-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VU7W42cU6qYZeU4ldWJYbKoOlxL1HJSir54WagOrBw9719hKgwAatkphi5edj7fC Vjy3lMhYBuN3Hes9ZuffoA== 0000950117-05-000843.txt : 20050304 0000950117-05-000843.hdr.sgml : 20050304 20050304172620 ACCESSION NUMBER: 0000950117-05-000843 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050228 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050304 DATE AS OF CHANGE: 20050304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUAKER FABRIC CORP /DE/ CENTRAL INDEX KEY: 0000103341 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221] IRS NUMBER: 041933106 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07023 FILM NUMBER: 05662187 BUSINESS ADDRESS: STREET 1: 941 GRINNELL ST. CITY: FALL RIVER STATE: MA ZIP: 02721 BUSINESS PHONE: 5086781951 MAIL ADDRESS: STREET 1: 941 GRINNELL ST CITY: FALL RIVER STATE: MA ZIP: 02721 FORMER COMPANY: FORMER CONFORMED NAME: VERTIPILE INC DATE OF NAME CHANGE: 19870811 8-K 1 a39364.txt QUAKER FABRIC CORPORATION - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 February 28, 2005 Date of Report (Date of earliest event reported) QUAKER FABRIC CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-7023 04-1933106 (State of incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 941 Grinnell Street, Fall River, Massachusetts 02721 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 678-1951
(Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement Quaker Fabric Corporation (the "Company") historically has financed its operations and capital requirements through a combination of internally generated funds, borrowings under the Credit Agreement (as hereinafter defined), and debt and equity offerings. The Company's capital requirements have arisen principally in connection with (i) the purchase of equipment to expand production capacity, introduce new technologies to broaden and differentiate the Company's products, and improve the Company's quality and productivity performance, (ii) increases in the Company's working capital needs related to its sales growth, and (iii) investments in the Company's information technology systems. The primary source of the Company's liquidity and capital resources in recent years has been operating cash flow. The Company's net cash provided by operating activities was $15.2 million and $22.8 million in the first nine months of 2004 and 2003, respectively. Cash provided by operating activities decreased during 2004 due principally to a reduction in net income of $4.8 million and a reduction in the deferred tax provision. Historically, the Company has supplemented its operating cash flow with borrowings under the Credit Agreement. Capital expenditures in the first nine months of 2004 and 2003 were $12.1 million and $6.6 million, respectively. Capital expenditures during the first nine months of 2004 were funded by operating cash flow. Management believes that cash on hand, operating income and borrowings under the Credit Agreement (as hereinafter defined), will provide sufficient funding for the Company's capital expenditures, working capital and debt service needs for the foreseeable future, subject to the favorable resolution of discussions with its Lenders (as hereinafter defined) described below. Quaker Fabric Corporation of Fall River, a wholly-owned subsidiary of the Company ("Quaker") issued $45.0 million of Senior Notes due October 2005 and 2007 (the Senior Notes) during 1997 under a Note Agreement (as amended, the "Senior Note Agreement") with an insurance company (the "Insurance Company"). The Senior Notes are unsecured and bear interest at a fixed rate of 7.09% on $15.0 million and 7.18% on $30.0 million. The Senior Notes may be prepaid in whole or in part prior to maturity, at Quaker's option, subject to a yield maintenance premium, as defined. Annual principal payments began on October 10, 2003 with a final payment due October 10, 2007. Annual principal payment amounts are three payments of $5.0 million beginning in October 2003 (of which only the October 2005 payment is unpaid as of March 4, 2005), followed by two payments of $15.0 million beginning in 2006. On February 14, 2002, Quaker issued $5.0 million of 7.56% Series A Notes due February 2009 (the "Series A Notes") under a Note Purchase Agreement (as amended, the "Series A Note Agreement" and together with the Senior Note Agreement, the "Note Agreements") with the Insurance Company. The Series A Notes are unsecured and bear interest at a fixed rate of 7.56%, payable semiannually. The Series A Notes may be prepaid in whole or in part prior to maturity, at Quaker's option, subject to a yield maintenance premium, as defined. In addition, the Series A Note Agreement includes a $45.0 million non-committed shelf note provision pursuant to which, if the conditions to borrowing, including the consent of the Insurance Company, were met, Quaker could issue additional senior notes prior to February 14, 2005 with maturity dates of up to ten years. Quaker does not anticipate issuing any additional senior notes under the Series A Note Agreement. 2 The long term portion of the amounts outstanding under the Note Agreements was classified as "current" on the Balance Sheet as of October 2, 2004 in accordance with Emerging Issues Task Force Issue 86-30, "Classification of Obligations When a Violation is Waived by the Creditor." Quaker, two other subsidiaries of the Company and the Company, as guarantor, are parties to a Credit Agreement with a bank (the "Bank," and the Bank, together with the Insurance Company, the "Lenders") which expires January 31, 2007 (the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility and a letter of credit facility. See Note 5 of Notes to Consolidated Financial Statements included in the Company's 2003 Annual Report on Form 10-K. The Company and/or Quaker are required to comply with a number of affirmative and negative convenants under the Credit Agreement and the Note Agreements, including, but not limited to, maintenance of certain financial tests and ratios (including interest coverage ratios, net worth related ratios, and net worth requirements); limitations on certain business activities of the Company and Quaker; restrictions on the Company's and/or Quaker's ability to declare and pay dividends, incur additional indebtedness, create certain liens, incur capital lease obligations, make certain investments, engage in certain transactions with stockholders and affiliates, and purchase, merge, or consolidate with or into any other corporation. On October 12, 2004, Quaker and the Company, as guarantor, entered into an amendment, effective as of October 1, 2004, to the Note Agreements with the Insurance Company. The amendment provides for a reduction in the Fixed Charge Coverage Ratio (as defined in the Note Agreements) required to be maintained by Quaker from 1.75 to 1.00, to 1.50 to 1.00 for the twelve (12) month period ended on October 2, 2004 (the last day of the third fiscal quarter of 2004). In August 2004, Quaker, two other subsidiaries of the Company and the Company, as guarantor, entered into a similar amendment to the Credit Agreement with the Bank. The amendment to the Note Agreements also provides that (a) neither Quaker nor any of its subsidiaries will create or permit to exist any Lien (as defined in the Note Agreements) securing obligations under the Credit Agreement and (b) before December 31, 2004 or at any time when a Default (as defined in the Note Agreements) has occurred and is continuing, the Company will not declare or pay any dividends on or make any distributions with respect, or purchase, redeem or retire, any of its capital stock. As a result of the October 12, 2004 amendments to the Note Agreements and the Credit Agreement, Quaker and the Company were in compliance with their affirmative and negative covenants under those agreements as of October 2, 2004. On March 4, 2005, Quaker, two other subsidiaries of the Company and the Company, as guarantor, entered into a Waiver and Amendment to the Credit Agreement (the "Bank Waiver"). Pursuant to the terms of the Bank Waiver, Quaker, the Company and the other signatories acknowledged that in the absence of a waiver from the Bank, they anticipated that they would be in breach of both the debt service coverage ratio covenant and the profitable operations covenant in the Credit Agreement at year-end 2004 and that these breaches would constitute Events of Default, as defined in the Credit Agreement (the "Specified Bank Defaults"). In the Bank Waiver, the Bank agreed to waive the Specified Bank Defaults through the period ending March 13, 2005 (the "Limited Bank Waiver Period"), subject to certain conditions including the Bank's receipt of fully executed copies of a similar waiver from the Insurance Company with respect to the fixed charge coverage requirements 3 set forth in the Note Agreements. In the Bank Waiver, Quaker, the Company and the other signatories agreed that an Event of Default under the Credit Agreement will exist on March 14, 2005 and that at such time the Bank will have all of its rights and remedies as a result of the existance of an Event of Default. As of March 4, 2005, there were no loans outstanding under the Credit Agreement, approximately $4,704,144 of letters of credit and unused availability (after a reduction of the Bank's Commitment, as defined in the Credit Agreement) of $15,295,856. The parties previously had entered into waivers on December 20, 2004 and February 28, 2005 containing similar terms and including a reduction in the Bank's Commitment to $20.0 million. On March 4, 2005, Quaker and the Company, as guarantor, entered into a waiver agreement with respect to the Note Agreements with the Insurance Company (the "Insurance Company Waiver"). Pursuant to the terms of the Insurance Company Waiver, Quaker and the Company acknowledged that in the absence of a waiver from the Insurance Company, Quaker and the Company anticipated that they would be in breach of the fixed charge coverage covenant in the Note Agreements at year-end 2004 and that this breach would constitute an Event of Default, as defined in the Note Agreements (the "Specificied Insurance Company Default"). In the Insurance Company Waiver, the Insurance Company agreed to waive the Specified Insurance Company Default through the period ending March 13, 2005 (the "Limited Insurance Company Waiver period"), subject to certain conditions including, but not limited to, the Insurance Company's receipt of fully executed copies of a similar waiver from the Bank with respect to the debt service coverage ratio covenant and the profitable operations covenant set forth in the Credit Agreement. In the Insurance Company Waiver, Quaker and the Company agreed that an Event of Default under the Note Agreements will exist on March 14, 2005 and that at such time the Insurance Company will have all of its rights and remedies as a result of the existance of an Event of Default. As of March 4, 2005, Quaker owed $40,000,00 principal plus accrued interest under the Note Agreements. The parties previously had entered into waivers on December 22, 2004 and February 28, 2005 containing similar terms. The Company is in discussions with a commercial bank (the "Prospective Lender") regarding a proposed new credit facility to replace, and repay borrowings under, the Note Agreements and the Credit Agreement. Any such facility is expected to include terms which may be unfavorable to the Company including, but not limited to, the grant of security interests to the Prospective Lender to secure the payment and performance of Quaker's and the Company's obligations under the proposed credit facility and restrictions on Quaker's and the Company's capital expenditures going forward. There can be no assurance that the Company will reach agreement with the Prospective Lender on terms acceptable to the Company, or at all. The Company may be required to seek alternate financing sources, the terms of which financing, if obtainable, may be disadvantageous to the Company. Based upon the anticipated performance of the Company for the foreseeable future, and absent appropriate additional waivers from the Lenders, the failure to obtain new financing would likely result in an Event of Default under the Note Agreements and the Credit Agreement and the inability to borrow under the Credit Agreement no later than March 14, 2005. No dividends were paid on the Company's common stock prior to fiscal 2003. During the first quarter of fiscal 2003, the Board of Directors adopted a new dividend policy. This policy provides for future dividends to be declared at the discretion of the Board of Directors, based on the Board's quarterly evaluation of the Company's results of operations, cash requirements, financial conditions and other factors deemed relevant by the Board. In the first nine months of 2004 and in 2003, the 4 Company paid cash dividends of $1.5 million or $0.09 per common share and $1.3 million or $0.075 per common share, respectively. As noted above, the Company has agreed with its Lenders not to declare or pay any dividends or distributions before [December 31, 2004] or at any time when a Default has occurred and is continuing. It is anticipated that any further amendments to the Note Agreements or the Credit Agreement, or any agreements for alternate financing, may prohibit the declaration or payment of dividends. The foregoing descriptions of the Bank Waiver and the Insurance Company Waiver are qualified in their entirety by reference to the Bank Waiver and the Insurance Company Waiver, which are filed as Exhibits 10.12 and 10.13, respectively, to this Form 8-K and are incorporated by reference herein. The waiver from the Bank dated February 28, 2005 and the waiver from the Insurance Company dated February 28, 2005 are filed as Exhibits 10.14 and 10.15, respectively, to this Form 8-K and are incorporated herein by reference. 5 Item 9.01 Financial Statements and Exhibits (c) Exhibits 10.12 Waiver and Amendment dated as of March 4, 2005 to Second Amended and Restated Credit Agreement dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation and Quaker Fabric Mexico, S.A. de C.V., as Borrowers, Quaker Fabric Corporation, as Parent, and Fleet National Bank, as the Lender. 10.13 Waiver Agreement dated as of March 4, 2005 to the Note Agreement dated as of October 10, 1997 and the Note Purchase and Private Shelf Agreement, dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Pruco Life Insurance Company and The Prudential Insurance Company of America. 10.14 Waiver and Amendment dated as of February 28, 2005 to Second Amended and Restated Credit Agreement dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation and Quaker Fabric Mexico, S.A. de C.V., as Borrowers, Quaker Fabric Corporation, as Parent, and Fleet National Bank, as the Lender. 10.15 Waiver Agreement dated as of February 28, 2005 to the Note Agreement dated as of October 10, 1997 and the Note Purchase and Private Shelf Agreement, dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Pruco Life Insurance Company and The Prudential Insurance Company of America. 6 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QUAKER FABRIC CORPORATION (Registrant) Date: March 4, 2005 /s/ Paul J. Kelly --------------------------------------- Paul J. Kelly Vice President - Finance and Treasurer 7 EXHIBIT INDEX 10.12 Waiver and Amendment dated as of March 4, 2005 to Second Amended and Restated Credit Agreement dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation and Quaker Fabric Mexico, S.A. de C.V., as Borrowers, Quaker Fabric Corporation, as Parent, and Fleet National Bank, as the Lender. 10.13 Waiver Agreement dated as of March 4, 2005 to the Note Agreement dated as of October 10, 1997 and the Note Purchase and Private Shelf Agreement, dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Pruco Life Insurance Company and The Prudential Insurance Company of America. 10.14 Waiver and Amendment dated as of February 28, 2005 to Second Amended and Restated Credit Agreement dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation and Quaker Fabric Mexico, S.A. de C.V., as Borrowers, Quaker Fabric Corporation, as Parent, and Fleet National Bank, as the Lender. 10.15 Waiver Agreement dated as of February 28, 2005 to the Note Agreement dated as of October 10, 1997 and the Note Purchase and Private Shelf Agreement, dated as of February 14, 2002 by and among Quaker Fabric Corporation of Fall River, Pruco Life Insurance Company and The Prudential Insurance Company of America. 8 EX-10 2 ex10-12.txt EXHIBIT 10.12 FLEET NATIONAL BANK as of March 4, 2005 Quaker Fabric Corporation of Fall River 941 Grinnell Street Fall River, Massachusetts 02721 Attention: Mr. Paul J. Kelly Re: Waiver and Amendment to Second Amended and Restated Credit Agreement Ladies and Gentlemen: Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of February 14, 2002 (as amended and in effect from time to time, the "Credit Agreement"), by and among (a) Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "Company"), Quaker Textile Corporation, a Massachusetts corporation ("Quaker Textile") and Quaker Fabric Mexico, S.A. de C.V., a Mexican corporation ("Quaker Mexico", and collectively with the Company and Quaker Textile, the "Borrowers"), (b) Quaker Fabric Corporation, a Delaware corporation (the "Parent"), and (c) Fleet National Bank (formerly known as The First National Bank of Boston, "Fleet"). All capitalized terms used herein without definition that are defined in the Credit Agreement, as amended and in effect on the date hereof, shall have the same meanings herein as therein. All accounting terms used herein and not otherwise defined shall be used in accordance with generally accepted accounting principles. The Borrowers and the Parent have informed Fleet that, for the fiscal quarter ending on January 1, 2005, (i) the Debt Service Coverage Ratio for the prior four (4) consecutive fiscal quarters ending on January 1, 2005 was less than 1.50 to 1.00 and (ii) EBIT for the prior two (2) consecutive fiscal quarters ending on January 1, 2005 was less than $1.00. Each of the Borrowers and the Parent acknowledges and agrees that such performance results constitute Events of Default (the "Specified Defaults") under ss.ss.5.23(b) and (e), respectively, of the Credit Agreement. The Borrowers and the Parent have now requested, and by its signature below Fleet agrees to grant, a limited waiver in respect of the Specified Defaults subject to the terms and conditions provided herein. In consideration of Fleet's agreement to waive the Specified Defaults through the period ending March 13, 2005 (the "Limited Waiver Period"), the Borrowers and the Parent agree that: 1. an Event of Default will exist on March 14, 2005 and that at such time Fleet will have all of it's rights and remedies as a result of the existence of an Event of Default under the Credit Agreement and any other document, instrument or agreement executed in connection therewith or otherwise evidencing any extensions of credit made by Fleet to the Borrowers; 2. Fleet has no obligation to make Advances to the Borrowers or issue, extend or renew Letters of Credit; provided, however, without creating any obligation to do so (and the agreement to do so on any one occasion shall not constitute an agreement to do so on a future occasion), Fleet may in its sole discretion make Advances to the Borrowers and may continue to issue, extend or renew any Letters of Credit for the Borrowers' accounts; 3. except as expressly set forth herein, this letter shall not alter, release, discharge or otherwise affect any of their obligations under the Credit Agreement or otherwise under any other document, instrument or agreement executed in connection therewith under which such Person acts as a secondary obligor; and 4. each of the Borrowers and the Parent will comply and continue to comply will all of the terms, covenants and provisions contained in the Credit Agreement. Fleet's agreements contained herein shall become effective the upon satisfaction of the following conditions: (a) Each of the Borrowers and the Parent shall have executed and delivered to Fleet counterparts of this letter; and (b) Fleet shall have received fully executed copies of waiver documentation, in form and substance satisfactory to Fleet, between one or more of the Borrowers and the holders of the Senior Notes pursuant to which the holders of the Senior Notes have waived compliance with the provisions of the Note Agreement, the Additional Note Agreement and any other applicable document relating to the Senior Notes with respect to the fixed charge coverage requirements set forth therein, in each case for the duration of the Limited Waiver Period. This letter agreement may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this letter agreement it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. [Remainder of page intentionally left blank] If the foregoing terms are acceptable to you, we request that you indicate your agreement to these provisions by signing the counterpart of this letter enclosed herewith and returning such counterpart to us. Very truly yours, FLEET NATIONAL BANK, (f/k/a The First National Bank of Boston) By: /s/ ------------------------------------- Name: Title: ACCEPTED AND AGREED as of March 4, 2005 QUAKER FABRIC CORPORATION OF FALL RIVER By: /s/ --------------------------------------------- Name: Title: QUAKER TEXTILE CORPORATION By: /s/ --------------------------------------------- Name: Title: QUAKER FABRIC MEXICO, S.A. de C.V. By: /s/ --------------------------------------------- Name: Title: QUAKER FABRIC CORPORATION By: /s/ --------------------------------------------- Name: Title: EX-10 3 ex10-13.txt EXHIBIT 10.13 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA PRUCO LIFE INSURANCE COMPANY as of March 4, 2005 Quaker Fabric Corporation of Fall River 941 Grinnell Street Fall River, Massachusetts 02721 Attention: Mr. Paul J. Kelly Re: Waiver to Note Agreements Ladies and Gentlemen: Reference is hereby made to the (i) that certain Note Purchase Agreement, dated as of October 10, 1997 (as amended, restated, supplemented or otherwise modified from time to time, the "1997 Note Agreement") and (ii) that certain Note Agreement and Private Shelf Facility, dated as of February 14, 2002 (as amended, restated, supplemented or otherwise modified from time to time, the "2002 Note Agreement", and together with the 1997 Note Agreement, the "Note Agreements"), each by and among Quaker Fabric Corporation of Fall River (the "Company"), Pruco Life Insurance Company ("Pruco") and The Prudential Insurance Company of America ("Prudential"; and together with Pruco collectively, the "Noteholders"). All capitalized terms used herein without definition that are defined in the Note Agreements shall have the same meanings herein as therein. All accounting terms used herein and not otherwise defined shall be used in accordance with generally accepted accounting principles. The Company has informed the Noteholders that the Fixed Charge Ratio for the prior four (4) consecutive fiscal quarters ending on January 1, 2005 was less than 1.75 to 1.00. Each of the Borrowers and the Parent acknowledges and agrees that such performance result constitutes an Event of Default (the "Specified Default") under paragraph 6D of each Note Agreement. The Company has now requested, and by their signature below the Noteholders agree to grant, a limited waiver in respect of the Specified Default subject to the terms and conditions provided herein. In consideration of the Noteholders' agreement to waive the Specified Default through the period ending March 13, 2005 (the "Limited Waiver Period"), the Company agrees that: 1. an Event of Default will exist on March 14, 2005 and that at such time the Noteholders will have all of their rights and remedies as a result of the existence of an Event of Default under the Note Agreements and any other document, instrument or agreement executed in connection therewith or otherwise evidencing any extensions of credit made by the Noteholders to the Company; 2. during the Limited Waiver Period, the Company will not (a) take any actions that would otherwise be prohibited under Article VI of the Note Agreements if a Default or Event of Default existed, (b) incur any additional Priority Debt, or (c) make any investments otherwise permitted under clause (vii) of Paragraph 6H; 3. except as expressly set forth herein, this letter shall not alter, release, discharge or otherwise affect any of their obligations under the Note Agreements or otherwise under any other document, instrument or agreement executed in connection therewith under which such Person acts as a secondary obligor; and 4. the Company will comply and continue to comply with all of the terms, covenants and provisions contained in the Note Agreements and all other documents, instruments and agreements executed in connection therewith. The Noteholders' agreements contained herein shall become effective the upon satisfaction of the following conditions: (a) Each of the Company and the Parent shall have executed and delivered to the Noteholders counterparts of this letter; and (b) The Noteholders shall have received fully executed copies of waiver documentation, in form and substance satisfactory to the Noteholders, between the Company, the Parent, the subsidiaries of the Company and Fleet National Bank pursuant to which Fleet National Bank has waived compliance with the provisions of the Credit Agreement and any other applicable document relating thereto with respect to the debt service coverage and EBIT requirements set forth therein, in each case for the duration of the Limited Waiver Period. This letter agreement may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this letter agreement it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. [Remainder of page intentionally left blank] If the foregoing terms are acceptable to you, we request that you indicate your agreement to these provisions by signing the counterpart of this letter enclosed herewith and returning such counterpart to us. Very truly yours, THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ ----------------------------------------- Vice President PRUCO LIFE INSURANCE COMPANY By: /s/ ----------------------------------------- Vice President QUAKER FABRIC CORPORATION OF FALL RIVER By: /s/ ----------------------------------------- Title: --------------------------------------- The undersigned acknowledges and consents to the foregoing Waiver and confirms that the Guaranty and its obligations thereunder continue to be effective with respect to the Note Agreements, as amended hereby and that such Guaranty is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed as of this 4th day of March, 2005 QUAKER FABRIC CORPORATION, as Guarantor By: /s/ ----------------------------------------------------------- Name: Title: EX-10 4 ex10-14.txt EXHIBIT 10.14 FLEET NATIONAL BANK as of February 28, 2005 Quaker Fabric Corporation of Fall River 941 Grinnell Street Fall River, Massachusetts 02721 Attention: Mr. Paul J. Kelly Re: Waiver and Amendment to Second Amended and Restated Credit Agreement Ladies and Gentlemen: Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of February 14, 2002 (as amended and in effect from time to time, the "Credit Agreement"), by and among (a) Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "Company"), Quaker Textile Corporation, a Massachusetts corporation ("Quaker Textile") and Quaker Fabric Mexico, S.A. de C.V., a Mexican corporation ("Quaker Mexico", and collectively with the Company and Quaker Textile, the "Borrowers"), (b) Quaker Fabric Corporation, a Delaware corporation (the "Parent"), and (c) Fleet National Bank (formerly known as The First National Bank of Boston, "Fleet"). All capitalized terms used herein without definition that are defined in the Credit Agreement, as amended and in effect on the date hereof, shall have the same meanings herein as therein. All accounting terms used herein and not otherwise defined shall be used in accordance with generally accepted accounting principles. The Borrowers and the Parent have informed Fleet that, for the fiscal quarter ending on January 1, 2005, (i) the Debt Service Coverage Ratio for the prior four (4) consecutive fiscal quarters ending on January 1, 2005 was less than 1.50 to 1.00 and (ii) EBIT for the prior two (2) consecutive fiscal quarters ending on January 1, 2005 was less than $1.00. Each of the Borrowers and the Parent acknowledges and agrees that such performance results constitute Events of Default (the "Specified Defaults") under ss.ss.5.23(b) and (e), respectively, of the Credit Agreement. The Borrowers and the Parent have now requested, and by its signature below Fleet agrees to grant, a limited waiver in respect of the Specified Defaults subject to the terms and conditions provided herein. In consideration of Fleet's agreement to waive the Specified Defaults through the period ending March 6, 2005 (the "Limited Waiver Period"), the Borrowers and the Parent agree that: 1. an Event of Default will exist on March 7, 2005 and that at such time Fleet will have all of it's rights and remedies as a result of the existence of an Event of Default under the Credit Agreement and any other document, instrument or agreement executed in connection therewith or otherwise evidencing any extensions of credit made by Fleet to the Borrowers; 2. from and after the date hereof through the Maturity Date, the "Commitment" under and as defined in the Credit Agreement shall be reduced from $40,000,000 to $20,000,000, as such amount may be further reduced pursuant to the provisions of the Credit Agreement; 3. Fleet has no obligation to make Advances to the Borrowers or issue, extend or renew Letters of Credit; provided, however, without creating any obligation to do so (and the agreement to do so on any one occasion shall not constitute an agreement to do so on a future occasion), Fleet may in its sole discretion make Advances to the Borrowers and may continue to issue, extend or renew any Letters of Credit for the Borrowers' accounts; 4. except as expressly set forth herein, this letter shall not alter, release, discharge or otherwise affect any of their obligations under the Credit Agreement or otherwise under any other document, instrument or agreement executed in connection therewith under which such Person acts as a secondary obligor; and 5. each of the Borrowers and the Parent will comply and continue to comply will all of the terms, covenants and provisions contained in the Credit Agreement. Fleet's agreements contained herein shall become effective the upon satisfaction of the following conditions: (a) Each of the Borrowers and the Parent shall have executed and delivered to Fleet counterparts of this letter; and (b) Fleet shall have received fully executed copies of waiver documentation, in form and substance satisfactory to Fleet, between one or more of the Borrowers and the holders of the Senior Notes pursuant to which the holders of the Senior Notes have waived compliance with the provisions of the Note Agreement, the Additional Note Agreement and any other applicable document relating to the Senior Notes with respect to the fixed charge coverage requirements set forth therein, in each case for the duration of the Limited Waiver Period. This letter agreement may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this letter agreement it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. [Remainder of page intentionally left blank] If the foregoing terms are acceptable to you, we request that you indicate your agreement to these provisions by signing the counterpart of this letter enclosed herewith and returning such counterpart to us. Very truly yours, FLEET NATIONAL BANK, (f/k/a The First National Bank of Boston) By: ------------------------------------- Name: Title: ACCEPTED AND AGREED as of February __, 2005 QUAKER FABRIC CORPORATION OF FALL RIVER By: --------------------------------------------- Name: Title: QUAKER TEXTILE CORPORATION By: --------------------------------------------- Name: Title: QUAKER FABRIC MEXICO, S.A. de C.V. By: --------------------------------------------- Name: Title: QUAKER FABRIC CORPORATION By: --------------------------------------------- Name: Title: EX-10 5 ex10-15.txt EXHIBIT 10.15 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA PRUCO LIFE INSURANCE COMPANY as of February 28, 2005 Quaker Fabric Corporation of Fall River 941 Grinnell Street Fall River, Massachusetts 02721 Attention: Mr. Paul J. Kelly Re: Waiver to Note Agreements Ladies and Gentlemen: Reference is hereby made to the (i) that certain Note Purchase Agreement, dated as of October 10, 1997 (as amended, restated, supplemented or otherwise modified from time to time, the "1997 Note Agreement") and (ii) that certain Note Agreement and Private Shelf Facility, dated as of February 14, 2002 (as amended, restated, supplemented or otherwise modified from time to time, the "2002 Note Agreement", and together with the 1997 Note Agreement, the "Note Agreements"), each by and among Quaker Fabric Corporation of Fall River (the "Company"), Pruco Life Insurance Company ("Pruco") and The Prudential Insurance Company of America ("Prudential"; and together with Pruco collectively, the "Noteholders"). All capitalized terms used herein without definition that are defined in the Note Agreements shall have the same meanings herein as therein. All accounting terms used herein and not otherwise defined shall be used in accordance with generally accepted accounting principles. The Company has informed the Noteholders that the Fixed Charge Ratio for the prior four (4) consecutive fiscal quarters ending on January 1, 2005 was less than 1.75 to 1.00. Each of the Borrowers and the Parent acknowledges and agrees that such performance result constitutes an Event of Default (the "Specified Default") under paragraph 6D of each Note Agreement. The Company has now requested, and by their signature below the Noteholders agree to grant, a limited waiver in respect of the Specified Default subject to the terms and conditions provided herein. In consideration of the Noteholders' agreement to waive the Specified Default through the period ending March 6, 2005 (the "Limited Waiver Period"), the Company agrees that: 1. an Event of Default will exist on March 7, 2005 and that at such time the Noteholders will have all of their rights and remedies as a result of the existence of an Event of Default under the Note Agreements and any other document, instrument or agreement executed in connection therewith or otherwise evidencing any extensions of credit made by the Noteholders to the Company; 2. during the Limited Waiver Period, the Company will not (a) take any actions that would otherwise be prohibited under Article VI of the Note Agreements if a Default or Event of Default existed, (b) incur any additional Priority Debt, or (c) make any investments otherwise permitted under clause (vii) of Paragraph 6H; 3. except as expressly set forth herein, this letter shall not alter, release, discharge or otherwise affect any of their obligations under the Note Agreements or otherwise under any other document, instrument or agreement executed in connection therewith under which such Person acts as a secondary obligor; and 4. the Company will comply and continue to comply with all of the terms, covenants and provisions contained in the Note Agreements and all other documents, instruments and agreements executed in connection therewith. The Noteholders' agreements contained herein shall become effective the upon satisfaction of the following conditions: (a) Each of the Company and the Parent shall have executed and delivered to the Noteholders counterparts of this letter; and (b) The Noteholders shall have received fully executed copies of waiver documentation, in form and substance satisfactory to the Noteholders, between the Company, the Parent, the subsidiaries of the Company and Fleet National Bank pursuant to which Fleet National Bank has waived compliance with the provisions of the Credit Agreement and any other applicable document relating thereto with respect to the debt service coverage and EBIT requirements set forth therein, in each case for the duration of the Limited Waiver Period. This letter agreement may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this letter agreement it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. [Remainder of page intentionally left blank] If the foregoing terms are acceptable to you, we request that you indicate your agreement to these provisions by signing the counterpart of this letter enclosed herewith and returning such counterpart to us. Very truly yours, THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: ----------------------------------------- Vice President PRUCO LIFE INSURANCE COMPANY By: ----------------------------------------- Vice President QUAKER FABRIC CORPORATION OF FALL RIVER By: ----------------------------------------- Title: --------------------------------------- The undersigned acknowledges and consents to the foregoing Waiver and confirms that the Guaranty and its obligations thereunder continue to be effective with respect to the Note Agreements, as amended hereby and that such Guaranty is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed as of this 28th day of February, 2005 QUAKER FABRIC CORPORATION, as Guarantor By: ----------------------------------------------------------- Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----