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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:
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"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:
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Period Availability Reserve
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May 6, 2006 through May 25, 2006 $7,500,000
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May 26, 2006 through June 24, 2006 $6,250,000
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June 25, 2006 through July 1, 2006 $4,250,000
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July 2, 2006 through July 8, 2006 $3,250,000
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July 9, 2006 through August 19, 2006 $2,250,000
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August 20, 2006 through September 17, 2006 $3,500,000
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September 18, 2006 through December 15, 2006 $4,000,000
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December 16, 2006 and thereafter $5,000,000
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(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."
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"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."
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(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:
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Month Minimum Consolidated EBITDA
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April of 2006 ($1,275,000)
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May of 2006 ($750,000)
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June of 2006 ($55,000)
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July of 2006 ($2,100,000)
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August of 2006 ($1,750,000)
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September of 2006 $950,000
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October of 2006 $1,300,000
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November of 2006 $1,550,000
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December of 2006 $1,200,000
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January of 2007 $1,200,000
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February of 2007 $1,200,000
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(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.
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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
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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.
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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:
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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:
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Name: Matthew T. O'Keefe
Title: Senior Vice President
WELLS FARGO FOOTHILL, LLC
By:
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Name:
Title:
MERRILL LYNCH CAPITAL, A DIVISION OF
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By:
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Name:
Title:
Schedule 8.5.2
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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