EXECUTION
VERSION
GUARANTY
GUARANTY , dated as of May 18, 2005, by QUAKER TEXTILE
CORPORATION , a Massachusetts corporation (“
Quaker Textile ”), QUAKER FABRIC MEXICO,
S.A. de C.V. (“ Quaker Mexico ”), a
Mexican corporation, and QUAKER FABRIC CORPORATION , a
Delaware corporation (the “ Parent ”, and
together with Quaker Textile and Quaker Mexico, the “
Guarantors ”), in favor of BANK OF AMERICA,
N.A., as administrative agent (hereinafter, the “
Administrative Agent ”) for itself and the
other lending institutions (hereinafter, collectively the “
Lenders ”) which are or may become parties to a
Revolving Credit and Term Loan Agreement of even date herewith (the
“ Credit Agreement ”), among Quaker
Fabric Corporation of Fall River (the “ Company
”), the Parent, the Lenders, the Administrative Agent, Bank
of America, N.A., as Issuing Bank, and Fleet National Bank, as Cash
Management Bank.
WHEREAS, the Company and the
Guarantors are members of a group of related corporations, the
success of any one of which is dependent in part on the success of
the other members of such group;
WHEREAS, each Guarantor expects to
receive substantial direct and indirect benefits from the
extensions of credit to the Company by the Lenders pursuant to the
Credit Agreement (which benefits are hereby
acknowledged);
WHEREAS, it is a condition precedent
to the Lenders’ making any loans or otherwise extending
credit to the Company under the Credit Agreement that the
Guarantors execute and deliver to the Administrative Agent, for the
benefit of the Lenders and the Administrative Agent, a guaranty
substantially in the form hereof; and
WHEREAS, each Guarantor wishes to
guaranty the Company’s obligations to the Lenders and the
Administrative Agent under or in respect of the Credit Agreement as
provided herein;
NOW, THEREFORE, each Guarantor
hereby agrees with the Lenders and the Administrative Agent as
follows:
1.
Definitions . The term “Obligations” and
all other capitalized terms used herein without definition shall
have the respective meanings provided therefor in the Credit
Agreement.
2. Guaranty of
Payment and Performance . Each Guarantor hereby jointly and
severally unconditionally guarantees to the Lenders and the
Administrative Agent the full and punctual payment when due
(whether at stated maturity, by required pre-payment, by
acceleration or otherwise), as well as the performance, of all of
the Obligations, including all such which would become due but for
the operation of the automatic stay pursuant to §362(a) of the
Federal Bankruptcy Code and the operation of §§502(b) and
506(b) of the Federal Bankruptcy Code. This Guaranty is an
absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of all of the Obligations and not
of their collectibility only and is in no way
conditioned
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upon any requirement that the
Administrative Agent or any Lender first attempt to collect any of
the Obligations from the Company or resort to any collateral
security or other means of obtaining payment. Should the Company
default in the payment or performance of any of the Obligations,
the obligations of the Guarantors hereunder with respect to such
Obligations in default shall, upon demand by the Administrative
Agent, become immediately due and payable to the Administrative
Agent, for the benefit of the Lenders and the Administrative Agent,
without demand or notice of any nature, all of which are expressly
waived by each Guarantor. Payments by the Guarantors hereunder may
be required by the Administrative Agent on any number of occasions.
All payments by each Guarantor hereunder shall be made to the
Administrative Agent, in the manner and at the place of payment
specified therefor in the Credit Agreement, for the account of the
Lenders and the Administrative Agent.
3.
Guarantor’s Agreement to
Pay Enforcement Costs, etc . Each Guarantor further jointly and severally
agrees, as the principal obligor and not as a guarantor only, to
pay to the Administrative Agent, on demand, all costs and expenses
(including court costs and legal expenses) incurred or expended by
the Administrative Agent or any Lender in connection with the
Obligations, this Guaranty and the enforcement thereof, together
with interest on amounts recoverable under this §3 from the
time when such amounts become due until payment, whether before or
after judgment, at the rate of interest for overdue principal set
forth in the Credit Agreement, provided that if such interest
exceeds the maximum amount permitted to be paid under applicable
law, then such interest shall be reduced to such maximum permitted
amount.
4.
Waivers by Guarantor;
Lenders’ Freedom to Act . Each Guarantor agrees that the Obligations
will be paid and performed strictly in accordance with their
respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction, and applicable to the
Company, affecting any of such terms or the rights of the
Administrative Agent or any Lender with respect thereto. Each
Guarantor waives promptness, diligence, presentment, demand,
protest, notice of acceptance, notice of any Obligations incurred
and all other notices of any kind, all defenses which may be
available by virtue of any valuation, stay, moratorium law or other
similar law now or hereafter in effect, any right to require the
marshalling of assets of the Company or any other entity or other
person primarily or secondarily liable with respect to any of the
Obligations, and all suretyship defenses generally. Without
limiting the generality of the foregoing, each Guarantor agrees to
the provisions of any instrument evidencing, securing or otherwise
executed in connection with any Obligation and agrees that the
obligations of each Guarantor hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (i) the
failure of the Administrative Agent or any Lender to assert any
claim or demand or to enforce any right or remedy against the
Company or any other entity or other person primarily or
secondarily liable with respect to any of the Obligations; (ii) any
extensions, compromise, refinancing, consolidation or renewals of
any Obligation; (iii) any change in the time, place or manner of
payment of any of the Obligations or any rescissions, waivers,
compromise, refinancing, consolidation or other amendments or
modifications of any of the terms or provisions of the Credit
Agreement, the Notes, the other Loan Documents or any other
agreement evidencing, securing or
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otherwise executed in connection
with any of the Obligations; (iv) the addition, substitution or
release of any entity or other person primarily or secondarily
liable for any Obligation; (v) the adequacy of any rights which the
Administrative Agent or any Lender may have against any collateral
security or other means of obtaining repayment of any of the
Obligations; (vi) the impairment of any collateral securing any of
the Obligations, including without limitation the failure to
perfect or preserve any rights which the Administrative Agent or
any Lender might have in such collateral security or the
substitution, exchange, surrender, release, loss or destruction of
any such collateral security; or (vii) any other act or omission
which might in any manner or to any extent vary the risk of any of
the Guarantors or otherwise operate as a release or discharge of
any of the Guarantors, all of which may be done without notice to
the Guarantors. To the fullest extent permitted by law, each
Guarantor hereby expressly waives any and all rights or defenses
arising by reason of (A) any “one action” or
“anti-deficiency” law which would otherwise prevent the
Administrative Agent or any Lender from bringing any action,
including any claim for a deficiency, or exercising any other right
or remedy (including any right of set-off), against any of the
Guarantors before or after the Administrative Agent’s or such
Lender’s commencement or completion of any foreclosure
action, whether judicially, by exercise of power of sale or
otherwise, or (B) any other law which in any other way would
otherwise require any election of remedies by the Administrative
Agent or any Lender.
5.
Unenforceability of
Obligations Against Company . If for any reason the Company has no legal
existence or is under no legal obligation to discharge any of the
Obligations, or if any of the Obligations have become irrecoverable
from the Company
