EMPLOYMENT AGREEMENT

AMENDMENT TO EMPLOYMENT AGREEMENT

FORM OF CHANGE IN CONTROL AGREEMENT

EXECUTIVE SEVERANCE PLAN

 

 

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is effective as of June 18, 2007, by and between Furniture Brands International, Inc., a Delaware corporation (“Company”) and Ralph Scozzafava (“Executive”).

 

WHEREAS, Executive desires to serve as the Vice Chairman, a member of the Board, and Chief Executive Officer Designate of the Company and later as Chairman and Chief Executive Officer of the Company, and in exchange for the protection and other consideration set forth in this Agreement, is willing to give the Company, under certain circumstances, his covenant not to compete, and the Company desires to so employ Executive.

 

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the Company and Executive hereby agree as follows:

 

ARTICLE I

Definitions

 

1.1

Definitions. As used herein, the following terms shall have the following meanings.

 

(a)

“Board” means the Board of Directors of the Company.

 

(b)

“Cause” means (i) engaging by Executive in willful misconduct which is materially injurious to Company; (ii) conviction of Executive by a court of competent jurisdiction of, or entry of a plea of nolo contendere with respect to a felony; (iii) engaging by Executive in fraud, material dishonesty or gross misconduct in connection with the business of Company; (iv) engaging by Executive in any act of moral turpitude reasonably likely to materially and adversely affect Company or its business; or (v) Executive’s current chronic abuse of or dependency on alcohol or drugs (illicit or otherwise). No act or omission of Executive shall be “willful” if conducted in good faith or with a reasonable belief that such conduct was in the best interests of the Company. No termination shall be for “Cause” unless approved by a resolution of a majority of the members of the Board after reasonable prior notice to Executive and an opportunity to appear (with the assistance of counsel) before the Board.

 

(c)

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

 

(d)

“Confidential Information” as used in Section 2.5, shall mean all technical and business information of the Company, or which is learned or acquired by the Company from others with whom the Company has a business relationship in which, and as a result of which, similar information is revealed to the Company, whether patentable or not, which is of a confidential, trade secret and/or proprietary character and which is either developed by Executive (alone or with others) or to which Executive shall have had access during his employment. Confidential Information shall include (among other things) all confidential data, designs, plans, notes, memoranda, work sheets, formulas, processes, and Customer and supplier lists, but shall not include Executive’s rolodex (or other tangible or electronic address book).

 

(e)

“Constructive Termination” shall mean Executive’s voluntary termination of employment with the Company as a result of:

 

 

(i)

a material diminution in Executive’s title, authority, duties, or responsibilities, or a change in Executive’s supervisory reporting relationship within the Company (which, for the avoidance of doubt, includes: (A) any removal of Executive from,

 

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or failure to elect or reelect Executive to, the Board at any time, and (B) following a Change of Control, a status and reporting relationship in which Executive is not the senior-most officer, reporting to the board of directors, of the top-most parent company of which the Company may be the parent, subsidiary or a division thereof following such Change of Control);

 

(ii)

a change, caused by the Company, in geographic location of greater than 50 miles of the location at which Executive primarily performs services for the Company on the Commencement Date;

 

 

(iii)

a material reduction in Executive’s base pay, incentive compensation, or benefits;

 

 

(iv)

failure of the Company to promote Executive to Chief Executive Officer by January 1, 2008 and to Chairman by May 1, 2008.

No voluntary termination by Executive shall constitute a “Constructive Termination” unless he shall have given (x) notice of the proposed termination due to Constructive Termination, with particulars, to the Company not later than 90 days following the initial occurrence of the condition above forming the basis for such termination and (y) the Company an opportunity for 30 days after such notice within which to remedy such condition, in which such condition is not remedied.

(f)

“Customer” means any Person or entity to whom the Company has sold any products (i) in the case of on-going employment, during the twenty-four (24) calendar months immediately preceding any dispute under Section 2.6 of this Agreement, and, (ii) in the case of the employment having ended, the twenty-four (24) calendar months preceding Executive’s termination of employment.

 

(g)

“Person” means an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization, or a governmental entity or any department, agency or political subdivision thereof.

 

(h)

“Severance Payment” shall mean the aggregate gross amount of severance payments determined under Section 2.4 (c).

 

(i)

“Termination Date” shall mean the date on which Executive incurs a termination of employment with the Company.

 

ARTICLE II

Employment

 

2.1

Employment. Company agrees to employ Executive and Executive hereby accepts such employment with the Company, upon the terms and conditions set forth in this Agreement, for the period beginning on June 18, 2007 (“Commencement Date”) and ending as provided in Section 2.4 of this Agreement (the “Employment Period”).

 

2.2

Position and Duties.

 

(a)

Commencing on the Commencement Date, Executive shall serve as Vice Chairman and Chief Executive Officer Designate of the Company, and no later than January 1, 2008, as Vice Chairman and Chief Executive Officer of the Company, and no later than May 1, 2008, as Chairman and Chief Executive Officer of the Company. On the Commencement Date, Executive shall be appointed as a member of the Board. Executive, subject to the control of the Board, shall have general supervision and control over the business, property and affairs of the Company and perform such duties as may be assigned to him by the Board.

 

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(b)

Executive shall devote his best efforts and his full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. In the performance of his duties hereunder, Executive shall at all times report and be subject to the lawful direction of the Board and perform his duties hereunder subject to and in accordance with the resolutions or any other determinations of the Board and the certificate of incorporation and by-laws of the Company and applicable law. During the Employment Period, Executive shall not become an employee of any Person or entity other than the Company. This section shall not be construed to prohibit Executive from serving on the Board of Directors of one or more other entities (with the consent of the Board in the case of a for-profit entity) or from investing in a business to the extent consistent with the provisions of Section 2.6.

 

2.3

Compensation. Executive shall be entitled to the following compensation.

 

(a)

Annual Salary:

Executive shall receive a base salary at the annual rate of $700,000 payable in bi-weekly installments. The Base Salary level shall be reviewed as Executive moves into the position of Chairman and Chief Executive Officer of the Company, and annually thereafter, and increased (but not decreased) in the discretion of the Board (any such original or increased amount being Executive’s “Base Salary” thereafter).

 

(b)

Annual Incentive:

Executive shall eligible for an annual target incentive of 100% of Executive’s Base Salary. For 2007, Executive’s incentive will be guaranteed at 100% of Executive’s Base Salary, prorated for the full months served during 2007. For 2008 and thereafter, Executive’s incentive will be based on the provisions of the Company’s Short-Term Incentive Plan.

 

(c)

Long-Term
Compensation:


Executive shall be eligible for an annual long-term compensation target award of 200% of Executive’s Base Salary, which may be payable in a combination of cash and stock options.

 

(d)

Long-Term Cash
Plan:


The Company’s Special Long-Term Performance Cash Plan covers the performance period 2007-2008. Executive shall be eligible, under this Plan for a long-term incentive target for the 2007 performance period of $700,000, prorated for the full months served during 2007. For the full performance period 2007-08, Executive’s long-term incentive target shall be prorated for the full months served during 2007-2008. The actual payout for each performance period may be higher or lower depending on business results, with a payout limit of 200% of the target.

 

(e)

Annual Stock Option
Grants:


For the years 2007 and 2008 Executive shall receive a stock option grant with a Black-Scholes value of $700,000. Both grants will provide for vesting in four equal annual increments of 25% on the anniversary dates of the grant, with a 10-year expiration term and are forfeitable on termination of employment if unvested. The 2007 grant shall take place on Executive’s first

 

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day of employment, at the closing price of the Company’s shares of common stock (“Shares”) on that day. The 2008 grant will take place at the January meeting of the Human Resources Committee at the closing price of the Shares on that day.

 

(f)

Sign-On Equity
Grants:


On Executive’s first day of employment, Executive shall receive two special equity grants:

 

Stock Options – Non-qualified options for 100,000 Shares granted under the Company’s 1999 Long-Term Incentive Plan (“Plan”) that vest in four equal annual increments of 25% on the anniversary dates of the grant, with a 10-year expiration term and are forfeitable on termination of employment if unvested. This grant will be at the closing price of the Shares on that day.

 

Restricted Shares – 20,000 restricted Shares granted under the Plan that vest in three annual increments of 33-1/3% on the anniversary dates of the grant and are forfeitable at termination if unvested.

 

(g)

Relocation:

Executive shall be eligible for the Company’s standard relocation benefits; provided, all relocation expenses paid or reimbursed by the Company shall be grossed up for all taxes to the extent taxable to Executive. If Executive voluntarily resigns, other than due to Constructive Termination, or is terminated with Cause prior to the second anniversary of the Commencement Date, Executive must repay 100% of all relocation expenses previously reimbursed or paid by the Company if such termination occurs during the first year and all such relocation expenses on a prorated basis during the second year (the prorated amount payable by Executive to be based on one (1) minus the fraction the numerator of which is the number of days employed and the denominator of which is 730).

 

(h)

Vacation:

Executive shall receive 4 weeks of vacation annually.

 

(i)

Benefits:

Executive shall be eligible for employee benefits and other insurance plans which are described in the benefit highlights document given to employees generally. Executive is also eligible to participate in the Company’s Executive Deferred Compensation Program. and other benefits and perquisites provided to senior executives (other than benefits not available to new hires on the date hereof [or benefits available to the current Chief Executive Officer while Executive is not the Chief Executive Officer]).

 

2.4

Term.

 

(a)

General Term. This Agreement shall commence on June 18, 2007, and terminate on June 30, 2010, unless extended prior to that date (the “Term”). The Term shall automatically be extended for successive additional one-year periods unless either party to this Agreement provides the other party with notice of termination of this Agreement at least one hundred and eighty (180) days prior to the expiration of the original three-year period or any one-year period thereafter.

 

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(b)

Termination for Cause or Voluntary Termination Other than Constructive Termination. If Executive is terminated by the Company for Cause or if Executive voluntarily terminates his employment in any manner, except for a Constructive Termination or as provided in Section 2.4(g), prior to the end of the Employment Period, Executive shall be entitled only to his Base Salary and accrued unused vacation through the date of termination, but shall not be entitled to any further Base Salary or any applicable bonus or Benefits under Section 2.3(i) for that year or any future year, except for (“Accrued Benefits”): (i) any prior year earned unpaid bonus, (ii) any unreimbursed business expenses incurred on or prior to the Date of Termination and (iii) amounts as may be provided in an applicable benefit plan or program, or to any severance compensation of any kind, nature or amount.

 

Termination Without Cause. If Executive is terminated without Cause or if there is a Constructive Termination, Executive shall be entitled to the benefits described in this subsection.

 

 

(i)

A Severance Payment equal to two, multiplied by, the sum of (a) Executive’s annual Base Salary as of Executive’s Termination Date; and (b) the average annual bonus paid to Executive under the Company’s Short-Term Incentive Plan over the three year period (or such shorter period of time as Executive was eligible for a bonus under such Short-Term Incentive Plan) immediately preceding the year of Executive’s Termination Date;

 

 

(ii)

A cash payment in an amount equal to the premiums that Executive would pay in order to secure COBRA continuation coverage for health, dental and vision benefits under the Company’s medical plan for two years following termination of employment (irrespective of whether COBRA otherwise would terminate prior to expiration of such two-year period) (“COBRA Payment”); and the additional federal, state, and local income and other taxes (other than taxes under Section 409A of the Internal Revenue Code of 1986, as amended (“Code”)) that will result from the COBRA Payment (the “COBRA Tax Gross-up”).

Method of Payment. The Severance Payment, the COBRA Payment and the COBRA Tax Gross-up shall be paid in a single lump-sum cash payment, less all applicable withholding taxes, within fifteen days following Executive’s termination of employment to the extent they are not subject to Section 409A of the Code, or if they are subject to Section 409A, on the first day of the seventh month following Executive’s termination of employment or, if earlier, the date Executive dies following such termination of employment.

 

(iii)

Section 2.3(f) to the contrary notwithstanding, Executive shall immediately fully vest in the unvested portion of his Sign-On Equity Grants provided under Section 2.3(f) hereof. Executive shall vest in any and all other non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units, and restricted stock units (collectively “Equity Awards”) previously granted to Executive by the Company which are outstanding on Executive’s Termination Date in accordance with the terms of the plan(s) under which such Equity Awards were granted.

 

 

(iv)

Executive shall be entitled to receive a Bonus Payment equal to the pro-rata portion (determined as of the Termination Date) of Executive’s incentive bonus otherwise payable under the terms of the Company’s Long-Term Incentive Plan. Such Bonus Payment will be paid at the same time that the bonus would have been paid under the Company’s Long-Term Incentive Plan had Executive

 

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continued employment through end of the performance period during which the Termination Date occurred.

 

(v)

The Company (at its expense) shall, for a period of twelve months following Executive’s Termination Date:

Reimburse Executive for the reasonable costs of outplacement services, reasonable job hunting expenses, travel costs, and financial counseling costs associated with employment transition not to exceed $40,000. All reimbursements shall be made as soon as practicable after submission of appropriate expense reports but in no event later than the end of Executive’s third taxable year following the year in which Executive terminates employment with the Company; and

Allow Executive to participate in the welfare plans the Company generally makes available to its key employees on substantially the same terms as an actively employed key employee, except that (A) for a period of six months following the Date of Termination, Executive shall pay to the Company the premium cost of participation in such plans to the extent required to comply with Section 409A(2)(B)(i) of the Code and Regulation Section 1.409A-1(b)(9)(v) thereunder, and on the first day of the seventh month following the Date of Termination the Company shall pay Executive a lump sum amount equal to such amounts so paid by him, and (B) Executive may not continue to participate in the Company’s Short-Term Disability and Long-Term Disability Plans.

(c)

No Mitigation. To the extent that Executive shall receive compensation for personal services from employment other than with the Company subsequent to a termination of Executive’s employment with the Company, the amounts so earned shall not be offset against the amounts (if any) due under this Agreement following Executive’s termination of employment.

 

(d)

Cap on Certain Payments by the Company. In the event that (i) any payment or benefit of any type by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, would equal or exceed the product of 3 and Executive’s Base Amount (as defined in Section 280G of the Code), thereby making such payment or benefit subject to the excise tax imposed by Section 4999 of the of the Code, (ii) or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then unless Section 2.4(e) applies, Executive shall receive, subject to the conditions of this Agreement and in full satisfaction of any and all rights under this Agreement, only such payments and benefits which do not, in the aggregate, equal or exceed the product of 3 and Executive’s “Base Amount.”

 

(e)

Certain Additional Payments by the Company. Notwithstanding anything in this Agreement to the contrary, in the event that any payment or benefits of any type by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, exceeds the product of 3 and Executive’s “Base Amount” by an amount greater than ten (10) percent of such product, then the cap on payment imposed under Section 2.4(d) shall not apply and Executive shall be entitled to receive an additional payment (a “Gross Up Payment”) in an amount such that after payment by Executive of the Excise taxes and any income taxes (and any interest and penalties imposed with respect thereto) imposed upon the Gross Up Payment, Executive retains an amount of the Gross Up Payment equal to the Excise Tax imposed upon the payments.

 

All determinations required to be made under this Section 2.4(e), including whether and when a Gross Up Payment is required and the amount of such Gross Up Payment and

 

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the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm in the business of performing such calculations as may be designated by the Company (the “Consulting Firm”), which shall provide detailed supporting calculations both to the Company and Executive. All fees and expenses of the Consulting Firm shall be borne solely by the Company.

 

(f)

Severance Forfeiture. Executive agrees that Executive shall be entitled to the payments set forth in this Section 2.4 only if Executive has not materially breached, as of the Termination Date, any provisions of this Agreement and does not materially breach such provisions at any time during the period for which such payments are to be made. The Company’s obligation to make such payments will terminate upon the occurrence of any such material breach during the severance period.

 

(g)

No Additional Severance. Executive hereby agrees that no severance compensation of any kind, nature or amount shall be payable to Executive, except as expressly set forth in this Section 2.4, and Executive hereby irrevocably waives any claim for any other severance compensation.

 

(h)

Death or Disability. The Company’s obligation under this Agreement terminates on the last day of the month in which Executive’s death occurs or on the date as of which Executive first becomes entitled to receive disability benefits under the Company’s long-term disability plan. The Company shall pay to Executive or Executive’s estate all previously earned and accrued but unpaid Base Salary and accrued unused vacation up to such date. Thereafter, Executive or his estate shall not be entitled to any further Base Salary, bonus, or Benefits for that year or any subsequent year, except for his Accrued Benefits as provided in Section 2.4(b).

 

2.5

Confidential Information. Executive expressly recognizes and acknowledges that during his employment with the Company, he will become entrusted with, have access to, and gain possession of confidential and proprietary information, data, documents, records, materials, and other trade secrets and/or other proprietary business information of the Company that is not readily available to competitors, outside third parties and/or the public, including without limitation, information about (i) current or prospective customers and/or suppliers, (ii) employees, research, goodwill, production, and prices, (iii) business methods, processes, practices or procedures; (iv) computer software and technology development, and (v) business strategy, including acquisition, merger and/or divestiture strategies, (collectively or with respect to any of the foregoing, the “Confidential Information”). Executive agrees, by acceptance of the benefits under this Agreement, to protect all Confidential Information concerning the business activities of the Company which were acquired in connection with or as a result of the performance of service for the Company.

 

2.6

Competitive Activity. For a period of 12 months following termination of Executive’s employment hereunder, he shall not engage, or attempt to engage, on his own behalf or on behalf of a third party in any “Competitive Activity”. The term “Competitive Activity” shall mean participation by Executive, without written consent of the Board, in the management of any business operation of any enterprise if such operation engages in the design, manufacture, marketing, or retail of residential furniture in any geographic are where the Company or its subsidiaries conducts business.

 

2.7

Stock Ownership. The Board has approved stock ownership requirements for the senior officers of the Company. The ownership requirement for the Chief Executive Officer is 200,000 Shares. Executive will have five years from Executive’s appointment as Chairman and Chief Executive Officer to attain this level of ownership.

 

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                ARTICLE III

                Miscellaneous

 

3.1

Executive's Representations. Executive hereby represents and warrants to the Company that (i) Executive’s execution, delivery and performance of this Agreement do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that he fully understands the terms and conditions contained herein.

 

3.2

Survival. Sections 2.4, 2.5 and 2.6 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.

 

3.3

Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier, or sent via facsimile (provided recipient provides a facsimile acknowledgement of receipt within 24 hours thereafter in reply), to the recipient. Such notices, demands and other communications will be sent to the address indicated below:

 

 

To the Company:

 

 

Furniture Brands International, Inc.

 

 

Human Resources Committee

 

 

101 South Hanley Road

 

 

19th Floor

 

 

St. Louis, Missouri 63105

 

 

To Executive:

 

 

Ralph Scozzafava

 

 

At the last known residence address on the payroll records of the Company

 

Or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

 

3.4

Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, (a) the parties agree that such provision(s) will be enforced to the maximum extent permissible under the applicable law, and (b) any invalidity, illegality or unenforceability of a particular provision will not affect any other provision of this Agreement.

 

3.5

Successors and Assigns. Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company, and their respective successors and assigns. This Agreement is personal to Executive and except as otherwise specifically provided herein,

 

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this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive. If Executive dies prior to receipt of all amounts and benefits due him under this Agreement, including, without limitation, under Section 2.4, such amounts will be paid to Executive’s estate.

 

3.6

Descriptive Headings. The descriptive headings of this Agreement are inserted for

 

 

convenience only and do not constitute a part of this Agreement.

 

3.7

Counterparts. This Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

3.8

Waiver. Neither any course of dealing nor any failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of such right, power or privilege or of any other right, power or privilege or of the same right, power or privilege in any other instance. Without limiting the generality of the foregoing, Executive’s continued employment without objection shall not constitute Executive’s consent to, or a waiver of Executive’s rights with respect to, any circumstances constituting Constructive Termination (subject to Section 1.1(e)). All waivers by either party hereto must be contained in a written instrument signed by the party to be charged therewith, and, in the case of Company, by its duly authorized officer.

 

3.9

Entire Agreement. This instrument constitutes the entire agreement of the parties in this matter and shall supersede any other agreement between the parties, oral or written, concerning the same subject matter.

 

3.10

Amendment. This Agreement may be amended only by a writing which makes express reference to this Agreement as the subject of such amendment and which is signed by Executive and by a duly authorized officer of the Company.

 

3.11

Governing Law. This Agreement shall be signed by the parties in St. Louis, Missouri. All questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the domestic law of the State of Missouri, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Missouri or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Missouri. Any litigation relating to or arising out of this Agreement shall be filed and litigated exclusively in the St. Louis County Circuit Court or the United States District Court for the Eastern District of Missouri.

 

3.12

Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement, including, without limitation, Sections 2.5, 2.6 and 2.7 hereof, and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

 

3.13

Exit Interview. To ensure a clear understanding of this Agreement, Executive agrees, at the time of termination of Employee's employment, to engage in an exit interview with the Company at a time and place designated by the Company and at the Company's expense. Executive understands and agrees that during said exit interview, Executive may be required to confirm that he will comply with his on-going obligations under this

 

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Agreement. The Company may elect, at its option, to conduct the exit interview by telephone.

 

3.14

Future Employment. Executive shall disclose the existence of this Agreement to any new employer or potential new employer which offers products or services that compete with the Company’s Business if such new employment commences within two years following Executive’s termination of employment with the Company. Executive consents to the Company informing any subsequent employer of Executive, or any entity which the Company in good faith believes is, or is likely to be, considering employing Executive, of the existence and terms of this Agreement if such subsequent employment commences (or is expected to commence) within two years following Executive’s termination of employment with the Company.

 

3.15

Indemnification. he Company shall indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive's performance as an officer, director or employee of the Company or any of its subsidiaries or in any other capacity, including any fiduciary capacity, in which Executive serves at the request of the Company to the maximum extent permitted under applicable law. The Company shall cause Executive to be a covered person, during and after termination of his employment and membership on the Board respecting his acts and omissions occurring during such employment and membership, under any directors and officers liability insurance policy (or similar policy) that it may have in effect from time to time, and shall afford Executive all of the rights and privileges available to covered persons in accordance with the terms of any such policy.

 

3.16

Inconsistency. In the event of any inconsistency between this Agreement and any other agreement (including but not limited to any option, long-term incentive or other equity award agreement), plan, program, policy or practice (collectively, “Other Provision”) of the Company the terms of this Agreement shall control over such Other Provision. No provision in any policy, code, plan or program related to a violation thereof being grounds for termination, or similar language, shall result in a “cause” termination unless such violation is also Cause under this Agreement and the provisions hereof are complied with, and the foregoing shall apply even if Executive signs an acknowledgement or otherwise agrees to the provisions of such policy, code, plan or program.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement this 14th day of June, 2007, and effective as of the date first written above.

 

 

 

Furniture Brands International, Inc.

 

 

 

 

By:

/s/ Mary Elizabeth Sweetman

 

 

 

 

Name:

Mary Elizabeth Sweetman, Ph.D.

 

 

 

 

Title:

Senior Vice President, Human Resources

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

By:

/s/ Ralph Scozzafava

 

 

 

 

Name:

Ralph Scozzafava

 

 

 

 

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Exhibit 10.3

 

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

 

WHEREAS, Furniture Brands International, Inc. (“Company”) and Ralph Scozzafava (“Executive”) entered into an Executive Employment Agreement effective as of June 18, 2007 (“Agreement”); and

 

WHEREAS, the Company and the Executive retained the right to amend the Agreement pursuant to Section 3.10 thereof; and

 

WHEREAS, the Company and the Executive desire to amend the Agreement;

 

NOW, THEREFORE, effective as of _____, 2008, the Agreement is amended as follows:

 

 

1.   Section 2.4(b)(i) is deleted and replaced with the following:

“A Severance Payment equal to three, multiplied by the sum of (a) Executive’s annual Base Salary as of Executive’s Termination Date; and (b) the average annual bonus paid to Executive under the Company’s Short-Term Incentive Plan over the three year period (or such shorter period of time as Executive was eligible for a bonus under such Short-Term Incentive Plan) immediately preceding the year of Executive’s Termination Date;”

 

2.   A new Section 2.4(b)(vi) is added to read as follows:

(vi) Executive has been granted, and may in the future be granted, options to purchase shares of Company stock (“Stock Options”), as well as shares of restricted Company stock (Restricted Stock Awards”). If Executive’s employment is terminated within six months prior to a Change in Control (within the meaning of the Change in Control Agreements entered into with other Company executives in June, 2007), the Company shall pay to Executive an additional cash bonus equal to the sum of (a) and (b), where (a) equals the fair market value of nonvested shares of stock under the Restricted Stock Awards, and (b) equals the excess of the fair market value of the shares of stock subject to nonexercisable Stock Options, over the option exercise price. For this purpose, fair market vale shall be determined as of the date of Executive’s termination of employment. Such cash bonus shall be paid on the effective date of the Change of Control.”

 


 

IN WITNESS WHEREOF, the foregoing Amendment was executed on the __ day of ____, 2008.

 

 

 

FURNITURE BRANDS INTERNATIONAL, INC.

 

 

By: _________________________

 

 

Name:

 

 

Title:

 

 

 

EXECUTIVE

 

 

By: _________________________

 

 

Name: Ralph Scozzafava

 

 

 

 

 Top of the Document

 

EX-10.1 3 c59637exv10w1.htm EX-10.1

Exhibit 10.1

CHANGE IN CONTROL AGREEMENT

     This Agreement, effective as of the 1st day of January, 2011 (“Effective Date”), is by and between                      (“Executive”) and Furniture Brands International, Inc. and any successor to its business and/or assets (“Company”).

     WHEREAS, the Company considers it essential to the best interests of the Company that its key employees be encouraged to remain with the Company and to devote full attention to the Company’s business in the event that any third party expresses its intention to take action which could result in a change in control of the Company; and

     WHEREAS, Executive serves as a key employee of the Company;

     NOW, THEREFORE, to encourage Executive’s continued, undivided attention, dedication and services to the Company and the availability of Executive’s advice and counsel notwithstanding the possibility, threat or occurrence of a change in control of the Company, and to induce Executive to remain in the employ of the Company, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the Company and Executive agree as follows:

     1. Term of Agreement. The term of this Agreement shall commence on the Effective Date and shall end on December 31, 2011, and shall continue in effect for successive periods of one year thereafter unless either the Company or Executive gives written notice of intent to terminate the Agreement at least three (3) months prior to the expiration of the then-current term of this Agreement.

     2. Definitions. As used herein, the terms identified below shall have the meanings indicated:

          (a) Benefitsmeans all Company provided benefits that are made available to all employees of the Company for participation.

          (b) “Board” means the Company’s Board of Directors.

          (c) “Change in Control” means

               (1) an acquisition by an individual or entity of 35% of the outstanding common stock or voting power of the Company,

               (2) a contested change of a majority of the non-employee member of the Board of the Company,

               (3) the consummation via execution of a final written agreement for merger, sale, acquisition, or other such transaction where the shareholders of the Company

 

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immediately prior to such transaction do not own 60% of the outstanding common stock of the Company immediately following such transaction, or

               (4) shareholder approval of a complete dissolution of the Company (excluding bankruptcy).

          (d) “Cause” means: (i) engaging by Executive in willful misconduct which is materially injurious to Company; (ii) conviction of Executive by a court of competent jurisdiction of, or entry of a plea of nolo contendere with respect to a felony; (iii) engaging by Executive in fraud, material dishonesty or gross misconduct in connection with the business of Company; (iv) engaging by Executive in any act of moral turpitude reasonably likely to materially and adversely affect Company or its business; or (v) Executive’s current chronic abuse of or dependency on alcohol or drugs (illicit or otherwise). No act or omission of Executive shall be “willful” if conducted in good faith or with a reasonable belief that such conduct was in the best interests of the Company. No termination shall be for “Cause” unless approved by a resolution of a majority of the members of the Board after reasonable prior notice to Executive and an opportunity to appear (with the assistance of counsel) before the Board.

          (e) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and other guidance promulgated by the Treasury Department and the Internal Revenue Service thereunder.

          (f) “Constructive Termination” shall mean Executive’s voluntary termination of employment with the Company as a result of:

               (1) a material diminution in Executive’s title, authority, duties or responsibilities, or a change in Executive’s supervisory reporting relationship within the Company;

               (2) a change, caused by the Company, in geographic location greater than 50 miles of the location at which Executive primarily performs services for the Company on the Effective Date; or

               (3) a material reduction in Executive’s base pay or incentive compensation.

No voluntary termination by Executive shall constitute a “Constructive Termination” unless Executive shall have given (x) notice of the proposed termination due to Constructive Termination, with particulars, to the Company not later than 90 days following the initial occurrence of the condition above forming the basis for such termination and (y) the Company an opportunity for 30 days after such notice within which to remedy such condition, in which such condition is not remedied.

          (g) “Gross Up Payment” shall have the meaning as set forth in Section 7.

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          (h) “Qualifying Termination” shall have the meaning as set forth in Section 4.

          (i) “Severance Payment” shall mean any severance pay or benefits under any other severance program or plan of the Company or any affiliate, including the Company’s Executive Severance Plan, payable to Executive at the same time as amounts payable under this Agreement.

          (j) “Specified Employee” means any employee of the Company and its Affiliates that the Company determines is a Specified Employee within the meaning of Section 409A of the Code. The Company shall determine whether an employee is a Specified Employee by applying reasonable, objectively determinable identification procedures established by the Board (or a committee thereof) from time to time in accordance with Section 409A of the Code. For this purpose, an “Affiliate” is any person or entity with whom the Company would be considered a single employer under Sections 414(b) or 414(c) of the Code.

          (k) “Termination of Employment” and any similar term used in this Agreement means separation from service with the Company and its affiliates (generally 50% common control with the Company), as defined in IRS regulations under Section 409A of the Code (generally, a decrease in the performance of services to no more than 20% of the average for the preceding 36-month period, and disregarding leave of absences up to six (6) months where there is a reasonable expectation the Executive will return).

          (l) “Termination Factor” means a factor equal to ___.

     3. Stock Rights. In the event of a Change in Control, Executive’s non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units, and restricted stock units granted by the Company which are outstanding on the date of the Change in Control, shall vest and be exercisable pursuant to the terms of the awards and underlying plans.

     4. Qualifying Termination. The benefits only become payable under Sections 5 and 6 below if Executive experiences a “Qualifying Termination.” A “Qualifying Termination” shall mean Executive’s Termination of Employment (i) by the Company other than for Cause; or (ii) by the Executive for Constructive Termination; provided that Termination of Employment occurs during the period commencing on the date of the Change in Control and ending on the second anniversary thereof.

     5. Severance Benefits. Upon the occurrence of a Qualifying Termination, Executive shall be entitled to receive the severance benefits described in this Section 5, subject to applicable deductions for customary withholdings including, without limitation, federal and state withholding taxes and social security taxes. Notwithstanding the preceding, the benefits described in this Section 5 and in Section 6 shall be reduced by any Severance Payment.

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          (a) All previously earned and accrued but unpaid base salary up to the date of Executive’s Termination of Employment, which shall be paid within 30 days following Executive’s Termination of Employment.

          (b) An amount equal to the Termination Factor multiplied by the sum of (i) Executive’s annual base salary as of the date of Executive’s Termination of Employment; and (ii) Executive’s target annual bonus amount under the Company’s Short-Term Incentive Plan with respect to the year in which the Termination of Employment occurs. Subject to Section 11 concerning payments to a Specified Employee, such amount shall be paid within 30 days following Executive’s Termination of Employment and the Company’s receipt of an executed Release in accordance with Section 17; provided, that if the maximum 90 day period spans two tax years, the payment will be made no earlier than the first day of the second tax year.

          (c) A prorated annual incentive bonus with respect to the fiscal year of the Company during which the Termination of Employment occurs, the amount of which shall be equal to the amount of the annual bonus, if any, that would be due under the Company’s Short-Term Incentive Plan (or successor plan) had Executive still been employed through the end of such fiscal year, multiplied by a fraction, the numerator of which is the number of days in such fiscal year prior to the date of Termination of Employment and the denominator of which is 365, payable at the time such annual bonus would have been paid in accordance with the terms of the Short-Term Incentive Plan had Executive remained employed through the date of such payment.

          (d) In the event that Executive’s Termination of Employment occurs 18 months or more after the commencement of a three-year performance period under the Company’s Long-Term Incentive Plan and prior to the end of such performance period, and Executive is a participant in such plan for such performance period, Executive shall be entitled to receive a payment equal to the pro-rata portion (determined as of the date of Termination of Employment) of the cash payment, if any, that would have been payable to Executive under the terms of the Company’s Long-Term Incentive Plan had Executive remained employed through the end of the performance period. Such payment will be made at the same time that the payment would have been made under the Company’s Long-Term Incentive Plan had Executive continued employment through the end of the applicable performance period.

          (e) Any non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units and restricted stock units previously granted to Executive by the Company which are outstanding on the date of Executive’s Termination of Employment shall vest and be exercisable or payable pursuant to the terms of the awards and underlying plan(s).

     6. Continuation of Benefits. Executive shall receive the following benefits upon the occurrence of a Qualifying Termination:

          (a) For the 12 months following Executive’s Termination of Employment, Executive shall be entitled to reimbursement for the reasonable costs of outplacement services, reasonable job hunting expenses, travel costs, and financial counseling costs associated with employment transition not to exceed $40,000, provided that Executive shall only be entitled to

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such reimbursements over and above the amount of similar reimbursements provided to Executive under the Company’s Executive Severance Plan;

          (b) For the period of years equal to the Termination Factor multiplied by one, Executive shall be eligible to participate in the Company’s health, dental and vision plans under the Company’s medical plan that the Company generally makes available to its senior executives on substantially the same terms as an actively employed senior executive; provided that such coverage shall be provided on an after-tax basis, meaning that the Company shall report to the appropriate tax authorities the cost of such coverage as taxable income to Executive.

          (c) For 12 months following Executive’s Termination of Employment, Executive shall be eligible to continue to participate in the welfare plans; other than health, dental and vision benefit plans, that the Company generally makes available to its key employees on substantially the same terms as an actively employed key employee, except that, (i) if Executive is a Specified Employee on the date of Termination of Employment, for a period of six (6) months following the date of Termination of Employment Executive shall pay to the Company the premium cost of participation in such plans to the extent required to comply with Section 409A(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(b)(9)(v) thereunder, and on the first day of the seventh month following the date of Termination of Employment the Company shall pay Executive a lump sum amount equal to such amounts so paid by him, and (ii) Executive may not continue to participate in the Company’s Short-Term Disability and Long-Term Disability Plans;

          (d) The Company shall indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive’s performance as an officer, director, or employee of the Company, or any of its subsidiaries, or in any other capacity, including any fiduciary capacity, in which Executive serves at the request of the Company to the maximum extent permitted under applicable law. The Company shall cause Executive to be a covered person, during and after termination of his employment and membership on the board, if applicable, respecting his acts and omissions occurring during such employment and membership, under any directors and officers liability insurance policy (or similar policy) that it may have in effect from time to time, and shall afford Executive all of the rights and privileges available to covered persons in accordance with the terms of any such policy.

     7. Cap on Certain Payments by the Company/Certain Additional Payments by the Company.

          (a) In the event that, during the period beginning on the effective date of this Agreement and ending December 31, 2011 (“Initial Term”), (i) the aggregate value, as determined for purposes of Section 280G of the Code, of any payments or benefit of any type by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (“Payments”), would equal or exceed the product of three and Executive’s “Base Amount” (as defined in Section 280G of the Code), and any such Payments would be subject to the excise tax imposed by Section 4999 of the Code, or (ii) any interest or penalties would be incurred by Executive with respect to such excise

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tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then (A) if the value of the Payments exceeds the product of three and Executive’s Base Amount by an amount greater than 10% of such product, then Executive shall be entitled to receive an additional payment (a “Gross Up Payment”) in an amount such that after payment by Executive of the Excise Tax and any income and employment taxes (and any interest and penalties imposed with respect thereto) imposed upon the Gross Up Payment, Executive retains an amount of the Gross Up Payment equal to the Excise Tax imposed upon the Payments, and (B) if the value of the Payments does not exceed the product of three and Executive’s Base Amount by an amount greater than 10% of such product, then, notwithstanding anything in this Agreement to the contrary, the Payments shall be reduced to the “Reduced Amount” (as defined below). Any Gross Up Payment due pursuant to clause (A) of the preceding sentence shall be paid by the Company to Executive as soon as administratively practicable but in no event later than the end of Executive’s taxable year following the year in which Executive remits the Excise Tax to the Internal Revenue Service.

          (b) In the event that, after the Initial Period, any Payments to or for the benefit of Executive would equal or exceed the product of three and Executive’s Base Amount, then, notwithstanding anything in this Agreement to the contrary, the Payments shall be reduced to the Reduced Amount if Executive would have a greater “Net After-Tax Receipt” (as defined below) of aggregate Payments if Executive’s Payments were reduced to the Reduced Amount. If a reduction of the Payments to the Reduced Amount would not result in Executive having a greater Net After-Tax Receipt than in the absence of such reduction, Executive shall receive all Payments to which Executive is entitled under this Agreement.

All determinations required to be made under this Section 7, including whether and when a Gross Up Payment is required, the amount of any such Gross Up Payment, any reductions to Payments, and the assumptions to be utilized in arriving at such determinations, shall be made by such certified public accounting firm in the business of performing such calculations as may be designated by the Company (the “Consulting Firm”), which shall provide detailed supporting calculations both to the Company and Executive. All fees and expenses of the Consulting Firm shall be borne solely by the Company. For purposes of reducing the Payments to the Reduced Amount where required pursuant to this Section 7, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits under the following sections in the following order: Section 5(b), Section 5(c), Section 5(d) and Section 5(e). For purposes hereof, “Reduced Amount” shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the Excise Tax; and “Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of the Payments net of all taxes imposed on Executive with respect thereto under Sections 1, 3101 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws that applied to Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as Executive certifies, to the reasonable satisfaction of the Company, as likely to apply to him in the relevant tax year(s).

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     8. Confidential Information. Executive expressly recognizes and acknowledges that during his employment with the Company, Executive will become entrusted with, have access to, and gain possession of, confidential and proprietary information data, documents, records, materials, and other trade secrets and/or other proprietary business information of the Company that is not readily available to competitors, outside third parties and/or the public, including without limitation, information about (i) current or prospective customers and/or suppliers, (ii) employees, research, goodwill, production, and prices, (iii) business methods, processes, practices or procedures, (iv) computer software and technology development, and (v) business strategy, including acquisition, merger and/or divestiture strategies (collectively or with respect to any of the foregoing, the “Confidential Information”). Executive agrees, by acceptance of the benefits under this Agreement, to protect all Confidential Information concerning the business activities of the Company which was acquired in connection with or as a result of the performance of service for the Company.

     9. Competitive Activity. For a period of years equal to the Termination Factor times one, following the date of Executive’s Termination of Employment, Executive shall not engage, or attempt to engage, on his own behalf or on behalf of a third party, in any “Competitive Activity.” The term “Competitive Activity” shall mean participation by Executive, without written consent of the Board, in the management of any business operation of any enterprise if such operation engages in the design, manufacture, marketing, or retail of residential furniture in any geographic area where the Company or its subsidiaries conduct business.

     10. At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law. This Agreement is not a contract of employment and does not guarantee Executive employment for any particular period of time. If Executive’s employment terminates for any reason, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company’s established employee plans and practices or other agreements with the Company at the time of termination.

     11. General Payment and Reimbursement Procedure. Notwithstanding anything to the contrary in this Agreement, if Executive is a Specified Employee on the date of Executive’s Termination of Employment, no payment of nonqualified deferred compensation, as defined in Section 409A of the Code, that becomes payable on account of such Termination of Employment may be made until at least six (6) months after such Termination of Employment. Any payment otherwise due in such six (6) month period shall be suspended and become payable at the end of such six (6) month period with reasonable interest (as determined by the Company) for the period of delay.

     Subject to the preceding paragraph, to the extent that Executive is entitled to any reimbursements under this Agreement and the procedures for such reimbursements are not otherwise set forth herein, such reimbursements shall be made as soon as administratively practicable but in no event later than the end of Executive’s taxable year following the taxable year in which Executive incurred the expense giving rise to the reimbursement right.

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     12. General Creditor. Any and all amounts payable hereunder to Executive shall be made from assets which shall continue, for all purposes, to be part of the general, unrestricted assets of the Company; no person shall have nor acquire any interest in any such asset by virtue of the provisions of this Agreement. The Company’s obligation hereunder is an unfunded and unsecured promise to pay money in the future. To the extent that Executive or any person acquires a right to receive payments from the Company under the provisions hereof, such right shall be no greater than the right of any unsecured general creditor of the Company; no such person shall have nor acquire any legal or equitable right, interest or claim in or to any property or assets of the Company.

     13. Severability and Interpretation. In the event of a conflict between the terms of this Agreement and any of the definitions or provisions in the Company’s Executive Severance Plan, or otherwise, the terms of this Agreement shall prevail. Whenever possible, each provision of this Agreement and any portion hereof shall be interpreted in such a manner as to be effective and valid under applicable law, rules and regulations. If any covenant or other provision of this Agreement (or portion thereof) shall be held to be invalid, illegal, or incapable of being enforced, by reason of any rule of law, rule, regulation, administrative order, judicial decision or public policy, all other conditions and provisions of this Agreement shall, nevertheless, remain in full force and effect, and no covenant or provision shall be deemed dependent upon any other covenant or provision (or portion) unless so expressed herein. The parties hereto desire and consent that the court or other body making such determination shall, to the extent necessary to avoid any unenforceability, so reform such covenant or other provision or portions of this Agreement to the minimum extent necessary so as to render the same enforceable in accordance with the intent herein expressed.

     14. No Assignments. This Agreement shall inure to the benefit of, and be binding upon, the Company and any successor to the Company, but neither this Agreement nor any rights hereunder shall be assigned by Executive.

     15. Prior Agreements. Upon execution by both parties, this Agreement shall supersede and replace all prior Change in Control Agreements and employment agreements between the Company and Executive, and this Agreement shall constitute the entire agreement between the parties, except as expressly provided herein, concerning the effect of a Change in Control on the employment relationship between the Company and Executive.

     16. Entire Agreement. This Agreement represents the entire and integrated Change in Control Agreement between Executive and the Company and supersedes all prior negotiations, representations and agreements, either written or oral, with respect thereto.

     17. Waiver and Releases. In consideration of the covenants under this Agreement and as a condition precedent to receiving any payments under this Agreement, Executive agrees to execute a Release of all claims in such form as requested by the Company. Such release must be executed by Executive and returned to the Company within 60 days of Executive’s Termination of Employment or Executive shall forfeit any payments under this Agreement.

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     18. Notice. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, by registered or certified mail, return receipt requested, postage prepaid, or by overnight courier, addressed as set forth in this Section 18 or to such other address as may hereafter be notified by such party to the other party. Notices and communications shall be effective at the time they are given in the foregoing manner.

 

 

 

 

 

     If to Executive:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     If to the Company:

 

 

 

 

 

 

 

Furniture Brands International, Inc.

 

 

 

 

Human Resources Committee

 

 

 

 

1 N. Brentwood Blvd.

 

 

 

 

St. Louis, MO 63105

 

 

 

 

 

 

 

     With copy to: Office of the General Counsel (at the same address)

     19. Amendments and Waivers. No modification, amendment or waiver of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto, and signed by the parties hereto.

     20. Governing Law. The parties agree that this Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles. Any action concerning this Agreement shall be brought in a court of competent jurisdiction in Saint Louis County, Missouri and each party consents to the venue and jurisdiction of such courts.

     21. Headings. Section headings are provided in this Agreement for convenience only and shall not be deemed to substantively alter the content of such sections.

     22. Section 409A of the Code. This Agreement is intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A of the Code, shall in all respects be administered in accordance with Section 409A of the Code. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. All reimbursements and in-kind benefits, including any taxable health, dental and vision benefits provided under this Agreement that constitute deferred compensation within the meaning of Section 409A of the Code shall be made or provided in accordance with the requirements of Section 409A of the Code, including, without limitation, that (i) in no event shall reimbursements by Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred, provided, that Executive shall have submitted an invoice for such fees and expenses at

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least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of reimbursements or in-kind benefits that Company is obligated to pay or provide in any given calendar year (other than medical reimbursements described in Treas. Reg. § 1.409A-3(i)(1)(iv)(B)) shall not affect the reimbursements or in-kind benefits that Company is obligated to pay or provide in any other calendar year; and (iii) Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit. If Executive dies following the date of Executive’s Termination of Employment and prior to the payment of any amounts delayed on account of Section 409A of the Code, such amounts shall be paid to the personal representative of Executive’s estate within 30 days after the date of Executive’s death.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement this ___day of ___, 2010, effective as of the date first written above.

 

 

 

 

 

 

 

FURNITURE BRANDS INTERNATIONAL, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive

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EX-10.1 3 c56653exv10w1.htm EX-10.1

Exhibit 10.1

FURNITURE BRANDS INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN

(Amended and Restated Effective July 1, 2010)

1.

 

Purpose.

 

 

 

The Furniture Brands International, Inc. Executive Severance Plan (the “Plan”) is a top hat welfare plan under the Employee Retirement Income Security Act of 1974 and is intended to provide severance benefits to certain key employees of Furniture Brands International, Inc. (the “Company”) in the event of their termination of employment. The provisions herein are being offered and provided at the sole discretion of the Company. This Plan was originally effective May 3, 2007 and is amended and restated effective July 1, 2010.

 

2.

 

Definitions.

 

 

 

As used herein, the terms identified below shall have the meanings indicated:

 

 

(a) “Administrator” means the Human Resources Committee of the Board of Directors of the Company (unless and until the Board appoints another committee to administer this Plan).

 

 

(b) “Board” means the Board of Directors of the Company.

 

 

(c) “Cause” means the Company’s termination of an Eligible Executive’s employment with the Company as a result of: (i) engaging by the Eligible Executive in willful misconduct that is materially injurious to Company; (ii) conviction of the Eligible Executive by a court of competent jurisdiction of, or entry of a plea of nolo contendere with respect to a felony; (iii) engaging by the Eligible Executive in fraud, material dishonesty or gross misconduct in connection with the business of Company; (iv) engaging by the Eligible Executive in any act of moral turpitude reasonably likely to materially and adversely affect Company or its business; or (v) the Eligible Executive’s current chronic abuse of or dependency on alcohol or drugs (illicit or otherwise). No act or omission of the Eligible Executive shall be “willful” if conducted in good faith or with a reasonable belief that such conduct was in the best interests of the Company. No termination shall be for “Cause” unless approved by a resolution of a majority of the members of the Board after reasonable prior notice to the Eligible Executive and an opportunity to appear (with the assistance of counsel) before the Board.

 

 

(d) “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985.

 

 

(e) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and other guidance promulgated by the Treasury Department and the Internal Revenue Service thereunder.

 

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(f) “Constructive Termination” means the Eligible Executive’s voluntary termination of employment with the Company as a result of:

 

(i)

 

a material diminution in the Eligible Executive’s title, authority, duties or responsibilities, or a change in the Eligible Executive’s supervisory reporting relationship within the Company;

 

 

(ii)

 

a change, caused by the Company, in geographic location of greater than fifty (50) miles of the location at which the Eligible Executive primarily performs services for the Company; or

 

 

(iii)

 

a material reduction in the Eligible Executive’s base pay, incentive compensation or benefits.

     No voluntary termination by the Eligible Executive shall constitute a “Constructive Termination” unless he shall have given (x) notice of the proposed termination due to Constructive Termination, with particulars, to the Company not later than ninety (90) days following the initial occurrence of the condition above forming the basis for such termination and (y) the Company an opportunity for 30 days after such notice within which to remedy such condition, in which such condition is not remedied.

(g) “Disability” means any medically determinable physical or mental impairment resulting in the Eligible Executive’s inability to perform the duties of his or her position or any substantially similar position, where such impairment is expected to result in death or is expected to last for a continuous period of not less than six (6) months.

(h) “Eligible Executive” means a key employee of the Company who:

 

(i)

 

is expressly designated as an “Eligible Executive” by the Company for the purposes of this Plan pursuant to resolutions duly adopted by the Board; and

 

 

(ii)

 

receives written notice of his or her status as an Eligible Executive.

(i) Operating Unitshall mean any subsidiary, division or other business unit of Company.

(j) “Qualifying Termination” means either:

 

(i)

 

an involuntary termination of an Eligible Executive’s employment by the Company without Cause; or

 

 

(ii)

 

a voluntary termination of an Eligible Executive’s employment by the Eligible Executive as a result of a Constructive Termination.

(k) “Severance Payment” means the aggregate gross amount of severance payments determined in accordance with Section 4 of this Plan to be paid to an Eligible Executive who is entitled to receive such severance benefits under this Plan.

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(l) “Specified Employee” means any employee of the Company and its Affiliates that the Company determines is a Specified Employee within the meaning of Section 409A of the Code. The Company shall determine whether an employee is a Specified Employee by applying reasonable, objectively determinable identification procedures established by the Board (or a committee thereof) from time to time in accordance with Section 409A of the Code. For this purpose, an “Affiliate” is any person or entity with whom the Company would be considered a single employer under Sections 414(b) or 414(c) of the Code.

(m) “Termination Date” means the date on which an Eligible Executive has a “separation from service,” within the meaning of Section 409A of the Code, from the Company.

3.

 

Eligibility.

(a) Eligible Executives. Only Eligible Executives shall be eligible to receive benefits under this Plan.

(b) Qualifying Termination. Subject to the conditions described herein, including without limitation, the requirements of Section 10(a) of this Plan, the Company will pay severance benefits under Section 4 of this Plan solely to an Eligible Executive who incurs a Qualifying Termination.

(c) Non-Qualifying Termination. Notwithstanding any other provision of this Plan to the contrary, nothing in this Plan shall be construed to require the Company to pay any of the severance benefits under this Plan to an Eligible Executive if the Eligible Executive terminates employment with the Company under any circumstances that do not constitute a Qualifying Termination, including, without limitation:

 

(i)

 

a voluntary termination by the Eligible Executive (i.e., a termination, including retirement, initiated by the Eligible Executive), other than a Constructive Termination;

 

 

(ii)

 

the Company having terminated such Eligible Executive’s employment for Cause;

 

 

(iii)

 

death; or

 

 

(iv)

 

Disability.

4.

 

Amount and Payment of Benefits.

          Subject to Section 10(a) of this Plan, an Eligible Executive who incurs a Qualifying Termination shall be entitled to receive the severance benefits described in this Section 4.

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(a) Severance Payment. Unless otherwise provided herein, an Eligible Executive who incurs a Qualifying Termination shall receive a Severance Payment in an amount equal to the sum of:

 

(i)

 

one times the Eligible Executive’s annual base salary as of the Eligible Executive’s Termination Date; and

 

 

(ii)

 

one times the Eligible Executive’s target annual bonus under the Company’s Short-Term Incentive Plan with respect to the year in which the Termination Date occurs.

(b) Method of Payment. Any Severance Payment made under this Plan shall be paid in a single lump-sum cash payment, less all applicable withholding taxes, thirty (30) days following the Eligible Executive’s Termination Date or as soon as administratively practicable thereafter but in no event later than the latest date permitted under Section 409A of the Code. Notwithstanding the foregoing, if the Eligible Executive is a Specified Employee on his or her Termination Date, the Severance Payment shall be paid on the first day of the seventh month following the Eligible Executive’s Termination Date or, if earlier, the date the Eligible Executive dies following such Termination Date.

(c) Equity Award Vesting. An Eligible Executive who incurs a Qualifying Termination shall vest in any and all non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units, and restricted stock units (collectively, “Equity Awards”) previously granted to the Eligible Executive by the Company that are outstanding on the Eligible Executive’s Termination Date in accordance with the terms of the plan(s) under which such Equity Awards were granted and, notwithstanding the terms of the applicable plan or Equity Award, such Eligible Executive shall be entitled to exercise each vested stock option and stock appreciation right until the earlier of (i) the one (1) year anniversary of the Termination Date and (ii) the last day of its original term.

(d) Short-Term Incentive Plan. An Eligible Executive who incurs a Qualifying Termination shall be entitled to receive a prorated annual incentive bonus under the Company’s Short-Term Incentive Plan (or successor plan) in respect of the fiscal year during which the Termination Date occurs, the amount of which shall be equal to the amount of the annual incentive bonus, if any, that would be due under such Company’s Short-Term Incentive Plan (or successor plan) had the Eligible Executive remained employed through the end of such fiscal year, multiplied by a fraction, the numerator of which is the number of days in such fiscal year prior to the Termination Date and the denominator of which is three hundred sixty five (365), payable at the time such annual incentive bonus would have been paid had the Eligible Executive remained employed through the date of such payment.

(e) Long-Term Cash Plans. In the event that the Termination Date of an Eligible Executive who incurs a Qualifying Termination occurs eighteen (18) months or more after the commencement of a three-year performance cycle under the Company’s Long-Term Incentive Plan, the Eligible Executive shall be entitled to receive a payment equal

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to the pro-rata portion (determined as of the Termination Date) of the cash payment otherwise payable under the terms of the Company’s Long-Term Incentive Plan to that Eligible Executive. Such Payment will be paid at the same time that the payment would have been paid under the Company’s Long-Term Incentive Plan had the Eligible Executive continued employment through end of the performance period during which the Termination Date occurred.

(f) Benefits Continuation. The Company (at its expense) shall, for a period of twelve (12) months following the Eligible Executive’s Termination Date, provide the following benefits to an Eligible Executive who incurs a Qualifying Termination:

 

(i)

 

reimburse the Eligible Executive for the reasonable costs of outplacement services, reasonable job hunting expenses, travel costs, and financial counseling costs associated with employment transition not to exceed $40,000; provided that, a reimbursement shall be made as soon as practicable after submission of appropriate expense reports but in no event later than the end of the Eligible Executive’s taxable year following the year in which expense was incurred; and

 

 

(ii)

 

allow the Eligible Executive to participate in the welfare plans the Company generally makes available to its key employees on substantially the same terms as an actively employed key employee (except that the Eligible Executive may not continue to participate in the Company’s Short-Term Disability and Long-Term Disability Plans); provided that health, dental and vision benefit plan coverage shall be provided on an after-tax basis, meaning that the Company shall report to the appropriate tax authorities the cost of such coverage as taxable income to Eligible Executive.

5.

 

Sale of an Operating Unit.

 

 

 

Notwithstanding anything to the contrary set forth herein, and subject to Section 10(a) of this Plan, an Eligible Executive who incurs a Qualifying Termination in connection with the sale, divestiture or other disposition of any Operating Unit shall be entitled to receive the severance benefits described in Section 4 including an increase in the multiplier set forth in Section 4(a) above from one times to one and one half (1.5) times the results of the formulas set forth in such Section 4(a); provided that the Eligible Executive is not offered continued employment, or continues in employment, with the divested Operating Unit or the purchaser of the assets of the Operating Unit, as the case may be, or their respective affiliates on terms and conditions that would not constitute a Constructive Termination.

 

6.

 

Non-Disclosure of Confidential Information.

 

 

 

Each Eligible Executive expressly recognizes and acknowledges that during the Eligible Executive’s employment with the Company, the Eligible Executive became entrusted with, had access to, or gained possession of confidential and proprietary information,

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data, documents, records, materials, and other trade secrets and/or other proprietary business information of the Company that is not readily available to competitors, outside third parties and/or the public, including without limitation, information about (i) current or prospective customers and/or suppliers, (ii) employees, research, goodwill, production, and prices, (iii) business methods, processes, practices or procedures, (iv) computer software and technology development, and (v) business strategy, including acquisition, merger and/or divestiture strategies (collectively or with respect to any of the foregoing, the “Confidential Information”). The Eligible Executive agrees, by acceptance of the benefits under this Plan, to protect and maintain as confidential all Confidential Information concerning the business activities of the Company that were acquired in connection with or as a result of the performance of service for the Company for a period of twelve(12) months from the Termination Date.

7.

 

Non-Compete.

 

 

 

For a period of twelve (12) months following termination of the Eligible Executive’s employment hereunder, or for a period of eighteen (18) months in the event of a termination of the Eligible Executive’s employment pursuant to Section 5 above, the Eligible Executive shall not engage, or attempt to engage, on his or her own behalf or on behalf of a third-party in any “Competitive Activity”. The term “Competitive Activity” shall mean participation by the Eligible Executive, without written consent of the Company, in the part-time or full-time management or consulting of or for any business operation of any enterprise if such operation engages in the design, manufacture, marketing or retail of furniture.

 

8.

 

Administration/Amendment/Termination.

 

 

(a)

 

Administrator. The Administrator has the sole discretionary authority to construe and interpret this Plan and to make any and all determinations related to administration of this Plan, including all questions of eligibility for participation and benefits, to the maximum extent permitted by law. The decisions, actions and interpretations of the Administrator are final and binding on all parties.

 

 

(b)

 

Amendment/Termination. The Company reserves the right to amend or terminate this Plan, in whole or in part, at any time. No such amendment may impair the rights of an Eligible Employee who has terminated employment pursuant to Section 3(b) of this Plan unless such amendment is agreed to in a writing signed by the Eligible Executive and the Company.

9.

 

Claims for Benefits.

 

 

 

In the event an Eligible Executive disputes or otherwise disagrees with the Company’s determination of the severance benefits payable to him or her and desires to make a claim (the “claimant”) with respect to any of the benefits provided hereunder, the claimant shall

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so notify, in writing, the Administrator by actual receipt or registered mail (addressed to the “Human Resources Committee, Furniture Brands International, Inc., 1 N. Brentwood Blvd., St. Louis, MO 63105”) and shall submit evidence of events constituting a termination of employment with the Company. Any claim with respect to any of the benefits provided under this Plan shall be made in writing within one hundred eighty (180) days of the later of his or her becoming aware of the event which the claimant asserts entitles him or her to severance benefits or the Company notifying him or her of its determination of the severance benefits payable to him or her under this Plan as a result of the occurrence of that event. Failure by the claimant to submit his or her claim within such one hundred eighty (180) day period shall bar the claimant from disputing the Company’s notification to him or her of its determination of the severance benefits payable to him or her under this Plan as a result of the occurrence of that event.

Upon receipt of a claim, the Administrator shall advise the claimant that a reply will be forthcoming within a reasonable period of time, but ordinarily not later than ninety (90) days, and shall, in fact, deliver such reply within such period. However, the Administrator may extend the reply period for an additional ninety (90) days for reasonable cause. If the reply period will be extended, the Administrator shall advise the claimant in writing during the initial ninety (90) day period indicating the special circumstances requiring an extension and the date by which the Administrator expects to render the benefit determination. The Administrator will inform the claimant in writing of its determination and the reasons therefor in terms calculated to be understood by the claimant. The notice shall set forth the specific reasons for the denial, make specific reference to the pertinent Plan provisions on which the denial is based, and describe any additional material or information necessary for the claimant to perfect the claim and explain why such material or such information is necessary. Such notice shall, in addition, inform the claimant what procedure the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim.

The claimant or his or her duly authorized representative may appeal the denial of the claim to the Administrator at any time within sixty (60) days after the receipt by the claimant of written notice from the Administrator of the denial of the claim. In connection therewith, the claimant or his or her duly authorized representative may request a review of the denied claim, may review pertinent documents, and may submit issues and comments in writing. Upon receipt of a request for review of a denied claim, the Administrator shall make a decision with respect thereto and, not later than sixty (60) days after receipt of a request for review, shall furnish the claimant with a decision on the review in writing, including the specific reasons for the decision written in a manner reasonably calculated to be understandable by the claimant or the claimant’s attorney or accountant, as well as specific reference to the pertinent provisions of this Plan upon which the decision is based. If special circumstances require that the sixty (60) day time period be extended, the Administrator will so notify the claimant within the initial sixty (60) day period indicating the special circumstances requiring an extension and the date by which the Administrator expects to render its decision on review, which will be as soon as possible but not later than one hundred twenty (120) days after receipt of the request for review. In reaching its decision, the Administrator shall have the

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discretionary authority in good faith to determine on behalf of the Company all questions arising under this Plan.

10.

 

Miscellaneous Provisions.

(a) Release. In consideration of the covenants under this Plan and as a condition precedent to receiving any payments under this Plan, an Eligible Executive shall (i) execute and deliver to the Company a release of all claims in such form as requested by the Company within twenty-two (22) days following the Eligible Executive’s Termination Date and (ii) not revoke the release during the seven (7) day period following the date that the Eligible Executive executed the release. The Company shall supply a form of such release to the Eligible Executive no later than the Termination Date.

(b) Waiver. The failure of the Company to enforce at any time any of the provisions of this Plan, or to require at any time performance of any of the provisions of this Plan, shall in no way be construed to be a waiver of these provisions, nor in any way to affect the validity of this Plan or any part thereof, or the right of the Company thereafter to enforce every provision.

(c) Benefits Not Transferable. Except as may be required by law, no benefit that shall be payable under this Plan to any Eligible Executive shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to alienate, sell, transfer, assign, pledge, encumber or charge all or any part of the benefit shall be void; provided, however, that, in the event of the death of a terminated Eligible Executive prior to the end of the period over which such Eligible Executive is entitled to receive severance benefits under this Plan, the severance benefits payable hereunder shall be paid to the estate of such Eligible Executive or to the person who acquired the rights to such benefits by bequest or inheritance. Except as may be provided by law, no benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any Eligible Executive, nor shall it be subject to attachment or legal process for, or against, the Eligible Executive and the same shall not be recognized under this Plan.

(d) Successors of the Company. The rights and obligations of the Company under this Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

(e) No Contract of Employment. The definitions and criteria set forth herein are solely for the purpose of defining Plan eligibility. No legal rights to employment are created or implied by this Plan, nor are any conditions or restrictions hereby placed on termination of employment. Unless the employee has a written employment agreement binding on the Company that provides otherwise, employment with the Company is employment-at-will. As such, termination of employment may be initiated by the Eligible Executive or by the Company at any time for any reason that is not unlawful, with or without Cause.

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(f) Governing Law. To the extent not pre-empted by federal law, this Plan shall be construed, administered and governed in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles. Any action concerning this Plan shall be brought in a court of competent jurisdiction in Saint Louis County, Missouri and each party consents to the venue and jurisdiction of such courts.

(g) Entire Plan. This Plan constitutes the Company’s entire Executive Severance Plan for the Eligible Executive and, except as provided in Section 10(h) of this Plan, supersedes any and all previous representations, understandings and plans with respect to general severance for the Eligible Executives, and any such representations, understandings and plans with respect to officer severance are hereby canceled and terminated in all respects.

(h) Severability and Interpretation; No Duplication of Benefits. As to each Eligible Executive who is a party to a Change in Control Agreement with the Company, in the event of a conflict between the terms of this Plan and any of the definitions or provisions in such Change in Control Agreement, the terms of the Change in Control Agreement shall prevail. Whenever possible, each provision of this Plan and any portion hereof shall be interpreted in such a manner as to be effective and valid under applicable law, rules and regulations. If any covenant or other provision of this Plan (or portion thereof) shall be held to be invalid, illegal, or incapable of being enforced, by reason of any rule of law, rule, regulation, administrative order, judicial decision or public policy, all other conditions and provisions of this Plan shall, nevertheless, remain in full force and effect, and no covenant or provision shall be deemed dependent upon any other covenant or provision (or portion) unless so expressed herein. The parties hereto desire and consent that the court or other body making such determination shall, to the extent necessary to avoid any unenforceability, so reform such covenant or other provision or portion of this Plan to the minimum extent necessary so as to render the same enforceable in accordance with the intent herein expressed. Under no circumstances shall an Eligible Executive be entitled to any benefits under this Plan if the Eligible Executive has already been provided with, or will be provided with, benefits under a Change of Control Agreement between the Company and the Eligible Executive.

(i) No Mitigation Required. The Eligible Executive shall not be required to mitigate the amount provided for in Section 4 of this Plan by seeking other employment or otherwise, nor shall the amount of any payment provided for in Section 4 of this Plan be reduced by any compensation earned by the Eligible Executive as the result of employment by another employer after the date of termination, or otherwise.

(j) Validity. In the event any provision of this Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of this Plan.

(k) Captions and Titles. Captions and titles have been used in this Plan only for convenience, and in no way define, limit or describe the meaning of this Plan or any part thereof.

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(l) Section 409A Savings Clause. This Plan is intended to comply with the provisions of Section 409A of the Code and shall be administered and interpreted in accordance with Section 409A of the Code. Without limiting the generality of the foregoing, any term or provision that is determined by the Administrator to have an ambiguous definition shall be interpreted, to the extent reasonable, to comply with Section 409A of the Code. Each payment under this Plan shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may an Eligible Executive, directly or indirectly, designate the calendar year of any payment to be made under this Plan. All reimbursements and in-kind benefits, including any taxable health, dental and vision benefits provided under this Plan that constitute deferred compensation within the meaning of Section 409A of the Code shall be made or provided in accordance with the requirements of Section 409A of the Code, including, without limitation, that (i) in no event shall reimbursements by Company under this Plan be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred, provided, that the Eligible Executive shall have submitted an invoice for such fees and expenses at least ten (10) days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of in-kind benefits that Company is obligated to pay or provide in any given calendar year (other than medical reimbursements described in Treas. Reg. Section 1.409A-3(i)(1)(iv)(B)) shall not affect the in-kind benefits that Company is obligated to pay or provide in any other calendar year; (iii) the Eligible Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the end of the third year following the year in which Eligible Executive’s Termination Date occurred.

 

 

 

 

 

 

FURNITURE BRANDS INTERNATIONAL, INC.
 

 

 

By:  

/s/ Beth Sweetman  

 

 

Title: Senior Vice President- Human Resources 

 

 

Date: 2/24/10 

 

 

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