Letter Agreement, dated March 10, 2020, by and between the Company and Derek P. Schmidt
Exhibit 10.1
March 10, 2020
Dear Derek:
I am very pleased to extend this offer for the position of Chief Financial Officer and Chief Operating Officer with Flexsteel Industries, Inc. located in Dubuque, IA.
This offer of employment is conditioned upon the satisfactory completion of certain requirements, as more fully explained in the following letter. The key components of our offer are described below.
BASE SALARY
As an exempt employee, your starting salary will be $420,000 per year. In this position you will be paid semi-monthly with pay dates being on the 15th and last day of each month.
ANNUAL INCENTIVE
You will participate in the Flexsteel Cash Incentive Plan. Annual cash awards under this Plan are based on the Company's success in meeting specific annual goals as approved by the Compensation Committee of the Board of Directors.
Your participation in this Plan will be set at 75% of your base salary at Target Company Performance or "Funding" (i.e., $315,000 per year). Maximum funding is 200% of Target, or $630,000 per year. Your participation in the fiscal year 2020 cash incentive plan (July 1, 2019 - June 30, 2020) will be prorated based on your start date and will be guaranteed at target.
LONG-TERM INCENTIVE
You will be eligible to participate in Flexsteel's Long Term Incentive Plan (LTIP). Your participation level in the LTIP will be 65% of base salary ($273,000) and paid in shares. The LTIP uses overlapping 3-Year performance cycles, and awards are based on the Company's success in meeting specific goals approved by the Compensation Committee of the Board for the performance period. You will be eligible to participate in the three-year performance period ending June 30, 2022 on a prorated basis based on your start date.
SIGN-ON BONUS
You will receive a sign-on bonus of $50,000, grossed up for tax purposes and payable during your first week of employment.
STOCK OPTIONS
In accordance with the 2013 Omnibus Stock Plan and stock ownership requirements, on your first day of employment you will receive the equivalent of $122,000 issued in the form of stock options with a 3-year vesting schedule. The options will be determined utilizing the black scholes calculation method.
RESTRICTED STOCK UNITS (RSU's)
In accordance with the 2013 Omnibus Stock Plan and stock ownership requirements, you will be awarded a number of RSU's equal to $334,000 based upon the average of the previous 10 trading days closing stock price to the grant date (your first date of employment). One half of the awarded RSU’s will vest on July 1, 2020 and the second half will vest on January 1, 2021.
BENEFITS
Flexsteel offers a comprehensive benefits package that includes, but is not limited to, health and welfare, retirement and time off benefits.
| · | Comprehensive Health and Welfare Benefits |
| o | Health Insurance: After a one month waiting period, this Company-sponsored plan provides medical, prescription, vision and dental coverage to office employees. This is an 80/20 plan with $500 single and $1,000 family deductibles. The employee cost per month is currently $98 single, $220 employee plus one, and $257 family, and is subject to annual review. |
| o | The company will reimburse you the cost of one-month COBRA cost to ensure continued coverage through the Flexsteel plan's eligibility period. |
| · | Company Sponsored 401(k) Plan |
| o | The plan also matches 100% of the first 5% of gross wages. Based on what you contribute, total potential employer contribution equals 5%. You will be 100% vested in all contributions made by yourself and by Flexsteel. |
| · | Short / Long Term Disability |
| · | Life Insurance = $150,000 |
| · | Four (4) weeks of vacation annually |
| · | Ten paid holidays annually (9 scheduled holidays + 1 floating holiday) |
RELOCATION
To aid in your full relocation to the Dubuque, IA area, you will be reimbursed reasonable and customary closing and realtor costs for the sale of your Bettendorf, IA home. In addition, Flexsteel will reimburse you a monthly amount equal to the lesser of your two mortgages for the shorter of the following: until your Bettendorf, IA home sells or for up to six months after your start date. Relocation benefits will be grossed up for tax purposes.
If you leave the company, for any reason, within 2 years of your original start date, all relocation benefits/expenses (prorated for length of service within the 2 years) will be immediately repayable to Flexsteel.
SEVERANCE
You will be eligible to participate in the Flexsteel Industries, Inc. Severance Plan for Management Employees. Per this plan, upon a qualifying termination from the company you will be eligible for:
| · | Payment equal to twelve months base salary plus an amount equal to the value of your annual cash incentive at target performance. |
| · | Payment equal to 12 months COBRA premium. |
In addition to your current benefit package, you will be eligible for:
| · | Supplemental Health Insurance: This is a supplemental policy for officers that will pay the deductible and out-of-pocket expenses not covered by the regular health insurance, subject to policy limitations and exclusions. |
| · | Tax Preparation & Filing: The Company will pay your annual income tax preparation and filing fees. |
| · | Furniture Purchase Program: As an officer, you are eligible to obtain Flexsteel furniture for personal use at no cost with the requirement that if/when you remove the furniture from your home, you return all proceeds from sale to the Company. |
| · | Country Club Membership: The company will pay annual members fees to a Dubuque area Country Club. |
Your employment will be at-will, meaning that you or Flexsteel Industries, Inc. may modify compensation and benefits, and may terminate the employment relationship at any time, with or without cause, and with or without notice.
You will be subject to all applicable employment and other policies of Flexsteel Industries, Inc, as outlined in the company handbook and elsewhere; and agree to devote your full business time, attention and best efforts to the performance of your duties and to the furtherance of Flexsteel's interest during your employment.
This offer is contingent upon the following:
| (a) | Successful completion of a pre-employment drug screen |
| (b) | Satisfactory completion of a background check |
| (c) | Verification of your right to work in the United States, as demonstrated by your completion of the I-9 form upon hire and your submission of acceptable documentation (as noted on the I-9) for verifying your identity and work authorization within three days of starting employment. |
| (d) | Successful completion of the Confidentiality and Non-Competition Agreement |
By accepting this offer, you confirm that you are able to accept this job and carry out the work that it will involve without breaching any legal restrictions on your activities, such as restrictions imposed by a current or former employers. You also confirm that you will inform Flexsteel about any such restrictions and provide as much information about them as possible, including any agreements between you and your current or former employer describing such restrictions on your activities.
We are eager to have you join our team upon acceptance of this letter. To confirm your acceptance of this offer, please sign and return this letter to me by Thursday, March 12, 2019.
Sincerely,
/s/ Stacy Kammes
Stacy Kammes
VP - Human Resources
Agreed to and accepted by:
/s/ Derek Schmidt3/10/2020
Date:
Derek Schmidt
