LINENS 'N THINGS, INC.
Employment Agreement for Norman Axelrod
Effective as of October 12, 2000
LINENS 'N THINGS, INC.
Employment Agreement for Norman Axelrod
Page
1. Definitions................................................................................ 1
2. Term of Employment......................................................................... 2
3. Position, Duties and Responsibilities...................................................... 3
4. Base Salary................................................................................ 4
5. Annual Incentive Awards.................................................................... 4
6. Long-Term Stock Incentive Programs......................................................... 4
7. Employee Benefit Programs.................................................................. 5
8. Supplemental Executive Retirement Plan; Split Dollar Agreement............................. 6
9. Disability................................................................................. 6
10. Reimbursement of Business and Other Expenses; Perquisites.................................. 7
11. Termination of Employment.................................................................. 7
12. Forfeiture Provisions...................................................................... 18
13. Confidentiality; Cooperation with Regard to Litigation; Non-Disparagement
Return of Company Materials................................................................ 20
14. Non-competition............................................................................ 21
15. Non-solicitation of Employees.............................................................. 22
16. Remedies................................................................................... 22
17. Resolution of Disputes..................................................................... 23
18. Indemnification............................................................................ 23
19. Excise Tax Gross-Up........................................................................ 24
20. Effect of Agreement on Other Benefits...................................................... 26
21. Assignability; Binding Nature.............................................................. 26
22. Representation............................................................................. 26
23. Entire Agreement........................................................................... 26
24. Amendment or Waiver........................................................................ 27
25. Severability............................................................................... 27
26. Survivorship............................................................................... 27
27. Beneficiaries/References................................................................... 27
28. Governing Law/Jurisdiction................................................................. 27
29. Notices.................................................................................... 28
30. Headings................................................................................... 28
31. Counterparts............................................................................... 28
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 12th day of October, 2000
by and among Linens 'n Things, Inc., a Delaware corporation (together with its
successors and assigns, the "Company"), and Norman Axelrod (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to continue to employ Executive pursuant
to an agreement embodying the terms of such employment (this "Agreement") and
Executive desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of 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 Executive (individually a
"Party" and together the "Parties") agree as follows:
1 . Definitions.
(a) "Award" shall have the meaning set forth in Section
12 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
11(b) below.
(e) "Change in Control" shall have the meaning set forth
in Section 11(c) below.
(f) "Committee" shall have the meaning set forth in
Section 4 below.
(g) "Competition" shall have the meaning set forth in
Section 14(a) below.
(h) "Confidential Information" shall have the meaning set
forth in Section 13(c) below.
(i) "Constructive Termination Without Cause" shall have
the meaning set forth in Section 11(c) below.
(j) "Effective Date" shall have the meaning set forth in
Section 2(a) below.
(k) "Fair Market Value" shall have the meaning set forth
in Section 6(b) below.
(l) "Forfeiture Event" shall have the meaning set forth
in Section 12 below.
(m) "Original Term of Employment" shall have the meaning
set forth in Section 2(a) below.
(n) "Renewal Term" shall have the meaning set forth in
Section 2(a) below.
(o) "Restriction Period" shall have the meaning set forth
in Section 14(b) below.
(p) "Retirement" shall have the meaning set forth in
Section 11(f) below.
(q) "Target Performance" shall have the meaning set forth
in Section 11(a) below.
(r) "Severance Period" shall have the meaning set forth
in Section 11(c)(ii) below, except as provided
otherwise in Section 11(e) below.
(s) "Subsidiary" shall have the meaning set forth in
Section 13(d) below.
(t) "Term of Employment" shall have the meaning set forth
in Section 2(a) below.
2. Term of Employment.
(a) The term of Executive's employment under this Agreement
shall commence immediately upon the date of this agreement (the "Effective
Date") and end on December 31, 2004 (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") so
long as (i) Executive delivers a written renewal request to the Company no less
than 180 days prior to the expiration of the Original Term of Employment or any
Renewal Term, and (ii) the Company does not, prior to 150 days before such
expiration date, deliver a notification of non-renewal to Executive stating that
the Company 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.
(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 Executive's 60th birthday, such non-renewal shall be
treated as a "Constructive Termination Without Cause" pursuant to Section 11(c).
(c) In the event that this Agreement is not renewed because
Executive has given the 180-day notice prescribed in Section 2(a) on or before
the expiration of the Original Term of Employment or any Renewal Term, such
non-renewal shall be treated as a Termination for Cause for the purposes of
Sections 11(b)(iii) and 14(b) but not for purposes of Section 12 and Executive
shall have the same entitlements as provided in Section 11(b)(iii) below.
(d) 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 Executive, the Parties
shall meet to discuss this Agreement and may agree in writing to modify any of
the terms of this Agreement.
3. Position, Duties and Responsibilities.
(a) Generally. Executive shall serve as President, Chief
Executive Officer and Chairman of the Board of Directors (the "Board") of the
Company. For so long as he is serving on the Board, Executive agrees to serve as
a member of any committee of the Board to which he is elected. During the Term
of Employment the Board will nominate Executive for election to the Board for
terms coterminous with the Term of Employment. 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 chairman,
president and chief executive officer 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 Chairman of the Board, President and Chief Executive Officer
and for the Company's businesses, provided that Executive may relinquish any or
all of the positions of Chairman of the Board, President and Chief Executive
Officer at any time Executive chooses to do so, provided further that in the
event that Executive has relinquished all such officer positions with the
Company, Executive agrees to remain in the Company's employ as an employee in an
appropriate non-officer capacity until he reaches 60 years of age, provided that
such position as a non-officer shall not prohibit Executive from rendering
employment or other services to another entity that is not in Competition (as
defined in Section 14 below) with the Company and provided that while the
Executive is in such non-officer position the Company shall have no right to
terminate this Agreement (other than for "Cause") or to fail to renew the Term
of Employment for any period prior to Executive reaching age 60 (and any Company
attempt to so terminate or failure to renew prior to age 60 will be treated as
if it was a Termination without Cause at a time during the Term of Employment
when Executive was earning his greatest salary, annual incentive compensation
and long-term incentive compensation for purposes of Section 11(c). In such
event of Executive relinquishing all such officer positions, Executive shall be
entitled to continue to participate in the Company's insured welfare benefit
plans and programs (but not the SERP (as defined herein) and not the Split
Dollar Agreement (as defined herein)) as if he had remained employed by the
Company, provided that in the event Executive violates any of the provisions of
Section 13, 14 or 15 (subject to the cure periods expressly set forth therein),
all such rights shall immediately terminate effective as of the date of written
notice to Executive detailing such violation and provided that in the event
Executive undertakes full-time employment services to another employer such
benefit participation will cease.
(b) Other Activities. Anything herein to the contrary
notwithstanding, nothing in this Agreement shall preclude 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 principal corporate offices of the Company.
(d) Rank of Executive Within Company. As Chairman of the
Board, President and Chief Executive Officer of the Company, Executive shall be
the Company's highest-ranking executive.
4. Base Salary.
Executive shall be paid an annualized salary, payable in
accordance with the regular payroll practices of the Company, of not less than
$735,000, subject to review for increase at the discretion of the Compensation
Committee (the "Committee") of the Board ("Base Salary") provided that in the
event that Executive relinquishes all of his officer positions including
Chairman of the Board, President and Chief Executive Officer and continues his
employment with the Company as a non-officer employee, Executive shall receive
(in lieu of his Base Salary, annual incentive compensation and long-term
incentive compensation) remuneration in an amount and form equal to the amount
and form of remuneration then paid to the Company's non-employee directors, with
cash amounts paid in accordance with the Company's normal payroll practices.
5. Annual Incentive Awards.
Executive shall participate in the Company's annual incentive
compensation plan with a target annual incentive award opportunity of no less
than 70% of Base Salary and a maximum annual incentive award opportunity of not
less than 140% of Base Salary. Payment of annual incentive awards shall be made
no later than 75 days after the Company's fiscal year-end unless Executive
agrees otherwise.
6. Long-Term Incentive Programs.
(a) General. Executive shall be eligible to participate in the
Company's long-term incentive compensation programs including cash and/or stock
grants with or without restrictions on a deferred or current basis with a target
award opportunity of not less than 35% of Base Salary, and stock option grants.
(b) Grant of Deferred Stock. On the Effective Date, Executive
shall be granted shares of deferred stock equal to $1,000,000 at the Fair Market
Value on the Effective Date, with the initial 25% of such deferred stock to vest
and to be distributed as of the Effective Date and the remaining 75% of the
deferred stock to vest in 25% increments on the first, second and third
anniversaries of the Effective Date. Unless otherwise determined by the
Committee, for purposes of this Agreement "Fair Market Value" means as of any
given date, the closing sale price per share of the Company's common stock
reported on a consolidated basis for securities listed on the principal stock
exchange or market on which the common stock is traded on the date as of which
such value is being determined or, if there is no sale on that day, then on the
last previous day on which a sale was reported. The award under this Section
6(b) shall be entitled to the benefit of any applicable deferred compensation
arrangement then in effect by the Company. On each vesting date for such
deferred stock award under this Section 6(b), the Company shall deliver the
number of shares so vested less an amount equal to the applicable taxes payable
by Executive in connection with the vesting of such shares; for this purpose,
the number of shares to be withheld by the Company to pay such taxes shall be
determined at the Fair Market Value of the withheld shares as of the particular
vesting date.
7. Employee Benefit Programs.
(a) General Benefits. During the Term of Employment as
President and Chief Executive Officer, 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 limitation, health, medical, dental, long-term
disability, travel accident and life insurance plans. As a non-officer employee,
the Executive shall be entitled to participate in the Company's insured welfare
benefit plans and programs (but not the SERP (as defined herein) or the Split
Dollar Agreement (as defined herein)).
(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 stock 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."
Except as otherwise provided under Section 11, in the event of
Executive's termination of employment with the Company or as otherwise
determined by the Committee in the event of Executive's hardship, 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 distribute to the
Executive any shares of Company common stock credited to the Executive's
deferred accounts and pay to the Executive cash equal to the value of any other
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 such 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 (subject to Section 12);
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. Supplemental Executive Retirement Plan; Split Dollar Agreement. The
Company hereby ratifies and confirms the terms of Executive's Supplemental
Executive Retirement Plan effective as of July 1, 1999 ("SERP"), and Executive's
Split Dollar Agreement with the Company dated as of December 20, 1999 ("Split
Dollar Agreement"), which are incorporated herein by reference. The Company
hereby agrees to satisfy its obligations to Executive under the SERP and the
Split Dollar Agreement.
9. Disability.
(a) During the Term of Employment, as well as during the
Severance Period, Executive shall be entitled to disability coverage as
described in this Section 9(a). In the event Executive becomes disabled, as that
term is defined under the Company's Long-Term Disability Plan, 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) Executive's attainment of age 65 or (B) Executive's commencement of
retirement benefits from the Company in accordance with Section 11(f) below. If
(i) 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 Company's request pursuant to the
foregoing, he shall be treated as if he voluntarily terminated his employment
pursuant to Section 11(d) as of the date Executive ceases to be disabled. If
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 11(c) as of the date Executive ceases to be
disabled.
(b) Executive shall be entitled to a pro rata annual incentive
award for the year in which the Commencement Date occurs based on 70% 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. Executive shall not
be entitled to any annual incentive award with respect to the period following
the Commencement Date. If Executive recommences his positions in accordance with
Section 9(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 Executive is receiving disability
benefits pursuant to Section 9(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
Executive shall not be entitled to receive any annual salary increases or any
new long-term incentive plan grants following the Commencement Date.
10. Reimbursement of Business and Other Expenses: Perquisites.
(a) 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 such business expenses incurred in
connection therewith, subject to documentation in accordance with the Company's
policy. During the Term of Employment, the Company shall provide Executive with
personal financial and tax planning in accordance with terms adopted by the
Company.
(b) The Company shall pay all reasonable legal expenses up to
$27,500 incurred by Executive in connection with the negotiation of this
Agreement.
(c) Upon commencement of Executive's term as a non-officer
employee of the Company, Executive shall be entitled to the use of an
appropriate executive office at the Company's principal executive offices and a
full-time secretary. Such entitlement shall cease in the event the Executive
undertakes full-time employment services to another employer.
11. Termination of Employment.
(a) Termination Due to Death. In the event 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 Executive's death;
(ii) pro rata annual incentive award for the year
in which Executive's death occurs assuming
that Executive would have received an award
equal to 70% 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
restricted stock or 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 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 lump sum in cash
or stock promptly (but in no event later
than 15 days) after his death. "Target
Performance" for purposes of this Agreement
shall mean (i) the actual performance for
each completed year under each applicable
award, plus (ii) the "target" performance
for the then current year under each
applicable award;
(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
Executive's death;
(vii) settlement of all deferred compensation
arrangements in accordance with 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 (including
without limitation the benefits payable
under the SERP and the Split Dollar
Agreement).
(b) Termination by the Company for Cause.
(i) "Cause" shall mean:
(A) Executive's willful and material
breach of Sections 13, 14 or 15 of
this Agreement;
(B) Executive is convicted of a felony
involving moral turpitude; or
(C) 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. 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.
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, Executive shall then be
entitled to a hearing before the Committee
of the Board at which Executive is entitled
to appear. Such hearing shall be held within
25 days of such notice to 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,
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
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 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 Executive's
termination of employment;
(C) settlement of all deferred
compensation arrangements in
accordance with 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 (including without
limitation the benefits payable
under the SERP and the Split Dollar
Agreement).
(c) Termination Without Cause or Constructive Termination
Without Cause Prior to a Change in Control. In the event 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
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) Executive shall be entitled to and his sole
remedies under this Agreement shall be:
(i) Base Salary through the date of termination
of Executive's employment, which shall be
paid in a single lump sum not later than 15
days following Executive's termination of
employment;
(ii) Base Salary, at the annualized rate in
effect on the date of termination of
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 30
months following such termination (the
"Severance Period");
(iii) pro rata annual incentive award for the year
in which termination occurs equal to 70% of
Base Salary (determined in accordance with
Section 11(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 70% of Base Salary
(determined in accordance with Section
11(c)(ii) above) multiplied by 2.5, payable
in equal monthly payments over the Severance
Period;
(v) elimination of all restrictions on any
restricted stock or deferred stock awards
outstanding at the time of termination of
employment;
(vi) any outstanding stock options which are
unvested shall vest and Executive shall have
the right to exercise any vested stock
options during the Severance Period in the
case of options granted prior to the
Effective Date and in the case of options
granted after the Effective Date, for 30
months 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 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
Executive's termination of employment;
(ix) settlement of all deferred compensation
arrangements in accordance with Executive's
duly executed Deferral Election Forms
(unless Executive has previously and
appropriately elected not to have such
settlement upon such a termination);
(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 the termination of his
employment until the earlier of:
(A) the date upon which Executive
attains 65 years of age, provided
that the Company shall bear the cost
of such insurance only during the 30
months following the date of
termination of the Executive's
employment; thereafter Executive
shall reimburse the Company for the
cost of such insurance; 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 Executive is precluded
from continuing his participation in
any employee benefit plan or program
as provided in this clause (x) of
this Section 11(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 (x)
of this Section 11(c), (2) such cost
shall be deemed to be the lowest
reasonable cost that would be
incurred by Executive in obtaining
such benefit himself on an
individual basis, and (3) payment of
such amounts shall be made quarterly
in advance;
(xi) 30 months of additional age and service
credit for purposes of determining the
amount Executive's accrued benefits under
the SERP maintained by the Company, and
immediate vesting of any such benefits;
(xii) a lump sum amount equal to the difference
(determined on an actuarial basis) in the
benefit Executive would have received under
the Split Dollar Agreement then in effect if
the Company had continued to make the
required premium payments under such Split
Dollar Agreement for the Severance Period;
and
(xiii) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company (including
without limitation the benefits payable
under the SERP and the Split Dollar
Agreement).
A termination without "Cause" shall mean Executive's
employment is terminated by the Company for any reason other than Cause (as
defined in Section 11(b)) or due to death.
"Constructive Termination Without Cause" shall mean a
termination of Executive's employment at his initiative as provided in this
Section 11(c) following the occurrence, without 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 Chairman of the
Board, 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 70% 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 principal
corporate offices of the Company
outside a 35-mile radius of Clifton,
New Jersey; or
(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 30% or more
of the combined voting power of the
Company's or such subsidiary's then
outstanding securities;
(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;
(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 reasonably and in good
faith 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 14(d) and 15(d)
thereof, including "group" as
defined in Section 15(d) thereof.
(d) Voluntary Termination. In the event of a termination of
employment by 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, a Retirement pursuant to Section 11(f) below, or a
voluntary termination following a Change in Control within the 60-day period
described in Section 11(e) below, Executive shall have the same entitlements as
provided in Section 11(b)(iii) above for a termination for Cause, provided that
at the Company's election, furnished in writing to Executive within 15 days
following such notice of termination, the Company shall in addition pay the
Executive 170% of his Base Salary for a period of 12 months following such
termination in exchange for Executive not engaging in Competition with the
Company or any Subsidiary as set forth in Section 14(a) below. Notwithstanding
any implication to the contrary, 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, Retirement, or voluntary
termination following a Change in Control within the 60-day period described in
Section 11(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 170% of his
Base Salary in accordance with this Section 11(d), the Company shall waive any
and all claims it may have against Executive for any breach of this Agreement
relating to his voluntary termination of employment unless Executive is found by
a court of competent jurisdiction not to be in compliance with Section 14(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 Executive in violation of this Agreement.
(e) Termination Without Cause; Constructive Termination
Without Cause or Voluntary Termination Following a Change in Control. In the
event 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 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 Executive elects within the 60-day period commencing six
months following a Change in Control to terminate his employment for any reason,
Executive shall be entitled to and his sole remedies under this Agreement shall
be:
(i) Base Salary through the date of termination
of Executive's employment, which shall be
paid in a single lump sum not later than 15
days following Executive's termination of
employment;
(ii) an amount equal to 2.99 times Executive's
Base Salary, at the annualized rate in
effect on the date of termination of
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 Executive's termination of
employment;
(iii) pro rata annual incentive award for the year
in which termination occurs assuming that
Executive would have received an award equal
to 70% of Base Salary (determined in
accordance with Section 11(e)(ii) above) for
such year, payable in a cash lump sum
promptly (but in no event later than 15
days) following Executive's termination of
employment;
(iv) an amount equal to 70% of such Base Salary
(determined in accordance with Section
11(e)(ii) above) multiplied by 2.99, payable
in a cash lump sum promptly (but in no event
later than 15 days) following Executive's
termination of employment;
(v) elimination of all restrictions on any
restricted stock or deferred stock awards
outstanding at the time of termination of
employment;
(vi) immediate vesting of all outstanding stock
options and the right to exercise vested
stock options granted prior to the Effective
Date during the Severance Period or for the
remainder of the exercise period, if less;
options granted after the Effective Date
shall be exercisable for the remainder of
the exercise period;
(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 lump sum in cash
or stock promptly (but in no event later
than 15 days) following 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
Executive's termination of employment;
(ix) settlement of all deferred compensation
arrangements in accordance with Executive's
duly executed Deferral Election Forms
(unless Executive has previously and
appropriately elected not to have such
settlement upon such a termination;
(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 date upon which Executive
attains 65 years of age, provided
that the Company shall bear the cost
of such insurance until Executive's
60th birthday only; thereafter
Executive shall reimburse the
Company for the cost of such
insurance; 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 Executive is precluded
from continuing his participation in
any employee benefit plan or program
as provided in this clause (x) of
this Section 11(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 11(e), (2) such cost
shall be deemed to be the lowest
reasonable cost that would be
incurred by Executive in obtaining
such benefit himself on an
individual basis, and (3) payment of
such amounts shall be made quarterly
in advance; and
(xi) 36 months additional age and service credit
for purposes of determining the amount
Executive's accrued benefits under the SERP
maintained by the Company, and immediate
vesting of any such benefits;
(xii) a lump sum amount equal to the difference
(determined on an actuarial basis) in the
benefit Executive would have received under
the Split Dollar Agreement then in effect if
the Company had continued to make the
required premium payments under such Split
Dollar Agreement for the Severance Period;
and
(xiii) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company (including
without limitation the benefits payable
under the SERP and the Split Dollar
Agreement).
For purposes of any termination pursuant to this Section 11(e), the term
"Severance Period" shall mean the period of 36 months following the termination
of Executive's employment.
(f) Retirement. Upon Executive's Retirement (as defined
below), Executive shall be entitled to and his sole remedies under this
Agreement shall be:
(i) Base Salary through the date of termination
of Executive's employment, which shall be
paid in a single lump sum not later than 15
days following 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 Executive remained
employed by the Company) of any restricted
stock or deferred stock awards outstanding
at the time of his termination of
employment;
(iv) continued vesting (as if Executive remained
employed by the Company) of all outstanding
stock options granted after the Effective
Date and the right to exercise such stock
options for the remainder of the exercise
period; and continued vesting of all
outstanding options granted prior to the
Effective Date 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 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 applicable performance period(s),
payable in lump sum in cash or the Company's
common stock (with or without restrictions)
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
Executive's termination of employment;
(vii) settlement of all deferred compensation
arrangements in accordance with Executive's
duly executed Deferral Election Forms
(unless Executive has previously and
appropriately elected not to have such
settlement at such time;
(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 date upon which Executive
attains 65 years of age, provided
that the Company shall bear the cost
of such insurance until Executive's
60th birthday only; thereafter
Executive shall reimburse the
Company for the cost of such
insurance; 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-benefit, basis); provided
that (1) if Executive is precluded
from continuing his participation in
any employee benefit plan or program
as provided in this clause (viii) of
this Section 11(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 11(f), (2)
such cost shall be deemed to be the
lowest cost that would be incurred
by Executive in obtaining such
benefit himself on an individual
basis, and (3) payment of such
amounts shall be made quarterly in
advance;
(ix) other or additional benefits then due or
earned in accordance with applicable plans
and programs of the Company (including
without limitation the benefits payable
under the SERP and the Split Dollar
Agreement).
For purposes of this Agreement, "Retirement" shall mean Executive's voluntary
termination of employment with the Company at the earlier of (i) attaining age
55 and 15 years of service with the Company (which shall include all of
Executive's years of service with Melville Corporation), and (ii) attaining age
60.
(g) No Mitigation; No Offset. In the event of any termination
of employment, Executive shall be under no obligation to seek other employment;
amounts due 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 11
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 Executive's
termination of employment, payment made and performance by the Company in
accordance with this Section 11 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 Executive's rights under this Agreement.
Other than payment and performance under this Section 11, the Company and its
directors, officers, employees, subsidiaries, affiliates, stockholders,
successors, assigns, agents and representatives shall have no further obligation
or liability to Executive or any other person under this Agreement in the event
of Executive's termination of employment. The Company shall have the right to
condition the payment of any severance or other amounts pursuant to this Section
11 upon the delivery by Executive to the Company of a release in the form
satisfactory to the Company releasing any and all claims Executive may have
against the Company and its directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and representatives
arising out of this Agreement.
12. Forfeiture Provisions.
(a) Forfeiture of Stock Options and Other Awards and Gains
Realized Upon Prior Option Exercises or Award Settlements. Unless otherwise
determined by the Committee, upon a termination of Executive's employment for
Cause, the Executive's engaging in competition with the Company or any
Subsidiary after a voluntary termination of employment pursuant to Section
11(d), or Executive's violation of any of the other restrictive covenants
contained in Section 13, 14 or 15 (each a "Forfeiture Event") during the Term of
Employment and for 24 months thereafter, all of the following forfeitures will
result:
(i) The unexercised portion of any stock option,
whether or not vested, and any other Award not
then settled (except for an Award that has not
been settled solely due to an elective deferral
by Executive and otherwise is not forfeitable
in the event of any termination of Executive's
service) will be immediately forfeited and
canceled upon the occurrence of the Forfeiture
Event; and
(ii) Executive will be obligated to repay to the
Company, in cash, within five business days
after demand is made therefor by the Company,
the total amount of Award Gain (as defined
herein) realized by Executive upon each
exercise of a stock option or settlement of an
Award (regardless of any elective deferral)
that occurred (A) during the period commencing
with the date that is 24 months prior to the
occurrence of the Forfeiture Event and the date
24 months after the Forfeiture Event, if the
Forfeiture Event occurred while Executive was
employed by the Company or a Subsidiary or
affiliate, or (B) during the period commencing
24 months prior to the date Executive's
employment by the Company terminated and ending
12 months (or, in the event that the Forfeiture
Event is a breach of Section 15, 24 months)
after the date of such termination, if the
Forfeiture Event occurred after Executive
ceased to be so employed. For purposes of this
Section, the term "Award Gain" shall mean (i),
in respect of a given stock option exercise,
the product of (X) the Fair Market Value per
share of common stock at the date of such
exercise (without regard to any subsequent
change in the market price of shares) minus the
exercise price times (Y) the number of shares
as to which the stock option was exercised at
that date, and (ii), in respect of any other
settlement of an Award granted to Executive,
the Fair Market Value of the cash or stock paid
or payable to Executive (regardless of any
elective deferral) less any cash or the Fair
Market Value of any stock or property (other
than an Award or award which would have itself
then been forfeitable hereunder and excluding
any payment of tax withholding) paid by
Executive to the Company as a condition of or
in connection such settlement.
For purposes of this Agreement, "Award" shall mean any cash award, stock option,
stock appreciation right, restricted stock, deferred stock, bonus stock,
dividend equivalent, or other stock-based or performance-based award or similar
award, together with any related right or interest, granted to or held by
Executive (but excluding any annual cash incentive award which is payable on an
annual basis and is determined based entirely on a one-year (or less)
performance measurement period).
(b) Committee Discretion. The Committee may, in its
discretion, waive in whole or in part the Company's right to forfeiture under
this Section, but no such waiver shall be effective unless evidenced by a
writing signed by a duly authorized officer of the Company. In addition, the
Committee may impose additional conditions on Awards, by inclusion of
appropriate provisions in the document evidencing or governing any such Award.
13. Confidentiality: Cooperation with Regard to Litigation;
Non-Disparagement; Return of Company Materials.
(a) During the Term of Employment and thereafter, 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 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
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, 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 (i) all information
concerning the business of the Company or any Subsidiary including information
relating to any of their products, product development, trade secrets,
customers, suppliers, finances, and business plans and strategies, and (ii)
information regarding the organization structure and the names, titles, status,
compensation, benefits and other proprietary employment-related aspects of the
employees of the Company and the Company's employment practices. Excluded from
the definition of Confidential Information is information (A) that is or becomes
part of the public domain, other than through the breach of this Agreement by
Executive or (B) regarding the Company's business or industry properly acquired
by Executive in the course of his career as an executive in the Company's
industry and independent of Executive's employment by the Company. 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) Executive agrees to cooperate with the Company, during the
Term of Employment and thereafter (including following 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 Executive, on an after-tax basis, for all expenses actually incurred
in connection with his provision of testimony or assistance.
(f) The Executive agrees that, during the Term of Employment
and thereafter (including following Executive's termination of employment for
any reason) he will not make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take
any action which may, directly or indirectly, disparage the Company or any
Subsidiary or their respective officers, directors, employees, advisors,
businesses or reputations. The Company agrees that, during the Term of
Employment and thereafter (including following Executive's termination of
employment for any reason) the Company will not make statements or
representations, or otherwise communicate, directly or indirectly, in writing,
orally, or otherwise, or take any action which may directly or indirectly,
disparage Executive or his business or reputation. Notwithstanding the
foregoing, nothing in this Agreement shall preclude either Executive or the
Company from making truthful statements or disclosures that are required by
applicable law, regulation, or legal process.
(g) Upon any termination of employment, Executive agrees to
deliver any Company property and any documents, notes, drawings, specifications,
computer software, data and other materials of any nature pertaining to any
Confidential Information that are held by Executive and will not take any of the
foregoing, or any reproduction of any of the foregoing, that is embodied an any
tangible medium of expression, provided that the foregoing shall not prohibit
Executive from retaining his personal phone directories and rolodexes.
14. Non-competition.
(a) During the Restriction Period (as defined in Section 14(b)
below), 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., Home Place
Inc., J.C. Penney, Federated Department Stores, Mays, Target, Sears, Home Depot
and K-Mart (and any successor or successors thereto); (ii) any home textiles or
housewares store, specialty store or other retailer if either $25 million or 40%
or more of its annual gross sales revenues (in either case, based on the most
recent quarterly or annual financial statements available) are derived from the
sale of home textiles, housewares or other goods or merchandise of the types
sold in the Company's (or any Subsidiary's) stores; (iii) any corporation or
other entity whether independent or owned, funded or controlled by any other
entity, engaged or organized for the purpose of engaging, in whole or in part,
in the sale of home textiles, housewares or other goods or merchandise of the
types sold in the Company's (or any Subsidiary's) stores; (iv) any business that
provides buying office services to any business or group of businesses referred
to above, or (v) any business (in the U.S. or any country in which the Company
or any Subsidiary operates a store or stores) which is in material competition
with the Company or any Subsidiary or division thereof and in which Executive's
functions would be substantially similar to Executive's functions with the
Company. If 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 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 Executive at the time
Executive initially became employed or becomes a consultant, principal, agent,
officer, director, partner, or shareholder of the entity or (y) Executive
commences directly or indirectly to advise, plan, oversee or manage the
activities of an entity which becomes a Competitor during the Restriction
Period, that activities are competitive with the activities of the Company or
any Subsidiary.
(b) For the purposes of this Section 14, "Restriction Period"
shall mean the period beginning with the Effective Date and ending with:
(i) in the case of a termination of Executive's
employment without Cause or a Constructive
Termination Without Cause, the Restriction
Period shall terminate immediately upon
Executive's termination of employment;
(ii) in the case of a termination of Executive's
employment as an officer or non-officer
employee for Cause, 24 months from the date
of such termination;
(iii) in the case of a voluntary termination of
Executive's employment pursuant to Section
11(d) above followed by the Company's
election to pay the Executive (and subject
to the payment of) 170% of his Base Salary,
as provided in Section 11(d) above, the
first anniversary of such termination;
(iv) in the case of a voluntary termination of
the Executive's employment pursuant to
Section 11(d) above which is not followed by
the Company's election to pay the Executive
such 170% of Base Salary, the date of such
termination; or
(v) in the case of a Retirement pursuant to
Section 11(f) above, the remainder of the
Term of Employment.
15. Non-solicitation of Employees.
During the period beginning with the Effective Date and ending
24 months following the termination or other cessation of Executive's employment
for any reason, 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 Executive from engaging in generic nontargeted
advertising for employees generally. During such period, 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.
16. Remedies.
In addition to whatever other rights and remedies the Company
may have at equity or in law, if Executive breaches any of the provisions
contained in Sections 13, 14 or 15 above, the Company (a) shall have its rights
under Section 12 of this Agreement, (b) shall have the right to immediately
terminate all payments and benefits due under this Agreement and (c) shall have
the right to seek injunctive relief. Executive acknowledges that such a breach
of Sections 13, 14 or 15 would cause irreparable injury and that money damages
would not provide an adequate remedy for the Company; provided, however, the
foregoing shall not prevent Executive from contesting the issuance of any such
injunction on the ground that no violation or threatened violation of Sections
13, 14 or 15 has occurred.
17. 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 16, 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
13, 14 and 15 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 Executive under this Agreement. All reasonable costs
and expenses (including fees and disbursements of counsel) incurred by Executive
pursuant to this Section 17 shall be paid on behalf of or reimbursed to
Executive promptly by the Company; provided, however, that in the event the
arbitrator(s) determine(s) that any of Executive's litigation assertions or
defenses are determined to be in bad faith or frivolous, no such reimbursements
shall be due Executive, and any such expenses already paid to Executive shall be
immediately returned by Executive to the Company.
18. Indemnification.
(a) Company Indemnity. The Company agrees that if 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 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 Executive's alleged action in an official capacity
while serving as a director, officer, member, employee or agent, 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
Executive in connection therewith, and such indemnification shall continue as to
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
Executive's heirs, executors and administrators. The Company shall advance to
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 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 18(a) shall not be deemed exclusive of any other
rights of indemnification to which 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 Executive under Section
18(a) above that indemnification of 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 Executive has not met
such applicable standard of conduct, shall create a presumption that 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 Executive
to the extent the Company provides such coverage for its other executive
officers.
19. Excise Tax Gross-Up.
If 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 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 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 19, 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 Executive's 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
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, 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 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
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, 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 Executive or otherwise realized
as a benefit by 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
(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 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 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 Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority. 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.
20. 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 Executive's participation in any other employee benefit or other plans
or programs in which he currently participates.
21. 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 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 Executive under this Agreement
may be assigned or transferred by 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 27 below.
22. 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.
23. 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, except for certain rights regarding Executive's
stock options granted after October 1996 and prior to the date of this
Agreement, which shall be governed by the terms of Executive's 1996 employment
agreement as if such 1996 employment agreement remained in full force and
effect.
24. Amendment or Waiver.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by 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 Executive or an authorized officer
of the Company, as the case may be.
25. 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.
26. Survivorship.
The respective rights and obligations of the Parties hereunder
shall survive any termination of Executive's employment to the extent necessary
to the intended preservation of such rights and obligations.
27. Beneficiaries/References.
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 Executive's death by
giving the Company written notice thereof. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
28. 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 17, the Company and 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 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
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.
29. 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.
6 Brighton Road
Clifton, New Jersey 07015-5108
Attention: Secretary
If to Executive: Mr. Norman Axelrod
6 Sunflower Avenue
Upper Saddle River, New Jersey 07458
30. 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.
31. 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:_______________________________
Name:
Title:
EXECUTIVE
__________________________________
Norman Axelrod