ENVIRONMENTAL INDEMNITY AGREEMENT

                                                                   EXHIBIT 10.43


                        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 GB Merchant Partners, LLC, as Administrative Agent and 1903 Debt Fund, LP and
the other financial  institutions from time to time party thereto (collectively,
the "LENDERS" and the Administrative  Agent,  collectively,  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 Term Loan Agreement,  dated
as of the date hereof, by and among the Borrower, the Parent, the Administrative
Agent,  the Lenders and the Indemnitees (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 "Term Loans") to the Borrower,  which Term
Loans are secured,  in part,  by those certain  mortgages,  dated as of 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 Indemnitees are unwilling to make the Term 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 Term
Loans by the  Indemnitees  and the covenants,  agreements,  representations  and
warranties set forth in this Agreement and the Term Loan Agreement,  the parties
hereby covenant, agree, represent and warrant as follows:
<PAGE>

                  1.  Defined  Terms.  Unless the  context  otherwise  requires,
capitalized  terms used but not otherwise defined herein shall have the meanings
provided  therefore in the Term Loan  Agreement,  and the following  terms shall
have the following meanings:

                  "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.

                  "FORECLOSURE  DATE" has the meaning  provided in Section  2(e)
hereof.
<PAGE>

                  "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"  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:
<PAGE>

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

                           (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 Term Loan Agreement relating to Environmental  Claims; or

                           (v) any  reasonable  costs  and  expenses,  including
         reasonable attorneys' fees and disbursements incurred by any Indemnitee