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
