CHANGE IN CONTROL AGREEMENT
Exhibit 10.1
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) “Benefits” means 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
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 | ||||
| 0 X. Xxxxxxxxx Xxxx. | ||||
| Xx. Xxxxx, XX 00000 | ||||
| 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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