ITEM 1.01. ENTRY INTO A MATERIAL DEFINITVE AGREEMENT.
Effective August 3, 2009, the Board of Directors of Furniture Brands
International, Inc. (the "Company") adopted a Stockholders Rights Agreement (the
"Rights Agreement") to preserve the value of the Company's net deferred tax
assets. The Rights Agreement replaces the Company's existing Rights Agreement,
dated as of July 30, 1998, as amended as of July 10, 2008, between the Company
and American Stock Transfer and Trust Company, LLC (the "Original Rights
Agreement"). The Rights Agreement reduces the risk of limitation of the
Company's net operating loss carryforwards and certain other tax benefits or
attributes under Section 382 of the Internal Revenue Code (the "NOLs"), and also
maintains the provisions of the Original Rights Agreement, including the 15%
ownership threshold, which is designed to protect all stockholders against
potential acquirers who may pursue coercive or unfair tactics aimed at gaining
control of the Company without paying all stockholders a full and fair price.
The Board of Directors of the Company adopted the Rights Agreement in an
effort to protect stockholder value by attempting to reduce the likelihood of a
possible limitation on the Company's ability to use its NOLs. Under the Internal
Revenue Code and rules promulgated by the Internal Revenue Service, the
Company's ability to use its NOLs to offset any current and future earnings and
thus, reduce its federal income tax liability could be significantly limited if
it experiences an "ownership change" for federal income tax purposes. In
general, an ownership change will occur if there is a greater than 50% change in
ownership of stock by stockholders owning (or deemed to own under Section 382)
5% or more of a corporation's stock over a rolling three year period. A company
that experiences an ownership change will generally be subject to an annual
limitation on certain of its pre-ownership net operating losses equal to the
value of the company immediately before the ownership change multiplied by the
long-term tax exempt rate, subject to certain adjustments. The Rights Agreement
is intended to reduce the likelihood of an "ownership change" occurring as a
result of the buying and selling of the Company's common stock by
(i) discouraging any person or group from acquiring more than 4.75% of the
Company's common stock and becoming a "5-percent shareholder" under Section 382,
and (ii) discouraging any existing "5-percent shareholder" from acquiring
additional shares of the Company's common stock. There is no guarantee, however,
that the Rights Agreement will prevent the Company from experiencing an
ownership change.
The Company intends to seek stockholder approval of the Rights Agreement at
its next annual meeting of stockholders.
In connection with the adoption of the Rights Agreement, the Board of
Directors declared a distribution of one right (a "Right") for each outstanding
share of Common Stock, no par value, of the Company (the "Common Stock") to the
stockholders of record as of the close of business on August 13, 2009 (the
"Record Date") and for each share of Common Stock issued (including shares
distributed from Treasury) by the Company thereafter and prior to the
Distribution Date (as described below and defined in the Rights Agreement). Each
Right entitles the registered holder, subject to the terms of the Rights
Agreement, to purchase from the Company one one-thousandth of a share (a "Unit")
of Series B Junior Participating Preferred Stock, no par value (the "Series B
Preferred Stock"), at a Purchase Price of $20.00 per Unit, subject to adjustment
(the "Purchase Price").
Initially, no separate Rights Certificates will be distributed and instead
the Rights will attach to all certificates representing shares of outstanding
Common Stock, or, with respect to Common Stock in book entry form, to the
outstanding shares of Common Stock evidenced by the balances indicated in the
book entry account system of the transfer agent for the Common Stock. The Rights
will separate from the Common Stock and will become exercisable upon the earlier
of (i) ten business days following a public announcement that a person or group
of affiliated or associated persons has become an "Acquiring
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Person," or (ii) ten business days (or such later date as may be determined by
the Board of Directors prior to such time as any person becomes an Acquiring
. . .
ITEM 1.02. TERMINATION OF A MATERIAL DEFINITVE AGREEMENT.
On August 3, 2009, the Company entered into an amendment (the "Amendment") to
the Rights Agreement, dated as of July 30, 1998, and as amended as of July 10,
2008, between the Company and American Stock Transfer and Trust Company, LLC
(the "Original Rights Agreement"). The Amendment accelerates the expiration of
the Original Rights Agreement from July 30, 2011 to August 3, 2009, which is the
effective date of the Company's new Rights Agreement referenced above. The
Amendment is filed as Exhibit 4.2 to this Form 8-K and is incorporated herein by
reference in its entirety.
ITEM 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR.
On August 3, 2009, the Company filed a Certificate of Designation of Series B
Junior Participating Preferred Stock with the Secretary of State of the State of
Delaware. A copy of the Certificate of Designation is attached as Exhibit 3.1 to
this Form 8-K and is incorporated herein by reference in its entirety.
In addition, the Company filed a Certificate of Elimination with the
Secretary of State of the State of Delaware on August 3, 2009, to eliminate its
Series A Junior Participating Preferred Stock ("Series A Preferred Stock") in
connection with the expiration of the Original Rights Agreement referenced
above.
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The Certificate of Elimination eliminated the previous designation of 1,000,000
shares of Series A Preferred Stock and caused such shares of Series A Preferred
Stock to resume their status as undesignated shares of preferred stock of the
Company. A copy of the Certificate of Elimination is attached hereto as
Exhibit 3.2 to this Form 8-K and is incorporated herein by reference in its
entirety.
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