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EXHIBIT 10.6
LINENS 'N THINGS, INC.
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EMPLOYMENT AGREEMENT FOR XXXXXX XXXXXXX
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LINENS 'N THINGS, INC.
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EMPLOYMENT AGREEMENT FOR XXXXXX XXXXXXX
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1. Definitions........................................................................................ 1
2. Term of Employment................................................................................. 2
3. Position, Duties and Responsibilities.............................................................. 3
4. Base Salary........................................................................................ 3
5. Annual Incentive Awards............................................................................ 3
6. Long-Term Stock Incentive Programs................................................................. 3
7. Employee Benefit Programs.......................................................................... 4
8. Disability......................................................................................... 6
9. Reimbursement of Business and Other Expenses; Perquisites.......................................... 7
10. Termination of Employment.......................................................................... 8
11 Confidentiality; Cooperation with Regard to Litigation............................................. 18
12. Non-competition.................................................................................... 19
13. Non-solicitation of Employees...................................................................... 20
14. Remedies........................................................................................... 20
15. Resolution of Disputes............................................................................. 20
16. Indemnification.................................................................................... 20
17. Excise Tax Gross-Up................................................................................ 21
18. Effect of Agreement on Other Benefits.............................................................. 23
19. Assignability; Binding Nature...................................................................... 23
20. Representation..................................................................................... 24
21. Entire Agreement................................................................................... 24
22. Amendment or Waiver................................................................................ 24
23. Severability....................................................................................... 24
24. Survivorship....................................................................................... 24
25. Beneficiaries/References........................................................................... 24
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26. Governing Law/Jurisdiction........................................................................ 25
27. Notices........................................................................................... 25
28. Headings.......................................................................................... 26
29. Counterparts...................................................................................... 26
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EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 25th day of October, 1996 by
and among Linens 'n Things, Inc., a Delaware corporation (together with its
successors and assigns, the "Company"), Melville Corporation, a New York
corporation (together with its successors and assigns, "Melville"), and Xxxxxx
Xxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive pursuant to an
agreement embodying the terms of such employment (this "Agreement") and the
Executive desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of this Agreement;
WHEREAS, Melville has agreed to become a party to this Agreement for
purposes of Xxxxxxxx 0, 0(x), 0(x), 0(x), 00(x)(xxx),00(x)(xxxx) and 21 hereof
in order to induce the Executive to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1 . Definitions.
(a) "Approved Early Retirement" shall have the meaning
set forth in Section 10(f) below.
(b) "Base Salary" shall have the meaning set forth in
Section 4 below.
(c) "Board" shall have the meaning set forth in Section
3(a) below.
(d) "Cause" shall have the meaning set forth in Section
10(b) below.
(e) "Change in Control" shall have the meaning set forth
in Section 10(c) below.
(f) "Committee" shall have the meaning set forth in
Section 4 below.
(g) "Confidential Information" shall have the meaning set
forth in Section 11(c) below.
(h) "Constructive Termination Without Cause" shall have
the meaning set forth in Section 10(c) below.
(i) "Effective Date" shall have the meaning set forth in
Section 2(a) below.
(j) "IPO Date" shall have the meaning set forth in
Section 3(a) below.
(k) "Normal Retirement" shall have the meaning set forth
in Section 10(f) below.
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(l) "Original Term of Employment" shall have the meaning
set forth in Section 2(a) below.
(m) "Renewal Term" shall have the meaning set forth in
Section 2(a) below.
(n) "Restriction Period" shall have the meaning set forth
in Section 12(b) below.
(o) "Severance Period" shall have the meaning set forth
in Section 10(c)(ii) below, except as provided
otherwise in Section 2(b) or Section 10(e) below.
(p) "Subsidiary" shall have the meaning set forth in
Section 11(d) below.
(q) "Term of Employment" shall have the meaning set forth
in Section 2(a) below.
(r) "Termination Without Cause" shall have the meaning
set forth in Section 10(c) below.
2. Term of Employment.
(a) The term of the Executive's employment under this
Agreement shall commence immediately upon the date of this agreement (the
"Effective Date") and end on the fourth anniversary of such date (the "Original
Term of Employment"), unless terminated earlier in accordance herewith. The
Original Term of Employment shall be automatically renewed for successive
one-year terms (the "Renewal Terms") unless at least 180 days prior to the
expiration of the Original Term of Employment or any Renewal Term, either Party
notifies the other Party in writing that he or it is electing to terminate this
Agreement at the expiration of the then current Term of Employment. "Term of
Employment" shall mean the Original Term of Employment and all Renewal Terms.
Notwithstanding anything to the contrary in this Agreement, the Executive may
elect, upon at least 60 days' prior written notice, to accelerate the expiration
of the Term of Employment to June 30, 1998 if neither a Change in Control nor
the IPO Date has occurred on or prior to December 31, 1997.
(b) In the event that this Agreement is not renewed because
the Company has given the 180-day notice prescribed in the preceding paragraph
on or before the expiration of the Original Term of Employment or any Renewal
Term and, in either case, should such notice result in the expiration of the
Term of Employment prior to the Executive's 60th birthday, such non-renewal
shall be treated as a "Constructive Termination Without Cause" pursuant to
Section 10(c). For purposes of calculating the benefits payable under Section
10(c) in such circumstances, the term "Severance Period" shall mean the period
of 18 months following the termination of the Executive's employment, and any
unvested Company stock options outstanding on the date of such termination shall
not be canceled upon such termination but shall continue to vest as if the
Executive had continued in employment with the Company during the Severance
Period.
(c) Notwithstanding anything in this Agreement to the
contrary, at least one year prior to the expiration of the Original Term of
Employment, upon the written request of the Company or the Executive, the
Parties shall meet to discuss this Agreement and may agree in writing to modify
any of the terms of this Agreement.
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3. Position, Duties and Responsibilities.
(a) Generally. Executive shall serve as President and Chief
Executive Officer of the Company and, following the date on which shares of
common stock of the Company are first sold to the public pursuant to an initial
public offering (the "IPO Date"), as Chairman of the Board of Directors of the
Company. For so long as he is serving on the Board of Directors of the Company
(the "Board"), Executive agrees to serve as a member of any committee of the
Board if the Board shall elect Executive to such positions. In any and all such
capacities, Executive shall report only to the Board. Executive shall have and
perform such duties, responsibilities, and authorities as are customary for the
president and chief executive officer (and after the IPO Date, chairman of the
board) of corporations of similar size and businesses as the Company as they may
exist from time to time and as are consistent with such positions and status.
Executive shall devote substantially all of his business time and attention
(except for periods of vacation or absence due to illness), and his best
efforts, abilities, experience, and talent to the positions of President and
Chief Executive Officer (and after the IPO Date, Chairman) and for the
businesses of the Company.
(b) Other Activities. Anything herein to the contrary
notwithstanding, nothing in this Agreement shall preclude the Executive from (i)
serving on the boards of directors of a reasonable number of other corporations
or the boards of a reasonable number of trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community affairs, and
(iii) managing his personal investments and affairs, provided that such
activities do not materially interfere with the proper performance of his duties
and responsibilities under this Agreement.
(c) Place of Employment. Executive's principal place of
employment shall be the corporate offices of the Company.
(d) Rank of Executive Within Company. As President and Chief
Executive Officer of the Company, Executive shall be the highest-ranking
executive of the Company.
4. Base Salary.
The Executive shall be paid an annualized salary, payable in
accordance with the regular payroll practices of the Company, of not less than
$475,000, subject to review for increase at the discretion of the Compensation
Committee (the "Committee") of the Board ("Base Salary").
5. Annual Incentive Awards.
The Executive shall participate in the Company's (or until the
IPO Date, Melville's or the Company's) annual incentive compensation plan with a
target annual incentive award opportunity of no less than 55% of Base Salary and
a maximum annual incentive award opportunity of 110% of Base Salary. Payment of
annual incentive awards shall be made at the same time that other senior-level
executives receive their incentive awards; provided, however, that after the IPO
Date such annual incentive awards shall be paid in cash no later than 75 days
after the Company's fiscal year-end unless the Executive agrees otherwise.
6. Long-Term Incentive Programs.
(a) General. Commencing on the IPO Date, the Executive shall
be eligible to participate in the Company's long-term incentive compensation
programs (including stock options
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and stock grants) at a level greater than any other participant therein. Until
the IPO Date, the Executive shall be eligible to participate in Melville's
long-term incentive compensation programs (including stock options and stock
grants) at a level comparable to other similarly situated executives.
(b) Grant of Stock Option. On the IPO Date, the Executive
shall be granted an option to purchase common stock of the Company in accordance
with the Stock Option Grant Agreement attached hereto as Exhibit A.
Notwithstanding the foregoing, (i) if a Change in Control occurs prior to the
IPO Date, the Executive shall be entitled to receive, in lieu of the option
grant described in Exhibit A, a cash lump-sum payment within 15 days after the
Change in Control equal to 2% of the amount, if any, by which (A) the total cash
consideration and the fair market value of any other consideration received by
the stockholders of the Company in connection with the Change in Control exceeds
(B) $325,000,000; and (ii) if neither the IPO Date nor a Change in Control has
occurred on or prior to December 31, 1997, the Company shall promptly appoint an
investment banking firm, which must be reasonably acceptable to the Executive
(the Executive's consent not to be unreasonably withheld), to determine the fair
value of all the capital stock of the Company as of December 31, 1997, and the
Executive shall be entitled to receive, in lieu of the option grant described in
Exhibit A, a cash lump-sum payment within 15 days after the delivery of such
investment banking firm's valuation opinion, which shall be delivered no later
than March 31, 1998, equal to 2% of the amount, if any, by which (A) such fair
value of capital stock exceeds (B) $325,000,000.
(c) Grant of Deferred Stock. On the IPO Date, the Executive
shall be granted shares of deferred stock in accordance with the Deferred Stock
Grant Agreement attached hereto as Exhibit B. Notwithstanding the foregoing, (i)
if a Change in Control occurs prior to the IPO Date, the Executive shall be
entitled to receive, in lieu of the deferred stock grant described in Exhibit B,
a cash lump-sum payment within 15 days after the Change in Control equal to
$1,000,000; and (ii) if neither the IPO Date nor a Change in Control has
occurred on or prior to December 31, 1997, the Executive shall be entitled to
receive, in lieu of the deferred stock grant described in Exhibit B, a cash
lump-sum payment within 15 days after the delivery of the valuation opinion
described in Section 6(b) equal to $1,000,000, but only if such valuation
opinion is equal to or greater than $300,000,000.
(d) Melville Option. On the earlier of a Change in Control or
the IPO Date, the Executive's option to purchase 65,000 shares of Melville
common stock granted to Executive on April 11, 1995 (the "1995 Melville Option")
shall become immediately vested and exercisable in whole or in part at any time
on or prior to December 31, 1999. If neither the IPO Date nor a Change in
Control has occurred on or prior to December 31, 1996, the next installment of
the Executive's 1995 Melville Option scheduled to vest on April 11, 1997, shall
immediately vest.
(e) Melville Restricted Stock. If neither the IPO Date nor a
Change in Control has occurred on or prior to December 31, 1996, the Executive
shall vest immediately in 10,000 shares of his Melville restricted stock grant
for 20,067 shares dated April 11, 1995.
7. Employee Benefit Programs.
(a) General Benefits. During the Term of Employment, the
Executive shall be entitled to participate in such employee pension and welfare
benefit plans and programs of the Company as are made available to the Company's
senior-level executives or to its employees generally, as such plans or programs
may be in effect from time to time, including, without
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limitation, health, medical, dental, long-term disability, travel accident and
life insurance plans. Notwithstanding the foregoing, prior to the IPO Date the
Executive shall continue to participate in the employee pension and welfare
benefit plans and programs of Melville as are made available to the Company's
senior-level executives or to its employees generally, as such plans or programs
may be in effect from time to time, including, without limitation, health,
medical, dental, long-term disability, travel accident and life insurance plans.
(b) Deferral of Compensation. The Company shall implement
deferral arrangements, reasonably acceptable to Executive and the Company,
permitting Executive to elect to defer receipt, pursuant to written deferral
election terms and forms (the "Deferral Election Forms"), of all or a specified
portion of (i) his annual Base Salary and annual incentive compensation under
Sections 4 and 5, (ii) long term incentive compensation under Section 6 and
(iii) shares acquired upon exercise of options to purchase Company common stock
that are acquired in an exercise in which Executive pays the exercise price by
the surrender of previously acquired shares, to the extent of the net additional
shares otherwise issuable to Executive in such exercise; provided, however, that
such deferrals shall not reduce Executive's total cash compensation in any
calendar year below the sum of (i) the FICA maximum taxable wage base plus (ii)
the amount needed, on an after-tax basis, to enable Executive to pay the 1.45%
medicare tax imposed on his wages in excess of such FICA maximum taxable wage
base.
In accordance with such duly executed Deferral Election Forms,
the Company shall credit to a bookkeeping account (the "Deferred Compensation
Account") maintained for Executive on the respective payment date or dates,
amounts equal to the compensation subject to deferral, such credits to be
denominated in cash if the compensation would have been paid in cash but for the
deferral or in shares if the compensation would have been paid in shares but for
the deferral. An amount of cash equal in value to all cash-denominated amounts
credited to Executive's account and a number of shares of Company common stock
equal to the number of shares credited to Executive's account pursuant to this
Section 7(b) shall be transferred as soon as practicable following such
crediting by the Company to, and shall be held and invested by, an independent
trustee selected by the Company and reasonably acceptable to Executive (a
"Trustee") pursuant to a "rabbi trust" established by the Company in connection
with such deferral arrangement and as to which the Trustee shall make
investments based on Executive's investment objectives (including possible
investment in publicly traded stocks and bonds, mutual funds, and insurance
vehicles). Thereafter, Executive's deferral accounts will be valued by reference
to the value of the assets of the "rabbi trust". The Company shall pay all costs
of administration or maintenance of the deferral arrangement, without deduction
or reimbursement from the assets of the "rabbi trust."
On the earlier of a Change in Control or the IPO Date (the
"Crediting Date"), the Company shall credit to the Deferred Compensation Account
(or pay to the Executive in the event of a Change in Control) an amount equal to
the sum of: (i) $800,000; plus (ii) the excess of (A) $275,000 minus (B) 100% of
the pre-tax gain actually realized by the Executive from the exercise of any or
all of the options to purchase Melville common stock granted to Executive by
Melville that have not been exercised prior to the date of this Agreement (other
than the April 11, 1995 option to purchase 65,000 shares); plus (iii) the
product of the number of unvested shares of restricted stock of Melville held by
the Executive on the Crediting Date times the fair market value of a share of
Melville Corporation common stock on the Crediting Date. The Company and the
Executive agree that the options and restricted stock described in the preceding
clauses (ii) and (iii) (other than the April 11, 1995 option to purchase 65,000
shares referred to in Section 6(d) above) shall be canceled on the Crediting
Date, that as of the Crediting Date the Executive shall have no further rights
under the Supplemental Retirement Plan for Select Senior Management of Melville
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Corporation, that the fair market value of Melville common stock for purposes of
this paragraph shall be determined in accordance with the Melville Corporation
Omnibus Stock Incentive Plan, and that the amount credited to the Executive's
Deferred Compensation Account in accordance with this paragraph (and any
earnings thereon) shall be paid to the Executive in a lump sum on the third
anniversary of the Crediting Date unless the Executive has filed a Deferral
Election Form with the Company (in accordance with Company policies) specifying
a later payment date or payment method.
Except as otherwise provided under Section 10, in the event of
Executive's termination of employment with the Company or as otherwise
determined by the Committee in the event of hardship on the part of Executive,
upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall promptly pay to
Executive cash equal to the value of the assets then credited to Executive's
deferral accounts, less applicable withholding taxes, and such distribution
shall be deemed to fully settle such accounts; provided, however, that the
Company may instead settle such accounts by directing the Trustee to distribute
Company common stock and/or other assets of the "rabbi trust." The Company and
Executive agree that compensation deferred pursuant to this Section 7(b) shall
be fully vested and nonforfeitable; however, Executive acknowledges that his
rights to the deferred compensation provided for in this Section 7(b) shall be
no greater than those of a general unsecured creditor of the Company, and that
such rights may not be pledged, collateralized, encumbered, hypothecated, or
liable for or subject to any lien, obligation, or liability of Executive, or be
assignable or transferable by Executive, otherwise than by will or the laws of
descent and distribution, provided that Executive may designate one or more
beneficiaries to receive any payment of such amounts in the event of his death.
8. Disability.
(a) During the Term of Employment, as well as during the
Severance Period, the Executive shall be entitled to disability coverage as
described in this Section 8(a). In the event the Executive becomes disabled, as
that term is defined under the Company's Long-Term Disability Plan, the
Executive shall be entitled to receive pursuant to the Company's Long-Term
Disability Plan or otherwise, and in place of his Base Salary, an amount equal
to 60% of his Base Salary, at the annual rate in effect on the commencement date
of his eligibility for the Company's long-term disability benefits
("Commencement Date") for a period beginning on the Commencement Date and ending
with the earlier to occur of (A) the Executive's attainment of age 65 or (B) the
Executive's commencement of retirement benefits from the Company in accordance
with Section 10(f) below. If (i) the Executive ceases to be disabled during the
Term of Employment (as determined in accordance with the terms of the Long-Term
Disability Plan), (ii) the positions set forth in Section 3(a) are then vacant
and (iii) the Company requests in writing that he resume such positions, he may
elect to resume such positions by written notice to the Company within 15 days
after the Company delivers its request. If he resumes such positions, he shall
thereafter be entitled to his Base Salary at the annual rate in effect on the
Commencement Date and, for the year he resumes his positions, a pro rata annual
incentive award. If he ceases to be disabled during the Term of Employment and
does not resume his positions in accordance with the preceding sentence, he
shall be treated as if he voluntarily terminated his employment pursuant to
Section 10(d) as of the date the Executive ceases to be disabled. If the
Executive is not offered such positions after he ceases to be disabled during
the Term of Employment, he shall be treated as if his employment was terminated
Without Cause pursuant to Section 10(c) as of the date the Executive ceases to
be disabled.
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(b) The Executive shall be entitled to a pro rata annual
incentive award for the year in which the Commencement Date occurs based on 55%
of Base Salary paid to him during such year prior to the Commencement Date,
payable in a lump sum not later than 15 days after the Commencement Date. The
Executive shall not be entitled to any annual incentive award with respect to
the period following the Commencement Date. If the Executive recommences his
positions in accordance with Section 8(a), he shall be entitled to a pro rata
annual incentive award for the year he resumes such positions and shall
thereafter be entitled to annual incentive awards in accordance with Section 5
hereof.
(c) During the period the Executive is receiving disability
benefits pursuant to Section 8(a) above, he shall continue to be treated as an
employee for purposes of all employee benefits and entitlements in which he was
participating on the Commencement Date, including without limitation, the
benefits and entitlements referred to in Sections 6 and 7 above, except that the
Executive shall not be entitled to receive any annual salary increases or any
new long-term incentive plan grants following the Commencement Date.
9. Reimbursement of Business and Other Expenses: Perquisites.
(a) The Executive is authorized to incur reasonable expenses
in carrying out his duties and responsibilities under this Agreement, and the
Company shall promptly reimburse him for all business expenses incurred in
connection therewith, subject to documentation in accordance with the Company's
policy. During the Term of Employment, the Company shall, commencing 1996,
provide the Executive, in accordance with the terms adopted by the Company, with
personal financial and tax planning.
(b) The Company shall pay all reasonable legal expenses up to
$17,500 incurred by the Executive in connection with the negotiation of this
Agreement.
10. Termination of Employment.
(a) Termination Due to Death. In the event the Executive's
employment with the Company is terminated due to his death, his estate or his
beneficiaries, as the case may be, shall be entitled to and their sole remedies
under this Agreement shall be:
(i) Base Salary through the date of death, which
shall be paid in a single lump sum not later
than 15 days following the Executive's
death;
(ii) pro rata annual incentive award for the year
in which the Executive's death occurs
assuming that the Executive would have
received an award equal to 55% of Base
Salary for such year, which shall be payable
in a lump sum promptly (but in no event
later than 15 days) after his death;
(iii) elimination of all restrictions on any
deferred stock awards outstanding at the
time of his death;
(iv) immediate vesting of all outstanding stock
options and the right to exercise such stock
options for a period of one year following
death (or such longer period as may be
provided in stock options granted
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to other similarly situated executive
officers of the Company) or for the
remainder of the exercise period, if less;
(v) immediate vesting of all outstanding
long-term incentive awards and a pro rata
payment of such awards based on target
performance, payable in a cash lump sum
promptly (but in no event later than 15
days) after his death;
(vi) the balance of any incentive awards earned
as of December 31 of the prior year (but not
yet paid), which shall be paid in a single
lump sum not later than 15 days following
the Executive's death;
(vii) settlement of all deferred compensation
arrangements in accordance with the
Executive's duly executed Deferral Election
Forms; and
(viii) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company.
(b) Termination by the Company for Cause.
(i) "Cause" shall mean:
(A) the Executive's willful and
material breach of Sections 11, 12
or 13 of this Agreement;
(B) the Executive is convicted of a
felony involving moral turpitude;
or
(C) the Executive engages in conduct
that constitutes willful gross
neglect or willful gross misconduct
in carrying out his duties under
this Agreement, resulting, in either
case, in material harm to the
financial condition or reputation of
the Company.
For purposes of this Agreement, an act or failure to act on Executive's part
shall be considered "willful" if it was done or omitted to be done by him not in
good faith, and shall not include any act or failure to act resulting from any
incapacity of Executive.
(ii) A termination for Cause shall not take
effect unless the provisions of this
paragraph (ii) are complied with. The
Executive shall be given written notice by
the Company of its intention to terminate
him for Cause, such notice (A) to state in
detail the particular act or acts or failure
or failures to act that constitute the
grounds on which the proposed termination
for Cause is based and (B) to be given
within 90 days of the Company's learning of
such act or acts or failure or failures to
act. The Executive shall have 20 days after
the date that such written notice has been
given to him in which to cure such conduct,
to the extent such cure is possible. If he
fails to cure such conduct, the Executive
shall then be entitled to a hearing before
the Committee of the Board at which the
Executive is entitled to appear.
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Such hearing shall be held within 25 days of
such notice to the Executive, provided he
requests such hearing within 10 days of the
written notice from the Company of the
intention to terminate him for Cause. If,
within five days following such hearing, the
Executive is furnished written notice by the
Board confirming that, in its judgment,
grounds for Cause on the basis of the
original notice exist, he shall thereupon be
terminated for Cause.
(iii) In the event the Company terminates the
Executive's employment for Cause, he shall
be entitled to and his sole remedies under
this Agreement shall be:
(A) Base Salary through the date of the
termination of his employment for
Cause, which shall be paid in a
single lump sum not later than 15
days following the Executive's
termination of employment;
(B) any incentive awards earned as of
December 31 of the prior year (but
not yet paid), which shall be paid
in a single lump sum not later than
15 days following the Executive's
termination of employment;
(C) settlement of all deferred
compensation arrangements in
accordance with the Executive's duly
executed Deferral Election Forms;
and
(D) other or additional benefits then
due or earned in accordance with
applicable plans or programs of the
Company.
(c) Termination Without Cause or Constructive Termination
Without Cause Prior to Change in Control. In the event the Executive's
employment with the Company is terminated without Cause (which termination shall
be effective as of the date specified by the Company in a written notice to the
Executive), other than due to death, or in the event there is a Constructive
Termination Without Cause (as defined below), in either case prior to a Change
in Control (as defined below) the Executive shall be entitled to and his sole
remedies under this Agreement shall be:
(i) Base Salary through the date of termination
of the Executive's employment, which shall
be paid in a single lump sum not later than
15 days following the Executive's
termination of employment;
(ii) Base Salary, at the annualized rate in
effect on the date of termination of the
Executive's employment (or in the event a
reduction in Base Salary is a basis for a
Constructive Termination Without Cause, then
the Base Salary in effect immediately prior
to such reduction), for a period of 24
months (or 18 months if Section 2(b)
applies) following such termination (the
"Severance Period");
(iii) pro rata annual incentive award for the year
in which termination occurs equal to 55% of
Base Salary (determined in accordance with
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Section 10(c)(ii) above) for such year,
payable in a lump sum promptly (but in no
event later than 15 days) following
termination;
(iv) an amount equal to 55% of Base Salary
(determined in accordance with Section
10(c)(ii) above) multiplied by 2 (or 1.5 if
Section 2(b) applies), payable in equal
monthly payments over the Severance Period;
(v) elimination of all restrictions on any
deferred stock awards outstanding at the
time of termination of employment;
(vi) except as provided in Section 2(b), any
outstanding stock options which are unvested
shall vest and the Executive shall have the
right to exercise any vested stock options
during the Severance Period or for the
remainder of the exercise period, if less;
(vii) continued vesting (as if the Executive
remained employed by Melville during the
Severance Period) of all outstanding options
to purchase Melville common stock and the
right to exercise such stock options at any
time prior to 90 days following the
expiration of the Severance Period or for
the remainder of the exercise period, if
less;
(viii) immediate vesting in 50% of the Executive's
Melville restricted stock grant dated April
11, 1995 (i.e., the next installment) if
such termination occurs prior to April 11,
1997, and immediate vesting in 75% of such
restricted stock grant (i.e., the next
installment) if such termination occurs on
or after April 11, 1997 and prior to April
11, 1998;
(ix) immediate vesting of all outstanding
long-term incentive awards and a pro rata
payment of such awards based on target
performance, payable in a cash lump sum
promptly (but in no event later than 15
days) following the Executive's termination
of employment;
(x) the balance of any incentive awards earned
as of December 31 of the prior year (but not
yet paid), which shall be paid in a single
lump sum not later than 15 days following
the Executive's termination of employment;
(xi) settlement of all deferred compensation
arrangements in accordance with the
Executive's duly executed Deferral Election
Forms;
(xii) continued participation in all medical,
health and life insurance plans at the same
benefit level at which he was participating
on the date of the termination of his
employment until the earlier of:
(A) the end of the Severance Period; or
(B) the date, or dates, he receives
equivalent coverage and benefits
under the plans and programs of a
subsequent
- 10 -
14
employer (such coverage and benefits
to be determined on a
coverage-by-coverage, or
benefit-by-benefit, basis); provided
that (1) if the Executive is
precluded from continuing his
participation in any employee
benefit plan or program as provided
in this clause (xii) of this Section
10(c), he shall receive cash
payments equal on an after-tax basis
to the cost to him of obtaining the
benefits provided under the plan or
program in which he is unable to
participate for the period specified
in this clause (xii) of this Section
10(c), (2) such cost shall be deemed
to be the lowest reasonable cost
that would be incurred by the
Executive in obtaining such benefit
himself on an individual basis, and
(3) payment of such amounts shall be
made quarterly in advance; and
(xiii) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company.
"Termination Without Cause" shall mean the Executive's
employment is terminated by the Company for any reason other than Cause (as
defined in Section 10(b)) or due to death.
"Constructive Termination Without Cause" shall mean a
termination of the Executive's employment at his initiative as provided in this
Section 10(c) following the occurrence, without the Executive's written consent,
of one or more of the following events (except as a result of a prior
termination):
(A) a material diminution or change,
adverse to Executive, in Executive's
positions, titles, or offices as set
forth in Section 3(a), status, rank,
nature of responsibilities, or
authority within the Company, or a
removal of Executive from or any
failure to elect or re-elect or, as
the case may be, nominate Executive
to any such positions or offices,
including as a member of the Board;
(B) an assignment of any duties to
Executive which are inconsistent
with his status as President and
Chief Executive Officer of the
Company and other positions held
under Section 3(a);
(C) a decrease in annual Base Salary or
target annual incentive award
opportunity below 55% of Base
Salary;
(D) any other failure by the Company to
perform any material obligation
under, or breach by the Company of
any material provision of, this
Agreement that is not cured within
30 days;
(E) a relocation of the corporate
offices of the Company outside a
35-mile radius of Clifton, New
Jersey; or
- 11 -
15
(F) any failure to secure the agreement
of any successor corporation or
other entity to the Company to fully
assume the Company's obligations
under this Agreement.
A "Change in Control" shall be deemed to have occurred if:
(i) any Person (other than the Company, any
trustee or other fiduciary holding
securities under any employee benefit plan
of the Company, or any company owned,
directly or indirectly, by the stockholders
of the Company immediately prior to the
occurrence with respect to which the
evaluation is being made in substantially
the same proportions as their ownership of
the common stock of the Company) becomes the
Beneficial Owner (except that a Person shall
be deemed to be the Beneficial Owner of all
shares that any such Person has the right to
acquire pursuant to any agreement or
arrangement or upon exercise of conversion
rights, warrants or options or otherwise,
without regard to the sixty day period
referred to in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities
of the Company or any Significant Subsidiary
(as defined below), representing 25% or more
of the combined voting power of the
Company's or such subsidiary's then
outstanding securities; provided, however,
that such event shall not constitute a
Change in Control unless or until the
percentage of such securities owned
beneficially, directly or indirectly, by
such Person is equal to or more than all
such securities owned beneficially, directly
or indirectly, by Melville;
(ii) during any period of two consecutive years,
individuals who at the beginning of such
period constitute the Board, and any new
director (other than a director designated
by a person who has entered into an
agreement with the Company to effect a
transaction described in clause (i), (iii),
or (iv) of this paragraph) whose election by
the Board or nomination for election by the
Company's stockholders was approved by a
vote of at least two-thirds of the
directors then still in office who either
were directors at the beginning of the
two-year period or whose election or
nomination for election was previously so
approved but excluding for this purpose any
such new director whose initial assumption
of office occurs as a result of either an
actual or threatened election contest (as
such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the
Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on
behalf of an individual, corporation,
partnership, group, associate or other
entity or Person other than the Board, cease
for any reason to constitute at least a
majority of the Board; provided, however,
that such event shall not constitute a
Change in Control unless or until the
percentage of voting securities of the
Company owned beneficially, directly or
indirectly, by Melville is less than 50% of
all such outstanding securities;
- 12 -
16
(iii) the consummation of a merger or
consolidation of the Company or any
subsidiary owning directly or indirectly all
or substantially all of the consolidated
assets of the Company (a "Significant
Subsidiary") with any other entity, other
than a merger or consolidation which would
result in the voting securities of the
Company or a Significant Subsidiary
outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into
voting securities of the surviving or
resulting entity) more than 50% of the
combined voting power of the surviving or
resulting entity outstanding immediately
after such merger or consolidation;
(iv) the stockholders of the Company approve a
plan or agreement for the sale or
disposition of all or substantially all of
the consolidated assets of the Company
(other than such a sale or disposition
immediately after which such assets will be
owned directly or indirectly by the
stockholders of the Company in substantially
the same proportions as their ownership of
the common stock of the Company immediately
prior to such sale or disposition) in which
case the Board shall determine the effective
date of the Change in Control resulting
therefrom; or
(v) any other event occurs which the Board
determines, in its discretion, would
materially alter the structure of the
Company or its ownership.
For purposes of this definition:
(A) The term "Beneficial Owner" shall
have the meaning ascribed to such
term in Rule 13d-3 under the
Exchange Act (including any
successor to such Rule).
(B) The term "Exchange Act" means the
Securities Exchange Act of 1934, as
amended from time to time, or any
successor act thereto.
(C) The term "Person" shall have the
meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act
and used in Sections 13(d) and 14(d)
thereof, including "group" as
defined in Section 13(d) thereof.
(d) Voluntary Termination. In the event of a termination of
employment by the Executive on his own initiative after delivery of 10 business
days advance written notice, other than a termination due to death, a
Constructive Termination Without Cause, an Approved Early Retirement or Normal
Retirement pursuant to Section 10(f) below, or a voluntary termination following
a Change in Control within the 30-day period described in Section 10(e) below,
the Executive shall have the same entitlements as provided in Section 10(b)(iii)
above for a termination for Cause, provided that at the Company's election,
furnished in writing to the Executive within 15 days following such notice of
termination, the Company shall in addition pay the Executive 155% of his Base
Salary for a period of 12 months following such termination in exchange for the
Executive not engaging in competition with the Company or any Subsidiary as
- 13 -
17
set forth in Section 12(a) below. Notwithstanding any implication to the
contrary, the Executive shall not have the right to terminate his employment
with the Company during the Term of Employment except in the event of a
Constructive Termination Without Cause, Approved Early Retirement, Normal
Retirement, or voluntary termination following a Change in Control within the
30-day period described in Section 10(e) below, and any voluntary termination of
employment during the Term of Employment in violation of this Agreement shall be
considered a material breach; provided, however, if the Company elects to pay
the Executive 155% of his Base Salary in accordance with this Section 10(d), the
Company shall waive any and all claims it may have against the Executive for any
breach of this Agreement relating to his voluntary termination of employment
unless the Executive is found by a court of competent jurisdiction not to be in
compliance with Section 12(a) below; provided further, however, that,
notwithstanding anything contained in the foregoing to the contrary, it is not
the intention of the Company to waive any claims it may have against any third
parties relating to a voluntary termination by the Executive in violation of
this Agreement.
(e) Termination Without Cause; Constructive Termination
Without Cause or Voluntary Termination Following Change in Control. In the event
the Executive's employment with the Company is terminated by the Company without
Cause (which termination shall be effective as of the date specified by the
Company in a written notice to the Executive), other than due to death, or in
the event there is a Constructive Termination Without Cause (as defined above),
in either case within two years following a Change in Control (as defined
above), or in the event the Executive elects within the 30-day period commencing
six months following a Change in Control to terminate his employment for any
reason, the Executive shall be entitled to and his sole remedies under this
Agreement shall be:
(i) Base Salary through the date of termination
of the Executive's employment, which shall
be paid in a single lump sum not later than
15 days following the Executive's
termination of employment;
(ii) an amount equal to 2.99 times the
Executive's Base Salary, at the annualized
rate in effect on the date of termination of
the Executive's employment (or in the event
a reduction in Base Salary is a basis for a
Constructive Termination Without Cause, then
the Base Salary in effect immediately prior
to such reduction), payable in a cash lump
sum promptly (but in no event later than 15
days) following the Executive's termination
of employment;
(iii) pro rata annual incentive award for the year
in which termination occurs assuming that
the Executive would have received an award
equal to 55% of Base Salary (determined in
accordance with Section 10(e)(ii) above) for
such year, payable in a cash lump sum
promptly (but in no event later than 15
days) following the Executive's termination
of employment;
(iv) an amount equal to 55% of such Base Salary
(determined in accordance with Section
10(e)(ii) above) multiplied by 2.99, payable
in a cash lump sum promptly (but in no event
later than 15 days) following the
Executive's termination of employment;
- 14 -
18
(v) elimination of all restrictions on any
deferred stock awards outstanding at the
time of termination of employment;
(vi) immediate vesting of all outstanding stock
options and the right to exercise such stock
options during the Severance Period or for
the remainder of the exercise period, if
less;
(vii) immediate vesting of all outstanding
long-term incentive awards and a pro rata
payment of such awards based on target
performance, payable in a cash lump sum
promptly (but in no event later than 15
days) following the Executive's termination
of employment;
(viii) the balance of any incentive awards earned
as of December 31 of the prior year (but not
yet paid), which shall be paid in a single
lump sum not later than 15 days following
the Executive's termination of employment;
(ix) settlement of all deferred compensation
arrangements in accordance with Executive's
duly executed Deferral Election Forms;
(x) continued participation in all medical,
health and life insurance plans at the same
benefit level at which he was participating
on the date of termination of his employment
until the earlier of:
(A) the end of the Severance Period; or
(B) the date, or dates, he receives
equivalent coverage and benefits
under the plans and programs of a
subsequent employer (such coverage
and benefits to be determined on a
coverage-by-coverage, or
benefit-by-benefit, basis); provided
that (1) if the Executive is
precluded from continuing his
participation in any employee
benefit plan or program as provided
in this clause (x) of this Section
10(e), he shall receive cash
payments equal on an after-tax basis
to the cost to him of obtaining the
benefits provided under the plan or
program in which he is unable to
participate for the period specified
in this clause (x) of this Section
10(e), (2) such cost shall be deemed
to be the lowest reasonable cost
that would be incurred by the
Executive in obtaining such benefit
himself on an individual basis, and
(3) payment of such amounts shall be
made quarterly in advance; and
(xi) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company.
For purposes of any termination pursuant to this Section 10(e), the term
"Severance Period" shall mean the period of 36 months following the termination
of the Executive's employment.
- 15 -
19
(f) Approved Early Retirement or Normal Retirement. Upon the
Executive's Approved Early Retirement or Normal Retirement (each as defined
below), the Executive shall be entitled to and his sole remedies under this
Agreement shall be:
(i) Base Salary through the date of termination
of the Executive's employment, which shall
be paid in a single lump sum not later than
15 days following the Executive's
termination of employment;
(ii) pro rata annual incentive award for the year
in which termination occurs, based on
performance valuation at the end of such
year and payable in a cash lump sum promptly
(but in no event later than 15 days)
thereafter;
(iii) continued vesting (as if the Executive
remained employed by the Company) of any
deferred stock awards outstanding at the
time of his termination of employment;
(iv) continued vesting of all outstanding stock
options and the right to exercise such stock
options for a period of one year following
the later of the date the options are fully
vested or the Executive's termination of
employment (or such longer period as may be
provided in stock options granted to other
similarly situated executive officers of the
Company) or for the remainder of the
exercise period, if less;
(v) continued vesting (as if the Executive
remained employed by the Company) of all
outstanding long-term incentive awards and
payment of such awards based on valuation at
the end of the performance period, payable
in a cash lump sum promptly (but in no event
later than 15 days) thereafter;
(vi) the balance of any incentive awards earned
as of December 31 of the prior year (but not
yet paid), which shall be paid in a single
lump sum not later than 15 days following
the Executive's termination of employment;
(vii) settlement of all deferred compensation
arrangements in accordance with the
Executive's duly executed Deferral Election
Forms;
(viii) continued participation in all medical,
health and life insurance plans at the same
benefit level at which he was participating
on the date of the termination of his
employment until the earlier of:
(A) the Executive's attainment of age
60; or
(B) the date, or dates, he receives
substantially equivalent coverage
and benefits under the plans and
programs of a subsequent employer
(such coverage and benefits to be
determined on a
coverage-by-coverage, or benefit-by-
-16-
20
benefit, basis); provided that (1)
if the Executive is precluded from
continuing his participation in any
employee benefit plan or program as
provided in this clause (viii) of
this Section 10(f), he shall receive
cash payments equal on an after-tax
basis to the cost to him of
obtaining the benefits provided
under the plan or program in which
he is unable to participate for the
period specified in this clause
(viii) of this Section 10(f), (2)
such cost shall be deemed to be the
lowest cost that would be incurred
by the Executive in obtaining such
benefit himself on an individual
basis, and (3) payment of such
amounts shall be made quarterly in
advance; and
(ix) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company.
"Approved Early Retirement" shall mean the Executive's
voluntary termination of employment with the Company at or after attaining age
55 but prior to attaining age 60, if such termination is approved in advance by
the Committee.
"Normal Retirement" shall mean the Executive's voluntary
termination of employment with the Company at or after attaining age 60.
(g) No Mitigation; No Offset. In the event of any termination
of employment, the Executive shall be under no obligation to seek other
employment; amounts due the Executive under this Agreement shall not be offset
by any remuneration attributable to any subsequent employment that he may
obtain.
(h) Nature of Payments. Any amounts due under this Section 10
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
(i) No Further Liability; Release. In the event of the
Executive's termination of employment, payment made and performance by the
Company in accordance with this Section 10 shall operate to fully discharge and
release the Company and its directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and representatives from
any further obligation or liability with respect to the Executive's rights under
this Agreement. Other than payment and performance under this Section 10, the
Company and its directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives shall have no
further obligation or liability to the Executive or any other person under this
Agreement in the event of the Executive's termination of employment. The Company
shall have the right to condition the last payment of any severance or other
amounts pursuant to this Section 10 upon the delivery by the Executive to the
Company of a release in the form satisfactory to the Company releasing any and
all claims the Executive may have against the Company and its directors,
officers, employees, subsidiaries, affiliates, stockholders, successors,
assigns, agents and representatives arising out of this Agreement.
- 17 -
21
11. Confidentiality: Cooperation with Regard to Litigation.
(a) During the Term of Employment and thereafter, the
Executive shall not, without the prior written consent of the Company, disclose
to anyone (except in good faith in the ordinary course of business to a person
who will be advised by the Executive to keep such information confidential) or
make use of any Confidential Information except in the performance of his duties
hereunder or when required to do so by legal process, by any governmental agency
having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) that requires
him to divulge, disclose or make accessible such information. In the event that
the Executive is so ordered, he shall give prompt written notice to the Company
in order to allow the Company the opportunity to object to or otherwise resist
such order.
(b) During the Term of Employment and thereafter, Executive
shall not disclose the existence or contents of this Agreement beyond what is
disclosed in the proxy statement or documents filed with the government unless
and to the extent such disclosure is required by law, by a governmental agency,
or in a document required by law to be filed with a governmental agency or in
connection with enforcement of his rights under this Agreement. In the event
that disclosure is so required, the Executive shall give prompt written notice
to the Company in order to allow the Company the opportunity to object to or
otherwise resist such requirement. This restriction shall not apply to such
disclosure by him to members of his immediate family, his tax, legal or
financial advisors, any lender, or tax authorities, or to potential future
employers to the extent necessary, each of whom shall be advised not to disclose
such information.
(c) "Confidential Information" shall mean all information
concerning the business of the Company or any Subsidiary relating to any of
their products, product development, trade secrets, customers, suppliers,
finances, and business plans and strategies. Excluded from the definition of
Confidential Information is information (i) that is or becomes part of the
public domain, other than through the breach of this Agreement by the Executive
or (ii) regarding the Company's business or industry properly acquired by the
Executive in the course of his career as an executive in the Company's industry
and independent of the Executive's employment by the Company or Melville. For
this purpose, information known or available generally within the trade or
industry of the Company or any Subsidiary shall be deemed to be known or
available to the public.
(d) "Subsidiary" shall mean any corporation controlled
directly or indirectly by the Company.
(e) The Executive agrees to cooperate with the Company, during
the Term of Employment and thereafter (including following the Executive's
termination of employment for any reason), by making himself reasonably
available to testify on behalf of the Company or any Subsidiary in any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
and to assist the Company, or any Subsidiary, in any such action, suit, or
proceeding, by providing information and meeting and consulting with the Board
or its representatives or counsel, or representatives or counsel to the Company,
or any Subsidiary as requested; provided, however that the same does not
materially interfere with his then current professional activities. The Company
agrees to reimburse the Executive, on an after-tax basis, for all expenses
actually incurred in connection with his provision of testimony or assistance.
- 18 -
22
12. Non-competition.
(a) During the Restriction Period (as defined in Section 12(b)
below), the Executive shall not engage in Competition with the Company or any
Subsidiary. "Competition" shall mean engaging in any activity, except as
provided below, for a Competitor of the Company or any Subsidiary, whether as an
employee, consultant, principal, agent, officer, director, partner, shareholder
(except as a less than one percent shareholder of a publicly traded company) or
otherwise. A "Competitor" shall mean (i) Bed Bath & Beyond, Inc., Strouds, Inc.,
Home Express Inc. and Home Place Inc. (and any successor or successors thereto);
(ii) any specialty retailer if 40% or more of its revenues (based on the most
recent quarterly or annual financial statements available) are derived from the
sale of home textiles or housewares; (iii) any corporation, other entity, or
start-up corporation or other entity engaged primarily or organized for the
purpose of engaging primarily in the sale of home textiles or housewares having
a total capitalization (equity and/or long-term debt) in excess of $30,000,000
or revenues (based on the most recent quarterly or annual financial statements
available) in excess of $25,000,000. If the Executive commences employment or
becomes a consultant, principal, agent, officer, director, partner, or
shareholder of any entity that is not a Competitor at the time the Executive
initially becomes employed or becomes a consultant, principal, agent, officer,
director, partner, or shareholder of the entity, future activities of such
entity shall not result in a violation of this provision unless (x) such
activities were contemplated by the Executive at the time the Executive
initially became employed or becomes a consultant, principal, agent, officer,
director, partner, or shareholder of the entity or (y) the Executive commences
directly or indirectly overseeing or managing the activities of such Competitor
which are competitive with the activities of the Company or Subsidiary. The
Executive shall not be deemed indirectly overseeing or managing the activities
of such Competitor which are competitive with the activities of the Company or
Subsidiary so long as he does not regularly participate in discussions with
regard to the conduct of the competing business.
(b) For the purposes of this Section 12, "Restriction Period"
shall mean the period beginning with the Effective Date and ending with:
(i) in the case of a termination of the
Executive's employment without Cause or a
Constructive Termination Without Cause, the
Restriction Period shall terminate
immediately upon the Executive's termination
of employment;
(ii) in the case of a termination of the
Executive's employment for Cause, the first
anniversary of such termination;
(iii) in the case of a voluntary termination of
the Executive's employment pursuant to
Section 10(d) above followed by the
Company's election to pay the Executive (and
subject to the payment of) 155% of his Base
Salary, as provided in Section 10(d) above,
the first anniversary of such termination;
(iv) in the case of a voluntary termination of
the Executive's employment pursuant to
Section 10(d) above which is not followed by
the Company's election to pay the Executive
such 155% of Base Salary, the date of such
termination; or
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23
(v) in the case of Approved Early Retirement or
Normal Retirement pursuant to Section 10(f)
above, the remainder of the Term of
Employment.
13. Non-solicitation of Employees.
During the period beginning with the Effective Date and ending
one year following the termination of the Executive's employment, the Executive
shall not induce employees of the Company or any Subsidiary to terminate their
employment; provided, however, that the foregoing shall not be construed to
prevent the Executive from engaging in generic nontargeted advertising for
employees generally. During such period, the Executive shall not hire, either
directly or through any employee, agent or representative, any employee of the
Company or any Subsidiary or any person who was employed by the Company or any
Subsidiary within 180 days of such hiring.
14. Remedies.
In addition to whatever other rights and remedies the Company
may have at equity or in law, if the Executive breaches any of the provisions
contained in Sections 11, 12 or 13 above, the Company (a) shall have the right
to immediately terminate all payments and benefits due under this Agreement and
(b) shall have the right to seek injunctive relief. The Executive acknowledges
that such a breach of Sections 11, 12 or 13 would cause irreparable injury and
that money damages would not provide an adequate remedy for the Company;
provided, however, the foregoing shall not prevent the Executive from contesting
the issuance of any such injunction on the ground that no violation or
threatened violation of Section 11, 12 or 13 has occurred.
15. Resolution of Disputes.
Any controversy or claim arising out of or relating to this
Agreement or any breach or asserted breach hereof or questioning the validity
and binding effect hereof arising under or in connection with this Agreement,
other than seeking injunctive relief under Section 14, shall be resolved by
binding arbitration, to be held at an office closest to the Company's principal
offices in accordance with the rules and procedures of the American Arbitration
Association, except that disputes arising under or in connection with Sections
11, 12 and 13 above shall be submitted to the federal or state courts in the
State of New Jersey. Judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof. Pending the resolution of
any arbitration or court proceeding, the Company shall continue payment of all
amounts and benefits due the Executive under this Agreement. All reasonable
costs and expenses (including fees and disbursements of counsel) incurred by the
Executive pursuant to this Section 15 shall be paid on behalf of or reimbursed
to the Executive promptly by the Company; provided, however, that no
reimbursement shall be made of such expenses if and to the extent the
arbitrator(s) determine(s) that any of the Executive's litigation assertions or
defenses were in bad faith or frivolous.
16. Indemnification.
(a) Company Indemnity. The Company agrees that if the
Executive is made a party, or is threatened to be made a party, to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company or any Subsidiary or is or was serving at the request of
the Company or any Subsidiary as a director, officer, member, employee or agent
of
- 20 -
24
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is the Executive's alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Executive shall be indemnified and held harmless by the Company to the fullest
extent legally permitted or authorized by the Company's certificate of
incorporation or bylaws or resolutions of the Company's Board or, if greater, by
the laws of the State of Delaware against all cost, expense, liability and loss
(including, without limitation, attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by the Executive in connection therewith, and such
indemnification shall continue as to the Executive even if he has ceased to be a
director, member, officer, employee or agent of the Company or other entity and
shall inure to the benefit of the Executive's heirs, executors and
administrators. The Company shall advance to the Executive all reasonable costs
and expenses to be incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses. The provisions of this Section
16(a) shall not be deemed exclusive of any other rights of indemnification to
which the Executive may be entitled or which may be granted to him, and it shall
be in addition to any rights of indemnification to which he may be entitled
under any policy of insurance.
(b) No Presumption Regarding Standard of Conduct. Neither the
failure of the Company (including its Board, independent legal counsel or
stockholders) to have made a determination prior to the commencement of any
proceeding concerning payment of amounts claimed by the Executive under Section
16(a) above that indemnification of the Executive is proper because he has met
the applicable standard of conduct, nor a determination by the Company
(including its Board, independent legal counsel or stockholders) that the
Executive has not met such applicable standard of conduct, shall create a
presumption that the Executive has not met the applicable standard of conduct.
(c) Liability Insurance. The Company agrees to continue and
maintain a directors and officers' liability insurance policy covering the
Executive to the extent the Company provides such coverage for its other
executive officers.
17. Excise Tax Gross-Up.
If the Executive becomes entitled to one or more payments
(with a "payment" including, without limitation, the vesting of an option or
other non-cash benefit or property), whether pursuant to the terms of this
Agreement or any other plan, arrangement, or agreement with the Company or any
affiliated company (the "Total Payments"), which are or become subject to the
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any similar tax that may hereafter be imposed) (the "Excise
Tax"), the Company shall pay to the Executive at the time specified below an
additional amount (the "Gross-up Payment") (which shall include, without
limitation, reimbursement for any penalties and interest that may accrue in
respect of such Excise Tax) such that the net amount retained by the Executive,
after reduction for any Excise Tax (including any penalties or interest thereon)
on the Total Payments and any federal, state and local income or employment tax
and Excise Tax on the Gross-up Payment provided for by this Section 17, but
before reduction for any federal, state, or local income or employment tax on
the Total Payments, shall be equal to the sum of (a) the Total Payments, and (b)
an amount equal to the product of any deductions disallowed for federal, state,
or local income tax purposes because of the inclusion of the Gross-up Payment in
the Executive's
- 21 -
25
adjusted gross income multiplied by the highest applicable marginal rate of
federal, state, or local income taxation, respectively, for the calendar year in
which the Gross-up Payment is to be made. For purposes of determining whether
any of the Total Payments will be subject to the Excise Tax and the amount of
such Excise Tax:
(i) The Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" within
the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, unless, and
except to the extent that, in the written opinion of
independent compensation consultants, counsel or
auditors of nationally recognized standing
("Independent Advisors") selected by the Company and
reasonably acceptable to the Executive, the Total
Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable
compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of
Section 280G(b)(3) of the Code or are otherwise not
subject to the Excise Tax;
(ii) The amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal
to the lesser of (A) the total amount of the Total
Payments or (B) the total amount of excess parachute
payments within the meaning of Section 280G(b)(1) of
the Code (after applying clause (i) above); and
(iii) The value of any non-cash benefits or any deferred
payment or benefit shall be determined by the
Independent Advisors in accordance with the
principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-up
Payment, the Executive shall be deemed (A) to pay federal income taxes at the
highest marginal rate of federal income taxation for the calendar year in which
the Gross-up Payment is to be made; (B) to pay any applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of the Executive's adjusted gross income); and
(C) to have otherwise allowable deductions for federal, state, and local income
tax purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in the Executive's adjusted gross income. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, the Executive shall
repay to the Company at the time that the amount of such reduction in Excise Tax
is finally determined (but, if previously paid to the taxing authorities, not
prior to the time the amount of such reduction is refunded to the Executive or
otherwise realized as a benefit by the Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess
- 22 -
26
(plus any interest and penalties payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the
30th day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to the Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as not
to duplicate any prior Gross-up Payment. The Company shall have the right to
control all proceedings with the Internal Revenue Service that may arise in
connection with the determination and assessment of any Excise Tax and, at its
sole option, the Company may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties thereon);
provided, however, that the Company's control over any such proceedings shall be
limited to issues with respect to which a Gross-up Payment would be payable
hereunder, and the Executive shall be entitled to settle or contest any other
issue raised by the Internal Revenue Service or any other taxing authority. The
Executive shall cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any position
or action that would materially increase the amount of any Gross-Up Payment
hereunder.
18. Effect of Agreement on Other Benefits.
Except as specifically provided in this Agreement, the
existence of this Agreement shall not be interpreted to preclude, prohibit or
restrict the Executive's participation in any other employee benefit or other
plans or programs in which he currently participates.
19. Assignability: Binding Nature.
This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors, heirs (in the case of the
Executive) and permitted assigns. No rights or obligations of the Company under
this Agreement may be assigned or transferred by the Company except that such
rights or obligations may be assigned or transferred in connection with the sale
or transfer of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale or transfer of assets as described in the
preceding sentence, it shall take whatever action it legally can in order to
cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred
only by will or operation of law, except as provided in Section 25 below.
- 23 -
27
20. Representation.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement between
it and any other person, firm or organization.
21. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and, as of the
Effective Date, supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the Parties with
respect thereto, including, without limitation any prior change in control
agreement between the Parties or between the Executive and Melville.
22. Amendment or Waiver.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by the Executive and an authorized
officer of the Company. Except as set forth herein, no delay or omission to
exercise any right, power or remedy accruing to any Party shall impair any such
right, power or remedy or shall be construed to be a waiver of or an
acquiescence to any breach hereof. No waiver by either Party of any breach by
the other Party of any condition or provision contained in this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.
23. Severability.
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
24. Survivorship.
The respective rights and obligations of the Parties hereunder
shall survive any termination of the Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
25. Beneficiaries/References.
The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following the Executive's
death by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to the Executive shall be deemed, where appropriate, to refer to
his beneficiary, estate or other legal representative.
- 24 -
28
26. Governing Law/Jurisdiction.
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of New Jersey without reference to
principles of conflict of laws. Subject to Section 15, the Company and the
Executive hereby consent to the jurisdiction of any or all of the following
courts for purposes of resolving any dispute under this Agreement: (i) the
United States District Court for New Jersey or (ii) any of the courts of the
State of New Jersey. The Company and the Executive further agree that any
service of process or notice requirements in any such proceeding shall be
satisfied if the rules of such court relating thereto have been substantially
satisfied. The Company and the Executive hereby waive, to the fullest extent
permitted by applicable law, any objection which it or he may now or hereafter
have to such jurisdiction and any defense of inconvenient forum.
27. Notices.
Any notice given to a Party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give such notice of:
If to the Company: Linens 'n Things, Inc.
0 Xxxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Secretary
If to the Executive: Xx. Xxxxxx Xxxxxxx
0 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxx Xxxxx, Xxx Xxxxxx 00000
- 25 -
29
28. Headings.
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
29. Counterparts.
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
LINENS 'N THINGS, INC.
By: XXXXX X. XXXXX
_______________________________
Name: Xxxxx x. Xxxxx
Title: Vice President, Human
Resources
EXECUTIVE
XXXXXX XXXXXXX
__________________________________
Xxxxxx Xxxxxxx
For purposes of Xxxxxxxx 0, 0(x), 0(x), 0(x), 00(x)(xxx), 10(c)(viii) and 21
hereof:
MELVILLE CORPORATION
By: XXXXXXX X. XXXXXXXXX
_______________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman of the Board
and C.E.O.
- 26 -
30
Exhibit A
LINENS 'N THINGS, INC.
STOCK OPTION GRANT AGREEMENT
THIS STOCK OPTION GRANT AGREEMENT (the "Agreement") is made as
of ______________,_____* between Linens 'n Things, Inc., a Delaware corporation
(the "Company") and Xxxxxx Xxxxxxx (the "Employee") pursuant to the terms and
conditions of the Linens 'n Things, Inc. 1996 Incentive Compensation Plan (the
"Plan"). Capitalized terms not defined in this Agreement shall have the meanings
set forth in the Plan.
THE PARTIES AGREE AS FOLLOWS:
1. Award of Options. Pursuant to the Plan, the Company has
awarded to Employee hereunder options (the "Options") to acquire shares of
Company common stock (the "Stock"), at the exercise price per share (the
"Exercise Price"), all as set forth on the signature page hereof, subject to the
terms and conditions set forth in this Agreement and the Plan. The Options
granted hereunder are nonqualified stock options.
2. Vesting Schedule. Subject to Sections 6 and 7 hereof and
Sections 6(a) and 9 of the Plan, including the authority of the Committee in its
discretion to provide for accelerated vesting, the Options shall vest and become
exercisable in accordance with the Vesting Schedule set forth on the signature
page hereof.
3. Expiration Date. The Options subject to this Agreement
shall expire on ___________** (the "Expiration Date").
4. Payment of Exercise Price. The Exercise Price of the shares
as to which Options are exercised may be paid to the Company at the time of
exercise in cash or in Stock or in such other consideration as shall be
permitted by the Committee at the time of exercise, in each case (a) pursuant to
rules and procedures established by the Committee and (b) having a total Fair
Market Value determined as of the date of exercise equal to the Exercise Price,
or a combination of cash, Stock and such other consideration having a total Fair
Market Value equal to such Exercise Price.
5. Non-transferability. Except to the extent otherwise
determined by the Committee, the Options granted hereunder shall not be
assignable or otherwise transferable other than by will or the laws of descent
and distribution. Unless otherwise provided by the Committee, during the
lifetime of Employee the Options shall be exercisable and elections with respect
to the Options may be made only by Employee or Employee's guardian or legal
representative.
--------
* To be dated as of the date on which shares of common stock of the
Company are first sold to the public pursuant to an initial public
offering (the "IPO Date").
** Insert date ten years after IPO Date.
31
6. Termination of Employment.
(a) Except to the extent provided in Section 7 hereof or any
employment agreement between Employee and the Company, the provisions of this
Section 6 shall apply to the Options upon Employee's termination of employment
with the Company and all subsidiaries of the Company ("Termination") for any
reason.
(b) In the event of Employee's Termination for Cause, all
vested and unvested Options shall be canceled on the date of such Termination.
(c) In the event of Employee's Termination by reason of death,
all Options shall become immediately vested and shall be exercisable in whole or
in part at any time prior to the earlier of the Expiration Date and the date one
year after the date of such Termination (or such longer period as may be
provided in stock options granted to similarly situated executive officers of
the Company).
(d) In the event of Employee's Termination by reason of
Approved Early Retirement or Normal Retirement, the Options shall continue to
vest as if Employee had remained employed by the Company and, to the extent
vested, shall be exercisable in whole or in part at any time prior to the later
of one year following the date on which the Options are fully vested or one year
following such Termination (or such longer period as may be provided in stock
options granted to similarly situated executive officers of the Company), but in
no event later than the Expiration Date.
(e) In the event of a Termination without Cause (other than
due to death) or Constructive Termination Without Cause, all Options shall
become immediately vested and shall be exercisable in whole or in part at any
time prior to the earlier of the Expiration Date and the date twenty-four months
after the date of such Termination; provided, however, that in the event of a
Constructive Termination Without Cause due to the Company's failure to renew any
employment agreement between the Company and Employee then in effect, any
unvested Options shall continue to vest as if Employee had remained employed by
the Company and, to the extent vested, the Options shall be exercisable in whole
or in part at any time prior to the earlier of the Expiration Date and the date
eighteen months after the date of such Termination.
(f) In the event of Employee's Termination for any reason
other than as provided in Section 6(b), 6(c), 6(d) or 6(e), Options which are
unvested shall be canceled and Options which are vested and exercisable may be
exercised in whole or in part at any time prior to the earlier of the Expiration
Date and the date three months after the date of such Termination.
7. Change in Control.
(a) In the event of a Change in Control any Option that was
not previously exercisable and vested shall become fully exercisable and vested
at the time of the Change in Control except to the extent of any waiver by
Employee and subject to the applicable restrictions set forth in Section 9(a) of
the Plan.
(b) In the event of a Termination Without Cause (other than
due to death) or a Constructive Termination Without Cause, in either case within
two years following a Change in Control, or a voluntary termination of
employment within the 30-day period commencing six months following a Change in
Control, the Options may be exercised in whole or in part at any time prior
- 2 -
32
to the earlier of the Expiration Date and the date thirty-six months after the
date of such Termination. In the event of any other Termination following a
Change in Control, the Options may be exercised for the periods provided in the
applicable subsection of Section 6.
(c) Employee shall be entitled to elect during the 60-day
period immediately following a Change in Control, in lieu of acquiring the
shares of Stock covered by an Option, to receive, and the Company shall be
obligated to pay, in cash, in respect of each share of Stock subject to an
Option the excess of the Change in Control Price over the Exercise Price of such
Option.
8. Definitions. For purposes of this Agreement:
(a) "Approved Early Retirement" shall mean Employee's
voluntary termination of employment with the Company at or after attaining age
55 but prior to attaining age 60, if such termination is approved in advance by
the Committee;
(b) "Cause" shall have the meaning given to such term in any
employment agreement between the Company and Employee in effect at the date of
Termination and, in the absence of any such agreement, shall mean (i) Employee's
willful and continued failure substantially to perform his duties (other than as
a result of total or partial incapacity due to physical or mental illness or by
reason of Employee's prior voluntary termination of employment), (ii) Employee's
dishonesty in the performance of his duties or (iii) Employee's conviction of a
felony under the laws of the United States or any state thereof;
(c) "Constructive Termination Without Cause" shall have the
meaning given to such term in any employment agreement between the Company and
Employee in effect at the date of Termination and, in the absence of any such
agreement, shall mean a termination of Employee's employment at his initiative
following the occurrence, without Employee's written consent, of one or more of
the following events (except as a result of a prior termination):
(i) a material change, adverse to Employee, in
Employee's positions, titles, offices, status, rank, nature of responsibilities,
or authority within the Company, or a removal of Employee from or any failure to
elect or re-elect or, as the case may be, nominate Employee to any such
positions or offices, including as a member of the Board;
(ii) an assignment of any duties to Employee which
are inconsistent with his status as President and Chief Executive Officer of the
Company;
(iii) a decrease in the Employee's annual base salary
or target annual incentive award opportunity below 55% of base salary;
(iv) any other failure by the Company to perform any
material obligation under, or breach by the Company of any material provision
of, any employment agreement between the Company and Employee then in effect
that is not cured within 30 days;
(v) a relocation of the corporate offices of the
Company outside a 35-mile radius of Clifton, New Jersey; or
- 3 -
33
(vi) any failure to secure the agreement of any
successor corporation or other entity to the Company to fully assume the
Company's obligations under any employment agreement between the Company and
Employee then in effect; and
(d) "Normal Retirement" shall mean Employee's voluntary
termination of employment with the Company at or after attaining age 60.
9. Withholding Tax. Employee may be subject to withholding
taxes as a result of the exercise or settlement of an Option or other payment in
respect of an Option. Unless the Committee permits otherwise, Employee shall pay
to the Company in cash promptly when the amount of such obligations become
determinable, all applicable federal, state, local and foreign withholding taxes
that the Committee in its discretion determines result from each such exercise,
settlement or payment. Unless the Committee otherwise determines and subject to
such rules and procedures as the Committee may establish, Employee may make an
election to have shares of Stock withheld by the Company or to tender any such
securities to the Company to pay the amount of tax that the Committee in its
discretion determines to be required to be withheld by the Company upon exercise
of an Option, subject to satisfying any applicable requirements for compliance
with Section 16(b) of the Exchange Act. Any shares or other securities so
withheld or tendered will be valued by the Committee as of the date they are
withheld or tendered; provided, that Stock shall be valued at Fair Market Value
on such date. Unless otherwise permitted by the Committee, the value of the
shares withheld or tendered may not exceed the required federal, state, local
and foreign withholding tax obligations as computed by the Company.
10. Governing Law. This Agreement shall be governed by the
laws of the State of New Jersey, without regard to conflict of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
LINENS 'N THINGS, INC.
By: ____________________________
Employee hereby accepts and agrees to be bound by all the
terms and conditions of this Agreement and the Plan.
_______________________________
Xxxxxx Xxxxxxx
Enclosures: Plan
- 4 -
34
Number of Shares of Stock Subject to Options: _________*
Exercise Price: $________**
Cumulative Percentage
Vesting Schedule*** of Options Exercisable
---------------- ----------------------
_____________ 25%
_____________ 50%
_____________ 75%
_____________ 100%
--------
* Insert number of shares equal to 2% of the Company's shares of common stock
outstanding immediately prior to the IPO Date.
** Insert price at which Company stock is offered to public on IPO Date.
*** Insert 1st through 4th anniversaries of IPO Date.
- 5 -
35
Exhibit B
LINENS 'N THINGS, INC.
DEFERRED STOCK GRANT AGREEMENT
THIS DEFERRED STOCK GRANT AGREEMENT (the "Agreement") is made
and entered into as of ___________* between Linens 'n Things, Inc., a Delaware
corporation (the "Company") and Xxxxxx Xxxxxxx (the "Employee") pursuant to the
terms and conditions of the Linens 'n Things , Inc. 1996 Incentive Compensation
Plan (the "Plan"). Capitalized terms not defined in this Agreement shall have
the meanings set forth in the Plan.
THE PARTIES AGREE AS FOLLOWS:
1. Award of Deferred Stock. Pursuant to the Plan, the Company
hereby awards to Employee ________**shares of deferred stock (the "Deferred
Stock") corresponding to __________**shares of Company common stock (the
"Stock"), subject to the terms and conditions set forth in this Agreement and
the Plan. A copy of the Plan has been delivered to the Employee. By signing
below, the Employee agrees to be bound by all the provisions of the Plan. The
shares of Deferred Stock constitute an unsecured promise of the Company to pay
the amounts contemplated herein, and Employee as a holder of any Deferred Stock
has only the rights of a general unsecured creditor of the Company.
2. Vesting Schedule. Subject to Sections 5 and 6 hereof, and
Sections 6(a) and 9 of the Plan, including the authority of the Committee in its
discretion to provide for accelerated vesting, the shares of Deferred Stock
shall vest in four equal installments on each of the first, second, third and
fourth anniversaries of July 1, 1996, but in no event prior to the IPO Date
(each such date and any other date on which shares of Deferred Stock vest
pursuant to this Agreement, the Plan or Committee action, a "Vesting Date").
--------
* To be dated as of the date on which shares of common stock of the Company are
first sold to the public pursuant to an initial public offering (the "IPO
Date").
** Insert number of shares equal to $1,000,000 divided by the price at which
Company common stock is offered to the public on the IPO Date; provided,
however, if the IPO Date occurs after December 31, 1996 at an enterprise
valuation in excess of $375,000,000 (based on the shares of Company common
stock outstanding immediately prior to the IPO Date and the price at which
Company common stock is offered to the public), the number of shares to be
inserted will be increased by the result obtained by dividing (i) the sum of
(A) 2% of such enterprise value in excess of $375,000,000 plus (B) $1,000,000
multiplied by the percentage increase of such enterprise value in excess of
$375,000,000, by (ii) the price at which Company common stock is offered to
the public.
- 1 -
36
3. Payment or Conversion of Deferred Shares.
(a) On the Vesting Date, the shares of Deferred Stock which vest
on such date shall be canceled and the Company shall deliver to Employee, except
to the extent Employee has otherwise elected in accordance with Committee
authorization pursuant to Section 7(c) of the Plan, as soon as practicable cash
or shares of Stock or a combination thereof (as determined by the Committee)
having a value equal to the product of (A) the Fair Market Value of a share of
Stock as of such date and (B) the number of shares of Stock corresponding to
such vested shares of Deferred Stock.
(b) For so long as Employee holds a share of Deferred Stock, at
the time any dividend is paid with respect to a share of Stock, the Company
shall pay to Employee in respect of each share of Deferred Stock an amount in
cash, in Stock, in other property or Awards, or in a combination thereof, in
each case having a value equal to the Fair Market Value of such dividend
(hereinafter "Dividend Equivalents"), subject to any deferral election by
Employee in accordance with Committee authorization pursuant to Section 7(c) of
the Plan and/or any determination by the Committee to subject such Dividend
Equivalent payment in respect of stock dividends, dividends in kind or
extraordinary dividends to the vesting provisions applicable to such share of
Deferred Stock.
4. Restrictions. Except to the extent otherwise determined by the
Committee, no shares of Deferred Stock shall be assignable or otherwise
transferable by Employee other than by will or by the laws of descent and
distribution and, unless otherwise provided by the Committee, during the life of
Employee any elections with respect to a share of Deferred Stock may be made
only by Employee or Employee's guardian or legal representative.
5. Termination of Employment.
(a) Except to the extent provided in Section 6 hereof or any
employment agreement between Employee and the Company, the provisions of this
Section 5 shall apply to the unvested shares of Deferred Stock upon Employee's
termination of employment with the Company and all subsidiaries of the Company
("Termination") for any reason.
(b) In the event of Employee's Termination for Cause, all unvested
shares of Deferred Stock shall be canceled on the date of such Termination.
(c) In the event of Employee's Termination by reason of death,
Termination without Cause or Constructive Termination Without Cause, all shares
of Deferred Stock shall become immediately vested.
(d) In the event of Employee's Termination by reason of Approved
Early Retirement or Normal Retirement, all shares of Deferred Stock shall
continue to vest as if Employee had remained employed by the Company.
- 2 -
37
(e) In the event of Employee's Termination for any reason other
than as provided in Section 5(b), 5(c), or 5(d), all unvested shares of Deferred
Stock shall be canceled.
6. Change in Control. In the event of a Change in Control, all
shares of Deferred Stock shall become immediately vested at the time of the
Change in Control, except to the extent of any waiver by Employee and subject to
the applicable restrictions set forth in Section 10(a) of the Plan. As soon as
practicable following the Change in Control, the Company shall pay Employee, in
cash, for each share of Deferred Stock the Change in Control Price.
7. Definitions. For purposes of this Agreement:
(a) "Approved Early Retirement" shall mean Employee's voluntary
termination of employment with the Company at or after attaining age 55 but
prior to attaining age 60, if such termination is approved in advance by the
Committee;
(b) "Cause" shall have the meaning given to such term in any
employment agreement between the Company and Employee in effect at the date of
Termination and, in the absence of any such agreement, shall mean (i) Employee's
willful and continued failure substantially to perform his duties (other than as
a result of total or partial incapacity due to physical or mental illness or by
reason of Employee's prior voluntary termination of employment), (ii) Employee's
dishonesty in the performance of his duties or (iii) Employee's conviction of a
felony under the laws of the United States or any state thereof;
(c) "Constructive Termination Without Cause" shall have the
meaning given to such term in any employment agreement between the Company and
Employee in effect at the date of Termination and, in the absence of any such
agreement, shall mean a termination of Employee's employment at his initiative
following the occurrence, without Employee's written consent, of one or more of
the following events (except as a result of a prior termination):
(i) a material change, adverse to Employee, in Employee's
positions, titles, offices, status, rank, nature of responsibilities, or
authority within the Company, or a removal of Employee from or any failure to
elect or re-elect or, as the case may be, nominate Employee to any such
positions or offices, including as a member of the Board;
(ii) an assignment of any duties to Employee which are
inconsistent with his status as President and Chief Executive Officer of the
Company;
(iii) a decrease in the Employee's annual base salary or
target annual incentive award opportunity below 55% of base salary;
(iv) any other failure by the Company to perform any
material obligation under, or breach by the Company of any material provision
of, any employment
- 3 -
38
agreement between the Company and Employee then in effect that is not cured
within 30 days;
(v) a relocation of the corporate offices of the Company
outside a 35-mile radius of Clifton, New Jersey; or
(vi) any failure to secure the agreement of any successor
corporation or other entity to the Company to fully assume the Company's
obligations under any employment agreement between the Company and Employee then
in effect.
(d) "Normal Retirement" shall mean Employee's voluntary
termination of employment with the Company at or after attaining age 60.
8. Withholding Tax. Employee may be subject to withholding taxes
as a result of delivery of shares of Stock or payment of cash upon payment or
settlement of the Deferred Stock or payments of Dividend Equivalents. Unless the
Committee permits otherwise, Employee shall pay to the Company in cash all
applicable federal, state, local and foreign withholding taxes that the Company
in its discretion determines result from such payments. Unless the Committee
otherwise determines and subject to such rules and procedures as the Company may
establish, Employee may make an election to have settlement of shares of
Deferred Stock withheld by the Company upon settlement thereof or to tender
shares of Stock to the Company to pay the amount of tax that the Company in its
discretion determines to be required so to be withheld by the Company, subject
to satisfying any applicable requirements for compliance with Section 16(b) of
the Exchange Act. Any shares of Stock or other securities so withheld or
tendered will be valued as of the date they are withheld or tendered; provided,
that Stock shall be valued at Fair Market Value on such date. Unless otherwise
permitted by the Committee, the value of shares withheld or tendered may not
exceed the required federal, state, local and foreign withholding tax
obligations as computed by the Company.
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39
9. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey, without regard to conflict of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
LINENS 'N THINGS, INC.
By:___________________________
Employee hereby accepts and agrees to be bound by all of the terms
and conditions of this Agreement and the Plan.
_____________________________
Xxxxxx Xxxxxxx
Enclosures: Plan
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