________
Title:_Executive Vice President
and Chief Financial Officer
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<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> OCT-30-1999
<CASH> 621
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<RECEIVABLES> 10,733
<ALLOWANCES> 1,287
<INVENTORY> 74,032
<CURRENT-ASSETS> 91,104
<PP&E> 125,256
<DEPRECIATION> 70,985
<TOTAL-ASSETS> 170,366
<CURRENT-LIABILITIES> 114,082
<BONDS> 372
0
0
<COMMON> 211
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<TOTAL-LIABILITY-AND-EQUITY> 170,366
<SALES> 409,712
<TOTAL-REVENUES> 409,712
<CGS> 327,214
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<OTHER-EXPENSES> 146,657
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<INTEREST-EXPENSE> 8,951
<INCOME-PRETAX> (73,236)
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