Exhibit 10.108
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED and RESTATED AGREEMENT made the 17th day of March 2004, by and
between QUAKER FABRIC CORPORATION, a Delaware corporation with its principal
office at 941 Grinnell Street, Fall River, Massachusetts 02721 (the "Company"),
and LARRY A. LIEBENOW ("Employee").
W I T N E S S E T H:
WHEREAS, Employee has been employed by the Company as its President
and Chief Executive Officer pursuant to an employment agreement, dated as of
March 12, 1993, as amended by Amendment No. 1 dated as of February 24, 1997, and
Amendment No. 2 dated as of December 17, 1999 (the "Existing Agreement");
WHEREAS, the Company wishes to continue the employment of Employee as
President and Chief Executive Officer of the Company and Employee desires to
continue such employment;
WHEREAS, the parties wish to incorporate the two prior amendments,
further modify certain of the terms of the Existing Agreement, supersede the
Existing Agreement in its entirety, and restate the Existing Agreement as set
forth herein (such restated agreement, this "Agreement").
NOW THEREFORE, in consideration of the mutual covenants and mutual
promises herein contained, and other good and valuable consideration, it is
hereby covenanted and agreed by and between the parties hereto as follows:
1. (a) Subject to the terms and conditions set forth herein, the
Company hereby employs Employee as the President and Chief Executive Officer of
the Company. Employee agrees to devote his entire working time during the Term
hereof to the performance of his duties hereunder and to the furtherance of the
business and interests of the Company, and to perform his duties to the best of
his ability in a diligent manner. The services to be performed by Employee shall
be performed primarily at the Company's principal office in Fall River,
Massachusetts, on behalf of the Company. If Employee is required to travel, all
travel may be in first class accommodations.
(b) During the Term of this Agreement and for a period of 12
months after termination of this Agreement, Employee will not, directly or
indirectly, enter into the employ of, render any service to, or perform any duty
whatsoever for, any other person, firm, partnership, association, corporation,
or any other entity which is then competing with the Company, whether as a
consultant, advisor, employee, officer, director or in any other capacity
whatsoever, and regardless of whether or not any remuneration has been, is
being, or will be received therefor, without the prior written consent of the
Company (any such activity,
"Competition"). Notwithstanding the foregoing, in the event that Employee (i)
voluntarily terminates his employment and (ii) declines to make the election
described in the second sentence of Section 6(c) of this Agreement, the
restriction discussed in this Section 1(b) shall cease to apply from and after
the date of such employment termination.
2. (a) The Term of this Agreement shall continue until March 12, 2008,
subject to extension and termination as provided herein. The Term shall be
extended for additional periods of three years each, after March 12, 2008,
unless the Company notifies Employee in writing, received by Employee at least
one year prior to the commencement of each three-year extension period, that the
three-year extension period will not be included in the Term. For example, the
Term shall be extended for a period of three years after March 12, 2008, which
shall be to March 12, 2011, unless the Company notifies Employee in writing,
received by Employee by March 12, 2007, that the three-year period shall not be
added to the Term. The Term of this Agreement shall include the current period
plus each three-year extension period.
(b) Employee shall have the right to terminate his employment at
any time, effective six months after receipt of written notice by the Company to
that effect. The Company shall have the right to terminate the employment of
Employee only for cause. For purposes of this Agreement, "for cause" shall mean:
(i) willful insubordination to a board resolution after a written demand for
substantial performance is delivered to Employee by the Company, which demand
specifically identifies the manner in which the Company believes that Employee
has not substantially performed his duties or responsibilities; (ii) material
breach of this Agreement after a written demand for substantial performance is
delivered to Employee by the Company, which demand specifically identifies the
manner in which the Company believes that Employee has breached this Agreement;
(iii) acts or omissions intentionally and materially inimical to the Company
after a written demand for cessation of such conduct is delivered to Employee by
the Company, which demand specifically identifies the manner in which the
Company believes that Employee has engaged in such conduct and the injury to the
Company; (iv) gross negligence, after written demand for cessation of such
conduct is delivered to Employee by the Company, which demand specifically
identifies the manner in which the Company believes that Employee has engaged in
such conduct; or (v) conviction of a crime involving moral turpitude.
3. (a) For the services to be rendered by Employee to the Company
during the Term, the Company agrees to pay Employee a base salary (the "Base
Salary") payable in equal installments on the regular payroll dates of the
Company at the annual rate of $693,400.00 per annum, retroactive to January 1,
2004. The Base Salary to be paid to Employee by the Company during each calendar
year of the Term shall be the Base Salary paid for the prior calendar year, plus
such increase as may be agreed upon at the beginning of each calendar year.
(b) Employee shall also be entitled to receive an annual bonus in
such amount as may be determined by the Board of Directors.
(c) The Company shall withhold social security tax, and the
appropriate federal, state and any local income or employment taxes on all
payments made by the Company to Employee hereunder.
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(d) Employee will be reimbursed for reasonable expenses he incurs
on behalf of the Company in accordance with the Company's policy for
reimbursement of expenses, provided, however, that Employee submits to the
Company reasonably detailed expense reports, including vouchers and invoices, in
support of such expenses.
(e) The parties agree that Employee shall be entitled (i) to six
weeks vacation annually during the Term of this Agreement, (ii) to continue to
participate in the Company's non-qualified deferred compensation plan, and (iii)
to the other fringe benefits, such as medical plan, life insurance, profit
sharing, executive stock option plan, etc., provided by the Company to its
senior executives. The life insurance coverage provided by the Company to
Employee (which shall be in addition to such coverage as is generally provided
by the Company to its senior executives), for the benefit of beneficiaries
designated by Employee, shall be for an annual insurance premium of not less
than $7,000 and not greater than $15,000. The Company also agrees to pay for the
country club dues of Employee at one country club of his choice.
(f) The Company agrees to provide to Employee the exclusive use
of an automobile selected by Employee, at a cost (including base lease or
similar payment and expenses relating to operation and maintenance of such
payment) to the Company not to exceed $1,250 per month, which automobile may be
replaced, at the option of Employee, with a new automobile no more frequently
than once every three years.
4. Employee hereby warrants and represents that Employee is not a
party to any contract with any person, firm or corporation providing for the
employment of Employee or providing for Employee to render any services
whatsoever, and there is no impediment to, or restriction upon, Employee's
entering into this Agreement with the Company or Employee fully performing the
terms of this Agreement.
5. Employee shall during the Term of this Agreement and for one year
after termination of this Agreement, or expiration of this Agreement, not
divulge to any person, and shall during the Term of this Agreement use his best
efforts to prevent the publication or disclosure of, any confidential
information concerning the business accounts or finances of the Company or any
of the confidential financial information, trade secrets, dealings, transactions
or affairs of the Company, or any officer or shareholder of the Company, which
have come to the knowledge of Employee during the Term of this Agreement.
6. (a) If Employee dies or becomes so disabled or incapacitated
because of physical or mental disability that he shall be unable to perform the
services hereunder, the Company agrees to continue to pay Employee's Base Salary
through the end of the then current Term of this Agreement; provided, however,
that if death or disability occurs within a time period which is less than six
months before the expiration date of the then current Term, the Company agrees
to pay Employee in the event of disability, or Employee's estate in the event of
death, an amount equal to his Base Salary for a six month period plus any bonus
paid or payable with respect to the prior year. In addition, the Company shall
pay or provide to Employee any incurred but unreimbursed business expenses for
the period prior to termination payable in accordance with the Company's
policies, any base salary, bonus, vacation pay or other deferred compensation
accrued or earned under law or in accordance with the Company's policies
applicable to Employee but not yet paid and any other amounts or benefits due
under any
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applicable employee benefit, equity or incentive plans (the "Accrued Benefits").
Following the date of termination, the Company shall pay the premiums for
Employee (except in the case of Employee's death) and Employee's dependents'
health and welfare coverage (including, without limitation, medical, dental,
and, to the extent applicable, life insurance coverage) for five (5) years from
the date of termination of Employee's employment under the Company's health and
welfare plans which cover Employee or materially similar benefits, subject, in
all cases, to Employee's (or dependent's, if applicable) payment of customary
premiums in effect prior to the date of termination (such five-year coverage,
"Continuation Coverage").
(b) Upon termination of Employee's employment by the Company for
cause (other than pursuant to Section 2(b)(v)), Employee shall be entitled to
receive (i) any Accrued Benefits and (ii) Continuation Coverage.
(c) Upon termination of employment of Employee for any reason
(including a voluntary termination of employment by Employee) other than a
termination for cause or a termination described in Section 6(d), Employee shall
be entitled to receive: (i) a lump sum payment equal to three times the sum of
(x) Employee's Base Salary for the year ending immediately prior to the year in
which the date of termination occurs and (y) the bonus paid or payable to the
Employee with respect to such prior year, subject to the immediately following
sentence; (ii) any Accrued Benefits; and (iii) Continuation Coverage. In the
event that Employee voluntarily terminates his employment, he shall be eligible
for the benefit set forth in clause (i) of the immediately preceding sentence
solely if he elects in writing, in a form reasonably acceptable to the Company,
within three days after the date of his employment termination, not to engage in
Competition during the three-year period commencing on the date of termination.
For such purposes, during the period from the first anniversary of the date of
termination to the third anniversary thereof (the "Balance Period"), businesses
deemed to be competing with the Company under the definition of "Competition"
(as defined in Section 1(b) of this Agreement) shall be limited to businesses
that manufacture furniture coverings, including, without limitation, fabrics,
leathers, flocks or prints. It is expressly acknowledged that during the Balance
Period Employee will not be deemed to have engaged in Competition by reason of
providing services to a customer or supplier of the Company.
(d) Upon the occurrence of a Change in Control (as defined in
Exhibit A) all stock options held by Employee shall immediately vest in full. In
addition, upon termination of employment by the Company without cause or by
Employee for Good Reason (as defined in Exhibit A) during the period beginning
on the date of the Change in Control and ending one (1) year after the date of
such Change in Control, Employee shall be entitled to receive: (i) a lump sum
payment equal to three times the highest annual Base Salary paid by the Company
to Employee at any time prior to the Change in Control and three (3) times the
annual bonus paid, or required to be paid, by the Company to Employee for the
year preceding the year in which the Change in Control occurs; (ii) any Accrued
Benefits; and (iii) Continuation Coverage, with such Continuation Coverage
commencing on the later of the date of the Change in Control or the date of
termination, with the customary premiums payable by Employee for such coverage
those in effect prior to the Change in Control; and (iv) job outplacement at a
level and of a type appropriate for senior-level executives in an amount not to
exceed $20,000. In addition, notwithstanding the foregoing, in the event
Employee is terminated without cause or terminates employment for Good Reason
within ninety (90) days prior to the occurrence of a
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Change of Control, such termination shall, upon the occurrence of a Change in
Control, be deemed to be covered under this section of the Agreement and
Employee shall be entitled to all payments and benefits provided hereunder
reduced by any amounts otherwise received by the Executive in connection with
his termination of employment.
(e) All payments payable under this Section 6 shall be made as
soon as practicable following the date of termination, but in no event later
than ten (10) days thereafter (or, if such termination occurred within ninety
(90) days prior to a Change in Control, all payments shall be made as soon as
practicable following the Change in Control, but in no event later than ten (10)
days after the Change in Control). In the event the annual bonus needed to
calculate the lump sum payment due under Section 6(c), if any, cannot be
determined upon the date of termination, the portion of such lump sum payment
attributable to the bonus shall be paid as soon as practicable thereafter, but
in no event later than ten (10) days after it first may be calculated by the
Company.
(f) In connection with the Company's payment for Continuation
Coverage under Section 6 of this Agreement, all such payments for Continuation
Coverage may, at the discretion of the Company, be made by continuing Employee's
participation in the plan as a terminated employee or by covering Employee and
Employee's dependents under substitute arrangements, provided that,
notwithstanding anything herein to the contrary, to the extent Employee incurs
tax that Employee would not have incurred as an active employee as a result of
the aforementioned coverage or the benefits provided thereunder, Employee shall
receive from the Company an additional grossed up payment in the amount
necessary so that Employee will have no additional after-tax cost for receiving
such items or any additional payment. Notwithstanding anything herein to the
contrary, Employee (and his eligible dependents) shall retain all rights under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and such COBRA continuation coverage shall be available to Employee (and his
eligible dependents) at the expiration of the Continuation Coverage described
herein.
7. All notices required or permitted to be sent pursuant to this
Agreement shall be in writing and shall be personally delivered or sent by
certified mail, return receipt requested, all postal charges prepaid, addressed,
if to the Company, to the address set forth above, or if to Employee, at the
last address of Employee on file with the Company, or, in either case, to such
other address as may be specified by a party in a notice similarly sent. All
such notices shall be deemed to be given when delivered by hand or mailed in the
United States.
8. (a) This Agreement may not be altered, amended, modified or
discharged in any way whatsoever, except by subsequent written agreement
executed by the parties hereto.
(b) This Agreement shall be construed and interpreted under the
laws of Massachusetts, without regard to the conflict of law principles thereof.
(c) This Agreement shall be binding upon the respective parties
hereto and shall inure to the benefit of their respective heirs, executors,
administrators, successors and assigns.
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(d) Neither this Agreement nor the services of Employee may be
assigned by Employee.
(e) If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or enforceability shall not affect or
impair the validity or enforceability of the remaining provisions of the
Agreement, which will remain in full force and effect. If any restriction
regarding Competition is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it will be interpreted
to extend over the maximum period of time, range of activities or geographic
area as to which it may be enforceable. Employee acknowledges that the
restrictions set forth herein with regard to Competition are reasonable and that
the Company, in addition to any other rights and remedies available under this
Agreement or under applicable law, shall be entitled to seek injunctive relief,
from a court of competent jurisdiction, restraining Employee from committing or
continuing any violation thereof.
(f) The waiver of a breach of any of the terms hereof or of any
default hereunder shall not be deemed a waiver of any subsequent breach or
default, whether the same or similar nature, and shall not in any way affect the
other terms hereof. No waiver or modification shall be valid or binding unless
in writing and signed by the parties.
9. (a) In the event that Employee shall become entitled to the
payments and/or benefits provided by Section 6 or any other amounts (whether
pursuant to terms of this Agreement or any other plan, arrangement or agreement
with the Company, any person whose actions result in a change of ownership
covered by Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code") or any person affiliated with the Company or such person) as a
result of a Change of Control (collectively the "Company Payments"), and such
Company Payments will be subject to the tax (the "Excise Tax") imposed by
Section 4999 of the Code (and any similar tax that may hereafter be imposed) the
Company shall pay to Employee at the time specified in subsection (d) below an
additional amount (the "Gross-up Payment") such that the net amount retained by
Employee, after deduction of any Excise Tax on the Company Payments and any
federal, state, and local income or payroll tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any federal, state,
and local income or payroll tax on the Company Payments, shall be equal to the
Company Payments.
(b) For purposes of determining whether any of the Company
Payments and Gross-up Payments (collectively the "Total Payments") will be
subject to the Excise Tax and determining the amount of such Excise Tax: (i) the
Total Payments shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "parachute payments" in excess of the
"base amount" (as defined under Code Section 280G(b)(3) of the Code) shall be
treated as subject to the Excise Tax, unless and except to the extent that, in
the opinion of the Company's independent certified public accountants appointed
prior to any change in ownership (as defined under Code Section 280G(b)(2)) or
tax counsel selected by such accountants (the "Accountants") such Total Payments
(in whole or in part), (A) do not constitute "parachute payments," (B) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code or (C) are otherwise not subject to the Excise
Tax; and (ii) the value of any non-cash benefits or any deferred payment or
benefit shall
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be determined by the Accountants in accordance with the principles of Section
280G of the Code.
(c) For purposes of determining the amount of the Gross-up
Payment, Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of Employee's residence for
the calendar year in which the Company Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes if paid in such year. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Employee shall repay
to the Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the prior Gross-up Payment attributable to
such reduction (plus the portion of the Gross-up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by Employee if such repayment results in a
reduction in Excise Tax or a federal, state and local income tax deduction),
plus interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any
portion of the Gross-up Payment to be refunded to the Company has been paid to
any federal, state and local tax authority, repayment thereof (and related
amounts) shall not be required until actual refund or credit of such portion has
been made to Employee, and interest payable to the Company shall not exceed the
interest received or credited to Employee by such tax authority for the period
it held such portion. Employee and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the expense
thereof) if Employee's claim for refund or credit is denied.
In the event that the Excise Tax is later determined by the Accountants or the
Internal Revenue Service to exceed the amount taken into account hereunder at
the time the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for in
subsection (c) above shall be paid not later than the thirtieth (30th) day
following an event occurring which subjects Employee to the Excise Tax;
provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, the Company shall
pay to Employee on such day an estimate, as determined in good faith by the
Accountants, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in Code Section
1274(b)(2)(B) of the Code), subject to further payments pursuant to subsection
(c) hereof, as soon as the amount thereof can reasonably be determined, but in
no event later than the ninetieth (90th) day after the occurrence of the event
subjecting Employee to the Excise Tax. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to Employee, payable on the
fifth (5th) day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
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(e) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) under this Section 9, Employee shall permit
the Company to control issues related to this Section 9 (at its expense),
provided that such issues do not potentially materially adversely affect
Employee, but Employee shall control any other issues. In the event the issues
are interrelated, Employee and the Company shall in good faith cooperate so as
not to jeopardize resolution of either issue, but if the parties cannot agree,
Employee shall make the final determination with regard to the issues. In the
event of any conference with any taxing authority as to the Excise Tax or
associated income taxes, Employee shall permit the representative of the Company
to accompany him, and Employee and his representative shall cooperate with the
Company and its representative.
(f) The Company shall be responsible for all charges of the
Accountants.
(g) Notwithstanding anything herein to the contrary, to the
extent that any provision in Section 9(c) or (d) of this Agreement relating to
repayment by Employee shall be deemed to create a loan of a personal nature in
violation of Section 402 of the Sarbanes-Oxley Act of 2002, such provision shall
be null and void.
10. To the fullest extent permitted by law, the Company shall promptly
pay upon submission of statements all legal and other professional fees, costs
of litigation, prejudgment interest, and other expenses incurred in connection
with any dispute concerning payments, benefits and other entitlements to which
Employee may have under this Agreement; provided, however, the Company shall be
reimbursed by Employee for the fees and expenses advanced in the event
Employee's claim is, in a material manner, in bad faith or frivolous and the
arbitrator or court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate. The Company shall pay to Employee interest at
the prime lending rate as announced from time to time by Fleet National Bank (or
any successor) on all or any part of any amount to be paid to Employee hereunder
that is not paid when due. The prime rate for each calendar quarter shall be the
prime rate in effect on the first day of the calendar quarter.
11. The Company agrees that if Employee's employment with the Company
is terminated pursuant to this Agreement during the term of this Agreement,
Employee shall not be required to seek other employment or to attempt in any way
to reduce any amounts payable to Employee by the Company pursuant to this
Agreement. Further, the amount of any payment or benefit provided for in this
Agreement shall not be reduced by any compensation earned by Employee or benefit
provided to Employee as the result of employment by another employer or
otherwise. The Company's obligations to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against Employee.
12. The Company shall continue to cover Employee under any director
and officer insurance maintained for directors and officers of the Company or
any affiliate at the highest level so maintained for other officers or directors
or, if greater, at the level maintained by the Company immediately prior to a
Change in Control, with regard to action or inaction while an officer or
director.
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13. This Agreement constitutes the entire understanding of the
parties, and supersedes all prior understandings, whether written or oral
(including, without limitation, the Existing Agreement), with respect to the
subject matter hereof. 1.
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EXHIBIT A
(a) Termination for Good Reason. For purposes of this Agreement,
termination for Good Reason shall mean a termination by Employee effected by a
written notice given within sixty (60) days after the occurrence of the Good
Reason event. For purposes of this Agreement, "Good Reason" shall mean the
occurrence or failure to cause the occurrence of any of the following events
without Employee's express written consent: (i) any diminution in Employee's
duties and responsibilities, authority, or title, except in each case in
connection with the termination of Employee's employment for cause or as a
result of Employee's death, or temporarily as a result of Employee's illness or
other absence, or, if it occurs after a Change of Control, the assignment to
Employee of duties and responsibilities inconsistent with the position held by
Employee immediately prior to the Change of Control; (ii) a reduction in
Employee's annual Base Salary; (iii) a relocation of: (x) Employee's principal
business location to an area outside a fifty (50) mile radius of Employee's
current principal business location, (y) Employee's principal business location
to a location which is more than seventy (70) miles from Employee's principal
residence, or (z) the Company's headquarters to a location that is not
substantially the same as Employee's current principal business location; (iv)
failure of the Company to continue in effect any health and welfare plan,
employee benefit plan, pension plan, fringe benefit plan or compensation plan in
which Employee (and eligible dependents) are participating immediately prior to
such Change in Control, unless Employee (and eligible dependents) are permitted
to participate in other plans providing Employee with substantially comparable
benefits at no greater after-tax cost to Employee, or the taking of any action
by the Company which would adversely affect Employee's participation in or
reduce Executive's benefits under any such plan; (v) breach by the Company of
any other agreement with Employee without proper justification that remains
uncured for ten (10) days after written notice of such breach is given to the
Company; or (vi) failure of any successor to the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume in writing the obligations hereunder.
(b) A "Change in Control" shall mean the occurrence of any of the
following:
(i) any person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and as
used in Section 13(d) and 14(d) thereof), excluding the
Company, any subsidiary of the Company, any employee benefit
plan sponsored or maintained by the Company or its
subsidiaries (including any trustee of any such plan acting
in his capacity as trustee), and Nortex Holdings, Inc.,
Larry A. Liebenow (or his estate, beneficiaries or heirs)
and any Affiliate (as such term is defined in Rule 12b-2 of
the Exchange Act) of Larry A. Liebenow, becoming the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing
twenty-five percent (25%) of the total combined voting power
of the Company's then outstanding securities;
(ii) the merger, consolidation or other business combination of
the Company (a "Transaction"), other than a Transaction
involving
only the Company and one or more of its subsidiaries, or a
Transaction immediately following which the stockholders of
the Company immediately prior to the Transaction continue to
have a majority of the voting power in the resulting entity
and no person other than Nortex Holding, Inc., Larry A.
Liebenow (or his estate, beneficiaries or heirs) or any
Affiliate of Larry A. Liebenow is the beneficial owner of
securities of the resulting entity representing more than
twenty-five percent (25%) of the voting power in the
resulting entity;
(iii) during any period of two (2) consecutive years beginning on
or after the date hereof, the persons who were members of
the Board immediately before the beginning of such period
(the "Incumbent Directors") ceasing (for any reason other
than death) to constitute at least a majority of the Board
or the board of directors of any successor to the Company,
provided that, any director who was not a director as of the
date hereof shall be deemed to be an Incumbent Director if
such director was elected to the board of directors by, or
on the recommendation of or with the approval of, at least a
majority of the directors who then qualified as Incumbent
Directors either actually or by prior operation of the
foregoing unless such election, recommendation or approval
occurs as a result of an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act or any successor
provision) or other actual or threatened solicitation of
proxies or contests by or on behalf of a person other than a
member of the Board; or
(iv) the approval by the stockholders of the Company of an
agreement for the sale of all or substantially all of the
Company's assets other than the sale of all or substantially
all of the assets of the Company to Nortex Holdings, Inc.,
or Larry A. Liebenow (or his estate, beneficiaries or heirs)
or to a person or persons who beneficially own, directly or
indirectly, at least fifty percent (50%) or more of the
combined voting power of the outstanding voting securities
of the Company or Nortex Holding, Inc. at the time of such
sale.
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IN WITNESS WHEREOF, the parties hereto have set their hands and caused
those present to be executed as of the day and year first above written.
QUAKER FABRIC CORPORATION
By:
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Vice President
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LARRY A. LIEBENOW