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Flexsteel Industries, Inc._State of Iowa Direct Financial AssistanceIOWA ECONOMIC DEVELOPMENT AUTHORITY 200 East Grand Avenue I Des Moines, Iowa 50309 USA I Phone: 515.725.3000 iowaeconornicdeveloprnent.com C2f :( Il 1f it �//ii cap August 20, 2014 Ms. Dawn Rinehart, Director of Financial Reporting & Compliance Flexsteel Industries, Inc. 385 Bell Street Dubuque, IA 52001 RE: Project Closeout — Flexsteel Industries, Inc. Contract Number — 11-IVF/TC-070 Dear Ms. Rinehart: It is my pleasure to congratulate you on the completion of the above referenced project. The Authority has reviewed the End of Project Report and accompanying documentation and conducted a site visit. IEDA has determined that Flexsteel Industries is in compliance with the following contractual obligations: 1. The Project Completion Date was April 30, 2014. The Project Maintenance Date is April 30, 2016. 2. The project investment by the Project Completion Date was to be at least $12,000,000. Actual project expenditures were $12,051,524. 3. The Agreement called for the creation of 10 new full-time equivalent (FTE) jobs above a base of 96 FTEs for a total employment of 106 FTEs. The Business met this requirement with 116 total FTEs. 4. The Agreement called for the creation of 10 qualified FTEs above a base of 74 qualified FTEs for a total of 84 qualified FTEs. The Business met this requirement with 94 qualified FTEs. The pledged jobs paid documented wages of at least $15.44 per hour. Since all project activities have been completed and verified, the Authority has closed the financial monitoring section of this project file. The Authority will be monitoring the project on the Project Maintenance Date of April 30, 2016 to determine the Business's employment level at that time. In addition, the Business will be required to file an Annual Project Status Report every July through the Maintenance Period. We would Tike to express our thanks to you for your help in closing out this project. We appreciate the valuable contribution your business has made to the state, and look forward to working with you on future economic development projects. Please do not hesitate to contact me at 515-725- 3073 or benton.quade@iowa.gov if you should have any questions. Benton Quade Project Manager IEDA Compliance Team cc: IEDA Compliance File Mayor Roy Buol, City of Dubuque Governor Terry E. Branstad I Lt. Governor Kim Reynolds I Director Debi V, Durham 8. Oactott.. y940 c IOWA ECONOMIC DEVELOPMENT AUTHORITY Ppsi. r !+vT,1�� 200 East Grand Avenue Des Moines, Iowa 50309 USA ��Q -°: �iv� iowaeconomicdevelopment.com ��,-'': economic development tuo s, 0 yet, ,.„ � "y -- C4 --I !moi;.r.EiR� "i g ants - ` 3- 02 1M,�1 ilia) 0003006367 asa.iX '*� MAILED FROM ZlF �a o� Y AO AUDI 4-P thibudevt Y S`O w /31 S )1c -P -e i Du 6v tic, 9 wool 9864 E7:4-11 '1111 1I1rtt=t tttuIII1ihil t!! t[ts1,ztttt�t€1ttt� Masterpiece on the Mississippi Dubuque Itittil AA- Americacity 1 2007 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: State of Iowa Direct Financial Assistance Contract for Flexsteel Industries, Inc. DATE: July 23, 2011 Economic Development Director Dave Heiar recommends City Council approval of a contract with the Iowa Department of Economic Development (IDED) for Iowa Values Funds Financial Assistance benefits on behalf of Flexsteel Industries, Inc. for a corporate headquarters located in Dubuque. Flexsteel Industries, Inc. plans to invest over $9 million to construct a multi -story corporate office building. The project would relocate approximately 101 current corporate positions from the existing facility at 3400 Jackson Street to the new Flexsteel Corporate offices in the Port of Dubuque. The company has also committed to the creation of 10 new corporate positions. The Iowa Values Fund provides Flexsteel Industries, Inc. with a $40,000 Forgivable Loan and $1,423,000 of tax incentives. City assistance as public match for the Iowa Values Fund benefits is required. The benefit to Flexsteel Industries, Inc. is estimated at $1,540,000, consisting of a 10 year Tax Increment Financing rebate and an acquisition grant, which reduces the sale price of the land from $12.00 sq. ft. to $6.00 sq. ft. and the easement price from $6.00 sq. ft. to $3.00 sq. ft. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager David Heiar, Economic Development Director 2 Masterpiece on the Mississippi TO: Michael Van Milligen, City Manager FROM: David Heiar, Economic Development Director C, SUBJECT: Dubuque hall All-Ameficacity 11 111! 2007 State of Iowa Direct Financial Assistance Contract for Flexsteel Industries, Inc. DATE: July 20, 2011 INTRODUCTION This memorandum presents for City Council review and approval a resolution authorizing a contract with the Iowa Department of Economic Development (IDED) for Iowa Values Funds (IVF) Financial Assistance benefits on behalf of Flexsteel Industries, Inc. for a corporate headquarters located in Dubuque. The Master Contract is attached. BACKGROUND Flexsteel Industries, Inc. plans to invest over $9 million to construct a multi -story corporate office building. The project would relocate approximately 101 current corporate positions from the existing facility at 3400 Jackson Street to the new Flexsteel Corporate offices in the Port of Dubuque. The company has also committed to the creation of 10 new corporate positions. Following both Flexsteel's and the City of Dubuque's commitment to environmental sustainability, the building will be designed to be energy- efficient and environmentally friendly, including a design that utilizes large windows to make use of natural light. The new corporate office will feature Flexsteel's world -class products throughout, including our DMI commercial office, Flexsteel hospitality and home furnishings lines. The building will allow for expansion to take advantage of future growth opportunities. In April 2011, the City Council authorized submittal of an application to IDED for financial assistance from the Iowa Values Fund. The state approved an award of funds on April 21, 2011. This contract formalizes that award. The IVF benefits provide financial assistance to enable the company's expansion in Dubuque. As required by the incentive program, the application requires a commitment of City funds to the project. The City Council approved a Development Agreement with Flexsteel Industries, Inc., to provide 10 year of TIF and an acquisition grant, which reduces the sale price of the land from $12.00 sq. ft. to $6.00 sq. ft. and the easement price from $6.00 sq. ft. to $3.00 sq. ft. as the local match. DISCUSSION Flexsteel committed to 10 new employees and will invest approximately $9,000,000 in the project. The IVF provides Flexsteel Industries, Inc. with a $40,000 Forgivable Loan and $1,423,000 of tax incentives. City assistance as public match for the IVF benefits is required. The benefit to Flexsteel Industries, Inc. is estimated at $1,540,000, consisting of a 10 year TIF rebate and an acquisition grant, which reduces the sale price of the land from $12.00 sq. ft. to $6.00 sq. ft. and the easement price from $6.00 sq. ft. to $3.00 sq. ft. RECOMMENDATION recommend that the City Council approve the IVF contract for Flexsteel Industries, Inc. This project is consistent with the City's goals to help local businesses expand in the community, increase the number of good paying jobs and further diversify our economic base. ACTION STEP The action step for the City Council is to adopt the attached resolution. attachments F: \USERS\Econ Dev\Flexsteel \IDED Assistance\20110720_IDED Contract Approval Council memo.doc 2 RESOLUTION NO. 241 -11 RESOLUTION APPROVING AN IOWA VALUES FUND FINANCIAL ASSISTANCE CONTRACT BY AND AMONG THE IOWA DEPARTMENT OF ECONOMIC DEVELOPMENT, THE CITY OF DUBUQUE AND FLEXSTEEL INDUSTRIES, INC. Whereas, the Flexsteel Industries, Inc. application was approved by the Iowa Department of Economic Development on April 21, 2011; and Whereas, the Iowa Department of Economic Development has prepared and submitted for City Council approval a contract relating to Iowa Values Fund Financial Assistance benefits for Flexsteel Industries, Inc. a copy of which is attached hereto and by this reference made a part hereof; and Whereas, the City Council finds that the proposed contract is acceptable and necessary to the growth and development of the city. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the Iowa Department of Economic Development Iowa Values Fund Financial Assistance contract, Number 11- IVF/TC -70, is hereby approved. Section 2. That the Mayor is hereby authorized and directed to execute the Contract on behalf of the City of Dubuque and forward the executed copy to the Iowa Department of Economic Development for their approval. Attes Passed, approved, and adopted this 1 day of August, 2011. i Ke in S. Fir stahl, Acting City Clerk F: \USERS \Econ Dev \Flexsteel\20110720 Resolution Approv IVF Contract IDED.doc Roy D. ,�uol, Mayor ECONOMIC DEVELOPMENT FINANCIAL ASSISTANCE CONTRACT BY FLEXSTEEL INDUSTRIES, INC. THE CITY OF DUBUQUE AND THE IOWA DEPARTMENT OF ECONOMIC DEVELOPMENT CONTRACT NUMBER: 11- IVF/TC -70 TABLE OF CONTENTS ARTICLE 1: CONTRACT DURATION ARTICLE 2: DEFINITIONS ARTICLE 3: AWARD TERMS ARTICLE 4: CONDITIONS TO DISBURSEMENT OF FUNDS AND ISSUANCE OF TAX CREDIT NUMBER; DISBURSEMENT TERMS ARTICLE 5: SECURITY REQUIREMENTS ARTICLE 6: REPRESENTATIONS AND WARRANTIES ARTICLE 7: COVENANTS OF THE RECIPIENT ARTICLE 8: COVENANTS OF THE COMMUNITY ARTICLE 9: EVENTS OF DEFAULT; NOTICE AND OPPORTUNITY TO CURE; AND REMEDIES AVAILABLE TO IDED ARTICLE 10: MISCELLANEOUS CONTRACT EXHIBITS Exhibit A - Exhibit B -1 Exhibit B -4 Exhibit C - Exhibit D - Exhibit E - Exhibit F - Contract #1 1 -IVF/TC-70 Recipient's Financial Assistance Application (on file with IDED), Application # 11- 100 -14 and 11 -EZ -26 Enterprise Zone Program Special Conditions Grow Iowa Values Fund 100% Wage Component Special Conditions Description of the Project and Award Budget Job Obligations Irrevocable Letter of Credit Promissory Note - 2 - Fmt Approved 12/10 Economic Development Financial Assistance Contract RECIPIENT: Flexsteel Industries, Inc. COMMUNITY: City of Dubuque CONTRACT NUMBER: 11- IVF/TC -70 AWARD DATE: April 21, 2011 AWARD AMT. — CASH $40,000 AWARD AMT. — TAX BENEFITS $1,423,000 This ECONOMIC DEVELOPMENT FINANCIAL ASSISTANCE CONTRACT (Contract) is made as of the Contract Effective Date by the Iowa Department of Economic Development (IDED), 200 East Grand Avenue, Des Moines, IA 50309, and Flexsteel Industries, Inc. (Recipient), 3400 Jackson Street, Dubuque, Iowa 52001 and the City of Dubuque (Community), 50 W. 13th Street, Dubuque, Iowa 52001. WHEREAS, the Recipient submitted an application to IDED requesting financial assistance in the financing of its Project as more fully described in Exhibit C, Description of the Project and Award Budget (the Project); and WHEREAS, the Iowa Department of Economic Development Board (IDED Board) awarded the Recipient financial assistance for the Project from the funding sources identified herein (collectively, the Award), all of which are subject to the terms and conditions set forth herein; and NOW THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound, the Recipient, the Community and IDED agree to the following terms: Contract #11- IVF/TC -70 - 3 - Fmt Approved 12/10 ARTICLE l: CONTRACT DURATION This Contract shall be in effect on the Contract Effective Date and shall remain in effect until after completion of each of the following: (a) Through Project Period Completion Date. Through the Project Period Completion Date and for a reasonable period of time after Project Period Completion Date during which IDED will conduct Project closeout procedures to verify that the Project was completed in compliance with Contact requirements. (b) Through Maintenance Period Completion Date and Contract Closeout. Through the Maintenance Period Completion Date and for a reasonable period of time after Maintenance Period Completion Date during which IDED will conduct closeout procedures to verify that the Project was maintained in compliance with Contract requirements. (c) Repayment or payment Obligation. Until all outstanding amounts due to IDED, if any, are received by IDED or all outstanding obligations to IDED are satisfied in full. (d) Contract End Date. Until IDED has completed Contract closeout procedures and provided Recipient and Community with written Notice of Final Contract Closeout. This Contract shall terminate as of the date stated in the written Notice of Final Contract Closeout; such date shall be the Contract End Date. ARTICLE 2: DEFINITIONS The following terms apply to this Contract: "Award" means the sum of any and all assistance provided by IDED for the Project under this Contract. "Award Date" means the date first stated in this Contract and is the date the IDED Board approved the awarding of financial assistance to the Recipient for the Project. "Award Funds" means the cash that is provided by IDED for this Project as direct financial assistance, including loans. "Contract Effective Date" means the latest date on the signature page of this Contract. "Contract End Date" means the date stated in the Notice of Final Contract Closeout issued by IDED pursuant to Article 1. "Created Jobs" means the number of new, permanent, FTE Jobs the Recipient will add over and above the Recipient's Employment Base. "Forgivable Loan" means a form of an award made by IDED to the Recipient for which repayment is eliminated in part or entirely if the Recipient satisfies the terms of this Contract "Full -time Equivalent (FTE) Job" means the employment of one person for 8 hours per day for a 5 -day, 40 -hour workweek for 52 weeks per year, including paid holidays, vacations and other paid leave; or the number of hours or days per week, including paid holidays, vacations and other paid leave, currently established by schedule, custom, or otherwise, as constituting a week of full -time work for the kind of service an individual performs for an employing unit, whichever is appropriate and identified in Exhibit D, Job Obligations. Contract #1 1 -IVF/TC-70 - 4 - Fmt Approved 12/10 "Job Obligations" means the Recipient's Employment Base number and the new jobs to be created that pay the required wages and benefits, all as outlined in Exhibit D, Job Obligations. "Loan" means form of an award made by the IDED to the Recipient for which full repayment is expected. "Maintenance Period" means the period of time between the Project Completion Date and the Maintenance Period Completion Date. The Project must be maintained in Iowa for this period of time. "Maintenance Period Completion Date" means the date 2 years from the Project Completion Date and is the date on which the Maintenance Period ends. "Project" means the description of the work and activities to be completed by the Recipient as outlined in Exhibit C - Description of the Project and Award Budget. "Project Completion Date" (sometimes referred to as the "Project Period Completion Date ") means the date 3 years from the Award Date by which the Recipient must complete the Project. "Project Period Completion" means the period of time between Award Date and the Project Completion Date. "Qualifying Jobs" are those Created or Retained Jobs that meet or exceed the Qualifying Wage Threshold Requirement established to qualify for program funding for the programs providing assistance to this Project. "Qualifying Wage Threshold" means the county wage or the regional wage, whichever is lower, as calculated by IDED pursuant to statute or rule for each program that is providing financial assistance or tax credit benefits for this Project. The Qualifying Wage Threshold Requirement for this Project is outlined in Exhibit D, Job Obligations. "Recipient's Employment Base" means the number of jobs as stated in Exhibit D, Job Obligations that the Recipient and IDED have established as the job base for this Project. The number of jobs the Recipient has pledged to create shall be in addition to the Recipient's Employment Base. "Security Documents" means all security agreements, financing statements, mortgages, personal and/or corporate guarantees required by the IDED Board for this Award. "Sufficient Benefits" means that the Recipient offers to each FTE permanent position a benefits package that meets one of the following: 1. The Recipient pays 80 percent of the premium costs for a standard medical and dental plan for single employee coverage with a $750 maximum deductible; or 2. The Recipient pays 50 percent of the premium costs for a standard medical and dental plan for employee family coverage with a $1,500 maximum deductible; or 3. The Recipient provides medical coverage and pays the monetary equivalent of paragraph "1" or "2" above in supplemental employee benefits. Benefits counted toward monetary equivalent could include medical coverage, dental coverage, vision insurance, life insurance, pension, retirement (401k), profit sharing, disability insurance, child care services, and other nonwage compensation approved by the IDED Board. Contract #1 1 -IVF/TC-70 - 5 - Fmt Approved 12/10 "Sufficient Benefits Credit" means a benefits credit for which the Recipient qualifies if the Recipient provides Sufficient Benefits to each employee holding a Created or Retained job. The value of the Sufficient Benefits Credit for this Contract is as stated in Exhibit D, Job Obligations. This credit can be applied against the 130 percent Qualifying Wage Threshold requirement. The credit shall not be applied against the 100 percent Qualifying Wage Threshold requirement. "Tax Benefits" means the tax credits, refunds and other authorized benefits IDED has awarded for this Project as detailed in Article 3. "Total Project Cost" means the cost incurred by the Recipient to complete the Project as described in Exhibit C. ARTICLE 3: AWARD TERMS 3.1 Total Award Amount. The IDED Board has approved an Award to the Community and Recipient from the funding sources and in the maximum amounts shown below: DIRECT FINANCIAL ASSISTANCE FORM MAXIMUM AMOUNT IVF 100 % Qualifying Wage Component Forgivable Loan $40,000 TOTAL CASH ASSISTANCE: $40,000 TAX INCENTIVES Enterprise Zone Program Tax Incentives $1,423,000 TOTAL STATE TAX INCENTIVES: $1,423,000 3.2 Terms and Conditions of Award. The terms and conditions of the Award shall be as described in this Contract and the following incorporated exhibit(s): Exhibit B -1 Exhibit B -4 Enterprise Zone Program Special Conditions Grow Iowa Values Fund 100% Wage Component Special Conditions ARTICLE 4: CONDITIONS TO AWARD; DISBURSEMENT AND ISSUANCE TERMS 4.1 Direct State Financial Assistance — Disbursements of Award Funds. (a) Conditions to Disbursement. The obligation of IDED to make, continue or disburse funds under this Contract shall be subject to the conditions described in this Article 4. (b) Process to Request Disbursement of Award Funds. Recipient shall prepare, sign and submit disbursement requests and reports as specified in this Contract in the form and content required by IDED. Recipient shall review all disbursement requests and verify that claimed expenditures are allowable costs. The Recipient shall maintain documentation adequate to support the claimed costs. (c) Documents Submitted. Funds will not be disbursed until IDED has received the documents described in section 4.3 below as well as the following additional documents, properly executed and completed, and approved by IDED as to form and substance: 1. Security Documents. The fully executed Security Documents required in Article 5. Contract #11- IVF/TC -70 - 6 - Fmt Approved 12/10 2. Promissory Note(s). The Promissory Note(s) required and described in the exhibit(s). 3. Requests for Disbursement. All disbursements of Award proceeds shall be subject to receipt by the IDED of requests for disbursement, in form and content acceptable to IDED, submitted by the Recipient. All requests shall include documentation of costs that have been paid or costs to be paid immediately upon receipt of Award proceeds. (d) Prior Costs. No expenditures made prior to the Award Date may be included as Project costs. No funds will be disbursed for expenditures prior to the Award Date. (e) Cost Variation. In the event that the actual cost of the Project is less than the Total Project Cost specified in Exhibit B, the Award Funds specified in Article 3.1 shall be reduced at the same ratio as the reduction in the actual cost of the Project bears to the Total Project Cost specified in Exhibit B. Any funds previously disbursed by IDED in excess of the reduced direct financial assistance to be provided by IDED shall be returned to IDED immediately upon Recipient's receipt of a written request for repayment. (f) Investment of Award Funds. 1. In the event that the Award Funds are not immediately utilized, temporarily idle Award Funds held by the Recipient may be invested provided such investments shall be in accordance with State law, including but not limited to the provisions of Iowa Code chapter 12C concerning the deposit of public funds. Interest accrued on temporarily idle Award Funds held by the Recipient shall be credited to and expended on the Project prior to the expenditure of other Award Funds. 2. All proceeds remaining, including accrued interest, after all allowable Project costs have been paid or obligated shall be returned to IDED within thirty (30) days after the Project Completion Date. Within ten (10) days of receipt of a written request from IDED, Recipient shall inform IDED in writing of the amount of unexpended Award funds in the Recipient's possession or under the Recipient's control, whether in the form of cash on hand, investments, or otherwise. 4.2 Tax Benefits — Conditions to Issuance of Tax Credit Number. (a) Tax Credit Number Required to Claim Benefits. Recipient shall not claim the Tax Benefits described in Article 3 until IDED has issued a tax credit number for this Project and Recipient has undertaken the activities described in this Contract and the applicable law to be eligible for such Tax Benefits. (b) Issuance of Tax Credit Number. Upon satisfaction of the conditions described in herein, IDED will issue a tax credit number to the Recipient for this Project. The tax credit number shall be used in preparing any claims for Tax Benefits (c) Conditions to Issuance of Tax Credit Number. The obligation of IDED to issue a tax credit number shall be subject to the conditions precedent described in Article 4. (d) Documents Submitted. IDED shall have received the documents described in section 4.3, properly executed and completed, and approved by IDED as to form and substance, prior to issuing any tax credit number. 4.3 Documents required. (a) Contract. Fully executed Contract. (b) Incorporation Documents. Copies of the Articles of Incorporation or the Articles of Contract #1 1-IVF/TC-70 - 7 - Fmt Approved 12/10 Organization, whichever is appropriate, of the Recipient, certified in each instance by its secretary or assistant secretary. (c) Certificate of Existence; Certificate of Authority. A certificate of existence for the Recipient from the State of incorporation or organization, whichever is appropriate, and a certificate of authority authorizing the Recipient to conduct business in the state of Iowa, if it is not organized or incorporated in Iowa. (d) Results of Lien and Tax Search and Documentation of Satisfactory Credit History. Financing statement, tax and judgment lien search results, in the Recipient's state of incorporation or organization, against the Recipient and/or the property serving as the Recipient's security under this Contract, and documentation of satisfactory credit history of the Recipient and guarantors, as applicable, with no judgments or unsatisfied liens or similar adverse credit actions. (e) Other Required Documents. IDED shall have received such other contracts, instruments, documents, certificates and opinions as IDED may reasonably request. (f) Solid or Hazardous Waste Audit. To comply with Iowa Code section 15A.1(3) "b," if the Recipient generates solid or hazardous waste, it must either: a) submit a copy of the Recipient's existing in -house plan to reduce the amount of waste and safely dispose of the waste based on an in -house audit conducted within the past 3 years; or b) submit an outline of a plan to be developed in- house; or c) submit documentation that the Recipient has authorized the Iowa Department of Natural Resources or Iowa Waste Reduction Center to conduct the audit. (g) Release Form — Confidential Tax Information. A signed Authorization for Release of Confidential State Tax Information form to permit IDED to receive the Recipient's state tax information directly from the Iowa Department of Revenue for the purpose of evaluation and administration of tax credit programs and other state financial assistance programs. (h) Project Financial Commitments. The Recipient shall have submitted documentation acceptable to IDED from the funding sources identified in Exhibit A committing to the specified financial involvement in the Project and received the IDED's approval of the documentation. The documentation shall include the amount, terms and conditions of the financial commitment, as well as any applicable schedules and may include agreements and resolutions to that effect. (i) State Building Code Bureau Approval. If any part of the Award proceeds will be used for the construction of new buildings, bidding for construction shall not be conducted prior to the written approval of the final plans by the State Building Code Bureau of the Iowa Department of Public Safety, and only if either of the following applies: 1. The building or structure is located in a governmental subdivision which has not adopted a local building code; or 2. The building or structure is located in a governmental subdivision which has adopted a building code, but the building code is not enforced. 4.4 Suspension, Reduction or Delay of Award. Any one or more of the following shall be grounds for IDED to suspend, delay or reduce the amount of disbursement of Award Funds or delay the issuance of a tax credit number or receipt of other Tax Benefits. (a) Unremedied event of default. Upon the occurrence of an Event of Default (as defined in this Contract) by the Recipient, the IDED may suspend the payment or issuance of the Award to the Recipient until such time as the default has been cured to IDED' s satisfaction. Contract #1 1 -IVF/TC-70 - 8 - Fmt Approved 12//0 (b) Layoff, closure or relocation. In the event the Recipient experiences a layoff within the state of Iowa, relocates or closes any of its Iowa facilities IDED has the discretion to reduce or eliminate some or all of the amount of financial assistance to be received. (c) Reduction, discontinuance or alteration of state funding /programs. Any termination, reduction, or delay of funds or tax benefits available due, in whole or in part, to (i) lack of, reduction in, or a deappropriation of revenues or tax benefits previously appropriated or authorized for this Contract, or (ii) any other reason beyond the IDED's control may, in the IDED's discretion, result in the suspension, reduction or delay of Award Fund or authorization or issuance of Tax Benefits to the Recipient. ARTICLE 5: SECURITY REQUIREMENTS 5.1 Security for State Direct Financial Assistance Awarded. The Recipient shall execute in favor of the IDED all security agreements, financing statements, mortgages, personal and /or corporate guarantees (the "Security Documents ") as required by the IDED Board for this Award. (a) Form of Security. This Contract shall be secured by the collateral described below, shall be incorporated as Exhibit E of this Contract, and shall remain in effect through the Contract Effective Date: • Irrevocable Letter of Credit. (b) Value of Collateral. The value, as reasonably determined by IDED, of the security shall meet or exceed the amount of Award funds disbursed. (c) Additional or Substitute Collateral. In case of a decline in the market value of the security or any part thereof, IDED may require that additional or substitute collateral of quality and value satisfactory to IDED be pledged as security for this Award. The Recipient shall provide such additional or substitute collateral within 20 days of the date of the request for additional or substitute collateral to secure this Award in an amount equal to or greater than the amount of outstanding Award funds. (d) Annual Updated Financials from Guarantor(s) Required. If the form of security required as described in paragraph (a) above is a guarantee, the Recipient shall annually provide IDED with current financial statements from the guarantor(s) identified in paragraph "a" above. For purposes of this paragraph, "financial statements" includes but is not limited to profit and loss statement and balance sheet; schedule of aged accounts receivable; schedule of aged accounts payable; and schedule of other debts. These financial statements shall be submitted by Recipient in connection with the Annual Project Status Report required in Article 7.5(b). Updated financial statements may be requested by IDED more frequently than annually if IDED has reason to believe that there has been an adverse change in the financial condition of the guarantor(s). In which case, Recipient shall promptly submit the requested updated financial statements. 5.2 Security for Tax Benefits Awarded. The Recipient shall not be required to secure any portion of the Award that would be in the form of tax credits, if tax credits are awarded pursuant to this Contract. ARTICLE 6: REPRESENTATIONS AND WARRANTIES 6.1 Representations of Recipient. The Recipient represents and warrants to IDED as follows: (a) Organization and Qualifications. The Recipient is duly organized, validly existing and in good standing under the state of its incorporation or organization, whichever is appropriate, and is authorized to conduct business in the state of Iowa. The Recipient has full and adequate power to own its property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each Contract #1 1-IVF/TC-70 - 9 - Fmt Approved 12/10 jurisdiction in which the nature of the business conducted by it or the nature of the property owned or leased by it requires such licensing or qualifying, except where the failure to so qualify would not have a material adverse effect on the Recipient' s ability to perform its obligations hereunder. (b) Authority and Validity of Obligations. The Recipient has full right and authority to enter into this Contract. The person signing this Contract has full authority on behalf of Recipient to execute this Contract and issue, execute or otherwise secure or deliver any documents or obligations required under this Contract on behalf of the Recipient; and to perform, or cause to be performed, each and all of the obligations under the Contract. The Contract delivered by the Recipient has been duly authorized, executed and delivered by the Recipient and constitute the valid and binding obligations of the Recipient and is enforceable against it in accordance with its terms. This Contract and related documents do not contravene any provision of law or any judgment, injunction, order, or decree binding upon the Recipient or any provision of the corporate governance documents of the Recipient, nor does this Contract contravene or constitute a default under any covenant, indenture or contract of or effecting the Recipient or any of its properties. (c) Subsidiaries. The Recipient has no Subsidiaries involved with the Project on the Contract Effective Date. (d) Financial Reports. The balance sheet of the Recipient furnished to IDED fairly presents its financial condition as at said date in conformity with Generally Accepted Accounting Principles (GAAP) applied on a consistent basis. The Recipient has no contingent liabilities which are material to it, other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished to IDED. (e) No Material Adverse Change. Since the Award Date, there has been no change or the Recipient foresees no change in the condition (financial or otherwise) of the Recipient or the prospects of the Recipient, except those occurring in the ordinary course of Recipient, none of which individually or in the aggregate have been materially adverse. To the knowledge of the Recipient, there has been no material adverse change in the condition of the Recipient (financial or otherwise) or the prospects of the Recipient. (f) Full Disclosure; Recipient's Financial Assistance Application. The statements and other information furnished to the IDED by Recipient in its Financial Assistance Application and in connection with the negotiation of this Contract do not contain any untrue statements of a material fact or omit a material fact necessary to make the material statements contained herein or therein not misleading. The IDED acknowledges that as to any projections furnished to the IDED, the Recipient only represents that the same were prepared on the basis of information and estimates it believed to be reasonable. (g) Trademarks, Franchises and Licenses. The Recipient owns, possesses, or has the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, trade secrets, knowhow and confidential commercial and proprietary information to conduct its business as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, trade style, copyright or other proprietary right of any other Person. As used in this Contract, "Person" means an individual, partnership, corporation, association, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof. (h) Governmental Authority and Licensing. The Recipient has received all licenses, permits, and approvals of all Federal, state, local, and foreign governmental authorities, if any, necessary to conduct its business, in each case where the failure to obtain or maintain the same could reasonably be expected to have a material adverse effect. No investigation or proceeding which, if adversely determined, could reasonably be expected to result in revocation or denial of any material license, permit, or approval is pending or, to the knowledge of the Recipient threatened. Contract #11- IVF/TC -70 - 10 - Fmt Approved 12/10 (i) Litigation and Other Controversies. There is no litigation or governmental proceeding pending, nor to the knowledge of the Recipient threatened, against the Recipient which if adversely determined would result in any material adverse change in the financial condition, properties, business or operations of the Recipient, nor is the Recipient aware of any existing basis for any such litigation or governmental proceeding. (j) Good Title. The Recipient has good and defensible title to (or valid leasehold interests in) all of its property involved with the Project (including, without limitation, the Secured Property if real property is a security for this Contract) reflected on the most recent balance sheets furnished to the IDED (except for sales of assets in the ordinary course of business). (k) Taxes. All tax returns required to be filed by the Recipient in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and other governmental charges upon the Recipient or upon any of its property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees and governmental charges, if any, as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided. The Recipient knows of no proposed additional tax assessment against it for which adequate provisions in accordance with GAAP have not been made on its accounts. Adequate provisions in accordance with GAAP for taxes on the books of the Recipient have been made for all open years, and for their current fiscal period. (1) Other Contracts. The Recipient is not in default under the terms or any covenant, indenture or contract of or affecting either the Recipient' s business or any of its properties, which default, if uncured, would have a material adverse effect on its financial condition, properties, business or operations. (m) No Event of Default. No Event of Default, as defined in Article 9, has occurred or is continuing. (n) Compliance with Laws. The Recipient is in compliance with the requirements of all federal, state and local laws, rules and regulations applicable to or pertaining to the business operations of the Recipient and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes or substances, non - compliance with which could have a material adverse effect on the financial condition, properties, business or operations of the Recipient. The Recipient has not received notice to the effect that its operations are not in compliance with any of the requirements of applicable federal, state or local environmental or health and safety statutes and regulations or are the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non - compliance or remedial action could have a material adverse effect on the financial condition, properties, business or operations of the Recipient. (o) Effective Date of Representations and Warranties. The warranties and representations of this Article are made as of the Contract Effective Date and shall be deemed to be renewed and restated by the Recipient at the time each request for disbursement of Award Funds is submitted to IDED or each time Tax Benefits are claimed by the Recipient. 6.2 Representations of Community. (a) Local Approvals Received; Authority and Validity of Obligations. The Community has secured all necessary local approvals and has full right and authority to enter into this Contract. The person signing this Contract has full authority on behalf of the Community to: 1. Sign this Contract, and 2. Perform each and all of the Community's obligations under this Contract. Contract #11- IVF/TC -70 - 11 - Fmt Approved 12110 The Contract delivered by the Community has been duly authorized, executed and delivered by the Community and constitutes the valid and binding obligations of the Community and is enforceable against it in accordance with its terms. This Contract and related documents do not contravene any provision of law or any judgment, injunction, order or decree binding upon the Community, contravene or constitute a default under any covenant, indenture or contract of or effecting the Community or any of its properties. (b) Local Commitment. The Community represents that there are legally enforceable commitments in place for the Community local commitment identified for the Project in Exhibit C - Description of the Project and Award Budget. (c) No Material Adverse Change. Since the Award Date, there has been no material adverse change in the Community's ability to perform its obligations under this Contract. (d) Full Disclosure; Community's Financial Assistance Application. The statements and other information furnished to the IDED by the Community in its Financial Assistance Application and in connection with the negotiation of this Contract do not contain any untrue statements of a material fact or omit a material fact necessary to make the material statements contained herein or therein not misleading. The IDED acknowledges that as to any projections furnished to the IDED, the Community only represents that the same were prepared on the basis of information and estimates it believed to be reasonable. (e) Governmental Authority and Licensing. The Community has received all licenses, permits, and approvals of all federal, state, local, and foreign governmental authorities, if any, necessary to perform its obligations under this Contract. No investigation or proceeding which, if adversely determined, could reasonably be expected to result in revocation or denial of any material license, permit, or approval is pending or, to the knowledge of the Community threatened. (f) Litigation and Other Controversies. There is no litigation or governmental proceeding pending, nor to the knowledge of the Community threatened, against the Community which if adversely determined would result in any material adverse change in the Community's ability to perform under this Contract nor is the Community aware of any existing basis for any such litigation or governmental proceeding. (g) No Event of Default. No Event of Default by the Community, as defined in Article 9, has occurred or is continuing. (h) Compliance with Laws. The Community is in compliance with the requirements of all federal, state and local laws, rules and regulations applicable to or pertaining to the operations of the Community and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes or substances, non - compliance with which could have a material adverse effect on the financial condition, properties, business or operations of the Community. The Community has not received notice to the effect that its operations are not in compliance with any of the requirements of applicable federal, state or local environmental or health and safety statutes and regulations or are the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non - compliance or remedial action could have a material adverse effect on the financial condition, properties, business or operations of the Community. (i) Effective Date of Representations and Warranties. The warranties and representations of this Article are made as of the Contract Effective Date. Contract #11- IVF/TC -70 - 12 - Fmt Approved 12/10 ARTICLE 7: COVENANTS OF THE RECIPIENT For the duration of this Contract, the Recipient covenants to IDED as follows: 7.1 Project Performance Obligations. (a) Use Award Funds only for Project. The Recipient shall use the Award Funds only for the Project and for the activities described in Exhibit C - Description of the Project and Award Budget and this Contract. Use of the Award Funds shall conform to the Budget for the Project as detailed in Exhibit C - Description of the Project and Award Budget. The Recipient represents that there are legally enforceable commitments in place from the funding sources identified for the Project in Exhibit C - Description of the Project and Award Budget. (b) Meet and Maintain Eligibility Requirements. Recipient shall continue to meet and maintain all statutory eligibility requirements for the funding sources providing assistance under this Contract. (c) Project Time Period. This Contract covers the five (5) year Project time period from the Award Date through the Maintenance Period Completion Date. Recipient shall complete and maintain the Project within the Project time period shown below: COMPLIANCE MEASUREMENT POINT COMPLIANCE MEASUREMENT POINT Award Date Project Completion Period Project Completion Date Maintenance Period Maintenance Period Completion Date Contract Closeout "Award Date" "Project "Project "Maintenance "Maintenance Period IDED will conduct means the date Completion Completion Date" Period" means Completion Date" Contract Closeout first stated in this Period" means the means the date 3 the period of means the date 2 years procedures after all Contract and is period of time years from the time between from the Project events described in the date the between the Award Award Date. the Project Completion Date and Article 1 have been IDED Board Date and the Recipient must Completion is the date on which met. approved the Project Completion complete the Project Date and the the Maintenance awarding of financial Date. by this date. Maintenance Period Period ends. "Contract End Date" means the date stated assistance to the At this point, IDED Completion At this point, IDED in IDED's written Recipient for the will review the Date. The will review the Project Notice of Final Project. Project to verify Project must be to verify that it was Contract Closeout compliance with maintained in maintained in that is issued Contract terms and obligations. Iowa for this period of time. compliance with Contract terms and obligations. pursuant to Article 1. (d) Complete Project by Project Completion Date. By the Project Completion Date, Recipient shall complete the Project, make the total investment it pledged for the Project and in accordance with the Award Budget as detailed in Exhibit B - Description of the Project and Award Budget, and comply with all other performance requirements described in this Contract. (e) Total Project Costs. By the Project Completion Date, Recipient shall have completed the Project with a Total Project Cost as detailed in Exhibit C - Description of the Project and Award Budget. (f) Maintain Project through Maintenance Period Completion Date. Recipient shall maintain the Project through the Maintenance Period Completion Date. (g) Maintain Project in Iowa During Contract Period. The Recipient shall at all times preserve and Contract #11- IVF/TC -70 - 13 - Fmt Approved 12/10 maintain its existence as a corporation in good standing and maintain the Project in Iowa. The Recipient will preserve and keep in force and affect all licenses, permits, franchises, approvals, patents, trademarks, trade names, trade styles, copyrights and other proprietary rights necessary to the proper conduct of its respective Recipient. (h) Employ Legally Authorized Workers. Recipient shall only employ individuals legally authorized to work in the state of Iowa 7.2 Taxes and Insurance. (a) Pay Taxes and Assessments. The Recipient shall duly pay and discharge all taxes, rates, assessments, fees, and governmental charges upon or against its properties, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves are provided therefore. (b) Maintain Insurance. The Recipient shall insure and keep insured in good and responsible insurance companies, all insurable property owned by it which is of a character usually insured by Persons similarly situated and operating like properties against loss or damage from such hazards or risks as are insured by Persons similarly situated and operating like properties; and the Recipient shall insure such other hazards and risks (including employers' and public liability risks) in good and responsible insurance companies as and to the extent usually insured by Persons similarly situated and conducting similar business. The Recipient will upon request of IDED furnish a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Article. 7.3 Preserve Project and Protect Security. (a) Maintenance of Properties. The Recipient shall maintain, preserve and keep its properties in good repair, working order and condition (ordinary wear and tear excepted) and will from time to time make all needful and proper repairs, renewals, replacements, additions and betterments thereto so that at all time the efficiency thereof shall be fully preserved and maintained in accordance with prudent business practices. (b) Restrictions on Security. If Security is required pursuant to Article 5 of this Contract, the Recipient shall not, without prior written disclosure to IDED and prior written consent of IDED, which shall not be unreasonably withheld, directly or indirectly: 1. Sell, transfer, convey, assign, encumber or otherwise dispose of any of the Secured Property for this Project. 2. Place or permit any restrictions, covenants or any similar limitations on the Secured Property or in the Security Documents for the Project. 3. Remove from the Project site or the State all or substantially all of the Secured Property. 4. Create, incur or permit to exist any lien of any kind on the Secured Property. 7.4 Recipient Changes. (a) No Changes in Recipient Operations. The Recipient shall not materially change the Project or the nature of the business and activities being conducted, or proposed to be conducted by Recipient, as described in the Recipient's approved application for funding, Exhibit A of this Contract, unless approved in writing by IDED prior to the change. Contract #11- IVF/TC -70 - 14 - FmtApproved 12 /10 (b) Changes in Recipient Ownership, Structure and Control. The Recipient shall not materially change the ownership, structure, or control of the business if it would adversely affect the Project. This includes, but is not limited to, entering into any merger or consolidation with any person, firm or corporation or permitting substantial distribution, liquidation or other disposal of assets directly associated with the Project. Recipient shall provide IDED with advance notice of any proposed changes in ownership, structure or control. The materiality of the change and whether or not the change affects the Project shall be as reasonably determined by IDED. 7.5 Required Reports. (a) Review of Reports. The Recipient shall prepare, sign and submit required reports, in the form and content required by IDED, as specified in this Contract. (b) Reports. The Recipient shall prepare, sign and submit the following reports to the IDED throughout the Contract period: Report Due Date Annual Project Status Report July 31st for the period ending June 30th The Annual Project Status Report will collect information from the Recipient about the status of the Project. End of Project Report Within 30 days of Project Completion Date The End of Project Report will collect information from the Recipient about the completed Project. End of Maintenance Period Report Within 30 days of the end of the Job Maintenance Period Completion Date The End of Maintenance Period Report will collect information from the Recipient's continued maintenance of the Project. (c) Additional Reports, Financial Statements as Requested by IDED. The IDED reserves the right to require more frequent submission of reports if, in the opinion of the IDED, more frequent submissions would provide needed information about Recipient's Project performance, or if necessary in order to meet requests from the Iowa General Assembly, the Department of Management or the Governor's office. At the request of IDED, Recipient shall submit its annual financial statements completed by an independent CPA, or other financial statements including, but not limited to, income, expense, and retained earnings statements. 7.6 Compliance with Laws. (a) State, local and federal laws. Recipient shall comply in all material respects with the requirements of all applicable federal, state and local laws, rules, regulations and orders. (b) Environmental laws. Recipient shall comply in all material respects with all applicable environmental, hazardous waste or substance, toxic substance and underground storage laws and regulations, and the Recipient shall obtain any permits or, licenses and shall acquire or construct any buildings, improvements, fixtures, equipment or its property required by reason of any applicable environmental, hazardous waste or substance, toxic substance or underground storage laws or regulations. Contract #11 - IVF/TC -70 - 15 - Fmt Approved 12/10 (c) Nondiscrimination laws. Recipient shall comply in all material respects with all applicable federal, state, and local laws, rules, ordinances, regulations and orders applicable to the prevention of discrimination in employment, including the administrative rules of the Iowa Department of Management and the Iowa Civil Rights Commission which pertain to equal employment opportunity and affirmative action. (d) Worker rights and safety. The Recipient shall comply in all material respects with all applicable federal, state and local laws, rules, ordinances, regulations and orders applicable to worker rights and worker safety. (e) Immigration laws. Recipient shall only employ individuals legally authorized to work in this state. In addition to any and all other applicable penalties provided by current law, all or a portion of the Award is subject to recapture by IDED if Recipient is found to employ individuals not legally authorized to work in the state of Iowa. (f) Compliance with IDED's Administrative Rules. Recipient shall comply with IDED's administrative rules for the programs providing assistance to the Project and rules governing administration of this Contract. 7.7 Inspection and Audit. The Recipient shall permit the IDED and its duly authorized representatives, at such reasonable times and reasonable intervals as the IDED may designate, to: (a) Conduct site visits and inspect the Project. (b) Audit financial records related to the Project. (c) Examine and make copies of the books of accounts and other financial records of the Recipient related to the Project. (d) Discuss the affairs, finances and accounts of the Recipient with, and to be advised as to the same by, its officers, and independent public accountants and by this provision the Recipient authorizes such accountants to discuss with the IDED and the IDEt's duly authorized representatives the finances and 1 0.41 n ,. ,,sews' 44 e affairs of the Recipient). -coo. Contract #11- IVF/TC -70 - 16 - 7.8 Maintenance and Retention of Records. (a) Maintain Accounting Records. The Recipient is required to maintain its books, records and all other evidence pertaining to this Contract in accordance with GAAP and such other procedures specified by IDED. (b) Access to Records. Records to verify compliance with the terms of this Contract shall be available at all times, and made available to IDED and its designees at places and times designated by IDED, for the duration of this Contract and any extensions thereof. Recipient shall make its records available to: (i) IDED; (ii) IDED's internal or external auditors, agents and designees; (iii) the Auditor of the State of Iowa; (iv) the Attorney General of the State of Iowa; and (v) the Iowa Division of Criminal Investigations and any other applicable law enforcement agencies. (c) Records Retention Period. Recipient shall retain the records for a period of three (3) years from the Contract End Date, unless the records are the subject of an audit, investigation, or administrative or legal proceeding. In those instances, the records shall be retained until the audit, investigation or proceeding has been resolved. Fmr Approved 12/10 7.9 Required Notices from Recipient to IDED. (a) Notice of Major Changes. The Recipient shall promptly provide IDED with written notice of any major changes that would impact the success of the Project. (b) Notice of Meetings. The Recipient shall notify IDED at least two (2) working days in advance of all meetings of the board of directors at which the subject matter of this Contract or the Project is proposed to be discussed and when the outcome of such discussion is likely to result in an adverse impact to the Project. The Recipient shall provide IDED with copies of the agenda and minutes of such meetings and expressly agrees that a representative of IDED has a right to attend those portions of any and all such meetings where the Project or this Contract is discussed. In any event, the Recipient shall notify IDED immediately after and shall immediately provide IDED with copies of the minutes of any meeting at which the Project is discussed and the outcome of such discussion is likely to result in an adverse impact to the Project. (c) Notice of Proceedings. The Recipient shall promptly notify IDED of the initiation of any claims, lawsuits, bankruptcy proceedings or other proceedings brought against the Recipient which would adversely impact the Project. 7.10 Indemnification. The Recipient shall indemnify, defend and hold harmless the IDED, the State of Iowa, its departments, divisions, agencies, sections, commissions, officers, employees and agents from and against all losses, liabilities, penalties, fines, damages and claims (including taxes), and all related costs and expenses (including reasonable attorneys' fees and disbursements and costs of investigation, litigation, settlement, judgments, interest and penalties), arising from or in connection with any of the following: (a) Any claim, demand, action, citation or legal proceeding arising out of or resulting from the Project; (b) Any claim, demand, action, citation or legal proceeding arising out of or resulting from a breach by the Recipient of any representation, warranty or covenant made by the Recipient in this Contract; (c) Any claim, demand, action, citation or legal proceeding arising out of or related to occurrences that the Recipient is required to insure against as provided for in this Contract; and (d) Any claim, demand, action, citation or legal proceeding which results from an act or omission of the Recipient or any of their agents in its or their capacity as an employer of a person. 7.11 Repayment of Unallowable Costs. Recipient shall repay any Award received or realized that is determined by IDED, its auditors, agents or designees, the Auditor of the State of Iowa, or similar authorized governmental entity to be unallowable under the terms of this Contract. ARTICLE 8: COVENANTS OF THE COMMUNITY For the duration of this Contract, the Community covenants to IDED as follows: 8.1 Local Match. The Community shall provide the local financial assistance for the Project as described in Exhibit C, Project Description and Award Budget. 8.2 Notice to IDED. In the event the Community becomes aware of any material alteration in the Project, initiation of any investigation or proceeding involving the Project, change in the Recipient' ownership, structure or operation, or any other similar occurrence, the Community shall promptly provide written notice to IDED. Contract #11- NF/TC -70 - 17 - FmtApproved 12/10 ARTICLE 9: DEFAULTS AND REMEDIES 9.1 Default by Recipient. An unremedied Event of Default can result in termination of this Contract and repayment of all or a portion of the Award Funds disbursed to Recipient and the value of the Tax Benefits actually received, plus applicable default interest and costs. (a) Events of Default Any one or more of the following shall constitute an "Event of Default" under this Contract: 1. Nonpayment. Failure to make a payment when due (whether by lapse of time, acceleration or otherwise) for more than ten (10) business days of the due date thereof of any Loan or other payment required by this Contract; or 2. Noncompliance with Covenants. Default in the observance or performance of any covenant set forth in Article 7, for more than five (5) business days; or 3. Noncompliance with Security Documents. Default in the observance or performance of any term of any Security Document if required in Article 5 beyond any applicable grace period set forth therein; or 4. Noncompliance with Contract. Default in the observance or performance of any other provision of this Contract; or 5. Material Misrepresentation. Any representation or warranty made by the Recipient in this Contract or in any statement or certificate furnished by it pursuant to this Contract, or made in Exhibit A, Recipient's Financial Assistance Application, or in connection with any of the above, proves untrue in any material respect as of the date of the issuance or making thereof; or 6. Security Deficiencies. Any of the Security Documents that represent the Security pledged by Recipient to secure this Contract shall for any reason fail to create a valid and perfected priority security interest in favor of the IDED; or 7. Judgment. Any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes entered or filed against the Recipient or against any of its property and remains unvacated, unbonded or unstayed for a period of 30 days which materially and adversely affects Recipient's ability to perform its obligations under this Contract; or 8. Adverse Change in Financial Condition. Any change shall occur in the financial condition of the Recipient which would have a material adverse effect on the ability of the Recipient to perform under this Contract; or 9. Bankruptcy or Similar Proceedings Initiated. Either the Recipient shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, or (vi) fail to contest in Contract #11 -IVF/TC-70 - 18 - Fmt Approved 12/10 good faith any appointments or proceeding described below; or 10. Appointment of Officials. A custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for either the Recipient or any substantial part of any of its respective property, or a proceeding described above shall be instituted against either the Recipient and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) days; or 11. Insecurity. IDED shall in good faith deem itself insecure and reasonably believes, after consideration of all the facts and circumstances then existing, that the prospect of payment and satisfaction of the obligations under this Contract, or the performance of or observance of the covenants in this Contract, is or will be materially impaired; or 12. Failure to Submit Required Reports. The Recipient fails to submit complete reports by the required due dates as outlined in Article 7; or 13. Layoffs, Relocation or Closure. The Recipient experiences a layoff, relocates or closes any of its facilities within the state of Iowa; or 14. Hiring workers not authorized to work in state. The Recipient fails to only employ individuals legally authorized to work in the state of Iowa. If Recipient is found to knowingly employ individuals not legally authorized to work in the state of Iowa then, in addition to any and all other applicable penalties provided by current law, all or a portion of the assistance received is subject to repayment; or 15. Failure to Maintain Program Eligibility Requirements. Recipient fails to maintain a statutory eligibility requirement for a program providing assistance under this Contract. (b) Notice of Default and Opportunity to Cure. If IDED has reasonable cause to believe that an Event of Default has occurred under this Contract, IDED shall issue a written Notice of Default to the Recipient, setting forth the nature of the alleged default in reasonable specificity, and providing therein a reasonable period of time, which shall not be fewer than thirty (30) days from the date of the Notice of Default, in which the Recipient shall have an opportunity to cure, provided that cure is possible and feasible. (c) Remedies Available to IDED. When an Event of Default has occurred and is not cured within the required time period, IDED may, after written notice to Recipient: 1. Terminate this Contract. 2. Suspend or reduce pending and future disbursements. 3. Declare the principal and any accrued interest on any outstanding Promissory Notes issued pursuant to this Contract to be forthwith due and payable, including both principal and interest and all fees, charges and other amounts payable under this Contract shall be and become immediately due and payable without further demand, presentment, protest or notice of any kind. 4. Require repayment of all or a portion of Award Funds disbursed. 5. Revoke or reduce authorized Tax Benefits. 6. Require full repayment of all or a portion of the value of Tax Benefits received. (d) Pro Rata Repayment Permitted in Certain Circumstances. Barring any other Event of Default, if Contract #11- IVF/TC -70 - 19 - Fmt Approved 12/10 the default is due solely to one of the following circumstances, IDED will permit pro rata repayment of the direct financial assistance received: 1. Failure to Meet Job Obligations by Project Completion Date. If the Recipient does not meet its Job Obligations as detailed in Exhibit D, Job Obligations, by the Project Completion Date, Recipient shall repay a portion of the direct financial assistance received. The amount to be repaid is calculated based on the number of jobs that are at or above the Qualifying Wage Threshold Requirement. Repayment of any amounts due will be at the rate of $4,000 per unfilled job. This per job rate is calculated as follows: $40,000 Forgivable Loan Award Amount divided by 10 jobs to be created. For example, if the Recipient is short by 10 jobs the amount to be repaid is $4,000 per job multiplied by 10, for a total due of $40,000. Penalty interest shall apply as described in paragraph 9.1(e). Upon repayment of the amount due, IDED will reduce the Recipient's Employment Base. This reduced Employment Base must be maintained through the Maintenance Period Completion Date. 2. Job shortfall at Maintenance Period Completion Date. If the Recipient does not maintain its adjusted Employment Base through the Maintenance Period Completion Date, Recipient shall repay an additional portion of the direct financial assistance received for the number of jobs it failed to maintain. The amount to be repaid will be calculated as described in subsection 1 above. 3. Less than Total Project Cost at Project Completion Date. If the Recipient does not complete the Project with a Total Project Cost as stated in Exhibit B, Description of Project and Award Budget, by the Project Completion Date Recipient shall repay a portion of the direct financial assistance received. For example, if the Recipient's required Total Project Cost is 10% less than pledged, 10% of the Award amount received must be repaid (plus 6% interest calculated from the date of first disbursement of Award Funds). 4. Repayment Amount If Both Shortfall In Job Obligations and Less Than Total Project Cost. If the Recipient experiences a shortfall in its Job Obligations and the Total Project Cost is less than required, IDED will calculate the amount owing for the job shortfall and for investment of the Recipient of less than the Total Project Cost. The higher of these two amounts shall be the amount Recipient shall repay to IDED. (e) Default Interest Rate. If an Event of Default occurs and remains uncured, a default interest rate of 6% shall apply to repayment of amounts due under this Contract. The default interest rate shall accrue from the first date Award Funds are disbursed or Tax Benefits are received. (f) Expenses. The Recipient agrees to pay to the IDED all expenses reasonably incurred or paid by IDED including reasonable attorneys' fees and court costs, in connection with any Default or Event of Default by the Recipient or in connection with the enforcement of any of the terms of this Contract. 9.2 Default by Conununity. An unremedied Event of Default can result in termination of this Contract and repayment by Community of all or a portion of the pledged local match, plus applicable default interest and costs. (a) Events of Default. Any one or more of the following shall constitute an "Event of Default by Community" under this Contract: 1. Noncompliance with Covenants. Default in the observance or performance of any covenants of the Community set forth in Article 8, for more than five (5) business days; or 2. Material Misrepresentation. Any representation or warranty made by the Community in this Contract #11- IVF/TC -70 - 20 - FmtApproved 12/10 Contract or in any statement or certificate furnished by it pursuant to this Contract, or made by Community in Exhibit A, Recipient's Financial Assistance Application, or in connection with any of the above, proves untrue in any material respect as of the date of the issuance or making thereof; or (b) Notice of Default and Opportunity to Cure. If IDED has reasonable cause to believe that an Event of Default has occurred under this Contract, IDED shall issue a written Notice of Default to the Community, setting forth the nature of the alleged default in reasonable specificity, and providing therein a reasonable period time, which shall not be fewer than thirty (30) days from the date of the Notice of Default, in which the Community shall have an opportunity to cure, provided that cure is possible and feasible. (c) Remedies Available to IDED. When an Event of Default by Community has occurred and is not cured within the required time period, IDED may, after written notice to Community: 1. Suspend or reduce pending and future disbursements to Community. 2. Require repayment by Community for the amount of local financial assistance pledged to the Project but not provided. (d) Default Interest Rate. If an Event of Default occurs and remains uncured, a default interest rate of 6% shall apply to repayment of amounts due under this Contract. The default interest rate shall accrue from the first date Award Funds are disbursed or Tax Benefits are received. (e) Expenses. The Community agrees to pay to the IDED all expenses reasonably incurred or paid by IDED including reasonable attorneys' fees and court costs, in connection with any Default or Event of Default by the Community or in connection with the enforcement of any of the terms of this Contract. ARTICLE 10: MISCELLANEOUS. 10.1 State of Iowa Recognition. If the Project involves construction and there is signage recognizing the financial contributions made to the Project the Recipient agrees to include the Iowa Department of Economic Development on the list of entities providing assistance. For example, a sign or plaque indicating that the Project was funded in part by an Award from the State of Iowa and IDED. 10.2 Choice of Law and Forum; Governing Law. (a) In the event any proceeding of a quasi-judicial or judicial nature is commenced in connection with this Contract, the proceeding shall be brought in Des Moines, Iowa, in Polk County District Court for the State of Iowa, if such court has jurisdiction. If however, such court lacks jurisdiction and jurisdiction lies only in a United States District Court, the matter shall be commenced in the United States District Court for the Southern District of Iowa, Central Division. (b) This provision shall not be construed as waiving any immunity to suit or liability, in state or federal court, which may be available to the IDED, the State of Iowa or its members, officers, employees or agents. (c) This Contract and the rights and duties of the parties hereto shall be governed by, and construed in accordance with the internal laws of the State of Iowa without regard to principles of conflicts of laws. 10.3 Contract Amendments. Neither this Contract nor any documents incorporated by reference in connection with this Contract, may be changed, waived, discharged or terminated orally, but only as provided below: Contract #11- IVF/TC -70 - 21 - Fmt Approved 12/10 (a) Writing required. The Contract may only be amended if done so in writing and signed all the parties. Examples of situations requiring an amendment include, but are not limited to, time extensions, budget revisions, and significant alterations of existing activities or beneficiaries. (b) IDED Board review. Requests to amend this Contract shall be processed by MED in compliance with the IDED Board's rules and procedures applicable to contract amendments. 10.4 Notices. Except as otherwise specified herein, all notices hereunder shall be in writing (including, without limitation by fax) and shall be given to the relevant party at its address, e-mail address, or fax number set forth below, or such other address, e-mail address, or fax number as such party may hereafter specify by notice to the other given by United States mail, by fax or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices hereunder shall be addressed: To the Recipient at: Flexsteel Industries, Inc. Timothy E. Hall, Chief Financial Officer 3400 Jackson Street Dubuque, Iowa 52001 E -mail: thall @flexsteel.com Telephone: 563 -585 -8392 Facsimile. 563 -556 -3205 To the IDED at: Iowa Department of Economic Development Compliance 200 East Grand Avenue Des Moines, Iowa 50309 Attention: Business Development - Compliance E -mail: Compliance @iowa.gov Telephone: 515.725.3000 Facsimile: 515.725.3010 To the Community at: City of Dubuque David Heiar, Economic Development Director 50 W. 13th Street Dubuque, Iowa 52001 E -mail: dheiar @cityof Dubuque.org Telephone: 563 -589 -4393 Facsimile: 563 -589 -1733 Each such notice, request or other communication shall be effective (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Article and a confirmation of such facsimile has been received by the sender, (ii) if given by e -mail, when such e-mail is transmitted to the e- mail address specified in this Article and a confirmation of such e -mail has been received by the sender, (iii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iv) if given by any other means, when Contract #11- IVF/TC -70 - 22 - FmtApproved 12/10 delivered at the addresses specified in this Article. 10.5 Headings. Article headings used in this Contract are for convenience of reference only and are not a part of this Contract for any other purpose. 10.6 Final Authority. The IDED shall have the authority to reasonably assess whether the Recipient has complied with the terms of this Contract. Any IDED determinations with respect to compliance with the provisions of this Contract shall be deemed to be final determinations pursuant to Iowa Code Chapter 17A, Iowa Administrative Procedure Act. 10.7 Waivers. No waiver by IDED of any default hereunder shall operate as a waiver of any other default or of the same default on any future occasion. No delay on the part of the IDED in exercising any right or remedy hereunder shall operate as a waiver thereof. No single or partial exercise of any right or remedy by IDED shall preclude future exercise thereof or the exercise of any other right or remedy. 10.8 Counterparts. This Contract may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. 10.9 Survival of Representations. All representations and warranties made herein or in any other Contract document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Contract and the other Contract documents and shall continue in full force and effect with respect to the date as of which they were made until all of Recipient's obligations or liabilities under this Contract have been satisfied. 10.10 Severability of Provisions. Any provision of this Contract, which is unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Contract or any other Contract document may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Contract and any other Contract document are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Contract or any other Contract document invalid or unenforceable. 10.11 Successors and Assigns. This Contract shall be binding upon the Recipient and its respective successors and assigns, and shall inure to the benefit of the IDED and the benefit of their respective successors and assigns. 10.12 Nonassignment. This Contract shall not be assigned, in whole or in part, by Recipient unless approved in writing by IDED. 10.13 Termination. This Contract can be terminated under each of the following circumstances: (a) Agreement of the Parties. Upon written agreement of the Recipient, the Community and IDED. (b) Unremedied Event of Default. As a result of the Recipient' s or Community' s unremedied Event of Default pursuant to Article 9. (c) Termination or reduction in funding to IDED. As a result of the termination or reduction of funding to IDED as provided in Article 4.4(c). 10.14 Documents Incorporated by Reference. The following documents are incorporated by reference and considered an integral part of this Contract: Contract #11- IVF/TC -70 - 23 - Fmt Approved 12/10 A. Exhibit A - B. Exhibit B -1 C. Exhibit B -4 D. Exhibit C - E. Exhibit D - F. Exhibit E - G. Exhibit F - Recipient's Financial Assistance Application (on file with IDED), Application # 11- 100 -14 and 11 -EZ -26 Enterprise Zone Program Special Conditions Grow Iowa Values Fund 100% Wage Component Special Conditions Description of the Project and Award Budget Job Obligations Irrevocable Letter of Credit Promissory Note 10.15 Order of Priority. In the case of any inconsistency or conflict between the specific provisions of this document and the exhibits, the following order of priority shall control: 1. Article 1 - 10 of this Contract. 2. Exhibit A - Recipient's Financial Assistance Application (on file with IDED), Application # 11- 100 -14 and 11 -EZ -26 3. Exhibit B -1 Enterprise Zone Program Special Conditions 4. Exhibit B -4 Grow Iowa Values Fund 100% Wage Component Special Conditions 5. Exhibit C - Description of the Project and Award Budget 6. Exhibit D - Job Obligations 7. Exhibit E - Irrevocable Letter of Credit 8. Exhibit F - Promissory Note 10.16 Integration. This Contract contains the entire understanding between the Parties relating to the Project and any representations that may have been made before or after the signing of this Contract, which are not contained herein, are nonbinding, void and of no effect. None of the Parties have relied on any such prior representation in entering into this Contract. -This space intentionally left blank, signature page follows - Contract #11- IVF/TC -70 - 24 - Fmt Approved 12/10 IN WITNESS WHEREOF in consideration of the mutual covenants set forth above and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the parties have entered into this Contract and have caused their duly authorized representatives to execute this Contract, effective as of the latest date stated below (Contract Effective Date). FOR IDED: BY: BY: Deborah V. Durham, Director Date FOR THE;GOMMUNITY: BY: Signature Roy D. B Mayor Typed Name and Title Contract #11- IVF/TC -70 - 25 - FOR RECIPIENT: s w c . FICX S-{ 1 T u- Signature m o-N.y E. Typed Nam6 and Title 5 v F4,0.6.4c) C ire 41 7/1.( /2o 1/ Date Fmt Approved 12/10 LIST OF EXHIBITS Exhibit A - Recipient's Financial Assistance Application (on file with IDED), Application # 11- 100-14 and 11 -EZ -26 Exhibit B -1 Enterprise Zone Program Special Conditions Exhibit B -4 Grow Iowa Values Fund 100% Wage Component Special Conditions Exhibit C - Description of the Project and Award Budget Exhibit D - Job Obligations Exhibit E - Irrevocable Letter of Credit Exhibit F - Promissory Note Contract #11- IVF/TC -70 - 26 - Fmt Approved 12/10 EXHIBIT B —1 Enterprise Zone Program Special Conditions to Contract #11- IVF/TC -70 The following additional terms shall apply to the Contract: SECTION 1: ADDITIONAL DEFINITIONS. The following additional terms are defined in this Contract as follows: "Capital Investment" means the investment spent on depreciable assets. The minimum Capital Investment required for this Project is as stated in Section 2 of this Exhibit. The allowable categories of expenditures for purposes of calculating Capital Investment are described in IDED' s administrative rule 261 IAC 174.10. "Investment Qualifying for the Tax Credit" means new investment directly related to jobs created or retained by the start-up, location, expansion or modernization for this Project. Not all of the expenditure categories used to calculate the "Investment Qualifying for the Tax Credit" are included for purposes of claiming the tax credits. The allowable categories of expenditures for purposes of claiming the tax benefits are described in IDED's administrative rule 261 IAC 174.10. "Qualifying Investment for Tax Credit Program" means the statutorily - required minimum investment amount that must be met and maintained by the Recipient to receive Enterprise Zone tax benefits for this Project. This amount is as stated in Section 2 of this Exhibit. Not all expenditures count toward meeting the required Qualifying Investment for Tax Credit Program threshold. The categories of expenditures that can be included for purposes of meeting and maintaining statutorily- required investment requirements are described in IDED' s administrative rule 261 IAC 174.10. SECTION 2: TERMS AND CONDITIONS OF THE AWARD 2.1 Award. The Recipient is awarded the following Tax Benefits through the Enterprise Zone Program, based on the minimal investment requirements described herein: $1,423,000. 2.2 Minimum Investment Requirements. As a condition of receiving Tax Benefits, the Recipient shall meet the following minimum investment requirements: (a) Capital Investment. $ 12,000,000 (b) Qualifying Investment for Tax Credit Program. $ 11,500,000 (c) Investment Qualifying for Tax Credits. $ 11,200,000 2.3 Additional Tax Benefits. The Recipient is eligible for additional incentives pursuant to Iowa Code section 15E.196 (2009 Supplement) pursuant to its participation in the Enterprise Zone Program and its obligations and rights under the Contract. The following Tax Benefits, in the maximum amounts shown for each authorized benefit, are so available to the Recipient: Authorized Benefits Included in Award Maximum Amt. Supplemental New Jobs Credit. Additional funds for training new employees (1.5% withholding for 10 years) 1 Yes $ 0 No Contract #11- IVF/TC -70 - 27 - Fmt Approved 12/10 Authorized Benefits Included in Award Maximum Amt. Refund of Sales, Service, and Use Taxes. Refund of $303,000 /1 Yes sales, service, and use taxes paid to contractors or subcontractors during construction. ❑ No Investment Tax Credit (10 %) $1,120,000 11 Yes ❑ No Research Activities Credit. ❑ Yes $0 // No Local Property Tax Exemption Provided by Community ❑ Yes $0 ■ No 2.4 Conditions for Authorized Benefits. The Recipient is responsible to seek these additional benefits through processes described in the applicable statues and corresponding administrative rules, ordinances and procedures. The following conditions shall apply to the benefits described in section 2.3 of this Exhibit. (a)Supplemental New Jobs Credit - 0. As provided in the Iowa Code section 15E.197, the Recipient is eligible to claim a supplemental new jobs credit from withholding in the amount equal to 11/2 percent of the gross wages paid by the Recipient. The supplemental new jobs credit available under this program is in addition to and not in lieu of the program and withholding credit of 11/2 percent authorized under Iowa Code chapter 260E. Additional new jobs created by the Project, beyond those that were agreed to in Exhibit D — Job Obligations, are eligible for the additional 1 t percent withholding credit as long as those additional jobs meet the local Enterprise Zone wage eligibility criteria and are an integral part or a continuation of the Project. Approval and administration of the supplemental new jobs credit shall follow existing procedures established under Iowa Code Chapter 260E. (b)Refund Of Sales, Service And Use Taxes Paid To Contractors Or Subcontractors - $303,000. The Recipient is eligible for a refund of sales, service and use taxes paid to contractors and subcontractors as authorized in Iowa Code section 15E.196 (2009 Supplement) and described in Iowa Code section 15.331A (2009 Supplement). 1. The Recipient may apply for a refund of the sales and use taxes paid under Iowa Code chapters 422 and 423 for gas, electricity, water or sewer utility services, goods, wares, or merchandise, or on services rendered, furnished, or performed to or for a contractor or subcontractor and used in the fulfillment of a written contract relating to the construction or equipping of a facility of the Recipient. 2. Taxes attributable to intangible property and furniture and furnishings shall not be refunded. 3. To receive a refund of the sales, service and use taxes paid to contractors or subcontractors, the Recipient must: Inform the Iowa Department of Revenue (IDR) in writing within two weeks of project completion. For purposes of claiming this refund, "project completion" means the first date upon which the average annualized production of finished product for the preceding ninety -day period at the manufacturing facility operated by the Recipient is at least fifty percent of the initial design capacity of the facility. Contract #11- IVF/TC -70 - 28 - Fmt Approved 12/10 ii. Within one year after Project Completion, make an application to the Department of Revenue. (c) Investment Tax Credit - $1,120,000. 1. The Recipient may claim an investment tax credit as provided in Iowa Code section 15.333. Such credit may be claimed for a portion of the Qualifying Expenditures, as defined below in subparagraph (iii), directly related to job obligations, as described in Exhibit D, of the start -up, or location, expansion, or modernization of the business under this program. The Recipient shall not claim more than the amount authorized for this benefit as stated above and in Article 3.3(b). The credit is to be taken in the year the qualifying asset is placed in service. Any credit in excess of the tax liability for the tax year may be credited to the tax liability for the following seven years or until depleted, whichever occurs first. 2. The tax credit shall be amortized equally over a five -year period as specified below: July 1, 2010 — June 30, 2011 $224,000 July 1, 2011 — June 30, 2012 $224,000 July 1, 2012 — June 30, 2013 $224,000 July 1, 2013 — June 30, 2014 $224,000 July 1, 2014 — June 30, 2015 $224,000 3. Only Qualifying Expenditures are eligible for the investment tax credit. For purposes of this benefit, "Qualifying Expenditures" means: i. The purchase price of real property and any buildings and structures located on the real property. ii. The cost of improvements made to real property which is used in operation of the business. iii. The costs of machinery and equipment, as defined in Iowa Code section 427A.1(1) "e" and "j," purchased for use in the operation of the business and for which the purchase price may have been depreciated in accordance with GAAP. 4. If the Project includes leasing of new construction or major renovation of an existing building, the annual base rent paid to a third -party developer by a Recipient must be for a period equal to the term of the lease agreement but not to exceed the maximum term of the agreement, provided the cumulative cost of the base rent payments for that period does not exceed the cost of the land the third -party developer's costs to build or renovate the building for the Recipient. Limitations to annual base rent shall only be considered when the Project includes the construction of a new building or the major renovation of an existing building. The Recipient shall enter into a lease agreement with the third -party developer for a minimum of five years. (d) Reserved. Contract #11 -IVF/TC-70 - 29 - FmtApproved 12/10 (e) Reserved. SECTION 3: ADDITIONAL COVENANTS In addition to the Covenants described in Article 7 of the Contract, the Recipient shall be bound to the additional covenants: 3.1 Job Obligations. By the Project Completion Date, the Recipient shall create and/or retain the number of FTE Created Jobs and Retained Jobs included in, for Retained Jobs, and above, for Created Jobs, the Recipient's Employment Base, as detailed in Exhibit D — Job Obligations, and maintain the jobs through the Maintenance Period. 3.2 Wage Obligations. By the Project Completion Date and through the Maintenance Completion Period Date, the Recipient shall pay no less than the 90% Qualifying Wage Threshold as stated in Exhibit D — Job Obligations for the Created Jobs and/or Retained Jobs. For purposes of measuring compliance with the Job Obligations of this Contract, IDED will only count those jobs that meet or exceed the 90% Qualifying Wage Threshold. 3.3 Provide Sufficient Benefits. The Recipient shall provide all employees included as part of the job and wage obligations with Sufficient Benefits. SECTION 4: ADDITIONAL DEFAULT PROVISIONS In addition to the default provisions included in Article 9 of the Contract, the following additional default provisions shall apply: 4.1 Repayment of Tax Benefits Received - Enterprise Zone Program. IDR is the state agency responsible for collecting the value of any Tax Benefits received in violation of the terms of this Contract. The Community is the party responsible for collecting the value of the local tax benefits received in violation of this Contract. IDED will determine if the Recipient has meet the terms of this Contract. If there is an unremedied Event of Default, IDED will provide written notice IDR and the Community. Calculation of the amount owed may be based on a sliding scale in certain circumstances and may include penalty interest assessed by IDR. Those circumstances are as follows: (a) Failure to Meet Job Obligations by Project Completion Date. If the Recipient does not meet is Job Obligations as detailed in Exhibit D — Job Obligations by the Project Completion Date, Recipient shall repay a percentage of the Tax Benefits it has received. The repayment percentage will be equal to the percentage of jobs short of its Job Obligations. 1. The percentage to be repaid is calculated based on the number of jobs that are at or above the Qualifying Wage Threshold. 2. If the Recipient has met 50 percent or less of the requirement, the Recipient shall repay the same percentage in benefits as the Recipient failed to create in jobs. 3. If the Recipient has met more than 50 percent but not more than 75 percent of the requirement, the Recipient shall repay one -half of the percentage in benefits as the Recipient failed to create in jobs. Contract #11- IVF/TC -70 - 30 - Fmt Approved 12/10 4. If the Recipient has met more than 75 percent but not more than 90 percent of the requirement, the Recipient shall repay one - quarter of the percentage in benefits as the Recipient failed to create in jobs. 5. If the Recipient has not met the minimum job creation requirement of ten (10) Created or Retained FTE Jobs, the Recipient shall repay all of the incentives and assistance that it has received. 6. Upon repayment of the amount due, IDED will reduce the Recipient's Employment Base. This reduced employment base must be maintained through the Maintenance Period Completion Date. (b) Job shortfall at Maintenance Period Completion Date. If the Recipient does not maintain its adjusted Employment Base through the Maintenance Period Completion Date, Recipient shall repay an additional percentage of the Tax Benefits it has received. The repayment percentage will be equal to the percentage of jobs that the Recipient failed to maintain. The amount to be repaid will be calculated as described in subsection 1 above. (c) Less than Total Project Cost at Project Completion Date. If the Recipient does not complete the Project with a Total Project Cost as stated in Exhibit C, Project Description and Award Budget, by the Project Completion Date Recipient shall repay a portion of the Tax Benefits received. For example, if the Recipient's required Total Project Cost is 10% less than pledged, 10% of the value of the Tax Benefits received (plus any penalty interest assessed by IDR) must be repaid. (d) Wages and benefits. If the Recipient fails to comply with the Qualifying Wage Threshold or Sufficient Benefit requirements, Recipient shall not receive Enterprise Zone benefits for each year during which the Recipient is not in compliance. (e) Capital Investment. If Recipient does not meet the Capital Investment requirement described in Section 2 of this Exhibit, repayment shall be calculated as follows plus any penalty interest assessed by IDR: 1. If the Recipient has met 50 percent or less of the requirement, the Recipient shall repay the same percentage in benefits as the Recipient failed to invest. 2. If the Recipient has met more than 50 percent but not more than 75 percent of the requirement, the Recipient shall repay one -half of the percentage in benefits as the Recipient failed to invest. 3. If the Recipient has met more than 75 percent but not more than 90 percent of the requirement, the Recipient shall repay one - quarter of the percentage in Tax Benefits as the Recipient failed to invest. 4. If the Recipient has not met the minimum Enterprise Zone Program investment requirement of $500,000, the Recipient shall repay all of the Tax Benefits that it has received plus any penalty interest assessed by IDR. (f) Repayment Amount If Failure of Two or More Reasons Listed Above. If the Recipient has not met two or more of the specific circumstances listed above, IDED will calculate the percentage owing for each. The highest of these amounts shall be the amount Recipient shall repay to IDR. - End of Exhibit B — 1 - Contract #11- IVF/TC -70 - 31 - FmtApproved 12/10 EXHIBIT B — 4 Grow Iowa Values Fund 100% Wage Component Special Conditions to Contract #11- IVF/TC -70 The following additional terms shall apply to the Contract: SECTION 1: TERMS OF THE AWARD. 1.1 Description of Award. $40,000 of the Award shall be from the Grow Iowa Values Fund 100% Wage Component. 1.2 Form of Assistance. The Award, or portion thereof, made through the Grow Iowa Values Fund 100% Wage Component shall be in the following form(s): (a) Reserved. (b) Forgivable Loan. The Forgivable Loan shall be awarded to Recipient on the following terms and conditions: 1. Amount: $40,000. 2. Interest Rate: 0 %; Interest accrues from the date of first disbursement of funds. 3. Term: 60 months. 4. Promissory Note. The obligation to repay the Forgivable Loan shall be evidenced by a Promissory Note executed by the Recipient. 5. Terms of Forgiveness. This Forgivable Loan will be forgiven if the Recipient: (i) Completes the Project Performance Obligations in Article 7 of the Contract by the Project Completion Date, and (ii) Maintains the Project Performance Obligations in Article 7 through the Maintenance Period Completion Date, and (iii) Satisfies all other terms and of this Contract, and (iv) Is not in default under this Contract, and 6. Prepayment. The outstanding principal and accrued interest of this Forgivable Loan, or any part thereof that is not forgiven, may be prepaid in part or in full at any time without penalty. 7. Acceleration upon Default. If there is a failure to pay any installment of principal and interest when due, or only a portion is paid, or in the event of any other Event of Default under this Contract, the IDED may declare the entire unpaid principal and all accrued interest immediately due and payable. (c) Reserved. Contract #11- IVF/TC -70 - 32 - Fmt Approved 12/10 1.3 Additional Special Terms and Conditions. The Recipient shall comply with the additional terms and conditions as a requirement of the Award, or portion thereof, described in this Exhibit: • "None ". SECTION 2: ADDITIONAL COVENANTS In addition to the Covenants described in Article 7 of the Contract, the Recipient shall be bound to the additional covenants: 2.1 Job Obligations. By the Project Completion Date, the Recipient shall create and/or retain the number of FTE Created Jobs and Retained Jobs included in, for Retained Jobs, and above, for Created Jobs, the Recipient's Employment Base, as detailed in Exhibit D — Job Obligations, and maintain the jobs through the Maintenance Period. 2.2 Wage Obligations. The Qualifying Wage Threshold rates specific to this Contract that must be met are stated in Exhibit D, Job Obligations. By the Project Completion Date and through the Maintenance Completion Period Date, the Recipient shall: (a) For the Created Jobs, pay at least 100% of the Qualifying Wage Threshold by the Project Completion Date, and at least 100% of the Qualifying Wage Threshold throughout the Maintenance Period. (b) For the Retained Jobs, pay at least 100% of the Qualifying Wage Threshold throughout both the Project Completion Period and the Maintenance Period. To meet the Qualifying Wage Threshold, the Recipient may add to each FTE wage the Sufficient Benefits Credit as shown in Exhibit D, Job Obligations. This value shall be credited against the amount of the 100 percent Qualifying Wage Threshold requirement that the Recipient is required to meet. For purposes of measuring compliance with the Job Obligations of this Contract, IDED will only count those jobs that meet or exceed the 100% Qualifying Wage Threshold at the Project Completion Date and through the Maintenance Period Completion Date. 2.3 Provide Sufficient Benefits. The Recipient shall provide all employees included as part of the job and wage obligations with Sufficient Benefits. - End of Exhibit B — 4 - Contract #11- IVF/TC -70 - 33 - Fmt Approved 12/10 Contract #11- IVF/TC -70 TOTAL ALL FUNDS 1 $1,423,000 benefit value The Company will construct a new, four - story, 40,000 square foot corporate headquarters in the Port of Dubuque. Current corporate jobs will be moved to the new facility. SOURCE OF FUNDS IDED Programs '100% Component HQJC program benefits Source of Funds TIF Rebate Tax Abatement 260E Job Training In -Kind Contributions RISE RED Other Name of Community: City of Dubuque Contract Number: 11- IVF/TC -70 Total Other Funding DESCRIPTION OF THE PROJECT AND AWARD BUDGET (EXHIBIT C) Name of Recipient: Flexsteel Industries, Inc Amount SUBTOTAL. $12,000,000: SUBTOTAIL S0; $12,000,000 - 34 - Company 1 792oop $#1,see,e40._ City of Dubuque / 6 , 3r0 0 0 W400,008 Grant PROJECT DESCRIPTION AWARD BUDGET Other Funding Total Amount .$6.30Q # l 490 S10 GPO USE OF FUNDS *Land Acquisition $40,000 Forgivable Loan Site Preparation 'See below *Building Acquisition *Building Construction `Building Remodeling *Mfg Machinery and Equipment Other Machinery and Equipment . Racking, Shelving, etc. *Computer Hardware Computer Software *Furniture and Fixtures .Working Capital Research and Development :Job Training Other Expenses SUBTOTAL ' Included as capital Imeslment 0 awarded lax credit program Form/Term /year rebate lv SUBTOTAL Cost , sawii.eee :/4:3,600 40e0(178 3 5 o , 0,0 8'10, rf7, 96166 2co, 4.1447649' se of $12,000,000 50' • $12,000,000 Used as Match Project Local Match Fnrt Approved 12/10 Fm I ' 11109 Claw+' e s A 4.,co 4-e r eCka r ae..) ? i EXHIBIT D — JOB OBLIGATIONS Recipient: Flexsteel Industries, Inc. Community: City of Dubuque Contract Number: 11- IVF/TC -70 This Project has been awarded benefits from the 100% Component and Enterprise Zone Tax Credit Program. The charts below outline the contractual job obligations related to this Project. Data in the "Employment Base" column has been verified by the Department and reflects the employment characteristics of the facility receiving funding before this award was made. Jobs to be retained as a part of this Project must be included in these calculations. Data in the "Jobs To Be Created" column outlines the new full -time jobs (including their wage characteristics) that must be added to the employment base and, if applicable, statewide employment base as a result of this award. At the Project Completion Date and through the Maintenance Period Completion Date, the Business must achieve (at a minimum) the numbers found in the "Total Job Obligations" column. SOO %/ Enterprise Zone JOB OBLIGATIONS Project Completion Date: April 30, 2014 Maintenance Period Completion Date: April 30, 2016 . Employment Base Jobs To Be Created Total Job Obligations Total employment at project location 96 10 10 Average Wage of total employment at project location $31.06 Qualifying wage threshold requirement (per hr) $15.44 Sufficient Benefits Credit ( per hr) N/A Number of jobs at or above qualifying wage 74 10 10 Average Wage of jobs at or above qualifying wage $36.40 Notes re: Qualifying Wages 1. If the Sufficient Benefits Credit was added to the base wage to meet program wage threshold eligibility requirements, then any reduction in Sufficient Benefits Credit during the life of the Contract must be compensated for with salary to ensure that the Qualifying Wage rates are met. 2. Bonus or commission payments are not included when calculating the Qualifying Wage rate. 3. If the Recipient uses or proposes to use a non - standard work week (8 hours a day, 5 days a week, 52 weeks a year including holidays, vacation and other paid leave), check the box below and describe that alternative schedule. The alternative schedule must meet the requirements of 261 IAC 173.2.) By not checking the box and not providing the alternative schedule, IDED will consider "Full -time Equivalent (FTE) Job" to mean the employment of one person for 8 hours per day for a 5 -day, 40 -hour workweek for 52 weeks per year, including paid holidays, vacations and other paid leave. Contract #11 - IVF/TC -70 - 35 - Fmt Approved 12/10 EXHIBIT E Irrevocable Letter of Credit The Irrevocable Letter of Credit shall follow this page and shall be Exhibit E to the Contract. Contract #11- IVF/TC -70 - 36 - Fnit Approved 12/10 EXHIBIT F — PROMISSORY NOTE FORGIVABLE LOAN Recipient: Flexsteel Industries, Inc. Community: City of Dubuque Contract Number: 11- IVF /TC -70 FOR VALUE RECEIVED, the undersigned promises, in the event this Forgivable Loan is not forgiven, to pay to the order of the IOWA DEPARTMENT OF ECONOMIC DEVELOPMENT, at its office at 200 East Grand, Des Moines, Iowa 50309, the sum of Forty Thousand Dollars ($40,000) with interest at a rate of 0% unless an Event of Default occurs, in which case interest shall be at the default rate set forth in Contract number 11- IVF/TC -70 ( "Contract "). The terms and conditions by which forgiveness of this Loan may occur are as specified in the Contract. Interest shall first be deducted from the payment and any balance shall be applied on principal. Upon default in payment of any interest, or any installment of principal, the whole amount then unpaid shall become immediately due and payable at the option of the holder. The undersigned, in case of suit on this note, agrees to pay on demand all costs of collection, maintenance of collateral, legal expenses, and attorneys' fees incurred or paid by the holder in collecting and/or enforcing this Note on default. This note shall be secured by the Security specified in the Contract. Makers, endorsers and sureties waive demand of payment, notice of non - payment, protest and notice. Sureties, endorsers and guarantors agree to all of the provisions of this note, and consent that the time or times of payment of all or any part hereof may be extended after maturity, from time to time, without notice. ./1 Flexsteel Industries, Inc. 44 a 77f, �e� i 14 /4 B ) ;/f 6G cxa &U- /° d QT .14 4 ,;.,.ti o ( d ra . cipt43 Address: k; .L Wt lI afta'r -N+ re tc :rod ii)bs b ee*, C✓cw4c- Contract #11- IVF/TC -70 PROMISSORY NOTE Date: - 37 - Print or Type Name, Title 3400 Jackson Street Dubuque, Iowa 52001 Finf Approved 12/10 AUTHORIZATION FOR RELEASE OF CONFIDENTIAL STATE TAX INFORMATION AND CONFIDENTIAL UNEMPLOYMENT INSURANCE INFORMATION The undersigned (noted below as "Taxpayer ") is an applicant for or a recipient of an award by the Iowa Department of Economic Development and has entered into contract number 11- IVF /TC -70. The undersigned hereby authorizes the Department of Revenue to provide to (Awarding Agency) state tax information in the file pertinent to this contract or tax credit certificate(s). This Authorization for Release of Confidential State Tax Information shall be valid for all tax periods either 1) for a 3 -year period following completion of the contract or 2) for a 3 -year period following completion of tax credit claims using the above tax credit certificate number(s), whichever is longer. In the case of pass - through business entities (such as partnerships, limited liability companies, cooperatives, S corporations, etc.), data for members of the business entity will be aggregated and released at the business level to the Awarding Agency with this signed release from the business entity. The signature of a business representative on this Authorization form authorizes the Iowa Department of Revenue to release tax information at the business entity level. State tax information authorized for release includes tax information pertinent to the taxpayer for individual income tax, corporate income tax, franchise tax, insurance premiums tax, sales and use tax, withholding tax, moneys and credits tax, and the replacement tax on utilities that is requested by the Awarding Agency in the administration of tax credit programs and other state financial assistance programs. The undersigned hereby authorizes the Iowa Department of Workforce Development to provide to the Iowa Department of Revenue and to the Awarding Agency the Employment Contribution and Payroll Tax Report (form 65 -5300) and Multiple Worksite Report (BLS 3020) and information from these forms for the Employer Identification Number (EIN) number pertinent to the above specified contract or tax credit certificate(s). Iowa Workforce Development may provide the information without providing the report. The confidential unemployment insurance information will be released, pursuant to this authorization only to the Iowa Department of Economic Development and/or The Department of Revenue for the purpose of evaluation and administration of tax credit programs and other state financial assistance programs. This Authorization for Release of Confidential Unemployment Insurance information shall be valid for all periods either 1) for a 3 -year period following completion of the contract or 2) for a 3 -year period following completion of tax credit claims using the above tax credit certificate number(s), whichever is longer. Name of Taxpayer: F L c $ +Cc 1 L i . s 4 - y s i .► c. Street Address: S al oo . 5 s c (c s o S+r e e City, State, Zip ho u. hut 3 „. c. =o ..3 o- 5 2. 0 0 1 Telephone Number: $ b 3 — S'8 5 - 8 3 9 '2- Email Address: 44 a. 1 t ai ' (c ,z s i-ee 1 . Ca 19 Social Security Number (for individuals): A/ /A Employer Identification Number (for businesses): 4 Z. - 6 44 2_31'3 Unemployment Insurance Number (for businesses): Type of Entity: ❑ Individual /Sole Proprietorship ❑ Partnership ❑ S Corp X C Corp ❑ LLC ❑ Cooperative ❑ Other (specify) Signature of Taxpayer: Title (Required for partnerships and corporations'): Date signed: 6 /y /Zoir der - Partnerships — Only partners can authorize release of information. Corporations — Only corporate officers can authorize release of information. Revised 9/06 Form -9 (Rev. October 2007) Department of the Treasury Internal Revenue Service Request for Taxpayer Identification Number and Certification Give form to the requester. Do not send to the IRS. Print or type See Specific Instructions on page 2. Name (as shown on your income tax return) rleX�.�t -ce,1 •ndi brl' -s, e- - Business name, if different from above Check appropriate box: • Individual /Sole proprietor © Corporation • Partnership • Limited liability company. Enter the tax classification (D.-disregarded entity, C= corporation, P =partnership) ► • Other (see instructions) ■ Exempt • payee Address (number, street, and apt. or suite no.) fir' n .SA-.. Requester's name and address (optional) City, state, and ZIP code T__/1 /� / bu � , 6.liC 1 1 List account numt10(s) here (optional) Part I Taxpayer Identification Number (TIN) Enter your TIN in the appropriate box. The TIN provided must match the name given on Line 1 to avoid backup withholding. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 3. Note. If the account is in more than one name, see the chart on page 4 for guidelines on whose number to enter. Part II Certification Social security number or Employer identification number LJ o /ya3 i ci Under penalties of perjury, I certify that: 1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and 3. I am a U.S. citizen or other U.S. person (defined below). Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the Certification, but you must provide your correct TIN. See the instructions on page 4. Sign Signature of Here U.S. person • General Instructions Section references are to the Internal Revenue Code unless otherwise noted. Purpose of Form A person who is required to file an information return with the IRS must obtain your correct taxpayer identification number (11N) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA. Use Form W -9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester) and, when applicable, to: 1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued), 2. Certify that you are not subject to backup withholding, or 3. Claim exemption from backup withholding if you are a U.S. exempt payee. If applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners' share of effectively connected income. Note. If a requester gives you a form other than Form W -9 to request your TIN, you must use the requester's form if it is substantially similar to this Form W -9. Date • 4/,0724/ f U.S. person. For al tax Definition of a p purposes, you are considered a U.S. person if you are: • An individual who is a U.S. citizen or U.S. resident alien, • A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States, • An estate (other than a foreign estate), or • A domestic trust (as defined in Regulations section 301.7701 -7). Special rules for partnerships. Partnerships that conduct a trade or business in the United States are generally required to pay a withholding tax on any foreign partners' share of income from such business. Further, in certain cases where a Form W -9 has not been received, a partnership is required to presume that a partner is a foreign person, and pay the withholding tax. Therefore, if you are a U.S. person that is a partner in a partnership conducting a trade or business in the United States, provide Form W -9 to the partnership to establish your U.S. status and avoid withholding on your share of partnership income. The person who gives Form W -9 to the partnership for purposes of establishing its U.S. status and avoiding withholding on its allocable share of net income from the partnership conducting a trade or business in the United States is in the following cases: • The U.S. owner of a disregarded entity and not the entity, Cat. No. 10231X Form W -9 (Rev. 10 -2007) Certificate of Standing http: / /www.sos. state. ia. us /Cert/ Print .aspx ?cs= gF4XkSeN8g7PNdVe... Date: 6/9/2011 IOWA SECRETARY OF STATE MATT SCHULTZ Secretary of State Seal CERTIFICATE OF AUTHORIZATION Name: FLEXS'EEL INDUSTRIES, INC. (490 FP - 47084) Authorized date: 11/9/1936 Duration: PERPETUAL State of Incorporation: MINNESOTA I, Matt Schultz, Secretary of State of the State of Iowa, custodian of the records of incorporations, certify that the corporation named on this certificate is authorized to transact business in this state, that all fees required by the Iowa Business Corporation Act have been paid by the corporation, and that the most recent biennial corporate report required has been filed by the Secretary of State. Certificate ID: CS55473 To validate certificates visit: www. sos .state.ia.us/ValidateCertifica e Matt Schultz Iowa Secretary of State 1 of 1 06/09/2011 11:38 AM FLEXSTEEL INDUSTRIES, INC. I certify that the attached Articles of Incorporation are the Articles of Incorporation of Flexsteel Industries, Inc., as amended and restated, and that the Articles of Incorporation, as amended and restated, have not been rescinded and are now in full force and effect. FLEXSTEEL INDUSTRIES, INC. By: Timothy 1 L 11 Title: SVP- Finance, CFO, Treasurer & Secretary Date: 7 / /s' Lo // STATE OF IOWA COUNTY OF DUBUQUE On (S, O 1 1 , before me, a Notary Public in and for the State and County aforesaid, personally Vppeared T ino-t -h 1 E.. 46-11 , the MVP - 1--i nar, c e `JO, Ire( ,atrtX } Seat xi.0 of Flexsteel Industries, Inc., personally known to me or proven by satisfactory evidence to be the jrson whose name is subscribed to this instrument, and acknowledged to me that he executed the foregoing instrument in his authorized capacity, and that by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS MY HAND AND OFFICIAL SEAL. `•. DAWN M. RINEHART Commission Number 786092 My Comm. Exp. JAN 3, 2014 22 it(itaLc}- Notary Public My commission expires: &CLi1 . 3, o�Q /�/ AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FLEXSTEEL INDUSTRIES, INC. (As Amended through December 6, 2010) 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 Minnesota Statutes Chapter 302A. ARTICLE III Registered Office, Registered Agent The address of the corporation's registered office in the State of Minnesota is CT Corporation Systems, Inc., 100 South Fifth Street, Suite 1075, Minneapolis, Minnesota 55402. The name of its registered agent at such address is CT Corporation System, Inc. ARTICLE IV Authorized Capital 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 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. 6) 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 the following issue: • amending the Articles of Incorporation. 7) 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. B. $1.00 PAR VALUE PREFERRED SHARES. Seven hundred thousand (700,000) shall be $1.00 Par Value Preferred Shares of the par value of $1.00 each. 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: 1) 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. 2 2) 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. 3) Shares of $1.00 Par Value Preferred Shares shall be issued only as fully paid and non - assessable shares. 4) 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: i) 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; ii) the annual rate of dividends payable on shares of such series and if the dividends are cumulative; iii) 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. iv) 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; v) the provisions, if any, relating to any sinking fund or purchase fund with respect to shares of such series; vi) 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; vii) 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 Article X which Articles control in the event of a conflict; viii) any other rights, preferences and if voting, the number of votes per share which shall not exceed two; 3 5) 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. 6) 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. 7) 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. 8) 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. 9) 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. C. COMMON SHARES. 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. 1) 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. 2) 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. D. WARRANTS, RIGHTS, OPTIONS. 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 4 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 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. ARTICLE V Board of Directors A. Number The number of directors shall be set by the board of directors but shall not be less than seven (7) nor more than thirteen (13). The number of directors may be increased or decreased only by the affirmative vote of a majority of 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. If there is a decrease in the number of directors on the board of directors, the reduction in number will first apply to remove any vacancy, if any, existing at the time of the decrease. The decrease shall next apply to remove a director position upon the expiration of the term of a director then sitting. No director shall be removed during his term of office through a decrease in the size of the board of directors. B. Classification The board of directors is hereby divided into three classes. At the 2011 annual meeting of shareholders, the directors of Class I shall be elected at the 2012 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 term. The term of office of one of the classes of directors shall expire each year. At each 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 of directors, passed by 5 an affirmative vote of a majority of the 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 class sizes may be as equal as possible. C. Vacancies Any vacancy occurring in the board of directors may be filled only by a resolution of the board of directors passed by the affirmative vote of a majority of the remaining directors, even though less than a quorum. A director elected to fill a vacancy shall be elected for the unexpired portion of the term of his predecessor in that class. Any director position to be filled by reason of an increase in the number of directors set by the board of directors shall be filled only by a resolution of the board of directors passed by the affirmative vote of a majority of the directors serving at the time of the increase. A director elected to fill a newly created director position shall be elected for the unexpired portion of the term in the class to which such director is assigned. D. Removal of Directors 1. By Shareholders A director may be removed by the shareholders only for cause, as defined in Article V, D. 3. below, and then only by a resolution passed by the affirmative vote of two - thirds of all shares present and entitled to vote. 2. By Directors A director may be removed by the directors only for cause, as defined in Article V, D. 3. below, and then only by a resolution passed by the affirmative vote, in person, or by a director's consent if a director is absent, of at least two - thirds of the directors then in office. For voting purposes only, the director whose removal is being voted upon shall not be counted as being in office. Said director is disqualified from voting on the resolution. 3. Cause As used in this Article V, the meaning of "cause" shall be limited to malfeasance arising from the performance of a director's duties which has a materially adverse effect on the business of the corporation. E. Limiting Liability of Directors 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 Shareholders will have no rights of cumulative voting. ARTICLE VII Preemptive Rights Prohibition Shareholders will have no statutory preemptive rights. ARTICLE VIII Board of Director Action by Written Consent 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 A shareholders' quorum consists of the holders of a majority of the shares entitled to vote at the meeting. ARTICLE X Amendment of Amended and Restated Articles of Incorporation 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: i) A legally submitted, properly passed resolution of the board of directors or a legally proposed resolution submitted by the required voting power of the shares entitled to vote as set forth in Minnesota Statutes Chapter 302A., and ii) 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 iii) The approval of said resolution by the shareholders upon the affirmative vote of two - thirds of the voting power of the shares present and entitled to vote. 7 Rbits CERTIFICATE OF LIABILITY INSURANCE OP ID .i DATE(MM/DD/YYYY) 03/18/11 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). PRODUCER Cottingham & Butler, Inc. 800 Main Street Dubuque IA 52001 Phone:563- 587 -5000 Fax:563- 583 -7339 LOn r Al, r NAME: PHONE Ext): (A/C, No): ADDRESS: CUSTOMER ID S: FLEIND1 INSURER(S)AFFORDINGCOVERAGE NAIC# INSURED Flexsteel Industries, Inc. PO Box 877 Dubuque IA 52004 INSURER A: Sentry Insurance A Mutual co. 24988 INSURER B: INSURERC: 07/01/10 INSURER D : EACH OCCURRENCE INSURER E : PR MISES(Eatoccurrence) INSURER F : COVERAGES CERTIFICATE NUMBER: REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSR LTR TYPE OF INSURANCE AVM INSR SOUK WVD POUCY NUMBER POLICY EFF (MM /DD/YYYY) POUCY EXP (MM/DD/YYYY) LIMITS A GENERAL X LIABILITY COMMERCIAL GENERAL LIABILITY X OCCUR 90- 15343 -03 07/01/10 07/01/11 EACH OCCURRENCE $ 1000000 PR MISES(Eatoccurrence) $ 500000 CLAIMS -MADE MED EXP (Any one person) $ 10000 PERSONAL &ADVINJURY $ 1000000 GENERAL AGGREGATE $ 2000000 GEN'L AGGREGATE LIMIT APPLIES PER: 7 POLICY jRa LOC PRODUCTS - COMP /OP AGG $ 2 0 0 0 0 0 0 $ A AUTOMOBILE X LIABILITY ANY AUTO ALL OWNED AUTOS SCHEDULED AUTOS HIRED AUTOS NON -OWNED AUTOS 90- 15343 -04 07/01/10 07/01/11 COMBINED SINGLE LIMIT (Ea accident) $ 1000000 BODILY INJURY (Per person) $ BODILY INJURY (Per accident) $ PROPERTY DAMAGE (Per accident) $ $ $ UMBRELLA LIAR EXCESS UAB OCCUR CLAIMS -MADE EACH OCCURRENCE $ AGGREGATE $ DEDUCTIBLE RETENTION $ $ $ A A WORKERS COMPENSATION AND EMPLOYERS' LIABILITY ANY PROPRIETOR/PARTNER/EXECUTIVtri OFFICER/MEMBER EXCLUDED? (Mandatory In NH) If yes, describe under DESCRIPTION OF OPERATIONS below N / A 90- 15343 -01 ALL STATES 90-15343-02 AZ, MA, WI,oR 07/01/10 07/01/10 07/01/11 07/01/11 X WCSTATU- OTH- TORY LIMITS ER E.L. EACH ACCIDENT $ 1000000 E.L. DISEASE - EA EMPLOYEE $ 1000000 E.L. DISEASE - POLICY LIMIT $ 100000 0 DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES Attach ACORD 101, Additional Remarks Schedule, If more space Is required) 10/11 REGULAR (FLEXSTEEL) CERTIFICATE HOLDER CANCELLATION FOR ALL MUST INFORMATION ONLY CERTIFICATE REQUESTS COME FROM INSURED 0000000 SHOULD ANY OF THE ABOVE DESCRIBED POUCIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DEUVERED IN ACCORDANCE WITH THE POUCY PROVISIONS. AUTHORIZED REPRESENTATIVE Bradley J. Plummer ACORD 25 (2009/09) ®1988 -2009 ACORD CORPORATION. All rights reserved. The ACORD name and logo are registered marks of ACORD Flexsteel. Industries Incorporated Flexsteel's commitment to Environmental Stewardship All of Flexsteel's stakeholders have a responsibility to protect our environment. The officers of Flexsteel and its subsidiaries will use our role as business and community leaders to set the tone at the top to guide our management team in their efforts to improve the environment we directly impact. We will identify our environmental footprint and reduce our impact by implementing a wide variety of initiatives. Because we are committed to sustainable business practices, and to our environment, these initiatives will grow into core values dedicated to the stewardship of resources. J. Klosterman-President & CEO Sr VP Corpo te Services keting/Sales Don D - e -Pr ident & EO 0 kFurniture I • t resident Homestytes Pat Crahan-Sr VP Commercial Seating Ke ' Crahan-V S les Marketing ee Fautsch-VP Res ential Sales J' ilbertson Vehicle Seating/GM Dbq Mike Santil Marketing-Vehicle Seating POtir OFFICE. Box 877 1111 1.4,1 , IOWA 5zoo40877 111 563. 556 • 7730/IFLEPHoNE 1 563 . 556 .8345/FAx Flexsteel Industries, Inc. Enhancing Furniture's Environmental Culture Overview July 15, 2011 EFEC, "Enhancing Furniture's Environmental Culture," is a furniture industry - specific environmental management program developed by American Home Furniture Alliance (AHFA) in 1999 to help its member companies analyze and better understand the environmental impact of its operations, raw materials and finished products. EFEC is a facility registration applicable to factories, warehouses and office buildings. If a company implements EFEC at all of its domestic facilities, it can be recognized as an "EFEC Company." EFEC is a voluntary environmental management system (EMS) for furniture manufacturers. EFEC was created with the purpose of maintaining and furthering the industry's strong environmental performance. EFEC is a set of management tools and principles that your company needs to integrate environmental concerns into its daily business practices. EFEC provides a systematic approach to review and improve operations for better environmental performance and improved profitability. Benefits are obtained by setting up procedures to get the work done and reviewing these procedures to ensure they are working properly. What does it mean to be an EFEC- registered facility? An EFEC- registered facility has analyzed the environmental impact of its operations, raw materials and finished products and implemented a proven and systematic approach to continual review and improvement. This environmental management system has resulted in improved operational performance and efficiency. What does it mean to be an EFEC Company? An EFEC company has adopted a corporate culture of environmental stewardship and has analyzed the environmental impact of its operations, raw materials and finished products at all company -owned facilities, including factories, warehouses and office buildings. All facilities have implemented a proven and systematic approach to continual review and improvement as part of this industry- specific environmental management system. As a result, this company has improved management of resources and raw materials; reduced energy and water consumption; reduced waste disposal and associated costs; and improved its overall operational performance and efficiency. When did Flexsteel become EFEC Registered? Flexsteel Industries, Inc. became EFEC Registered in August 2009. In order to remain registered, each facility is audited on an annual basis to demonstrate continual progress. Flexsteel Environmental Policy Statement All of Flexsteel's stakeholders have a responsibility to protect our environment. The officers of Flexsteel and its subsidiaries will use our role as business and community leaders to set the tone at the top to guide our management team in their efforts to improve the environment we directly impact. We will identify our environmental footprint and reduce our impact by implementing a wide variety of initiatives. Because we are committed to sustainable business practices, and to our environment, this initiative will grow into core values dedicated to the stewardship of resources. What are Flexsteel's environmental goals? Continue to reduce our impact on the environment by reducing waste into the landfill, reduce the amount of water, natural gas and electricity at each facility. Continue to educate our employees, community and consumers about the efforts being made at Flexsteel.