LINENS N THINGS INC, S-1, 1996-09-18

LINENS N THINGS INC
S-1, 1996-09-18

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==============================================================================
As filed with the Securities and Exchange Commission on September 18, 1996

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Linens 'n Things, Inc.

(Exact name of Registrant as specified in its charter)

Delaware 5700 22-3463939
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)

6 Brighton Road
Clifton, NJ 07015
(201) 778-1300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

Norman Axelrod
Chief Executive Officer and President
6 Brighton Road
Clifton, NJ 07015
(201) 778-1300
(Name, address, including zip code, and telephone number, including area
code, of agent for service)

Copies to:

Sarah Jones Beshar, Esq. Roger H. Kimmel, Esq.
Davis Polk & Wardwell Latham & Watkins
450 Lexington Avenue 885 Third Avenue
New York, NY 10017 New York, NY 10022
(212) 450-4000 (212) 906-1200

Approximate date of commencement of proposed sale to public:
As soon as practicable after the Registration Statement becomes effective.

If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ ]

If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class Aggregate Offering Amount of
of Securities to be Registered Price(1) Registration Fee
------------------------------ ------------------ ----------------

<S> <C> <C>
Common Stock, par value $.01 per share.................. $275,000,000 $94,828

<FN>
- --------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of
1933. The proposed maximum aggregate offering price includes amounts
attributable to shares that may be purchased by the Underwriters to
cover over-allotments, if any.
</TABLE>

The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1996

LINENS 'N THINGS, INC.
Common Stock

(par value $.01 per share)

All of the shares of Common Stock (the "Common Stock") of Linens 'n Things,
Inc. ("Linens 'n Things" or the "Company") offered hereby (the
"Offering") are being sold by the Selling Shareholder named herein under
"Principal and Selling Shareholder." The Company will not receive any
proceeds from the sale of shares by the Selling Shareholder. Prior to
the Offering, there has been no public market for the Common Stock. It
is anticipated that the initial public offering price will be between $
and $ per share. For information relating to factors considered in
determining the initial public offering price, see "Underwriting."

Application has been made to list the Common Stock on the
New York Stock Exchange under the proposed symbol "LIN",
subject to official notice of issuance.

For a discussion of certain factors that should be considered in
connection with an investment in the Common Stock, see "Risk Factors"
beginning on page 8 herein.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Shareholder(1)
------ ----------- --------------
Per Share...... $ $ $
Total(2)....... $ $ $

(1) Before deduction of expenses payable by the Selling Shareholder estimated
at $ .

(2) The Selling Shareholder has granted the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase a
maximum of additional shares in order to cover over-allotments of
shares. If the option is exercised in full, the total Price to Public
will be $ , Underwriting Discounts and Commissions will
be $ and Proceeds to the Selling Shareholder will be $ .

The shares will be offered by the several Underwriters when, as
and if delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or part. It is expected that the shares will
be ready for delivery on or about , 1996, against payment in
immediately available funds.

CS First Boston Donaldson, Lufkin & Jenrette
Securities Corporation
The date of this Prospectus is , 1996.

[Image material appears here
consisting of a map of the United States
with current store locations.]

[Image material appears here
consisting of various photos
displaying the Company's merchandise.]

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS
PARTICIPATING IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN
ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO
EXEMPTIONS FROM RULES 10b-6, 10b-7, AND 10b-8 UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and
financial statements appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus assumes the
Underwriters' over-allotment option is not exercised. All pro forma
information in this Prospectus gives effect to: (i) the Reorganization (as
defined in "Capitalization") and (ii) the Offering.

The Company

Linens 'n Things, Inc. (with its subsidiaries and its
predecessors, "Linens 'n Things" or the "Company") is one of the leading,
national large format retailers of home textiles, housewares and home
accessories operating in 32 states. According to Home Textiles Today,
Linens 'n Things was the largest specialty retailer (as measured by sales)
in the home linens category in 1995. As of June 29, 1996, the Company
operated 113 superstores averaging approximately 32,000 gross square feet
in size and 42 smaller traditional stores averaging approximately 10,000
gross square feet in size. The Company's newest superstores range between
35,000 and 40,000 gross square feet in size and are located in strip malls
or power center locations. The Company's business strategy is to offer a
broad assortment of high quality, brand name merchandise at everyday low
prices, provide efficient customer service and maintain low operating costs.

Linens 'n Things' extensive selection of over 25,000 stock
keeping units ("SKUs") in its superstores is driven by the Company's
commitment to offering a broad and deep assortment of high quality, brand
name "linens" (e.g., bedding, towels and pillows) and "things" (e.g.,
housewares and home accessories). Brand names sold by the Company include
Wamsutta, Cannon, Laura Ashley, Martex, Waverly, Royal Velvet, Braun,
Krups, Calphalon and Henckel. The Company also sells an increasing amount
of merchandise under its own private label (approximately 10% of sales)
which is designed to supplement the Company's offering of brand name
products by offering high quality merchandise at value prices. The
Company's merchandise offering is coupled with a "won't be undersold"
everyday low pricing strategy with price points substantially below regular
department store prices and comparable with or below department store sale
prices.

From its founding in 1975 through the late 1980s, the
Company operated a chain of traditional stores ranging between 7,500 and
10,000 gross square feet in size. Beginning in 1990, the Company
introduced its superstore format which has evolved from 20,000 gross square
feet in size to its current size of 35,000 to 40,000 gross square feet,
offering a broad merchandise assortment in a more visually appealing,
customer friendly format. This superstore roll-out has resulted in the
closing or relocation of 99 of the Company's traditional stores through
June 29, 1996. As a result of superstore openings and traditional store
closings, the Company's gross square footage more than tripled from 1.2
million to 4.0 million between January 1991 and June 29, 1996, although its
store base only increased 10%, from 141 to 155 during this period. Over
this same period, the Company's net sales increased from $202.1 million for
the year ended December 31, 1990 to $601.3 million for the twelve months
ended June 29, 1996. In addition, as part of its strategic initiative to
capitalize on customer demand for one-stop shopping, the Company has
balanced its merchandise mix from being driven primarily by the "linens"
side of its business to a fuller assortment of "linens" and "things." The
Company estimates that the "things" side of its business has increased from
less than 5% of net sales in 1991 to 35% in 1996.

Key components of the Company's strategy to increase sales
and profitability are: (i) new superstore expansion and (ii) increasing
productivity of the existing store base. Principal elements of the
Company's growth strategy are highlighted as follows:

New Store Expansion. The Company's expansion strategy is to
increase market share in existing markets and to penetrate new markets in
which the Company believes it can become a leading operator of home
furnishings superstores. The Company believes that it is well-positioned
to take advantage of the continued market share gain by the superstore
chains in the home furnishings sector. The Company believes there is an
opportunity to more than triple the number of its current prototype
superstores across the country, providing the Company with significant
growth opportunities to profitably enter new markets, as well as backfill
in existing markets. In 1996, the Company plans to open 36 superstores, of
which 14 have already been opened, and close 18 stores (primarily
traditional stores), of which 14 stores have already been closed. In 1997,
the Company plans to open 20 to 25 superstores and close approximately 10
to 12 stores (primarily traditional stores).

Increase Productivity of Existing Store Base. The Company is
committed to increasing its sales per square foot, inventory turnover ratio
and return on invested capital. The Company believes the following
initiatives will allow it to achieve this goal:

Enhance Merchandise Mix and Presentation. The Company continues to
explore opportunities to increase sales in its "things" segment while
maintaining the strength of its "linens" side of the business. The
Company's long-term goal is to increase the sales of the "things"
segment to approximately 50% of net sales. The Company expects this
shift to positively impact net sales per square foot and inventory
turnover since "things" merchandise tends to be more impulse driven
merchandise as compared to the "linens" portion of the business. In
addition, the Company intends to continue improving its merchandising
presentation and techniques, space planning and store layout to further
improve the productivity of its existing and future superstore
locations.

Increase Operating Efficiencies. As part of its strategy to increase
operating efficiencies, the Company has invested significant capital in
building a centralized infrastructure, including a distribution center
and a management information system, which it believes will allow it to
maintain low operating costs as it pursues its superstore expansion
strategy. In July 1995, the Company began full operations of its
275,000 square foot distribution center in Greensboro, North Carolina.
Management estimates that by the end of 1996 approximately 80% of
merchandise will be received at the Company's distribution center, as
compared to approximately 20% received at the distribution center in
1995. Management believes that the increased utilization of the
distribution center will result in lower average freight costs, more
efficient scheduling of inventory shipments to the stores, improved
inventory turnover, better in-stock positions and improved information
flow. In addition, the Company believes that the transfer of inventory
receiving responsibilities from the stores to the distribution center
allows the store sales associates to redirect their focus to the sales
floor, thereby increasing the level of customer service. The Company's
ability to effectively manage its inventory is also enhanced by a
centralized merchandising management team and its MIS system which
allows the Company to more accurately monitor and better balance
inventory levels and improve in-stock positions in its stores.

Continue Conversion of Store Base to Superstore Format. As of June 29,
1996, the Company operated 113 superstores, representing 73% of its
total stores, and 42 traditional stores. The Company plans to close or
relocate approximately 15 of the 42 traditional stores by the end of
1997. Although the remaining traditional stores are currently
profitable, the Company's long-term plans include closing most of the
remaining traditional stores as opportunities arise.

The Company was founded in 1975 and was operated as a private
company until it was acquired in 1983 by Melville Corporation (which plans to
be known as "CVS Corporation" by the end of 1996) (together with its
subsidiaries, "CVS"). The Company's corporate offices are located at 6
Brighton Road, Clifton, New Jersey 07015, and its telephone number is (201)
778-1300.

The Offering

<TABLE>
<S> <C>
Common Stock offered by the Selling Shareholder...................... shares
Common Stock to be outstanding after the Offering(1)................. shares
Dividend policy...................................................... After the completion of the Offering,
the Company intends to retain all
earnings for the foreseeable future for
use in the operation and expansion of its
business and, accordingly, the Company
currently has no plans to pay cash
dividends on the Common Stock. See
"Dividend Policy."
Proposed New York Stock Exchange symbol.............................. "LIN"
</TABLE>

- --------------
(1) Excludes approximately shares issuable upon the exercise of stock
options to be granted prior to completion of the Offering. See
"Underwriting" and "Management--1996 Incentive Compensation Plan" and
"Management--1996 Non-Employee Director Stock Plan."

Summary Financial and Operating Data

<TABLE>
<CAPTION>
Twenty-six
Year Ended December 31, Weeks Ended(1)
----------------------- --------------
July 1, June 29,
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data and selected operating data)

<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements of Operations
Data:
Net sales............................. $221,360 $270,889 $333,178 $440,118 $555,095 $239,588 $285,816
Gross profit.......................... 89,985 108,794 133,871 174,397 209,933 (2) 90,683 106,750
Selling, general & administrative
expense............................. 82,666 95,904 112,135 142,155 190,826 (2) 83,126 106,735
Restructuring and asset impairment
charges............................. -- 13,100 (3) -- -- 10,974 (2) -- --
Operating profit (loss)............... 7,319 (210)(3) 21,736 32,242 8,133 (2) 7,557 15
Interest expense, net................. 1,610 1,301 1,398 3,170 7,059 3,212 3,820
Income (loss) before provision for
income taxes and cumulative
effect of change in accounting
principle........................... 5,709 (1,511) 20,338 29,072 1,074 4,345 (3,805)
Net income (loss)..................... 3,758 (1,201) 11,719 17,198 (212) 2,326 (2,197)
Net income (loss) per share...........
Weighted average number of shares
outstanding.........................

Pro Forma Data(4):
Pro forma net income.................. 15,752 (740)
Pro forma net income (loss) per
share(5)............................

Selected Operating Data:
Number of stores:
At beginning of period.............. 141 143 144 143 145 145 155
Opened during period................ 12 22 20 29 28 6 14
Closed during period................ 10 21 21 27 18 9 14
-- -- -- -- -- -- --

At end of period:
Traditional stores................ 133 119 98 71 54 62 42
Superstores....................... 10 25 45 74 101 80 113
-- -- -- -- --- -- ---

Total stores........................ 143 144 143 145 155 142 155
=== === === === === === ===

Total gross square feet of store space
(000's)(6).......................... 1,350 1,633 2,078 2,865 3,691 2,984 4,034
Net sales per gross square foot(6)(7). $ 188 $ 185 $ 187 $ 190 $ 178 $ 190(8) $ 171(8)
Increase (decrease) in comparable
store net sales(9).................. (1.1%) 7.5% 5.0% 5.4% (1.5%)(10) 3.2% (2.7%)(10)
</TABLE>

June 29, 1996
--------------------------
Actual Pro Forma(4)
------ ------------
(Dollars in thousands)
Balance Sheet Data:
Working capital............. $106,864
Total assets................ 358,148
Total debt(11).............. 36,363
Shareholders' equity........ 204,491

- ----------
(1) The operating results for interim periods are not necessarily
indicative of the results that may be expected for a full year. The
Company's quarters end on the Saturday nearest to the end of the last
month of such quarter, except the fourth quarter which ends on December
31.

(2) Reflects certain one-time special charges related to the CVS Strategic
Program (as defined in "Management's Discussion and Analysis of
Financial Condition and Results of Operations"). Gross profit and
operating profit in 1995 excluding the effect of these charges would
have been $218.1 million and $31.5 million, respectively. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."

(3) Reflects a $13.1 million realignment charge associated with the
anticipated costs of closing 66 traditional stores from 1993 to 1995.
This charge includes the write-down of fixed assets, lease settlement
costs, severance and inventory liquidation costs. Operating profit in
1992 excluding the effect of this charge would have been $12.9 million.

(4) Pro forma to give effect to the Reorganization. See "Capitalization"
and "Unaudited Pro Forma Consolidated Statements of Operations."

(5) Pro forma net income (loss) per share is based on the weighted average
number of shares of common stock outstanding during the period after
consideration of the dilutive effect, if any, of stock options granted.
See "Consolidated Financial Statements" and "Unaudited Pro Forma
Consolidated Statements of Operations."

(6) Store space includes the storage, receiving and office space that
generally occupies 10% to 15% of total store space. All numbers
provided for the end of the respective periods.

(7) Net sales per square foot is the result of dividing net sales for the
period by the average of gross square footage at the beginning of the
year and at the end of each interim quarterly and year period.

(8) Amounts for interim periods are calculated based on annual net sales
for the 52 weeks ending at the end of such interim period.

(9) New store net sales become comparable in the first full month
following 13 full months of operations. Stores that undergo major
expansion or that are relocated are not included in the comparable
store base.

(10) The decrease in comparable store net sales during 1995 and the
twenty-six weeks of 1996 was primarily due to new competitive
intrusions in existing markets at approximately 40% of the Company's
superstores included in the comparable store base which previously had
limited competition from other superstores. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."

(11) Total debt consists of short-term intercompany indebtedness due
primarily to CVS.

RISK FACTORS

Prospective investors should carefully consider the factors
set forth below, as well as other information contained in this Prospectus,
in evaluating an investment in the Common Stock.

Lack of Operating History as a Stand-Alone Company

The Company has not operated as a stand-alone or public
company, and the historical financial data reflects periods during which the
Company did not operate as an independent company and, accordingly, certain
allocations were made in preparing such financial data. The Company is
subject to the risks and uncertainties associated with any newly independent
company. Prior to the date of the Offering , the Company had access to
financial and other support from CVS. Following the consummation of the
Offering, the Company will no longer be able to rely on CVS for financial
support or benefit from its relationship with CVS to obtain credit or receive
favorable terms for the purchase of certain limited goods and services.
Accordingly, in the future, the costs of financing of the Company may be
higher than historical costs reflected in the Company's financial statements.
See "Unaudited Pro Forma Consolidated Statements of Operations."

Prior to the Offering, CVS has acted as the guarantor with
regard to substantially all of the Company's store leases. After the
Offering, although CVS will continue to guarantee the Company's store
leases where CVS has guaranteed such leases in the past (including
extensions and renewals relating to certain of such leases), CVS will no
longer enter into commitments to guarantee future leases on behalf of the
Company. Pursuant to a stockholder agreement to be entered into between
the Company and CVS (the "Stockholder Agreement") at the time of the
Offering, the Company has agreed to indemnify CVS with respect to all
losses incurred by CVS in connection with the Company's failure to pay or
otherwise perform under the guaranteed leases. See "Relationship with
CVS." There can be no assurance in the future that store leases will be
available, or that the Company will be able to secure leases, on similar
terms or in as desirable locations, as those that were available to the
Company in the past.

Prior to the Offering, CVS provided certain administrative
functions to the Company, most of which will be terminated following the
completion of the Offering. CVS will continue to provide certain services
to the Company pursuant to a transitional services agreement and the
stockholder agreement. Although management believes that the costs of the
services to be provided by CVS pursuant to these agreements are competitive
with costs for similar services provided by third parties, the stockholder
and transitional services agreements will not result from arm's length
negotiations. See "Relationship with CVS." In the future, certain of the
costs associated with the administrative services and other costs to the
Company may be higher than the historical costs reflected in the Company's
financial statements. See "Unaudited Pro Forma Consolidated Statements of
Operations."

Risks of Growth Strategy

The growth of the Company is dependent, in large part, upon
the Company's ability to successfully execute its expansion program and to
increase productivity of the existing store base. In 1996, pursuant to the
expansion program the Company plans to open 36 superstores, of which 14
have already been opened, and close 18 stores (primarily traditional
stores), of which 14 stores have already been closed. During 1997, the
Company plans to open 20 to 25 superstores and close approximately 10 to 12
stores (primarily traditional stores). See "Business--Growth Strategy--New
Store Expansion." The success of the Company's expansion program will be
dependent upon, among other things, the identification of suitable markets
and sites for new superstores, negotiation of leases on acceptable terms,
construction or renovation of sites and obtaining financing for those
sites. In addition, the Company must be able to hire, train and retain
competent managers and personnel and manage the systems and operational
components of its growth. The failure of the Company to open new
superstores on a timely basis, obtain acceptance in markets in which it
currently has limited or no presence, attract qualified management and
personnel or appropriately adjust operational systems and procedures would
adversely affect the Company's future operating results. In addition,
there can be no assurance that as the Company opens new superstores in
existing markets, that these new stores will not have an adverse effect on
comparable store net sales at already existing stores in these markets. In
addition, the Company plans to increase productivity at the existing store
base in part by enhancing its merchandise and presentation mix. There is
no assurance that the Company will be able to increase store profitability
by enhancing its merchandise and presentation mix. See "Business -- Growth
Strategy -- Increase Productivity of Existing Store Base." There can be no
assurance that the Company will be able to successfully implement its
growth strategies or maintain its current growth levels.

Competition

The market for home textiles, housewares and home
accessories is fragmented and highly competitive. The Company competes
with many different types of retailers that sell many or most of the items
sold by the Company, including department stores, mass merchandisers,
specialty retail stores, mail order and other retailers. Many of the
Company's competitors have substantially greater financial and other
resources than the Company, including, in some cases, more profitable store
economics or better name recognition. See "Business--Industry" and
"Business--Competition." In addition, there can be no assurance that
additional competitors will not enter the Company's existing or planned new
markets. Increased competition by existing or future competitors,
resulting in the Company reducing prices in an effort to gain or retain
market share, could result in reductions in the Company's sales and
profitability which could have a material adverse effect on the Company's
business and financial condition. In 1995 and the twenty-six weeks of
1996, the Company experienced new competitive intrusions in existing
markets at approximately 40% of its superstores included in the comparable
store base which previously had limited competition from other superstores.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations."

Reliance on Systems and Distribution Center

The Company relies upon its existing management information
systems in operating and monitoring all major aspects of the Company's
business, including sales, warehousing, distribution, purchasing, inventory
control, merchandise planning and replenishment, as well as various
financial systems. Any disruption in the operation of the Company's
management information systems, or the Company's failure to continue to
upgrade, integrate or expend capital on such systems as its business
expands, would have a material adverse effect upon the Company. In
addition, the Company is committed to a centralized distribution strategy
and, as a result, began full operations of its new distribution center in
July 1995. As of the end of 1995, only 20% of the Company's inventory was
received through the distribution center, which amount is projected to
increase to 80% by the end of 1996. Despite the limited operating history
of the Company's distribution center, management believes the systems and
controls related to the distribution center are fully integrated and are
adequate to support the Company's growth over the next few years. Any
disruption in the operations of the distribution center would have a
material adverse effect on the Company's business. See "Business--Growth
Strategy--Increase Productivity of Existing Store Base" and "Business--
Management Information Systems."

Effect of Economic Conditions and Consumer Trends

The success of the Company's operations depends upon a number
of factors relating to consumer spending, including future economic conditions
affecting disposable consumer income such as employment, business conditions,
interest rates and taxation. If existing economic conditions deteriorate,
consumer spending may decline, thereby adversely affecting the Company's
business and results of operations.

In addition, the success of the Company depends on its ability
to anticipate and respond to changing merchandise trends and consumer demands
in a timely manner. If the Company miscalculates either the market for its
merchandise or its customers' purchasing habits, it may be required to sell a
significant amount of inventory at reduced margins. These outcomes may have a
material adverse effect on the Company's operating results and financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

Reliance on Key Vendors

The Company purchases its inventory from approximately 1,000
suppliers and has no long-term purchase commitments or exclusive contracts
with any vendor or supplier. Springs Industries, Inc., through its various
operating companies, supplied approximately 15% of the Company's total
purchases in 1995. The Company also purchases significant amounts of
products from other key suppliers, none of which supplied greater than 10%
of the Company's purchases in 1995. The Company's results of operations
could be adversely affected by a disruption in purchases from any of these
key suppliers. In addition, many of the Company's key suppliers currently
provide the Company with certain incentives, such as volume purchasing
allowances, trade discounts, cooperative advertising and other purchasing
incentives. A reduction or discontinuance of these incentives could have a
material adverse effect on the Company. Although the Company believes that
its relationships with key vendors are good, the Company has no supply
contracts with any of its vendors, and any vendor could discontinue selling
to the Company at any time.

Dependence Upon Key Employees

The Company's success is largely dependent on the efforts and
abilities of its executive officers, particularly, Norman Axelrod, Chief
Executive Officer and President. The loss of the services of Mr. Axelrod
could have a material adverse impact on the Company. Prior to the Offering,
the Company will enter into an employment agreement with Mr. Axelrod. The
Company's success is also dependent upon its ability to continue to attract
and retain qualified employees to meet the Company's needs for its planned
expansion. See "Business--Business Strategy" and "Management."

Seasonality and Quarterly Fluctuations

The Company's business is subject to substantial seasonal
variations. Historically, the Company has realized a significant portion
of its net sales and substantially all of its net income for the year
during the third and fourth quarters, with a majority of net sales and net
income for such quarters realized in the fourth quarter. The Company's
quarterly results of operations may also fluctuate significantly as a
result of a variety of other factors, including the timing of new store
openings. The Company believes this is the general pattern associated with
its segment of the retail industry and expects this pattern will continue
in the future. In anticipation of its peak selling season, the Company
substantially increases its inventory levels and hires a significant number
of part-time employees. If for any reason the Company's sales during the
fourth quarter were substantially below expectations, the Company's annual
results would be adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Control of the Company by CVS

Upon completion of the Offering, Nashua Hollis CVS, Inc. (a
wholly owned, indirect subsidiary of CVS), the Company's former parent and the
Selling Shareholder, will beneficially own % of the outstanding Common
Stock ( % if the Underwriters' over-allotment option is exercised in
full). Consequently, as a result of CVS's ownership of the outstanding Common
Stock, CVS will be in a position to significantly influence the outcome of all
matters requiring a shareholder vote, including the election of directors. In
addition, pursuant to the Stockholder Agreement, CVS shall have the right to
designate (i) members of the Board of Directors of the Company so long as
CVS in aggregate owns at least % of the total votes represented by the
total outstanding voting stock, (ii) members of the Board of Directors of
the Company, so long as CVS in aggregate owns at least % but less than %
of the total outstanding voting stock, and (iii) zero members of the Board of
Directors of the Company as soon as CVS in aggregate owns less than % of
the total outstanding voting stock. The share ownership of CVS may also make
any takeover of the Company pursuant to a tender offer more difficult if CVS
failed to accept such an offer. See "Principal and Selling Shareholder,"
"Relationship with CVS" and "Description of Capital Stock."

Shares Eligible for Future Sale

Upon completion of the Offering, the Company will have
shares of Common Stock outstanding. Of these shares, the shares
of Common Stock sold in the Offering ( shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restriction under the Securities Act of 1933, as amended (the "Securities
Act"), except any such shares which may be acquired by an "affiliate" of the
Company. The remaining shares of Common Stock held by CVS are subject to
a "lock-up" agreement whereby CVS has agreed not to sell any shares of Common
Stock without the prior consent of CS First Boston Corporation ("CS First
Boston") for a period of 180 days from the date of this Prospectus. Upon
completion of the 180-day period, or earlier if permitted by CS First Boston,
shares of Common Stock held by CVS will be eligible for sale in
the public market, subject to compliance with the resale volume limitations
and other restrictions of Rule 144 under the Securities Act. In addition, CVS
will have certain rights to register its shares of Common Stock under the
Securities Act at the expense of the Company. See "Relationship with CVS--The
Stockholder Agreement." CVS has publicly announced its intention to dispose
of, subject to market conditions, all of its remaining shares of Common Stock
in the Company in 1997. Future sales of the shares of Common Stock held by
existing shareholders could have an adverse effect on the price of the Common
Stock and could impair the Company's ability to raise capital through an
offering of equity securities. See "Shares Eligible for Future Sale" and
"Underwriting."

Lack of Prior Public Market and Possible Volatility of Stock Price

Prior to the Offering, there has been no public market for the
Common Stock. Application has been made to list the Common Stock on the New
York Stock Exchange. However, there can be no assurance that an active
trading market will develop or be sustained or that shares of the Common Stock
will be able to be resold at or above the initial public offering price. The
initial public offering price will be determined by negotiations among CVS,
the Company and the representatives of the Underwriters. See "Underwriting."
The market price of the Common Stock also could be subject to significant
fluctuations in response to operating results and other factors. In addition,
the stock market in recent years has experienced price and volume fluctuations
that often have been unrelated or disproportionate to the operating
performance of companies. These fluctuations, as well as general economic and
market conditions, may adversely affect the market price of the Common Stock.

USE OF PROCEEDS

The net proceeds to the Selling Shareholder from the Offering
are estimated to be $ million, based upon the midpoint of the range of
the initial public offering price stated on the cover page hereof and after
deduction of the underwriting discount and estimated offering expenses. The
Company will not receive any proceeds from the sale of shares of Common Stock
by the Selling Shareholder.

DIVIDEND POLICY

The Company intends to retain all its earnings for the
foreseeable future for use in the operation and expansion of its business;
accordingly, the Company currently has no plans to pay cash dividends on
the Common Stock. The payment of any future cash dividends will be
determined by the Board of Directors in light of conditions then existing,
including the Company's earnings, financial condition and requirements,
restrictions in financing agreements, business conditions and other
factors. The Company expects that its ability to pay dividends will be
restricted under its proposed new credit facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

CAPITALIZATION

Prior to the Offering, Linens 'n Things was operated as a
wholly owned, indirect subsidiary of CVS. The following table sets forth
(i) the capitalization of the Company at June 29, 1996; and (ii) the
capitalization of the Company as of such date, giving effect to the
reorganization. The reorganization of the Company immediately prior to the
Offering (the "Reorganization") will include the following: (i) an
estimated capital contribution by CVS in the amount of $ million and an
estimated related reduction in the intercompany indebtedness due to CVS in
the amount of $ million (the estimated balance of intercompany indebtedness
due to CVS at December 31, 1996); (ii) transfers of net assets and
liabilities between the Company and CVS related to certain CVS employee
benefit plans and other Company liabilities; and (iii) the merger of Linens
'n Things Center, Inc. (a California company) into the Company and the
filing of an Amended and Restated Certificate of Incorporation which will
be completed prior to the Offering which will, among other things, (a)
change the authorized share capital of the Company from shares of Class A
Common, Voting, no par value shares (the "Old Common Stock"), to shares of
Common Stock, par value $.01 per share (the "Common Stock"), and (b)
convert each issued and outstanding share of Old Common Stock into shares
of Common Stock (subject to rounding upward in the case of any fractional
shares held by a shareholder). For additional information on the
elimination of intercompany balances, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

The capitalization table below should be read in conjunction
with the historical Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the "Unaudited Pro Forma
Consolidated Statements of Operations."

<TABLE>
<CAPTION>
June 29, 1996
(unaudited)
-------------
Pro
Actual Forma(1)
------ --------
(In thousands)
<S> <C> <C>
Short-term debt:
Due to CVS.............................................................................. $ 36,363 $
Revolving credit facility............................................................... 0
-------- --------
Total Short-term debt................................................................. 36,363
-------- --------
Long-term debt:
Revolving credit facility............................................................. 0
-------- --------
Total Long-term debt.................................................................. 0
-------- --------
Shareholders' equity:
Preferred Stock, $ par value, shares authorized; none issued and outstanding...
Common Stock, par value $ per share; shares authorized; shares issued
and outstanding....................................................................... 130,010
Contributed capital..................................................................... 42,372
Retained earnings....................................................................... 32,109
-------- --------
Total Shareholders' equity............................................................ 204,491
-------- --------
Total capitalization.................................................................. $240,854 $
======== ========

<FN>
- ----------
(1) To reflect the capitalization of the Company after giving effect to
the Reorganization.
</TABLE>

SELECTED FINANCIAL AND OPERATING DATA

Prior to the Offering, the Company was operated as a wholly
owned, indirect subsidiary of CVS. The table below sets forth the selected
historical consolidated financial data for the Company. The historical
financial data presented below reflect periods during which the Company did
not operate as an independent company and, accordingly, certain allocations
were made in preparing such financial data. Therefore, such data may not
reflect the results of operations or the financial condition which would
have resulted if the Company had operated as a separate, independent
company during such periods and are not necessarily indicative of the
Company's future results of operations or financial condition.

The selected financial data presented below under the
captions "Income Statement Data" and "Balance Sheet Data" have been derived
from the Consolidated Financial Statements of the Company which have been
audited by KPMG Peat Marwick LLP, whose report on the Consolidated
Financial Statements as of December 31, 1994 and 1995 and for the years
ended December 31, 1993, 1994 and 1995 is included elsewhere in this
Prospectus. The selected financial data as of June 29, 1996 and for the
twenty-six weeks ended July 1, 1995 and June 29, 1996 have been derived
from unaudited consolidated financial statements of the Company which are
included elsewhere in this Prospectus and include all adjustments
consisting only of normal recurring adjustments necessary for a fair
presentation of the operating results and financial position as of and for
the unaudited periods. The information presented below under the caption
"Selected Operating Data" is unaudited. The selected financial data should
be read in conjunction with the consolidated financial statements as of
December 31, 1994 and 1995 and for the years ended December 31, 1993, 1994
and 1995, the related notes and the audit report thereto. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Consolidated Financial Statements."

<TABLE>
<CAPTION>
Twenty-six
Year Ended December 31, Weeks Ended (1)
---------------------------------------------------------- ----------------------------
1991 1992 1993 1994 1995 July 1, 1995 June 29, 1996
---- ---- ---- ---- ---- ------------ -------------
(Dollars in thousands, except per share data and selected operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales ......................... $ 221,360 $ 270,889 $333,178 $440,118 $ 555,095 $239,588 $ 285,816
Cost of sales, including buying
and warehousing costs ........... 131,375 162,095 199,307 265,721 345,162(2) 148,905 179,066
--------- --------- --------- --------- --------- --------- ---------
Gross profit ...................... 89,985 108,794 133,871 174,397 209,933(2) 90,683 106,750
Selling, general and administrative
expenses ........................ 82,666 95,904 112,135 142,155 190,826(2) 83,126 106,735
Restructuring and asset
impairment charge ............... -- 13,100(3) -- -- 10,974(2) -- --
--------- --------- --------- --------- --------- --------- ---------
Operating profit (loss) ........... 7,319 (210)(3) 21,736 32,242 8,133(2) 7,557 15
Interest expense, net ............. 1,610 1,301 1,398 3,170 7,059 3,212 3,820
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision for
income taxes and cumulative
effect of change in accounting
principle ....................... 5,709 (1,511) 20,338 29,072 1,074 4,345 (3,805)
Provision for (benefit from)
income taxes .................... 1,951 (310) 8,619 11,874 1,108 1,841 (1,608)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of change in accounting
principle ....................... 3,758 (1,201) 11,719 17,198 (34) 2,504 (2,197)
Cumulative effect of change in
accounting principle, net ....... -- -- -- -- 178 178 --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ................. $ 3,758 $ (1,201) $ 11,719 $ 17,198 $ (212) $ 2,326 $ (2,197)
========= ========= ======== ======== ========= ======== =========
Net income (loss) per share
Weighted average number of
shares outstanding...............
Selected Operating Data:
Number of stores:
At beginning of period .......... 141 143 144 143 145 145 155
Opened during period ............ 12 22 20 29 28 6 14
Closed during period ............ 10 21 21 27 18 9 14
--------- --------- --------- --------- --------- --------- ---------
At end of period:
Traditional stores ............ 133 119 98 71 54 62 42
Superstores ................... 10 25 45 74 101 80 113
--------- --------- --------- --------- --------- --------- ---------
Total stores ...................... 143 144 143 145 155 142 155
========= ========= ======== ======== ========= ======== =========
Total gross square feet of
store space (000's)(4) .......... 1,350 1,633 2,078 2,865 3,691 2,984 4,034
Net sales per gross square
foot(4)(5) ...................... $ 188 $ 185 $ 187 $ 190 $ 178 $ 190(6) $ 171(6)
Increase (decrease) in comparable
store net sales(7) ............ (1.1%) 7.5% 5.0% 5.4% (1.5%)(8) 3.2% (2.7%)(8)
</TABLE>

<TABLE>
<CAPTION>
December 31, June 29, 1996
------------------------------------------------------------ ------------------------
1991 1992 1993 1994 1995 Actual Pro Forma(9)
---- ---- ---- ---- ---- ------ ------------
(Dollars in thousands)

<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital ................. $ 37,354 $ 34,606 $ 35,143 $ 42,315 $ 68,332 $106,864
Total assets .................... 111,163 157,639 196,517 273,167 343,522 358,148
Total debt(10) .................. 22,760 31,180 44,620 67,452 118,652 36,363
Shareholders' equity ............ 41,104 65,171 74,340 85,819 76,678 204,491
</TABLE>

- ----------
(1) The operating results for the interim periods are not necessarily
indicative of the results that may be expected for a full year. The
Company's quarters end on the Saturday nearest to the end of the last
month of such quarter, except the fourth quarter which ends on December
31.

(4) Store space includes the storage, receiving and office space that
generally occupies 10% to 15% of total store space. All numbers
provided for the end of the respective periods.

(5) Net sales per square foot is the result of dividing net sales for the
period by the average of gross square footage at the beginning of the
year and at the end of each interim quarterly and year period.

(6) Amounts for interim periods are calculated based on annual net sales
for the 52 weeks ending at the end of such interim period.

(7) New store net sales become comparable in the first full month
following 13 full months of operations. Stores that undergo major
expansion or that are relocated are not included in the comparable
store base.

(8) The decrease in comparable store net sales during 1995 and the twenty-
six weeks of 1996 was primarily due to new competitive intrusions in
existing markets at approximately 40% of the Company's superstores
included in the comparable store base which previously had limited
competition from other superstores. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(9) Pro forma to give effect to the Reorganization. See "Capitalization."

(10) Total debt consists of short-term intercompany indebtedness due
primarily to CVS. Amount of short term debt at June 29, 1996 reflects
a $130.0 million capital contribution from CVS in May 1996 used to
repay a portion of the Company's intercompany debt to CVS.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

The following Unaudited Pro Forma Consolidated Statements of
Operations sets forth the historical statement of operations of the Company
for the year ended December 31, 1995 and the twenty-six weeks ended June 29,
1996 and as adjusted for the transactions and events as described in the
accompanying Notes to the Unaudited Pro Forma Consolidated Statements of
Operations.

Management believes that the assumptions used provide a
reasonable basis on which to present such Unaudited Pro Forma Consolidated
Statements of Operations. The Unaudited Pro Forma Consolidated Statements
of Operations: (i) are provided for informational purposes only and should
not be construed to be indicative of the Company's results of operations
had the transactions and events described above been consummated on the
dates assumed; (ii) may not reflect the results of operations which would
have resulted had the Company been operated as a separate, independent
company during such periods; and (iii) are not necessarily indicative of
the Company's future results of operations.

The Unaudited Pro Forma Consolidated Statements of Operations
and accompanying notes to unaudited pro forma consolidated statements of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements as of December 31, 1994 and 1995 and for the years ended
December 31, 1993, 1994 and 1995 and notes thereto contained elsewhere in this
Prospectus.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Historical (1) Adjustments Pro Forma
-------------- ----------- ---------
(Dollars in thousands)

<S> <C> <C> <C>
Net sales................................................ $555,095 $ $555,095
Cost of sales, including buying and warehousing costs.... 345,162 (8,200)(2) 336,962
-------- ------- -------
Gross profit........................................ 209,933 8,200 218,133
Selling, general and administrative expenses............. 190,826 788 (3) 187,401
(33)(4)
(4,180)(2)
Restructuring and asset impairment charges............... 10,974 (10,974)(2) 0
-------- ------- -------
Operating profit.................................... 8,133 22,599 30,732
Interest expense, net.................................... 7,059 (3,633)(5) 3,426
-------- ------- -------
Income before income taxes.......................... 1,074 26,232 27,306
Income tax expense....................................... 1,108 10,446 (6) 11,554
-------- ------- -------
Net income (loss)................................... $ (34) $15,786 $15,752
======== ======= =======

See accompanying notes to unaudited pro forma consolidated statements of operations.
</TABLE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Twenty-six Weeks Ended June 29, 1996

<TABLE>
<CAPTION>
Historical (1) Adjustments Pro Forma
-------------- ----------- ---------
(Dollars in thousands)

<S> <C> <C> <C>
Net sales.................................................. $285,816 $ 0 $285,816
Cost of sales, including buying and warehousing costs...... 179,066 0 179,066
-------- ------ --------
Gross profit........................................... 106,750 0 106,750
Selling, general and administrative expenses............... 106,735 41(3) 106,757
(19)(4)
-------- ------ --------
Operating profit (loss)................................ 15 (22) (7)
Interest expense, net...................................... 3,820 (2,534)(5) 1,286
-------- ------ --------
Income (loss) before income taxes...................... (3,805) 2,512 (1,293)
Income tax expense (benefit)............................... (1,608) 1,055(6) (553)
-------- ------ --------
Net income (loss).......................................... $ (2,197) $1,457 $ (740)
======== ====== ========
See accompanying notes to unaudited pro forma consolidated statements of operations.
</TABLE>

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

(1) Historical amounts reflect all special charges associated with the CVS
Strategic Program. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(2) These amounts reflect adjustments for the impact of the CVS Strategic
Program charge. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

(3) These adjustments record the elimination of CVS expense allocations
(e.g., insurance costs, health and medical benefit costs, employee
stock ownership plan expenses and administrative overhead costs) as if
they had occurred on January 1 of the applicable accounting period and
the anticipated change in overhead costs based on the Company
operations on a stand alone basis. These increases consist of the
following (in thousands):

Year ended December 31, 1995
- ----------------------------
Elimination of CVS expense allocation............... $(8,849)
Stand-alone overhead costs.......................... 9,637
-------
Net increase.................................. $ 788
=======

Twenty-six weeks ended June 29, 1996
- ------------------------------------
Elimination of CVS expense allocation............... $(5,865)
Stand-alone overhead costs.......................... 5,906
-------
Net increase.................................. $ 41
=======

(4) These adjustments eliminate the COLI (Corporate Owned Life Insurance)
expense as this is a CVS sponsored program that will not continue when the
Company is on a stand alone basis after the Offering.

(5) These adjustments eliminate the interest expense incurred on
intercompany indebtedness of $67.5 million at January 1, 1995 and
$118.7 million at January 1, 1996 assuming capital contributions by CVS
of equivalent amounts were made at the beginning of each reporting
period which were used to repay the intercompany debt. The stand-alone
interest expense calculations are based on an assumed rate of 7.7%,
which management believes approximates the Company's stand-alone
borrowing costs during these periods. These adjustments consist of the
following (in thousands):

Year ended December 31, 1995
- ----------------------------
Interest expense as stated on statement of
operations....................................... $7,059
Elimination of interest expense associated with
beginning of year intercompany debt.............. (4,123)
Effect of stand-alone interest rate.................... 697
-------
Net decrease.................................... $(3,633)
=======
Twenty-six weeks ended June 29, 1996
- ------------------------------------
Interest expense as stated on statement of
operations....................................... $3,820
Elimination of interest expense associated with
beginning of period intercompany debt............ (1,639)
Effect of stand-alone interest rate.................... 353
-------
Net decrease.................................... $(2,534)
=======

(6) These adjustments record the net change in the provision for income
taxes as a result of the pro forma adjustments. The effective tax rate
utilized was 42%, which approximated the Company's blended statutory
rate, except in 1995 when, due to the adjustment for the impact of the
CVS Strategic Program, the effective tax rate utilized was
approximately 40%.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

Linens 'n Things, a leading specialty retailer of home
textiles, housewares and home accessories currently operating in 32 states,
was founded in 1975 and was operated as a private company until it was
acquired by CVS in 1983. As of June 29, 1996, the Company operated 113
superstores averaging approximately 32,000 gross square feet in size and 42
smaller traditional stores averaging approximately 10,000 gross square feet in
size. The Company's newest superstores range between 35,000 and 40,000 gross
square feet in size. The Company's business strategy is to offer a broad
assortment of high quality, brand name merchandise at everyday low prices,
provide efficient customer service and maintain low operating costs.

From its founding in 1975 through the late 1980s, the Company
operated a chain of traditional stores ranging between 7,500 and 10,000 gross
square feet in size. Beginning in 1990, the Company introduced its superstore
format which has evolved from 20,000 gross square feet in size to its current
size of 35,000 to 40,000 gross square feet, offering a broad merchandise
assortment in a more visually appealing, customer friendly format. This
superstore roll-out has resulted in the closing or relocation of 99 of the
Company's traditional stores to date. As a result of superstore openings and
traditional store closings, the Company's gross square footage more than
tripled from 1.2 million to 4.0 million between January 1991 and June 29,
1996, although its store base only increased 10% from 141 to 155. Over
this same period, the Company's net sales increased from $202.1 million for
the year ended December 31, 1990 to $601.3 million for the twelve months
ended June 29, 1996. In addition, as part of the strategic initiative to
capitalize on customer demands for one-stop shopping, the Company has
balanced its merchandise mix from being driven primarily by the "linens"
side of its business to a fuller assortment of "linens" and "things." The
Company estimates that the "things" side of its business has increased from
less than 5% of net sales in 1991 to 35% in 1996.

In July 1995, the Company began operations of its 275,000
square foot state-of-the-art distribution center in Greensboro, North
Carolina. After the distribution center became fully operational in 1995, the
Company's gross margin was negatively affected by the following factors: (i)
transitional costs associated with the start-up of the distribution center and
(ii) higher freight and handling costs incurred given the less than full
utilization of the distribution center during its implementation phase.
Management believes that the utilization of the distribution center will
result in lower average freight costs, more timely control of inventory
shipments to the stores, improved inventory turnover, better in-stock
positions and improved information flow. In addition, the Company believes
that the transfer of inventory receiving responsibilities from the stores to
the distribution center has allowed store associates to redirect their focus
to the sales floor, thereby increasing the level of customer service.
Management estimates that by the end of 1996 approximately 80% of merchandise
will be received at the Company's distribution center, as compared to
approximately 20% received at the distribution center in 1995.

On October 24, 1995, CVS announced a comprehensive strategic
program (the "CVS Strategic Program"), which resulted in the Company recording
a pre-tax charge of $23.4 million in the fourth quarter of 1995. The CVS
Strategic Program consisted of: (1) restructuring charges of $9.5 million
including primarily estimated tenancy costs and asset write-offs associated
with the closing of six stores and asset write-offs related to MIS
outsourcing; (2) an asset impairment charge of $1.4 million due to the early
adoption of Statement of Financial Accounting Standards No. 121 ("SFAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of"; and (3) asset write-offs and other charges totaling $12.5
million consisting primarily of the write-off of certain non-productive
assets, as well as costs associated with the changeover to the Company's
new distribution network relating to the opening of the distribution
center. Excluding these charges in connection with the CVS Strategic
Program, gross profit and operating profit would have been $218.1 million
and $31.5 million in 1995, respectively, as compared to $209.9 million and
$8.1 million, respectively, reflected in the Company's consolidated
statement of operations for such year.

In 1992, the Company established a realignment reserve of $13.1
million for the anticipated costs of closing 66 traditional stores between
1993 and 1995. In addition, in 1995, as part of the CVS Strategic Program,
the Company reserved $8.8 million for the anticipated costs of closing six
unprofitable stores during 1996. This $8.8 million cost, which consisted of
the write-off of fixed assets, lease acquisition costs and future lease
obligation costs associated with these stores, was higher than the usual such
closing costs because the Company elected to close these stores and terminate
these leases before their stated lease termination dates.

The Company's policy for costs associated with stores closed
in the normal course of business is to charge such costs to current
operations, and, accordingly, the Company has not provided for any costs
relating to future store closings. Through June 29, 1996, in addition to
the six stores mentioned above, the Company has closed eight additional
traditional stores, and in the remainder of 1996, the Company plans to
close an additional four stores at a combined additional cost of $3.0
million. In 1997, the Company expects to close approximately 10 to 12
stores at a cost of approximately $4.0 to $5.0 million. As a result, these
store closing costs will adversely affect the Company's results of
operations in the periods in which they are closed. In addition, the
Company expects that continuing competitive intrusions in markets where
certain of its traditional stores operate will result in lower operating
profit for those stores than that previously experienced. The Company's
long-term plans are to close most of the remaining traditional stores as
opportunities arise.

Effective January 1, 1995, the Company changed its policy from
capitalizing internally developed software costs to expensing them as
incurred. The impact on 1995 as a result of this change exclusive of the
cumulative effect of $0.3 million was to reduce net income by $0.2 million.

The historical financial information presented herein reflects
periods during which the Company did not operate as an independent company,
and accordingly, certain allocations were made in preparing such financial
information. Such information may not necessarily reflect the results of
operations and financial condition of the Company which would have resulted
had the Company been an independent public company during the reporting
periods. In addition, operating and financing costs may be higher in future
reporting periods for the Company than such costs as reported in the financial
information included herein and as a result the Company's results of
operations and financial condition may be adversely affected. See "Risk
Factors--Lack of Operating History as a Stand-Alone Company."

Results of Operations

The following table sets forth the percentage of net sales and
percentage change of certain items included in the Company's statements of
operations for the periods indicated:

<TABLE>
<CAPTION>
Twenty-six
Twenty-six Weeks
Year Ended December 31, Weeks Ended Year Ended December 31, Ended
-------------------------- ---------------- ----------------------- --------
July 1, June 29, June 29,
1993 1994 1995 1995 1996 1994 1995 1996
---- ---- ---- ---- ---- ---- ---- ----
Percentage change
Percentage of net sales from prior period
------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Net sales................ 100.0% 100.0% 100.0% 100.0% 100.0% 32.1% 26.1% 19.3%
Cost of sales, including
buying and
warehousing costs.... 59.8 60.4 62.2 62.2 62.7 33.3 29.9 20.3
---- ---- ---- ---- ---- ---- ---- ----
Gross profit............. 40.2 39.6 37.8 37.8 37.3 30.3 20.4 17.7
Selling, general and
administrative
expenses............. 33.7 32.3 34.3 34.7 37.3 26.8 34.2 28.4
Restructuring and asset
impairment charges... -- -- 2.0 -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ----
Operating profit......... 6.5 7.3 1.5 3.1 0.0 48.3 (74.8) (99.8)
Interest expense, net.... 0.4 0.7 1.3 1.3 1.3 126.8 122.7 18.9
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle............ 6.1 6.6 0.2 1.8 (1.3) 42.9 (96.3) (187.6)
Provision for (benefit
from) income taxes... 2.6 2.7 0.2 0.8 (0.5) 37.8 (90.7) (187.3)
Income (loss) before
cumulative effect of
change in accounting
principle............ 3.5 3.9 0.0 1.0 (0.8) 46.8 (101.2) (187.7)
Cumulative effect of
change in accounting
principle, net....... -- -- 0.0 0.0 -- -- -- --
---- ---- ---- ---- ---- ---- ---- ----
Net income (loss)........ 3.5% 3.9% 0.0% 1.0% (0.8)% 46.8% (101.2)% (187.7)%
==== ==== ==== ==== ==== ==== ====== ======

</TABLE>

Twenty-Six Weeks Ended June 29, 1996 Compared to Twenty-Six Weeks Ended July
1, 1995

During the twenty-six weeks ended June 29, 1996, the Company
opened 14 superstores and closed 14 stores, as compared to opening six
superstores and closing nine stores in the same period during 1995. At June
29, 1996, the Company operated 155 stores, as compared to 142 at July 1, 1995,
of which 113 were superstores, as compared to 80 superstores at July 1, 1995.
Net sales increased 19.3% to $285.8 million for the twenty-six weeks ended
June 29, 1996, as compared to $239.6 million for the twenty-six weeks ended
July 1, 1995, primarily as a result of new store openings. Comparable store
net sales for the twenty-six weeks ended June 29, 1996 decreased by 2.7% due
primarily to increased competitive intrusions in existing markets during the
period at approximately 40% of the Company's superstores included in the
comparable store base which previously had limited competition from other
superstores.

Gross profit for the twenty-six weeks ended June 29, 1996 was
$106.8 million, or 37.3% of net sales, as compared to $90.7 million, or 37.8%
of net sales, in the same period during 1995. This decrease as a percentage
of net sales resulted from higher clearance markdowns during the first quarter
of 1996 as compared to the same period in the prior year.

Selling, general and administrative expenses for the twenty-
six weeks ended June 29, 1996 were $106.7 million, or 37.3% of net sales,
as compared to $83.1 million, or 34.7% of net sales in the corresponding
period during 1995. This increase as a percentage of net sales resulted
primarily from decreased leverage of fixed expenses, including occupancy
costs, due to the decrease in comparable store net sales and higher pre-
opening costs associated with 14 new store openings during this period as
compared with six new store openings during the same period in the prior
year.

As a result of the factors described above, operating profit
for the twenty-six weeks ended June 29, 1996 decreased to $15,000, from $7.6
million, or 3.1% of net sales, during the same period in 1995.

Interest expense in the twenty-six weeks ended June 29, 1996
increased 18.9% to $3.8 million, or 1.3% of net sales, from $3.2 million, or
1.3% of net sales, during the same period in 1995. This increase is
attributable to a higher average level of intercompany debt due to CVS
relating to capital expenditures and working capital increases in support of
the Company's store expansion program. In May 1996, the Company received a
$130.0 million capital contribution from CVS which was used to repay a portion
of the Company's intercompany debt to CVS.

The Company's income tax benefit for the twenty-six weeks ended
June 29, 1996 was $1.6 million, as compared to income tax expense of $1.8
million during the same period in 1995.

Effective January 1, 1995, the Company changed its policy from
capitalizing internally developed software costs to expensing them as
incurred. The impact on the twenty-six weeks ended July 1, 1995 as a result
of this change exclusive of the cumulative effect of $0.3 million was to
reduce net income by $0.2 million.

As a result of the factors described above, the Company
incurred a net loss of $2.2 million for the twenty-six weeks ended June 29,
1996, as compared to net income of $2.3 million, or 1.0% of net sales, during
the same period in 1995.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

During 1995, the Company opened 28 superstores and closed 18
stores, as compared to opening 29 superstores and closing 27 stores in
1994. At the end of 1995, the Company operated 155 stores, as compared to
145 stores at the end of 1994, of which 101 were superstores, as compared
to 74 superstores at the end of 1994. Net sales increased 26.1% to $555.1
million in 1995, as compared to $440.1 million in 1994, primarily as a
result of new store openings. Comparable store net sales in 1995 decreased
1.5% primarily due to new competitive intrusions in existing markets at
approximately 40% of the Company's superstores included in the comparable
store base which previously had limited competition from other superstores,
as well as to a general slowdown in the retail sector during 1995.

Gross profit in 1995 was $209.9 million, or 37.8% of net
sales, as compared to $174.4 million, or 39.6% of net sales, in fiscal
1994. This decrease as a percentage of net sales was primarily due to
transitional costs associated with the start-up of the distribution center.
Excluding these costs, the Company's gross profit would have been $218.1
million or 39.3% of net sales. The remaining decrease is primarily
attributable to higher freight and handling costs incurred given the less
than full usage of the distribution center during its implementation phase
and the Company's expansion to the western United States.

Selling, general and administrative expenses in 1995 were
$190.8 million, or 34.3% of net sales, as compared to $142.2 million, or
32.3% of net sales, in 1994. This increase as a percentage of net sales
was primarily attributable to higher occupancy costs due to a higher
proportion of superstores located in prime real estate locations as
compared to the prior year and lower fixed expense leverage due to the
decrease in comparable store net sales.

In fourth quarter of 1995, the Company incurred a $11.0
million, or 2.0% of net sales, pre-tax restructuring and asset impairment
charge as a result of the CVS Strategic Program. In connection with the
CVS Strategic Program, six underperforming stores were identified to be
closed in 1996. The net sales and operating losses in 1995 of these six
stores aggregated approximately $14.3 million and $1.5 million,
respectively.

As a result of factors described above, operating profit in
1995 decreased to $8.1 million, or 1.5% of net sales, from $32.2 million, or
7.3% of net sales, in 1994. Excluding charges related to the CVS Strategic
Program, operating profit in 1995 would have been $31.5 million, or 5.7% of
net sales.

Interest expense in 1995 increased 122.7% to $7.1 million,
or 1.3% of net sales, from $3.2 million, or 0.7% of net sales, in 1994.
This increase is attributable to a higher level of intercompany debt due to
CVS in 1995 relating to capital expenditures and working capital increases
in support of the Company's store expansion program and capital
expenditures in connection with the purchase of material handling equipment
for the distribution center. In addition, there was a higher weighted
average interest rate of 6.5% in 1995 as compared to 4.9% in 1994.

The Company's income tax expense in 1995 was $1.1 million,
as compared to $11.9 million in 1994. The Company's effective tax rate in
1995 was 103.2%, as compared to 40.8% in 1994, primarily due to the effect
of the Company's one-time charges incurred in 1995. Excluding these
charges, the Company's effective tax rate would have been 42.3% in 1995.
This increase was primarily attributable to a decrease in earnings before
taxes, while book to tax permanent differences remained constant.

Effective October 1, 1995, the Company adopted SFAS No. 121.
As a result of this adoption, the Company incurred a charge of $1.4 million in
1995.

As a result of factors described above, the Company incurred a
net loss of $212,000 in 1995, as compared to net income of $17.2 million, or
3.9% of net sales, in 1994. Excluding one-time charges relating to the CVS
Strategic Program, the Company's net income would have been $14.1 million, or
2.5% of net sales, in 1995.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

During 1994, the Company opened 29 superstores and closed 27
stores, as compared to opening 20 superstores and closing 21 stores in 1993.
At the end of 1994, the Company operated 145 stores, as compared to 143 stores
at the end of 1993, of which 74 were superstores, as compared to 45
superstores in 1993. Net sales increased 32.1% to $440.1 million in 1994, as
compared to $333.2 million in 1993, primarily attributable to new store
openings and a 5.4% increase in comparable store net sales primarily due to
increased sales due to a higher proportion of merchandise in the "things"
segment.

Gross profit in 1994 was $174.4 million, or 39.6% of net sales,
as compared to $133.9 million, or 40.2% of net sales, in 1993. This decrease
as a percentage of net sales was primarily attributable to certain costs
associated with the distribution center in 1994 and increased freight costs
associated with the Company's expansion to the western United States.

Selling, general and administrative expenses in 1994 were
$142.2 million, or 32.3% of net sales, as compared to $112.1 million, or
33.7% of net sales, in 1993. This decrease as a percentage of net sales
was primarily attributable to increased leverage of fixed expenses due to
higher comparable store net sales, partially offset by pre-opening costs
related to a higher number of new store openings in this period as compared
to the prior year.

As a result of the factors described above, operating profit in
1994 increased 48.3% to $32.2 million, or 7.3% of net sales, from $21.7
million, or 6.5% of net sales, in 1993.

Interest expense in 1994 increased 126.8% to $3.2 million, or
0.7% of net sales, from $1.4 million, or 0.4% of net sales, in 1993. This
increase is primarily attributable to a higher level of intercompany debt due
to CVS in 1994 as a result of capital expenditures and working capital in
support of the Company's store expansion program and to a higher weighted
average interest rate of 4.9% in 1994, as compared to 3.4% in 1993.

The Company's income tax expense in 1994 was $11.9 million, as
compared to $8.6 million in 1993. The Company's effective tax rate in 1994
decreased to 40.8%, as compared to 42.4% in 1993. This decrease was primarily
attributable to an increase in earnings before taxes, while book to tax
permanent differences remained constant.

As a result of the factors described above, net income in 1994
increased 46.8% to $17.2 million, or 3.9% of net sales, as compared to $11.7
million, or 3.5% of net sales, in 1993.

Liquidity and Capital Resources

The Company's capital requirements have been used primarily
for capital investment in new stores, new store inventory purchases and
seasonal working capital. The capital requirements and working capital
needs have been funded through a combination of internally generated cash
from operations, credit extended by suppliers and intercompany borrowings
from CVS.

Net cash used in operating activities in 1995 was $12.1
million, as compared to cash provided of $15.7 million in 1994. The
operating cash usage increase in 1995 was primarily due to decreased
profitability and a slower rate of inventory turnover. The increase in
inventory and accounts payable balances from 1993 to 1994 were inflated due
to the Company's transition to its current superstore prototype, a larger
number of new store openings in the latter part of the fourth quarter as
compared to the prior year and the timing of vendor payments. In addition,
the change in accrued expenses resulted from the final utilization of the
1992 realignment reserve for traditional store closings in 1995. For the
twenty-six weeks ended June 29, 1996, net cash used in operating activities
was $13.0 million, as compared to $17.5 million in the same period of the
previous year. This decrease was primarily due to improved inventory
management and lower inventory requirements as a result of a smaller number
of new store openings in the early part of the third quarter as compared to
the prior year. This decrease was partially offset by negative comparable
store net sales which resulted in a net loss in the first half of 1996, as
compared to a net profit in the first half of 1995. The improved
management of inventory was the result of efficiencies achieved from the
Company's new distribution center and more conservative inventory
purchasing in the first half of 1996 as compared to the first half of 1995
which was prompted in part by the Company's negative comparable store net
sales experience beginning in the second half of 1995.

Net cash used in investing activities in 1995 was $41.3
million, as compared to $39.1 million in 1994. This increase was primarily
due to higher capital expenditures associated with the Company's new 275,000
square foot distribution center in Greensboro, North Carolina in 1995 as
compared to 1994. For the twenty-six weeks ended June 29, 1996, net cash used
in investing activities was $17.5 million, as compared to $20.1 million in the
same period of the previous year. This decrease in capital expenditures in
the first half of 1996 relates to lower capital expenditures associated with
the distribution center in 1996 as compared to 1995, which was partially
offset by an increased number of new store openings in the first half of 1996,
as compared to the first half of 1995.

Net cash provided by financing activities in 1995 was $53.5
million, as compared to $25.3 million in 1994. This increase was principally
related to CVS's funding of the Company's increased working capital needs.
For the twenty-six weeks ended June 29, 1996, net cash provided by financing
activities was $29.1 million, as compared to $36.0 million in the same period
of the prior year. This decrease is primarily attributable to timing of the
settlement of vendor liabilities offset by the discontinuance of dividend
payments to CVS in 1996. Net cash provided by financing activities in 1996
was primarily the result of CVS's funding of the Company's capital investment
activities. Furthermore, the Company received a capital contribution of
$130.0 million from CVS in May 1996, which was used to repay a portion of
the intercompany debt.

As of June 29, 1996, the Company owed CVS $36.4 million for
intercompany borrowings. The weighted average interest rate on borrowings
from CVS for the years ended December 31, 1993, 1994 and 1995 was 3.4%,
4.9% and 6.5%, respectively. Intercompany balances between the Company, on
the one hand, and CVS, on the other, will be eliminated prior to closing of
the Offering as follows: CVS will make a capital contribution in an amount
to be determined prior to closing, and the remaining intercompany balance
will be repaid to CVS (through borrowings or internally generated funds) or
to the Company, as the case may be. The actual amount of such repayment in
connection with the elimination of the intercompany balance will depend on
the amount of the intercompany balance (which balance will fluctuate based
primarily on the amount of working capital) as of the closing. After the
Reorganization and the Offering, the Company will have an estimated $
million of debt outstanding. See "Capitalization."

The Company has begun negotiations with certain financial
institutions and expects to complete negotiations prior to the Offering on a
$100 to $150 million revolving credit facility (the "credit facility"). The
credit facility is anticipated to contain customary events of default and a
number of customary covenants, including restrictions on liens and sales of
assets, prohibitions on dividends and certain changes in control, and
maintenance of certain financial ratios. Management expects the costs of such
credit facility to be higher than the historical costs of the Company's
intercompany borrowings reflected in the Company's historical financial
statements. See "Risk Factors--Lack of Operating History as a Stand-Alone
Company." See "Unaudited Pro Forma Consolidated Statements of Operations" and
Note 9 of the Notes to Consolidated Financial Statements of the Company
included herein.

The Company's total capital expenditures are expected to be
approximately $43.0 to $45.0 million in 1996 (of which $17.5 million has
already been expended as of June 29, 1996) and $30.0 to $32.0 million in 1997.
These capital expenditures primarily relate to new store openings, remodels of
existing store locations and other capital investment activities. Management
believes that the Company's cash flow from operations and its planned credit
facility will be sufficient to fund anticipated capital expenditures and
working capital requirements for at least the next three years.

The Company currently operates all of its stores on an
operating lease basis. Based upon the Company's prior experience, the Company
estimates that the net cost of opening a superstore 35,000 to 40,000 gross
square feet in size is $2.0 to $2.4 million. This amount includes $0.9 to
$1.1 million of inventory (net of vendor payables), $0.9 to $1.1 million for
leasehold improvements and fixtures and $225,000 to $250,000 for pre-opening
expenses, which are expensed as incurred. Based on historical performance,
new stores are typically profitable within their first full year of
operations. Management estimates that the costs of its planned store closings
will be approximately $3.0 million in 1996 and $4.0 to $5.0 million in 1997.

Inflation

The Company does not believe that its operating results have
been materially affected by inflation during the preceding three years. There
can be no assurance, however, that the Company's operating results will not be
affected by inflation in the future.

Seasonality and Quarterly Results

The Company's business is subject to substantial seasonal
variations. Historically, the Company has realized a significant portion of
its net sales and substantially all of its net income for the year during the
third and fourth quarters, with a majority of net sales and net income for
such quarters realized in the fourth quarter. The Company's quarterly results
of operations may also fluctuate significantly as a result of a variety of
other factors, including the timing of new store openings. The Company
believes this is the general pattern associated with its segment of the retail
industry and expects this pattern will continue in the future. Consequently,
comparisons between quarters are not necessarily meaningful and the results
for any quarter are not necessarily indicative of future results.

Management anticipates that the Company's operating loss in the
first quarter of 1997 may be higher than the operating loss in the first
quarter of 1996, due primarily to higher occupancy costs as a result of a
higher proportion of superstores located in prime real estate locations during
the first quarter of 1997 as compared to the same period of 1996. These
occupancy costs are less likely to be leveraged due to typically lower sales
in the first quarter as compared to other quarters.

The following table sets forth certain unaudited financial
information for the Company in each quarter during 1994 and 1995 and the first
two quarters of 1996. The unaudited quarterly information includes all normal
recurring adjustments which management considers necessary for a fair
presentation of the information shown. See "Risk Factors--Seasonality and
Quarterly Fluctuations."

<TABLE>
<CAPTION>
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter Year
- ---- ------- ------- ------- ------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $87,170 $89,356 $120,138 $143,454 $440,118
Gross profit....................... 33,593 35,191 47,538 58,075 174,397
Operating profit................... 2,197 2,927 10,240 16,878 32,242
Net income......................... 959 1,242 5,394 9,603 17,198
Percentage increase in comparable
store net sales.................. 5.6% 3.8% 6.7% 5.7% 5.4%
Total stores (end of period)....... 136 135 134 145 145
</TABLE>

<TABLE>
<CAPTION>
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter Year
- ---- ------- ------- ------- ------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Net sales......................... $115,298 $124,290 $138,050 $177,457 $555,095
Gross profit...................... 42,787 47,896 54,666 64,584(1) 209,933
Operating profit (loss)........... 2,890 4,667 6,432 (5,856)(1) 8,133
Net income (loss)................. 682 1,644 2,599 (5,137)(1) (212)
Percentage increase (decrease) in
comparable store net sales...... 1.4% 4.7% (6.6%)(2) (3.3%)(2) (1.5%)(2)
Total stores (end of period)...... 139 142 146 155 155
</TABLE>

First Second
1996 Quarter Quarter
- ---- ------- -------
(Dollars in thousands)
Net sales............................ $138,167 $147,649
Gross profit......................... 50,498 56,252
Operating profit (loss).............. (1,011) 1,026
Net loss............................. (1,786) (411)
Percentage increase (decrease) in
comparable store net sales......... 1.7%(2) (6.7%)(2)
Total stores (end of period)......... 148 155

- ----------
(1) Excluding the CVS Strategic Program, gross profit, operating profit and
net income in the fourth quarter of 1995 would have been $72.8 million,
$17.5 million and $9.0 million, respectively.

(2) Comparable store net sales were negatively affected primarily due to
new competitive intrusions in existing markets at approximately 40% of
the Company's superstores included in the comparable store base which
previously had limited competition from other superstores. In
addition, the fluctuation between the first and second quarter in 1996
is due in part to the inclusion of the Easter selling season in the
first quarter of 1996, as compared to its inclusion in the second
quarter in 1995. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

BUSINESS

General

Linens 'n Things is one of the leading, national large format
retailers of home textiles, housewares and home accessories operating in 32
states. According to Home Textiles Today, Linens 'n Things was the largest
specialty retailer (as measured by sales) in the home linens category in 1995.
As of June 29, 1996, the Company operated 113 superstores averaging
approximately 32,000 gross square feet in size and 42 smaller traditional
stores averaging approximately 10,000 gross square feet in size. The
Company's newest stores range between 35,000 and 40,000 gross square feet in
size and are located in strip malls or power center locations. The Company's
business strategy is to offer a broad assortment of high quality, brand name
merchandise at everyday low prices, provide reliable customer service and
maintain low operating costs.

Linens 'n Things' extensive selection of over 25,000 SKUs in
its superstores is driven by the Company's commitment to offering a broad
and deep assortment of high quality, brand name "linens" (e.g., bedding,
towels and pillows) and "things" (e.g., housewares and home accessories)
merchandise. Brand names sold by the Company include Wamsutta, Cannon,
Laura Ashley, Martex, Waverly, Royal Velvet, Braun, Krups, Calphalon and
Henckel. The Company also sells an increasing amount of merchandise under
its own private label (approximately 10% of sales) which is designed to
supplement the Company's offering of brand name products by offering high
quality merchandise at value prices. The Company's merchandise offering is
coupled with a "won't be undersold" everyday low pricing strategy with
price points substantially below regular department store prices and
comparable with or below department store sale prices.

From its founding in 1975 through the late 1980's, the Company
operated a chain of traditional stores ranging between 7,500 and 10,000 gross
square feet in size. Beginning in 1990, the Company introduced its superstore
format which has evolved from 20,000 gross square feet in size to its current
size of 35,000 to 40,000 gross square feet, offering a broad merchandise
assortment in a more visually appealing, customer friendly format. This
superstore roll-out has resulted in the closing or relocation of 99 of the
Company's traditional stores through June 29, 1996. As a result of superstore
openings and traditional store closings, the Company's gross square footage
more than tripled from 1.2 million to 4.0 million between January 1991 and
June 29, 1996, although its store base only increased 10% from 141 to 155
during this period. Over this same period, the Company's net sales
increased from $202.1 million for the year ended December 31, 1990 to
$601.3 million for the twelve months ended June 29, 1996. As part of this
strategy, the Company instituted centralized management and operating
programs and invested significant capital in its distribution and
management information systems infrastructure in order to control operating
expenses as the Company grows. In addition, as part of its strategic
initiative to capitalize on customer demand for one-stop shopping, the
Company has balanced its merchandise mix from being driven primarily by the
"linens" side of its business to a fuller assortment of "linens" and
"things." The Company estimates that the "things" side of its business has
increased from less than 5% of net sales in 1991 to 35% in 1996.

Business Strategy

The Company's business strategy is to offer a broad
assortment of high quality, brand name products at everyday low prices,
provide reliable customer service and maintain low operating costs. Key
elements of the Company's business strategy are as follows:

Offer a Broad Assortment of Quality Name Brands at Everyday Low
Prices. Linens 'n Things' merchandising strategy is to offer the largest
breadth of selection in high quality, brand name fashion home textiles,
housewares and home accessories at everyday low prices. The Company offers
over 25,000 SKUs in its superstores across six departments, including bath,
home accessories, housewares, storage, top of the bed and window treatments.
The Company continues to explore opportunities to increase sales in its
"things" segment while maintaining the strength of its "linens" portion of the
business. The Company's long-term goal is to increase the sales of the
"things" segment to approximately 50% of net sales. See "--Growth
Strategy--Increase Productivity of Existing Store Base." The Company
is one of the largest retailers of brand names, including Wamsutta,
Laura Ashley, Martex, Waverly, Royal Velvet, Braun, Krups and Calphalon. The
Company also sells an increasing amount of merchandise under its own private
label (approximately 10% of sales) which is designed to supplement the
Company's offering of brand name products by offering high quality merchandise
at value prices. The Company believes its prices are typically well below the
non-sale prices offered by department stores and are comparable to or slightly
below the sale prices offered by such stores. In addition, the Company
maintains a "won't be undersold" approach which guarantees its customers
prices as low as those offered by any of its competitors.

Provide Efficient Customer Service and Shopping Convenience.
To enhance customer satisfaction and loyalty, Linens 'n Things strives to
provide prompt, knowledgeable sales assistance and enthusiastic customer
service. Linens 'n Things emphasizes competitive wages, training and
personnel development in order to attract and retain well-qualified, highly
motivated employees committed to providing efficient customer service.
Linens 'n Things also endeavors to provide more knowledgeable sales
associates by providing training through various programs which include
management training, daily sales associate meetings and vendor product
support seminars. In addition, the Company has taken initiatives to
enhance the speed of its customer service, including installing satellite
transmission for credit card authorizations and upgrading its current
point-of-sale ("POS") system. The customer's experience is also enhanced
by the availability of sales associates who, since the transfer of
inventory and receiving responsibilities from the stores to the
distribution center, have redirected their focus from the backroom to the
selling floor. The Company's superstore format is designed to save the
customer time by having inventory visible and accessible on the selling
floor for immediate purchase. A number of the superstores have additional
in-store customer services, such as same day monogramming, and the Company
is currently in the process of implementing a bridal registry service in
all of its stores, which it expects will be completed in 1997. The Company
believes its knowledgeable sales staff and efficient customer service,
together with the Company's liberal return policy, create a positive
shopping experience which engenders customer loyalty.

Maintain Low Operating Costs. A cornerstone of the Company's
business strategy is its commitment to maintaining low operating costs. In
addition to savings realized through sales volume efficiencies, operational
efficiencies are expected to be achieved through the streamlining of the
Company's centralized merchandising structure, the use of integrated
management information systems and the utilization of the distribution center.
The Company believes that its significant investment in the technology of its
management information systems and in its distribution center will allow the
Company to grow without requiring significant additional capital contributions
to its infrastructure through 1998. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The Company is able to
limit its advertising expenses by relying upon an everyday low price strategy
which reduces the Company's need to advertise sales.

Growth Strategy

New Store Expansion. The Company's expansion strategy is to
increase market share in existing markets and to penetrate new markets in
which the Company believes it can become a leading operator of home
furnishings superstores. The Company believes that it is well-positioned to
take advantage of the continued market share gain by the superstore chains in
the home furnishings sector. The Company believes there is an opportunity to
more than triple the number of its current prototype superstores across the
country, providing the Company with significant growth opportunities to
profitably enter new markets, as well as backfill in existing markets. In
1996, the Company plans to open 36 new superstores, of which 14 have
already been opened, and close 18 stores (primarily traditional stores), of
which 14 stores have already been closed. In 1997, the Company plans to
open 20 to 25 new superstores and close approximately 10 to 12 stores
(primarily traditional stores).

The following table sets forth information concerning the
Company's expansion program during the most recent five years:

Square Footage Store Count
--------------------- ---------------------
Year Openings Closings Begin Year End Year Begin Year End year
---- -------- -------- ---------- -------- ---------- --------
1992 22 21 1,350 1,633 143 144
1993 20 21 1,633 2,078 144 143
1994 29 27 2,078 2,865 143 145
1995 28 18 2,865 3,691 145 155
1996(1) 36 18 3,691 4,836 155 173

- ----------
(1) Estimated

Linens 'n Things focuses on opening new superstores in
metropolitan areas where it believes it can become a leading retailer of
home-related products. The Company's goal is to enter two to three new
markets a year through its expansion efforts. Markets for new superstores are
selected on the basis of demographic factors, such as income, population and
number of households. Linens 'n Things focuses its site locations on prime
locations within trading areas of 200,000 persons within a ten-mile radius and
demographic characteristics that match the Company's target profile. The
Company's stores are located predominantly in power strip centers and, to a
lesser extent, in malls and as stand-alone stores.

The Company currently operates all of its superstores on an
operating lease basis. Based upon the Company's prior experience, the Company
estimates that the net cost of opening a superstore 35,000 to 40,000 gross
square feet in size is $2.0 to $2.4 million. This amount includes $0.9 to
$1.1 million of inventory (net of vendor payables), $0.9 to $1.1 million for
leasehold improvements and fixtures and $225,000 to $250,000 for pre-opening
expenses, which are expensed as incurred. Based on historical performance, new
stores are typically profitable within their first full year of operations.
Management estimates that the costs of its planned store closings will be
approximately $3.0 million in 1996 and $4.0 to $5.0 million in 1997. The
Company believes that its current management infrastructure and management
information systems, together with its new distribution center, are capable of
supporting planned expansion through 1998. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--General."

Increase Productivity of Existing Store Base. The Company is
committed to increasing its net sales per square foot, inventory turnover
ratio and return on invested capital. The Company believes the following
initiatives will allow it to achieve these goals:

Enhance Merchandise Mix and Presentation. The Company
continues to explore opportunities to increase sales in its "things" segment
without sacrificing market share or customer image in the "linens" side of the
business. The Company's long-term goal is to increase the sales of the
"things" segment to approximately 50% of net sales. The Company expects
this shift to positively impact net sales per square foot and inventory
turnover since "things" merchandise tends to be more impulse driven
merchandise as compared to the "linens" portion of the business. The Company
plans on regularly introducing new products which it expects will increase
sales and generate additional customer traffic.

In addition, the Company intends to continue improving its
merchandising presentation techniques, space planning and store layout to
further improve the productivity of its existing and future superstore
locations. The Company periodically restyles its stores to incorporate new
offerings and realign its store space with its growth segments. The
Company expects that the addition of in-store customer services, such as
the bridal registry service, will further improve its store productivity.

Increase Operating Efficiencies. As part of its strategy to
increase operating efficiencies, the Company has invested significant capital
in building a centralized infrastructure, including a distribution center and
a management information system, which it believes will allow it to maintain
low operating costs as it pursues its superstore expansion strategy. In July
1995, the Company began full operations of its 275,000 square foot
distribution center in Greensboro, North Carolina. Management estimates that
by the end of 1996 approximately 80% of merchandise will be received at the
distribution center, as compared to approximately 20% of merchandise received
at the Company's distribution center in 1995. Management believes that the
increased utilization of the distribution center will result in lower average
freight costs, more efficient scheduling of inventory shipments to the stores,
improved inventory turnover, better in-stock positions and improved
information flow. The Company believes that the transfer of inventory
receiving responsibilities from the stores to the distribution center allows
the store sales associates to redirect their focus to the sales floor, thereby
increasing the level of customer service. The warehouse portion of the
distribution center provides the Company flexibility to manage safety stock
and take advantage of opportunistic purchases. The Company's ability to
effectively manage its inventory is also enhanced by a centralized
merchandising management team and its MIS system which allows the Company to
more accurately monitor and better balance inventory levels and improve
in-stock positions in its stores.

Continue Conversion of Store Base to Superstore Format. As of
June 29, 1996, the Company operated 113 superstores, representing 73% of its
total stores, and 42 traditional stores. The Company plans to close or
relocate approximately 15 of the 42 traditional stores by the end of 1997.
Although the remaining traditional stores are currently profitable, the
Company's long-term plans include closing most of the remaining traditional
stores as opportunities arise.

Industry

According to U.S. Department of Commerce data, total industry
sales of products sold in the Company's stores, which primarily includes home
textiles, housewares and decorative furnishings categories, were estimated to
be over $60 billion in 1995. The market for home furnishings is fragmented
and highly competitive. Specialty superstores are the fastest growing channel
of distribution in this market. In 1995, the three largest specialty
superstore retailers of fashion home textiles (including the Company) had
aggregate sales of approximately $1.4 billion, representing less than 3% of
the industry's total unit sales.

The Company competes with many different types of retailers
that sell many or most of the items sold by the Company, including department
stores, mass merchandisers, specialty retail stores and other retailers.
Linens 'n Things generally classifies its competition within one of the
following categories:

Department Stores: This category includes national and
regional department stores such as J.C. Penney Company Inc., Sears,
Roebuck and Co., Dillard Department Stores, Inc. and the department store
chains operated by Federated Department Stores, Inc. and The May Department
Store Company. These retailers offer branded merchandise as well as their
own private label furnishings in a high service environment. Department
stores also offer certain designer merchandise, such as Ralph Lauren, which
is not generally distributed through the specialty and mass merchandise
distribution channels. In general, the department stores offer a more
limited selection of merchandise than the Company. The prices offered by
department stores during off-sale periods are significantly higher than
those of the Company and during on-sale periods are comparable to or
slightly higher than those of the Company.

Mass Merchandisers: This category includes companies such
as Wal-Mart Stores, Inc., the Target Stores division of Dayton Hudson
Corporation and Kmart Corporation. Fashion home furnishings represent only
a small portion of the total merchandise sales in these stores and reflect
a significantly more limited selection with fewer high quality name brands
and lower quality merchandise at lower price points than specialty stores
or department stores. In addition, these mass merchandisers typically have
more limited customer services staffs than the Company.

Specialty Stores/Retailers: This category includes large
format home furnishings retailers most similar to Linens 'n Things,
including Bed Bath & Beyond Inc., Home Place and Strouds, Inc. and smaller
niche retailers such as Crate & Barrel, Lechters, Inc. and Williams-Sonoma,
Inc. The Company estimates that large format stores range in size from
approximately 30,000 to 50,000 gross square feet and offer a home
furnishings merchandise selection of approximately 20,000 to 30,000 SKUs.
The Company believes that these retailers have similar pricing on
comparable brand name merchandise and that they compete by attempting to
develop loyal customers and increase customer traffic by providing a single
outlet to satisfy all the customer's household needs. The niche retailers
are typically smaller in size than the large format superstores and offer a
highly focused and broad assortment within a specific niche. The prices
offered by niche retailers are often higher than the large format
superstores and most do not maintain an everyday low price strategy.

Other Retailers: This category includes mail order
retailers, such as Spiegel Inc. and Domestications, off-price retailers,
such as the T.J. Maxx and Marshall's divisions of the TJX Companies, Inc.
and local "mom and pop" retail stores. Both mail order retailers and
smaller local retailers generally offer a more limited selection of brand
name merchandise at prices which tend to be higher than those of the
Company. Off-price retailers typically offer close-out or out of season
brand name merchandise at competitive prices.

Merchandising

The Company offers quality home textiles, housewares and
home accessories at everyday low prices. The Company's strategy consists
of a commitment to offer a breadth and depth of selection and to create
merchandise presentation that makes it easy to shop in a visually pleasing
environment. The stores feature a "racetrack" layout, enabling the
customer to visualize and purchase fully coordinated and accessorized
ensembles. Seasonal merchandise is featured at the front of every store to
create variety and excitement and to capitalize on key selling seasons
including back-to-school and holiday events.

The Company's extensive merchandise offering of over 25,000
SKUs enables its customers to select from a wide assortment of styles,
brands, colors and designs within each of the Company's major product
lines. The Company is committed to maintaining a consistent in-stock
inventory position. This presentation of merchandise enhances the
customer's impression of a dominant assortment of merchandise in an easy to
shop environment. The Company's broad and deep merchandise offering is
coupled with everyday low prices that are substantially below regular
department store prices and comparable with or slightly below department
store sale prices. The Company has adopted a "won't be undersold" approach
and believes that the uniform application of its everyday low price policy
is essential to maintaining the integrity of this policy. This is an
important factor in establishing its reputation as a price leader and in
helping to build customer loyalty. In addition, the Company offers on a
regular basis "special" purchases which it obtains primarily through
opportunistic purchasing to enhance its high value perception among its
customers.

The Company also sells an increasing amount of merchandise
under its own private label (approximately 10% of net sales) which is
designed to supplement the Company's offering of brand name products by
offering high quality merchandise at value prices. The Company believes
its private label program will continue to enhance customer awareness of
its superstores and provides a distinct competitive advantage. Merchandise
directly imported represented approximately 5% of net sales in 1995.

Merchandise and sample brands offered in each major department
are highlighted below:

<TABLE>
<CAPTION>
Department Items Sold Sample Brands
- ---------- ---------- -------------
<S> <C> <C>
Bath Towels, shower curtains, waste baskets, Fieldcrest, Martex, Royal Velvet and
hampers, bathroom rugs and wall hardware. Springmaid.

Home Accessories Decorative pillows, napkins, tablecloths, Dakotah, Waverly and Laura Ashley.
placemats, lamps, gifts, picture frames and
framed art.

Housewares Cookware, cutlery, kitchen gadgets, small Braun, Krups, Calphalon, Henckel,
electric appliances (such as blenders and coffee Mikasa, Circulon, Faberware, Black
grinders), dinnerware, flatware and glassware. & Decker, Kitchen Aid, Copco and
International Silver.

Storage Closet-related items (such as hangers, organizers Rubbermaid and Closetmaid.
and shoe racks).

Top of the Bed Sheets, comforters, comforter covers, Wamsutta, Laura Ashley,
bedspreads, bed pillows, blankets and mattress Revman, Croscill, Fieldcrest,
pads. Springmaid, Royal Sateen and
Beautyrest.

Window Treatment Curtains, valances and window hardware. Croscill, Graber, Bali, Waverly and
Laura Ashley.
</TABLE>

As part of a strategic effort to capitalize on consumer
demand for one-stop shopping, the Company has balanced its merchandise mix
from being driven primarily by the "linens" side of its business to a
fuller assortment of "linens" and "things." The Company estimates that the
"things" side of its business has increased from less than 5% of its net
sales in 1991 to 35% in 1996. The Company continues to explore
opportunities to increase the sales in its "things" segment while
maintaining the strength of its "linens" side of the business. The
Company's long-term goal is to increase the sales of the "things" segment to
approximately 50% of net sales. See "--Growth Strategy--Increase
Productivity of Existing Store Base."

The Company's "racetrack" layout allows customers to easily
shop between corresponding departments and stimulates impulse sales by
encouraging the customers to shop the entire store. The Company also
believes its stores allow customers to locate products easily and reinforce
the customer's perception of an extensive merchandise selection. In
addition, the Company actively works with vendors to improve the customers'
in-store experience through designing displays, unique packaging and
product information signs that optimally showcase its product offering and
by training associates in product education in order to maximize service to
the customer.

Customer Service

Linens 'n Things treats every customer as a guest. The
Company's philosophy supports enhancing the guest's entire shopping
experience and believes that all elements of service differentiate them
from the competition. To facilitate the ease of shopping, the assisted
self service culture is complimented by trained department specialists,
zoned floor coverage, product information displays and videos, self
demonstrations and vendor supported training seminars. This philosophy is
designed to encourage guest loyalty as well as continually develop
knowledgeable Company associates. A number of the superstores have in-
store services, such as monogramming, and the Company is currently in the
process of implementing a bridal registry service in all of its stores.
The entire store team is hired and trained to be highly visible in order to
assist guests with their selections. The ability to assist guests has been
enhanced by the transfer of inventory receiving responsibilities from the
stores, allowing sales associates to focus on the sales floor. Enhanced
management systems which provide efficient customer service and liberal
return procedures are geared toward making each guest's final impression of
visiting a store a convenient, efficient and pleasant experience.

Advertising

Advertising programs are focused on building and
strengthening the Linens 'n Things superstore concept and image. Because
of the Company's commitment to everyday low prices, advertising vehicles
are aggressively used in positioning the Company among new and existing
customers by communicating price, value and breadth and depth of selection,
with a "won't be undersold" approach. The Company focuses its advertising
programs during key selling seasons such as back-to-school and holidays.

The Company primarily uses full color inserts in newspapers to
reach its customers. In addition, the Company periodically advertises on
television and radio during peak seasonal periods or promotional events.
Grand opening promotional events are used to support new stores, with more
emphasis placed on those located in new markets. The Company's marketing
programs are targeted at its primary customer base of women, age 35-55, with
household income greater than $50,000.

Stores

The Company's 155 stores are located in 32 states,
principally in suburban areas of medium and large sized cities. Store
locations are targeted primarily for power strip centers and mall-proximate
sites in densely populated areas within trading areas of 200,000 persons
within a ten-mile radius.

The Company's superstores range in size from 19,000 to 50,000
gross square feet, but are predominantly between 35,000 and 40,000 gross
square feet in size. The Company's traditional stores range in size from
7,500 to 10,000 gross square feet. In both superstores and traditional
stores, approximately 85% to 90% of store space is used for selling areas and
the balance for storage, receiving and office space.

For a list of current store locations as of June 29, 1996, see
the inside front cover of this prospectus.

Purchasing and Suppliers

The Company maintains its own central buying staff,
comprised of one Senior Vice President, two Vice Presidents and twelve
Buyers. The merchandising mix for each store is selected by the central
buying staff in consultation with district store managers. The Company
purchases its merchandise from approximately 1,000 suppliers. Springs
Industries, Inc., through its various operating companies, supplied
approximately 15% of the Company's total purchases in 1995. In 1995, the
Company purchased a significant amount of products from other key
suppliers. See "Risk Factors--Reliance on Key Vendors." Due to its breadth
of selection, the Company is often one of the largest customers for certain
of its vendors. The Company believes that this buying power and its
ability to make centralized purchases generally allow it to acquire
products at favorable terms. In addition, the Company has established
programs with certain vendors that allow merchandise to be shipped floor-
ready and pre-ticketed with the Company's price labels, increasing overall
operating efficiency. In 1995, approximately 95% of the Company's
merchandise was purchased in the United States.

Distribution

In 1995, the Company began full operations of its 275,000
square foot state-of-the-art distribution center in Greensboro, North
Carolina. The system that supports this facility was designed to use the
latest electronic data interchange ("EDI") capabilities to optimize
allocation of product to the locations that achieve the highest sales and
inventory productivity potential. Management believes that the utilization
of the centralized distribution center has resulted in lower average
freight expense, more timely control of inventory shipment to stores,
improved inventory turnover, better in-stock positions and improved
information flow. In addition, the transfer of inventory receiving
responsibilities from the stores to the distribution center allows the
sales associates to redirect their focus to the sales floor, thereby
increasing the level of customer service. The Company believes strong
distribution support for its stores is a critical element to its growth
strategy and is central to its ability to maintain a low cost operating
structure.

The Company manages the distribution process centrally from
its corporate headquarters. Purchase orders issued by Linens 'n Things are
electronically transmitted to the majority of its suppliers. By the end of
1996, the Company anticipates that 80% of its total inventory will be
received through the distribution center. The balance of the Company's
merchandise is directly shipped to individual stores. The Company plans to
continue efforts to ship as much merchandise through the distribution
center as possible to ensure all benefits of the Company's logistics
strategy are fully leveraged. Continued growth will also facilitate new
uses of EDI technologies between Linens 'n Things and its suppliers to
exploit the most productive and beneficial use of its assets and resources.

As of June 29, 1996, the distribution center was utilized at
approximately 50% of capacity. Management estimates that the distribution
center can support the Company's growth through the end of 1998. As the
Company continues to open more superstores in the western United States,
another distribution center may be necessary or desirable to support the
further growth of the Company. Such a distribution center would further
increase freight savings and reduce transit time to the western stores. In
order to realize greater efficiency, the Company uses third party delivery
services to ship its merchandise from the distribution center to its stores.

Management Information Systems

Over the last three years, the Company has made significant
investment in technology to improve customer service, gain efficiencies and
reduce operating costs. Linens 'n Things has installed a customized
IBM AS/400 management information system, which integrates all major
aspects of the Company's business, including sales, distribution,
purchasing, inventory control, merchandise planning and replenishment and
financial systems. The Company utilizes POS terminals with price look-up
capabilities for both inventory and sales transactions on a SKU basis which
the Company is currently in the process of upgrading. Information obtained
daily by the system results in automatic inventory replenishment in
response to specific requirements of each superstore. The upgraded
terminals will also enable the store operator to initiate the credit
approval process and will have the capability to support the Company's
planned bridal registry service. The Company has further integrated its
planning process through a comprehensive EDI system used for substantially
all purchase orders, invoices and bills of lading and which, combined with
automatic shipping notice technology used in the distribution systems,
creates additional efficiencies by capturing data through bar codes thereby
reducing clerical errors and inventory shrinkage.

The Company believes its management information systems have
fully integrated the Company's stores, distribution and home office. The
Company continually evaluates and upgrades its management information systems
on a regular basis to enhance the quantity, quality and timeliness of
information available to management.

Store Management and Operations

Each superstore is staffed with one General Manager, two to
four Merchandise Managers and one Receiving Manager. The operations of
each store are supervised by one of 19 District Managers and one of three
Zone Vice Presidents. Each Zone Vice President reports to the Senior Vice
President of Store Operations.

The Company places a strong emphasis on its people, their
development and opportunity for advancement, particularly at the store
level. The Company's commitment to maintaining a high internal promotion
rate is best exemplified through the practice of opening each new store
with a seasoned management crew, who participate in training at an existing
store immediately prior to the new opening. As a result, the vast majority
of General Managers opening a new store have significant experience at the
Company. Additionally, the structured management training program requires
each new associate to learn all facets of the business within the framework
of a fully operational store. This program includes, among other things,
product knowledge, merchandise presentation, business and sales
perspective, employee relations and manpower planning, complimented at the
associate level through daily product knowledge seminars and structured
register training materials and proficiencies. The Company believes that
its policy of promoting from within the Company, as well as the
opportunities for advancement generated by its ongoing store expansion
program, serve as incentives to attract and retain quality individuals
which, the Company believes, results in lower turnover.

Linens 'n Things stores are open seven days a week, generally
from 10:00 a.m. to 9:00 p.m. Monday through Saturday and 11:00 a.m. to 6:00
p.m. on Sunday, unless affected by local laws.

Employees

As of June 1996, the Company employed approximately 6,000
people of whom approximately 2,500 were full-time employees and 3,500 were
part-time employees. Less than 7% of employees are non-store personnel.
None of the Company's employees are represented by unions, and the Company
believes that its relationship with its employees is good.

Competition

The Company believes that although it will continue to face
competition from retailers in all four of the categories referred to in
"Business--Industry," its most significant competition is from the large
format specialty stores. The home textiles industry is becoming
increasingly competitive as several specialty retailers are in the process
of expanding into new markets. In addition, as the Company expands into
new markets, it will face new competitors. In 1995 and the first twenty-
six weeks of 1996, the Company experienced new competition in existing
markets at approximately 40% of the superstores included in the comparable
store base which previously had limited competition from other superstores,
negatively impacting comparable store net sales. The visibility of the
Company may encourage additional competitors or may encourage existing
competitors to imitate the Company's format and methods. If any of the
Company's major competitors seek to gain or retain market share by reducing
prices, the Company may be required to reduce its prices in order to remain
competitive.

The Company believes that the ability to compete
successfully in its markets is determined by several factors, including
price, breadth and quality of product selection, in-stock availability of
merchandise, effective merchandise presentation, customer service and
superior store locations. The Company believes that it is well positioned
to compete on the basis of these factors. Nevertheless, there can be no
assurance that any or all of the factors that enable the Company to compete
favorably will not be adopted by companies having greater financial and
other resources than the Company.

Properties

The Company currently leases all of its existing stores and
expects that its policy of leasing rather than owning will continue as it
expands. The Company's leases provide for original lease terms that
generally range from 5 to 20 years and certain of the leases provide for
renewal options that range from 5 to 15 years at increased rents. Certain
of the leases provide for scheduled rent increases (which, in the case of
fixed increases, the Company accounts for on a straight line basis over the
noncancelable lease term) and certain of the leases provide for contingent
rent (based upon store sales exceeding stipulated amounts). Prior to the
Offering, CVS has acted as guarantor on substantially all of the Company's
store leases. After the Offering, although CVS will continue to guarantee
the Company's current store leases where CVS has guaranteed such leases in
the past (including extensions and renewals relating to certain of such
leases), CVS will no longer enter into commitments to guarantee future
leases on behalf of the Company. See "Risk Factors--Lack of Operating
History as a Stand-Alone Company."

The Company owns its 275,000 square foot distribution center
in North Carolina. The Company leases its 59,000 square foot corporate
office in Clifton, New Jersey.

Legal Proceedings

There are no material legal proceedings against the Company.
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.

Trade Names and Service Marks

The Company uses the "Linens 'n Things" name as a trade name
and as a service mark in connection with retail services. The Company has
registered the "Linens 'n Things" logo as a service mark with the United
States Patent and Trademark Office. Management believes that the name Linens
'n Things is an important element of the Company's business.

MANAGEMENT

Executive Officers and Directors

The following table sets forth information regarding the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Norman Axelrod 44 Chief Executive Officer, President and Director
James M. Tomaszewski 47 Senior Vice President, Chief Financial Officer
Steven B. Silverstein 36 Senior Vice President, General Merchandise Manager
Hugh J. Scullin 47 Senior Vice President, Store Operations
Charles C. Conaway 36 Director
</TABLE>

Mr. Axelrod has been Chief Executive Officer and President
of the Company since 1988. Prior to joining Linens 'n Things, Mr. Axelrod
held various management positions at Bloomingdale's between 1976 to 1988
including: Buyer, Divisional Merchandise Manager, Vice
President/Merchandise Manager and Senior Vice President/General Merchandise
Manager. Mr. Axelrod earned his B.S. from Lehigh University and his
M.B.A. from New York University.

Mr. Tomaszewski has served as Senior Vice President, Chief
Financial Officer since joining Linens 'n Things in 1994. Mr. Tomaszewski
began his career with J.L. Hudsons Department Store in Detroit in 1970. In
1982, he was promoted to Vice President Controller of Diamonds Department
Store in Tempe, Arizona. In 1985, he joined Filene's Department Store as Vice
President Controller, and later that year he was promoted to Senior Vice
President & Chief Financial Officer for Filene's Basement. In 1987, Mr.
Tomaszewski joined Lechmere's in Boston as Senior Vice President and Chief
Financial Officer. In 1992, he was promoted to Executive Vice President
Retail Operations at Lechmere's and elected to Lechmere's Board of Directors.
Mr. Tomaszewski has a B.S. in Finance and Economics and an M.B.A. in Finance
from Wayne State University.

Mr. Silverstein joined Linens 'n Things in 1992 as Vice
President, General Merchandise Manager. Prior to joining Linens 'n Things,
Mr. Silverstein was Merchandise Vice President of Home Textiles at
Bloomingdales from 1985 to 1992. Mr. Silverstein has been Senior Vice
President, General Merchandise Manager since 1993. He received his B.A. from
Cornell University and his M.B.A. from Wharton Business School.

Mr. Scullin joined Linens 'n Things in 1989 as Vice President,
Store Operations. Mr. Scullin has been Senior Vice President, Store
Operations since 1994. From 1978 to 1987, Mr. Scullin held various management
positions with The Gap, Inc., including Zone Vice President at both The Gap
and Banana Republic from 1984 to 1987. From 1987 to 1989, Mr. Scullin was
Vice President of Stores with Alcott and Andrews. Mr. Scullin graduated from
St. Joseph's University with a B.S. in Marketing Management.

Mr. Conaway has served as Director since 1996. Prior to
joining CVS, he held the position of Executive Vice President and Chief
Operating Officer for Reliable Drug Stores, Inc. Mr. Conaway joined CVS in
1992 as the Senior Vice President, Pharmacy. Mr. Conaway has been Executive
Vice President and Chief Financial Officer of CVS since 1995. Mr. Conaway
holds a B.S. in Accounting from Michigan State University and an M.B.A.
from the University of Michigan.

Upon completion of the Offering, the Board of Directors, which
is expected to consist of seven members, will be divided into three classes,
with each class holding office for staggered three-year terms. The terms of
Messrs. and will expire at the 1997 annual meeting of the
Company's shareholders, the terms of Messrs. and will expire at
the 1998 annual meeting of the Company's shareholders and the terms of the
additional directors will expire at the 1999 annual meeting of the
Company's shareholders. The Company's officers are elected by the Board of
Directors for one-year terms and serve at the discretion of the Board of
Directors. Shortly after the Offering, the Company will appoint
additional directors to the Board of Directors. At least two of such
directors will not be associated with CVS or management of the Company.

At the time of the Offering, the Stockholder Agreement provides
that CVS shall have the right to designate (i) members of the Board of
Directors of the Company so long as CVS in aggregate owns at least % of the
total votes represented by the total outstanding voting stock, (ii) members
of the Board of Directors of the Company, so long as CVS in aggregate owns at
least % but less than % of the total outstanding voting stock, and (iii)
zero members of the Board of Directors of the Company as soon as CVS in
aggregate owns less than % of the total outstanding voting stock.

Key Managers

The following table sets forth information regarding the key
managers of the Company.

Name Age Position
- ---- --- --------
William T. Giles 37 Vice President, Finance, Controller
Matthew J. Meaney 50 Vice President, Management Information Systems
Brian D. Silva 40 Vice President, Human Resources
Dominick J. Trapasso 43 Vice President, Logistics

Mr. Giles joined Linens 'n Things in 1991 as Assistant
Controller and was promoted to Vice President of Finance and Controller in
1994. From 1981 to 1990 , Mr. Giles was with Price Waterhouse. From 1990
to 1991, Mr. Giles held the position of Director of Financial Reporting
with Melville Corporation. Mr. Giles is a certified public accountant and
member of the American Institute of Certified Public Accountants. He
graduated from Alfred University with a B.A. in Accounting and Management.

Mr. Meaney joined Linens 'n Things in 1991 as Vice
President of Management Information Services. From 1985 to 1991, Mr.
Meaney was Vice President of Management Information Services for Laura
Ashley, Inc. Mr. Meaney received a B.S. in Economics from St. Peter's
College and an M.B.A. in Finance from Seton Hall University.

Mr. Silva has been Vice President, Human Resources, since
joining Linens 'n Things in 1995. Mr. Silva was Assistant Vice President,
Human Resources at the Guardian, an insurance and financial services company,
from 1986 to 1995. He holds an M.A. in Organizational Development from
Columbia University and an M.A. in Human Resources Management from New York
Institute of Technology. Mr. Silva received his B.A. from St. John's
University.

Mr. Trapasso has been Vice President, Logistics since joining
Linens 'n Things in 1993. From 1979 to 1986, he was employed with John
Wanamaker as Director, Warehouse, Distribution. From 1986 to 1993, he was
Senior Vice President Distribution, Transportation at Charming Shoppes, Inc.
Mr. Trapasso received his B.A. from New York University.

Compensation of Directors

Directors who are not currently receiving compensation as
officers or employees of the Company or any of its affiliates will be paid
an annual retainer fee of and a fee for each meeting of the Company Board
or any committee that they attend and a retainer fee for serving as a
Committee chair. Non-employee directors will also participate in the 1996
Non-Employee Director Stock Option Plan. See "--1996 Non-Employee Director
Stock Option Plan."

Executive Compensation

The following tables set forth the compensation paid or
accrued by the Company during 1995 to its executive officers.

Summary Compensation Table

Long Term Compensation
Annual Compensation Awards
------------------- -------------------------
Restricted Securities All
Stock Underlying Other
Award(s) Options Compensation
Name and Principal Position Salary Bonus ($)(1) (#)(2) ($)(3)
--------------------------- ------ ----- ------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Norman Axelrod(4).............................. 455,000 0 750,004 65,000 6,918
Chief Executive Officer and President
Steven B. Silverstein ......................... 265,000 0 200,031 20,000 7,069
Senior Vice President, General Merchandise
Manager
James M. Tomaszewski .......................... 264,000 0 100,016 15,000 5,373
Senior Vice President, Chief Financial Officer
Hugh J. Scullin ............................... 210,000 0 0 6,000 8,519
Senior Vice President, Store Operations

<FN>
- ----------
(1) All restricted stock disclosed in the table is CVS restricted stock
which is subject to a four year vesting period from date of grant which
was April 11, 1995. On December 31, 1995 Messrs. Axelrod, Silverstein
and Tomaszewski had the right to receive 25,011, 7,538 and 2,676
shares, having a market value on December 31, 1995 (based on the value
of CVS common stock on that date of $30.875) of $772,214, $232,735 and
$82,621, respectively. As of the date of the Offering all shares of
restricted stock will be vested.

(2) These options are multi-year grants to buy CVS common stock which
become exercisable in one-third increments over a three year period,
except for Mr. Scullin who received a traditional grant which is
fully exercisable one year after the grant date. In the case of Mr.
Scullin, his options are fully exercisable for the 90 day period
following the Offering.

(3) Includes $3,918, $4,069, $2,373 and $5,519 contributed under the CVS
401K Profit Sharing Plan for Messrs. Axelrod, Silverstein,
Tomaszewski and Scullin, respectively, and 56.13 ESOP shares (with a
value of $3,000) contributed under the CVS Employee Stock Ownership
Plan for each of these named executives.

(4) The Company intends to enter into an employment agreement with Mr.
Axelrod prior to the Offering.
</TABLE>

Option Grants in 1995

Individual Grants(1)
------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options
Options Granted to Exercise
Granted Employees or Base Price Grant Date
Name # in Fiscal Year ($/sh) Expiration Date Present Value $(2)
- -------------------- ----------- -------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Norman Axelrod 65,000 2.1% $37.375 4/10/2005 $595,197
Steven B. Silverstein 20,000 .6% $37.375 4/10/2005 $183,137
James M. Tomaszewski 15,000 .5% $37.375 4/10/2005 $137,353
Hugh J. Scullin 6,000 .2% $36.250 3/29/2005 $ 53,288

<FN>
- ----------
(1) These options are multi-year grants to buy CVS stock that become
exercisable in one-third increments over a three-year period, except
for Mr. Scullin who received a traditional grant which is fully
exercisable one year after the grant date. They were awarded at fair
market value on the date of grant.

(2) The hypothetical present values on grant date are calculated using the
Black-Scholes option pricing model which for 1995 grants was
determined based on the following six inputs: (1) the option
exercise price is $37.375 ($36.250 in the case of Mr. Scullin); (2)
the fair value of the stock under option at the time of grant is also
$37.375 ($36.250 in the case of Mr. Scullin); (3) the dividend
yields is 4.07% (4.19% in the case of Mr. Scullin), which equals the
$1.52 dividend to be paid to shareholders during the year prior to
the date of grant of the option divided by the stock price of $37.375
($36.250 in the case of Mr. Scullin); (4) the option term is 10
years; (5) the volatility of the stock is 19.27%, based on an
analysis of weekly closing stock prices and dividends paid during the
three-year period prior to the grant of the options; and (6) the
assumed risk-free rate of interest is 7.32%, equivalent to a 10 year
treasury yield at the time of grant of the options. No other
discounts or any other restrictions related to vesting or the
likelihood of vesting were applied.

Aggregated Option Exercises in 1995 and 1995 Year-end Option Values
</TABLE>

Numbeer of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)
---------------------- --------------------
Shares Acquired Valued Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- -------------------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Norman Axelrod 0 0 42,000/65,000 0/0
Steven B. Silverstein 0 0 8,500/20,000 0/0
James M. Tomaszewski 0 0 7,500/15,000 0/0
Hugh J. Scullin 0 0 13,500/6,000 0/0
</TABLE>

Executive Employment and Severance Agreements

The Company has entered into severance agreements with
Messrs. Silverstein, Tomaszewski and Scullin which provide that the
executives will receive continued base salary and medical and dental
benefits for 24 months and a pro rata bonus based on % of base salary if
the executive's employment is involuntarily terminated (or is voluntarily
terminated with good reason) within two years after a "Change in Control"
(as defined in the agreements) of the Company. Prior to the Offering, the
Company intends to enter into an agreement with Mr. Axelrod.

1996 Incentive Compensation Plan

The Board of Directors of the Company intends to adopt, and
Nashua Hollis CVS, Inc., as sole shareholder intends to approve, the
Company's 1996 Incentive Compensation Plan (the "1996 ICP"). The Company's
Board of Directors believes that attracting and retaining key employees is
essential to the Company's growth and success. The following is a brief
description of the material features of the 1996 ICP. Such description is
qualified in its entirety by reference to the full text of the 1996 ICP.

Types of Awards. The terms of the 1996 ICP provide for grants
of stock options, stock appreciation rights ("SARs"), restricted stock,
deferred stock, other stock-related awards, and performance or annual
incentive awards that may be settled in cash, stock, or other property
("Awards").

Shares Subject to the 1996 ICP and Annual Limitations. Under
the 1996 ICP, the total number of shares of the Company's Common Stock
reserved and available for delivery to participants in connection with Awards
is (i) shares, plus (ii) % of the number of shares of Common Stock
newly issued by the Company or delivered out of treasury shares during the
term of the Plan (excluding any issuance or delivery in connection with
Awards, or any other compensation or benefit plan of the Company); provided,
however, that the total number of shares of Common Stock with respect to which
incentive stock options may be granted shall be . Shares of Common
Stock subject to an Award that is canceled, expired, forfeited, settled in
cash, or otherwise terminated without a delivery of shares to the participant,
including Common Stock withheld or surrendered in payment of any exercise or
purchase price of an Award or taxes relating to an Award, will again be
available for Awards under the 1996 ICP. Common Stock issued under the 1996
ICP may be either newly issued shares or treasury shares.

In addition, the 1996 ICP imposes individual limitations on the
amount of certain Awards in order to comply with Section 162(m) of the
Internal Revenue Code (the "Code"). Under these limitations, during any
fiscal year the number of options, SARs, shares of restricted stock, shares of
deferred stock, shares of Common Stock issued as a bonus or in lieu of other
Company obligations, and other stock-based Awards granted to any one
participant shall not exceed shares for each type of such Award,
subject to adjustment in certain circumstances. The maximum amount that may
be earned as a final annual incentive award or other cash Award in any fiscal
year by any one participant is $ million, and the maximum amount that
may be earned as a final performance award or other cash Award in respect of a
performance period by any one participant is $ million.

The Committee is authorized to adjust the number and kind of
shares subject to the aggregate share limitations and annual limitations under
the 1996 ICP and subject to outstanding Awards (including adjustments to
exercise prices and number of shares of options and other affected terms of
Awards) in the event that a dividend or other distribution (whether in cash,
shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event affects the
Common Stock so that an adjustment is appropriate. The Committee is also
authorized to adjust performance conditions and other terms of Awards in
response to these kinds of events or in response to changes in applicable
laws, regulations, or accounting principles.

Eligibility and Administration. Executive officers and
other officers and employees of the Company or any subsidiary, including
any such person who may also be a director of the Company, shall be
eligible to be granted Awards under the 1996 ICP. It is anticipated that
approximately persons will be granted Awards under the 1996 ICP. The 1996
ICP will be administered by the Committee except to the extent the Board
elects to administer the 1996 ICP. Subject to the terms and conditions of
the 1996 ICP, the Committee is authorized to select participants, determine
the type and number of Awards to be granted and the number of shares of
Common Stock to which Awards will relate, specify times at which Awards
will be exercisable or settleable (including performance conditions that
may be required as a condition thereof), set other terms and conditions of
such Awards, prescribe forms of Award agreements, interpret and specify
rules and regulations relating to the 1996 ICP, and make all other
determinations that may be necessary or advisable for the administration of
the 1996 ICP.

Stock Options and SARS. The Committee is authorized to grant
stock options, including both incentive stock options ("ISOs") and
non-qualified stock options, and SARs entitling the participant to receive the
excess of the fair market value of a share of Common Stock on the date of
exercise over the grant price of the SAR. The exercise price per share
subject to an option and the grant price of an SAR is determined by the
Committee, but must not be less than the fair market value of a share of
Common Stock on the date of grant (except to the extent of in-the-money awards
or cash obligations surrendered by the participant at the time of grant).
The maximum term of each option or SAR may not exceed ten years. Options may
be exercised by payment of the exercise price in cash, Common Stock,
outstanding Awards, or other property (possibly including notes or obligations
to make payment on a deferred basis) having a fair market value equal to the
exercise price, as the Committee may determine from time to time. Methods of
exercise and settlement and other terms of the SARs are determined by the
Committee.

Restricted Stock, Deferred Stock and Dividend Equivalents. The
Committee is authorized to grant restricted stock and deferred stock.
Restricted stock is a grant of Common Stock which may not be sold or disposed
of, and which may be forfeited in the event of certain terminations of
employment and/or failure to meet certain performance requirements, prior to
the end of a restricted period specified by the Committee. An Award of
deferred stock confers upon a participant the right to receive shares at the
end of a specified deferral period, subject to possible forfeiture of the
Award in the event of certain terminations of employment and/or failure to
meet certain performance requirements prior to the end of a specified
restricted period (which restricted period need not extend for the entire
duration of the deferral period). The Committee is authorized to grant
dividend equivalents conferring on participants the right to receive,
currently or on a deferred basis, cash, shares, other Awards, or other
property equal in value to dividends paid on a specific number of shares or
other periodic payments.

Bonus Stock and Awards in Lieu of Cash Obligations and other
Stock-Based Awards. The Committee is authorized to grant shares as a bonus
free of restrictions, or to grant shares or other Awards in lieu of Company
obligations to pay cash under other plans or compensatory arrangements,
subject to such terms as the Committee may specify. The 1996 ICP also
authorizes the Committee to grant other Awards that are denominated or payable
in, valued by reference to, or otherwise based on or related to shares.

Performance Awards, Including Annual Incentive Awards. The
right of a participant to exercise or receive a grant or settlement of an
Award, and the timing thereof, may be subject to such performance conditions
as may be specified by the Committee. In addition, the 1996 ICP authorizes
specific annual incentive awards, which represent a conditional right to
receive cash, shares or other Awards upon achievement of pre-established
performance goals during a specified one-year period. Performance awards and
annual incentive awards granted to persons the Committee expects will, for the
year in which a deduction arises, be among the Chief Executive Officer and
four other most highly compensated executive officers (the "Named Executive
Officers"), will, if so intended by the Committee, be subject to provisions
that should qualify such Awards as "performance-based compensation" not
subject to the limitation on tax deductibility by the Company under Code
Section 162(m).

The performance goals to be achieved as a condition of
payment or settlement of a performance award or annual incentive award will
consist of (i) one or more business criteria and (ii) a targeted level or
levels of performance with respect to each such business criteria. In the
case of performance awards intended to meet the requirements of Code
Section 162(m), the business criteria used must be one of those specified
in the 1996 ICP, although for other participants the Committee may specify
any other criteria. The business criteria specified in the 1996 ICP are:
(1) earnings per share; (2) revenues; (3) cash flow; (4) cash flow
return on investment; (5) return on assets, return on investment, return
on capital, return on equity; (6) economic value added; (7) operating
margin; (8) net income; pretax earnings; pretax earnings before interest,
depreciation and amortization; pretax operating earnings after interest
expense and before incentives, service fees, and extraordinary or special
items; operating earnings; (9) total stockholder return; and (10) any of
the above goals as compared to the performance of a published or special
index deemed applicable by the Committee including, but not limited to, the
Standard & Poor's 500 Stock Index. The Committee may, in its discretion,
determine that the amount payable as a final annual incentive or
performance award will be increased or reduced from the amount of any
potential Award, but may not exercise discretion to increase any such
amount intended to qualify under Code Section 162(m). Subject to the
requirements of the 1996 ICP, the Committee will determine other
performance award and annual incentive award terms, including the required
levels of performance with respect to the business criteria, the
corresponding amounts payable upon achievement of such levels of
performance, termination and forfeiture provisions, and the form of
settlement.

Other Terms of Awards. Awards may be settled in the form of
cash, Common Stock, other Awards, or other property, in the discretion of
the Committee. The Committee may require or permit participants to defer
the settlement of all or part of an Award in accordance with such terms and
conditions as the Committee may establish, including payment or crediting
of interest or dividend equivalents on deferred amounts, and the crediting
of earnings, gains, and losses based on deemed investment of deferred
amounts in specified investment vehicles. The Committee is authorized to
place cash, shares, or other property in trusts or make other arrangements
to provide for payment of the Company's obligations under the 1996 ICP.
Awards granted under the 1996 ICP generally may not be pledged or otherwise
encumbered and are not transferable except by will or by the laws of
descent and distribution, or to a designated beneficiary upon the
participant's death, except that the Committee may, in its discretion,
permit transfers for estate planning or other purposes. Awards under the
1996 ICP are generally granted without a requirement that the participant
pay consideration in the form of cash or property for the grant (as
distinguished from the exercise), except to the extent required by law.
The Committee may, however, grant Awards in exchange for other Awards under
the 1996 ICP, awards under other Company plans, or other rights to payment
from the Company, and may grant Awards in addition to and in tandem with
such other Awards, awards, or rights as well.

Change of Control. The Committee may, in its discretion,
accelerate the exercisability, the lapsing of restrictions, or the
expiration of deferral or vesting periods of any Award, and such
accelerated exercisability, lapse, expiration and vesting shall occur
automatically in the case of a "change in control" of the Company except to
the extent otherwise determined by the Committee at the date of grant. In
addition, the Committee may provide that the performance goals relating to
any performance-based award will be deemed to have been met upon the
occurrence of any change in control. Upon the occurrence of a change in
control, except to the extent otherwise determined by the Committee at the
date of grant, options may at the election of the participant be cashed out
based on a defined "change in control price," which will be the higher of
(i) the cash and fair market value of property that is the highest price
per share of Common Stock paid (including extraordinary dividends) in any
change in control or liquidation of shares of Common Stock following a sale
of substantially all of the assets of the Company, or (ii) the highest fair
market value per share of Common Stock (generally based on market prices)
at any time during the 60 days before and 60 days after a change in
control. "Change in control" is defined in the 1996 ICP to include a
variety of events, including significant changes in the stock ownership of
the Company or a significant subsidiary, changes in the Company's board of
directors, certain mergers and consolidations of the Company or a
significant subsidiary, and the sale or disposition of all or substantially
all the consolidated assets of the Company.

Amendment and Termination of the 1996 ICP. The Board of
Directors may amend, alter, suspend, discontinue, or terminate the 1996 ICP
or the Committee's authority to grant Awards without further stockholder
approval, except stockholder approval must be obtained for any amendment or
alteration if required by law or regulation or under the rules of any stock
exchange or automated quotation system on which the shares are then listed
or quoted. Stockholder approval will not be deemed to be required under
laws or regulations, such as those relating to ISOs, that condition
favorable treatment of participants on such approval, although the Board
may, in its discretion, seek stockholder approval in any circumstance in
which it deems such approval advisable. Unless earlier terminated by the
Board, the 1996 ICP will terminate at such time as no shares remain
available for issuance under the 1996 ICP and the Company has no further
rights or obligations with respect to outstanding Awards under the 1996
ICP.

Federal Income Tax Implications of the 1996 ICP. The following
is a brief description of the federal income tax consequences generally
arising with respect to Awards under the 1996 ICP.

The grant of an option or SAR will create no tax consequences
for the participant or the Company. A participant will not recognize taxable
income upon exercising an ISO (except that the alternative minimum tax may
apply). Upon exercising an option other than an ISO, the participant must
generally recognize ordinary income equal to the difference between the
exercise price and fair market value of the freely transferable and
nonforfeitable shares acquired on the date of exercise. Upon exercising an
SAR, the participant must generally recognize ordinary income equal to the
cash or the fair market value of the freely transferable and nonforfeitable
shares received.

Upon a disposition of shares acquired upon exercise of an ISO
before the end of the applicable ISO holding periods, the participant must
generally recognize ordinary income equal to the lesser of (i) the fair market
value of the shares at the date of exercise of the ISO minus the exercise
price, or (ii) the amount realized upon the disposition of the ISO shares
minus the exercise price.

Generally, for Awards granted under the 1996 ICP that result in
the payment or issuance of cash or shares or other property, the participant
must recognize ordinary income equal to the cash or the fair market value of
shares or other property received. With respect to Awards involving the
issuance of shares or other property that is restricted as to transferability
and subject to a substantial risk of forfeiture, the participant must
generally recognize ordinary income equal to the fair market value of the
shares or other property received at the first time the shares or other
property becomes transferable or is not subject to a substantial risk of
forfeiture, whichever occurs earlier. However, a participant may elect to be
taxed at the time of receipt of shares or other property rather than upon
lapse of restrictions on transferability or substantial risk of forfeiture.
The Company generally will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the participant in connection with an option,
SAR or the Award.

The foregoing summary of the federal income tax consequences in
respect of the 1996 ICP is for general information only. Interested parties
should consult their own advisors as to specific tax consequences, including
the application and effect of foreign, state and local tax laws.

1996 Non-Employee Director Stock Plan

The Board of Directors of the Company intends to adopt, and
Nashua Hollis CVS, Inc., as sole shareholder of the Company intends to
approve, the 1996 Non-Employee Director Stock Plan (the "1996 Director Plan").
The 1996 Director Plan is intended to assist the Company in attracting and
retaining highly qualified persons to serve as non-employee directors by
providing a significant portion of their total compensation in the form of
Company Common Stock, thereby more closely aligning such directors' current
and ongoing interests with those of the Company's shareholders.

The following summary of the material terms of the 1996
Director Plan is qualified in its entirety by reference to the full text of
the 1996 Director Plan.

Eligibility. Under the 1996 Director Plan, only directors who
are not employees of the Company or of any subsidiary or parent corporation of
the Company are "non-employee directors" eligible to participate in the Plan.

Option Grant. An option to purchase shares of Common
Stock (an "Option") will be automatically granted to each non-employee
director upon the later of the Offering or initial election to the Board.
Options granted under the 1996 Director Plan will be non-qualified stock
options and will have the following principal terms and conditions: (i) the
exercise price per share of Common Stock purchasable under an Option will be
equal to 100% of the fair market value of Common Stock on the date of grant of
the Option; (ii) each Option will expire at the earliest of (a) ten years
after the date of grant, (b) 12 months after the non-employee director ceases
to serve as a director of the Company for any reason other than death,
disability, or retirement at or after attaining age 65, or (c) immediately
upon removal of the non-employee director for cause; (iii) each Option will
become exercisable as to 20% of the shares of Common Stock relating to the
Option on each of the first five anniversaries of the date of grant, and will
thereafter remain exercisable until the Option expires; provided that an
Option previously granted to a participant (a) will be fully exercisable in
the event of a "change in control" (as defined in the 1996 Director Plan), (b)
will be fully exercisable after the non-employee director ceases to serve as a
director of the Company due to death, disability, or retirement at or after
attaining age 65 and (c) will be exercisable after the non-employee director
ceases to serve as a director of the Company for any reason other than death,
disability, or retirement at or after attaining age 65 only if the Option was
exercisable at the date of such cessation of service; and (iv) each Option may
be exercised, in whole or in part, at such time as it is exercisable and prior
to its expiration by, among other things, giving written notice of exercise to
the Company specifying the number of shares to be purchased and accompanied by
payment in full of the exercise price in cash (including by check) or by
surrender of shares of Common Stock or a combination thereof.

Stock Unit Grants. The 1996 Director Plan also provides for
automatic grants of stock units ("Stock Units") to each non-employee
director on the Offering and thereafter to each person who, at the close of
business on the date of each annual meeting of the Company's stockholders
commencing in 1997, is a non-employee director. Each Stock Unit represents
the right to receive one share of Common Stock at the end of a specified
period. One-half of such Stock Units will be paid six months and a day after
the grant date, provided the non-employee director has not ceased to serve as
a director for any reason other than death, disability, or retirement at or
after attaining age 65, except that payment of such Stock Units shall be
accelerated in the event of a change in control. The remaining one-half of
such Stock Units will be paid upon the later of ceasing to be a director or
attaining age 65, provided that payment of such Stock Units shall be
accelerated in the event of death, disability, or a change in control.

Deferral. The 1996 Director Plan permits a non-employee
director to elect to defer receipt of all or a portion of the shares otherwise
deliverable in connection with Stock Units. The 1996 Director Plan also
permits a non-employee director to elect to defer receipt of fees otherwise
payable in cash, with such deferred amounts deemed invested in Stock Units.
The director may make such election for up to 100% of the fees otherwise
payable to him or her, including annual retainer fees, fees for attendance at
meetings of the Board of Directors or any committee and any other fees for
service as director. If a director elects to defer fees in the form of Stock
Units, the Company will credit a deferral account established for the director
with a number of Stock Units equal to the number of shares of Common Stock
(including fractional shares) having an aggregate fair market value at that
date equal to the amount of fees deferred by the director. The deferral
period applicable to Stock Units will be as elected by the director. However,
all periods will end upon a change in control of the Company.

Dividends. When, as, and if dividends are declared and paid on
Common Stock, dividend equivalents equal to the amount or value of any per
share dividend will be credited on each then outstanding Stock Unit. Such
dividend amounts will be deemed invested in non-forfeitable Stock Units, based
on the then-current fair market value of Common Stock.

Shares Available for Issuance. A total of shares of
Common Stock are reserved and available for issuance under the 1996 Director
Plan. Such shares may be authorized but unissued shares, treasury shares or
shares acquired in the market for the account of a director. If any Option or
Stock Unit is canceled or forfeited, the shares subject thereto will again be
available for issuance under the 1996 Director Plan. The aggregate number of
shares of Common Stock issuable under the 1996 Director Plan and the number of
shares subject to each automatic grant of Options or Stock Units will be
appropriately adjusted by the Board of Directors in the event of a
recapitalization, reorganization, merger, consolidation, spin-off,
combination, repurchase, exchange of shares or other securities of the
Company, stock split or reverse split, stock dividend, certain other
extraordinary dividends, liquidation, dissolution, or other similar corporate
transaction or event affecting the Common Stock, in order to prevent dilution
or enlargement of directors' rights under the 1996 Director Plan.

Administration. The 1996 Director Plan will be administered by
the Board of Directors. The 1996 Director Plan may be amended, altered,
suspended, discontinued or terminated by the Board of Directors without
further stockholder approval, unless such approval is required by law or
regulation or under the rules of any stock exchange or automated quotation
system on which the Common Stock is then listed or quoted. Stockholder
approval will not be deemed to be required under laws or regulations that
condition favorable treatment of participating directors on such approval,
whether or not the amendment would increase the cost of the 1996 Director Plan
to the Company, although the Board of Directors may, in its discretion, seek
stockholder approval in any circumstance in which it deems such approval
advisable.

Effective and Termination Dates. The 1996 Director Plan will
become effective upon the Offering. Unless earlier terminated by the Board of
Directors, the 1996 Director Plan will terminate when no shares remain
available under the 1996 Director Plan and the Company and directors have no
further rights and obligations under the 1996 Director Plan.

Federal Income Tax Implications of the 1996 Director Plan. The
federal income tax consequences related to the grant and exercise of Options
to non-employee directors under the 1996 Director Plan are substantially
similar to the tax consequences described herein with respect to the grant of
non-qualified stock options under the 1996 Incentive Compensation Plan.
Directors will recognize ordinary income equal to the fair market value of
Common Stock received in connection with the payment of Stock Units, and the
Company will be entitled to a corresponding tax deduction at such time.

PRINCIPAL AND SELLING SHAREHOLDER

The following table and the notes thereto set forth information
as of immediately prior to and immediately after completion of the Offering
relating to beneficial ownership (as defined in Rule 13d-3 of the Securities
and Exchange Act of 1934) of the Company's Common Stock by each director, the
executive officers and directors as a group and the Selling Shareholder:

<TABLE>
<CAPTION>
Beneficial Ownership of Beneficial Ownership of
Common Stock Prior to Common Stock After
Offering(1) Offering(2)
--------------------------- --------------------------
Number of Number of
Shareholders Shares Percent Shares Percent
------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Nashua Hollis CVS, Inc.(3).....................
Norman Axelrod.................................
Charles C. Conaway.............................
Executive Officers and Directors as a Group....

<FN>
- ----------
(1) Common Stock will be the only class of equity securities outstanding
immediately prior to completion of the Offering.

(2) Assuming the Underwriters' over-allotment option is not exercised.

(3) Nashua Hollis CVS, Inc. is a wholly owned, indirect subsidiary of CVS.
Its address is 670 White Plains Road, Suite 204, Scarsdale, New York
10583.
</TABLE>

RELATIONSHIP WITH CVS

The Company was acquired by CVS in 1983. Upon completion of
the Offering, CVS will own approximately % of the Common Stock of the Company
( % if the Underwriters' over-allotment option is exercised in full) and
will initially have the right to designate members of the Board of
Directors of the Company. See "Management." This section describes certain
arrangements between CVS and the Company that have existed prior to the
Offering and that will be in effect after the Offering.

Real Estate and Certain Administrative Costs

CVS has historically allocated real estate service costs and
various other administrative expenses to the Company. Allocations were based
on the Company's ratable share of expense incurred by CVS on behalf of the
Company for the combined programs. The total costs allocated to the Company
for the years ended December 31, 1993, 1994 and 1995 was approximately $2.7
million, $3.3 million and $3.0 million, respectively. After the Offering,
CVS will no longer provide the real estate and, except for the transitional
services referred to below, the administrative services to the Company.

In addition, a subsidiary of CVS has guaranteed the leases of
certain stores operated by the Company and charges a fee for that service
which amounted to approximately $0.2 million, $0.3 million and $0.3 million
for the years ended December 31, 1993, 1994 and 1995, respectively.
Subsequent to the Offering, CVS will no longer enter into commitments to
guarantee new store leases on behalf of the Company. However, pursuant to the
Stockholder Agreement, CVS will continue to guarantee store leases where CVS
has guaranteed such leases in the past (including extensions and renewals
relating to certain of such leases). The Company will agree to indemnify
CVS under the Stockholder Agreement for any losses arising in connection
therewith.

CVS and the Company intend to enter into a transitional
services agreement (the "Transitional Services Agreement") effective
concurrently with the Offering under which CVS agrees to provide or cause to
be provided to the Company certain specified services for a transitional
period after the Offering. The transitional services to be provided by CVS
will be check authorization and collection, insurance claims administration
and VSAT satellite communications system services (the "Services"). The
Transitional Services Agreement provides that the Services will be provided in
exchange for fees based on CVS's usual and customary charges for such
Services. The period for which CVS will provide the Services will vary
depending on the type of Service, but will in no event exceed eighteen months.
In addition, at the request of the Company, CVS will continue to provide for a
period ending no later than May 31, 1997 administrative services under certain
welfare benefit plans in respect of employees of the Company as of the
Offering, with the cost of such services to be paid by the Company.

Financing

The weighted average interest rate on borrowings from CVS for
the years ended December 31, 1993, 1994 and 1995 was 3.4%, 4.9% and 6.5%,
respectively. The related interest expense recognized by the Company on such
borrowings was $1.4 million, $3.2 million and $7.1 million, respectively.
Subsequent to the Offering, the Company will no longer receive financing
assistance support from CVS and expects to enter into a new credit facility.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."

The Stockholder Agreement

The Company and CVS intend to enter into the Stockholder
Agreement effective concurrently with the Offering under which the Company and
CVS will agree to certain arrangements. The Stockholder Agreement provides
that the Company and CVS will indemnify each other against certain
liabilities. The Stockholder Agreement also provides that, at the request of
CVS, the Company will use its best efforts to effect registration under the
applicable federal and state securities laws of the shares of the
Common Stock held by CVS for sale in accordance with certain specified
methods described in the Stockholder Agreement, and will take such other
action necessary to permit the sale thereof in other jurisdictions, subject
to certain limitations specified in the Stockholder Agreement. CVS will
also have the right, which it may exercise from time to time, to include
the shares of the Common Stock (and any other securities issued in respect
of or in exchange for such shares) held by it in certain other
registrations of the Common Stock initiated by the Company on its own
behalf or on behalf of its other shareholders. Such rights are subject to
a "lock-up" agreement whereby CVS has agreed not to sell any shares of
Common Stock without the prior consent of CS First Boston for a period of
180 days from the date of this Prospectus. See "Underwriting."

The Stockholder Agreement provides that generally CVS will
cease to have any liability under its employee benefit plans with respect to
employees and former employees of the Company after the Offering, except that
(i) options and other outstanding stock based awards in respect to CVS stock
will continue to operate in accordance with their terms; (ii) the full account
balances of current employees of the Company in CVS's 401(k) profit sharing
plan will be transferred to a similar successor plan of the Company; and (iii)
employees of the Company will be entitled to exercise applicable distribution
rights under CVS's employee stock ownership plan.

Terms of the Tax Disaffiliation Agreement

Prior to the completion of the Offering, CVS and the Company
will enter into a tax disaffiliation agreement (the "Tax Disaffiliation
Agreement") that will set forth each party's rights and obligations with
respect to payments and refunds, if any, with respect to taxes for periods
before and after the completion of the Offering and related matters such as
the filing of tax returns and the conduct of audits or other proceedings
involving claims made by taxing authorities.

In general, CVS will be responsible for filing consolidated
federal and consolidated, combined or unitary state income tax returns for
periods through the date on which the Offering is completed, and paying the
associated taxes. The Company will reimburse CVS for the portion of such
taxes, if any, relating to the Company's businesses, provided, however, that
with respect to any combined and unitary state income taxes based in part on
allocation percentages, the Company will reimburse CVS for the portion of such
taxes attributable to the Company's businesses' contribution to the relevant
allocation percentage. The Company will be reimbursed, however, for tax
attributes, such as net operating losses and foreign tax credits, when and to
the extent that they are used on a consolidated, combined or unitary basis.
The Company will be responsible for filing, and paying the taxes associated
with, all other tax returns for tax periods (or portions thereof) relating
solely to the Company's businesses. CVS, however, will be responsible for
preparing all income tax returns to be filed by the Company for tax periods
that end on or before the date on which the Offering is completed.

In general, the Company will agree to indemnify CVS for taxes
relating to a tax period (or portion thereof) ending on or before the
completion of the Offering to the extent such taxes are attributable to the
Company's businesses or, in the case of any combined and unitary state income
taxes based in part on allocation percentages, to the extent such taxes are
attributable to contribution of the Company's businesses to the relevant
allocation percentage and CVS will agree to indemnify the Company for all
other taxes relating to a tax period (or portion thereof) ending on or before
the completion of the Offering. The Tax Disaffiliation Agreement will also
provide that CVS will generally pay to the Company the net benefit realized by
CVS relating to the Company's businesses from the carryback to tax periods or
portions thereof ending on or before the completion of the Offering of certain
tax attributes of the Company arising in tax periods or portions thereof
beginning after the completion of the Offering.

The Company and CVS will agree not to take (or omit to take)
any action that results in any increased liability relating to a tax period
(or portion thereof) ending on or before the completion of the Offering. The
Company and CVS will each agree to indemnify the other for liabilities arising
as a result of the breach of this agreement. The Company will also agree to
indemnify CVS for liabilities resulting from a breach by the Company of a
similar agreement and certain other agreements contained in the Tax
Disaffiliation Agreement among Footstar, Inc., Melville Corporation (CVS's
predecessor) and their respective affiliates, to which the Company will
continue to be a party after completion of the Offering.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have
outstanding shares of Common Stock. Of these shares, the shares
of Common Stock sold in the Offering will be immediately freely tradable
without restriction under the Securities Act except for any shares purchased
by an "affiliate" of the Company (as that term is defined under the rules and
regulations of the Securities Act), which will be subject to the resale
limitations of Rule 144 adopted under the Securities Act. The remaining
shares of Common Stock held by CVS upon completion of the Offering are
"restricted securities" for purposes of Rule 144 and may not be resold in a
public distribution except in compliance with the registration requirements of
the Securities Act or pursuant to Rule 144. The share numbers in this section
assume that the Underwriters' over-allotment options are not exercised.

In general, under Rule 144, as currently in effect, a
shareholder (or shareholders whose shares are aggregated) who has beneficially
owned for at least two years shares of Common Stock which are treated as
"restricted securities," including persons who may be deemed affiliates of the
company, would be entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the then outstanding shares
of Common Stock ( shares immediately after completion of the Offering)
or the average weekly reported trading volume in the Common Stock during the
four calendar weeks preceding the date on which notice of such sale is given,
provided certain manner of sale and notice requirements and requirements as to
the availability of current public information about the Company are satisfied
(which requirements as to the availability of current public information are
expected to be satisfied commencing 90 days after the date of this
Prospectus). In addition, affiliates of the Company must comply with the
restrictions and requirements of Rule 144, other than the two-year holding
period requirement, in order to sell shares of Common Stock which are not
"restricted securities" (such as shares acquired by affiliates in the
Offering). Under Rule 144(k) a shareholder who is deemed not to have been an
affiliate of the Company at any time during the 90 days preceding a sale by
him, and who has beneficially owned for at least three years shares of Common
Stock which are treated as "restricted securities," would be entitled to sell
such shares, without regard to the foregoing restrictions and requirements.

The Company and CVS have agreed pursuant to the Underwriting
Agreement that they will not, with certain limited exceptions, sell any Common
Stock without the prior consent of CS First Boston for a period of 180 days
from the date of this Prospectus. After the expiration of such 180-day
period, or earlier if permitted by CS First Boston, the shares of
Common Stock held by CVS will become available for sale subject to the
applicable resale limitations of Rule 144.

In addition, upon completion of the Offering, CVS will have
certain rights to register its shares of Common Stock under the Securities Act
at the expense of the Company. See "Relationship with CVS--The Stockholder
Agreement." CVS has publicly announced its intention to dispose of, subject
to market conditions, all of its remaining shares of Common Stock in the
Company in 1997. The Stockholder Agreement provides that, at the request of
CVS, the Company will use its best efforts to effect registration under the
applicable federal and state securities laws of the shares of the
Common Stock held by CVS for sale in accordance with certain specifed methods
described in the Stockholder Agreement, and will take such other action
necessary to permit the sale thereof in other jurisdictions, subject to
certain limitations specified in the Stockholder Agreement. CVS will also
have the right, which it may exercise from time to time, to include the
shares of the Common Stock (and any other securities issued in respect of
or in exchange for such shares) held by it in certain other registrations
of the Common Stock initiated by the Company on its own behalf or on behalf
of its other shareholders.

The Company expects, after completion of the Offering, to file
a Registration Statement under the Securities Act to register the issuance of
shares of Common Stock issuable under its stock-based compensation plans. See
"Management--1996 Incentive Compensation Plan and 1996 Non-Employee Director
Stock Plan." Shares of Common Stock issued under these plans after the
effective date of such Registration Statement, other than shares held by
affiliates of the Company, will be eligible for resale in the public market
without restriction.

Prior to the Offering, there has been no public market for the
Common Stock. The Company can make no prediction as to the effect, if any,
that sales of shares of Common Stock or the availability of shares for sale
will have on the market price prevailing from time to time. Nevertheless,
sales of substantial amounts of the Common Stock in the public market could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through an offering of equity
securities.

DESCRIPTION OF CAPITAL STOCK

General

The authorized capital stock of the Company consists of
shares of Preferred Stock, par value $ and shares of Common Stock,
par value $.01 per share. As of the date of this Prospectus, the Company had
shares of Common Stock and no shares of Preferred Stock outstanding.

Preferred Stock

The Board of Directors has the authority, subject to any
limitations prescribed by law, to issue the Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by the
shareholders of the Company. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the
Company without further action by the shareholders and may adversely affect
the voting and other rights of the holders of Common Stock. At present,
the Company has no plans to issue any of the Preferred Stock.

Common Stock

Each holder of Common Stock is entitled to one vote per
share on all matters submitted to a vote of shareholders, including the
election of directors. The Common Stock does not have cumulative voting
rights, which means that the holders of a majority of the shares voting for
election of directors can elect all members of the Board of Directors.
Under Delaware State law, the approval of the holders of two-thirds of all
outstanding stock is required to effect a merger of the Company or the
disposition of all or substantially all of the Company's assets. A
majority vote is sufficient for certain other actions that require the vote
or concurrence of shareholders. See "Risk Factors--Control of the Company
by CVS" and "Principal and Selling Shareholder." Subject to the
preferential rights of the holders of shares of Preferred Stock, if any,
the holders of Common Stock are entitled to share ratably in such
dividends, if any, as may be declared and paid by the Board of Directors
out of funds legally available therefor. See "Dividend Policy." Upon
liquidation or dissolution of the Company, the holders of Common Stock of
the Company will be entitled to share ratably in the assets of the Company
legally available for distribution to shareholders after payment of
liabilities and subject to the prior rights of any holders of Preferred
Stock then outstanding. Holders of Common Stock have no conversion,
sinking fund, redemption, preemptive or subscription rights. The shares of
Common Stock presently issued and outstanding are, and the Common Stock to
be issued in connection with the Offering will be, when issued and paid
for, fully paid and nonassessable. The rights, preferences and privileges
of holders of Common Stock are subject to the rights of the holders of
shares of any series of Preferred Stock which the Company may issue in the
future.

Certain Provisions of Law

Following the consummation of the Offering, the Company will
be subject to the "Business Combination" provisions of the Delaware General
Corporation Law. In general, such provisions prohibit a publicly held
Delaware corporation from engaging in various "business combination"
transactions with any "interested stockholder" for a period of three years
after the date of the transaction which the person became an "interested
stockholder," unless (i) the transaction is approved by the Board of
Directors prior to the date the "interested stockholder" obtained such
status, (ii) upon consummation of the transaction in which resulted in the
shareholder becoming an "interested shareholder," the "interested
stockholder," owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes
of determining the number of shares outstanding those shares owned by (a)
persons who are directors and also officers and (b) employee stock plans in
which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in
a tender or exchange offer, or (iii) on or subsequent to such date the
"business combination" is approved by the board of directors and authorized
at an annual or special meeting of shareholders by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
"interested shareholder." A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit
to a stockholder. In general, an "interested stockholder" is a Person who,
together with affiliates and associates, owns (or within three years, did
own) 15% or more of a corporation's voting stock. The statute could
prohibit or delay mergers or other takeover or change in control attempts
with respect to the Company and, accordingly, may discourage attempts to
acquire the Company.

Transfer Agent

The transfer agent for the Company's Common Stock is .

UNDERWRITING

Under the terms and subject to the conditions contained in an
Underwriting Agreement dated , 1996 (the "Underwriting
Agreement"), the Underwriters named below (the "Underwriters"), for whom CS
First Boston and Donaldson, Lufkin & Jenrette Securities Corporation are
acting as representatives (the "Representatives"), have severally but not
jointly agreed to purchase from the Selling Shareholder the following
respective numbers of shares of Common Stock:

Number of
Underwriter Shares
----------- ---------
CS First Boston Corporation................................
Donaldson, Lufkin & Jenrette Securities Corporation........

Total..............................................
=========

The Underwriting Agreement provides that the obligations of
the Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common
Stock offered hereby (other than those shares covered by the over-allotment
option described below) if any are purchased. The Underwriting Agreement
provides that, in the event of a default by an Underwriter, in certain
circumstances the purchase commitments of the nondefaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.

The Selling Shareholder has granted to the Underwriters an
option, expiring at the close of business on the 30th day after the date of
this Prospectus, to purchase up to additional shares at the initial
public offering price less the underwriting discounts and commissions, all as
set forth on the cover page of this Prospectus. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock. To
the extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares of Common Stock as it was obligated to purchase
pursuant to the Underwriting Agreement.

The Company and the Selling Shareholder have been advised by
the Representatives that the Underwriters propose to offer shares of Common
Stock to the public initially at the public offering price set forth on the
cover page of this Prospectus and, through the Representatives, to certain
dealers at such price less a concession of $ per share, and the
Underwriters and such dealers may allow a discount of $ per share on
sales to certain other dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
Representatives.

The Representatives have informed the Company and CVS that
they do not expect discretionary sales by the Underwriters to exceed 5% of
the shares of Common Stock being offered hereby.

The Company and CVS have agreed that they will not offer, sell,
contract to sell, announce their intention to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities Exchange
Commission a registration statement under the Securities Act relating to, any
shares of its Common Stock or securities convertible or exchangeable into or
exercisable for any shares of Common Stock without the prior written consent
of CS First Boston for a period of 180 days from the date of this Prospectus.

The Company and CVS have agreed to indemnify the Underwriters
against certain liabilities, including civil liabilities under the Securities
Act, or contribute to payments which the Underwriters may be required to make
in respect thereof.

Application has been made to list the shares of Common Stock on
the New York Stock Exchange, subject to official notice of issuance, under the
symbol "LIN".

Prior to the Offering, there has been no public market for the
Common Stock. The initial price to the public for the shares of Common Stock
has been negotiated among the Company, CVS and the Representatives. Such
initial price is based on, among other things in addition to prevailing market
conditions, the Company's financial and operating history and condition, its
prospects and the prospects for its industry in general, the management of the
Company and the market prices for securities of companies in businesses
similar to that of the Company.

Certain of the Underwriters and their affiliates have provided
from time to time, and expect to provide in the future, various investment
banking and commercial banking services for CVS, for which such Underwriters
have received and will receive customary fees and commissions.

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the Common Stock in Canada is being made
only on a private placement basis exempt from the requirement that the Company
prepare and file a prospectus with the securities regulatory authorities in
each province where trades of Common Stock are effected. Accordingly, any
resale of the Common Stock in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Common
Stock.

Representations of Purchasers

Each purchaser of Common Stock in Canada who receives a
purchase confirmation will be deemed to represent to the Company, the Selling
Shareholder and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities
laws to purchase such Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent and (iii) such purchaser
has reviewed the text above under "Resale Restrictions."

Right of Action and Enforcement

The securities being offered are those of a foreign issuer and
Ontario purchasers will not receive the contractual right of action prescribed
by Section 32 of the Regulation under the Securities Act (Ontario). As a
result, Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.

All of the Company's directors and officers as well as the
experts named herein may be located outside of Canada and, as a result, it
may not be possible for Ontario purchasers to effect service of process
within Canada upon the Company or such persons. All or a substantial
portion of the assets of the Company and such persons may be located
outside of Canada and, as a result, it may not be possible to satisfy a
judgment against the Company or such persons in Canada or to enforce a
judgment obtained in Canadian courts against the Company of such persons
outside of Canada.

Notice to British Columbia Residents

A purchaser of Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Common Stock acquired by such purchaser pursuant to the Offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Company.
Only one such report must be filed in respect of Common Stock acquired on the
same date and under the same prospectus exemption.

CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain U.S. federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S.
Holder" is a person or entity that, for U.S. federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership,
or a non-resident fiduciary of a foreign estate or trust.

This discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), and administrative interpretations as of the date
hereof, all of which are subject to change, including changes with retroactive
effect. This discussion does not address all aspects of U.S. federal income
and estate taxation that may be relevant to Non-U.S. Holders in light of their
particular circumstances and does not address any tax consequences arising
under the laws of any state, local or foreign jurisdiction. Prospective
holders should consult their tax advisors with respect to the particular tax
consequences to them of owning and disposing of Common Stock, including the
consequences under the laws of any state, local or foreign jurisdiction.

Proposed United States Treasury Regulations were issued on
April 15, 1996 (the "Proposed Regulations") which, if adopted, would affect
the United States taxation of dividends paid to a Non-U.S. Holder on Common
Stock. The Proposed Regulations are generally proposed to be effective with
respect to dividends paid after December 31, 1997, subject to certain
transition rules. The discussion below is not intended to be a complete
discussion of the provisions of the Proposed Regulations, and prospective
investors are urged to consult their tax advisors with respect to the effect
the Proposed Regulations would have if adopted.

Dividends

Subject to the discussion below, dividends, if any, paid to a
Non-U.S. Holder of Common Stock generally will be subject to withholding tax
at a rate of 30% of the gross amount of the dividend or such lower rate as may
be specified by an applicable income tax treaty. For purposes of determining
whether tax is to be withheld at a 30% rate or at a reduced rate as specified
by an income tax treaty, in accordance with existing United States Treasury
Regulations, the Company ordinarily will presume that dividends paid to an
address in a foreign country are paid to a resident of such country absent
knowledge that such presumption is not warranted.

Under the Proposed Regulations, to obtain a reduced rate of
withholding under a treaty, a Non-United States Holder would generally be
required to provide an Internal Revenue Service Form W-8 certifying such
Non-United States Holder's entitlement to benefits under a treaty. The
Proposed Regulations would also provide special rules to determine whether,
for purposes of determining the applicability of a tax treaty, dividends paid
to a Non-United States Holder that is an entity should be treated as paid to
the entity or those holding an interest in that entity.

There will be no withholding tax on dividends paid to a
Non-U.S. Holder that are effectively connected with the Non-U.S. Holder's
conduct of a trade or business within the United States if a Form 4224 stating
that the dividends are so connected is filed with the Company or its Paying
Agent. Instead, the effectively connected dividends will be subject to
regular U.S. income tax in the same manner as if the Non-U.S. Holder were a
U.S. resident. In addition to the graduated tax described above, a non-U.S.
corporation receiving effectively connected dividends may be subject to a
"branch profits tax" which is imposed, under certain circumstances, at a rate
of 30% (or such lower rate as may be specified by an applicable treaty) of the
non-U.S. corporation's effectively connected earnings and profits, subject to
certain adjustments.

Generally, the Company must report to the U.S. Internal Revenue
Service the amount of dividends paid, the name and address of the recipient,
and the amount, if any, of tax withheld. A similar report is sent to the
holder. Pursuant to tax treaties or certain other agreements, the U.S.
Internal Revenue Service may make its reports available to tax authorities in
the recipient's country of residence.

Dividends paid to a Non-U.S. Holder at an address within the
United States may be subject to backup withholding imposed at a rate of 31% if
the Non-U.S. Holder fails to establish that it is entitled to an exemption or
to provide a correct taxpayer identification number and certain other
information to the Company or its Paying Agent.

Gain on Disposition of Common Stock

A Non-U.S. Holder generally will not be subject to U.S.
federal income tax (and no tax will generally be withheld) with respect to
gain realized on a sale or other disposition of Common Stock unless (i) the
gain is effectively connected with a trade or business of such holder in
the United States, (ii) in the case of certain Non-U.S. Holders who are
non-resident alien individuals and hold the Common Stock as a capital
asset, such individuals are present in the United States for 183 or more
days in the taxable year of the disposition, (iii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of the Code regarding the
taxation of U.S. expatriates, or (iv) the Company is or has been a "U.S.
real property holding corporation" for federal income tax purposes and the
Non-U.S. Holder owned directly or pursuant to certain attribution rules
more than 5% of the Company's Common Stock (assuming the Common Stock is
regularly traded on an established securities market) at any time within
the shorter of the five-year period preceding such disposition or such
holder's holding period. The Company is not, and does not anticipate
becoming, a U.S. real property holding corporation.

Information Reporting Requirements and Backup Withholding on Disposition of
Common Stock

Under current United States federal income tax law, information
reporting and backup withholding imposed at a rate of 31% will apply to the
proceeds of a disposition of Common Stock paid to or through a U.S. office of
a broker unless the disposing holder certifies as to its non-U.S. status or
otherwise establishes an exemption. Generally, U.S. information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
payment is made outside the United States through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds outside
the United States if the payment is made through an office outside the
United States of a broker that is (i) a U.S. person, (ii) a foreign person
which derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States or (iii) a "controlled
foreign corporation" for U.S. federal income tax purposes, unless the
broker maintains documentary evidence that the holder is a Non-U.S. Holder
and that certain conditions are met, or that the holder otherwise is
entitled to an exemption.

The Proposed Regulations would, if adopted, alter the foregoing
rules in certain respects. Among other things, the Proposed Regulations would
provide certain presumptions under which a Non-United States Holder would be
subject to backup withholding and information reporting unless the Company
receives certification from the holder of non-U.S. status.

Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the U.S. Internal Revenue Service.

Federal Estate Tax

An individual Non-U.S. Holder who is treated as the owner of,
or has made certain lifetime transfers of, an interest in the Common Stock
will be required to include the value thereof in his gross estate for U.S.
federal estate tax purposes, and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.

LEGAL MATTERS

The validity of the shares of the Common Stock being offered
hereby will be passed upon for the Company and the Selling Shareholder by
Davis Polk & Wardwell. Certain legal matters relating to the Common Stock
offered hereby will be passed on for the Underwriters by Latham & Watkins, New
York, New York.

EXPERTS

The consolidated financial statements of Linens 'n Things and
its subsidiaries as of December 31, 1994 and 1995 and for each of the years in
the three-year period ended December 31, 1995, included herein and elsewhere
in this Prospectus, have been included herein and in the registration
statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange
Commission, Washington, D.C. (the "Commission"), a Registration Statement
under the Securities Act, with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the Rules and Regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is hereby made to such
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete and where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions of such exhibit,
to which reference is hereby made for a full statement of the provisions
thereof. The Registration Statement, including the exhibits and schedules
filed therewith, may be inspected without charge at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices located in New York (75 Park Place, 14th Floor, New York, New York
10007) and Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois
60661). Copies of these documents may be obtained at prescribed rates from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. Such material may be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.

The Company intends to furnish its shareholders annual reports
containing audited financial statements certified by its independent
accountants and quarterly reports for the first three quarters of each year
containing unaudited financial information.

LINENS 'N THINGS, INC. AND SUBSIDIARIES
(formerly Bloomington, MN., L.T., Inc.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
Independent Auditors' Report.............................................. F-2

Consolidated Balance Sheets as of December 31, 1994, December 31, 1995,
July 1, 1995 and June 29, 1996....................................... F-3

Consolidated Statements of Operations for the fiscal years 1993, 1994
and 1995 and for the twenty-six weeks ended July 1, 1995 and
June 29, 1996 ....................................................... F-4

Consolidated Statements of Shareholder's Equity for the fiscal years 1993,
1994 and 1995 and for the twenty-six weeks ended June 29, 1996....... F-5

Consolidated Statements of Cash Flows for the fiscal years 1993, 1994 and
1995 and for the twenty-six weeks ended July 1, 1995 and
June 29, 1996........................................................ F-6

Notes to Consolidated Financial Statements ............................... F-7

When the transaction referred to in note (12) of the Notes to Consolidated
Financial Statements has been consummated, we will be in a position to render
the following report:

/s/ KPMG Peat Marwick LLP

Independent Auditors' Report

The Board of Directors and Shareholder
Linens 'n Things, Inc.

We have audited the accompanying consolidated balance sheets of
Linens 'n Things, Inc. (formerly Bloomington, MN., L.T., Inc.) and
Subsidiaries as of December 31, 1994 and 1995 and the related consolidated
statements of operations, shareholder's equity and cash flows for each of the
years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Linens 'n Things, Inc. and Subsidiaries as of December 31, 1994 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.

As discussed in the notes to the consolidated financial
statements, the Company has adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective October 1, 1995 and changed
its policy for accounting for the costs of internally developed software
effective January 1, 1995.

New York, New York
February 21, 1996, except as to note 11,
which is as of June 19, 1996

LINENS 'N THINGS, INC. AND SUBSIDIARIES
(formerly Bloomington, MN., L.T., Inc.)
Consolidated Balance Sheets
(in thousands)

<TABLE>
<CAPTION>
December 31, July 1, June 29,
1994 1995 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash......................................................... $ 4,106 $ 4,222 $ 2,419 $ 2,811
Accounts receivable (note 3)................................. 12,022 13,955 7,468 15,484
Inventories.................................................. 130,560 176,893 145,281 181,425
Prepaid expenses and other current assets (note 4)........... 5,753 11,076 7,252 10,908
-------- -------- -------- --------
Total current assets ...................................... 152,441 206,146 162,420 210,628
-------- -------- -------- --------
Property and equipment, net (note 5)......................... 86,721 107,542 101,145 118,440
Goodwill, net of accumulated amortization of $3,115 at
December 31, 1994, $3,965 at December 31, 1995, $3,540
at July 1, 1995 and $4,390 at June 29, 1996................ 24,075 23,225 23,650 22,800
Deferred charges and other noncurrent assets, net............ 9,930 6,609 9,640 6,280
-------- -------- -------- --------
Total Assets................................................. $273,167 $343,522 $296,855 $358,148
======== ======== ======== ========
Liabilities and Shareholder's Equity
Current Liabilities:
Accounts payable............................................. $ 73,209 $ 96,496 $ 56,350 $ 72,440
Accrued expenses and other current liabilities (note 6)...... 36,917 41,318 28,375 31,324
Due to parent and other divisions (note 9)................... 67,452 118,652 118,012 36,363
-------- -------- -------- --------
Total current liabilities.................................. 177,578 256,466 202,737 140,127
Deferred income taxes and other long-term liabilities........ 9,770 10,378 9,897 13,530
-------- -------- -------- --------
Total liabilities.......................................... 187,348 266,844 212,634 153,657
-------- -------- -------- --------

Shareholder's equity:
Common stock, no par value; 100 shares authorized, issued
and outstanding (note 11).................................. 122 122 122 130,010
Contributed capital.......................................... 42,250 42,250 42,250 42,372
Retained earnings............................................ 43,447 34,306 41,849 32,109
-------- -------- -------- --------
Total shareholder's equity................................. 85,819 76,678 84,221 204,491
-------- -------- -------- --------
Total liabilities and shareholder's equity................. $273,167 $343,522 $296,855 $358,148
======== ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

LINENS 'N THINGS, INC. AND SUBSIDIARIES
(formerly Bloomington, MN., L.T., Inc.)
Consolidated Statements of Operations
(in thousands, except per share amounts)

Twenty-six
Year Ended December 31, Weeks Ended
----------------------- -----------
July 1, June 29,
1993 1994 1995 1995 1996
---- ---- ---- ---- ----

(unaudited)

<S> <C> <C> <C> <C> <C>
Net sales........................................... $333,178 $440,118 $555,095 $239,588 $285,816
Cost of sales, including buying and warehousing
costs............................................. 199,307 265,721 345,162 148,905 179,066
-------- -------- -------- -------- --------
Gross profit..................................... 133,871 174,397 209,933 90,683 106,750
Selling, general and administrative expenses........ 112,135 142,155 190,826 83,126 106,735
Restructuring and asset impairment charges (note 2). -- -- 10,974 -- --
-------- -------- -------- -------- --------
Operating profit.................................. 21,736 32,242 8,133 7,557 15
Interest expense, net............................... 1,398 3,170 7,059 3,212 3,820
-------- -------- -------- -------- --------
Income (loss) before income taxes and
cumulative effect of change in accounting
principle....................................... 20,338 29,072 1,074 4,345 (3,805)
Provision for (benefit from) income taxes (note 8).. 8,619 11,874 1,108 1,841 (1,608)
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of
change in accounting principle.................
11,719 17,198 (34) 2,504 (2,197)
Cumulative effect of change in accounting
principle, net (note 1)......................... -- -- 178 178 --
-------- -------- -------- -------- --------
Net income (loss)................................... $ 11,719 $ 17,198 $ (212) $ 2,326 $ (2,197)
======== ======== ======== ======== ========
Net income (loss) per share.........................
Average shares outstanding..........................
</TABLE>

<TABLE>
LINENS 'N THINGS, INC. AND SUBSIDIARIES
(formerly Bloomington, MN., L.T., Inc.)
Consolidated Statements of Shareholder's Equity
(in thousands except number of shares)

<CAPTION>
Common Stock Contributed Retained
Shares Amount Capital Earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>

Balance at December 31, 1992.......................... 100 $122 $42,250 $22,798 $65,170
Net income... ..................................... -- -- 11,719 11,719
Dividends paid to Parent.. ........................ -- -- -- (2,549) (2,549)
------- ------- ------- ------- -------
Balance at December 31, 1993.......................... 100 122 42,250 31,968 74,340
Net income... ..................................... -- -- 17,198 17,198
Dividends paid to Parent... ....................... -- -- -- (5,719) (5,719)
------- ------- ------- ------- -------
Balance at December 31, 1994.......................... 100 122 42,250 43,447 85,819
Net loss............................................ -- -- (212) (212)
Dividends paid to Parent............................ -- -- (8,929) (8,929)
------- ------- ------- ------- -------
Balance at December 31, 1995.......................... 100 122 42,250 34,306 76,678
Net loss (unaudited)................................ -- -- -- (2,197) (2,197)
Common Stock issued by Linens 'n Things Center,
Inc. (unaudited) (note 11)........................ 100 130,010 -- -- 130,010
Contribution of Common Stock of Bloomington MN,
L.T., Inc., to Linens 'n Things Center, Inc., by CVS
(unaudited) (note 11)............................. (100) (122) 122 -- --
Balance at June 29, 1996 (unaudited).................. 100 $130,010 $42,372 $32,109 $204,491
======= ======== ======= ======= ========

</TABLE>
See accompanying notes to consolidated financial statements.

LINENS 'N THINGS, INC. AND SUBSIDIARIES
(formerly Bloomington, MN., L.T., Inc.)
Consolidated Statements of Cash Flows
(in thousands)

<TABLE>
<CAPTION>
Twenty-six
Year Ended December 31, Weeks Ended
----------------------------- --------------------
July 1, June 29,
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $11,719 $17,198 $ (212) $ 2,326 $ (2,197)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization......................... 7,356 9,588 12,862 6,091 7,102
Restructuring and asset impairment charges........... -- -- 10,974 -- --
Cumulative effect of change in accounting principle .. -- -- 294 294 --
Deferred income taxes............................... 2,735 3,580 (3,296) 40 2,193
Loss on disposal of assets.......................... 1,145 2,928 3,817 582 326
Changes in assets and liabilities:
Accounts receivable................................. (1,692) (6,122) (1,933) 4,554 (1,529)
Inventories......................................... (17,847) (42,171) (46,333) (14,722) (4,532)
Prepaid expenses and other current assets........... 28 421 (1,928) (1,539) 807
Deferred charges and other noncurrent assets........ (1,675) (318) 567 (232) (24)
Accounts payable.................................... 12,680 24,946 17,246 (7,732) (12,582)
Accrued expenses and other liabilities.............. 2,919 5,625 (4,135) (7,165) (2,542)
------- ------- ------- ------- -------

Net cash provided by (used in) operating activities....... 17,368 15,675 (12,077) (17,503) (12,978)
------- ------- ------- ------- -------
Cash flows from investing activities:
Additions to property and equipment..................... (30,636) (39,074) (41,329) (20,149) (17,548)
------- ------- ------- ------- -------
Cash flows from financing activities:
Increase (decrease) in due to parent and other divisions 13,440 22,832 51,200 50,560 (82,290)
Issuance of Common Stock by Linens 'n Things Center,
Inc..................................................... -- -- -- -- 130,010
Dividends paid to parent................................ (2,549) (5,719) (8,929) (4,102) --
Increase (decrease) in book overdrafts.................. 1,716 8,169 11,251 (10,493) (18,605)
------- ------- ------- ------- -------
Net cash provided by financing activities............... 12,607 25,282 53,522 35,965 29,115
------- ------- ------- ------- -------
Net (decrease) increase in cash......................... (661) 1,883 116 (1,687) (1,411)

Cash:
Beginning of period..................................... 2,884 2,223 4,106 $4,106 $ 4,222
------- ------- ------- ------- -------
End of period........................................... $ 2,223 $ 4,106 $ 4,222 $2,419 $ 2,811
======= ======= ======= ====== =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (net of amounts capitalized)................... $ 1,536 $ 3,360 $ 7,339 $3,325 $ 4,011
======= ======= ======= ====== =======
Income taxes............................................ $ 1,464 $ 9,014 $ 7,214 $3,538 $ 851
======= ======= ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.

LINENS 'N THINGS, INC. AND SUBSIDIARIES
(formerly Bloomington, MN., L.T., Inc.)

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

(a) Basis of Presentation (see notes 11 and 12)

The consolidated financial statements include those of Linens 'n
Things, Inc. (formerly Bloomington, MN., L.T., Inc.) and
Subsidiaries (collectively, the "Company"), a wholly owned, indirect
subsidiary of CVS Corporation ("CVS" or the "Parent"), formerly
Melville Corporation. All intercompany balances and transactions
have been eliminated.

The Parent allocates certain costs to its subsidiaries, including the
Company. A summary of the amounts allocated to the Company for the
years ended December 31, are as follows:

(in thousands)
----------------------------

1993 1994 1995
---- ---- ----
Cost of Employee Stock
Ownership Plan............. $697 $719 $1,016
Administrative costs.......... 2,700 3,336 3,021
------ ------ ------
Total...................... $3,397 $4,055 $4,037
====== ====== ======

Allocations to the Company by CVS are based on the Company's share of
costs paid by the Parent on its behalf for consolidated programs.
Such allocations may not be reflective of the costs which would be
incurred if the Company operated on a stand-alone basis or which will
be incurred in the future. Management believes that the basis for
allocations was reasonable.

(b) Business

The Company operated 145 and 155 stores selling brand name domestics,
accessories and selected home furnishings as of December 31, 1994 and
1995, respectively, all of which were located in the United States.

Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS No. 121").

Effective January 1, 1995, the Company changed its policy from
capitalizing internally developed software costs to expensing them as
incurred. The Company believes that this change results in a better
matching of revenues and expenses. The impact on 1995 as a result of
this change exclusive of the cumulative effect of $0.3 million was to
reduce net income by $0.2 million.

Effective January 1, 1993, the Company adopted SFAS No. 109
"Accounting for Income Taxes," the cumulative effect of which was
immaterial to the consolidated financial statements and therefore is
not presented separately.

(d) Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ
from those estimates.

(e) Cash

The Company's cash management program utilizes zero balance accounts.
Accordingly, all book overdraft balances have been reclassified to
current liabilities.

(f) Inventories

Inventories consist of finished goods merchandise purchased from
domestic and foreign vendors and are carried at the lower of cost or
market. Inventories are determined on the retail inventory method
valued on a first-in, first-out (FIFO) basis.

(g) Property and Equipment

Property and equipment are stated at cost. Depreciation and
amortization of property and equipment is computed on a straight-line
basis, generally over the estimated useful lives of the assets or,
when applicable, the life of the lease, whichever is shorter.
Capitalized software costs are amortized on a straight-line basis
over their estimated useful lives, beginning in the year placed in
service. Fully depreciated property and equipment is removed from
the cost and related accumulated depreciation accounts.

Maintenance and repairs are charged directly to expense as incurred.
Major renewals or replacements are capitalized after making the
necessary adjustment to the asset and accumulated depreciation
accounts of the items renewed or replaced.

(h) Impairment of Long-Lived Assets

When changes in circumstance warrant measurement, impairment losses
for store fixed assets are calculated by comparing projected
individual store cash flows over the lease term to the asset carrying
values.

(i) Deferred Charges

Deferred charges, principally beneficial leasehold costs, are
amortized on a straight-line basis, generally over the remaining life
of the leasehold acquired.

(j) Goodwill

The excess of acquisition costs over the fair value of net assets
acquired is amortized on a straight-line basis not to exceed 40
years. Impairment is assessed based on the profitability of the
related business relative to planned levels.

(k) Store Opening and Closing Costs

New store opening costs are charged to expense as incurred. In the
event a store is closed before its lease has expired, the total lease
obligation, less sublease rental income, is provided for in the year
of closing.

(l) Advertising Costs

The Company charges production costs of advertising to expense the
first time the advertising takes place.

(m) Income Taxes

The Parent and its subsidiaries, including the Company, file a
consolidated Federal income tax return and, where applicable, group
state and local returns. The provision for Federal income taxes
recorded by the Company represents the amount calculated on a
separate return basis in accordance with a tax sharing agreement with
the Parent. State income taxes represent actual amounts paid or
payable by the Company.

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

(n) Interim Financial Statements

The accompanying consolidated balance sheets as of July 1, 1995 and
June 29, 1996 and the related consolidated statements of operations
and cash flows for the twenty-six weeks ended July 1, 1995 and June
29, 1996 and consolidated statement of shareholder's equity for the
twenty-six weeks ended June 29, 1996 are unaudited. The unaudited
consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and, in the
opinion of management, include all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation for the
period presented.

The results of operations for the twenty-six weeks ended July 1, 1995
and June 29, 1996 are not necessarily indicative of results to be
achieved for the full fiscal years.

(2) Strategic Program and Asset Impairment Charges

On October 24, 1995, CVS announced a comprehensive strategic program.
In connection with the initiation of the plan, the Company recorded a
pre-tax charge of $11.0 million. Asset write-offs included in the
charge totaled $7.1 million, while the balance will require cash
outlays, primarily in 1996. In connection with the various
components of the plan, six stores will be closed and approximately
45 store employees will be terminated.

The components of the restructuring and asset impairment charges as
of December 31, 1995 and the amounts remaining were as follows (in
thousands):

<TABLE>
<CAPTION>
Recorded Remaining
-------- ---------
<S> <C> <C>
Lease obligations and fixed asset and lease acquisition cost write-offs for store
closings............................................................................... $ 8,809 $ 3,800

Asset write-offs relating to MIS outsourcing.............................................. 690 --

Severance and other employee benefit vesting.............................................. 35 35
------- ------
9,534 3,835
Asset impairment charge in connection with the adoption of SFAS No. 121................... 1,440 --
------- ------
$10,974 $ 3,835
======= =======

</TABLE>

The SFAS No. 121 charge related entirely to assets to be held or used as
defined in SFAS No. 121. The net sales and operating losses in 1995 of the
stores to be closed were approximately $14.3 million and $1.5 million,
respectively.

Through December 31, 1995, no stores have been closed and no associates
have been terminated in connection with the restructuring plan.

(3) Accounts Receivable

Accounts receivable consisted of the following (in thousands):

December 31,
--------------------
1994 1995
---- ----

Credit and charge card receivables... 3,547 5,353
Due from vendors..................... 1,098 3,835
Due from landlords................... 7,107 4,069
Other, net of allowance.............. 270 698
------- -------
Total.............................. $12,022 $13,955
======= =======

(4) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in
thousands):

December 31,
----------------
1994 1995
---- ----

Deferred income taxes......... $4,928 $8,323
Other......................... 825 2,753
------ -------
Total....................... $5,753 $11,076
====== =======

(5) Property and Equipment

Property and equipment consisted of the following (in thousands):

December 31
------------------
1994 1995
---- ----

Land......................................... $ 430 $ 430
Buildings and improvements................... 4,760 4,760
Store equipment.............................. 62,779 79,402
Furniture and fixtures....................... 7,074 10,390
Leasehold improvements....................... 28,027 35,034
Computer software............................ 4,193 4,404
-------- --------
107,263 134,420
Less accumulated depreciation and amortization 20,542 26,878
-------- --------
Total....................................... $ 86,721 $107,542
======== ========

(6) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the
following (in thousands):

December 31,
--------------------
1994 1995
---- ----

Federal income taxes payable............ $ 3,275 $ 713
Taxes other than Federal income taxes... 8,475 7,810
Rent.................................... 2,950 6,082
Salaries and compensated absences....... 3,042 3,014
Restructuring reserves.................. 2,387 3,835
Other................................... 16,788 19,864
------- -------
Total.................................. $36,917 $41,318
======= =======

(7) Leases

The Company has noncancelable operating leases, primarily for retail
stores, which expire through 2015. The leases generally contain renewal
options for periods ranging from five to fifteen years and require the
Company to pay costs such as real estate taxes and common area maintenance.
Contingent rentals are paid based on a percentage of sales. Net rental
expense for all operating leases for the years ended December 31, 1993,
1994 and 1995 was as follows (in thousands):

December 31, December 31, December 31,
1993 1994 1995
------------ ------------ ------------

Minimum rentals......... $20,642 $28,065 $38,788
Contingent rentals...... 710 492 201
------- ------- -------
21,352 28,557 38,989
Less sublease rentals... 41 45 151
------- ------- -------
Total................ $21,311 $28,512 $38,838
======= ======= =======

At December 31, 1995, the future minimum rental payments required under
operating leases and the future minimum sublease rentals excluding lease
obligations for closed stores were as follows (in thousands):

Operating
Year Leases
- ---- ---------
1996................................................ $ 55,095
1997................................................ 54,095
1998................................................ 53,099
1999................................................ 54,981
2000................................................ 53,363
Thereafter.......................................... 492,227
--------
Total............................................... $762,860
========
Total future minimum sublease rentals............... $ 440
========

(8) Income Taxes

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
assets and liabilities at December 31 were as follows (in thousands):

December 31, December 31,
1994 1995
------------ ------------
Deferred tax assets:
Employee benefits....................... $ 1,222 $ 1,030
Inventories............................. 3,941 5,156
Other................................... 161 872
------- -------
Total deferred tax assets.. .......... 5,324 7,058
Deferred tax liabilities:
Property and equipment....... .......... 8,312 6,750
------- -------
Net deferred tax (liabilities) assets $(2,988) $ 308
======= =======

Based on the Company's historical and current pretax earnings, management
believes it is more likely than not that the Company will realize the net
deferred tax assets.

The provision for income taxes comprised the following (in thousands):

Year Ended
------------------------------------------------
December 31, December 31, December 31,
1993 1994 1995
------------ ------------ ------------
Current:
Federal.... $3,424 $ 6,161 $2,565
State...... 1,345 1,272 914
------ ------- ------
4,769 7,433 3,479
------ ------- ------
Deferred:
Federal.... 3,217 3,580 (2,143)
State...... 633 861 (228)
------ ------- ------
3,850 4,441 (2,371)
------ ------- ------
Total...... $8,619 $11,874 $1,108
====== ======= ======

The following is a reconciliation between the statutory Federal income tax
rate and the effective rate for the years ended December 31, 1993, 1994 and
1995:

December 31, December 31, December 31,
1993 1994 1995
------------ ------------ ------------

<S> <C> <C> <C>
Effective tax rate................................ 42.4% 40.8% 103.2%
State income taxes, net of Federal benefit........ (6.3) (4.8) (41.5)
Goodwill.......................................... (1.5) (1.0) (27.8)
Meals and entertainment........................... (0.1) (0.2) (5.1)
Targeted job tax credit........................... 0.1 0.2 5.5
Other............................................. 0.4 -- 0.7
---- ---- ----
Statutory Federal income tax rate 35.0% 35.0% 35.0%
==== ==== ====

</TABLE>

(9) Related Party Transactions

401(k) Profit Sharing Plan

The Parent has a qualified 401(k) Profit Sharing Plan available to
full-time employees who meet the plan's eligibility requirements.
This plan, which is a defined contribution plan, contains a profit
sharing component with tax-deferred contributions to each employee
based on certain performance criteria, and also permits employees to
make contributions up to the maximum limits allowed by Internal
Revenue Code Section 401(k). Under the 401(k) component, the Parent
matches a portion of the employee's contribution under a
predetermined formula based on the level of contribution and years of
vesting. The Parent charges to its subsidiaries the portion of the
expense related to these contributions based on the proportionate
share of qualifying compensation at the Company to the total of all
compensation for all plan participants.

Contributions to the plan by the Company, for both profit sharing and
matching of employee contributions, were approximately $0.6 million,
$0.4 million and $0.6 million for the years ended December 31, 1993,
1994 and 1995, respectively.

Employee Stock Ownership Plan

The Company's employees participate in the Parent's Employee Stock
Ownership Plan ("ESOP"). The ESOP is a defined contribution plan for
all employees meeting certain eligibility requirements. During 1989,
the ESOP trust (the "Trust") borrowed $357.5 million at an interest
rate of 8.6% through a 20-year loan guaranteed by the Parent. The
Trust used the proceeds of the loan to purchase a new issue of
convertible preference stock from the Parent.

The Parent charges compensation expense to the Company based upon
total payments due to the ESOP. The charge allocated to the Company
is based on the Company's proportionate share of qualifying
compensation expense and does not reflect the manner in which the
Parent funds these costs or the related tax benefits realized by the
Parent. As a result of the Company's allocation from the Parent,
compensation expense of approximately $.7 million, $.7 million and
$1.0 million was recognized for the years ended December 31, 1993,
1994 and 1995, respectively.

Administrative Costs

The Parent allocates real estate service costs and various other
administrative expenses to the Company. Allocations are based on the
Company's ratable share of expense incurred by the Parent on behalf
of the Company for the combined programs. The total costs allocated
to the Company for the years ended December 31, 1993, 1994 and 1995
were approximately $2.7 million, $3.3 million and $3.0 million,
respectively.

In addition, Melville Realty Company, Inc., a subsidiary of the
Parent, guarantees the leases of certain stores operated by the
Company and charges a fee for that service which amounted to
approximately $0.2 million, $0.3 million and $0.3 million for the
years ended December 31, 1993, 1994 and 1995, respectively.

Borrowings

The weighted average interest rate on borrowings from the Parent and
other divisions for the years ended December 31, 1993, 1994 and 1995,
respectively, was 3.4%, 4.9% and 6.5%. The related interest expense
recognized by the Company on such borrowings was $1.4 million, $3.2
million and $7.1 million, respectively.

(10) Commitments and Contingencies

The Company had outstanding letters of credit amounting to
approximately $2.7 million at December 31, 1995 which were used to
guarantee certain foreign purchase contracts. The Company is not
obligated under any formal or informal compensating balance
requirements.

The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position, results of
operations or liquidity.

(11) Subsequent Events

During the twenty-six weeks ended June 29, 1996, CVS acquired 100
shares of common stock of Linens 'n Things Center, Inc. ("LNT
Center"), a newly formed California corporation, for $130,010,000. On
June 19, 1996, CVS contributed all outstanding shares of common stock
of Bloomington, MN., L.T., Inc. to LNT Center.

(12) Company Reorganization

In the Fall of 1996, CVS expects to merge LNT Center into a newly
formed wholly owned Delaware corporation, Linens 'n Things, Inc.

The accompanying consolidated financial statements are presented as if
Linens 'n Things, Inc. had existed and owned LNT Center and
Bloomington, MN., L.T., Inc. throughout 1993, 1994, and 1995.

No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company, the Selling
Shareholder or any Underwriter. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any
time subsequent to the date hereof or that there has been no change in the
affairs of the Company since such date.

TABLE OF CONTENTS

Page
Prospectus Summary...........................................................3
Risk Factors.................................................................8
Use of Proceeds.............................................................11
Dividend Policy.............................................................11
Capitalization..............................................................12
Selected Financial and Operating Data.......................................13
Unaudited Pro Forma Consolidated
Statements of Operations....................................................15
Management's Discussion and Analysis of
Financial Condition and Results of Operations...............................18
Business....................................................................26
Management..................................................................35
Principal and Selling Shareholder...........................................45
Relationship with CVS.......................................................45
Shares Eligible for Future Sale.............................................48
Description of Capital Stock................................................50
Underwriting................................................................51
Notice to Canadian Residents................................................52
Certain U.S. Federal Tax Considerations for Non-
U.S. Holders of Common Stock................................................53
Legal Matters...............................................................55
Experts.....................................................................55
Available Information.......................................................55
Index to Consolidated Financial Statements.................................F-1

Until , 1996 (25 days after the public offering),
all dealers effecting transactions in the registered securities, whether or
not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.

LINENS 'N THINGS, INC.

Shares
Common Stock
($.01 par value)

PROSPECTUS

CS First Boston

Donaldson, Lufkin & Jenrette
Securities Corporation

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

SEC Registration Fee.................... $94,828
NASD Filing Fee......................... 28,000
Transfer Agent's Fees................... *
Printing and Engraving.................. *
Legal Fees.............................. *
Accounting Fees......................... *
Blue Sky Fees........................... *
NYSE Filing Fee......................... *
Miscellaneous........................... *
-------
Total......................... $ *
=======

- ---------
* To be filed by amendment.

Each of the amounts set forth above, other than the SEC
Registration Fee and the NASD Filing Fee, is an estimate.

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Act permits
the Registrant to indemnify officers, directors or employees against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement in connection with legal proceedings "if [as to any officer,
director or employee] he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to the best interests of the corporation,
and, with respect to any criminal act or proceeding, had no reasonable
cause to believe his conduct was unlawful," provided that with respect to
actions by, or in the right of the corporation against, such individuals,
indemnification is not permitted as to any matter as to which such person
"shall have been adjudged to be liable to the corporation, unless, and only
to the extent that, the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper." Individuals who are successful in the defense of such action are
entitled to indemnity for such expenses reasonably incurred in connection
therewith.

The By-Laws of the Registrant require the Registrant to
indemnify directors and officers against liabilities which they may incur
under the circumstances set forth in the preceding paragraph.

The Registrant maintains standard policies of insurance
under which coverage is provided (a) to its directors and officers against
loss rising from claims made by reason of breach of duty or other wrongful
act, and (b) to the Registrant with respect to payments which may be made
by the Registrant to such officers and directors pursuant to the above
indemnification provision or otherwise as a matter of law.

The proposed forms of Underwriting Agreement filed as Exhibit 1
to this Registration Statement provide for indemnification of directors and
officers of the Registrant by the underwriters against certain liabilities.

Item 15. Recent Sales of Unregistered Securities.

Except for the issuance of common stock to CVS, the Company
has not issued any securities in unregistered transactions. The issuance
of such securities is exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof.

Item 16. Exhibits and Financial Statement Schedules.

(a)The following exhibits are filed as part of this
Registration Statement:

Exhibit
Number Description
- ------- -----------
* 1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
* 3.2 Amended and Restated Certificate of Incorporation
* 3.3 By-Laws of the Registrant
* 5 Opinion of Davis Polk & Wardwell
* 10.1 Transitional Services Agreement between the Registrant and CVS
Corporation
* 10.2 Stockholder Agreement between the Registrant and CVS
Corporation
* 10.3 Tax Disaffiliation Agreement between the Registrant and CVS
Corporation
* 10.4 Employment Agreement between Norman Axelrod and the
Registrant
* 10.5 Severance Agreement between James M. Tomaszewski and the
Registrant
* 10.6 Severance Agreement between Steven B. Silverstein and the
Registrant
* 10.7 Severance Agreement between Hugh J. Scullin and the Company
* 10.8 1996 Incentive Compensation Plan
* 10.9 1996 Non-Employee Director Stock Plan
21 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
* 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5)

- ----------------
* To be filed by amendment.

(b) The following financial statement schedules are filed as
part of this Registration Statement:

Not applicable.

Item 17. Undertakings

The undersigned registrant hereby undertakes:

(a) The undersigned registrant hereby undertakes to provide to
the underwriter at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and persons
controlling the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification (other than by
policies of insurance) is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon rule 430A and contained in a form of prospectus
filed by the registrant pursuant to rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,
Linens 'n Things, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-1 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clifton, State of
New Jersey, on the 18th day of September, 1996.

Linens 'n Things, Inc.

By /s/ Norman Axelrod
-----------------------------
Norman Axelrod, President

KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Norman Axelrod and Charles C.
Conaway, and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and revocation, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments filed pursuant to Rule
462) to this Registration Statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
things requisite and necessary to be done as fully to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Norman Axelrod Chief Executive Officer, September 18, 1996
- ------------------------ President and Director
Norman Axelrod

/s/ James M. Tomaszewski Senior Vice President, September 18, 1996
- ------------------------ Chief Financial Officer
James M. Tomaszewski

/s/ William T. Giles Vice President of Finance, September 18, 1996
- ------------------------ Controller
William T. Giles

/s/ Charles C. Conaway Director September 18, 1996
- ------------------------
Charles C. Conaway

EXHIBIT INDEX

Exhibit Number Description Sequentially Numbered Page
- -------------- ----------- --------------------------
<S> <C> <C>
* 1 Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
* 3.2 Amended and Restated Certificate of Incorporation
* 3.3 By-Laws of the Registrant
* 5 Opinion of Davis Polk & Wardwell
* 10.1 Transitional Services Agreement between the Registrant
and CVS Corporation
* 10.2 Stockholder Agreement between the Registrant and CVS
Corporation
* 10.3 Tax Disaffiliation Agreement between the Registrant and
CVS Corporation
* 10.4 Employment Agreement between Norman Axelrod and
the Registrant
* 10.5 Severance Agreement between James M. Tomaszewski
and the Registrant
* 10.6 Severance Agreement between Steven B. Silverstein and
the Registrant
* 10.7 Severance Agreement between Hugh J. Scullin and the
Company
* 10.8 1996 Incentive Compensation Plan
* 10.9 1996 Non-Employee Director Stock Plan
21 List of Subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
* 23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5)
</TABLE>

* To be filed by amendment.

EXHIBIT 3.1
CERTIFICATE OF INCORPORATION

LINENS 'N THINGS, INC.

* * * * *

FIRST: The name of the Corporation is
Linens 'n Things, Inc.

SECOND: The address of its registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange
Street, City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The
Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be organized under
the General Corporation Law of the State of Delaware as the same exists or
may hereafter be amended ("Delaware Law").

FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 100, and the par value of each
such share is $.01, amounting in the aggregate to $1.00.

FIFTH: The name and mailing address of the
incorporator are:

Name Mailing Address
---- ---------------

Elisha Tuku 450 Lexington Avenue
New York, New York 10017

<PAGE>

SIXTH: The Board of Directors shall have the power to
adopt, amend or repeal the bylaws of the Corporation.

SEVENTH: Election of directors need not be by written
ballot unless the bylaws of the Corporation so provide.

EIGHTH: (1) A director of the Corporation shall not be
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest
extent permitted by Delaware Law.

(2)(a) Each person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened to be
made a party to, or is involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, shall be indemnified and held
harmless by the Corporation to the fullest extent permitted by Delaware
Law. The right to indemnification conferred in this ARTICLE EIGHTH shall
also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition
to the fullest extent authorized by Delaware Law. The right to
indemnification conferred in this ARTICLE EIGHTH shall be a contract right.

(b) The Corporation may, by action of its Board of
Directors, provide indemnification to such of the employees and agents of
the Corporation to such extent and to such effect as the Board of Directors
shall determine to be appropriate and authorized by Delaware Law.

(3) The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss incurred by such person in any such
capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability
under Delaware Law.

(4) The rights and authority conferred in this ARTICLE
EIGHTH shall not be exclusive of any other right which any person may
otherwise have or hereafter acquire.

<PAGE>

(5) Neither the amendment nor repeal of this ARTICLE
EIGHTH, nor the adoption of any provision of this Certificate of
Incorporation or the bylaws of the Corporation, nor, to the fullest extent
permitted by Delaware Law, any modification of law, shall eliminate or
reduce the effect of this ARTICLE EIGHTH in respect of any acts or
omissions occurring prior to such amendment, repeal, adoption or
modification.

NINTH: The Corporation reserves the right to amend this
Certificate of Incorporation in any manner permitted by Delaware Law and,
with the sole exception of those rights and powers conferred under the
above ARTICLE EIGHTH, all rights and powers conferred herein on
stockholders, directors and officers, if any, are subject to this reserved
power.

3
<PAGE>

IN WITNESS WHEREOF, I have hereunto signed my name this 10th
day of September, 1996.

/s/ Elisha Tuku
--------------------------
Elisha Tuku

<PAGE>

EXHIBIT 21

Subsidiaries State of
Name # Incorporation
- ---------------------------------------------- --- -------------
Little Rock, Ar., L.T., Inc. 255 Arkansas
Peoria Linens 'n Things, Inc. 427 Arizona
Tempe L.T., Inc. 430 Arizona
Bloomington, Mn., L.T., Inc./Scottsdale Az 439 Arizona
Bloomington, Mn., L.T., Inc./Town & Country Az 440 Arizona
Treasurer Island LT Inc. 485 Arizona
Sacramento, Ca., L.T., Inc. 237 California
Citrus Heights, Ca., L.T., Inc. 238 California
Roseville, Ca., L.T., Inc. 273 California
Great Mall L.T., Inc. 369 California
La Jolla Linens 'n Things, Inc. 381 California
Hillside, L.T., Inc. 386 California
Mission L.T., Inc. 391 California
Northridge Pavilion L.T., Inc. 392 California
Stevens Creek L.T., Inc. 394 California
West Covina L.T., Inc. 415 California
L.A. Metro Mall L.T., Inc. 428 California
Torrance L.T., Inc. 431 California
South Coast Linens 'n Things, Inc. 448 California
Fresno Linens 'n Things, Inc. 463 California
Rockford L.T., Inc. 468 California
Thousand Oaks Linens 'n Things Inc. 475 California
Encinitas Linens 'n Things Inc. 480 California
Dublin Linens 'n Things Inc. 482 California
Olympic Los Angeles Linens 'n Things, Inc. 491 California
Goleta Linens 'n Things, Inc. 495 California
Stevenson Ranch Linens 'n Things, Inc. 503 California
Montclair Linens 'n Things, Inc. 512 California
Murrieta Linens 'n Things, Inc. 513 California
Meadows Marketplace Linens 'n Things, Inc. 401 Colorado
Belleview Shores L.T., Inc. 412 Colorado
Bloomington Mn., L.T., Inc./West Minster 433 Colorado
Newington, Ct., L.T., Inc. 251 Connecticut
The Plaza at Buckland L.T., Inc. 355 Connecticut
Federal Road L.T., Inc. 359 Connecticut
Norwalk L.T., Inc. 360 Connecticut
Avon L.T., Inc. 373 Connecticut
Milford L.T., Inc. 379 Connecticut
Fairfield L.T., Inc. 410 Connecticut
Farmington Linens 'n Things, Inc. 457 Connecticut
EWK Miami, Inc. 143 Florida
International Drive L.T., Inc. 214 Florida
Clearwater, Fl., L.T., Inc. 235 Florida
Fort Myers, Fl., L.T., Inc. 248 Florida
Sarasota, Fl., L.T., Inc. 258 Florida
Pembroke Commons L.T., Inc. 275 Florida
Colonial (Orlando, Fl.) L.T., Inc. 284 Florida
Renaissance Center L.T., Inc. 296 Florida
Miami L.T., Inc. 305 Florida
Westland Promenade L.T., Inc. 318 Florida
Carrollwood Commons L.T., Inc. 331 Florida
Highland Lake L.T., Inc. 333 Florida
Festival Shoppes L.T., Inc. 335 Florida
Naples L.T., Inc. 411 Florida
Venetian Isle L.T., Inc. 346 Florida
Coral Springs L.T., Inc. 354 Florida
Aventura L.T., Inc. 374 Florida
Fort Meyers L.T., Inc. 375 Florida
Miami-Flagler L.T., Inc. 402 Florida
The Fountains L.T., Inc. 425 Florida
Tampa Linens 'n Things, Inc. 434 Florida
Orlando Linens 'n Things Inc. 450 Florida
Pelican Plaza Linens 'n Things, Inc. 455 Florida
Colonial Plaza Linens 'n Things, Inc. 459 Florida
Federal Hwy. Linens 'n Things, Inc. 477 Florida
Gwinnett, Ga., L.T., Inc. 279 Georgia
Memorial Drive L.T., Inc. 308 Georgia
Shannon L.T., Inc. 311 Georgia
Kings Market L.T., Inc. 313 Georgia
Kennesaw L.T., Inc. 314 Georgia
Marietta L.T., Inc. 316 Georgia
Stone Mountain L.T., Inc. 328 Georgia
Peach L.T., Inc. 358 Georgia
Perimter L.T., Inc. 388 Georgia
Alpharetta, L.T., Inc. 393 Georgia
Gwinnett L.T., Inc. 398 Georgia
Barrett Place L.T., Inc. 400 Georgia
Laweranceville Market Linens 'n Things, Inc. 484 Georgia
EWK Deerfield, Inc. 137 Illinois
Skokie L.T., Inc. 175 Illinois
Woodbridge L.T., Inc. 215 Illinois
Vernon Hills L.T., Inc. 224 Illinois
Southpoint L.T., Inc. 299 Illinois
Linens 'n Things, Inc. 329 Illinois
Naperville, Il., L.T., Inc. 337 Illinois
Bloomingdale, Il., L.T., Inc. 338 Illinois
Lincoln Park, Il., L.T., Inc. 348 Illinois
Schaumburg Il. L.T., Inc. 349 Illinois
Lakeview Il., L.T., Inc. 356 Illinois
Chicago, Il., L.T., Inc. 363 Illinois
Clark Street LT Inc. 399 Illinois
Downers Grove L.T., Inc. 408 Illinois
Rivertree Court LT, Inc. 418 Illinois
Northbrook L.T., Inc. 420 Illinois
Michigan Avenue Linens 'n Things, Inc. 474 Illinois
Skokie Linens 'n Things, Inc. 476 Illinois
Allisonville Road Linens 'n Things, Inc. 465 Indiana
Overland Park L.T., Inc. 220 Kansas
Great Mall L.T., Inc. 435 Kansas
Overland Park Linens 'n Things, Inc. 464 Kansas
Elmwood L.T., Inc. 226 Louisiana
EWK Kittery, Inc. 163 Maine
EWK Greenbelt, Inc. 124 Maryland
EWK Gaithersburg, Inc. 144 Maryland
EWK Briggs Chaney, Inc. 155 Maryland
Annapolis L.T., Inc. 219 Maryland
Mid Pike Plaza L.T., Inc. 302 Maryland
101 South York Road L.T., Inc 424 Maryland
Canton L.T., Inc. 196 Massachusetts
Burlington L.T., Inc. 197 Massachusetts
Franklin, Ma., L.T., Inc. 247 Massachusetts
North Attleborough L.T., Inc. 319 Massachusetts
Swampscott L.T., Inc. 324 Massachusetts
Danvers L.T., Inc. 365 Massachusetts
Framingham LT, Inc. 436 Massachusetts
Burlington Linens 'n Things, Inc. 499 Massachusetts
Ann Arbor L.T., Inc. 173 Michigan
Rochester Hills Linens 'n Things, Inc. 451 Michigan
Novi Linens 'n Things, Inc. 453 Michigan
Lakeside Linens 'n Things, Inc. 511 Michigan
Bloomington, Mn., L.T., Inc. 244 Minnesota
St. Louis, Mn., L.T., Inc. 261 Minnesota
Rockford L.T., Inc. 334 Minnesota
Woodbury Village L.T., Inc. 340 Minnesota
Mall of America L.T., Inc. 351 Minnesota
Town & Country L.T., Inc. 380 Missouri
Clayton L.T., Inc. 384 Missouri
Independence Linens 'n Things, Inc. 472 Missouri
Omaha L.T., Inc. 216 Nebraska
Las Vegas LT, Inc. 445 Nevada
Henderson Linens 'n Things Inc. 466 Nevada
Linens 'n Things, Inc. 800 New Jersey
EWK Somerville, Inc. 115 New Jersey
EWK Clifton, Inc. 116 New Jersey
Fairfield L.T., Inc. 210 New Jersey
Toms River L.T., Inc. 236 New Jersey
Sayreville L.T., Inc. 263 New Jersey
Deptford Crossing L.T., Inc. 295 New Jersey
Shrewsbury L.T., Inc. 320 New Jersey
Castle Ridge L.T., Inc. 343 New Jersey
Menlo Park L.T., Inc. 344 New Jersey
East Gate Square L.T., Inc. 350 New Jersey
Linens 'n Things, Inc. 353 New Jersey
Springfield L.T., Inc. 421 New Jersey
Somerville L.T., Inc. 441 New Jersey
Princeton Linens 'n Things, Inc. 462 New Jersey
Totowa Linens 'n Things, Inc. 483 New Jersey
Albuquerque Linens 'n Things, Inc. 500 New Mexico
EWK Niagara, Inc. 444 New York
EWK Penfield, Inc. 156 New York
EWK Henrietta, Inc. 403 New York
EWK Colonie, Inc. 165 New York
Jefferson Yorktown L.T., Inc. 186 New York
Onondaga County L.T., Inc. 292 New York
Middletown L.T., Inc. 326 New York
McKinley L.T., Inc. 327 New York
Bailey L.T., Inc. 347 New York
Bayshore L.T., Inc. 366 New York
Penfield L.T., Inc. 371 New York
Brooktown L.T., Inc. 377 New York
Carle Place L.T., Inc. 382 New York
Patchogue L.T., Inc. 390 New York
Manhasset Linens 'n Things Inc. 493 New York
EWK Charlotte, Inc. 132 North Carolina
EWK Alamance, Inc. 136 North Carolina
EWK Greensboro, Inc. 153 North Carolina
Raleigh L.T., Inc. 471 North Carolina
Winston-Salem L.T., Inc. 178 North Carolina
Ashville L.T., Inc. 179 North Carolina
Wilmington L.T., Inc. 460 North Carolina
Pleasant Valley (Raleigh, N.C.) L.T., Inc. 283 North Carolina
Cary, N.C., L.T., Inc. 325 North Carolina
Centrum L.T., Inc. 342 North Carolina
EWK Kings Island, Inc. 161 Ohio
Columbus L.T., Inc. 207 Ohio
Cleveland L.T. Store, Inc. 212 Ohio
Sawmill L.T., Inc. 396 Ohio
Kenwood L.T., Inc. 422 Ohio
Cassinelli Square L.T., Inc. 426 Ohio
North Oklahoma L.T., Inc. 159 Oklahoma
Tulsa Linens 'n Things, Inc. 461 Oklahoma
Rockvale Square L.T., Inc. 294 Pennsylvania
Montgomeryville L.T., Inc. 362 Pennsylvania
Lincoln Plaza L.T., Inc. 368 Pennsylvania
Willow Grove Linens 'n Things, Inc. 449 Pennsylvania
Marple Linens 'n Things, Inc. 456 Pennsylvania
Garden City L.T., Inc. 370 Rhode Island
EWK Murfreesboro, Inc. 118 Tennessee
EWK Lakeland, Inc. 134 Tennessee
EWK Memphis, Inc. 147 Tennessee
EWK Nashville, Inc. 169 Tennessee
Hickory Ridge, L.T., Inc. 339 Tennessee
Memphis Linens 'n Things, Inc. 501 Tennessee
EWK North Richland Hills, Inc. 150 Texas
Plano L.T., Inc. 167 Texas
Preston L.T., Inc. 405 Texas
Beltline L.T., Inc. 361 Texas
Grapevine Linens 'n Things, Inc. 364 Texas
Post Oak L.T., Inc. 367 Texas
Hulen L.T., Inc. 372 Texas
Baybrook L.T., Inc. 376 Texas
West Park Boulevard L.T., Inc. 397 Texas
Preston L.T., Inc. 405 Texas
Vista Ridge L.T., Inc. 409 Texas
San Pedro L.T., Inc. 413 Texas
Gateway Square L.T., Inc. 423 Texas
Sugarland L.T., Inc. 438 Texas
Woodlands L.T., Inc. 442 Texas
Arlington Linens 'n Things, Inc. 443 Texas
San Antonio Linens 'n Things, Inc. 446 Texas
Mesquite, Tx Linens 'n Things, Inc. 447 Texas
Town & County Village Linens 'n Things, Inc. 452 Texas
SouthTowne Marketplace Linens 'n Things, Inc. 508 Texas
EWK Chittenden, Inc. 151 Vermont
EWK Falls Church, Inc. 129 Virginia
EWK Springfield, Inc. 131 Virginia
EWK Richmond, Inc. 157 Virginia
EWK Williamsburg, Inc. 158 Virginia
EWK Virginia Beach, Inc. 170 Virginia
Dale City L.T., Inc. 206 Virginia
Landmark L.T., Inc. 298 Virginia
Moorefield L.T., Inc. 300 Virginia
Portsmouth Station L.T., Inc. 303 Virginia
Greenbriar L.T., Inc. 322 Virginia
Tysons Station L.T., Inc. 323 Virginia
Vienna L.T., Inc. 330 Virginia
Springfield L.T., Inc. 378 Virginia
Sterling L.T., Inc. 387 Virginia
Parham L.T., Inc. 389 Virginia
Pentagon Centre L.T., Inc. 419 Virginia
Westpark Linens 'n Things, Inc. 458 Virginia
Fairfax Linens 'n Things, Inc. 489 Virginia
Virginia Beach Linens 'n Things Inc. 497 Virginia
Tukwila Linens 'n Things, Inc. 469 Washington
Lynnwood Linens 'n Things, Inc. 514 Washington
Brookfield Linens 'n Things, Inc. 454 Wisconsin

EXHIBIT 23.1

Linens 'n Things Center, Inc.
6 Brighton Road
Clifton, New Jersey 07015

The Board of Directors
Linens 'n Things Center, Inc.:

We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Registration Statement.

/s/ KPMG Peat Marwick LLP

New York, New York
September 18, 1996