<PAGE>
                                                                    Exhibit 10.5


                                 LOAN AGREEMENT
                                 --------------

         THIS AGREEMENT made this 30th day of March, 1999, between DM Management
Company of 25 Recreation Park Drive, Hingham, Massachusetts 02043 (the
"BORROWER") and Belknap County Economic Development Council, Inc., having its
principal office at 64 Court Street, Laconia, NH 03246 (the "LENDER").

                                   WITNESSETH
                                   ----------

In consideration of the mutual covenants and agreements contained herein, the
parties agree as follows:

1.       PURPOSE AND AMOUNT OF LOAN. LENDER agrees to lend to BORROWER, and the
         BORROWER hereby agrees to borrow from LENDER and repay to LENDER or its
         assigns the principal sum of $980,000.00 (hereinafter called the Loan)
         for the purpose of purchasing specific equipment (the "Equipment") for
         the facility located at 100 Birch Pond Drive, Tilton, New Hampshire.

2.       INTEREST. Interest on the Loan shall be payable at the rate of 6.25%
         per annum on the principal received. Interest shall be payable monthly,
         beginning on April 30, 1999.

3.       TERM. The term of the Loan shall be thirty six (36) months. All
         payments shall be applied first to the payment of interest accrued to
         the date of receipt thereof, and the balance, if any, to the reduction
         of principal. The Loan may be prepaid at any time without premium or
         penalty.

4.       THE NOTE. The Loan shall be evidenced by a note in such form as the
         LENDER shall require (the "NOTE") and shall be executed by the
         BORROWER.

5.       RIGHTS AND OBLIGATION. The holders of the Note, and BORROWER, hereby
         expressly reserve all right to amend any provision of this Agreement,
         to consent to or waive any departure from the provisions of this
         Agreement, to amend or consent to or, waive departure from the
         provision of the Note, and to release or otherwise deal with any
         collateral security for payment of the Note.

6.       CONDITIONS OF CLOSING. The obligation of LENDER to make the Loan as
         provided in this Agreement is subject to the receipt by LENDER from
         BORROWER of the Note in compliance with the terms hereof and, in
         LENDER'S sole discretion, to the following additional conditions
         precedent:

         a.       Subject to receipt of copies of Purchase Orders & canceled
                  checks confirming that at least $2,000,000 in non-CDBG funds
                  has been committed to the project, in accordance with CDBG
                  requirements.

         b.       The truth and accuracy, as of the closing date, of all
                  representations and warranties made herein by BORROWER and the
                  receipt by LENDER, of such documents, certificates of officers
                  of BORROWER, and such other evidence, as LENDER shall have
                  reasonably requested respecting the meeting of these
                  conditions.

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                                       2

         c.       The receipt by the LENDER from BORROWER of copies of all
                  documents in connection with this Agreement and the
                  transactions contemplated hereby, or respecting the business
                  and affairs of BORROWER, that LENDER or its counsel may
                  reasonably have requested, satisfactory in form and substance
                  to LENDER and its counsel and certified, when appropriate, by
                  proper corporate officers and governmental authorities.

         d.       The payment by the Borrower of all closing costs and expenses
                  including but not limited to filing fees to perfect an
                  interest in the collateral for the loan.


7.       APPLICATION OF PROCEEDS.

         a.       BORROWER agrees that it will apply the funds received by it
                  under this Agreement in accordance with the use of loan
                  proceeds specified in the loan request as approved by LENDER
                  and described in Section 1 above.

         b.       BORROWER agrees to provide additional equity funds to cover
                  additional project costs incurred as a result of overruns or
                  unanticipated expenses in financing the outfitting of the
                  facility (the "Project").

8.       LOAN DISBURSEMENT. The LENDER has established for the BORROWER the Loan
         amount for the purpose as set forth in Paragraph 1 herein. At the
         closing, or shortly thereafter the LENDER will disburse to the BORROWER
         the proceeds of the Loan.

9.       SECURITY

         a.       BORROWER shall execute and deliver to LENDER at the closing of
                  the Loan a security agreement (the "Security Agreement") and
                  financing statements (the "Financing Statements") giving
                  LENDER security in all of the items (hereinafter the
                  "collateral") listed in Schedule A, attached hereto and hereby
                  made a part hereof, to secure payment of the principal of the
                  Note, the interest thereon, and any other sums payable by
                  BORROWER hereunder.

         b.

                  (i)      BORROWER represents that as of closing date LENDER
                           will have a valid first priority security interest in
                           the specific collateral listed in Schedule A.

                  (ii)     The Security Agreement, Financing Statements, and
                           Note shall be in form satisfactory to LENDER and
                           shall provide, among other things, that in the event
                           of default by the BORROWER in any agreement, covenant
                           or condition contained in this Loan Agreement, or in
                           the Note or Security Agreement, LENDER may, at its
                           option, in addition to all other remedies, take
                           possession of the property given as security. LENDER
                           however, shall be under no obligation to exercise
                           this right and its action in this respect shall be
                           wholly at its option.


<PAGE>
                                       3

                  (iii)    BORROWER agrees to permit LENDER, until the Note has
                           been fully repaid with interest, at all reasonable
                           hours to inspect and audit all books, records,
                           contractual documents, and all other papers relating
                           to the business of Borrower; and BORROWER shall give
                           LENDER free access to the Facility for the purpose of
                           such inspection or audit and also for the purpose of
                           determining the condition of the Facility. In
                           addition, BORROWER shall provide to LENDER annual
                           financial statements within 120 days after the close
                           of the fiscal year.

10.      INSURANCE. The collateral which is of insurable character will be kept
         insured by financially sound and reputable insurers against loss or
         damage by fire, explosion and other hazards customarily insured against
         by extended coverage for the full insurable value of the property
         insured and in any event an amount sufficient to prevent the owner
         thereof from becoming a co-insurer, the proceeds thereof including
         accrued interest, to be paid to LENDER to satisfy the balance owing on
         the Note at the time of the loss, the remainder of the insurance
         proceeds to be payable to BORROWER. If the proceeds of the insurance
         together with such other funds as are available to BORROWER are
         sufficient to pay for the restoration of the premises, BORROWER and
         LENDER shall negotiate in good faith for the application of such funds
         to such restoration. BORROWER will maintain, with financially sound and
         reputable insurers, insurance against other hazards and risks as is
         customarily maintained by other companies similarly situated and
         operating like businesses including but not limited to Workmen's
         Compensation Insurance, public liability and other risks.

         All policies of insurance covering the equipment shall provide for
         thirty days written minimum cancellation notice to Lender and at
         request of Lender copies thereof shall be delivered to and held by it
         and after an event of default and while it is continuing Lender may act
         as attorney for BORROWER in obtaining, adjusting, settling and
         canceling such insurance and endorsing any drafts.

11.      REPRESENTATIONS. in order to induce the Lender to make the Loan
         hereunder, BORROWER represents and warrants:

         a.       That BORROWER is not a party to any action, suit or proceeding
                  pending, or to the knowledge of the BORROWER, threatened at
                  law or in equity before any Court or administrative officer or
                  agency which brings into question the validity of the
                  transaction herein contemplated or is likely to result in any
                  adverse change in the business or financial condition of the
                  BORROWER.

         b.       That the BORROWER is not in default of any obligations,
                  covenants, or conditions contained in any bond, debenture,
                  note, or other evidence of indebtedness or any mortgages or
                  collateral instruments securing the same. The making of this
                  Agreement and the consummation of the transaction contemplated
                  herein will not violate any provision of law or result in a
                  breach or constitute a default under any agreement to which
                  BORROWER is a part or result in a creation of any lien, charge
                  or encumbrance upon any of its property or its assets.

         c.       BORROWER has filed all tax returns which are required to be
                  filed and has paid or made provision for the payment of all
                  material taxes which have or 



<PAGE>
                                        4

                  may become due pursuant to said returns or pursuant to any
                  assessments received by it. No tax liability has been asserted
                  by the Internal Revenue Service or other taxing agency,
                  federal, state or foreign, for taxes materially in excess of
                  those already provided for and the BORROWER knows of no basis
                  for any such deficiency assessment.

         d.       The BORROWER shall use all of the proceeds of this Loan for
                  the purposes stated in Section 1 hereof.

12.      CONDITIONS OF LOAN. The making of the Loan hereunder shall be subject
         to the following conditions precedent.

         a.       All loan provisions contained in ATTACHMENT III -REQUIRED LOAN
                  PROVISIONS are incorporated herein as Schedule B.

         b.       All of the representations and warranties contained in this
                  Agreement shall be true and correct on and as of the closing
                  date.

         c.       All proceedings taken in connection with the transaction
                  contemplated by this Agreement and all documents incidental
                  thereto shall be satisfactory in form, scope and substance to
                  LENDER'S counsel, and LENDER shall have received copies of all
                  documents which it or its counsel may reasonably request in
                  connection with the transaction in form, scope and substance
                  satisfactory to its counsel.

         d.       All necessary approvals or consents, if any such approvals or
                  consents be required of Governmental bodies having
                  jurisdiction with respect to any construction herein
                  contemplated, shall have been obtained, and failure to have
                  obtained such consents shall constitute a default hereunder.

         e.       There shall be delivered to LENDER a copy of the record of
                  minutes of the BORROWER's Board of Directors specifically
                  authorizing its officers to execute this Agreement and all
                  other documents necessary to the consummation of this
                  transaction. The record of the minutes of the Board shall be
                  certified to be true by the Secretary or Assistant Secretary
                  of BORROWER.

         f.       All necessary approvals or consents required with respect to
                  this transaction by any mortgagee or other party having any
                  interest in the specific collateral shall have been obtained,
                  and failure to have obtained such consents shall constitute a
                  default hereunder.

13.      AFFIRMATIVE COVENANTS. Until payment in full of the Note and all of the
         other payments due LENDER hereunder and the performance of all of the
         terms, conditions and provisions of this Agreement, Borrower shall
         cause the following to be done:

         a.       borrower will deliver to LENDER within fifteen (15) days after
                  any written request therefor from LENDER such information as
                  may be reasonably necessary to determine whether the BORROWER
                  is complying with its covenants and agreements contained in
                  this Loan Agreement or an Event of Default has occurred.


<PAGE>
                                        5

         b.       BORROWER will punctually pay or cause to be paid the principal
                  and interest to become due in respect to the Note in
                  accordance with the terms thereof.

         c.       BORROWER will, upon demand, promptly pay and discharge all
                  taxes, assessments or other governmental charges which may
                  lawfully be levied or assessed on its income or profits or on
                  any property, real, personal or mixed, belonging to it or upon
                  any part thereof, and also all lawful claims for labor or
                  material and supplies, which, if unpaid, might become a lien
                  or charge upon any such property except that BORROWER shall
                  not be required to pay any such taxes, assessments, charges,
                  levies or claims so long as the validity thereof shall be
                  actively contested in good faith by proper proceedings,
                  provided that BORROWER shall establish reserves equal to any
                  such tax, assessment, charge, levy or claim during such
                  proceedings and such tax, assessment, levy or claim shall be
                  paid forthwith upon a final adjudication and order to pay from
                  any court of competent jurisdiction.

         d.       BORROWER will, upon demand, pay or cause to be paid the
                  principal and interest on all indebtedness to other lenders
                  heretofore or hereafter incurred or assumed by it when and as
                  the same shall become due and payable unless such indebtedness
                  be renewed or extended, and will observe, perform and
                  discharge all of the covenants, conditions and obligations
                  which are imposed on it by any and all agreements securing or
                  evidencing an encumbrance upon the collateral so as to prevent
                  an occurrence of any act or omission which under the
                  provisions thereof may be declared to be a default thereunder
                  which could result in a lien being placed upon the collateral.

         e.       BORROWER will at all times cause all of the collateral to be
                  maintained and kept in such condition and repair that LENDER'S
                  security will be adequately protected.

         f.       In the event that any provision of this Agreement or any other
                  instrument executed at closing or the application thereof to
                  any person or circumstances shall be declared unenforceable by
                  a Court of competent jurisdiction, the remainder of such
                  agreement shall nevertheless remain in full force and effect,
                  and to this end, the provisions of all covenants, conditions,
                  and agreements described herein are deemed separate.

         g.       BORROWER will give LENDER prior notice, in writing, of any
                  public hearing or meeting before any administrative or other
                  public agency which may, in any manner, affect the collateral.

         h.       The BORROWER agrees to diligently pursue the purposes of this
                  loan.

         i.       From time-to-time, BORROWER will execute and deliver any and
                  all further, or other instruments, and perform such acts, as
                  LENDER or its counsel may reasonably deem necessary or
                  desirable to confirm and secure to LENDER all rights and
                  remedies conferred upon LENDER by the terms of this Agreement
                  and by the Note.

<PAGE>
                                        6

14. NEGATIVE COVENANTS. Until payment in full of the Note and performance of all
the obligations of this Agreement:

         a.       BORROWER will neither create nor suffer to exist any mortgage,
                  pledge, lien, charge, or encumbrance, including liens arising
                  from judgments, on the collateral (except for such liens as
                  are specifically set forth herein above as exceptions to
                  BORROWER'S title) which remain on the equipment for more than
                  ten days, except for taxes not delinquent or being contested
                  in good faith and by appropriate proceedings.

         b.       BORROWER will neither sell nor convey nor suffer to be
                  conveyed any of the equipment in a manner that is not in the
                  ordinary course of its business during the terms of its
                  obligation to LENDER.


15.      ADDITIONAL COVENANTS.

         a.       EXPENSES. BORROWER agrees to pay all costs and taxes that
                  might be imposed or determined to be payable in connection
                  with the execution, issuance or delivery of the Note, or in
                  connection with any modification, amendment, or alteration of
                  the terms and provisions thereof, and to save LENDER and any
                  other holder of the Note harmless against any and all
                  liability with respect to the Note, all of which agreements of
                  BORROWER shall survive payment of the Note.

         b.       EXPENSES OF COLLECTION OR ENFORCEMENTS. If BORROWER shall at
                  any time default in making any payment of principal or
                  interest on the Note, BORROWER agrees that it will, to the
                  full extent permitted by law, pay to the holder of the Note,
                  in addition to any other amounts that may be due from BORROWER
                  to such holder, an amount equal to the costs and expenses of
                  collection or enforcement incurred by such holder in such
                  collection. In addition, the LENDER may impose upon the
                  BORROWER a delinquency charge at the rate of 5% per annum on
                  each installment of principal or interest not paid on or
                  before 10 days after such installment is due.

         c.       EXPENSES OF CORRECTION BY LENDER OF DEFAULT. In the event of
                  any default by BORROWER in full performance or observance of
                  any covenant or agreement contained herein or in the Note,
                  LENDER may, upon 10 days of written notice to BORROWER, and at
                  LENDER'S sole option (but without any obligation of LENDER to
                  do so) take such steps as may be necessary or appropriate to
                  correct or remedy such default in whole or in part, and all
                  costs and expenses incurred by LENDER in taking such steps
                  (including reasonable attorney's fee incurred by LENDER and
                  including any other sums paid or payable by LENDER to third
                  parties) shall forthwith upon written demand by LENDER be due
                  and payable by BORROWER to LENDER, with interest thereon
                  (payable on the first day of each calendar month) from the
                  time of incurrence thereof by LENDER at the rate of 10% per
                  annum until paid. In the event LENDER takes any action
                  provided for in the preceding sentence, the commencement or
                  taking of such action shall not be deemed to be a waiver by
                  LENDER of the default of BORROWER or a waiver of any other
                  available remedy of LENDER by reason of such default.

<PAGE>
                                       7

         d.       EXPENSES OF AMENDMENTS, WAIVER, CONSENTS, ETC. In the event
                  BORROWER proposes to take or omit any act or action on the
                  part of BORROWER prohibited or required by any provision of
                  this Agreement or the Note, and BORROWER requests Lender to
                  consent thereto or waive compliance with any such provision,
                  or in the event BORROWER requests LENDER to consent to any
                  modification or amendment of this Agreement or the Note then,
                  in each such case, BORROWER agrees to reimburse or pay to
                  LENDER any expenses incurred by LENDER in connection with such
                  consent or waiver, or such modification or amendment, as the
                  case may be.

16.      EVENTS OF DEFAULT. The principal indebtedness evidenced by the Note or
         the unpaid balance thereof at the time outstanding shall be due and
         payable at the election of the LENDER if any one or more of the
         following events (herein called "events of Default") shall occur for
         any reason whatsoever, and whether such occurrence shall be voluntary,
         involuntary or come about or be effected by operation of law, or
         pursuant to or in compliance with any judgment, decree or order of any
         court or any order, rule or regulation of any administrative or
         government body.

         a.       Default shall be made in payment of any principal of or
                  interest on the Note when due and payable; or

         b.       Default shall be made in the performance or observance of any
                  of the covenants or agreements contained in Section 14 hereof;

         c.       Any representation or warranty made by the BORROWER herein or
                  any statement or representations made in any certificate,
                  statement, or opinion delivered pursuant to this Loan
                  Agreement shall prove to have been incorrect in any material
                  respect as of the date when made; or

         d.       Any obligations of the BORROWER for the payment of borrowed
                  money (other than its obligations hereunder or under the Note)
                  shall not be paid at its maturity or any such obligations
                  shall become or be declared, pursuant to its terms, to be due
                  and payable prior to the express maturity thereof by reason of
                  default or other violation of the terms thereof, or

         e.       Default shall be made in the performance or observance of any
                  of the other covenants or agreements of BORROWER herein
                  contained not covered by (a), (b), (c) or (d) above, and such
                  default shall have continued for a period of 10 days after
                  notice thereof to the BORROWER by LENDER; or

         f.       BORROWER shall admit in writing its inability to pay its debts
                  generally as they become due, make an assignment for the
                  benefit of creditors, file a petition in bankruptcy, be
                  adjudicated insolvent or bankrupt, petition or apply to any
                  tribunal for an appointment of any receiver or trustee thereof
                  or of any substantial part of its property or commence any
                  proceedings under any arrangement, readjustment of debt, or
                  statute of any jurisdiction, whether now of hereafter in
                  effect; or there is commenced against BORROWER any such
                  proceedings which remain undismissed for a period of 90 days;
                  or

<PAGE>
                                        8

         g.       BORROWER by any act indicates its consent to, approval of, or
                  acquiescence in any such proceedings or in the appointment of
                  any receiver or of any trustee for BORROWER with respect to a
                  substantial part of its property.

         h.       If any final judgment for the payment of money that is not
                  fully covered by liability insurance and is in excess of
                  $100,000.00 shall be rendered against BORROWER and not
                  discharged within 30 days.

         i.       If the BORROWER during the term of this loan affects a change
                  in ownership or control of the business substantially all of
                  its assets without prior written consent of the LENDER.

17.      WAIVER OF NOTICE. The BORROWER hereby expressly waives any requirement
         for presentation, demand, protest, notice of protest or other notice or
         dishonor of any kind, other than the notice specifically provided for
         in this Agreement.

18.      NOTICES. All notices, demands and communications provided for herein or
         made hereunder shall be delivered, or sent by certified mail, return
         receipt requested, addressed in each case as follows, until some other
         address shall have been designated in a written notice to the other
         party hereto given in like manner.

         TO BORROWER:
         DM Management Company
         25 Recreation Park Drive
         Hingham, Massachusetts  02043

         TO LENDER:
         Belknap County Economic Development Council, Inc.
         64 Court Street
         Laconia, New Hampshire  03246
         and shall be deemed to have been given or made when so delivered or
         mailed. Notification of change shall be delivered to LENDER and
         BORROWER within ten days of any change affecting this provision.

19.      SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND OBLIGATIONS. All
         representations and warranties contained herein shall survive the
         execution and delivery of this Agreement and of the Note, Security
         Agreement and Financing Statements, and any investigation at any time
         made by the Note, Security Agreement and Financing Statements. All
         obligations of the BORROWER under this Loan Agreement, and under the
         Note, and the Security Agreement, which have not been fully performed,
         paid and satisfied at the time of closing of the Loan, shall survive
         the closing.

20.      CONSTRUCTION AND AMENDMENT. This Loan Agreement constitutes the entire
         agreement between the parties pertaining to the subject matter hereof
         and supersedes all prior and contemporaneous agreements and
         understandings of the parties in connection therewith. This Agreement
         may not be changed, amended or terminated orally but only by agreement
         in writing and signed by the party against whom enforcement of any
         change, amendment or termination is sought.

<PAGE>
                                       9

21.      PAYMENT. The BORROWER will pay to LENDER at its address specified in
         Section 18, or at such other address as it may designate in writing,
         all amounts payable with respect to the principal of, and interest on,
         the Note held by the LENDER.

22.      SUCCESSORS AND ASSIGNS. All covenants, agreements, representations and
         warranties made herein or in certificates delivered in connection
         herewith shall, whether so expressed or not, bind and inure to the
         benefit of successors and assigns of the BORROWER and LENDER.

23.      COUNTERPARTS. This Agreement may be executed in two or more
         counterparts, each of which shall be deemed an original, but all of
         which together shall constitute one and the same instrument.

24.      NO WAIVER: REMEDIES CUMULATIVE. No exercise, partial exercise, failure
         or delay on the part of the LENDER in exercising any power or right
         hereunder, or under the Note, or Security Agreement, shall operate as a
         waiver of the power or right, except as specifically provide herein. No
         remedy conferred herein or in the Note, or Security Agreement is
         intended to be exclusive, to any other remedy, and each and every other
         remedy given hereunder or now hereafter existing at law or in equity or
         by statute or otherwise, may be sought by the enforcing party.


25.      GOVERNING LAW. This Agreement and the Note, the Security Agreement and
         the Financing Statements shall be governed by and interpreted in
         accordance with the laws of the State of New Hampshire.


         LENDER: belknap county economic development council


         by: /s/ Eliza Leadbeater                      Date:  3/30/99
              ------------------------------------           ------------------
              Eliza Leadbeater, Executive Director

         BORROWER:  DM MANAGEMENT COMPANY

         by:  /s/ Peter J. Tulp                        Date:  3/30/99      
              ------------------------------------           ------------------
              Peter J. Tulp, VP Fianance,
              Corporate Controller


<PAGE>

                                                                         Page 1


                                     SCHEDULE B

                                   ATTACHMENT III

                              REQUIRED LOAN PROVISIONS


Belknap County ("Grantee") and Subrecipient Belknap County Economic 
Develpment Corp. ("BCEDC") hereby warrant and agree that BCEDC, in its 
loan agreement with DM Management, and in any future agreements conveying
or transferring interests in the DM facility, shall include the following 
required minimum terms and conditions providing for the performance of 
grant-related activities and commitments.

1.    LOAN TERMS

      1.1    The loan shall provide that BCEDC shall lend, and DM shall 
      borrow, $980,000 as part of financing package for the purchase of 
      equipment.

      1.2    The loan payments shall be based on a three (3) year 
      amortization, with interest accruing at a rate not less than one half 
      of one percent below the interest established by bank financing,
      currently existing and subsequently re-negotiated by DM. DM will notify
      BCEDC and the NH office of State Planning ("OSP") of the terms of interest
      of the company's renegotiated debt.

      1.3    Loan payments shall be made in periodic intervals, to be 
      determined at loan closing, but must include principal and interest.

      1.4    The loan shall be secured, at a mininum, by a second collateral 
      position on specific equipment, in an amount equal to the amount of the
      loan extended to DM by BCEDC. Security will be evidenced by appropiate
      UCC filings, enumerating the equipment secured.

      1.5    DM shall enter into a Promissory Note wherein it agrees to pay to 
      BCEDC the principal and interest as provided above. It shall require DM
      to pay on demand all reasonable costs of collection, including court 
      costs, service fees and attorneys fees, whether or not any foreclosure
      or other action is instituted by the holder in its discretion; and late 
      charges in the event of any installment payment is not received within
      the terms set by the BCEDC.

      1.6    DM shall enter into a Security Agreement with BCEDC, 
      establishing the BCEDC's collateral position, as provided above.

2.    EMPLOYMENT COMMITMENTS.

      2.1     At the facility, DM will create at least one hundred 
      twenty-five (125) new full-time equivalent permanent jobs. At least 
      seventy-five (75) positions, or sixty percent (60%) said jobs created,
      will be filled by low and moderate income persons. Said jobs will have 
      descriptions, entry level wages, and benefits as follows:

              2.1.1    Jobs in the "Distribution center" will have entry 
              level wages of at least $7.25 per hour, with weekly incentive, 
              in the range of $25 to $65.

              2.1.2    Jobs in the "Call center" will have entry level 
              wages of at least $6.25 per hour, with weekly incentive, of
              up to $40 per week.

<PAGE>

                                                                        Page 2

          2.1.3    Employee benefits include medical insurance paid at 75% of 
total cost, three weeks combined company-paid vacation and sick leave, paid 
disability and life insurance policies, and 401K and stock purchase plans.

    2.2   To document DM's existing employees at the start of this Project, 
DM shall provide certified payrolls documenting the number of full-time and 
full-time equivalent employees and position titles in all of its U.S. 
operations and facilities no earlier than May 19, 1998.

    2.3   As documentation of and for purposes of monitoring Project 
employment commitments, DM shall submit to BCEDC a list of all employees 
hired to work at the Property, indicating positions, names, income and 
minority or protected class status and date of hire. Documentation of 
employees shall also be submitted which shall include copies of current 
company payrolls listing job titles and names of employees; copies of family 
income verifications signed by new employees; and designation of beneficiary 
minority or protected class status of new employees. This documentation shall 
be submitted as of the Grant Agreement Effective Date and periodically 
thereafter as required by BCEDC.

    2.4    For each new employee at time of hiring, DM shall verify and 
document family income status and minority or protected class status in 
accordance with the federal regulations set forth in Section 5 of the 
Gerneral Provisions of the Grant Agreement.

    2.5    In the event that DM fails to establish the minimum number of jobs 
required to be filled with persons from Low and Moderate Income Families or 
other employment commitment as provided in Section 2.1 herein, then DM shall 
confer forthwith with BCEDC, the Grantee and OSP and develop a mutually 
acceptable plan pursuat to which it will rectify any employment shortfalls 
and maintain the required minimums. In such event, DM shall also provide 
BCEDC with monthly updates containing information in a form reasonably 
satisfactory to BCEDC in order for BCEDC to determine whether it is in 
compliance with such plan and its employment obligations as provided herein,
said monthly reports to continue until the employment commitments are 
achieved.

    2.6    The continued failure of DM to achieve its employment commitments 
as required herein for ninety (90) days following the date specified for such 
requirment shall constitute an event of default under DM's loan, which shall 
give rise to any of the remedies available to BCEDC as set forth therein.

    2.7    The parties acknowledge that the obligation of DM to provide the 
specified minimum number of jobs for Low and Moderate Income Persons is an 
essential component of BCEDC's willingness to make a loan in the Project 
Property to DM upon the terms and conditions set forth in such loan 
conveyance, or other transfer document. DM agrees that it shall exercise good 
faith at all in its hiring practices in order to achieve its job commitments.

    2.8    In any loan, or other agreement entered into between BCEDC and DM, 
BCEDC shall include, as an event of default, the failure to meet the 
employment commitments and reporting requirements as provided herein. Upon 
breach of the employment commitments or reporting requirements giving rise to 
an event of default BCEDC shall undertake efforts to result in a cure of the 
default or shall, where applicable, terminate the loan or other agreement and 
seek damages or other relief as appropriate.

3.   GENERAL INDEMNIFICATION.

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                                                                        Page 3


    3.1. DM shall indemnify, defend and hold harmless BCEDC, Grantee and OSP 
    against and from any and all claims, judgments, damages, penalties, 
    fines, assessments, costs and expenses, liabilities and losses (including 
    without limitation damages for the loss or restriction on the use of the 
    facility, sums paid in settlement of claims, attorneys' fees, 
    consultants' fees and experts' fees) resulting or arising during the term 
    of the loan:

         (1) from any condition of the facility, including any building 
         structure or improvement thereon;

         (2) from any breach or default on the part of DM in the performance 
         of any mortgage lien or agreement to be performed pursuant to the 
         terms of the loan, or from any act or omission of DM or any of its 
         agents, contractors, servants, employees, subloans, licensees or 
         invitees; or

         (3) from any accident, injury or damage whatsoever caused to any 
         person occurring during the term of the loan, in the facility or 
         areas adjacent thereto.

4.  ENVIRONMENTAL PROTECTION.

    4.1 DM shall comply with all material provisions of federal, state and 
    local laws, regulations, and standards relating to protection or 
    preservation of the environment that are or may become applicable to its 
    activities at the facility.

    4.2 DM, and any sublessee or assignee of DM, shall be solely 
    responsible for obtaining at their cost and expense any environmental 
    permits required for their operations.

    4.3 DM shall indemnify, defend and hold harmless BCEDC, Grantee and OSP 
    against and from all claims, judgments, damages, penalties, fines, costs 
    and expenses, liabilities and losses (including, without limitation, 
    diminution in value of the premises, damages for the loss or 
    restriction on the use of the premises, and sums paid in settlement of 
    claims, attorney's fees, consultant's fees and experts' fees) resulting 
    or arising from discharges, emissions, spills, reloans, storage, or 
    disposal of any hazardous substances or any other action by DM or any 
    sublessee or assignee of DM, giving rise to BCEDC or Grantee or State 
    liability, civil or criminal, or responsibility under federal, state or 
    local environmental laws.

    This indemnification includes, without limitation, any and all claims, 
    judgments, damages, penalties, fines, costs and expenses, liabilities 
    and losses incurred by BCEDC, Grantee or the State in connection with 
    any investigation or site conditions, or any remedial or removal action 
    or other site restoration work required by any federal, state or local 
    governmental unit or other person for or pertaining to any discharges, 
    emissions, spills, reloans, storage or disposal of hazardous substances 
    arising or resulting from any act or omission of BCEDC at the facility.

    The provisions of this Section shall survive the expiration or 
    termination of the loan or other agreements.

5.  THE BUSINESS REPRESENTATIONS AND WARRANTIES.

    DM shall represent and warrant:

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                                                                        Page 4

5.1  It has obtained or will obtain all necessary approvals of the plans and 
all necessary permits for the operation of its business in Tilton from all 
governmental authorities having jurisdiction over the Project;

5.2  Construction of any Improvements for the Project will not violate any 
zoning, environmental, subdivision, or land use ordinance, regulation or law; 
the Facility conforms and complies in all material respects with covenants, 
conditions, restrictions, reservations and zoning, environmental land use, and 
other applicable ordinances, laws, rules and regulations, federal, state or 
local, affecting the Facility;

5.3  No litigation, claims, suits, orders, investigations or proceedings are 
pending or threatened against DM or affecting the Facility or the Project at 
law or in equity or before or by any federal, state, municipal or other 
governmental instrumentality; there are no arbitration proceedings pending 
under collective bargaining agreements or otherwise; and to the knowledge of 
DM there is no basis for any of the foregoing;

5.4  DM has filed all federal, state and local tax returns required to be 
filed and has paid or made adequate provision for the payment of all federal, 
state and local taxes, charges and assessments;

5.5  DM is a duly organized and validly existing Corporation registered in 
New Hampshire and in good standing under the laws of this state. DM has the 
power and authority to own its properties and to carry on DM as now being 
conducted and has the power to execute and deliver, and perform its 
obligations under the Loan Documents;

5.6  The execution and delivery and performance of DM of its obligations 
under the Loan Documents have been duly authorized by all requisite corporate 
action and will not violate any provision of law, any order of any court or 
other agency of government, or any indenture, agreement or other instrument 
to which DM is a party, or by which it is bound, or be in conflict with 
result in a breach of, or constitute a default under, or, except as may be 
provided therein, result in the creation or imposition of any lien, charge or 
encumbrance of any nature whatsoever upon any of the property or assets of 
DM pursuant to any such indenture, agreement or instrument. DM is not 
required to obtain any consent, approval or authorization form, or to file 
any declaration of statement with, any governmental instrumentality or other 
agency in connection with or as a condition to the execution, delivery or 
performance of the Loan Documents;

5.7  DM is not contemplating either the filing of a petition under any state 
or federal bankruptcy or insolvency laws or the liquidating of all or a major 
portion of its property, and has no knowledge of any person contemplating the 
filing of any such petition against it.

5.8  No statement of fact made by or on behalf of DM in any of the Loan 
Documents or in any certificate, exhibit or schedule furnished to BCEDC 
pursuant thereto, contains any untrue statement of a material fact or omits 
to state any material fact necessary to make statements contained therein or 
herein not misleading. There is no fact or circumstance presently known to DM 
that has not been disclosed to BCEDC that when made materially affects 
adversely, nor as far as DM can foresee, will materially affect adversely DM, 
operations or considerations (financial or otherwise) of DM.

5.9  DM has complied in all material respects with all applicable statutes, 
regulations and rules of federal, state and local governments in respect to 
the conduct of its business and operations, including without limitation all 
applicable environmental statutes, regulations and rules and all

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                                                                       Page 5

     statutes, regulations and rules and all statutes, regulations and rules 
     pertaining to the manufacturing of its products.

     5.10  No Event of Default has occurred and is continuing under the Loan 
     Documents and no event or condition which would, upon notice of 
     expiration of any applicable cure, constitute an Event of Default has 
     occurred and is continuing; DM is not in default under any note or other 
     evidence of indebtedness or other obligations for borrowed money or any 
     mortgage, deed to trust, indenture, loan agreement or other agreement 
     relating thereto.

     5.11  All representations, warranties and obligations of DM as provided 
     in any loan documents to include the employment commitments shall be 
     applicable to its successors and assigns.

     Each of the foregoing representations and warranties is true and correct 
     as of the date of the loan Documents and DM shall indemnify and hold 
     harmless Grantee and OSP from and against any loss, damage, or liability 
     attributable to the breach thereof, including any and all fees and 
     expenses incurred in the defense or settlement of any claim arising 
     therefrom against Grantee or OSP.

6.   ADDITIONAL EVENTS OF DEFAULT.

     The occurrence of any one or more of the following events shall 
     constitute an additional Event of Default under the Loan Documents:

     6.1  DM's failure to comply with the employment reporting requirements 
     as specified herein;

     6.2  DM's failure to meet the employment commitments as specified herein;

     6.3  Any attempt by DM to assign its rights under the Loan Documents or 
     any advance made or to be made hereunder or any interest therein, or if 
     the Secured Property is conveyed or encumbered in any way without the 
     prior written consent of Grantee and OSP;

     6.4  The facility is materially damaged or destroyed by fire or other 
     casualty or cause and the insurance proceeds therefrom are inadequate to 
     rebuild or restore the facility to its condition immediately prior to 
     such casualty;

     6.5  Any representation or warranty made herein or in any report, 
     certification, or other instrument furnished in connection with the Loan 
     Documents or any advances of Grant funds made hereunder, by or in behalf 
     of DM shall prove to be false or misleading in any material respect when 
     made;

     6.6  Any mechanics', laborers', materialmen's or similar statutory lien, 
     or any notice thereof, shall be filed against DM and shall not be 
     discharged within thirty (30) days of such filing;

     6.7  DM shall (i) apply for or consent to the appointment of a receiver, 
     trustee or liquidator of it or any of its property, (ii) admit in 
     writing its inability to pay its debts as they mature, (iii) make a 
     general assignment for the benefit of creditors, (iv) be adjudicated as 
     bankrupt or insolvent or (v) file a voluntary petition in bankruptcy, or 
     a petition or answer seeking reorganization or an arrangement with 
     creditors or to take advantage of any bankruptcy, reorganization, 
     arrangement, insolvency, readjustment of debt, dissolution or 
     liquidation law or statute, or an answer admitting the material 
     allegations of a petition filed against it in any proceeding under any 
     such law;

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                                                                       Page 6

     6.8  A petition, order, judgement or decree shall be entered, without the
     application, approval or consent of DM by any court of competent 
     jurisdiction, approving a petition seeking reorganization or approving 
     the appointment of a receiver, trustee or liquidator of DM of all or a 
     substantial part of its assets, and such order, judgment or decree shall 
     continue unstayed and in effect for any period of thirty (30) days;

     6.9  The dissolution, termination of existence, merger or consolidation 
     of DM or a sale of all or substantially all assets of DM out of the 
     ordinary course of business without the prior written consent of BCEDC; 
     and

     6.10 Failure to remedy an ineligible expenditure of grant funds or to 
     reimburse BCEDC, Grantee or OSP for any ineligible costs which are paid 
     from Grant funds.