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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
July 3, 2007
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 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
To the extent required by Item 2.04 of Form 8-K, the information contained or
incorporated in Item 8.01 of this report is incorporated by reference in this
Item 2.04.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On July 2, 2007, the Company issued a press release to announce "that it likely
will commence an orderly liquidation of its business and a sale of its assets."
The ultimate costs associated with any such liquidation have not been
determined. The Company anticipates that the process of quantifying these
charges will continue over a period of the next several weeks.
At this time, the Company is unable in good faith to make a determination of an
estimate or range of estimates required by paragraphs (b), (c) and (d) of Item
2.05 of Form 8-K with respect to any such liquidiation activities. As permitted
by Item 2.05 of Form 8-K, the Company will file an amendment to this report
under Item 2.05 within four business days after the Company's determination of
such estimates or range of estimates.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
On July 3, 2007, the employment relationships of the following officers of the
Company were terminated: Michael E. Costa, the Company's principal accounting
officer; James A. Dulude, the Company's Vice President-Manufacturing; and Thomas
Muzekari, the Company's Vice President-Sales.
Item 8.01 Other Events
On November 9, 2006, Quaker Fabric Corporation of Fall River ("Quaker"), a
wholly-owned subsidiary of Quaker Fabric Corporation (the "Company"), entered
into a $25.0 million amended and restated senior secured revolving credit
agreement with Bank of America, N.A. (the "Bank") and two other lenders
(the"2006 Revolving Credit Agreement"). Quaker's obligations to the revolving
credit lenders are secured by all of the Company's assets, with a junior
interest in Quaker's real estate and machinery and equipment. Simultaneously,
Quaker entered into two (2) senior secured term loans in the aggregate amount of
$24.6 million, with GB Merchant Partners, LLC ("GB") as Agent for the term loan
lenders (the "2006 Term Loan Agreement"). The two term loans consist of a $12.5
million real estate loan and a $12.1 million equipment loan (the "Real Estate
Term Loan" and the "Equipment Term Loan", respectively, and together, the "Term
Loans"). The Term Loans are secured by all of the Company's assets, with a first
priority security interest in the Company's machinery and equipment and real
estate. The 2006 Revolving Credit Agreement and the 2006 Term Loan Agreement are
together referred to in this report as the "2006 Loan Agreements" and loans made
pursuant thereto are together referred to in this report as "Loans."
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On July 2, 2007, the Company issued a press release to announce that "the
Company has determined that it has not met the requirements for committed
borrowings under its existing lending facilities and, as a result, any advances
to the Company by its revolving lenders will only occur on a discretionary
basis." The Company further announced "that it likely will commence an orderly
liquidation of its business and a sale of its assets," and that "any such
winding up and liquidation would not generate sufficient funds to permit any
payment to holders of its common stock."
On July 3, 2007, both the Bank and GB provided the Company with "Notice of
Defaults and Exercise of Remedies; Reservation of Rights" letters (the "Default
Notices") alleging that events of default had arisen under the 2006 Loan
Agreements because various representations and warranties made by the Company
were not true at the time certain Loans were made and the aforementioned July 2,
2007 press release constituted an admission of the Company's inability to pay
its debts when due. The effect of these Default Notices includes an increase in
the interest rates on the 2006 Loan Agreements to the Default Rate, as defined
in the 2006 Loan Agreements, which is 2% higher than the otherwise applicable
interest rates in the Agreements. In addition, the Default Notice provided to
the Company by the Bank includes a provision notifying the Company that the
Lenders "have no further obligation or commitment to make additional Loans to
the Borrower (Quaker). The decision to make any further Loans will be made in
the sole discretion of the Lenders. The Administrative Agent expressly reserves
the full extent of its rights and remedies under the Credit Agreement (the 2006
Revolving Credit Agreement) and applicable law (the `Reservation of Rights
Clause')". The Default Notice from GB includes an identical Reservation of
Rights Clause. Each of the Bank and GB have the right to demand immediate
repayment of all amounts outstanding under the Loans upon the occurrence of the
events of default described in the Default Notices. To date, neither the Bank
nor GB has made any such demand.
As of July 3, 2007, there were $34.2 million of loans outstanding under the 2006
Loan Agreements, including $19.5 million of loans outstanding under the 2006
Term Loan and $14.7 million of loans outstanding under the 2006 Revolving Credit
Agreement, including approximately $4.0 million of letters of credit
outstanding.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
99.1 Registrant's Press Release dated July 2, 2007
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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: July 10, 2007 By: /s/ Paul J. Kelly
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Paul J. Kelly
Vice President - Finance and Treasurer
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EXHIBIT INDEX
99.1 Registrant's Press Release dated July 2, 2007
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