Exhibit 10(b)
FURNITURE BRANDS
EXECUTIVE INCENTIVE PLAN
February 1995
Amended March 1, 1996
Amended September 26, 1996
Amended February 24, 1997
TABLE OF CONTENTS
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INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . 1
OBJECTIVES OF PLAN. . . . . . . . . . . . . . . . . . . . . 1
Objectives . . . . . . . . . . . . . . . . . . . . . . . 1
Award Achievement. . . . . . . . . . . . . . . . . . . . 1
PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 2
Eligibility. . . . . . . . . . . . . . . . . . . . . . . 2
Participation. . . . . . . . . . . . . . . . . . . . . . 2
Non-Eligibility. . . . . . . . . . . . . . . . . . . . . 3
Plan Year. . . . . . . . . . . . . . . . . . . . . . . . 3
HOW THE PLAN WORKS. . . . . . . . . . . . . . . . . . . . . 3
0Plan Factors. . . . . . . . . . . . . . . . . . . . . . 3
Setting Furniture Brands Goals . . . . . . . . . . . . . 3
Notification of Participation. . . . . . . . . . . . . . 3
MECHANICS OF DETERMINING AWARDS . . . . . . . . . . . . . . 4
Definitions of Terms . . . . . . . . . . . . . . . . . . 4
Mechanics of Determining Awards. . . . . . . . . . . . . 4
DISCRETIONARY AWARDS PROGRAM. . . . . . . . . . . . . . . . 5
CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . . 6
PAYMENT OF AWARDS . . . . . . . . . . . . . . . . . . . . . 6
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 6
MANNER OF EXERCISE OF COMMITTEE AUTHORITY. . . . . . . . . 6
CERTAIN PERFORMANCE BASED AWARDS . . . . . . . . . . . . . 6
NO CONTRACT OF EMPLOYMENT. . . . . . . . . . . . . . . . . 6
ASSIGNMENTS AND TRANSFERS. . . . . . . . . . . . . . . . . 6
GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 6
AMENDMENT AND TERMINATION OF PLAN AND AWARDS . . . . . . . 6
EFFECTIVE DATE OF THE PLAN. . . . . . . . . . . . . . . . . 7
FURNITURE BRANDS
CORPORATE
EXECUTIVE INCENTIVE PLAN
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1. INTRODUCTION
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This Executive Incentive Plan (the "Plan") has been designed for
those management persons at the corporate offices of Furniture Brands
International, Inc. ("FBI") who directly and substantially influence
achievement of certain corporate goals. The Plan provides monetary
awards for the achievement of those goals. In select cases, the Plan
provides for additional special discretionary awards.
FBI believes that the total annual income of key employees should
be influenced by their individual and collective effort, and that
rewards should directly relate to the achievement of planned,
meaningful results. The Plan is in addition to and assumes the
existence of a base salary which is competitive, equitable, and
subject to periodic performance-related adjustments.
The overall administration and control of the Plan, including
final determination of annual bonus awards to each participant, is the
responsibility of the Executive Compensation and Stock Option
Committee of the FBI Board of Directors (the "Committee"). The
Committee (or a subcommittee thereof which has been designated by the
Committee to administer the Plan) shall consist solely of three or
more members of the FBI Board of Directors who are "outside directors"
as defined in Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder. Members of the
Committee are not eligible to participate in the Plan.
2. OBJECTIVES OF PLAN
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A. Objectives. The Plan has been created with several
objectives in mind:
(1) to emphasize achievement of planned strategic
objectives;
(2) to reinforce the importance of annual growth; and
(3) to motivate and challenge participating executives
through meaningful compensation opportunities.
B. Award Achievement. To achieve these objectives, the Plan
is designed to:
(1) provide for monetary awards of significant value
related directly to measurable FBI results;
(2) motivate participating individuals to achieve results
beyond the routine of position responsibilities; and
(3) be appropriate for both the level of responsibility
and total compensation for the position.
Total compensation, resulting from the combination of base
salary and monetary awards under the Plan, is designed to
be competitive with total compensation for similar
positions in American industry.
3. PARTICIPATION
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A. Eligibility. Only management persons whose performance
directly and substantially influences the annual results
of FBI will be considered for participation in the Plan.
Ordinarily the extent of such influence will be
reflected in the Bonus Percentage (as herein defined).
B. Participation
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(1) At the start of each Plan Year (as herein defined)
FBI management will submit a list of proposed
participants and Bonus Percentages for review and
approval by the Committee. The Committee may in
its discretion change the participants and Bonus
Percentages, provided, however, that the Committee
shall, within the first 90 days of each Plan Year,
set forth in writing, a final approved list of
participants and Bonus Percentages for such Plan
Year. Such final list of participants and Bonus
Percentages may not thereafter be modified except
as provided in this Plan. With respect to persons
who have been determined to be "covered employees"
within the meaning of Code Section 162(m)(3) for
such Plan Year (a "Covered Employee"), additional
participation in the Plan during a Plan Year shall
be permitted only in the event of an unusual
circumstance, such as a new hire. Executive
officers of the Company may be participants in the
Plan to the extent approved by the Committee.
(2) To earn an award, an individual must be designated
a participant for the Plan Year and must
participate effectively for a minimum of eight full
months of the Plan Year.
(3) A participant who has lost time due to illness, or
dies, retires or becomes totally disabled during
the Plan Year, will be considered for an award
under the Plan provided that his/her influence on
goal achievement can be identified and that
achievement of results can be measured.
C. Non-Eligibility
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(1) Any individual whose employment is terminated at
any time during the Plan Year by reason of
voluntary or encouraged resignation, or who is
discharged, will not receive an award.
(2) Any individual who has been demoted at any time
during the Plan Year to a position not included in
the Plan will not receive an award.
D. Plan Year. The Plan Year will correspond with the FBI
fiscal year.
4. HOW THE PLAN WORKS
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A. Plan Factors. There are two factors which will be
measured in order to determine an award: opportunity
and FBI performance.
(1) Opportunity is the potential impact that a
participant may have on the achievement of goals.
This is expressed by the Bonus Percentage.
(2) FBI Performance is the result of achievement. This
is measured by the percentage of attainment of
FBI's goals.
B. Setting FBI Goals. At or prior to the beginning of each
Plan Year, FBI management will recommend to the
Committee for approval, one or more objective measurable
performance goals for FBI (the "Goals") for such year,
and the weighting to be assigned to each Goal. The
Goals will be based upon one or more of the following
criteria: sales; earnings; earnings per share; pre-tax
earnings; net profits; return on equity; cash flow; debt
reduction; asset management; stock price; market share;
costs; or selling, general and administrative ("SG&A")
expenses. The Goals will be realistic, yet rigorous.
They will be attainable, but attainment will require
above average performance. The Committee may, in its
discretion, approve management's recommendations or
change the Goals and/or weightings, provided, however,
that the Company shall, within the first 90 days of the
year (or, in the case of a new hire added to the Plan
during the year, before 25% of such individual's
services for the Company for the year has elapsed), set
forth in writing the final approved Goals, the Minimum
Percentages (as herein defined) for such year and the
weighting to be assigned to such Goals.
C. Notification of Participation. Each participant's
target Bonus Percentage will be communicated each Plan
Year by delivery of the Participation Form.
5. MECHANICS OF DETERMINING AWARDS
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A. Definitions of Terms
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(1) Bonus Percentage. The Bonus Percentage will be
expressed as a percentage (not less than 10% and
not more than 50%) of the participant's base
salary. That percentage will be higher for a
position with significantly greater
responsibilities, thus recognizing the direct
relationship between position responsibility and
influence on FBI results. Participants who are
promoted during a Plan Year to a position with a
higher Bonus Percentage will receive a prorated
award based on the percentage of the Plan Year
spent in each position.
(2) Aggregate Target Amount. The Aggregate Target
Amount will be expressed as a dollar amount,
calculated by multiplying the participant's base
annual salary rate, as in effect on March 1 of the
Plan Year, which has been established at or before
the time of the setting of the Aggregate Target
Amount, by the Bonus Percentage. The result will
be the total award to which the participant will be
entitled if FBI achieves 100% of all Goals for that
Plan Year.
(3) Weighted Target Amounts. For each Goal a Weighted
Target Amount will be calculated by multiplying the
Aggregate Target Amount by the weighted percentage
applicable to the Goal. The result for each Goal
will be the portion of the total award to which the
participant will be entitled if FBI achieves 100%
of that Goal for that Plan Year. The sum of the
Weighted Target Amounts will equal the Aggregate
Target Amount.
B. Mechanics of Determining Awards.
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(1) FBI Performance. FBI's performancegainst the Goals
will be measured by the percentage of achievement
of each Goal. FBI's performance with respect to
each Goal will be based upon audited results.
(2) Achievement of Target. The Plan is designed to
provide the participant with 100% of his/her
Weighted Target Amount with respect to each Goal if
FBI achieves 100% satisfaction of that Goal.
(3) Minimum FBI Performance. Each Plan Year the
Committee will establish a minimum percentage (the
"Minimum Percentage") with respect to each Goal.
Achievement below the Minimum Percentage will
result in no award with respect to that Goal.
Under certain circumstances, the Committee may
establish Goals the achievement of which
contemplate reducing rather than increasing an
amount, such as a reduced debt level or reduced
SG&A expenses. In any such case, the percentage
which will be applied to the Weighted Target Amount
for such Goal will be inversely proportional to the
performance against the Goal. For example, if a
Goal is a year-end debt amount and the actual year
-end debt is 105% of the Goal, the percentage of
Weighted Target Amount to be paid with respect to
that Goal would be 95%. In these circumstances,
the Minimum Percentage will be expressed in terms
of a figure greater than 100%.
(4) Calculation of Award. The percentage of FBI's
achievement of each Goal will be applied to the
Weighted Target Amount for that Goal to determine
the amount of the award payable with respect to
that Goal. Awards will be calculated separately
for each Goal, but will be aggregated and paid as
one award check.
(5) Discretion to Increase Award. The Committee shall,
under no circumstances, increase an award granted
under this Section 5 except to the extent permitted
under Treasury Regulation Section 1.162-
27(e)(2)(iii).
6. DISCRETIONARY AWARDS PROGRAM.
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(1) To recognize special needs, a discretionary awards
program is part of this Plan. Its objective is to
recognize the performance of FBI through a more
qualitative evaluation, rather than a quantitative
evaluation. This could occur, for example, if FBI
does not achieve one or more Goals due to business
or economic reasons beyond its control but, given
these adverse circumstances, nonetheless performed
well. Under such circumstances, a special award
may be granted at the discretion of the Committee.
(2) To the extent all or any portion of an award is not
immediately deductible as compensation expense by
FBI for federal income tax purposes, payment of
such award or portion thereof, as the case may be,
will be deferred until following termination of
employment of the participant or until such earlier
date as the Committee shall, in its discretion,
determine, either at the time of deferral or
thereafter, whereupon such award or any portion
thereof, as the case may be, less appropriate
withholdings, will be paid by check provided that
the same shall then have become immediately
deductible as compensation expense by FBI for
federal income tax purposes. Simple interest shall
be paid annually on the deferred compensation at
FBI's effective borrowing rate.
(3) Nothing contained in this Section 6 shall be deemed
to permit or provide for discretionary increases in
awards payable to Covered Employees under Section 5
hereof.
7. CERTIFICATION. Before any payments are made under this Plan,
the Committee must certify in writing that the Goals justifying the
payment of an award have been met.
8. PAYMENT OF AWARDS. Except as provided in Section 6 hereof,
awards, to the extent immediately deductible as compensation expense
by FBI for federal income tax purposes, less appropriate withholdings,
will be paid by check as soon as practical after the audited close of
a fiscal year.
9. ADMINISTRATION. Subject to the limitations as herein set
forth, the Committee is authorized and empowered to administer the
Plan; interpret the Plan; establish, modify and grant waivers of award
restrictions; prescribe, amend and rescind rules relating to the Plan;
and determine the rights and obligations of participants under the
Plan. All decisions of the Committee shall be final and binding upon
all parties including the Company, its stockholders, and its
participants.
10. MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The express grant
of any specific power to the Committee and the taking of any action by
the Committee, shall not be construed, as limiting any power or
authority of the Committee. All designations of participation, bonus
percentages, goals, minimum percentages, aggregate amounts, and
certifications of performance shall be in writing. A writing signed
by all members of the Committee shall constitute the act of the
Committee without the necessity, in such event, to hold a meeting.
The Committee may delegate the authority, subject to such terms as the
Committee shall determine, to perform administrative functions
(excluding those described in the second sentence of this Section 10)
under the Plan.
11. CERTAIN PERFORMANCE BASED AWARD. Any awards under Section 5
hereof are intended to be "qualified performance-based compensation"
within the meaning of Section 162(m) of the Code and shall be paid
solely on account of the attainment of one or more preestablished,
objective performance goals within the meaning of Section 162(m). If
any provision of this Plan does not comply with the requirements of
Section 162(m) of the Code as then applicable to any employee, such
provision shall be construed or deemed amended to the extent necessary
to conform to such requirements with respect to such employee.
12. NO CONTRACT OF EMPLOYMENT. Participation in the Plan shall not
be considered an agreement to employ a participant for any period of
time or in any position.
13. ASSIGNMENTS AND TRANSFERS. With the exception of transfer by
will or by the laws of descent and distribution, rights under the Plan
may not be transferred or assigned.
14. GOVERNING LAW. The Plan shall be construed, administered and
governed in all respects under and by the applicable internal laws of
the State of Missouri, without giving effect to the principles of
conflicts of law thereof.
15. AMENDMENT AND TERMINATION OF PLAN AND AWARDS. The Board may
amend, alter, suspend, discontinue or terminate the Plan without the
consent of stockholders or participants, except as is required by any
federal or state law or regulation or the rules of any stock exchange
on which the shares of FBI ("Shares") are listed, or if the Board in
its discretion determines that obtaining such stockholder approval is
for any reason advisable, provided, however, that (i) without the
consent of an affected participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may impair the
rights of such participant under any award theretofore granted to such
participant, and (ii) the Plan may not be amended without the consent
of the stockholders of a majority of the Shares then outstanding to
(a) materially modify the requirements as to eligibility for
participation in the Plan, (b) change the specified performance
objectives for payment of awards under Section 5, (c) increase the
maximum award payable under Section 5, (d) withdraw administration of
the Plan from the Committee or (e) extend the period during which
awards may be granted.
16. EFFECTIVE DATE OF THE PLAN. The Plan, as amended, shall become
effective on January 1, 1997 provided that the Plan is approved by the
affirmative vote of the holders of a majority of the Shares present or
represented and entitled to vote at the 1997 annual meeting of the
stockholders of FBI. The terms of the Plan shall be perpetual;
subject to earlier termination by the Board pursuant to Section 15,
after which no awards may be made under the Plan, but any such
termination shall not affect awards then outstanding or the authority
of the Committee to continue to administer the Plan.