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ENVIRONMENTAL INDEMNITY AGREEMENT

Environmental Indemnity Agreement

ENVIRONMENTAL INDEMNITY AGREEMENT | Document Parties: Quaker  Fabric  Corporation  of Fall River | Quaker  Textile  Corporation | Quaker  Fabric  Corporation | BANK OF AMERICA, N.A You are currently viewing:
This Environmental Indemnity Agreement involves

Quaker Fabric Corporation of Fall River | Quaker Textile Corporation | Quaker Fabric Corporation | BANK OF AMERICA, N.A

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Title: ENVIRONMENTAL INDEMNITY AGREEMENT
Governing Law: Massachusetts     Date: 11/15/2006
Industry: Apparel/Accessories    

ENVIRONMENTAL INDEMNITY AGREEMENT, Parties: quaker  fabric  corporation  of fall river , quaker  textile  corporation , quaker  fabric  corporation , bank of america  n.a
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                                                                   EXHIBIT 10.39

                        ENVIRONMENTAL INDEMNITY AGREEMENT

         THIS ENVIRONMENTAL   INDEMNITY AGREEMENT (this "AGREEMENT"),   made as of
November 9, 2006,   Quaker   Fabric   Corporation   of Fall River,   a   Massachusetts
corporation   (the   "BORROWER"),   Quaker   Textile   Corporation,   a   Massachusetts
corporation   ("QUAKER   TEXTILE"),   Quaker Fabric Mexico,   S.A. de C.V., a Mexico
corporation   ("QUAKER   MEXICO"),   and   Quaker   Fabric   Corporation,   a   Delaware
corporation   (the "PARENT",   and together with Quaker Textile and Quaker Mexico,
the "GUARANTORS")   (each of the Borrower and Guarantors being sometimes referred
to herein as an "INDEMNITOR" and collectively, as the "INDEMNITORS"), to Bank of
America,   N.A.,   as   Administrative   Agent (as   defined in the Credit   Agreement
referred   to   below)   and the   lenders   from   time to time   party to the   Credit
Agreement   (the   Administrative   Agent   and the   Lenders,   together   with   their
officers, directors, employees,   shareholders,   members, successors and assigns,
the "INDEMNITEES").


                                    RECITALS

         WHEREAS,   Indemnitor   is the owner and/or   lessee of the Real   Property
described on EXHIBIT A attached   hereto,   together with all   improvements   dated
thereon (the "REAL   PROPERTY") and has the exclusive   rights to manage,   control
and operate the Real Property;

         WHEREAS, pursuant to that certain Amended and Restated Revolving Credit
Agreement,   dated as of the date hereof, by and among the Borrower,   the Parent,
the Administrative Agent, and the Lenders (as amended, modified and supplemented
and in effect from time to time, the "CREDIT   AGREEMENT",   all capitalized terms
used herein without   definitions shall have the respective   meanings ascribed to
such   terms in the   Credit   Agreement),   at the   request   of the   Borrower,   the
Indemnitees agreed to make loans (the "REVOLVING LOANS") to the Borrower,   which
Revolving Loans are secured,   in part, by those certain   mortgages,   dated on or
prior to the date hereof,   by the Borrower to the   Indemnitees   encumbering   the
Real Property (as the same may be amended,   modified,   supplemented   or restated
and in effect from time to time, collectively, the "SECURITY INSTRUMENTS") ;

         WHEREAS, the Borrower has disclosed to the Indemnitees the existence of
certain Environmental Conditions at the Real Property; and

         WHEREAS,   the Lenders are unwilling to make Revolving   Loans unless the
Indemnitors    indemnify   the   Indemnitees    against   liabilities   arising   under
Environmental   Laws (as herein   defined),   relating to those   disclosed   and any
undisclosed Environmental Conditions at the Real Property.

         NOW,   THEREFORE,   in consideration of the making of the Revolving Loans
by the Lenders and the covenants, agreements, representations and warranties set
forth in this Agreement and the Credit   Agreement,   the parties hereby covenant,
agree, represent and warrant as follows:

         1. DEFINED TERMS.   Unless the context otherwise   requires,   capitalized
terms used but not   otherwise   defined   herein shall have the meanings   provided
therefore   in the   Credit   Agreement,   and the   following   terms   shall have the
following meanings:
<PAGE>

         "ENVIRONMENTAL    CLAIM"    means   any    notice,    notification,    claim,
administrative, regulatory or judicial action, suit, judgment, demand, decree or
other communication by any Person or Governmental Authority requiring,   alleging
or asserting   liability   with respect to the   Indemnitors   or the Real   Property
pursuant    to    Environmental    Laws,    whether    for    damages,    contribution,
indemnification,   cost recovery, compensation, injunctive relief, investigatory,
assessment,   monitoring, response, remedial or cleanup costs, damages to natural
resources,   real property damage, personal injuries,   fines or penalties arising
out of,   based on or   resulting   from or related to (a) the   presence or alleged
presence,   Use,   Release   or   threatened   Release   of any   Hazardous   Substances
originating,   at or from, migrating to or from or otherwise affecting,   the Real
Property   or   any   part   thereof,   (b)   any   fact,   circumstance,   condition   or
occurrence   forming the basis of any   violation,   or alleged   violation,   of any
Environmental Law by the Indemnitors,   the Real Property or any part thereof, or
(c) any alleged injury or threat of injury to health,   safety or the environment
by the Indemnitors or relating the Real Property or any part thereof.

         "ENVIRONMENTAL    CONDITIONS"   means   any   environmental   condition   (a)
constituting   or which with the passage of time or lack of Remediation   would or
would likely   constitute a violation of   Environmental   Laws,   including but not
limited to the presence of any Hazardous   Substances   requiring reporting and/or
the   performance of response   actions under   Massachusetts   General Laws Chapter
21E, or (b) that   requires   reporting,   investigation,   assessment,   monitoring,
remediation or other response actions or would allow any Governmental   Authority
to record a lien or   encumbrance   in the land   records   with respect to the Real
Property or an Environmental Claim.   Submission to the Massachusetts   Department
of Environmental   Protection of a Class A or B Response Action Outcome Statement
by a Licensed   Site   Professional   (as defined in Mass.   Gen. L. ch. 21E,   ss.2)
pursuant to, and in compliance with, the Massachusetts Contingency Plan (310 CMR
40.0000)   shall   be   deemed   confirmation   that any   Environmental   Condition(s)
addressed in such Response Action Outcome Statement no longer exists.

         "ENVIRONMENTAL LAWS" means any judgment,   decree,   order, law, license,
rule,   permit or   regulation   pertaining   to   environmental   matters,   including
without limitation,   those arising under the Resource   Conservation and Recovery
Act   ("RCRA"),   the   Comprehensive   Environmental   Response,    Compensation   and
Liability   Act of 1980 as   amended   ("CERCLA"),   the   Superfund   Amendments   and
Reauthorization   Act of 1986 ("SARA"),   the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic   Substances   Control   Act, or any other   state,   local,
foreign or common law,   statute,   regulation,   ordinance,   order,   decree or any
other binding   requirement   of any   Governmental   Authority   relating to health,
safety or the environment.
<PAGE>

         "FORECLOSURE DATE" has the meaning provided in SECTION 2(E) hereof.

         "HAZARDOUS   SUBSTANCE"   means any   hazardous   waste,   as   defined by 42
U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section
9601(14),   any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33)
and any toxic   substances,   oil or   hazardous   materials   or other   chemicals or
substances regulated by any Environmental Laws

         "KNOWN   ENVIRONMENTAL   CONDITIONS" has the meaning   provided in SECTION
2(D) hereof.

         "LOSSES" has the meaning provided in SECTION 2(A) hereof.

         "PERSON" means any individual,   corporation, limited liability company,
partnership,   joint venture, estate, trust,   unincorporated   association, or any
other entity, any federal,   state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.

         "RELEASE" means any past or present release, spill, emission,   leaking,
pumping,   injecting,   pouring, emptying,   escaping,   dumping, deposit, disposal,
discharge, dispersal, leaching, migration into the indoor or outdoor environment
of   Hazardous   Substances,    including,   without   limitation,   the   movement   of
Hazardous Substances through ambient air, soil, surface water, sediments, ground
water, wetlands, land or subsurface strata.

          "REMEDIATION" means the investigation, assessment, monitoring, removal,
abatement, treatment, risk assessment, institutional controls, deed restrictions
and/or   activity and use   limitations,   containment,   payment of   compliance   or
oversight fees, and all other activities   required under   Environmental   Laws to
respond to an Environmental Condition.

         "USE" means, with respect to any Hazardous   Substance,   the generation,
manufacture,   processing,   distribution,   handling, use, treatment, recycling or
storage   of such   Hazardous   Substances   or   transportation   to or from the Real
Property by any Person of such Hazardous Substances.

         2. INDEMNIFICATION.

                  (a) The   Indemnitors   agree to   indemnify,   reimburse,   defend
(with counsel   reasonably   satisfactory to   Indemnitees),   and hold harmless the
Indemnitees from and against all demands,   claims,   actions or causes of action,
assessments,   losses,   damages,   liabilities,   interest,   reasonable   costs   and
expenses,   including,   without   limitation,    interest,   penalties,    reasonable
attorneys' fees, reasonable disbursements and expenses,   diminution in the value
of   the   Real   Property    (subject   to   subsection   (e)   below)   and   reasonable
consultants' and expert witness fees, disbursements,   fines, penalties, fees and
expenses, including costs of reporting,   investigation,   assessment, monitoring,
remediation or other response   actions   (collectively,   the "LOSSES"),   asserted
against,   resulting   to,   imposed   on, or incurred   by   Indemnitees   directly or
indirectly in connection with any of the following:

                           (i) any events,   circumstances,   or conditions   which
                  relate   to,   form or are   alleged   to form   the   basis   for an
                  Environmental Claim;
<PAGE>

                           (ii)   the   presence,    Use,   Release,   or   threatened
                  Release of Hazardous   Substances   at, on, in,   under,   from or
                  otherwise affecting the Real Property;

                           (iii)   any    violation    or   alleged    violation    of
                  Environmental   Laws by the   Indemnitors or with respect to the
                  Real Property, or any act or omission causing an Environmental
                   Condition;

                           (iv)   the   material   breach   of   any   representation,
                  warranty   or   covenant   set   forth in   Sections   6.19,   7.5.6,
                  7.15.4,   8.9,   and   16 of the   Credit   Agreement   relating   to
                  Environmental Claims; or

                           (v) any   reasonable   costs   and   expenses,   including
                  reasonable   attorneys' fees and disbursements   incurred by any
                  Indemnitee   in (x)   exercising   any   right,   power   or   remedy
                  conferred by this Agreement, or (y) enforcing the Indemnitors'
                  obligations pursuant hereto.

                  (b) The indemnity   provided in this   Agreement is not intended
to be and shall not be   included   in any   exculpation   of the   Indemnitors   from
personal   liability provided in the Credit Agreement or in any of the other Loan
Documents.   Nothing in this Agreement shall be deemed to deprive the Indemnitees
of any   rights   or   remedies   provided   to the   Indemnitees   elsewhere   in   this
Agreement or in the Loan   Documents or otherwise   available to them under law or
at equity.

                  (c) The Indemnitors waive and release the Indemnitees from any
rights or defenses the   Indemnitors   may have under common


 
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