BOYDS COLLECTION LTD, S-1/A, 1999-02-23

BOYDS COLLECTION LTD
S-1/A, 1999-02-23
MISCELLANEOUS NONDURABLE GOODS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 1999

REGISTRATION NO. 333-69535
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

---------------------

THE BOYDS COLLECTION, LTD.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
MARYLAND 5199 52-1418730
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification Number)
</TABLE>

350 SOUTH STREET
MCSHERRYSTOWN, PENNSYLVANIA 17344
(717) 633-9898

(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------

C/O CHRISTINE L. BELL
THE BOYDS COLLECTION, LTD.
350 SOUTH STREET
MCSHERRYSTOWN, PENNSYLVANIA 17344
(717) 633-9898

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES OF ALL CORRESPONDENCE TO:

<TABLE>
<S> <C>
JOHN B. TEHAN, ESQ. PHILIP E. COVIELLO, ESQ.
SIMPSON THACHER & BARTLETT LATHAM & WATKINS
425 LEXINGTON AVENUE 885 THIRD AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10022
(212) 455-2000 (212) 906-1200
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
TITLE OF MAXIMUM
SECURITIES TO AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C>
Common Stock, par value $.0001 per share........................ $368,000,000 $102,304
</TABLE>

(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.

(2) The Registrant previously paid $69,500 upon the original filing of this
Registration Statement on December 23, 1998, $19,460 upon the filing of
Amendment No. 1 to this Registration Statement on February 8, 1999 and
$13,344 upon the filing of Amendment No. 2 to this Registration Statement on
February 16, 1999.

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SEC RELATING TO THESE SECURITIES IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>

SUBJECT TO COMPLETION -- FEBRUARY 23, 1999

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- --------------------------------------------------------------------------------

PROSPECTUS

, 1999

[LOGO]

THE BOYDS COLLECTION, LTD.

16,000,000 SHARES OF COMMON STOCK
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THE BOYDS COLLECTION, LTD.:

- We are a designer, importer and distributor of premier branded, high-
quality, hand-crafted collectibles and other specialty giftware products.

- We sell our products through an extensive network of independent gift and
collectibles retailers, premier department stores, selected catalogue
retailers and other electronic and retail channels.

- The Boyds Collection, Ltd.
350 South Street
McSherrystown, PA 17344
(717) 633-9898

PROPOSED SYMBOL & MARKET:
- FOB / NYSE

THE OFFERING:

- We are offering 9,250,000 of the shares and the selling stockholders
identified on page 10 of this prospectus are offering 6,750,000 of the
shares.

- The underwriters have an option to purchase an additional 2,400,000 shares
from the selling stockholders to cover over-allotments.

- We currently estimate that the price of the shares will be between $18 and
$20.

- This is our initial public offering, and no public market currently exists
for our shares.

- We plan to use the proceeds from the offering to redeem part of our
outstanding notes and to repay part of our bank term loan. We will not
receive any proceeds from the shares sold by the selling stockholders.

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<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
</TABLE>

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<TABLE>
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Boyds:
Proceeds to selling
stockholders:
</TABLE>

THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 13.
- --------------------------------------------------------------------------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
<PAGE>
[PICTURES OF PRODUCTS]
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----

<S> <C>
Prospectus Summary............................... 4

Risk Factors..................................... 12

Use of Proceeds.................................. 16

Dividend Policy.................................. 16

Capitalization................................... 17

Dilution......................................... 18

Selected Financial and Other Data................ 19

Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 20

Business......................................... 27

Management....................................... 36

Relationships and Transactions Related to
Boyds.......................................... 40

Principal and Selling Stockholders............... 41

Description of Long-term Indebtedness............ 43

Description of Capital Stock..................... 45

Selected Provisions of Maryland Law and of Boyds'
Charter and Bylaws............................. 46

Shares Eligible for Future Sale.................. 48

Underwriters..................................... 50

Legal Matters.................................... 53

Experts.......................................... 53

Available Information............................ 53

Index to Consolidated Financial Statements....... F-1

Unaudited Pro Forma Consolidated Condensed
Financial Statements........................... P-1
</TABLE>

3
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SECTION HIGHLIGHTS THE KEY INFORMATION CONTAINED IN THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE "RISK FACTORS,"
AND THE FINANCIAL STATEMENTS AND ALL NOTES.

THE BOYDS COLLECTION, LTD.

We are a designer, importer and distributor of premier branded,
high-quality, hand-crafted collectibles and other specialty giftware products.
We have successfully developed a strong niche and brand identity in our markets
because of our affordably priced, high-quality, "Folksy With Attitude-SM-"
collectibles.

Our products, which include resin figurines, plush animals, porcelain dolls
and boxes and related clothing and accessories, incorporate year-round themes.
Our three major resin figurine lines are THE BEARSTONE
COLLECTION-REGISTERED TRADEMARK-, THE DOLLSTONE COLLECTION-TM- and THE FOLKSTONE
COLLECTION-REGISTERED TRADEMARK-, which together encompass over 420 different
items. Each of our resin figurines is inscribed with Boyds' distinctive symbol
of authenticity, a hidden bear paw and a bottom stamp indicating the name,
edition and piece number of the figurine. Many of our resin figurines also
contain famous quotes, which help customers identify with the piece. Our plush
animal lines include dressed and non-dressed bears and other animals, which are
made of assorted materials and incorporate varying, whimsical themes. Most of
our plush animals are fully jointed with sewn-in joints for arms, legs and
heads. Our plush line has grown to encompass over 430 different items ranging
from 2 1/2" miniatures to 21" large animals.

The following chart provides additional information about our products:

<TABLE>
<CAPTION>
% OF FISCAL 1998 NET APPROXIMATE RECENT PRODUCT
PRODUCT PRODUCT WEIGHTED AVERAGE MAJOR PRODUCT LINES LINE INTRODUCTIONS
CATEGORIES SALES RETAIL PRICE (YEAR INTRODUCED) (YEAR INTRODUCED)
- ----------------- --------------------- ------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Resin Figurines 44.6% $ 16.00 THE BEARSTONE COLLECTION WEE FOLKSTONES-TM- (1997)
(1993) Porcelain Dolls (1997)
THE FOLKSTONE COLLECTION LE BEARMOGE-TM- (1998)
(1994) CARVERS CHOICE-TM- (1998)
THE DOLLSTONE COLLECTION DESKANIMALS-TM- (1998)
(1995) GLASSSMITH ORNAMENTS-TM-
(1998)

Plush Animals 52.0% $ 14.50 Original non-dressed plush MOHAIR BEARS-TM- (1997)
(1982) T.F. WUZZIES-TM- (1997)
J.B. BEAN & ASSOCIATES-TM-
(1987)
Custom designed plush (1990)
T.J.'S BEST DRESSED-TM- (1992)

Other Products 3.4% $ 11.50 BEAR NECESSITIES-TM- (1992) BEARWARE POTTERYWORKS-TM-
(1997)
</TABLE>

Our net sales and income from operations have grown rapidly from fiscal 1993
to fiscal 1998 at compound annual growth rates of approximately 61% and 65%,
respectively. During this time, we steadily increased our operating income
margins from 54.3% in fiscal 1993 to 61.1% in fiscal 1998. Our growth and high
operating margins have resulted from our competitive strengths, which include:

- the establishment of Boyds as a premier collectibles brand name

- the development of strong relationships with our large distribution
network of dealers

- our process for developing, designing, sourcing and marketing high-quality
and affordable products

- our experience in expanding existing product lines and identifying new
product categories and trends

- the creation of well-established sourcing relationships with our suppliers

- our focus on maintaining low selling, marketing and overhead costs

4
<PAGE>

We believe that the way we operate our business results in operating margins
which are approximately 25% to 45% higher than those of giftware and
collectibles companies of similar or larger size.

We sell our products through a large and diverse network including
independent gift and collectibles retailers, premier department stores and
selected catalogue retailers. This distribution network includes approximately
19,950 independent gift and collectibles accounts, representing approximately
26,000 individual retail outlets. We selectively choose our resin figurine
dealers and require them to meet annual performance criteria to retain
dealership status. There is currently a waiting list of over 5,500 retailers,
consisting primarily of our plush-only dealers, that have expressed an interest
in carrying our resin figurines.

We also sell both resin figurines and plush animals through approximately
150 major accounts, including department stores, catalogue retailers and QVC, a
television and electronic retailer.

Our nationwide dealer network is currently divided into five major
categories: three PAW-SM- designations, which include GOLD, SILVER and BRONZE,
other resin and plush dealers and plush-only dealers. We encourage our resin
figurine dealers to obtain the highest PAW qualification because it affords them
additional benefits including priority delivery of our products and special
consideration when ordering limited editions, new product offerings and items in
particularly high demand. Differences in PAW designations are based primarily on
annual order volume.

The following chart provides additional detail about our distribution
network:

<TABLE>
<CAPTION>
APPROXIMATE % OF FISCAL 1998 NET
TYPE NUMBER PRODUCT SALES
- --------------------------------------- ------------- -----------------------
<S> <C> <C>
PAW Dealers............................ 2,250 48%
Other Resin and Plush Dealers.......... 3,750 21
Major Accounts......................... 150 15
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Resin and Plush Dealers.............. 6,150 84

Plush-Only Dealers..................... 13,800 17
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Total Dealers........................ 19,950 100%
------ -----
------ -----
</TABLE>

UNITY MARKETING, a market research firm which specializes in the
collectibles industry and is not affiliated with Boyds, estimates that consumer
sales of collectibles in the United States in 1997 totaled $10.0 billion.
Figurines, which represented approximately 45% of our net product sales in
fiscal 1998, are estimated by UNITY MARKETING to represent the largest segment
of the U.S. collectibles industry, with an estimated $3.9 billion in total sales
in 1997. UNITY MARKETING currently estimates that women between the ages of 35
and 64 encompass the majority of collectors. This group, which we believe
constitutes a substantial portion of our collectors, is projected by the U.S.
Census Bureau to grow approximately 12% from 1998 to 2005. UNITY MARKETING
expects that growth in the collectibles industry will be driven by the increased
number of middle-aged female collectors and higher spending habits of the baby
boom generation.

5
<PAGE>

OUR OPERATING AND GROWTH STRATEGY

WE PLAN TO INCREASE SALES TO EXISTING ACCOUNTS

We plan to increase sales volume in our existing accounts by increasing
sales support, implementing additional telemarketing to our retail accounts,
expanding product offerings within existing lines and introducing new product
lines. Many of our resin dealers carry BEARSTONES but may not carry our other
resin lines such as FOLKSTONES, DOLLSTONES, WEE FOLKSTONES and CARVERS CHOICE.
Based on our experience, we believe that retailers who expand their product and
product line offerings experience significant revenue growth in our products.
For example, our GOLD PAW-TM- dealers, who carry a broad selection of our resin
and plush product lines and receive the greatest level of sales support, sell on
average five times more than our other resin dealers. We plan to hire additional
sales staff and open additional showrooms in order to further increase existing
account volume. From fiscal 1995 to fiscal 1998, our average net product sales
per account grew from approximately $3,700 to approximately $9,000, a 34%
compound annual growth rate.

WE PLAN TO EXPAND SALES TO NEW ACCOUNTS

We plan to selectively expand our resin dealer network while maintaining the
high quality and affordability of our products. New resin dealers will be
selected primarily from our 13,800 existing plush-only dealers, which make up
the majority of our current waiting list of over 5,500 retailers. We believe we
can continue to selectively add additional retail channels such as collectible
doll stores, high-end toy stores, stores located on military bases and other
select specialty retailers as part of a managed retail expansion plan.

WE PLAN TO PENETRATE NEW DISTRIBUTION CHANNELS

We are continuing to pursue corporate and retail partners to expand our
distribution channels. These corporate arrangements provide the client with a
product designed exclusively for them or in conjunction with them. In either
case, these products are for exclusive distribution by the corporate partner.
For example, we produced plush ornaments of well-known animated characters in
conjunction with a large media conglomerate. We believe this relationship may
result in the production of additional products in the future with that
corporate partner. We have also produced customized products for Barnes & Noble
and San Francisco Music Box stores, QVC and several of our larger resin dealers.
We believe that these efforts increase Boyds' brand recognition while
maintaining our emphasis on quality.

WE PLAN TO INCREASE LICENSING AND INTERNATIONAL SALES

Due to Boyds' popularity, we selectively license our images for other
products including stationery, afghans, throw pillows, rubber stamps and
clothing. For example, we currently license some of our product images to
Interart Holding Corporation, a subsidiary of Hallmark Cards, to produce gift
cards, package wrap and other assorted paper items. Though our royalty income is
currently small relative to our net sales, we expect to increase the number of
our licensed products through additional licensing arrangements in the future.
We will also seek to increase international sales, which currently represent
approximately 2% of our net sales. We believe that Asia, Europe and Canada offer
significant long-term potential for our products.

WE STRIVE TO CONTINUALLY DEVELOP AND INTRODUCE NEW PRODUCTS

One of our strategies for maintaining the demand for and collectibility of
our products is to constantly develop and introduce new designs and themes
within existing product lines, while selectively retiring pieces within each
product line. We typically refresh approximately 40% of our existing product
lines each year. In addition to our ongoing line extensions, we also regularly
develop and introduce

6
<PAGE>
completely new product line concepts that maintain Boyds' whimsical and "Folksy
With Attitude" themes. Our recently introduced product lines include:

- CARVERS CHOICE, a line of resin figurines, picture frames and accessories
resembling hand-carved and painted wooden sculptures

- GLASSSMITH ORNAMENTS, blown glass antique-style ornaments based on popular
Boyds themes

- Porcelain Dolls, a line of traditional high-quality porcelain dolls

- LE BEARMOGE, small porcelain figurines, based on popular Boyds resin
characters, placed decoratively atop an ornamental box containing a
miniature porcelain figurine

For fiscal 1999, we plan to introduce the following new lines:

- UPTOWN BEARS, upscale dressed bears

- PURRSTONES, a new line of resin figurines

- BABYBOYDS, plush animals targeted for the children's market

- THE BEATRICE COLLECTION-TM-, fine porcelain hinged boxes with designs
reproduced from original works of art made exclusively for Boyds

WE PLAN TO PURSUE STRATEGIC ACQUISITIONS

While we have historically grown primarily through internal expansion, we
believe that the collectibles industry is highly fragmented. Because other
giftware and collectibles companies typically realize margins significantly
lower than we do, we believe that our successful business model can, in many
cases, be transferred to other giftware and collectibles companies and product
lines. For example, in November 1998 we completed the acquisition of H.C.
Accents & Associates, Inc., a company without an extensive distribution network
whose product lines complement those of Boyds. H.C. Accents was acquired for
approximately $4 million, including the forgiveness of debt.

THE RECAPITALIZATION

On April 21, 1998, the stockholders of Boyds prior to the April 1998
recapitalization and Bear Acquisition, Inc., together completed a
recapitalization of Boyds. Bear Acquisition is an affiliate of Kohlberg Kravis
Roberts & Co. L.P. Investment funds controlled by an affiliate of KKR, which
include KKR 1996 Fund L.P. and KKR Partners II, L.P., own a substantial majority
of Bear Acquisition's common stock. The recapitalization consisted of the
purchase by Bear Acquisition of 41,327,007 shares of common stock of Boyds held
by the original stockholders of Boyds for approximately $184 million and the
redemption by Boyds of 106,237,360 shares of common stock held by the original
stockholders for approximately $473 million. Boyds financed the redemption with
$325.0 million of bank borrowings and the issuance of $165.0 million principal
amount of senior subordinated notes. Immediately after the recapitalization,
Bear Acquisition owned approximately 80% of the common stock and the original
stockholders retained approximately 20% of the common stock. On April 22, 1998,
Bear Acquisition acquired 843,385 additional shares of newly-issued Boyds common
stock for $3.8 million with the proceeds from the sale of Bear Acquisition
common stock. At February 23, 1999, Bear Acquisition and the original
stockholders owned approximately 81% and 19%, respectively, of the outstanding
common stock.

After the recapitalization, Boyds transferred substantially all of its
assets to The Boyds Collection, Ltd., L.P., a Delaware limited partnership
wholly owned by us. We are the sole limited partner of Boyds L.P. The sole
general partner of Boyds L.P. is Boyds Operations, Inc., a Delaware corporation
and our direct wholly owned subsidiary.

7
<PAGE>

Prior to the offering, the current stockholders of Boyds will transfer all
of their shares of Boyds common stock to Boyds in exchange for newly-issued
shares of Boyds common stock. Each old share of Boyds common stock will be
exchanged for 1.1230165 new shares of Boyds common stock. After receiving its
newly-issued Boyds shares, Bear Acquisition will distribute these shares in
liquidation to its stockholders. Bear Acquisition's only asset is its investment
in Boyds common stock. As a result, KKR 1996 Fund L.P. and KKR Partners II, L.P.
will collectively own approximately 79% and the original stockholders will
retain approximately 19%, respectively, of the outstanding common stock
immediately prior to the offering.

8
<PAGE>
THE OFFERING

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<S> <C>
Common stock offered by:

Boyds......................... 9,250,000 shares

The selling stockholders
(1)......................... 6,750,000 shares (2)

Total....................... 16,000,000 shares (2)

Common stock to be outstanding
after the offering............ 61,838,246 shares (3)

Use of proceeds................. To redeem $66.0 million principal amount of Boyds'
outstanding 9% senior subordinated notes, which also
requires payment of a $5.9 million premium, and to repay
approximately $90.8 million of bank indebtedness. Boyds
will receive no proceeds from the sale of common stock in
the offering by the selling stockholders. See "Use of
Proceeds."

Proposed NYSE symbol............ FOB
</TABLE>

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(1) The selling stockholders in the offering will be KKR 1996 Fund L.P. and KKR
Partners II, L.P.

(2) Excludes 2,400,000 shares to be sold by the selling stockholders if the
underwriters' over-allotment option is exercised in full. See
"Underwriters."

(3) Shares of common stock, par value $.0001, outstanding at December 31, 1998.
This number of shares excludes

- 1,133,124 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1998, of which 269,524 options to purchase
shares of common stock were then exercisable

- 1,112,909 shares of common stock reserved for future issuance under Boyds'
option plan
See "Management--Benefit Plans for Boyds' Employees"

* * *

EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES
THAT THE COMMON STOCK BEING OFFERED WILL BE SOLD AT $19.00 PER SHARE, WHICH IS
THE MID-POINT OF THE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS, AND
THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. ALL OF THE
INFORMATION IN THIS PROSPECTUS, INCLUDING ALL REFERENCES TO THE NUMBER OF SHARES
OF COMMON STOCK, ASSUMES THE 1.1230165 FOR 1 EXCHANGE OF BOYDS' COMMON STOCK TO
BE EFFECTED PRIOR TO THIS OFFERING.

9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

You should read the summary consolidated financial and other data below in
conjunction with the Consolidated Financial Statements and the Unaudited Pro
Forma Consolidated Condensed Financial Statements and the accompanying notes to
each, which are contained later in this prospectus. You should also read the
Selected Financial and Other Data and the accompanying Management's Discussion
and Analysis of Financial Condition and Results of Operations, also contained
later in this prospectus. The historical financial data for the three years
ended December 31, 1998 have been derived from the audited Consolidated
Financial Statements and the accompanying notes, which are contained later in
this prospectus. The historical financial data for the year ended December 31,
1995 have been derived from audited financial statements for such period, which
are not contained in this prospectus. The historical financial data for the year
ended December 31, 1994 have been derived from unaudited financial statements,
which are also not contained in this prospectus. The pro forma data as adjusted
for the recapitalization and the offering have been derived from the Unaudited
Pro Forma Consolidated Condensed Financial Statements and the accompanying
notes, which are contained later in this prospectus.

Prior to the recapitalization on April 21, 1998, Boyds was operated as an S
Corporation for federal and state income tax purposes. As a result, Boyds'
taxable earnings were taxed directly to its then-existing stockholders. After
the recapitalization, Boyds became subject to federal and state income taxes.
The pro forma provision for income taxes, pro forma net income and pro forma
statement of income data assume that Boyds was subject to federal and state
income taxes and was taxed as a C Corporation at the effective tax rates that
would have applied for all periods. Pro forma statement of income data, as
adjusted for the recapitalization and the offering, also gives effect to the
recapitalization and the offering as if they had occurred on January 1, 1998.
The balance sheet data, as adjusted for the offering, give effect to the
offering as if it had occurred on December 31, 1998.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................................................ $ 34,833 $ 70,147 $ 98,365 $ 129,841 $ 197,806
Cost of goods sold............................................... 12,450 24,221 33,022 43,278 63,852
--------- --------- --------- --------- ---------
Gross profit..................................................... 22,383 45,926 65,343 86,563 133,954
Selling, general and administrative expenses..................... 2,675 4,332 6,314 8,528 14,446
Other operating income, net...................................... 78 31 387 1,171 1,280
--------- --------- --------- --------- ---------
Income from operations........................................... 19,786 41,625 59,416 79,206 120,788
Interest expense................................................. (39) (89) (187) (242) (29,618)
Other income (expense), net including $3,248 of other expenses in
1998 related to the recapitalization........................... 88 578 868 166 (2,885)
--------- --------- --------- --------- ---------
Income before provision for income taxes......................... 19,835 42,114 60,097 79,130 88,285
Provision for income taxes....................................... -- -- -- -- 22,007
--------- --------- --------- --------- ---------
Net income....................................................... $ 19,835 $ 42,114 $ 60,097 $ 79,130 $ 66,278
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma provision for income taxes............................. $ 8,033 $ 17,455 $ 25,045 $ 33,152 $ 34,732
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income............................................. $ 11,802 $ 24,659 $ 35,052 $ 45,978 $ 53,553
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma basic earnings per common share (1).................... $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.64
Pro forma diluted earnings per common share (1).................. $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.63

PRO FORMA STATEMENT OF INCOME DATA, AS ADJUSTED FOR THE
RECAPITALIZATION AND THE OFFERING:
Net income before extraordinary item............................. $ 55,483
Interest expense................................................. 26,078
Basic and diluted earnings per common share (1).................. $ 0.90
</TABLE>

(CONTINUED ON FOLLOWING PAGE)

10
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<TABLE>
<CAPTION>
(CONTINUED FROM PREVIOUS PAGE)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>

OTHER DATA:
Gross profit margin.............................................. 64.3% 65.5% 66.4% 66.7% 67.7%
Operating income margin.......................................... 56.8% 59.3% 60.4% 61.0% 61.1%
Depreciation and amortization.................................... $ 46 $ 131 $ 221 $ 254 $ 2,260
Capital expenditures............................................. 132 545 269 367 1,247
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERING
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................... $ 11,606 $ 11,606
Working capital (excluding cash and cash equivalents)............................... 22,262 26,008
Total assets........................................................................ 298,410 293,944
Total debt.......................................................................... 443,000 286,235
Total stockholders' equity (deficit)................................................ (158,766) (2,721)
</TABLE>

- ------------------------
(1) Pro forma basic earnings per common share is calculated based on weighted
average common shares outstanding of 157,671,516 for the four fiscal years
ended December 31, 1997 and 84,142,163 for the fiscal year ended December
31, 1998. Pro forma diluted earnings per common share is calculated based on
weighted average diluted shares outstanding of 84,484,571 for the year ended
December 31, 1998. Pro forma basic and diluted earnings per common share, as
adjusted for the recapitalization and the offering, is calculated based on
weighted average basic and diluted shares outstanding of 61,375,424 and
61,717,832, respectively.

11
<PAGE>
RISK FACTORS

BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE OF VARIOUS RISKS,
INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK
FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS,
BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.

IF WE ARE NOT ABLE TO GROW OUR BUSINESS AS PLANNED, OUR SALES GROWTH AND
EARNINGS COULD BE DIMINSHED

We intend to continue to pursue a business strategy of increasing sales and
earnings by expanding our existing brands and distribution channels. Our ability
to implement this growth strategy successfully will be in part dependent on
factors beyond our control. These factors include prevailing economic
conditions, changes in consumer preferences and changes in our competitive
environment.

Our ability to anticipate changes in the collectibles market and identify
industry trends will be a critical factor in our ability to grow and remain
competitive. We will also need to successfully develop and introduce new
products on a timely basis. Our new products may not be completed on a timely
basis and may not enjoy market acceptance following their introduction. In
addition, we may not be able to accurately predict the anticipated development
schedules for new or refreshed products and product lines.

THE LOSS OF EITHER OF OUR TWO INDEPENDENT BUYING AGENCIES OR ANY OF OUR
MANUFACTURING SOURCES COULD DISRUPT OUR BUSINESS

Substantially all of the products that we sell are purchased through two
independent buying agencies. One buying agency is located in Hong Kong, and the
other buying agency is located in the United States. These two buying agencies,
which contract with a total of 19 independent manufacturers, account for
approximately 91% of our total imports. These two buying agencies also perform a
number of functions for us, including collaborating in our product design and
development process. As a result, we are substantially dependent on these buying
agencies and the manufacturers with which they contract. We do not have
long-term contracts with either of our primary buying agencies. We believe that
the loss of either of our primary buying agencies would:

- have a material adverse effect on our financial condition and results of
operations

- cause disruptions in our orders

- affect the quality of our products

- possibly require us to select alternative manufacturers

BECAUSE ALL OF OUR SIGNIFICANT MANUFACTURERS ARE LOCATED IN CHINA, OUR BUSINESS
IS EXPOSED TO POTENTIAL ECONOMIC AND POLITICAL RISKS

All of our significant manufacturers are located in China. Although we have
identified alternate manufacturers which could meet our quality and reliability
standards at similar costs in China and in other countries, the loss of any one
or more of our manufacturers could have a material adverse effect on our
business.

Because we rely primarily on Chinese manufacturers, we are subject to the
following risks that could restrict our manufacturers' ability to make our
products or increase our manufacturing costs:

- economic and political instability in China

- transportation delays

- restrictive actions by the Chinese government

12
<PAGE>
- the laws and policies of the United States affecting importation of goods,
including duties, quotas and taxes

- Chinese trade and tax laws

In particular, we could be adversely affected if the Chinese renminbi
appreciates significantly relative to the United States dollar. This is because
the cost of our products fluctuates with the value of the Chinese renminbi.

BECAUSE WE ARE CONTROLLED BY KKR, OTHER STOCKHOLDERS HAVE A REDUCED ABILITY TO
INFLUENCE OUR BUSINESS

Following the offering, KKR 1996 Fund L.P. and KKR Partners II, L.P.
(together, the "KKR Partnerships") will own approximately 56% of our outstanding
common stock on a fully diluted basis and will continue to control us.
Accordingly, affiliates of KKR will be able to:

- elect the entire Board of Directors of Boyds

- control the management and policies of Boyds

- determine, without the consent of other Boyds stockholders, the outcome of
any corporate transaction or other matter submitted to the Boyds
stockholders for approval, including mergers, consolidations and the sale
of all or substantially all of Boyds' assets

Affiliates of KKR will also be able to prevent or cause a change in control
of Boyds and will be able to amend our bylaws at any time. The interests of KKR
may also conflict with the interests of the other holders of common stock.

BECAUSE WE IMPORT SUBSTANTIALLY ALL OF OUR PRODUCTS, OUR BUSINESS IS SUBJECT TO
POTENTIAL ADVERSE TRADE REGULATIONS AND RESTRICTIONS

Boyds does not own or operate any manufacturing facilities. Instead, we
import substantially all of our retail products from independent foreign
manufacturers, primarily in China. As a result, substantially all of our
products are subject to United States Customs Service duties and regulations.
These regulations include requirements that we disclose information regarding
the country of origin on our products, such as "Handmade in China." Within its
discretion, the United States Customs Service may also set new regulations
regarding the amount of duty to be paid, the value of merchandise to be reported
or other customs regulations relating to our imported products. Failure to
comply with these regulations may result in the imposition of additional duties
or penalties or forfeiture of merchandise.

The countries in which our products are manufactured may impose new quotas,
duties, tariffs or other charges or restrictions. This could adversely affect
our financial condition, results of operations or our ability to continue to
import products at current or increased levels. In particular, our costs could
increase, or the mix of countries from which we import our products may be
changed, if the Generalized System of Preferences program is not renewed or
extended each year. The Generalized System of Preferences allows selected
products of beneficiary countries to enter the United States duty free. In
addition, if countries that are currently accorded "Most Favored Nation" status
by the United States, such as China, cease to have such status, we could be
adversely affected. We cannot predict what regulatory changes may occur or the
type or amount of any financial impact these changes may have on us in the
future.

IF CONSUMERS DO NOT ACCEPT OUR NEW PRODUCTS, OUR RESULTS OF OPERATIONS MAY BE
IMPAIRED

The demand for our products may be quickly affected by changing consumer
tastes and interests. Our results of operations depend substantially upon our
ability to continue to conceive, design, source and market new pieces and upon
continuing market acceptance of our existing and future product lines. If we
fail or are significantly delayed in introducing new pieces to our existing
product lines or

13
<PAGE>
creating new product line concepts or if our new products do not meet with
market acceptance, our results of operations may be impaired. A number of
companies who participate in the giftware and collectibles industries are part
of large, diversified companies that have greater financial resources than us
and offer a wider range of products and may be less affected by changing
consumer tastes.

THE LOSS OF ANY MEMBER OF OUR SENIOR MANAGEMENT COULD ADVERSELY EFFECT OUR
BUSINESS

Our success is substantially dependent upon the retention of our executive
officers, including Gary M. Lowenthal, our founder, chairman and chief executive
officer. We believe that each of our executive officers is a key employee for
our business. However, we do not have employment agreements with any of our
executive officers. If any of our executive officers becomes unable or unwilling
to participate in the business and operations of Boyds, our future business and
operations could be materially and adversely effected.

BECAUSE WE BELIEVE OUR INTELLECTUAL PROPERTY IS MATERIAL TO OUR SUCCESS,
INFRINGEMENT OR LEGAL ACTIONS RELATED TO OUR INTELLECTUAL PROPERTY COULD
ADVERSELY IMPACT OUR FINANCIAL CONDITION

We believe that our trademarks and other proprietary rights are material to
our success and competitive position. Accordingly, we devote resources to the
establishment and protection of our intellectual property on a worldwide basis.
The actions we take to establish and protect our trademarks and other
proprietary rights may not be adequate to protect our intellectual property or
to prevent imitation of our products by others. Moreover, while we have not
experienced any proprietary license infringements or legal actions that have had
a material impact on our financial condition or results of operations, other
persons have and will likely in the future assert rights in, or ownership of,
our trademarks and other proprietary rights. We may not be able to successfully
resolve such conflicts. In addition, the laws of foreign countries may not
always protect intellectual property to the same extent as do the laws of the
United States. See "Business--Boyds' Intellectual Property."

THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK, AND THE MARKET PRICE OF THE
SHARES WILL FLUCTUATE

Prior to the offering, there has been no market for our common stock. The
initial public offering price of the common stock will be determined by
negotiations among Boyds, the selling stockholders and the representatives of
the underwriters. The common stock may trade at prices significantly below the
initial public offering price.

The price of the common stock after the offering may fluctuate widely,
depending upon many factors. These factors include:

- the perceived prospects of Boyds

- differences between our actual financial and operating results and those
expected by investors and analysts

- changes in analysts' recommendations or projections

- changes in general economic or market conditions

We have applied to list the common stock on The New York Stock Exchange. The
NYSE listing does not, however, guarantee that a trading market for the common
stock will develop or, if a market does develop, the depth of the trading market
for the common stock.

SALES BY EXISTING STOCKHOLDERS OF THEIR COMMON STOCK COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK

As of February 23, 1999, there were 52,588,246 shares of common stock
outstanding, excluding shares to be sold in this offering. After the offering,
persons who currently hold common stock will be

14
<PAGE>

entitled to register their common stock under the Securities Act of 1933 at our
expense. These shares may also be sold under Rule 144 of the Securities Act,
depending on the holding period of such securities and subject to significant
restrictions in the case of shares held by persons deemed to be affiliates of
Boyds. We cannot predict the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price of the
common stock. Sales of substantial amounts of common stock, or the perception
that such sales could occur, may adversely affect prevailing market prices for
the common stock. Boyds, the selling stockholders and our officers and
directors, which in the aggregate owned 52,052,938 shares at February 23, 1999,
have agreed not to offer, sell, contract to sell or otherwise dispose of any
common stock for a period of 180 days after the date of this prospectus without
the written consent of the underwriters.

WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEM

We believe we have replaced all of our systems that are not Year 2000
compliant. However, if any of our systems are not compliant or if our customers,
buying agencies, manufacturers or shippers fail to achieve Year 2000 compliance,
we may experience the following adverse consequences:

- We may be unable to receive our products due to failures by our
manufacturers, buying agencies or shippers

- Our customers may be unable to place orders with us due either to our
system failures or those of our customers

- We may be unable to deliver our products on a timely basis

For a description of our Year 2000 compliance efforts you should read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."

THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS WHICH COULD DIFFER FROM
ACTUAL FUTURE RESULTS

Some of the matters discussed under the captions "Summary," "Risk Factors,"
"Unaudited Pro Forma Consolidated Financial Statements," "The Boyds Collection,
Ltd." and elsewhere in this prospectus include forward-looking statements.
Statements that are predictive in nature, that depend upon or refer to future
events or conditions or that include words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates" and similar expressions are
forward-looking statements. Although we believe that these statements are based
upon reasonable assumptions, we can give no assurance that our goals will be
achieved. These forward-looking statements are made as of the date of this
prospectus, and we assume no obligation to update them or the reasons why actual
results may differ.

15
<PAGE>
USE OF PROCEEDS

The net proceeds to us from the sale of the 9,250,000 shares of common stock
offered by us, after deducting the underwriting discount and estimated offering
expenses, are estimated to be approximately $162.7 million. These proceeds will
be used to redeem $66.0 million principal amount of our 9% Senior Subordinated
Notes due 2008 at a redemption price of 109% of the principal amount, which will
require payment of approximately $5.9 million in addition to the principal
amount of the notes, and to repay $90.8 million of indebtedness under our credit
facility with DLJ Capital Funding, Inc. and other lenders. The credit facility
consists of a $325.0 million term loan facility and a $40.0 million revolving
credit facility. At December 31, 1998, $278.0 million of loans under the term
loan facility were outstanding, none of the revolving credit facility was drawn
down and the weighted average interest rate on the credit facility was 7.38%.
Indebtedness under the credit facility and the notes was incurred in connection
with the recapitalization to (1) redeem common stock of Boyds and (2) pay
transaction fees and expenses. See "Prospectus Summary--The Recapitalization."

We will receive no proceeds from the sale of common stock in the offering by
the selling stockholders.

DIVIDEND POLICY

We do not intend to pay any cash dividends for the foreseeable future but
instead intends to retain earnings, if any, for the future operation and
expansion of its business. Any determination to pay dividends in the future will
be at the discretion of our board of directors and will be dependent upon our
results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors deemed relevant by our
board of directors. In addition, both the credit facility and the indenture
governing the notes currently contain limitations on our ability to declare or
pay cash dividends on the common stock. Future indebtedness or loan arrangements
incurred by us may also prohibit or restrict our ability to pay dividends and
make distributions to our stockholders.

16
<PAGE>
CAPITALIZATION

The following table sets forth our debt and capitalization at December 31,
1998, and as adjusted to give effect to:

- the receipt by us of the net proceeds from the sale of 9,250,000 shares of
common stock offered by us in this offering at an assumed initial public
offering price of $19.00 per share, after deducting the underwriting
discount and estimated offering expenses payable by us in the offering

- the application of the net proceeds therefrom as described under "Use of
Proceeds"

In addition, the following table should be read in conjunction with the
Unaudited Pro Forma Consolidated Condensed Financial Statements and the
Consolidated Financial Statements and the accompanying notes to each, which are
contained later in this prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERING
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Total debt:
Revolver.......................................................................... $ -- $ --
Term Loan A....................................................................... 88,250 88,250
Term Loan B....................................................................... 189,750 98,985
9% Senior Subordinated Notes...................................................... 165,000 99,000
----------- --------------
Total debt...................................................................... 443,000 286,235

Total stockholders' equity (deficit)................................................ (158,766) (2,721)
----------- --------------
Total capitalization............................................................ $ 284,234 $ 283,514
----------- --------------
----------- --------------
</TABLE>

17
<PAGE>
DILUTION

The tangible book deficit of Boyds at December 31, 1998 was $161.2 million,
or $3.07 per outstanding share of common stock. The net tangible book deficit
per share of common stock is equal to Boyds' total tangible assets, which is
defined as total assets less intangible assets, less its total liabilities,
divided by the number of shares of common stock outstanding. After giving effect
to the sale of 9,250,000 shares of common stock to be sold by Boyds in the
offering at an assumed initial public offering price of $19.00 per share, which
is the midpoint of the estimated range of the initial public offering price, and
the application by Boyds of the estimated net proceeds to it as described in
"Use of Proceeds," the net tangible book deficit of Boyds at December 31, 1998
would have been $5.1 million, or $0.08 per share of common stock. This
represents an immediate increase in net tangible book value of $2.99 per share
of common stock and an immediate dilution in net tangible book value of $19.08
per share of common stock to new investors of common stock in this offering.

The following table illustrates the per share dilution that would have
occurred if this offering had been consummated on December 31, 1998:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of common stock........................ $ 19.00
Net tangible book deficit per share before the offering.............................. (3.07)
Increase per share attributable to the offering (1).................................. 2.99
---------
Net tangible book deficit per share of common stock after the offering................. (0.08)
---------
Dilution per share to new investors (2)................................................ $ 19.08
---------
---------
</TABLE>

- ------------------------

(1) After deducting the underwriting discounts and estimated expenses payable by
Boyds in the offering.

(2) Dilution is determined by subtracting net tangible book deficit per share
after giving effect to the offering from the assumed initial public offering
price paid by new investors.

The following table summarizes the differences, as of December 31, 1998,
between the existing stockholders and the new investors with respect to the
number of shares purchased from Boyds, the total consideration paid and the
average price per share paid. For the purpose of the following table only, the
shares purchased from Boyds exclude shares retained by the original stockholders
in the recapitalization and the shares sold by the selling stockholders in this
offering.

<TABLE>
<CAPTION>
TOTAL CONSIDERATION (2)
SHARES PURCHASED (1) --------------------------
------------------------------ AMOUNT AVERAGE
NUMBER (IN PRICE
(IN THOUSANDS) PERCENT THOUSANDS) PERCENT PER SHARE
--------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 35,709 58% $ 158,985 34% $ 4.45
New investors....................... 16,000 26 304,000 66 19.00
--
------ ------------- ---
Total............................... 51,709 84% $ 462,985 100%
--
--
------ ------------- ---
------ ------------- ---
</TABLE>

- ------------------------------

(1) Includes shares purchased by officers and directors. Does not include shares
of common stock retained by the original stockholders in the
recapitalization.

(2) Does not include the consideration for the common stock retained by the
original stockholders in the recapitalization.

The computations made above do not give effect to either of the following:

- 1,133,124 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1998, of which 269,524 options to purchase
shares of common stock were then exercisable

- 1,112,909 shares of common stock reserved for future issuance under Boyds'
option plan

To the extent that shares are issued in connection with the exercise of
stock options, there will be further dilution to new investors. In addition,
sales by the selling stockholders in this offering will reduce the number of
shares held by current stockholders, including the original stockholders, to
45,838,246, or 74.1% of the total number of shares outstanding after this
offering, and will increase the number of shares of common stock held by new
investors to 16,000,000, or 25.9% of the total number of shares of common stock
outstanding after this offering. See "Principal and Selling Stockholders."

18
<PAGE>
SELECTED FINANCIAL AND OTHER DATA

The following table sets forth selected historical financial and other data
of Boyds. The historical financial data as of December 31, 1997 and 1998 and for
the three years ended December 31, 1998 have been derived from, and should be
read in conjunction with, the audited Consolidated Financial Statements and the
accompanying notes, which are contained later in this prospectus. The historical
financial data as of December 31, 1995 and 1996 and for the year ended December
31, 1995 have been derived from audited financial statements for such periods,
which are not contained in this prospectus. The historical data as of and for
the year ended December 31, 1994 have been derived from unaudited financial
statements which are not contained in this prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the accompanying notes, which are
contained later in this prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales........................................................ $ 34,833 $ 70,147 $ 98,365 $ 129,841 $ 197,806
Cost of goods sold............................................... 12,450 24,221 33,022 43,278 63,852
--------- --------- --------- --------- ---------
Gross profit..................................................... 22,383 45,926 65,343 86,563 133,954
Selling, general and administrative expenses..................... 2,675 4,332 6,314 8,528 14,446
Other operating income, net...................................... 78 31 387 1,171 1,280
--------- --------- --------- --------- ---------
Income from operations........................................... 19,786 41,625 59,416 79,206 120,788
Interest expense................................................. (39) (89) (187) (242) (29,618)
Other income (expense), net including $3,248 of other expenses in
1998 related to the recapitalization........................... 88 578 868 166 (2,885)
--------- --------- --------- --------- ---------
Income before provision for income taxes......................... 19,835 42,114 60,097 79,130 88,285
Provision for income taxes....................................... -- -- -- -- 22,007
--------- --------- --------- --------- ---------
Net income....................................................... $ 19,835 $ 42,114 $ 60,097 $ 79,130 $ 66,278
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma provision for income taxes............................. $ 8,033 $ 17,445 $ 25,045 $ 33,152 $ 34,732
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income............................................. $ 11,802 $ 24,659 $ 35,052 $ 45,978 $ 53,553
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma basic earnings per common share (1).................... $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.64
Pro forma diluted earnings per common share (1).................. $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.63
OTHER DATA:
Gross profit margin.............................................. 64.3% 65.5% 66.4% 66.7% 67.7%
Operating income margin.......................................... 56.8% 59.3% 60.4% 61.0% 61.1%
Depreciation and amortization.................................... $ 46 $ 131 $ 221 $ 254 $ 2,260
Capital expenditures............................................. 132 545 269 367 1,247
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $ 1,700 $ 4,279 $ 6,083 $ 11,210 $ 11,606
Working capital (excluding cash and cash equivalents)............ 5,856 13,384 13,250 23,398 22,262
Total assets..................................................... 8,526 19,943 22,582 38,936 298,410
Total debt....................................................... 7,500 17,700 19,300 30,000 443,000
Total stockholders' equity (deficit)............................. 250 916 1,191 5,272 (158,766)
</TABLE>

- ------------------------------

(1) Pro forma basic earnings per common share is calculated based on weighted
average common shares outstanding of 157,671,516 for the four fiscal years
ended December 31, 1998 and 84,142,163 for the year ended December 31, 1998.
Pro forma diluted earnings per common share is calculated based on weighted
average diluted shares outstanding of 84,484,571 for the year ended December
31, 1998.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

Boyds has grown significantly to become a leading domestic designer,
importer and distributor of branded, high-quality, hand-crafted collectibles and
other specialty giftware products. Boyds sells its products through an extensive
network of approximately 19,950 accounts comprised of independent gift and
collectibles retailers, premier department stores, selected catalogue retailers
and other electronic and retail channels. Boyds has a demonstrated history of
strong sales growth with net sales increasing from $18.2 million in fiscal 1993
to $197.8 million in fiscal 1998, a compound annual growth rate of approximately
61%. Substantially all sales growth has resulted from increases in unit volumes
sold.

As a result of developing a strong brand image and a high level of consumer
awareness, Boyds believes its sales growth has outpaced the giftware and
collectibles industries and allowed it to gain market share. Boyds also believes
it is one of the most profitable companies in terms of both gross profit and
operating income margins in the giftware and collectibles industries for
companies of similar or larger size. Boyds' fiscal 1998 gross and operating
income margins were 67.7% and 61.1%, respectively.

Boyds' products include resin figurines, plush animals, porcelain dolls and
boxes and related clothing and accessories. The following table sets forth
Boyds' resin figurine, plush animal and other sales and their percentage of
Boyds' net sales:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -------------------------------
1996 1997 1998 1996 1997 1998
(DOLLARS IN MILLIONS) (PERCENT OF NET SALES)
<S> <C> <C> <C> <C> <C> <C>

Resin figurines................................... $ 42.1 $ 54.9 $ 80.2 42.8% 42.3% 40.6%

Plush animals..................................... 46.4 58.1 93.4 47.2 44.8 47.2

Other............................................. 9.9 16.8 24.2 10.0 12.9 12.2
--------- --------- --------- --------- --------- ---------

Net sales....................................... $ 98.4 $ 129.8 $ 197.8 100.0% 100.0% 100.0%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

Growth in resin figurines has been primarily driven by the substantial
growth of Boyds' three major resin figurine product lines, BEARSTONES,
FOLKSTONES and DOLLSTONES, all of which have exhibited growth each year since
their introduction. In late 1993, Boyds introduced its BEARSTONES product line,
which was an immediate success. In early 1994, Boyds introduced another resin
figurine line known as FOLKSTONES, followed by DOLLSTONES in late 1995. Boyds
also established a network of dealers in 1994, selected primarily from Boyds'
plush-only dealers, that were authorized to carry Boyds' resin figurine product
lines. These dealers have grown in number to 6,000 accounts and accounted for
approximately 63% of Boyds' net sales in fiscal 1998. Boyds currently has a
waiting list of over 5,500 retailers that have expressed interest in becoming
resin figurine dealers.

Growth in plush animals for the period from fiscal 1993 through fiscal 1998
has been largely attributable to the growth of Boyds' line of dressed animals in
the T.J.'S BEST DRESSED collection, introduced in 1992, and in other
custom-designed plush animals. Boyds began selling non-dressed plush animals in
1982 and has since introduced product collections which currently include BEARS
IN THE ATTIC-TM-, J.B. BEAN & ASSOCIATES, the ARCHIVE COLLECTION-TM- and MOHAIR
BEARS.

Boyds' resin figurine and plush animal sales accounted for 87.8% of fiscal
1998 net sales with other product sales, freight sales, collectors club sales
and distributor sales comprising the remainder. Freight sales represent shipping
and handling charges assessed on each order based on order size. Collectors club
sales are generated from annual dues collected directly from consumers who
become members of

20
<PAGE>
Boyds' collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, which began in July
1996 and currently has approximately 120,000 paying members. Distributor sales
represent sales of Boyds' products to independent distributors in other
countries and to certain accounts in the U.S., which are shipped directly from
overseas suppliers.

Boyds believes its gross profit and operating income margins are higher than
giftware and collectibles companies of similar or larger size, even though it
serves similar markets, retail distribution channels and consumers, due to its
avoidance of substantial volume purchase discounts, its use of in-house
development teams, limited royalties paid to outside artists, and relatively low
warehousing, distribution and obsolescence costs.

Selling, general and administrative expenses are comprised of overhead,
selling and marketing costs, administration, professional fees and Pennsylvania
capital stock taxes. For fiscal 1998, Boyds' SG&A expenses were $14.4 million,
representing 7.3% of net sales. Boyds believes it has one of the lowest SG&A
levels, as a percentage of net sales, among giftware and collectibles companies
of similar or larger size. Unlike many of its competitors, Boyds does not
utilize a network of internal or independent commissioned sales personnel, but
relies instead on an in-house team of non-commissioned telemarketing and sales
professionals. In addition, Boyds exhibits its products at many national and
regional tradeshows where orders are taken by Boyds' employees and part-time
help. Boyds operates almost exclusively out of a leased office/distribution
facility in McSherrystown, Pennsylvania where it believes both labor and rental
costs are attractive. These factors, combined with Boyds' access to low-cost
manufacturing sources located primarily in China, have resulted in an operating
income margin that Boyds believes is among the highest in the industry.

Boyds licenses certain of its product designs to other companies for
products including stationery, greeting cards and home textiles. Boyds believes
such licensing, in addition to providing royalty income, helps to increase
consumer awareness of Boyds' designs and brand image. Boyds reports royalty
income as other operating income.

Boyds has substantial operating income margins and has experienced
significant growth in income from operations. Its operating income margins have
increased from 56.8% in fiscal 1994 to 61.1% for fiscal 1998, which Boyds
believes is approximately 25% to 45% higher than giftware and collectibles
companies of similar or larger size. Historically, Boyds has funded its cash
needs from operations and has not found it necessary to make substantial capital
investments.

RESULTS OF OPERATIONS

The following table sets forth the components of net income as a percentage
of net sales for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
<S> <C> <C> <C>
Net sales................................................................................ 100.0% 100.0% 100.0%
Gross profit............................................................................. 66.4 66.7 67.7
Selling, general and administrative expenses............................................. 6.4 6.6 7.3
Other operating income, net.............................................................. 0.4 0.9 0.7
Income from operations................................................................. 60.4 61.0 61.1
Interest expense......................................................................... (0.2) (0.2) 15.0
Other income, net........................................................................ 0.9 0.1 (0.1)
Expenses related to the recapitalization................................................. -- -- 1.6
Provision for income taxes............................................................... -- -- 11.1
--------- --------- ---------
Net income............................................................................. 61.1% 60.9% 33.5%
--------- --------- ---------
--------- --------- ---------
</TABLE>

21
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1998 VS. FISCAL YEAR ENDED DECEMBER 31, 1997

NET SALES. Net sales increased 52.4% to $197.8 million in fiscal 1998 from
$129.8 million in fiscal 1997. Net sales of resin figurines were $80.2 million
in fiscal 1998, an increase of 46.1% as compared to resin figurine net sales of
$54.9 million in fiscal 1997. The increase in net sales of resin figurines was
primarily attributable to increased sales of BEARSTONES, FOLKSTONES and
Porcelain Dolls, which resulted from strong consumer and retailer demand, and
the introduction of CARVERS CHOICE. Net sales of plush animals were $93.4
million in fiscal 1998, an increase of 60.8% as compared to plush animal net
sales of $58.1 million in fiscal 1997. The increase in net sales of plush
animals was primarily attributable to increased sales of T.J.'S BEST DRESSED,
along with sales of T.F. WUZZIES mini-bears and MOHAIR BEARS, which were
introduced in the fall of 1997.

GROSS PROFIT. Gross profit increased 54.7% to $134 million in fiscal 1998
from $86.6 million in fiscal 1997. Gross profit as a percent of sales increased
to 67.7% for fiscal 1998 from 66.7% for fiscal 1997. The increase in gross
profit was primarily attributable to the increase in sales for both the plush
animal and resin figurine categories for fiscal 1998 as compared to fiscal 1997.

SG&A. SG&A expenses increased 69.4% to $14.4 million in fiscal 1998 from
$8.5 million in fiscal 1997. SG&A expenses as a percent of net sales increased
to 7.3% in fiscal 1998 from 6.6% in fiscal 1997. The increase in SG&A expenses
was primarily attributable to increased administrative costs due to Boyds' net
sales increase during the periods. The increase in SG&A expenses as a percent of
net sales was attributable to increased wages of $750,000 incurred due to an
increased provision for Boyds' employee incentive program and an increase in
professional fees of $1.5 million.

INCOME FROM OPERATIONS. Income from operations increased 52.5% to $120.8
million in fiscal 1998 from $79.2 million in fiscal 1997. The operating income
margin increased to 61.1% in fiscal 1998 from 61.0% in fiscal 1997. The increase
in operating income margin was due to an increase in net sales for the period.
The increase in income from operations was primarily attributable to the
increase in net sales for the period.

INTEREST EXPENSE. Interest expense increased to $29.6 million in fiscal
1998 from $242,000 in fiscal 1997. The increase in interest expense was due to
indebtedness incurred in connection with the recapitalization.

EXPENSES RELATED TO THE RECAPITALIZATION. Transaction costs for fiscal 1998
were $3.2 million, representing 1.6% of net sales. Transaction costs consisted
of non-recurring bonuses paid to key employees in connection with the
recapitalization.

NET INCOME. Net income decreased 16.2% to $66.3 million in fiscal 1998 from
$79.1 million in fiscal 1997. The decrease in net income was attributable to
$54.6 million of additional costs in 1998 that did not occur in 1997, including:

- interest expense of $29.4 million

- income tax expense of $22.0 million due to Boyds becoming a tax paying
entity

- expenses related to the recapitalization of $3.2 million

The net income margin decreased to 33.5% in fiscal 1998 from 60.9% in fiscal
1997. The decrease in net income margin was attributable to the tax and interest
expenses as discussed above.

FISCAL YEAR ENDED DECEMBER 31, 1997 VS. FISCAL YEAR ENDED DECEMBER 31, 1996

NET SALES. Net sales increased 31.9% to $129.8 million in fiscal 1997 from
$98.4 million in fiscal 1996. Net sales of resin figurines were $54.9 million in
fiscal 1997, an increase of 30.4% as compared to resin figurine net sales of
$42.1 million in fiscal 1996. The increase in net sales of resin figurines was

22
<PAGE>
primarily attributable to increased sales of BEARSTONES and FOLKSTONES, which
resulted from strong consumer and retailer demand. Net sales of plush animals
were $58.1 million in fiscal 1997, an increase of 25.2% as compared to plush
animal net sales of $46.4 million in fiscal 1996. The increase in net sales of
plush animals was primarily attributable to increased sales of T.J.'S BEST
DRESSED, as well as increased sales of other specialty dressed plush animals.

GROSS PROFIT. Gross profit increased 32.6% to $86.6 million in fiscal 1997
from $65.3 million in fiscal 1996. Gross profit as a percent of net sales
increased slightly to 66.7% in fiscal 1997 from 66.4% in fiscal 1996. The
increase in gross profit was primarily attributable to the increase in sales for
both the plush animal and resin figurine categories for fiscal 1997 as compared
to fiscal 1996.

SG&A. SG&A expenses increased 34.9% to $8.5 million in fiscal 1997 from
$6.3 million in fiscal 1996. SG&A expenses as a percent of net sales increased
to 6.6% in fiscal 1997 from 6.4% in fiscal 1996. The increase in SG&A expenses
as a percent of net sales in fiscal 1997 as compared to fiscal 1996 was
primarily due to an increase in Boyds' capital stock tax. In general, SG&A
expenses grew in line with Boyds' net sales increase for fiscal 1997 as compared
to fiscal 1996.

INCOME FROM OPERATIONS. Income from operations increased 33.3% to $79.2
million in fiscal 1997 from $59.4 million in fiscal 1996. The operating income
margin also increased to 61.0% in fiscal 1997 from 60.4% in fiscal 1996
primarily due to the increase in royalty income reflected in other operating
income.

INTEREST EXPENSE. There was no material change in interest expense between
fiscal 1997 and fiscal 1996.

NET INCOME. Net income increased 31.6% to $79.1 million in fiscal 1997 from
$60.1 million in fiscal 1996. The increase in net income was primarily
attributable to the increase in net sales. The net income margin decreased
slightly to 60.9% in fiscal 1997 from 61.1% in fiscal 1996. The slight decrease
in net income margin was attributable to increased SG&A expenses.

LIQUIDITY AND CAPITAL RESOURCES

Historically, Boyds utilized its operating cash flow to support working
capital and ongoing capital expenditures. Cash flow from operations increased
18.3% to $82.6 million for fiscal 1998 from $69.8 million for fiscal 1997. The
cash flow increase was primarily attributable to the increase in amortization,
interest payable and accruals, partially offset by increases in accounts
receivable and inventory. Net cash used in financing activities was $77.5
million and $64.3 million for fiscal 1998 and fiscal 1997, respectively. The
funds were used to repay notes to the stockholders, reduce outstanding debt and
fund the costs of the recapitalization.

Boyds' primary sources of liquidity are cash flow from operations and
borrowings under the credit facility. Boyds has elected to treat the
recapitalization as an asset acquisition for federal income tax purposes,
thereby creating tax deductible goodwill. Boyds expects that this deductible
goodwill will reduce cash taxes by approximately $16.3 million per year for the
next 15 years, assuming sufficient income to realize the full benefit of this
reduction. Boyds' primary uses of cash are to fund working capital and to
service debt.

On April 21, 1998 Boyds issued the senior subordinated notes and entered
into the credit facility. The term loans were for an aggregate principal amount
of $325.0 million. Boyds has repaid $47.0 million of the term loans through
December 31, 1998. The revolving credit facility provides revolving loans in an
aggregate amount of up to $40.0 million. Boyds has not borrowed under the
revolving credit facility. Thus, the amount available under the revolving credit
facility will be available to fund Boyds' working capital requirements.

23
<PAGE>
Borrowings under the credit facility bear interest at a rate per year equal
to a margin over either a base rate or LIBOR. The revolving loan commitment will
terminate seven years after the date of the initial funding of the credit
facility. The term loans will be amortized over an eight-year period with no
amortization in the first two years. The credit facility contains customary
covenants and events of default, including substantial restrictions on Boyds'
ability to declare dividends or make distributions. The term loans are subject
to mandatory prepayment with the proceeds of certain asset sales and a portion
of Boyds' excess cash flow. See "Description of Certain Indebtedness."

Boyds plans to use the net proceeds of the offering to redeem $66.0 million
aggregate principal amount of the notes and to repay $90.8 million of its term
loans.

Boyds does not incur significant capital expenditures due to its sourcing
arrangements with its buying agencies. As a result of these arrangements, other
companies manufacture Boyds' products and Boyds is therefore able to avoid
related capital expenditures. Boyds does not expect to incur significant capital
expenditures for the foreseeable future.

Management believes that cash flow from operations and availability under
the revolving credit facility will provide adequate funds for Boyds' foreseeable
working capital needs, planned capital expenditures and debt service
obligations. Any future acquisitions, joint ventures or other similar
transactions may require additional capital and there can be no assurance that
any such capital will be available to Boyds on acceptable terms or at all.
Boyds' ability to fund its working capital needs, planned capital expenditures
and scheduled debt payments, to refinance indebtedness and to comply with all of
the financial covenants under its debt agreements, depends on its future
operating performance and cash flow, which in turn are subject to prevailing
economic conditions and to financial, business and other factors, some of which
are beyond Boyds' control.

SEASONALITY

Boyds does not have the significant seasonal variation in its orders that it
believes is experienced by many other giftware and collectibles companies. Boyds
receives orders throughout the year and generally ships merchandise out on a
first-in, first-out basis. Approximately 40% of orders are taken between
November and April while approximately 60% of orders are placed between May and
October in anticipation of the holiday season. Boyds does not build a large
receivables balance relative to sales because it typically does not offer its
customers long payment terms or dating programs.

EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income."
Comprehensive income includes net income and several other items that current
accounting standards require to be recognized outside of net income. This
standard requires enterprises to display comprehensive income and its components
in financial statements, to classify items of comprehensive income by their
nature in financial statements, and to display the accumulated balances of other
comprehensive income in stockholders' equity separately from retained earnings
and additional paid-in capital. Boyds adopted SFAS No. 130 for the year ended
December 31, 1998. There were no items of other comprehensive income for all
periods presented.

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement is effective for fiscal
years beginning after December 15, 1997. As provided by SFAS No. 131,
disclosures are not required for interim periods of the initial year of
application, but comparative information will be reported in financial
statements for interim periods during the second year of application. Management
has determined that Boyds operates in a single industry segment.

24
<PAGE>
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for periods beginning
after June 15, 1999. Boyds is currently evaluating the impact, if any, of this
statement.

FOREIGN EXCHANGE

The dollar value of Boyds' assets abroad is not significant. Boyds' sales
are denominated in United States dollars and, as a result, are not subject to
changes in exchange rates.

Boyds imports most of its products from manufacturers in China. Boyds' costs
could be adversely affected on a short-term basis if the Chinese renminbi
appreciates significantly relative to the United States dollar. Conversely, its
costs would be favorably affected on a short-term basis if the Chinese renminbi
depreciates significantly relative to the the United States dollar. Although
Boyds generally pays for its products in United States dollars, the cost of such
products fluctuates with the value of the Chinese renminbi. In the future Boyds
may, from time to time, enter into foreign exchange contracts or prepay
inventory purchases as a partial hedge against currency fluctuations.
Differences between the amounts of such contracts and costs of specific material
purchases are included in inventory and cost of sales. Boyds intends to manage
foreign exchange risks to the extent appropriate.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer programs being written to use
two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in systems failure or miscalculations causing
disruptions of operations. Boyds currently uses information technology for
processing orders and tracking inventory.

Management believes that Boyds' systems are Year 2000 compliant. Boyds has
purchased Year 2000 compliant software and currently has Year 2000 compliance
certificates from its key software suppliers. In addition, Boyds has
substantially completed the internal testing of its information technology
systems and will continue to monitor such systems through the summer of 1999.
Boyds has also specifically addressed internally its non-information technology
related systems and believes that there will be no significant operational
problems relating to the Year 2000 issue. Boyds has not obtained, and does not
intend to obtain, an independent verification and validation of its Year 2000
compliance.

Other than system replacements due to planned upgrades, Boyds has not
replaced any of its information technology or non-information technology systems
as a result of the Year 2000 issue.

Boyds depends heavily on its relationships with customers, buying agencies,
manufacturers and shippers. It is communicating with customers, buying agencies,
manufacturers and shippers to determine the extent to which these third parties
are moving toward Year 2000 compliance. To assess Year 2000 compliance and any
potential exposure to the Year 2000 problem, Boyds is in the process of sending
surveys to such third parties. Boyds is also seeking Year 2000 compliance
certificates from third parties it has indentified as "critical" to its
operations, which include all of its buying agencies and manufacturers and its
most important customers and shippers. To date, all of these critical third
parties have been contacted, and Boyds has not been made aware of any Year 2000
compliance problems.

Boyds believes that any adverse effect on its relationship with customers,
buying agencies, manufacturers and shippers due to the Year 2000 problem will be
lessened by the fact that it does not share information technology. However,
failure of any of these parties to have their systems timely converted may have
a material adverse effect on Boyds' business and operations.

Boyds believes it has substantially completed its Year 2000 project. Boyds
did not incur significant incremental costs specifically in connection with
seeking to achieve Year 2000 compliance and all

25
<PAGE>
upgrades and system replacements made in connection with its Year 2000 project
were part of previously planned software and hardware upgrades. Furthermore, in
order to achieve Year 2000 compliance, Boyds has needed, and expects that it
will continue to need, only existing employees who otherwise have been assigned
to the planned upgrade of Boyds' software and hardware.

Notwithstanding Boyds' progress to date, there are several ways in which its
systems could still be affected by the Year 2000 problem. First, the software
code Boyds uses in its information systems may not in fact be Year 2000
compliant in all instances. Second, Boyds may be unable to complete the
remaining upgrades to its information technology systems by the Year 2000.
Third, even if Boyds completes the system upgrade by the Year 2000, it may be
unable to fully test and monitor the upgrades, making it difficult for Boyds to
identify and remedy any problems that might exist. Fourth, Boyds' customers,
buying agencies, independent manufacturers and shippers may be unable to achieve
Year 2000 compliance in time.

The most reasonably likely worst-case scenario resulting from Boyds'
inability, or the inability of its customers, buying agencies, manufacturers or
shippers, to become Year 2000 compliant, includes the following adverse effects:

- SUPPLY PROBLEMS. Boyds would be unable to receive products due to year
2000-related failures on the part of its manufacturers and suppliers
causing Boyds to be unable to fulfill the orders of many of its customers
for Boyds' products.

- ORDER DIFFICULTIES. Boyds' customers would be unable to place their
orders with Boyds because of its own system failures or those of its
customers resulting in delayed or potentially lost orders for Boyds'
products.

- DELIVERY DELAYS. Boyds would be unable to deliver ordered products to its
customers on a timely basis due to a system failure at Boyds or at one of
its product shippers leading to delays in arrival of Boyds' products and
possibly dissatisfied customers.

Boyds has not developed, and does not intend to develop, contingency plans
relating to the Year 2000 problem unless Boyds becomes aware of a Year 2000
compliance problem in its own systems or those of its manufacturers, buying
agencies, customers or shippers.

Boyds' assessment of its Year 2000 compliance is based on numerous
assumptions about future events, including third party modification plans and
other factors. However, there can be no guarantee that this assessment is
correct and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.

INFLATION

Boyds does not believe that inflation has had a material impact on its
operations.

26
<PAGE>
BUSINESS

HISTORY OF BOYDS

Boyds was founded in 1979 by Gary and Justina Lowenthal as a small antique
business in Boyds, Maryland. By 1984, Boyds had begun to reproduce and sell
miniature houses, duck decoys and merino wool teddy bears to selected retail
outlets. In 1984, Boyds also introduced its first major plush product, a unique,
fully-jointed wool teddy bear named MATTHEW-TM-, and the GNOMES HOMES-TM-, a
small collection of hand-sculpted miniature cast resin houses. Boyds relocated
from Maryland to southern Pennsylvania in 1987 in order to take advantage of
more favorable labor markets. The product line was expanded to include other
plush animals and related accessories including miniature clothes, furniture and
ornaments. Boyds began distributing its plush animal lines to department stores
and gift retailers, opting against selling to mass merchandisers, major discount
stores and toy chains. This strategy strengthened Boyds' relationship with its
retailers, a competitive advantage which exists today. In 1993, Boyds began
selling cast resin figurines with the introduction of its BEARSTONES line.

THE COLLECTIBLES INDUSTRY

UNITY MARKETING, an independent market research firm which specializes in
the collectibles industry and is not affiliated with Boyds, estimates that
consumer sales of collectibles in the United States in 1997 totaled $10.0
billion. The industry grew at a compound annual growth rate of approximately 11%
from 1993 to 1997. Figurines, which represent approximately 45% of Boyds' net
product sales, are estimated by UNITY MARKETING to represent the largest
category within the U.S. collectibles industry with an estimated $3.9 billion in
total sales in 1997. Within the collectibles industry, figurine sales have grown
at a compound annual growth rate of approximately 10% since 1993, though
management believes that low- to mid-priced figurines have grown at a faster
rate. According to UNITY MARKETING, women between the ages of 35 and 64
encompass the majority of collectors. Boyds also believes that this group
constitutes a substantial portion of its collectors. The U.S. Census Bureau
reports that the number of women in this age group is expected to grow
approximately 12% by the year 2005. UNITY MARKETING expects that strong growth
in the collectibles industry will be driven by the increased number of
middle-aged female collectors and higher spending habits of the baby boom
generation.

The following chart illustrates the strong historical growth of the
collectibles market:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
U.S. CONSUMER SALES OF COLLECTIBLES, 1993-1997
<S> <C>
(IN BILLIONS)
11% Compound Annual Growth
1993 $6.6
1994 $7.2
1995 $8.2
1996 $9.1
1997 $10.0
</TABLE>

(1) Source: UNITY MARKETING

27
<PAGE>
BOYDS' PRODUCT LINES

Boyds' success is largely due to the established strength of the Boyds brand
name, which Boyds has built among retailers and customers through consistently
offering affordably priced, high-quality collectibles. Boyds brand name is
associated with consistent product quality and Boyds' distinctive, award-winning
"Folksy With Attitude" product design and craftsmanship. Boyds' recognized brand
name makes it easier to successfully introduce new products.

Since 1982, Boyds' product lines have expanded from plush bears to include
other plush animals such as hares, moose and cats, resin figurines, porcelain
dolls and boxes and related clothing and accessories. Boyds' continuous new
product development efforts incorporating traditional, enduring concepts have
resulted in strong brand awareness and broad appeal for Boyds' products. Boyds'
products have been consistently recognized for excellence in product design.
Boyds' industry and consumer awards include Toby awards, Golden Teddy awards,
Collectors Jubilee awards and NALED (National Association of Limited Edition
Dealers) awards.

One of Boyds' strategies for maintaining the demand for and collectibility
of its existing resin figurine and plush animal product lines is to constantly
develop and introduce new designs and themes while selectively retiring others.
There are independently published price guides printed each year that report the
secondary market value of Boyds products, which show that many of Boyds'
products trade at prices substantially higher than their original retail prices.
While Boyds does not participate in this market, Boyds believes the existence of
this market reinforces the demand for its products.

In further building existing product lines, Boyds applies its formula of
developing high-quality, whimsical in nature products to new animals and
concepts, such as the introduction of dressed animals in the case of the plush
lines and to new situations and concepts in the case of the resin figurines.
Boyds is able to keep the categories familiar, yet fresh, with new ideas by
keeping annual product turnover near 40%, further strengthening the image and
collectibility of its products.

In addition, Boyds has developed a successful process for identifying,
designing and marketing unique products for its target markets. Boyds'
development process includes researching, developing and effectively
merchandising and packaging its products in a manner consistent with its product
image. Boyds enhances its product development process by giving careful
attention to design and price points and through its proven method of testing
new products with selected retailers and consumers prior to introduction. Boyds
believes that its close relationships with its suppliers, retailers and
customers allow it to quickly introduce new products, accurately estimate
consumer demand, promptly identify both new product categories and trends
regarding existing lines, and substantially reduce development costs.

RESIN FIGURINES

Net product sales of resin figurines for fiscal 1998 were $80.2 million,
representing 44.6% of net product sales. Pieces in the resin figurine category
are generally priced between $9 and $60 at retail. Each figurine is inscribed
with Boyds' distinctive symbol of authenticity, a hidden bear paw, and a bottom
stamp indicating the name, edition and piece number. Many figurines contain
famous quotes which help the customers identify with the piece. The items are
packaged individually with a certificate of authenticity describing the product.

Boyds' resin figurine category currently consists of three main collections,
BEARSTONES, FOLKSTONES and DOLLSTONES, and two sub-collections, SHOEBOX
BEARS-TM- and WEE FOLKSTONES. Together, these categories include over 420 styles
of finely detailed, hand-painted miniature cast resin bears, other animals and
people.

Boyds introduced the BEARSTONES in 1993 with ten different styles. Since its
introduction, Boyds has expanded the offerings to include additional figurines,
resin jewelry, ornaments, waterballs, SHOEBOX

28
<PAGE>
BEARS, votive holders, ceramics, picture frames and wooden clocks. The ceramics,
frames and clocks were introduced in 1997.

Boyds also produces a collection of ceramic pieces which it is expanding and
currently considers part of its BEARSTONES family of products. The ceramic line,
entitled BEARWARE POTTERYWORKS, was introduced in the fall of 1997 and includes
ceramic cookie jars and salt and pepper shakers.

The FOLKSTONES line of products, introduced in 1994, includes
non-traditional, whimsical figurines of traditional folk art themes, other
figurines, jewelry, ornaments, waterballs, WEE FOLKSTONES and votive holders.
The votive holders and WEE FOLKSTONES, depicting faeries, angels, elves and
other characters, were introduced in 1997.

The DOLLSTONES line of products, introduced in 1995, is based on nostalgic
themes and includes figurines of children depicted with animals, waterballs,
votive holders and musicals. In the fall of 1997, Boyds introduced two limited
edition porcelain dolls within the DOLLSTONES product category. Due to the
success of this introduction, several more limited edition porcelain dolls were
introduced during 1998 and Boyds plans to further expand this category in 1999.

PLUSH ANIMALS

Net product sales of plush animals for fiscal 1998 were $93.4 million,
representing 52.0% of net product sales. Retail prices for the plush animals
generally range from $4 to $95. The plush animal category consists of both
dressed and non-dressed animals which are made of various materials. The outer
covering ranges from acrylic plush to custom-dyed chenille and wool; the
interior is filled with plastic pellets for the beanbag animals or 100% acrylic
fiberfill for the other animals. Most of the animals are fully jointed with
sewn-in joints for arms, legs and heads. Boyds began selling its plush animals
in 1982. Today the plush animal category has grown to encompass over 430
different items ranging from 2 1/2" miniatures to 21" large animals.

Introduced in 1992, the popularity of Boyds' T.J.'S BEST DRESSED line,
characterized by fully jointed bears, cats, moose and other animals dressed in
stylish, hand-sewn outfits, has helped create additional brand awareness for
Boyds.

Boyds' non-dressed plush animal lines include the BEARS IN THE ATTIC, the
ARTISAN SERIES-TM-, J.B. BEAN & ASSOCIATES, the ARCHIVE COLLECTION and ANGELS
AND FRIENDS-TM- ornaments. The largest revenue-generating line in this plush
category is Boyds' J.B. BEAN & ASSOCIATES, featuring fully-jointed bears, hares,
moose, lambs and other animals.

In the fall of 1997, Boyds introduced MOHAIR BEARS, which are fully-jointed,
high-quality bears with mohair bodies, suede paws and hand-embroidered paws and
faces. Boyds believes its MOHAIR BEARS are comparable in quality to bears
manufactured by certain competitors, but at wholesale prices which are
significantly lower.

OTHER PRODUCTS

In addition to Boyds' resin figurine and plush animal lines, Boyds sells
over 150 additional items which generally generate margins comparable to its
resin figurine and plush animal lines. The majority of the revenues generated by
these products are from the sale of Boyds' BEAR NECESSITIES line that includes
miniature knit clothing, miniature furniture, wooden accessories, glasses, cast
iron products and resin accessories. Boyds also sells various printed and
promotional materials to support its product lines.

29
<PAGE>
NEW PRODUCT INTRODUCTIONS

Boyds continually develops and introduces new products and product line
concepts. For example, its MOHAIR BEARS, introduced in the fall of 1997,
represent an important new plush animal line. In 1998, the MOHAIR BEARS line was
expanded to include other animals. In addition, in late 1997 Boyds introduced
its first line of porcelain dolls under the DOLLSTONES line. The demand for
Boyds' first editions of porcelain dolls was high and the dolls sold out almost
immediately. This successful entry into the porcelain doll category extends the
Boyds brand name into the doll segment of the collectibles and giftware markets.
Boyds intends to further expand its Porcelain Doll line in 1999. Also in late
1997, Boyds introduced BEARWARE POTTERYWORKS under the BEARSTONES line.

Boyds introduced four new product lines for sale in 1998: CARVERS CHOICE,
GLASSSMITH ORNAMENTS, DESKANIMALS and LE BEARMOGE. CARVERS CHOICE is a new line
of resin figures, picture frames and related accessories based on hand-carved
wooden sculptures. These items capture the same whimsical spirit Boyds has
become known for in the giftware and collectibles industries. GLASSSMITH
ORNAMENTS is a new category consisting of three blown glass antique-style
ornaments that are based on some of Boyds' most popular themes. DESKANIMALS is a
new concept in resin sculptures containing multiple piece depictions of animals
that can be placed on a desk or other flat surface and appear to go under the
surface and reappear as though they were swimming in water. LE BEARMOGE is a new
category consisting of ornamental porcelain boxes. Each box is adorned with a
porcelain figurine based on popular Boyds' characters and contains a miniature
porcelain figurine.

Boyds continually evaluates new product line ideas and plans to regularly
introduce new product lines over the next several years. For fiscal 1999, Boyds'
emphasis is to further expand its resin and plush product lines that have been
successfully introduced in the last two years, including Porcelain Dolls, LE
BEARMOGE and MOHAIR BEARS. Also in fiscal 1999, Boyds plans to introduce the
following new lines:

- UPTOWN BEARS, upscale dressed bears

- PURRSTONES, a new line of resin figurines

- BABYBOYDS, plush animals targeted for the children's market

- THE BEATRICE COLLECTION-TM-, fine porcelain hinged boxes with designs
reproduced from original works of art made exclusively for Boyds

PRODUCT DESIGN AND DEVELOPMENT

Boyds has developed a process of designing and sourcing which has enabled it
to:

- consistently develop award-winning designs prized by collectors

- maintain demand for Boyds' products without compromising high quality
standards

- maintain high gross margins due to Boyds' established sourcing network

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<PAGE>
Although certain elements of Boyds' design process are proprietary, Boyds
typically

- researches the general giftware and collectibles markets to identify
specific product areas that are large or have the potential to grow due to
evolving consumer trends

- focuses on developing a specific niche within the identified product area

- develops several items that are tested in the marketplace

- tailors the product line to properly position it with retailers if market
reception is positive

The time-to-market for a new product within an existing line, from idea
generation to shipping, can be as short as five months, but typically takes one
year. New product line concepts normally take one to two years to fully develop
for market entry.

Boyds' in-house creative design team consists of seven full-time, salaried
design professionals and senior management. Once a design has been created,
Boyds, together with its buying agencies, works with outside artists and
sculptors, primarily in China, who are responsible for creating a prototype and
refining the product's appearance for review by Boyds. Boyds also works with its
buying agencies and manufacturers in order to ensure the product can be produced
at an acceptable cost per unit, without compromising quality, given a certain
level of production. A product will not be produced unless the Boyds formula for
high quality and affordability can be maintained.

Boyds' resin figurines are developed into designs and clay models by artists
and modelmakers overseas under the guidance and direction of Boyds' creative
design team. Whether designed and/or conceptualized in-house or externally,
Boyds strives for an overall "Boyds image" to achieve product consistency.

LICENSING OF BOYDS' IMAGES AND PRODUCT DESIGNS

Due to Boyds' popularity, it has begun to license its images for other
products including stationery, afghans, throw pillows, rubber stamps and
clothing. For example, Boyds currently licenses certain product images to
Interart Holding Corporation, a subsidiary of Hallmark Cards, to produce gift
cards, package wrap and other assorted paper items. Interart Holding
Corporation's Boyds line is expected to consist of over 150 SKUs; each SKU, or
Stock Keeping Unit, is a designation for a distinct product.

BOYDS' INTELLECTUAL PROPERTY
TRADEMARKS. Boyds has obtained 17 U.S. trademark registrations for
trademarks and logos related to its resin figurines and plush animals. These
registrations allow Boyds to use on an exclusive basis these trademarks and
logos in the United States in connection with its products. If Boyds continues
to use such trademarks and logos and makes timely filings with, and pays all
required fees to, the U.S. Patent and Trademark Office, its trademark
registrations can exist in perpetuity. Boyds also has common-law trademark
rights to the extent it uses unregistered names and logos on its various
products. The strength and scope of these rights is determined by the geographic
extent and duration of their use. Additionally, to the extent that the packaging
and overall visual impact of Boyds' products is inherently distinctive or has
acquired distinctiveness through sales in the marketplace, Boyds has proprietary
rights in such "trade dress" of its products.
COPYRIGHTS. Boyds has secured more than 300 copyright registrations for its
products with the U.S. Copyright Office. Boyds may enforce these rights in U.S.
courts with regard to infringements occurring in the United States and also, to
varying extents, in foreign jurisdictions with regard to infringements occurring
outside the United States. In addition, Boyds has copyrights in the original
expression contained in other products that it has created, whether or not those
copyrights have been registered. In all events, Boyds' copyright in its products
is limited in scope to the original, creative expression embodied in them and
does not extend to elements drawn from public sources or to functional

31
<PAGE>
elements. For all products created by or on behalf of Boyds since its founding
date, the U.S. copyright currently runs for a term of 95 years from the date of
their creation.

Notwithstanding Boyds' proprietary rights in its intellectual property,
Boyds remains subject to both infringement of its intellectual property and
claims of infringement by other parties. However, Boyds protects its
intellectual property rights, both through policing any potential infringement
by third parties and registering such rights, when appropriate, with applicable
government authorities.

SPECIALTY PRODUCTS FOR BOYDS' CORPORATE AND RETAIL PARTNERS

Boyds is pursuing corporate and retail partners as an expanded distribution
channel. These corporate arrangements provide the client with a customized or
co-branded product for exclusive distribution by the corporate partner. Each
product has the potential to enhance Boyds brand recognition while maintaining
the same degree of quality found in traditional Boyds products. For example,
Boyds produced co-branded plush ornaments of well-known animated characters
under an agreement with a large media conglomerate. Boyds believes this
relationship may result in the introduction of additional co-branded products in
the future. Boyds is also working with other major corporations in the
stationery, toy and entertainment industries to develop long-term co-branding
relationships for Boyds products. Boyds has also produced customized products
for Barnes & Noble and San Francisco Music Box stores, QVC and several of its
larger resin dealers.

SOURCING OF BOYDS' PRODUCTS

Boyds coordinates its production and cooperative development efforts
primarily through two buying agencies with whom it has established long-term
business relationships. These buying agencies perform a number of functions for
Boyds, including collaborating in its product design and development process,
identifying suitable manufacturers for its products and supervising its
manufacturers to assure the proper quality and timing of Boyds' orders. Each of
Boyds' two primary buying agencies is responsible for assisting Boyds in the
design and production of one of its two major product categories, resin
figurines and plush animals. Boyds and its plush animal buying agency have
collaborated for over 15 years while Boyds and its resin figurine buying agency
have collaborated since 1993, the first year in which Boyds' resin figurines
were offered. Boyds' two primary buying agencies, which contract with a number
of manufacturers, represent approximately 91% of its total imports.

Although Boyds believes that the loss of either of its two primary buying
agencies would have a short-term material adverse effect on its financial
condition and results of operations, it believes that alternative buying
agencies would be available in the long-term and such alternative buying
agencies would be able to work directly with Boyds' manufacturers.

In conjunction with Boyds' buying agencies, Boyds sources most of its
merchandise from a select group of 19 independently-owned manufacturers in
China, which allows Boyds to offer detailed, high-quality products at a low
cost.

Boyds believes that its relationships with its buying agencies and foreign
manufacturers have allowed Boyds to provide quality craftsmanship at a
relatively low cost. Boyds represents the vast majority of orders of both of its
primary buying agencies and the majority of orders of its manufacturers. Boyds
is therefore able to significantly influence the schedule, quality and timing of
its orders.

Boyds' domestic products are shipped by ocean freight to the United States
and then by truck to Boyds' 155,000 square-foot distribution center in
McSherrystown, Pennsylvania. Boyds ships the majority of its products to its
nationwide retailer network via United Parcel Service.

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<PAGE>

BOYDS' DISTRIBUTION NETWORK AND CUSTOMERS

Boyds' has a large national distribution network, which includes
approximately 19,950 independent retail gift and collectibles accounts, high-end
department stores and selected catalogue retailers, representing approximately
26,000 individual retail outlets. Boyds' products generally sell quickly, which
enhances store traffic and allows for substantial mark-ups by Boyds'
distributors.

The largest portion of Boyds' net sales are generated by a specially
selected resin dealer network of approximately 6,000 accounts which include card
and gift shops, country stores and specialty collectibles stores which are
authorized to carry Boyds' resin figurine products. Most resin figurine dealers
also carry Boyds' plush animals. These resin dealers accounted for approximately
69% of net product sales in fiscal 1998. Resin figurine dealers are selectively
chosen by Boyds and must meet annual performance criteria to retain dealership
status. There is currently a waiting list of over 5,500 retailers, consisting
primarily of Boyds' plush-only dealers, that have expressed interest in carrying
Boyds' resin figurines. In total, approximately 13,800 retail accounts, which
are not resin figurine dealers, carry Boyds' plush animals and other non-resin
products and accounted for approximately 17% of net product sales in fiscal
1998.

Boyds also sells both resin figurines and plush animals through
approximately 150 major accounts, including department stores, catalogue
retailers and QVC, a television and electronic retailer. Sales to these accounts
comprised approximately 15% of net product sales in fiscal 1998. No single
customer account represented more than 6% of net product sales in fiscal 1998.
The top ten accounts comprised approximately 17% of net product sales during the
same period.

To build dealer trust and loyalty and minimize dealer turnover, Boyds does
not sell to mass merchandisers or discount chains other than an occasional
disposal of obsolescent merchandise, which Boyds estimates to be less than 1% of
total inventory.

Boyds believes it has very low annual customer account turnover among its
resin dealers and normal turnover for its other dealers. Turnover among
non-resin dealers occurs primarily in small accounts, which become inactive due
to ownership changes, poor credit, or lack of commitment to Boyds' products.
Accounts which became inactive in fiscal 1998 represented approximately 2% of
Boyds' fiscal 1997 net sales. Boyds generally does not offer dating terms or
volume discounts.

PAW DEALERS

Boyds' nationwide resin figurine dealer network is divided into four major
categories, GOLD, SILVER and BRONZE PAW distinctions and other resin dealers,
which are primarily based upon the amount of merchandise ordered annually from
Boyds. Boyds encourages resin dealers to obtain the highest PAW qualification
because it affords them additional benefits including priority delivery of Boyds
products and special consideration when ordering limited editions, certain new
product offerings and items in particularly high demand. Each PAW dealer, among
other things, must consistently meet stringent credit criteria, designate a
Boyds in-store "specialist," offer pieces from each resin figurine line and a
significant portion of the plush animal lines of Boyds, actively solicit members
for Boyds' collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, and promote the
brand name by sponsoring at least one Boyds event annually.

THE LOYAL ORDER OF FRIENDS OF BOYDS

Boyds' collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, has gained
strong popularity among Boyds' growing customer base and helped strengthen
Boyds' brand-name recognition. Formed in July 1996 to further enhance consumer
awareness and loyalty, the club currently has approximately 120,000 paying
members.

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<PAGE>
Upon payment of the annual membership fee, which is currently $32.50,
members receive a special product kit typically containing a resin figurine, a
plush animal and a resin pin. These items are limited edition pieces, are not
available in stores and, taken together, would retail for more than the
membership fee. In addition, certain of Boyds' products are limited editions
offered exclusively to members.

SALES & MARKETING OF BOYDS' PRODUCTS

Boyds sends catalogues and promotional mailings to all retailers twice a
year for its spring and fall product offerings. Boyds generates its order volume
through its team of telemarketers and internal sales personnel, catalogue
mailings to its retailers and from trade show sales. Boyds leases showroom space
in Atlanta, Chicago, Dallas, Denver, Los Angeles and New York. Approximately 40%
of orders are taken between November and April, while approximately 60% of
orders are placed between May and October in anticipation of the holiday season.

Each major segment of Boyds' account base, including resin figurine dealers,
department stores, catalogue retailers and general accounts, is managed by a
different group of sales professionals. Boyds' showrooms, with the exception of
Chicago, are staffed with full-time employees.

All Boyds sales personnel are paid an annual base salary and a
performance-based bonus. Because Boyds does not generally rely on external
commissioned sales personnel, Boyds believes its sales expenses are lower than
its competitors of similar or larger size.

COMPETITION WITH PRODUCERS OF COLLECTIBLES, GIFTWARE AND HOME DECORATIVE
PRODUCTS

Boyds competes generally for the disposable income of consumers and, in
particular, with other producers of fine quality collectibles, specialty
giftware and home decorative accessory products. The collectibles area, in
particular, is affected by changing consumer tastes and interests. The giftware
and collectibles industries are highly competitive, with a large number of both
large and small participants. Boyds' competitors distribute their products
through independent gift retailers, department stores, mass merchandisers and
catalogue retailers or through direct response marketing. Boyds believes the
principal elements of competition in the giftware and collectibles industries
are product design and quality, product and brand name loyalty, product display
and price. Boyds believes its competitive position is enhanced by a variety of
factors, including the innovativeness, quality and enduring themes of Boyds'
products, its reputation among retailers and consumers, its in-house design
expertise, its sourcing and marketing capabilities and the pricing of its
products. Some of Boyds' competitors, however, are part of large, diversified
companies having greater financial resources and a wider range of products than
Boyds.

CURRENT EMPLOYEES AND HIRING PROGRAM

Boyds currently employs a total of 203 full time individuals, 182 of whom
are located in McSherrystown, Pennsylvania. Seven employees are located at
Boyds' showrooms. In addition, fourteen Boyds employees work at the office of
H.C. Accents & Associates, Inc., Boyds' wholly-owned subsidiary, which is
located in Illinois. All of these employees are non-union. Boyds also uses
contract labor to work at the various trade shows around the nation.

To better manage the anticipated growth in Boyds' product lines, Boyds has
embarked on a hiring program to supplement its existing staff with individuals
having specialized design, marketing and operational skills.

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<PAGE>
WAREHOUSING, DISTRIBUTION AND SHOWROOM FACILITIES

Boyds leases approximately 155,000 square feet of distribution and warehouse
space in McSherrystown, Pennsylvania. Boyds' existing distribution center
includes two loading docks, two automated conveyor systems and 130,000 square
feet of storage area. Boyds' lease expires in 2009. Boyds is in the process of
building an additional 54,000 square feet of warehouse space. Attached to the
warehouse area is Boyds' 12,000 square-foot corporate headquarters which is
subject to the same lease provisions. Boyds also leases office space for H.C.
Accents in Illinois and showroom space in Atlanta, Chicago, Dallas, Denver, Los
Angeles and New York. Boyds redesigned and upgraded its entire distribution
system in 1995 with the addition of physical equipment and computer hardware and
software to allow for continued growth of Boyds. Management anticipates that its
current facilities, after the current warehouse expansion is completed, should
be adequate for Boyds' planned growth needs for the next several years, and
vacant land is available on-site for additional expansion should it be
necessary.

DEVELOPMENT AND UPGRADES OF BOYDS' MANAGEMENT INFORMATION SYSTEMS

Boyds' management information systems have been developed through the
modification of off-the-shelf software programs to serve Boyds' current needs.
Boyds has recently upgraded its computer systems to aid in the management of
Boyds' newly automated warehouse system. Future upgrades will include a system
to assist the telemarketers with their accounts, the automation of the credit
approval system, the enhancement of the ordering systems and other improvements.
Boyds believes that its internal information systems are Year 2000 compliant.
See "Risk Factors--We May Be Adversely Affected By the Year 2000 Problem" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."

LEGAL PROCEEDINGS INVOLVING BOYDS

Boyds does not believe that there are any pending or threatened legal
proceedings that, if adversely determined, would have a material adverse effect
on Boyds.

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<PAGE>
MANAGEMENT

BOYDS' DIRECTORS AND EXECUTIVE OFFICERS

The bylaws of Boyds provide that the directors will be elected annually. All
directors of the Boyds hold office until the election and qualification of their
successors. Executive officers of Boyds are chosen by the board of directors of
Boyds and serve at its discretion. The following sets forth certain information
regarding the executive officers and directors of Boyds:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --------- ---------------------------------------------------------------
<S> <C> <C>
Gary M. Lowenthal......................... 50 Chairman and Chief Executive Officer
Robert T. Coccoluto....................... 56 President and Director
Christine L. Bell......................... 43 Chief Operating Officer and Controller
Elizabeth E. Smith........................ 53 Vice President of Product Development
Henry R. Kravis........................... 55 Director
George R. Roberts......................... 55 Director
Scott M. Stuart........................... 39 Director
Marc S. Lipschultz........................ 30 Director
Timothy Brady............................. 30 Director
</TABLE>

GARY M. LOWENTHAL has been a director and the chief executive officer since
founding Boyds with his wife, Justina, in 1979. Mr. Lowenthal oversees the
executive management of Boyds and collaborates in the design and marketing of
Boyds products.

ROBERT T. COCCOLUTO has been the president since December 1998 and a
director of Boyds since April 1998. Prior to his current role as president, Mr.
Coccoluto had been an outside strategic advisor to Boyds since September 1997.
He has also been the owner and president of Advanced Design Group LLC since
January 1995. Prior to such time, he was an officer of Department 56, Inc. from
December 1989 through December 1994, where he held various positions including
executive vice president, chief financial officer and director.

CHRISTINE L. BELL has been the chief operating officer and controller since
joining Boyds in 1992.

ELIZABETH E. SMITH has been the vice president of product development since
1996. Ms. Smith joined Boyds in 1990. Prior to her current role, Ms. Smith ran
the Company's import division and coordinated the product development process.

HENRY R. KRAVIS has been a director of Boyds since April 1998. He is a
managing member of KKR & Co. L.L.C., the limited liability company which serves
as the general partner of KKR. He is also a director of Accuride Corporation,
Amphenol Corporation, Borden, Inc., Bruno's, Inc., Evenflo Company, Inc., The
Gillette Company, IDEX Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Group, Inc., Newsquest Capital plc, Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food Markets, Inc., RELTEC
Corporation, Safeway Inc., Sotheby's Holdings Inc., Spalding Holdings
Corporation and World Color Press, Inc.

GEORGE R. ROBERTS has been a director of Boyds since April 1998. He is a
managing member of KKR & Co. L.L.C., the limited liability company which serves
as the general partner of KKR. He is also a director of Accuride Corporation,
Amphenol Corporation, Borden, Inc., Bruno's, Inc., Evenflo Company, Inc., IDEX
Corporation, KinderCare Learning Centers, Inc., KSL Recreation Group, Inc.,
Owens-Illinois, Inc., Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food
Markets, Inc., RELTEC Corporation, Safeway Inc., Spalding Holdings Corporation
and World Color Press, Inc.

SCOTT M. STUART has been a director of Boyds since April 1998. He is a
member of KKR & Co. L.L.C., the limited liability company which serves as the
general partner of KKR. He is also a director of Borden, Inc., KSL Recreation
Group, Inc., Newsquest Capital plc and World Color Press, Inc.

36
<PAGE>
MARC S. LIPSCHULTZ has been a director of Boyds since April 1998. He has
been an executive at KKR since 1995. Prior thereto, he was an investment banker
with Goldman, Sachs & Co. He is also a director of Amphenol Corporation, Evenflo
Company, Inc. and Spalding Holdings Corporation.

TIMOTHY BRADY has been a director of Boyds since January 1999. He has been
the executive producer and vice president of production of Yahoo! Inc. since
April 1995. Prior to such time, Mr. Brady was a product marketing manager with
Motorola, Inc. in Tokyo.

Messrs. Kravis and Roberts are first cousins.

The Board of Directors intends to appoint one additional director who is not
affiliated with Boyds or KKR during the one year period after the offering. The
additional director has not yet been identified.

COMMITTEES OF BOYDS' BOARD OF DIRECTORS

Following the offering, the Board of Directors of Boyds will have three
standing committees: (1) an audit committee, (2) a compensation committee and
(3) an executive committee. Messrs. Kravis, Stuart, Lipschultz and Lowenthal
comprise the executive committee of the Board of Directors. Currently, the audit
committee consists of Mr. Brady. Boyds intends to appoint to the audit committee
only persons who qualify as an "independent" director for purposes of the rules
and regulations of the NYSE. The Audit Committee will select and engage, on
behalf of Boyds, the independent public accountants to audit Boyds' annual
financial statements, and will review and approve the planned scope of the
annual audit. Currently, Messrs. Stuart and Lipschultz serve as members of the
compensation committee. The compensation committee will establish remuneration
levels for certain officers of Boyds and will perform such functions as provided
under Boyds' employee benefit programs and executive compensation programs.

COMPENSATION OF BOYDS' DIRECTORS

Directors of Boyds receive no remuneration for serving as directors. All
directors are reimbursed for reasonable expenses incurred to attend director and
committee meetings.

BENEFIT PLANS FOR BOYDS' EMPLOYEES

1998 STOCK OPTION PLAN

Boyds adopted the 1998 Option Plan for Key Employees of The Boyds
Collection, Ltd. (the "1998 Stock Option Plan") at the closing of the
recapitalization, which provides for the grant of Non-Qualified Stock Options to
purchase shares of authorized but unissued or reacquired shares of common stock,
subject to adjustment to reflect certain events such as stock dividends, stock
splits, recapitalizations, mergers or reorganizations of or by Boyds. The 1998
Stock Option Plan is intended to assist Boyds in attracting and retaining
employees of outstanding ability and to promote the identification of their
interests with those of the stockholders of Boyds. A total of 2,246,033 shares
of common stock have been authorized for issuance under the 1998 Stock Option
Plan. Unless sooner terminated by Boyds' board of directors, the 1998 Stock
Option Plan will expire in April 2008. Such termination will not affect the
validity of any grant outstanding on the date of termination.

The compensation committee of the board of directors administers the 1998
Stock Option Plan, including, without limitation, the determination of the
employees to whom grants will be made, the number of shares of common stock
subject to each grant, and the various terms of such grants, including the
period for vesting. The compensation committee of the board of directors may
from time to time amend the terms of any grant, but, except for adjustments made
upon a change in the common stock of Boyds by reason of a stock split, spin-off,
stock dividend, stock combination or reclassification, recapitalization,
reorganization, consolidation, change of control, or similar event, such action
shall not

37
<PAGE>

adversely affect the rights of any participant under the 1998 Stock Option Plan
with respect to the options without such participant's consent. The board of
directors retains the right to amend, suspend or terminate the 1998 Stock Option
Plan.

LIMITATIONS ON LIABILITY OF BOYDS' DIRECTORS AND OFFICERS AND INDEMNIFICATION BY
BOYDS

- to the extent that it is proved that the director or officer actually
received an improper benefit or profit

- if a judgment or other financial adjudication is entered in a proceeding
based on a finding that the director's or officer's action, or failure to
act, was the result of active and deliberate dishonesty and was material
to the cause of action adjudicated in such proceeding

These provisions also do not affect the ability of Boyds or its stockholders
to obtain equitable relief, such as an injunction or rescission.

- the act or omission of the director of officer was material to the matter
giving rise to such proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty

- the director or officer actually received an improper benefit in money,
property or services

- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the action or omission was unlawful

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Boyds
pursuant to the foregoing provisions, Boyds has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

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<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the compensation awarded or paid to, or
earned by, the chief executive officer of Boyds and Boyds' other three executive
officers (the "Named Executive Officers") during fiscal 1998:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
SECURITIES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)
- ----------------------------------------------------------------------------- ----------- --------- -------------
<S> <C> <C> <C>
Gary M. Lowenthal............................................................ 220,800 -- 44,921
Chief Executive Officer

Robert T. Coccoluto (1)...................................................... -- -- 381,826
President

Christine L. Bell............................................................ 122,229 1,815,000 --
Chief Operating Officer and Controller

Elizabeth E. Smith........................................................... 81,486 1,026,000 --
Vice President of Product Development
</TABLE>

- ------------------------------

(1) Mr. Coccoluto became an employee of the Company on December 31, 1998 and
will be paid a base salary of $450,000 for fiscal 1999.

During fiscal 1998, Boyds did not pay any other forms of compensation,
whether annual, long-term or otherwise, to its Named Executive Officers.

STOCK OPTION GRANTS IN FISCAL 1998

The following table sets forth information concerning individual grants of
stock options made by Boyds during fiscal 1998 to each of the Named Executive
Officers. All of these options, which were granted pursuant to the 1998 Stock
Option Plan, were non-qualified, were granted at exercise prices not less than
fair value on the date of grant and have a term of ten years. Any outstanding
options will become immediately exercisable upon a change of control of Boyds.
The stock options expiring in July 2008 vested immediately upon their granting,
and the options expiring in December 2008 vest ratably over a five year period.
We recommend caution in interpreting the financial significance of the figures
representing the potential realizable value of the stock options. They are
calculated by multiplying the number of options granted by the difference
between a future hypothetical stock price and the option exercise price and are
shown pursuant to rules of the Securities and Exchange Commission. They assume
the fair value of common stock, which was $4.45 at the date of issuance,
appreciates 5% or 10% each year, compounded annually, for ten years (the life of
each option). They are not intended to forecast possible future appreciation, if
any, of such stock price or to establish a present value of options. Also, if
appreciation does occur at the 5% or 10% per year rate, the amounts shown would
not be realized by the recipients until the year 2008. Depending on inflation
rates, these amounts may be worth significantly less in 2008, in real terms,
than their value today.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
---------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN 1998 ($/SHARE) DATE 5% 10%
- -------------------------------------- ----------- ----------------- ------------- ----------------- --------- ---------
Gary M. Lowenthal..................... 44,921 4% $ 4.45 July 21, 2008 $ 125,779 $ 318,748
Robert T. Coccoluto................... 44,921 4% 4.45 July 21, 2008 125,779 318,748
336,905 30% 13.36 December 31, 2008 0 0
</TABLE>

39
<PAGE>

RELATIONSHIPS AND TRANSACTIONS RELATED TO BOYDS

Affiliates of Kohlberg Kravis Roberts & Co. at February 23, 1999
beneficially owned approximately 80% of Boyds' outstanding shares of common
stock on a fully diluted basis, and after giving effect to the offering will own
approximately 56% on a fully diluted basis. Accordingly, affiliates of KKR will
be able to elect the entire board of directors of Boyds, control the management
and policies of Boyds and, in general, determine without the consent of Boyds'
other stockholders the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of Boyds' assets. Affiliates of KKR
will also be able to prevent or cause a change in control of Boyds and will be
able to amend Boyds' bylaws at any time. Shares of common stock which are owned
beneficially by KKR 1996 GP L.L.C. and KKR Associates, L.P. are currently held
by Bear Acquisition. After consummation of the liquidation of Bear Acquisition
and prior to the consummation of the offering, shares of common stock which are
owned beneficially by KKR 1996 GP L.L.C. and KKR Associates will be held
directly by the KKR Partnerships rather than Bear Acquisition. The managing
members of KKR 1996 GP L.L.C. are Messrs. Henry R. Kravis and George R. Roberts
and the other members of which are Messrs. Paul E. Raether, Michael W.
Michelson, James H. Greene, Jr., Michael T. Tokarz, Clifton S. Robbins, Edward
A. Gilhuly, Perry Golkin, Scott M. Stuart and Robert I. MacDonnell. The general
partners of KKR Associates are the same individuals who are the members of KKR
1996 GP L.L.C. Messrs. Kravis, Roberts and Stuart are also directors of Boyds,
as is Marc S. Lipschultz, who is a limited partner of KKR Associates and an
executive of KKR.

KKR received a cash fee of $6.0 million from Boyds for negotiating the
recapitalization and arranging the related financing, plus the reimbursement of
its associated expenses. In addition, KKR has agreed to render management,
consulting and financial services to Boyds for an annual fee of $375,000 plus
expenses, payable quarterly. During fiscal 1998, Boyds paid $251,367 to KKR for
such services and for reimbursement of expenses.

In connection with the recapitalization, Bear Acquisition entered into a
registration rights agreement, dated April 21, 1998 with Boyds. Pursuant to such
agreement, Bear Acquisition has the right to require Boyds to register under the
Securities Act of 1933 shares of common stock held by Bear Acquisition. In
addition, the registration rights agreement also provides the KKR Partnerships
with certain piggyback registration rights. The registration rights agreement
provides, among other things, that Boyds will pay all expenses in connection
with the first ten demand registrations requested by Bear Acquisition and in
connection with any registration in which Bear Acquisition participates through
piggyback registration rights granted under such agreement. After the
liquidation of Bear Acquisition the KKR Partnerships will have all of the rights
and obligations of Bear Acquisition under the registration rights agreement.

Prior to the recapitalization, all shares of Boyds' common stock were
beneficially owned by Gary and Justina Lowenthal, a portion of which were
redeemed pursuant to the recapitalization. In connection with the
recapitalization, Boyds and Mr. Lowenthal entered into a registration rights
agreement granting Mr. Lowenthal piggyback registration rights with respect to
shares of common stock currently owned by him.

Advanced Design Group LLC has in the past rendered strategic consulting
services to Boyds. Robert T. Coccoluto, who is the president and a director of
Boyds, is owner and president of Advanced Design Group LLC. In addition, in
connection with the recapitalization, Mr. Coccoluto received $1.7 million in
payment for advisory services rendered to Boyds. After the offering, Boyds does
not expect that Advanced Design Group LLC will render any services to Boyds. See
"Management--Boyds' Directors and Executive Officers."

DLJ Fund Investment Partners II, L.P., an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation, at February 23, 1999 owned approximately 1% of
the common stock of Bear Acquisition. Such shares of common stock were purchased
from Bear Acquisition immediately after the closing of the recapitalization. In
addition, DLJ has an indirect interest, through an investment by DLJ Fund
Investment Partners II, L.P. in KKR Partners II, L.P., of approximately 1% of
the common stock of Bear Acquisition.

Boyds believes that the material terms of each of the transactions described
above are no more favorable than those that would have been agreed to by third
parties on an arm's length basis.

40
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of Boyds' common stock as of February 23, 1999 by each of the
following:

- each person who is known by Boyds to beneficially own more than 5% of
Boyds' common stock

- each of Boyds' directors

- each of the executive officers of Boyds

- all directors and executive officers as a group

- each selling stockholder

Unless otherwise indicated, the address of each person named in the table
below is The Boyds Collection, Ltd., 350 South Street, McSherrystown,
Pennsylvania 17344. The amounts and percentage of common stock beneficially
owned are reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of securities.
Under the rules of the Commission, a person is deemed to be a "beneficial owner"
of a security if that person has or shares "voting power," which includes the
power to vote or to direct the voting of such security, or "investment power,"
which includes the power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which that person has a right to acquire beneficial ownership within 60 days.
Under these rules, more than one person may be deemed a beneficial owner of the
same securities and a person may be deemed to be a beneficial owner of
securities as to which such person has no economic interest. The information set
forth in the following table (1) assumes that the liquidation of Bear
Acquisition has been consummated and the over-allotment option by the
underwriters has not been exercised and (2) excludes any shares purchased in the
offering by the respective beneficial owner:

<TABLE>
<CAPTION>
PERCENT OF TOTAL
--------------------------------------
<S> <C> <C> <C> <C>
SHARES SHARES TO BE
BENEFICIALLY SOLD PERCENT AFTER
NAME AND ADDRESS OWNED IN OFFERING PERCENT BEFORE OFFERING OFFERING
- -------------------------------------- ----------------- ---------------- ----------------------- -------------
KKR 1996 GP L.L.C. (1)................ 39,558,031 6,461,071 74.8% 53.3%
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Strata LLC (2)........................ 1,768,976 288,929 3.3 2.4
c/oKohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
The GJL L.L.C. (3).................... 4,492,066 -- 8.5 7.2

Gary M. Lowenthal..................... 5,682,463 -- 10.8 9.2
Robert T. Coccoluto................... 112,302 -- * *
Henry R. Kravis....................... 67,381 -- * *
George R. Roberts..................... 67,381 -- * *
Scott M. Stuart....................... 67,381 -- * *
Marc S. Lipschultz (4)................ 67,381 -- * *
Timothy Brady......................... -- -- -- --
Christine L. Bell..................... 212,250 -- * *
Elizabeth E. Smith.................... 121,286 -- * *
All officers and directors as a group
(11 individuals).................... 6,458,468 -- 12.2 10.4
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

41
<PAGE>
(FOOTNOTES FROM PRECEDING PAGE)

- --------------------------

* Percentage of shares of common stock beneficially owned does not exceed one
percent.

(1) Shares of common stock shown as beneficially owned by KKR 1996 GP L.L.C. are
currently held by Bear Acquisition. After consummation of the liquidation of
Bear Acquisition and prior to the consummation of the offering, all of the
shares of common stock shown as beneficially owned by KKR 1996 GP L.L.C.
will be held directly by KKR 1996 Fund L.P. KKR 1996 GP L.L.C. is the sole
general partner of KKR Associates 1996, L.P., which is the sole general
partner of KKR 1996 Fund L.P. KKR 1996 GP L.L.C. is a limited liability
company, the managing members of which are Messrs. Henry R. Kravis and
George R. Roberts, and the other members of which are Messrs. Paul E.
Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz,
Clifton S. Robbins, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and
Robert I. MacDonnell. Messrs. Kravis, Roberts and Stuart are directors of
Boyds. Each of the individuals who are the members of KKR 1996 GP L.L.C. may
be deemed to share beneficial ownership of any shares beneficially owned by
KKR 1996 GP L.L.C. Each of such individuals disclaims beneficial ownership.

(2) Shares of common stock shown as beneficially owned by Strata LLC are
currently held by Bear Acquisition. After consummation of the liquidation of
Bear Acquisition and prior to the consummation of the offering, all of the
shares of common stock shown as beneficially owned by Strata LLC will be
held directly by KKR Partners II, L.P. Strata LLC is the sole general
partner of KKR Associates (Strata) L.P., which is the sole general partner
of KKR Partners II, L.P. Strata LLC is a limited liability company, the
members of which are Messrs. Henry R. Kravis, George S. Roberts, Paul E.
Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz,
Clifton S. Robbins, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and
Robert I. MacDonnell. Messrs. Kravis, Roberts and Stuart are directors of
Boyds. Each of the individuals who are the members of Strata LLC may be
deemed to share beneficial ownership of any shares beneficially owned by
Strata LLC. Each of such individuals disclaims beneficial ownership.

(3) Gary Lowenthal is the sole managing member of The GJL L.L.C., the other
member of which is Justina Lowenthal.

(4) Mr. Marc S. Lipschultz is a director of Boyds and is also an executive of
KKR and a limited partner of KKR Associates (Strata) L.P.. Mr. Lipschultz
disclaims beneficial ownership of any shares beneficially owned by KKR
Associates (Strata) L.P..

42
<PAGE>

DESCRIPTION OF LONG-TERM INDEBTEDNESS

THE CREDIT FACILITY

In April 1998, in connection with the recapitalization, Boyds entered into
the credit facility with a syndicate of banks and other financial institutions
led by DLJ Capital Funding, Inc., as arranger and syndication agent, Fleet
National Bank as administrative agent and The Fuji Bank, Limited, New York
Branch as documentation agent. The credit facility consists of the $325.0
million of loans under the term loan facility and the $40.0 million revolving
credit facility. The term loans are comprised of the $100.0 million Term Loan A,
which matures on April 21, 2005, and the $225.0 million Term Loan B, which
matures on April 21, 2006.

All of the term loans and the loans under the revolving credit facility bear
interest, at Boyds' option, at either of the following rates:

- the administrative agent's alternative base rate plus

- in the case of Term Loan A and loans under the revolving credit
facility, a debt to EBITDA-dependent rate ranging from 0.00% to 1.00%
per year

- in the case of Term Loan B, a debt to EBITDA-dependent rate ranging
from 0.75% to 1.25% per year

- a LIBOR rate plus

- in the case of Term Loan A and loans under the revolving credit
facility, a debt to EBITDA-dependent rate ranging from 0.625% to
2.25% per year

- in the case of Term Loan B, a debt to EBITDA-dependent rate ranging
from 2.00% to 2.50% per year

At December 31, 1998, the weighted average interest rate on the term loans
was 7.38%.

Boyds also pays a commitment fee calculated at a debt to EBITDA-dependent
rate ranging from 0.25% to 0.50% per year of the available daily average unused
commitment under the credit facility. Such fee is payable quarterly in arrears
and upon the final maturity of the revolving credit facility.

In addition, Boyds pays a letter of credit fee calculated at the rate per
year of the face amount of each letter of credit then applicable to loans under
the revolving credit facility bearing interest based on LIBOR, less a fronting
fee calculated at a rate equal to 0.125% per year of the face amount of each
letter of credit. Such fees are payable quarterly in arrears. In addition, Boyds
will pay customary transaction charges in connection with any letters of credit.

Beginning April 21, 2000, term loans under the credit facility will amortize
in annual installments in the following percentages of aggregate amounts
outstanding:

<TABLE>
<CAPTION>
DATE TERM LOAN A TERM LOAN B
- ------------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
April 21, 2000....................................................................... 7% 1%
April 21, 2001....................................................................... 11 1
April 21, 2002....................................................................... 14 1
April 21, 2003....................................................................... 17 1
April 21, 2004....................................................................... 23 1
April 21, 2005....................................................................... 28 1
April 21, 2006....................................................................... -- 94
</TABLE>

The term loans will be subject to mandatory prepayment with the proceeds of
certain asset sales and on an annual basis with 50% of Boyds' excess cash flow
if the ratio of Boyds' total debt to EBITDA is greater than 4.0:1.0 on the last
day of any fiscal year.

43
<PAGE>
The credit facility contains covenants and provisions that restrict, among
other things, Boyds' ability to change its business, declare dividends, grant
liens, incur additional indebtedness, exceed a leverage ratio, fall below a
minimum interest coverage ratio and make certain capital expenditures. Boyds was
in compliance with these covenants as of December 31, 1998. The credit facility
is secured by a pledge of the limited partnership interests of, and is
guaranteed by, Boyds L.P.

9% SENIOR SUBORDINATED NOTES DUE 2008

On April 21, 1998, Boyds issued $165.0 million aggregate principal amount of
the notes. The notes mature on May 15, 2008 and are general unsecured
obligations of Boyds, subordinated in right of payment to all existing and
future indebtedness of Boyds that is not expressly subordinated to, or made
equal with, the notes.

The notes may be redeemed at any time, in whole or in part, on or after May
15, 2003 at a redemption price equal to 104.5% of the principal amount of the
notes in the first year and declining yearly to par at May 15, 2006, plus
accrued and unpaid interest and liquidated damages, if any, to the date of
redemption. On or prior to May 15, 2001, Boyds may also redeem up to 40% of the
aggregate principal amount of the notes, originally issued at a redemption price
equal to 109% of the aggregate principal amount of the notes plus accrued and
unpaid interest and liquidated damages, if any, to the date of redemption, with
the proceeds of one or more equity offerings of Boyds. Boyds will use a portion
of the proceeds from the offering to redeem $66.0 million aggregate principal
amount of the notes. See "Use of Proceeds."

Upon the occurrence of a change of control, Boyds has the option, at any
time on or prior to May 15, 2003, to redeem the notes, in whole but not in part,
at a redemption price equal to 100% of the aggregate principal amount of the
notes plus a premium and accrued and unpaid interest and liquidated damages, if
any, on the notes. If a change of control occurs and Boyds does not so redeem
the notes or if the change of control occurs after May 15, 2003, Boyds will be
required to make an offer to repurchase all notes properly tendered at a price
equal to 101% of the principal amount plus accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase.

The indenture governing the notes contains covenants that, among other
things, limit the ability of Boyds and its subsidiaries to:

- incur additional indebtedness or liens

- repay other indebtedness

- pay dividends or make other distributions

- repurchase equity interests

- consummate asset sales

- enter into transactions with affiliates

- enter into sale and leaseback transactions

- merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the
assets of Boyds or its subsidiaries

- enter into guarantees of indebtedness

Pursuant to a registration rights agreement entered into in connection with
the issuance of the notes, Boyds agreed to provide the holders of the notes with
registration rights and in the event that Boyds fails to satisfy such
registration obligations, Boyds will be obligated to pay liquidated damages to
such holders.

44
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

The charter of Boyds authorizes 100,000,000 shares of capital stock, par
value $0.0001 per share, all of which is initially classified as common stock,
par value $0.0001 per share. The board of directors of Boyds is authorized to
reclassify any unissued portion of the authorized shares of capital stock to
provide for the issuance of shares in other classes or series, including
preferred stock in one or more series, to establish the number of shares in each
class or series and to fix the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such class or series. As of February 23, 1999, the
outstanding common stock of Boyds consisted of 52,588,246 shares of common stock
held by 8 stockholders of record. The following summaries of certain provisions
of the capital stock do not purport to be complete and are subject to, and
qualified in their entirety by, the provisions of the charter and bylaws of
Boyds, which are included as exhibits to the registration statement of which
this prospectus forms a part, and by applicable law. See "Selected Provisions of
Maryland Law and of Boyds' Charter and Bylaws."

COMMON STOCK

Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders of Boyds, and do not have cumulative voting
rights in the election of directors. The holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the board of directors of Boyds out of funds legally available for that purpose,
subject to preferences that may be applicable to any outstanding preferred stock
and any other provisions of Boyds' charter. Boyds currently intends to retain
any future earnings for use in its business and does not anticipate paying any
cash dividends in the foreseeable future. The declaration and payment in the
future of any cash dividends will be at the election of Boyds' board of
directors and will depend upon the earnings, capital requirements and financial
position of Boyds, future loan covenants, general economic conditions and other
pertinent factors. Holders of common stock have no preemptive or other rights to
subscribe for additional shares. No shares of common stock are subject to
redemption or a sinking fund. In the event of any liquidation, dissolution or
winding up of Boyds, after payment of the debts and other liabilities of Boyds,
and subject to the rights of holders of shares of preferred stock, holders of
common stock are entitled to share pro rata in any distribution to the
stockholders. All of the outstanding shares of common stock are, and the shares
offered by this prospectus will be, fully paid and nonassessable. See "Risk
Factors--Because We Are Controlled By KKR, Other Stockholders Have a Reduced
Ability to Influence Our Business" and "Relationships and Transactions Related
to Boyds."

ADDITIONAL CLASSES OF STOCK

Additional classes of stock, including preferred stock, may be issued from
time to time, in one or more series, as authorized by the board of directors of
Boyds. Prior to issuance of shares of each series, the board of directors of
Boyds is required by the Maryland General Corporation Law and Boyds' charter to
set for each such series the preferences, conversion or other rights, voting
powers, restrictions, limitations as to the dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted under
Maryland law. The board of directors of Boyds could authorize the issuance of
capital stock with terms and conditions which could have the effect of
discouraging a takeover or other transaction which holders of some, or a
majority, of the common stock might believe to be in their best interests or in
which holders of some, or a majority, of the common stock might receive a
premium for their common stock over the then market price of such common stock.
As of the date of this prospectus, no such additional classes of stock are
outstanding and Boyds has no present plans to issue any such stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock will be The Bank of
New York, a New York banking corporation.

45
<PAGE>
SELECTED PROVISIONS OF MARYLAND LAW
AND OF BOYDS' CHARTER AND BYLAWS

The following paragraphs summarize selected provisions of the Maryland
General Corporation Law and Boyds' charter and bylaws. The summary does not
purport to be complete and is subject to and qualified in its entirety by
reference to Maryland law and Boyds' charter and bylaws for complete
information.

STOCKHOLDER PROPOSALS

For any stockholder proposal to be presented in connection with an annual
meeting of stockholders of Boyds, including any proposal relating to the
nomination of a director to be elected to Boyds' board of directors, the
stockholder must submit written notice to Boyds generally not less than 60 nor
more than 90 days in advance of the first anniversary of the preceding year's
annual meeting.

BUSINESS COMBINATIONS

The MGCL prohibits certain "business combinations," which include a merger,
consolidation, share exchange, or an asset transfer or issuance or
reclassification of equity securities, between a Maryland corporation and an
"Interested Stockholder." Interested Stockholders are either of the following
types of persons:

- anyone who beneficially owns 10% or more of the voting power of the
corporation's shares

- an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question, was an Interested
Stockholder or an affiliate or an associate thereof

Such business combinations are prohibited for five years after the most recent
date on which the Interested Stockholder became an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of such corporation and approved by the affirmative vote of at least
both of the following:

- 80% of the votes entitled to be cast by all holders of voting shares of
the corporation

- 66 2/3% of the votes entitled to be cast by all holders of voting shares
of the corporation other than voting shares held by the Interested
Stockholder or an affiliate or associate of the Interested Stockholder,
with whom the business combination is to be effected

However, such votes are not required if the corporation's stockholders receive a
statutorily-defined minimum price for their shares and the consideration is
received in cash or in the same form previously paid by the Interested
Stockholder for its shares.

The business combination statute does not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. A Maryland corporation may adopt an amendment to its
charter electing not to be subject to the special voting requirements of the
foregoing legislation. Any such amendment would have to be approved by the
affirmative vote of at least 80% of the votes entitled to be cast by all holders
of outstanding shares of voting stock and 66 2/3% of the votes entitled to be
case by holders of outstanding shares of voting stock who are not Interested
Stockholders. Although Boyds has not adopted such an amendment to its charter,
the board of directors of Boyds approved the recapitalization and the
acquisition of common stock by the KKR Partnerships.

CONTROL SHARE ACQUISITIONS

The MGCL provides that the "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the

46
<PAGE>

votes entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by the corporation's officers or the corporation's directors who are
employees of the corporation. Control shares are shares of voting stock which,
if aggregated with all other shares of stock previously acquired by such a
person, would entitled the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (a) 20% or more
but less than 33 1/3%, (b) 33 1/3% or more but less than a majority, or (c) a
majority of all voting power. Control shares do not include shares of stock an
acquiring person is entitled to vote as a result of having previously obtained
stockholder approval. A control share acquisition generally means the
acquisitions of, ownership of or the power to direct the exercise of voting
power with respect to, control shares.

A person who has made or proposes to make a "control share acquisition,"
upon satisfaction of conditions, including an undertaking to pay expenses, may
compel the board of directors to call a special meeting of stockholders to be
held within 50 days of demand therefore to consider the voting rights of the
shares. If no request for a meeting is made, the corporation may itself present
the question at any stockholders' meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as permitted by the statute, then
the corporation generally may redeem any or all of the control shares, except
those for which voting rights have previously been approved, for fair value
determined, without regard to voting rights, as of the date of the last control
share acquisition or of any meeting of stockholders at which the voting rights
of such shares are considered and not approved. If voting rights for "control
shares" are approved at a stockholders' meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the stock as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a "control share acquisition."

The control share acquisition statute does not apply to stock acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions previously approved or exempted by a provision
in the charter or bylaws of the corporation. The Boyds charter does not contain
such a provision, but the Boyds bylaws contain a provision exempting all shares
of Boyds' capital stock from the control share acquisition statute to the
fullest extent permitted by Maryland law.

47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

GENERAL

Upon the consummation of the offering, Boyds will have 61,838,246 shares of
common stock issued and outstanding. All of the 16,000,000 shares of common
stock to be sold in the offering and any shares sold upon exercise of the
underwriters' over-allotment option will be freely tradable without restrictions
or further registration under the Securities Act of 1933, except for any shares
purchased by an "affiliate" of Boyds as that term is defined in Rule 144 under
the Securities Act, which will be subject to the resale limitations of Rule 144.
All of the currently outstanding shares of common stock are "restricted
securities" as that term is defined in Rule 144 and are also subject to
restrictions on disposition. Restricted securities may be sold in the public
market only if registered or if qualified for an exemption from registration
under Rule 144 or Rule 701 under the Securities Act. Sales of restricted
securities in the public market, or the availability of such shares for sale,
could have an adverse effect on the price of the common stock. See "Risk
Factors--There has Been No Prior Market for Our Common Stock, and the Market
Price of the Shares Will Fluctuate," "--Existing Stockholders May Sell Their
Common Stock" and "Dilution."

REGISTRATION RIGHTS

Boyds and Bear Acquisition have entered into the registration rights
agreement, pursuant to which Boyds has granted to Bear Acquisition demand rights
to cause Boyds to file a registration statement under the Securities Act
covering resales of all shares of common stock held by Bear Acquisition, and to
cause such registration statement to become effective. The registration rights
agreement also grants "piggyback" registration rights permitting Bear
Acquisition to include its registrable securities in a registration of
securities by Boyds. Boyds is obligated to pay the expenses of such
registrations. After the liquidation of Bear Acquisition, the KKR Partnerships
will have all of the rights and obligations of Bear Acquisition under the
registration rights agreement.

In addition, pursuant to stockholder agreements, Boyds has granted
"piggyback" registration rights to (1) substantially all of its employees and
directors, including Gary M. Lowenthal, that have purchased shares of common
stock and/or that have been awarded options to purchase shares of common stock
and (2) DLJ Fund Investment Partners II, L.P. Such registration rights are
exercisable only upon registration by the company of shares of common stock held
by Bear Acquisition. The holders of common stock entitled to such registration
rights are entitled to notice of any proposal to register shares held by Bear
Acquisition and to include their shares in such registration, subject to
restrictions including the right of a managing underwriter participating in an
offering to limit the number of shares included in such registration. Boyds is
obligated to pay the expenses of such piggyback registrations. See
"Relationships and Transactions Related to Boyds."

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of either
of the following:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering

- the average weekly trading volume of the common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale

Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about Boyds.

48
<PAGE>
RULE 144(K)

Under Rule 144(k), a person who is not deemed to have been one of Boyds'
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering. The sale of such shares, or the perception that
sales will be made, could adversely effect the price of Boyds' common stock
after the offering because a greater supply of shares would be, or would be
perceived to be, available for sale in the public market.

Each of Boyds, its executive officers and directors and the selling
stockholders has agreed that, for a period of 180 days from the date of this
prospectus, they will not, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation do either of the following:

- offer, pledge, sell, contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock
or any securities convertible into or exercisable or exchangeable for
common stock

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of the common
stock

Either of the foregoing transaction restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise. At February 23, 1999 these
stockholders owned in the aggregate 52,052,938 shares of common stock. In
addition, during such period, Boyds has agreed not to file any registration
statement with respect to, and each of its executive officers and directors and
the selling stockholders, has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any
securities convertible into or exercisable for common stock without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation. See
"Underwriters."

49
<PAGE>
UNDERWRITERS

Subject to the terms and conditions contained in an underwriting agreement,
dated , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, have severally agreed to purchase from Boyds and
the selling stockholders the number of shares set forth opposite their names
below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES
------------
<S> <C>
Underwriters:
Donaldson, Lufkin & Jenrette Securities Corporation...............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................................

------------
Total............................................................................................. 16,000,000
------------
------------
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of legal matters by their counsel and to
customary conditions, including the effectiveness of the registration statement,
the continuing correctness of the representations of Boyds and the selling
stockholders, the receipt of a "comfort letter" from Boyds' accountants, the
listing of the common stock on the NYSE and no occurrence of an event that would
have a material adverse effect on Boyds. The underwriters are obligated to
purchase and accept delivery of all the shares, other than those covered by the
over-allotment option described below, if they purchase any of the shares.

The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to dealers at the public offering price less a
concession not in excess of $ per share. The underwriters may allow, and such
dealers may re-allow, a concession not in excess of $ per share on sales to
other dealers. After the initial offering of the shares to the public, the
representatives of the underwriters may change the public offering price and
such concessions. The underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority.

DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in the offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJDIRECT Inc. for sale to its
brokerage account holders.

50
<PAGE>
The following table shows the underwriting fees to be paid to the
underwriters by Boyds and the selling stockholders in connection with this
offering. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of common stock.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
------------- -------------
<S> <C> <C>
Boyds:
Per share........................................................ $ $
Total............................................................ $ $
Selling Stockholders:
Per share........................................................ $ $
Total............................................................ $ $
</TABLE>

The selling stockholders have granted to the underwriters an option,
exercisable for 30 days from the date of the underwriting agreement, to purchase
up to 2,400,000 additional shares at the public offering price less the
underwriting fees. Boyds has not granted the underwriters any option to purchase
additional shares. The underwriters may exercise such option solely to cover
over-allotments, if any, made in connection with this offering. To the extent
that the underwriters exercise such option, each underwriter will become
obligated, subject to conditions, to purchase a number of additional shares
approximately proportionate to such underwriter's initial purchase commitment.
Boyds estimates its expenses relating to the offering to be $ .

Boyds, the selling stockholders and the underwriters have agreed to
indemnify each other against liabilities, including liabilities under the
Securities Act of 1933.

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock

Either of the foregoing transaction restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise. In addition, during such period,
Boyds has agreed not to file any registration statement with respect to, and
each of its executive officers and directors and the selling stockholders, has
agreed not to make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any securities convertible into or
exercisable for common stock without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation.

At Boyds' request, the underwriters have reserved up to five percent of the
shares offered by this prospectus for sale at the initial public offering price
to Boyds' employees, officers and directors and other individuals associated
with Boyds and members of their families. The number of shares of common stock
available for sale to the general public will be reduced to the extent these
individuals purchase or confirm for purchase, orally or in writing, such
reserved shares. Any reserved shares not purchased or confirmed for purchase
will be offered by the underwriters to the general public on the same basis as
the other shares offered by this prospectus.

Application has been made to list the common stock on the New York Stock
Exchange under the symbol "FOB." In order to meet the requirements for listing
the common stock on the NYSE, the

51
<PAGE>
underwriters have undertaken to sell lots of 100 or more shares to a minimum of
2,000 beneficial owners.

Other than in the United States, no action has been taken by Boyds, the
selling stockholders or the underwriters that would permit a public offering of
the shares of common stock included in this offering in any jurisdiction where
action for that purpose is required. The shares included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisement in connection with the offer and sale
of any such shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in this offering in any jurisdiction where that
would not be permitted or legal.

Donaldson, Lufkin & Jenrette Securities Corporation or its affiliates have
provided and may in the future provide investment banking or other financial
advisory services to KKR and its affiliates and/or to Boyds and its affiliates
in the ordinary course of business, for which they have received and are
expected to receive customary fees and expenses. The credit facility was
provided by a group of banks led by DLJ Capital Funding, Inc., an affiliate of
Donaldson, Lufkin & Jenrette Securities Corporation. Donaldson Lufkin & Jenrette
Securities Corporation was the initial purchaser of the notes issued by Boyds in
connection with the recapitalization. See "Relationships and Transactions
Related to Boyds" and "Description of Long-term Indebtedness."

STABILIZATION

In connection with this offering, any of the underwriters may decide to
engage in transactions that stabilize, maintain or otherwise affect the price of
the common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of common stock in the open market to cover syndicate short
positions or to stabilize the price of the common stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members if
Donaldson, Lufkin & Jenrette Securities Corporation repurchases previously
distributed common stock in syndicate covering transactions, in stabilizing
transactions or otherwise or if Donaldson, Lufkin & Jenrette Securities
Corporation receives a report that indicates that the clients of such syndicate
members have "flipped" the common stock. These activities may stabilize or
maintain the market price of the common stock above independent market levels.
The underwriters are not required to engage in these activities and may end any
of these activities at any time.

PRICING OF THE OFFERING

Prior to the offering, there has been no established market for the common
stock. The initial public offering price for the shares of common stock offered
by this prospectus will be determined by negotiation among Boyds, the selling
stockholders and the representatives of the underwriters. The factors to be
considered in determining the initial public offering price include:

- the history of and the prospects for the industry in which Boyds competes

- the past and present operations of Boyds

- the historical results of operations of Boyds

- the prospects for future earnings of Boyds

- the recent market prices of securities of generally comparable companies

- the general conditions of the securities market at the time of the
offering

52
<PAGE>
LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for Boyds by Simpson Thacher & Bartlett, New York, New York and
Piper & Marbury L.L.P., Baltimore, Maryland and for the underwriters by Latham &
Watkins, New York, New York. Partners of Simpson Thacher & Bartlett, members of
their families, related persons and others, have an indirect interest, through
limited partnerships, who are investors in KKR 1996 Fund L.P., in less than 1%
of the common stock. Partners of Latham & Watkins, members of their families,
related persons and others, have an indirect interest, through limited
partnerships who are investors in KKR 1996 Fund L.P., in less than 1% of the
common stock. In addition, Latham & Watkins has in the past provided, and may
continue to provide, legal services to Kohlberg Kravis Roberts & Co. and its
affiliates, including KKR 1996 Fund L.P. Simpson Thacher & Bartlett and Latham &
Watkins will each rely upon the opinion of Piper & Marbury L.L.P. as to matters
of Maryland law.

EXPERTS

The consolidated financial statements of Boyds as of December 31, 1997 and
1998 and for the years ended December 31, 1996, 1997 and 1998 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing in this prospectus, and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

AVAILABLE INFORMATION

Boyds has filed with the Securities and Exchange Commission a registration
statement on Form S-1, which includes amendments, exhibits, schedules and
supplements, under the Securities Act of 1933 and the rules and regulations
under the Securities Act, for the registration of the common stock offered by
this prospectus. Although this prospectus, which forms a part of the
registration statement, contains all material information included in the
registration statement, parts of the registration statement have been omitted
from this prospectus as permitted by the rules and regulations of the
Commission. For further information with respect to Boyds and the common stock
offered by this prospectus, please refer to the registration statement.
Statements contained in this prospectus as to the contents of any contracts or
other document referred to in this prospectus are not necessarily complete and,
where such contract or other document is an exhibit to the registration
statement, each such statement is qualified in all respects by the provisions of
such exhibit, to which reference is now made. The registration statement can be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at Seven World Trade
Center, 13(th) Floor, New York, New York 10048 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may
obtain information regarding the Washington, D.C. Public Reference Room by
calling the Commission at 1-800-SEC-0330. In addition, the registration
statement is publicly available through the Commission's site on the Internet's
World Wide Web, located at: http://www.sec.gov. Following the offering, Boyds'
future public filings are expected to be available for inspection at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

53
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................................................... F-2
FINANCIAL STATEMENTS:

Consolidated Balance Sheets as of December 31, 1997 and 1998............................................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1996, 1997 and 1998................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998..... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998............... F-6
Notes to Consolidated Financial Statements............................................................... F-7
</TABLE>

F-1
<PAGE>

The accompanying consolidated financial statements give effect to the
completion of the 1.1230165 for 1 exchange of Boyds' outstanding common stock
which will take place on the effective date of the offering. The following
report is in the form which will be furnished by Deloitte & Touche LLP upon
completion of the exchange of Boyds' outstanding common stock described in Note
13 to the consolidated financial statements and assuming that from January 28,
1999 to the date of such completion no other material events have occurred that
would affect the accompanying consolidated financial statements or required
disclosure in such financial statements.

INDEPENDENT AUDITORS' REPORT

"To the Board of Directors and Stockholders of
The Boyds Collection, Ltd.
McSherrystown, Pennsylvania

We have audited the accompanying consolidated balance sheets of The Boyds
Collection, Ltd. ("Boyds") as of December 31, 1997 and 1998 and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of Boyds' management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Boyds at December 31, 1997 and 1998 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.

Deloitte & Touche LLP
New York, New York
January 28, 1999 (March , 1999 as to Note 13)"

DELOITTE & TOUCHE LLP
New York, New York
February 23, 1999

F-2
<PAGE>
THE BOYDS COLLECTION, LTD.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1997 AND 1998

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 11,210 $ 11,606
Accounts receivable, less allowance for doubtful accounts of $150,000 and $180,000 in
1997 and 1998, respectively........................................................... 19,796 24,355
Inventory--primarily finished goods..................................................... 3,403 8,440
Inventory in transit.................................................................... 3,438 3,116
Other current assets.................................................................... 425 527
--------- -----------
Total current assets................................................................ 38,272 48,044
FURNITURE AND EQUIPMENT:
Furniture and equipment................................................................. 1,321 2,662
Less accumulated depreciation........................................................... (680) (1,143)
--------- -----------
Total furniture and equipment........................................................... 641 1,519
OTHER ASSETS:
Deferred debt issuance costs............................................................ -- 12,019
Deferred tax asset...................................................................... -- 234,403
Other assets............................................................................ 23 2,425
--------- -----------
Total other assets.................................................................. 23 248,847
--------- -----------
TOTAL ASSETS.............................................................................. $ 38,936 $ 298,410
--------- -----------
--------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................................ $ 748 $ 1,513
Accrued taxes........................................................................... 1,481 5,364
Accrued expenses........................................................................ 1,412 1,798
Interest payable........................................................................ 23 5,501
--------- -----------
Total current liabilities........................................................... 3,664 14,176
NOTES PAYABLE--Stockholders............................................................... 30,000 --
LONG TERM DEBT............................................................................ -- 443,000
COMMITMENTS AND CONTINGENCIES (Notes 6, 7 and 11)
STOCKHOLDERS' EQUITY:
Capital stock (157,671,516 and 52,588,246 issued and outstanding at December 31, 1997
and 1998, respectively) and paid-in capital in excess of par.......................... 48 (193,043)
Retained earnings....................................................................... 5,224 34,277
--------- -----------
Total stockholders' equity (deficit)................................................ 5,272 (158,766)
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................ $ 38,936 $ 298,410
--------- -----------
--------- -----------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
THE BOYDS COLLECTION, LTD.

CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
-------------- -------------- -------------

<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C>
NET SALES........................................................ $ 98,365 $ 129,841 $ 197,806
COST OF GOODS SOLD............................................... 33,022 43,278 63,852
-------------- -------------- -------------
Gross profit................................................. 65,343 86,563 133,954
GENERAL AND ADMINISTRATIVE EXPENSES.............................. 6,314 8,528 14,446
OTHER OPERATING INCOME........................................... 387 1,171 1,280
-------------- -------------- -------------
INCOME FROM OPERATIONS........................................... 59,416 79,206 120,788
-------------- -------------- -------------
OTHER INCOME (EXPENSE):
Interest and dividend income................................... 208 414 399
Other income, (expense)........................................ 660 (248) (36)
Expenses related to recapitalization........................... -- -- (3,248)
-------------- -------------- -------------
Net other income (expense)................................... 868 166 (2,885)
-------------- -------------- -------------
INTEREST EXPENSE:
Interest expense............................................... 187 242 27,764
Amortization of deferred debt issuance costs................... -- -- 1,854
-------------- -------------- -------------
TOTAL INTEREST EXPENSE........................................... 187 242 29,618
-------------- -------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES......................... 60,097 79,130 88,285
PROVISION FOR INCOME TAXES....................................... -- -- 22,007
-------------- -------------- -------------
NET INCOME....................................................... 60,097 79,130 66,278
PRO FORMA INFORMATION
(Unaudited):
HISTORICAL INCOME BEFORE PROVISION FOR INCOME TAXES.............. $ 60,097 $ 79,130 $ 88,285
PRO FORMA PROVISION FOR INCOME TAXES............................. 25,045 33,152 34,732
-------------- -------------- -------------
PRO FORMA NET INCOME............................................. $ 35,052 $ 45,978 $ 53,553
-------------- -------------- -------------
-------------- -------------- -------------
PRO FORMA BASIC EARNINGS PER SHARE............................... $ .22 $ .29 $ .64
-------------- -------------- -------------
-------------- -------------- -------------
PRO FORMA DILUTED EARNINGS PER SHARE............................. $ .22 $ .29 $ .63
-------------- -------------- -------------
-------------- -------------- -------------
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING........................ 157,671,516 157,671,516 84,142,163
-------------- -------------- -------------
-------------- -------------- -------------
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING...................... 157,671,516 157,671,516 84,484,571
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
THE BOYDS COLLECTION, LTD.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
AND PAID-IN
CAPITAL
NUMBER OF IN EXCESS RETAINED
SHARES OF PAR EARNINGS
-------------- -------------- ----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE, DECEMBER 31, 1995............................................ 157,671,516 48 868
Net income.......................................................... -- -- 60,097
Distributions to stockholders'...................................... -- -- (59,822)
-------------- -------------- ----------
BALANCE, DECEMBER 31, 1996............................................ 157,671,516 48 1,143
Net income.......................................................... -- -- 79,130
Distributions to stockholders'...................................... -- -- (75,049)
-------------- -------------- ----------
BALANCE, DECEMBER 31, 1997............................................ 157,671,516 48 5,224
Net income.......................................................... -- -- 66,278
Capital contribution from stockholder............................... -- 3,500 --
Transfer of retained earnings to additional paid in capital at
termination of sub-S election..................................... -- 37,225 (37,225)
Recognition of deferred tax asset................................... -- 245,854 --
Redemption and retirement of common stock........................... (106,237,360) (484,809) --
Issuance of common stock............................................ 1,154,090 5,139 --
-------------- -------------- ----------

BALANCE, DECEMBER 31, 1998............................................ 52,588,246 $ (193,043) $ 34,277
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
THE BOYDS COLLECTION, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 60,097 $ 79,130 $ 66,278
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation................................................................... 221 254 406
Amortization of deferred debt issuance costs................................... -- -- 1,854
Deferred taxes................................................................. -- -- 11,451
Loss on sale of equipment...................................................... -- 38 36
Changes in assets and liabilities (net of acquisition):
Accounts receivable--net..................................................... (1,211) (9,030) (3,869)
Inventory.................................................................... (580) (162) (4,008)
Inventory in transit......................................................... 909 (2,195) 322
Other assets................................................................. (170) 160 (298)
Accounts payable............................................................. 140 122 702
Accrued taxes................................................................ 409 539 3,873
Accrued expenses............................................................. 215 912 410
Interest payable............................................................. -- -- 5,467
--------- --------- ---------
Net cash provided by operating activities.................................. 60,030 69,768 82,624
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment............................................................ (269) (367) (1,247)
Dividend distributions from investment in
The Boyds Collection (Hong Kong) Ltd........................................... -- 320 --
Proceeds from sales of equipment................................................. -- 5 --
Issuance of notes receivable..................................................... -- (250) (1,296)
Purchase of business--net of cash acquired....................................... -- -- (2,200)
--------- --------- ---------
Net cash used in investing activities...................................... (269) (292) (4,743)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of note payable--stockholders........................................... 26,000 34,000 --
Repayment of note payable--stockholders.......................................... (24,400) (23,300) (30,000)
Distributions to stockholders.................................................... (59,822) (75,049) --
Issuance of debt................................................................. -- -- 490,000)
Repayment of debt................................................................ -- -- (47,360)
Redemption of common stock....................................................... -- -- (484,809)
Sale of common stock............................................................. -- -- 5,056
Capital contribution............................................................. -- -- 3,500
Deferred debt issuance cost...................................................... -- -- (13,872)
--------- --------- ---------
Net cash used in financing activities...................................... (58,222) (64,349) (77,485)
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......................................... 1,539 5,127 396
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 4,544 6,083 11,210
--------- --------- ---------
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 6,083 $ 11,210 $ 11,606
--------- --------- ---------
--------- --------- ---------
CASH PAID DURING THE PERIOD FOR INTEREST........................................... $ 183 $ 227 $ 22,208
--------- --------- ---------
--------- --------- ---------
CASH PAID DURING THE PERIOD FOR INCOME TAXES....................................... $ -- $ -- $ 7,886
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL NON-CASH ACTIVITIES:
Pro forma income taxes........................................................... $ 25,045 $ 33,152 $ 34,732
Common stock issued as part of purchase price of business acquired............... 83
Forgiveness of notes receivable in exchange for net assets acquired.............. 1,469
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. HISTORY, RECAPITALIZATION AND FINANCING

The Boyds Collection, Ltd. ("Boyds") is a primary wholesaler and importer of
resin figurines and plush animals that are distributed to retail operations
primarily throughout the United States. Substantially all of its products are
sourced from foreign manufacturers in China through buying agencies. The two
largest buying agencies each represent approximately 46% of Boyds' total
imports.

On March 5, 1998, Boyds entered into a Recapitalization and Stock Purchase
Agreement with Bear Acquisition, Inc. ("Bear Acquisition"). Bear Acquisition is
a subsidiary of KKR 1996 Fund L.P., a limited partnership formed at the
direction of Kohlberg Kravis Roberts & Co. LP ("KKR"). In connection with the
closing of the Recapitalization on April 21, 1998, Boyds used approximately
$490.0 million of aggregate proceeds from certain financing described below (the
"Financing") and approximately $8.0 million of existing cash balances of Boyds
to: (i) redeem (the "Redemption") a portion of Boyds' common stock, par value
$0.0001 per share, held by the original stockholders (the "Original
Stockholders") for approximately $473.0 million and (ii) pay transaction fees
and expenses of approximately $25.0 million. In addition, Bear Acquisition
acquired shares of common stock from the Original Stockholders for approximately
$184.0 million (the "Stock Purchase," and together with the Redemption, the
"Recapitalization"). Upon completion of the Recapitalization, Bear Acquisition
owned approximately 80% of the common stock and the Original Stockholders
retained approximately 20% of the common stock.

The Financing consisted of: (i) an aggregate of $325.0 million of bank
borrowings by Boyds under senior secured term loans (the "Term Loans") and (ii)
$165.0 million aggregate principal amount of senior subordinated notes (the
"Notes"). In addition, Boyds entered into a $40.0 million senior secured
revolving credit facility which is available for Boyds' working capital
requirements and to support trade letters of credit (the "Revolver" and,
together with the Term Loans, the "Credit Facility"). Boyds did not have any
borrowings under the Revolver to consummate the Recapitalization.

In connection with the Recapitalization, Boyds had nonrecurring transaction
related bonuses (including the related payroll taxes) of $3.2 million which was
used by certain key employees to purchase Bear Acquisition common stock. These
transaction related bonuses were paid from the proceeds of capital contributions
from the Original Stockholders. Financing costs of approximately $13.8 million
were classified as deferred debt issuance costs and will be amortized using the
effective interest rate method over the lives of the related debt facilities. In
addition, Boyds incurred approximately $11.8 million of costs associated with
the Redemption, which were charged to paid-in capital in excess of par.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of Boyds and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS--Boyds considers all short-term interest-bearing
investments with original maturities of three months or less to be cash
equivalents.

INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined under the first-in, first out method of accounting. Inventory
in-transit consists of purchases from foreign suppliers for which title has
passed to Boyds.

F-7
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FURNITURE, EQUIPMENT AND DEPRECIATION--Furniture and equipment is stated at
cost. Depreciation is computed using the declining balance method over the
estimated useful lives of the various assets. The estimated useful lives of
furniture and fixtures range from five to seven years and the estimated useful
lives of equipment range from three to seven years. The estimated useful lives
of leasehold improvements is the lesser of the estimated life of the improvement
or the term of the lease.

INVESTMENT IN UNCONSOLIDATED SUBSIDIARY--Boyds had a 30% investment in The
Boyds Collection (Hong Kong) Ltd. until such investment was liquidated in 1997.
This investment was accounted for under the equity method of accounting and the
amounts included in the financial statements were not material for any period
presented.

DEFERRED DEBT ISSUANCE COSTS--Boyds amortizes deferred debt issuance costs
using the interest method over the life of debt. Amortization of deferred debt
issuance costs includes amounts charged as a result of prepayments.

IMPAIRMENT ACCOUNTING--Boyds reviews the recoverability of its long-lived
assets, when events or changes in circumstances occur that indicate that the
carrying value of the assets may not be recoverable. The measurement of possible
impairment is based on Boyds' ability to recover the carrying value of the asset
from the expected future undiscounted cash flows generated. The measurement of
impairment requires management to use estimates of expected future cash flows.
If an impairment loss existed, the amount of the loss would be recorded in the
consolidated statements of operations. It is possible that future events or
circumstances could cause these estimates to change.

PRO FORMA ADJUSTMENTS--Boyds had elected to be treated as an S Corporation
for Federal and state income tax purposes. Under this election, income is not
taxed at the corporate level, but is taxed to the stockholders at the individual
level.

On April 21, 1998, Boyds elected to change its tax status from an S
Corporation to a C Corporation. The income statement reflects a provision for
income taxes for the period Boyds was a C Corporation. The objective of the pro
forma financial information is to show what the significant effects on the
historical financial information might have been had Boyds not been treated as
an S Corporation during 1996, 1997 and the portion of 1998 prior to April 21.

INCOME TAXES--Effective April 21, 1998, Boyds accounts for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
ACCOUNTING FOR INCOME TAXES, which requires an asset and liability approach to
accounting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future, based on enacted tax laws and rates applicable to periods in which
the differences are expected to affect taxable income. Income taxes/benefit is
the tax payable/receivable for the period plus or minus the change during the
period in deferred income tax assets and liabilities.

FAIR VALUE OF FINANCIAL INSTRUMENTS--Management considers that the carrying
amount of financial instruments, including cash, accounts receivable, accounts
payable and accrued expenses, approximates fair value. Interest on long-term
bank debt is payable at variable rates which approximates fair market value. The
fair value of the Notes, face value of $165.0 million, was $176.6 million at
December 31, 1998 and was determined based on the market price on that date as
quoted by Bridge Fixed Income Services.

REVENUE RECOGNITION--Sales revenue is recognized upon shipment of the items,
when title passes to the customer.

F-8
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ADVERTISING--Boyds expenses the costs of advertising as they are incurred.
Advertising expense was $133,001, $179,559 and $199,882 for the years ended
1996, 1997 and 1998, respectively.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS--Certain 1996 and 1997 financial statement amounts have
been reclassified to conform to the 1998 presentation.

NEW ACCOUNTING STANDARDS--In June 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
130, REPORTING COMPREHENSIVE INCOME. Comprehensive income includes net income
and several other items that current accounting standards require to be
recognized outside of net income. This standard requires enterprises to display
comprehensive income and its components in financial statements, to classify
items of comprehensive income by their nature in financial statements, and to
display the accumulated balances of other comprehensive income in stockholders'
equity separately from retained earnings and additional paid-in capital. Boyds
adopted SFAS No. 130 for the year ended December 31, 1998. There were no items
of other comprehensive income for all periods presented.

In June 1997, the FASB issued SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, replacing SFAS No. 14 and its amendments.
This standard requires enterprises to report certain information about products
and services, activities in different geographic areas, and reliance on major
customers and to disclose certain segment information in their interim financial
statements. The basis for determining an enterprise's operating segments is the
manner in which financial information is used internally by the enterprise's
chief operating decision maker. Boyds adopted SFAS No. 131 for the year ended
December 31, 1998. Boyds has determined that it operates in one segment,
collectibles. In addition, less than 2% of total revenue is derived from
customers outside the United States and all long lived assets are located in the
United States. No customer represents more than 10% of total revenue.

During 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for periods beginning
after June 15, 1999. Boyds is currently evaluating the impact, if any, of this
statement.

3. FURNITURE AND EQUIPMENT

The components of property, plant and equipment at December 31, 1997 and
1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Equipment................................................................... $ 833 $ 997
Furniture and fixtures...................................................... 478 1,399
Leasehold improvements...................................................... 10 266
--------- ---------
Total................................................................... 1,321 2,662
--------- ---------
Less accumulated depreciation and amortization.............................. (680) (1,143)
--------- ---------
$ 641 1,519
--------- ---------
--------- ---------
</TABLE>

F-9
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITIONS

In September 1998, Boyds agreed in principal with the stockholders of H.C.
Accents & Associates, Inc. to acquire all of the issued and outstanding shares
of capital stock of H.C. Accents, an Illinois corporation. H.C. Accents is a
designer, importer and distributor of collectibles and other specialty giftware
products. The transaction was consummated on November 3, 1998. The aggregate
purchase price was approximately $4.0 million, consisting of $2.3 million cash
paid, the forgiveness of notes receivable due to Boyds of approximately $1.5
million and 18,721 shares of common stock issued valued at $83,000. The purchase
price was assigned to the acquired assets, primarily inventory and accounts
receivable, based on their fair market values. In addition, Boyds has recorded
goodwill of approximately $2.4 million, included in other assets, related to the
excess of the purchase price over the fair value of assets acquired which it
will amortize using the straight line method over 20 years. The results of
operations and net assets acquired are not material to Boyds. The purchase
agreement requires future contingent payments through 2002 provided H.C. Accents
achieves minimum levels of EBITDA. Such payments will range from 1.0 to 1.6
times threshold H.C. Accents' EBITDA amounts, and will be recorded as additional
purchase costs if and when H.C. Accents achieves the minimum EBITDA thresholds.

5. CONCENTRATION OF CREDIT RISK

Boyds maintains cash balances at several financial institutions located in
Pennsylvania. Accounts at each institution are secured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances aggregated $9.4 million
and $11.2 million at December 31, 1997 and 1998, respectively.

6. LEASE COMMITMENTS

Boyds conducts its operations and warehouses inventory in a leased facility
classified as an operating lease. In May 1996, Boyds signed an addendum to its
original lease agreement dated March 1, 1995. The addendum permitted Boyds to
lease additional space, increasing the monthly payment from $13,211 to $22,735.
Effective January 1, 1998, Boyds also has exercised an option to lease the
remaining space of the warehouse for an additional monthly payment of $8,717.
The term of this lease expires in December 2009. The future minimum annual lease
commitments for the facilities are as follows:

<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
1999........................................................................... $ 379
2000........................................................................... 379
2001........................................................................... 377
2002........................................................................... 377
2003........................................................................... 377
Thereafter..................................................................... 2,265
------
$ 4,154
------
------
</TABLE>

Rent expense amounted to $238,059, $273,220 and $497,158 for 1996, 1997 and
1998, respectively.

F-10
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

At December 31, 1998, Boyds had letters of credit outstanding under the
Credit Facility, amounting to $11.2 million. See Notes 1 and 9. At December 31,
1997, Boyds had letters of credit outstanding under a line of credit of $6.4
million, which expired on April 21, 1998. These letters of credit represent
Boyds' commitment to purchase inventory, which is to be produced and/or shipped.

8. RELATED PARTY TRANSACTIONS AND NOTES PAYABLE - STOCKHOLDERS

The stockholders loaned $30.0 million to Boyds at December 31, 1997, at an
interest rate of 5.0%. These notes payable were repaid in 1998. Interest
amounting to $182,705, $226,616 and $310,237 was paid to the stockholders during
the years ended 1996, 1997 and 1998, respectively. The stockholders' notes
payable was subordinated to the line of credit described in Note 7.

During 1998, Boyds paid fees in the amount of $6.0 million and $1.7 million
to KKR and a director, respectively, for consulting services in connection with
the Recapitalization which are included in transaction-related expenses charged
directly to paid-in capital in excess of par. In addition, the director was paid
$140,000 of consulting fees which are included in expenses. KKR has also agreed
to render management, consulting and financial services to Boyds for an annual
fee of $375,000 plus expenses. During the year ended December 31, 1998, Boyds
paid $251,367 to KKR for such services.

9. LONG-TERM DEBT

In connection with the Recapitalization, on April 21, 1998 Boyds issued
$165.0 million principal of senior subordinated notes. In addition, on April 21,
1998 Boyds entered into a Credit Facility with a syndicate of banks and other
financial institutions, consisting of $325.0 million in Term Loans and a $40.0
million Revolver. Net proceeds to Boyds after deducting $13.8 million of
deferred debt issuance costs, were $476.2 million.

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
1998
-----------------
<S> <C>
(IN THOUSANDS)
9% Senior Subordinated Notes due May 15, 2008.............................. $ 165,000

Credit Facility:
Secured Tranche A Term Loans due April 2005. Interest based on LIBOR or
base rate as defined................................................... 88,250
Secured Tranche B Term Loans due April 2006. Interest based on LIBOR or
base rate as defined................................................... 189,750
Secured revolving loan commitment of $40,000,000. Interest based on LIBOR
or base rate as defined................................................ --
--------
$ 443,000
--------
--------
</TABLE>

At December 31, 1998, the weighted average interest rate in effect for the
Term Loans was 7.38%.

The Notes have an optional redemption feature exercisable by Boyds any time
on or after May 15, 2003. Boyds may also redeem up to 40% of the Notes with the
proceeds of one or more equity offerings at any time on or prior to May 15,
2001. Interest on the Notes is payable semiannually on May 15 and November 15.

F-11
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Credit Facility contains certain covenants, including the requirement of
a minimum interest coverage ratio as defined in the agreement (effective for the
first quarter of 1999) and substantial restrictions as to dividends and
distributions. Boyds is in compliance with all applicable covenants as of
December 31, 1998. The Credit Facility also provides that the Term Loans and
Revolver will be secured by the capital stock of Boyds' future subsidiaries. In
addition, the Term Loans are subject to mandatory prepayment with the proceeds
of certain asset sales and a portion of Boyds' excess cash flow as defined in
the Credit Facility. Boyds has the option of selecting its own interest period
at one, two, three, six, nine or twelve month periods.

The scheduled maturities of the long-term debt are as follows:

<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
1999............................................................................... $ --
2000............................................................................... --
2001............................................................................... 6,250
2002............................................................................... 14,000
2003............................................................................... 17,000
Thereafter......................................................................... 405,750
</TABLE>

10. PROVISION FOR INCOME TAXES

Prior to April 21, 1998 Boyds had elected to be treated as an S Corporation
for federal and state income tax purposes. Therefore, there is no income tax
provision for 1996 and 1997.

The 1998 income tax expense consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1998
-------------
<S> <C>
(IN
THOUSANDS)
Federal:
Current...................................................................... $ 8,879
Deferred..................................................................... 9,237
-------------
Total Federal.................................................................. 18,116

State:
Current...................................................................... 1,677
Deferred..................................................................... 2,214
-------------
Total State.................................................................... 3,891
-------------
Total Income Tax Provision..................................................... $ 22,007
-------------
-------------
</TABLE>

For federal income tax purposes, Boyds has elected to treat the
Recapitalization and Stock Purchase as an asset acquisition by making a Section
338(h)(10) election. As a result, there is a difference between the financial
reporting and tax bases of Boyds' assets. The difference creates deductible
goodwill for tax purposes, which creates a deferred tax asset for financial
reporting purposes. The deferred tax asset will be realized as the tax goodwill
is deducted over a period of fifteen years. In the opinion of management, Boyds
believes it will have sufficient profits in the future to realize the deferred
tax asset.

F-12
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A reconciliation of the statutory federal income tax rate and the effective
rate of the provision for income taxes consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1998
---------------
<S> <C>
Statutory federal income tax rate............................................... 35.0%
State income taxes--net of federal income tax benefit........................... 2.8
Sub-chapter S income............................................................ (12.8)
-----
Effective income tax rate....................................................... 25.0%
-----
-----
</TABLE>

11. CONTINGENCIES

Boyds is engaged in various lawsuits, either as plaintiff or defendant,
involving alleged patent infringement and breaches of contract. In the opinion
of management, based upon advice of counsel, the ultimate outcome of these
lawsuits will not have a material impact on Boyds' financial condition or
results of operations.

12. STOCKHOLDERS' EQUITY

CAPITAL STOCK--As of December 31, 1997 and 1998 Boyds had 351 million, and
100 million shares of capital stock (par value $.0001), respectively, authorized
and 157.7 million and 52.6 million, respectively, shares issued as common stock.
The Board of Directors is authorized to issue the unissued portion of the
authorized shares in another class or series of stock, including preferred
stock.

During 1998, the Original Stockholders made capital contributions of $3.5
million. In connection with the Recapitalization, Boyds redeemed, and
subsequently retired, 106,237,360 shares of common stock from the original
stockholders (see Note 1). Boyds issued 1,154,090 shares of common stock, of
which 18,721 shares were issued in connection with the acquisition of H.C.
Accents.

STOCK OPTION PLAN--On April 21, 1998, Boyds implemented an incentive stock
plan (the "1998 Stock Option Plan") which provides for the granting to certain
employees and directors of options to acquire Boyds' common stock. The option
prices of stock which may be purchased under the incentive stock plan are not
less than the fair value of common stock on the dates of the grants.

Outstanding options issued to employees during 1998 vest and become
exercisable over a five-year period from the date of grant. The outstanding
options expire ten years from the date of grant or upon an employee's retirement
or termination from Boyds, and are contingent upon continued employment during
the applicable five-year period.

On July 21, 1998, Boyds issued 44,921 options to each of its six directors.
These options vested immediately, expire 10 years from the date of grant and the
option prices of the stock which may be purchased were not less than the fair
value of common stock on the dates of the grants.

Boyds has reserved a total of 2,246,033 shares for issuance under the 1998
Stock Option Plan, of which 1,112,909 remains reserved at December 31, 1998 for
future issuances.

Effective with the adoption of the 1998 Stock Option Plan, Boyds adopted
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS 123 establishes a
fair value based method of accounting for stock-based employee compensation
plans; however, it also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO

F-13
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

EMPLOYEES. Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at the grant date or other measurement date over the amount an
employee must pay to acquire the stock. Boyds has elected to continue to account
for its employee compensation plans under APB Opinion No. 25 with pro forma
disclosures of net earnings and earnings per share, as if the fair value based
method of accounting defined in SFAS No. 123 had been applied.

If compensation cost for stock option grants had been determined based on
the fair value on the grant dates for the year ended December 31, 1998
consistent with the method prescribed by SFAS No. 123, Boyds' pro forma net
earnings and diluted earnings per share would have been $53.2 million and $.63,
respectively.

Under FASB No. 123, the fair value of each option grant is estimated on the
date of grant. The following weighted average assumptions were used for grants
under the 1998 Stock Option Plan in 1998: volatility of 10%, dividend yield of
0%, risk-free interest rate of 6.1%, and expected lives of 6.5 years.

A summary of the status of stock option grants as of December 31, 1998 and
changes during the period ending on that date is presented below:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
PRICE
OPTIONS PER SHARE
---------- -----------
<S> <C> <C>
Outstanding at December 31, 1997...................................... -- --
Granted............................................................... 1,133,124 $ 7.10
Forfeited............................................................. -- --
---------- -----
Outstanding at December 31, 1998...................................... 1,133,124 $ 7.10
---------- -----
---------- -----
</TABLE>

The fair value of options granted during 1998 was $1.0 million for options
issued with an exercise price of $4.45 and $.3 million for options issued with
an exercise price of $13.36.

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
WEIGHTED
EXERCISE OPTIONS OPTIONS AVERAGE
PRICE OUTSTANDING EXERCISABLE REMAINING LIFE
----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
$ 4.45 796,219 269,524 9.4
$ 13.36 336,905 -- 10.0
</TABLE>

EARNINGS PER SHARE--In March 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE. This Statement establishes
standards for computing and presenting earnings per share ("EPS") and applies to
all entities with publicly held common stock or potential common stock. This
Statement replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings.

F-14
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the income and net income
available to common stockholders.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------

<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Pro forma net income available to common stockholders............. $ 35,052 $ 45,978 $ 53,553
Denominator:
Denominator for basic earnings per share--weighted average
shares.......................................................... 157,671,516 157,671,516 84,142,163
Effect of dilutive securities:
Effect of shares issuable under stock option plans based on
treasury stock method......................................... -- -- 342,408
------------- ------------- -------------
Dilutive potential common shares.................................... -- -- 342,408
------------- ------------- -------------
Denominator for diluted earnings per share--weighted average
shares............................................................ 157,671,516 157,671,516 84,484,571
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

13. SUBSEQUENT EVENTS

On , the Board of Directors authorized a 1.1230165 for 1 exchange
of Boyds' common stock to be effected prior to the effectiveness of the
Offering. All share and per share amounts have been restated to give effect to
this exchange.

* * * * * *

F-15
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Consolidated Condensed Financial
Statements have been derived by the application of pro forma adjustments to
Boyds' historical financial statements included elsewhere in this prospectus.
The Unaudited Pro Forma Consolidated Condensed Statement of Income for the
periods presented give effect to the recapitalization and related transactions
and the offering as if such transactions were consummated as of January 1, 1998.
The Unaudited Pro Forma Consolidated Condensed Balance Sheet gives effect to the
offering as if such transaction had occurred as of December 31, 1998. The
adjustments are described in the accompanying Notes to the Unaudited Pro Forma
Consolidated Condensed Balance Sheet and to the Unaudited Pro Forma Consolidated
Condensed Statements of Income. The Unaudited Pro Forma Consolidated Condensed
Financial Statements should not be considered indicative of actual results that
would have been achieved had the recapitalization and related transactions and
the offering been consummated on the dates or for the periods indicated and do
not purport to indicate balance sheet data or results of operations as of any
future date or for any future period. The Unaudited Pro Forma Consolidated
Condensed Financial Statements should be read in conjunction with Boyds'
historical financial statements and the notes thereto included elsewhere in this
prospectus.

P-1
<PAGE>
THE BOYDS COLLECTION, LTD.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS

Current Assets:
Cash and cash equivalents................................................ $ 11,606 (1) $ 11,606
Accounts receivable...................................................... 24,355 24,355
Inventory................................................................ 8,440 8,440
Inventory in transit..................................................... 3,116 3,116
Other current assets..................................................... 527 527
------------ ----------- -----------
Total current assets................................................... 48,044 48,044

Furniture and equipment, net............................................. 1,519 1,519
Deferred debt issuance costs............................................. 12,019 (4,466)(2) 7,553
Deferred tax asset....................................................... 234,403 234,403
Other assets............................................................. 2,425 2,425
------------ ----------- -----------
$ 298,410 $ (4,466) $ 293,944
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable......................................................... $ 1,513 $ 1,513
Accrued taxes............................................................ 5,364 (3,746)(3) 1,618
Accrued expenses......................................................... 1,798 1,798
Interest payment......................................................... 5,501 5,501
------------ ----------- -----------
Total current liabilities.............................................. 14,176 (3,746) 10,430

Term Loan A.............................................................. 88,250 88,250
Term Loan B.............................................................. 189,750 (90,765)(4) 98,985
Senior Subordinated Notes................................................ 165,000 (66,000)(5) 99,000
------------ ----------- -----------
Total liabilities...................................................... 457,176 (160,511) 296,665

Capital stock and paid-in capital in excess of par....................... (193,043) 162,705(6) (30,338)
Retained earnings........................................................ 34,277 (6,660)(7) 27,617
------------ ----------- -----------
Total Stockholders' Equity (Deficit)..................................... (158,766) 156,045 (2,721)
------------ ----------- -----------
$ 298,410 $ (4,466) $ 293,944
------------ ----------- -----------
------------ ----------- -----------
</TABLE>

See Notes to Unaudited Pro Forma Consolidated Condensed Balance Sheet

P-2
<PAGE>
THE BOYDS COLLECTION, LTD.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET

The pro forma financial data have been derived by the application of pro
forma adjustments to Boyds' historical financial statements as of December 31,
1998.

(1) The sources and uses of cash assumed from the Offering are as follows:

<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Proceeds to Boyds from the Offering............................................ $ 175,750

USES OF FUNDS:
Redemption of principal amount of the Notes.................................... (66,000)
Premium on redemption of principal amount of the Notes at 109%................. (5,940)
Repayment of indebtedness under the Credit Facility............................ (90,765)
Estimated transaction fees and expenses........................................ (13,045)
-------------
Net adjustments to cash...................................................... $ --
-------------
-------------
</TABLE>

(2) The adjustment represents the write off of $4,466 of deferred debt issuance
costs related to the Notes assumed to be redeemed and the portion of the
Credit Facility assumed to be repaid from the proceeds of the offering.

(3) The adjustment represents the income tax benefit related to (i) the $5,940
premium related to Notes assumed to be redeemed and (ii) the $4,466 writeoff
of deferred debt issuance costs related to notes assumed to be redeemed and
the portion of the Credit Facility assumed to be repaid from the proceeds of
the offering. The income tax benefit of $3,746 was computed at a 36%
statutory income tax rate.

(4) The adjustment represents the portion of the Credit Facility assumed to be
repaid from the proceeds of the offering.

(5) The adjustment represents the portion of the Notes assumed to be redeemed
from the proceeds of the offering.

(6) The adjustment represents the assumed proceeds from the offering of
$175,750, net of assumed expenses of $13,045.

(7) The adjustment represents the extraordinary loss resulting from (i) the
$5,940 premium related to Notes assumed to be redeemed and (ii) the $4,466
writeoff of deferred debt issuance costs related to notes assumed to be
redeemed and the portion of the Credit Facility assumed to be repaid from
the proceeds of the offering, net of the associated tax benefits of $3,746.

P-3
<PAGE>
THE BOYDS COLLECTION, LTD.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
------------- -------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales......................................................... $ 197,806 $ $ 197,806
Cost of goods sold................................................ 63,852 63,852
------------- -------------- --------------
Gross profit.................................................... 133,954 133,954
General and administrative expenses............................... 14,446 124(1) 14,570
Other operating income............................................ 1,280 1,280
------------- -------------- --------------
Income from operations.......................................... 120,788 (124) 120,664
------------- -------------- --------------
Interest and dividend income.................................. 399 (399)(2) --
Other income (expense)........................................ (36) (36)
Expenses related to the Recapitalization...................... (3,248) (3,248)
------------- -------------- --------------
Net other income (expense)........................................ (2,885) (399) (3,284)
------------- -------------- --------------
Interest expense................................................ (27,764) 2,550(3) (25,214)
Amortization and write off of deferred debt issuance costs...... (1,854) 990(4) (864)
------------- -------------- --------------
Total interest expense............................................ (29,618) 3,540 (26,078)
------------- -------------- --------------
Income before provision for income taxes and extraordinary item... $ 88,285 $ 3,017 $ 91,302
------------- -------------- --------------
------------- -------------- --------------
Income before provision for income taxes and extraordinary item... $ 88,285 $ 3,017 $ 91,302
Pro forma provision for income taxes.............................. 34,732 1,087(5) 35,819
------------- -------------- --------------
Pro forma net income before extraordinary item.................. $ 53,553 $ 1,930 $ 55,483
------------- -------------- --------------
------------- -------------- --------------
Basic earnings (loss) per common share:
Pro forma net income before extraordinary item............ $ 0.64 $ 0.90
------------- --------------
------------- --------------
Diluted earnings (loss) per common share:
Pro forma net income before extraordinary item............ $ 0.63 $ 0.90
------------- --------------
------------- --------------

Weighted average basic shares outstanding......................... 84,142,163 61,375,424
------------- --------------
------------- --------------
Weighted average diluted shares outstanding....................... 84,484,571 61,717,832
------------- --------------
------------- --------------
</TABLE>

See Notes to Unaudited Pro Forma Consolidated Condensed Statements of Income

P-4
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME

The pro forma financial data have been derived by the application of pro
forma adjustments to Boyds' historical financial statements for the period ended
December 31, 1998. The historical basis of Boyds' assets and liabilities will
not be impacted by the Recapitalization.

(1) The adjustment relates to management, consulting and financial services
rendered by KKR for an annual fee of $375. The adjustment is reduced by $251
which is recorded in the historical financial statements.

(2) The adjustment eliminates historical interest and dividend income on cash
and short-term investments not expected to be received after the
Recapitalization and related transactions and the Offering.

(3) The adjustment to interest expense reflects the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Interest expense with respect to the Notes and Credit Facility giving effect to the
Recapitalization and related transactions as if they occurred as of January 1, 1998 at
an assumed weighted average interest rate of 8.06%..................................... $ 38,307

Reduction of interest expense related to the redemption of the Notes and repayment under
the Credit Facility giving effect to the Offering as if they occurred as of January 1,
1998 at an assumed weighted average interest rate of 8.35%............................. (13,093)
--------

Pro forma interest expense............................................................... 25,214
Historical interest expense.............................................................. (27,764)
--------

Total adjustment......................................................................... $ 2,550
--------
--------
</TABLE>

A 0.125% increase or decrease in the assumed weighted average interest rate
would change pro forma interest expense with respect to the Credit Facility by
$274. The pro forma net income would change by $175.

(4) The adjustment to amortization and write off of deferred debt issuance
costs reflects the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Amortization and write off of deferred debt issuance costs giving effect to the
Recapitalization and related transactions and the Offering as if they occurred as of
January 1, 1998........................................................................ $ 864
Historical amortization and write off of deferred debt issuance costs.................... (1,854)
--------

Total adjustment......................................................................... $ (990)
--------
--------
</TABLE>

(5) The adjustment reflects the tax effect of the pro forma adjustments at a
36% statutory income tax rate.

(6) The pro forma net income before extraordinary item amounts are before, and
do not include, an extraordinary loss of approximately $6,771. The total loss of
$10,579 includes the $5,940 premium on the redemption of the Notes and the write
off of $4,639 of deferred financing costs related to the redemption of the Notes
and the repayment under the Credit Facility. The loss has been reduced by the
related income tax benefit.

P-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

, 1999

[LOGO]

THE BOYDS COLLECTION, LTD.

16,000,000 SHARES OF COMMON STOCK

---------------------

P R O S P E C T U S

---------------------

DONALDSON, LUFKIN & JENRETTE

MERRILL LYNCH & CO.

- ---------------------------------------------------------

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Boyds have
not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Until , 1999 (25 days after the date of this prospectus), all
dealers, whether or not participating in this offering, that effect transactions
in these securities may be required to deliver a prospectus. This is in addition
to the dealer's obligation to deliver a prospectus when acting as an underwriter
in this offering and when selling previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of common stock registered hereby,
all of which expenses, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee, and the New York Stock Exchange listing application fee, are estimated.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 102,304
National Association of Securities Dealers, Inc. filing fee............... 30,500
New York Stock Exchange listing application fee........................... *
Printing and engraving fees and expenses.................................. *
Legal fees and expenses................................................... *
Accounting fees and expenses.............................................. *
Blue Sky fees and expenses................................................ *
Transfer Agent and Registrar fees and expenses............................ *
Miscellaneous expenses.................................................... *
---------
Total................................................................... *
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Boyds' charter provides that to the fullest extent permitted by the Maryland
General Corporation Law, directors and officers of Boyds shall not be liable to
Boyds or its stockholders for monetary damages for breach of fiduciary duty as a
director or an officer. Under Maryland law, however, these provisions do not
eliminate or limit the personal liability of a director or an officer (a) to the
extent that it is proved that the director or officer actually received an
improper benefit or profit or (b) if a judgment or other final adjudication is
entered in a proceeding based on a finding that the director's or officer's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in such proceeding. These
provisions also do not affect the ability of Boyds or its stockholders to obtain
equitable relief, such as an injunction or rescission.

As permitted by the MGCL, Boyds' charter obligates Boyds to indemnify its
directors and officers and to pay or reimburse expenses for such individuals in
advance of the final disposition of a proceeding to the maximum extent permitted
by Maryland law. The Boyds' bylaws contain indemnification procedures which
implement those obligations of the charter. The MGCL permits a corporation to
indemnify its directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities, unless it is established that (a)
the act or omission of the director or officer was material to the matter giving
rise to such proceeding and (1) was committed in bad faith or (2) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper benefit in money, property or services, or (c) in the case
of any criminal proceeding, the director or officer had reasonable cause to
believe that the action or omission was unlawful.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

During the three years preceding the filing of this registration statement,
Boyds sold shares of its common stock in the amounts, at the times, and for the
aggregate amounts of consideration listed below without registration under the
Securities Act of 1933. Exemption from registration under the Securities Act for
each of the following sales is claimed under Section 4(2) of the Securities Act
because such transactions were by an issuer and did not involve a public
offering:

II-1
<PAGE>
On April 22, 1998, Boyds issued 843,385 shares of common stock to Bear
Acquisition for aggregate consideration of $3,755,000.

On July 21, 1998 Boyds issued 22,460 shares of common stock to Gary M.
Lowenthal for aggregate consideration of $100,000 and 157,223 shares of common
stock to Bear Acquisition for aggregate consideration of $700,000.

On October 6, 1998, Boyds issued 67,381 shares of common stock to three
individuals employed by Boyds' buying agencies. These shares were issued in
consideration for their assistance in the design and development of Boyds'
products and supervising the manufacture of such products. The value of such
services was determined by Boyds and the buying agencies to be $300,000.

On November 2, 1998 Boyds issued 9,360 shares of common stock to Stephen
Chambliss and 9,360 shares of common stock to Edward Sullivan as partial
consideration for the purchase by Boyds of H.C. Accents & Associates, Inc., a
company formerly owned by Messrs. Chambliss and Sullivan.

On November 20, 1998, Boyds issued 44,921 shares of common stock to Bear
Acquisition for aggregate consideration of $200,000.

ITEM 16. EXHIBITS

The following exhibits are filed with this registration statement or
incorporated into this registration statement by reference.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement among Boyds and the Underwriters named
therein**
3.1 Amended and Restated Articles of Incorporation of Boyds*
3.2 Bylaws of Boyds*
4.1 Form of Common Stock certificate***
4.2 See Exhibits 3.1 and 3.2 of this Registration Statement for provisions of
the Amended and Restated Articles of Incorporation and the Bylaws of
Boyds defining rights of security holders*
4.3 Indenture, dated as of April 21, 1998 between Boyds and The Bank of New
York, as trustee*
4.4 Form of 9% Senior Subordinated Note due 2008 (included in Exhibit 4.3)*
5.1 Opinion of Simpson Thacher & Bartlett***
5.2 Opinion of Piper & Marbury L.L.P.***
10.1 Credit Agreement, dated as of April 21, 1998 among Boyds, the several
lenders from time to time parties thereto, DLJ Capital Funding, Inc.,
The Fuji Bank, Limited, New York Branch, and Fleet National Bank**
10.2 Forms of Notes evidencing loans under the Credit Agreement (included in
Exhibit 10.1)**
10.3 1998 Stock Option Plan*
10.4 Lease Agreement for Boyds' McSherrystown, Pennsylvania facility**
21 List of subsidiaries*
23.1 Consent of Simpson Thacher & Bartlett (included in the opinion filed as
Exhibit 5.1)***
23.2 Consent of Piper & Marbury L.L.P. (included in the opinion filed as
Exhibit 5.2)***
23.3 Consent of Deloitte and Touche LLP***
24 Powers of Attorney*
</TABLE>

- ------------------------

* Previously filed.

** Filed with this registration statement.

*** To be filed by amendment.

II-2
<PAGE>
ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by the director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of McSherrystown, State of
Pennsylvania on the 23rd day of February, 1999.

<TABLE>
<S> <C> <C>
THE BOYDS COLLECTION, LTD.

By: /s/ Christine L. Bell
-----------------------------------------
Christine L. Bell
Chief Operating Officer, Controller and
Secretary
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on February 23, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------

<C> <S>
i) Principal executive
officer:

*
- ------------------------------ Chief Executive Officer
Gary M. Lowenthal and Director

ii) Principal financial and
accounting officer:

/s/ CHRISTINE L. BELL
- ------------------------------ Controller
Christine L. Bell

iii) Directors:

*
- ------------------------------ President and Director
Robert T. Coccoluto

*
- ------------------------------
Henry R. Kravis

*
- ------------------------------
George R. Roberts

*
- ------------------------------
Scott M. Stuart

*
- ------------------------------
Marc S. Lipschultz

*
- ------------------------------
Timothy Brady

*By: /s/ CHRISTINE L. BELL
- ------------------------------
Christine L. Bell
Attorney-in-Fact
</TABLE>

II-4
<PAGE>
INDEX TO EXHIBITS

3.1 Amended and Restated Articles of Incorporation of Boyds*

3.2 Bylaws of Boyds*

4.1 Form of Common Stock certificate***

4.2 See Exhibits 3.1 and 3.2 of this Registration Statement for provisions of
the Amended and Restated Articles of Incorporation and the Bylaws of
Boyds defining rights of security holders*

4.3 Indenture, dated as of April 21, 1998 between Boyds and The Bank of New
York, as trustee*

4.4 Form of 9% Senior Subordinated Note due 2008 (included in Exhibit 4.3)*

5.1 Opinion of Simpson Thacher & Bartlett***

5.2 Opinion of Piper & Marbury L.L.P.***

10.1 Credit Agreement, dated as of April 21, 1998 among Boyds, the several
lenders from time to time parties thereto, DLJ Capital Funding, Inc.,
The Fuji Bank, Limited, New York Branch, and Fleet National Bank**

10.2 Forms of Notes evidencing loans under the Credit Agreement (included in
Exhibit 10.1)**

10.3 1998 Stock Option Plan*

10.4 Lease Agreement for Boyds' McSherrystown, Pennsylvania facility**

21 List of subsidiaries*

23.1 Consent of Simpson Thacher & Bartlett (included in the opinion filed as
Exhibit 5.1)***

23.2 Consent of Piper & Marbury L.L.P. (included in the opinion filed as
Exhibit 5.2)***

23.3 Consent of Deloitte and Touche LLP***

24 Powers of Attorney*
</TABLE>

- ------------------------

* Previously filed.

** Filed herewith.

*** To be filed by amendment.

<PAGE>

__________ Shares

THE BOYDS COLLECTION, LTD.

Common Stock

UNDERWRITING AGREEMENT
----------------------

__________, 1999

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
Asrepresentatives of the several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172

Dear Sirs:

The Boyds Collection, Ltd., a Maryland corporation (the "COMPANY"),
proposes to issue and sell to the several underwriters named in Schedule 1
hereto (the "UNDERWRITERS"), and certain stockholders of the Company named in
Schedule II hereto (the "SELLING STOCKHOLDERS"), severally and not jointly,
propose to sell to the several Underwriters, an aggregate of _______________
shares of the common stock, par value $0.0001 per share of the Company (the
"FIRM SHARES"), of which _____________ shares are to be issued and sold by
the Company and _____________ shares are to be sold by the Selling
Stockholders, each Selling Stockholder selling the amount set forth opposite
such Selling Stockholder's name in Schedule II hereto.

The Selling Stockholders also propose to sell to the several
Underwriters not more than an additional _____ shares, in aggregate, of their
Common Stock, par value $0.0001 per share (the "ADDITIONAL SHARES") if and to
the extent requested by the Underwriters as provided in Section 2 hereof. The
Firm Shares and the Additional Shares are hereinafter referred to
collectively as the "SHARES". The shares of common stock of the Company to be
outstanding after giving effect to the sales contemplated hereby are
hereinafter referred to as the "COMMON STOCK". The Company and the Selling
Stockholders are hereinafter sometimes referred to collectively as the
"Sellers."

<PAGE>

SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to
Rule 430A under the Act, is hereinafter referred to as the "REGISTRATION
STATEMENT"; and the prospectus in the form first used to confirm sales of
Shares is hereinafter referred to as the "Prospectus". If the Company has
filed or is required pursuant to the terms hereof to file a registration
statement pursuant to Rule 462(b) under the Act registering additional shares
of Common Stock (a "RULE 462(B) REGISTRATION STATEMENT"), then, unless
otherwise specified, any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462(b) Registration Statement.

SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS .
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) the Company agrees to
issue and sell ______________ Firm Shares, (ii) each Selling Stockholder
agrees, severally and not jointly, to sell the number of Firm Shares set
forth opposite such Selling Stockholder's name in Schedule II hereto and
(iii) each Underwriter agrees, severally and not jointly, to purchase from
each Seller at a price per Share of $______ (the "PURCHASE PRICE") the number
of Firm Shares (subject to such adjustments to eliminate fractional shares as
you may determine) that bears the same proportion to the total number of Firm
Shares to be sold by such Seller as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto bears to the total
number of Firm Shares.

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, each of the Selling
Stockholders, severally and not jointly, agrees to sell, and the Underwriters
shall have the right to purchase, severally and not jointly, up to ___
Additional Shares from the Selling Stockholders at the Purchase Price.
Additional Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. The
Underwriters may exercise their right to purchase Additional Shares in whole
or in part from time to time by giving written notice thereof to the Selling
Stockholders within 30 days after the date of this Agreement. You shall give
any such notice on behalf of the Underwriters and such notice shall specify
the number of Additional Shares to be purchased pursuant to such exercise and
the date for payment and delivery thereof, which date shall be a business day
(i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase from the Selling Stockholders the number of
Additional Shares (subject to such adjustments to eliminate fractional shares
as you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased from the Selling Stockholders as the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
bears to the total number of Firm Shares.

<PAGE>

Each Seller hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other
arrangement that transfers all or a portion of the economic consequences
associated with the ownership of any Common Stock (regardless of whether any
of the transactions described in clause (i) or (ii) is to be settled by the
delivery of Common Stock, or such other securities, in cash or otherwise),
except to the Underwriters pursuant to this Agreement, for a period of 180
days after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding the
foregoing or anything contained in this Agreement to the contrary, during
such period (i) the Company may grant stock options pursuant to the Company's
existing stock option plan and (ii) the Company may issue shares of Common
Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof. The Company also agrees not to file
any registration statement with respect to any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
for a period of 180 days after the date of the Prospectus without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation. In
addition, each Selling Stockholder agrees that, for a period of 180 days
after the date of the Prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, it will not make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock. The Company shall, prior to or concurrently
with the execution of this Agreement, deliver an agreement executed by (i)
each Selling Stockholder, (ii) each of the directors and officers of the
Company who is not a Selling Stockholder and (iii) each stockholder listed on
Annex I hereto to the effect that such person will not, during the period
commencing on the date such person signs such agreement and ending 180 days
after the date of the Prospectus, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, (A) engage in any of the
transactions described in the first sentence of this paragraph or (B) make
any demand for, or exercise any right with respect to, the registration of
any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock.

SECTION 3. TERMS OF PUBLIC OFFERING. The Sellers are advised by you
that the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.

Of the shares of Common Stock to be offered by the Underwriters,
_________ have been reserved (the "Reserved Shares") for sale to certain
individuals, including employees, officers and directors of the Company and
other parties associated with the Company and members of their families. The
number of shares available to the general public will be reduced to the
extent those persons purchase, or confirm the purchase (either orally or in
writing) of, Reserved Shares. Any Reserved Shares not so purchased or
confirmed for purchase will be offered in the Offering.

SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations
and registered in such names as

<PAGE>

Donaldson, Lufkin & Jenrette Securities Corporation shall request no later
than two business days prior to the Closing Date or the applicable Option
Closing Date (as defined below), as the case may be. The Shares shall be
delivered by or on behalf of the Sellers, with any transfer taxes thereon
duly paid by the respective Sellers, to Donaldson, Lufkin & Jenrette
Securities Corporation through the facilities of The Depository Trust Company
("DTC"), for the respective accounts of the several Underwriters, against
payment to the Sellers of the Purchase Price therefore by wire transfer of
Federal funds immediately available in New York City. The certificates
representing the Shares shall be made available for inspection not later than
11:30 A.M., New York City time, on the business day prior to the Closing Date
or the applicable Option Closing Date (as defined below), as the case may be,
at the office of DTC or its designated custodian (the "DESIGNATED OFFICE").
The time and date of delivery and payment for the Firm Shares shall be 9:00
A.M., New York City time, on ________, 1999 or such other time on the same or
such other date as Donaldson, Lufkin & Jenrette Securities Corporation and
the Company shall agree in writing. The time and date of delivery and payment
for the Firm Shares are hereinafter referred to as the "CLOSING DATE". The
time and date of delivery and payment for any Additional Shares to be
purchased by the Underwriters shall be 9:00 A.M., New York City time, on the
date specified in the applicable exercise notice given by you pursuant to
Section 2 or such other time on the same or such other date as Donaldson,
Lufkin & Jenrette Securities Corporation and the Selling Stockholders shall
agree in writing. The time and date of delivery and payment for any
Additional Shares are hereinafter referred to as the "OPTION CLOSING DATE".

The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 9 of this Agreement
shall be delivered at the offices of Latham & Watkins, 885 Third Avenue, New
York, NY 10022 and the Shares shall be delivered at the Designated Office,
all on the Closing Date or such Option Closing Date, as the case may be.

SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with you:

(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, following notice to the Company of or the Company becoming
aware of (i) any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information, (ii) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to
the Registration Statement becomes effective, (iv) if the Company is required
to file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective
and (v) the happening of any event during the period referred to in Section
5(d) below which makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which requires any
additions to or changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will use reasonable efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.

<PAGE>

(b) To furnish to you three signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of
each amendment to it, without exhibits, as you may reasonably request.

(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any
further amendment to the Registration Statement and not to make any amendment
or supplement to the Prospectus of which you shall not previously have been
advised or to which you shall reasonably object after being so advised; and,
during such period, to prepare and file with the Commission, promptly upon
your reasonable request, any amendment to the Registration Statement or
amendment or supplement to the Prospectus which may be necessary or advisable
in connection with the distribution of the Shares by you, and to use
reasonable efforts to cause any such amendment to the Registration Statement
to become promptly effective.

(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or
a dealer, to furnish in New York City to each Underwriter and any dealer as
many copies of the Prospectus (and of any amendment or supplement to the
Prospectus) as such Underwriter or dealer may reasonably request.

(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel for the Underwriters and the Company, it becomes necessary to amend
or supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the Underwriters and the
Company, it is necessary to amend or supplement the Prospectus to comply with
applicable law, forthwith to prepare and file with the Commission an
appropriate amendment or supplement to the Prospectus so that the statements
in the Prospectus, as so amended or supplemented, will not in the light of
the circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.

(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now
so qualified or to take any action that would subject it to general consent
to service of process or taxation other than as to matters and

<PAGE>

transactions relating to the Prospectus, the Registration Statement, any
preliminary prospectus or the offering or sale of the Shares, in any
jurisdiction in which it is not now so subject.

(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement (which need not be audited) covering the
twelve-month period ending March 31, 2000 that shall satisfy the provisions
of Section 11(a) of the Act, and to advise you in writing when such statement
has been so made available.

(h) During the period of three years after the date of this Agreement
unless the Company is sooner dissolved, acquired or merged out of existence,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished
to or filed with the Commission or any national securities exchange on which
any class of securities of the Company is listed and such other publicly
available information concerning the Company and its subsidiaries as you may
reasonably request.

(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Sellers' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel, the Company's accountants and any Selling Stockholder's
counsel (in addition to the Company's counsel) in connection with the
registration and delivery of the Shares under the Act and all other fees and
expenses in connection with the preparation, printing, filing and
distribution of the Registration Statement (including financial statements
and exhibits), any preliminary prospectus, the Prospectus and all amendments
and supplements to any of the foregoing, including the mailing and delivering
of copies thereof to the Underwriters and dealers in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of
the Shares to the Underwriters, including any transfer or other taxes payable
thereon, (iii) all costs of printing or producing this Agreement and any
other agreements or documents in connection with the offering, purchase, sale
or delivery of the Shares, (iv) all expenses in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing
or producing any Preliminary and Supplemental Blue Sky Memoranda in
connection therewith (including the filing fees and fees and disbursements of
counsel for the Underwriters in connection with such registration or
qualification and memoranda relating thereto), (v) the filing fees and
disbursements of counsel for the Underwriters in connection with the review
and clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to
the Common Stock and all costs and expenses incident to the listing of the
Shares on the NYSE and other national securities exchanges and foreign stock
exchanges, (vii) the cost of printing certificates representing the Shares,
(viii) the costs and charges of any transfer agent, registrar and/or
depositary, and (ix) all other costs and expenses incident to the performance
of the obligations of the Company and the Selling Stockholders hereunder for
which provision is not otherwise made in this Section. The provisions of this
Section shall not supersede or otherwise affect any agreement that the
Company and the Selling Stockholders may otherwise have for allocation of
such expenses among themselves.

<PAGE>

(j) To use its reasonable best efforts to list, subject to notice of
issuance, the Shares on the NYSE or other national exchange or automated
quotation system and to maintain the listing of the Shares on the NYSE or
other national exchange or automated quotation system for a period of three
years after the date of this Agreement unless the Company is sooner
dissolved, acquired or merged out of existence or does not qualify for
listing on the NYSE or other national exchange or automated quotation system.

(k) To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the Shares.

(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered in compliance with Rule 462(b) by 10:00 P.M., New York City time, on
the date of this Agreement and to pay to the Commission the filing fee for
such Rule 462(b) Registration Statement at the time of the filing thereof or
to give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.

SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each Underwriter that:

(a) The Registration Statement has become effective (other than any
Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement; and
no stop order suspending the effectiveness of the Registration Statement is
in effect, and no proceedings for such purpose are pending before or
threatened by the Commission.

(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended,
if applicable, will not contain as of the date of such amendment or
supplement any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other
than any Rule 462(b) Registration Statement to be filed by the Company after
the effectiveness of this Agreement) and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Act, (iii) if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, such Rule
462(b) Registration Statement and any amendments thereto, when they become
effective (A) will not contain as of the date of such amendment or supplement
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the Act and (iv)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
that the

<PAGE>

representations and warranties set forth in this paragraph do not apply to
statements in or omissions from the Registration Statement or the Prospectus
(as amended or supplemented) based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through
you expressly for use therein.

(c) Each preliminary prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements in or
omissions from such preliminary prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.

(d) The Company has no direct or indirect subsidiaries other than Boyds
Operations, Inc., The Boyds Collection, Ltd., L.P. (the "PARTNERSHIP") and H.
C. Accents & Associates, Inc. (collectively, the "Subsidiaries") Boyds
Operations, Inc. has no assets other than its 1% general partnership interest
in the Partnership, no liabilities other than those associated with its
general partnership interest in the Partnership and has conducted no
operations other than those taken on behalf of the Partnership as its general
partner.

(e) Each of the Company and its Subsidiaries other than the Partnership
has been duly incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to conduct its business as described in the
Prospectus and to own, lease and operate its properties, except where failure
to be duly incorporated or validly existing or to have such power and
authority would not have a Material Adverse Effect (as defined below). The
Partnership has been duly formed and is validly existing as a limited
partnership in good standing under the state of Delaware and has the power
and authority to conduct its business as described in the Prospectus and to
own, lease and operate its properties, except where the failure to be duly
formed or validly existing or to have such power and authority would not have
a Material Adverse Effect. Each of the Company and its Subsidiaries is duly
qualified to do business in each jurisdiction in which the conduct of its
business requires such qualification, except where the failure to be so
qualified would not reasonably be expected to have a material adverse effect
on the business, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries, taken as a whole, (a "MATERIAL ADVERSE
EFFECT").

(f) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued
by the Company or any of its Subsidiaries relating to or entitling any person
to purchase or otherwise to acquire any shares of the capital stock or
partnership interests of the Company or any Subsidiary, except as otherwise
disclosed in the Registration Statement.

(g) All of the outstanding shares of capital stock of the Company,
including the Shares to be sold by the Selling Stockholders, have been duly
authorized and validly issued and are fully

<PAGE>

paid, non-assessable and not subject to any preemptive or similar rights; and
the Shares to be issued and sold by the Company have been duly authorized
and, when issued and delivered to the Underwriters against payment therefor
as provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.

(h) All of the outstanding shares of capital stock or partnership
interests of each of the Company Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable, and are owned by the
Company or Boyds Operations, Inc., free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature other than any
liens under the Credit Agreement, dated as of April 21, 1998, among the
Company, the several lenders from time to time parties thereto, DLJ Capital
Funding Inc., the Fuji Bank, Limited, New York Branch, and Fleet National
Bank (the "CREDIT AGREEMENT").

(i) The authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof contained in
the Prospectus under the caption "Description of Capital Stock."

(j) Neither the Company nor any of its Subsidiaries (other than the
Partnership) is in violation of its charter or by-laws and the Partnership is
not in violation of its agreement of limited partnership. Neither the Company
nor any of its Subsidiaries is (i) in default in the performance of any
obligation, agreement or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument material to the
conduct of the business of the Company and its Subsidiaries, taken as a
whole, to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or their respective property is bound,
or (ii) in violation of any law, statute, rule regulation, judgment or court
decree applicable to the Company or any of its Subsidiaries, except for any
such violation or default that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

(k) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not result in a
breach of, constitute a default under or violate (i) any of the terms,
conditions or provisions of the charter or by-laws of the Company or any of
its Subsidiaries (other than the Partnership) or the agreement of limited
partnership of the Partnership, (ii) any of the terms or provisions of any
document, agreement, indenture or other instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their properties are bound, or (iii) (assuming
compliance with all applicable state securities or Blue Sky laws) any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on the Company or any of its Subsidiaries or
any of their respective properties except, in the case of each of (ii) and
(iii), for such conflicts, defaults or violations that would not reasonably
be expected to have a Material Adverse Effect. No consent, approval, waiver,
license or authorization or other action by or filing with any governmental
authority is required in connection with the execution, delivery and
performance by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby,

<PAGE>

except such as (i) may be required under the state securities or Blue Sky
laws or (ii) shall have been obtained or made on or prior to the Closing Date.

(l) Except as otherwise set forth in the Registration Statement or the
Prospectus, there are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
Subsidiaries is a party or of which any of their respective property is the
subject, which might reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect.

(m) Neither the Company nor any of its Subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("Environmental Laws"), any provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or any provisions of the Foreign Corrupt Practices Act or the rules and
regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not be reasonably expected to have a Material
Adverse Effect.

(n) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities
and any potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.

(o) Each of the Company and its Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities (each, an "AUTHORIZATION" or, collectively, "PERMITS"),
including, without limitation, under any applicable foreign, federal, state
or local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants, as are necessary to own, lease and operate its
properties and to conduct its business in the manner described in the
Registration Statement and the Prospectus the lack of which would have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received notice of any proceedings relating to the revocation or termination
of any such Permits; except where such revocation or termination of any such
Permits would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

(p) Each of the Company and its Subsidiaries has good and marketable
title, free and clear of all liens, claims, encumbrances and restrictions to
all property and assets described in the Registration Statement and
Prospectus as being owned by it except for any such liens (i) for taxes not
yet due and payable or for taxes being contested in good faith and for which
adequate reserves, in accordance with generally accepted accounting
principles, have been taken; (ii) under the Credit Agreement or (iii) as
would not, individually or in the aggregate, have a Material Adverse Effect.

(q) Each of the Company and its Subsidiaries owns all rights to or has
adequate licenses or other rights to use all of the patents, trademarks,
service marks, trade names and copyrights necessary to conduct its respective
business described in the Registration Statement and Prospectus,

<PAGE>

except where the failure to own or possess or have the ability to acquire any
of the foregoing would not have a Material Adverse Effect and neither the
Company nor any of its Subsidiaries has received notice of any conflict with
the asserted rights of others with respect to any patents, trademarks,
service marks, trade names or copyrights, the result of which conflict is
reasonably likely to result in a Material Adverse Effect.

(r) This Agreement has been duly authorized, executed and delivered by
the Company.

(s) Deloitte & Touche LLP, who has certified the financial statements
included in the Registration Statement and the Prospectus, is an independent
public accountant with respect to the Company and its Subsidiaries.

(t) The consolidated financial statements, together with related notes
thereto, included in the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly in all material respects the
consolidated financial position and the results of operations and changes in
financial position of the Company and its Subsidiaries on the basis stated in
the Registration Statement and Prospectus at the respective dates or for the
respective periods to which they apply; such statements and related notes
have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein. The other financial and statistical information and data
set forth in the Registration Statement and the Prospectus (and any amendment
or supplement thereto) are based on or derived from sources which the Company
believes to be reliable and accurate.

(u) The pro forma financial information included in the Registration
Statement and Prospectus (A) present fairly in all material respects the
information shown therein and (B) have been prepared in accordance with
applicable requirements of Regulation S-X promulgated under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"). The assumptions used
in the preparation of the pro forma financial statements included in the
Registration Statement and Prospectus are reasonable and the adjustments used
therein are appropriate to give effect to the transactions or circumstances
referred to therein.

(v) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined within the meaning of the Investment Company Act of 1940, as amended.

(w) Other than as otherwise disclosed in the Registration Statement and
Prospectus, there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company
to file a registration statement under the Act with respect to any securities
of the Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement.

(x) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there has not occurred any material adverse change or any

<PAGE>

development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations
of the Company and the Partnership, taken as a whole, which would have a
Material Adverse Effect and (ii) other than in the ordinary course of
business, neither the Company nor any of its Subsidiaries has incurred any
material liability or obligation, direct or contingent.

(y) Each certificate signed by any officer of the Company and delivered
to the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.

SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLING
STOCKHOLDERS. Each Selling Stockholder represents and warrants to each
Underwriter that:

(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on
the Closing Date and any Option Closing Date will have, good and clear title
to such Shares, free of all restrictions on transfer, liens, encumbrances,
security interests, equities and claims whatsoever.

(b) The Shares to be sold by such Selling Stockholder have been duly
authorized and validly issued and are fully paid, non-assessable and were not
issued in violation of any preemptive or similar rights.

(c) Such Selling Stockholder has, and on the Closing Date and any
Option Closing Date will have, full legal right, power and authority, and all
authorization and approval required by law, to enter into this Agreement, and
to sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder in the manner provided herein.

(d) This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Stockholder.

(e) Upon delivery of the Shares to be sold by each of the Selling
Stockholders pursuant hereto and payment therefor in accordance with this
Agreement, and, assuming the Underwriters are acquiring the Shares in good
faith without notice of any adverse claim, within the meaning of the Uniform
Commercial Code as in effect in the State of New York, the Underwriters will
be the owner of the Shares free and clear of all liens, encumbrances, and
charges whatsoever, arising as a result of action by the Selling Stockholders.

(f) The execution, delivery and performance of this Agreement by or on
behalf of such Selling Stockholder, the compliance by such Selling
Stockholder with all the provisions hereof and the consummation of the
transactions contemplated hereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the organizational documents of such Selling Stockholder, if such Selling
Stockholder is not an individual, or any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder or any property of

<PAGE>

such Selling Stockholder is bound and which is material to the business of
such Selling Stockholder or (iii) violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over such Selling Stockholder
or any property of such Selling Stockholder.

(g) The information in the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relates to such
Selling Stockholder does not, and will not on the Closing Date or any Option
Closing Date, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.

(h) At any time during the period described in Section 5(d), if there
is any change in the information referred to in Section 7(g), such Selling
Stockholder will immediately notify you of such change.

(i) Each certificate signed by or on behalf of such Selling Stockholder
and delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Stockholder to the
Underwriters as to the matters covered thereby.

(j) The Selling Stockholder is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.

SECTION 8. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless each Underwriter,
its directors, its officers and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto)
or any preliminary prospectus, or caused by any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company
by such Underwriter through you expressly for use therein; provided, however,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus (as then amended or supplemented, provided by the
Company to the several Underwriters in the requisite quantity and on a timely
basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages and liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material

<PAGE>

misstatement or omission was cured in such Prospectus and such Prospectus was
required by law to be delivered at or prior to the written confirmation of
sale to such person.

(b) Each of the Selling Stockholders agrees, jointly and severally, to
indemnify and hold harmless each Underwriter, its directors, its officers and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to such Selling Stockholder furnished in
writing by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus.
Notwithstanding the foregoing, the aggregate liability of each Selling
Stockholder pursuant to the provisions of this paragraph shall be limited to
an amount equal to the total proceeds (before deducting underwriting
discounts and commissions and expenses) received by such Selling Stockholder
from the sale of its Shares hereunder; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not
inure to the benefit of any Underwriter who failed to deliver a Prospectus
(as then amended or supplemented, provided by the Company to the several
Underwriters in the requisite quantity and on a timely basis to permit proper
delivery on or prior to the Closing Date) to the persons asserting any such
losses, claims, damages and liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such material misstatement or
omission or alleged material misstatement or omission was cured in such
Prospectus and such Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person.

(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
Selling Stockholder and each person, if any, who controls such Selling
Stockholder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Sellers
to such Underwriter but only with reference to information relating to such
Underwriter furnished in writing to the Company by such Underwriter through
you expressly for use in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto), or any
preliminary prospectus.

(d) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Sections 8(a), 8(b) or
8(c) (the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify
the person against whom such indemnity may be sought (the "INDEMNIFYING
PARTY") in writing and the indemnifying party shall assume the defense of
such action, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all reasonable fees and expenses of
such counsel, as incurred (except that in the case of any action in respect
of which indemnity may be sought pursuant to Sections 8(a), 8(b) and 8(c),
the Underwriter shall not be required to assume the defense of such action
pursuant to this Section 8(d), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and

<PAGE>

participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the
indemnifying party, and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the indemnified party). In any such case,
the indemnifying party shall not, in connection with any one action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for (i) subject to the limitations of the previous sentence, the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all Underwriters, their officers and
directors and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act,
(ii) the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for the Company, its directors,
its officers who sign the Registration Statement and all persons, if any, who
control the Company within the meaning of either such Section and (iii) the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all Selling Stockholders and all persons,
if any, who control any Selling Stockholder within the meaning of either such
Section, and all such reasonable fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the
Underwriters, their officers and directors and such control persons of any
Underwriters, such firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation. In the case of any such separate firm for
the Company and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. In the case of any
such separate firm for the Selling Stockholders and such control persons of
any Selling Stockholders, such firm shall be designated in writing by the
Selling Stockholders. The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action
(i) effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than forty (40) business days
after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the reasonable fees and expenses of
counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the
indemnifying party shall have failed to (a) comply with such reimbursement
request or (b) object in writing that such reimbursement is not appropriate
or reasonable. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement or compromise of, or consent
to the entry of judgment with respect to, any pending or threatened action in
respect of which the indemnified party is or could have been a party and
indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
on claims that are or could have been the subject matter of such

<PAGE>

action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.

(e) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers, on the one hand, and the Underwriters, on the other hand, from the
offering of the Shares or (ii) if the allocation provided by clause 8(e)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(e)(i) above but also the relative fault of the Sellers, on the one hand,
and the Underwriters, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Sellers, on the one hand, and the
Underwriters, on the other hand, shall be deemed to be in the same proportion
as the total net proceeds from the offering (after underwriting discounts and
commissions, but before deducting expenses) received by the Sellers, and the
total discounts and commissions received by the Underwriters, bear to the
total price to the public of the Shares, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Sellers,
on the one hand, and the Underwriters, on the other hand, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Selling
Stockholders, on the one hand, or the Underwriters, on the other hand, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(e) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 8(e) are several in proportion to the respective
number of Shares purchased by each of the Underwriters hereunder and not
joint.

<PAGE>

(f) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.

SECTION 9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares under this
Agreement are subject to the satisfaction of each of the following conditions:

(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date. The Company shall have
performed or complied in all material respects with all of the agreements
herein contained and required to be performed or complied with by the Company
at or prior to the Closing Date.

(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York
City time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.

(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the president or any vice president and the chief
financial, operating or accounting officer of the Company to the effect that:

(i) The representations and warranties of the Company contained in
this Agreement are true and correct in all material respects as of the date
of this Agreement and as of the Closing Date (except to the extent such
representations or warranties specifically relate to an earlier date and
time) and the Company has complied in all material respects with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied under this Agreement on or prior to the Closing Date;

(ii) At the Closing Date, since the respective dates as of which
information is given in the Registration Statement and Prospectus
(exclusively of any amendment or supplement after the date hereof), there
has not occurred any event or events that, individually or in the
aggregate, would have a Material Adverse Effect; and

(iii) To the best of such person's knowledge, the sale of the
Shares hereunder has not been enjoined (temporarily or permanently).

(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its Subsidiaries, taken
as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt
of the Company or any of its Subsidiaries and (iii) neither the Company

<PAGE>

nor any of its Subsidiaries shall have incurred any liability or obligation,
direct or contingent, the effect of which, in any such case described in
clause 9(d)(i), 9(d)(ii) or 9(d)(iii), in your judgment, is material and
adverse and, in your judgment, makes it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.

(e) All the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct on the Closing Date
with the same force and effect as if made on and as of the Closing Date, and
you shall have received on the Closing Date a certificate dated the Closing
Date from each Selling Stockholder to such effect and to the effect that such
Selling Stockholder has complied with all of the agreements and satisfied all
of the conditions herein contained and required to be complied with or
satisfied by such Selling Stockholder on or prior to the Closing Date.

(f) You shall have received on the Closing Date an opinion (as to the
matters set forth in Annex II attached hereto), dated the Closing Date or the
Option Closing Date, as the case may be, of Simpson Thacher & Bartlett,
counsel for the Company and the Selling Stockholders. The opinion of Simpson
Thacher & Bartlett shall be rendered to you at the request of the Company and
the Selling Stockholders and shall so state therein.

(g) You shall have received on the Closing Date an opinion (as to the
matters set forth in Annex III attached hereto), dated the Closing Date or
the Option Closing Date, as the case may be, of Piper & Marbury L.L.P.,
special Maryland counsel for the Company, with respect to the Company. The
opinion of Piper & Marbury L.L.P. shall be rendered to you at the request of
the Company and shall so state therein.

(h) You shall have received on the Closing Date or any Option Closing
Date, as the case may be, an opinion, dated the Closing Date or the Option
Closing Date, as the case may be, of Latham & Watkins, counsel for the
Underwriters, in form and substance reasonably satisfactory to the
Underwriters.

(i) You shall have received, on each of the date hereof and the Closing
Date a letter dated the date hereof or the Closing Date in form and substance
satisfactory to you from Deloitte & Touche LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information contained in the
Registration Statement and the Prospectus.

(j) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.

(k) The Shares shall have been duly listed, subject to notice of
issuance, on the NYSE.

(l) The Company and the Selling Stockholders shall not have failed on
or prior to the Closing Date, to perform or comply with any of the agreements
herein contained and required to be

<PAGE>

performed or complied with by the Company or the Selling Stockholders, as the
case may be, on or prior to the Closing Date.

The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to
the good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such
Additional Shares.

SECTION 10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This
Agreement shall become effective upon the execution and delivery of this
Agreement by the parties hereto.

This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment,
is material and adverse and, in your judgment, makes it impracticable to
market the Shares on the terms and in the manner contemplated in the
Prospectus, (ii) the suspension or material limitation of trading in
securities or other instruments on the New York Stock Exchange, the American
Stock Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange
or the Nasdaq National Market, (iii) the suspension of trading of any
securities of the Company on any exchange or in the over-the-counter market,
(iv) the enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely
affects, or will materially and adversely affect, the business, prospects,
financial condition or results of operations of the Company and the
Partnership, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action
by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse
effect on the financial markets in the United States.

If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not
more than one-tenth of the total number of Firm Shares or Additional Shares,
as the case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I
bears to the total number of Firm Shares which all the non-defaulting
Underwriters have agreed to purchase, or in such other proportion as you may
specify, to purchase the Firm Shares or Additional Shares, as the case may
be, which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number
of Firm Shares or Additional Shares, as the case may be, which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 10 by an amount in excess of one-ninth of such
number

<PAGE>

of Firm Shares or Additional Shares, as the case may be, without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased by all
Underwriters and arrangements satisfactory to you, the Company and the
Selling Stockholders for purchase of such Firm Shares are not made within 48
hours after such default, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter, the Company or the Selling
Stockholders. In any such case which does not result in termination of this
Agreement, either you or the Sellers shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect
to which such default occurs is more than one-tenth of the aggregate number
of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase such Additional Shares or (ii) purchase not less than
the number of Additional Shares that such non-defaulting Underwriters would
have been obligated to purchase on such date in the absence of such default.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.

SECTION 11. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder agrees with you and the Company:

(a) To pay or to cause to be paid all transfer taxes payable in
connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.

(b) To do and perform all things to be done and performed by such
Selling Stockholder under this Agreement prior to the Closing Date or any
Option Closing Date, as the case may be, and to satisfy all conditions
precedent to the delivery of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement.

SECTION 12. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to The
Boyds Collection, Ltd., 350 South Street, McSherrystown, PA 17344, (ii) if to
the Selling Stockholders, to Kohlberg Kravis Roberts & Co., 9 West 57th
Street, New York, NY 10019, Attention: Marc Lipschultz and (iii) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.

The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and
the several Underwriters set forth in or made pursuant to this Agreement
shall remain operative and in full force and effect, and will survive
delivery of and payment for the Shares, regardless of (i) any investigation,
or statement as to the results thereof, made by or on behalf of any
Underwriter, the officers or directors of any Underwriter, any person
controlling any Underwriter, the Company, the officers or directors of the

<PAGE>

Company, any person controlling the Company, any Selling Stockholder or any
person controlling such Selling Stockholder, (ii) acceptance of the Shares
and payment for them hereunder and (iii) termination of this Agreement.

If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply
with the terms or to fulfill any of the conditions of this Agreement, or if
for any reason any Seller shall be unable to perform its obligations under
this Agreement, the Sellers agree, jointly and severally, to reimburse the
several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination
of this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant to Section 5(i) hereof. The Sellers also agree,
jointly and severally, to reimburse the several Underwriters, their directors
and officers and any persons controlling any of the Underwriters for any and
all fees and expenses (including, without limitation, the fees disbursements
of counsel) incurred by them in connection with enforcing their rights
hereunder (including, without limitation, pursuant to Section 8 hereof).

Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Selling
Stockholders, the Underwriters, the Underwriters' directors and officers, any
controlling persons referred to herein, the Company's directors and the
Company's officers who sign the Registration Statement and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of
this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Shares from any of the several Underwriters merely
because of such purchase.

This Agreement shall be governed and construed in accordance with the
laws of the State of New York.

This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.

<PAGE>

Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.

Very truly yours,

THE BOYDS COLLECTION, LTD.

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

THE SELLING STOCKHOLDERS:

KKR 1996 FUND L.P.

By: KKR Associates 1996, L.P.,
general partner

By: KKR 1996 GP L.L.C.
general partner

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

KKR PARTNERS II, L.P.

By: KKR Associates (Strata), L.P.

By: Strata LLC
general partner

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

<PAGE>

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto

By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

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

<PAGE>

SCHEDULE I
----------

Underwriters Number of Shares
to be Purchased

Donaldson, Lufkin & Jenrette Securities
Corporation

Merrill Lynch, Pierce, Fenner & Smith
Incorporated

Total

<PAGE>

SCHEDULE II
-----------

Selling Stockholders
--------------------

Name Number of Firm
Shares Being Sold

KKR 1996 Fund L.P.

KKR Partners II, L.P.

Total

<PAGE>

Annex I

[Insert names of stockholders of the Company who will be required to sign
lock ups]

<PAGE>

Annex II
Opinion of Simpson Thacher & Bartlett

1. The Shares to be issued and sold by the Company have been duly
authorized and, upon payment and delivery in accordance with the
Underwriting Agreement, the Shares will be validly issued, fully paid and
nonassessable.

2. Each Selling Stockholder is the sole registered owner of the
Shares to be sold by such Selling Stockholder; each Selling Stockholder has
full partnership power, right and authority to enter into the Underwriting
Agreement and to sell such Shares and upon payment for and delivery of the
Shares in accordance with the Underwriting Agreement, the Underwriters will
acquire all of the rights of each Selling Stockholder in the Shares and
will also acquire their interest in such Shares free of any adverse claim.

3. The statements made under the caption "Description of Capital
Stock" in the Prospectus and Item 15 of Part II of the Registration
Statement, insofar as they purport to constitute summaries of the terms of
the Company's capital stock, constitute accurate summaries of the terms of
such capital stock in all material respects.

4. The Underwriting Agreement has been duly authorized, executed and
delivered by the Company and by or on behalf of each Selling Stockholder.

5. The issue and sale of the Shares by the Company, the execution
and delivery of the Underwriting Agreement by the Company and the
compliance by the Company with all of the provisions of the Underwriting
Agreement will not breach or result in a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
filed as an exhibit to the Registration Statement, nor will such action
violate any federal statute or any rule or regulation that has been issued
pursuant to any federal statute or any order known to us issued pursuant to
any federal statute or by any court or governmental agency or body or court
having jurisdiction over the Company or any of its subsidiaries or any of
their properties.

6. No consent, approval, authorization, order, registration or
qualification of or with any federal or New York governmental agency or
body or, to our knowledge, any federal or New York court is required for
the issue and sale of the Shares by the Company and the compliance by the
Company with all of the provisions of the Underwriting Agreement, except
for the registration under the Act and the Exchange Act of the Shares, and
such consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters.

7. The sale of the Shares by the Selling Stockholders, the execution
and delivery of the Underwriting Agreement by the Selling Stockholders and
the compliance by the Selling Stockholders with all of the provisions of
the Underwriting Agreement will not breach or result in a default under any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument identified on the annexed schedule furnished to us by the
Selling

<PAGE>

Stockholders and which each Selling Stockholder has represented lists all
material instruments to which such Selling Stockholder is a party or by
which such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action violate
the Partnership Agreements of any Selling Stockholder or any federal or New
York statute or the Delaware Revised Uniform Limited Partnership Act or any
order known to us issued pursuant to any federal or New York statute or the
Delaware Revised Uniform Limited Partnership Act by any court or
governmental agency or body or court having jurisdiction over any Selling
Stockholder or any of its properties.

8. No consent, approval, authorization, order, registration or
qualification of or with any federal or New York governmental agency or
body or any Delaware governmental agency or body acting pursuant to the
Delaware Revised Uniform Limited Partnership Act or, to our knowledge, any
federal or New York court or any Delaware court acting pursuant to the
Delaware Revised Uniform Limited Partnership Act is required for the issue
and sale of the Shares by the Selling Stockholders and the compliance by
the Selling Stockholders with all of the provisions of the Underwriting
Agreement, except for the registration under the Act and the Exchange Act
of the Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Shares by the
Underwriters.

9. The Registration Statement has become effective under the Act and
the Prospectus was filed on ________, 19__ pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act and, to our
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued or proceeding for that purpose has been
instituted or threatened by the Commission.

10. The Boyds Collection, Ltd., L.P., which is a subsidiary of the
Company, has been duly formed and is validly existing as a limited
partnership in good standing under the laws of its jurisdiction of
formation and has full partnership power and authority to conduct its
business as described in the Registration Statement and Prospectus.

11. The Company is not an "investment company" within the meaning of
and subject to regulation under the Investment Company Act of 1940, as
amended.

12. We have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration Statement
or the Prospectus and take no responsibility therefor, except as and to the
extent set forth in paragraph 3 above. In the course of the preparation by
the Company of the Registration Statement and the Prospectus, we
participated in conferences with certain officers and employees of the
Company and with representatives of Deloitte & Touche LLP and with special
Maryland counsel to the Company. Based upon our examination of the
Registration Statement and the Prospectus, our investigations made in
connection with the preparation of the Registration Statement and the
Prospectus and our participation in the conferences referred to above, (i)
we are of the opinion that the Registration Statement, as of its effective
date, and the Prospectus, as of

<PAGE>

____________, 1999, complied as to form in all material respects with the
requirements of the Act and the applicable rules and regulations of the
Commission thereunder, except that in each case we express no opinion with
respect to the financial statements or other financial data contained in
the Registration Statement or the Prospectus, and (ii) we have no reason to
believe that the Registration Statement, as of its effective date,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading or that the Prospectus contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that in
each case we express no belief with respect to the financial statements or
other financial data contained in the Registration Statement or the
Prospectus.

The opinion of Simpson Thacher & Bartlett is rendered at the request of the
Company and the Selling Stockholders.

<PAGE>

Annex III
Opinion of Piper & Marbury L.L.P.

1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland and has all
requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus.

2. The Shares to be issued and sold by the Company have been duly
authorized and, when issued and delivered to the Underwriters against
payment therefor as provided by this Agreement, will be validly issued,
fully paid and non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights created under the charter of
the Company or the Maryland General Corporation Law.

3. This Agreement has been duly authorized, executed and delivered
by the Company.

4. The authorized capital stock of the Company conforms as to legal
matters to the description thereof under the caption "Description of
Capital Stock" contained in the Prospectus.

5. The issue and sale of the Shares and the execution, delivery and
performance of the Underwriting Agreement by the Company, compliance by the
Company with all the provisions hereof and thereof and the consummation of
the transactions contemplated hereby and thereby will not conflict with,
constitute a default under or violate (i) any of the terms, conditions or
provisions of the charter or by-laws of the Company or (ii) to our
knowledge, any judgment writ, injunction, decree, order or ruling of any
Maryland court or Maryland governmental authority binding on the Company or
any of its respective properties except, in the case of (ii), for such
conflicts, defaults or violations that would not have a Material Adverse
Effect.

6. All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights created
under the charter of the Company or the Maryland General Corporation Law.

7. No consent, approval authorization or order of, or filing or
qualification with, any Maryland governmental agency or body acting
pursuant to the Maryland General Corporation Law or, to our knowledge, any
Maryland Court acting pursuant to the Maryland General Corporation Law, is
required in connection with the issue and sale of the Shares by the Company
or the sale of the Shares by the Selling Stockholders pursuant to the
Underwriting Agreement, except such as may be required under state
securities law, as to which we express no opinion, and those that have
already been obtained.

8. The statements in the Registration Statement and Prospectus under
the caption "Selected Provisions of Maryland Law and of Boyds' Charter and
Bylaws" and Item 14 of Part II of the Registration

<PAGE>

Statement insofar as they purport to constitute summaries of the documents
therein and the laws and regulations or legal conclusions with respect
thereto, constitute accurate summaries of such documents and the matters
described therein in all material respects.

The opinion of Piper & Marbury L.L.P. is rendered at the request of the
Company.

<PAGE>
Exhibit 10.1

================================================================================

U.S.$365,000,000

CREDIT AGREEMENT

DATED AS OF APRIL 21, 1998

AMONG

THE BOYDS COLLECTION, LTD.,
AS BORROWER,

THE LENDERS LISTED HEREIN,
AS LENDERS,

DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,

THE FUJI BANK, LIMITED
NEW YORK BRANCH,
AS DOCUMENTATION AGENT,

AND

FLEET NATIONAL BANK,
AS ADMINISTRATIVE AGENT.

================================================================================

ARRANGED BY:
-----------
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION

<PAGE>

THE BOYDS COLLECTION, LTD.

CREDIT AGREEMENT

TABLE OF CONTENTS

Page

SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . .2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement . . . . . . . . . . . . . . . . . . . . . . . . 34
1.3 Other Definitional Provisions and Rules of Construction. . . . . 35

SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . . 35
2.1 Commitments; Making of Loans; the Register; Notes. . . . . . . . 35
2.2 Interest on the Loans. . . . . . . . . . . . . . . . . . . . . . 42
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral and Payments Under the
Guaranties.. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.5 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 53
2.6 Special Provisions Governing LIBOR Loans.. . . . . . . . . . . . 53
2.7 Increased Costs; Capital Adequacy. . . . . . . . . . . . . . . . 55
2.8 Notice of Certain Costs; Obligation of Lenders and Issuing
Lenders to Mitigate. . . . . . . . . . . . . . . . . . . . . . . 60
2.9 Defaulting Lenders.. . . . . . . . . . . . . . . . . . . . . . . 61
2.10 Removal or Replacement of a Lender.. . . . . . . . . . . . . . . 62

SECTION 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . 64
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein . . . . . . . . . . . . . . . . . . . . . 64
3.2 Letter of Credit Fees. . . . . . . . . . . . . . . . . . . . . . 67
3.3 Drawings and Reimbursement of Amounts Paid Under
Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 68
3.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 70
3.5 Indemnification; Nature of Issuing Lenders' Duties . . . . . . . 71
3.6 Increased Costs and Taxes Relating to Letters of Credit. . . . . 72

SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT. . . . . . . . . . . 73
4.1 Conditions to Initial Loans. . . . . . . . . . . . . . . . . . . 74
4.2 Conditions to All Loans. . . . . . . . . . . . . . . . . . . . . 78
4.3 Conditions to Letters of Credit. . . . . . . . . . . . . . . . . 78

<PAGE>

Page

SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 79
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries. . . . . . . . . . . . . . . . . . . . 79
5.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . 80
5.3 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . 80
5.4 No Material Adverse Effect.. . . . . . . . . . . . . . . . . . . 81
5.5 Title to Properties; Liens.. . . . . . . . . . . . . . . . . . . 81
5.6 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . . 81
5.7 Payment of Taxes.. . . . . . . . . . . . . . . . . . . . . . . . 81
5.8 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . 82
5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 82
5.10 Environmental Protection . . . . . . . . . . . . . . . . . . . . 83
5.11 Disclosure.. . . . . . . . . . . . . . . . . . . . . . . . . . . 83

SECTION 6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 84
6.1 Financial Statements and Other Reports.. . . . . . . . . . . . . 84
6.2 Corporate Existence, etc.. . . . . . . . . . . . . . . . . . . . 87
6.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . 88
6.4 Maintenance of Properties; Insurance.. . . . . . . . . . . . . . 88
6.5 Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . 88
6.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . 89
6.7 Execution of Subsidiary Guaranty by Future Domestic
Subsidiaries; Pledge of Stock of Future Direct Subsidiaries;
Ratable Credit Support . . . . . . . . . . . . . . . . . . . . . 89
6.8 Transactions with Affiliates.. . . . . . . . . . . . . . . . . . 90
6.9 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 90
6.10 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 90
6.11 Conveyance of Assets . . . . . . . . . . . . . . . . . . . . . . 90

SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 90
7.1 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2 Liens and Related Matters. . . . . . . . . . . . . . . . . . . . 92
7.3 Investments; Joint Ventures. . . . . . . . . . . . . . . . . . . 93
7.4 Guarantee Obligations. . . . . . . . . . . . . . . . . . . . . . 94
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . 95
7.6 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . 96
7.7 Restriction on Certain Fundamental Changes; Asset Sales and
Acquisitions.. . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.8 Consolidated Capital Expenditures. . . . . . . . . . . . . . . . 98
7.9 Amendments of Documents Relating to Subordinated Indebtedness. . 99

SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 99
8.1 Failure to Make Payments When Due. . . . . . . . . . . . . . . . 99

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<PAGE>

Page

8.2 Default in Other Agreements. . . . . . . . . . . . . . . . . . . 99
8.3 Breach of Certain Covenants. . . . . . . . . . . . . . . . . . .100
8.4 Breach of Warranty.. . . . . . . . . . . . . . . . . . . . . . .100
8.5 Other Defaults Under Loan Documents. . . . . . . . . . . . . . .100
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.. . . . . .100
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.. . . . . . .101
8.8 Judgments and Attachments. . . . . . . . . . . . . . . . . . . .101
8.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
8.10 Change of Control. . . . . . . . . . . . . . . . . . . . . . . .101
8.11 Material Invalidity of Guaranties; Material Failure of Security;
Repudiation of Obligations . . . . . . . . . . . . . . . . . . .101

SECTION 9. AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .103
9.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . .103
9.2 Powers and Duties; General Immunity. . . . . . . . . . . . . . .103
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.. . . . . . . . . . . . . . . . . . . . . . . .105
9.4 Right to Indemnity.. . . . . . . . . . . . . . . . . . . . . . .105
9.5 Successor Agents and Swing Line Lender.. . . . . . . . . . . . .106
9.6 Collateral Documents and Guaranties. . . . . . . . . . . . . . .106

SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .107
10.1 Assignments and Participations in Loans and Letters of Credit. .107
10.2 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . .110
10.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . .111
10.4 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . .112
10.5 Ratable Sharing. . . . . . . . . . . . . . . . . . . . . . . . .112
10.6 Amendments and Waivers.. . . . . . . . . . . . . . . . . . . . .113
10.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
10.8 Survival of Representations, Warranties and Agreements.. . . . .115
10.9 Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . .115
10.10 Marshalling; Payments Set Aside. . . . . . . . . . . . . . . . .115
10.11 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . .116
10.12 Obligations Several; Independent Nature of Lenders' Rights.. . .116
10.13 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . .116
10.14 Applicable Law.. . . . . . . . . . . . . . . . . . . . . . . . .116
10.15 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . .116
10.16 Consent to Jurisdiction and Service of Process . . . . . . . . .117
10.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . .117
10.18 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . .118
10.19 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . .118
10.20 Other Transactions.. . . . . . . . . . . . . . . . . . . . . . .119

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<PAGE>

10.21. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . .119

Signature pages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1

EXHIBITS

I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT
IV FORM OF TRANCHE A TERM NOTE
V FORM OF TRANCHE B TERM NOTE
VI FORM OF REVOLVING NOTE
VII FORM OF SWING LINE NOTE
VIII FORM OF OFFICER'S CLOSING DATE CERTIFICATE
IX FORM OF COMPLIANCE CERTIFICATE
X-A FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER AND FLOM, NEW YORK COUNSEL
X-B FORM OF OPINION OF SIMPSON THACHER & BARTLETT, NEW YORK COUNSEL TO LOAN
PARTIES
X-C FORM OF OPINION OF BALLARD SPAHR ANDREWS & INGERSOLL, MARYLAND COUNSEL TO
BORROWER
XI FORM OF ASSIGNMENT AGREEMENT
XII FORM OF CERTIFICATE RE NON-BANK STATUS
XIII FORM OF MASTER PLEDGE AGREEMENT
XIV FORM OF SUBSIDIARY GUARANTY

SCHEDULES

2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
5.6 LITIGATION
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING GUARANTEE OBLIGATIONS

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<PAGE>
CREDIT AGREEMENT

This CREDIT AGREEMENT is dated as of April 21, 1998 and entered into
by and among THE BOYDS COLLECTION, LTD., a Maryland corporation ("BORROWER"),
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "LENDER" and collectively as "LENDERS"),
DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent (in such capacity,
"SYNDICATION AGENT"), THE FUJI BANK, LIMITED NEW YORK BRANCH ("FUJI"), as
documentation agent for Lenders (in such capacity, "DOCUMENTATION AGENT"), and
FLEET NATIONAL BANK ("FLEET"), as administrative agent for Lenders (in such
capacity, "ADMINISTRATIVE AGENT").

RECITALS

WHEREAS, Bear (this and other capitalized terms used in these recitals
without definition being used as defined in subsection 1.1) has been formed by
KKR and its Affiliates for the purpose of acquiring, in the aggregate, not less
than 80% of the Shares;

WHEREAS, on or before the Closing Date, KKR and its Affiliates will
make a cash investment in Bear of not less than $184,000,000 in gross cash
proceeds (the "BEAR EQUITY AMOUNT") in consideration for all of the outstanding
common stock of Bear;

WHEREAS, on the Closing Date, (i) in connection with the
Recapitalization, (a) Borrower will repurchase $473,000,000 of the Shares and
(b) Existing Shareholders will retain $229,000,000 of the Shares, in each case
in accordance with the terms of the Recapitalization Agreement, (ii) Bear will
purchase from Existing Shareholders approximately 80% of the aggregate amount of
the Shares for cash in an amount equal to $184,000,000 and Existing Shareholders
will retain approximately 20% of the Shares valued at $45,000,000, and (iii)
Borrower will issue and sell not less than approximately $165,000,000 in
aggregate principal amount of Senior Subordinated Debt;

WHEREAS, Lenders have agreed to extend certain credit facilities to
Borrower, the proceeds of which will be used (i) together with the proceeds of
the issuance and sale of the Senior Subordinated Debt and the proceeds of the
Bear Equity Amount, to fund that portion of the Recapitalization Financing
Requirements required to be funded on the Closing Date, and (ii) to provide
financing for working capital and other general corporate purposes of Borrower
and its Subsidiaries; and

WHEREAS, Borrower desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a first priority pledge of (i) 100% of the capital stock (or other
equivalent equity interest) of each of its direct Domestic Subsidiaries and (ii)
65% of the capital stock (or other equivalent equity interest) of each of its
direct Material Foreign Subsidiaries;

<PAGE>

NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Lenders, Syndication Agent,
Documentation Agent and Administrative Agent agree as follows:

SECTION 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . .DEFINITIONS

1.1 CERTAIN DEFINED TERMS.

The following terms used in this Agreement shall have the following
meanings:

"ACQUISITION" means the acquisition by Borrower or any of its
Subsidiaries (by purchase or otherwise) of all or substantially all of the
business, property or fixed assets of, or the stock or other evidence of
beneficial ownership of, any Person or any division, business unit or line of
business of any Person.

"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.

"ADMINISTRATIVE AGENT FEE LETTER" means that certain Fee Letter dated
April 21, 1998 of Administrative Agent to Borrower and accepted by Borrower on
April 21, 1998.

"AFFECTED LENDER" has the meaning assigned to that term in subsection
2.6C.

"AFFILIATE", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to (i) vote 10% or more of the Voting Stock of such
Person or (ii) direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise.

"AGENTS" shall mean Syndication Agent and Administrative Agent.

"AGREEMENT" means this Credit Agreement dated as of the date hereof,
as it may be amended, supplemented or otherwise modified from time to time.

"APPLICABLE COMMITMENT FEE PERCENTAGE" means with respect to any date
of determination, a rate per annum equal to the percentage set forth below
opposite the Applicable Leverage Ratio in effect as of such date of
determination, any change in the Applicable Commitment Fee Percentage to be
effective on the date of any corresponding change in the Applicable Leverage
Ratio:

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<PAGE>

APPLICABLE LEVERAGE RATIO APPLICABLE COMMITMENT FEE PERCENTAGE

6.25:1.00 or greater 0.50%

5.50:1.00 or greater, but
less than 6.25:1.00 0.425%

5.00:1.00 or greater, but
less than 5.50:1.00 0.375%

4.50:1.00 or greater, but
less than 5.00:1.00 0.375%

4.00:1.00 or greater, but
less than 4.50:1.00 0.350%

3.50:1.00 or greater, but
less than 4.00:1.00 0.300%

less than 3.50:1.00 0.250%

"APPLICABLE LEVERAGE RATIO" means with respect to any date of
determination, the Consolidated Leverage Ratio set forth in the Pricing
Certificate (as defined below) in effect for the Pricing Period (as defined
below) in which such date of determination occurs. For purposes of this
definition, (i) "PRICING CERTIFICATE" means an Officer's Certificate of Borrower
certifying as to the Consolidated Leverage Ratio as of the last day of any
Fiscal Quarter and setting forth the calculation of such Consolidated Leverage
Ratio in reasonable detail, which Officer's Certificate may be delivered to
Agents at any time on or after the date of delivery by Borrower of the
Compliance Certificate (the "RELATED COMPLIANCE CERTIFICATE") with respect to
the period ending on the last day of such Fiscal Quarter pursuant to subsection
6.1(iii), and (ii) "PRICING PERIOD" means each period commencing on the first
Business Day after the delivery to Agents of a Pricing Certificate and ending on
the first Business Day after the next Pricing Certificate is delivered to
Agents; PROVIDED that, anything contained in this definition to the contrary
notwithstanding, (a) the Pricing Certificate in respect of the first Pricing
Period may be delivered at any time on or after the date upon which the
Compliance Certificate for the first Fiscal Quarter following the Closing Date
is delivered or required to be delivered by Borrower to Agents pursuant to
subsection 6.1(iii) and shall relate to the most recent financial statements
delivered by Borrower to Agents pursuant to subsection 6.1(i), (b) the
Applicable Leverage Ratio for the period from the Closing Date to but excluding
the date of commencement of such first Pricing Period shall be deemed to be
5.50:1.00, and (c) in the event that, after the commencement of the first
Pricing Period, (X) Borrower fails to deliver a Pricing Certificate to Agents
setting forth the Consolidated Leverage Ratio as of the last day of any Fiscal
Quarter on or before the last day (the "CUTOFF DATE") on which Borrower is
required to deliver the Related Compliance Certificate and (Y) Administrative
Agent determines (each such determination being an "AGENT

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<PAGE>

DETERMINATION") on or after the Cutoff Date (on the basis of the Related
Compliance Certificate or a Pricing Certificate delivered after the Cutoff Date)
that the Applicable Leverage Ratio that would have been in effect if Borrower
had delivered a Pricing Certificate on the Cutoff Date is greater than the
Consolidated Leverage Ratio set forth in the most recent Pricing Certificate
actually delivered by Borrower, then (1) the Applicable Leverage Ratio in effect
for the period from the Cutoff Date to the date of delivery by Borrower of the
next Pricing Certificate (or, if earlier, the next date on which an Agent
Determination is made) shall be the Consolidated Leverage Ratio determined
pursuant to the Agent Determination and (2) on the first Business Day after
Administrative Agent delivers written notice to Borrower of any Agent
Determination, Borrower shall pay to Administrative Agent, for distribution (as
appropriate) to Lenders, an aggregate amount equal to the additional interest,
letter of credit fees and commitment fees Borrower would have been required to
pay in respect of all Loans, Letters of Credit or Commitments in respect of
which any interest or fees have been paid by Borrower during the period from the
Cutoff Date to the date such notice is given by Administrative Agent to Borrower
if the amount of such interest and fees had been calculated using the Applicable
Leverage Ratio based on such Agent Determination.

"APPLICABLE TRANCHE A BASE RATE MARGIN" means with respect to any date
of determination, a rate per annum equal to the percentage set forth below
opposite the Applicable Leverage Ratio in effect as of such date of
determination, any change in any such Applicable Tranche A Base Rate Margin to
be effective on the date of any corresponding change in the Applicable Leverage
Ratio:

APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE A BASE RATE MARGIN

5.50:1.00 or greater 1.000%

5.00:1.00 or greater, but
less than 5.50:1.00 0.750%

4.50:1.00 or greater, but
less than 5.00:1.00 0.325%

4.00:1.00 or greater, but
less than 4.50:1.00 0.125%

3.50:1.00 or greater, but
less than 4.00:1.00 0.000%

3.00:1.00 or greater, but
less than 3.50:1.00 0.000%

less than 3.00:1.00 0.000%

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<PAGE>

"APPLICABLE TRANCHE A LIBOR MARGIN" means, at any date of
determination, a rate per annum equal to the percentage set forth below opposite
the Applicable Leverage Ratio in effect as of such date of determination, any
change in any such Applicable Tranche A LIBOR Margin to be effective on the date
of any corresponding change in the Applicable Leverage Ratio:

APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE A LIBOR MARGIN

5.50:1.00 or greater 2.250%

5.00:1.00 or greater, but
less than 5.50:1.00 2.000%

4.50:1.00 or greater, but
less than 5.00:1.00 1.625%

4.00:1.00 or greater, but
less than 4.50:1.00 1.375%

3.50:1.00 or greater, but
less than 4.00:1.00 1.125%

3.00:1.00 or greater, but
less than 3.50:1.00 0.875%

less than 3.00:1.00 0.625%

"APPLICABLE TRANCHE B BASE RATE MARGIN" means, at any date of
determination, a rate per annum equal to the percentage set forth below opposite
the Applicable Leverage Ratio in effect as of such date of determination, any
change in any such Applicable Tranche B Base Rate Margin to be effective on the
date of any corresponding change in the Applicable Leverage Ratio:

APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE B BASE RATE MARGIN

5.00:1.00 or greater 1.250%

4.00:1.00 or greater, but
less than 5.00:1.00 1.000%

less than 4.00:1.00 0.750%

"APPLICABLE TRANCHE B LIBOR MARGIN" means, at any date of
determination, a rate per annum equal to the percentage set forth below opposite
the Applicable Leverage Ratio in effect as of such date of determination, any
change in any such Applicable Tranche B LIBOR

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<PAGE>

Margin to be effective on the date of any corresponding change in the Applicable
Leverage Ratio:

APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE B LIBOR MARGIN

5.00:1.00 or greater 2.500%

4.00:1.00 or greater, but
less than 5.00:1.00 2.250%

less than 4.00:1.00 2.000%

"ASSET SALE" means the sale by Borrower or any of its Subsidiaries to
any Third Party of (i) any of the stock or other ownership interests of any of
Borrower's Subsidiaries, (ii) substantially all of the assets of any division or
line of business of Borrower or any of its Subsidiaries, or (iii) any other
assets (whether tangible or intangible) of Borrower or any of its Subsidiaries
outside of the ordinary course of business (other than any other such assets to
the extent that the aggregate value of such assets sold in any single
transaction or related series of transactions is equal to $250,000 or less).

"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially
the form of EXHIBIT XI annexed hereto.

"AVAILABLE AMOUNT" means, as of any date of determination, an amount
equal to (i) the aggregate amount of net cash proceeds received by Borrower
after the Closing Date in respect of any equity contributions made to Borrower
by, or any issuances of equity Securities by Borrower to, any Third Party other
than an Unrestricted Subsidiary (other than proceeds from purchases of capital
stock of Borrower to the extent such purchases are financed with the proceeds of
Investments permitted under subsection 7.3(ii)) PLUS (ii) the aggregate amount
of Retained Excess Cash Flow (as defined in subsection 2.4B(iii)(b)) as of such
date PLUS (iii) the aggregate amount of Retained Prepayments (as defined in
subsection 2.4B(iv)(c)) as of such date MINUS (iv) any proceeds received by
Borrower from the issuance of new shares of its common stock to the extent such
proceeds are used as provided in subsection 7.5(iii).

"AVAILABLE AMOUNT USAGE" means, as of any date of determination, an
amount equal to the sum of (i) the aggregate amount of Investments made pursuant
to subsection 7.3(v)(b) as of such date PLUS (ii) the aggregate amount of
Restricted Junior Payments made pursuant to subsection 7.5(ii) on or prior to
such date (other than any such Restricted Junior Payments made pursuant to a
Refinancing (as defined in the definition of "Refinancing Sub Debt")) PLUS (iii)
the aggregate amount of any Refinancing Premiums (as defined in the definition
of "Refinancing Sub Debt") paid by Borrower on or prior to such date.

"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.

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<PAGE>

"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.

"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.

"BEAR" means Bear Acquisition, Inc., a Delaware corporation.

"BEAR EQUITY AMOUNT" has the meaning assigned to that term in the
recitals to this Agreement.

"BORROWER" has the meaning assigned to that term in the introduction
to this Agreement.

"BUSINESS DAY" means, for all purposes other than as covered by clause
(ii) below, (i) any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of New York City, New York or Boston, Massachusetts or is
a day on which banking institutions located in such state are authorized or
required by law or other governmental action to close and, (ii) with respect to
all notices, determinations, fundings and payments in connection with LIBOR or
any LIBOR Loans, any day that is a Business Day described in clause (i) above
and that is also (a) a day for trading by and between banks in Dollar deposits
in the London interbank market and (b) a day on which banking institutions are
open for business in London.

"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.

"CASH" means money, currency or a credit balance in a Deposit Account.

"CASH EQUIVALENTS" means (i) marketable securities (a) issued or
directly and unconditionally guaranteed as to interest and principal by the
United States Government or (b) issued by any agency of the United States the
obligations of which are backed by the full faith and credit of the United
States, in each case maturing within 24 months after the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within 24 months after the date
of acquisition thereof and having, at the time of the acquisition thereof, an
investment grade rating generally obtainable from either Standard & Poor's
Ratings Group ("S&P") or Moody's Investors Service, Inc. ("MOODY'S"); (iii)
commercial paper maturing no more than 12 months from the date of creation
thereof and having, at the time of the acquisition thereof, a rating of at least
A-2 from S&P or at least P-2 from Moody's; (iv) domestic and eurodollar
certificates of deposit or bankers' acceptances maturing within 24 months after
the date of acquisition thereof and issued or accepted by any Lender or by any
other commercial bank that has combined capital and surplus of not less than
$250,000,000; (v) repurchase agreements with a term of not more than 30 days for
underlying

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<PAGE>

securities of the types described in clauses (i), (ii) and (iv) above entered
into with any commercial bank meeting the requirements specified in clause (iv)
above or with any securities dealer of recognized national standing; (vi) shares
of investment companies that are registered under the Investment Company Act of
1940, as amended and that invest solely in one or more of the types of
investments referred to in clauses (i) through (v) above; and (vii) in the case
of any Foreign Subsidiary, high quality, short-term liquid Investments made by
such Foreign Subsidiary in the ordinary course of managing its surplus cash
position in a manner consistent with past practices.

"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in
the form of EXHIBIT XII annexed hereto delivered by a Lender to Administrative
Agent pursuant to subsection 2.7B(iv).

"CHANGE OF CONTROL" means, and shall be deemed to have occurred, if:
(i)(a) KKR, its Affiliates and the Management Group shall at any time not own,
in the aggregate, directly or indirectly, beneficially and of record, at least
35% of the outstanding Voting Stock of Borrower (other than as the result of one
or more widely distributed offerings of common stock of Borrower, in each case
whether by Borrower or by KKR, its Affiliates or the Management Group) and/or
(b) any person, entity or "group" (within the meaning of Section 13(d) or 14(d)
of the Exchange Act) shall at any time have acquired direct or indirect
beneficial ownership of a percentage of the outstanding Voting Stock of Borrower
that exceeds the percentage of such Voting Stock then beneficially owned, in the
aggregate, by KKR, its Affiliates and the Management Group, UNLESS, in the case
of either clause (a) or (b) above, KKR, its Affiliates and the Management Group
shall, at the relevant time, have the collective right or ability, either by
contract or pursuant to a written proxy or other written evidence of voting
power, to elect or designate for election a majority of the Board of Directors
of Borrower; and/or (ii) at any time Continuing Directors shall not constitute a
majority of the Board of Directors of Borrower. For purposes of this
definition, "CONTINUING DIRECTOR" means, as of any date of determination, an
individual (A) who is a member of the Board of Directors of Borrower on the
Closing Date, (B) who, as of such date of determination, has been a member of
such Board of Directors for at least the 12 preceding months (or, if such date
of determination occurs during the period comprising the first 12 months after
the Closing Date, since the Closing Date), or (C) who has been nominated to be a
member of such Board of Directors, directly or indirectly, by KKR or Persons
nominated by KKR or who has been nominated to be a member of such Board of
Directors by a majority of the other Continuing Directors then in office.

"CLASS" means, as applied to Lenders, each of the following three
classes of Lenders: (i) Lenders having Revolving Loan Exposure, (ii) Lenders
having Tranche A Term Loan Exposure and (iii) Lenders having Tranche B Term Loan
Exposure.

"CLOSING DATE" means the date on or before June 30, 1998 (which shall
be a Business Day), on which the initial Loans are made.

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<PAGE>

"COLLATERAL" means all of the personal property (including capital
stock (or other equivalent equity interest)) in which Liens are purported to be
granted pursuant to the Collateral Documents as security for the Obligations.

"COLLATERAL DOCUMENTS" means the Pledge Agreements, this Agreement
(with respect to Section 8 hereof) and any security documents that may be
entered into from time to time after the Closing Date by any Subsidiary of
Borrower pursuant to subsection 6.7B or by Borrower pursuant to Section 8.

"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Borrower or
any of its Subsidiaries in the ordinary course of business of Borrower or such
Subsidiary.

"COMMITMENTS" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.

"COMMODITIES AGREEMENT" means any forward commodities contract,
commodities futures contract, commodities option contract or similar agreement
or arrangement to which Borrower or any of its Subsidiaries is a party.

"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT IX annexed hereto delivered to Agents and Lenders by Borrower
pursuant to subsection 6.1(iii).

"CONFIDENTIAL INFORMATION MEMORANDUM" means that certain Confidential
Information Memorandum relating to Borrower dated April, 1998.

"CONSOLIDATED ADJUSTED EBITDA" means, with respect to any Person for
any period, an amount equal to (i) Consolidated Net Income PLUS (ii) to the
extent the following items are deducted in calculating such Consolidated Net
Income, the sum, without duplication, of the amounts for such period of (a)
Consolidated Interest Expense, (b) taxes computed on the basis of income, (c)
total depreciation expense, (d) total amortization expense (including
amortization of deferred financing fees), (e) any expenses or charges incurred
in connection with any issuance of debt or equity Securities (including upfront
fees payable in respect of bank facilities), (f) any restructuring charges or
reserves, (g) any expenses or charges relating to the Recapitalization, (h) any
fees and expenses related to Acquisitions and Investments permitted hereunder,
(i) any other non-cash charges, (j) any deduction for minority interest expense,
and (k) any other non-recurring charges MINUS (iii) to the extent the following
items are added in calculating such Consolidated Net Income, the sum, without
duplication, of the amounts for such period of (a) any non-recurring gains, and
(b) any non-cash gains, all of the foregoing as determined on a consolidated
basis for such Person and its Subsidiaries in conformity with GAAP; PROVIDED
that (X) Consolidated Adjusted EBITDA of any Included Pro Forma Entity (other
than any Unrestricted Subsidiary redesignated as a Subsidiary of Borrower) shall
be increased (if positive)

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<PAGE>

or decreased (if negative) by any Pro Forma Adjustment applicable thereto and
(Y) Consolidated Adjusted EBITDA of Borrower and its Subsidiaries shall be
increased (if positive) or decreased (if negative) by the Net EBITDA Adjustment.

"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized as principal on the consolidated balance sheet of Borrower and its
Subsidiaries) by Borrower and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Borrower and its Subsidiaries; PROVIDED that Consolidated Capital
Expenditures shall not include (i) any such expenditures constituting all or a
portion of the purchase price in connection with any Acquisition, (ii) any such
expenditures made in connection with the replacement, substitution, repair or
restoration of any assets to the extent financed (a) with insurance proceeds
received by Borrower or any of its Subsidiaries on account of the loss of, or
any damage to, the assets being replaced, substituted for, repaired or restored
or (b) with the proceeds of any compensation awarded to Borrower or any of its
Subsidiaries as a result of the taking, by eminent domain or condemnation, of
the assets being replaced or substituted for, (iii) the purchase price of any
equipment that is purchased simultaneously with the trade-in of any existing
equipment by Borrower or any of its Subsidiaries to the extent that the gross
amount of such purchase price is reduced by any credit granted by the seller of
such equipment for such equipment being traded in, or (iv) the purchase price of
any property, plant or equipment purchased within one year of the consummation
of any Asset Sale or any other sale by Borrower or any of its Subsidiaries of
any other property, plant or equipment to the extent purchased with the Net
Asset Sale Proceeds of such Asset Sale or the proceeds of such other sale.

"CONSOLIDATED CURRENT ASSETS" means, as at any date of determination,
the total assets of Borrower and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP, EXCLUDING
Cash and Cash Equivalents.

"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Borrower and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, EXCLUDING the current portions of Funded Debt.

"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year, an amount
(if positive) equal to (i) the sum, without duplication, of the amounts for such
Fiscal Year of (a) Consolidated Net Income, (b) the amount of all non-cash
charges to the extent deducted in arriving at such Consolidated Net Income, (c)
any net decrease in Consolidated Working Capital since the end of the preceding
Fiscal Year, and (d) the aggregate net non-cash loss realized by Borrower and
its Subsidiaries in connection with the sale, lease, transfer or other
disposition of assets by Borrower and its Subsidiaries during such Fiscal Year
(other than sales in the ordinary course of business), to the extent deducted in
arriving at such Consolidated Net Income, MINUS (ii) the sum, without
duplication, of the amounts for such Fiscal Year of (a) the amount of all

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<PAGE>

non-cash credits to the extent added in arriving at such Consolidated Net
Income, (b) Consolidated Capital Expenditures actually paid in Cash during such
Fiscal Year (net of the principal amount of any Indebtedness incurred to finance
such Consolidated Capital Expenditures, whether incurred in such Fiscal Year or
in the immediately succeeding Fiscal Year), (c) the aggregate amount of all
prepayments of Revolving Loans and Swing Line Loans to the extent accompanied by
permanent reductions in the Revolving Loan Commitments, (d) the aggregate amount
of all principal payments in respect of any Indebtedness of Borrower or any of
its Subsidiaries (including the Term Loans and the principal component of any
payments in respect of Capital Leases), other than (1) any mandatory prepayments
of the Term Loans pursuant to subsection 2.4B(iii), (2) any prepayments of
Indebtedness with the proceeds of other Indebtedness, or (3) repayments in
respect of any revolving credit facility except to the extent there is a
permanent reduction in commitments thereunder in connection with such
repayments, (e) any net increase in Consolidated Working Capital since the end
of the preceding Fiscal Year, (f) the aggregate net non-cash gain realized by
Borrower and its Subsidiaries in connection with the sale, lease, transfer or
other disposition of assets by Borrower and its Subsidiaries during such Fiscal
Year (other than sales in the ordinary course of business), (g) the aggregate
amount of all Cash payments made by Borrower and its Subsidiaries in respect of
long-term liabilities of Borrower or any of its Subsidiaries other than
Indebtedness, (h) the aggregate amount of new Investments made in Cash in
accordance with subsection 7.3(v), (i) the aggregate amount of Cash
consideration paid in connection with any Acquisitions (net of any such
consideration paid out of any Net Asset Sale Proceeds), (j) the aggregate amount
of Restricted Junior Payments made in accordance with subsection 7.5(i) (to the
extent such Restricted Junior Payments are required by the terms of the
applicable management and/or employee stock plan, stock subscription agreement
or shareholder agreement), (ii) and (v), (k) the aggregate amount of any
expenditures actually made in Cash by Borrower and its Subsidiaries during such
Fiscal Year (including expenditures for the payment of financing fees) to the
extent such expenditures are not expensed during such Fiscal Year, (l) the
aggregate amount of any net currency gains realized by Borrower and its
Subsidiaries during such Fiscal Year that are prohibited from being repatriated
to the United States, and (m) the aggregate amount of any premium, make-whole or
penalty payments actually paid in cash during such Fiscal Year that are required
in connection with any prepayment of Indebtedness and that are accounted for by
Borrower as extraordinary items, all of the foregoing as determined on a
consolidated basis for Borrower and its Subsidiaries in accordance with GAAP.

"CONSOLIDATED GROSS SALES REVENUES" means, for any Fiscal Year, an
amount equal to gross sales revenues of Borrower and its Subsidiaries for such
Fiscal Year on a consolidated basis determined in conformity with GAAP; PROVIDED
that, for purposes of calculating such gross sales revenues, (i) the gross sales
revenues of any business acquired during such Fiscal Year in an Acquisition
permitted under subsection 7.7(ii) shall be determined on a pro forma basis
(based on assumptions believed by Borrower in good faith to be reasonable) as if
such Acquisition had been consummated on the first day of such Fiscal Year and
(ii) the gross sales revenues of any business sold or otherwise disposed of by
Borrower or any of its Subsidiaries during such Fiscal Year shall be excluded in
their entirety.

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<PAGE>

"CONSOLIDATED GROSS SALES REVENUES ADJUSTMENT" means, for any Fiscal
Year, 5% of the amount equal to (i) the increase (if any) of consolidated gross
sales revenues of Borrower and its Subsidiaries for such Fiscal Year
attributable to any business acquired during such Fiscal Year in an Acquisition
permitted under subsection 7.7(ii) MINUS (ii) the decrease (if any) in such
consolidated gross sales revenues attributable to any business sold or otherwise
disposed of by Borrower or any of its Subsidiaries during such Fiscal Year.

"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, an amount equal to, without duplication, (i) total interest expense
(including that portion attributable to Capital Leases in accordance with GAAP,
capitalized interest and any administrative agency or commitment or other
similar fees payable in respect of bank facilities) of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, with
respect to all outstanding Indebtedness of such Person and its Subsidiaries,
including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financings and net costs
under Interest Rate Agreements, but excluding, however, (a) any interest expense
(including amortization of discount, amortization of debt issuance costs, and
amortization of any other charges relating to the Recapitalization) not payable
in Cash during such period and (b) any amounts referred to in subsection 2.3
payable to Administrative Agent, Syndication Agent, Documentation Agent and
Lenders on or before the Closing Date MINUS (ii) total interest income of such
Person and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, but excluding, however, any interest income not received in Cash
during such period; PROVIDED that Consolidated Interest Expense of Borrower and
its Subsidiaries shall be increased (if positive) or decreased (if negative) by
the Net Interest Adjustment.

"CONSOLIDATED LEVERAGE RATIO" means, as of the last day of any Fiscal
Quarter, the ratio of (i) Consolidated Total Debt as of such date to (ii)
Consolidated Adjusted EBITDA of Borrower and its Subsidiaries for the
four-Fiscal Quarter period ending on such date.

"CONSOLIDATED NET INCOME" means, with respect to any Person (the
"SUBJECT PERSON") for any period, the net income (or loss) of the Subject Person
and its Subsidiaries on a consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP; PROVIDED that there shall
be excluded (i) the income (or loss) of any Person in which any other Person
(other than the Subject Person or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Subject Person or any of its Subsidiaries by the other Person during
such period, (ii) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary of the Subject Person or is merged into or consolidated
with the Subject Person or any of its Subsidiaries or that Person's assets are
acquired by the Subject Person or any of its Subsidiaries, (iii) any after-tax
gains or losses, and any related fees and expenses, in each case to the extent
attributable to Asset Sales or returned surplus assets of any Pension Plan, (iv)
any translation currency gains and losses, and (v) (to the extent not included
in clauses (i) through (iv) above) any net extraordinary gains or net
extraordinary losses.

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<PAGE>

"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Borrower and its
Subsidiaries under clauses (i), (ii) and (iii) of the definition of
"Indebtedness" (but only to the extent, in the case of said clause (iii), of any
drawings honored under letters of credit and not yet reimbursed by Borrower or
any of its Subsidiaries), as determined on a consolidated basis in accordance
with GAAP.

"CONSOLIDATED WORKING CAPITAL" means, as at any date of determination,
the excess (or deficit) of Consolidated Current Assets over Consolidated Current
Liabilities.

"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.

"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, currency futures contract, currency option contract, synthetic
currency exchange rate cap or other similar agreement or arrangement to which
Borrower or any of its Subsidiaries is a party.

"DEFAULTING LENDER" has the meaning assigned to that term in
subsection 2.9.

"DEFAULT PERIOD" has the meaning assigned to that term in subsection
2.9.

"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.

"DLJ" has the meaning assigned to that term in the introduction to
this Agreement.

"DOCUMENTATION AGENT" has the meaning assigned to that term in the
introduction to this Agreement.

"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.

"DOMESTIC SUBSIDIARY" means any Subsidiary of Borrower that is not a
Foreign Subsidiary.

"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; PROVIDED that

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<PAGE>

(x) such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including insurance companies,
mutual funds and lease financing companies; and (B) any Lender, any Affiliate of
any Lender and, with respect to any Lender that is an investment fund that
invests in commercial loans, any other investment fund that invests in
commercial loans and that is managed by the same investment advisor as such
Lender or by an Affiliate of such investment advisor; PROVIDED that no Affiliate
of Borrower shall be an Eligible Assignee.

"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by Borrower or any of its Subsidiaries (i) in the ordinary course of such
Person's business or (ii) as required in connection with a financing transaction
or an acquisition or disposition of real estate) or proceedings relating in any
way to any Environmental Law (for purposes of this definition, "CLAIMS"),
including (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law and (b) any and all Claims by any
Third Party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.

"ENVIRONMENTAL LAWS" means any and all present and future laws,
statutes, ordinances, rules, regulations, requirements, restrictions, permits,
orders, and determinations of any governmental authority that have the force and
effect of law, and that pertain to pollution (including hazardous, toxic or
dangerous substances), natural resources or the environment, whether federal,
state, or local, domestic or foreign including environmental response laws such
as the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 and
as the same may be further amended (hereinafter collectively called "CERCLA").

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations promulgated thereunder.

"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with Borrower or any of its Subsidiaries
within the meaning of Section 414(b) or (c) of the Internal Revenue Code or (for
purposes of provisions of the Internal Revenue Code relating to Section 412 of
the Internal Revenue Code) Section 414(m) or (o) of the Internal Revenue Code.

"ERISA EVENT" means any of the following events or occurrences if such
event or occurrence could, individually or in the aggregate, reasonably be
expected to have a Material

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<PAGE>

Adverse Effect: (i) the failure to make a required contribution to a Pension
Plan; (ii) a withdrawal by Borrower, any of its Subsidiaries or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA), or a cessation of operation which is treated as such a withdrawal under
Section 4062(e) of ERISA; (iii) a complete or partial withdrawal by Borrower,
any of its Subsidiaries or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization or is insolvent
pursuant to Section 4241 or 4245 of ERISA; (iv) the filing of a notice of intent
to terminate, the treatment of a Plan amendment as a termination under Section
4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate, in each case with respect to a Pension Plan or Multiemployer Plan;
(v) an event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; (vi) the
imposition of any liability upon Borrower, any of its Subsidiaries or any ERISA
Affiliate under Title IV of ERISA (other than with respect to PBGC premiums due
but not delinquent under Section 4007 of ERISA) upon Borrower, any of its
Subsidiaries or any ERISA Affiliate; (vii) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA
with respect to any Pension Plan; (viii) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other Plan intended
to qualify under Section 401(a) of the Internal Revenue Code) to qualify under
Section 401(a) of the Internal Revenue Code, or the failure of any trust forming
part of any Pension Plan to qualify for exemption from taxation under Section
501(a) of the Internal Revenue Code; or (ix) the violation of any applicable
foreign law, or an event or occurrence that is comparable to any of the
foregoing events or occurrences, in either case with respect to a Plan that is
not subject to regulation under ERISA by reason of Section 4(b)(4) of ERISA.

"EVENT OF DEFAULT" means each of the events set forth in Section 8.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.

"EXCLUDED PRO FORMA ENTITY" means, for any period, (i) any Person,
property, business or asset (other than an Unrestricted Subsidiary) that is
sold, transferred or otherwise disposed of by Borrower or any of its
Subsidiaries to a Third Party during such period; PROVIDED that, for purposes of
calculating any consolidated financial information for any Excluded Pro Forma
Entity to be used in determining the Net EBITDA Adjustment or Net Interest
Adjustment for such period, financial information pertaining to any Person,
property, business or asset that was related to such Excluded Pro Forma Entity
but that was not disposed of by Borrower or such Subsidiary shall not be
consolidated with the relevant financial information of the Excluded Pro Forma
Entity and (ii) any Subsidiary of Borrower that is redesignated as an
Unrestricted Subsidiary during such period.

"EXISTING CREDIT AGREEMENT" means that certain letter agreement dated
as of August 14, 1997, made by Corestates Bank, N.A. ("EXISTING LENDER"), and
accepted by Borrower on August 19, 1997, as amended by that certain letter
agreement dated as of January

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<PAGE>

23, 1998, made by Existing Lender and accepted by Borrower on January 28, 1998,
relating to a line of credit extended by Existing Lender to Borrower in an
aggregate amount of $15,000,000.

"EXISTING SHAREHOLDERS" means Gary M. Lowenthal and certain trusts
formed by or related to him and/or Justina J. Lowenthal owning prior to the
consummation of the Recapitalization, in the aggregate, 100% of the Shares.

"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.

"FEE LETTERS" means, collectively, the Administrative Agent Fee Letter
and the Syndication Agent Fee Letter.

"FINANCIAL PLAN" has the meaning assigned to that term in subsection
6.1(ix).

"FIRST PRIORITY" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral and (ii) such Lien is
the only Lien (other than Permitted Encumbrances) to which such Collateral is
subject.

"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.

"FISCAL YEAR" means the fiscal year of Borrower and its Subsidiaries
ending on December 31 of each calendar year (or any other date to which such
Fiscal Year-end is changed pursuant to subsection 6.10).

"FLEET" has the meaning assigned to that term in the introduction to
this Agreement.

"FOREIGN SUBSIDIARY" means any Subsidiary of Borrower which is
organized under the laws of any jurisdiction outside of the United States of
America.

"FUJI" has the meaning assigned to that term in the introduction to
this Agreement.

"FUNDED DEBT", as applied to any Person, means all Indebtedness for
borrowed money of that Person (including any current portions thereof) which by
its terms or by the terms of any instrument or agreement relating thereto
matures more than one year from, or is directly

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renewable or extendable at the option of that Person to a date more than one
year from (including an option of that Person under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more from), the date of the creation thereof.

"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative
Agent and Swing Line Lender located at One Federal Street, Third Floor, Boston,
MA 02211 or (ii) such other office of Administrative Agent and/or Swing Line
Lender as may from time to time hereafter be designated as such in a written
notice delivered by Administrative Agent and/or Swing Line Lender to Borrower
and each Lender.

"FUNDING DATE" means the date of the funding of a Loan.

"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession in the United States, in each case as the same are
applicable to the circumstances as of the date of determination.

"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state,
local or foreign governmental authority, agency or court.

"GUARANTEE OBLIGATIONS" means, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness of any other
Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including any obligation of such Person, whether or not contingent, (i) to
purchase any such Indebtedness or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (a) for the purchase or
payment of any such Indebtedness or (b) to maintain working capital or equity
capital of the Primary Obligor or otherwise to maintain the net worth or
solvency of the Primary Obligor, (iii) to purchase property, Securities or
services primarily for the purpose of assuring the owner of any such
Indebtedness of the ability of the Primary Obligor to make payment of such
Indebtedness or (iv) otherwise to assure or hold harmless the owner of such
Indebtedness against loss in respect thereof; PROVIDED, HOWEVER, that the term
"Guarantee Obligations" shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the Indebtedness in respect of which such Guarantee
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.

"GUARANTIES" means the Subsidiary Guaranty and any guaranty entered
into by any Subsidiary of Borrower pursuant to subsection 6.7B.

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<PAGE>

"HAZARDOUS MATERIALS" means any substance that is defined or listed as
a hazardous, toxic or dangerous substance under any present or future
Environmental Law or that is otherwise regulated or prohibited or subject to
investigation or remediation under any present or future Environmental Law
because of its hazardous, toxic, or dangerous properties, including (i) any
substance that is a "hazardous substance" under CERCLA (as defined in the
definition of "ENVIRONMENTAL LAWS") and (ii) petroleum wastes or products.

"HEDGE AGREEMENT" means any Interest Rate Agreement, Commodities
Agreement or Currency Agreement designed to hedge against fluctuations in
interest rates, the price or availability of commodities, or currency values,
respectively.

"INCLUDED PRO FORMA ENTITY" means, for any period, (i) any Person,
property, business or asset (other than an Unrestricted Subsidiary) that is
acquired by Borrower or any of its Subsidiaries from a Third Party during such
period and not subsequently sold, transferred or otherwise disposed of by
Borrower or such Subsidiary to a Third Party during such period; PROVIDED that,
for purposes of calculating any consolidated financial information for any
Included Pro Forma Entity to be used in determining the Net EBITDA Adjustment or
Net Interest Adjustment for such period, financial information pertaining to any
Person, property, business or asset that was related to such Included Pro Forma
Entity but that was not acquired by Borrower or such Subsidiary shall not be
consolidated with the relevant financial information of the Included Pro Forma
Entity and (ii) any Unrestricted Subsidiary that is redesignated as a Subsidiary
of Borrower during such period.

"INDEBTEDNESS", as applied to any Person, means (i) all indebtedness
of such Person for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
of such Person in conformity with GAAP, (iii) any obligation incurred by such
Person in connection with banker's acceptances and the maximum aggregate amount
from time to time available for drawing under all outstanding letters of credit
issued for the account of such Person together, without duplication, with the
amount of all honored but unreimbursed drawings thereunder, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price (a)
is due more than six months from the date of incurrence of the obligation in
respect thereof and (b) would be shown on the liability side of the balance
sheet of such Person in accordance with GAAP, (v) all monetary obligations of
such Person under Hedge Agreements (it being understood that monetary
obligations under Interest Rate Agreements, Commodities Agreements and Currency
Agreements other than Hedge Agreements constitute Investments and not
Indebtedness), and (vi) all indebtedness referred to in clauses (i) through (iv)
above secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person; PROVIDED that the
term "Indebtedness" shall in no event include any trade payables or accrued
expenses arising in the ordinary course of business.

"INDEMNITEE" has the meaning assigned to that term in subsection 10.3.

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"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Borrower and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Borrower and its Subsidiaries, taken as a whole.

"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan,
each March 31, June 30, September 30 and December 31 of each year, commencing on
the first such date to occur after the Closing Date, and (ii) with respect to
any LIBOR Loan, the last day of each Interest Period applicable to such Loan;
PROVIDED that, in the case of each Interest Period of longer than three months,
"Interest Payment Date" shall also include each date that is three months, or an
integral multiple thereof, after the commencement of such Interest Period.

"INTEREST PERIOD" has the meaning assigned to that term in subsection
2.2B.

"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Borrower or any of its Subsidiaries is a
party.

"INTEREST RATE DETERMINATION DATE" means with respect to any Interest
Period relating to a Loan, the second Business Day prior to the first day of
such Interest Period.

"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.

"INVESTMENT" means (i) any purchase or other acquisition by Borrower
or any of its Subsidiaries of, or of a beneficial interest in, any Securities of
any other Person (other than a Person that prior to such purchase or acquisition
was a Subsidiary of Borrower), (ii) any loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Borrower or any of its Subsidiaries to any Third Party, including all
indebtedness and accounts receivable from that Third Party that are not current
assets or did not arise from sales to that Third Party in the ordinary course of
business, (iii) the designation of any Person as an Unrestricted Subsidiary, or
(iv) any monetary obligations under Interest Rate Agreements, Commodities
Agreements or Currency Agreements not constituting Hedge Agreements. The amount
of any Investment shall be (A) the original cost of such Investment (determined,
in the case of an Investment described in clause (iii) above, as provided in the
definition of "Subsidiary", without any adjustments for increases or decreases
in value, or write-ups, write-downs or write-offs with respect to such
Investment, MINUS (B) the lesser of (1) the aggregate amount of any repayments,
redemptions, dividends or distributions thereon or proceeds from the sale
thereof, in each case to the extent of Cash payments (including any Cash
received by way of deferred payment pursuant to, or monetization of, a note
receivable or otherwise, but only as and when so received) actually received by
Borrower or the applicable Subsidiary of Borrower, and (2) the aggregate amount
described in the immediately preceding clause (A).

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<PAGE>

"ISSUING LENDER" means, as the context may require, Fleet, any Person
serving as a successor Administrative Agent hereunder, in its capacity as issuer
of the Letters of Credit and/or at the request of Administrative Agent and the
consent of Borrower, another Lender or an Affiliate of Administrative Agent that
may issue one or more Letters of Credit hereunder.

"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; PROVIDED
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.

"KKR" means Kohlberg Kravis Roberts & Co. L.P.

"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires; PROVIDED that
the term "LENDERS", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.

"LENDING OFFICE" means, as to any Lender, the office or offices of
such Lender specified on SCHEDULE 2.1 annexed hereto (with respect to Lenders
listed on the signature pages hereof) or in the Assignment Agreement pursuant to
which it became or becomes a Lender, or such other office or offices as such
Lender may have or may from time to time hereafter designate as such in a
written notice delivered by such Lender to Borrower and Administrative Agent.

"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of Borrower pursuant to subsection 3.1.

"LETTER OF CREDIT USAGE" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding
(whether or not the conditions to drawing can be met thereunder) PLUS (ii) the
aggregate amount of all drawings under Letters of Credit honored by Issuing
Lenders and not theretofore reimbursed by Borrower (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B).

"LIBOR" means, for any Interest Rate Determination Date with respect
to an Interest Period for a LIBOR Loan, the rate per annum determined on the
basis of the London interbank offered rate for Dollar deposits with maturities
comparable to such Interest Period as of approximately 11:00 A.M. (London time)
on such Interest Rate Determination Date as set forth on Telerate Page 3750;
PROVIDED that in the event such rate does not appear on Page 3750 (or otherwise)
of the Telerate Service, "LIBOR" for purposes of this paragraph shall be
determined by reference to (i) such other publicly available service for
displaying interest rates for deposits in Dollars as may be agreed upon by
Borrower and Administrative Agent or (ii) in the absence of

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<PAGE>

such agreement, the arithmetic average (rounded upward to the nearest 1/16 of
one percent) of the offered quotations, if any, to first class banks in the
London interbank market for Dollars by Reference Lenders for Dollar deposits of
amounts in same day funds comparable to the respective principal amounts of the
LIBOR Loans of Reference Lenders for which LIBOR is then being determined (which
principal amount shall be deemed to be $1,000,000 in the case of any Reference
Lender not making, converting to or continuing such a LIBOR Loan) with
maturities comparable to such Interest Period as of approximately 10:00 A.M.
(Boston, Massachusetts time) on such Interest Rate Determination Date; PROVIDED
that if any Reference Lender fails to provide Administrative Agent with its
aforementioned quotation then LIBOR shall be determined based on the
quotation(s) provided to Administrative Agent by the other Reference Lender(s).

"LIBOR LOANS" means Loans bearing interest at rates determined by
reference to LIBOR as provided in subsection 2.2A.

"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or other similar encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any other similar
preferential arrangement having the practical effect of any of the foregoing.

"LOAN" or "LOANS" means one or more of the Tranche A Term Loans,
Tranche B Term Loans, Revolving Loans or Swing Line Loans or any combination
thereof.

"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of
Credit (and any applications for Letters of Credit), the Guaranties and the
Collateral Documents.

"LOAN PARTY" means Borrower, each Subsidiary Guarantor and each
Subsidiary executing and delivering a Loan Document after the Closing Date
pursuant to subsection 6.7B, and "LOAN PARTIES" means all such Persons,
collectively.

"MANAGEMENT GROUP" means, at any time, the Chairman of the Board, the
President, the chief executive officer, the chief operating officer, any
Executive Vice President or Vice President, the Treasurer and the Secretary of
Borrower at such time.

"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.

"MASTER PLEDGE AGREEMENT" means the Master Pledge Agreement executed
and delivered on the Closing Date by Borrower and Administrative Agent,
substantially in the form of EXHIBIT XIII annexed hereto, as such Master Pledge
Agreement may thereafter be amended, supplemented or otherwise modified from
time to time.

"MATERIAL ADVERSE EFFECT" means any circumstance or condition
affecting the business, assets, operations, properties or financial condition of
Borrower and its Subsidiaries,

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<PAGE>

taken as a whole, that would materially adversely affect (a) the ability of Loan
Parties, taken as a whole, to perform their obligations under this Agreement and
the other Loan Documents, taken as a whole, or (b) the rights and remedies of
Agents and Lenders under this Agreement and the other Loan Documents, taken as a
whole.

"MATERIAL FOREIGN SUBSIDIARY" means a Material Subsidiary that is a
Foreign Subsidiary.

"MATERIAL SUBSIDIARY" means each Subsidiary of Borrower now existing
or hereafter acquired or formed by Borrower which, on a consolidated basis for
such Subsidiary and its Subsidiaries, (a) for the most recent Fiscal Year
accounted for more than 5% of the consolidated gross revenues of Borrower and
its Subsidiaries or (b) as at the end of such Fiscal Year, was the owner of more
than 5% of the consolidated total assets of Borrower and its Subsidiaries.

"MOODY'S" has the meaning assigned to that term in the definition of
"Cash Equivalents".

"MULTIEMPLOYER PLAN" means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, with respect to which Borrower, any of its
Subsidiaries or any ERISA Affiliate may have liability.

"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of (i) the costs and expenses
relating to such Asset Sale, (ii) all taxes paid or estimated to be payable in
connection with such Asset Sale, (iii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the stock or assets in question and
that is required to be repaid under the terms thereof as a result of such Asset
Sale and (iv) the amount of any reasonable reserves established in accordance
with GAAP against any liabilities (other than taxes described in clause (ii)
above) that are (a) associated with the assets that are the subject of such
Asset Sale and (b) retained by Borrower or any of its Subsidiaries; PROVIDED
that (X) in the event the amount of any taxes estimated to be payable as
described in clause (ii) above exceeds the amount actually paid, Borrower or the
applicable Subsidiary shall be deemed to have received Net Asset Sale Proceeds
in the amount of such excess on the date such taxes are paid, and (Y) upon any
subsequent reduction in the amount of any reserve described in clause (iv) above
(other than in connection with a payment by Borrower or the applicable
Subsidiary in respect of the applicable liability), Borrower or the applicable
Subsidiary shall be deemed to have received Net Asset Sale Proceeds on the date
and in the amount of such reduction.

"NET EBITDA ADJUSTMENT" means, for any period, an amount equal to (i)
the sum of the aggregate of the amounts of Consolidated Adjusted EBITDA for any
Included Pro Forma Entities (calculated for the entire such period for each such
Included Pro Forma Entity as

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<PAGE>

if such Included Pro Forma Entity had become an Included Pro Forma Entity on the
first day of such period) MINUS (ii) the sum of the aggregate of the amounts of
Consolidated Adjusted EBITDA for any Excluded Pro Forma Entities (calculated for
the entire such period for each such Excluded Pro Forma Entity, including any
portion thereof prior to the date on which it became an Excluded Pro Forma
Entity).

"NET INTEREST ADJUSTMENT" means, for any period, an amount equal to
(i) the sum of the aggregate of the amounts of Consolidated Interest Expense for
any Included Pro Forma Entities (calculated for the entire such period for each
such Included Pro Forma Entity, including any portion thereof prior to the date
on which it became an Included Pro Forma Entity, in each case on a pro forma
basis as if any Indebtedness of such Included Pro Forma Entity that was
incurred, assumed or prepaid in connection with the transaction pursuant to
which it became an Included Pro Forma Entity had been incurred, assumed or
prepaid on the first day of such period) MINUS (ii) the sum of the aggregate of
the amounts of Consolidated Interest Expense for any Excluded Pro Forma Entities
(calculated for the entire such period for each such Excluded Pro Forma Entity,
including any portion thereof prior to the date on which it became an Excluded
Pro Forma Entity).

"NEWSUB" means Boyds Operations, Inc., a Delaware corporation
newly-formed on or prior to the Closing Date and wholly-owned by Borrower.

"NON-EXCLUDED TAX" has the meaning assigned to that term in subsection
2.7B(i).

"NOTES" means one or more of the Tranche A Term Notes, Tranche B Term
Notes, Revolving Notes or Swing Line Note or any combination thereof.

"NOTICE OF BORROWING" means a notice substantially in the form of
EXHIBIT I annexed hereto delivered by Borrower to Administrative Agent pursuant
to subsection 2.1B with respect to a proposed borrowing.

"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of EXHIBIT II annexed hereto delivered by Borrower to Administrative
Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.

"NOTICE OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of EXHIBIT III annexed hereto delivered by Borrower to
Administrative Agent pursuant to subsection 3.1B(i) with respect to the proposed
issuance of a Letter of Credit.

"OBLIGATIONS" means all monetary obligations of every nature of each
Loan Party from time to time owed to Agents, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.

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<PAGE>

"OFFICER'S CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by a Responsible Officer
thereof.

"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.

"PENSION PLAN" means a pension plan as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan), with respect to which Borrower, any of
its Subsidiaries or any ERISA Affiliate may have any liability.

"PERMITTED ENCUMBRANCES" means the following types of Liens:

(i) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that payment thereof is otherwise not, at the time, required by subsection 6.3;

(ii) Liens in respect of property or assets imposed by law, such as
carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or
other similar Liens arising in the ordinary course of business, in each case so
long as such Liens do not, individually or in the aggregate, have a Material
Adverse Effect;

(iii) Liens (other than any Lien imposed pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of business
(exclusive of obligations in respect of payments for borrowed money);

(iv) Liens incurred in the ordinary course of business on securities
to secure repurchase and reverse repurchase obligations in respect of such
securities;

(v) Liens consisting of judgment or judicial attachment liens in
circumstances not constituting an Event of Default under subsection 8.8;

(vi) easements, rights-of-way, restrictions, minor defects or
irregularities of title and other similar encumbrances not interfering in any
material respect with the business of Borrower and its Subsidiaries, taken as a
whole;

(vii) Liens securing obligations in respect of Capital Leases on
the assets subject to such Capital Leases; PROVIDED that such Capital Leases are
otherwise permitted hereunder.

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<PAGE>

(viii) Liens arising solely by virtue of any statutory or common
law provision relating to bankers' liens, rights of set-off or similar rights
and remedies with respect to deposit accounts or other funds maintained with a
creditor depository institution; PROVIDED that the applicable deposit account is
not a cash collateral account;

(ix) any interest or title of a lessor, or secured by a lessor's
interest under, any lease permitted by this Agreement;

(x) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;

(xi) Liens on goods the purchase price of which is financed by a
Commercial Letter of Credit issued for the account of Borrower; PROVIDED that
such Lien secures only the obligations of Borrower or such Subsidiary in respect
of such Commercial Letter of Credit to the extent permitted under this
Agreement; and

(xii) leases or subleases granted to others not interfering in any
material respect with the business of Borrower and its Subsidiaries, taken as a
whole.

"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.

"PLAN" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower or any of its Subsidiaries sponsors or maintains, or to
which Borrower or any of its Subsidiaries makes, is making or is obligated to
make contributions, or to which Borrower or any of its Subsidiaries may have any
liability, and includes any Pension Plan.

"PLEDGE AGREEMENTS" means the Master Pledge Agreement and any pledge
agreements or other similar instruments that Borrower may enter into from time
to time after the Closing Date with respect to any Material Foreign Subsidiary
pursuant to the terms of the Master Pledge Agreement, as such agreements or
instruments may thereafter be amended, supplemented or otherwise modified from
time to time.

"PLEDGED COLLATERAL" means, collectively, the "Pledged Collateral" as
defined in each Pledge Agreement.

"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.

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<PAGE>

"PRIME RATE" means the rate that Fleet announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Fleet or any other Lender may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.

"PRO FORMA ADJUSTMENT" means, for any period with respect to any
Included Pro Forma Entity (other than an Unrestricted Subsidiary redesignated as
a Subsidiary of Borrower, for which there shall be no Pro Forma Adjustment), the
pro forma increase or decrease in the Consolidated Adjusted EBITDA of such
Included Pro Forma Entity that Borrower in good faith predicts will occur as a
result of reasonably identifiable and supportable net cost savings or additional
net costs or a reasonably identifiable and supportable increase in sales volume,
as the case may be, that will be realizable during such period by combining the
operations of such Included Pro Forma Entity with the operations of Borrower and
its Subsidiaries; PROVIDED that, so long as such net cost savings or additional
net costs or increase in sales volume will be realizable at any time during such
period it shall be assumed, for purposes of projecting such pro forma increase
or decrease in such Consolidated Adjusted EBITDA, that such net cost savings or
additional net costs or increase in sales volume will be realizable during the
entire such period; and PROVIDED, FURTHER that any such pro forma increase or
decrease in such Consolidated Adjusted EBITDA shall be without duplication of
any net cost savings or additional net costs or increase in sales volume
actually realized during such period and already included in such Consolidated
Adjusted EBITDA.

"PRO FORMA ADJUSTMENT CERTIFICATE" shall mean a certificate of a
Responsible Officer of Borrower delivered pursuant to subsection 6.1(xii)
setting forth the information described in clause (d) of subsection 6.1(iii).

"PRO RATA SHARE" means (i) with respect to all payments, computations
and other matters relating to the Tranche A Term Loan Commitment or the Tranche
A Term Loan of any Lender, the percentage obtained by DIVIDING (x) the Tranche A
Term Loan Exposure of that Lender BY (y) the aggregate Tranche A Term Loan
Exposure of all Lenders, (ii) with respect to all payments, computations and
other matters relating to the Tranche B Term Loan Commitment or the Tranche B
Term Loan of any Lender, the percentage obtained by DIVIDING (x) the Tranche B
Term Loan Exposure of that Lender BY (y) the aggregate Tranche B Term Loan
Exposure of all Lenders, (iii) with respect to all payments, computations and
other matters relating to the Revolving Loan Commitment or the Revolving Loans
of any Lender or any Letters of Credit issued or participations therein
purchased by any Lender or any participations in any Swing Line Loans purchased
by any Lender, the percentage obtained by DIVIDING (x) the Revolving Loan
Exposure of that Lender BY (y) the aggregate Revolving Loan Exposure of all
Lenders, and (v) for all other purposes with respect to each Lender, the
percentage obtained by DIVIDING (x) the sum of the Tranche A Term Loan Exposure
of that Lender PLUS the Tranche B Term Loan Exposure of that Lender PLUS the
Revolving Loan Exposure of that Lender BY (y) the sum of the aggregate Tranche A
Term Loan Exposure of all Lenders PLUS the aggregate Tranche B Term Loan
Exposure of all Lenders PLUS the aggregate Revolving Loan Exposure of

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<PAGE>

all Lenders, in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share
of each Lender for purposes of each of clauses (i), (ii) and (iii) of the
preceding sentence is set forth opposite the name of that Lender in SCHEDULE 2.1
annexed hereto.

"RECAPITALIZATION" means, collectively, (i) the transactions
contemplated by the Recapitalization Agreement, (ii) the issuance of the Senior
Subordinated Debt and (iii) the related transactions in respect of the Shares
rolled-over by the Existing Shareholders, including the purchase of Shares by
Bear.

"RECAPITALIZATION AGREEMENT" means that certain Recapitalization and
Stock Purchase Agreement, dated as of March 6, 1998 by and among Borrower, Bear
and the Existing Shareholders, in the form delivered to Agents and Lenders prior
to their execution of this Agreement and as such agreement may be amended from
time to time thereafter.

"RECAPITALIZATION FINANCING REQUIREMENTS" means the aggregate of all
amounts necessary (i) to pay the aggregate cash consideration payable to all
holders of Shares pursuant to the Recapitalization Agreement upon consummation
of the Recapitalization, and (ii) to pay Transaction Costs.

"REFERENCE LENDERS" means Fleet, DLJ and Fuji.

"REFINANCING SUB DEBT" means Indebtedness of Borrower issued in
exchange for, or the proceeds of which are used to repurchase, redeem, defease
or otherwise prepay or retire (collectively, to "REFINANCE" or a "REFINANCING"),
Senior Subordinated Debt; PROVIDED that (i) the aggregate principal amount of
such Indebtedness shall not exceed the sum of (a) the aggregate principal amount
of Senior Subordinated Debt thereby Refinanced PLUS (b) the amount of any tender
premium, call premium or similar premium (any such premium being a "REFINANCING
PREMIUM") paid by Borrower in connection with such Refinancing, (ii) such
Indebtedness is unsecured and is not guarantied by any Subsidiary of Borrower,
and (iii) the terms of such Indebtedness (including the maturity, amortization
schedule, covenants, defaults, remedies, subordination provisions and other
material terms thereof) shall be no less favorable in any material respect to
Lenders than the other terms of the Senior Subordinated Debt.

"REFINANCING SUB DEBT INDENTURE" means the Indenture pursuant to which
any Refinancing Sub Debt is issued, as such indenture may be amended from time
to time.

"REFUNDED SWING LINE LOANS" has the meaning assigned to that term in
subsection 2.1A(iv).

"REGISTER" has the meaning assigned to that term in subsection 2.1D.

"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.

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<PAGE>

"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.

"RELATED AGREEMENTS" means, collectively, the Recapitalization
Agreement and the Senior Subordinated Debt Documents.

"REQUISITE CLASS LENDERS" means, at any time of determination (i) for
the Class of Lenders having Revolving Loan Exposure, Lenders having or holding
more than 50% of the aggregate Revolving Loan Exposure of all Lenders, (ii) for
the Class of Lenders having Tranche A Term Loan Exposure, Lenders having or
holding more than 50% of the aggregate Tranche A Term Loan Exposure of all
Lenders, and (iii) for the Class of Lenders having Tranche B Term Loan Exposure,
Lenders having or holding more than 50% of the aggregate Tranche B Term Loan
Exposure of all Lenders.

"REQUISITE LENDERS" means Lenders having or holding more than 50% of
the sum of the aggregate Tranche A Term Loan Exposure of all Lenders PLUS the
aggregate Tranche B Term Loan Exposure of all Lenders PLUS the aggregate
Revolving Loan Exposure of all Lenders.

"RESPONSIBLE OFFICER" means, with respect to any Person, its chief
executive officer, chief operating officer, president, or any vice president,
managing director, treasurer, controller or other officer of such Person having
substantially the same authority and responsibility; PROVIDED that, with respect
to compliance with financial covenants or the delivery of financial statements
and related financial reports, "RESPONSIBLE OFFICER" means the chief financial
officer, treasurer or controller of Borrower, or any other Responsible Officer
of Borrower whose responsibilities include substantially the same authority and
responsibility.

"RESTRICTED ACQUISITION SUBSIDIARY" means (i) a Subsidiary of Borrower
that is (a) first created or acquired by Borrower or any of its Subsidiaries
after the Closing Date in connection with an Acquisition and (b) designated as a
"Restricted Acquisition Subsidiary" pursuant to a written notice delivered by
Borrower to Agents prior to the consummation of such Acquisition; PROVIDED that
Borrower may, by written notice to Agents, redesignate any Restricted
Acquisition Subsidiary as a Subsidiary that is not a Restricted Acquisition
Subsidiary so long as, after giving effect to the aggregate principal amount of
any outstanding Indebtedness of such Restricted Acquisition Subsidiary that was
originally incurred pursuant to subsection 7.1(ix) as if such Indebtedness were
being incurred by such Restricted Acquisition Subsidiary as of the date of such
redesignation, no Event of Default or Potential Event of Default shall have
occurred and be continuing or would result therefrom and (ii) any Subsidiary of
a Restricted Acquisition Subsidiary described in the foregoing clause (i).

"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Borrower now or hereafter outstanding, except a dividend payable solely in
shares of common stock of Borrower or payable solely in shares of that class of
stock to the holders of that class, (ii) any redemption, retirement,

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sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Borrower now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Borrower now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, or redemption, purchase, retirement, defeasance
(including in-substance or legal defeasance), sinking fund or similar payment
with respect to, any Subordinated Indebtedness.

"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
Revolving Loans to Borrower pursuant to subsection 2.1A(iii), and "REVOLVING
LOAN COMMITMENTS" means such commitments of all Lenders in the aggregate.

"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the earliest of (i)
June 30, 1998 if the initial Term Loans are not made on or before that date,
(ii) the seventh anniversary of the Closing Date and (iii) such earlier date on
which the Revolving Loan Commitments may be terminated pursuant to subsection
2.4B or Section 8.

"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum, without duplication, of
(a) the aggregate outstanding principal amount of the Revolving Loans of that
Lender PLUS (b) in the event that Lender is an Issuing Lender, the aggregate
Letter of Credit Usage in respect of all Letters of Credit issued by that Lender
(in each case net of any participations purchased by other Lenders in such
Letters of Credit or any unreimbursed drawings thereunder) PLUS (c) the
aggregate amount of all participations purchased by that Lender in any
outstanding Letters of Credit or any unreimbursed drawings under any Letters of
Credit PLUS (d) in the case of Swing Line Lender, the aggregate outstanding
principal amount of all Swing Line Loans (net of any participations therein
purchased by other Lenders) PLUS (e) the aggregate amount of all participations
purchased by that Lender in any outstanding Swing Line Loans, in each case
without duplication.

"REVOLVING LOANS" means the Loans made by Lenders to Borrower pursuant
to subsection 2.1A(iii).

"REVOLVING NOTES" means (i) any promissory notes of Borrower issued
pursuant to subsection 2.1E to evidence the Revolving Loans of any Lenders and
(ii) any promissory notes issued by Borrower pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Revolving Loan
Commitments and Revolving Loans of any Lenders, in each case substantially in
the form of EXHIBIT VI annexed hereto, as they may be amended, supplemented or
otherwise modified from time to time.

"S&P" has the meaning assigned to that term in the definition of "Cash
Equivalents".

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"SEC" means the Securities and Exchange Commission or any successor
thereto.

"SECURITIES" means any stock, shares, partnership interests, limited
liability company interests, voting trust certificates, certificates of interest
or participation in any profit-sharing agreement or arrangement, options,
warrants, bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.

"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.

"SENIOR SUBORDINATED DEBT" means the $165,000,000 in aggregate
principal amount of Senior Subordinated Debt Notes.

"SENIOR SUBORDINATED DEBT DOCUMENTS" means the Senior Subordinated
Debt Indenture, the Senior Subordinated Debt Notes and the Senior Subordinated
Debt Guarantee, collectively.

"SENIOR SUBORDINATED DEBT GUARANTEE" means any subordinated guaranty
made by Subsidiaries of Borrower in favor of the holders of the Senior
Subordinated Debt Notes pursuant to the Senior Subordinated Debt Indenture, the
subordination provisions of which shall be on terms substantially the same as
the subordination provisions in the Senior Subordinated Debt Indenture, as such
subordinated guaranty may be amended from time to time.

"SENIOR SUBORDINATED DEBT INDENTURE" means the indenture pursuant to
which the Senior Subordinated Debt is issued, as such indenture may be amended
from time to time.

"SENIOR SUBORDINATED DEBT NOTES" means the 9% Senior Subordinated
Notes due 2008 of Borrower issued pursuant to the Senior Subordinated Debt
Indenture and substantially in the form set forth in Article II thereof, as such
Senior Subordinated Notes may be amended from time to time.

"SHARES" means the outstanding common stock of Borrower, par value
$1.00 per share.

"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Borrower or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Borrower or any of its Subsidiaries, (iii) the obligations of third party
insurers of Borrower or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or operating leases

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of Borrower or any of its Subsidiaries, and (v) other lawful corporate purposes
of Borrower or any of its Subsidiaries.

"SUBORDINATED INDEBTEDNESS" means (i) the Indebtedness of Borrower
evidenced by the Senior Subordinated Debt, and (ii) the Indebtedness of Borrower
evidenced by any Refinancing Sub Debt.

"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof; PROVIDED that, with respect to Borrower or any of its Subsidiaries, the
term "Subsidiary" shall not include any Unrestricted Subsidiary; and PROVIDED,
FURTHER that Borrower shall be permitted from time to time to (i) designate any
Unrestricted Subsidiary as a "Subsidiary" of Borrower hereunder by written
notice to Agents, so long as (a) no Event of Default or Potential Event of
Default shall have occurred and be continuing or shall be caused thereby and (b)
the provisions of subsection 6.7 shall have been complied with in respect of
such newly-designated Subsidiary, or (ii) designate any Subsidiary of Borrower
that is formed or acquired after the Closing Date, or any Person that, as a
result of the acquisition after the Closing Date by Borrower or any of its
Subsidiaries of any equity Securities of such Person, would otherwise be a
Subsidiary of Borrower hereunder, to be an "Unrestricted Subsidiary" by written
notice to Agents so long as (1) after giving effect to such designation as an
Investment in such Unrestricted Subsidiary (calculated as an amount equal to the
sum of (X) the net worth of the Subsidiary or other Person so designated (the
"DESIGNATED PERSON") immediately prior to such designation (such net worth to be
calculated, in the case of a Designated Person that is currently a Subsidiary of
Borrower, without regard to any Obligations of such Subsidiary under the
Subsidiary Guaranty) and (Y) the aggregate principal amount of any Indebtedness
owed by the Designated Person to Borrower or any of its Subsidiaries immediately
prior to such designation, all calculated, except as set forth in the
parenthetical to clause (X) above, on a consolidated basis in accordance with
GAAP), Borrower shall be in compliance with the provisions of subsection 7.3(v),
(2) no Subsidiary is a Subsidiary of such Unrestricted Subsidiary, (3) on or
promptly after the date of designation of such Person as such Unrestricted
Subsidiary, such Unrestricted Subsidiary shall enter into a tax sharing
agreement with Borrower that provides (as determined by Borrower in good faith)
for an appropriate allocation of tax liabilities and benefits, and (4) no
recourse whatsoever (whether by contract or by operation of law or otherwise)
may be had to Borrower or any of its Subsidiaries or any of their respective
properties or assets for any obligations of such Unrestricted Subsidiary except
to the extent that the aggregate maximum amount of such recourse constitutes (X)
an Investment permitted under subsection 7.3(v) or (Y) a Guarantee Obligation
permitted under subsection 7.4(vii).

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"SUBSIDIARY GUARANTOR" means any Domestic Subsidiary that executes and
delivers a counterpart of the Subsidiary Guaranty on the Closing Date or from
time to time thereafter pursuant to subsection 6.7.

"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and
delivered by existing Domestic Subsidiaries on the Closing Date and to be
executed and delivered by additional Domestic Subsidiaries from time to time
thereafter in accordance with subsection 6.7A, substantially in the form of
EXHIBIT XIV annexed hereto, as such Subsidiary Guaranty may thereafter be
amended, supplemented or otherwise modified from time to time.

"SUPERMAJORITY CLASS LENDERS" means, at any time of determination (i)
for the Class of Lenders having Revolving Loan Exposure and/or Tranche A Term
Loan Exposure, Lenders having or holding more than 66-2/3% of the sum of (x) the
aggregate Revolving Loan Exposure of all Lenders and (y) the aggregate Tranche A
Term Loan Exposure of all Lenders, and (ii) for the Class of Lenders having
Tranche B Term Loan Exposure, Lenders having or holding more than 66-2/3% of the
aggregate Tranche B Term Loan Exposure of all Lenders.

"SWING LINE LENDER" means Fleet, or any Person serving as a successor
Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder.

"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line Lender
to make Swing Line Loans to Borrower pursuant to subsection 2.1A(iv).

"SWING LINE LOANS" means the Loans made by Swing Line Lender to
Borrower pursuant to subsection 2.1A(iv).

"SWING LINE NOTE" means (i) any promissory note of Borrower issued
pursuant to subsection 2.1E to evidence the Swing Line Loans of Swing Line
Lender and (ii) any promissory note issued by Borrower to any successor
Administrative Agent and Swing Line Lender pursuant to the last sentence of
subsection 9.5B, in each case substantially in the form of EXHIBIT VII annexed
hereto, as it may be amended, supplemented or otherwise modified from time to
time.

"SYNDICATION AGENT" has the meaning assigned to that term in the
introduction to this Agreement.

"SYNDICATION AGENT FEE LETTER" means that certain Fee Letter dated
April 1, 1998 of Syndication Agent and Donaldson, Lufkin & Jenrette Securities
Corporation ("ARRANGER") to Borrower and accepted by Borrower on April 2, 1998.

"TAX" or "TAXES" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; PROVIDED that "TAX ON THE OVERALL NET INCOME" of a Person shall be
construed as a reference to a tax imposed by the

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jurisdiction in which that Person is organized or in which that Person's
principal office (and/or, in the case of a Lender, its applicable Lending
Office) is located or in which that Person (and/or, in the case of a Lender, its
applicable Lending Office) is deemed to be doing business on all or part of the
net income, profits or gains (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its
applicable Lending Office).

"TERM LOANS" means the Tranche A Term Loans and the Tranche B Term
Loans, collectively.

"THIRD PARTY" means any Person other than Borrower or any of its
Subsidiaries.

"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans or reimbursing the applicable Issuing
Lender for any amount drawn under any Letter of Credit but not yet so applied)
PLUS (ii) the aggregate principal amount of all outstanding Swing Line Loans
PLUS (iii) the Letter of Credit Usage.

"TRANCHE A LENDER" means a Lender that has Tranche A Term Loan
Exposure.

"TRANCHE A TERM LOAN COMMITMENT" means the commitment of a Lender to
make a Tranche A Term Loan to Borrower pursuant to subsection 2.1A(i), and
"TRANCHE A TERM LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.

"TRANCHE A TERM LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche A Term Loans,
that Lender's Tranche A Term Loan Commitment and (ii) after the funding of the
Tranche A Term Loans, the outstanding principal amount of the Tranche A Term
Loan of that Lender.

"TRANCHE A TERM LOANS" means the Loans made as Tranche A Term Loans by
Lenders to Borrower pursuant to subsection 2.1A(i).

"TRANCHE A TERM NOTES" means any promissory notes of Borrower issued
pursuant to subsection 2.1E to evidence the Tranche A Term Loans of any Lenders,
substantially in the form of EXHIBIT IV annexed hereto, as any such note may be
amended, supplemented or otherwise modified from time to time.

"TRANCHE B TERM LOAN COMMITMENT" means the commitment of a Lender to
make a Tranche B Term Loan to Borrower pursuant to subsection 2.1A(ii), and
"TRANCHE B TERM LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.

"TRANCHE B TERM LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche B Term Loans,
that Lender's

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Tranche B Term Loan Commitment and (ii) after the funding of the Tranche B Term
Loans, the outstanding principal amount of the Tranche B Term Loan of that
Lender.

"TRANCHE B TERM LOANS" means the Loans made as Tranche B Term Loans by
Lenders to Borrower pursuant to subsection 2.1A(ii).

"TRANCHE B TERM NOTES" means any promissory notes of Borrower issued
pursuant to subsection 2.1E to evidence the Tranche B Term Loans of any Lenders,
substantially in the form of EXHIBIT V annexed hereto, as any such note may be
amended, supplemented or otherwise modified from time to time.

"TRANSACTION COSTS" means the fees, costs and expenses payable by
Borrower in connection with the transactions contemplated by the Loan Documents,
the Related Agreements on or before the Closing Date.

"TYPE" means, as applied to any Loan, whether such Loan is a Tranche A
Term Loan, a Tranche B Term Loan, a Revolving Loan or a Swing Line Loan.

"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

"UNFUNDED PENSION LIABILITY" means, with respect to any Pension Plan,
the amount of unfunded benefit liabilities of such Pension Plan as defined in
Section 4001(a)(18) of ERISA.

"UNREINVESTED ASSET SALE PROCEEDS" means that portion, if any, of any
Net Asset Sale Proceeds that shall not have been reinvested by Borrower and its
Subsidiaries in the business of Borrower and its Subsidiaries within (i) two
years after the receipt by Borrower or any of its Subsidiaries of such Net Asset
Sale Proceeds, in the case of an Asset Sale consisting of the issuance of
capital stock by any of Borrower's Subsidiaries to a Third Party or (ii) one
year after the receipt by Borrower or any of its Subsidiaries of such Net Asset
Sale Proceeds, in the case of any other Asset Sale.

"UNRESTRICTED SUBSIDIARY" means any corporate Subsidiary of Borrower
(determined without giving effect to the provisos set forth in the definition of
"Subsidiary") that is formed or acquired after the Closing Date and that is
designated by Borrower as an "Unrestricted Subsidiary" as provided in the
definition of "Subsidiary".

"VOTING STOCK" means, with respect to any Person, Securities of such
Person having ordinary voting power (without regard to the occurrence of any
contingency) to vote in the election of directors of such Person.

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1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.

Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. All computations made for purposes of
determining any Applicable Leverage Ratio or any amount of Consolidated Excess
Cash Flow or for purposes of determining compliance with any of the provisions
of Section 7, including any related computations of amounts represented by terms
defined in subsection 1.1, shall utilize accounting principles and policies in
effect at the time of preparation of, and consistent with those used to prepare,
the historical financial statements of Borrower and its Subsidiaries described
in subsection 5.3. Financial statements and other information required to be
delivered by Borrower to Lenders pursuant to clauses (i), (ii) and (ix) of
subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation; PROVIDED that if any of the computations described in
the immediately preceding sentence shall at any time utilize accounting
principles and policies different from those utilized in preparing the financial
statements referred to in this sentence, such financial statements shall be
delivered together with reconciliation worksheets showing in reasonable detail
the differences that would result in such computations if the accounting
principles and policies utilized in preparing such financial statements were
utilized in making such computations.

1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.

A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.

B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.

C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.

SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES.

A. COMMITMENTS. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower herein set
forth, each Lender

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hereby severally agrees to make the Loans described in subsections 2.1A(i),
2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees to make the Loans
described in subsection 2.1A(iv).

(i) TRANCHE A TERM LOANS. Each Lender severally agrees to lend to
Borrower on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche A Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Tranche A Term Loan Commitment is set forth opposite its name on SCHEDULE
2.1 annexed hereto and the aggregate amount of the Tranche A Term Loan
Commitments is $100,000,000. Each Lender's Tranche A Term Loan Commitment
shall expire immediately and without further action on June 30, 1998 if the
Tranche A Term Loans are not made on or before that date. Borrower may
make only one borrowing under the Tranche A Term Loan Commitments. Amounts
borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid
may not be reborrowed.

(ii) TRANCHE B TERM LOANS. Each Lender severally agrees to lend to
Borrower on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche B Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Tranche B Term Loan Commitment is set forth opposite its name on SCHEDULE
2.1 annexed hereto and the aggregate amount of the Tranche B Term Loan
Commitments is $225,000,000. Each Lender's Tranche B Term Loan Commitment
shall expire immediately and without further action on June 30, 1998 if the
Tranche B Term Loans are not made on or before that date. Borrower may
make only one borrowing under the Tranche B Term Loan Commitments. Amounts
borrowed under this subsection 2.1A(ii) and subsequently repaid or prepaid
may not be reborrowed.

(iii) REVOLVING LOANS. Each Lender severally agrees, subject to
the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Borrower from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Lender's Revolving Loan
Commitment is set forth opposite its name on SCHEDULE 2.1 annexed hereto
and the aggregate original amount of the Revolving Loan Commitments is
$40,000,000; PROVIDED that the Revolving Loan Commitments of Lenders shall
be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; and PROVIDED, FURTHER that the
amount of the Revolving Loan Commitments shall be reduced from time to time
by the amount of any reductions thereto made pursuant to subsection
2.4B(ii). Each Lender's Revolving Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Revolving Loans and all
other amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that date.
Amounts borrowed under this

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subsection 2.1A(iii) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.

Anything contained in this Agreement to the contrary notwithstanding,
the Revolving Loans and the Revolving Loan Commitments shall be subject to
the limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.

(iv) SWING LINE LOANS. Swing Line Lender hereby agrees, subject to
the limitations set forth below with respect to the maximum amount of Swing
Line Loans permitted to be outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Borrower from time to time
during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date by making Swing Line Loans to Borrower in an
aggregate amount not exceeding the amount of the Swing Line Loan Commitment
to be used for the purposes identified in subsection 2.5B, notwithstanding
the fact that such Swing Line Loans, when aggregated with Swing Line
Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share
of the Letter of Credit Usage then in effect, may exceed Swing Line
Lender's Revolving Loan Commitment. The original amount of the Swing Line
Loan Commitment is $5,000,000; PROVIDED that any reduction of the Revolving
Loan Commitments made pursuant to subsection 2.4B(ii) which reduces the
aggregate Revolving Loan Commitments to an amount less than the then
current amount of the Swing Line Loan Commitment shall result in an
automatic corresponding reduction of the Swing Line Loan Commitment to the
amount of the Revolving Loan Commitments, as so reduced, without any
further action on the part of Borrower, Administrative Agent or Swing Line
Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Swing Line Loans and all other amounts
owed hereunder with respect to the Swing Line Loans shall be paid in full
no later than that date. Amounts borrowed under this subsection 2.1A(iv)
may be repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.

Anything contained in this Agreement to the contrary notwithstanding,
the Swing Line Loans and the Swing Line Loan Commitment shall be subject to
the limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.

With respect to any Swing Line Loans which have not been voluntarily
prepaid by Borrower pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Administrative
Agent (with a copy to Borrower), no later than 11:00 A.M. (Boston,
Massachusetts time) on the first Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Borrower) requesting Lenders to make Revolving Loans that are Base
Rate Loans on such Funding Date in an amount equal to the amount of such
Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date
such notice is

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given which Swing Line Lender requests Lenders to prepay. Anything
contained in this Agreement to the contrary notwithstanding, (i) the
proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing Line
Lender (and not to Borrower) and applied to repay a corresponding portion
of the Refunded Swing Line Loans and (ii) on the day such Revolving Loans
are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line
Loans shall be deemed to be paid with the proceeds of a Revolving Loan made
by Swing Line Lender, and such portion of the Swing Line Loans deemed to be
so paid shall no longer be outstanding as Swing Line Loans and shall no
longer be due under the Swing Line Note, if any, of Swing Line Lender but
shall instead constitute part of Swing Line Lender's outstanding Revolving
Loans and shall be due under the Revolving Note, if any, of Swing Line
Lender. If any portion of any such amount paid (or deemed to be paid) to
Swing Line Lender should be recovered by or on behalf of Borrower from
Swing Line Lender in bankruptcy, by assignment for the benefit of creditors
or otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 10.5.

If for any reason (a) Revolving Loans are not made upon the request of
Swing Line Lender as provided in the immediately preceding paragraph in an
amount sufficient to repay any amounts owed to Swing Line Lender in respect
of any outstanding Swing Line Loans or (b) the Revolving Loan Commitments
are terminated at a time when any Swing Line Loans are outstanding, each
Lender shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Swing Line Loans in an amount equal to
its Pro Rata Share (calculated, in the case of the foregoing clause (b),
immediately prior to such termination of the Revolving Loan Commitments) of
the unpaid amount of such Swing Line Loans together with accrued interest
thereon. Upon one Business Day's notice from Swing Line Lender, each
Lender shall deliver to Swing Line Lender an amount equal to its respective
participation in same day funds at the Funding and Payment Office. In
order to further evidence such participation (and without prejudice to the
effectiveness of the participation provisions set forth above), each Lender
agrees to enter into a separate participation agreement at the request of
Swing Line Lender in form and substance reasonably satisfactory to Swing
Line Lender. In the event any Lender fails to make available to Swing Line
Lender the amount of such Lender's participation as provided in this
paragraph, Swing Line Lender shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. In the
event Swing Line Lender receives a payment of any amount in which other
Lenders have purchased participations as provided in this paragraph, Swing
Line Lender shall promptly distribute to each such other Lender its Pro
Rata Share of such payment.

Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to

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purchase a participation in any unpaid Swing Line Loans pursuant to the
immediately preceding paragraph shall be absolute and unconditional and
shall not be affected by any circumstance, including (a) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against Swing Line Lender, Borrower or any other Person for any reason
whatsoever; (b) the occurrence or continuation of an Event of Default or a
Potential Event of Default; (c) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or
prospects of Borrower or any of its Subsidiaries; (d) any breach of this
Agreement or any other Loan Document by any party thereto; or (e) any other
circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing; PROVIDED that such obligations of each Lender are subject
to the condition that (X) Swing Line Lender believed in good faith that all
conditions under Section 4 to the making of the applicable Refunded Swing
Line Loans or other unpaid Swing Line Loans, as the case may be, were
satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line
Loans were made or (Y) the satisfaction of any such condition not satisfied
had been waived in accordance with subsection 10.6 prior to or at the time
such Refunded Swing Line Loans or other unpaid Swing Line Loans were made.

B. BORROWING MECHANICS. Tranche A Term Loans or Tranche B Term Loans
made on any Funding Date as Base Rate Loans or as LIBOR Loans with a particular
Interest Period shall be in an aggregate minimum amount of $2,500,000 and
integral multiples of $250,000 in excess of that amount. Revolving Loans (other
than Revolving Loans made pursuant to a request by Swing Line Lender pursuant to
subsection 2.1A(iv) for the purpose of repaying any Refunded Swing Line Loans or
Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing
any Issuing Lender for the amount of a drawing under a Letter of Credit issued
by it) made on any Funding Date shall be in an aggregate minimum amount of
$1,000,000 and integral multiples of $100,000 in excess of that amount. Swing
Line Loans made on any Funding Date shall be in an aggregate minimum amount of
$250,000 and integral multiples of $100,000 in excess of that amount. Whenever
Borrower desires that Lenders make Term Loans or Revolving Loans to Borrower it
shall deliver to Administrative Agent a Notice of Borrowing no later than 11:00
A.M. (Boston, Massachusetts time) at least three Business Days in advance of the
proposed Funding Date (in the case of a LIBOR Loan) or at least one Business Day
in advance of the proposed Funding Date (in the case of a Base Rate Loan).
Whenever Borrower desires that Swing Line Lender make a Swing Line Loan, it
shall deliver to Administrative Agent a Notice of Borrowing no later than 1:00
P.M. (Boston, Massachusetts time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and Type of Loans requested, (iii) in the case of Swing
Line Loans and any Loans made on the Closing Date, that such Loans shall be Base
Rate Loans, (iv) in the case of Revolving Loans not made on the Closing Date,
whether such Loans shall be Base Rate Loans or LIBOR Loans, and (v) in the case
of any Loans requested to be made as LIBOR Loans, the initial Interest Period
requested therefor. Term Loans and Revolving Loans may be continued as or
converted into Base Rate Loans and LIBOR Loans in the manner provided in
subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing,
Borrower may give Administrative Agent telephonic notice by the required time of
any proposed borrowing under

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this subsection 2.1B; PROVIDED that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Administrative Agent on or
before the applicable Funding Date.

Neither Administrative Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Borrower shall have effected Loans hereunder.

Borrower shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Borrower is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Borrower of the proceeds
of any Loans shall constitute a re-certification by Borrower, as of the
applicable Funding Date, as to matters to which Borrower is required to certify
in the applicable Notice of Borrowing.

C. DISBURSEMENT OF FUNDS. All Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, being understood that no Lender shall be responsible
for any default by any other Lender in that other Lender's obligation to make a
Loan requested hereunder nor shall the Commitment of any Lender to make the
particular Type of Loan requested be increased or decreased as a result of a
default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder. Promptly after receipt by Administrative Agent of a Notice
of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
Administrative Agent shall notify each Lender or Swing Line Lender, as the case
may be, of the proposed borrowing. Each Lender shall make the amount of its
Loan available to Administrative Agent not later than 1:00 P.M. (Boston,
Massachusetts time) on the applicable Funding Date, and Swing Line Lender shall
make the amount of its Swing Line Loan available to Administrative Agent not
later than 2:00 P.M. (Boston, Massachusetts time) on the applicable Funding
Date, in each case in same day funds, at the Funding and Payment Office for such
Loans. Except as provided in subsection 2.1A(iv) or subsection 3.3B with
respect to Revolving Loans used to repay Refunded Swing Line Loans or to
reimburse any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it, upon satisfaction or waiver of the conditions precedent
specified in subsections 4.1 (in the case of Loans made on the Closing Date) and
4.2 (in the case of all Loans), Administrative Agent shall make the proceeds of
such Loans available to Borrower on the applicable Funding Date by causing an
amount of same day funds equal to the proceeds of all such Loans received by
Administrative Agent from Lenders or Swing Line Lender, as the case may be, to
be credited to the account of Borrower at the Funding and Payment Office for
such Loans.

Unless Administrative Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent

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the amount of such Lender's Loan requested on such Funding Date, Administrative
Agent may assume that such Lender has made such amount available to
Administrative Agent on such Funding Date and Administrative Agent may, in its
sole discretion, but shall not be obligated to, make available to Borrower a
corresponding amount on such Funding Date. If such corresponding amount is not
in fact made available to Administrative Agent by such Lender, Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from such Funding Date until
the date such amount is paid to Administrative Agent at the customary rate set
by Administrative Agent for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. If such Lender does not pay such
corresponding amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify Borrower, and Borrower shall
immediately pay such corresponding amount to Administrative Agent together with
interest thereon for each day from such Funding Date until the date such amount
is paid to Administrative Agent, at the rate payable under this Agreement for
Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that Borrower may have against any Lender as a result of any default
by such Lender hereunder.

D. THE REGISTER.

(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.7, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans (whether or not
separately evidenced by one or more Notes) of each Lender from time to time
(the "REGISTER"). The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.

(ii) Administrative Agent shall record in the Register the Tranche A
Term Loan Commitment, Tranche B Term Loan Commitment and Revolving Loan
Commitment and the Tranche A Term Loans, Tranche B Term Loan and Revolving
Loans from time to time of each Lender, the Swing Line Loan Commitment and
the Swing Line Loans from time to time of Swing Line Lender and each
repayment or prepayment in respect of the principal amount of the Tranche A
Term Loans, Tranche B Term Loan, or Revolving Loans of each Lender or the
Swing Line Loans of Swing Line Lender. Any such recordation shall be
conclusive and binding on Borrower and each Lender, absent clearly
demonstrable error; PROVIDED that failure to make any such recordation, or
any error in such recordation, shall not affect any Lender's Commitments or
Borrower's Obligations in respect of any applicable Loans.

(iii) Each Lender shall record on its internal records (including
any Notes held by such Lender) the amount of the Tranche B Term Loan and
the Tranche A Term Loan and Revolving Loan made by it and each payment in
respect thereof. Any such recordation shall be conclusive and binding on
Borrower, absent clearly demonstrable error; PROVIDED that failure to make
any such recordation, or any error in such recordation,

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shall not affect any Lender's Commitments or Borrower's Obligations in
respect of any applicable Loans; and PROVIDED, FURTHER that in the event of
any inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.

(iv) Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii). Any assignment or transfer of all or part of a Loan evidenced
by a Note shall be registered on the Register only upon surrender for
cancellation, accompanied by a duly executed Assignment Agreement, of the
Note evidencing such Loan. Prior to such recordation, all amounts owed
with respect to the applicable Commitment or Loan shall be owed to the
Lender listed in the Register as the owner thereof, and any request,
authority or consent of any Person who, at the time of making such request
or giving such authority or consent, is listed in the Register as a Lender
shall be conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Commitments or Loans.

(v) Borrower hereby designates Fleet to serve as its agent solely for
purposes of maintaining the Register as provided in this subsection 2.1D,
and Borrower hereby agrees that, to the extent Fleet serves in such
capacity, Fleet and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection
10.3.

E. OPTIONAL NOTES. Upon the request of any Lender made through the
Administrative Agent at any time, solely to facilitate the pledge or assignment
of such Lender's applicable Loans pursuant to subsection 10.1D), Borrower shall
execute and deliver to such Lender (and/or, if applicable and if so specified in
such notice, to any Person who is an assignee of such Lender pursuant to
subsection 10.1), promptly after Borrower's receipt of such notice, a Note or
Notes to evidence such Lender's Tranche A Term Loans, Tranche B Term Loan,
Revolving Loans or Swing Line Loans, as the case may be, substantially in the
form of EXHIBIT IV, EXHIBIT V, EXHIBIT VI, or EXHIBIT VII annexed hereto,
respectively, with appropriate insertions.

2.2 INTEREST ON THE LOANS.

A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made to maturity (whether by acceleration
or otherwise) at a rate determined by reference to the Base Rate or LIBOR.
Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear
interest on the unpaid principal amount thereof from the date made through
maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base

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Rate. The applicable basis for determining the rate of interest with respect to
any Term Loan or any Revolving Loan shall be selected by Borrower initially at
the time a Notice of Borrowing is given with respect to such Loan pursuant to
subsection 2.1B, and the basis for determining the interest rate with respect to
any Term Loan or any Revolving Loan may be changed from time to time pursuant to
subsection 2.2D. Subject to the last proviso to the first paragraph of
subsection 2.2D, if on any day a Term Loan or Revolving Loan is outstanding with
respect to which notice has not been delivered to Administrative Agent in
accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day that Loan shall bear
interest determined by reference to the Base Rate.

(i) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche A Term Loans and the Revolving Loans shall bear interest through
maturity as follows:

(a) if a Base Rate Loan, then at the sum of the Base Rate PLUS
the Applicable Tranche A Base Rate Margin; or

(b) if a LIBOR Loan, then at the sum of LIBOR PLUS the
Applicable Tranche A LIBOR Margin.

(ii) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche B Term Loans shall bear interest through maturity as follows:

(a) if a Base Rate Loan, then at the sum of the Base Rate PLUS
the Applicable Tranche B Base Rate Margin; or

(b) if a LIBOR Loan, then at the sum of LIBOR PLUS the
Applicable Tranche B LIBOR Margin.

(iii) Subject to the provisions of subsections 2.2E and 2.7, the
Swing Line Loans shall bear interest through maturity at the sum of the
Base Rate PLUS the Applicable Tranche A Base Rate Margin MINUS the
Applicable Commitment Fee Percentage.

B. INTEREST PERIODS. In connection with each LIBOR Loan, Borrower may,
pursuant to the applicable Notice of Borrowing or Notice of Conversion/
Continuation, as the case may be, select an interest period (each an "INTEREST
PERIOD") to be applicable to such Loan, which Interest Period shall be, at
Borrower's option, either a one, two, three or six month period or if deposits
in the interbank Eurodollar market are generally available for such period to
all Lenders making the applicable Loans (as determined by such Lenders in good
faith based on prevailing market conditions), a nine or twelve month period;
PROVIDED that:

(i) the initial Interest Period for any LIBOR Loan shall commence on
the Funding Date in respect of such Loan, in the case of a Loan initially
made as a LIBOR Loan, or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Loan converted to a LIBOR Loan;

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(ii) in the case of immediately successive Interest Periods applicable
to a LIBOR Loan continued as such pursuant to a Notice of Conversion/
Continuation, each successive Interest Period shall commence on the day on which
the next preceding Interest Period expires;

(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;

(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clauses (v) and (vi) of this subsection 2.2B, end on the last
Business Day of a calendar month;

(v) no Interest Period with respect to any portion of the Tranche A
Term Loans shall extend beyond the seventh anniversary of the Closing Date,
no Interest Period with respect to any portion of the Tranche B Term Loans
shall extend beyond the eighth anniversary of the Closing Date, and no
Interest Period with respect to any portion of the Revolving Loans shall
extend beyond the Revolving Loan Commitment Termination Date;

(vi) no Interest Period with respect to any portion of the Tranche A
Term Loans or Tranche B Term Loans shall extend beyond a date on which
Borrower is required to make a scheduled payment of principal of the
Tranche A Term Loans or Tranche B Term Loans, as the case may be, unless
the sum of (a) the aggregate principal amount of Tranche A Term Loans or
Tranche B Term Loans, as the case may be, that are Base Rate Loans plus (b)
the aggregate principal amount of Tranche A Term Loans or Tranche B Term
Loans, as the case may be, that are LIBOR Loans with Interest Periods
expiring on or before such date equals or exceeds the principal amount
required to be paid on the Tranche A Term Loans or Tranche B Term Loans, as
the case may be, on such date;

(vii) there shall be no more than 20 Interest Periods outstanding
at any time; and

(viii) in the event Borrower fails to specify an Interest Period
for any LIBOR Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Borrower shall be deemed to have selected an
Interest Period of one month.

C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at

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maturity (including final maturity); PROVIDED that in the event any Swing Line
Loans or any Revolving Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B, interest accrued on such Swing Line Loans or Revolving Loans
through the date of such prepayment shall be payable on the next succeeding
Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final
maturity).

D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, (i) Borrower shall have the option to convert at any time all or any part
of its outstanding Tranche A Term Loans, Tranche B Term Loans or Revolving Loans
equal to $2,500,000 and integral multiples of $250,000 in excess of that amount
from Loans bearing interest at a rate determined by reference to one basis to
Loans bearing interest at a rate determined by reference to an alternative basis
and (ii) upon the expiration of any Interest Period applicable to a LIBOR Loan,
Borrower shall have the option to continue as a LIBOR Loan all or any portion of
such Loan equal to $2,500,000 and integral multiples of $250,000 in excess of
that amount; PROVIDED, HOWEVER, that if, upon the expiration of any Interest
Period applicable to any LIBOR Loan, Borrower shall have failed to give a Notice
of Conversion/Continuation with respect to such LIBOR Loan in accordance with
this subsection 2.2D, Borrower shall be deemed to have given a timely Notice of
Conversion/Continuation electing to continue such LIBOR Loan as a LIBOR Loan
with an Interest Period of one month.

Borrower shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 11:00 A.M. (Boston, Massachusetts time) at
least one Business Day in advance of the proposed conversion date (in the case
of a conversion to a Base Rate Loan) and at least three Business Days in advance
of the proposed conversion/continuation date (in the case of a conversion to, or
a continuation of, a LIBOR Loan). A Notice of Conversion/Continuation shall
specify (i) the proposed conversion/continuation date (which shall be a Business
Day), (ii) the amount and Type of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation, (iv) in the case of a conversion
to, or a continuation of, a LIBOR Loan, the requested Interest Period, and (v)
in the case of a conversion to, or a continuation of, a LIBOR Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
Borrower may give Administrative Agent telephonic notice by the required time of
any proposed conversion/continuation under this subsection 2.2D; PROVIDED that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Administrative
Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender.

Neither Administrative Agent nor any Lender shall incur any liability
to Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to

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any Loans in accordance with this Agreement pursuant to any such telephonic
notice Borrower shall have effected a conversion or continuation, as the case
may be, hereunder.

Except as otherwise provided in subsections 2.6B, 2.6C and 2.6F, a
Notice of Conversion/Continuation for conversion to, or continuation of, a LIBOR
Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after
the related Interest Rate Determination Date, and Borrower shall be bound to
effect a conversion or continuation in accordance therewith.

E. POST-MATURITY INTEREST. Any principal payments on the Loans not paid
when due and, to the extent permitted by applicable law, any interest payments
on the Loans or any fees or other amounts owed hereunder not paid when due, in
each case whether at stated maturity, by notice of prepayment, by acceleration
or otherwise, shall thereafter bear interest (including post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable on demand at a rate which is 2% per annum in excess of the interest rate
otherwise payable under this Agreement for Base Rate Loans of the applicable
Type (any such fees and other amounts being deemed for such purposes to bear
interest on the same basis as Revolving Loans). Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Administrative Agent or any Lender.

F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed (i)
in the case of Base Rate Loans bearing interest at a rate determined by
reference to the Prime Rate, on the basis of a 365-day or 366-day year, as the
case may be, and (ii) in the case of LIBOR Loans and Base Rate Loans bearing
interest at a rate determined by reference to the Federal Funds Effective Rate,
on the basis of a 360-day year, in each case for the actual number of days
elapsed in the period during which it accrues. In computing interest on any
Loan, the date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a LIBOR Loan, the date of conversion of such LIBOR Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a LIBOR Loan, the date of
conversion of such Base Rate Loan to such LIBOR Loan, as the case may be, shall
be excluded; PROVIDED that if a Loan is repaid on the same day on which it is
made, one day's interest shall be paid on that Loan.

2.3 FEES.

A. COMMITMENT FEES. Borrower agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the aggregate principal
amount of outstanding Revolving Loans (but not any outstanding Swing Line Loans
or the Letter of Credit Usage) MULTIPLIED BY the Applicable

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Commitment Fee Percentage, such commitment fees to be calculated on the basis of
a 365-day or 366-day year, as the case may be, and the actual number of days
elapsed and to be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year, commencing on the first such date to occur
after the Closing Date, and on the Revolving Loan Commitment Termination Date.

B. OTHER FEES. Borrower agrees to pay to Administrative Agent,
Syndication Agent, Documentation Agent, Arranger, and Lenders, as applicable,
such other fees in the amounts and at the times separately agreed upon between
Borrower and Administrative Agent, Syndication Agent, Documentation Agent and
Arranger, as the case may be.

2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF
COLLATERAL AND PAYMENTS UNDER THE GUARANTIES.

A. SCHEDULED PAYMENTS OF TERM LOANS.

(i) SCHEDULED PAYMENTS OF TRANCHE A TERM LOANS. Borrower shall make
principal payments on the Tranche A Term Loans made to Borrower in
installments on the second anniversary of the Closing Date and on each
subsequent anniversary of the Closing Date until the Tranche A Term Loans
are paid in full, each such installment to be in an amount equal to the
corresponding percentages set forth below of the original principal amount
of the Tranche A Term Loans made to Borrower:

Annual Percentage of Original
Principal Amount of
Anniversary of Closing Date Tranche A Term Loans
--------------------------- --------------------

Second 7%
Third 11%
Fourth 14%
Fifth 17%
Sixth 23%
Seventh 28%
-----
TOTAL 100%

; PROVIDED that the scheduled installments of principal of the Tranche A
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche A Term Loans in
accordance with subsection 2.4B(iv); and PROVIDED, FURTHER that the Tranche
A Term Loans and all other amounts owed hereunder with respect to the
Tranche A Term Loans shall be paid in full no later than the seventh
anniversary of the Closing Date, and the final installment payable by
Borrower in respect of the Tranche A Term Loans on such date shall be in an
amount, if such amount is

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different from that specified above, sufficient to repay all amounts owing
by Borrower under this Agreement with respect to the Tranche A Term Loans.

(ii) SCHEDULED PAYMENTS OF TRANCHE B TERM LOANS. Borrower shall make
principal payments on the Tranche B Term Loans made to Borrower in
installments on the second anniversary of the Closing Date and on each
subsequent anniversary of the Closing Date until the Tranche B Term Loans
are paid in full, each such installment to be in an amount equal to the
corresponding percentages set forth below of the original principal amount
of the Tranche B Term Loans made to Borrower:

Annual Percentage of Original
Principal Amount of
Anniversary of Closing Date Tranche B Term Loans
--------------------------- --------------------
Second 1%
Third 1%
Fourth 1%
Fifth 1%
Sixth 1%
Seventh 1%
Eighth 94%
-----
TOTAL 100%

; PROVIDED that the scheduled installments of principal of the Tranche B
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4B(iv); and PROVIDED, FURTHER that the Tranche
B Term Loans and all other amounts owed hereunder with respect to the
Tranche B Term Loans shall be paid in full no later than the eighth
anniversary of the Closing Date, and the final installment payable by
Borrower in respect of the Tranche B Term Loans on such date shall be in an
amount, if such amount is different from that specified above, sufficient
to repay all amounts owing by Borrower under this Agreement with respect to
the Tranche B Term Loans.

B. PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS.

(i) VOLUNTARY PREPAYMENTS. Borrower may, upon written or telephonic
notice to Administrative Agent at or prior to 1:00 P.M. (Boston,
Massachusetts time) on the date of prepayment, which notice, if telephonic,
shall be promptly confirmed in writing, at any time and from time to time
prepay any Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $250,000 and integral multiples of $100,000 in
excess of that amount. Borrower may, upon not less than one Business Day's
prior written or telephonic notice, in the case of Base Rate Loans, and
three Business Days' prior written or telephonic notice, in the case of
LIBOR Loans, in each case given to Administrative Agent by 12:00 Noon
(Boston, Massachusetts time) on the date required

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and, if given by telephone, promptly confirmed in writing to Administrative
Agent (which original written or telephonic notice Administrative Agent
will promptly transmit by telefacsimile or telephone to each Lender), at
any time and from time to time prepay any of Borrower's Tranche A Term
Loans, Tranche B Term Loans or Revolving Loans on any Business Day in whole
or in part in an aggregate minimum amount of $2,500,000 and integral
multiples of $250,000 in excess of that amount. Notice of prepayment
having been given as aforesaid, the principal amount of the Loans specified
in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as
specified in subsection 2.4B(iv).

(ii) VOLUNTARY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. Borrower
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original written
or telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time to
time terminate in whole or permanently reduce in part, without premium or
penalty, the Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed termination or
reduction; PROVIDED that any such partial reduction of the Revolving Loan
Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $500,000 in excess of that amount. Borrower's notice
to Administrative Agent shall designate the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial
reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Borrower's notice
and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share.

(iii) MANDATORY PREPAYMENTS. Subject to the provisions of
subsections 2.4B(iv)(d), the Loans shall be prepaid in the amounts and
under the circumstances set forth below, all such prepayments to be applied
as set forth below or as more specifically provided in subsection 2.4B(iv):

(a) PREPAYMENTS FROM NET ASSET SALE PROCEEDS. No later than the
fifth Business Day following the date on which any Net Asset Sale
Proceeds become Unreinvested Asset Sale Proceeds, Borrower shall
prepay its outstanding Term Loans in an aggregate amount equal to such
Unreinvested Asset Sale Proceeds; PROVIDED that Borrower may in its
sole discretion elect, pursuant to a written notice given by Borrower
to Administrative Agent describing such election, to postpone any
mandatory prepayments otherwise required to be made by Borrower
pursuant to this subsection 2.4B(iii)(a) (any such prepayment, until
the time actually made, being "POSTPONED PREPAYMENTS") until such time
as the aggregate amount of Postponed Prepayments equals $5,000,000.

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(b) PREPAYMENTS FROM CONSOLIDATED EXCESS CASH FLOW. In the
event that (i) the Consolidated Leverage Ratio shall be equal to or
greater than 4.00:1.00 as of the last day of any Fiscal Year
(commencing with Fiscal Year 1999) and (ii) there shall be
Consolidated Excess Cash Flow for such Fiscal Year, Borrower shall, no
later than the date on which Borrower is required to deliver audited
financial statements with respect to such Fiscal Year pursuant to
subsection 6.1(ii), prepay its outstanding Term Loans in an aggregate
amount equal to 50% of such Consolidated Excess Cash Flow (the
remaining 50% of such Consolidated Excess Cash Flow being "RETAINED
EXCESS CASH FLOW").

(c) PREPAYMENTS DUE TO REDUCTIONS OR RESTRICTIONS OF REVOLVING
LOAN COMMITMENTS. Borrower shall from time to time prepay FIRST the
Swing Line Loans and SECOND the Revolving Loans to the extent
necessary so that the Total Utilization of Revolving Loan Commitments
shall not at any time exceed the Revolving Loan Commitments then in
effect.

(iv) APPLICATION OF PREPAYMENTS.

(a) APPLICATION OF VOLUNTARY PREPAYMENTS BY TYPE OF LOANS AND
ORDER OF MATURITY. Any voluntary prepayments pursuant to subsection
2.4B(i) shall be applied as specified by Borrower in the applicable
notice of prepayment; PROVIDED that in the event Borrower fails to
specify the Loans of Borrower to which any such prepayment shall be
applied, such prepayment shall be applied FIRST to repay outstanding
Swing Line Loans to the full extent thereof, SECOND to repay
outstanding Revolving Loans to the full extent thereof, and THIRD to
repay outstanding Term Loans to the full extent thereof. Any
voluntary prepayment of Borrower's Term Loans pursuant to subsection
2.4B(i) shall be applied to prepay the Tranche A Term Loans and the
Tranche B Term Loans in the manner specified by Borrower and to reduce
the scheduled installments of principal of the Tranche A Term Loans
and the Tranche B Term Loans set forth in subsections 2.4A(i), or
2.4A(ii), as the case may be, in such order as Borrower shall direct.

(b) APPLICATION OF MANDATORY PREPAYMENTS OF TERM LOANS TO
TRANCHE A TERM LOANS, TRANCHE B TERM LOANS AND THE SCHEDULED
INSTALLMENTS OF PRINCIPAL THEREOF. Any mandatory prepayments of
Borrower's Term Loans pursuant to subsection 2.4B(iii) shall be
applied to prepay the Tranche A Term Loans and the Tranche B Term
Loans on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof). Any mandatory prepayment of
the Tranche A Term Loans or the Tranche B Term Loans shall be applied
to scheduled installments of principal of such Tranche A Term Loans or
the Tranche B Term Loans, as the case may be, set forth in subsection
2.4A(i) or 2.4A(ii), respectively, that are unpaid at the time of such
prepayment in the forward order of maturity.

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(c) WAIVER OF CERTAIN MANDATORY PREPAYMENTS. Anything contained
herein to the contrary notwithstanding, so long as any Tranche A Term
Loans are outstanding, in the event Borrower is required to make any
mandatory prepayment (a "WAIVABLE MANDATORY PREPAYMENT") of the
Tranche B Term Loans, pursuant to subsection 2.4B(iii), (V) Borrower
may, by written or telephonic notice (promptly confirmed in writing)
given to Administrative Agent not less than three Business Days prior
to the date (the "REQUIRED PREPAYMENT DATE") on which Borrower is
required to make such Waivable Mandatory Prepayment, elect to offer
each Lender holding an outstanding Tranche B Term Loan the option to
refuse such Lender's Pro Rata Share of such Waivable Mandatory
Prepayment, (W) in the event Borrower gives such notice to
Administrative Agent, Administrative Agent will promptly notify each
such Lender of the amount of such Lender's Pro Rata Share of such
Waivable Mandatory Prepayment and such Lender's option to refuse such
amount, (X) each such Lender may exercise such option by giving
written notice to Borrower and Administrative Agent of its election to
do so on or before the first Business Day (the "CUTOFF DATE") prior to
the Required Prepayment Date, (Y) on the Required Prepayment Date,
Borrower shall pay to Administrative Agent an amount equal to the sum
of (1) that portion of the Waivable Mandatory Prepayment payable to
those Lenders that have elected not to exercise such option (it being
understood that any Lender which does not notify Borrower and
Administrative Agent of its election to exercise such option on or
before the Cutoff Date shall be deemed to have elected, as of the
Cutoff Date, not to exercise such option), which amount shall be
applied to prepay the Tranche B Term Loans of such Lenders in
accordance with subsection 2.4B(iv)(b) PLUS (2) 50% of that portion
(the "WAIVED PORTION") of the Waivable Mandatory Prepayment otherwise
payable to those Lenders that have elected to exercise such option,
which amount shall be applied to prepay the Tranche A Term Loans in
the same manner as voluntary prepayments of the Tranche A Term Loans
are applied pursuant to subsection 2.4B(iv)(a), and (Z) Borrower shall
be entitled to retain the remaining 50% of the Waived Portion (such
amount being a "RETAINED PREPAYMENT") to be used for general corporate
purposes.

(d) APPLICATION OF PREPAYMENTS TO BASE RATE LOANS AND LIBOR
LOANS; OPTION TO DEFER CERTAIN MANDATORY PREPAYMENTS OF LIBOR LOANS.
Considering Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans being prepaid separately, any prepayment thereof shall be
applied first to Base Rate Loans to the full extent thereof before
application to LIBOR Loans, in each case in a manner which minimizes
the amount of any payments required to be made by Borrower pursuant to
subsection 2.6D; PROVIDED that, anything contained in this Agreement
to the contrary notwithstanding, in the event that (1) the application
of any mandatory prepayment pursuant to subsection 2.4B(iii) in
accordance with the foregoing provisions of this subsection 2.4B(iv)
would result in the prepayment of all or any portion of a LIBOR Loan
prior to the end of the Interest Period applicable thereto, (2) the
remaining term of such Interest Period is less than three

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months, and (3) no Potential Event of Default or Event of Default
shall have occurred and be continuing, Borrower shall have the option,
by giving written notice (or telephonic notice promptly confirmed in
writing) to Administrative Agent of its election to do so on or before
the first Business Day prior to the date on which such prepayment
would otherwise be required to be made, to defer the making of such
prepayment until the last day of such Interest Period or such earlier
date as Borrower may specify in such notice.

C. GENERAL PROVISIONS REGARDING PAYMENTS.

(i) MANNER AND TIME OF PAYMENT. All payments by Borrower of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in same day funds, in each case without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 3:00 P.M. (Boston, Massachusetts time)
on the date due at the applicable Funding and Payment Office for the
account of Lenders; funds received by Administrative Agent after that time
on such due date shall be deemed to have been paid by Borrower on the next
succeeding Business Day.

(ii) APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.

(iii) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest
payments in respect of Term Loans and Revolving Loans shall be apportioned
among all outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its applicable Lending
Office or at such other address as such Lender may request, its Pro Rata
Share of all such payments received by Administrative Agent and the
commitment fees of such Lender when received by Administrative Agent
pursuant to subsection 2.3. Notwithstanding the foregoing provisions of
this subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro
Rata Share of any LIBOR Loans, Administrative Agent shall give effect
thereto in apportioning payments received thereafter.

(iv) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.

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D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER THE
GUARANTIES.

(i) APPLICATION OF PROCEEDS OF COLLATERAL. All proceeds received by
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral under any Collateral
Document may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time
thereafter) applied in full or in part by Administrative Agent against, the
applicable Secured Obligations (as defined in such Collateral Document) in
the following order of priority:

(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Administrative
Agent in connection with the exercise of any right or remedy under
such Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;

(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and

(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whomsoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.

(ii) APPLICATION OF PAYMENTS UNDER THE GUARANTIES. All payments
received by Administrative Agent under the Guaranties shall be applied
promptly from time to time by Administrative Agent in the following order
of priority:

(a) To the payment of the costs and expenses of any collection
or other realization under the Guaranties, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;

(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and

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(c) thereafter, to the extent of any excess such payments, to
the payment to the applicable Guarantor or to whomsoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.

2.5 USE OF PROCEEDS.

A. TERM LOANS. The proceeds of the Term Loans, together with a portion
of the proceeds of the initial Revolving Loans (the "RECAPITALIZATION REVOLVING
LOANS") and the proceeds of the debt and equity capitalization of Borrower
described in subsection 4.1C(ii), were or shall be applied by Borrower to fund
the Recapitalization Financing Requirements.

B. REVOLVING LOANS; SWING LINE LOANS. The proceeds of the
Recapitalization Revolving Loans shall be applied by Borrower as provided in
subsection 2.5A. The proceeds of any other Revolving Loans and any Swing Line
Loans shall be applied by Borrower for general corporate purposes.

2.6 SPECIAL PROVISIONS GOVERNING LIBOR LOANS.

Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to LIBOR Loans as to the
matters covered:

A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (Boston, Massachusetts time), on each Interest Rate
Determination Date, Administrative Agent shall determine (which determination
shall, absent clearly demonstrable error, be final, conclusive and binding upon
all parties) the interest rate that shall apply to LIBOR Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Borrower and each Lender.

B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have reasonably determined (which determination
shall, absent clearly demonstrable error, be final and conclusive and binding
upon all parties hereto), on any Interest Rate Determination Date with respect
to any LIBOR Loans, that by reason of circumstances affecting the London
interbank market for Dollars adequate and fair means do not exist for
ascertaining the interest rate applicable to such Loans on the basis provided
for in the definition of LIBOR, Administrative Agent shall on such date give
notice (by telefacsimile or by telephone confirmed in writing) to Borrower and
each Lender of such determination, whereupon (i) no Loans may be made as, or
converted to, LIBOR Loans until such time as Administrative Agent notifies
Borrower and Lenders that the circumstances giving rise to such notice no longer
exist (which notice Administrative Agent shall give at such time as such
circumstances no longer exist), and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by
Borrower.

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C. ILLEGALITY OR IMPRACTICABILITY OF LIBOR LOANS. In the event that on
any date any Lender shall have reasonably determined (which determination shall
be made only after consultation with Borrower and Administrative Agent, it being
understood that any such determination so made shall, absent clearly
demonstrable error, be final and conclusive and binding upon all parties hereto)
that the making, maintaining or continuation of its LIBOR Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful) or (ii) has become impracticable as a result of contingencies
occurring after the date of this Agreement which materially and adversely affect
the London interbank market then, and in any such event, such Lender shall be an
"AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by
telephone confirmed in writing) to Borrower and Administrative Agent of such
determination (which notice Administrative Agent shall promptly transmit to each
other Lender). Thereafter (a) the obligation of the Affected Lender to make
Loans as, or to convert Loans to, LIBOR Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a LIBOR Loan then being
requested by Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding LIBOR Loans (the "AFFECTED LOANS") shall
be terminated at the earlier to occur of the expiration of the Interest Period
then in effect with respect to the Affected Loans or when required by law, and
(d) any Affected Loans shall automatically convert into Base Rate Loans on the
date of such termination. Notwithstanding the foregoing, to the extent a
determination by an Affected Lender as described above relates to a LIBOR Loan
then being requested by Borrower pursuant to a Notice of Borrowing or a Notice
of Conversion/Continuation, Borrower shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, LIBOR Loans in accordance with the terms of this Agreement.

D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth in reasonable detail the basis for requesting
such amounts), for all reasonable losses, costs and expenses sustained by that
Lender (including losses, costs and expenses actually sustained by that Lender
in connection with the liquidation or re-employment of deposits or other funds
acquired by it to make or carry the subject LIBOR Loans but excluding any loss
of anticipated profits): (i) if for any reason (other than a default by that
Lender or Administrative Agent) a borrowing of any LIBOR Loan by Borrower does
not occur on a date specified therefor in a Notice of Borrowing or a telephonic
request for borrowing, or a conversion to or

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continuation of any LIBOR Loan by Borrower does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including any prepayment
pursuant to subsection 2.4B(i)) or other principal payment or any conversion of
any of Borrower's LIBOR Loans occurs on a date prior to the last day of an
Interest Period applicable to that Loan or (iii) if any prepayment of any of
Borrower's LIBOR Loans is not made on any date specified in a notice of
prepayment given by Borrower.

E. BOOKING OF LIBOR LOANS. Any Lender may make, carry or transfer LIBOR
Loans at, to, or for the account of any of its branch offices or the office of
an Affiliate of that Lender.

F. LIBOR LOANS AFTER DEFAULT. If, after the occurrence of and during the
continuation of a Potential Event of Default or an Event of Default,
Administrative Agent or Requisite Lenders have determined in its or their sole
discretion not to permit the making or continuation of any Loans as, or the
conversion of any Loans to, LIBOR Loans and Administrative Agent has so notified
Borrower in writing (i) Borrower may not elect to have any Loans be made as or
converted to LIBOR Loans or elect to have any outstanding LIBOR Loans continued
as such after the expiration of the Interest Periods then in effect for such
LIBOR Loans, (ii) subject to the provisions of subsection 2.6D, any Notice of
Borrowing or Notice of Conversion/Continuation given by Borrower with respect to
a requested borrowing or conversion/continuation in respect of LIBOR Loans that
has not yet occurred shall be deemed to be rescinded by Borrower.

2.7 INCREASED COSTS; CAPITAL ADEQUACY.

A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall reasonably determine (which
determination shall, absent clearly demonstrable error, be final and conclusive
and binding upon all parties hereto) that the introduction or adoption (after
the date hereof) of any law, treaty or governmental rule, regulation or order,
or that any change (after the date hereof) in any law, treaty or governmental
rule, regulation or order or in the interpretation, administration or
application thereof, or that any determination (after the date hereof) by a
court or governmental authority, or that compliance by such Lender with any
guideline, request or directive issued or made (after the date hereof) by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law), in any such case:

(i) subjects such Lender (or its applicable Lending Office) to any
additional Tax (excluding (x) any Tax on the overall net income of such
Lender, (y) any Tax imposed on any Lender as a result of a present or
former connection between the jurisdiction imposing such Taxes and such
Lender (except a present connection arising solely from such Lender having
executed, delivered or performed its obligations or received a payment
under, or enforced any Loan Documents) and (z) any Tax with respect

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to which the provisions of subsection 2.7B are applicable) with respect to
this Agreement or any of its obligations hereunder or any payments to such
Lender (or its applicable Lending Office) of principal, interest, fees or
any other amount payable hereunder;

(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender; or

(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable Lending Office)
or its obligations hereunder or the London interbank market;

and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable Lending Office) with
respect thereto; then, in any such case, Borrower shall pay to such Lender,
promptly after receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
reasonable discretion shall determine) as may be necessary to compensate such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Borrower (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be conclusive and binding upon all
parties hereto absent clearly demonstrable error.

B. WITHHOLDING OF TAXES.

(i) PAYMENTS TO BE FREE AND CLEAR. All sums payable by Borrower
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding for or on account of, any Tax imposed, levied,
collected, withheld or assessed by or within the United States of America
or any political subdivision in or of the United States of America or any
other jurisdiction from or to which a payment is made by or on behalf of
Borrower or by any federation or organization of which the United States of
America or any such jurisdiction is a member at the time of payment,
excluding (x) any Tax on the overall net income of such Lender and (y) any
Tax imposed on any Agent or any Lender as a result of a present or former
connection between the jurisdiction imposing such Taxes and such Lender
(except a present connection arising solely from such Agent or such Lender
having executed, delivered or performed its obligations or received a
payment under, or enforced any Loan Documents) (any such non-excluded Tax,
a "NON-EXCLUDED TAX").

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(ii) GROSSING-UP OF PAYMENTS. If Borrower or any other Person is
required by law to make any deduction or withholding on account of any such
Non-Excluded Tax from any sum paid or payable by Borrower to Administrative
Agent or any Lender under any of the Loan Documents:

(a) Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Borrower
becomes aware of it;

(b) Borrower shall pay any such Non-Excluded Tax before the date
on which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on Borrower) for its own account or (if
that liability is imposed on Administrative Agent or such Lender, as
the case may be) on behalf of and in the name of Administrative Agent
or such Lender;

(c) the sum payable by Borrower in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made; and

(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Non-Excluded Tax which it is
required by clause (b) above to pay, Borrower shall deliver to
Administrative Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;

PROVIDED that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change in any
applicable law, treaty or governmental rule, regulation or order, or any
change in the interpretation, administration or application thereof, after
the date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which
such Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.

(iii) INDEMNIFICATION. Borrower agrees to indemnify and hold
harmless each Lender and each Agent for the full amount of Non-Excluded
Taxes that are payable by such Lender or such Agent and any penalties,
interest, additions to tax, expenses or other similar liabilities arising
therefrom or with respect thereto, whether or not such Non-

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Excluded Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 45 days after the date such Lender or
such Agent makes written demand therefor.

(iv) EVIDENCE OF EXEMPTION FROM U.S. WITHHOLDING TAX.

(a) Each Lender that is not a United States person as defined in
Section 770(a) of the Code (for purposes of this subsection 2.7B(iv),
a "NON-US LENDER") shall deliver to Administrative Agent for
transmission to Borrower, on or prior to the Closing Date (in the case
of each Lender listed on the signature pages hereof) or on or prior to
the date of the Assignment Agreement pursuant to which it becomes a
Lender (in the case of each other Lender), and at such other times as
may be necessary in the determination of Borrower or Administrative
Agent (each in the reasonable exercise of its discretion), (1) two
original copies of Internal Revenue Service Form 1001 or 4224 (or any
successor forms), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder
to establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or other amounts
payable under any of the Loan Documents or (2) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the Internal
Revenue Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 pursuant to clause (1) above, a Certificate re Non-Bank
Status together with two original copies of Internal Revenue Service
Form W-8 (or any successor form), properly completed and duly executed
by such Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Lender is not subject to
deduction or withholding of United States federal income tax with
respect to any payments to such Lender of interest payable under any
of the Loan Documents.

(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iv)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall promptly (1) deliver to Administrative Agent for
transmission to Borrower two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case may
be, properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
payments to such

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Lender of interest payable under any of the Loan Documents or (2)
notify Administrative Agent and Borrower of its inability to deliver
any such forms, certificates or other evidence.

(c) Borrower shall not be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.7B(ii) or to
indemnify any Non-US Lender subsection 2.7B(iii) if such Lender shall
have failed to satisfy the requirements of clause (a) or (b)(1) of
this subsection 2.7B(iv); PROVIDED that if such Lender shall have
satisfied the requirements of subsection 2.7B(iv)(a) on the Closing
Date (in the case of each Lender listed on the signature pages hereof)
or on the date of the Assignment Agreement pursuant to which it became
a Lender (in the case of each other Lender), nothing in this
subsection 2.7B(iv)(c) shall relieve Borrower of its obligation to pay
any additional amounts pursuant to clause (c) of subsection 2.7B(ii)
or to indemnify any Lender pursuant to subsection 2.7B(iii) in the
event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is
no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender
is not subject to withholding as described in subsection 2.7B(iv)(a).

C. REFUND AND CONTEST. If Borrower determines in good faith that a
reasonable basis exists for contesting any Non-Excluded Tax for which
indemnification has been demanded hereunder, the relevant Lender (to the extent
such Lender reasonably determines in good faith that it will not suffer any
adverse effect as a result thereof) or any Agent, as applicable, shall cooperate
with Borrower in challenging the imposition of such Non-Excluded Tax at
Borrower's expense if so requested by Borrower in writing. If any Lender or any
Agent, as applicable receives a refund of a Non-Excluded Tax for which a payment
has been made by Borrower pursuant to this Agreement, which refund in the good
faith judgment of such Lender or such Agent, as the case may be, is attributable
to Borrower, then such Lender or such Agent, as the case may be, shall reimburse
Borrower for such amount as such Lender or such Agent, as the case may be,
determines to be the proportion of the refund as will leave it, after such
reimbursement, in no better or worse position than it would have been in if the
payment had not been required. Neither Lenders nor Agents shall be obliged to
disclose information regarding its tax affairs or computations to Borrower in
connection with this subsection 2.7C or any other provision of subsection 2.7B.

D. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that
the introduction or adoption (after the date hereof) of any law, rule or
regulation (or any provision thereof) regarding capital adequacy, or that any
change (after the date hereof) therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or that
compliance by any Lender (or its applicable Lending Office) with any guideline,
request or directive regarding capital adequacy (whether or not having the force
of law) introduced or adopted (after

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the Closing Date) by any such governmental authority, central bank or comparable
agency, in any such case has or would have the effect of reducing the rate of
return on the capital of such Lender or any corporation controlling such Lender
as a consequence of such Lender's Loans or Commitments or Letters of Credit or
participations therein or other obligations hereunder with respect to the Loans
or the Letters of Credit to a level below that which such Lender or such
controlling corporation could have achieved but for such introduction, adoption,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time to
time, promptly after receipt by Borrower from such Lender of the statement
referred to in the next sentence, Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such controlling
corporation for such reduction. Such Lender shall deliver to Borrower (with a
copy to Administrative Agent) a written statement setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be conclusive and binding upon all parties hereto absent clearly
demonstrable error.

2.8 NOTICE OF CERTAIN COSTS; OBLIGATION OF LENDERS AND ISSUING LENDERS TO
MITIGATE.

A. Notwithstanding anything in this Agreement to the contrary, to
the extent subsection 2.6, 2.7 or 3.6 requires any Lender or Issuing Lender to
give notice to Borrower of an event or a condition that would entitle such
Lender or Issuing Lender to receive payments under subsection 2.6, 2.7 or 3.6,
as the case may be, in the event such notice is given by such Lender or Issuing
Lender more than 180 days after such Lender or Issuing Lender has knowledge of
the occurrence or existence of such event or circumstance, such Lender or
Issuing Lender shall not be entitled to receive any such payments under
subsection 2.6, 2.7 or 3.6, as the case may be, in respect of the period ending
on the Business Day immediately preceding the date on which such notice is given
to Borrower.

B. Each Lender and Issuing Lender agrees that, if an event occurs or
a condition arises that would cause such Lender to become an Affected Lender or
that would entitle such Lender or Issuing Lender to receive payments under
subsection 2.7 or subsection 3.6, it will, if so requested by Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
(i) make, issue, fund or maintain the Commitments of such Lender or the affected
Loans or Letters of Credit (or participations therein) of such Lender or Issuing
Lender through another lending or letter of credit office of such Lender or
Issuing Lender or (ii) take such other measures as such Lender or Issuing Lender
may deem reasonable in good faith, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if the making, issuing, funding or maintaining of such
Commitments or Loans or Letters of Credit (or participations therein) through
such other lending or letter of credit office or in accordance with such other
measures, as the case may be, would not otherwise materially adversely affect
such Commitments or Loans or Letters of Credit (or participations therein) or
cause such Lender or Issuing Lender to suffer any economic, legal or regulatory

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disadvantage; PROVIDED that nothing in this subsection 2.8 shall affect or
postpone any of the Obligations of Borrower or the rights of any Lender provided
in subsection 2.6C, 2.7 or 3.6.

2.9 DEFAULTING LENDERS.

Anything contained herein to the contrary notwithstanding, in the
event that any Lender (a "DEFAULTING LENDER") defaults (a "FUNDING DEFAULT") in
its obligation to fund any Revolving Loan (a "DEFAULTED REVOLVING LOAN") in
accordance with subsection 2.1 as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority, then (i) during any Default Period (as defined
below) with respect to such Defaulting Lender, such Defaulting Lender shall be
deemed not to be a "Lender" for purposes of voting on any matters (including the
granting of any consents or waivers) with respect to any of the Loan Documents,
(ii) to the extent permitted by applicable law, until such time as the Default
Excess (as defined below) with respect to such Defaulting Lender shall have been
reduced to zero, (a) any voluntary prepayment of the Revolving Loans pursuant to
subsection 2.4B(i) shall, if Borrower so directs at the time of making such
voluntary prepayment, be applied to the Revolving Loans of other Lenders as if
such Defaulting Lender had no Revolving Loans outstanding and the Revolving Loan
Exposure of such Defaulting Lender were zero, and (b) any mandatory prepayment
of the Revolving Loans pursuant to subsection 2.4B(iii) shall, if Borrower so
directs at the time of making such mandatory prepayment, be applied to the
Revolving Loans of other Lenders (but not to the Revolving Loans of such
Defaulting Lender) as if such Defaulting Lender had funded all Defaulted
Revolving Loans of such Defaulting Lender, it being understood and agreed that
Borrower shall be entitled to retain any portion of any mandatory prepayment of
the Revolving Loans that is not paid to such Defaulting Lender solely as a
result of the operation of the provisions of this clause (b), (iii) such
Defaulting Lender's Revolving Loan Commitment and outstanding Revolving Loans
and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage shall
be excluded for purposes of calculating the commitment fee payable to Lenders
pursuant to subsection 2.3A in respect of any day during any Default Period with
respect to such Defaulting Lender, and such Defaulting Lender shall not be
entitled to receive any commitment fee pursuant to subsection 2.3A with respect
to such Defaulting Lender's Revolving Loan Commitment in respect of any Default
Period with respect to such Defaulting Lender, and (iv) the Total Utilization of
Revolving Loan Commitments as at any date of determination shall be calculated
as if such Defaulting Lender had funded all Defaulted Revolving Loans of such
Defaulting Lender.

For purposes of this Agreement, (I) "DEFAULT PERIOD" means, with
respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(A) the date on which all Revolving Loan Commitments are cancelled or terminated
and/or the Obligations are declared or become immediately due and payable, (B)
the date on which (1) the Default Excess with respect to such Defaulting Lender
shall have been reduced to zero (whether by the funding by such Defaulting
Lender of any Defaulted Revolving Loans of such Defaulting Lender or by the
non-pro rata application of any voluntary or mandatory prepayments of the
Revolving Loans in accordance

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with the terms of this subsection 2.9 or by a combination thereof) and (2) such
Defaulting Lender shall have delivered to Borrower and Administrative Agent a
written reaffirmation of its intention to honor its obligations under this
Agreement with respect to its Revolving Loan Commitment, and (C) the date on
which Borrower, Administrative Agent and Requisite Lenders waive all Funding
Defaults of such Defaulting Lender in writing, and (II) "DEFAULT EXCESS" means,
with respect to any Defaulting Lender, the excess, if any, of such Defaulting
Lender's Pro Rata Share of the aggregate outstanding principal amount of
Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other
than such Defaulting Lender) had funded all of their respective Defaulted
Revolving Loans) over the aggregate outstanding principal amount of Revolving
Loans of such Defaulting Lender.

No Commitment of any Lender shall be increased or otherwise affected,
and, except as otherwise expressly provided in this subsection 2.9, performance
by Borrower of its obligations under this Agreement and the other Loan Documents
shall not be excused or otherwise modified, as a result of any Funding Default
or the operation of this subsection 2.9. The rights and remedies against a
Defaulting Lender under this subsection 2.9 are in addition to other rights and
remedies which Borrower may have against such Defaulting Lender with respect to
any Funding Default and which Administrative Agent or any Lender may have
against such Defaulting Lender with respect to any Funding Default.

2.10 REMOVAL OR REPLACEMENT OF A LENDER.

A. Anything contained in this Agreement to the contrary
notwithstanding, in the event that:

(i) (a) any Lender (an "INCREASED-COST LENDER") shall give notice to
Borrower that such Lender is an Affected Lender or that such Lender is
entitled to receive payments under subsection 2.7 or subsection 3.6, (b)
the circumstances which have caused such Lender to be an Affected Lender or
which entitle such Lender to receive such payments shall remain in effect,
and (c) such Lender shall fail to withdraw such notice within five Business
Days after Borrower's request for such withdrawal; or

(ii) (a) any Lender shall become a Defaulting Lender, (b) the Default
Period for such Defaulting Lender shall remain in effect, and (c) such
Defaulting Lender shall fail to cure the default as a result of which it
has become a Defaulting Lender within five Business Days after Borrower's
request that it cure such default; or

(iii) (a) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of
this Agreement as contemplated by clauses (i) through (iv) of the first
proviso to subsection 10.6A, the consent of Requisite Lenders shall have
been obtained but the consent of one or more of such other Lenders (each a
"NON-CONSENTING LENDER") whose consent is required shall not have been
obtained, and (b) the failure to obtain Non-Consenting Lenders' consents
does not result solely from the exercise of Non-Consenting Lenders' rights
(and the withholding of

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any required consents by Non-Consenting Lenders) pursuant to the second
proviso to subsection 10.6A;

then, and in each such case, Borrower shall have the right, at its option, to
remove or replace the applicable Increased-Cost Lender, Defaulting Lender or
Non-Consenting Lender (the "TERMINATED LENDER") to the extent permitted by
subsection 2.10B.

B. Borrower may, by giving written notice to Administrative Agent and any
Terminated Lender of its election to do so:

(i) elect to (a) terminate the Revolving Loan Commitment, if any, of
such Terminated Lender upon receipt by such Terminated Lender of such
notice and (b) prepay on the date of such termination any outstanding Loans
made by such Terminated Lender, together with accrued and unpaid interest
thereon and any other amounts payable to such Terminated Lender hereunder
pursuant to subsection 2.6, subsection 2.7 or subsection 3.6 or otherwise;
PROVIDED that, in the event such Terminated Lender has any Loans
outstanding at the time of such termination, the written consent of
Administrative Agent and Requisite Lenders (which consent shall not be
unreasonably withheld or delayed) shall be required in order for Borrower
to make the election set forth in this clause (i); or

(ii) elect to cause such Terminated Lender (and such Terminated Lender
hereby irrevocably agrees) to assign its outstanding Loans and its
Revolving Loan Commitment, if any, in full to one or more Eligible
Assignees (each a "REPLACEMENT LENDER") in accordance with the provisions
of subsection 10.1B; PROVIDED that (a) on the date of such assignment,
Borrower shall pay any amounts payable to such Terminated Lender pursuant
to subsection 2.6, subsection 2.7 or subsection 3.6 or otherwise as if it
were a prepayment and (b) in the event such Terminated Lender is a
Non-Consenting Lender, each Replacement Lender shall consent, at the time
of such assignment, to each matter in respect of which such Terminated
Lender was a Non-Consenting Lender;

PROVIDED that (X) Borrower may not make either of the elections set forth in
clauses (i) or (ii) above with respect to any Non-Consenting Lender unless
Borrower also makes one of such elections with respect to each other Terminated
Lender which is a Non-Consenting Lender and (Y) Borrower may not make either of
such elections with respect to any Terminated Lender that is an Issuing Lender
unless, prior to the effectiveness of such election, Borrower shall have caused
each outstanding Letter of Credit issued by such Issuing Lender to be cancelled
or backstopped by a successor Issuing Lender.

C. Upon the prepayment of all amounts owing to any Terminated Lender and
the termination of such Terminated Lender's Revolving Loan Commitment, if any,
pursuant to clause (i) of subsection 2.10B, (i) SCHEDULE 2.1 shall be deemed
modified to reflect any corresponding changes in the Revolving Loan Commitments
and (ii) such Terminated Lender shall no longer constitute a "Lender" for
purposes of this Agreement; PROVIDED that any rights of such Terminated Lender
to indemnification under this Agreement (including under

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subsections 2.6D, 2.7, 3.6, 10.2 and 10.3) shall survive as to such Terminated
Lender reasonably satisfactory to such Terminated Lender.

SECTION 3. LETTERS OF CREDIT

3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.

A. LETTERS OF CREDIT. In addition to Borrower requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(iii) and that Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(iv), Borrower may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date, that one or more Issuing Lenders issue Letters of Credit for
the account of Borrower for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of Borrower herein set forth, any one or more Lenders may, but
(except as provided in subsection 3.1B(ii)) shall not be obligated to, issue
such Letters of Credit in accordance with the provisions of this subsection 3.1;
PROVIDED that Borrower shall not request that any Lender issue (and no Lender
shall issue):

(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;

(ii) any Standby Letter of Credit having an expiration date later than
the earlier of (a) five Business Days prior to the Revolving Loan
Commitment Termination Date and (b) the date which is one year from the
date of issuance of such Standby Letter of Credit; PROVIDED that the
immediately preceding clause (b) shall not prevent any Issuing Lender from
agreeing that a Standby Letter of Credit will automatically be extended for
one or more successive periods not to exceed one year each unless such
Issuing Lender elects not to extend for any such additional period; and
PROVIDED, FURTHER that such Issuing Lender shall elect not to extend such
Standby Letter of Credit if it has been notified by Administrative Agent
that an Event of Default has occurred and is continuing (and has not been
waived in accordance with subsection 10.6) at the time such Issuing Lender
must elect whether or not to allow such extension;

(iii) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (X) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (Y) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion;

(iv) any Letter of Credit that does not provide for sight payment; or

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(v) any Letter of Credit that is denominated in a currency other than
Dollars.

B. MECHANICS OF ISSUANCE.

(i) NOTICE OF REQUEST FOR ISSUANCE. Whenever Borrower desires the
issuance of a Letter of Credit, it shall deliver to Administrative Agent a
Notice of Request for Issuance of Letter of Credit substantially in the
form of EXHIBIT III annexed hereto no later than 12:00 Noon (Boston,
Massachusetts time) at least three Business Days (in the case of Standby
Letters of Credit) or five Business Days (in the case of Commercial Letters
of Credit), or in each case such shorter period as may be agreed to by
Issuing Lender in any particular instance, in advance of the proposed date
of issuance or, in the case where the Issuing Lender is the Administrative
Agent, as otherwise agreed to by such Issuing Lender and Borrower. The
Notice of Request for Issuance of Letter of Credit shall specify (a) the
proposed date of issuance (which shall be a Business Day), (b) whether the
Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter
of Credit, (c) the face amount of the Letter of Credit, (d) the expiration
date of the Letter of Credit, (e) the name and address of the beneficiary,
and (f) either the verbatim text of the proposed Letter of Credit or the
proposed terms and conditions thereof, including a precise description of
any documents to be presented by the beneficiary which, if presented by the
beneficiary in substantial compliance with the terms and conditions of the
Letter of Credit on or prior to the expiration date of the Letter of
Credit, would require Issuing Lender to make payment under the Letter of
Credit; PROVIDED that Issuing Lender, in its reasonable discretion, may
require changes in the text of the proposed Letter of Credit or any such
documents; and PROVIDED, FURTHER that no Letter of Credit shall require
payment against a conforming draft to be made thereunder on the same
Business Day (under the laws of the jurisdiction in which the office of
Issuing Lender to which such draft is required to be presented is located)
that such draft is presented if such presentation is made after 11:00 A.M.
(in the time zone of such office of Issuing Lender) on such Business Day.

Borrower shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing Lender)
prior to the issuance of any Letter of Credit in the event that any of the
matters to which Borrower is required to certify in the applicable Notice
of Request for Issuance of Letter of Credit is no longer true and correct
as of the proposed date of issuance of such Letter of Credit, and upon the
issuance of any Letter of Credit Borrower shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
Borrower is required to certify in the applicable Notice of Request for
Issuance of Letter of Credit.

(ii) DETERMINATION OF ISSUING LENDER. Upon receipt by Administrative
Agent of a Notice of Request for Issuance of Letter of Credit pursuant to
subsection 3.1B(i) requesting the issuance of a Letter of Credit, in the
event Administrative Agent elects to issue such Letter of Credit,
Administrative Agent shall promptly so notify Borrower, and Administrative
Agent shall be the Issuing Lender with respect thereto. In the event that

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Administrative Agent, in its sole discretion, elects not to issue such
Letter of Credit, Administrative Agent shall promptly so notify Borrower,
whereupon Borrower may request any other Lender to issue such Letter of
Credit by delivering to such Lender a copy of the applicable Notice of
Request for Issuance of Letter of Credit. Any Lender so requested to issue
such Letter of Credit shall promptly notify Borrower and Administrative
Agent whether or not, in its sole discretion, it has elected to issue such
Letter of Credit, and any such Lender which so elects to issue such Letter
of Credit shall be the Issuing Lender with respect thereto. In the event
that all other Lenders shall have declined to issue such Letter of Credit,
notwithstanding the prior election of Administrative Agent not to issue
such Letter of Credit, Administrative Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect to
such Letter of Credit and with respect to all other Letters of Credit
issued by Administrative Agent, when aggregated with Administrative Agent's
outstanding Revolving Loans and Swing Line Loans, may exceed Administrative
Agent's Revolving Loan Commitment then in effect.

(iii) ISSUANCE OF LETTER OF CREDIT. Upon satisfaction or waiver
(in accordance with subsection 10.6) of the conditions set forth in
subsection 4.3, the Issuing Lender shall issue the requested Letter of
Credit in accordance with the Issuing Lender's standard operating
procedures.

(iv) NOTIFICATION TO LENDERS REGARDING STANDBY LETTERS OF CREDIT.
Upon the issuance of any Standby Letter of Credit the applicable Issuing
Lender shall promptly notify Administrative Agent and each other Lender of
such issuance, which notice shall be accompanied by a copy of such Standby
Letter of Credit. Promptly after receipt of such notice (or, if
Administrative Agent is the Issuing Lender, together with such notice),
Administrative Agent shall notify each Lender of the amount of such
Lender's respective participation in such Standby Letter of Credit,
determined in accordance with subsection 3.1C. In addition, on the first
Business Day of each calendar month each Issuing Lender shall deliver to
Administrative Agent and each Lender a report setting forth the maximum
aggregate amount which is at or any time thereafter may become available
for drawing under all Standby Letters of Credit issued by such Issuing
Lender then outstanding, and identifying each Standby Letter of Credit
issued by such Issuing Lender and the maximum amount that may become
available thereunder.

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(v) REPORTS TO ADMINISTRATIVE AGENT AND LENDERS REGARDING COMMERCIAL
LETTERS OF CREDIT. Each Issuing Lender (other than Administrative Agent)
with respect to any Commercial Letter of Credit shall deliver to
Administrative Agent, by telefacsimile transmission on the first Business
Day of each week, a report setting forth the daily aggregate amount
available for drawing during the immediately preceding week under all
outstanding Commercial Letters of Credit issued by such Issuing Lender.
Within 15 days after the end of each calendar month ending after the
Closing Date, so long as any Commercial Letter of Credit shall have been
outstanding during such calendar month, Administrative Agent shall deliver
to each Lender a report setting forth for such calendar month the daily
aggregate amount available to be drawn under all Commercial Letters of
Credit that were outstanding during such calendar month.

C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately
upon the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Lender a
participation in such Letter of Credit and any drawings honored thereunder in an
amount equal to such Lender's Pro Rata Share of the maximum amount which is or
at any time may become available to be drawn thereunder.

3.2 LETTER OF CREDIT FEES.

Borrower agrees to pay the following amounts with respect to Letters
of Credit issued hereunder:

(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to the applicable Issuing Lender for its own account,
equal to 0.125% per annum MULTIPLIED BY the daily amount available to be
drawn under such Letter of Credit and (b) a letter of credit fee, payable
to Administrative Agent for the account of Lenders, equal to the Applicable
Tranche A LIBOR Margin MINUS 0.125% per annum MINUS the Applicable
Commitment Fee Percentage MULTIPLIED BY the daily amount available to be
drawn under such Letter of Credit, each such fronting fee or letter of
credit fee to be payable in arrears on and to (but excluding) each March
31, June 30, September 30 and December 31 of each year and on the Revolving
Loan Commitment Termination Date, in each case computed on the basis of a
365-day or 366-day year, as the case may be, for the actual number of days
elapsed; and

(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), customary
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance with such Issuing Lender's
standard schedule for such charges in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.

For purposes of calculating any fees payable under clause (i) of this subsection
3.2 the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of

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business on any date of determination. Promptly upon receipt by Administrative
Agent of any amount described in clause (i)(b) of this subsection 3.2,
Administrative Agent shall distribute to each Lender its Pro Rata Share of such
amount.

3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.

A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in substantial compliance with
the terms and conditions of such Letter of Credit.

B. REIMBURSEMENT BY BORROWER OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Borrower and
Administrative Agent, and Borrower shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds
equal to the amount of such honored drawing; PROVIDED that, anything contained
in this Agreement to the contrary notwithstanding, (i) unless Borrower shall
have notified Administrative Agent and such Issuing Lender prior to 11:00 A.M.
(Boston, Massachusetts time) on the date such drawing is honored that Borrower
intends to reimburse such Issuing Lender for the amount of such honored drawing
with funds other than the proceeds of Revolving Loans, Borrower shall be deemed
to have given a timely Notice of Borrowing to Administrative Agent requesting
Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement
Date in an amount in Dollars equal to the amount of such honored drawing and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are
Base Rate Loans in the amount of such honored drawing, the proceeds of which
shall be applied directly by Administrative Agent to reimburse such Issuing
Lender for the amount of such honored drawing; and PROVIDED, FURTHER that if for
any reason proceeds of Revolving Loans are not received by such Issuing Lender
on the Reimbursement Date in an amount equal to the amount of such honored
drawing, Borrower shall reimburse such Issuing Lender, on demand, in an amount
in same day funds equal to the excess of the amount of such honored drawing over
the aggregate amount of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Borrower shall retain any and all rights it may have against any
Lender resulting from the failure of such Lender to make such Revolving Loans
under this subsection 3.3B.

C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER LETTERS OF
CREDIT.

(i) PAYMENT BY LENDERS. In the event that Borrower shall fail for
any reason to reimburse any Issuing Lender as provided in subsection 3.3B
in an amount equal to the

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amount of any drawing honored by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall promptly notify each other
Lender of the unreimbursed amount of such honored drawing and of such other
Lender's respective participation therein based on such Lender's Pro Rata
Share. Each Lender shall make available to such Issuing Lender an amount
equal to its respective participation, in Dollars and in same day funds, at
the office of such Issuing Lender specified in such notice, not later than
12:00 Noon (Boston, Massachusetts time) on the first Business Day (under
the laws of the jurisdiction in which such office of such Issuing Lender is
located) after the date notified by such Issuing Lender. Anything
contained herein to the contrary notwithstanding, each Lender's obligation
to make available to such Issuing Lender on such Business Day the amount of
such Lender's participation pursuant to the immediately preceding sentence
shall be absolute and unconditional and shall not be affected by any
circumstance, including (a) any set-off, counterclaim, recoupment, defense
or other right which such Lender may have against such Issuing Lender,
Borrower or any other Person for any reason whatsoever; (b) the occurrence
or continuation of an Event of Default or a Potential Event of Default; (c)
any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Borrower or any of its
Subsidiaries; (d) any breach of this Agreement or any other Loan Document
by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; PROVIDED that
nothing in this subsection 3.3C shall be deemed to prejudice the right of
any Lender to recover from any Issuing Lender any amounts made available by
such Lender to such Issuing Lender pursuant to this subsection 3.3C in the
event that it is determined by the final judgment of a court of competent
jurisdiction that the payment with respect to a Letter of Credit by such
Issuing Lender in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of such
Issuing Lender. In the event that any Lender fails to make available to
such Issuing Lender on such Business Day the amount of such Lender's
participation in such Letter of Credit as provided in this subsection 3.3C,
such Issuing Lender shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Federal Funds Effective
Rate for three Business Days and thereafter at the Base Rate.

(ii) DISTRIBUTION TO LENDERS OF REIMBURSEMENTS RECEIVED FROM BORROWER.
In the event any Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any drawing
honored by such Issuing Lender under a Letter of Credit issued by it, such
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such honored
drawing such other Lender's Pro Rata Share of all payments subsequently
received by such Issuing Lender from Borrower in reimbursement of such
honored drawing when such payments are received. Any such distribution
shall be made to a Lender at its primary address set forth below its name
on the appropriate signature page hereof or at such other address as such
Lender may request.

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D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.

(i) PAYMENT OF INTEREST BY BORROWER. Borrower agrees to pay to each
Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by such Issuing Lender in
respect of each such honored drawing from the date such drawing is honored
to but excluding the date such amount is reimbursed by Borrower (including
any such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B) at a rate equal to (a) for the period from the date such
drawing is honored to but excluding the Reimbursement Date, the rate then
in effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement with respect
to Revolving Loans that are Base Rate Loans. Interest payable pursuant to
this subsection 3.3D(i) shall be computed in the manner specified in
subsection 2.2F for the computation of interest on Base Rate Loans and
shall be payable on demand or, if no demand is made, on the date on which
the related drawing under a Letter of Credit is reimbursed in full.

(ii) DISTRIBUTION OF INTEREST PAYMENTS BY ISSUING LENDER. Promptly
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing honored under a Letter of
Credit issued by it, (a) such Issuing Lender shall distribute to each other
Lender, out of the interest received by such Issuing Lender in respect of
the period from the date such drawing is honored to but excluding the date
on which such Issuing Lender is reimbursed for the amount of such drawing
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B), the amount that such other Lender would have
been entitled to receive in respect of the letter of credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored under such Letter
of Credit, and (b) in the event such Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any
portion of such honored drawing, such Issuing Lender shall distribute to
each other Lender which has paid all amounts payable by it under subsection
3.3C(i) with respect to such honored drawing such other Lender's Pro Rata
Share of any interest received by such Issuing Lender in respect of that
portion of such honored drawing so reimbursed by other Lenders for the
period from the date on which such Issuing Lender was so reimbursed by
other Lenders to but excluding the date on which such portion of such
honored drawing is reimbursed by Borrower. Any such distribution shall be
made to a Lender at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request.

3.4 OBLIGATIONS ABSOLUTE.

The obligation of Borrower to reimburse each Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i)

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shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including any of the
following circumstances:

(i) any lack of validity or enforceability of any Letter of Credit;

(ii) the existence of any claim, set-off, defense or other right which
Borrower or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Borrower, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower or one
of its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);

(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit;

(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower or any
of its Subsidiaries;

(vi) any breach of this Agreement or any other Loan Document by any
party thereto;

(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or

(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;

PROVIDED, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question.

3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.

A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Borrower hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or

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indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender,
other than as a result of (a) the gross negligence or willful misconduct of such
Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").

B. NATURE OF ISSUING LENDERS' DUTIES. As between Borrower and any
Issuing Lender, Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the foregoing, such Issuing Lender shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including any Governmental Acts, and none of the
above shall affect or impair, or prevent the vesting of, any of such Issuing
Lender's rights or powers hereunder.

In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Borrower.

Notwithstanding anything to the contrary contained in this subsection
3.5, Borrower shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender.

3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.

Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall

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reasonably determine (which determination shall, absent clearly demonstrable
error, be final and conclusive and binding upon all parties hereto) that the
introduction or adoption (after the Closing Date) of any law, treaty or
governmental rule, regulation or order, or that any change (after the Closing
Date) therein or in the interpretation, administration or application thereof,
or that any determination (after the Closing Date) by a court or governmental
authority, or that compliance by any Issuing Lender or Lender with any
guideline, request or directive issued or made (after the Closing Date) by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law), in any such case:

(i) subjects such Issuing Lender or Lender (or its applicable lending
or letter of credit office) to any additional Tax (excluding (x) any Tax on
the overall net income of such Issuing Lender or Lender, (y) any Tax
imposed on any Issuing Lender or Lender as a result of a present or former
connection between the jurisdiction imposing such Taxes and such Issuing
Lender or Lender (except a present connection arising solely from such
Lender having executed, delivered or performed its obligations or received
a payment under, or enforced any Loan Documents and (z) any Tax with
respect to which the provisions of subsection 2.7B are applicable) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Lender;

(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by any Issuing Lender or participations
therein purchased by any Lender; or

(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter of credit office) regarding this Section 3 or
any Letter of Credit or any participation therein;

and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Borrower shall pay to such Issuing Lender or Lender,
promptly after receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Borrower
(with a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Issuing Lender or Lender under this subsection 3.6, which statement shall be
conclusive and binding upon all parties hereto absent clearly demonstrable
error.

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SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT

The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.

4.1 CONDITIONS TO INITIAL LOANS.

The obligations of Lenders to make the initial Term Loans and any
Revolving Loans and Swing Line Loans to be made on the Closing Date and the
issuance of any Letters of Credit to be issued on the Closing Date are, in
addition to the conditions precedent specified in subsection 4.2 (in the case of
any such Loans) or 4.3 (in the case of any such Letters of Credit), subject to
prior or concurrent satisfaction of the following conditions:

A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Borrower shall,
and shall cause each other Loan Party to, deliver to Lenders (or to Agents for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following with respect to Borrower or such Loan
Party, as the case may be, each, unless otherwise noted, dated the Closing Date:

(i) Certified copies of the Certificate or Articles of Incorporation
of such Person, together with a good standing certificate from the
Secretary of State of, in the case of Borrower, each of the States of
Pennsylvania and Maryland and, in the case of Newsub, the State of
Delaware, each dated a recent date prior to the Closing Date;

(ii) Copies of the Bylaws of such Person, certified as of the Closing
Date by such Person's corporate secretary or an assistant secretary;

(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of the
Loan Documents and Related Agreements to which it is a party, certified as
of the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;

(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party; and

(v) Executed originals of the Loan Documents to which such Person is
a party.

B. NO MATERIAL ADVERSE EFFECT. No material adverse change has occurred
since December 31, 1997 with respect to the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower and its
Subsidiaries, taken as a whole.

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C. PROCEEDS OF DEBT AND EQUITY CAPITALIZATION OF BEAR AND BORROWER.

(i) EQUITY CAPITALIZATION OF BEAR. On or before the Closing Date,
Affiliates of KKR shall have made an aggregate cash investment in Bear in
an amount equal to the Bear Equity Amount.

(ii) ISSUANCE OF SENIOR SUBORDINATED DEBT BY BORROWER. On or before
the Closing Date, Borrower shall receive not less than $165,000,000 in
gross proceeds from the issuance and sale of the Senior Subordinated Debt.

(iii) INVESTMENT BY EXISTING SHAREHOLDERS. On or before the
Closing Date, Existing Shareholders shall have retained Shares equal in
value to approximately $229,000,000.

(iv) INVESTMENT BY BEAR. On or before the Closing Date, Bear shall
have acquired approximately 80% of the Shares from the Existing
Shareholders for cash in an amount equal to $184,000,000.

D. RELATED AGREEMENTS.

(i) FORM OF SENIOR SUBORDINATED DEBT INDENTURE. The Senior
Subordinated Debt Documents shall be in the form of the drafts dated April
19, 1998, with such changes thereto, if any, that have been approved by
Syndication Agent or that would otherwise have been permitted to be made
pursuant to subsection 7.9 if the Senior Subordinated Debt were issued and
outstanding at the time of any such change.

(ii) RELATED AGREEMENTS IN FULL FORCE AND EFFECT. Agents shall have
received a fully executed or conformed copy of each Related Agreement
(including the Recapitalization Agreement and the Senior Subordinated Debt
Indenture and any documents executed in connection therewith), and each
Related Agreement shall be in full force and effect and no provision
thereof shall have been modified or waived in any respect materially
adverse to the interests of either Agent or the Lenders, in each case
without the consent of Syndication Agent.

E. MATTERS RELATING TO EXISTING INDEBTEDNESS OF BORROWER AND ITS
SUBSIDIARIES.

(i) TERMINATION OF EXISTING CREDIT AGREEMENT AND RELATED LIENS;
EXISTING LETTERS OF CREDIT. On the Closing Date, Borrower and its
Subsidiaries shall have (a) repaid in full all Indebtedness outstanding
under the Existing Credit Agreement, (b) terminated any commitments to lend
or make other extensions of credit thereunder, (c) delivered to Agents all
documents or instruments necessary to release all Liens securing
Indebtedness or other obligations of Borrower and its Subsidiaries
thereunder, and (d) made arrangements satisfactory to Syndication Agent
with respect to the

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cancellation of any letters of credit outstanding thereunder or the
issuance of Letters of Credit to support the obligations of Borrower and
its Subsidiaries with respect thereto.

(ii) EXISTING INDEBTEDNESS TO REMAIN OUTSTANDING. Agents shall have
received an Officer's Certificate of Borrower stating that, after giving
effect to the transactions described in this subsection 4.1E, Borrower and
its Subsidiaries do not have any Indebtedness or unfunded credit
facilities, other than Indebtedness and unfunded credit facilities under
the Loan Documents and the Senior Subordinated Debt Documents and
Indebtedness listed on SCHEDULE 7.1.

F. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC. Borrower shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Recapitalization, the other
transactions contemplated by the Loan Documents and the Related Agreements, and
the continued operation of the business conducted by Borrower and its
Subsidiaries in substantially the same manner as conducted prior to the
consummation of the Recapitalization, and each of the foregoing shall be in full
force and effect, in each case other than those the failure to obtain or
maintain which, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. All applicable waiting periods
shall have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose adverse conditions
on the Recapitalization or the financing thereof.

G. CONSUMMATION OF RECAPITALIZATION.

(i) The Recapitalization Agreement shall not have been amended and
the fulfillment of any conditions set forth therein shall not have been
waived, in each case unless such amendment or waiver is not adverse in any
material respect to the interests of Lenders;

(ii) the Recapitalization shall have become effective in accordance
with the terms of the Recapitalization Agreement; and

(iii) the maximum aggregate amount (excluding Letters of Credit)
of Revolving Loans drawn on the Closing Date shall not exceed $7,500,000.

H. SECURITY INTERESTS IN PLEDGED COLLATERAL. Agents shall each have
received evidence satisfactory to them that Borrower shall have taken or caused
to be taken all such actions, executed and delivered or caused to be executed
and delivered all such agreements, documents and instruments, and made or cause
to be made all such registrations, filings and recordings (other than the filing
or recording of items described in clause (c) below) that may be necessary or,
in the opinion of Administrative Agent, desirable in order to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and (upon such filing
and recording)

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perfected First Priority security interest in the entire Pledged Collateral.
Such actions shall include the following:

(a) SCHEDULES TO PLEDGE AGREEMENT. Delivery to Administrative
Agent of accurate and complete schedules to the Pledge Agreements.

(b) STOCK CERTIFICATES. Delivery to Administrative Agent of
certificates to the extent applicable (which certificates shall be
accompanied by irrevocable undated stock powers or power of
assignment, duly endorsed in blank and otherwise satisfactory in form
and substance to Administrative Agent) representing all capital stock
(or equivalent equity interest) included in the Pledged Collateral;
and

(c) UCC FINANCING STATEMENTS. Delivery to Administrative Agent
of a UCC financing statement duly executed by Borrower with respect to
certain Collateral under the Pledge Agreement, for filing in the
jurisdiction where Borrower maintains its "chief executive office" (as
that term is defined in the UCC as in effect in the State of New
York).

I. FINANCIAL STATEMENTS; PRO FORMA BALANCE SHEET. On or before the
Closing Date, Lenders shall have received from Borrower (i) audited financial
statements of Borrower and its Subsidiaries for Fiscal Years 1995, 1996 and
1997, consisting of balance sheets and the related consolidated statements of
income, stockholders' equity and cash flows for such Fiscal Years, and (ii) a
pro forma consolidated balance sheet of Borrower and its Subsidiaries as of the
date of the most recently audited balance sheet of Borrower and its
Subsidiaries, prepared in accordance with GAAP and reflecting the consummation
of the Recapitalization, the related financings and the other transactions
contemplated by the Loan Documents and the Related Agreements, which pro forma
financial statements shall be in form and substance reasonably satisfactory to
Lenders.

J. SOLVENCY ASSURANCES. On the Closing Date, Agents and Lenders shall
have received a letter from Valuation Research Corporation, dated the Closing
Date and addressed to Agents and Lenders, in form and substance satisfactory to
Syndication Agent and with appropriate attachments, demonstrating that, after
giving effect to the consummation of the Recapitalization, the related
financings and the other transactions contemplated by the Loan Documents and the
Related Agreements, Borrower will be solvent.

K. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of (i) Skadden, Arps, Slate, Meagher & Flom L.L.P., special New
York counsel for Borrower, dated as of the Closing Date and setting forth
substantially the matters in the opinions designated in EXHIBIT X-A annexed
hereto, (ii) Simpson Thacher & Bartlett, special New York counsel for Loan
Parties, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in EXHIBIT X-B annexed hereto, and (iii)
Ballard Spahr Andrews & Ingersoll,

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special Maryland counsel for Borrower, dated as of the Closing Date and setting
forth substantially the matters in the opinions designated in EXHIBIT X-C
annexed hereto, and Borrower hereby requests such counsel for Loan Parties to
deliver such opinions.

L. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS. Agents and
their counsel shall have received copies of each of the opinions of counsel
delivered to the parties under the Related Agreements, together with a letter
from each such counsel (if available) authorizing Lenders to rely upon such
opinion to the same extent as though it were addressed to Lenders.

M. FEES. Borrower shall have paid to Administrative Agent, for
distribution (as appropriate) to Administrative Agent, Syndication Agent,
Arranger and Lenders, the fees payable on the Closing Date referred to in
subsection 2.3.

N. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Borrower
shall have delivered to Agents an Officer's Certificate, dated as of the Closing
Date and substantially in the form of EXHIBIT VIII annexed hereto, to the effect
that the representations and warranties in Section 5 hereof are true, correct
and complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date (or, to the extent such
representations and warranties specifically relate to an earlier date, that such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date).

4.2 CONDITIONS TO ALL LOANS.

The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:

A. Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, an executed
Notice of Borrowing, in each case signed by a Responsible Officer of Borrower
who is included in the incumbency and specimen certificate delivered pursuant to
subsection 4.1A(iv) or by any other Responsible Officer of Borrower designated
in an updated incumbency and specimen certificate delivered to Administrative
Agent by Borrower.

B. As of that Funding Date:

(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects on
and as of such earlier date; and

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(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default.

4.3 CONDITIONS TO LETTERS OF CREDIT.

The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:

A. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Request for Issuance of
Letter of Credit or a request for such Letter of Credit in such other form, to
the extent permitted in such subsection and in such form as agreed to
thereunder, in each case signed by a Responsible Officer of Borrower who is
included in the incumbency and specimen certificate delivered pursuant to
subsection 4.1A(iv) or by any other Responsible Officer of Borrower designated
in an updated incumbency and specimen certificate delivered to Administrative
Agent by Borrower, together with all other information specified in subsection
3.1B(i).

B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.

SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES

In order to induce Lenders to enter into this Agreement and to make
the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce
other Lenders to purchase participations therein, Borrower represents and
warrants to each Lender, on the date of this Agreement, on the Closing Date,
each Funding Date and on the date of issuance of each Letter of Credit, that the
following statements are true, correct and complete:

5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.

A. ORGANIZATION AND POWERS. Borrower and each Material Subsidiary is a
corporation or other business entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or formation
as specified in SCHEDULE 5.1 annexed hereto and has all requisite corporate or
other power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted. Each Loan Party has
all requisite corporate or other power and authority to enter into the Loan
Documents and Related Agreements to which it is a party and to carry out the
transactions contemplated thereby.

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B. QUALIFICATION AND GOOD STANDING. Borrower and each Material
Subsidiary is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, except to the extent that the failure to be so
qualified or in good standing could reasonably be expected to have a Material
Adverse Effect.

C. SUBSIDIARIES. All of the Subsidiaries and Unrestricted Subsidiaries
of Borrower as of the Closing Date are identified in SCHEDULE 5.1 annexed hereto
and each Material Subsidiary as of the Closing Date has been so designated on
said SCHEDULE 5.1.

5.2 AUTHORIZATION OF BORROWING, ETC.

A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents and the Related Agreements have been duly authorized by
all necessary corporate or other action on the part of each Loan Party that is a
party thereto.

B. NO CONFLICT. The execution, delivery and performance by Loan Parties
of the Loan Documents to which they are parties and the consummation of the
transactions contemplated by the Loan Documents and the Related Agreements do
not and will not (i) violate any provision of any material law or any material
governmental rule or regulation applicable to Borrower or any of its Material
Subsidiaries or any other Loan Party, the Certificate or Articles of
Incorporation or Bylaws (or equivalent constitutional documents) of Borrower or
any of its Subsidiaries, or any material order, judgment or decree of any court
or other agency of government binding on Borrower or any of its Material
Subsidiaries or any other Loan Party, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrower or any of its Material Subsidiaries or any
other Loan Party, or (iii) result in or require the creation or imposition of
any Lien under any such Contractual Obligation upon any of the properties or
assets of Borrower or any of its Subsidiaries or any other Loan Party (other
than any Liens created under any of the Loan Documents in favor of
Administrative Agent on behalf of Lenders).

C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents and the
Related Agreements do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body except (i) any thereof that have
been obtained and are in full force and effect and (ii) as of the Closing Date
with respect to the consummation of the Recapitalization, any thereof which the
failure to obtain or make could not reasonably be expected to have a Material
Adverse Effect.

D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed
and delivered by each Loan Party that is a party thereto and is the legally
valid and binding obligation of such Loan Party, enforceable against such Loan
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws

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relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.

5.3 FINANCIAL CONDITION.

Borrower has heretofore delivered to Lenders, at Lenders' request, the
audited consolidated balance sheets of Borrower and its Subsidiaries as at
December 31, 1995, December 31, 1996 and December 31, 1997 and the related
consolidated statements of income, stockholders' equity and cash flows of
Borrower and its Subsidiaries for the Fiscal Years then ended. All such
statements were prepared in conformity with GAAP except as otherwise noted
therein and fairly present, in all material respects, the financial position (on
a consolidated basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated basis) of the entities described therein for each of the periods
then ended.

5.4 NO MATERIAL ADVERSE EFFECT.

Since December 31, 1997, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect.

5.5 TITLE TO PROPERTIES; LIENS.

Borrower and each of its Subsidiaries have good title to, or leasehold
interests in, all properties that are necessary for the conduct of their
respective businesses as now conducted and as proposed to be conducted, free and
clear of all Liens (other than any Liens permitted by this Agreement), except
where the failure to have such good title or leasehold interests could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

5.6 LITIGATION; ADVERSE FACTS.

Except as set forth in SCHEDULE 5.6 annexed hereto, there are no
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Borrower or any of its Subsidiaries) at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (including any Environmental Claims) that are pending or, to
the knowledge of Borrower, threatened against or affecting Borrower or any of
its Subsidiaries that, individually or in the aggregate (taking into
consideration, among other things, the ability of Borrower and its Subsidiaries
to obtain indemnification in respect thereof from Persons that are willing and
able to honor any existing indemnification obligations with respect thereto),
(i) could reasonably be expected to result in a Material Adverse Effect, or (ii)
on or prior to the Closing Date, is reasonably likely to impair or impose
material adverse conditions on the consummation of the transactions contemplated
hereunder or in connection herewith (including the Recapitalization) and is
reasonably likely to have a material adverse effect on the rights and

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remedies of, or impose any material liability on, either Agent or the Lenders
under this Agreement and the Loan Documents, taken as a whole.

5.7 PAYMENT OF TAXES.

Each of Borrower, each of its Subsidiaries and each other corporation
(each a "CONSOLIDATED CORPORATION") with whom Borrower or any of its
Subsidiaries joins in the filing of a consolidated or combined return has filed
all Federal income tax returns and other material tax returns and reports,
domestic and foreign, required to be filed by it, and has paid all material
taxes, assessments, fees and other governmental charges levied or imposed upon
it or its respective properties, income or assets to the extent the same have
become due and payable, except those which are not yet delinquent or which are
being contested in good faith. Each of Borrower, each of its Subsidiaries and
each Consolidated Corporation has paid, or has provided adequate reserves (in
the good faith judgment of the management of Borrower) in accordance with GAAP
(or, in the case of a Foreign Subsidiary, appropriate reserves under generally
accepted accounting principles in the applicable jurisdiction), for the payment
of, all such material taxes, assessments, fees and charges relating to all prior
taxable years and the current taxable year of Borrower, each of its Subsidiaries
and each Consolidated Corporation. To the best knowledge of Borrower, there is
no proposed tax assessment against Borrower, any of its Subsidiaries or any
Consolidated Corporation that could reasonably be expected to have a Material
Adverse Effect.

5.8 GOVERNMENTAL REGULATION.

Neither the making of any extension of credit hereunder, nor the use
of any of the proceeds thereof, will violate the provisions of Regulation T, U
or X of the Board of Governors of the Federal Reserve System. Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

5.9 EMPLOYEE BENEFIT PLANS.

A. Borrower, each of its Subsidiaries and each ERISA Affiliate is in
compliance with all applicable provisions of ERISA, the Internal Revenue Code
and other applicable federal, state or foreign law with respect to each Plan,
and has performed all of its obligations under each Plan, except to the extent
that failure to comply, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. Borrower, each of its
Subsidiaries and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Internal Revenue Code, except to the extent
that a failure to do so could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code has been made with respect to any Plan.

B. There are no pending or, to the best knowledge of Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any

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Pension Plan which, individually or in the aggregate, have resulted or could
reasonably be expected to result in a Material Adverse Effect.

C. (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability in an amount
which, individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), could reasonably be expected to have a Material
Adverse Effect if such Pension Plan or Pension Plans were then terminated,
unless such Pension Plan is not reasonably likely to be terminated; and (iii)
neither Borrower nor any of its Subsidiaries nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or 4212(c) of ERISA that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

5.10 ENVIRONMENTAL PROTECTION.

Borrower and each of its Subsidiaries is in compliance with all
applicable Environmental Laws in respect of the conduct of its business and the
ownership of its property, except such noncompliance as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Without limiting the effect of the preceding sentence:

(a) neither Borrower nor any of its Subsidiaries has received a
complaint, order, citation, notice or other written communication with
respect to the existence or alleged existence of a violation of, or
liability arising under, any Environmental Law, the outcome of which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect; and

(b) to the best of Borrower's knowledge, after due inquiry,
there are no environmental, health or safety conditions existing or
reasonably expected to exist at any real property owned, operated, leased
or used by Borrower or any of its existing or former Subsidiaries or any of
their respective predecessors, including off-site treatment or disposal
facilities used by Borrower or its existing or former Subsidiaries for
wastes treatment or disposal, which could reasonably be expected to require
any construction or other capital costs or clean-up obligations to be
incurred prior to the final scheduled maturity of the Tranche B Term Loans
in order to assure compliance with any Environmental Law, including
provisions regarding clean-up, to the extent that any of such conditions,
construction or other capital costs or clean-up obligations, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.

5.11 DISCLOSURE.

All factual information (taken as a whole) furnished by or on behalf
of Borrower or any of its Subsidiaries to any Agent or any Lender in writing on
or before the Closing Date (including any such information contained in the
Confidential Information Memorandum or in any Loan Document or Related Agreement
or in any other document, certificate or written

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statement furnished to Lenders by or on behalf of Borrower or any of its
Subsidiaries) for use in connection with the transactions contemplated by this
Agreement is true and correct in all material respects and does not omit to
state a material fact necessary in order to make the statements contained herein
and therein, taken as a whole, not misleading at such time in light of the
circumstances in which the same were made, it being understood that, for
purposes of this subsection 5.11, such factual information does not include
projections and pro forma financial information. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.

SECTION 6. AFFIRMATIVE COVENANTS

Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6 and shall further cause each of its Unrestricted
Subsidiaries that is a Consolidated Corporation to perform the covenants in
subsection 6.3.

6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.

Borrower will deliver to Agents and Lenders:

(i) QUARTERLY FINANCIALS: promptly when available but in any event
no later than 60 days after the end of the first three Fiscal Quarters of
each Fiscal Year, the consolidated balance sheet of Borrower and its
Subsidiaries as at the end of each Fiscal Quarter and the related
consolidated statements of income, stockholders' equity and cash flows of
Borrower and its Subsidiaries for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year, all in reasonable detail and certified by a Responsible Officer of
Borrower that they fairly present, in all material respects, the financial
condition of Borrower, its Subsidiaries and its Unrestricted Subsidiaries
or Borrower and its Subsidiaries, as the case may be, as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal
year-end adjustments;

(ii) YEAR-END FINANCIALS: promptly when available but in any event no
later than 120 days after the end of each Fiscal Year, the consolidated
balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, stockholders'
equity and cash flows of Borrower and

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its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year,
all in reasonable detail and certified by a Responsible Officer of Borrower
that they fairly present, in all material respects, the financial condition
of Borrower and its Subsidiaries as at the end of such Fiscal Year and the
results of their operations and their cash flows for such Fiscal Year, and
a report thereon of a firm of independent certified public accountants of
recognized national standing selected by Borrower, which report shall be
unqualified as to the scope of audit or as to the going concern status of
Borrower, its Subsidiaries and its Unrestricted Subsidiaries or Borrower
and its Subsidiaries, as the case may be (in either case taken as a whole),
and shall state that such consolidated financial statements fairly present,
in all material respects, the consolidated financial condition of Borrower,
its Subsidiaries and its Unrestricted Subsidiaries or Borrower and its
Subsidiaries, as the case may be, as at the end of such Fiscal Year and the
results of their operations and their cash flows for such Fiscal Year in
conformity with GAAP applied on a basis consistent with prior years (except
as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards;

(iii) OFFICER'S AND COMPLIANCE CERTIFICATES: together with each
delivery of financial statements of Borrower and its Subsidiaries pursuant
to subdivisions (i) and (ii) above, (a) an Officer's Certificate of
Borrower stating that the signers do not have knowledge of the existence,
as at the date of such Officer's Certificate, of any condition or event
that constitutes an Event of Default or Potential Event of Default, or, if
any such condition or event exists, specifying the nature and period of
existence thereof and what action Borrower has taken, is taking and
proposes to take with respect thereto; (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the covenants set forth in subsection
7.6 and with any specific dollar amounts specified in respect of any
restrictions contained in any other provisions of Section 7; (c) in the
event the identity of any of the Subsidiaries or Unrestricted Subsidiaries
of Borrower has changed since the Closing Date (or, if applicable, since
the date of the most recent Officer's Certificate delivered to Lenders in
accordance with this clause (c)), an Officer's Certificate setting forth
such change; (d) the amount of any Pro Forma Adjustment not previously set
forth in any Pro Forma Adjustment Certificate or any change in the amount
of a Pro Forma Adjustment set forth in any Pro Forma Adjustment Certificate
previously provided and, in either case, in reasonable detail, the
calculations and basis therefor, and (e) at the time of the delivery of the
financial statements pursuant to subdivision (ii) above, the Available
Amount as at the end of the Fiscal Year to which such statements relate;

(iv) ACCOUNTANTS' CERTIFICATION: together with each delivery of
consolidated financial statements of Borrower and its Subsidiaries pursuant
to subdivision (ii) above, a written statement by the independent certified
public accountants giving the report thereon stating whether, in connection
with their audit examination, any condition or event that constitutes an
Event of Default or Potential Event of Default under

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subsection 7.6 has come to their attention and, if such a condition or
event has come to their attention, specifying the nature thereof;

(v) SEC FILINGS: promptly after the transmission thereof by Borrower
or any of its Subsidiaries to the SEC, copies of any filings on Form 10-K,
10-Q, or 8-K and any effective registration statements (and, upon the
effectiveness thereof, any material amendments thereto) filed with the SEC
(but not any exhibits to any such registration statement or amendment
(except as provided below) or any registration statement on Form S-8), and
copies of all financial statements, proxy statements, notices and reports
that Borrower or any of its Subsidiaries actually sends to the holders of
any publicly-issued debt Securities of Borrower or any of its Subsidiaries
(including the Subordinated Indebtedness) in their capacity as such holders
(in each case to the extent not theretofore delivered to Lenders pursuant
to this Agreement and in each case including, to the extent requested by
either Agent, any schedules and exhibits thereto), in each case as so
transmitted to the SEC;

(vi) EVENTS OF DEFAULT, ETC.: promptly upon any Responsible Officer
of Borrower obtaining actual knowledge of (a) any condition or event that
constitutes an Event of Default or Potential Event of Default or (b) any
acceleration, redemption or purchase demands or notices provided by the
trustee for, or any event of default under, any Subordinated Indebtedness,
a notice specifying the nature and period of existence of such condition or
event or specifying the notice given by such trustee or the nature of such
event of default, and what action Borrower has taken, is taking and
proposes to take with respect thereto;

(vii) LITIGATION OR OTHER PROCEEDINGS: promptly upon any
Responsible Officer of Borrower obtaining actual knowledge of (X) the
institution of any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting Borrower or any of its Subsidiaries or any property of
Borrower or any of its Subsidiaries (collectively, "PROCEEDINGS") not
previously disclosed in writing by Borrower to Lenders or (Y) any material
development in any Proceeding that, in any such case, could reasonably be
expected to give rise to a Material Adverse Effect, written notice thereof
together with such other information as may be reasonably available to
Borrower to enable Lenders and their counsel to evaluate such matters;

(viii) ERISA EVENTS: promptly upon any Responsible Officer of
Borrower obtaining knowledge of the occurrence or forthcoming occurrence of
any ERISA Event, a written notice specifying the nature thereof and what
action Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto;
and, promptly upon receipt thereof, copies of any notice received by
Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates from the Internal Revenue Service, the Department of Labor or
the PBGC or from a Multiemployer Plan sponsor concerning any ERISA Event;

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(ix) FINANCIAL PLANS: as soon as practicable and in any event no
later than 60 days after the beginning of each Fiscal Year, consolidated
operating and related budgets for Borrower and its Subsidiaries for each
Fiscal Quarter of such Fiscal Year (the "FINANCIAL PLAN" for such Fiscal
Year), in reasonable detail as customarily prepared by management of
Borrower for its internal use and setting forth an explanation of the
principal assumptions on which such budgets are based;

(x) ENVIRONMENTAL AUDITS AND REPORTS: as soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Borrower or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Real Estate (as
defined in subsection 6.1(xi)(1)) which, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect or with
respect to any Environmental Claims which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect;

(xi) NOTICE OF CERTAIN ENVIRONMENTAL MATTERS: promptly upon any
Responsible Officer of Borrower obtaining knowledge of any one or more of
the following environmental matters the existence of which, either
individually or when aggregated with all other such matters, would
reasonably be expected to result in a Material Adverse Effect, a written
notice specifying in reasonable detail the nature thereof and what action
Borrower and its Subsidiaries have taken, are taking or propose to take
with respect thereto:

(1) any pending or threatened Environmental Claim against
Borrower or any of its Subsidiaries or any land, buildings and improvements
owned or leased by Borrower or any of its Subsidiaries (but excluding all
operating fixtures and equipment, whether or not incorporated into
improvements) (collectively, "REAL ESTATE");

(2) any condition or occurrence that (x) results in
noncompliance by Borrower or any of its Subsidiaries with any applicable
Environmental Law or (y) could reasonably be anticipated to form the basis
of an Environmental Claim against Borrower or any of its Subsidiaries or
any Real Estate;

(3) any condition or occurrence on any Real Estate that could
reasonably be anticipated to cause such Real Estate to be subject to any
restrictions on the ownership, occupancy, use or transferability of such
Real Estate under any Environmental Law; or

(4) the taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real
Estate;

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(xii) PRO FORMA ADJUSTMENT CERTIFICATE: not later than the
consummation of any Acquisition by Borrower or any of its Subsidiaries for
which there shall be a Pro Forma Adjustment, an Officer's Certificate of
Borrower setting forth the amount of such Pro Forma Adjustment and, in
reasonable detail, the calculations and basis therefor; and

(xiii) OTHER INFORMATION: with reasonable promptness, such other
information and data with respect to Borrower or any of its Subsidiaries as
from time to time may be reasonably requested by any Agent on its own
behalf or on behalf of Requisite Lenders.

6.2 CORPORATE EXISTENCE, ETC.

Except as permitted under subsection 7.7, Borrower will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect (i) its corporate existence (except, in the case of a Subsidiary of
Borrower) only, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect) and (ii) all rights and franchises
material to its business (except, in any case, to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect).

6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.

Borrower will, and will cause each of its Subsidiaries and each
Consolidated Corporation that is an Unrestricted Subsidiary to, pay all material
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any material penalty accrues thereon, and all lawful material
claims (including claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have become or could reasonably
be expected to become a material Lien upon any of the properties or assets of
Borrower or any of its Subsidiaries or any Consolidated Corporation; PROVIDED
that no such charge or claim need be paid if it is being contested in good faith
and by proper proceedings, so long as it has maintained adequate reserves (in
the good faith judgment of Borrower or such Subsidiary or such Consolidated
Corporation) with respect thereto in accordance with GAAP.

6.4 MAINTENANCE OF PROPERTIES; INSURANCE.

A. MAINTENANCE OF PROPERTIES. Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Borrower and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof, in each case except to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.

B. INSURANCE. Borrower will, and will cause each of its Material
Subsidiaries to, at all times maintain in full force and effect, with insurance
companies which Borrower

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believes (in the good faith judgment of Borrower's management) are financially
sound and responsible at the time the relevant coverage is placed or renewed,
insurance in at least such amounts and against at least such risks (and with
such risk retentions) as are usually insured against in the same general area by
companies engaged in the same or a similar business. Borrower shall furnish to
Lenders, upon written request from either Agent, information presented in
reasonable detail as to the insurance so carried.

6.5 INSPECTION RIGHTS.

Borrower shall, and shall cause each of its Material Subsidiaries to,
permit any authorized representatives designated by any Agent or Requisite
Lenders to visit and inspect any of the properties of Borrower or of any of its
Material Subsidiaries, to inspect, copy and make abstracts from its and their
financial and accounting records, and to discuss its and their affairs, finances
and accounts with its and their officers and independent public accountants
(provided that Borrower may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may reasonably be requested.

6.6 COMPLIANCE WITH LAWS, ETC.

Borrower shall comply, and shall cause each of its Subsidiaries to
comply, in all material respects, with the requirements of all applicable laws,
rules, regulations and orders (including all Environmental Laws) of any
governmental authority having jurisdiction over it, except such as may be
contested in good faith or as to which a bona fide dispute may exist and except
to the extent that noncompliance therewith could not reasonably be expected to
cause, individually or in the aggregate, a Material Adverse Effect.

6.7 EXECUTION OF SUBSIDIARY GUARANTY BY FUTURE DOMESTIC SUBSIDIARIES; PLEDGE OF
STOCK OF FUTURE DIRECT SUBSIDIARIES; RATABLE CREDIT SUPPORT.

A. In the event that any Person (other than a Restricted Acquisition
Subsidiary or a Subsidiary that has incurred Indebtedness permitted under
subsection 7.1(x)(b)) becomes a Domestic Subsidiary after the date hereof,
Borrower will promptly notify each Agent of that fact and cause such Domestic
Subsidiary to execute and deliver to Administrative Agent a counterpart of the
Subsidiary Guaranty. In the event that any Person (other than a Restricted
Acquisition Subsidiary or, subject to subsection 6.7B, a Subsidiary the capital
stock (or other equivalent equity interest) of which is certificated and is
pledged pursuant to subsection 7.2(vi)(b)) becomes a direct Domestic Subsidiary
or a direct Material Foreign Subsidiary after the Closing Date, Borrower will
promptly notify each Agent of that fact and cause the capital stock (or other
equivalent equity interest) owned by Borrower of such direct Domestic Subsidiary
or such direct Material Foreign Subsidiary (or, if Borrower owns 65% or more of
any such direct Material Foreign Subsidiary, 65% of the capital stock (or other
equivalent equity interest) of such direct Material Foreign Subsidiary) to be
pledged under the Pledge Agreement (or, if the capital stock (or other
equivalent equity interest) of any such direct

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Domestic Subsidiary is uncertificated, confirmation and evidence satisfactory to
the Administrative Agent in accordance with Articles 8 and 9 of the Uniform
Commercial Code as in effect in the State of New York or any similar law which
may be applicable) and, in the case of any such direct Material Foreign
Subsidiary, also under any pledge agreements or instruments that the
Administrative Agent deems necessary or advisable, or that the Administrative
Agent may reasonably request, pursuant to the terms of the Master Pledge
Agreement to effectuate such pledge in the jurisdiction in which such Material
Foreign Subsidiary is organized.

B. In the event that any Subsidiary of Borrower has guaranteed any
Indebtedness incurred pursuant to subsection 7.1(x) in an aggregate principal
amount exceeding $75,000,000, or has granted any security interests as
collateral therefor, such Subsidiary shall (i) guaranty the Obligations
hereunder and under the other Loan Documents on a PARI PASSU basis with its
guaranty of any portion of such Indebtedness exceeding $75,000,000 and shall
grant Liens on such assets securing the Obligations on an equal and ratable
basis with the security for such Indebtedness pursuant to documentation
reasonably satisfactory to Agents and Requisite Lenders and (ii) execute and
deliver to Administrative Agent all such documents and instruments as may be
necessary or, in the opinion of Administrative Agent, desirable, in order to
more fully evidence, perfect or protect such security interest.

6.8 TRANSACTIONS WITH AFFILIATES.

Borrower shall, and shall cause each of its Subsidiaries to, conduct
all transactions with any of its Affiliates (other than Borrower or any of its
Subsidiaries) upon terms that are substantially as favorable to Borrower or such
Subsidiary as it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of Borrower or such Subsidiary; PROVIDED that the
foregoing restrictions shall not apply to (a) the payment of customary annual
fees to KKR and its Affiliates for management, consulting and financial services
rendered to Borrower and its Subsidiaries, and customary investment banking fees
paid to KKR and its Affiliates for services rendered to Borrower and its
Subsidiaries in connection with divestitures, acquisitions, financings and other
transactions, (b) reasonable and customary fees paid to members of the Board of
Directors of Borrower and its Subsidiaries and (c) transactions otherwise
expressly permitted hereunder between Borrower or any of its Subsidiaries and
any such Affiliate.

6.9 CONDUCT OF BUSINESS.

From and after the Closing Date, Borrower shall, and shall cause its
Subsidiaries (taken as a whole) to, engage primarily in (i) the lines of
business carried on by Borrower and its Subsidiaries on the Closing Date, (ii)
other businesses or activities that are reasonably similar thereto or that
constitute a reasonable extension, development or expansion thereof or that are
ancillary or reasonably related thereto.

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6.10 FISCAL YEAR.

Borrower shall maintain its Fiscal Year-end at December 31 of each
year; PROVIDED that Borrower may, upon prior written notice to Agents, change
such Fiscal Year-end to any other date reasonably acceptable to Agents, in which
case Borrower and Agents shall, and are hereby authorized by Lenders to, make
any adjustments to this Agreement that are necessary in order to reflect any
corresponding changes in financial reporting.

6.11 CONVEYANCE OF ASSETS.

Borrower shall convey a substantial majority of its assets (other than
any Pledged Shares (or other equivalent equity interest) to Newsub on or prior
to the date which is 120 days subsequent to the Closing Date.

SECTION 7. NEGATIVE COVENANTS

7.1 INDEBTEDNESS.

Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:

(i) Borrower may become and remain liable with respect to the
Obligations;

(ii) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations permitted under subsection 7.4 and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Guarantee Obligations so extinguished;

(iii) Borrower and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Capital Leases in an aggregate
amount not to exceed at any time $25,000,000;

(iv) Borrower may become and remain liable with respect to
Indebtedness to any of its Subsidiaries, and any Subsidiary of Borrower may
become and remain liable with respect to Indebtedness to Borrower or any
other Subsidiary of Borrower;

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(v) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in SCHEDULE 7.1 annexed hereto;

(vi) (a) Borrower may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Debt in an aggregate
principal amount not to exceed $165,000,000 and any Refinancing Sub Debt
and (b) its Subsidiaries may become liable under the Senior Subordinated
Debt Guaranty, if any, in respect of such Indebtedness;

(vii) Borrower and its Subsidiaries may become and remain liable
with respect to Indebtedness (a) incurred within 270 days of the
acquisition, construction or improvement of fixed or capital assets to
finance the acquisition, construction or improvement of such fixed or
capital assets or (b) otherwise incurred in respect of Capital Expenditures
permitted under subsection 7.8;

(viii) Borrower and its Subsidiaries may become and remain liable with
respect to Indebtedness under Hedge Agreements;

(ix) Any Person that becomes a Restricted Acquisition Subsidiary (a)
may remain liable with respect to (X) Indebtedness of such Person existing
at the time of consummation of the Acquisition pursuant to which such
Person becomes a Subsidiary of Borrower or (Y) Indebtedness secured by
assets acquired by such Person in an Acquisition at the time of
consummation of such Acquisition; PROVIDED that such Indebtedness was not
incurred in contemplation of the Acquisition referred to in clause (X) or
the acquisition of such assets referred to in clause (Y), as the case may
be, and (b) may become and remain liable with respect to Indebtedness
incurred to finance the Acquisition pursuant to which such Person becomes a
Subsidiary of Borrower;

(x) Borrower and its Subsidiaries (a) may remain liable with respect
to (X) in the case of a Subsidiary, Indebtedness of such Subsidiary
existing at the time of consummation of an Acquisition pursuant to which
such Person becomes a Subsidiary of Borrower or (Y) Indebtedness secured by
assets acquired by such Person in an Acquisition at the time of
consummation of such Acquisition; PROVIDED that such Indebtedness was not
incurred in contemplation of the Acquisition referred to in clause (X) or
the acquisition of such assets referred to in clause (Y), as the case may
be, and (b) may become and remain liable with respect to Indebtedness
incurred to finance an Acquisition consummated by such Person, including an
Acquisition pursuant to which such Person becomes a Subsidiary of Borrower;
PROVIDED that the aggregate outstanding principal amount of all
Indebtedness permitted pursuant to this subsection 7.1(x) shall at no time
exceed $75,000,000;

(xi) Borrower and its Subsidiaries may extend the maturity of, and may
become and remain liable with respect to Indebtedness incurred to
refinance, any Indebtedness permitted under clauses (ii) through (iv), and
(vii) through (x) above; PROVIDED that (a) the

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principal amount of any such Indebtedness is not increased above the
principal amount thereof outstanding immediately prior to such extension or
refinancing, (b) the direct and contingent obligors with respect to such
Indebtedness are not changed as a result of such extension or refinancing,
except as otherwise permitted hereunder, and (c) a Potential Event of
Default would not occur solely as a result of such extension or
refinancing; and

(xii) Borrower and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount not to
exceed $100,000,000 at any time outstanding.

7.2 LIENS AND RELATED MATTERS.

Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or permit to exist any Lien on or
with respect to any property or asset of any kind (including any document or
instrument in respect of goods or accounts receivable) of Borrower or any of its
Subsidiaries, whether now owned or hereafter acquired, except:

(i) Permitted Encumbrances;

(ii) Liens granted pursuant to the Collateral Documents;

(iii) Liens existing on the Closing Date securing Indebtedness
described on SCHEDULE 7.2 annexed hereto in an aggregate principal amount
not to exceed $5,000,000;

(iv) Liens placed on property, plant or equipment used in the ordinary
course of business of Borrower or any of its Subsidiaries to secure
Indebtedness incurred to pay all or a portion of the purchase price
thereof; PROVIDED that (a) the Lien encumbering such property, plant or
equipment does not encumber any other asset of Borrower or any of its
Subsidiaries and (b) the Indebtedness secured thereby is permitted under
subsection 7.1(vii);

(v) (a) Liens encumbering assets of a Restricted Acquisition
Subsidiary that are granted to secure Indebtedness permitted under
subsection 7.1(ix) at the time such Indebtedness is assumed by such
Restricted Acquisition Subsidiary; PROVIDED that such Liens are not granted
in contemplation of the Acquisition pursuant to which such Person becomes a
Subsidiary of Borrower, and (b) Liens encumbering the capital stock of a
Restricted Acquisition Subsidiary that are granted to secure Indebtedness
permitted under subsection 7.1(ix)(b);

(vi) (a) Liens encumbering assets of a Subsidiary of Borrower that are
granted to secure Indebtedness permitted under subsection 7.1(x) at the
time such Indebtedness is originally incurred and (b) Liens encumbering the
capital stock of a Subsidiary of Borrower that are granted to secure
Indebtedness permitted under subsection 7.1(x)(b);

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PROVIDED that the aggregate outstanding principal amount of Indebtedness
secured by all Liens permitted pursuant to this subsection 7.2(vi) shall at
no time exceed $75,000,000, except to the extent that such Subsidiary has
granted a Lien on the assets securing any portion of such Indebtedness in
excess of $75,000,000 on an equal and ratable basis to Administrative Agent
on behalf of Lenders to secure the Obligations; and

(vii) Other Liens securing Indebtedness in an aggregate amount not
to exceed $25,000,000 at any time outstanding.

7.3 INVESTMENTS; JOINT VENTURES.

Except as provided in subsections 7.7(i), (ii) or (v), Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
make or own any Investment in any Person, including any Joint Venture, except:

(i) Borrower and its Subsidiaries may make and own Investments in
Cash Equivalents;

(ii) Borrower and its Subsidiaries may make loans and advances to
officers, directors and employees of Borrower or any of its Subsidiaries
(a) to finance the purchase of capital stock of Borrower and (b) in an
aggregate principal amount not to exceed $5,000,000 at any time outstanding
for additional purposes not contemplated by the foregoing clause (a);

(iii) Borrower and its Subsidiaries may make and own Investments
consisting of any non-cash proceeds received by Borrower or any of its
Subsidiaries in connection with any Asset Sale permitted under subsection
7.7(v);

(iv) Borrower and its Subsidiaries may continue to own the Investments
owned by them and described in SCHEDULE 7.3 annexed hereto and Borrower and
its Subsidiaries may make and own Investments purchased with the proceeds
of the sale of any Investments permitted under this subsection 7.3(iv); and

(v) Borrower and its Subsidiaries may make and own Investments
(collectively, "UNRESTRICTED INVESTMENTS") in addition to those permitted
under clauses (i) through (iv) above, including Investments in Restricted
Acquisition Subsidiaries and in Unrestricted Subsidiaries, as follows: (a)
Unrestricted Investments in an aggregate amount not to exceed at any time
(1) $25,000,000 for all such Unrestricted Investments in Unrestricted
Subsidiaries or (2) $50,000,000 for all such Unrestricted Investments
(including all such Unrestricted Investments in Restricted Acquisition
Subsidiaries ) and (b) Unrestricted Investments in addition to the
Unrestricted Investments permitted under the preceding clause (a), PROVIDED
that after giving effect to any such additional Unrestricted Investment
pursuant to this clause (b) the Available Amount Usage shall not exceed the
Available Amount.

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7.4 GUARANTEE OBLIGATIONS.

Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Guarantee Obligation, except:

(i) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations in respect of the Guaranties;

(ii) Borrower may become liable with respect to Guarantee Obligations
in respect of Letters of Credit;

(iii) Borrower and its Subsidiaries may become and remain liable
with respect to Guarantee Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets;

(iv) Borrower and its Subsidiaries (i) may become liable in respect of
Letters of Credit and (ii) may become and remain liable with respect to
Guarantee Obligations in respect of customary indemnification and purchase
price adjustment obligations incurred in connection with Asset Sales or
other sales of assets;

(v) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations under guarantees in the ordinary course of
business of the obligations of suppliers, customers, franchisees and
licensees of Borrower and its Subsidiaries;

(vi) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations in respect of any Indebtedness of Borrower
or any of its Subsidiaries (other than Restricted Acquisition Subsidiaries)
permitted by subsection 7.1; PROVIDED that (a) neither Borrower nor any of
its Subsidiaries may become or remain liable with respect to Guarantee
Obligations in respect of any Indebtedness permitted under subsection
7.1(x)(b) unless such Person becomes a Subsidiary of Borrower pursuant to
the Acquisition financed with the proceeds of such Indebtedness or acquires
a direct Subsidiary pursuant to such Acquisition;

(vii) Borrower and its Subsidiaries, as applicable, may remain
liable with respect to Guarantee Obligations described in SCHEDULE 7.4
annexed hereto; and

(viii) Borrower and its Subsidiaries may become and remain liable
with respect to other Guarantee Obligations; PROVIDED that the maximum
aggregate liability, contingent or otherwise, of Borrower and its
Subsidiaries in respect of all such Guarantee Obligations shall at no time
exceed $15,000,000.

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7.5 RESTRICTED JUNIOR PAYMENTS.

Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; PROVIDED that so long as no Event of Default or
Potential Event of Default has occurred and is continuing or would be caused
thereby, Borrower may:

(i) repurchase shares of its capital stock or of any corporate parent
(together with options or warrants in respect of any thereof) held by
present and former officers, directors and employees of Borrower so long as
such repurchase is pursuant to, and in accordance with the terms of,
management and/or employee stock plans, stock subscription agreements or
shareholder agreements;

(ii) repurchase, redeem, defease or otherwise prepay or retire Senior
Subordinated Debt or Refinancing Sub Debt; PROVIDED that after giving
effect thereto the Available Amount Usage shall not exceed the Available
Amount;

(iii) purchase, redeem or otherwise acquire shares of common stock
of Borrower or warrants or options to acquire any such shares with proceeds
received by Borrower from substantially concurrent equity contributions or
issuances of new shares of its common stock;

(iv) redeem or exchange, in whole or in part, any capital stock of
Borrower for shares of another class of capital stock of Borrower or rights
to acquire shares of such other class of capital stock; PROVIDED that such
other class of capital stock contains terms and provisions (taken as a
whole, and taking into account the relative amounts of the shares of each
class of capital stock involved in such redemption or exchange) that are at
least as advantageous to Lenders as those contained in the capital stock
redeemed or exchanged therefor; and

(v) make other Restricted Junior Payments; PROVIDED that on the date
(the "DECLARATION DATE") of declaration of any dividend in respect of
Borrower's outstanding capital stock pursuant to the terms of this clause
(v) or the making of any other Restricted Junior Payment pursuant to the
terms of this clause (v), (X) the Consolidated Leverage Ratio as of the
last day of the Fiscal Quarter most recently ended shall be less than
4.00:1.00 and (Y) the aggregate amount of any such Restricted Junior
Payment, when added to the aggregate amount of all Restricted Junior
Payments previously declared or (without duplication) paid by Borrower
pursuant to this clause (v) during the period commencing on the Closing
Date and ending on the Declaration Date, does not exceed 50% of cumulative
Consolidated Net Income of Borrower and its Subsidiaries for the period
commencing on the Closing Date and ending on the last day of the Fiscal
Quarter most recently ended.

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7.6 FINANCIAL COVENANTS.

A. MINIMUM INTEREST COVERAGE RATIO. Borrower shall not permit the ratio
of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for
the four-Fiscal Quarter period ending on the last day of any Fiscal Quarter set
forth below to be less than the correlative ratio indicated:

MINIMUM INTEREST
YEAR FISCAL QUARTER COVERAGE RATIO
---- --------------- ----------------

1999 First 1.50:1.00
Second 1.50:1.00
Third 1.50:1.00
Fourth 1.50:1.00

2000 First 1.50:1.00
Second 1.50:1.00
Third 1.75:1.00
Fourth 1.75:1.00

2001 First 1.75:1.00
Second 1.75:1.00
Third 1.75:1.00
Fourth 1.75:1.00

2002 First 1.75:1.00
Second 1.75:1.00

Thereafter 2.00:1.00

B. MAXIMUM LEVERAGE RATIO. Borrower shall not permit the Consolidated
Leverage Ratio as of the last day of any Fiscal Quarter set forth below to
exceed the correlative ratio indicated:

MINIMUM INTEREST
YEAR FISCAL QUARTER COVERAGE RATIO
---- --------------- ----------------

1999 First 6.65:1.00
Second 6.50:1.00
Third 6.40:1.00
Fourth 6.25:1.00

2000 First 6.00:1.00
Second 6.00:1.00

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Third 6.00:1.00
Fourth 5.75:1.00

2001 First 5.50:1.00
Second 5.50:1.00
Third 5.50:1.00
Fourth 4.75:1.00

2002 First 4.75:1.00
Second 4.75:1.00
Third 4.75:1.00
Fourth 4.25:1.00

2003 First 4.25:1.00
Second 4.25:1.00

Thereafter 4.00:1.00

7.7 RESTRICTION ON CERTAIN FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.

Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any transaction of merger or consolidation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired, or make any
Acquisition, except:

(i) any Subsidiary of Borrower may be merged with or into
Borrower or any other Subsidiary of Borrower, and any Subsidiary of
Borrower may be liquidated, wound up or dissolved, or all or any part of
its business, property or assets (including capital stock of any Subsidiary
of Borrower) may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to Borrower or
any other Subsidiary of Borrower; PROVIDED that in the case of any such
merger involving Borrower, Borrower shall be the continuing or surviving
corporation;

(ii) Borrower and its Subsidiaries may make Acquisitions (by
merger or otherwise) so long as, prior to the consummation of any such
Acquisition, Borrower shall have delivered to Agents (a) financial
statements for Borrower and its Subsidiaries for the four Fiscal-Quarter
period most recently ended (the "PRO FORMA TEST PERIOD"), prepared on a pro
forma basis as if such Acquisition had been consummated on the first day of
the Pro Forma Test Period and giving effect to Borrower's good faith
estimate of any anticipated cost savings or increases as a result of the
consummation thereof, and (b) a pro forma Compliance Certificate
demonstrating that, on the basis of such pro forma financial statements,
Borrower would have been in compliance with all financial covenants set
forth in subsection 7.6 on the last day of the Pro Forma Test Period;
PROVIDED that, for

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Acquisitions consummated prior to the last day of the fourth Fiscal Quarter
of 1999, the requirements of subsection 7.6 in effect for the four
Fiscal-Quarter period ending on such date shall be deemed to be in effect
for the Pro Forma Test Period;

(iii) Borrower and its Subsidiaries may dispose of obsolete, worn
out or surplus property in the ordinary course of business and sell or
discount without recourse accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof;

(iv) Borrower and its Subsidiaries may sell or otherwise dispose
of other assets in transactions that do not constitute Asset Sales;

(v) Borrower and its Subsidiaries may make Asset Sales of assets
having a fair value not in excess of $150,000,000 during the term of this
Agreement; PROVIDED that (w) the consideration received in each such Asset
Sale shall be in an amount at least equal to the fair value of the assets
being sold; (x) any non-cash consideration received by Borrower in respect
of any such Asset Sale in the form of Indebtedness of any Person in an
amount in excess of $5,000,000 shall be evidenced by a promissory note
which shall be pledged by Borrower to Administrative Agent pursuant to the
Master Pledge Agreement as security for the Obligations; and (y) the
proceeds of such Asset Sales shall be applied as required by subsection
2.4B(iii)(a); and

(vi) Investments permitted under subsection 7.3.

7.8 CONSOLIDATED CAPITAL EXPENDITURES.

Borrower shall not, and shall not permit its Subsidiaries to, make
or incur Consolidated Capital Expenditures in any Fiscal Year (the "CURRENT
FISCAL YEAR") in an aggregate amount in excess of an amount (the "MAXIMUM
CAPITAL EXPENDITURES AMOUNT" for the Current Fiscal Year) equal to (x) 10% of
Consolidated Gross Sales Revenues for the immediately preceding Fiscal Year PLUS
(y) the Consolidated Gross Sales Revenues Adjustment for the Current Fiscal
Year; PROVIDED that the Maximum Capital Expenditures Amount for any Fiscal Year
shall be increased by an amount equal to the excess, if any, of the Maximum
Capital Expenditures Amount for the previous Fiscal Year (prior to adjustment in
accordance with this proviso) over the actual amount of Consolidated Capital
Expenditures for such previous Fiscal Year.

7.9 AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.

Borrower shall not, and shall not permit any of its Subsidiaries
to, amend or otherwise change any of the terms of any Subordinated Indebtedness
in a manner that would be adverse to Lenders in any material respect.

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SECTION 8. EVENTS OF DEFAULT

If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur:

8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.

Failure by Borrower to pay:

(i) any installment of principal of any Loan when due from
Borrower, whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise;

(ii) failure by Borrower to pay when due any amount payable to an
Issuing Lender in reimbursement of any drawing under a Letter of Credit; or

(iii) failure by Borrower to pay any interest on any Loan or any
fee or any other amount due from Borrower under this Agreement, in each
case within five days after the date due; or

8.2 DEFAULT IN OTHER AGREEMENTS.

(i) Failure of Borrower or any of its Subsidiaries to pay when due
any principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Guarantee Obligations with an aggregate principal amount of $20,000,000
or more beyond the end of any grace or notice period provided therefor; or (ii)
breach or default by Borrower or any of its Subsidiaries with respect to any
other material term of (a) one or more items of Indebtedness or Guarantee
Obligations in the aggregate principal amount referred to in clause (i) above or
(b) any loan agreement, mortgage, indenture or other agreement relating to such
item(s) of Indebtedness or Guarantee Obligation(s), if such breach or default
continues after any applicable grace or notice period provided therefor and the
effect of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to
become or be declared due and payable prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be; or

8.3 BREACH OF CERTAIN COVENANTS.

Failure of Borrower to perform or comply with any term or condition
contained in subsection 6.1(vi)(a), Section 6.11 or Section 7; or

8.4 BREACH OF WARRANTY.

Any representation, warranty, certification or other statement made
by Borrower or any of its Subsidiaries in any Loan Document or in any statement
or certificate at any time given by Borrower or any of its Subsidiaries in
writing pursuant hereto or thereto or in

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connection herewith or therewith shall be false in any material respect on the
date as of which made; or

8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.

Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 8,
and such default shall not have been remedied or waived within 30 days after
receipt by Borrower and such Loan Party of notice from either Agent or any
Lender of such default; or

8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Borrower or any of its Material
Subsidiaries in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect,
which decree or order is not stayed; or any other similar relief shall be
granted under any applicable federal, state or foreign law; or (ii) an
involuntary case shall be commenced against Borrower or any of its Material
Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency, dissolution, liquidation or similar law now or hereafter in effect;
or a decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Borrower or any of its Material Subsidiaries,
or over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Borrower or any of its Material Subsidiaries for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process shall have been issued against any substantial part of the
property of Borrower or any of its Material Subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or

8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) Borrower or any of its Material Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary case under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency,
dissolution, liquidation or similar law (whether federal, state or foreign) now
or hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Borrower or any of its Material Subsidiaries shall make
any assignment for the benefit of creditors; or (ii) Borrower or any of its
Material Subsidiaries shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of Directors
of Borrower or any of its Material Subsidiaries (or any committee thereof) shall
adopt any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or

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8.8 JUDGMENTS AND ATTACHMENTS.

Any money judgments, writs or warrants of attachment or similar
processes involving in the aggregate at any time an amount in excess of
$20,000,000 (to the extent such amount is not adequately covered by insurance as
to which the insurance company has not disputed coverage in writing) shall be
entered or filed against Borrower or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days; or

8.9 ERISA.

An ERISA Event shall occur with respect to a Pension Plan or
Multiemployer Plan; or

8.10 CHANGE OF CONTROL.

A Change of Control shall occur; or

8.11 MATERIAL INVALIDITY OF GUARANTIES; MATERIAL FAILURE OF SECURITY;
REPUDIATION OF OBLIGATIONS.

At any time after the execution and delivery thereof, (i) any
material provision of the Subsidiary Guaranty or any guaranty entered into by a
Subsidiary of Borrower pursuant to subsection 6.7B for any reason, other than
the satisfaction in full of all Obligations, shall cease to be in full force and
effect (other than in accordance with its terms) or shall be declared to be null
and void, in either case, as to any material portion of Subsidiary Guarantors
and other Subsidiaries guaranteeing the Obligations, with respect to the
Subsidiary Guaranty and any guaranty entered into pursuant to subsection 6.7B,
(ii) any Collateral Document shall cease to create a valid security interest in
the collateral purported to be covered thereby or shall cease to be in full
force and effect (other than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction in full of the
Obligations or any other termination of such Collateral Document in accordance
with the terms hereof or thereof), in each case to the extent the same affects a
material portion of the Collateral and in each case for any reason other than
any act or omission of either Agent or any Lender, or (iii) any Loan Party shall
deny in writing its obligations under any Loan Document to which it is a party:

THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and the obligation of each Lender to

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make any Loan, the obligation of Administrative Agent to issue any Letter of
Credit and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate, and (ii) upon the occurrence and during the continuation of
any other Event of Default, Administrative Agent shall, upon the written request
or with the written consent of Requisite Lenders, by written notice to Borrower,
declare all or any portion of the amounts described in clauses (a) through (c)
above to be, and the same shall forthwith become, immediately due and payable,
and the obligation of each Lender to make any Loan, the obligation of
Administrative Agent to issue any Letter of Credit and the right of any Lender
to issue any Letter of Credit hereunder shall thereupon terminate; PROVIDED that
the foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(iv).

Any amounts described in clause (b) above, when received by
Administrative Agent, shall be paid to Administrative Agent, for the benefit of
Lenders, and held by Administrative Agent, for the benefit of Lenders, as
collateral security for the Obligations of Borrower in respect of all
outstanding Letters of Credit, and Borrower hereby (X) grants to Administrative
Agent, for the benefit of Lenders, a security interest in all such amounts,
together with any interest accrued thereon and any Investments of such amounts,
as security for the Obligations, (Y) agrees to execute and deliver to
Administrative Agent all such documents and instruments as may be necessary or,
in the opinion of Administrative Agent, desirable in order to more fully
evidence, perfect or protect such security interest, and (Z) agrees that, upon
the honoring by any Issuing Bank of any drawing under a Letter of Credit issued
by it, Administrative Agent is authorized and directed to apply any amounts held
as collateral security in accordance with the terms of this paragraph to
reimburse such Issuing Lender for the amount of such drawing.

Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to clause (ii) of such paragraph Borrower shall pay all arrears of
interest and all payments on account of principal which shall have become due
otherwise than as a result of such acceleration (with interest on principal and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by
written notice to Borrower, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to
bind Lenders to a decision which may be made at the election of Requisite
Lenders and are not intended, directly or indirectly, to benefit Borrower, and
such provisions shall not at any time be construed so as to grant Borrower the
right to require Lenders to rescind or annul any acceleration hereunder or to
preclude Agents or Lenders from exercising any of the rights or remedies
available to them under any of the Loan Documents, even if the conditions set
forth in this paragraph are met.

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SECTION 9. AGENTS

9.1 APPOINTMENT OF AGENTS.

Fleet is hereby appointed Administrative Agent hereunder and under
the other Loan Documents and each Lender hereby authorizes Administrative Agent
to act as its administrative agent in accordance with the terms of this
Agreement and the other Loan Documents. DLJ is hereby appointed Syndication
Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes Syndication Agent to act as its syndication agent in accordance with
the terms of this Agreement and the other Loan Documents. Each Agent agrees to
act upon the express conditions contained in this Agreement and the other Loan
Documents, as applicable. The provisions of this Section 9 are solely for the
benefit of Agents and Lenders and Borrower shall not have any rights as a third
party beneficiary of any of the provisions thereof. In performing their
functions and duties under this Agreement, Agents shall act solely as agents of
Lenders and do not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for Borrower or any of its
Subsidiaries. Documentation Agent shall not have any liability to any Person
under this Agreement except in its capacity as a Lender or, if applicable, an
Issuing Lender.

9.2 POWERS AND DUTIES; GENERAL IMMUNITY.

A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. Neither Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon either Agent any obligations in respect of this Agreement or any of
the other Loan Documents except as expressly set forth herein or therein.

B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Neither Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by either Agent to Lenders or by or on
behalf of Borrower to either Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Borrower or any other Person liable for the
payment of any Obligations, nor shall either Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements

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contained in any of the Loan Documents or to assure that the Collateral exists
or is owned by the Borrower or another Loan Party or is cared for, protected or
insured or that the Liens granted to the Administrative Agent herein or in any
other Loan Document or pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected, protected, enforced, realized upon
or are entitled to any particular priority or as to the use of the proceeds of
the Loans or the use of the Letters of Credit or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, Administrative
Agent shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.

C. EXCULPATORY PROVISIONS. Neither Administrative Agent nor
Syndication Agent nor any of their respective officers, directors, employees or
agents shall be liable to Lenders for any action taken or omitted by such Agent
under or in connection with any of the Loan Documents except to the extent
solely caused by such Agent's gross negligence or willful misconduct. Each
Agent shall be entitled to refrain from any act or the taking of any action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents or from the exercise of any power, discretion or
authority vested in it hereunder or thereunder unless and until such Agent shall
have received instructions in respect thereof from Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6) and, upon receipt of such instructions from Requisite Lenders (or such
other Lenders, as the case may be), such Agent shall be entitled to act or
(where so instructed) refrain from acting, or to exercise such power, discretion
or authority, in accordance with such instructions. Without prejudice to the
generality of the foregoing, (i) each Agent shall be entitled to rely, and shall
be fully protected in relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and shall be entitled to rely and shall be protected
in relying on opinions and judgments of attorneys (who may be attorneys for
Borrower and its Subsidiaries), accountants, experts and other professional
advisors selected by it; and (ii) no Lender shall have any right of action
whatsoever against either Agent as a result of such Agent acting or (where so
instructed) refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6).

D. AGENTS ENTITLED TO ACT AS LENDERS. The agency hereby created shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, either Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and the Letters of
Credit, such Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder, and the term "Lender" or "Lenders" or any
similar term shall, unless the context clearly otherwise indicates, include each
Agent in its individual capacity. Each Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Borrower or any of its Affiliates as
if it were not performing the duties specified herein, and may accept fees and
other

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consideration from Borrower for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.

9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.

Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Borrower and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Borrower and its Subsidiaries. Neither
Agent shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and neither Agent shall have any responsibility
with respect to the accuracy of or the completeness of any information provided
to Lenders.

9.4 RIGHT TO INDEMNITY.

Each Lender, in proportion to its Pro Rata Share, severally agrees
to indemnify Administrative Agent, Documentation Agent and Syndication Agent to
the extent that such Person shall not have been reimbursed by Borrower, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against such Person in exercising its
powers, rights and remedies or performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as Administrative Agent,
Documentation Agent or Syndication Agent, respectively, in any way relating to
or arising out of this Agreement or the other Loan Documents; PROVIDED that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the gross negligence or willful misconduct of the
indemnified Person. If any indemnity furnished to Administrative Agent,
Documentation Agent or Syndication Agent for any purpose shall, in the opinion
of such Person, be insufficient or become impaired, such Person may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.

9.5 SUCCESSOR AGENTS AND SWING LINE LENDER.

A. SUCCESSOR AGENTS. Syndication Agent may resign as such upon
one Business Day's notice to Borrower and the Administrative Agent.
Administrative Agent may resign at any time by giving 30 days' prior written
notice thereof to all Lenders and Borrower, and Administrative Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Borrower and Administrative Agent and signed
by Requisite Lenders. Upon any such notice of resignation or any such removal,
Requisite Lenders

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shall have the right, upon five Business Days' notice to Borrower, to appoint a
successor Administrative Agent acceptable to Borrower (which acceptance shall
not be unreasonably withheld). Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed
Administrative Agent and the retiring or removed Administrative Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.

B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Fleet or its successor as Swing Line Lender, and any
successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon
its acceptance of such appointment, become the successor Swing Line Lender for
all purposes hereunder. In such event (i) Borrower shall prepay any outstanding
Swing Line Loans made by the retiring or removed Administrative Agent in its
capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or
removed Administrative Agent and Swing Line Lender shall surrender any Swing
Line Note held by it to Borrower for cancellation, and (iii) if so requested by
the successor Administrative Agent and Swing Line Lender in accordance with
subsection 2.1E, Borrower shall issue a new Swing Line Note to the successor
Administrative Agent and Swing Line Lender substantially in the form of EXHIBIT
VII annexed hereto, in the principal amount of the Swing Line Loan Commitment
then in effect and with other appropriate insertions.

9.6 COLLATERAL DOCUMENTS AND GUARANTIES.

Each Lender hereby further authorizes Administrative Agent, on
behalf of and for the benefit of Lenders, to enter into each Collateral Document
as secured party and to be the agent for and representative of Lenders under the
Guaranties, and each Lender agrees to be bound by the terms of each Collateral
Document and each Guaranty; PROVIDED that Administrative Agent shall not (i)
enter into or consent to any material amendment, modification, termination or
waiver of any provision contained in any Collateral Document or the Guaranties
or (ii) release any Collateral (except as otherwise expressly permitted or
required pursuant to the terms of this Agreement or the applicable Collateral
Document), in each case without the prior consent of Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6); PROVIDED FURTHER, HOWEVER, that, without further written consent or
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented or (b) release
any Subsidiary from its Guaranty if all of the capital stock (or other
equivalent equity interest) of such Subsidiary is sold to any Person (other than
an Affiliate of Borrower) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented. Anything
contained in any of the Loan Documents to the

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contrary notwithstanding, Borrower, Administrative Agent and each Lender hereby
agree that (X) no Lender shall have any right individually to realize upon any
of the Collateral under any Collateral Document or to enforce the Guaranties, it
being understood and agreed that all powers, rights and remedies under the
Collateral Documents and the Guaranties may be exercised solely by
Administrative Agent for the benefit of Lenders in accordance with the terms
thereof, and (Y) in the event of a foreclosure by Administrative Agent on any of
the Collateral pursuant to a public or private sale, Administrative Agent or any
Lender may be the purchaser of any or all of such Collateral at any such sale
and Administrative Agent, as agent for and representative of Lenders (but not
any Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.

SECTION 10. MISCELLANEOUS

10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.

A. GENERAL. Subject to subsection 10.1B, each Lender shall have the
right at any time (i) to sell, assign or transfer to any Eligible Assignee, or
(ii) to sell participations to any Person in, all or any part of its Commitments
or any Loan or Loans made by it or its Letters of Credit or participations
therein or any other interest herein or in any other Obligations owed to it;
PROVIDED that no such sale, assignment, transfer or participation shall, without
the consent of Borrower, require Borrower to file a registration statement with
the SEC or apply to qualify such sale, assignment, transfer or participation
under the securities laws of any state; PROVIDED FURTHER that no such sale,
assignment or transfer described in clause (i) above shall be effective unless
and until an Assignment Agreement effecting such sale, assignment or transfer
shall have been accepted by Agents and recorded in the Register as provided in
subsection 10.1B(ii); PROVIDED FURTHER that no such sale, assignment, transfer
or participation of any Letter of Credit or any participation therein may be
made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Lender effecting such sale, assignment, transfer or participation; and
PROVIDED FURTHER that anything contained herein to the contrary notwithstanding,
the Swing Line Loan Commitment and the Swing Line Loans of Swing Line Lender may
not be sold, assigned or transferred as described in clause (i) above to any
Person other than a successor Administrative Agent and Swing Line Lender to the
extent contemplated by subsection 9.5. Except as otherwise provided in this
subsection 10.1, no Lender shall, as between Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any sale, assignment
or transfer of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein, or
the other Obligations owed to such Lender.

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B. ASSIGNMENTS.

(i) AMOUNTS AND TERMS OF ASSIGNMENTS. Each Commitment, Loan,
Letter of Credit or participation therein, or other Obligation may (a) be
assigned in a minimum amount of $1,000,000 to another Lender, to an
Affiliate of the assigning Lender or another Lender, or, with respect to
any Lender that is an investment fund that invests in commercial loans, any
other investment fund that invests in commercial loans and that is managed
by the same investment advisor as such Lender or by an Affiliate of such
investment advisor, with the giving of notice to Borrower and Agents or (b)
be assigned in an aggregate amount of not less than $5,000,000 (or such
lesser amount as shall constitute the aggregate amount of the Commitments,
Loans, Letters of Credit and participations therein, and other Obligations
of the assigning Lender) to any other Eligible Assignee with the consent of
Borrower and Agents (which consent of Borrower and Agents shall not be
unreasonably withheld or delayed, and in the case of any assignment by a
Lender that is an Agent or an Affiliate thereof, which consent of the
Agents shall not be required); PROVIDED, that the consent of Borrower shall
not be required for any assignment that occurs at any time when an Event of
Default under subsection 8.6 or 8.7 shall have occurred and be continuing.
To the extent of any such assignment in accordance with either clause (a)
or (b) above, the assigning Lender shall be relieved of its obligations
with respect to its Commitments, Loans, Letters of Credit or participations
therein, or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to Administrative
Agent, for its acceptance and recording in the Register, an Assignment
Agreement, together with a processing and recordation fee of $2,500 and
such forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iv)(a). Upon such execution, delivery,
acceptance and recordation, from and after the effective date specified in
such Assignment Agreement, (y) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement, shall have the rights
and obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, relinquish its
rights (other than any rights which survive the termination of this
Agreement under subsection 10.8B) and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering
all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party
hereto; PROVIDED that, anything contained in any of the Loan Documents to
the contrary notwithstanding, if such Lender is the Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall continue to
have all rights and obligations of an Issuing Lender with respect to such
Letters of Credit until the cancellation or expiration of such Letters of
Credit and the reimbursement of any amounts drawn thereunder). The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of any Notes

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hereunder, the assigning Lender shall, at the time of assignment, surrender
its applicable Notes, if any, to Administrative Agent for cancellation, and
thereupon new Notes shall, if so requested by the assignee and/or the
assigning Lender in accordance with subsection 2.1E, be issued to the
assignee and to the assigning Lender, substantially in the form of EXHIBIT
IV, EXHIBIT V, EXHIBIT VI or EXHIBIT VII annexed hereto, as the case may
be, with appropriate insertions, to reflect the new Commitments and/or
outstanding Tranche A Term Loans and/or Tranche B Term Loans, as the case
may be, of the assignee and the assigning Lender.

(ii) ACCEPTANCE BY ADMINISTRATIVE AGENT; RECORDATION IN REGISTER.
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing and recordation fee referred to in subsection 10.1B(i) and
any forms, certificates or other evidence with respect to United States
federal income tax withholding matters that such assignee may be required
to deliver to Administrative Agent pursuant to subsection 2.7B(iv)(a), and
with respect to a Loan evidenced by a Note, surrender of the Note
evidencing such Loan for cancellation, Administrative Agent shall, if
Agents and Borrower have consented to the assignment evidenced thereby (in
each case to the extent such consent is required pursuant to subsection
10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart
thereof as provided therein (which acceptance shall evidence any required
consent of Administrative Agent to such assignment), (b) record the
information contained therein in the Register, and (c) give prompt notice
thereof to Borrower and Syndication Agent. Administrative Agent shall
maintain a copy of each Assignment Agreement delivered to and accepted by
it as provided in this subsection 10.1B(ii).

C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation
or a reduction of the fee payable in respect of any Letter of Credit allocated
to such participation or a reduction of any commitment fee in respect of any
Commitment allocated to such participation, and all amounts payable by Borrower
hereunder (including amounts payable to such Lender pursuant to subsections
2.6D, 2.7 and 3.6) shall be determined as if such Lender had not sold such
participation. Borrower and each Lender hereby acknowledge and agree that,
solely for purposes of subsections 10.4 and 10.5, (a) any participation will
give rise to a direct obligation of Borrower to the participant and (b) the
participant shall be considered to be a "Lender".

D. ASSIGNMENTS TO FEDERAL RESERVE BANKS AND FUND TRUSTEES. In
addition to the assignments and participations permitted under the foregoing
provisions of this subsection 10.1, any Lender may assign and pledge all or any
portion of its Loans, the other Obligations owed to such Lender, and its Notes
to any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank and with the consent of Borrower and Agents,
any

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Lender which is an investment fund may pledge all or any portion of its Notes or
Loans to its trustee in support of its obligations to its trustee; PROVIDED that
(i) no Lender shall, as between Borrower and such Lender or between any Agent
and such Lender, be relieved of any of its obligations hereunder as a result of
any such assignment and pledge and (ii) in no event shall such Federal Reserve
Bank be considered to be a "Lender" or be entitled to require the assigning
Lender to take or omit to take any action hereunder.

E. INFORMATION. Each Lender may furnish any information concerning
Borrower and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.18.

F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.

10.2 EXPENSES.

Subject to the making of the Term Loans to Borrower by Tranche A Term
Lenders and Tranche B Term Lenders on the Closing Date, and whether or not the
other transactions contemplated hereby shall be consummated, Borrower agrees to
pay promptly (i) all the actual and reasonable costs and expenses of preparation
of the Loan Documents and any consents, amendments, waivers or other
modifications thereto; (ii) all the costs of furnishing all opinions by counsel
for Borrower (including any opinions requested by Lenders as to any legal
matters arising hereunder) and of Borrower's performance of and compliance with
all agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents including with respect to confirming
compliance with environmental, insurance and solvency requirements; (iii) the
reasonable fees, expenses and disbursements of counsel to Agents (including
allocated costs of internal counsel) in connection with the negotiation,
preparation, execution and administration of the Loan Documents and any
consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by Borrower; (iv) all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of Administrative
Agent on behalf of Lenders pursuant to any Collateral Document, including filing
fees, expenses and taxes, stamp or documentary taxes, search fees and reasonable
fees, expenses and disbursements of counsel to Agents; (v) all the actual costs
and reasonable expenses (including the reasonable fees, expenses and
disbursements of any environmental consultants retained by Agents or its
counsel) of obtaining and reviewing

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any environmental audits or reports provided for on or before the Closing Date;
(vi) all the actual costs and reasonable expenses of the custody or preservation
of any of the Collateral; (vii) all other actual and reasonable costs and
expenses incurred by Syndication Agent, Documentation Agent and Administrative
Agent in connection with the syndication of the Commitments and the negotiation,
preparation and execution of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and the transactions contemplated
thereby; and (viii) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees and costs of settlement, incurred
by Agents and each Lender in enforcing any Obligations of or in collecting any
payments due from any Loan Party hereunder or under the other Loan Documents by
reason of such Event of Default (including in connection with the sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of the Guaranties) or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings.

10.3 INDEMNITY.

In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Administrative Agent, Syndication Agent,
Documentation Agent and each Lender, and the officers, directors, employees,
trustees, partners, agents and affiliates of Administrative Agent, Syndication
Agent, Documentation Agent and each Lender (collectively called the
"INDEMNITEES"), from and against any and all Indemnified Liabilities (as
hereinafter defined); PROVIDED that Borrower shall not have any obligation to
any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent such Indemnified Liabilities arise solely from the gross negligence or
willful misconduct of that Indemnitee as determined by a final judgment of a
court of competent jurisdiction.

As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel
for Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto, and any
fees or expenses incurred by Indemnitees in enforcing this indemnity), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner relating
to or arising out of (i) this Agreement or the other Loan Documents or the
Related Agreements or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds thereof or the issuance of Letters of Credit hereunder or the use or
intended use of any thereof, or any enforcement of any of the Loan Documents
(including any sale of, collection

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from, or other realization upon any of the Collateral or the enforcement of the
Guaranties), (ii) the statements contained in the commitment letter delivered by
any Lender to Borrower with respect thereto, or (iii) any Environmental Claim or
any Hazardous Materials relating to or arising from, directly or indirectly, any
past or present activity, operation, land ownership, or practice of Borrower or
any of its Subsidiaries.

To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this subsection 10.3 may be unenforceable in whole or
in part because they are violative of any law or public policy, Borrower shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.

10.4 SET-OFF.

In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Borrower at any time or
from time to time, without notice to Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other Indebtedness at any time held or owing by that Lender to
or for the credit or the account of Borrower against and on account of any
obligations and liabilities of Borrower then due and payable to that Lender
under this Agreement, the Letters of Credit and participations therein and the
other Loan Documents, irrespective of whether or not that Lender shall have made
any demand for payment thereof.

10.5 RATABLE SHARING.

Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
each Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to

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them; PROVIDED that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered from such Lender upon
the bankruptcy or reorganization of Borrower or otherwise, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Borrower expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Borrower to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.

10.6 AMENDMENTS AND WAIVERS.

A. No amendment, modification, termination or waiver of any
provision of the Loan Documents, or consent to any departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; PROVIDED that no such amendment, modification, termination,
waiver or consent shall, without the consent of each Lender (with Obligations
directly affected in the case of the following clause (i)): (i) extend the
scheduled final maturity of any Loan or Note, or extend the stated expiration
date of any Letter of Credit beyond the Revolving Loan Commitment Termination
Date, or reduce the rate of interest on any Loan (other than any waiver of any
increase in the interest rate applicable to any Loan pursuant to subsection
2.2E) or any commitment fees or letter of credit fees payable hereunder, or
extend the time for payment of any such interest or fees, or reduce the
principal amount of any Loan or any reimbursement obligation in respect of any
Letter of Credit, (ii) amend, modify, terminate or waive any provision of this
subsection 10.6, (iii) reduce the percentage specified in the definition of
"Requisite Lenders" (it being understood that, with the consent of Requisite
Lenders, additional extensions of credit pursuant to this Agreement may be
included in the determination of "Requisite Lenders" on substantially the same
basis as the Term Loans, the Revolving Loan Commitments and the Revolving Loans
are included on the Closing Date) or (iv) consent to the assignment or transfer
by Borrower of any of its rights and obligations under this Agreement; PROVIDED,
FURTHER that no such amendment, modification, termination or waiver shall (1)
increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that no amendment,
modification or waiver of any condition precedent, covenant, Potential Event of
Default or Event of Default shall constitute an increase in the Commitment of
any Lender, and that no increase in the available portion of any Commitment of
any Lender shall constitute an increase in such Commitment of such Lender); (2)
amend, modify, terminate or waive any provision of subsection 2.1A(iv) or any
other provision of this Agreement relating to the Swing Line Loan Commitment or
the Swing Line Loans without the consent of Swing Line Lender; (3) amend the
definition of "Supermajority Class Lenders" without the consent of the
Supermajority Class Lenders of each Class, or release all or substantially all
of the Collateral or all or substantially all of the Subsidiary Guarantors from
the Subsidiary Guaranty except as expressly provided in the Loan Documents,
without the consent of the Supermajority Class Lenders of each Class, (4) amend
the definition of "Requisite Class Lenders" without the consent of Requisite
Class Lenders of each Class, or alter the required application of any repayments
or prepayments as

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between Classes pursuant to subsection 2.4B(iv) without the consent of Requisite
Class Lenders of each Class which is being allocated a lesser repayment or
prepayment as a result thereof (although Requisite Lenders may waive, in whole
or in part, any mandatory prepayment so long as the application, as between
Classes, of any portion of such prepayment which is still required to be made is
not altered); (5) without the consent of Requisite Class Lenders of the
respective Class, waive, reduce or postpone any scheduled repayment (other than
the repayment scheduled on the scheduled final maturity date of any Loan or
Note) set forth in subsection 2.4A(i) or 2.4A(ii) with respect to the applicable
Term Loans of such affected Class; (6) amend, modify, terminate or waive any
obligation of Lenders relating to the purchase of participations in Letters of
Credit as provided in subsection 3.1C without the written concurrence of
Administrative Agent and of each Issuing Lender which has a Letter of Credit
then outstanding or which has not been reimbursed for a drawing under a Letter
of Credit issued it; or (7) amend, modify, terminate or waive any provision of
Section 9 as the same applies to Administrative Agent, or any other provision of
this Agreement as the same applies to the rights or obligations of
Administrative Agent, in each case without the consent of Administrative Agent;
PROVIDED, FURTHER, that at any time that no Potential Event of Default or Event
of Default has occurred and is continuing, the Revolving Loan Commitment of any
Lender may be increased, with the consent of such Lender and the Borrower and
without the consent of the Requisite Lenders, (x) so long as (I) the Increased
Commitment Amount (as defined below) at such time, when added to the amount of
Indebtedness permitted pursuant to subsection 7.1(x)(b) and outstanding at such
time, does not exceed the limits set forth therein, (II) the capital stock (or
other equivalent equity interest) of such Person (which Person shall become a
direct Domestic Subsidiary of Borrower in connection with the Acquisition
referred to therein) whose Indebtedness is permitted to remain outstanding under
subsection 7.1(x)(b) shall be pledged by Borrower in accordance with subsection
6.7A, and (III) such Person shall execute and deliver to Administrative Agent a
supplement to the Subsidiary Guaranty in accordance with subsection 6.7A, and
(y) to the extent determined by the Administrative Agent to be necessary to
ensure pro rata borrowings commencing with the initial borrowing after giving
effect to such increase, the Borrower shall prepay any LIBOR Loans outstanding
immediately prior to such initial borrowing; as used herein, the "INCREASED
COMMITMENT AMOUNT" means at any time, the aggregate amount of all increases
pursuant to this PROVISO made at or prior to such time less the aggregate amount
of all reductions of the Revolving Loan Commitments made prior to such time.

B. Administrative Agent may, but shall have no obligation to,
with the concurrence of any Lender, execute amendments, modifications, waivers
or consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 10.6 shall be binding upon each Lender at the time
outstanding, each future Lender and Borrower, if signed by Borrower.

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10.7 NOTICES.

Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; PROVIDED that notices to either Agent shall not be
effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Borrower and each Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.

10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

A. All representations, warranties and agreements made herein
shall survive the execution and delivery of this Agreement and the making of the
Loans and the issuance of the Letters of Credit hereunder.

B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Borrower set forth in subsections 2.6D, 2.7,
3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.

10.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.

No failure or delay on the part of any Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.

10.10 MARSHALLING; PAYMENTS SET ASIDE.

Neither Administrative Agent, nor Syndication Agent nor any Lender
shall be under any obligation to marshal any assets in favor of Borrower or any
other party or against or in payment of any or all of the Obligations. To the
extent that Borrower makes a payment or payments to either Agent or Lenders (or
to either Agent for the benefit of Lenders), or either Agent or Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are

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subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.

10.11 SEVERABILITY.

In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

10.12 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.

The obligations of Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.

10.13 HEADINGS.

Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

10.14 APPLICABLE LAW.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.

10.15 SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and

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assigns of Lenders (it being understood that Lenders' rights of assignment are
subject to subsection 10.1). Borrower's rights or obligations hereunder or
under the other Loan Documents or any interest therein may not be assigned or
delegated by Borrower without the prior written consent of all Lenders.

10.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY

(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;

(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.7;

(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER BORROWER IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;

(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST BORROWER IN
THE COURTS OF ANY OTHER JURISDICTION; AND

(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.16 RELATING
TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.

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10.17 WAIVER OF JURY TRIAL.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS AMONG THEM
RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.17 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.

10.18 CONFIDENTIALITY.

Each Lender shall hold all non-public information obtained pursuant
to the requirements of this Agreement which has been identified as confidential
by Borrower in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Borrower that in any event
a Lender may make disclosures to Affiliates of such Lender or disclosures
reasonably required by any bona fide assignee, transferee or participant in
connection with the contemplated assignment or transfer by such Lender of any
Loans or any participations therein or disclosures required or requested by any
governmental agency or representative thereof, or the National Association of
Insurance Commissioners (the "NAIC") or any other Person with the prior written
consent of Borrower and Agents in the exercise of their respective sole
discretion or pursuant to legal process; PROVIDED that, unless specifically
prohibited by applicable law or court order, each Lender shall notify Borrower
of any request by any governmental agency or representative thereof or the NAIC
(other than any such request in connection with any examination of the financial
condition of such Lender by such governmental agency or the NAIC) for disclosure
of any such non-public information prior to disclosure of

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such information; and PROVIDED, FURTHER that in no event shall any Lender be
obligated or required to return any materials furnished by Borrower or any of
its Subsidiaries.

10.19 COUNTERPARTS; EFFECTIVENESS.

This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Borrower and
Agents of written or telephonic notification of such execution and authorization
of delivery thereof.

10.20 OTHER TRANSACTIONS.

Nothing contained herein shall preclude the Administrative Agent,
the Syndication Agent, the Documentation Agent, any Issuing Lender or any other
Lender from engaging in any transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with Borrower or any of its
Affiliates in which Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.

10.21. ENTIRE AGREEMENT.

This Agreement, together with the other Loan Documents and the Fee
Letters, embodies the entire agreement and understanding among Borrower, Lenders
and Agents, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

BORROWER:
THE BOYDS COLLECTION, LTD.

By: /s/ Christine Bell
------------------------------
Name: Christine Bell
Title: Chief Operating Officer

Notice Address: 350 South Street
McSherrystown, PA 17344

Attention: Gary Lowenthal
Facsimile: 717-633-1188

AGENTS:
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent

By: /s/ Harold J. Philipps
------------------------------
Name: Harold J. Philipps
Title: Managing Director

Notice Address: 277 Park Avenue
New York, NY 10172

Attention: Diane Albanese
Facsimile: 212-892-7272

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<PAGE>

FLEET NATIONAL BANK,
as Administrative Agent

By: /s/ Alex Saole
------------------------------
Name: Alex Saole
Title: Director

Notice Address: One Federal Street
Third Floor
Boston, MA 02211

Attention: Kerry McElhiney
Facsimile: 617-346-5093

THE FUJI BANK, LIMITED,
NEW YORK BRANCH,
as Documentation Agent

By: /s/ Teiji Teramoto
------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager

Notice Address: Two World Trade Center
79th Floor
New York, NY 10048

Attention: Teiji Teramoto
Facsimile: 212-898-2398

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<PAGE>

LENDERS:
DLJ CAPITAL FUNDING, INC.

By: /s/ Harold J. Philipps
------------------------------
Name: Harold J. Philipps
Title: Managing Director

Notice Address: 277 Park Avenue
New York, NY 10172

Attention: Diane Albanese
Facsimile: 212-892-6031

THE FUJI BANK, LIMITED,
NEW YORK BRANCH

By: /s/ Teiji Teramoto
------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager

Notice Address: Two World Trade Center
79th Floor
New York, NY 10048

Attention: Teiji Teramoto
Facsimile: 212-898-2398

S-3

<PAGE>

LENDERS:
FLEET NATIONAL BANK

By: /s/ Alex Saole
------------------------------
Name: Alex Saole
Title: Director

Notice Address: One Federal Street
Third Floor
Boston, MA 02211

Attention: Kerry McElhiney
Facsimile: 617-346-5093

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<PAGE>

EXHIBIT I

[FORM OF]

NOTICE OF BORROWING

Pursuant to that certain Credit Agreement dated as of April 21,
1998, as amended, supplemented or otherwise modified to the date hereof (said
Credit Agreement, as so amended, supplemented or otherwise modified, being
the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined
herein being used herein as therein defined), by and among The Boyds
Collection, Ltd., a Maryland corporation ("BORROWER"), the financial
institutions listed therein as Lenders ("LENDERS"), DLJ Capital Funding,
Inc., as Syndication Agent, The Fuji Bank, Limited, New York Branch, as
Documentation Agent, and Fleet National Bank, as Administrative Agent
("ADMINISTRATIVE AGENT"), this represents Borrower's request to borrow as
follows:

1. DATE OF BORROWING: ________________, ______

2. AMOUNT OF BORROWING: $________

3. LENDER(S): a. Lenders, in accordance with their
applicable Pro Rata Shares

b. Swing Line Lender

4. TYPE OF LOANS: a. Tranche A Term Loans

b. Tranche B Term Loans

c. Revolving Loans

d. Swing Line Loan

5. INTEREST RATE OPTION: a. Base Rate Loan(s)

b. LIBOR Loans with an initial Interest
Period of ____________ month(s)*

- -----------------------

* NOT AVAILABLE FOR SWING LINE LOANS.

<PAGE>

The proceeds of such Loans are to be deposited in Borrower's account at
Administrative Agent.

The undersigned officer, to the best of his or her knowledge,
and Borrower certify that:

(i) The representations and warranties contained in
the Credit Agreement and the other Loan Documents are true,
correct and complete in all material respects on and as of the
date hereof to the same extent as though made on and as of the
date hereof, except to the extent such representations and
warranties specifically relate to an earlier date, in which
case such representations and warranties were true, correct
and complete in all material respects on and as of such
earlier date; and

(ii) No event has occurred and is continuing or would
result from the consummation of the borrowing contemplated
hereby that would constitute an Event of Default or a
Potential Event of Default.

DATED: ______________ THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

<PAGE>

EXHIBIT II

[FORM OF]

NOTICE OF CONVERSION/CONTINUATION

Pursuant to that certain Credit Agreement dated as of April
21, 1998, as amended, supplemented or otherwise modified to the date hereof
(said Credit Agreement, as so amended, supplemented or otherwise modified, being
the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined
herein being used herein as therein defined), by and among The Boyds Collection,
Ltd., a Maryland corporation ("BORROWER"), the financial institutions listed
therein as Lenders, DLJ Capital Funding, Inc., as Syndication Agent,The Fuji
Bank, Limited, New York Branch, as Documentation Agent, and Fleet National Bank,
as Administrative Agent, this represents Borrower's request to convert or
continue Loans as follows:

1. DATE OF CONVERSION/CONTINUATION: ________________, ______

2. AMOUNT OF LOANS BEING
CONVERTED/CONTINUED: $______________________

3. TYPE OF LOANS BEING

CONVERTED/CONTINUED: a. Tranche A Term Loans
b. Tranche B Term Loans
c. Revolving Loans

4. NATURE OF
CONVERSION/CONTINUATION: a. Conversion of Base Rate Loans
to LIBOR Loans
b. Conversion of LIBOR Loans to
Base Rate Loans
c. Continuation of LIBOR Loans
as such

5. If Loans are being continued as or converted to LIBOR Loans, the
duration of the new Interest Period that commences on the
conversion/continuation date: ______________ month(s)

I-1
<PAGE>

In the case of a conversion to or continuation of LIBOR
Loans, the undersigned officer, to the best of his or her knowledge, and
Borrower certify that no Event of Default or Potential Event of Default has
occurred and is continuing under the Credit Agreement.

DATED: ______________ THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

II-2
<PAGE>

EXHIBIT III

[FORM OF]

NOTICE OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT

Pursuant to that certain Credit Agreement dated as of April 21, 1998,
as amended, supplemented or otherwise modified to the date hereof (said
Credit Agreement, as so amended, supplemented or otherwise modified, being
the "CREDIT AGREEMENT", the terms defined therein and not otherwise defined
herein being used herein as therein defined), by and among The Boyds
Collection, Ltd., a Maryland corporation ("BORROWER"), the financial
institutions listed therein as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, The Fuji Bank, Limited, New York Branch, as Documentation
Agent, and Fleet National Bank, as Administrative Agent ("ADMINISTRATIVE
AGENT"), this represents Borrower's request for the issuance of a Letter of
Credit by Administrative Agent as follows:

1. DATE OF ISSUANCE OF LETTER OF CREDIT: _________________, _____

2. TYPE OF LETTER OF CREDIT: a. Commercial Letter of Credit
b. Standby Letter of Credit

3. FACE AMOUNT OF LETTER OF CREDIT: $_______________________

4. EXPIRATION DATE OF LETTER OF CREDIT: _________________, _____

5. NAME AND ADDRESS OF BENEFICIARY:

6. ATTACHED HERETO IS:

a. the verbatim text of such proposed Letter of Credit

b. a description of the proposed terms and conditions of
such Letter of Credit, including a precise
description of any documents to be presented by the
beneficiary which, if presented by the beneficiary
prior to the expiration date of such Letter of
Credit, would require the Issuing Lender to make
payment under such Letter of Credit.

<PAGE>

The undersigned officer, to the best of his or her knowledge,
and Borrower certify that:

(ii) No event has occurred and is continuing or would
result from the issuance of the Letter of Credit contemplated
hereby that would constitute an Event of Default or a
Potential Event of Default.

DATED: ______________ THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

III-2
<PAGE>

EXHIBIT IV

[FORM OF TRANCHE A TERM NOTE]

THE BOYDS COLLECTION, LTD.

PROMISSORY NOTE DUE APRIL 21, 2005

$______________ New York, New York

April 21, 1998

FOR VALUE RECEIVED, THE BOYDS COLLECTION, LTD., a Maryland
corporation ("BORROWER"), promises to pay to ______________ ("PAYEE") or its
registered assigns the principal amount of _____________ ($_______________)
in the installments referred to below.

Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at
the times which shall be determined in accordance with the provisions of that
certain Credit Agreement dated as of April 21, 1998 by and among Borrower,
the financial institutions listed therein as Lenders, DLJ Capital Funding,
Inc., as Syndication Agent, The Fuji Bank, Limited, New York Branch, as
Documentation Agent, and Fleet National Bank, as Administrative Agent (said
Credit Agreement, as it may be amended, supplemented or otherwise modified
from time to time, being the "CREDIT AGREEMENT", the terms defined therein
and not otherwise defined herein being used herein as therein defined).

Borrower shall make principal payments on this Note in consecutive
annual installments, commencing on the second anniversary of the Closing Date
and ending on the seventh anniversary of the Closing Date. Each such
installment shall be due on the date specified in the Credit Agreement and in
an amount determined in accordance with the provisions thereof; PROVIDED that
the last such installment shall be in an amount sufficient to repay the
entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon.

This Note is one of Borrower's "Tranche A Term Notes" in the
aggregate principal amount of $100,000,000 and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Tranche A Term Loan evidenced hereby was made and is to be repaid.

IV-1
<PAGE>

Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii) of the Credit Agreement, Borrower and Agents shall be entitled to
deem and treat Payee as the owner and holder of this Note and the Loan
evidenced hereby. Payee hereby agrees, by its acceptance hereof, that before
disposing of this Note or any part hereof it will make a notation hereon of
all principal amounts previously made hereunder and of the date to which
interest hereon has been paid; PROVIDED, HOWEVER, that the failure to make a
notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Borrower hereunder with respect to payments of principal
of or interest on this Note.

Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note.

This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option
of Borrower as provided in subsection 2.4B(i) of the Credit Agreement.

THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE SATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.

Upon the occurrence of an Event of Default, the unpaid balance of
the principal amount of this Note, together with all accrued and unpaid
interest thereon, may become, or may be declared to be, due and payable in
the manner, upon the conditions and with the effect provided in the Credit
Agreement.

The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.

This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.15 of the Credit Agreement.

Borrower and any endorsers of this Note hereby consent to renewals
and extensions of time at or after the maturity hereof, without notice, and
hereby waive diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder.

IV-2
<PAGE>

IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

IV-3
<PAGE>

EXHIBIT V

[FORM OF TRANCHE B TERM NOTE]

THE BOYDS COLLECTION, LTD.

PROMISSORY NOTE DUE APRIL 21, 2006

$____________ New York, New York

April 21, 1998

FOR VALUE RECEIVED, THE BOYDS COLLECTION, LTD., a Maryland
corporation ("BORROWER"), promises to pay to _________________ ("PAYEE") or
its registered assigns the principal amount of _____________ ($_____________)
in the installments referred to below.

Borrower shall make principal payments on this Note in consecutive
annual installments, commencing on the second anniversary of the Closing Date
and ending on the eighth anniversary of the Closing Date. Each such
installment shall be due on the date specified in the Credit Agreement and in
an amount determined in accordance with the provisions thereof; PROVIDED that
the last such installment shall be in an amount sufficient to repay the
entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon.

This Note is one of Borrower's "Tranche B Term Notes" in the
aggregate principal amount of $225,000,000 and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Tranche B Term Loan evidenced hereby was made and is to be repaid.

V-1
<PAGE>

Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii) of the Credit Agreement, Borrower and Agents shall be entitled to
deem and treat Payee as the owner and holder of this Note and the Loan
evidenced hereby. Payee hereby agrees, by its acceptance hereof, that before
disposing of this Note or any part hereof it will make a notation hereon of
all principal payments previously made hereunder and of the date to which
interest hereon has been paid; PROVIDED, HOWEVER, that the failure to make a
notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Borrower hereunder with respect to payments of principal
of or interest on this Note.

THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF BORROWER AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK),
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.

This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.15 of the Credit Agreement.

V-2
<PAGE>

IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

V-3
<PAGE>

EXHIBIT VI

[FORM OF REVOLVING NOTE]

THE BOYDS COLLECTION, LTD.

PROMISSORY NOTE DUE APRIL 21, 2005

$________________ New York, New York

April 21, 1998

FOR VALUE RECEIVED, THE BOYDS COLLECTION, LTD., a Maryland
corporation ("BORROWER"), promises to pay to ____________________ ("PAYEE")
or its registered assigns, on or before April 21, 2005, the lesser of (x)
______________ ($_________) and (y) the unpaid principal amount of all
advances made by Payee to Borrower as Revolving Loans under the Credit
Agreement referred to below.

This Note is one of Borrower's "Revolving Notes" in the aggregate
principal amount of $40,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a
more complete statement of the terms and conditions under which the Revolving
Loans evidenced hereby were made and are to be repaid.

All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at
the Funding and Payment Office or at such other place as shall be designated
in writing for such purpose in accordance with the terms of the Credit
Agreement. Unless and until an Assignment Agreement effecting the assignment
or transfer of this Note shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii) of the Credit
Agreement, Borrower and Agents shall be entitled to deem and treat Payee as
the owner and holder of this Note and the Loans evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note
or any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, HOWEVER, that the failure to make a

VI-1
<PAGE>

notation of any payment made on this Note shall not limit or otherwise affect
the obligations of Borrower hereunder with respect to payments of principal
of or interest on this Note.

The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.

This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.15 of the Credit Agreement.

IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

VI-2
<PAGE>

TRANSACTIONS
ON
REVOLVING NOTE

Date Type of Amount of Amount of Outstanding Notation
---- Loan Made Loan Made Principal Paid Principal Made By
This Date This Date This Date Balance -------
--------- --------- --------- This Date
---------
<S> <C> <C> <C> <C> <C>

</TABLE>

VI-3
<PAGE>

EXHIBIT VII

[FORM OF SWING LINE NOTE]

THE BOYDS COLLECTION, LTD.

PROMISSORY NOTE DUE APRIL 21, 2005

$5,000,000 New York, New York

April 21, 1998

FOR VALUE RECEIVED, THE BOYDS COLLECTION, LTD., a Maryland
corporation ("BORROWER"), promises to pay to FLEET NATIONAL BANK ("PAYEE"),
on or before April 21, 2005, the lesser of (x) FIVE MILLION and NO/100
DOLLARS ($5,000,000.00) and (y) the unpaid principal amount of all advances
made by Payee to Borrower as Swing Line Loans under the Credit Agreement
referred to below.

Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at
the times which shall be determined in accordance with the provisions of that
certain Credit Agreement dated as of April 21, 1998 by and among Borrower,
the financial institutions listed therein as Lenders, DLJ Capital Funding,
Inc., as Syndication Agent, The Fuji Bank, Limited, New York Branch, as
Documentation Agent, and Payee, as Administrative Agent (said Credit
Agreement, as it may be amended, supplemented or otherwise modified from time
to time, being the "CREDIT AGREEMENT", the terms defined therein and not
otherwise defined herein being used herein as therein defined).

This Note is Borrower's "Swing Line Note" and is issued pursuant to
and entitled to the benefits of the Credit Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Swing Line Loans evidenced hereby were made and are to be repaid.

VII-1
<PAGE>

The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.

This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.15 of the Credit Agreement.

IN WITNESS WHEREOF, Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

VII-2
<PAGE>

TRANSACTIONS
ON
SWING LINE NOTE

Date Amount of Amount of Outstanding Notation
---- Loan Made Principal Paid Principal Made By
This Date This Date Balance -------
--------- --------- This Date
---------
<S> <C> <C> <C> <C>

</TABLE>

VII-3
<PAGE>

EXHIBIT VIII

[FORM OF]

OFFICER'S CLOSING DATE CERTIFICATE

This OFFICER'S CLOSING DATE CERTIFICATE (this "CERTIFICATE") is
delivered in connection with that certain Credit Agreement dated as of April
21, 1998 (the "CREDIT AGREEMENT") by and among The Boyds Collection, Ltd., a
Maryland corporation ("BORROWER"), the financial institutions referred to
therein as Lenders ("LENDERS"), DLJ Capital Funding, Inc., as Syndication
Agent, The Fuji Bank, Limited, New York Branch, as Documentation Agent, and
Fleet National Bank, as Administrative Agent. Capitalized terms used herein
without definition have the same meanings as in the Credit Agreement. The
undersigned duly qualified and acting Chief Operating Officer, Controller and
Secretary of Borrower hereby certifies on behalf of Borrower solely in my
capacity as an officer of Borrower and not personally as follows:

A. I am, and at all pertinent times mentioned herein have been, the
duly qualified and acting Chief Operating Officer, Controller and Secretary
of Borrower. In such capacity, I have participated actively in the management
of the affairs and operations of Borrower and its Subsidiaries. I have,
together with other officers of Borrower, acted on behalf of Borrower in
connection with the negotiation of the Credit Agreement, the Loan Documents
and the Related Documents and I am familiar with the terms and conditions
thereof.

B. I have carefully reviewed the contents of this Certificate, and
I have conferred with counsel for Borrower for the purpose of discussing the
meaning of its contents.

C. After giving effect to the Recapitalization, the
representations and warranties contained in Section 5 of the Credit Agreement
and in each of the other Loan Documents are true and correct in all material
respects on and as of the Closing Date as though made on and as of such date
(except to the extent such representations and warranties expressly refer to
an earlier date, in which case they shall be true and correct in all material
respects as of such earlier date);

D. No Potential Event of Default or Event of Default exists or
would result from the initial Loans, the consummation of the Recapitalization
and other transactions contemplated by the Loan Documents and the Related
Agreements or from the grant or perfection of the Lien of Agents and Lenders
on the collateral security provided under the Loan Documents;

E. No material adverse change has occurred since December 31, 1997
with respect to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Borrower and its Subsidiaries, taken
as a whole;

VIII-1
<PAGE>

F. Neither Borrower nor any of its Subsidiaries is subject to any
material litigation or governmental proceeding with respect to the
Recapitalization and other transactions contemplated by the Loan Documents
and the Related Agreements and no injunction or restraining order exists with
respect to the Recapitalization and such transactions;

G. The conditions set forth in clauses (C), (E), (F) and (G) of
Section 4.1 of the Credit Agreement have been satisfied;

H. Attached hereto as ANNEXES I and II are true and complete
copies of the Recapitalization Agreement and the Senior Subordinated Debt
Documents, respectively, together with all schedules and exhibits thereto
reasonably requested by Syndication Agent; none of the foregoing documents
having been amended or modified;

I. Attached hereto as ANNEXES III and IV are true and complete
copies of the financial statements and pro forma balance sheet referred to in
subsections 4.1I(i) and 4.1I(ii), respectively;

J. Attached hereto as ANNEX V is a true and complete copy of the
Articles of Incorporation of Borrower as in full force and effect as of the
date hereof. No action has been taken by Borrower or by the stockholders,
directors or officers of Borrower in contemplation of the filing of any
amendment or other document and no action or proceeding with respect to
liquidation or dissolution of Borrower is pending or contemplated;

K. Attached hereto as ANNEX VI is a true and complete copy of the
By-laws of Borrower, including all amendments thereto, if any, as in full
force and effect as of the date hereof;

L. Attached hereto as ANNEX VII is a true and complete copy of
resolutions duly adopted by the unanimous written consent of the Board of
Directors of Borrower, dated April 15, 1998, and such resolutions have not
been amended, modified or rescinded and remain in full force and effect as of
the date hereof; and

M. The individuals whose names are set forth on SCHEDULE I hereto
are the qualified and acting officers of Borrower as set forth in the right
column opposite their respective names and the signature appearing in the
extreme right column opposite the name of each of such officer is a true
specimen of the genuine signature of such person;

and the undersigned Chief Executive Officer and President of Borrower hereby
certifies on behalf of Borrower solely in his capacity as an officer of
Borrower and not personally as follows:

VIII-2
<PAGE>

N. Christine L. Bell is duly elected and qualified as Chief
Operating Officer, Controller and Secretary of Borrower as of the date
hereof, and that the signature set forth below is such officer's genuine
signature.

VIII-3
<PAGE>

IN WITNESS WHEREOF, the undersigned have hereunto set our names.

- ------------------------------------ ----------------------------------------
Name: Gary M. Lowenthal Name: Christine L. Bell
Title: Chief Executive Officer and Title: Chief Operating Officer,
President Controller and Secretary

VIII-4
<PAGE>

SCHEDULE I

OFFICERS OF BORROWER

NAME OFFICE SIGNATURE
- ---- ------ ---------

Gary M. Lowenthal Chief Executive Officer and
President ----------------------------

Christine L. Bell Chief Operating Officer, ----------------------------
Controller and Secretary

VIII-5
<PAGE>

EXHIBIT IX

[FORM OF]

COMPLIANCE CERTIFICATE

THE UNDERSIGNED HEREBY CERTIFY THAT:

(1) We are the duly elected [Title] and [Title] of The Boyds
Collection, Ltd., a Maryland corporation ("BORROWER"); this Certificate
is given on behalf of Borrower solely in our capacities as officers of
Borrower and not personally;

(2) We have reviewed the terms of that certain Credit
Agreement dated as of April 21, 1998, as amended, supplemented or
otherwise modified to the date hereof (said Credit Agreement, as so
amended, supplemented or otherwise modified, being the "CREDIT
AGREEMENT", the terms defined therein and not otherwise defined in this
Certificate (including Attachment No. 1 annexed hereto and made a part
hereof) being used in this Certificate as therein defined), by and
among Borrower, the financial institutions listed therein as Lenders,
DLJ Capital Funding, Inc., as Syndication Agent, The Fuji Bank,
Limited, New York Branch, as Documentation Agent, and Fleet National
Bank, as Administrative Agent, and the terms of the other Loan
Documents, and we have made, or have caused to be made under our
supervision, a review in reasonable detail of the transactions and
condition of Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements; and

(3) The examination described in paragraph (2) above did not
disclose, and we have no knowledge of, the existence of any condition
or event which constitutes an Event of Default or Potential Event of
Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate[,
except as set forth below].

[Set forth [below] [in a separate attachment to this Certificate] are
all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Borrower has taken, is taking, or proposes to take with respect to each such
condition or event:

IX-1
<PAGE>

The foregoing certifications, together with the computations set
forth in Attachment No. 1 annexed hereto and made a part hereof and the
financial statements delivered with this Certificate in support hereof, are
made and delivered this _____ day of April, 1998 pursuant to subsection
6.1(iii) of the Credit Agreement.

THE BOYDS COLLECTION, LTD.

By:
Name:
Title:

IX-2
<PAGE>

ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE

This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ________, ____ and pertains to the period from
__________, ___ to _________, ___. Subsection references herein relate to
subsections of the Credit Agreement.

<TABLE>
<S> <C>
A. Indebtedness

1. Indebtedness in respect of Capital Leases permitted under $_____________
subsection 7.1(iii):
2. Maximum permitted under subsection 7.1(iii): $25,000,000
3. Indebtedness permitted under subsection 7.1(x): $_____________
4. Maximum permitted under subsection 7.1(x): $75,000,000
5. Indebtedness permitted under subsection 7.1(xii): $_____________
6. Maximum permitted under subsection 7.1(xii): $100,000,000

B. Liens

1. Indebtedness permitted under subsection 7.1(x) secured by liens $_____________
on assets not equally and ratably shared by Administrative Agent
and Lenders:

2. Maximum permitted under 7.2(vi): $75,000,000
3. Indebtedness secured by Liens permitted under subsection 7.2(vii): $_____________
4. Maximum permitted under subsection 7.2(vii): $25,000,000

C. Investments

1. Investments in loans and advances to officers, directors and $_____________
employees other than for the purchase of stock permitted under
subsection 7.3(ii):
2. Maximum permitted under subsection 7.3(ii): $5,000,000
3. Unrestricted Investments in Unrestricted Subsidiaries permitted $_____________
under subsection 7.3(v)(a):
4. Maximum permitted under subsection 7.3(v)(a): $25,000,000

IX-3
<PAGE>

5. Aggregate Unrestricted Investments permitted under $_____________
subsection 7.3(v):
6. Maximum permitted under subsection 7.3(v): $50,000,000

D. Guarantee Obligations

1. Guarantee Obligations permitted under subsection 7.4(viii): $_____________
2. Maximum permitted under subsection 7.4(viii): $15,000,000

E. Restricted Junior Payments

1. Aggregate amount of dividends paid since the Closing Date in $_____________
respect of Borrower's common stock as permitted under
clause (v) of subsection 7.5:
2. Cumulative Consolidated Net Income during the period from the $_____________
Closing Date to the end of the Fiscal Quarter most recently ended:

3. Maximum aggregate amount of dividends since Closing Date $_____________
(50% of E.2)

F. MINIMUM INTEREST COVERAGE RATIO (for the four-Fiscal Quarter
period ending _____________, ____)

1. Consolidated Net Income: $_____________
2. Consolidated Interest Expense: $_____________
3. Provisions for taxes based on income: $_____________
4. Total depreciation expense: $_____________
5. Total amortization expense: $_____________
6. Expenses or charges incurred in connection with any issuance of $_____________
debt or equity Securities:
7. Restructuring charges or reserves: $_____________
8. Expenses or charges relating to the Recapitalization: $_____________
9. Fees and expenses related to permitted acquisitions and $_____________
investments:
10. Other non-cash charges: $_____________
11. Deductions for minority interest expense: $_____________
12. Other non-recurring charges: $_____________
13. Non-recurring gains: $_____________
14. Non-cash gains: $_____________
15. Net EBITDA Adjustment: $_____________
16. Consolidated Adjusted EBITDA prior to Pro Forma Adjustment (E.1 + $_____________
E.2 + E.3 + E.4 + E.5 + E.6 + E.7 + E.8 + E.9 + E.10 + E.11 +
E.12 - E.13 - E.14 + 15):
17. Pro Forma Adjustment: $_____________

IX-4
<PAGE>

18. Consolidated Adjusted EBITDA $_____________
(E.16 + E.17):
19. Interest Coverage Ratio (E.18):(E.2): ____:1.00
20. Minimum ratio required under subsection 7.6A: ____:1.00

G. MAXIMUM LEVERAGE RATIO (as of _________, ___)

1. Consolidated Total Debt: $_____________
2. Consolidated Adjusted EBITDA (F.18): $_____________
3. Leverage Ratio (G.1):(G.2): ____:1.00
4. Maximum ratio permitted under subsection 7.6B: ____:1.00

H. Fundamental Changes

1. Aggregate fair value of assets sold in any one or more Asset $_____________
Sales after Closing Date in one or more transactions permitted
under subsection 7.7(v):
2. Maximum permitted under subsection 7.7(v): $150,000,000

I. Consolidated Capital Expenditures

1. Consolidated Capital Expenditures for Fiscal Year-to-date: $_____________
2. Consolidated Gross Sales Revenues for the preceding Fiscal Year: $_____________
3. Increase of consolidated gross sales revenues for Fiscal $_____________
Year-to-Date attributable to any business acquired in an Acquisition
permitted under subsection 7.7(ii) during Fiscal Year-to-Date:
4. Decrease of consolidated gross sales revenues of business sold $_____________
during Fiscal Year-to-Date:
5. Consolidated Gross Sales Revenues Adjustment $_____________
(5% of (I.3 - I.4):
6. Carry-forward from Maximum Capital Expenditures Amount for $_____________
preceding Fiscal Year:
7. Maximum Capital Expenditures Amount for current Fiscal Year under $_____________
subsection 7.8 (5% of the sum of I.2 + I.5 + I.6):

</TABLE>

IX-5
<PAGE>

EXHIBIT XI

[FORM OF]

ASSIGNMENT AGREEMENT

This ASSIGNMENT AGREEMENT (this "AGREEMENT") is entered into
by and between the parties designated as Assignor ("ASSIGNOR") and Assignee
("ASSIGNEE") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "SCHEDULE OF
TERMS") and relates to that certain Credit Agreement described in the Schedule
of Terms (said Credit Agreement, as amended, supplemented or otherwise modified
to the date hereof and as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined).

IN CONSIDERATION of the agreements, provisions and covenants
herein contained, the parties hereto hereby agree as follows:

SECTION 1. ASSIGNMENT AND ASSUMPTION.

(a) Effective upon the Settlement Date specified in Item 4 of
the Schedule of Terms (the "SETTLEMENT DATE"), Assignor hereby sells and assigns
to Assignee, without recourse, representation or warranty (except as expressly
set forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitments and outstanding Loans, if any, which represents, as of
the Settlement Date, the percentage interest specified in Item 3 of the Schedule
of Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "ASSIGNED SHARE"). Without limiting the generality of the
foregoing, the parties hereto hereby expressly acknowledge and agree that any
assignment of all or any portion of Assignor's rights and obligations relating
to Assignor's Revolving Loan Commitment shall include (i) in the event Assignor
is an Issuing Lender with respect to any outstanding Letters of Credit (any such
Letters of Credit being "ASSIGNOR LETTERS OF CREDIT"), the sale to Assignee of a
participation in the Assignor Letters of Credit and any drawings thereunder as
contemplated by subsection 3.1C of the Credit Agreement and (ii) the sale to
Assignee of a ratable portion of any participations previously purchased by
Assignor pursuant to said subsection 3.lC with respect to any Letters of Credit
other than the Assignor Letters of Credit.

(b) In consideration of the assignment described above,
Assignee hereby agrees to pay to Assignor, on the Settlement Date, the principal
amount of any outstanding Loans included within the Assigned Share, such payment
to be made by wire

XI-1
<PAGE>

transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 5 of the Schedule of Terms.

(c) Assignor hereby represents and warrants that Item 3 of the
Schedule of Terms correctly sets forth the amount of the Commitments, the
outstanding Term Loans and the Pro Rata Share[s] corresponding to the Assigned
Share.

(d) Assignor and Assignee hereby agree that, upon giving
effect to the assignment and assumption described above, (i) Assignee shall be a
party to the Credit Agreement and shall have all of the rights and obligations
under the Loan Documents, and shall be deemed to have made all of the
representations, covenants and agreements contained in the Loan Documents,
arising out of or otherwise related to the Assigned Share, and (ii) Assignor
shall be absolutely released from any of such obligations, covenants and
agreements assumed or made by Assignee in respect of the Assigned Share.
Assignee hereby acknowledges and agrees that the agreement set forth in this
Section l(d) is expressly made for the benefit of Borrower, Administrative
Agent, Assignor and the other Lenders and their respective successors and
permitted assigns.

(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitments, the outstanding Term
Loans and the Pro Rata Share[s] corresponding to the Assigned Share as set forth
in Item 3 of the Schedule of Terms or on the interest of Assignee in any
outstanding Revolving Loans corresponding thereto, and (iii) from and after the
Settlement Date, Administrative Agent shall make all payments under the Credit
Agreement in respect of the Assigned Share (including all payments of principal
and accrued but unpaid interest, commitment fees and letter of credit fees with
respect thereto) (A) in the case of any such interest and fees that shall have
accrued prior to the Settlement Date, to Assignor, and (B) in all other cases,
to Assignee; PROVIDED that Assignor and Assignee shall make payments directly to
each other to the extent necessary to effect any appropriate adjustments in any
amounts distributed to Assignor and/or Assignee by Administrative Agent under
the Loan Documents in respect of the Assigned Share in the event that, for any
reason whatsoever, the payment of consideration contemplated by Section l(b)
occurs on a date other than the Settlement Date.

SECTION 2. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.

(b) Assignor shall not be responsible to Assignee for the
execution, effectiveness, genuineness, validity, enforceability, collectibility
or sufficiency of any of the Loan Documents or for any representations,
warranties, recitals or statements made therein or made in any written or oral
statements or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by Assignor

XI-2
<PAGE>

to Assignee or by or on behalf of Borrower or any of its Subsidiaries to
Assignor or Assignee in connection with the Loan Documents and the
transactions contemplated thereby or for the financial condition or business
affairs of Borrower or any other Person liable for the payment of any
Obligations, nor shall Assignor be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Loan Documents or as to the
use of the proceeds of the Loans or the use of the Letters of Credit or as to
the existence or possible existence of any Event of Default or Potential
Event of Default.

(c) Assignee represents and warrants that it is an Eligible
Assignee; that it has experience and expertise in the making of loans such as
the Loans; that it has acquired the Assigned Share for its own account in the
ordinary course of its business and without a view to distribution of the Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of
subsection 10.1 of the Credit Agreement, the disposition of the Assigned Share
or any interests therein shall at all times remain within its exclusive
control); and that it has received, reviewed and approved a copy of the Credit
Agreement (including all Exhibits and Schedules thereto).

(d) Assignee represents and warrants that it has received from
Assignor such financial information regarding Borrower and its Subsidiaries as
is available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Borrower and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Borrower and its Subsidiaries. Assignor shall have no duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.

(e) Each party to this Agreement represents and warrants to
the other party hereto that it has full power and authority to enter into this
Agreement and to perform its obligations hereunder in accordance with the
provisions hereof, that this Agreement has been duly authorized, executed and
delivered by such party and that this Agreement constitutes a legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity.

SECTION 3. MISCELLANEOUS.

(a) Each of Assignor and Assignee hereby agrees from time
to time, upon request of the other such party hereto, to take such additional
actions and to execute and deliver such additional documents and instruments
as such other party may

XI-3
<PAGE>

reasonably request to effect the transactions contemplated by, and to carry
out the intent of, this Agreement.

(b) Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated, except by an instrument in writing signed by
the party (including, if applicable, any party required to evidence its consent
to or acceptance of this Agreement) against whom enforcement of such change,
waiver, discharge or termination is sought.

(c) Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and may be personally served, telexed or sent by telefacsimile or United
States mail or courier service and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telefacsimile or
telex, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed. For the purposes hereof, the notice
address of each of Assignor and Assignee shall be as set forth on the Schedule
of Terms or, as to either such party, such other address as shall be designated
by such party in a written notice delivered to the other such party. In
addition, the notice address of Assignee set forth on the Schedule of Terms
shall serve as the initial notice address of Assignee for purposes of subsection
10.7 of the Credit Agreement.

(d) In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.

(f) This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.

(g) This Agreement may be executed in one or more counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

(h) This Agreement shall become effective upon the date
(the "EFFECTIVE DATE") upon which all of the following conditions are
satisfied: (i) the

XI-4
<PAGE>

execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
execution of a counterpart hereof by Borrower and Agents as evidence of their
respective consents hereto to the extent required under subsection 10.1B(i)
of the Credit Agreement, (iii) the receipt by Administrative Agent of the
applicable processing and recordation fee referred to in subsection 10.1B(i)
of the Credit Agreement, (iv) in the event Assignee is a Non-US Lender (as
defined in subsection 2.7B(iv)(a) of the Credit Agreement), the delivery by
Assignee to Administrative Agent of such forms, certificates or other
evidence with respect to United States federal income tax withholding matters
as Assignee may be required to deliver to Administrative Agent pursuant to
said subsection 2.7B(iv)(a), (v) the execution of a counterpart hereof by
Administrative Agent as evidence of its acceptance hereof in accordance with
subsection 10.1B(ii) of the Credit Agreement, (vi) the receipt by
Administrative Agent of originals or telefacsimiles of the counterparts
described above and authorization of delivery thereof, and (vii) the
recordation by Administrative Agent in the Register of the pertinent
information regarding the assignment effected hereby in accordance with
subsection 10.1B(ii) of the Credit Agreement.

[Remainder of page intentionally left blank]

XI-5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized, such execution being made as of the Effective Date
in the applicable spaces provided on the Schedule of Terms.

XI-6
<PAGE>

SCHEDULE OF TERMS

1. BORROWER: The Boyds Collection, Ltd.

2. NAME AND DATE OF CREDIT AGREEMENT: Credit Agreement dated as of April
21, 1998 by and among The Boyds Collection, Ltd., a Maryland
corporation, the financial institutions listed therein as Lenders, DLJ
Capital Funding, Inc., as Syndication Agent, The Fuji Bank, Limited,
New York Branch, as Documentation Agent, and Fleet National Bank, as
Administrative Agent.

3. AMOUNTS:

<TABLE>
<CAPTION>
Re: Tranche A Re: Tranche B Re: Revolving
Term Loans Term Loans Loans
------------------- ------------------ --------------------
<S> <C> <C> <C>
(a) Aggregate Commitments of all Lenders: $_________ $_________ $_________
(b) Assigned Share/Pro Rata Share: _____% _____% _____%
(c) Amount of Assigned Share of Commitments $_________ $_________ $_________
(d) Amount of Assigned Share of Term: $_________ $_________ $_________

</TABLE>

4. SETTLEMENT DATE: ______________, ____

5. PAYMENT INSTRUCTIONS:

ASSIGNOR: ASSIGNEE:
On file with ______________________
Administrative Agent ______________________
_____________________ ______________________
Attention: ___________
Reference: ___________

6. NOTICE ADDRESSES:

ASSIGNOR: ASSIGNEE:
On file with ______________________
Administrative Agent ______________________
_____________________ ______________________
Attention: ___________
Reference: ___________

7. SIGNATURES:

[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee

By: By:
Title: Title:

XI-7
<PAGE>

[Consented and] Accepted in
accordance with subsection[s 10.1B(i)
and] 10.1B(ii) of the Credit Agreement

FLEET NATIONAL BANK,
Administrative Agent

By:
Title:

[Consented to in accordance with
subsection 10.1B(i) of the
Credit Agreement

DLJ CAPITAL FUNDING, INC.,
Syndication Agent

By:
Title:]

[Consented to in accordance with
subsection 10.1B(i) of the
Credit Agreement

THE BOYDS COLLECTION, LTD.

By:
Title:]

XI-8
<PAGE>

EXHIBIT XII

[FORM OF]

CERTIFICATE RE NON-BANK STATUS

Reference is hereby made to that certain Credit Agreement dated as
of April 21, 1998 (said Credit Agreement, as amended, supplemented or
otherwise modified to the date hereof, being the "CREDIT AGREEMENT") by and
among The Boyds Collection, Ltd., a Maryland corporation, the financial
institutions listed therein as Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, The Fuji Bank, Limited, New York Branch, as Documentation
Agent, and Fleet National Bank, as Administrative Agent. Capitalized terms
used herein without definition have the same meanings as in the Credit
Agreement. [NAME OF NON-US LENDER] ("NON-US LENDER") is providing this
certificate pursuant to subsection 2.7B(iv) of the Credit Agreement. Non-US
Lender hereby represents and warrants that:

1. Non-US Lender is the sole record and beneficial owner of
the Loans or the obligations evidenced by the Note(s) in respect of
which it is providing this certificate.

2. Non-US Lender is not a "bank" for purposes of Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"CODE"). In this regard, Non-US Lender further represents and warrants
that:

(a) Non-US Lender is not subject to regulatory or
other legal requirements as a bank in any jurisdiction; and

(b) Non-US Lender 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 tax, securities law or other legal
requirements;

3. Non-US Lender is not a 10-percent shareholders of
Borrower within the meaning of Section 881(c)(3)(B) of the Code.

4. Non-US Lender is not a controlled foreign corporation
receiving interest from a related person within the meaning of Section
881(c)(3)(C) of the Code.

XII-1
<PAGE>

IN WITNESS WHEREOF, the undersigned has duly executed this certificate.

[NAME OF NON-US LENDER]

By:
Name:
Title:

XII-2
<PAGE>

EXHIBIT XIII

MASTER PLEDGE AGREEMENT

This MASTER PLEDGE AGREEMENT (this "AGREEMENT") is dated as of April
21, 1998 and entered into by and between THE BOYDS COLLECTION, LTD., a
Maryland corporation ("PLEDGOR"), and FLEET NATIONAL BANK, as agent for and
representative of (in such capacity herein called "ADMINISTRATIVE AGENT") the
financial institutions party to the Credit Agreement referred to below and
any Lenders that are Lender Counterparties (as hereinafter defined)
(collectively, the "SECURED LENDER PARTIES").

PRELIMINARY STATEMENTS

A. Pledgor is the legal and beneficial owner of the shares of
stock (the "PLEDGED SHARES") described in Part A of Schedule I annexed hereto
and issued by the corporations named therein.

B. Administrative Agent, Lenders, DLJ Capital Funding, Inc., as
Syndication Agent, and The Fuji Bank, Limited, New York Branch, as
Documentation Agent, have entered into a Credit Agreement dated as of April
21, 1998 (said Credit Agreement, as it may hereafter be amended, supplemented
or otherwise modified from time to time, being the "CREDIT AGREEMENT", the
terms defined therein and not otherwise defined herein being used herein as
therein defined) with Pledgor pursuant to which Lenders have made certain
commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Pledgor.

C. Pledgor may from time to time enter into one or more Interest
Rate Agreements (collectively, the "LENDER INTEREST RATE AGREEMENTS") with
one or more Lenders (in such capacity, collectively, "LENDER Counterparties")
in accordance with the terms of the Credit Agreement, and it is desired that
the obligations of Pledgor under the Lender Interest Rate Agreements,
including the obligation of Pledgor to make payments thereunder in the event
of early termination thereof, together with all obligations of Pledgor under
the Credit Agreement and the other Loan Documents, be secured hereunder.

D. It is a condition precedent to the initial extensions of credit
by Lenders under the Credit Agreement that Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.

NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and other extensions of credit under the Credit
Agreement and to induce Lender Counterparties to enter into the Lender
Interest Rate Agreements,

XIII-1
<PAGE>

and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Pledgor hereby agrees with Administrative
Agent as follows: I. SECTION PLEDGE OF SECURITY. Pledgor hereby pledges and
assigns to Administrative Agent, for the benefit of the Secured Lender
Parties, and hereby grants to Administrative Agent, for the benefit of the
Secured Lender Parties, a first priority security interest in, all of
Pledgor's right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):

(a) the Pledged Shares and the certificates representing
the Pledged Shares and any interest of Pledgor in the entries on the
books of any financial intermediary pertaining to the Pledged Shares,
and all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares;

(b) all additional shares of, and all securities
convertible into and warrants, options and other rights to purchase or
otherwise acquire, stock of any issuer of the Pledged Shares from time
to time acquired by Pledgor in any manner (which shares shall be deemed
to be part of the Pledged Shares), the certificates or other instruments
representing such additional shares, securities, warrants, options or
other rights and any interest of Pledgor in the entries on the books of
any financial intermediary pertaining to such additional shares, and all
dividends, cash, warrants, rights, instruments and other property or
proceeds from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such additional shares,
securities, warrants, options or other rights;

(c) all shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire,
stock of any Person that, after the date of this Agreement, becomes, as
a result of any occurrence, a direct Domestic Subsidiary or direct
Material Foreign Subsidiary of Pledgor (which shares shall be deemed to
be part of the Pledged Shares), the certificates or other instruments
representing such shares, securities, warrants, options or other rights
and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to such shares (all such shares, securities,
warrants, options, rights, certificates, instruments and interests
collectively being "NEW PLEDGED SHARES"), and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time
to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such New Pledged Shares; PROVIDED,
HOWEVER, that in the case of any such direct Material Foreign Subsidiary
of Pledgor, Pledgor shall only be required to pledge New Pledged Shares
of such Material Foreign Subsidiary possessing up to but not exceeding
65% of the voting power of all classes of Voting Stock of such Material
Foreign Subsidiary, and all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of such New Pledged Shares, and shall satisfy such requirement
within 30 days after such Person becoming a direct Material Foreign
Subsidiary;

XIII-2
<PAGE>

(d) all indebtedness from time to time owed to Pledgor in
an original principal amount in excess of $5,000,000 as part of the
consideration received by Pledgor in respect of any Asset Sale (the
"PLEDGED DEBT"); and

(e) to the extent not covered by clauses (a) through (d)
above, all proceeds of any or all of the foregoing Pledged Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Pledged Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary, and includes proceeds of any indemnity or
guaranty payable to Pledgor or Administrative Agent from time to time
with respect to any of the Pledged Collateral.

I. SECTION SECURITY FOR OBLIGATIONS. In the case of the Secured Lender
Parties, this Agreement secures, and the Pledged Collateral is collateral
security for, the prompt payment or performance in full when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. ss.362(a)), of all obligations and liabilities of every nature of
Pledgor now or hereafter existing under or arising out of or in connection
with the Credit Agreement and the other Loan Documents and the Lender
Interest Rate Agreements and all extensions or renewals thereof, whether for
principal, interest (including interest that, but for the filing of a
petition in bankruptcy with respect to Pledgor, would accrue on such
obligations), reimbursement of amounts drawn under Letters of Credit,
payments for early termination of Lender Interest Rate Agreements, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct
or indirect, absolute or contingent, liquidated or unliquidated, whether or
not jointly owed with others, and whether or not from time to time decreased
or extinguished and later increased, created or incurred, and all or any
portion of such obligations or liabilities that are paid, to the extent all
or any part of such payment is avoided or recovered directly or indirectly
from Administrative Agent or any Lender or Lender Counterparties as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgor now or hereafter existing under this Agreement (all such
obligations of Pledgor being the "SECURED OBLIGATIONS").

I. SECTION DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of Administrative Agent pursuant hereto
and shall be in suitable form for transfer by delivery and shall be
accompanied by Pledgor's endorsement, where necessary, or duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Administrative Agent. Upon the occurrence and during the
continuance of an Event of Default, (i) Administrative Agent shall have the
right, without notice to Pledgor, to transfer to or to register in the name
of Administrative Agent or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a),
and (ii) Administrative Agent shall have the right to exchange certificates
or instruments representing or evidencing Pledged Collateral for certificates
or instruments of smaller or larger denominations.

XIII-3
<PAGE>

I. SECTION REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants as follows:

(a) DUE AUTHORIZATION, ETC. OF PLEDGED SHARES. All of the Pledged
Shares have been duly authorized and validly issued and are fully paid and
non-assessable.

(b) DESCRIPTION OF PLEDGED SHARES. Except as set forth in SCHEDULE
II annexed hereto, the Pledged Shares constitute all of the issued and
outstanding shares of stock of each issuer thereof and there are no
outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged
Shares.

(c) OWNERSHIP OF PLEDGED COLLATERAL. Pledgor is the legal, record
and beneficial owner of the Pledged Collateral free and clear of any Lien
except for the security interest created by this Agreement.

I. SECTION TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
ETC. Pledgor shall:

(a) not, except as expressly permitted by the Credit Agreement
(including pursuant to any transaction permitted by the Credit Agreement),
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of,
or grant any option with respect to, any of the Pledged Collateral, (ii)
create or suffer to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement, or (iii)
permit any issuer of Pledged Shares to merge or consolidate unless all the
outstanding capital stock of the surviving or resulting corporation is, upon
such merger or consolidation, pledged hereunder and no cash, securities or
other property is distributed in respect of the outstanding shares of any
other constituent corporation; PROVIDED that if the surviving or resulting
corporation upon any such merger or consolidation involving an issuer of
Pledged Shares which is a direct Material Foreign Subsidiary is a direct
Material Foreign Subsidiary, then Pledgor shall only be required to pledge
outstanding capital stock of such surviving or resulting corporation
possessing up to but not exceeding 65% of the voting power of all classes of
Voting Stock of such Material Foreign Subsidiary; PROVIDED, FURTHER that, in
the event Pledgor makes an Asset Sale permitted by the Credit Agreement and
the assets subject to such Asset Sale are Pledged Shares, Administrative
Agent shall release the Pledged Shares that are the subject of such Asset
Sale to Pledgor free and clear of the lien and security interest under this
Agreement concurrently with the consummation of such Asset Sale; PROVIDED,
FURTHER that the Net Asset Sale Proceeds of such Asset Sale shall be applied
as set forth in the Credit Agreement;

(b) (i) cause each issuer of Pledged Shares not to issue any stock
or other equity securities in addition to or in substitution for the Pledged
Shares issued by such issuer, except to Pledgor and except pursuant to any
transaction permitted by the Credit Agreement, (ii) pledge hereunder,
immediately upon its acquisition thereof, any

XIII-4
<PAGE>

and all additional shares of stock or other equity securities of each issuer of
Pledged Shares and (iii) to the extent required under the Credit Agreement,
pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all shares of stock of any Person that, after the date of this
Agreement, becomes, as a result of any occurrence, a direct Domestic Subsidiary
or direct Material Foreign Subsidiary of Pledgor; PROVIDED that, notwithstanding
anything contained in this subdivision (b), Pledgor shall only be required to
pledge the outstanding capital stock of a direct Material Foreign Subsidiary
possessing up to but not exceeding 65% of the voting power of all classes of
Voting Stock of such Material Foreign Subsidiary;

(c) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidence of indebtedness in an original principal amount
in excess of $5,000,000 from time to time owed to Pledgor as part of the
consideration received by Pledgor in respect of any Asset Sale; and

(d) promptly deliver to Administrative Agent all written notices of
redemption, repurchase or other defeasance received by it with respect to the
Pledged Collateral.

I. SECTION FURTHER ASSURANCES; PLEDGE AMENDMENTS.

(a) Pledgor agrees that from time to time, at the expense of
Pledgor, Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be reasonably necessary
or desirable, or that Administrative Agent may reasonably request, in order
to perfect and protect any security interest granted or purported to be
granted hereby or to enable Administrative Agent to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral. Without
limiting the generality of the foregoing, Pledgor will: (i) execute and file
such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as
Administrative Agent may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby and (ii) at
Administrative Agent's reasonable request, appear in and defend any action or
proceeding that may affect Pledgor's title to or Administrative Agent's
security interest in all or any part of the Pledged Collateral and (iii)
execute and deliver from time to time such agreements or instruments under
the laws of a country in which any Material Foreign Subsidiary is organized
that Administrative Agent deems necessary or advisable, or that
Administrative Agent may reasonably request, to perfect or otherwise protect
the priority of the Liens granted to Administrative Agent on behalf of the
Secured Lender Parties in the stock of such Material Foreign Subsidiary and
take all such other actions under the laws of such jurisdictions as
Administrative Agent may deem necessary or advisable, or that Administrative
Agent may reasonably request, to perfect or otherwise protect such Liens.

(b) Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged
hereunder as provided in Section 5(b) or (c), promptly (and in any event
within five Business Days) deliver to Administrative Agent a Pledge
Amendment, duly executed by Pledgor, in substantially

XIII-5
<PAGE>

the form of SCHEDULE III annexed hereto (a "PLEDGE AMENDMENT"), in respect of
the additional Pledged Shares or Pledged Debt to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Administrative Agent to attach each
Pledge Amendment to this Agreement and agrees that all Pledged Shares and
Pledged Debt listed on any Pledge Amendment delivered to Administrative Agent
shall for all purposes hereunder be considered Pledged Collateral; PROVIDED
that the failure of Pledgor to execute a Pledge Amendment with respect to any
additional Pledged Shares or Pledged Debt pledged pursuant to this Agreement
shall not impair the security interest of Administrative Agent therein or
otherwise adversely affect the rights and remedies of Administrative Agent
hereunder with respect thereto.

I. SECTION VOTING RIGHTS; DIVIDENDS; ETC.

(a) So long as no Event of Default shall have occurred and be
continuing:

(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not
prohibited by the terms of this Agreement or the Credit
Agreement;

(ii) Pledgor shall be entitled to receive and retain,
and to utilize free and clear of the lien of this
Agreement, any and all dividends, interest, principal and
other distributions paid in respect of the Pledged
Collateral to the extent payment thereof is not prohibited
by the terms of the Credit Agreement; PROVIDED, HOWEVER,
that any and all dividends of equity Securities of any
issuer included in the Pledged Collateral or Pledged Shares
shall be, and shall forthwith be, to the extent required
under the Credit Agreement, delivered to Administrative
Agent to hold as, Pledged Collateral and shall, if received
by Pledgor, be received in trust for the benefit of
Administrative Agent, be segregated from the other property
or funds of Pledgor and be forthwith delivered to
Administrative Agent as Pledged Collateral in the same form
as so received (with all necessary indorsements); and

(iii) Administrative Agent shall promptly execute and
deliver (or cause to be executed and delivered) to Pledgor
all such proxies, dividend payment orders and other
instruments as Pledgor may from time to time reasonably
request for the purpose of enabling Pledgor to exercise the
voting and other consensual rights which it is entitled to
exercise pursuant to paragraph (i) above and to receive the
dividends, principal or interest payments and other
distributions which it is authorized to receive and retain
pursuant to paragraph (ii) above.

XIII-6
<PAGE>

(b) Upon the occurrence and during the continuation of
an Event of Default and written notice from Administrative Agent to
Pledgor of its election that the following become effective:

(i) upon written notice from Administrative Agent to
Pledgor, all rights of Pledgor to exercise the voting and
other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 7(a)(i) shall
cease, and all such rights shall thereupon become vested in
Administrative Agent who shall thereupon have the sole
right to exercise such voting and other consensual rights;

(ii) all rights of Pledgor to receive the dividends
and interest payments which it would otherwise be
authorized to receive and retain pursuant to Section
7(a)(ii) shall cease, and all such rights shall thereupon
become vested in Administrative Agent who shall thereupon
have the sole right to receive and hold as Pledged
Collateral such dividends; and

(iii) all dividends, principal and interest payments
which are received by Pledgor contrary to the provisions of
paragraph (ii) of this Section 7(b) shall be received in
trust for the benefit of Administrative Agent, shall be
segregated from other funds of Pledgor and shall forthwith
be paid over to Administrative Agent as Pledged Collateral
in the same form as so received (with any necessary
indorsements).

(c) In order to permit Administrative Agent to exercise the
voting and other consensual rights which it may be entitled to exercise
pursuant to Section 7(b)(i) and to receive all dividends and other
distributions which it may be entitled to receive under Section 7(a)(ii)
or Section 7(b)(ii), (i) Pledgor shall, upon written notice from
Administrative Agent, promptly execute and deliver (or cause to be
executed and delivered) to Administrative Agent all such proxies,
dividend payment orders and other instruments as Administrative Agent
may from time to time reasonably request, including to the extent
necessary so that the pledge hereunder of any shares of stock of any
Material Foreign Subsidiary is registered (if not already so registered)
on the appropriate books and records of such Material Foreign Subsidiary
if such registration is required under applicable law in order to permit
Administrative Agent to exercise such rights or to receive such
dividends and other distributions.

I. SECTION ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
irrevocably appoints Administrative Agent as Pledgor's attorney-in-fact, with
full authority in the place and stead of Pledgor and in the name of Pledgor,
Administrative Agent or otherwise, from time to time upon the occurrence and
during the continuation of an Event of Default, to take any action and to
execute any instrument that Administrative Agent may reasonably deem necessary
or advisable to accomplish the purposes of this Agreement, including:

XIII-7
<PAGE>

(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;

(b) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Pledged Collateral;

(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the
same; and

(d) to file any claims or take any action or institute any
proceedings that Administrative Agent may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the
rights of Administrative Agent with respect to any of the Pledged Collateral.

I. SECTION ADMINISTRATIVE AGENT MAY PERFORM. If Pledgor fails to
perform any agreement contained herein, Administrative Agent may itself
perform, or cause performance of, such agreement, and the expenses of
Administrative Agent incurred in connection therewith shall be payable by
Pledgor under subsection 10.2 of the Credit Agreement.

I. SECTION STANDARD OF CARE. The powers conferred on Administrative
Agent hereunder are solely to protect its interest in the Pledged Collateral
and shall not impose any duty upon it to exercise any such powers. Except for
the exercise of reasonable care in the custody of any Pledged Collateral in
its possession and the accounting for moneys actually received by it
hereunder, Administrative Agent shall have no duty as to any Pledged
Collateral, it being understood that Administrative Agent shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Administrative Agent has or is deemed to
have knowledge of such matters, (b) taking any necessary steps (other than
steps taken in accordance with the standard of care set forth above to
maintain possession of the Pledged Collateral) to preserve rights against any
parties with respect to any Pledged Collateral, (c) taking any necessary
steps to collect or realize upon the Secured Obligations or any guarantee
therefor, or any part thereof, or any of the Pledged Collateral, or (d)
initiating any action to protect the Pledged Collateral against the
possibility of a decline in market value. Administrative Agent shall be
deemed to have exercised reasonable care in the custody and preservation of
Pledged Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which Administrative Agent accords its
own property consisting of negotiable securities.

I. SECTION REMEDIES.

XIII-8
<PAGE>

(a) If any Event of Default shall have occurred and be continuing,
Administrative Agent may exercise in respect of the Pledged Collateral in
addition to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies which it may have as a secured
party on default under the Uniform Commercial Code as in effect in any
relevant jurisdiction (the "CODE") (whether or not the Code applies to the
affected Pledged Collateral) or under any other applicable laws, whether of
the United States or of any state thereof or of any foreign jurisdiction, and
Administrative Agent may also in its sole discretion, without notice except
as specified below, sell such Pledged Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange or broker's board
or at any of Administrative Agent's offices or elsewhere, for cash, on credit
or for future delivery, at such time or times and at such price or prices and
upon such other terms as Administrative Agent may deem commercially
reasonable, irrespective of the impact of any such sales on the market price
of such Pledged Collateral. Administrative Agent or any Lender or Lender
Counterparty may be the purchaser of any or all of such Pledged Collateral at
any such sale and Administrative Agent, as agent for and representative of
Lenders and Lender Counterparties (but not any Lender or Lenders or Lender
Counterparties in its or their respective individual capacities unless
Requisite Obligees (as defined in Section 14(a)) shall otherwise agree in
writing), shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of such Pledged
Collateral sold at any such public sale, to use and apply any of the Secured
Obligations then owing to it as a credit on account of the purchase price for
such Pledged Collateral payable by Administrative Agent at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free from
any claim or right on the part of Pledgor, and Pledgor hereby waives (to the
extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted. Pledgor agrees
that, to the extent notice of sale shall be required by law, at least ten
days' notice to Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Administrative Agent shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given.
Administrative Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Pledgor hereby waives any claims against Administrative Agent
arising by reason of the fact that the price at which any Pledged Collateral
may have been sold at such a private sale was less than the price which might
have been obtained at a public sale, even if Administrative Agent accepts the
first offer received and does not offer such Pledged Collateral to more than
one offeree. If the proceeds of any sale or other disposition of the Pledged
Collateral are insufficient to pay all the Secured Obligations, Pledgor shall
be liable for the deficiency and the fees of any attorneys employed by
Administrative Agent to collect such deficiency.

(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws,
Administrative Agent may be compelled, with respect to any sale of all or any
part of the Pledged Collateral conducted

XIII-9
<PAGE>

without prior registration or qualification of such Pledged Collateral under
the Securities Act and/or such state securities laws, to limit purchasers to
those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to the distribution
or resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public
sale without such restrictions (including a public offering made pursuant to
a registration statement under the Securities Act) and, notwithstanding such
circumstances, Pledgor agrees that any such private sale shall not, by virtue
thereof, result in such sale being deemed to have been made in a commercially
unreasonable manner and that Administrative Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Pledged
Collateral for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if such issuer
would, or should, agree to so register it.

(c) If Administrative Agent determines to exercise its right to
sell any or all of the Pledged Collateral, upon written request, Pledgor
shall and shall cause each issuer of any Pledged Shares to be sold hereunder
from time to time to furnish to Administrative Agent all such information as
Administrative Agent may request in order to determine the number of shares
and other instruments included in the Pledged Collateral which may be sold by
Administrative Agent in exempt transactions under the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder,
as the same are from time to time in effect.

I. SECTION APPLICATION OF PROCEEDS. All proceeds received by
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral shall be applied
as provided in subsection 2.4D of the Credit Agreement.

I. SECTION CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This
Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until the payment in
full of all Secured Obligations under the Credit Agreement, the cancellation
or termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit, (b) be binding upon Pledgor, its successors
and assigns, and (c) inure, together with the rights and remedies of
Administrative Agent hereunder, to the benefit of Administrative Agent and
its successors, transferees and assigns; PROVIDED that upon a release of any
Pledged Collateral in accordance with the terms of the Credit Agreement, the
security interest created hereby in and with respect to such released Pledged
Collateral shall terminate. Without limiting the generality of the foregoing
clause (c), but subject to the provisions of subsection 10.1 of the Credit
Agreement, any Lender may assign or otherwise transfer any Loans held by it
to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to Lenders herein or otherwise.
Upon the payment in full of all Secured Obligations under the Credit
Agreement, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all

XIII-10
<PAGE>

rights to the Pledged Collateral shall revert to Pledgor. Upon any such
termination Administrative Agent will, at Pledgor's expense, execute and
deliver to Pledgor such documents as Pledgor shall reasonably request to
evidence such termination and Pledgor shall be entitled to the return, upon
its request and at its expense, against receipt and without recourse to
Administrative Agent, of such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.

I. SECTION ADMINISTRATIVE AGENT AS ADMINISTRATIVE AGENT.

(a) Administrative Agent has been appointed to act as
Administrative Agent hereunder by Lenders and, by their acceptance of the
benefits hereof, Lender Counterparties. Administrative Agent shall be
obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including the release or substitution of
Pledged Collateral), solely in accordance with this Agreement and the Credit
Agreement; PROVIDED that Administrative Agent shall exercise, or refrain from
exercising, any remedies provided for in Section 11 in accordance with the
instructions of Requisite Lenders. In furtherance of the foregoing provisions
of this Section 14(a), each Lender Counterparty, by its acceptance of the
benefits hereof, agrees that it shall have no right individually to realize
upon any of the Pledged Collateral hereunder, it being understood and agreed
by such Lender Counterparty that all rights and remedies hereunder may be
exercised solely by Administrative Agent for the benefit of Lenders and
Lender Counterparties in accordance with the terms of this Section 14(a).

(b) Written notice of resignation by Administrative Agent pursuant
to subsection 9.5 of the Credit Agreement shall also constitute notice of
resignation as Administrative Agent under this Agreement; removal of
Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute removal as Administrative Agent under this Agreement; and
appointment of a successor Administrative Agent pursuant to subsection 9.5 of
the Credit Agreement shall also constitute appointment of a successor
Administrative Agent under this Agreement. Upon the acceptance of any
appointment as Administrative Agent under subsection 9.5 of the Credit
Agreement by a successor Administrative Agent, that successor Administrative
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring or removed Administrative Agent
under this Agreement, and the retiring or removed Administrative Agent under
this Agreement shall promptly (i) transfer to such successor Administrative
Agent all sums, securities and other items of Pledged Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Administrative Agent under this Agreement, and (ii) execute and deliver to
such successor Administrative Agent such amendments to financing statements,
and take such other actions, as may be necessary or appropriate in connection
with the assignment to such successor Administrative Agent of the security
interests created hereunder, whereupon such retiring or removed
Administrative Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of
this Agreement shall

XIII-11
<PAGE>

inure to its benefit as to any actions taken or omitted to be taken by it
under this Agreement while it was Administrative Agent hereunder.

I. SECTION AMENDMENTS; ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be
in writing and signed by Administrative Agent and, in the case of any such
amendment or modification, by Pledgor. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which it was given.

I. SECTION NOTICES. Any notice or other communication herein required
or permitted to be given shall be in writing and may be personally served,
telexed or sent by telefacsimile or United States mail or courier service and
shall be deemed to have been given when delivered in person or by courier
service, upon receipt of telefacsimile or telex, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the address of each party hereto shall be
as provided in subsection 10.7 of the Credit Agreement.

I. SECTION SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

I. SECTION HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.

I. SECTION GOVERNING LAW; TERMS. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE CODE PROVIDES THAT THE PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Credit
Agreement, terms used in Articles 8 and 9 of the Uniform Commercial Code in
the State of New York are used herein as therein defined.

I. SECTION COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages

XIII-12
<PAGE>

may be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

I. SECTION CONSENT TO JURISDICTION AND SERVICE OF PROCESS. In addition
(and without prejudice) to the agreements of Pledgor contained in subsection
10.16 of the Credit Agreement, Pledgor hereby agrees that any judicial
proceeding brought against Pledgor arising out of or relating to the pledge
of any shares of stock of any Material Foreign Subsidiary hereunder may be
brought in any court of competent jurisdiction in the jurisdiction in which
such Foreign Subsidiary is organized and, by execution and delivery of this
Agreement, Pledgor accepts for itself and in connection with its properties
(including the applicable Pledged Shares), generally and unconditionally, the
nonexclusive jurisdiction of any such court and waives any defense of forum
non conveniens (or any similar defense under the laws of such jurisdiction)
and irrevocably agrees to be bound by any judgment rendered thereby in
connection with such pledge or the enforcement thereof.

[Remainder of page intentionally left blank]

XIII-13
<PAGE>

IN WITNESS WHEREOF, Pledgor and Administrative Agent have caused
this Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

THE BOYDS COLLECTION, LTD.

By:_____________________________
Name:
Title:

FLEET NATIONAL BANK,
as Administrative Agent

By:_____________________________
Name:
Title:

XIII-14
<PAGE>

SCHEDULE I

Attached to and forming a part of the Pledge Agreement dated as of
April 21, 1998 between The Boyds Collection, Ltd., as Pledgor, and Fleet
National Bank, as Administrative Agent.

<TABLE>
<CAPTION>
Class of Stock Par Number of
Stock Issuer Stock Certificate Nos. Value Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>

</TABLE>

<PAGE>

SCHEDULE II

Attached to and forming a part of the Pledge Agreement dated as of
April 21, 1998 between The Boyds Collection, Ltd., as Pledgor, and Fleet
National Bank, as Administrative Agent.

<TABLE>
<CAPTION>
Number of Percentage Holders
Shares Issued Represented of Shares
Stock Issuer and Outstanding by Pledged Shares Not Pledged
------------ --------------- ----------------- -----------
<S> <C> <C> <C>

</TABLE>

<PAGE>

SCHEDULE III

PLEDGE AMENDMENT

This Pledge Amendment, dated _________ __, ___, is delivered
pursuant to Section 6(b) of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement dated April 21, 1998, between the undersigned and Fleet
National Bank, as Administrative Agent (the "PLEDGE AGREEMENT," capitalized
terms defined therein being used herein as therein defined), and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be part of
the Pledged Shares and shall become part of the Pledged Collateral and shall
secure all Secured Obligations.

THE BOYDS COLLECTION, LTD.

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

<PAGE>

<TABLE>
<CAPTION>
Percentage Represented
Number of by Pledged Shares
Shares pledged pursuant to the
Class of Stock Par Number of Issued and Master Pledge Agreement Debt Amount of
Stock Issuer Stock Certificate Nos. Value Shares Outstanding and all Pledge Amendments Issuer Indebtedness
------------ -------- ---------------- ----- --------- ----------- ------------------------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

</TABLE>

<PAGE>

EXHIBIT XIV

[FORM OF]

SUBSIDIARY GUARANTY

This SUBSIDIARY GUARANTY is entered into as of April 21, 1998 by THE
UNDERSIGNED (each a "GUARANTOR" and collectively, "GUARANTORS") in favor of and
for the benefit of FLEET NATIONAL BANK, as agent for and representative of (in
such capacity herein called "GUARANTIED PARTY") the financial institutions
("LENDERS") party to the Credit Agreement referred to below and any Lender
Counterparties (as hereinafter defined), and, subject to subsection 3.13, for
the benefit of the other Beneficiaries (as hereinafter defined).

RECITALS

A. The Boyds Collection, Ltd., a Maryland corporation ("BORROWER"), has
entered into that certain Credit Agreement dated as of April 21, 1998 with
Guarantied Party, Lenders, DLJ Capital Funding, Inc., as Syndication Agent, and
The Fuji Bank, Limited, New York Branch, as Documentation Agent (said Credit
Agreement, as it may hereafter be amended, supplemented or otherwise modified
from time to time, being the "CREDIT AGREEMENT"; capitalized terms defined
therein and not otherwise defined herein being used herein as therein defined).

B. Borrower may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "LENDER
INTEREST RATE AGREEMENTS") with or one or more Lenders (in such capacity,
collectively, "LENDER COUNTERPARTIES") in accordance with the terms of the
Credit Agreement, and it is desired that the obligations of Borrower under the
Lender Interest Rate Agreements, including the obligation of Borrower to make
payments thereunder in the event of early termination thereof (all such
obligations being the "INTEREST RATE OBLIGATIONS"), together with all
obligations of Borrower under the Credit Agreement and the other Loan Documents,
be guarantied hereunder.

C. A portion of the proceeds of the Loans made to Borrower, may be
advanced to Guarantors and thus the Guarantied Obligations (as hereinafter
defined) are being incurred for and will inure to the benefit of Guarantors
(which benefits are hereby acknowledged).

D. It is a condition precedent to the making of the initial Loans
under the Credit Agreement that Borrower's obligations thereunder be
guarantied by Guarantors.

E. Guarantors are willing irrevocably and unconditionally to guaranty
such obligations of Borrower.

XIV-
<PAGE>

NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce Lender Counterparties to enter into the Lender Interest Rate Agreements,
Guarantors hereby agree as follows:

I. SECTION DEFINITIONS

A. CERTAIN DEFINED TERMS. As used in this Guaranty, the following
terms shall have the following meanings unless the context otherwise requires:

"BENEFICIARIES" means Guarantied Party, Lenders and any Lender
Counterparties.

"GUARANTIED OBLIGATIONS" has the meaning assigned to that term in
subsection 2.l.

"GUARANTY" means this Subsidiary Guaranty dated as of April 21,
1998, as it may be amended, supplemented or otherwise modified from
time to time.

"PAYMENT IN FULL", "PAID IN FULL" or any similar term means
payment in full of the Guarantied Obligations, including all principal,
interest, costs, fees and expenses (including reasonable legal fees and
expenses) of Beneficiaries as required under the Loan Documents and the
Lender Interest Rate Agreements.

B. INTERPRETATION.

1. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Guaranty unless otherwise specifically
provided.

2. In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of
this Guaranty shall prevail.

I. SECTION THE GUARANTY

A. GUARANTY OF THE GUARANTIED OBLIGATIONS. Subject to the provisions
of subsection 2.2(a), Guarantors jointly and severally hereby irrevocably and
unconditionally guaranty the due and punctual payment in full of all
Guarantied Obligations when the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of
the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a) or any provision of foreign law having similar effect). The term
"GUARANTIED OBLIGATIONS" is used herein in its most comprehensive sense and
includes:

XIV-2
<PAGE>

1. any and all Obligations of the Loan Parties and any and all
Interest Rate Obligations, in each case now or hereafter made, incurred or
created, whether absolute or contingent, liquidated or unliquidated, whether
due or not due, and however arising under or in connection with the Credit
Agreement and the other Loan Documents and the Lender Interest Rate
Agreements, including those arising under successive borrowing transactions
under the Credit Agreement which shall either continue the Obligations of the
Loan Parties or from time to time renew them after they have been satisfied
and including interest which, but for the filing of a petition in bankruptcy
with respect to any Loan Party, would have accrued on any Guarantied
Obligations, whether or not a claim is allowed against such Loan Party for
such interest in the related bankruptcy proceeding under domestic or foreign
law; and

2. those expenses set forth in subsection 2.7 hereof.

B. LIMITATION ON AMOUNT GUARANTIED; CONTRIBUTION BY GUARANTORS.

1. Anything contained in this Guaranty to the contrary
notwithstanding, if any Fraudulent Transfer Law (as hereinafter defined) is
determined by a court of competent jurisdiction to be applicable to the
obligations of any Guarantor under this Guaranty, such obligations of such
Guarantor hereunder shall be limited to a maximum aggregate amount equal to
the largest amount that would not render its obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title
11 of the United States Code or any applicable provisions of comparable state
law (collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving
effect to all other liabilities of such Guarantor, contingent or otherwise,
that are relevant under the Fraudulent Transfer Laws (specifically excluding,
however, any liabilities of such Guarantor (x) in respect of intercompany
indebtedness to Borrower or other affiliates of Borrower to the extent that
such indebtedness would be discharged in an amount equal to the amount paid
by such Guarantor hereunder and (y) under any guaranty of Subordinated
Indebtedness which guaranty contains a limitation as to maximum amount
similar to that set forth in this subsection 2.2(a), pursuant to which the
liability of such Guarantor hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of such Guarantor pursuant to applicable law
or pursuant to the terms of any agreement (including any such right of
contribution under subsection 2.2(b)).

2. Guarantors under this Guaranty and each guarantor under other
guaranties, if any, of the Obligations related to the Credit Agreement (the
"RELATED GUARANTIES") which contain a contribution provision similar to that
set forth in this subsection 2.2(b), together desire to allocate among
themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and
equitable manner, their obligations arising under this Guaranty and the
Related Guaranties. Accordingly, in the event any payment

XIV-3
<PAGE>

or distribution is made on any date by any Guarantor under this Guaranty or a
guarantor under a Related Guaranty (a "FUNDING GUARANTOR") that exceeds its
Fair Share (as defined below) as of such date, that Funding Guarantor shall
be entitled to a contribution from each of the other Contributing Guarantors
in the amount of such other Contributing Guarantor's Fair Share Shortfall (as
defined below) as of such date, with the result that all such contributions
will cause each Contributing Guarantor's Aggregate Payments (as defined
below) to equal its Fair Share as of such date. "FAIR SHARE" means, with
respect to a Guarantor as of any date of determination, an amount equal to
(i) the ratio of (x) the Adjusted Maximum Amount (as defined below) with
respect to such Guarantor to (y) the aggregate of the Adjusted Maximum
Amounts with respect to all Guarantors MULTIPLIED BY (ii) the aggregate
amount paid or distributed on or before such date by all Funding Guarantors
under this Guaranty in respect of the obligations guarantied. "FAIR SHARE
SHORTFALL" means, with respect to a Contributing Guarantor as of any date of
determination, the excess, if any, of the Fair Share of such Contributing
Guarantor over the Aggregate Payments of such Contributing Guarantor.
"ADJUSTED MAXIMUM AMOUNT" means, with respect to a Contributing Guarantor as
of any date of determination, the maximum aggregate amount of the obligations
of such Contributing Guarantor under this Guaranty and the Related Guaranties
determined as of such date in accordance with subsection 2.2(a); PROVIDED
that, solely for purposes of calculating the "Adjusted Maximum Amount" with
respect to any Contributing Guarantor for purposes of this subsection 2.2(b),
any assets or liabilities of such Contributing Guarantor arising by virtue of
any rights to subrogation, reimbursement or indemnification or any rights to
or obligations of contribution hereunder shall not be considered as assets or
liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS" means, with
respect to a Contributing Guarantor as of any date of determination, an
amount equal to (i) the aggregate amount of all payments and distributions
made on or before such date by such Contributing Guarantor in respect of this
Guaranty and the Related Guaranties (including in respect of this subsection
2.2(b) or any similar provision contained in a Related Guaranty) MINUS (ii)
the aggregate amount of all payments received on or before such date by such
Contributing Guarantor from the other Contributing Guarantors as
contributions under this subsection 2.2(b) or any similar provision contained
in a Related Guaranty. The amounts payable as contributions hereunder and
under similar provisions in the Related Guaranties shall be determined as of
the date on which the related payment or distribution is made by the
applicable Funding Guarantor. The allocation among Contributing Guarantors of
their obligations as set forth in this subsection 2.2(b) shall not be
construed in any way to limit the liability of any Contributing Guarantor
hereunder or under a Related Guaranty. Each Contributing Guarantor under a
Related Guaranty is a third party beneficiary to the contribution agreement
set forth in this subsection 2.2(b).

C. PAYMENT BY GUARANTORS; APPLICATION OF PAYMENTS. Subject to the
provisions of subsection 2.2(a), Guarantors hereby jointly and severally
agree, in furtherance of the foregoing and not in limitation of any other
right which any Beneficiary may have at law or in equity against any
Guarantor by virtue hereof, that upon the failure of Borrower to pay any of
the Guarantied Obligations when and as the same shall become due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the

XIV-4
<PAGE>

operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. Section 362(a) or other provision of foreign law having similar
effect), Guarantors will upon demand pay, or cause to be paid, in cash, to
Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to
the sum of the unpaid principal amount of all Guarantied Obligations then due
as aforesaid, accrued and unpaid interest on such Guarantied Obligations
(including interest which, but for the filing of a petition in bankruptcy
with respect to Borrower, would have accrued on such Guarantied Obligations,
whether or not a claim is allowed against Borrower for such interest in the
related bankruptcy proceeding) and all other Guarantied Obligations then owed
to Beneficiaries as aforesaid. All such payments shall be applied promptly
from time to time by Guarantied Party as provided in subsection 2.4D of the
Credit Agreement.

D. LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and
unconditional and shall not be affected by any circumstance which constitutes
a legal or equitable discharge of a guarantor or surety other than payment in
full of the Guarantied Obligations. In furtherance of the foregoing and
without limiting the generality thereof, each Guarantor agrees as follows:

1. This Guaranty is a guaranty of payment when due and not of
collectibility.

2. Guarantied Party may enforce this Guaranty upon the occurrence of
an Event of Default notwithstanding the existence of any dispute between
Borrower and any Beneficiary with respect to the existence of such Event of
Default.

3. The obligations of each Guarantor hereunder are independent of
the obligations of Borrower under the Loan Documents or the Lender Interest
Rate Agreements and the obligations of any other guarantor (including any
other Guarantor) of the obligations of Borrower under the Loan Documents or
the Lender Interest Rate Agreements, and a separate action or actions may be
brought and prosecuted against such Guarantor whether or not any action is
brought against Borrower or any of such other guarantors and whether or not
Borrower is joined in any such action or actions.

4. Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge any
Guarantor's liability for any portion of the Guarantied Obligations which has
not been paid. Without limiting the generality of the foregoing, if
Guarantied Party is awarded a judgment in any suit brought to enforce any
Guarantor's covenant to pay a portion of the Guarantied Obligations, such
judgment shall not be deemed to release such Guarantor from its covenant to
pay the portion of the Guarantied Obligations that is not the subject of such
suit, and such judgment shall not, except to the extent satisfied by such
Guarantor, limit, affect, modify or abridge any other Guarantor's liability
hereunder in respect of the Guarantied Obligations.

XIV-5
<PAGE>

6. Any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of this
Guaranty or giving rise to any reduction, limitation, impairment, discharge
or termination of any Guarantor's liability hereunder, from time to time may
(i) renew, extend, accelerate, increase the rate of interest on, or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (ii) settle, compromise, release or discharge, or accept or
refuse any offer of performance with respect to, or substitutions for, the
Guarantied Obligations or any agreement relating thereto and/or subordinate
the payment of the same to the payment of any other obligations; (iii)
request and accept other guaranties of the Guarantied Obligations and take
and hold security for the payment of this Guaranty or the Guarantied
Obligations; (iv) release, surrender, exchange, substitute, compromise,
settle, rescind, waive, alter, subordinate or modify, with or without
consideration, any security for payment of the Guarantied Obligations, any
other guaranties of the Guarantied Obligations, or any other obligation of
any Person (including any other Guarantor) with respect to the Guarantied
Obligations; (v) enforce and apply any security now or hereafter held by or
for the benefit of such Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that such Beneficiary may have against any
such security, in each case as such Beneficiary in its discretion may
determine consistent with the Credit Agreement or the applicable Lender
Interest Rate Agreement and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, and even though such action operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy
of any Guarantor against Borrower or any security for the Guarantied
Obligations; and (vi) exercise any other rights available to it under the
Loan Documents or the Lender Interest Rate Agreements.

7. This Guaranty and the obligations of Guarantors hereunder shall
be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
payment in full of the Guarantied Obligations), including the occurrence of
any of the following, whether or not any Guarantor shall have had notice or
knowledge of any of them: (i) any failure or omission to assert or enforce or
agreement or election not to assert or enforce, or the stay or enjoining, by
order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Loan Documents or the Lender Interest Rate Agreements, at
law, in equity or otherwise) with respect to the Guarantied Obligations or
any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of the Guarantied Obligations; (ii) any rescission,
waiver, amendment or modification of, or any consent to departure from, any
of the terms or provisions (including provisions relating to events of
default) of the Credit Agreement, any of the other Loan Documents, any of the
Lender Interest Rate Agreements, or any agreement or instrument executed
pursuant thereto, or of any other guaranty or security for the Guarantied
Obligations, in each case whether or not in accordance with the terms of the
Credit Agreement, such Loan Document, such Lender Interest Rate Agreement, or
any agreement relating to such other guaranty or

XIV-6
<PAGE>

security; (iii) the Guarantied Obligations, or any agreement relating
thereto, at any time being found to be illegal, invalid or unenforceable in
any respect; (iv) the application of payments received from any source (other
than payments received pursuant to the other Loan Documents or any of the
Lender Interest Rate Agreements or from the proceeds of any security for the
Guarantied Obligations, except to the extent such security also serves as
collateral for indebtedness other than the Guarantied Obligations) to the
payment of indebtedness other than the Guarantied Obligations, even though
any Beneficiary might have elected to apply such payment to any part or all
of the Guarantied Obligations; (v) any Beneficiary's consent to the change,
reorganization or termination of the corporate structure or existence of
Borrower or any of its Subsidiaries and to any corresponding restructuring of
the Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of the
Guarantied Obligations; (vii) any defenses, set-offs or counterclaims which
Borrower may allege or assert against any Beneficiary in respect of the
Guarantied Obligations, including failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (viii) any other act or thing or omission, or
delay to do any other act or thing, which may or might in any manner or to
any extent vary the risk of any Guarantor as an obligor in respect of the
Guarantied Obligations.

E. WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the
benefit of Beneficiaries:

1. any right to require any Beneficiary, as a condition of payment
or performance by such Guarantor, to (i) proceed against Borrower, any other
guarantor (including any other Guarantor) of the Guarantied Obligations or
any other Person, (ii) proceed against or exhaust any security held from
Borrower, any such other guarantor or any other Person, (iii) proceed against
or have resort to any balance of any deposit account or credit on the books
of any Beneficiary in favor of Borrower or any other Person, or (iv) pursue
any other remedy in the power of any Beneficiary whatsoever;

2. any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Borrower (other than payment
in full of the Guarantied Obligations) including any defense based on or
arising out of the lack of validity or the unenforceability of the Guarantied
Obligations or any agreement or instrument relating thereto or by reason of
the cessation of the liability of Borrower from any cause other than payment
in full of the Guarantied Obligations;

3. any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;

4. any defense based upon any Beneficiary's errors or omissions in
the administration of the Guarantied Obligations, except behavior which
amounts to bad faith;

XIV-7
<PAGE>

5. (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Guaranty and any
legal or equitable discharge of such Guarantor's obligations hereunder, (ii)
the benefit of any statute of limitations affecting such Guarantor's
liability hereunder or the enforcement hereof, (iii) any rights to set-offs,
recoupments and counterclaims, and (iv) promptness, diligence and any
requirement that any Beneficiary protect, secure, perfect or insure any
security interest or lien or any property subject thereto;

6. notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including
acceptance of this Guaranty, notices of default under the Credit Agreement,
the Lender Interest Rate Agreements or any agreement or instrument related
thereto, notices of any renewal, extension or modification of the Guarantied
Obligations or any agreement related thereto, notices of any extension of
credit to Borrower and notices of any of the matters referred to in
subsection 2.4 and any right to consent to any thereof; and

7. any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this Guaranty.

F. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the
Guarantied Obligations shall have been indefeasibly paid in full and the
Commitments shall have terminated and all Letters of Credit shall have
expired or been canceled, each Guarantor hereby waives any claim, right or
remedy, direct or indirect, that such Guarantor now has or may hereafter have
against Borrower or any of its assets in connection with this Guaranty or the
performance by such Guarantor of its obligations hereunder, in each case
whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including (a) any right of
subrogation, reimbursement or indemnification that such Guarantor now has or
may hereafter have against Borrower, (b) any right to enforce, or to
participate in, any claim, right or remedy that any Beneficiary now has or
may hereafter have against Borrower, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by any
Beneficiary. In addition, until the Guarantied Obligations shall have been
indefeasibly paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been canceled, each Guarantor shall
withhold exercise of any right of contribution such Guarantor may have
against any other guarantor (including any other Guarantor) of the Guarantied
Obligations (including any such right of contribution under subsection 2.2(b)
or under a Related Guaranty as contemplated by subsection 2.2(b)). Each
Guarantor further agrees that, to the extent the waiver or agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement or indemnification such Guarantor may have against
Borrower or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall
be junior and subordinate to any rights any Beneficiary may have against
Borrower, to all right, title and interest any Beneficiary may have in

XIV-8
<PAGE>

any such collateral or security, and to any right any Beneficiary may have
against such other guarantor. If any amount shall be paid to any Guarantor on
account of any such subrogation, reimbursement, indemnification or
contribution rights at any time when all Guarantied Obligations shall not
have been paid in full, such amount shall be held in trust for Guarantied
Party on behalf of Beneficiaries and shall forthwith be paid over to
Guarantied Party for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in
accordance with the terms hereof.

G. EXPENSES. Guarantors jointly and severally agree to pay, or
cause to be paid, on demand, and to save Beneficiaries harmless against
liability for, any and all costs and expenses (including fees and
disbursements of counsel and allocated costs of internal counsel) incurred or
expended by any Beneficiary in connection with the enforcement of or
preservation of any rights under this Guaranty.

H. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and
shall remain in effect until all of the Guarantied Obligations shall have
been paid in full and the Commitments shall have terminated and all Letters
of Credit shall have expired or been cancelled. Each Guarantor hereby
irrevocably waives any right to revoke this Guaranty as to future
transactions giving rise to any Guarantied Obligations.

I. AUTHORITY OF GUARANTORS OR BORROWER. It is not necessary for any
Beneficiary to inquire into the capacity or powers of any Guarantor or
Borrower or the officers, directors or any agents acting or purporting to act
on behalf of any of them.

J. FINANCIAL CONDITION OF BORROWER. Any Loans may be granted to
Borrower or continued from time to time, and any Lender Interest Rate
Agreements may be entered into from time to time, in each case without notice
to or authorization from any Guarantor regardless of the financial or other
condition of Borrower at the time of any such grant or continuation or at the
time such Lender Interest Rate Agreement is entered into, as the case may be.
No Beneficiary shall have any obligation to disclose or discuss with any
Guarantor its assessment, or any Guarantor's assessment, of the financial
condition of Borrower. Each Guarantor has adequate means to obtain
information from Borrower on a continuing basis concerning the financial
condition of Borrower and its ability to perform its obligations under the
Loan Documents and the Lender Interest Rate Agreements, and each Guarantor
assumes the responsibility for being and keeping informed of the financial
condition of Borrower and of all circumstances bearing upon the risk of
nonpayment of the Guarantied Obligations. Each Guarantor hereby waives and
relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of Borrower
now known or hereafter known by any Beneficiary.

K. RIGHTS CUMULATIVE. The rights, powers and remedies given to
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by
virtue of any statute or rule of law or in any of the other Loan Documents,
any of the Lender Interest Rate Agreements

XIV-9
<PAGE>

or any agreement between any Guarantor and any Beneficiary or Beneficiaries
or between Borrower and any Beneficiary or Beneficiaries. Any forbearance or
failure to exercise, and any delay by any Beneficiary in exercising, any
right, power or remedy hereunder shall not impair any such right, power or
remedy or be construed to be a waiver thereof, nor shall it preclude the
further exercise of any such right, power or remedy.

L. BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF GUARANTY.
(a) So long as any Guarantied Obligations remain outstanding, no Guarantor
shall, without the prior written consent of Guarantied Party acting pursuant
to the instructions of Requisite Obligees (as defined in subsection 3.13),
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency proceedings of or against Borrower. The
obligations of Guarantors under this Guaranty shall not be reduced, limited,
impaired, discharged, deferred, suspended or terminated by any proceeding,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrower or by any defense
which Borrower may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding.

(b) Each Guarantor acknowledges and agrees that any interest on
any portion of the Guarantied Obligations which accrues after the
commencement of any proceeding referred to in clause (a) above (or, if
interest on any portion of the Guarantied Obligations ceases to accrue by
operation of law by reason of the commencement of said proceeding, such
interest as would have accrued on such portion of the Guarantied Obligations
if said proceedings had not been commenced) shall be included in the
Guarantied Obligations because it is the intention of Guarantors and
Beneficiaries that the Guarantied Obligations which are guarantied by
Guarantors pursuant to this Guaranty should be determined without regard to
any rule of law or order which may relieve Borrower of any portion of such
Guarantied Obligations. Guarantors will permit any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or
similar person to pay Guarantied Party, or allow the claim of Guarantied
Party in respect of, any such interest accruing after the date on which such
proceeding is commenced.

(c) In the event that all or any portion of the Guarantied
Obligations are paid by Borrower, the obligations of Guarantors hereunder
shall continue and remain in full force and effect or be reinstated, as the
case may be, in the event that all or any part of such payment(s) are
rescinded or recovered directly or indirectly from any Beneficiary as a
preference, fraudulent transfer or otherwise, and any such payments which are
so rescinded or recovered shall constitute Guarantied Obligations for all
purposes under this Guaranty.

M. SET OFF. In addition to any other rights any Beneficiary may
have under law or in equity, if any amount shall at any time following the
occurrence and during the continuance of an Event of Default be due and owing
by any Guarantor to any Beneficiary under this Guaranty, such Beneficiary is
authorized at any time or from time to time, without notice (any such notice
being hereby expressly waived), to set off and to

XIV-10
<PAGE>

appropriate and to apply any and all deposits (general or special, including
indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness of such Beneficiary owing to such
Guarantor against and on account of the Guarantied Obligations and
liabilities of such Guarantor then due and payable to any Beneficiary under
this Guaranty.

N. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If (a) any or all
of the stock of any Guarantor or any of its successors in interest under this
Guaranty shall be sold or otherwise disposed of (including by merger or
consolidation) in an Asset Sale not prohibited by subsection 7.7 of the
Credit Agreement or otherwise consented to by Requisite Lenders such that
such Guarantor is no longer a Subsidiary or (b) if such Guarantor is
designated as an Unrestricted Subsidiary pursuant to the Credit Agreement,
the Guaranty of such Guarantor or such successor in interest, as the case may
be, hereunder shall automatically be discharged and released without any
further action by any Beneficiary or any other Person effective as of the
time of such Asset Sale; PROVIDED that the applicable Net Asset Sale Proceeds
shall be applied as set forth in the Credit Agreement.

I. SECTION MISCELLANEOUS

A. SURVIVAL OF WARRANTIES. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Guaranty and the other Loan Documents and the Lender Interest Rate Agreements
and any increase in the Commitments under the Credit Agreement.

B. NOTICES. Any communications between Guarantied Party and any
Guarantor and any notices or requests provided herein to be given may be
given by mailing the same, postage prepaid, or by telex, facsimile
transmission or cable to each such party at its address set forth in the
Credit Agreement, on the signature pages hereof or to such other addresses as
each such party may in writing hereafter indicate. Any notice, request or
demand to or upon Guarantied Party or any Guarantor shall not be effective
until received.

C. SEVERABILITY. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

D. AMENDMENTS AND WAIVERS. No amendment, modification, termination
or waiver of any provision of this Guaranty, and no consent to any departure
by any Guarantor therefrom, shall in any event be effective without the
written concurrence of Guarantied Party and, in the case of any such
amendment or modification, each Guarantor against whom enforcement of such
amendment or modification is sought. Any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which it was given.

XIV-11
<PAGE>

E. HEADINGS. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive
effect.

F. APPLICABLE LAW; RULES OF CONSTRUCTION. THIS GUARANTY AND THE
RIGHTS AND OBLIGATIONS OF GUARANTORS AND BENEFICIARIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES. The rules of construction set forth in
subsection 1.3 of the Credit Agreement shall be applicable to this Guaranty
MUTATIS MUTANDIS.

G. SUCCESSORS AND ASSIGNS. This Guaranty is a continuing guaranty
and shall be binding upon each Guarantor and its respective successors and
assigns. This Guaranty shall inure to the benefit of Beneficiaries and their
respective successors and assigns. No Guarantor shall assign this Guaranty or
any of the rights or obligations of such Guarantor hereunder without the
prior written consent of all Lenders. Any Beneficiary may, without notice or
consent, assign its interest in this Guaranty in whole or in part. The terms
and provisions of this Guaranty shall inure to the benefit of any transferee
or assignee of any Loan, and in the event of such transfer or assignment the
rights and privileges herein conferred upon such Beneficiary shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof.

H. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW
YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GUARANTOR, FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY

(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SUBSECTION 3.2;

XIV-12
<PAGE>

(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE
IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GUARANTOR IN ANY
SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT;

(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.

I. WAIVER OF TRIAL BY JURY. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF
THE BENEFITS HEREOF, EACH BENEFICIARY EACH HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS GUARANTY. The scope of this waiver is intended to be
all encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each Guarantor and, by its acceptance of the benefits
hereof, each Beneficiary, each (i) acknowledges that this waiver is a
material inducement for such Guarantor and Beneficiaries to enter into a
business relationship, that such Guarantor and Beneficiaries have already
relied on this waiver in entering into this Guaranty or accepting the
benefits thereof, as the case may be, and that each will continue to rely on
this waiver in their related future dealings and (ii) further warrants and
represents that each has reviewed this waiver with its legal counsel, and
that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL
WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED BY
GUARANTIED PARTY AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
GUARANTY. In the event of litigation, this Guaranty may be filed as a written
consent to a trial by the court.

J. NO OTHER WRITING. This writing is intended by Guarantor and
Beneficiaries as the final expression of this Guaranty and is also intended
as a complete and exclusive statement of the terms of their agreement with
respect to the matters covered hereby. No course of dealing, course of
performance or trade usage, and no parol

XIV-13
<PAGE>

evidence of any nature, shall be used to supplement or modify any terms of
this Guaranty. There are no conditions to the full effectiveness of this
Guaranty.

K. FURTHER ASSURANCES. At any time or from time to time, upon the
request of Guarantied Party, Guarantors shall execute and deliver such
further documents and do such other acts and things as Guarantied Party may
reasonably request in order to effect fully the purposes of this Guaranty.

L. COUNTERPARTS; EFFECTIVENESS. This Guaranty may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original for all purposes; but all such counterparts together shall
constitute but one and the same instrument. This Guaranty shall become
effective as to Guarantor upon the execution of a counterpart hereof by
Guarantor and receipt by Guarantied Party of written or telephonic
notification of such execution and authorization of delivery thereof.

M. GUARANTIED PARTY AS ADMINISTRATIVE AGENT.

1. Guarantied Party has been appointed to act as Guarantied
Party hereunder by Lenders and, by their acceptance of the benefits hereof,
Lender Counterparties. Guarantied Party shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action,
solely in accordance with this Guaranty and the Credit Agreement; PROVIDED
that Guarantied Party shall exercise, or refrain from exercising, any
remedies hereunder in accordance with the instructions of (i) Requisite
Lenders or (ii) after payment in full of all Obligations under the Credit
Agreement and the other Loan Documents, the holders of a majority of the
aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount
then due and payable (exclusive of expenses and similar payments but
including any early termination payments then due) under such Lender Interest
Rate Agreement) under all Lender Interest Rate Agreements (Requisite Lenders
or, if applicable, such holders being referred to herein as "REQUISITE
OBLIGEES"). In furtherance of the foregoing provisions of this subsection
3.13, each Interest Rate Exchanger, by its acceptance of the benefits hereof,
agrees that it shall have no right individually to enforce this Guaranty, it
being understood and agreed by such Interest Rate Exchanger that all rights
and remedies hereunder may be exercised solely by Guarantied Party for the
benefit of Beneficiaries in accordance with the terms of this subsection 3.13.

2. Guarantied Party shall at all times be the same Person that
is Administrative Agent under the Credit Agreement. Written notice of
resignation by Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute notice of resignation as Guarantied Party
under this Guaranty; removal of Administrative Agent pursuant to subsection
9.5 of the Credit Agreement shall also constitute removal as Guarantied Party
under this Guaranty; and appointment of a successor Administrative Agent
pursuant to subsection 9.5 of the Credit Agreement shall

XIV-14
<PAGE>

also constitute appointment of a successor Guarantied Party under this
Guaranty. Upon the acceptance of any appointment as Administrative Agent
under subsection 9.5 of the Credit Agreement by a successor Administrative
Agent, that successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring or removed Guarantied Party under this Guaranty, and the retiring or
removed Guarantied Party under this Guaranty shall promptly (i) transfer to
such successor Guarantied Party all sums held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or appropriate
in connection with the assignment to such successor Guarantied Party of the
rights created hereunder, whereupon such retiring or removed Guarantied Party
shall be discharged from its duties and obligations under this Guaranty.
After any retiring or removed Guarantied Party's resignation or removal
hereunder as Guarantied Party, the provisions of this Guaranty shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Guaranty while it was Guarantied Party hereunder.

[Remainder of page intentionally left blank]

XIV-15
<PAGE>

IN WITNESS WHEREOF, each of the undersigned Guarantors has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.

BOYDS OPERATIONS, INC.

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

Address: 350 South Street
McSherrystown, PA 17344
Attn: Gary M. Lowenthal
Fax: 717-633-1188

<PAGE>

IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, 199_.

(Name of Additional Guarantor)

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

Address:
-----------------------------

-----------------------------

<PAGE>

Exhibit 10.4

AGREEMENT

THIS AGREEMENT of lease, executed this 1st day of March, 1995, between
Adams County Realty Co. having its offices at 6343 Red Cedar Place, Baltimore,
Maryland 21209, hereinafter referred to as LESSOR, and The Boyds Collection
Ltd., Inc., having its offices at 12 South Queen Street, Littlestown,
Pennsylvania 17340, hereinafter referred to as LESSEE.

WITNESSETH:

LESSOR, for and in consideration of the rent, covenants and agreements
hereinafter more fully mentioned and reserved, does by these presents lease to
the LESSEE a portion of that certain tract of real estate, being a portion of
the warehouse and offices in the former Sylvania Shoe facility located at 350
South Street, McSherrystown, Pennsylvania as shown on Exhibit A attached hereto
and made part hereof, containing approximately 57,678 square feet, for a term of
three (3) years, beginning on the first day of May, 1995, at the total rental or
cost of Four Hundred, Seventy-Five Thousand, Five Hundred, Ninety and 60/100
Dollars ($475,590.60), payable in monthly installments of $13,210.85, in
advance, without demand, on the first day of each month during the term or any
continuance or renewal of time, to and at the office of H.G. Rotz Associates,
Inc., 11 East Market Street, York, Pennsylvania 17401. The security deposit and
first month's rent are due upon the signing of the Lease.

SECURITY DEPOSIT

LESSEE shall pay a security deposit of $13,000.00 at the signing of
this lease. The Security Deposit shall be held by H.G. Rotz Associates, Inc. and
shall bear interest at the rate paid on that account by the banking institution
holding said Deposit. At the termination of this lease, the security deposit
shall be first applied to repairs required as a result of LESSEE'S occupancy,
reasonable wear and tear excepted, thereafter to cleaning, thereafter to unpaid
rents, if any, and the balance, if any, shall be returned to the LESSEE. The
LESSEE may not consider the security deposit as a deposit toward the last
month's rent.

PAYMENT OF RENT

There will be a late payment charge of $25.00 per day on all late
rentals beginning with the first day following the due date. Late fees shall be
due and payable as additional rent.

LESSEE shall not make any deductions from rental payments for repairs
or other charges incurred by LESSEE, regardless of said charges being the
obligation of LESSOR except as provided below. Any and all such charges paid by
LESSEE, if appropriate under the terms of this Agreement, shall be invoiced to
LESSOR, who will reimburse LESSEE within five business days of receipt of
invoice. If reimbursement is not received by LESSEE within ten business days
following LESSEE'S invoicing date, LESSEE may escrow with LESSEE'S attorney an
amount equal to such invoice and reduce its next rental payment in that same
amount.

LESSEE further agrees to pay to LESSOR, or LESSOR'S agent, the sum of
$15.00 for each and every check which LESSEE tenders to LESSOR, or LESSOR'S
agent, which is dishonored. If LESSOR, or LESSOR'S agent, receives a total of
two insufficient checks which are dishonored by

<PAGE>
2

LESSOR'S bank for any reason during this lease agreement, LESSEE agrees that all
rental payments thereafter will be made by money order.

OPTION TO RENEW

Providing the LESSEE is not in default of this lease agreement, LESSEE
shall have the option to renew this lease for an additional term of two (2)
years from May 1, 1998 through April 30, 2000 by giving written notice to LESSOR
on or before November 1, 1997. All terms and conditions of this lease shall
remain unchanged except for the rental. Annual rental for the renewal term shall
be $178,717.50 payable in monthly installments of $14,893.13.

OPTION TO LEASE ADDITIONAL SPACE

Provided LESSEE is not in default of this lease agreement, LESSEE shall
have the option to lease 10,000 square feet of additional space at the end of
the second year of the initial term of this lease for the balance of the initial
term. The location of the additional space shall be as designated by LESSOR and
shall be contiguous to LESSEE'S leased area. All terms and conditions of this
lease shall apply to this space. Annual rental for such additional space shall
be Twenty Thousand and 00/100 Dollars ($20,000.00) payable in monthly
installments of $1,666.67 during the initial term of this lease. In the event
the LESSEE exercises the option to extend as provided herein, this space shall
be included in the option to renew. During the renewal term of this lease,
annual rental for such additional space shall be $22,916.67 payable in monthly
installments of $1,909.72.

TERMINATION

In the event LESSEE does not exercise its option as set forth in the
paragraph entitled, "Option to Renew," either party may terminate this lease at
the end of the term herein by giving the other written notice of at least 90
days prior thereto, but in default of such notice this lease shall continue upon
the same terms and conditions for a further period of one (1) month, and so on
from month to month until terminated by either party giving to the other party
90 days written notice, in which event this lease shall terminate on the last
day of the month following the end of the 90-day notice period.

DEFAULT BY TENANT

The failure of LESSEE to pay, when due, any installment of rent or
additional rent or any other sum payable by LESSEE under this Lease, which
failure shall continue unremedied by LESSEE for a period of five (5) days after
written notice thereof shall have been given to LESSEE by LESSOR shall
constitute default of this Lease Agreement provided, however, that, if LESSEE
defaults in making its payments of rent or additional rent requiring LESSOR'S
written notice on three (3) occasions within any twelve (12) month period, then,
at LESSOR'S election, such third (or subsequent) default shall not be capable of
cure by LESSEE.

If LESSEE falls to comply by correcting said default, and if
proceedings shall then be commenced by LESSOR to recover possession, either at
the end of the term or sooner termination of this lease, LESSEE waives any
further right to any statutory notice and agrees that five (5) days written
notice shall be sufficient.

OCCUPANCY

<PAGE>
3

Occupancy of the premises shall be as of May 1, 1995. However, LESSEE
may begin to occupy available spaces prior to said date by paying a rental
calculated on the following basis:
For the high bay area, $0.007361 per sq. ft. per day,
For the low bay area, $0.006667 per sq. ft. per day, and
For the office area, $66.75 per day;
such areas to be calculated in full bay increments for all warehouse space.

It is understood and agreed that LESSEE shall use the demised premises
for office and distribution, provided, however, that such use shall not include
volatile or unstable substances creating fire or explosion hazards, unless such
hazardous use is first approved, in writing, by the LESSOR, and the LESSOR shall
have the unilateral right to reject such hazardous use.

LESSEE shall conduct its business in compliance with all Local, State
and Federal rules and regulations, and LESSEE shall not permit or do anything
not permitted by any Local, State or Federal laws.

It is understood and agreed that LESSEE'S use of the demised premises
shall not include the use of hazardous waste or regulated materials as defined
by the Pennsylvania Department of Environmental Resources Regulations and the
United States Environmental Protection Agency Regulations or any other
regulatory body, without first obtaining the written consent of LESSOR. In the
event LESSOR consents to such use, treatment or handling of hazardous waste or
regulated material in and upon the demised premises, LESSEE hereby covenants and
agrees to deliver and surrender to LESSOR possession of the demised premises
upon expiration of this lease or its earlier termination as herein provided,
free and clear of such hazardous waste or regulated material. LESSEE shall
comply with all prescribed rules, regulations, and statutes of all federal,
state, and local governmental bodies when treating, using, handling, and/or
disposing of such hazardous waste or regulated material. In the event LESSEE
falls to comply with this provision of this lease agreement, LESSEE shall
protect and save and keep the LESSOR forever harmless and indemnified against
and from any penalty or damage or charges imposed for any violation of any law
or ordinance, whether occasioned by the neglect of LESSEE or those holding under
LESSEE, and that LESSEE will at all times protect, indemnify and save and keep
harmless the LESSOR against and from all claims, loss, costs, damage or expense
arising out of or from any accident or occurrence on or about the demised
premises causing injury to any person or property whomsoever or whatsoever, and
will protect, indemnify, save and keep harmless the LESSOR against and from any
and all claims and against any and all loss, cost, damage or expense arising out
of any failure of LESSEE in any respect to comply with and perform all the
requirements and provisions of this lease or to comply with any government, law,
rule, or regulation. LESSEE shall further reimburse LESSOR for all costs
incurred by LESSOR in treating, handling, disposing of, and cleaning up said
hazardous waste or regulated material from or about the demised premises.

LESSOR to the best of LESSOR'S knowledge is not aware of any hazardous
waste or regulated material present in and upon the demised premises nor any
that was in and upon the demised promises, and LESSOR shall hold LESSEE harmless
from any and all claims that may arise out of any conditions which may have
existed prior to LESSEE'S occupancy of the demised promises.

It shall be the LESSOR'S responsibility to see that the building is in
compliance with Pennsylvania Department of Labor and Industry regulations for
use as a warehousing facility and for

<PAGE>
4

administrative offices, as described on Exhibit A attached to and made a part
hereof, at the inception of this lease. LESSEE shall be responsible, at LESSEE'S
expense, for securing a codes enforcement inspection and use certificate, if
applicable, for LESSEE'S use. LESSEE shall be responsible, at LESSEE'S expense,
for bringing the demised premises into compliance with code requirements for
LESSEE'S use, and for keeping the promises in compliance as its use may require.

PARKING

LESSEE shall have the exclusive use of the parking lot located north of
the office entrance on South Street. Additional parking needs of LESSEE shall be
in common with other tenants of the LESSOR on the south side of the facility,
however, LESSEE shall have no less than 60 parking spaces. LESSEE shall ensure
at all times that parking does not interfere with loading and docking facilities
and the access thereto.

MAINTENANCE

LESSOR agrees to keep and maintain in good repair the structure
including the exterior walls and roof, driveways and parking areas, water lines,
sewer or septic lines, rain gutters and down spouts. electrical service to the
building, water service to the building, and sewer lines from the building.

LESSEE agrees to keep and maintain in good repair the major mechanical
systems, including electrical, plumbing, heating and air conditioning systems,
making proper replacement when necessary. LESSEE'S financial responsibility for
repair and replacement of any unit heaters which are not new at the commencement
of this Lease which are located in the high bay and low bay warehouse areas
shall be limited to $200 annually per unit heater which is not now at the
commencement of this Lease. LESSEE shall be responsible for all repair and
replacement of any unit heater and the office HVAC system which are now upon
commencement of this Lease. LESSOR warrants that at the beginning of this lease,
the heating and AC units for the office area are new, the majority of the unit
heaters located in the low bay space are new, and the remaining unit heaters in
the high bay and low bay warehouse areas have been serviced and are in operating
order, and LESSOR warrants that the electrical and plumbing systems are in
working order. LESSEE shall be responsible for contracting with a reliable
maintenance service to maintain the heating and HVAC systems an a semi-annual
basis. Written maintenance reports will be submitted to LESSOR after each
inspection/repair. LESSEE further agrees to maintain in good repair, reasonable
wear and tear excluded, the interior of the demised area including entrances and
plate glass windows, overhead doors, and dock seals.

LESSEE shall maintain the demised premises, at LESSEE'S expense, in a
clean, orderly and sanitary condition, free of insects, rodents, vermin and
other pests, and shall not permit undue accumulation of garbage, trash, rubbish
and other refuse. LESSEE shall be responsible for all routine maintenance,
including but not limited to, cleaning and/or replacement of heating and
air-conditioning system filters, light bulb replacement, faucet washer repairs,
electrical switch or outlet repairs, etc.

LESSEE shall be prepared for and shall exercise prudence in the
elimination of hazards to its employees and invitees. Said hazards shall
include, but not be limited to, removal and salting of ice in front of common
accessways. removal of water from common floor areas where slippery conditions

<PAGE>
5

can be created, installation of light bulbs in common areaways, and removal of
debris and/or other objects from common areaways.

LESSEE shall insure that all storage and display of merchandise will
permit emergency crews to reach electrical panels, sprinkler risers, and
doorways.

LESSEE shall reimburse LESSOR for LESSEE'S pro rate share of lawn and
shrubbery maintenance charges within fifteen (15) days of receiving an invoice
therefor. LESSEE'S pro rata share shall be defined as the ratio of the LESSEE'S
area as compared to the net rentable building area, LESSEE'S share of such lawn
and shrubbery maintenance charges shall not exceed $.05 per square foot per
year.

It shall be the duty of the LESSEE to keep the sidewalks in front of
LESSEE'S premises, clear of snow and in conformance with local municipal
regulations. It shall be the duty of the LESSEE to keep the driveway, loading,
and parking areas and sidewalks, clear of snow and ice as required by LESSEE.
Fines levied, if any, by the appropriate authorities for failure to conform with
local regulations shall be the responsibility of the LESSEE, and, if not paid
promptly by LESSEE, shall become additional rent hereunder and be paid within
ten (10) days of LESSOR submitting an invoice therefore.

Excepting any damage covered by fire and extended coverage insurance as
required in the section, "Fire Insurance," LESSEE shall make repairs in a
professional and workmanlike manner for all damages to the premises, and to
equipment and installations therein, and to any and all other parts of LESSOR'S
property which are necessitated by any act or lack of due care on the part of
LESSEE, its employees. agents, representatives, or visitors; such repairs are to
be made in a reasonable amount of time following written notice from LESSOR, and
LESSEE shall pay as additional rent the deductible up to $1,000.00 per
occurrence. If LESSEE does not make such repairs in a reasonable amount of time
or in a professional or workmanlike manner, then the cost that will be required
in repairing such damages shall, at LESSOR'S option, be considered as additional
rent, payable together with the next installment of rent hereinabove specified,
the same to be paid after the date on which such damage shall have been occurred
subject to all the provisions of this lease and of the relating law to default
in payment of rent.

LESSEE shall, at all times, conduct its business in such a manner as to
not inconvenience the other tenants of LESSOR. Such inconvenience shall include,
but not be limited to, noise, odor, dust, fumes, etc. that are at a level
greater than those normally associated with mechanized warehouse distribution.

LESSEE shall place chair mats under all desk chairs and work stations.

SURRENDER OF DEMISED PREMISES

LESSEE covenants and agrees to deliver up and surrender to LESSOR
possession of the demised promises upon expiration of this lease, or its earlier
termination as herein provided, broom clean and in as good condition and repair
as the same shall be at the commencement of the term of this lease, or may have
been put by the LESSOR during the continuance thereof, normal wear and tear
excepted. Acceptance by delivery of the demised promises or opening same for
business shall be deemed conclusive evidence that the demised promises were in
good order and condition at the commencement of the term of this lease. Prior to
the end of the term of this Agreement or any

<PAGE>
6

extensions thereof, LESSEE may request a walk-through with agent of LESSOR to
identify any damages requiring repair by LESSEE.

LESSEE shall at LESSEE'S expense remove all property of LESSEE and all
alterations, additions and improvements as to which LESSOR shall have opted to
be removed as provided in the section entitled, "Lessee Alterations," repair all
damage to the demised premises caused by such removal and restore the demised
premises to the condition in which they were prior to the installation of the
articles so removed. Any property not so removed and as to which LESSOR shall
have not opted to be removed as provided in the section entitled,"Lessee
Alterations." shall be deemed to have been abandoned by LESSEE and may be
retained or disposed of by LESSOR, as LESSOR shall desire. LESSEE'S obligation
to observe or perform this covenant shall survive the expiration of the term of
this lease.

UTILITIES

LESSEE shall be responsible, at LESSEE'S expense, for furnishing all
utilities for the demised premises. LESSEE shall have utility meters, where
appropriate, placed in the name of the LESSEE effective with the beginning date
of this lease. Utilities shall include: fuel for heating and/or processing;
electricity; water for sanitary and/or processing; water for sprinkler
operation; sewerage; and municipal refuse removal, if applicable.

Sanitary sewer and water services will be provided by LESSOR and LESSEE
shall reimburse LESSOR for LESSEE'S pro rata share of utilities used by LESSEE
that cannot be placed in LESSEE'S name. Such expenses will be due and payable as
additional rent on or before thirty (30) days after receiving the invoice from
LESSOR. LESSOR shall provide to LESSEE the charges incurred over the past year
with these utilities within 14 days of execution of this Agreement.

LESSEE will be prudent and responsible in its use of utilities not
placed in its name and will be responsible, as additional rent, for any excess
utility expenses caused by LESSEE. However, in no case shall LESSEE be held
responsible for any excess utility expenses incurred by other tenants of LESSOR.

In no event shall LESSOR be liable for the quality, quantity, failure
or interruption of such services to the demised promises unless such
discontinuance of service is caused by the negligence of LESSOR.

LESSEE shall maintain a minimum temperature of 45 Degrees Fahrenheit in
the demised promises.

LESSEE shall be responsible, at LESSEE'S expense, for curing any and
all sewer problems caused by LESSEE'S misuse or carelessness.

LESSEE shall be responsible for recycling all refuse as required by the
municipal authorities and/or regulating bodies in a manner according to their
regulations. Any fines imposed upon the LESSOR due to LESSEE'S negligence in
adhering to the same regulations concerning recycling shall be due and payable
by LESSEE as additional rent and shall be payable within fifteen (15) days of
receipt of an invoice therefor.

<PAGE>
7

LESSEE shall handle all waste, raw materials, work in process and
finished goods in compliance with all Local, State and Federal regulations.

REFUSE REMOVAL

LESSEE shall be responsible, at LESSEE'S expense, for the removal of
all refuse, waste, and debris from the demised promises.

TAXES AND ASSESSMENTS

LESSOR shall be responsible for the payment of all real estate taxes
levied against the property of which the demised promises are a part. LESSOR'S
obligation for tax expenses in each year shall be limited to the amount levied
for Adams County and McSherrystown Borough for the full calendar year 1995 and
the school taxes for the full fiscal year of 1994-1995. LESSEE shall be
responsible, as additional rent, for its pro rata share of increases in real
estate taxes, if any, over those set forth above, which are brought about by
increased assessments or millages. In the event the school district, county
and/or municipality shall replace the real estate taxes levied against the
property of which the demised promises are a part with a tax which is borne by
LESSEE, such as inventory tax, LESSOR shall credit LESSEE against future rentals
any reduction in LESSOR-paid real estate taxes which are subsequently borne by
LESSEE. In no event shall LESSOR have any obligation greater than the base tax
periods established herein. In the event such real estate taxes are replaced in
whole or in part by a value added tax, LESSOR shall have no obligation to
provide such credit unless LESSOR has no burden under such value added tax.

LESSEE shall be responsible for any other taxes that shall result from
LESSEE'S use and occupancy of the premises. However, in no case shall LESSEE be
held responsible for any other taxes or increase in current taxes that shall
result from use and occupancy by other tenants of LESSOR or alterations or
improvements made by LESSOR for or by any other tenant of the premises.

FIRE INSURANCE

LESSOR shall be responsible for insuring the building of which the
demised premises are a part against loss by fire and such other hazards as are
provided for by an extended coverage endorsement to a standard Pennsylvania
insurance policy. LESSOR shall maintain at all times the amount of coverage
required to satisfy the minimum co-insurance requirements of the rating bureau.

LESSEE shall, as additional rent, be responsible, for its pro rata
share of increases in fire and extended coverage insurance premiums brought
about by rising replacement costs or by rate changes established by the
Insurance Services Office of Pennsylvania, over those premiums existing at the
beginning of this lease, and shall reimburse LESSOR within fifteen (15) days of
receipt of an invoice therefor. LESSOR represents that the insurance currently
in force for the premises covers activities such as warehousing and
distribution, provided, however, that such activities do not include volatile,
explosive or hazardous substances in any manner.

LESSEE shall not do or store anything on the promises which will
increase the insurance rates for the building or contents. In the event the cost
of insurance shall be increased by reason of LESSEE'S use or the materials kept
or stored thereon, LESSEE agrees to pay the additional cost of such insurance
within fifteen (15) days of receipt of an invoice and supporting documents
therefor.

<PAGE>
8

However, in no case shall LESSEE be held responsible for any increase in the
cost of insurance by reason of use or the materials kept or stored in the
promises by other tenants of LESSOR.

LESSEE shall be responsible for insuring its contents stored in the
demised premises against -such hazards as it may decide.

LESSOR shall not be responsible for any loss or theft of property of
LESSEE.

LESSEE shall be responsible, at LESSEE'S expense, for furnishing fire
extinguishers, as required, to meet local codes and for fire insurance
underwriting. Such extinguishers shall be properly placed in the demised area as
of the beginning date of this lease and shall be maintained and kept currently
inspected by LESSEE. At the termination of this lease or any renewal thereof,
LESSEE may remove its fire extinguishers. All of LESSEE'S fire extinguishers
shall be labeled with LESSEE'S name.

LESSEE shall comply with any insurance requirements necessary to
maintain insurance, prevent undue increases in insurance costs, and maintain the
promises in a safe condition.

LESSOR'S AND LESSEE'S RELEASE OF RECOVERY RIGHTS

The LESSOR and LESSEE hereby agree to release the other from any claim
for recovery for any loss or damage to any of its property which is insured
under valid and collectible insurance policies to the extent of any recovery
collectible under such insurance. It is further agreed that this waiver shall
apply only when permitted by the applicable policy of insurance.

LIABILITY INSURANCE

LESSEE agrees to indemnify and save harmless the LESSOR from any
casualty claim or lose arising by reason of LESSEE'S use or misuse on or about
the demised premises, of by reason of an accident or damage to any person or
property happening on or about the demised promises arising out of the acts or
omissions of LESSEE, their officers, employees, invitees, agents or visitors.
LESSEE agrees that it will provide a policy or policies of insurance in an
amount not less than One Million Dollars ($1,000,000.00) combined single limit,
bodily injury and property damage liability for each occurrence and aggregate.
LESSOR, ADAMS COUNTY REALTY CO., SHALL BE NAMED AS AN ADDITIONAL INSURED IN ANY
INSURANCE POLICY OR POLICIES OR CERTIFICATES AS EVIDENCE THEREOF. IN THE EVENT
OF A SUBLEASE, THEN LESSOR AND SUBLESSOR SHALL BE NAMED AS AN ADDITIONAL
INSURED. Certificates of insurance shall be provided to LESSOR by LESSEE. Such
certificates shall provide that the insurance may not be canceled without the
LESSOR receiving written notice from LESSEE'S insurance carrier at least ten
(10) days prior to such cancellation.

Certificates of such insurance shall be delivered to LESSOR a minimum
of fifteen (15) days following possession of the demised premises by LESSEE with
renewals thereof delivered to LESSOR a minimum of thirty (30) days prior to the
expiration of any such policies. If requested to do so, LESSEE shall also
provide LESSOR with copies of the pertinent portions of all such policies and
shall also permit LESSOR to examine the original policies. Each policy and
certificate evidencing the same shall contain an agreement by the insurer that
such policy shall not be canceled or modified without ten (10) days' written
notice to LESSOR and that no act or omission of LESSEE shall invalidate the
interest of LESSOR under such insurance without 10 days written notice to
LESSOR.

<PAGE>
9

If LESSEE fails to obtain and maintain any such insurance or to deliver any of
the certificates as required in this Lease, LESSOR may, in addition to any other
remedy under this Lease, procure such insurance at the expense of LESSEE and pay
the cost thereof. Such cost shall be deemed additional rent and shall be payable
by LESSEE to LESSOR immediately upon demand, together with interest until paid.

LESSOR agrees to indemnify and save harmless the LESSEE from any
casualty claim or loss arising by reason of LESSOR'S use or misuse on or about
the demised promises, or by reason of an accident or damage to any person or
property happening on the premises, except such casualty claim, loss, accident
or damage to any person or property happening on the promises which shall arise
out of LESSEE'S agent, employees or servants, licensees or invitees, or any
contract of LESSEE, or by default of LESSEE under this Lease. LESSOR agrees that
it will provide a policy or policies of insurance in an amount not less than One
Million Dollars ($1,000,000.00) combined single limit, bodily injury and
property damage liability for each occurrence and aggregate. LESSEE, THE BOYDS
COLLECTION, LTD, INC.. SHALL BE NAMED AS AN ADDITIONAL INSURED IN ANY INSURANCE
POLICY OR POLICIES OR CERTIFICATES AS EVIDENCE THEREOF provided LESSOR'S
insurance carrier permits LESSEE to be named as an additional insured.

DESTRUCTION

(1) In the event of:

(a) a partial destruction of the premises or the building
containing same during the term, which requires repairs to either the premises
or the building, or

(b) the promises or the building being declared unsafe or
unfit for occupancy by an authorized public authority for any reason other
than LESSEE'S act, use, or occupation, which declaration requires repairs to
either the promises or the building;

LESSOR shall, within ten (10) days following the date of destruction,
make a decision whether the repairs can be reasonably made under the laws and
regulations of authorized public authorities within a period of sixty (60) days,
and if such repairs can be made within said sixty (60) day period, and notify
LESSEE that LESSOR will make such repairs and forthwith make such repairs. Such
partial destruction, including any destruction necessary in order to make
repairs required by any such declaration. shall in no way annul or void this
lease except that LESSEE shall be entitled to a proportionate reduction to be
based upon the extent to which the making of such repair shall interfere with
the business carried on by LESSEE in said promises.

(2) It such repairs cannot be made within sixty (60) days, and
providing such destruction or repairs will not materially affect LESSEE'S
conduct of business, LESSOR may, at LESSOR'S option. make same within a
reasonable time, this lease continuing in full force and offered and the rent
proportionately abated as in this paragraph provided.

(3) In the event that the LESSOR elects not to make such repairs
which require more than sixty (60) days to complete, or such repairs cannot
be made under existing laws and regulations, LESSOR shall so notify LESSEE
within ten (10) days following the destruction and this lease may be
terminated at the option of either party.

<PAGE>
10

(4) If such repairs cannot be completed within one hundred twenty
(120) days from the date of such partial destruction or declaration, or if
LESSOR elects to make such repairs and is unable to complete same within one
hundred twenty (120) days, as aforesaid, the LESSEE may terminate this lease
upon thirty (30) days written notice to the LESSOR of such election.

(5) The total destruction, including any destruction required by any
public authority, of either the promises or the building shall terminate this
lease automatically.

ASSIGNMENT

LESSEE will not assign this lease nor underlet nor in any manner
dispose of the promises or any part thereof without the written consent of the
LESSOR; such consent not to be unreasonably withheld nor delayed more than 45
days following receipt of necessary information by LESSOR.

Any assignment or subletting shall terminate and void the LESSEE'S
rights or any other parties' right to exercise the terms and conditions of the
Option to Renew and the Option to Lease Additional Space. Additionally, any
assignment or subletting shall not eliminate or reduce LESSEE'S obligations,
regardless of type, under this Agreement.

BANKRUPTCY

If LESSEE shall become insolvent, or be declared bankrupt, or shall
make an assignment for the benefit of creditors, or have an execution issued
against LESSEE, the whole of the rent for the then entire term shall immediately
become due and payable.

SIGNS

LESSEE shall have the right to maintain appropriate advertising signs
on or appurtenant to the promises, or, where provided by the LESSOR, in the
areas designated by the LESSOR; however, no signs shall be painted an the
building itself. It shall be the responsibility of the LESSEE to secure approval
for its signs from the appropriate municipal authorities. LESSOR shall retain
the right to approve any sign or signs of LESSEE including the method of
attachment to the building, such approval not to be unreasonably withheld or
delayed.

LESSEE ALTERATIONS

LESSEE will not, without the prior written consent of the LESSOR such
consent not to be unreasonably withheld or delayed, make any alteration,
addition, or change in or to the premises, nor in any way deface or mutilate the
walls, floors, coiling, or other parts thereof, nor do or keep anything on the
promises which will affect the insurance against fire or other hazards or the
rate thereof, or which shall violate any law or government regulation, nor will
LESSEE permit or suffer anything to be done which is prohibited in this
paragraph. LESSOR understands that LESSEE will be installing and operating a
mechanized pick system in the demised promises, and grants permission in
principal for that installation subject to final approval by LESSOR following
submission of drawings to LESSOR by LESSEE prior to LESSEE installation of
system, such approval not to be unreasonably withheld or delayed.

All alterations and additions made by the LESSEE to LESSOR'S building,
including electrical, plumbing, HVAC, structural changes, offices, etc., shall
remain and become the property

<PAGE>
11

of the LESSOR. LESSOR, at LESSOR'S option, may require LESSEE, at LESSEE'S
expense, to restore the premises to the condition existing at the beginning of
this lease, normal wear and tear excepted. Unless otherwise approved in writing
by the parties hereto, there shall be no exceptions to this lease provision. All
alterations and additions made by the LESSEE to LESSOR'S building shall be done
in a professional and workmanlike manner.

In the event LESSOR consents to alterations by LESSEE, LESSEE shall
secure and properly 1119 a stipulation against liens from any and all
contractors hired by LESSEE in order that LESSOR'S property shall not be subject
to any lien arising out of LESSEE'S alterations and/or additions to the demised
promises. LESSEE shall not permit any mechanic's or other lien or claim for lien
or notice in respect thereto to be filed against the demised promises or any
fixtures, equipment or furnishing contained therein. If any such lien or claim
be made or flied, LESSEE shall, within ten (10) days after notice of the filing
thereof, cause such said lien, notice or claim for lien to be effectively
removed and discharged of record; provided, however, that LESSEE shall have the
right to contest the amount or validity, in whole or in part, of any such lien,
notice or claim by appropriate proceedings. But, in any event, LESSOR shall
promptly bond such lien, notice or claim with a surety company satisfactory to
LESSOR and shall prosecute such proceedings with all due diligence and dispatch.
If LESSEE fails to so discharge or bond such lien, LESSOR may, at its election,
remove or discharge such lien, notice or claim by paying the full amount
thereof, or otherwise, and without any investigation or contest of validity
thereof, and LESSEE shall pay to LESSOR, upon demand, as additional rent, the
amount paid by the LESSOR, including LESSOR'S costs, expenses and counsel fees.

LESSOR ALTERATIONS

LESSOR shall make alterations as described on Exhibit "B."

LESSOR INSPECTION

LESSOR shall have the right to enter the promises during the normal
business hours of the LESSEE for the purpose of inspecting the promises and for
the purpose of making repairs required therein. LESSOR shall have the right to
enter the premises at any time, by master key or by force, if necessary, for
purposes of preventing damage, making of emergency repairs, for the purpose of
distraint, and to enforce any provisions of this lease.

LESSOR or LESSOR'S agent shall have the right to show the demised
promises to prospective tenants at any time during the three month period prior
to the lease termination. LESSOR or LESSOR'S agent may show the demised promises
to prospective purchasers at any time. LESSOR or LESSOR'S agent will provide a
minimum of 24 hours notice, by voice or in writing, to LESSEE of any intent to
show the demised promises and will attempt to do so during normal business
hours.

CONDEMNATION

If, during the term of this lease, the whole or any part of the demised
premises shall be taken under the power of Eminent Domain by any public,
quasi-public, or private authority, then in such event, the proceeds of said
condemnation shall be paid to LESSOR.

A. In the event the taking of the demised premises shall result in a
reduction in the size of the building and/or parking areas such that the
remaining areas are not reasonably suited for the conduct

<PAGE>
12

of LESSEE'S business, then LESSEE may terminate this lease, at LESSEE'S
election, by giving LESSOR sixty (60) days notice of its election to terminate.

B. In the event the taking of the demised premises shall result in a
reduction in the size of the building and LESSOR shall determine that the cost
of restoration of the building is not reasonable and within the damages awarded
by the condemning authority, then in such event, LESSOR may elect to terminate
this lease by giving LESSEE sixty (60) days notice of its election to terminate.

C. In the event the taking of the demised premises shall result in a
reduction in the size of the building, and such reduction does not unreasonably
affect LESSEE'S business operation, then in such event, this Lease shall
continue in full force and effect except that the rental shall be reduced
proportionately based on the reduction of the demised area.

D. At such time as a notice of intent to condemn is received by LESSOR,
LESSOR will immediately notify LESSEE of said action, and LESSEE may elect to
participate in the negotiation for the purpose of limiting the damages from such
condemnation and securing any claims which LESSEE may have for damages to its
business or leasehold interest, damages to the real estate excepted.

ADDITIONAL REMEDIES OF LESSOR

In addition to all other remedies of the LESSOR, in the event of
default by LESSEE, as hereinbefore provided, the following remedies shall, at
the option of the LESSOR, be available:

A. If said rent or part thereof shall remain in arrears and unpaid
for a period of five (5) days following written notice from LESSOR or
LESSOR'S agent, LESSOR may at its option re-enter and resume possession of
the premises and declare this lease and the tenancy hereby created
terminated, and LESSOR may thereupon remove all persons and property from the
premises, with or without resort to process of any court, by force or
otherwise. If proceedings shall be commenced by LESSOR to recover possession,
either at the end of the term or sooner termination of this lease for
non-payment of rent, LESSEE specifically waives any right to any statutory
notice and agrees that five (5) days written notice shall be sufficient.
LESSEE further agrees that notwithstanding such termination, it shall remain
liable for any rent due to LESSOR or damages caused to LESSOR prior thereto.

B. It is understood that as often as default shall be made in the
payment of any installment of rent when due, the LESSOR may proceed by
Landlord's warrant at any time after said default, to make collection of all
rent then due, with costs of such proceedings. LESSEE hereby waives the benefit
of all laws or usages exempting any property from liability for rent, and the
LESSOR shall not waive any remedies given by existing laws. LESSEE hereby
authorizes any attorney, of any court of record, as often as default shall be
made in the payment of said rental, as provided under this lease agreement, to
appear for LESSEE and confess judgment against LESSEE for the amount then due
and unpaid, with attorney's commission of ten (10%) percent together with costs
of suit, without stay of execution, waiving inquisition and exemption.
Notwithstanding any provision in the printed portion of this lease to the
contrary, the removal from the demised premises by the LESSEE of any stored
products in the ordinary course of its business shall not be deemed a
clandestine or fraudulent removal.

<PAGE>
13

C. In the event LESSEE fails to pay any installment of rent when
due, or to keep all covenants of this lease, or remove from the premises at
the termination of this lease, then LESSEE hereby authorizes and empowers any
attorney, or any Court of Record of Pennsylvania or elsewhere, to appear in
said Court and confess judgment in an amicable action of ejectment for the
premises above described, and LESSEE authorizes the immediate issuance of a
Writ of Possession for the premises.

D. In addition to any other remedies available to LESSOR, it is further
agreed that if an event of default has occurred or if the said specified rent or
other charges shall be in arrears and unpaid, or if the LESSEE shall remove or
attempt to remove or express or declare an intention to remove any of the goods
and chattels from the premisses without the consent or authorization of the
LESSOR, or if said LESSEE or those claiming under LESSEE shall fail to keep or
comply with any other of the covenants, regulations, terms and conditions of
this Lease, or any renewal or extension thereof, or with any notice given under
the terms hereof, this Lease may, at the option of the LESSOR, be forthwith
terminated and become absolutely void without any right on the part of the
LESSEE, or those claiming under the LESSEE, to reinstate the same by payment or
other performance of the condition or conditions violated. Furthermore, at the
option of the LESSOR, all rent for the entire unexpired term shall at once
become due and payable and any attorney may for the LESSEE or for those claiming
under the LESSEE, sign an agreement for entering in any competent court a
confession of judgment in ejectment of any term then past or present (without
any stay of execution) against the LESSEE and all persons claiming under the
LESSEE for the recovery by the LESSOR of possession of the within premises,
attorney's fee of ten (10%) percent, and costs without any liability on the part
of LESSOR or of the said attorney, for which this shall be a sufficient warrant,
and in like manner such attorney may file in any competent court a confession of
judgment in Assumpsit, for all rent and other charges due, or which may at any
time become due under the terms of this Lease or any extension or renewal
thereof, and so on from time to time as often as any of said rent or other
charges as aforesaid shall follow or become due or be in arrears, without any
liability on the part of the said LESSOR or said attorney, for which this is a
sufficient warrant, and upon the confession of such judgment or judgments
respectively, if LESSOR so desires, a Writ of Possession may issue forthwith,
without any prior writ or proceeding whatsoever, and a Writ of Execution on said
judgment for rent and other charges may issue forthwith, and so on from time to
time as often as any breach of the terms and conditions of this Lease shall
occur, and LESSEE does hereby release LESSOR for Itself and those claiming under
it of all errors and defects whatsoever in entering such actions or judgments or
proceedings thereon. No such termination of this Lease or taking or recovering
possession of the premises shall deprive LESSOR of any other remedy or action
against LESSEE or those claiming under LESSEE. It is further provided that the
LESSOR shall have the right In any subsequent default or defaults to bring one
or more amicable actions in the manner and form as hereinbefore set forth, and
that any previous confession of judgment shall not exhaust the same nor deprive
the LESSOR of entering Judgment upon any future default.

E. Except in the case of default in rental payments as set forth above,
LESSOR agrees that in the event of default, LESSEE shall be afforded a period of
thirty (30) days after written notice by Certified Mail of such default, to cure
same, before such default shall become actionable under any provision of this
lease.

INTEREST

Wherever in this lease there is a provision that LESSEE shall be liable
for the payment of any sum to LESSOR or LESSOR shall be liable for the same to
LESSEE, together with interest thereon,

<PAGE>
14

or whenever LESSEE or LESSOR shall fail to pay any sum when due, such sum shall
bear interest until paid at a rate equal to the greater of:

(1) The prime rate of interest charged by the York Bank & Trust Company
of York, Pennsylvania, or Its successors, plus two (2%) percent; or

(2) Six (6%) percent per annum; but, in no event shall the rate be
greater than the legal rate of Interest which may be charged to borrowers of the
same character as LESSEE or LESSOR.

NOTICES

Any notice provided for herein shall be given by registered or
certified mail, addressed:

If to the LESSEE as follows:

LESSEE: THE BOYDS COLLECTION LTD., INC.
P.O. Box 4385
Gettysburg, PA 17325

ALSO TO: H.G. ROTZ ASSOCIATES, INC.
11 East Market Street
York, PA 17401

If to the LESSOR as follows:

LESSOR: ADAMS COUNTY REALTY CO.
6343 Red Cedar Place
Baltimore, MD 21209

BROKER: H.G. ROTZ ASSOCIATES, INC.
11 East Market Street
York, PA 17401

HOLDING OVER

Any holding over after notice of termination of this Lease shall, at
LESSOR'S option upon notice to LESSEE, be construed to be a tenancy either from
month-to-month at the rent and other payments herein specified and shall
otherwise be subject to the conditions, covenants and agreements of this Lease.
If LESSEE shall hold over after the termination of this Lease for any reason
whatsoever, and LESSOR has notified LESSEE in writing that such holding over
shall not be permitted, LESSEE shall pay as liquidated damages and not as a
penalty an amount equal to twice the monthly rent in effect for the last month
of LESSEE'S lawful occupancy prorated for the period during which such holding
over continues. Nevertheless, the acceptance of such amount by LESSOR shall be
without prejudice to any other rights or remedies of LESSOR at law or in equity
or under this Lease.

NON WAIVER

<PAGE>
15

The failure of either LESSOR or LESSEE to insist in any one or more
instances upon a strict performance of any covenant of this lease, or to
exercise any right herein contained, shall not be construed as a waiver for the
future of such covenant or right, but the same shall continue in full force and
effect, unless the contrary is expressed in writing by one party to the other
party.

In every instance where approval is required by LESSOR or LESSEE, such
approval shall not be unreasonably withheld and a response shall be promptly
given.

PRO-RATA SHARE

Wherever pro-rata share is mentioned in this lease, pro-rata share
shall be defined as the ratio of the LESSEES' demised area as compared to the
total net rentable area of the building of which the demised area is a part.
Subject to increase under LESSEE'S "Option to Lease Additional Space," LESSEE's
pro-rata share of the building of which the demised premises is a part is 33%.

QUIET ENJOYMENT

LESSOR covenants that LESSEE, on paying said rental and performing
covenants and conditions in this lease contained, shall and may peaceably and
quietly have, hold and enjoy the demised premises for the entire term hereof,
including any renewal term, subject to all the provisions of this lease.

ATTORNMENT

So long as LESSEE has quiet enjoyment of the premises, LESSEE, for
itself and its successors and assigns, agrees to attorn to any person who shall
acquire title to the property by virtue of a foreclosure of the Deed of Trust or
deed given in lieu of such foreclosure, or otherwise, and the LESSEE further
agrees to execute and deliver, upon request, an appropriate agreement
memorializing the attornment.

SUBORDINATION

This lease, at LESSOR'S option, will be subordinate to any form of
security now or later placed on the property and to all advances made on the
security and Io all renewals, modifications, consolidations, replacements, and
extensions. If any mortgagee, trustee, or ground LESSOR elects to have this
lease be prior to the lien of its security, and gives written notice to LESSEE,
this lease will be deemed prior to said security, whether dated before or after
the date of the recording date of the security. LESSEE agrees to execute any
required documents, and LESSEE irrevocably appoints LESSOR as LESSEE'S
attorney-in-fact to do so if LESSEE fails to do so within ten (10) days after
written demand.

NONDISTURBANCE

So long as LESSEE is not in default in the payment of any rent or in
the performance of any of the terms, covenants or conditions of this Lease,
LESSEE'S rights to quiet enjoyment shall not be terminated or interfered with by
LESSOR or anyone claiming by, through or under LESSOR, whether by mortgage or
otherwise.

DESCRIPTIVE HEADINGS

<PAGE>
16

The descriptive headings in this agreement are inserted for convenience
in reference only and do not constitute a part of this agreement.

BROKER

LESSOR and LESSEE certify that H.G. Rotz Associates, Inc. is the broker
for this lease. LESSOR shall pay to H.G. Rotz Associates, Inc. a commission of
6% of the rent on the original term of the Lease and any renewals for any and
all modifications or extensions of this lease and for a sales commission of 6%
in the event the property is purchased by LESSEE, its parent or affiliated
companies, successors or assigns. LESSOR hereby indemnifies LESSEE from any
obligation to pay or claim of nonpayment of said commissions throughout the term
of this Lease and any extensions or renewals thereof.

It is the intention of the parties hereto to be legally bound hereby
and this lease shall be binding upon the said parties hereto, their respective
heirs, executors, administrators, successors, and/or assigns.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.

LESSOR: ADAMS COUNTY REALTY CO.

- ------------------------------- ------------------------------------------
Witness Allan Pearlstein, Partner

LESSEE: THE BOYDS COLLECTION LTD., INC.

- ------------------------------- ------------------------------------------
Attest Gary M. Lowenthal, President

- ------------------------------- ------------------------------------------
Attest Secretary of the Corporation, if required.

LESSEE: Employer Tax Identification Number: ________________________
<PAGE>
17

ADDENDUM NO. 1

TO THE

LEASE AGREEMENT

BETWEEN

ADAMS COUNTY REALTY COMPANY, LESSOR

AND

THE BOYD'S COLLECTION LTD., INC. LESSEE

DATED MARCH 1, 1995

WE, THE UNDERSIGNED, hereby agree to amend the above referenced Lease
Agreement as follows:

1. The Leased area shall be increased approximately 27,153 square feet
as shown on the attached Exhibit A which is made part of this Agreement.

2. The monthly rental for the entire area shall increase from
$13,210.85 to $17,736.00 beginning May 1, 1996.

3. LESSEE shall lease an additional area of 29,994 square feet as shown
on Exhibit A from July 1, 1996 through December 31, 1996 for an additional rent
of $4,999.00 per month.

LESSEE shall have the option to lease this space at the same rental
beginning January 1, 1997 and ending April 30, 1998 by giving written notice to
LESSOR on or before December 31, 1996.

4. In the event LESSEE should exercise their Option to Renew this Lease
Agreement, the option shall apply to all space that is leased as of the time the
option is exercised. The rental for the additional area shall be calculated by
increasing the monthly rental as of the date of exercising the option by 12.73%.
All other terms and conditions of the lease shall remain unchanged.

5. The option to lease additional space under the original lease as
specified in the section titled OPTION TO LEASE ADDITIONAL SPACE is hereby
terminated.

6. LESSEE'S pro rata share of the building is hereby changed from
33% to 52.53%. The share for the additional space is 18.57%.

7. LESSEE agrees to cooperate with LESSOR in the relocation of
Merchandising Innovations.

8. LESSOR agrees to place the current gas fired unit heaters in good
operating condition. LESSOR shall be responsible for any alterations required to
the electrical meters.

9. LESSEE agrees to make any and all additional improvements to the
space as required. LESSOR grants LESSEE the right to move existing lighting as
LESSEE requires.

10. All other terms of the original lease remain in full force and
effect and apply to the additional leased areas except as amended herein.

<PAGE>
18

11. If the terms and conditions of this Addendum conflict with any
of the terms and conditions of the original lease, this Addendum shall govern.

IN WITNESS WHEREOF, we hereunto set our hands and seals as of the dates
below.

- ------------------------ ---------------------------- -------------------
WITNESS ADAMS COUNTY REALTY, DATE
LESSOR

- ------------------------ ---------------------------- -------------------
ATTEST THE BOYD'S COLLECTION DATE
LTD., INC., LESSEE

<PAGE>
19

ADDENDUM NO. 2

TO THE LEASE AGREEMENT

BETWEEN

ADAMS COUNTY REALTY CO., LESSOR

AND

BOYD'S COLLECTION, LTD., INC., LESSEE

DATED MARCH 1, 1995

WE, THE UNDERSIGNED, hereby agree to amend the above referenced lease
agreement as follows:

1. The term of this lease shall be extended for an additional three
(3) years beginning the first day of May, 1998. The current
monthly rental being $22,735.00 shall remain unchanged. The
leased area shall remain unchanged.

2. Provided LESSEE is not in default of this lease agreement,
LESSEE shall have the option to lease the remaining space in the
building for a monthly rental of $8717.00, by giving LESSOR 90
days written notice. Occupancy and rental for this additional
area shall be effective upon Merchandising Innovations or any
other tenant then occupying the area vacating this space.
LESSEE'S pro rata share of the building upon occupancy of the
option area shall be 100%. All other terms and conditions of the
lease shall apply to this additional area.

3. LESSEE agrees to make any and all additional improvements to the
space as required. LESSOR grants LESSEE the right to move
existing lighting as LESSEE requires. LESSOR grants LESSEE the
right to install approximately 4,000 to 6,000 square feet of
additional office space directly behind existing office area.
All work shall be done in a professional and workmanship type
manner. LESSEE shall not permit any mechanics' liens to be
attached to this property.

4. If any terms and conditions of this Addendum conflict with any
other terms and conditions of the original lease this Addendum
shall govern.

5. All other terms and conditions not modified herein remain in
full force and effect.

IN WITNESS WHEREOF, we herein set our hands and seals with 8th day of
October, 1997.

- ------------------------ ---------------------------- -------------------
WITNESS ADAMS CO. REALTY COMPANY, DATE
LESSOR

<PAGE>
20

- ------------------------ ---------------------------- -------------------
ATTEST BOYD'S COLLECTION LTD., INC. DATE

<PAGE>
21

ADDENDUM NO. 3
TO THE LEASE AGREEMENT
BY AND BETWEEN

ADAMS COUNTY REALTY, COMPANY, LESSOR

AND

BOYD'S COLLECTION, LTD., INC. LESSEE

DATED MARCH 1, 1995

We the undersigned, hereby agree to amend the lease dated March 1, 1995
between the above mentioned parties as follows:

1. The term of this lease shall be extended for an additional 10 years
beginning January 1, 1999 and ending December 31, 2009.

2. LESSOR shall reserve the right to increase the rent beginning
January 1, 2004, by giving written notice to LESSEE on or before July 1, 2003
of LESSOR'S intent to increase the monthly rent. The monthly rental of
$31,452.00 shall increase in proportion to the change in the Consumer Price
Index (U.S. All items). Upon LESSOR giving written notice to LESSEE, LESSEE
shall have until August 1, 2003 to accept the increase or give written notice
to LESSOR of LESSEE'S intent to terminate the lease as of December 31, 2003.
In event the LESSEE does not respond in writing on or before August 1, 2003
then the rental increase shall automatically become effective January 1,
2004. In the event LESSEE gives notice of LESSEE'S intent to terminate the
lease, LESSOR shall have until September 1, 2003 in which to withdraw
LESSOR'S notice to increase the monthly rental. In the event LESSOR does not
give written notice to LESSEE of LESSOR'S withdraw of the notice to increase
the monthly rental the lease shall terminate December 31, 2003.

3. LESSEE shall reimburse LESSOR for all real estate taxes effective
January 1, 1999 within fifteen (15) days of receiving an invoice from LESSOR or
at LESSOR'S option LESSEE shall pay the taxes when due at the flat rate due date
and provide LESSOR with copies of the paid tax invoices.

4. LESSEE at LESSEE'S expense shall build approximately 50,000 square
feet of warehouse space and shall complete such building on or before December
31, 1999. Lessor approves the attached building specifications and site plans as
shown on Exhibit "A".

5. LESSEE shall lease the entire site owned by LESSOR located at the
corner of South Street and 4th Street, McSherrystown, PA effective upon all
parties signing this addendum.

6. Providing the LESSEE in not in default of this lease agreement,
LESSEE shall have the option to renew this lease for an additional five (5) year
term, beginning January 1, 2010 through December 31, 2014 by giving written
notice to LESSOR on or before January 1, 2009 of such intent to renew. Rental
for the renewal term shall be negotiated at the time of renewal as follows:

A. LESSOR shall, within Thirty (30) days following receipt of
LESSEE'S notice to renew, provide LESSEE, in writing, with the proposed rental
for the renewal period.

<PAGE>
22

B. LESSEE shall have Thirty (30) days following receipt of
LESSOR'S rental proposal to accept the proposed rent or negotiate a rental rate
with the LESSOR which is acceptable to the LESSEE.

C. In the event the parties fail to agree to a rental rate for
the renewal term on or before May 1, 2009, this lease shall terminate absolutely
on December 31, 2009.

7. In the event the Consumer Price Index no longer exists, LESSOR at
LESSOR'S choice may substitute a similar statistic.

All other terms and conditions of the basic lease not modified hereby
or in any other addendum shall remain unchanged and in full force and effect
throughout the extended term of this lease. If any terms of this addendum
conflict with any other terms of the lease agreement, this addendum shall
govern.

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
this 30 Day of December, 1998.

- ------------------------------ -------------------------------------
WITNESS ADAMS COUNTY REALTY CO., LESSOR

- ------------------------------ -------------------------------------
WITNESS BOYD'S COLLECTION LTD., INC., LESSEE

<PAGE>
23

RIDER TO ADDENDUM
NO. 3 TO BOYDS' LEASE AGREEMENT

Notwithstanding any other provisions of the Agreement of Lease dated
March 1, 1995 between Adams County Realty Co., as Lessor, and, The Boyds
Collection, Ltd., as Lessee, or any amendment thereto, the following provisions
shall apply:

1. The premises demised under the Lease shall be all of the land described
on Exhibit A attached hereto, together with the buildings, structures and
improvements now or hereafter located thereon.

A. Lessor acknowledges that activities conducted at demised premises
prior to commencement of Lessee's occupancy thereof my have
involved the use or generation of hazardous waste or regulated
materials as defined in the lease dated March 1, 1995, Lessor
will at all times protect, indemnify and same and keep harmless
the Lessee against and from all claims, loss, costs, damages or
expense arising out of or from the presence or alleged presence
of any hazardous waste or regulated materials present at,
emanating from, or generated at or transported from, the demised
premises prior to March 1, 1995, or structures in which such
hazardous waste or regulated materials are or were contained.

B. Lessor acknowledges and agrees that Lessee may, in connection
with building the warehouse space referred to in paragraph 5 of
Addendum No. 3, at Lessee's own cost and expense, conduct tests
to identify the possible presence of hazardous waste or regulated
materials at any of the demised premises that in any way may be
affected by such building. If such testing identifies the
presence of hazardous waste or regulated materials ("Site
Contamination"), Lessor agrees that it shall be responsible for
the further investigation and remediation of the Site
Contamination in compliance with all applicable legal obligations
and as required by all regulatory authorities with jurisdiction
over the matter, except in any case to the extent such Site
Contamination results from hazardous waste or regulated materials
not present at the demised premises until after March 1, 1995 and
not caused by Lessor. If within thirty (30) days of Lessee's
notifying Lessor of Site Contamination, Lessor has not given
Lessee reasonable assurances that the Site Contamination will be
investigated and remediated as provided in the previous sentence
in a manner that will permit the warehouse space to be built and
completed as planned by June 30, 1999, Lessee may terminate this
lease extension immediately upon written notice to Lessor.

C. Lessor acknowledges and agrees that hazardous waste or regulated
material may be present at the demised premises in quantities and
concentrations consistent with ordinary maintenance of the
demised premises and with building the warehouse space. With
respect to such hazardous waste or regulated materials, Lessee
affirms its obligations as set forth in the "Occupancy" section
of the Lease.

2. If Lessee requests Lessor's consent to make any alterations under the
Lease, Lessor shall respond to such request within five (5) business
days, and Lessor's failure to so respond within such five (5) day period
shall be deemed to be approval of the requested matter.

3. Lessee shall be permitted to remove any alterations that are particular
to its business and of which Lessee notified Lessor at the time it
installed such Installation, that such Installation would be removed by
Lessee at the and of the lease term.

4. The 60-day and 120-day periods referred to in the paragraph of the Lease
entitled "DESTRUCTION" shall all be deemed to be 180 days.

<PAGE>
24

5. If the whole or any part of the demised premises are acquired or
condemned by eminent domain for any public or quasi public purpose, then
Lessee shall have the right to assert a claim for and receive the portion
of any payment for such taking attributable to Lessee's personal
property, fixtures, installations or improvements in or on the demised
premises, Lessee's relocation expenses and the value of the unexpired
term of this lease.

6. The parties also agree that if Lessor fails to perform any repair or any
other affirmative obligation required by it under the lease, Lessee shall
have the right to perform such obligation on behalf of Lessor, provided
Lessee takes the following actions: (i) notifies Lessor of its
performance obligation in writing, (ii) lessor fails to perform such
obligation within a commercially reasonable time, (iii) Lessee sends a
second notice apprizing Lessor that if Lessor fails to perform its
obligations within 15 days, Lessee will perform the obligation. If Lessor
does not commence such obligation within such 15 days period and
diligently complete perform such obligation. Any such amounts actually
and reasonably spent by Lessee, as certified by a competent court or
arbitrator as being properly spent by Lessee, may thereafter be used by
Lessee as a credit against future rent obligations of Lessee.

7. A. Real estate taxes that Lessee is responsible for shall not
include penalties or interest incurred by Lessor, income taxes,
use taxes, taxes on rentals, transfer or recording taxes,
inheritance taxes, estate taxes, concession taxes, capital stock,
franchise taxes, excise taxes, or sales taxes. If due to a future
change in the method of taxation, any franchise, income profit or
other tax, assessment, levy or governmental charge of any kind or
nature whatsoever, however designated, is substituted for or
replacing, in full or in part, real estate taxes such tax shall
be considered a real estate tax for purposes of this lease.
Additionally, if Lessor sells the demised premises, Lessee shall
not be responsible for any portion of a real estate tax increase
based on such sale.

B. If Lessor does not seek to contest the real estate taxes assessed
against the Building for any tax year during the term of this
lease, Lessor grants the right to Lessee to protest those taxes
in the name of and on behalf of Lessor.

8. If fifty percent or more of the stock of Lessee or substantially all of
the assets of Lessee are transferred pursuant to a merger or acquisition
of Lessee with another company or corporation, or if the Lessee assigns
this Lease to an affiliate of Lessee, said merger, acquisition or
assignment will not require the prior consent of Lessor hereunder. Lessee
shall have the right at any time and from time to time, without Lessor's
consent, to mortgage or otherwise encumber Lessee's interest in any or
all improvements appertaining thereto pursuant to one or more Leasehold
mortgages or deeds of trust ("Leasehold Mortgages"), provided that the
leasehold Mortgage is a bank, savings bank, insurance company, real
estate investment trust, mortgage investment trust, mortgage banking
company, investment banking company, trust company, any other
institutional-type lender.

9. If Lessee should desire to contest the validity of any legal requirement
or insurance requirement which Lessee by the provisions hereof is
obligated to comply with then, provided that so long as any contest does
not adversely affect the building and does not subject Landlord to the
possibility of civil liability, including the filing of any liens against
the building, or criminal protection, Lessee, at its expense, any carry
on such contest and non-compliance by it during such contest shall not be
deemed a breach of any covenant to comply with laws or insurance
requirements, provided that it shall indemnify and hold Landlord harmless
against the cost thereof and against all liability for any damages,
interest, penalties and expenses (including reasonable attorney's fees)
resulting from or incurred in connection with such contest or
noncompliance.

<PAGE>
25

- ------------------------------- -------------------------------------
Witness Adams County Realty Co., Lessor

- ------------------------------- -------------------------------------
Witness The Boyds Collection Ltd., Lessee