ESCROW AGREEMENT
This is an Escrow Agreement (the "Agreement") dated as of July 9, 1996, by
and between DMI FURNITURE, INC., a Delaware corporation (the "Corporation");
XXXXXX X. XXXXXX, Chairman, President and Chief Executive Officer of the
Corporation ("Xxxxxx"); BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a
national banking association with its principal office in Indianapolis, Indiana
("Bank One") and THE FIFTH THIRD BANK OF KENTUCKY, INC., a Kentucky banking
corporation authorized to conduct a trust business (the "Agent") .
RECITALS
A. The Corporation considers it essential to the best interests of its
stockholders to xxxxxx the continuous employment of key management personnel.
In this connection, the Corporation's Board of Directors (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change-in-control of the Corporation may exist and that such a
possibility, due to the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders.
B. The Board has determined that appropriate steps should be taken from
time to time to reinforce and encourage the continued attention and dedication
of members of the Corporation's management to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change-in-control of the Corporation, and to promote
objectivity in the face of any pending change-in-control of the Corporation.
C. Consistent with the foregoing purposes, the Corporation has entered
into an Amendment to Employment Agreement and Officer Severance Agreement (the
Severance Agreement") with Xxxxxx, in his capacity as Chairman, President and
Chief Executive of the Corporation, providing for the payment of certain
benefits to Xxxxxx upon the termination of his employment following a change-in-
control of the Corporation.
D. To better enable the Corporation to realize the intended benefit of
the Severance Agreement, the Board wishes to establish appropriate arrangements
to fund the payment of benefits payable to Xxxxxx under the Severance Agreement
in the event of a change-in-control of the Corporation.
E. Bank One provides a credit facility to the Corporation, pursuant to an
Amended and Restated Credit Agreement dated June 9, 1994, between the
Corporation and Bank One, as subsequently amended (the "Credit Agreement").
The Corporation has requested that Bank One consent to the funding of the
payment of benefits payable to Xxxxxx under the Severance Agreement in the
event of a change-in-control of the Corporation. Bank One has agreed to
consent to the Corporation's funding of the payment of benefits payable to
Xxxxxx with moneys advanced under the Credit Agreement, for a period of 365
days, renewable thereafter with express written consent of Bank One, subject
at all times to the terms of this Agreement and to the terms of the Credit
Agreement.
E-54
F. The Corporation has requested that the Agent serve as escrow agent
hereunder and the Agent has agreed to so serve, pursuant to the terms hereof.
AGREEMENT
1. The Agent shall act as an escrow agent for the parties in accordance
with the terms and provisions of this Agreement.
2. Upon the execution of this Agreement, the Corporation shall deposit
with the Agent an amount equal to not less than 50% of the amount of severance
compensation set forth in Section 5(a) of the Severance Agreement (the "Escrowed
Funds"). Bank One agrees that the Corporation may provide the Escrowed Funds
from moneys advanced to the Corporation under the Credit Agreement; provided,
however, that Bank One's consent to the Corporation's use of such funds is for a
period of 365 days from the date hereof, subject to extension only upon the
express written agreement of Bank One and the Corporation, and subject at all
times to the Corporation's compliance with the terms of this Agreement and the
terms of the Credit Agreement.
3. The Corporation hereby directs the Agent to invest the Escrowed Funds
in liquid investments such that the Escrowed Funds may be distributed in
accordance with paragraph 5 hereof. Such investments include short-term U.S.
government securities, repurchase agreements secured by U.S. government
securities, and/or deposits in an FDIC-insured bank, but NOT money market funds,
corporate equity or debt securities, banker's acceptances, commercial paper, or
municipal securities. This direction is a continuing investment direction
unless the Corporation, Xxxxxx and Bank One revoke it by a written instrument
signed by all of them.
4. The Agent shall have no discretion in determining whether a
distribution of the Escrowed Funds shall be made, and the Agent shall make
distributions of the Escrowed Funds as follows:
(A) Any interest generated by the investment of the Escrowed Funds
shall be paid directly to the Corporation at not less than quarterly intervals
until the Escrowed Funds have been distributed as provided in Paragraph 4(B) or
Paragraph 4(C) hereof.
(B) If any Vice President, Secretary, Treasurer, director of the
Corporation or Xxxxxx delivers a certificate to the Agent (with copies to all
other parties to this Agreement) stating that a "change in control" of the
Corporation has occurred within the meaning of the Severance Agreement, the
Agent promptly thereafter shall distribute the Escrowed Funds only as directed
by Xxxxxx, following presentment by Xxxxxx of a certificate of Xxxxxx stating
that Xxxxxx is entitled to payment of the Escrowed Funds under the terms of the
Severance Agreement and that Xxxxxx demands payment of the Escrowed Funds.
(C) If, prior to a distribution of the Escrowed Funds pursuant to
Paragraph 4(B) hereof, Bank One delivers a certificate to the Agent (with
copies to all other parties to this Agreement) stating (i) that an "Event of
Default" has occurred other than an Event of Default caused by a change in
control of the Corporation and/or the distribution of the Escrowed Funds to
Xxxxxx or (ii) Bank One's consent to the Corporation's use of moneys advanced
under the Credit Agreement
E-55
to provide the Escrowed Funds pursuant to Paragraph 2 hereof has expired and has
not been extended, the Agent promptly thereafter shall distribute the Escrowed
Funds to Bank One.
(D) If no distribution of the Escrowed Funds pursuant to Paragraph
4(B) or Paragraph 4(C) hereof has occurred on or before the tenth anniversary
hereof, the Escrow Agent shall distribute the Escrowed Funds to the Corporation
on the first business day following the tenth anniversary hereof, unless the
Corporation, the Escrow Agent, Bank One and Xxxxxx have agreed in writing to the
extension of the term of this Agreement beyond the tenth anniversary.
5. To the extent that all documents required by either Paragraph 4(B) or
4(C) have been presented to the Agent by 9 a.m. on a business day, the Agent
shall make the distributions required thereby no later than the end of the
following business day. To the extent that all documents required by either
Paragraph 4(B) or 4(C) have been presented to the Agent after 9 a.m. on a
business day, the Agent shall make the distributions required thereby no later
than the end of the second business day following the date of presentment of
documents. Distribution to Xxxxxx pursuant to Paragraph 4(B) hereof shall be
made in a lump sum in cash unless Xxxxxx by written notice to the Corporation
and Agent specifies distribution over a longer period. Distribution to Bank One
pursuant to Paragraph 4(C) hereof shall be made in a lump sum in cash.
6. If Xxxxxx is entitled to distribution of the Escrowed Funds pursuant
to Paragraph 4(B) hereof and he fails to survive the time of such payment, then
the Agent is hereby ordered to distribute the Escrowed Funds to the designated
beneficiaries of Xxxxxx upon the presentation of the materials and evidence
required by Paragraph 4(B).
7. The Corporation shall pay the Agent an annual fee for its escrow
services under this Agreement the amount of $1,000 per year. The Agent's fee
shall be deducted from interest payable on the Escrowed Funds. Termination of
this Agreement shall not relieve the Corporation of its obligation with respect
to payment of the Agent's fee.
8. The Agent may confer with counsel about any question relating to its
duties and responsibilities under this Agreement and shall not be liable for any
act or failure to act performed in good faith on the advice of counsel. The
Agent shall be protected in acting upon any certificate, statement, request,
consent, agreement, or other instrument in writing (not only as to its execution
and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information it contains) that it in good faith believes
to be valid and to have been signed or presented by a proper person or
persons. The Agent shall not be liable or responsible for any act or failure to
act in good faith, it being expressly agreed that the Agent's liability under
this Agreement shall be limited solely to negligence or willful misconduct on
its part.
9. The Agent is not a party to, and shall not be bound by, any contract
between the Corporation and Xxxxxx. The Agent shall act as depository only and
shall not be required to take notice of any default or pledge or warranty under
any contract between the Corporation and Xxxxxx.
10. The Agent shall be indemnified by the Corporation for all reasonable
attorneys' fees (other than fees incurred in connection with preparation of this
Agreement), costs, damages, expenses, and liabilities that, in good faith and
without fault by the Agent, the Agent may incur in connection with the
performance of its duties under this Agreement. The indemnification provided to
Agent hereby shall survive the termination of this Agreement.
E-56
11. This Agreement shall terminate upon the earlier of (i) the completion
of the events described in paragraphs 4 and 5 hereof or (ii) the tenth
anniversary hereof, unless prior to the tenth anniversary hereof, all parties
hereto have agreed in writing to the extension of the term hereof.
12. All notices and communications under this Agreement shall be in
writing and shall be deemed given when deposited in the United States mail,
certified, return-receipt requested and postage prepaid, or upon actual receipt
thereof; provided, however, that all certificates and other communications
required to be given by paragraph 4(B) or 4(C) hereof shall additionally
be given by fax, at the telephone fax number listed below:
(i) If to the Corporation, addressed to:
DMI Furniture, Inc.
One Oxmoor Place
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Secretary
Fax: (000) 000-0000
(ii) If to the Agent, addressed to:
The Fifth Third Bank of Kentucky, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxx
Senior Vice President - Trust Division
Fax: (000) 000-0000
with a copy to
The Fifth Third Bank of Kentucky, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Vice President and General Counsel
Fax: (000) 000-0000
(iii)If to Bank One, addressed to:
Bank One, Indianapolis, NA
Bank One Center/Tower, Suite 1911
000 Xxxxxxxx Xxxxxx
XX Xxx 0000
Xxxxxxxxxxxx, XX 00000-0000
Attn: Manager, Regional Banking Department B
Fax: (000) 000-0000
(iv) If to Xxxxxx, addressed to:
E-57
Xx. Xxxxxx Xxxxxx
DMI Furniture, Inc.
One Oxmoor Place
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Any party may change the designated address by giving written notice to the
other party.
13. This Agreement may only be modified, amended, or terminated by a
writing signed by all parties hereto.
14. The rights created by this Agreement shall inure to the benefit of,
and the obligations created hereby shall be binding on, the parties and their
successors and assigns.
15. This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement dated as of
July 9, 1996, but actually on the dates set forth below.
DMI FURNITURE, INC. XXXXXX X. XXXXXX
By:/s/Illegible By:/s/Xxxxxx X. Xxxxxx
---------------------------- --------------------------------
Title: VP & CFO Date: 7/15/96
Secretary/Treasurer
---------------------------- --------------------------------
Date: 7/15/96
--------------------------
BANK ONE, INDIANAPOLIS, NA THE FIFTH THIRD BANK OF KENTUCKY INC.
By:/s/D. Xxxxx Xxxxxxxx By:/s/Xxxxxxxxx Illegible
---------------------------- --------------------------------
Title: Vice President Title: Assistant Vice President
---------------------------- --------------------------------
Date: 7/16/96 Date: 7/15/96
---------------------------- --------------------------------
E-58
ESCROW AGREEMENT
This is an Escrow Agreement (the "Agreement") dated as of July 9, 1996, by
and between DMI FURNITURE, INC., a Delaware corporation (the "Corporation");
XXXXXX X. XXXX, Vice President of Finance and Chief Financial Officer of the
Corporation("Hill"); BANK ONE, INDIANAPOLIS, NATIONAL ASSOCIATION, a national
banking association with its principal office in Indianapolis, Indiana ("Bank
One") and THE FIFTH THIRD BANK OF KENTUCKY, INC., a Kentucky banking
corporation authorized to conduct a trust business (the "Agent") .
RECITALS
A. The Corporation considers it essential to the best interests of its
stockholders to xxxxxx the continuous employment of key management personnel.
In this connection, the Corporation's Board of Directors (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change-in-control of the Corporation may exist and that such a
possibility, due to the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders.
B. The Board has determined that appropriate steps should be taken from
time to time to reinforce and encourage the continued attention and dedication
of members of the Corporation's management to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change-in-control of the Corporation, and to promote
objectivity in the face of any pending change-in-control of the Corporation.
C. Consistent with the foregoing purposes, the Corporation has entered
into an Amendment to Employment Agreement and Officer Severance Agreement (the
Severance Agreement") with Hill, in his capacity as Vice President of Finance
and Chief Financial Officer of the Corporation, providing for the payment of
certain benefits to Hill upon the termination of his employment following a
change-in-control of the Corporation.
D. To better enable the Corporation to realize the intended benefit of
the Severance Agreement, the Board wishes to establish appropriate arrangements
to fund the payment of benefits payable to Hill under the Severance Agreement in
the event of a change-in-control of the Corporation.
E. Bank One provides a credit facility to the Corporation, pursuant to an
Amended and Restated Credit Agreement dated June 9, 1994, between the
Corporation and Bank One, as subsequently amended (the "Credit Agreement").
The Corporation has requested that Bank One consent to the funding of the
payment of benefits payable to Hill under the Severance Agreement in the event
of a change-in-control of the Corporation. Bank One has agreed to consent to
the Corporation's funding of the payment of benefits payable to Hill with moneys
advanced under the Credit Agreement, for a period of 365 days, renewable
thereafter with express written consent of Bank One, subject at all times to
the terms of this Agreement and to the terms of the Credit Agreement.
E-59 Page 100
F. The Corporation has requested that the Agent serve as escrow agent
hereunder and the Agent has agreed to so serve, pursuant to the terms hereof.
AGREEMENT
1. The Agent shall act as an escrow agent for the parties in accordance
with the terms and provisions of this Agreement.
2. Upon the execution of this Agreement, the Corporation shall deposit
with the Agent an amount equal to not less than 50% of the amount of severance
compensation set forth in Section 5(a)of the Severance Agreement (the "Escrowed
Funds"). Bank One agrees that the Corporation may provide the Escrowed Funds
from moneys advanced to the Corporation under the Credit Agreement; provided,
however, that Bank One's consent to the Corporation's use of such funds is for a
period of 365 days from the date hereof, subject to extension only upon the
express written agreement of Bank One and the Corporation, and subject at all
times to the Corporation's compliance with the terms of this Agreement and the
terms of the Credit Agreement.
3. The Corporation hereby directs the Agent to invest the Escrowed Funds
in liquid investments such that the Escrowed Funds may be distributed in
accordance with paragraph 5 hereof. Such investments include short-term U.S.
government securities, repurchase agreements secured by U.S. government
securities, and/or deposits in an FDIC-insured bank, but NOT money market funds,
corporate equity or debt securities, banker's acceptances, commercial paper, or
municipal securities. This direction is a continuing investment direction
unless the Corporation, Hill and Bank One revoke it by a written instrument
signed by all of them.
4. The Agent shall have no discretion in determining whether a
distribution of the Escrowed Funds shall be made, and the Agent shall make
distributions of the Escrowed Funds as follows:
(A) Any interest generated by the investment of the Escrowed Funds
shall be paid directly to the Corporation at not less than quarterly intervals
until the Escrowed Funds have been distributed as provided in Paragraph 4(B) or
Paragraph 4(C)hereof.
(B) If any Vice President, Secretary, Treasurer, director of the
Corporation or Hill delivers a certificate to the Agent (with copies to all
other parties to this Agreement) stating that a "change in control" of the
Corporation has occurred within the meaning of the Severance Agreement, the
Agent promptly thereafter shall distribute the Escrowed Funds only as directed
by Hill, following presentment by Hill of a certificate of Hill stating that
Hill is entitled to payment of the Escrowed Funds under the terms of the
Severance Agreement and that Hill demands payment of the Escrowed Funds.
(C) If, prior to a distribution of the Escrowed Funds pursuant to
Paragraph 4(B) hereof, Bank One delivers a certificate to the Agent (with
copies to all other parties to this Agreement) stating (i) that an "Event of
Default" has occurred other than an Event of Default caused by a change in
control of the Corporation and/or the distribution of the Escrowed Funds to Hill
or (ii) Bank One's consent to the Corporation's use of moneys advanced under
the Credit Agreement
E-60 Page 101
to provide the Escrowed Funds pursuant to Paragraph 2 hereof has expired and has
not been extended, the Agent promptly thereafter shall distribute the Escrowed
Funds to Bank One.
(D) If no distribution of the Escrowed Funds pursuant to Paragraph
4(B) or Paragraph 4(C) hereof has occurred on or before the tenth anniversary
hereof, the Escrow Agent shall distribute the Escrowed Funds to the Corporation
on the first business day following the tenth anniversary hereof, unless the
Corporation, the Escrow Agent, Bank One and Hill have agreed in writing to the
extension of the term of this Agreement beyond the tenth anniversary.
5. To the extent that all documents required by either Paragraph 4(B) or
4(C) have been presented to the Agent by 9 a.m. on a business day, the Agent
shall make the distributions required thereby no later than the end of the
following business day. To the extent that all documents required by either
Paragraph 4(B) or 4(C) have been presented to the Agent after 9 a.m. on a
business day, the Agent shall make the distributions required thereby no later
than the end of the second business day following the date of presentment of
documents. Distribution to Hill pursuant to Paragraph 4(B) hereof shall be made
in a lump sum in cash unless Hill by written notice to the Corporation and Agent
specifies distribution over a longer period. Distribution to Bank One pursuant
to Paragraph 4(C) hereof shall be made in a lump sum in cash.
6. If Hill is entitled to distribution of the Escrowed Funds pursuant to
Paragraph 4(B) hereof and he fails to survive the time of such payment, then the
Agent is hereby ordered to distribute the Escrowed Funds to the designated
beneficiaries of Hill upon the presentation of the materials and evidence
required by Paragraph 4(B).
7. The Corporation shall pay the Agent an annual fee for its escrow
services under this Agreement the amount of $1,000 per year. The Agent's fee
shall be deducted from interest payable on the Escrowed Funds. Termination of
this Agreement shall not relieve the Corporation of its obligation with respect
to payment of the Agent's fee.
8. The Agent may confer with counsel about any question relating to its
duties and responsibilities under this Agreement and shall not be liable for any
act or failure to act performed in good faith on the advice of counsel. The
Agent shall be protected in acting upon any certificate, statement, request,
consent, agreement, or other instrument in writing (not only as to its execution
and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information it contains) that it in good faith believes
to be valid and to have been signed or presented by a proper person or persons.
The Agent shall not be liable or responsible for any act or failure to act in
good faith, it being expressly agreed that the Agent's liability under this
Agreement shall be limited solely to negligence or willful misconduct on its
part.
9. The Agent is not a party to, and shall not be bound by, any contract
between the Corporation and Hill. The Agent shall act as depository only and
shall not be required to take notice of any default or pledge or warranty under
any contract between the Corporation and Hill.
10. The Agent shall be indemnified by the Corporation for all reasonable
attorneys' fees (other than fees incurred in connection with preparation of this
Agreement), costs, damages, expenses, and liabilities that, in good faith and
without fault by the Agent, the Agent may incur in connection with the
performance of its duties under this Agreement. The indemnification provided to
Agent hereby shall survive the termination of this Agreement.
E-61 Page 102
11. This Agreement shall terminate upon the earlier of (i) the completion
of the events described in paragraphs 4 and 5 hereof or (ii) the tenth
anniversary hereof, unless prior to the tenth anniversary hereof, all parties
hereto have agreed in writing to the extension of the term hereof.
12. All notices and communications under this Agreement shall be in
writing and shall be deemed given when deposited in the United States mail,
certified, return-receipt requested and postage prepaid, or upon actual receipt
thereof; provided, however, that all certificates and other communications
required to be given by paragraph 4(B) or 4(C) hereof shall additionally be
given by fax, at the telephone fax number listed below:
(i) If to the Corporation, addressed to:
DMI Furniture, Inc.
One Oxmoor Place
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Secretary
Fax: (000) 000-0000
(ii) If to the Agent, addressed to:
The Fifth Third Bank of Kentucky, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxx
Senior Vice President - Trust Division
Fax: (000) 000-0000
with a copy to
The Fifth Third Bank of Kentucky, Inc.
000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxx
Vice President and General Counsel
Fax: (000) 000-0000
(iii) If to Bank One, addressed to:
Bank One, Indianapolis, NA
Bank One Center/Tower, Suite 1911
000 Xxxxxxxx Xxxxxx
XX Xxx 0000
Xxxxxxxxxxxx, XX 00000-0000
Attn: Manager, Regional Banking Department B
Fax: (000) 000-0000
(iv) If to Hill, addressed to:
E-62 Page 103
Xx. Xxxxxx X. Xxxx
DMI Furniture, Inc.
One Oxmoor Place
000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Any party may change the designated address by giving written notice to the
other party.
13. This Agreement may only be modified, amended, or terminated by a
writing signed by all parties hereto.
14. The rights created by this Agreement shall inure to the benefit of,
and the obligations created hereby shall be binding on, the parties and their
successors and assigns.
15. This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have executed this agreement dated as of
July 9, 1996, but actually on the dates set forth below.
DMI FURNITURE, INC. XXXXXX X. XXXX
By:/s/ Xxxxxx X. Xxxxxx By:/s/ Xxxxxx X. Xxxx
-------------------- --------------------
Title: President & CEO Date: 7/15/96
-------------------- --------------------
Date: 7/15/96
--------------------
BANK ONE, INDIANAPOLIS, NA THE FIFTH THIRD BANK OF KENTUCKY
INC.
By:/s/ D. Xxxxx Xxxxxxxx By:/s/ illegible
--------------------- -------------------------
Title: Vice President Title: Assistant Vice President
-------------------- --------------------------------
Date: 7/16/96 Date: 7/15/96
-------------------- --------------------
E-63 Page 104
