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Exhibit 10.2
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of [ ], 1996 (the "Agreement")
between Melville Corporation, a New York corporation, to be known as CVS
Corporation ("CVS"), Nashua ▇▇▇▇▇▇ CVS, Inc. ("Nashua ▇▇▇▇▇▇"), and Linens 'n
Things, Inc. ("Linens"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, Linens is presently a wholly owned Subsidiary
of CVS;
WHEREAS, after the sale on the date hereof of Common Stock,
$0.01 par value per share (the "Common Stock"), of Linens to the public in an
initial public offering (the "Initial Public Offering") registered under the
Securities Act of 1933, as amended, CVS will own approximately __% of the
outstanding Common Stock of Linens;
WHEREAS, CVS and Linens are concurrently herewith entering
into the Transitional Services Agreement and the Tax Disaffiliation Agreement;
WHEREAS, the parties hereto desire to set forth herein certain
matters relating to the relationship and the respective rights and obligations
of the parties following the Initial Public Offering;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Action" means any claim, suit, action, arbitration,
investigation or other proceeding by or before any court, governmental or other
regulatory or administrative agency or commission or any other tribunal.
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling, controlled by,
or under common control with, such Person. For the purposes of
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this definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided that, for purposes hereof, CVS and Linens
will be deemed not to be Affiliates of each other.
"Applicable CVS Number" has the meaning assigned to such term
in the Linens Charter.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning assigned thereto in the
recitals above.
"CVS Group" means CVS and its Subsidiaries (other than any
Subsidiary or member of, or other entity in, the Linens Group).
"CVS Liabilities" means all (i) Liabilities of the CVS Group
under this Agreement and (ii) except as otherwise specifically provided herein
or in the Tax Disaffiliation Agreement, other Liabilities that arise from or in
connection with a Third Party Claim, whether arising before, on or after the
Initial Public Offering Date, and that are of or relate to the CVS Group or
arise from or in connection with the conduct of the businesses of the CVS Group
(other than the Linens Business) or the ownership or use of assets in connection
therewith. Notwithstanding the foregoing, "CVS Liabilities" shall exclude (x)
any Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Disaffiliation Agreement) and (y) any Liabilities specifically retained or
assumed by Linens pursuant to this Agreement.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, permits, licenses and governmental
restrictions, whether now or hereafter in effect, relating to the environment,
the effect of the environment on human health or to emissions, discharges,
releases, manufacturing, storage, processing, distribution, use, treatment,
disposal, transportation or handling of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes or the clean-up or other remediation thereof.
"Finally Determined" means, with respect to any Action
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or other matter, that the outcome or resolution of such Action or matter has
been judicially determined by judgment or order not subject to further appeal or
discretionary review.
"Group" means, as the context requires, the Linens Group or
the CVS Group.
"Guaranteed Lease" has the meaning assigned to such term in
Section 3.01.
"Indemnified Party" has the meaning set forth in Section 2.04.
"Indemnifying Party" has the meaning set forth in Section
2.04.
"Initial Public Offering Date" means the business day as of
which the Initial Public Offering shall be effected.
"Lease Guarantee" has the meaning assigned to such term in
Section 3.01.
"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, any action, order, injunction or consent
decree of any governmental agency or entity, or any award of any arbitrator of
any kind, and those arising under any agreement, commitment or undertaking.
"Linens Business" means the businesses and operations
(including, without limitation, the home textiles and housewares- related
purchasing, distribution and sales operations and activities) associated with
Linens or otherwise of the Linens Group, in each case whether conducted prior
to, on or after the Initial Public Offering Date.
"Linens Charter" means the Amended and Restated Certificate of
Incorporation of Linens in effect as of the date hereof.
"Linens Group" means Linens and its Subsidiaries as of (and,
except where the context clearly indicates otherwise, after) the Initial Public
Offering Date (including all predecessors to such Persons).
"Linens Liabilities" means all (i) Liabilities of the
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Linens Group under this Agreement and (ii) except as otherwise specifically
provided herein or in the Tax Disaffiliation Agreement, other Liabilities that
arise from or in connection with a Third Party Claim, whether arising before, on
or after the Initial Public Offering Date, and that are of or relate to the
Linens Group or arise from or in connection with the conduct of the Linens
Business or the ownership or use of assets in connection therewith, including
without limitation any such Liabilities that arise under or relate to
Environmental Laws. Notwithstanding the foregoing, "Linens Liabilities" shall
exclude: (x) any Liabilities for Taxes (since such Liabilities shall be governed
by the Tax Disaffiliation Agreement), (y) any Liabilities arising from
shareholder derivative lawsuits against CVS, and (z) any Liabilities
specifically retained or assumed by CVS pursuant to this Agreement.
"Losses" means, with respect to any Person, any and all
damage, loss, liability and expense incurred or suffered by such Person
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any and all Actions
or threatened Actions).
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust or other entity or organization,
including a governmental or political subdivision or an agency or
instrumentality thereof.
"Principal Stockholder" has the meaning assigned to
such term in the Linens Charter.
"Prospectus" means the prospectus relating to the Registration
Statement in the form first used to confirm the sale of shares of Common Stock
in the Initial Public Offering.
"Registration Statement" means the registration statement on
Form S-1 filed with the Commission relating to the offering and sale of the
shares of Common Stock of Linens in the Initial Public Offering.
"Stockholder Documents" means all of the agreements and other
documents entered into between Linens and CVS in connection with the Initial
Public Offering as contemplated hereby, including, without limitation, this
Agreement, the Transitional Services Agreement and the Tax Disaffiliation
Agreement.
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"Subsidiary" means, with respect to any Person, any other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
"Tax" means Tax as such term is defined in the Tax
Disaffiliation Agreement.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation
Agreement dated as of the date hereof between CVS and Linens.
"Third-Party Claim" has the meaning set forth in Section 2.05.
ARTICLE II
INDEMNIFICATION
Section 2.01. Linens Indemnification of the CVS Group. (a)
Subject to Section 2.03, on and after the Initial Public Offering Date, Linens
shall indemnify, defend and hold harmless the CVS Group and the respective
directors, officers and Affiliates of each Person in the CVS Group (the "CVS
Indemnitees") from and against any and all Losses incurred or suffered by any of
the CVS Indemnitees arising out of, or due to the failure of any Person in the
Linens Group to pay, perform or otherwise discharge, any of the Linens
Liabilities.
(b) Subject to Section 2.03, Linens shall indemnify, defend
and hold harmless each of the CVS Indemnitees and each Person, if any, who
controls any CVS Indemnitee within the meaning of either Section 15 of the 1933
Act or Section 20 of the 1934 Act from and against any and all Losses caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if Linens shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
Losses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished to Linens in writing by
CVS expressly for use therein.
(c) Subject to Section 2.03, on and after the Initial
Public Offering Date, Linens shall indemnify, defend and hold
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harmless each of the CVS Indemnitees and each Person, if any, who controls any
CVS Indemnitee from and against any and all Losses incurred or suffered by any
of the CVS Indemnitees (i) due to the failure of any Person in the Linens Group
to pay, perform or otherwise discharge its obligations under any of the
Guaranteed Leases or (ii) otherwise arising out of or with respect to any of the
Guaranteed Leases or Lease Guarantees, except in the case of this clause (ii),
to the extent Losses are attributable to any breach of any agreement or covenant
by the CVS Group under any Lease Guarantee.
Section 2.02. CVS Indemnification of Linens Group. (a) Subject
to Section 2.03, on and after the Initial Public Offering Date, CVS shall
indemnify, defend and hold harmless the Linens Group and the respective
directors, officers and Affiliates of each Person in the Linens Group (the
"Linens Indemnitees") from and against any and all Losses incurred or suffered
by any of the Linens Indemnitees and arising out of, or due to the failure of
any Person in the CVS Group to pay, perform or otherwise discharge, any of the
CVS Liabilities.
(b) Subject to Section 2.03, CVS shall indemnify, defend and
hold harmless each of the Linens Indemnities and each Person, if any, who
controls any Linens Indemnitee within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act from and against any and all Losses
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if Linens
shall have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such Losses are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished to Linens in writing by CVS expressly for use
therein.
(c) The parties agree that, for purposes of Sections 2.01(b)
and 2.02(b) hereof, the only information furnished to Linens in writing by CVS
expressly for use in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if Linens
shall have furnished any amendments or supplements thereto) is the information
contained therein under the following captions: "Risk Factors--Control of the
Company by CVS" and "Relationship with CVS".
Section 2.03. Insurance; Third Party Obligations; Tax
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Benefits. Any indemnification pursuant to Sections 2.01 or 2.02 shall be paid
net of the amount of any insurance or other amounts that would be payable by any
third party to the Indemnified Party (as defined below) in the absence of this
Agreement (irrespective of time of receipt of such insurance or other amounts)
and net of any tax benefit to the Indemnified Party attributable to the relevant
payment or Liability. It is expressly agreed that no insurer or any other third
party shall be (i) entitled to a benefit it would not be entitled to receive in
the absence of the foregoing indemnification provisions, (ii) relieved of the
responsibility to pay any claims to which it is obligated or (iii) entitled to
any subrogation rights with respect to any obligation hereunder.
Section 2.04. Notice and Payment of Claims. If any CVS
Indemnitee or Linens Indemnitee (the "Indemnified Party") determines that it is
or may be entitled to indemnification by any party (the "Indemnifying Party")
under Article II (other than in connection with any Action subject to Section
2.05), the Indemnified Party shall deliver to the Indemnifying Party a written
notice specifying, to the extent reasonably practicable, the basis for its claim
for indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. Within 30 days after receipt of such
notice, the Indemnifying Party shall pay the Indemnified Party such amount in
cash or other immediately available funds unless the Indemnifying Party objects
to the claim for indemnification or the amount thereof. If the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
indemnity claim and setting forth the grounds therefore within such 30-day
period, the Indemnifying Party shall be deemed to have acknowledged its
liability for such claim and the Indemnified Party may exercise any and all of
its rights under applicable law to collect such amount. In the event of such a
timely objection by the Indemnifying Party, the amount, if any, that is Finally
Determined to be required to be paid by the Indemnifying Party in respect of
such indemnity claim shall be paid by the Indemnifying Party to the Indemnified
Party in cash within 15 days after such indemnity claim has been so Finally
Determined.
Section 2.05. Notice and Defense of Third-Party Claims.
Promptly following the earlier of (i) receipt of notice of the commencement by a
third party of any Action against or otherwise involving any Indemnified Party
or (ii) receipt of information from a third party alleging the existence of a
claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall give the Indemnifying Party written notice
thereof. The failure of the Indemnified Party to give notice as provided in this
Section 2.05
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shall not relieve the Indemnifying Party of its obligations under this
Agreement, except to the extent that the Indemnifying Party is prejudiced by
such failure to give notice. Within 30 days after receipt of such notice, the
Indemnifying Party may (i) by giving written notice thereof to the Indemnified
Party, acknowledge liability for such indemnification claim and at its option
elect to assume the defense of such Third-Party Claim at its sole cost and
expense or (ii) object to the claim for indemnification set forth in the notice
delivered by the Indemnified Party pursuant to the first sentence of this
Section 2.05; provided that if the Indemnifying Party does not within such
30-day period give the Indemnified Party written notice objecting to such
indemnification claim and setting forth the grounds therefor, the Indemnifying
Party shall be deemed to have acknowledged its liability for such
indemnification claim. If the Indemnifying Party has elected to assume the
defense of a Third-Party Claim, (x) the defense shall be conducted by counsel
retained by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party, provided that the Indemnified Party shall have the right to
participate in such proceedings and to be represented by counsel of its own
choosing at the Indemnified Party's sole cost and expense; and (y) the
Indemnifying Party may settle or compromise the Third Party Claim without the
prior written consent of the Indemnified Party so long as such settlement
includes an unconditional release of the Indemnified Party from all claims that
are the subject of such Third Party Claim, provided that the Indemnifying Party
may not agree to any such settlement pursuant to which any remedy or relief,
other than monetary damages for which the Indemnifying Party shall be
responsible hereunder, shall be applied to or against the Indemnified Party,
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld. If the Indemnifying Party does not assume the
defense of a Third-Party Claim for which it has acknowledged liability for
indemnification hereunder, the Indemnified Party may require the Indemnifying
Party to reimburse it on a current basis for its reasonable expenses of
investigation, reasonable attorney's fees and reasonable out-of-pocket expenses
incurred in defending against such Third-Party Claim and the Indemnifying Party
shall be bound by the result obtained with respect thereto by the Indemnified
Party; provided that the Indemnifying Party shall not be liable for any
settlement effected without its consent, which consent shall not be unreasonably
withheld. The Indemnifying Party shall pay to the Indemnified Party in cash the
amount, if any, for which the Indemnified Party is entitled to be indemnified
hereunder within 15 days after such Third Party Claim has been Finally
Determined, in the case of an indemnity claim as to which the Indemnifying Party
has acknowledged liability or, in the case of any indemnity claim as to which
the Indemnifying Party has not acknowledged liability, within 15 days after such
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Indemnifying Party's objection to liability hereunder has been Finally
Determined.
Section 2.06. Certain Limitations on Claims. Notwithstanding
anything else contained in this Agreement, no claim may be made under Section
2.01(a), 2.01 (b), 2.02(a) or 2.02(b): (a) in respect of any single Loss claim
or item of $500 or less, provided that this clause (a) shall not preclude a
claim under any such Section in an amount in excess of $500 that is made up of
several related claims or items that individually are less than $500 in amount,
or (b) if the Loss giving rise to such claim is incurred after the fifth
anniversary of the date hereof.
Section 2.07. Contribution. If for any reason the
indemnification provided for in Section 2.01 or 2.02 is unavailable to any
Indemnified Party, or insufficient to hold it harmless, then, subject to the
provisions of the Underwriting Agreement relating to the Initial Public
Offering, the Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect all relevant equitable considerations.
Section 2.08. Non-Exclusivity of Remedies. The remedies
provided for in this Article II are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any Indemnified Party at law or
in equity.
ARTICLE III
CERTAIN AGREEMENTS RELATING TO LEASES; OTHER AGREEMENTS
Section 3.01. Continuity of Existing Lease Guarantees. With
respect to each real estate lease under which any Person in the Linens Group is
a lessee or sublessee and that is in effect prior to the date hereof (including,
without limitation, the leases set forth in Schedule 3.01 hereto (the "Scheduled
Leases")) and that remains in effect following the date hereof (i) without any
renewal option having been exercised or (ii) except in the case of the Scheduled
Leases, by reason of the exercise of any renewal option provided for in the
terms of such lease as in effect as of the date hereof (collectively, the
"Guaranteed Leases"), any lease guarantee of such Guaranteed Lease provided by
CVS or any of its Affiliates and in effect as of the date hereof (a "Lease
Guarantee") will remain in effect after the date hereof for the duration of the
term of such lease and, except in the case of the Scheduled Leases, any
extension thereof pursuant to the exercise of any such renewal option. CVS
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and its Affiliates shall be indemnified against any Losses arising from such
Guaranteed Leases or Lease Guarantees, as provided in Section 2.01(c).
Section 3.02. No New CVS Lease Guarantees To be Furnished
After The Initial Public Offering. Except as expressly provided otherwise in
Section 3.01, to the extent that any guarantee is required to be provided after
the date hereof with respect to any real estate or other lease entered into by a
Person in the Linens Group, such guarantee shall not be furnished by any Person
in the CVS Group.
Section 3.03. Intercompany Accounts. All intercompany
receivable, payable and loan balances in existence as of the date hereof between
the CVS Group and Linens Group will be eliminated as provided in Schedule 3.03
hereto.
Section 3.04. Certain Rights Upon a Third Party Obtaining
Above a Specified Ownership Level of Linens Common Stock. (a) No Person or group
(within the meaning of Section 13(d) under the ▇▇▇▇ ▇▇▇) of Persons shall become
the beneficial owner (within the meaning of Rule 13d-3 under the ▇▇▇▇ ▇▇▇) of a
majority of the Common Stock (such beneficial ownership level being "Majority
Beneficial Ownership") unless (i) CVS shall have received prior written notice
that such Person or group proposes to acquire Majority Beneficial Ownership and
(ii) prior to such acquisition such Person or group provides to CVS (unless
waived by CVS in writing) a guarantee, in form and substance acceptable to CVS,
of the obligations of Linens under Section 2.01(c) of this Agreement. In
addition, upon any such Person or group acquiring Majority Beneficial Ownership,
CVS may, at its election, forthwith terminate its provision of any or all of the
Services under the Transitional Services Agreement.
(b) As soon as Linens is aware or has reason to believe that
any Person or group proposes to acquire (or is considering acquiring) Majority
Beneficial Ownership, (i) Linens shall promptly provide written notice thereof
to CVS and (ii) Linens shall promptly inform such Person or group in writing of
the provisions of this Section 3.04. So long as (x) Linens has a class of its
capital stock registered under Section 12 of the 1934 Act and (y) the aggregate
future minimum lease payments under the Guaranteed Leases is greater than $50
million, Linens shall disclose the provisions of this Section 3.04 in each
Linens' Annual Report on Form 10-K filed under the 1934 Act.
Section 3.05. Intellectual Property Rights and Licenses.
Except as expressly set forth in Schedule 3.05 hereto, neither Group shall have
any right or license in or to any
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technology, software, intellectual property (including any trademark, service
▇▇▇▇, patent or copyright), know-how or other proprietary right owned, licensed
or held for use by the other Group. [Note: Linens has mentioned that certain
licenses may be requested, but no requested licenses have yet been specified by
Linens.]
ARTICLE IV
REGISTRATION RIGHTS
Section 4.01. General. Linens grants to CVS and each other
Person in the CVS Group that agrees to be bound by the terms of Appendix A
hereto the registration rights set forth in Appendix A hereto. CVS, Nashua
▇▇▇▇▇▇ and Linens hereby agree to the terms and provisions set forth in Appendix
A hereto.
ARTICLE V
ACCESS TO INFORMATION
Section 5.01. Provision of Corporate Records. Immediately
prior to or as soon as practicable following the Initial Public Offering Date,
each Group shall provide to the other Group all documents, contracts, books,
records and data (including but not limited to minute books, stock registers,
stock certificates and documents of title) in its possession relating to such
other Group or such other Group's business and affairs; provided that if any
such documents, contracts, books, records or data relate to both Groups or the
business and operations of both Groups, each such Group shall provide to the
other Group true and complete copies of such documents, contracts, books,
records or data.
Section 5.02. Access to Information. From and after the
Initial Public Offering Date until the later of (a) two years after the date
hereof and (b) the date CVS ceases to be a Principal Stockholder, each Group
shall afford promptly to the other Group and its accountants, counsel and other
designated representatives reasonable access during normal business hours to all
documents, contracts, books, records, computer data and other data in such
Group's possession relating to such other Group or the business and affairs of
such other Group (other than data and information subject to an attorney/client
or other privilege), insofar as such access is reasonably required by such other
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Group, including, without limitation, for audit, accounting, litigation and
disclosure and reporting purposes.
Section 5.03. Litigation Cooperation. Each Group shall use
reasonable efforts to make available to the other Group and its accountants,
counsel, and other designated representatives, upon written request, its
directors, officers, employees and representatives as witnesses, and shall
otherwise cooperate with the other Group, to the extent reasonably required in
connection with any legal, administrative or other proceedings arising out of
either Group's business and operations prior to the Initial Public Offering Date
in which the requesting party may from time to time be involved.
Section 5.04. Reimbursement. Each Group providing information
or witnesses to the other Group, or otherwise incurring any expense in
connection with cooperating, under Sections 5.01, 5.02 or 5.03 shall be entitled
to receive from the recipient thereof, upon the presentation of invoices
therefor, payment for all out-of-pocket costs and expenses (excluding charges
for employee time) as may be reasonably incurred in providing such information,
witnesses or cooperation.
Section 5.05. Retention of Records. Except as otherwise
required by law or agreed to in writing, each party shall, and shall cause the
members of its respective Group to, retain all information relating to the other
Group's business and operations in accordance with the past practice of such
party. Notwithstanding the foregoing, any party may destroy or otherwise dispose
of any such information at any time, provided that, prior to such destruction or
disposal, (i) such party shall provide not less than 90 days' prior written
notice to the other party, specifying the information proposed to be destroyed
or disposed of, and (ii) if the recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the
expense of the requesting party.
Section 5.06. Confidentiality. Each party shall hold and shall
cause its directors, officers, employees, agents, consultants and advisors
("Representatives") to hold in strict confidence all information (other than any
such information relating solely to the business or affairs of such party)
concerning the other party unless (i) such party is compelled to disclose such
information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law or (ii) such information can be shown to
have been (A) in the
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public domain through no fault of such party or (B) lawfully acquired after the
date hereof on a non-confidential basis from other sources. Notwithstanding the
foregoing, such party may disclose such information to its Representatives so
long as such Persons are informed by such party of the confidential nature of
such information and are directed by such party to treat such information
confidentially. If such party or any of its Representatives becomes legally
compelled to disclose any documents or information subject to this Section, such
party will promptly notify the other party so that the other party may seek a
protective order or other remedy or waive such party's compliance with this
Section. If no such protective order or other remedy is obtained or waiver
granted, such party will furnish only that portion of the information which it
is advised by counsel is legally required and will exercise its reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded such information. Such party agrees to be responsible for any breach of
this Section by it and its Representatives.
Section 5.07. Inapplicability of Article V to Tax Matters.
Notwithstanding anything to the contrary in Article V, Article V shall not apply
with respect to information, records and other matters relating to Taxes, all of
which shall be governed by the Tax Disaffiliation Agreement.
ARTICLE VI
EMPLOYEE MATTERS
6.01 With respect to employee matters and employee benefit
arrangements, the parties hereto agree as set forth in Schedule 6.01.
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ARTICLE VII
CVS' GOVERNANCE RIGHTS
Section 7.01. Appointment of Outside Directors. Within three
months after the date hereof, the Board of Directors of Linens (the "Linens
Board") shall fill [two] of the vacancies on the Linens Board with individuals
who are not officers or employees of any entity in the CVS Group or the Linens
Group.
Section 7.02. CVS Designated Directors. CVS shall have the
right to designate the Applicable CVS Number of directors to the Linens Board
and the right to designate the class of the Linens Board to which each such CVS
designee shall be elected. In connection with each election of directors, Linens
shall nominate each of the Applicable CVS Number of individuals designated by
CVS (each, a "CVS Designee") as a director to the Board of Directors and shall
recommend to the stockholders the election of each CVS Designee as a director
(in the class so designated by CVS). Within three months after the date hereof,
the Linens Board shall fill one or more vacancies on the Linens Board with
individuals who are CVS Designees so that, after giving effect thereto, the
Applicable CVS Number of CVS Designees shall serve as directors on the Linens
Board.
Section 7.03. Removal of CVS Designees. In the event of a
decrease in the Applicable CVS Number at any time, (i) one or more (as
appropriate) CVS Designees (selected by CVS as provided in clause (ii)) shall
automatically be deemed removed from the Board effective at such time, and (ii)
CVS shall have the right to select the individual[s] to be removed if any CVS
Designee is to remain as a director after giving effect to such decrease;
provided that if after giving effect to such decrease the Applicable CVS Number
is zero, one CVS Designee (selected by CVS) shall continue to serve as a
director until the next annual meeting of stockholders. Except as aforesaid or
as provided in clause (g) of Article FIFTH of the Linens Charter, no CVS
Designee may be removed from the Linens Board except with the written consent of
CVS. CVS shall have the right to remove any CVS Designee at any time (such
removal to be effective upon delivery of notice thereof to Linens), and the
vacancy resulting from such removal shall be filled as provided in Section 7.04.
Section 7.04. Filling of Vacancy of CVS Designee. In the event
that (i) there occurs at any time a vacancy in the Linens Board by reason of the
death, retirement, resignation, removal or other departure of any CVS Designee
and (ii) after giving effect to such vacancy the number of CVS Designees on the
Linens Board is less than the Applicable CVS Number at such time, the Linens
Board will act as promptly as practicable to fill such
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vacancy with a CVS Designee (and will so fill multiple vacancies, if necessary)
so that, after giving effect to the election of such CVS Designee as a director,
the Applicable CVS Number of CVS Designees shall serve as directors on the
Linens Board.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. All notices and other communications to
any party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be deemed given when received addressed as follows:
If to CVS, to:
CVS Corporation
▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (401) 765-XXXX
Attention: Chief Financial Officer and
General Counsel
With a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to Linens, to:
Linens 'n Things, Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
With a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall
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thereafter be made.
Section 8.02. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by CVS and Linens,
or in the case of a waiver, by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 8.03. Expenses. Except as specifically provided
otherwise in this Agreement, the Transitional Services Agreement or the Tax
Disaffiliation Agreement (including, without limitation, in Article II, Sections
3.03, 5.04, 5.05 and 8.08(c) and Schedule 6.01 of this Agreement, and Sections
__ of the Transitional Services Agreement), all costs and expenses incurred in
connection with the preparation, execution and delivery of the Stockholder
Documents and the consummation of the Initial Public Offering (including the
fees and expenses of all counsel, accountants and financial and other advisors
of both Groups in connection therewith, and all expenses in connection with
preparation, filing and printing of the Registration Statement relating to the
Initial Public Offering) shall be paid by CVS; provided that Linens shall be
responsible for and pay the fees, expenses and other amounts payable to the
lenders under Linens's credit facilities and all other fees and expenses
incurred in connection therewith (including the fees and expenses of Linens's
counsel in connection with the preparation and negotiation of all documentation
relating to such credit facilities).
Section 8.04. Successor and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 8.05. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of New York (except for
Article VII, which shall be construed in accordance with and governed by the law
of the State of Delaware), without regard to the conflicts of laws rules of
either such State.
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Section 8.06. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other parties hereto.
Section 8.07. Entire Agreement. This Agreement and the other
Stockholder Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to the subject matter hereof and thereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein or in the other Stockholder Documents has been made or relied
upon by any party hereto. Neither this Agreement nor any provision hereof is
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
Section 8.08. Tax Disaffiliation Agreement; Set-Off. (a) Except as
otherwise provided herein and not inconsistent with the Tax Disaffiliation
Agreement, this Agreement shall not govern any Tax, and any and all claims,
losses, damages, demands, costs, expenses or liabilities relating to Taxes shall
be exclusively governed by the Tax Disaffiliation Agreement.
(b) If, at the time Linens is required to make any payment to
CVS under this Agreement, CVS owes Linens any amount under this Agreement or the
Tax Disaffiliation Agreement, then such amounts shall be offset and the excess
shall be paid by the party liable for such excess. Similarly, if at the time CVS
is required to make any payment to Linens under this Agreement, Linens owes CVS
any amount under this Agreement or the Tax Disaffiliation Agreement, then such
amounts shall be offset and the excess shall be paid by the party liable for
such excess.
(c) If, pursuant to a Final Determination, any amount paid by
CVS, Linens or their respective Post-Distribution Affiliates pursuant to this
Agreement results in any increased Tax liability or reduction of any Tax Asset
of any member of the Linens Group, Linens or its Post-Distribution Affiliates,
or the CVS Group, CVS or its Post-Distribution Affiliates, respectively, then
CVS or Linens, as the case may be, shall indemnify the other party and hold it
harmless from any interest or penalty attributable to such increased Tax
liability or the reduction of such Tax asset and shall pay to the other party,
in addition to amounts otherwise owed, 100 percent of the After-Tax Amount. All
capitalized terms used in this Section 8.08(c) and not otherwise
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defined in this Agreement are used as defined in the Tax Disaffiliation
Agreement.
Section 8.09. Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in the United States District Court for the Southern District of New
York or the United States District Court for the District of Delaware or any
other New York State court sitting in New York County or any other court of the
State of Delaware, and each of the parties hereby consents to the jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient form. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 8.01 shall
be deemed effective service of process on such party.
Section 8.10. Existing Arrangements. Except as otherwise
contemplated hereby, all prior agreements and arrangements, including those
relating to goods, rights or services provided or licensed, between the Linens
Group and the CVS Group shall be terminated effective as of the Initial Public
Offering Date, if not theretofore terminated. No such agreements or arrangements
shall be in effect after the Initial Public Offering Date unless embodied in the
Stockholder Documents.
Section 8.11. Further Assurances. In addition to the actions
specifically provided for elsewhere in the Stockholder Documents, each of the
parties hereto shall use its reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by the
Stockholder Documents.
Section 8.12. Effective Date. This Agreement shall
become effective upon the closing of the Initial Public Offering.
Section 8.13. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
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IN WITNESS WHEREOF the parties hereto have caused this
Stockholder Agreement to be duly executed by their respective authorized
officers as of the date first above written.
[CVS] CORPORATION
By ____________________________
Name:
Title:
LINENS 'N THINGS, INC.
By ____________________________
Name:
Title:
NASHUA ▇▇▇▇▇▇ CVS, INC.
By ____________________________
Name:
Title:
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SCHEDULE 6.01
EMPLOYEE MATTERS
Section 1. General. Except as otherwise set forth in this
Schedule 6.01, (a) CVS shall retain (i) any and all liabilities relating to or
arising out of any employee benefit or compensation arrangement (a "Plan") in
respect of any employee or former employee of CVS and any Affiliate of CVS who
is not a Transferred Employee (as hereinafter defined), and (ii) any and all
liabilities relating to or arising out of any Plan in respect of all Transferred
Employees that were incurred or are otherwise related to any period prior to and
including the Initial Public Offering Date and (b) CVS shall have no liability
relating to or arising out of any Plan in respect of Transferred Employees to
the extent that any such liability is incurred or otherwise relates to any
period after the Initial Public Offering Date.
Section 2. Employees. With respect to each individual [listed
on Schedule 6.01A or] who, as of the Initial Public Offering Date, is employed
(including persons absent from active service by reason of Short Term Disability
or Long Term Disability, as hereinafter defined, or absence not relating to
disability, whether paid or unpaid) in the Linens Business ("Transferred
Employees"), Linens shall cause the employment of each Transferred Employee to
be continued on the Initial Public Offering Date, provided that nothing stated
herein shall limit the right of Linens or any Subsidiary to terminate the
employment of any Transferred Employee following the Initial Public Offering
Date or to reduce or otherwise modify the position, responsibilities,
compensation or benefits of any Transferred Employee at any time, and provided
further that an individual who is employed as of the Initial Public Offering
Date by Linens or any of its Subsidiaries, but on such date is absent from
active service and (i) is receiving Long Term Disability Benefits (as
hereinafter defined) or (ii) is absent by reason of Short Term Disability but
subsequently begins to receive Long Term Disability Benefits shall not be
considered a Transferred Employee for purposes of the CVS Long Term Disability
Plan. The employee benefit plans and arrangements maintained by Linens shall
give full service credit for purposes of eligibility and vesting (and in
connection with any such severance or vacation plan or policy, for purposes of
determining the level of benefit) for any service on or prior to the Initial
Public Offering Date of a Transferred Employee with CVS and its Subsidiaries.
For purposes of this Agreement, (i) "Short Term Disability" shall mean a
condition with respect to which an employee is receiving
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21
benefits, as of the Initial Public Offering Date, under either the CVS Short
Term Disability Plan or the CVS Salary Continuation Plan, and (ii) "Long Term
Disability Benefits" shall mean benefits under the CVS Long Term Disability
Plan.
Section 3. Qualified Plans. (a) CVS shall retain all
liabilities and obligations in respect to benefits accrued by Transferred
Employees under CVS's ESOP. CVS shall cause each Transferred Employee to become
100% vested in the employee's account in CVS's ESOP as of the Initial Public
Offering Date. As soon as practicable after the Initial Public Offering Date,
CVS shall take such action as may be necessary, if any, to permit each
Transferred Employee to exercise his rights under CVS's ESOP to effect an
immediate distribution of such Transferred Employee's full account balances
under CVS's ESOP or to effect a tax-free rollover of the taxable portion of the
account balances into an eligible retirement plan (within the meaning of Section
401(a)(31) of the Internal Revenue Code ("Code"), a "Direct Rollover")
maintained by Linens (the "Linens Plan") or to an individual retirement account.
CVS and Linens shall work together in order to facilitate any such distribution
or rollover and to effect a Direct Rollover for those participants who elect to
roll over their account balances directly into the Linens Plan; provided that
nothing contained herein shall obligate the Linens Plan to accept a Direct
Rollover in a form other than cash.
(b) On the Initial Public Offering Date, or as soon as
practicable thereafter, Linens shall establish or designate the Linens Plan in
order to accommodate the Direct Rollovers described above and shall take all
action necessary, if any, to qualify the Linens Plan under the applicable
provisions of the Code and shall make any and all filings and submissions to the
appropriate governmental authorities required to be made by it in connection
with any Direct Rollover.
(c) As soon as practicable after the Initial Public Offering
Date, Linens shall establish or designate an individual account plan (the
"Successor Individual Account Plan"), which may be the same plan as the Linens
Plan, for the benefit of Transferred Employees, shall take all necessary action,
if any, to qualify such plan under the applicable provisions of the Code and
shall make any and all filings and submissions to the appropriate governmental
agencies required to be made by it in connection with the transfer of assets
described below. CVS shall cause each Transferred Employee to be 100% vested in
the employee's account balance under CVS's 401(k) Profit Sharing Plan as of the
Initial Public Offering Date. No later than the date of the transfer described
herein, Linens shall make all applicable 401(k), profit sharing, matching
contributions and
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qualified non-elective contributions payable under CVS's 401(k) Profit Sharing
Plan with respect to Transferred Employees for periods on or prior to the
Initial Public Offering Date and shall be entitled to retain any applicable
reserves or accruals relating thereto. As soon as practicable following the
Initial Public Offering Date, CVS shall cause the trustee of CVS's 401(k) Profit
Sharing Plan to transfer in the form of cash or, to the extent applicable, notes
representing outstanding loans made to Transferred Employees under CVS's 401(k)
Profit Sharing Plan (or such other form as may be agreed to by CVS and Linens)
the full account balances of Transferred Employees (and beneficiaries thereof)
under CVS's 401(k) Profit Sharing Plan (which account balances will have been
credited with appropriate earnings attributable to the period from the Initial
Public Offering Date to the date of transfer described herein), reduced by any
necessary benefit or withdrawal payments to or in respect of Transferred
Employees occurring during the period from the Initial Public Offering Date to
the date of transfer described herein, to the appropriate trustee as designed by
Linens under the trust agreement forming a part of the Successor Individual
Account Plan, it being understood that CVS is under no obligation to effect a
distribution, payment or loan under CVS's 401(k) Profit Sharing Plan in respect
of a Transferred Employee who either requests a loan or terminates employment
after the Initial Public Offering Date but prior to the date of transfer
described herein if the required distribution, payment or loan, as the case may
be, forms have not been received by CVS prior to the last day of the month
preceding the month in which the transfer described herein occurs. CVS and
Linens agree to take such actions and enter into such agreements, if any, that
may be necessary to effect the transfer described herein. In consideration for
the transfer of assets described herein, Linens shall, effective as of the date
of transfer described herein, assume all of the obligations of CVS in respect of
the account balances accumulated by Transferred Employees under CVS's 401(k)
Profit Sharing Plan (exclusive of any portion of such account balances which are
paid or otherwise withdrawn prior to the date of transfer described herein) with
respect to the account balances transferred to the Successor Individual Account
Plan. CVS hereby indemnifies Linens, the Company and the Subsidiaries against
and agrees to hold them harmless from any liabilities or claims (including
claims for benefits or for breach of fiduciary duties, but excluding claims for
benefits to the extent of the assets transferred hereunder) relating to CVS's
401(k) Profit Sharing Plan (or the qualified status of that Plan) which arose
prior to the transfer of assets described herein or which relate to the
operation or administration of that Plan prior to the transfer of assets. Linens
hereby indemnifies CVS against and agrees to hold it harmless from any
liabilities or claims relating to the qualified status of the Successor
Individual Account Plan or the
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operation or administration of that Plan following the transfer of assets
described herein.
Section 4. Welfare Plans and Worker Compensation. (a) Linens and its
Affiliates shall each establish or designate welfare benefit plans, within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended, and applicable workers compensation plans, for the benefit of their
respective Transferred Employees (the "Replacement Welfare Plans"). The
Replacement Welfare Plans shall be effective as of the Initial Public Offering
Date, provided, that at the request of Linens, CVS shall continue to provide, to
the extent applicable, services for (i) Transferred Employees (and eligible
spouses and dependents) and (ii) former employees of the Linens Business and
their qualified beneficiaries who as of the Initial Public Offering Date are
covered pursuant to Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985 and Section 4980B of the Code under its Plans which provide medical,
dental, life insurance, accidental death and dismemberment, pharmacy, eyecare
and disability benefits for such period of time from the Initial Public Offering
Date to not later than May 1, 1997 as Linens shall specify in such request (the
"Benefit Transition Period"). Linens shall pay the claim and claims processing
cost of such services during the Benefit Transition Period (including claims
runout in respect of claims incurred both before and after the Initial Public
Offering Date) and shall directly fund all medical and dental claims through a
bank account set up solely for such purposes. In addition, Linens shall be
entitled to retain any applicable reserves or accruals relating to such
benefits. Linens and its designated Affiliates shall retain or assume all of the
obligations for any retiree benefits under any welfare plan provided Transferred
Employees (and dependents) and retirees (and dependents) terminated while
employed by Linens and any Affiliate or while employed in the Linens Business
prior to the Initial Public Offering Date. Linens and its Affiliates shall
assume as of the end of the Benefit Transition Period all obligations to provide
coverage and benefits for Transferred Employees and former employees of the
Linens Business and their qualified beneficiaries under the Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985 and Section 4980B of the
Code.
(b) Linens shall be responsible for all workers compensation
claims, whether arising before or after the Initial Public Offering Date, with
respect to any employee or former employee of the Linens Business, including,
but not limited to, any Transferred Employee. In addition, Linens shall be
entitled to retain any applicable reserves or accruals relating thereto.
Section 5. Stock Options. Except as otherwise
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provided in any agreement with a Transferred Employee, as of the Initial Public
Offering Date all outstanding options issued to Transferred Employees to
purchase CVS Common Stock that have heretofore been granted under any employee
stock option plan of CVS and are exercisable on the Initial Public Offering Date
shall be exercisable for a period of 90 days from the Initial Public Offering
Date.
Section 6. Bonus and Profit Incentive Plans. Except as otherwise
provided in any agreement with a Transferred Employee, CVS shall have no
liability for any bonus or profit incentive awards and Linens shall be
responsible for all such awards relating to the period beginning on the Initial
Public Offering Date.
Section 7. Severance. The continued employment by Linens and its
Affiliates of Transferred Employees after the Initial Public Offering Date shall
not be deemed a severance of employment of such Transferred Employees from CVS
for purposes of any policy, Plan, program or agreement of CVS or any of its
Subsidiaries that provides for the payment of severance, salary continuation or
similar benefits.
Section 8. Supplemental Retirement Benefits and Deferred
Compensation. (a) Linens and its Affiliates shall assume as of the Initial
Public Offering Date all of the obligations and liabilities of CVS and any of
its Affiliates for any Transferred Employee under the Deferred Compensation Plan
of CVS Corporation and Affiliated Companies and any reserve or accrual in
respect of such Transferred Employees shall be retained to Linens.
(b) CVS shall have no liability for any obligation relating to
Transferred Employees under the Supplemental Retirement Plans I and II for
Select Senior Management of CVS Corporation and any Linens reserve or accrual in
respect of such Transferred Employees shall be transferred to CVS.
Section 9. No Third Party Beneficiaries. Neither Transferred
Employees nor any current, former or retired employee of CVS or its affiliates
shall be entitled to enforce the provisions of this Schedule 6.01 against the
respective parties as third party beneficiaries thereof.
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APPENDIX A
REGISTRATION RIGHTS
ARTICLE I
DEFINITIONS
1.1. Definitions. (a) Terms defined in the Stockholder
Agreement (the "Agreement") dated as of _________, 1996 between Melville
Corporation, to be known as CVS Corporation ("CVS"), Nashua ▇▇▇▇▇▇ CVS, Inc.
("Nashua ▇▇▇▇▇▇") and Linens 'n Things, Inc. ("Linens") are used herein as
therein defined.
(b) In addition, as used in this Appendix A, the following
terms will have the following meanings, applicable both to the singular and the
plural forms of the terms described:
"Agreement" has the meaning ascribed thereto in Section 1.1(a)
hereto, as such agreement may be amended and supplemented from time to time in
accordance with its terms.
"Company Securities" has the meaning ascribed thereto in
Section 2.2(b).
"CVS Holder" means any Holder that is a Person in the CVS
Group.
"CVS Holder Securities" has the meaning ascribed thereto in
Section 2.2(b).
"Disadvantageous Condition" has the meaning ascribed thereto
in Section 2.1(a).
"Holder" means CVS, each Subsidiary of CVS and any Transferee.
"Initial Public Offering Date" means the date of completion of
the initial sale of Common Stock in the Initial Public Offering.
"Lockup Period" has the meaning ascribed thereto in Section
2.1(d).
"Other Holders" has the meaning ascribed thereto in Section
2.2(c).
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"Other Securities" has the meaning ascribed thereto in Section
2.2.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
government (and any department or agency thereof) or other entity.
"Registrable Securities" means Common Stock or any other class
or series of capital stock of Linens and any stock or other securities into
which or for which such capital stock may hereafter be changed, converted or
exchanged and any other shares or securities issued to Holders of such capital
stock (or such shares or other securities into which or for which such shares
are so changed, converted or exchanged) upon any reclassification, share
combination, share subdivision, share dividend, share exchange, merger,
consolidation or similar transaction or event. As to any particular Registrable
Securities, such Registrable Securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale by the Holder thereof
shall have been declared effective under the 1933 Act and such securities shall
have been disposed of in accordance with such registration statement, (ii) they
shall have been distributed to the public in accordance with Rule 144, (iii)
they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by
Linens and subsequent disposition of them shall not require registration or
qualification of them under the 1933 Act or any state securities or blue sky law
then in effect or (iv) they shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration or marketing of securities
pursuant to Article II, including, without limitation, (i) the fees,
disbursements and expenses of Linens' counsel and accountants in connection with
this Agreement and the performance of Linens' obligations hereunder; (ii) all
expenses, including filing fees, in connection with the preparation, printing
and filing of the registration statement, any preliminary prospectus or final
prospectus, any other offering document and amendments and supplements thereto
and the mailing and delivering of copies thereof to any underwriters and
dealers; (iii) the cost of printing or producing any agreements among
underwriters, underwriting agreements, and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of the securities to be
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disposed of; (iv) all expenses in connection with the qualification of the
securities to be disposed of for offering and sale under state securities laws,
including the fees and disbursements of counsel for the underwriters or the
Holders of securities in connection with such qualification and in connection
with any blue sky and legal investment surveys; (v) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the securities to be disposed of; (vi) transfer
agents' and registrars' fees and expenses and the fees and expenses of any other
agent or trustee appointed in connection with such offering; (vii) all security
engraving and security printing expenses; (viii) all fees and expenses payable
in connection with the listing of the securities on any securities exchange or
automated interdealer quotation system or the rating of such securities; (ix)
any other fees and disbursements of underwriters customarily paid by the issuers
of securities, but excluding underwriting discounts and commissions and transfer
taxes, if any; (x) the costs and expenses of Linens relating to analyst or
investor presentations or any "road show" undertaken in connection with the
registration and/or marketing of any Registrable Securities; and (xi) other
reasonable out-of-pocket expenses of Holders other than legal fees and expenses
referred to in clause (iv) above.
"Rule 144" means Rule 144 (or any successor rule to similar
effect) promulgated under the 1933 Act.
"Rule 415 Offering" means an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the 1933 Act.
"Selling Holder" has the meaning ascribed thereto in Section
2.5(e).
"Transferee" has the meaning ascribed thereto in Section 2.9.
"Unfettered CVS Demand Registration" has the meaning ascribed
thereto in clause (x) of the proviso to Section 2.1(a)(i).
1.2. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Appendix A, and
references to the parties shall mean the parties to the Agreement.
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ARTICLE II
REGISTRATION RIGHTS
2.1. Demand Registration - Registrable Securities. (a) Upon
written notice provided at any time after the Initial Public Offering Date by
a CVS Holder or, subject to Section 2.11(b)(i), by a Transferee requesting that
Linens effect the registration under the 1933 Act of any or all of the
Registrable Securities held by such requesting Holder, which notice shall
specify the intended method or methods of disposition of such Registrable
Securities, Linens shall prepare and (within 90 days (or, in the case of the
Unfettered CVS Demand Registration contemplated in Section 2.1(d), immediately)
after such request has been given) file with the Commission a registration
statement with respect to such Registrable Securities and thereafter use its
best efforts to effect the registration under the 1933 Act and applicable state
securities laws of such Registrable Securities for disposition in accordance
with the intended method or methods of disposition stated in such request (which
requested method of disposition may be a Rule 415 Offering); provided that:
(i) with respect to any registration statement filed, or to be
filed, pursuant to this Section 2.1, if Linens shall furnish to the
Holders of Registrable Securities that have made such request a
certified resolution of the Board of Directors of Linens (adopted by
the affirmative vote of a majority of the directors not designated by
the CVS Group) stating that in the Board of Directors' good faith
judgment it would (because of the existence of, or in anticipation of,
any acquisition or other material event or transaction the public
disclosure of which at the time would be materially prejudicial to
Linens) be significantly disadvantageous (a "Disadvantageous
Condition") to Linens for such a registration statement to be
maintained effective, or to be filed and become effective, and setting
forth the general reasons for such judgment, Linens shall be entitled
to cause such registration statement to be withdrawn and the
effectiveness of such registration statement terminated, or, in the
event no registration statement has yet been filed, shall be entitled
not to file any such registration statement, until such Disadvantageous
Condition no longer exists (notice of which Linens shall promptly
deliver to such Holders). Upon receipt of any such certification of a
Disadvantageous Condition, such Holders shall forthwith discontinue use
of the prospectus contained in such registration
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statement and, if so directed by Linens, each such Holder will deliver
to Linens all copies, other than permanent file copies then in such
Holder's possession, of the prospectus then covering such Registrable
Securities current at the time of receipt of such notice; provided
that, notwithstanding anything else contained in the Stockholder
Documents, (x) Linens shall have no right to delay the filing or
effectiveness of a registration statement, to withdraw a registration
statement, or to terminate its effectiveness pursuant to its rights
under clause (i) until one registration statement filed pursuant to a
request made by CVS under Section 2.1 (the "Unfettered CVS Demand
Registration") shall have become effective and all the Registrable
Securities registered thereunder for sale by CVS shall have been
disposed of (whereupon the Unfettered CVS Demand Registration shall be
deemed completed), and (y) subject to clause (x) of this proviso, (1)
neither the filing nor the effectiveness of any such registration
statement may be delayed for a period in excess of 180 days due to the
occurrence of any particular Disadvantageous Condition and (2) Linens
may exercise its delay rights under this clause (i) on only one
occasion (and then for not more than 180 days) in connection with any
registration request under Section 2.1;
(ii) the CVS Holders may collectively exercise their rights
under this Section 2.1 on not more than two occasions (including the
Unfettered CVS Demand Registration as one of such two occasions) (the
"CVS Personal Demands");
(iii) Holders will have the right to transfer the right to
request a registration under Section 2.1 to transferees in accordance
with Section 2.9, which Transferees may collectively exercise their
rights under this Section 2.1 on not more than two occasions (it being
understood that such transfers in accordance with Section 2.9 will not
reduce the two CVS Personal Demands);
(iv) following completion of the Unfettered CVS Demand
Registration, the Holders of Registrable Securities shall not have the
right to require the filing of a registration statement pursuant to
this Section 2.1 within six months following the registration and sale
of Registrable Securities effected pursuant to a prior exercise of the
registration rights provided in this Section 2.1; and
(v) following completion of the Unfettered CVS Demand
Registration, a request for registration of Registrable Securities
pursuant to this Section 2.1 may not be made unless the Registrable
Securities subject
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to such request represent (x) at least $ __ million in proposed gross
offering proceeds to the Selling Holders, (y) at least ___ shares of
Common Stock of Linens, or (z) if less than (x) and (y), all
Registrable Securities then held by the requesting Holder.
(b) Notwithstanding any other provision of this Agreement to
the contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 2.1 shall not be deemed to have been effected (and,
therefore, not requested (and rights of a Holder shall be deemed not to have
been exercised) for purposes of paragraph (a) above), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the related
registration statement or (iii) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied or waived other than by reason of some act
or omission by such Holder of Registrable Securities.
(c) In the event that any registration pursuant to this
Section 2.1 shall involve, in whole or in part, an underwritten offering, the
Holders of a majority of the Registrable Securities to be registered shall have
the right to designate an underwriter or underwriters as the lead or managing
underwriters of such underwritten offering who shall, in the case of any
registration effected following completion of the CVS Unfettered Demand
Registration, be reasonably acceptable to Linens and, in connection with each
registration pursuant to this Section 2.1, such Holders may select one counsel
to represent all such Holders.
(d) Notwithstanding anything else contained in any Stockholder
Document, (i) it is understood that CVS intends that, subject to market
conditions, the Unfettered CVS Demand Registration will be effected immediately
after expiration of the 180-day underwriter "lockup" period (the "Lockup
Period") provided for in the underwriting agreement relating to the Initial
Public Offering and (ii) to that end, Linens agrees that it shall co-operate
with CVS and take all action (including preparing a registration statement)
during the Lockup Period so as to be in a position to file the registration
statement relating to the Unfettered CVS Demand Registration with the Commission
under the 1933 Act as soon as requested by any CVS Holder immediately after
expiration of the Lockup Period. The right to request the CVS Unfettered Demand
Registration (x) may be exercised only by a CVS Holder and may not be
transferred to any Person that is not a CVS Holder and (y) may not be exercised
as such after December 31, 1997.
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(e) Subject to Section 2.11, Linens shall have the right to
cause the registration of additional equity securities for sale for the account
of any Person that is not a Holder (including, without limitation, Linens and
any existing or former directors, officers or employees of the Linens Group) in
any registration of Registrable Securities requested by the Holders pursuant to
paragraph (a) above; provided that if such Holders are advised in writing (with
a copy to Linens) by a nationally recognized investment banking firm selected by
such Holders reasonably acceptable to Linens (which shall be the lead
underwriter or a managing underwriter in the case of an underwritten offering
and which, in the case of any registration effected after completion of the CUS
Unfettered Demand Registration, shall be reasonably acceptable to Linens)
that, in such firm's good faith view, all or a part of such additional equity
securities cannot be sold and the inclusion of such additional equity securities
in such registration would be likely to have an adverse effect on the price,
timing or distribution of the offering and sale of the Registrable Securities
then contemplated by any Holder, the registration of such additional equity
securities or part thereof shall not be permitted. The Holders of the
Registrable Securities to be offered pursuant to paragraph (a) above may require
that any such additional equity securities be included in the offering proposed
by such Holders on the same conditions as the Registrable Securities that are
included therein. In the event that the number of Registrable Securities
requested to be included in a registration statement by the Holders thereof
exceeds the number which, in the good faith view of such investment banking
firm, can be sold without adversely affecting the price, timing, distribution or
sale of securities in the offering, the number shall be allocated pro rata among
the requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any number in excess of
a Holder's request may be reallocated among the remaining requesting Holders in
a like manner).
2.2. Piggyback Registration. Subject to Section 2.11, in the
event that Linens proposes to register any of its Common Stock, any other of its
equity securities or securities convertible into or exchangeable for its equity
securities (collectively, including Common Stock, "Other Securities") under the
1933 Act, whether or not for sale for its own account, in a manner that would
permit registration of Registrable Securities for sale for cash to the public
under the 1933 Act, it shall (1) in the case of each such proposed registration
prior to the later of (i) January 1, 1998 and (ii) such time as CVS beneficially
owns less than 5% of Linens' Common Stock, give prompt written notice to each
Holder of Registrable Securities, and (2) in the case of each such proposed
registration occurring after
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expiration of the period referred to in clause (1) and prior to December 31,
1999, give prompt written notice to each Holder of Registrable Securities (other
than any CVS Holder), in the case of each of clause (1) and (2), of its
intention to do so and of the rights of such Holder under this Section 2.2 (with
only the Holders so required to be notified pursuant to the foregoing clauses
(1) and (2) having rights pursuant to this Section 2.2). Subject to the terms
and conditions hereof, such notice shall offer each such Holder the opportunity
to include in such registration statement such number of Registrable Securities
as such Holder may request. Upon the written request of any such Holder made
within 15 days after the receipt of Linens' notice (which request shall specify
the number of Registrable Securities intended to be disposed of and the intended
method of disposition thereof), Linens shall use its best efforts to effect, in
connection with the registration of the Other Securities, the registration under
the 1933 Act of all Registrable Securities which Linens has been so requested to
register, to the extent required to permit the disposition (in accordance with
such intended methods thereof) of the Registrable Securities so requested to be
registered; provided, that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date of
the registration statement filed in connection with such registration, Linens
shall determine for any reason not to register the Other Securities, Linens may,
at its election, give written notice of such determination to such Holders and
thereupon Linens shall be relieved of its obligation to register such
Registrable Securities in connection with the registration of such Other
Securities, without prejudice, however, to the rights of the Holders of
Registrable Securities immediately to request that such registration be effected
as a registration under Section 2.1 to the extent permitted thereunder;
(b) if the registration referred to in the first sentence of
this Section 2.2 is to be an underwritten registration on behalf of Linens, and
a nationally recognized investment banking firm selected by Linens advises
Linens in writing that, in such firm's good faith view, the inclusion of all or
a part of such Registrable Securities in such registration would be likely to
have an adverse effect upon the price, timing or distribution of the offering
and sale of the Other Securities then contemplated, Linens shall include in such
registration: (i) first, all Other Securities Linens proposes to sell for its
own account ("Company Securities"), (ii) second, up to the full number
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33
of Registrable Securities held by CVS Holders that are requested to be included
in such registration (Registrable Securities that are so held being sometimes
referred to herein as "CVS Holder Securities") in excess of the number of
Company Securities to be sold in such offering which, in the good faith view of
such investment banking firm, can be sold without adversely affecting such
offering and the sale of the Other Securities then contemplated (and (x) if such
number is less than the full number of such CVS Holder Securities, such number
shall be allocated by CVS among such CVS Holders and (y) in the event that such
investment banking firm advises that less than all of such CVS Holder Securities
may be included in such offering, such CVS Holders may withdraw their request
for registration of their Registrable Securities under this Section 2.2 and
request that 90 days subsequent to the effective date of the registration
statement for the registration of such Other Securities such registration of CVS
Holder Securities be effected as a registration under Section 2.1 to the extent
permitted thereunder), (iii) third, up to the full number of Registrable
Securities held by Holders (other than the CVS Holders) of Registrable
Securities that are requested to be included in such registration in excess of
the number of Company Securities and CVS Holder Securities to be sold in such
offering which, in the good faith view of such investment banking firm, can be
so sold without so adversely affecting such offering (and (x) if such number is
less than the full number of such Registrable Securities, such number shall be
allocated pro rata among such Holders on the basis of the number of Registrable
Securities requested to be included therein by each such Holder and (y) in the
event that such investment banking firm advises that less than all of such
Registrable Securities may be included in such offering, such Holders may
withdraw their request for registration of their Registrable Securities under
this Section 2.2 and request that 90 days subsequent to the effective date of
the registration statement for the registration of such Other Securities such
registration be effected as a registration under Section 2.1 to the extent
permitted thereunder), and (iv) fourth, up to the full number of the Other
Securities (other than Company Securities), if any, in excess of the number of
Company Securities and Registrable Securities to be sold in such offering which,
in the good faith view of such investment banking firm, can be so sold without
so adversely affecting such offering (and, if such number is less than the full
number of such Other Securities, such number shall be allocated pro rata among
the holders of such Other Securities (other than Company Securities) on the
basis of the number of securities requested to be included therein by each such
holder);
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(c) if the registration referred to in the first sentence of
this Section 2.2 is to be an underwritten secondary registration, permitted by
Section 2.11, on behalf of holders (the "Other Holders") of Other Securities
that are not Holders, and the lead underwriter or managing underwriter advises
Linens in writing that in their good faith view, all or a part of such Other
Securities cannot be sold and the inclusion of such additional securities in
such registration would be likely to have an adverse effect on the price, timing
or distribution of the offering and sale of the Other Securities then
contemplated, Linens shall include in such registration the number of securities
(including Registrable Securities) that such underwriters advise can be so sold
without adversely affecting such offering, allocated pro rata among the Other
Holders and the Holders of Registrable Securities on the basis of the number of
securities (including Registrable Securities) requested to be included therein
by each Other Holder and each Holder of Registrable Securities; provided, that
if such Other Holders have requested that such registration statement be filed
pursuant to demand registration rights granted to them by Linens in accordance
with Section 2.11, Linens shall include in such registration (1) first, Other
Securities sought to be included therein by the Other Holders pursuant to the
exercise of such demand registration rights, (2) second, the number of CVS
Holder Securities sought to be included in such registration in excess of the
number of Other Securities sought to be included in such registration by the
Other Holders which in the good faith view of such investment banking firm, can
be so sold without so adversely affecting such offering (and (x) if such number
is less than the full number of such CVS Holder Securities, such number shall be
allocated by CVS among such CVS Holders and (y) in the event that such
investment banking firm advises that less than all of such CVS Holder Securities
may be included in such offering, such CVS Holders may withdraw their request
for registration of their Registrable Securities under this Section 2.2 and
request that 90 days subsequent to the effective date of the registration
statement for the registration of such Other Securities such registration be
effected as a registration under Section 2.1 to the extent permitted thereunder)
and (3) third, the number of Registrable Securities sought to be included in
such registration by Holders (other than the CVS Holders) of Registrable
Securities in excess of the number of Other Securities and the number of CVS
Holder Securities sought to be included in such registration which, in the good
faith view of such investment banking firm, can be so sold without so adversely
affecting such offering (and (x) if such number is less than the full number of
such Registrable Securities, such number shall be allocated pro rata among such
Holders
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35
on the basis of the number of Registrable Securities requested to be included
therein by each such Holder and (y) in the event that such investment banking
firm advises that less than all of such Registrable Securities may be included
in such offering, such Holders may withdraw their request for registration of
their Registrable Securities under this Section 2.2 and request that 90 days
subsequent to the effective date of the registration statement for the
registration of such Other Securities such registration be effected as a
registration under Section 2.l to the extent permitted thereunder);
(d) Linens shall not be required to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
executive or employee benefit or compensation plans; and
(e) no registration of Registrable Securities effected under
this Section 2.2 shall relieve Linens of its obligation to effect a registration
of Registrable Securities pursuant to Section 2.1.
2.3. Expenses. Except as provided herein, Linens shall pay all
Registration Expenses with respect to a particular offering (or proposed
offering). Notwithstanding the foregoing, (i) each Holder and Linens shall be
responsible for its own internal administrative and similar costs, which shall
not constitute Registration Expenses, and (ii) each Holder shall be responsible
for the legal fees and expenses of its own counsel in connection with any
registration requested by a Holder pursuant to Section 2.1.
2.4. Registration and Qualification. If and whenever Linens is
required to effect the registration of any Registrable Securities under the 1933
Act as provided in Sections 2.1 or 2.2, Linens shall as promptly as practicable:
(a) prepare, file and use its reasonable best efforts to cause
to become effective a registration statement under the 1933 Act relating to the
Registrable Securities to be offered in accordance with the intended method of
disposition thereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
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36
to comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities until the earlier of (A) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition set forth in such registration statement and (B) the
expiration of 90 days (or, in the case of the Unfettered CVS Demand
Registration, six months) after such registration statement becomes effective;
provided, that such six-month or 90-day period shall be extended for such number
of days that equals the number of days elapsing from (x) the date the written
notice contemplated by paragraph (f) below is given by Linens to (y) the date on
which Linens delivers to the Holders of Registrable Securities the supplement or
amendment contemplated by paragraph (f) below;
(c) furnish to the Holders of Registrable Securities and to
any underwriter of such Registrable Securities such number of conformed copies
of such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the 1933
Act, such documents incorporated by reference in such registration statement or
prospectus, and such other documents, as the Holders of Registrable Securities
or such underwriter may reasonably request, and a copy of any and all
transmittal letters or other correspondence to or received from, the Commission
or any other governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange) relating to
such offering;
(d) use its best efforts to register or qualify all
Registrable Securities covered by such registration statement under the
securities or blue sky laws of such jurisdictions as the Holders of such
Registrable Securities or any underwriter of such Registrable Securities shall
request, and use its best efforts to obtain all appropriate registrations,
permits and consents in connection therewith, and do any and all other acts and
things which may be necessary or advisable to enable the Holders of Registrable
Securities or any such underwriter to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such registration
statement; provided, that Linens shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any such
jurisdiction wherein it is not so qualified or to consent to general service of
process in any such jurisdiction;
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(e) (i) use its best efforts to furnish to each Holder of
Registrable Securities included in such registration (each, a "Selling Holder")
and to any underwriter of such Registrable Securities an opinion of counsel for
Linens addressed to each Selling Holder and dated the date of the closing under
the underwriting agreement (if any) (or if such offering is not underwritten,
dated the effective date of the registration statement), and (ii) use its best
efforts to furnish to each Selling Holder a "cold comfort" letter addressed to
each Selling Holder and signed by the independent public accountants who have
audited the financial statements of Linens included in such registration
statement, in each such case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein) as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of securities
and such other matters as the Selling Holders may reasonably request and, in the
case of such accountants' letter, with respect to events subsequent to the date
of such financial statements;
(f) as promptly as practicable, notify the Selling Holders in
writing (i) at any time when a prospectus relating to a registration pursuant to
Sections 2.1 or 2.2 is required to be delivered under the 1933 Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) of any request by the Commission
or any other regulatory body or other body having jurisdiction for any amendment
of or supplement to any registration statement or other document relating to
such offering, and in either such case, at the request of the Selling Holders
prepare and furnish to the Selling Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading;
(g) if reasonably requested by the lead or managing
underwriters, use its best efforts to list all such Registrable Securities
covered by such registration on each securities exchange and automated
inter-dealer quotation
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38
system on which a class of common equity securities of Linens is then listed;
(h) send appropriate officers of Linens to attend any "road
shows" and analysts presentations scheduled in connection with any such
registration and use reasonable efforts to co-operate as requested by the
Holders in the marketing of the Registrable Securities, with all out-of-pocket
costs and expense incurred by Linens or such officers in connection with such
attendance or co-operation to be paid by Linens; and
(i) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Sections 2.1 or 2.2 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
2.5. Conversion of Other Securities, Etc. In the event that
any Holder offers any options, rights, warrants or other securities issued by it
or any other Person that are offered with, convertible into or exercisable or
exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue to
be eligible for registration pursuant to Sections 2.1 and 2.2.
2.6. Underwriting; Due Diligence. (a) If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under this Article II, Linens shall enter into an
underwriting agreement with such underwriters for such offering, which agreement
will contain such representations and warranties by Linens and such other terms
and provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnification and contribution provisions substantially to the effect and to
the extent provided in Section 2.7, and agreements as to the provision of
opinions of counsel and accountants' letters to the effect and to the extent
provided in Section 2.4(e). The Selling Holders on whose behalf the Registrable
Securities are to be distributed by such underwriters shall be parties to any
such underwriting agreement and the representations and warranties by, and the
other agreements on the part of, Linens to and for the benefit of such
underwriters, shall also be made to and for the benefit of such Selling Holders.
Such underwriting agreement shall also contain such representations and
warranties by such Selling Holders and
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39
such other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnification and contribution provisions substantially to the
effect and to the extent provided in Section 2.7.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the 1933 Act
pursuant to this Article II, Linens shall give the Holders of such Registrable
Securities and the underwriters, if any, and their respective counsel and
accountants, such reasonable and customary access to its books, records and
properties and such opportunities to discuss the business and affairs of Linens
with its officers and the independent public accountants who have certified the
financial statements of Linens as shall be necessary, in the opinion of such
Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the 1933 Act; provided, that such
Holders and the underwriters and their respective counsel and accountants shall
use their reasonable best efforts to coordinate any such investigation of the
books, records and properties of Linens and any such discussions with Linens'
officers and accountants so that all such investigations occur at the same time
and all such discussions occur at the same time.
2.7. Indemnification and Contribution. (a) Linens agrees to
indemnify and hold harmless each Selling Holder and each person, if any, who
controls each Selling Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or any amendment
thereof, any preliminary prospectus or prospectus (as amended or supplemented if
Linens shall have furnished any amendments or supplements thereto) relating to
the Registrable Securities, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to a
Selling Holder furnished to Linens in writing by a Selling Holder expressly for
use therein. Linens also agrees to indemnify any
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40
underwriter of the Registrable Securities so offered and each person, if any,
who controls such underwriter on substantially the same basis as that of the
indemnification by Linens of the Selling Holder provided in this Section 2.7(a).
(b) Each Selling Holder agrees to indemnify and hold harmless
Linens, its directors, the officers who sign the Registration Statement and each
person, if any who controls Linens within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or any amendment
thereof, any preliminary prospectus or prospectus (as amended or supplemented if
Linens shall have furnished any amendments or supplements thereto) relating to
the Registrable Securities, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with reference to information
relating to a Selling Holder furnished in writing by or on behalf of a Selling
Holder expressly for use in a registration statement, any preliminary
prospectus, prospectus or any amendments or supplements thereto. Each Selling
Holder also agrees to indemnify any underwriter of the Registrable Securities so
offered and each person, if any, who controls such underwriter on substantially
the same basis as that of the indemnification by such Selling Holder of Linens
provided in this Section 2.7(b).
(c) Each party indemnified under paragraph (a) or (b) above
shall, promptly after receipt of notice of a claim or action against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the claim or action; provided, that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party on account of the indemnity agreement
contained in paragraph (a) or (b) above except to the extent that the
indemnifying party was actually prejudiced by such failure, and in no event
shall such failure relieve the indemnifying party from any other liability that
it may have to such indemnified party. If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying party thereof, unless in such indemnified party's reasonable
judgment a conflict of
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interest between such indemnified party and indemnifying parties may exist in
respect of such claim, the indemnifying party shall be entitled to participate
therein, and, to the extent that it wishes, jointly with any other similarly
notified indemnifying party, to assume the defense thereof with counsel
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 2.7 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. Any indemnifying party against whom indemnity
may be sought under this Section 2.7 shall not be liable to indemnify an
indemnified party if such indemnified party settles such claim or action without
the consent of the indemnifying party. The indemnifying party may not agree to
any settlement of any such claim or action, other than solely for monetary
damages for which the indemnifying party shall be responsible hereunder, the
result of which any remedy or relief shall be applied to or against the
indemnified party, without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld. In any action hereunder as to
which the indemnifying party has assumed the defense thereof with counsel
satisfactory to the indemnified party, the indemnified party shall continue to
be entitled to participate in the defense thereof, with counsel of its own
choice, but the indemnifying party shall not be obligated hereunder to reimburse
the indemnified party for the costs thereof.
(d) If the indemnification provided for in this Section 2.7
shall for any reason be unavailable (other than in accordance with its terms) to
an indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, cost, claim or damage (A)
as between Linens and the underwriters, (i) in such proportion as is appropriate
to reflect the relative benefits received by Linens on the one hand and the
underwriters on the other hand from the offering of the Registrable Securities
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in
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such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations, and (B) as between (x) Linens and the Selling Holders,
or (y) the Selling Holders and the underwriters, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by Linens on the one hand and the
underwriters on the other hand in connection with the offering of the
Registrable Securities shall be deemed to be in the same respective proportions
as the net proceeds from the offering of the Registrable Securities (before
deducting expenses) (as if, for purposes of this clause (d), Linens had received
the proceeds of any secondary offering) and the total underwriting discounts and
commissions received by the underwriters, in each case as set forth in the table
on the cover of a prospectus, bear to the aggregate public offering price of the
Registrable Securities. The relative fault of Linens and the Selling Holder on
the one hand and the underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by Linens, by a Selling Holder or by the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by an indemnified party as a result of the loss, cost, claim,
damage or liability, or action in respect thereof, referred to above in this
paragraph (d) shall be deemed to include, for purposes of this paragraph (d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. Linens and
the Selling Holders agree that it would not be just and equitable if
contribution pursuant to this Section 2.7 were determined by pro rata allocation
(even if the underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in this paragraph. Notwithstanding any other
provision of this Section 2.7, no Selling Holder shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities of such Selling Holder were offered to the public exceeds
the amount of any damages which such Selling Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. Each Selling Holder's obligations to
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contribute pursuant to this Section 2.7 are several in proportion to the
proceeds of the offering received by such Selling Holder bears to the total
proceeds of the offering received by all the Selling Holders and not joint. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) Indemnification and contribution similar to that specified
in the preceding paragraphs of this Section 2.7 (with appropriate modifications)
shall be given by Linens, the Selling Holders and underwriters with respect to
any required registration or other qualification of securities under any state
law or regulation or governmental authority.
(f) The obligations of the parties under this Section 2.7
shall be in addition to any liability which any party may otherwise have to any
other party.
2.8. Rule 144 and Form S-3. Commencing 90 days after the
Initial Public Offering Date, Linens shall use its best efforts to ensure that
the conditions to the availability of Rule 144 set forth in paragraph (c)
thereof shall be satisfied. Upon the request of any Holder of Registrable
Securities, Linens will deliver to such Holder a written statement as to whether
it has complied with such requirements. Linens further agrees to use its
reasonable efforts to cause all conditions to the availability of Form S-3 (or
any successor form) under the 1933 Act for the filing of registration statements
under this Agreement to be met as soon as practicable after the Initial Public
Offering Date.
2.9. Transfer of Registration Rights. Any Holder may, at any
time prior to January 1, 1998, transfer all or any portion of its rights under
Article II to any transferee of Registrable Securities owned by such Holder
(each transferee that receives such Registrable Securities, a "Transferee"). Any
transfer of registration rights pursuant to this Section 2.9 shall be effective
upon receipt by Linens of (i) written notice from such Holder stating the name
and address of any Transferee and identifying the number of Registrable
Securities with respect to which the rights under this Agreement are being
transferred and the nature of the rights so transferred and (ii) a written
agreement from such Transferee to be bound by the terms of this Appendix. The
Holders may exercise their rights hereunder in such priority as they shall agree
upon among themselves.
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2.10. Holdback Agreement. If any registration pursuant to this
Article II shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any public sale
or distribution, including any sale under Rule 144, of any equity security of
Linens (otherwise than through the registered public offering then being made),
within 7 days prior to or 90 days (or such lesser period as the lead or managing
underwriters may permit) after the effective date of the registration statement
(or the commencement of the offering to the public of such Registrable
Securities in the case of Rule 415 Offerings). Linens hereby also so agrees and
agrees to cause each other holder of equity securities or securities convertible
into or exchangeable or exercisable for such securities (other than in the case
of equity securities issued under dividend reinvestment plans or employee stock
plans) purchased from Linens otherwise than in a public offering to so agree.
2.11 Restrictions on Other Registrations and Registration
Rights. (a) If during the period after Expiration of the Lockup Period and
prior to any written notice having been provided by a CVS Holder to Linens
pursuant to Section 2.1(a) in respect of the CVS Unfettered Demand Registration
Linens desires to register any of its equity securities under the 1993 Act for
sale for its own account, Linens may during such period notify CVS to such
effect. Within 14 days after receipt of such notice from Linens, a CVS Holder
may provide written notice to Linens exercising such CVS Holder's right to
require that the CVS Unfettered Demand Registration then be effected pursuant to
Section 2.1, in which case Linens shall have the right to include additional
securities in the CVS Unfettered Demand Registration for Linens' own account to
the extent permitted by Section 2.1(e). If no CVS Holder within such 14 day
period exercises the right of a CVS Holder to require that the CVS Unfettered
Demand Registration then be effected pursuant to Section 2.1, Linens may proceed
to effect a registration of any of its equity securities for its own account;
provided that (i) the CVS Holders shall not in such case lose their right to
require that the CVS Unfettered Demand Registration be effected at any time
thereafter pursuant to Section 2.1(a), (ii) if Linens does not effect such
registration for its own account within 30 days after the end of such 14 day
period, Linens shall not be permitted to effect such registration without first
again complying with the provisions of this Section 2.11(a), and (iii) Linens
shall be required to again comply with the provisions of this Section 2.11(a)
should Linens desire to effect a subsequent registration of its equity
securities for its own account during the period referred to in the first
sentence of this Section 2.11(a).
(b) Notwithstanding anything else contained in the Stockholder
Documents, except as provided in Section 2.11(a), Linens shall not,
without the prior written consent of CVS:
(i) effect the registration under the 1933 Act of any equity
security of Linens for sale for the account of Linens or any other
Person (except for (i) any registration requested by a CVS Holder in
accordance with the terms hereof, and (ii) any registration on Form S-8
of securities issued to Linens employees pursuant to stock option or
other executive or employee benefit or compensation plans) until after
completion of the Unfettered CVS Demand Registration, or
(ii) grant or issue to any Person any right, or enter into any
agreement with any Person entitling such Person, to request or require
that Linens effect, prior to January 1, 1998, the registration under
the 1933 Act of any security of Linens for the account of any Person
(other than the rights granted to the Holders hereunder).
ARTICLE III
PRIVATE PLACEMENTS
3.1 Private Placements. (a) Linens will use its reasonable
best efforts to cooperate with and assist the CVS Holders, at their request, in
the marketing by the CVS Holders, at any time and from time to time prior to
December
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31, 1997, of any securities of Linens held by the CVS Holders in any private
transaction not requiring registration under the 1933 Act, including without
limitation (i) providing reasonable access to Linens' books, records,
properties, offices, officers, employees, accountants, counsel, and other
agents, (ii) making available senior management of Linens for participation in
analyst, investor and "road show" presentations, and (iii) in preparation of a
private placement memorandum or other selling or marketing materials (the
"Selling Materials") relating to any such sale of Linens securities.
(b) Linens shall be responsible for all expenses incurred in
connection with such co-operation, assistance and marketing efforts contemplated
by Section 3.1(a), including, without limitation, (1) the fees, disbursements
and expenses of Linens' counsel and accountants in connection therewith, (2) all
expenses in connection with the preparation and printing of all Selling
Materials and amendments and supplements thereto and the mailing and delivering
of copies thereof to any placement agents and other intermediaries, (3) the cost
of preparing and printing or producing any agreements with placement agents or
other intermediaries involved in such private placement transaction and any blue
sky or legal investment memoranda, any selling agreements and any other
documents in connection with the offering, sale or delivery of the securities to
be disposed of, (4) all expenses in connection with the qualification of the
securities to be disposed of for offering and sale under state securities laws,
including the fees and disbursements of counsel for the placement agents or
other intermediaries or the CVS Holders of securities in connection with such
qualification and in connection with any blue sky and legal investment surveys,
(5) transfer agents' and registrars' fees and expenses and the fees and expenses
of any other agent or trustee appointed in connection with such transaction, (6)
all security engraving and security printing expenses, (7) all fees and expenses
payable in connection with the rating of such securities, (8) any other fees and
disbursements of placement agents or other intermediaries customarily paid by
the issuers of securities, but excluding placement or selling fees and
commissions and transfer taxes, if any, (9) the costs and expenses of Linens
relating to analyst or investor presentations or any "road show" undertaken in
connection with the marketing of any such securities, and (10) other reasonable
out-of-pocket expenses of CVS Holders in connection therewith. Notwithstanding
the foregoing, (i) each CVS Holder and Linens shall be responsible for its own
internal administrative and similar costs, and (ii) each CVS Holder shall be
responsible for the legal fees and expenses
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of its own counsel in connection with any marketing efforts requested by a CVS
Holder pursuant to Section 3.1.
(c) Linens agrees to indemnify and hold harmless each CVS
Holder and each person, if any, who controls each CVS Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or alleged untrue statement of a material fact contained in any such Selling
Materials or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to a CVS Holder
furnished to Linens in writing by a CVS Holder expressly for use therein. CVS
agrees to indemnify and hold harmless Linens and each person who so controls
Linens to the same extent as the foregoing indemnity by Linens of the CVS
Holders and persons so controlling the CVS Holders but only with reference to
information relating to a CVS Holder furnished to Linens in writing by a CVS
Holder expressly for use therein. The provisions and procedures set forth in
Section 2.7(c) shall apply in the case of any indemnification claim made under
the foregoing provisions of this Section 3.1(c).
(d) To the extent that indemnification under Section 3.1(c) is
unavailable for any reason or insufficient to hold any indemnified party
harmless, the indemnifying party will contribute to the amount paid or payable
by the indemnified party, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in the losses, claims, damages or liabilities (with
such relative fault to be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by Linens or by a CVS Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission).
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(e) Nothing contained in this Article III and no performance
by Linens of its obligations under this Article III shall in any way limit or
reduce the rights of any Holder under Article II or any other provision of
Appendix A.
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