FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999 or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number I-91
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Furniture Brands International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-0337683
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 South Hanley Road, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 863-1100
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Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
51,390,470 Shares as of April 30, 1999
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PART I FINANCIAL INFORMATION
----------------------------
Item 1. Financial Statements
Consolidated Financial Statements for the quarter ended March 31, 1999.
Consolidated Balance Sheets
Consolidated Statements of Operations:
Three Months Ended March 31, 1999
Three Months Ended March 31, 1998
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 1999
Three Months Ended March 31, 1998
Notes to Consolidated Financial Statements
Separate financial statements and other disclosures with respect to the
Company's subsidiaries are omitted as such separate financial statements and
other disclosures are not deemed material to investors.
The financial statements are unaudited, but include all adjustments
(consisting of normal recurring adjustments) which the management of the
Company considers necessary for a fair presentation of the results of the
period. The results for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year.<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C>
March 31, December 31,
1999 1998
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ASSETS
Current assets:
Cash and cash equivalents...................... $ 5,428 $ 13,220
Receivables, less allowances of $20,325
($18,333 at December 31, 1998)............... 356,747 324,164
Inventories.........................(Note 1)... 299,816 307,382
Prepaid expenses and other current assets...... 32,421 31,107
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Total current assets......................... 694,412 675,873
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Property, plant and equipment.................... 508,994 499,913
Less accumulated depreciation.................. 217,611 206,136
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Net property, plant and equipment............ 291,383 293,777
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Intangible assets................................ 313,610 316,998
Other assets..................................... 15,891 16,556
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$ 1,315,296 $ 1,303,204
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued interest expense....................... $ 5,504 $ 5,608
Accounts payable and other accrued expenses.... 171,193 161,117
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Total current liabilities.................... 176,697 166,725
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Long-term debt................................... 578,400 589,200
Other long-term liabilities...................... 132,763 133,770
Shareholders' equity:
Preferred stock, authorized 10,000,000
shares, no par value - issued, none.......... - -
Common stock, authorized 100,000,000 shares,
$1.00 stated value - issued 52,277,066
shares at March 31, 1999 and
December 31, 1998............................ 52,277 52,277
Paid-in capital................................ 124,710 127,513
Retained earnings.............................. 272,369 244,662
Treasury stock at cost - 987,355 shares at
March 31, 1999 (525,000 shares at
December 31, 1998)........................... (21,920) (10,943)
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Total shareholders' equity................... 427,436 413,509
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$ 1,315,296 $ 1,303,204
=========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(Unaudited)
<S> <C> <C> <C>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
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Net sales...................................... $ 533,902 $ 505,298
Costs and expenses:
Cost of operations........................... 381,697 364,068
Selling, general and administrative expenses. 84,056 81,470
Depreciation and amortization................ 14,968 14,837
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Earnings from operations....................... 53,181 44,923
Interest expense............................... 9,854 11,263
Other income, net.............................. 621 647
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Earnings before income tax expense............. 43,948 34,307
Income tax expense............................. 16,241 12,693
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Net earnings................................... $ 27,707 $ 21,614
=========== ===========
Net earnings per common share:
Basic........................................ $ 0.54 $ 0.41
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Diluted...................................... $ 0.52 $ 0.40
====== ======
Weighted average common shares outstanding:
Basic........................................ 51,561,368 52,118,527
========== ==========
Diluted...................................... 53,127,433 53,862,107
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FURNITURE BRANDS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
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Cash Flows from Operating Activities:
Net earnings......................................... $ 27,707 $ 21,614
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation of property, plant and equipment.... 11,953 11,822
Amortization of intangible and other assets...... 3,015 3,015
Noncash interest and other expense............... 560 479
Increase in receivables.......................... (32,583) (36,531)
(Increase) decrease in inventories............... 7,566 (8,613)
Increase in prepaid expenses and other assets.... (1,562) (1,898)
Increase in accounts payable, accrued interest
expense and other accrued expenses............. 9,972 32,099
Decrease in net deferred tax liabilities......... (1,279) (780)
Increase in other long-term liabilities.......... 1,151 881
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Net cash provided by operating activities............ 26,500 22,088
=========== ==========
Cash Flows from Investing Activities:
Proceeds from the disposal of assets................. 5 8
Additions to property, plant and equipment........... (9,616) (8,437)
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Net cash used by investing activities................ (9,611) (8,429)
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Cash Flows from Financing Activities:
Payments of long-term debt........................... (10,800) (10,800)
Proceeds from the issuance of common stock........... - 1,960
Purchase of treasury stock........................... (15,454) -
Proceeds from the issuance of treasury stock......... 1,573 -
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Net cash used by financing activities................ (24,681) (8,840)
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Net increase (decrease) in cash and cash equivalents... (7,792) 4,819
Cash and cash equivalents at beginning of period....... 13,220 12,274
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Cash and cash equivalents at end of period............. $ 5,428 $ 17,093
=========== ===========
Supplemental Disclosure:
Cash payments for income taxes, net.................. $ 6,360 $ 700
=========== ===========
Cash payments for interest........................... $ 9,463 $ 11,257
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
<S> <C> <C>
(1) Inventories are summarized as follows:
March 31, December 31,
1999 1998
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Finished products $ 127,240 $ 122,993
Work-in-process 53,349 57,915
Raw materials 119,227 126,474
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$ 299,816 $ 307,382
========== ==========
(2) Weighted average shares used in the computation of basic and diluted net
earnings per common share are as follows:
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
------------ ------------
Weighted average shares used for
basic net earnings per common
share 51,561,368 52,118,527
Effect of dilutive securities:
Stock options 1,566,065 1,743,580
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Weighted average shares used for
diluted net earnings per common
share 53,127,433 53,862,107
========== ==========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Furniture Brands International, Inc. (the "Company") is the largest
manufacturer of residential furniture in the United States. The Company has
three primary operating subsidiaries: Broyhill Furniture Industries, Inc.;
Lane Furniture Industries, Inc.; and Thomasville Furniture Industries, Inc.
Comparison of Three Months Ended March 31, 1999 and 1998
Selected financial information for the three months ended March 31, 1999 and
1998 is presented below:
($ in millions except per share data)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Three Months Ended
----------------------------------------
March 31, 1999 March 31, 1998
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% of % of
Dollars Net Sales Dollars Net Sales
------- --------- ------- ---------
Net sales $533.9 100.0% $505.3 100.0%
Cost of operations 381.7 71.5 364.1 72.1
Selling, general and administrative
expenses 84.0 15.7 81.5 16.1
Depreciation and amortization 15.0 2.8 14.8 2.9
------ ------ ------ ------
Earnings from operations 53.2 10.0 44.9 8.9
Interest expense 9.9 1.9 11.3 2.2
Other income, net 0.6 0.1 0.7 0.1
------ ------ ------ ------
Earnings before income tax expense 43.9 8.2 34.3 6.8
Income tax expense 16.2 3.0 12.7 2.5
------ ------ ------ ------
Net earnings $ 27.7 5.2% $ 21.6 4.3%
====== ====== ====== ======
Gross profit (1) $141.7 26.5% $130.8 25.9%
====== ====== ====== ======
(1) The Company believes that gross profit provides useful information regarding a company's
financial performance. Gross profit has been calculated by subtracting cost of operations
and the portion of depreciation associated with cost of goods sold from net sales.
</TABLE>
Three Months Ended
March 31,
------------------
1999 1998
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Net sales $533.9 $505.3
Cost of operations 381.7 364.1
Depreciation (associated with 10.5 10.4
cost of goods sold) ------ ------
Gross profit $141.7 $130.8
====== ======
Net sales for the three months ended March 31, 1999 were $533.9 million,
compared to $505.3 million in the three months ended March 31, 1998, an
increase of $28.6 million or 5.7%. The improved sales performance occurred
at each operating company and ranged, in varying degrees, across all product
lines.
Cost of operations for the three months ended March 31, 1999 was $381.7
million compared to $364.1 million for the comparable prior year period.
Cost of operations as a percentage of net sales decreased from 72.1% for
the three months ended March 31, 1998 to 71.5% for the three months ended
March 31, 1999. The decrease reflects improved manufacturing capacity
utilization, reduced stock keeping units and ongoing cost reduction
programs.
Selling, general and administrative expenses for the three months ended
March 31, 1999 were $84.0 million compared with $81.5 million in the prior
year. As a percentage of net sales, selling, general and administrative
expenses were 15.7% and 16.1% for the three months ended March 31, 1999
and 1998, respectively. The decrease reflects continued good control of
selling, general and administrative expenses.
Interest expense totaled $9.9 million for the three months ended March 31,
1999 compared to $11.3 million in the prior year comparable period. The
decrease in interest expense in the three months ended March 31, 1999
resulted from lower long-term debt levels and reduced interest rates, both
resulting from the company's aggressive deleveraging program.
The effective income tax rate was 37.0% for the three months ended March 31,
1999 and March 31, 1998. The effective tax rates for each period were
adversely impacted by certain nondeductible expenses incurred and provisions
for state and local taxes.
Net earnings per common share for basic and diluted were $0.54 and $0.52 for
the three months ended March 31, 1999, respectively, compared with $0.41 and
$0.40 for the same period last year, respectively. Average common and
common equivalent shares outstanding used in the calculation of net earnings
per common share on a basic and diluted basis were 51,561,000 and
53,127,000, respectively, for the three months ended March 31, 1999 and
52,119,000 and 53,862,000, respectively, for the three months ended
March 31, 1998.
FINANCIAL CONDITION
Working Capital
Cash and cash equivalents at March 31, 1999 amounted to $5.4 million,
compared with $13.2 million at December 31, 1998. During the three months
ended March 31, 1999, net cash provided by operating activities totaled
$26.5 million, net cash used by investing activities totaled $9.6 million
and net cash used by financing activities totaled $24.7 million.<PAGE>
Working capital was $517.7 at March 31, 1999, compared with $509.1 million
at December 31, 1998. The current ratio was 3.9 to 1 at March 31, 1999,
compared to 4.1 to 1 at December 31, 1998.
Financing Arrangements
As of March 31, 1999, long-term debt consisted of the following, in
millions:
Secured credit agreement:
Revolving credit facility $360.0
Term loan facility 200.0
Other 18.4
------
$578.4
======
To meet short-term capital and other financial requirements, the Company
maintains a $600.0 million revolving credit facility as part of its Secured
Credit Agreement with a group of financial institutions. The revolving
credit facility allows for both issuance of letters of credit and cash
borrowings. Letter of credit outstandings are limited to no more than
$60.0 million. Cash borrowings are limited only by the facility's maximum
availability less letters of credit outstanding. At March 31, 1999, there
were $360.0 million of cash borrowings outstanding under the revolving
credit facility and $42.2 million in letters of credit outstanding, leaving
an excess of $197.8 million available under the revolving credit facility.
The Company believes its Secured Credit Agreement, together with cash
generated from operations, will be adequate to meet liquidity requirements
for the foreseeable future.
Year 2000
The Company has completed a comprehensive review of all software, hardware
and equipment that could potentially be affected by the year 2000 issue and
adopted a year 2000 plan to meet the needs of its customers and business
partners. The results of the review indicate that the Company will be year
2000 compliant well before the year 2000. At this time remediations have
been implemented and testing of the remediations is in process. The total
cost for year 2000 compliance activity will not be material to the Company's
results of operations and financial position. The Company is continuing
the process of verifying compliance of critical suppliers with year 2000
standards. There can be no assurance that another company's failure to
ensure year 2000 compliance will not have a material adverse effect on the
Company, however this is a circumstance not currently expected to occur.
The Company will develop and implement contingency plans, if necessary, in
the event it appears that it or its key suppliers will not be year 2000
compliant and such noncompliance is expected to have a material adverse
impact on the operations of the Company.
Forward Looking Statements
From time to time, the Company may make statements which constitute or
contain "forward-looking" information as that term is defined in the
Private Securities Litigation Reform Act of 1995 or by the Securities
and Exchange Commission in its rules, regulations and releases. The
Company cautions investors that any such forward-looking statements made by
the Company are not guarantees of future performance and that actual results
may differ materially from those in the forward-looking statements. The
impact of the year 2000 on the Company's order, production, distribution
and financial systems and the systems of its suppliers and customers is a
factor which could cause actual results to differ materially from estimates
contained in the Company's forward looking statements.<PAGE>
PART II OTHER INFORMATION
Item 5. Other Information
On February 10, 1999, the Company and Benchmark Home Furnishings, Inc.
announced a cooperative effort to develop a 160,000 square foot Benchmark
store in Kansas City dedicated exclusively to products manufactured by the
Company.
On February 17, 1999, the Company and Kittle's Home Furnishings, Inc.
announced a strategic alliance whereby Kittle's has agreed to expand its
commitment to products manufactured by the Company.
On February 26, 1999, the Company and Outlook International, Ltd.
announced an agreement in which Outlook will act as exclusive representative
for the Company for manufacture of products in the Far East.
Item 6. Exhibits and Reports on Form 8-K
(a)10 (a). Furniture Brands International, Inc. 1992 Stock Option Plan,
as amended.
10 (b). Furniture Brands International, Inc. 1999 Long Term Incentive
Plan.
27. Financial Data Schedule.
(b) A Form 8-K was not required to be filed during the quarter
ended March 31, 1999.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Furniture Brands International, Inc.
(Registrant)
By /s/ Steven W. Alstadt
-----------------------------
Steven W. Alstadt
Controller and
Chief Accounting Officer
Date: May 12, 1999
<PAGE>
Exhibit 10(a)
FURNITURE BRANDS
1992 STOCK OPTION PLAN
1. Objectives of the Plan
The Furniture Brands 1992 Stock Option Plan (the Plan ) of
Furniture Brands International, Inc. (the Corporation ) is
intended to encourage and provide opportunities for ownership of
the Corporation s Common Stock by such key employees (including
officers) of the Corporation and any subsidiaries of the
Corporation as the Board of Directors of the Corporation (the
Board ) or a committee thereof constituted for this purpose may
from time to time determine. The Plan is also intended to
provide incentives for such employees to put forth maximum
efforts for the successful operation of the Corporation and its
subsidiaries. By extending to such key employees the opportunity
to acquire proprietary interests in the Corporation and to
participate in its success, the Plan may be expected to benefit
the Corporation and its shareholders by making it possible for
the Corporation and its subsidiaries to attract and retain the
best available talent and by providing such key employees with
added incentives to increase the value of the Corporation s
stock.
2. Stock Subject to the Plan
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 ). Such Shares may be, in whole or in
part, as the Board shall from time to time determine, authorized
but unissued Shares, or issued Shares which shall have been
reacquired by the Corporation.
3. Administration
Subject to the express provisions of the Plan, the Plan
shall be administered by the Executive Compensation and Stock
Option Committee of the Board (the Committee ), and the
Committee shall have plenary authority, in its discretion, to
determine the individuals to whom, and the time or times at
which, options, if any, shall be granted, the type of option to
be granted (e.g., qualified or nonqualified) and the number of
Shares to be subject to an option. Subject to the express
provisions of the Plan, the Committee shall also have plenary
authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations regarding it, and to take whatever action
is necessary to carry out the purposes of the Plan. The
Committee s determinations on matters referred to in this Section
3 shall be conclusive.<PAGE>
4. The Committee
The Committee shall consist of three or more members of the
Board. The Committee shall be appointed by the Board, which may
from time to time designate the number to serve on the Committee,
appoint members of the Committee in substitution for members
previously appointed and fill vacancies, however caused, in the
Committee. No member of the Board while a member of the
Committee shall be eligible to receive an option under the Plan.
The Committee shall elect one of its members as its Chairman and
shall hold its meetings at such times and places as it may
determine. A majority of the members shall constitute a quorum.
Any determination reduced to writing and signed by all the
members of the Committee shall be fully as effective as if it had
been made by a majority vote at a meeting duly called and held.
The Committee may appoint a secretary, shall keep minutes of its
meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
5. Eligibility
Options may be granted only to key employees (which term as
used herein includes officers) of the Corporation and of its
subsidiary corporations (the subsidiaries ) as the term
subsidiary corporation is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended, (the Code ). For the
purposes of the Plan the term employee shall be an individual
with an employment relationship as defined in Section 421
(Regs. Section 1.421-7(h)) of the Code. A member of the Board or
of the board of directors of a subsidiary who is not also an
employee of the Corporation or of one of its subsidiaries shall
not be eligible to receive an option. Nothing contained in the
Plan shall be construed to limit the right of the Corporation to
grant options otherwise than under the Plan in connection with
(i) the employment of any person,(ii) the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the
business or assets of another corporation, firm or association,
including grants to employees thereof who become employees of the
Corporation or a subsidiary, or (iii) other proper corporate
purposes.
6. Nonqualified Stock Options
Unless it is designated a qualified option by the Committee,
any option granted under the Plan shall be nonqualified and shall
be in such form as the Committee may from time to time approve.
Any such nonqualified option shall be subject to the following
terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the provisions of the Plan, as
the Committee shall deem desirable:
(a) Option Price. The per share purchase price of Shares
purchasable under an option shall be determined by the Committee
in accordance with procedures established by the Committee;<PAGE>
provided however, that except for options granted to replace pre-
existing compensation or benefit programs, in no event shall more
than 10% of the shares reserved for issue under the Plan be the
subject of (i) options granted at less than fair market value on
the date of grant, and (ii) new options substituted for
previously granted options having higher option prices as
provided for in Section 9 hereof.
(b) Option Period. The term of option shall be fixed by
the Committee, but no option shall be exercisable after the
expiration of ten years from the date the option is granted.
(c) Exercisability. Options shall be exercisable at such
time or times as determined by the Committee at or subsequent to
grant; no option shall be exercisable during the year ending on
the day before the first anniversary date of the granting of the
option. The proceeds of sale of Shares subject to option are to
be added to the general funds of the Corporation. Except as
provided in Subsections (f), (g) and (h) of this Section 6, no
option may be exercised at any time unless the holder is then a
regular employee of the Corporation or a subsidiary and has
continuously remained an employee at all times since the date of
granting of the option. If any option granted under the Plan
shall expire or terminate for any reason without ever having been
exercised in full, the unissued shares subject thereto shall
again be available for the purposes of the Plan.
(d) Method of Exercise. Options which are exercisable may
be exercised in whole or in part at any time during the option
period, by completing and delivering to the Corporation an option
exercise form provided by the Corporation specifying the number
of Shares to be purchased. Such form shall be accompanied by
payment in full of the purchase price in cash. No Shares shall be
issued until full payment therefor has been made.
(e) Nontransferability of Options. No option shall be
transferable by the optionee otherwise than by will or by the
laws of descent and distribution, and such options shall be
exercisable, during the optionee s lifetime, only by the
optionee, provided, however, that with respect to options granted
on or after January 29, 1999, the Committee may, in its sole
discretion, authorize all or a portion of the options granted to
an optionee to be on terms which permit transfer to: (i) the
spouse, children or grandchildren of the optionee ( Immediate
Family Members ), (ii) a trust or trusts for the exclusive
benefit of Immediate Family Members, or (iii) a partnership in
which Immediate Family Members are the only partners, provided
that subsequent transfers of transferred options shall be
prohibited except by will or the laws of descent and
distribution. Following transfer, any such options shall
continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer.
(f) Termination by Reason of Death. If an optionee s
employment by the Corporation or any subsidiary terminates by
reason of death, as to those Shares with respect to which the
option had become exercisable (under the provisions of the
particular option) on the date of death, the stock option may
thereafter be exercised by the legal representative of the estate
or by the legatee of the optionee under the will of the optionee,
during a period of six months from the date of such death or
until the expiration of the stated period of the option,
whichever period is the shorter.
(g) Termination by Reason of Retirement or Permanent
Disability. If an optionee s employment by the Corporation or
any subsidiary terminates by reason of retirement or permanent
disability, as to those Shares with respect to which the option
had become exercisable (under the provisions of the particular
option) on the date of termination of employment, any stock
option held by such optionee may thereafter be exercised during a
period of three months from the date of such termination of
employment or the expiration of the stated period of the option,
whichever period is the shorter; provided, however, that if the
optionee dies within such three-month period, any unexercised
stock option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time
of death for a period of six months from the date of such death
or for the stated period of the option, whichever period is the
shorter.
(h) Other Termination. If an optionee s employment
terminates for any reason other than death, permanent disability,
or retirement, as to those Shares with respect to which the
option had become exercisable (under the provisions of the
particular option) on the date of termination of employment, any
option held by such optionee may thereafter be exercised during a
period of one month from the date of such termination of
employment or the expiration of the stated period of the option,
whichever period is shorter; provided, however, that if the
optionee dies within such one-month period, any unexercised
option held by such optionee shall thereafter be exercisable to
the extent to which is was exercisable at the time of death for a
period of six months from the date of such death or for the
stated period of the option, whichever period is the shorter.
(i) Option Buyout. The Committee may at any time offer to
repurchase an option (other than an option which has been held
for less than six months by an optionee who is subject to Section
16(b) of the Securities Exchange Act of 1934) based on such terms
and conditions as the Committee shall establish and communicate
to the optionee at the time that such offer is made.
(j) Special Provisions Governing Options Granted on or
after January 29, 1999. Notwithstanding the provisions of
Sections 6(f), 6(g) and 6(h), above, the following provisions
will apply to the exercise of options granted on or after January
29, 1999 ( 1999 Options ):<PAGE>
(1) If an optionee s employment terminates by reason of
retirement, that optionee may exercise any 1999 Option at any
time within three (3) years after such termination, but only to
the extent the optionee was entitled to exercise at the date of
such termination, and in any event not after the expiration of
the stated period of the 1999 Option; provided however, that the
Committee may, at or subsequent to grant, establish such longer
or shorter period as it may determine in its discretion, but in
any event not longer than five (5) years nor shorter than one (1)
year after the date of such termination. For purposes of this
Plan, retirement is defined as termination of service with
Furniture Brands at or after attainment of age 55 with not less
than ten years of service.
(2) If an optionee s employment terminates by reason of
disability, that optionee may exercise any 1999 Option at any
time within one (1) year after such termination, but only to the
extent the optionee was entitled to exercise at the date of such
termination, and in any event not after the expiration of the
stated period of the 1999 Option. For purposes of this Plan,
disability means the incapacity to attend to and perform
effectively one s duties and responsibilities which continues for
at least 26 weeks after its commencement, as determined by a
physician selected by Furniture Brands. A person shall be
considered disabled only if he or she furnishes such proof of
disability as the Committee may require.
(3) If an optionee s employment terminates by reason of
death while he or she is employed by Furniture Brands, or within
three (3) months after termination of such employment (or one (1)
year in the case of the termination of employment or service by
reason of disability, or five (5) years in the case of
termination of employment or service by reason of retirement),
any 1999 Option held by an optionee may be exercised by a legatee
or legatees under the optionee s last will, or by personal
representatives or distributees, at any time within one (1) year
after death, but only to the extent that the optionee was
entitled to exercise at the date of such death, and in any event
not after the expiration of the stated period of the 1999 Option.
(4) If an optionee s employment terminates for any reason
other than retirement, disability or death, that optionee may
exercise any 1999 Option at any time within three (3) months
after such termination, but only to the extent the optionee was
entitled to exercise at the date of such termination, and in any
event not after the expiration of the stated period of the 1999
Option.
7. Qualified Stock Options
Any option granted under the Plan shall, at the discretion
of the Committee, qualify as an incentive stock option as defined
in Section 422(b) of the Code and shall be in such form as the
Committee may from time to time approve. Any such qualified<PAGE>
option shall be subject to the following terms and conditions in
addition to those set forth in Section 6 and shall contain such
additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable:
(a) Eligibility. Incentive stock options shall not be
granted to any individual who, at the time the option is granted,
owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Corporation or its
parent corporation (as the term parent corporation is defined
in Section 424(e) of the Code) or the subsidiaries unless: l) the
option price is at least 110% of the fair market value of the
stock subject to the option and 2) the option states that it is
not exercisable after the expiration of five years from the date
of its grant.
(b) Limitation on Exercise of Options. The maximum
aggregate fair market value (determined at the time an option is
granted) of the Shares with respect to which qualified options
are exercisable for the first time by any Participant during any
calendar year (under all plans of the Company and its parent
corporation and subsidiaries) shall not exceed $100,000. If the
provisions of this Section limit the exercisability of certain
qualified options which would otherwise become exercisable on
account of termination of employment or a change of control, the
Committee, in its sole discretion, shall determine the times at
which such qualified options become exercisable so that the
provisions of this Section 7(b) are not violated; provided that
in no event shall any qualified option be exercisable more than
ten (10) years from the date of granting thereof (five (5) years
in the case of qualified options granted to ten percent
shareholders (described in Section 7(a)).
8. Adjustment Upon Changes in Capitalization, Etc.
The aggregate number and class of shares reserved under the
Plan, the number and class of shares subject to each option
granted pursuant to the Plan and/or the option price per share
payable under each such option shall be appropriately and
equitably adjusted in the event of: any reclassification or
increase or decrease in the number of the issued Shares of the
Corporation by reason of a split-up or consolidation of Shares;
the payment of a stock dividend; a recapitalization; a
combination or exchange of Shares; a spin-off; or any like
capital adjustment.
If the Corporation shall be reorganized or shall be merged
into or consolidated with any other corporation, each option, if
any, then outstanding under the Plan shall thereafter apply to
such number and kind of securities as would have been issuable by
reason of such reorganization, merger or consolidation to a
holder of the number of Shares which were subject to the option,
if any, immediately prior to such reorganization, merger or
consolidation.<PAGE>
In the event of the proposed dissolution or liquidation of
the Corporation or in the event of a proposed sale of
substantially all of the assets of the Corporation, each option,
if any, outstanding under the Plan shall terminate as of a date
to be fixed by the Committee and approved by the Board upon not
less than thirty days written notice to the optionee; provided,
however, that any option granted at least six months prior to
such event, if any, of any optionee who has been an employee for
one year or more prior to the date of such notice shall be
accelerated and such optionee shall be entitled to exercise such
option, in whole or in part, without regard to any installment
provision of the option, and provided further that said exercise
shall be made prior to the termination date fixed in said notice.
All adjustments under this Section 8 shall be made by the
Committee, subject to the approval of the Board, which action
shall be final and conclusive.
Anything to the contrary notwithstanding, upon a Change of
Control(as hereinafter defined) which occurs after the first
anniversary of the Effective Date (as defined in Section 12),
each option granted at least six months prior to such Change of
Control shall become immediately exercisable in full. As used
herein, Change of Control shall mean any of the following
events which occur more than one year after the first anniversary
of the Effective Date:
(a) The acquisition (other than from the Corporation) by
any person, entity or group , within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
Exchange Act ), excluding, for this purpose, the Corporation or
its subsidiaries, or any employee benefit plan of the Corporation
or its subsidiaries, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more
of either the then outstanding Shares or the combined voting
power of the Corporation s then outstanding voting securities
entitled to vote generally in the election of directors; or
(b) Individuals who, as of the first anniversary of the
Effective Date, constitute the Board (as of such date, the
Incumbent Board ), cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a
director subsequent to the first anniversary of the Effective
Date whose election, or nomination for election by the
Corporation s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Corporation, as such terms are used in Rule 14
all of Regulation 14A promulgated under the Exchange Act) shall
be considered as though such person were a member of the
Incumbent Board; or<PAGE>
(c) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with
respect to which persons who were the stockholders of the
Corporation immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own, directly or
indirectly, more than 50% of the combined voting power entitled
to vote generally in the election of directors of the
reorganized, merged or consolidated company s then outstanding
voting securities, or a liquidation or dissolution of the
Corporation or the sale of all or substantially all of the assets
of the Corporation.
9. Amendments and Termination
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which
would impair the rights of an optionee under an option without
the optionee s consent, or which without the approval of the
stockholders would: except as is provided in Section 8 of the
Plan, increase the total number of Shares reserved for the
purpose of the Plan; decrease the option price of any option to
less than 100% of the fair market value on the date of the
granting of the option; change the employees or class of
employees eligible to participate in the Plan; or extend the
maximum option period under Section 6(b) of the Plan.
The Committee may amend the terms of any option theretofore
granted, prospectively or retroactively, but no such amendment
shall impair the rights of any optionee without the consent of
the optionee. The Committee may also substitute new options for
previously granted options, including substitution for previously
granted options having higher option prices, subject to the
limitation set forth in Section 6(a) hereof.
10. General Provisions
(a) The Committee may require each person purchasing
Shares pursuant to an option under the Plan to represent to and
agree with the Corporation in writing that the optionee is
acquiring the Shares without a view to distribution thereof. The
certificates for such Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on
transfer.
(b) All certificates for Shares delivered under the Plan
shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Shares are
then listed, and any applicable federal or state securities law,
and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.<PAGE>
(c) Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is
required; and such arrangements may be either generally
applicable or applicable only in specific cases.
11. Taxes
Following exercise of an option, the optionee shall, no
later than the date as of which an amount related to the option
exercise first becomes includable in the gross income of the
optionee for federal income tax purposes, pay to the Corporation,
or make arrangements satisfactory to the Corporation regarding
payment of, any federal, state, or local taxes of any kind
required by law to be withheld with respect to such amount and
the Corporation and its subsidiaries shall, to the extent
permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the optionee.
12. Effective Date of Plan
This Plan shall be effective on the effective date of the
Joint Plan of Reorganization of the Corporation and its
subsidiaries ( Effective Date ). However, no option granted under
this Plan may be exercised in whole or in part until this Plan is
approved by the holders of a majority of the outstanding stock of
the Corporation entitled to vote on the issue, which approval
must occur within the twelve-month period after the Effective
Date. In the event such approval is not forthcoming within the
time specified, this Plan and any options granted pursuant to it
shall be null and void.
13. Term of Plan
No option shall be granted pursuant to the Plan more than
10 years after the Plan is approved by the Board of Directors of
the Corporation, but options theretofore granted may extend
beyond and be exercised after that date.
Adopted by the Board of Directors on January 20, 1992 (2,500,000
shares reserved for issuance)
Amended by the Board of Directors on January 26, 1993 (increase
shares to 3,500,000
and allow for below-market grants)
Approved by the stockholders on May 5, 1993
Amended by the Board of Directors on October 19, 1994 (spin-off
adjustments)
Amended by the Board of Directors on January 30, 1996
and approved by the stockholders on April 23, 1996 (increase
shares to 4,500,000)
Amended by the Board of Directors on March 1, 1996 (change name)
Amended by the Board of Directors on April 23, 1996 (limit below-
market grants to 10%)
Amended by the Board of Directors on January 28, 1997
and approved by the stockholders on April 29, 1997 (increase
shares to 5,500,000)
Amended by the Board of Directors on January 29, 1998 (accord
termination and transferability
provisions with 1999 Plan)<PAGE>
Exhibit 10(b)
FURNITURE BRANDS INTERNATIONAL, INC.
1999 LONG-TERM INCENTIVE PLAN
1. PURPOSE. The purpose of the 1999 Long-Term Incentive
Plan (the Plan ) of Furniture Brands International, Inc. (the
Furniture Brands ) is to promote the interests of Furniture
Brands and its stockholders (i) by attracting and retaining
exceptional executive personnel and other key employees of
Furniture Brands, (ii) by motivating such key employees to remain
in the employ of Furniture Brands and to work to the best of
their abilities for the achievement of Furniture Brands
strategic growth objectives, and (iii) by encouraging ownership
of Furniture Brands Common Stock ( Common Stock or "Shares") by
such key employees. Furniture Brands intends to accomplish these
purposes by awarding to such key employees long-term, equity-
based incentives, which, if performance objectives and/or
service requirements with Furniture Brands are achieved, will
permit them to share in Furniture Brands success.
2. PARTICIPANTS. (a) Participants in the Plan
( Participants ) shall be those full time employees of Furniture
Brands whom the Committee (as herein defined) determines, in its
discretion, to be key employees important to the growth of
Furniture Brands, and to whom the Committee shall make any award
under the Plan. At the discretion of the Committee, outside
directors of Furniture Brands may also be Participants in the
Plan. As used in this Plan, Furniture Brands" includes all
subsidiaries and divisions of Furniture Brands, and any other
entities in which Furniture Brands or one of its subsidiaries has
a significant equity or other interest as determined by the
Committee. Awards made under the Plan shall not be affected by
any change of employment so long as the Participant continues to
be an employee of Furniture Brands.
(b) No person shall have any claim or right to receive
an award under the Plan, and nothing in the Plan or in any award
made pursuant to the Plan shall alter the terms of any
participant's employment or confer on any Participant any right
to continue in the employ of Furniture Brands or interfere in any
way with the right of Furniture Brands to terminate his or her
employment at any time.
3. ADMINISTRATION. (a) The Plan shall be administered
by the Executive Compensation and Stock Option Committee (the
Committee ) of the Board of Directors (the Board") of Furniture
Brands, or such other committee as the Board may determine,
provided that the Committee shall consist of two or more members
who are "Non-Employee Directors" as defined in Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and who are "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").<PAGE>
(b) Subject to the express provisions of the Plan, the
Committee shall have plenary authority, in its discretion, to
determine the individuals to whom and the times at which awards
shall be made under the Plan, the number of Shares subject to
each award, and the terms and provisions of each award. In
making such determinations the Committee may take into account
any factors that the Committee, in its discretion, shall deem
relevant. Subject to the express provisions of the Plan, the
Committee shall also have plenary authority to interpret the
Plan, to prescribe, amend and rescind rules relating to it, and
to make all other determinations which the Committee believes
necessary or advisable for the proper administration of the Plan.
The Committee's determinations on matters relating to the Plan
shall be final and conclusive on Furniture Brands and all
Participants. No member of the Committee shall be liable to any
person for any action taken or omitted in connection with the
interpretation and administration of the Plan unless attributable
to willful misconduct or lack of good faith.
4. SHARES COVERED BY THE PLAN. (a) The number of
Shares allocated to and reserved for award under the Plan shall
be the total of: (i) 2,250,000 Shares, plus (ii) all Shares which
are reserved for issuance and available for award in the
Furniture Brands 1992 Stock Option Plan (the 1992 Plan ) as of
the Effective Date (as defined herein), plus (iii) all Shares
which become available for award (due to cancellation or
otherwise) under the 1992 Stock Option Plan before or after the
Effective Date. The maximum aggregate number of stock options
and Stock Appreciation Rights which may be awarded to a
Participant in any given year shall be 250,000 Shares, and the
maximum aggregate number of Performance Shares and Shares of
Restricted Stock which may be awarded to a Participant for any
given performance or restriction period shall be 250,000 Shares.
Throughout the term of the Plan, not more than 750,000 of the
Shares allocated to and reserved for award under the Plan shall
be awarded as Performance Shares or Shares of Restricted Stock.
(b) Any Shares covered by any award or portion of an
award made under the Plan, which is forfeited, canceled or
expires shall be deemed not to have been delivered for purposes
of determining the maximum number of Shares available for
delivery under the Plan, and the Committee may again award to an
existing or new Participant the Shares so canceled or forfeited.
(c) The number of Shares reserved and available for
award under the Plan, the number of Shares covered by each
outstanding award, the price per share in each award and
performance standards may all be appropriately and equitably
adjusted by the Committee for any change in the Common Stock
resulting from stock dividends, stock splits, spin-offs,
combination or exchange of Shares, reclassification,
reorganization, merger, consolidation, recapitalization and
similar matters affecting outstanding Shares. The determination
of the Committee shall be final and conclusive in this regard. <PAGE>
No fractional Shares shall be awarded or issued under the Plan;
cash may be paid in lieu of any fractional Shares in settlement
of awards. In the event Furniture Brands enters into a
transaction described in Section 424(a) of the Code with any
other corporation, the Committee shall make awards under the Plan
to employees or former employees of such corporation in
substitution of awards previously made to them upon such terms
and conditions as shall be necessary to qualify such award as a
substitution described in Section 424(a) of the Code.
(d) Furniture Brands will allocate and reserve in each
fiscal year a sufficient number of Shares for issuance upon the
exercise of options and Stock Appreciation Rights awarded under
the Plan. Furniture Brands may, in its discretion, use Shares
held in the treasury or authorized but unissued Shares for the
Plan.
5. TIME OF AWARDS. Any award under this Plan shall be
deemed to be made on the date on which the Committee takes formal
action with respect to the award, provided that such award is
evidenced by a written communication duly executed on behalf of
Furniture Brands and delivered to the Participant within a
reasonable time after the date of the Committee action.
6. STOCK OPTIONS.
(a) Nature of Awards. The Committee may, from time to
time, award to Participants options to purchase Shares. Any
option awarded under the Plan may, at the discretion of the
Committee, qualify as an incentive stock option as defined in
Section 422(b) of the Code ("Incentive Stock Option"), provided,
however, that outside directors of Furniture Brands may not
receive Incentive Stock Options. Unless it is designated an
Incentive Stock Option by the Committee, any option awarded under
the Plan shall be non-qualified. Any option awarded under the
Plan shall be subject to the provisions of this Plan and shall
contain such additional terms and conditions, not inconsistent
with the provisions of the Plan, as the Committee shall deem
desirable.
(b) Option Price. The Committee shall determine the
exercise price of any option granted under the Plan, provided
however, that except for options awarded to replace pre-existing
compensation or benefit programs, in no event shall any options
be awarded at less than Fair Market Value at the time of grant.
"Fair Market Value" for all purposes under this Plan shall be the
closing price of Furniture Brands Common Stock as reported on
the New York Stock Exchange Composite Tape for the day in
question ( Closing Price ); provided, however, that, in the
absence of a Closing Price, the Committee may adopt any other
comparable criteria for the determination of Fair Market Value as
it may determine to be appropriate.
(c) Payment of Option Prices. The exercise price is to<PAGE>
be paid in full upon the exercise of the option, either (i) in
cash, (ii) pursuant to a cashless exercise process offered by
Furniture Brands, (iii) in the discretion of the Committee, by
the tender either actually or by attestation to Furniture Brands
of Shares owned by the Participant and registered in the
Participant's name or held for the Participant's benefit by a
registered holder, having a Fair Market Value equal to the
aggregate exercise price of the options being exercised, or (iv)
in the discretion of the Committee, by any combination of the
payment methods specified in clauses (i), (ii) or (iii) above.
Provided, however, that a Participant may not tender Shares in
exercise of an Incentive Stock Option if the Participant acquired
such Shares through the exercise of an Incentive Stock Option or
an employee stock purchase plan described in Section 423 of the
Code, unless (i) the Participant has held such Shares for at
least one (1) year, and (ii) at least two (2) years have elapsed
since the option was awarded. The cash proceeds derived from the
exercise of options are to be added to the general funds of
Furniture Brands.
(d) Taxes. Following exercise of an option, the
Participant shall, no later than the date as of which an amount
related to the option exercise first becomes includable in the
gross income of the Participant for federal income tax purposes,
pay to Furniture Brands, or make arrangements satisfactory to
Furniture Brands regarding payment of, any federal, state, or
local taxes of any kind required by law to be withheld with
respect to such amount. Furniture Brands shall have the right at
the time of exercise to deduct such taxes or to withhold
sufficient Shares to satisfy Furniture Brands obligation to
withhold for federal, state and local taxes on such exercise.
(e) Limitations Applicable to Incentive Stock Options.
The maximum aggregate Fair Market Value (determined at the time
an option is awarded) of Shares with respect to which any
Participant may exercise Incentive Stock Options for the first
time during any calendar year (under all plans of Furniture
Brands and its Subsidiaries) shall not exceed the amount
specified in Section 422(d) of the Code. If the provisions of
this Section limit the exercisability of certain Incentive Stock
Options which would otherwise become exercisable on account of
termination of employment or a Change of Control (as defined
herein), the Committee, in its sole discretion, shall determine
the time at which such Incentive Stock Options become exercisable
so that the provisions of this Section are not violated. The
Committee may not award Incentive Stock Options to any individual
who, at the time the option is awarded, owns stock possessing
more than ten percent (10%) of the total combined voting power of
all classes of stock of Furniture Brands unless: (i) the Purchase
Price is at least 110% of the Fair Market Value of the Shares
subject to the option, and (ii) the option states that it is not
exercisable after the expiration of five (5) years from the date
of award.<PAGE>
(f) Exercise of Options. The Committee shall fix the
term of each option at the time of award, but no option shall be
exercisable after the expiration of ten (10) years from the date
of award. Within such limit, options will be exercisable at such
time or times, and subject to such restrictions and conditions,
as the Committee shall determine, at or subsequent to grant,
which restrictions and conditions need not be uniform for all
Participants; provided, however, that no option shall be
exercisable before the first anniversary date of the award; and
provided, further, that, except as provided in Paragraph (g) of
this Section 6, no option may be exercised unless the Participant
is at that time a full-time employee of Furniture Brands or a
director of Furniture Brands and has been so employed or engaged
continuously since the date of award.
(g) Termination of Employment or Service as an Outside
Director.
(1) If a Participant's employment (or service as an
outside director) terminates by reason of retirement, that
Participant may exercise any option at any time within three (3)
years after such termination, but only to the extent the
Participant was entitled to exercise at the date of such
termination, and in any event not after the expiration of the
stated period of the option; provided however, that the Committee
may, at or subsequent to grant, establish such longer or shorter
period as it may determine in its discretion, but in any event
not longer than five (5) years nor shorter than one (1) year
after the date of such termination. For purposes of this Plan,
retirement is defined as termination of service with Furniture
Brands at or after attainment of age 55 with not less than ten
years of service.
(2) If a Participant's employment (or service as an
outside director) terminates by reason of disability, that
Participant may exercise any option at any time within one (1)
year after such termination, but only to the extent the
Participant was entitled to exercise at the date of such
termination, and in any event not after the expiration of the
stated period of the option. For purposes of this Plan,
"disability" means the incapacity to attend to and perform
effectively one's duties and responsibilities which continues for
at least 26 weeks after its commencement, as determined by a
physician selected by Furniture Brands. A person shall be
considered disabled only if he or she furnishes such proof of
disability as the Committee may require.
(3) If a Participant's employment (or service as an
outside director) terminates by reason of death while he or she
is employed by or serving as an outside director of Furniture
Brands, or within three (3) months after termination of such
employment or service (or one (1) year in the case of the
termination of employment or service by reason of disability, or
five (5) years in the case of termination of employment or<PAGE>
service by reason of retirement), any option held by a
Participant may be exercised by a legatee or legatees under the
Participant's last will, or by personal representatives or
distributees, at any time within one (1) year after death, but
only to the extent that the Participant was entitled to exercise
at the date of such death, and in any event not after the
expiration of the stated period of the option.
(4) If a Participant's employment (or service as an
outside director) terminates for any reason other than
retirement, disability or death, that Participant may exercise
any option at any time within three (3) months after such
termination, but only to the extent the Participant was entitled
to exercise at the date of such termination, and in any event not
after the expiration of the stated period of the option.
(h) Option Repurchase. The Committee may at any time
offer to repurchase an option (other than an option which has
been held for less than six months by a Participant who is
subject to Section 16(b) of the Securities Exchange Act of 1934)
on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time the offer is made.
(i) Restrictions on Shares. The Committee may require
each Participant exercising an option under the Plan to represent
to Furniture Brands in writing that he/she is not acquiring the
Shares with a view to distribution thereof. The certificates for
such Shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer. All
certificates for Shares delivered under the Plan shall be subject
to such stock-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission, any
stock exchange upon which the Shares are then listed, and any
applicable federal or state securities law, and the Committee may
cause a legend to be put on any such certificates to make
appropriate reference to such restrictions.
(j) Transferability of Options. Each option awarded
under the Plan shall be non-transferable otherwise than by will
or the laws of descent and distribution, provided, however, that
the Committee may, in its sole discretion, authorize all or a
portion of the options granted to a Participant to be on terms
which permit transfer to: (i) the spouse, children or
grandchildren of the Participant ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of Immediate
Family Members, (iii) a partnership in which Immediate Family
Members are the only partners, or (iv) a former spouse pursuant
to a qualified domestic relations order, provided that subsequent
transfers of transferred options shall be prohibited except by
will or the laws of descent and distribution. Following
transfer, any such options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to
transfer.<PAGE>
7. STOCK APPRECIATION RIGHTS.
(a) Tandem Stock Appreciation Rights. (a) The
Committee may award Tandem Stock Appreciation Rights along with
the award of any stock option under the Plan. A Tandem Stock
Appreciation Right shall be the right of the option holder to
surrender the related stock option and to receive from Furniture
Brands cash and/or Shares equal to the excess of the Fair Market
Value per Share on the date the Right is exercised over the
exercise price of the related option. Tandem Stock Appreciation
Rights may be granted at any time prior to the exercise or
termination of the related stock options; provided, however that
a Tandem Stock Appreciation Right awarded in relation to an
Incentive Stock Option must be granted concurrently with that
Incentive Stock Option. Tandem Stock Appreciation Rights may be
exercised only (i) when the related stock option is also
exercisable, (ii) when the Fair Market Value per Share exceeds
the exercise price of the related option, and (iii) by surrender
of the related option for cancellation.
(b) Free-Standing Stock Appreciation Rights. The
Committee may also award Free-Standing Stock Appreciation Rights.
A Free-Standing Stock Appreciation Right shall not relate to any
particular option award, but shall be the right of a Participant
to receive from Furniture Brands cash and/or Shares equal to the
excess of the Fair Market Value per Share on the date the Right
is exercised over the "Base Price" established by the Committee
at the time of award. Subject to the same limitations as are
included in Section 6(c) with respect to below-market grants of
options, the Base Price may be equal to or greater than or less
than the Fair Market Value per Share on the date of award.
Successive awards of Free-Standing Stock Appreciation Rights may
be made to the same Participant regardless of whether Rights
previously awarded to the Participant remain unexercised. The
Committee shall fix the term of each Free-Standing Stock
Appreciation Right at the time of award, but no Free-Standing
Stock Appreciation Right awarded hereunder shall be exercisable
after the expiration of ten (10) years from the date of award.
(c) Procedure for Award. Each award of a Stock
Appreciation Right shall be evidenced by a writing executed on
behalf of Furniture Brands by an officer and delivered to the
Participant, which writing shall describe the Stock Appreciation
Rights, identify the related stock options (if applicable), state
that such Stock Appreciation Rights are subject to all of the
terms and conditions of this Plan, and contain such other terms
and conditions not inconsistent with this Plan, as the Committee
may approve.
(d) Exercise and Payment. A Stock Appreciation Right
shall be exercised by the delivery to Furniture Brands of a
written notice which shall state that the Participant elects to
exercise his or her Stock Appreciation Right as to the number of
Shares specified in the notice. In the discretion of the<PAGE>
Committee, Stock Appreciation Right award amounts shall be
payable in cash or in Shares or in any combination thereof.
(e) Other Provisions of Plan Applicable. All provisions
of the Plan applicable to options awarded under the Plan shall
apply with equal effect to Stock Appreciation Rights.
8. PERFORMANCE SHARES.
(a) Performance Shares; Performance Period. The
Committee may award Shares covered by the Plan as units
representing Performance Shares. Performance Shares represent
the right to receive future payment contingent on both
continuation of service with Furniture Brands and the achievement
of specified performance objectives which are established at the
time of award. No Shares will be issued at the time of an award
of Performance Shares, but the award will represent the right to
receive payment if the performance objectives are achieved.
Performance objectives need not be the same in respect of all
Participants and may be established separately for Furniture
Brands as a whole or for its subsidiaries or portions thereof.
The performance objectives shall be based upon one or more of the
following criteria: sales, pre-tax earnings, net earnings,
earnings per share, earnings per share growth, operating profit
margin, gross profit margin, cash flow, return on equity, asset
management, and total shareholder return. The performance
objectives may include or exclude specified items of an unusual,
non-recurring or extraordinary nature. The performance period
for which achievement of any performance objective shall be
measured shall not be less than three years. Performance periods
may overlap one another, and a Participant may simultaneously
hold awards covering overlapping periods with different
performance goals.
(b) Performance Share Awards. Performance Share awards
shall be made as follows:
(1) Performance Programs; Initial Awards. The Committee
may establish one or more performance programs each with
specified objectives and a specified performance period.
Participants may be awarded Performance Shares in any one or more
of the performance programs.
(2) Subsequent Awards. During the term of a performance
program, additional Performance Shares may be awarded (subject to
the maximum number of Shares allocated to and reserved for award
under the Plan), either (i) to new Participants in the program,
or (ii) if circumstances so warrant, to any one or more of the
initial Participants in the program. In respect of such
additional awards the Committee may make such adjustments therein
as it may deem reasonable on account of any lesser period of
participation in the program by the holder of any subsequent
award.<PAGE>
(3) Notice of Awards. Upon the making of any award, the
Committee shall advise the Participant in writing of the number
of Performance Shares awarded and of the terms of the award.
(c) Performance Share Payment. If the applicable
targeted performance objective is met, the Participant shall be
entitled to receive an amount equal to the Fair Market Value of
one Share on the date of the expiration of the applicable
performance period multiplied by the number of Performance Shares
held. At the time it establishes the targeted performance
objective, the Committee may (i) establish a minimum performance
target below which no payment will be made, (ii) provide for
payment of less than Fair Market Value if the minimum performance
target is met but the targeted performance objective is not
achieved; and/or (iii) provide for payment of greater than Fair
Market Value if the targeted performance objective is exceeded,
up to a maximum payment of two times the targeted performance
payment. The Committee may provide that any awards under the
Plan earn dividend equivalents, and such dividend equivalents
will be credited to a Participant's account. Payment for
Performance Shares may be in Shares, in cash, in stock equivalent
units, or in any combination thereof as determined by the
Committee, and any such payment may be subject to such terms,
conditions or restrictions as the Committee may impose.
(d) Time of Payment. Subject to the deferral provisions
of Section 12 hereof, distribution of amounts to which a
Participant is entitled after the expiration of a performance
period shall be made as soon as practicable after the holder of
the Performance Shares becomes entitled thereto, unless the terms
of that award specify that payment of the Performance Shares is
subject to specified vesting conditions after attainment of the
performance objective, in which case payment shall be delayed
until such vesting conditions have been satisfied.
(e) Conditions to Payments. In order to be entitled to
receive any payment on Performance Shares, a Participant must be
in the employ of Furniture Brands on the expiration of the
relevant performance period and must have been continuously in
the employ of Furniture Brands from the time of the date of the
award. No vested interest in any payment under the Performance
Shares shall accrue during the performance period and no payment
in respect of the Performance Shares shall be required to be made
to any Participant whose employment with Furniture Brands is
terminated, with or without cause, prior to the time such
Participant is entitled to receive a distribution under the Plan;
provided, however, that (i) if a Participant in the Plan retires
prior to the time such Participant is to receive distribution on
any Performance Shares awarded, the amount of payment to such
Participant shall be pro-rated in such manner as the Committee
shall reasonably determine, and (ii) the Committee, in its
absolute discretion, may provide for such pro-rata or other
payment (or no payment), as it may determine to a Participant
whose employment terminates (other than by reason of retirement)<PAGE>
prior to the time the Participant is entitled to receive
distribution of Performance Shares. If termination is on account
of death, the Committee may provide for payment of any
distribution it authorizes to the Participant's surviving spouse,
heirs or estate.
(f) Determination of Achievement of Objectives. The
Committee shall determine whether any performance objective of
any program has been met. In making this determination, the
Committee shall apply the accounting results, as audited at the
end of any fiscal year by Furniture Brands independent certified
accountants, but may adjust such results for unusual,
nonrecurring or extraordinary items. When making a Performance
Share payment, the Committee shall certify in writing the
achievement of the applicable performance objectives and the
amount of payments to be made to each Participant.
9. RESTRICTED STOCK. The Committee may make awards of
Restricted Stock under the Plan. Each award of Restricted Stock
shall constitute an immediate transfer of the ownership of Shares
to the Participant in consideration of the performance of
services, entitling each Participant to voting, dividend and
other ownership rights, but subject to substantial risk of
forfeiture (within the meaning of Section 83 of the Code).
Awards of Restricted Stock shall be forfeitable if the
Participant resigns or is discharged from the employ of Furniture
Brands, with or without cause, during the restriction period,
which shall in no event be less than three years. The Restricted
Stock shall be forfeitable on such other terms and conditions and
shall be subject to such additional restrictions as may be
specified by the Committee in the notice of award. After the
date of award, the Committee, in its discretion, may waive any of
the terms and conditions thereof and may reduce the restriction
period applicable thereto; provided, however, that the Committee
shall not reduce such period to less than three years.
10. OTHER LONG-TERM INCENTIVES. Subject to the maximum
number of Shares allocated to and reserved for award under the
Plan, in addition to stock options, Stock Appreciation Rights,
Performance Shares and Restricted Stock as described herein, the
Committee may, in its sole discretion, award other equity-based,
long-term incentives under the Plan, establishing therefor such
terms and conditions as it may deem appropriate under the
circumstances.
11. CHANGE IN CONTROL. Any provision herein to the
contrary notwithstanding, in the event of a Change of Control (as
defined below) (i) all options and Stock Appreciation Rights
awarded prior to such Change of Control shall become fully
exercisable, (ii) Participants then holding awards of Performance
Shares shall be entitled to receive such Performance Shares (or
equivalent value in Shares or in cash) free of any conditions as
if the specified performance periods had elapsed and the
performance objectives relating thereto had been fully achieved,<PAGE>
and (iii) the restriction period applicable to all Restricted
Stock then outstanding shall be accelerated and be deemed to be
satisfied so that the holders of such Restricted Stock shall
immediately hold said Restricted Stock fully vested and without
any continuing restrictions thereon, excepting, however, such
restrictions, if any, as may then be applicable under state or
federal securities laws. "Change of Control'' as used in this
Plan shall mean:
(a) The purchase or other acquisition (other than from
Furniture Brands) by any person, entity or group of persons,
within the meaning of Section 13(d) or 14(d) of the 1934 Act
(excluding, for this purpose, Furniture Brands or its
subsidiaries or any employee benefit plan of Furniture Brands or
its subsidiaries), of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of 25% or more of either the
then-outstanding Shares or the combined voting power of Furniture
Brands then-outstanding voting securities entitled to vote
generally in the election of directors; or
(b) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any
person who becomes a director subsequent to the Effective Date
whose election or nomination for election by Furniture Brands
stockholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an
individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of directors of Furniture Brands) shall be considered as
though such person were a member of the Incumbent Board; or
(c) Approval by the stockholders of Furniture Brands of
(i) a reorganization, merger, or consolidation, in each case with
respect to which persons who were the stockholders of Furniture
Brands immediately prior to such reorganization, merger or
consolidation would not immediately thereafter own, directly or
indirectly, more than 50% of the combined voting power entitled
to vote generally in the election of directors of the
reorganized, merged or consolidated corporation's
then-outstanding voting securities, or (ii) a liquidation or
dissolution of Furniture Brands or (iii) the sale of all or
substantially all of Furniture Brands' assets.
12. DEFERRAL. The Committee may permit Participants to
elect to defer the issuance of Shares or the settlement of any
awards under this Plan in cash under such rules and procedures as
it may establish under a separate deferred compensation plan.
13. FOREIGN PARTICIPATION. The Committee may provide for
such special terms for awards to Participants who are foreign
nationals, or who are employed by Furniture Brands outside the
United States of America, as the Committee may consider necessary
or appropriate to accommodate differences in local law, tax<PAGE>
policy or custom.
14. AMENDMENT AND TERMINATION. (a) The Committee may at
any time terminate the Plan or make such modifications of the
Plan as it shall deem advisable; provided, however, that the
Committee may not, without further approval by the Furniture
Brands stockholders, make any modifications which (i) would
increase the total number of Shares allocated to and reserved for
award under the Plan, or (ii) by applicable law or rule, require
such approval. No termination or amendment of the Plan may,
without the consent of the Participant to whom any award shall
theretofore have been made, adversely affect the rights of such
Participant under such award.
(b) The Committee may amend the terms of any award under
the Plan, prospectively or retroactively, but no such amendment
shall impair the rights of any Participant without the consent of
the Participant, and in no case shall the terms of any option be
amended to reduce the exercise price to a price less than the
Fair Market Value on the original date of grant.
15. PAYMENTS IN COMMON STOCK; SOURCE OF SHARES. (a) It is
anticipated that any Shares delivered pursuant to the terms of
the Plan will be Treasury Shares. The Committee, however, may
instead utilize authorized but unissued Shares or may purchase
Shares on the open market; and, subject to the approval of this
Plan by the stockholders of Furniture Brands, the Board and
officers of Furniture Brands are authorized to take such action
as may be necessary to provide for the issuance of any or all of
the Shares which may be necessary to satisfy Furniture Brands
obligations under the Plan and to cause said Shares to be listed
on the New York and any other stock exchanges on which the Common
Stock may at such time be listed.
(b) Shares delivered to Participants under the Plan in
satisfaction of Performance Share rights, and other Incentive
Shares after the release of any conditions applicable thereto may
nonetheless thereafter be restricted stock under the Securities
Act of 1933, as presently amended, (the ``1933 Act'') and the
certificates for such Shares may have a legend imprinted thereon
restricting the resale, hypothecation or further transfer of said
Shares except in a registered offering or pursuant to an
available exemption from registration.
16. EFFECTIVE DATE; TERM. (a) The Plan will become
effective upon adoption by the Board of Directors of Furniture
Brands on January 29, 1999 (the "Effective Date"), subject to
approval of the Plan by the stockholders of Furniture Brands
within twelve (12) months of such date. Awards under the Plan
may be made before such stockholder approval (but may not be
exercisable before such approval), and if such approval is not
obtained, this Plan and such awards shall be void and of no force
or effect.<PAGE>
(b) The Plan shall terminate ten (10) years after the
Effective Date, and no awards shall be made under the Plan after
the expiration of such ten-year period. During the term of the
Plan, awards may be made with terms, conditions or restrictions
extending beyond the end of the term of the Plan. Conditions and
restrictions in respect of awards made under the Plan during the
term of the Plan shall continue in effect after the termination
of the Plan until they shall be satisfied or forfeited in
accordance with their terms.
17. SEPARABILITY OF PROVISIONS. With respect to
Participants subject to Section 16 of the 1934 Act, this Plan and
transactions under the Plan are intended to comply with all
applicable provisions of Rule 16b-3 under the 1934 Act or its
successors. To the extent that any provision of the Plan or
action of the Committee fails to so comply, it shall be deemed
null and void to the extent permitted by law and deemed advisable
by the Committee, and the validity, legality and enforceability
of the remaining provisions of the Plan shall not be in any way
affected or impaired thereby. To the extent permissible by law,
any provision which could be deemed null and void shall first be
construed, interpreted or revised retroactively to permit this
Plan to be construed in compliance with all applicable laws so as
to foster the intent of the Plan
18. GOVERNING LAW. To the extent that federal laws do not
otherwise control, the Plan shall be construed in accordance with
and governed by the laws of the State of Delaware.
Adopted by the Board of Directors of Furniture Brands
International, Inc. on January 29, 1999.<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS
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0
0
<COMMON> 52,277
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