<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 7, 1996
-------------------
The Caldor Corporation
-------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-10745 06-1282044
- -------------------------- ---------------- -----------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation File No. Identification No.)
20 Glover Avenue, Norwalk, Connecticut 06856-5620
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
(203) 846-1641
------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS.
A. WARREN D. FELDBERG EMPLOYMENT AGREEMENT.
On June 7, 1996, the Bankruptcy Court approved the employment agreement dated as
of April 15, 1996, as amended on June 7, 1996, between the Registrant and
Warren D. Feldberg (collectively, the "Agreement"), pursuant to which Mr.
Feldberg will serve as President and Chief Operating Officer of the Registrant
and was designated a director of the Registrant, subject to continued election
by its stockholders. The Agreement provides for an initial three year term of
employment and continues for successive periods of one year each, unless
terminated by the Registrant or Mr. Feldberg upon not less than 180 days written
notice prior to the expiration of the then applicable term of employment.
The Agreement provides for an annual base salary of $900,000 per annum with
increases at the discretion of the Board of Directors. Mr. Feldberg will receive
a lump sum cash bonus of $750,000. In addition, on the date the Registrant's
plan of reorganization (the "Plan of Reorganization") becomes effective in
accordance with its terms (the "Effective Date"), Mr. Feldberg will be paid an
amount equal to (i) 35% of his annual base salary then in effect plus (ii) up to
52.5% of his annual base salary depending upon the level of the Registrant's
achievement as determined under the Company's Performance Retention Program
approved by the Bankruptcy Court by order dated March 27, 1996; and six months
following the Effective Date, Mr. Feldberg will be paid an additional amount
equal to the amount paid on the Effective Date (the "Retention Payments"). The
Retention Payments will be made only if, at the time that they are payable, Mr.
Feldberg is employed by the Registrant, or, if not then employed, Mr. Feldberg's
employment was terminated (i) by the Registrant without cause (as defined in the
Agreement) or (ii) by Mr. Feldberg for Good Reason for Resignation (as defined
in the Agreement). Mr. Feldberg will be entitled to participate in any cash
bonus arrangements, including the Performance Incentive Plan ("PIP"), applicable
to his position during the term of his employment. However, notwithstanding any
limitations contained in the PIP, Mr. Feldberg will receive a minimum annual
amount each year, from the date on which he commences employment with the
Registrant through the Effective Date, equal to 50% of the maximum amount
payable to him under the PIP for any fiscal year irrespective of the financial
performance of the Registrant, and will have the opportunity to be paid up to
the additional 50% depending upon the attainment of certain financial
performance goals by the Registrant under the PIP.
If the Registrant elects not to renew the Agreement, then he will be entitled to
receive, within 30 days after termination, a lump sum severance payment equal to
twelve (12) multiplied by the sum of (i) 1/12 of his annual base salary in
effect at the time of such expiration plus (ii) 1/12 of 100% of his Target Bonus
Opportunity (as defined in the Agreement) for the fiscal year of the Registrant
in which such expiration occurs (the sum of (i) plus (ii), as measured as of the
time of the applicable expiration or termination under the Agreement, the
"Monthly Severance Amount"). Upon termination by the Registrant without cause
(as defined in the Agreement) or by Mr. Feldberg for Good Reason for Resignation
(as defined in the Agreement), the severance payment would be equal to (i) the
Monthly Severance Amount as of the date of such
2
<PAGE> 3
termination, multiplied by (ii) the greater of (a) the number of full calendar
months remaining in his then current term of employment and (b) twelve (12);
provided that if he terminates his employment by virtue of a Good Reason for
Resignation relating to failure of the Registrant to maintain officer and
director insurance, the severance payment will be reduced by one-half. If Mr.
Feldberg terminates his employment (or, in certain circumstances, is dismissed)
following the occurrence of certain "change in control" events specified in the
Agreement, then he will be entitled to receive, within 30 days after
termination, in cash, as severance, a lump sum payment equal to the excess of
2.99 times (or in certain circumstances 1.55 times) his "base amount" over the
"present value" of any other "parachute payments" that he has received or to
which he is entitled ("base amount," "present value," and "parachute payments"
have the meanings set forth in Section 280G of the Internal Revenue Code of
1986, as amended, except that "parachute payments" is determined without regard
to whether or not they equal or exceed three times Mr. Feldberg's "base
amount"). The obligations of the Registrant under the Agreement are secured by a
$3.9 million standby letter of credit.
This summary does not purport to be complete and is qualified in its entirety by
reference to the employment agreement and the amendment thereto, copies of
which are attached hereto as Exhibits 99.1 and 99.2, respectively.
3
<PAGE> 4
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
99.1 Employment Agreement dated as of April 15, 1996
between the Registrant and Warren D. Feldberg
("the Employment Agreement")
99.2 Amendment dated June 7, 1996 to the Employment
Agreement between the Registrant and Warren D.
Feldberg
</TABLE>
4
<PAGE> 5
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.
THE CALDOR CORPORATION
(Registrant)
Date: June 18, 1996 By: /s/ Bennett S. Gross
--------------------
Bennett S. Gross
Vice President
5
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page Number
- -------------- ----------- -----------
<S> <C>
99.1 Employment Agreement dated as of April 15, 1996
between the Registrant and Warren D. Feldberg
("the Employment Agreement")
99.2 Amendment dated June 7, 1996 to the Employment
Agreement between the Registrant and Warren D.
Feldberg
</TABLE>
6
<PAGE> 1
Exhibit 99.1
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of April, 1996 by and between The
Caldor Corporation, a Delaware corporation and debtor-in-possession under
Chapter 11 of the Federal Bankruptcy Code, with principal offices at 20 Glover
Avenue, Norwalk, Connecticut 06856 (hereinafter referred to as the "Company"),
and Warren D. Feldberg, with a permanent residence located at 75 Buttrick's Hill
Road, Concord, Massachusetts (hereinafter referred to as the "Employee").
W I T N E S S E T H
WHEREAS, the Company desires that the Employee shall be employed by the
Company, and the Employee is desirous of such employment, upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
1. Employment. The Company shall employ the Employee, and the Employee
shall serve the Company and its subsidiaries (the "Subsidiaries"), upon the
terms and conditions hereinafter set forth.
2. Term. The employment of the Employee by the Company hereunder shall
commence on the date (the "Approval Date") of entry of an order of approval of
this Agreement by the United States Bankruptcy Court for the Southern District
of New York (the "Bankruptcy Court") and, unless sooner terminated in the manner
as hereinafter provided, shall terminate on the third anniversary of the
Approval Date; provided, however,
<PAGE> 2
that the term of this Agreement shall be renewed for additional periods of one
year each unless and until either party shall give the other party written
notice not less than 180 days prior to the expiration of the then applicable
term of its intention not to renew. Following the giving of such notice, the
Employee shall cooperate with the Company in phasing in his successor and no
modification in the duties or title of the Employee resulting from the phase-out
of the Employee or the phase-in of his successor shall be deemed to constitute
"Good Reason for Resignation" or a ground for resignation under Paragraph 13b
hereof.
3. Duties.
a. During the term of his employment hereunder, the Employee
shall serve as the President and Chief Operating Officer of the Company with
such duties commensurate with his position as may be assigned to him by the
Chief Executive Officer. The Employee shall serve, faithfully and to the best of
his ability, subject to the direction and control of the Board of Directors and
in accordance with the lawful practices and policies of the Company.
b. As soon as reasonably practicable following the Approval
Date, the Employee shall be elected to the Board of Directors of the Company, to
serve until the next annual meeting of stockholders at which Directors are
elected. Although it is understood that the right to elect Directors of the
Company is by law vested in the stockholders of the Company, subject to his
continued election by the stockholders, the Employee will serve as a Director of
the Company at all times during the term of his employment.
2
<PAGE> 3
c. During the term of his employment hereunder, the Employee
shall devote his full business time, energy and skill to such employment and
shall not, without the prior written approval of the Company, directly or
indirectly, engage or participate in, or become employed by, or become a
director, officer or partner of, or render advisory services to or provide other
services in connection with, any business activity other than that of the
Company and the Subsidiaries (it being understood that approval of the Company
will not be unreasonably withheld if such business activity does not interfere
with the execution of the Employee's duties hereunder, violate any provision of
this Agreement or the Company's Conflict of Interest Policy or otherwise
conflict in any material way with the business of the Company or its
Subsidiaries); provided, however, that the Employee shall be permitted to
personally invest in any corporation, partnership or other entity, so long as
any such investment does not require or involve the active participation of the
Employee in the management of the business of any such corporation, partnership
or other entity, does not interfere with the execution of the Employee's duties
hereunder and does not otherwise violate any provisions of this Agreement or of
the Company's Conflict of Interest Policy; and, provided, further, that the
Employee may engage in other activities, such as activities involving
charitable, educational, religious and similar types of organizations, speaking
engagements and similar type activities to the extent that such other activities
do not interfere with the execution of the Employee's duties hereunder, do not
otherwise violate any provision of this Agreement or of the Company's Conflict
of Interest Policy, or otherwise conflict in any material way with the business
of the Company or the Subsidiaries.
3
<PAGE> 4
4. Base Salary. The Company shall pay to the Employee a base
salary for his services at the rate of $900,000 per annum, payable in accordance
with the regular payroll practices of the Company. The base salary of the
Employee shall be subject to annual review by the Board of Directors of the
Company, at which time it may be adjusted in the sole discretion of the Board of
Directors but may not be decreased below the rate set forth above. The first
annual review shall be made on or about May 1, 1997.
5. Bonus Arrangements. In addition to the base salary provided
for in Paragraph 4 hereof, the Employee shall be entitled to the following
bonuses:
a. The Employee shall be paid an up-front cash bonus
of $750,000, payable in a lump sum within 10 days following the Approval Date.
If the Employee terminates his employment, other than for Good Reason for
Resignation (as defined in Paragraph 11c below), or the Company terminates his
employment for cause (as defined in Paragraph 11a below), in either case prior
to the earlier of (i) the date a Plan of Reorganization for the Company under
Chapter 11 of the Federal Bankruptcy Code becomes effective in accordance with
its terms (the "Plan Effective Date") and (ii) the third anniversary of the
Approval Date, the Employee shall, within 10 days following termination, repay
such bonus to the Company in full.
b. On the Plan Effective Date the Employee, if then
employed by the Company, shall be paid an amount equal to (i) 35% of his base
salary as in effect on such date plus (ii) up to an additional 52.5% of his base
salary as in effect on such date, depending upon the level of achievement by the
Company during the fiscal year preceding that in which the Plan Effective Date
occurs of its target EBITDAR (earnings before
4
<PAGE> 5
interest, taxes, depreciation, amortization and reorganization expenses) for
such preceding fiscal year established as provided in the Performance Retention
Program of the Company approved by the Bankruptcy Court by order dated March 27,
1996 ("Target EBITDAR"). On the date six months following the Plan Effective
Date the Employee, if then employed by the Company, shall be paid a further
amount equal to the amount paid on the Plan Effective Date. The variable portion
of such payments referred to in clause (ii) of the preceding sentence (the
"Variable Payment") shall be calculated as follows: If the Company achieves 75%
or less of Target EBITDAR, the Variable Payment will be zero. If the Company
achieves 100% of EBITDAR, the Variable Payment will be 35% of base salary. If
the Company achieves 125% or more of Target EBITDAR, the Variable Payment will
be 52.5% of base salary. For EBITDAR between 75% and 100% of Target EBITDAR, the
amount of the Variable Payment will be interpolated on a straight-line basis
between zero and 35% of base salary; for EBITDAR between 100% and 125% of
Target EBITDAR, the Variable Payment will be interpolated on a straight-line
basis between 35% and 52.5% of base salary (e.g. if EBITDAR is 90% of Target
EBITDAR, the Variable Payment will be 15/25 of 35% of base salary, or 21% of
base salary; if EBITDAR is 120% of Target EBITDAR, the Variable Payment will be
35% (the portion payable at 100% of EBITDAR) plus 20/25 of 17.5% (the maximum
additional payable at 125% of EBITDAR) of base salary, or 49% of base salary).
For purposes of this Paragraph 5c, if the Employee is not employed by the
Company on the Plan Effective Date or the date six months thereafter solely
because his employment was previously terminated by the Company without cause
(and not by virtue of death, permanent disability or the expiration of the term
of this
5
<PAGE> 6
Agreement) or by the Employee for Good Reason for Resignation, then the
condition that the Employee be employed by the Company on the relevant date
shall nonetheless be considered to be fulfilled.
c. The Employee shall be entitled to participate in
cash bonus arrangements, including the Performance Incentive Plan, applicable to
his position (for purposes of the Performance Incentive Plan = Executive
Committee Member/Principal) during the term of his employment hereunder, subject
to the terms and conditions of such arrangements as from time to time in effect.
Notwithstanding any contrary provision of the Company's Performance Incentive
Plan as the same may from time to time be in effect, during the period from
commencement of the Employee's employment with the Company (whether before or
after the Approval Date) to the Plan Effective Date (the "Bankruptcy Period"),
the Employee shall be entitled to receive 50% of the maximum amount payable to
him thereunder in any fiscal year irrespective of the financial performance of
the Company, provided the Employee remains employed throughout such fiscal year
and until April 1 of the following fiscal year; but receipt of the remaining 50%
will be subject to satisfaction of the financial performance factors established
under the Performance Incentive Plan (with any pro-ration under the Performance
Incentive Plan being applied to such remaining 50% as if it were the maximum
amount payable to the Employee thereunder). Following the Bankruptcy Period, the
normal terms and conditions of the Performance Incentive Plan shall be
applicable.
6
<PAGE> 7
6. Other Employee Benefits and Perquisites.
a. During the term of this Agreement, the Company
will provide to the Employee benefits consistent with the Company's current and
future benefit plans and programs provided to the Company's senior executives,
except as otherwise provided in this Agreement. As of the date hereof, these
include the contributory and non-contributory programs listed on Schedule A.
(For certain of the programs listed on Schedule A, the Employee will be entitled
to participate only upon satisfaction of generally-applicable eligibility
requirements, such as length of service requirements.) It is expressly
understood that the Company may in its discretion from time to time modify any
bonus, benefit or other employee programs applicable to substantially all
employees who benefit from each program, including without limitation terms of
eligibility, benefit levels and other terms and conditions, and that all such
modifications shall be binding upon the Employee.
b. As the Employee will not be eligible to enroll in
the Company's group medical plan until the first day of the month following
completion of ninety (90) days of service, the Company will reimburse the
Employee for all COBRA payments for continuation of the Employee's current
medical insurance program during the period prior to such eligibility, but only
to the extent such COBRA payments exceed the contribution which would have been
payable by the Employee under the Company's group medical plan had the Employee
been enrolled during such period.
c. The Employee shall be entitled to vacations (taken
consecutively or in segments), aggregating four weeks each fiscal year during
the term of employment, and to reasonable sick leave as determined by the
Company.
7
<PAGE> 8
7. Expenses. It is contemplated that, in connection with his
employment hereunder, the Employee may be required to incur reasonable and
necessary travel, business entertainment and other business expenses. The
Company agrees to reimburse the Employee, consistent with the Company's
policies, for all reasonable and necessary travel, business entertainment and
other business expenses incurred or expended by him incident to the performance
of his duties hereunder. The Company will also reimburse the Employee for
relocation expenses in accordance with the Company's standard relocation expense
reimbursement policy applicable to executives of his level, and will pay to the
Employee additional compensation sufficient to cover all federal, state and
local income taxes payable with respect to such reimbursement and to the
additional payment specified in this sentence.
8. Permanent Disability. In the event of the permanent
disability (as hereinafter defined) of the Employee during the term of his
employment hereunder, the Company shall have the right, upon written notice to
the Employee, to terminate his employment hereunder, effective upon the giving
of such notice. Upon such termination, the Company shall be discharged and
released from any further obligations under this Agreement, except for accrued
but unpaid base salary, a bonus amount for the portion of the fiscal year
actually worked by the Employee equal to a pro rata portion of the Target Bonus
Opportunity (as hereinafter defined) for the then-current fiscal year of the
Company, any accrued but unpaid amounts under employee benefit plans and
arrangements to the extent contemplated by such plans and arrangements and any
business expenses for which the Employee is entitled to reimbursement (all such
obligations for accrued salary,
8
<PAGE> 9
bonus and benefits hereinafter referred to as the "Specified Obligations"), but
the Employee shall have the obligations provided for in Paragraph 12 hereof. For
purposes of this Paragraph 8, "permanent disability" shall mean any physical or
mental disability or incapacity which continues for 180 consecutive days or an
aggregate period of more than 180 days in any 12-month period and which shall
render the Employee incapable of performing the services required of him by the
Company throughout such period. As used herein, "Target Bonus Opportunity" means
the bonus which would be earned under the Performance Incentive Plan or under
applicable bonus programs were the Company to achieve, but not exceed, its
business plan. For example, Target Bonus Opportunity under the Performance
Incentive Plan for fiscal year ending February 3,1996 would be two thirds (2/3)
of the maximum bonus payable under such plan. Disability benefits, if any, due
under applicable plans and programs of the Company shall be determined under the
provisions of such plans and programs.
9. Death. In the event of the death of the Employee during the
term of his employment hereunder, the base salary to which the Employee is
entitled pursuant to Paragraph 4 hereof shall continue to be paid through the
end of the month in which death occurs to the last beneficiary designated by the
Employee pursuant to Paragraph 25 hereof, or, failing such designation, to his
estate. In accordance with Paragraph 25 hereof, upon payment of such salary, the
Company shall have no further obligations under this Paragraph 9 or Paragraph 4,
except for any Specified Obligations.
9
<PAGE> 10
10. Severance Letter of Credit. In order to secure all
obligations of the Company to the Employee hereunder arising or remaining unpaid
upon termination of the Employee's employment, the Company shall, at all times
during the initial 3-year term of the Employee's employment hereunder and for 30
days thereafter, cause to be maintained in effect for the benefit of the
Employee, a letter of credit in a face amount of not less than $3,900,000,
having a term when issued of at least six months from the date of issue and
issued or confirmed by a bank reasonably satisfactory to the Employee,
substantially in the form of Exhibit I hereto. Should the Company fail to
furnish such a replacement or substitute letter of credit in such amount and
with such term at least 75 days prior to its then-expiration, the Employee shall
be entitled to draw the full amount of the letter of credit provided that the
proceeds of such drawing shall be segregated by the Employee and held by him,
unencumbered, solely for the purpose of satisfying future obligations of the
Company hereunder arising or remaining unpaid upon termination of the Employee's
employment, with any balance (including earnings thereon) remaining upon
satisfaction in full of such obligations to be returned promptly to the Company.
11. Termination and Expiration of Employment.
a. The Employee's employment hereunder may be
terminated by the Company for "cause" at any time if the Employee shall commit
any of the following acts of default:
(i) The Employee shall have willfully failed to
perform any of his material obligations as set forth herein
and shall have failed to cure such failure within 10 days
after
10
<PAGE> 11
receiving written notice thereof from the Company; or within
such further time as may be reasonably necessary to cure the
failure with the exercise of all due diligence; or
(ii) The Employee shall have committed an act or acts
of fraud, theft or dishonesty which, in the judgment of the
Board of Directors of the Company, is or are likely to result
in financial harm aggregating $10,000 or more to the Company;
or
(iii) The Employee shall be convicted of (or plead
nolo contendere to) any felony or a misdemeanor involving
moral turpitude, which misdemeanor might, in the reasonable
opinion of the Company, cause embarrassment to the Company.
If the Employee is terminated for "cause," or the Employee
terminates his employment hereunder (except pursuant to Paragraph 11c(ii) or
13 hereof), the Company shall pay to the Employee any base salary accrued but
unpaid to the date of termination and any amounts accrued but unpaid to such
date under employee benefit plans, but shall have no further obligations under
this Agreement, and the Employee shall continue to have the obligations
provided for in Paragraph 12 hereof.
b. If the Company notifies the Employee that it
elects not to continue his employment pursuant to Paragraph 2 hereof (whether at
the end of the initial three-year term or any renewal term), then the Employee
shall be entitled to receive,
11
<PAGE> 12
within 30 days after the date of such termination, any Specified Obligations and
a severance payment, payable in a single lump sum, equal to twelve (12)
multiplied by the sum of (i) 1/12 of his annual base salary in effect at the
time of such termination in accordance with the provisions of Paragraph 4 hereof
plus (ii) 1/12 of 100% of his Target Bonus Opportunity for the fiscal year of
the Company in which such termination occurs. In the event of such termination,
the Employee shall also be entitled to a continuation of the health and
insurance benefits in which he is participating at the time of such termination
upon the same terms and conditions (including continued payment by the Company
of its share of the cost thereof) for a period of twelve (12) months following
the date of such termination, it being the intention of the Company that COBRA
benefits will begin only after the expiration of such twelve (12) month period.
c. If (i) the Company terminates the employment of
the Employee during the term of this Agreement other than for "cause" (as
defined in Paragraph 11a hereof) or (ii) if the Employee terminates his
employment during the term of this Agreement because the Company, after having
received written notice from the Employee specifying that a Good Reason for
Resignation (as defined below) exists, has failed to cure the specified
situation within 30 days after receipt of such notice, then the Employee shall
be entitled to receive any Specified Obligations, as well as a severance
payment, payable in a lump sum within 30 days after the date of such
termination, equal to (x) the sum of (A) 1/12 of his annual base salary in
effect at the time of such termination in accordance with the provisions of
Paragraph 4 hereof plus (B) 1/12 of 100% of his Target Bonus Opportunity for the
fiscal year of the Company in which such termination occurs, multiplied
12
<PAGE> 13
by (y) the greater of (A) the number of full calendar months remaining in the
Employee's then-current term of employment and (B) twelve (12); provided that if
the Employee terminates his employment by virtue of a Good Reason for
Resignation specified in clause (III) of the definition thereof, the severance
payment shall be reduced by one-half. The period from the date of termination to
the expiration of the number of months equal to the greater of (y)(A) or (y)(B)
is hereinafter referred to as the "Remaining Term". In the event of such
termination, the Employee shall also be entitled to a continuation of the health
and insurance benefits in which he is participating at the time of such
termination upon the same terms and conditions (including continued payment by
the Company of its share of the cost thereof) for the Remaining Term, it being
the intention of the Company that COBRA benefits will begin only after the
expiration of the Remaining Term. The lump sum payment and any Specified
Obligations shall not be subject to reduction for any compensation received from
other employment. As used in this Agreement, a "Good Reason for Resignation"
shall mean that (I) the Company shall have breached its obligations under any of
Paragraphs 3(a), 3(b), 4, 5, 6, 7, 10 or 24 of this Agreement which breaches, in
the case of financial obligations, shall exceed $10,000 in the aggregate at any
time outstanding, (II) any other breach of this Agreement by the Company which
is material and adverse to the Employee shall have occurred, or (III) (A) the
Company shall have failed for any reason to maintain and to continue in effect
the directors and officers insurance ("D&O Insurance") coverage contemplated by
Paragraph 24 of this Agreement, regardless of whether such coverage continues to
be available on commercially reasonable terms, or (B) a transaction or other
event shall occur during the term or policy
13
<PAGE> 14
period of any such D&O Insurance, the result of which is that events or
circumstances thereafter occurring or arising would not, in whole or in part, be
insured under such D&O Insurance, unless in the case of either clause (III)(A)
or (III)(B), such coverage or gap in coverage shall have been promptly replaced
(which replacement may, at the option of the Company and if reasonably
acceptable to the Employee, take the form of another instrument or undertaking
providing adequate liquidity and assurance of payment).
12. Restrictive Covenants and Confidentiality; Injunctive
Relief.
a. The Employee agrees, as a condition to the
performance by the Company of its obligations hereunder, particularly its
obligations under Paragraphs 4 and 5 hereof, that during the term of his
employment hereunder and thereafter during the Post-Employment Period (as
defined below), the Employee shall not, without the prior written approval of
the Company, directly or indirectly through any other person, firm or
corporation, (i) engage or participate or make any financial investment in or
become employed by or render advisory or other services to or for any person,
firm or corporation, or in connection with any business enterprise, which is,
directly or indirectly, in competition with the Company (ii) solicit, entice or
induce any person who on the date of termination of employment of the Employee
is, or within the last three months of the Employee's employment by the Company
was, an employee of the Company or any Subsidiary, to become employed by any
person, firm or corporation, and the Employee shall not approach any such
employee for such purpose or authorize or knowingly approve the taking of such
actions by any other person. Nothing herein contained, however, shall restrict
the Employee from making any investments in any company whose stock is listed
14
<PAGE> 15
on a national securities exchange or actively traded in the over-the-counter
market, so long as such investment does not give him the right to control or
influence the policy decisions of any business or enterprise which is or might
be, directly or indirectly, in competition with any of the business operations
or activities of the Company and the Subsidiaries. For the purposes hereof, a
person, firm, corporation or other business enterprise shall be deemed to be in
competition with the Company only if it operates a full line, general
merchandise discount department store (e.g. Wal Mart, K-Mart or Bradlee's)
within a radius of 75 miles of any discount department store operated by the
Company or any Subsidiary (hereinafter shall be referred to as a "Competitor").
As used herein, the "Post-Employment Period" shall mean (A) in the case of a
non-renewal of this Agreement by the Employee pursuant to Paragraph 2 (whether
at the end of the initial three-year term or any renewal term), (x) for purposes
of prohibitions in clause (i) of this Paragraph 12a, 6 months from the
expiration of the term of employment hereunder, (y) for purposes of prohibitions
in clause (ii) of this Paragraph 12a, 12 months from the expiration of the term
of employment hereunder, (B) in the case of a termination by the Company during
the initial or any renewal term, whether or not for "cause", or a termination by
the Employee in accordance with Paragraph 11c(ii) hereof, the Remaining Term,
and (C) in the case of a non-renewal of this Agreement by the Company pursuant
to Paragraph 2 (whether at the end of the initial or any renewal term), a
termination by the Company based on permanent disability pursuant to Paragraph 8
or a termination by the Employee following a Change in Control, 12 months from
the date of termination.
15
<PAGE> 16
b. Recognizing that the knowledge, information and
relationship with customers, suppliers, and agents, and the knowledge of the
Company's and the Subsidiaries' business methods, systems, plans and policies
which he shall hereafter establish, receive or obtain as an employee of the
Company or any Subsidiary, are valuable and unique assets of the respective
businesses of the Company and the Subsidiaries, the Employee agrees that, during
and after the term of his employment hereunder, he shall not (otherwise than
pursuant to his duties hereunder) disclose, without the prior written approval
of the Company's Chief Executive Officer, any such knowledge or information
pertaining to the Company or any Subsidiary, their business, personnel or
policies, to any unauthorized person, firm, corporation or other entity, for any
reason or purpose whatsoever. The provisions of this Paragraph 12b shall not
apply to information which is or shall become generally known to the public or
the trade (except by reason of the Employee's breach of his obligations
hereunder), information which is or shall become available in trade or other
publications, information known to the Employee prior to entering or subsequent
to leaving the employ of the Company or which the Employee receives or obtains
other than as an employee of the Company or any Subsidiary, and information
which the Employee is required to disclose by law or an order of a court of
competent jurisdiction. If the Employee is required by law or a court order to
disclose such information, he shall notify the Company of such requirement and
provide the Company an opportunity (if the Company so elects and at the
Company's sole expense) to contest such law or court order.
16
<PAGE> 17
c. The Employee acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character and, in
connection with such services, he will have access to confidential information
vital to the Company's and the Subsidiaries' businesses. By reason of this, the
Employee consents and agrees that if he violates any of the provisions of this
Paragraph 12, the Company and the Subsidiaries would sustain irreparable harm
and, therefore, in addition to any other remedies which the Company may have
under this Agreement or otherwise, the Company shall be entitled to apply to any
court of competent jurisdiction for an injunction restraining the Employee from
committing or continuing any such violation of this Paragraph 12, and the
Employee shall not object to any such application.
13. Change in Control, Termination of Employment and
Compensation in Event of Termination.
a. For purposes hereof, a "Change in Control" shall
be deemed to have occurred (i) if there has occurred a "change in control" as
such term is used in Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as in effect at the date hereof (the
"Act"); or (ii) if there has occurred a change in control as the term "control"
is defined in Rule 12b-2 promulgated under the Act; or (iii) when any "person"
(as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Act) becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the Company's then outstanding securities having the
right to vote on the election of directors; or (iv) if the shareholders of the
Company approve a plan of complete liquidation or dissolution of the Company or
a merger or consolidation in
17
<PAGE> 18
which the Company is not the surviving corporation; or (v) if there is a change
in the ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")); or
(vi) when the individuals who are members of the Board on the date hereof shall
cease to constitute at least a majority of the Board; provided, however, that
any new director (x) whose election to the Board or nomination for election to
the Board by the Company's stockholders was approved by a vote of at least 50%
of the directors then still in office, or (y) who was designated in or pursuant
to a Plan of Reorganization, shall not be deemed to have replaced his or her
predecessor. Notwithstanding the foregoing, no issuance of equity securities of
the Company to its creditors pursuant to a Plan of Reorganization, irrespective
of the effect of such issuance on beneficial ownership of the Company's
securities or on control of the Company, and no merger or sale of assets of the
Company to any person pursuant to a Plan of Reorganization, shall be deemed to
constitute or to result in a "Change in Control". (Any event which would
constitute a "Change in Control" but for the provisions of the foregoing
sentence is hereinafter referred to as a "Reorganization Change").
b. The Employee may terminate his employment at any
time
i. within six months after a Change in
Control has occurred, provided that such Change in Control results in 20% or
more of the Company's then outstanding securities having the right to vote on
the election of directors being owned by a person or an entity which is, or has
a direct or indirect ownership of 20% or more of the securities of, a Competitor
of the Company (other than a person or an entity which is, or
18
<PAGE> 19
becomes at any time, an investor that does not have a representative on the
board of directors of the Company and/or the other entity), or
ii. within 12 months after a Change in
Control or a Reorganization Change and any of the following events has occurred:
(A) an assignment to the Employee of any duties inconsistent with the status of
the Employee's office and/or position with the Company as constituted
immediately prior to the Change in Control or Reorganization Change or a
significant adverse change in the nature or scope of the Employee's authorities,
powers, functions or duties as constituted immediately prior to the Change in
Control or Reorganization Change, (B) a failure by the Company, after having
received written notice from the Employee specifying that a Good Reason for
Resignation exists, to cure the specified situation within 30 days after receipt
of such notice, or (C) the headquarters of the Company is moved to a new
location which is more than 60 miles from its current location, or
iii. following a Change in Control which
occurs subsequent to the Plan Effective Date, and not in whole or in part in
implementation of the Plan of Reorganization, if such Change in Control was not
approved by a majority of the members of the Board of Directors of the Company
who are members of the Board on the date hereof (including for this purpose any
new director (x) whose election to the Board or nomination for election to the
Board by the Company's stockholders was approved by a vote of at least 50% of
the directors then still in office, or (y) who was designated in or pursuant to
a Plan of Reorganization), or
19
<PAGE> 20
iv. following a Change in Control which
occurs subsequent to the Plan Effective Date, and not in whole or in part in
implementation of the Plan of Reorganization, if as a result of such Change in
Control and within 12 months thereafter a Material Deterioration in Working
Environment shall have occurred. As used herein a "Material Deterioration in
Working Environment" shall mean a material, adverse change in the working
environment of the Company resulting from (A) a material change in the
fundamental business orientation or business strategy of the Company, (B) a
material change in management policies, performance objectives or standards at
the Company, or (C) a material change in corporate values. For purposes hereof,
a Material Deterioration in Working Environment shall be deemed to have occurred
if (I) one-third or more of the senior executives of the Company (being Senior
Vice Presidents and above) depart the Company, whether or not voluntarily,
within 12 months following the Change in Control, excluding for this purpose the
Employee and any executives whose employment was terminated by or upon the
recommendation of the Employee or who retired at normal retirement age, or (II)
a determination to that effect shall have been made by unanimous decision of the
Executive Committee of the Board of Directors of the Company, or (III) a
determination to that effect shall have been made by an arbitrator in a
proceeding described below. If the Employee believes that a Material
Deterioration in Working Environment has occurred and the objective standard of
clause (I) is not satisfied, the Employee may request a determination with
respect thereto by the Executive Committee of the Board of Directors. If the
Executive Committee does not reach a determination favorable to the Employee
within 15 days of such request, he may commence an
20
<PAGE> 21
arbitration which shall be held in Stamford, Connecticut before a single
arbitrator jointly designated by the Company and the Employee. The arbitration
shall be conducted in accordance with the rules of commercial arbitration of the
American Arbitration Association and if the parties cannot agree upon an
arbitrator the arbitrator shall be selected in accordance with such rules,
provided that the arbitrator so selected shall have knowledge of or experience
in senior management of the Company or of businesses similar or comparable to
that of the Company. Each side shall bear its own costs in connection with such
arbitration and the fees of the arbitrator shall be borne equally by the
parties. The parties shall use their best efforts to have the arbitration heard
and a determination reached within 30 days of the date the arbitration is
commenced. The determination of the arbitrator shall be conclusive and binding
on the Company and the Employee.
c. An election by the Employee to terminate his
employment under subparagraph b shall not be deemed a voluntary termination of
employment by the Employee for the purpose of interpreting the provisions of any
of the Company's employee benefit plans. The Employee's continued employment
with the Company for any period of time after a Change in Control or
Reorganization Change shall not be considered a waiver of any right he may have
to terminate his employment to the extent permitted under subparagraph b.
If the Company terminates the Employee without
cause (as defined in Paragraph 11a hereof) within six months after a Change of
Control or Reorganization Change has occurred, such termination shall be deemed
an election by the Employee to terminate his employment pursuant to this Section
13.
21
<PAGE> 22
In addition, in the event of such
termination, the Employee shall continue to have the obligations provided for in
Paragraph 12 hereof; provided, however, that the restriction from the activities
described in Paragraph 12 shall be limited to one year following the Termination
Date (as defined in Paragraph 14(b) hereof).
d. If the Employee's employment with the Company is
terminated under subparagraph b, the Employee (i) shall be entitled to any
Specified Obligations accrued as of the Termination Date and, in addition
thereto, (ii) shall be paid a severance payment, payable in a lump sum within 30
days after the Termination Date, in cash, in an amount equal to the excess of
2.99 times (or 1.50 times, in the case of a termination under subparagraph
b(iv)) the Employee's "base amount" over the "present value" of any other
"parachute payments" with respect to the Company which the Employee has received
or to which he may be entitled, whether under this Agreement or otherwise
(unless such other payment is waived in writing by the Employee within 20 days
after the Termination Date). Such severance payment is referred to as the
"Termination Compensation." For purposes of this Agreement, the terms "base
amount," "present value," and "parachute payments" shall have the meanings as
set forth in Section 280G of the Code, except that "parachute payments" shall be
determined without regard to whether or not they equal or exceed three times the
Employee's "base amount." The amount of the Termination Compensation shall be
determined, at the Company's expense, by its regular certified public accountant
immediately prior to the Notice of Termination (the "Accountant"), whose
determination shall be conclusive and binding on the parties. Upon payment of
the Termination Compensation and all accrued compensation, this Agreement shall
terminate (except for
22
<PAGE> 23
the Employee's obligations pursuant to Paragraph 12 hereof and the Company's
agreements pursuant to Paragraphs 5b, 13e, 13f, 13h and 14c) and be of no
further force or effect.
e. After a Change in Control has occurred, the
Company will honor the Employee's exercise of the Employee's outstanding stock
options and any other stock-related rights (if any), in accordance with the plan
under which issued. After a Change in Control has occurred and the Employee's
employment is terminated as a result thereof, the Employee (or his designated
beneficiary or personal representative pursuant to Paragraph 25 hereof) shall
also receive, except to the extent already paid pursuant to Paragraph 13d(i)
hereof or otherwise, the sums the Employee would otherwise have received
(whether under this Agreement, by law or otherwise) by reason of termination of
employment if a Change in Control had not occurred; provided, however, that this
Paragraph 13e shall not be construed to indicate that the Employee is entitled
to payment of any amounts under Paragraph 11c hereof.
f. Notwithstanding anything in this Agreement to the
contrary (except pursuant to Paragraph 13(g) hereof), the Employee shall have
the right, prior to the receipt by him of any amounts due hereunder, to waive
the receipt thereof or, subsequent to the receipt by him of any amounts due
hereunder, to treat some or all of such amounts as a loan from the Company which
the Employee shall repay to the Company, within 90 days from the date of
receipt, with interest at the rate provided in Section 7872 of the Code. Notice
of any such waiver or treatment of amounts received as
23
<PAGE> 24
a loan shall be given by the Employee to the Company in writing and shall be
binding upon the Company.
g. It is intended that the "present value" of the
payments and benefits to the Employee, whether under this Agreement or
otherwise, which are includable in the computation of "parachute payments" shall
not, in the aggregate, exceed 2.99 times the "base amount." Accordingly, if the
Employee received (or is guaranteed to receive in the future) payments or
benefits from the Company which, when added to the Termination Compensation,
would, in the opinion of the Accountant, subject any of the payments or benefits
to the Employee to the excise tax imposed by Section 4999 of the Code, the
Termination Compensation shall be reduced by the smallest amount necessary, in
the opinion of the Accountant, to avoid such tax. In addition, the Company shall
have no obligation to make any payment or provide any benefit to the Employee
subsequent to payment of the Termination Compensation which, in the opinion of
the Accountant, would subject any of the payments or benefits to the Employee to
the excise tax imposed by Section 4999 of the Code. No reduction in Termination
Compensation or release of the Company from any payment or benefit obligation in
reliance upon any aforesaid opinion of the Accountant shall be permitted unless
the Company shall have provided a copy of any such opinion, specifically
entitling the Employee to rely thereon, to the Employee no later than the date
otherwise required for payment of the Termination Compensation or any such later
payment or benefit.
h. The Employee shall not be required to mitigate the
payment of the Termination Compensation by seeking other employment. To the
extent that the
24
<PAGE> 25
Employee shall, during (in accordance with Paragraph 3(c) hereof) or after the
Term, receive compensation from any other employment, the payment of Termination
Compensation shall not be adjusted.
14. Notice of Termination and Termination Date; No
Mitigation.
a. Any termination of the Employee's employment by
the Company or by the Employee shall be communicated by a "Notice of
Termination" to the other party hereto. For purposes hereof, a "Notice of
Termination" shall mean a notice which shall state the "Termination Date" (as
defined below) and the specific reasons for such termination, and shall set
forth in reasonable detail the relevant facts and circumstances.
b. "Termination Date" shall mean the date specified
in the Notice of Termination as the last day of the Employee's employment by the
Company.
c. The Employee shall not be required to mitigate any
payments payable hereunder by seeking other employment following the termination
of his employment hereunder.
15. Deductions and Withholding. The Employee agrees that the
Company shall withhold from any and all payments required to be made to the
Employee pursuant to this Agreement, all federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statutes and/or regulations from time to time in effect.
25
<PAGE> 26
16. Prior Agreements. This Agreement cancels and supersedes
any and all prior agreements and understandings between the parties hereto
respecting the employment of the Employee by the Company on or after the
Approval Date.
17. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be (i) sent by registered
or certified mail, return receipt requested (with copies sent by Federal Express
or other priority delivery service or by telecopier) or (ii) delivered
personally, to the other party hereto at his or its address as set forth at the
beginning of this Agreement. Either party may change the address to which
notices, requests, demands and other communications hereunder shall be sent by
sending written notice of such change of address to the other party.
18. Assignability, Binding Effect and Survival. This Agreement
shall inure to the benefit of and shall be binding upon the heirs, executors,
administrators, successors and legal representatives of the Employee, and shall
inure to the benefit of and be binding upon the Company and its successors and
assigns. Notwithstanding the foregoing, the obligations of the Employee may not
be delegated and, except as expressly provided in Paragraph 25 hereof relating
to the designation of beneficiaries, the Employee may not assign, transfer,
pledge, encumber, hypothecate or otherwise dispose of this Agreement, or any of
his rights hereunder, and any such attempted delegation or disposition shall be
null and void and without effect. The provisions of Paragraphs 5b, 8, 9, 10, 11,
12, 13, 14c and 24 hereof shall survive termination of this Agreement and, to
the extent appropriate to the intention of the parties and the subject matter of
this Agreement, other rights and
26
<PAGE> 27
obligations of the parties (such as the obligation of the Company to pay amounts
accrued and unpaid as of the date of termination) may survive the termination of
this Agreement.
19. Complete Understanding; Amendment. This Agreement
constitutes the complete understanding between the parties with respect to the
employment of the Employee hereunder, and no statement, representation, warranty
or covenant has been made by either party with respect thereto except as
expressly set forth herein. This Agreement shall not be altered, modified,
amended or terminated except by written instrument signed by each of the parties
hereto. Waiver by either party hereto of any breach hereunder by the other party
shall not operate as a waiver of any other breach, whether similar to or
different from the breach waived.
20. Governing Law. Except to the extent Connecticut law may be
superseded by federal bankruptcy law, this Agreement shall be governed by and
construed in accordance with the laws of the Connecticut without giving effect
to principles of conflicts of law.
21. Paragraph Headings. The paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
22. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected
27
<PAGE> 28
thereby, and each provision hereof shall be validated and shall be enforced to
the fullest extent permitted by law.
23. Arbitration. Any dispute arising out of or relating to the
obligations of either party hereto shall be settled by arbitration in accordance
with the rules of the American Arbitration Association. The decision of the
arbitrator shall be final and binding on the parties hereto. As part of his or
her decision, the arbitrator shall determine if such dispute was frivolous and,
if so, the reasonable fees and expenses of the parties shall be paid by the
party against whom such a determination is made or, in the absence of such a
determination, the Company shall pay all such reasonable fees and expenses. The
provisions of this Paragraph 23 shall not be applicable to the arbitration
proceeding contemplated by Paragraph 11b(iv) of this Agreement.
24. Indemnification; Insurance.
a. The Company agrees to indemnify and hold the Employee
harmless from and against any and all losses, liabilities, damages, costs or
expenses of any kind, including reasonable attorneys' fees (hereinafter
collectively referred to as the "Indemnified Costs"), based upon or arising out
of the Employee's service as an officer or Director of the Company or any of its
Subsidiaries, in each case to the full extent provided in Article V of the
By-Laws of the Company in effect on the date hereof; provided that
notwithstanding the provisions of Sections 3 and 5 of Article V of the By-Laws,
the Company shall indemnify the Employee pursuant to Sections 1 and 2, and shall
advance expenses and costs of defense pursuant to Section 5 without requiring
the delivery of a separate repayment undertaking, in each case in which
indemnification and advancement of
28
<PAGE> 29
expenses thereunder is sought by the Employee without separate determination by
the Corporation that such indemnification is proper, whether or not the actions
or omissions for which indemnification is sought are asserted to have been taken
or omitted in bad faith, to be unlawful or to create an improper personal
benefit received by the Employee; provided further, however, that if it shall
ultimately be determined by a final judgment of a court of competent
jurisdiction, after all appeals have been denied or appeals period expired, that
the Employee did not meet the applicable standard of conduct required for
indemnification as set forth in Section 1 or Section 2, as the case may be, of
Article V of the By-Laws, and only in the event of such final adjudication, no
indemnification shall be provided thereafter to the Employee with respect to the
matter or matters to which such adjudication relates and the Employee shall
promptly repay to the Company all indemnification payments previously made to or
on behalf of the Employee with respect to such matters, together with the amount
of all expenses advanced by the Company for the defense of such matters.
b. The Company agrees to continue to maintain D&O Insurance
(as defined in Paragraph 11c) with substantially the same coverage as is
currently in effect throughout the term of the Employee's employment hereunder,
provided such coverage continues to be available on commercially reasonable
terms. The Company also agrees that, in the event of any cancellation or
non-renewal of any D&O Insurance, it will elect and pay for, in accordance with
the terms of the policies then in force, the maximum discovery or "tail"
coverage available under policies providing such insurance, unless the
29
<PAGE> 30
policies to be cancelled or not renewed are replaced, with no break in coverage,
with policies providing substantially the same coverage as the policies being
replaced.
25. Designation of Beneficiary. The Employee shall have the
right to name, from time to time by written notice to the Company, any one or
more persons as beneficiaries hereunder or, with the consent of the Company, he
may make other forms of designation of beneficiary or beneficiaries. In the
absence of any designation or in the event the beneficiaries predecease the
Employee, the Employee's estate shall be deemed to be his designated
beneficiary. The Employee's designated beneficiary, estate or personal
representative, as the case may be, shall accept the payments provided for in
Paragraph 9 or Paragraph 13e hereof, and any Specified Obligations, as
applicable, in full discharge and release of the Company of and from any further
obligations under this Agreement. Any other benefits due under applicable plans
and programs of the Company shall be determined under the provisions of such
plans and programs.
26. Representations of the Company. As a further inducement to
the Employee to enter into this Agreement, the Company represents and warrants
to the Employee as follows:
a. There is currently in full force and effect the D&O
Insurance evidenced by the policies, in the amounts and with the scheduled
expiration dates specified on Schedule A to this Agreement.
b. All premiums for the insurance coverages described on
Schedule A have been paid in full for the entire term of such policies, except
as otherwise described on Schedule A.
30
<PAGE> 31
c. Schedule A also sets forth a correct and complete
description of all claims pending or threatened in writing against the Company,
any subsidiary of the Company or any other person or entity (including any
director or officer) covered by such insurance, as to which the coverages
described on Schedule A may be applicable.
d. The Company has received no written notice that coverage
under any of such D&O Insurance now in effect has been or may be denied, that
any such coverage has been or may be terminated or cancelled, or that any such
coverage will not or may not be renewed.
27. Effectiveness of Agreement. This Agreement shall enter
into effect as of the Approval Date. Promptly following execution of this
Agreement, the Company shall file an application with the Bankruptcy Court
seeking approval of this Agreement and shall diligently pursue such application.
Should this Agreement not be approved by the Bankruptcy Court on or before May
31, 1996 it shall be void and of no further force or effect.
IN WITNESS WHEREOF, the parties hereto set their hands as of
the date set forth above.
THE CALDOR CORPORATION
By: /s/ Dennis M. Lee /s/ Warren D. Feldberg
------------------------- ----------------------------
Dennis M. Lee Warren D. Feldberg
Senior Vice President -
Human Resources
31
<PAGE> 32
SCHEDULE A -- EMPLOYEE BENEFIT PROGRAMS
Cash Bonus and Profit-Sharing Programs:
Performance Incentive Plan
Caldor Profit Sharing Plan
Pension/Retirement Plans:
Caldor Retirement Plan
Caldor Supplemental Retirement Plan
Insurance Programs:
Company-Paid Life Insurance
Split Dollar Life Insurance Plan
Group Medical Plan
Executive Medical Plan
Long-Term Disability Insurance
Travel Accident Insurance
Other:
Standard Automobile allowance
Tax Preparation/Financial Planning/Executive Physicals/
Club Membership/Car Phone
10% Associate Discount Program
Relocation Program
<PAGE> 33
EXHIBIT I
IRREVOCABLE LETTER OF CREDIT NO. ___________
Date: ______________, 1996
Mr. Warren Feldberg
Dear Sir:
At the request of The Caldor Corporation ("Caldor"), 20 Glover Avenue,
Norwalk, Connecticut, we hereby open in favor of Mr. Warren Feldberg our
Irrevocable Standby Credit, numbered as indicated above, for a sum not exceeding
U.S. $3,900,000, available by your drafts drawn on us.
This Letter of Credit expires at our office on ________, 199_.
Funds under this Letter of Credit are available to Mr. Feldberg upon
presentation to us of a draft drawn by him on us, stating on its face that it is
drawn under the Irrevocable Letter of Credit No. ____________, provided that
either of the following conditions is met:
(i) such presentation is made at any time prior to the expiration of
this letter of credit and is accompanied by a certificate executed by Mr.
Feldberg certifying that his employment under the Employment Agreement dated as
of April 15, 1996 between Caldor and Mr. Feldberg (the "Employment Agreement")
has terminated, specifying in detail the amounts then due and unpaid from Caldor
to Mr. Feldberg pursuant to the Employment Agreement (which shall be no less
than the amount of the draft being presented hereunder) and certifying that Mr.
Feldberg has made a written demand pursuant to Paragraph 17 of the Employment
Agreement for payment of the full amount being drawn and that such demand has
remained unsatisfied for a period of at least 45 days from the date of such
demand, or
(ii) (a) the date of expiration of this Letter of Credit (as the same
may have theretofore been extended) is prior to June _____, 1999 [31st day
following expiration of initial 3-year term], and (b) such presentation is made
75 days or less prior to the date of expiration of this Letter of Credit (as the
same may have theretofore been extended), and is accompanied by a certificate
executed by Mr. Feldberg certifying that (x) this letter has not been extended
or replaced in accordance with the terms of the Employment Agreement, and (y) he
continues to be entitled to the benefits of this letter of credit under the
terms of the Employment Agreement, and (z) the proceeds of such drawing shall be
held and applied by him in accordance with the terms of the Employment
Agreement.
<PAGE> 34
Partial drawings are allowed.
This Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits, 1993 Revision, ICC Publication No. 500.
We hereby agree to honor each draft drawn under and in compliance with
the terms of this Letter of Credit, if duly presented at our office
____________________________ Attn: __________________ on or before the
expiration date of the term or any extended term.
Very truly yours,
-------------------------
Authorized Signature
<PAGE> 1
Exhibit 99.2
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT, made this 7th day of June 1996, to EMPLOYMENT AGREEMENT (the
"Original Employment Agreement") made as of the 15th day of April 1996 by and
between The Caldor Corporation, a Delaware corporation and debtor-in-possession
under chapter 11 of the Federal Bankruptcy Code, with principal offices at 20
Glover Avenue, Norwalk, Connecticut 06856 (hereinafter referred to as the
"Company"), and Warren D. Feldberg, with a permanent residence located at 75
Buttrick's Hill Road, Concord, Massachusetts (hereinafter referred to as the
"Employee").
WITNESSETH
1. Section 10 of the Original Employment Agreement is hereby modified
in its entirety to read as follows:
"10. Severance Letter of Credit. In order to secure
all obligations of the Company to the Employee hereunder arising or
remaining unpaid upon termination of the Employee's employment, the
Company shall, at all times during the L/C Period (as hereinafter
defined), cause to be maintained in effect for the benefit of the
Employee, a letter of credit in a face amount of not less than
$3,900,000, having a term when issued of at least six months from the
date of issue and issued or confirmed by a bank reasonably satisfactory
to the Employee, substantially in the form of Exhibit I hereto. If any
letter of credit furnished pursuant to this Section 10 is scheduled to
expire prior to the end of the L/C Period, the Company shall, not later
than 75 days prior to the scheduled expiration date, cause the term of
the existing letter of credit to be extended for at least six months
(or until the end of the L/C Period, if earlier) or furnish to the
Employee a replacement or substitute letter of credit in the same
amount and having the same term. Should the Company fail to extend the
existing letter of credit or to furnish such a replacement or
substitute letter of credit at least 75 days prior to such scheduled
expiration date, the Employee shall be entitled to draw the full amount
of the letter of credit provided that the proceeds of such drawing
shall be segregated by the Employee and held by him, unencumbered,
solely for the purpose of satisfying future obligations of the Company
hereunder arising or remaining unpaid upon termination of the
Employee's employment, with any balance (including earnings thereon)
remaining upon satisfaction in full of such obligations to be returned
promptly to the Company. As used herein, the "L/C Period" shall be the
period beginning on the Approval Date and ending on the earlier of (a)
55 days following expiration of the initial 3-year term of this
Agreement, and (b) 10 days following delivery to the Employee and the
issuer of the letter of credit (which delivery shall be no earlier than
<PAGE> 2
the end of the second full fiscal month following the Plan Effective
Date or, if the second full fiscal month is the month of December, the
third full fiscal month) of a certificate of the Chief Financial
Officer of the Company, accompanied by an "AgreedUpon Procedures
Report" of the regular certified public accountants of the Company
confirming the accuracy of that certificate, to the effect that the
Average Days Payable (defined as the accounts payable of the Company
divided by its cost of goods sold) for the most recent full fiscal
month equals or exceeds the Average Days Payable for the last three (3)
full fiscal months immediately prior to the Plan Effective Date;
provided that if such last three (3) fiscal months include the fiscal
month of December, such month shall be deleted from the determination
of the Average Days Payable and the fiscal month preceding such three
(3) month period shall be substituted in lieu thereof."
2. Sections 11b-c of the Original Employment Agreement are hereby
deleted in their entirety and replaced by the following Sections 11b-d:
"b. If the Company notifies the Employee that it
elects not to continue his employment pursuant to Paragraph 2 hereof
(whether at the end of the initial three-year term or any renewal
term), then the Employee shall be entitled to receive, within 30 days
after the date of expiration of the then-current term, any Specified
Obligations and a severance payment, payable in a single lump sum,
equal to twelve (12) multiplied by the sum of (i) 1/12 of his annual
base salary in effect at the time of such expiration in accordance with
the provisions of Paragraph 4 hereof plus (ii) 1/12 of 100% of his
Target Bonus Opportunity for the fiscal year of the Company in which
such expiration occurs (the sum of (i) plus (ii), as measured as of the
time of the applicable expiration or termination under this Agreement,
being hereinafter referred to as the "Monthly Severance Amount"). In
the event of such termination, the Employee shall also be entitled to a
continuation of the health and insurance benefits in which he is
participating at the time of such termination upon the same terms and
conditions (including continued payment by the Company of its share of
the cost thereof) for a period of twelve (12) months following the date
of such termination, it being the intention of the Company that COBRA
benefits will begin only after the expiration of such twelve (12) month
period.
"c. If (i) the Company terminates the employment of
the Employee during the term of this Agreement other than for "cause"
(as defined in Paragraph 11a hereof) or (ii) if the Employee terminates
his employment during the term of this Agreement because the Company,
after having received written notice from the Employee specifying that
a Good Reason for Resignation (as defined in Paragraph 11d below)
exists, has failed to cure the specified situation within 30 days after
receipt of such notice, then the Employee shall be entitled to receive
any Specified Obligations, as well as a severance payment equal to (A)
the Monthly Severance Amount as of the date of such termination,
multiplied by (B) the greater of (I) the number of full calendar months
remaining in the Employee's then-current term of employment and (II)
twelve (12); provided that if the Employee terminates his employment by
virtue of
2
<PAGE> 3
a Good Reason for Resignation specified in clause (iii) of the
definition thereof, the severance payment shall be reduced by one-half.
The period from the date of termination to the expiration of the number
of months equal to the greater of (B)(I) or (B)(II) is hereinafter
referred to as the "Remaining Term". In the event of such termination,
the Employee shall also be entitled to a continuation of the health and
insurance benefits in which he is participating at the time of such
termination upon the same terms and conditions (including continued
payment by the Company of its share of the cost thereof) for the
Remaining Term, it being the intention of the Company that COBRA
benefits will begin only after the expiration of the Remaining Term.
The Specified Obligations shall not be subject to reduction for any
compensation received from other employment. The severance payments
shall not be subject to such reduction except as and to the extent
provided in the next paragraph.
"If the Remaining Term is 18 months or less, the
severance payment described above and all of the Specified Obligations
shall be paid in a lump sum within 30 days after the date of
termination. If the Remaining Term is greater than 18 months, the
amount of such severance payment in excess of the Deferred Payment (as
defined in Paragraph 11d below) and all of the Specified Obligations
shall be paid in a lump sum within 30 days after the date of
termination, and the Deferred Payment (net of any reduction for other
employment compensation and subject to delivery of an extension letter
of credit, all as provided below) shall be paid within six months after
the date of termination. The Deferred Payment shall be reduced by the
amount of any compensation earned by the Employee from employment
during the six months following the date of termination (including any
such compensation the payment of which is subject to determination
based upon performance results or which is deferred other than pursuant
to retirement or similar benefit programs generally applicable to
similarly situated employees of the Employee's new employer). The
Employee agrees to notify the Company promptly upon obtaining other
employment during such period and to make available to the Company such
records as the Company may reasonably request to verify the amount of
his compensation therefrom. Nothing herein shall obligate the Employee
to seek other employment within the six months following the date of
termination, nor shall anything herein be deemed to modify the
restrictions of Paragraph 12. If a portion of the severance payment is
to be deferred as herein provided, the Company shall, within 30 days
after the date of termination of the Employee's employment, deliver to
the Employee an amendment to or substitute for the letter of credit
referred to in Paragraph 10 in an amount equal to the Deferred Payment,
having a term expiring 240 days following the date of termination and
otherwise substantially in the form of Exhibit I hereto with the
omission of condition (ii) thereof; provided that if such an amended or
substitute letter of credit is not so delivered, the entire severance
payment will be paid in a lump sum within such 30 day period and no
portion thereof will be deferred; provided further that if the letter
of credit referred to in Paragraph 10 shall have expired prior to
termination of the Employee's employment, the foregoing provisions of
this sentence shall not require it to be revived or a new letter of
credit to be issued.
3
<PAGE> 4
"d. As used in this Agreement, a "Good Reason for
Resignation" shall mean that (i) the Company shall have breached its
obligations under any of Paragraphs 3(a), 3(b), 4, 5, 6, 7, 10 or 24 of
this Agreement which breaches, in the case of financial obligations,
shall exceed $10,000 in the aggregate at any time outstanding, (ii) any
other breach of this Agreement by the Company which is material and
adverse to the Employee shall have occurred, or (iii) (A) the Company
shall have failed for any reason to maintain and to continue in effect
the directors and officers insurance ("D&O Insurance") coverage
contemplated by Paragraph 24 of this Agreement, regardless of whether
such coverage continues to be available on commercially reasonable
terms, or (B) a transaction or other event shall occur during the term
or policy period of any such D&O Insurance, the result of which is that
events or circumstances thereafter occurring or arising would not, in
whole or in part, be insured under such D&O Insurance, unless in the
case of either clause (iii)(A) or (iii)(B), such coverage or gap in
coverage shall have been promptly replaced (which replacement may, at
the option of the Company and if reasonably acceptable to the Employee,
take the form of another instrument or undertaking providing adequate
liquidity and assurance of payment). As used in this Agreement, the
"Deferred Payment" shall mean an amount equal to the Monthly Severance
Amount multiplied by the lesser of (I) the number of full calendar
months in the Remaining Term in excess of 18, and (II) 6."
3. Section 13b(ii)(C) of the Original Employment Agreement is hereby
modified in its entirety to read as follows:
" (C) the headquarters of the Company is moved to a new location which
is both more than 60 miles from its current location and farther from
the Employee's principal residence in the Fairfield County, Connecticut
region than is the current location, or"
4. Section 13d of the Original Employment Agreement is hereby modified
in its entirety to read as follows:
"d. If the Employee's employment with the Company is
terminated under subparagraph b, the Employee (i) shall be entitled to
any Specified Obligations accrued as of the Termination Date and, in
addition thereto, (ii) shall be paid a severance payment, in cash, in
an amount equal to the excess of 2.99 times (or 1.50 times, in the case
of a termination under subparagraph b(iv)) the Employee's "base amount"
over the "present value" of any other "parachute payments" with respect
to the Company which the Employee has received or to which he may be
entitled, whether under this Agreement or otherwise (unless such other
payment is waived in writing by the Employee within 20 days after the
Termination Date). Such severance payment is referred to as the
"Termination Compensation." For purposes of this Agreement, the terms
"base amount," "present value," and "parachute payments" shall have the
meanings as set forth in Section 280G of the Code, except that
"parachute payments" shall be determined without regard to whether or
not they equal or exceed
4
<PAGE> 5
three times the Employee's "base amount." The amount of the Termination
Compensation shall be determined, at the Company's expense, by its
regular certified public accountant immediately prior to the Notice of
Termination (the "Accountant"), whose determination shall be conclusive
and binding on the parties. The amount of the Termination Compensation
in excess of an amount equal to the Deferred Payment (as defined in
Paragraph 11d) and all of the Specified Obligations shall be paid in a
lump sum within 30 days after the Termination Date, and an amount equal
to the Deferred Payment (net of any reduction for other employment
compensation and subject to delivery of an extension letter of credit,
all as provided below) shall be paid within six months after the
Termination Date. The Deferred Payment shall be reduced by the amount
of any compensation earned by the Employee from employment during the
six months following the Termination Date (including any such
compensation the payment of which is subject to determination based
upon performance results or which is deferred other than pursuant to
retirement or similar benefit programs generally applicable to
similarly situated employees of the Employee's new employer). The
Employee agrees to notify the Company promptly upon obtaining other
employment during such period and to make available to the Company such
records as the Company may reasonably request to verify the amount of
his compensation therefrom. Nothing herein shall obligate the Employee
to seek other employment within the six months following the
Termination Date, nor shall anything herein be deemed to modify the
restrictions of Paragraph 12. The Company shall, within 30 days after
the Termination Date, deliver to the Employee an amendment to or
substitute for the letter of credit referred to in Paragraph 10 in an
amount equal to the Deferred Payment, having a term expiring 240 days
following the Termination Date and otherwise substantially in the form
of Exhibit I hereto with the omission of condition (ii) thereof;
provided that if such an amended or substitute letter of credit is not
so delivered, the entire Termination Compensation will be paid in a
lump sum within such 30 day period and no portion thereof will be
deferred; provided further that if the letter of credit referred to in
Paragraph 10 shall have expired prior to termination of the Employee's
employment, the foregoing provisions of this sentence shall not require
it to be revived or a new letter of credit to be issued. Upon final
payment of the Termination Compensation and all accrued compensation,
this Agreement shall terminate (except for the Employee's obligations
pursuant to Paragraph 12 hereof and the Company's agreements pursuant
to Paragraphs 5b, 13e, 13f, 13h and 14c) and be of no further force or
effect."
5. Section 13h of the Original Employment Agreement is hereby modified
in its entirety to read as follows:
"h. The Employee shall not be required to mitigate the payment
of the Termination Compensation by seeking other employment. To the
extent that the Employee shall, during (in accordance with Paragraph
3(c) hereof) or after the Term, receive compensation from any other
employment, the payment of Termination Compensation shall be adjusted
only as and to the extent provided in Paragraph 13d."
5
<PAGE> 6
6. The final sentence of Paragraph 27 of the Original Employment
Agreement, reading "Should this Agreement not be approved by the Bankruptcy
Court on or before May 31, 1996 it shall be void and of no further force or
effect." is hereby deleted.
7. Exhibit I to the Original Employment Agreement is hereby deleted in
its entirety and Exhibit I to this Amendment is hereby substituted therefor.
8. Except as specifically modified by this Amendment, the Original
Employment Agreement shall continue in full force and effect in accordance with
its terms, subject to the provisions of Section 27 thereof.
IN WITNESS WHEREOF, the parties hereto set their hands as of
the date set forth above.
THE CALDOR CORPORATION
By: /s/ Dennis M. Lee /s/ Warren D. Feldberg
------------------------- ----------------------------
Dennis M. Lee Warren D. Feldberg
Senior Vice President -
Human Resources
6
<PAGE> 7
[SUBJECT TO REVIEW BY CHEMICAL BANK
LETTER OF CREDIT DEPARTMENT]
EXHIBIT I
IRREVOCABLE LETTER OF CREDIT No. ______________
Date: ___________, 1996
BENEFICIARY:
Mr. Warren Feldberg ("Beneficiary")
75 Buttrick's Hill Road
Concord Massachusetts
Dear Sir:
We hereby establish our Irrevocable Letter of Credit Number
T-__________ in your favor at the request and for the account of The Caldor
Corporation ("Caldor") for an aggregate amount not to exceed USD $3,900,000.
Funds under this Letter of Credit are available to you upon
presentation of your draft(s) at sight, drawn on Chemical Bank, stating on their
face "Drawn Under Chemical Bank Letter of Credit Number T-_________" accompanied
by your written statement purportedly signed by you (with your signature
authenticated by your bank) reading:
"The amount of this drawing USD $_______ under Chemical Bank Letter of
Credit Number T-________ represents funds due me by Caldor as [insert
either A or B]:
[A] 'Beneficiary's employment under the employment agreement
dated as of April 15, 1996 between Caldor and Beneficiary (as
amended by Amendment dated June __, 1996, the "Employment
Agreement") has terminated; the amount of this drawing is due
and unpaid from Caldor to Beneficiary pursuant to the
Employment Agreement; and Beneficiary subsequent to
termination of his employment with the Company has made a
written demand pursuant to Paragraph 17 of the Employment
Agreement for payment of at least the full amount being drawn
and such demand to the extent of the amount being drawn has
remained unsatisfied for a period of at least 45 days from the
date of such demand.'
[B] 'Caldor has failed to renew (whether pursuant to the
automatic extension provision set forth below or otherwise) or
7
<PAGE> 8
replace the Letter of Credit at least seventy-five (75) days
prior to the current expiration date of the Letter of Credit
or any extended expiration date; the Chief Financial Officer
of Caldor has not delivered or has withdrawn the termination
notice that is referred to in the Letter of Credit;
Beneficiary continues to be entitled to the benefits of the
Letter of Credit under the terms of the Employment Agreement;
and the proceeds of such drawing shall be held and applied by
Beneficiary in accordance with the terms of the Employment
Agreement'".
It is a condition of this Irrevocable Letter of Credit that it shall be
automatically extended for an additional period of ____________ (___) days,
unless at least One Hundred (100) days prior to its present expiration date we
send you notice in writing by registered mail, or hand delivery at the above
address, that we elect not to renew this Letter of Credit for such additional
period; however in no event shall this Letter of Credit be extended beyond the
final expiry date of November 18, 1997. Any such notice shall be effective when
sent by us.
This Letter of Credit shall expire on June __, 1997, the expiration
date, or the automatically extended expiration date of November 18, 1997 as
provided herein.
Notwithstanding the above, this Letter of Credit shall automatically
terminate prior to its expiration date on a date which is ten (10) days after,
and shall be immediately unavailable for a drawing under a certificate in the
form of alternative "B" above upon, receipted delivery to us of (1) a
certificate purportedly signed by Caldor's Chief Financial Officer reading:
"(i) The date of delivery of this Certificate is no earlier than the
end of the second full fiscal month (or, if the second full fiscal
month is the month of December, the third full fiscal month) following
the date on which a plan of reorganization for Caldor under Chapter 11
of the Federal Bankruptcy Code became effective in accordance with its
terms (the "Plan Effective Date"), (ii) the Average Days Payable
(defined as the accounts payable of The Caldor Corporation divided by
its cost of goods sold) for the most recent full fiscal month equals or
exceeds the Average Days Payable for the last three (3) full fiscal
months immediately prior to the Plan Effective Date (if such last three
(3) fiscal months included the fiscal month of December, such month has
been deleted from the determination of the average days payable and the
fiscal month preceding such three (3) month period has been substituted
in lieu thereof) and (iii) a copy of this Certificate has been
delivered to Mr. Warren Feldberg."
and (2) an "Agreed-Upon Procedures Report" purportedly issued by the regular
certified public accountants of Caldor substantially in the form of Exhibit __
hereto.
Notwithstanding the foregoing provisions of this paragraph, this Letter of
Credit shall not automatically terminate, and shall once more become available
for drawing, upon delivery to
8
<PAGE> 9
us prior to the end of the ten (10) day period of a certificate purportedly
signed by Caldor's Chief Financial Officer reading:
"The termination certificate delivered by me and dated ___________,
19__ is hereby withdrawn."
This Letter of Credit is not transferable in whole or in part, except
to your estate or personal representative upon your death.
This Letter of Credit sets forth in full the terms of our undertaking
and such undertaking shall not in any way be modified, amended or amplified by
reference to any documents, instrument or agreement referred to herein or to
which this Letter of Credit relates, and any such reference shall not be deemed
to incorporate herein by reference any document, instrument or agreement.
We hereby agree with you that all drafts drawn under and in accordance
with the terms and conditions of this Letter of Credit will be duly honored by
us. All documents presented to us in connection with any demand for payment
hereunder, as well as all other communications to us with respect to this Letter
of Credit, shall be in writing and addressed and presented to us at 55 Water
Street, 17th Floor, Room 1708, New York, New York 10041 Attention; Standby
Letter of Credit Department, and shall make specific reference to this Letter of
Credit Number T-_________.
We hereby issue this documentary credit in your favor. It is subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce Publication No. 500 (the "UCP").
CHEMICAL BANK
By:____________________________
Its Duly Authorized Officer
9
