THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
PRUCO LIFE INSURANCE COMPANY
as of February 28, 2005
Quaker Fabric Corporation of Fall River
000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxx
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.
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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:
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Vice President
PRUCO LIFE INSURANCE COMPANY
By:
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Vice President
QUAKER FABRIC CORPORATION OF FALL RIVER
By:
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Title:
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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:
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Name:
Title:
