Document:

Exhibit 10.40

                               TERM LOAN AGREEMENT

                          DATED AS OF NOVEMBER 9, 2006

                                      AMONG

                    QUAKER FABRIC CORPORATION OF FALL RIVER,

                                  AS BORROWER,

                    1903 DEBT FUND, LP, AND THE OTHER LENDING
                    INSTITUTIONS LISTED ON SCHEDULE 1 HERETO,

                                       AND

                           GB MERCHANT PARTNERS, LLC,

                             AS ADMINISTRATIVE AGENT

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                                TABLE OF CONTENTS

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1. DEFINITIONS AND RULES OF INTERPRETATION..................................................1

     1.1.DEFINITIONS  1

     1.2.RULES OF INTERPRETATION...........................................................21

2. TERM LOANS..............................................................................22

     2.1.REAL PROPERTY TERM LOAN...........................................................22

     2.2.EQUIPMENT TERM LOAN...............................................................22

     2.3.NOTES.............................................................................22

     2.4.INTEREST ON LOANS.................................................................23

3. REPAYMENT OF LOANS......................................................................23

     3.1.REAL PROPERTY TERM LOAN...........................................................23

         3.1.1.       MINIMUM AMORTIZATION PAYMENTS........................................23

         3.1.2.       LATE SALE AMORTIZATION PAYMENTS......................................24

         3.1.3.       MANDATORY PREPAYMENTS OF THE REAL PROPERTY TERM LOAN.................24

         3.1.4.       MANDATORY PREPAYMENTS OF THE EQUIPMENT TERM LOAN.....................26

         3.1.5.       ADDITIONAL TERM LOAN PREPAYMENTS.....................................26

         3.1.6.       OPTIONAL PREPAYMENTS OF TERM LOANS...................................27

         3.1.7.       APPLICATION OF PREPAYMENTS...........................................28

         3.1.8.       MATURITY DATE........................................................28

4. ENVIRONMENTAL AND PLANT CONSOLIDATION ESCROWS...........................................28

     4.1.ENVIRONMENTAL ESCROW..............................................................28

     4.2.PLANT CONSOLIDATION ESCROW........................................................29

5. CERTAIN GENERAL PROVISIONS..............................................................30
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     5.1.CLOSING FEE.......................................................................30

     5.2.FUNDS FOR PAYMENTS................................................................30

         5.2.1.       PAYMENTS TO ADMINISTRATIVE AGENT.....................................30

         5.2.2.       NO OFFSET, ETC.......................................................30

         5.2.3.       NON-U.S. LENDERS.....................................................30

     5.3.COMPUTATIONS 31

     5.4.INTEREST LIMITATION...............................................................31

     5.5.INTENTIONALLY OMITTED.............................................................32

     5.6.INTENTIONALLY OMITTED.............................................................32

     5.7.ADDITIONAL COSTS, ETC.............................................................32

     5.8.CAPITAL ADEQUACY..................................................................33

     5.9.CERTIFICATE  34

     5.10.            INTENTIONALLY OMITTED................................................34

     5.11.            INTEREST AFTER DEFAULT...............................................34

     5.12.            COLLATERAL SECURITY AND GUARANTIES...................................34

6. REPRESENTATIONS AND WARRANTIES..........................................................34

     6.1.CORPORATE AUTHORITY, ETC..........................................................34

         6.1.1.       EXISTENCE, GOOD STANDING.............................................34

         6.1.2.       AUTHORIZATION........................................................35

         6.1.3.       DELIVERY.............................................................36

         6.1.4.       ENFORCEABILITY.......................................................36

     6.2.FINANCIAL STATEMENTS; PROJECTIONS.................................................36

     6.3.SOLVENCY...........................................................................37

     6.4.NO MATERIAL  ADVERSE CHANGES, ETC.................................................37

     6.5.ABSENCE OF MORTGAGES AND LIENS....................................................37

     6.6.FRANCHISES, PATENTS, COPYRIGHTS, ETC..............................................37

     6.7.LITIGATION.........................................................................37
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    6.8.NO MATERIALLY ADVERSE CONTRACTS, ETC...............................................38

    6.9.COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.......................................38

     6.10.            TAX STATUS...........................................................38

     6.11.            NO DEFAULT OR EVENT OF DEFAULT.......................................38

     6.12.            HOLDING COMPANY AND INVESTMENT COMPANY ACTS..........................38

     6.13.            EMPLOYEE BENEFIT PLANS...............................................39

         6.13.1.      IN GENERAL...........................................................39

         6.13.2.      TERMINABILITY OF WELFARE PLANS.......................................39

         6.13.3.      GUARANTEED PENSION PLANS.............................................39

         6.13.4.      MULTIEMPLOYER PLANS..................................................39

     6.14.            REGULATIONS U AND X..................................................40

     6.15.            TRUE COPIES OF GOVERNING DOCUMENTS...................................40

     6.16.            FISCAL YEAR..........................................................40

     6.17.            PERFECTION OF SECURITY INTERESTS.....................................40

     6.18.            SUBSIDIARIES, ETC....................................................40

     6.19.            ENVIRONMENTAL COMPLIANCE.............................................40

     6.20.            BANK ACCOUNTS........................................................42

     6.21.            LABOR CONTRACTS......................................................42

     6.22.            DISCLOSURE...........................................................42

     6.23.            TITLE TO PROPERTIES; LEASES..........................................43

         6.23.1.      GENERAL..............................................................43

         6.23.2.      REAL PROPERTY........................................................43

     6.24.            CERTAIN TRANSACTIONS.................................................44

     6.25.            FIXED ASSETS.........................................................44

     6.26.            FOREIGN ASSETS CONTROL REGULATIONS, ETC..............................44
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     6.27.            COMPLIANCE...........................................................44

     6.28.            CONTRACTS............................................................45

     6.29.            UTILITIES AND PUBLIC ACCESS..........................................45

     6.30.            PHYSICAL CONDITION...................................................45

7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER....................................45

     7.1.PUNCTUAL PAYMENT..................................................................45

     7.2.MAINTENANCE OF OFFICE.............................................................45

     7.3.RECORDS AND ACCOUNTS..............................................................46

     7.4.FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION................................46

     7.5.NOTICES...........................................................................48

         7.5.1.       DEFAULTS.............................................................48

         7.5.2.       NOTICE OF LITIGATION AND JUDGMENTS...................................48

         7.5.3.       NOTIFICATION OF CLAIM AGAINST COLLATERAL.............................49

         7.5.4.       NOTICES CONCERNING INVENTORY COLLATERAL..............................49

         7.5.5.       NOTIFICATION OF ADDITIONAL INTELLECTUAL PROPERTY RIGHTS..............49

         7.5.6.       ENVIRONMENTAL EVENTS.................................................50

         7.5.7.       NOTIFICATION REGARDING THE REAL PROPERTY.............................50

     7.6.LEGAL EXISTENCE; MAINTENANCE OF PROPERTIES........................................50

     7.7.INSURANCE.........................................................................50

     7.8.TAXES.............................................................................51

     7.9.COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS............................51

     7.10.            EMPLOYEE BENEFIT PLANS...............................................51

     7.11.            USE OF PROCEEDS......................................................52

     7.12.            CERTAIN CHANGES......................................................52

     7.13.            CONDUCT OF BUSINESS..................................................52
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     7.14.            FURTHER ASSURANCES...................................................52

     7.15.            INSPECTION OF PROPERTIES AND BOOKS, ETC..............................52

         7.15.1.      GENERAL..............................................................52

         7.15.2.      APPRAISALS...........................................................52

         7.15.3.      COMMUNICATIONS WITH ACCOUNTANTS......................................53

         7.15.4.      ENVIRONMENTAL ASSESSMENTS............................................53

     7.16.            ADDITIONAL MORTGAGED PROPERTY........................................53

     7.17.            INTENTIONALLY OMITTED................................................54

     7.18.            DOMESTIC SUBSIDIARIES................................................54

     7.19.            LANDLORD WAIVERS.....................................................54

     7.20.            INTENTIONALLY OMITTED................................................54

     7.21.            FINANCIAL CONSULTANT.................................................54

     7.22.            POST CLOSING OBLIGATIONS.............................................54

8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER.......................................54

     8.1.INVESTMENTS.......................................................................54

     8.2.RESTRICTIONS ON INDEBTEDNESS......................................................55

     8.3.RESTRICTIONS ON LIENS.............................................................56

         8.3.1.       PERMITTED LIENS......................................................56

         8.3.2.       RESTRICTIONS ON NEGATIVE PLEDGES AND UPSTREAM LIMITATIONS............57

     8.4.RESTRICTED PAYMENTS...............................................................58

     8.5.MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS...................................58

         8.5.1.       MERGERS AND ACQUISITIONS.............................................58

         8.5.2.       DISPOSITION OF ASSETS................................................58

     8.6.SALE AND LEASEBACK................................................................58

     8.7.CHANGE OF FISCAL YEAR.............................................................59
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     8.8.EMPLOYEE BENEFIT PLANS............................................................59

     8.9.COMPLIANCE WITH ENVIRONMENTAL LAWS................................................59

     8.10.            CHANGE IN TERMS OF GOVERNING DOCUMENTS...............................59

     8.11.            CREATION OF SUBSIDIARIES.............................................60

     8.12.            TRANSACTIONS WITH AFFILIATES.........................................60

     8.13.            INTENTIONALLY OMITTED................................................60

     8.14.            BUSINESS ACTIVITIES..................................................61

9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER......................................61

     9.1.FIXED CHARGE COVERAGE RATIOS......................................................61

     9.2.CAPITAL EXPENDITURES..............................................................61

10. CLOSING CONDITIONS.....................................................................62

     10.1.            LOAN DOCUMENTS.......................................................62

     10.2.            CERTIFIED COPIES OF GOVERNING DOCUMENTS..............................62

     10.3.            CORPORATE OR OTHER ACTION............................................62

     10.4.            INCUMBENCY CERTIFICATE...............................................62

     10.5.            VALIDITY OF LIENS....................................................62

     10.6.            PERFECTION CERTIFICATES AND UCC SEARCH RESULTS.......................62

     10.7.            CERTIFICATES OF INSURANCE............................................62

     10.8.            INTENTIONALLY OMITTED................................................63

     10.9.            BORROWING BASE CERTIFICATES AND COLLATERAL UPDATE CERTIFICATE........63

     10.10.           ACCOUNTS RECEIVABLE AGING REPORT.....................................63

     10.11.           PAYMENT OF CLOSING FEES..............................................63

     10.12.           INTENTIONALLY OMITTED................................................63

     10.13.           OPINIONS OF COUNSEL..................................................63

     10.14.           SURVEY, TAXES, ETC...................................................63
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     10.15.           TITLE INSURANCE......................................................63

     10.16.           HAZARDOUS WASTE ASSESSMENTS..........................................64

     10.17.           INTENTIONALLY OMITTED................................................64

     10.18.           NO MATERIAL ADVERSE CHANGE...........................................64

     10.19.           LANDLORD WAIVERS.....................................................64

     10.20.           LANDLORD CONSENTS....................................................64

     10.21.           COLLATERAL EXAMINATIONS/APPRAISALS...................................64

     10.22.           FINANCIAL STATEMENT AND PROJECTIONS..................................64

     10.23.           REFERENCES...........................................................64

     10.24.           INTERCREDITOR AGREEMENT ET. AL.......................................64

     10.25.           NO LEGAL.............................................................65

     10.27.           IMPEDIMENT...........................................................65

     10.27.           PROCEEDINGS AND DOCUMENTS............................................65

     10.28.           REPRESENTATIONS TRUE; NO DEFAULT OR EVENT OF DEFAULT.................65

     10.29.           EXCHANGE LIMITATIONS.................................................65

11. INTENTIONALLY OMITTED..................................................................65

12. EVENTS OF DEFAULT; ACCELERATION; ETC...................................................65

     12.1.            EVENTS OF DEFAULT AND ACCELERATION...................................65

     12.2.            INTENTIONALLY OMITTED................................................68

     12.3.            REMEDIES.............................................................68

     12.4.            DISTRIBUTION OF COLLATERAL PROCEEDS..................................69

13. SETOFF.................................................................................70

14. THE ADMINISTRATIVE AGENT...............................................................71

     14.1.            AUTHORIZATION........................................................71

     14.2.            EMPLOYEES AND ADMINISTRATIVE AGENTS..................................72
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     14.3.            NO LIABILITY.........................................................72

     14.4.            NO REPRESENTATIONS...................................................72

         14.4.1.      GENERAL..............................................................72

         14.4.2.      CLOSING DOCUMENTATION, ETC...........................................72

     14.5.            PAYMENTS.............................................................73

         14.5.1.      PAYMENTS TO ADMINISTRATIVE AGENT.....................................73

         14.5.2.      DISTRIBUTION BY ADMINISTRATIVE AGENT.................................73

         14.5.3.      DELINQUENT LENDERS...................................................73

     14.6.            INTENTIONALLY OMITTED................................................74

     14.7.            INDEMNITY............................................................74

     14.8.            ADMINISTRATIVE AGENT AS LENDER.......................................74

     14.9.            RESIGNATION..........................................................74

     14.10.           NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.......................74

     14.11.           DUTIES IN THE CASE OF ENFORCEMENT....................................74

     14.12.           ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM........................75

15. EXPENSES...............................................................................76

16. INDEMNIFICATION........................................................................77

17. SURVIVAL OF COVENANTS, ETC.............................................................77

18. ASSIGNMENT AND PARTICIPATION...........................................................78

     18.1.            GENERAL CONDITIONS...................................................78

     18.2.            ASSIGNMENTS..........................................................78

     18.3.            REGISTER.............................................................79

     18.4.            PARTICIPATIONS.......................................................79

     18.5.            PAYMENTS TO PARTICIPANTS.............................................80

     18.6.            MISCELLANEOUS ASSIGNMENT PROVISIONS..................................80

     18.7.            ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE PARENT...................80
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     18.8.            NEW NOTES............................................................81

     18.9.            SPECIAL PURPOSE FUNDING VEHICLE......................................81

19. NOTICES, ETC...........................................................................82

20. GOVERNING LAW..........................................................................82

21. HEADINGS...............................................................................83

22. COUNTERPARTS...........................................................................83

23. ENTIRE AGREEMENT, ETC..................................................................83

24. WAIVER OF JURY TRIAL...................................................................83

25. CONSENTS, AMENDMENTS, WAIVERS, ETC.....................................................84

26. SEVERABILITY...........................................................................85

27. CONFIDENTIALITY........................................................................86

28. USA PATRIOT ACT........................................................................87

29. DESIGNATION OF PERMITTED LIENS.........................................................87
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SCHEDULES AND EXHIBITS

Schedule 1                 Lenders, Commitment Percentages, Lending Offices
Schedule 1.1(a)            Mortgaged Properties
Schedule 6.6               Intellectual Property
Schedule 6.7               Litigation
Schedule 6.8               Material Adverse Contracts
Schedule 6.10              Municipal Taxes
Schedule 6.13.1            Employment Matters
Schedule 6.18              Subsidiaries
Schedule 6.19(a)           Environmental Notices
Schedule 6.19(b)           Material Environmental Notices
Schedule 6.19(c            Hazardous Substances
Schedule 6.19(e) .         Material Environmental Reports
Schedule 6.20              Bank Accounts
Schedule 6.21              Labor Contracts
Schedule 6.23              Title to Properties
Schedule 6.25              Fixed Assets
Schedule 8.1               Existing Investments
Schedule 8.2               Existing Indebtedness
Schedule 8.3.1             Existing Liens
Schedule 10.20(a).         Landlord Waivers

Exhibit A                  Form of Compliance Certificate
Exhibit B                  Form of Assignment and Acceptance
Exhibit C                  Form of Term Note

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                               TERM LOAN AGREEMENT

         THIS TERM LOAN  AGREEMENT  dated as of November 9, 2006 is by and among
Quaker  Fabric  Corporation  of Fall River,  a  Massachusetts  corporation  (the
"BORROWER"),  Quaker Fabric Corporation,  a Delaware corporation (the "PARENT"),
1903 Debt Fund, LP and the other Lenders from time to time party hereto,  and GB
Merchant Partners,  LLC, a Delaware limited liability company, as Administrative
Agent.

         The parties hereto agree as follows:

                   1. DEFINITIONS AND RULES OF INTERPRETATION.

         1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this  SECTION 1 or elsewhere in the  provisions  of this Term Loan  Agreement
referred to below:

         ADJUSTED NET PROCEEDS.  With respect to any Real  Property,  the sum of
(i) the Net  Proceeds  realized  by the  Borrower on account of the sale of such
Real Property, plus (ii) the aggregate amount of Late Sale Amortization Payments
paid by the Borrower with respect to such Real Property,  if any, plus (iii) the
aggregate amount of any Sale Proceeds Credit  previously  applied to reduce such
Late Sale  Amortization  Payments,  if any, plus (iv) the then  outstanding Sale
Proceeds Credit Balance, if any.

         ADJUSTED  REAL  PROPERTY  VALUE.  With  respect to each  parcel of Real
Property,  an amount equal to 50% of the Real Property  Appraisal  Value of such
parcel of Real Property.

         ADMINISTRATIVE   AGENT.   GB   Merchant   Partners,   LLC,   acting  as
administrative  agent for the Lenders,  and each other  person  appointed as the
successor Administrative Agent in accordance with SECTION 14.9.

         ADMINISTRATIVE QUESTIONNAIRE. An Administrative Questionnaire in a form
supplied by the Administrative Agent.

         ADMINISTRATIVE   AGENT'S  OFFICE.  The  Administrative  Agent's  office
located at 101 Huntington  Ave.,  Boston MA 02109,  or at such other location as
the Administrative Agent may designate from time to time.

         ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Greenberg Traurig, LLP, or such
other counsel as may be approved by the Administrative Agent.

         AFFILIATE.  With respect to any Person, any other Person which directly
or indirectly,  controls,  is controlled by or is under common control with such
Person.  "Control"  means the power,  directly  or  indirectly,  (a) to vote ten
percent  (10%) or more of the  Capital  Stock  (on a fully  diluted  basis) of a
Person  having  ordinary  voting power for the election of  directors,  managing
members  or  general  partners  (as  applicable);  or (b) to direct or cause the
direction of the  management  and  policies of a Person  (whether by contract or
otherwise).

         ALLOCATED ESCROW AMOUNT. The total amount of Environmental Escrow Funds
allocated to each Remediation Location under the Business Plan.
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         AMORTIZATION   PAYMENT(S).    Collectively,    all   required   Minimum
Amortization Payments and Late Sale Amortization Payments.

         APPLICABLE MARGIN. With respect to the Real Property Term Loans and the
Equipment Term Loans, 7.75% per annum.

         APPLICABLE PENSION LEGISLATION.  At any time, any pension or retirement
benefits  legislation  (be it  national,  federal,  provincial,  territorial  or
otherwise) then applicable to the Parent or any of its Subsidiaries.

         APPROVED  FUND.  Any Fund  that is  administered  or  managed  by (a) a
Lender,  (b) an  Affiliate  of a Lender,  or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.

         APPROVED PLANT C RELOCATION  COSTS. All costs and expenses  incurred by
the Parent and its Subsidiaries associated with the relocation and consolidation
of the  operations  of the  Parent  and  its  Subsidiaries  of  Plant  C, as are
reasonably satisfactory to the Administrative Agent.

         ASSIGNMENT AND ACCEPTANCE. An assignment and acceptance entered into by
a Lender and an Eligible  Assignee  (with the consent of any party whose consent
is required by SECTION  18.2),  and  accepted by the  Administrative  Agent,  in
substantially  the  form  of  EXHIBIT  B or  any  other  form  approved  by  the
Administrative Agent.

         AVAILABILITY  RESERVE. The "Availability  Reserve" under and as defined
in the Revolving Credit Agreement.

         BALANCE SHEET DATE. September 30, 2006.

         BORROWER. As defined in the preamble hereto.

         BORROWING BASE CERTIFICATE.  Each Borrowing Base Certificate  delivered
by the Borrower to the Revolving  Credit Agent and/or  Revolving  Credit Lenders
pursuant to the Revolving Credit Agreement.

         BUSINESS  DAY.  Any day on which  commercial  banking  institutions  in
Boston, Massachusetts, are open for the transaction of banking business.

         BUSINESS  PLAN. The "Quaker  Fabric Bank  Presentation"  by Alvarez and
Marsal,  dated May 19, 2006, as supplemented on September 29, 2006,  October 30,
2006,  and  November  9,  2006,  as the same may be  updated  from time to time;
PROVIDED, HOWEVER, that any additional change in the projected sale proceeds for
any parcel of Real Property  reflected therein may only be made with the express
written consent of the Administrative Agent.

         CAPITAL ASSETS.  Fixed assets, both tangible (such as land,  buildings,
fixtures,  machinery and equipment) and intangible (such as patents, copyrights,
trademarks,  franchises  and  goodwill);  PROVIDED that Capital Assets shall not
include any item  customarily  charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with GAAP.

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         CAPITAL  EXPENDITURES.  Amounts  paid or  Indebtedness  incurred by the
Parent or any  Subsidiary of the Parent in  connection  with (i) the purchase or
lease by the Parent or such  Subsidiary of Capital Assets that would be required
to be  capitalized  and shown on the balance  sheet of such Person in accordance
with GAAP or (ii) the lease of any  assets by the Parent or such  Subsidiary  as
lessee under any Synthetic  Lease to the extent that such assets would have been
Capital Assets had the Synthetic Lease been treated for accounting purposes as a
Capitalized Lease.

         CAPITALIZED  LEASES.  Leases  under  which  the  Parent  or  any of its
Subsidiaries  is the lessee or obligor,  the  discounted  future rental  payment
obligations  under which are required to be  capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.

         CAPITAL STOCK. Any and all shares,  interests,  participations or other
equivalents (however designated) of capital stock of a corporation,  any and all
equivalent  ownership  interests in a Person (other than a corporation)  and any
and all warrants,  rights or options to purchase any of the foregoing (including
convertible debt instruments).

         CASUALTY EVENT. With respect to any property (including any interest in
property) of the Parent or any Subsidiary of the Parent, any loss of, damage to,
or  condemnation  or other taking of, such property for which the Parent or such
Subsidiary  receives  insurance  proceeds,  proceeds of a condemnation  award or
other compensation.

         CHANGE OF CONTROL.  An event or series of events by which:

                  (a) any  "person"  or  "group"  (as  such  terms  are  used in
         Sections  13(d) and 14(d) of the  Securities  Exchange Act of 1934, but
         excluding any employee benefit plan of such person or its subsidiaries,
         and any person or entity  acting in its  capacity as trustee,  agent or
         other fiduciary or administrator  of any such plan),  other than Nortex
         Holdings, Inc. or any Affiliate thereof, becomes the "beneficial owner"
         (as defined in Rules 13d-3 and 13d-5 under the Securities  Exchange Act
         of  1934,  except  that a  person  or group  shall  be  deemed  to have
         "beneficial  ownership" of all securities that such person or group has
         the right to acquire  (such  right,  an "option  right"),  whether such
         right is  exercisable  immediately  or only after the passage of time),
         directly or indirectly,  of 30% or more of the equity securities of the
         Parent  entitled  to vote for  members  of the  board of  directors  or
         equivalent  governing body of the Parent on a fully-diluted  basis (and
         taking into account all such  securities  that such person or group has
         the right to acquire pursuant to any option right);

                  (b) during any period of 12 consecutive  months, a majority of
         the members of the board of  directors  or other  equivalent  governing
         body of the Parent  ceases to be composed of  individuals  (i) who were
         members of that board or equivalent  governing body on the first day of
         such  period,  (ii)  whose  election  or  nomination  to that  board or
         equivalent  governing body was approved by  individuals  referred to in
         clause  (i)  above  constituting  at  the  time  of  such  election  or
         nomination  at least a majority of that board or  equivalent  governing
         body or (iii)  whose  election  or  nomination  to that  board or other
         equivalent  governing body was approved by  individuals  referred to in
         clauses (i) and (ii) above constituting at the time of such election or
         nomination  at least a majority of that board or  equivalent  governing
         body (excluding,  in the case of both clause (ii) and clause (iii), any
         individual whose initial  nomination for, or assumption of office as, a
         member of that board or equivalent governing body occurs as a result of
         an actual or  threatened  solicitation  of proxies or consents  for the
         election  or  removal of one or more  directors  by any person or group
         other than a solicitation  for the election of one or more directors by
         or on behalf of the board of directors); or

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                  (c) any  Person,  other  than  Nortex  Holdings,  Inc.  or any
         Affiliate thereof,  or two or more Persons acting in concert shall have
         acquired  by  contract  or  otherwise,  or shall  have  entered  into a
         contract or arrangement that, upon consummation thereof, will result in
         its or  their  acquisition  of  the  power  to  exercise,  directly  or
         indirectly,  a controlling influence over the management or policies of
         the  Parent,  or  control  over the  equity  securities  of the  Parent
         entitled to vote for members of the board of  directors  or  equivalent
         governing body of the Parent on a fully-diluted  basis (and taking into
         account all such  securities that such Person or group has the right to
         acquire  pursuant to any option right)  representing 30% or more of the
         combined voting power of such securities.

         CLOSING  DATE.  The  first  date on which the  conditions  set forth in
SECTIONS 10 have been satisfied and any Term Loan is to be made hereunder.

         CLOSING FEE.  See SECTION 5.1.

         CODE. The Internal Revenue Code of 1986.

         COLLATERAL.  All of the  property,  rights  and  interests  of (a)  the
Borrower,  (b) the Parent,  (c) each Subsidiary of the Parent, and (d) all other
Guarantors from time to time party to the Guaranties that are or are intended to
be subject to the Liens created by the Security Documents.

         COLLATERAL  UPDATE  CERTIFICATE.  Each  Collateral  Update  Certificate
delivered by the Borrower to the Revolving  Credit Agent and/or Revolving Credit
Lenders pursuant to the Revolving Credit Agreement.

         COMMITMENT. With respect to each Lender, the Dollar amount set forth on
SCHEDULE  1 hereto as the  amount of such  Lender's  commitment  (a) to make the
Equipment Term Loan to the Borrower, and (b) to make the Real Property Term Loan
to the Borrower.

         COMMITMENT PERCENTAGE.  With respect to each Lender, the percentage set
forth on  SCHEDULE 1 hereto  reflecting  such  Lender's  commitment  to make the
Equipment Term Loan and the Real Property Term Loan.

         COMPLIANCE CERTIFICATE.  See SECTION 7.4(D).

         CONSOLIDATED  OR  CONSOLIDATED.  With  reference  to any  term  defined
herein,  shall mean that term as applied to the  accounts  of the Parent and its
Subsidiaries, consolidated in accordance with GAAP.

                                       4
<PAGE>

         CONSOLIDATED EBITDA. For any period, (a) the net income (or deficit) of
the Parent and its  Subsidiaries  (determined  on a  consolidated  basis without
duplication  in  accordance  with GAAP) for such period,  plus (b) to the extent
deducted in calculating  net income (i) income taxes accrued during such period,
(ii) interest and fees in respect of Indebtedness  (including amounts accrued or
paid in respect of  Derivative  Agreements)  during such period  (whether or not
actually paid in cash during such period), (iii) depreciation,  amortization and
other non-cash charges  (including  asset  impairment  charges) accrued for such
period,  (iv)  extraordinary  losses during such period,  (v) costs and expenses
incurred by the Parent and its  Subsidiaries  in  connection  with the  Parent's
retention of the Financial  Consultant,  (vi) severance  charges incurred by the
Parent  and  its  Subsidiaries,   (vii)  up  to  $300,000  per  month  of  plant
consolidation  expenses  specifically  identified  to  the  satisfaction  of the
Administrative  Agent, and (viii)  transaction costs incurred during such period
in connection with the transactions contemplated hereby and the Revolving Credit
Agreement  not to exceed  $2,600,000 in the  aggregate,  minus (c) to the extent
such items were added in calculating net income (i)  extraordinary  gains during
such period and (ii) proceeds received during such period in respect of Casualty
Events and dispositions of any property (other than dispositions in the ordinary
course of business on ordinary business terms)

         CONSOLIDATED  INTEREST  EXPENSE.  For  any  period,  the  sum,  without
duplication,  for the Parent and its Subsidiaries  (determined on a consolidated
basis without  duplication in accordance with GAAP),  of the following:  (a) all
interest in respect of  Indebtedness  required to be paid or accrued during such
period  (whether  or not  actually  paid  during  such  period),  but  excluding
capitalized debt acquisition  costs (including fees and expenses related to this
Term Loan Agreement and the Revolving Credit Agreement) plus (b) the net amounts
payable  (or  minus  the  net  amounts  receivable)  in  respect  of  Derivative
Agreements  accrued during such period (whether or not actually paid or received
during such  period)  excluding  reimbursement  of legal fees and other  similar
transaction costs and further excluding payments required by reason of the early
termination  of Derivative  Agreements in effect on the date hereof plus (c) all
fees, including letter of credit fees and expenses (but excluding  reimbursement
of legal fees and any early  termination  fee paid by the  Borrower  pursuant to
Section 2.3 of the Existing  Credit  Agreement in connection with the Borrower's
reduction of the Total Commitment (as defined in the Existing Credit  Agreement)
effective as of February 3, 2006) incurred hereunder during such period.

         COPYRIGHT  MORTGAGE.  The  Memorandum of Grant of Security  Interest in
Copyrights,  dated  as of the  Closing  Date,  made  by  the  Borrower  and  the
Guarantors  in  favor  of  the  Administrative  Agent,  in  form  and  substance
satisfactory to the Administrative Agent.

         DEFAULT. See SECTION 12.1.

         DEFAULT  RATE.  An interest  rate equal to (i) the LIBOR Rate PLUS (ii)
the Applicable  Margin PLUS (iii) 2% per annum, to the fullest extent  permitted
by applicable laws.

         DELINQUENT LENDER.  See SECTION 14.5.3.

         DERIVATIVE  AGREEMENT.  Any forward contract,  futures contract,  swap,
option or other similar agreement or arrangement (including, without limitation,
caps, floors,  collars and similar agreements),  the value of which is dependent
upon interest  rates,  currency  exchange  rates,  commodities  or other indices
(including foreign exchange lines).

                                       5
<PAGE>

         DISTRIBUTION.  The  declaration  or  payment of any  dividend  on or in
respect  of any  shares  of any  class of  Capital  Stock of the  Parent  or any
Subsidiary  of the  Parent,  other than  dividends  payable  solely in shares of
common  stock of the Parent or such  Subsidiary;  the payment or  prepayment  of
principal  of,  premium,  if any,  or  interest  on,  or  purchase,  redemption,
defeasance, retirement or other acquisition of with respect to any shares of any
class of Capital Stock of the Parent or any  Subsidiary of the Parent,  directly
or indirectly  through a Subsidiary of such Person or otherwise  (including  the
setting  apart of assets  for a sinking or other  analogous  fund to be used for
such  purpose);  the return of capital  by the Parent or any  Subsidiary  of the
Parent to its  shareholders as such; or any other  distribution on or in respect
of any shares of any class of Capital  Stock of the Parent or any  Subsidiary of
the Parent.

         DOLLARS  OR $.  Dollars  in lawful  currency  of the  United  States of
America.

         DOMESTIC  LENDING  OFFICE.   Initially,   the  office  of  each  Lender
designated as such in SCHEDULE 1 hereto;  thereafter,  such other office of such
Lender,  if any,  located  within  the  United  States  that  will be  making or
maintaining Term Loans.

         DOMESTIC SUBSIDIARY. Any Subsidiary that is organized under the laws of
the United States of America,  any state or territory thereof or the District of
Columbia.

         ELIGIBLE  ASSIGNEE.  Any of (a) a Lender, (b) an Affiliate of a Lender,
(c) an Approved  Fund,  and (d) any other Person  (other than a natural  person)
approved by (i) the  Administrative  Agent and (ii) unless a Default or an Event
of Default has occurred and is continuing,  the Borrower (each such approval not
to be unreasonably withheld or delayed).

         ELIGIBLE EQUIPMENT.  All of the Equipment owned by the Borrower and the
Guarantors  except for any Equipment to which any of the  exclusionary  criteria
set forth  below  applies.  The  Administrative  Agent  shall  have the right to
establish,  modify or eliminate Reserves against Eligible Equipment from time to
time in its reasonable credit judgment. Eligible Equipment shall not include any
Equipment of any of the Borrower or the Guarantors that:

                  (a) is not  owned by such  Person  free and clear of all Liens
         and encumbrances, except the Liens in favor of Administrative Agent, on
         behalf of the Lenders, and other Permitted Liens;

                  (b) is not subject to a first priority perfected Lien in favor
         of Administrative Agent on behalf of the Lenders;

                  (c)  as to  which  any of the  applicable  representations  or
         warranties  pertaining to Equipment set forth in the Loan  Documents is
         untrue in any material respect;

                  (d) is not covered by casualty insurance reasonably acceptable
         to Administrative Agent;

                  (e) is otherwise  unacceptable to Administrative  Agent in its
         reasonable credit judgment; or

                  (f) which is not included in the Equipment Appraisal Report.

                                       6
<PAGE>

         ELIGIBLE REAL PROPERTY. All of the Real Property owned or leased by the
Borrower except for any Real Property to which any of the exclusionary  criteria
set forth  below  applies.  The  Administrative  Agent  shall  have the right to
establish, modify or eliminate Reserves against Eligible Real Property from time
to time in its  reasonable  credit  judgment.  Eligible Real Property  shall not
include any Real Property of any of the Borrower that:

                  (a) is not owned or leased by the  Borrower  free and clear of
         all Liens and encumbrances, except the Liens in favor of Administrative
         Agent, on behalf of the Lenders, and other Permitted Liens;

                  (b) is not subject to a first priority perfected Lien in favor
         of Administrative Agent on behalf of the Lenders;

                  (c)  as to  which  any of the  applicable  representations  or
         warranties  pertaining to Real Property and  environmental  matters set
         forth in the Loan Documents is untrue in any material respect;

                  (d)  as  to  which  the  Administrative  Agent  shall  not  be
         satisfied  with the  Borrower's  material  compliance  with all zoning,
         environmental  and  other  laws,  ordinances,   rules  and  regulations
         affecting or relating to such Real Property;

                  (e) as to which (i) any  condemnation  shall have  occurred or
         shall  have been  threatened,  (ii) any  significant  damage by fire or
         other casualty has been suffered which has not been repaired within 180
         days  since  the date of such  casualty,  (iii)  any  law,  regulation,
         ordinance, moratorium, injunctive proceeding, restriction,  litigation,
         action,  citation  or  similar  proceeding  or matter  shall  have been
         enacted,  adopted,  or  threatened  by any third party or  Governmental
         Authority,  which would have, in the Administrative  Agent's reasonable
         credit  judgment,  a material  adverse effect on the value of such Real
         Property;

                  (f) is not covered by casualty insurance reasonably acceptable
         to Administrative Agent; or

                  (g)  which  is not  included  in the Real  Property  Appraisal
         Report.

         EMPLOYEE  BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(3) of ERISA  maintained or contributed to by the Parent,  the Borrower
or any ERISA Affiliate,  other than a Guaranteed Pension Plan or a Multiemployer
Plan.

         ENVIRONMENTAL CLAIM. 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 Parent or any of its Subsidiaries 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 Parent or any of its Subsidiaries, the Real Property or
any part  thereof,  or (c) any  alleged  injury or  threat of injury to  health,
safety or the  environment by the Parent or any of its  Subsidiaries or relating
the Real Property or any part thereof.

                                       7
<PAGE>

         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 LAW(S). As defined in SECTION 6.19.

         ENVIRONMENTAL ESCROW FUNDS. As defined in Section 4.1(a).

         ENVIRONMENTAL  REPORT.  The  certain  report  dated  November  3,  2006
prepared by Environmental Resource Management.

         EQUIPMENT. As defined in UCC Article 9.

         EQUIPMENT APPRAISAL REPORT. The appraisal report on fixed assets issued
by Hilco  Appraisal  Services,  LLC on July 12,  2006,  as updated,  modified or
supplemented from time to time as provided in this Agreement.

         EQUIPMENT  APPRAISAL  SHORTFALL.  At any time,  the amount by which the
aggregate  outstanding  principal  amount of the  Equipment  Term  Loan  exceeds
seventy  percent  (70%) of the Net Orderly  Liquidation  Value of the  Equipment
established from time to time by the Equipment Appraisal Report.

         EQUIPMENT APPRAISAL SHORTFALL NOTICE. See SECTION 3.1.4(A)(I).

         EQUIPMENT APPRAISAL SHORTFALL PREPAYMENT. See SECTION 3.1.4(A)(II).

         EQUIPMENT  SALE.  A sale or other  disposition  by the  Borrower of any
Equipment.

         EQUIPMENT TERM LOAN. The term loan advanced to the Borrower pursuant to
SECTION 2.2.

         EQUIPMENT TERM LOAN COMMITMENT AMOUNT. An amount equal to the lesser of
(i)  70% of the  aggregate  Net  Orderly  Liquidation  Value  of the  Borrower's
Eligible  Equipment,  minus any  Reserves  established  by the  Lenders in their
reasonable discretion, and (ii) $12,100,000.

                                       8
<PAGE>

         EQUIPMENT TERM NOTES. See SECTION 2.3.

         ERISA. The Employee Retirement Income Security Act of 1974.

         ERISA AFFILIATE.  Any Person which is treated as a single employer with
the Parent or any Subsidiary of the Parent under Section 414 of the Code.

         ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension  Plan  within the meaning of Section  4043 of ERISA and the  regulations
promulgated  thereunder  as to which  the  requirement  of  notice  has not been
waived.

         ESCROW ACCOUNT.  An interest bearing escrow account  established in the
name of the  Administrative  Agent  with the  Escrow  Agent  containing  (i) the
Environmental Escrow Funds, and (ii) the Plant Consolidation Escrow Amount.

         ESCROW  AGENT.  GB Merchant  Partners,  LLC,  acting in its capacity as
escrow  agent  with  respect  to  the  Escrow  Account,  or  another  depository
institution mutually acceptable to the Administrative Agent and the Borrower.

         EUROCURRENCY  RESERVE RATE. For any day, the maximum rate (expressed as
a decimal)  at which any bank  subject  thereto  would be  required  to maintain
reserves  under  Regulation D of the Board of  Governors of the Federal  Reserve
System  (or any  successor  or  similar  regulations  relating  to such  reserve
requirements)  against  "EUROCURRENCY  LIABILITIES"  (as  that  term  is used in
Regulation D), if such liabilities were  outstanding.  The Eurocurrency  Reserve
Rate shall be  adjusted  automatically  on and as of the  effective  date of any
change in the Eurocurrency Reserve Rate.

         EVENT OF DEFAULT.  See SECTION 12.1.

         EXCESS REVOLVING CREDIT  AVAILABILITY.  As of any date of determination
thereof,  the difference  between (a) the lesser of (i) the Total  Commitment at
such  time and (ii)  the  Borrowing  Base at such  time,  and (b) the  Revolving
Exposure  at such time,  as each such term is defined  in the  Revolving  Credit
Agreement as in effect on the date hereof.

         EXCLUDED TAXES. With respect to the Administrative Agent and any Lender
or any  other  recipient  of any  payment  to be  made by or on  account  of any
obligation  of the Borrower  hereunder,  (a) taxes imposed on or measured by its
overall net income (however denominated),  and franchise taxes imposed on it (in
lieu of net income taxes),  by the  jurisdiction  (or any political  subdivision
thereof)  under the laws of which such  recipient  is  organized or in which its
principal office is located,  (b) any branch profits taxes imposed by the United
States  or any  similar  tax  imposed  by any  other  jurisdiction  in which the
Borrower is located,  (c) in the case of a Non-U.S.  Lender, any withholding tax
that is  imposed on amounts  payable  to such  Non-U.S.  Lender at the time such
Non-U.S. Lender becomes a party hereto, and (d) any taxes imposed on a Lender as
a result of such Lender's failure to comply with SECTION 5.2.3.

         EXISTING  CREDIT   AGREEMENT.   The  Revolving  Credit  and  Term  Loan
Agreement, dated as of May 18, 2005 (as amended as of July 27, 2005, October 25,
2005,  December 30, 2005,  March 22, 2006,  and May 6, 2006),  among the Parent,
Quaker Fabric Corporation of Fall River, the Lenders, the Administrative  Agent,
and the Issuing Bank and Cash Management Bank named therein.

         FEES. The Closing Fee and each other fee payable to the  Administrative
Agent  and/or  the  Lenders  pursuant  to  this  Agreement  and the  other  Loan
Documents.

                                       9
<PAGE>

         FINANCIAL  CONSULTANT.   Alvarez  and  Marsal,  or  another  nationally
recognized  financial consultant  reasonably  satisfactory to the Administrative
Agent.

         FISCAL QUARTER(S). The thirteen (13) or fourteen (14) week periods, the
first of which shall  commence on the first day of each Fiscal Year, and each of
which shall be referred to as "FQ1", "FQ2", "FQ3" and "FQ4", respectively.

         FISCAL YEAR. The fifty-two (52) or fifty-three  (53) week period ending
on the Saturday closest to January 1 of each calendar year.

         FIXED ASSET  COLLATERAL.  All  Collateral  consisting of Real Property,
Fixtures,  Equipment of the Borrower, the Parent, each Subsidiary of the Parent,
and any other  Guarantor  from time to time  party to the  Guaranties,  which is
subject to a  mortgage,  lien or  security  interest  pursuant  to the Term Loan
Documents, together with all identifiable proceeds of the foregoing.

         FIXED CHARGE COVERAGE RATIO. As at any date of determination, the ratio
of (a) (i) Consolidated EBITDA for the four Fiscal Quarter period ending on such
date of  determination  MINUS  (ii) the  aggregate  amount  of all  Non-Financed
Capital  Expenditures  made during such period MINUS (iii) the aggregate  amount
paid,  or required to be paid (without  duplication),  in cash in respect of the
current  portion of all income  taxes for such period  MINUS (iv) the  aggregate
amount of dividends and  distributions  permitted to be paid by the Parent under
SECTION 8.4 (if any) and  actually  paid in cash during such period PLUS (v) tax
refunds  received  in cash  during such period to (b) the sum for the Parent and
its  Subsidiaries  (determined  on a consolidated  basis without  duplication in
accordance  with GAAP),  of (i) the aggregate  amount of  Consolidated  Interest
Expense for such period and (ii) the  aggregate  amount of  regularly  scheduled
payments of principal in respect of Indebtedness  for borrowed money  (including
the principal  component of any payments in respect of Capitalized  Leases) paid
or required to be paid during such period  (excluding  payments made pursuant to
SECTIONS 3.1.3, 3.1.4, 3.1.5 and 3.1.6).

         FIXTURE(S). As defined in UCC Article 9.

         FOREIGN SUBSIDIARY.  Any Subsidiary that is not a Domestic Subsidiary.

         FUND.  Any Person  (other than a natural  person)  that is (or will be)
engaged in making,  purchasing,  holding or otherwise  investing  in  commercial
loans and similar extensions of credit in the ordinary course of its business.

         GAAP.  (i) When used in  SECTION  9,  whether  directly  or  indirectly
through reference to a capitalized term used therein,  means (A) principles that
are  consistent  with the  principles  promulgated  or adopted by the  Financial
Accounting  Standards Board and its predecessors,  in effect for the Fiscal Year
ended  on  December  31,  2005,  and  (B) to the  extent  consistent  with  such
principles, the accounting practice of the Parent and its Subsidiaries reflected
in the Parent's  financial  statements for the period ended on the Balance Sheet
Date,  and (ii)  when used in  general,  other  than as  provided  above,  means
principles that are (A) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (B) consistently applied with past financial statements of the
Parent and its Subsidiaries adopting the same principles,  provided that in each
case  referred to in this  definition  of "GAAP" a certified  public  accountant
would,  insofar as the use of such accounting  principles is pertinent,  be in a
position to deliver an unqualified opinion (other than qualifications  regarding
changes  in  GAAP  and  as to  normal  year-end  adjustments)  as  to  financial
statements in which such principles have been properly applied.

                                       10
<PAGE>

         GOVERNING  DOCUMENTS.  With respect to any Person,  its  certificate or
articles of  incorporation,  certificate  of formation,  or, as the case may be,
certificate of limited partnership,  its by-laws, operating agreement or, as the
case may be,  partnership  agreement  or other  constitutive  documents  and all
shareholder agreements, voting trusts and similar arrangements applicable to any
of its Capital Stock.

         GOVERNMENTAL  AUTHORITY.  Any  foreign,   federal,  state,  provincial,
regional,  local municipal or other government,  or any department,  commission,
board, bureau, agency, public authority or instrumentality thereof, or any court
or arbitrator.

         GUARANTIES.  The  Guaranties  made by the  Guarantors  in  favor of the
Lenders and the Administrative Agent pursuant to which such Guarantors guarantee
to the Lenders and the Administrative  Agent the payment and performance in full
of the Obligations.

         GUARANTORS.  Collectively,  (i) the  Parent,  Quaker  Mexico and Quaker
Textile, and (ii) any other direct or indirect Domestic Subsidiary of the Parent
which is not a Borrower.

         GUARANTEED  PENSION PLAN. Any employee  pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Parent, the
Borrower  or any  ERISA  Affiliate,  the  benefits  of which are  guaranteed  on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,  other
than a Multiemployer Plan.

         HAZARDOUS SUBSTANCES. As defined in SECTION 6.19.

         INDEBTEDNESS. As to any Person and whether recourse is secured by or is
otherwise  available  against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:

                  (a) every obligation of such Person for money borrowed,

                  (b)  every  obligation  of such  Person  evidenced  by  bonds,
         debentures,  notes or other similar instruments,  including obligations
         incurred in  connection  with the  acquisition  of property,  assets or
         businesses,

                  (c) every reimbursement obligation of such Person with respect
         to letters  of  credit,  bankers'  acceptances,  or similar  facilities
         issued for the account of such Person,

                                       11
<PAGE>

                  (d) every  obligation  of such Person issued or assumed as the
         deferred purchase price of property or services  (including  securities
         repurchase  agreements but excluding trade accounts  payable or accrued
         liabilities arising in the ordinary course of business),

                  (e) every  obligation  of such  Person  under any  Capitalized
         Lease,

                  (f) every obligation of such Person under any Synthetic Lease,

                  (g) all  sales  by such  Person  of (i)  accounts  or  general
         intangibles  for  money  due or to  become  due,  (ii)  chattel  paper,
         instruments  or documents  creating or evidencing a right to payment of
         money or (iii) other receivables (collectively "RECEIVABLES"),  whether
         pursuant to a purchase facility or otherwise,  other than in connection
         with the disposition of the business operations of such Person relating
         thereto or a disposition of defaulted receivables for collection (or as
         a sale of claims in bankruptcy) and not as a financing arrangement, and
         together  with  any  obligation  of such  Person  to pay any  discount,
         interest,  fees, indemnities,  penalties,  recourse,  expenses or other
         amounts in connection therewith,

                  (h)  every  obligation  of such  Person  (an  "EQUITY  RELATED
         PURCHASE OBLIGATION") to purchase,  redeem, retire or otherwise acquire
         for value any  shares of  Capital  Stock  issued by such  Person or any
         rights measured by the value of such Capital Stock,

                  (i) every  obligation  of such  Person  under  any  Derivative
         Agreement,

                  (j) every  obligation in respect of  Indebtedness of any other
         entity  (including  any  partnership  in which such Person is a general
         partner) to the extent that such Person is liable  therefor as a result
         of such Person's  ownership interest in or other relationship with such
         entity,  except  to the  extent  that the  terms  of such  Indebtedness
         provide  that such  Person is not  liable  therefor  and such terms are
         enforceable under applicable law, and

                  (k) every obligation,  contingent or otherwise, of such Person
         guaranteeing, or having the economic effect of guarantying or otherwise
         acting as surety for,  any  obligation  of a type  described  in any of
         clauses (a) through (j) (the "PRIMARY  obligation")  of another  Person
         (the "PRIMARY OBLIGOR"), in any manner, whether directly or indirectly,
         and including, without limitation, any obligation of such Person (i) to
         purchase or pay (or advance or supply  funds for the  purchase  of) any
         security for the payment of such primary  obligation,  (ii) to purchase
         property,  securities  or  services  for the  purpose of  assuring  the
         payment  of such  primary  obligation,  or  (iii) to  maintain  working
         capital,  equity  capital or other  financial  statement  condition  or
         liquidity of the primary obligor so as to enable the primary obligor to
         pay such primary obligation.

                  The "amount" or "principal  amount" of any Indebtedness at any
         time of determination represented by (1) any Indebtedness,  issued at a
         price that is less than the principal amount at maturity thereof, shall
         be the  amount  of the  liability  in  respect  thereof  determined  in
         accordance  with GAAP, (2) any  Capitalized  Lease shall be the present
         value of the aggregate of the rentals obligation under such Capitalized
         Lease payable over the term thereof that is not subject to  termination
         by the  lessee,  (3) any sale of  receivables  shall be the  amount  of
         unrecovered  capital or principal  investment of the  purchaser  (other
         than  the  Parent  or any of its  wholly-owned  Subsidiaries)  thereof,
         excluding  amounts  representative  of yield or interest earned on such
         investment, (4) any Synthetic Lease shall be the stipulated loss value,
         termination  value  or other  equivalent  amounts,  (5) any  derivative
         contract shall be the maximum amount of any termination or loss payment
         required to be paid by such Person if such derivative contract were, at
         the time of  determination,  to be terminated by reason of any event of
         default  or early  termination  event  thereunder,  whether or not such
         event of default or early termination  event has in fact occurred,  (6)
         any equity  related  purchase  obligation  shall be the  maximum  fixed
         redemption  or  purchase  price  thereof  inclusive  of any accrued and
         unpaid  dividends to be comprised in such  redemption or purchase price
         and (7) any  guaranty  or other  contingent  liability  referred  to in
         clause  (k) shall be an  amount  equal to the  stated  or  determinable
         amount of the primary  obligation  in respect of which such guaranty or
         other contingent  obligation is made or, if not stated or determinable,
         the  maximum  reasonably   anticipated  liability  in  respect  thereof
         (assuming such Person is required to perform  thereunder) as determined
         by such Person in good faith.

                                       12
<PAGE>

         INTERCREDITOR AGREEMENT.  That certain Intercreditor Agreement dated as
of the date hereof by and among the Revolving Credit Agent,  the  Administrative
Agent, the Borrower and the Guarantors.

         INVESTMENTS.  All loans,  advances (other than  commission,  travel and
similar  advances to  officers,  directors  and  employees  made in the ordinary
course of  business),  extensions  of credit  (other  than  accounts  receivable
arising in the ordinary course of business  provided that in no event shall such
extension  of credit  exceed 180 days in  accordance  with its  terms),  deposit
account  or  contribution  of capital  to any  Person or any  investment  in, or
purchase or other  acquisition  of, the  Capital  Stock of, or in respect of any
guaranty of the obligations of, any Person.  In determining the aggregate amount
of  Investments  outstanding  at any  particular  time:  (i) the  amount  of any
Investment  represented  by a  guaranty  shall be  taken  at not  less  than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be  included  as an  Investment  all  interest  accrued  with  respect  to
Indebtedness  constituting an Investment unless and until such interest is paid;
(iii)  there shall be  deducted  in respect of each such  Investment  any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment,  liquidating dividend or liquidating distribution);  (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such  Investment,  whether as  dividends,  interest  or  otherwise,  except that
accrued  interest  included  as  provided  in the  foregoing  clause (ii) may be
deducted  when paid;  and (v) there  shall not be  deducted  from the  aggregate
amount of Investments any decrease in the value thereof.

         LATE SALE AMORTIZATION PAYMENT. See SECTION 3.1.3(A)(II).

         LENDER  OR  LENDERS.   1903  Debt  Fund,  LP,  and  the  other  lending
institutions  listed on  SCHEDULE 1 hereto and any other  person who  becomes an
assignee of any rights and obligations of a Lender pursuant to SECTION 18.

                                       13
<PAGE>

         LIBOR  BUSINESS  DAY.  Any day on which  commercial  banks are open for
international business (including dealings in U.S. dollar deposits) in London.

         LIBOR RATE.  The rate of interest  equal to (i) the rate  determined by
the Administrative  Agent at which Dollar deposits for an interest period of one
month are offered as of 11:00 am London time on the LIBOR Business Day preceding
the date of determination based on information presented on Page 3750 of the Dow
Jones Market  Service  (formerly  known as the  Telerate  Service) or such other
commercially  available  source providing such information and designated by the
Administrative  Agent,  divided  by  (ii) a  number  equal  to  1.00  minus  the
Eurocurrency  Reserve Rate. If the rate  described  above does not appear on the
Dow Jones Market Service or such other  commercially  available source providing
such  information and designated by the  Administrative  Agent on any applicable
interest  determination  date, the LIBOR Rate shall be the rate (rounded upward,
if  necessary,  to the nearest one  hundred-thousandth  of a percentage  point),
determined on the basis of the offered  rates for one month  deposits in Dollars
which  are  offered  by four  major  banks in the  London  interbank  market  at
approximately  11:00 a.m.  London time, on the LIBOR  Business Day preceding the
date of  determination.  The  principal  London office of each of the four major
London  banks will be  requested  to provide a quotation  of its Dollar  deposit
offered rate. If at least two such  quotations  are provided,  the rate for that
date will be the arithmetic mean of the quotations. If fewer than two quotations
are  provided as  requested,  the rate for that date will be  determined  on the
basis of the rates quoted for loans in Dollars to leading  European  banks for a
period of time comparable to such one month period offered by major banks in New
York City at approximately  11:00 a.m. New York City time, on the LIBOR Business
Day preceding the date of determination.

         LICENSES. See SECTION 6.27.

         LIENS.  Any   encumbrance,   mortgage,   deed  of  trust,   assignment,
attachment,  deposit  arrangement,  lien  (statutory,  judgment  or  otherwise),
pledge, hypothecation,  charge, restriction or other security interest, security
agreement,  or any interest of any kind securing any obligation of any entity or
person,  whether  such  interest is based on common law,  civil law,  statute or
contract.

         LOAN DOCUMENTS.  This Term Loan Agreement,  the Notes,  the Guaranties,
the Security  Documents,  the  Intercreditor  Agreement and any other  agreement
between the Borrower and/or the Guarantors and the  Administrative  Agent and/or
any Lender relating to the transaction contemplated hereby.

         MATURITY DATE.  May 18, 2010.

         MINIMUM AMORTIZATION PAYMENTS.  See SECTION 3.1.1(A).

         MINIMUM PROCEEDS. As to any parcel of Real Property, 92.5% of projected
sale proceeds for such Real Property, as set forth in the Business Plan.

         MORTGAGED PROPERTY.  Any Real Property which is subject to a Mortgage.

         MORTGAGE(S). (a) The mortgage(s) and, if applicable,  deed(s) of trust,
dated on or prior to the Closing Date,  from the Borrower to the  Administrative
Agent with  respect to the fee and, if  applicable,  leasehold  interests of the
Borrower in the properties  listed on SCHEDULE 1.1(A) hereto,  and (b) any other
deeds of mortgage,  deeds of trust, or deeds of leasehold  mortgage executed and
delivered to the Administrative Agent after the Closing Date pursuant to SECTION
7.16  hereof,  in  each  case,  in  form  and  substance   satisfactory  to  the
Administrative Agent.

                                       14
<PAGE>

         MULTIEMPLOYER  PLAN.  Any  multiemployer  plan  within  the  meaning of
Section 3(37) of ERISA maintained or contributed to by the Parent,  the Borrower
or any ERISA Affiliate.

         NET ORDERLY  LIQUIDATION  VALUE. With respect to any fixed assets other
than Real Property,  the net appraised  orderly  liquidation value of such fixed
assets, as determined from time to time by the Administrative Agent by reference
to the most recent Equipment Appraisal Report.

         NET  PROCEEDS.  With respect to any Real Property  Sale,  and Equipment
Sale or the sale of any other  Collateral by the Borrower or any  Guarantor,  an
amount equal to: (a) cash payments received by the applicable party arising from
such sale; MINUS (b) any bona fide direct costs incurred in connection with such
sale,  including (i) income or gains Taxes payable by the applicable  seller and
its  stockholders or members,  partners or owners of such  stockholders and as a
result of any gain recognized in connection with such sale during the tax period
in which such sale occurs,  (ii) payment of the outstanding  Indebtedness (other
than the Term Loans and the obligations  under the Revolving  Credit  Agreement)
that is secured by a Lien on the assets in  question  and that is required to be
repaid under the terms  thereof as a result of such sale  (including  principal,
premium, or penalty, if any, interest, costs, expenses and other amounts), (iii)
reasonable and customary broker's fees,  commissions and professionals fees paid
to Persons that are not Affiliates of the Parent or any of its  Subsidiaries and
incurred  in  consummating  any such  sale,  and (iv) any cash  reserve  for any
indemnification   payments  (fixed  or  contingent)   attributable  to  seller's
indemnities,  representations and warranties to the purchaser in respect of such
sale undertaken by the applicable seller in connection with such sale;  PROVIDED
that upon release of any such cash reserve, the amount of cash released shall be
considered Net Proceeds.

         NON-FINANCED CAPITAL EXPENDITURES Capital Expenditures paid in cash and
not  financed  with  Indebtedness  for  borrowed  money;  PROVIDED  that Capital
Expenditures  financed with the proceeds of Revolving  Loans under the Revolving
Credit   Agreement   shall  be  deemed  to  constitute   "Non-Financed   Capital
Expenditures" for purposes of this Agreement.

         NON-U.S. LENDER. See SECTION 5.2.3.

         NOTES.  Collectively,  the  Equipment  Term Notes and the Real Property
Term Notes.

         OBLIGATIONS.  All  indebtedness,  obligations  and  liabilities  of the
Parent,  the  Borrower  and  their  Subsidiaries  to  any of  the  Lenders,  the
Administrative Agent, or any of their Affiliates,  individually or collectively,
existing on the date of this Term Loan Agreement or arising  thereafter,  direct
or indirect,  joint or several,  absolute or  contingent,  matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise,  arising or incurred  under this Term Loan Agreement or any
of the other Loan Documents or any Derivative  Agreement or in respect of any of
the Term Loans made, or any  obligations  under  Derivative  Agreements or other
instruments at any time evidencing any thereof.

                                       15
<PAGE>

         OUTSTANDING  or  OUTSTANDING.  With  respect  to the  Term  Loans,  the
aggregate unpaid principal thereof as of any date of determination.

         PARENT. As defined in the preamble hereto.

         PATENT  AGREEMENT.   The  Patent  Collateral  Assignment  and  Security
Agreement, dated as of the Closing Date, made by the Borrower and the Guarantors
in favor of the Administrative Agent, in form and substance  satisfactory to the
Administrative Agent.

         PBGC. The Pension Benefit Guaranty  Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.

         PERFECTION CERTIFICATES.  The Perfection Certificates referenced to and
defined in the Security Agreement.

         PERMITTED LIENS.  Liens permitted by SECTION 8.3.1 hereof.

         PERSON.  Any  individual,   corporation,   limited  liability  company,
partnership,  limited partnership, trust, unincorporated association,  business,
or other legal entity, or any Governmental Authority.

         PLANT C SALE PROCEEDS. As defined in SECTION 4.2(A).

         PLANT C LOCATION.  The real property and  improvements  located at 1082
Davol Street, Fall River, Massachusetts.

         PLANT CONSOLIDATION ESCROW AMOUNT. The information technology,  design,
build-out and rental costs  associated with the relocation and  consolidation of
the Plant C facilities,  as are reasonably  satisfactory  to the  Administrative
Agent.

         PLEDGE AGREEMENT. The Pledge Agreement,  executed by the Parent and the
Borrower  in  favor  of  the   Administrative   Agent,  in  form  and  substance
satisfactory to the Administrative Agent.

         PROJECTIONS. Those certain treasury cash flow forecasts of receipts and
disbursements delivered by the Borrower to the Administrative Agent on or before
the Closing Date, as such forecasts may be updated from time to time pursuant to
SECTION 7.4(M).

         QUAKER MEXICO.  Quaker Fabric Mexico, SA de CV, a corporation organized
under the laws of Mexico.

         QUAKER   TEXTILE.   Quaker   Textile   Corporation,   a   Massachusetts
corporation.

                                       16
<PAGE>

         REAL PROPERTY. All real property at any time owned or leased (as lessee
or sublessee) by the Parent or any Subsidiary of the Parent, including,  without
limitation, such real property set forth on SCHEDULE 1.1(A) hereto.

         REAL PROPERTY APPRAISAL REPORT.  See SECTION 3.1.3(B).

         REAL PROPERTY APPRAISAL SHORTFALL. At any time, the amount by which the
aggregate  outstanding  amount of the Real Property Term Loan exceeds the sum of
(i) the aggregate  Adjusted Real Property Value of all parcels of Real Property,
plus (ii) the then outstanding Sale Proceeds Credit Balance, if any.

         REAL PROPERTY APPRAISAL SHORTFALL NOTICE. See SECTION 3.1.3(B)(I).

         REAL PROPERTY APPRAISAL SHORTFALL PREPAYMENT. See SECTION 3.1.3(B)(II).

         REAL  PROPERTY  APPRAISAL  VALUE.  With  respect to each parcel of Real
Property,  the  market  value of such  Real  Property,  as set forth in the Real
Property  Appraisal Report, and including any value of such Real Property as may
be determined by the  Administrative  Agent pursuant to appraisals  delivered to
and approved by the Administrative Agent in its reasonable  discretion after the
Closing Date.

         REAL PROPERTY  SALE. A sale or other  disposition  by the Borrower of a
parcel of Real Property,  or in the case of leased Real Property,  an assignment
of the leasehold estate.

         REAL  PROPERTY  TERM  LOAN.  The term  loan  advanced  to the  Borrower
pursuant to SECTION 2.1.

         REAL  PROPERTY  TERM LOAN  COMMITMENT  AMOUNT.  An amount  equal to the
lesser  of (i) 50% of the  aggregate  Real  Property  Appraisal  Value  for each
Eligible Real Property,  minus any Reserves  established by the Lenders in their
reasonable discretion, and (ii) $12,500,000.

         REAL PROPERTY TERM NOTES. See SECTION 3.1.3(B).

         RECORD.  The grid attached to a Note, or the continuation of such grid,
or any other  similar  record,  including  computer  records,  maintained by any
Lender with respect to any Term Loan referred to in such Note.

         REGISTER. See SECTION 18.3.

         RELATED PARTIES.  With respect to any specified  Person,  such Person's
Affiliates  and  the  respective  directors,  officers,  employees,  agents  and
advisors of such Person and such Person's Affiliates.

         RELEASE.  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.

                                       17
<PAGE>

         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.

         REMEDIATION COSTS. With respect to each Remediation Location, the costs
of conducting a Remediation of all Environmental  Conditions at such Remediation
Location.

         REMEDIATION   LOCATION(S).   Collectively,   the  Borrower's  locations
referred to in the Environmental Report.

         REMEDIATION  REPORT. For each Remediation  Location,  an assessment and
remediation  plan  (and  all  associated  costs)  prepared  by a  Licensed  Site
Professional (as defined in Mass. Gen. L. ch. 21E) of  Environmental  Conditions
known at that time for each Remediation Location.

         REQUIRED  LENDERS.  As of any date, any one or more Lenders  holding at
least fifty-one  percent (51%) of the outstanding  principal balance of the Term
Loans.

         RESERVES.  As determined by the Administrative Agent in the exercise of
its  reasonable  credit  judgment  and  upon  written  notice  delivered  to the
Borrower,  such amounts as the Administrative Agent may establish (a) to reflect
(i) any Default or Event of Default, or (ii) events,  conditions,  contingencies
or risks which do or may have a material adverse effect on the business, assets,
operations or financial condition of the Borrower and the Guarantors (taken as a
whole),  or the  ability  of the Parent and its  Subsidiaries  to fulfill  their
obligations  under this Term Loan Agreement or the other Loan Documents,  or (b)
to reflect the belief of the Administrative  Agent that any collateral report or
financial  information  furnished  by  or on  behalf  of  the  Borrower  to  the
Administrative  Agent  or any of the  Lenders  is or may have  been  incomplete,
inaccurate  or  misleading in any material  respect,  or (c) to reflect  events,
conditions,  contingencies or risks which would reasonably be expected to have a
material adverse effect on the value of the Collateral, taken as a whole, or the
value of the security interests and other rights of the Administrative Agent and
the Lenders in the  Collateral  (including  the  enforceability,  perfection  or
priority  thereof),  or (d) to reflect any costs and  expenses  (or  anticipated
costs and expenses)  determined by the Administrative  Agent in order to realize
on the Collateral.

         RESTRICTED PAYMENT. In relation to the Parent and any Subsidiary of the
Parent,  any (a)  Distribution  or (b) any payment made to any Affiliates of the
Parent or a Subsidiary  of the Parent in respect of  management,  consulting  or
other similar services provided to the Parent or a Subsidiary of the Parent.

         REVOLVING  CREDIT AGENT.  Bank of America,  N.A., and its successors in
such capacity under the Revolving Credit Agreement.

         REVOLVING CREDIT AGREEMENT.  The Amended and Restated  Revolving Credit
Agreement,  dated as of November 9, 2006,  among the Borrower,  the Parent,  the
Revolving  Credit Agent and the Lenders named  therein,  as amended from time to
time.

         REVOLVING  CREDIT  DOCUMENTS.  The Revolving  Credit Agreement and each
other document,  instrument and agreement from time to time executed pursuant to
the foregoing,  including,  without  limitation,  the Revolving  Credit Security
Documents.

                                       18
<PAGE>

         REVOLVING CREDIT SECURITY  DOCUMENTS.  The "Guaranties",  the "Security
Agreement",  the  "Copyright  Mortgage",  the  "Patent  Agreement",  the "Pledge
Agreement",  the "Mortgages",  the "Trademark Agreement" (each as defined in the
Revolving Credit Agreement), and all other instruments and documents,  including
without  limitation  Uniform  Commercial  Code  financing  statements  and other
equivalent registration documents,  control agreements and the like, required to
be executed or  delivered  pursuant to, or in  connection  with,  the  Revolving
Credit  Agreement  or any other "Loan  Document"  (as  defined in the  Revolving
Credit Agreement).

         REVOLVING LOAN(S). As defined in the Revolving Credit Agreement.

         SALE  PROCEEDS  CREDIT.  With respect to any Real  Property  Sale,  the
amount  by which  (a) the sum of (i) the Net  Proceeds  realized  upon such Real
Property Sale, plus (ii) the aggregate amount of Late Sale Amortization Payments
paid by the Borrower as a result of the failure to sell such Real Property on or
before the date therefor set forth in the Business  Plan, if any, plus (iii) the
aggregate amount of any Sale Proceeds Credit  previously  applied to reduce such
Late Sale  Amortization  Payments,  is  greater  than (b) the  Minimum  Proceeds
established for such parcel of Real Property.

         SALE PROCEEDS CREDIT BALANCE.  At any time, the aggregate amount of all
unapplied Sale Proceeds Credits.

         SALE PROCEEDS  SHORTFALL.  With respect to any Real Property  Sale, the
positive difference, if any, between (a) the Adjusted Real Property Value of the
applicable  parcel of Real Property,  and (b) the Adjusted Net Proceeds received
by Borrower in respect of such Real Property Sale.

         SARBANES-OXLEY ACT.  The Sarbanes-Oxley Act of 2002.

         SECURITY  AGREEMENT.  The Security  Agreement,  dated as of the Closing
Date, among the Borrower, the Guarantors and the Administrative Agent.

         SECURITY  DOCUMENTS.  The  Guaranties,   the  Security  Agreement,  the
Copyright  Mortgage,  the  Patent  Agreement,   the  Mortgages,   the  Trademark
Agreement,  Pledge Agreement and all other instruments and documents,  including
without  limitation  Uniform  Commercial  Code  financing  statements  and other
equivalent registration documents,  control agreements and the like, required to
be executed or delivered  pursuant  to, or in  connection  with,  this Term Loan
Agreement or any other Loan Document.

         SENIOR MANAGEMENT.  The chairman,  president,  chief executive officer,
chief  financial  officer,  any  executive  vice  president,   any  senior  vice
president,  the  vice-president - legal and  environmental,  the treasurer,  the
controller, or the general counsel of the Parent or a Subsidiary of the Parent.

                                       19
<PAGE>

         SUBSIDIARY.  Any  corporation,  association,  trust,  or other business
entity  of which  the  designated  parent  shall at any  time  own  directly  or
indirectly  through a Subsidiary or  Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.

         SYNTHETIC LEASE. Any lease of goods or other property,  whether real or
personal,  which is treated as an  operating  lease  under GAAP and as a loan or
financing for U.S. income tax purposes.

         TAXES.  All  present  or  future  taxes,   levies,   imposts,   duties,
deductions,  withholdings,  assessments,  fees or other  charges  imposed by any
Governmental  Authority,  including any interest,  additions to tax or penalties
applicable thereto.

         TERM LOAN(S). The Equipment Term Loan and the Real Property Term Loan.

         TERM LOAN AGREEMENT. This Term Loan Agreement,  including the Schedules
and Exhibits hereto.

         TITLE INSURANCE  COMPANY.  Stewart Title Guaranty  Company,  or another
nationally  recognized  title  insurance  company  reasonably  acceptable to the
Administrative Agent.

         TITLE POLICY. In relation to each Mortgaged Property,  an ALTA standard
form title insurance policy issued by the Title Insurance Company in such amount
as may be determined by the  Administrative  Agent  insuring the priority of the
Mortgage  of  such  Mortgaged  Property  and  that  the  Parent  or  one  of its
Subsidiaries  holds  marketable fee simple or leasehold  title to such Mortgaged
Property, subject only to Permitted Liens and which shall not contain exceptions
for mechanics  liens,  persons in occupancy or matters which would be shown by a
survey (except as may be permitted by such Mortgage),  shall not insure over any
matter except to the extent that any such affirmative insurance is acceptable to
the  Administrative  Agent in its reasonable credit judgment,  and shall contain
such endorsements and affirmative  insurance as the Administrative  Agent in its
discretion  may  require,   including  but  not  limited  to  (a)  comprehensive
endorsement,  (b) variable rate of interest endorsement,  (c) usury endorsement,
(d) revolving credit  endorsement,  (e) tie-in  endorsement,  (f) doing business
endorsement and (g) ALTA form 3.1 zoning endorsement.

         TOTAL  COMMITMENT.  The sum of the  Commitments  of the Lenders,  as in
effect from time to time.

         TRADEMARK  AGREEMENT.  The  Trademark  Collateral  Security  and Pledge
Agreement, dated as of the Closing Date, made by the Borrower and the Guarantors
in favor of the Administrative  Agent and the Assignments of Trademarks executed
in   connection   therewith,   in  form  and  substance   satisfactory   to  the
Administrative Agent.

         UCC. The Uniform  Commercial  Code, as the same may, from time to time,
be enacted and in effect in the Commonwealth of Massachusetts; PROVIDED, that to
the extent  that the UCC is used to define any term  herein or in any other Loan
Document and such term is defined differently in different Articles or Divisions
of the UCC, the definition of such term contained in Article or Division 9 shall
govern; PROVIDED FURTHER, that if, by reason of mandatory provisions of law, any
or all of the attachment, perfection or priority of, or remedies with respect to
the  Administrative  Agent's Lien on any  Collateral  is governed by the Uniform
Commercial  Code as  enacted  and in effect  in a  jurisdiction  other  than the
Commonwealth of Massachusetts,  the term "UCC" shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction  solely for purposes of
the provisions  thereof  relating to such  attachment,  perfection,  priority or
remedies and for purposes of definitions related to such provisions.

                                       20
<PAGE>
         VOTING  STOCK.  Stock or  similar  interests,  of any class or  classes
(however  designated),  the holders of which are at the time  entitled,  as such
holders,  to vote for the  election of a majority of the  directors  (or persons
performing  similar functions) of the corporation,  association,  trust or other
business entity  involved,  whether or not the right so to vote exists by reason
of the happening of a contingency.

         1.2. RULES OF INTERPRETATION.

                  (a) A reference  to any document or  agreement  shall  include
         such document or agreement as amended,  modified or  supplemented  from
         time to time in  accordance  with its  terms and the terms of this Term
         Loan Agreement.

                  (b) The singular  includes the plural and the plural  includes
         the singular.

                  (c) Unless otherwise expressly  indicated,  a reference to any
         law or regulation includes any amendment or modification to such law or
         regulation.

                  (d)  A  reference  to  any  Person   includes  its   permitted
         successors and permitted assigns.

                  (e)  Accounting  terms not otherwise  defined  herein have the
         meanings  assigned to them by GAAP applied on a consistent basis by the
         accounting entity to which they refer.

                  (f) The words  "include",  "includes" and  "including" are not
         limiting.

                  (g) All  terms  not  specifically  defined  herein or by GAAP,
         which terms are defined in the Uniform  Commercial Code as in effect in
         the Commonwealth of  Massachusetts,  have the meanings assigned to them
         therein,  with the term "instrument" being that defined under Article 9
         of the Uniform Commercial Code.

                  (h) Reference to a particular "Section" refers to that section
         of this Term Loan Agreement unless otherwise indicated.

                  (i) The words  "herein",  "hereof",  "hereunder"  and words of
         like import shall refer to this Term Loan  Agreement as a whole and not
         to any particular section or subdivision of this Term Loan Agreement.

                  (j) Unless otherwise expressly  indicated,  in the computation
         of periods of time from a specified date to a later specified date, the
         word "from" means "from and including," the words "to" and "until" each
         mean  "to  but  excluding,"  and  the  word  "through"  means  "to  and
         including."

                                       21
<PAGE>

                  (k) This Term Loan  Agreement and the other Loan Documents may
         use several  different  limitations,  tests or measurements to regulate
         the  same  or  similar  matters.   All  such  limitations,   tests  and
         measurements  are,  however,  cumulative  and  are to be  performed  in
         accordance with the terms thereof.

                  (l) This Term Loan  Agreement and the other Loan Documents are
         the result of negotiation  among, and have been reviewed by counsel to,
         among others, the Administrative Agent, the Borrower and the Guarantors
         and are the product of discussions and negotiations  among all parties.
         Accordingly,  this Term Loan Agreement and the other Loan Documents are
         not intended to be construed against the Administrative Agent or any of
         the  Lenders  merely on  account of the  Administrative  Agent's or any
         Lender's involvement in the preparation of such documents.

                  (m) If at any  time  any  change  in  GAAP  would  affect  the
         computation of any financial ratio or requirement set forth in any Loan
         Document,  and either the  Borrower or the  Required  Lenders  shall so
         request,  the Administrative  Agent, the Lenders and the Borrower shall
         negotiate in good faith to amend such ratio or  requirement to preserve
         the original intent thereof in light of such change in GAAP (subject to
         the approval of the Required Lenders); provided that, until so amended,
         (i)  such  ratio  or  requirement  shall  continue  to be  computed  in
         accordance with GAAP prior to such change therein and (ii) the Borrower
         shall  provide to the  Administrative  Agent and the Lenders  financial
         statements and other documents  required under this Term Loan Agreement
         or as reasonably  requested  hereunder  setting forth a  reconciliation
         between calculations of such ratio or requirement made before and after
         giving effect to such change in GAAP.

                                 2. TERM LOANS.

         2.1. REAL PROPERTY TERM LOAN.  Subject to the terms and  conditions set
forth in this Term Loan Agreement, each Lender agrees to lend to the Borrower on
the Closing Date its Real Property Term Loan in an amount equal to such Lender's
Commitment  Percentage  of the Real Property Term Loan  Commitment  Amount.  Any
portion of the Real  Property  Term Loan  Commitment  Amount not advanced on the
Closing Date may not be borrowed  thereafter,  except as  otherwise  provided in
Section 4.1(c).

         2.2. EQUIPMENT TERM LOAN. Subject to the terms and conditions set forth
in this Term Loan  Agreement,  each Lender agrees to lend to the Borrower on the
Closing  Date  an  Equipment  Term  Loan in an  amount  equal  to such  Lender's
Commitment  Percentage of the Equipment Term Loan Commitment Amount. Any portion
of the Equipment  Term Loan  Commitment  Amount not advanced on the Closing Date
may not be borrowed thereafter.

         2.3.  NOTES.  The Real Property  Term Loan and the Equipment  Term Loan
shall be evidenced by separate promissory notes of the Borrower in substantially
the form of EXHIBIT C hereto  (each a "REAL  PROPERTY  TERM NOTE" or  "EQUIPMENT
TERM NOTE", as applicable,  and collectively referred to herein as the "NOTES"),
each dated the  Closing  Date (or such other date on which a Lender may become a
party  hereto  in  accordance   with  SECTION  18  hereof)  and  completed  with
appropriate insertions.  Each Lender shall receive a Real Property Term Note and
an Equipment Term Note payable to the order of such Lender in a principal amount
equal to such Lender's Commitment Percentage of the aggregate amount of the Real
Property Term Loan and the Equipment Term Loan,  respectively,  and representing
the obligation of the Borrower to pay to such Lender such  principal  amount or,
if less, the outstanding amount of such Lender's  Commitment  Percentage of each
of the Real  Property  Term Loan and  Equipment  Term Loan,  respectively,  plus
interest  accrued  thereon,  as  set  forth  below.  The  Borrower   irrevocably
authorizes  each Lender to make or cause to be made a notation on such  Lender's
Term Note Record  reflecting  the  original  principal  amount of such  Lender's
Commitment  Percentage of each of the Real Property Term Loan and Equipment Term
Loan,  respectively,  and, at or about the time of such Lender's  receipt of any
principal payment on such Lender's Real Property Term Note and/or Equipment Term
Note, an appropriate  notation on such Lender's Term Note Record reflecting such
payment(s).  The  aggregate  unpaid  amount set forth on such Lender's Term Note
Record shall be PRIMA FACIE  evidence of the principal  amount thereof owing and
unpaid to such Lender with respect to the Real  Property Term Loan and Equipment
Term  Loan,  as  applicable,  but the  failure  to  record,  or any  error in so
recording,  any such amount on such  Lender's  Term Note Record shall not affect
the  obligations  of the  Borrower  hereunder  or under any Term Note or to make
payments of principal of and interest on any Term Note when due.

                                       22
<PAGE>

         2.4. INTEREST ON LOANS.  Except as otherwise  provided in SECTION 5.11,
the Real Property  Term Loan and the Equipment  Term Loan shall bear interest at
the rate per annum  equal to the LIBOR Rate as in effect  from time to time PLUS
the  Applicable  Margin.  The  Borrower  promises  to pay  interest  on the Real
Property Term Loan and the Equipment Term Loan or any portion thereof in arrears
on the last day of each calendar month, commencing November 30, 2006, and on the
Maturity Date.

                             3. REPAYMENT OF LOANS.

         3.1. REAL PROPERTY TERM LOAN.

                  3.1.1. MINIMUM AMORTIZATION PAYMENTS.

                           (a)  Subject  to the  following  provisions  of  this
                  SECTION  3.1,  upon  the  sales  of the  last  parcel  of Real
                  Property  contemplated  to be sold in  Fiscal  Years  2006 and
                  2007, as set forth in the Business  Plan,  and the sale of one
                  additional  parcel of Real  Property in Fiscal Year 2008,  the
                  Borrower  shall  commence to repay the  principal  of the Real
                  Property Term Loan in equal monthly  installments  of $100,000
                  (each, a "MINIMUM  AMORTIZATION  PAYMENT") payable on the last
                  day of  each  calendar  month  (each a  "MINIMUM  AMORTIZATION
                  PAYMENT DATE").

                           (b) Notwithstanding the foregoing:

                                    (i) no Minimum Amortization Payment shall be
                           required  for the month ending July 31, in any Fiscal
                           Year; and

                                    (ii) no Minimum  Amortization  Payment shall
                           be required on any Minimum  Amortization Payment Date
                           to the extent  that as of such  Minimum  Amortization
                           Payment  Date,  the Lenders have  received  since the
                           first day of the then current Fiscal Year,  Late Sale
                           Amortization  Payments,   mandatory  prepayments  and
                           voluntary prepayments on account of the Real Property
                           Term  Loan,  in an amount no less than the  aggregate
                           scheduled Minimum Amortization Payments on account of
                           the Real Property Term Loan during such period.

                  3.1.2. LATE SALE AMORTIZATION PAYMENTS.

                           (a) In the event one or more parcels of Real Property
                  are not sold or  otherwise  disposed of by the  Borrower on or
                  before  the  applicable  scheduled  dates  set  forth  in  the
                  Business Plan, the Borrower shall repay the principal  balance
                  of the Real  Property Term Loan,  beginning  with the month in
                  which the first such Real Property Sale should have  occurred,
                  in an amount  equal to  $150,000  per month (each a "LATE SALE
                  AMORTIZATION PAYMENT"), payable on the last day of each month.
                  The  Borrower  shall  continue to make Late Sale  Amortization
                  Payments  until  the  first to occur of (i) the date  that the
                  Borrower   consummates  the  Real  Property   Sale(s)  of  the
                  parcel(s) of Real Property that  triggered the  requirement to
                  make Late  Sale  Amortization  Payments,  and (ii) the date on
                  which  the  aggregate  amount  of (x) Late  Sale  Amortization
                  Payments  made by the  Borrower,  plus (y) any  Sale  Proceeds
                  Credit Balance  previously  applied to reduce or eliminate any
                  Late Sale  Amortization  Payment(s),  if any,  have equaled or
                  exceeded the aggregate  Minimum  Proceeds for all such parcels
                  of Real Property that  triggered the  requirement to make Late
                  Sale Amortization Payments.

                                       23
<PAGE>

                           (b) Notwithstanding the foregoing:

                                    (i) no Late Sale Amortization  Payment shall
                           be  required  for the  month  ending  July 31, in any
                           Fiscal Year; and

                                    (ii) any Late Sale Amortization  Payment may
                           be  eliminated or reduced to the extent of the amount
                           of the then current Sale Proceeds Credit Balance,  if
                           any.

                           (c) Real  Properties  scheduled  for sale  under  the
                  Business Plan shall be subject to substitution by the Borrower
                  with other Real Properties scheduled for sale.

                           (d) The Late Sale  Amortization  Payments required to
                  be made pursuant to this SECTION 3.1.2 shall be in addition to
                  any Minimum Amortization Payments and mandatory prepayments on
                  the Real  Property  Term Loan  required  hereunder,  except as
                  expressly set forth in SECTION 3.1.1(B) above.

                  3.1.3. MANDATORY PREPAYMENTS OF THE REAL PROPERTY TERM LOAN.

                           (a) REAL  PROPERTY  SALE  PREPAYMENTS.  The  Borrower
                  shall make mandatory  prepayments  of the principal  amount of
                  the Real  Property  Term  Loan upon  consummation  of any Real
                  Property  Sale,  in an  amount  equal  to the  100% of the Net
                  Proceeds realized upon such Real Property Sale, subject to the
                  following:

                                    (i) SALE PROCEEDS CREDIT.  In the event that
                           the  Borrower  realizes a Sale  Proceeds  Credit with
                           respect to any Real Property  Sale, the Sale Proceeds
                           Credit  may be  applied  to,  and shall  reduce,  any
                           required Late Sale Amortization  Payment(s),  and any
                           prepayments  required under (x) SECTION  3.1.3(A)(II)
                           with respect to any Sale Proceeds  Shortfall(s),  and
                           (y)  SECTION   3.1.3(B)(II)   with   respect  to  any
                           Appraisal  Shortfall(s),  until  the  Sales  Proceeds
                           Credit Balance is reduced to zero.

                                       24
<PAGE>

                                    (ii) SALE PROCEEDS  SHORTFALL.  In the event
                           that a Sale Proceeds Shortfall occurs with respect to
                           any Real Property  Sale,  the Borrower  shall make an
                           additional  payment of principal on the Real Property
                           Term  Loan in an  amount  equal to the Sale  Proceeds
                           Shortfall (less any applicable Sale Proceeds  Credit)
                           for such parcel of Real Property.

                           (b) REAL PROPERTY APPRAISAL PREPAYMENTS.

                                    (i) REAL PROPERTY  APPRAISALS.  The Borrower
                           shall engage Hilco Appraisal Services, LLC or another
                           nationally  recognized  appraisal company  reasonably
                           acceptable to the Administrative  Agent to conduct an
                           annual  appraisal of the Real  Property to take place
                           in the month of November  of each  Fiscal  Period and
                           deliver a report on the value of each  parcel of Real
                           Property  (the  "REAL  PROPERTY  APPRAISAL  REPORT").
                           Based on evaluation  of the Real  Property  Appraisal
                           Report,  the  Administrative  Agent  shall  determine
                           whether a Real Property  Appraisal  Shortfall exists,
                           and shall so notify the  Borrower in writing (a "REAL
                           PROPERTY APPRAISAL  SHORTFALL  NOTICE").  If the Real
                           Property Appraisal Shortfall  identified by reference
                           to the  applicable  Real  Property  Appraisal  Report
                           represents  a decrease in value of the Real  Property
                           of more  than  thirty  percent  (30%)  over  the most
                           recent Real Property  Appraisal  Report  delivered to
                           the  Administrative  Agent,  the Borrower may, within
                           twenty (20) Business Days after  delivery of the Real
                           Property Appraisal Shortfall Notice, establish either
                           that a Real  Property  Appraisal  Shortfall  does not
                           exist  or  that  the  aggregate  amount  of the  Real
                           Property  Appraisal  Shortfall  is less than that set
                           forth  in  the  Real  Property  Appraisal   Shortfall
                           Notice, and shall notify the Administrative  Agent in
                           writing  of the  same  (a  "REAL  PROPERTY  APPRAISAL
                           SHORTFALL  RESPONSE").   Administrative  Agent  shall
                           consider any such Real Property  Appraisal  Shortfall
                           Response by the  Borrower  in good  faith,  and shall
                           notify the Borrower of its  determination to make any
                           adjustments to the Real Property Appraisal  Shortfall
                           amount  based  upon  the  Real   Property   Appraisal
                           Shortfall Response. The Borrower's failure to deliver
                           a Real Property  Appraisal  Shortfall Response within
                           the time  frame  set  forth  above  shall  be  deemed
                           acceptance  by  the  Borrower  of the  Real  Property
                           Appraisal  Shortfall  set forth in the Real  Property
                           Appraisal Shortfall Notice.

                                    (ii)  REAL  PROPERTY   APPRAISAL   SHORTFALL
                           PREPAYMENT.  If a Real Property  Appraisal  Shortfall
                           exists,  the Borrower shall be required to prepay the
                           principal of the Real Property Term Loan in an amount
                           equal  to  the  applicable  Real  Property  Appraisal
                           Shortfall (less any applicable Sale Proceeds  Credit,
                           if  any)  (a  "REAL  PROPERTY   APPRAISAL   SHORTFALL
                           PREPAYMENT").  A Real  Property  Appraisal  Shortfall
                           Prepayment shall be paid by Borrower as follows:

                                       25
<PAGE>

                                             (x) on the date  twenty  five  (25)
                                    Business Days after delivery to the Borrower
                                    of the  Real  Property  Appraisal  Shortfall
                                    Notice,    the   Borrower   shall   pay   to
                                    Administrative Agent, for the account of the
                                    Lenders, the lesser of (A) $500,000, and (B)
                                    the amount of the  applicable  Real Property
                                    Appraisal Shortfall; and

                                             (y)   thereafter,   on   the   last
                                    Business Day of each of the next  succeeding
                                    three (3) calendar months  following the end
                                    of the month  during  which  the  prepayment
                                    described  in  SECTION   3.1.3(B)(II)(X)  is
                                    payable,  the  Borrower  shall  pay  to  the
                                    Administrative Agent, for the account of the
                                    Lenders,  the greater of (A)  $150,000,  and
                                    (B) one third of the remaining unpaid amount
                                    of the  Real  Property  Appraisal  Shortfall
                                    Prepayment,  but in no event  more  than the
                                    amount  of  the  applicable  remaining  Real
                                    Property Appraisal Shortfall.

                  3.1.4. MANDATORY PREPAYMENTS OF THE EQUIPMENT TERM LOAN.

                           (a) FIXED ASSET APPRAISAL PREPAYMENTS.

                                    (i) EQUIPMENT APPRAISALS. The Borrower shall
                           engage  Hilco  Appraisal  Services,  LLC  or  another
                           nationally  recognized  appraisal company  reasonably
                           acceptable to the  Administrative  Agent to update or
                           render a semi-annual  Equipment  Appraisal  Report to
                           take place in the months of April and October of each
                           Fiscal  Period.  Based on evaluation of the Equipment
                           Appraisal  Report,  the  Administrative  Agent  shall
                           determine  whether an Equipment  Appraisal  Shortfall
                           exists,  and shall so notify the  Borrower in writing
                           (an "EQUIPMENT APPRAISAL SHORTFALL NOTICE").

                                    (ii)    EQUIPMENT     APPRAISAL    SHORTFALL
                           PREPAYMENT.  Upon receipt of the Equipment  Appraisal
                           Shortfall  Notice,  the Borrower shall be required to
                           prepay the principal of the Equipment Term Loan in an
                           amount equal to the  applicable  Equipment  Appraisal
                           Shortfall   (an   "EQUIPMENT    APPRAISAL   SHORTFALL
                           PREPAYMENT")  within  five (5)  Business  Days  after
                           delivery to the Borrower of the  Equipment  Appraisal
                           Shortfall Notice.

                           (b) EQUIPMENT  SALE  PREPAYMENTS.  The Borrower shall
                  make  mandatory  prepayments  of the  principal  amount of the
                  Equipment Term Loan upon  consummation  of any Equipment Sale,
                  in an amount  equal to the 100% of the Net  Proceeds  realized
                  upon such Equipment Sale.

                  3.1.5. ADDITIONAL TERM LOAN PREPAYMENTS. Concurrently with the
         receipt by the Parent or any Subsidiary of the Parent of:

                           (a) net cash proceeds from the issuance by the Parent
                  or any Subsidiary of any debt (other than debt permitted under
                  SECTION   8.2)  or  equity   securities   (other  than  equity
                  securities issued in connection with any compensatory employee
                  benefit or option plan); or

                           (b) net cash  proceeds  received by the Parent or any
                  Subsidiary  from Casualty  Events which have not been utilized
                  by the  Parent or such  Subsidiary  to repair or  replace  the
                  property so damaged, destroyed or taken within one hundred and
                  eighty (180) days of receipt of such proceeds;

                                       26
<PAGE>

         the Borrower shall pay to the  Administrative  Agent for the respective
         accounts of the Lenders an amount equal to one hundred  percent  (100%)
         of such  proceeds,  to be  applied  in the  manner set forth in SECTION
         3.1.7; provided,  that (i) to the extent that any amounts received as a
         result of any Casualty  Event  related to  Collateral  other than Fixed
         Asset  Collateral  are  applied  to  prepay  the  Revolving  Loans  and
         permanently   reduce  the  Commitments   under  the  Revolving   Credit
         Agreement,  such amounts  shall not be required to be applied to prepay
         the Term Loans  pursuant to SECTION  3.1.5(B),  (ii) the Borrower shall
         only be required to apply 50% pursuant to SECTION 3.1.5 of the net cash
         proceeds from the issuance by the Parent or any  Subsidiary of any debt
         or equity  securities  so long as 50% of such  proceeds  are applied to
         prepay  the  Revolving  Loans.   Notwithstanding  the  foregoing,   the
         provisions of this SECTION  3.1.5(B) shall not impair any  restrictions
         set forth in the Loan  Documents  with  respect  to the  incurrence  of
         Indebtedness by the Parent or any of its Subsidiaries.

                  3.1.6.  OPTIONAL PREPAYMENTS OF TERM LOANS. The Borrower shall
         have the right at any time to prepay  the Real  Property  Term Loan and
         the Equipment Term Loan on or before the Maturity Date, as a whole,  or
         in part,  in minimum  amounts of $500,000,  upon not less than five (5)
         Business  Days  prior  written  notice  to  the  Administrative  Agent;
         PROVIDED, that (a) each partial prepayment shall be allocated among the
         Lenders,  in proportion,  as nearly as  practicable,  to the respective
         outstanding  amount of each such  Lender's  Real  Property Term Note or
         Equipment Term Note, as the case may be, with adjustments to the extent
         practicable   to  equalize  any  prior   prepayments   not  exactly  in
         proportion,  (b) any  prepayment  of  principal of the Term Loans shall
         include all  interest  accrued to the date of  prepayment  and shall be
         applied pro rata among the Lenders,  and (c) the  Borrower  shall pay a
         prepayment  fee to the  Administrative  Agent,  for the  account of the
         Lenders, in connection with any such voluntary prepayment, as follows:

                           (i) if such  prepayment  is made on or  prior  to the
                  first  anniversary  of the Closing  Date,  an amount  equal to
                  2.50% of the amount prepaid;

                           (ii)  if such  prepayment  is made  after  the  first
                  anniversary  of the Closing Date but on or prior to the second
                  anniversary  of the Closing  Date, an amount equal to 1.75% of
                  the amount prepaid;

                           (iii) if such  prepayment  is made  after the  second
                  anniversary  of the Closing  Date but on or prior to the third
                  anniversary  of the Closing  Date, an amount equal to 1.50% of
                  the amount prepaid; and

                           (iv)  if such  prepayment  is made  after  the  third
                  anniversary  of the  Closing  Date but  prior to the  Maturity
                  Date, an amount equal to 1.00% of the amount prepaid.

                                       27
<PAGE>

No amount  repaid  with  respect to the Term Loans may be  reborrowed.  Unless a
Default or an Event of Default has occurred and continues to exist, the Borrower
may allocate any amount payable  pursuant to this SECTION 3.1.6 between the Term
Loans in its discretion.

                  3.1.7. APPLICATION OF PREPAYMENTS.

                           (a)  Subject  to  the  terms  of  the   Intercreditor
                  Agreement, all payments made pursuant to SECTIONS 3.1.3(A) and
                  3.1.3(B)  shall be applied  as  follows:  FIRST,  to repay all
                  amounts  outstanding  under the Real Property Term Loan, until
                  paid in full, pro rata among the Lenders,  in accordance  with
                  their respective  Commitment  Percentages;  and SECOND, to all
                  amounts  outstanding under the Equipment Term Loan, until paid
                  in full, pro rata among the Lenders,  in accordance with their
                  respective Commitment Percentages.

                           (b) All payments  made  pursuant to SECTION  3.1.4(A)
                  and,  subject  to the  terms of the  Intercreditor  Agreement,
                  SECTION   3.14(B),   shall  be  used  to  repay  all   amounts
                  outstanding under the Equipment Term Loan, until paid in full,
                  pro rata among the Lenders in accordance with their respective
                  Commitment Percentages.

                           (c) All payments  made pursuant to SECTION 3.1.5 and,
                  except as otherwise provided in SECTION 3.1.6,  SECTION 3.1.6,
                  shall be applied  between the Real  Property Term Loan and the
                  Equipment  Term  Loan  in such  manner  as  determined  by the
                  Administrative Agent in its sole discretion.

                           (d)  All  prepayments  of the  Term  Loans  shall  be
                  allocated  among  the  Lenders  in  proportion,  as  nearly as
                  practicable,  to the  respective  outstanding  amounts of each
                  such Lender's Notes or loan accounts, as the case may be, with
                  adjustments  to the extent  practicable  to equalize any prior
                  prepayments not exactly in proportion.  No amounts repaid with
                  respect to the Term Loans  pursuant to this SECTION  3.1.7 may
                  be reborrowed under this Term Loan Agreement.

                  3.1.8.  MATURITY DATE.  Notwithstanding any other provision in
         this Term Loan  Agreement,  the  entire  principal  balance of the Term
         Loans,  together  with all  accrued  and unpaid  interest,  any payment
         required  to be made  under this  ARTICLE 3, and all other  outstanding
         Obligations,  shall be due and payable on the Maturity Date, unless due
         sooner as a result of acceleration hereunder.

                4. ENVIRONMENTAL AND PLANT CONSOLIDATION ESCROWS.

         4.1. ENVIRONMENTAL ESCROW.

                  (a) On the Closing Date, The Administrative Agent shall retain
         from the proceeds of the Real Property Term Loan the sum of one million
         dollars  ($1,000,000.00)  (the  "ENVIRONMENTAL  ESCROW  FUNDS"),  which
         amount  shall be deposited  by the  Administrative  Agent in the Escrow
         Account.  The  Environmental  Escrow  Funds shall be  available  to the
         Borrower,  and,  following the  occurrence of an Event of Default,  the
         Administrative  Agent and the Lenders,  to fund the  Remediation  Costs
         with respect to each of the Remediation Locations.

                                       28
<PAGE>

                  (b) The Administrative  Agent will release to the Borrower all
         or a portion of the  Environmental  Escrow  Funds for each  Remediation
         Location in an amount not  exceeding  the  Allocated  Escrow Amount for
         such   Remediation   Location   (unless   otherwise   agreed   by   the
         Administrative  Agent) to pay or reimburse the Borrower for payment of,
         the reasonable costs of undertaking a Remediation of the  Environmental
         Conditions  at a  Remediation  Location or  reimburse  the Borrower for
         Remediation  offsets,  credits or work  performed  by a purchaser  of a
         Remediation Location, upon delivery of reasonable evidence delivered by
         the Borrower to the Administrative Agent supporting the total aggregate
         amount of such costs and, if applicable, showing that such amounts have
         been paid by the  Borrower;  provided,  that for each such  Remediation
         Location,   such  Remediation  is  performed  in  accordance  with  the
         recommendations   set  forth  in  the  Remediation   Report  reasonably
         satisfactory to the Administrative Agent.

                  (c) With respect to any Remediation Location, (i) in the event
         that the Administrative Agent reasonably determines that no Remediation
         is  necessary in order to eliminate  Environmental  Conditions  at such
         Remediation  Location as may be required by Environmental  Law, or (ii)
         (A) after  completion  of all  required  Remediation  of  Environmental
         Conditions at such Remediation  Location,  or (B) upon  consummation of
         the sale of such  Remediation  Location,  there  remains  unapplied any
         Allocated Escrow Amount for such Remediation  Location,  the balance of
         such Allocated  Escrow Amount  (including any interest  earned thereon)
         shall be applied as follows: FIRST, against any Sale Proceeds Shortfall
         (less  any Sale  Proceeds  Credit)  arising  from the sale of such Real
         Property,  if applicable,  SECOND, to any Appraisal Shortfall (less any
         Sales Proceeds  Credit) then due and payable,  THIRD,  to any Late Sale
         Amortization  Payments  (less any Sales  Proceeds  Credit) then due and
         payable,  FOURTH,  to any Equipment  Appraisal  Shortfall  then due and
         payable and,  FIFTH,  to the  Borrower,  as a Real  Property  Term Loan
         advance.

                  (d)  Notwithstanding  any provision in this SECTION 4.1 to the
         contrary,  the Borrower's obligations under this Agreement with respect
         to  any  environmental  matters,  including  but  not  limited  to  its
         obligations under SECTIONS 6.19, 7.5.6 and 8.9, shall not be limited by
         the  existence  of  any   Environmental   Escrow  Funds.  The  Borrower
         acknowledges  that  the  Administrative   Agent  shall  not  be  deemed
         responsible under Environmental Laws or otherwise for any Environmental
         Condition at any Remediation Location.

         4.2. PLANT CONSOLIDATION ESCROW.

                  (a) In the event that the Borrower  consummates  a sale of the
         Plant C Location, the Borrower shall cause the purchaser to deliver the
         Net  Proceeds  of such sale to the  Administrative  Agent (the "PLANT C
         SALE  PROCEEDS").  The  Administrative  Agent shall deposit one million
         dollars  ($1,000,000.00)  of such  Plant C Sale  Proceeds  (the  "Plant
         Consolidation  Escrow  Amount")  in the Escrow  Account to fund Plant C
         Consolidation  Costs, as further described below. Any remaining Plant C
         Sale Proceeds shall be applied against the  outstanding  Obligations as
         provided herein.

                  (b) Provided  that there exists no Default or Event of Default
         has occurred  and  continues to exist,  the  Administrative  Agent will
         cause  the  Escrow  Agent to  release  funds  constituting  the Plant C
         Consolidation Escrow Amount (together with any interest thereon) to the
         Borrower  on a periodic  basis,  in an amount  equal to the  reasonable
         Plant C  Consolidation  Costs  incurred  by the  Borrower,  based  upon
         reasonable  evidence  delivered by the  Borrower to the  Administrative
         Agent supporting the total aggregate amount of such costs.  Advances on
         account of the Plant C  Consolidation  Escrow  Account shall be made no
         more  frequently  than  monthly,  and in a  minimum  amount of at least
         $50,000.00, unless otherwise agreed by the Administrative Agent.

                                       29
<PAGE>

                         5. CERTAIN GENERAL PROVISIONS.

                  5.1. CLOSING FEE. The Borrower shall pay to the Administrative
         Agent on the Closing Date a closing fee in the amount of $500,000  (the
         "CLOSING  FEE").  The  Closing  Fee shall be fully  earned  and due and
         payable on the Closing Date.

         5.2. FUNDS FOR PAYMENTS.

                  5.2.1.  PAYMENTS  TO  ADMINISTRATIVE  AGENT.  All  payments of
         principal  and interest on Term Loans,  Fees and any other  amounts due
         hereunder  or  under  any of  the  other  Loan  Documents  (unless  the
         provisions of this Term Loan Agreement require otherwise) shall be made
         on the due date thereof to the Administrative  Agent in Dollars for the
         respective accounts of the Lenders and the Administrative Agent, at the
         Administrative   Agent's  Office  or  at  such  other  place  that  the
         Administrative  Agent may from time to time designate,  in each case no
         later than 12:00 noon (Boston, Massachusetts,  time or other local time
         at the place of payment) and in immediately available funds.

                  5.2.2. NO OFFSET,  ETC. All payments by the Borrower hereunder
         and  under  any of the  other  Loan  Documents  shall  be made  without
         recoupment,  setoff or  counterclaim  and free and clear of and without
         deduction  for any  taxes,  levies,  imposts,  duties,  charges,  fees,
         deductions, withholdings,  compulsory loans, restrictions or conditions
         of any nature now or hereafter imposed or levied by any jurisdiction or
         any political  subdivision thereof or taxing or other authority therein
         (other than Excluded  Taxes) unless the Borrower is compelled by law to
         make such deduction or  withholding.  If any such obligation is imposed
         upon the Borrower with respect to any amount payable by it hereunder or
         under any of the other Loan  Documents,  the  Borrower  will pay to the
         Administrative  Agent,  for the  account of the Lenders or (as the case
         may be) the  Administrative  Agent, on the date on which such amount is
         due and  payable  hereunder  or under such other  Loan  Document,  such
         additional  amount in  Dollars  as shall be  necessary  to  enable  the
         Lenders  or the  Administrative  Agent to  receive  the same net amount
         which the Lenders or the  Administrative  Agent would have  received on
         such due date had no such  obligation  been imposed upon the  Borrower.
         The  Borrower  will  deliver  promptly  to  the  Administrative   Agent
         certificates  or other valid  vouchers  for all taxes or other  charges
         deducted  from or paid with  respect to payments  made by the  Borrower
         hereunder or under such other Loan Document.

                                       30
<PAGE>

                  5.2.3.  NON-U.S.  LENDERS.  Each Lender and the Administrative
         Agent that is not a U.S.  Person as defined in Section  7701(a)(30)  of
         the Code for federal income tax purposes (a "NON-U.S.  LENDER")  hereby
         agrees  that,  if and to the  extent  it is  legally  able to do so, it
         shall,  prior  to the  date on which  it  becomes  a Lender  hereunder,
         deliver to the Borrower and the  Administrative  Agent,  as applicable,
         such certificates, documents or other evidence, as and when required by
         the Code or Treasury Regulations issued pursuant thereto, including (a)
         in the case of a  Non-U.S.  Lender  that is a "bank"  for  purposes  of
         Section  881(c)(3)(A)  of the Code,  two (2) duly  completed  copies of
         Internal  Revenue  Service  Form  W-8BEN or Form  W-8ECI  and any other
         certificate or statement of exemption required by Treasury Regulations,
         or any  subsequent  versions  thereof or successors  thereto,  properly
         completed and duly executed by such Lender or the Administrative  Agent
         establishing  that with respect to payments of  principal,  interest or
         fees  hereunder  it  is  (i)  not  subject  to  United  States  federal
         withholding  tax under the Code  because  such  payment is  effectively
         connected with the conduct by such Lender or Administrative  Agent of a
         trade or business in the United  States,  or (ii)  totally  exempt from
         United  States  federal   withholding  tax  under  a  provision  of  an
         applicable tax treaty, and (b) in the case of a Non-U.S. Lender that is
         not a "bank"  for  purposes  of  Section  881(c)(3)(A)  of the Code,  a
         certificate  in  form  and  substance  reasonably  satisfactory  to the
         Administrative  Agent and the  Borrower and to the effect that (i) such
         Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A) of
         the Code, is not subject to regulatory or other legal requirements as a
         bank in any  jurisdiction,  and  has not  been  treated  as a bank  for
         purposes of any tax,  securities law or other filing or submission made
         to any governmental authority,  any application made to a rating agency
         or  qualification  for any exemption  from any tax,  securities  law or
         other legal  requirements,  (ii) is not a ten percent (10%) shareholder
         for purposes of Section  881(c)(3)(B)  of the Code,  and (iii) is not a
         controlled foreign corporation receiving interest from a related person
         for  purposes  of Section  881(c)(3)(C)  of the Code,  together  with a
         properly  completed  Internal  Revenue  Service  Form  W-8 or  W-9,  as
         applicable  (or  successor  forms).  Each Lender or the  Administrative
         Agent  agrees  that it shall,  promptly  upon a change  of its  lending
         office or the selection of any additional lending office, to the extent
         the forms  previously  delivered  by it pursuant to this section are no
         longer   effective,   and   promptly   upon  the   Borrower's   or  the
         Administrative  Agent's  reasonable request after the occurrence of any
         other event (including the passage of time) requiring the delivery of a
         Form  W-8BEN,  Form  W-8ECI,  Form  W-8  or W-9  in  addition  to or in
         replacement of the forms previously delivered,  deliver to the Borrower
         and the Administrative Agent, as applicable, if and to the extent it is
         properly  entitled to do so, a properly  completed  and  executed  Form
         W-8BEN,  Form W-8ECI,  Form W-8 or W-9, as applicable (or any successor
         forms thereto).

         5.3. COMPUTATIONS.  All computations of interest on the Term Loans, any
Fees or any  other  amount  due  hereunder  shall,  unless  otherwise  expressly
provided  herein,  be based on a 360-day year and paid for the actual  number of
days  elapsed.  Whenever  a payment  hereunder  or under  any of the other  Loan
Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding  Business Day, and interest and
fees shall accrue during such extension.

         5.4. INTEREST  LIMITATION.  Notwithstanding any other term of this Term
Loan Agreement or any other document referred to herein or therein,  the maximum
amount of interest  which may be charged to or collected  from any person liable
hereunder by the Lenders shall be  absolutely  limited to, and shall in no event
exceed,  the  maximum  amount of  interest  which  could  lawfully be charged or
collected  under  applicable  law  (including,  to the  extent  applicable,  the
provisions  of Section  5197 of the  Revised  Statutes  of the United  States of
America, as amended or 12 U.S.C. Section 85, as amended), so that the maximum of
all amounts  constituting  interest under  applicable law,  howsoever  computed,
shall never exceed as to any Person liable therefor such lawful maximum, and any
term of this Term Loan  Agreement  or any other  document  referred to herein or
therein  which could be construed  as  providing  for interest in excess of such
lawful maximum, shall be and hereby is made expressly subject to and modified by
the provisions of this paragraph.

                                       31
<PAGE>

         5.5. INTENTIONALLY OMITTED.

         5.6. INTENTIONALLY OMITTED.

         5.7.  ADDITIONAL  COSTS,  ETC. If any present or future applicable law,
which  expression,  as used herein,  includes  statutes,  rules and  regulations
thereunder  and  interpretations  thereof  by  any  competent  court  or by  any
governmental   or  other   regulatory   body  or  official   charged   with  the
administration  or  the   interpretation   thereof  and  requests,   directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the  Administrative  Agent by any central bank
or other fiscal, monetary or other authority (whether or not having the force of
law), shall:

                  (a) subject  any Lender or the  Administrative  Agent,  to any
         Tax, levy, impost,  duty, charge,  fee, deduction or withholding of any
         nature  with  respect  to this Term  Loan  Agreement,  the  other  Loan
         Documents, such Lender's Commitment or the Term Loans, or change in the
         basis of taxation  of  payments  to such  Lender or the  Administrative
         Agent (other than Taxes, levies, imposts.  charges, fees, deductions or
         withholdings  covered by SECTION  5.2.2 and the  imposition  of, or any
         change in the rate of, any  Excluded  Tax payable by such Lender or the
         Administrative Agent), or

                  (b) impose or increase or render applicable (other than to the
         extent specifically provided for elsewhere in this Term Loan Agreement)
         any special deposit, reserve,  assessment,  liquidity, capital adequacy
         or other similar requirements  (whether or not having the force of law)
         against  assets held by, or deposits in or for the account of, or loans
         by, or letters of credit issued by, or  commitments of an office of any
         Lender or the Administrative Agent, or

                  (c) impose on any Lender or the Administrative Agent any other
         conditions or  requirements  with respect to this Term Loan  Agreement,
         the other Loan Documents, such Lender's Commitment, the Term Loans, and
         the result of any of the foregoing is:

                  (i) to  increase  the cost to any Lender of  making,  funding,
         issuing,  renewing,  extending or maintaining  any of the Term Loans or
         such Lender's Commitment, or

                           (ii) to reduce the amount of principal,  interest, or
                  other  amount  payable  to such  Lender or the  Administrative
                  Agent on account  of such  Lender's  Commitment  or any of the
                  Term Loans, or

                           (iii) to require  such  Lender or the  Administrative
                  Agent to make any  payment or to forego any  interest or other
                  sum payable hereunder, the amount of which payment or foregone
                  interest or other sum is  calculated by reference to the gross
                  amount of any sum receivable or deemed received by such Lender
                  or the Administrative Agent from the Borrower hereunder,

                                       32
<PAGE>

then, and in each such case, the Borrower will,  upon demand made by such Lender
or the  Administrative  Agent at any time and from  time to time and as often as
the occasion therefor may arise, pay to such Lender or the Administrative  Agent
such  additional  amounts as will be sufficient to compensate such Lender or the
Administrative  Agent for such additional cost,  reduction,  payment or foregone
interest or other sum upon  presentation  by such  Lender or the  Administrative
Agent of a certificate in accordance with SECTION 5.9 hereof;  PROVIDED that the
Borrower shall not be liable to any Lender or the Administrative Agent for costs
incurred  more than one  hundred  and twenty  (120) days prior to receipt by the
Borrower of such  certificate from such Lender or the  Administrative  Agent, as
applicable,  unless such costs were incurred prior to such 120-day period solely
as a result of such present or future applicable law being retroactive to a date
which occurred prior to such 120-day period.

         5.8.  CAPITAL  ADEQUACY.  If after the date  hereof  any  Lender or the
Administrative  Agent  determines that (i) the adoption of or change in any law,
governmental rule,  regulation,  policy,  guideline or directive (whether or not
having  the  force of law)  regarding  capital  requirements  for  banks or bank
holding companies or any change in the interpretation or application  thereof by
a  court  or  governmental  authority  with  appropriate  jurisdiction,  or (ii)
compliance  by  such  Lender  or the  Administrative  Agent  or any  corporation
controlling such Lender or the Administrative  Agent with any law,  governmental
rule,  regulation,  policy,  guideline or  directive  (whether or not having the
force of law) of any such entity regarding capital  adequacy,  has the effect of
reducing the return on such Lender's or the  Administrative  Agent's  commitment
with  respect to any Term Loans to a level  below that which such  Lender or the
Administrative  Agent  could  have  achieved  but for such  adoption,  change or
compliance  (taking  into  consideration  such  Lender's  or the  Administrative
Agent's then  existing  policies  with respect to capital  adequacy and assuming
full utilization of such entity's  capital) by any amount deemed by such Lender,
or  the  Administrative   Agent  to  be  material,   then  such  Lender  or  the
Administrative Agent may notify the Borrower of such fact upon presentation of a
certificate in accordance with SECTION 5.9 hereof. To the extent that the amount
of such  reduction in the return on capital is not  reflected in the LIBOR Rate,
the  Borrower  and such Lender  shall  thereafter  attempt to  negotiate in good
faith,  within  thirty (30) days of the day on which the Borrower  receives such
notice,  an  adjustment  to  the  compensation   payable  hereunder  which  will
adequately  compensate  such  Lender  in light of  these  circumstances.  If the
Borrower and such Lender are unable to agree to such  adjustment  within  thirty
(30)  days of the  date  on  which  the  Borrower  receives  such  notice,  then
commencing on the date of such notice (but not earlier than the  effective  date
of any such increased  capital  requirement),  the fees payable  hereunder shall
increase by an amount that will, in the Administrative  Agent's or such Lender's
reasonable  determination,  provide  adequate  compensation;  PROVIDED  that the
Borrower shall not be liable to any Lender or the Administrative Agent for costs
incurred  more than one  hundred  and twenty  (120) days prior to receipt by the
Borrower of such notice.  Each Lender shall allocate such cost  increases  among
its customers in good faith and on an equitable basis.

                                       33
<PAGE>

         5.9.  CERTIFICATE.  A certificate  setting forth any additional amounts
payable  pursuant to SECTION 5.7 or SECTION 5.8 and a brief  explanation of such
amounts which are due,  submitted by any Lender or the  Administrative  Agent to
the Borrower, shall be PRIMA FACIE evidence that such amounts are due and owing.

         5.10. INTENTIONALLY OMITTED.

         5.11.  INTEREST  AFTER  DEFAULT.  Immediately  upon the  occurrence and
during the  continuance of an Event of Default,  the Borrower shall pay interest
on the principal amount of all outstanding Obligations at a fluctuating interest
rate per annum at all times  equal to the  Default  Rate to the  fullest  extent
permitted by applicable laws.

5.12.    COLLATERAL SECURITY AND GUARANTIES. Each of the Parent and the Borrower
         covenants and agrees that:

                  (a)  Pursuant  to the  terms of the  Security  Documents,  the
         Obligations  shall be secured by a perfected  first  priority  security
         interest   (subject  only  to  Permitted  Liens)  in  the  Fixed  Asset
         Collateral,  and a perfected second priority security interest (subject
         only to Permitted Liens) in all other Collateral.

                  (b) If at  any  time  the  Parent  or any of its  Subsidiaries
         grants any  security  interest  to the  Revolving  Credit  Agent or any
         lender  party  to the  Revolving  Credit  Agreement,  or  any of  their
         respective successors,  assigns or transferees,  on any property of the
         Parent or such Subsidiary,  or any other party,  then the Parent,  such
         Subsidiary   or  such  other   party,   as  the  case  may  be,   shall
         simultaneously grant to the Administrative Agent a security interest in
         such  property,  and such  security  interest  shall be  subject to the
         Intercreditor Agreement.

                  (c) The Obligations  shall also be guaranteed  pursuant to the
         terms of the Guaranties.

                       6. REPRESENTATIONS AND WARRANTIES.

         Each of the Parent and the  Borrower  represents  and  warrants  to the
Lenders and the Administrative Agent as follows:

         6.1. CORPORATE AUTHORITY, ETC.

                  6.1.1. EXISTENCE, GOOD STANDING.

                           (a) Each of the Parent and its  Subsidiaries (i) is a
                  corporation  (or  similar  business  entity)  duly  organized,
                  validly  existing and in good  standing  under the laws of its
                  jurisdiction of incorporation or formation, (ii) has taken all
                  actions  which,  by reason of its  ownership  of  property  or
                  carrying on of business,  are required to be taken by it under
                  the laws of any  jurisdiction,  wherein  it owns  property  or
                  carries on  business,  except where the failure to do so would
                  not  materially  and  adversely  affect the  Borrower  and the
                  Guarantors  (taken  as a whole),  and (iii) has all  corporate
                  authority  (or  the  equivalent  company)  power  to  own  its
                  property  and conduct its  business  as now  conducted  and as
                  presently contemplated.

                                       34
<PAGE>

                           (b)  Each  of the  Parent  and its  Subsidiaries  has
                  adequate power and authority and has full legal right to enter
                  into each of the Loan Documents to which it is or is to become
                  a  party,  to  perform,  observe  and  comply  with all of its
                  agreements and obligations  under each of such documents,  and
                  to make all of the  borrowings  and obtain the  extensions  of
                  credit contemplated by this Term Loan Agreement.

                           6.1.2.  AUTHORIZATION.  The execution and delivery by
                  each of the  Parent and its  Subsidiaries  of each of the Loan
                  Documents executed and delivered on the Closing Date to which,
                  by the terms of such document,  it is a party, the performance
                  by  each of the  Parent  and  its  Subsidiaries  of all of its
                  agreements and obligations  under each of such documents,  and
                  the  making  by  the   Borrower  of  all  of  the   borrowings
                  contemplated  by this  Term Loan  Agreement,  are  within  the
                  corporate (or the equivalent  company) authority of the Parent
                  and each of its  Subsidiaries,  as applicable,  have been duly
                  authorized by all  necessary  corporate or other action on the
                  part of the Parent and its Subsidiaries, as applicable, and do
                  not  and  will  not  (i)   except   as   otherwise   expressly
                  contemplated by the Loan  Documents,  conflict with, or result
                  in a breach of any material  term,  condition or provision of,
                  or constitute a default under or result in the creation of any
                  mortgage,  lien,  pledge,  charge,  security interest or other
                  encumbrance  upon any of the  property  of the  Parent  or its
                  Subsidiaries,  under any  agreement,  trust  deed,  indenture,
                  mortgage or other instrument to which the Parent or any of its
                  Subsidiaries  is a party or by which the  Parent or any of its
                  Subsidiaries  or any of the  property  of the Parent or any of
                  its  Subsidiaries  is bound,  the  consequences of which would
                  have a material and adverse effect on the financial condition,
                  assets or operations of the Borrower and the Guarantors (taken
                  as a whole),  (ii) violate or contravene  any provision of any
                  law, regulation, order, ruling or interpretation thereunder or
                  any decree,  order or judgment of any court or governmental or
                  regulatory authority,  bureau, agency or official (all as from
                  time to time in effect and  applicable to the Parent or any of
                  its Subsidiaries) except where such violation or contravention
                  would  not  materially  and  adversely  affect  the  financial
                  condition,  assets  or  operations  of the  Borrower  and  the
                  Guarantors  (taken as a whole),  (iii)  require  any  waivers,
                  consents or approvals by any of the creditors of the Parent or
                  any of its  Subsidiaries  which have not been obtained (except
                  when  failure  to do so would  not  materially  and  adversely
                  affect the  financial  condition,  assets or operations of the
                  Borrower and the  Guarantors  (taken as a whole),  (iv) in the
                  case of the Parent and its Subsidiaries,  require any consents
                  or  approvals by any  shareholders  or members of such Person,
                  (except  such as will be  obtained  on or prior to the Closing
                  Date and will be in full  force  and  effect  on and as of the
                  Closing  Date),  (v) require  any  approval,  consent,  order,
                  authorization  or license  by, or giving  notice to, or taking
                  any  other  action  with  respect  to,  any   governmental  or
                  regulatory  authority or agency under any provision of any law
                  applicable  to the Parent or any of its  Subsidiaries,  except
                  those  actions which have been taken or will be taken prior to
                  the Closing Date and except where failure to take such actions
                  would  not  materially  and  adversely  affect  the  financial
                  condition,  assets  or  operations  of the  Borrower  and  the
                  Guarantors  (taken  as a  whole),  or (vi)  conflict  with any
                  provision  of the  Governing  Documents  of the  Parent or any
                  Subsidiary of the Parent.

                                       35
<PAGE>

                           6.1.3.   DELIVERY.   Each  of  the   Parent  and  its
                  Subsidiaries  has duly executed and delivered each of the Loan
                  Documents to which it is a party and each of such documents is
                  in full force and effect.

                           6.1.4. ENFORCEABILITY.  The execution and delivery of
                  this Term Loan Agreement and the other Loan Documents to which
                  the  Parent  or any of its  Subsidiaries  is or is to become a
                  party will result in valid and legally binding  obligations of
                  such  Person  enforceable  against it in  accordance  with the
                  respective terms and provisions hereof and thereof,  except as
                  enforceability   is   limited   by   bankruptcy,   insolvency,
                  reorganization,  moratorium  or  other  laws  relating  to  or
                  affecting  generally the enforcement of creditors'  rights and
                  except  to the  extent  that  availability  of the  remedy  of
                  specific  performance  or injunctive  relief is subject to the
                  discretion of the court before which any  proceeding  therefor
                  may be brought.

         6.2. FINANCIAL STATEMENTS; PROJECTIONS.

                  (a) There has been furnished to the  Administrative  Agent the
         audited  consolidated  balance sheet of the Parent and its Subsidiaries
         as at December 31, 2005, and consolidated statements of income and cash
         flow of the Parent and its Subsidiaries for the Fiscal Year then ended,
         certified by PriceWaterhouseCoopers.  Such balance sheet and statements
         of income and cash flow have been prepared in accordance  with GAAP and
         fairly   present  the  financial   condition  of  the  Parent  and  its
         Subsidiaries  as at the close of business  on the date  thereof and the
         results of  operations  for the Fiscal  Year then  ended.  There are no
         contingent  liabilities of the Parent or any of its  Subsidiaries as of
         such date  involving  material  amounts,  known to the  officers of the
         Parent or the Borrower,  which were not disclosed in such balance sheet
         and the notes related thereto

                  (b) There has been  furnished to the  Administrative  Agent an
         unaudited consolidated balance sheet of the Parent and its Subsidiaries
         as at September  30, 2006,  and  unaudited  consolidated  statements of
         income  and  cash  flow  of the  Parent  and its  Subsidiaries  for the
         period(s)  then ended.  Such balance sheet and statements of income and
         cash flow have been prepared in accordance with GAAP and fairly present
         the financial  condition of the Parent and its  Subsidiaries  as at the
         close of business on the date thereof and the results of operations for
         the period(s)  then ended.  There are no contingent  liabilities of the
         Parent or any of its  Subsidiaries  as of such date involving  material
         amounts,  known to the  officers of the Parent or the  Borrower,  which
         were not disclosed in such balance sheet and the notes related thereto.

                  (c) There has also been furnished to the Administrative  Agent
         the  Projections and the Business Plan, in each case, on a consolidated
         basis.  To the knowledge of the Parent and its  Subsidiaries,  no facts
         exist  that  (individually  or in the  aggregate)  would  result in any
         material  change in any of such  projections  (taken  as a whole).  The
         Projections and the Business Plan are based upon  reasonable  estimates
         and assumptions and reflect the reasonable  estimates of the Parent and
         its  Subsidiaries  of the results of operations  and other  information
         projected  therein (it being understood that such projections are not a
         guarantee of future performance).

                                       36
<PAGE>

         6.3.  SOLVENCY.  As of the Closing Date and after giving  effect to the
Term Loans hereunder and the other transactions contemplated hereby:

                  (a) the  aggregate  value of all  properties of the Parent and
         its  Subsidiaries,  on a  consolidated  basis,  at their  present  fair
         saleable  value  exceed  the  amount  of all  the  probable  debts  and
         liabilities   (including   contingent,   subordinated,   unmatured  and
         unliquidated  liabilities)  of the Parent and its  Subsidiaries as they
         become absolute and mature;

                  (b) the  present  fair  saleable  value of the  assets  of the
         Parent and its Subsidiaries,  on a consolidated basis, is not less than
         the amount that will be required to pay the probable liability on their
         debts as they become absolute and mature;

                  (c)  the  Parent  and  its   Subsidiaries   will  not,   on  a
         consolidated  basis,  have an unreasonably  small capital with which to
         conduct their business operations as heretofore conducted; and

                  (d) the Parent and its  Subsidiaries do not, on a consolidated
         basis, intend to incur debts or liabilities beyond their ability to pay
         such debts and liabilities as they mature.

         6.4. NO MATERIAL  ADVERSE  CHANGES,  ETC. Since the Balance Sheet Date,
there has  occurred no material  adverse  change in the  financial  condition or
business of the Parent or any of its Subsidiaries,  taken as a whole.  Since the
Balance Sheet Date, neither the Parent nor any Subsidiary of the Parent has made
any Restricted  Payment (other than Restricted  Payments permitted under Section
8.4).

         6.5.  ABSENCE OF MORTGAGES AND LIENS.  Except with respect to Permitted
Liens, there is no financing  statement,  security agreement,  chattel mortgage,
real  estate  mortgage  or other  document  filed or  recorded  with any  filing
records, registry or other public office, that purports to cover, affect or give
notice of any present or possible  future Lien on, or security  interest in, any
of the material assets or property of the Parent or any Subsidiary of the Parent
or of any of the rights relating thereto.

         6.6. FRANCHISES,  PATENTS,  COPYRIGHTS, ETC. Each of the Parent and its
Subsidiaries possesses all franchises,  patents,  copyrights,  trademarks, trade
names,  licenses and permits,  and rights in respect of the foregoing,  adequate
for the conduct of its business  substantially  as now  conducted  without known
conflict with any rights of others unless the failure of such  possession  would
not have a material adverse effect on the business,  assets or operations of the
Borrower and the Guarantors (taken as a whole).  Attached hereto as SCHEDULE 6.6
is a true,  correct  and  complete  list of all  patents,  patent  applications,
federally registered copyrights, trademarks, trademark applications, trade names
and other  intellectual  property  owned by the Parent or any  Subsidiary of the
Parent as of the Closing Date.

         6.7. LITIGATION.  Except as set forth in SCHEDULE 6.7 hereto, there are
no actions, suits, proceedings or investigations of any kind pending, or, to the
best knowledge of the Senior Management after all due investigation  appropriate
under  the   circumstances,   threatened  against  the  Parent  or  any  of  its
Subsidiaries,  before any court, tribunal or administrative agency or board that
would be likely to, either in any case or in the aggregate, materially adversely
affect the properties,  assets,  financial condition or business of the Borrower
and the  Guarantors,  taken as a whole,  or  materially  impair the right of the
Borrower  and  the   Guarantors,   taken  as  a  whole,  to  carry  on  business
substantially  as now conducted by them, or that  questions the validity of this
Term Loan Agreement or any of the other Loan Documents.

                                       37
<PAGE>

         6.8.  NO  MATERIALLY  ADVERSE  CONTRACTS,  ETC.  Except as set forth on
SCHEDULE 6.8,  neither the Parent nor any of its  Subsidiaries is subject to any
charter, partnership or other legal restriction, or any judgment, decree, order,
law, statute, rule or regulation that has or is expected in the future to have a
material  adverse effect on the business,  assets or financial  condition of the
Borrower or the Guarantors,  taken as a whole.  Except as listed on SCHEDULE 6.8
hereto,  neither  the  Parent  nor any of its  Subsidiaries  is a  party  to any
contract or agreement  that has or is expected,  in the judgment of the Parent's
or the Borrower's officers,  to have any material adverse effect on the business
of the Borrower and the Guarantors, taken as a whole.

         6.9.  COMPLIANCE WITH OTHER INSTRUMENTS,  LAWS, ETC. Neither the Parent
nor any of its  Subsidiaries  is in violation of any  provision of its Governing
Documents or, except for environmental  matters more specifically  dealt with in
SECTION 6.19, any agreement or instrument to which it may be subject or by which
it or  any of its  properties  may be  bound  or any  decree,  order,  judgment,
statute,  license, rule or regulation, in any of the foregoing cases in a manner
that could materially and adversely affect the financial  condition,  properties
or business of the Parent and its Subsidiaries.

         6.10. TAX STATUS.  Except as set forth on SCHEDULE 6.10, the Parent and
its Subsidiaries (i) have made or filed all federal, provincial and all material
state, provincial and foreign income and all other material tax returns, reports
and  declarations  required by any jurisdiction to which any of them is subject,
(ii) have paid all material Taxes and other governmental assessments and charges
imposed on them,  except those being  contested in good faith and by appropriate
proceedings  and for which the  Parent  and its  Subsidiaries  have set aside on
their books reasonably adequate provisions therefor (unless foreclosure or other
enforcement  action  has  been  commenced  in  respect  thereof  or any Lien has
attached as security therefor, in which case such exception does not apply), and
(iii)  have set aside on their  books  provisions  reasonably  adequate  for the
payment  of all  taxes for  periods  subsequent  to the  periods  to which  such
returns,  reports  or  declarations  apply.  There  are no  unpaid  Taxes in any
material amount claimed to be due by the taxing  authority of any  jurisdiction,
except those being contested in good faith and as to which adequate reserves are
maintained, and the officers of the Parent and the Borrower know of no basis for
any such claim.

         6.11.  NO DEFAULT OR EVENT OF  DEFAULT.  No Default or Event of Default
has occurred and is continuing.

         6.12.  HOLDING COMPANY AND INVESTMENT  COMPANY ACTS. Neither the Parent
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company", as such terms are
defined  in  the  Public  Utility  Holding  Company  Act of  1935;  nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.

                                       38
<PAGE>

         6.13. EMPLOYEE BENEFIT PLANS.

                  6.13.1.  IN  GENERAL.  Each  Employee  Benefit  Plan  and each
         Guaranteed  Pension Plan has been maintained and operated in compliance
         in  all  material   respects  with  applicable  law  including  without
         limitation  the   provisions  of  ERISA  and  all  Applicable   Pension
         Legislation and, to the extent applicable,  the Code, including but not
         limited   to   the   provisions    thereunder   respecting   prohibited
         transactions,  other  than as set  forth on  SCHEDULE  6.13.1  attached
         hereto.  The Parent and the Borrower have  heretofore  delivered to the
         Administrative  Agent the most recently  completed annual report,  Form
         5500, with all required  attachments,  and actuarial statement required
         to be submitted  under  Section  103(d) of ERISA,  with respect to each
         Guaranteed Pension Plan.

                  6.13.2.  TERMINABILITY  OF WELFARE PLANS.  Under each Employee
         Benefit  Plan which is an  employee  welfare  benefit  plan  within the
         meaning of Section  3(1) or Section  3(2)(B) of ERISA,  no benefits are
         due unless the event  giving  rise to the  benefit  entitlement  occurs
         prior to plan  termination  (except as  required  by Title I, Part 6 of
         ERISA). The Parent, the Borrower or an ERISA Affiliate, as appropriate,
         may terminate each such Plan at any time (or at any time  subsequent to
         the  expiration  of  any  applicable   bargaining   agreement)  in  the
         discretion of the Parent,  the Borrower or such ERISA Affiliate without
         liability  to any Person,  other than for  benefits  which have accrued
         prior to termination.

                  6.13.3.  GUARANTEED PENSION PLANS. Each contribution  required
         to be made to a Guaranteed Pension Plan, whether required to be made to
         avoid the incurrence of an accumulated funding  deficiency,  the notice
         or lien provisions of Section 302(f) of ERISA,  or otherwise,  has been
         timely  made.  No  waiver  of  an  accumulated  funding  deficiency  or
         extension of amortization periods has been received with respect to any
         Guaranteed  Pension  Plan and none of the Parent,  the Borrower nor any
         ERISA  Affiliate is obligated to or has posted  security in  connection
         with an amendment to a Guaranteed  Pension Plan pursuant to Section 307
         of ERISA or Section  401(a)(29)  of the Code.  No liability to the PBGC
         (other than required insurance  premiums,  all of which have been paid)
         has been  incurred by the Parent,  the Borrower or any ERISA  Affiliate
         with respect to any Guaranteed  Pension Plan and there has not been any
         ERISA Reportable  Event, or any other event or condition which presents
         a material risk of termination  of any  Guaranteed  Pension Plan by the
         PBGC.  Based on the latest  valuation of each  Guaranteed  Pension Plan
         (which in each case  occurred  within twelve months of the date of this
         representation),  and on the actuarial methods and assumptions employed
         for that  valuation,  the  aggregate  benefit  liabilities  of all such
         Guaranteed  Pension  Plans  within the meaning of Section 4001 of ERISA
         did not exceed the aggregate value of the assets of all such Guaranteed
         Pension Plans.

                  6.13.4.  MULTIEMPLOYER PLANS. None of the Parent, the Borrower
         nor any ERISA Affiliate has incurred any material liability  (including
         secondary  liability)  to  any  Multiemployer  Plan  as a  result  of a
         complete  or  partial  withdrawal  from such  Multiemployer  Plan under
         Section  4201 of ERISA or as a result of a sale of assets  described in
         Section 4204 of ERISA.  None of the Parent,  the Borrower nor any ERISA
         Affiliate  has  been  notified  that  any  Multiemployer   Plan  is  in
         reorganization  or  insolvent  under and within the  meaning of Section
         4241 or Section 4245 of ERISA or is at risk of entering  reorganization
         or  becoming  insolvent,  or that any  Multiemployer  Plan  intends  to
         terminate or has been terminated under Section 4041A of ERISA.

                                       39
<PAGE>

         6.14. REGULATIONS U AND X. The proceeds of the Term Loans shall be used
solely for the purposes  specified in SECTION  7.11. No portion of any Term Loan
is to be used for the purpose of purchasing or carrying any "margin security" or
"margin  stock" as such  terms are used in  Regulations  U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.

         6.15. TRUE COPIES OF GOVERNING  DOCUMENTS.  The Parent and the Borrower
have  furnished  or  caused  to be  furnished  to each of the  Lenders  true and
complete  copies  of the  Governing  Documents  (together  with  any  amendments
thereto) of the Parent and each Subsidiary of the Parent.

         6.16.  FISCAL YEAR. The Parent has a Fiscal Year which is the fifty-two
(52) or fifty-three (53) week period ending on the Saturday closest to January 1
of each calendar year.

         6.17.  PERFECTION  OF SECURITY  INTERESTS.  All  filings,  assignments,
pledges and deposits of documents  or  instruments  have been made and all other
actions have been taken that are necessary or advisable, under applicable United
States  federal and state law,  to  establish  and  perfect  the  Administrative
Agent's (i) first-priority Lien and security interest in the assets constituting
Fixed Asset  Collateral,  and (ii) second priority Lien and security interest in
all other Collateral.  The Collateral and the Administrative Agent's rights with
respect to the Collateral are not subject to any setoff, claims, withholdings or
other defenses. The Borrower and the Guarantors party to the Security Agreements
are the owners of the Collateral free from any Lien, except for Permitted Liens.

         6.18.  SUBSIDIARIES,  ETC.  The Parent  does not have any  Subsidiaries
except as set forth on SCHEDULE  6.18  hereto,  as such  schedule may be updated
from time to time by the Borrower in accordance with SECTION 8.11.

         6.19.  ENVIRONMENTAL  COMPLIANCE.  With respect to the past and present
condition and usage of the Real Property and the operations conducted thereon:

                  (a)  Except as  disclosed  on  SCHEDULE  6.19(A),  none of the
         Parent,  its  Subsidiaries  or any operator of the Real Property or any
         operations  thereon  is in  violation,  or  alleged  violation,  of 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
         (all of the foregoing,  collectively,  the "ENVIRONMENTAL LAWS"), which
         violation  could  reasonably  be  expected  to have a material  adverse
         effect on the business assets, operations or financial condition of the
         Borrower and the Guarantors  (taken as a whole),  or the ability of the
         Parent or any Subsidiary of the Parent to fulfill its obligations under
         this Term Loan Agreement or the other Loan Documents;

                                       40
<PAGE>

                  (b) (i) Except as set forth on SCHEDULE 6.19(A) hereto,  as of
         the Closing Date,  neither the Parent nor any of its  Subsidiaries  has
         received notice from any third party including, without limitation, any
         Governmental Authority, (A) that any one of them has been identified by
         the  United  States  Environmental   Protection  Agency  ("EPA")  as  a
         potentially  responsible  party  under  CERCLA  with  respect to a site
         listed on the National  Priorities List, 40 C.F.R. Part 300 Appendix B;
         (B) that 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 ("HAZARDOUS SUBSTANCES")
         which any one of them has  generated,  transported  or  disposed of has
         been found at any site at which a Governmental  Authority has conducted
         or has ordered that the Parent or any  Subsidiary of the Parent conduct
         a remedial investigation,  removal or other response action pursuant to
         any  Environmental  Law; or (C) that it is or shall be a named party to
         any  claim,   action,   cause  of  action,   complaint,   or  legal  or
         administrative  proceeding  (in each  case,  contingent  or  otherwise)
         arising out of any third party's incurrence of costs, expenses,  losses
         or damages of any kind  whatsoever  in  connection  with the Release of
         Hazardous Substances, and (ii) except as set forth on SCHEDULE 6.19(B),
         as such  schedule  may be  updated  from  time to time by the  Borrower
         (subject to the prior approval of the  Administrative  Agent),  neither
         the  Parent  nor  any of its  Subsidiaries  has  received  any  notices
         referred to in clause (i) above identifying any event or condition that
         could  materially  and  adversely   affect  the  financial   condition,
         properties or business of the Borrower and the  Guarantors,  taken as a
         whole;

                  (c) Except as set forth on SCHEDULE  6.19(A)  attached hereto:
         (i) no  portion  of  the  Real  Property  is  used  for  the  handling,
         processing,  storage or  disposal  of  Hazardous  Substances  except in
         material  accordance  with applicable  Environmental  Laws; and, to the
         best of the Parent's and Borrower's  knowledge,  no underground tank or
         other  underground  storage  receptacle  for  Hazardous  Substances  is
         located on any portion of the Real Property;  (ii) in the course of any
         activities  conducted by the Parent,  its  Subsidiaries or operators of
         its  properties,  no Hazardous  Substances  have been  generated or are
         being used on the Real  Property  except in  material  accordance  with
         applicable  Environmental  Laws;  (iii)  there have been no Releases or
         threatened Releases of Hazardous  Substances on, upon, into or from the
         properties  of the Parent or its  Subsidiaries,  which  Releases  could
         reasonably be expected to have a material  adverse  effect on the value
         of any of the Real Property or on the business,  assets,  operations or
         financial  condition  of the Borrower  and the  Guarantors  (taken as a
         whole),  or the  ability of the Parent or the  Borrower  to fulfill its
         obligations under this Term Loan Agreement or the other Loan Documents;
         (iv) to the best of the Parent's and the  Borrower's  knowledge,  there
         have been no Releases on, upon,  from or into any real  property in the
         vicinity of any of the Real Property which, through soil or groundwater
         contamination,  may  have  come  to be  located  on,  and  which  could
         reasonably be expected to have a material  adverse  effect on the value
         of any of the Real Property or adjacent  properties or the  environment
         or on the business,  assets,  operations or financial  condition of the
         Borrower  and the  Guarantors  (taken as a whole) or the ability of the
         Parent or any Subsidiary of the Parent to fulfill its obligations under
         this  Term  Loan  Agreement  or the other  Loan  Documents;  and (v) in
         addition, to the best of the Parent's and the Borrower's knowledge, any
         Hazardous  Substances  that  have  been  generated  on any of the  Real
         Property  have been  transported  offsite  only by  carriers  having an
         identification  number issued by the EPA (or the equivalent  thereof in
         any foreign jurisdiction),  treated or disposed of only by treatment or
         disposal  facilities   maintaining  valid  permits  as  required  under
         applicable  Environmental  Laws, which transporters and facilities have
         been and are, to the best of the Parent's and the Borrower's knowledge,
         operating in compliance with such permits and applicable  Environmental
         Laws;

                                       41
<PAGE>

                  (d) None of the  Parent  or its  Subsidiaries,  any  Mortgaged
         Property or any of the other Real Property is subject to any applicable
         Environmental  Law requiring the  performance  of Hazardous  Substances
         site   assessments,   or  the  removal  or   remediation  of  Hazardous
         Substances,  or the giving of notice to any  Governmental  Authority or
         the  recording  or  delivery  to  other  Persons  of  an  environmental
         disclosure  document or  statement  by virtue of the  transactions  set
         forth  herein  and  contemplated  hereby,  or  as a  condition  to  the
         recording  of  any  Mortgage  or to  the  effectiveness  of  any  other
         transactions contemplated hereby; and

                  (e) To the best of their  knowledge  after due inquiry,  there
         are listed on SCHEDULE  6.19(E),  all  material  environmental  reports
         relating to the Parent and its  Subsidiaries  and their  properties and
         operations,  copies of which have been furnished to the  Administrative
         Agent's Special Counsel.

         6.20.  BANK  ACCOUNTS.  SCHEDULE  6.20, as such schedule may be updated
from time to time by the Borrower,  sets forth the account  numbers and location
of all bank accounts of the Parent and its Subsidiaries.

         6.21. LABOR CONTRACTS.  Except as set forth on SCHEDULE 6.21, as of the
Closing  Date,  neither the Parent nor any of its  Subsidiaries  is party to any
collective bargaining agreement. Except as disclosed to the Administrative Agent
and the Lenders in writing,  (a) neither the Parent nor any of its  Subsidiaries
is a party to any collective  bargaining agreement and (b) there are no material
grievances,  disputes or controversies  with any union or other  organization of
the Parent's or any of its Subsidiary's employees, or threats of strikes or work
stoppages.

         6.22. DISCLOSURE. Neither this Term Loan Agreement nor any of the other
Loan  Documents  contains any untrue  statement  of a material  fact or omits to
state a material  fact  (known to the Parent or any of its  Subsidiaries  in the
case of any document or  information  not  furnished by the Parent or any of its
Subsidiaries)  necessary in order to make the  statements  herein or therein not
misleading.  Except as disclosed to the Administrative  Agent and the Lenders in
writing,  there is no fact known to the Parent or any of its Subsidiaries  which
could  reasonably be expected to have a material adverse effect on the business,
assets,  operations  or financial  condition of the Borrower and the  Guarantors
(taken as a whole), or the ability of the Parent or any Subsidiary of the Parent
to fulfill  its  obligations  under this Term Loan  Agreement  or the other Loan
Documents,  exclusive  of effects  resulting  from  changes in general  economic
conditions, legal standards or regulatory conditions.

                                       42
<PAGE>

         6.23. TITLE TO PROPERTIES; LEASES.

                  6.23.1.  GENERAL.  Except as set forth on SCHEDULE  6.23,  the
         Parent  and its  Subsidiaries  own all of the assets  reflected  in the
         consolidated balance sheet of the Parent and its Subsidiaries delivered
         to the  Administrative  Agent pursuant to SECTION 10.23,  subject to no
         Liens or other rights of others, except Permitted Liens.

                  6.23.2. REAL PROPERTY.  The Borrower has good,  marketable and
         indefeasible  title in fee to the Mortgaged  Property free and clear of
         all Liens except  Permitted  Liens.  All transfer  taxes,  deed stamps,
         intangible  taxes or other  amounts  in the  nature of  transfer  taxes
         required to be paid by any Person under applicable  legal  requirements
         in  connection  with the  transfer  of the  Mortgaged  Property  to the
         Borrower have been paid.  Each  Mortgage when properly  recorded in the
         appropriate   records,   together  with  any  Uniform  Commercial  Code
         Financing Statements required to be filed in connection therewith, will
         create (a) a valid,  perfected  first  priority Lien on the  Borrower's
         interest in the respective Mortgaged Property,  (b) valid and perfected
         collateral  assignments  of,  all  leases  relating  to such  Mortgaged
         Property, and (c) valid and perfected first priority security interests
         in all other related assets constituting Fixed Asset Collateral, all in
         accordance  with the terms  thereof,  in each case  subject only to any
         applicable Permitted Liens. All mortgage,  recording, stamp, intangible
         or  other  similar  taxes  required  to be  paid  by any  Person  under
         applicable  legal   requirements  in  connection  with  the  execution,
         delivery, recordation, filing, registration,  perfection or enforcement
         of any of the Loan Documents have been paid. No  condemnation  or other
         material   proceeding  has  been  commenced  or,  to  Borrower's   best
         knowledge, is contemplated with respect to all or part of the Mortgaged
         Property  or for the  relocation  of roadways  providing  access to the
         Mortgaged Property.  There are no claims for payment for work, labor or
         materials  affecting the Mortgaged  Property  which are or may become a
         Lien prior to, or of equal priority with, the Liens created by the Loan
         Documents.  Other than as disclosed to the Administrative  Agent, there
         are no  outstanding  options  to  purchase  or rights of first  refusal
         affecting all or any portion of the Mortgaged Property.  To the best of
         the Borrower's  knowledge,  the ALTA survey  delivered by Borrower with
         respect to each parcel of Mortgaged  Property  does not fail to reflect
         any material matter affecting the applicable  Mortgaged Property or the
         title  thereto.  To  the  best  of  Borrower's  knowledge,  all  of the
         improvements included in determining the appraised value of each parcel
         of Mortgaged  Property lie wholly  within the  boundaries  and building
         restriction lines of such Mortgaged Property,  and no improvement on an
         adjoining  property  encroaches  upon such Mortgaged  Property,  and no
         easement or other  encumbrance  upon the Real Property  encroaches upon
         any of the  improvements,  except in each case those insured against by
         the  title  insurance  policy  insuring  the  Lien  of  the  applicable
         Mortgage.  Each parcel comprising each Mortgaged Property is a separate
         tax lot and is not a portion of any other tax lot that is not a part of
         the applicable Mortgaged Property. To Borrower's  knowledge,  there are
         no  pending  or  proposed  special  or  other  assessments  for  public
         improvements or otherwise affecting any of the Mortgaged  Property,  or
         any contemplated improvements to the Mortgaged Property that may result
         in such special or other assessments.

                                       43
<PAGE>

         6.24.  CERTAIN  TRANSACTIONS.  Except  for  arm's  length  transactions
pursuant to which the Parent,  the  Borrower,  any of the  Guarantors  or any of
their  Subsidiaries  make payments in the ordinary course of business upon terms
no less  favorable  than  the  Parent,  the  Borrower,  the  Guarantors  or such
Subsidiary could obtain from third parties, none of the officers,  directors, or
employees  of  the  Parent,  the  Borrower,  the  Guarantors  or  any  of  their
Subsidiaries  is  presently  a party to any  transaction  with the  Parent,  the
Borrower,  the Guarantors or any of their Subsidiaries  (other than for services
as employees,  officers and  directors),  including  any contract,  agreement or
other  arrangement  providing for the furnishing of services to or by, providing
for rental of real or  personal  property  to or from,  or  otherwise  requiring
payments to or from any officer,  director or such employee or, to the knowledge
of the Parent and the Borrower,  any  corporation,  partnership,  trust or other
entity in which any officer,  director,  or any such  employee has a substantial
interest or is an officer, director, trustee or partner.

         6.25.  FIXED  ASSETS.  The  Borrower  has  previously  furnished to the
Lenders a schedule of fixed assets  constituting part of the Equipment Appraisal
Report.  Other than as set forth on SCHEDULE 6.25, the Borrower has not sold any
fixed assets reflected in the most recent  Equipment  Appraisal Report delivered
to the Lenders.

         6.26. FOREIGN ASSETS CONTROL  REGULATIONS,  ETC. None of the requesting
or  borrowing  of the Term Loans or the use of the  proceeds of any thereof will
violate the Trading With the Enemy Act (50 U.S.C. Section 1 et seq., as amended)
(the  "TRADING  WITH  THE  ENEMY  Act")  or any of the  foreign  assets  control
regulations  of the United  States  Treasury  Department  (31 CFR,  Subtitle  B,
Chapter  V, as  amended)  (the  "FOREIGN  ASSETS  CONTROL  REGULATIONS")  or any
enabling  legislation  or  executive  order  relating  thereto  (which  for  the
avoidance  of doubt  shall  include,  but shall not be limited to (a)  Executive
Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions
With Persons Who Commit,  Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) (the  "EXECUTIVE  ORDER"),  and (b) the Uniting and  Strengthening
America by  Providing  Appropriate  Tools  Required to  Intercept  and  Obstruct
Terrorism Act of 2001 (Public Law 107-56)). Furthermore,  neither the Parent nor
any of its  Subsidiaries  or other  Affiliates  (i) is or will become a "blocked
person" as described in the Executive  Order,  the Trading With the Enemy Act or
the Foreign  Assets Control  Regulations,  or (ii) engages or will engage in any
dealings or  transactions,  or be otherwise  associated,  with any such "blocked
person."

         6.27.  COMPLIANCE.  The Borrower and each parcel of Mortgaged  Property
and the use thereof comply in all material  respects with all  applicable  legal
requirements  (including with respect to parking and applicable  zoning and land
use laws,  regulations  and  ordinances)  or constitute  permitted,  preexisting
conditions with respect thereto.  Borrower is not in default or violation of any
order, writ,  injunction,  decree or demand of any Governmental  Authority,  the
violation  of which could  reasonably  be  expected  to have a material  adverse
effect on the  business,  assets or  financial  condition of the Borrower or the
Guarantors,  taken  as a  whole.  In the  event  that  all or  any  part  of the
improvements  on any of the Mortgaged  Property are  destroyed or damaged,  said
improvements  can be  legally  reconstructed  to their  condition  prior to such
damage or destruction,  and thereafter exist for the same use without  violating
any  material  zoning or other  ordinances  applicable  thereto  and without the
necessity  of  obtaining  any  variances  or special  permits  (provided  that a
casualty  affecting  more than 50% of the assessed  value of the  structure  may
require such relief if not then in conformity  with the zoning bylaw).  No legal
proceedings are pending or, to the best of Borrower's knowledge, threatened with
respect to the  zoning of the Real  Property  the  consequences  of which  could
reasonably be expected to have a material adverse effect on the business, assets
or  financial  condition of the  Borrower or the  Guarantors,  taken as a whole.
Neither  the zoning nor any other  right to  construct,  use or operate the Real
Property is in any way dependent  upon or related to any property other than the
Real Property.  All material  certifications,  permits,  licenses and approvals,
including  certificates  of completion  and occupancy  permits  required for the
legal use,  occupancy  and  operation of the Real  Property  (collectively,  the
"LICENSES"),  have been obtained and are in full force and effect. The use being
made of the Real Property is in conformity  with the  certificates  of occupancy
issued  for  the  Real  Property  and  all  other  restrictions,  covenants  and
conditions affecting the Real Property.

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         6.28. CONTRACTS. There are no service,  maintenance or repair contracts
affecting the Mortgaged  Property that are not  terminable on one month's notice
or less  without  cause  and  without  penalty  or  premium.  All such  service,
maintenance  or repair  contracts  affecting the Real Property have been entered
into at  arms-length in the ordinary  course of Borrower's  business and provide
for the payment of fees in amounts and upon terms  comparable to existing market
rates.

         6.29.  UTILITIES  AND  PUBLIC  ACCESS.  Excluding  the  Bleachery  Pond
property, there is reasonable utility and public access to the Real Property.

         6.30. PHYSICAL CONDITION. The Real Property is in good condition, order
and  repair  in all  material  respects;  there  exists no  structural  or other
material  defect or damages to the Real  Property,  whether latent or otherwise.
The  Borrower  has not  received  notice from any  insurance  company or bonding
company of any defect or inadequacy in the Real  Property,  or any part thereof,
which would materially adversely affect its insurability or cause the imposition
of extraordinary premiums or charges thereon or any termination of any policy of
insurance  or bond.  Except as may be  expressly  disclosed  on the  compilation
drawing of the Mortgage  Property  certified  to the  Administrative  Agent,  no
portion  of the  Mortgaged  Property  is located  in an area  identified  by the
Federal Emergency Management Agency as an area having special flood hazards.

            7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER.

         Each of the Parent and the Borrower  covenants and agrees that, so long
as any Term Loan is  outstanding  or any Lender has any  obligation  to make any
Term Loans:

         7.1.  PUNCTUAL  PAYMENT.  Each of the Parent and the Borrower will duly
and  punctually  pay or cause to be paid when due all  principal and interest on
the Term Loans,  the Fees and all other  Obligations and amounts provided for in
this Term Loan Agreement and the other Loan Documents to which it is a party and
will cause to be paid any amounts owing by any of Subsidiary of the Parent,  all
in  accordance  with the terms of this Term Loan  Agreement  and such other Loan
Documents.

         7.2.  MAINTENANCE  OF OFFICE.  Each of the Parent and the Borrower will
maintain  its chief  executive  office in Fall River,  Massachusetts  or at such
other place as the Parent and the Borrower  shall  designate upon written notice
to the Administrative Agent, where notices, presentations and demands to or upon
the Parent or the Borrower in respect of the Loan  Documents to which the Parent
or the Borrower is a party may be given or made.

                                       45
<PAGE>

         7.3. RECORDS AND ACCOUNTS. Each of the Parent and the Borrower will (i)
keep, and cause each of its  Subsidiaries to keep, true and accurate records and
books  of  account  in which  full,  true and  correct  entries  will be made in
accordance  with,  and all  financial  statements  provided  for herein shall be
prepared in accordance with GAAP  consistently  applied;  (ii) maintain adequate
accounts and reserves for all taxes  (including  incomes  taxes),  depreciation,
depletion, obsolescence and amortization of its properties and the properties of
its  Subsidiaries,  contingencies,  and other reserves;  and (iii) at all times,
maintain  independent  certified  public  accountants  as the  Parent's  and the
Borrower's accountants which shall be satisfactory to the Administrative Agent.

         7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Parent and
the Borrower will deliver to each of the Lenders:

                  (a) as soon as  practicable,  but in any event not later  than
         ninety (90) days after the end of each Fiscal  Year,  the  consolidated
         balance sheet of the Parent and its Subsidiaries, as at the end of such
         year,  and the related  consolidated  statements of income and retained
         earnings and  consolidated  statement of cash flow for such year,  each
         setting forth in comparative  form the figures for the previous  Fiscal
         Year and all such consolidated financial statements to be in reasonable
         detail,  prepared in accordance  with GAAP  consistently  applied,  and
         certified without  qualification and without  expression of uncertainty
         as to the  ability of the Parent and its  Subsidiaries  to  continue as
         going  concerns,  by  PricewaterhouseCoopers  or by  other  independent
         certified public accountants  satisfactory to the Administrative  Agent
         (PROVIDED,  that for the 2006 Fiscal Year only, such  certification may
         be issued with a going concern  qualification if such  qualification is
         reasonable and necessary in the reasonable  judgment of the independent
         certified  public  accountant),  together with (i) a written  statement
         from such  accountants to the effect that they have read a copy of this
         Term Loan Agreement,  and that, in making the examination  necessary to
         said  certification,  they have obtained no knowledge of any Default or
         Event of Default, or, if such accountants shall have obtained knowledge
         of any then existing Default or Event of Default they shall disclose in
         such statement any such Default or Event of Default; PROVIDED that such
         accountants  shall not be liable to the  Lenders  for failure to obtain
         knowledge of any Default or Event of Default;  and (ii) a copy of their
         accountants' management letter (if any) for such Fiscal Year;

                  (b) as soon as practicable, but in any event within forty-five
         (45) days after the end of each  Fiscal  Quarter,  unaudited  quarterly
         consolidated and consolidating  financial  statements of the Parent and
         its  Subsidiaries  for such Fiscal Quarter (i.e.,  the consolidated and
         consolidating  balance sheet of the Parent and its Subsidiaries,  as at
         the end of  such  Fiscal  Quarter,  and the  related  consolidated  and
         consolidating   statements   of  income  and   retained   earnings  and
         consolidated and  consolidating  statement of cash flow for such Fiscal
         Quarter) and the unaudited  consolidated  and  consolidating  financial
         statements of the Parent and its Subsidiaries for the period commencing
         at the end of the previous  Fiscal Year and ending with the end of such
         Fiscal  Quarter,  each  prepared in accordance  with GAAP  consistently
         applied,  together with a certification  by the principal  financial or
         accounting  officer(s) of the Parent that the information  contained in
         such financial  statements fairly presents in all material respects the
         financial  condition of the Parent and its Subsidiaries (as a whole) on
         the date thereof (subject to year-end adjustments);

                                       46
<PAGE>

                  (c) as soon as  practicable,  but in any event  within  thirty
         (30) days after the end of each month in each  Fiscal  Year,  unaudited
         monthly  consolidated and consolidating  financial statements of Parent
         and its  Subsidiaries  for  such  month  (i.e.,  the  consolidated  and
         consolidating  balance sheet of the Parent and its Subsidiaries,  as at
         the end of such month, and the related  consolidated and  consolidating
         statements  of  income  and  retained  earnings  and  consolidated  and
         consolidating  statement of cash flow for such month) and the unaudited
         consolidated and consolidating  financial  statements of the Parent and
         its Subsidiaries  for the period  commencing at the end of the previous
         Fiscal Year and ending with the end of such  month,  each,  prepared in
         accordance   with   GAAP   consistently   applied,   together   with  a
         certification  by the principal  financial or accounting  officer(s) of
         the Parent that the information  contained in such financial statements
         fairly presents in all material respects the financial condition of the
         Parent and its  Subsidiaries  (as a whole) on the date thereof (subject
         to year-end adjustments);

                  (d)   simultaneously   with  the  delivery  of  the  financial
         statements  referred to in  subsections  (a) and (b) above, a statement
         certified by the principal  financial or  accounting  officer(s) of the
         Parent in  substantially  the form of  EXHIBIT A hereto (a  "COMPLIANCE
         CERTIFICATE"),  (i) setting  forth in  reasonable  detail  computations
         evidencing compliance with the covenants contained in SECTION 9 and (if
         applicable)  reconciliations  to  reflect  changes  in GAAP  since  the
         Balance Sheet Date,  and (ii) stating that such  officer(s)  has caused
         this Term Loan  Agreement  to be reviewed  and has no  knowledge of any
         Default or Event of Default during such Fiscal Quarter or at the end of
         such year, or if such  officer(s) has such  knowledge,  specifying each
         Default or Event of Default and the nature thereof;

                  (e) as  requested  by the  Administrative  Agent,  such  other
         information  relating to the  Collateral  as the  Administrative  Agent
         shall reasonably request;

                  (f)  concurrently  with  delivery of the same to the Revolving
         Credit  Agent,   copies  of  (i)  Borrowing  Base  Certificates,   (ii)
         Collateral Update Certificates, (iii) inventory and accounts receivable
         aging reports, and (iv) all other material reports and material notices
         and  other  written  information   delivered  by  the  Parent  and  its
         Subsidiaries to the Revolving Credit Agent and/or the Revolving Lenders
         pursuant to the  Revolving  Credit  Agreement  and the other  Revolving
         Credit Documents;

                  (g) not later than December 31st of each  calendar  year,  the
         annual  business  plan  of the  Parent  and  its  Subsidiaries  for the
         succeeding  Fiscal  Year  on a  monthly  basis  in  reasonable  detail,
         including projected  consolidated balance sheets,  statements of income
         and retained  earnings and cash flow  statements  of the Parent and its
         Subsidiaries for the succeeding Fiscal Year on a monthly basis, in each
         case in the same  format as the audited  balance  sheet,  statement  of
         income and retained earnings and cash flow statement respectively;

                                       47
<PAGE>

                  (h) promptly  after the sending or filing  thereof,  copies of
         all reports  which the Parent or any  Subsidiary of the Parent sends to
         any of its security holders, and copies of all reports and registration
         statements  which the Parent or any Subsidiary of the Parent files with
         the  Securities  and Exchange  Commission  or any  national  securities
         exchange  (including,  without  limitation,  all  10-K,  10-Q  and  8-K
         reports),  which reports are required to be sent to security holders or
         so filed by law or by  regulation  or under the  terms of the  Parent's
         listing agreement with NASDAQ or any other stock exchange;

                  (i)  from  time  to  time  such  other   financial   data  and
         information   (including   accountants'   management  letters)  as  the
         Administrative Agent or any Lender may reasonably request;

                  (j)   simultaneously   with  the  delivery  of  the  financial
         statements   referred  to  in  subsection   (c)  above,   a  Compliance
         Certificate setting forth in reasonable detail computations  evidencing
         compliance with the financial covenants contained in SECTION 9;

                  (k) [intentionally omitted];

                  (l) on Wednesday of each week, a comparison of actual  results
         for the immediately  prior one week period to the previously  projected
         results for such one week period as set forth in the Projections; and

                  (m) within five (5) Business Days after the end of each month,
         updated 13 week  projections  reflecting  any changes to the previously
         provided Projections.

         7.5. NOTICES.

                  7.5.1.  DEFAULTS.  The Parent and the Borrower  will  promptly
         notify the  Administrative  Agent in writing of the  occurrence  of any
         Default or Event of Default. If any Person shall give any notice to the
         Parent or its  Subsidiaries  or take any other  action in  respect of a
         claimed default (whether or not constituting an Event of Default) under
         this Term Loan Agreement or any other note,  evidence of  indebtedness,
         indenture or other  obligation for borrowed money in excess of $500,000
         to which or with respect to which the Parent or any of its Subsidiaries
         is a party or  obligor,  whether  as  principal,  guarantor,  surety or
         otherwise,  the Parent shall  forthwith  give written notice thereof to
         the  Administrative  Agent,  describing  the  notice or action  and the
         nature of the claimed  default.  The Borrower shall promptly notify the
         Administrative  Agent in writing of the  occurrence  of any  default or
         event of default  under the  Revolving  Credit  Agreement,  stating the
         nature of such default or event of default.

                  7.5.2. NOTICE OF LITIGATION AND JUDGMENTS.  The Parent and the
         Borrower will give notice to the Administrative Agent in writing within
         fifteen (15) days of Senior Management becoming aware of any litigation
         or  proceedings  threatened  in writing or any pending  litigation  and
         proceedings affecting the Parent or any of its Subsidiaries or to which
         the Parent or any of its  Subsidiaries  is or becomes a party involving
         (i) an uninsured  claim  against the Parent or any of its  Subsidiaries
         that would  reasonably  be  expected  to result in damages of more than
         $1,000,000  against  the  Parent or any of its  Subsidiaries  or have a
         material  adverse effect on the Borrower and the Guarantors  taken as a
         whole, or (ii) any litigation proceeding against Persons with which the
         Parent or any of its Subsidiaries has a business  relationship which is
         likely to  materially  and  adversely  affect the  business,  financial
         condition,  assets or  operations  of the Borrower  and the  Guarantors
         (taken as a whole) and stating the nature and status of such litigation
         or  proceedings.  The  Parent  will give  notice to the  Administrative
         Agent,   in   writing,   in  form  and  detail   satisfactory   to  the
         Administrative  Agent, within ten (10) days of any judgment not covered
         by  insurance,  final or  otherwise,  against  the Parent or any of its
         Subsidiaries in an amount in excess of $1,000,000.

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<PAGE>

                  7.5.3.  NOTIFICATION OF CLAIM AGAINST  COLLATERAL.  The Parent
         and the Borrower will, immediately upon becoming aware thereof,  notify
         the  Administrative  Agent and each of the  Lenders  in  writing of any
         setoff,   claims  (including,   with  respect  to  the  Real  Property,
         Environmental  Claims),  withholdings  or  other  defenses  in  amounts
         greater  than  $250,000  to  which  any  of  the  Collateral,   or  the
         Administrative  Agent's  rights  with  respect to the  Collateral,  are
         subject.

                  7.5.4. NOTICES CONCERNING INVENTORY COLLATERAL. The Parent and
         the Borrower shall provide to the Administrative Agent prompt notice of
         (a)  any  quarterly  physical  count  of  the  Parent's  or  any of its
         Subsidiaries'  inventory,  together with a copy of the results  thereof
         certified by the Parent or such  Subsidiary,  (b) any  determination by
         the Parent or any of its Subsidiaries  that the inventory levels of the
         Parent  or  such   Subsidiary  are  not  adequate  to  meet  the  sales
         projections  of the Parent or such  Subsidiary,  and (c) any failure of
         the  Parent  or any of its  Subsidiaries  to  pay  rent  at any  leased
         location, which failure continues for more than ten (10) days following
         the day on which  such rent is due and  payable  by the  Parent or such
         Subsidiary.

                  7.5.5.   NOTIFICATION  OF  ADDITIONAL   INTELLECTUAL  PROPERTY
         RIGHTS.  Within ten (10) days of the end of each  Fiscal  Quarter,  the
         Parent and the  Borrower  will (a) notify the  Administrative  Agent in
         writing of (i) any patents,  patent  applications,  patent  application
         disclosures  filed with any patent office during such Fiscal Quarter or
         which  the  intellectual  property  committee  of the  Parent  or  such
         Subsidiary  has  approved  for filing  during such Fiscal  Quarter as a
         patent  application,  registered  copyrights  or mask works  registered
         during such Fiscal Quarter, applications for registration of copyrights
         or mask works filed during such Fiscal  Quarter,  trademark and service
         mark  registrations  during such Fiscal Quarter,  trademark and service
         mark  registration  applications  filed  during  such  Fiscal  Quarter,
         trademarks,  service  marks and trade names for which the  intellectual
         property committee of the Parent or such Subsidiary has approved filing
         trademark registration  applications during such Fiscal Quarter, all of
         the  foregoing  whether a foreign or United  States  right and  whether
         owned by the  Parent or such  Subsidiary,  to the  extent not listed on
         SCHEDULE 6.6, (ii) the abandonment of any of the foregoing  during such
         Fiscal Quarter,  and (b) deliver to the Administrative Agent (x) a list
         of the fifty  (50)  most  valuable  copyrights  of the  Parent  and its
         Subsidiaries as of the end of such Fiscal Quarter (based on the revenue
         derived  therefrom)  and (y) evidence  that such fifty (50)  copyrights
         have been  registered  with the  United  States  Copyright  Office,  or
         applications  regarding the same have been filed with the United States
         Copyright Office.

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<PAGE>

                  7.5.6.  ENVIRONMENTAL EVENTS. The Parent and the Borrower will
         promptly  give  notice  to the  Administrative  Agent  and  each of the
         Lenders (a) of any violation of any  Environmental  Law that the Parent
         or any of its Subsidiaries  reports in writing or is reportable by such
         Person in writing (or for which any written report  supplemental to any
         oral report is made) to any Governmental Authority, and (b) upon Senior
         Management  becoming  aware  thereof,   of  any  inquiry,   proceeding,
         investigation,  or other action,  including a notice from any agency of
         potential environmental  liability, of any Governmental Authority that,
         in the case of  clauses  (a) or (b) above,  could  have a material  and
         adverse  affect on the financial  position,  business,  operations,  or
         affairs of the Borrower and the Guarantors (taken as a whole).

                  7.5.7.  NOTIFICATION REGARDING THE REAL PROPERTY. The Borrower
         will promptly give notice to the  Administrative  Agent and each of the
         Lenders of receipt or  knowledge of any notice or  correspondence  by a
         Governmental  Authority  concerning the Real Property along with a copy
         of any such notice or  correspondence  by the  Governmental  Authority,
         including,  but not limited to any notice of casualty  loss and eminent
         domain proceedings.

         7.6. LEGAL EXISTENCE; MAINTENANCE OF PROPERTIES.

                  (a) Except as  permitted  by SECTION  8.5,  the Parent and the
         Borrower  will do and will cause each of their  Subsidiaries  to do all
         things  necessary  to (i) in the  case of each  of the  Parent  and the
         Borrower,  maintain  in full force and effect its legal  existence  and
         good standing under the laws of its  jurisdiction  of  organization  or
         incorporation,  (ii) maintain its  qualification to do business in each
         state or other  jurisdiction in which the failure to do so would have a
         material  adverse effect on the condition,  financial or otherwise,  of
         the Borrower and the Guarantors (taken as a whole),  and (iii) maintain
         all of its rights and franchises,  except where the failure to maintain
         such right or franchise would not have a material adverse effect on the
         conduct of the business of the Borrower and the  Guarantors  taken as a
         whole.

                  (b) Each of the Parent and the  Borrower (i) will cause all of
         its  properties  and  those of its  Subsidiaries  used or useful in the
         conduct of the Parent's business or the business of its Subsidiaries to
         be maintained and kept in good condition,  repair and working order and
         supplied with all necessary  equipment,  (ii) will cause to be made all
         necessary repairs, renewals, replacements, betterments and improvements
         thereof,  all as in the  judgment of the Parent and the Borrower may be
         necessary so that the business  carried on in connection  therewith may
         be properly and advantageously  conducted at all times, and (iii) will,
         and  will  cause  each  of its  Subsidiaries  to,  continue  to  engage
         primarily  in the  businesses  now  conducted by them and in related or
         complementary businesses;  PROVIDED that nothing in this SECTION 7.6(B)
         shall prevent either the Parent or the Borrower from  discontinuing the
         operation and  maintenance  of any of its properties or any of those of
         its  Subsidiaries  if such  discontinuance  is, in the  judgment of the
         Parent  and the  Borrower,  desirable  in the  conduct  of its or their
         business and that do not in the aggregate  materially  adversely affect
         the business of the Parent and its Subsidiaries on consolidated basis.

         7.7. INSURANCE. Each of the Parent and the Borrower will and will cause
each of its  Subsidiaries  to,  maintain  with  financially  sound and reputable
insurers  insurance  with respect to its  properties  and business  against such
casualties  and  contingencies  as  shall  be in  accordance  with  the  general
practices of  businesses  engaged in similar  activities  in similar  geographic
areas and in amounts,  containing such terms, in such forms and for such periods
as may be  reasonable  and  prudent  and in  accordance  with  the  terms of the
Security  Documents.  Each of the Parent and the Borrower  will,  and will cause
each of its Subsidiaries to, maintain insurance,  in form, substance and amounts
satisfactory  to the  Administrative  Agent,  on  the  Mortgaged  Properties  in
accordance with the terms of the Mortgages.

                                       50
<PAGE>

         7.8.  TAXES.  Each of the Parent and the Borrower  will, and will cause
each of its  Subsidiaries  to, duly pay and  discharge,  or cause to be paid and
discharged,  before the same shall become  overdue,  all Taxes,  assessments and
other  governmental  charges imposed upon it and its real properties,  sales and
activities,  or any part thereof,  or upon the income or profits  therefrom,  as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a Lien or charge upon any of its  property;  provided  that any such Tax,
assessment,  charge,  levy or claim need not be paid if the  validity  or amount
thereof shall  currently be contested in good faith by  appropriate  proceedings
and if the Parent,  the Borrower or such Subsidiary  shall have set aside on its
books  adequate  reserves with respect  thereto;  and provided  further that the
Parent and each  Subsidiary of the Parent will pay all such Taxes,  assessments,
charges,  levies or claims  forthwith  upon the  commencement  of proceedings to
foreclose  or  otherwise  enforce  any Lien that may have  attached  as security
therefor.

         7.9. COMPLIANCE WITH LAWS,  CONTRACTS,  LICENSES,  AND PERMITS. Each of
the Parent and the Borrower  will, and will cause each of its  Subsidiaries  to,
comply with (i) the  applicable  laws and  regulations  wherever its business is
conducted,  including  all  Environmental  Laws,  (ii)  the  provisions  of  its
Governing Documents,  (iii) all agreements and instruments by which it or any of
its  properties  may be bound  and  (iv) all  applicable  decrees,  orders,  and
judgments,  PROVIDED,  that in each case, such  compliance  shall be required by
this Term Loan  Agreement  only where  noncompliance  with Sections  7.9(i)-(iv)
would have a material  adverse  effect on the  business,  assets,  operations or
financial  condition of the Borrower and the Guarantors  (taken as a whole),  or
the  ability of either the Parent or the  Borrower  to fulfill  its  obligations
under  this  Term  Loan   Agreement  or  the  other  Loan   Documents.   If  any
authorization,  consent, approval, permit or license from any officer, agency or
instrumentality  of any  government  or any  central  bank or  other  fiscal  or
monetary  authority shall become necessary or required in order that the Parent,
the  Borrower or any of their  Subsidiaries  may fulfill any of its  obligations
hereunder or any of the other Loan  Documents to which the Parent,  the Borrower
or such Subsidiary is a party, the Parent and the Borrower will, or (as the case
may be) will cause such  Subsidiary  to,  promptly take or cause to be taken all
reasonable steps within the power of the Parent, the Borrower or such Subsidiary
to obtain such authorization,  consent,  approval,  permit or license,  and upon
request of the Administrative Agent, to furnish the Administrative Agent and the
Lenders with evidence thereof.

         7.10.  EMPLOYEE BENEFIT PLANS. Each of the Parent and the Borrower will
(i)  promptly  upon  filing (if  required by  applicable  law) the same with the
Department   of  Labor  or  Internal   Revenue   Service  upon  request  of  the
Administrative  Agent,  furnish to the  Administrative  Agent a copy of the most
recent  actuarial  statement  required to be submitted  under Section  103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in respect of
each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish
to the  Administrative  Agent any  notice,  report or demand sent or received in
respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063,
4065,  4066 and 4068 of ERISA,  or in respect  of a  Multiemployer  Plan,  under
Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.

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<PAGE>

         7.11. USE OF PROCEEDS.  The proceeds of the Term Loans  contemplated to
be  advanced  or made  available  to the  Borrower  shall be used solely for (i)
repayment of a portion of the outstanding  obligations of the Borrower under the
Existing Credit Agreement, and (ii) to fund certain fees and expenses related to
the Revolving Credit Agreement and the transactions contemplated hereby.

         7.12. CERTAIN CHANGES. Each of the Parent and the Borrower shall notify
the Administrative  Agent, in writing,  not less than thirty (30) days prior (i)
to any  change  in its  chief  executive  office,  its  name or the  type of its
organization,  (ii) the acquisition of any real estate pursuant to SECTION 7.16,
or (iii) the  acquisition  of any asset in any  jurisdiction  other  than  those
jurisdictions   specified  on  the  Parent's  and  the   Borrower's   Perfection
Certificate.

         7.13. CONDUCT OF BUSINESS.  Except as permitted by SECTION 8.5, each of
the Parent and the Borrower will and will cause their  Subsidiaries  to continue
to engage primarily in the businesses engaged in by the Parent, the Borrower and
their  Subsidiaries  on the Closing Date, or such  businesses as are  reasonably
related  or  complementary  to the  businesses  engaged  in by the  Parent,  the
Borrower and their Subsidiaries on the Closing Date.

         7.14. FURTHER ASSURANCES. Each of the Parent and the Borrower will, and
will cause each of their  Subsidiaries  to,  cooperate  with the Lenders and the
Administrative  Agent and execute such further  instruments and documents as the
Lenders or the  Administrative  Agent shall  reasonably  request to carry out to
their satisfaction the transactions contemplated by this Term Loan Agreement and
the other Loan Documents.

         7.15. INSPECTION OF PROPERTIES AND BOOKS, ETC.

                  7.15.1.  GENERAL. The Parent and the Borrower shall permit the
         Lenders,  through the Administrative Agent or any of the Lenders' other
         designated representatives,  at the Borrower's expense (such expense to
         include a $850 per day field examination  charge plus all out of pocket
         expenses related  thereto),  to visit and inspect any of the properties
         of the  Parent  or any of its  Subsidiaries,  to  examine  the books of
         account of the Parent and its Subsidiaries  (and to make copies thereof
         and  extracts  therefrom),  and to discuss the  affairs,  finances  and
         accounts of the Parent and its Subsidiaries  with, and to be advised as
         to the same by, its and their officers, and to conduct examinations and
         verifications  (whether by internal  commercial  finance  examiners  or
         independent  auditors  satisfactory to the Administrative  Agent (which
         may be affiliated  with one or more of the Lenders)) of the Collateral,
         all at such reasonable times and intervals and with prior notice as the
         Administrative Agent or any Lender may reasonably request.

                  7.15.2. APPRAISALS. At the request of the Administrative Agent
         or the  Required  Lenders,  which  requests may be made  annually  with
         respect to Real Property and  semi-annually  with respect to Equipment,
         and  without  duplication  of  any  such  appraisals  required  by  the
         Revolving  Credit Agent and  Revolving  Credit  Lenders,  (or with such
         other  frequency  as the  Administrative  Agent shall  request upon the
         occurrence  and  during  the  continuation  of a Default or an Event of
         Default),  the Parent and the  Borrower  will obtain and deliver to the
         Administrative  Agent and the  Lenders  appraisal  reports  in form and
         substance and from appraisers satisfactory to the Administrative Agent,
         stating (a) the then current fair market, net orderly liquidation value
         and  forced  liquidation  values  of  all or any  portion  of the  Real
         Property and Equipment owned by the Parent or any of its  Subsidiaries,
         and  (b)  the  then  current  business  value  of the  Parent  and  its
         Subsidiaries.  Each such  appraisal  shall be conducted and made at the
         expense of the Borrower.

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                  7.15.3.    COMMUNICATIONS    WITH   ACCOUNTANTS.    Upon   the
         Administrative  Agent's reasonable request,  each of the Parent and the
         Borrower will request that the Parent's and the Borrower's  independent
         certified public accountants communicate with the Administrative Agent,
         and, if  accompanied by the  Administrative  Agent,  the Lenders,  with
         respect  to  the  financial  condition  of  the  Parent  or  any of its
         Subsidiaries;   PROVIDED  that  the  Parent  and  the  Borrower   shall
         participate in all such communications.

                  7.15.4.  ENVIRONMENTAL  ASSESSMENTS.  No more  frequently than
         once during each  calendar  year (or with such other  frequency  as the
         Administrative Agent shall request upon the occurrence and continuation
         of a Default or an Event of Default), the Administrative Agent may, for
         the  purpose  of  assessing  and  ensuring  the value of any  Mortgaged
         Property,  obtain one or more  environmental  assessments  or audits of
         such Mortgaged  Property prepared by a  hydrogeologist,  an independent
         engineer  or other  qualified  consultant  or  expert  approved  by the
         Administrative  Agent to evaluate or confirm (a) whether any  Hazardous
         Substances are present in the soil or water at such Mortgaged Property,
         and (b)  whether  the  use and  operation  of such  Mortgaged  Property
         complies with all  Environmental  Laws.  Environmental  assessments may
         include  without   limitation   detailed  visual  inspections  of  such
         Mortgaged Property including any and all storage areas,  storage tanks,
         drains,  dry wells and leaching areas,  and the taking of soil samples,
         surface water samples and ground water  samples,  as well as such other
         investigations   or   analyses  as  the   Administrative   Agent  deems
         appropriate.  All such environmental assessments shall be conducted and
         made at the expense of the Borrower.

         7.16.  ADDITIONAL MORTGAGED PROPERTY. At any time following the Closing
Date,  upon  request  of the  Administrative  Agent,  each of the Parent and the
Borrower shall,  and shall cause each of its  Subsidiaries to, forthwith (but in
any event within sixty (60) days following any such request therefor) deliver to
the  Administrative  Agent  for the  benefit  of the  Lenders  a fully  executed
mortgage or deed of trust over any or all parcels of Real  Property  acquired or
leased by the Parent,  the Borrower or such  Subsidiary  after the Closing Date,
each of which shall be in form and substance  satisfactory to the Administrative
Agent and shall be deemed to be a Security  Document  hereunder,  together  with
such  title  insurance  policies,   surveys,   environmental  site  assessments,
evidences of  insurance  with the  Administrative  Agent named as loss payee and
additional  insured,  legal opinions and other documents and  certificates  with
respect  to such  Real  Property  as the  Administrative  Agent  may  reasonably
request.  Each of the Parent and the Borrower further agrees that, following the
taking of such actions with respect to such Real  Property,  the  Administrative
Agent shall have, for the benefit of the Lenders,  a valid and enforceable first
priority  mortgage or deed of trust over such Real  Property,  free and clear of
all defects and encumbrances except for Permitted Liens.

                                       53
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         7.17. INTENTIONALLY OMITTED.

         7.18.  DOMESTIC  SUBSIDIARIES.  The Parent  shall  cause each  Domestic
Subsidiary  of the Parent  (other than the  Borrower)  to be a Guarantor  at all
times.

         7.19. LANDLORD WAIVERS. The Borrower shall use commercially  reasonable
efforts to obtain and deliver to the Administrative  Agent, landlord waivers, in
form and substance reasonably satisfactory to the Administrative Agent, relating
to each of the leased properties listed on SCHEDULE 10.20.

         7.20. INTENTIONALLY OMITTED.

         7.21. FINANCIAL CONSULTANT.  The Parent and the Borrower shall continue
to retain, at the Borrower's and Guarantors'  expense,  the Financial Consultant
on terms and conditions  satisfactory to the Administrative  Agent, for a period
of not less than three (3)  months  after the  Closing  Date,  as its  financial
consultant.  Parent  acknowledges that the Financial  Consultant has been chosen
solely by the Parent and the Financial  Consultant  will be an agent only of the
Parent, and not of the Administrative  Agent or any Lender, in all respects.  At
any time and from time to time, the Borrower and the  Guarantors  shall make the
Financial  Consultant,  its officers and other consultants of the Parent and its
Subsidiaries available,  whether by telephone or in person to review and discuss
the Parent's and its Subsidiaries' financial condition; PROVIDED that the Parent
shall have the option to participate in such communications.

         7.22. POST CLOSING OBLIGATIONS.  The Borrower shall comply with each of
the following post-closing obligations within the time frames indicated:

                  (a) Within thirty (30) days  following  the Closing Date,  the
         Borrower  shall  deliver to the  Administrative  Agent the  Articles of
         Organization  and  Bylaws of Quaker  Mexico,  or such  other  documents
         corresponding to the same under Mexican law; and

                  (b) Within  fifteen (15) days  following the Closing Date, the
         Borrower shall use  commercially  reasonable  efforts to deliver to the
         Administrative Agent landlord waivers, in form and substance reasonably
         satisfactory  to the  Administrative  Agent,  with  respect to the Real
         Properties located at 54 Graham Road, Fall River,  Massachusetts and 81
         Commerce Drive, Fall River, Massachusetts.

              8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER.

         Each of the Parent and the Borrower  covenants and agrees that, so long
as any Term Loan is  outstanding  or any Lender has any  obligation  to make any
Term Loans:

         8.1.  INVESTMENTS.  Neither  the Parent nor the  Borrower  will or will
permit any of their  Subsidiaries  to make any Investment in any Person,  except
for Investments which consist of:

                  (a) marketable direct or guaranteed  obligations of the United
         States of  America  that  mature  within  one (1) year from the date of
         purchase by the Parent or any Subsidiary of the Parent;

                  (b)  demand   deposits,   certificates  of  deposit,   bankers
         acceptances  and time  deposits of United  States  banks  having  total
         assets in excess of $100,000,000;

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<PAGE>

                  (c) securities  commonly known as "commercial paper" issued by
         a  corporation  organized  and  existing  under the laws of the  United
         States of America  or any state  thereof  that at the time of  purchase
         have been  rated and the  ratings  for which are not less than "P 1" if
         rated by Moody's, and not less than "A 1" if rated by S&P;

                  (d)   overnight   Investments   in  money  market  funds  with
         portfolios  comprised of the items described in clauses (a) through (c)
         above;

                  (e) Investments consisting of the Guaranties;

                  (f)  Investments  existing  on the date  hereof  and listed on
         SCHEDULE 8.1;

                  (g)  Investments  with  respect to  Indebtedness  permitted by
         SECTION  8.2(D) so long as such  entities  remain  Subsidiaries  of the
         Borrower;

                  (h) Investments (i) by the Parent in Domestic  Subsidiaries of
         the Parent,  and (ii) by the Borrower in Domestic  Subsidiaries  of the
         Borrower;

                  (i) Investments  consisting of loans and advances to employees
         for moving,  entertainment,  travel, housing and other similar expenses
         in the  ordinary  course  of  business  not to exceed  $250,000  in the
         aggregate at any time outstanding; and

                  (j) Notes  receivable  and  securities  received in connection
         with the  insolvency  or inability to pay of any of the Parent's or the
         Borrower's  account debtors in an aggregate amount not to exceed at any
         time the greater of (i)  $3,000,000  and (ii) ten percent  (10%) of the
         outstanding face amount of the Borrower's  accounts  receivable at such
         time;

         PROVIDED,  HOWEVER,  such Investments shall be permitted hereunder only
to the extent such Investments (if held by the Parent or any Domestic Subsidiary
of the Parent) are subject to a second  priority  security  interest in favor of
the Administrative  Agent, securing the Obligations free of all Liens other than
Permitted Liens.

         8.2.  RESTRICTIONS  ON  INDEBTEDNESS.  The Parent and the Borrower will
not, and will not permit any of their  Subsidiaries to, create,  incur,  assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:

                  (a) Indebtedness created hereunder;

                  (b)  Indebtedness  existing on the  Closing  Date which is set
         forth in SCHEDULE 8.2;

                  (c)  other  Indebtedness   incurred  after  the  Closing  Date
         (determined on a consolidated  basis without  duplication in accordance
         with GAAP) in respect of  Capitalized  Leases  and/or  secured by Liens
         permitted under SECTION 8.3(H), in an aggregate principal amount at any
         time outstanding not in excess of $2,500,000;

                                       55
<PAGE>

                  (d)  Indebtedness of a Domestic  Subsidiary of the Borrower to
         the  Borrower;  PROVIDED  that,  in each  case,  such  Indebtedness  is
         evidenced by a note which is pledged to the Administrative Agent;

                  (e) Indebtedness of the Parent or any Subsidiary of the Parent
         in respect of Derivative Agreements;

                  (f) Indebtedness of the Parent and its Subsidiaries consisting
         of (i)  the  Priority  Bank  Debt  (as  defined  in  the  Intercreditor
         Agreement),  and  (ii)  any  refinancings  thereof;  PROVIDED  that the
         committed  amount of such  Indebtedness is not increased at the time of
         such   refinancing   and  such   refinancing   and  the   intercreditor
         arrangements  with the holders of such  Indebtedness  are  otherwise on
         terms and conditions satisfactory to the Administrative Agent; and

                  (g) Indebtedness of the Parent and its Subsidiaries consisting
         of the financing of insurance  premiums incurred in the ordinary course
         of business.

         8.3. RESTRICTIONS ON LIENS.

                  8.3.1.  PERMITTED  LIENS.  Neither the Parent nor the Borrower
         will, nor will they permit any of their Subsidiaries to, create, incur,
         assume or permit to exist any Lien on any of its  property or assets of
         any character now owned or hereafter  acquired by it, or assign or sell
         any income or revenues  (including  accounts  receivable)  or rights in
         respect of any thereof,  except (the following being called  "PERMITTED
         LIENS"):

                           (a) Liens  created  hereunder or under the other Loan
                  Documents;

                           (b) any Lien on any  property  or asset of the Parent
                  or any  Subsidiary  of the Parent  existing on the date hereof
                  and set forth in SCHEDULE  8.3.1,  PROVIDED that (i) such Lien
                  shall not apply to any other  property  or asset of the Parent
                  or any  Subsidiary  of the  Parent  and (ii) such  Lien  shall
                  secure  only  those  obligations  which it secures on the date
                  hereof;

                           (c) Liens imposed by any  Governmental  Authority for
                  taxes,  assessments or charges not yet delinquent or which are
                  being  contested in good faith and by appropriate  proceedings
                  if adequate  reserves with respect  thereto are  maintained on
                  the books of the  Parent  and  Subsidiaries  of the  Parent in
                  accordance with GAAP and which reserves shall be acceptable to
                  the Administrative Agent;

                           (d)    landlords',     carriers',     warehousemen's,
                  mechanics',  materialmen's,  repairmen's  or other like Liens,
                  and  vendors'  Liens  imposed  by  statute  or common  law not
                  securing  the  repayment  of  Indebtedness,   arising  in  the
                  ordinary course of business which are not overdue for a period
                  of more than sixty (60) days or which are being  contested  in
                  good faith and by appropriate  proceedings  and Liens securing
                  judgments   (including,   without   limitation,   pre-judgment
                  attachments);

                                       56
<PAGE>

                           (e) pledges or deposits under worker's  compensation,
                  unemployment  insurance and other social security  legislation
                  and  pledges or deposits  to secure the  performance  of bids,
                  tenders,  trade  contracts  (other than for  borrowed  money),
                  leases  (other  than  Capitalized  Leases),  utility  purchase
                  obligations,  statutory obligations,  surety and appeal bonds,
                  performance  bonds  and  other  obligations  of a like  nature
                  incurred in the ordinary course of business;

                           (f) easements, rights-of-way,  restrictions and other
                  similar  encumbrances  incurred  in  the  ordinary  course  of
                  business and encumbrances  consisting of zoning  restrictions,
                  easements, licenses,  restrictions on the use of Real Property
                  or  minor   imperfections  in  title  thereto  which,  in  the
                  aggregate,  are not  material in amount,  and which do not, in
                  the aggregate,  materially  detract from the value of the Real
                  Property  of the  Parent or any  Subsidiary  of the  Parent or
                  materially interfere with the ordinary conduct of the business
                  of the Parent or any Subsidiary of the Parent;

                           (g) Liens  consisting of bankers' liens and rights of
                  setoff,  in each case,  arising by operation of law, and Liens
                  on documents presented in letter of credit drawings;

                           (h) Liens on Capital Assets acquired,  constructed or
                  improved  by the  Parent  or  any  Subsidiary  of the  Parent,
                  PROVIDED  that (i) such Liens secure  Indebtedness  (including
                  Indebtedness with respect to Capitalized  Leases) permitted by
                  SECTION 8.2(C),  (ii) such Liens and the Indebtedness  secured
                  thereby are incurred  prior to or within  ninety 90 days after
                  such  acquisition  or the completion of such  construction  or
                  improvement  or were in  effect  at the time the  Parent  or a
                  Subsidiary of the Parent  acquired the assets or stock,  (iii)
                  the  Indebtedness  secured thereby does not exceed the cost of
                  acquiring,  constructing  or  improving  such fixed or capital
                  assets,  and (iv) such security  interests  shall not apply to
                  any  other   property   or   assets  of  the   Parent  or  its
                  Subsidiaries;

                           (i)  Other  nonconsensual  Liens;  PROVIDED  that the
                  aggregate  amount  of  obligations  secured  thereby  does not
                  exceed $100,000 at any time;

                           (j)  Liens  created   under  the   Revolving   Credit
                  Agreement and the other Revolving  Credit  Documents to secure
                  the Indebtedness  permitted under SECTION 8.2(F) and any Liens
                  securing any permitted refinancing thereof; and

                           (k)  Liens on  insurance  policies  and the  proceeds
                  thereof pursuant to insurance premium  financing  arrangements
                  permitted under SECTION 8.2(G).

                  8.3.2.   RESTRICTIONS   ON  NEGATIVE   PLEDGES  AND   UPSTREAM
         LIMITATIONS. The Parent and the Borrower will not, nor will they permit
         any of their  Subsidiaries  to (a)  enter  into or  permit to exist any
         arrangement or agreement (excluding this Term Loan Agreement, the other
         Loan Documents and the Revolving  Credit  Documents)  which directly or
         indirectly  prohibits  the  Parent  or  any of  its  Subsidiaries  from
         creating, assuming or incurring any Lien upon its properties,  revenues
         or  assets  or those of any of its  Subsidiaries  whether  now owned or
         hereafter  acquired,  or (b)  enter  into any  agreement,  contract  or
         arrangement   (excluding  this  Term  Loan  Agreement  the  other  Loan
         Documents and the Revolving Credit  Documents)  restricting the ability
         of any  Subsidiary  of the  Parent  and  the  Borrower  to pay or  make
         dividends  or  distributions  in  cash or  kind  to the  Parent  or the
         Borrower,  to make  loans,  advances or other  payments  of  whatsoever
         nature  to  the  Parent  or  the  Borrower,  or to  make  transfers  or
         distributions  of all or any part of its  assets  to the  Parent or the
         Borrower; in each case other than customary anti-assignment  provisions
         contained in leases and licensing agreements entered into by the Parent
         or any Subsidiary in the ordinary  course of its business,  but only if
         consents by the  counterparty  thereto have been obtained by the Parent
         or  its  Subsidiaries  in  form  and  substance   satisfactory  to  the
         Administrative Agent.

                                       57
<PAGE>

         8.4.   RESTRICTED   PAYMENTS.   The  Parent,  the  Borrower  and  their
Subsidiaries will not make any Restricted  Payments other than  Distributions to
the Parent from a Subsidiary  of the Parent or to the Borrower from a Subsidiary
of the Borrower.

         8.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.

         8.5.1.  MERGERS AND  ACQUISITIONS.  Neither the Parent nor the Borrower
will, or will permit any of their  Subsidiaries to, become a party to any merger
or  consolidation,  or  agree  to or  effect  any  asset  acquisition  or  stock
acquisition  (other than the  acquisition  of assets in the  ordinary  course of
business   consistent  with  past  practices)  except  for  (i)  the  merger  or
consolidation  of one or more of the  Subsidiaries of the Borrower with and into
the Borrower,  (ii) the merger or consolidation  of two or more  Subsidiaries of
the Borrower.

         8.5.2. DISPOSITION OF ASSETS.

                           (a) Neither the Parent nor the Borrower will, or will
                  permit  any of  their  Subsidiaries  to,  become a party to or
                  agree to or effect any  disposition of any assets,  other than
                  (i) the  sale of  inventory,  the  licensing  of  intellectual
                  property and the disposition of obsolete assets,  in each case
                  in the  ordinary  course  of  business  consistent  with  past
                  practices, and (ii) the sales of the Real Property,  fixtures,
                  machinery and  equipment  contemplated  by the Business  Plan;
                  PROVIDED  that (x) the amount of Net Proceeds  received by the
                  Borrower from a sale of Real Property is greater than or equal
                  to the  amount  of  Minimum  Proceeds  for  such  sale of Real
                  Property,  or if less than such amount, the Borrowers receives
                  the prior written consent of the Administrative Agent for such
                  sale,  and (y) all of the Net  Proceeds  from  such  sale  are
                  applied,  contemporaneously  upon receipt,  in accordance with
                  SECTION 3.1.7.

                           (b) In  connection  with any  disposition  of  assets
                  permitted under this SECTION 8.5.2, each of the Lenders hereby
                  authorizes the Administrative Agent to execute and deliver any
                  collateral  releases  necessary  to release  its Liens on such
                  assets;  PROVIDED, that in the case of any Mortgaged Property,
                  the  Lenders  hereby  authorize  the  Administrative  Agent to
                  release  its Lien on any  parcel of  Mortgaged  Property  upon
                  consummation  of any Real Property Sale yielding  Adjusted Net
                  Proceeds  equal to or greater  than the Minimum  Proceeds  for
                  such parcel of Mortgaged Property.

         8.6. SALE AND  LEASEBACK.  Neither the Parent nor the Borrower will, or
will permit any of their  Subsidiaries to, enter into any arrangement,  directly
or indirectly,  whereby the Parent or any Subsidiary of the Parent shall sell or
transfer  any  property  owned by it in order then or  thereafter  to lease such
property  (other  than  short-term  or  transitional   leases  entered  into  in
connection  with the disposition of any Real Property  and/or  consolidation  of
operations)  that the Parent or any  Subsidiary of the Parent intends to use for
substantially the same purpose as the property being sold or transferred.

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<PAGE>

         8.7.  CHANGE OF FISCAL YEAR. The Parent will not at any time change its
Fiscal Year without the prior written consent of the Required Lenders.

         8.8. EMPLOYEE BENEFIT PLANS.  Neither the Parent,  the Borrower nor any
ERISA Affiliate will:

                  (a) engage in any "prohibited  transaction" within the meaning
         of Section 406 of ERISA or Section  4975 of the Code which could result
         in a material liability for the Parent or any of its Subsidiaries; or

                  (b)  permit   any   Guaranteed   Pension   Plan  to  incur  an
         "accumulated  funding  deficiency",  as such term is defined in Section
         302 of ERISA, whether or not such deficiency is or may be waived; or

         (c)      fail to contribute to any Guaranteed Pension Plan to an extent
                  which,  or terminate any  Guaranteed  Pension Plan in a manner
                  which, could result in the imposition of a Lien or encumbrance
                  on the  assets  of  the  Parent  or  any  of its  Subsidiaries
                  pursuant to Section 302(f) or Section 4068 of ERISA; or

                  (d)  amend  any  Guaranteed   Pension  Plan  in  circumstances
         requiring  the posting of security  pursuant to Section 307 of ERISA or
         Section 401(a)(29) of the Code.

         8.9.  COMPLIANCE WITH  ENVIRONMENTAL  LAWS. The Parent and the Borrower
will not, and will not permit any of their  Subsidiaries  to, (a) use any of the
Real Property or any portion  thereof for the handling,  processing,  storage or
disposal of  Hazardous  Substances,  (b) cause or permit to be located on any of
the Real Property any underground tank or other underground  storage  receptacle
for Hazardous  Substances,  (c) generate any Hazardous  Substances on any of the
Real  Property,  (d) conduct any  activity at any Real  Property or use any Real
Property  in any  manner  so as to cause a  Release  or  threatened  Release  of
Hazardous  Substances  on,  upon or into the  Real  Property,  or (e)  otherwise
conduct any activity at any Real Property or use any Real Property in any manner
that  would  violate  any  Environmental  Law or bring  such  Real  Property  in
violation of any Environmental  Law, unless, in each case, such violation,  use,
condition,  generation  or activity  could not  reasonably be expected to have a
material  adverse  effect on the value of such Real  Property  or the  business,
assets,  operations or financial  condition of the Borrower and the  Guarantors,
taken as a whole,  or the  ability of the Parent,  the  Borrower or any of their
Subsidiaries  to fulfill its  obligations  under this Term Loan Agreement or the
other Loan Documents.

         8.10.  CHANGE  IN TERMS OF  GOVERNING  DOCUMENTS.  The  Parent  and the
Borrower  shall not effect or permit any change in or amendment to the Governing
Documents of the Parent or any of its  Subsidiaries,  which could  reasonably be
expected to adversely affect the Lenders.

                                       59
<PAGE>

         8.11.  CREATION OF  SUBSIDIARIES.  Neither the Parent nor the  Borrower
shall, or shall permit any of their  Subsidiaries  to, create or permit to exist
any  Subsidiary  unless (a) one hundred  percent  (100%) of the Capital Stock or
other equity  interests of such  Subsidiary  are owned by the  Guarantors or the
Borrower,  (b) prior to the  formation  of such  Subsidiary,  the Parent and the
Borrower  shall  notify  the  Administrative  Agent and the  Lenders  thereof in
writing and deliver to the  Administrative  Agent an updated  SCHEDULE 6.18, (c)
contemporaneously with the formation of any Domestic Subsidiary,  the Parent and
the Borrower shall, and shall cause each of their  Subsidiaries to, (i) take all
steps as may be  necessary  or  advisable  in the opinion of the  Administrative
Agent to pledge to the Administrative  Agent, for the benefit of the Lenders and
the  Administrative  Agent, on a perfected,  second-priority  basis,  all of the
Capital Stock or other equity interests of such Domestic  Subsidiary pursuant to
a pledge  agreement in form and  substance  satisfactory  to the  Administrative
Agent,  which such pledge  agreement shall be a Pledge  Agreement and a Security
Document  hereunder,  (ii) cause any such Domestic Subsidiary to guaranty all of
the  Obligations  hereunder  pursuant  to  a  guaranty  in  form  and  substance
satisfactory  to the  Administrative  Agent,  which  such  guaranty  shall  be a
Guaranty and a Security Document  hereunder,  (iii) cause any such Subsidiary to
take  all  steps  as  may be  necessary  or  advisable  in  the  opinion  of the
Administrative  Agent to grant to the  Administrative  Agent, for the benefit of
the Lenders and the Administrative  Agent, a first priority,  perfected security
interest in the Fixed Asset  Collateral  owned by such  Subsidiary  and a second
priority security interest in and to all other Collateral  (subject to the Liens
of the Revolving  Credit Agent under the Revolving  Credit Agreement and related
documents) owned by such Subsidiary,  as collateral  security for such Guaranty,
pursuant to security documents,  mortgages,  pledges and other documents in form
and substance  satisfactory to the Administrative Agent, each of which documents
shall be a Security Document  hereunder,  and (iv) deliver to the Administrative
Agent all such  evidence of corporate  or other  authorization,  legal  opinions
(including local counsel opinions where  applicable) and other  documentation as
the  Administrative  Agent  may  request,  and (d)  contemporaneously  with  the
formation  of any Foreign  Subsidiary,  the Parent and the Borrower  shall,  and
shall cause each of their Subsidiaries to, take all steps as may be necessary or
advisable  in  the  opinion  of  the  Administrative  Agent  to  pledge  to  the
Administrative  Agent,  for the benefit of the  Lenders  and the  Administrative
Agent  (subject to the Liens of the  Revolving  Credit Agent under the Revolving
Credit Agreement), sixty-five percent (65%) of the Capital Stock or other equity
interests of such Foreign Subsidiary  pursuant to a pledge agreement in form and
substance  satisfactory to the Administrative Agent, which such pledge agreement
shall be a Pledge Agreement and a Security Document hereunder.

         8.12.  TRANSACTIONS  WITH AFFILIATES.  The Parent and the Borrower will
not, and will not permit any of their Subsidiaries to, engage in any transaction
with any Affiliate (excluding Domestic Subsidiaries of the Parent) of the Parent
(other than for services by individuals as employees,  officers and  directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property  to or  from,  or  otherwise  requiring  payments  to or from  any such
Affiliate or, to the knowledge of the Parent and the Borrower,  any corporation,
partnership, trust or other entity in which any such Affiliate has a substantial
interest or is an officer, director, trustee or partner, on terms more favorable
to such Person than would have been obtainable on an  arm's-length  basis in the
ordinary course of business.

         8.13. INTENTIONALLY OMITTED.

         8.14.  BUSINESS  ACTIVITIES.  The Parent and the Borrower will not, and
will not permit any of their  Subsidiaries  to,  engage  directly or  indirectly
(whether  through  Subsidiaries or otherwise) in any type of business other than
the businesses conducted by them on the Closing Date and in related businesses.

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             9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER.

         Each of the Parent and the Borrower  covenants and agrees that, so long
as any Term Loan is  outstanding  or any Lender has any  obligation  to make any
Term Loans and based on the consolidated  financial statements of the Parent and
its Subsidiaries delivered in accordance with the terms hereof:

         9.1. FIXED CHARGE COVERAGE RATIOS.  Each of the Parent and the Borrower
covenants and agrees that, so long as any Term Loan is outstanding  and based on
the  consolidated  financial  statements  of the  Parent  and  its  Subsidiaries
delivered in accordance with the terms hereof: (a) at any time during any Fiscal
Quarter  (x) ending  prior to or at the end of FQ3 of 2008 and (y) during  which
Excess Revolving Credit Availability (before the application of the Availability
Reserve) is less than the sum of (1)  $4,250,000,  plus (2) any increases in the
Availability  Reserve following the Closing Date, plus (3) $500,000,  the Parent
and the Borrower shall not permit the Fixed Charge Coverage Ratio, determined as
of the end of the most recently ended Fiscal Quarter, to be less than 1.00:1.00,
and (b) at any time during any Fiscal  Quarter (x) ending  after FQ3 of 2008 and
(y) during which Excess Revolving Credit Availability (before application of the
Availability  Reserve)  is less  than  the sum of (1)  $4,250,000,  plus (2) any
increases in the  Availability  Reserve  following  the Closing  Date,  plus (3)
$2,500,000,  the Parent  and the  Borrower  shall not  permit  the Fixed  Charge
Coverage  Ratio,  determined  as of the end of the most  recently  ended  Fiscal
Quarter, to be less than 1.00:1.00.

9.2. CAPITAL  EXPENDITURES.  During any period referenced in the table set forth
below,  the Parent and the  Borrower  will not,  and will not allow any of their
Subsidiaries to, make Capital  Expenditures that exceed the aggregate amount set
forth in the table below opposite such period:

--------------------------------------------------------------------------
                   Period                         Amount

--------------------------------------------------------------------------
              Fiscal Year 2006                  $10,000,000
--------------------------------------------------------------------------
              Fiscal Year 2007                  $12,000,000
--------------------------------------------------------------------------
 Fiscal Year 2008 and for each Fiscal Year      $15,000,000
                 thereafter
--------------------------------------------------------------------------

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<PAGE>

                             10. CLOSING CONDITIONS.

         The  obligations of the Lenders to make the Term Loans shall be subject
to the satisfaction of the following conditions precedent, in each case, in form
and substance satisfactory to the Administrative Agent and the Lenders:

         10.1. LOAN  DOCUMENTS.  Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and  effect  and  shall be in form  and  substance  satisfactory  to each of the
Lenders.  Each Lender  shall have  received a fully  executed  copy of each such
document.

         10.2.  CERTIFIED  COPIES OF  GOVERNING  DOCUMENTS.  Each of the Lenders
shall  have  received  from  the  Guarantors,  the  Borrower  and  each of their
Subsidiaries a copy,  certified by a duly  authorized  officer of such Person or
other appropriate Person to be true and complete on the Closing Date, of each of
its Governing Documents as in effect on such date of certification.

         10.3.  CORPORATE  OR OTHER  ACTION.  All  corporate  (or other)  action
necessary for the valid  execution,  delivery and performance by the Guarantors,
the Borrower and each of their  Subsidiaries of this Term Loan Agreement and the
other Loan Documents to which it is or is to become a party shall have been duly
and effectively  taken, and evidence  thereof  satisfactory to the Lenders shall
have been provided to each of the Lenders.

         10.4. INCUMBENCY  CERTIFICATE.  Each of the Lenders shall have received
from the Guarantors,  the Borrower and each of their  Subsidiaries an incumbency
certificate,  dated as of the Closing Date, signed by a duly authorized  officer
of such  Guarantor,  the  Borrower or such  Subsidiary,  and giving the name and
bearing a specimen signature of each individual who shall be authorized:  (a) to
sign, in the name and on behalf of each such Person,  each of the Loan Documents
to which the Borrower,  the Guarantors or such Subsidiary are or are to become a
party;  and (b) to give notices and to take other action on its behalf under the
Loan Documents.

         10.5.  VALIDITY OF LIENS. The Security  Documents shall be effective to
create in favor of the Administrative Agent a legal, valid and enforceable first
priority perfected security interest in and Lien upon the Fixed Asset Collateral
and a second  priority  perfected  security  interest in and Lien upon all other
Collateral  (subject  to the  Liens of the  Revolving  Credit  Agent  under  the
Revolving Credit Agreement). All filings, recordings,  deliveries of instruments
and other  actions  necessary or desirable in the opinion of the  Administrative
Agent to protect  and  preserve  such  security  interests  shall have been duly
effected.  The Administrative Agent shall have received evidence thereof in form
and substance satisfactory to the Administrative Agent.

         10.6.   PERFECTION   CERTIFICATES   AND   UCC   SEARCH   RESULTS.   The
Administrative  Agent shall have received from the Guarantors,  the Borrower and
their Subsidiaries a completed and fully executed Perfection Certificate and the
results of UCC searches (and the equivalent  thereof in all  applicable  foreign
jurisdictions)  with respect to the  Collateral,  indicating no Liens other than
Permitted  Liens  and  otherwise  in  form  and  substance  satisfactory  to the
Administrative Agent.

         10.7.  CERTIFICATES OF INSURANCE.  The Administrative  Agent shall have
received (a) a certificate  of insurance from an  independent  insurance  broker
dated as of the  Closing  Date,  naming the  Administrative  Agent as loss payee
and/or  additional  insured,  as  applicable,  identifying  insurers,  types  of
insurance,  insurance  limits,  and policy terms,  and otherwise  describing the
insurance obtained in accordance with the provisions of the Security Agreements,
and  (b)  certified  copies  of  all  policies  evidencing  such  insurance  (or
certificates  therefore signed by the insurer or an agent authorized to bind the
insurer).

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<PAGE>

         10.8. INTENTIONALLY OMITTED.

         10.9.  BORROWING BASE CERTIFICATES AND COLLATERAL  UPDATE  CERTIFICATE.
The  Administrative  Agent shall have  received a copy of an executed  Borrowing
Base  Certificate,  which Borrowing Base Certificate  shall  demonstrate  Excess
Revolving  Credit  Availability  (after giving effect to the payment of all fees
and expenses,  the issuance of all letters of credit under the Revolving  Credit
Agreement and the funding of the Term Loans and all Revolving  Loans to be paid,
issued or funded on the Closing Date) of not less than the sum of (i) $1,000,000
plus (ii) accounts  payable that are more than seven (7) days past due in excess
of $3,250,000, and (b) a copy of the Collateral Update Certificate and any other
reports  relative  to the  Collateral  delivered  on  the  Closing  Date  to the
Revolving Credit Agent and/or the Revolving Credit Lenders.

         10.10. ACCOUNTS RECEIVABLE AGING REPORT. The Administrative Agent shall
have  received from the Borrower the most recent  inventory  report and accounts
receivable aging report of the Borrower  delivered to the Revolving Credit Agent
pursuant to the Revolving Credit Agreement.

         10.11.  PAYMENT OF CLOSING  FEES.  The Borrower  shall have paid to the
Administrative Agent any Fees required to be paid by them on the Closing Date.

         10.12. INTENTIONALLY OMITTED.

         10.13.  OPINIONS OF COUNSEL. Each of the Lenders and the Administrative
Agent shall have received a favorable legal opinion addressed to the Lenders and
the  Administrative  Agent,  dated as of the Closing Date, in form and substance
satisfactory  to the Lenders and the  Administrative  Agent,  from Wilmer Cutler
Pickering Hale and Dorr LLP, counsel to the Parent and its Subsidiaries.

         10.14. SURVEY, TAXES, ETC. The Administrative Agent shall have received
(a) ALTA surveys with respect to each parcel of Mortgaged  Property if necessary
to  eliminate  any  exceptions  that would  otherwise  be contained in the Title
Policies relating to matters which would be shown by a survey,  (b) a flood zone
certificate  with  respect to each  parcel of  Mortgaged  Property  located in a
"flood  zone",  and (c) evidence of payment of real estate  taxes and  municipal
charges on all Real Property not delinquent on or before the Closing Date..

         10.15. TITLE INSURANCE.  The Administrative Agent shall have received a
Title Policy  covering each  Mortgaged  Property (or  commitments  to issue such
policies,  with all  conditions  to issuance of the Title  Policy  deleted by an
authorized agent of the Title Insurance  Company) together with proof of payment
of all fees and premiums for such policies, from the Title Insurance Company and
in amounts  satisfactory to the Administrative  Agent,  insuring the interest of
the  Administrative  Agent  and  each of the  Lenders  as  mortgagee  under  the
Mortgages.

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<PAGE>

         10.16. HAZARDOUS WASTE ASSESSMENTS. The Administrative Agent shall have
received  environmental  reports  and  hazardous  waste  site  assessments  from
environmental  engineers and evidence of compliance with environmental  laws, in
form and substance  satisfactory to the Administrative  Agent, covering all Real
Property  and all other real  property  in respect of which the Parent or any of
its Subsidiaries may have material  liability,  whether contingent or otherwise,
for dumping or disposal of Hazardous Substances.

         10.17. INTENTIONALLY OMITTED.

         10.18.  NO MATERIAL  ADVERSE  CHANGE.  Since the Balance Sheet Date, as
determined by the  Administrative  Agent, there has occurred no material adverse
change in the financial  condition,  business,  assets,  liabilities or business
prospects of the Borrower and the Guarantors, taken as a whole.

         10.19.  LANDLORD WAIVERS.  The Administrative Agent shall have received
landlord waivers, each in form and substance  satisfactory to the Administrative
Agent,  relating  to each of the  leased  properties  listed on  SCHEDULE  10.20
hereto.

         10.20.  LANDLORD  CONSENTS.  The Parent and its Subsidiaries shall have
delivered  to  the   Administrative   Agent  all   consents   required  for  the
Administrative Agent to receive, as part of the Security Documents, a collateral
assignment of each material  leasehold of personal  property,  and a mortgage of
each  material  leasehold  of real  property,  together  in each  case with such
estoppel certificates as the Administrative Agent may request.

         10.21.  COLLATERAL  EXAMINATIONS/APPRAISALS.  The Administrative  Agent
shall have  received  the  results of  collateral  examinations  and  appraisals
performed with respect to the  Collateral,  including  without  limitation,  the
Equipment  Appraisal  Report,  each in form and  substance  satisfactory  to the
Administrative Agent.

         10.22.  FINANCIAL STATEMENT AND PROJECTIONS.  The Administrative  Agent
shall have  received the financial  statements  and  projections  referred to in
SECTION 6.2, each in form and substance satisfactory to the Administrative Agent

         10.23.  REFERENCES.  The Administrative  Agent shall have received,  in
each case,  satisfactory trade control check and background and reference checks
on: (i) the Parent  and the  Borrower  and (ii)  their  executive  officers  and
chairman;  in each case, as determined by the  Administrative  Agent in its sole
discretion.  The  Parent  and the  Borrower  hereby  consent to execute or cause
execution of any documents necessary to effectuate such checks

         10.24.  INTERCREDITOR  AGREEMENT  ET. AL. The  Intercreditor  Agreement
shall have been duly executed and delivered by the respective  parties  thereto,
shall  be in  full  force  and  effect  and  shall  be  in  form  and  substance
satisfactory  to each of the Lenders.  Each Lender  shall have  received a fully
executed copy of the Intercreditor  Agreement.  The Revolving Credit Agent shall
have executed and delivered  such mortgage  subordination  agreements  and other
documents,  instruments and agreements reasonably required by the Administrative
Agent in order to  effectively  subordinate  the liens of the  Revolving  Credit
Agent in the Fixed Asset Collateral to the liens of the Administrative  Agent in
such Fixed  Asset  Collateral,  and  certified  copies of the  Revolving  Credit
Agreement and related documents.

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<PAGE>

         10.25. NO LEGAL 10.27. IMPEDIMENT. No change shall have occurred in any
law or regulations thereunder or interpretations  thereof that in the reasonable
opinion of any Lender  would  make it illegal  for such  Lender to make the Term
Loans to be funded by it on the Closing Date.

         10.27.  PROCEEDINGS  AND DOCUMENTS.  All proceedings in connection with
the  transactions  contemplated  by this Term  Loan  Agreement,  the other  Loan
Documents and all other  documents  incident  thereto shall be  satisfactory  in
substance  and in form to the  Lenders and to the  Administrative  Agent and the
Administrative  Agent's Special  Counsel,  and the Lenders,  the  Administrative
Agent and such counsel shall have received all information and such  counterpart
originals or certified or other copies of such  documents as the  Administrative
Agent may reasonably request.

         10.28.  REPRESENTATIONS  TRUE; NO DEFAULT OR EVENT OF DEFAULT.  Each of
the  representations  and  warranties of the Parent and any of its  Subsidiaries
contained  in the term  Loan  Agreement,  the  other  Loan  Documents  or in any
document or instrument  delivered  pursuant to or in  connection  with this Term
Loan Agreement  shall be true as of the Closing Date, and no Default or Event of
Default  shall have  occurred and be  continuing,  and no condition  shall exist
which constitutes an Event of Default.

         10.29.  EXCHANGE  LIMITATIONS.   There  exists  no  reason  whatsoever,
including,  without  limitation,  by reason of the  application of any so-called
"currency  exchange" laws, rules or regulations (as in effect at the time of any
proposed  borrowings  hereunder) which could reasonably be expected to interfere
with the Borrower satisfying any of its Obligations in full at such time as such
Obligations become due and payable pursuant to the terms hereof.

                           11. INTENTIONALLY OMITTED.

                    12. EVENTS OF DEFAULT; ACCELERATION; ETC.

         12.1.  EVENTS OF  DEFAULT  AND  ACCELERATION.  If any of the  following
events  ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:

                  (a) the Borrower  shall fail to pay any  principal of the Term
         Loans when the same shall become due and payable, whether at the stated
         date of  maturity or any  accelerated  date of maturity or at any other
         date fixed for payment;

                  (b) the  Parent,  the  Borrower  or any of their  Subsidiaries
         shall fail to pay any  interest on the Term Loans,  the Fees,  or other
         sums due hereunder or under any of the other Loan  Documents,  when the
         same shall  become  due and  payable,  whether  at the  stated  date of
         maturity or any accelerated date of maturity or at any other date fixed
         for payment and such  failure  shall  continue for three (3) days after
         written  notice of such  failure  has been  given to the Parent and the
         Borrower by the Administrative Agent;

                  (c)  either the  Parent or the  Borrower  shall fail to comply
         with any of its  covenants  contained in SECTIONS  7.1,  7.2, 7.4, 7.5,
         7.6(A)(I),  7.6(B)(III), 7.7, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16,
         7.18, 7.21, 7.22, ARTICLE 8 or ARTICLE 9 of this Term Loan Agreement or
         any of the covenants contained in any of the Mortgages;

                                       65
<PAGE>

                  (d)  the  Parent  or any of its  Subsidiaries  shall  fail  to
         perform any term,  covenant or agreement  contained herein or in any of
         the other Loan Documents (other than those specified  elsewhere in this
         SECTION 12.1) for thirty (30) days after written notice of such failure
         has been  given to the Parent and the  Borrower  by the  Administrative
         Agent;

                  (e) any representation or warranty of the Parent or any of its
         Subsidiaries  in this Term  Loan  Agreement  or any of the  other  Loan
         Documents or in any other document or instrument  delivered pursuant to
         or in connection with this Term Loan Agreement shall prove to have been
         false in any material respect upon the date when made;

                  (f)  the  Parent  or any of its  Subsidiaries  shall  make  an
         assignment  for the  benefit  of  creditors,  or admit in  writing  its
         inability to pay or  generally  fail to pay its debts as they mature or
         become due, or shall petition or apply for the appointment of a trustee
         or other custodian,  liquidator or receiver of the Parent or any of its
         Subsidiaries or of any substantial  part of the assets of the Parent or
         any of its  Subsidiaries or shall commence any case or other proceeding
         relating to the Parent or any of its Subsidiaries under any bankruptcy,
         reorganization,   arrangement,   insolvency,   readjustment   of  debt,
         dissolution or liquidation or similar law of any  jurisdiction,  now or
         hereafter  in  effect,  or shall  take any  action to  authorize  or in
         furtherance  of any of  the  foregoing,  or if  any  such  petition  or
         application  (including  bankruptcy  application) shall be filed or any
         such case or other proceeding shall be commenced  against the Parent or
         any of its Subsidiaries or the Parent or any of its Subsidiaries  shall
         indicate its approval thereof,  consent thereto or acquiescence therein
         or such petition or application  shall not have been  dismissed  within
         sixty (60) days following the filing thereof;

                  (g) a decree  or  order  (including  a  bankruptcy  order)  is
         entered appointing any such trustee, custodian,  liquidator or receiver
         or  adjudicating  the  Parent or any of its  Subsidiaries  bankrupt  or
         insolvent,  or approving a petition or  bankruptcy  application  in any
         such  case or other  proceeding,  or a decree  or  order  (including  a
         bankruptcy order) for relief is entered in respect of the Parent or any
         Subsidiary of the Parent in an involuntary  case under  bankruptcy laws
         as now or hereafter constituted;

                  (h) there shall remain in force, undischarged, unsatisfied and
         unstayed,  for more than thirty (30) days,  whether or not consecutive,
         any final  judgment  against  the  Parent  and any of its  Subsidiaries
         (considered collectively) that, with other outstanding final judgments,
         undischarged,  against  the  Parent  and its  Subsidiaries  (considered
         collectively) exceeds in the aggregate $1,000,000;

                  (i) (A) the Parent,  the Borrower or any ERISA Affiliate incur
         any  liability  to the PBGC or a Guaranteed  Pension  Plan  pursuant to
         Title IV of ERISA in an aggregate amount exceeding  $1,000,000,  or the
         Parent,  the Borrower or any ERISA  Affiliate  are assessed  withdrawal
         liability  pursuant  to  Title  IV of  ERISA  by a  Multiemployer  Plan
         requiring aggregate annual payments exceeding $1,000,000, or any of the
         following  occurs with respect to a  Guaranteed  Pension  Plan:  (i) an
         ERISA Reportable Event, or a failure to make a required  installment or
         other  payment  (within  the  meaning of Section  302(f)(1)  of ERISA),
         PROVIDED that the  Administrative  Agent  determines in its  reasonable
         discretion  that such event (A) could be expected to -------- result in
         liability of the Parent or any of its  Subsidiaries to the PBGC or such
         Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and
         (B) could  constitute  grounds for the  termination of such  Guaranteed
         Pension Plan by the PBGC, for the appointment by the appropriate United
         States  District  Court of a  trustee  to  administer  such  Guaranteed
         Pension  Plan  or  for  the  imposition  of a lien  in  favor  of  such
         Guaranteed  Pension  Plan; or (ii) the  appointment  by a United States
         District Court of a trustee to administer such Guaranteed Pension Plan;
         or (iii) the  institution  by the PBGC of proceedings to terminate such
         Guaranteed Pension Plan;

                                       66
<PAGE>

                  (j) the Parent or any of its Subsidiaries shall fail to pay at
         maturity,  or within any applicable period of grace, any obligation for
         Indebtedness  in excess of $500,000,  or fail to observe or perform any
         material  term,  covenant or agreement  contained  in any  agreement by
         which it is bound,  evidencing  or securing  Indebtedness  in excess of
         $500,000 for such period of time as would permit  (assuming  the giving
         of appropriate  notice if required) the holder or holders thereof or of
         any obligations issued thereunder to accelerate the maturity thereof;

                  (k)  if  any  of  the  Loan  Documents   shall  be  cancelled,
         terminated, revoked or rescinded or the Administrative Agent's security
         interests,  mortgages or liens in all or a  substantial  portion of the
         Collateral  shall  cease to be  perfected,  or shall  cease to have the
         priority  contemplated by the Security  Documents and the Intercreditor
         Agreement,  in each case  otherwise  than in accordance  with the terms
         thereof  or with  the  express  prior  written  agreement,  consent  or
         approval  of the  Lenders,  or any action at law,  suit or in equity or
         other  legal  proceeding  to cancel,  revoke or rescind any of the Loan
         Documents  shall  be  commenced  by or on  behalf  of the  Parent,  its
         Subsidiaries,  the Guarantors or any of their respective  stockholders,
         or any court or any  other  governmental  or  regulatory  authority  or
         agency of competent  jurisdiction  shall make a determination  that, or
         issue a judgment,  order,  decree or ruling to the effect that, any one
         or more of the Loan Documents is illegal,  invalid or  unenforceable in
         accordance with the terms thereof;

                  (l) if any material  covenant,  agreement or obligation of the
         Parent or the Borrower  contained in or evidenced by the Loan Documents
         shall cease to be legal,  valid,  binding, or enforceable in accordance
         with the terms  thereof  other  than as a result of a default or waiver
         thereof by the Administrative Agent;

                  (m) a Change of Control shall occur;

                  (n) there shall occur any material  damage to, or loss,  theft
         or  destruction  of, any  Collateral,  whether or not  insured,  or any
         strike, lockout, labor dispute, embargo,  condemnation,  expropriation,
         act of God or public enemy, or other  casualty,  which in any such case
         causes,  for more than thirty (30)  consecutive  days, the cessation or
         substantial curtailment of revenue producing activities at any facility
         of the Parent or any of its  Subsidiaries if such event or circumstance
         is not  covered by  business  interruption  insurance  and would have a
         material adverse effect on the business, assets, operation or financial
         condition of the Borrower and the Guarantors (taken as a whole), or the
         ability of the Parent or any  Subsidiary  of the Parent to fulfill  its
         obligations under this Term Loan Agreement or the other Loan Documents;

                                       67
<PAGE>

                  (o) the Parent or any of its  Subsidiaries  shall be enjoined,
         restrained  or in any way  prevented  by the order of any  Governmental
         Authority  from  conducting  any part of their  business and such order
         shall  continue  in effect for more than  thirty  (30) days unless such
         order would not have a material adverse effect on the business, assets,
         operation  or financial  condition  of the Borrower and the  Guarantors
         (taken as a whole),  or the ability of the Parent or any  Subsidiary of
         the Parent to fulfill its obligations under this Term Loan Agreement or
         the other Loan Documents;

                  (p) there shall occur the loss,  suspension or revocation  of,
         or  failure  to renew,  any  license  or permit  now held or  hereafter
         acquired  by  the  Parent  or any of its  Subsidiaries  if  such  loss,
         suspension,  revocation  or  failure  to renew  would  have a  material
         adverse  effect  on  the  business,   assets,  operation  or  financial
         condition of the Borrower or the Guarantors  (taken as a whole), or the
         ability of the Parent or any  Subsidiary  of the Parent to fulfill  its
         obligations under this Term Loan Agreement or the other Loan Documents;

                  (q)  any  "event  of  default"  under  the  Revolving   Credit
         Agreement shall occur and be continuing; or

                  (r)  the   subordination   provisions  in  the   Intercreditor
         Agreement  relative to the liens of the  Revolving  Credit Agent in the
         Fixed  Asset  Collateral  shall  cease,  in  whole  or in  part,  to be
         effective or cease to be legally valid, binding and enforceable against
         the Revolving Credit Agent and the holders of the Revolving Loans,

then,  and in any  such  event,  so  long as the  same  may be  continuing,  the
Administrative Agent may, and upon the request of the Required Lenders shall, by
notice in writing to the  Borrower,  declare all amounts  owing with  respect to
this Term Loan  Agreement  and the other  Loan  Documents  to be, and they shall
thereupon  forthwith  become,  immediately due and payable without  presentment,
demand,  protest or other notice of any kind, all of which are hereby  expressly
waived by each of the Parent and the Borrower; provided that in the event of any
Event of Default  specified  in SECTIONS  12.1(F) or 12.1(G),  all such  amounts
shall  become  immediately  due  and  payable   automatically  and  without  any
requirement of notice from the Administrative Agent or any Lender.

         12.2. INTENTIONALLY OMITTED.

         12.3. REMEDIES.  In case any one or more of the Events of Default shall
have  occurred  and be  continuing,  and whether or not the  Lenders  shall have
accelerated  the  maturity  of the Term Loans  pursuant  to SECTION  12.1,  each
Lender, if owed any amount with respect to the Term Loans, may, with the consent
of the Required  Lenders but not  otherwise,  proceed to protect and enforce its
rights by suit in equity, action at law or other appropriate proceeding, whether
for the specific performance of any covenant or agreement contained in this Term
Loan Agreement and the other Loan Documents or any instrument  pursuant to which
the  Obligations  to such  Lender  are  evidenced,  including  as  permitted  by
applicable law the obtaining of the ex parte appointment of a receiver,  and, if
such  amount  shall have become due, by  declaration  or  otherwise,  proceed to
enforce  the  payment  thereof  or any other  legal or  equitable  right of such
Lender. No remedy herein conferred upon any Lender or the  Administrative  Agent
is intended to be  exclusive of any other remedy and each and every remedy shall
be cumulative and shall be in addition to every other remedy given  hereunder or
now or  hereafter  existing  at law or in  equity  or by  statute  or any  other
provision of law.

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         12.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
the  occurrence  or  during  the  continuance  of  any  Event  of  Default,  the
Administrative  Agent or any Lender,  as the case may be, receives any monies in
connection with the enforcement of any of the Security  Documents,  or otherwise
with respect to the realization  upon any of the Collateral,  such monies shall,
subject to the  Intercreditor  Agreement,  be  distributed  for  application  as
follows:

                  (a)  FIRST,  to the  payment  of,  or (as the case may be) the
         reimbursement of the  Administrative  Agent for all fees,  indemnities,
         costs, expenses, disbursements and other amounts (including charges and
         disbursements  of  counsel  to the  Administrative  Agent)  and  losses
         payable to the  Administrative  Agent or incurred or  sustained  by the
         Administrative  Agent  in its  capacity  as  such,  including,  without
         limitation,  in  connection  with the  collection of such monies by the
         Administrative  Agent,  for the exercise,  protection or enforcement by
         the Administrative Agent of all or any of the rights, remedies,  powers
         and  privileges  of the  Administrative  Agent  under  this  Term  Loan
         Agreement  or any of the other  Loan  Documents  or in  respect  of the
         Collateral or in support of any provision of adequate  indemnity to the
         Administrative  Agent  against  any  Taxes or liens  which by law shall
         have, or may have, priority over the rights of the Administrative Agent
         to such monies;

                  (b) SECOND,  to the payment of that portion of the Obligations
         constituting  fees,  indemnities,  costs,  expenses,  disbursements and
         other amounts  (including  charges and  disbursements of counsel to the
         Lenders but excluding  principal  and interest)  payable to the Lenders
         (including  amounts  payable under SECTION 5.7),  ratably among them in
         proportion to the amounts  described in this clause  SECOND  payable to
         them;

                  (c) THIRD,  to the payment of that portion of the  Obligations
         constituting  accrued  and unpaid  interest on the Term Loans and other
         Obligations,  ratably among the Lenders in proportion to the respective
         amounts described in this clause THIRD payable to them;

                  (d)  FOURTH,  ratably to the  payment  of that  portion of the
         Obligations  constituting  unpaid principal of the Term Loans,  ratably
         among the Lenders in proportion to the respective  amounts described in
         this clause FOURTH payable to them (with such principal to be allocated
         between the Real Property Term Loan and the Equipment Term Loan in such
         manner determined by the Administrative Agent in its sole discretion);

                  (e)  FIFTH,  to  all  other   Obligations  in  such  order  or
         preference as the Required  Lenders may determine;  provided,  however,
         that (i)  distributions  shall be made  with  respect  to each  type of
         Obligation  owing to the Lenders  among the Lenders pro rata,  and (ii)
         the Administrative Agent may in its discretion make proper allowance to
         take into account any Obligations not then due and payable;

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                  (f) SIXTH,  upon  payment  and  satisfaction  in full or other
         provisions  for  payment in full  satisfactory  to the  Lenders and the
         Administrative  Agent of all of the Obligations,  to the payment of any
         obligations required to be paid pursuant to Sections  9-608(a)(1)(C) or
         9  615(a)(3)  of the Uniform  Commercial  Code of the  Commonwealth  of
         Massachusetts; and

                  (g)  SEVENTH,  the  excess,  if any,  shall be returned to the
         Borrower or to such other Persons as are entitled thereto.

                                   13. SETOFF.

         Regardless of the adequacy of any  collateral,  if any Event of Default
shall have occurred and be continuing, any deposits or other sums credited by or
due from any of the Lenders to the Borrower or the Guarantors and any securities
or other  property of the Borrower or the  Guarantors in the  possession of such
Lender or any of its Affiliates may, at any time,  without demand or notice (any
such notice being expressly waived by the Borrower and the Guarantors), in whole
or in part,  be  applied to or set off by such  Lender  against  the  payment of
Obligations  and  any and all  other  liabilities  or  obligations,  direct,  or
indirect,  absolute  or  contingent,  due or to  become  due,  now  existing  or
hereafter  arising,  of the Borrower or the Guarantors to such Lender regardless
of the adequacy of any other  collateral  securing  the Term Loans.  Each of the
Lenders  agrees with each other Lender that (i) if an amount to be set off is to
be applied to  Indebtedness  of the Borrower or the  Guarantors  to such Lender,
such  amount  shall be applied  ratably to such  other  Indebtedness  and to the
Indebtedness  evidenced  by the Notes of such  Lender,  and (ii) if such  Lender
shall receive from the Borrower or the  Guarantors or any other source,  whether
by  voluntary  payment,  exercise  of the right of setoff,  counterclaim,  cross
action,  enforcement  of the claim  evidenced  by the Notes in the name of, such
Lender  by  proceedings  against  the  Borrower  at law or in equity or by proof
thereof in  bankruptcy,  reorganization,  liquidation,  receivership  or similar
proceedings,  or  otherwise,  and shall  retain and apply to the  payment of its
Notes,  any amount in excess of its ratable portion of the payments  received by
all of the Lenders with respect to the debt evidenced by the Notes corresponding
to all of the Lenders,  such Lender will make such  disposition and arrangements
with  the  other  Lenders  with  respect  to  such  excess,  either  by  way  of
distribution,  pro tanto assignment of claims, subrogation or otherwise as shall
result in each Lender receiving in respect of the debt evidenced by the Notes in
its name, its proportionate payment as contemplated by this Term Loan Agreement;
provided that if all or any part of such excess payment is thereafter  recovered
from such Lender,  such disposition and arrangements  shall be rescinded and the
amount restored to the extent of such recovery,  but without  interest.  ANY AND
ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL  WHICH SECURES THE OBLIGATIONS,  PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS,  CREDITS OR OTHER PROPERTY OF THE
BORROWER OR THE GUARANTORS ARE HEREBY  KNOWINGLY,  VOLUNTARILY  AND  IRREVOCABLY
WAIVED.

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                          14. THE ADMINISTRATIVE AGENT.

         14.1. AUTHORIZATION.

                  (a) The Administrative Agent is authorized to take such action
         on behalf of each of the Lenders and to exercise all such powers as are
         hereunder  and under any of the other Loan  Documents  and any  related
         documents  delegated to the  Administrative  Agent,  together with such
         powers as are  reasonably  incident  thereto,  including the authority,
         without  the  necessity  of any  notice to or  further  consent  of the
         Lenders,  from  time to time to take any  action  with  respect  to any
         Collateral or the Security Documents which may be necessary to perfect,
         maintain  perfected or insure the priority of the security  interest in
         and  liens  upon  the  Collateral  granted  pursuant  to  the  Security
         Documents,  and,  PROVIDED  that  no  duties  or  responsibilities  not
         expressly  assumed  herein or  therein  shall be  implied  to have been
         assumed by the Administrative Agent.

                  (b) The relationship between the Administrative Agent and each
         of the  Lenders is that of an  independent  contractor.  The use of the
         term  "Administrative  Agent"  is for  convenience  only and is used to
         describe,  as  a  form  of  convention,   the  independent  contractual
         relationship  between the Administrative Agent and each of the Lenders.
         Nothing  contained  in this Term  Loan  Agreement  nor the  other  Loan
         Documents  shall be  construed  to  create  an  agency,  trust or other
         fiduciary  relationship between the Administrative Agent and any of the
         Lenders.

                  (c) As an independent  contractor  empowered by the Lenders to
         exercise certain rights and perform certain duties and responsibilities
         hereunder and under the other Loan Documents,  the Administrative Agent
         is  nevertheless  a  "representative"  of the Lenders,  as that term is
         defined in Article 1 of the Uniform  Commercial  Code,  for purposes of
         actions for the benefit of the  Lenders  and the  Administrative  Agent
         with respect to all collateral security and guaranties  contemplated by
         the  Loan  Documents.  Such  actions  include  the  designation  of the
         Administrative Agent as "secured party", "mortgagee" or the like on all
         financing  statements  and other  documents  and  instruments,  whether
         recorded or otherwise, relating to the attachment, perfection, priority
         or enforcement of any security  interests,  mortgages or deeds of trust
         in collateral security intended to secure the payment or performance of
         any of the  Obligations,  all for the  benefit of the  Lenders  and the
         Administrative Agent.

                  (d) The  Administrative  Agent is  authorized  and directed to
         consent to any sale or other disposition of Collateral  permitted to be
         sold or  disposed  of  hereunder,  and to  release  its  liens  on such
         Collateral,  and the  Administrative  Agent is  authorized to rely on a
         certification  from the  Borrower  that  such  sale or  disposition  is
         permitted hereunder

                  (e) The  Administrative  Agent is  authorized  and directed to
         execute  and  deliver  the  Intercreditor  Agreement  on  behalf of the
         Lenders and to act in accordance with the provisions  thereof.  Each of
         the Lenders agrees to be bound by the provisions thereof.

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<PAGE>

         14.2. EMPLOYEES AND ADMINISTRATIVE AGENTS. The Administrative Agent may
exercise its powers and execute its duties by or through employees or agents and
shall be  entitled to take,  and to rely on,  advice of counsel  concerning  all
matters  pertaining to its rights and duties under this Term Loan  Agreement and
the other Loan Documents.  The Administrative  Agent may utilize the services of
such Persons as the  Administrative  Agent in its sole discretion may reasonably
determine,  and all  reasonable  fees and expenses of any such Persons  shall be
paid by the Borrower.

         14.3. NO  LIABILITY.  Neither the  Administrative  Agent nor any of its
shareholders,  directors,  officers or employees nor any other Person  assisting
them in their duties nor any agent or employee  thereof,  shall be liable to any
Lender for any waiver, consent or approval given or any action taken, or omitted
to be taken,  in good  faith by it or them  hereunder  or under any of the other
Loan Documents,  or in connection  herewith or therewith,  or be responsible for
the consequences of any oversight or error of judgment  whatsoever,  except that
the Administrative Agent or such other Person, as the case may be, may be liable
for losses due to its willful misconduct or gross negligence.

         14.4. NO REPRESENTATIONS.

                  14.4.1.   GENERAL.  The  Administrative  Agent  shall  not  be
         responsible  for the  execution or validity or  enforceability  of this
         Term Loan Agreement,  any of the other Loan Documents or any instrument
         at  any  time  constituting,  or  intended  to  constitute,  collateral
         security  for any of the Loan  Documents,  or for the value of any such
         collateral   security   or  for  the   validity,   enforceability,   or
         collectibility  of any such  amounts  owing with  respect to any of the
         Loan  Documents,  or for any  recitals  or  statements,  warranties  or
         representations made herein or in any of the other Loan Documents or in
         any certificate or instrument hereafter furnished to it by or on behalf
         of the Parent or any of its  Subsidiaries,  or be bound to ascertain or
         inquire  as to the  performance  or  observance  of  any of the  terms,
         conditions,  covenants or agreements herein or in any instrument at any
         time constituting,  or intended to constitute,  collateral security for
         any of the Loan Documents or to inspect any of the properties, books or
         records of the Parent or any of its  Subsidiaries.  The  Administrative
         Agent shall not be bound to  ascertain  whether  any  notice,  consent,
         waiver or request  delivered to it by the Parent or the Borrower  shall
         have  been duly  authorized  or is true,  accurate  and  complete.  The
         Administrative   Agent   has  not   made  nor  does  it  now  make  any
         representations or warranties,  express or implied,  nor does it assume
         any liability to the Lenders,  with respect to the credit worthiness or
         financial  conditions  of the Parent or any of its  Subsidiaries.  Each
         Lender  acknowledges  that it has,  independently  and without reliance
         upon the Administrative  Agent or any other Lender, and based upon such
         information  and documents as it has deemed  appropriate,  made its own
         credit  analysis and  decision to enter into this Term Loan  Agreement.

                  14.4.2.   CLOSING   DOCUMENTATION,   ETC.   For   purposes  of
         determining  compliance  with the  conditions  set forth in SECTION 10,
         each Lender that has executed this Term Loan Agreement  shall be deemed
         to have consented to,  approved or accepted,  or to be satisfied  with,
         each  document  and  matter  either  sent,  or made  available,  by the
         Administrative Agent to such Lender for consent,  approval,  acceptance
         or  satisfaction,  or  required  thereunder  to be to be  consent to or
         approved by or acceptable  or  satisfactory  to such Lender,  unless an
         officer of the Administrative  Agent active upon the Borrower's account
         shall  have  received  notice  from such  Lender  not less than one (1)
         Business  Day  prior  to the  Closing  Date  specifying  such  Lender's
         objection  thereto and such objection  shall not have been withdrawn by
         notice to the  Administrative  Agent to such  effect on or prior to the
         Closing Date.

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         14.5. PAYMENTS.

                  14.5.1.  PAYMENTS TO  ADMINISTRATIVE  AGENT.  A payment by the
         Borrower  to the  Administrative  Agent  hereunder  or under any of the
         other Loan  Documents for the account of any Lender shall  constitute a
         payment to such Lender.  The  Administrative  Agent agrees  promptly to
         distribute  to each  Lender  such  Lender's  pro rata share of payments
         received  by the  Administrative  Agent for the  account of such Lender
         except as otherwise  expressly  provided  herein or in any of the other
         Loan Documents.

                  14.5.2.  DISTRIBUTION  BY  ADMINISTRATIVE  AGENT.  If  in  the
         opinion  of the  Administrative  Agent the  distribution  of any amount
         received  by it in such  capacity  hereunder  or under any of the other
         Loan  Documents  might  involve it in  liability,  it may refrain  from
         making  distribution  until its right to make  distribution  shall have
         been  adjudicated by a court of competent  jurisdiction.  If a court of
         competent  jurisdiction  shall  adjudge  that any amount  received  and
         distributed by the Administrative Agent is to be repaid, each Person to
         whom any such  distribution  shall have been made shall either repay to
         the  Administrative  Agent  its  proportionate  share of the  amount so
         adjudged  to be repaid or shall pay over the same in such manner and to
         such Persons as shall be determined by such court.

                  14.5.3.  DELINQUENT LENDERS.  Notwithstanding  anything to the
         contrary contained in this Term Loan Agreement or any of the other Loan
         Documents,  any  Lender  that  fails  (i)  to  make  available  to  the
         Administrative  Agent its PRO RATA share of any Term Loan in accordance
         with the terms of this Term Loan  Agreement  or (ii) to comply with the
         provisions  of  SECTION  13 with  respect  to making  dispositions  and
         arrangements  with the other Lenders,  where such Lender's share of any
         payment received,  whether by setoff or otherwise,  is in excess of its
         pro rata share of such  payments due and payable to all of the Lenders,
         in each case as, when and to the full extent required by the provisions
         of this Term Loan Agreement,  shall be deemed delinquent (a "DELINQUENT
         LENDER")  and shall be deemed a  Delinquent  Lender  until such time as
         such delinquency is satisfied.  A Delinquent  Lender shall be deemed to
         have assigned any and all payments due to it from the Borrower, whether
         on account of outstanding Term Loans, interest,  fees or otherwise,  to
         the remaining applicable non-delinquent Lenders for application to, and
         reduction of, their  respective pro rata shares of all outstanding Term
         Loans. The Delinquent Lender hereby authorizes the Administrative Agent
         to distribute such payments to the applicable non-delinquent Lenders in
         proportion  to their  respective  pro  rata  shares  of all  applicable
         outstanding  Term Loans.  A  Delinquent  Lender shall be deemed to have
         satisfied in full a delinquency when and if, as a result of application
         of the assigned  payments to all applicable  outstanding  Term Loans of
         the non-delinquent  Lenders, the Lenders' respective PRO RATA shares of
         all outstanding Term Loans have returned to those in effect immediately
         prior to such  delinquency  and without giving effect to the nonpayment
         causing such delinquency

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         14.6. INTENTIONALLY OMITTED.

         14.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold
harmless the Administrative  Agent from and against any and all claims,  actions
and suits (whether groundless or otherwise),  losses,  damages,  costs, expenses
(including  any  expenses  for  which  the  Administrative  Agent  has not  been
reimbursed by the Borrower as required by SECTION 15), and  liabilities of every
nature and  character  arising out of or related to this Term Loan  Agreement or
any of the other Loan Documents or the  transactions  contemplated  or evidenced
hereby or thereby,  or the  Administrative  Agent's  actions taken  hereunder or
thereunder,  except to the extent that any of the same shall be directly  caused
by the Administrative Agent's willful misconduct or gross negligence.

         14.8.  ADMINISTRATIVE AGENT AS LENDER. In its individual  capacity,  GB
Merchant  Partners,  LLC shall have the same  obligations  and the same  rights,
powers and privileges in respect to its Commitment and the Term Loans made by it
as it would have were it not also the Administrative Agent.

         14.9.  RESIGNATION.  The Administrative Agent may resign at any time by
giving  sixty (60) days prior  written  notice  thereof to the  Lenders  and the
Borrower.  Upon any such resignation,  the Required Lenders shall have the right
to  appoint a  successor  Administrative  Agent.  Unless a  Default  or Event of
Default shall have occurred and be  continuing,  such  successor  Administrative
Agent  shall  be  reasonably   acceptable  to  the  Borrower.  If  no  successor
Administrative  Agent shall have been so appointed  by the Required  Lenders and
shall have accepted such appointment  within thirty (30) days after the retiring
Administrative  Agent's  giving  of  notice of  resignation,  then the  retiring
Administrative  Agent  may,  on  behalf  of the  Lenders,  appoint  a  successor
Administrative  Agent, which shall be a financial institution having a rating of
not less than "A" or its equivalent by Standard & Poor's  Corporation.  Upon the
acceptance of any appointment as  Administrative  Agent hereunder by a successor
Administrative  Agent,  such  successor  Administrative  Agent  shall  thereupon
succeed to and become vested with all the rights, powers,  privileges and duties
of the retiring  Administrative  Agent,  and the retiring  Administrative  Agent
shall be  discharged  from its  duties  and  obligations  hereunder.  After  any
retiring  Administrative  Agent's resignation,  the provisions of this Term Loan
Agreement and the other Loan Documents  shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Administrative Agent.

         14.10.  NOTIFICATION  OF DEFAULTS  AND EVENTS OF  DEFAULT.  Each Lender
hereby  agrees  that,  upon  learning of the  existence of a Default or Event of
Default,  it  shall  promptly  notify  the  Administrative  Agent  thereof.  The
Administrative  Agent  hereby  agrees that upon receipt of any notice under this
SECTION  14.10 it shall  promptly  notify the other  Lenders of the existence of
such Default or Event of Default.

         14.11.  DUTIES IN THE CASE OF ENFORCEMENT.  Subject to the terms of the
Intercreditor Agreement, in case one or more Events of Default have occurred and
shall be continuing,  and whether or not  acceleration of the Obligations  shall
have  occurred,  the  Administrative  Agent  shall,  if (a) so  requested by the
Required Lenders and (b) the Lenders have provided to the  Administrative  Agent
such additional  indemnities and assurances  against expenses and liabilities as
the  Administrative  Agent  may  reasonably  request,  proceed  to  enforce  the
provisions of the Security  Documents  authorizing the sale or other disposition
of all or any part of the  Collateral  and  exercise all or any such other legal
and  equitable  and other  rights or  remedies as it may have in respect of such
Collateral.  The Required Lenders may direct the Administrative Agent in writing
as to the  method  and the  extent  of any such sale or other  disposition,  the
Lenders hereby agreeing to indemnify and hold the Administrative Agent, harmless
from all  liabilities  incurred  in respect of all  actions  taken or omitted in
accordance with such directions, PROVIDED that the Administrative Agent need not
comply  with any such  direction  to the extent  that the  Administrative  Agent
reasonably believes the Administrative Agent's compliance with such direction to
be unlawful or commercially unreasonable in any applicable jurisdiction.

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         14.12. ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM.

                  (a) In case of the pendency of any  receivership,  insolvency,
         liquidation,  bankruptcy,   reorganization,   arrangement,  adjustment,
         composition or other judicial, administrative or like proceeding or any
         assignment  for the benefit of creditors  relative to the Parent or any
         of its Subsidiaries,  the Administrative Agent (irrespective of whether
         the  principal of any Term Loan shall then be due and payable as herein
         expressed or by  declaration or otherwise and  irrespective  of whether
         the  Administrative  Agent shall have made any demand on the  Borrower)
         shall be entitled and empowered,  by intervention  in such  proceeding,
         under any such assignment or otherwise:

                           (i) to file and prove a claim for the whole amount of
                  the principal and interest  owing and unpaid in respect of the
                  Term Loans and all other Obligations that are owing and unpaid
                  and to  file  such  other  documents  as may be  necessary  or
                  advisable  in order to have the claims of the  Lenders and the
                  Administrative  Agent  (including any claim for the reasonable
                  compensation,  expenses,  disbursements  and  advances  of the
                  Lenders  and the  Administrative  Agent and  their  respective
                  agents and counsel  and all other  amounts due the Lenders and
                  the Administrative Agent under SECTIONS 5.1 and 15) allowed in
                  such proceeding or under any such assignment; and

                           (ii)  subject  to  the  Intercreditor  Agreement,  to
                  collect and receive  any monies or other  property  payable or
                  deliverable on any such claims and to distribute the same;

                  (b) Any custodian,  receiver,  assignee, trustee,  liquidator,
         sequestrator or other similar  official in any such proceeding or under
         any such  assignment  is hereby  authorized by each Lender to make such
         payments  to the  Administrative  Agent  and,  in the  event  that  the
         Administrative  Agent  shall  consent  to the  making of such  payments
         directly  to the  Lenders,  nevertheless  to pay to the  Administrative
         Agent  any  amount  due  for  the  reasonable  compensation,  expenses,
         disbursements and advances of the  Administrative  Agent and its agents
         and counsel,  and any other amounts due the Administrative  Agent under
         SECTIONS 5.1 and 15).

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<PAGE>

                  (c)   Nothing    contained    herein   shall   authorize   the
         Administrative  Agent to consent to or accept or adopt on behalf of any
         Lender  any  plan  of   reorganization,   arrangement,   adjustment  or
         composition affecting the Obligations owed to such Lender or the rights
         of any  Lender  or to  authorize  the  Administrative  Agent to vote in
         respect of the claim of any Lender in any such  proceeding or under any
         such assignment.

                                  15. EXPENSES.

         The Borrower  agrees to pay (i) the  reasonable  costs of producing and
reproducing  this Term Loan  Agreement,  the other Loan  Documents and the other
agreements and instruments  mentioned  herein,  (ii) without  duplication of any
amounts paid by the Borrower pursuant to SECTION 5.2.2, any Taxes (including any
interest and penalties in respect thereto) payable by the  Administrative  Agent
or any of the Lenders  (other  than  Excluded  Taxes) on or with  respect to the
transactions  contemplated  by this Term Loan  Agreement  (the  Borrower  hereby
agreeing to  indemnify  the  Administrative  Agent and each Lender with  respect
thereto),   (iii)  the  reasonable  fees,  expenses  and  disbursements  of  the
Administrative   Agent's   Special   Counsel   or  any  local   counsel  to  the
Administrative Agent incurred in connection with the preparation, administration
or interpretation of the Loan Documents and other instruments  mentioned herein,
each  closing  hereunder,  amendments,  modifications,  approvals,  consents  or
waivers hereto or hereunder, and proposed amendments, modifications,  approvals,
consents or waivers hereto or hereunder,  (iv) the reasonable fees, expenses and
disbursements of the Administrative  Agent incurred by the Administrative  Agent
in connection  with the  preparation  and  syndication of the Loan Documents and
other instruments mentioned herein,  including,  without limitation,  collateral
examination,  appraisal  expenses and environmental  audits,  (v) the reasonable
fees,  expenses and  disbursements of the  Administrative  Agent incurred by the
Administrative  Agent in connection with the administration or interpretation of
the Loan Documents and other instruments  mentioned herein,  including,  without
limitation, collateral examination, appraisal expenses and environmental audits,
inspections,  testing and reports,  (vi) all reasonable  out-of-pocket  expenses
(including  without  limitation   reasonable   attorneys'  fees  and  costs  and
reasonable  consulting,  accounting,  appraisal,  investment banking and similar
professional  fees and  charges)  incurred  by the  Administrative  Agent or any
Lender in connection with (A) the enforcement of or preservation of rights under
any of the Loan  Documents  against the  Guarantors,  the Borrower or any of its
Subsidiaries or the administration  thereof after the occurrence of a Default or
Event of Default, and (B) any litigation,  proceeding or dispute whether arising
hereunder or otherwise, in any way related to any Lender's or the Administrative
Agent's  relationship  with the Parent or any of its  Subsidiaries,  unless such
Lender or the Administrative Agent, as applicable, is conclusively determined to
have breached its obligations  hereunder,  (vii) any fees,  costs,  expenses and
bank  charges,  including  bank  charges for  returned  checks,  incurred by the
Administrative  Agent or any of its Affiliates in  establishing,  maintaining or
handling of any accounts for the collection of any of the Collateral, (viii) all
reasonable fees, expenses and disbursements of the Administrative Agent incurred
in connection with UCC searches,  UCC filings,  intellectual  property searches,
intellectual  property filings,  mortgage recordings and other personal and real
property  searches  and  filings,  and (ix) all  title  insurance  premiums  and
surveyor, engineering,  appraisal and examination charges. The covenants of this
SECTION 15 shall survive payment or satisfaction of all other Obligations.

                                       76
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                              16. INDEMNIFICATION.

         The Borrower  agrees to indemnify and hold harmless the  Administrative
Agent  and the  Lenders,  together  with  each of  their  Affiliates  and  their
officers, directors, employees, agents, attorneys and advisors, from and against
any and all claims, actions and suits whether groundless or otherwise,  and from
and  against any and all  liabilities,  losses,  damages  and  expenses of every
nature and character arising out of this Term Loan Agreement or any of the other
Loan  Documents  or the  transactions  contemplated  hereby  including,  without
limitation,  (i) any  actual or  proposed  use by the  Borrower  or any of their
Subsidiaries  of the  proceeds  of any of the Term Loans,  (ii) the  reversal or
withdrawal of any provisional credits granted by the Administrative Agent or any
of its  Affiliates  upon the  transfer  of funds  from  bank  agency or lock box
accounts  or in  connection  with the  provisional  honoring  of checks or other
items,  (iii) the Parent or any of its Subsidiaries  entering into or performing
this Term Loan Agreement or any of the other Loan Documents,  (iv) any actual or
alleged  infringement  of any  patent,  copyright,  trademark,  service  mark or
similar  right  of  the  Parent  or any of  its  Subsidiaries  comprised  in the
Collateral,  or (v) with  respect to the Parent and its  Subsidiaries  and their
respective  properties and assets,  the violation of any Environmental  Law, the
Release or threatened Release of any Hazardous  Substances or any action,  suit,
proceeding or investigation  brought or threatened with respect to any Hazardous
Substances  (including,  but not  limited to,  claims  with  respect to wrongful
death, personal injury or damage to property),  in each case including,  without
limitation,  the  reasonable  fees and  disbursements  of  counsel  incurred  in
connection  with  any  such  investigation,   litigation  or  other  proceeding,
PROVIDED,  HOWEVER,  that the Borrower shall not be liable to the Administrative
Agent, any Lender, any of their Affiliates or any of their officers,  directors,
employees,  agents and advisors for any of the foregoing to the extent that they
arise  from such  Person's  gross  negligence,  breach of  contract  or  willful
misconduct.  In litigation,  or the  preparation  therefor,  the Lenders and the
Administrative  Agent  shall be entitled  to select  their own  counsel  and, in
addition to the  foregoing  indemnity,  the Borrower  agrees to pay promptly the
reasonable  fees and  expenses of such  counsel.  If, and to the extent that the
obligations  of the  Borrower  under this ARTICLE 16 are  unenforceable  for any
reason,  the  Borrower  hereby  agrees to make the maximum  contribution  to the
payment  in  satisfaction  of  such  obligations   which  is  permissible  under
applicable law. The covenants contained in this ARTICLE 16 shall survive payment
or satisfaction  in full of all other  Obligations.  Each of the  Administrative
Agent and the Lenders  agree to promptly  notify the Borrower of any such claim,
action,  suit,  liability,  loss,  damage or expense after becoming aware of the
same;  PROVIDED  that the failure to provide  such  notice  shall not affect the
Borrower's obligations under this ARTICLE 16.

                         17. SURVIVAL OF COVENANTS, ETC.

         All covenants, agreements,  representations and warranties made herein,
in any of the other Loan Documents or in any documents or other papers delivered
by or on behalf of the Parent or any of its  Subsidiaries  pursuant hereto shall
be deemed to have been relied upon by the Lenders and the Administrative  Agent,
notwithstanding  any investigation  heretofore or hereafter made by any of them,
and shall survive the making by the Lenders of any of the Term Loans,  as herein
contemplated,  and shall continue in full force and effect so long as any amount
due under this Term Loan  Agreement or any of the other Loan  Documents  remains
outstanding  or any Lender has any  obligation  to make any Term Loans,  and for
such  further  time as may be  otherwise  expressly  specified in this Term Loan
Agreement.  All statements contained in any certificate or other paper delivered
to any  Lender  or the  Administrative  Agent at any time by or on behalf of the
Parent or any of its  Subsidiaries  pursuant  hereto or in  connection  with the
transactions contemplated hereby shall constitute representations and warranties
by the Parent or such Subsidiary hereunder.

                                       77
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                        18. ASSIGNMENT AND PARTICIPATION.

         18.1.  GENERAL  CONDITIONS.  The provisions of this Term Loan Agreement
shall be binding  upon and inure to the benefit of the parties  hereto and their
respective  successors  and assigns  permitted  hereby,  except that neither the
Borrower  nor the Parent may assign or  otherwise  transfer any of its rights or
obligations  hereunder  without the prior written  consent of each Lender and no
Lender  may  assign or  otherwise  transfer  any of its  rights  or  obligations
hereunder  except (a) to an Eligible  Assignee in accordance with the provisions
of SECTION 18.2, (b) by way of  participation  in accordance with the provisions
of SECTION  18.4 or (c) by way of pledge or  assignment  of a security  interest
subject to the restrictions of SECTION 18.6 (and any other attempted  assignment
or transfer by any party  hereto  shall be null and void).  Nothing in this Term
Loan  Agreement,  expressed  or implied,  shall be  construed to confer upon any
Person (other than the parties hereto,  their respective  successors and assigns
permitted  hereby,  Participants  to the extent provided in SECTION 18.4 and, to
the extent  expressly  contemplated  hereby,  the Related Parties of each of the
Administrative  Agent and the Lenders) any legal or equitable  right,  remedy or
claim  under or by reason of this Term Loan  Agreement  or any of the other Loan
Documents.

         18.2.  ASSIGNMENTS.  Any Lender  may at any time  assign to one or more
Eligible  Assignees  all or a portion of its rights and  obligations  under this
Term Loan  Agreement  (including all or a portion of its Commitment and the Term
Loans at the time owing to it); PROVIDED that:

                  (a) except in the cases of an assignment of the entire balance
         of the  Term  Loans at the time  owing to it or of an  assignment  to a
         Lender or a Lender  Affiliate,  the aggregate  amount of the Commitment
         (which for this purpose includes Term Loans outstanding thereunder) or,
         if the  applicable  Commitment  is not then in  effect,  the  principal
         outstanding  balance of the Term Loans of the assigning  Lender subject
         to  each  such  assignment  (determined  as of the  date on  which  the
         Assignment and Acceptance  with respect to such assignment is delivered
         to the  Administrative  Agent) shall not be less than $2,000,000 unless
         each of the Administrative Agent and, so long as no Default or Event of
         Default has occurred and is continuing, the Borrower otherwise consents
         (each such consent not to be unreasonably withheld or delayed);

                  (b) each partial  assignment shall be made as an assignment of
         a  proportionate   part  of  all  the  assigning  Lender's  rights  and
         obligations  under this Term Loan  Agreement  with  respect to the Term
         Loans or the Commitment assigned, it being understood that NON-PRO RATA
         assignments of or among any of the  Commitments  and the Term Loans are
         not permitted;

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                  (c) any  assignment of a Commitment  and the Term Loans of any
         Lender must be approved by the Administrative Agent (whether or not the
         proposed  assignee  is  itself  a  Lender  with a  commitment  or would
         otherwise qualify as an Eligible Assignee); and

                  (d) the parties to each  assignment  shall execute and deliver
         to the Administrative Agent an Assignment and Acceptance, together with
         a processing and recordation fee of $3,500,  and the Eligible Assignee,
         if it shall not be a Lender,  shall deliver to the Administrative Agent
         an Administrative Questionnaire.

                  Subject   to   acceptance   and   recording   thereof  by  the
         Administrative  Agent  pursuant  to  SECTION  18.3,  from and after the
         effective  date  specified  in  each  Assignment  and  Acceptance,  the
         Eligible  Assignee  thereunder  shall  be a  party  to this  Term  Loan
         Agreement  and,  to  the  extent  of  the  interest  assigned  by  such
         Assignment and Acceptance  have the rights and  obligations of a Lender
         under this Term Loan  Agreement,  and the assigning  Lender  thereunder
         shall,  to the extent of the interest  assigned by such  Assignment and
         Acceptance,  be  released  from its  obligations  under  this Term Loan
         Agreement  (and, in the case of an Assignment and  Acceptance  covering
         all of the assigning  Lender's rights and  obligations  under this Term
         Loan Agreement, such Lender shall cease to be a party hereto) but shall
         continue to be entitled to the  benefits of (i)  SECTIONS  5.2.2,  5.7,
         5.8, and 5.10 with respect to facts and  circumstances  occurring prior
         to  the  effective  date  of  such   assignment  and  (ii)  SECTION  16
         notwithstanding such assignment. Any assignment or transfer by a Lender
         of rights or  obligations  under this Term Loan Agreement that does not
         comply with this  paragraph  shall be treated for purposes of this Term
         Loan  Agreement  as a sale by such  Lender of a  participation  in such
         rights and obligations in accordance with SECTION 18.4.

         18.3.  REGISTER.  The  Administrative  Agent,  acting  solely  for this
purpose  as an agent  of the  Borrower,  shall  maintain  at the  Administrative
Agent's Office a copy of each  Assignment  and Acceptance  delivered to it and a
register for the recordation of the names and addresses of the Lenders,  and the
Commitments  of, and  principal  amounts of the Term Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "REGISTER").  The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent and
the  Lenders  may treat each  Person  whose  name is  recorded  in the  Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this Term
Loan Agreement,  notwithstanding  notice to the contrary.  The Register shall be
available for inspection by the Borrower and any Lender,  at any reasonable time
and from time to time upon reasonable prior notice.

         18.4.  PARTICIPATIONS.  Any Lender may at any time, without the consent
of, or notice to, the Parent,  the Borrower or the  Administrative  Agent,  sell
participations   to  any  Person  (other  than  a  natural   person)   (each,  a
"PARTICIPANT")  in all or a portion of such Lender's  rights and/or  obligations
under this Term Loan  Agreement  (including  all or a portion of its  Commitment
and/or the Term Loans owing to it); PROVIDED that (a) such Lender's  obligations
under this Term Loan  Agreement  shall remain  unchanged,  (b) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such obligations and (c) the Parent, the Borrower,  the Administrative Agent and
the other Lenders shall continue to deal solely and directly with such Lender in
connection  with such  Lender's  rights  and  obligations  under  this Term Loan
Agreement.  Any agreement or instrument  pursuant to which a Lender sells such a
participation  shall  provide  that such Lender  shall  retain the sole right to
enforce this Term Loan Agreement and to approve any amendment,  modification  or
waiver  of any  provision  of this  Term  Loan  Agreement;  PROVIDED  that  such
agreement  or  instrument  may provide  that such  Lender will not,  without the
consent of the Participant, agree to any amendment,  modification or waiver that
would reduce the principal of or the interest rate on any Term Loans, extend the
term or increase  the amount of the  Commitment  of such Lender as it relates to
such Participant or extend any regularly scheduled payment date for principal or
interest.  Subject to SECTION 18.5, the Parent and the Borrowers agree that each
Participant  shall be entitled to the benefits of SECTIONS  5.2.2,  5.7, 5.8 and
5.10 to the same extent as if it were a Lender and had  acquired its interest by
assignment  pursuant  to SECTION  18.2.  To the extent  permitted  by law,  each
Participant  also shall be entitled  to the  benefits of SECTION 13 as though it
were a Lender,  provided such Participant  agrees to be subject to SECTION 13 as
though it were a Lender.

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         18.5. PAYMENTS TO PARTICIPANTS.  A Participant shall not be entitled to
receive  any  greater  payment  under  SECTIONS  5.2.2,  5.7  and 5.8  than  the
applicable  Lender  would  have been  entitled  to receive  with  respect to the
participation sold to such Participant.

         18.6.  MISCELLANEOUS  ASSIGNMENT  PROVISIONS.  A Lender may at any time
grant a security  interest in all or any  portion of its rights  under this Term
Loan  Agreement  to  secure  obligations  of  such  Lender,   including  without
limitation  (a) any pledge or  assignment  to secure  obligations  to any of the
twelve Federal  Reserve Banks  organized  under Section 4 of the Federal Reserve
Act, 12 U.S.C. Section 341 and (b) with respect to any Lender that is a Fund, to
any  lender or any  trustee  for,  or any other  representative  of,  holders of
obligations  owed or  securities  issued  by  such  Fund as  security  for  such
obligations  or securities or any  institutional  custodian for such Fund or for
such lender;  PROVIDED  that no such grant shall release such Lender from any of
its obligations  hereunder,  provide any voting rights  hereunder to the secured
party  thereof,  substitute  any such  secured  party for such Lender as a party
hereto or affect any rights or  obligations  of the Parent,  the Borrower or the
Administrative Agent hereunder.

         18.7.  ASSIGNEE  OR  PARTICIPANT  AFFILIATED  WITH THE  PARENT.  If any
assignee  Lender is an Affiliate of the Parent,  then any such  assignee  Lender
shall have no right to vote as a Lender hereunder or under any of the other Loan
Documents  for  purposes  of  granting  consents  or waivers or for  purposes of
agreeing to amendments or other  modifications  to any of the Loan  Documents or
for purposes of making requests to the Administrative  Agent pursuant to SECTION
12.1 or SECTION 12.2, and the  determination  of the Required  Lenders shall for
all purposes of this Term Loan  Agreement  and the other Loan  Documents be made
without regard to such assignee  Lender's  interest in any of the Term Loans. If
any  Lender  sells  a  participating  interest  in any of the  Term  Loans  to a
Participant,  and such  Participant is the Parent or an Affiliate of the Parent,
then such transferor  Lender shall promptly notify the  Administrative  Agent of
the sale of such participation.  A transferor Lender shall have no right to vote
as a Lender  hereunder or under any of the other Loan  Documents for purposes of
granting  consents  or waivers or for  purposes of  agreeing  to  amendments  or
modifications to any of the Loan Documents or for purposes of making requests to
the Administrative  Agent pursuant to SECTION 12.1 or SECTION 12.2 to the extent
that such  participation is beneficially owned by the Parent or any Affiliate of
the Parent, and the determination of the Required Lenders shall for all purposes
of this Term Loan  Agreement and the other Loan Documents be made without regard
to the  interest  of such  transferor  Lender in the Term Loans to the extent of
such participation.

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<PAGE>

         18.8.  NEW NOTES.  Upon its  receipt of an  Assignment  and  Acceptance
executed by the parties to such  assignment,  together with each Note subject to
such  assignment,  the  Administrative  Agent  shall (a) record the  information
contained  therein in the Register,  and (b) give prompt  notice  thereof to the
Borrower  and the Lenders  (other than the  assigning  Lender).  Within five (5)
Business  Days after receipt of such notice,  the Borrower,  at its own expense,
shall,  if  applicable,  execute and  deliver to the  Administrative  Agent,  in
exchange for each surrendered  Note, a new Note to the order of such Assignee in
an  amount  equal  to the  amount  assumed  by such  Assignee  pursuant  to such
Assignment and Acceptance and, if the assigning Lender has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Lender in
an amount  equal to the amount  retained by it  hereunder.  Such new Notes shall
provide that they are  replacements  for the surrendered  Notes,  shall be in an
aggregate  principal  amount  equal to the  aggregate  principal  amount  of the
surrendered  Notes,  shall be dated the effective  date of such  Assignment  and
Acceptance  and shall  otherwise  be in  substantially  the form of the assigned
Notes.

         18.9. SPECIAL PURPOSE FUNDING VEHICLE.  Notwithstanding anything to the
contrary  contained  in this  SECTION 18, any Lender (a  "GRANTING  LENDER") may
grant to a special purpose  funding vehicle (an "SPC") of such Granting  Lender,
identified as such in writing from time to time delivered by the Granting Lender
to the  Administrative  Agent and the  Borrower,  the  option to  provide to the
Borrower  all or any part of any Term  Loan  that  such  Granting  Lender  would
otherwise  be  obligated  to make to the  Borrower  pursuant  to this  Term Loan
Agreement,  PROVIDED  that (a) nothing  herein shall  constitute a commitment to
make any Term Loan by any SPC, (b) the Granting  Bank's  obligations  under this
Term Loan Agreement shall remain unchanged, (c) the Granting Lender shall retain
the sole right to enforce this Term Loan Agreement and to approve any amendment,
modification  or waiver of any provision of this Term Loan  Agreement and (d) if
an SPC elects not to exercise  such option or otherwise  fails to provide all or
any part of such Term Loan, the Granting  Lender shall be obligated to make such
Term Loan  pursuant  to the terms  hereof.  The  making of a Term Loan by an SPC
hereunder  shall  utilize  the  Commitment  of the  Granting  Lender to the same
extent,  and as if, such Term Loan were made by the Granting Lender.  Each party
hereto hereby agrees that no SPC shall be liable for any expense  reimbursement,
indemnity or similar  payment  obligation  under this Term Loan  Agreement  (all
liability for which shall remain with the Granting  Lender).  In  furtherance of
the foregoing,  each party hereto hereby agrees (which  agreement  shall survive
the termination of this Term Loan Agreement) that, prior to the date that is one
year and one day after the later of (i) the  payment in full of all  outstanding
senior indebtedness of any SPC and (ii) the Maturity Date, it will not institute
against,  or  join  any  other  person  in  instituting  against,  such  SPC any
bankruptcy,  reorganization,  arrangement, insolvency or liquidation proceedings
or similar  proceedings  under the laws of the  United  States of America or any
State thereof. In addition,  notwithstanding  anything to the contrary contained
in this SECTION  18.9,  any SPC may (A) with notice to, but (except as specified
below)  without the prior  written  consent of, the Parent,  the Borrower or the
Administrative Agent and without paying any processing fee therefor,  assign all
or a portion of its interests in any Term Loans to its Granting Lender or to any
financial institutions (consented to by the Administrative Agent and, so long as
no Default or Event of Default has occurred  and is  continuing,  the  Borrower,
which  consents  shall  not  be  unreasonably  withheld  or  delayed)  providing
liquidity and/or credit facilities to or for the account of such SPC to fund the
Term Loans made by such SPC or to support the securities (if any) issued by such
SPC to fund  such  Term  Loans  and (B)  disclose  on a  confidential  basis any
non-public  information  relating  to  its  Term  Loans  (other  than  financial
statements referred to in SECTIONS 6.2 or 7.4) to any rating agency,  commercial
paper  dealer  or  provider  of a  surety,  guarantee  or  credit  or  liquidity
enhancement  to such SPC. In no event shall the  Borrower be obligated to pay to
an SPC that has made a Term Loan any greater amount than the Borrower would have
been obligated to pay under this Term Loan Agreement if the Granting  Lender had
made such Term Loan.  An  amendment  to this  SECTION  18.9  without the written
consent  of an SPC shall be  ineffective  insofar  as it alters  the  rights and
obligations of such SPC.

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                                19. NOTICES, ETC.

         Except as otherwise expressly provided in this Term Loan Agreement, all
notices and other  communications  made or required to be given pursuant to this
Term Loan Agreement shall be in writing and shall be (i) delivered in hand, (ii)
mailed by United  States  registered  or  certified  first class  mail,  postage
prepaid,  (iii) sent by overnight courier, or (iv) sent by telegraph,  telecopy,
facsimile  or telex and  confirmed  by delivery  via courier or postal  service,
addressed as follows:

                  (a) if to the Parent or the Borrower,  at 941 Grinnell Street,
         Fall River, MA 02721,  Attention:  Chief  Financial  Officer or at such
         other U.S.  address for notice as the Parent or the Borrower shall last
         have furnished in writing to the Person giving the notice;

                  (b) if to the Administrative Agent,

                           (i)  101  Huntington  Avenue,  10th  floor,   Boston,
                  Massachusetts  02199,  Attention:  Judi Nevins, Loan Portfolio
                  Analyst,  and D. Michael Murray,  Managing  Director,  or such
                  other  address  for notice as the  Administrative  Agent shall
                  last have  furnished  in  writing  to the  Person  giving  the
                  notice; and

                           (ii)  Alternative  Investment  Solutions,   LLC,  433
                  Hackensack  Ave,  11th  floor,  Hackensack,  New Jersey  07601
                  Attention: Steve Yacubic, Account Officer; and

                  (c) if to  any  Lender,  at  such  Lender's  address  for  its
         Domestic  Lending Office set forth on SCHEDULE 1 hereto,  or such other
         address for notice as such Lender shall have last  furnished in writing
         to the Person giving the notice.

Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand,  overnight  courier or facsimile
to a  responsible  officer of the party to which it is directed,  at the time of
the receipt thereof by such officer or the sending of such facsimile and (ii) if
sent by registered or certified  first-class mail, postage prepaid, on the third
Business Day following the mailing thereof.

                               20. GOVERNING LAW.

         THIS TERM LOAN AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN,  EACH OF THE OTHER LOAN  DOCUMENTS ARE CONTRACTS  UNDER THE LAWS OF THE
COMMONWEALTH  OF  MASSACHUSETTS  AND  SHALL FOR ALL  PURPOSES  BE  CONSTRUED  IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID  COMMONWEALTH OF  MASSACHUSETTS
(EXCLUDING  THE LAWS  APPLICABLE  TO  CONFLICTS  OR CHOICE OF LAW).  EACH OF THE
PARENT AND THE BORROWER  AGREES THAT ANY SUIT FOR THE  ENFORCEMENT  OF THIS TERM
LOAN  AGREEMENT OR ANY OF THE OTHER LOAN  DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE  COMMONWEALTH OF  MASSACHUSETTS  OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENTS TO THE  NONEXCLUSIVE  JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
IN ANY SUCH SUIT  BEING MADE UPON THE  PARENT  AND THE  BORROWER  BY MAIL AT THE
ADDRESS  SPECIFIED  IN SECTION  19. EACH OF THE PARENT AND THE  BORROWER  HEREBY
WAIVES ANY OBJECTION  THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

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                                  21. HEADINGS.

         The  captions  in this  Term  Loan  Agreement  are for  convenience  of
reference only and shall not define or limit the provisions hereof.

                                22. COUNTERPARTS.

         This Term Loan  Agreement and any  amendment  hereof may be executed in
several counterparts and by each party on a separate counterpart,  each of which
when  executed and  delivered  shall be an original,  and all of which  together
shall  constitute one  instrument.  In proving this Term Loan Agreement it shall
not be necessary to produce or account for more than one such counterpart signed
by the party against whom enforcement is sought. Delivery by facsimile by any of
the parties  hereto of an executed  counterpart  hereof or of any  amendment  or
waiver hereto shall be as effective as an original executed  counterpart  hereof
or of such amendment or waiver and shall be considered a representation  that an
original  executed  counterpart  hereof or such amendment or waiver, as the case
may be, will be delivered.

                           23. ENTIRE AGREEMENT, ETC.

         The Loan  Documents are intended by the parties as the final,  complete
and exclusive statement of the transactions evidenced by the Loan Documents. All
prior or contemporaneous promises,  agreements and understandings,  whether oral
or written,  are deemed to be superseded by the Loan Documents,  and no party is
relying on any  promise,  agreement or  understanding  not set forth in the Loan
Documents.

                            24. WAIVER OF JURY TRIAL.

         EACH  PARTY  HERETO   MUTUALLY   HEREBY   KNOWINGLY,   VOLUNTARILY  AND
INTENTIONALLY  WAIVES ITS RIGHT TO A JURY  TRIAL  WITH  RESPECT TO ANY ACTION OR
CLAIM BASED HEREON  ARISING OUT OF, UNDER OR IN  CONNECTION  WITH THIS TERM LOAN
AGREEMENT  OR ANY  OF THE  OTHER  LOAN  DOCUMENTS,  ANY  RIGHTS  OR  OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS  OF ANY PARTY,  INCLUDING  ANY COURSE OF  CONDUCT,  COURSE OF  DEALINGS,
STATEMENTS OR ACTIONS OF THE ADMINISTRATIVE  AGENT OR ANY LENDER RELATING TO THE
ADMINISTRATION OF THE TERM LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES
THAT IT WILL NOT SEEK TO  CONSOLIDATE  ANY SUCH ACTION WITH ANY OTHER  ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN  WAIVED.  Except as  prohibited  by
law,  each party hereto  hereby waives any right it may have to claim or recover
in any litigation referred to in the preceding sentence any special,  exemplary,
punitive or consequential  damages or any damages other than, or in addition to,
actual  damages.  Each of the  Parent and the  Borrower  (i)  certifies  that no
representative,  agent or attorney of any Lender or the Administrative Agent has
represented,  expressly  or  otherwise,  that such Lender or the  Administrative
Agent  would not,  in the event of  litigation,  seek to enforce  the  foregoing
waivers and (ii) acknowledges that this waiver constitutes a material inducement
for the Administrative Agent and the Lenders to execute this Term Loan Agreement
and make the Term Loans.

                                       83
<PAGE>

                     25. CONSENTS, AMENDMENTS, WAIVERS, ETC.

         Any  consent  or  approval  required  or  permitted  by this  Term Loan
Agreement  to be given by all of the Lenders may be given,  and any term of this
Term Loan Agreement,  the other Loan Documents or any other  instrument  related
hereto or mentioned herein may be amended,  and the performance or observance by
the Parent or any of its  Subsidiaries of any terms of this Term Loan Agreement,
the other Loan  Documents or such other  instrument  or the  continuance  of any
Default or Event of Default may be waived  (either  generally or in a particular
instance and either  retroactively  or  prospectively)  with, but only with, the
written  consent of the Required  Lenders.  Notwithstanding  the  foregoing,  no
amendment, modification or waiver shall:

                  (a) without the written  consent of the Parent,  the  Borrower
         and each Lender directly affected thereby:

                           (i) reduce or  forgive  the  principal  amount of any
                  Term  Loans,  or reduce the rate of interest on the Term Loans
                  (other  than  interest   accruing  pursuant  to  SECTION  5.11
                  following  the  effective  date of any waiver by the  Required
                  Lenders of the Event of Default relating thereto);

                           (ii)  increase the amount of the Total  Commitment or
                  any Lender's  Commitment or extend the expiration  date of the
                  Total Commitment or any Lender's Commitment;

                           (iii)  postpone  or extend the  Maturity  Date or any
                  other regularly  scheduled dates for payments of principal of,
                  or  interest  on, the Term Loans or any fees or other  amounts
                  payable to such Lender or waive any Event of Default  relating
                  thereto  (it  being  understood  that  (A)  a  waiver  of  the
                  application  of the Default Rate,  (B) any vote to rescind any
                  acceleration  made  pursuant to SECTION 12.1 of amounts  owing
                  with respect to the Term Loans and other  Obligations  and (C)
                  any  modifications  of the  provisions  relating to amounts or
                  timing of  prepayments  of Term  Loans  and other  Obligations
                  shall require only the approval of the Required Lenders); or

                                       84
<PAGE>

                           (iv)  release  the  Borrower  from  any   Obligations
                  consisting  of  principal,   interest,   fees,   reimbursement
                  obligations,   expenses,   or  indemnities,   release  all  or
                  substantially  all of the Collateral or release the Guarantors
                  from  their   guaranty   obligations   under  the   Guaranties
                  (excluding,  if the  Parent or any  Subsidiary  of the  Parent
                  becomes  a debtor  under  the  federal  Bankruptcy  Code,  the
                  release of "cash collateral",  as defined in Section 363(a) of
                  the federal  Bankruptcy  Code  pursuant  to a cash  collateral
                  stipulation with the debtor approved by the Required Lenders);

                           (b)  without  the  written  consent  of  all  of  the
                  Lenders,  (i) amend or waive this SECTION 25 or the definition
                  of Required  Lenders,  (ii) amend the  definitions of Eligible
                  Real Property,  Eligible Equipment, or Net Orderly Liquidation
                  Value,  in each case,  in a manner  which would result in more
                  credit  being made  available to the  Borrower  hereunder;  or
                  (iii) amend or waive SECTION 12.4;

                           (c) without the written consent of the Administrative
                  Agent,  amend or  waive  SECTION  14,  the  amount  or time of
                  payment of the  Administrative  Agent's  Fee  payable  for the
                  Administrative   Agent's   account  or  any  other   provision
                  applicable to the Administrative Agent;

                           (d) in the event of any change in the  Person  acting
                  as the  Administrative  Agent  hereunder,  without the written
                  consent of the Person formerly acting as Administrative Agent,
                  amend or waive  any  provision  of this  Term  Loan  Agreement
                  accruing  to the  benefit  of such  Person in  respect  of all
                  actions  taken or  omitted to be taken by either of them prior
                  to such change.

No waiver  shall  extend to or affect any  obligation  not  expressly  waived or
impair any right consequent  thereon.  No course of dealing or delay or omission
on the part of the  Administrative  Agent or any Lender in exercising  any right
shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice
to or demand  upon the Parent or the  Borrower  shall  entitle the Parent or the
Borrower to other or further notice or demand in similar or other circumstances.

                                26. SEVERABILITY.

         The provisions of this Term Loan Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction,  then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction,  and shall
not in any manner affect such clause or provision in any other jurisdiction,  or
any other clause or provision of this Term Loan  Agreement in any  jurisdiction.
The  parties  agree  that they  will  negotiate  in good  faith to  replace  any
provision hereof so held invalid or  unenforceable  with a valid provision which
is as similar as possible to the invalid or unenforceable provision.

                                       85
<PAGE>

                              27. CONFIDENTIALITY.

         Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality  of the Information (as defined below),  except that Information
may be disclosed (a) to its Affiliates and to its and its Affiliates' respective
partners,  directors,  officers, employees, agents, advisors and representatives
in connection  with this Term Loan Agreement and the  transactions  contemplated
hereby (it being  understood  that the Persons to whom such  disclosure  is made
will be informed of the  confidential  nature of such Information and instructed
to keep such  Information  confidential),  (b) to the  extent  requested  by any
regulatory  authority  purporting to have  jurisdiction  over it (including  any
self-regulatory  authority,  such  as  the  National  Association  of  Insurance
Commissioners),  (c) to the extent required by applicable laws or regulations or
by any subpoena or similar legal process,  (d) to any other party hereto, (e) in
connection  with the exercise of any remedies  hereunder or under any other Loan
Document or any action or  proceeding  relating to this  Agreement  or any other
Loan Document or the enforcement of rights hereunder or thereunder,  (f) subject
to an agreement  containing  provisions  substantially the same as those of this
ARTICLE  27,  to (i) any  assignee  of or  Participant  in,  or any  prospective
assignee of or Participant in, any of its rights or obligations  under this Term
Loan Agreement or (ii) any actual or prospective  counterparty (or its advisors)
to any swap or derivative transaction relating to the Parent and its obligations
or the Borrower and its  obligations,  (g) with the consent of the Parent or (h)
to the extent such  Information (x) becomes  publicly  available other than as a
result  of a  breach  of  this  ARTICLE  27 or  (y)  becomes  available  to  the
Administrative  Agent,  any Lender or any of their  respective  Affiliates  on a
nonconfidential basis from a source other than the Borrower.

         For  purposes  of this  Section,  "Information"  means all  information
received from the Parent or any Subsidiary of the Parent  relating to the Parent
or any  Subsidiary of the Parent or any of their  respective  businesses,  other
than any such information that is available to the  Administrative  Agent or any
Lender on a  nonconfidential  basis  prior to  disclosure  by the  Parent or any
Subsidiary of the Parent. Any Person required to maintain the confidentiality of
Information  as provided in this Section  shall be  considered  to have complied
with its  obligation  to do so if such Person has  exercised  the same degree of
care to maintain the  confidentiality  of such  Information as such Person would
accord to its own confidential information.

         Each of the Administrative  Agent and the Lenders acknowledges that (a)
the  Information  may include  material  non-public  information  concerning the
Parent or a Subsidiary  of the Parent,  as the case may be, (b) it has developed
compliance  procedures regarding the use of material non-public  information and
(c) it will handle such  material  non-public  information  in  accordance  with
applicable  Law,  including  Federal and state  securities  Laws.  To the extent
practicable  and  possible  in  compliance  with  applicable  law,   regulation,
proceeding  or court  order,  each of the Lenders and the  Administrative  Agent
shall,  prior to  disclosure  thereof,  notify the  Borrower  of any request for
disclosure of any such  non-public  information  by any  governmental  agency or
representative  thereof  (other  than any such  request  in  connection  with an
examination  of the  financial  condition  of such  Lender by such  governmental
agency) or pursuant to legal process.

         The  Parent  and  the  Borrower   hereby   acknowledge   that  (a)  the
Administrative  Agent  may  make  available  to  the  Lenders  materials  and/or
information  provided by or on behalf of the Parent and the  Borrower  hereunder
(collectively,  "BORROWER  MATERIALS")  by posting  the  Borrower  Materials  on
IntraLinks or another similar electronic system (the "PLATFORM") and (b) certain
of the Lenders may be "public-side"  Lenders (i.e.,  Lenders that do not wish to
receive material non-public information with respect to the Parent, the Borrower
or their  securities)  (each,  a "PUBLIC  LENDER").  The Parent and the Borrower
hereby agree that (w) all Borrower  Materials  that are to be made  available to
Public Lenders shall be clearly and  conspicuously  marked  "PUBLIC" which, at a
minimum, shall mean that the word "PUBLIC" shall appear prominently on the first
page thereof;  (x) by marking  Borrower  Materials  "PUBLIC," the Parent and the
Borrower  shall be deemed to have  authorized the  Administrative  Agent and the
Lenders  to  treat  such  Borrower  Materials  as not  containing  any  material
non-public  information  with  respect  to the  Parent,  the  Borrower  or their
securities  for  purposes of United  States  Federal and state  securities  laws
(PROVIDED,  HOWEVER,  that to the  extent  such  Borrower  Materials  constitute
Information,  they shall be treated as set forth in this  ARTICLE  27);  (y) all
Borrower  Materials marked "PUBLIC" are permitted to be made available through a
portion of the Platform designated "Public Investor;" and (z) the Administrative
Agent  shall be  entitled to treat any  Borrower  Materials  that are not marked
"PUBLIC" as being  suitable  only for posting on a portion of the  Platform  not
designated "Public Investor."

                                       86
<PAGE>

         The  Lenders  shall  have  the  right  to  refer  to  the   transaction
contemplated  by this Term Loan Agreement in their  marketing  materials,  press
releases and  announcements,  subject to Borrower's right to review and approval
of the same,  following the later of the Closing Date or the  Borrower's  public
announcement of the transaction contemplated by this Term Loan Agreement.

                              28. USA PATRIOT ACT.

         Each  Lender  hereby   notifies  the  Borrower  that  pursuant  to  the
requirements  of the USA PATRIOT Act (Title III of Pub. L. 107-56  (signed  into
law October 26, 2001)) (the "ACT"), it is required to obtain,  verify and record
information that identifies the Borrower,  which  information  includes the name
and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.

                       29. DESIGNATION OF PERMITTED LIENS.

         The  designation of a Lien as a Permitted Lien is not, and shall not be
deemed to be, an  acknowledgment by the  Administrative  Agent or the Lenders to
any Person that the Lien shall have priority over any Lien of the Administrative
Agent granted in any Loan Document.

                                       87
<PAGE>

         IN WITNESS  WHEREOF,  the undersigned have duly executed this Term Loan
Agreement as a sealed instrument as of the date first set forth above.

                                  QUAKER FABRIC CORPORATION OF FALL RIVER

                                  By:
                                  ----------------------------------------
                                  Name:
                                  Title:

                                  QUAKER FABRIC CORPORATION

                                  By:
                                  ----------------------------------------
                                  Name:
                                  Title:

                                       88

<PAGE>

                                  1903 DEBT FUND, LP
                                  By: [to be provided]

                                  By:
                                  -----------------------------------------
                                  Name:
                                  Title:

                                  GB MERCHANT PARTNERS, LLC,
                                  as Administrative Agent

                                  By:
                                  -----------------------------------------
                                  Name:
                                  Title:

                                       89EXHIBIT 10.40

SCHEDULE 1 - LENDERS, COMMITMENT PERCENTAGES, LENDING OFFICES

                        LENDER          TERM LOAN             TERM LOAN
                                       COMMITMENT       COMMITMENT PERCENTAGE

1903 Debt Fund, LP                   $24,600,000.00              100%
101 Huntington Avenue
Boston, Massachusetts 02109
Attn: D. Michael Murray

<PAGE>

SCHEDULE 1.1(A) MORTGAGED PROPERTIES

FEE MORTGAGES:

1. 941 Grinnell Street,  Fall River, MA 2. 1092 Davol Street,  Fall River, MA 3.
81 Ferry  Street,  Fall River,  MA 4. 1450  Brayton Ave,  Fall River,  MA 5. 387
Quarry Street, Fall River, MA 6. Godfrey Road, Verona, MS
7. 994 Jefferson Street (Bleachery Pond), Fall River, MA

LEASEHOLD MORTGAGES:

     1. 81 Commerce Drive, Fall River, MA

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]