Document:

Exhibit 10.1 NSO Grant

		

			Exhibit 10.1

		

		
			FLEXSTEEL INDUSTRIES, INC.
		

		
			NOTIFICATION OF NON-STATUTORY STOCK OPTION AWARD
		

		
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						Name of Optionee:  Derek P. Schmidt 

				
	
					
						Effective Date:  April 6, 2020

				
	
					
						Number of Shares Covered:  78,884

					
					
						Date of Grant:  April 6, 2020

				
	
					
						Exercise Price Per Share: $9.97  

					
					
						Expiration Date:   April 6, 2030

				

		
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			Flexsteel Industries, Inc. (the “Company”) hereby grants you an option (the “Option”) under this Notification of Non-Statutory Stock Option Award (this “Notification of Award”) as an inducement grant.  The Options granted under this Notification of Award are subject to the following terms and conditions:
		

		
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			1.         Omnibus Stock Plan.  The Option is not granted directly pursuant to the Company’s 2013 Omnibus Stock Plan (the “Plan”) (See Attachment C “Omnibus Stock Plan”). However, all applicable terms and conditions of the Plan will govern the Shares purchased or purchasable under the Option. Capitalized terms not otherwise defined within this Notification of Award shall have the respective meanings assigned to such terms in the Plan. 
		

		
			2.         Stock Option.  The Option is not intended to be an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code (the “Code”).
		

		
			3.         Purchase Price.  The purchase price of the Stock is the Exercise Price Per Share, which shall not be less than the Fair Market Value of the Stock on the Date of Grant.
		

		
			4.         Expiration Date.  Unless the right to exercise the Option is terminated earlier under Section 8, the Option will expire on the Expiration Date.  The Expiration Date shall not be more than ten years from the Date of Grant.  You are solely responsible for exercising this Option, if at all, prior to its Expiration Date. The Company has no obligation to notify you of this Option’s expiration. 
		

		
			5.         Vesting.  The Shares under the Option shall vest pursuant to the following vesting schedule:  
		

			
					
						Shares

					
					
						Date

				
	
					
						78,884

					
					
						April 6, 2023

				

		
			In the event that a Change in Control (see Attachment A, “Definitions”) occurs while the Employee is employed by the Company, then the vesting schedule set forth above shall be automatically accelerated so that all Shares purchased or purchasable upon exercise of this Option shall become fully vested, effective as of the effective time of the Change in Control. 
		

		
			6.         Exercise Period.  The Option may only be exercised prior to the Expiration Date.  Your right to exercise some or all of the Option may be terminated before the Expiration Date as provided in Section 8, relating to termination of your employment.  In all cases, you may only exercise the Option to the extent the Option has vested as stated in the Notification of Award. 
		

		
			7.         Transferability.  The Option may be exercised during your lifetime only by you and any exercise must be prior to the Expiration Date.  You may not transfer the Option, other than by will or the laws of descent and distribution.
		

		

		

		 

 

		
		

		
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			8.         Termination of Employment.  All of your rights in this Option, to the extent not previously vested and exercised, shall terminate upon your termination of employment except as described in this Section 8.  With respect to the vested and exercisable portion of the Option, and subject to subsection (f):  
		

		
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			(a)    In the event of your termination of employment due to reasons other than death, Disability, Termination for Cause (see Attachment A, “Definitions”) or termination on or after your Retirement Date, the Option may be exercised (to the extent exercisable at the date of termination) by you within three months after the date of termination of employment.
		

		
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			(b)    In the event of your termination of employment on or after your Retirement Date, the Option may be exercised (to the extent exercisable at the date of termination) by you within three years after the date of termination of employment.         
		

		
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			(c)      In the event of your termination of employment due to Disability, the Option may be exercised in full by you within one year after the date of termination of employment.
		

		
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			(d)    In the event of your termination of employment due to death, the Option may be exercised in full by your estate or by a person who acquires the right to such Option by bequest or inheritance or otherwise by reason of your death, within one year after the date of termination of employment.
		

		
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			(e)    In the event of your Termination for Cause, the Option and your right to exercise the Option shall terminate immediately.
		

		
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			(f)    Notwithstanding anything in this Notification of Award, in no event may the Option be exercised after the Expiration Date.
		

		
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			9.         Method of Exercise; Use of Company Stock.  
		

		
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			    (a)    The Option may be exercised by delivering written notice of exercise to the Company at the principal executive office of the Company, to the attention of the Company’s Secretary.  The notice must state the number of Shares to be purchased, and must be signed by the person exercising the Option.  If you are not the person exercising the Option, the person also must submit appropriate proof of his/her right to exercise the Option.  The Company may designate a third party to administer the option program in which case the third party may receive any required notice.
		

		
			    (b)    Upon giving notice of any exercise hereunder, you must provide for payment of the purchase price of the Shares being purchased through one or a combination of the following methods:
		

		
			        (i)    Purchase.  By paying cash (including check paid to the Company, wire transfer, bank draft, or money order);
		

		
			        (ii)  Delivery of Shares.  By delivery or tender to the Company of unencumbered Shares (by actual delivery or attestation) having an aggregate Fair Market Value on the date the Option is exercised equal to the purchase price of the Shares being purchased under the Option, or 
		

		 

		

			 

		

		

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		a combination thereof, as determined by the Committee (provided, however, that no fractional Shares will be issued or accepted);  
		

		
			    (iii)     Broker-Assisted Cashless Exercise.  By directing a stockbroker designated by the Company to affect a broker assisted cashless exercise to sell Shares issued on exercise of the Option and remitting the proceeds of such sale to the Company; or
		

		
			    (iv)     Net Exercise.  By instructing the Company to withhold Shares having an aggregate Fair Market Value on the date of exercise less than or equal to the purchase price of the Shares acquired upon exercise; provided that this method of exercise may only be used to deliver net shares to you and no cash compensation may be provided.
		

		
			    In no event will you be permitted to pay any portion of the purchase price with Shares, through a broker-assisted cashless exercise or through net exercise, if the Committee, in its sole discretion, determines that payment in such manner could have adverse tax, securities law or financial accounting consequences for the Company.
		

		
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			10.       Withholding.  In any case where withholding is required or advisable under federal, state or local law in connection with any exercise by you under this Notification of Award, the Company is authorized to withhold appropriate amounts from amounts payable to you, or may require that you remit to the Company an amount equal to such appropriate amounts.  Upon the exercise of the Option, you may elect, subject to the approval of the Committee and compliance with applicable laws and regulations, to satisfy any withholding requirements, in whole or in part, by having the Company withhold Stock having a Fair Market Value, on the date the tax is to be determined, equal to the standard required withholding rates for non-periodic payments.  In no event will the Company be required to permit the exercise of the Option unless the applicable withholding requirements are satisfied.
		

		
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			11.       Changes in Capitalization, Dissolution, Liquidation, Reorganization, Acquisition.  The terms stated in the Notification of Award are subject to modification upon the occurrence of certain events as described in Section 16 of the Plan.
		

		
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			12.        Severability.  In the event any provision of this Notification of Award is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of this Notification of Award, and the Notification of Award will be interpreted and enforced as if the illegal or invalid provision had not been included.
		

		
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			13.       No Guarantee of Employment.  The Notification of Award will in no way restrict the right of the Company to terminate your employment at any time.
		

		
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			14.       Tax Advice.    You acknowledge that you have not looked to or relied upon the Company or any of its officers, directors, optionees, shareholders, accountants or legal counsel for tax advice concerning the tax consequences of the grant to, and your exercise of, the Option and that you have obtained such advice, to the extent you determine that it is necessary, from other sources located by you.
		

		
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			15.       No Shareholder Rights.    You will have no rights as a shareholder with respect to any Stock subject to the Option prior to the date of exercise of the Option and, after such date, will only have rights as a shareholder with respect to the Stock acquired upon exercise.
		

		
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		16.       Governing Terms.  This Notification of Award is not made according to the provisions of the Plan.  However, all applicable terms and conditions of the Plan will govern the Shares purchased or purchasable under the Option.  The terms of the Plan are incorporated by reference in this Notification of Award.  Terms used in this Notification of Award have the meanings used in the Plan unless the context clearly requires otherwise.  The terms “termination of employment,” “terminate employment,” and similar terms shall mean “Separation from Service” as defined in the Plan.  In the event of a conflict between the provisions of the Plan and the provisions of this Notification of Award, the provisions of this Notification of Award will govern. 
		

		
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			17.       Resale Restrictions.  The terms of the Plan shall not restrict the resale of Stock acquired upon exercise of the Option. Resales by participants who are officers or directors of the Company must comply with (i) Rule 144 under the Securities Act of 1933, as amended, and (ii) the six-month short swing profit restrictions under Section 16(b) of the Securities Exchange Act of 1934, as amended. The Board of Directors of Flexsteel Industries, Inc. has adopted Stock Ownership Guidelines (see Attachment D “Stock Ownership Guidelines”). These guidelines are a part of this Notification of Award. 
		

		
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			18.       Entire Understanding.    This Notification of Award constitutes the entire understanding of you and the Company with respect to the subject matter of this Notification of Award, and, except as otherwise provided in the Plan, may not be amended, changed, modified, terminated, or waived other than by written instrument signed by you and the Company.  This Notification of Award supersedes all prior oral or written agreements and understandings between you and the Company concerning the subject matter of the Notification of Award, including any implied or express representations regarding your ownership of any interest in the Company or its property, and any prior oral or written agreements conveying stock option rights to you.
		

		
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			19.       Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation.    By accepting the Option, you acknowledge that:  (a) the grant of the Option is a one-time benefit that does not create any contractual or other right to receive future grants of options, or benefits in lieu of options; (b) all determinations with respect to any such future grants, including but not limited to, the times when options will be granted, the number of shares of Stock subject to each option, the Exercise Price Per Share, and the time or times when each option will be exercisable, will be at the sole discretion of the Company; (c) the value of the Option is an extraordinary item of compensation that is outside the scope of your employment agreement, if any, with the Company; (d) the Option is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payment, bonus, long-service award, pension or retirement benefit or similar payment; (e) the exercisability of the Option ceases upon termination of employment with the Company for any reason except as may otherwise be explicitly provided in the Plan or this Notification of Award or otherwise permitted by the Committee; (f) the future value of the Stock subject to the Option is unknown and cannot be predicted with certainty; and (g) if the Stock subject to the Option does not increase in value, the Option will have no value.
		

		
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			20.       Forfeiture and Repayment. If you receive or become entitled to receive a payment under this Notification of Award within six months before your Separation from Service with the Company, the Company, in its sole discretion, may require you to forfeit or return the Award, as the case may be, in the event you:  (a) engage in Competitive Activity at any time during your employment or within a two-year period after your Separation from Service or (b) engage in Improper Use of Confidential Information at any time.  (See Attachment A, “Definitions.”)  The Company also reserves the right to require you to pay back to the Company any amount received under the Award as described in Section 18 of the Plan.  Further, in no event will you be entitled to an Award under 
		

		 

		

			 

		

		

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		this Notification of Award if you have a Termination for Cause at any time before the payment date of the Award.  Any repayment due under this Section 20 or Section 18 of the Plan will be made by you either in the Shares, or in a dollar amount equal to the Fair Market Value of the Shares determined on the date of repayment, you received under the Award.  The Committee, in its discretion, will determine which method of payment is acceptable.  Further, in no event will you be entitled to an Award under this Notification of Award if you have a Termination for Cause at any time prior to the payment date.  
		

		
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			21.       Beneficiary Designation.  If your employment is terminated as a result of your death,  someone other than you may become entitled to exercise this Option, as provided in Section 8 of this Notification of Award.  You are hereby permitted to designate a beneficiary to exercise the vested portion of this Option in the event of your death.  Any beneficiary can be named and you may change your beneficiaries at any time by submitting such designation, in writing, to the Company.  (See Attachment B, “Beneficiary Designation of Employee”)
		

		
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			[Signature Page to Follow]
		

		

		

		 

		

			 

		

		

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			FLEXSTEEL INDUSTRIES, INC.
		

		
			NOTIFICATION OF NON-STATUTORY STOCK OPTION AWARD
		

		
			ACKNOWLEDGEMENT
		

		
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						Name of Optionee:  Derek P. Schmidt 

				
	
					
						Effective Date:  April 6, 2020

					
					
						Vesting Schedule:  78,884 shares    April 6, 2023

				
	
					
						Number of Shares Covered: 78,884 

					
					
						Date of Grant:  April 6, 2020

				
	
					
						Exercise Price Per Share:  $9.97

					
					
						Expiration Date:  April 6, 2030

				

		
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						FLEXSTEEL INDUSTRIES, INC.:

				
	
					
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						By:  Jerald K. Dittmer

				
	
					
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						Its:  President & CEO

				

		
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			Acknowledgement:  Your receipt of this Notification of Award constitutes your agreement to be bound by the terms and conditions of this Notification of Award and the Plan.
		

		
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						OPTIONEE:

				
	
					
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						/s/ Derek Schmidt

				
	
					
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						Derek P. Schmidt

				

		
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		ATTACHMENT A
		

		
			Definitions
		

		
			The Capitalized terms used in this Notification of Award have the meanings set forth below.
		

		
			“Change in Control” means any of the following but only if such event meets the definition of “change in control” for purposes of Section 409A of the Code):
		

		
			(i)     Any individual, entity or group becomes a “Beneficial Owner” (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended), directly or indirectly, of at least thirty percent (30%) but less than fifty percent (50%) of the voting stock of the Company in a transaction that is not previously approved by the Board of Directors of the Company;
		

		
			(ii)    Any individual, entity or group becomes a Beneficial Owner, directly or indirectly, of at least fifty percent (50%) of the voting stock of the Company;
		

		
			(iii)  The person who were directors of the Company immediately prior to any contested election or series of contested elections, tender offer, exchange offer, merger, consolidation, other business combination, or any combination of the foregoing cease to constitute a majority of the members of the Board of Directors immediately following such occurrence;
		

		
			(iv)   Any merger, consolidation, reorganization or other business combination where the individuals or entities who constituted the Company’s shareholders immediately prior to the combination will not immediately after the combination own at least fifty percent (50%) of the voting securities of the business resulting from the combination; 
		

		
			(v)    The sale, lease, exchange, or other transfer of all or substantially all the assets of the Company to any individual, entity or group not affiliated with the Company;
		

		
			(vi)    The liquidation or dissolution of the Company; or
		

		
			(v)    The occurrence of any other event by which the Company no longer operates as an independent public company. 
		

		
			  “Competitive Activity” means any of the following regardless of whether it is undertaken, directly or indirectly, on your own behalf or on behalf of any person or entity other than the Company, including without limitation as a proprietor, principal, agent, partner, officer, director, stockholder, employee, member of any association, contractor, consultant or otherwise:
		

		
			(i)     Engaging in any business activity, in any geographic market in which the Company is then engaged in business that is competitive with the business of the Company; or
		

		
			(ii)    Hiring or soliciting for employment any person who is then an employee of the Company; or  
		

		
			(iii)   Inducing or attempting to induce any person to end his or her employment relationship with the Company; or  
		

		
			(iv)   Soliciting business concerning any business (as described in Section (i) above) from any person or entity who is, or who was, a client, customer, prospective client or prospective customer of the Company; or 
		

		
			
		

		 

		

			 

		

		

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		(v)    Taking any action to divert business from, or inducing or attempting to induce any customer or prospective customer or any vendor, supplier or other business relation to cease doing business with the Company.
		

		
			“Improper Use of Confidential Information” means:  
		

		
			(i)    Any use or disclosure of Confidential Information except as required for the performance of your duties as an employee of the Company;
		

		
			(ii)    Any act or omission that directly or indirectly would materially reduce the value of Confidential Information except for such acts or omissions that are required for the performance of your duties as an employee of the Company.   
		

		
			(iii)    Notwithstanding anything in Sections (i) or (ii) above, Improper Use of Confidential Information does not include:
		

		
			(A)    any disclosure, use or other act or omission that is expressly authorized in writing, in advance by the Company; or 
		

		
			(B)    any required disclosure of Confidential Information by law or legal process, if:  (x) you provide prompt notice to the Company in writing, and prior to disclosing any Confidential Information, so that the Company may elect to seek an appropriate protective order to prevent disclosure at the Company’s option and expense; and (y) you cooperate with the Company in any efforts to seek a protective order.
		

		
			    For purposes of this definition, “Confidential Information” means any non-public information regarding the Company or any of its owners, directors, representatives, agents, employees, suppliers, vendors, shareholders, members, clients, customers, or other third parties or entities with whom the Company does business and which you have learned or developed in the past as a result of your employment by or association with the Company or which you learn or develop while providing services to the Company.  Confidential Information includes, but is not limited to, trade secrets, information about customers, prospective customers, marketing strategies, business strategies, sales strategies, products, services, key personnel, suppliers, pricing, technology, computer software code, methods, processes, designs, research, development systems, techniques, finances, accounting, purchasing, forecasts, or planning.  All information disclosed to you or to which you obtain access in whatever form, whether originated by you or by others, during the period that you provide services to the Company will be presumed to be Confidential Information if it is treated by the Company as being Confidential Information or if you have a reasonable basis to believe it to be Confidential Information.  For these purposes, Confidential Information will not include knowledge or information:  (i) that is now or subsequently becomes generally publicly known, other than as a direct or indirect result of Improper Use or Disclosure of Confidential Information by you; or (ii) that is independently made available to you in good faith by a third party who has not violated any legal duty or confidential relationship with the Company.
		

		
			“Termination for Cause” means the involuntary termination of a Participant’s employment with the Company as a result of dishonesty, fraud, misappropriation of funds, theft relating to the Participant’s position, harassment, an act of violence, acts punishable by law, misconduct as described in the Flexsteel Industries, Inc. Employee Handbook, as amended from time to time, or such other serious misconduct as will be determined by the Company to constitute conduct that warrants forfeiture pursuant to the Plan and this Notification of Award.
		

		

		

		 

		

			 

		

		

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		ATTACHMENT B
		

		
			FLEXSTEEL INDUSTRIES, INC.
		

		
			NON-STATUTORY STOCK OPTION
		

		
			BENEFICIARY DESIGNATION OF EMPLOYEE
		

		
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			Pursuant to the Notification of Non-Statutory Stock Option Award granted to me by Flexsteel Industries, Inc. (the “Company”) on April 6, 2020,  I,  Derek P. Schmidt, hereby designate the following as beneficiary of any portion of my award which has been earned according to the terms of the Company’s 2013 Omnibus Stock Option Plan and unpaid at the time of my death.
		

		
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			A.    Primary Beneficiary:  _____________________________________
		

		
			B.    Contingent Beneficiary:  ___________________________________
		

		
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			Signature:  ________________________________
		

		
			Name:   Derek P. Schmidt
		

		
			*This election is valid until a later dated designation is completed and filed with the Company.
		

		

		

		 

		

			 

		

		

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			ATTACHMENT C
		

		
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			FLEXSTEEL INDUSTRIES, INC.
		

		
			OMNIBUS STOCK PLAN
		

		
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			Effective July 1, 2013
		

		
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			PURPOSE
		

		
			The purpose of the Plan is to promote the interests of the Company and its shareholders by providing key personnel of the Company with an opportunity to acquire a proprietary interest in the Company and reward them for achieving a high level of corporate performance, and thereby develop a stronger incentive to put forth maximum effort for the continued success and growth of the Company. In addition, the opportunity to acquire a proprietary interest in the Company will aid in attracting and retaining key personnel of outstanding ability. The Plan is also intended to provide nonemployee directors with an opportunity to acquire a proprietary interest in the Company, to compensate nonemployee directors for their contribution to the Company and to aid in attracting and retaining nonemployee directors.
		

		
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			ELIGIBILITY
		

		
			Participation in the Plan is limited to employees of the Company and to the members of the Board. The granting of awards under the Plan is solely at the discretion of the Nominating and Compensation Committee of the Board (the “Committee”).
		

		
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			ADMINISTRATION OF THE PLAN
		

		
			The Committee will administer the Plan. The Committee has exclusive power to (i) make awards, (ii) determine when and to whom awards will be granted, the form of each award, the amount of each award, and any other terms or conditions of each award consistent with the Plan, and (iii) determine whether, to what extent and under what circumstances, awards may be canceled, forfeited or suspended.
		

		
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			SHARES AVAILABLE UNDER THE PLAN
		

		
			The number of shares of common stock available for distribution under the Plan may not exceed 700,000 (subject to adjustment for changes in capitalization of the Company). Any Shares subject to the terms and conditions of an award under the Plan that are not used because the terms and conditions of the award are not met may again be used for an Award under the Plan.
		

		
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			DESCRIPTION OF PLAN AWARDS
		

		
			The Plan provides that the Committee may grant awards to participants in the form of (i) shares of common stock subject to restrictions on transfer and conditions of forfeiture, commonly referred to as “restricted stock,” (ii) right to receive shares of common stock subject to restrictions and conditions for payment of shares are satisfied, commonly referred to as “restricted stock unit,” (iii) “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or non-statutory stock options, (iv) rights to receive a payment from the Company in Common Stock equal to the excess of the fair market value of a share of common stock on the date of exercise over a specified price fixed by the Committee, commonly referred to as “Stock Appreciation Rights” or “SARs,” or (v) rights to receive payment from the Company 
		

		 

		

			 

		

		

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		in common stock based upon the achievement of performance goals established by the Committee, commonly known as “performance units.”
		

		
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			Options. The Committee will have the authority to grant stock options and to determine all terms and conditions of each stock option, including a vesting schedule, if any. The Committee will fix the option price per share of Common Stock, which may not be less than the fair market value of the Common Stock on the date of grant. The Committee will determine terms and conditions of exercise, as well as the expiration date of each option, but the expiration date will not be later than 10 years after the grant date. 
		

		
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			The option price is payable in full at the time of exercise, provided that to the extent permitted by law, the Notification of Award may permit the participants to simultaneously exercise options and sell the shares thereby acquired pursuant to a brokerage transaction and use the proceeds from the sale as payment of the purchase price of the shares, or exercise the option in a “net exercise,” by which the number of shares distributed to the participant is reduced by the aggregate purchase price of the shares being exercised divided by the then fair market value of a share.  The purchase price may also be payable in cash or by delivery or tender of shares (by actual delivery or attestation) having a fair market value as of the date the option is exercised equal to the purchase price of the shares being exercised, or a combination thereof. 
		

		
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			If the aggregate fair market value of the shares subject to the option that becomes exercisable during a calendar year exceeds $100,000, then the option will be treated as a nonqualified stock option to the extent the $100,000 limitation is exceeded. Each incentive stock option that the administrator grants to an eligible employee who owns more than ten percent of the total combined voting power of all classes of stock then issued by our company or a subsidiary must have an exercise price at least equal to 110% of the fair market value of the common stock on the date of grant and must terminate no later than five years after the date of grant.
		

		
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			Stock Appreciation Rights. The Committee will have the authority to grant stock appreciation rights. A stock appreciation right is the right of a participant to receive Common Stock with a fair market value, equal to the appreciation of the fair market value of a share of common stock during a specified period of time. The Committee will determine all terms and conditions of each stock appreciation right.
		

		
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			Performance and Stock Awards. The Committee will have the authority to grant awards of restricted stock or restricted stock units. Restricted stock means shares of common stock that are subject to a risk of forfeiture, restrictions on transfer or both a risk of forfeiture and restrictions on transfer. Restricted stock unit means the right to receive a payment shares equal to the fair market value of one share of Common Stock. The Committee will determine all terms and conditions of the awards.
		

		
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			PERFORMANCE GOALS
		

		
			For purposes of the Plan, Performance Goals are the goals established for a given performance period, the achievement of which may be a condition for receiving an award under the Plan. A Performance Goal may be adjusted in accordance with Section 162(m) of the Internal Revenue Code during a Performance Period to prevent dilution or enlargement of an Award as a result of extraordinary events or circumstances as determined by the Committee or to exclude the effects of extraordinary, unusual or nonrecurring events, changes in accounting principles, discontinued operations, acquisitions, divestitures and material restructuring charges. Performance Goals may be based on one or more of the following criteria and may 
		

		 

		

			 

		

		

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		be based on attainment of a particular level of or positive change in consolidated (company-wide) or subsidiary, division or operating unit financial measures: (1) pre-tax or after-tax income (before or after allocation of corporate overhead and incentive compensation), (2) net income, (3) reduction in expenses, (4) operating income, (5) earnings (including earnings before taxes, earnings before interest and taxes, or earnings before interest, taxes, depreciation and amortization), (6) gross revenue, (7) working capital, (8) profit margin or gross profits, (9) share price, (10) cash flow, free cash flow or cash flow per share (before or after dividends), (11) cash flow return on investment, (12) return on capital (including return on total capital or return on invested capital), (13) return on assets or net assets, (14) market share, (15) pre-tax or after-tax earnings per share, (16) operating earnings per share, (17) total stockholder return, (18) growth measures, including revenue growth, as compared with a peer group or other benchmark, (19) economic value-added models or equivalent metrics, (20) comparisons with various stock market indices, (21) improvement in or attainment of expense levels or working capital levels, (22) operating margins, gross margins or cash margins, (23) year-end cash, (24) debt reductions, (25) stockholder equity, (26) regulatory achievements, (27) implementation, completion or attainment of measurable objectives with respect to research, development, products or projects, production volume levels, acquisitions and divestitures, (28) leadership, recruiting, developing and maintaining personnel, (29) customer satisfaction, (30) operating efficiency, productivity ratios, (31) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market penetration, geographic business expansion goals (including accomplishing regulatory approval for projects), cost or cost savings targets, accomplishing critical milestones for projects, and goals relating to acquisitions or divestitures, or any combination thereof (in each case before or after such objective income and expense allocations or adjustments as the Committee may specify within the applicable period).
		

		
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			AWARD LIMITS
		

		
			To qualify awards under the Plan as “performance-based compensation” under Section 162(m), the Company is required to establish limits on the number of awards that may be granted to an individual participant. The maximum number of shares that may be awarded to a participant under the Plan in any fiscal year of the Company, by form of Award, is as follows: (a) restricted stock: 30,000 shares; (b) restricted stock units: 30,000 shares; (c) shares purchasable under options (including non-statutory stock options and incentive stock options): 30,000 shares; (d) shares with respect to which stock appreciation rights may be exercised: 30,000 shares; and (e) performance units: 30,000 shares. Each of these limitations is subject to adjustment for changes in capitalization of the Company.
		

		
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			FEDERAL TAX TREATMENT
		

		
			The Plan is not a qualified pension, profit-sharing or stock bonus plan under Section 401(a) of the Code.  The Plan is not subject to any provisions of the Employee Retirement Income Security Act of 1974.  
		

		
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			The U.S. federal income tax consequences of the Plan under current federal law, which is subject to change, are summarized in the following discussion which deals with the general tax principles applicable to the Plan.  This summary is not intended to be exhaustive and does not describe state, local or FICA tax consequences.  The tax consequences to a participant depend on the type of award granted under the Plan.    
		

		
			 
		

		
			Options. Stock option grants under the Plan may either be granted as incentive stock options, which are governed by Section 422, as amended, or as non-qualified stock options, which are governed by Section 83 
		

		 

		

			 

		

		

			12

		

 

		of the Internal Revenue Code, as amended. Generally, no federal income tax is payable by the participant upon the grant of an incentive stock option and no deduction is taken by us. If certain holding periods are met, the exercise of an incentive stock option does not result in taxation to the participant; rather, the participant is taxed only at the time of sale of the shares received upon exercise. If the shares have been held for at least one year after the date of exercise and at least two years from the date of grant of the option, the participant will be taxed on any appreciation in excess of the exercise price as long-term capital gains. In that event, we are not entitled to a deduction for the amount of the capital gains. Under current tax laws, if a participant exercises a non-qualified stock option, the participant will be taxed on the difference between the fair market value of the stock on the exercise date and the exercise price and, thereafter, the participant would receive capital gains on any appreciation in stock value after the exercise date, depending upon the length of time the participant held the stock after exercise. When the option is exercised, we will be entitled to a corresponding tax deduction.
		

		
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			Restricted and Performance Stock and Units. Awards of restricted stock and restricted stock units, performance stock and performance units under the Plan generally are not subject to federal income tax when awarded, unless the participant properly elects to accelerate the tax recognition. Restricted stock is generally subject to ordinary income tax at the time the restrictions lapse and performance stock is taxed at the time the performance targets are met. Restricted stock units and performance units are generally subject to ordinary tax at the time of payment, even if vested earlier. We are entitled to a corresponding deduction at the time the participant recognizes taxable income on the restricted or performance stock or units.
		

		
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			Section 162(m) Limit on Deductibility of Compensation. Section 162(m) of the Internal Revenue Code limits the deduction the Company can take for compensation paid to our “Covered Employees” (as defined under Code Section 162(m)) to $1,000,000 per year per individual. However, performance-based compensation that meets the requirements of Section 162(m) does not have to be included as part of the $1,000,000 limit. The Plan is designed so that awards granted to the covered individuals may meet the Section 162(m) requirements for performance-based compensation.
		

		
			﻿
		

		
			Code Section 409A. Awards under the Plan may constitute, or provide for, a deferral of compensation under Section 409A of the Internal Revenue Code. If the requirements of Section 409A are not complied with, then holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax and, potentially, interest and penalties. The Plan has been designed to issue awards that comply with, or be exempt from Section 409A and the Department of Treasury regulations and other interpretive guidance that may be issued pursuant to Section 409A.
		

		
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			FORFEITURE AND CLAWBACK
		

		
			The Company may provide that if a participant has received or been entitled to an award within six months before the participant’s termination of employment with the Company, the Committee may require the participant to return or forfeit the award in the event of certain occurrences specified in the award. The occurrences may, but need not, include termination for “cause” (as defined in the award or, if applicable, as defined in any employment agreement between the participant and the Company), competition with the Company, unauthorized disclosure of material proprietary information of the Company, a violation of applicable business ethics policies of the Company, a violations of applicable law, or any other occurrence specified in the award within the period or periods of time specified in the award. In addition, the Company 
		

		 

		

			 

		

		

			13

		

 

		reserves the right to require a participant to pay back to the Company all shares received under the Plan to the extent required by law, under any applicable listing standard or under any applicable clawback policy adopted by the Company.
		

		
			CHANGE IN CONTROL
		

		
			The Company may provide that an award under the Plan includes a provision for full vesting or a pro rata payment if a participant’s employment terminates during a performance period in connection with a change in control.
		

		
			﻿
		

		
			EFFECTIVE DATE AND DURATION OF THE PLAN
		

		
			The Plan became effective as of July 1, 2013, but subject to the shareholders’ approval of the Plan at the 2013 Annual Meeting of Shareholders. The Plan will remain in effect until all Common Stock subject to it is distributed, all awards have expired or lapsed, or the Plan is terminated pursuant to its terms or June 30, 2023; provided, however, that awards made before the termination date may be exercised, vested or otherwise effectuated beyond the termination date unless limited in the agreement or otherwise. No award of an incentive stock option will be made more than 10 years after the effective date.
		

		
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			AMENDMENT AND MODIFICATION OF AWARDS UNDER THE PLAN
		

		
			The Board may at any time and from time-to-time terminate, suspend or modify the Plan. The Committee may at any time alter or amend any or all agreements under the Plan to the extent permitted by law. No termination, suspension, or modification of the Plan will materially and adversely affect any right acquired by any participant under an award granted before the date of termination, suspension, or modification, unless otherwise agreed to by the participant in the agreement or otherwise, or required as a matter of law.
		

		
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			RESALE RESTRICTIONS
		

		
			The resale of shares of Common Stock acquired upon exercise of awards granted under the Plan is generally not restricted by the terms of the Plan. Resales by participants who are officers or directors of the Company must comply with (i) Rule 144 under the Securities Act of 1933, as amended, and (ii) the six-month short swing profit restrictions under Section 16(b) of the Exchange Act.
		

		

		

		 

		

			 

		

		

			14

		

 

		
		

		
			ATTACHMENT D
		

		
			STOCK OWNERSHIP GUIDELINES
		

		
			Adopted July 22, 2016
		

		
			﻿
		

		
			The Board of Directors (the “Board”) of Flexsteel Industries, Inc. (“Flexsteel” or the “Company”) has adopted Stock Ownership Guidelines (“Ownership Guidelines”).  These Ownership Guidelines are applicable to all Flexsteel Section 16 executive officers (“executive officers”) (as such term is defined pursuant to Section 16 of the Securities and Exchange Act of 1934, as amended), the non-employee directors of the Board (“directors”), other officers of the Company (“officers”), and all other employees that receive stock based compensation (“key associates”) in any form from the Company (collectively “participants”).
		

		
			﻿
		

		
			Ownership Guidelines
		

		
			Pursuant to these Ownership Guidelines, each of the participants will be expected to maintain an ownership position in the Company’s shares of common stock as set forth in the applicable guidelines below:
		

		
			﻿
		

		
			    Minimum Stock Ownership Requirement
		

		
			﻿
		

			
					
						﻿

					
					
						 

					
					
						 

				
	
					
						Leadership Position

					
					
						 

					
					
						Ownership Guidelines

				
	
					
						Directors of the Board

					
					
						 

					
					
						3 times annual director cash compensation

				
	
					
						Executive Officers

					
					
						 

					
					
						2 times base salary

				
	
					
						Officers

					
					
						 

					
					
						1 times base salary

				
	
					
						Key Associates

					
					
						 

					
					
						0.5 times base salary

				
	
					
						﻿

					
					
						 

					
					
						 

				
	
					
						﻿

					
					
						 

					
					
						 

				

		
			﻿
		

		
			Ownership Defined
		

		
			For purposes of meeting the applicable Ownership Guidelines, stock that counts toward satisfaction of Flexsteel’s Stock Ownership Guidelines include:
		

		
			﻿
		

		
			    Flexsteel Industries, Inc. common stock owned (i) directly by the participant or their spouse, (ii) jointly by the participant or their spouse, and (iii) indirectly by a trust, partnership, limited liability company or other entity for the benefit of the participant or their spouse;
		

		
			    100% of Restricted Stock Awards (vested and unvested) issued under the Company’s Equity Incentive Plans; and 
		

		
			    100% of the intrinsic value of unexercised Stock Options (vested and unvested) issued under the Company’s Equity Plans.
		

		
			﻿
		

		
			Subject to the Retention Ratio requirements, there is no expected time period to achieve the minimum stock ownership requirement.
		

		
			﻿
		

		
			Retention Ratio
		

		
			Participants must maintain at least 60% of the stock received from equity awarded (on a shares-issued basis) until minimum stock ownership requirement level is achieved.
		

		
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			﻿
		

		

		

		 

		

			 

		

		

			15

		

 

		﻿
		

		
			Stock Holding Requirements
		

		
			Once the Ownership Guideline has been achieved, participants will be required to maintain the stock holding requirement for the duration of their employment with or service to the Company.
		

		
			﻿
		

		
			Compliance
		

		
			The Company’s Compensation Committee (the “Committee”) shall have authority to enforce these Stock Ownership Guidelines.
		

		
			﻿
		

		
			Non-Compliance
		

		
			If a participant is not in compliance with the Ownership Guidelines, the participant will be prohibited from selling or otherwise disposing of the Flexsteel common stock until their holdings meet the applicable minimum requirements, and then only to the extent that their remaining holdings do not fall below the applicable minimum holding requirement.
		

		
			﻿
		

		
			Administration
		

		
			The Committee shall periodically assess these Ownership Guidelines and recommend changes, if any, to the Board of Directors. The Board of Directors may amend or terminate these Ownership Guidelines in its discretion.
		

		
			﻿
		

		
			Hardship
		

		
			There may be instances in which the Ownership Guidelines would place a severe hardship on the participant.  Under these circumstances, the Committee may, on a case-by-case basis, modify the Ownership Guidelines, in its discretion.
		

		
			﻿
		

		 

		

			 

		

		

			16ex_210338.htm

 

SEPARATION AGREEMENT 

 

THIS SEPARATION AGREEMENT is made and entered into by and between Richard Cribbs (the “Employee”) and Transport Management Services, LLC (the “Company”) (the employee and the Company being sometimes collectively referred to as the “Parties”).

 

W I T N E S S E T H:

 

WHEREAS, Employee’s employment with the Company and any member of the Company Group will end as of the Separation Date set forth below;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein the Parties agree as follows:

 

1. Separation. The Parties agree that Employee’s employment with the Company and any member of the Company Group will end effective as of the close of business on September 15, 2020 (the “Separation Date”). Until the Separation Date, the Parties agree that Employee shall continue to perform those job duties as directed by the Company or any member of the Company Group on an as-needed, when-requested basis. Accordingly, except for payment of: (a) Employee’s regular pay and benefits during the period leading up to the Separation Date, and (b) the Separation Pay, Additional Separation Pay, COBRA Premium Pay, Severance Benefits described herein, as applicable, Employee shall not be entitled to any other or future compensation (whether cash, equity, or otherwise), pay or benefits from any member of the Company Group after the Separation Date unless future consulting services or Employee’s time is utilized in accordance with Section 5(h) of this Separation Agreement are requested by any member of the Company Group.

 

2. Separation Pay.

 

(a)   Separation Pay. In consideration of this Agreement, the Company agrees to pay Employee a minimum of One Hundred Sixty-seven Thousand Five Hundred dollars ($167,500.00) representing six (6) months’ gross wages (the “Separation Pay”). The Company will pay the Separation Pay to Employee in thirteen (13) bi-weekly installment payments of Twelve Thousand Eight Hundred Eighty-Four & 62/100 ($12,884.62) each (the “Bi-Weekly Payments”), consistent with the Company’s regular payroll intervals; provided the Bi-Weekly Payment shall not become due and payable until the Company’s regular payroll date that occurs at least seven (7) days after the General Release becomes effective and period for revocation has expired (such bi-weekly installment period being collectively referred to as the “Separation Pay Period”). Payment of the Separation Pay (and any Additional Separation Pay) shall be subject to applicable withholdings and other ordinary and customary payroll taxes.   

 

(b)   Acceptance of Permitted Employment Prior to Expiration of Separation Pay Period. Subject to Section 6 below, at all times following the Effective Date of this Agreement and continuing through the expiration of the Separation Pay Period, the Parties agree that Employee shall be expected to actively pursue other employment opportunities consistent with Employee’s professional experience and/or skillset and paying an annualized base compensation of at least $167,500 (a “New Position”). If Employee accepts a New Position at any time prior to expiration of the Separation Pay Period, the Company shall nonetheless be obligated to pay Employee the entirety of the Separation Pay regardless of Employee’s acceptance of New Position. Notwithstanding the foregoing or anything contained herein to the contrary, Employee shall not be permitted to begin employment with a Competitive Business until the expiration of the Non-Compete Term.

 

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(c)   Option for Additional Separation Pay after the Separation Pay Period. If, after good faith efforts to secure employment, Employee has not accepted a New Position prior to expiration of the Separation Pay Period, the Company agrees to pay Employee additional compensation representing up to a cumulative of Two Hundred Fifty-Eight Thousand Dollars ($258,000.00) (the “Additional Separation Pay”). The Company will pay the Additional Separation Pay to Employee in bi-weekly installment payments of Nine Thousand Nine Hundred Twenty-Three & 08/100 Dollars ($9,923.08) each (the “Additional Bi-Weekly Payments”). If activated, the Additional Separation Pay will be limited to a maximum of twenty-six (26) Additional Bi-Weekly Payments which will be paid consistent with the Company’s regular payroll intervals commencing on the first regular pay period following expiration of the Separation Pay Period and continuing thereafter until such time as Employee accepts a New Position (the “Additional Pay Period”) at which time the Company’s obligation to pay Additional Separation Pay will terminate. In addition to the other payment contingencies set forth herein (including, without limitation, those set forth in Sections 4, 5 and 6), any and all Additional Separation Pay is expressly contingent upon Employee making good faith efforts to secure other employment both during the Separation Pay Period and during any Additional Pay Period. If Employee fails to undertake such efforts during the Separation Pay Period or during any Additional Pay Period, the Company will not pay Employee any Additional Separation Pay, and any Additional Separation Pay already paid to Employee will be returned by Employee to the Company. For purposes of this Agreement, it is understood and agreed that a good faith attempt by Employee to secure other employment but failure to do so will not be deemed a failure by Employee to make good faith efforts to secure the same. For the avoidance of doubt, the Company’s Additional Separation Pay obligations under this Agreement shall automatically terminate in the event of Employee’s death or disability as of the date of any such occurrence, however the Company’s Separation Pay and Severance Benefits obligations under this Agreement shall remain in effect if such obligations have not already been provided to Employee prior to the Employee’s death or disability.

 

(d)   Notice of New Employment. Employee shall notify the Company in writing immediately upon Employee’s acceptance of any New Position, providing both the name of the employer and the agreed upon start date, and the Company’s obligation to make any further Additional Separation Pay shall cease concurrent with Employee’s new start date.

 

3. Severance Benefits

 

(a)   Group Health Insurance COBRA Premium Pay. The Company also agrees to pay Employee’s group health insurance COBRA premiums (the “COBRA Pay”) for a period not to exceed eighteen (18) months of premium pay (such 18-month payment period being collectively referred to as the “COBRA Pay Period”). If Employee accepts a New Position at any time prior to expiration of the COBRA Pay Period, the Company’s obligation to continue making Employee’s monthly COBRA premium payments shall cease when Employee becomes eligible for health insurance coverage with Employee’s new employer, regardless of whether Employee enrolls for such coverage.

 

(b)   Severance Benefits. In further consideration of this Agreement, the Company agrees to pay Employee the amount of One Hundred Forty-Four Thousand Dollars ($144,000.00) (the “Severance Benefits”). The Company will pay the Severance Benefits to Employee in thirteen (13) bi-weekly installment payments of Eleven Thousand, Seventy Six & 92/100 ($11,076.92) each (the “Additional Bi-Weekly Payments”), consistent with the Company’s regular payroll intervals during the Separation Pay Period; provided the Additional Bi-Weekly Payments shall not become due and payable until the Company’s regular payroll date that occurs at least seven (7) days after the General Release becomes effective and period for revocation has expired. Payment of the Severance Benefits shall be subject to applicable withholdings and other ordinary and customary payroll taxes.

 

2

 

 

4. Separation Payment Conditions. As a condition to the receipt of any and all Separation Pay, Additional Separation Pay, COBRA Pay, Severance Benefits, and any other payments or benefits described in this Agreement, in addition to any other conditions set forth herein, Employee shall:

 

(a)     execute and comply with the terms of a general release of all claims (the “General Release”) against the Company Group and their affiliates and representatives, in the form attached hereto as Exhibit B, as updated by the Company for any change in laws. The General Release must be signed, and the period provided therein for revocation must have expired, not later than sixty days from the Separation Date. Notwithstanding anything to the contrary contained herein, no separation payments or other benefits or payments required under this Agreement shall be paid until the General Release is signed and the revocation period has expired, and any amounts that would otherwise have been paid prior to such date shall be paid within a reasonable time after such date, without interest; and

 

(b)     fully perform and comply with all of Employee’s obligations hereunder, including, without limitation, Employee’s obligations under Section 6. In the event Employee breaches any of Employee’s obligations hereunder (including, without limitation, Employee’s obligations under Section 6), then, in addition to any other remedies to which the Company Group may be entitled as a result of such breach, the Company Group shall be immediately and automatically released from any obligation to make any further Separation Pay, Additional Separation Pay, Severance Benefits or COBRA Pay and, upon notice from the Company, Employee shall be required to reimburse the Company Group for any and all after-tax Separation Pay, Additional Separation Pay and Severance Benefits made to Employee by the Company or any member of the Company Group within thirty days from the Company’s notice to Employee of such breach.

 

5.     Employee Representations. As an inducement for the Company to enter into this Agreement, Employee hereby represents, warrants and covenants as follows:

 

	 	
			(a)

				
			Employee has carefully read and fully understands all of the provisions of this Agreement;

			

 

(b)     Is through this Agreement, releasing each member of the Company Group and each such member’s officers, agents, directors, supervisors, employees, representatives, successors and assigns and all persons acting by, through, under, or in concert with any of them from any and all claims Employee may have against any member of the Company Group or such individuals, including those under the Age Discrimination in Employment Act of 1967 (29 U.S.C. §621, et seq.), except as specified herein;

 

(c)     Employee knowingly and voluntarily agrees to all of the terms set forth in this Agreement;

 

(d)     Employee knowingly and voluntarily intends to be legally bound by the terms set forth in this Agreement;

 

(e)     Employee agrees not to disclose the terms of this Agreement to anyone except Employee’s attorney, financial and other professional advisors, the IRS or other taxing authorities, or Employee’s immediate family (spouse, children, siblings, parents) (collectively; “Representatives”), or as required by law, or in response to any inquiry from any judicial, governmental, regulatory, or self-regulatory agency or organization. To the extent Employee discloses the terms of this Agreement to any permitted Representative, Employee agrees to advise them that they must not disclose the terms of this Agreement. Employee agrees to be responsible for any breach of this Agreement by his Representatives and agrees to take any and all action necessary to enforce compliance with the terms of this Agreement by his Representatives.

 

3

 

 

(f)     Within three (3) days following execution of this Agreement or on the actual Separation Date, whichever occurs last, Employee shall return to the Company all items of Company Group property which the Employee may still have in Employee’s possession, custody or control, including without any limitation whatsoever: all identification cards, credit cards, customer and vendor files or any other Company Group files, records, materials or information produced by, for or relating to the Company Group, its business, Employee’s job duties or functions, or any customer or vendor; all keys (in any form) to any Company Group office building, employee office, filing cabinet, desk or other key; all cell phones, pagers or other electronic devices or items of tangible personal property; all computer software; the Microsoft Surface laptop or other computer previously issued to Employee by any member of the Company Group, together with any and all passwords and/or passcodes to any of the items described above. The Company will pay Employee Two Thousand Dollars ($2,000) to assist in Employee’s purchase of a replacement laptop computer and will allow Employee to keep the remaining associated computer hardware (i.e. docking station, desk monitors (2), speakers, cabling and input devices).

 

(g)     Further, Employee represents and warrants to the Company Group as follows: (1) the financial information of any member of the Company Group that Employee is responsible for (if any) does not contain any untrue statement of a fact or omit a statement of fact making the information misleading; (2) no events have occurred since the end of the most recent reporting period and up through the date of this Agreement that would require adjustment to the financial information of any member for the Company Group that Employee is responsible for (if any); (3) during Employee’s employment by any member of the Company Group, the Parent’s Ethics Hotline was made available to Employee and to Employee’s department, and during such time, Employee did not have any complaints or concerns (nor were any brought directly to Employee’s attention) regarding ethics or policy violations, or of fraud or the suspicion of fraud, involving management that have not been properly reported to a member of the Company Group; and (4) if an event of fraud or a suspicion of fraud, whether or not material, that involved management or other employees of any member of the Company Group occurred during Employee’s employment within five (5) years prior to the Separation Date, Employee has disclosed said event or suspicion to the Internal Audit Department of Parent or otherwise properly reported the matter in writing to a member of the Company Group unless said event or suspicion was known by Employee to have been previously disclosed to the Internal Audit Department of Parent or otherwise properly reported in writing to a member of the Company Group by another Person.

 

(h)     Employee agrees that he will reasonably cooperate with any member of the Company Group and their counsel in any legal action or other claim against any member of the Company Group and any legal action or other claim made by any member of the Company Group about which he may have particular knowledge or in which he may be a witness. Such cooperation includes meeting with representatives and counsel of any member of the Company Group to disclose facts; preparing with counsel of any member of the Company Group for depositions, trials, hearings or other proceedings; attending depositions, trials, hearings or other proceedings to provide truthful testimony; and providing other assistance to any member of the Company Group and their counsel in any legal action or claim as may, in the judgment of counsel of any member of the Company Group, be necessary. The Company agrees to reimburse Employee for reasonable expenses incurred in the course of complying with this obligation of cooperation, and after the Company’s obligation to pay Separation Pay and Additional Separation Pay has expired, if Employee is requested and/or required to devote more than 10 hours in a given month in the course of complying with this obligation of cooperation, the Company agrees to compensate Employee for reasonable expenses incurred and for time devoted in excess of 10 hours per month at a reasonable hourly rate to be agreed upon by the parties.

 

6. Restrictive Covenants. Employee acknowledges and agrees that during the course of Employee’s employment with the Company or any member of the Company Group, Employee has had access to confidential information which, if disclosed, would assist in competition against the Company Group, and that Employee has generated goodwill for the Company Group during the course of Employee’s employment. Therefore, Employee hereby acknowledges and agrees that the following restrictive covenants (i) are necessary to protect the goodwill, confidential information, and other legitimate interests of the Company Group, (ii) are reasonable and necessary to induce the Company to enter into this Agreement, and (iii) are of a scope that is reasonably tailored, and not broader than necessary, to protect the legitimate business interests of the Company Group, and do not prevent or preclude Employee from earning a suitable livelihood. Employee hereby agrees to abide by the following restrictive covenants:

 

4

 

 

(a)     Non-Competition. Until the Separation Date, during the remainder of the month in which the Separation Date occurs and for three (3) full calendar months immediately after the month in which the Separation Date occurs (collectively the “Non-Compete Term”), Employee shall not, directly or indirectly, without the prior written consent of the Company, which may be withheld in the Company’s sole and absolute discretion, directly or indirectly engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, serve as an agent, officer, director or consultant to, be associated with or in any manner connected with, lend his name or any similar name to, lend his credit or render services or advice to, any Competitive Business anywhere in North America, provided, however, that nothing herein will be deemed to prevent Employee from acquiring through market purchases and owning, solely as an investment, less than one percent (1%) in the aggregate of the equity securities of any entity that derives more than fifty percent (50%) of its gross revenues from the conduct of any Competitive Business, whose shares are registered under Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are listed or admitted for trading on any United States national securities exchange or are quoted on any system of automated dissemination of quotations of securities prices in common use, so long as Employee is not directly or indirectly a member of any “control group” (within the meaning of the rules and regulations of the Securities and Exchange Commission) of any such issuer; and provided further, however, that nothing herein will be deemed to prevent Employee from acquiring through market purchases and owning, solely as an investment, any shares, units or other interest in a mutual fund, exchange-traded fund, unit investment trust, or similar investment vehicle whose holdings include investments in any Competitive Business or any entity involved in a Competitive Business.

 

(b)     Customers and Employees: Non-Solicitation and Non-Interference. Until the Separation Date, during the remainder of the month in which the Separation Date occurs and for twelve (12) full calendar months immediately after the month in which the Separation Date occurs (collectively the “Non-Solicitation Term”), Employee shall not, directly or indirectly, without the prior written consent of the Company, which may be withheld in the Company’s sole and absolute discretion:

 

(i) whether on Employee’s own behalf or on behalf of another Person, provide or solicit to provide any Competitive Services to any Person that: (x) was at any time in the twelve (12) months prior to the Separation Date a customer, shipper, carrier or other client of any member of the Company Group; or (y) to Employee’s knowledge, was at any time in the twelve (12) months prior to the Separation Date or the solicitation of Competitive Services, a customer, shipper, carrier or other client of any member of the Company Group;

 

(ii) whether on Employee’s own behalf or on behalf of another Person, solicit to employ, or otherwise engage as an employee, independent contractor, agent or otherwise, any Person who: (x) was at any time in the twelve (12) months prior to the Separation Date an employee, independent contractor, or agent of or otherwise engaged with any member of the Company Group; or (y) to Employee’s knowledge, was at any time in the twelve (12) months prior to the solicitation, employment, or engagement of such Person an employee, independent contractor, or agent of or otherwise engaged with any member of the Company Group; or

 

5

 

 

(iii) at any time interfere with any member of the Company Group’s relationship with any Person that: (x) was at any time in the twelve (12) months prior to the Separation Date an employee, contractor, supplier, agent, customer, shipper, carrier or other client of any member of the Company Group; or (y) to Employee’s knowledge, was at any time in the twelve (12) months prior to the interference an employee, contractor, supplier, agent, customer, shipper, carrier or other client of any member of the Company Group; including, without limitation, soliciting, encouraging, advising or influencing such Person(s) to discontinue or reduce the extent of such relationship.

 

(c)     Non-Disclosure. Until the Separation Date and at all times after the Separation Date (continuing indefinitely), Employee will not, directly or indirectly, without the prior written consent of the Company, which may be withheld in the Company’s sole and absolute discretion:

 

(i) divulge, communicate, use to the detriment of any member of the Company Group, or for the benefit of any other Person(s), or misuse in any way, any confidential information, documents, materials or trade secrets pertaining to any member of the Company Group, except as required or compelled by law; or

 

(ii) divulge, communicate, use to the detriment of any member of the Company Group, or for the benefit of any other Person(s), or misuse in any way, any information, documentation, files, or other materials (written or verbal) arising out of or related to any Company Group employee, contractor, customer, shipper, vendor or supplier, except as required or compelled by law, regardless of whether such information, documents or materials are treated as confidential by any member of the Company Group.

 

(d)     Mutual Non-Disparagement. Employee agrees not to do or say anything which would portray any member of the Company Group or any of their respective stockholders, directors, officers, employees, agents, products or services in a negative light or poor manner, except as may be required in legal or statutory proceedings. Likewise, Company agrees that its directors and officers will not do or say anything which would portray Employee in a negative light or poor manner, except as may be required in legal or statutory proceedings. This provision shall become null and void five (5) years after the Separation Date, except as to any matters that occurred prior to the Separation Date. Any matters that occurred prior to the Separation Date will always be protected by this provision.

 

(e)     Reformation; Severability; Injunctive Relief. Employee expressly acknowledges and agrees that the restrictions contained herein are reasonable and no greater than necessary to protect the legitimate interests of the Company Group. However, if any covenant set forth in this Agreement (including, without limitation, this Section 6) is determined by any court to be unenforceable by reason of its extending for too great a period of time or over too great a geographic area, or by reason of its being too extensive in any other respect, such covenant shall be reformed and interpreted to extend only for the longest period of time and over the greatest geographic area, and to otherwise have the broadest application as shall be enforceable. The invalidity or unenforceability of any particular provision (or part thereof) of this Agreement (including, without limitation, this Section 6) shall not affect the other provisions hereof (or parts thereof), which shall continue in full force and effect. Without limiting the foregoing, the covenants contained herein shall be construed as separate covenants, covering their respective subject matters, with respect to each of the separate cities, counties and states, and each political subdivision thereof, within North America. Employee further acknowledges that any violation of this Agreement (including, without limitation, this Section 6) will result in irreparable injury to the Company Group, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to the Company Group for such a violation. Accordingly, Employee agrees that if Employee violates the provisions of this Agreement (including, without limitation, this Section 6), any member of the Company Group, in addition to all other remedies which may be available to it at law or in equity, shall be entitled to specific performance and injunctive relief, without posting bond or other security, but only with proof of actual damages. Such relief will not be exclusive, but will be in addition to all other relief available to the Company Group, at law and equity.

 

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(f)     Certain Defined Terms. For purposes of this Agreement, the following defined terms shall have the meanings set forth below:

 

(i)     “Competitive Business” means any business conducted by any member of the Company Group as of the date of Employee’s termination (including any business where strategic plans were in place as of the date of Employee’s termination for any member of the Company Group to engage in such business).

 

(ii)     “Competitive Services” means those services provided in the furtherance of a Competitive Business.

 

(iii)     “Company Group” means the Company, Covenant Logistics Group, Inc., formerly Covenant Transportation Group, Inc. (“Parent”), successors thereto, and any subsidiary or affiliate of the Company or Parent and including any equity method investments of any of the foregoing (collectively, the “Company Group”).

 

(iv)     “Person” means any individual, person, business, enterprise or legal entity.

 

7. No Admission. It is understood and agreed that by tendering this Agreement to Employee, by offering to enter into it, or by entering into it, the Company has not admitted and is not admitting that it has violated any law or breached any duty owing to Employee by the Company or any member of the Company Group.

 

8. No Effect on COBRA Rights. The parties further agree that nothing in this Agreement shall be construed to waive or affect in any way any rights which Employee may have under the Consolidated Omnibus Budget Reconciliation Act of 1989 (COBRA) to continue at Employee’s own expense any coverage which Employee may have and which Employee may be entitled to continue under the Company's group health insurance program.

 

9. NDA and Other Matters. This Agreement represents the entire and sole agreement between the Parties with respect to the subject matter hereof and supersedes any and all prior negotiations, understandings, representations or agreements whether written or oral. Notwithstanding the foregoing, the Parties acknowledge that Employee has previously entered that certain Confidentiality, Non-Disclosure and Restrictive Covenants Agreement dated June 26, 2011 (the “NDA”), and the Parties expressly intend for such NDA to remain in full force and effect in accordance with the terms of said NDA . However, in the event of a conflict between the terms set forth herein and those set forth in Employee’s NDA, the terms set forth herein shall control. This Agreement cannot be modified, changed or amended, except for in writing signed by the Parties. If any provision of this Agreement is declared invalid or unenforceable, such provision shall be deemed modified to the extent necessary and possible to render it valid and enforceable. In any event, the unenforceability or invalidity of any provision shall not affect any other provision of this Agreement, and this Agreement shall continue in full force and effect, and be construed and enforced, as if such provision had not been included, or had been modified as above provided, as the case may be. This Agreement shall be interpreted and governed by the laws of the State of Tennessee without regard to any conflict of laws rules or provisions of such state, and the Parties agree that any controversy or dispute in any way relating to or arising out of this Agreement shall: (a) first, be promptly submitted to private resolution between the parties (with or without their respective legal counsel being present as the parties may decide), and if such private meeting is unsuccessful within ten (10) days after an invitation to meet has been delivered by one party to the other, then (b) be promptly submitted to non-binding mediation conducted by a mutually agreeable certified mediator in Hamilton County, Tennessee, and if no satisfactory resolution is obtained at the conclusion of the mediation which must occur within twenty (20) days after the private resolution meeting ends, then (c) thereafter be resolved exclusively in the courts located in Hamilton County, Tennessee, and the prevailing party (as determined by the court) shall be entitled to all reasonable attorneys’ fees incurred on behalf of that party in association with the underlying controversy or dispute. The foregoing multi-step resolution process shall not apply with respect to any claims or disputes arising out of alleged violations of Employee’s obligations under Section 6) or Employee’s NDA and the matter may proceed directly to court under sub-item (c) above.

 

THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THE FOREGOING SEPARATION AGREEMENT, FULLY UNDERSTAND IT, AND ARE FREELY AND VOLUNTARILY ENTERING INTO THIS AGREEMENT, INTENDING TO BE LEGALLY BOUND BY THE SAME.

 

IN WITNESS WHEREOF, the parties have executed and delivered, or have caused to be executed and delivered by their duly authorized representatives, this Separation Agreement on the date set forth next to each party's name.

 

EMPLOYEE:                              TRANSPORT MANAGEMENT SERVICES, INC.

 

         

	/s/ Richard B. Cribbs           	By: /s/ Joey B. Hogan      President 
	(Signature)	Title               

Actual Date Execution: August 20, 2020          Actual Date of Execution: August 20, 2020

 

The “Effective Date” of this Agreement shall be the close of business on August 28, 2020 which is the 8th day after Employee’s actual execution of this Agreement.

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EXHIBIT B – GENERAL RELEASE

 

In exchange for the payments and benefits described in the Separation Agreement to which this General Release is attached (the “Agreement”), Employee, on his or her own behalf and on behalf of his or her heirs, executors, administrators, assigns and successors, does hereby covenant not to sue and acknowledges full and complete satisfaction of and hereby releases, absolves and discharges the Company, Parent, each affiliate or subsidiary of the Company or the Parent, and its and their successors and assigns, parents, subsidiaries and affiliates, including any equity method investments of any of the foregoing, past and present, as well as their trustees, directors, officers, agents, attorneys, insurers, stockholders and employees, past and present, and each of them (hereinafter collectively referred to as “Releasees”), with respect to and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, debts, wages, vacation pay, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which Employee now owns or holds or has at any time heretofore owned or held as against said Releasees, or any of them, arising out of or in any way connected with his or her employment or other relationships with the Company, Parent, or its or their subsidiaries or affiliates, including any equity method investments of any of the foregoing, or his or her separation from any such employment or other relationships (collectively, “Released Claims”), including specifically, but without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended by the Older Worker’s Benefit Protection Act (“ADEA”), the federal Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, or any other employment related federal, state or local law, regulation or ordinance; provided, however, that the foregoing release will not include or affect (and the following are expressly excluded from any Released Claims): (i) Employee’s rights under the Agreement; (ii) Employee’s rights to file claims for workers’ compensation or unemployment insurance benefits, (iii) Employee’s regular and usual salary accrued prior to the Separation Date, accrued but unused vacation through the Separation Date, COBRA continuation coverage and life insurance conversion rights, if any, (iv) Employee’s rights to provide information, assist or participate in any investigation, proceedings, or litigation concerning any administrative claim with any government agency under any applicable law that protects such rights, or to file such a claim, or (v) Employee’s rights under any written contracts between the Employee or his or her affiliated entities and any member of the Company Group. This General Release does not (i) limit Employee's ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”), (ii) limit Employee’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company, or (iii) limit Employee’s right to receive an award for information provided to any Government Agencies.

 

Employee acknowledges that the non-disparagement and confidentiality provisions contained in the Agreement infringe on Employee’s rights described in this release, and Employee agrees that he or she is aware of and has consented to such infringement.

 

8

 

 

Employee acknowledges that he or she is waiving and releasing any rights he or she may have under the ADEA and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date (as hereinafter defined) of the Agreement. Employee acknowledges that the consideration given for the Agreement is in addition to anything of value to which he was already entitled. Employee further acknowledges that he or she has been advised by this writing that:

 

(a)     He or she should consult with an attorney of his/her choice prior to executing the Agreement and this General Release;

 

(b)     He or she has at least twenty-one (21) days within which to consider the Agreement and if he/she has not availed himself/herself of that full time period that he/she has failed to do so knowingly and voluntarily;

 

(c)     He or she has seven (7) days following his or her execution of the Agreement to revoke the Agreement and has been and hereby is advised in writing that this Agreement shall not become effective or enforceable until the revocation period has expired;

 

(d)     This Agreement will not be effective until the eighth day after Employee executes and does not revoke the Agreement (the “Effective Date”); and

 

(e)     Nothing in the Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law. Any revocation must be in writing and electronically delivered to the Company’s then VP of Human Resources with confirmed receipt or hand delivered to the Company by close of business on or before the seventh day from the date that Employee signs the Agreement. In the event that Employee exercises his or her right of revocation, neither Employee nor any member of the Company, Parent, or its or their subsidiaries or affiliates, including any equity method investments of any of the foregoing, will have any further rights or obligations under the Agreement.

 

It is the desire and intent of the parties that the provisions of this release be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this release is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be so modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this release; provided, however, that the legality, binding effect and enforceability of the remaining provisions of this release, to the extent the benefits conferred upon the parties by virtue of this release remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provision in such jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Employee represents and warrants that he or she has no present knowledge of any injury, illness or disease to him or her that is or might be compensable as a workers’ compensation claim or similar claim for workplace injuries, illnesses or diseases.

 

Terms used herein and not otherwise defined will have the meanings set forth in the Agreement to which this Release was attached. Intending to be legally bound, I have signed this General Release as of the date written below.

 

Employee Signature: /s/ Richard B. Cribbs

 

Date Signed: August 20, 2020

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