EXHIBIT 10.34
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
as of July 23, 2001 by and among NANCI FREEMAN, a resident of the State of
California ("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 and Chief Executive Officer of CCIP, a wholly owned subsidiary 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 her full time and effort to her 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, 2004 ("Initial Period") unless Employee dies before the end of the
Initial Period, provided that the term of this Agreement shall after March 31,
2003 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 writing of its or her 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 available to similarly-situated employees which are adopted by Employer
from time to time.
6. Vacation. Employee shall be entitled to twenty (20) 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 she shall bear a fiduciary responsibility to Employer to
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.
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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 her 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;
(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;
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(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 her 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 her 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 her from any
source by virtue of her 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.
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 her 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
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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
upon the instructions of any senior officer of the Employer 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 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
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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 she is entitled within five (5) days of the
date due;
(iv) the Employer's requiring the Employee to be
based anywhere other than within fifty (50) miles of the Employee's job
location, except for reasonably required travel on the Employer's business which
is not materially increased;
(v) 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;
(vi) the taking of any action by the Employer that
would materially adversely affect the physical conditions in or under which the
Employee performs her 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 her employment duties;
(vii) the insolvency or the filing of a petition for
bankruptcy by the Employer;
(viii) 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
(ix) any breach by the Employer of any material
provision of this Agreement.
The Employee's right to terminate her employment pursuant to this
Section 10.3 shall not be affected by her incapacity due to physical or mental
illness.
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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, and
Employee shall be entitled to payment of her compensation, on a bi-weekly basis,
during the Restricted Period, as defined in Section 12.1 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.
1500 RiverEdge Parkway
Suite 200
Atlanta, Georgia 30328
Attn: E. Randall Chestnut, President
with a copy to: Rogers & Hardin LLP
2700 Cain Tower
229 Peachtree Street
Atlanta, Georgia 30303
Attn: Steven E. Fox, Esquire
Employee: Nanci Freeman
3000 Via Alvarado
Palos Verdes Estates, CA 90274
with a copy to: Troutman Sanders LLP
600 Peachtree Street, NE
Suite 5200
Atlanta, Georgia 30308
Attn: Neal H. Ray, Esq.
12. Restrictive Covenants
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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 she will not, without the prior
written consent of the Board, either directly or indirectly, alone or in
conjunction with any other person or entity, accept, enter into or attempt to
enter into a Competitive Position in the Restricted Territory at any time during
her employment with the Employer and during the Restricted Period.
12.3 Employee agrees that she 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 her employment with the Employer and during the Restricted Period.
12.4 Employee agrees that she 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
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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 her employment with the
Employer or for a period of two years thereafter. For purposes of this
subsection (d), "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, (ii) Employee is employed by Employer at such time,
and (iii) this Agreement is not specifically assumed by the new Control Party
with the Employee retaining the same responsibilities, job location and benefits
other than job title.
13.1 "Change in Control" shall mean:
13.1.1 any transaction, whether by merger,
consolidation, asset sale, tender offer, reverse stock split, or otherwise,
which results in the acquisition or beneficial ownership (as such term is
defined under rules and regulations promulgated under the Securities Exchange
Act of 1934, as amended) by any person or entity or any group of persons or
entities acting in concert, of 20% or more of the outstanding shares of common
stock of Employer; provided, that, in determining whether a Change in Control
has occurred, shares 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.
13.1.2 the sale of all or substantially all of the
assets of Employer; or
13.1.3 the liquidation of Employer.
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13.2 If there occurs a Change in Control of Employer, Employee
shall be entitled within 90 days after the date of closing of the transaction
effecting such Change in Control to deliver to Employer written notice of
termination of this Agreement whereupon Employer shall pay to Employee a lump
sum cash payment in an amount equal to the then current compensation and
benefits, including salary, bonuses, all perquisites, and all other forms of
compensation that would be remaining under the applicable terms of the Agreement
then in effect for the greater of the remaining term of this Agreement or one
(1) year. This payment shall be paid to Employee by Employer within 30 days
after the delivery of such notice of termination by Employee to Employer.
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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
"Employee"
/s/ DEBRA L. DUNNE /s/ NANCI FREEMAN (SEAL)
- ----------------------------------------------------- ------------------------------------
Witness Nanci Freeman
ATTEST: "Employer"
CROWN CRAFTS, INC.
By: /s/ ROBERT A. ENHOLM /s/ E. RANDALL CHESTNUT
-------------------------------------------------- ------------------------------------
, Secretary President & CEO
--------------------------------- ------------------------------------
(CORPORATE SEAL)
(STAMP)
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Exhibit A
to Employment Agreement By and Between
Nanci Freeman 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: $225,000 per year subject to annual increases of at least 5%.
LONG TERM INCENTIVES: Restricted Stock Grant for 150,000 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
150,000 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 $270,000, 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
------------------
% of
Salary Salary $ Amount 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Nanci
Freeman $225,000 40% 90,000 9,000 18,000 27,000 36,000 45,000 54,000 63,000 72,000 81,000 90,000
AUTO ALLOWANCE: Cost of automobile and all operating expenses.
INSURANCE: Employee's and her 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.
SCHEDULE 12
1. Bentonville, Arkansas
2. Paramus, New Jersey
3. Troy, Michigan
4. Minneapolis, Minnesota
5. Burlington, New Jersey
6. New York, New York
7. Plano, Texas
8. Chicago, Illinois
EXHIBIT "B"
PROPOSED ANNUAL CASH PAY
THE PROPOSED ANNUAL BONUSES WILL BE DRIVEN BY EBITDA (see facing exhibit)
o 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
o EBITDA targets for maximum bonuses are set higher than EBITDA levels
shared with on April 20, 2001
o In FY2002, CCIP bonuses are calculated independently of Pillow Buddies.
CCIP and Buddies are combined for all years thereafter
o Hamco and Burgundy are combined for purposes of calculating bonuses
o 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
EXHIBIT "C"
FY2002 BONUS STRUCTURE
HAMCO/
BURGUNDY
CCIP (3) (4) CHURCHILL PB (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.