Furniture Brands' ability to realize its net deferred tax assets would be substantially limited by Section 382 if an "ownership change" occurred -- generally, a greater than 50-percentage point change in ownership of stock by stockholders owning (or deemed to own under Section 382) 5 percent or more of a corporation's stock over a defined period of time. The stockholder rights plan is intended to reduce the likelihood of an "ownership change" occurring as a result of the buying and selling of Furniture Brands common stock.
In connection with the rights plan, Furniture Brands has declared a dividend of one preferred share purchase right for each outstanding share of common stock as of August 13, 2009. Each right initially represents the right to purchase 1/1,000th of a share of Furniture Brands preferred stock at a price of $20.00. Effective today and subject to certain exceptions described in the rights plan, any stockholder or group that acquires beneficial ownership of 4.75 percent or more of Furniture Brands' outstanding stock (an "acquiring person") without the approval of the company's board of directors would be subject to significant dilution in its holdings. Existing stockholders holding 4.75 percent or more of Furniture Brands' common stock will not be considered acquiring persons unless they acquire additional shares, subject to certain exceptions described in the rights plan. The 4.75 percent threshold is intended to reduce the likelihood that a stockholder will inadvertently become a "5-percent stockholder" under Section 382 by providing that there are a sufficient number of shares that a stockholder may inadvertently acquire after triggering the rights plan, but before acquiring 5 percent or more of the company's stock.
