LINENS 'N THINGS, INC.
 
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               EMPLOYMENT AGREEMENT FOR NORMAN AXELROD, AS AMENDED
 
       (ORIGINALLY EFFECTIVE AS OF OCTOBER 11, 2000 AND AS AMENDED THROUGH
                               NOVEMBER 29, 2004)
 
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                             LINENS 'N THINGS, INC.
 
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                     EMPLOYMENT AGREEMENT FOR NORMAN AXELROD
 
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1.    Definitions.........................................................    1
2.    Term of Employment..................................................    2
3.    Position, Duties and Responsibilities...............................    3
4.    Base Salary.........................................................    5
5.    Annual Incentive Awards.............................................    5
6.    Long-Term Stock Incentive Programs..................................    5
7.    Employee Benefit Programs...........................................    5
8.    Supplemental Executive Retirement Plan; Split Dollar Agreement......    7
9.    Disability..........................................................    7
10.   Reimbursement of Business and Other Expenses; Perquisites...........    8
11.   Termination of Employment...........................................    9
12.   Forfeiture Provisions...............................................   23
13.   Confidentiality; Cooperation with Regard to Litigation;
      Non-Disparagement Return of Company Materials.......................   24
14.   Non-competition.....................................................   26
15.   Non-solicitation of Employees.......................................   29
16.   Remedies............................................................   29
17.   Resolution of Disputes..............................................   29
18.   Indemnification.....................................................   30
19.   Excise Tax Gross-Up.................................................   31
20.   Effect of Agreement on Other Benefits...............................   33
21.   Assignability; Binding Nature.......................................   33
22.   Representation......................................................   33
23.   Entire Agreement....................................................   34
24.   Amendment or Waiver.................................................   34
25.   Severability........................................................   34
26.   Survivorship........................................................   34
27.   Beneficiaries/References............................................   34
28.   Governing Law/Jurisdiction..........................................   35
29.   Notices.............................................................   35
30.   Headings............................................................   35
31.   Counterparts........................................................   36
 
<PAGE>
 
                              EMPLOYMENT AGREEMENT
 
        AGREEMENT, originally made and entered into as of the 11th day of
October, 2000 and as amended through November 29, 2004, by and among Linens 'n
Things, Inc., a Delaware corporation (together with its successors and assigns,
the "Company"), and Norman Axelrod (the "Executive").
 
 
                              W I T N E S S E T H:
 
        WHEREAS, the Company desires to continue to employ Executive pursuant to
an agreement embodying the terms of such employment (this "Agreement") and
Executive desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of this Agreement.
 
        NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and Executive (individually a
"Party" and together the "Parties") agree as follows:
 
        1.      DEFINITIONS.
 
                (a)     "Award" shall have the meaning set forth in Section 12
                        below.
 
                (b)     "Base Salary" shall have the meaning set forth in
                        Section 4 below.
 
                (c)     "Board" shall have the meaning set forth in Section 3(a)
                        below.
 
                (d)     "Cause" shall have the meaning set forth in Section
                        11(b) below.
 
                (e)     "Change in Control" shall have the meaning set forth in
                        Section 11(c) below.
 
                (f)     "Committee" shall have the meaning set forth in Section
                        4 below.
 
                (g)     "Competition" shall have the meaning set forth in
                        Section 14(a) below.
 
                (h)     "Confidential Information" shall have the meaning set
                        forth in Section 13(c) below.
 
                (i)     "Constructive Termination Without Cause" shall have the
                        meaning set forth in Section 11(c) below.
 
<PAGE>
 
                (j)     "Effective Date" shall have the meaning set forth in
                        Section 2(a) below.
 
                (k)     "Fair Market Value" shall have the meaning set forth in
                        Section 11 below.
 
                (l)     "Forfeiture Event" shall have the meaning set forth in
                        Section 12 below.
 
                (m)     "Original Term of Employment" shall have the meaning set
                        forth in Section 2(a) below.
 
                (n)     "Renewal Term" shall have the meaning set forth in
                        Section 2(a) below.
 
                (o)     "Restriction Period" shall have the meaning set forth in
                        Section 14(b) below.
 
                (p)     "Retirement" shall have the meaning set forth in Section
                        11(f) below.
 
                (q)     "Target Performance" shall have the meaning set forth in
                        Section 11(a) below.
 
                (r)     "Severance Period" shall have the meaning set forth in
                        Section 11(c)(ii) below, except as provided otherwise in
                        Section 11(e) below.
 
                (s)     "Subsidiary" shall have the meaning set forth in Section
                        13(d) below.
 
                (t)     "Term of Employment" shall have the meaning set forth in
                        Section 2(a) below.
 
        2.      TERM OF EMPLOYMENT.
 
                (a)     The term of Executive's employment under this Agreement
shall commence immediately upon the original date of this agreement, October 11,
2000 (the "Effective Date") and, by reason of the within amendment effective as
of November 29, 2004, shall end on July 31, 2007 (the "Original Term of
Employment"), unless terminated earlier in accordance herewith. The Original
Term of Employment shall be automatically renewed for successive one-year terms
(the "Renewal Terms") unless either Executive or the Company delivers a written
non-renewal notice to the other party no less than 150 days prior to the
expiration of the Original Term of Employment or any Renewal Term, that
Executive or the Company, as the case may be, is electing to not renew this
Agreement beyond the expiration of the then current Term of Employment.
 
 
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<PAGE>
 
"Term of Employment" shall mean the Original Term of Employment and all Renewal
Terms.
 
                (b)     In the event that this Agreement is not renewed because
the Company has given the 150-day non-renewal notice as set forth in the
preceding paragraph and should such non-renewal notice result in the expiration
of the Term of Employment prior to Executive's 60th birthday, such non-renewal
shall be treated as a "Constructive Termination Without Cause" pursuant to
Section 11(c).
 
                (c)     In the event that Executive's employment with the
Company ceases at the end of the Original Term of Employment or any Renewal Term
because Executive (and not the Company) has given the non-renewal notice as set
forth in Section 2(a), then such termination of employment shall for all
purposes be treated as a "Voluntary Termination" by Executive for purposes of
Section 11(d), Section 12, and Section 14(b).
 
                (d)     Notwithstanding anything in this Agreement to the
contrary, at least one year prior to the expiration of the Original Term of
Employment, upon the written request of the Company or Executive, the Parties
shall meet to discuss this Agreement and may agree in writing to modify any of
the terms of this Agreement.
 
        3.      POSITION, DUTIES AND RESPONSIBILITIES.
 
                (a)     GENERALLY. Executive shall serve as Chief Executive
Officer and Chairman of the Board of Directors (the "Board") of the Company. For
so long as he is serving on the Board, Executive agrees to serve as a member of
any committee of the Board to which he is elected. During the Term of Employment
the Board will nominate Executive for election to the Board for terms
coterminous with the Term of Employment, unless otherwise elected by Executive.
In any and all such capacities, Executive shall report only to the Board.
Executive shall have and perform such duties, responsibilities, and authorities
as are customary for the chairman and chief executive officer of corporations of
similar size and businesses as the Company as they may exist from time to time
and as are consistent with such positions and status. Executive shall devote
substantially all of his business time and attention (except for periods of
vacation or absence due to illness), and his best efforts, abilities,
experience, and talent to the positions of Chairman of the Board and Chief
Executive Officer and for the Company's businesses, PROVIDED THAT Executive may
relinquish any or all of the positions of Chairman of the Board and Chief
Executive Officer at any time Executive chooses to do so upon 90 days advance
written notice to the Company, PROVIDED FURTHER that in the event that Executive
has relinquished all such officer positions with the Company, Executive agrees
to remain in the Company's employ as an employee in an appropriate non-officer
consultive capacity (including assisting in the transition to a successor CEO)
for at least one year, provided that such position as a non-officer shall not
prohibit Executive from rendering employment or other services to another entity
that is not in Competition (as defined in Section 14 below) with the Company
and, unless otherwise mutually agreed upon by the Company and Executive, such
non-officer position shall
 
 
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<PAGE>
 
not require a material portion of his time and such consultive services may be
rendered from such location as Executive may determine and PROVIDED FURTHER that
while the Executive is in such non-officer position the Company shall have no
right to terminate this Agreement (other than for "Cause") or to fail to renew
the Term of Employment for any period prior to Executive reaching age 60 (and
any Company attempt to so terminate or failure to renew prior to age 60 will be
treated as if it was a Termination without Cause at a time during the Term of
Employment when Executive was earning his greatest salary, annual incentive
compensation and long-term incentive compensation for purposes of Section
11(c)). In such event of Executive relinquishing all such officer positions,
Executive shall be entitled to continue to participate in the Company's insured
welfare benefit plans and programs on the same terms as other executive officers
of the Company (but not the SERP (as defined herein) and not the Split Dollar
Agreement (as defined herein) or its equivalent pursuant to Section 8) as if he
had remained employed by the Company as well as be entitled to a pro rata (based
on the period prior to relinquishing such officer positions) annual incentive
award and a pro rata (based on the period prior to relinquishing such officer
positions) long-term incentive award to the extent then outstanding in each case
based on actual Company performance for the applicable performance period(s)
(including Company performance while Executive is in such non-officer position)
and continued service vesting in all awards, stock options and deferred or
restricted stock or units while Executive is in such non-officer position), and
PROVIDED FURTHER that in the event Executive violates any of the provisions of
Section 13, 14 or 15 (subject to the cure periods expressly set forth therein),
all such rights shall immediately terminate effective as of the date of written
notice to Executive detailing such violation and PROVIDED THAT in the event
Executive undertakes full-time employment services to another employer such
welfare benefit participation will cease.
 
                (b)     OTHER ACTIVITIES. Anything herein to the contrary
notwithstanding, nothing in this Agreement shall preclude Executive from (i)
serving on the boards of directors of a reasonable number of other corporations
or the boards of a reasonable number of trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community affairs, and
(iii) managing his personal investments and affairs, PROVIDED THAT such
activities do not materially interfere with the proper performance of his duties
and responsibilities under this Agreement.
 
                (c)     PLACE OF EMPLOYMENT. Except as otherwise provided in
this Agreement, Executive's principal place of employment shall be the principal
corporate offices of the Company.
 
                (d)     RANK OF EXECUTIVE WITHIN COMPANY. As Chairman of the
Board and Chief Executive Officer of the Company, Executive shall be the
Company's highest-ranking executive.
 
 
                                       4
<PAGE>
 
        4.      BASE SALARY.
 
                Executive shall be paid an annualized salary, payable in
accordance with the regular payroll practices of the Company, of not less than
$875,000, subject to review for increase at the discretion of the Compensation
Committee (the "Committee") of the Board ("Base Salary") PROVIDED THAT in the
event that Executive relinquishes all of his officer positions including
Chairman of the Board and Chief Executive Officer and continues his employment
with the Company as a non-officer employee under Section 3(a), Executive shall
receive (in lieu of his Base Salary, annual incentive compensation and long-term
incentive compensation) remuneration in an amount and form equal to such amount
as may be reasonably and in good faith determined by the Board commensurate with
the services to be performed for the Company in such non-officer position, but
in all circumstances subject to a minimum amount not less than the amount and
form of remuneration then paid to the Company's non-employee directors, with
cash amounts paid in accordance with the Company's normal payroll practices.
 
        5.      ANNUAL INCENTIVE AWARDS.
 
                Executive shall participate in the Company's annual incentive
compensation plan with a target annual incentive award opportunity of no less
than 80% of Base Salary and a maximum annual incentive award opportunity of not
less than 160% of Base Salary.
 
        6.      LONG-TERM INCENTIVE PROGRAMS.
 
                (a)     GENERAL. Executive shall be eligible to participate in
any long-term incentive compensation programs then in effect for the senior
executive officers of the Company including cash and/or stock grants with or
without restrictions on a deferred or current basis with a target award
opportunity of not less than 35% of Base Salary, and stock option and/or
possible restricted or deferred stock grants.
 
                (b)     [Deleted]
 
        7.      EMPLOYEE BENEFIT PROGRAMS.
 
                (a)     GENERAL BENEFITS. During the Term of Employment as Chief
Executive Officer, Executive shall be entitled to participate in such employee
pension and welfare benefit plans and programs of the Company as are made
available to the Company's senior level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, health, medical, dental, long-term disability,
travel accident and life insurance plans. As a non-officer employee, the
Executive shall be entitled to participate, on the same terms as other executive
officers of the Company, in the Company's insured welfare benefit plans and
programs (but not the SERP (as defined herein) or the Split Dollar Agreement (as
defined herein) or its equivalent in accordance with Section 8.
 
 
                                       5
<PAGE>
 
                (b)     DEFERRAL OF COMPENSATION. To the extent permitted by
then applicable law, the Company shall implement deferral arrangements,
reasonably acceptable to Executive and the Company, permitting Executive to
elect to defer receipt, pursuant to written deferral election terms and forms
(the "Deferral Election Forms"), of all or a specified portion of (i) his annual
Base Salary and annual incentive compensation under Sections 4 and 5, (ii) any
long term incentive compensation which may be applicable and (iii) deferred or
restricted stock grants, and (iv) shares acquired upon exercise of stock options
to purchase Company common stock that are acquired in an exercise in which
Executive pays the exercise price by the surrender of previously acquired
shares, to the extent of the net additional shares otherwise issuable to
Executive in such exercise; PROVIDED, HOWEVER, that such deferrals shall not
reduce Executive's total cash compensation in any calendar year below the sum of
(i) the FICA maximum taxable wage base plus (ii) the amount needed, on an
after-tax basis, to enable Executive to pay the 1.45% Medicare tax imposed on
his wages in excess of such FICA maximum taxable wage base.
 
                In accordance with such duly executed Deferral Election Forms,
the Company shall credit to a bookkeeping account (the "Deferred Compensation
Account") maintained for Executive on the respective payment date or dates,
amounts equal to the compensation subject to deferral, such credits to be
denominated in cash if the compensation would have been paid in cash but for the
deferral or in shares if the compensation would have been paid in shares but for
the deferral. An amount of cash equal in value to all cash-denominated amounts
credited to Executive's account and a number of shares of Company common stock
equal to the number of shares credited to Executive's account pursuant to this
Section 7(b) shall be transferred as soon as practicable following such
crediting by the Company to, and shall be held and, if cash, invested by, an
independent trustee selected by the Company and reasonably acceptable to
Executive (a "Trustee") pursuant to a "rabbi trust" established by the Company
in connection with such deferral arrangement and as to which, if cash, the
Trustee shall make investments based on Executive's investment objectives
(including possible investment in publicly traded stocks and bonds, mutual
funds, and insurance vehicles). Thereafter, Executive's deferral accounts will
be valued by reference to the value of the assets of the "rabbi trust". The
Company shall pay all costs of administration or maintenance of the deferral
arrangement, without deduction or reimbursement from the assets of the "rabbi
trust."
 
                Except as otherwise provided under Section 11 or by applicable
law, in the event of Executive's termination of employment with the Company or
as otherwise determined by the Committee in the event of Executive's hardship,
upon such date(s) or event(s) set forth in the Deferral Election Forms
(including forms filed after deferral but before settlement in which Executive
may elect to further defer settlement), the Company shall promptly distribute to
the Executive any shares of Company common stock credited to the Executive's
deferred accounts and pay to the Executive cash equal to the value of any other
assets then credited to Executive's deferral accounts, less applicable
withholding taxes, and such distribution shall be deemed to fully settle such
accounts; PROVIDED, HOWEVER, that the Company may instead settle such accounts
by
 
 
                                       6
<PAGE>
 
directing the Trustee to distribute such other assets of the "rabbi trust." The
Company and Executive agree that compensation deferred pursuant to this Section
7(b) shall be fully vested and nonforfeitable (subject to Section 12); HOWEVER,
Executive acknowledges that his rights to the deferred compensation provided for
in this Section 7(b) shall be no greater than those of a general unsecured
creditor of the Company, and that such rights may not be pledged,
collateralized, encumbered, hypothecated, or liable for or subject to any lien,
obligation, or liability of Executive, or be assignable or transferable by
Executive, otherwise than by will or the laws of descent and distribution,
provided that Executive may designate one or more beneficiaries to receive any
payment of such amounts in the event of his death.
 
        8.      SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN; SPLIT DOLLAR AGREEMENT.
The Company hereby ratifies and confirms the terms of Executive's Supplemental
Executive Retirement Plan effective as of July 1, 1999 ("SERP"), and Executive's
Split Dollar Agreement with the Company dated as of December 20, 1999 ("Split
Dollar Agreement"), which are incorporated herein by reference, and the Company
hereby agrees to satisfy its obligations to Executive under the SERP and the
Split Dollar Agreement, PROVIDED HOWEVER, that due to limitations imposed by the
Sarbanes-Oxley Act of 2002, the Company has been legally unable to continue to
make its required premium payment obligations under the Split Dollar Agreement
beginning with the premium payment due in or about July 2003 and as a result is
pursuing an equivalent economic value for Executive reasonably acceptable to the
parties, with the Company acknowledging its obligation to provide such
equivalent economic value to Executive.
 
        9.      DISABILITY.
 
                (a)     During the Term of Employment, as well as during the
Severance Period, Executive shall be entitled to disability coverage as
described in this Section 9(a). In the event Executive becomes disabled, as that
term is defined under the Company's Long-Term Disability Plan, Executive shall
be entitled to receive disability payments pursuant to the Company's Long-Term
Disability Plan or otherwise, in place of his salary and annual incentive
compensation, beginning on the commencement date of his eligibility for the
Company's long-term disability benefits ("Commencement Date") and on a
participation basis equivalent to the other senior executives of the Company,
for a period beginning on the Commencement Date and ending with the earlier to
occur of (A) Executive's attainment of age 65 or (B) Executive's commencement of
retirement benefits from the Company in accordance with Section 11(f) below. If
(i) Executive ceases to be disabled during the Term of Employment (as determined
in accordance with the terms of the Long-Term Disability Plan), (ii) the
positions set forth in Section 3(a) are then vacant and were not relinquished by
Executive under Section 3(a) prior to such Disability and (iii) the Company
requests in writing that he resume such positions, he may elect to resume such
positions by written notice to the Company within 15 days after the Company
delivers its request. If he resumes such positions, he shall thereafter be
entitled to his Base Salary at the annual rate in effect on the Commencement
Date and, for the year he resumes his positions, a pro rata annual incentive
award. If he ceases to be
 
 
                                       7
<PAGE>
 
disabled during the Term of Employment and does not resume his positions
pursuant to the foregoing, he shall be treated as if he voluntarily terminated
his employment pursuant to Section 11(d) as of the date Executive ceases to be
disabled. If Executive is not offered such positions after he ceases to be
disabled during the Term of Employment and had not relinquished such positions
prior to such Disability under Section 3(a), he shall be treated as if his
employment was terminated Without Cause pursuant to Section 11(c) as of the date
Executive ceases to be disabled.
 
                (b)     Executive shall be entitled to a pro rata annual
incentive award then in effect for Executive for the year in which the
Commencement Date occurs based on 80% of Base Salary paid to him during such
year prior to the Commencement Date, payable in a lump sum not later than 15
days after the Commencement Date. Executive shall not be entitled to any annual
incentive award with respect to the period following the Commencement Date. If
Executive recommences his positions in accordance with Section 9(a), he shall be
entitled to a pro rata annual incentive award for the year he resumes such
positions and shall thereafter be entitled to annual incentive awards in
accordance with Section 5 hereof.
 
                (c)     Executive shall be entitled to a pro rata long term
incentive award as may then be in effect and outstanding for the Executive for
the period through the Commencement Date based on target performance, payable in
a lump sum not later than 15 days after the Commencement Date. Executive shall
not be entitled to any long term incentive award with respect to the period
following the Commencement Date. If Executive recommences his position in
accordance with Section 9(a), he shall be entitled to a pro rata long term
incentive award, to the extent then outstanding for the executive officers, for
the period in which he resumes such position and shall thereafter be entitled to
long term incentive awards in accordance with and subject to Section 6 hereof.
 
                (d)     During the period Executive is receiving disability
benefits pursuant to Section 9(a) above, he shall continue to be treated as an
employee for purposes of all employee benefits and entitlements in which he was
participating on the Commencement Date, including without limitation, the
benefits and entitlements referred to in Sections 6 and 7 above, except that
Executive shall not be entitled to receive any annual salary increases or any
new long-term incentive plan grants following the Commencement Date.
 
        10.     REIMBURSEMENT OF BUSINESS AND OTHER EXPENSES: PERQUISITES.
 
                (a)     Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, and the
Company shall promptly reimburse him for all such business expenses incurred in
connection therewith, subject to documentation in accordance with the Company's
policy. During the Term of Employment, the Company shall provide Executive with
personal financial and tax planning in accordance with terms adopted by the
Company.
 
 
                                       8
<PAGE>
 
                (b)     The Company shall pay all reasonable legal expenses up
to $27,500 incurred by Executive in connection with the negotiation of the 2004
amendment to this Agreement.
 
                (c)     Upon commencement of Executive's term as a non-officer
employee of the Company under Section 3(a), and upon commencement of Retirement
under Section 11(f), and in each case continuing until age 65, Executive shall
be entitled to the use of an appropriate executive office at the Company's
principal executive offices and a full-time secretary. Such entitlement shall
cease in the event the Executive undertakes full-time employment services to
another employer.
 
        11.     TERMINATION OF EMPLOYMENT.
 
                (a)     TERMINATION DUE TO DEATH. In the event Executive's
employment with the Company is terminated due to his death, his estate or his
beneficiaries, as the case may be, shall be entitled to and their sole remedies
under this Agreement shall be:
 
                        (i)     Base Salary through the date of death, which
                                shall be paid in a single lump sum not later
                                than 15 days following Executive's death;
 
                        (ii)    pro rata annual incentive award for the year in
                                which Executive's death occurs assuming that
                                Executive would have received an award equal to
                                80% of Base Salary for such year, which shall be
                                payable in a lump sum promptly (but in no event
                                later than 15 days) after his death;
 
                        (iii)   elimination of all restrictions on any
                                restricted stock or deferred stock awards
                                outstanding at the time of his death;
 
                        (iv)    immediate vesting of all outstanding stock
                                options and the right to exercise such stock
                                options for a period of one year following death
                                (or such longer period as may be provided in
                                stock options granted to other similarly
                                situated executive officers of the Company) or
                                for the remainder of the exercise period, if
                                less;
 
                        (v)     immediate vesting of any outstanding long-term
                                incentive awards previously granted and a pro
                                rata payment of any such awards based on Target
                                Performance, payable in a lump sum in cash or
                                stock promptly (but in no event later than 15
                                days) after his death. "Target Performance" for
                                purposes of this Agreement shall mean (i) the
                                actual performance for each completed year under
                                each applicable award, PLUS (ii) the "target"
                                performance for the then current year under each
                                applicable award;
 
 
                                       9
<PAGE>
 
                        (vi)    the balance of any incentive awards earned as of
                                December 31 of the prior year (but not yet
                                paid), which shall be paid in a single lump sum
                                not later than 15 days following Executive's
                                death;
 
                        (vii)   settlement of all deferred compensation
                                arrangements in accordance with Executive's duly
                                executed Deferral Election Forms; and
 
                        (viii)  other or additional benefits then due or earned
                                in accordance with applicable plans and programs
                                of the Company (including without limitation the
                                benefits payable under the SERP and the Split
                                Dollar Agreement).
 
                (b)     TERMINATION BY THE COMPANY FOR CAUSE.
 
                        (i)     "Cause" shall mean:
 
                                (A)     Executive's willful and material breach
                                        of Sections 13, 14 or 15 of this
                                        Agreement;
 
                                (B)     Executive is convicted of a felony
                                        involving moral turpitude; or
 
                                (C)     Executive engages in conduct that
                                        constitutes willful gross neglect or
                                        willful gross misconduct in carrying out
                                        his duties under this Agreement,
                                        resulting, in either case, in material
                                        harm to the financial condition or
                                        reputation of the Company.
 
For purposes of this Agreement, an act or failure to act on Executive's part
shall be considered "willful" if it was done or omitted to be done by him not in
good faith, and shall not include any act or failure to act resulting from any
incapacity of Executive.
 
                        (ii)    A termination for Cause shall not take effect
                                unless the provisions of this paragraph (ii) are
                                complied with. Executive shall be given written
                                notice by the Company of its intention to
                                terminate him for Cause, such notice (A) to
                                follow a good faith investigation into the
                                particular act or acts or failure or failures to
                                act that constitute the grounds on which the
                                proposed termination for Cause is based; (B) to
                                state in detail the particular act or acts or
                                failure or failures to act that constitute the
                                grounds on which the proposed termination for
                                Cause is based and (C) to be given within 90
                                days of the Company's learning of such act or
                                acts or failure or failures
 
 
                                       10
<PAGE>
 
                                to act. Executive shall have 20 days after the
                                date that such written notice has been given to
                                him in which to cure such conduct, to the extent
                                such cure is possible. If he fails to cure such
                                conduct, Executive shall then be entitled to a
                                hearing before the Committee of the Board at
                                which Executive is entitled to appear. Such
                                hearing shall be held within 25 days of such
                                notice to Executive, provided he requests such
                                hearing within 10 days of the written notice
                                from the Company of the intention to terminate
                                him for Cause. If, within five days following
                                such hearing, Executive is furnished written
                                notice by the Board confirming that, in its good
                                faith judgment, grounds for Cause on the basis
                                of the original notice exist, he shall thereupon
                                be terminated for Cause.
 
                        (iii)   In the event the Company terminates Executive's
                                employment for Cause, he shall be entitled to
                                and his sole remedies under this Agreement shall
                                be:
 
                                (A)     Base Salary through the date of the
                                        termination of his employment for Cause,
                                        which shall be paid in a single lump sum
                                        not later than 15 days following
                                        Executive's termination of employment;
 
                                (B)     any incentive awards earned as of
                                        December 31 of the prior year (but not
                                        yet paid), which shall be paid in a
                                        single lump sum not later than 15 days
                                        following Executive's termination of
                                        employment;
 
                                (C)     settlement of all deferred compensation
                                        arrangements in accordance with
                                        Executive's duly executed Deferral
                                        Election Forms; and
 
                                (D)     other or additional benefits then due or
                                        earned in accordance with applicable
                                        plans or programs of the Company
                                        (including without limitation the
                                        benefits payable under the SERP and the
                                        Split Dollar Agreement).
 
                (c)     TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION
WITHOUT CAUSE PRIOR TO A CHANGE IN CONTROL. In the event Executive's employment
with the Company is terminated without Cause (which termination shall be
effective as of the date specified by the Company in a written notice to
Executive), other than due to death, or in the event there is a Constructive
Termination Without Cause (as defined below), in either case prior to a Change
in Control (as defined below) Executive shall be entitled to and his sole
remedies under this Agreement shall be:
 
 
                                       11
<PAGE>
 
                        (i)     Base Salary through the date of termination of
                                Executive's employment, which shall be paid in a
                                single lump sum not later than 15 days following
                                Executive's termination of employment;
 
                        (ii)    Base Salary, at the annualized rate in effect on
                                the date of termination of Executive's
                                employment (or in the event a reduction in Base
                                Salary is a basis for a Constructive Termination
                                Without Cause, then the Base Salary in effect
                                immediately prior to such reduction), for a
                                period of 24 months following such termination
                                (the "Severance Period");
 
                        (iii)   pro rata annual incentive award for the year in
                                which termination occurs equal to 80% of Base
                                Salary (determined in accordance with Section
                                11(c)(ii) above) for such year, payable in a
                                lump sum promptly (but in no event later than 15
                                days) following termination;
 
                        (iv)    an amount equal to 80% of Base Salary
                                (determined in accordance with Section 11(c)(ii)
                                above) multiplied by 2, payable in equal monthly
                                installments over the Severance Period;
 
                        (v)     elimination of all restrictions on any
                                restricted stock or deferred stock awards
                                outstanding at the time of termination of
                                employment;
 
                        (vi)    any outstanding stock options which are unvested
                                shall vest and Executive shall have the right to
                                exercise any vested stock options during the
                                Severance Period in the case of options granted
                                prior to the Effective Date and in the case of
                                options granted after the Effective Date, for
                                the remainder of the exercise period;
 
                        (vii)   immediate vesting of all outstanding long-term
                                incentive awards and a pro rata payment of such
                                awards based on Target Performance, payable in a
                                cash lump sum promptly (but in no event later
                                than 15 days) following Executive's termination
                                of employment;
 
                        (viii)  the balance of any incentive awards earned as of
                                December 31 of the prior year (but not yet
                                paid), which shall be paid in a single lump sum
                                not later than 15 days following Executive's
                                termination of employment;
 
 
                                       12
<PAGE>
 
                        (ix)    settlement of all deferred compensation
                                arrangements in accordance with Executive's duly
                                executed Deferral Election Forms and the plan
                                documents (unless Executive has previously and
                                appropriately elected not to have such
                                settlement upon such a termination);
 
                        (x)     continued participation in all medical, health
                                and life insurance plans at the same benefit and
                                participation level at which he was
                                participating on the date of the termination of
                                his employment until the earlier of:
 
                                (A)     the date upon which Executive attains 65
                                        years of age, PROVIDED THAT the Company
                                        shall bear the cost of such insurance
                                        only during the 24 months following the
                                        date of termination of the Executive's
                                        employment; thereafter Executive shall
                                        reimburse the Company for the cost of
                                        such insurance; or
 
                                (B)     the date, or dates, he receives
                                        equivalent coverage and benefits under
                                        the plans and programs of a subsequent
                                        employer (such coverage and benefits to
                                        be determined on a coverage-by-coverage,
                                        or benefit-by-benefit, basis); provided
                                        that (1) if Executive is precluded from
                                        continuing his participation in any
                                        employee benefit plan or program as
                                        provided in this clause (x) of this
                                        Section 11(c), he shall receive cash
                                        payments equal on an after-tax basis to
                                        the cost to him of obtaining the
                                        benefits provided under the plan or
                                        program in which he is unable to
                                        participate for the period specified in
                                        this clause (x) of this Section 11(c),
                                        (2) such cost shall be deemed to be the
                                        lowest reasonable cost that would be
                                        incurred by Executive in obtaining such
                                        benefit himself on an individual basis,
                                        and (3) payment of such amounts shall be
                                        made quarterly in advance;
 
                        (xi)    24 months of additional age and service credit
                                for purposes of determining the amount
                                Executive's accrued benefits under the SERP
                                maintained by the Company, and immediate vesting
                                of any such benefits;
 
                        (xii)   a lump sum amount equal to the difference
                                (determined on an actuarial basis) in the
                                benefit Executive would have received under the
                                Split Dollar Agreement (or its equivalent under
                                Section 8) if the Company had continued to make
                                the required premium payments under such Split
                                Dollar Agreement for an additional 24 months;
                                and
 
 
                                       13
<PAGE>
 
                        (xiii)  other or additional benefits then due or earned
                                in accordance with applicable plans and programs
                                of the Company (including without limitation the
                                benefits payable under the SERP and the Split
                                Dollar Agreement (or its equivalent under
                                Section 8)).
 
                A termination without "Cause" shall mean Executive's employment
is terminated by the Company for any reason other than Cause (as defined in
Section 11(b)) or due to death.
 
                "Constructive Termination Without Cause" shall mean a
termination of Executive's employment at his initiative as provided in this
Section 11(c) following the occurrence, without Executive's written consent, of
one or more of the following events (except as a result of a prior termination):
 
                                (A)     a material diminution or change adverse
                                        to Executive effected by the Company and
                                        not cured by the Company within 30 days
                                        following written notice, in Executive's
                                        positions, titles, or offices as set
                                        forth in Section 3(a), status, rank,
                                        nature of responsibilities, or authority
                                        within the Company, or a removal of
                                        Executive from or any failure to elect
                                        or re-elect or, as the case may be,
                                        nominate Executive to any such positions
                                        or offices, including as a member of the
                                        Board but excluding any such change or
                                        diminution resulting from Executive's
                                        relinquishing any such positions under
                                        Section 3(a);
 
                                (B)     an assignment of any duties to Executive
                                        which are inconsistent with his status
                                        as Chairman of the Board and Chief
                                        Executive Officer of the Company and
                                        other positions held under Section 3(a)
                                        but excluding any such change resulting
                                        from Executive's relinquishing any such
                                        positions under Section 3(a);
 
                                (C)     a decrease in annual Base Salary or
                                        target annual incentive award
                                        opportunity below 80% of Base Salary but
                                        excluding any such decrease resulting
                                        from Executive's relinquishing any
                                        positions under Section 3(a);
 
 
                                       14
<PAGE>
 
                                (D)     any other failure by the Company to
                                        perform any material obligation under,
                                        or breach by the Company of any material
                                        provision of, this Agreement that is not
                                        cured within 30 days;
 
                                (E)     a relocation of the principal corporate
                                        offices of the Company outside a 35-mile
                                        radius of Clifton, New Jersey (unless
                                        Executive is, at the time of such
                                        relocation, a non-officer employee under
                                        Section 3(a)); or
 
                                (F)     any failure to secure the agreement of
                                        any successor corporation or other
                                        entity to the Company to fully assume
                                        the Company's obligations under this
                                        Agreement.
 
                A "Change in Control" shall be deemed to have occurred if:
 
                        (i)     any Person (other than the Company, any trustee
                                or other fiduciary holding securities under any
                                employee benefit plan of the Company, or any
                                company owned, directly or indirectly, by the
                                stockholders of the Company immediately prior to
                                the occurrence with respect to which the
                                evaluation is being made in substantially the
                                same proportions as their ownership of the
                                common stock of the Company) becomes the
                                Beneficial Owner (except that a Person shall be
                                deemed to be the Beneficial Owner of all shares
                                that any such Person has the right to acquire
                                pursuant to any agreement or arrangement or upon
                                exercise of conversion rights, warrants or
                                options or otherwise, without regard to the
                                sixty day period referred to in Rule 13d-3 under
                                the Exchange Act), directly or indirectly, of
                                securities of the Company or any Significant
                                Subsidiary (as defined below), representing 30%
                                or more of the combined voting power of the
                                Company's or such subsidiary's then outstanding
                                securities;
 
                        (ii)    during any period of two consecutive years,
                                individuals who at the beginning of such period
                                constitute the Board, and any new director
                                (other than a director designated by a person
                                who has entered into an agreement with the
                                Company to effect a transaction described in
                                clause (i), (iii), or (iv) of this paragraph)
                                whose election by the Board or nomination for
                                election by the Company's stockholders was
                                approved by a vote of at least two-thirds of the
                                directors then still in office who either were
                                directors at the beginning of the two-year
                                period or whose election or nomination for
                                election was
 
 
                                       15
<PAGE>
 
                                previously so approved but excluding for this
                                purpose any such new director whose initial
                                assumption of office occurs as a result of
                                either an actual or threatened election contest
                                (as such terms are used in Rule 14a-11 of
                                Regulation 14A promulgated under the Exchange
                                Act) or other actual or threatened solicitation
                                of proxies or consents by or on behalf of an
                                individual, corporation, partnership, group,
                                associate or other entity or Person other than
                                the Board, cease for any reason to constitute at
                                least a majority of the Board;
 
                        (iii)   the consummation of a merger or consolidation of
                                the Company or any subsidiary owning directly or
                                indirectly all or substantially all of the
                                consolidated assets of the Company (a
                                "Significant Subsidiary") with any other entity,
                                other than a merger or consolidation which would
                                result in the voting securities of the Company
                                or a Significant Subsidiary outstanding
                                immediately prior thereto continuing to
                                represent (either by remaining outstanding or by
                                being converted into voting securities of the
                                surviving or resulting entity) more than 50% of
                                the combined voting power of the surviving or
                                resulting entity outstanding immediately after
                                such merger or consolidation;
 
                        (iv)    the consummation of the sale or disposition of
                                all or substantially all of the consolidated
                                assets of the Company (other than such a sale or
                                disposition immediately after which such assets
                                will be owned directly or indirectly by the
                                stockholders of the Company in substantially the
                                same proportions as their ownership of the
                                common stock of the Company immediately prior to
                                such sale or disposition); or
 
                        (v)     any other event occurs which the Board
                                reasonably and in good faith determines would
                                materially alter the structure of the Company or
                                its ownership.
 
                For purposes of this definition:
 
                                (A)     The term "Beneficial Owner" shall have
                                        the meaning ascribed to such term in
                                        Rule 13d-3 under the Exchange Act
                                        (including any successor to such Rule).
 
                                (B)     The term "Exchange Act" means the
                                        Securities Exchange Act of 1934, as
                                        amended from time to time, or any
                                        successor act thereto.
 
 
                                       16
<PAGE>
 
                                (C)     The term "Person" shall have the meaning
                                        ascribed to such term in Section 3(a)(9)
                                        of the Exchange Act and used in Sections
                                        14(d) and 15(d) thereof, including
                                        "group" as defined in Section 15(d)
                                        thereof.
 
                (d)     VOLUNTARY TERMINATION. In the event of a termination of
employment by Executive on his own initiative after delivery of 10 business days
advance written notice, other than a termination due to death, a Constructive
Termination Without Cause, a Retirement pursuant to Section 11(f) below, or a
voluntary termination following a Change in Control within the 60-day period
described in Section 11(e) below, Executive shall have the same entitlements as
provided in Section 11(b)(iii) above for a termination for Cause, provided that
at the Company's election (the "Company Option"), furnished in writing to
Executive within 15 days following such notice of termination, the Company shall
in addition pay the Executive 180% of his Base Salary for a period of 12 months
following such termination in exchange for Executive not engaging in Competition
with the Company or any Subsidiary as set forth in Section 14(a) below (PROVIDED
THAT, if Executive is voluntarily terminating his employment from a non-officer
position assumed under Section 3(a), then his "Restriction Period" for purposes
of Competition with the Company will be determined in accordance with Section
14(b)). Notwithstanding any implication to the contrary, Executive shall not
have the right to terminate his employment with the Company during the Term of
Employment except in the event of a Constructive Termination Without Cause,
Retirement, voluntary termination following a Change in Control within the
60-day period described in Section 11(e) below, or a voluntary termination from
a non-officer position established under Section 3(a) following one year in such
non-officer position, and any voluntary termination of employment during the
Term of Employment in violation of this Agreement shall be considered a material
breach; provided however, if the Company elects to pay the Executive 180% of his
Base Salary in accordance with this Section 11(d), the Company shall waive any
and all claims it may have against Executive for any breach of this Agreement
relating to his voluntary termination of employment unless Executive is found by
a court of competent jurisdiction not to be in compliance with Section 14(a)
below; provided further, however, that notwithstanding anything contained in the
foregoing to the contrary, it is not the intention of the Company to waive any
claims it may have against any third parties relating to a voluntary termination
by Executive in violation of this Agreement.
 
                (e)     TERMINATION WITHOUT CAUSE; CONSTRUCTIVE TERMINATION
WITHOUT CAUSE OR VOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL. In the
event Executive's employment with the Company is terminated by the Company
without Cause (which termination shall be effective as of the date specified by
the Company in a written notice to Executive), other than due to death, or in
the event there is a Constructive Termination Without Cause (as defined above),
in either case within two years following a Change in Control (as defined
above), or in the event Executive elects within the 60-day period commencing six
months following a Change in Control to terminate his employment for any reason,
Executive shall be entitled to and his sole remedies under this Agreement shall
be:
 
 
                                       17
<PAGE>
 
                        (i)     Base Salary through the date of termination of
                                Executive's employment, which shall be paid in a
                                single lump sum not later than 15 days following
                                Executive's termination of employment;
 
                        (ii)    an amount equal to 2.99 times Executive's Base
                                Salary, at the annualized rate in effect on the
                                date of termination of Executive's employment
                                (or in the event a reduction in Base Salary is a
                                basis for a Constructive Termination Without
                                Cause, then the Base Salary in effect
                                immediately prior to such reduction), payable in
                                a cash lump sum promptly (but in no event later
                                than 15 days) following Executive's termination
                                of employment;
 
                        (iii)   pro rata annual incentive award for the year in
                                which termination occurs assuming that Executive
                                would have received an award equal to 80% of
                                Base Salary (determined in accordance with
                                Section 11(e)(ii) above) for such year, payable
                                in a cash lump sum promptly (but in no event
                                later than 15 days) following Executive's
                                termination of employment;
 
                        (iv)    an amount equal to 80% of such Base Salary
                                (determined in accordance with Section 11(e)(ii)
                                above) multiplied by 2.99, payable in a cash
                                lump sum promptly (but in no event later than 15
                                days) following Executive's termination of
                                employment;
 
                        (v)     elimination of all restrictions on any
                                restricted stock or deferred stock awards
                                outstanding at the time of termination of
                                employment;
 
                        (vi)    immediate vesting of all outstanding stock
                                options and the right to exercise vested stock
                                options granted prior to the Effective Date
                                during the Severance Period or for the remainder
                                of the exercise period, if less; options granted
                                after the Effective Date shall be exercisable
                                for the remainder of the exercise period;
 
                        (vii)   immediate vesting of all outstanding long-term
                                incentive awards and a pro rata payment of such
                                awards based on Target Performance, payable in a
                                lump sum in cash or stock promptly (but in no
                                event later than 15 days) following Executive's
                                termination of employment;
 
 
                                       18
<PAGE>
 
                        (viii)  the balance of any incentive awards earned as of
                                December 31 of the prior year (but not yet
                                paid), which shall be paid in a single lump sum
                                not later than 15 days following Executive's
                                termination of employment;
 
                        (ix)    settlement of all deferred compensation
                                arrangements in accordance with Executive's duly
                                executed Deferral Election Forms (unless
                                Executive has previously and appropriately
                                elected not to have such settlement upon such a
                                termination;
 
                        (x)     continued participation in all medical, health
                                and life insurance plans at the same benefit and
                                participation level at which he was
                                participating on the date of termination of his
                                employment until the earlier of:
 
                                (A)     the date upon which Executive attains 65
                                        years of age, PROVIDED THAT the Company
                                        shall bear the cost of such insurance
                                        until Executive's 60th birthday only;
                                        thereafter Executive shall reimburse the
                                        Company for the cost of such insurance;
                                        or
 
                                (B)     the date, or dates, he receives
                                        equivalent coverage and benefits under
                                        the plans and programs of a subsequent
                                        employer (such coverage and benefits to
                                        be determined on a coverage-by-coverage,
                                        or benefit-by-benefit, basis); provided
                                        that (1) if Executive is precluded from
                                        continuing his participation in any
                                        employee benefit plan or program as
                                        provided in this clause (x) of this
                                        Section 11(e), he shall receive cash
                                        payments equal on an after-tax basis to
                                        the cost to him of obtaining the
                                        benefits provided under the plan or
                                        program in which he is unable to
                                        participate for the period specified in
                                        this clause (x) of this Section 11(e),
                                        (2) such cost shall be deemed to be the
                                        lowest reasonable cost that would be
                                        incurred by Executive in obtaining such
                                        benefit himself on an individual basis,
                                        and (3) payment of such amounts shall be
                                        made quarterly in advance; and
 
                        (xi)    36 months additional age and service credit for
                                purposes of determining the amount Executive's
                                accrued benefits under the SERP maintained by
                                the Company, and immediate vesting of any such
                                benefits;
 
                        (xii)   a lump sum amount equal to the difference
                                (determined on an actuarial basis) in the
                                benefit Executive would have
 
 
                                       19
<PAGE>
 
                                received under the Split Dollar Agreement (or
                                its equivalent) if the Company had continued to
                                make the required premium payments under such
                                Split Dollar Agreement for the Severance Period;
                                and
 
                        (xiii)  other or additional benefits then due or earned
                                in accordance with applicable plans and programs
                                of the Company (including without limitation the
                                benefits payable under the SERP and the Split
                                Dollar Agreement (or its equivalent)).
 
For purposes of any termination pursuant to this Section 11(e), the term
"Severance Period" shall mean the period of 36 months following the termination
of Executive's employment.
 
                (f)     RETIREMENT. Upon Executive's Retirement (as defined
below), Executive shall be entitled to and his sole remedies under this
Agreement shall be:
 
                        (i)     Base Salary through the date of termination of
                                Executive's employment, which shall be paid in a
                                single lump sum not later than 15 days following
                                Executive's termination of employment;
 
                        (ii)    pro rata annual incentive award for the year in
                                which termination occurs (unless the Executive
                                is at the time of such Retirement a non-officer
                                employee under Section 3(a), in which case
                                Section 3(a) will control), based on performance
                                valuation at the end of such year and payable in
                                a cash lump sum promptly (but in no event later
                                than 15 days) thereafter;
 
                        (iii)   continued vesting (as if Executive remained
                                employed by the Company) of any restricted stock
                                or deferred stock awards outstanding at the time
                                of his termination of employment;
 
                        (iv)    continued vesting (as if Executive remained
                                employed by the Company) of all outstanding
                                stock options granted after the Effective Date
                                and the right to exercise such stock options for
                                the remainder of the exercise period; and
                                continued vesting of all outstanding options
                                granted prior to the Effective Date and the
                                right to exercise such stock options for a
                                period of one year following the later of the
                                date the options are fully vested or the
                                Executive's termination of employment (or such
                                longer period as may be provided in stock
                                options granted to other similarly situated
                                executive
 
 
                                       20
<PAGE>
 
                                officers of the Company), or for the remainder
                                of the exercise period, if less;
 
                        (v)     pro rata payment (based on actual service to the
                                date of Retirement) of any long-term incentive
                                awards previously granted to Executive and then
                                outstanding (unless the Executive is at the time
                                of such Retirement a non-officer employee under
                                Section 3(a), in which case Section 3(a) will
                                control), with such pro rata payment based on
                                valuation at the end of the applicable
                                performance period(s), and continued service
                                vesting (as if Executive remained employed by
                                the Company) in all such outstanding awards,
                                with such awards to be payable in lump sum in
                                cash or the Company's common stock (with or
                                without restrictions) promptly (but in no event
                                later than 15 days) after the latter of the
                                scheduled payment or vesting date for each such
                                award;
 
                        (vi)    the balance of any incentive awards earned as of
                                December 31 of the prior year (but not yet
                                paid), which shall be paid in a single lump sum
                                not later than 15 days following Executive's
                                termination of employment;
 
                        (vii)   settlement of all deferred compensation
                                arrangements in accordance with Executive's duly
                                executed Deferral Election Forms and the plan
                                documents (unless Executive has previously and
                                appropriately elected not to have such
                                settlement at such time;
 
                        (viii)  continued participation in all medical, health
                                and life insurance plans at the same benefit and
                                participation level at which he was
                                participating on the date of the termination of
                                his employment until the earlier of:
 
                                (A)     the date upon which Executive attains 65
                                        years of age, PROVIDED THAT the Company
                                        shall bear the cost of such insurance
                                        until Executive's 60th birthday only;
                                        thereafter Executive shall reimburse the
                                        Company for the cost of such insurance;
                                        or
 
                                (B)     the date, or dates, he receives
                                        substantially equivalent coverage and
                                        benefits under the plans and programs of
                                        a subsequent employer (such coverage and
                                        benefits to be determined on a
                                        coverage-by-coverage, or
                                        benefit-by-benefit, basis); PROVIDED
                                        THAT (1) if Executive is precluded from
                                        continuing his
 
 
                                       21
<PAGE>
 
                                        participation in any employee benefit
                                        plan or program as provided in this
                                        clause (viii) of this Section 11(f), he
                                        shall receive cash payments equal on an
                                        after-tax basis to the cost to him of
                                        obtaining the benefits provided under
                                        the plan or program in which he is
                                        unable to participate for the period
                                        specified in this clause (viii) of this
                                        Section 11(f), (2) such cost shall be
                                        deemed to be the lowest cost that would
                                        be incurred by Executive in obtaining
                                        such benefit himself on an individual
                                        basis, and (3) payment of such amounts
                                        shall be made quarterly in advance;
 
                        (ix)    other or additional benefits then due or earned
                                in accordance with applicable plans and programs
                                of the Company (including without limitation the
                                benefits payable under the SERP and the Split
                                Dollar Agreement or its equivalent).
 
For purposes of this Agreement, "Retirement" shall mean Executive's voluntary
termination of employment with the Company at the earlier of (i) attaining age
55 and 15 years of service with the Company (which shall include all of
Executive's years of service with Melville Corporation and which service began
in April 1988), and (ii) attaining age 60.
 
In the case of such Retirement, the Executive's "Restriction Period" for
purposes of engaging in Competition with the Company will be determined in
accordance with Section 14(b).
 
                (g)     Notwithstanding anything else herein to the contrary in
Sections 7, 10 or otherwise, distributions attributable to any deferred
compensation arrangements to be made to Executive may be delayed for up to 12
months solely to avoid adverse tax implications to Executive or the Company
under Section 4009A of the Internal Revenue Code of 1986 (the "Code").
 
                (h)     NO MITIGATION; NO OFFSET. In the event of any
termination of employment, Executive shall be under no obligation to seek other
employment; amounts due Executive under this Agreement shall not be offset by
any remuneration attributable to any subsequent employment that he may obtain.
 
                (i)     NATURE OF PAYMENTS. Any amounts due under this Section
11 are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
 
                (j)     NO FURTHER LIABILITY; RELEASE. In the event of
Executive's termination of employment, payment made and performance by the
Company in accordance with this Section 11 shall operate to fully discharge and
release the
 
 
                                       22
<PAGE>
 
Company and its directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives from any further
obligation or liability with respect to Executive's rights under this Agreement.
Other than payment and performance under this Section 11, the Company and its
directors, officers, employees, subsidiaries, affiliates, stockholders,
successors, assigns, agents and representatives shall have no further obligation
or liability to Executive or any other person under this Agreement in the event
of Executive's termination of employment. The Company shall have the right to
condition the payment of any severance or other amounts pursuant to this Section
11 upon the delivery by Executive to the Company of a release in substantially
the form attached hereto as Exhibit A releasing any and all claims Executive may
have against the Company and its directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and representatives
arising out of this Agreement.
 
        12.     FORFEITURE PROVISIONS.
 
                (a)     FORFEITURE OF STOCK OPTIONS AND OTHER AWARDS AND GAINS
REALIZED UPON PRIOR OPTION EXERCISES OR AWARD SETTLEMENTS. Unless otherwise
determined by the Committee, upon a termination of Executive's employment for
Cause, the Executive's engaging in "Competition" (as defined in Section 14(a))
with the Company or any Subsidiary or Executive's violation of any of the other
restrictive covenants contained in Section 13, 14 or 15 (each a "Forfeiture
Event") during the Term of Employment and for 24 months thereafter, all of the
following forfeitures will result:
 
                        (i)     The unexercised portion of any stock option,
                                whether or not vested, and any other Award not
                                then settled (except for an Award that has not
                                been settled solely due to an elective deferral
                                by Executive and otherwise is not forfeitable in
                                the event of any termination of Executive's
                                service) will be immediately forfeited and
                                canceled upon the occurrence of the Forfeiture
                                Event; and
 
                        (ii)    Executive will be obligated to repay to the
                                Company, in cash, within five business days
                                after demand is made therefor by the Company,
                                the total amount of Award Gain (as defined
                                herein) realized by Executive upon each exercise
                                of a stock option or settlement of an Award
                                (regardless of any elective deferral) that
                                occurred (A) during the period commencing with
                                the date that is 24 months prior to the
                                occurrence of the Forfeiture Event and the date
                                24 months after the Forfeiture Event, if the
                                Forfeiture Event occurred while Executive was
                                employed by the Company or a Subsidiary or
                                affiliate, or (B) during the period commencing
                                24 months prior to the date Executive's
                                employment by the Company terminated, and ending
                                12 months (or, in the event that the Forfeiture
                                Event is a breach of Section 15, 24 months)
                                after the date of such
 
 
                                       23
<PAGE>
 
                                termination, if the Forfeiture Event occurred
                                after Executive ceased to be so employed. For
                                purposes of this Section, the term "Award Gain"
                                shall mean (i), in respect of a given stock
                                option exercise, the product of (X) the Fair
                                Market Value per share of common stock at the
                                date of such exercise (without regard to any
                                subsequent change in the market price of shares)
                                minus the exercise price times (Y) the number of
                                shares as to which the stock option was
                                exercised at that date, and (ii), in respect of
                                any other settlement of an Award granted to
                                Executive, the Fair Market Value of the cash or
                                stock paid or payable to Executive (regardless
                                of any elective deferral) less any cash or the
                                Fair Market Value of any stock or property
                                (other than an Award or award which would have
                                itself then been forfeitable hereunder and
                                excluding any payment of tax withholding) paid
                                by Executive to the Company as a condition of or
                                in connection with such settlement.
 
For purposes of this Agreement, "Fair Market Value" shall mean as of any given
date, the closing sale price per share of the Company's common stock reported on
a consolidated basis for securities listed on the principal stock exchange or
market on which the common stock of the Company is traded on the date as of
which such value is being determined, or, if there is no sale on that day, then
on the last previous day on which a sale was reported; and "Award" shall mean
any cash award, stock option, stock appreciation right, restricted stock,
deferred stock (such as a restricted stock unit), bonus stock, dividend
equivalent, or other stock-based or performance-based award or similar award,
together with any related right or interest, granted to or held by Executive
(but excluding any annual cash incentive award which is payable on an annual
basis and is determined based entirely on a one-year (or less) performance
measurement period).
 
                (b)     COMMITTEE DISCRETION. The Committee may, in its
discretion, waive in whole or in part the Company's right to forfeiture under
this Section, but no such waiver shall be effective unless evidenced by a
writing signed by a duly authorized officer of the Company. In addition, the
Committee may impose additional conditions on Awards, by inclusion of
appropriate provisions in the document evidencing or governing any such Award.
 
        13.     CONFIDENTIALITY: COOPERATION WITH REGARD TO LITIGATION;
NON-DISPARAGEMENT; RETURN OF COMPANY MATERIALS.
 
                (a)     During the Term of Employment and thereafter, Executive
shall not, without the prior written consent of the Company, disclose to anyone
(except in good faith in the ordinary course of business to a person who will be
advised by Executive to keep such information confidential) or make use of any
Confidential Information, except in the performance of his duties hereunder or
when required to do so by legal process, by any governmental agency having
supervisory authority over the business of the
 
 
                                       24
<PAGE>
 
Company or by any administrative or legislative body (including a committee
thereof) that requires him to divulge, disclose or make accessible such
information. In the event that Executive is so ordered, he shall give prompt
written notice to the Company in order to allow the Company the opportunity to
object to or otherwise resist such order.
 
                (b)     During the Term of Employment and thereafter, Executive
shall not disclose the existence or contents of this Agreement beyond what is
disclosed in the proxy statement or documents filed with the government unless
and to the extent such disclosure is required by law, by a governmental agency,
or in a document required by law to be filed with a governmental agency or in
connection with enforcement of his rights under this Agreement. In the event
that disclosure is so required, Executive shall give prompt written notice to
the Company in order to allow the Company the opportunity to object to or
otherwise resist such requirement. This restriction shall not apply to such
disclosure by him to members of his immediate family, his tax, legal or
financial advisors, any lender, or tax authorities, or to potential future
employers to the extent necessary, each of whom shall be advised not to disclose
such information.
 
                (c)     "Confidential Information" shall mean (i) all
information concerning the business of the Company or any Subsidiary including
information relating to any of their products, product development, trade
secrets, customers, suppliers, finances, and business plans and strategies, (ii)
all documents marked "Confidential," and (iii) information regarding the
organization structure and the names, titles, status, compensation, benefits and
other proprietary employment-related aspects of the employees of the Company and
the Company's employment practices. Excluded from the definition of Confidential
Information is information (A) that is or becomes part of the public domain,
other than through the breach of this Agreement by Executive or (B) regarding
the Company's business or industry properly acquired by Executive in the course
of his career as an executive in the Company's industry and independent of
Executive's employment by the Company. For this purpose, information known or
available generally within the trade or industry of the Company or any
Subsidiary shall be deemed to be known or available to the public.
 
                (d)     "Subsidiary" shall mean any corporation controlled
directly or indirectly by the Company.
 
                (e)     Executive agrees to cooperate with the Company, during
the Term of Employment and thereafter (including following Executive's
termination of employment for any reason), by making himself reasonably
available to testify on behalf of the Company or any Subsidiary in any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
and to assist the Company, or any Subsidiary, in any such action, suit, or
proceeding, by providing information and meeting and consulting with the Board
or its representatives or counsel, or representatives or counsel to the Company,
or any Subsidiary as requested; provided, however that the same does not
materially interfere with his then current professional activities. The Company
agrees to reimburse Executive, on an after-tax basis, for all expenses actually
incurred in connection with his provision of testimony or assistance.
 
 
                                       25
<PAGE>
 
                (f)     Executive agrees that, during the Term of Employment and
thereafter (including following Executive's termination of employment for any
reason) he will not make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take
any action which may, directly or indirectly, disparage the Company or any
Subsidiary or their respective officers, directors, employees, advisors,
businesses or reputations. The Company agrees that, during the Term of
Employment and thereafter (including following Executive's termination of
employment for any reason) the Company will not make statements or
representations, or otherwise communicate, directly or indirectly, in writing,
orally, or otherwise, or take any action which may directly or indirectly,
disparage Executive or his business or reputation. Notwithstanding the
foregoing, nothing in this Agreement shall preclude either Executive or the
Company from making truthful statements or disclosures that are required by
applicable law, regulation, or legal process.
 
                (g)     Upon any termination of employment, Executive agrees to
deliver any Company property and any documents, notes, drawings, specifications,
computer software, data and other materials of any nature pertaining to any
Confidential Information that are held by Executive and will not take any of the
foregoing, or any reproduction of any of the foregoing, that is embodied an any
tangible medium of expression, provided that the foregoing shall not prohibit
Executive from retaining his personal phone directories and rolodexes.
 
                (h)     Executive hereby represents and warrants to Company
that, as of the Effective Date, he does not have in his personal possession,
outside of his office, any documents constituting Confidential Information.
 
        14.     NON-COMPETITION.
 
                (a)     During the Restriction Period (as defined in Section
14(b) below), Executive shall not engage in Competition with the Company or any
Subsidiary. "Competition" shall mean engaging in any activity, except as
provided below, for a Competitor of the Company or any Subsidiary, whether as an
employee, consultant, principal, agent, officer, director, partner, shareholder
(except as a less than one percent shareholder of a publicly traded company) or
otherwise. A "Competitor" shall mean (i) Bed Bath & Beyond, Spencer Gifts, Inc.,
J.C. Penny's, Target, Ross Stores, Inc., The TJX Companies, Inc., Kohls
Corporation, Federated Department Stores, Inc. or The May Department Stores
Company (and any successor or successors thereto); (ii) any home textiles or
housewares store, specialty store or other retailer if $50 million or more of
its annual gross sales revenues (in either case, based on the most recent
quarterly or annual financial statements available) are derived from the sale of
home textiles, housewares or other goods or merchandise of the types sold in the
Company's (or any Subsidiary's) stores; (iii) any corporation or other entity
whether independent or owned, funded or controlled by any other entity, engaged
or organized for the purpose of engaging, in whole or in part, in the sale of
home textiles, housewares or other goods or merchandise of the types sold in the
Company's (or any Subsidiary's) stores; (iv) any
 
 
                                       26
<PAGE>
 
business that provides buying office services to any business or group of
businesses referred to above, or (v) any business (in the U.S. or any country in
which the Company or any Subsidiary operates a store or stores) which is in
material competition with the Company or any Subsidiary or division thereof and
in which Executive's functions would be substantially similar to Executive's
"officer" functions with the Company.
 
                (b)     For the purposes of this Section 14, "Restriction
Period" shall mean the period beginning with the Effective Date and the
"Restriction Period" will end as follows:
 
                        (i)     in the case of a termination of Executive's
                                employment without Cause or a Constructive
                                Termination Without Cause or a voluntary
                                termination by Executive within the 60-day
                                period commencing six months following a Change
                                in Control, the Restriction Period shall
                                terminate immediately upon Executive's
                                termination of employment;
 
                        (ii)    in the case of a termination of Executive's
                                employment for Cause, the Restriction Period
                                will end 24 months from the date of such
                                termination;
 
                        (iii)   in the case of a voluntary termination of
                                Executive's employment pursuant to Section
                                11(d), prior to Executive assuming a non-officer
                                position under Section 3(a) (or Executive, prior
                                to assuming a non-officer position under Section
                                3(a), provides notice of non-renewal of the Term
                                of Employment under Section 2), followed by the
                                Company's election to exercise the Company
                                Option and to pay the Executive (and subject to
                                the payment of) 180% of his Base Salary as
                                provided in Section 11(d) above, the Restriction
                                Period will end on the first anniversary of such
                                termination;
 
                        (iv)    in the case of a voluntary termination of the
                                Executive's employment pursuant to Section
                                11(d), prior to Executive assuming a non-officer
                                position under Section 3(a) (or Executive, prior
                                to assuming a non-officer position under Section
                                3(a), provides notice of non-renewal of the Term
                                of Employment under Section 2), which is not
                                followed by the Company's election to exercise
                                the Company Option and to pay the Executive such
                                180% of Base Salary, the Restriction Period will
                                end on the date of such termination;
 
                        (v)     in the case of a voluntary termination of
                                Executive's employment under Section 11(d) at a
                                time when Executive is serving in a non-officer
                                position assumed pursuant to Section 3(a), or in
                                the case of Executive's Retirement at a
 
 
                                       27
<PAGE>
 
                                time when Executive is serving in a non-officer
                                position assumed pursuant to Section 3(a), and
                                where in either case Executive had served in
                                that non-officer position for at least one year,
                                the Restriction Period will end on the date of
                                such voluntary termination or Retirement;
 
                        (vi)    in the case of a voluntary termination of
                                Executive's employment under Section 11(d) at a
                                time when Executive is serving in a non-officer
                                position assumed pursuant to Section 3(a), or in
                                the case of Executive's Retirement at a time
                                when Executive is serving in a non-officer
                                position assumed pursuant to Section 3(a), and
                                where in either case Executive has not served at
                                least one year in such non-officer position, the
                                Restriction Period will end on the date that is
                                the one year anniversary of when the Executive
                                initially assumed the non-officer position under
                                Section 3(a) (subject to the continued payment
                                during such Restriction Period of the same
                                compensation Executive had been receiving in the
                                non-officer position); or
 
                        (vii)   in the case of a Retirement pursuant to Section
                                11(f), where Executive had not, prior to such
                                Retirement, assumed a non-officer position under
                                Section 3(a), the Company shall have the Company
                                Option, to be furnished in writing to Executive
                                within 15 days after receiving written notice of
                                such Retirement, to pay the Executive 180% of
                                his Base Salary for a period of 12 months
                                following such Retirement for Executive not to
                                engage in Competition with the Company or any
                                Subsidiary as set forth in Section 14(a), in
                                which case the "Restriction Period" will end on
                                the first anniversary of the date of Retirement,
                                and if the Company does not exercise such
                                Company Option, the "Restriction Period" will
                                end on the date of Retirement.
 
        15.     NON-SOLICITATION OF EMPLOYEES.
 
                During the period beginning with the Effective Date and ending
24 months following the termination or other cessation of Executive's employment
for any reason, Executive shall not induce employees of the Company or any
Subsidiary to terminate their employment; provided, however, that the foregoing
shall not be construed to prevent Executive from engaging in generic nontargeted
advertising for employees generally. During such period, Executive shall not
hire, either directly or through any employee, agent or representative, any
employee of the Company or any Subsidiary or any person who was employed by the
Company or any Subsidiary within 180 days of such hiring.
 
 
                                       28
<PAGE>
 
        16.     REMEDIES.
 
                In addition to whatever other rights and remedies the Company
may have at equity or in law, if Executive breaches any of the provisions
contained in Sections 13, 14 or 15 above, the Company (a) shall have its rights
under Section 12 of this Agreement, (b) shall have the right to immediately
terminate all payments and benefits due under this Agreement and (c) shall have
the right to seek injunctive relief (without posting bond or other security and
without the need to prove damages). Executive acknowledges that such a breach of
Sections 13, 14 or 15 would cause irreparable injury and that money damages
would not provide an adequate remedy for the Company; provided, however, the
foregoing shall not prevent Executive from contesting the issuance of any such
injunction on the ground that no violation or threatened violation of Sections
13, 14 or 15 has occurred.
 
        17.     RESOLUTION OF DISPUTES.
 
                Any controversy or claim or defense arising out of or relating
to this Agreement or any breach or asserted breach hereof or questioning or
defending the validity and binding effect hereof arising under or in connection
with this Agreement, other than seeking injunctive relief under Section 16,
shall be resolved by binding arbitration, to be held in Newark, New Jersey in
accordance with the rules and procedures of the Rules for the Resolution of
Employment Disputes of the American Arbitration Association, except that
disputes arising under or in connection with Sections 13, 14 and 15 above shall
be submitted to the federal or state courts in the State of New Jersey. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts and benefits due
Executive under this Agreement. All reasonable costs and expenses (including
fees and disbursements of counsel) incurred by Executive pursuant to this
Section 17 shall be paid on behalf of or reimbursed to Executive promptly by the
Company; PROVIDED, HOWEVER, that in the event the arbitrator(s) determine(s)
that any of Executive's litigation assertions or defenses are determined to be
in bad faith or frivolous, no such reimbursements related to such assertions or
defenses shall be due Executive, and any such expenses already paid to Executive
shall be immediately returned by Executive to the Company. Nothing contained in
this Agreement shall constitute a waiver of Executive's right to binding
arbitration hereunder.
 
        18.     INDEMNIFICATION.
 
                (a)     COMPANY INDEMNITY. The Company agrees that if Executive
is made a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company or any Subsidiary or is or was serving at the request of
the Company or any Subsidiary as a director, officer, member, employee or agent
of another corporation, partnership, joint venture,
 
 
                                       29
<PAGE>
 
trust or other enterprise, including service with respect to employee benefit
plans, whether or not the basis of such Proceeding is Executive's alleged action
in an official capacity while serving as a director, officer, member, employee
or agent, Executive shall be indemnified and held harmless by the Company to the
fullest extent legally permitted or authorized by the Company's certificate of
incorporation or bylaws or resolutions of the Company's Board or, if greater, by
the laws of the State of Delaware against all cost, expense, liability and loss
(including, without limitation, attorney's fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if he has ceased to be a
director, member, officer, employee or agent of the Company or other entity and
shall inure to the benefit of Executive's heirs, executors and administrators.
The Company shall advance to Executive all reasonable costs and expenses to be
incurred by him in connection with a Proceeding within 20 days after receipt by
the Company of a written request for such advance. Such request shall include an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses. The provisions of this Section 18(a) shall not be deemed
exclusive of any other rights of indemnification to which Executive may be
entitled or which may be granted to him, and it shall be in addition to any
rights of indemnification to which he may be entitled under any policy of
insurance.
 
                (b)     NO PRESUMPTION REGARDING STANDARD OF CONDUCT. Neither
the failure of the Company (including its Board, independent legal counsel or
stockholders) to have made a determination prior to the commencement of any
proceeding concerning payment of amounts claimed by Executive under Section
18(a) above that indemnification of Executive is proper because he has met the
applicable standard of conduct, nor a determination by the Company (including
its Board, independent legal counsel or stockholders) that Executive has not met
such applicable standard of conduct, shall create a presumption that Executive
has not met the applicable standard of conduct.
 
                (c)     LIABILITY INSURANCE. The Company agrees to continue and
maintain a directors and officers' liability insurance policy covering Executive
to the extent the Company provides such coverage for its other executive
officers.
 
        19.     EXCISE TAX GROSS-UP.
 
                If Executive becomes entitled to one or more payments (with a
"payment" including, without limitation, the vesting of an option or other
non-cash benefit or property), whether pursuant to the terms of this Agreement
or any other plan, arrangement, or agreement with the Company or any affiliated
company (the "Total Payments"), which are or become subject to the tax imposed
by Section 4999 of the Code (or any similar tax that may hereafter be imposed)
(the "Excise Tax"), the Company shall pay to Executive at the time specified
below an additional amount (the "Gross-up Payment") (which shall include,
without limitation, reimbursement for any
 
 
                                       30
<PAGE>
 
penalties and interest that may accrue in respect of such Excise Tax) such that
the net amount retained by Executive, after reduction for any Excise Tax
(including any penalties or interest thereon) on the Total Payments and any
federal, state and local income or employment tax and Excise Tax on the Gross-up
Payment provided for by this Section 19, but before reduction for any federal,
state, or local income or employment tax on the Total Payments, shall be equal
to the sum of (a) the Total Payments, and (b) an amount equal to the product of
any deductions disallowed for federal, state, or local income tax purposes
because of the inclusion of the Gross-up Payment in Executive's adjusted gross
income multiplied by the highest applicable marginal rate of federal, state, or
local income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax:
 
                        (i)     The Total Payments shall be treated as
                                "parachute payments" within the meaning of
                                Section 280G(b)(2) of the Code, and all "excess
                                parachute payments" within the meaning of
                                Section 280G(b)(1) of the Code shall be treated
                                as subject to the Excise Tax, unless, and except
                                to the extent that, in the written opinion of
                                independent compensation consultants, counsel or
                                auditors of nationally recognized standing
                                ("Independent Advisors") selected by the Company
                                and reasonably acceptable to Executive, the
                                Total Payments (in whole or in part) do not
                                constitute parachute payments, or such excess
                                parachute payments (in whole or in part)
                                represent reasonable compensation for services
                                actually rendered within the meaning of Section
                                280G(b)(4) of the Code in excess of the base
                                amount within the meaning of Section 280G(b)(3)
                                of the Code or are otherwise not subject to the
                                Excise Tax;
 
                        (ii)    The amount of the Total Payments which shall be
                                treated as subject to the Excise Tax shall be
                                equal to the lesser of (A) the total amount of
                                the Total Payments or (B) the total amount of
                                excess parachute payments within the meaning of
                                Section 280G(b)(1) of the Code (after applying
                                clause (i) above); and
 
                        (iii)   The value of any non-cash benefits or any
                                deferred payment or benefit shall be determined
                                by the Independent Advisors in accordance with
                                the principles of Sections 280G(d)(3) and (4) of
                                the Code.
 
For purposes of determining the amount of the Gross-up Payment, Executive shall
be deemed (A) to pay federal income taxes at the highest marginal rate of
federal income taxation for the calendar year in which the Gross-up Payment is
to be made; (B) to pay any applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which the Gross-up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state
 
 
                                       31
<PAGE>
 
and local taxes if paid in such year (determined without regard to limitations
on deductions based upon the amount of Executive's adjusted gross income); and
(C) to have otherwise allowable deductions for federal, state, and local income
tax purposes at least equal to those disallowed because of the inclusion of the
Gross-up Payment in Executive's adjusted gross income. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company at the time that the amount of such reduction in Excise Tax
is finally determined (but, if previously paid to the taxing authorities, not
prior to the time the amount of such reduction is refunded to Executive or
otherwise realized as a benefit by Executive) the portion of the Gross-up
Payment that would not have been paid if such Excise Tax had been applied in
initially calculating the Gross-up Payment, plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-up Payment), the Company shall make an additional Gross-up Payment in
respect of such excess (plus any interest and penalties payable with respect to
such excess) at the time that the amount of such excess is finally determined.
 
                The Gross-up Payment provided for above shall be paid on the
30th day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; PROVIDED, HOWEVER, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Executive, payable on the
fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up
Payment is made, the amount of each Gross-up Payment shall be computed so as not
to duplicate any prior Gross-up Payment. The Company shall have the right to
control all proceedings with the Internal Revenue Service that may arise in
connection with the determination and assessment of any Excise Tax and, at its
sole option, the Company may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with any taxing authority in
respect of such Excise Tax (including any interest or penalties thereon);
PROVIDED, HOWEVER, that the Company's control over any such proceedings shall be
limited to issues with respect to which a Gross-up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest any other issue
raised by the Internal Revenue Service or any other taxing authority. Executive
shall cooperate with the Company in any proceedings relating to the
determination and assessment of any Excise Tax and shall not take any position
or action that would materially increase the amount of any Gross-Up Payment
hereunder.
 
 
                                       32
<PAGE>
 
        20.     EFFECT OF AGREEMENT ON OTHER BENEFITS.
 
                Except as specifically provided in this Agreement, the existence
of this Agreement shall not be interpreted to preclude, prohibit or restrict
Executive's participation in any other employee benefit or other plans or
programs in which he currently participates.
 
        21.     ASSIGNABILITY: BINDING NATURE.
 
                This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors, heirs (in the case of Executive)
and permitted assigns. No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred in connection with the sale or
transfer of all or substantially all of the assets of the Company, provided that
the assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Company further agrees that, in the
event of a sale or transfer of assets as described in the preceding sentence, it
shall take whatever action it legally can in order to cause such assignee or
transferee to expressly assume the liabilities, obligations and duties of the
Company hereunder. No rights or obligations of Executive under this Agreement
may be assigned or transferred by Executive other than his rights to
compensation and benefits, which may be transferred only by will or operation of
law, except as provided in Section 27 below.
 
        22.     REPRESENTATION.
 
                The Company represents and warrants that it is fully authorized
and empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization.
 
        23.     ENTIRE AGREEMENT.
 
                This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and, as of the date of
this amendment, supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the Parties with
respect thereto, including, without limitation any prior change in control
agreement between the Parties, except for certain rights regarding Executive's
stock options granted after October 1996 and prior to October 11, 2000, which
shall be governed by the terms of Executive's 1996 employment agreement as if
such 1996 employment agreement remained in full force and effect.
 
 
                                       33
<PAGE>
 
        24.     AMENDMENT OR WAIVER.
 
                No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by Executive and an authorized
officer of the Company. Except as set forth herein, no delay or omission to
exercise any right, power or remedy accruing to any Party shall impair any such
right, power or remedy or shall be construed to be a waiver of or an
acquiescence to any breach hereof. No waiver by either Party of any breach by
the other Party of any condition or provision contained in this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by Executive or an authorized officer
of the Company, as the case may be.
 
        25.     SEVERABILITY.
 
                In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
 
        26.     SURVIVORSHIP.
 
                The respective rights and obligations of the Parties hereunder
shall survive any termination of Executive's employment to the extent necessary
to the intended preservation of such rights and obligations.
 
        27.     BENEFICIARIES/REFERENCES.
 
                Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death by
giving the Company written notice thereof. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
 
        28.     GOVERNING LAW/JURISDICTION.
 
                This Agreement shall be governed by and construed and
interpreted in accordance with the laws of New Jersey without reference to
principles of conflict of laws. Subject to Section 17, the Company and Executive
hereby consent to the jurisdiction of any or all of the following courts for
purposes of resolving any dispute under this Agreement: (i) the United States
District Court for New Jersey or (ii) any of the courts of the State of New
Jersey. The Company and Executive further agree that any service of process or
notice requirements in any such proceeding shall be satisfied if the rules of
such court relating thereto have been substantially satisfied. The
 
 
                                       34
<PAGE>
 
Company and Executive hereby waive, to the fullest extent permitted by
applicable law, any objection which it or he may now or hereafter have to such
jurisdiction and any defense of inconvenient forum.
 
        29.     NOTICES.
 
                Any notice given to a Party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address as
such Party may subsequently give such notice of:
 
                If to the Company:      Linens 'n Things, Inc.
                                        6 Brighton Road
                                        Clifton, New Jersey 07015-5108
                                        Attention: Secretary
 
                If to Executive:        Mr. Norman Axelrod
                                        c/o Linens 'n Things, Inc.
                                        6 Brighton Road
                                        Clifton, New Jersey 07015-5108
 
        30.     HEADINGS.
 
                The headings of the Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
 
 
                                       35
<PAGE>
 
        31.     COUNTERPARTS.
 
                This Agreement may be executed in two or more counterparts.
 
 
        IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
 
 
                                            LINENS 'N THINGS, INC.
 
 
                                            By:_______________________________
                                            Name:
                                            Title:
 
                                            EXECUTIVE
 
                                            ----------------------------------
                                            Norman Axelrod
 
 
                                       36
<PAGE>
 
                                    EXHIBIT A
 
                                 GENERAL RELEASE
                                 ---------------
 
        THIS GENERAL RELEASE (the "Agreement") is made and entered into as of
the __ day of ________, ____, by and between Linens 'n Things, Inc., a Delaware
corporation (together with its successors and assigns, the "Company"), and
___________ (the "Executive").
 
        WHEREAS, the Company and the Executive have previously entered into, and
executed, an Employment Agreement, dated as of ______________ (the "Employment
Agreement"), a copy of which is attached hereto and incorporated herein; and
 
        WHEREAS, the Executive's employment with the Company has been terminated
[with/without "Cause" prior to/after a "Change in Control" (as such terms are
defined in the Employment Agreement)], effective as of _________________ (the
"Date of Termination");
 
        NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, it is agreed as follows:
 
        1.      The Executive, on behalf of himself and his respective heirs,
executors, administrators and assigns (hereinafter the "Releasors"), in
consideration for good and valuable consideration received from the Company,
which is acknowledged to be in addition to any payments or benefits which he
would otherwise be entitled to receive and the sufficiency of which is hereby
acknowledged, hereby releases and forever discharges the Company and each of its
parent, subsidiary, predecessor, and successor or affiliated companies, and each
of its or their past and present officers, directors, employees, agents,
attorneys, benefit committees, trustees, fiduciaries, plans, and trusts, and the
respective heirs, executors, administrators, successors and assigns of each of
the foregoing (hereinafter the "Releasees"), from any and all actions, causes of
action, demands, suits and claims, in law or in equity, whether now known or
unknown which he
 
 
                                       37
<PAGE>
 
ever had, now has, or could have, including any and all claims arising out of or
relating in any way to the Executive's employment with the Company and the
termination of that employment. The claims released include, but are not limited
to:
 
                (a)     all statutory claims including claims arising under the
New Jersey Law Against Discrimination, the Conscientious Employee Protection
Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act, the Americans With Disabilities Act,
the Family and Medical Leave Act, the New Jersey Family Leave Act, the
Rehabilitation Act, and the Employee Retirement Income Security Act;
 
                (b)     all claims arising under the United States or New Jersey
Constitutions;
 
                (c)     all claims arising under any Executive Order or derived
from or based upon any federal regulations;
 
                (d)     all common law claims including claims for wrongful
discharge, public policy claims, retaliation claims, claims for breach of an
express or implied contract (including but not limited to any claims arising in
connection with the Employment Agreement and any amendments or supplements
thereto), claims for breach of an implied covenant of good faith and fair
dealing, intentional or negligent infliction of emotional distress, defamation,
conspiracy, loss of consortium, tortious interference with contract or
prospective economic advantage, and negligence;
 
                (e)     all claims for any compensation including back wages,
front pay, bonuses or awards, severance, fringe benefits, stock options, profit
sharing, pay in lieu of notice of termination of employment, reinstatement,
retroactive seniority, pension benefits, or any other form of economic loss,
except as set forth in the Employment Agreement;
 
 
                                       38
<PAGE>
 
                (f)     all claims for personal injury, including physical
injury, mental anguish, emotional distress, pain and suffering, embarrassment,
humiliation, damage to name or reputation, liquidated damages, and punitive
damages; and
 
                (g)     all claims for costs and attorneys' fees on behalf of
any attorneys who may have represented him.
 
Nothing contained in this paragraph is intended, nor shall be construed, as
releasing any future claims arising after the date of execution of this
Agreement; however, this Agreement in conjunction with the Employment Agreement
is intended to set forth the complete agreement of the parties with respect to
the Executive's employment relationship with the Company through and including
the Date of Termination, and this paragraph is intended to release all claims in
connection therewith and the termination of employment.
 
        2.      The Executive represents that he has not filed any charge,
claim, or complaint of any kind against the Releasees, and he further covenants
and represents that no such charge, claim or complaint will be filed against the
Releasees with respect to any matter released under Paragraph 1 of this
Agreement. Notwithstanding any of the foregoing provisions of this Agreement,
the Executive does not release the Company from any rights he has or any
obligations of the Company to him (including but not limited to the obligation
to continue to indemnify him and not to disparage him) to the extent set forth
in the Employment Agreement. Nothing contained herein shall prohibit the parties
to this Agreement from (a) bringing any action to enforce the terms of this
Agreement or the Employment Agreement or challenge the validity of this
Agreement or the Employment Agreement; (b) filing a timely charge or complaint
with the Equal Employment Opportunity Commission ("EEOC") regarding the validity
of this Agreement; (c) filing a timely charge or complaint with the EEOC or
participating in any investigation or
 
 
                                       39
<PAGE>
 
proceeding conducted by the EEOC or any other governmental agency (although the
Executive agrees that he has waived any right to personal recovery or personal
injunctive relief in connection with any such charge or complaint), or (d)
participating or testifying in any action if compelled to do so by judicial
subpoena, court order, or as otherwise required by state or federal law.
 
        Without limiting the foregoing, the Executive expressly acknowledges
that all stock options heretofore granted by the Company to the Executive,
including all of the vested options, are expressly subject to all of the terms
and conditions of Section 12 of the Employment Agreement and are subject to (i)
the Executive having materially complied, during his Term of Employment, with
Section 14 ("Non-Competition") of the Employment Agreement and (ii) the
Executive's continued compliance with Section 13 ("Confidentiality; Cooperation
with Regard to Litigation; Non-Disparagement; Return of Company Materials") and
Section 15 ("Non-Solicitation") of the Employment Agreement during his Term of
Employment and for periods stated therein following the Date of Termination. The
Executive acknowledges and agrees that the provisions of Sections 12, 13, 14 and
15 of the Employment Agreement are valid and enforceable against the Executive
and, in the event of any breach of the terms thereof, the Company would be
entitled to all of the rights and remedies set forth in the Employment Agreement
as well as all such other rights and remedies as may arise or exist at law or in
equity.
 
        3.      The Executive agrees to reasonably cooperate with and to assist
the Releasees in connection with the preparation and defense, including but not
limited to personal appearances and testimony, of any claim, action or
litigation in which any Releasee is, or may become, a party and which relates in
any way to matters or actions within the possible scope of the Executive's
responsibilities while in the employment of the Company. In seeking the
Executive's assistance, the Company will make reasonable efforts to accommodate
the Executive's other
 
 
                                       40
<PAGE>
 
personal and business obligations. The Company agrees to reimburse the Executive
for reasonable and necessary out of pocket expenses incurred while so
cooperating and assisting the Releasees. The Executive further agrees that he
will advise the Company immediately upon becoming aware of any claim or
litigation connected in any way to the Company or to any of the Releasees in
which he is required or requested to appear as a witness or made a party.
 
        4.      (a)     Notwithstanding any of the foregoing, the Executive
agrees that all of his duties and responsibilities set forth in the Employment
Agreement (including, but not limited to, the provisions relating to
confidentiality and non-solicitation, but excluding the duties and
responsibilities set forth in Section 3 of the Employment Agreement), as well as
the Company's remedies in the event of a breach of such duties and
responsibilities, shall remain in full force and effect.
 
                (b)     The Executive and the Company agree that the Company's
remedy at law for breach of the Executive's obligations under subsection 4(a)
above will be inadequate. In the event of a breach, in addition to all other
rights under the Employment Agreement (including, without limitation, Section 12
of the Employment Agreement) or at law or in equity, the Company shall be
released from its obligations under this Agreement and all of the Executive's
stock options referenced herein shall immediately cease, expire, terminate and
be of no further force or effect.
 
        5.      This Agreement shall be construed in accordance with the laws of
New Jersey.
 
        6.      The Executive acknowledges that the only consideration he has
received for executing this Agreement is that set forth herein. No other
promise, inducement, threat, agreement or understanding of any kind or
description has been made with him or to him or anyone else to cause him to
enter into this Agreement.
 
 
                                       41
<PAGE>
 
        7.      This Agreement reflects the entire agreement reached among the
parties and supersedes all prior agreements which are hereby made null and void,
except that the Employment Agreement (except as otherwise provided herein)
continues in full force and effect. There is no other agreement except as stated
herein. It may not be changed unless the change is in writing and signed by the
Executive and by a duly authorized representative of the Company or its
successor.
 
        8.      The Executive is advised to consult with an attorney before
signing this Agreement. He represents that he has carefully read and fully
understands all of the provisions of this Agreement, that he has had an
opportunity to review and discuss it with an attorney of his choosing if he
wished to do so, and that he is voluntarily executing this Agreement without
duress or coercion
 
        9.      The Executive is hereby advised that he is permitted a period of
twenty-one (21) days to review and consider this Agreement before signing it. He
understands that he is free to use as much of the twenty-one day period as he
wishes or considers necessary before signing this Agreement. The Executive is
further advised that he may revoke his signature within seven (7) days of
signing by delivering written notice of revocation marked "Personal and
Confidential" to the Senior Vice President, Human Resources, Linens `n Things,
Inc., Six Brighton Road, Clifton, New Jersey. It is understood and agreed that
the benefits of this Agreement will not become effective until seven (7) days
have passed from the date of execution of this Agreement by the Executive, at
which point he will no longer be able to revoke his signature, and this
Agreement will become binding and effective.
 
 
                                       42
<PAGE>
 
        10.     The parties agree that any claim or dispute arising out of or
relating to this Agreement will be settled in the same manner as is set forth in
Section 16 of the Employment Agreement.
 
LINENS 'N THINGS, INC.                          EXECUTIVE
 
By:________________________                     ___________________________
Name:
Title:
 
Dated:_______________, ____                     Dated:_______________, ____
 
 
 
                                       43
 
</TEXT>
</DOCUMENT>