EXHIBIT 10.42
GUARANTY
GUARANTY, dated as of
November 9, 2006, 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 GB MERCHANT PARTNERS, LLC, 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 the Term Loan Agreement of even date herewith (the
"Credit Agreement"),
among Quaker Fabric Corporation of Fall River (the
"Company"), the Parent, the Lenders, and the Administrative
Agent.
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 Section 362(a) of the Federal
Bankruptcy Code and
the operation of
Section 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
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.
<PAGE>
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
Section y3 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 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.
<PAGE>
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 by reason of the Company's insolvency, bankruptcy or
reorganization or by
other operation of law or for any other reason, this
Guaranty shall
nevertheless be
binding on each Guarantor to the same extent as
if such Guarantor
at all times had
