changed, the shares of common
stock represented by each proxy received by the Company will be voted at the
meeting and at any adjournments or postponements of the meeting. If a
shareholders shares of common stock are held in street name by a broker, bank
or other financial institution, such shareholder must contact them to change
his or her vote. Execution of the proxy will in no way affect a shareholders
right to attend the meeting and vote in person. If a shareholder specifies how
the proxy is to be voted on any business to come before the meeting, it will be
voted in accordance with such specification. If no specification is made, it
will be voted
FOR
the election of
Jeffrey T. Bertsch, Lynn J. Davis and Eric S. Rangen as Class III Directors
(Proposal I) and for the approval of Proposals II-VII. Each of the above named
director nominees have been previously elected by the shareholders.
As
of the close of business on October 8, 2010, the record date for determining
shareholders entitled to notice of, and to vote at, the meeting, the Company
had 6,688,835 outstanding shares of common stock, par value $1.00 per share,
which is the only class of the Companys capital stock entitled to vote at the
meeting. Each share of common stock issued and outstanding as of the record date
is entitled to one vote upon each matter to be presented at the meeting, and
cumulative voting for directors is not permitted. A quorum, consisting of a
majority of the outstanding shares of common stock entitled to vote at the
meeting, must be present in person or represented by proxy before action may be
taken at the meeting.
Votes
cast by proxy or in person will be counted by the inspector of election
appointed for the meeting who will be present at the meeting. The affirmative
vote of a plurality of the shares of common stock present in person or
represented by proxy at the meeting and entitled to vote is required for the
election of the director nominees named in this proxy statement. For Proposal
No. I, the election of Class III Directors, the three nominees that receive the
highest number of FOR votes will be elected. For the other Proposals, the
affirmative vote of the holders of two-thirds of the shares of common stock
represented in person or proxy and entitled to vote will be required for
approval. A WITHHELD vote will be counted for purposes of determining whether
there is a quorum, but will not be voted in favor of the nominee with respect
to whom authority has been withheld. A proxy voted ABSTAIN with respect to
Proposal Nos. II, III, IV, V, VI and VII will not be voted, although it will be
considered present and entitled to vote, and thus has the same effect as a
negative vote. A broker non-vote is treated as present for purposes of
determining a quorum, but will not be counted as shares entitled to vote and
will have no effect on the result of the vote.
2
While
the Board knows of no other matter to be presented at the meeting or any
adjournment or postponement of the meeting, all proxies returned to the Company
will be voted on any such matter in accordance with the judgment of the
proxies.
EXPENSE OF SOLICITATION
The
cost of the solicitation of proxies on behalf of the Board will be paid by the
Company. Solicitation of proxies will be principally by mail. In addition, the
officers or employees of the Company and others may solicit proxies, either
personally, by telephone, by special letter, or by other forms of
communication. The Company will also make arrangements with banks, brokerage
houses and other custodians, nominees and fiduciaries to send proxies and proxy
material to their principals and will reimburse them for reasonable expenses in
so doing. Officers and employees of the Company will not receive additional
compensation in connection with the solicitation of proxies.
PROPOSAL I
ELECTION OF DIRECTORS
Our
Restated Articles of Incorporation, as amended, permit the election of thirteen
Directors. The Board currently consists of ten persons divided into three
classes. At this time, the Board has determined to maintain the size of the
Board at ten members. At each Annual Meeting the terms of one class of
Directors expire and persons are elected to that class for terms of three years
or until their respective successors are duly qualified and elected or until
their earlier resignation, removal or termination. The Nominating &
Compensation Committee believes that, as a group, the nominees below bring a
diverse range of backgrounds, experiences and perspectives to the Boards
deliberations.
Set
forth below is information with respect to all Board members, including the
nominees, their recent employment or principal occupation, a summary of their
specific experience, qualifications, attributes or skills that led to the conclusion
that they are qualified to serve as a director, the names of other public
companies for which they currently serve as a director or have served as a
director within the past five years, their period of service as a Flexsteel
director and their age.
The
Board of Directors believes that the directors listed below come from a wide
variety of business backgrounds and the majority are independent, possess
highly ethical standards, uncompromising integrity and operate in the best
interest of the shareholders.
3
DIRECTORS WHOSE TERMS EXPIRE AT THE 2010 ANNUAL MEETING,
CLASS III
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Jeffrey T. Bertsch
Age 55
Director since 1997
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Senior Vice President
Corporate Services, 1989 to present, Flexsteel Industries, Inc.; Director,
American Trust and Savings Bank (an Iowa bank).
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Mr. Bertsch provides
insight and perspective on operations, finance, supply- chain management and
Flexsteel culture.
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Lynn J. Davis
Age 63
Director since 1999
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Retired President and
Chief Operating Officer, 2005 to 2006, August Technology (a public supplier
of inspection equipment for microelectronic industry); Partner, 2002 to 2005,
Tate Capital Partners (private investment firm); President, 2001, ADC
Telecommunications, Inc. (a public supplier of network infrastructure
products and services); Director, Automated Quality Technologies, Inc.
(manufacturer of non-contact measurement equipment); Director, Superconductor
Technologies, Inc. (a public manufacturer of wireless communication
infrastructure).
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Mr. Davis brings a wide
range of experience to our Board through his service in various management
roles and as an independent director. Mr. Davis brings experience in finance,
general management, human resources, marketing, sales and manufacturing.
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Mr. Davis is a member of
the Audit and Ethics Committee and the Nominating and Compensation Committee.
The Board has determined that he is an audit committee financial expert as
defined by SEC rules.
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Eric S. Rangen
Age 53
Director since 2002
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Senior Vice President and
Chief Accounting Officer, 2006 to present, UnitedHealth Group (a public
diversified health and well-being company); Executive Vice President and
Chief Financial Officer, 2001 to 2006, Alliant Techsystems Inc. (a public
advanced weapons and space systems company); Partner 1994 to 2001, Deloitte
& Touche LLP (an accounting firm); Director, Global Defense Technology
& Systems, Inc. (a public intelligence services company).
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Mr. Rangen brings
experience in finance, general management, and human resources to our Board.
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4
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Mr. Rangen is Chair of the
Audit and Ethics Committee and a member of the Nominating and Compensation
Committee. The Board has determined that he is an audit committee financial
expert as defined by SEC rules.
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DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE
AT THE 2011 ANNUAL MEETING,
CLASS I
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Thomas E. Holloran
Age 80
Director since 1971
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Professor Emeritus,
College of Business, Senior Distinguished Fellow, School of Law, University
of St. Thomas, St. Paul; former Director, Medtronic, Inc. (a medical device
company).
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Mr. Holloran has served
nearly forty years on our Board. Mr. Holloran brings expertise in business
and law to our Board and Flexsteel culture.
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Mr. Holloran is a member
and former Chair of the Audit & Ethics Committee and a member of the
Nominating & Compensation Committee.
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L. Bruce Boylen
Age 77
Director since 1993
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Retired Vice President,
Fleetwood Enterprises, Inc. (a public manufacturer of recreational vehicles
and manufactured homes); Chairman of the Board, Flexsteel Industries, Inc.,
2000 to present.
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Mr. Boylen brings
experience in finance, sales, marketing, manufacturing, human resources and
operations to our Board and Flexsteel culture.
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Ronald J. Klosterman
Age 62
Director since 2005
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Chief Executive Officer,
2006 to present; President, 2005 to present; Chief Operating Officer, 2005 to
2006; Director of Operations, 2004 to 2005; Executive Vice President and
Chief Financial Officer, 1995 to 2005, Flexsteel Industries, Inc.; Director,
EDSB (an Iowa bank); Director, Iowa Health System (network of hospitals in
Iowa and Illinois).
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Mr. Klosterman serves as
the leader of Flexsteel and brings in-depth knowledge of Flexsteels business
and culture and experience in finance, human resources, operations,
manufacturing, and management to our Board and Flexsteel culture.
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5
DIRECTORS CONTINUING TO SERVE WHOSE TERMS EXPIRE
AT THE 2012 ANNUAL MEETING,
CLASS II
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James R. Richardson
Age 66
Director since 1990
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Senior Vice President
Sales and Marketing, 1994 to present, Flexsteel Industries, Inc.
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Mr. Richardson brings
knowledge of our supply-chain, human resources and marketing to the Board and
Flexsteel culture.
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Patrick M. Crahan
Age 62
Director since 1997
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Senior Vice President
Commercial Seating, 2003 to present, Flexsteel Industries, Inc.; Trustee,
University of Dubuque; Trustee, Dubuque Racing Association (not-for profit
gaming); Director, Dubuque Bank and Trust Company (an Iowa bank).
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Mr. Crahan brings
experience in operations, manufacturing, sales, finance, human resources and
general management to our Board and Flexsteel culture.
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Robert E. Deignan
Age 71
Director since 2001
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Senior Counsel, Baker
& McKenzie LLP (law firm).
Mr. Deignan brings
expertise in legal matters and general management to our Board.
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Mr. Deignan is a member
and former Chair of the Nominating & Compensation Committee and a member
of the Audit & Ethics Committee.
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Mary C. Bottie
Age 51
Director since 2003
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Retired Vice President of
Marketing and General Management, Motorola, Inc. (a public integrated
communications and embedded electronic solutions company).
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Ms. Bottie brings
expertise in marketing, general management, human resources, operations, and
sales to our Board.
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Ms. Bottie is Chair of the Nominating and Compensation
Committee and a member of the Audit & Ethics Committee.
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The
Board has nominated, based on the recommendation of the Nominating and
Compensation Committee, Jeffrey T. Bertsch, Lynn J. Davis and Eric S. Rangen
for election as Class III Directors of the Company. The Class III Directors
next term expires at the 2013 Annual Meeting or upon their respective
successors being elected and qualified or until their
6
earlier
resignation, removal or termination. It is the intention of the proxies named
herein to vote
FOR
these nominees
unless otherwise directed in the proxy. All of the nominees have been
previously elected by the shareholders.
All
nominees named above have consented to serve as Directors if elected. In the
event that any of the nominees should fail to stand for election, the persons
named as proxy in the enclosed form of proxy intend to vote for substitute
nominees as may be selected by the Board. The proxies cannot be voted for a
greater number of persons than the number of nominees named in this proxy
statement.
The
Board recommends a vote for its Director nominees named in this proxy
statement. Proxies solicited by the Board will be so voted unless shareholders
specify otherwise in their proxies.
PROPOSALS II, III, IV, V, VI AND VII
APPROVAL OF AMENDMENTS
TO THE 1983 RESTATED ARTICLES OF INCORPORATION.
Our
Board, as part of an effort to modernize and conform to Minnesota law our
Articles of Incorporation, has unanimously adopted and now recommends
shareholder approval of six proposals to amend our 1983 Restated Articles of
Incorporation.
The
following summary of the proposed amendments may not contain all the information
that is important to you. The complete text of the proposed amended and
restated Articles reflecting the amendments proposed in this Proxy Statement is
set forth in Appendix A. This summary is qualified in its entirety to the text
of the proposed Amended and Restated Articles in Appendix A, which you are
urged to read in its entirety. The Company reserves the right to not implement
any particular Proposal adopted by the shareholders in the event one or more of
the other proposals is not adopted.
7
PROPOSAL II
APPROVAL OF AMENDMENT TO ARTICLE IV OF OUR
1983 RESTATED
ARTICLES OF INCORPORATION REGARDING AUTHORIZED CAPITAL.
The
Company is proposing an amendment to its 1983 Restated Articles of
Incorporation to eliminate the specifically designated shares of preferred
stock but reserve the right to the Board the authority to establish more than
one class or series of shares and to fix the relative rights and preferences of
any such different class or series.
The
Company currently has authorized 15,000,000 shares of common stock, $1 par
value, 60,000 cumulative preferred shares, $50 par value, and 700,000 preferred
shares, $1 par value. There are no preferred shares currently outstanding.
The
Board believes it is in the best interest of the Company to modify its capital
structure and cancel the authorized preferred stock. This would result in the
articles authorizing a total of 15,000,000 shares, of which there are 6,688,835
shares of common stock issued and outstanding as of October 8, 2010. The
unissued shares would be available to issue as common stock or as preferred
stock. This Proposal II will provide the Board significant flexibility to
designate rights, voting power and preferences of preferred stock. The Board
has no plans to issue preferred stock.
The
authority of the Board to issue additional shares of common or preferred stock
may potentially have an anti-takeover effect by making it more difficult to
obtain shareholder approval of various transactions. For example, the Board
could authorize preferred stock and issue it to another person or entity to
make it more difficult for another entity to obtain control of the Company.
Presently the Board has no intention of issuing additional shares for such
purposes and has no knowledge of any takeover efforts.
An
affirmative vote of 2/3 of the voting power of the shares present and entitled
to vote is required to approve this Proposal Number II.
The
Board recommends a vote FOR Proposal II.
8
PROPOSAL III
APPROVAL OF AMENDMENT TO ARTICLE V OF THE
1983 RESTATED
ARTICLES OF INCORPORATION REGARDING NOTICE OF NOMINATIONS TO
THE BOARD OF DIRECTORS AND INDEMNIFICATION
Article
V of the 1983 Restated Articles of Incorporation includes a provision regarding
a procedure for shareholders to make nominations for the election of directors
and the timing for shareholders to make such nominations. The 1983 Restated
Articles of Incorporation currently provide that any nomination not intended to
be included in proxy materials must be delivered to the Secretary of the
Company not less than 18 days and no more that 50 days prior to the day of any
meeting of shareholders called for the election of directors. The rules
relating to nomination of directors are commonly included in a companys bylaws
and amendments permitted to be made with Board approval. The Board believes it
is in the best interest of the Company to delete the nomination notice
provisions from the Articles and place them in the bylaws to enable the Board
to respond to changes in laws and regulations on a timely basis. The Board
further believes that it has the best interest of the Company to, in general,
require not less than 90 days notice of any nomination before an annual
meeting, to provide the Company with sufficient time to respond, if necessary,
in the proxy materials. The Board intends to amend the Companys bylaws
accordingly if this Proposal III is approved.
Article
V also includes limitation on the maximum aggregate amount of indemnification
payable to all persons eligible for indemnification to $5,000,000 in 1987
constant dollars or approximately $10,500,000 in 2010 dollars over and above
all insurance amounts paid. The Board of Directors believes that this provision
is not consistent with the current practice for public companies and could
negatively affect the ability of the Company to attract and retain qualified
directors. The proposed amendment would eliminate any limitation in the
Articles of Incorporation on indemnity payable to eligible persons and the
Board intends to adopt language in its bylaws which would provide that the
eligible persons would be entitled to indemnification to the full extent
provided by Minnesota Business Corporation Act if this Proposal III is
approved.
An
affirmative vote of 2/3 of the voting power of the shares present and entitled
to vote is required to approve this Proposal Number III.
The
Board recommends a vote FOR Proposal III.
9
PROPOSAL IV
APPROVAL OF AMENDMENT TO DELETE ARTICLE VII
OF THE
1983 RESTATED ARTICLES OF INCORPORATION REGARDING ACTIONS
REQUIRING SHAREHOLDER APPROVAL
Article
VII sets forth a list of actions that the Board of Directors can take only with
the approval of two-thirds of the voting power of the shares present and
entitled to vote except for certain actions where the Board determines the
action is in the course of business of the Company. This Article is unusual
and differs substantially from the Minnesota Business Corporation Act. This
Article is unnecessary because the shareholder protections it was designed to
provide are substantially set forth in the Minnesota Business Corporation Act.
For example the Minnesota Business Corporation requires the approval of the
majority of all outstanding shares for a merger of the Company into another
entity and for the sale of substantially all of the assets of the Company. In
addition, the required two-thirds of the voting power of the shares present and
entitled to vote as now set forth in the 1983 Restated Articles of
Incorporation may not meet the current Minnesota law requirement of a majority
of all shares outstanding for approval of certain matters. The Board believes
it is in the Companys best interest to delete Article VII in its entirety as
it is no longer necessary and it is in part inconsistent with the Minnesota
Business Corporation Act.
An
affirmative vote of 2/3 of the voting power of the shares present and entitled
to vote is required to approve this Proposal Number IV.
The
Board recommends a vote FOR Proposal IV.
PROPOSAL V
APPROVAL OF AMENDMENT TO DELETE ARTICLE IX OF
THE
1983 RESTATED ARTICLES OF INCORPORATION REGARDING ACTIONS
AUTHORIZED TO BE TAKEN BY THE BOARD OF DIRECTORS
WITHOUT SHAREHOLDER APPROVAL
Article
IX sets forth a list of actions that the Board may take without prior
shareholder approval. Article IX specifically provides that its language is not
in limitation of the powers conferred by statute. The Minnesota Business
Corporation Act provides general authority to the Board to manage the business
and affairs of a corporation, and accordingly the grant of authority by this
Article is unnecessary. The deletion of this Article would also remove the
provision that two-thirds of the voting power of the shares present and
entitled to vote is required for shareholders to amend the bylaws. Removing
this provision results in default
10
to the
statutory requirement that the bylaws can be amended by a majority of the
voting power present and entitled to vote. The Board believes there is no
reason for such a voting requirement in excess of the general requirement under
the Minnesota Business Corporation Act.
The
deletion of Article IX also deletes the requirement that any motion to make,
alter or rescind a bylaw provision must be delivered to the Secretary of the
Company not less than 18 days and no more than 50 days prior to the day of any
meeting of shareholders. The Board believes it is in the best interest of the
Company to delete the notice provisions for amending the bylaws from the
Articles and place notice requirements in the bylaws. The Board further
believes that it is in the best interest of the Company to in general require
not less than 90 days notice of any nomination before a shareholder meeting for
such purpose, to provide the Company with sufficient time to respond, if
necessary, in the proxy materials. The Board intends to amend the Companys
bylaws accordingly, if this Proposal V is approved.
The
deletion of this Article IX removes the anti-greenmail provision which is in
conflict with the Minnesota Business Corporation Act.
An
affirmative vote of 2/3 of the voting power of the shares present and entitled
to vote is required to approve this Proposal Number V.
The
Board recommends a vote FOR Proposal V.
PROPOSAL VI
APPROVAL OF AMENDMENT TO AUTHORIZE THE
BOARD OF DIRECTORS TO ACT BY LESS THAN UNANIMOUS WRITTEN
CONSENT WHEN PERMITTED BY LAW
The
Minnesota Business Corporation Act permits the written action by unanimous
written action even if not permitted by a companys articles of incorporation.
The Board believes it is in the best interest of the Company that for actions
that do not require shareholder approval, the Board may act by written action
by the number of directors required to take the same action at a meeting at
which all directors were present. The adoption of this language is designed to
provide flexibility to the Board so that it can act by written consent in
addition to the traditional in-person meeting or a meeting by remote
communication. This would allow the Board to take an action on an expedited
basis when obtaining a unanimous written action is not possible.
11
An
affirmative vote of 2/3 of the voting power of the shares present and entitled
to vote is required to approve this Proposal Number VI.
The
Board recommends a vote FOR Proposal VI.
PROPOSAL VII
APPROVAL TO AMEND AND RESTATE THE 1983
RESTATED
ARTICLES OF INCORPORATION TO MAKE CERTAIN OTHER CHANGES TO
CONFORM THE COMPANYS ARTICLES OF INCORPORATION TO THE
MINNESOTA BUSINESS CORPORATION ACT.
In
addition to the proposed amendments to the 1983 Restated Articles of
Incorporation described in Proposals II, III, IV, V and VI, the Board recommends
shareholder approval of a proposal to amend and restate our 1983 Restated
Articles of Incorporation to integrate all of the amendments approved by the
shareholders at the Annual Meeting into one document and to make such further
amendments necessary to simplify the Articles of Incorporation, to correct
various cross-references, to remove outdated and inconsistent language and
replace it with language consistent and not in conflict with the Minnesota
Business Corporation Act and to renumber and reformat the Articles of
Incorporation. Reference is made to the proposed Amended and Restated Articles
set forth as Appendix A hereto, which reflects all of the amendments proposed
in this Proxy Statement.
An
affirmative vote of 2/3 of the voting power of the shares present and entitled
to vote is required to approve this Proposal Number VII.
The
Board recommends a vote FOR Proposal VII.
12
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following table sets forth the cash and non-cash compensation for the last two
fiscal years awarded to or earned by (i) the individual that served as our
principal executive officer (Chief Executive Officer) during our fiscal year
ended June 30, 2010, referred to as
fiscal
2010
; (ii) our two most highly compensated individuals who served as
executive officers of Flexsteel other than our Chief Executive Officer at the
end of fiscal 2010. The Chief Executive Officer and the two executive officers
named below are collectively referred to in this proxy statement as the
named executive officers.
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Name and
Principal Position
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Year
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Salary
($)
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Stock
Awards
($)(1)
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Option
Awards
($)(2)
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Non-Equity
Incentive
Plan
Compensation
($)(3)
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All
Other
Compensation
($)
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Total ($)
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Ronald J. Klosterman
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2010
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477,600
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169,260
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41,000
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305,670
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215,875
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(5)
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1,209,405
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Chief Executive Officer
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2009
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470,100
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169,260
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12,900
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(4)
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143,249
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(5)
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795,509
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James R. Richardson
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2010
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299,250
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53,460
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24,600
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163,040
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71,758
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(5)
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612,108
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Senior Vice President Marketing
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2009
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297,000
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53,460
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8,600
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(4)
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78,537
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(5)
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437,597
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Donald D. Dreher
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2010
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382,200
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|
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24,600
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162,370
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34,400
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(6)
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603,570
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President and Chief Executive Officer of DMI Furniture, Inc.
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2009
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379,200
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8,600
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(4)
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32,036
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(6)
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419,836
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(1)
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The amounts shown represent the potential three-year
performance stock awards granted under the 2007 Long-Term Management
Incentive Plan during each fiscal year. No shares will be issued unless the
minimum specific performance goals set by the Nominating & Compensation
Committee are met. The 2010 three-year performance period is July 1, 2009
June 30, 2012. The 2009 three-year performance period is July 1, 2008 June
30, 2011. Shares earned, if any, will be issued following each respective
three-year performance period. The amounts shown reflect the grant date fair value
of the awards assuming achievement of the at target performance goals. The
maximum share award value that could be issued for each of 2010 and 2009 for
Mr. Klosterman is $270,830 and for Mr. Richardson is $85,560.
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(2)
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The amounts shown represent the aggregate grant date
fair value computed in accordance with FASB ASC Topic 718 used in calculating
the stock option award amount may be found in Note 8 to the audited financial
statements in our Annual Report on Form 10-K for the fiscal year ended June
30, 2010.
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(3)
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The amounts shown represent the cash bonuses earned
under the Companys annual incentive program.
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(4)
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In June 2008, the
Nominating and Compensation Committee established the targets for the
Companys Executive Officers annual incentive awards. At the end of fiscal
year 2009, it was determined that the target for free cash flow was exceeded
and the Executive Officers as a group were eligible to receive $306,000 in
cash bonuses. The Executive Officers believed that it was inappropriate to
receive any cash bonuses for fiscal year 2009 due to the overall actions
taken in response to the dramatic economic downturn. These actions included
closing facilities, significant employee terminations, salary deferrals and a
reduction in the dividend payments to
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shareholders. The Company experienced significant
declines in revenue, operating results were near breakeven and the Company
recorded a net loss. As many of the factors affecting fiscal year 2009 could
not have been anticipated when the targets were established, the Nominating
and Compensation Committee concurred with the recommendation of the Executive
Officers and no cash bonuses were awarded or paid for fiscal year 2009.
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(5)
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Includes for the named executive officer indicated
amounts paid or accrued for the following perquisites and personal benefits:
car allowance or company-provided car, tax planning services, country club
dues, supplemental health insurance, furniture program, company retirement
plan contributions and matching contributions to our 401(k) plan. The amounts
of our contribution to the senior officer supplemental retirement plan for
2010 and 2009 for Mr. Klosterman were $151,000 and $93,000, respectively and
for Mr. Richardson were $61,000 and $31,000, respectively.
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(6)
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Includes for the named executive officer indicated
amounts paid for the following perquisites and personal benefits: car
allowance, tax planning services, country club dues, supplemental health
insurance and matching contributions to the Companys 401(k) plan.
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Annual
Incentive Program.
The plan is structured as an annual
cash payment tied to the achievement of Company objectives during the fiscal
year. The incentive award levels are expressed as a percentage of the named
executive officers salary ranging from 40% to 75% based on the individuals
responsibility level. The objectives for fiscal year 2010 for each of the named
executive officers, including weighting for each objective, were (i) Mr.
Klosterman60% diluted earnings per share, 20% net sales, and 20% free cash
flow; (ii) Mr. Richardson30% diluted earnings per share, 10% net sales, 10%
free cash flow, and 50% related to individual goals; and (iii) Mr. Dreher20%
diluted earnings per share, 10% net sales, 10% free cash flow, and 60% related
to individual goals.
2007
Long-Term Management Incentive Compensation Plan.
The
plan provides for shares of common stock and cash to be awarded to officers and
key employees based on performance targets set by the Nominating and
Compensation Committee of the Board. The Companys shareholders approved
500,000 shares to be issued under the plan. No shares have been issued as of
June 30, 2010. The committee selected consolidated operating results for
organic net sales (weighted 20%) and fully-diluted earnings per share (weighted
80%) for the three-year performance periods beginning July 1, 2008 and ending
on June 30, 2011, beginning July 1, 2009 and ending on June 30, 2012, and
beginning July 1, 2010 and ending on June 30, 2013. The Committee has also
specified that payouts, if any, for awards earned under the fiscal years
2009-2011, 2010-2012 and 2011-2013 performance periods will be 60% stock and
40% cash.
We
offer the following retirement plan benefits to our executive officers, other
than Donald D. Dreher (who receives the benefits required by his employment
agreement described below):
Retirement Savings
Plans.
We maintain the Flexsteel Industries, Inc. Salaried
Employees Retirement and 401(k) Plan, referred to as the
Retirement Plan
, a qualified plan available
generally to all salaried employees. The Retirement Plan provides that we can
make
14
discretionary
contributions, on a non-discriminatory basis, under the Retirement Plan. There
was no discretionary contribution during fiscal years 2010 and 2009. The
Retirement Plan also provides for each participant to make elective
contributions up to 50% of base salary and annual cash bonus (pay), subject to
Internal Revenue Code limits, which are matched by us at 25% of the first 4% of
pay contributed by the participant. In addition, the Retirement Plan requires that
we contribute 4% of pay up to the Social Security base and 6% of pay in excess
of the Social Security base on behalf of each participant in the plan. The
amount of these matching contributions and other required company contributions
is shown in the Summary Compensation Table in the column titled All other
compensation above.
Nonqualified Voluntary
Deferred Compensation and Senior Officer Supplemental Retirement Plans.
Voluntary
Deferred Compensation
We maintain the Flexsteel Industries,
Inc. Voluntary Deferred Compensation Plan, referred to as the
Voluntary Plan
, which allows our executive
officers the opportunity to voluntarily defer, based on annual elections, 10%
to 30% of their base salary, 10% to 100% of annual incentive compensation and
33% to 100% of their long-term incentive compensation. We offer this
opportunity to our executive officers to assist them in income tax and estate
planning purposes. The executive officer may elect an earnings credit based on
the prime interest rate effective on January 1 of each calendar year, the
annual return of the S&P 500 Index as of the end of calendar year, or a
combination of the two. Distributions are made upon the earliest of the
participants death, disability, or the date which is six months after the date
of the executives separation of service from the Company. The Voluntary Plan
does not permit us to make contributions.
Senior
Officer Supplemental Retirement Plan
We maintain
supplemental retirement plans, collectively referred to as the
Supplemental Plan
, which provides for
additional annual defined contributions toward retirement benefits to our
senior executive officers. The additional contribution is stipulated in the
executives individual agreements or in the document governing the
arrangements. Earnings are credited to the accumulated contributions based on
the investment return of assets we designate for this obligation. The amount of
the contribution for each named executive officer is reported in the Summary
Compensation Table in the column titled All other compensation. Distributions
begin when the executive attains age 65 and retires or in some cases when the
executive terminates employment. Distributions are paid in installments or lump
sums as elected by the executive. Under the Supplemental Plan our named
executive officers are entitled to monthly payments of $5,000 until they reach
or would have reached age 65 upon termination of employment due to death or
disability.
15
Employment
Agreement for Donald D. Dreher.
On October 1, 2006, we
entered into an employment agreement with Donald D. Dreher, a Senior Vice
President of Flexsteel and Chief Executive Officer and President of DMI
Furniture, Inc. and on June 27, 2008, we entered into an amendment to the
employment agreement extending the term of the agreement from December 31, 2009
to September 30, 2012, unless terminated prior to that time as provided in the
employment agreement. We have the right to terminate the employment agreement
upon 30 days advance notice without cause and can terminate the employment
agreement for cause (as defined in the employment agreement) upon 120 days
advance notice. Under the terms of the employment agreement, Mr. Dreher is
entitled to a base annual salary of $379,200 and an annual bonus, subject to
achieving annual performance levels established by our Board, of not less than
$50,000, unless our subsidiary, DMI Furniture, Inc., reports a financial
pre-tax loss (before this bonus) in which case no bonus shall be paid. Mr.
Drehers employment agreement also provides that we provide him with life
insurance; health, disability and travel accident insurance consistent with DMI
Furniture, Incs coverage; automobile allowance; reimbursement for certain
medical care expenses; personal tax and financial planning expense allowance;
and country club dues. If the employment agreement is terminated without cause
prior to September 30, 2012, Mr. Dreher is entitled to payment in one lump sum
of the balance of his base salary through September 30, 2012 so long as he
agrees to comply with the noncompete provisions of the employment agreement.
The employment agreement also contains a 24-month post-termination noncompete
provision and non-solicitation and confidentiality provisions. Assuming Mr.
Dreher was terminated without cause effective June 30, 2010, he would have been
entitled to an estimated lump sum cash severance payment in the aggregate
amount of approximately $860,000. The foregoing amounts are estimates of the
amounts that would have been paid out to Mr. Dreher upon his termination of
employment. The actual amounts to be paid out can only be determined at the
time Mr. Dreher in fact terminates employment with us.
Outstanding Equity Awards at Fiscal Year-End
The
following table sets forth certain information relating to equity awards
outstanding at June 30, 2010 for each of our named executive officers.
16
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Option Awards
(1)
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Stock Awards
(2)(3)
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Name
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Option
Grant
Date
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Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
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Option
Exercise
Price
($)
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Option
Expiration
Date
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Performance
Period
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Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)
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Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)
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Ronald J. Klosterman
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12/07/2009
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25,000
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8.42
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12/07/2019
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7/1/2008-
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12/10/2007
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15,000
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12.35
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12/10/2017
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6/30/2011
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5,264
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$
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57,904
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12/11/2006
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15,000
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12.65
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12/11/2016
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7/1/2009-
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12/13/2005
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12,000
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14.40
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12/13/2015
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6/30/2012
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7,066
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$
|
77,726
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12/14/2004
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12,000
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16.49
|
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12/04/2014
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11/25/2003
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12,000
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19.21
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11/25/2013
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12/09/2002
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10,750
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15.925
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12/09/2012
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Donald D. Dreher
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12/07/2009
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15,000
|
|
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8.42
|
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12/07/2019
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12/08/2008
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20,000
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6.81
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12/08/2018
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12/10/2007
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10,000
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12.35
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12/10/2017
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12/11/2006
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10,000
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12.65
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12/11/2016
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12/13/2005
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10,750
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14.40
|
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12/13/2015
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|
|
|
|
|
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|
|
|
|
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12/14/2004
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10,000
|
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16.49
|
|
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12/04/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
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11/25/2003
|
|
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8,000
|
|
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19.21
|
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11/25/2013
|
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|
|
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|
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James R. Richardson
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12/10/2007
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10,000
|
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12.35
|
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12/10/2017
|
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7/1/2008-
|
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12/11/2006
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10,000
|
|
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12.65
|
|
|
12/11/2016
|
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6/30/2011
|
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1,664
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$
|
18,304
|
|
|
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12/13/2005
|
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10,750
|
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14.40
|
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12/13/2015
|
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7/1/2009-
|
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12/14/2004
|
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10,750
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16.49
|
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12/04/2014
|
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6/30/2012
|
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2,233
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$
|
24,563
|
|
|
|
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11/25/2003
|
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10,750
|
|
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19.21
|
|
|
11/25/2013
|
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12/09/2002
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10,750
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15.925
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12/09/2012
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(1)
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All option awards are fully vested as of the date of
grant.
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(2)
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The amounts shown represent the potential three-year
performance stock awards granted under the 2007 Long-Term Management
Incentive Plan during each fiscal year. No shares will be issued unless the
minimum specific performance goals set by the Nominating & Compensation
Committee are met. Shares earned, if any, will be issued following each
respective three-year performance period. The amounts shown reflect the fair
value of the awards as of June 30, 2010 closing stock price assuming
achievement of the minimum performance goals.
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(3)
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The closing stock price was $11.00 per share on June
30, 2010.
|
17
DIRECTOR COMPENSATION
The
following table sets forth the cash and non-cash compensation for fiscal 2010
awarded to or earned by each of our directors who is not also a named executive
officer.
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Name
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Fees Earned or
Paid in Cash
($)(1)
|
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Option
Awards
($)(2)
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Total
($)
|
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L. Bruce Boylen
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46,600
|
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4,175
|
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50,775
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Mary C. Bottie
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36,800
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4,175
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40,975
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Lynn J. Davis
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35,100
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4,175
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39,275
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Robert E. Deignan
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36,600
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4,175
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40,775
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Thomas E. Holloran
(3)
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36,400
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4,175
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40,575
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Eric S. Rangen
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37,000
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4,175
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41,175
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(1)
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Each Director who is not an employee of the Company
is paid a retainer at the rate of $14,000 per year. In addition, each is paid
a fee of $3,000 for each Board meeting each attends. The Chairman of the
Board is paid a retainer of $24,500 per year and a fee of $5,200 for each
Board meeting attended. For attending a committee meeting or a meeting of
independent directors each is paid a fee of $1,300. The Chairman of each
Committee is paid $1,500 for each meeting attended. We pay no additional
remuneration to our employees who are Directors.
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(2)
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The amounts shown represent the aggregate grant date
fair value computed in accordance with FASB ASC Topic 718. Each Director who
is not employed by us receives on the first business day after each annual
meeting a non-discretionary, non-qualified stock option grant for 2,500 shares
valued at fair market value on the date of grant, exercisable for 10 years.
Each person who becomes for the first time a non-employee member of the
Board, including by reason of election, appointment or lapse of three (3)
years since employment by us, will receive an immediate one-time option grant
for 2,500 shares.
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(3)
|
We have a long-standing agreement with Thomas E.
Holloran pursuant to which we will pay to him, or his beneficiaries, $20,000
after he ceases to be a Director as additional compensation in recognition of
Director services rendered.
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(4)
|
As of June 30, 2010, each Director who is not an
employee had the following stock options outstanding; Mr. Boylen, 22,000
options; Ms. Bottie, 15,000 options; Mr. Davis, 17,500 options; Mr. Deignan,
18,000 options; Mr. Holloran, 22,000 options; and Mr. Rangen, 22,000 options.
|
18
CORPORATE GOVERNANCE
Board of Directors
Our
Board of Directors is currently comprised of the ten members identified under
Proposal 1 (Election of Directors). During the fiscal year ended June 30, 2010,
four meetings of the Board were held. All of the directors of the Company
attended no less than 75% of the meetings of the Board and the committees on
which they served. The Company does not have a formal policy regarding
attendance by Board members at the Companys annual meetings, but the Board
encourages all its members to attend the annual meeting of shareholders. Nine
members of the Board of Directors attended the prior years annual meeting.
The
Board has determined that the following directors, which constitute a majority
of the Board of Directors, are independent directors as defined by The NASDAQ
Stock Market listing standards: Mary C. Bottie, L. Bruce Boylen, Lynn J. Davis,
Robert E. Deignan, Thomas E. Holloran and Eric S. Rangen. The independent
directors meet periodically in executive session without the Chief Executive
Officer or other management directors present. Thomas E. Holloran presides at
these meetings.
Board Leadership Structure
The
Board elected an independent director, Mr. Boylen, to serve as Chairman of the
Board at this time. Our By-Laws provide that the Chairman of the Board may be
an independent director or the Chief Executive Officer of the Company. In
making leadership determinations, the Board considers many factors including
the specific needs of the business and what is in the best interest of our
shareholders. The Board believes that presently it is in the best interest of
the Company that the positions of Chairman of the Board and Chief Executive
Officer are separate. The Board believes that this separation is presently
appropriate as it allows the Chief Executive Officer to focus primarily on
leading our day-to-day operations while the Chairman of the Board can focus on
leading the Board.
Ability of Shareholders to Communicate with the Board of
Directors
The
Board has provided the means by which shareholders may send communications to
the Board or to individual members of the Board. Such communications, whether
by letter, email or telephone should be directed to the Secretary of the
Company who will forward them to the intended recipients. However, unsolicited
advertisements or invitations to conferences or promotional material, in the
discretion of the Secretary, may not be forwarded to the directors.
19
Committees of the Board
Our
Board of Directors has established two standing committees of the Board. The
names of the committees and the principal duties are as follows:
Audit
and Ethics Committee
Confers with the independent registered public accounting firm on
various matters, including the scope and results of the audit; authorizes
special reviews or audits; reviews internal auditing procedures and the
adequacy of internal controls; and reviews policies and practices respecting
compliance with laws, conflicts of interest and ethical standards of the
Company. The Committee held six meetings during the fiscal year ended June 30,
2010. The Committee members are Eric S. Rangen Chair, Mary C. Bottie, Lynn J.
Davis, Robert E. Deignan and Thomas E. Holloran. The Board has adopted a
written charter for the Audit and Ethics Committee. The Board believes all
Audit and Ethics Committee members are independent as defined by The NASDAQ
Stock Market listing standards. The Board has determined that two members of
the Audit and Ethics Committee qualify as audit committee financial experts
within the meaning of the Securities Exchange Act of 1934, as amended, referred
to as the
1934 Act,
and have designated
Eric S. Rangen and Lynn J. Davis as the audit committee financial experts.
Nominating
and Compensation Committee
Makes recommendations regarding Board compensation; reviews
performance and compensation of all executive officers; determines stock option
grants; advises regarding employee benefit plans; reviews timely proposed
nominations received from any source including nominations by shareholders and
makes recommendations to the Board regarding all director nominees; and
develops and maintains succession planning policies and criteria for senior
executives and Board members.
The
Board has adopted a written charter for the Nominating and Compensation
Committee. The Board believes all Nominating and Compensation Committee members
are independent as defined by The NASDAQ Stock Market listing standards. The
Committee held three meetings during the fiscal year ended June 30, 2010. The
Committee members are Mary C. Bottie Chair, Robert E. Deignan, Lynn J. Davis,
Thomas E. Holloran and Eric S. Rangen.
Stock
Option Granting Policy
The Nominating and Compensation Committee has formalized its stock
option granting practices by adopting a policy for the grant of stock options.
The policy reflects the Nominating and Compensation Committees long-standing
approach to stock option grants described above. In addition, the policy
provides, among other things, that all grants of stock options must be approved
by the Nominating and Compensation Committee at in person or telephonic
meetings generally on an annual basis;
20
stock options may not be
granted to a current director, officer or employee during any quarterly or
other blackout period as defined in our insider trading policy; the grant date
for each option will be the date of the Nominating and Compensation Committee
meeting at which action was taken to approve the stock option; the exercise
price for the stock option will be equal to the last sale price per share of
our common stock as reported on The NASDAQ Stock Market on the grant date;
specifies procedures for granting stock options to newly hired executives; and
that any program, plan or practice to time or select the grant dates of stock
options in coordination with the release by us of material non-public information
is prohibited.
Nomination
Matters
The
Nominating and Compensation Committee of the Board of Directors is responsible
for making recommendations to the Board concerning nominees for election as
directors and nominees for Board vacancies. When assessing a director
candidates qualifications, the Nominating & Compensation Committee
considers the candidates expertise in finance, general management, human
resources, legal training, marketing, sales, operations, manufacturing,
supply-chain management, and company culture, independence, high ethical
standards, and uncompromising integrity. In addition, the Nominating &
Compensation Committee looks at the overall composition of the Board and how a
candidate would contribute to the overall synergy and collaborative process of
the Board. The Nominating & Compensation Committee has not established
specific minimum eligibility requirements for candidates other than high
ethical standards, uncompromising integrity, commitment to act in the best
interests of the shareholders, requirements relating to age and ensuring that a
substantial majority of the Board remains independent.
In
addition to the considerations described above, our Nominating &
Compensation Committee considers diversity in its evaluation of candidates for
Board membership. Although the Company has no formal diversity policy, the
Board believes that diversity with respect to factors such as background,
experience, skills, race, gender and national origin is an important
consideration in board composition. The Nominating & Compensation Committee
discusses diversity considerations in connection with each candidate, as well
as on a periodic basis in connection with the composition of the Board as a
whole.
If
the Nominating and Compensation Committee approves a candidate for further
review following an initial screening, the Nominating and Compensation
Committee will establish an interview process for the candidate. Generally, the
candidate will meet with the members of the Nominating and Compensation
Committee, along with our Chief Executive Officer. Contemporaneously with the
interview process, the Nominating and Compensation Committee will conduct a
comprehensive conflicts-of-interest assessment of the candidate.
21
The Nominating and
Compensation Committee will consider reports of the interviews and the
conflicts-of-interest assessment to determine whether to recommend the
candidate to the full Board. The Nominating and Compensation Committee will
also take into consideration the candidates personal attributes, including,
without limitation, personal integrity, loyalty to us and concern for our
success and welfare, willingness to apply sound and independent business
judgment, awareness of a directors vital part in good corporate citizenship
and image, time available for meetings and consultation on Company matters and
willingness to assume broad, fiduciary responsibility.
Recommendations
for candidates to be considered for election to the Board at our annual
shareholder meetings may be submitted to the Nominating and Compensation
Committee by our shareholders. Candidates recommended by our shareholders will
be considered under the same standards as candidates that are identified by the
Nominating and Compensation Committee. Currently, nominations by shareholders
to be made at the annual meeting but not to be included in our proxy statement
must be received by the Secretary of the Company at least 18 days before the
annual meeting and set forth nominee information as required by the Companys
1983 Restated Articles of Incorporation, as amended, which are available upon
request to the Secretary of the Company. To enable the committee to evaluate
the candidates qualifications, shareholder recommendations must currently include
the following information:
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The name, age, business
address and, if known, residence address of each nominee proposed in such
notice;
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The principal occupation
or employment of each such nominee; and
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The number of shares of
stock of the Company, which are beneficially owned by each such nominee.
|
If
Proposal III described in this proxy statement is approved by the shareholders,
the Board intends to amend its bylaws to require that such notice of nomination
must be received by the Secretary of the Company at least ninety (90) days
before the date of the annual meeting and set for the information that must
accompany such notice. Upon adoption of the amended bylaws, the Company intends
to file a Form 8-K with the Securities and Exchange Commission describing such
amendments along with a copy of the amended bylaws. The process and timing set
forth in the amended bylaws would apply to nominations for directors at the
Companys 2011 annual meeting. A copy of the amended bylaws, if applicable,
will be available by request to the Secretary of the Company.
Committee
Charters
Subject to applicable law and regulatory requirements, the Board may establish
additional or different committees from time to time. The charters of the
22
Audit and Ethics Committee
and Nominating and Compensation Committee are available at www.flexsteel.com.
Audit and Ethics Committee Report
The
Audit and Ethics Committee has reviewed and discussed the audited financial
statements with management. The Audit and Ethics Committee has discussed with
Deloitte & Touche LLP, the Companys independent registered public
accounting firm, the matters required to be discussed by Statements on Auditing
Standards (SAS) No. 61 and 90 Communication with Audit Committees, as
amended, as adopted by the Public Company Accounting Oversight Board, referred
to as the PCAOB in Rule 3200T. The Audit and Ethics Committee has received the
written disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committee, as adopted by the PCAOB in Rule 3200T, as may be modified or
supplemented, and has discussed with Deloitte & Touche LLP, the firms
independence. Based on the review and discussions referred to above in this
report, the Audit and Ethics Committee recommended to the Board that the
audited financial statements be included in the Companys Annual Report on Form
10-K for the last fiscal year for filing with the SEC.
This
report has been prepared by members of the Audit and Ethics Committee. Members
of this Committee are:
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Eric S. Rangen
Chair
|
Mary C. Bottie
|
Lynn J. Davis
|
Thomas E. Holloran
|
Robert E. Deignan
|
Risk Oversight
Our
Board of Directors is responsible for consideration and oversight of risks
facing Flexsteel. Together with the Boards standing committees, the Board is
responsible for ensuring that material risks are identified and managed
appropriately. The Board and its committees, regularly review strategic,
operational, financial, compensation and compliance risks with senior
management. The Audit & Ethics Committee performs a central oversight role
with respect to financial and compliance risks, and reports on its findings at
each regularly scheduled meeting of the full Board. The Audit & Ethics
Committee also is responsible for assessing risk related to our capital
structure, significant financial exposures, our risk management and major
insurance programs and our employee pension plan policies and performance and
regularly evaluates financial risk associated with such programs. The
Nominating & Compensation Committee considers risk in connection with its
design of compensation programs for our executives.
23
Code of Ethics
The
Company has had a written code of ethics titled
Guidelines for Business Conduct
for many years. The code of
ethics applies to the Companys directors and employees including the Chief
Executive Officer, Chief Financial Officer and Principal Accounting Officer.
The code of ethics includes guidelines relating to the ethical handling of
actual or potential conflicts of interest, compliance with laws, accurate
financial reporting, and procedures for promoting compliance with, and
reporting violations of, the code of ethics. The code of ethics is available on
the Companys website at www.flexsteel.com. The Company intends to post any
amendments to or waivers of its code of ethics (to the extent applicable to the
Companys Chief Executive Officer, Chief Financial Officer or Principal
Accounting Officer) at this location on its website.
24
OWNERSHIP OF STOCK BY
DIRECTORS AND EXECUTIVE OFFICERS
The
table below sets forth the shares of the Companys common stock beneficially
owned by the Companys directors, the named executive officers, and by all
directors and executive officers as a group as of September 30, 2010. Unless
otherwise indicated, to the best knowledge of the Company, all persons named in
the table have sole voting and investment power with respect to the shares
shown.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
Title
|
|
Amount
of
Common Stock
Beneficially
Owned
(1)(2)
|
|
Percent
of Common
Stock
Outstanding
(6)
|
|
Jeffrey T. Bertsch
|
|
|
Senior Vice President
Corporate Services, Director
|
|
359,854
|
(3)(5)
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary C. Bottie
|
|
|
Director
|
|
15,100
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
L. Bruce Boylen
|
|
|
Chairman of the Board of
Directors
|
|
22,000
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick M. Crahan
|
|
|
Senior Vice President
Commercial Seating, Director
|
|
204,589
|
(5)
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn J. Davis
|
|
|
Director
|
|
25,000
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert E. Deignan
|
|
|
Director
|
|
23,000
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald D. Dreher
|
|
|
Senior Vice President,
President and Chief Executive Officer DMI Furniture, Inc.
|
|
84,750
|
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Holloran
|
|
|
Director
|
|
32,680
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald J. Klosterman
|
|
|
Chief Executive Officer
and President, Director
|
|
204,637
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Rangen
|
|
|
Director
|
|
22,500
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Richardson
|
|
|
Senior Vice President
Sales and Marketing, Director
|
|
448,406
|
(4)(5)
|
|
6.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Directors and Executive Officers as a Group (14)
|
|
1,817,106
|
|
|
24.4
|
%
|
|
|
|
|
(1)
|
Includes the following number of shares which may be
acquired by exercise of stock options: J.T. Bertsch 98,000; M.C. Bottie
15,000; L.B. Boylen 22,000; P.M. Crahan 85,560; L.J. Davis 17,500; R.E.
Deignan 18,000; D. D. Dreher 83,750; T.E. Holloran 22,000; R. J.
Klosterman 101,750; E.S. Rangen 22,000; J.R. Richardson 63,000.
|
|
|
|
(2)
|
Includes shares, if any, owned beneficially by their
respective spouses.
|
|
|
|
(3)
|
Does not include 137,858 shares held in irrevocable
trusts for which trusts American Trust & Savings Bank serves as sole
trustee. Under the Terms of Trust, J. T. Bertsch has a possible contingent
interest in each trust. J. T. Bertsch disclaims beneficial ownership in the
shares held by each such trust.
|
|
|
|
(4)
|
Includes 168,568 shares held in the Irrevocable
Arthur D. Richardson Trust for which J.R. Richardson serves as co-trustee and
over which shares J.R. Richardson has the rights of voting and disposition.
|
25
|
|
|
(5)
|
Includes the following number of shares deferred
pursuant to election to participate in the Companys Voluntary Deferred
Compensation Plan: J.T. Bertsch 9,769; P.M. Crahan 12,049; J.R.
Richardson 15,049.
|
|
|
|
(6)
|
Shares of the Companys common stock not outstanding
but deemed beneficially owned because the respective person or group has the
right to acquire the shares as of September 30, 2010, or within 60 days of
such date, are treated as outstanding for purposes of calculating the
percentage of common stock outstanding for such person or group.
|
OWNERSHIP OF STOCK BY
CERTAIN BENEFICIAL OWNERS
To
the best knowledge of the Company, no person owns beneficially 5% or more of
the outstanding common stock of the Company as of September 30, 2010 except as
is set forth below. Unless otherwise indicated, to the best knowledge of the
Company, all persons named in the table have sole voting and investment power
with respect to the shares shown.
|
|
|
|
|
|
|
|
Name and
Address of Beneficial Owner
|
|
Amount of
Common Stock
Beneficially
Owned
(1)
|
|
Percent
of
Class
(7)
|
|
Dimensional Fund Advisors LP, 6300 Bee Cave Rd.,
Bldg. One, Austin, TX 78746
|
|
522,999
|
(5)
|
|
7.9
|
%
|
|
James R. Richardson, P.O. Box 877, Dubuque, IA 52004
|
|
448,406
|
(3)(4)
|
|
6.7
|
%
|
|
Jeffrey T. Bertsch, P.O. Box 877, Dubuque, IA 52004
|
|
359,854
|
(2)(4)
|
|
5.3
|
%
|
|
Perritt Capital Management, Inc., 300 South Wacker Dr.,
Suite 2880, Chicago, IL 60606
|
|
344,908
|
(6)
|
|
5.2
|
%
|
|
|
|
|
(1)
|
To the best knowledge of the Company, no beneficial
owner named above has the right to acquire beneficial ownership in additional
shares, except as disclosed in footnotes (1) and (5) of Ownership of Stock by
Directors and Executive Officers.
|
|
|
|
(2)
|
Does not include 137,858 shares held in irrevocable
trusts as disclosed in footnote (3) of Ownership of Stock by Directors and
Executive Officers.
|
|
|
|
(3)
|
Includes 168,568 shares held in the Irrevocable
Arthur D. Richardson Trust as disclosed in footnote (4) of Ownership of Stock
by Directors and Executive Officers.
|
|
|
|
(4)
|
Includes the following number of shares deferred
pursuant to election to participate in the Companys Voluntary Deferred
Compensation Plan: J.T. Bertsch 9,769; J.R. Richardson 15,049.
|
|
|
|
(5)
|
The number of shares beneficially owned is based on
information provided in a Schedule 13G filed with the Securities and Exchange
Commission on February 8, 2010, which reflects sole voting power with respect
to 519,789 shares and sole dispositive power with respect to 522,999 shares.
|
|
|
|
(6)
|
The number of shares beneficially owned is based on
information provided in a Schedule 13G filed with the Securities and Exchange
Commission on January 26, 2010, which reflects sole voting and dispositive
power over 28,300 shares and shared voting and dispositive power over 316,608
shares.
|
|
|
|
(7)
|
Shares of the Companys common stock not outstanding
but deemed beneficially owned because the respective person or group has the
right to acquire the shares as of September 30, 2010, or within 60 days of
such date, are treated as outstanding for purposes of calculating the
percentage of common stock outstanding for such person or group.
|
26
EXECUTIVE OFFICERS
The
executive officers of the Company, their ages, positions (in each case as of
June 30, 2010), and the year they were first elected or appointed an officer of
the Company, are as follows:
|
|
|
Name (age)
|
|
Position
(date first became officer)
|
Ronald J. Klosterman (62)
|
|
Chief Executive Officer and
President (1989)
|
James R. Richardson (66)
|
|
Senior Vice President of
Residential Sales and Marketing (1979)
|
Thomas D. Burkart (67)
|
|
Senior Vice President of
Vehicle Seating (1984)
|
Patrick M. Crahan (62)
|
|
Senior Vice President of
Commercial Seating (1989)
|
Jeffrey T. Bertsch (55)
|
|
Senior Vice President of
Corporate Services (1989)
|
Donald D. Dreher (61)
|
|
Senior Vice President
(2004), and President & CEO of DMI Furniture, Inc. (1986)
|
James E. Gilbertson (60)
|
|
Vice President of Vehicle
Seating (1989)
|
Timothy E. Hall (52)
|
|
Vice President-Finance,
Chief Financial Officer & Secretary (2000)
|
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte
& Touche LLP was the Companys independent registered public accounting
firm in fiscal 2010. In addition to performing the audit of the Companys
consolidated financial statements, Deloitte & Touche LLP provided various
audit-related services during fiscal 2010.
The
Audit and Ethics Committee pre-approves both the type of services to be
provided by Deloitte & Touche LLP and the estimated fees related to these
services. The Audit and Ethics Committee reviewed professional services and the
possible effect on Deloitte & Touche LLPs independence was considered. The
Audit and Ethics Committee has considered and found the provision of services
for non-audit services compatible with maintaining Deloitte & Touche LLPs
independence. All services provided by Deloitte & Touche LLP during fiscal
2010 were pre-approved by the Audit and Ethics Committee.
The
aggregate fees billed for each of the past two fiscal years ended June 30 for
each of the following categories of services are set forth below:
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
Audit Fees
(1)
|
|
$
|
373,000
|
|
$
|
365,000
|
|
Audit Related Fees
(2)
|
|
|
|
|
|
38,000
|
|
Total
|
|
$
|
373,000
|
|
$
|
403,000
|
|
27
|
|
|
|
|
(1)
|
Professional fees and expenses for audit of financial
statements and internal control over financial reporting services for fiscal
2009 and 2008, as applicable, and consisted of (i) audit of the Companys
annual consolidated financial statements; (ii) reviews of the Companys
quarterly consolidated financial statements; (iii) consents and other
services related to Securities and Exchange Commission matters; and (iv)
consultations on financial accounting and reporting matters arising during
the course of the audit and reviews.
|
|
|
(2)
|
Professional fees and expenses for audit-related
services billed in fiscal 2009 consisted of employee benefit plan audits. In
fiscal 2010, the line item for audit fees category includes the non-specified
fees for the employee benefit plan audits.
|
EQUITY COMPENSATION PLAN INFORMATION
The
following table summarizes information as of June 30, 2010 about the Companys
equity compensation plans, including the Companys stock option plans and
management incentive plan. All of these plans have been approved by
shareholders.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
(a)
Number of
securities to
be issued upon
exercise of
outstanding
options,
warrants and
rights
|
|
(b)
Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
|
|
(c)
Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))
|
|
Equity compensation plans approved by security holders
|
|
|
1,052,244
|
|
$
|
12.70
|
|
|
1,008,950
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,052,244
|
|
$
|
12.70
|
|
|
1,008,950
|
|
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
Management Directors Interests in Financial Institutions
Jeffrey
T. Bertsch, an executive officer and director of the Company, is a director of
American Trust and Savings Bank where the Company maintains a $5.0 million line
of credit, cumulative letter of credit facilities of $0.7 million and $4.9
million in fiscal years 2010 and 2009, respectively, and where its routine
daily banking transactions are processed. In addition, the Company has unfunded
deferred compensation plans. Funds of the deferred compensation plans are held
in a Rabbi Trust. The Rabbi Trust assets are administered by American Trust and
Savings Banks trust department. The Company receives no special
28
services or pricing on the
services performed by this bank due to the directorship of Mr. Bertsch. At June
30, 2010 and 2009, no amounts were outstanding on the line of credit at the
prime rate minus 1%. It is expected that the Companys relationship with this
bank will continue in the future.
PROPOSALS BY SHAREHOLDERS
Shareholders
wishing to have a proposal considered for inclusion in the Companys proxy
statement for the 2011 annual meeting must submit the proposal in writing and
direct it to the Secretary of the Company at the address shown in this proxy
statement. The Company must receive it no later than May 23, 2011. The proposal
must be in accordance with the provisions of Rule 14a-8 promulgated by the SEC
under the 1934 Act. It is suggested the proposal be submitted by certified
mail, return receipt requested. Shareholders who intend to present a proposal
at the 2011 annual meeting (other than a director nomination) without including
such proposal in the Companys proxy statement must provide the Company notice
of such proposal no later than September 17, 2011. Please refer to the section
Nomination Matters under CORPORATE GOVERNANCE above for the timing and process
of nominating a director without such nomination being included in the proxy
statement. The Company reserves the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these and other applicable requirements.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our officers
and directors, and persons who own more than ten percent of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the SEC. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms
they file.
Based
on the Section 16(a) forms furnished to us and other information, we believe
that all officers, directors and greater than ten percent shareholders met all
applicable filing requirements under Section 16(a) during fiscal 2010, except
for a Form 4 filed late by Mary C. Bottie.
29
OTHER MATTERS
The
percentage total number of the outstanding shares represented at each of the
last three years shareholders annual meetings was as follows: 2007 95.6%;
2008 89.3%; 2009 92.4%.
A
copy of the Companys Annual Report on Form 10-K for the year ended June 30,
2010, other reports filed or furnished with or to the Securities and Exchange
Commission, our Guidelines for Business Conduct, Audit and Ethics Committee
Charter and Nominating and Compensation Committee Charter are available,
without charge, on the Companys website at
www.flexsteel.com
or by
writing to the Office of the Secretary, Flexsteel Industries, Inc., P.O. Box
877, Dubuque, Iowa 52004-0877.
The
Board does not know of any other matter which may come before the meeting.
However, should any other matter properly come before the meeting, the persons
named in the proxy card will vote in accordance with their judgment upon such
matters unless a contrary direction is indicated by lining or crossing out the
authority on the proxy card.
If
any matters properly come before the 2011 annual meeting, but the Company did
not receive notice of it prior to September 17, 2011, the persons named in our
proxy card for that annual meeting will have the discretion to vote the proxies
on such matters in accordance with their best judgment.
Shareholders
are urged to vote, date, sign and return the proxy card in the enclosed
envelope to which no postage need be affixed if mailed in the United States.
Prompt response is helpful and your cooperation will be appreciated.
|
|
|
BY ORDER OF THE BOARD OF
DIRECTORS
|
|
|
|
TIMOTHY E. HALL
|
|
Secretary
|
|
|
Dated:
|
October 22, 2010
Dubuque, Iowa
|
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
DECEMBER 6, 2010.
The
Companys Proxy Statement for the 2010 Annual Meeting of Shareholders and 2010
Annual Report to Shareholders are available at www.flexsteel.com in the About
Flexsteel section under Investor Relations.
30
EXHIBIT
APPENDIX
A
THE 1983
AMENDED AND
RESTATED
ARTICLES OF INCORPORATION
OF
FLEXSTEEL INDUSTRIES, INC.,
AS AMENDED THROUGH FEBRUARY 14, 2007
ARTICLE I
Name
The
name of this corporation is Flexsteel Industries, Inc.
ARTICLE II
Purpose
This
corporation shall have general business purposes and shall have unlimited power
to engage in and do any lawful act concerning any and all lawful activity for
which corporations may be organized and may conduct business under
M.S.A.
302A. Without limiting the generality of the foregoing, its further purposes
are:
Minnesota Statutes Chapter 302A.
|
|
|
|
a)
|
To manufacture, purchase,
import, or otherwise acquire, repair, work with, invest in, own, mortgage,
pledge, sell, assign, and transfer, export or otherwise dispose of, trade,
deal in and deal with all types of seating, furniture, household goods,
appliances, and any and all other goods, wares, merchandise, trademarks,
tradenames, patent rights, copyrights, inventions and personal property of
every class and description; to undertake, conduct, manage, assist, promote,
and to engage or participate in every kind of research or scientific,
experimental design or developmental work, including pure or basic research;
to purchase, develop, operate, sell, encumber and otherwise dispose of real
estate and personal property within the State of Minnesota and anywhere else
in and on the planet Earth and in and on the Moon and in and on other
heavenly, bodies;
|
|
|
|
|
b)
|
To acquire by purchase,
exchange, subscription or otherwise, and to hold, own, mortgage, pledge,
hypothecate, sell, assign, transfer, exchange, or otherwise dispose of or
deal in or with, securities (which term, for purposes of this Article II,
includes
|
A-1
|
|
|
|
|
without limitation, any
shares of stock, bonds, debentures, notes, mortgages, or other obligations,
and any certificates, receipts or other instruments representing rights to
receive, purchase or subscribe for the same, or representing any other rights
or interests therein or in any property or assets) created or issued by this
corporation or other persons, firms, associations, corporations or
instrumentalities thereof; foreign or domestic and to deal in and with
commodities, bullion, coin, foreign exchange, currencies, royalties and property
of every kind and nature;
|
|
|
|
|
c)
|
To make payment therefore
in any lawful manner or to issue in exchange therefore its own securities;
and to exercise, as owner or holder of any securities, any and all rights,
powers and privileges in respect thereof;
|
|
|
|
|
d)
|
To acquire by purchase,
exchange or otherwise, all, or any part of, or any interest in, the
properties, assets, business and goodwill of any one or more persons, firms,
associations, or corporations and to pay for the same in cash, property, obligations
or otherwise; to buy its own or other securities and to hold, operate,
reorganize, liquidate, mortgage, pledge, sell, exchange, or in any other
manner deal in or with or dispose of the whole or any part thereof; and in
connection therewith, to become surety for and/or to assume or guarantee
performance of any liabilities, obligations, or contracts of such persons,
firms, associations, or corporations and to conduct in any lawful manner the
whole or any part of any business thus acquired;
|
|
|
|
|
e)
|
To enter into one or more
partnership agreements or one or more joint venture agreements with any other
person, firm or corporation;
|
|
|
|
|
f)
|
To become surety for or
guarantee the carrying out and performance of any contract, lease or
obligation of any kind of any person, firm or corporation in connection with
the carrying on of any business which, in the judgment of the Board of
Directors of this corporation, will be of benefit to this corporation;
|
|
|
|
|
g)
|
And in connection with its
business and all the powers heretofore expressed, to do any and all things
necessary or incident thereto or advisable therewith and to conduct its
business and exercise all the above powers without consent, permission or
vote of the shareholders.
|
A-2
ARTICLE III
Registered Office, Registered Agent
The
address of the
corporations
registered office
* of the corporation
in
the State of Minnesota is:
Flexsteel Industries
CT Corporation Systems
,
Inc.
,
100 South Fifth Street
,
Suite
1075
1075
, Minneapolis, Minnesota
55402
.
55402
The
name of its
registered agent at
that
such
address is
:
CT Corporation System
,
Inc.
ARTICLE IV
The
aggregate number of authorized shares of Capital Stock of this corporation is
15,760,000 shares.
|
|
|
|
|
A.
|
$50.00 PAR CUMULATIVE PREFERRED
SHARES
|
|
|
|
|
|
Sixty thousand (60,000) of
such shares shall be Cumulative Preferred Shares of the Par Value of $50.00
each.
|
|
|
|
|
|
|
1)
|
The holders of the $50.00
Par Cumulative Preferred Shares, in preference to the holders of $1.00 Par
Value Preferred Shares, shall be entitled to receive, as and when declared by
the Board of Directors out of any funds legally available therefore, cash
dividends at the annual cumulative rate set by the Board of Directors at the
time the shares are issued.
|
|
|
|
|
|
|
2)
|
The Board of Directors is
authorized to designate series within the $50.00 Par Cumulative Preferred
Share classification based upon different annual cumulative dividend rates.
The Board or Directors is authorized to set the dividend rate at the time the
series is established but the rate shall not exceed the average Prime Rate of
the major banks in the Minneapolis-St. Paul area at that time.
|
|
|
|
|
|
|
|
No dividends shall be paid
on the Common Shares or on the $1.00 Par Value Preferred Shares at any time
when there are any accrued cumulative dividends on the $50.00 Par Cumulative
Preferred Shares unpaid. Preferred dividends shall be paid quarterly. The
$50.00 Par Cumulative Preferred Shares shall not participate in any dividends
or distributions of any nature except to the extent stated herein. $50.00 Par
Cumulative Preferred Shares shall be callable at any time at the option of
the corporation at $50.00 per share plus accrued unpaid
|
A-3
|
|
|
|
|
|
|
|
dividends to the date of
call plus future dividends figured 30 days beyond the call date.
|
|
|
|
|
|
|
3)
|
In the event of any
dissolution, liquidation or winding up of the affairs of the corporation, the
$50.00 Par Cumulative Preferred Shares shall receive out of the assets of the
corporation the $50.00 par value thereof plus accrued unpaid dividends,
before any distribution is made to the Common Shares or to the $1.00 Par
Value Preferred Shares.
|
|
|
|
|
|
|
4)
|
Shares of $50.00 Par
Cumulative Preferred Shares shall be issued only as fully paid and
non-assessable shares.
|
|
|
|
|
|
|
5)
|
At any time when there are
two (2) years cumulative dividends on the $50.00 Cumulative Preferred Shares
unpaid, each $50.00 Par Cumulative Preferred Share shall automatically
entitle its holder to participate fully in all common shareholder matters and
at all common shareholder meetings. Each $50.00 Par Cumulative Preferred
entitles the holder to vote 50 votes per share on all matters submitted to
the vote of the common shareholders (including the election of Directors).
Each common share shall be entitled to one vote.
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6)
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In order to protect the
$50.00 Par Cumulative Preferred shareholders, whether or not the cumulative
dividends on the $50.00 Par Cumulative Preferred Shares are paid currently,
each $50.00 Par Cumulative Preferred Share entitles the holder to vote 50
votes per share at all shareholder meetings on any of the following issues:
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a)
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amending the Articles of Incorporation;
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b)
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all matters set forth in
Article VII (mergers, sale of assets, reclassification of shares, dissolution
of the corporation, etc.).
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7)
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The holders of $50.00 Par
Cumulative Preferred Shares shall have no preemptive right to subscribe for
any shares of stock of any class issued by the corporation and the voting
rights of the $50.00 Par Cumulative Preferred Shares shall not be cumulative.
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B.
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$1.00 PAR VALUE PREFERRED
SHARES
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Seven hundred thousand
(700,000) shall be $1.00 Par Value Preferred Shares of the par value of $1.00
each.
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A-4
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The designations, relative
rights, voting power, preferences and restrictions of the shares of $1.00 Par
Value Preferred Shares, including the express grant of authority to the Board
of Directors in connection therewith, are as follows:
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1)
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The $1.00 Par Value
Preferred Shares shall be junior and subordinate to the $50.00 Par Cumulative
Preferred Shares, and the Common Shares shall be junior and subordinate to
both the $50.00 Cumulative Preferred Shares and the $1.00 Par Value Preferred
Shares.
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2)
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Shares of $1.00 Par Value
Preferred Shares may be issued from time to time in one or more series, each
of which series shall have such designation, and dividend rights, relative
rights, voting power, preferences and restrictions as are hereinafter
provided and, to the extent hereinafter permitted, as are determined and
stated by the Board of Directors in the resolution or resolutions authorizing
the creation of shares of such series.
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3)
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Shares of $1.00 Par Value
Preferred Shares shall be issued only as fully paid and non-assessable
shares.
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4)
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Authority is hereby
expressly granted to the Board of Directors to authorize and issue $1.00 Par
Value Preferred Shares in one or more series and to determine and state, by
the resolution or resolutions authorizing the creation of each series:
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i)
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the designation of the
series and the number of shares which shall constitute such series, which
number may be altered from time to time by like action of the Board of
Directors in respect of shares then unallotted;
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ii)
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the annual rate of
dividends payable on shares of such series and if the dividends are
cumulative;
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iii)
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the price or prices per
share and the time or times at which the shares of such series shall be or
may be called or redeemable and the terms on which the shares of such series
shall be or may be called or redeemed.
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iv)
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the amounts payable on
shares of such series in the event of any dissolution, liquidation or winding
up of the affairs of the corporation, which amounts may differ in the case of
a voluntary or involuntary dissolution or winding up of such affairs;
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A-5
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v)
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the provisions, if any,
relating to any sinking fund or purchase fund with respect to shares of such
series;
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vi)
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the rights, if any, of
conversion of shares of such series into or in exchange for shares of any
other class or classes or of any other series of the same or other class or
classes of the stock of the corporation and at such price or prices or at
such rates of exchange and with such adjustments as is determined;
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vii)
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the voting or non-voting
rights and if voting, the number of votes per share which shall not exceed
two but subject to the required voting rights given the shareholders in
Articles VII and XI which Articles control in the event of a conflict;
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viii)
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any other rights,
preferences and if voting, the number of votes per share which shall not
exceed two;
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5)
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The $1.00 Par Value
Preferred Shares are senior to the Common Shares upon liquidation of the
corporation. No dividends shall be paid on the Common Shares if there is any
arrearages on the $1.00 Par Value Preferred Share dividends.
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6)
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Subject to the provisions
in Article IV, A., dividends may be declared by the Board of Directors and
paid from time to time, out of any funds legally available therefore, upon
the then outstanding shares of $1.00 Par Value Preferred Shares of the
corporation.
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7)
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In the event of any
dissolution, liquidation, or winding up of the affairs of the corporation,
before any distribution of payment shall be paid to the holders of any class
of shares ranking junior to the $1.00 Par Value Preferred Shares, the holders
of the $1.00 Par Value Preferred Shares shall be entitled to be paid an
amount equal to the value set by the Board of Directors in the resolution or resolutions
authorizing the series, together with a sum of money equivalent to the amount
of unpaid dividends thereon.
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8)
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The consolidation or
merger of the corporation into or with any other corporation or corporations
shall not be deemed a liquidation, dissolution or winding up the affairs of
the corporation within the meaning of any of the provisions of this Article
IV.
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A-6
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9)
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The holders
of $1.00 Par Value Preferred Shares shall have no preemptive right to
subscribe for any shares of stock of any class issued by the corporation and
the voting rights of the $1.00 Par Value Preferred Shares shall not be
cumulative.
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C.
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COMMON
SHARES
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Fifteen
million (15,000,000) shall be Common Shares par value $1.00 each, subject to
all prior provisions in Article IV herein. Each Common Share is entitled to
one vote.
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1)
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Subject to
Article IV, dividends may be declared by the Board of Directors and paid from
time to time, out of any funds legally available therefore, upon the then
outstanding Common Shares of the Corporation and the holders of the $50.00
Par Cumulative Preferred Shares and the $1.00 Par Value Preferred Shares
shall not be entitled to participate in any such dividends.
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2)
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The holders
of Common Shares of $1.00 Par Value shall have no preemptive right to
subscribe for any shares of stock of any class issued by the corporation and
the voting rights of the Common Shares shall not be cumulative.
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D.
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WARRANTS,
RIGHTS, OPTIONS
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The
corporation is hereby expressly authorized and empowered, from time to time,
by resolution of its Board of Directors, without shareholder approval, to
authorize and issue, whether or not in connection with the issue and sale of
any shares of stock or other securities of the corporation, warrants, rights
or options entitling the holders or owners thereof to purchase or acquire
from the corporation any shares of its Common Stock, $50.00 Par Cumulative
Preferred Shares, $1.00 Par Value Preferred Shares and/or any series thereof
or other securities, whether now or hereafter authorized. Such rights or
options shall be evidenced by or in such warrants or other instruments as
shall be approved by the Board of Directors. The terms upon which, the time
or times which may be limited or unlimited in duration at or within which,
and the price or prices at which any such shares or other securities may be
purchased or acquired from the corporation upon the exercise of any such
rights or options shall be such as shall be fixed in a resolution or
resolutions adopted by the Board of Directors providing for the authorization
and issuance of such rights or options, and set forth or incorporated by
reference in the warrants or other instruments evidencing such rights or
options. The Board of Directors is hereby authorized and empowered to
authorize and issue any such
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A-7
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rights or
options and any such warrants or other instruments from time to time, for
such consideration as the Board of Directors may determine. Any and all
shares of stock which may be purchased or acquired or issued upon the
exercise of any such right or option, shall be deemed fully paid stock and
not liable to any further call or assessment thereon, or partly paid and
liable to further call or assessment, as the terms of the warrants or other
instruments evidencing such rights or options shall provide. Except as
otherwise provided by law, the Board of Directors shall have full power and
discretion to prescribe and regulate from time to time the procedure to be
followed in, and all other matters concerning the issuance and exercise of
any such rights and options and such warrants or other instruments, and the setting
aside of stock or other securities for the purpose thereof, and the issuance
of such stock or other securities upon the exercise thereof.
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Authorized Capital
The
total authorized number of shares of this corporation is 15,000,000 shares.
All shares will have a par value of $1.00 per share. The board of directors
has the authority to establish more than one class or series of shares and to fix the relative rights and
preferences of any such different class or series.
ARTICLE V
BOARD OF DIRECTORS
Board of Directors
A
)
.
Number
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The number
of directors shall be set by the
Board
board of directors
but shall not be less than seven (7) nor more than thirteen (13). The
Board
to be elected at the 2006 Annual Meeting of Shareholders shall consist of
eleven (11) directors. Thereafter, the
number of directors may be
increased or decreased only by the affirmative vote of a majority of
Directors
directors
then in office at the time of the vote but subject to the above stated minimum of seven (7) and maximum of
thirteen (13) directors.
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The Board of
Directors shall consist of six (6) directors until changed by resolution of
the Board.
If there is a decrease in the number of
Directors
directors
on the board of directors
, the reduction in number will first apply to
remove any vacancy,
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A-8
if any,
existing at the time of the decrease. The decrease shall next apply to remove
a
seat
director position
upon the expiration of the term of
a
Director
director
then sitting.
No
Director
director
shall be removed during his term of
office through a decrease in the
size of the
Board. Directors need not be a resident of the State of
Minnesota nor a shareholder of the corporation
board of directors
.
B
)
.
Classification
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Presently,
the Board of Directors is fixed at six (6). The Board
The
board
of
Directors
directors
is hereby divided into
three classes
of two directors each
. At the
1983 Annual Meeting of Shareholders
2011
annual meeting of shareholders
, the directors of
the First
Class
I
shall be elected
for a term expiring at the 1984 Annual Meeting of
Shareholders; the directors of the Second Class for a term expiring at the
1985 Annual Meeting of Shareholders; and the directors of the Third Class for
a term expiring at the 1986 Annual Meeting of Shareholders. At each Annual
Meeting thereafter, successors to those directors whose terms expire at that
time
; at the2012
annual meeting of shareholders, the directors of Class II shall be elected;
and at the 2013 annual meeting of shareholders, the directors of Class III
shall be elected. At each annual meeting of shareholders the applicable class
of directors
will be elected to
a
three-year
terms
term
.
The term of office of one of the
above
classes of directors shall
expire each year.
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At each
Annual
Meeting
annual meeting
of shareholders
, the directors chosen to succeed those whose terms then
expire shall be identified as being of the same class as the directors they
succeed. If, as the result of an increase or decrease in the number of
directors, the class sizes are not equal, then the classes may be equalized,
if possible, by a resolution of the
Board
board
of
Directors
directors
,
passed by an affirmative vote of
a majority of the
Directors
directors
then in office at the
time of such vote. The
resolution may designate any single director into another class of directors
such that the
seat
class sizes may be
as nearly
as
equal as possible.
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C)
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Notice of
Nominations
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1)
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Nominations
for the election of directors may be made by the Board or by any shareholder
entitled to vote for the election of directors. Such nominations by
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A-9
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shareholders,
if the nominations are to be made from the floor of the meeting of
shareholders called for the election of Directors without being included in
proxy material sent prior thereto to the shareholders, shall be made by
notice in writing, delivered or mailed by first class United States Mail,
postage prepaid, to the Secretary of the Corporation and actually received by
the Secretary, not less than 18 days nor more than 50 days prior to the day
of any meeting of the shareholders called for the election of directors;
provided, however, that if less than 21 days notice of the meeting is given
to shareholders by the Corporation, such written notice by shareholders shall
be delivered or mailed by first class mail, but actually received by the
Secretary of the Corporation not later than the close of the sixth day
following the day on which notice of the meeting was mailed to shareholders
by the Corporation.
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Nominations
proposed by a majority of the Board of Directors are exempted from the formal
written notice requirements set forth above.
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2)
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The notice
under 1) above shall set forth:
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a)
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the name,
age, business address and if known, residence address of each nominee
proposed in such notice;
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b)
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the
principal occupation or employment of each such nominee;
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c)
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the number
of shares of stock of the corporation which are beneficially named by each
such nominee.
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3) The Chairman
of the meeting, in his sole discretion and without recourse, may determine
and declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, if the facts warrant, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded. D)
.
Vacancies
Any
vacancy occurring in the
Board
board
of
Directors
directors
may be filled only by a resolution of the
Board
board
of
Directors
directors
passed by the affirmative vote of a majority
of the
Directors then in office at the time of such vote
remaining
directors
, even though less than a quorum
of the full Board of
Directors
. A director elected to fill a vacancy shall be elected for the
unexpired portion of the term of his predecessor in that class.
Any
directorship
director position
to be filled by reason of an
increase in the number of
Directors
directors
set by the
Board
board
of directors
shall be filled only by a resolution of
A-10
the
Board
board
of
Directors
directors
passed by the affirmative vote of a
majority of the
Directors then in office
directors serving
at the time of
such vote even through less than a quorum of the full Board
of Directors
the increase
. A director elected to fill a newly
created
directorship
director position
shall be elected for
the unexpired portion of the term in the class to which such
Director is
assigned. The Board of Directors, in its sole discretion, reserves the right
to designate the class to which such newly created directorship shall belong
but the Directors shall make all classes as nearly equal in number as
possible.
director is assigned
.
E)
D.
Removal of
Directors
a)
1.
By
Shareholders
A
Director
director
may be removed by the shareholders only for cause, as defined in
c)
Article V, D.
3.
below, and then only by a resolution passed by the affirmative vote
of two
-
thirds
(2/3rds) of all the votes cast on this issue.
Shareholders that withhold their vote or abstain from voting shall not be
counted as voting.
of all shares present and entitled to vote.
b)
2.
By Directors
A
Director
director
may be removed by the
Directors
directors
only for cause, as
defined in
c)
Article V, D. 3.
below, and then only by a
resolution passed by the affirmative vote, in person, or by a
Director
director
s
consent if a
Director
director
is absent, of at least two-thirds (
2/3rds)
of the
Directors
directors
then in office. For voting purposes only, the
Director
director
whose removal is being voted upon shall not be counted as being in office.
Said
Director
director
is disqualified from voting on the
resolution.
c)
3.
Cause
As used in
this Article
V
,
5,
the meaning of cause shall be limited
to malfeasance arising from the
performance of a
Director
director
s duties which has a
materially adverse effect on the business of the corporation.
A-11
F)
E.
Limiting
Liability of Directors
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The
liability of the Directors of the corporation to the corporation and/or to
its Shareholders is hereby eliminated to the fullest extent permitted by the
Minnesota Business Corporation Act, other applicable statutory and case law,
as all the aforementioned now exists or hereafter, from time to time, may be
changed, amended or supplemented. Any repeal, change or amendment affecting
this section (Article V F)) or to the law referred to herein, shall not apply
to, eliminate, reduce or adversely affect any rights or protection of a
Director, existing prior to such repeal, change or amendment.
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G)
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Indemnification
(amended)
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The
Corporation shall indemnify its former and present Directors, Officers and
Members of Committees of the Board of Directors at Flexsteel, and one who at
the request of Flexsteel is serving as a Director or Officer of another
corporation, partnership, joint venture, trust or other enterprise including
employee benefit plans; and may indemnify one who at the request of Flexsteel
is serving as an Employee, Partner, Trustee, Fiduciary, Agent, Attorney or in
any other capacity of another corporation, partnership, joint venture, trust
or other enterprise including employee benefit plans, and one who is serving
Flexsteel as an Other Person such as Employee, Partner, Trustee, Agent,
Attorney, Fiduciary, or in any other capacity (all the above hereinafter
called Indemnitees) for actions undertaken or omitted in such Capacity to the
fullest extent permitted by the Minnesota Business Corporations Act, other
applicable statutory and case law (the Law), as all the foregoing now exists
or hereafter, from time to time, may be changed, amended or supplemented. The
indemnification shall inure to the benefit of the person, the persons heirs,
legal representatives and administrators.
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If the
Indemnitee institutes a Proceeding against the Corporation, the Indemnitee
shall not be entitled to indemnification unless the Corporation has first
consented in writing to the proceedings prior to its commencement by the
Indemnitee.
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In furtherance
thereof said Corporation is authorized, but shall not be required, to enter
into Contracts and Agreements with any Indemnitee providing for
indemnification and for the advancement and reimbursement of attorneys fees
and disbursements, judgments, penalties, fines, excise taxes, other
disbursements, amounts paid in settlement and other expenses of every kind
and nature (Expenses) all to the fullest extent permitted by the Law. The
Corporations failure to do so
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A-12
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shall in no
manner affect or limit the rights provided for in this section (Article V G))
or otherwise.
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The maximum
aggregate amount of indemnity payable by the Corporation to all Indemnitees
arising out of the same occurrence regardless of how many claims or people
are involved is five million dollars in 1987 constant dollars on over and
above all insurance paid.
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Any repeal,
change, or amendment affecting this section (Article V G)) or to the
Minnesota Business Corporation Act or other applicable statutory and case
law, shall not apply to eliminate, reduce or adversely affect any rights or
protection of an Indemnitee existing prior to such repeal, change or
amendment but to the extent that a Law change permits the Corporation to
provide greater or broader rights or protection, the Law shall apply
retroactively to the effective date of this Article V G).
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The
Corporation may purchase and maintain insurance for and an behalf of any
person that the Corporation Shall or May Indemnify.
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No
director of this corporation will be personally liable to the corporation or
its shareholders for monetary damages for breach of fiduciary duty by such
director, except to the extent expressly required by Minnesota law. Any
repeal or modification of this Article V,E
by the shareholders of the corporation will be prospective only and will not
adversely affect any limitation on the personal liability of a director of
the corporation existing at the time of such repeal or modification.
ARTICLE VI
Cumulative Voting Prohibition
After
approval of this Article V G) Indemnification by the Shareholders and its
filing with the Secretary of State of Minnesota, Article IX former subsection
G. of the 1983 Restated Articles of Incorporation shall become null and void
Shareholders
will have no rights of cumulative voting
.
A-13
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ARTICLE
VI
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The
shareholders of all classes of shares of this corporation shall:
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i) have no
right to cumulate votes for the election of Directors or otherwise;
VII
Preemptive Rights Prohibition
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ii)
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have
no
preemptive rights to subscribe for, or purchase, or acquire any part of any
class or series of shares or securities of this corporation now or hereafter
made.
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No action
required to be taken or which may be taken at any annual meeting or special
meeting of shareholders of this corporation may be taken without a meeting.
The power of shareholders to consent in writing, without a meeting, to the
taking of any action is specifically denied.
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A
stockholders quorum consists of the holders of a majority of the shares
entitled to vote at the meeting.
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ARTICLE VII
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Except as
excepted in this Article VII, the affirmative vote of two-thirds (2/3rds) of
all the shares voting on this issue, of the aggregate voting power of the
outstanding Common Shares and the outstanding $50.00 Par Value Preferred
Shares and the outstanding $1.00 Par Value Preferred Shares, voting together
and for this purpose considered one class, (shareholders that withhold their
vote or abstain from voting shall not be counted as voting), shall be
required for:
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i)
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the merger
or consolidation of this corporation into any business combination (as
hereinafter defined).
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ii)
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the merger
or consolidation of any business combination with or into this corporation
other than in the course of business of this corporation (as hereinafter
defined).
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iii)
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the sale,
lease, exchange, transfer or other disposition (including without limitation
a mortgage or any other security device) of a major portion of the property
and assets of this corporation to any business combination, and/or the
distribution of a major portion of the property and assets of this
corporation in liquidation or pursuant to a plan of liquidation.
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A-14
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iv)
|
the sale,
lease, exchange, transfer or other disposition of all or a substantial part
of the assets of any business combination to this corporation other than in
the course of business of this corporation.
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v)
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the
acquisition by this corporation of any security of any business corporation
other than in the course of business of this corporation.
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vi)
|
the
reclassification of the shares of this corporation or any recapitalization
involving said shares.
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vii)
|
the making
of a major change in this corporations business or equity capital structure
other than in the course of business of this corporation.
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viii)
|
the purchase
by this corporation of the shares of this corporation possessing voting
rights in elections for Directors other than in the course of business of
this corporation.
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ix)
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the
dissolution of this corporation.
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Business
combination
means any individual, corporation, firms, partnership, joint
venture, associations, governmental identity, or other person or legal
entity.
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Corporation
means the corporation and any subsidiary thereof.
Course of business
means the doing of business as defined from time to time by a majority of the
full Board of Directors. It does not mean a takeover or attempted takeover of
this corporation, or its management or its Board of Directors, directly or
indirectly.
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Shareholders
will have no statutory preemptive rights.
ARTICLE VIII
The
Board of Directors of the corporation, when evaluating any proposal of another
party consisting of: (a) a takeover, tender or exchange offer of any security
of this corporation, or (b) a merger or consolidation of this corporation with
another corporation or entity, or (c) the purchase or otherwise acquisition of
all or a major portion of the properties and assets of this corporation, shall,
in connection with the exercise of its judgment in determining what is in the
best interests of the corporation and its shareholders, give due consideration
to all relevant factors, including without limitation, the social, economic and
other effects on the employees, customers, suppliers and other constituents of
this corporation and on the communities in which this corporation operates or
is located.
A-15
Board of Director Action by Written Consent
In
evaluating proposals the Directors may retain special outside legal counsel,
investment banking firms, special accounting firms and such other experts as
they, in their discretion, deem necessary or appropriate to assist them in
their evaluation of the transaction, all at the expense of the corporation.
Any
action required or permitted to be taken at a meeting of the board of directors
may be taken by written action signed, or consented to by authenticated
electronic communication, by all of the directors then in office, unless the
action is one which need not be approved by the shareholders, in which case
such action will be effective if signed by, or consented to by authenticated
electronic communication, the number of directors that would be required to
take the same action at a meeting at which all directors were present.
ARTICLE IX
Quorum
The
property, business and affairs of the corporation shall be managed and
controlled by the Board of Directors
A shareholders
A
stockholders
quorum consists of the holders of a majority of the
shares entitled to vote at the meeting.
The
board of Directors is governed by the statutes, the Articles of Incorporation
and their amendments and restatements and the By-Laws of the corporation.
Subject to these Restated Articles of Incorporation, the Bylaws shall define a
quorum and set the percentage vote for an action by the Board.
In
furtherance, and not in limitation of the powers conferred by statute, the
Board of Directors is expressly authorized without shareholder approval or
consent:
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A.
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To allot,
authorize, issue and set the value of the authorized but unissued shares of
this corporation, as well as to allot, authorize, issue and set the value and
terms of warrants, including the declaration of dividends payable in shares
of any class to shareholders of any other class if not prohibited elsewhere
in these Articles;
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B.
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To fix the
terms, provisions, and conditions of and authorize the issue, sale, pledge or
exchange of bonds, debentures, notes and evidences of indebtedness;
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A-16
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C.
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To fix the terms,
provisions, and conditions of and authorize the issue, sale or exchange of
(i) rights to convert any securities of this corporation into shares of any
class or classes, including the conversion basis or bases; and (ii) options
to purchase or subscribe for shares of any class or classes, including the
option price or prices at which shares may be purchased or subscribed for;
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D.
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To make, alter, amend,
rescind and repeal a By-Law or By-Laws of the corporation. The By-Laws or any
By-Law may also be made, altered, amended or rescinded or repealed by the
shareholders upon the affirmative vote of two-thirds (2/3rds) of all the
shares voting on this issue, of the aggregate voting power of all the
outstanding Common Shares and all the outstanding $50.00 Par Cumulative
Preferred Shares and all the outstanding $1.00 Par Value Preferred Shares (if
this right is specifically included in the $1.00 Par Value Preferred Shares
preference and rights when the class or series is created by the Board of
Directors) all voting together and for this purpose considered one class. If
a resolution or motion to make, alter, amend, rescind, or repeal a By-Law or
By-Laws is to be made from the floor of a shareholders meeting without being
in the proxy materials sent prior thereto to the shareholders, then notice in
writing, delivered or mailed by first class United States mail, postage
prepaid to the Secretary of the corporation and actually received by the
Secretary, not less than 18 days nor more than 50 days prior to the day of
the meeting of the shareholders at which said resolution or motion shall be
made; provided, however, that if less than 21 days notice of the meeting is
given to shareholders by the corporation such written notice shall be delivered
or mailed by first class mail, but actually received, by the Secretary of the
corporation, not later than the close of the sixth day following the day on
which notice of the meeting was mailed to shareholders by the corporation.
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Said motion or resolution
if proposed by a majority of the Board of Directors is exempted from the
formal written notice requirement set forth above.
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E.
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To elect all senior and
policy making officers and arrange for the appointment and employment of all
other officers and employees. To designate the duties and responsibilities of
all senior and policy making officers and arrange for the designation of the
duties and responsibilities of all other officers and employees;
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F.
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To provide for the
reasonable compensation of its own members in their status as directors,
officers and employees, and all other officers and employees, including but
not limited to, salaries, pension, profit-sharing, retirement benefits, cash
bonuses, stock options, stock purchase, stock bonuses, and deferred payment
and
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A-17
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compensation plans,
trusts, and other provisions, and all other forms of incentive and
compensation;
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G.
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To adopt indemnity plans
and to purchase and maintain insurance for officers, directors, employees,
and agents of this corporation or of another enterprise if such are serving
at the request of this corporation, against liability asserted against them
and incurred in any such capacity or arising out of their status as such, to
the fullest extent now or hereafter permitted by law.
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H.
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To take written action
signed by two-thirds (2/3rds) of the entire Board of Directors. (See
302A.239)
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I.
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By two-thirds (2/3rds)
affirmative vote of the Board, to designate two or more of its members to
constitute an executive committee, which, to the extent determined by the
Board, shall have and exercise the authority of the Board in the management
of the business of the corporation;
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J.
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To make and carry into
effect acquisitions of all types and descriptions, subject only to the
provisions of these Restated Articles of Incorporation and By-Laws of this
corporation;
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K.
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In addition, to exercise
all powers and to do such acts that may be exercised or done by this
corporation and authorized under these Restated Articles of Incorporation.
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L)
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Anti-Greenmail
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1.)
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Vote Required:
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Except as set forth in
L.2.) herein, in addition to any affirmative vote of the Stockholders
required by the Restated Articles of Incorporation or law, any direct or
indirect purchase or agreement to purchase or the otherwise acquisition by
the Corporation or any Subsidiary of any Equity Security (as defined herein)
from any Interested Person (as defined herein) who has Owned or Beneficially
Owned (as defined herein) such Equity Security for less than three years
prior to the date of such direct or indirect purchase or agreement to
purchase or the otherwise acquisition thereof by the Corporation or any
Subsidiary, shall require the affirmative vote of two-thirds (2/3rds) of all
the shares voting on this issue, of the aggregate voting power of the
Outstanding Common Shares and the Outstanding $50.00 par value Cumulative
Preferred Shares and the Outstanding $1.00 par value Preferred Shares all
voting together and for this purpose considered one class, Shareholders that
withhold
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A-18
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their vote or abstain from
voting shall not be counted as voting. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or a lesser
percent may be specified, by law or any agreement with any national
securities exchange or otherwise.
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2.)
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Vote Not Required:
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The provisions of section
L.1.) herein shall not be applicable with respect to:
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(a)
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any purchase or other
acquisition of Equity Securities made as part of a tender or exchange offer
by the Corporation to purchase Equity Securities of the same class made on
the same terms to all holders of such Equity Securities and complying with
the applicable requirements of the Securities Exchange Act of 1934, as
amended (the Exchange Act), and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or regulations);
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(b)
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any purchase or
acquisition at no more than Market Price by the Corporation made pursuant to
an open market purchase program which is approved by the vote of a majority
of the Directors then in office; or
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(c)
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any purchase or
acquisition by the Corporation which is approved by the vote of a majority of
the Directors then in office and which is made at no more than the Market
Price (as defined in Section L.3. herein) on the date that the understanding
between the Corporation and the Interested Person is reached with respect to
such purchase (whether or not such purchase is made or a written agreement
relating to such purchase is executed on such date), of shares of the class
of Equity Security to be purchased.
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3.)
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Certain Definitions:
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(a)
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Affiliate and
Associate shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on January 1, 1987.
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b)
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Beneficial Owner and
Beneficial Ownership shall have the meanings ascribed to such terms in Rule
13d-3 and Rule 13d-5 of the General Rules and Regulations under the Exchange
Act, as in effect on January 1, 1987.
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(c)
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Equity Security shall
mean any Outstanding Company security described in Section 3a11-1 of the
Exchange Act, as in effect on January 1, 1987,
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A-19
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which is traded on a
national securities exchange or NASDAQ National Market System.
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(d)
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Interested Person shall
mean any person (other than the Corporation or any Subsidiary, any employee
benefit plan maintained by the Corporation or any Subsidiary or any trustee
of, or fiduciary with respect to, any such plan when acting in such capacity)
that is the direct or indirect Beneficial Owner of more than 3% of the
Outstanding Voting Shares, and any Affiliate or Associate of any such person.
For the purpose of determining whether a Person is an Interested Person, the
Outstanding Voting Shares shall include unissued shares of voting stock of
the Corporation of which the Interested Person is the Beneficial Owner but
shall not include any other shares of voting stock of the Corporation which
may be issuable pursuant to an agreement arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise, to any
Person who is not the Interested Person.
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(e)
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Market Price of shares
of a class of Equity Security on any day shall mean the highest sale price of
shares of such class of Equity Security on such day, or, if that day is not a
trading day of such shares, on the trading day of such shares immediately
preceding such day, on the national securities exchange or the NASDAQ
National Market System on which such class of Equity Security is traded.
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(f)
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Person shall mean any
individual, partnership, firm, corporation, association, trust, unincorporated
organization or other entity, as well as any syndicate or group deemed to be
a person pursuant to Regulation 14C, Schedule 14C Section 14(d)(2) of the
Exchange Act, as in effect on January 1, 1987.
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(g)
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Subsidiary shall mean
any Company of which the Corporation owns, directly or indirectly, (i) a
majority of the outstanding shares of Equity Securities of such Company or
(ii) shares having a majority of the voting power of the outstanding voting
stock of such Company. For the purpose of determining whether a Company is a
Subsidiary, the outstanding voting stock and shares of Outstanding Equity
Securities thereof shall include unissued shares of which the Corporation is
the Beneficial Owner but, except for the purposes of Section L.3.(d) herein,
shall not include any other shares which may be issuable pursuant to any
agreement,
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A-20
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arrangement or
understanding, or upon the exercise of conversion rights, warrants or
options, or otherwise, to any Person who is not the Corporation.
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(h)
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Corporation/Company
shall mean the Company and its Subsidiaries.
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ARTICLE X
4.)
Amendment Supersedes
Minnesota Statutes.
Amendment of Amended and Restated Articles of
Incorporation
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The provisions of Article
IX L.) supersede in all respects the Minnesota Greenmail and Anti-Greenmail
Statutes as they now exist, hereafter become effective, or hereafter from
time to time, may be changed, amended or supplemented.
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ARTICLE X
Meetings
of the shareholders and directors may be held outside the State of Minnesota.
The books of this corporation may be kept outside the State of Minnesota at
such places as may be from time to time designated by the Board of Directors or
in the By-Laws of the corporation.
ARTICLE XI
These
Amended and
Restated Articles of Incorporation shall only be amended, altered,
changed, modified, added to, rescinded or repealed in whole or in part by:
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a
i
)
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a
A
legally submitted, properly passed
resolution of the
Board
board
of
Directors
directors
or a legally
proposed resolution submitted by the required voting power of the shares
entitled to vote as set forth in Minnesota Statutes
Annotated,
Chapter
302A.,
and
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b
ii
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its
Its
submission to a vote at a regular or
special meeting of shareholders to which written notice setting forth the
substance of the proposed amendment and the time and place of the meeting is
timely given to the shareholders entitled to vote at the meeting,
and
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A-21
c
iii
)
the
The
approval of said resolution by the
shareholders upon the
affirmative vote of two-thirds
(2/3rds) of all the
shares voting on this issue, of the aggregate voting power of the outstanding
Common Shares and the outstanding $50.00 Par Cumulative Preferred Shares and
the outstanding $1.00 Par Value Preferred Shares voting together and for this
purpose considered one class. Shareholders that withhold their vote or
abstain from voting shall not be counted as voting
of the voting power of the shares present and entitled to vote.
*.*.*
ARTICLE XII
These
amended and restated Articles restate the Articles in their entirety and
supercede the original Articles and all amendments and restatements of them.
These Restated Articles are effective when filed with the Secretary of the
State of Minnesota.
A-22
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A-23
This page has been left blank intentionally.
A-24
This page has been left blank intentionally.
A-25
Notice of 2010
Annual Meeting
and
Proxy Statement
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FLEXSTEEL INDUSTRIES, INC.
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ANNUAL MEETING OF SHAREHOLDERS
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Monday, December 6, 2010
2:00 p.m.
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Hilton Minneapolis
1001 Marquette Avenue
Minneapolis, MN 55403
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This proxy is solicited on behalf of the Board of
Directors for the Annual Meeting of Shareholders to be held December 6, 2010.
The undersigned, a shareholder of Flexsteel Industries, Inc., hereby
appoints Ronald J. Klosterman and Thomas E. Holloran, and each of them, as
proxies, with full power of substitution, to vote on behalf of the undersigned
the same number of shares which the undersigned is then entitled to vote at the
Annual Meeting of the Shareholders of Flexsteel Industries, Inc., to be held on
Monday, December 6, 2010 at 2:00 P.M. at the Hilton Minneapolis, 1001 Marquette
Avenue, Minneapolis, Minnesota 55403, and at any adjournments or postponements
thereof as follows.
TO VOTE BY MAIL AS THE
BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
The Board of Directors Recommends a Vote
FOR Items 1, 2, 3, 4, 5, 6 and 7.
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1.
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To elect three (3) Class III Directors to serve until the
year 2013 Annual Meeting and until their respective successors have been
elected and qualified or until their earlier resignation, removal or
termination.
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Vote FOR
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Vote WITHHELD
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Jeffrey T. Bertsch
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Lynn J. Davis
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Eric S. Rangen
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all nominees
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from all nominees
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(except as marked)
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(Instructions:
To withhold authority to vote for any indicated nominee, write the number(s)
of the nominee(s) in the box provided to the right.)
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2.
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A proposal to amend Article IV of
the 1983 Restated Articles of Incorporation regarding authorized capital.
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o
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For
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o
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Against
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Abstain
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3.
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A proposal to amend Article V of
the 1983 Restated Articles of Incorporation regarding notice of nominations
to the Board of Directors and indemnification.
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o
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For
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o
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Against
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Abstain
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4.
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A proposal to delete Article VII
of the 1983 Restated Articles of Incorporation regarding actions requiring
shareholder approval.
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o
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For
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o
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Against
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Abstain
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5.
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A proposal to delete Article IX
of the 1983 Restated Articles of Incorporation regarding actions authorized
to be taken by the Board of Directors without shareholder approval and
certain other actions.
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o
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For
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o
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Against
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Abstain
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6.
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A proposal to authorize the Board
of Directors to act by less than unanimous written consent when permitted by
law.
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o
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For
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o
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Against
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Abstain
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7.
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A proposal to amend and restate
the 1983 Restated Articles of Incorporation to make certain other changes to
conform the Companys Articles of Incorporation to the Minnesota Business
Corporation Act.
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o
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For
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o
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Against
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o
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Abstain
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In their discretion to vote upon
such other business as may properly come before the meeting or any
adjournments or postponements thereof, UNLESS THE SHAREHOLDER LINES OR
CROSSES OUT THIS AUTHORITY.
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THIS PROXY WHEN
PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN,
WILL BE VOTED
FOR
EACH PROPOSAL AND THE GRANT OF AUTHORITY TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF WILL NOT BE CROSSED OUT. THE
UNDERSIGNED HEREBY REVOKES ANY PROXY OR PROXIES TO VOTE SUCH SHARES
HERETOFORE GIVEN.
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Date
________________________
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Signature(s) in Box
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Signature of shareholder shall
correspond exactly with the name appearing hereon. If a joint account, each
owner must sign. When signing as attorney, executor, administrator, trustee,
guardian or corporate official, give your full title as such.
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