Exhibit 10.1
	 	 


 


June 29, 2012


 


 


Ms. Karel Czanderna


28595 E. River Road


Perrysburg, OH 43551


 


RE:   Employment with Flexsteel
Industries, Inc.


 


Dear Karel:


 


The purpose of this letter is to outline the
employment terms that Flexsteel Industries, Inc. (hereafter “Flexsteel”) is offering to you. If you are in agreement
with these terms, I would request that you return one executed copy of this letter, which is being provided in duplicate, to me
in the enclosed self-addressed, stamped envelope. Please remember to date your signature. Additionally, please provide a copy of
the signature page to Mary Bottie electronically.


 


The terms under which you are being hired are
as follows:


 


	1.       Title	
        President and Chief Executive Officer

         

	2.       Start Date	
        July 1, 2012, 12:01 a.m.

         

	3.       Term	
        You will be in employment “At Will”,
        so there is no specific term for employment. However, if Flexsteel terminates employment, there is a severance provision as addressed
        later in this letter.

         

	4.       Job Duties	
        See Exhibit “A” attached.

         

	5.       Standard of Care	
        Ÿ   Devote
        your full time and best efforts;

        Ÿ   Exercise
        the highest degree of loyalty and care; and

        Ÿ   Do
        nothing to harm the business or reputation of Flexsteel.

         

        You may participate in civic, industry or charitable
        activities and manage your personal investments, provided that such activities do not interfere with your duties to Flexsteel,
        as limited herein.

         

	6.       Location	
        You are expected to work at the principal office
        location of Flexsteel in Dubuque, Iowa.

         



 


 


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Ms. Karel Czanderna


June 29, 2012


 


 


	7.       Base Salary	
        An annual base salary of $600,000 paid over
        the standard payroll cycle, to be reviewed by the Compensation Committee of the Board of Directors on an annual basis. Base salary
        will not be reduced without agreement.

         

	
        8.      
        Annual Incentive

                (Bonus)
	
        You will be eligible to participate in the
        annual executive incentive compensation program which is established annually by the Compensation Committee of the Board of Directors.
        The incentive plan sets targets for the President and CEO. The annual incentive target award percentage for you is 100% of base
        salary for fiscal year 2013. This annual performance incentive is guaranteed to you for fiscal year 2013. Additionally, if Flexsteel
        exceeds the established targets for fiscal year 2013 such that the annual incentive compensation would be greater than 100% of
        base salary, you will be eligible for the increase compensation.

         

	
        9.      
        One Year Equity Incentive Plan

         
	
        As an inducement for your hiring, Flexsteel
        has established a one-year equity and cash incentive plan for the performance period 7/1/12 through 6/30/13. This plan is structured
        in a fashion similar to the long-term incentive plan (LTIP) described below under Long-Term Incentives, but is structured for only
        a one year period. The provisions of this one year incentive will be provided to you separately.

         

	10.    Long-Term Incentives	
        You will be entitled to
        participate in the Company’s LTIP as a “New Hire” as provided in the LTIP for the performance period beginning
        7/1/11 and ending 6/30/14 on a prorated basis. The goals of the LTIP for this performance period for you are identical to all other
        employees participating in the LTIP. The provisions of the LTIP for this performance period will be provided to you separately.

         

        You will also be eligible to participate in
        the Company’s LTIP for the performance period beginning 7/1/12 and ending 6/30/15. The goals of the LTIP for this performance
        period for you are identical to all other employees participating in the LTIP. The specific provisions of the LTIP for this performance
        period will be provided to you separately.

         

	11.    Sign-On Equity Grant	
        A sign-on equity grant of 25,000 fully-vested
        stock options at an exercise price equal to the closing price on July 2, 2012. The options will have a term of ten years and be
        subject to the Company’s Stock Option Plan.

         



 


 


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Ms. Karel Czanderna


June 29, 2012


 


 


	12.    Sign-On Longevity Grant	
        As an inducement to your hiring, you will be
        granted 10,000 restricted stock units of Flexsteel on July 2, 2012 that will vest under the following schedule:

         

        a.   6,000 shares will vest
        on the third anniversary of your employment;

         

        b.   2,000 shares will vest
        on the fourth anniversary of your employment; and

         

        c.   2,000 shares will vest
        on the fifth anniversary of your employment.

         

        If you should leave by reason of death, disability,
        termination by Flexsteel for reasons other than Cause, or you resign for Good Reason, any shares which are not vested at the time
        of your departure will be deemed fully vested. No dividends will be paid prior to vesting.

         

	13.    Health and Welfare	
        The Company will provide you with health
        and welfare benefits, supplemental health care insurance and long term disability insurance as provided to all other executive
        officers.

        Health Insurance: This Company
        sponsored plan provides medical, prescription, vision and dental coverage to office employees. This is an 80/20 plan with $450
        single and $900 family deductibles. The employee cost per month is currently $60 single, $150 employee plus one and $165 family
        and is subject to annual review.

        Life Insurance: Exempt employees
        receive $50,000 life and accidental death and dismemberment coverage.

        Supplemental Health Insurance:
        This is a supplemental policy for officers that pays the deductible and out of pocket expenses not covered by the regular health
        insurance, subject to policy limitations and exclusions.

        Long-Term Disability Insurance:
        This benefit begins after you have been totally disabled for six (6) continuous months. The benefit is equal to fifty percent (50%)
        of your base pay.

 



	14.    Relocation	
        You are expected to move to the Dubuque Area
        and are entitled to receive the relocation benefits described herein to relocate her family to the Dubuque Area.

         

        A $25,000 payment will be paid to you on the
        first date of employment, which may be used to cover miscellaneous and incidental moving expenses. This payment will be grossed
        up for Federal (35%), State (6%) and Medicare (1.45%) Taxes.

         

         



 


 


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Ms. Karel Czanderna


June 29, 2012


 


 


	 	
        In addition to the $25,000.00 payment, Flexsteel
        will either pay or reimburse you the following:

         

        a.   Air fare for you and your
        spouse for up to two (2) round trips from Toledo, Ohio;

         

        b.   Reasonable and customary
        closing costs for a new home in the Dubuque area which typically includes loan cost, buyer closing costs, legal and other expenses
        associated with the acquisition of a new home. The total payment or reimbursement will not exceed three percent (3%) of the purchase
        price of the new home.

         

        c.   Pack, load and move, via van line, normal family
        household goods with full replacement insurance.

         

        d.   Storage of your household goods up to ninety
        (90) days.

         

        e.   Shipping of up to two (2) automobiles to Dubuque,
        Iowa from Toledo, Ohio.

         

        f.   Tax preparation for calendar year 2012 and,
        if Residence, as defined herein, sells in 2013, tax preparation for calendar year 2013.

         

        g.   You will receive temporary
        housing for 90 days. Housing will be paid for directly by the corporate office.

         

        Any amount paid or reimbursed to you under
        subparagraphs a through g above will be grossed up (as defined above for the $25,000 payment) for tax purposes to the extent
        they are not eligible to be treated as moving expenses under Section 217 of the Internal Revenue Code of 1986.

         

	15.    Retirement Benefits	
        You are entitled to participate
        in the Company’s Employee Savings Plan (401k) on the same basis as other employees. Subject to length of service requirements
        (currently one year) and IRS limits and restrictions, the Company sponsored 401(k) plan provides a four percent (4%) pension contribution
        plus a matching contribution of one percent (1%) of the first four percent (4%) of employee contributions.

         



 


 


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Ms. Karel Czanderna


June 29, 2012


 


 


	
        16.   
        Purchase of Flexsteel Furniture

         
	
        You may purchase Flexsteel
        Furniture for your personal use at 50% of lowest available wholesale price, plus Iowa sales tax.

         

	17.    Severance	
        A severance payment equal
        to eighteen (18) months base salary and one and one-half (1 1⁄2) times the annual incentive bonus for the most recently completed
        fiscal year will be paid in a lump sum if Flexsteel terminates your employment for any reason or no reason during the first seven
        (7) years of your employment, other than a termination for Cause (as described below) or disability. Payment will be made within
        thirty (30) days of termination. If a severance payment is due, Flexsteel will also provide (i) reimbursement of full COBRA payments
        (employee and employer share) for 18 months and (ii) payment for a senior executive level outplacement program by an outplacement
        firm selected by you and reasonably approved by Flexsteel. “Cause” shall mean (i) willful misconduct, breach of fiduciary
        duty, breach of trust, intentional failure to perform your duties, fraud, embezzlement or other misappropriation by you of funds
        or property of Flexsteel or any of its affiliates; (ii) the commission of acts by you that constitute a felony or a crime of moral
        turpitude; (iii) the conviction (including plea of nolo contendere) of you or a crime involving any financial impropriety or that
        would interfere in any material respect with your ability to perform the services to be performed by you or that otherwise would
        be injurious in any material respect to Flexsteel or any of its affiliates or their reputation or brand; or (iv) the breach by
        you in any material respect of any of your material obligations under the agreement and, with respect to any breach that is curable
        in the judgment of Flexsteel, the continuation of that breach for 30 days after written notice by Flexsteel to you (such notice
        to specify the basis for such breach in reasonable detail. The payment of any severance is conditioned upon the execution of a
        mutually agreeable severance agreement which releases both parties from any and all claims against the other and will contain provisions,
        including but not limited to the following:

         

        a.   A mutual
        non-disparagement clause.

         

        b.   Confidentiality
        clause.

         

        c.   An
        eighteen month non-compete clause.

         

        d.   Eighteen
        months non-hire and non-solicitation clause.

         



 


 


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Ms. Karel Czanderna


June 29, 2012


 


 


	 	
        This severance provision
        shall also apply if your employment is terminated as a result of a change of control. However, this severance provision shall not
        apply if your employment is terminated as a result of your death or your disability. Disability will be defined to have occurred
        in the event you have incurred or are afflicted with a medical determinable physical or mental impairment that can be expected
        to result in death or can be expected to last for a continuous period of not less than twelve (12) months.

         

        If your employment terminates
        due to your voluntary decision to quit, then no severance will be due. However, if you quit for Good Reason (as defined below),
        then this severance provision shall apply. You are entitled to terminate your employment for Good Reason, provided however, that
        no such termination for Good Reason shall be effective unless:

         

        a)   You
        provide written notice to the Chairman of the Board of Flexsteel of the existence of a condition specified in the definition of
        Good Reason below within ninety (90) days of the initial existence of the condition;

         

        b)   The
        Company does not remedy or begin to remedy such condition within sixty (60) days of the date of such notice; and

         

        c)   The
        executive terminates employment within ninety (90) days following the last day of the remedial period described above.

         

        For purposes of this Term
        Sheet, “Good Reason” shall mean, without your express written consent any of the following:

         

        (i)   The
        assignment to you of any duties inconsistent in any respect with your authority, duties or responsibilities with respect to your
        officer position, or any action by Flexsteel that results in a diminution in such authority, duties or responsibilities (whether
        or not occurring solely as a result of Flexsteel ceasing to be a publicly traded entity);

         

        (ii)   The
        material reduction in your base salary or material change in annual incentive target award percentage;

         

        (iii)   A
        material reduction in the budget over which you retain authority;

         

        (iv)   A
        material change in the geographic location at which you must perform services for Flexsteel;

         

        (v)   A material breach of your
        agreement by Flexsteel.



 


 


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Ms. Karel Czanderna


June 29, 2012


 


 


	18.    External Board Involvement	
        You may continue to serve
        on the board/s on which you currently serve with a one-year moratorium on additional board services. Thereafter, service on a board
        requires the consent of the Flexsteel Board.

         

	19.    Director Position	
        You will be considered
        for Directorship of Flexsteel at the Board of Directors meeting held in September, 2012.

         

	20.    Indemnification and Insurance	
        As a corporate officer,
        the Flexsteel Bylaws provide you with indemnification to the full extent permitted by Minnesota law. Flexsteel provides director
        and officer insurance at levels approved by the Board of Directors. After you cease being a corporate officer and/or Director of
        Flexsteel, for ten years you will continue to be covered under Flexsteel’s director and officer insurance at the same level
        as active Flexsteel corporate officers and directors.

         

	21.    Legal Fees	
        Flexsteel will reimburse
        you up to $10,000 for legal fees incurred to review this Term Sheet and related legal matters.

         

	22.    Current Home Assistance	
        Flexsteel will guarantee
        a mutually agreed upon value for your current residence in Ohio (“Residence”) for as long as you are employed by Flexsteel.
        If the Residence is not sold during your employment with Flexsteel, this guarantee is terminated and Flexsteel will have no further
        obligation related to the Residence. Flexsteel must approve any offer which is received for the Residence which is less than the
        mutually agreed upon value. All offers must be presented to the Chairperson of Flexsteel’s Compensation Committee (“Chairperson”).
        If an offer on the Residence is received at the mutually agreed upon value or greater which is not accepted by you or your husband,
        Flexsteel’s guarantee terminates and Flexsteel will have no further obligation related to the Residence. The Residence must
        be listed with a realtor appropriately licensed in the state of Ohio within thirty (30) days of the start of your employment with
        Flexsteel. The contact person for all matters relating to the Residence will be the Chairperson.

         

	23.    Contingency of Offer	
        The offer of employment
        to you is contingent upon your satisfactory completion of a post-offer drug and alcohol screen.

         

	24.    Miscellaneous	This Letter Agreement supersedes all prior agreements and understandings related to the subject matter hereof.  This Letter Agreement shall be construed in accordance with and governed and interpreted by the laws of the State of Iowa without regard to principles of conflicts of law which may result in the application of the law of any other jurisdiction.  Any action or proceeding to enforce this Letter Agreement shall be brought in the Iowa District Court in and for Dubuque County.  If any provision of this Letter Agreement shall be declared by any Court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of this Letter Agreement shall not be affected and shall remain in full force and effect.  This Letter Agreement shall be deemed drafted by both parties hereto, even though one of the parties may have initially drafted the Letter Agreement and submitted it to the other.  No provision of this Letter Agreement shall be interpreted for or against a party due to the fact the party drafted the provision.  This Letter Agreement may be signed in counterparts and electronically by the parties.


 


 


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Karel, we are delighted to extend this offer
to you by this Letter Agreement. This Letter should not be construed as an Employment Agreement for a term of years, as your employment
is “At Will” employment. The Board of Directors is excited and enthusiastic about you joining Flexsteel as its seventh
President and CEO. This is an exciting time for Flexsteel and we are honored and privileged to have you join us.


 


Sincerely,


 





 


Lynn J. Davis,


Chairman of Board of Directors


 


Attachment (Exhibit “A”)


 


 


I hereby acknowledge receipt of this Letter
Agreement and am accepting employment with Flexsteel pursuant to the terms and conditions set forth in this Letter Agreement.


 


 


	By:	/s/ Karel K. Czanderna	 
	 	Karel K. Czanderna	 
	 	 	 
	Date: 	June 29, 2012	 
	 	 	 


 


 


 


 


 


 


 


 


 


 


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