Amendment 1 to the Furniture Brands Note Purchase Agreement dated 04/16/07


    EXECUTION
      COPY

    


    FURNITURE
      BRANDS INTERNATIONAL, INC.

    BROYHILL
      FURNITURE INDUSTRIES, INC.

    HDM
      FURNITURE INDUSTRIES, INC.

    LANE
      FURNITURE INDUSTRIES, INC.

    THOMASVILLE
      FURNITURE INDUSTRIES, INC.

    


    FIRST
      AMENDMENT 

    TO
      NOTE PURCHASE AGREEMENT

    


    $150,000,000
      

    6.83%
      Senior Notes

    Due
      May
      17, 2018

    


    


    


    Dated
      as
      of April 16, 2007

    


    


    To
      the
      Holders of the Senior Notes

    Named
      in
      the Attached Schedule I

    


    Ladies
      and Gentlemen:

    


    Reference
      is made to the Note Purchase Agreement dated as of May 17, 2006 (the “Note
      Agreement”) among Furniture Brands International, Inc., a Delaware corporation
      (the “Company”), each Subsidiary Co-Obligor listed above (together with the
      Company, the “Obligors”), and each of the Purchasers named in Schedule A thereto
      pursuant to which the Company issued $150,000,000 aggregate principal amount
      of
      its 6.83% Senior Notes, due May 17, 2018 (the “Notes”). You are referred to
      herein individually as a “Holder” and collectively as the “Holders.” Capitalized
      terms used and not otherwise defined herein shall have the meanings ascribed
      to
      them in the Note Agreement, as amended hereby.

    


    The
      Obligors have requested an amendment of the Consolidated Debt and Fixed Charge
      Coverage covenants contained in Sections 10.1 and 10.2 of the Note Agreement,
      respectively. The Obligors have made a similar request of the Banks in respect
      of the Credit Agreement. The Holders are willing to amend such sections of
      the
      Note Agreement on the terms and conditions set forth herein.

    


    In
      connection with the amendments described in the preceding paragraph, the Banks,
      the Holders and the Obligors have agreed that the obligations to the Banks
      under
      the Credit Agreement and the obligations to the Holders in respect of the Notes
      shall be secured pari
      passu
      pursuant
      to certain security documents. In addition, the Holders and the Banks have
      agreed to enter into an Intercreditor Agreement. 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    In
      consideration of the premises and for good and valuable consideration, the
      receipt and sufficiency of which are acknowledged, the Obligors and the Holders
      agree as follows:

    


    1. AMENDMENTS
      TO NOTE AGREEMENT

    


    1.1. Amendment
      of Section 1.
      The
      last sentence of Section 1 is replaced with the following:

    


    “The
      Notes will be secured pursuant to the Security Documents by a Lien on the
      Collateral in favor of the Collateral Agent until such Lien is released as
      provided by this Agreement and the Intercreditor Agreement.”

    


    1.2. Amendment
      of Section 7.1.
      Section
      7.1(d) is amended to read in its entirety as follows:

    


    “(d) Notice
      of Default or Event of Default
      -
      promptly, and in any event concurrently with the delivery to the Banks or,
      if
      earlier, within five Business Days after a Responsible Officer becoming aware
      of
      the existence of any Default or Event of Default or that any Person has given
      any notice to any Obligor or taken any action with respect to a claimed default
      hereunder or that any Person has given any notice to any Obligor or taken any
      action with respect to a claimed default of the type referred to in Section
      11(f), a written notice specifying the nature and period of existence thereof
      and what action the Obligors are taking or propose to take with respect
      thereto;” 

    


    1.3. Amendment
      of Section 7.2.
      The
      reference in Section 7.2(a) to “Section 10.11” shall be replaced with a
      reference to “Section 10.14.”

    


    1.4. Amendment
      of Section 10.1.
      Section
      10.1 is amended to read in its entirety as follows:

    


    “10.1.
      Consolidated Debt.

     

    The
      Company will not permit the ratio of Consolidated Debt (as of any date) to
      Consolidated EBITDA (for the Company’s then most recently completed four fiscal
      quarters) to be greater than or equal to 3.25 to 1.00 at any time; provided,
      however, that solely with respect to the period from and including March 31,
      2007 through and including June 29, 2007, the Company shall be deemed in
      compliance with this Section 10.1 so long as such ratio is not at any time
      during such period greater than 4.25 to 1.00.”

     

    
      
        
        

      

      
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    1.5. Amendment
      of Section 10.2.
      Section
      10.2 is amended to read in its entirety as follows:

     

    “10.2.
      Fixed Charge Coverage.

     

    The
      Company will not permit the ratio of Consolidated EBITDAR to Consolidated Fixed
      Charges (in each case for the Company’s then most recently completed four fiscal
      quarters) to be less than or equal to:

     

    (a) 1.90
      to
      1.00 as of the end of the fiscal quarter ending on March 31, 2007;

     

    (b) 2.75
      to
      1.00 as of the end of any fiscal quarter ending prior to March 31, 2009 (other
      than the fiscal quarter ending March 31, 2007); or

     

    (c) 3.00
      to
      1.00 as of the end of any fiscal quarter ending on or after March 31,
      2009.”

     

    1.6. Amendment
      of Section 10.5.
      Sections 10.5(b), (f), (g) and (l) and the final paragraph of Section 10.5
      are
      amended to read in their entirety as follows:

     

    “(b) any
      attachment or judgment Lien, unless the judgment it secures has not, within
      60
      days after the entry thereof, been discharged or execution thereof stayed
      pending appeal, or has not been discharged within 60 days after the expiration
      of any such stay; provided that the aggregate of such attachment or judgment
      Liens not paid or fully covered by a reputable and solvent insurance company
      shall not exceed $40,000,000;”

     

    “(f) Liens
      (i)
      securing Indebtedness of a Subsidiary to the Company or to another Wholly Owned
      Subsidiary; or (ii) in favor of the Collateral Agent under the Security
      Documents for the ratable benefit of the holders of the Notes and the
      Banks;”

     

    “(g) Liens
      (i)
      existing on property at the time of its acquisition by the Company or a
      Subsidiary and not created in contemplation thereof, whether or not the
      Indebtedness secured by such Lien is assumed by the Company or a Subsidiary;
      or
      (ii) on property created contemporaneously with its acquisition or within 180
      days of the acquisition or completion of construction or development thereof
      to
      secure or provide for all or a portion of the purchase price or cost of the
      acquisition, construction or development of such property after the date of
      Closing; or (iii) existing on property of a Person at the time such Person
      is
      merged or consolidated with, or becomes a Subsidiary of, or substantially all
      of
      its assets are acquired by, the Company or a Subsidiary and not created in
      contemplation thereof; provided that in the case of clauses (i), (ii) and (iii)
      

     

    
      
        
        

      

      
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    such
      Liens do not extend to additional property of the Company or any Subsidiary
      (other than property that is an improvement to or is acquired for specific
      use
      in connection with the subject property) and that the aggregate principal amount
      of Indebtedness secured by each such Lien does not exceed the fair market value
      (determined in good faith by one or more officers of the Company to whom
      authority to enter into such transaction has been delegated by the board of
      directors of the Company) of the property subject thereto; and provided further
      that the aggregate outstanding principal amount of all Indebtedness secured
      by
      Liens permitted by clause (ii), together with the aggregate amount of
      Indebtedness of the Company and its Subsidiaries evidenced by Capital Lease
      Obligations, shall not at any time exceed $20,000,000;”

     

    “(l) Liens
      securing Indebtedness not otherwise permitted by paragraphs (a) through (k)
      of
      this Section 10.5 to the extent attaching to properties and assets with an
      aggregate fair value not in excess of, and securing liabilities not in excess
      of, $30,000,000 in the aggregate at any time outstanding.”

     

    “Notwithstanding
      the foregoing, the Company will not, and will not permit any other Subsidiary
      to, permit to exist, create, assume or incur, directly or indirectly, any Liens
      securing obligations under the Credit Agreement, unless the Company
      contemporaneously provides for the Notes to be equally and ratably secured
      with
      such obligations under the Credit Agreement (pursuant to documentation,
      including an intercreditor agreement, reasonably satisfactory to the Required
      Holders), and in such case the Notes shall have the benefit, to the fullest
      extent that, and with such priority as, the holders of the Notes may be entitled
      under applicable law, of an equitable Lien on such property.”

     

    1.7. Amendment
      of Section 10.6.
      Section
      10.6 is amended to include the following new final sentence:

     

    “Notwithstanding
      the foregoing, during the period from and including March 31, 2007 through
      and
      including June 30, 2007, without the consent of the Required Holders, the
      Company will not, and will not permit any Subsidiary to, engage in any
      transaction otherwise permitted by this Section 10.6, except (i) any Obligor
      may
      consolidate or merge with any other Obligor or convey, transfer, sell or lease
      all or substantially all of its assets in a single transaction or series of
      transactions to any other Obligor and (ii) any other Subsidiary may merge into
      an Obligor (provided that the Obligor is the surviving corporation) or another
      Wholly Owned Subsidiary or sell, transfer or lease all or any part of its assets
      to an Obligor or another Wholly Owned Subsidiary; provided in each instance
      set
      forth in clauses (i) and (ii) that, immediately before and after giving effect
      to such transaction, no Default or Event of Default would exist.”

     

    
      
        
        

      

      
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    1.8. Amendment
      of Section 10.7.
      Section
      10.7 is amended to include the following new final sentence:

     

    “Notwithstanding
      the foregoing, during the period from and including March 31, 2007 through
      and
      including June 30, 2007, without the consent of the Required Holders, the
      Company will not, and will not permit any Subsidiary to, sell, lease, convey,
      dispose of or otherwise transfer (collectively, for purposes of this sentence,
      “transfers”) any assets other than: 

     

    (i)
       those
      made by a Subsidiary to an Obligor or another Wholly Owned Subsidiary or by
      an
      Obligor to another Obligor; 

     

    (ii)
       inventory
      held for sale or lease; 

     

    (iii)
       equipment,
      fixtures, supplies or materials no longer required in the operation of the
      business of the Obligors or any other Subsidiary or that are obsolete;


     

    (iv)
       accounts
      receivable sold or discounted without recourse in connection with the compromise
      or collection thereof; and 

     

    (v)
       other
      transfers of assets so long as: 

     

    (a) in
      the
      good faith opinion of the Company such transfer is in exchange for consideration
      having a fair market value at least equal to that of the property exchanged
      and
      is in the best interest of the Company or such Subsidiary;

     

    (b) immediately
      before and after giving effect to such transfer, no Default or Event of Default
      would exist; and 

     

    (c) together
      with all other property of the Company and its Subsidiaries previously
      transferred pursuant to this clause (v) during the twelve-month period ending
      with the month in which any such transaction occurs, such assets do not
      constitute a Substantial Portion of the property of the Company and its
      Subsidiaries. 

     

    For
      purposes of the foregoing clause (v), “Substantial Portion” shall mean property
      that (a) represents more than 10% of Consolidated Total Assets as of the
      beginning of the twelve-month period ending with the last day of the month
      preceding the month in which such determination is made or (b) is responsible
      for more than 10% of the consolidated net sales of the Company and its
      Subsidiaries or of the Consolidated Net Income for such twelve months.”


     

    
      
        
        

      

      
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    1.9. Amendment
      of Section 10.9.
      Section
      10.9 is amended to read in its entirety as follows:

     

    “10.9.
      Subsidiary Guaranty and Collateral. 

     

    The
      Company will not permit any Subsidiary that is not an Obligor to become a
      borrower or a guarantor of Indebtedness owed to banks under the Credit Agreement
      unless such Subsidiary is, or concurrently therewith becomes, a party to the
      Subsidiary Guaranty. At such time as such Subsidiary becomes a party to the
      Subsidiary Guaranty, such Subsidiary shall (i) execute and deliver a joinder
      to
      such Security Documents as the Required Holders may
      request, and (ii) execute such additional Security Documents as the
      Required Holders may
      request, in each case as deemed appropriate by the Required Holders to cause
      substantially all personal property of such Subsidiary other than equity
      interests in foreign Subsidiaries to constitute Collateral and in form and
      substance satisfactory to the Required Holders and, in the case of both (i)
      and
      (ii) above, accompanied by such resolutions, opinions, corporate certificates
      and other documents as the Required Holders may
      reasonably request.” 

     

    1.10. Addition
      of Section 10.12.
      New
      Section 10.12 is added to the Note Agreement as follows:

     

    “10.12.
      Certain Prepayments.

     

    The
      Company will not, and will not permit any of its Subsidiaries to, directly
      or
      indirectly, (i) voluntarily prepay, defease or in substance defease, purchase,
      redeem, retire or otherwise acquire, any Indebtedness (other than the Notes
      and
      obligations under the Credit Agreement) having an aggregate principal amount
      in
      excess of $1,000,000 or (ii) during the period from and including
      April 1, 2007 to and including June 30, 2007, repay (other than upon
      acceleration, in which case the Notes shall have become immediately due and
      payable in accordance with Section 12.1(a)) any principal amounts of
      Indebtedness outstanding under the Credit Agreement, unless, after giving effect
      to such repayment, the aggregate outstanding principal amount of loans and
      unreimbursed letter of credit amounts under the Credit Agreement is $150,000,000
      or greater.” 

     

    1.11. Addition
      of Section 10.13.
      New
      Section 10.13 is added to the Note Agreement as follows:

     

    “10.13.
      Further Assurances, etc.

     

    (a) The
      Obligors will, and will cause each of their respective Subsidiaries to, at
      the
      expense of the Obligors, make, execute, endorse, acknowledge, file and/or
      deliver to the Collateral Agent from time to time such schedules, confirmatory
      assignments, conveyances, financing statements, transfer endorsements, powers
      of
      attorney, certificates, reports, and other assurances or 

     

    
      
        
        

      

      
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    instruments
      and take such further steps relating to the Collateral covered by any of the
      Security Documents as the Required Holders may reasonably require to assure
      the
      creation and continuation of perfected security interests in the Collateral
      and
      as are generally consistent with the terms of this Agreement and the Security
      Documents. Furthermore, the Obligors will, and will cause their respective
      Subsidiaries to, deliver to the Collateral Agent such opinions of counsel and
      other related documents as may be reasonably requested by the Required Holders
      to assure compliance with this Section 10.13. Without limiting the foregoing,
      the Obligors shall use their best efforts to cause to be delivered to the
      Collateral Agent for the benefit of the Holders (i) a landlord waiver and/or
      mortgagee estoppel letter, as applicable, with respect to each material parcel
      of real property leased by any of the Obligors or any of the Subsidiary
      Guarantors as and to the extent the Required Holders shall request, each in
      form
      and substance acceptable to the Required Holders and
      (ii)
      such bailee letters with respect to Collateral held by third parties as and
      to
      the extent the Required Holders shall request, each in form and substance
      acceptable to the Required Holders.

     

    (b) The
      Obligors agree that each action required by clause (a) of this Section 10.13
      shall be completed as soon as reasonably practical, but in no event later than
      twenty (20) Business Days (or such greater number of days as the Required
      Holders may agree) after such action is requested to be taken by the Required
      Holders.”

     

    1.12. Addition
      of Section 10.14.
      New
      Section 10.14 is added to the Note Agreement as follows:

     

    “10.14.
      Limitation on Interest Rate Protection Arrangements.

     

    During
      the period from and including March 31, 2007 through and including June 30,
      2007, without the consent of the Required Holders, the Company will not, and
      will not permit any Subsidiary to, enter into any interest rate swap agreement,
      interest rate cap agreement, interest collar agreement, interest rate hedging
      agreement or other similar agreement or arrangement (“Interest Hedges”), other
      than Interest Hedges that renew or replace existing Interest Hedges, provided
      that such renewal or replacement Interest Hedges have a notional amount not
      greater than $150,000,000 in the aggregate and a term not greater than four
      years.” 

     

    1.13. Amendment
      of Section 11.
      

     

    1.13.1. Sections
      11(c) and (e) are amended to read in their entirety as follows:

     

    “(c) any
      Obligor defaults in the performance of or compliance with any term contained
      in
      Section 7.1(b), Section 7.1(d) or Sections 10.1 through 10.14; or”

     

    
      
        
        

      

      
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    “(e) any
      representation or warranty made in writing by or on behalf of the Obligors
      or
      any Subsidiary Guarantor or by any officer of any Obligor or any Subsidiary
      Guarantor in this Agreement, the Subsidiary Guaranty, any Security Document
      or
      in any writing furnished in connection with the transactions contemplated hereby
      or thereby proves to have been false or incorrect in any material respect on
      the
      date as of which made; or”

     

    1.13.2. The
      period at the end of Section 11(k) is replaced with a semicolon followed by
      the
      word “or” and new Section 11(l) is added as follows:

     

    “(l) any
      Security Document ceases to be in full force and effect, or ceases to give
      the
      Collateral Agent for the benefit of the Senior Lenders (as defined in the
      Intercreditor Agreement) a valid and perfected first priority security interest
      or Lien in any of the Collateral purported to be covered thereby, subject only
      to Liens described in clauses (a), (c), (d), (e), (g), (h), (i) and (k) of
      Section 10.5, or a default or event of default occurs under any of the Security
      Documents and such default or event of default continues beyond any period
      of
      grace with respect thereto.”

     

    1.14. Amendment
      of Section 12.1.
      Section
      12.1(a) is amended to read in its entirety as follows:

     

    “(a) If
      an
      Event of Default with respect to any Obligor described in Section 11(g) or
      (h)
      (other than an Event of Default described in clause (i) of Section 11(g) or
      described in clause (vi) of Section 11(g) by virtue of the fact that such clause
      encompasses clause (i) of Section 11(g)) has occurred and is continuing or,
      during the period from and including March 31, 2007 through and including June
      30, 2007, Indebtedness under the Credit Agreement has become or been declared
      due and payable before its stated maturity or before its regularly scheduled
      dates of payment, all the Notes then outstanding shall automatically become
      immediately due and payable.”

     

    1.15. Amendment
      of Section 15.
      Section
      15.1 is amended to read in its entirety as follows:

     

    “15.1. Transaction
      Expenses.

    


    Whether
      or not the transactions contemplated hereby or by the Subsidiary Guaranty are
      consummated, the Obligors will pay all reasonable costs and expenses (including
      reasonable attorneys’ fees of one special counsel for all holders and, if
      reasonably required by the Required Holders, local or other counsel) incurred
      by
      you and each Other Purchaser or holder of a Note in connection with such
      transactions and in connection with any amendments, waivers or consents under
      or
      in respect of this Agreement, the Notes, the 

     

    
      
        
        

      

      
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    Subsidiary
      Guaranty or any Security Document (whether or not such amendment, waiver or
      consent becomes effective), including: (a) the costs and expenses incurred
      in
      enforcing or defending (or determining whether or how to enforce or defend)
      any
      rights under this Agreement, the Notes, the Subsidiary Guaranty or any Security
      Document, or in responding to any subpoena or other legal process or informal
      investigative demand issued in connection with this Agreement, the Notes, the
      Subsidiary Guaranty or any Security Document, or by reason of being a holder
      of
      any Note, (b) the reasonable costs and expenses incurred in connection with
      the
      insolvency or bankruptcy of any Obligor or any other Subsidiary or in connection
      with any work-out or restructuring of the transactions contemplated hereby
      or by
      the Notes, the Subsidiary Guaranty or any Security Document, (c) the reasonable
      costs and expenses incurred in connection with transactions permitted by Section
      10.6, and (d) the filing fee charged by the SVO in connection with the initial
      filing of this Agreement and all related documents and financial information
      with the SVO, provide that the fees under this clause (d) shall not exceed
      $5,000. The Obligors will pay, and will save you and each other holder of a
      Note
      harmless from, all claims in respect of any reasonable fees, costs or expenses
      if any, of brokers and finders (other than those retained by you or another
      holder in connection with its purchase of the Notes).”

    


    1.16. Amendment
      of Section 22.
      Section
      22 is amended to read in its entirety as follows:

     

    “22. RELEASE
      OF SUBSIDIARY GUARANTOR.

    


    You
      and
      each subsequent holder of a Note agree to release any Subsidiary Guarantor
      from
      the Subsidiary Guaranty if such Subsidiary Guarantor ceases to be such as a
      result of an Asset Disposition or other transaction permitted by Section 10.6
      or
      10.7; provided, however, that you and each subsequent holder will not be
      required to release a Subsidiary Guarantor from the Subsidiary Guaranty if
      (A) a
      Default or Event of Default has occurred and is continuing, (B) such
      Subsidiary Guarantor is to become a borrower or a guarantor under the Credit
      Agreement, or (C) such release is part of a plan of financing that contemplates
      such Subsidiary Guarantor guaranteeing any other Indebtedness of the Company.
      Such Subsidiary Guarantor shall automatically be released from the Subsidiary
      Guaranty upon the delivery to the holders of the Notes of a certificate from
      a
      Senior Financial Officer of the Company stating that such transaction has
      occurred and none of the circumstances described in clauses (A), (B) and (C)
      above are true. If any fee or other form of consideration is given to any holder
      of Indebtedness of the Company for such release, holders of the Notes shall
      receive equivalent consideration.”

    


    
      
        
        

      

      
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    1.17. Amendment
      of Schedule B.
      

     

    1.17.1. The
      following defined terms are added to Schedule B:

     

    “Banks”
      means
      the lenders from time to time party to the Credit Agreement and their respective
      successors and assigns.

     

    “Collateral”
shall
      be as defined in the Security Documents. 

     

    “Collateral
      Agent”
means
      JPMorgan Chase Bank, N.A. in its capacity as collateral agent under the Security
      Documents and its successors and assigns. 

     

    “Continuing
      Directors”
      means
      the directors of the Company on April 21, 2006 (the effective date of the
      original Credit Agreement) and each other director if such director’s nomination
      for election to the board of directors of the Company is recommended by a
      majority of the then Continuing Directors.

     

    “First
      Amendment”
      means
      the First Amendment to Note Purchase Agreement dated as of April 16,
      2007.

    


    “Intercreditor
      Agreement”
      means
      the Intercreditor and Collateral Agency Agreement dated as of April 16, 2007
      among the holders of the Notes, the Banks and the Collateral Agent, as the
      same
      may from time to time be amended, modified or restated, or replaced in
      connection with a refinancing of the Credit Agreement.

     

    “Security
      Documents”
      means
      the security agreements, pledge agreements and each other document or instrument
      pursuant to which security is granted to the Collateral Agent for the benefit
      of
      the holders of the Notes and the Banks, as the same may be amended, modified
      or
      restated from time to time.

    


    1.17.2. The
      following terms are amended to read in their entirety as follows:

     

    “Change
      of Control Event”
      means
      the occurrence of any of the following: (i) the Company shall at any time cease
      to own 100% of the capital stock of any of Broyhill Furniture Industries, Inc.,
      Lane Furniture Industries, Inc., HDM Furniture Industries, Inc. or Thomasville
      Furniture Industries, Inc., (ii) HDM Furniture Industries, Inc. shall cease
      to own 100% of the capital stock of Maitland-Smith Furniture Industries, Inc.,
      (iii) the first date upon which a majority of the Persons on the board of
      directors of the Company are not Continuing Directors or (iv) any Person, entity
      or “group” (as such term is defined in Section 13(d)(3) of the Securities
      Exchange Act of 1934, as amended) is or becomes the beneficial owner of an
      amount of outstanding Voting 

     

    
      
        
        

      

      
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    Stock
      of
      the Company in excess of 25% of the total amount of fully diluted shares of
      outstanding Voting Stock of the Company. The date on which such event occurs
      is
      referred to as the “Effective
      Date of the Change of Control.”

    


    “Material
      Adverse Effect”
      means a
      material adverse effect on (a) the business, operations, affairs, financial
      condition, assets or properties of the Company and its Subsidiaries taken as
      a
      whole, (b) the ability of any Obligor to perform its obligations under this
      Agreement, the Notes or any Security Document, (c) the ability of any Subsidiary
      Guarantor to perform its obligations under the Subsidiary Guaranty or any
      Security Document, or (d) the validity or enforceability of this Agreement,
      the
      Notes, the Subsidiary Guaranty, any Security Document or the Liens created
      by
      the Security Documents.

    


    “Required
      Holders”
      means,
      at any time, the holders of more than 50% in principal amount of the Notes
      at
      the time outstanding (exclusive of Notes then owned by an Obligor or any of
      its
      Affiliates); provided, however, that “Required Holders” shall mean the holders
      of more than 75% in principal amount of the Notes at the time outstanding
      (exclusive of Notes then owned by an Obligor or any of its Affiliates) for
      purposes of the following actions: (a) the release of any Liens on Collateral
      for which the consent of the holders of the Notes is required, (b) the release
      of any Subsidiary Guarantor from the Subsidiary Guaranty for which the consent
      of the holders of the Notes is required, or (c) any amendment, modification
      or
      waiver in respect of the Intercreditor Agreement, or the approval of terms
      different from the terms of the Intercreditor Agreement in effect on the date
      of
      the First Amendment contained in a replacement intercreditor agreement entered
      into in connection with a refinancing of the Credit Agreement.

    


    2. COUPON
      ADJUSTMENT

    Anything
      in Section 1, Schedule A or Exhibit 1(a) of the Note Agreement or the
      outstanding Notes to the contrary notwithstanding, in consideration of the
      Holders entering into this First Amendment, beginning on March 31, 2007 through
      June 30, 2007 (the “Relevant Period”), each of (i) the annual interest rate on
      the Notes, as stated in clause (a) of the first paragraph of Exhibit 1(a) to
      the
      Note Agreement and the outstanding Notes, and (ii) the annual interest rate
      applicable to overdue payments as specified in clause (b) of the first paragraph
      of Exhibit 1(a) to the Note Agreement and the outstanding Notes, shall be
      increased by 0.50%. Notwithstanding the foregoing, for purposes of calculating
      the Make-Whole Amount during the Relevant Period, the interest rate on the
      Notes
      shall be deemed to be 6.83%, the interest rate in effect immediately prior
      to
      this First Amendment.

     

    It
      shall
      not be necessary for any Holder to surrender its Notes in connection with this
      First Amendment. For purposes of the Note Agreement, including Section 11(b),
      the amounts due under this Section 2 of this First Amendment shall be deemed
      to
      be interest on the Notes. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    3. WAIVER

     

    The
      Holders hereby waive any Default or Event of Default under Section 10.9 of
      the
      Note Agreement resulting from the failure of the Company to cause each of
      Broyhill Retail, Inc., Broyhill Home Furnishings, Inc., Lane Home Furnishings
      Retail, Inc. and Hickory Business Furniture, Inc. to be a party to the
      Subsidiary Guaranty. This waiver is limited to its terms and shall not
      constitute a waiver of any other term, condition, representation or covenant
      under the Note Agreement or any of the other agreements, documents or
      instruments executed and delivered in connection therewith.

     

    4. REAFFIRMATION;
      REPRESENTATIONS AND WARRANTIES 

     

    4.1. Reaffirmation
      of Note Agreement.
      The
      Obligors reaffirm their agreement to comply with each of the covenants,
      agreements and other provisions of the Note Agreement and the Notes, including
      the additions and amendments of such provisions effected by this First
      Amendment.

     

    4.2. Note
      Agreement.
      The
      Obligors, jointly and severally, represent and warrant that the representations
      and warranties contained in the Note Agreement are true and correct as of the
      date hereof, except (a) to the extent that any of such representations and
      warranties specifically relate to an earlier date, (b) for such changes, facts,
      transactions and occurrences that have arisen since May 17, 2006 in the ordinary
      course of business, (c) for such other matters as have been previously disclosed
      in writing by the Obligors (including in financial statements and notes thereto)
      to the Holders and (d) for other changes that, individually or in the aggregate,
      could not reasonably be expected to have a Material Adverse Effect.  

     

    4.3. No
      Default or Event of Default.
      After
      giving effect to the transactions contemplated hereby, there will exist no
      Default or Event of Default.

     

    4.4. Authorization.
      

     

    4.4.1. Obligors.
      The
      execution, delivery and performance by each of the Obligors of this First
      Amendment and each Security Document to which it is a party have been duly
      authorized by all necessary corporate action and, except as provided herein,
      do
      not require any registration with, consent or approval of, notice to or action
      by, any Person (including any Governmental Authority) in order to be effective
      and enforceable. The Note Agreement, this First Amendment and such Security
      Documents each constitute the legal, valid and binding obligations of the
      Obligors, enforceable in accordance with their respective terms, except as
      such
      enforceability may be limited by (i) applicable bankruptcy, insolvency,
      fraudulent conveyance, reorganization, moratorium or other similar laws
      affecting the enforcement of creditors’ rights generally and (ii) general
      principles of equity (regardless of whether such enforceability is considered
      in
      a proceeding in equity or at law).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    4.4.2. Subsidiary
      Guarantors.
      The
      execution, delivery and performance by each Subsidiary Guarantor of the
      Reaffirmation of Subsidiary Guaranty and each Security Document to which it
      is a
      party have been duly authorized by all necessary corporate action and, except
      as
      provided herein, do not require any registration with, consent or approval
      of,
      notice to or action by, any Person (including any Governmental Authority) in
      order to be effective and enforceable. Such Security Documents and the
      Subsidiary Guaranty each constitute the legal, valid and binding obligations
      of
      such Subsidiary Guarantor, enforceable in accordance with their respective
      terms, except as such enforceability may be limited by (i) applicable
      bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
      other similar laws affecting the enforcement of creditors’ rights generally and
      (ii) general principles of equity (regardless of whether such
      enforceability is considered in a proceeding in equity or at law).

     

    4.5. Compliance
      with Laws, Other Instruments, etc.

     

    4.5.1. Obligors.
      The
      execution, delivery and performance by each Obligor of this First Amendment
      and
      each Security Document to which it is a party will not, except as contemplated
      herein, (i) contravene, result in any breach of, or constitute a default
      under, or result in the creation of any Lien in respect of any property of
      any
      Obligor or any other Subsidiary under, any indenture, mortgage, deed of trust,
      loan, purchase or credit agreement, lease, corporate charter or by-laws, or
      any
      other agreement or instrument to which any Obligor or any other Subsidiary
      is
      bound or by which any Obligor or any other Subsidiary or any of their respective
      properties may be bound or affected, (ii) conflict with or result in a breach
      of
      any of the terms, conditions or provisions of any order, judgment, decree,
      or
      ruling of any court, arbitrator or Governmental Authority applicable to any
      Obligor or any other Subsidiary or (iii) violate any provision of any statute
      or
      other rule or regulation of any Governmental Authority applicable to any Obligor
      or any other Subsidiary. 

     

    4.5.2. Subsidiary
      Guarantors.
      The
      execution, delivery and performance by each Subsidiary Guarantor of the
      Reaffirmation of Subsidiary Guaranty and each Security Document to which it
      is a
      party will not, except as contemplated herein, (i) contravene, result in
      any breach of, or constitute a default under, or result in the creation of
      any
      Lien in respect of any property of any Subsidiary Guarantor under, any
      indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
      corporate charter or by-laws, or any other agreement or instrument to which
      any
      Subsidiary Guarantor is bound or by which any Subsidiary Guarantor or any of
      their respective properties may be bound or affected, (ii) conflict with or
      result in a breach of any of the terms, conditions or provisions of any order,
      judgment, decree, or ruling of any court, arbitrator or Governmental Authority
      applicable to any Subsidiary Guarantor or (iii) violate any provision of any
      statute or other rule or regulation of any Governmental Authority applicable
      to
      any Subsidiary Guarantor. 

     

    4.6. Security
      Documents.
      The
      security interests created in favor of the Collateral Agent, for the benefit
      of
      the holders of the Notes and the Banks, under the security agreements and pledge
      agreements constituting Security Documents constitute 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    perfected
      security interests in the Collateral described in such Security Document under
      its governing law, subject to no Lien of any other Person, except as permitted
      by such Security Document and the Note Purchase Agreement. No filings or
      recordings (other than filings or recordings that have been made) are required
      in order to perfect (or maintain the perfection or priority of) the security
      interests created in the Collateral pledged under any Security Document other
      than with respect to Collateral of a type as to which perfection may not be
      accomplished by filing under the Uniform Commercial Code.

     

    4.7. Amounts
      Outstanding under Credit Agreement.
      As of
      March 31, 2007, the Company’s obligations under the Credit Agreement were: (i)
      revolving loans with an outstanding aggregate principal amount of $150,000,000
      and (ii) stand-by letters of credit with a face amount of
      $9,426,000.

     

    5. EFFECTIVE
      DATE

     

    This
      First Amendment shall become effective as of March 31, 2007 upon the
      satisfaction of the following conditions: 

    


    5.1. Consent
      of Holders to First Amendment.
      Execution by the Required Holders and receipt by the Holders of a counterpart
      of
      this First Amendment duly executed by the Obligors.

     

    5.2. Reaffirmation
      of Subsidiary Guaranty.
      Each
      Subsidiary Guarantor shall have executed and delivered to the Holders a
      Reaffirmation of Subsidiary Guaranty in the form of Exhibit A
      hereto.

     

    5.3. Joinder
      to Subsidiary Guaranty.
      The
      Holders shall have received from each of Broyhill Retail, Inc., Broyhill Home
      Furnishings, Inc., Lane Home Furnishings Retail, Inc. and Hickory Business
      Furniture, Inc. a Joinder to Subsidiary Guaranty in form and substance
      satisfactory to them.

     

    5.4. Opinion
      of Counsel for the Obligors.
      The
      Holders shall have received an opinion of counsel for the Obligors, in form
      and
      substance satisfactory to the Holders and their special counsel, to the effect
      set forth in Sections 4.4 and 4.5 of this First Amendment and to the further
      effect that the Holders have a valid and perfected security interest in the
      Collateral subject to the Security Documents.

     

    5.5. Security
      Interest.
      The
      Holders shall have received executed Security Documents in form and substance
      satisfactory to the Holders. The Collateral Agent shall have filed UCC-1
      financing statements in the jurisdiction of incorporation of each of the
      Obligors and Subsidiary Guarantors (or arrangement for such filing satisfactory
      to counsel for the Holders shall have been made) and shall have taken possession
      of stock certificates evidencing the pledged shares, in each case as necessary
      to perfect the Liens of the Security Documents, except as contemplated to take
      place after the effective date of this First Amendment.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    5.6. Intercreditor
      Agreement.
      The
      Intercreditor Agreement shall have been executed and delivered by the Holders
      and the Banks and acknowledged by the Obligors and each Subsidiary Guarantor.
      

     

    5.7. Amendment
      to Credit Agreement.
      The
      Holders shall have received a copy of an executed Amendment No. 1 to Credit
      Agreement dated as of April 16, 2007, in form and substance satisfactory to
      the
      Holders.

     

    5.8. Amendment
      Fee.
      Each
      Holder shall have received an amendment fee equal to 0.05% of the outstanding
      principal amount of the Notes held by such Holder.

     

    5.9. Fees
      of Special Counsel.
      The
      Obligors shall have paid all fees and expenses of special counsel to the
      Holders.

     

    6. MISCELLANEOUS

     

    6.1. Ratification.
      Except
      as amended hereby, the Note Agreement, including the representations and
      warranties contained therein, shall remain in full force and effect and is
      ratified, approved and confirmed in all respects as of the date
      hereof.

     

    6.2. Reference
      to and Effect on the Note Agreement.
      Upon
      the final effectiveness of this First Amendment, each reference in the Note
      Agreement and in other documents describing or referencing the Note Agreement
      to
      the “Agreement,” “Note Agreement,” “hereunder,” “hereof,” “herein,” or words of
      like import referring to the Note Agreement, shall mean and be a reference
      to
      the Note Agreement, as amended hereby.

     

    6.3. Binding
      Effect.
      This
      First Amendment shall be binding upon and inure to the benefit of the respective
      successors and assigns of the parties hereto.

     

    6.4. Governing
      Law.
      This
      First Amendment shall be governed by and construed in accordance with New York
      law.

     

    6.5. Counterparts.
      This
      First Amendment may be executed in any number of counterparts, each executed
      counterpart constituting an original, but altogether only one
      instrument.

     

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

     

    IN
      WITNESS WHEREOF,
      the
      Obligors and the Holders have caused this First Amendment to be executed and
      delivered by their respective officer or officers thereunto duly
      authorized.

    


    


    
      	 	
              FURNITURE
                BRANDS INTERNATIONAL, INC.

            
	 	 	 
	 	
              By:
                

            	
              /s/
                Denise L. Ramos

            
	 	
              Name:
                

            	
              Denise
                L. Ramos

            
	 	
              Title:
                

            	
              Senior
                Vice President and Chief Financial Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	
              SUBSIDIARY
                CO-OBLIGORS

            
	 	 	 
	 	
              BROYHILL
                FURNITURE INDUSTRIES, INC. 

            
	 	
              HDM
                FURNITURE INDUSTRIES, INC. 

            
	 	
              LANE
                FURNITURE INDUSTRIES, INC.

            
	 	
              THOMASVILLE
                FURNITURE INDUSTRIES, INC. 

            
	 	 	 
	 	
              By:
                

            	 /s/
              Denise L. Ramos
	 	
              Name:
                

            	 Denise
              L. Ramos
	 	
              Title:
                

            	 Vice
              President


    

    


    
      
        
        

      

      
        S-1

        
          

        

      

      
        
        

      

    

    


    

      


      
        	
                The
                  foregoing is agreed 

              	 
	
                to
                  as of the date thereof.

              	 
	 	 	 
	 	 	 
	
                THE
                  PRUDENTIAL INSURANCE

              	 
	 	
                COMPANY
                  OF AMERICA

              	 
	 	 	 
	
                By:

              	
                /s/
                  Brian E. Lemons

              	 
	 	
                Vice
                  President

              	 
	 	 	 
	 	 	 
	
                GIBRALTAR
                  LIFE INSURANCE CO., LTD.

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Investment Management (Japan),

              	 
	 	
                Inc.,
                  as Investment Manager

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Investment Management, Inc., as

              	 
	 	
                Sub-Adviser

              	 
	 	 	 
	
                By:

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	
                Vice
                  President

              	 
	 	 	 
	 	 	 
	
                GATEWAY
                  RECOVERY TRUST

              	 
	 	 	 
	
                By:
                  

              	
                Prudential
                  Investment Management, Inc., as

              	 
	 	
                Asset
                  Manager

              	 
	 	 	 
	
                By:
                  

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	 	 
	 	 	 
	
                ZURICH
                  AMERICAN INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                By:
                  

              	
                Prudential
                  Private Placement Investors,

              	 
	 	
                L.P.
                  (as Investment Advisor)

              	 
	 	 	 
	
                By:
                  

              	
                Prudential
                  Private Placement Investors, Inc. (as

              	 
	 	
                its
                  General Partner)

              	 
	 	 	 
	
                By:
                  

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	
                Vice
                  President

              	 


      

      


      
        
          
          

        

        
          S-2

          
            

          

        

        
          
          

        

      


      


      
        	
                AMERICAN
                  MEMORIAL LIFE

              	 
	 	
                INSURANCE
                  COMPANY

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, L.P. (as

              	 
	 	
                Investment
                  Advisor)

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, Inc.

              	 
	 	
                (as
                  its General Partner)

              	 
	 	 	 
	
                By:

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	
                Vice
                  President

              	 
	 	 	 
	 	 	 
	
                UNION
                  SECURITY INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors,

              	 
	 	
                L.P.
                  (as Investment Advisor)

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, Inc.

              	 
	 	
                (as
                  its General Partner)

              	 
	
                By:

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	
                Vice
                  President

              	 
	 	 	 
	 	 	 
	
                AMERICAN
                  SECURITY INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, L.P.

              	 
	 	
                (as
                  Investment Advisor)

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, Inc.

              	 
	 	
                (as
                  its General Partner)

              	 
	 	 	 
	
                By:

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	
                Vice
                  President

              	 


      

      


      


      
        
          
          

        

        
          S-3

          
            

          

        

        
          
          

        

      

      


       

      
        	
                UNITED
                  SERVICE PROTECTION CORP.

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, L.P.

              	 
	 	
                (as
                  Investment Advisor)

              	 
	 	 	 
	
                By:

              	
                Prudential
                  Private Placement Investors, Inc.

              	 
	 	
                (as
                  its General Partner)

              	 
	 	 	 
	
                By:

              	
                
                  /s/
                    Brian E. Lemons

                

              	 
	 	
                Vice
                  President

              	 


      

      


      


      


      
        
          
          

        

        
          S-4

          
            

          

        

        
          
          

        

      

      


      
        	
                ING
                  USA ANNUITY AND LIFE

              	 
	 	
                INSURANCE
                  COMPANY

              	 
	 	 	 
	
                ING
                  LIFE INSURANCE AND ANNUITY

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                RELIASTAR
                  LIFE INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                SECURITY
                  LIFE OF DENVER

              	 
	 	
                INSURANCE
                  COMPANY

              	 
	 	 	 
	
                By:

              	
                ING
                  Investment Management LLC, as

              	 
	 	 Agent	 
	 	 	 
	
                By:

              	
                /s/
                  James V. Wittich

              	 
	
                Name:

              	
                James
                  V. Wittich

              	 
	
                Title:

              	
                Senior
                  Vice President

              	 


      

      


      


      
        
          
          

        

        
          S-5

          
            

          

        

        
          
          

        

      

      


      
        	
                TRANSAMERICA
                  LIFE INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                By:

              	
                /s/
                  Christopher D. Pahlke

              	 
	
                Name:

              	
                Christopher
                  D. Pahlke

              	 
	
                Title:

              	
                Vice
                  President

              	 


      

      


      


      
        
          
          

        

        
          S-6

          
            

          

        

        
          
          

        

      

      


      
        	
                THE
                  GUARDIAN LIFE INSURANCE

              	 
	 	
                COMPANY
                  OF AMERICA

              	 
	 	 	 
	
                By:

              	
                /s/
                  Barry Scheinholtz

              	 
	
                Name:

              	
                Barry
                  Scheinholtz

              	 
	
                Title:

              	
                Private
                  Placements Manager

              	 


      

      


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      


      


      
        	
                BANKERS
                  LIFE AND CASUALTY

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                CONSECO
                  LIFE INSURANCE COMPANY

              	 
	 	 
	
                CONSECO
                  SENIOR HEALTH INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                CONSECO
                  HEALTH INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                WASHINGTON
                  NATIONAL INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                By:

              	
                /s/
                  Edwin Ferrell

              	 
	
                Name:

              	
                Edwin
                  Ferrell

              	 
	
                Title:

              	
                Senior
                  Vice President

              	 


      

      


      


      
        
          
          

        

        
          S-8

          
            

          

        

        
          
          

        

      

      


      


      
        	
                AMERUS
                  LIFE INSURANCE COMPANY

              	 
	 	 	 
	
                AMERICAN
                  INVESTORS LIFE INSURANCE

              	 
	 	
                COMPANY

              	 
	 	 	 
	
                By:

              	
                Aviva
                  Capital Management, Inc., its

              	 
	 	
                authorized
                  attorney-in-fact

              	 
	 	 	 
	
                By:

              	
                /s/
                  Roger D. Fors

              	 
	
                Name:

              	
                
                  Roger
                    D. Fors

                

              	 
	
                Title:

              	
                V.P.
                  - Private Placements

              	 


      

      


      


      


      
        
          
          

        

        
          S-9

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        I

      


      


      


      
        	
                    Holder 

                 

              	 	 	
                Principal
                  Amount of Senior Notes

                
                

              	 
	
                The
                  Prudential Insurance Company of America

                 

              	 	
                $

                
                

              	
                9,500,000

                
                

              	 
	
                Gibraltar
                  Life Insurance Co., Ltd.

                 

              	 	 	
                25,000,000

                
                

              	 
	
                Gateway
                  Recovery Trust

                 

              	 	 	
                5,800,000

                
                

              	 
	
                Zurich
                  American Insurance Company

                 

              	 	 	
                3,450,000

                
                

              	 
	
                American
                  Memorial Life Insurance Company

                 

              	 	 	
                2,000,000

                
                

              	 
	
                Union
                  Security Insurance Company

                 

              	 	 	
                2,000,000

                
                

              	 
	
                American
                  Security Insurance Company

                 

              	 	 	
                1,500,000

                
                

              	 
	
                United
                  Service Protection Corp.

                 

              	 	 	
                750,000

                
                

              	 
	
                ING
                  USA Annuity and Life Insurance Company

                 

              	 	 	
                4,000,000

                
                

              	 
	
                ING
                  Life Insurance and Annuity Company

                 

              	 	 	
                7,000,000

                
                

              	 
	
                Reliastar
                  Life Insurance Company

                 

              	 	 	
                5,000,000

                
                

              	 
	
                Security
                  Life of Denver Insurance Company

                 

              	 	 	
                16,000,000

                
                

              	 
	
                Transamerica
                  Life Insurance Company

                 

              	 	 	
                30,000,000

                
                

              	 
	
                The
                  Guardian Life Insurance Company of America

                 

              	 	 	
                18,000,000

                
                

              	 
	
                Bankers
                  Life and Casualty Company

                 

              	 	 	
                4,000,000

                
                

              	 
	
                Conseco
                  Life Insurance Company

                 

              	 	 	
                2,000,000

                
                

              	 
	
                Conseco
                  Senior Health Insurance Company

                 

              	 	 	
                1,500,000

                
                

              	 
	
                Conseco
                  Health Insurance Company

                 

              	 	 	
                1,000,000

                
                

              	 
	
                Washington
                  National Insurance Company

                 

              	 	 	
                1,500,000

                
                

              	 
	
                AmerUs
                  Life Insurance Company

                 

              	 	 	
                5,000,000

                
                

              	 
	
                American
                  Investors Life Insurance Company

                 

              	 	 	
                5,000,000

                
                

              	 


      

      


      


      


      


      Schedule
        I