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EXHIBIT 10.32
WAIVER AND AMENDMENT NO. 4
WAIVER AND AMENDMENT NO. 4 dated as of March 22, 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, (a) an Event of Default has occurred and is continuing under the
Credit Agreement as a result the Borrower's failure to comply with the financial
covenant contained in Section 9.1 of the Credit Agreement as of the fiscal month
ended March 4, 2006 and (b) the Borrower has advised the Lenders that an Event
of Default will occur as a result of the Borrower's failure to deliver audited
financial statements without qualification or expression of concern as to
uncertainty of the Parent to continue as a going concern within ninety (90) days
after the end of the 2005 Fiscal Year (the Events of Default referred to in
clauses (a) and (b) above are collectively referred to herein as the "Specified
Defaults").
WHEREAS, on March 15, 2006, the Borrower delivered to the Administrative
Agent an irrevocable notice (the "Commitment Reduction Notice") of its election
to permanently reduce the Total Commitment to $30,000,000 pursuant to the
provisions of Section 2.3 of the Credit Agreement;
WHEREAS, the Loan Parties have requested that the Administrative Agent and
the Lenders waive the Specified Defaults and amend certain of the terms and
provisions of the Credit Agreement, as specifically set forth in this Amendment.
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. Waiver. Subject to the satisfaction of the conditions specified
in Section 4 herein, the Administrative Agent and the Lenders hereby permanently
waive the Specified Defaults.
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Section 3. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 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 "Availability Reserve" contained therein and substituting in lieu
thereof the following new definition:
"Availability Reserve. means, (a) $8,500,000 during the period
commencing on March 22, 2006 and ending on May 1, 2006 and (b) $7,500,000
at all times thereafter."
(b) Section 2.11.2 of the Credit Agreement is hereby amended by deleting
subsection (a) contained therein and substituting in lieu thereof the text
"[intentionally omitted]".
(c) Section 2.11.2 of the Credit Agreement is hereby amended by deleting
the text contained in the first two lines of subsection (b) thereof and
substituting in lieu thereof the following:
"Prior to the occurrence of an Event of Default of which the account
officers of the Administrative Agent active on the Borrower's account have
knowledge, all funds transferred to the Concentration Account and for which
the Borrower has received credits shall be applied to the Obligations of
the Borrowers as follows:"
(d) Section 3.2.1(a) of the Credit Agreement is hereby amended by deleting
the chart contained therein and substituting in lieu thereof the following new
chart:
----------------------------------------------------------
Term Loan Installment Payment Term Loan Installment
Date
----------------------------------------------------------
November 1, 2005 $1,000,000
----------------------------------------------------------
February 1, 2006 $1,000,000
----------------------------------------------------------
May 1, 2006 $1,000,000
----------------------------------------------------------
June 1, 2006 $333,333
----------------------------------------------------------
July 1, 2006 $333,333
----------------------------------------------------------
August 1, 2006 $333,333
----------------------------------------------------------
September 1, 2006 $333,333
----------------------------------------------------------
October 1, 2006 $333,333
----------------------------------------------------------
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November 1, 2006 $333,333
----------------------------------------------------------
December 1, 2006 $333,333
----------------------------------------------------------
January 1, 2007 $333,333
----------------------------------------------------------
February 1, 2007 $333,333
----------------------------------------------------------
March 1, 2007 $333,333
----------------------------------------------------------
April 1, 2007 $333,333
----------------------------------------------------------
May 1, 2007 $333,333
----------------------------------------------------------
June 1, 2007 $333,333
----------------------------------------------------------
July 1, 2007 $333,333
----------------------------------------------------------
August 1, 2007 $333,333
----------------------------------------------------------
September 1, 2007 $333,333
----------------------------------------------------------
October 1, 2007 $333,333
----------------------------------------------------------
November 1, 2007 $333,333
----------------------------------------------------------
December 1, 2007 $333,333
----------------------------------------------------------
January 1, 2008 $333,333
----------------------------------------------------------
February 1, 2008 $333,333
----------------------------------------------------------
March 1, 2008 $333,333
----------------------------------------------------------
April 1, 2008 $333,333
----------------------------------------------------------
May 1, 2008 $333,333
----------------------------------------------------------
June 1, 2008 $375,000
----------------------------------------------------------
July 1, 2008 $375,000
----------------------------------------------------------
August 1, 2008 $375,000
----------------------------------------------------------
September 1, 2008 $375,000
----------------------------------------------------------
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October 1, 2008 $375,000
----------------------------------------------------------
November 1, 2008 $375,000
----------------------------------------------------------
December 1, 2008 $375,000
----------------------------------------------------------
January 1, 2009 $375,000
----------------------------------------------------------
February 1, 2009 $375,000
----------------------------------------------------------
March 1, 2009 $375,000
----------------------------------------------------------
April 1, 2009 $375,000
----------------------------------------------------------
May 1, 2009 $375,000
----------------------------------------------------------
June 1, 2009 $375,000
----------------------------------------------------------
July 1, 2009 $375,000
----------------------------------------------------------
August 1, 2009 $375,000
----------------------------------------------------------
September 1, 2009 $375,000
----------------------------------------------------------
October 1, 2009 $375,000
----------------------------------------------------------
November 1, 2009 $375,000
----------------------------------------------------------
December 1, 2009 $375,000
----------------------------------------------------------
January 1, 2010 $375,000
----------------------------------------------------------
February 1, 2010 $375,000
----------------------------------------------------------
March 1, 2010 $375,000
----------------------------------------------------------
April 1, 2010 $375,000
----------------------------------------------------------
Maturity Date $375,008 or the
remaining outstanding
amount of the
Term Loan
----------------------------------------------------------
(e) Section 3.2.1(d) of the Credit Agreement is hereby amended by deleting
the text "to be applied against the remaining scheduled installments of
principal of the Term Loan on a pro rata basis" occurring in clauses (i) and
(ii) of such Section, and substituting in lieu thereof the following: "to be
applied against the remaining scheduled installments of principal of the Term
Loan in the inverse order of maturity".
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(f) Section 3.2.2 of the Credit Agreement is hereby amended by deleting the
text "shall be applied pro rata to the remaining scheduled installments of
principal of the Term Loan on a pro rata basis" occurring therein, and
substituting in lieu thereof the following: "shall be applied against the
remaining scheduled installments of principal of the Term Loan in the inverse
order of maturity".
(g) Section 7.4 is hereby further amended by deleting the text "and"
contained immediately after subsection (h) thereof, deleting the period
contained at the end of subsection (i) thereof and substituting in lieu thereof
the text "; and" and by inserting the following new subsections:
"(j) simultaneously with the delivery of the financial statements
referred to in subsection (c) above, a Compliance Certificate setting forth
in reasonable detail computations evidencing compliance with the financial
covenant contained in ss.9.1;
(k) as soon as available, but in any event not later than May 12,
2006, (A) a revised 2006 business plan for the Parent, prepared by the
Parent with the assistance of the Additional Financial Consultant (as
defined in Section 7.21) and (B) an initial assessment and action item
report, prepared by the Additional Financial Consultant, in form
satisfactory to the Administrative Agent, which outlines the Additional
Financial Consultant's assessment of the Loan Parties' business prospects
and sets forth the Additional Financial Consultant's initial
recommendations as to performance and operating efficiency initiatives as
well as restructuring plans and strategic alternatives for the Loan
Parties; and
(l) weekly, commencing not later than May 12, 2006, a 13-week forecast
of cash flows, in form satisfactory to the Administrative Agent. Without
limiting the generality of the foregoing, such forecast shall detail, on a
weekly basis, the projected outstanding amount of Revolving Loans and the
Maximum Drawing Amount for all Letters of Credit for the period, such
forecast to be in form and substance satisfactory to the Administrative
Agent."
(h) Section 7.17.1(b) of the Credit Agreement is hereby by amended by
deleting the comma contained immediately prior to clause (v) contained therein
and substituting in lieu thereof a period, by deleting clauses (v) and (vi)
contained therein in their entirety and by inserting the following new sentence
of the end thereof:
"The Borrower hereby agrees that all amounts received by the
Administrative Agent in the Concentration Account will be the sole and
exclusive property of the Administrative Agent, for the accounts of the
applicable Lenders and the Administrative Agent, to be applied in
accordance with ss.2.11 or ss.2.12 as applicable."
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(i) Section 7 of the Credit Agreement is hereby amended by adding the
following new section immediately after Section 7.20 contained therein:
7.21. Additional Financial Consultant. Not later than April 3, 2006,
the Parent shall engage an experienced financial consultant acceptable to
the Administrative Agent (the "Additional Financial Consultant") to work
collaboratively with the senior management team of the Parent, the board of
directors of the Parent and the Parent's professionals to assist the Parent
in evaluating and implementing strategic and tactical options for the
restructuring process, including without limitation, to (i) assist the
Parent in implementing a rolling 13-week cash receipts and disbursements
forecast, together with an actual-to-forecast variance reporting process,
to provide on-time information related to the Parent's liquidity consistent
with Section 7.4(l), (ii) assist the Parent and its professionals in the
ongoing development of overall strategic and business plans including
analyzing alternative strategic plans, including without limitation (A)
turnaround, restructuring options and alternative transactions, (B)
potential modification of the Credit Agreement or refinancing or (C) any
combination of the foregoing, (iii) assist the Parent and its professionals
with the analysis and, if applicable, negotiation of the divestiture of
assets in conjunction with considering other strategic alternatives, (iv)
assist management with assessing organizational and operational structure
of the Parent and work with the Parent regarding potential changes and
efficiencies, (v) meet with the Administrative Agent and the Lenders and
potential refinancing lenders and their respective advisors with respect to
the Parent's financial and operational matters, and discuss the matters set
forth in this ss.7.21 with the Administrative Agent and the Lenders;
provided that the Parent shall be given prior notice of any meetings
wherein a substantive issue will be discussed, and may participate in such
meetings, (vi) assist the Parent in analyzing performance improvement and
cash enhancement opportunities, and (vii) assist with such other matters as
may be requested by the Administrative Agent that fall within the
Additional Financial Consultant's expertise and that are mutually agreeable
to the Parent, the Administrative Agent and the Additional Financial
Consultant, all upon terms and a timetable reasonably acceptable to the
Administrative Agent. The scope and other terms of engagement shall be
reasonably acceptable to the Administrative Agent.
(j) 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:
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----------------------------------------------------
Month Minimum Consolidated EBITDA
----------------------------------------------------
April of 2006 $1,475,000
----------------------------------------------------
May of 2006 $1,975,000
----------------------------------------------------
(k) Notwithstanding anything to the contrary contained in the Credit
Agreement, from and after the date hereof, the Borrower shall not be
entitled to borrow, request, convert or continue any LIBOR Rate Loans. Any
LIBOR Rate Loans outstanding on the date hereof shall continue as such
until the end of the current Interest Period with respect thereto, at which
time such LIBOR Rate Loans shall be converted to Base Rate Loans.
Section 4. Conditions Precedent. The Administrative Agent, the Lenders, and
each of the Loan Parties agree that this Amendment shall become effective as of
the date hereof 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) The Administrative Agent shall have received payment from the Borrower
for the pro rata account of each Lender executing this Amendment an amendment
fee in the amount of $125,000.
(c) 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;
(d) As of the date hereof, after giving effect to this Amendment, there
shall be no Default or Event of Default existing;
(e) The Administrative Agent shall have received the Commitment Reduction
Notice.
(f) 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.
Section 5. 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
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;
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(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 6. Affirmation and Acknowledgment.
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(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.
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Section 7. 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 8. 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. Amounts payable pursuant to this Section 8 shall be subject to
the provisions of Section 15 of the Credit Agreement, as fully as if set forth
therein.
Section 9. Miscellaneous.
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(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.
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
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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:
2