Executive Life Program
Collateral Assignment Split Dollar Agreement
This Split Dollar Agreement is entered into as of December 20, 1999, by and
between Norman Axelrod, (the "Employee")(hereinafter, the Employee or this trust
shall be referred to as the "Owner" when referred to in that capacity) and
Linens 'n Things, Inc., a Delaware corporation (the "Employer").
Recitals
Whereas, Employee is eligible for and wishes to participate in the
Employer's Executive Life Program (the "Program"); and
Whereas, Owner will be the sole owner and possessor of the Policy and
assign an interest in the Policy's death benefit and cash value to the Employer
as collateral to secure repayment of Employer's premium payments with respect to
the Policy; and
Whereas, it is the intent of the Employer and Owner to define the
limited extent of the Employer's security interest in the Policy;
Now, therefore, Employer and Owner mutually agree that:
(1) Interests in the Policy Cash Values
The Policy, which is the subject of this Split Dollar Agreement, is a variable
universal life policy issued by Nationwide Life and Annuity Company (the
"Insurer") Policy Number N056077170, on the life of the Employee. The Employer's
interest in the cash value of the Policy (the "Employer's Interest") shall be
equal to the total amount of the premium payments made on the Policy (including
any unused amounts paid to the Insurer as pre-paid premiums triggered by a
Change in Control Event as defined below). The Owner's interest in the cash
value of the Policy (the "Owner's Interest") shall be equal to the remaining
cash value of the Policy, if any, in excess of the Employer's Interest, reduced
by the amount of any distributions from the cash value of the Policy made to the
Owner as permitted by this Agreement.
(2) Premium Payments
On or before the due date of each premium payment on the Policies, Employer will
pay the entire premium due on the Policy. The Employer will make premium
payments as they are due until the termination of service of the Employee with
the Employer, or in the event the Employee becomes "disabled" as defined under
the Employer-maintained long term disability program, until the Employee's age
55, provided, however, that upon the happening of a Change in Control Event, the
Employer shall pay to the Insurer, in the form of pre-paid premiums, an amount
equal to the present value of the remaining premium payments due on the Policy
until the Employee attains age 55, such amount to be determined by the Insurer.
The Employee shall have imputed income each year in an amount equal to the
annual cost of current death benefit protection on the life of the Employee,
measured by the lower of (a) the PS 58 rate, as set forth in Revenue Ruling
55-747 (or the corresponding applicable provision of any future Revenue Ruling),
or (b) the Insurer's current published premium rate for annually renewable term
insurance for standard risks.
(3) Death Benefit Amounts
Upon the death of the Employee, and subject to the minimum death benefits
provided to the Owner as described below, the death benefit payable to the
Employer (or the Employer's designated beneficiaries) under this Agreement shall
be equal to the Employer's Interest in the Policy as defined in Section 1 above,
accumulated at interest at a rate of 3.4% per annum, except that, in the event
of Employee's death after a Change in Control as herein defined, the death
benefit payable to the Employer under this paragraph shall be limited to the
Employer's Interest in the Policy as defined in Section 1 above.
Upon the death of the Employee, the death benefit payable to the Owner (or the
Owner's designated beneficiaries) shall be equal to the excess of the total
death proceeds under the Policy less the amount payable to the Employer (or the
Employer's designated beneficiaries) as defined above, except that the minimum
death benefit payable to the Owner shall be twenty-five thousand dollars ($
25,000).
Owner understands that sufficiency of cash value in the Policy to provide
expected amounts of death benefit under this Agreement may vary as a result of
Policy performance and duration of premium payments and this is in no event
guaranteed by the Employer or the Insurer. The Employer makes no representation
or warranty as to the merits or risks of the investment performance of the
Policy.
(4) Ownership and Rights in the Policy
The Policy will be owned exclusively by the Owner or the Owner's Assignee (for
purposes of this Agreement, Owner's Assignee shall be included in the definition
of Owner). Any rights in the Policy other than those specifically mentioned in
this Agreement must be exercised with the written consent of both the Owner and
the Employer.
Employer's Rights. While this Agreement is in effect, the Employer has a
security interest in the Policy limited exclusively to: (a) that portion of the
cash value of the Policy equal to the Employer's Interest in the Policy; or (b)
the death benefit payable to the Employer as set forth in paragraph 3, above. In
addition, prior to the occurrence of a Change in Control Event, the Employer
shall have the right to make any investment choices permitted by the Policy with
respect to the cash value of the Policy, and Owner shall agree to waive this
right prior to the occurrence of a Change in Control Event as long as this
Agreement remains in force in accordance with the established procedures of the
Insurer. After a Change in Control Event, the Owner shall have the right to make
any investment choices permitted by the Policy with respect to the cash value of
the Policy.
Owner's Rights. The Owner's rights include the right to irrevocably assign any
of his or its rights under the Policy, with the consent of the Employer and the
Insurer and to select and change beneficiaries to receive Owner's death
benefits. The Owner will not be permitted to borrow against, or partially or
totally surrender the Policy as long as the Collateral Assignment remains in
force. The Owner shall not be permitted to receive a distribution from the cash
value of the Policy prior to the termination of the Employee's services with the
Employer, at which time the Owner may request an annual distribution from the
Owner's Interest in the cash value of the Policy, commencing on the first day of
the month coincident with or next following the date the Employee terminates
service with the Employer. The distribution shall be made annually and shall be
limited to an amount of five hundred and thirty thousand dollars ($530,000) per
year and shall continue for the remainder of the Employee's lifetime, or until
the Owner's Interest is exhausted.
(5) Assignment of Policy to Secure Employer's Payments
To secure Employer's Interest in the Policy under this Agreement, Owner will
collaterally assign the Policy to the Employer by signing the separate
Collateral Assignment. The Collateral Assignment cannot be altered without the
Employer's, Owner's, and Insurer's consent.
(6) Termination of Split Dollar Agreement
This Split Dollar Agreement, and all obligations of the Employer to pay premiums
under it, will terminate upon the earliest to occur of the following:
a) Death of the Employee;
b) Written agreement of both the Owner and the Employer to terminate this
Agreement;
c) Termination of Employee's employment with the Employer for Cause;
d) Voluntary termination by the Employee of Employee's service with the Employer
unless;
(i) Employer fails to renew Owner's Employment Agreement prior to the
Employee attaining age 60;
(ii) Termination of service is due to any "Constructive Termination
Without Cause" as defined in the Employment Agreement; or
(iii) Employee terminates service with the Employer under an "Approved Early
Retirement" or "Normal Retirement" as defined in the Employment Agreement;
e) Failure of the Employee or Owner to complete all necessary requirements for
the Insurer to issue a policy, including the waiver of investment choices;
and,
f) At the sole discretion of the Employer, upon the Employee entering into
Competition with the Employer during the "Restriction Period" as defined
in the Employment Agreement.
Upon termination of this Agreement, as set forth above, the Employer shall
receive the Employer's Interest in the Policy as soon as is practical, but in no
event shall receipt be later than sixty (60) days from the earliest of the dates
listed above. In the event of termination of this Agreement for reason other
than the death of the Employee, the Employer's Interest in the Policy and under
this Agreement shall be satisfied either directly from the cash value of the
Policy or by direct payment by the Owner, at the discretion of the Owner. In
this event, the recovery of the Employer's Interest shall be limited to the cash
value of the Policy at that time. In the event of Termination of this Agreement
by reason of the death of the Employee, the Employer's Interest in the Policy
and under this Agreement shall be satisfied through direct payment from the
Insurer from the Policy proceeds.
(7) Payment of Proceeds or Cash Value to Employer
Upon receipt of the Employer's Interest in the Policy, as provided in paragraph
1 above, whether from the Policy or from the Owner, the Employer will release
the Collateral Assignment. Upon satisfaction of the Employer's Interest in the
Policy, the Owner shall have unrestricted ownership to the Policy.
Upon termination of this Split Dollar Agreement by reason of the death of the
Insured, the Insurer in satisfaction of the Owner's obligations, will issue a
check directly to the Employer as collateral assignee in an amount equal to the
Employer's Interest in the Policy.
(8) Miscellaneous
Not an Employment Agreement. This Split Dollar Agreement does not in any way
constitute an employment agreement, and the Employer reserves the right to
terminate Employee's employment to the same extent as though the Split Dollar
Agreement did not exist. This Split Dollar Agreement may be amended at any time
by written agreement signed on behalf of the Employer and by the Owner.
Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the Employer and its successors and assigns, and to the Employee and the
Employee's successors, assigns, heirs, executor or personal representative, and
beneficiaries.
Certain Defined Terms. For purposes of this Agreement, the following terms have
the meanings set forth below:
"Approved Early Retirement" has the meaning set forth in Section 10(f) of
the Employment Agreement.
"Cause" has the meaning set forth in Section 10(b) of the Employment
Agreement.
"Change in Control" has the meaning set forth in Section 10(c) of the
Employment Agreement.
"Competition" has the meaning set forth in Section 12(a) of the Employment
Agreement.
"Constructive Termination Without Cause" has the meaning set forth in
Section 10(c) of the Employment Agreement.
"Employment Agreement" means the Employment Agreement dated October 16,
1996 between Employee and Employer.
"Normal Retirement" has the meaning set forth in Section 10(f) of the
Employment Agreement.
"Restriction Period" has the meaning set forth in Section 12(b) of the
Employment Agreement.
"Termination Without Cause" has the meaning set forth in Section 10(c) of
the Employment Agreement.
Notices. Any notice, consent or demand required or permitted under this
Agreement shall be made in writing and shall be signed by the party making the
notice, consent, or demand. Such notice shall be sent by United States certified
mail, postage pre-paid and shall be sent to the other party's last known address
as shown on the records of the Employer. The date of such mailing shall be
deemed to be the date of such notice, consent or demand.
Entire Agreement; Amendment of Agreement. This Agreement, including only those
provisions of the Employment Agreement specifically referred to above, evidences
the entire agreement of the parties with respect the subject matter hereof and
supercedes all prior discussions or understandings. This Agreement may be
altered, amended or modified, including the addition of any additional policy
provisions, only by a written agreement signed by the Employer and the Owner. It
shall be the responsibility of the Employer to notify the Insurer of any
amendments or changes to this Agreement.
Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the State of New Jersey.
(9) Named Fiduciary
The Employer is designated as the Named Fiduciary of this Agreement for purposes
of the Employee Retirement Income Security Act of 1974, as amended. The business
address and telephone number of the Named Fiduciary are as follows:
Linens 'n Things, Inc.
c/o Corporate Secretary
6 Brighton Rd.
Clifton, NJ 07015
The Named Fiduciary shall have the authority to control and manage the operation
and administration of the Executive Life Program, of which this Agreement forms
a part thereof. The Named Fiduciary is empowered to construe and interpret the
terms of the Program and this Agreement, to supply omissions consistent with the
intent of the Program and the Agreement, and to make all determinations and
resolve all disputes regarding eligibility for and the amount of, benefits under
the Program and Agreement, consistent with the terms of the Policy. The Named
Fiduciary may delegate some or all of its duties and responsibilities to another
person or entity (e.g. a committee designated by the Employer), including
persons who are not Named Fiduciaries. Any decisions and determinations made by
the Named Fiduciary (or its delegate) shall be conclusive and binding on all
parties. The Named Fiduciary shall have the sole discretion of carrying out its
responsibilities. Any person or entity claiming a benefit, requesting an
interpretation or ruling under the Plan, or requesting information under the
Plan (hereinafter referred to as "Claimant") shall present the request in
writing to the Employer, which shall respond in writing as soon as practicable.
If the claim or request is denied, the written notice of denial shall state the
reason for denial, with specific reference to the provisions on which the denial
is based, a description of any additional material or information required and
an explanation of why it is necessary, and an explanation of the program's
claims review procedure.
(10) Claims Procedures
Any person or entity claiming a benefit, requesting an interpretation or ruling
under the Plan, or requesting information under the Plan (hereinafter referred
to as "Claimant") shall present the request in writing to the Employer, which
shall respond in writing as soon as practicable. If the claim or request is
denied, the written notice of denial shall state the reason for denial, with
specific reference to the provisions on which the denial is based, a description
of any additional material or information required and an explanation of why it
is necessary, and an explanation of the program's claims review procedure.
Review of Claim. Any Claimant whose claim or request is denied or who has not
received a response within sixty (60) days may request a review by notice given
in writing to the Employer. Such request must be made within sixty (60) days
after receipt by the Claimant of the written notice of denial, or in the event
Claimant has not received a response sixty (60) days after receipt by the
Employer of Claimant's claim or request. The claim or request shall be reviewed
by the Employer which may, but shall not be required to, grant the Claimant a
hearing. On review, the Claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
Final Decision. The decision on review shall normally be made within thirty (30)
days after the Employer's receipt of Claimant's claim or request. If an
extension of time is required for a hearing or other special circumstances, the
Claimant shall be notified and the time limit shall be sixty (60) days. The
decision shall be in writing and shall state the reason and the relevant
provisions. All decisions on review shall be final and bind all parties
concerned.
IN WITNESS WHEREOF, the Employer and the Owner or the Owner's Assignee have
signed this Split Dollar Agreement, which is effective as of the effective date
of the Policy described herein.
BRIAN SILVA
__________________________________________
Officer of Corporation
Title: Sr. V.P. Human Resources &
Corp. Secretary
________________________________
Witness NORMAN AXELROD
__________________________________________
Owner
Date: 12/20/99