STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of December 2, 1996 (the "Agreement")
between CVS Corporation, a Delaware corporation ("CVS"), Nashua Xxxxxx CVS,
Inc., a New Hampshire corporation ("Nashua Xxxxxx"), 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 32.5% 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
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 date on which the closing
of the Initial Public Offering is consummated.
"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 and Related Party Transactions".
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Section 2.03. Insurance; Third Party Obligations; Tax 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
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Indemnified Party to give notice as provided in this Section 2.05 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
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Party has not acknowledged liability, within 15 days after such 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 (which will be guaranteed only through the initial term thereof), 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
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and, except in the case of the Scheduled Leases (which will be guaranteed only
through the initial term thereof), any extension thereof pursuant to the
exercise of any such renewal option. CVS 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 in the manner described in the
Registration Statement.
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 0000 Xxx) of Persons shall become the
beneficial owner (within the meaning of Rule 13d-3 under the 0000 Xxx) 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
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Licenses. Neither Group shall have any right or license in or to any technology,
software, intellectual property (including any trademark, service xxxx, patent
or copyright), know-how or other proprietary right owned, licensed or held for
use by the other Group.
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 Xxxxxx 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
Group, including, without limitation, for audit, accounting, litigation and
disclosure and reporting purposes.
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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 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
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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
Section 6.01. Employee Matters. 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 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
0 XXX Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer and
General Counsel
With a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
If to Linens, to:
Linens 'n Things, Inc.
0 Xxxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Telecopy: (000) 000-0000
Attention:
With a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall
15
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), 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.
16
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
17
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 XXXXXX CVS, INC.
By
-----------------------------
Name:
Title:
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 Xxxxxxxx Xxxxxxxx or each
individual 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
20
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
22
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
23
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 by 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.
24
