SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Furniture Brands International, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY
FURNITURE BRANDS
INTERNATIONAL,INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of the stockholders of Furniture Brands
International, Inc. will be held at 10 a.m. on Tuesday, April 29,
1997, at the Rihga Royal Hotel, 151 West 54th Street, New York, New
York, for the following purposes:
I. to elect thirteen directors;
II. to consider and act upon a proposal to
increase the shares reserved for issuance
under the Furniture Brands 1992 Stock
Option Plan;
III. to consider and act upon a proposal to adopt the Furniture
Brands International, Inc. Executive Incentive Plan;
IV. to ratify the selection of independent auditors;
and
V. to transact such other business as may
properly come before the meeting.
Stockholders of record at the close of business on March 7, 1997, will
be entitled to receive notice of and to vote during the 1997 annual
meeting and during any adjournment or adjournments thereof.
By order of the Board of Directors,
/s/ Lynn Chipperfield
Lynn Chipperfield,
Vice-President and Secretary
St. Louis, Missouri, March __, 1997.
IMPORTANT
Whether or not you plan to attend the meeting, please complete, date
and sign the enclosed proxy form, and return it PROMPTLY
in the enclosed envelope, which requires no postage if
mailed in the United States.<PAGE>
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors ("Board")
of Furniture Brands International, Inc. ("Company"), 101 South Hanley
Road, St. Louis, Missouri 63105, for use during the 1997 annual
meeting of stockholders and at any adjournments thereof, for the
purposes set forth in the accompanying notice of annual meeting of
stockholders. The cost of the solicitation will be borne by the
Company and will consist primarily of printing, postage and handling,
including the expenses of brokers, nominees and other fiduciaries in
forwarding proxy materials to beneficial owners; and directors,
officers and other employees of the Company may also solicit proxies
personally or by telephone. In addition, the Company has engaged
Morrow & Co. to assist in the solicitation from brokers, bank nominees
and institutional holders for a fee of $5,000 plus out-of-pocket
expenses. The notice of meeting, this proxy statement and the form of
proxy are expected to be mailed to stockholders on or about March 17,
1997. A copy of the Company's Annual Report containing financial
statements for the calendar year ended December 31, 1996, has been
forwarded to all registered stockholders under separate cover.
Voting Procedure
Stockholders of record at the close of business on March 7, 1997
("record date") are entitled to vote during the 1997 annual meeting
and may cast one vote for each share of the Company's common stock
("Common Stock") held on the record date on each matter that may
properly come before the meeting. On the record date there were
__________ shares of Common Stock outstanding.
The holders of a majority of the outstanding shares of Common
Stock must be present or represented at the meeting for there to be a
quorum for the conduct of business. If a quorum is present and/or
represented at the meeting, then the thirteen nominees for director
who receive the highest numbers of votes of the votes cast will be
elected, and a majority of the votes cast will be required to approve
the amendment to the Furniture Brands 1992 Stock Option Plan, to adopt
the Furniture Brands International, Inc. Executive Incentive Plan, to
ratify the selection of independent auditors and to take action on
such other matters as may properly come before the meeting. Shares
represented by proxies which are marked "withheld" as applied to
voting for directors and "abstain" as to the approval of the amendment
to the Furniture Brands 1992 Stock Option Plan, the adoption of the
Furniture Brands International, Inc. Executive Incentive Plan, the
ratification of auditors, or to deny discretionary authority on any
other matters will be counted as shares present for purposes of
determining the presence of a quorum; such shares will also be
treated as shares present and entitled to vote, which will have the
same effect as a vote against any such other matters. Shares
represented by proxy will be voted as directed on the proxy forms and,
if no direction is given, will be voted in the election of directors
for the persons nominated by the Board, to approve the amendment to<PAGE>
the Furniture Brands 1992 Stock Option Plan, to adopt the Furniture
Brands International, Inc. Executive Incentive Plan, for ratification
of the selection of independent auditors and in the best judgment of
the persons named in the proxies on such other matters that may
properly come before the meeting. Any proxy given by a stockholder
may be revoked at any time prior to its use by execution of a later
dated proxy, by a personal vote at the meeting, or by written notice
to the Secretary of the Company.
Security Ownership
Table 1 below sets forth information regarding the firms that
have reported beneficial ownership, including sole voting and
investment power except as otherwise indicated, of more than 5% of the
Common Stock.
Table 1
Shares Percent
Class of Beneficially of
Name and Address Stock Owned (a) Class(a)
----------------------------------------------------------------------
Apollo Investment Fund,L.P.(b)
c/o CICB Bank and Trust
Company (Cayman) Limited
Edward Street, Georgetown,
Grand Cayman, Cayman Islands
British West Indies;
and
Lion Advisors, L.P.(b) Common 23,233,120(b) 37.6%
Two Manhattanville Road
Purchase, NY 10577
J. P. Morgan & Co. Incorporated Common 5,094,852(c) 8.3%
60 Wall Street
New York, NY 10260
FMR Corp.(d) Common 4,135,000(d) 6.7%
82 Devonshire Street
Boston, MA 02109
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(a) Shares beneficially owned, above and below, are as of January
31, 1997 and as defined by the Securities and Exchange
Commission ("SEC")Rule 13d-3 which provides in part that persons
are deemed the beneficial owners of securities if they have or
share the power to vote or dispose of the securities or if they
have the right to acquire the securities within the next sixty
days. Accordingly, included, above and below, in shares
beneficially owned are shares of Common Stock that may be
purchased upon exercise of outstanding Series 1 Warrants and
exercisable stock options, and such shares as may be so
purchased were deemed to be outstanding for purposes of
calculating percentages of outstanding shares.
(b) Includes (i) 11,474,519 shares and (ii) warrants to purchase
145,439 shares beneficially held by Apollo Investment Fund, L.P.
("Apollo") and (iii) 11,467,780 shares and (iv) warrants to
purchase 145,382 shares beneficially held by Lion Advisors, L.P.
("Lion Advisors") for the benefit of an investment account under
management over which Lion Advisors has sole voting and
investment power. Lion Advisors is affiliated with Apollo
Advisors, L.P. ("Apollo Advisors"), the managing general partner
of Apollo, a securities investment fund. The Apollo Directors,
identified below, are associated with Apollo and Lion Advisors.
See footnote (a) to Table 2.
(c) Sole voting power as to 4,384,752 shares and sole investment
power as to 5,094,852 shares.
(d) FMR Corp. exercises sole investment power over 4,045,900 shares
through its wholly-owned subsidiary, Fidelity Management &
Research Company, a regulated investment advisor and exercises
sole voting and investment power over 89,100 shares through its
wholly-owned subsidiary, Fidelity Management Trust Company, an
investment manager.
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Table 2 below sets forth information regarding the beneficial
ownership of Common Stock by directors, nominees for directors,
executive officers named in the Summary Compensation Table below
("Named Executive Officers"), and all directors and executive officers
as a group (20 persons) as of January 31, 1997. Except as noted
below, all such persons possessed sole voting and investment power
with respect to the shares listed. An asterisk (*) in the column
listing the percentage of class indicates that the person
beneficially owned less than 1% of the Common Stock as of January 31,
1997.
Table 2
Directors, Nominees Shares
for Directors and Class of Beneficially Percent of
Named Executive Officers Stock Owned (a)(b) Class
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L. D. Black Common 23,233,120 37.6%
M. S. Gross Common 23,233,120 37.6
J. J. Hannan Common 23,233,120 37.6
J. J. Harris Common 23,233,120 37.6
W. G. Holliman Common 105,000 *
B. A. Karsh Common 388,915 *
B. B. Kincaid Common 130,000 *
J. H. Kissick Common 23,233,120 37.6
D. E. Lasater Common 5,271 *
L. M. Liberman Common 7,328 *
R. B. Loynd Common 271,400 *
M. J. Rowan Common 23,233,120 37.6
J. J. Ryan III Common 0 *
F. B. Starr Common 40,000 *
K. S. Tyler, Jr. Common 38,808 *
M. D. Weiner Common 23,233,120 37.6
Directors and
Executive Officers
as a group
(20 persons) Common 24,387,642 39.0
---------------<PAGE>
(a) The shares listed as beneficially owned by Messrs. Black, Gross,
Hannan, Harris, Kissick, Rowan and Weiner (collectively "Apollo
Directors") are the shares and warrants identified in Table 1
above as beneficially held by Apollo and Lion Advisors, with
which the Apollo Directors are associated, and each Apollo
Director disclaims personal pecuniary interest in said shares
and warrants; the shares listed as beneficially owned by
Messrs. Holliman, Kincaid and Starr consist of exercisable stock
options to purchase such shares; the shares listed as
beneficially owned by Mr. Karsh consist of 388,915 shares, all
of which are beneficially owned by The TCW Group, Inc., with
which Mr. Karsh has a partnership arrangement, and Mr. Karsh
disclaims personal pecuniary interest in said shares; the shares
listed as beneficially owned by Mr. Liberman consist of 5,000
shares owned directly and 2,328 shares owned in trust; the
shares listed as beneficially owned by Mr. Loynd consist of
21,400 shares and exercisable stock options to purchase 250,000
additional shares; the shares listed as beneficially owned by
Mr. Tyler consist of 58 shares, with respect to which Mr. Tyler
has shared investment power only, and exercisable stock options
to purchase 38,750 additional shares.
(b) The shares listed as beneficially owned by directors and
executive officers as a group consist of 23,367,321 shares,
warrants to purchase 290,821 additional shares and exercisable
stock options to purchase 729,500 additional shares.
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I. Election Of Directors
Nominees
Thirteen directors are to be elected during the 1997 annual
meeting, to serve, subject to their earlier death, resignation or
removal, for terms of one year, ending at the 1998 annual meeting, or
until their successors are elected and qualify. Certain information
regarding the thirteen nominees is presented below. Should any nominee
become unable or unwilling to serve, an event not anticipated to
occur, proxies (except proxies marked to the contrary) will be voted
for another person designated by the Board unless the Board shall have
reduced the number of directors to be elected.
Company
Name, Age, Principal Occupation Director
or Position, Other Directorships Since
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Leon D. Black, 45 1992
Officer and director of Apollo
Capital Management, Inc. (a)
Director of Big Flower Press, Inc.,
Converse Inc., Culligan Water
Technologies, Inc., Samsonite
Corporation, Telemundo Group, Inc.
and Vail Resorts, Inc.
Michael S. Gross, 35 1992
Officer of Apollo Capital Management, Inc. (a)
Director of Breuners Home Furnishings, Inc.,
Converse Inc., Florsheim Group, Inc.,
Proffitts, Inc. and UROHEALTH, Inc.
John J. Hannan, 44 1992
Officer and director of Apollo Capital
Management, Inc. (a)
Director of Aris Industries, Inc.,
Converse Inc., Florsheim Group, Inc.
and United Auto Group, Inc.
Joshua J. Harris, 32 1995
Officer of Apollo Capital Management, Inc. (a)
Director of Breuners Home Furnishings, Inc.,
Converse Inc., and Florsheim Group, Inc.
Wilbert G. Holliman, 59 1996
President and Chief Executive Officer of the
Company
Director of BanCorpSouth, Inc.
Bruce A. Karsh, 41 1992
President and Principal of Oaktree Capital
Management, LLC
Director of Littelfuse, Inc.
John H. Kissick, 55 1992
Officer of Lion Capital Management, Inc. (a)
Director of Continental Graphics
Holdings, Inc., Converse Inc., Florsheim
Group, Inc. and Food 4 Less Holdings, Inc.
Donald E. Lasater, 71 1970
Retired, formerly Chairman of the Board
and Chief Executive Officer of
Mercantile Bancorporation, Inc., a bank
holding company
Director of A. P. Green Industries, Inc.
Lee M. Liberman, 75 1985
Retired from and currently a consultant to
Laclede Gas Company, a gas public utility,
of which he was formerly Chairman of the
Board and Chief Executive Officer
Director of CPI Corporation, D.T. Industries,
Inc. and Falcon Products Company
Richard B. Loynd, 69 1987
Chairman of the Board of the Company (b)
Director of Converse Inc., Emerson Electric Co.,
and Florsheim Group, Inc.
Marc J. Rowan, 35 1996
Officer of Apollo Capital Management, Inc. (a)
Director of Culligan Water Technologies, Inc.,
Farley, Inc., Samsonite Corporation and Vail
Resorts, Inc.
John J. Ryan III, 69 1996
Financial Advisor
Director of Evergreen Resources Inc. and
Vail Resorts, Inc.
Michael D. Weiner, 44 1996
Officer of Apollo Capital Management, Inc. (a)
Director of Applause, Inc., Capital Apartment
Properties, Inc., Continental Graphics
Holdings, Inc. and Florsheim Group, Inc.
-------------------------
(a) Apollo Advisors. Each of the Apollo Directors, other than Mr.
Kissick and Mr. Weiner, is a limited partner of Apollo Advisors
and each holds a comparable position with Lion Capital
Management, Inc., a related company, which is the general partner
of Lion Advisors. Mr. Kissick is a consultant to Apollo Capital.
(b) In 1991, a voluntary petition for reorganization under Chapter 11
of the U.S. Bankruptcy Code was filed on behalf of the Company.
A Chapter 11 Plan of Reorganization became effective August 3,
1992, on which date the Company emerged from Chapter 11.
-------------------------
Each of the director nominees has held the same position or other
executive positions with the same employer during the past five years
except Mr. Karsh who has been associated with Oaktree Capital
Management, Inc. since 1995 and, prior thereto, he was Managing
Director of Trust Company of the West.
Compensation and Organization of Board of Directors
There were six meetings of the Board during the year ended
December 31, 1996, and all nominees who were directors during 1996
were present for at least 75% of the meetings of the Board and
committees of the Board on which they served. Each director who is
not an employee of the Company or of a subsidiary of the Company is
paid a monthly fee of $2,000 and a fee of $1,000 plus expenses for
each meeting of the Board attended. In addition, for attending a
meeting of a committee of the Board, each is paid a fee of $700 plus
expenses if the director is a member of the committee or $950 plus
expenses if the director is the Chairman of the committee. Such fees
are not paid to directors who are employees of the Company or a
subsidiary of the Company.<PAGE>
In addition, the Company has a retirement plan for non-employee
directors. Under the plan, a director who is not an employee of the
Company or of a subsidiary of the Company and who has reached age 62
or older and has served as a director for at least five years will,
after termination of service as a director, receive for life a
percentage of the monthly fee for directors in effect at the time of
termination of service. Such percentage is 50% for five years'
service and increases 10% for each additional year of service to 100%
for ten or more years' service.
The Board has a number of standing committees, including an Audit
Committee and an Executive Compensation and Stock Option Committee.
The Board does not currently have a Nominating Committee.
The Audit Committee, which currently consists of Mr. Liberman,
Chairman, and Messrs. Lasater and Karsh, and which met four times
during the year ended December 31, 1996: recommends the selection and
retention of independent accountants; reviews auditing and financial
accounting and reporting matters, the adequacy of internal accounting
controls and asset security, audit fees and expenses, and compliance
with the code of corporate conduct; and counsels regarding auditing
and financial accounting and reporting matters.
The Executive Compensation and Stock Option Committee, which
currently consists of Mr. Lasater, Chairman, and Messrs. Gross, Karsh
and Kissick, and which met four times during the year ended December
31, 1996: reviews and recommends compensation of officers and
directors; administers supplementary retirement, performance incentive
and stock option plans; and counsels regarding compensation of other
key employees, management development and succession, and major
personnel matters.
Certain Business Relationships
The Company is a party to a Consulting Agreement with Apollo
Advisors pursuant to which Apollo Advisors provides corporate
advisory, financial and other consulting services to the Company.
Fees under the Agreement are payable at an annual rate of $500,000
plus out-of-pocket expenses for a term ending December 31, 1997 and
the Consulting Agreement is automatically renewable for successive
one-year terms unless terminated by the Board. The Company has also
granted registration rights to Apollo with regard to its Common Stock.
Executive Compensation
The following table shows compensation awarded to, earned by or
paid to the Chief Executive Officer and the four most highly
compensated executive officers of the Company other than the Chief
Executive Officer who were serving at December 31, 1996.<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
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Annual Compensation / Awards /
---------------------------------------------/---------------/
/ Other / / All
/ Annual / Securities / Other
Name and / Salary Bonus Compensation / Underlying / Compensation
Position Year / $ $ $ / Options # / $(a)
------------------------------------------------------------------------------------------------------
Wilbert G. Holliman 1996 130,000 1,189,765 0 250,000 35,626
President and Chief 1995 120,000 938,417 0 0 35,757
Executive Officer(b) 1994 100,000 1,019,781 0 50,000 36,708
Richard B. Loynd 1996 710,000 514,324 0 0 71,730
Chairman of the Board 1995 683,000 945,384 0 0 70,647
1994 678,742 426,875 0 0 72,865
Brent B. Kincaid 1996 282,453 260,000 0 50,000 5,114
President, Broyhill 1995 266,667 223,077 0 0 5,006
Furniture Industries, 1994 246,604 208,258 0 50,000 5,015
Inc. (c)
Frederick B. Starr 1996 289,235 80,140 0 200,000 0
President, Thomasville 1995 284,400 179,819 0 0 0
Furniture Industries, 1994 268,800 184,589 0 0 0
Inc. (c)
K. Scott Tyler, Jr. 1996 170,000 372,695 0 50,000 28,242
President, The Lane 1995 155,000 284,175 0 0 28,242
Company, Incorpora- 1994 140,000 327,771 0 50,000 28,242
ted (c)
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(a) Amounts shown for 1996 consist of the following: life insurance premiums for Mr. Loynd $71,730;
annual contribution to the Broyhill Furniture Industries, Inc. Profit Sharing Retirement Plan for
Mr. Kincaid $4,814; "split dollar" life insurance premiums, substantial percentages of which will
be recovered at age 65 or death of the executive,for Mr. Tyler $28,242; and a matching contribution
of $300 to a 401(k) savings plan for Mr. Kincaid.
(b) Mr. Holliman has an Employment Agreement with the Company for a return of three years beginning on
January 1, 1997 at an initial salary of $750,000 per year with an initial target incentive bonus of
50% of base salary under the Furniture Brands International, Inc. Executive Incentive Plan. If
Mr. Holliman serves three years, at age 65 he will be entitled to a bonus payment of $1 million per year
for three years.<PAGE>
(c) Messrs. Kincaid, Starr and Tyler have employment agreements with Broyhill Furniture Industries,
Inc., Thomasville Furniture Industries, Inc. and The Lane Company, Incorporated, respectively,
beginning on August 1, 1966 (the "Effective Date") for the greater of three years or one year from
the date each is terminated other than for cause or as the result of death or disability. Each
shall be entitled to receive an annual base salary equal to his annual base salary on the Effective
Date and annual cash bonus potential equal to the level in existence on the Effective Date.
-------------------------<PAGE>
</TABLE>
Executive Compensation and Stock Option Committee
Report on Executive Compensation
Among its responsibilities, the Executive Compensation and Stock
Option Committee ("Committee") of the Company's Board of Directors
("Board") reviews the compensation of the executive officers of the
Company and the officers of its primary operating companies and makes
recommendations to the Board concerning compensation matters for
executive officers. The Committee also administers the Company's
stock option program. The Committee consists entirely of outside
directors.
In its deliberations the Committee is guided by certain
fundamental considerations, including:
- the need to attract and to retain talented key executives;
- the need to provide both annual and long-term incentives to
focus executive performance on the achievement of company
objectives; and
- the need to provide compensation opportunities that align
executive compensation with the interests of the
stockholders.
Based on these objectives, the executive compensation program has
been designed to generate compensation from several sources, including
salaries, annual cash incentive awards, long-term incentive
opportunities, and other benefits typically offered to executives by
major corporations. In designing and administering the components of
the executive compensation program, the Committee strives to balance
short- and long-term incentive objectives and to employ prudent
judgment when establishing performance criteria, evaluating
performance and determining actual incentive payments.
Early in 1996, base salary rates of Mr. Loynd, Mr. Holliman and
other Named Executive Officers were increased, establishing Mr.
Loynd's annual salary at $710,000 for the year and Mr. Holliman's
annual salary at $130,000 for the year. The Committee makes its
compensation decisions based on an analysis of the Company's
performance, an evaluation of comparative compensation information,
and an evaluation of the performance of executive officers. The
increases in annual salary rates, 4.0% for Mr. Loynd, 8.3% for Mr.
Holliman and 5.2% for all Named Executive Officers as a group, were
based on recommendations of Mr. Loynd and were designed to adjust for
inflation and, in certain instances, to recognize superior individual
and operating company performance. In addition, the increase in
salary for Mr. Loynd took into account that he had received no base
salary increase in 1995. Later in the year, consistent with
recommendations of Mr. Loynd the salary rate for Mr. Holliman,
effective January 1, 1997, was increased further to reflect his
promotion and assumption of increased responsibilities as president
and CEO of the Company. Effective the same date, Mr. Holliman became
a participant in the Company's annual incentive plan.
Existing annual incentive plans for key personnel (including Mr.
Loynd, Mr. Holliman and other Named Executive Officers) were continued
in effect during 1996. Those plans utilized sales, pre-tax earnings
and cash flow as objectives, with pre-tax earnings generally weighted
more heavily. Under the provisions of the plan applicable in 1996 to
key personnel (including Mr. Loynd) based at the corporate offices,
plan participants could earn a bonus equal to percentages of their
base salaries (the target percentage of Mr. Loynd being 50%) depending
totally upon the Company's degree of achievement against budgeted
objectives (sales, pre-tax earnings and cash flow) which were met in
1996. Target percentages were payable when objectives were met; lower
or greater percentages (to a maximum of 150% of target) were payable
for degrees of achievement below or above budgeted objectives. Mr.
Holliman's bonus for 1996 was pursuant to the terms of a profit
sharing plan providing for the payment of a predetermined percentage
of the pre-tax earnings of Action Industries, Inc., a subsidiary of
the Company. He will no longer participate in that plan in the
future.
For 1996, Mr. Loynd earned a bonus of $514,324 under the annual
incentive plan (which represented 144.88% of the target bonus amount
under the plan), and of such amount, payment of $484,484 was deferred
pursuant to a plan provision calling for payment after all or any
portion of that bonus amount becomes immediately deductible as
compensation expense by the Company for federal income tax purposes.
To amounts so deferred interest is credited at the Company's effective
borrowing rate for the period of deferral. For 1996, Mr. Holliman
earned a bonus of $1,189,765 under the profit sharing plan described
above.
The Committee believes that management's ownership of a
significant equity interest in the Company is a major incentive in
building stockholder value and aligning the long-term interests of
management and the stockholders. Stock options are therefore granted
as the Company's only long-term incentive program. During 1996 stock
options to purchase 1,630,449 shares of Common Stock were granted
pursuant to the 1992 Plan, of which 550,000 were granted to Named
Executive Officers as shown below. The size of awards is subjectively
determined by the Committee based on position, responsibilities and
individual performance, subject to plan limits. The amount and terms
of prior option grants are reviewed, but are not explicitly considered
in determining the size of individual awards. Except in the case of
certain options granted to Mr. Starr to replace an equity-based
incentive program which pre-existed the Company's acquisition of
Thomasville Furniture Industries, Inc., the option exercise prices
equaled or exceeded the market price per share of Common stock on the
dates of grant.
Donald E. Lasater, Chairman Bruce A. Karsh
Michael S. Gross John H. Kissick
Compensation Committee Interlocks and Insider Participation
Messrs. Gross and Kissick, directors and members of the Executive
Compensation and Stock Option Committee of the Board, are associated
with Apollo Advisors and Apollo. The Company is a party to a
Consulting Agreement with Apollo Advisors pursuant to which Apollo
Advisors provides corporate advisory, financial and other consulting
services to the Company. Fees under the Agreement for a term ending
on December 31, 1997 are payable at an annual rate of $500,000 plus
out-of-pocket expenses and the Consulting Agreement is automatically
renewable for successive one-year terms unless terminated by the
Board. The Company believes that the terms of this agreement are as
favorable to the Company as could be received from unaffiliated third
parties. The Company has also granted registration rights to Apollo
with respect to its Common Stock.
Stock Options
The following table contains information concerning stock option
grants made during the year ended December 31, 1996, pursuant to the
Furniture Brands 1992 Stock Option Plan ("1992 Plan").<PAGE>
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C> <C> <C>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
% of Total Value at Assume
Number of Options Annual Rates of
Securities Granted Stock Price
Underlying to Exercise Appreciation for
Options Employees or Option Term (b)
Granted in Base Price Expriation -------------------------------
Name #(a) Year ($/Sh) Date 0%($) 5%($) 10%($)
-------------------------------------------------------------------------------------------------------
W.G. Holliman 50,000 3.1% 9.125 01/30/05 0 251,500 619,500
200,000 12.3 14.250 09/26/05 0 3,870,200
1,571,200
R.B. Loynd 0 -- -- -- -- -- --
B.B. Kincaid 50,000 3.1 9.125 01/30/05 0 251,500 619,500
F.B. Starr 139,448 8.6 9.125 01/29/05 0 701,563 1,727,900
60,552(c) 3.7 .625 01/30/05 514,692 819,329 1,264,992
K.S. Tyler 50,000 3.1 9.125 01/30/05 0 251,550 619,500
-------------------------
(a) The grants become exercisable in cumulative installments and at various dates during 1997-2005,
subject to provisions of the 1992 Plan that would accelerate the exercisability in the event of a
change of control of the Company. As defined, a change of control includes an acquisition by a
person or group of 20% or more of the Common Stock or combined voting power, a change in the
composition of at least a majority of the Board, or stockholder approval of a reorganization,
merger or consolidation resulting in former stockholders' retaining 50% or less of the combined
voting power.
(b) The value, if any, one may realize upon exercise of a stock option depends on the excess of the
then current market value per share over the exercise price per share. There is no assurance that
the values to be realized upon exercise of the stock options listed above will be at or near the
amounts shown.
(c) Grant issued in consideration of cancellation of benefits under the Thomasville Value Plan.
--------------------------------<PAGE>
</TABLE>
The following table contains information concerning unexercised
stock options held as of December 31, 1996 pursuant to the 1992 Plan.
No stock options were exercised by Named Executive Officers during the
year ended December 31,1996.
<TABLE>
<CAPTION>
<S><C> <S> <C> <C> <C> <C>
AGGREGATED FY-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End at FY-End (a)
---------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
Name # # $ $
W.G. Holliman 95,000 305,000 938,155 721,995
R.B. Loynd 250,000 0 2,654,250 0
B.B. Kincaid 120,000 80,000 1,203,580 456,570
F. B. Starr 0 200,000 0 1,489,692
K.S. Tyler, Jr. 28,750 111,250 234,779 788,351
-------------------------
(a) Based on the $14.00 per share closing price of the Common Stock on the
New York Stock Exchange on December 31, 1996.
-------------------------
</TABLE>
Mr. Loynd is a participant in that segment of the Furniture Brands
Retirement Plan which applies to corporate office employees. The plan is a
noncontributory, defined benefit pension plan designed to provide
retirement benefits upon normal retirement at age 65. Covered remuneration
is base salary and incentive compensation and, based on straight life
annuity, annual benefits at normal retirement equal to the sum of 1.1% of
final average compensation (the highest five consecutive calendar years of
the last 10 years) multiplied by credited service up to a maximum of 35
years and 0.45% of final average compensation in excess of "covered
compensation" as defined by the IRS multiplied by credited service up to a
maximum of 35 years, without deduction for Social Security benefits. Mr.
Loynd has nine years credited service under the plan and estimated annual
benefits payable to Mr. Loynd at retirement is $161,602 assuming
continuation of current covered remuneration.
Messrs. Holliman and Tyler are participants in that segment of the
Furniture Brands Retirement Plan which applies to employees of The Lane
Company, Incorporated. The plan is a noncontributory, defined benefit
pension plan designed to provide retirement benefits upon normal retirement
at age 65. Covered remuneration is base salary and incentive compensation
and, based on a straight life annuity, annual benefits, at normal
retirement, are equal to the greater of (a) the sum of 0.65% of an average
of the highest five consecutive years (of the last 10 years) of covered
remuneration and 0.65% of the said average in excess of the greater of (i)
10,000 or (ii) 50% of "covered compensation" as defined by the IRS,
multiplied by years of credited service (not to exceed 35 years), without
deduction for Social Security benefits, or (b) $28 multiplied by years of
credited service. Messrs. Holliman and Tyler have 27 and 28 years credited
service under the plan, respectively, and estimated annual benefits payable
upon the retirement of Messrs. Holliman and Tyler are $233,632 and
$233,500, respectively, assuming continuation of current covered
remuneration.
Mr. Starr became a participant in that segment of the Furniture Brands
Retirement Plan which became applicable to employees of Thomasville
Furniture Industries, Inc. effective January 1, 1997. The Plan is a
noncontributory, defined benefit pension plan designed to provide
retirement benefits upon normal retirement at age 65. Covered remuneration
is base salary and incentive compensation and, based on straight life
annuity, annual benefits at normal retirement are the sum of 1.4% of final
average compensation (the highest five consecutive calendar years of the
last 10 years) multiplied by total Thomasville service; less 1.4% of
Primary Social Security multiplied by total Thomasville service with a
maximum offset of 50% of Social Security, less his accrued benefit as of
December 29, 1995. The accrued benefit at December 29, 1995 is the benefit
amount Mr. Starr accrued prior to the acquisition of Thomasville Furniture
Industries, Inc. by the Company under the predecessor plan. Mr. Starr has
38 years credited service under the plan and estimated annual benefits
payable upon retirement of Mr. Starr at normal retirement are $77,865,
assuming continuation of current covered remuneration. This amount will be
reduced at retirement, by his accrued benefit as of December 29, 1995 from
the predecessor plan. Due to changes in the applicable laws and
regulations concerning maximum recognizable compensation to be considered
for qualified plan purposes since December 31, 1993, the offset calculated
as of December 29, 1995 may exceed the estimated benefits payable from the
Furniture Brands Retirement Plan.
Benefits payable pursuant to provisions of Company-sponsored
retirement plans may be limited by applicable laws and regulations.
Supplemental retirement plans have been adopted providing for payments from
general funds to certain executives, including the Chairman of the Board
and Named Executive Officers, of any retirement income that would otherwise
be payable pursuant to the retirement plans in the absence of any such
limitations. With respect to Mr. Loynd, following retirement he will also
receive under the supplemental plan an amount equal to the difference, if
any, between (i) the benefits he would have received had he continued until
retirement as a participant in the Converse Inc. Retirement Plan (in which
Mr. Loynd was formerly an active participant) and (ii) the total of the
benefits he will receive from the Converse Inc. Retirement Plan and the
Furniture Brands Retirement Plan. With respect to Messrs. Holliman, Tyler
and Kincaid, the supplemental plans provide for payments, commencing at age
65 after 30 or more years service, equal to the differences, if any,
between (i) the total of the straight life annuities from their base
retirement plans plus social security benefits and (ii) 50% of an average
of the highest five consecutive years (of the last 10 years) of covered
remuneration.
Incentive Agreements
Each of the Named Executive Officers is a participant in an annual
incentive compensation plan under which the officer may earn a bonus during
and payable following the close of the calendar year ending December 31,
1997, contingent upon the achievement of certain financial objectives by
the Company as a whole for Messrs. Holliman and Loynd and by their
respective operating companies for Messrs. Kincaid, Starr and Tyler.
Performance Graph
The following graph shows the cumulative total stockholder returns
(assuming reinvestment of dividends) during two periods, following assumed
investment of $100 each in shares of the Common Stock that were outstanding
on February 28, 1992, and on August 3, 1992. As detailed below, all shares
of Common Stock ($0.10 per share stated value)("Old Common Stock") that
were outstanding and that traded during the period of February 28, 1992
through June 26, 1992 (when trading in the Old Common Stock was suspended
permanently by the New York Stock Exchange) were cancelled prior to August
3, 1992, pursuant to provisions of an order of the U.S. Bankruptcy Court
and a Chapter 11 Plan of Reorganization, and shares of Common Stock ($1.00
per share stated value)("New Common Stock") that are currently outstanding
are shares that were issued to former creditors or their assigns on and
after August 3, 1992, and after cancellation of the Old Common Stock,
pursuant to provisions of the same order of the Bankruptcy Court and
Chapter 11 Plan of Reorganization. The indices shown below are included
for comparative purposes only and do not necessarily reflect the Company's
opinion that such indices are an appropriate measure of the relative
performance of the Common Stock.<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2/28/92 6/26/92 8/3/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
----------------------/--------/--------/-------/--------/---------/---------/---------/---------/--------
Furniture Brands / / / / / / / / /
Common Stock o / 92 / 0 / / 100 / 110 / 154 / 132 / 176 / 274
----------------------/--------/--------/-------/--------/---------/---------/---------/------------------
S&P 500 Index / 113 / 110 / / 100 / 103 / 110 / 108 / 145 / 174
----------------------/--------/--------/-------/--------/---------/---------/---------/---------/--------
Dow Jones Home / / / / / / / / /
Furnishings & / / / / / / / / /
Appliances Index + / 175 / 157 / / 100 / 107 / 152 / 122 / 139 / 148
----------------------/--------/--------/-------/--------/---------/---------/---------/---------/--------
-------------------------
(a) That which appears to the left of the vertical double bar in the Performance Graph, above, is a comparison of (i) the
cumulative total return of the Old Common Stock outstanding prior to the Company's emergence from Chapter 11
reorganization, that is during the period of February 28, 1992 through June 26, 1992 when trading in such shares was
suspended permanently, with (ii) the Standard & Poor's 500 Index, and (iii) the Dow Jones Home Furnishings Sector Index.
Pursuant to provisions of an order of the Bankruptcy Court and the Bankruptcy Court-confirmed Chapter 11 Plan of
Reorganization, all shares of Old Common Stock outstanding on and prior to June 26, 1992 were cancelled prior to the
August 3, 1992 effective date of the said Plan of Reorganization, and no distributions were made on account of interests
in those former securities.
(b) Pursuant to provisions of an order of the Bankruptcy Court and the Bankruptcy Court-confirmed Chapter 11 Plan of
Reorganization, as of the August 3, 1992 effective date of the said Plan of Reorganization, shares of New Common Stock
currently outstanding were issued to former creditors or their assigns of the Company and its subsidiaries and that
which appears to the right of the vertical double bar in the Performance Graph, above, is a comparison of (i) the
cumulative total return of the New Common Stock outstanding subsequent to the Company's emergence from Chapter 11
reorganization, that is during the period of August 3, 1992 through December 31, 1996, with (ii) the Standard & Poor's
500 Index, and (iii) the Dow Jones Home Furnishings Sector Index.
-------------------------<PAGE>
</TABLE>
II To Approve an Amendment to the
Furniture Brands
1992 Stock Option Plan
Increasing the Number of Shares Reserved for
Issuance upon Exercise of Options
On January 20, 1992, the Board adopted the Furniture Brands 1992
Stock Option Plan (the "1992 Plan"). Under the 1992 Plan, 2,500,000
shares of Common Stock were available for grant. On August 31, 1992
non-qualified grants to purchase 2,500,000 shares of Common Stock were
made under the 1992 Plan. On January 26, 1993 the Board amended the
1992 Plan to increase the number of shares reserved for issuance from
2,500,000 to 3,500,000 shares of Common Stock and a non-qualified
grant to purchase 250,000 shares was made under the 1992 Plan. The
1992 Plan and the amendment to the 1992 Plan were approved by
stockholders on May 5, 1993. On January 30, 1996 non-qualified grants
to purchase 227,501 shares at an option price of $0.625 per share were
made under the 1992 Plan in consideration of cancellation of benefits
under the Thomasville Value Plan. At the same time, non-qualified
grants to purchase 675,448 shares at an option price of $9.125 per
share were made under the 1992 Plan of which grants of 270,000 shares
were conditioned upon stockholder approval of this amendment to
increase the number of shares available for issuance pursuant to the
1992 Plan. This amendment was approved by stockholders on April 23,
1996.
To ensure that a sufficient number of shares will continue to be
available to meet the stated purposes of the 1992 Plan, the Board, on
January 28, 1997, adopted, conditioned upon stockholders' approval, an
amendment to the 1992 Plan to increase the number of shares reserved
for issuance from 4,500,000 to 5,500,000 shares of Common Stock. No
determination has been made as to the key employees, if any, to whom
further grants may be made under the 1992 Plan, but all key employees,
including the personnel named in the Summary Compensation Table,
above, and other executive officers, but excluding members of the
Executive Compensation and Stock Option Committee, will be eligible.
To effect the amendment, the first sentence of Section 2 of the 1992
Plan will be changed from "There are reserved for issue under the Plan
4,500,000 shares of the Common Stock, without nominal or par value, of
the corporation (the "Shares")" to "There are reserved for issue under
the Plan 5,500,000 shares of the Common Stock, without nominal or par
value of the Corporation (the "Shares")." The remaining terms and
conditions of the 1992 Plan, as amended, remain in full force and
effect. The closing price of one share of Common Stock, as reported
on the New York Stock Exchange on January 31, 1997 was $14.25.
Administration of the 1992 Plan is vested in the Executive
Compensation and Stock Option Committee of the Board, the members of
which are ineligible to receive grants under the 1992 Plan. The
Committee has general supervisory and interpretive authority and may
determine, subject to the provisions of the 1992 Plan, the key
employees to whom grants will be made, the types of options to be
granted, the dates of such grants, the numbers of option shares to be
granted, and the terms of exercise of stock options. The 1992 Plan
will terminate on January 20, 2002, subject to the right of the Board
to suspend or discontinue the 1992 Plan at any prior date.<PAGE>
Grants under the 1992 Plan are exercisable at such dates, at
least one year after the date of grant, in one or more cumulative
installments, as the Committee may in its discretion determine and
provide for in particular grants. The term of each grant shall be not
more than ten years from the date of grant of the stock option.
Generally, stock options may be exercised only during the term of
employment or within one month following termination of employment.
In the event an optionee's employment terminates by reason of
retirement or permanent disability, stock options may be exercised
within three months after termination of employment. In the event of
the death of an optionee while employed, stock options may be
exercised within six months after death. Each stock option is non-
transferable except by will or the applicable laws of descent and
distribution and is exercisable during the lifetime of the optionee
only by the optionee.
Lynn Chipperfield, Esq., General Counsel of the Company, has
advised that the federal income tax consequences with respect to
grants under the 1992 Plan differ depending on the form of the grant,
as follows:
(1) with respect to incentive stock options: grants and
exercises thereof are not taxable events; but upon the
subsequent disposition of the shares acquired in an
exercise, the optionee realizes, as long-term capital
gain or loss, the difference between the sale price and
the option price, provided the shares are held by the
optionee for one year after the date of the exercise; but
if the shares are disposed of before the expiration of
the one-year holding period, the optionee realizes
ordinary compensation income at the time of the
disposition limited to the lesser of (a) the gain, if
any, or (b) the excess of the fair market value of the
shares at the time the option was exercised over the
option price, and the Company is entitled to a deduction
equal to the ordinary compensation income realized by the
optionee; and
(2) with respect to non-qualified stock options: grants
thereof are not taxable events; but upon exercise the
optionee realizes ordinary compensation income in the
amount that the fair market value of the shares so
acquired exceeds the option price and the Company is
entitled to a deduction equal to the ordinary
compensation income realized by the optionee.
Vote required. Approval of the proposal to amend the 1992
Plan requires the affirmative votes of the holders of a majority of
the outstanding shares entitled to vote during the annual meeting.
The Board of Directors unanimously recommends a VOTE FOR the
proposal.
III. To Adopt the Furniture Brands International, Inc.
Executive Incentive Plan
The Company believes that the total annual income of key
employees should be influenced by their individual and collective
effort, and that rewards should directly relate to the achievement of
planned, meaningful results. Accordingly, the Company has had in
effect since 1995 an Executive Incentive Plan (the "Plan") which is
designed to provide incentive compensation to those management persons
at the corporate headquarters of the Company who directly and
substantially influence achievement of certain corporate goals. The
purpose of this proposal is to seek stockholder approval of the Plan
to satisfy federal income tax laws which impose limits on the
Company's ability to deduct compensation paid to the executive
officers listed in the Summary Compensation Table unless certain
requirements are met.
The Plan has been amended to meet the law's requirements that the
material terms of a performance-based, compensation plan be disclosed
to and approved by a majority of stockholders. The following is a
summary of the Plan provisions. The summary is qualified by reference
to the full Plan which is attached as Appendix A.
Purpose. The Plan has been created to emphasize achievement of
planned strategic objectives, to reinforce the importance of annual
growth, and to motivate and challenge participating executives through
meaningful compensation opportunities. To achieve these objectives,
the Plan is designed to provide for monetary awards related directly
to measurable corporate results and to motivate participating
individuals to achieve results beyond their routine responsibilities.
Consistent with the Company's goal for executive compensation, total
compensation resulting from the combination of base salary and
monetary awards under the Plan is designed to be competitive with
total compensation for similar positions in similarly situated
companies.
Administration. The Plan is administered by the Executive
Compensation and Stock Option Committee of the Board of Directors (the
"Committee"), which has broad authority to administer and interpret
the Plan and its provisions.
Participation. Only management persons whose performance
directly and substantially influences the annual results of the
Company will be considered for participation in the Plan. It is
anticipated that thirteen individuals, including Mr. Holliman, will
participate in the Plan in 1997. At the start of each fiscal year
Company management will submit a list of proposed participants and
bonus percentages (expressed as a percentage of base salary) for
review and approval by the Committee. The Committee may in its
discretion change the participants and bonus percentages.
Setting Company Goals. At or prior to the beginning of each
fiscal year, Company management will recommend for approval to the
Committee one or more objective, measurable, performance goals for the
Company (the "Goals") for such year, and the weighting to be assigned
to each Goal. The Goals may include one or more of the following
performance criteria: sales, earnings per share, pre-tax earnings,
net profits, return on equity, and asset management. The goals will
be attainable, but attainment will require above average performance.
The Committee may, in its discretion, approve management's
recommendations or change the Goals and/or weightings.
Mechanics of Determining Awards. The Company's performance
against the Goals will be measured by the percentage of achievement of
each Goal. The Company's performance with respect to each Goal will
be based upon audited results. The Plan is designed to provide the
participant with 100% of his/her target bonus with respect to each
Goal if the Company achieves 100% satisfaction of that Goal. Each
fiscal year the Committee will establish a minimum percentage with
respect to each Goal. Achievement below the minimum percentage will
result in no award with respect to that Goal. Awards will be
calculated separately for each Goal, but will be aggregated and paid
as one award check as soon as practical after the audited close of a
fiscal year.
Discretionary Awards. To recognize special needs, a
discretionary awards program is part of this Plan. Its objective is
to recognize the performance of the Company through a more qualitative
evaluation, rather than a quantitative evaluation. Discretionary
awards are not intended to qualify as performance-based compensation,
and consequently payments in excess of limits imposed by federal
income tax laws to any officer listed in the Summary Compensation
Table will not be paid currently, but will be deferred until the
payments would be deductible for federal income tax purposes.
Plan Benefits. The Company is not able presently to determine
the benefits to be paid under the Plan for fiscal year 1997
performance. However, Mr. Loynd's bonus for fiscal 1996 under the
pre-existing plan was $514,324, and Mr. Holliman's target bonus under
the amended Plan for 1997 will be $375,000.
If the Plan, as amended, is not approved by the stockholders, the
amendments will not become effective and the existing Plan will remain
in effect.
Vote required. Approval of the proposal to adopt the Furniture
Brands International, Inc. Executive Incentive Plan requires the
affirmative votes of the holders of a majority of the outstanding
shares entitled to vote during the annual meeting.
The Board of Directors unanimously recommends a VOTE FOR the
proposal.
IV. To Ratify The Selection Of Independent Auditors
Upon recommendation of its Audit Committee, the Board continued
the engagement of KPMG Peat Marwick LLP, certified public accountants,
as independent auditors for the calendar year ending December 31,
1997, and has unanimously recommended that the stockholders ratify
that action. A formal statement by representatives of KPMG Peat
Marwick LLP is not planned for the annual meeting; however, as in
years past, such representatives are expected to be present during the
meeting and to respond to appropriate questions.
Vote required. A majority of the votes cast during the meeting, a
quorum being present, is required to ratify the engagement of
independent auditors.
The Board of Directors unanimously recommends a VOTE FOR
ratification.
V. Stockholder Proposals
Neither the Board nor management knows of any matters other than
those items set forth above that will be presented for consideration
during the 1997 annual meeting. However, if other matters should
properly come before the meeting, it is intended that the persons
named in the proxies will vote, act and consent in accordance with
their best judgment with respect to any such matters.
Stockholder proposals submitted for inclusion in the Company's
proxy materials for the 1998 annual meeting should be addressed to the
Secretary of the Company and must be received at the Company's
executive offices not later than November 21, 1997. Upon receipt of
any such proposal, the Company will determine whether or not to
include such proposal in the proxy statement and proxy form in
accordance with SEC regulations governing the solicitation of proxies.
By order of the Board of Directors
/s/ Lynn Chipperfield
Lynn Chipperfield,
Vice-President and Secretary
St. Louis, Missouri, March __, 1997.<PAGE>
Appendix A
FURNITURE BRANDS INTERNATIONAL, INC.
EXECUTIVE INCENTIVE PLAN
February 1995
Amended March 1, 1996
Amended September 26, 1996
Amended February 24, 1997<PAGE>
TABLE OF CONTENTS
-----------------
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OBJECTIVES OF PLAN. . . . . . . . . . . . . . . . . . . . . . . . 1
Objectives. . . . . . . . . . . . . . . . . . . . . . . . . 1
Award Achievement. . . . . . . . . . . . . . . . . . . . . . 1
PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . 2
Participation. . . . . . . . . . . . . . . . . . . . . . . . 2
Non-Eligibility. . . . . . . . . . . . . . . . . . . . . . . 3
Plan Year. . . . . . . . . . . . . . . . . . . . . . . . . . 3
HOW THE PLAN WORKS. . . . . . . . . . . . . . . . . . . . . . . . 3
Plan Factors. .. . . . . . . . . . . . . . . . . . . . . . . 3
Setting Furniture Brands Goals. . . . . . . . . . . . . . . 3
Notification of Participation. . . . . . . . . . . . . . . . 3
MECHANICS OF DETERMINING AWARDS. . . . . . . . . . . . . . . . . 4
Definitions of Terms. . . . . . . . . . . . . . . . . . . . 4
Mechanics of Determining Awards. . . . . . . . . . . . . . . 4
DISCRETIONARY AWARDS PROGRAM. . . . . . . . . . . . . . . . . . . 5
CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 6
PAYMENT OF AWARDS. . . . . . . . . . . . . . . . . . . . . . . . 6
ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . 6
MANNER OF EXERCISE OF COMMITTEE AUTHORITY. . . . . . . . . . . .. 6
CERTAIN PERFORMANCE BASED AWARDS. . . . . . . . . . . . . . . . . 6
NO CONTRACT OF EMPLOYMENT. . . . . . . . . . . . . . . . . . . .. 6
ASSIGNMENTS AND TRANSFERS. . . . . . . . . . . . . . . . . . . .. 6
GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
AMENDMENT AND TERMINATION OF PLAN AND AWARDS. . . . . . . . . . .. 6
EFFECTIVE DATE OF THE PLAN. . . . . . . . . . . . . . . . . . . . 7<PAGE>
FURNITURE BRANDS INTERNATIONAL, INC.
CORPORATE
EXECUTIVE INCENTIVE PLAN
------------------------
1. INTRODUCTION
------------
This Executive Incentive Plan (the "Plan") has been designed for
those management persons at the corporate offices of Furniture Brands
International, Inc. ("FBI") who directly and substantially influence
achievement of certain corporate goals. The Plan provides monetary
awards for the achievement of those goals. In select cases, the Plan
provides for additional special discretionary awards.
FBI believes that the total annual income of key employees should
be influenced by their individual and collective effort, and that
rewards should directly relate to the achievement of planned,
meaningful results. The Plan is in addition to and assumes the
existence of a base salary which is competitive, equitable, and
subject to periodic performance-related adjustments.
The overall administration and control of the Plan, including
final determination of annual bonus awards to each participant, is the
responsibility of the Executive Compensation and Stock Option
Committee of the FBI Board of Directors (the "Committee"). The
Committee (or a subcommittee thereof which has been designated by the
Committee to administer the Plan) shall consist solely of three or
more members of the FBI Board of Directors who are "outside directors"
as defined in Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder. Members of the
Committee are not eligible to participate in the Plan.
2. OBJECTIVES OF PLAN
------------------
A. Objectives. The Plan has been created with several
objectives in mind:
(1) to emphasize achievement of planned strategic
objectives;
(2) to reinforce the importance of annual growth; and
(3) to motivate and challenge participating executives
through meaningful compensation opportunities.
B. Award Achievement. To achieve these objectives, the Plan
is designed to:
(1) provide for monetary awards of significant value
related directly to measurable FBI results;
(2) motivate participating individuals to achieve results
beyond the routine of position responsibilities; and
(3) be appropriate for both the level of responsibility
and total compensation for the position.
Total compensation, resulting from the combination of base
salary and monetary awards under the Plan, is designed to
be competitive with total compensation for similar
positions in American industry.
3. PARTICIPATION
-------------
A. Eligibility. Only management persons whose performance
directly and substantially influences the annual results
of FBI will be considered for participation in the Plan.
Ordinarily the extent of such influence will be
reflected in the Bonus Percentage (as herein defined).
B. Participation
-------------
(1) At the start of each Plan Year (as herein defined)
FBI management will submit a list of proposed
participants and Bonus Percentages for review and
approval by the Committee. The Committee may in
its discretion change the participants and Bonus
Percentages, provided, however, that the Committee
shall, within the first 90 days of each Plan Year,
set forth in writing, a final approved list of
participants and Bonus Percentages for such Plan
Year. Such final list of participants and Bonus
Percentages may not thereafter be modified except
as provided in this Plan. With respect to persons
who have been determined to be "covered employees"
within the meaning of Code Section 162(m)(3) for
such Plan Year (a "Covered Employee"), additional
participation in the Plan during a Plan Year shall
be permitted only in the event of an unusual
circumstance, such as a new hire. Executive
officers of the Company may be participants in the
Plan to the extent approved by the Committee.
(2) To earn an award, an individual must be designated
a participant for the Plan Year and must
participate effectively for a minimum of eight full
months of the Plan Year.
(3) A participant who has lost time due to illness, or
dies, retires or becomes totally disabled during
the Plan Year, will be considered for an award
under the Plan provided that his/her influence on
goal achievement can be identified and that
achievement of results can be measured.
C. Non-Eligibility
---------------
(1) Any individual whose employment is terminated at
any time during the Plan Year by reason of
voluntary or encouraged resignation, or who is
discharged, will not receive an award.
(2) Any individual who has been demoted at any time
during the Plan Year to a position not included in
the Plan will not receive an award.
D. Plan Year. The Plan Year will correspond with the FBI
fiscal year.
4. HOW THE PLAN WORKS
------------------
A. Plan Factors. There are two factors which will be
measured in order to determine an award: opportunity
and FBI performance.
(1) Opportunity is the potential impact that a
participant may have on the achievement of goals.
This is expressed by the Bonus Percentage.
(2) FBI Performance is the result of achievement. This
is measured by the percentage of attainment of
FBI's goals.
B. Setting FBI Goals. At or prior to the beginning of each
Plan Year, FBI management will recommend to the
Committee for approval, one or more objective measurable
performance goals for FBI (the "Goals") for such year,
and the weighting to be assigned to each Goal. The
Goals will be based upon one or more of the following
criteria: sales; earnings; earnings per share; pre-tax
earnings; net profits; return on equity; cash flow; debt
reduction; asset management; stock price; market share;
costs; or selling, general and administrative ("SG&A")
expenses. The Goals will be realistic, yet rigorous.
They will be attainable, but attainment will require
above average performance. The Committee may, in its
discretion, approve management's recommendations or
change the Goals and/or weightings, provided, however,
that the Company shall, within the first 90 days of the
year (or, in the case of a new hire added to the Plan
during the year, before 25% of such individual's
services for the Company for the year has elapsed), set
forth in writing the final approved Goals, the Minimum
Percentages (as herein defined) for such year and the
weighting to be assigned to such Goals.
C. Notification of Participation. Each participant's
target Bonus Percentage will be communicated each Plan
Year by delivery of the Participation Form.
5. MECHANICS OF DETERMINING AWARDS
-------------------------------
A. Definitions of Terms
--------------------
(1) Bonus Percentage. The Bonus Percentage will be
expressed as a percentage (not less than 10% and
not more than 50%) of the participant's base
salary. That percentage will be higher for a
position with significantly greater
responsibilities, thus recognizing the direct
relationship between position responsibility and
influence on FBI results. Participants who are
promoted during a Plan Year to a position with a
higher Bonus Percentage will receive a prorated
award based on the percentage of the Plan Year
spent in each position.
(2) Aggregate Target Amount. The Aggregate Target
Amount will be expressed as a dollar amount,
calculated by multiplying the participant's base
annual salary rate, as in effect on March 1 of the
Plan Year, which has been established at or before
the time of the setting of the Aggregate Target
Amount, by the Bonus Percentage. The result will
be the total award to which the participant will be
entitled if FBI achieves 100% of all Goals for that
Plan Year.
(3) Weighted Target Amounts. For each Goal a Weighted
Target Amount will be calculated by multiplying the
Aggregate Target Amount by the weighted percentage
applicable to the Goal. The result for each Goal
will be the portion of the total award to which the
participant will be entitled if FBI achieves 100%
of that Goal for that Plan Year. The sum of the
Weighted Target Amounts will equal the Aggregate
Target Amount.
B. Mechanics of Determining Awards.
--------------------------------
(1) FBI Performance. FBI's performancegainst the Goals
will be measured by the percentage of achievement
of each Goal. FBI's performance with respect to
each Goal will be based upon audited results.
(2) Achievement of Target. The Plan is designed to
provide the participant with 100% of his/her
Weighted Target Amount with respect to each Goal if
FBI achieves 100% satisfaction of that Goal.
(3) Minimum FBI Performance. Each Plan Year the
Committee will establish a minimum percentage (the
"Minimum Percentage") with respect to each Goal.
Achievement below the Minimum Percentage will
result in no award with respect to that Goal.
Under certain circumstances, the Committee may
establish Goals the achievement of which
contemplate reducing rather than increasing an
amount, such as a reduced debt level or reduced
SG&A expenses. In any such case, the percentage
which will be applied to the Weighted Target Amount
for such Goal will be inversely proportional to the
performance against the Goal. For example, if a
Goal is a year-end debt amount and the actual year
-end debt is 105% of the Goal, the percentage of
Weighted Target Amount to be paid with respect to
that Goal would be 95%. In these circumstances,
the Minimum Percentage will be expressed in terms
of a figure greater than 100%.
(4) Calculation of Award. The percentage of FBI's
achievement of each Goal will be applied to the
Weighted Target Amount for that Goal to determine
the amount of the award payable with respect to
that Goal. Awards will be calculated separately
for each Goal, but will be aggregated and paid as
one award check.
(5) Discretion to Increase Award. The Committee shall,
under no circumstances, increase an award granted
under this Section 5 except to the extent permitted
under Treasury Regulation Section 1.162-
27(e)(2)(iii).
6. DISCRETIONARY AWARDS PROGRAM.
-----------------------------
(1) To recognize special needs, a discretionary awards
program is part of this Plan. Its objective is to
recognize the performance of FBI through a more
qualitative evaluation, rather than a quantitative
evaluation. This could occur, for example, if FBI
does not achieve one or more Goals due to business
or economic reasons beyond its control but, given
these adverse circumstances, nonetheless performed
well. Under such circumstances, a special award
may be granted at the discretion of the Committee.
(2) To the extent all or any portion of an award is not
immediately deductible as compensation expense by
FBI for federal income tax purposes, payment of
such award or portion thereof, as the case may be,
will be deferred until following termination of
employment of the participant or until such earlier
date as the Committee shall, in its discretion,
determine, either at the time of deferral or
thereafter, whereupon such award or any portion
thereof, as the case may be, less appropriate
withholdings, will be paid by check provided that
the same shall then have become immediately
deductible as compensation expense by FBI for
federal income tax purposes. Simple interest shall
be paid annually on the deferred compensation at
FBI's effective borrowing rate.
(3) Nothing contained in this Section 6 shall be deemed
to permit or provide for discretionary increases in
awards payable to Covered Employees under Section 5
hereof.
7. CERTIFICATION. Before any payments are made under this Plan,
the Committee must certify in writing that the Goals justifying the
payment of an award have been met.
8. PAYMENT OF AWARDS. Except as provided in Section 6 hereof,
awards, to the extent immediately deductible as compensation expense
by FBI for federal income tax purposes, less appropriate withholdings,
will be paid by check as soon as practical after the audited close of
a fiscal year.
9. ADMINISTRATION. Subject to the limitations as herein set
forth, the Committee is authorized and empowered to administer the
Plan; interpret the Plan; establish, modify and grant waivers of award
restrictions; prescribe, amend and rescind rules relating to the Plan;
and determine the rights and obligations of participants under the
Plan. All decisions of the Committee shall be final and binding upon
all parties including the Company, its stockholders, and its
participants.
10. MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The express grant
of any specific power to the Committee and the taking of any action by
the Committee, shall not be construed, as limiting any power or
authority of the Committee. All designations of participation, bonus
percentages, goals, minimum percentages, aggregate amounts, and
certifications of performance shall be in writing. A writing signed
by all members of the Committee shall constitute the act of the
Committee without the necessity, in such event, to hold a meeting.
The Committee may delegate the authority, subject to such terms as the
Committee shall determine, to perform administrative functions
(excluding those described in the second sentence of this Section 10)
under the Plan.
11. CERTAIN PERFORMANCE BASED AWARD. Any awards under Section 5
hereof are intended to be "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code and shall be paid
solely of account of the attainment of one or more preestablished,
objective performance goals within the meaning of Section 162(m). If
any provision of this Plan does not comply with the requirements of
Section 162(m) of the Code as then applicable to any employee, such
provision shall be construed or deemed amended to the extent necessary
to conform to such requirements with respect to such employee.
12. NO CONTRACT OF EMPLOYMENT. Participation in the Plan shall not
be considered an agreement to employ a participant for any period of
time or in any position.
13. ASSIGNMENTS AND TRANSFERS. With the exception of transfer by
will or by the laws of descent and distribution, rights under the Plan
may not be transferred or assigned.<PAGE>
14. GOVERNING LAW. The Plan shall be construed, administered and
governed in all respects under and by the applicable internal laws of
the State of Missouri, without giving effect to the principles of
conflicts of law thereof.
15. AMENDMENT AND TERMINATION OF PLAN AND AWARDS. The Board may
amend, alter, suspend, discontinue or terminate the Plan without the
consent of stockholders or participants, except as is required by any
federal or state law or regulation or the rules of any stock exchange
on which the shares of FBI ("Shares") are listed, or if the Board in
its description determines that obtaining such stockholder approval is
for any reason advisable, provided, however, that (i) without the
consent of an affected participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may impair the
rights of such participant under any award theretofore granted to such
participant, and (ii) the Plan may not be amended without the consent
of the stockholders of a majority of the Shares then outstanding to
(a) materially modify the requirements as to eligibility for
participation in the Plan, (b) change the specified performance
objectives for payment of awards under Section 5, (c) increase the
maximum award payable under Section 5, (d) withdraw administration of
the Plan from the Committee or (e) extend the period during which
awards may be granted.
16. EFFECTIVE DATE OF THE PLAN. The Plan, as amended, shall become
effective on January 1, 1997 provided that the Plan is approved by the
affirmative vote of the holders of a majority of the Shares present or
represented and entitled to vote at the 1997 annual meeting of the
stockholders of FBI. The terms of the Plan shall be perpetual;
subject to earlier termination by the Board pursuant to Section 15,
after which no awards may be made under the Plan, but any such
termination shall not affect awards then outstanding or the authority
of the Committee to continue to administer the Plan.<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
--------
/ /
/ /
--------
I. Election of Directors FOR all nominees ---- WITHHOLD AUTHORITY to vote ---- *EXCEPTIONS ----
listed below / / for all nominees listed below / / / /
/ / / / / /
---- ---- ----
Nominees: L.D. Black, M.S. Gross, J.J. Hannan, J.J. Harris, W.G. Holliman, B.A. Karsh, J.H. Kissick, D.E. Lasater,
L.M. Liberman, R.B. Loynd, M.J. Rowan, J.J. Ryan III and M.D. Weiner
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that
nominee's name in the space provided below.)
*Exceptions __________________________________________________________________________________________________________
II. Increase of shares reserved for issuance under III. Adoption of Executive Incentive Plan
the 1992 Stock Option Plan
FOR ---- AGAINST ---- ABSTAIN ---- FOR ---- AGAINST ---- ABSTAIN ----
/ / / / / / / / / / / /
/ / / / / / / / / / / /
---- ---- ---- ---- ---- ----
IV. Ratification of Selection of Auditors V, In their discretion, upon such other matters
as my property come before the meeting.
FOR ---- AGAINST ---- ABSTAIN ---- Change of Address and ----
/ / / / / / or Comments Mark Here / /
/ / / / / / / /
---- ---- ---- ----
Please sign exactly as name appears hereon.
Executors, Administrators, Trustees, etc.
should so indicate.
Dated: _____________________________, 1997
_________________________________________
Signature
_________________________________________
Signature
Votes MUST be indicated ----
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. (x) in Black or Blue ink. / /
/ /
----
----------------------------------------------------------------------------------------------------------------------
</TABLE>
FURNITURE BRANDS INTERNATIONAL, INC.
Proxy for 1997 Annual Meeting of Stockholders
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints M.S. Gross, W.G. Holliman
and L. Chipperfield, and each of them, with power of substitution,
proxy or proxies to represent the undersigned, and to vote all shares
of Common Stock the undersigned would be entitled to vote, at
the Annual Meeting of Stockholders of Furniture Brands International, Inc.
to be held on April 29, 1997, and at any adjournment thereof, upon
the items set forth in the proxy statement for the meeting
and identified below.
The Board of Directors recommends a vote FOR
(Continued, and to be signed and dated on the reverse side)
FURNITURE BRANDS INTERNATIONAL, INC.
P.O. BOX 11246
NEW YORK, N.Y. 10203-0246<PAGE>
