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EXHIBIT 10.33
March 20, 2006
Xx. Xxxxx Xxxxxxxx
President and Chief Executive Officer
Quaker Fabric Corporation
000 Xxxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Dear Xxxxx:
This letter confirms and sets forth the terms and conditions of the
engagement between Xxxxxxx & Marsal, LLC ("A&M") and Quaker Fabric Corporation
(the "Company"), including the scope of the services to be performed and the
basis of compensation for those services. Upon execution of this letter by each
of the parties below and receipt of the retainer described below, this letter
will constitute an agreement between the Company and A&M.
1. Description of Services
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(a) A&M shall provide consulting services to the Company in
connection with the Company's evaluation and implementation of
strategic and tactical alternatives for the restructuring
process. It is anticipated that A&M's activities shall include
(but not be limited to) the following:
(i) assistance in the preparation of a rolling 13-week cash
flow receipts and disbursement forecast and
actual-to-forecast variance reports;
(ii) assistance in preparation and implementation of revised
strategic, financial and operating plans, including
assistance in:
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- identification and implementation of cost reductions;
- identification and implementation of operations
improvements;
- identification and implementation of improved working
capital management;
- identification and implementation of the sale or other
disposition of assets; and
- assessment of organizational and operational structure
of the Company and evaluation and implementation of
potential changes;
(iii) analysis of strategic alternatives, including assistance in
evaluating raising of debt and/or equity financing;
(iv) assistance in preparation of reports, communication and
meeting with, and negotiation with the Company's lenders
and other stakeholders and their advisors; and
(v) other activities as are approved by you or the Board of
Directors and agreed to by A&M.
You understand that the services to be rendered by A&M may
include the preparation of recommendations, projections and other
forward-looking statements, and that numerous factors can affect
the actual results of the Company's operations, which may
materially and adversely differ from those projections. In
addition, A&M will be relying on information provided by the
Company in the preparation of those recommendations, projections
and other forward-looking statements. Further, A&M assumes no
responsibility for the selection, approval, or implementation of
any actions which it assists the Company in formulating.
In rendering its services to the Company, A&M will report
directly to the Chief Executive Officer and the Board of
Directors of the Company, and will make recommendations to and
consult with such senior officers as they direct.
(b) The engagement will be staffed as follows:
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Xxxxxx Xxxx, a Managing Directors of A&M, will be responsible for
the overall engagement. Xxxxxx Xxxxxxxxx, a Managing Directors of
A&M, will be responsible for the financing and sale services.
Xxxxxx and Xxxxxx xxxx be assisted by Xxxxxx Xxxxxxx, a Senior
Director, and by other A&M personnel as required by the
engagement. A&M personnel providing services to the Company may
also work with other A&M clients in conjunction with unrelated
matters.
2. Compensation
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(a) A&M will receive fees based on the following hourly rates:
Xxxxxx Xxxx $550
Xxxxxx Xxxxxxxxx $550
Xxxxxx Xxxxxxx $425
Associate/Analyst $250-300
(b) In addition, A&M will be reimbursed for its reasonable
out-of-pocket expenses incurred in connection with this
assignment, such as travel, lodging, duplicating, computer
research, messenger and telephone charges. In addition, A&M shall
be reimbursed for the reasonable fees and expenses of its counsel
incurred in connection with the enforcement of this Agreement.
All fees and expenses will be billed and payable on a monthly
basis or, at A&M's discretion, more frequently.
(c) The Company shall promptly remit to A&M a retainer in the amount
of $50,000, which shall be credited against any amounts due at
the termination of this engagement and returned upon the
satisfaction of all obligations hereunder.
3. Term
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The engagement will commence as of the date hereof and may be
terminated by either party without cause by giving 20 days' written
notice to the other party. In the event of any such termination, any
fees and expenses due to A&M shall be remitted promptly (including
fees and expenses that accrued prior to but were invoiced subsequent
to such termination) and all A&M work product including, but not
limited to reports, analyses, spreadsheets, documents and other such
materials prepared by A&M in connection with this engagement shall be
turned over to the Company.
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4. Relationship of the Parties
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The parties intend that an independent contractor relationship will be
created by this engagement letter. Neither A&M nor any of its
personnel or subcontractors is to be considered an employee or agent
of the Company and the personnel and subcontractors of A&M are not
entitled to any of the benefits that the Company provides for the
Company employees. The Company acknowledges that A&M's engagement
shall not constitute an audit, review or compilation, or any other
type of financial statement reporting engagement that is subject to
the rules of the AICPA, SEC or other state or national professional or
regulatory body.
5. No Third Party Beneficiary
--------------------------
The Company acknowledges that all advice (written or oral) given by
A&M to the Company in connection with this engagement is intended
solely for the benefit and use of the Company (limited to its Board of
Directors and management) in considering the matters to which this
engagement relates. The Company agrees that no such advice shall be
used for any other purpose or reproduced, disseminated, quoted or
referred to at any time in any manner or for any purpose other than
accomplishing the tasks referred to herein without A&M's prior
approval (which shall not be unreasonably withheld), except as
required by law. Notwithstanding the foregoing, the parties hereto
hereby agree that the advice, analysis, opinions, reports and other
work product of A&M will be shared with the Company's senior lenders
in accordance with the terms of the Company's senior loan arrangements
(including, without limitation, the confidentiality provisions
thereof), provided, however that prior to the receipt of such
information such senior lenders shall be informed, that their use of
such advice, analysis, opinions, reports and other work product of A&M
shall be without representation or warranty by A&M.
6. Conflicts
---------
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A&M is not currently aware of any relationship that would create a
conflict of interest with the Company or those parties-in-interest of
which you have made us aware. Because A&M is a consulting firm that
serves clients on a national basis in numerous cases, both in and out
of court, it is possible that A&M may have rendered services to or
have business associations with other entities or people which had or
have or may have relationships with the Company, including creditors
of the Company.
7. Confidentiality / Non-Solicitation
----------------------------------
A&M shall keep as confidential all non-public information received
from the Company in conjunction with this engagement, except: (i) as
requested by the Company or its legal counsel, (ii) as required by
legal proceedings, or (iii) as may be provided to the Company's senior
lenders in accordance with Paragraph 5 hereof. All obligations as to
non-disclosure shall cease as to any part of such information to the
extent that such information is or becomes public other than as a
result of a breach of this provision. The Company, on behalf of itself
and its affiliates and any person which may acquire all or
substantially all of its assets agrees that, until one (1) year
subsequent to the termination of this engagement, it will not solicit,
recruit, hire or otherwise engage any employee of A&M who worked on
this engagement while employed by A&M ("Solicited Person"); provided
that this restriction shall not apply with respect to any general
solicitation for new employees which is not targeted at the Solicited
Person. Should the Company or any of its affiliates or any person who
acquires all or substantially all of its assets extend an offer of
employment to or otherwise engage any Solicited Person and should such
offer be accepted, A&M shall be entitled to a fee from the party
extending such offer equal to the Solicited Person's hourly client
billing rate at the time of the offer multiplied by 2,000 hours. The
fee shall be payable at the time of the Solicited Person's acceptance
of employment or engagement.
8. Indemnification
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The attached indemnification agreement is incorporated herein by
reference and shall be executed upon the acceptance of this Agreement.
Termination of this engagement shall not affect these indemnification
provisions, which shall remain in full force and effect.
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9. Miscellaneous
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This engagement letter (together with the attached indemnity
provisions): (a) shall be governed and construed in accordance with
the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflict of laws
thereof; (b) incorporates the entire understanding of the parties with
respect to the subject matter hereof; and (c) may not be amended or
modified except in writing executed by both parties hereto. The
Company and A&M agree to waive trial by jury in any action, proceeding
or counterclaim brought by or on behalf of the parties hereto with
respect to any matter relating to or arising out of the engagement or
the performance or non-performance of A&M hereunder
If the foregoing is acceptable to you, kindly sign the enclosed copy
to acknowledge your agreement with its terms.
Very truly yours,
Xxxxxxx & Marsal, LLC
By: ____________________
Xxxxxx X. Xxxx
Title: Managing Director
Accepted and agreed:
Quaker Fabric Corporation
By: _____________________
Xxxxx X. Xxxxxxxx
President & CEO
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INDEMNIFICATION AGREEMENT
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This indemnity is made part of an agreement, dated January 26, 2006 (which
together with any renewals, modifications or extensions thereof, is herein
referred to as the "Agreement") by and between Xxxxxxx & Marsal, LLC ("A&M") and
Quaker Fabric Corporation (the "Company"), for services to be rendered to the
Company by A&M.
A. The Company agrees to indemnify and hold harmless each of A&M, its affiliates
and their respective shareholders, members, managers, employees, agents,
representatives and subcontractors (each, an "Indemnified Party" and
collectively, the "Indemnified Parties") against any and all losses, claims,
damages, liabilities, penalties, obligations and expenses, including the costs
for counsel or others (including employees of A&M, based on their then current
hourly billing rates) in investigating, preparing or defending any action or
claim, whether or not in connection with litigation in which any Indemnified
Party is a party, or enforcing the Agreement (including these indemnity
provisions), as and when incurred, caused by, relating to, based upon or arising
out of (directly or indirectly) the Indemnified Parties' acceptance of or the
performance or nonperformance of their obligations under the Agreement;
provided, however, such indemnity shall not apply to any such loss, claim,
damage, liability or expense to the extent it is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from such Indemnified Party's gross negligence, material
breach of contract resulting in damages in excess of $300,000 or willful
misconduct. The Company also agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement of A&M, except to the extent
that any such liability for losses, claims, damages, liabilities or expenses are
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) to have resulted primarily and directly from such Indemnified
Party's gross negligence, material breach of contract resulting in damages in
excess of $300,000 or willful misconduct. The Company further agrees that it
will not, without the prior consent of an Indemnified Party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which such Indemnified Party
seeks indemnification hereunder (whether or not such Indemnified Party is an
actual party to such claim, action, suit or proceedings) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liabilities arising out of such claim, action, suit or
proceeding.
B. These indemnification provisions shall be in addition to any liability which
the Company may otherwise have to the Indemnified Parties. In the event that, at
any time whether before or after termination of the engagement or the Agreement,
as a result of or in connection with the Agreement or A&M's and its personnel's
role under the Agreement, A&M or any Indemnified Party is required to produce
any of its personnel (including former employees) or for examination, deposition
or other written, recorded or oral presentation, or A&M or any of its personnel
(including former employees) or any other Indemnified Party is required to
produce or otherwise review, compile, submit, duplicate, search for, organize or
report on any material within such Indemnified Party's possession or control
pursuant to a subpoena or other legal (including administrative) process, the
Company will reimburse the Indemnified Party for its out of pocket expenses,
including the reasonable fees and expenses of its counsel, and will compensate
the Indemnified Party for the time expended by its personnel based on such
personnel's then current hourly rate; provided, however, that this Clause B
shall not apply to any proceeding or other legal action between A&M and the
Company.
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C. If any action, proceeding or investigation is commenced to which any
Indemnified Party proposes to demand indemnification hereunder, such Indemnified
Party will notify the Company with reasonable promptness; provided, however,
that any failure by such Indemnified Party to notify the Company will not
relieve the Company from its obligations hereunder, except to the extent that
such failure shall have actually prejudiced the defense of such action or
increased the cost of defending such action. The Company shall promptly pay
expenses reasonably incurred by any Indemnified Party in defending,
participating in, or settling any action, proceeding or investigation in which
such Indemnified Party is a party or is threatened to be made a party or
otherwise is participating in by reason of the engagement under the Agreement
and to which it is entitled to indemnification under Clause A, upon submission
of invoices therefor, whether in advance of the final disposition of such
action, proceeding, or investigation or otherwise; provided, however, that this
Clause C shall not apply to any proceeding or other legal action between A&M and
the Company. Each Indemnified Party hereby undertakes, and the Company hereby
accepts its undertaking, to repay any and all such amounts so advanced if it
shall ultimately be determined that such Indemnified Party is not entitled to be
indemnified therefor. If any such action, proceeding or investigation in which
an Indemnified Party is a party is also against the Company, the Company may, in
lieu of advancing the expenses of separate counsel for such Indemnified Party,
provide such Indemnified Party with legal representation by the same counsel who
represents the Company, provided such counsel is reasonably satisfactory to such
Indemnified Party, at no cost to such Indemnified Party; provided, however, that
if such counsel or counsel to the Indemnified Party shall determine that due to
the existence of actual or potential conflicts of interest between such
Indemnified Party and the Company such counsel is unable to represent both the
Indemnified Party and the Company, then the Indemnified Party shall be entitled
to use separate counsel of its own choice, and the Company shall promptly
advance its reasonable expenses of such separate counsel upon submission of
invoices therefor. Nothing herein shall prevent an Indemnified Party from using
separate counsel of its own choice at its own expense. The Company will be
liable for any settlement of any claim against the Indemnified Party for which
the Indemnified Party is entitled to indemnification hereunder made with the
Company's written consent, which consent will not be unreasonably withheld.
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D. In order to provide for just and equitable contribution if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification, then the
relative fault of the Company, on the one hand, and the Indemnified Parties, on
the other hand, in connection with the statements, acts or omissions which
resulted in the losses, claims, damages, liabilities and costs giving rise to
the indemnification claim and other relevant equitable considerations shall be
considered and further provided that in no event will the Indemnified Parties'
aggregate contribution for all loses, claims, damages, liabilities and expenses
with respect to which contribution is available hereunder exceed $450,000. No
person found liable for a fraudulent misrepresentation shall be entitled to
contribution hereunder from any person who is not also found liable for such
fraudulent misrepresentation.
E. The rights provided herein shall not be deemed exclusive of any other rights
to which the Indemnified Parties may be entitled under the certificate of
incorporation or bylaws of the Company, any other agreements, any vote of
stockholders or disinterested directors of the Company, any applicable law or
otherwise.
QUAKER FABRIC CORPORATION XXXXXXX & MARSAL, LLC
By: ____________________ By: ____________________
Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxx
President & Chief Executive Managing Director
Officer
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