GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of October 10, 1997 (the "Guaranty
Agreement"), is made by QUAKER FABRIC CORPORATION, a Delaware corporation (the
"Guarantor") in favor of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey mutual insurance company, ("Prudential") and Pruco Life Insurance
Company, an Arizona corporation (herein referred to individually as the
"Purchaser" and collectively as the "Purchasers"). Terms not defined herein
shall have the meanings specified in the Note Agreement (as defined below).
WHEREAS, each of the Purchasers has severally agreed to purchase those certain
7.09% Senior Notes due October 10, 2005, in the aggregate principal amount of
$15,000,000 and 7.18% Senior Notes due October 10, 2007, in the aggregate
principal amount of $30,000,000 (collectively, the "Notes") to be issued by
Quaker Fabric Corporation of Fall River (the "Company") pursuant to that certain
Note Purchase Agreement dated as of October 10, 1997, by and between each of the
Purchasers and the Company (the "Note Agreement"); and
WHEREAS, it is a condition to the agreement of the Purchasers to purchase the
Notes that this Guaranty Agreement shall have been executed and delivered by the
Guarantor and shall be in full force and effect;
NOW THEREFORE, in order to induce, and in consideration of, the execution and
delivery of the Note Agreement and the purchase of the Notes by each OF the
Purchasers, the Guarantor hereby covenants, and agrees with, and represents and
warrants to each of the Purchasers as follows:
1. THE GUARANTY. The Guarantor hereby irrevocably and unconditionally
guarantees to each holder from time to time of any of the Notes, the due
and punctual payment in full of (i) the principal of, the Yield-Maintenance
Amount, if any, and interest on, and any other amounts due under, the Notes
when and as the same shall become due and payable (whether at stated
maturity or by required or optional prepayment or by acceleration or
otherwise) and (ii) any other sums which may become due under the terms and
provisions of the Note Agreement and the Notes (all such obligations
described in clauses (i) and (ii) above are herein called the "Guaranteed
Obligations"). The guaranty in the preceding sentence is an absolute,
present, and continuing guaranty of payment and not of collectibility and
is in no way conditional or contingent upon any attempt to collect from the
Company or upon any other action, occurrence or circumstance whatsoever. In
the event that the Company shall fail so to pay any of such! Guaranteed
Obligations, the Guarantor agrees to pay the same when due to the holders
of the Notes entitled thereto, without demand, presentment, protest or
notice of any kind, in lawful money of the United States of America, at the
place for payment specified in the Notes and the Note Agreement. Each
default in payment of principal of, Yield-Maintenance Amount, if any, or
interest
on any Note shall give rise to a separate cause of action hereunder and
separate suits may be brought hereunder as each cause of action arises. The
Guarantor hereby agrees that the Notes issued in connection with the Note
Agreement may make reference to this guaranty.
The Guarantor hereby agrees to pay and to indemnify and save the holders of
the Notes harmless from and against any damage, loss, cost or expense
(including attorneys' fees) which such holder may incur or be subject to as
a consequence, direct or indirect, of (i) any breach by the Guarantor or by
the Company of any warranty, covenant, term or condition in, or the
occurrence of any default under, this Guaranty Agreement, the Notes or the
Note Agreement, together with all expenses resulting from the compromise or
defense of any claims or liabilities arising as a result of any such breach
or default, and (ii) any legal action commenced to challenge the validity
of this Guaranty Agreement, the Notes or the Note Agreement.
2. OBLIGATIONS ABSOLUTE. The obligations of the Guarantor hereunder shall be
primary, absolute, irrevocable and unconditional, irrespective of the
validity, regularity or enforceability of the Notes or of the Note
Agreement, shall not be subject to any counterclaim, setoff, deduction or
defense based upon any claim the Guarantor may have against the Company or
any holder of the Notes or otherwise, and shall remain in full force and
effect without regard to, and shall not be released, discharged or in any
way affected by, any circumstance or condition whatsoever (whether or not
the Guarantor shall have any knowledge or notice thereof), including,
without limitation: (a) any amendment, modification of or supplement to the
Note Agreement, the Notes or any other instrument referred to therein
(except that the obligations of the Guarantor hereunder shall apply to the
Note. Agreement, the Notes or such other instruments as so amended,
modified or supplemented) or any assignment or transfer of any thereof or
of any interest therein, or any furnishing, acceptance or release of any
security for the Notes, (b) any waiver, consent, extension, indulgence or
other action or inaction under or in respect of the Notes or in respect of
the Note Agreement; (c) any bankruptcy, insolvency, readjustment,
composition, liquidation or similar proceeding with respect to the Company
or its property; (d) any merger, amalgamation or consolidation of the
Guarantor or of the Company into or with any other corporation or any sale,
lease or transfer of any or all of the assets of the Guarantor or of the
Company to any person; (e) any failure on the part of the Company for any
reason to comply with or perform any of the terms of any other agreement
with the Guarantor, or (f) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. The
Guarantor covenants that its obligations hereunder will not be discharged
except by payment in full of all of the Guaranteed Obligations.
3. WAIVER. The Guarantor unconditionally waives to the fullest extent
permitted by law, (a) notice of acceptance hereof, of any action taken or
omitted in reliance hereon and of any defaults by the Company in the
payment of any amounts due
under the Notes or the Note Agreement, and of any of the matters referred
to in paragraph 2 hereof, (b) all notices which may be required by statute,
rule of law or otherwise to preserve any of the rights of each holder from
time to time of the Notes against the Guarantor, including, without
limitation, presentment to or demand for payment from the Company or the
Guarantor with respect to any Note, notice to the Company or to the
Guarantor of default or protest for nonpayment or dishonor and the filing
of claims with a court in the event of the bankruptcy of the Company, (b)
any right to the enforcement, assertion or exercise by any holder of the
Notes of any right, power or remedy conferred in this Guaranty Agreement,
the Note Agreement or the Notes, (d) any requirement or diligence on the
part of any holder of the Notes and (e) any other act or omission or thing
or delay to do any other act or thing which might in any manner or to any
extent vary the risk of the Guarantor or which might otherwise operate as a
discharge of the Guarantor.
4. OBLIGATIONS UNIMPAIRED. The Guarantor authorizes the holders of the Notes,
without notice or demand to the Guarantor and without affecting its
obligations hereunder, from time to time (a) to renew, compromise, extend,
accelerate or otherwise change the time for payment of, or otherwise change
the terms of, all or any part of the Notes, the Note Agreement or any other
instrument referred to therein, (b) to take and hold security for the
payment of the Notes, for the performance of this Guaranty Agreement or
otherwise for the indebtedness guaranteed hereby and to exchange, enforce,
waive and release any such security, (c) to apply any such security and to
direct the order or manner of sale thereof as the holders of the Notes in
their sole discretion may determine; (d) to obtain additional or substitute
endorsers or guarantors; (e) to exercise or refrain from exercising any
rights against the Company and others; and (f) to apply any sums, by
whomsoever paid or however realized, to the payment of the principal of,
Yield-Maintenance Amount, if any, and interest on the Notes and any other
Guaranteed Obligation hereunder. The Guarantor waives any right to require
the holders of the Notes to proceed against any additional or substitute
endorsers or guarantors or to pursue or exhaust any security provided by
the Company, the Guarantor or any other person or to pursue any other
remedy available to such holders.
5. SUBROGATION. The Guarantor will not exercise any rights which it may have
acquired by way of subrogation under this Guaranty Agreement, by any
payment made hereunder or otherwise, or accept any payment on account of
such rights, or any rights of reimbursement or indemnity or any rights or
recourse to any security for the Notes or this Guaranty Agreement unless
and until all of the obligations, undertakings or conditions to be
performed or observed by the Company pursuant to the Notes and the Note
Agreement at the time of the Guarantor's exercise of any such right shall
have been performed, observed or paid in full.
For a period of one year after the payment in full of the Guaranteed
Obligations, the Guarantor hereby waives (x) all rights of subrogation
which it may at any time otherwise have as a result of this Guaranty
Agreement (whether, statutory or otherwise) to the claims of the holders of
the Notes against the Company or any other guarantor of the Guaranteed
Obligations (each referred to herein as the "Other Party") and all
contractual, statutory or common law rights of reimbursement, contribution
or indemnity from any Other Party which it may, at any time otherwise have
as a result of this Guaranty Agreement; (y) any right to enforce any other
remedy which the holders of the Notes now have or may hereafter have
against any Other Party, any endorser or any other guarantor of all or any
part of the Guaranteed Obligations; and (z) all claims (as such term is
defined in the Bankruptcy Code) it may at any time otherwise have against
any Other Party arising from any transaction whatsoever, including without
limitation its right to assert or enforce any such claims.
6. REINSTATEMENT OF GUARANTY. This Guaranty Agreement shall continue to be
effective, or be reinstated, as the case may be, if and to the extent at
any time payment, in whole or in part, of any of the sums due to any holder
of the Notes for principal, Yield-Maintenance Amount, if any, or interest
on the Notes or any of the other Guaranteed Obligations is rescinded or
must otherwise be restored or returned by such holder upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company, or
upon or as a result of the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to the Company or any
substantial part of its property, or otherwise, all as though such payments
had not been made. If an event permitting the acceleration of the maturity
of the principal amount of the Notes shall at any time have occurred and be
continuing and such acceleration shall at such time be prevented or the
right of any holder of a Note to receive any payment under any Note shall
at such time be delayed or otherwise affected by reason of the pendency
against the Company of a case or proceeding under a bankruptcy or
insolvency law, the Guarantor agrees that, for purposes of this Guaranty
Agreement and its obligations hereunder, the maturity of such principal
amount shall be deemed to have been accelerated with the same effect as if
the holders of the Notes had accelerated the same in accordance with the
terms of the Note Agreement, and the Guarantor shall forthwith pay such
accelerated principal amount, accrued interest and Yield-Maintenance
Amount, if any, thereon and any other amounts guaranteed hereunder.
7. RANK OF GUARANTY. The Guarantor agrees that its obligations under this
Guaranty Agreement shall rank at least pari passu with all other unsecured
senior obligations of the Guarantor now or hereafter existing.
8. ADDITIONAL COVENANTS OF THE GUARANTOR.
(a) Maintenance of Corporate Existence, Etc. The Guarantor will at all
times do or cause to be done all things necessary to maintain and preserve
its
corporate existence and the corporate existence of each subsidiary of the
Guarantor, and maintain, preserve and renew its and their licenses, patents
and franchises material to the conduct of the business of the Guarantor and
such subsidiaries taken as a whole, provided that nothing contained in this
Section 8(a) shall (i) require the Guarantor or any such subsidiary (other
than the Company) to maintain, preserve or renew any license, patent or
franchise not necessary or desirable in the conduct of its business, (ii)
prohibit the Guarantor from terminating the corporate existence of a
subsidiary (other than the Company) if in the reasonable opinion of an
officer of the Guarantor such termination is in the best interests of the
Guarantor and is not disadvantageous to the holders of the Notes and such
termination has been approved by the Board of Directors of the Guarantor,
or (iii) prohibit a consolidation or merger by one subsidiary with, or a
conveyance, transfer or lease by one subsidiary to, the Guarantor or
another subsidiary.
(b) Merger, Consolidation. The Guarantor shall not consolidate with or
merge into any other person or convey, transfer or lease all or
substantially all of its assets as an entirety (whether by one transaction
or a series of related transactions) to any person, unless:
(i) the successor entity formed by such consolidation or into
which the Guarantor is merged or the successor entity which acquires
by conveyance, transfer or lease all or substantially all of its
assets as an entirety shall be a solvent entity organized and existing
under the laws of the United States of America, any State thereof or
the District of Columbia and a substantial part of such successor
entity's assets, properties and operations shall be within the United
States;
(ii) such successor entity (or entity to which all or
substantially all of the Guarantor's assets shall have been conveyed,
transferred or leased) shall expressly assume in writing by instrument
or instruments reasonably satisfactory to the Required Holders, in
scope, form and legal effect, the due and punctual payment,
performance and observance of all obligations of the Guarantor under
this Guaranty Agreement, with the same effect as if such entity had
originally been named Guarantor herein or had been a party hereto;
(iii) prior to and immediately after giving effect to such
transaction, no default or Event of Default shall exist under the
Notes or the Note Agreement, or under any other document or instrument
referred to therein; and
(iv) the Guarantor shall have delivered to each of the holders of
the Notes an officer's certificate stating that such consolidation,
merger, conveyance, transfer or lease and the assumption agreement
required by clause (ii) above comply with the provisions of this
Section 8(b).
Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of the Guarantor as an
entirety in accordance with this Section 8(b), the successor
corporation formed by such consolidation or into which the Guarantor
is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, the Guarantor under this Guaranty
Agreement, with the same effect as of such successor corporation had
been named as the Guarantor herein. No such conveyance, transfer or
lease of all or substantially all of the assets of the Guarantor (or
any successor corporation which shall theretofore have become such in
the manner prescribed in this Section 8(b)) from its obligations
hereunder unless and until the Guarantor (or such successor) shall
dissolve.
(c) The Guarantor's Interest in the Company. The Guarantor shall not
convey or transfer (whether by one transaction or a series of related
transactions) more than fifty percent of its equity ownership interest in
the Company to another person who is not an affiliate of the Guarantor
without first giving each holder of a Note an opinion of counsel,
reasonably satisfactory to the Required Holders, to the effect that such
conveyance or transfer shall not cause this Guaranty Agreement to cease to
be in full force and effect and valid and enforceable.
10. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor represents and warrants as follows:
(a) Incorporation, Good Standing and Location. The Guarantor is (i) a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, (ii) duly qualified and authorized to do
business and in good standing in every other jurisdiction where the nature
of its business requires such qualification and (iii) has all requisite
corporate power and authority, and all governmental licenses and permits,
to own and operate its properties and to carry on its businesses as
presently conducted. The Guarantor has the requisite corporate power to
enter into and perform its obligations under this Guaranty Agreement.
(b) Approval and Enforceability of Guaranty Agreement. The execution,
delivery and performance of this Guaranty Agreement have been duly
authorized by all necessary corporate action on the part of the Guarantor.
The Guaranty Agreement has been duty and validly executed and delivered and
constitutes the legal, valid and binding obligation of the Guarantor,
enforceable against it. In accordance with Us terms, subject to (I)
applicable bankruptcy, insolvency, moratorium, reorganization, receivership
and similar laws affecting the rights and remedies of creditors generally,
and (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
10. NOTICES. Unless otherwise specifically provided herein, all notices,
consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof shall be in
writing, and any such communication shall become effective when received,
addressed in the following manner: (a) if to the Guarantor, to 000 Xxxxxxxx
Xxxxxx, Xxxx Xxxxx, Xxxxxxxxxxxxx 00000, Attn: President, or (b) if to any
holder of a Note, to the respective addresses set forth in the Purchasers
Schedule to the Note Agreement; provided, however, that any such addressee
may change its address for communications by notice given as aforesaid to
the other parties hereto.
11. CONSTRUCTION. The section and subsection headings in this Guaranty
Agreement are for convenience of reference only and shall neither be deemed
to be a part of this Guaranty Agreement nor modify, define, expand or limit
any of the terms or provisions hereof. All references herein to numbered
sections, unless otherwise indicated, are to sections of this Guaranty
Agreement. Words and definitions in the singular shall be read and
construed as though in the plural and vice versa, and words in the
masculine, neuter or feminine gender shall be read and construed as though
in either of the other genders where the context so requires.
12. SEVERABILITY. If any provision of this Guaranty Agreement, or the
application thereof to any person or circumstances, shall, for any reason
or to any extent, be invalid or unenforceable, such invalidity or
unenforceability shall not in any manner affect or render invalid or
unenforceable the remainder of this Guaranty Agreement, and the application
of that provision to other persons or circumstances shall not be affected
but, rather, shall be enforced to the extent permitted by applicable law.
13. SUCCESSORS. The terms and provisions of this Guaranty Agreement shall be
binding upon and inure to the benefit of the Guarantor and the holders of
the Notes from time to time and their respective permitted successors,
transferees and assigns.
14. ENTIRE AGREEMENT; AMENDMENT. This Guaranty Agreement expresses the entire
understanding of the subject matter hereof; and all other understandings,
written or oral, are hereby merged herein and superseded. No amendment of
or supplement to this Guaranty Agreement, or waiver or modification of, or
consent under, the terms hereof shall be effective unless in writing and
signed by the party to be bound thereby.
15. TERM OF GUARANTY AGREEMENT. The Guaranty Agreement and all guarantees,
covenants and agreements of the Guarantor contained herein shall
continue in full force and effect and shall not be discharged until such
time as all of the Guaranteed Obligations shall be paid or otherwise
discharged in full.
16. SURVIVAL. All warranties, representations and covenants made by the
Guarantor herein or in any certificate or other instrument delivered by it
or on its behalf under this Guaranty Agreement shall be considered to have
been relied upon by the holders of the Notes and shall survive the
execution and delivery of this Guaranty Agreement, regardless of any
investigation made by the holder of the Notes or on their behalf.
17. FURTHER ASSURANCES. The Guarantor hereby agrees to execute and deliver all
such instruments and take all such action as the holders of the Notes may
from time to time reasonably request in order to effectuate fully the
purposes of this Guaranty Agreement.
18. GOVERNING LAW. This Guaranty Agreement has been executed and delivered in
the State of New York and shall be governed by, construed and enforced in
all respects in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely therein, without
regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty Agreement
to be duly executed and delivered as of the date and year first above
written.
QUAKER FABRIC CORPORATION
By /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: Vice President--Finance
