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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of July 23, 2001 by and among E. XXXXXXX XXXXXXXX, a resident of the State of
Georgia ("Employee"), and Crown Crafts, Inc., a Georgia corporation
("Employer").
WITNESSETH:
WHEREAS, Employer and Employee each deem it necessary and desirable,
for their mutual protection, to execute a written document setting forth the
terms and conditions of their employment relationship;
NOW, THEREFORE, in consideration of the employment of Employee by
Employer, of the premises and the mutual promises and covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. Employment and Duties. Employer hereby employs Employee to
serve as President, Chief Executive Officer and Chairman of the Board of
Employer and to perform such other duties and responsibilities as customarily
performed by persons acting in such capacity. During the term of this Agreement,
Employee will devote his full time and effort to his duties hereunder.
2. Term. Subject to the provisions regarding Termination as set
forth in Section 10 of this Agreement, the period of Employee's employment under
this Agreement shall be deemed to have commenced as of the date hereof and shall
end on March 31, 2005 ("Initial Period") unless Employee dies before the end of
the Initial Period, provided that the term of this Agreement shall after March
31, 2004 be extended automatically on the 1st day of each month for one
additional month so that this Agreement shall always be for a full one-year
period unless the Employer or the Employee shall affirmatively decide and notify
the other to the contrary in
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writing of its or his intention that this Agreement shall not be so extended, in
which event this Agreement shall terminate at the end of the one year period
following such notice.
3. Compensation. For all services to be rendered by Employee
during the term of this Agreement, Employer shall pay Employee in accordance
with the terms set forth in Exhibit A, net of applicable withholdings, payable
in bi-weekly installments, except all bonuses, if any, will be paid annually in
July of each year.
4. Expenses. So long as Employee is employed hereunder, Employee
is entitled to receive reimbursement for, or seek payment directly by Employer
of, all reasonable expenses which are consistent with the normal policy of
Employer in the performance of Employee's duties hereunder, provided that
Employee accounts for such expenses in writing.
5. Employee Benefits. So long as Employee is employed hereunder,
Employee shall be entitled to participate in the various employee benefit
programs adopted by Employer from time to time.
6. Vacation. Employee shall be entitled to fifteen (15) days
annual vacation.
7. Confidentiality. In Employee's position as an employee of
Employer, Employee has had and will have access to confidential information,
trade secrets and other proprietary information of vital importance to Employer
and has developed and will continue to develop relationships with customers,
employees and others who deal with Employer which are of value to Employer.
Employer requires, as a condition to Employee's employment with Employer, that
Employee agree to certain restrictions on Employee's use of the proprietary
information and valuable relationships developed during Employee's employment
with Employer. In consideration of the terms and conditions contained herein,
the parties hereby agree as follows:
7.1 Employer and Employee mutually agree and acknowledge
that Employer may entrust Employee with highly sensitive, confidential,
restricted and proprietary information concerning various Business Opportunities
(as hereinafter defined), customer lists, and personnel matters. Employee
acknowledges that he shall bear a fiduciary responsibility to Employer to
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protect such information from use or disclosure that is not necessary for the
performance of Employee's duties hereunder, as an essential incident of
Employee's employment with Employer.
7.2 For the purposes of this Section 7, the following
definitions shall apply:
7.2.1 "Trade Secret" shall mean the identity and
addresses of customers of Employer, the whole or any portion or phase of any
scientific or technical information, design, process, procedure, formula or
improvement that is valuable and secret (in the sense that it is not generally
known to competitors of Employer) and which is defined as a "trade secret" under
Georgia law pursuant to the Georgia Trade Secrets Act.
7.2.2 "Confidential Information" shall mean any
data or information, other than Trade Secrets, which is material to Employer and
not generally known by the public. Confidential Information shall include, but
not be limited to, Business Opportunities of Employer (as hereinafter defined),
the details of this Agreement, Employer's business plans and financial
statements and projections, information as to the capabilities of Employer's
employees, their respective salaries and benefits and any other terms of their
employment and the costs of the services Employer may offer or provide to the
customers it serves, to the extent such information is material to Employer and
not generally known by the public.
7.2.3 "Business Opportunities" shall mean all
activities of the type conducted, authorized, offered, or provided to the
Employer by Employee prior to termination of his employment hereunder, including
the duties performed by the Employee under Section 1, "Employment and Duties",
of this Agreement. For purpose of reference, such activities as of the date of
the commencement of this Agreement include the business of manufacturing,
marketing and distribution of infant bedding, infant blankets, infant
accessories, infant bibs, infant bath items and infant gift sets and the
Employer's operations and activities related thereto.
7.2.4 Notwithstanding the definitions of Trade
Secrets, Confidential Information, and Business Opportunities set forth above,
Trade Secrets, Confidential Information, and Business Opportunities shall not
include any information:
(i) that is or becomes generally known
to the public;
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(ii) that is already known by Employee
or is developed by Employee after termination of employment through entirely
independent efforts;
(iii) that Employee obtains from an
independent source having a bona fide right to use and disclose such
information;
(iv) that is required to be disclosed by
law, except to the extent eligible for special treatment under an appropriate
protective order; or
(v) that Employer's Board of Directors
approves for release.
7.3 Employee shall not, without the prior approval of
Employer's Board of Directors, during his employment with Employer and for so
long thereafter as the information or data remain Trade Secrets, use or
disclose, or negligently permit any unauthorized person who is not an employee
of Employer to use, disclose, or gain access to, any Trade Secrets.
8. Observance of Security Measures. During Employee's employment
with Employer, Employee is required to observe all security measures adopted to
protect Trade Secrets, Confidential Information and Business Opportunities.
9. Return of Materials. Upon the request of Employer and, in any
event, upon the termination of his employment with Employer, Employee shall
deliver to Employer all memoranda, notes, records, manuals or other documents,
including all copies of such materials containing Trade Secrets or Confidential
Information, whether made or compiled by Employee or furnished to him from any
source by virtue of his employment with Employer.
10. Termination.
10.1 During the term of this Agreement, Employee's
employment may be terminated (i) at the election of Employer for Cause; (ii) at
Employee's election for Good Reason; (iii) upon Employee's death; (iv) at the
election of either party, upon Employee's disability resulting in an inability
to perform the duties described in Section 1 of this Agreement for a period of
180 consecutive days; (v) as set forth in Section 13 of this Agreement; or (vi)
by mutual written agreement of Employer and Employee.
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10.2 Cause. For purposes of this Agreement, a termination
of employment is for "Cause" if the Employee has been convicted of a felony or
if the termination is evidenced by a resolution adopted in good faith by
two-thirds (2/3) of the Board that the Employee (i) intentionally and
continually failed substantially to perform his reasonably assigned duties with
the Employer (other than a failure resulting from the Employee's incapacity due
to physical or mental illness or from the Employee's assignment of duties that
would constitute "Good Reason" as hereinafter defined) which failure continued
for a period of at least thirty (30) days after a written notice of demand for
substantial performance has been delivered to the Employee specifying the manner
in which the Employee has failed substantially to perform, or (ii) intentionally
engaged in illegal conduct or gross misconduct which results in material
economic harm to the Employer; provided, however, that no termination of the
Employee's employment shall be for Cause as set forth in clause (ii) above until
(x) there shall have been delivered to the Employee a copy of a written notice
setting forth that the Employee was guilty of the conduct set forth in clause
(ii) and specifying the particulars thereof in detail, and (y) the Employee
shall have been provided an opportunity to be heard in person by the Board (with
the assistance of the Employee's counsel if the Employee so desires). No act, or
failure to act, on the Employee's part, shall be considered "intentional" unless
the Employee has acted or failed to act with a lack of good faith and with a
lack of reasonable belief that the Employee's action or failure to act was in
the best interests of the Employer. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Employer shall be conclusively presumed to be
done, or omitted to be done, by the Employee in good faith and in the best
interests of the Employer. Any termination of the Employee's employment by the
Employer hereunder shall be deemed to be a termination other than for Cause
unless it meets all requirements of this Section 10.2
10.3 For purposes of this Agreement, "Good Reason" shall
mean a good faith determination by the Employee, in the Employee's sole and
absolute judgment, that any one or
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more of the following events or conditions has occurred, without the Employee's
express written consent:
(i) The assignment to the Employee of any duties
inconsistent with the Employee's position (including, without limitation,
status, titles and reporting requirements), authority, duties or
responsibilities, or any other action by the Employer that results in a material
diminution in such position, authority, duties or responsibilities, excluding
for this purpose isolated and inadvertent action not taken in bad faith and
remedied by the Employer promptly after receipt of notice thereof given by the
Employee;
(ii) A material reduction by the Employer of the
Employee's base salary as the same may be increased from time to time, or a
change in the eligibility requirements or performance criteria under any bonus,
incentive or compensation plan, program or arrangement under which the Employee
is covered which adversely affects the Employee;
(iii) any failure to pay the Employee any
compensation or benefits to which he is entitled within five (5) days of the
date due;
(iv) without replacement by a plan providing
benefits to the Employee substantially equivalent to or greater than those
discontinued, the failure by the Employer to continue in effect, within its
maximum stated term, any pension, bonus, incentive, stock ownership, purchase,
option, life insurance, health, accident disability, or any other employee
benefit plan, program or arrangement, in which the Employee participates, or the
taking of any action by the Employer that would adversely affect the Employee's
participation or materially reduce the Employee's benefits under any of such
plans;
(v) the taking of any action by the Employer
that would materially adversely affect the physical conditions in or under which
the Employee performs his employment duties, provided that the Employer may take
action with respect to such conditions so long as such conditions are at least
commensurate with the conditions in or under which an officer of the Employee's
status would customarily perform his employment duties;
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(vi) the insolvency or the filing of a petition
for bankruptcy by the Employer;
(vii) any purported termination of the Employee's
employment for Cause by the Employer which does not comply with the terms of
Section 10.2 hereof; or
(viii) any breach by the Employer of any material
provision of this Agreement.
The Employee's right to terminate his employment pursuant to
this Section 10.3 shall not be affected by his incapacity due to physical or
mental illness.
10.4 If this Agreement is terminated either pursuant to
Cause, Employee's death or Employee's disability, Employee shall receive no
further compensation or benefits, other than Employee's salary and other
compensation as accrued through the date of such termination.
10.5 If this Agreement is terminated at the Employer's
election without Cause or at the election of Employee for Good Reason, Employee
shall be entitled to those benefits to which Employee would be entitled if a
Change in Control would have occurred as set forth in Section 13 hereof.
11. Notices. All notice provided for herein shall be in writing
and shall be deemed to be given when delivered in person or deposited in the
United States Mail, registered or certified, return receipt requested, with
proper postage prepaid and addressed as follows:
Employer: Crown Crafts, Inc.
0000 XxxxxXxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: E. Xxxxxxx Xxxxxxxx, President
with a copy to: Xxxxxx & Xxxxxx LLP
2700 Xxxx Tower
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxx, Esquire
Employee: E. Xxxxxxx Xxxxxxxx
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0000 XxxxxXxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
with a copy to: Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxx, Esq.
12. Restrictive Covenants
12.1 For purposes of this Agreement, the following terms
shall have the following respective meanings:
"Competing Business" means a business that, wholly or
partly, directly or indirectly, engages in manufacturing, marketing and
distribution of infant bedding, infant blankets, infant accessories, infant
bibs, infant bath items or infant gift sets.
"Competitive Position" means: (A) Employee's direct
or indirect equity ownership (excluding ownership of less than one percent (1%)
of the outstanding common stock of any publicly held corporation) or control of
any portion of any Competing Business; (B) Employee serving as a director,
officer, consultant, lender, joint venturer, partner, agent, advisor or
independent contractor of or to any Competing Business (except where Employee's
duties would relate to divisions or activities which do not compete with the
Employer); or (C) any employment arrangement between Employee and any Competing
Business whereby Employee is required to perform services for the Competing
Business substantially similar to those that Employee performed for the
Employer.
"Restricted Territory" means the area within a 35
mile radius of the city limits of the cities listed on Schedule 12, attached
hereto.
"Restricted Period" means a period of time that is
one (1) year following termination of this Agreement.
12.2 Employee agrees that he will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity,
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accept, enter into or attempt to enter into a Competitive Position in the
Restricted Territory at any time during his employment with the Employer and
during the Restricted Period.
12.3 Employee agrees that he will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit, entice or induce any
customer of the Employer (or any actively sought or prospective customer of the
Employer) in which Employee had direct or indirect contact during the Term for
or on behalf of any Competing Business in the Restricted Territory at any time
during his employment with the Employer and during the Restricted Period.
12.4 Employee agrees that he will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity, solicit or attempt to solicit any
"key or material" employee, consultant, contractor or other personnel of the
Employer in the Restricted Territory to terminate, alter or lessen that party's
affiliation with the Employer or to violate the terms of any agreement or
understanding between such employee, consultant, contractor or other person and
the Employer at any time during his employment with the Employer or for a period
of two years thereafter. For purposes of this Section 12.4, "key or material"
employees, consultants, contractors or other personnel shall mean those such
persons or entities who have direct access to or have had substantial exposure
to Confidential Information or Trade Secrets.
12.5 Notwithstanding any expiration or termination of the
Term, the provisions of this Section 12 shall survive and remain in full force
and effect, as shall any other provision hereof that, by its terms or reasonable
interpretation thereof, sets forth obligations that extend beyond the
termination of this Agreement.
13. Change in Control.
The benefits provided in this Section 13 shall be payable to
Employee if: (i) there shall have been a Change in Control of Employer, as set
forth in this Section 13, and (ii) Employee is employed by Employer at such
time.
13.1 "Change in Control" shall have the same meaning as
set forth in Section 2.5 of the Severance Protection Agreement dated September
5, 1998 between the Employer and the Employee, provided, that, in determining
whether a Change in Control has occurred, shares
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acquired by Bank of America, N.A., The Prudential Insurance Company of America
and Wachovia Bank, N.A. pursuant to that certain Subordinated Note and Warrant
Purchase Agreement dated as of July 23, 2001 shall not be included.
13.2 If there occurs a Change in Control of Employer,
Employee shall be entitled to the Compensation and Benefits set forth in Section
3 of the Severance Protection Agreement dated September 5, 1998 between Employer
and Employee.
14. Miscellaneous.
14.1 This Agreement, together with Exhibits A, B, C and
Schedule 12, constitutes and expresses the whole agreement of the parties in
reference to the employment of Employee by Employer, and there are no
representations, inducements, promises, agreements, arrangements, or
undertakings oral or written, between the parties other than those set forth
herein.
14.2 This Agreement shall be governed by the laws of the
State of Georgia.
14.3 Should any clause or any other provision of this
Agreement be determined to be void or unenforceable for any reason, such
determination shall not affect the validity or enforceability of any clause or
provision of this Agreement, all of which shall remain in full force and effect.
14.4 Time is of the essence in this Agreement.
14.5 This Agreement shall be binding upon and enure to the
benefit of the parties hereto and their successors and assigns. This Agreement
shall not be assignable by Employee without the prior written consent of
Employer.
14.6 This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute but a single instrument.
14.7 Employer and Employee acknowledge that the Severance
Protection Agreement dated September 5, 1998 between Employer and Employee shall
remain in full force
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and effect except for the references to Xxxxxxx Xxxxxxxxx contained in Section
2.7.1(i) and (viii) which are hereby mutually agreed to be deleted therefrom.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
"Employee"
/s/ Xxxxxx X. Xxxxxx /s/ E. Xxxxxxx Xxxxxxxx (SEAL)
-------------------------- -----------------------------
Witness E. Xxxxxxx Xxxxxxxx
-----------------------------
ATTEST: "Employer"
CROWN CRAFTS, INC.
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxx Texeter
---------------------------------- -----------------------------------
Xxxxxx X. Xxxxxx , Secretary Vice President and Chief Financial Officer
-------------------------- ------------------------------------------
(CORPORATE SEAL)
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Exhibit A
to Employment Agreement By and Between
E. Xxxxxxx Xxxxxxxx and
Crown Crafts, Inc., Inc.
Employee Compensation
Capitalized terms used herein and not defined shall have the meanings set forth
in the Employment Agreement.
BASE SALARY: $350,000 per year subject to annual increases as reviewed and
approved by the Board of Directors (i).
LONG TERM INCENTIVES: Restricted Stock Grant for 420,000 shares of the
Employer's Common Stock to be adjusted to maintain the Employee's ownership
percentage upon exercise of warrants by Bank of America, N.A., The Prudential
Insurance Company of America and Wachovia, N.A. and should Employee elect income
tax treatment for such grant under Section 83(b) of the Internal Revenue Code,
Employer to loan Employee 83(b) election costs to be repaid over three (3) year
period by biweekly payroll deduction, interest free or such shorter period as
mutually agreed by Employer and Employee; provided, however, that if such
420,000 shares are not granted (at no cost to Employee other than taxes) on or
before the date of this Agreement, Employee may elect instead to receive a
payment of $1,312,500, payable by Employer based on the Senior Management
Compensation Strategy Report dated June 29, 2001 prepared by SCA Consulting
which will be payable three years from the time when the stock should have been
granted. This cash payment will vest 1/3 at the end of year one, 2/3 at the end
of year two and be fully vested at the end of year three. In the event of
Termination without Cause, this cash payment will vest 100% at the time of
Termination and will become immediately payable.
BONUS: Payable each July, as follows for Fiscal Year 2002, and thereafter based
on a performance matrix established against budgets and approved by the
Employer's Board of Directors. See Exhibit B and Exhibit C attached hereto.
Target Bonus
---------------------
Salary % of Salary $ Amount 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
-------- ----------- -------- ------ ------ ------ ------ ------- ------- ------- ------- ------- -------
Xxxxxxx
Xxxxxxxx $350,000 60% 210,000 21,000 42,000 63,000 84,000 105,000 126,000 147,000 168,000 189,000 210,000
AUTO ALLOWANCE: Cost of automobile and all operating expenses.
INSURANCE: Employee's and his dependents' hospitalization, dental, life
insurance and 401(k) plans as adopted by the Employer's Board of Directors for
similarly-situated employees of the Employer, subject to the terms of such
plans.
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(i) If required to relocate to California, salary will be automatically
increased by $50,000 effective upon relocation.
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SCHEDULE 12
1. Bentonville, Arkansas
2. Paramus, New Jersey
3. Troy, Michigan
4. Minneapolis, Minnesota
5. Burlington, New Jersey
6. Xxx Xxxx, Xxx Xxxx
0. Xxxxx, Xxxxx
8. Chicago, Illinois
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EXHIBIT "B"
PROPOSED ANNUAL CASH PAY
THE PROPOSED ANNUAL BONUSES WILL BE DRIVEN BY EBITDA (see facing exhibit)
- Cash bonuses will be awarded based on Corporate or division EBITDA
- At 90% of target EBITDA, the bonus is 5% of target maximum
bonus
- Above 91% of EBITDA, each additional 0.10% of EBITDA results
in incremental 1.0% of bonus
- EBITDA targets for maximum bonuses are set higher than EBITDA levels
shared with on April 20, 2001
- In FY2002, CCIP bonuses are calculated independently of Pillow Buddies.
CCIP and Buddies are combined for all years thereafter
- Hamco and Burgundy are combined for purposes of calculating
- In FY2002, Corporate level bonuses will be based on performance from
transaction (August 2001) through March 2002, which includes 8 months
of corporate expenses and post-close transition expenses
- Other business lines will be based on full fiscal year results
without respect to corporate or transition expenses
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EXHIBIT "C"
FY2002 BONUS STRUCTURE
HAMCO/
BURGUNDY
CCIP(3) (4) XXXXXXXXX XX(3) CORP.(5) TOTAL
------- -------- --------- ----- -------- -------
EBITDA - Bonus(1) $6,553 $7,335 $637 $824 $8,209 $11,722
EBITDA - Lenders(2) $5,974 $7,135 $537 $624 $7,539 $10,643
Target Bonus Potential $ 324 $ 89 $ 46 $ 0 $ 274 $ 733
BONUS PAYOUTS
TOTAL CASH EBITDA
% BONUS BONUS BEFORE EBITDA EXCESS
% TARGET EBITDA (6) PAYOUT BONUS W/BONUS BONUS (7)
--------------- ------- ---------- ------- ------- ---------
90% 5% $ 16 $ 4 $ 2 $0 $ 14 $ 37 $10,187 $10,150 $ 37
91% 10% $ 32 $ 9 $ 5 $0 $ 27 $ 73 $10,341 $10,267 $ 73
92% 20% $ 65 $18 $ 9 $0 $ 55 $147 $10,494 $10,348 $147
93% 30% $ 97 $27 $14 $0 $ 82 $220 $10,648 $10,428 $215
94% 40% $130 $35 $18 $0 $110 $293 $10,801 $10,508 $135
95% 50% $162 $44 $23 $0 $137 $366 $10,955 $10,588 $ 55
96% 60% $195 $53 $27 $0 $164 $440 $11,108 $10,669 $ 0
97% 70% $227 $62 $32 $0 $192 $513 $11,262 $10,749 $ 0
98% 80% $260 $71 $37 $0 $219 $586 $11,415 $10,829 $ 0
99% 90% $292 $80 $41 $0 $247 $659 $11,569 $10,909 $ 0
100% 100% $324 $89 $46 $0 $274 $733 $11,722 $10,989 $ 0
(1) 'EBITDA - Bonus' represents EBITDA targets for 100% bonus, which is set
higher than EBITDA levels shared with lenders.
(2) 'EBITDA - Lenders' represents EBITDA levels shared with lenders on
April 20, 2001.
(3) In FY2002 CCIP bonuses are calculated independently of Pillow Buddies.
CCIP and Pillow Buddies combined all years thereafter.
(4) Hamco and Burgundy are combined for purposes of calculating bonuses.
(5) In FY2002, Corporate level bonuses will be based on performance from
transaction close (August 2001) through March 2002, which includes 8
months of corporate expenses and all post-close transition expenses.
Other business lines will be based on full fiscal year results without
respect to corporate or transition expenses.
(6) Above 91% of EBITDA, each additional 0.10% of EBITDA will result in
incremental 1.0% of bonus.
(7) Excess bonus relative to lenders' anticipated EBITDA level.
