1
EXHIBIT 10.3
EXHIBIT C
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is effective
as October 27, 1995, by and between Crown Crafts, Inc., a Georgia
corporation ("Crown Crafts"), The Red Calliope & Associates,
Inc., a California corporation (the "Company"), and Xxxxx Xxxxxxx
(the "Executive").
WHEREAS, Crown Crafts is acquiring the entire equity
interest of the Company by means of a merger pursuant to a Merger
Agreement dated as of October 8, 1995 the ("Merger Agreement");
and
WHEREAS, Executive is the Executive Vice President-Sales
and Marketing of the Company and desires to continue her
employment with the Company in such capacity; and
WHEREAS, Crown Crafts desires that Executive continue to
serve in the capacity of Vice President-Operations of the
Company; and
WHEREAS, Crown Crafts, the Company and Executive desire
to set forth in writing the terms and conditions of Executive's
continued employment with the Company.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Employment and Duties.
(a) The Company hereby agrees to continue to
employ Executive and Executive agrees to continue employment in
her capacity as Executive Vice President-Sales and Marketing of
the Company to act in accordance with the terms and conditions
set forth herein. Executive also consents to serve without
additional compensation, if elected, as a director of the
Company. During the term of this Agreement, Executive agrees
that this position will be her principal employment, that she
will serve the Company faithfully and to the best of her ability
and that she will devote her full business time, attention and
skills to the operation of the Business of the Company (as
defined herein), subject to reasonable absences for vacation and
illness, and that she will perform such duties, functions and
responsibilities in connection with such position and consistent
with the foregoing as are from time to time delegated to
Executive by the Board of Directors or Chief Executive Officer of
the Company; provided, however, that the foregoing shall not be
deemed to restrict Executive from devoting a reasonable
2
amount of time and attention to the management of her personal
affairs and investments, so long as such activities do not
interfere with the responsible performance of Executive's duties
hereunder. Executive shall provide the Board with periodic
reports on, and keep them informed on a current basis concerning,
the business and affairs of the Company. For purposes of this
Agreement, the Business of the Company shall be defined as
designing, manufacturing, distributing and selling infant and
juvenile bedding products.
(b) In addition, the Company shall provide
Executive as her principal office with a private office,
secretarial and administrative assistance, office equipment,
supplies and other facilities and services suitable to
Executive's position and located at 00000 Xxxxx Xxxxxxxx Xxxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at a comparable location within
Los Angeles County.
2. Term. The term ("Term") of this Agreement shall
commence on the date hereof and shall continue until October 26,
1999.
3. Compensation. In consideration of the services
to be rendered by Executive to the Company hereunder, the Company
hereby agrees to pay or otherwise provide Executive the following
compensation and benefits, it being understood that the Company
shall have the right to deduct therefrom all taxes which may be
required to be deducted or withheld under any provision of
applicable law (including, without limitation, Social Security
payments, income tax withholding and other required deductions
now in effect or which may become effective by law anytime during
the Term):
(a) Salary. Executive shall receive an annual
salary of ("Salary") of (i) $140,000 for the first twelve months
hereof, (ii) $145,000 for the second twelve months hereof, (iii)
$150,000 for the third twelve months hereof, and (iv) $155,000
for the fourth twelve months hereof, to be paid in equal
installments in accordance with the Company's salary payment
practices in effect from time to time for executives of the
Company.
(b) Bonus Payment. In addition to Salary,
Executive shall receive periodic bonus payments (payable within
ninety (90) days of the end of the applicable fiscal year) as
follows:
(i) Budgeted Pre-tax Profit (as defined
below) of the Company is $2,900,000 for the fiscal year ended
June 30, 1996; $3,400,000 for the fiscal year ended June 30,
1997; $3,900,000 for the fiscal year ended June 30, 1998; and
$4,500,000 for the fiscal year ended June 30, 1999.
(ii) A bonus ("Bonus") shall be paid to
Executive on each anniversary hereof as follows (subject to
Section 3(b)(iii) below): $60,000 if
2
3
budgeted Pre-tax Profit is realized for the fiscal year ended
June 30, 1996; $65,000 if budgeted Pre-tax Profit is realized for
the fiscal year ended June 30, 1997; $70,000 if budgeted Pre-tax
Profit is realized for the fiscal year ended June 30, 1998; and
$75,000 if budgeted Pre-tax profit is realized for the fiscal
year ended June 30, 1999.
(iii) In the event that less than 100%
but at least 80% of budgeted Pre-tax Profit is realized for any
such year, a bonus (in lieu of the full amount of the Bonus
payable pursuant to Section 3(b)(ii), above) equal to 30% of the
Bonus for such year shall be paid on each respective anniversary
hereof, and for each 1/100 of 1% of the budgeted Pre-tax Profit
above 80% an additional 35/1,000 of 1% of the Bonus (converted to
the nearest 1/100) (each full 1% of budgeted Pre-tax Profit
therefore converting into 3.5% of Bonus) shall likewise be paid
on each respective anniversary hereof, up to an maximum of 100%
of Bonus.
(iv) By way of example of the
foregoing, if Pre-tax Profit in fiscal year ended June 30, 1996
is $2,860,270, the bonus payable for Executive with respect to
such year shall be calculated as follows:
$2,860,270 (actual Pre-tax Profit)
divided by $2,900,000 (budgeted Pre-tax Profit) x 100 = 98.63% of
budget; and
98.63% of budget converts into 95.21% of
Bonus as follows:
18% of budget in excess of 80% of budget
converts (at a rate of 3.5% of Bonus for each 1% of budget) to
63% (3.5 times 18) of Bonus in excess of 30% (63% plus 30% then
equals 93%),
and .63% of budget converts (at a rate
of 35/1,000 of 1% of Bonus to each 1/100 of 1% of budget) into an
additional 2.205% (rounded off to 2.21%) of Bonus, for a total
(93% plus 2.21%) of 95.21% of Bonus.
(v) Notwithstanding the foregoing,
regardless of Pre-tax Profit, the Company agrees to pay Executive
a Bonus of $40,000 on each of the first two anniversaries hereof.
(vi) "Pre-tax Profit" is defined as
profit before taxes calculated in accordance with generally
accepted accounting principles, consistently applied, consistent
with the Company's prior practice, adjusted to exclude:
A. all acquisition expenses,
payments, amortization of goodwill and, adjustments relating to
the acquisition of the Company by Crown Crafts;
3
4
B. costs of meeting accounting and
legal requirements imposed on the Company by Crown Crafts as a
result of Crown Crafts being a public company;
C. any interest expense incurred
with respect to borrowings obtained to finance the acquisition by
Crown Crafts of the Company;
provided, however, that the Company will not be charged for
services provided by Crown Crafts, except that any expense
savings achieved by the merger pursuant to the Merger Agreement
(including, without limitation, any reduction in purchasing
expenses, accounting expenses or overhead) will be calculated as
follows: 85% of the actual savings on the books of the Company
will accrue to the benefit of Crown Crafts (by means of a charge
to the Company's expenses) and 15% will accrue to the benefit of
the Company for the purpose of calculating the Bonus; and
provided, further, that with respect to any products created,
designed or manufactured by Crown Crafts, Pre-tax Profit as
defined herein shall be adjusted upward as follows: (x) if such
product is sold or distributed by the Company, the Company shall
receive a additional credit of 5% of the sales commission paid
with respect to such sale, and (y) if such product is sold or
distributed by Crown Crafts but the product is based on a design
or pattern created by the Company, the Company shall be credited
with a monthly royalty of 5% of the sale; and
provided, further, that any Bonus payable with respect to the
fiscal year ending June 30, 1996, shall be reduced dollar-for-
dollar by the amount of any bonus paid to Executive by the
Company on or before the Closing Date (as defined in the Merger
Agreement) with respect to any portion of such fiscal year; and
provided, further, that notwithstanding anything appearing
elsewhere herein, the Bonus payable with respect to the fiscal
year ending June 30, 1996, shall be the greater of (i) the amount
calculated pursuant to Section 3(b) hereof or (ii) the amount, if
any, accrued on the books of the Company as of the Closing Date
with respect to Executive for the period from June 30, 1995 to
the Closing Date; and
provided, further, that Pre-Tax Profit shall include a charge for
a reasonable estimate of the amount of bonus payable to Executive
under this Agreement and to Xxxx Xxxxxxx under his employment
agreement; and
provided, further, that for purposes of calculating Pre-Tax
Profit, the Company will be charged at a rate of $4.00 per
warrant with respect to any warrant issued by Crown Crafts to The
Disney Company in connection with the renewal of licenses for
Classic Pooh, Pooh and Baby Mickey & Co., such charges to be
applied ratably over the term of the warrants.
4
5
(c) Benefit Plans. In addition to, and not in
limitation of, the compensation set forth above, Executive shall
be entitled to participate in all benefit programs provided by
the Company, including, without limitation, any health, accident,
disability and life insurance programs, vacation and sick leave
benefits, and any other fringe benefit program, which the Company
may adopt and implement for the benefit of the Company's
employees. Notwithstanding the foregoing, however, nothing
contained herein shall be construed as an obligation of the
Company to implement any benefit program, or if implemented, to
maintain any program for any period of time for any employee.
(d) Expenses. Executive shall be entitled to receive
reimbursement for all reasonable expenses incurred by her in
connection with the fulfillment of her duties hereunder upon
receipt of appropriate vouchers therefor, provided, however, that
Executive has complied with all reasonable policies and
procedures relating to the reimbursement of such expenses as
shall, from time to time, be established by the Company.
(e) Automobile. The Company shall provide Executive
with the use of an automobile with a purchase price (new) of
approximately $30,000, and shall pay all the reasonable expenses
of operation, maintenance and service thereof, including
gasoline, insurance and repair.
(f) Options. Executive shall be granted non-qualified
stock options to purchase 10,000 shares of Crown Crafts common
stock, exercisable for five years, such options to be granted as
of the date hereof, pursuant to the Crown Crafts, Inc. 1995 Stock
Option Plan. Executive shall be eligible for future grants of
stock options in amounts and on terms substantially similar to
those options awarded executives of Crown Crafts with similar
positions or salaries to Executive.
(g) Promotion. Unless this Agreement has been otherwise
earlier terminated pursuant to Section 4 hereof, Executive will
be promoted to President and Chief Executive Officer of the
Company not later than October 26, 1997, at which time her salary
shall be increased by an additional $40,000 per annum.
4. Termination.
(a) This Agreement shall terminate on the
earliest to occur of the following events: (i) on the mutual
agreement of the Company and Executive; (ii) the death of
Executive or Executive's voluntary retirement; (iii) Executive
becoming unable to perform a substantial portion of her duties as
described herein due to injury, illness or disability (mental or
physical) as determined by an independent physician selected by
the Company and reasonably satisfactory to Executive for a period
of three (3) consecutive months or any aggregate period of six
(6) months in any eighteen (18) month period ("Disability"); or
(iv) immediately upon the
5
6
Company giving written notice to Executive of termination for
Cause (as defined herein).
(b) The Company may terminate Executive's
employment under this Agreement at any time for Cause. The
termination shall be evidenced by written notice to Executive,
which shall specify the cause for termination. "Cause" shall
exist if: (i) Executive is convicted of (from which no appeal
may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony, (ii) in the
reasonable determination of the Board, the Executive has engaged
in conduct or activity materially damaging to the business of the
Company (it being understood, however, that unintentional
physical damage to any property of the Company by Executive shall
not be a ground for such a determination by the Board), or
(iii) Executive has failed, without reasonable cause, to devote
her full business time and best efforts to the Business of the
Company as provided in Section 1(a) hereof and, after written
notice from the Company of such failure, Executive at any time
thereafter again so fails.
5. Representations and Warranties.
(a) Executive represents and warrants to the
Company that: (i) she has the full power and authority to
execute, deliver and perform this Agreement, and that she has
taken all actions necessary to secure all approvals required in
connection herewith and therewith; (ii) this Agreement has been
duly authorized, executed and delivered by her and constitute her
valid and binding agreement, enforceable against her in
accordance with its terms; and (iii) the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not, with the passage of
time or the giving of notice or both, violate or conflict with,
constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of or
entitle any party to accelerate any obligation under or pursuant
to, any material mortgage, lien, leases, agreement, instrument,
order, arbitration award, judgment or decree to which she is a
party or by which she or any of her assets are bound.
(b) Crown Crafts and the Company respectively
hereby each represent and warrant to Executive that: (i) this
Agreement has been duly authorized, executed and delivered by
them, and constitutes the valid and binding agreement of them,
enforceable against them in accordance with its terms; (ii) they
have the full power authority to execute, deliver and perform
this Agreement and have taken all necessary to secure all
approvals required in connection herewith; and (iii) the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not,
with the passage of time or the giving of notice or both, violate
or conflict with, constitute a breach of or default under, result
in the loss of any material benefit under, or permit the
acceleration of or entitle any party to accelerate any obligation
under or pursuant
6
7
to, their Articles of Incorporation or By-Laws or any material
mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree to which they are a party or by which
they or any of their assets are bound.
6. Confidentiality.
(a) Executive recognizes and acknowledges that
in the course of her employment with the Company, as contemplated
by this Agreement, and as a result of the position of trust that
she will hold under this Agreement, she will obtain private and
confidential information and proprietary data relating to Crown
Crafts, the Company and other affiliates of Crown Crafts,
including without limitation, financial information, product and
design information, marketing information, customer lists and
other data that are valuable assets and property rights of the
Company and Crown Crafts and its affiliates (collectively
referred to as "Confidential Information"). Executive agrees
that she will not, during the term of this Agreement or any time
after the termination of this Agreement, either directly or
indirectly, disclose or use any Confidential Information acquired
during her employment with the Company, unless (i) the
Confidential Information has been made public through no action
or fault of the Executive, or (ii) its disclosure is requested or
compelled by applicable law or regulatory agency. Executive
further agrees that after the termination of this Agreement, or
at such other time as the Company requests, Executive will return
to the Company all documents, papers and records constituting
Confidential Information, and all copies of same in Executive's
possession and control.
(b) Executive acknowledges that irreparable
loss and injury would result to Crown Crafts and the Company upon
the breach of any of the covenants contained in this Section 6
and that damages arising out of such breach would be difficult to
ascertain. Executive agrees that, in addition to all other
remedies provided at law or at equity, the Company may petition and
obtain from a court of law or equity both temporary and permanent
injunctive relief without the necessity of proving actual damages
and without posting bond or other security to prevent a breach by
Executive of any covenant contained in this Section 6, as well as
to an equitable accounting of all earnings and profits and other
benefits arising out of any such violations.
7. Restrictive Covenants. Executive agrees to be
bound by and subject to Sections 6.7, 6.8 and 6.9 of the Merger
Agreement to the same extent as Xxxx Xxxxxxx is bound thereby
except that, as to Executive, the duration of the "Noncompete
Period" shall be equal to the length of the Term hereunder unless
Executive is terminated prior thereto other than for Cause (and
if Executive is so terminated other than for Cause the Noncompete
Period shall lapse).
7
8
8. Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing
and deemed to have been given when delivered in person or when
dispatched by telegram or electronic facsimile transfer
(confirmed in writing by mail, registered or certified, return
receipt requested, postage prepaid, simultaneously dispatched) to
the addresses specified below.
If to Executive: Xxxxx Xxxxxxx
2652 Xxx Xxxxxxx
Xxxxx Xxxxxx Xxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
If to Crown Crafts or Crown Crafts, Inc.
the Company: 0000 XxxxxXxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: President
or to such other address or fax number as either party may from
time to time designate in writing to the other.
9. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto relating to the
subject matter hereof, and supersedes all prior agreements and
understandings, whether oral or written, with respect to the
same; provided, however, that nothing herein shall affect the
validity of Sections 6.7, 6.8 or 6.9 of the Merger Agreement. No
modification, alteration, amendment or recision of or supplement
to this Agreement shall be valid or effective unless the same is
in writing and signed by both parties hereto.
10. Governing Law. This Agreement and the rights and
duties of the parties hereunder shall be governed by, construed
under and enforced in accordance with the laws of the State of
California.
11. Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective heirs, personal representatives, successors and
permitted assigns. The rights, duties and obligations under this
Agreement are assignable by the Company to a successor of all or
substantially all of the business or assets of the Company. The
rights, duties and obligations of Executive under this Agreement
shall not be assignable.
12. Survival. The respective obligations of the
parties under Section 6 hereof shall survive the termination of
this Agreement.
8
9
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
CROWN CRAFTS, INC.
By:
-------------------------------
THE RED CALLIOPE & ASSOCIATES, INC.
By:
------------------------------
-----------------------------------
Xxxxx Xxxxxxx
9
