EXHIBIT 10(F)
EXTENSION AND RENEWAL OF
EMPLOYMENT AGREEMENT
THIS AGREEMENT, as of this 9th day of October, 1997 by and
between DMI FURNITURE, INC., a Delaware corporation ("DMI" or the
"Corporation") and XXXXXX X. XXXXXX ("Employee").
WHEREAS, Employee and DMI have entered into an Employment
Agreement dated as of September 1, 1986, which has been amended from time to
time and extended and renewed for additional terms through December 31, 1998;
WHEREAS, the Employment Agreement, as amended, extended and
renewed to date, is intended to complement the terms of the Amendment to
Employment Agreement and Officer Severance Agreement dated as of May 19, 1988
between the Employee and DMI (the "Officer Severance Agreement"), which
provides for the payment of certain benefits to Employee in certain
circumstances following a "change in control" of DMI (as defined in the
Officer Severance Agreement).
WHEREAS, Employee and DMI desire to renew and extend the
Employment Agreement between them for an additional term expiring on August
31, 2000; and
NOW, THEREFORE, intending to be legally bound hereby and in
consideration of the mutual undertakings hereinafter set forth, DMI and
Employee agree as follows, effective October 9, 1997;
1. EMPLOYMENT. DMI or its successors hereby employs Employee
and Employee hereby accepts employment as Chairman of the Board, President,
and Chief Executive Officer of DMI for a period commencing October 9, 1997
and ending August 31, 2000.
2. DUTIES OF EMPLOYEE. Employee further agrees as follows:
(a) To perform well and faithfully all such duties as are
assigned to him by the Board of Directors of DMI; and
(b) To devote the time and attention to the performance of
all matters necessary and appropriate to the discharge of the duties so
assigned to him in the operation of DMI, it being the intention of this
provision to require that Employee serve as a "full-time" employee of DMI, to
devote his best efforts to the performance of the duties of him; and
(c) To refrain from investment or other involvement in any
business or other activity that competes with the business of DMI other than
nominal investments as a passive investor in publicly traded companies.
3. COMPENSATION. As compensation for his services pursuant to
this Agreement, Employee shall be paid as follows:
(a) SALARY. A minimum salary of $275,000 per year payable
at the rate of $11,458.33 semi-monthly during the term
of this Agreement. Each year, on the anniversary of
this Agreement, the Compensation Committee of the
Corporation's Board of Directors will review increases
in the cost of living and may negotiate upward
revisions to salary with the Employee.
(b) CASH BONUS. For each of the Corporation's fiscal years
during the term of this Agreement,
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(c) Employee shall receive an incentive bonus based on the
"adjusted net pre-tax income" for said fiscal year.
For the purposes of this subsection, "adjusted net
pre-tax income" shall mean the pre-tax income as
reported to the Securities and Exchange Commission on
Form 10-K excluding as expenses all dividends paid by
the Corporation to the holders of any class of its
preferred stock, as well as all interest paid by the
Corporation in connection with any funds borrowed for
the redemption of 675,000 shares of preferred stock at
$2.49 per share or $1,680,750 on August 28, 1989 and
any future redemptions of preferred stock, and also
excluding (i) any gains or losses resulting from the
sale, conversion or other disposition of capital
assets; (ii) accruals made in accordance with general
accepted accounting principles to recognize the costs
associated with the permanent closure of an operation
and the carrying costs prior to the sale of the assets
of that operation; (iii) gain or loss resulting from
non-operational litigation; and (iv) charges or credits
resulting from the adoption of a change in accounting
principle.
Employee shall receive a fractional share of the adjusted
net pre-tax income calculated as follows: X = (.0325 + .0195 {Y}) x Z where
X equals the bonus earned, Y equals the adjusted net pre-tax income expressed
in millions of dollars rounded to three decimal places, and Z equals the
adjusted net pre-tax income.
Example:
Reported income before income tax $1,525,169
Add back: Interest on borrowing for
Preferred stock redemption 201,500
Deduct: Gain on sale of building {156,000}
----------
Adjusted pre-tax income $1,570,369
then:
X = (.0325 + (.0195 x 1.570)) x $1,570,369
X = (.0325 + .0306) x $1,570,369
X = .0631 x $1,570,369
X = $99,090
(c) STOCK BONUS. For each fiscal year during the term of
this Agreement, Employee shall be eligible to earn a stock bonus as provided
herein. All stock granted pursuant to this bonus shall be granted as of the
date upon which the cash bonus earned by Employee is paid to him and shall be
valued at the bid price of the Corporation's common stock as listed by NASDAQ
on the last day of the fiscal year. To the extent feasible, stock (or other
equity securities of the Corporation) granted pursuant to this bonus shall be
issued under a plan meeting the terms and conditions of Rule 16b-3 under the
Exchange Act.
Employee shall have the option to receive a grant for shares
of common stock with a value equal to 59.3% of Employee's Cash Bonus.
Employee may decline to exercise the right to receive any
stock grant by so advising the Corporation within 10 days of the date upon
which he is advised of his bonus. The grant of stock referred to herein is
subject to the Corporation's shareholders having approved the issuance of
sufficient shares of stock to permit the grant of these shares. The
Corporation agrees to seek such approval, as and to the extent, required.
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(d) BONUS PAYMENTS. Any bonus under this paragraph 3 shall be
paid within one hundred thirty days of the end of the fiscal
year.
For any fiscal year of DMI during which the period of
Employee's employment set forth in paragraph 1 (or any extension thereof)
expires before completion of the fiscal year, Employee shall receive a cash
bonus and a stock bonus equal to the bonuses that would have been due
Employee under paragraphs 3(b) and 3(c) had Employee remained employed until
the end of DMI's fiscal year multiplied by a fraction, the numerator of which
is the number of complete calendar months during which Employee was employed
during the fiscal year and the denominator of which is 12.
3. FRINGE BENEFITS. DMI will provide Employee with fringe
benefits as follows:
(a) DMI will maintain, without contribution by Employee,
life insurance with benefits payable as designated by Employee in a face
amount equal to three times Employee's annual base salary rate hereunder
provided however the face amount of life insurance benefits are not to exceed
$750,000.
(b) DMI will maintain health insurance at least as
comprehensive as provided for other key and executive employees.
(c) DMI will maintain, without contribution by Employee,
travel accident insurance with benefits payable as designated by Employee in
a face amount equal to $250,000 death benefits for accidental death in the
course of travel.
(d) DMI will provide Employee with an automobile comparable
to those furnished to other key executives, or its cash equivalent of $675
per month, for Employee's business related use.
(e) Employee shall receive reimbursement for expenses
incurred by him in connection with Medical Care for Employees, his spouse and
his dependents, provided, however, that the amount paid by DMI to Employee
pursuant to this subsection in any fiscal year during the term of this
Agreement shall not exceed $2,000. For the purpose of this subsection the
term "Medical Care" means amounts paid for the diagnosis, care, medication,
treatment, or prevention of disease, or for the purpose of affecting any
structure or function of the body (including amounts paid for accident or
health insurance), or for transportation primarily for and essential to
Medical Care. Payments hereunder may be made from time to time as requested
by Employee with or without requiring proof of the medical expenses in
questions, in the discretion of the Board of Directors, and it is not
necessary that such medical expenses have already been paid by Employee, his
spouse, or his aforesaid dependents, but merely that, if not yet paid, there
exists an obligation to pay them. Premiums paid by DMI under any group
accident or health insurance policy that may be maintained by DMI covering or
for the benefit of some or all of its employees, and payments made by
insurers pursuant to said policy, shall not to any extent be regarded as
payments made pursuant to this subsection.
(f) Employee shall receive annual reimbursement for expenses
incurred by him in connection with personal or tax financial planning, not to
exceed $2,000 per year.
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(g) Employee shall be entitled to participate in any
benefit plan of a type not specifically covered by this Agreement and
established by DMI for key employees during the term of Employee's employment
hereunder on a basis consistent with his age, position, responsibilities, and
level of compensation.
(h) Employee shall be reimbursed for his reasonable
out-of-pocket travel and business expenses, including but not limited to,
membership in private clubs for business purposes. All such club memberships
will be approved by a majority of outside members of the Board of Directors.
(i) Employee shall designate a medical doctor as his choice
for annual physical examinations. DMI shall receive a doctor's report on
each annual examination. DMI shall bear the reasonable travel and
examination expense related with these examinations so long as the
examinations are performed in the Continental United States.
5. VACATION. Employee shall be entitled to a six-week vacation
with pay in each 12-month period ending August 31. A maximum of one week of
annual paid vacation shall be cumulative and will not be deemed waived if not
taken during the applicable 12-month period. Employee's paid vacation shall
be pro-rated based on the number of months he has remained employed by DMI
during any fiscal year during which this Agreement expires or is terminated.
6. OTHER BOARD OF DIRECTORS ACTION. Nothing in this Agreement
shall be deemed to prevent the Board of Directors of DMI from taking any
action it may deem, in its sole discretion, to be desirable to make the terms
and conditions of this Employment Agreement more beneficial to Employee, or
to add further benefits to his employment with DMI, provided that Employee
agrees to such changes and additions.
7. TERMINATION. This Agreement shall terminate and, except to
the extent previously accrued or as otherwise provided in the Officer
Severance Agreement, all rights and obligations of DMI and Employee under
this Agreement shall be void, upon the earliest to occur of any of the
following:
(a) Expiration of the period of employment set forth in
paragraph 1, unless the period of employment is extended by the Board of
Directors, in which event termination shall occur upon the expiration of the
period of employment as extended by the Board of Directors;
(b) Death of Employee;
(c) Mental or physical illness or disability of Employee
that shall incapacitate him, for a period of 90 successive days or for an
aggregate period of 120 days during any 12 calendar months, from fully
performing the duties assigned to him hereunder and in the good faith
determination of the Board of Directors and upon written notice to Employee.
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(e) If Employee (i) is found guilty of having committed against
DMI any criminal act, including criminal fraud, or (ii) is
found guilty of having committed any criminal act involving
moral turpitude, or (iii) the willful and continued failure
by the Employee to substantially perform the
(f) Employee's duties with DMI after a written demand for
substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in
which the Board believes that the Employee has not
substantially performed his duties; or (iv) the willful
engaging by the Employee in gross misconduct materially and
demonstrably injurious to the Corporation. For the
purposes of this definition, no act, or failure to act on
the Employee's part shall be considered "willful" unless
done or omitted to be done by the Employee other than in
good faith and without reasonable belief that the
Employee's action or omission was in the best interests of
DMI. The Employee shall not be deemed to have been
terminated for Cause (as defined in the Officer Severance
Agreement) unless and until DMI has delivered a Notice of
Termination, as provided therein.
(g) Voluntary cessation by Employee of his duties and
responsibilities under this agreement.
If DMI terminates Employee's employment other than for Cause
(as defined in the Officer Severance Agreement), and a change in control (as
defined in the Officer Severance Agreement) occurs within 9 months
thereafter, then Employee shall be entitled to all benefits provided under
the Officer Severance Agreement.
Otherwise, if Employee's employment hereunder is terminated
for any other reason than those specified in subparagraphs (a) through (e) of
this paragraph 7, then DMI shall remain liable to Employee and shall pay
Employee in full settlement of DMI's obligations hereunder: (i) the full
amount of the balance of his base salary as provided in subparagraph 3(a)
above, to the expiration date of this Agreement or to such expiration date as
may have been extended by action of the Board of Directors pursuant to
subparagraph 7(a), in a lump sum; PLUS (ii) an amount equal to the cash bonus
and the stock bonus that would have been payable to Employee pursuant to
subparagraphs 3(b) and 3(c) above had Employee remained employed until the
end of DMI's fiscal year, multiplied by a fraction, the numerator of which is
the number of complete calendar months during which Employee was employed
during the fiscal year and the denominator of which is 12. The payments
based upon the cash bonus and the stock bonus shall be paid within 130 days
of the delivery to DMI of the financial statements upon which they shall be
based.
8. DIRECTORSHIP. Employee shall be nominated for election to
the Board of Directors of DMI at each annual meeting of DMI's stockholders.
If duly elected or appointed, Employee agrees to serve on the Board and shall
be designated as Chairman of the Board.
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9. COORDINATION WITH OFFICER SEVERANCE AGREEMENT. For the
purposes of the Officer Severance Agreement, this Agreement shall constitute
a renewal and extension of the Employment Agreement dated as of September 1,
1986 between Employee and DMI. If any provision of this Agreement may be
viewed as conflicting with a provision of the Officer Severance Agreement,
and the provision at issue does not specifically state that it is intended to
supersede the Officer Severance Agreement, the office Severance Agreement
shall control.
10. NON-COMPETITION. If this Agreement is terminated for any
reason specified in subparagraphs (a) through (e) of Paragraph 7, Employee
shall refrain, for a period of one year after the termination of this
Agreement, from carrying on a business that competes with a business
conducted by DMI within the geographic areas described as follows:
The 50 states of the United States of America and Puerto
Rico, except for the states of Washington, Oregon, Idaho,
Colorado, Wyoming, North Dakota and South Dakota.
For the purposes of this paragraph, a business shall be deemed carried on by
Employee if carried on by a proprietorship, partnership, association, or
corporation, or other business entity with which Employee is connected,
except that Employee shall not be deemed to be connected with a business
competitive to that conducted by DMI to the extent that Employee is merely a
passive investor therein or not engaged in the business operations thereof as
an officer, director, employee, agent, consultant, sales representative, or
other provider of personal services in a capacity that would enable him to
use his knowledge or DMI's trade secrets, customer lists or unique business
methods to compete against DMI. It is agreed that in the event of a breach
or a threatened breach of the foregoing, no adequate remedy exists at law to
protect DMI's interests and that DMI shall be entitled to appropriate
injunctive relief. Should the foregoing covenant be adjudged to any extend
invalid by any court of competent jurisdiction, such covenant shall be deemed
modified to the extend necessary to make it enforceable.
11. PLACE OF EMPLOYMENT. DMI agrees that the principal location
at which Employee is to render his services hereunder will continue to be
Louisville, Kentucky.
12. NOTICES. Any notice to DMI or Employee hereunder may be
given by delivering it to, or by depositing it in the United States mail,
postage pre-paid, addressed to the parties at the following addresses:
DMI:
Xx. Xxxxxx X. Xxxx
DMI Furniture, Inc.
One Oxmoor Place
000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
with a required copy to:
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Chairman, Compensation / Stock Option Committee
DMI Furniture, Inc.
One Oxmoor Place
000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
EMPLOYEE:
Xx. Xxxxxx X. Xxxxxx
0000 Xxxxxxxx Xx.
Xxxxxxxxxx, XX 00000
13. ENTIRE AGREEMENT. This Agreement and the Officer Severance
Agreement (a) contain the complete and entire understanding and agreement of
DMI and Employee respecting the subject matter hereof; (b) supersede and
cancel all understandings or agreements, oral or written, respecting the
employment of Employee in connection with the business of DMI; and (c) may
not be modified except by an instrument in writing executed by DMI and
Employee.
14. WAIVER OF BREACH. The waiver by either party, of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach of either party.
15. ASSIGNMENT. Employee may not assign his rights or
obligations under this agreement. The rights and obligations of DMI shall
inure to the benefit of and shall be binding upon the successors and assigns
of DMI.
16. CAPTIONS. All captions and headings used herein are for
convenient reference only and do not form part of this Agreement.
IN WITNESS WHEREOF, DMI and Employee have caused this Agreement
to be duly executed and delivered on the day and year first above written,
but effective January 1, 1996.
DMI FURNITURE, INC.
ATTEST: By
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Xxxxxx X. Xxxx
Vice President, Finance, Chief Financial
Officer, Secretary and Treasurer
-------------------------------
Xxxxxx X. Xxxxxx
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