UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to ________________________

Commission File Number: 1-11692

Ethan Allen Interiors Inc.

(Exact name of registrant as specified in its charter)

Delaware		06-1275288
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Ethan Allen Drive, Danbury, Connecticut		06811
(Address of principal executive offices)		(Zip Code)

(203) 743-8000

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [X]

Accelerated filer [ ]

Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes [X] No

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

At September 30, 2007, there were 29,767,645 shares of Class A Common Stock,
par value $.01, outstanding

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Item		Page
Part I Financial Information
1.	Financial Statements as of September 30, 2007 (unaudited) and June 30, 2007 and for the three months ended September 30, 2007 and 2006 (unaudited)
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders' Equity	5
	Notes to Consolidated Financial Statements	6
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
3.	Quantitative and Qualitative Disclosures About Market Risk	31
4.	Controls and Procedures	31

	Part II Other Information
1.	Legal Proceedings	32
1A.	Risk Factors	32
2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
3.	Defaults Upon Senior Securities	32
4.	Submission of Matters to a Vote of Security Holders	32
5.	Other Information	32
6.	Exhibits	32

	Signatures	33

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)

	September 30, 2007			June 30, 2007
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	133,484		$	147,879
Accounts receivable, less allowance for doubtful accounts of $2,093 at September 30, 2007 and $2,042 at June 30, 2007		14,255			14,602
Inventories (note 4)		181,297			181,884
Prepaid expenses and other current assets		29,572			33,104
Deferred income taxes		4,464			4,960

Total current assets		363,072			382,429

Property, plant and equipment, net		326,460			322,185
Goodwill and other intangible assets (notes 6 and 7)		92,656			92,500
Other assets (note 8)		5,246			5,484

Total assets	$	787,434		$	802,598

LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Current maturities of long-term debt (note 8)	$	40		$	40
Customer deposits		56,216			52,072
Accounts payable		25,184			26,650
Accrued compensation and benefits		36,656			35,243
Accrued expenses and other current liabilities (note 5)		31,469			33,434

Total current liabilities		149,565			147,439

Long-term debt (note 8)		202,899			202,868
Other long-term liabilities (note 3)		21,144			12,003
Deferred income taxes		30,199			30,646

Total liabilities		403,807			392,956
Shareholders equity:
Class A common stock, par value $.01, 150,000,000 shares authorized; 48,217,915 shares issued at September 30, 2007 and 47,454,450 shares issued at June 30, 2007		482			474
Class B common stock, par value $.01, 600,000 shares authorized; no shares issued and outstanding at September 30, 2007 and June 30, 2007		-			-
Preferred stock, par value $.01, 1,055,000 shares authorized; no shares issued and outstanding at September 30, 2007 and June 30, 2007		-			-
Additional paid-in capital		353,418			330,268

		353,900			330,742
Less: Treasury stock (at cost), 18,450,270 shares at September 30, 2007 and 16,644,582 shares at June 30, 2007		(557,307	)		(496,005	)
Retained earnings		585,168			573,535
Accumulated other comprehensive income (notes 8 and 11)		1,866			1,370

Total shareholders equity		383,627			409,642

Total liabilities and shareholders equity	$	787,434		$	802,598

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

	Three Months Ended September 30,
	2007		2006
Net sales	$	248,727	$	242,823
Cost of sales		115,270		116,494

Gross profit		133,457		126,329
Operating expenses:
Selling		57,578		55,038
General and administrative		48,082		43,125
Restructuring and impairment charge, net (note 5)		-		13,936

Total operating expenses		105,660		112,099

Operating income		27,797		14,230

Interest and other miscellaneous income, net		2,922		2,232
Interest and other related financing costs (note 8)		2,935		2,938

Income before income taxes		27,784		13,524
Income tax expense		10,280		5,072

Net income	$	17,504	$	8,452

Per share data (note 10) :
Basic earnings per common share:
Net income per basic share	$	0.58	$	0.27

Basic weighted average common shares		30,084		31,815
Diluted earnings per common share:

Net income per diluted share	$	0.57	$	0.26

Diluted weighted average common shares		30,464		32,631

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Three Months Ended September 30,
	2007			2006
Operating activities:
Net income	$	17,504		$	8,452
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,937			5,604
Compensation expense related to share-based awards		132			218
Provision (benefit) for deferred income taxes		49			(1,683	)
Excess tax benefits from share-based payment arrangements		(2,081	)		(1,643	)
Restructuring and impairment charge, net		-			9,933
(Gain) loss on disposal of property, plant and equipment		(552	)		396
Other		69			284
Change in assets and liabilities, net of the effects of acquired businesses:
Accounts receivable		347			1,251
Inventories		587			10,669
Prepaid expenses and other current assets		1,509			(1,319	)
Other assets		142			458
Customer deposits		4,144			(988	)
Accounts payable		1,970			(2,472	)
Accrued expenses and other current liabilities		2,552			6,109
Other long-term liabilities		9,141			31

Net cash provided by operating activities		41,450			35,300

Investing activities:
Proceeds from the disposal of property, plant and equipment		5,063			42
Capital expenditures		(12,545	)		(15,652	)
Acquisitions		(705	)		(6,209	)
Other		6			38

Net cash used in investing activities		(8,181	)		(21,781	)

Financing activities:
Payments on long-term debt		(9	)		(10	)
Proceeds from issuance of common stock		307			93
Excess tax benefits from share-based payment arrangements		2,081			1,643
Payment of deferred financing costs		-			(107	)
Payment of cash dividends		(6,185	)		(5,790	)
Purchases and other retirements of company stock		(44,101	)		(19,536	)

Net cash used in financing activities		(47,907	)		(23,707	)

Effect of exchange rate changes on cash		243			23

Net decrease in cash and cash equivalents		(14,395	)		(10,165	)
Cash and cash equivalents - beginning of period		147,879			173,801

Cash and cash equivalents - end of period	$	133,484		$	163,636

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders Equity

Three Months Ended September 30, 2007

(Unaudited)

(In thousands, except share data)

	Common Stock		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings			Total

Balance at June 30, 2007	$	474	$	330,268	$	(496,005	)	$	1,370	$	573,535		$	409,642

Issuance of 763,465 shares of common stock upon exercise of share-based awards		8		20,937		-			-		-			20,945

Compensation expense associated with share-based awards		-		132		-			-		-			132

Tax benefit associated with exercise of share-based awards		-		2,081		-			-		-			2,081

Purchase/retirement of 1,805,688 shares of company stock		-		-		(61,302	)		-		-			(61,302	)

FIN 48 transition adjustment (note 3)		-		-		-			-		683			683

Dividends declared on common stock		-		-		-			-		(6,554	)		(6,554	)

Other comprehensive income (notes 8 and 11):
Currency translation adjustments		-		-		-			484		-			484
Reclass of loss on cash-flow hedge, net-of-tax		-		-		-			12		-			12
Net income		-		-		-			-		17,504			17,504

Total comprehensive income		-		-		-			-		-			18,000


Balance at September 30, 2007	$	482	$	353,418	$	(557,307	)	$	1,866	$	585,168		$	383,627

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1)

Basis of Presentation

Ethan Allen Interiors Inc. ("Interiors") is a Delaware corporation incorporated on May 25, 1989. The consolidated financial statements include the accounts of Interiors, its wholly-owned subsidiary Ethan Allen Global, Inc. ("Global"), and Globals subsidiaries (collectively "We", "Us", "Our", "Ethan Allen", or the "Company"). All intercompany accounts and transactions have been eliminated in the consolidated financial statements. All of Globals capital stock is owned by Interiors, which has no assets or operating results other than those associated with its investment in Global.

(2)

Interim Financial Presentation

All intercompany accounts and transactions have been eliminated in the consolidated financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for fair presentation, have been included in the consolidated financial statements. The results of operations for the three months ended September 30, 2007 are not necessarily indicative of results that may be expected for the entire fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2007.

Certain prior year amounts have been reclassified in order for them to conform to the current years presentation. These changes were made for disclosure purposes only and did not have any impact on previously reported results of operations or shareholders equity.

(3)

Income Taxes -- Adoption of FIN 48

Effective July 1, 2007, we adopted Financial Accounting Standards Board ("FASB") Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes , an interpretation of FASB Statement No. 109, Accounting for Income Taxes , which provides a comprehensive model for the recognition, measurement, presentation, and disclosure in a companys financial statements of uncertain tax positions taken, or expected to be taken, on a tax return. Under FIN 48, if an income tax position exceeds a more likely than not (i.e. greater than 50%) probability of success upon tax audit, based solely on the technical merits of the position, the company is to recognize an income tax benefit in its financial statements. The tax benefits recognized are to be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If it is not more than likely than not that the benefit will be sustained on its technical merits, no benefit is to be recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold for purposes of applying FIN 48. Therefore, if it can be established that the only uncertainty is when an item is taken on a tax return, such positions have satisfied the recognition step for purposes of FIN 48 and uncertainty related to timing should be assessed as part of measurement.

FIN 48 requires that a liability associated with an unrecognized tax benefit be classified as a long-term liability, except for the amount for which a cash payment is expected to be made within one year. Further, companies are required to accrue interest and related penalties, if applicable, on all tax exposures consistent with the respective jurisdictional tax laws.

The adoption of FIN 48 resulted in a non-cash transition (cumulative effect of a change in accounting principle) adjustment of $0.7 million which was recorded as an increase to beginning retained earnings. The transition adjustment is a result, primarily, of tax positions associated with state income tax exposures where the original tax benefit related to periods dating back to 1998. Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

As of July 1, 2007, we had unrecognized income tax benefits totaling $4.8 million and related accrued interest and penalties of $1.4 million (after related tax benefits), all of which was reclassified from current to long-term liabilities upon adoption. If recognized, essentially all of the unrecognized tax benefits and related interest and penalties would be recorded as a benefit to income tax expense. Since adopting FIN 48, our unrecognized tax benefits and related interest and penalties have increased by $0.3 million and $0.2 million, respectively. We do not currently anticipate significant changes in such amounts over the next twelve months.

As of July 1, 2007, we remained subject to examination in the following major tax jurisdictions for the tax years indicated below:

Major Tax Jurisdictions	Open Audit Years
North America United States:
New York	1998 through 2006
New Jersey	2001 through 2006
Massachusetts	2001 through 2006
North Carolina	2001 through 2006

(4)

Inventories

Inventories at September 30, 2007 and June 30, 2007 are summarized as follows (in thousands):

	September 30, 2007	June 30, 2007
Finished goods	$150,655	$150,994
Work in process	6,290	6,172
Raw materials	24,352	24,718
	$181,297	$181,884

Inventories are presented net of a related valuation allowance of $2.7 million at September 30, 2007 and $2.9 million at June 30, 2007.

(5)

Plant Consolidations

In recent years, we have developed, announced and executed plans to consolidate our manufacturing operations as part of an overall strategy to maximize production efficiencies and maintain our competitive advantage.

On September 6, 2006, we announced a plan to close our Spruce Pine, North Carolina case goods manufacturing facility and convert our Atoka, Oklahoma upholstery manufacturing facility into a regional distribution center. In connection with this initiative, we permanently ceased production at both locations, allocating production among our remaining domestic manufacturing locations and selected offshore suppliers. The decision impacted approximately 465 employees with the reduction in headcount occurring during the second and third quarters of fiscal 2007. We recorded a pre-tax restructuring and impairment charge of $14.1 million during the quarter ended September 30, 2006, of which $4.0 million was related to employee severance and benefits and other plant exit costs, and $10.1 million, which was non-cash in nature, was related to fixed asset impairment charges, primarily for real property and machinery and equipment, stemming from the decision to cease production activities. During the three months ended March 31, 2007 and December 31, 2006, adjustments totaling $0.2 million and $0.3 million, respectively, were recorded to reverse remaining previously established accruals which were no longer deemed necessary. There were no restructuring and impairment charges associated with plant consolidations recorded during the three months ended September 30, 2007.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

As of September 30, 2007, all restructuring related obligations for severance and employee benefits have been satisfied and any remaining accrual balances which were deemed unnecessary have been reversed. No restructuring reserves remain in the Consolidated Balance Sheets as accrued expenses within current liabilities. Activity with respect to our September 2006 restructuring reserve is summarized as follows (in thousands):

		Original Charges		Cash Payments			Non-cash Utilized			Adjustments			Balance at September 30, 2007
Spruce Pine, NC/Atoka, OK Employee severance and other related payroll and benefit costs	$	3,903	$	(3,455	)	$	-		$	(448	)	$	-
Other plant exit costs		100		(100	)		-			-			-
Write-down of long-lived assets		10,099		-			(10,099	)		-			-
	$	14,102	$	(3,555	)	$	(10,099	)	$	(448	)	$	-

(6)

Business Acquisitions

In September 2006, we acquired, in a single transaction, two Ethan Allen retail design centers from an independent retailer for total consideration of approximately $6.3 million. As a result of this acquisition, we recorded additional inventory and other assets (primarily real estate) of $0.9 million and $5.5 million, respectively, and assumed customer deposits and other liabilities of $0.4 million and $0.1 million, respectively. Goodwill associated with this acquisition totaled $0.4 million. There were no acquisitions completed during the three months ended September 30, 2007. However, the Consolidated Statements of Cash Flows reflect $0.6 million of consideration paid during the period in connection with the acquisition of a retail design center with an effective (closing) date of June 30, 2007 and for which funding did not occur until July 2, 2007.

All acquisitions are subject to a contractual holdback, or reconciliation, period, during which the parties to the transaction may agree to certain normal and customary purchase accounting adjustments.

Goodwill associated with our acquisitions represents the premium paid to the seller related to the acquired business (i.e. market presence) and other fair value adjustments to the assets acquired and liabilities assumed. Further discussion of our goodwill and other intangible assets can be found in Note 7.

A summary of our allocation of purchase price associated with acquisitions occurring during the three months ended September 30, 2006 is provided below (in thousands):

Nature of acquisition		2 design centers
Total consideration	$	6,272
Fair value of assets acquired and liabilities assumed:
Inventory		948
PP&E and other assets		5,460
Customer deposits		(410)
A/P and other liabilities		(109)
Goodwill and other intangible assets	$	383

(7)

Goodwill and Other Intangible Assets

As of September 30, 2007, we had goodwill, including product technology, of $73.0 million and other indefinite-lived intangible assets of $19.7 million. Comparable balances as of June 30, 2007 were $72.8 million and $19.7 million, respectively.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Goodwill in the wholesale and retail segments was $45.5 million and $27.5 million, respectively, at September 30, 2007 and $45.3 million and $27.5 million, respectively, at June 30, 2007. The wholesale segment, at both dates, includes additional indefinite-lived intangible assets of $19.7 million which represent Ethan Allen trade names.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets , we do not amortize goodwill or other indefinite-lived intangible assets but, rather, evaluate such assets for impairment on an annual basis and between annual tests whenever events or circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value. We conduct our required annual impairment test during the fourth quarter of each fiscal year. No impairment losses have been recorded on our goodwill or other indefinite-lived intangible assets as a result of applying the provisions of SFAS No. 142.

(8)

Borrowings

Total debt obligations at September 30, 2007 and June 30, 2007 consist of the following (in thousands):

		September 30, 2007		June 30, 2007
5.375% Senior Notes due 2015	$	198,717	$	198,677
Industrial revenue bonds		3,855		3,855
Other debt		367		376
Total debt		202,939		202,908
Less: current maturities		40		40
Total long-term debt	$	202,899	$	202,868

On September 27, 2005, we completed a private offering of $200.0 million of ten-year senior unsecured notes due 2015 (the "Senior Notes"). The Senior Notes were offered by Global and have an annual coupon rate of 5.375% with interest payable semi-annually in arrears on April 1 and October 1 of each year beginning on April 1, 2006. Proceeds received in connection with the issuance of the Senior Notes, net of a related discount of $1.6 million, totaled $198.4 million. We intend to use the net proceeds from the offering to expand our retail network, invest in our manufacturing and logistics operations, and for other general corporate purposes. As of September 30, 2007, outstanding borrowings related to this transaction have been included in the Consolidated Balance Sheets within long-term debt. The discount on the Senior Notes is being amortized to interest expense over the life of the related debt.

In connection with the offering, debt issuance costs totaling $2.0 million were incurred related, primarily, to banking, legal, accounting, rating agency, and printing services. As of September 30, 2007, these costs have been included in the Consolidated Balance Sheets as deferred financing costs within other assets and are being amortized to interest expense over the life of the Senior Notes.

Also in connection with the issuance of the Senior Notes, Global, in July and August 2005, entered into 6 separate forward contracts to hedge the risk-free interest rate associated with $108.0 million of the related debt in order to minimize the negative impact of interest rate fluctuations on earnings, cash flows and equity. The forward contracts were entered into with a major banking institution thereby mitigating the risk of credit loss.

Upon issuance of the Senior Notes and settlement of the related forward contracts, losses totaling $0.9 million were incurred representing the change in the fair value of the forward contracts since their respective trade dates. In accordance with SFAS No. 133, as amended, it was determined that a portion of the related losses was the result of hedge ineffectiveness and, as such, $0.1 million of the losses was included, within interest and other related financing costs, in the Consolidated Statement of Operations for the fiscal year ended June 30, 2006. The

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

balance of the losses has been included (on a net-of-tax basis) in the Consolidated Balance Sheets within accumulated other comprehensive income and is being amortized to interest expense over the life of the Senior Notes. The remaining unamortized balance of these forward contract losses totaled $0.6 million ($0.4 million, net-of-tax) at both September 30, 2007 and June 30, 2007.

(9)

Litigation

Environmental Matters

We and our subsidiaries are subject to various environmental laws and regulations. Under these laws, we and/or our subsidiaries are, or may be, required to remove or mitigate the effects on the environment of the disposal or release of certain hazardous materials.

As of September 30, 2007, we and/or our subsidiaries have been named as a potentially responsible party ("PRP") with respect to the remediation of three active sites currently listed, or proposed for inclusion, on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). The sites are located in Southington, Connecticut; High Point, North Carolina; and Atlanta, Georgia.

In addition, during the fiscal year ended June 30, 2007, our liability with respect to a fourth site located in Lyndonville, Vermont was resolved. We had previously received a certificate of construction completion for this location, subject to certain limited conditions which were the obligation of another PRP. In July 2007, we obtained the final certificate of construction completion advising us that all conditions had been met.

We do not anticipate incurring significant costs with respect to the Southington, Connecticut, High Point, North Carolina, or Atlanta, Georgia sites as we believe that we are not a major contributor based on the very small volume of waste generated by us in relation to total volume at those sites. Specifically, with respect to the Southington site, our volumetric share is less than 1% of over 51 million gallons disposed of at the site and there are more than 1,000 PRPs. With respect to the High Point site, our volumetric share is less than 1% of over 18 million gallons disposed of at the site and there are more than 2,000 PRPs, including more than 1,000 "de-minimis" parties (of which we are one). With respect to the Atlanta site, a former solvent recycling/reclamation facility, our volumetric share is less than 1% of over 20 million gallons disposed of at the site by more than 1,700 PRPs. In all three cases, the other PRPs consist of local, regional, national and multi-national companies.

Liability under CERCLA may be joint and several. As such, to the extent certain named PRPs are unable, or unwilling, to accept responsibility and pay their apportioned costs, we could be required to pay in excess of our pro rata share of incurred remediation costs. Our understanding of the financial strength of other PRPs has been considered, where appropriate, in the determination of our estimated liability.

In addition, in July 2000, we were notified by the State of New York (the "State") that we may be named a PRP in a separate, unrelated matter with respect to a site located in Carroll, New York. To date, no further notice has been received from the State and the State has not yet conducted an initial environmental study at this site.

As of September 30, 2007, we believe that established reserves related to these environmental contingencies are adequate to cover probable and reasonably estimable costs associated with the remediation and restoration of these sites.

We are subject to other federal, state and local environmental protection laws and regulations and are involved, from time to time, in investigations and proceedings regarding environmental matters. Such investigations and

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

proceedings typically concern air emissions, water discharges, and/or management of solid and hazardous wastes. We believe that our facilities are in material compliance with all such applicable laws and regulations.

Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal, and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize emissions and safety risks for employees. We will continue to evaluate the most appropriate, cost effective control technologies for finishing operations and design production methods to reduce the use of hazardous materials in the manufacturing process.

(10)

Earnings Per Share

Basic and diluted earnings per share are calculated using the following weighted average share data (in thousands):

	Three Months Ended September 30,
	2007	2006
Weighted average common shares outstanding for basic calculation	30,084	31,815
Effect of dilutive stock options and other share-based awards	380	816
Weighted average common shares outstanding, adjusted for diluted calculation	30,464	32,631

As of September 30, 2007 and 2006, stock options to purchase 785,326 and 346,981 common shares, respectively, had exercise prices which exceeded the average market price of our common stock for the corresponding periods. These options have been excluded from the respective diluted earnings per share calculation as their impact is anti-dilutive.

(11)

Comprehensive Income

Total comprehensive income represents the sum of net income and items of "other comprehensive income or loss" that are reported directly in equity. Such items, which are generally presented on a net-of-tax basis, may include foreign currency translation adjustments, minimum pension liability adjustments, fair value adjustments (i.e. gains and losses) on certain derivative instruments, and unrealized gains and losses on certain investments in debt and equity securities. We have reported our total comprehensive income in the Consolidated Statements of Shareholders Equity.

Our accumulated other comprehensive income, which is comprised of losses on certain derivative instruments and accumulated foreign currency translation adjustments, totaled $1.9 million at September 30, 2007 and $1.4 million at June 30, 2007. Losses on derivative instruments are the result of cash-flow hedging contracts entered into in connection with the issuance of the Senior Notes (see Note 8). Foreign currency translation adjustments

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

are the result of changes in foreign currency exchange rates related to our operation of five Ethan Allen-owned retail design centers located in Canada. Foreign currency translation adjustments exclude income tax expense (benefit) given that the earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.

(12)

Segment Information

Our operations are classified into two operating segments: wholesale and retail. These operating segments represent strategic business areas which, although they operate separately and provide their own distinctive services, enable us to more effectively offer our complete line of home furnishings and accessories.

The wholesale segment is principally involved in the development of the Ethan Allen brand, which encompasses the design, manufacture, domestic and off-shore sourcing, sale and distribution of a full range of home furnishings and accessories to a network of independently-owned and Ethan Allen-owned design centers as well as related marketing and brand awareness efforts. Wholesale revenue is generated upon the wholesale sale and shipment of our product to all retail design centers, including those owned by Ethan Allen. Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs associated with wholesale segment activities.

The retail segment sells home furnishings and accessories to consumers through a network of Company-owned design centers. Retail revenue is generated upon the retail sale and delivery of our product to our customers. Retail profitability includes (i) the retail gross margin, which represents the difference between the retail sales price and the cost of goods purchased from the wholesale segment, and (ii) other operating costs associated with retail segment activities.

Inter-segment eliminations result, primarily, from the wholesale sale of inventory to the retail segment, including the related profit margin.

We evaluate performance of the respective segments based upon revenues and operating income. While the manner in which our home furnishings and accessories are marketed and sold is consistent, the nature of the underlying recorded sales (i.e. wholesale versus retail) and the specific services that each operating segment provides (i.e. wholesale manufacturing, sourcing, and distribution versus retail selling) are different. Within the wholesale segment, we maintain revenue information according to each respective product line (i.e. case goods, upholstery, or home accessories and other).

A breakdown of wholesale sales by these product lines for the three months ended September 30, 2007 and 2006 is provided below:

	Three Months Ended September 30,
	2007		2006
Case Goods	47	%	45	%
Upholstered Products	37		39
Home Accessories and Other	16		16
	100	%	100	%

Revenue information by product line is not as easily determined within the retail segment. However, because wholesale production and sales are matched, for the most part, to incoming orders, we believe that the allocation of retail sales by product line would be similar to that of the wholesale segment.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Segment information for the three months ended September 30, 2007 and 2006 is set forth below (in thousands):

		Three Months Ended September 30,
		2007		2006
Net Sales:
Wholesale segment	$	156,323		155,641
Retail segment		182,754		165,970
Elimination of inter-company sales		(90,350)		(78,788)
Consolidated Total	$	248,727	$	242,823

Operating Income:
Wholesale segment(1 )	$	26,780	$	11,424
Retail segment		899		2,843
Adjustment of inter-company profit (2)		118		(37)
Consolidated Total	$	27,797	$	14,230

Capital Expenditures:
Wholesale segment	$	2,044	$	2,758
Retail segment		10,501		12,894
Acquisitions (3) (4)		96		6,209
Consolidated Total	$	12,641	$	21,861


	September 30, 2007			June 30, 2007

Total Assets:
Wholesale segment	$	396,476		416,237
Retail segment		429,885		425,382
Inventory profit elimination (5)		(38,927)		(39,021)
Consolidated Total	$	787,434	$	802,598

	(1)	Operating income for the wholesale segment for the three months ended September 30, 2006 includes a pre-tax restructuring and impairment charge, net of $13.9 million.
	(2)	Represents the change in the inventory profit elimination entry necessary to adjust for the embedded wholesale profit contained in Ethan Allen-owned design center inventory existing at the end of the period. See footnote 5 below.
	(3)	Amount reflected as acquisitions for 2007 excludes the purchase (for consideration totaling $0.6 million) of a retail design center with an effective (closing) date of June 30, 2007 and for which funding did not occur until July 2, 2007.
	(4)	Amount reflected as acquisitions for 2006 includes the purchase of 2 retail design centers.
	(5)	Represents the embedded wholesale profit contained in Ethan Allen-owned design center inventory that has not yet been realized. These profits are realized when the related inventory is sold.

There are 37 independent retail design centers located outside the United States. Approximately 2% of our net sales are derived from sales to these retail design centers.

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Subsequent Events

Business Acquisitions

On October 1, 2007, we acquired, in a single transaction, two Ethan Allen retail design centers from an independent retailer for total consideration of approximately $2.1 million. As a result of this acquisition, we recorded additional inventory and other assets of $1.9 million and $0.4 million, respectively, and assumed customer deposits and other liabilities of $1.1 million and $0.1 million, respectively. Goodwill associated with this acquisition totaled $1.0 million.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

On October 25, 2007, Ethan Allen Operations, Inc., a wholly-owned subsidiary of Global, acquired a cut and sew upholstery facility from Americraft Leather for total consideration of approximately $4.4 million. The facility, which contains 40,000 square feet of manufacturing space and employs 165 people, is located in Silao, in the state of Guanajuato, Mexico. As a result of this acquisition, we recorded additional property, plant and equipment of $2.7 million, and inventory of $1.1 million. Goodwill associated with this acquisition totaled $0.6 million.

Stock Repurchases and Remaining Authorization

Subsequent to September 30, 2007 and through November 2, 2007, we repurchased, in 3 separate open market transactions, an additional 0.3 million shares of our common stock at a total cost of $7.8 million, representing an average price per share of $30.10. As of November 2, 2007, we had a remaining Board authorization to repurchase 1.8 million shares.

Employment Agreement / Share-Based Awards

On October 10, 2007, the Companys Board of Directors and M. Farooq Kathwari, our President and Chief Executive Officer, agreed to the terms of a new employment agreement expiring on June 30, 2012 (the "Agreement"). Pursuant to the terms of the Agreement, Mr. Kathwari was awarded, on October 10, 2007, options to purchase 150,000 shares of our common stock. These options were issued at an exercise price of $34.03 (the closing price of a share of our common stock on the New York Stock Exchange as of such date), and vest ratably over a 3-year period. The Agreement provides for additional grants of 90,000 and 60,000 shares on July 1, 2008 and July 1, 2009, respectively, with exercise prices equal to the closing price of a share of our common stock on the New York Stock Exchange as of such dates. The 2008 grant will vest ratably over a 2-year period and the 2009 grant will vest ratably over a 1-year period. All options awarded under the Agreement have a contractual term of 10 years.

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Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements , which provides a single definition of fair value, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 emphasizes that fair value is a market-based measurement defined as the price that would be received to sell an asset or liability in an orderly transaction between market participants at the measurement date. Thus, SFAS No. 157 adheres to a definition of fair value based upon exit-price as opposed to entry-price (i.e. the price paid to acquire an asset or liability). This authoritative guidance is effective for fiscal years beginning after November 15, 2007 (July 1, 2008 for the Company). As such, we are currently in the process of evaluating the impact of this authoritative guidance on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities , which allows the Company to choose to measure selected financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 (July 1, 2008 for the Company). As such, we are currently in the process of evaluating the impact of this authoritative guidance on our consolidated financial statements.

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Financial Information About the Parent, the Issuer and the Guarantors

On September 27, 2005, Global (the "Issuer") issued $200 million aggregate principal amount of Senior Notes which have been guaranteed on a senior basis by Interiors (the "Parent"), and other wholly-owned subsidiaries of the Issuer and the Parent, including Ethan Allen Retail, Inc., Ethan Allen Operations, Inc., Ethan Allen Realty, LLC, Lake Avenue Associates, Inc. and Manor House, Inc. The subsidiary guarantors (other than the Parent) are collectively called the "Guarantors". The guarantees of the Guarantors are unsecured. All of the guarantees are

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

full, unconditional and joint and several and the Issuer and each of the Guarantors are 100% owned by the Parent. Ethan Allen (UK) Ltd., KEA International Inc. (which was legally dissolved in January 2007), Northeast Consolidated, Inc. (which was legally dissolved in June 2007), Riverside Water Works, Inc. (which was legally dissolved in June 2007), and our other subsidiaries which are not guarantors are called the "Non-Guarantors".

The following tables set forth the condensed consolidating balance sheets as of September 30, 2007 and June 30, 2007, the condensed consolidating statements of operations for the three months ended September 30, 2007 and 2006, and the condensed consolidating statements of cash flows for the three months ended September 30, 2007 and 2006 of the Parent, the Issuer, the Guarantors and the Non-Guarantors.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

(in thousands)

September 30, 2007

	Parent		Issuer		Guarantors		Non-Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	-	$	128,830	$	4,654	$	-		$	-		$	133,484
Accounts receivable, net		-		13,800		442		13			-			14,255
Inventories		-		-		220,224		-			(38,927	)		181,297
Prepaid expenses and other current assets		-		13,355		20,681		-			-			34,036
Intercompany		-		638,543		201,864		-			(840,407	)		-

Total current assets		-		794,528		447,865		13			(879,334	)		363,072

Property, plant and equipment, net		-		11,639		314,821		-			-			326,460
Goodwill and other intangible assets		-		37,905		54,751		-			-			92,656
Other assets		-		4,062		1,184		-			-			5,246
Investment in affiliated companies		620,894		142,534		-		-			(763,428	)		-

Total assets	$	620,894	$	990,668	$	818,621	$	13		$	(1,642,762	)	$	787,434


Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt	$	-	$	-	$	40	$	-		$	-		$	40
Customer deposits		-		-		56,216		-			-			56,216
Accounts payable		-		6,531		18,653		-			-			25,184
Accrued expenses and other current liabilities		6,683		43,337		18,105		-			-			68,125
Intercompany		232,450		43,443		564,462		52			(840,407	)		-

Total current liabilities		239,133		93,311		657,476		52			(840,407	)		149,565

Long-term debt		-		198,717		4,182		-			-			202,899
Other long-term liabilities		-		9,005		12,139		-			-			21,144
Deferred income taxes		-		30,199		-		-			-			30,199

Total liabilities		239,133		331,232		673,797		52			(840,407	)		403,807

Shareholders' equity		381,761		659,436		144,824		(39	)		(802,355	)		383,627

Total liabilities and shareholders' equity	$	620,894	$	990,668	$	818,621	$	13		$	(1,642,762	)	$	787,434

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

(in thousands)

June 30, 2007

	Parent		Issuer		Guarantors		Non-Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	-	$	142,253	$	5,626	$	-		$	-		$	147,879
Accounts receivable, net		-		14,118		471		13			-			14,602
Inventories		-		-		210,146		10,759			(39,021	)		181,884
Prepaid expenses and other current assets		-		15,743		21,969		352			-			38,064
Intercompany		-		591,102		195,444		-			(786,546	)		-

Total current assets		-		763,216		433,656		11,124			(825,567	)		382,429

Property, plant and equipment, net		-		11,104		311,081		-			-			322,185
Goodwill and other intangible assets		-		37,905		54,595		-			-			92,500
Other assets		-		4,299		1,185		-			-			5,484
Investment in affiliated companies		600,453		149,524		-		-			(749,977	)		-

Total assets	$	600,453	$	966,048	$	800,517	$	11,124		$	(1,575,544	)	$	802,598


Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt	$	-	$	-	$	40	$	-		$	-		$	40
Customer deposits		-		-		52,072		-			-			52,072
Accounts payable		3,436		6,509		12,732		3,973			-			26,650
Accrued expenses and other current liabilities		6,286		47,471		14,920		-			-			68,677
Intercompany		182,458		43,443		553,479		7,166			(786,546	)		-

Total current liabilities		192,180		97,423		633,243		11,139			(786,546	)		147,439

Long-term debt		-		198,676		4,192		-			-			202,868
Other long-term liabilities		-		227		11,776		-			-			12,003
Deferred income taxes		-		30,646		-		-			-			30,646

Total liabilities		192,180		326,972		649,211		11,139			(786,546	)		392,956

Shareholders' equity		408,273		639,076		151,306		(15	)		(788,998	)		409,642

Total liabilities and shareholders' equity	$	600,453	$	966,048	$	800,517	$	11,124		$	(1,575,544	)	$	802,598

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(in thousands)

Three Months Ended September 30, 2007

	Parent			Issuer			Guarantors			Non-Guarantors		Eliminations			Consolidated
Net sales	$	-		$	156,547		$	250,964		$	-	$	(158,784	)	$	248,727
Cost of sales		-			110,533			163,641			-		(158,904	)		115,270

Gross profit		-			46,014			87,323			-		120			133,457

Selling, general and administrative expenses		41			11,004			94,615			-		-			105,660
Restructuring and impairment charge, net		-			-			-			-		-			-

Total operating expenses		41			11,004			94,615			-		-			105,660

Operating income (loss)		(41	)		35,010			(7,292	)		-		120			27,797

Interest and other miscellaneous income, net		17,545			(4,456	)		414			-		(10,581	)		2,922
Interest and other related financing costs		-			2,859			76			-		-			2,935

Income before income tax expense		17,504			26,540			(6,954	)		-		(10,461	)		27,784
Income tax expense		-			10,244			36			-		-			10,280


Net income (loss)	$	17,504		$	17,451		$	(6,990	)	$	-	$	(10,461	)	$	17,504

Three Months Ended September 30, 2006

	Parent			Issuer			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	-		$	154,927		$	239,164		$	-		$	(151,268	)	$	242,823
Cost of sales		-			108,888			158,798			5			(151,197	)		116,494
Gross profit		-			46,039			80,366			(5	)		(71	)		126,329


Selling, general and administrative expenses		41			11,468			86,651			3			-			98,163
Restructuring and impairment charge, net		-			-			13,936			-			-			13,936
Total operating expenses		41			11,468			100,587			3			-			112,099
Operating income (loss)		(41	)		34,571			(20,221	)		(8	)		(71	)		14,230


Interest and other miscellaneous income, net		8,493			(18,322	)		(172	)		12			12,221			2,232
Interest and other related financing costs		-			2,862			76			-			-			2,938
Income before income tax expense		8,452			13,387			(20,469	)		4			12,150			13,524
Income tax expense		-			4,785			287			-			-			5,072


Net income (loss)	$	8,452		$	8,602		$	(20,756	)	$	4		$	12,150		$	8,452

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(in thousands)

Three Months Ended September 30, 2007

	Parent			Issuer			Guarantors			Non-Guarantors		Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	49,979		$	(14,216	)	$	5,687		$	-	$	-	$	41,450

Cash flows from investing activities:
Capital expenditures		-			(1,294	)		(11,251	)		-		-		(12,545	)
Acquisitions		-			-			(705	)		-		-		(705	)
Proceeds from the disposal of property, plant and
equipment		-			-			5,063			-		-		5,063
Other		-			6			-			-		-		6

Net cash used in investing activities		-			(1,288	)		(6,893	)		-		-		(8,181	)

Cash flows from financing activities:
Payments on long-term debt		-			-			(9	)		-		-		(9	)
Purchases and other retirements of company stock		(44,101	)		-			-			-		-		(44,101	)
Proceeds from issuance of common stock		307			-			-			-		-		307
Excess tax benefits from share-based payment
arrangements		-			2,081			-			-		-		2,081
Dividends paid		(6,185	)		-			-			-		-		(6,185	)

Net cash provided by (used in) financing activities		(49,979	)		2,081			(9	)		-		-		(47,907	)


Effect of exchange rate changes on cash		-			-			243			-		-		243

Net decrease in cash and cash equivalents		-			(13,423	)		(972	)		-		-		(14,395	)


Cash and cash equivalents - beginning of period		-			142,253			5,626			-		-		147,879

Cash and cash equivalents - end of period	$	-		$	128,830		$	4,654		$	-	$	-	$	133,484

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(in thousands)

Three Months Ended September 30, 2006

	Parent			Issuer			Guarantors			Non-Guarantors		Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	25,233		$	(11,981	)	$	22,048		$	-	$	-	$	35,300

Cash flows from investing activities:
Capital expenditures		-			(2,270	)		(13,382	)		-		-		(15,652	)
Acquisitions		-			-			(6,209	)		-		-		(6,209	)
Proceeds from the disposal of property, plant and
equipment		-			2			40			-		-		42
Other		-			38			-			-		-		38

Net cash used in investing activities		-			(2,230	)		(19,551	)		-		-		(21,781	)

Cash flows from financing activities:
Payments on long-term debt		-			-			(10	)		-		-		(10	)
Payment of deferred financing costs		-			(107	)		-			-		-		(107	)
Purchases and other retirements of company stock		(19,536	)		-			-			-		-		(19,536	)
Proceeds from issuance of common stock		93			-			-			-		-		93
Excess tax benefits from share-based payment arrangements		-			1,643			-			-		-		1,643
Dividends paid		(5,790	)		-			-			-		-		(5,790	)

Net cash provided by (used in) financing activities		(25,233	)		1,536			(10	)		-		-		(23,707	)

Effect of exchange rate changes on cash		-			-			23			-		-		23

Net increase (decrease) in cash and cash equivalents		-			(12,675	)		2,510			-		-		(10,165	)
Cash and cash equivalents - beginning of period		-			172,246			1,555			-		-		173,801

Cash and cash equivalents - end of period	$	-		$	159,571		$	4,065		$	-	$	-	$	163,636

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of financial condition and results of operations should be read in conjunction with (i) our Consolidated Financial Statements, and notes thereto, as set forth in this Quarterly Report on Form 10-Q and (ii) our Annual Report on Form 10-K for the year ended June 30, 2007.

Forward-Looking Statements

Management's discussion and analysis of financial condition and results of operations and other sections of this Quarterly Report contain forward-looking statements relating to our future results. Such forward-looking statements are identified by use of forward-looking words such as "anticipates", "believes", "plans", "estimates", "expects", and "intends" or words or phrases of similar expression. These forward-looking statements are subject to management decisions and various assumptions, risks and uncertainties, including, but not limited to: the effects of terrorist attacks or conflicts or wars involving the United States or its allies or trading partners; the effects of labor strikes; weather conditions that may affect sales; volatility in fuel, utility, transportation and security costs; changes in global or regional political or economic conditions, including changes in governmental and central bank policies; changes in business conditions in the furniture industry, including changes in consumer spending patterns and demand for home furnishings; effects of our brand awareness and marketing programs, including changes in demand for our existing and new products; our ability to locate new design center sites and/or negotiate favorable lease terms for additional design centers or for the expansion of existing design centers; competitive factors, including changes in products or marketing efforts of others; pricing pressures; fluctuations in interest rates and the cost, availability and quality of raw materials; those matters discussed in Items 1A and 7A of our Annual Report on Form 10-K for the year ended June 30, 2007 and in our SEC filings; and our future decisions. Accordingly, actual circumstances and results could differ materially from those contemplated by the forward-looking statements.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles which require, in some cases, that certain estimates and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes. Estimates are based on currently known facts and circumstances, prior experience and other assumptions believed to be reasonable. We use our best judgment in valuing these estimates and may, as warranted, solicit external advice. Actual results could differ from these estimates, assumptions and judgments, and these differences could be material. The following critical accounting policies, some of which are impacted significantly by estimates, assumptions and judgments, affect our consolidated financial statements.

Inventories Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a first-in, first-out basis, or market. Cost is determined based solely on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing overhead costs). We estimate an inventory valuation allowance for excess quantities and obsolete items based on specific identification and historical write-downs, taking into account future demand and market conditions. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.

Revenue Recognition Revenue is recognized when all of the following have occurred: persuasive evidence of a sales arrangement exists (e.g. a wholesale purchase order or retail sales invoice); the sales arrangement specifies a fixed or determinable sales price; product is shipped or services are provided to the customer; and collectibility is reasonably assured. As such, revenue recognition occurs upon the shipment of goods to independent retailers or, in the case of Ethan Allen-owned retail design centers, upon delivery to the customer. Recorded sales provide for estimated returns and allowances. We permit our customers to return defective products and incorrect shipments, and terms we offer are standard for the industry.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall aging analysis. Judgments are made with respect to the collectibility of accounts receivable based on historical experience and current economic trends. Actual losses could differ from those estimates.

Retail Design Center Acquisitions - We account for the acquisition of retail design centers and related assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations , which requires application of the purchase method for all business combinations initiated after June 30, 2001. Accounting for these transactions as purchase business combinations requires the allocation of purchase price paid to the assets acquired and liabilities assumed based on their fair values as of the date of the acquisition. The amount paid in excess of the fair value of net assets acquired is accounted for as goodwill.

Impairment of Long-Lived Assets and Goodwill We periodically evaluate whether events or circumstances have occurred that indicate that long-lived assets may not be recoverable or that the remaining useful life may warrant revision. When such events or circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use of the asset. In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the assets carrying value over its fair value is recorded. The long-term nature of these assets requires the estimation of cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets , goodwill and other indefinite-lived intangible assets are evaluated for impairment on an annual basis and between annual tests whenever events or circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value. We conduct our required annual impairment test during the fourth quarter of each fiscal year and use a discounted cash flow model to estimate fair value. This model requires the use of long-term planning forecasts and assumptions regarding industry-specific economic conditions that are outside our control.

Business Insurance Reserves We have insurance programs in place to cover workers compensation and property/casualty claims. The insurance programs, which are funded through self-insured retention, are subject to various stop-loss limitations. We accrue estimated losses using actuarial models and assumptions based on historical loss experience. Although we believe that the insurance reserves are adequate, the reserve estimates are based on historical experience, which may not be indicative of current and future losses. In addition, the actuarial calculations used to estimate insurance reserves are based on numerous assumptions, some of which are subjective. We adjust insurance reserves, as needed, in the event that future loss experience differs from historical loss patterns.

Other Loss Reserves We have a number of other potential loss exposures incurred in the ordinary course of business such as environmental claims, product liability, litigation, tax liabilities, restructuring charges, and the recoverability of deferred income tax benefits. Establishing loss reserves for these matters requires the use of estimates and judgment with regard to maximum risk exposure and ultimate liability or realization. As a result, these estimates are often developed with our counsel, or other appropriate advisors, and are based on our current understanding of the underlying facts and circumstances. Because of uncertainties related to the ultimate outcome of these issues or the possibilities of changes in the underlying facts and circumstances, additional charges related to these issues could be required in the future .

Results of Operations

Our revenues are comprised of (i) wholesale sales to independently-owned and Company-owned retail design centers and (ii) retail sales of Company-owned design centers. See Note 12 to our Consolidated Financial Statements for the three months ended September 30, 2007 and 2006.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

The components of consolidated revenue and operating income were as follows (in millions):

		Three Months Ended September 30,
		2007			2006
Revenue:
Wholesale segment	$	156.3		$	155.6
Retail segment		182.8			166.0
Elimination of inter-company sales		(90.4	)		(78.8	)
Consolidated Revenue	$	248.7		$	242.8

Operating Income:
Wholesale segment (1)	$	26.8		$	11.4
Retail segment		0.9			2.8
Adjustment of inter-company profit (2)		0.1			-
Consolidated Operating Income	$	27.8		$	14.2

(1)

Operating income for the wholesale segment for the three months ended September 30, 2006 includes a pre-tax restructuring and impairment charge, net of $13.9 million.

(2)

Represents the change in the inventory profit elimination entry necessary to adjust for the embedded wholesale profit contained in Ethan Allen-owned design center inventory existing at the end of the period.

Quarter Ended September 30, 2007 Compared to Quarter Ended September 30, 2006

Consolidated revenue for the three months ended September 30, 2007 increased by $5.9 million, or 2.4%, to $248.7 million, from $242.8 million for the three months ended September 30, 2006. Net sales for the period largely reflect the delivery of product associated with booked orders and backlog existing as of the end of the preceding quarter. During the quarter, sales were positively impacted by (i) our continued efforts to reposition the retail network, and (ii) new product introductions. These factors were partially offset by a weak retail environment for home furnishings likely attributable, to some degree, to continued economic concerns, particularly as it relates to consumer credit.

To date, our repositioning of the retail network has involved three primary elements: the opening of larger, new or relocated design centers in more prominent locations; development of a more focused advertising campaign to highlight our solutions-based approach and position Ethan Allen as an authority in style and design; and investment within the retail network to strengthen the existing management structure. Implementation of our project management initiative, which has resulted in the promotion and/or hiring of more than 300 project managers, has enabled us to increase the level of service, professionalism, interior design competence, efficiency, and effectiveness of retail design center personnel. With project managers actively partnering with design consultants and their customers, we believe we have improved the customer service experience and facilitated, to some degree, better awareness of potential cross-selling opportunities.

Wholesale revenue for the first quarter of fiscal 2008 increased by $0.7 million, or 0.4%, to $156.3 million from $155.6 million in the prior year comparable period. The quarter-over-quarter increase was primarily attributable to improved service position within certain imported product lines which resulted in shorter delivery cycle times, partially offset by a decline in the incoming order rate as a result of the softer retail environment for home furnishings noted during the period.

Retail revenue from Ethan Allen-owned design centers for the three months ended September 30, 2007 increased by $16.8 million, or 10.1%, to $182.8 million from $166.0 million for the three months ended September 30, 2006.The increase in retail sales by Ethan Allen-owned design centers was attributable to (i) an increase in sales generated by newly opened (including relocated) or acquired design centers of $18.9 million, and (ii) an increase in comparable design center delivered sales of $0.4 million, or 0.2%. These favorable variances were partially offset by reduced revenue from sold and closed design centers, which generated $2.5 million fewer sales in the first quarter of fiscal 2008 as compared to the same

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

period in fiscal 2007. The number of Ethan Allen-owned design centers increased to 158 as of September 30, 2007 as compared to 141 as of September 30, 2006. During that twelve month period, we acquired 10 design centers from independent retailers and opened 13 design centers (4 of which were relocations), and closed 2 design centers.

Comparable design centers are those which have been operating for at least 15 months. Minimal net sales, derived from the delivery of customer ordered product, are generated during the first three months of operations of newly opened (including relocated) design centers. Design centers acquired by us from independent retailers are included in comparable design centers sales in their 13th full month of Ethan Allen-owned operations.

Quarter-over-quarter, written business of Ethan Allen-owned design centers increased 9.8% and comparable design centers written business increased 0.3%. Over that same period, wholesale orders decreased 8.4%. Retail written business likely reflects (i) our continued efforts to reposition the retail network, (ii) recent product introductions, and (iii) our continued use of national television as an advertising medium. These factors have likely been offset, to some degree, by the softer retail environment for home furnishings noted throughout the period. Wholesale written business reflects the impact of the aforementioned factors, as well as the timing of floor sample orders placed in connection with our annual retailer conference (October 2007 as compared to September 2006).

Gross profit increased during the quarter to $133.5 million from $126.3 million in the prior year comparable quarter. The $7.2 million, or 5.6%, increase in gross profit was primarily attributable to a shift in sales mix with retail sales representing a higher proportionate share of total sales in the current quarter (74%) compared to the prior year period (68%), and (ii) improved performance within our remaining product sourcing operations, including a reduction in overhead as a result of past plant closures and price stabilization with regard to the selected raw materials. These favorable factors were partially offset by (i) increased costs incurred during the period which stem from excess capacity experienced within our case good manufacturing facilities during the fourth quarter of fiscal 2007 and (ii) a prior period gain associated with business interruption insurance recoveries received in connection with hurricane losses sustained during fiscal 2006. Consolidated gross margin increased to 53.7% for the first quarter of fiscal 2008 from 52.0% in the prior year quarter as a result, primarily, of the factors set forth above.

Operating profit , the elements of which are discussed in greater detail below, was impacted by the following items during the three months ended September 30, 2007 and 2006:

Including the restructuring and impairment charge referred to above, operating expenses decreased $6.4 million, or 5.7%, to $105.7 million, or 42.5% of sales, in the current quarter from $112.1 million, or 46.2% of sales, in the prior year quarter. The decrease was primarily attributable to (i) the aforementioned prior period restructuring and impairment charge, and (ii) a reduction in costs associated with our distribution operations. These decreases were partially offset by increased costs associated with our continued efforts to reposition the retail network which, during the period, resulted in higher costs associated with occupancy, designer compensation, managerial salaries and benefits, and delivery and warehousing.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Including the restructuring and impairment charge referred to above, consolidated operating income for the three month period ended September 30, 2007 totaled $27.8 million, or 11.2% of sales, as compared to $14.2 million, or 5.9% of sales, for the three months ended September 30, 2006.This represents an increase of $13.6 million which was attributable to an increase in gross profit and lower period-over-period operating expenses, both of which were discussed previously.

Wholesale operating income for the three months ended September 30, 2007 totaled $26.8 million, or 17.1% of sales, as compared to $11.4 million, or 7.3% of sales, in the prior year comparable quarter. The increase of $15.4 million was primarily attributable to (i)the prior period restructuring and impairment charge mentioned above, (ii) an increase in sales volume, (iii) lower distribution costs, and (iv) improved performance within our remaining product sourcing operations, including a reduction in overhead as a result of past plant closures and price stabilization with regard to the selected raw materials. These factors were partially offset by increased costs incurred during the period which stem from excess capacity experienced within our case good manufacturing facilities during the fourth quarter of fiscal 2007.

Retail operating income decreased $1.9 million to $0.9 million, or 0.5% of sales, for the first quarter of fiscal 2008 from $2.8 million, or 1.7% of sales, for the first quarter of fiscal 2007. The decrease in retail operating income generated by Ethan Allen-owned design centers was primarily attributable to (i) higher operating expenses as a result of our continued efforts to reposition the retail network, (ii) a decline in sales volume associated with design centers closed or sold during the period, and (iii) a prior period gain associated with business interruption insurance recoveries received in connection with hurricane losses sustained during fiscal 2006. These unfavorable variances were partially offset by higher sales volume generated by newly-opened (including relocations), acquired and comparable design centers.

Interest and other miscellaneous income, net increased $0.7 million from the prior year comparable quarter. The increase was due, primarily, to gains recorded in connection with the sale of selected real estate assets, partially offset by a decrease in investment income resulting from lower cash and short-term investment balances maintained during the current period.

Interest and other related financing costs amounted to $2.9 million in both the current and prior year periods. This amount consists, primarily, of interest expense incurred in connection with our issuance of senior unsecured debt in September 2005.

Income tax expense for the three months ended September 30, 2007 totaled $10.3 million as compared to $5.1 million for the three months ended September 30, 2006. Our effective tax rate for the current quarter was 37.0%, down from 37.5% in the prior year quarter. The lower effective tax rate was a result, primarily, of the benefits derived from the manufacturers deduction provided for under The Jobs Creation Act of 2004 and certain tax planning initiatives. Partially offsetting these items were the adverse effects of recently-enacted changes within certain state tax legislation, increased state income tax liability arising in connection with the operation of a greater number of Company-owned design centers, and increased foreign income tax liability associated with our five retail design centers operating in Canada.

For the three months ended September 30, 2007, we recorded net income of $17.5 million as compared to $8.5 million in the prior year comparable period, which included the aforementioned restructuring and impairment charge. Net income per diluted share totaled $0.57 in the current quarter and $0.26 per diluted share in the prior year quarter.

Liquidity and Capital Resources

As of September 30, 2007 we maintained cash and cash equivalents totaling $133.5 million. Our principal sources of liquidity include cash and cash equivalents, cash flow from operations, and borrowing capacity under a $200.0 million revolving credit facility.

The credit facility includes an accordion feature which provides for an additional $100.0 million of liquidity, if needed, as well as sub-facilities for trade and standby letters of credit of $100.0 million and swingline loans of $5.0 million. The credit facility contains various covenants which may limit our ability to: incur debt; engage in mergers and

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

consolidations; make restricted payments; sell certain assets; make investments; and issue stock. We are also required to meet certain financial covenants including a fixed charge coverage ratio, which shall not be less than 3.00 to 1 for any period of four consecutive fiscal quarters ended on or after June 30, 2005, and a leverage ratio, which shall not be greater than 3.00 to 1 at any time. As of September 30, 2007, we had satisfactorily complied with these covenants.

In addition, on September 27, 2005, we completed a private offering of $200.0 million in ten-year senior unsecured notes due 2015 (the "Senior Notes"). The Senior Notes were offered by Ethan Allen Global, Inc. ("Global"), a wholly-owned subsidiary of the Company, and have an annual coupon rate of 5.375%. The net proceeds of $198.4 million are being utilized to expand our retail network, invest in our manufacturing and logistics operations, and for other general corporate purposes.

In connection with the issuance of the Senior Notes, Global, in July and August 2005, entered into 6 separate forward contracts to hedge the risk-free interest rate associated with $108.0 million of the related debt in order to mitigate the negative impact of interest rate fluctuations on earnings, cash flows and equity. The forward contracts were entered into with a major banking institution thereby mitigating the risk of credit loss. Upon issuance of the Senior Notes and settlement of the related forward contracts, losses totaling $0.9 million were incurred representing the change in the fair value of the forward contracts since their respective trade dates. In accordance with SFAS No. 133, Accounting for Certain Derivative Instruments and Certain Hedging Activities , as amended, it was determined that a portion of the related losses was the result of hedge ineffectiveness and, as such, $0.1 million of the losses was included, within interest and other related financing costs, in the Consolidated Statement of Operations for the three month period ended September 30, 2005. The balance of the losses is included (on a net-of-tax basis) in the Consolidated Balance Sheets within accumulated other comprehensive income and is being amortized to interest expense over the life of the Senior Notes. The remaining unamortized balance of these forward contract losses totaled $0.6 million ($0.4 million, net-of-tax) as of September 30, 2007.

A summary of net cash provided by (used in) operating, investing, and financing activities for the three month periods ended September 30, 2007 and 2006 is provided below (in millions):

		Three Months Ended September 30,
		2007		2006
Operating Activities:
Net income plus depreciation and amortization	$	23.4	$	14.1
Working capital		11.2		13.2
Excess tax benefits from share-based payment arrangements		(2.1)		(1.6)
Other (non-cash items, long-term assets and liabilities)		9.0		9.6
Total provided by operating activities	$	41.5	$	35.3

Investing Activities:
Capital expenditures	$	(12.5)	$	(15.7)
Acquisitions		(0.7)		(6.2)
Asset sales		5.0		-
Other		-		0.1
Total used in investing activities	$	(8.2)	$	(21.8)

Financing Activities:
Issuances of common stock		0.3		0.1
Purchases and other retirements of company stock		(44.1)		(19.5)
Payment of cash dividends		(6.2)		(5.8)
Payment of deferred financing costs		-		(0.1)
Excess tax benefits from share-based payment arrangements		2.1		1.6
Total used in financing activities	$	(47.9)	$	(23.7)

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Operating Activities

As compared to the same period in fiscal year 2007, cash provided by operating activities increased $6.2 million during the three months ended September 30, 2007 as a result, primarily, of higher sales and operating income. Partially offsetting this increase in profitability were changes in working capital (accounts receivable, inventories, prepaid and other current assets, customer deposits, payables, and accrued expenses and other current liabilities) arising in the ordinary course of business. In addition, operating cash flow for the three month period includes the effects of changes in several other non-cash items, including restructuring and impairment charges and gains incurred in connection with the sale of certain property, plant and equipment during the period.

Investing Activities

As compared to the same period in fiscal year 2007, cash used in investing activities decreased $13.6 million during the three months ended September 30, 2007 due, primarily, to (i) a reduction in cash utilized to fund acquisition activity and capital expenditures, and (ii) an increase in proceeds related to the disposition of certain property, plant and equipment. The current level of capital spending is principally attributable to (i) new design center development and renovation, (ii) entity-wide technology initiatives, and (iii) improvements within our remaining manufacturing facilities. We anticipate that cash from operations will be sufficient to fund future capital expenditures.

Financing Activities

As compared to the same period in fiscal year 2007, cash used in financing activities increased $24.2 million during the three months ended September 30, 2007 as a result, primarily, of an increase in payments related to the acquisition of treasury stock. On July 24, 2007, we declared a dividend of $0.22 per common share, payable on October 25, 2007, to shareholders of record as of October 10, 2007. We expect to continue to declare quarterly dividends for the foreseeable future.

As of September 30, 2007, our outstanding debt totaled $202.9 million, the current and long-term portions of which amounted to less than $0.1 million and $202.9 million, respectively. The aggregate scheduled maturities of long-term debt for each of the next five fiscal years are: less than $0.1 million in each of fiscal 2008, 2009, and 2010; and $3.9 million in fiscal 2011. The balance of our long-term debt ($198.9 million) matures in fiscal years 2012 and thereafter.

We had no revolving loans outstanding under the credit facility as of September 30, 2007, and stand-by letters of credit outstanding under the facility at that date totaled $15.1 million. Remaining available borrowing capacity under the facility was $184.9 million at September 30, 2007.

Except as set forth below, there has been no material change to the amount or timing of cash payments related to our outstanding contractual obligations as set forth in Part II, Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended June 30, 2007 as filed with the Securities and Exchange Commission on August 28, 2007.

On July 1, 2007, we adopted Financial Accounting Standards Board ("FASB") Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes , an interpretation of FASB Statement No. 109, Accounting for Income Taxes . As discussed further in Note 3, FIN 48 requires the recognition of a liability for unrecognized tax benefits, including related interest and penalties. As of July 1, 2007, we had unrecognized income tax benefits totaling $4.8 million and related accrued interest and penalties of $1.4 million (after related tax benefits), all of which was reclassified from current to long-term liabilities upon adoption. Since adopting FIN 48, our unrecognized tax benefits and related interest and penalties have increased by $0.3 million and $0.2 million, respectively. We do not currently anticipate significant changes in such amounts over the next twelve months. The payment obligations associated with these liabilities have not been reflected in our contractual obligations disclosure referred to above due to the absence of scheduled maturities and the resultant uncertainty regarding the timing of future cash outflows associated with such obligations. Therefore, the timing of these payments

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

cannot be determined, except for amounts estimated to be payable within twelve months that are included in current liabilities, of which there are none as September 30, 2007.

We believe that our cash flow from operations, together with our other available sources of liquidity, will be adequate to make all required payments of principal and interest on our debt, to permit anticipated capital expenditures, and to fund working capital and other cash requirements. As of September 30, 2007, we had working capital of $213.5 million and a current ratio of 2.43 to 1.

In addition to using available cash to fund changes in working capital, necessary capital expenditures, acquisition activity, the repayment of debt, and the payment of dividends, we have been authorized by our Board of Directors to repurchase our common stock, from time to time, either directly or through agents, in the open market at prices and on terms satisfactory to us. All of our common stock repurchases and retirements are recorded as treasury stock and result in a reduction of shareholders equity.

During the three months ended September 30, 2007 and 2006, we repurchased and/or retired the following shares of our common stock:

Three Months Ended

September 30,

2007 (1)(2)

2006 (3)(4)

Common shares repurchased	1,144,000	478,300
Cost to repurchase common shares	$38,268,917	$16,672,720
Average price per share	$33.45	$34.86


	(1)	Repurchase activity for the three months ended September 30, 2007 excludes $3,436,230 in common stock repurchases with a June 2007 trade date and a July 2007 settlement date.
	(2)	During August 2007, we also retired 661,688 shares of common stock tendered upon the exercise of outstanding employee stock options (592,861 to cover share exercise and 68,827 to cover related employee tax withholding liabilities). The total value of such shares on the date redeemed was $23,033,359, representing an average price per share of $34.81.
	(3)	Repurchase activity for the three months ended September 30, 2006 excludes $1,000,807 in common stock repurchases with a June 2006 trade date and a July 2006 settlement date.
	(4)	During August 2006, we also retired 185,930 shares of common stock tendered upon the exercise of outstanding employee stock options (137,517 to cover share exercise and 48,413 to cover related employee tax withholding liabilities). The total value of such shares on the date redeemed was $7,154,586, representing an average price per share of $38.48.

For each of the periods presented above, we funded our purchases of treasury stock with existing cash on hand and cash generated through current period operations. On July 24, 2007, the Board of Directors increased the then remaining share repurchase authorization to 2,500,000 shares. As of September 30, 2007, we had a remaining Board authorization to repurchase 2,051,300 shares.

Off-Balance Sheet Arrangements and Other Commitments, Contingencies and Contractual Obligations

Except as indicated below, we do not utilize or employ any off-balance sheet arrangements, including special-purpose entities, in operating our business. As such, we do not maintain any (i) retained or contingent interests, (ii) derivative instruments (other than as specified below), or (iii) variable interests which could serve as a source of potential risk to our future liquidity, capital resources and results of operations.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

We may, from time to time in the ordinary course of business, provide guarantees on behalf of selected affiliated entities or become contractually obligated to perform in accordance with the terms and conditions of certain business agreements. The nature and extent of these guarantees and obligations may vary based on our underlying relationship with the benefiting party and the business purpose for which the guarantee or obligation is being provided. Details of those arrangements for which we act as guarantor or obligor are provided below.

Retailer-Related Guarantees

Independent Retailer Credit Facility

We have obligated ourselves, on behalf of one of our independent retailers, with respect to a $1.5 million credit facility (the "Credit Facility") comprised of a $1.1 million revolving line of credit and a $0.4 million term loan. This obligation requires us, in the event of the retailers default under the Credit Facility, to repurchase the retailers inventory, applying such purchase price to the retailers outstanding indebtedness under the Credit Facility. Our obligation remains in effect for the life of the term loan which expires in April 2008. The maximum potential amount of future payments (undiscounted) that we could be required to make under this obligation is limited to the amount outstanding under the Credit Facility at the time of default (subject to pre-determined lending limits based on the value of the underlying inventory) and, as such, is not an estimate of future cash flows. No specific recourse or collateral provisions exist that would enable recovery of any portion of amounts paid under this obligation, except to the extent that we maintain the right to take title to the repurchased inventory. We anticipate that the repurchased inventory could subsequently be sold through our retail design center network.

As of September 30, 2007, the amount outstanding under the Credit Facility totaled approximately $0.9 million, substantially all of which was outstanding under the revolving credit line. Based on the underlying creditworthiness of the respective retailer, we believe this obligation will expire without requiring funding by us. However, in accordance with the provisions of FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others , a liability has been established to reflect our non-contingent obligation under this arrangement as a result of modifications made to the Credit Facility subsequent to January 1, 2003. As of September 30, 2007, the carrying amount of such liability is less than $50,000.

Ethan Allen Consumer Credit Program

The terms and conditions of our consumer credit program, which is financed and administered by a third-party financial institution on a non-recourse basis to Ethan Allen, are set forth in an agreement between us and that financial service provider (the "Program Agreement"). Any independent retailer choosing to participate in the consumer credit program is required to enter into a separate agreement with that same third-party financial institution which sets forth the terms and conditions under which the retailer is to perform in connection with its offering of consumer credit to its customers (the "Retailer Agreement"). We have obligated ourselves on behalf of any independent retailer choosing to participate in our consumer credit program by agreeing, in the event of default, breach, or failure of the independent retailer to perform under such Retailer Agreement, to take on certain responsibilities of the independent retailer, including, but not limited to, delivery of goods and reimbursement of customer deposits. Customer receivables originated by independent retailers remain non-recourse to Ethan Allen. Our obligation remains in effect for the term of the Program Agreement which expires in July 2012. While the maximum potential amount of future payments (undiscounted) that we could be required to make under this obligation is indeterminable, recourse provisions exist that would enable us to recover, from the independent retailer, any amount paid or incurred by us related to our performance. Based on the underlying

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

creditworthiness of our independent retailers, including their historical ability to satisfactorily perform in connection with the terms of our consumer credit program, we believe this obligation will expire without requiring funding by us.

Product Warranties

Our products, including our case goods, upholstery and home accents, generally carry explicit product warranties that extend from three to five years and are provided based on terms that are generally accepted in the industry. All of our domestic independent retailers are required to enter into, and perform in accordance with the terms and conditions of, a warranty service agreement. We record provisions for estimated warranty and other related costs at time of sale based on historical warranty loss experience and make periodic adjustments to those provisions to reflect actual experience. On rare occasion, certain warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or litigation. In certain cases, a material warranty issue may arise which is beyond the scope of our historical experience. We provide for such warranty issues as they become known and are deemed to be both probable and estimable. It is reasonably possible that, from time to time, additional warranty and other related claims could arise from disputes or other matters beyond the scope of our historical experience. As of September 30, 2007, our product warranty liability totaled $1.5 million.

Business Outlook

While we cannot forecast, with any degree of certainty, changes in the various macro-economic factors that influence the incoming order rate, we believe that we are well-positioned for the next phase of economic growth based upon our existing business model which includes: (i) an established brand; (ii) a comprehensive complement of home decorating solutions; and (iii) a vertically-integrated operating structure.

As macro-economic factors change, however, it is also possible that our costs associated with production (including raw materials and labor), distribution (including freight and fuel charges), and retail operations (including compensation and benefits, delivery and warehousing, occupancy, and advertising expenses) may increase. We cannot reasonably predict when, or to what extent, such events may occur or what effect, if any, such events may have on our consolidated financial condition or results of operations.

The home furnishings industry remains extremely competitive with respect to both the sourcing of products and the retail sale of those products. Domestic manufacturers continue to face pricing pressures as a result of the manufacturing capabilities developed during recent years in other countries, specifically within Asia. In response to these pressures, a large number of U.S. furniture manufacturers and retailers, including us, have increased their overseas sourcing activities in an attempt to maintain a competitive advantage and retain market share. At the present time, we domestically manufacture and/or assemble approximately 60% of our products. We continue to believe that a balanced approach to product sourcing, which includes the domestic manufacture of certain product offerings coupled with the import of other selected products, provides the greatest degree of flexibility and is the most effective approach to ensuring that acceptable levels of quality, service and value are attained.

In addition, we believe that our retail strategy, which involves (i) a continued focus on providing a wide array of product solutions and superior customer service, (ii) the opening of larger, new or relocated design centers in more prominent locations, while encouraging independent retailers to do the same, and (iii) the development of a more professional management structure within our retail network, provides an opportunity to further grow our business.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks relating to fluctuations in interest rates and foreign currency exchange rates.

Interest rate risk exists primarily through our borrowing activities. Our policy has been to utilize United States dollar denominated borrowings to fund our working capital and investment needs. Short-term debt, if required, is used to meet working capital requirements and long-term debt is generally used to finance long-term investments. There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements.

For floating-rate obligations, interest rate changes do not affect the fair value of the underlying financial instrument but do impact future earnings and cash flows, assuming other factors are held constant. Conversely, for fixed-rate obligations, interest rate changes affect the fair value of the underlying financial instrument but do not impact earnings or cash flows. At September 30, 2007, we had no floating-rate debt obligations outstanding. As of that same date, our fixed-rate debt obligations consist, primarily, of the Senior Notes. The estimated fair value of the Senior Notes as of September 30, 2007, which is based, primarily, on interest rate changes subsequent to the date on which the debt was issued, and which has been determined using quoted market prices, was $187.4 million as compared to a carrying value of $198.7 million.

Foreign currency exchange risk is primarily limited to our operation of five Ethan Allen-owned retail design centers located in Canada as substantially all purchases of imported parts and finished goods are denominated in United States dollars. As such, gains or losses resulting from market changes in the value of foreign currencies have not had, nor are they expected to have, a material effect on our consolidated results of operations.

Historically, we have not entered into financial instrument, including derivative, transactions for trading or other speculative purposes or to manage interest rate or currency exposure. However, in connection with the issuance of the Senior Notes, Global, in July and August 2005, entered into 6 separate forward contracts to hedge the risk-free interest rate associated with $108.0 million of the related debt in order to minimize the negative impact of interest rate fluctuations on earnings, cash flows and equity. The forward contracts were entered into with a major banking institution thereby mitigating the risk of credit loss. Upon issuance of the Senior Notes, the related forward contracts were settled. At the present time, we have no current plans to engage in further hedging activities.

Item 4. Controls and Procedures

Managements Report on Disclosure Controls and Procedures

Our management, including the Chairman of the Board and Chief Executive Officer ("CEO") and the Vice President-Finance ("VPF"), conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the CEO and VPF have concluded that, as of September 30, 2007, our disclosure controls and procedures were effective in ensuring that material information relating to us (including our consolidated subsidiaries), which is required to be disclosed by us in our periodic reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (ii) accumulated and communicated to management, including the CEO and VPF, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first fiscal quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth in Note 9 to the Consolidated Financial Statements, which is incorporated by reference herein, there has been no material change to the matters discussed in Part I, Item 3 - Legal Proceedings in our Annual Report on Form 10-K for the year ended June 30, 2007 as filed with the Securities and Exchange Commission on August 28, 2007.

Item 1A. Risk Factors

There has been no material change to the matters discussed in Part I, Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended June 30, 2007 as filed with the Securities and Exchange Commission on August 28, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Certain information regarding purchases made by or on behalf of us or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of our common stock during the three months ended September 30, 2007 is provided below:

Period	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (a)
July 2007	812,500	$33.68	812,500	2,382,800
August 2007	331,500	$32.90	331,500	2,051,300
September 2007	-	-	-	2,051,300
Total	1,144,000	$33.45	1,144,000

(a)

We have been authorized by our Board of Directors to repurchase our common stock, from time to time, either directly or through agents, in the open market at prices and on terms satisfactory to us. In recent years, the Board of Directors has increased the then remaining share repurchase authorization as follows: from 753,600 shares to 2,000,000 shares on November 16, 2004; from 691,100 shares to 2,000,000 shares on April 26, 2005; from 393,100 shares to 2,500,000 shares on November 15, 2005; from 1,110,400 shares to 2,500,000 shares on July 25, 2006; and from 707,300 shares to 2,500,000 shares on July 24, 2007.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Description
10 (b)-7	The Ethan Allen Retirement Savings Plan, as Amended and Restated, effective January 1, 2006
10 (e)-3	Second Amended and Restated Private Label Consumer Credit Card Program Agreement, dated July 23, 2007, between Ethan Allen Global, Inc., Ethan Allen Retail, Inc., and GE Money Bank (confidential treatment requested under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC)
31.1	Rule 13a-14(a) Certification of Principal Executive Officer
31.2	Rule 13a-14(a) Certification of Principal Financial Officer
32.1	Section 1350 Certification of Principal Executive Officer
32.2	Section 1350 Certification of Principal Financial Officer

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ETHAN ALLEN INTERIORS INC.

(Registrant)

DATE:

November 5, 2007

BY:

/s/ M. Farooq Kathwari

M. Farooq Kathwari

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

DATE:

November 5, 2007

BY:

/s/ Jeffrey Hoyt

Jeffrey Hoyt

Vice President, Finance and Treasurer

(Principal Financial Officer and

Principal Accounting Officer)

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

EXHIBIT INDEX

Exhibit

Number

Exhibit

10 (b)-7

The Ethan Allen Retirement Savings Plan, as Amended and Restated, effective January 1, 2006

10 (e)-3

Second Amended and Restated Private Label Consumer Credit Card Program Agreement, dated July 23, 2007, between Ethan Allen Global, Inc., Ethan Allen Retail, Inc., and GE Money Bank (confidential treatment requested under Rule 24b-2 as to certain portions which are omitted and filed separately with the SEC)

31.1

Rule 13a-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certification of Principal Executive Officer

32.2

Section 1350 Certification of Principal Financial Officer

EXHIBIT 10(b)-7

THE ETHAN ALLEN RETIREMENT SAVINGS PLAN

(As Amended and Restated Effective January 1, 2006)

Mayer Brown LLP
Chicago

I, , Secretary of ETHAN ALLEN GLOBAL, INC., hereby certify that the attached document is a full, true and complete copy of THE ETHAN ALLEN RETIREMENT SAVINGS PLAN as presently in effect.

Dated this

day of

, 2007.

Secretary as Aforesaid

(Seal)

THE ETHAN ALLEN RETIREMENT SAVINGS PLAN

(As Amended and Restated Effective January 1, 2006)

SECTION 1

General

1.1 History, Purpose and Effective Date . Effective as of September 28, 1958, Ethan Allen Retail Inc. (formerly known as Ethan Allen Inc., the “Company”), established the Profit Sharing and Stock Bonus Plan of Ethan Allen Inc. (the “Profit Sharing Plan”) so that it, and each Related Company (as defined in subsection 1.2) which, with the consent of the Company, adopted the Profit Sharing Plan could assist their eligible employees in providing for their future security. The Profit Sharing Plan was amended from time to time and was first renamed the Profit Sharing Plan of Ethan Allen Inc. and then the Retirement Program of Ethan Allen Inc. effective as of, respectively, February 28, 1983 and July 1, 1989. Effective June 29, 1989, the Company established a second plan, the Ethan Allen 401(k) Employee Savings Plan (the “401(k) Plan”). The Profit Sharing Plan and the 401(k) were merged effective as of July 1, 1994 and, effective as of January 1, 1999, the merged plan was renamed “The Ethan Allen Retirement Savings Plan” (the “Plan”). Effective as of December 31, 2000, the Carriage House 401(k) Plan was merged into the Plan and, effective as of September 1, 2006, the Mirons 401(k) Plan was merged into the Plan. The following provisions constitute an amendment, restatement and continuation of the Plan as in effect immediately prior to January 1, 2006, the “Effective Date” of the Plan as set forth herein. The Plan is intended to qualify as a profit sharing plan under section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”). From and after the Effective Date, Ethan Allen Global, Inc. shall be the sponsor of the Plan and shall be substituted for Ethan Allen Inc. as the “Company” hereunder.

1.2 Related Companies and Employers . The term “Related Company” means any corporation or trade or business during any period during which it is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Code. The Company and each Related Company which, with the Company’s consent, adopts the Plan are referred to below collectively as the “Employers” and individually as an “Employer”. Ethan Allen Global, Inc. became an “Employer” under the Plan effective July 1, 2005. Each company that is an Employer under the Plan as of the Effective Date is set forth in Appendix B hereto.

1.3 Trust Agreements, Plan Administration . All contributions made under the Plan will continue to be held, managed and controlled by one or more trustees (the “Trustee”) acting under one or more Trusts which form a part of the Plan. The terms of the Trust as in effect on the Effective Date are set forth in one or more Trust Agreements. The authority to control and manage the operation and administration of the Plan is vested in a Committee as described in subsection 12.1. The members of the Committee shall be “named fiduciaries”, as described in section 402 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with respect to their authority under the Plan. Except as otherwise expressly provided in the Plan, the Committee shall be the Administrator of the Plan and shall have the rights, duties and

obligations of an “administrator” as that term is defined in section 3(16)(A) of ERISA and of a “plan administrator” as that term is defined in section 414(g) of the Code.

1.4 Plan Year . The term “Plan Year” means the calendar year.

1.5 Accounting Dates . The term “Accounting Date” means each business day.

1.6 Applicable Laws . The Plan shall be construed and administered in accordance with the internal laws of the State of Connecticut to the extent that such laws are not preempted by the laws of the United States of America.

1.7 Gender and Number . Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural, and the plural shall include the singular.

1.8 Notices . Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at its principal executive offices. Any notice required under the Plan may be waived by the person entitled to notice.

1.9 Form and Time of Elections . Unless otherwise specified herein, each election permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed with the Committee at such times and in such form as the Committee shall require.

1.10 Evidence . Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

1.11 Action by Employers . Any action required or permitted to be taken by any Employer which is a corporation shall be by resolution of its Board of Directors, by resolution of a duly authorized committee of its Board of Directors, or by a person or persons authorized by the Board of Directors or such committee.

1.12 No Reversion to Employers . No part of the corpus or income of the Trust shall revert to any Employer or be used for, or diverted to, purposes other than for the exclusive benefit of Participants and other persons entitled to benefits under the Plan, except as specifically provided in the applicable Trust Agreement.

1.13 Plan Supplements . The provisions of the Plan as applied to any Employer or any group of employees of any Employer may, with the consent of the Company, be modified or supplemented from time to time by the adoption of one or more Supplements. Each Supplement shall form a part of the Plan as of the Supplement’s effective date. In the event of any inconsistency between a Supplement and the Plan document, the terms of the Supplement shall govern.

1.14 Defined Terms . Terms used frequently with the same meaning are indicated by initial capital letters, and are defined throughout the Plan. Appendix A contains an alphabetical listing of such terms and the subsections in which they are defined.

SECTION 2

Participation in Plan

2.1 Eligibility for Participation . Subject to the terms and conditions of the Plan, each individual who was a Participant in the Plan immediately prior to the Effective Date will continue to be a Participant in the Plan from and after the Effective Date. Subject to the terms and conditions of the Plan, each employee of an Employer who was not a Participant in the Plan immediately prior to the Effective Date will become a “Participant” in the Plan on the Effective Date or on the first day of any subsequent April, July, October or January coincident with or next following the three-month anniversary of his date of hire (an “Entry Date”) if he then meets the following requirements:

(a)

he has completed at least three months of Service (as defined in Section 3) since his date of hire; and

(b)

he is not a member of a collective bargaining unit as to which retirement benefits have been the subject of good faith bargaining unless the Plan has been extended to the collective bargaining unit under a currently effective collective bargaining agreement; and

(c)

he is not a nonresident alien and he receives earned income (within the meaning of section 911(d)(2) of the Code) from an Employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code).

Notwithstanding the foregoing provisions of this subsection, if an individual is reemployed by an Employer on or after the first day of the calendar quarter coincident with or next following the date on which he first meets the requirements of paragraph (a) next above, he shall become a Participant in the Plan immediately upon meeting the requirements of paragraphs (b) and (c) next above. Except as otherwise specifically provided in Section 2.4, no benefits shall be provided or service credited under the Plan on a retroactive basis to any person who has performed services for an Employer or Related Company as an independent contractor or as a Leased Employee, even if such person subsequently becomes a common law employee of an Employer or Related Company (or is deemed by a government agency, court or other third party to have been a common law employee of an Employer or Related Company).

2.2 Inactive Participation . Once an eligible employee becomes a Participant in the Plan, he will remain a Participant for all purposes under the Plan, except the contribution provisions of Sections 4 and 5 and the withdrawal and loan provisions of Section 10, as long as he continues to have an Account balance under the Plan.

2.3 Plan Not Contract of Employment . The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee or Participant the right to be retained in the employ of any Employer nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.

2.4 Leased Employees . If, pursuant to one or more agreements between an Employer or Related Company and one or more leasing organizations (within the meaning of section 414(n) of the Code), a person provides services to the Employer or Related Company, in a capacity other than as an employee, on a substantially full-time basis for a period of at least one year and such services are performed under the primary direction or control of an Employer or Related Company, such person shall be a “Leased Employee”. Leased Employees shall not be eligible to participate in this Plan or in any other plan maintained by the Employer or Related Company which is qualified under section 401(a) of the Code. A Leased Employee shall be treated as if the services performed by him in such capacity (including service performed during such initial one-year period) were performed by him as an employee of a Related Company which has not adopted the Plan; provided, however, that no such service shall be credited:

(a)

for any period during which fewer than 20 percent of the workforce of the Employers and the Related Companies that is not Highly Compensated (as defined in section 414(q) of the Code) consists of Leased Employees and the Leased Employee is a Participant in a money purchase pension plan maintained by the leasing organization which (i) provides for a nonintegrated employer contribution of at least 10 percent of compensation, (ii) provides for full and immediate vesting, and (iii) covers all employees of the leasing organization (beginning with the date they become employees), other than those employees excluded under section 414(n)(5) of the Code; or

(b)

for any other period unless the Leased Employee provides satisfactory evidence to the Employer or Related Company that he meets all of the conditions of this subsection 2.4 and applicable law required for treatment as a Leased Employee.

2.5 Compliance with Veterans’ Laws . Notwithstanding any other provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Code.

SECTION 3

Service

3.1 Service . The term “Service” means, with respect to any employee or Participant, the number of full months elapsed since the first date for which he was paid, or entitled to payment, for the performance of duties for an Employer or a Related Company, subject to the following:

(a)

If an employee’s or Participant’s employment with the Employer and the Related Companies terminates and he incurs a One Year Break in Service (as defined below), he shall not be credited with Service for the period between the date his employment terminates and the date, if any, of his reemployment by an Employer or a Related Company.

(b)

The service of each employee of an Employer who performed services for a prior authorized Ethan Allen Dealer shall be taken into account with respect to the employee for purposes of the Plan, up to a maximum of three months of Service.

3.2 One Year Break in Service . Except with respect to an individual whose absence from employment constitutes a Maternity or Paternity Absence (as defined below), the term “One Year Break in Service” means the 12-consecutive-month period commencing on an employee’s Termination Date (as defined in subsection 9.2) if he is not paid or entitled to payment for the performance of duties for the Company or a Related Company during that period. With respect to an individual whose absence from employment constitutes a Maternity or Paternity Absence, the term “One Year Break in Service” means the 12-consecutive-month period commencing on the second anniversary of the date such individual’s Maternity or Paternity Absence began if he is not paid or entitled to payment for the performance of duties for the Company or a Related Company during that period. The term “Maternity or Paternity Absence” means an employee’s absence from work on account of the pregnancy of such individual, the birth of a child of such individual, the placement of a child with such individual in connection with the adoption of a child by such individual, or for purposes of caring for the child by such individual immediately following such birth or placement. The Committee may require the employee to furnish such information as it considers necessary to establish that such individual’s absence was a Maternity or Paternity Absence.

SECTION 4

Before-Tax, After-Tax and Rollover Contributions

4.1 Before-Tax Contributions . Subject to the limitations set forth in Section 8, a Participant may elect to have his Eligible Compensation (as defined in subsection 4.7) reduced by one to 100 percent, in whole percent increments, and a corresponding amount contributed on his behalf by his Employer as a “Before-Tax Contribution” to the Plan; provided, however, certain Participants that are so designated by the Committee shall be deemed to have elected to make a Before-Tax Contribution, beginning on the Participant’s Entry Date, in an amount equal to two percent of the Participant’s Eligible Compensation until the Participant elects to change such deemed election in accordance with subsection 4.5 of the Plan. Notwithstanding the foregoing, a Participant granted a withdrawal on account of Financial Hardship (as defined in subsection 10.2) may be ineligible to elect Before-Tax Contributions for a period of time, as determined by the Committee under reasonable rules and regulations, from one to four calendar quarters beginning with the calendar quarter in which the Financial Hardship withdrawal is made.

4.2 After-Tax Contributions . Subject to the limitations set forth in Section 8, for any Plan Year, a Participant may elect to make “After-Tax Contributions” to the Plan through payroll deduction in an amount that is not less than one percent and not more than 100 percent (in whole percent increments) of his Eligible Compensation.

4.3 Catch-Up Contributions . Subject to the limitations set forth in Section 8, all employees who are eligible to make Before-Tax Contributions under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make “Catch-Up Contributions” in accordance with, and subject to the limitations of, section 414(v) of the Code. Such Catch-Up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of sections 402(g) and 415 of the Code. Notwithstanding any other provision of the Plan, the Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of section 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such Catch-Up Contributions.

4.4 Payment of Before-Tax and After-Tax Contributions . Before-Tax, After-Tax, and Catch-Up contributions shall be paid to the Trustee by an Employer on the earliest date on which such contributions can reasonably be segregated from the Employer’s general assets, but no later than the 15th business day of the month following the month such amounts would otherwise have been payable to the Participant or such other date permitted by law.

4.5 Variation, Discontinuance and Resumption of Before-Tax, After-Tax, or Catch-Up Contributions . Subject to such rules as the Committee may establish and the limitations of subsections 4.1, 4.2 and 4.3, a Participant may elect to change the rate of his Before-Tax, After-Tax or Catch-Up Contributions, suspend any or all such contributions or resume any or all such contributions. Notwithstanding the foregoing provisions of this subsection 4.5, no change to, suspension or resumption of contributions shall be applied retroactively and all changes to

elections (including suspensions of contributions) shall be effective as soon as administratively feasible after the date elected by the Participant.

4.6 Rollover Contributions and Transferred Amounts . A Participant or employee who meets the requirements of subsection 2.1 of the Plan, other than paragraph (a) thereof, may, in accordance with procedures approved by the Committee, make a Rollover Contribution (as defined below) to the Trustee of the Plan. The term “Rollover Contribution” means:

(a)

a cash contribution to the Plan by the Participant of amounts distributed from an eligible plan (as defined below) or distributed from an individual retirement account and constituting a “rollover contribution” as described in section 408(d)(3) of the Code and made within 60 days of receipt of such amount; or

(b)

a payment made to the Plan by another qualified plan described in section 401(a) of the Code as a direct rollover (as contemplated by section 401(a)(31) of the Code) on behalf of and at the direction of the Participant, which payment shall be in cash; provided, however, that to the extent and under such circumstances as approved by the Committee, such payment may be made in assets other than cash, including, but not limited to, promissory notes evidencing outstanding loans to the Participant or employee under the other qualified plan,

provided, in either case, such distributed or directly rolled over amounts are permitted to be rolled over to a qualified plan under the applicable provisions of the Code as then in effect. For purposes of this subsection 4.6, an “eligible plan” shall mean a qualified plan described in section 401(a) or 403(a) of the Code, an annuity contract described in section 403(b) of the Code, an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state, or an individual retirement account or annuity described in section 408(a) or 408(b) of the Code. The Committee may request from the Participant such documents as it considers necessary or desirable to establish that the Rollover Contribution satisfies the foregoing requirements. In addition, a plan qualified under section 401(a) of the Code and holding amounts for the benefit of a Participant or an employee may, with such individual’s consent and the consent of the Committee, transfer such amounts to the Plan, but only if such amounts are not subject to the provisions of section 401(a)(11) or 411(d)(6) of the Code and the Committee may consent to the transfer of assets and liabilities from another plan qualified under section 401(a) or to the merger of another qualified plan into the Plan. If an employee who is not otherwise a Participant makes a Rollover Contribution to the Plan or has amounts transferred to the Plan on his behalf (including as the result of a plan merger), he shall be treated as a Participant only with respect to the amounts so contributed or transferred until he has met the requirements for Plan participation set forth in subsection 2.1.

4.7 Eligible Compensation . For purposes of the Plan, a Participant’s “Eligible Compensation” shall mean his basic salary plus overtime and bonuses for the portion of the Plan Year during which he is eligible to participate in the Plan, determined prior to any election to reduce his Eligible Compensation as described in subsection 4.1 or 4.3 or under a plan defined in section 125 or 132(f)(4) of the Code, provided that a Participant’s Eligible Compensation shall not exceed the maximum level permitted for a Plan Year under section 401(a)(17) of the Code,

taking into account for purposes of such limitation any proration required under applicable Treasury regulations on account of a short Plan Year.

SECTION 5

Employer Contributions

5.1 Company Profit Sharing Contributions . Subject to the conditions and limitations of Section 8, the Company shall make a “Company Profit Sharing Contribution” for a Plan Year in the amount, if any, determined by the Company in its sole discretion. Any such contribution shall be allocated to Participants’ Accounts (as defined in subsection 7.1) in accordance with the provisions of subsection 7.3. Each other Employer shall make a Company Profit Sharing Contribution for the same Plan Year on behalf of each Participant entitled to an allocation in accordance with subsection 7.3 in an amount that equals the same percentage of Eligible Compensation as the contribution made by the Company.

5.2 Company Match Contributions . Subject to the conditions and limitations of Section 8, each Employer shall make a “Company Match Contribution” for a Plan Year in the amount, if any, determined by the Company in its sole discretion, on behalf of each Participant employed by such Employer who makes Before-Tax Contributions in such year; provided, however, in no event shall the Company Match Contribution exceed 100 percent of such Participant’s Before-Tax Contributions (or such other percentage as determined by the Company) up to a maximum Company Match Contribution of $1,300 per Participant (or such other amount as determined by the Company) per Plan Year and in no event shall Company Match Contributions be made with respect to Catch-Up Contributions.

5.3 Limitations on Amount of Employer Contributions . In no event shall the sum of the Company Profit Sharing Contribution and the Company Match Contribution made by an Employer for any Plan Year exceed the limitations imposed by section 404 of the Code on the maximum amount deductible on account thereof by that Employer for that year.

5.4 Payment of Employer Contributions . Each Employer’s Company Profit Sharing and Company Match Contributions under the Plan for any Plan Year shall be paid to the Trustee, without interest, no later than the time prescribed by law for filing the Employer’s federal income tax return, including any extensions thereof.

SECTION 6

Investment Elections

6.1 Investment of Contributions . Each Participant may elect to have the Before-Tax, After-Tax, Catch-Up, Rollover, Company Match and Company Profit Sharing Contributions made on that Member’s behalf invested, in whole percent increments, in any one or more of the investment funds which are from time to time selected by the Committee and made available to Participants for investment of their Accounts, including a “Company Stock Fund” which shall be invested solely in the common stock of the Company’s parent, Ethan Allen Interiors, Inc. (“Company Stock”) and a “Loan Fund” which shall consist only of promissory notes evidencing loans made to Participants in accordance with the provisions of subsection 10.3, provided, however, the Before-Tax Contribution of Participants who are deemed to have elected Before-Tax Contributions under subsection 4.1 of the Plan will be invested in a fund designated by the Committee until the Participant elects otherwise in accordance with subsection 6.3 of the Plan.

6.2 Investment Transfers . Each Participant may elect as of any Accounting Date, according to rules established by the Committee, to have the assets in a particular investment fund transferred, in whole percent increments, to any one or more other investment fund or funds in a manner such that the Participant determines the ultimate percentage of assets to be held by each investment fund.

6.3 Investment Elections . Each Participant may make the elections described in subsection 6.1 or 6.2 by filing an election form with the Committee (or its designee) upon becoming a Participant. Such elections may be changed to be effective each Accounting Date according to rules established by the Committee; provided, however, that a Participant’s investment elections shall apply with respect to both investment of future contributions and the Participant’s current Accounts. During any period in which no election has been made, contributions credited to a Participant shall be invested in the investment funds as determined by the Committee.

6.4 Transfer of Assets . The Committee shall direct the Trustee to transfer monies or other property from the appropriate investment fund to the other investment fund as may be necessary to carry out the aggregate transfer transactions after the Committee has caused the necessary entries to be made in the Participants’ Accounts in the investment funds and has reconciled offsetting transfer elections, in accordance with uniform rules therefor established by the Committee. In the event of a transfer of assets and liabilities from another qualified plan to the Plan (including as a result of plan-to-plan transfers or a plan merger), the Committee shall direct the Trustee as to the investment of assets to be transferred to the Plan.

SECTION 7

Plan Accounting

7.1 Participants’ Accounts . The Committee shall maintain (or cause to be maintained) the following “Accounts” in the name of each Participant:

(a)

a “Before-Tax Contributions Account”, which shall reflect Before-Tax Contributions and Catch-Up Contributions, if any, made on his behalf and the income, losses, appreciation and depreciation attributable thereto;

(b)

an “After-Tax Contributions Account”, which shall reflect After-Tax Contributions, if any, made on his behalf and the income, losses, appreciation and depreciation attributable thereto;

(c)

a “Company Match Contributions Account”, which shall reflect Company Match Contributions, if any, made on his behalf and the income, losses, appreciation and depreciation attributable thereto;

(d)

a “Company Profit Sharing Contributions Account”, which shall reflect Company Profit Sharing Contributions, if any, allocated to him in accordance with subsection 7.3, and the income, losses, appreciation and depreciation attributable thereto; and

(e)

a “Rollover Contributions Account”, which shall reflect Rollover Contributions, if any, made by him, the income, losses, appreciation and depreciation attributable thereto and the portion of any Rollover Contributions which are attributable to after-tax employee contributions.

The Accounts provided for in this subsection shall be for accounting purposes only, and there shall be no segregation of assets within the investment funds among the separate Accounts. Reference to the “balance” in a Participant’s Accounts means the aggregate of the balances in the subaccounts maintained in the investment funds attributable to the Accounts. In the case of a transfer of assets and liabilities from another qualified plan to the Plan (including as a result of plan-to-plan transfers or a plan merger), the transferred assets shall be allocated to Participants’ Accounts as directed by the Committee.

7.2 Adjustment of Accounts . As of each Accounting Date occurring prior to or coincident with his Distribution Date (as described in subsection 11.1), a Participant’s Accounts shall be adjusted in the following manner and order:

(a)

first , there shall be charged to the proper subaccount for each Account of each Participant under each of the investment funds all payments, withdrawals, distributions and loans made since the last preceding Accounting Date that have not been charged previously;

(b)

next , the balances of the subaccounts of all such Participants under each of the investment funds, other than the Loan Fund, shall be adjusted upward or

downward, pro rata, according to the balances so that the total of the balances equals the then Fair Market Value (as defined below) of such investment fund;

(c)

next , there shall be allocated and credited to each Participant’s Loan Fund subaccounts any loan made to such Participant and any interest which has accrued thereon since the last preceding Accounting Date in accordance with paragraph 10.3(c);

(d)

next , there shall be charged to each Participant’s Loan Fund subaccounts and credited to the Participant’s subaccounts under the other investment funds in accordance with paragraph 10.3(f) any payments of principal and interest received by the Trustee since the last preceding Accounting Date;

(e)

finally , there shall be allocated and credited to each Participant’s appropriate Account the contributions, if any, that are to be allocated and credited as of that date in accordance with the provisions of subsection 7.3.

The “Fair Market Value” of an investment fund (other than the Loan Fund) as at any date means the then net worth of that investment fund, as determined by the Trustee and, to the extent held under that fund, exclusive of:

(A)

Company Profit Sharing and Company Match Contributions, if any, received by the Trustee for the period elapsed since the close of the last preceding Plan Year;

(B)

Before-Tax, After-Tax, Catch-Up and Rollover Contributions, if any, received by the Trustee for the period elapsed since the last preceding Accounting Date; and

(C)

any payments of interest and repayments of principal with respect to any loans under subsection 10.3 received by the Trustee since the last preceding Accounting Date.

7.3 Allocation and Crediting of Contributions . Subject to the provisions of Section 8, contributions shall be allocated among and credited to the Accounts of Participants as follows:

(a)

Before-Tax, After-Tax, Catch-Up and Rollover Contributions made by or on behalf of a Participant for any calendar quarter shall be credited to that Participant’s appropriate Accounts as soon as administratively possible following the day such contributions are received by the Trustee; and

(b)

As of the last day of each Plan Year, the Company Profit Sharing Contributions of an Employer for that Plan Year shall be allocated among and credited to the appropriate Accounts of Participants who were employed by the Employer on the last working day of that year (including Participants who were on an authorized leave of absence or layoff on that day), pro rata, according to the Eligible Compensation paid to them by the Employer during that Plan Year; and

(c)

As of the last day of each Plan Year, the Company Match Contributions of an Employer for that Plan Year shall be allocated among and credited to the appropriate Accounts of Participants who were employed by the Employer on the last working day of that year (including Participants who were on an authorized leave of absence or layoff on that day) and Participants who terminated employment with all the Employers and Related Companies during that year before the last working day because of death or Disability (as defined below). Notwithstanding the foregoing, Participants who terminated employment by reason of the Company’s closing the location at which the Participants worked shall be credited with Company Match Contributions of their Employer for the Plan Year in which their termination of employment occurred as of the date of such termination of employment.

“Disability” means a Participant’s inability to work because of disease or accidental bodily injury, as determined in a uniform and nondiscriminatory manner by the Committee after requiring any medical examinations by a physician or reviewing any medical evidence which the Committee considers necessary, and results in the termination of the Participant’s employment. For purposes of this Section 7, Company Profit Sharing and Company Match Contributions for any Plan Year shall be considered to have been made on the last day of that year, regardless of when paid to the Trustee.

7.4 Statement of Accounts . As soon as practicable after the last day of each calendar quarter the Committee shall provide each Participant with a statement of the balance in his Accounts as of that day.

SECTION 8

Limitations on Compensation, Contributions and Allocations

8.1 Reduction of Contribution Rates . To conform the operation of the Plan to sections 401(a)(4), 401(k)(3), 401(m)(2), 402(g) and 415(c) of the Code, the Committee may unilaterally modify or revoke any Before-Tax or After-Tax Contribution election made by a Participant pursuant to subsections 4.1 or 4.2 or may reduce (to zero, if necessary) the level of Company Match Contributions to be made pursuant to subsection 5.2 on behalf of Highly Compensated Participants.

8.2 Compensation for Limitation/Testing Purposes . The term “Compensation” for purposes of this Section 8 shall mean:

(a)

the Participant’s wages, salaries, commissions, bonuses and other amounts received during the Plan Year from any Employer or Related Company or Section 415 Affiliate (defined below) for personal services actually rendered, including taxable fringe benefits, nonqualified stock options taxable in the year of grant, amounts taxable under a section 83(b) election and nondeductible moving expenses, but excluding distributions from any deferred compensation plan (qualified or nonqualified), amounts realized from the exercise of (or disposition of stock acquired under) any nonqualified stock option or other benefits given special tax treatment; plus

(b)

any elective contributions made on the Participant’s behalf for the Plan Year to a plan sponsored by an Employer or a Related Company that are excludable from gross income in accordance with sections 125, 402 or 132(f)(4) of the Code,

up to a maximum limit of $200,000 or such other amount as may be permitted for any Plan Year under section 401(a)(17) of the Code, taking into account for purposes of such limitation any proration of such amount required under applicable Treasury regulations on account of a short Plan Year. The term “Section 415 Affiliate” means any entity that would be a Related Company if the ownership test of sections 414(b) and (c) of the Code were “more than 50%” rather than “at least 80%”.

8.3 Limitations on Annual Addition . Notwithstanding any other provisions of the Plan to the contrary, a Participant’s Annual Addition (as defined below) for any Plan Year shall not exceed an amount equal to the lesser of:

(a)

$45,000 (as adjusted for each Plan Year to take into account any applicable cost-of-living adjustment for that year provided by the Secretary of the Treasury under section 415(d) of the Code); or

(b)

100 percent of the Participant’s Compensation for that Plan Year (determined without regard to the limitation under Section 401(a)(17) of the Code), calculated as if each Section 415 Affiliate were a Related Company,

reduced by any Annual Additions for the Participant for the Plan Year under any other defined contribution plan of an Employer or a Related Company or Section 415 Affiliate, provided that, if any other such plan has a similar provision, the reduction shall be pro rata. The term “Annual

Addition” means, with respect to any Participant for any Plan Year the sum of all contributions allocated to the Participant’s Accounts under the Plan for such year, excluding Before-Tax Contributions that are distributed as excess deferrals. The term Annual Addition shall also include employer contributions allocated for a Plan Year to any individual medical account (as defined in section 415(l) of the Code) of a Participant under a defined benefit plan and any amount allocated for a Plan Year to the separate account of a Participant for payment of post-retirement medical benefits under a funded welfare benefit plan (as described in section 419(A)(d)(2) of the Code) which is maintained by a Related Company or a Section 415 Affiliate.

8.4 Excess Annual Addition . If, as a result of a reasonable error in estimating a Participant’s Compensation or a reasonable error in determining the amount of elective deferrals (as defined in section 402(g)(3) of the Code) or as a result of such other circumstances as the Commissioner of Internal Revenue may determine, a Participant’s Annual Additions for a Plan Year would exceed the limitations set forth in subsection 8.3:

(a)

The amount of the Participant’s After-Tax Contributions which may not be credited to the Participant’s accounts because of the foregoing provisions of this Section 8, together with earnings thereon, will be returned to the Participant as soon as practicable. Contributions which are to be returned pursuant to this paragraph (a) shall be returned in the following order: (i) After-Tax Contributions for which no Company Match Contributions were made, and (ii) After-Tax Contributions for which Company Match Contributions were made and any Company Match Contributions related thereto.

(b)

The amount of Before-Tax Contributions made on behalf of a Participant which may not be credited to the Participant’s Accounts because of the foregoing provisions of this Section 8, together with earnings thereon, will be returned to the Participant as soon as practicable. Contributions which are to be returned pursuant to this paragraph (b) shall be returned in the following order: (i) Before-Tax Contributions for which no Company Match Contributions were made, and (ii) Before-Tax Contributions for which Company Match Contributions were made and any Company Match Contributions related thereto.

(c)

The amount of any Company Match Contributions and Company Profit Sharing Contributions that may not be credited to Participants’ Accounts for any Plan Year because of the foregoing provisions of this Section 8 will be treated in accordance with Treas. Reg. § 1.415-6(b)(6)(ii).

Amounts returned to a participant or credited to a suspense account in accordance with this subsection 8.4 shall not be considered an Annual Addition for purposes of the Plan.

8.5 Before-Tax Contributions Dollar Limitation . In no event shall the Before-Tax Contributions for a Participant under the Plan (together with elective deferrals under any other cash-or-deferred arrangement maintained by an Employer or a Related Company) for any taxable year exceed the dollar amount permitted under section 402(g) of the Code. If during any taxable year a Participant is also a participant in another cash or deferred arrangement not sponsored by an Employer or a Related Company and if his elective deferrals under such other arrangement

together with his Before-Tax Contributions exceed the maximum amount permitted for the Participant for that year under section 402(g) of the Code, the Participant, not later than March 1 following the close of such taxable year, may request the Committee to direct the Trustee to distribute all or a portion of such excess deferrals to him, with the income allocable thereto, determined in accordance with applicable regulations. Any such request shall be in writing and shall include adequate proof of the existence of such excess, as determined by the Committee in its sole discretion, taking into account any Before-Tax Contributions previously distributed to the Participant pursuant to the foregoing provisions of this Section to conform to the limitations of section 401(k) of the Code. If the Committee is so notified, such excess amount shall be distributed to the Participant no later than April 15 following the close of the Participant’s taxable year. If the applicable limitation for a Plan Year happens to be exceeded with respect to this Plan alone, or this Plan and another plan or plans of the Employers and Related Companies, the Committee shall direct such excess Before-Tax Contributions (with allocable gains or losses) to be distributed to the Participant as soon as practicable after the Committee is notified of the excess deferrals by the Company, an Employer or the Participant, or otherwise discovers the error (but not later than the April 15 following the close of the Participant’s taxable year). The dollar amount of any distribution due pursuant to this subsection 8.5 shall reduced by the dollar amount of any Before-Tax Contributions which are previously distributed to the same Participant pursuant to subsection 8.7; provided, however, that for purposes of subsections 8.3 and 8.8, the correction under this subsection 8.5 shall be deemed to have occurred before the correction under subsection 8.7. Notwithstanding any other provision of the Plan, if any Before-Tax Contributions are returned to a Participant pursuant to this subsection 8.5, the amount of any Company Match Contributions attributable to such returned contributions (and any earnings thereon) shall also be returned to the Participant.

8.6 401(k)(3) Tests . For each Plan Year, the Plan will satisfy the requirements of section 401(k)(3) of the Code and the requirements of Treas. Reg. § 1.401(k)-2 (the “ADP Test”). The determination as to whether the ADP Test is satisfied for any Plan Year shall be made based on the “current year testing method”.

8.7 Correction of Section 401(k) Excess . In the event that the ADP Test is not initially satisfied for any Plan Year, the Committee shall direct the Trustee to distribute excess contributions in accordance with Treas. Reg. § 1.401(k)-2(b). Without limiting the generality of the foregoing, if the requirements of this subsection 8.7 are applicable, the excess contributions shall be corrected in accordance with Treas. Reg. § 1.401(k)-2(b)(2) including:

(a)

determining in accordance with Treas. Reg. § 1.401(k)-2(b)(2)(ii) the total amount of excess contributions that must be distributed;

(b)

apportioning the total amount of excess contributions that must be distributed among Highly Compensated employees in accordance with Treas. Reg. § 1.401(k)-2(b)(2)(iii);

(c)

determining the income allocable to the excess contributions in accordance with the method under Treas. Reg. § 1.401(k)-2(b)(2)(iv)(C) and the safe harbor method for determining income for the gap period; and

(d)

distributing the apportioned excess contributions and income allocable thereto in accordance with Treas. Reg. § 1.401(k)-2(b)(2)(v).

8.8 Limitation on Company Match and After-Tax Contributions . For each Plan Year, the Plan will satisfy the requirements of section 401(m)(2) of the Code and the requirements of Treas. Reg. § 1.401(m)-2 (the “ACP Test”). The determination as to whether the ADP Test is satisfied for any Plan Year shall be made based on the “current year testing method”.

8.9 Correction of Section 401(m) Excess . In the event that the ACP Test is not initially satisfied for any Plan Year, the Committee shall direct the trustee to distribute excess aggregate contributions in accordance with Treas. Reg. § 1.401(m)-2(b). Without limiting the generality of the foregoing, if the requirements of this subsection 8.9 are applicable, the excess contributions shall be corrected in accordance with Treas. Reg. § 1.401(m)-2(b)(2) including:

(a)

determining in accordance with Treas. Reg. § 1.401(m)-2(b)(2)(ii) the total amount of excess aggregate contributions that must be distributed;

(b)

apportioning the total amount of excess aggregate contributions that must be distributed amount Highly Compensated employees in accordance with Treas. Reg. § 1.401(m)-2(b)(2)(iii);

(c)

determining the income allocable to the excess aggregate contributions in accordance with the method under Treas. Reg. § 1.401(m)-2(b)(2)(iv)(C) and the safe harbor method for determining income for the gap period; and

(d)

distributing the apportioned excess aggregate contributions and income allocable thereto in accordance with Treas. Reg. § 1.401(m)-2(b)(2)(v).

8.10 Highly Compensated . For purposes of the Plan, an employee or Participant shall be considered “Highly Compensated” for any Plan Year if:

(a)

at any time during that Plan Year or the preceding Plan Year, he was a 5 percent owner of an Employer or a Related Company; or

(b)

he received Compensation for the preceding Plan Year in excess of $100,000 (indexed for cost-of-living adjustments under section 415(d) of the Code as provided in section 414(q) of the Code) and was in the top-paid group of employees for such year.

An employee is considered to be in the “top-paid group” of employees for any year if such employee is in the group consisting of the top 20 percent of the active employees of all of the Employers and Related Companies when ranked on the basis of Compensation paid during such year. A former employee (that is, any employee who separated from service or was deemed to have separated prior to the year in question and who performs no services for the Employer and Related Companies during the year) shall be “Highly Compensated” if he was a Highly Compensated active employee for either the separation year or any Plan Year ending on or after his 55th birthday.

8.11 Catch-Up Contributions . In no event shall Catch-Up Contributions for any Plan Year exceed the limits permitted under section 414(v) of the Code. Catch-Up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of sections 402(g) and 415 of the Code. Notwithstanding any other provision of the Plan to the contrary, the Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416 or the Code, as applicable, by reason of the making of such Catch-Up Contributions.

SECTION 9

Vesting and Termination Dates

9.1 Determination of Vested Interest . A Participant shall at all times be fully vested and have a nonforfeitable interest in all of his Accounts.

9.2 Termination Date . A Participant’s “Termination Date” shall be the date on which his employment with the Employers and the Related Companies terminates for any reason. A Participant shall be entitled to commence distribution upon his severance from employment, subject to other provisions of the Plan governing distributions, other than provisions which require a separation from service before such amounts may be distributed. In any event, in the case of an employee or Participant who ceases to perform duties for the Employers and Related Companies on account of layoff, leave of absence or Disability (as defined below), his Termination Date with respect to his vested Company Profit Sharing Contributions Account, the amount of which shall be determined as of June 30, 1994 (but not greater than the amount of such account as of such Termination Date), shall be the earlier of the date on which the employee’s or Participant’s employment with the Employers and Related Companies terminates or the first anniversary of the date on which the employee or Participant ceases to perform services for the Employers and Related Companies. For purposes of this subsection 9.2, a Participant shall be considered to have a “Disability” if he is unable to perform the job for which he was hired by his Employer or Related Company.

SECTION 10

Loans and Withdrawals of Contributions While Employed

10.1 Withdrawals During Employment . Subject to such rules as the Committee may adopt with respect to the number, timing and amount of withdrawals, a Participant whose Termination Date has not yet occurred may elect to withdraw all or part of his interest in the investment funds (other than the Loan Fund), as provided and in the order set forth below:

(a)

up to 100 percent of the Participant’s After-Tax Contributions Account;

(b)

up to 100 percent of the Participant’s Rollover Contributions Account;

(c)

up to 100 percent of the Participant’s Company Match Contributions Account but only if the withdrawal is after the Participant’s attainment of age 59-1/2 or is because of a Financial Hardship (as defined in subsection 10.2);

(d)

up to 100 percent of the Participant’s Before-Tax Contributions Account but only if the withdrawal is after the Participant’s attainment of age 59-1/2, or up to 100 percent of the Participant’s Before-Tax Contributions and earnings credited thereon before January 1, 1989 but only if the withdrawal is because of a Financial Hardship; and

(e)

up to 100 percent of the Participant’s Company Profit Sharing Contributions Account but only if the withdrawal is after the Participant’s attainment of age 59-1/2 or is because of a Financial Hardship.

Each withdrawal shall be made in cash as soon as administratively possible after the relevant Accounting Date.

10.2 Financial Hardship . A withdrawal will not be considered to be made on account of “Financial Hardship” unless the following requirements are met:

(a)

The withdrawal is requested because of an immediate and heavy financial need of the Participant, and will be so deemed if the Participant represents that the withdrawal is made on account of:

(i)

expenses incurred for or necessary to obtain medical care (described in section 213(d) of the Code without regard to whether the expenses exceed 7.5% of adjusted gross income) of the Participant, the Participant’s spouse, any dependents of the Participant (as defined in section 152 of the Code) or a non-custodial child of the Participant;

(ii)

costs directly related to the purchase (excluding mortgage payments) of a principal residence of the Participant;

(iii)

payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant, or his spouse, children or

dependents (as defined in section 152 of the Code and, for taxable years beginning on or after January 1, 2005, without regard to section 152(d)(1)(B) of the Code);

(iv)

payments necessary the need to prevent (1) the eviction of the Participant from his principal residence or (2) the foreclosure on the mortgage of that residence;

(v)

payments for burial or funeral expenses of the Participant’s deceased parent, spouse, children or dependents (as defined in section 152 of the Code and, for taxable years beginning on or after January 1, 2005, without regard to section 152(d)(1)(B) of the Code);

(vi)

expenses for the repair of damage to the Participant’s principal residence that qualify for the casualty loss deduction under section 165 of the Code (without regard to whether the loss exceeds 10 percent of adjusted gross income); or

(vii)

any other distribution which is deemed by the Commissioner of Internal Revenue to be made on account of immediate and heavy financial need as provided in Treasury Regulations.

(b)

The withdrawal must also be necessary to satisfy the heavy and financial need of the Participant. It will be considered necessary only to the extent that the Committee determines that the amount of the withdrawal does not exceed the amount required to relieve the financial need (taking into account any applicable income or penalty taxes resulting from the withdrawal) and if the need cannot be satisfied from other resources that are reasonably available to the Participant (and the Employer does not have any knowledge to the contrary). In making this determination, the Committee may reasonably rely on the Participant’s written representation that the need cannot be relieved in whole or in part by any of the following (to the extent such actions themselves would have the effect of increasing the amount of the need):

(i)

reimbursement or compensation by insurance or otherwise;

(ii)

liquidation of the Participant’s assets; or

(iii)

cessation of Before Tax Contributions and/or After-Tax Contributions to the Plan;

(iv)

other currently available distributions and nontaxable (at the time of the loan) loans under the Plan and any other plans (qualified and nonqualified) maintained by the Employers or Related Companies or any other employer; or

(v)

borrowing from commercial sources on reasonable commercial terms in an amount sufficient to satisfy the need.

(c)

The withdrawal must be made pursuant to a written request to the Committee, which request shall include any representation required by this subsection and adequate proof thereof, as determined by the Committee in its sole discretion.

10.3 Loans . Each Participant who is an employee or who otherwise is required to be given the opportunity to borrow under applicable regulations may request a loan from that Participant’s Account, and the Committee in its sole discretion may direct the Trustee to make a cash loan to such Participant. The terms of such loan shall be determined in the sole discretion of the Committee, subject to the following conditions:

(a)

No loan shall be made to a Participant if, immediately after such loan, the sum of the outstanding balances (including principal and interest) of all loans made to him under this Plan and under any other qualified retirement plans made by Employers or Related Companies would exceed $50,000, reduced by the excess, if any, of:

(i)

the highest outstanding balance of all loans to the Participant from the plans during the one-year period ending on the day immediately before the date on which the loan is made; over

(ii)

the outstanding balance of loans from the plans to the Participant on the date on which such loan is made;

and no loan shall be made to a Participant if the aggregate amount of that loan and the outstanding balance of any other loans to the Participant would exceed one-half of the total vested balance of the Participant’s Account balances under the Plan as of the date the loan is made.

(b)

Each loan shall be evidenced by a legally enforceable agreement specifying the amount and date of the loan and providing for:

(i)

a reasonable repayment period of not more than 5 years from the date of the loan (or such longer period permitted by the Committee in the case of a loan which is used to acquire a dwelling which, within a reasonable period of time, will be used as the Participant’s principal residence (as defined in section 121 of the Code)); provided, however, that the term of any loan which is being used to refinance a then existing loan under the Plan shall not exceed the maximum permitted term of the loan that is being refinanced;

(ii)

a reasonable rate of interest, as determined from time to time by the Committee;

(iii)

substantially equal payments of principal and interest over the term of the loan no less frequently than quarterly on a basis that would permit such loan to be amortized over its term; and

(v)

such other terms and conditions as the Committee shall determine.

(c)

Any loans shall be charged against the Participant’s Account and subaccounts in the order prescribed by the Committee.

(d)

A Participant shall not be permitted to have more than one loan from the Plan outstanding at any time; provided, however, that a Participant may have two loans outstanding at a time if such second loan is used to refinance a then existing loan under the Plan.

(e)

The minimum amount of any loan shall be $1,000.

(f)

A prepayment of the entire outstanding principal and interest may be made without penalty. The Committee may require that loan payments be made by payroll deductions. During any period when payroll deduction is not possible or is not permitted under applicable law, repayment may be made by a direct debit from a Participant’s savings or checking account. Notwithstanding the foregoing, a Participant’s repayment obligation may be suspended for any period he is laid off or on an approved leave of absence, up to a maximum of twelve months.

(g)

Any loan to a Participant shall become immediately due and payable as of the last day of the calendar quarter following the calendar quarter in which any required installment was due and remains unpaid or, if earlier, upon the Participant’s Termination Date. Notwithstanding any other provision of the Plan to the contrary, if the outstanding balance of principal and interest on any loan is not paid by the last day of the calendar quarter following the calendar quarter following the date on which the loan term expires or upon acceleration in accordance with the foregoing provisions of this paragraph (g), a default shall occur and the Trustee shall apply all or a portion of the Participant’s vested interest in the Plan in satisfaction of such outstanding obligation, but only to the extent such vested interest (or portion thereof) is then distributable under applicable provisions of the code and under the terms of the Plan. If necessary to satisfy the entire outstanding obligation, such application of the Participant’s vested interest may be executed in a series of actions as amounts credited to the Participant’s account become distributable. The provisions of this paragraph shall be applied in accordance with applicable state and federal law.

(h)

Appropriate disclosure shall be made pursuant to the Truth in Lending Act to the extent applicable.

(i)

Amounts of principal and interest received on a loan shall be credited to such Participant’s Account and the outstanding loan balance shall be considered an investment of the assets of such Account. Payment of principal and interest shall be credited to the subaccount in the Participant’s Account from which the loan originated unless the Committee adopts a rule to the contrary.

(j)

A loan application fee and annual loan administrative fees shall be established by the Committee.

(k)

The Committee shall establish uniform procedures for applying for a loan, evaluating loan applications and setting reasonable rates of interest, which shall be communicated to Participants in writing.

(l)

If distribution is to be made to a Beneficiary in accordance with subsection 11.2, any outstanding promissory note of the Participant shall be canceled and the unpaid balance of the loan, together with any accrued interest thereon, shall be treated as a distribution to or on behalf of the Participant immediately prior to commencement of distribution to the Beneficiary.

The Committee shall administer the Plan loan program in accordance with section 72(p) of the Code and application Treasury Regulations issued thereunder.

SECTION 11

Distributions

11.1 Distributions to Participants After Termination of Employment . If a Termination Date occurs with respect to a Participant (for a reason other than his death), the vested portions of his Account shall be distributed in accordance with the following provisions of this subsection, subject to the rules of subsection 11.3:

(a)

If the value of the vested portion of the Participant’s Account does not exceed $1,000, determined as of the Accounting Date coincident with or next preceding his Termination Date, such vested portion (other than any loan balance distributable in accordance with subsection 10.3) shall be distributed to the Participant as soon as practicable after his Termination Date, in a lump sum payment.

(b)

If the value of the vested portion of the Participant’s Accounts exceeds $1,000, determined as of the Accounting Date coincident with or next preceding his Termination Date, such vested portion (other than any outstanding loan balance distributable in accordance with subsection 10.3) shall be distributed (or shall begin to be distributed) to the Participant on (or as soon as practicable after) the Distribution Date (as defined in paragraph (c) next below) he elects by one of the following methods chosen by the Participant:

(i)

by payment in a lump sum, or

(ii)

by payment in a series of substantially equal annual or more frequent installments for a period not exceeding 15 years ;

provided, however, a Participant may elect a partial distribution of his Accounts at his Termination Date and defer the balance until a later Distribution Date.

(c)

The term “Distribution Date” shall mean the Accounting Date as of which a payment in any form is made pursuant to this Section 10, which date shall be no later than the Accounting Date next following the date of the Participant’s death.

(d)

Distribution may be made before 30 days after the date on which the notice required under Treas. Reg. § 1.411(a)-11(c) is given if the Committee clearly informs the Participant of his right to consider whether to elect the distribution for a period of at least 30 days after receiving the notice and the Participant, after receiving the notice, affirmatively elects the distribution.

(e)

If a Participant terminates employment but is reemployed by an Employer or a Related Company before a distribution has been made to the Participant under this subsection, the distribution of the Participant’s Account shall not be made and the Participant’s Account shall continue to be held in the Trust Fund until the Participant again has a Termination Date.

11.2 Distributions to Beneficiaries . Subject to subsection 11.4, if a Participant dies before the vested portion of his Account has been distributed, such balance (less any outstanding loan balance distributable in accordance with subsection 10.3) shall be distributed as soon as practicable after the Accounting Date coincident with or next following the Participant’s death, to his Beneficiary (as defined in subsection 11.4) in a lump sum payment.

11.3 Limits on Commencement and Duration of Distributions . The following distribution rules shall be applied in accordance with sections 401(a)(9) and 401(a)(14) of the Code and applicable regulations thereunder, including the minimum distribution incidental benefit requirement of Treas. Reg. § 1.401(a)(9)-2, and shall supersede any other provision of the Plan to the contrary:

(a)

Unless a Participant elects otherwise, in no event shall distribution commence later than 60 days after the close of the Plan Year in which the latest of the following events occurs: the Participant’s attainment of age 65; the 10th anniversary of the date on which the Participant began participating in the Plan; or the Participant’s Termination Date.

(b)

The Participant’s vested Account shall be distributed in a lump sum payment no later than his “Required Beginning Date”, that is, April 1 of the calendar year following the later of (i) the calendar year in which the Participant’s Termination Date occurs, or (ii) the calendar year in which he attains age 70-1/2; provided, however, that clause (i) shall not apply to any Participant who is a 5 percent owner of an Employer or a Related Company (as defined in section 416 of the Code).

(c)

If a Participant dies before distribution of his vested interest in the Plan has been made, distribution of such vested interest to his Beneficiary shall be made by December 31 of the calendar year in which the fifth anniversary of the Participant’s death occurs.

(d)

For periods on and after January 1, 2003, minimum required distributions under the Plan shall be governed by Supplement B to this Plan.

11.4 Beneficiary Designations . The term “Beneficiary” shall mean the Participant’s surviving spouse. However, if the Participant is not married, or if the Participant is married and (i) his spouse consents to the designation of a person other than the spouse, (ii) he is legally separated or he has been abandoned (within the meaning of local law) and he has a court order to such effect, or (iii) it is established to the satisfaction of the Committee that the spouse cannot be located, the term “Beneficiary” shall mean such person or persons as the Participant designates to receive the vested portion of his Account upon his death. Such designation may be made, revoked or changed (without the consent of any previously-designated Beneficiary except his spouse) only by an instrument signed by the Participant and received by the Committee prior to his death. A spouse’s consent to the designation of a Beneficiary other than the spouse shall be in writing, shall acknowledge the effect of such designation, shall be witnessed by a notary public and shall be effective only with respect to such consenting spouse. In default of such designation, or at any time when there is no surviving spouse and no existing Beneficiary

designated by the Participant, his Beneficiary shall be the legal representative of his estate. For purposes of the Plan, “spouse” means the person to whom the Participant is legally married at the relevant time.

11.5 Facility of Payment . Notwithstanding the provisions of subsections 11.1 and 11.2, if, in the Committee’s opinion, a Participant or Beneficiary is under a legal disability or is in any way incapacitated so as to be unable to manage his financial affairs, the Committee may direct the Trustee to make payment to a relative or friend of such person for his benefit until claim is made by a conservator or other person legally charged with the care of his person or his estate. Thereafter, any benefits under the Plan to which such Participant or Beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of his person or his estate.

11.6 Interests Not Transferable . The interests of Participants and other persons entitled to benefits under the Plan are not subject to the claims of their creditors and may not be voluntarily or involuntarily assigned, alienated or encumbered, except (i) in the case of qualified domestic relations orders that relate to the provision of child support, alimony or marital rights of a spouse, child or other dependent and which meet such other requirements as may be imposed by section 414(p) of the Code or regulations issued thereunder, (ii) pursuant to a judgment or settlement order issued after August 5, 1997 (against a Participant convicted of a crime involving the misuse of Plan funds or a civil judgment for breach of fiduciary duty) meeting the requirements of section 401(a)(13)(C) of the Code, (ii) in the case of a tax lien obtained by the Internal Revenue Service, or (iv) in the case of a voluntary revocable assignment to an Employer provided that such assignments do not in the aggregate exceed 10 percent of any benefit payment and further provided that such assignments are not made for the purpose of defraying administrative costs of the Plan. Notwithstanding any other provision of the Plan to the contrary, such domestic relations order may permit distribution of the entire portion of the vested Account balance of a Participant awarded to his alternate payee, in a lump sum payment as soon as practicable after the Committee determines that such order is qualified, without regard to whether the Participant would himself be entitled under the terms of the Plan to withdraw or receive a distribution of such vested amount at that time.

11.7 Form of Payment . All distributions under the Plan shall be made in cash unless the Participant elects to have the portion of his Accounts invested in the Company Stock Fund distributed in whole shares of Company Stock.

11.8 Absence of Guaranty . None of the Committee, the Trustee, or the Employers in any way guarantee the Trust Fund from loss or depreciation. The Employers do not guarantee any payment to any person. The liability of the Trustee to make any payment is limited to the available assets of the Trust Fund.

11.9 Missing Participants or Beneficiaries . Each Participant and each designated Beneficiary must file with the Committee from time to time in writing his post office address and each change of post office address. Any communication, statement or notice addressed to a Participant or designated Beneficiary at his last post office address filed with the Committee, or, in the case of a Participant, if no address is filed with the Committee, then at his last post office address as shown on the Employers’ records, will be binding on the Participant and his

designated Beneficiary for all purposes of the Plan. None of the Committee, the Employers nor the Trustee will be required to search for or locate a Participant or designated Beneficiary.

11.10 Optional Direct Transfer of Eligible Rollover Distribution . Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this subsection 11.10, a distributee may elect to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. For purposes of this subsection 11.10, the following definitions shall apply:

(a)

An “eligible rollover distribution” means any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee’s designated beneficiary, or for a specified period of ten years or more; and any distribution to the extent such distribution is required under section 401(a)(9) of the Code. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income; provided, however, that such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. A distribution which is made upon the hardship of the employee shall not constitute an eligible rollover distribution for purposes of the Plan.

(b)

An “eligible retirement plan” means an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code or a qualified trust described in section 401(a) of the Code, that accepts the distributee’s eligible rollover distribution; provided, however, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.

(c)

A “distributee” means an employee or former employee and the employee’s or former employee’s surviving spouse and the employee’s or former employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order as defined in section 414(p) of the Code.

A “direct rollover to an eligible retirement plan” means a payment by the Plan to the eligible retirement plan specified by the distributee.

SECTION 12

The Committee

12.1 Membership and Authority . The Retirement Committee referred to in subsection 1.3 shall consist of at least one member appointed by the Company. Except as otherwise specifically provided in this Section, in controlling and managing the operation and administration of the Plan, the Committee shall act by a majority of its then members, by meeting or by writing filed without meeting and any decision made by the Committee pursuant to this subsection (or any other provision of the Plan granting it such authority) shall be final. Notwithstanding any other provision of the Plan to the contrary, benefits under the Plan will be paid only if the Committee decides, in its discretion, that the applicant is entitled to such benefits.

12.2 Rights, Powers and Duties . The Committee shall have such authority as may be necessary to discharge its responsibilities under the Plan, including the following discretionary powers, rights and duties (in addition to those vested in it elsewhere in the Plan or Trust):

(a)

to adopt such rules of procedure and regulations as, in its opinion, may be necessary for the proper and efficient administration of the Plan and as are consistent with the provisions of the Plan;

(b)

to enforce the Plan in accordance with its terms and with such applicable rules and regulations as may be adopted by the Committee;

(c)

to conclusively determine all questions arising under the Plan, including the power to determine the eligibility of employees and the rights of Participants and other persons entitled to benefits under the Plan and their respective benefits, and to remedy any ambiguities, inconsistencies or omissions of whatever kind;

(d)

to maintain and keep adequate records concerning the Plan and concerning its proceedings and acts in such form and detail as the Committee may decide;

(e)

to direct all payments of benefits under the Plan;

(f)

to perform the functions of a “plan administrator” as defined in section 414(q) of the Code, for purposes of Section 6 and for purposes of establishing and implementing procedures to determine the qualified status of domestic relations orders (in accordance with requirements of section 414(p) of the Code) and to administer distribution sunder such qualified orders;

(g)

to employ agents, attorneys, accountants or other persons (who may also be employed by or represent the Employers) for such purposes as the Committee considers necessary or desirable to discharge its duties; and

(h)

to establish a claims procedure in accordance with section 503 of ERISA.

The certificate of a majority of the members of the Committee that the Committee has taken or authorized any action shall be conclusive in favor of any person relying on the certificate.

12.3 Allocation and Delegation of Committee Responsibilities and Powers . In exercising its authority to control and manage the operation and administration of the Plan, the Committee may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation and the acceptance thereof by the Committee member or delegate shall be in writing and may be revoked at any time. Any member or delegate exercising Committee responsibilities and powers under this subsection shall periodically report to the Committee on its exercise thereof and the discharge of such responsibilities.

12.4 Uniform Rules . In managing the Plan, the Committee shall uniformly apply rules and regulations adopted by it to all persons similarly situated.

12.5 Information to be Furnished to Committee . The Employers and Related Companies shall furnish the Committee such data and information as may be required for it to discharge its duties. The records of the Employers and Related Companies as to an employee’s or Participant’s period of employment, termination of employment and the reason therefor, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish to the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan.

12.6 Committee’s Decision Final . To the extent permitted by law, any interpretation of the Plan and any decision on any matter within the discretion of the Committee made by the Committee in good faith shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Committee shall make such adjustment on account thereof as it considers equitable and practicable. Notwithstanding any other provision of the Plan to the contrary, benefits under the Plan will be paid only if the Committee, in its discretion, determines that the applicant is entitled to them pursuant to the terms of the Plan.

12.7 Exercise of Committee’s Duties . Notwithstanding any other provisions of the Plan, the Committee shall discharge its duties hereunder solely in the interests of the Participants and other persons entitled to benefits under the Plan, and:

(a)

for the exclusive purpose of providing benefits to Participants and other persons entitled to benefits under the Plan; and

(b)

with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.

12.8 Remuneration and Expenses . No remuneration shall be paid from the Plan to any Committee member as such. However, the reasonable expenses (including the fees and expenses of persons employed by it in accordance with paragraph 12.2(g)) of a Committee member

incurred in the performance of a Committee function shall be paid from the Trust to the extent not paid by the Employers.

12.9 Indemnification of the Committee . The Committee and the individual members thereof shall be indemnified by the Employers against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members by reason of the performance of a Committee function if the Committee or such members did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises.

12.10 Resignation or Removal of Committee Member . A Committee member may resign at any time by giving ten days’ advance written notice to the Employers, the Trustee and the Chairman or Secretary of the Committee or the Company’s Board of Directors. The Company may remove a Committee member by giving advance written notice to him, the Trustee and the other Committee members.

12.11 Appointment of Successor Committee Members . The Company’s Board of Directors may fill any vacancy in the membership of the Committee and shall give prompt written notice thereof to the other Committee members, the other Employers and the Trustee. While there is a vacancy in the membership of the Committee, the remaining Committee members shall have the same powers as the full Committee until the vacancy is filled.

SECTION 13

Amendment and Termination

13.1 Amendment . While the Company expects to continue the Plan, it necessarily reserves the right, subject to the provisions of the Trust Agreement, to amend the Plan from time to time, except that no amendment will reduce a Participant’s interest in the Plan to less than an amount equal to the amount he would have been entitled to receive if he had resigned from the employ of the Employers and the Related Companies on the day of the amendment.

13.2 Termination . The Plan will terminate as to all of the Employers on any day specified by the Company if advance written notice of the termination is given to the other Employers. Employees of any Employer shall cease active participation in the Plan (and, to the extent applicable, will be treated as inactive Participants in accordance with subsection 2.2) on the first to occur of the following:

(a)

the date on which that Employer, by appropriate action communicated in writing to the Company, ceases to be a contributing Employer to the Plan;

(b)

the date that Employer is judicially declared bankrupt or insolvent; or

(c)

the dissolution, merger, consolidation or reorganization of that Employer, or the sale by that Employer of all or substantially all of its assets, except that, subject to the provisions of subsection 13.3, with the consent of the Company, in any such event, arrangements may be made whereby the Plan will be continued by any successor to that Employer or any purchaser of all or substantially all of that Employer’s assets, in which case the successor or purchaser will be substituted for the Employer under the Plan.

13.3 Merger and Consolidation of the Plan, Transfer of Plan Assets . In the case of any merger or consolidation with, or transfer of assets and liabilities to, any other plan, provision shall be made so that each affected Participant in the Plan on the date thereof (if the Plan, as applied to that Participant, then terminated) would receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer if the Plan, as applied to him, had then terminated.

13.4 Distribution on Termination and Partial Termination . Upon termination or partial termination of the Plan, all benefits under the Plan shall continue to be paid in accordance with Section 11 as such section may be amended from time to time.

SUPPLEMENT A

THE ETHAN ALLEN RETIREMENT SAVINGS PLAN

(Top-Heavy)

Application

A-1. This Supplement A to The Ethan Allen Retirement Savings Plan (the “Plan”) shall be applicable on and after the date on which the Plan becomes Top-Heavy (as described in subsection A-4).

Definitions

A-2. Unless the context clearly implies or indicates the contrary, a word, term or phrase used or defined in the Plan is similarly used or defined for purposes of this Supplement A.

Affected Participant

A-3. For purposes of this Supplement A, the term “Affected Participant” means each Participant who is employed by an Employer or a Related Company during any Plan Year for which the Plan is Top-Heavy; provided, however, that the term “Affected Participant” shall not include any Participant who is covered by a collective bargaining agreement if retirement benefits were the subject of good faith bargaining between his Employer and his collective bargaining representative.

Top-Heavy

A-4. The Plan shall be “Top-Heavy” for any Plan Year if, as of the Determination Date for that year (as described in paragraph (a) next below), the present value of the benefits attributable to Key Employees (as defined in subsection A-5) under all Aggregation Plans (as defined in subsection A-8) exceeds 60 percent of the present value of all benefits under such plans. The foregoing determination shall be made in accordance with the provisions of section 416 of the Code. Subject to the preceding sentence:

(a)

The Determination Date with respect to any plan for purposes of determining Top-Heavy status for any plan year of that plan shall be the last day of the preceding plan year or, in the case of the first plan year of that plan, the last day of that year. The present value of benefits as of any Determination Date shall be determined as of the accounting date or valuation date coincident with or next preceding the Determination Date. If the plan years of all Aggregation Plans do not coincide, the Top-Heavy status of the Plan on any Determination Date shall be determined by aggregating the present value of Plan benefits on that date with the present value of the benefits under each other Aggregation Plan determined as of the Determination Date of such other Aggregation Plan which occurs in the same calendar year as the Plan’s Determination Date.

A-1

(b)

Benefits under any plan as of any Determination Date shall include the amount of any distributions from that plan made during the plan year which includes the Determination Date (including distributions under a terminated plan which, if it had not been terminated, would have been required to be included in an aggregation group) or during any of the preceding four plan years, but shall not include any amounts attributable to employee contributions which are deductible under section 219 of the Code, any amounts attributable to employee-initiated rollovers or transfers made after December 31, 1983 from a plan maintained by an unrelated employer, or, in the case of a defined contribution plan, any amounts attributable to contributions made after the Determination Date unless such contributions are required by section 412 of the Code or are made for the plan’s first plan year.

(c)

Benefits attributable to a participant shall include benefits paid or payable to a beneficiary of the participant, but shall not include benefits paid or payable to any participant who has not performed services for an Employer or Related Company during any of the five plan years ending on the applicable Determination Date; provided, however, that if a participant performs no services for five years and then performs services, the benefits attributable to such participant shall be included.

(d)

The accrued benefit of any participant who is a Non-Key Employee with respect to a plan but who was a Key Employee with respect to such plan for any prior plan year shall not be taken into account.

(e)

The accrued benefit of a Non-Key Employee shall be determined under the method which is used for accrual purposes for all plans of the Employer and Related Companies; or, if there is not such a method, as if the benefit accrued not more rapidly than the slowest accrual rate permitted under section 411(b)(1)(c) of the Code.

(f)

The present value of benefits under all defined benefit plans shall be determined on the basis of a 5 percent per annum interest factor and the 1971 Group Annuity Mortality Table.

Key Employee

A-5. The term “Key Employee” shall mean any Employee or deceased Employee (including any beneficiary of such Employee) who is a Key Employee within the meaning ascribed to that term

A-2

by section 416(i) of the Code. Subject to the preceding sentence, the term Key Employee includes any employee or deceased employee (or beneficiary of such deceased employee) who at any time during the plan year which includes the Determination Date or during the preceding plan years was:

(a)

an officer of any Employer or Related Company with Compensation (as defined in subsection A-6) in excess of 50 percent of the amount in effect under section 415(b)(1)(A) of the Code for the calendar year in which that year ends; provided, however, that the maximum number of employees who shall be considered Key Employees under this paragraph (a) shall be the lesser of 50 or 10 percent of the total number of employees of the Employers and Related Companies disregarding excludable employees under section 414(q)(8) of the Code;

(b)

one of the 10 employees owning the largest interests in any Employer or any Related Company (disregarding any ownership interest which is less than 1/2 of one percent), excluding any employee for any plan year whose compensation did not exceed the applicable amount in effect under section 415(c)(1)(A) of the Code for the calendar year in which that year ends;

(c)

a 5 percent owner of any Employer or of any Related Company; or

(d)

a 1 percent owner of any Employer or any Related Company having Compensation in excess of $150,000.

Compensation

A-6. The term “Compensation” for purposes of this Supplement A generally means, for any year, compensation within the meaning of section 415(c)(3) of the Code for that year, not exceeding $150,000 or such other amount as may be permitted for any year under section 401(a)(17) of the Code; provided, however, that solely for purposes of determining who is a Key Employee, the term “Compensation” means compensation as defined in section 414(q)(7) of the Code.

Non-Key Employee

A-7. The term “Non-Key Employee” means any employee (or beneficiary of a deceased employee) who is not a Key Employee.

Aggregation Plan

A-8. The term “Aggregation Plan” means the Plan and each other retirement plan (including any terminated plan) maintained by an Employer or Related Company which is qualified under section 401(a) of the Code and which:

A-3

(e)

during the plan year which includes the applicable Determination Date, or during any of the preceding four plan years, includes a Key Employee as a participant;

(f)

during the plan year which includes the applicable Determination Date or, during any of the preceding four plan years, enables the Plan or any plan in which a Key Employee participates to meet the requirements of section 401(a)(4) or 410 of the Code; or

(g)

at the election of the Employer, would meet the requirements of sections 401(a)(4) and 410 if it were considered together with the Plan and all other plans described in paragraphs (a) and (b) next above.

Required Aggregation Plan

A-9. The term “Required Aggregation Plan” means a plan described in either paragraph (a) or (b) of subsection A-8.

Permissive Aggregation Plan

A-10. The term “Permissive Aggregation Plan” Aggregation means a plan described in paragraph (c) of subsection A-8.

Minimum Contribution

A-11. For any Plan Year during which the Plan is Top-Heavy, the minimum amount of Employer contributions and forfeitures allocated to the Account of each Affected Participant who is employed by an Employer or Related Company on the last day of that year (whether or not he has completed 1,000 Hours of Service during that year) who is a Non-Key Employee and who is not entitled to a minimum benefit for that year under any defined benefit Aggregation Plan which is top-heavy, nor is entitled to a minimum benefit for that year under any other defined contribution Aggregation Plan maintained by the Employer, shall, when expressed as a percentage of the Affected Participant’s Compensation, be equal to the lesser of:

(h)

3 percent; or

(i)

the percentage at which Employer contributions (including Employer contributions made pursuant to a cash or deferred arrangement) and Forfeitures are allocated to the Accounts of the Key Employees for whom such percentage is greatest.

For purposes of the preceding sentence, compensation earned while a member of a group of employees to which the Plan has not been extended shall be disregarded. Paragraph (b) next above shall not be applicable for any Plan Year if the Plan enables a defined benefit plan described in paragraph A-8(a) or A-8(b) to meet the requirements of section 401(a)(4) or 410 of the Code for that year.

A-4

Employer contributions for any Plan Year during which the Plan is Top-Heavy shall be allocated first to Non-Key Employees until the requirements of this subsection A-11 have been met and, to the extent necessary to comply with the provisions of this subsection A-11, additional contributions shall be required of the Employers.

Special Rules

A-12. This subsection shall apply for purposes of determining whether the Plan is a top-heavy plan under section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of section 416(c) of the Code for such years. To the extent applicable, this subsection supersedes the foregoing provisions of this Supplement A.

(a)

A “Key Employee” means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employers and Related Companies having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the Employers and Related Companies, or a 1-percent owner of the Employer and Related Companies having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

(b)

The following provisions shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the Determination Date.

(i)

The present values of accrued benefits and the amounts of account balances of an employee as of the Determination Date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated

A-5

with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death or disability, this provision shall be applied by substituting “5-year period” for “1-year period”.

(ii)

Accrued benefits and accounts of any individual who has not performed services for the Employers and Related Companies during the 1-year period ending on the Determination Date shall not be taken into account.

(c)

Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another Plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of section 401(m) of the Code.

A-6

SUPPLEMENT B

THE ETHAN ALLEN RETIREMENT SAVINGS PLAN

(Required Minimum Distributions After 2002)

Application and

B-1. This Supplement B to The Ethan Allen Retirement Savings

Effective Date

Plan (the “Plan”) shall apply with respect to required minimum distributions for calendar years beginning with the 2003 calendar year.

Definitions

B-2. Unless the context clearly implies or indicates the contrary, a word, term or phrase used or defined in the Plan is similarly used or defined for purposes of this Supplement B.

General Rules

B-3. The following shall apply with respect to this Supplement B:

(a)

Precedence . The requirements of this Supplement B will take precedence over any inconsistent provisions of the Plan.

(b)

Requirements of Treasury Regulations Incorporated . All distributions required under this Supplement B will be determined and made in accordance with the Treasury regulations under section 401(a)(9) of the Code.

(c)

TEFRA Section 242(b)(2) Elections . Notwithstanding the other provisions of this Supplement B, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (“TEFRA”) and the provisions of the Plan that relate to section 242(b)(2) of TEFRA.

Time and Manner of

B-4. The following provisions of this Supplement B shall apply

Distribution

with respect to the time and manner of distributions:

(a)

Required Beginning Date . The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.

(b)

Death of Participant Before Distributions Begin . If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(i)

If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, then

B-1

distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained the age of 70 ½, if later.

(ii)

If the Participant’s surviving spouse is not the Participant’s sole designated beneficiary, then distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

(iii)

If there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(iv)

If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this subsection B-4, other than paragraph B-4(b)(i), will apply as if the surviving spouse were the Participant.

For purposes of this subsection B-4 and subsection B-6, unless paragraph B-4(b)(iv) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If paragraph B-4(b)(iv) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse under paragraph B-4(b)(i).

(c)

Forms of Distribution . Unless the Participant’s interest is distributed in a single lump sum on or before the Required Beginning Date, as of the first distribution calendar year distributions will be made in accordance with subsections B-5 and B-6 of this Supplement B.

Required Minimum

B-5. The following rules shall apply under this Supplement B

Distributions During

with respect to required minimum distributions during a

Participant’s Lifetime

Participant’s lifetime:

B-2

(a)

Amount of Required Minimum Distribution for Each Distribution Calendar Year . During the Participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(i)

the quotient obtained by dividing the Participant’s Account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s age as of the Participant’s birthday in the distribution calendar year; or

(ii)

if the Participant’s sole designated beneficiary for the distribution calendar year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the distribution calendar year.

(b)

Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death . Required minimum distributions will be determined under this subsection B-5 beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the Participant’s date of death.

Required Minimum

B-6. The following provisions shall apply with respect to

Distributions After

required minimum distributions after a Participant’s death:

Participant’s Death

(a)

Death On or After Distributions Begin .

(i)

Participant Survived by designated beneficiary. If the Participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant’s designated beneficiary, determined as follows:

B-3

(1)

The Participant’s remaining life expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2)

If the Participant’s surviving spouse is the Participant’s sole designated beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(3)

If the Participant’s surviving spouse is not the Participant’s sole designated beneficiary, the designated beneficiary’s remaining life expectancy is calculated using the age of the beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

(ii)

No designated beneficiary. If the Participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining life expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(b)

Death Before Date Distributions Begin .

(i)

Participant Survived by designated beneficiary. If the Participant dies before the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each

B-4

distribution calendar year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the remaining life expectancy of the Participant’s designated beneficiary, determined as provided in subsection B-6.

(ii)

No designated beneficiary. If the Participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

(iii)

Death of Surviving Spouse Before Distributions to Surviving Spouse are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under paragraph B-4(b)(i) this paragraph B-6(b) will apply as if the surviving spouse were the Participant.

Special Rule

B-9. If the Participant dies before distributions begin and there is a designated beneficiary, distribution to the designated beneficiary is not required to begin by the date specified in subsection B-4 of this Supplement B, but the Participant's entire interest will be distributed to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the Participant's death. If the Participant's surviving spouse is the Participant's sole designated beneficiary and the surviving spouse dies after the Participant but before distributions to either the Participant or the surviving spouse begin, this election will apply as if the surviving spouse were the Participant.

Definitions

B-8.

Words and phrases defined in this subsection B-8 of

Supplement B to the Plan shall have that meaning when used in this Supplement B, unless the context clearly indicates otherwise.

(a)

DESIGNATED BENEFICIARY means the individual who is designated as the beneficiary under subsection 11.4 of the Plan and is the designated beneficiary under section

B-5

401(a)(9) of the Code and section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.

(b)

DISTRIBUTION CALENDAR YEAR means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 2.2. The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that distribution calendar year.

(c)

LIFE EXPECTANCY means life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury regulations.

(d)

PARTICIPANT’S ACCOUNT BALANCE means the account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (“Valuation Calendar Year”) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the Valuation Calendar Year after the valuation date and decreased by distributions made in the Valuation Calendar Year after the valuation date. The account balance for the Valuation Calendar Year includes any amounts rolled over or transferred to the Plan either in the Valuation Calendar Year or in the distribution calendar year if distributed or transferred in the Valuation Calendar Year.

B-6

APPENDIX A
Definitions
Defined Term	Section
401(k) Plan	1.1
Account	7.1
Accounting Date	1.5
Administrator	1.3
ACP Test	8.8
ADP Test	8.6
Affected Participant	A-3
After-Tax Contribution	4.2
After-Tax Contributions Account	7.1
Aggregation Plan	A-8
Annual Addition	8.3
Balance	7.1
Before-Tax Contribution	7.1
Before-Tax Contributions Account	7.1
Beneficiary	11.4
Distribution Date	11.1
Catch-Up Contributions	4.3
Code	1.1
Committee	1.3
Company	1.1
Company Match Contribution	5.2
Company Match Contributions Account	7.1
Company Profit Sharing Contribution	5.1
Company Profit Sharing Contributions Account	7.1
Company Stock	6.1
Compensation	8.2, A-6
Disability	7.3
Distribution Date	11.1
Effective Date	1.1
Eligible Compensation	4.6
Employers	1.2
Employer	1.2
Entry Date	2.1
ERISA	1.3
Fair Market Value	7.2
Financial Hardship	10.2
Highly Compensated	8.11
Inactive Participation	2.2
Investment Funds	6.1
Key Employee	A-5
Leased Employee	2.4
Loan Fund	6.1

Appendix A-1

Maternity or Paternity Absence	3.2
Named Fiduciaries	1.3
Non-Key Employee	A-7
One Year Break in Service	3.2
Participant	2.1
Party in Interest	10.3
Permissive Aggregation Plan	A-10
Plan	1.1
Plan Administrator	1.3
Plan Year	1.4
Profit Sharing Plan	1.1
Related Company	1.2
Required Aggregation Plan	A-9
Required Beginning Date	11.3
Rollover Contribution	4.5
Rollover Contributions Account	7.1
Section 415 Affiliate	8.2
Separation from Service	9.2
Service	3.1
Spouse	11.4
Top-paid Group	8.11
Termination Date	9.3
The Ethan Allen Retirement Savings Plan	1.1
Top-Heavy	A-4
Trustee	1.3

Appendix A-2

APPENDIX B

Employers

Ethan Allen Global, Inc.

Ethan Allen Retail, Inc.

Ethan Allen Operations, Inc.

Appendix B-1

TABLE OF CONTENTS

Page

SECTION 1

GENERAL

1.1

History, Purpose and Effective Date

1.2

Related Companies and Employers

1.3

Trust Agreements, Plan Administration

1.4

Plan Year

1.5

Accounting Dates

1.6

Applicable Laws

1.7

Gender and Number

1.8

Notices

1.9

Form and Time of Elections

1.10

Evidence

1.11

Action by Employers

1.12

No Reversion to Employers

1.13

Plan Supplements

1.14

Defined Terms

SECTION 2

PARTICIPATION IN PLAN

2.1

Eligibility for Participation

2.2

Inactive Participation

2.3

Plan Not Contract of Employment

2.4

Leased Employees

2.5

Compliance with Veterans’ Laws

SECTION 3

SERVICE

3.1

Service

3.2

One Year Break in Service

SECTION 4

BEFORE-TAX, AFTER-TAX AND ROLLOVER

CONTRIBUTIONS

4.1

Before-Tax Contributions

4.2

After-Tax Contributions

4.4

Payment of Before-Tax and After-Tax Contributions

4.5

Variation, Discontinuance and Resumption of Before-Tax, After-Tax, or

Catch-Up Contributions

-i-

TABLE OF CONTENTS

(continued)

Page


4.6	Rollover Contributions and Transferred Amounts	7
4.7	Eligible Compensation	8

SECTION 5

EMPLOYER CONTRIBUTIONS

5.1

Company Profit Sharing Contributions

5.2

Company Match Contributions

5.3

Limitations on Amount of Employer Contributions

5.4

Payment of Employer Contributions

SECTION 6

INVESTMENT ELECTIONS

6.1

Investment of Contributions

6.2

Investment Transfers

6.3

Investment Elections

6.4

Transfer of Assets

SECTION 7

PLAN ACCOUNTING

7.1

Participants’ Accounts

7.2

Adjustment of Accounts

7.3

Allocation and Crediting of Contributions

7.4

Statement of Accounts

SECTION 8

LIMITATIONS ON COMPENSATION, CONTRIBUTIONS AND

ALLOCATIONS

8.1

Reduction of Contribution Rates

8.2	Compensation for Limitation/Testing Purposes	15
8.3	Limitations on Annual Additions	15
8.4	Excess Annual Addition	16

8.5	Before-Tax Contributions Dollar Limitation	16
8.6	401(k)(3) Tests	17
8.7	Correction of Section 401(k) Excess	17
8.8	Limitation on Company Match and After-Tax Contributions	18
8.9	Correction of Section 401(m) Excess	18

8.11

Catch-Up Contributions

SECTION 9

VESTING AND TERMINATION DATES

9.1

Determination of Vested Interest

9.2

Termination Date

SECTION 10

LOANS AND WITHDRAWALS OF CONTRIBUTIONS WHILE

EMPLOYED

10.1

Withdrawals During Employment

10.2

Financial Hardship

10.3

Loans

SECTION 11

DISTRIBUTIONS

-ii-

TABLE OF CONTENTS

(continued)

Page

	11.1	Distribution to Participants After Termination of Employment	26
	11.2	Distributions to Beneficiaries	27

11.3

Limits on Commencement and Duration of Distributions

11.4

Beneficiary Designations

11.5

Facility of Payment

11.6

Interests Not Transferable

11.7

Form of Payment

11.8

Absence of Guaranty

	11.9	Missing Participants or Beneficiaries	28
	11.10	Optional Direct Transfer of Eligible Rollover Distribution	29

SECTION 12

The Committee

12.1

Membership and Authority

12.2

Rights, Powers and Duties

12.3

Allocation and Delegation of Committee Responsibilities and Powers

12.4

Uniform Rules

12.5

Information to be Furnished to Committee

12.6

Committee’s Decision Final

12.7

Exercise of Committee’s Duties

12.8

Remuneration and Expenses

12.9

Indemnification of the Committee

12.10

Resignation or Removal of Committee Member

12.11

Appointment of Successor Committee Members

SECTION 13

Amendment and Termination

13.1

Amendment

13.2

Termination

13.3

Merger and Consolidation of the Plan, Transfer of Plan Assets

13.4

Distribution on Termination and Partial Termination

-iii-

New Balance	Late Payment Fee
Under $100	$15
$100-$999.99	$29
$1000 or above	$35

OR	7a. ORGANIZATION’S NAME
	7b. INDIVIDUAL’S LAST NAME			FIRST NAME	MIDDLE NAME		SUFFIX

7c. MAILING ADDRESS				CITY	STATE	POSTAL CODE	COUNTRY

7d. SEE INSTRUCTIONS		ADD’L INFO RE ORGANIZATION DEBTOR	7e. TYPE OF ORGANIZATION	7f. JURISDICTION OF ORGANIZATION	7g. ORGANIZATIONAL ID #, if any
								[ ]NONE
8. AMENDMENT (COLLATERAL CHANGE): check only one box. Describe collateral [ ] deleted or [ ] added, or give entire [ ] restated collateral description, or describe collateral [ ] assigned.

OR	9a. ORGANIZATION’S NAME
	9b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX

10. OPTIONAL FILER REFERENCE DATA 11. OPTIONAL FILER REFERENCE DATA