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Schedule 14A Information
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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LINENS 'N THINGS, INC.
(Name of Registrant as Specified in its Charter
and
Name of Person Filing Proxy Statement)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: ______________________________________
Form, Schedule or Registration Statement No.: _________________
Filing Party: ________________________________________________
Date Filed: __________________________________________________
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<PAGE>
PRELIMINARY COPY
LINENS 'N THINGS, INC.
6 BRIGHTON ROAD
CLIFTON, NEW JERSEY 07015
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1999
To Linens 'n Things, Inc. Shareholders:
The Annual Meeting of Shareholders of Linens 'n Things, Inc.,
a Delaware corporation, will be held at the Company's headquarters at 6 Brighton
Road, Clifton, New Jersey, on Wednesday, April 21, 1999, at 11:00 a.m., for the
following purposes:
1. To elect two directors for a three year term.
2. To approve an amendment to the Company's Amended and
Restated Certificate of Incorporation to increase the
authorized shares of Common Stock from 60 million shares
to 135 million shares.
3. To act upon such other business as may properly come
before the Annual Meeting or any postponement or
adjournment.
Shareholders of record at the close of business on March 1,
1999 are entitled to notice of and to vote at the Annual Meeting or at any
postponement or adjournment.
By order of the Board of Directors,
BRIAN D. SILVA
Secretary
March ___, 1999
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YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,
PLEASE COMPLETE THE ENCLOSED PROXY AND RETURN IT PROMPTLY, WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
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<PAGE>
PRELIMINARY COPY
LINENS 'N THINGS, INC.
6 BRIGHTON ROAD
CLIFTON, NEW JERSEY 07015
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1999
PROXY STATEMENT
This Proxy Statement is being furnished to the shareholders of
Linens 'n Things, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Shareholders of the Company to be held on
Wednesday, April 21, 1999, at 11:00 a.m., at 6 Brighton Road, Clifton, New
Jersey and at any postponement or adjournment (the "Annual Meeting"). At the
Annual Meeting, shareholders of the Company are being asked to consider and vote
on (1) the election of two directors, each for a three year term, and (2) a
proposal to increase the authorized Common Stock of the Company from 60 million
shares to 135 million shares.
This Proxy Statement, Notice of Meeting and accompanying proxy
are first being mailed to shareholders on or about March ___, 1999.
GENERAL
The holders of shares of the Company's Common Stock of record
at the close of business on March 1, 1999 are entitled to vote such shares at
the Annual Meeting. On February 1, 1999, there were outstanding 39,047,733
shares of Common Stock. All references to shares of Common Stock throughout this
Proxy Statement have been adjusted as appropriate to reflect the Company's
2-for-1 stock split in May 1998.
The presence in person or by proxy of the holders of a
majority of the shares outstanding on the record date is necessary to constitute
a quorum for the transaction of business at the Annual Meeting. Each shareholder
is entitled to one vote, in person or by proxy, for each share of Common Stock
held as of the record date on each matter to be voted on at the Annual Meeting.
Directors are elected by the affirmative vote of a plurality of the votes cast
at the Annual Meeting and entitled to vote. Approval of the proposal to increase
the authorized Common Stock of the Company requires the affirmative vote of a
majority of the outstanding Common Stock entitled to vote at the Annual Meeting
on this proposal.
Abstentions and broker non-votes are included in determining
the number of shares present or represented at the Annual Meeting for purposes
of determining whether a quorum exists. Neither abstentions nor broker non-votes
are counted as votes in connection with determining the plurality required to
elect directors and have no effect on the outcome of that vote. In determining
whether the proposed increase in authorized Common Stock receives the requisite
shareholder votes for approval, abstentions and broker non-votes are counted and
have the same effect as a vote against the proposal. Broker non-votes occur when
a broker nominee does not vote on one or more matters at the meeting because it
has not received voting instructions from the beneficial owner and does not have
discretionary authority to vote on such matter. The Company believes that the
Company's proposals will be considered "discretionary" items under New York
Stock Exchange Rules upon which member firms holding Company shares in street
name may vote if beneficial owners have not timely furnished voting
instructions.
Shares of Common Stock represented by a properly executed
proxy received in time for the Annual Meeting will be voted as specified in the
proxy, unless the proxy has previously been revoked. Unless contrary
instructions are given in the proxy, it will be voted for the persons designated
in the proxy as the Board of Directors' nominees for director, for the proposal
to increase the authorized Common Stock of the Company, and, with respect to any
other matters properly submitted to shareholders at the Annual Meeting, as
recommended by the Board of Directors or, if no recommendation is given, in its
discretion.
A proxy may be revoked by filing with the Secretary of the
Company, prior to the exercise of such proxy, either a written revocation of
that proxy or a new proxy bearing a later date. A proxy may also be revoked by
voting in person at the Annual Meeting. Attendance at the Annual Meeting will
not in itself constitute revocation of a proxy.
This proxy solicitation is being made on behalf of the Company
and the expense of preparing, printing and mailing this Proxy Statement and
proxy is being paid by the Company. In addition to use of the mails, proxies may
be solicited personally or by telephone, telefax or telex by regular employees
of the Company without additional compensation. The Company will reimburse
banks, brokers and other custodians, nominees and fiduciaries for their costs in
sending proxy materials to the beneficial owners of Common Stock.
<PAGE>
ITEM 1
ELECTION OF TWO DIRECTORS
General. The Board of Directors currently consists of five
members and is divided into three classes approximately equal in size. Directors
are generally elected for three-year terms on a staggered term basis, so that
each year the term of office of one class will expire and the terms of office of
the other classes will extend for additional periods of one and two years
respectively. This year's nominees have each been nominated to serve for a
three-year term expiring in the year 2002. The Company has inquired of such
nominees and determined that each will serve if elected. If, for any reason,
either nominee is not available for election, which is not expected, the proxy
committee would vote for such substitute nominee as may be recommended by the
Board of Directors.
The nominees to the Board of Directors at the Annual Meeting
are current directors of the Company. Set forth below is a brief description of
the background of the nominees for election. Also set forth below are
descriptions of the backgrounds of the existing directors whose terms of office
extend beyond the Annual Meeting. The Board of Directors recommends that
shareholders vote "FOR" the Company's nominees for director.
Nominees for Election at the Annual Meeting
NORMAN AXELROD Director since September 1996
Mr. Axelrod, age 46, has been Chairman, Chief Executive
Officer and President of the Company since 1997 and President and Chief
Executive Officer of the Company since 1988. Prior to joining Linens 'n Things,
Mr. Axelrod held various management positions at Bloomingdale's between 1976 and
1988, ending with Senior Vice President, General Merchandise Manager.
CHARLES C. CONAWAY Director since September 1996
Mr. Conaway, age 38, is currently Executive Vice President and
Chief Financial Officer of CVS Corporation ("CVS"). 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, and has held his current positions since 1995.
<PAGE>
Directors Whose Terms Do Not Expire this Year
STANLEY P. GOLDSTEIN Director since October 1996
Mr. Goldstein, age 64, is currently Chairman of the Board of
CVS (formerly known as Melville Corporation) and until May 1998 was Chairman of
the Board and Chief Executive Officer of CVS. Mr. Goldstein co-founded Consumer
Value Stores, a retail drug chain, in 1963. CVS was acquired by Melville
Corporation in 1969, at which time Mr. Goldstein became President of the CVS
Division of Melville Corporation. In 1984, he was appointed Executive Vice
President of Melville Corporation, in 1986 President of Melville Corporation,
and in 1987 Chairman and Chief Executive Officer of Melville Corporation. Mr.
Goldstein's term as a director of the Company expires in 2001. Mr. Goldstein is
also a director of Bell Atlantic Corporation and Footstar, Inc. and is on the
board of overseers of The Wharton School, University of Pennsylvania.
PHILIP E. BEEKMAN Director since January 1997
Mr. Beekman, age 67, is President of Owl Hollow Enterprises,
Inc., a consulting and investment company. Mr. Beekman's term as a director of
the Company expires in 2000. From 1986 to 1994, Mr. Beekman was Chairman of the
Board and Chief Executive Officer of Hook SupeRx, Inc., a retail drug store
chain. Prior to that he was President and Chief Operating Officer of Seagram
Company Limited. Mr. Beekman is also a director of General Chemical Group, Inc.,
Kendle Company International and the Ladies Professional Golf Association.
HAROLD F. COMPTON Director since March 1998
Mr. Compton, age 51, is President and Chief Operating Officer
of CompUSA Stores Inc. ("CompUSA Stores") and Executive Vice President and Chief
Operating Officer of CompUSA Inc. ("CompUSA"). Mr. Compton was elected as a
director by the Board in March 1998 and his term as a director of the Company
expires in 2000. Mr. Compton joined CompUSA in 1994 as Executive Vice President
- - Operations, becoming Chief Operating Officer in 1995 and President of CompUSA
Stores in 1996. From 1993 to 1994 he served as President and Chief Operating
Officer of Central Electric, Inc. and from 1989 to 1993 he served as Executive
Vice President - Operations and Human Resources and Director of Stores for
HomeBase. Mr. Compton is also a director of Jumbo Sports, Inc. and Stage Stores,
Inc.
Director Compensation - Attendance; Committees. Directors who
are not employees of the Company are paid an annual retainer of $10,000 which
may be taken either in cash or Common Stock of the Company. Each director has
currently elected to accept such retainer in the form of Common Stock.
Non-employee directors are also eligible to participate in the 1996 Non-Employee
Director Stock Plan. Under the 1996 Non-Employee Director Stock Plan, each new
non-employee director appointed or elected to the Board is currently eligible to
receive, upon his or her initial election or appointment to the Board, an option
to purchase 6,000 shares of the Common Stock of the Company and 400 stock units.
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 and the other half approximately six months
thereafter, provided that on such date the non-employee director has not ceased
to serve as a director for any reason other than death, disability, or
retirement at or after age 65. In addition, each non-employee director receives
400 stock units and also an option to purchase up to 2,000 shares of Common
Stock on the date of each Annual Meeting.
In 1998, the Board of Directors held four meetings, the Audit
Committee held four meetings and the Compensation Committee held two meetings.
There is no standing nominating committee. Each director attended 100% of the
meetings of the Board of Directors and of the Committees of which he was a
member. Messrs. Beekman and Conaway are the current members of the Audit
Committee. Messrs. Goldstein, Conaway and Compton are the current members of the
Compensation Committee.
Audit Committee. The Audit Committee is intended to function
as a communication point among non-Audit Committee directors, internal auditors,
the independent auditors and Company management as their respective duties
relate to financial accounting, reporting and internal controls. The Audit
Committee is also intended to assist the Board of Directors in fulfilling its
responsibility with respect to accounting policies, internal controls, financial
and operating controls, standards of corporate conduct and performance, and
reporting practices of the Company and the sufficiency of auditing. Mr. Beekman
is Chairman of the Audit Committee.
Compensation Committee. The principal responsibilities of the
Compensation Committee include the determination and administration of
compensation for the senior officers of the Company and other key members of the
Company's management, including salary and incentive based plans and ongoing
review, in consultation with the Company's executive management and the Board of
Directors, of the policies relating to compensation of the Company's senior
officers and other key members of the Company's management. Mr. Goldstein is
Chairman of the Compensation Committee.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information on compensation for
the Company's Chairman, Chief Executive Officer and President, and for the four
other most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
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Annual Compensation Awards
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Number of
Securities All Other
Name and Principal Fiscal Restricted Underlying Compensation
Position Year Salary ($) Bonus ($) Stock Award(s) Options/ SARs # ($) (3)
($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Norman Axelrod, 1998 548,846 707,945 548,373(1) 378,774 9,600
Chairman, 1997 496,920 513,838 0 300,000 9,500
Chief Executive 1996 475,000 65,313 998,707(2) 770,710 3,167
Officer and President
Steven B. Silverstein, 1998 304,808 234,192 211,436(1) 109,376 9,600
Executive Vice 1997 282,310 210,900 0 60,000 9,500
President, Chief 1996 275,000 27,500 290,250(2) 150,000 3,167
Merchandising Officer
Hugh J. Scullin, 1998 215,000 153,940 149,053(1) 27,509 9,600
Senior Vice President, 1997 213,650 159,100 0 30,000 9,500
Store Operations 1996 210,000 21,000 174,150(2) 90,000 3,167
Brian D. Silva, 1998 208,769 151,792 146,976(1) 28,345 9,600
Senior Vice President, 1997 191,210 148,000 0 36,000 9,500
Human Resources, and
Secretary
William T. Giles, 1998 200,000 121,720 110,927 28,345 9,600
Chief Financial Officer 1997 163,210 96,971 0 30,000 9,500
</TABLE>
(1) Valuation of the restricted stock awarded on July 1, 1998 is based on
the closing price of $30.56 on June 30, 1998, net of consideration paid
of $0.01 per share. The restricted stock awards for each of the named
executives are: Mr. Axelrod, 17,950 shares; Mr. Silverstein, 6,921
shares; Mr. Scullin, 4,879 shares; Mr. Silva, 4,811 shares; and Mr.
Giles, 3,631 shares. Shares of restricted stock vest 100% on July 1,
2001. Holders of restricted stock are entitled to receive dividends, if
any, on the restricted stock. The number and value of the aggregate of
all restricted stock holdings at the end of fiscal 1998 for each of the
named executives are: Mr. Axelrod, 118,208 shares, $4,682,810; Mr.
Silverstein, 35,045 shares, $1,388,308; Mr. Scullin, 24,870 shares,
$985,225; Mr. Silva, 16,466 shares, $652,301; and Mr. Giles, 15,286
shares, $605,555. The foregoing values are calculated by multiplying
the total number of restricted shares by the closing price of the
Company's Common Stock on the last day of fiscal 1998, $39.625, net of
consideration paid of $0.01 per share.
(2) Valuation of the restricted stock awarded in 1996 is based on the IPO
price of $7.75, net of consideration paid of $0.01 per share. The
restricted stock awards for each of the named executives are: Mr.
Axelrod, 129,032 shares; Mr. Silverstein, 37,500 shares; and Mr.
Scullin, 22,500 shares. Shares of restricted stock vest 25% on July 1,
1997, July 1, 1998, July 1, 1999 and July 1, 2000. Holders of
restricted stock are entitled to receive dividends, if any, on the
restricted stock.
(3) For each of fiscal years 1998 and 1997, represents amounts contributed
under the Company's 401(k) profit sharing plan. For fiscal year 1996,
represents amounts contributed under the CVS 401(k) profit sharing plan
from January through November 1996.
<PAGE>
Option Grants in Last Fiscal Year. The table below sets forth certain
information concerning stock options granted during 1998 by the Company to the
named executive officers. The hypothetical present values on date of grant are
presented pursuant to the rules of the Securities and Exchange Commission (the
"SEC") and are calculated under the modified Black-Scholes Model for pricing
options. No stock appreciation rights ("SARs") have been granted or are
outstanding.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS GRANT DATE
UNDERLYING OPTIONS GRANTED TO EXERCISE OR PRESENT VALUE
GRANTED (#) EMPLOYEES IN FISCAL BASE PRICE EXPIRATION DATE ($)(3)
NAME YEAR ($/SHARE)
- ------------------------------ -------------------- --------------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Norman Axelrod 28,774 (1) 3.4 26.06 09/18/03 325,972
350,000 (2) 41.0 30.65 11/25/08 4,664,660
Steven B. Silverstein 9,376 (1) 1.1 26.06 09/18/03 106,218
100,000 (2) 11.7 30.65 11/25/08 1,332,760
Hugh J. Scullin 2,509 (1) 0.3 26.06 09/18/03 28,424
25,000 (2) 2.9 30.65 11/25/08 333,190
Brian D. Silva 3,345 (1) 0.4 26.06 09/18/03 37,895
25,000 (2) 2.9 30.65 11/25/08 333,190
William T. Giles 3,345 (1) 0.4 26.06 09/18/03 37,895
25,000 (2) 2.9 30.65 11/25/08 333,190
</TABLE>
(1) These options were granted in connection with an early distribution of
vested restricted stock from the Deferred Compensation Plan due to
changes in accounting rules effective September 30, 1998. These options
were issued at fair market value and vested and become exercisable
six months from the grant date.
(2) These options were granted at fair market value and vest and become
exercisable in 33.3% annual increments beginning the third year from
the grant date.
(3) The hypothetical present values on grant date are calculated under the
modified Black-Scholes Model, which is a mathematical formula used to
value options traded on stock exchanges. This formula considers a
number of factors in hypothesizing an option's present value. Factors
used to value options granted include the stock's expected volatility
rate (45%), risk free rate of return (4.7%), dividend yield (0%),
projected time of exercise (4.5 years) and projected risk of forfeiture
and non-marketability for the vesting period (6.21% per annum).
<PAGE>
Option Exercises And Year-End Option Holdings. The following
table shows information regarding option exercises during 1998 as well as 1998
year-end option holdings for each of the named executive officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY-END IN-THE-MONEY OPTIONS/SARS
SHARES (#) EXERCISABLE/ AT FY-END ($)
ACQUIRED ON UNEXERCISABLE EXERCISABLE/
EXERCISE (#) VALUE UNEXERCISABLE
REALIZED ($)
NAME
- ------------------------------- ---------------- -------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C>
Norman Axelrod 192,500 3,198,900 267,855/989,129 7,811,316/20,806,876
Steven B. Silverstein
30,000 462,450 60,000/229,376 1,767,188/4,413,725
Hugh J. Scullin
22,500 358,875 30,000/95,009 883,594/2,191,997
Brian D. Silva
13,000 223,925 26,000/85,345 741,563/1,825,054
William T. Giles
0 0 37,500/80,845 1,122,656/1,725,210
</TABLE>
Employment Agreements and Change in Control Agreements. The
Company has employment agreements with Messrs. Axelrod, Silverstein and Scullin
(each referred to individually as an "Employment Agreement"). The following
briefly summarizes the principal terms of the Employment Agreements.
The period of employment under the Employment Agreements
extends initially for four years subject to automatic one-year extensions at the
end of the initial term unless either party gives notice of non-renewal at least
180 days prior to expiration of the term. The Employment Agreements generally
provide for payment of an annual base salary that will be reviewed each year,
but may not be decreased from the amount in effect in the previous year, and
there is an annual target bonus of a minimum of 55% and a maximum of 110% of
base salary for Mr. Axelrod and a minimum of 40% and a maximum of 80% of base
salary for the other named executive officers.
The Employment Agreements generally provide for (i) continued
payment of annual base salary, incentive compensation, and other benefits for 24
months in the case of Mr. Axelrod and for 12 months in the case of the other
executives in the event the executive's employment is terminated other than in
connection with a termination by the Company for "cause" or voluntary
termination by the executive without "good reason;" (ii) other restrictive
covenants including non-disclosure, non-solicitation of employees and
availability for litigation support; (iii) participation in certain benefit
plans and programs (including retirement benefits, disability and life
insurance, and medical benefits); (iv) annual and long-term incentive
compensation opportunities; and (v) deferred compensation arrangements. Mr.
Axelrod also received from CVS an initial crediting to a deferred compensation
account of approximately $2.2 million in lieu of certain accumulated pension
benefits, outstanding CVS restricted stock awards and outstanding CVS stock
options.
In the event of a "change in control," the Employment
Agreements generally provide lump sum severance benefits equal to 2 times (2.99
for Mr. Axelrod) annual base salary and target bonus and continued participation
in certain welfare benefit plans for 24 months (36 months for Mr. Axelrod). In
addition, in the case of voluntary termination, the Company may elect to pay the
executive over a 12 month period an amount equal to annual base salary plus
target annual bonus in exchange for the executive's agreement not to compete
with the Company for a period of one year. Upon a termination for cause, the
executives have agreed not to compete with the Company for a period of one year.
A "change in control" is defined to include a variety of
events, including significant changes in the stock ownership of the Company or a
significant subsidiary, certain 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. "Good reason" is defined generally as demotion, reduction in
compensation, unapproved relocation in the case of Mr. Axelrod or a material
breach of the Employment Agreement by the Company. "Cause" is defined generally
as a breach of the restrictive covenants contained in the Employment Agreements,
certain felony convictions, or willful acts or gross negligence that are
materially damaging to the Company.
If payments under the Employment Agreements following a change
in control are subject to the "golden parachute" excise tax, the Company will
make an additional "gross-up" payment sufficient to ensure that the net
after-tax amount retained by the executive (taking into account all taxes,
including those on the gross-up payment) is the same as it would have been had
such excise tax not applied. The Employment Agreements obligate the Company to
indemnify the executives to the fullest extent permitted by law, including the
advancement of expenses, and, in the case of Mr. Axelrod, generally provides
that the Company will reimburse Mr. Axelrod for expenses incurred in seeking
enforcement of his Employment Agreement, unless Mr. Axelrod's assertion of such
rights is in bad faith or is frivolous.
REPORT ON COMPENSATION OF EXECUTIVE OFFICERS
Compensation decisions for the Company's Chief Executive
Officer and the other named executive officers for fiscal 1998 were reviewed and
determined by the Compensation Committee of the Board of Directors.
The overall objectives of the Company's executive compensation
program are to attract and retain the highest quality executives to manage and
lead the Company, and to provide annual and long term incentives to management,
based on both Company performance and individual performance, in order to build
and sustain value for shareholders.
The Company's executive compensation program for 1998 was
reviewed and approved by the Compensation Committee of the Board of Directors.
Before the Company's 1996 IPO, a national compensation consultant was retained
by the Compensation Committee to assist the Compensation Committee in reviewing
competitive compensation programs for the Company. The consultant reviewed
competitive compensation in connection with the Company's senior officers,
including the Chief Executive Officer and each of the other named executive
officers as well as other members of the management group. This review included
compensation levels reported for senior executives of a survey group of 14
retailers. The survey group is not the same group of companies included in the
Peer Group index set forth in the Company's Performance Graph below because, in
the view of the Compensation Committee and such compensation consultant, such
survey group is not necessarily the most representative group for purposes of
determining competitive compensation pay practices for the senior executives.
Since that time, the Compensation Committee has continued to review the
competitiveness of the Company's executive compensation practices based on the
pre-IPO survey as well as its own subjective view of the appropriate level and
competitiveness of such compensation levels.
Annual Base Salary. Based on this survey group review, annual
base salaries for the Chief Executive Officer and the other named executives
were established prior to the IPO at approximately the mean of the range of
salaries considered in the survey group, with increases through fiscal 1998 made
by the Compensation Committee based on its subjective view of appropriate,
competitive annual base salary levels for such executives without specific
reference to such survey group. Actual total remuneration levels may range below
or above target in any one year and over a period of years based on performance
against annual and long term goals and return to shareholders. At the time of
the IPO, the Company entered into employment agreements with the Chief Executive
Officer and Messrs. Scullin and Silverstein under which a minimum base pay level
for each individual was established.
Incentive Awards. The Company's incentive program provides for
cash bonuses based on performance relative to predetermined objectives
established for the year. For 1998, the target award was 70% for the Chief
Executive Officer, a blended target rate equivalent to 42% for Mr. Silverstein,
40% for Messrs. Scullin and Silva and 34% for Mr. Giles. Larger awards may be
permitted from time to time if performance exceeds predetermined objectives.
Smaller or no awards may be made if performance falls below such objectives.
Eligible members of management, including the Chief Executive Officer and the
other named executives, can defer receipt of a portion of their incentive award.
For 1998, incentive bonuses payable to the Chief Executive Officer and the other
named executives were based on specific earnings objectives established by the
Compensation Committee in early 1998. Such goals for 1998 having been surpassed
by a substantial margin, actual 1998 incentive awards were determined to be 179%
of the target levels for each of the named executive officers (see Summary
Compensation Table above).
Stock Based Compensation. The Board of Directors and the
Compensation Committee are of the view that stock ownership or its equivalent by
management aligns the interest of management with the Company's shareholders.
Stock options are granted at fair market value and are intended to align
executive compensation opportunities with shareholder returns. Stock options
granted during 1998 were made in two segments. The first grant (see option grant
table above) was made in connection with early distributions of restricted stock
from the Company's Deferred Compensation Plan as a result of changes in
accounting rules. The second grant was part of the Compensation Committee's
customary review and these option grants were made at levels which the
Compensation Committee determined to be appropriate long-term equity based
incentives to such executives and were made at approximately the mean level for
each of the named executives based on the survey group. Vesting under these
latter stock option grants generally does not begin until three years from date
of grant and then only in one-third annual increments. Stock options are
intended to provide long term compensation incentive, and future grants of
options or other awards will be periodically reviewed and determined by the
Compensation Committee. Restricted stock awards made in fiscal 1998 (see Summary
Compensation Table) were made by the Compensation Committee to the named
executive officers based on such executives having exceeded certain established
performance objectives for earnings and net return on assets, with each named
executive having an award incentive rate ranging from 55% of annual base salary
to, in the case of Mr. Axelrod, 96% of annual base salary. Such restricted stock
vests three years from the date of grant. [CEO]
Compliance with Internal Revenue Code Section 162(m). Section
162(m) of the Internal Revenue Code, enacted in 1993, generally allows a
deduction to publicly traded companies for certain qualifying performance based
compensation. Section 162(m), however, disallows a deduction to the extent of
excess non-performance based compensation over $1 million paid to the Chief
Executive Officer or to any of the four other most highly compensated executive
officers. The Company believes that Section 162(m) deduction limits for fiscal
1999 will not be applicable or, if applicable, would not be material in terms of
net financial effect or number of persons covered and therefore the Company does
not intend to seek to restructure any fiscal 1999 compensation arrangements. The
Company and the Compensation Committee will continue to monitor this matter.
Compensation Committee of the
Board of Directors
Stanley P. Goldstein, Chairman
Charles C. Conaway
Harold F. Compton
<PAGE>
PERFORMANCE GRAPH
The following graph compares the percentage change in the
cumulative total shareholders' return on the Company's Common Stock on a
quarterly basis from November 26, 1996, the first trading day of the Company's
Common Stock, through December 31, 1998, with the cumulative total return on the
Standard & Poor's Specialty Retail Index, the 14 Company Peer Group Index and
the Standard & Poor's 500 Index for the same period. In accordance with the SEC
rules, the returns are indexed to a value of $100 at November 26, 1996 and it is
assumed that all dividends were reinvested.
The 14 Company Peer Group Index is comprised of the following
companies in the retail industry: Bed, Bath & Beyond; Bombay Company; Borders
Group; Fabri-Centers of America; General Nutrition Cos.; Haverty Furniture Cos.;
Lechters, Inc.; Michaels Stores, Inc.; Petsmart, Inc.; Pier 1 Imports, Inc.;
Sharper Image, Inc.; The Sports Authority, Inc.; Strouds, Inc. and
Williams-Sonoma, Inc. The returns of each issuer in the 14 Company Peer Group
Index have been weighted according to the issuer's stock market capitalization
at the beginning of each period for which a return is indicated.
COMPARISON OF YEAR END CUMULATIVE TOTAL RETURN OF LINENS 'N THINGS, INC.,
STANDARD & POOR'S SPECIALTY RETAIL INDEX, 14 COMPANY PEER GROUP
AND STANDARD & POOR'S 500 INDEX
[GRAPHIC OMITTED]
Compensation Committee Interlocks and Insider Participation.
The Compensation Committee of the Board of Directors is comprised of Mr.
Goldstein, Mr. Conaway and Mr. Compton. Mr. Goldstein has been Chairman of the
Board, and a director of CVS and Mr. Conaway has been Executive Vice President
and Chief Financial Officer of CVS. Immediately following the 1996 IPO and prior
to the secondary offering of Common Stock in fiscal 1997, CVS owned
approximately 32.5% of the Company's Common Stock.
Certain Transactions With Related Parties. The Company was
acquired by Melville Corporation in 1983. After the Company's IPO in November
1996, CVS, as successor in interest to Melville Corporation, retained
approximately 32.5% of the Common Stock of the Company. During fiscal 1997, CVS
sold substantially all of its equity interest in the Company's Common Stock in
an underwritten public offering by the Company.
The following are summary descriptions of the Transitional
Services Agreement, Stockholder Agreement and Tax Disaffiliation Agreement. The
descriptions do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of such documents,
which have been filed with the SEC.
Lease Guarantees. CVS guarantees the leases of certain stores
operated by the Company and, prior to the IPO, charged a fee for that service.
Since the IPO, CVS has no longer charged the Company a fee for this service.
Although CVS remains obligated under its existing guarantees of the Company's
store leases entered into prior to the IPO, CVS will not enter into any
additional guarantees of leases on behalf of the Company. The Company has agreed
to indemnify CVS under the Stockholder Agreement for any losses arising in
connection with such lease guarantees.
Transitional Services Agreement. CVS and the Company entered
into a transitional services agreement (the "Transitional Services Agreement")
effective concurrently with the IPO, under which CVS provided or caused to be
provided to the Company certain specified services for a transitional period
after the IPO, including check authorization and collection. The Transitional
Services Agreement provides that the services would be provided in exchange for
fees based on CVS's cost for such services.
Stockholder Agreement. The Company and CVS entered into a
Stockholder Agreement as of December 2, 1996 in connection with the IPO. The
Stockholder Agreement provided that the Company and CVS will indemnify each
other against certain liabilities. In addition, pursuant to the Stockholder
Agreement no person or group shall acquire a majority of the beneficial
ownership of the Common Stock of the Company unless (i) CVS receives prior
written notice that such person or group proposes to acquire such majority
beneficial ownership and (ii) prior to such acquisition such person or group
provides to CVS (unless waived by CVS in writing) a guarantee, in form and
substance acceptable to CVS, of the obligations of the Company under the
Stockholder Agreement to indemnify the CVS Group in respect of the CVS Lease
Guarantees. Upon such person or group acquiring majority ownership, CVS may
terminate the provision of any or all of its services under the Transitional
Services Agreement.
The Stockholder Agreement provides generally that CVS will
cease to have any liability under its employee benefit plans with respect to
employees and former employees of the Company after the IPO, except that (i) the
full account balances of current employees of the Company in CVS's 401(k) profit
sharing plan were transferred to a similar successor plan of the Company and
(ii) employees of the Company were entitled to exercise applicable distribution
rights under CVS's employee stock ownership plan.
Tax Disaffiliation Agreement. CVS and the Company entered into
a tax disaffiliation agreement (the "Tax Disaffiliation Agreement") in
connection with the 1996 IPO that 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 IPO 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 is responsible for filing consolidated federal
and consolidated, combined or unitary state income tax returns for periods
through the date on which the IPO was 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, when and to the extent that they are
used on a consolidated, combined or unitary basis. The Company is 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, is 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 IPO was
completed.
In general, the Company has agreed to indemnify CVS for taxes
relating to a tax period (or portion thereof) ending on or before the completion
of the IPO 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 the
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 IPO.
The Tax Disaffiliation Agreement also provides 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 IPO of certain tax attributes of the Company arising in tax
periods or portions thereof beginning after the completion of the IPO.
The Company and CVS have agreed 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 IPO. The Company and
CVS have each agreed to indemnify the other for liabilities arising as a result
of the breach of this agreement. The Company also agreed 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 continues to be a party.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Certain Beneficial Owners. The following table sets forth
certain information as to beneficial ownership of each person known to the
Company to own beneficially more than 5% of the outstanding Common Stock of the
Company as of February 1, 1999.
<TABLE>
<CAPTION>
Beneficial Owner Number of Shares Percent of Class
<S> <C> <C>
Putnam Investments, Inc. (1) 5,230,260 13.4%
One Post Office Square
Boston, Massachusetts 02109
Oppenheimer Funds, Inc. (2) 2,052,800 5.3%
Two World Trade Center, Suite 3400
New York, New York 10048-0203
</TABLE>
(1) Based on a Report on Schedule 13G dated January 26, 1999, which was
jointly filed by Marsh & McLennan Companies, Inc., Putnam Investment
Management, Inc. and The Putnam Advisory Company, Inc.
(2) Based on a Report on Schedule 13G dated February 11, 1999, which was
filed by Oppenheimer Funds, Inc.
Stock Ownership of Directors and Executive Officers. The
following table sets forth certain information as to beneficial ownership of the
outstanding Common Stock of the Company as of February 1, 1999, by each director
and nominee of the Company, each of the named executive officers listed in the
Summary Compensation Table, and all executive officers and directors of the
Company as a group. Except as otherwise indicated, all persons listed below have
sole voting and investment power with respect to such shares. No director,
nominee or executive officer beneficially owns more than one percent of the
total outstanding Common Stock, and all directors and executive officers as a
group own 1.45% of the total outstanding Common Stock.
<PAGE>
<TABLE>
<CAPTION>
No. of Shares No. of Shares
of Common Stock of Common
(1)(2) Name of Beneficial Owner Stock(1)(2)
Name of Beneficial Owner
- ---------------------------------- ----------------- --------------------------------- --------------- ------
<S> <C> <C> <C>
N. Axelrod.......................... 332,970 (3) S. Silverstein...................... 80,750
P. Beekman.......................... 10,986 H. Scullin.......................... 45,650 (4)
C. Conaway.......................... 10,986 B. Silva............................ 33,500
S. Goldstein........................ 10,986 W. Giles............................ 45,000
H. Compton.......................... 3,190
All executive officers and
directors as a group................ 574,018 (5)
</TABLE>
(1) Includes shares of restricted stock which were vested as of February 1,
1999 (or will vest within 60 days thereafter), as follows: Mr. Axelrod,
35,741; Mr. Beekman, 3,200; Mr. Conaway, 3,200; Mr. Goldstein, 3,200;
Mr. Compton, 800; Mr. Silverstein, 9,375; Mr. Scullin, 8,741; Mr.
Silva, 4,155; Mr. Giles, 4,155; and all directors and executive
officers as a group, 72,567.
(2) Includes shares subject to stock options which were exercisable as of
February 1, 1999 (or will become exercisable within 60 days
thereafter), as follows: Mr. Axelrod, 296,629; Mr. Beekman, 7,350; Mr.
Conaway, 7,350; Mr. Goldstein, 7,350; Mr. Compton, 2,000; Mr.
Silverstein, 69,376; Mr. Scullin, 32,509; Mr. Silva, 29,345; Mr. Giles,
40,845; and all directors and executive officers as a group, 492,754.
(3) Includes 400 shares held by Mr. Axelrod's minor children, as to which
shares Mr. Axelrod disclaims beneficial ownership.
(4) Includes 1,000 shares held by Mr. Scullin's minor child and 1,000
shares held by Mr. Scullin's spouse, as to which shares Mr. Scullin
disclaims beneficial ownership.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors to file reports regarding
ownership of the Company's Common Stock with the Securities and Exchange
Commission, and to furnish the Company with copies of all such filings. Based on
a review of these filings, the Company believes all such filings were timely
made.
<PAGE>
ITEM 2
PROPOSED INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors has approved a proposal to amend the Company's
Amended and Restated Certificate of Incorporation to increase the authorized
Common Stock from 60 million shares to 135 million shares. If approved by
shareholders at this Annual Meeting, the proposed amendment would become
effective upon filing with the Secretary of State of Delaware, which will occur
promptly following the Annual Meeting.
The Board of Directors believes that it is in the Company's best
interests to increase the number of authorized shares of Common Stock in order
to have additional authorized but unissued shares available to meet business
needs as they arise.
The Company's Amended and Restated Certificate of Incorporation
currently authorizes the issuance of a total of 60 million shares of Common
Stock and one million shares of Preferred Stock without designation.
On May 7, 1998 the Company effected a two-for-one split of the
Common Stock of the Company in the form of a stock dividend. As a result of the
two-for-one stock split, together with the additional shares of Common Stock
issued under the Company's equity incentive plans following the stock split, as
of February 1, 1999 there were 39,047,733 shares of Common Stock outstanding and
53,333 treasury shares. In addition, as of February 1, 1999, there were
approximately 4.5 million shares of Common Stock currently reserved for future
issuance under the Company's equity incentive plans. No shares of Preferred
Stock are currently outstanding or reserved.
The increased authorized shares of Common Stock would be available for
issuance at such times and for such corporate purposes as the Board of Directors
may deem advisable, without further action by the Company's shareholders except
as may be required by applicable law, by the Company's Amended and Restated
Certificate of Incorporation, or by the rules of the New York Stock Exchange or
any other stock exchange or national securities association trading systems on
which the securities may then be listed or traded.
The Board of Directors believes that the availability of such
additional authorized Common Stock will provide the Company with the flexibility
to issue Common Stock for possible future stock splits or stock dividends, if
such action is determined by the Board to be advisable, or in connection with
acquisitions, equity incentive plans, financings or other corporate purposes
which may be identified in the future by the Board of Directors, without the
possible expense or delay of a special shareholders' meeting. Upon issuance,
such shares of Common Stock will have the same rights as the outstanding shares
of Common Stock. Issuance of additional shares of Common Stock may have a
dilutive effect on existing holders of Common Stock. Holders of Common Stock
have no preemptive rights.
The proposed increase in the authorized Common Stock is not designed to
have an anti-takeover effect. However, although the Board of Directors has no
present intention of doing so, it could issue shares of Common Stock or
Preferred Stock (within the limits imposed by applicable law, by the Amended and
Restated Certificate of Incorporation and by the rules of applicable
self-regulatory organizations) which could, depending upon the circumstances,
make more difficult or discourage an attempt to obtain control of the Company by
means of a merger, tender offer, proxy contest or other means, including sale or
issuance to persons favorable to the Board or management or otherwise having the
effect of diluting the stock ownership of a person or entity. The Company
currently has no firm plans or commitments involving the issuance of Common
Stock, other than under its equity incentive plans.
INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP as the Company's
independent auditors to make an examination of the accounts of the Company for
the 1999 fiscal year. KPMG LLP has served as the independent auditors of the
Company since November 26, 1996 (formerly known as KPMG Peat Marwick LLP).
Representatives of KPMG LLP are expected to be present at the Annual Meeting and
will be available to respond to appropriate questions and to make such
statements as they may desire.
<PAGE>
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the
Company's 2000 Annual Meeting of Shareholders must be received by the Secretary
of the Company, for inclusion in the Company's Proxy Statement, Notice of
Meeting and Proxy relating to the 2000 Annual Meeting, not later than November
__, 1999.
The Company's Bylaws establish an advance written notice
procedure for shareholders seeking to nominate candidates for election as
directors at any Annual Meeting of Shareholders, or to bring business before an
Annual Meeting of Shareholders of the Company. The Bylaws provide that only
persons who are nominated by, or at the direction of, the Board, or by a
shareholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Bylaws also provide that at any
meeting of shareholders only such business may be conducted as has been brought
before the meeting by, or at the direction of, the Board or, in the case of an
Annual Meeting of Shareholders, by a shareholder who has given timely written
notice to the Secretary of the Company of such shareholder's intention to bring
such business before such meeting. Under the Bylaws, for any such shareholder
notice to be timely, such notice must be received by the Company in writing not
less than 60 days nor more than 90 days prior to the meeting, or in the event
that less than 70 days' notice or prior public disclosure of the date of the
Annual Meeting is given or made to shareholders, to be timely, notice by the
shareholder must be received not later than the close of business on the 10th
day following the day on which such notice of the date of the meeting or such
public disclosure was made. Under the Bylaws, a shareholder's notice must also
contain certain information specified in the Bylaws.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS HAS BEEN
MAILED TO ALL SHAREHOLDERS OF RECORD. SHAREHOLDERS, UPON WRITTEN REQUEST TO THE
INVESTOR RELATIONS DEPARTMENT OF THE COMPANY, 6 BRIGHTON ROAD, CLIFTON, NEW
JERSEY 07015, MAY RECEIVE, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE 1998 FISCAL YEAR.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of
no business that will be presented for consideration at the Annual Meeting other
than the items referred to above. Proxies in the enclosed form will be voted in
respect of any other business that is properly brought before the Annual Meeting
as recommended by the Board of Directors or, if no such recommendation is given,
in the discretion of the proxy holders.
PRELIMINARY COPY
LINENS 'N THINGS, INC.
PROXY
April 21, 1999
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF LINENS 'N THINGS, INC.
The undersigned hereby appoints Brian D. Silva, William T.
Giles and Denise Tolles, and each of them, with power of substitution, proxies
for the undersigned and authorizes each of them to represent and vote, as
designated, all of the shares of stock of Linens 'n Things, Inc. (the
"Company") which the undersigned may be entitled to vote at the Annual Meeting
of Shareholders of the Company to be held at the Company's headquarters at 6
Brighton Road, Clifton, New Jersey on April 21, 1999 and at any adjournment or
postponement of such meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO CONTRARY DIRECTION IS
MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 AND PROPOSAL 2. PLEASE VOTE
PROMPTLY.
(continued and to be signed on reverse side)
<PAGE>
[ X ] Please mark votes as in this example.
1. ELECTION OF TWO DIRECTORS.
To elect Norman Axelrod as director for a three-year term:
FOR WITHHELD
[ ] [ ]
To elect Charles C. Conaway as director for a three-year term:
FOR WITHHELD
[ ] [ ]
2. Proposal to increase authorized Common Stock to 135,000,000 shares.
FOR WITHHELD ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name or names appear
hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation, please print the
full corporate name and sign by president or other
authorized officer. If a partnership, please print the
full partnership name and sign by authorized person.
Signature________________________________________ Date: ________________, 1999
Signature________________________________________ Date: ________________, 1999
