-----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, VEAeAUcGSSflY5MS/f4eiUBRHUTH23njnjdRqgwlDi/W0FoHz7nwUCuh62gCds/j TlRp8cf0YU2wtm4YVb1jwA== 0001157523-06-005877.txt : 20060606 0001157523-06-005877.hdr.sgml : 20060606 20060606171729 ACCESSION NUMBER: 0001157523-06-005877 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060605 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060606 DATE AS OF CHANGE: 20060606 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: 06889935 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 a5164541.txt QUAKER FABRIC CORPORATION 8-K - -------------------------------------------------------------------------------- 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 June 5, 2006 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) (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)) -2- Item 1.01 Entry into a Material Definitive Agreement Credit Agreement Amendment On May 18, 2005, Quaker Fabric Corporation of Fall River ("Quaker"), a wholly-owned subsidiary of Quaker Fabric Corporation (the "Company"), entered into a five-year senior secured revolving credit and term loan agreement with Bank of America, N.A. and two other lenders (the "2005 Credit Agreement"). At inception, the 2005 Credit Agreement provided for a $20.0 million term loan (the "Term Loan") and a $50.0 million revolving credit and letter of credit facility (the "Revolving Credit Facility"). Principal payments made by the Company in accordance with the amortization schedule applicable to the Term Loan have reduced the Term Loan to $16.7 million, as of June 6, 2006. Amendments made to the 2005 Credit Agreement reduced the Total Commitment (as defined in the 2005 Credit Agreement) of the lenders under the Revolving Credit Facility to $30.0 million, effective March 22, 2006. Quaker's obligations under the 2005 Credit Agreement are guaranteed by the Company and two Quaker subsidiaries (the "Guaranty"). Pursuant to a Security Agreement (also dated as of May 18, 2005) executed by Quaker, the Company, and two subsidiaries of Quaker, all of Quaker's obligations under the 2005 Credit Agreement are secured by first priority liens upon all of Quaker's and the Company's assets and on the assets of the two Quaker subsidiaries acting as guarantors (the "Security Agreement"). On June 5, 2006, the Company and the other parties to the 2005 Credit Agreement entered into Amendment No. 5, effective as of May 6, 2006, to the 2005 Credit Agreement ( "Amendment No. 5") to (i) waive compliance with certain financial covenants through the end of fiscal 2006, (ii) reset the performance levels in the two (2) consecutive month minimum consolidated EBITDA covenant through February of 2007, (ii) require the Company to continue to engage the services of the Additional Financial Consultant (as defined in Amendment No. 4) to perform the services set forth in Amendment No. 4, as well as certain additional services, (iii) adjust the Availability Reserve requirements to levels consistent with the Company's forecasted cash flows (advances under the Revolving Credit Facility are limited to a formula based on Quaker's accounts receivable and inventory minus the Availability Reserve), (iv) add a new "Minimum Net Cash Flow" covenant, (v) provide that a portion of the net proceeds from the sale of certain identified real estate and all of the net proceeds of other asset sales be applied to the remaining scheduled installments of principal under the Term Loan in the inverse order of their maturity, (vi) reinstate the Company's ability to request, convert and continue LIBOR Rate Loans, and (vii) increase the interest rates payable by the Company on all outstanding balances by 200 basis points. In addition, the Company also agreed to an amendment fee of $469,900, payable in monthly installments of $25,000 each, beginning on June 1, 2006, with the balance of $294,000 due on December 31, 2006. -3- As of June 5, 2006, there were $34.7 million of loans outstanding under the 2005 Credit Agreement, including the remaining $16.7 million term loan component, approximately $4.5 million of letters of credit and unused availability of $4.0 million, net of the $6.25 million Availability Reserve required pursuant to Amendment No. 5. The Company's ability to meet its current obligations is dependent on: (i) its access to trade credit, (ii) its operating cash flow and (iii) its Availability under the 2005 Credit Agreement, which is a function of Eligible Accounts Receivable, Eligible Inventory, and the Availability Reserve as those terms are defined in the 2005 Credit Agreement. Decreases in the Availability Reserve increase Availability and thus the Company's ability to borrow. Increases in the Availability Reserve have the opposite effect. The Company manages its inventory levels, accounts receivable, accounts payable and capital expenditures to provide adequate resources to meet its operating needs, maximize its cash flow and reduce the need to borrow under the 2005 Credit Agreement. However, its cash position may be adversely affected by factors it cannot completely control, including but not limited to, a reduction in incoming order rates, production rates, sales, and accounts receivable, as well as delays in receipt of payment of accounts receivable and limitations of trade credit. The Company has implemented a plan to carefully monitor and manage its investment in inventory and is seeking to dispose of certain manufacturing and warehousing facilities no longer needed as a result of the consolidation of some of its facilities. In addition, management adjusts the Company's cost structure on a continuing basis to reflect changes in demand. The foregoing description of Amendment No. 5 to the 2005 Credit Agreement is qualified in its entirety by reference to Amendment No. 5 filed as Exhibit 10.34 to this Report on Form 8-K and incorporated by reference herein. Item 7.01 Regulation FD Disclosure Engagement Letter - Financial Advisory Services On June 6, 2006, Quaker Fabric Corporation issued a press release announcing that the Company had entered into a financial advisory services agreement with Alvarez & Marsal Securities, LLC ("A&M"), a part of Alvarez & Marsal, LLC, a New York-based global professional services firm, to advise the Company in connection with the Company's efforts to seek financing on a private placement basis, the proceeds of which would be used to provide the Company with additional working capital and to repay all or a portion of the Company's existing indebtedness under its senior secured credit facility. A copy of the press release is attached to this Report on Form 8-K as Exhibit 10.35 and incorporated herein by reference. -4- Item 9.01 Financial Statements and Exhibits (c) Exhibits 10.34 Amendment No. 5 dated as of May 6, 2006 to Revolving Credit and Term Loan Agreement (dated as of May 18, 2005) by and among Quaker Fabric Corporation of Fall River, as Borrower; Bank of America, N.A. and the Other Lending Institutions which are or may become parties thereto; Bank of America, N.A., as Administrative Agent and Issuing Bank; Fleet National Bank, as Cash Management Bank; and Banc of America Securities LLC, as Sole Lead Arranger and Book Manager. 10.35 Registrant's Press Release dated June 6, 2006. -5- 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: June 6, 2006 /s/ Paul J. Kelly -------------------------------------- Paul J. Kelly Vice President - Finance and Treasurer -6- EXHIBIT INDEX 10.34 Amendment No. 5 dated as of May 6, 2006 to Revolving Credit and Term Loan Agreement (dated as of May 18, 2005) by and among Quaker Fabric Corporation of Fall River, as Borrower; Bank of America, N.A. and the Other Lending Institutions which are or may become parties thereto; Bank of America, N.A., as Administrative Agent and Issuing Bank; Fleet National Bank, as Cash Management Bank; and Banc of America Securities LLC, as Sole Lead Arranger and Book Manager. 10.35 Registrant's Press Release dated June 6, 2006 EX-10.34 2 a5164541ex10_34.txt EXHIBIT 10.34 -7- EXHIBIT 10.34 AMENDMENT NO. 5 AMENDMENT NO. 5 dated as of May 6, 2006 (this "Amendment") by and among Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "Borrower"), Quaker Fabric Corporation, a Delaware corporation (the "Parent" and together with the Borrower and the Guarantors signatory hereto, the "Loan Parties"), Bank of America, N.A. and the other lenders party hereto (collectively, the "Lenders", and individually, a "Lender") and Bank of America, N.A., as Administrative Agent, Issuing Bank and Cash Management Bank. WHEREAS, the Parent, the Borrower, the Lenders party thereto, the Administrative Agent, the Issuing Bank and the Cash Management Bank are parties to that certain Revolving Credit and Term Loan Agreement, dated as of May 18, 2005 (as amended and in effect from time to time, the "Credit Agreement"); WHEREAS, the Loan Parties have requested that the Administrative Agent and the Lenders amend certain of the terms and provisions of the Credit Agreement, as specifically set forth in this Amendment; and WHEREAS, the Loan Parties have informed the Administrative Agent and the Lenders that the Loan Parties have engaged Alvarez and Marsal Securities, LLC ("AMS") to provide certain additional services to the Loan Parties, as set forth in an engagement letter, dated June __, 2006, between the Parent and AMS. NOW THEREFORE, in consideration of the premises and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section l. Definitions. Except as otherwise defined in this Amendment, terms defined in the Credit Agreement are used herein as defined therein. Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 3 herein, the Credit Agreement shall be amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Applicable Margin" contained therein and substituting in lieu thereof the following: "Applicable Margin. With respect to Revolving Loans that are Base Rate Loans, 3.00%, with respect to Revolving Loans that are LIBOR Rate Loans, 4.50%, with respect to all or a portion of the Term Loan that is a Base Rate Loan, 3.75%, and with respect to all or a portion of the Term Loan that is a LIBOR Rate Loan, 5.25%." (b) Section 1.1 of the Credit Agreement is hereby further amended by deleting the definition of "Availability Reserve" contained therein and substituting in lieu thereof the following new definition: -8- "Availability Reserve. At any time during a period set forth in the table below, the dollar amount set forth opposite such period in the table below: - -------------------------------------------------------------------------------- Period Availability Reserve - -------------------------------------------------------------------------------- May 6, 2006 through May 25, 2006 $7,500,000 - -------------------------------------------------------------------------------- May 26, 2006 through June 24, 2006 $6,250,000 - -------------------------------------------------------------------------------- June 25, 2006 through July 1, 2006 $4,250,000 - -------------------------------------------------------------------------------- July 2, 2006 through July 8, 2006 $3,250,000 - -------------------------------------------------------------------------------- July 9, 2006 through August 19, 2006 $2,250,000 - -------------------------------------------------------------------------------- August 20, 2006 through September 17, 2006 $3,500,000 - -------------------------------------------------------------------------------- September 18, 2006 through December 15, 2006 $4,000,000 - -------------------------------------------------------------------------------- December 16, 2006 and thereafter $5,000,000 - -------------------------------------------------------------------------------- (c) Section 1.1 of the Credit Agreement is hereby further amended by deleting the definition of "Consolidated EBITDA" contained therein and substituting in lieu thereof the following: "Consolidated EBITDA. For any period, (a) the net income (or deficit) of the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) for such period, plus (b) to the extent deducted in calculating net income (i) income taxes accrued during such period, (ii) interest and fees in respect of Indebtedness (including amounts accrued or paid in respect of Derivative Agreements) during such period (whether or not actually paid in cash during such period), (iii) depreciation, amortization and other non-cash charges (including asset impairment charges) accrued for such period, (iv) Eligible Non-Recurring Charges for such period, (v) extraordinary losses during such period, (vi) costs and expenses incurred by the Loan Parties and their Subsidiaries in connection with the Parent's retention of the Additional Financial Consultant (as defined in ss.7.21), (vii) severance charges incurred by the Loan Parties, (viii) up to $300,000 per month of plant consolidation expenses specifically identified to the satisfaction of the Administrative Agent, and (ix) transaction costs incurred in connection with the Fifth Amendment, minus (c) to the extent such items were added in calculating net income (i) extraordinary gains during such period and (ii) proceeds received during such period in respect of Casualty Events and dispositions of any property (other than dispositions in the ordinary course of business on ordinary business terms)." (d) Section 1.1 of the Credit Agreement is hereby further amended by inserting the following new definitions in appropriate alphabetical order: "Bleachery Pond Property. That certain parcel of land located in Fall River, Massachusetts, as more specifically described on Schedule 8.5.2." -9- "Consolidated Net Cash Flow. For any period, an amount equal to the difference of total cash receipts of the Borrower (excluding proceeds from the sale of Real Estate and equipment permitted hereunder, Revolving Loans and any other incurrence of Indebtedness) for such period, minus, cash disbursements for operating expenses (excluding Consolidated Interest Expense paid in cash during such period, fees paid in cash to the Additional Financial Consultant during such period and plant consolidation expenses (provided that such plant consolidation expenses shall not exceed $300,000 per month), specifically identified to the satisfaction of the Administrative Agent) of the Borrower for such period, minus Capital Expenditures made during such period, minus scheduled principal payments of Term Loan made during such period." "Fifth Amendment. That certain Amendment No. 5, dated as of May 6, 2006, by and among the parties hereto." "Plant D. That certain plant located in Fall River, Massachusetts, as more specifically described on Schedule 8.5.2." "Plant I. That certain plant located in Somerset, Massachusetts, as more specifically described on Schedule 8.5.2." "Projections. Those certain treasury cash flow forecasts of receipts and disbursements delivered to the Administrative Agent pursuant to Section 3(e) of the Fifth Amendment, as such forecasts may be updated from time to time pursuant to Section 7.4(n)." (e) Section 3.2.1(c)(i) of the Credit Agreement is hereby amended by deleting the text "in excess of $100,000 in any Fiscal Year or $500,000 in the aggregate during the term of this Credit Agreement, which have not been utilized by the Parent or such Subsidiary to replace the assets disposed of within sixty (60) days of such Asset Sale". (f) Section 3.2.1(c) of the Credit Agreement is hereby amended by inserting the following text immediately after the last paragraph contained therein: "Notwithstanding anything contained in this clause (c) to the contrary, (a) with respect to a disposition of the Bleachery Pond Land, the Borrower shall only be required to pay to the Administrative Agent seventy-five percent (75%) of the net cash proceeds received from such disposition pursuant to this clause (c); (b) with respect to a disposition of Plant I, the Borrower shall only be required to pay to the Administrative Agent fifty percent (50%) of the net cash proceeds received from such disposition pursuant to this clause (c); and (c) with respect to a disposition of Plant D the Borrower shall only be required to pay to the Administrative Agent, twenty-five percent (25%) of the net cash proceeds received from such disposition pursuant to this clause (c), so long as, in each case, the net cash proceeds retained by the Borrower are used for working capital purposes of the Borrower." -10- (g) The Credit Agreement is hereby further amended by deleting Section 8.5.2 thereof and substituting in lieu thereof the following: "Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, become a party to or agree to or effect any disposition of any assets, other than (a) the sale of inventory, the licensing of intellectual property and the disposition of obsolete assets, in each case in the ordinary course of business consistent with past practices and (b) the sales of the real property, fixtures, machinery and equipment located at the facilities identified on Schedule 8.5.2 hereto; provided that (i) the amount of net cash proceeds received by the Borrower from such sale is acceptable to the Administrative Agent and (ii) all of the net cash proceeds from such sale are applied, contemporaneously upon receipt, in accordance with ss.3.2.1. In connection with any disposition of assets permitted under this ss.8.5.2, each of the Lenders authorizes the Administrative Agent to execute and deliver any collateral releases necessary to release its liens on such assets." (h) Section 7.4 of the Credit Agreement is hereby amended by deleting the text "and" contained immediately after subsection (k) thereof, deleting the period contained at the end of subsection (l) thereof and substituting in lieu thereof the text "; and" and by inserting the following new subsections: "(m) On Wednesday of each week, a comparison of actual results for the immediately prior one week period to the previously projected results for such one week period as set forth in the Projections; and (n) Within five (5) Business Days after the end of each month, an updated treasury cash flow forecast reflecting any changes to the previously provided Projections." (i) The Credit Agreement is hereby further amended by deleting Section 9.1 thereof and substituting in lieu thereof the following: "9.1. Minimum Consolidated EBITDA. The Parent and the Borrower shall not permit Consolidated EBITDA, determined as at the end of each month set forth in the table below for the period of the two (2) consecutive prior months then ending, to be less than the amount set forth opposite such month in such table: - -------------------------------------------------------------------------------- Month Minimum Consolidated EBITDA - -------------------------------------------------------------------------------- April of 2006 ($1,275,000) - -------------------------------------------------------------------------------- May of 2006 ($750,000) - -------------------------------------------------------------------------------- June of 2006 ($55,000) - -------------------------------------------------------------------------------- July of 2006 ($2,100,000) - -------------------------------------------------------------------------------- August of 2006 ($1,750,000) - -------------------------------------------------------------------------------- -11- - -------------------------------------------------------------------------------- September of 2006 $950,000 - -------------------------------------------------------------------------------- October of 2006 $1,300,000 - -------------------------------------------------------------------------------- November of 2006 $1,550,000 - -------------------------------------------------------------------------------- December of 2006 $1,200,000 - -------------------------------------------------------------------------------- January of 2007 $1,200,000 - -------------------------------------------------------------------------------- February of 2007 $1,200,000 - -------------------------------------------------------------------------------- (j) The Credit Agreement is hereby further amended by deleting Section 9.2 thereof and substituting in lieu thereof the following: "9.2. Fixed Charge Coverage Ratios. (a) Fixed Charge Coverage Ratio. The Parent and the Borrower shall not permit the Fixed Charge Coverage Ratio, determined as of the end of each Fiscal Quarter, commencing with FQ1 of 2007, to be less than 1.15:1.00. (b) Two Quarter Fixed Charge Coverage Ratio. The Parent and the Borrower shall not permit the Two Quarter Fixed Charge Coverage Ratio, determined as of the end of FQ1 of 2007, to be less than 1.0:1.0." (k) The Credit Agreement is hereby further amended by inserting the following new Section immediately after Section 9.3 contained therein: "9.4. Minimum Consolidated Net Cash Flow. The Parent and the Borrower will not permit the negative variance between (a) actual Consolidated Net Cash Flow for any period of four (4) weeks (measured as at the end of each week (commencing with the week ending July 1, 2006) for the four (4) week period then ending) and (b) projected Consolidated Net Cash Flow for such period (as set forth in the Projections delivered to the Administrative Agent pursuant to Section 3(e) of the Fifth Amendment or, only if such updated Projections are acceptable to the Administrative Agent, pursuant to Section 7.4(n)) to be more than an amount equal to the greater of (x) $150,000 and (y) fifteen percent (15%) of such projected Consolidated Net Cash Flow)." (l) The Credit Agreement is hereby further amended by adding Schedule 8.5.2, as attached hereto, in its entirety, immediately after Schedule 8.3.1. (m) The Credit Agreement is hereby further amended by deleting Section 3(k) contained in the Waiver and Amendment No. 4, dated as of March 22, 2005, by and among the parties hereto, in its entirety. -12- Section 3. Conditions Precedent. The Administrative Agent, the Lenders, and each of the Loan Parties agree that this Amendment shall become effective as of May 6, 2006 upon the satisfaction of the following conditions precedent, each in form and substance reasonably satisfactory to the Agent: (a) The Loan Parties and the Required Lenders shall have executed and delivered to the Administrative Agent this Amendment; (b) After giving effect to this Amendment, the representations and warranties of each of the Loan Parties in each of the Loan Documents to which it is a party shall be true and correct on and as of the date hereof, except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date; (c) As of the date hereof, after giving effect to this Amendment, there shall be no Default or Event of Default existing; (d) The Administrative Agent and the Lenders shall have received payment for all fees and expenses including, without limitation, reasonable legal fees and expenses, for which invoices or reasonable estimates therefor have been provided to the Borrower on or prior to the date hereof; and (e) The Administrative Agent and the Lenders shall have received a treasury cash flow forecast for the remaining months of Fiscal Year 2006 in reasonable detail (including, without limitation, a projection of disbursements and receipts for each 13 week period contained therein), in form and substance satisfactory to the Administrative Agent (the Administrative Agent and the Lenders confirm receipt of such satisfactory forecast). Section 4. Amendment Fee. The Borrower hereby covenants and agrees to pay to the Administrative Agent, for the pro rata account of each Lender executing this Amendment, an amendment fee in the amount of $469,900 (the "Amendment Fee"). The parties hereto hereby acknowledge and agree that the Amendment Fee shall be fully earned on the date hereof and shall be payable in monthly installments of $25,000 on each of June 1, 2006, July 1, 2006, August 1, 2006, September 1, 2006, October 1, 2006, November 1, 2006 and December 1, 2006, with the balance of $294,900, due and payable on December 31, 2006. Section 5. Additional Financial Consultant. The Borrower shall continue the engagement of the Additional Financial Consultant on terms and conditions satisfactory to the Administrative Agent. Section 6. Representations and Warranties. Each of the Loan Parties hereby represents and warrants to the Lenders as follows: (a) The execution and delivery by the Borrower and each Guarantor and the performance by each of the Borrower and each Guarantor of each of its -13- obligations and agreements under this Amendment and the Credit Agreement and the other Loan Documents, as amended hereby, are within the organizational authority of each such Person, have been duly authorized by all necessary proceedings on behalf of each such Person, and do not and will not contravene any provision of law, statute, rule or regulation to which any such Person is subject or any of such Person's organizational documents or of any agreement or other instrument binding upon any such Person; (b) This Amendment and the Credit Agreement and the other Loan Documents, as amended hereby, constitute legal, valid and binding obligations of each of the Borrower and each Guarantor, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights in general, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Borrower and/or each Guarantor of this Amendment or the Credit Agreement and the other Loan Documents as amended hereby, except for such filings which have been made prior to the date hereof and are in full force and effect; (d) After giving effect to this Amendment, the representations and warranties contained in Section 6 of the Credit Agreement are true and correct at and as of the date made and as of the date hereof, except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date; and (e) Each of the Borrower and each Guarantor has performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions hereof, there exists no Event of Default or Default. Section 7. Affirmation and Acknowledgment. (a) The Borrower hereby ratifies and confirms all of its Obligations to the Administrative Agent and the Lenders and the Borrower hereby affirms its absolute and unconditional promise to pay to the Lenders the Loans and all other amounts due under the Credit Agreement, as amended hereby. The Borrower hereby confirms that the Obligations are and remain secured pursuant to the Security Documents, and pursuant to all other instruments and documents executed and delivered by the Borrower as security for the Obligations. (b) Each Guarantor hereby acknowledges the provisions of this Amendment and hereby confirms and ratifies all of its obligations under the Guaranty and each Loan Document (as amended hereby) to which such Guarantor is a party. Each Guarantor hereby confirms (i) that the Guaranties and each of the other Loan Documents remain in full force and effect and (ii) that its obligations under the Guaranty to which it is a party are and remain secured pursuant to the Security Documents to which it is a party. -14- Section 8. No Waiver. Except as otherwise expressly provided for in this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect without modification or waiver. Section 9. Expenses. The Borrower agrees to pay to the Administrative Agent and the Lenders upon written demand therefor an amount equal to any and all reasonable out-of-pocket costs, expenses, and liabilities incurred or sustained by the Administrative Agent and the Lenders in connection with the preparation of this Amendment, and the on-going administration of the Loan Documents after the date hereof (including, without limitation, travel expenses and reasonable fees and expenses of legal counsel). Amounts payable pursuant to this Section 9 shall be subject to the provisions of Section 15 of the Credit Agreement, as fully as if set forth therein. Section 10. Miscellaneous. (a) This Amendment shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts. (b) This Amendment shall constitute a Loan Document under the Credit Agreement, and all obligations included in this Amendment (including, without limitation, all obligations for the payment of principal, interest, fees, and other amounts and expenses) shall constitute obligations under the Loan Documents and be secured by the collateral security for the Obligations. (c) This Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute but one instrument. In making proof of this Amendment 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] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. QUAKER FABRIC CORPORATION OF FALL RIVER QUAKER FABRIC CORPORATION QUAKER TEXTILE CORPORATION QUAKER FABRIC MEXICO, S.A. de C.V. By: ------------------------------------ Name: Paul J. Kelly Title: Vice President Finance BANK OF AMERICA, N.A. individually and as Administrative Agent, Issuing Bank and Cash Management Bank By: ------------------------------------ Name: Matthew T. O'Keefe Title: Senior Vice President WELLS FARGO FOOTHILL, LLC By: ------------------------------------ Name: Title: MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. By: ------------------------------------ Name: Title: Schedule 8.5.2 -------------- Property Plant D - Land and buildings located at 537 Quequechan Street, Fall River MA. Land 4.83 acres. Book/Page 1401-17 Plant I - Land and building located at 3129 County Street, Somerset Ma. Assessors parcel E5-333 Bleachery Pond - Approximately 66 acres of land located at Hiatt Street, Fall River MA. Book/Page 3650-182 EX-10.35 3 a5164541ex10_35.txt EXHIBIT 10.35 EXHIBIT 10.35 For Release: IMMEDIATELY Contact: LARRY A. LIEBENOW -- (508) 646-2264 PAUL J. KELLY -- (508) 646-2251 CYNTHIA L. GORDAN -- (508) 646-2261 QUAKER FABRIC REPORTS AMENDMENT TO BANK DEAL AND INTENT TO SEEK FINANCING ON A PRIVATE PLACEMENT BASIS FALL RIVER, MASSACHUSETTS, June 6, 2006 - - - QUAKER FABRIC CORPORATION (NASDAQ Symbol: QFAB) today announced an amendment to its five year, senior secured credit facility. "We have reached agreement with our lenders on certain changes to our loan documents. These changes, including certain changes in the financial covenants in the documents, are intended to continue to provide the company with access to the capital resources needed to support its business operations and ongoing restructuring and repositioning initiatives," commented Larry A. Liebenow, Quaker's President and CEO. Quaker also announced the retention of Alvarez & Marsal Securities, LLC (A&M), a part of Alvarez & Marsal, LLC, a New York-based global professional services firm, to advise the company in connection with a proposed refinancing, the proceeds of which would be used to provide the company with additional working capital and to repay all or a portion of the company's existing indebtedness under its senior secured credit facility. "We remain grateful for the ongoing support of our workforce, our suppliers and our customers, as we continue to pursue our business development objectives," Mr. Liebenow added. Quaker officials noted that the company would be making a Form 8-K filing with the U.S. Securities and Exchange Commission later this week with respect to this most recent amendment to its loan documents and its retention of A&M. Quaker Fabric Corporation is a leading manufacturer of woven upholstery fabrics for furniture markets in the United States and abroad, and the largest producer of Jacquard upholstery fabric in the world. THIS PRESS RELEASE CONTAINS "FORWARD LOOKING STATEMENTS," AS THAT TERM IS DEFINED IN THE FEDERAL SECURITIES LAWS. THE READER IS CAUTIONED THAT SUCH STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND THAT, AS A RESULT OF VARIOUS FACTORS, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED. FOR A FURTHER DISCUSSION OF THESE FACTORS, SEE "RISK FACTORS" IN THE COMPANY'S 2005 FORM 10-K AND FIRST QUARTER 2006 FORM 10-Q FILINGS WITH THE SEC. -----END PRIVACY-ENHANCED MESSAGE-----