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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended February 1, 1997
or
/ /TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ____________ to ____________
Commission file number 1-10745
THE CALDOR CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 06-1282044
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
20 GLOVER AVENUE, NORWALK, CT 06856-5620
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (203) 846-1641
Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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COMMON STOCK, $.01 PAR VALUE PER SHARE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: Common Stock Purchase Rights
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(Title of Class)
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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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/.
The aggregate market value at April 15, 1997 of the Common Stock, based on the
closing price of such stock on the New York Stock Exchange, held by
non-affiliates of the Registrant was approximately $29.6 million.
As of April 15, 1997, there were issued and outstanding 16,939,106 shares of
Common Stock of the Registrant.
Documents incorporated by reference
None
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Caldor Corporation (the "Registrant"), a Delaware corporation, and
its subsidiaries (collectively, the "Company") operate a leading upscale
discount retail chain offering a diverse line of branded and private-label
merchandise, including hardline products such as housewares, electronics,
furniture and toys and softline products such as apparel, shoes, jewelry,
cosmetics and domestics. As of April 15, 1997, the Company operated 157 stores
in ten East Coast and Mid-Atlantic states, including the key markets of
Connecticut, New York City, Long Island, Westchester County, the Hudson River
Valley of New York State, northern New Jersey and the greater Boston,
Philadelphia and Baltimore areas. The Company's stores are located primarily in
urban/suburban areas with high population densities. For further information,
see "Item 2. Properties."
From time to time, information provided by the Company, statements made
by its employees ("Associates") or information included in its filings with the
Securities and Exchange Commission (the "SEC") (including the Annual Report on
Form 10-K) may contain statements that are not historical facts, so-called
"forward-looking statements," which involve risks and uncertainties. In
particular, statements in "Business" related to the Company's business
strategies and the Company's ability to compete, and in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
relating to the sufficiency of capital to meet working capital and capital
expenditures requirements may be forward-looking statements. The Company's
actual future results may differ significantly from those stated in any
forward-looking statements. Factors that may cause such differences include,
but are not limited to, the factors discussed below. Each of these factors, and
others, are discussed from time-to-time in the Company's filings with the SEC.
The Company's future results are subject to substantial risks and
uncertainties. As described below, the Company is presently operating its
business as a debtor-in-possession under the Bankruptcy Code and its future
results are subject to the development and confirmation of a plan of
reorganization. The Company's business is seasonal; a majority of its sales and
income from operations are generated during the fourth quarter of the fiscal
year which includes the Christmas selling season. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Selected Quarterly Data (Unaudited)" for additional information concerning
quarterly results. Any substantial decrease in sales during such period would
have a material adverse effect on the financial condition, results of operations
and liquidity of the Company. The Company has working capital needs which are
expected to be funded largely through borrowings under the post-petition
revolving credit and letter of credit facility (the "DIP Facility"). The DIP
Facility contains financial and other covenants that restrict, among other
things, the ability of the Company and its subsidiaries to incur additional
indebtedness, create liens, pay dividends on or repurchase shares of capital
stock, and make certain loans, investments or guarantees. Such restrictions may
limit the Company's operating and financial flexibility. On May 2, 1997, Chase,
as agent for the bank group under the DIP Facility, advised the Company that
the bank group had agreed to extend the DIP Facility to June 15, 1998 (the "DIP
Extension"). For further information, see "Reorganization Case."
References in this Annual Report on Form 10-K to a particular year mean
the Company's fiscal year; e.g. references to 1996 mean the fiscal year ended
February 1, 1997.
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REORGANIZATION CASE
On September 18, 1995, the Registrant and certain of its subsidiaries
(collectively, the "Debtors" or the "Company") filed voluntary petitions (the
"Filing") for relief under Chapter 11 of the United States Bankruptcy Code
("Chapter 11"). The Debtors are presently operating their business as
debtors-in-possession subject to the jurisdiction of the U. S. Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). For further
information, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and notes to consolidated financial
statements.
In connection with the Filing, on October 17, 1995, the Bankruptcy
Court entered a final order (the "Final Order") approving the DIP Facility as
provided under the Amended and Restated Revolving Credit and Guaranty Agreement
dated as of October 17, 1995, among the Registrant, as the borrower thereunder,
the subsidiaries of the Registrant named therein, as the guarantors thereunder,
and a bank group led by Chemical Bank (now merged with, and known as The Chase
Manhattan Bank) ("Chase"). The DIP Facility amends and restates, in its
entirety, the Registrant's Debtor-In-Possession Revolving Credit and Guaranty
Agreement dated as of September 18, 1995 with Chase as agent. Pursuant to the
terms of the DIP Facility, as amended, the bank group has made available to the
Registrant a revolving credit and letter of credit facility in an aggregate
principal amount, at February 1, 1997, not to exceed a total of $492.4 million,
divided into two separate tranches consisting of (i) a post-petition
revolving credit and letter of credit facility in an aggregate principal amount
not to exceed $250 million (reflecting the Second Amendment (as hereinafter
defined)) to be made available by Tranche A Banks (the "Tranche A Facility") and
(ii) the continued use of the revolving credit and letter of credit portion of
the pre-petition credit facility made available by the Tranche B Banks (the
"Tranche B Facility") in an aggregate principal amount of $242.4 million which
principal amount may be borrowed, paid and reborrowed. The Company's maximum
borrowing under the Tranche A Facility, up to $250 million, may not exceed the
lesser of 60% of Eligible Cost Value of Inventory or 50% of Eligible Retail
Value of Inventory (the "Borrowing Base"). At February 1, 1997, the Borrowing
Base was $243.1 million. The DIP Facility has a sublimit of $175 million for the
issuance of letters of credit. The Tranche B Facility must be fully utilized
before the Company can borrow under the Tranche A Facility. On July 16, 1996,
the Bankruptcy Court approved the Second Amendment to the DIP Facility (the
"Second Amendment") which, among other things, provided for rescinding a $50
million line reduction of the Tranche A Facility commitment that took effect on
May 4, 1996 and eliminating the $50 million line reduction of the Tranche A
Facility commitment that was scheduled for October 5, 1996. Instead, the Second
Amendment provided for an automatic $50 million line reduction of the Tranche A
Facility commitment on May 3, 1997. On March 12, 1997, the Company, the
guarantors and the bank group entered into an amendment to the DIP Facility
providing that all of the proceeds of the 4 Store Closing Sales (as hereinafter
defined) are to be applied to a prepayment of the Tranche B loans and that the
Tranche B Facility commitment be reduced by such amount. Pursuant to this
amendment, 70% of the proceeds have been applied in this manner and the balance
is to be so applied no later than 60 days after the conclusion of the 4 Store
Closing Sales. The DIP Facility expires on the earlier of September 18, 1997 or
the date of an entry of an order by the Bankruptcy Court confirming a plan of
reorganization.
On May 2, 1997, Chase, as agent for the bank group under the DIP
Facility, advised the Company that the bank group had agreed to extend the DIP
Facility to June 15, 1998 subject to the execution of documentation and
Bankruptcy Court approval. The DIP Extension provides for a total commitment
of $450 million consisting of a Tranche A Facility of $250 million and a
Tranche B Facility of $200 million. In addition, the DIP Extension amends the
DIP Facility to provide for, among other things, a mandatory paydown of the
aggregate principal amount of the outstanding loans (exclusive of letters of
credit) to $165 million for a period of 15 consecutive business days
during the period from December 15, 1997 through January 15, 1998, capital
expenditures not to exceed $30 million through the fiscal year ending January
31, 1998 and $16 million (subject to a $3 million increase if certain EBITDA
projections are achieved) thereafter through the maturity date, revised EBITDA
thresholds for the trailing four quarters for each of the fiscal quarters in
fiscal year 1997 and for the fiscal quarter ending April 30, 1998, and revised
monthly inventory amounts through June 15, 1998. In all other material
respects the DIP Facility remains unchanged.
The Final Order provides that (i) the Company pay monthly interest
payments on the outstanding principal amount of pre-petition indebtedness under
the term portion of the pre-petition credit facility (the "Term Loan") and the
real estate based loan agreement (the "Real Estate Loan") between the Company
and Chase and (ii) the lenders under such pre-petition facilities be granted a
replacement security interest in and lien upon all of the properties and assets
of the Company. The outstanding principal amounts on the Term Loan and the Real
Estate Loan have been classified as
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liabilities subject to compromise on the consolidated balance sheet (see note
6 to consolidated financial statements).
The United States Trustee for the Southern District of New York has
appointed Official Committees ("Committees") of Unsecured Creditors and Equity
Security Holders for the Chapter 11 case. The role of the Committees includes,
among other things: (a) consultation with the Debtors concerning the
administration of the Chapter 11 case; (b) investigation of the acts, conduct,
assets, liabilities, financial condition and operations of the Debtors, and the
desirability of the continuation of their business and other relevant matters;
and (c) participation in the formulation of a plan of reorganization. In
discharging these responsibilities, the Committees have standing to raise issues
with the Bankruptcy Court relating to the business of the Debtors and the
conduct and course of the Chapter 11 case. The Debtors are required to pay
certain expenses of the Committees, including professional fees, to the extent
allowed by the Bankruptcy Court.
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. Amended and restated schedules were 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. The
Bankruptcy Court fixed August 12, 1996 as the last date by which creditors of
the Debtors could file proofs of claim for claims that arose prior to the
Filing. The Debtors are in the process of reconciling differences between
amounts shown by the Debtors and claims filed by creditors. 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.
The Bankruptcy Court has extended the period in which the Debtors possess the
exclusive right to file a plan of reorganization through September 1, 1997, and
the period in which the Debtors can solicit acceptances for the plan of
reorganization through October 30, 1997. At this time, it is uncertain what, if
anything, a plan of reorganization may provide for equity security holders.
On June 7, 1996, the Bankruptcy Court approved the Debtors' reclamation
program, which authorizes the Debtors to settle the claims of 425 vendors that
submitted reclamation demands at the time of Filing. The program provides for
each reclamation vendor that extends mutually acceptable credit support to
receive both a cash payment of up to 50% of its eligible reclamation claim and
priority treatment for the remainder of its claim. Reclamation cash payments of
$11.6 million were made in 1996. To the extent these payments exceed $10
million, the Debtors are required to apply such excess to pay down the Term Loan
in an equivalent amount (up to $8.5 million). As of February 1, 1997 the Debtors
had paid down $1.4 million of the Term Loan related to the reclamation program.
On December 6, 1996 the Company presented its Five-Year Business Plan
(the "Business Plan") to the Company's Creditor, Bank and Equity Committees
setting forth its strategy to restore the Company to long-term profitability by
raising customer satisfaction levels, revamping advertising programs, lowering
everyday prices and focusing its promotional activity, narrowing and refocusing
merchandise assortments, and implementing improved operating efficiencies and
cost reductions. To implement its strategy to restore the Company to long-term
profitability, the Company has continued to strengthen its management team. For
further information regarding the management team, see "Item 10. Directors and
Executive Officers of the Registrant." In order to raise customer satisfaction
levels, the Company plans to focus on
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improving in-stocks and customer service by reducing levels of promotional
activity combined with more efficient product flow as a result of the new
regionalized distribution network.
The Company has discontinued regular coupon sales and one-day sale
events, has reduced the number of circular pages and the number of promotional
items in each circular and has eliminated the distribution of midweek circulars,
with the exception of selected weeks. The Company made the determination that
the discontinued marketing programs were neither profitable nor compatible with
its long term marketing strategy. In 1997, the Company plans to continue to
reduce the number of circular pages and promotional items and to focus on key
items and categories in order to reduce costs and improve in-stock positions,
and promote the Company's upscale image and draw more customers into its stores
through more compelling circulars.
In the third and fourth quarters of 1996, the Company introduced its
Price Cut Program which lowered everyday prices on selected items in
electronics, health and beauty aids, diapers, household chemicals, furniture,
hardware and housewares. The Company believes that this will rebuild customers'
perceptions of Caldor as an everyday fair price store. The Company is currently
evaluating extending the Price Cut program to other product categories. By
lowering everyday prices on a variety of frequently purchased items, the Company
has been able to stimulate regular priced business. The Company will continue to
offer a broad range of products, but plans to prioritize the family apparel and
fashion home categories that it believes differentiate the Company from the
competition and appeal to its upscale core customer. In addition, the Company
has examined each of its departments and is reallocating selling space to
present a more focused value and quality message to its customers.
The Company believes that the Business Plan sets forth a strategic
direction to take advantage of its strengths and to improve key areas of its
business. The Company will continue to review and refine the Business Plan.
Under Chapter 11, 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.
Under Section 502 of the Bankruptcy Code, a lessor's claim for damages resulting
from the rejection of a real property lease is limited to the rent provided
under such lease, without acceleration, for the greater of one year, or 15%, not
to exceed three years, of the remaining term of the lease following the earlier
of the date of the Filing or the date on which the property is returned to the
landlord. Forty-five of the Company's store leases, including three which were
rejected in 1996, are guaranteed by the Company's former parent, The May
Department Stores Company ("May Company"). Prior to the Filing, the Company had
agreed to indemnify May Company for any damages incurred by May Company under
its guaranties. Accordingly, the Company's liability to May Company for the
amount of the remaining payments on these leases, if rejected, may not be
limited under Section 502 of the Bankruptcy Code. A landlord may also have a
claim for unpaid pre-petition rent. As of April 15, 1997, the Debtors had
rejected leases for 26 locations and moved to reject two others (14 closed
stores and 14 additional real estate leases), assumed 15 real estate leases
(seven of which were for stores opened prior to 1996, two for warehouses and the
balance were for stores that were opened in 1996), conditionally assumed two
real estate leases and had reached agreement with landlords to terminate,
without liability, seven additional leases. The Company is required by an order
of the Bankruptcy Court, subject to the right of both the Company and the
applicable landlord to move to accelerate for due cause shown, to make a
decision to assume or reject an additional two leases by September 30, 1997, 43
leases by March 31, 1998 and the balance of real property leases on confirmation
of its plan of reorganization. As part of the ongoing review
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of its operations, the Company is currently negotiating with landlords regarding
rent reductions and lease restructurings.
On April 2, 1996, the Bankruptcy Court approved the closing of 12
under-performing stores and the Debtors' retention of a liquidator to conduct
store closing sales (the "Closing Sales"). These sales were completed and the
stores were closed by the end of June 1996. On July 16, 1996, the Bankruptcy
Court directed the application of the net proceeds of such Closing Sales to the
payment of the Term Loan. The Company paid $22.5 million to Chase for
application to the Term Loan and will similarly apply that portion of the
remaining net proceeds (approximately $4 million) upon resolution of a
litigation brought by the liquidators of the inventory of those 12 stores. As
part of the Company's ongoing review process, the Company identified, and on
March 12, 1997 obtained Bankruptcy Court approval to close, four
under-performing stores in 1997. The Company has retained a liquidator that has
completed store closing sales at two of these locations and currently is
conducting store closing sales at the other two locations (the "4 Store Closing
Sales"). The proceeds of the 4 Store Closing Sales are to be applied to a
prepayment of the Tranche B loans.
The Debtors continue to review leases and contracts, as well as other
operational and merchandising changes, and cannot presently determine or
reasonably estimate the ultimate outcome of, or liability resulting from, this
review.
MERCHANDISING
The Company seeks to position itself as an upscale discount store. To
achieve this objective, the Company emphasizes quality branded hardline and
softline products, seeks to respond quickly to emerging fashion and product
trends and has enhanced its softlines presentation and assortment. In the third
and fourth quarters of 1996, to better balance its promotional and
regular-priced business and to provide fair prices everyday, the Company
introduced its Price Cut Program, which lowered everyday prices on selected
items in electronics, health and beauty aids, diapers, household chemicals,
furniture, hardware and housewares. The Company believes that this will rebuild
customers' perceptions of Caldor as an everyday fair price store. The Company is
currently evaluating extending the Price Cut Program to other product
categories.
The Company's stores feature nationally branded hardline and softline
merchandise, including KitchenAid, Farberware, Nikko, Westpoint Stevens, Sony,
Braun, Wrangler, Britannia and Hanes. Softline sales and hardline sales as a
percentage of total sales in 1996 were 40% and 60%, respectively. The Company's
softline merchandise balances quality, fashion and price and its principal
apparel lines consist of casual and weekend wear. Although the Company relies
primarily on purchases from domestic resources, the Company's direct imports in
1996 totaled approximately 12% of total purchases.
STORES
Management. The management of the Company's stores is regionalized in
order to provide operational and merchandising assistance to the stores. Each of
the Company's store managers reports to one of 12 district managers, who in turn
report to one of two regional vice presidents. The districts are divided into
two geographical regions, each of which is headed by a regional vice president
who reports to the Executive Vice President - Store Operations. In addition, the
management team at the corporate level
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monitors store functions and attempts to implement improvements to enhance the
efficiency and effectiveness of work processes.
Prototype. The Company's newer and recently remodeled stores feature a
customer-friendly store format with upscale fixtures, bright color schemes,
improved lighting, focal and impact areas (for electronics, jewelry, domestics
and housewares) and wider aisles which are an integral part of the Company's
customer-oriented strategy. The Company remodeled 48 stores during the past five
years to incorporate many of these features. The Company continues to refine its
prototype store and plans to remodel four stores in 1997.
CUSTOMER DRIVEN
The Company emphasizes a customer-driven culture throughout its
organization in order to improve the shopping experience. The Company provides
management training and incentives to promote and reward customer service in its
stores. A Company-wide Friendliness Program, monitored by customer surveys,
encourages proactive customer service by store Associates. Positive recognition
and performance evaluations are tied to stores' Friendliness ratings and
in-stock performance.
MARKETING, ADVERTISING AND PROMOTION
Color circulars are the primary components of the Company's advertising
program. Circulars are distributed in major newspapers and by hand delivery in
each of the Company's markets on every weekend of the year and selectively
during midweek. These circulars generally range from 16 to 48 pages, average 29
pages, and typically contain between 250 and 350 promotional items. The Company
has taken steps to better focus its advertising and reduce the number of items
featured, which will also simplify ordering and store handling of merchandise.
The Company also implemented its Price Cut program on certain items in the
third quarter of 1996. In 1997, the Company plans to continue to reduce the
number of circular pages and the number of promotional items in order to reduce
costs and improve in-stock positions, and promote the Company's upscale image
and draw more customers into its stores through more compelling circulars. In
1995, television commercials were reinstituted during the Christmas season as
part of the Company's advertising program. The Company also participates with
vendors in vendor-paid cooperative advertising. In 1996, 1995 and 1994, net
advertising costs constituted approximately 1.3%, 1.4% and 1.1%, respectively,
of the Company's total sales.
PURCHASING, DISTRIBUTION AND INVENTORY MANAGEMENT
Merchandise is purchased, primarily through the Company's centralized
buying organization, from over 3,000 manufacturers and suppliers. During 1996,
the Company's top 25 domestic vendors accounted for approximately 24% of net
purchases, and no one vendor accounted for more than 3%.
The Company's distribution centers are located in North Bergen, New
Jersey and Westfield, Massachusetts. In September 1996, the Company converted to
a regionalized distribution network by closing its Newburgh, New York facility
and opening a new facility in Westfield, Massachusetts. Under this new
regionalized network, using automated sortation handling systems, each facility
handles the full range of merchandise distribution for its respective region.
The North Bergen facility was expanded in 1989 and upgraded in 1992. The Company
plans to design and implement a comprehensive warehouse
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management system to enhance merchandise receiving, inventory management and
paperless processing in order to further increase efficiency and reduce overhead
costs.
COMPETITION
The general merchandise discount retail business is highly competitive.
The Company considers merchandise selection, quality, in-stock positions,
pricing, store location, shopping environment, customer service and advertising
to be the most significant competitive factors. Because of the broad range of
merchandise sold, the Company, which on the basis of annual sales volume is the
fourth largest discount department store chain in the U.S., competes with a
variety of national, regional and local discounters, department stores,
specialty stores and retail chains, some of which are larger and better
capitalized than the Company. Competition will increase as competitors open
additional stores in the Company's market areas.
TRADEMARKS AND LICENSES
The Company owns the "Caldor" name, which it uses as a tradename and
service mark and as a trademark in connection with various merchandise. The
Company also uses various other registered and common law trademarks and trade
names pursuant to which it markets certain merchandise. The Company believes
that no individual trademark or tradename, other than "Caldor", is material to
the Company's competitive position in the industry.
ASSOCIATES
As of April 15, 1997, the Company and its subsidiaries employed
approximately 22,000 Associates. Approximately 8,000 additional persons are
employed temporarily during the Christmas season. Substantially all of the
Company's retail store and distribution center Associates are represented by
unions. The Company has never suffered a strike and believes that its relations
with its Associates and their unions are good.
ITEM 2. PROPERTIES
As of April 15, 1997, the Company and its subsidiaries operated 157
stores in a corridor comprised of ten East Coast and Mid-Atlantic states. The
Company's stores are located in well-established, high-traffic retail corridors,
strip shopping centers and enclosed shopping malls, or operate as free-standing
units, primarily in or near densely populated urban and suburban locations. The
Company's stores average approximately 101,100 square feet. Approximately 75% of
the square footage is used as selling space and the remainder is used for
merchandise processing, temporary storage and store administration.
As of April 15, 1997, the Company operated stores in the following
states: Connecticut (30), Delaware (3), Maryland (14), Massachusetts (22), New
Hampshire (1), New Jersey (26), New York (46), Pennsylvania (10), Rhode Island
(2) and Virginia (3).
The Company owns seven stores (three of which include land and
building, and four, the building only), its MIS facility in Trumbull,
Connecticut and has construction loans on two store locations, with the
remainder of its facilities operated under predominantly long-term leases. The
typical store lease has an initial term of 20 years, with renewal options
between 10 and 30 years, exercisable at the Company's option.
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In April 1996, the Company entered into a lease for a 649,521 square
foot distribution center in Westfield, Massachusetts. The initial term of the
Westfield lease is 25 years with two 10 year renewal periods at the Company's
option. The Company has the option, during the first 10 years of the lease, to
add up to 350,500 square feet to the facility. The Company also leases a
616,000 square foot facility located in North Bergen, New Jersey. For further
information, see "Item 1. Business--Purchasing, Distribution and Inventory
Management." The Company also leases its corporate headquarters located in
Norwalk, Connecticut and administrative facilities located in North Ridgeville,
Ohio and Sheffield Lake, Ohio. All of these facilities have leases with terms
subject to renewal by the Company. The Company sublets its excess land parcels
and retail space to generate additional revenue. All of the properties and
assets of the Company currently are subject to security interests and liens
under the Company's various credit facilities. For further information, see
"Item 1. Business--Reorganization Case."
As part of the Company's ongoing review of its operations, the Company
identified, and on March 12, 1997 obtained Bankruptcy Court approval to close,
four under-performing stores, consisting of two stores in the New York City
market; one store in Massachusetts; and one store in Rhode Island. The Company
has retained a liquidator that has completed store closing sales at two of these
locations and currently is in the process of conducting store closing sales at
the other two locations. The Company also closed 12 stores in 1996, consisting
of five stores in the Rochester, New York market; three stores in the Syracuse,
New York market; two stores in Massachusetts; one store in Connecticut; and one
store on Long Island, New York.
In 1996, the Company opened seven new stores located in District
Heights, Maryland; Glen Oaks, New York; Philadelphia, Pennsylvania; Westbury,
New York; Silver Spring, Maryland; Brooklyn, NY, and Edgewater, New Jersey.
The Company believes that the sites of its new stores are consistent with its
strategy of focusing on urban/suburban markets.
As of April 15, 1997, the Debtors had rejected leases for 26 locations
and moved to reject two others (14 closed store leases and 14 additional
locations), assumed 15 real estate leases (seven of which were for stores opened
prior to 1996, two were for warehouses and the balance were for stores that were
opened in 1996), conditionally assumed two real estate leases and reached
agreements with landlords to terminate an additional seven leases without
liability. For further information regarding "assumption" and "rejection," see
"Item 3. Legal Proceedings--Commencement of Chapter 11 Case -- Chapter 11
Reorganization Under the Bankruptcy Code."
ITEM 3. LEGAL PROCEEDINGS
COMMENCEMENT OF CHAPTER 11 CASE
While the following discussion provides general background information
regarding the Debtors' Chapter 11 case, it is not intended to be an exhaustive
summary.
General. On September 18, 1995, the Debtors filed petitions for relief
under Chapter 11 of the Bankruptcy Code. The individual Chapter 11 cases were
consolidated for procedural purposes only and are being jointly administered by
the Bankruptcy Court. See "Item 1. Business -- Reorganization Case".
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Chapter 11 Reorganization Under the Bankruptcy Code. Pursuant to
Section 362 of the Bankruptcy Code, during a Chapter 11 case, creditors and
other parties in interest may not, without Bankruptcy Court approval: (i)
commence or continue judicial, administrative or other proceedings against the
Debtors which were or could have been commenced prior to commencement of the
Chapter 11 case, or recover a claim that arose prior to commencement of the
case; (ii) enforce any pre-petition judgments against the Debtors; (iii) take
any action to obtain possession of or exercise control over property of the
Debtors or their estates; (iv) create, perfect or enforce any lien against the
property of the Debtors; (v) collect, assess or recover claims against the
Debtors that arose before the commencement of the case; or (vi) set off any debt
owing to the Debtors that arose prior to the commencement of the case against a
claim of such creditor or party in interest against the Debtors that arose
before the commencement of the case.
Although the Debtors are authorized to operate their businesses and
manage their properties as debtors-in-possession, they may not engage in
transactions outside of the ordinary course of business without complying with
the notice and hearing provisions of the Bankruptcy Code and obtaining
Bankruptcy Court approval.
An Official Unsecured Creditors' Committee and an Official Committee of
Equity Security Holders have been appointed by the United States Trustee and are
acting in the Chapter 11 case of the Debtors. The Debtors are required to pay
certain expenses of these committees and those of the Steering Committee of the
banks participating in the DIP Facility, including counsel, accountants' and
financial advisors' fees to the extent allowed by the Bankruptcy Court.
As debtors-in-possession, the Debtors have the right, subject to
Bankruptcy Court approval and certain other limitations, to assume or reject
executory, pre-petition contracts and unexpired leases. In this context,
"assumption" requires the Debtors to perform their obligations and cure all
existing defaults under the assumed contract or lease and "rejection" means that
the Debtors are relieved from their obligations to perform further under the
rejected contract or lease, but are subject to a claim for damages for the
breach thereof subject to certain limitations contained in the Bankruptcy Code.
Any damages resulting from rejection are treated as general unsecured claims in
the reorganization.
Under the Bankruptcy Code, a creditor's claim is treated as secured
only to the extent of the value of such creditor's collateral, and the balance
of such creditor's claim is treated as unsecured. Generally, unsecured and
undersecured debt does not accrue interest after the filing.
Pre-petition claims which were contingent or unliquidated at the
commencement of the Chapter 11 case are generally allowable against the Debtors
in amounts to be fixed by the Bankruptcy Court or otherwise agreed upon. These
claims, including, without limitation, those which arise in connection with the
rejection of executory contracts, including leases, are expected to be
substantial. The Company has established a reserve approximating what the
Company believes will be its liability under these claims. The Bankruptcy Court
fixed August 12, 1996 as the last date by which creditors of the Debtors could
file proofs of claim for claims that arose prior to the Filing.
Plan of Reorganization - Procedures. For 120 days after the date of the
filing of a voluntary Chapter 11 petition, a debtor has the exclusive right to
propose and file a plan of reorganization with the Bankruptcy Court and an
additional 60 days within which to solicit acceptances to any plan so filed (the
"Exclusive Period"). The Bankruptcy Court may increase or decrease the Exclusive
Period for cause shown, and as long as the Exclusive Period continues, no other
party may file a plan of reorganization.
-10-
<PAGE> 11
Given the magnitude of the Debtors' operations and the number of
interested parties asserting claims that must be resolved in the Chapter 11
case, the plan formulation process is complex. The Debtors currently retain the
exclusive right to propose and solicit acceptances of a plan or plans of
reorganization until September 1, 1997 and October 30, 1997, respectively.
If a Chapter 11 debtor fails to file its plan during the Exclusive
Period or after such plan has been filed fails to obtain acceptance of such plan
from impaired classes of creditors and equity security holders during the
exclusive solicitation period, any party in interest, including a creditor, an
equity security holder or a committee of creditors or equity security holders,
may file a plan of reorganization for such Chapter 11 debtor.
Inherent in a successful plan of reorganization is a capital structure
which permits the Company to generate sufficient cash flow after reorganization
to meet its restructured obligations and fund the current obligations of the
Company. Under the Bankruptcy Code, the rights and treatment of pre-petition
creditors and stockholders may be substantially altered. At this time it is not
possible to predict the outcome of the Chapter 11 case, in general, or the
effects of the Chapter 11 case on the business of the Company or on the
interests of creditors. At this time, it is uncertain what, if anything, a plan
of reorganization may provide for equity security holders.
Generally, after a plan has been filed with the Bankruptcy Court, it
will be sent, with a disclosure statement approved by the Bankruptcy Court
following a hearing, to members of all classes of impaired creditors and equity
security holders for acceptance or rejection. Following acceptance or rejection
of any such plan by impaired classes of creditors and equity security holders,
the Bankruptcy Court, after notice and a hearing, would consider whether to
confirm the plan. Among other things, to confirm a plan the Bankruptcy Court is
required to find that (i) each impaired class of creditors and equity security
holders will, pursuant to the plan, receive at least as much as the class would
have received in a liquidation of the debtor and (ii) confirmation of the plan
is not likely to be followed by the liquidation or need for further financial
reorganization of the debtor or any successor to the debtor, unless the plan
proposes such liquidation or reorganization.
To confirm a plan, the Bankruptcy Court generally is also required to
find that each impaired class of creditors and equity security holders has
accepted the plan by the requisite vote. If any impaired class of creditors or
equity security holders does not accept a plan but all of the other requirements
of the Bankruptcy Code are met, the proponent of the plan may invoke the
so-called "cram down" provisions of the Bankruptcy Code. Under these provisions,
the Bankruptcy Court may confirm a plan notwithstanding the non-acceptance of
the plan by an impaired class of creditors or equity security holders if certain
requirements of the Bankruptcy Code are met, including that (i) at least one
impaired class of claims has accepted the plan, (ii) the plan "does not
discriminate unfairly" and (iii) the plan "is fair and equitable with respect to
each class of claims or interests that is impaired under, and has not accepted,
the plan." As used by the Bankruptcy Code, the phrases "discriminate unfairly"
and "fair and equitable" have narrow and specific meanings unique to bankruptcy
law.
-11-
<PAGE> 12
OTHER PENDING LEGAL PROCEEDINGS: CLASS ACTIONS
On or about September 13, 1995, a class action complaint was filed in
the United States District Court for the District of Connecticut (the
"Connecticut District Court") by Joel A. Gerber (the "Gerber Complaint") against
the Company and certain of its former officers and directors. The action seeks
to recover damages on behalf of all persons who purchased the Company's common
stock between August 23, 1995 through September 11, 1995. The Gerber Complaint
alleges the defendants made material misrepresentations and omissions in
statements to the press on August 23 and 24, 1995, concerning the Company's
relationships with its vendors and factors, as well as the Company's ability to
maintain current payments, in violation of the provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
A second class action complaint was filed on or about September 21,
1995 in the Connecticut District Court against certain of the Company's former
officers and directors (but not the Company) by Lawrence Cowit and others (the
"Cowit Complaint"). The action seeks to recover damages on behalf of all persons
who purchased the Company's common stock between June 22, 1995 through September
15, 1995. The Cowit Complaint alleges the defendants made materially false and
misleading representations and omissions concerning the Company's credit
position and relationship with crucial creditors, as well as the likelihood that
the Company would deviate from its business plan, all in violation of the
provisions of the Exchange Act. The Cowit Complaint further asserts that the
Company disseminated a series of positive press releases regarding new store
openings which were allegedly false and misleading because the Company would not
be able to sustain its expansion program.
A third class action complaint was filed by Dominic Pignetti (the
"Pignetti Complaint") on or about October 27, 1995 in the Connecticut District
Court against certain of the Company's former officers and directors (but not
the Company). The action seeks to recover damages on behalf of all persons who
purchased the Company's common stock between February 27, 1995 through September
15, 1995. The Pignetti Complaint alleges the defendants made materially false
statements and omissions in the press, the Company's annual report and other SEC
filings by failing to disclose the Company's allegedly strained relationships
with its trade factors and suppliers and the adequacy of financing for Company
operations and planned growth, all in violation of the provisions of the
Exchange Act. In addition, the Pignetti Complaint, based upon the same
allegations, asserts claims for negligent misrepresentation and common law
fraud.
A fourth class action complaint was filed on or about November 30,
1995 in the Connecticut District Court by Ann V. Nelms and others (the "Nelms
Complaint") against certain of the Company's former officers and directors (but
not the Company). The action seeks to recover damages on behalf of all persons
who purchased the Company's common stock between February 6, 1995 through
September 15, 1995. The Nelms Complaint alleges that the defendants made
materially false statements and omissions in the press, the Company's annual
report and other SEC filings purportedly concerning the Company's relationships
with its factors and its bankers, its ability to finance its growth plans, and
its need for additional bank financing; all in violation of the provisions of
the Exchange Act. In addition, the Nelms Complaint asserts claims for negligent
misrepresentation and common law fraud.
Pursuant to an Order of Consolidation, the Gerber, Cowit and Nelms
actions were consolidated (the "Consolidated Action"), and a consolidated
amended complaint was served on December 18, 1995. On the same date, a separate
amended complaint was served in the Pignetti action, which was not subject to
the Order of Consolidation. The amended complaints assert claims only against
certain of the Company's
-12-
<PAGE> 13
former officers and directors. Although the Company is not a named defendant in
either the Consolidated Action or the Pignetti action, a proof of claim was
filed in the Chapter 11 case by the plaintiffs in the Consolidated Action. The
amount of liability, if any, related to these actions is not presently
determinable.
On December 18, 1995, the Company commenced an adversary proceeding in
Bankruptcy Court and brought on a motion for a preliminary injunction by order
to show cause to stay proceedings in all of the pending stockholder class action
litigations against the remaining defendants. The Bankruptcy Court entered an
order, dated February 7, 1997, granting the Company's motion for a preliminary
injunction enjoining prosecution of the class actions until further order of the
Bankruptcy Court. Although the Company is required to indemnify the defendants
to the extent provided by Delaware law, the Company has directors and officers
liability coverage. As a result of the preliminary injunction, none of the
former officers or directors named as a defendant in any of the actions has been
required to answer any of the foregoing complaints, which actions are believed
by the Company to be without merit and will be vigorously defended.
OTHER ACTIONS
The Company and certain of its subsidiaries are defendants in various
other actions commenced by vendors, customers, former employees and others that
are incidental to the normal course of its business. Similarly situated persons
have asserted claims against the Company but have not made those claims the
subject of litigation. However, cases that relate to a claim that arose before
the Filing generally were stayed pursuant to Section 362 of the Bankruptcy Code
and are to be dealt with as part of the claims resolution process.
The Company believes that the ultimate outcome of the foregoing actions
and claims pending will not have a material adverse effect on its consolidated
financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-13-
<PAGE> 14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "CLD." The last reported sale price of the Company's
Common Stock on the NYSE Composite Tape on April 15, 1997 was $1-3/4. The
approximate number of holders of the Company's Common Stock as of such date was
16,800.
The Company has not paid, and has no current plans to pay in the
foreseeable future, dividends on its Common Stock. As detailed in "Item 3. Legal
Proceedings," the Debtors have filed for protection under Chapter 11 of the
Bankruptcy Code and the Company is precluded from paying dividends until such
cases have been concluded. The DIP Facility prohibits the declaration of cash
dividends on the Company's Common Stock.
COMMON STOCK PRICE
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1996
High 4-3/4 4-1/4 2-3/8 1-7/8
Low 2-7/8 1-5/8 1-5/8 1
1995
High 24-1/4 21-1/8 13-3/4 5-1/8
Low 18-5/8 13-3/8 3-1/4 2-7/8
</TABLE>
-14-
<PAGE> 15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
THE CALDOR CORPORATION AND SUBSIDIARIES
(in thousands, except
per share data) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
OPERATING DATA:
<S> <C> <C> <C> <C> <C>
Net sales $ 2,602,456 $ 2,765,525 $2,748,634 $2,414,124 $2,127,684
Cost of merchandise sold 1,935,500 2,131,281 1,961,475 1,742,276 1,527,731
----------------------------------------------------------------------------------
Gross margin 666,956 634,244 787,159 671,848 599,953
Selling, general and
administrative expenses
(net of depreciation and
amortization) 669,434 713,916 631,805 528,913 462,296
Depreciation and
amortization 55,323 61,081 48,478 40,501 34,954
Interest expense, net 39,502 40,973 34,948 34,904 39,934
----------------------------------------------------------------------------------
Earnings (loss) before
reorganization items,
income taxes, extraordinary
items and cumulative effect
of accounting changes (97,303) (181,726) 71,928 67,530 62,769
Reorganization items 87,522 170,731 -- -- --
----------------------------------------------------------------------------------
Earnings (loss) before
income taxes, extraordinary
items and cumulative effect
of accounting changes (184,825) (352,457) 71,928 67,530 62,769
Income tax provision(benefit) 500 (59,825) 27,569 26,152 25,507
----------------------------------------------------------------------------------
Earnings (loss) before
extraordinary items and
cumulative effect of
accounting changes (185,325) (292,632) 44,359 41,378 37,262
Extraordinary items -- (8,396) -- (5,378) --
Cumulative effect of
accounting changes -- -- -- (2,768) (2,812)
----------------------------------------------------------------------------------
Net earnings (loss) $ (185,325) $ (301,028) $ 44,359 $ 33,232 $ 34,450
==================================================================================
EARNINGS (LOSS) PER SHARE:
Earnings (loss) before
extraordinary items and
cumulative effect of
accounting changes $ (10.91) $ (17.30) $ 2.65 $ 2.50 $ 2.54
----------------------------------------------------------------------------------
Net earnings (loss) $ (10.91) $ (17.79) $ 2.65 $ 2.01 $ 2.35
----------------------------------------------------------------------------------
BALANCE SHEET DATA:
Merchandise inventories $ 450,499 $ 499,948 $ 550,932 $ 468,069 $ 407,176
Working capital 102,119 271,365 42,220 80,587 113,755
Total assets 1,050,523 1,174,019 1,149,472 1,006,196 861,512
Long-term debt 18,463 8,640 236,699 272,065 303,839
Liabilities subject to
compromise 719,980 783,102
Stockholders' equity (deficit) (148,208) 37,208 337,166 291,757 204,065
</TABLE>
For further information, see notes to consolidated financial statements.
-15-
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The notes to consolidated financial statements are an integral part of
Management's Discussion and Analysis of Financial Condition and Results of
Operations and should be read in conjunction herewith.
On September 18, 1995, the Debtors filed voluntary petitions for
relief under Chapter 11 of the United States Bankruptcy Code and are presently
operating their business as debtors-in-possession subject to the jurisdiction
of the United States Bankruptcy Court for the Southern District of New York.
For further discussion of Chapter 11 proceedings, see "Item 1.
Business--Reorganization Case" and note 1 to consolidated financial statements.
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization
of assets and liquidation of liabilities and commitments in the normal course
of business. The Filing, related circumstances and the losses from operations,
raise substantial doubt about the Company's ability to continue as a going
concern. The appropriateness of using the going concern basis is dependent
upon, among other things, confirmation of a plan of reorganization, future
profitable operations, and the ability to generate sufficient cash from
operations and financing sources to meet obligations. As a result of the Filing
and related circumstances, however, such realization of assets and liquidation
of liabilities is subject to significant uncertainty. While under the
protection of Chapter 11, the Debtors may sell or otherwise dispose of assets,
and liquidate or settle liabilities, for amounts other than those reflected in
the accompanying consolidated financial statements. Further, a plan of
reorganization could materially change the amounts reported in the accompanying
consolidated financial statements. The consolidated financial statements do not
include any adjustments relating to a recoverability of the value of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary as a consequence of a plan of reorganization.
-16-
<PAGE> 17
RESULTS OF OPERATIONS
The Company's fiscal year ends on the Saturday closest to January 31.
References to 1996, 1995 and 1994 relate to the fiscal years ended February 1,
1997, February 3, 1996 and January 28, 1995, respectively. Each of these fiscal
years included 52 weeks except for 1995 which included 53 weeks. References to
years relate to fiscal years rather than calendar years. The following table
summarizes the Company's operating results for the years 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------ ----------------
(dollars in thousands) $ % $ % $ %
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 2,602,456 100.0 2,765,525 100.0 2,748,634 100.0
Cost of merchandise sold 1,935,500 74.4 2,131,281 77.1 1,961,475 71.4
Gross margin 666,956 25.6 634,244 22.9 787,159 28.6
Selling, general and
administrative expenses 724,757 27.8 774,997 28.0 680,283 24.7
Interest expense, net 39,502 1.5 40,973 1.5 34,948 1.3
Earnings (loss) before
reorganization items,
income taxes and extraordinary
items (97,303) (3.7) (181,726) (6.6) 71,928 2.6
Net earnings (loss) (185,325) (7.1) (301,028) (10.9) 44,359 1.6
</TABLE>
1996 VS. 1995
Net sales during 1996 decreased by 5.9% from 1995 due to a decrease in
same store sales, one less week of sales and the closing of 12 stores in 1996 (a
$115.5 million reduction in sales) partly offset by sales from the opening of 10
new stores since July 1995 (incremental sales of $116.9 million in 1996). For
1996, same store sales decreased 5.3% on a comparable 52 week basis from 1995.
The decrease in same store sales was primarily attributable to changes in the
Company's marketing strategy including the discontinuance of one-day sale
events, mid-week circulars and coupon sales, as well as the intensely
competitive retail environment. The Company made the determination that the
marketing programs it discontinued were neither profitable nor compatible with
its long-term marketing strategy. In addition, same store sales for the fiscal
month of December were lower primarily due to five fewer Christmas shopping days
and unseasonably warm weather in the Northeast. Hardline sales, exclusive of the
12 stores closed in 1996, decreased in 1996 primarily due to decreased sales of
electronics, cameras, housewares and small electrical appliances resulting from
a number of factors including increased competition, the impact of the Price Cut
Program and a reduction in the number of items advertised as part of the
Company's new marketing strategy. Softline sales, exclusive of the 12 stores
closed in 1996, increased in 1996 mainly as a result of increased sales of
ready-to-wear merchandise. The Price Cut Program lowered everyday prices in the
third and fourth quarters of 1996 on items in electronics, health and beauty
aids, diapers, household chemicals, furniture, hardware and housewares. The
Company is currently evaluating extending the Price Cut Program to other product
categories. The Company believes that the impact of the Price Cut Program will
be partially offset by reduced promotional and permanent markdowns and by
increased sales of regular priced merchandise.
-17-
<PAGE> 18
Gross margin as a percentage of sales increased to 25.6% for 1996
compared to 22.9% in 1995. The increase was mainly attributable to reduced
promotional markdowns due to the change in the Company's marketing strategy,
partly offset by an increase in the reserve for shrinkage. In addition, gross
margin in 1995 included a provision for vendor claims estimated to result upon
reconciliation of differences between pre-petition liabilities shown by the
Company and claims filed by creditors in connection with the Filing, and
provision to cover anticipated losses on the liquidation of inventory. For
further information, see note 7 to consolidated financial statements.
Selling, general and administrative expenses ("SG&A") as a percentage
of sales decreased to 27.8% in 1996 from 28.0% in 1995, primarily attributable
to a decrease in advertising expense and other expenses associated with the cost
reduction initiatives adopted by the Company in 1996 which included changes in
marketing strategy, reduction of corporate overhead and the discontinuance of
additional accruals related to the pension plan. The decrease was also due to
the closing of the 12 under-performing stores in 1996. The Company continues to
evaluate its operating procedures and expects additional reductions in SG&A to
occur due to improved operating efficiencies and technological advancements at
both the corporate and store level.
Interest expense, net, decreased in 1996 primarily due to a decrease in
average revolving credit borrowings as well as a decrease in the related
weighted average interest rates as compared to 1995. Average revolving credit
borrowings were $151.8 million at a weighted average interest rate of 6.6% in
1996 compared to $160.0 million at 7.2% in 1995. The weighted average interest
rate on the Term Loan was 6.3% in 1996 compared to 6.7% in 1995.
The Company recorded reorganization charges of $87.5 million and $170.7
million in 1996 and 1995, respectively. The costs relate primarily to provisions
related to the lease rejections and closings of locations, as well as the
reduction to net realizable value of fixed assets in the closed stores. For
further information, see "Item 2. Properties" and note 8 to consolidated
financial statements.
The Company has identified and obtained Bankruptcy Court approval for
the closing of four under-performing stores. The Company has retained a
liquidator that has completed store closing sales at two of these locations and
is currently in the process of conducting store Closing Sales at the other two
locations. The Company closed 12 under-performing stores in 1996. The lease
obligations and related reserves for closings include numerous real property
leases rejected and amounts for other executory contracts that have been
identified for rejection pursuant to the Bankruptcy Code and are reflected at
estimated settlement amounts. The costs relating to these facilities closings
may be greater or less than the amount provided in the consolidated financial
statements. Also included in reorganization costs are $15.0 million and $12.5
million related to employee retention plans and $13.7 million and $8.8 million
in professional fees for 1996 and 1995, respectively. For further information,
see note 8 to consolidated financial statements.
The Company's effective income tax rate in 1996 was 0.3% primarily due
to the non-recognition by the Company of deferred tax assets related to net
operating loss carryforwards, other credit carryforwards and certain deductible
temporary differences. A provision of $0.5 million for state and local taxes
was recorded in 1996. The Company realized an income tax benefit of $59.8
million in 1995 as a result of the net losses incurred and the recognition by
the Company of the reduction of previously recorded deferred income tax
liabilities as well as the receipt by the Company of refunds of previously paid
income taxes.
-18-
<PAGE> 19
The effective income tax rate in 1995 was 17.0%, primarily due to the
non-recognition of operating loss carryforwards in 1995.
1995 VS. 1994
Net sales during 1995 increased by 0.6% from 1994 due to the opening of
three new stores in 1995 and 11 new stores in the second half of 1994 and an
extra week of sales, mostly offset by a decline in same store sales. For 1995,
same store sales decreased 5.2% on a comparable 52 week basis (and decreased
4.4% on a 53 week basis) from 1994. Through negotiations, the Company
normalized shipments from virtually all of the Company's factored and
non-factored vendors. Nevertheless, merchandise disruption and changes in
vendor terms caused by the Filing adversely affected the Company's in-stock
position and margins for certain merchandise in 1995. These factors, coupled
with the difficult, highly competitive retail climate and increased promotions,
adversely affected the Company's results in 1995. The Company's sales of
hardlines categories increased in 1995 primarily due to increased sales of
furniture, housewares and food products. Softline sales declined in 1995 mainly
due to bankruptcy-related disruptions, such as shipping delays of imported
products, and increased competition. New store sales contributed $149.7 million
in incremental sales in 1995.
Gross margin as a percentage of sales decreased to 22.9% in 1995
compared to 28.6% in 1994. The decrease was mainly attributable to increased
promotional markdowns. Also, the Company was unable to fully realize all vendor
allowances due to reduced receipts of merchandise and strained vendor relations
caused by the Filing, resulting in higher cost of merchandise sold in 1995.
Gross margin in 1995 included provisions recorded to cover anticipated losses on
the liquidation of inventory as well as a provision for vendor claims estimated
to result upon reconciliation of differences between pre-petition liabilities
shown by the Company and claims filed by the creditors in connection with the
Filing.
SG&A as a percentage of sales increased to 28.0% in 1995 from 24.7% in
1994, primarily attributable to a decrease in same store sales, an increase in
depreciation expense, an increase in insurance costs, as well as an increase in
costs associated with new stores. The Company also incurred higher advertising
costs in 1995 due to higher industry-wide paper costs associated with the
printing of its weekly circulars as well as higher costs incurred for the
reinstitution of television advertisements during the fourth quarter holiday
season. The new stores, located in urban markets, have higher rent costs and
higher related costs, such as real estate taxes.
Interest expense, net, as a percentage of sales increased to 1.5% in
1995 compared to 1.3% in 1994. The increase in 1995 was primarily due to an
increase in the average short and long-term borrowings as well as an increase in
the weighted average interest rates paid in 1995. Average revolving credit
borrowings were $160.0 million at a weighted average interest rate of 7.2% in
1995 compared to $110.7 million at 6.0% in 1994. The weighted average interest
rate on the Term Loan was 6.7% in 1995 compared to 5.6% in 1994.
The Company recorded a $170.7 million reorganization charge in 1995.
The costs relate primarily to provisions related to the lease rejections and
closings of locations, as well as the reduction to net realizable value of fixed
assets in the closed stores. For further information, see "Item 2. Properties"
and note 8 to consolidated financial statements.
-19-
<PAGE> 20
The lease obligations and related reserves for facilities closings
include numerous real property leases rejected and amounts for other executory
contracts that have been identified for rejection pursuant to the Bankruptcy
Code and are reflected at estimated settlement amounts. The costs relating to
these facilities closings may be greater or less than the amount provided in the
consolidated financial statements. Also included in reorganization costs in 1995
were $12.5 million related to employee retention plans and $8.8 million in
professional fees.
The Company realized an income tax benefit of $59.8 million in 1995 as
a result of the net losses incurred and the ability to recognize the reduction
of previously recorded deferred income taxes liabilities as well the ability to
receive refunds of previously paid income taxes. The effective income tax rate
in 1995 was only 17.0%, primarily due to the non-recognition of operating loss
carryforwards in 1995. The Company's effective income tax rate in 1994 was
38.3%.
In 1995, the Company recorded an extraordinary loss of $8.4 million on
the defeasance of the then outstanding 15% Senior Subordinated Notes. For
further information, see note 12 to consolidated financial statements.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's working capital as of February 1, 1997 decreased by
$169.2 million from February 3, 1996. This decrease was primarily due to
increased borrowings under the DIP Facility of $112.0 million, which resulted
from a net loss of $185.3 million in 1996, capital expenditures of $36.6
million, and cash outlays of $29.9 million related to the Company's
reorganization charges. In addition, inventories decreased by $49.4 million,
partly related to the Company's program to reduce inventories and due to the
closure of certain stores. Assets held for disposal at year-end 1995 were
liquidated through closing sales and the proceeds were applied to the Term
Loan, contributing to a decrease in working capital. Refundable income taxes
and deferred income taxes decreased by $9.0 million primarily due to the
receipt of federal income tax refunds in 1996.
The Company's working capital as of February 3, 1996 increased by
approximately $229 million from January 28, 1995 primarily due to the
reclassification of approximately $356 million of current liabilities in the
form of accounts payable and pre-petition accrued liabilities to long-term
liabilities subject to compromise.
Net cash used in operating activities for 1996 was $73.0 million as
compared to net cash provided by operating activities of $93.2 million in 1995.
This use of cash for operating activities in 1996 was primarily due to the
Company's net loss of $185.3 million, a reduction in liabilities subject to
compromise of $78.2 million and reorganization items of $29.9 million. The
reduction of liabilities subject to compromise, approved by the Bankruptcy
Court, included application of the Closing Sales proceeds to the Term Loan,
reclamation payments made to vendors, a reduction in the liability for vendor
claims, payments for sales and use tax, the refinancing of the loan related to
the Silver Spring, Maryland store, and normal amortization of capital lease
obligations.
-20-
<PAGE> 21
Net cash provided by operating activities in 1995 increased $48.5
million over 1994 primarily due to the increase in working capital resulting
from reclassification of current liabilities to long-term liabilities subject to
compromise in 1995. These items were offset by the net loss in 1995 of $301
million compared to net income of $44.4 million in 1994, a change of $345.4
million. The net loss in 1995 included a noncash reorganization charge of $170.7
million that offset this change.
Capital expenditures were $36.6 million in 1996 compared to $81.1
million in 1995 and $90 million in 1994. The Company opened three new stores in
1995 and seven new stores in 1996. A substantial portion of the expenditures
related to the stores that opened in 1996 was incurred in 1995. In 1995, the
Company utilized construction loans to build two of its new store locations. In
1994, the Company spent approximately $8 million on the acquisition of leasehold
interests. The Company's capital expenditures for 1997 are projected to be
approximately $30 million to be used primarily for store remodeling, management
information systems and distribution center and store upgrades and improvements.
On October 17, 1995, the Bankruptcy Court entered a final order
approving the DIP Facility as provided under the Amended and Restated Revolving
Credit and Guaranty Agreement dated as of October 17, 1995, among the
Registrant, as the borrower thereunder, the subsidiaries of the Registrant
named therein, as the guarantors thereunder, and a bank group led by Chase. The
DIP Facility amends and restates, in its entirety, the Registrant's
Debtor-In-Possession Revolving Credit and Guaranty Agreement dated as of
September 18, 1995 with Chase as agent. Pursuant to the terms of the DIP
Facility, as amended, the bank group has made available to the Registrant a
revolving credit and letter of credit facility in an aggregate principal
amount, at February 1, 1997, not to exceed a total of $492.4 million, divided
into two separate tranches consisting of (i) the Tranche A Facility not to
exceed $250 million (reflecting the Second Amendment) and (ii) the Tranche B
Facility in an aggregate principal amount of $242.4 million which principal
amount may be borrowed, paid and reborrowed. The Company's maximum borrowing
under the Tranche A Facility, up to $250 million, may not exceed the Borrowing
Base. At February 1, 1997, the Borrowing Base was $243.1 million. The DIP
Facility has a sublimit of $175 million for the issuance of letters of credit.
On July 16, 1996, the Bankruptcy Court approved the Second Amendment which,
among other things, provided for rescinding a $50 million line reduction of the
Tranche A Facility commitment that took effect on May 4, 1996 and eliminating
the $50 million line reduction of the Tranche A Facility commitment that was
scheduled for October 5, 1996. Instead, the Second Amendment provided for an
automatic $50 million line reduction of the Tranche A Facility commitment on
May 3, 1997. On March 12, 1997, the Company, the guarantors and the bank group
entered into an amendment to the DIP Facility providing that all of the
proceeds of the 4 Store Closing Sales are to be applied to a prepayment of the
Tranche B loans and that the Tranche B Facility commitment be reduced by such
amount. Pursuant to this amendment, 70% of the proceeds have been applied in
this manner and the balance is to be so applied no later than 60 days after the
conclusion of the 4 Store Closing Sales. The Tranche B Facility must be fully
utilized before the Company can borrow under the Tranche A Facility. The DIP
Facility expires on the earlier of September 18, 1997 or the date of an entry
of an order by the Bankruptcy Court confirming a plan of reorganization.
The DIP Facility provides that advances made (i) under the Tranche A
Facility will bear interest at a rate of 0.5% per annum in excess of ABR, or, at
the Registrant's option, a rate of 1.50% per annum in excess of the reserve
adjusted LIBOR for the interest periods of one, three or six months or (ii)
under the Tranche B Facility will bear interest at ABR, or, at the Registrant's
option, at a rate of 0.75% per annum in excess of LIBOR.
On May 2, 1997, Chase, as agent for the bank group under the DIP
Facility, advised the Company that the bank group had agreed to extend the DIP
Facility to June 15, 1998 subject to the execution of documentation and
Bankruptcy Court approval. The DIP Extension provides for a total commitment
of $450 million consisting of a Tranche A Facility of $250 million and a
Tranche B Facility of $200 million. In addition, the DIP Extension amends the
DIP Facility to provide for, among other things, a mandatory paydown of the
aggregate principal amount of the outstanding loans (exclusive of letters of
credit) to $165 million for a period of 15 consecutive business days during the
period from December 15, 1997 through January 15, 1998, capital expenditures
not to exceed $30 million through the fiscal year ending January 31, 1998 and
$16 million (subject to a $3 million increase if certain EBITDA projections are
achieved) thereafter through the maturity date, revised EBITDA thresholds for
the trailing four quarters for each of the fiscal quarters in fiscal year 1997
and for the fiscal quarter ending April 30, 1998, and revised monthly inventory
amounts through June 15, 1998. The Company will incur approximately $3 million
in bank fees associated with the DIP Extension. In all other material respects
the DIP Facility remains unchanged.
The DIP Extension provides that advances made (i) under the Tranche A
Facility will bear interest at a rate of 0.75% per annum in excess of ABR, or
at the Registrant's option, a rate of 1.75% per annum in excess of LIBOR for
the interest periods of one, three or six months or (ii) under the Tranche B
Facility will bear interest at 0.25% per annum in excess of ABR, or, at the
Registrant's option, a rate of 1.0% per annum in excess of LIBOR.
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<PAGE> 22
The Tranche A Banks and the Tranche B Banks were granted a lien on all
of the assets of the Debtors and a superpriority claim over all obligations of
the Debtors arising under the Tranche A Facility and the Tranche B Facility,
respectively. However, the claim of the Tranche B Banks is subordinate in
priority to the claim of the Tranche A Banks. In addition, Chase, as agent, was
granted a security interest in all of the shares of capital stock now or
hereafter issued to the Registrant by certain of its subsidiaries. The
pre-petition banks have been granted a security interest in all assets of the
Debtors, subordinate to the security interests and liens thereon granted to the
Tranche A Banks and the Tranche B Banks, subject to the conditions of the
financing order of the Bankruptcy Court, dated October 17, 1995.
As of February 1, 1997, the outstanding borrowings under the DIP
Facility were $152 million and open letters of credit were $52.6 million. In
addition, the Company had outstanding borrowings of $191.1 million and $215
million on its Term Loan as of February 1, 1997 and February 3, 1996,
respectively. The Term Loan was reduced by application of the net proceeds of
the Closing Sales of $22.5 million and will be reduced by the application of the
remaining net proceeds (approximately $4 million) upon resolution of a
litigation brought by the liquidators of the inventory of these stores. The
Term Loan was also reduced by $1.4 million in payments related to the
reclamation program in 1996. The borrowings outstanding under the Term Loan
have been classified as liabilities subject to compromise in the consolidated
balance sheets (see note 6 to consolidated financial statements).
In February 1995, the Company increased the Term Loan borrowings by $50
million to $215 million. Using the additional $50 million in Term Loan
borrowings and $16 million in revolving credit borrowings, the Company executed
an in-substance defeasance of the outstanding 15% Senior Subordinated Notes (the
"Notes") by depositing $66 million of U.S. Government Securities into an
irrevocable trust to cover the redemption value (including principal, call
premium and interest) of the Notes on June 1, 1995, at which time the Notes were
called.
The Company borrowed $10.9 million in 1996 under a construction loan
relating to the Silver Spring, Maryland store. The proceeds of this loan were
used to refinance an existing construction loan and for capital expenditures for
such store. As of February 1, 1997, the outstanding borrowings under this loan
were $10.5 million and bear interest at a rate of 1.75% per annum in excess of
LIBOR.
In August 1995, the Company entered into the Real Estate Loan with
Chase consisting of a $37.1 million non-amortizing term loan through August
1997. The borrowing is secured by mortgages on certain real estate. The
outstanding borrowings of $37.1 million for 1996 and 1995 have been classified
as liabilities subject to compromise in the consolidated balance sheets (see
note 6 to consolidated financial statements).
The Company believes that cash on hand, refundable income taxes,
amounts available under the DIP Facility, as to be amended by the DIP
Extension, and funds from operations will enable the Company to meet its
current liquidity and capital expenditure requirements for the next twelve
months. Until a plan of reorganization is approved, the Company's long-term
liquidity and the adequacy of its capital resources cannot be determined.
Inherent in a successful plan of reorganization is a capital structure
which permits the Company to generate sufficient cash flow after reorganization
to meet its restructured obligations and fund the current obligations of the
Company. Under the Bankruptcy Code, the rights and treatment of pre-petition
creditors and stockholders may be substantially altered. At this time it is not
possible to predict the outcome of the Chapter 11 case, in general, or the
effects of such case on the business of the Company or on the interests of
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<PAGE> 23
creditors and stockholders. At this time, it is uncertain what, if anything, a
plan of reorganization may provide for equity security holders.
As a result of the Filing, the prosecution of litigation against the
Debtors involving matters arising prior to the Filing for bankruptcy generally
was stayed. Such stay may be modified by the Bankruptcy Court for cause shown in
appropriate circumstances.
Certain former officers and directors of the Company are defendants in
class actions brought on behalf of all persons who purchased the Company's stock
during specified periods of time. These actions are discussed in "Item 3. Legal
Proceedings." Although the Company is not a named defendant in these actions, a
proof of claim was filed in the Chapter 11 case by the plaintiffs in the
Consolidated Action. The amount of liability, if any, related to these actions
is not presently determinable. The Company is required to indemnify the
defendants to the extent provided by Delaware law and the Company has directors'
and officers' liability coverage. Accordingly, no amounts have been provided for
such liability in the consolidated financial statements.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made
by its employees or information included in its filings with the SEC (including
the Annual Report on Form 10-K) may contain statements that are not historical
facts, so-called "forward-looking statements", which involve risks and
uncertainties. In particular, statements in "Item 1. Business" related to the
Company's business strategies and the Company's ability to compete, and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" relating to the sufficiency of capital to meet working capital and
capital expenditures requirements may be forward-looking statements. The
Company's actual future results may differ significantly from those stated in
any forward-looking statements. Factors that may cause such differences include,
but are not limited to, the factors discussed below. Each of these factors, and
others, are discussed from time-to-time in the Company's filings with the SEC.
The Company's future results are subject to substantial risks and
uncertainties. The Company is operating as a debtor-in-possession under the
Bankruptcy Code and its future results are subject to the development and
confirmation of a plan of reorganization. The Company's business is seasonal; a
substantial portion of its sales and income from operations are generated
during the fourth quarter of the fiscal year which includes the Christmas
selling season. Any substantial decrease in sales during such period would have
a material adverse effect on the financial condition, results of operations and
liquidity of the Company. The Company may be adversely affected as competitors
open additional stores in the Company's market areas. The Company has working
capital needs which are expected to be funded largely through borrowings under
the DIP Facility, as to be amended by the DIP Extension. The DIP Facility, as
to be amended by the DIP Extension, contains restrictive covenants, including,
among other things, limitations on the creation of additional liens and
indebtedness, limitations on capital expenditures, capital leases and annual
rents, the sale of assets and the maintenance of minimum earnings before
interest, taxes, depreciation, amortization, and reorganization items, the
maintenance of inventory levels, and a prohibition on the payment of dividends.
Such restrictions may limit the Company's operating and financial flexibility.
For further information, see "Item 1. Business--Reorganization Case."
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<PAGE> 24
SEASONALITY
The Company's business is highly seasonal with a major portion of its
annual sales occurring in the fourth quarter of the year due to increased
customer buying during the Christmas selling season. As a result, the Company's
operating earnings have historically been concentrated in the fourth quarter.
In 1996 and 1995, 32% and 34% of the Company's total sales were recorded in the
fourth quarter, respectively.
INFLATION
The Company believes that the impact of inflation and changing prices
has not significantly affected the Company's sales or results of operations. The
Company uses the LIFO inventory accounting method for financial reporting
purposes, because it is believed to provide a better matching of current costs
with revenue than does the FIFO method. Therefore, the cost of merchandise sold
included in the results of operations are already adjusted for inflation.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). This statement requires
that long-lived assets be reviewed for impairment and written down to fair
value whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. As part of the ongoing review of its operations,
the Company is currently negotiating with landlords regarding rent reductions
and lease restructurings. In the event the Company does not achieve certain
expected rent reductions, the Company could incur an impairment charge for
certain of its properties.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which is
effective for the Company beginning February 4, 1996. SFAS No. 123 requires
expanded disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation expense to be measured based on
the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply Accounting Principles Board Opinion No. 25 ("APB
No. 25"), which recognizes compensation costs based on the intrinsic value of
the equity instrument awarded. The Company elected to continue applying APB No.
25 for its stock-based compensation awards to employees. See note 9 to
consolidated financial statements for expanded disclosures required by SFAS No.
123.
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<PAGE> 25
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per share" ("SFAS No. 128"), which is effective for the
Company beginning with the fiscal year ending January 31, 1998 ("1997"). SFAS
No. 128 establishes standards for computing and presenting earnings per share.
The Company does not believe the adoption of SFAS No. 128 in fiscal year 1997
will have a significant impact on the Company's earnings per share.
-25-
<PAGE> 26
SELECTED QUARTERLY DATA (UNAUDITED)
The following quarterly results are determined in accordance with the
same accounting policies used for the annual information, including certain
items based upon estimates for the entire year:
<TABLE>
<CAPTION>
(in thousands, except per share amounts) First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Net sales $ 568,560 $ 622,212 $ 568,596 $ 843,088 $ 2,602,456
Gross margin (LIFO) 142,400 167,196 161,430(1) 195,930 666,956
Selling, general and
administrative expenses 168,524 175,792 192,333 188,108 724,757
Reorganization items 8,761 10,779 5,881 62,101(2) 87,522
Net loss (43,281) (28,420) (47,960) (65,664) (185,325)
PER SHARE AMOUNTS:
Net loss $ (2.57) $ (1.67) $ (2.81) $ (3.86) $ (10.91)
-------------------------------------------------------------------------------------
Weighted average number of
shares used in computing
net loss per share 16,857 17,012 17,062 17,046 16,994
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts) First Second Third Fourth Year
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Net sales $ 564,250 $670,830 $ 591,386 $ 939,059 $ 2,765,525
Gross margin (LIFO) 156,547 183,335 151,847 142,515(3) 634,244
Selling, general and
administrative expenses 161,488 167,874 190,426 255,209 774,997
Reorganization items 4,637 166,094(4) 170,731
Earnings (loss) before extraordinary
items (9,242) 3,343 (32,600) (254,133) (292,632)
Net earnings (loss) (14,406) 3,343 (32,600) (257,365) (301,028)
PER SHARE AMOUNTS:
Earnings (loss) before extraordinary
items $ (0.55) $ 0.20 $ (1.92) $ (15.01) $ (17.30)
Net earnings (loss) $ (0.86) $ 0.20 $ (1.92) $ (15.20) $ (17.79)
-------------------------------------------------------------------------------------
Weighted average number of
shares used in computing
net earnings per share 16,751 16,933 16,964 16,929 16,918
</TABLE>
(1) The 1996 third quarter gross margin includes a $15 million
reduction in the provision for vendor claims that was recorded during 1995. In
addition, the Company has refined its practice of capitalizing certain costs in
inventory, resulting in additional cost of merchandise sold, of approximately
$13 million upon liquidation of such inventory.
(2) The 1996 fourth quarter reorganization items that were directly
associated with the Company's Chapter 11 case included $30.8 million of
provisions for closed stores, $20.8 million for lease rejection obligations,
$7.2 million for the Employee Retention Plan and $2.4 million for professional
fees.
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<PAGE> 27
(3) The 1995 fourth quarter gross margin and operating earnings were
impacted by a provision of approximately $39 million recorded for the
anticipated loss on the liquidation of inventory as well as a provision of
approximately $29 million for vendor claims estimated to result upon the
reconciliation of differences between pre-petition liabilities shown by the
Company and claims filed by the creditors in connection with the Filing.
(4) The 1995 fourth quarter reorganization items included $96.5
million for lease rejection obligations, $47.3 million of provisions for closed
and unopened stores, $12.5 million for the Employee Retention Plan, $6.2 million
for professional fees and $2.1 million for bankruptcy related expenses.
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
See the consolidated financial statements of The Caldor Corporation and
Subsidiaries attached hereto and listed on the index to consolidated financial
statements set forth in Item 14 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
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<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors as of May 1, 1997:
<TABLE>
<CAPTION>
Name Age Election Position
---- --- -------- --------
<S> <C> <C> <C>
Warren D. Feldberg 47 1996 Chairman and Chief Executive Officer
John G. Reen 47 1996 Executive Vice President,
Chief Financial Officer and Director
Bruce Carswell 67 1994 Director
Steven M. Friedman 42 1989 Director
Verna K. Gibson 54 1991 Director
William F. Glavin 65 1991 Director
</TABLE>
Executive officers of the Company as of May 1, 1997:
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
Warren D. Feldberg 47 Chairman and Chief Executive Officer
John G. Reen 47 Executive Vice President and Chief Financial Officer
Elliott J. Kerbis 44 Executive Vice President-General Merchandise Manager-Hardlines
Dennis M. Lee 47 Executive Vice President-Human Resources and Merchandise
Logistics
James E. Fothergill 45 Senior Vice President-Human Resources
Bennett S. Gross 45 Senior Vice President-General Counsel and Secretary
Gary A. Maxwell 35 Senior Vice President-Merchandise Distribution and
Replenishment
Mark E. Minsky 47 Senior Vice President-General Merchandise Manager-Softlines
Daniel C. O'Harra 46 Senior Vice President-Operations
Susan V. Sprunk 55 Senior Vice President-Marketing
John Tempesta 48 Senior Vice President-Distribution and Logistics
Brian Woolf 48 Senior Vice President-General Merchandise Manager
Bruce A. Caldwell 39 Vice President-Controller
</TABLE>
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<PAGE> 29
Certain information concerning the directors and executive officers of the
Company:
WARREN D. FELDBERG has been Chairman of the Board of Directors and Chief
Executive Officer of the Company since January 1997. He was President and Chief
Operating Officer of the Company and a director of the Company from April 1996
to January 1997. From 1991 to 1995, Mr. Feldberg was Chairman and Chief
Executive Officer of Marshall's, a division of Melville Corporation
("Marshalls"). From December 1990 to October 1991, he served as President of
Target Stores ("Target"), a division of Dayton Hudson Corporation ("Dayton
Hudson"). From October 1988 to November 1990, he served as Executive Vice
President, Merchandising of Target. From March 1988 to November 1988, he was
Senior Vice President, General Merchandise Manager, Softlines of Target. From
1984 to 1988, Mr. Feldberg was Executive Vice President, Marketing of Lechmere,
Inc., a division of Dayton Hudson.
JOHN G. REEN has been Executive Vice President, Chief Financial Officer
and a director of the Company since January 1996. From 1991 to 1995, Mr. Reen
was Executive Vice President and Chief Financial Officer of Hills Department
Stores ("Hills"). From 1979 to 1991, he held various positions including Vice
President-Controller of Hills. Mr. Reen was also a director and Chairman of the
Finance Committee of Hills from 1993 to 1995. In October 1993, Hills emerged
from reorganization proceedings under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11"). Hills had voluntarily filed a petition for
reorganization under Chapter 11 in February 1991.
BRUCE CARSWELL has been a consultant to GTE Corporation ("GTE") since April
1995. He was Senior Vice President of Human Resources and Administration of GTE
from 1986 to March 1995, when he retired. He is a director of the Electronic
Industries Association, the Electronic Industries Foundation ("EIF"), The
National Alliance of Business, Cornell Center for Advanced Human Resources
Studies (and its first Visiting CAHRS Executive), the Employment Policy
Foundation and the National Advisory Council for Employment of the Handicapped
of the EIF. Mr. Carswell was appointed to the National Skill Standards Board by
the Congress of the United States and currently is Vice Chairman.
STEVEN M. FRIEDMAN was Chairman of the Board and Vice President of the
Company from 1989 to 1991 and, prior thereto, in 1989, he was President of the
Company. He was a director of Caldor, Inc. ("Caldor") from 1989 to 1993. Since
January 1, 1994, Mr. Friedman has been a General Partner of Eos Partners, L.P.
From 1988 to 1993, he was a General Partner of Odyssey Partners, L.P.
("Odyssey"). From 1983 to 1988, he was a principal of Odyssey. He is also
Chairman of the Board and a director of Rickel Home Centers, Inc., and a
director of JPS Textile Group Inc., Eagle Food Centers, Inc. and Forstmann &
Company, Inc.
VERNA K. GIBSON is a partner of Retail Options, a business advisory firm
founded in June 1993, and is President of Outlook Consulting, Inc. From 1995 to
1996 she served as Chairman of the Board of Petrie Retail, Inc. From 1985 to
1991, she was President of The Limited Stores, Inc. and was a director of the
Federal Reserve Board, Cleveland, Ohio, for six years ending December 31, 1993.
Ms. Gibson is currently a director of Today's Man, Inc., Chico's FAS Inc. and
Mother's Work, Inc.
WILLIAM F. GLAVIN has been President of Babson College (Wellesley, Mass.)
since 1989. From 1985 to 1989, he was Vice Chairman of Xerox Corporation. He is
also a director of Reebok International Ltd., INCO Limited, John Hancock Mutual
Funds, Inc., St. John's Seminary and a member of the President's Council of The
College of the Holy Cross.
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<PAGE> 30
ELLIOTT J. KERBIS has been Executive Vice President-General Merchandise
Manager-Hardlines of the Company since January 1996. He was Senior Vice
President-General Merchandise Manager-Hardlines for the Company and its
predecessors from March 1987 to January 1996. From 1985 to 1987, he was Group
Vice President with Macy's New York, Inc.
DENNIS M. LEE has been Executive Vice President-Human Resources and
Merchandise Logistics, of the Company since January 1997. He was Executive Vice
President-Human Resources and Merchandise Distribution and Replenishment of the
Company from January 1996 to January 1997. He was Senior Vice President-Human
Resources and Merchandise Distribution and Replenishment of the Company from May
1994 to January 1996. He was Senior Vice President-Human Resources of the
Company and its predecessors since 1987. From 1985 to 1987, he was Vice
President, Executive Development for May Company.
JAMES E. FOTHERGILL has been Senior Vice President-Human Resources of the
Company since January 1997. He was Vice President-Human Resources of the Company
from May 1994 to January 1997. From February 1986 to May 1994, he held various
positions with the Company, including Vice President-Organizational Planning,
Field Personnel and Special Businesses.
BENNETT S. GROSS has been Senior Vice President-General Counsel of the
Company since January 1997 and Secretary of the Company since February 1996. He
was Vice President-General Counsel of the Company and its predecessors from May
1993 to January 1997. He held various positions, including Vice
President-General Attorney, with R.H. Macy & Co., Inc. from 1985 to May 1993.
GARY A. MAXWELL has been Senior Vice President-Merchandise Distribution and
Replenishment of the Company since January 1997. Previously, he was Vice
President-Merchandise Distribution and Replenishment of the Company from January
1994 to January 1997. From June 1993 to January 1994, he was Vice
President-Merchandise Planning and Control of the Company. From May 1990 to June
1993, he was a Consultant for Webb and Shirley, a department of KPMG Peat
Marwick LLP.
MARK E. MINSKY has been Senior Vice President-General Merchandise
Manager-Softlines of the Company and its predecessors since July 1992.
Previously, he was Operating Vice President, Divisional Merchandise
Manager-Ready to Wear of Caldor from 1991 to July 1992. From 1985 to 1991, he
was Operating Vice President, Divisional Merchandise Manager-Jewelry,
Accessories and Intimate Apparel of Caldor.
DANIEL C. O'HARRA has been Senior Vice President-Operations of the Company
and its predecessors since 1987. From 1985 to 1987, he was Senior Vice
President-Facilities Management of Caldor.
SUSAN V. SPRUNK has been Senior Vice President-Marketing of the Company
since August 1996. Previously, she was Vice President-Marketing of Hills from
November 1993 to August 1996. From 1983 to 1993, she held a number of positions
with Mervyn's, a division of Dayton Hudson, including Vice President-Sales
Promotion.
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<PAGE> 31
JOHN TEMPESTA has been Senior Vice President-Distribution and Logistics of
the Company since November 1993. From 1988 to 1993, he was Senior Vice
President-Operations for Chadwicks of Boston, and from 1983 to 1988 he was
Senior Vice President-Operations for Filene's Basement.
BRIAN WOOLF has been Senior Vice President-General Merchandise Manager of
the Company since May 1996. From March 1995 to February 1996, he was Vice
President-General Merchandise Manager-Women's Ready-to-Wear at Marshall's. From
1988 to 1995, he was Senior Vice President-General Merchandise Manager for
Lazarus, a department store division of Federated Department Stores.
BRUCE A. CALDWELL has been Vice President-Controller of the Company since
February 1997 and was Vice President-Treasurer of the Company from February 1996
to February 1997. He held various positions, including Vice President-Treasurer,
with Hills from 1987 to February 1996.
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<PAGE> 32
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER INFORMATION. The following table shows, for
the fiscal years ended 1996, 1995 and 1994, the compensation paid or accrued by
the Company and its subsidiaries to those persons who were at February 1, 1997
(i) the persons who served as Chief Executive Officer during the 1996 fiscal
year and (ii) the other four most highly compensated executive officers of the
Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term Compensation
Compensation(1) -------------------------------
---------------------- Restricted Securities
Name & Principal Fiscal Stock Underlying All Other
Position Year Salary(2) Bonus Awards Options/SARs Compensation
- ------------------ ---- --------- ----- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Don R. Clarke 1996 $750,000 $ -- $ 120,621(3)(4) -- $ 3,105,914(5)
Former Chairman and 1995 750,000 225,000 1,500,000(4)(7) 80,000 3,351(6)
Chief Executive Officer(8) 1994 563,055 245,606 -- 80,000 7,822(9)
Warren D. Feldberg 1996 681,923 405,000 120,621(3) -- 796,731(10)
Chairman and Chief
Executive Officer(11)
John G. Reen 1996 472,500 145,500 -- -- 219,108(12)
Executive Vice President 1995 5,308 -- -- -- --
and Chief Financial
Officer(13)
Elliott J. Kerbis 1996 401,674 121,530 52,404(3) -- 2,186(6)
Executive Vice President- 1995 387,600 58,710 403,688(7) 20,000 1,889(6)
General Merchandise 1994 297,620 42,670 -- 20,000 12,960(9)
Manager-Hardlines(14)
Kevin Freeman 1996 377,500 114,000 50,928(3)(4) -- 1,875(15)
Executive Vice President- 1995 244,747 35,000 418,744(4)(7) -- 75,000(16)
Store Operations(17)
Dennis M. Lee 1996 371,618 112,500 50,928(3) -- 1,875(15)
Executive Vice President- 1995 330,370 50,160 417,994(7) 20,000 1,875(15)
Human Resources and 1994 308,172 46,368 -- 20,000 8,533(9)
Merchandise Logistics(18)
</TABLE>
- -----------------------
(1) Perquisites and other personal benefits did not exceed the lesser of $50,000
or 10% of reported annual salary and bonus for any of the Named Officers.
(2) The table reflects salary paid or deferred during the respective fiscal
years shown.
(3) Consists of 30,634; 30,634; 13,309; 12,934; and 12,934 shares of restricted
stock for Messrs. Clarke, Feldberg, Kerbis, Freeman and Lee, respectively.
Restricted stock awards vest the later of 3 years or 6 months following the
date of reorganization. The value of the restricted stock awards at year end for
Messrs. Clarke, Feldberg, Kerbis, Freeman and Lee was $42,122; $42,122; $18,300;
$17,784 and $17,784, respectively. Amounts in the Restricted Stock Awards column
reflect the value of the restricted stock awards at the date of grant.
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<PAGE> 33
(4) Upon the termination of their employment, the restricted stock awards to
Messrs. Clarke and Freeman were canceled.
(5) Consists of a $3,100,000 severance payment, a $1,875 matching contribution
credited to the Company's 401(k) plan, with the balance representing an increase
in Mr. Clarke's share of the cash value of the Company's split dollar plan.
(6) Consists of $1,875 matching contribution credited to the 401(k) plan, with
the balance representing an increase in the executive's share of the cash value
of the split dollar plan.
(7) Consists of 64,516, 21,530, 22,333 and 22,293 shares of restricted stock for
Messrs. Clarke, Kerbis, Freeman and Lee, respectively. Restricted stock awards
vest on the later of three years from the 1996 grant date or six months
following the date of a plan of reorganization. The value of the restricted
stock awards at year-end for Messrs. Clarke, Kerbis, Freeman and Lee was
$88,710, $29,604, $30,708 and $30,653, respectively. Amounts in the Restricted
Stock Awards column reflect the value of the restricted stock awards at the
date of grant.
(8) Mr. Clarke served as Chairman of the Board of Directors and Chief Executive
Officer of the Company until January 31, 1997.
(9) Consists of $1,875 matching contribution credited to the 401(k) plan, with
the balance representing an amount credited to the executive's account in the
Executive Deferred Compensation Plan for contributions that could not be made to
the 401(k) plan and the Company's qualified retirement plans because of
limitations imposed by the Internal Revenue Code of 1986, as amended (the
"Code").
(10) Consists of $750,000 signing bonus and $46,731 relocation allowance paid to
Mr. Feldberg.
(11) Mr. Feldberg served as President and Chief Operating Officer of the Company
from April 1996 to January 1997. Mr. Feldberg has been Chairman of the Board of
Directors and Chief Executive Officer of the Company since January 31, 1997.
(12) Consists of $200,000 relocation bonus and $19,108 relocation allowance paid
to Mr. Reen.
(13) Since January 1996 Mr. Reen has been Executive Vice President and Chief
Financial Officer of the Company.
(14) Prior to January 1996 Mr. Kerbis was Senior Vice President-General
Merchandise Manager - Hardlines.
(15) Consists of matching contribution credited to the 401(k) plan.
(16) Consists of relocation allowance paid to Mr. Freeman.
(17) Mr. Freeman served as Executive Vice President-Store Operations of the
Company from January 1996 to April 25, 1997. From May 1995 to January 1996 he
was Senior Vice President-Store Operations of the Company.
(18) Since January 1997 Mr. Lee has been Executive Vice President-Human
Resources and Merchandise Logistics. From January 1996 to January 1997 Mr. Lee
was Executive Vice President-Human Resources and Merchandise Distribution and
Replenishment. From May 1994 to January 1996 Mr. Lee was Senior Vice
President-Human Resources and Merchandise Distribution and Replenishment.
-33-
<PAGE> 34
STOCK OPTIONS. During the 1996 fiscal year, there were no grants to Named
Officers of stock options under the 1991 Stock Option Plan for Key Employees
or the 1991 Stock Option Plan for Directors or of performance-based Stock
Appreciation Rights ("SARs") under the 1994 Performance SAR and Restricted
Stock Plan. Pursuant to the Company's Retention Program, approved by the
Bankruptcy Court on March 27, 1996, stock option and SARs issued in prior
fiscal years to certain officers of the Company, including Named Officers, were
surrendered upon receipt of restricted stock grants. No stock option or SAR was
exercised by a Named Officer during the 1996 fiscal year and no Named Officer
held an unexercised stock option or SAR at the end of the 1996 fiscal year.
RETIREMENT AND CERTAIN OTHER BENEFIT PLANS
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under the Company's qualified
defined benefit pension plan as well as the Company's non-qualified supplemental
pension plan based on covered compensation and years of service with the
Company. All future benefits accruals for the Retirement Plan and the
Supplemental Executive Retirement Plan have been frozen as of July 31, 1996.
<TABLE>
<CAPTION>
Highest Average Annual
Covered Compensation for Annual Benefits for Years of
Consecutive 36 Months (1) Credited Service After January 1, 1990(2)
---------------------------- --------------------------------------------
<S> <C> <C> <C>
5 Years 10 Years
-------- ----------
$ 100,000 $ 6,000 $ 12,000
200,000 12,000 24,000
300,000 18,000 36,000
400,000 24,000 48,000
500,000 30,000 60,000
600,000 36,000 72,000
700,000 42,000 84,000
800,000 48,000 96,000
900,000 54,000 108,000
1,000,000 60,000 120,000
1,100,000 66,000 132,000
1,200,000 72,000 144,000
</TABLE>
- ---------------
(1) A participant's covered compensation (base salary plus bonus) is his or her
highest average annual compensation for 36 consecutive months prior to August 1,
1996. Benefits shown on the table include benefits from the qualified plan plus
100% of the estimated Social Security benefits. The target benefit has been 25%
to 35% (depending upon Company performance and prorated for less than 25 years
of credited service since January 1, 1990 and prior to August 1, 1996) of the
highest average compensation for 36 consecutive months prior to August 1, 1996.
Benefits are reduced if they begin prior to age 60.
(2) Annual benefits, for participants in the supplemental plan as of January 1,
1993 are 125% of the above amounts. Each of the Named Officers has been credited
with up to six years of service.
-34-
<PAGE> 35
DIRECTOR COMPENSATION
Directors who are members of management receive no compensation or fees
for service as directors. All other directors receive annual retainers of
$25,000 and meeting fees of $1,000 for each Board of Directors meeting attended.
The Chairmen of the Compensation and Audit Committees each receive an additional
annual retainer of $5,000. On March 14, 1997 the Company suspended its Retainer
Stock Plan for Non-Employee Directors, which permitted Non-Employee Directors to
elect to receive up to 100% of the total amount of the retainer in shares of
Common Stock of the Company having a fair market value equal to the retainer
amount.
EMPLOYMENT CONTRACTS, TERMINATION, SEVERANCE AND CHANGE-OF-CONTROL ARRANGEMENTS
Each of the Named Officers was during fiscal 1996 and, except as
indicated below, is currently a party to an employment agreement with the
Company.
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 Company and
Warren D. Feldberg, pursuant to which Mr. Feldberg was appointed President and
Chief Operating Officer of the Company and was designated a director of the
Company, 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 Company or Mr.
Feldberg upon not less than 180 days written notice prior to the expiration of
the then applicable term of employment. Since January 1997, Mr. Feldberg has
served as Chairman of the Board of Directors and Chief Executive Officer of the
Company.
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
received a lump sum cash bonus of $750,000. In addition, on the date the
Company'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
Company'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 "Feldberg Retention
Payments"). The Feldberg Retention Payments will be made only if, at the time
that they are payable, Mr. Feldberg is employed by the Company, or, if not then
employed, Mr. Feldberg's employment was terminated (i) by the Company 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 commenced
employment with the Company 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 Company, and will have the opportunity to be
paid up to the additional 50% depending upon the attainment of certain financial
performance goals by the Company under the PIP.
-35-
<PAGE> 36
If the Company elects not to renew the agreement, Mr. Feldberg 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 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 the
agreement, the "Monthly Severance Amount"). Upon termination by the Company
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 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 Company 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 1.50 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 Code 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 Company under the agreement are secured
by a $3.9 million standby letter of credit.
Mr. Clarke was employed by the Company until January 31, 1997. His
employment agreement provided for an initial term expiring on January 31, 2000
and continuing for successive periods of one year each unless terminated by the
Company or the employee upon not less than 120 days written notice prior to the
expiration of the then applicable term of employment. The agreement provided for
an initial annual base salary of $750,000 per annum with increases at the
discretion of the Board of Directors. Mr. Clarke was entitled to receive a lump
sum payment upon termination other than for "cause", or non-renewal, of the
agreement by the Company or termination of the agreement by him in the event of
the Company's breach of the agreement or in certain circumstances after a
"change in control" of the Company. In connection with the foregoing, Mr. Clarke
received restricted stock awards pursuant to a separate agreement.
On February 26, 1997, the Bankruptcy Court approved the termination
agreement dated as of January 31, 1997 between the Company and Mr. Clarke (the
"Termination Agreement"), pursuant to which Mr. Clarke's employment with the
Company was terminated effective January 31, 1997. Pursuant to the Termination
Agreement, the Company paid Mr. Clarke a single lump sum payment (the "Severance
Payment") of $3.1 million, in lieu of all payments to which he was otherwise
entitled from the Registrant. The Termination Agreement also entitles Mr. Clarke
to certain health and life insurance benefits and other allowances. As a result
of the termination of his employment, the restricted stock awarded to Mr. Clarke
was canceled. Mr. Clarke will continue to be bound until January 31, 2000 by
restrictions with regard to competition and solicitation of the Company's
employees. Mr. Clarke will also be bound by restrictions with regard to
confidentiality of information.
On March 6, 1996, the Bankruptcy Court approved the employment
agreement dated as of January 29, 1996, as amended on March 5, 1996, between the
Company and John G. Reen, pursuant to which Mr. Reen serves as an Executive Vice
President and Chief Financial Officer of the Company and was designated a
director of the Company, subject to continued election by its stockholders. The
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<PAGE> 37
agreement provides for an initial term of employment expiring on March 6, 1999
and continuing for successive periods of one year each unless terminated by the
Company or the employee upon not less than 120 days written notice prior to the
expiration of the then applicable term of employment.
The agreement provides for an annual base salary of $460,000 per annum
with increases at the discretion of the Board of Directors. In addition Mr. Reen
received a lump sum cash bonus of $200,000 upon his relocation. On the Effective
Date of the Company's Plan of Reorganization, Mr. Reen will be paid an amount
equal to 60% of his annual base salary then in effect; and, six months following
the Effective Date, Mr. Reen will be paid an additional amount equal to the
greater of (i) $600,000 minus the amount paid at the Effective Date or (ii) 60%
of his base salary in effect on such subsequent date (the "Reen Retention
Payments"). The Reen Retention Payments will be made only if, at the time that
they are payable, Mr. Reen is employed by the Company, or, if not then employed,
Mr. Reen's employment was terminated (i) by reason of Mr. Reen's death, (ii) by
the Company other than for cause (as defined in the Agreement), (iii) by Mr.
Reen for Good Reason for Resignation (as defined in the Agreement) or (iv) as a
result of non-renewal of the agreement by the Company. Mr. Reen will be entitled
to participate in any cash bonus arrangements, including the PIP, applicable to
his position during the term of his employment. However, notwithstanding any
limitations contained in the PIP, Mr. Reen will receive a minimum annual bonus
each year, from the date on which he commenced employment with the Company
through the date the Court enters an order confirming the Company's Plan of
Reorganization ("Confirmation"), equal to 30% of his annual base salary (as in
effect on May 1 of the fiscal year for which the bonus is to be paid) and will
have the opportunity to be paid up to an additional 30% of his annual base
salary depending upon the attainment of achievable financial objectives
determined by the Company and applicable to all senior executives who
participate in the PIP. Mr. Reen will also be entitled to participate on a level
immediately below that of "Principal" in any equity or cash bonus program
included or contemplated by any Plan of Reorganization confirmed by the
Bankruptcy Court.
If the Company 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 the sum of (i) 100% of his annual base salary in effect at the
time of such termination plus (ii) 100% of his target bonus opportunity (the
bonus payable upon the Company achieving, but not exceeding, its business plan)
for the fiscal year in which such termination occurs. Upon termination of the
agreement by the Company without cause (as defined in the agreement) or by Mr.
Reen for Good Reason for Resignation (as defined in the agreement), the
severance payment would be equal to the sum of (i) 1/12 of the annual base
salary plus 1/12 of the target bonus opportunity for the fiscal year of the
Company in which such termination occurs multiplied by the greater of (a) the
number of full calendar months remaining in his then current term of employment
and (b) twelve (12). If Mr. Reen terminates his employment (or, in certain
circumstances, is dismissed) pursuant to certain "change in control" provisions
(as described 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 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 Code, except that "parachute payments" is determined
without regard to whether or not they equal or exceed three times Mr. Reen's
"base amount").
The employment agreements of each of Messrs. Kerbis and Lee are
substantially identical and expire on October 31, 1997. Each such agreement
continues for successive periods of one year unless terminated by either party
upon not less than two months' written notice prior to the expiration of the
then applicable term of employment. Such agreements provide for an annual salary
during their respective terms (the base salary for
-37-
<PAGE> 38
the fiscal year ended February 1, 1997 is the amount set forth for 1996 in the
above Summary Compensation Table), with increases subject to the discretion of
the Board of Directors.
If the Company elects not to renew the employment agreement of Mr.
Kerbis or Mr. Lee, then such employee would receive, within 30 days after
termination, a lump sum payment equal to the sum of (i) 1/12 of his annual base
salary in effect at the time of such termination plus (ii) 1/12 of 100% of his
target bonus opportunity for the fiscal year in which such termination occurs,
which sum is multiplied by nine. Such agreements also provide for the
continuation of health and insurance benefits for a period of nine months
following termination. If, during the term of any such employment agreement, the
Company terminates the employment of the employee other than for "cause" (as
defined below), or the employee terminates his employment because the Company,
upon 30 days' prior written notice by the employee specifying a material breach
of any of its obligations to the employee under such agreement, has failed to
cure such material breach (within such 30-day notice period), then such employee
is entitled to receive, within 30 days after termination, a lump sum payment
equal to (X) the sum of (i) 1/12 of his annual base salary in effect at the time
of such termination plus (ii) 1/12 of 100% of his target bonus opportunity for
the fiscal year in which such termination occurs, multiplied by (Y) the greater
of (a) the number of calendar months remaining in his term of employment and (b)
nine. Such agreements also provide for the continuation of health and insurance
benefits for the number of months determined under clause (Y) above. ("Cause" is
defined as (i) the willful failure to perform any material obligations under the
employment agreement, (ii) an act of fraud, theft or dishonesty likely to result
in financial harm to the Company, (iii) the conviction of any felony or (iv) the
conviction of any misdemeanor involving moral turpitude which might cause
embarrassment to the Company.)
In addition, Messrs. Kerbis and Lee each has the right to terminate his
employment within 12 months after (i) he has obtained actual knowledge that a
"change in control" (as defined) of the Company has occurred and (ii) an
assignment to him of any duties inconsistent with the status of his office
and/or position with the Company as constituted immediately prior to the change
in control or a significant adverse change in the nature or scope of his
authorities, powers, functions or duties as constituted immediately prior to the
change in control. The employment agreements of each of Messrs. Kerbis and Lee
provide that if he terminates his employment following a change in control, then
he is entitled to receive, within 30 days after termination, in cash, as
severance, a lump sum payment equal to the salary and bonus amounts paid by the
Company to him during the 12 month period immediately preceding the termination
(the "Payment Period"), but not to exceed 2.99 times his "base amount" (as
defined below). In June 1995, Messrs. Kerbis and Lee each entered into
substantially identical amendments to their employment agreements lengthening
the Payment Period from 12 to 24 months.
In each of the foregoing employment agreements, a "change in control"
is deemed to have occurred (i) if there has occurred a change in control as
provided under certain rules or regulations under the federal securities laws,
(ii) when any person or entity becomes a beneficial owner of 20% or more of the
Company's securities, (iii) if the stockholders of the Company approve a plan of
complete liquidation; or (iv) if there occurs a change in ownership or effective
control of the Company or a substantial portion of its assets. The term "base
amount" as used in each of the foregoing employment agreements has the meaning
ascribed to such term in Section 280G of the Code.
On April 25, 1997, Kevin Freeman terminated his employment with the
Company. Mr. Freeman's employment agreement with the Company was substantially
identical to those of Messrs. Kerbis and Lee and would have expired on May 19,
1997.
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<PAGE> 39
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1996, the Compensation Committee consisted of Steven M.
Friedman, Bruce Carswell, William F. Glavin and Brian D. Young (who served
through January 14, 1997). Steven M. Friedman was formerly an officer of the
Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) To the best of the Company's knowledge, there were no beneficial owners of
more than 5% of the issued and outstanding shares of Common Stock as of March
15, 1997.
(b) The following table sets forth information regarding the beneficial
ownership at March 15, 1997 of the issued and outstanding shares of Common Stock
of (a) each of the current directors of the Company, (b) each of the Named
Officers and (c) all 17 current directors and executive officers of the Company
as a group:
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Percent of Total Common Stock(1)
- ------------------------ ---------------- -----------------------------
<S> <C> <C>
Warren D. Feldberg (2) 30,634 *
Don R. Clarke (3) 129,865 *
John G. Reen 0 *
Bruce Carswell 4,943 *
Steven M. Friedman 0 *
Verna K. Gibson 0 *
William F. Glavin 14,113 *
Kevin Freeman (4) 36,267 *
Elliott J. Kerbis (5) 35,411 *
Dennis M. Lee (6) 58,490 *
All current directors and executive
officers as a group (17 persons)(7)(8) 277,591 1.7%
</TABLE>
* Ownership does not exceed 1% of the outstanding shares.
(1) Unless otherwise noted, each beneficial owner has sole voting and investment
power with respect to the shares attributable to such owner. The percent of
total stock owned is based on 16,719,121 shares issued and outstanding at the
close of business on March 15, 1997.
(2) Consists of 30,634 shares of restricted stock subject to cancellation if Mr.
Feldberg leaves the employ of the Company prior to vesting.
(3) Includes 128,114 shares owned by a grantor trust of which Mr. Clarke is the
trustee and 1,200 shares owned by his children. Mr. Clarke disclaims any
beneficial interest in the shares owned by his children.
(4) Consists of 36,267 shares of restricted stock that were canceled upon the
termination of Mr. Freeman's employment with the Company.
(5) Includes 34,839 shares of restricted stock subject to cancellation if Mr.
Kerbis leaves the employ of the Company prior to vesting.
(6) Includes 35,227 shares of restricted stock subject to cancellation if Mr.
Lee leaves the employ of the Company prior to vesting.
-39-
<PAGE> 40
(7) Includes an aggregate of 183,718 shares of restricted stock held by officers
subject to cancellation if such executive officers leave the employ of the
Company prior to vesting.
(8) Includes an aggregate of 16,875 shares which may be acquired within 60 days
of March 15, 1997 upon exercise of options or SARs.
(c) The Company is not aware of any arrangements, including any pledge by any
person of securities of the Company, the operation of which may at a subsequent
date result in a change of control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to 1992, loans were made by May Company or its then subsidiary,
Caldor, to certain persons to induce them to enter into the employ of Caldor and
to assist them to relocate and purchase residences. The Company, upon its
acquisition of Caldor, succeeded to May Company's position with respect to such
loans. During fiscal 1996, the largest aggregate amount of indebtedness
outstanding under each loan was as follows: $97,000 for Dennis M. Lee, Executive
Vice President-Human Resources and Merchandise Logistics; and $350,000 for
Robert S. Schauman, former Senior Vice President-Finance and former Chief
Financial Officer. The loan to Mr. Lee bears interest at the rate of 8.75%.
Principal and interest payments have been made since April 1996 with a final
installment of $50,600 due on January 2, 1998. The loan to Mr. Schauman does not
bear interest. The loan to Mr. Schauman was in part offset by the Company
against the second enhanced severance payment due to Mr. Schauman on January 30,
1997 and, at April 15, 1997, $142,514 was due and owing on the loan. Each loan
is secured by a mortgage on real estate.
-40-
<PAGE> 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this annual report:
(1) Financial Statements:
The Consolidated Financial Statements are set forth
in the Index to Consolidated Financial Statements on
page F-1 hereof.
(2) Financial Statement Schedules:
None.
(3) Exhibits:
Exhibits are set forth on the "Index to Exhibits" on
page E-1 hereof.
(b) Reports on Form 8-K:
Subsequent to the last fiscal quarter of the period covered by
this Report, the Registrant filed a Current Report on Form 8-K
for an event that occurred on February 26, 1997 reporting on
Item 5. No financial statements were included in such filing.
-41-
<PAGE> 42
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ Warren D. Feldberg
---------------------------------------
Warren D. Feldberg
Dated May 2, 1997 Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Warren D. Feldberg Chairman, Chief Executive Officer May 2, 1997
- ---------------------------------------- and Director (Principal Executive
Warren D. Feldberg Officer)
/s/ John G. Reen Executive Vice President, May 2, 1997
- ---------------------------------------- Chief Financial Officer and Director
John G. Reen (Principal Financial and Accounting
Officer)
/s/ Bruce Carswell Director May 2, 1997
- ----------------------------------------
Bruce Carswell
/s/ Steven M. Friedman Director May 2, 1997
- ----------------------------------------
Steven M. Friedman
/s/ Verna K. Gibson Director May 2, 1997
- ----------------------------------------
Verna K. Gibson
/s/ William F. Glavin Director May 2, 1997
- ----------------------------------------
William F. Glavin
</TABLE>
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<PAGE> 43
THE CALDOR CORPORATION
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Independent Auditors' Report F-2
Consolidated Financial Statements
Consolidated Statements of Operations F-4
Consolidated Balance Sheets F-5
Consolidated Statements of Stockholders' Equity (Deficit) F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
F-1
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
The Caldor Corporation
Norwalk, Connecticut
We have audited the accompanying consolidated balance sheets of The
Caldor Corporation (Debtor-in-Possession) and subsidiaries (the "Company") as of
February 1, 1997 and February 3, 1996, and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for each of the
three years in the period ended February 1, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of The Caldor Corporation
(Debtor-in-Possession) and subsidiaries as of February 1, 1997 and February 3,
1996, and the results of their operations and their cash flows for each of the
three years in the period ended February 1, 1997 in conformity with generally
accepted accounting principles.
As discussed in Note 1, the Company and certain of its subsidiaries
filed for reorganization under Chapter 11 of the United States Bankruptcy Code
in September 1995. The accompanying consolidated financial statements do not
purport to reflect or provide for the consequences of the bankruptcy
proceedings. In particular, such financial statements do not purport to show (a)
as to assets, their realizable value on a liquidation basis or their
availability to satisfy liabilities; (b) as to pre-petition liabilities, the
amounts that may be allowed for claims or contingencies, or the status and
priority thereof; (c) as to stockholder accounts, the effect of any changes that
may be made in the capitalization of the Company; (d) as to operations, the
effect of any changes that may be made in its business; or (e) as to the
litigation, claims and contingencies discussed in Note 16, the amounts that may
be allowed for such matters. The eventual outcome of these matters is not
presently determinable.
F-2
<PAGE> 45
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1, the bankruptcy filings and related circumstances and the losses from
operations raise substantial doubt about its ability to continue as a going
concern. The continuation of its business as a going concern is contingent upon,
among other things, future profitable operations, the ability to generate
sufficient cash from operations and financing sources to meet its obligations,
and the development and confirmation of a plan of reorganization. Management's
plans concerning these matters are also discussed in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of the uncertainties referred to herein and in the preceding paragraph.
DELOITTE & TOUCHE LLP
New York, New York
April 18, 1997 (May 2, 1997 as to Note 5)
F-3
<PAGE> 46
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------------------------
February 1, February 3, January 28,
(in thousands, except per share data) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 2,602,456 $ 2,765,525 $ 2,748,634
Cost of merchandise sold (note 7) 1,935,500 2,131,281 1,961,475
Selling, general and administrative
expenses (notes 13 and 15) 724,757 774,997 680,283
Interest expense, net (note 14) 39,502 40,973 34,948
----------- ----------- -----------
Earnings (loss) before reorganization items, income
taxes and extraordinary items (97,303) (181,726) 71,928
Reorganization items (note 8) 87,522 170,731 --
----------- ----------- -----------
Earnings (loss) before income taxes and extraordinary
items (184,825) (352,457) 71,928
Provision (benefit) for income taxes (note 11) 500 (59,825) 27,569
----------- ----------- -----------
Earnings (loss) before extraordinary items (185,325) (292,632) 44,359
Extraordinary loss on early retirement of debt (note 12) -- (8,396) --
----------- ----------- -----------
Net earnings (loss) $ (185,325) $ (301,028) $ 44,359
=========== =========== ===========
Per Share Amounts:
Earnings (loss) before extraordinary items $ (10.91) $ (17.30) $ 2.65
Extraordinary loss -- (0.49) --
----------- ----------- -----------
Net earnings (loss) $ (10.91) $ (17.79) $ 2.65
=========== =========== ===========
Weighted average number of common
and common equivalent shares used
in computing per share amounts 16,994 16,918 16,753
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 47
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 1, February 3,
(in thousands, except share and per share data) 1997 1996
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 27,477 $ 25,577
Restricted cash (note 2) 5,254 --
Accounts receivable 12,216 18,059
Merchandise inventories (note 2) 450,499 499,948
Assets held for disposal(note 2) 8,177 25,265
Refundable income taxes (note 11) 13,040 5,380
Prepaid expenses and other current assets 17,422 17,047
----------- -----------
Total current assets 534,085 591,276
Property and equipment, net (notes 2 and 3) 508,071 551,977
Debt issuance costs 2,516 4,674
Deferred income taxes (note 11) -- 16,626
Other assets 5,851 9,466
----------- -----------
Total $ 1,050,523 $ 1,174,019
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 152,151 $ 156,240
Accrued expenses 62,787 70,835
Other accrued liabilities (note 4) 64,478 52,836
Borrowings under revolving credit agreement (note 5) 152,000 40,000
Current maturities of long-term debt (note 5) 550 --
----------- -----------
Total current liabilities 431,966 319,911
Long-term debt (note 5) 18,463 8,640
Other long-term liabilities 28,322 25,158
Liabilities subject to compromise (note 6) 719,980 783,102
Commitments and contingencies (notes 6,8,13,15 and 16)
Stockholders' Equity (Deficit) (notes 9 and 10):
Preferred stock, par value $.01-
authorized, 10,000,000 shares
issued and outstanding, none
Common stock, par value $.01-
authorized, 50,000,000 shares;
issued and outstanding 16,939,106 and 16,921,433
shares, respectively 169 169
Additional paid-in capital 201,823 205,048
Deficit (348,810) (163,485)
Unearned compensation (1,390) (4,524)
----------- -----------
Total stockholders' equity (deficit) (148,208) 37,208
----------- -----------
Total $ 1,050,523 $ 1,174,019
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 48
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Outstanding
Common Stock Additional Retained
-------------------------- Paid-in Earnings Unearned Stockholders'
(in thousands, except share data) Shares Amount Capital (Deficit) Compensation Equity (Deficit)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 29, 1994 16,534,376 $ 165 $ 198,408 $ 93,184 $ -- $ 291,757
Exercise of stock options
and warrants 161,918 2 1,014 -- -- 1,016
Issuance of common stock 1,173 -- 34 -- -- 34
Net earnings -- -- -- 44,359 -- 44,359
---------- ----------- ----------- ----------- ----------- -----------
BALANCE, JANUARY 28, 1995 16,697,467 167 199,456 137,543 -- 337,166
Exercise of stock options
and warrants 2,725 -- 43 -- -- 43
Issuance of common stock 5,053 -- 117 -- -- 117
Shares issued under restricted
stock plan 216,188 2 5,432 -- (5,434) --
Amortization of unearned
compensation -- -- -- -- 910 910
Net loss -- -- -- (301,028) -- (301,028)
---------- ----------- ----------- ----------- ----------- -----------
BALANCE, FEBRUARY 3, 1996 16,921,433 169 205,048 (163,485) (4,524) 37,208
Cancellation of restricted
stock (187,372) (2) (4,030) -- 2,974 (1,058)
Shares issued under director
stock plan 13,876 -- 42 -- -- 42
Shares issued under restricted
stock plan 191,169 2 763 -- (765) --
Amortization of unearned
compensation -- -- -- -- 925 925
Net loss -- -- -- (185,325) -- (185,325)
---------- ----------- ----------- ----------- ----------- -----------
BALANCE, FEBRUARY 1, 1997 16,939,106 $ 169 $ 201,823 $ (348,810) $ (1,390) $ (148,208)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 49
THE CALDOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------
February 1, February 3, January 28,
(in thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $(185,325) $(301,028) $ 44,359
Adjustments to reconcile net (loss) earnings to cash
(used in) provided by operating activities:
Amortization of debt issuance costs 1,778 900 1,000
Depreciation and other amortization 55,323 61,081 48,478
Deferred income taxes -- (28,296) 1,694
Extraordinary loss on early retirement of debt -- 3,471 --
Loss on disposal of property and equipment -- -- 1,359
Amortization of unearned compensation 925 910 --
Reorganization items 87,522 170,731 --
Working capital and other 74,894 188,570 (52,167)
--------- --------- --------
Net cash provided by operating activities
before reorganization items 35,117 96,339 44,723
Reorganization items
Reduction in liabilities subject to compromise (78,182) -- --
Reorganization items paid (29,890) (3,090) --
--------- --------- --------
Net cash (used in) provided by operating activities (72,955) 93,249 44,723
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (36,553) (81,084) (90,009)
Acquisition of leasehold interests -- -- (8,025)
--------- --------- --------
Net cash used in investing activities (36,553) (81,084) (98,034)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under construction loan 10,942 -- --
Retirement of Senior Secured Notes -- (59,500) --
Proceeds from borrowings under Term Loan -- 50,000 --
Proceeds from borrowings under revolving credit 112,000 -- 70,243
Repayment of construction loan previously subject to compromise (5,753) (30,243) --
Proceeds from Real Estate Loan -- 37,145 --
Repayment of long-term debt (569) (5,250) (19,432)
Increase in restricted cash (5,254) -- --
Proceeds from issuance of common stock
and exercise of warrants and options 42 160 1,050
--------- --------- --------
Net cash provided by (used in) financing activities 111,408 (7,688) 51,861
--------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,900 4,477 (1,450)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 25,577 21,100 22,550
--------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 27,477 $ 25,577 $ 21,100
========= ========= ========
WORKING CAPITAL AND OTHER:
Accounts receivable $ 5,843 $ (9,834) $ (4,475)
Merchandise inventories 49,449 22,251 (82,863)
Assets held for disposal 17,088 -- --
Refundable income taxes and deferred income taxes 8,966 -- --
Prepaid expenses and other current assets (375) (5,857) (3,358)
Accounts payable (4,089) 113,847 7,309
Accrued expenses (8,048) 122,525
Other accrued liabilities 5,371 (3,822) 13,311
Federal and state income taxes payable (44,584) 17,567
Other assets and long-term liabilities 689 (5,956) 342
--------- --------- --------
WORKING CAPITAL AND OTHER $ 74,894 $ 188,570 $(52,167)
========= ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest payments $ 36,278 $ 36,210 $ 33,251
Income tax payments 562 8,101 8,388
Capital lease obligations incurred 462 14,756 5,000
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 50
THE CALDOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1 - CHAPTER 11 PROCEEDINGS AND BASIS OF FINANCIAL STATEMENTS PRESENTATION
On September 18, 1995, The Caldor Corporation (the "Registrant") and
certain of its subsidiaries (collectively, the "Debtors", "Caldor" or the
"Company") filed voluntary petitions (the "Filing") for relief under Chapter 11
of the United States Bankruptcy Code ("Chapter 11"). The Debtors are presently
operating their business as debtors-in-possession subject to the jurisdiction
of the U.S. Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court").
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. Amended and restated schedules were 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. The
Bankruptcy Court fixed August 12, 1996 as the last date by which creditors of
the Debtors could file proofs of claim for claims that arose prior to the
Filing. The Debtors are in the process of reconciling differences between
amounts shown by the Debtors and claims filed by creditors. 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 determinable. The
Bankruptcy Court has extended the period in which the Debtors possess the
exclusive right to file a plan of reorganization through September 1, 1997 and
the period in which the Debtors can solicit acceptances for the plan of
reorganization through October 30, 1997. At this point, it is uncertain what, if
anything, a plan of reorganization may provide for equity security holders.
The United States Trustee for the Southern District of New York has
appointed Official Committees ("Committees") of Unsecured Creditors and Equity
Security Holders for the Chapter 11 case. The role of the Committees includes,
among other things: (a) consultation with the Debtors concerning the
administration of the Chapter 11 case; (b) investigation of the acts, conduct,
assets, liabilities, financial condition and operations of the Debtors, and the
desirability of the continuation of their business and other relevant matters;
and (c) participation in the formulation of a plan of reorganization. In
discharging these responsibilities, the Committees have standing to raise issues
with the Bankruptcy Court relating to the business of the Debtors and the
conduct and course of the Chapter 11 case. The Debtors are required to pay
certain expenses of the Committees, including professional fees, to the extent
allowed by the Bankruptcy Court.
On June 7, 1996, the Bankruptcy Court approved the Debtors' reclamation
program, which authorizes the Debtors to settle the claims of 425 vendors that
submitted reclamation demands at the time of Filing. The program provides for
each reclamation vendor that extends mutually acceptable credit support to
receive both a cash payment of up to 50% of its eligible reclamation claim and
priority treatment for the
F-8
<PAGE> 51
remainder of its claim. Reclamation cash payments of $11.6 million were made in
1996. To the extent these payments exceed $10 million, the Debtors are required
to apply such excess to pay down the term portion of the pre-petition credit
facility (the "Term Loan") in an equivalent amount (up to $8.5 million). As of
February 1, 1997, the Debtors had paid down $1.4 million of the Term Loan
related to the reclamation program.
On December 6, 1996 the Company presented its Five-Year Business Plan
(the "Business Plan") to the Company's Creditor, Bank and Equity Committees
setting forth its strategy to restore the Company to long-term profitability by
raising customer satisfaction levels, revamping advertising programs, lowering
everyday prices and focusing its promotional activity, narrowing and refocusing
merchandise assortments, and implementing improved operating efficiencies and
cost reductions. To implement its strategy to restore the Company to long-term
profitability, the Company has continued to strengthen its management team. In
order to raise customer satisfaction levels, the Company plans to focus on
improving in-stocks and customer service by reducing levels of promotional
activity combined with more efficient product flow as a result of the new
regionalized distribution network.
The Company has discontinued regular coupon sales and one-day sale
events, has reduced the number of circular pages and the number of promotional
items in each circular and has eliminated the distribution of midweek circulars,
with the exception of selected weeks. The Company made the determination that
the discontinued marketing programs were neither profitable nor compatible with
its long term marketing strategy.
In the third and fourth quarters of 1996, the Company introduced its
Price Cut Program which lowered everyday prices on selected items in
electronics, health and beauty aids, diapers, household chemicals, furniture,
hardware and housewares. The Company believes that this will rebuild customers'
perceptions of Caldor as an everyday fair price store. The Company is currently
evaluating extending the Price Cut program to other product categories. By
lowering everyday prices on a variety of frequently purchased items, the Company
has been able to stimulate regular priced business. The Company will continue to
offer a broad range of products, but plans to prioritize the family apparel and
fashion home categories that it believes differentiate the Company from the
competition and appeal to its upscale core customer. In addition, the Company
has examined each of its departments and is reallocating selling space to
present a more focused value and quality message to its customers.
The Company believes that the Business Plan sets forth a strategic
direction to take advantage of its strengths and to improve key areas of its
business. The Company will continue to review and refine the Business Plan.
Under Chapter 11, 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.
Under Section 502 of the Bankruptcy Code, a lessor's claim for damages resulting
from the rejection of a real property lease is limited to the rent provided
under such lease, without acceleration, for the greater of one year, or 15%, not
to exceed three years, of the remaining term of the
F-9
<PAGE> 52
lease following the earlier of the date of the Filing or the date on which the
property is returned to the landlord. Forty-five of the Company's store leases,
including three of which were rejected in 1996, are guaranteed by the Company's
former parent, The May Department Stores Company ("May Company"). Prior to the
Filing, the Company had agreed to indemnify May Company for any damages incurred
by the May Company under its guarantees. Accordingly, the Company's liability to
May Company for the amount of the remaining payments on these leases, if
rejected, may not be limited under section 502 of the Bankruptcy Code. A
landlord may also have a claim for unpaid pre-petition rent. As of April 15,
1997, the Debtors had rejected leases for 26 locations and moved to reject two
others (14 closed stores and 14 additional real estate leases), assumed 15 real
estate leases (seven of which were for stores opened prior to 1996, two for
warehouses and the balance were for stores that were opened in 1996),
conditionally assumed two real estate leases and had reached agreement with
landlords to terminate, without liability, seven additional leases. The Company
is required by an order of the Bankruptcy Court, subject to the right of both
the Company and the applicable landlord to move to accelerate for due cause
shown, to make a decision to assume or reject an additional two leases by
September 30, 1997, 43 leases by March 31, 1998 and the balance of the real
property leases on confirmation of its plan of reorganization. As part of the
ongoing review of its operations, the Company is currently negotiating with
landlords regarding rent reductions and lease restructurings. (See note 8).
On April 2, 1996, the Bankruptcy Court approved the closing of 12
under-performing stores (the "Closed Stores") and the Debtors' retention of a
liquidator to conduct store closing sales (the "Closing Sales"). The Closing
Sales were completed and the stores were closed by the end of June 1996. On July
16, 1996, the Bankruptcy Court directed the application of the net proceeds of
the Closing Sales to the payment of the Term Loan. The Company paid $22.5
million to Chemical Bank (now merged with, and known as, The Chase Manhattan
Bank) ("Chase"), as agent for the Term Loan banks, for application to the Term
Loan related to the Closing Sales. As part of the Company's ongoing review
process, the Company identified, and on March 12, 1997 obtained Bankruptcy Court
approval to close, 4 under-performing stores in 1997 (the "1997 Closed Stores").
The Company retained a liquidator that has completed Closing Sales at two
of these locations and currently is conducting store Closing Sales at the other
two locations (the "4 Store Closing Sales"). The proceeds of the 4 Store Closing
Sales are to be applied to a prepayment of the Tranche B loans.
The Debtors continue to review leases and contracts, as well as other
operational and merchandising changes, and cannot presently determine or
reasonably estimate the ultimate outcome of, or liability resulting from this
review.
The consolidated financial statements of the Company have been
presented 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 have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern, which contemplates continuity of operations, realization of assets and
the liquidation of liabilities and commitments in the normal course of business.
The Filing, related circumstances and the losses from operations, raise
substantial doubt about its ability to continue as a going concern. The
appropriateness of using the going concern basis is dependent upon, among other
things, confirmation of a plan of reorganization, future profitable operations,
and the ability to generate sufficient cash from operations and financing
sources to meet obligations. As a result of the Filing and related
circumstances, however, such realization of assets and liquidation of
liabilities is subject to significant uncertainty. While under the protection of
Chapter 11, the Debtors may sell or
F-10
<PAGE> 53
otherwise dispose of assets, and liquidate or settle liabilities, for amounts
other than those reflected in the consolidated financial statements. Further, a
plan of reorganization could materially change the amounts reported in the
consolidated financial statements. The consolidated financial statements do not
include any adjustments relating to a recoverability of the value of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary as a consequence of a plan of reorganization.
NOTE 2 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business - The Company operates a regional chain of
upscale discount retail stores located in ten East Coast and Mid-Atlantic
states. The Company's fiscal year ends on the Saturday closest to January 31.
References to 1996, 1995 and 1994 relate to the fiscal years ended February 1,
1997, February 3, 1996 and January 28, 1995, respectively. Each of these fiscal
years included 52 weeks except for 1995 which included 53 weeks. References to
years relate to fiscal years rather than calendar years.
b. Principles of Consolidation and Basis of Presentation - The
consolidated financial statements include the accounts of the Company and all of
its subsidiaries. All material intercompany accounts and transactions between
the entities have been eliminated.
c. Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. Cash equivalents are stated at cost, which approximates market
value.
d. Merchandise Inventories -The value of merchandise inventories is
determined by the lower of LIFO (last-in, first-out) cost, using the retail
inventory method, or market. As a result of provisions for inventory markdowns,
the LIFO cost of merchandise inventories exceeded current cost at February 1,
1997 and February 3, 1996. Therefore, the reported amounts of merchandise
inventory approximate market at February 1, 1997 and February 3, 1996. At
January 28, 1995 the LIFO cost was $0.1 million less than current cost, as
determined by the FIFO (first-in, first-out) method.
e. Assets Held for Disposal - Assets held for disposal represent the
net realizable value of inventories located at the stores to be closed.
f. Property and Equipment - Property and equipment are stated at cost
(or purchase cost) less accumulated depreciation and amortization. Provisions
for depreciation and amortization are computed using the straight-line method
based upon the estimated useful lives of the assets, which are 40 to 50 years
for buildings and 3 to 15 years for furniture, fixtures and equipment. Leasehold
improvements are amortized over the shorter of their economic lives or the terms
of the leases. Leasehold interests and investments in property under capital
leases are amortized over the related lease term.
g. Debt Issuance Costs - Debt issuance costs are amortized over the
term of the related debt agreements. (See note 14).
h. Selling, General and Administrative Expenses - Buying and store
occupancy costs are included in selling, general and administrative expenses.
F-11
<PAGE> 54
i. Store Pre-Opening Expenses - Costs associated with the opening of
new stores are expensed in the year the stores are opened. The Company incurred
pre-opening expenses of $3.1 million, $1.6 million and $7.6 million in 1996,
1995 and 1994, respectively.
j. Advertising Costs - Advertising costs, net are expensed as incurred
and were $34.8 million, $39.4 million and $30.1 million, respectively in 1996,
1995 and 1994.
k. Income Taxes - The Company provides for deferred income taxes under
the asset and liability method in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," whereby
deferred income taxes result from the tax effect of temporary differences
between the tax bases of assets and liabilities and their reported amounts in
the financial statements.
l. Earnings (Loss) Per Share - Earnings (loss) per share were computed
by dividing net earnings by the weighted average number of common and common
equivalent shares outstanding during each period. Common equivalent shares
include stock options and warrants calculated using the treasury stock method.
m. Self Insurance Programs - The Company is self insured for workers
compensation and general liability claims, and recognizes the projected costs of
such programs on a discounted basis using a risk-free rate. Use of a risk-free
rate to discount future cash payments produces a reserve that approximates the
amount at which such claims could be settled in an arm's length transaction with
a third party.
n. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The consolidated financial statements include
estimates of restructuring charges for certain facilities closings (see note 8)
and do not purport to reflect or provide for the consequences of the bankruptcy
proceedings and other uncertainties. Actual results could differ from reported
results.
o. Reclassifications - Certain balances in prior fiscal years have been
reclassified to conform with the current year's classifications.
p. Stock-Based Compensation - The Company accounts for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations. In 1996, the Company adopted the disclosure-only
provisions of SFAS No.123, "Accounting for Stock-Based Compensation Plans."
(See note 9).
q. Recent Accounting Pronouncements - The Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" in 1996. This statement requires that long-lived assets be
reviewed for impairment and written down to fair value whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. As part of the ongoing review of its operations, the Company is
currently negotiating with landlords regarding rent reductions and lease
restructurings. In the event the Company does not achieve certain expected rent
reductions, the Company could incur an impairment charge for certain of its
properties.
F-12
<PAGE> 55
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share" ("SFAS No. 128"), which is effective for the
Company beginning with the fiscal year ending January 31, 1998 ("1997"). SFAS
No. 128 establishes standards for computing and presenting earnings per share.
The Company does not believe the adoption of SFAS No. 128 in fiscal year 1997
will have a significant impact on the Company's earnings per share.
r. Fair Value of Financial Instruments - SFAS No. 107, "Disclosures
About Fair Value of Financial Instruments" requires disclosures of estimated
fair values of financial instruments both reflected and not reflected in the
accompanying consolidated financial statements. The estimated fair values of
the Company's cash and cash equivalents, accounts receivable, borrowings under
credit agreements and accounts payable (post-petition) approximate the carrying
amounts at February 1, 1997 and February 3, 1996 due to their short maturities
or variable-rate nature of the borrowings. The fair value of the Company's
liabilities subject to compromise is not presently determinable as a result of
the Chapter 11 proceedings.
s. Restricted Cash - As of February 1, 1997, the restricted cash
balance of $5.3 million was being held in an escrow account pending final
resolution of issues concerning the closing sales agreement between the Company
and the liquidator for the stores that were closed in 1996.
F-13
<PAGE> 56
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost, less accumulated depreciation and
amortization, as follows:
<TABLE>
<CAPTION>
February 1, 1997 February 3, 1996
---------------- ----------------
<S> <C> <C>
Land $ 15,561 $ 10,186
Buildings, leasehold
interests and improvements 293,023 300,517
Furniture, fixtures and equipment 263,743 266,720
Property under capital leases 123,633 124,733
--------- ---------
695,960 702,156
Less: Accumulated depreciation and
amortization (187,889) (150,179)
--------- ---------
Property and equipment, net $ 508,071 $ 551,977
========= =========
</TABLE>
NOTE 4 - OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
February 1, 1997 February 3, 1996
---------------- ----------------
<S> <C> <C>
Accrued reorganization costs $33,713 $27,443
Accrued wages and benefits 18,557 14,762
Other accrued expenses 12,208 10,631
------- -------
Total $64,478 $52,836
======= =======
</TABLE>
F-14
<PAGE> 57
NOTE 5 - DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
February 1, 1997 February 3, 1996
---------------- ----------------
<S> <C> <C>
Short-term debt:
Borrowings under revolving credit agreement
$ 152,000 $40,000
========= =======
Long-term debt:
Capital lease obligations, due 1997 - 2018,
10.7% $ 8,527 $ 8,640
Construction loan, due 1997-2015 10,486 --
--------- -------
19,013 8,640
Less: Current Maturities (550) --
--------- -------
Total long-term debt $ 18,463 $ 8,640
========= =======
</TABLE>
On October 17, 1995, the Bankruptcy Court entered a final order (the
"Final Order") approving the Debtor-in-Possession Financing Agreement (the "DIP
Facility") as provided under the Amended and Restated Revolving Credit and
Guaranty Agreement dated as of October 17, 1995, among the Registrant, as the
borrower thereunder, the subsidiaries of the Registrant named therein, as the
guarantors thereunder, and a bank group led by Chase. The DIP Facility amends
and restates, in its entirety, the Registrant's Debtor-In-Possession Revolving
Credit and Guaranty Agreement dated as of September 18, 1995 with Chase as
agent. Pursuant to the terms of the DIP Facility, as amended, the bank group
has made available to the Registrant a revolving credit and letter of credit
facility in an aggregate principal amount, at February 1, 1997, not to exceed a
total of $492.4 million, divided into two separate tranches consisting of
(i) a post-petition revolving credit and letter of credit facility in an
aggregate principal amount not to exceed $250 million (reflecting the Second
Amendment (as hereinafter defined)) to be made available by Tranche A Banks (the
"Tranche A Facility") and (ii) the continued use of the revolving credit and
letter of credit portion of the pre-petition credit facility made available by
the Tranche B Banks (the "Tranche B Facility") in an aggregate principal amount
of $242.4 million which principal amount may be borrowed, paid and reborrowed.
The Company's maximum borrowing under the Tranche A Facility, up to $250
million, may not exceed the lesser of 60% of Eligible Cost Value of Inventory or
50% of Eligible Retail Value of Inventory (the "Borrowing Base"). At February 1,
1997, the Borrowing Base was $243.1 million. The DIP Facility has a sublimit of
$175 million for the issuance of letters of credit. On July 16, 1996, the
Bankruptcy Court approved the Second Amendment to the DIP Facility (the "Second
Amendment") which, among other things, provided for rescinding a $50 million
line reduction of the Tranche A Facility commitment that took effect on May 4,
1996 and eliminating the $50 million line reduction of the Tranche A Facility
commitment that was scheduled for October 5, 1996. Instead, the Second Amendment
provided for an automatic $50 million line reduction of the Tranche A Facility
commitment on May 3, 1997. On March 12, 1997, the Company, the guarantors and
the bank group entered into an amendment to the DIP Facility providing that all
of the proceeds of the 4 Store Closing Sales are to be applied to a prepayment
of the Tranche B loans and that the Tranche B Facility commitment be reduced in
such amount. Pursuant to
F-15
<PAGE> 58
this amendment, 70% of the proceeds have been applied in this manner and the
balance is to be so applied no later than 60 days after the conclusion of the 4
Store Closing Sales. The Tranche B Facility must be fully utilized before the
Company can borrow under the Tranche A Facility.
The Final Order provides that (i) the Company pay monthly interest
payments on the outstanding principal amount of pre-petition indebtedness under
the Term Loan and the real estate based loan agreement (the "Real Estate Loan")
between the Company and Chase at an annual rate equal to LIBOR plus 3/4 of 1%
and (ii) the lenders under such pre-petition facilities be granted a replacement
security interest in and lien upon all of the properties and assets of the
Company. The outstanding principal amounts on the Term Loan and the Real Estate
Loan have been classified as liabilities subject to compromise on the
consolidated balance sheets (see note 6).
Borrowings under the DIP Facility may be used to fund working capital
and inventory purchases and for other general corporate purposes. The DIP
Facility contains restrictive covenants, including, among other things,
limitations on the creation of additional liens and indebtedness, limitations on
capital expenditures, capital leases and annual rents, the sale of assets and
the maintenance of minimum earnings before interest, taxes, depreciation,
amortization and reorganization items, the maintenance of inventory levels and a
prohibition on the payment of dividends.
The DIP Facility provides that advances made (i) under the Tranche A
Facility will bear interest at a rate of 0.5% per annum in excess of Chase's
Alternative Base Rate ("ABR"), or at the Registrant's option, a rate of 1.5% per
annum in excess of the reserve adjusted London Interbank Offered Rate ("LIBOR")
for the interest periods of one, three or six months or (ii) under the Tranche B
Facility will bear interest at ABR or, at the Registrant's option, at a rate of
0.75% per annum in excess of LIBOR.
Under the Tranche A Facility, the Company pays a commitment fee of 0.5%
per annum on the unused portion thereof, a letter of credit fee equal to 1.5%
per annum of average outstanding letters of credit and certain other fees. Under
the Tranche B Facility, the Company pays a commitment fee of 0.3125% per annum
on the unused portion thereof, a letter of credit fee equal to 0.75% per annum
of average outstanding letters of credit and certain other fees. The Tranche B
Facility must be fully utilized before the Company can borrow under the Tranche
A Facility. The Tranche A Facility and the Tranche B Facility expire on the
earlier of September 18, 1997 or the date of entry of an order by the Bankruptcy
Court confirming a plan of reorganization.
On May 2, 1997, Chase, as agent for the bank group under the DIP
Facility, advised the Company that the bank group had agreed to extend the DIP
Facility to June 15, 1998 (the "DIP Extension") subject to the execution of
documentation and Bankruptcy Court approval. The DIP Extension provides for a
total commitment of $450 million consisting of a Tranche A Facility of $250
million and a Tranche B Facility of $200 million. In addition, the DIP
Extension amends the DIP Facility to provide for, among other things, a
mandatory paydown of the aggregate principal amount of the outstanding loans
(exclusive of letters of credit) to $165 million for a period of 15 consecutive
business days during the period from December 15, 1997 through January 15,
1998, capital expenditures not to exceed $30 million through the fiscal year
ending January 31, 1998 and $16 million (subject to a $3 million increase if
certain EBITDA projections are achieved) thereafter through the maturity date,
revised EBITDA thresholds for the trailing four quarters for each of the fiscal
quarters in fiscal year 1997 and for the fiscal quarter ending April 30, 1998,
and revised monthly inventory amounts through June 15, 1998. The Company will
incur approximately $3 million in bank fees associated with the DIP Extension.
In all other material respects the DIP Facility remains unchanged.
The DIP Extension provides that advances made (i) under the Tranche A
Facility will bear interest at a rate of 0.75% per annum in excess of ABR, or
at the Registrant's option, a rate of 1.75% per annum in excess of LIBOR for
the interest periods of one, three or six months or (ii) under the Tranche B
Facility will bear interest at 0.25% per annum in excess of ABR, or, at the
Registrant's option, a rate of 1.0% per annum in excess of LIBOR.
The Tranche A Banks and the Tranche B Banks were granted a lien on all
of the assets of the Debtors and a superpriority claim for all obligations of
the Debtors arising under the Tranche A Facility and the Tranche B Facility,
respectively. However, the claim of the Tranche B Banks is subordinate in
priority to the claim of the Tranche A Banks. In addition, Chase, as agent, was
granted a security interest in all of the shares of capital stock now or
hereafter issued to the Registrant by certain of its subsidiaries.
F-16
<PAGE> 59
At February 1, 1997 and February 3, 1996, the respective principal
amounts outstanding were $152.0 million and $40.0 million in revolving credit
borrowings and $52.6 million and $52.5 million in letters of credit, which were
issued primarily to import merchandise in the normal course of the Company's
business. The effective interest rate at February 1, 1997 and February 3, 1996
was 6.3% and 7.1%, respectively on revolving credit borrowings.
The maximum amounts of revolving credit borrowings at any month-end
were $267.0 million in 1996, $222.1 million in 1995 and $199.5 million in 1994.
Average revolving credit borrowings outstanding were $151.8 million at a
weighted average interest rate of 6.6% in 1996, $160.0 million at a weighted
average interest rate of 7.2% in 1995 and $110.7 million at a weighted average
interest rate of 6.0% in 1994.
The Company borrowed $10.9 million in 1996 under a construction loan
relating to the Silver Spring, Maryland store. As of February 1, 1997 the
outstanding borrowings under this loan were $10.5 million and bear interest at a
rate of 1.75% per annum in excess of LIBOR. Scheduled annual loan repayments
are approximately $0.5 million per year through 2015.
NOTE 6 - 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:
<TABLE>
<CAPTION>
February 1, 1997 February 3, 1996
---------------- ----------------
<S> <C> <C>
Accounts payable $226,506 $265,249
Term Loan 191,100 215,000
Real Estate Loan 37,145 37,145
Rejected leases and other
miscellaneous claims 129,900 109,087
Accrued expenses 80,784 90,343
Capital lease obligations 39,318 45,234
Construction loans 11,511 17,264
Industrial revenue bonds and
mortgage notes 3,716 3,780
-------- --------
Total $719,980 $783,102
======== ========
</TABLE>
Liabilities subject to compromise under reorganization proceedings
include substantially all current and long-term unsecured debt as of the date of
the Filing. Pursuant to the provisions of the Bankruptcy Code, payment of those
liabilities may not be made except pursuant to a plan of reorganization or
Bankruptcy Court order while the Debtors continue to operate as
debtors-in-possession. The Company has recorded an estimated liability for
certain leases that have either been rejected or the Company anticipates
rejecting.
Accounts payable subject to compromise was reduced by reclamation
payments of $11.6 million, the reduction to the liability for vendor claims of
$15.0 million (see note 7) and $11.7 million related to the ongoing
reconciliation of differences between amounts shown by Debtors and creditors and
processing and reconciliation of pre-petition merchandise in transit. The
outstanding principal amount of the Term Loan
F-17
<PAGE> 60
was reduced by application of the net proceeds of the closing sales of $22.5
million and $1.4 million in payments related to the reclamation program.
Rejected leases and other miscellaneous claims increased to reflect lease
rejection claims for four stores to be closed in 1997. Accrued expenses were
reduced by Bankruptcy Court approved payments for sales and use tax and
reclamation claims. Capital lease obligations were reduced by normal
amortization. Construction loans were reduced by the refinancing transaction
approved by the Bankruptcy Court for the Silver Spring, Maryland store.
The Company determined that the Term Loan and the Real Estate Loan
referenced in the DIP Facility are pre-petition obligations which are still
subject to bankruptcy proceedings and, accordingly, reclassified these
obligations from long term debt to liabilities subject to compromise.
F-18
<PAGE> 61
NOTE 7 - COST OF MERCHANDISE SOLD
During the year ended February 3, 1996, the Company recorded reserves
for additional vendor claims of approximately $29 million estimated to result
upon the reconciliation of pre-petition liabilities and for anticipated losses
on the liquidation of inventories in 1996 of approximately $39 million. Based
upon actual claims reconciliation experience, the Company has reduced its
provision and liability for vendor claims by approximately $15 million in 1996.
In addition, the Company has refined its practice of capitalizing certain costs
in inventory, resulting in additional cost of merchandise sold of approximately
$13 million upon liquidation of such inventories. The impact of these items,
which was included in cost of merchandise sold in 1996, was not material to the
Company's consolidated financial position or results of operations.
NOTE 8 - REORGANIZATION ITEMS
The components of reorganization items and accrual activity that were
directly associated with the Company's Chapter 11 reorganization proceedings and
the resulting restructuring of its operations were as follows:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Reorganization items
Provision for closed and unopened stores $30,770 $ 47,250
Lease rejection obligations 20,813 96,458
Retention costs (note 15) 15,042 12,509
Professional fees 13,700 8,816
Write-off of deferred financing costs 1,261 2,200
Other 5,936 3,498
------- --------
Total $87,522 $170,731
======= ========
</TABLE>
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accrual activity
Balance - beginning of year $ 136,530 $ --
Reorganization items 87,522 170,731
Cash payments (29,890) (3,090)
Asset write-offs (30,549) (31,111)
--------- ---------
Balance - end of year $ 163,613 $ 136,530
========= =========
</TABLE>
Cash payments made in 1996 included $15.9 million for professional fees,
$3.8 million for severance payments, $7.2 million for bankruptcy expenses and
$3.0 million for store closing expenses. As discussed in note 1, the Company
closed 12 under-performing stores in 1996. On March 12, 1997, the Bankruptcy
Court approved the closing of four under-performing stores in 1997 and the
Company retained a liquidator that has completed Closing Sales at two of these
locations and currently is
F-19
<PAGE> 62
conducting Closing Sales at the other two locations. The provision for
closed and unopened stores covers costs associated with the closing of the
stores and primarily relate to fixed asset and inventory write-offs. The lease
obligations and related reserves for the facilities closings include numerous
real property leases rejected and to be rejected and amounts for other executory
contracts that have been identified for rejection pursuant to Section 365 of the
Bankruptcy Code and are reflected at the estimated amount of the eventually
allowed claims of the lessors in the Chapter 11 case as prescribed by Section
502 of the Bankruptcy Code for the rejection of leases. Forty-five of the
Company's store leases, including three which were rejected in 1996, are
guaranteed by the Company's former parent, The May Department Stores Company
("May Company"). The Company has agreed to indemnify May Company for any
damages incurred by May Company under its guaranties. Accordingly, the Company
may be liable to May Company for the full amount of the remaining payments on
these leases, if rejected, without the limitation of Section 502 of the
Bankruptcy Code, to the extent paid by May Company under its guaranties. The
costs relating to these facilities closings may be greater or less than the
amount provided in the consolidated financial statements. Net sales of the
stores to be closed in 1997 were approximately $92.6 million, $88.2 million and
$69.9 million during 1996, 1995 and 1994, respectively. Net sales of the 12
stores closed in 1996 were approximately $18.1 million, $133.6 million and
$124.3 million during 1996, 1995, and 1994, respectively.
NOTE 9 - STOCK COMPENSATION PLANS
At February 1, 1997, the Company had four stock-based compensation plans
which are described below. The Company applies Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its stock-based compensation plans other than for its
restricted stock awards. The Company determined that had compensation cost for
the Company's stock-based compensation plans been determined consistent with the
methodology prescribed under SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), the impact on the Company's net loss and loss
per share would not be material. The effects of applying SFAS No. 123 are not
indicative of future results as SFAS No. 123 does not take into consideration
compensation expense related to awards granted prior to 1995.
a. Stock Option Plans - The Company's 1995 Stock Option Plan for Key
Employees, 1991 Stock Option Plan for Key Employees and 1991 Stock Option Plan
for Directors provide for the granting of options to purchase 1,500,000 shares
of the Company's common stock to key employees and directors. The option price
under the plans is the fair market value of the shares on the grant date.
Exercise terms are determined at each grant date. Stock options granted during
1995 and 1994 become exercisable in installments of 25% per year on each of the
first through fourth anniversaries of the grant date and have a maximum term of
ten years.
F-20
<PAGE> 63
A summary of the status of the Company's three stock option plans and
changes during the years ended February 1, 1997, February 3, 1996 and January
28, 1995 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- ---------------------------- -------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 1,083,037 $26.15 972,600 $ 28.05 804,876 $ 26.67
Granted -- -- 316,350 20.54 272,550 31.42
Exercised -- -- (2,725) 15.63 (11,924) 18.03
Canceled (803,738) 26.51 (203,188) 26.63 (92,902) 27.32
--------- --------- -------
Outstanding at end of year 279,299 25.12 1,083,037 26.15 972,600 28.05
========= ========= =======
Options exercisable at
year-end 182,323 $24.40 401,342 $ 24.88 150,475 $ 22.35
</TABLE>
b. Stock Appreciation Rights and Restricted Stock Plan - The Company's
1994 Performance Stock Appreciation Rights ("SARs") and Restricted Stock Plan
provides for the granting of 1,300,000 shares of the Company's common stock to
key employees in the form of SARs or as restricted stock. No more than 546,000
shares will be granted as restricted stock.
During fiscal 1995 and 1994, 225,000 and 220,000 SARs were granted
at a weighted average fair market value of $18.63 and $31.88, respectively. No
SARs were granted during fiscal 1996. At February 1, 1997, SARs which have been
awarded and are outstanding amounted to 15,000 shares at a price of $31.88,
20,000 shares at a price of $18.75 and 5,000 shares at a price of $13.50. No
compensation expense was recognized in connection with the granting of SARs.
During fiscal 1996 and 1995, 191,169 and 216,188 restricted stock
awards at a weighted average fair market value of $4.00 and $21.44,
respectively, were granted to certain key employees at no cost to these
employees. The outstanding restricted stock awards vest on the later of three
years subsequent to the 1996 award date or six months following the effective
date of a plan of reorganization. The cost of restricted stock awards, based on
the stock's fair market value at the award date is charged to stockholders'
equity and subsequently amortized against earnings over the vesting period. For
fiscal 1996 and 1995 the Company amortized $0.9 million per year of unamortized
compensation related to restricted stock awards. At February 1, 1997, 219,985
shares were outstanding under restricted stock awards.
F-21
<PAGE> 64
NOTE 10 - SHAREHOLDER RIGHTS PLAN
On August 2, 1995, the Company adopted a Shareholder Rights Plan
and declared a distribution of one Right for each outstanding share of Common
Stock, par value $.01 per share (the "Company Common Stock"). Such Rights only
become exercisable ten business days after a person or group (an "Acquiring
Person") acquires beneficial ownership of, or commences a tender or exchange
offer for, 15% or more of the Company's Common Stock (the "Stock Acquisition
Date").
Each Right entitles the holder to purchase from the Company one
one-hundredth of a share of Series A Preferred Stock, par value $.01 per share,
at a purchase price of $64 for each one one-hundredth of a share, subject to
adjustment. Thereafter, upon the occurrence of certain events (for example, if
the Company is the surviving corporation of a merger with an Acquiring Person),
each holder of a Right will have the right to receive, upon exercise, shares of
Preferred Stock (or, in certain circumstances, Common Stock, cash, property or
other securities of the Company) having a value of twice the exercise price of
the Rights. Alternatively, upon the occurrence of certain other events (for
example, if the Company is acquired in a merger or other business combination in
which the Company is not the surviving corporation), each holder (other than the
Acquiring Person) of a Right will have the right to receive, upon exercise,
shares of Common Stock of the surviving corporation having a value of twice the
exercise price of the Rights.
At any time until 10 business days following the Stock Acquisition
Date, the Company may redeem the Rights in whole, but not in part, at a price of
$.01 per Right (subject to adjustment in certain events) payable at the option
of the Company. The Rights will expire on August 2, 2005.
F-22
<PAGE> 65
NOTE 11 - INCOME TAXES
The provision (benefit) for income taxes included the following:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ $(32,394) $20,028
State and local 500 865 5,847
-------- -------- -------
500 (31,529) 25,875
-------- -------- -------
Deferred:
Federal -- (28,296) 1,723
State and local -- -- (29)
-------- -------- -------
(28,296) 1,694
-------- -------- -------
Total $ 500 $(59,825) $27,569
======== ======== =======
</TABLE>
A reconciliation between income taxes computed using the effective income
tax rate and the statutory income tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes (benefit) at statutory rates $ (64,689) $ (123,360) $ 25,175
State and local income taxes, net of federal benefit 325 562 3,829
Targeted jobs tax credit -- -- (617)
Unrecognized deferred tax asset 62,879 62,973 --
Other 1,985 -- (818)
---------- ---------- --------
Provision (benefit) for income taxes $ 500 $ (59,825) $ 27,569
========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax rate (35.0)% (35.0)% 35.0 %
State and local income taxes, net of federal benefit 0.2 0.1 5.3
Targeted jobs tax credit -- -- (0.9)
Unrecognized deferred tax asset 34.0 17.9 --
Other 1.1 -- (1.1)
------ ------ ------
Effective income tax rate 0.3% (17.0)% 38.3 %
====== ====== ======
</TABLE>
F-23
<PAGE> 66
The tax effect of temporary differences and carry forwards which give rise
to deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carryforward $ 95,308 $ 18,911
Targeted jobs tax credit carryforward 6,108 5,035
Alternative minimum tax credit carryforward 6,011 12,545
Reserves for reorganization items 29,780 63,217
Reserves for restructuring items 62,797 42,814
--------- ---------
Total deferred tax assets 200,004 142,522
--------- ---------
Fixed assets and accumulated depreciation (32,892) (27,108)
Current assets and accrued liabilities (15,591) (16,291)
--------- ---------
Total deferred tax liabilities (48,483) (43,399)
--------- ---------
Total deferred tax assets (liabilities), net 151,521 99,123
Less: Valuation allowance (151,521) (82,497)
--------- ---------
Net deferred tax assets $ -- $ 16,626
========= =========
</TABLE>
F-24
<PAGE> 67
The Company and its subsidiaries file a consolidated federal income tax
return. For tax reporting purposes, the Company has adopted the year ending on
the Thursday occurring nearest to the last day of the calendar month of October.
The Company has certain federal and state net operating loss carryforwards
at October 1996 which will expire in the years 1997 through 2011. The Company
has an alternative minimum tax credit carryforward of approximately $6.0 million
available to offset future regular income taxes payable to the extent such
regular taxes exceed alternative minimum taxes payable. The Company has
approximately $6.0 million of targeted jobs tax credit carryforwards, which
expire in the years 2005 through 2010. The valuation allowance relates to the
uncertainty associated with future realization of net operating loss
carryforwards, credit carryforwards and certain deductible temporary
differences.
NOTE 12 - EXTRAORDINARY ITEMS
During February 1995, the Company amended its credit agreement to increase
the amortizing Term Loan to $215 million. Using $50 million in Term Loan
borrowings and $16 million of non-amortizing revolver borrowings, the Company
executed, on February 7, 1995, an in-substance defeasance of the outstanding 15%
Senior Subordinated Notes (the "Notes") by depositing $66 million of U.S.
government securities into an irrevocable trust to cover the redemption value
(including principal, call premium and interest) of the Notes on June 1, 1995,
at which time the Notes were called. For financial reporting purposes, the Notes
were considered extinguished during the first quarter of fiscal 1995, and the
defeasance transaction resulted in an extraordinary loss of $8.4 million. During
the fourth quarter of fiscal 1995, the previously recorded tax benefit from this
extraordinary loss was reversed and allocated to continuing operations.
NOTE 13 - LEASE OBLIGATIONS AND COMMITMENTS
The Company leases the majority of its stores and certain equipment under
noncancelable leases. Certain of the store leases provide for contingent rentals
based on sales. Substantially all of the store leases require the Company to pay
taxes, insurance and other occupancy costs and contain renewal options which
range from 5 to 60 years.
F-25
<PAGE> 68
Rental expense for operating leases consisted of:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real property:
Minimum rentals $ 89,865 $ 91,093 $ 76,531
Contingent rentals 2,509 2,485 3,161
-------- -------- --------
92,374 93,578 79,692
Equipment rentals 20,380 23,182 20,274
-------- -------- --------
Total $112,754 $116,760 $ 99,966
======== ======== ========
</TABLE>
Excluding leases rejected or identified to be rejected, future minimum
lease payments at February 1, 1997 for each of the next five years were as
follows:
<TABLE>
<CAPTION>
Capital Operating
Year Leases Leases Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $ 9,470 $ 84,439 $ 93,909
1998 8,880 84,120 93,000
1999 9,310 79,297 88,607
2000 7,883 78,765 86,648
2001 6,052 78,278 84,330
Thereafter 47,334 931,889 979,223
----------- ----------- -----------
Minimum lease payments 88,929 $ 1,336,788 $ 1,425,717
=========== ===========
Less: Imputed interest component and
executory costs (41,084)
-----------
Present value of net minimum lease payments $ 47,845
===========
</TABLE>
NOTE 14 - INTEREST EXPENSE, NET
Interest expense, net, included the following:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $ 38,208 $ 40,767 $ 34,453
Amortization of debt issuance costs 1,778 900 1,000
-------- -------- --------
39,986 41,667 35,453
Interest income (484) (694) (505)
--------- -------- --------
Interest expense, net $ 39,502 $ 40,973 $ 34,948
======== ======== ========
</TABLE>
F-26
<PAGE> 69
NOTE 15 - BENEFIT PLANS
a. Pension Plans - The Company has three defined benefit plans, which
cover all employees ("Associates") who meet certain requirements including age,
length of service, and hours worked per year. The benefits provided are based
upon years of service and compensation during employment. Two of these plans,
The Caldor, Inc. Retirement Plan and the Supplemental Executive Retirement Plan
were amended on August 1, 1996 to discontinue additional accruals for
participants. The benefits accrued prior to August 1, 1996 are not affected by
the change and current participants are eligible to vest with additional years
of service after August 1, 1996.
Contributions to the pension plans, which are made solely by
the Company, are determined by an outside actuarial firm. To compute net pension
costs, the actuarial firm estimates the total benefits which will ultimately be
paid to eligible Associates and then allocates these costs to service periods.
Each of the actuarial assumptions used to calculate pension costs is reviewed
annually. The following tables summarize the funded status of the pension plans,
components of pension expense and actuarial assumptions.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
FUNDED STATUS
Actuaral present value of benefit obligation:
Vested benefit obligation $ 21,397 $ 20,887
-------- --------
Accumulated benefit obligation (ABO) $ 25,221 $ 24,649
-------- --------
Projected benefit obligation (PBO) $ 25,333 $ 25,850
-------- --------
Plan assets at fair value (primarily equity and
income securities) $ 22,294 $ 20,544
-------- --------
Plan assets less than PBO (3,039) (5,306)
Unrecognized prior service costs -- 587
Unrecognized loss 110 1,512
-------- --------
Accrued pension costs $ (2,929) $ (3,207)
-------- --------
Plan assets less than ABO $ (2,927) $ (4,105)
-------- --------
</TABLE>
F-27
<PAGE> 70
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET PENSION EXPENSE
Service cost $ 3,348 $ 3,827 $ 3,978
Interest on PBO 1,852 1,603 1,388
Actual (return) loss on plan assets (1,773) (2,987) 213
Net amortization and deferral 218 1,488 (1,336)
Curtailment gain (712) -- --
------- ------- -------
Total $ 2,933 $ 3,931 $ 4,243
======= ======= =======
Actuarial assumptions:
Discount rate 7.75% 7.25% 8.50%
Expected return on plan assets 10.00 10.00 8.75
Salary increases 3.00 3.50 4.00
</TABLE>
F-28
<PAGE> 71
b. Profit Sharing Plan - The Company has a profit sharing plan pursuant to
Section 401 of the Internal Revenue Code, whereby eligible participants (all
nonunion Associates who meet certain hour requirements) may contribute a
percentage of compensation, but not in excess of the maximum allowed. The plan
provides for matching contributions and additional contributions depending upon
achievement of specific earnings levels. Charges to earnings for the Company's
contributions during 1996, 1995 and 1994 were $850, $965 and $1,099,
respectively.
c. Employee Retention Plan - Included in reorganization costs for 1996 and
1995 are charges of $15.0 million and $12.5 million, respectively for the
employee retention program. The Company has implemented an employee retention
program, which provides for retention payments and enhanced severance payments
to key employees who continue their employment with the Company during the
Chapter 11 proceedings. The retention plan provides, among other things, a
payment to be made to employees upon confirmation of a plan of reorganization
and a second payment 6 months thereafter. The severance plan provides for
enhanced severance payments and change in control severance payments to be made
to certain employees upon involuntary termination.
NOTE 16 - CONTINGENCIES
As a result of the Filing, the prosecution of litigation against the
Debtors involving matters arising prior to the Filing for bankruptcy is stayed.
Such stay may be lifted by the Bankruptcy Court handling the bankruptcy
proceedings in appropriate circumstances.
Four class actions against certain present and former officers of the
Company have been brought on behalf of all persons who purchased the Company's
stock during specified periods of time. The Company is not a defendant in these
actions (three of which have been consolidated). A proof of claim was filed in
the Chapter 11 case by the plaintiffs in the consolidated action. Although it is
required to indemnify the defendants to the extent required by Delaware law, the
Company has directors' and officers' liability coverage. The amount of
liability, if any, related to these actions is not presently determinable. These
actions are believed by the Company to be without merit and will be vigorously
defended.
The Company and certain of its subsidiaries are defendants in various other
actions commenced by vendors, customers, former employees and others. Similarly
situated persons have asserted claims against the Company but have not made
those claims the subject of litigation. However, cases that relate to a claim
that arose before the Filing generally were stayed pursuant to Section 362 of
the Bankruptcy Code and are to be dealt with as part of the claims resolution
process.
The Company believes that the ultimate outcome of the foregoing actions and
claims pending against the Company and its subsidiaries will not have a material
adverse effect on the consolidated financial position, results of operations or
liquidity of the Company.
F-29
<PAGE> 72
Commission File No. 1-10745
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended February 1, 1997
THE CALDOR CORPORATION
E-1
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE
- -------------- ----------- ----
<S> <C> <C>
3.1 Certificate of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-8,
filed September 28, 1994, File No. 33-84526 (the
"1994 Form S-8")).
3.2 By-laws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement
on Form S-1, filed September 10, 1990, File No.
33-35157 (the "1990 Registration Statement")).
4.1 Rights Agreement dated as of August 2, 1995 between
the Company and Chemical Bank, as Rights Agent
(incorporated by reference to Exhibit 1.1 to the
Company's Registration Statement on Form 8-A, filed
on August 11, 1995).
10.1 Credit Agreement, dated as of October 21, 1993 (the
"Credit Agreement"), among the Company, Caldor, Inc.
- NY, Caldor, Inc. - CT, certain lenders named
therein and Chemical Bank as Administrative Agent and
Fronting Bank (incorporated by reference to Exhibit
99.3 to the Company's Current Report on Form 8-K,
reporting an event occurring on October 21, 1993,
File No. 1-10745 (the "October 1993 Form 8-K")).
10.1(i) First Amendment, dated as of August 16, 1994, to the
Credit Agreement among the Company, Caldor, Inc.-NY,
Caldor, Inc.-CT, the lenders listed on the signature
pages thereto, Chemical Bank as Administrative Agent,
the Fronting Banks named therein and the Swingline
Lender named therein (incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form
8-K reporting an event occurring on August 16, 1994,
File No. 1-10745).
10.1(ii) Second Amendment dated as of February 6, 1995, to the
Credit Agreement among the Company, Caldor, Inc.-NY,
Caldor, Inc.-CT, the lenders listed on the signature
pages thereto, Chemical Bank as Administrative Agent,
the Fronting Banks named therein and the Swingline
Lender named therein (incorporated by reference to
Exhibit 99.2 to the Company's Current Report on Form
8-K reporting an event occurring on February 6, 1995,
File No. 1-10745 (the "February 1995 Form 8-K")).
10.1(iii) Third Amendment dated as of April 18, 1995, to the
Credit Agreement among the Company, Caldor, Inc.-NY,
Caldor, Inc.-CT, the lenders listed on the signature
pages thereto, Chemical Bank as Administrative Agent,
the Fronting Banks named therein and the Swingline
Lender named therein (incorporated by reference to
Exhibit 99.8 to the February 1995 Form 8-K).
</TABLE>
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<PAGE> 74
<TABLE>
<S> <C> <C>
10.1(iv) Fifth Amendment dated as of August 7, 1995 to the
Credit Agreement among the Company, Caldor, Inc.-NY,
Caldor, Inc.-CT, Chemical Bank as Administrative
Agent, and the lenders listed on the signature pages
thereto (incorporated by reference to Exhibit 99.7 to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended July 29, 1995, File No.
1-10745 (the "July 1995 Form 10-Q")).
10.1(v) Amended and Restated Revolving Credit and Guaranty
Agreement dated as of October 17, 1995 (the "DIP
Agreement") among the Company as borrower, Caldor,
Inc.-CT and Caldor, Inc.-NY as retail guarantors, the
other subsidiaries of the borrower named therein as
guarantors, the banks party thereto and Chemical Bank
as agent (incorporated by reference to Exhibit 99.1
to the Company's Current Report on Form 8-K reporting
an event occurring on October 17, 1995, File No.
1-10745 (the "October 1995 Form 8-K")).
10.1 (vi) Amendment Letter Agreement dated April 24, 1996 to
the DIP Agreement among the Company as borrower,
certain of its subsidiaries as guarantors, the banks
party thereto and Chemical Bank (incorporated by
reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K reporting an event occurring on
May 7, 1996, File No. 1-10745).
10.1 (vii) Second Amendment dated as of June 28, 1996 to the DIP
Agreement among the Company as borrower, certain of
its subsidiaries as guarantors, the banks party
thereto and Chemical Bank (incorporated by reference
to Exhibit 99.1 to the Company's Current Report on
Form 8-K reporting an event occurring on July 16,
1996, File No. 1-10745).
10.1 (viii) Four Store Amendment Letter Agreement dated as of
March 12, 1997 among the Company, as borrower,
certain of its subsidiaries as guarantors, the banks
party thereto and The Chase Manhattan Bank, N.A.
(formerly, Chemical Bank).*
</TABLE>
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<PAGE> 75
<TABLE>
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10.2 Form of Term Note (contained in Exhibit 10.1 as
Exhibit A-3).
10.3 Guarantee Agreement, dated as of October 21, 1993,
among Lacdor Realty Corp., Premier Service Programs,
Inc. and Chemical Bank as Collateral Agent
(incorporated by reference to Exhibit 99.7 to the
October 1993 Form 8-K).
10.4 Guarantee, dated as of April 13, 1995 (the
"Guarantee") from the Company, Caldor, Inc.-NY and
Caldor, Inc.-CT to Chemical Bank as agent
(incorporated by reference to Exhibit 99.4 to the
February 1995 Form 8-K).
10.4(i) Second Amendment dated as of August 7, 1995 to the
Guarantee from the Company, Caldor, Inc.-NY and
Caldor, Inc.-CT in favor of Chemical Bank as agent,
and the lenders party thereto (incorporated by
reference to Exhibit 99.8 to the July 1995 Form
10-Q).
10.5 Amended and Restated Pledge Agreement, dated as of
April 13, 1995, between the Company and Chemical Bank
as Collateral Agent (incorporated by reference to
Exhibit 99.5 to the February 1995 Form 8-K).
10.5(i) Amended and Restated Pledge Agreement dated as of
October 17, 1995 between the Company and Chemical
Bank as agent for the banks party to the DIP
Agreement (incorporated by reference to Exhibit 99.2
to the October 1995 Form 8-K).
10.6 Amended and Restated Security Agreement, dated as of
April 13, 1995, among the Company, Caldor, Inc.-NY,
Caldor, Inc.-CT and Chemical Bank as Collateral Agent
(incorporated by reference to Exhibit 99.6 to the
February 1995 Form 8-K).
10.6(i) Amended and Restated Security Agreement dated as of
October 17, 1995 between the Company and Chemical
Bank as agent for the banks party to the DIP
Agreement (incorporated by reference to Exhibit 99.3
to the October 1995 Form 8-K).
10.7 Collateral Agent Agreement, dated as of April 13,
1995, among the Company, Caldor, Inc.-CT, Caldor
Lease Financing Trust and Chemical Bank as Collateral
Agent and agent to the lenders party thereto
(incorporated by reference to Exhibit 99.7 to the
February 1995 Form 8-K).
10.8 Credit Agreement dated as of August 8, 1995 among the
Company, Caldor, Inc.-NY, Caldor, Inc.-CT and
Chemical Bank as Administrative Assistant and as
Collateral Agent (incorporated by reference to
Exhibit 99.6 to the July 1995 Form 10-Q).
10.9 Amended and Restated Stockholders' and Warrant
Holders' Agreement, dated as of May 24, 1990, among
the Company, Odyssey Partners, L.P., May Funding,
Inc.,
</TABLE>
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<PAGE> 76
<TABLE>
<S> <C> <C>
certain institutional investors named therein,
certain management stockholders named therein and
certain members of the Investor Group (as defined
therein) named therein (the "Amended and Restated
Stockholders' and Warrant Holders' Agreement")
(incorporated by reference to Exhibit 10.7 to the
1990 Registration Statement).
10.9(i) Amendment No. 1, dated as of August 24, 1990, to the
Amended and Restated Stockholders' and Warrant
Holders' Agreement (incorporated by reference to
Exhibit 10.6(i) to the Company's Annual Report on
Form 10-K for the year ended February 1, 1992, File
No. 1-10745 (the "1991 Form 10-K")).
10.9(ii) Amendment No. 2, dated as of March 14, 1991, to the
Amended and Restated Stockholders' and Warrant
Holders' Agreement (incorporated by reference to
Exhibit 10.6(ii) to the 1991 Form 10-K).
10.9(iii) Amendment No. 3, dated as of March 14, 1991, to the
Amended and Restated Stockholders' and Warrant
Holders' Agreement (incorporated by reference to
Exhibit 10.6(iii) to the 1991 Form 10-K).
10.9(iv) Amendment No. 4, dated as of January 26, 1993, to the
Amended and Restated Stockholders' and Warrant
Holders' Agreement (incorporated by reference to
4.11(iv) to the Company's Registration Statement on
Form S-3, filed on January 27, 1993, File No.
33-57476 (the "1993 Registration Statement")).
10.9(v) Amendment No. 5, dated as of January 26, 1993, to the
Amended and Restated Stockholders' and Warrant
Holders' Agreement (incorporated by reference to
Exhibit 4.11(v) to the 1993 Registration Statement).
10.9(vi) Amendment No. 6, dated as of September 28, 1994, to
the Amended and Restated Stockholders' and Warrant
Holders' Agreement (incorporated by reference to
Exhibit 4.8(vi) to the Company's Registration
Statement on Form S-3, filed on September 29, 1994,
File No. 33-84488).
10.10+ Termination Agreement dated as of January 31,1997
between the Company and Don R. Clarke (incorporated
by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K, reporting an event
occurring on February 26, 1997).
10.11+ Employment Agreement dated as of April 15, 1996
between the Company and Warren D. Feldberg
(incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K, reporting an
event occurring on June 7, 1996 (the "June 1996 Form
8-K")).
</TABLE>
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<PAGE> 77
<TABLE>
<S> <C> <C>
10.11(i)+ Amendment dated as of June 7, 1996 to the Employment
Agreement between the Company and Warren D. Feldberg
(incorporated by reference to Exhibit 99.2 to the
June 1996 Form 8-K).
10.12+ Employment Agreement dated April 24, 1991 ("Kerbis
Employment Agreement") between the Company and Elliot
J. Kerbis (incorporated by reference to Exhibit 10.13
to the Company's Annual Report on Form 10-K for the
year ended February 3, 1996, File No. 1-10745 (the
"1996 Form 10-K")).
10.12(i)+ Amendment dated June 20, 1995 between the Company and
Elliott J. Kerbis to the Kerbis Employment Agreement
(incorporated by reference to Exhibit 10.13 (i) to
the 1996 Form 10-K).
10.13+ Employment Agreement dated April 24, 1991 ("Lee
Employment Agreement") between the Company and Dennis
M. Lee (incorporated by reference to Exhibit 10.14 to
the 1996 Form 10-K).
10.13(i)+ Amendment dated June 20, 1995 between the Company and
Dennis M. Lee to the Lee Employment Agreement
(incorporated by reference to Exhibit 10.14 (i) to
the 1996 Form 10-K).
10.14+ Employment Agreement dated as of January 29, 1996
between the Company and John G. Reen ("Reen
Employment Agreement") (incorporated by reference to
Exhibit 99.1 to the Company's current Report on Form
8-K, reporting an event occurring on March 6, 1996,
File No. 1-10745) (the "March 1996 Form 8-K").
10.14 (i)+ Amendment dated March 5, 1996 between the Company and
John G. Reen to the Reen Employment Agreement
(incorporated by reference to Exhibit 99.2 to the
March 1996 Form 8-K).
</TABLE>
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<PAGE> 78
<TABLE>
<S> <C> <C>
10.15+ Caldor, Inc. Retirement Plan, effective January 1,
1990 (incorporated by reference to Exhibit 10.25 to
the 1990 Registration Statement).
10.16+ Caldor, Inc. Supplemental Non-Qualified Retirement
Plan, effective February 1, 1990 (incorporated by
reference to Exhibit 10.32 to the Company's
Registration Statement on Form S-1, filed on March
18, 1991, File No. 33-39475).
10.17+ Caldor, Inc. Profit Sharing Plan, amended and
restated effective January 1, 1991 (incorporated by
reference to Exhibit 28.01(b) to the Company's
Registration Statement on Form S-8, filed on January
9, 1992, File No. 33-44996).
10.18+ The Caldor Performance Incentive Plan (incorporated
by reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended January 28,
1995, File No. 1-10745).
10.18(i)+ Summary of Amendment to The Caldor Performance
Incentive Plan. (incorporated by reference to Exhibit
10.19 (i) to the 1996 Form 10-K).
10.19+ 1991 Stock Option Plan for Directors, as amended
through May 25, 1994 (incorporated by reference to
Exhibit 99.1 of the 1994 Form S-8).
10.19(i)+ 1991 Stock Option Plan for Directors, as amended
through October 31,1996.*
10.20+ 1991 Stock Option Plan for Key Employees, as amended
through May 25, 1994 (incorporated by reference to
Exhibit 99.2 of the 1994 Form S-8).
10.20(i)+ 1991 Stock Option Plan for Key Employees, as amended
through October 31,1996.*
10.21+ 1993 Retainer Stock Plan for Non-Employee Directors
(incorporated by reference to Exhibit 99.3 of the
1994 Form S-8).
10.22+ 1994 Performance SAR and Restricted Stock Plan
(incorporated by reference to Exhibit 10.23 to the
1996 Form 10-K).
10.22(i)+ 1994 Performance SAR and Restricted Stock Plan as
amended through October 31, 1996.*
10.23+ 1995 Stock Option Plan for Key Employees
(incorporated by reference to Exhibit 10.24 to the
1996 Form 10-K).
</TABLE>
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<PAGE> 79
10.23(i)+ 1995 Stock Option Plan for Key Employees as amended
through October 31,1996.*
10.24+ Summary of Severance Program (incorporated by
reference to Exhibit 10.25 to the 1996 Form 10-K).
10.25+ Summary of Performance Retention Program
(incorporated by reference to Exhibit 10.26 to the
1996 Form 10-K).
11 Statement regarding the computation of per share
earnings.*
21 List of Subsidiaries of the Company (incorporated by
reference to Exhibit 21 to the 1996 Form 10-K).
23 Consent of Deloitte & Touche LLP*
27 Financial Data Schedule*
* Filed herewith
+ Management contract or compensation plan or arrangement required to be
noted as provided in Item 14(a)(3).
E-8
<PAGE> 1
THE CALDOR CORPORATION
20 Glover Avenue
Norwalk, Connecticut 06856-5620
March 12, 1997
TO THE BANKS PARTY TO THE AMENDED AND RESTATED REVOLVING CREDIT AND GUARANTY
AGREEMENT DATED AS OF OCTOBER 17, 1995, AS AMENDED, AMONG THE CALDOR
CORPORATION, THE GUARANTORS NAMED THEREIN, THE BANKS PARTY THERETO AND CHEMICAL
BANK, AS AGENT
Revised Four Store Amendment Letter Agreement
Gentlemen:
This has reference to the Amended and Restated Revolving Credit and
Guaranty Agreement dated as of October 17, 1995 (as heretofore amended, the
"Credit Agreement") among The Caldor Corporation, as Borrower, the Guarantors
named therein, the Banks party thereto and Chemical Bank, as Agent. All terms
used herein that are defined in the Credit Agreement shall have the same
meanings herein.
The Borrower (i) has determined to close the four retail stores listed
on Annex A hereto and to conduct going out of business sales at such stores (the
"GOB Sales") and (ii) at the request of the Required Banks, has agreed that 100%
of the net proceeds of the GOB Sales shall be applied to a prepayment of the
Tranche B Loans (and to the permanent reduction of the Total Tranche B
Commitment in an amount that is equal to the amount of such prepayment of the
Tranche B Loans). Accordingly, the Borrower, the Guarantors, the Agent and the
Banks hereby agree as follows:
1. The definition of the term "Tranche B Commitment" set forth in
Section 1.01 of the Credit Agreement is hereby amended by inserting the
words "Section 2.01(b)," immediately before the words "Section 2.10"
appearing therein.
2. Section 2.01(b) of the Credit Agreement is hereby amended by
adding the following sentence at the end thereof:
"Notwithstanding anything to the contrary set forth in this
Section or on Annex A hereto, the Total Tranche B Commitment shall
be permanently reduced by an amount that is equal to the proceeds
of the store closing sales referred to in Section 6.12(iv) that
are applied to the prepayment of the Tranche B Loans pursuant to
such Section, such
<PAGE> 2
2 March 12, 1997
reduction to take effect automatically upon the making of such
prepayment."
3. Section 2.13(b) of the Credit Agreement is hereby amended by
inserting the words "and Section 6.12(iv)" immediately after the words
"Section 6.12(iii)" appearing in subclause (y)(i) of the parenthetical
clause at the end of such Section.
4. Section 6.11(vii) of the Credit Agreement is hereby amended by
inserting the words "and Section 6.12(iv)" immediately after the words
"Section 6.12(iii)" appearing therein.
5. Section 6.12 of the Credit Agreement is hereby amended by (x)
deleting the word "and" immediately preceding clause (iii) thereof and
inserting in lieu thereof a comma and (y) inserting the following new
clause (iv) at the end thereof:
"and (iv) in addition to the sales permitted by clauses (i), (ii)
and (iii) above, sales of Inventory in store closing sales at the
four (4) retail locations set forth on Schedule 6.12-I, PROVIDED,
that (x) the Liens on such Inventory granted to the Agent on
behalf of the Banks shall attach to the proceeds of such sales,
(y) 100% of the net proceeds of such sales (the "Section 6.12(iv)
Proceeds") shall be applied (in the manner described in this
clause (iv)(y)) to a prepayment of the outstanding Tranche B Loans
(and to the simultaneous permanent reduction of the Total Tranche
B Commitment by an amount that is equal to the amount that is
applied to such prepayment of the Tranche B Loans), it being
understood and agreed that (A) 70% of the funds on deposit in the
segregated interest-bearing account referred to in subclause (z)
below shall be applied to the Tranche B Loans and the Total
Tranche B Commitment immediately following the deposit of such
funds in such account and (B) the remaining balance of the funds
on deposit in such account shall be so applied to the Tranche B
Loans and the Total Tranche B Commitment no later than 60 days
after the conclusion of the store closing sales permitted by this
subclause (iv) (other than, in each case, such amount, if any, the
entitlement to which may then be in dispute under the terms of the
Purchase and License Agreement dated March 4, 1997 between the
Borrower and Gordon Brothers Companies entered
<PAGE> 3
3 March 12, 1997
into in connection with such store closing sales, with the amount
thereof to which the Borrower is entitled to be paid over to the
Agent for such application promptly upon the resolution of such
dispute) and (z) all of the Section 6.12(iv) Proceeds shall,
promptly after receipt, be deposited with the Agent in a
segregated interest-bearing account and shall be maintained
therein until the application of such Section 6.12(iv) Proceeds in
accordance with the terms of the preceding subclause (y), it being
expressly agreed that the funds maintained in such segregated
interest-bearing account shall not be withdrawn or used for any
purpose except in accordance with this Section 6.12(iv)."
6. The Schedules to the Credit Agreement are hereby amended to
include new Schedule 6.12-I thereto in the form of Annex A hereto.
The Borrower, the Guarantors, the Agent and the Banks hereby
acknowledge that the Four-Store Amendment Letter Agreement dated February 21,
1997 did not become effective and shall be of no force or effect.
This Letter Agreement shall not become effective until the date on
which (i) this Letter Agreement shall have been executed by the Borrower, the
Guarantors and Banks constituting the Required Banks, and the Agent shall have
received evidence satisfactory to it of such execution and (ii) the Bankruptcy
Court shall have entered an order (in form and substance satisfactory to the
Agent) approving the payment on account of the principal of the Term Debt that
is contemplated herein.
This Letter Agreement shall be limited precisely as written and shall
not be deemed to be a consent granted pursuant to, or a waiver or modification
of, any other term or condition of the Credit Agreement or any of the
instruments or agreements referred to therein or to prejudice any right or
rights which the Agent or the Banks may now have or may have in the future under
or in connection with the Credit Agreement or any of the instruments or
agreements referred to therein.
This Letter Agreement may be executed in any number of counterparts and
by the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute but one and the same letter.
This Letter Agreement shall be construed in accordance with and
governed by the laws of the State of New York.
<PAGE> 4
4 March 12, 1997
If you are in agreement with the foregoing, kindly sign the enclosed
counterpart of this Letter Agreement and deliver such signed counterpart (by
telecopy and by overnight delivery) to the Agent.
Very truly yours,
THE CALDOR CORPORATION
By:___________________________
Title:
GUARANTORS:
CALDOR, INC.-CT
By:___________________________
Title:
CALDOR, INC.-NY
By:___________________________
Title:
CAL LEASING, INC.
By:___________________________
Title:
LACDOR REALTY CORP.
By:___________________________
Title:
CALFAX, INC.
By:___________________________
Title:
TRI-STATE ADVERTISING AGENCY, INC.
By:___________________________
Title:
<PAGE> 5
5 March 12, 1997
PREMIER SERVICE PROGRAMS, INC.
By:___________________________
Title:
CALDOR-SILVER SPRING, L.L.C.
By:___________________________
Title:
CAL SILVER SPRING, INC.
By:___________________________
Title:
AGREED AND ACCEPTED:
_______________________________
Name of Bank
By:____________________________
Title:
<PAGE> 6
ANNEX A to
Four Store Amendment
Letter Agreement
SCHEDULE 6.12-I
to
AMENDED AND RESTATED REVOLVING
CREDIT AND GUARANTY AGREEMENT
LIST OF STORES TO BE CLOSED
Store No. Store Location
59 514 East Main Street
Westfield, Massachusetts
66 1842 Diamond Hill Road
Woonsocket, Rhode Island
163 2501 Grand Concourse
Bronx, New York
188 1009 Flatbush Avenue
Brooklyn, New York
<PAGE> 1
1991 STOCK OPTION PLAN
FOR DIRECTORS
OF
THE CALDOR CORPORATION
(as amended through October 31, 1996)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to directors who are key employees of The
Caldor Corporation, a Delaware corporation (the "Company"), and its present and
future subsidiary corporations, as defined in Paragraph 19 ("Subsidiaries"), and
to offer an additional inducement in obtaining the services of such individuals.
The Plan provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("NQSOs"), but the Company makes no
warranty as to the qualification of any option as an "incentive stock option"
under the Code. The ISOs and NQSOs granted pursuant to this Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation for
the services of key employee directors.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of Common Stock, $.01 par value per share, of
the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 400,000. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan. Subject to the provisions of Paragraph 13, any shares of Common Stock
subject to an option which for any reason expires, is cancelled or is terminated
unexercised or which ceases for any reason to be exercisable shall again become
available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or, to the extent the Board of Directors may determine, a
committee of the Board of Directors consisting of not less than two directors
(or such greater number as may be required by law) each of whom shall be a
"non-employee director" (the "Committee"), all within the meaning of Rule 16b-3
(or any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). References in the Plan to
determinations by the Committee shall be deemed to include determinations and
actions by the Board of Directors. A majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, and any acts approved in writing by
all members without a meeting, shall be the acts of the Committee.
<PAGE> 2
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the key employee
directors who shall receive options; the times when they shall receive options;
whether an option shall be an ISO or a NQSO; the number of shares of Common
Stock to be subject to each option; the term of each option; the date each
option shall become exercisable; whether an option shall be exercisable in
whole, in part or in installments, and, if in installments, the number of shares
of Common Stock to be subject to each installment; whether the installments
shall be cumulative; the date each installment shall become exercisable and the
term of each installment; whether to accelerate the date of exercise of any
installment; whether shares of Common Stock may be issued on exercise of an
option as partly paid, and, if so, the dates when future installments of the
exercise price shall become due and the amounts of such installments; the
exercise price of each option; the form of payment of the exercise price; the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes;
whether to restrict the sale or other disposition of the shares of Common Stock
acquired upon the exercise of an option and to waive any such restriction;
whether to subject the exercise of all or any portion of an option to the
fulfillment of contingencies as specified in the Contract (as described in
Paragraph 11), including without limitations, contingencies relating to entering
into a covenant not to compete with the Company and its Parent and Subsidiaries,
to financial objectives for the Company, a Subsidiary, a division, a product
line or other category, and/or the period of continued employment of the
optionee with the Company or its Subsidiaries, and to determine whether such
contingencies have been met; to construe the respective Contracts and the Plan;
with the consent of the optionee, to cancel or modify an option, provided such
option as modified would be permitted to be granted on such date under the terms
of the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; and to make all other determinations necessary or advisable for
administering the Plan. The determinations of the Committee on the matters
referred to in this Paragraph 3 shall be conclusive.
The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company. No member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted hereunder.
4. ELIGIBILITY; GRANTS. The Committee may, consistent with the
purposes of the Plan, grant options from time to time, to directors who are key
employees of the Company or any of its Subsidiaries. Options granted shall cover
such number of shares of Common Stock as the Committee may determine; provided,
however, that the maximum number of shares of Common Stock subject to options
which may be granted to any person under the Plan in any fiscal year of the
Company shall not exceed 250,000; and further provided that the aggregate market
value (determined at the time the option is granted) of the shares of Common
Stock for which any eligible person may be granted ISOs under the Plan or any
other plan of the Company, or of a Parent or a Subsidiary of the Company, which
are exercisable for the first time by such optionee during any calendar year
shall not exceed $100,000. The $100,000 ISO
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<PAGE> 3
limitation shall be applied by taking ISOs into account in the order in which
they were granted. Any option (or the portion thereof) granted in excess of such
amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee; provided, however, that
the exercise price shall not be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and further provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of the Common Stock on any day shall be (a) if
the principal market for the Common Stock is a national securities exchange, the
average between the high and low sales prices of the Common Stock on such day as
reported by such exchange or on a consolidated tape reflecting transactions on
such exchange, (b) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), and
(i) if actual sales price information is available with respect to the Common
Stock, the average between the high and low sales prices of the Common Stock on
such day on NASDAQ, or (ii) if such information is not available, the average
between the highest bid and the lowest asked prices for the Common Stock on such
day on NASDAQ, or (c) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on NASDAQ, the
average between the highest bid and lowest asked prices for the Common Stock on
such day as reported on the NASDAQ OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided that if clauses
(a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have
been made or no quotes are available for such day, the fair market value of the
Common Stock shall be determined by the Committee by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options. The determination of the Committee shall be conclusive in determining
the fair market value of the stock.
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and further, provided, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the term of the ISO shall be for a period not exceeding five years from the date
of grant. Options shall be subject to earlier termination as hereinafter
provided.
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<PAGE> 4
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office (at present 20 Glover Avenue, Norwalk,
Connecticut 06852, Attn: Director Plan Stock Option Committee), stating which
ISO or NQSO is being exercised, specifying the number of shares of Common Stock
as to which such option is being exercised and accompanied by payment in full of
the aggregate exercise price therefor (or the amount due on exercise if the
Contract permits installment payments) (a) in cash or by certified check or (b)
with the authorization of the Committee, with previously acquired shares of
Common Stock having an aggregate fair market value, on the date of exercise,
equal to the aggregate exercise price of all options being exercised, or with
any combination of cash, certified check or shares of Common Stock.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF EMPLOYMENT. Any holder of an option whose
employment with the Company (and its Parent and Subsidiaries) has terminated for
any reason other than his death or Disability (as defined in Paragraph 19) may
exercise such option, to the extent exercisable on the date of such termination,
at any time within three months after the date of termination, but not
thereafter and in no event after the expiration of the term of the option;
provided, however, that if his employment shall be terminated either (a) for
cause, or (b) without the consent of the Company, said option shall terminate
immediately. Options granted under the Plan shall not be affected by any change
in the status of the holder so long as he continues to be a full-time employee
of the Company, its Parent or any of the Subsidiaries (regardless of having been
transferred from one corporation to another). Merely ceasing to be a director of
the Company without a termination of employment shall not affect the status of
any option under the Plan.
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by
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<PAGE> 5
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or as a director of the Company, or interfere
in any way with the right of the Company, its Parent or any of its Subsidiaries
to terminate the employee's employment at any time for any reason whatsoever
without liability to the Company, its Parent or any of its Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. If an optionee dies (a) while
he is employed by the Company, its Parent or any of its Subsidiaries, (b) within
three months after the termination of his employment (unless such termination
was for cause or without the consent of the Company) or (c) within one year
following the termination of his employment by reason of Disability, the option
may be exercised, to the extent exercisable on the date of his death, by his
executor, administrator or other person at the time entitled by law to his
rights under such option, at any time within one year after death, but not
thereafter and in no event after the expiration of the term of the option.
Any optionee whose employment has terminated by reason of Disability
may exercise his option, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the expiration of the term of the option.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in
its discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of shares of Common Stock upon such exercise. In connection therewith,
the Committee may require the optionee to execute and deliver to the Company his
representation and warranty, in form and substance satisfactory to the
Committee, that the shares of Common Stock to be issued upon the exercise of the
option are being acquired by the optionee for his own account, for investment
only and not with a view to the resale or distribution thereof. In addition, the
Committee may require the optionee to represent and warrant in writing that any
subsequent resale or distribution of shares of Common Stock by such optionee
will be made only pursuant to (i) a Registration Statement under the Securities
Act which is effective and current with respect to the Shares of Common Stock
being sold, or (ii) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the optionee shall prior to
any offer of sale or sale of such shares of Common Stock provide the Company
with a favorable written opinion of counsel, in form and substance satisfactory
to the Company, as to the applicability of such exemption to the proposed sale
or distribution. The foregoing restriction, however, shall not apply with
respect to (x) issuances by the Company so long as the shares of Common Stock
being issued are registered under the Securities Act and a prospectus in respect
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<PAGE> 6
thereof is current, (y) reofferings of shares of Common Stock by persons who are
not affiliates (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) of the Company if the shares of Common
Stock were so registered, or (z) reofferings of shares by Common Stock by
affiliates (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) of the Company if the shares being
reoffered are registered for reoffer under the Securities Act and a prospectus
in respect thereof is current.
Nothing herein shall be construed as requiring the Company to
register shares subject to any option under the Securities Act. In addition, if
at any time the Committee shall determine in its discretion that the listing or
qualification of the shares of Common Stock subject to such option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of an option, or the issue of shares of
Common Stock thereunder, such option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, split-up,
combination or exchange of shares or the like, the aggregate number and kind of
shares subject to the Plan, the aggregate number and kind of shares subject to
each outstanding option and the exercise price thereof and the limitation on the
aggregate number and kind of shares as to which options may be granted in any
fiscal year under Paragraph 4 shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization in which more than 50% of
the shares of Common Stock of the Company entitled to vote are exchanged, any
outstanding options shall terminate, unless other provision is made therefor in
the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on March 18, 1991 and amended on February 11, 1993, April
15, 1994 and October 31, 1996. No option may be granted under the Plan after
March 17, 2001. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISO granted
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<PAGE> 7
hereunder meet the requirements for "incentive stock options" under the Code, to
comply with the provisions of Rule 16b-3 promulgated under the Exchange Act, and
to conform to any change in applicable law or to regulations or rulings of
administrative agencies; provided, however, that no amendment shall be effective
without the requisite prior or subsequent stockholder approval which would (a)
except as contemplated in Paragraph 12, increase the maximum number of shares of
Common Stock for which options may be granted under the Plan, (b) materially
increase the benefits to participants under the Plan or (c) change the
eligibility requirements for individuals entitled to receive options hereunder.
No termination, suspension or amendment of the Plan shall, without the consent
of the holder of an existing option affected thereby, adversely affect his
rights under such option. The power of the Committee to construe and administer
any options granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold cash and/or, with
the authorization of the Committee, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value equal to the amount which
it determines is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other taxes incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand. The Company shall not
be required to issue any shares of Common Stock pursuant to any such option
until all required payments have been made. Fair market value of the shares of
Common Stock shall be determined in accordance with Paragraph 5.
Notwithstanding anything in the Plan or in any Contract to the
contrary, the Company may not withhold shares of Common Stock to satisfy the tax
withholding consequences of the exercise of an option by a holder who is subject
to the reporting requirements of Section 16(a) of the Exchange Act (as it
constitutes a deemed exercise of a stock appreciation right ("SAR") under Rule
16b-3 under the Exchange Act), unless (a) the Company has filed all periodic
reports and statements required to be filed by it pursuant to Section 13(a) of
the Exchange Act for at least one year prior to the date of such exercise, (b)
the Company on a regular basis releases for publication quarterly and annual
summary statements of sales and earnings in the manner contemplated in the rules
promulgated under Section 16 of the Exchange Act, (c) except when the date of
exercise of such SAR is automatic or fixed in advance under the Plan and is
outside the control of the holder, the election by the holder to receive cash in
full or partial settlement of the SAR, as well as the exercise of the SAR for
cash, is made during the period beginning on the
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<PAGE> 8
third business day following the date of release of the summary statements
referred to in clause (b) and ending on the 12th business day following such
date, and (d) the option has been held for at least six months from the date of
grant to the date of cash settlement.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for its general corporate purposes
as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
a. Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
b. Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
c. Constituent Corporation. The term "Constituent Corporation"
shall mean any corporation which engages with the Company, its Parent or any
Subsidiary in a transaction to which Section 424(a) of the Code applies (or
would apply if the option assumed or substituted were an ISO), or any Parent or
any Subsidiary of such corporation.
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<PAGE> 9
d. Disability. The term "Disability" shall mean a permanent
and total disability within the meaning of Section 22(e)(3) of the Code.
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. STOCKHOLDER APPROVAL. The amendment to this Plan shall be
subject to approval by a majority of the votes cast at the next meeting of its
stockholders at which a majority of the outstanding voting shares are present,
in person or by proxy, and voting on the amendment. No options granted
thereunder may be exercised prior to such approval, provided that the date of
grant of any options granted thereunder shall be determined as if the amendment
to the Plan had not been subject to such approval. Notwithstanding the
foregoing, if the amendment to the Plan is not approved by a vote of the
stockholders of the Company on or before April 14, 1995, the Plan shall continue
in full force and effect without regard to the amendment and any options granted
pursuant to such amendment shall terminate.
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<PAGE> 1
1991 STOCK OPTION PLAN
FOR KEY EMPLOYEES
OF
THE CALDOR CORPORATION
(as amended through October 31, 1996)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to key employees (other than directors) of The
Caldor Corporation, a Delaware corporation (the "Company"), and its present and
future subsidiary corporations, as defined in Paragraph 19 ("Subsidiaries"), and
to offer an additional inducement in obtaining the services of such individuals.
The Plan provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("NQSOs"), but the Company makes no
warranty as to the qualification of any option as an "incentive stock option"
under the Code. The ISOs and NQSOs granted pursuant to this Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation for
the services of key employees.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of Common Stock, $.01 par value per share, of
the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 1,100,000. Such shares of Common Stock may, in the discretion
of the Board of Directors of the Company (the "Board of Directors"), consist
either in whole or in part of authorized but unissued shares of Common Stock or
shares of Common Stock held in the treasury of the Company. The Company shall at
all times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan. Subject to the provisions of Paragraph 13, any shares of Common Stock
subject to an option which for any reason expires, is cancelled or is terminated
unexercised or which ceases for any reason to be exercisable shall again become
available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or, to the extent the Board of Directors may determine, a
committee of the Board of Directors consisting of not less than two directors
(or such greater number as may be required by law) each of whom shall be a
"non-employee director" (the "Committee") all within the meaning of Rule 16b-3
(or any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). References in the Plan to
determinations or actions by the Committee shall be deemed to include
determinations and actions by the Board of Directors. A majority of the members
of the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.
<PAGE> 2
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the key employees who
shall receive options; the times when they shall receive options; whether an
option shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole, in part or
in installments, and, if in installments, the number of shares of Common Stock
to be subject to each installment; whether the installments shall be cumulative;
the date each installment shall become exercisable and the term of each
installment; whether to accelerate the date of exercise of any installment;
whether shares of Common Stock may be issued on exercise of an option as partly
paid, and, if so, the dates when future installments of the exercise price shall
become due and the amounts of such installments; the exercise price of each
option; the form of payment of the exercise price; the amount, if any, necessary
to satisfy the Company's obligation to withhold taxes; whether to restrict the
sale or other disposition of the shares of Common Stock acquired upon the
exercise of an option and to waive any such restriction; whether to subject the
exercise of all or any portion of an option to the fulfillment of contingencies
as specified in the Contract (as described in Paragraph 11), including without
limitations, contingencies relating to entering into a covenant not to compete
with the Company and its Parent and Subsidiaries, to financial objectives for
the Company, a Subsidiary, a division, a product line or other category, and/or
the period of continued employment of the optionee with the Company or its
Subsidiaries, and to determine whether such contingencies have been met; to
construe the respective Contracts and the Plan; with the consent of the
optionee, to cancel or modify an option, provided such option as modified would
be permitted to be granted on such date under the terms of the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; and to
make all other determinations necessary or advisable for administering the Plan.
The determinations of the Committee on the matters referred to in this Paragraph
3 shall be conclusive.
The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company. No member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted hereunder.
4. ELIGIBILITY; GRANTS. The Committee may, consistent with the
purposes of the Plan, grant options from time to time, to key employees of the
Company or any of its Subsidiaries; provided, however, that directors of the
Company (including directors who are employees of the Company or its
Subsidiaries) are not eligible to receive grants under the Plan. Options granted
shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that the maximum number of shares of Common Stock
subject to options which may be granted to any person under the Plan in any
fiscal year of the Company shall not exceed 250,000; and further provided that
the aggregate market value (determined at the time the option is granted) of the
shares of Common Stock for which any eligible person may be granted ISOs under
the Plan or any other plan of the Company, or of a Parent or a Subsidiary of
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<PAGE> 3
the Company, which are exercisable for the first time by such optionee during
any calendar year shall not exceed $100,000. The $100,000 ISO limitation shall
be applied by taking ISOs into account in the order in which they were granted.
Any option (or the portion thereof) granted in excess of such amount shall be
treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee; provided, however, that
the exercise price shall not be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and further provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of the Common Stock on any day shall be (a) if
the principal market for the Common Stock is a national securities exchange, the
average between the high and low sales prices of the Common Stock on such day as
reported by such exchange or on a consolidated tape reflecting transactions on
such exchange, (b) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ"), and
(i) if actual sales price information is available with respect to the Common
Stock, the average between the high and low sales prices of the Common Stock on
such day on NASDAQ, or (ii) if such information is not available, the average
between the highest bid and the lowest asked prices for the Common Stock on such
day on NASDAQ, or (c) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is not quoted on NASDAQ, the
average between the highest bid and lowest asked prices for the Common Stock on
such day as reported on the NASDAQ OTC Bulletin Board Service or by National
Quotation Bureau, Incorporated or a comparable service; provided that if clauses
(a), (b) and (c) of this Paragraph are all inapplicable, or if no trades have
been made or no quotes are available for such day, the fair market value of the
Common Stock shall be determined by the Committee by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options. The determination of the Committee shall be conclusive in determining
the fair market value of the stock.
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and further, provided, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the term of the ISO shall be for a period not exceeding five years from the date
of grant. Options shall be subject to earlier termination as hereinafter
provided.
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<PAGE> 4
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office (at present 20 Glover Avenue, Norwalk,
Connecticut 06852, Attn: Key Employee Plan Stock Option Committee), stating
which ISO or NQSO is being exercised, specifying the number of shares of Common
Stock as to which such option is being exercised and accompanied by payment in
full of the aggregate exercise price therefor (or the amount due on exercise if
the Contract permits installment payments) (a) in cash or by certified check or
(b) with the authorization of the Committee, with previously acquired shares of
Common Stock having an aggregate fair market value, on the date of exercise,
equal to the aggregate exercise price of all options being exercised, or with
any combination of cash, certified check or shares of Common Stock.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
option holder using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF EMPLOYMENT. Any holder of an option whose
employment with the Company (and its Parent and Subsidiaries) has terminated for
any reason other than his death or Disability (as defined in Paragraph 19) may
exercise such option, to the extent exercisable on the date of such termination,
at any time within three months after the date of termination, but not
thereafter and in no event after the expiration of the term of the option;
provided, however, that if his employment shall be terminated either (a) for
cause, or (b) without the consent of the Company, said option shall terminate
immediately. Options granted under the Plan shall not be affected by any change
in the status of the holder so long as he continues to be a full-time employee
of the Company, its Parent or any of the Subsidiaries (regardless of having been
transferred from one corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
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Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or interfere in any way with the right of the
Company, its Parent or any of its Subsidiaries to terminate the employee's
employment at any time for any reason whatsoever without liability to the
Company, its Parent or any of its Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. If an optionee dies (a) while
he is employed by the Company, its Parent or any of its Subsidiaries, (b) within
three months after the termination of his employment (unless such termination
was for cause or without the consent of the Company) or (c) within one year
following the termination of his employment by reason of Disability, the option
may be exercised, to the extent exercisable on the date of his death, by his
executor, administrator or other person at the time entitled by law to his
rights under such option, at any time within one year after death, but not
thereafter and in no event after the expiration of the term of the option.
Any optionee whose employment has terminated by reason of Disability
may exercise his option, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the expiration of the term of the option.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may
require, in its discretion, as a condition to the exercise of any option that
either (a) a Registration Statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Common Stock to be issued
upon such exercise shall be effective and current at the time of exercise, or
(b) there is an exemption from registration under the Securities Act for the
issuance of shares of Common Stock upon such exercise. In connection therewith,
the Committee may require the optionee to execute and deliver to the Company his
representation and warranty, in form and substance satisfactory to the
Committee, that the shares of Common Stock to be issued upon the exercise of the
option are being acquired by the optionee for his own account, for investment
only and not with a view to the resale or distribution thereof. In addition, the
Committee may require the optionee to represent and warrant in writing that any
subsequent resale or distribution of shares of Common Stock by such optionee
will be made only pursuant to (i) a Registration Statement under the Securities
Act which is effective and current with respect to the Shares of Common Stock
being sold, or (ii) a specific exemption from the registration requirements of
the Securities Act, but in claiming such exemption, the optionee shall prior to
any offer of sale or sale of such shares of Common Stock provide the Company
with a favorable written opinion of counsel, in form and substance satisfactory
to the Company, as to the applicability of such exemption to the proposed sale
or distribution. The foregoing restriction, however, shall not apply with
respect to (x) issuances by the Company so long as the shares of Common Stock
being issued are registered under the Securities Act and a prospectus in respect
thereof is current, (y) reofferings of shares of Common Stock by persons who are
not affiliates (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) of the Company if the shares of Common
Stock were so registered, or (z) reofferings of shares by
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<PAGE> 6
Common Stock by affiliates (as defined in Rule 405 or any successor rule or
regulation promulgated under the Securities Act) of the Company if the shares
being reoffered are registered for reoffer under the Securities Act and a
prospectus in respect thereof is current.
Nothing herein shall be construed as requiring the Company to
register shares subject to any option under the Securities Act. In addition, if
at any time the Committee shall determine in its discretion that the listing or
qualification of the shares of Common Stock subject to such option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of an option, or the issue of shares of
Common Stock thereunder, such option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Not withstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, split-up,
combination or exchange of shares or the like, the aggregate number and kind of
shares subject to the Plan, the aggregate number and kind of shares subject to
each outstanding option and the exercise price thereof and the limitation on the
aggregate number and kind of shares as to which options may be granted in any
fiscal year under Paragraph 4 shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger or consolidation in which the Company is not the surviving
corporation, or (c) any other capital reorganization in which more than 50% of
the shares of Common Stock of the Company entitled to vote are exchanged, any
outstanding options shall terminate, unless other provision is made therefor in
the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on March 18, 1991 and amended on February 11, 1993, April
15, 1994 and October 31, 1996. No option may be granted under the Plan after
March 17, 2001. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISO granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-3 promulgated under the Exchange Act, and to
conform to any change in applicable law or to regulations or rulings of
administrative agencies; provided, however, that no amendment
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<PAGE> 7
shall be effective without the requisite prior or subsequent stockholder
approval which would (a) except as contemplated in Paragraph 12, increase the
maximum number of shares of Common Stock for which options may be granted under
the Plan, (b) materially increase the benefits to participants under the Plan or
(c) change the eligibility requirements for individuals entitled to receive
options hereunder. No termination, suspension or amendment of the Plan shall,
without the consent of the holder of an existing option affected thereby,
adversely affect his rights under such option. The power of the Committee to
construe and administer any options granted under the Plan prior to the
termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold cash and/or, with
the authorization of the Committee, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value equal to the amount which
it determines is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other taxes incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand. The Company shall not
be required to issue any shares of Common Stock pursuant to any such option
until all required payments have been made. Fair market value of the shares of
Common Stock shall be determined in accordance with Paragraph 5.
Notwithstanding anything in the Plan or in any Contract to the
contrary, the Company may not withhold shares of Common Stock to satisfy the tax
withholding consequences of the exercise of an option by a holder who is subject
to the reporting requirements of Section 16(a) of the Exchange Act (as it
constitutes a deemed exercise of a stock appreciation right ("SAR") under Rule
16b-3 under the Exchange Act), unless (a) the Company has filed all periodic
reports and statements required to be filed by it pursuant to Section 13(a) of
the Exchange Act for at least one year prior to the date of such exercise, (b)
the Company on a regular basis releases for publication quarterly and annual
summary statements of sales and earnings in the manner contemplated in the rules
promulgated under Section 16 of the Exchange Act, (c) except when the date of
exercise of such SAR is automatic or fixed in advance under the Plan and is
outside the control of the holder, the election by the holder to receive cash in
full or partial settlement of the SAR, as well as the exercise of the SAR for
cash, is made during the period beginning on the third business day following
the date of release of the summary statements referred to in clause (b) and
ending on the 12th business day following such date, and (d) the option has been
held for at least six months from the date of grant to the date of cash
settlement.
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<PAGE> 8
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse
such legend or legends upon the certificates for shares of Common Stock issued
upon exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for its general corporate purposes
as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition
as "parent corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent
Corporation" shall mean any corporation which engages with the Company, its
Parent or any Subsidiary in a transaction to which Section 424(a) of the Code
applies (or would apply if the option assumed or substituted were an ISO), or
any Parent or any Subsidiary of such corporation.
(d) Disability. The term "Disability" shall mean a permanent
and total disability within the meaning of Section 22(e)(3) of the Code.
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<PAGE> 9
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. STOCKHOLDER APPROVAL. The amendment to this Plan shall be
subject to approval by a majority of the votes cast at the next meeting of its
stockholders at which a majority of the outstanding voting shares are present,
in person or by proxy, and voting on the amendment. No options granted
thereunder may be exercised prior to such approval, provided that the date of
grant of any options granted thereunder shall be determined as if the amendment
to the Plan had not been subject to such approval. Notwithstanding the
foregoing, if the amendment to the Plan is not approved by a vote of the
stockholders of the Company on or before April 14, 1995, the Plan shall continue
in full force and effect without regard to the amendment and any options granted
pursuant to such amendment shall terminate.
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<PAGE> 1
1994 PERFORMANCE SAR AND RESTRICTED STOCK PLAN
OF
THE CALDOR CORPORATION
(as amended through October 31, 1996)
1. PURPOSES OF THE PLAN. This performance based stock appreciation
rights and restricted stock plan (the "Plan") is designed to provide an
incentive to key employees (including officers and directors who are key
employees) of The Caldor Corporation, a Delaware corporation (the "Company"),
and its present and future subsidiary corporations, as defined in Paragraph 17
(the "Subsidiaries"), and to offer an additional inducement in obtaining the
services of such individuals. The Plan provides for the grant of
performance-based stock appreciation rights (the "SARs") where value may be
based not only on the price of the Company's stock, but also on the Company's
earnings and for the grant of stock of the Company which may be subject to
restrictions (collectively, the "Awards"). The Awards granted pursuant to this
Plan are a matter of separate inducement and are not in lieu of any salary or
other compensation for the services of key employees.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of Common Stock, $.01 par value per share, of
the Company ("Common Stock") for which Awards may be granted under the Plan
shall not exceed 1,300,000. Subject to the provisions of Paragraph 13, any
shares of Common Stock subject to an SAR which for any reason expires, is
canceled or is terminated unexercised or which ceases for any reason to be
exercisable, and any restricted stock which is forfeited back to the Company,
shall again become available for the granting of Awards under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or, to the extent the Board of Directors may determine, a
committee of the Board of Directors consisting of not less than two directors
(or such greater number as may be required by law), each of whom shall be a
"non-employee director" (the "Committee"), all within the meaning of Rule 16b-3
(or any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and an "outside director" within
the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). References in the Plan to determinations or actions by the
Committee shall be deemed to include determinations and actions by the Board of
Directors. A majority of the members of the Committee shall constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present, and any acts approved in writing by all members without a
meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the key employees who
shall receive Awards; the
<PAGE> 2
times when they shall receive Awards; the number of shares of Common Stock to be
subject to each Award; whether the Award shall be an SAR or restricted stock;
the term of each SAR; the base price of each SAR; the fair market value of the
Common Stock; the performance-based formula, if any, for an SAR; the amount
payable upon exercise of an SAR; the date each SAR shall become exercisable;
whether an SAR shall be exercisable in whole, in part or in installments, and,
if in installments, the number of shares of Common Stock to be subject to each
installment; whether the installments shall be cumulative; the date each
installment shall become exercisable and the term of each installment; the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes
or other amounts; the contingencies and restrictions with respect to each
restricted stock Award, and whether to subject the exercise of all or any
portion of an SAR to the fulfillment of contingencies or restrictions, in each
case as specified in the Contract (as described in Paragraph 11), including
without limitation, contingencies relating to entering into a covenant not to
compete with the Company and its Parent (as defined in Paragraph 17) and
Subsidiaries, to financial objectives for the Company, a Subsidiary, a division,
a product line or other category, and/or to a period of continued employment of
the holder of the Award with the Company or its Subsidiaries, and to determine
whether such contingencies or restrictions have been met; the amount of any
adjustment to an Award in recognition of an unusual or nonrecurring event or
change in applicable law, regulation or accounting principle; to construe the
respective Contracts and the Plan; with the consent of the holder of the Award,
to cancel or modify an Award, provided such Award as modified would be
permitted to be granted on such date under the terms of the Plan and Section
162(m) of the Code; to prescribe, amend and rescind rules and regulations
relating to the Plan; and to make all other determinations necessary or
advisable for administering the Plan. The terms of each Award and Contract need
not be identical. The determinations of the Committee on the matters referred to
in this Paragraph 3 shall be conclusive.
The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company.
No member or former member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any Award
granted hereunder. In addition, each member or former member of the Committee
shall be indemnified and held harmless from and against any liability, claim for
damages and expenses that may be incurred by reason of any action or failure to
act under the Plan or in connection with any Award granted hereunder to the
fullest extent permitted with respect to directors under the Company's
certificate of incorporation, by-laws and applicable law.
4. ELIGIBILITY. The Committee may, consistent with the purposes of
the Plan, grant Awards from time to time, to key employees (including officers
and directors who are key employees) of the Company or any of its Subsidiaries.
Awards granted shall cover such number of shares of Common Stock as the
Committee may determine; provided, however, that
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<PAGE> 3
the maximum number of shares of Common Stock subject to SARs which may be
granted to any person under the Plan in any fiscal year of the Company shall not
exceed 100,000.
5. AMOUNT OF AWARD. An SAR shall entitle the holder thereof to be
paid, promptly after exercise, in cash or by check, an amount equal to the
excess, if any, of the fair market value of the shares of Common Stock with
respect to which the SAR is exercised over the base price of such shares. The
Contract may (but shall not be required to) provide for such amount to be
multiplied by a performance-based factor (which may be more or less than 1),
based on the earnings of the Company; provided, however, that such
performance-based factor must meet the requirements for qualified
performance-based compensation within the meaning of Section 162(m) of the Code.
The base price of the shares of Common Stock under each SAR shall be determined
by the Committee; provided, however, that the base price shall not be less than
the fair market value of the Common Stock subject to such SAR on the date of
grant.
A restricted stock Award is a grant of shares of Common Stock of the
Company, which are subject to such contingencies and restrictions as the
Committee may determine as set forth in the Contract. Prior to the occurrence of
any specified contingency, the shares shall be considered outstanding shares
owned by the holder, who shall, subject to the contingencies and restrictions
contained in the Award, have all rights of a stockholder of record with respect
to such shares, including the right to vote and to receive distributions. Upon
the occurrence of any such contingency, the holder may be required to forfeit
all or a portion of such shares back to the Company. Accordingly, the Committee
may require that such shares be held by the Company, together with a stock power
duly endorsed in blank by the holder, until the shares vest in the holder.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the average between the high and low sales prices of the Common Stock
on such day as reported by such exchange or on a consolidated tape reflecting
transactions on such exchange, (b) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), and (i) if actual sales price information is available with respect
to the Common Stock, the average between the high and low sales prices of the
Common Stock on such day on NASDAQ, or (ii) if such information is not
available, the average between the highest bid and the lowest asked prices for
the Common Stock on such day on NASDAQ, or (c) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is not
quoted on NASDAQ, the average between the highest bid and lowest asked prices
for the Common Stock on such day as reported on the NASDAQ OTC Bulletin Board
Service or by National Quotation Bureau, Incorporated or a comparable service;
provided that if clauses (a), (b) and (c) of this Paragraph are all
inapplicable, or if no trades have been made or no quotes are available for such
day, the fair market value of the Common Stock shall be determined by the
Committee by any method consistent with applicable regulations adopted by the
Treasury Department relating to stock options.
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<PAGE> 4
6. TERM. The term of each SAR and the vesting period of each
restricted stock Award granted pursuant to the Plan shall be such term as is
established by the Committee, in its sole discretion, at or before the time the
Award is granted; provided, however, that the term of an SAR shall not exceed
five years from the date of grant thereof. Awards shall be subject to earlier
termination as hereinafter provided.
7. EXERCISE OF SAR. An SAR (or any part or installment thereof), to
the extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office (at present 20 Glover Avenue, Norwalk,
Connecticut 06852, Attn: SAR Committee), stating which SAR is being exercised
and specifying the number of shares of Common Stock as to which such SAR is
being exercised.
8. TERMINATION OF EMPLOYMENT. Except as may otherwise be expressly
provided in the Contract, any holder of an SAR whose employment with the Company
(and its Parent and Subsidiaries) has terminated for any reason other than his
death or Disability (as defined in Paragraph 17) may exercise such SAR, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event after
the expiration of the term of the SAR; provided, however, that if his employment
shall be terminated either (a) for cause, or (b) without the consent of the
Company, said SAR shall terminate immediately. Except as may otherwise be
expressly provided in the Contract, upon the termination of employment of the
holder of a restricted stock Award with the Company (and its Parent and
Subsidiaries) for any reason, the share Award shall cease any further vesting
and the unvested portion as of the date of such termination shall be forfeited
to the Company for no consideration. Awards granted under the Plan shall not be
affected by any change in the status of the holder so long as he continues to be
a full-time employee of the Company, its Parent or any of the Subsidiaries
(regardless of having been transferred from one corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
Nothing in the Plan or in any Award granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or interfere in any way with any right of the
Company, its Parent or any of its Subsidiaries to terminate the employee's
employment at any time for any reason whatsoever without liability to the
Company, its Parent or any of its Subsidiaries.
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<PAGE> 5
9. DEATH OR DISABILITY. Except as may otherwise be expressly
provided in the Contract, if the holder of an SAR dies (a) while he is employed
by the Company, its Parent or any of its Subsidiaries, (b) within three months
after the termination of his employment (unless such termination was for cause
or without the consent of the Company) or (c) within one year following the
termination of his employment by reason of Disability, the SAR may be exercised,
to the extent exercisable on the date of his death, by his executor,
administrator or other person at the time entitled by law to his rights under
such SAR, at any time within one year after death, but not thereafter and in no
event after the expiration of the term of the SAR.
Except as may otherwise be expressly provided in the Contract, any
holder of an SAR whose employment has terminated by reason of Disability may
exercise his SAR, to the extent exercisable upon the effective date of such
termination, at any time within one year after such date, but not thereafter and
in no event after the expiration of the term of the SAR.
10. CHANGE IN CONTROL. Notwithstanding anything herein to the
contrary, upon a Change in Control, the unvested portion of each outstanding
Award shall vest and each outstanding SAR shall become immediately exercisable.
For purposes of this Plan, a "Change in Control" shall be deemed to have
occurred (a) 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 Exchange Act,
(b) if there has occurred a change in control as the term "control" is defined
in Rule 12b-2 promulgated under the Exchange Act, (c) when any "person" (as such
term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange 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, (d) if the stockholders of the
Company approve a plan of complete liquidation or dissolution of the Company or
a merger or consolidation in which the Company is not the surviving corporation,
(e) if there has occurred a change in the ownership or effective control of the
Company or a change in the ownership of a substantial portion of the assets of
the Company (within the meaning of Section 280G(b)(2)(A) of the Code), or (f)
when the individuals who are members of the Board of Directors on the date
hereof shall cease to constitute at least a majority of the Board of Directors;
provided, however, that any new director whose election to the Board of
Directors or nomination for election to the Board of Directors by the Company's
stockholders was approved by a vote of at least 50% of the directors then still
in office shall be deemed to have been a director on the date hereof.
11. CONTRACTS. Each Award shall be evidenced by an appropriate
Contract which shall be duly executed by the Company and the employee, and shall
contain such terms and conditions not inconsistent herewith as may be determined
by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger or
consolidation in which the Company is the surviving corporation, split-up,
combination or exchange of shares or the like,
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<PAGE> 6
the aggregate number and kind of shares subject to the Plan, the aggregate
number and kind of shares subject to each outstanding SAR and the base price
thereof, the maximum number of shares subject to SARs that may be granted to any
person in any fiscal year shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company or
(b) a merger or consolidation in which the Company is not the surviving
corporation, any outstanding SARs shall terminate, unless other provision is
made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on September 9, 1994 and amended on February 22, 1995 and
October 31, 1996. No Award may be granted under the Plan after September 8,
1999. The Board of Directors, without further approval of the Company's
stockholders, may at any time suspend or terminate the Plan, in whole or in
part, or amend it from time to time in such respects as it may deem advisable,
including, without limitation, to comply with the provisions of Rule 16b-3
promulgated under the Exchange Act or Section 162(m) of the Code, and to conform
to any change in applicable law or to regulations or rulings of administrative
agencies; provided, however, that no amendment shall be effective without the
requisite prior or subsequent stockholder approval which would (a) except as
contemplated in Paragraph 12, increase the maximum number of shares of Common
Stock for which Awards may be granted under the Plan, (b) materially increase
the benefits to participants under the Plan or (c) change the eligibility
requirements for individuals entitled to receive Awards hereunder. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing Award affected thereby, adversely affect his rights
under such Award. The power of the Committee to construe and administer any
Awards granted under the Plan prior to the termination or suspension of the Plan
nevertheless shall continue after such termination or during such suspension.
14. NON-TRANSFERABILITY. No Award granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
an SAR may be exercised, during the lifetime of the holder thereof, only by him
or his legal representatives. Except to the extent provided above, Awards may
not be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold from payments due to
the holder of an Award cash in the amount which the Company determines is
necessary to satisfy its obligation to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant, exercise or disposition
of an Award.
16. ADJUSTMENT FOR UNUSUAL EVENTS. Prior to a Change in Control, the
Committee may make adjustments in the terms or conditions of, or the criteria or
factors included in, an Award to reduce the amount that would otherwise be
payable upon exercise of the SAR or the number of shares of Common Stock that
would otherwise vest under a
-6-
<PAGE> 7
restricted stock Award in recognition of unusual or nonrecurring events
affecting the Company or its financial statements, or of changes in applicable
law, regulations or accounting principles, if the Committee determines that such
adjustments are appropriate in order to prevent an unintended increase in the
benefits or potential benefits available under the Plan as a result of such
unusual or nonrecurring events or changes.
17. DEFINITIONS.
a. Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
b. Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
c. Disability. The term "Disability" shall mean a permanent
and total disability within the meaning of Section 22(e)(3) of the Code.
18. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
19. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
20. STOCKHOLDER APPROVAL. The Plan as amended shall be subject to
approval by a majority of the votes cast at the next meeting of the stockholders
of the Company at which a majority of the outstanding voting shares are present,
in person or by proxy, and voting on the Plan. No SAR granted hereunder may be
exercised and no restricted stock Award shall vest prior to such approval,
provided that the date of grant of any Awards granted hereunder shall be
determined as if the Plan had not been subject to such approval. Notwithstanding
the foregoing, if the Plan is not approved by a vote of the stockholders of the
Company on or before September 8, 1995, the Plan and any Awards granted
hereunder shall terminate.
-7-
<PAGE> 1
1995 STOCK OPTION PLAN
FOR KEY EMPLOYEES
OF
THE CALDOR CORPORATION
(as amended on October 31, 1996)
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
designed to provide an incentive to key employees (other than directors) of The
Caldor Corporation, a Delaware corporation (the "Company"), and its present and
future subsidiary corporations, as defined in Paragraph 19 ("Subsidiaries"), and
to offer an additional inducement in obtaining the services of such individuals.
The Plan provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("NQSOs"), but the Company makes no
warranty as to the qualification of any option as an "incentive stock option"
under the Code. The options granted pursuant to this Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation for
the services of key employees.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph
12, the aggregate number of shares of Common Stock, $.01 par value per share, of
the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 400,000. Such shares of Common Stock may, in the discretion of
the Board of Directors of the Company (the "Board of Directors"), consist either
in whole or in part of authorized but unissued shares of Common Stock or shares
of Common Stock held in the treasury of the Company. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan. Subject to the provisions of Paragraph 13, any shares of Common Stock
subject to an option which for any reason expires, is cancelled or is terminated
unexercised or which ceases for any reason to be exercisable shall again become
available for the granting of options under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board of Directors or, to the extent the Board of Directors may determine, a
committee of the Board of Directors consisting of not less than two directors
(or such greater number as may be required by law) each of whom shall be a
"non-employee director" (the "Committee"), all within the meaning of Rule 16b-3
(or any successor rule or regulation) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). References in the Plan to
determinations or actions by the Committee shall be deemed to include
determinations and actions by the Board of Directors. A majority of the members
of the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.
<PAGE> 2
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole discretion, to determine the key employees who
shall receive options; the times when they shall receive options; whether an
option shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole, in part or
in installments, and, if in installments, the number of shares of Common Stock
to be subject to each installment; whether the installments shall be cumulative;
the date each installment shall become exercisable and the term of each
installment; whether to accelerate the date of exercise of any installment;
whether shares of Common Stock may be issued on exercise of an option as partly
paid, and, if so, the dates when future installments of the exercise price shall
become due and the amounts of such installments; the exercise price of each
option; the form of payment of the exercise price; the fair market value of a
share of Common Stock; the amount, if any, necessary to satisfy the Company's
obligation to withhold taxes or other amounts; whether to restrict the sale or
other disposition of the shares of Common Stock acquired upon the exercise of an
option and to waive any such restriction; whether to subject the exercise of all
or any portion of an option to the fulfillment of contingencies as specified in
the contract referred to in Paragraph 11 (the "Contract"), including without
limitations, contingencies relating to entering into a covenant not to compete
with the Company and its Parent (as defined in Paragraph 19) and Subsidiaries,
to financial objectives for the Company, a Subsidiary, a division, a product
line or other category, and/or the period of continued employment of the
optionee with the Company or its Subsidiaries, and to determine whether such
contingencies have been met; to construe the respective Contracts and the Plan;
with the consent of the optionee, to cancel or modify an option, provided such
option as modified would be permitted to be granted on such date under the terms
of the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; and to make all other determinations necessary or advisable for
administering the Plan. The determinations of the Committee on the matters
referred to in this Paragraph 3 shall be conclusive.
The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company. No member or former member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted hereunder.
4. ELIGIBILITY. The Committee may, consistent with the purposes of
the Plan, grant options from time to time, to key employees of the Company or
any of its Subsidiaries; provided, however, that directors of the Company
(including directors who are employees of the Company or its Subsidiaries) are
not eligible to receive grants under the Plan. Options granted shall cover such
number of shares of Common Stock as the Committee may determine; provided,
however, that the maximum number of shares of Common Stock subject to options
which may be granted to any person under the Plan in any fiscal year of the
Company shall not exceed 250,000; and further provided that the aggregate market
value (determined at the time the option is granted) of the shares of Common
Stock for which any eligible person may be
-2-
<PAGE> 3
granted ISOs under the Plan or any other plan of the Company, or of a Parent or
a Subsidiary of the Company, which are exercisable for the first time by such
optionee during any calendar year shall not exceed $100,000. The $100,000 ISO
limitation shall be applied by taking ISOs into account in the order in which
they were granted. Any option (or the portion thereof) granted in excess of such
amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock
under each option shall be determined by the Committee; provided, however, that
the exercise price of an ISO shall not be less than 100% of the fair market
value of the Common Stock subject to such option on the date of grant; and
further provided, that if, at the time an ISO is granted, the optionee owns (or
is deemed to own under Section 424(d) of the Code) stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
of any of its Subsidiaries or of a Parent, the exercise price of such ISO shall
not be less than 110% of the fair market value of the Common Stock subject to
such ISO on the date of grant.
The fair market value of a share of Common Stock on any day shall be
(a) if the principal market for the Common Stock is a national securities
exchange, the average between the high and low sales prices per share of the
Common Stock on such day as reported by such exchange or on a consolidated tape
reflecting transactions on such exchange, (b) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is
quoted on the National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), and (i) if actual sales price information is available with
respect to the Common Stock, the average between the high and low sales prices
per share of the Common Stock on such day on NASDAQ, or (ii) if such information
is not available, the average between the highest bid and the lowest asked
prices per share for the Common Stock on such day on NASDAQ, or (c) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on NASDAQ, the average between the highest bid
and lowest asked prices per share for the Common Stock on such day as reported
on the NASDAQ OTC Bulletin Board Service or by National Quotation Bureau,
Incorporated or a comparable service; provided that if clauses (a), (b) and (c)
of this Paragraph are all inapplicable, or if no trades have been made or no
quotes are available for such day, the fair market value of the Common Stock
shall be determined by the Committee by any method consistent with applicable
regulations adopted by the Treasury Department relating to stock options.
6. TERM. The term of each option granted pursuant to the Plan shall
be such term as is established by the Committee, in its sole discretion, at or
before the time such option is granted; provided, however, that the term of each
ISO granted pursuant to the Plan shall be for a period not exceeding 10 years
from the date of grant thereof, and further, provided, that if, at the time an
ISO is granted, the optionee owns (or is deemed to own under Section 424(d) of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a Parent,
the term of the ISO shall be for a period not exceeding five years from the date
of grant. Options shall be subject to earlier termination as hereinafter
provided.
-3-
<PAGE> 4
7. EXERCISE. An option (or any part or installment thereof), to the
extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office (at present 20 Glover Avenue, Norwalk,
Connecticut 06852, Attn: Compensation Committee), stating which ISO or NQSO is
being exercised, specifying the number of shares of Common Stock as to which
such option is being exercised and accompanied by payment in full of the
aggregate exercise price therefor (or the amount due on exercise if the Contract
permits installment payments) (a) in cash or by certified check or (b) with the
authorization of the Committee, with previously acquired shares of Common Stock
having an aggregate fair market value, on the date of exercise, equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash, certified check or shares of Common Stock. In such case, the fair
market value of the Common Stock shall be determined in accordance with
Paragraph 5.
A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for such
shares; provided, however, that until such stock certificate is issued, any
optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF EMPLOYMENT. Except as may otherwise be expressly
provided in the applicable Contract, any optionee whose employment with the
Company (and its Parent and Subsidiaries) has terminated for any reason other
than his death or Disability (as defined in Paragraph 19) may exercise such
option, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the expiration of the term of the option; provided, however, that if
his employment shall be terminated either (a) for cause, or (b) without the
consent of the Company, said option shall terminate immediately. Except as may
otherwise be expressly provided in the applicable Contract, Options granted
under the Plan shall not be affected by any change in the status of the holder
so long as he continues to be a full-time employee of the Company, its Parent or
any of the Subsidiaries (regardless of having been transferred from one
corporation to another).
For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or
-4-
<PAGE> 5
by contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
Nothing in the Plan or in any option granted under the Plan shall
confer on any individual any right to continue in the employ of the Company, its
Parent or any of its Subsidiaries, or interfere in any way with the right of the
Company, its Parent or any of its Subsidiaries to terminate the employee's
employment at any time for any reason whatsoever without liability to the
Company, its Parent or any of its Subsidiaries.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is employed by the Company, its Parent or any of its Subsidiaries, (b) within
three months after the termination of his employment (unless such termination
was for cause or without the consent of the Company) or (c) within one year
following the termination of his employment by reason of Disability, the option
may be exercised, to the extent exercisable on the date of his death, by his
executor, administrator or other person at the time entitled by law to his
rights under such option, at any time within one year after death, but not
thereafter and in no event after the expiration of the term of the option.
Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose employment has terminated by reason of Disability
may exercise his option, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the expiration of the term of the option.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in
its discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of shares of Common Stock upon such exercise. Nothing herein shall be
construed as requiring the Company to register under the Securities Act the
shares subject to any option.
The Committee may require the optionee to execute and deliver
to the Company his representations and warranties, in form and substance
satisfactory to the Committee, that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel, in form
and substance satisfactory to the Company, as to the applicability of such
exemption to the proposed
-5-
<PAGE> 6
sale or distribution. The foregoing restriction, however, shall not apply with
respect to (x) issuances by the Company so long as the shares of Common Stock
being issued are registered under the Securities Act and a prospectus in respect
thereof is current, (y) reofferings of shares of Common Stock by persons who
are not affiliates (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) of the Company if the shares of Common
Stock were so registered, or (z) reofferings of shares of Common Stock by
affiliates (as defined in Rule 405 or any successor rule or regulation
promulgated under the Securities Act) of the Company if the shares being
reoffered are registered for reoffer under the Securities Act and a prospectus
in respect thereof is current.
In addition, if at any time the Committee shall determine in its
discretion that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange or under any applicable law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of an option,
or the issue of shares of Common Stock thereunder, such option may not be
exercised in whole or in part unless such listing, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee and shall contain such terms and conditions not inconsistent herewith
as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Not withstanding any
other provisions of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger in which
the Company is the surviving corporation, split-up, combination or exchange of
shares or the like, the aggregate number and kind of shares subject to the Plan,
the aggregate number and kind of shares subject to each outstanding option and
the exercise price thereof and the maximum number and kind of shares as to which
options may be granted to any person in any fiscal year shall be appropriately
adjusted by the Board of Directors, whose determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company,
(b) a merger in which the Company is not the surviving corporation or a
consolidation, or (c) any other capital reorganization in which more than 50% of
the shares of Common Stock of the Company entitled to vote are exchanged, any
outstanding options shall terminate, unless other provision is made therefor in
the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by
the Board of Directors on February 22, 1995 and amended by the Board of
Directors on October 31, 1996. No option may be granted under the Plan after
February 21, 2005. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects
-6-
<PAGE> 7
as it may deem advisable, including, without limitation, in order that ISOs
granted hereunder meet the requirements for "incentive stock options" under the
Code, to comply with the provisions of Section 162(m) of the Code or Rule 16b-3
promulgated under the Exchange Act, and to conform to any change in applicable
law or to regulations or rulings of administrative agencies; provided, however,
that no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or the maximum number of shares as to which options may
be granted to any person in any fiscal year, (b) materially increase the
benefits to participants under the Plan or (c) change the eligibility
requirements for individuals entitled to receive options hereunder. No
termination, suspension or amendment of the Plan shall, without the consent of
the holder of an existing option affected thereby, adversely affect his rights
under such option. The power of the Committee to construe and administer any
options granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan
shall be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the holder
thereof, only by him or his legal representatives. Except to the extent provided
above, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process.
15. WITHHOLDING TAXES. The Company may withhold cash and/or, with
the authorization of the Committee, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value equal to the amount which
it determines is necessary to satisfy its obligation to withhold Federal, state
and local income taxes or other taxes incurred by reason of the grant or
exercise of an option, its disposition, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand. The Company shall not
be required to issue any shares of Common Stock pursuant to any such option
until all required payments have been made. Fair market value of the shares of
Common Stock shall be determined in accordance with Paragraph 5.
Notwithstanding anything in the Plan or in any Contract to the
contrary, the Company may not withhold shares of Common Stock to satisfy the tax
withholding consequences of the exercise of an option by a holder who is subject
to the reporting requirements of Section 16(a) of the Exchange Act (as it
constitutes a deemed exercise of a stock appreciation right ("SAR") under Rule
16b-3 under the Exchange Act), unless (a) the Company has filed all periodic
reports and statements required to be filed by it pursuant to Section 13(a) of
the Exchange Act for at least one year prior to the date of such exercise, (b)
the Company on a regular basis releases for publication quarterly and annual
summary statements of sales and earnings in the manner contemplated in the rules
promulgated under Section 16 of the Exchange Act, (c) except when the date of
exercise of such SAR is automatic or fixed in advance under the Plan and is
outside
-7-
<PAGE> 8
the control of the holder, the election by the holder to receive cash in full or
partial settlement of the SAR, as well as the exercise of the SAR for cash, is
made during the period beginning on the third business day following the date of
release of the summary statements referred to in clause (b) and ending on the
12th business day following such date, and (d) the option has been held for at
least six months from the date of grant to the date of cash settlement.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act, (b) implement the provisions of the Plan or any agreement between the
Company and the optionee with respect to such shares of Common Stock, or (c)
permit the Company to determine the occurrence of a "disqualifying disposition,"
as described in Section 421(b) of the Code, of the shares of Common Stock
transferred upon the exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of
Common Stock pursuant to the exercise of options under the Plan shall be added
to the general funds of the Company and used for its general corporate purposes.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS.
(a) Subsidiary. The term "Subsidiary" shall have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.
(b) Parent. The term "Parent" shall have the same definition
as "parent corporation" in Section 424(e) of the Code.
(c) Constituent Corporation. The term "Constituent
Corporation" shall mean any corporation which engages with the Company, its
Parent or any Subsidiary in a transaction to which Section 424(a) of the Code
applies (or would apply if the option assumed or substituted were an ISO), or
any Parent or any Subsidiary of such corporation.
-8-
<PAGE> 9
(d) Disability. The term "Disability" shall mean a permanent
and total disability within the meaning of Section 22(e)(3) of the Code.
20. GOVERNING LAW. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
21. PARTIAL INVALIDITY. The invalidity or illegality of any
provision herein shall not affect the validity of any other provision.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes cast at the next meeting of the stockholders of the
Company at which a majority of the outstanding voting shares are present, in
person or by proxy, and voting on the amendment. No options granted hereunder
may be exercised prior to such approval, provided that the date of grant of any
options granted hereunder shall be determined as if the Plan had not been
subject to such approval. Notwithstanding the foregoing, if the Plan is not
approved by a vote of the stockholders of the Company on or before February 21,
1996, the Plan and any options granted pursuant to the Plan shall terminate.
-9-
<PAGE> 1
- --------------------------------------------------------------------------------
Statement Re Computation of Per Share Earnings Exhibit 11
The Caldor Corporation and Subsidiaries
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
February 1, February 3, January 28,
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
Net Earnings (Loss) $ (185,325) $ (301,028) $ 44,359
============ ============ ============
Weighted average number of common shares
outstanding 16,994,234 16,902,339 16,582,781
Common equivalent shares:
Shares issued upon exercise of warrants (1) 89,091
Shares issued upon exercise of outstanding
stock options(1) 15,604 81,164
------------ ------------ ------------
Weighted average number of common and common
equivalent shares outstanding 16,994,234 16,917,943 16,753,036
============ ============ ============
Net earnings (loss) per share (primary and fully-
diluted) $ (10.91) $ (17.79) $ 2.65
============ ============ ============
</TABLE>
- -------------------------------
(1) Calculated using the treasury stock method
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23
We consent to the incorporation by reference in a) Registration Statement No.
33-44996 of The Caldor Corporation (Debtor-In-Possession) ("Caldor") on Form
S-8, b) Registration Statement No. 33-41321 of Caldor on Form S-8, c)
Registration Statement No. 33-51510 of Caldor on Form S-8, d) Registration
Statement No. 33-67438 of Caldor on Form S-8, and e) Registration Statement No.
33-84526 of Caldor on Form S-8, of our report dated April 18, 1997 (May 2, 1997
as to note 5) which expresses an unqualified opinion and includes explanatory
paragraphs relating to the Company's reorganization proceedings and its ability
to continue as a going concern, appearing in this Annual Report on Form 10-K of
Caldor for the year ended February 1, 1997.
DELOITTE & TOUCHE LLP
New York, New York
May 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 27,477
<SECURITIES> 0
<RECEIVABLES> 12,216
<ALLOWANCES> 0
<INVENTORY> 450,499
<CURRENT-ASSETS> 534,085
<PP&E> 695,960
<DEPRECIATION> (187,889)
<TOTAL-ASSETS> 1,050,523
<CURRENT-LIABILITIES> 431,966
<BONDS> 301,253
0
0
<COMMON> 169
<OTHER-SE> (148,377)
<TOTAL-LIABILITY-AND-EQUITY> 1,050,523
<SALES> 2,602,456
<TOTAL-REVENUES> 2,602,456
<CGS> 1,935,500
<TOTAL-COSTS> 1,935,500
<OTHER-EXPENSES> 812,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,502
<INCOME-PRETAX> (184,825)
<INCOME-TAX> 500
<INCOME-CONTINUING> (185,325)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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</TABLE>
