Exhibit 10.46 




Description of
O’Sullivan Key Employee Retention Plan 



        Pursuant
to O’Sullivan’s Key Employee Retention Plan, certain O’Sullivan employees
(“KERP employees”) could potentially receive a total of up to approximately $1.1
million in cash over time. If any of the KERP employees is terminated or resigns prior to
the date on which an applicable KERP payment becomes due, such employee no longer shall be
eligible to receive any payment thereunder. In addition, certain of O’Sullivan’s
other employees (who are not among the KERP employees) shall be eligible to receive
payments from a $200,000 discretionary pool; approximately $63,000 of such discretionary
pool has already been targeted for 15 of O’Sullivan’s employees. Except with
respect to payments from the discretionary pool, O’Sullivan does not intend to
substitute or add employees in the event that any of the KERP employees no longer is
employed by O’Sullivan as of the date that a payment thereunder becomes due and
payable. 



        The
KERP employees are divided into two tiers, with one tier, consisting of four members of
O’Sullivan’s most senior management, potentially receiving a total cash payment
equal to 37.5% of their annual salary (representing up to $636,150 in the aggregate), and
a second tier, consisting of approximately 16 other key employees, potentially receiving a
total cash payment equal to 25% of their annual salary (representing up to $482,294 in the
aggregate). The payments are divided into a retention component and an incentive
component. 



        The
maximum potential aggregate amount of the KERP’s retention component is $520,758.
Fifty percent of the retention component shall be paid upon the earlier of the effective
date of O’Sullivan’s modified second amended plan of reorganization or June 30,
2006, and the remaining 50% thereof shall be paid upon the earlier of September 30, 2006
or 90 days after the effective date, in each case to those of the KERP employees who are
still employed by O’Sullivan on such date. 



        The
maximum potential aggregate amount of the KERP’s incentive component is $597,686. The
incentive component of the KERP is tied to two separate and distinct financial performance
goals, with each goal pertaining to one-half of the incentive component: (a) a net sales
for FY 2006 and (b) earnings before interest, taxes, depreciation, amortization and
restructuring expenses for FY 2006. If 100% of either such goal is achieved, then 100% of
the incentive-based KERP amount with respect to each such goal (i.e., up to
$298,843) will be paid; if greater than or equal to 90% and less than 100% of either such
goal is achieved, then 75% of the incentive-based KERP amount with respect to such goal
will be paid; if greater than or equal to 80% and less than 90% of either such goal is
achieved, then 50% of the incentive-based KERP amount with respect to such goal will be
paid; and if less than 80% of either such goal is achieved, then none of the
incentive-based KERP amount with respect to such goal will be paid. The incentive
component of the KERP will be paid to those of the KERP employees then employed by
O’Sullivan on the earlier of (a) the completion of an audit of O’Sullivan’s
FY 2006 financial statements or (b) 90 days after the end of FY 2006 (subject to
O’Sullivan’s approval of the FY 2006 financial statements). 



        For
those KERP employees in Tier I, the incentive component shall be 75% and the retention
component shall be 25% of their total potential KERP payments. O’Sullivan will have
the discretion to decide what portion, if any, of the payments otherwise payable with
respect to O’Sullivan’s current President and Chief Executive Officer will be
paid under the circumstances. For those KERP employees in Tier II, the incentive component
shall be 25% and the retention component shall be 75% of their total potential KERP
payments.