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EXHIBIT 10.26
AGREEMENT TO SECURE CERTAIN CONTINGENT PAYMENTS
THIS AGREEMENT TO SECURE CERTAIN CONTINGENT PAYMENTS between Xxxxxxx
Fabrics, Inc., a Delaware corporation (the "Company"), and Xxxxx X. Xxxxx (the
"Executive"), dated as of December 10, 1996.
R E C I T A L S :
WHEREAS, Executive and the Company have entered into that certain
Severance Agreement dated this date (in its present form or as it may hereafter
be amended, extended or renewed, the "Severance Agreement") and that certain
Agreement dated this date ("Deferred Compensation Agreement"); and
WHEREAS, under such Agreements, certain payments are to be made at
times which are contingent upon a change in control of the Company, and in
certain instances also contingent upon a termination of Executive's employment,
all of which contingencies are set forth in such Agreements; and
WHEREAS, the Company wishes to make additional provision for the
security of the payment of certain of the contingent amounts under such
Agreements in order to assure itself of continuity of management and to assure
the Executive of payment of the amounts in question,
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, it is hereby agreed by and between the Company and
the Executive as follows:
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1. Letter of Credit Required.
The Company shall, no later than the date of a change in control as
defined in the Severance Agreement ("Change in Control"), provide Executive with
an irrevocable letter of credit ("Letter of Credit"), under which Executive
shall be the beneficiary, to pay the following amounts:
x. Xxxxxxxxx benefits to be paid by the Company as provided in Section
(5)(a)(I) of the Severance Agreement.
b. "Penalty Taxes" (as defined in Section 10 of the Severance
Agreement) and all other amounts to be paid by the Company as provided in
Section 10 of the Severance Agreement.
c. Payments to be made by the Company under Section 16 of the Deferred
Compensation Agreement.
2. Amount of Letter of Credit.
a. The Letter of Credit shall be in an amount equal to the sum
determined by the Accounting Firm identified in Section 9 (the "Accounting
Firm"), as follows (both initially and recalculated as provided in Section 7)
plus ten percent (10%) of said sum.
b. The Accounting Firm shall determine the sum of:
(i) The amount which would be payable to the Executive
under Section 5(a)(I) of the Severance Agreement assuming a Change of Control
has occurred and that the Executive terminates employment for Good Reason (as
defined in the Severance Agreement) at the time the determination is made;
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(ii) The amount of "Penalty Taxes" and income taxes, if any,
that the Accounting Firm has determined as the total amount payable by the
Company to the Executive under Section 10(a) of the Severance Agreement; and
(iii) The amount which would be payable to the Executive
under Section 16 of the Deferred Compensation Agreement if he had made the
election to receive benefits under that Section and was in all other respects
eligible to receive benefits thereunder at the time the determination is made.
c. The amount so determined shall be stated in a written notice by the
Accounting Firm to the Company; and such notice shall thereupon be marked
"Attachment A" and be attached to and become a part of this Agreement.
3. Form of Letter of Credit.
The Letter of Credit shall be in a form agreed to by the Company and
the issuing bank (the "Bank") consistent with the terms of this Agreement. The
Executive shall be entitled to draw on the Letter of Credit by presenting to the
Bank a draft and a certificate in which the Executive certifies in writing that
the requisite events have occurred under the Severance Agreement and/or the
Deferred Compensation Agreement for payment to the Executive of amounts
specified in Section 1.
4. Issuer.
The Letter of Credit shall be issued by a commercial bank that is a
state or national banking association and which has a stockholders' equity in
excess of $1 billion.
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5. Single Letter of Credit with Multiple Beneficiaries.
At the Company's discretion, the Letter of Credit may provide for
payment of similar compensation and benefits to other executives of the Company
who are parties to agreements similar to this Agreement as long as the total
amount of the Letter of Credit, for all such other executives and for the
Executive, is, at all times, no less than the sum of the required amounts of the
Letter of Credit and of the letters of credit required under the agreements with
such other executives (initially or after recalculation pursuant to Section 7).
6. Term of Letter of Credit.
The Letter of Credit to be provided as required by Section 1 shall be
issued for a term which shall be the maximum term then available for commercial
letters of credit. Until such time as all amounts described in Sections 1(a),
1(b) and 1(c) have been paid in full, the Company shall, not later than thirty
(30) days before the Letter of Credit would otherwise lapse or expire, renew the
Letter of Credit or establish a replacement letter of credit with terms at least
as favorable as the initial Letter of Credit. The term "Letter of Credit" shall
mean both the original letter of credit and the renewal and replacement letters
of credit referred to in this Section 6. The period of time during which a
Letter of Credit is required to remain in effect under this Agreement is herein
called the "Secured Period." If the Company does not establish or renew a Letter
of Credit as required by Section 1 and this Section 6, the payment of all
amounts described in Section 1 shall be accelerated in accordance with Section 8
hereof.
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7. Calculation and Recalculation of Amounts Secured by Letter of
Credit and Increase in Amount of Letter of Credit.
During the Secured Period, the Accounting Firm shall, no later than the
end of each calendar quarter in the Secured Period, recalculate the amounts
listed on Attachment A and give prompt written notice of such recalculations to
the Executive, the Company and the Bank. Any such recalculated amounts shall
thereafter be deemed to be the amounts listed on Attachment A. If such
recalculated amounts plus ten percent (10%) thereof exceed the amounts payable
under the Letter of Credit then in effect, no later than seven (7) days after
receipt of such written notice of recalculation, the Company shall cause the
amounts payable under the Letter of Credit to be increased to the recalculated
amounts plus 10%.
8. Acceleration Under Letter of Credit.
If at least 30 days prior to the expiration of a Letter of Credit
established hereunder, which expiration would occur before the end of the
Secured Period, the Executive shall not have received written notice from the
Company that an extension or renewal of the expiring Letter of Credit has
occurred or a new Letter of Credit has been obtained with the terms and
conditions at least as favorable as the predecessor Letter of Credit, then,
notwithstanding any other provisions of the Severance Agreement, the Deferred
Compensation Agreement, or this Agreement, all amounts which are described in
Section 1 shall be due and payable immediately without regard to any
contingencies or future events and Executive, his beneficiaries or estate shall
be entitled to immediately draw on the Letter of Credit for all such amounts.
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9. Accounting Firm.
The Accounting Firm shall mean the same Accounting Firm as determined
under the provisions of Section 10(h) of the Severance Agreement. All
calculations by the Accounting Firm shall be binding on the Company, the
Executive and the Bank in the absence of wilful misconduct or gross negligence
by the Accounting Firm.
10. Expenses.
The Company shall pay all expenses and fees of the Accounting Firm.
11. Information.
The Company shall provide the Accounting Firm with such information as
the Company has in its possession that the Accounting Firm believes necessary,
in its discretion, to make its calculations and recalculations under this
Agreement.
12. Obligation of Executive.
Subject to the provisions of Section 8, if Executive receives payments
under the Letter of Credit for any amount in excess of that to which he is
entitled under the Severance Agreement, the Deferred Compensation Agreement, or
this Agreement, Executive shall immediately repay such amount to Company.
13. Legal Fees, Etc.
If Executive incurs any legal fees and expenses as a result of seeking
to obtain or enforce any right or benefit provided by this Agreement, Company
shall pay or reimburse Executive for all such reasonable fees and expenses.
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14. No Waivers.
The payment by a Bank on a Letter of Credit established in accordance
with the terms hereof shall not constitute a waiver by the Company of, or in any
way preclude the Company from asserting, any claim the Company may have against
Exec utive that Executive is not entitled to some or all of such payment.
Drawing upon the Letter of Credit shall not constitute a waiver by Executive of,
or in any way preclude Executive from asserting, any claim Executive may have
against the Company that Executive is entitled to amounts under this Agreement
or the Severance Agreement or the Deferred Compensation Agreement (except to the
extent that such amounts have been paid in full by the Bank under the Letter of
Credit).
15. Enforceability.
Subject to Section 19, this Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
16. No Change to Agreements.
Except as expressly modified by this Agreement, Executive's rights
under the Severance Agreement and the Deferred Compensation Agreement are
unchanged by this Agreement.
17. Modification in Writing.
No provision of this Agreement may be modified or waived unless in
writing and signed by Executive and such officer of Company as may be designated
or authorized by its Board of Directors.
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18. Severability.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
19. Assignment.
Executive's rights under this Agreement and the Letter of Credit are
not assignable.
20. Notices.
Any notice, report, demand or waiver required or permitted hereunder
shall be in writing and shall be given personally or by prepaid registered or
certified mail, return receipt requested, addressed as follows:
If to the Company: Xxxxxxx Fabrics, Inc.
0000 Xxxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Corporate Secretary
If to the Executive: Xxxxx X. Xxxxx
0000 Xxxx
Xxxxxxx, Xxxxxxxxx 00000
A notice shall be effective upon the receipt thereof. The above addresses can be
changed by notice in writing delivered as provided above.
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21. Additional Benefits.
The security provided under this Agreement is in addition to and not by
way of limitation of any rights or benefits to which Executive is entitled under
the Severance Agreement and the Deferred Compensation Agreement.
IN WITNESS WHEREOF Executive and, pursuant to authorization from its
Board of Directors, Company have executed this Agreement to Secure Certain
Contingent Payments effective as of the date first above written.
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Xxxxx X. Xxxxx, Executive
XXXXXXX FABRICS, INC.
By
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Its
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