================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------


                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                    For the Fiscal Year Ended March 31, 2001
                         Commission File Number 0-28822
                           --------------------------

                                 ROCKSHOX, INC.

             (Exact name of registrant as specified in its charter)

           DELAWARE           1610  Garden  of the Gods Road          77-0396555
(State or other jurisdiction   Colorado Springs, CO 80907       (I.R.S. Employer
of incorporation or organization)    (719) 278-7469       Identification Number)

          (Address of principal executive offices, including zip code
                   and telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

         TITLE  OF  EACH  CLASS              EACH  EXCHANGE  ON WHICH REGISTERED
   Common Stock, par value $.01 per share          OTC Bulletin Board

      Securities  registered  pursuant  to  Section  12(g) of the Act:  None

      Indicate  by  check mark whether the registrant: (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was  required to file such reports) and (2) has been subject to such
filing  requirements  for  the  past  90  days.  Yes  [X]  No  [ ]

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [X]

      As  of  June 25, 2001, the aggregate market value of the voting stock held
by  non-affiliates  of  the  Registrant  was  $2,671,376.

      As  of  June  25,  2001,  the  Registrant  had 13,761,147 shares of Common
Stock  outstanding.


<PAGE>
DOCUMENTS  INCORPORATED  BY  REFERENCE:

  Portions  of  the  ROCKSHOX,  INC.  Proxy Statement to be mailed in connection
with  the  Registrant's 2001 Annual Meeting of Stockholders to be held on August
21,  2001,  are  incorporated  by  reference  in  Part  III  hereof.
==============================================================================


                                        2
<PAGE>
                                TABLE OF CONTENTS


ITEM  DESCRIPTION
----  -----------

                                     PART I


1     Business

2     Properties

3     Legal  Proceedings

4     Submission  of  Matters  to  a  Vote  of  Security  Holders


                                    PART II

5     Market  for  Registrant's  Common  Equity  and Related Stockholder Matters

6     Selected  Financial  Data

7     Management's  Discussion  and  Analysis of Financial Condition and Results
      of  Operations

7A    Quantitative  and  Qualitative  Disclosures  About  Market  Risk

8     Financial  Statements  and  Supplementary  Data

9     Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
      Financial  Disclosure


                                    PART III

10    Directors  and  Executive  Officers  of  the  Registrant

11    Executive  Compensation

12    Security  Ownership  of  Certain  Beneficial  Owners  and  Management

13    Certain  Relationships  and  Related  Transactions


                                    PART IV

14     Exhibits,  Financial  Statement  Schedules  and  Reports  on  Form  8-K


                                        3
<PAGE>
     Unless  the  context  indicates otherwise, when we refer to "we," "us," the
"Company" or "RockShox," in this Annual Report on Form 10-K, we are referring to
ROCKSHOX,  INC.,  its predecessors and their respective parents and subsidiaries
on  a consolidated basis. Unless the context indicates otherwise, all references
to  a  fiscal  year  are  to  our  fiscal  year. This Annual Report on Form 10-K
includes  references  to  our  registered trademarks and brand names, including:
ROCKSHOX,  JUDY,  JETT,  SID,  PSYLO,  DELUXE  and  DUKE.


                                    PART  I

ITEM  1.   BUSINESS  -

GENERAL

     We  are a worldwide leader in the design, manufacture and marketing of high
performance  bicycle suspension products. Our suspension products enhance riding
performance  and  comfort  by  mitigating  the  impact  of  rough terrain and by
providing  better  wheel  contact  with  the  riding surface. The Company, which
currently  manufactures  front  suspension  forks,  rear  shocks  and suspension
seatposts  for  mountain  bikes,  has  combined  technical  innovation with high
quality  products  and  creative  marketing  to establish one of the most widely
recognized  brand  names  in  the  bicycle  industry.

     For  the  2001  model  year,  we  offered seventeen front suspension forks,
including  four  new  models,  four  rear shocks, and two suspension seat posts.

     Approximately  77%  of  our  net  sales in fiscal 2001 represented sales to
original  equipment manufacturers ("OEMs"), such as Trek Bicycle Corp. ("Trek"),
Giant  Manufacturing Company, Ltd. ("Giant") and Specialized Bicycle Components,
Inc.("Specialized"),  which  incorporate  ROCKSHOX branded components as part of
new,  fully-assembled  mountain bikes sold worldwide. Our products are also sold
as  an  accessory  component  to  consumers  through  a  network  of over 10,000
independent  bicycle  dealers  ("IBDs")  worldwide.

     Our  principal executive office is located at 1610 Garden of the Gods Road,
Colorado  Springs,  Colorado  80907;  our  telephone  number  is (719) 278-7469.

     In  March  2000,  RockShox,  Inc.  announced  that  it  would  relocate and
consolidate  its  corporate,  assembly  and  distribution operations to Colorado
Springs,  Colorado.  The Sales, Marketing, Research and Development, Information
Technology,  Finance, and Human Resources divisions moved from the San Jose area
to  a  leased  location in Colorado Springs in the summer of 2000. The Company's
assembly  and  distribution  operations remained in San Jose location until they
were  relocated  to  Colorado  Springs  in  April  2001.  The Company expects to
complete its planned relocation by the summer of 2001, at a total operating cost
of  approximately  $5  million. The machine shop, which employs approximately 40
employees,  is expected to continue to operate in San Jose through the summer of
2002.  The  Company continues to evaluate options for that portion of operations
beyond  that  date.

     In  fiscal  year  2001,  RockShox,  in  voluntary cooperation with the U.S.
Consumer  Product Safety Commission (CPSC), conducted a recall of the 2001 model
year Metro, Jett and Judy TT model suspension forks.  Following up on reports of
failures in the field, we determined that there was a potential for failure of a
structural component, the compression rod, under a unique set of conditions.  To
protect  our  customer's  health  and safety, RockShox immediately contacted the


                                        4
<PAGE>
CPSC  and  initiated  a  program to retrofit over 220,000 forks in 26 countries.
The  recall was announced on October 12, 2000 and all retrofit kits were shipped
and  forks reworked by November 30, 2000.  The cost for this recall and retrofit
program  was  approximately  $1.9  million.

PRODUCTS

     ROCKSHOX  suspension  products  are  generally  designed  to enhance riding
performance  and  comfort,  and include front suspension forks, rear shocks, and
seatposts  based  on  elastomer technology or hydraulically damped systems using
coil  or  air springs. Our bicycle suspension systems incorporate two functional
components:  a  spring  and  a damper. The spring function absorbs the impact of
rough  terrain  and  returns the suspension device (fork, shock, or seatpost) to
its  original  position  after  compression.  The damper also absorbs impact and
moderates  the  movement  of the suspension device as it returns to its original
position.  As a result, suspension provides better wheel contact with the riding
surface,  especially  on  off-road or nonpaved surfaces, enabling the cyclist to
ride  with  more  speed,  comfort  and control. The suspension seatpost provides
improved  comfort and control for cyclists with bikes that are not equipped with
rear  wheel  suspension.

     Each  of  our  products  uses  aerospace  alloys  and  features  adjustable
suspension,  a  progressive  spring rate, structural rigidity and low weight. We
believe  that  the key to any suspension system is the spring rate, which allows
the suspension device to move easily over small bumps, but not "bottom out" over
larger  ones.  The  structural  rigidity of our suspension products improves the
rider's  ability  to control the bike, while low weight enhances overall bicycle
performance.  Each  of  our  products is covered by a one-year limited warranty.

     Our  2001  models represent our broadest line of product offerings to date.
For  the 2001 model year, we offered seventeen front suspension forks, including
four  new  models,  four  rear  shocks,  including  our  SID  Air model, and two
suspension  seat  posts.  For  the  2001  model year, all RockShox products have
received  a multitude of changes and upgrades aimed at increased performance and
durability.

     The newest member of the Rock Shox family for 2002 is Duke. This fork takes
the place of lower end SIDs, the XC and 100, and the Judy Race. The platform has
been  specifically  developed  around  the evolving demands of the sport, and is
designed  to  provide  both  performance  and  visual  excitement.

The  following  tables  summarize  our  2001  product  offerings  of  front
forks  and  rear  shocks:

<TABLE>
<CAPTION>
                                        FRONT FORKS

                                Suggested
                  Typical        Retail
                   Retail       Price In                                               Date of
                 Bike Price     Accessory                           Suspension         Original
   Model          Point (1)       Market           Use              Technology       Shipment (2)
--------------  -------------  -----------  ---------------------  ---------------   --------------
<S>              <C>            <C>         <C>                     <C>               <C>
METRO XC         $300-$500       $ 99.00    Trekking: Commuting     Coil Spring       Jun-00
                                            Comfort

METRO SL         $400-$800        N/A AM    Trekking: Commuting     Coil Spring       Jun-00
                                            Comfort

JETT             $300-$500       $ 99.99    Cross-Country;Moderate  Coil Spring       May-98
                                            Terrain


                                        5
<PAGE>
JUDY TT          $400-$800       $149.99    Cross-Country;Moderate  Coil/MCU          Jun-00
                                            Terrain

JUDY C           $550-$900        N/A AM    Cross-Country;Moderate  HydraCoil System  Jun-00
                                            Terrain

JUDY XC          $600-$1000      $229.99    Cross-Country;Moderate  HydraCoil System  May-97
                                            Terrain

JUDY SL          $650-$1200      $289.99    Cross-Country;Moderate  HydraCoil System  Sep-94
                                            Terrain

JUDY RACE        $800-$1300      $349.99    Cross-Country Racing    HydraCoil System  Jun-99

SID XC           $1000-$2500     $429.99    Cross-Country;Racing    Hydra Air System  Jun-97

SID 100          $1000-$2000     $459.99    Cross-Country;Racing;   Hydra Air System  Jun-99
                                            Enduro

SID SL           $1300-$4000     $579.99    Cross-Country;Racing    Dual Air System   Jul-97

SID RACE         $1500-$4000     $619.99    Pro Cross-Country       Dual Air System   Jul-97
                                            Racing

SIDNEY           $1500-$4000     $699.99    Pro Cross-Country       Dual Air System   Oct-00
                                            Racing

PSYLO XC         $700-$1400      $329.99    Enduro;Cross-Country;   Single Sided Air  Jun-00
                                            Dual Slalom             Pure

PSYLO SL         $1000-$2500     $439.99    Enduro;Cross-Country;   Single Sided Air  Jun-00
                                            Dual Slalom             Pure

PSYLO RACE       $1300-$4000     $579.99    Pro Enduro Racing;      Single Sided Air  Jun-00
                                            Dual Slalom Racing;     Pure
                                            Cross-Country

BOXXER           $2500+        $1,349.99    Pro Downhill Racing     HydraCoil System  Nov-97
</TABLE>


<TABLE>
<CAPTION>
                                        REAR SUSPENSION

                                Suggested
                  Typical        Retail
                   Retail       Price In                                               Date of
                 Bike Price     Accessory                           Suspension         Original
   Model          Point (1)       Market           Use              Technology       Shipment (2)
--------------  -------------  -----------  ---------------------  ---------------   --------------
<S>              <C>            <C>         <C>                     <C>               <C>
<S>             <C>             <C>          <C>                   <C>                <C>
REAR SC         $1000-$1500      N/A AM       Cross-Country         Dual Air System    Jul-98

SID REAR SC ADJ $1200-$2500      N/A AM       Cross-Country         Dual Air System    Jul-99

SID REAR SC LO  $1700-$3500      $259.99      Cross-Country         Dual Air System    Jun-00

SID REAR RACE   $1700-$3500      $294.99      Pro Cross-Country     Dual Air System    Jun-00
                                              Racing

DELUXE          $800-$1400       N/A AM       Downhill Racing;      Coil Spring        Jun-95
                                              Enduro Racing

DELUXE ADJ      $1000-$1500      N/A AM       Downhill Racing;      Coil Spring        Jun-96
                                              Enduro Racing

PRO DELUXE      $1500-$4000      N/A AM       Pro Downhill Racing;  Coil Spring        Jul-95
                                              Enduro Racing

MOUNTAIN POST   $1000-$2000     $119.99       Hardtail Seatposts     MCU               May-98

ROAD POST       $1200-$2500     $119.99       Road Bicycling         MCU               Aug-99
                                              Seatpost
</TABLE>


                                        6
<PAGE>
(1)  The typical retail bike price point represents management's estimate of the
     U.S.  retail  range  for  OEM  mountain  bikes  that  include the indicated
     product.

(2)  Models  are  generally  upgraded  and  revised  periodically.

(3)  MCU  stands  for  Microcellular  Urethane  spring.

(4)  Hydracoil  system  is a single coil spring housed in each fork leg, and is
(6)  coupled  with  an  open  oil  bath  damper.

(5)  HydraAir  system  is an air spring housed in each fork leg, coupled with an
     open  oil  bath  damper.

(6)  Single-sided  is an isolated spring medium located on one side of the fork.

(7)  Dual  air  is our custom-tuning feature for air forks, using a positive and
     negative  air  chamber.

(8)  Pure  is  our  compression  and  rebound  damping  system  and  features  a
     compression  lockout.

(9)  Coil spring is a positive spring medium utilizing a steel spring instead of
     an  air  spring.


RESEARCH  AND  DEVELOPMENT

     As  of  March 31, 2001, our product development activities are supported by
17  professionals,  including  9  project  engineers. Development for each major
product line (Metro, Judy, Duke, Psylo, SID, Boxxer, Deluxe, Seat Post, etc.) is
conducted  using an array of sophisticated design and analytical tools. A senior
level  project  engineer  heads  each  product  platform.  Design  assistance is
received  from  additional  engineers  and  technicians. We also have an ongoing
advanced  technologies  program,  which investigates new technologies, materials
and  processes  not  utilized  for  current  products.

      We  maintain  a  well-equipped  test  laboratory  to collect data and test
products  prior  to  and  after  commercial introduction. The test laboratory is
managed  by  a  Test  Lab  Supervisor,  and  is staffed with two technicians who
conduct  a variety of performance tests, accelerated life tests, and analysis on
products  and  components.

      The  product  development process usually begins one to two years prior to
the  expected commercial introduction of a new product, and generally focuses on
having  a  product  ready  for distribution at the start of the applicable model
year.  In  addition, short-term projects involving upgrades of existing products
and  improvements  to manufacturing processes occur regularly. New product ideas
come  from  a  variety  of  sources,  including  mountain bike race teams, OEMs,
consumers  and  employees.  Products  are developed using design and engineering
software  tools  that  provide  full  parametric  three-dimensional modeling and
finite  element  analysis,  allowing for computer optimization of structures and
greatly  reducing  the  time  required  to develop and prototype designs. At the
beginning  of every product development cycle, we establish an interdepartmental


                                        7
<PAGE>
team  which  includes  representatives  from  our  engineering,  manufacturing,
marketing,  quality,  sourcing  and  customer  service  departments.  This
interdepartmental  approach  to product development reduces time to market while
significantly  enhancing  product  quality.

        Current areas of focus for product development include, among others:

-    research  in  the  area  of  product  design,  materials  and manufacturing
     processes  to  reduce  the  cost and improve the performance of our current
     products;
-    investigation  of  potential  new  products  and  technologies;
-    the  introduction  of  products appropriately priced for a broad segment of
     the  mountain  bike  market;  and
-    the  design  of  new  products,  such  as a suspension systems for trekking
     bikes.

     Our  future  success  will  depend,  in part, upon our continued ability to
develop  and  successfully introduce new and popular bicycle suspension products
and  other  types  of bicycle components. There can be no assurance that we will
introduce  any  new  products  or, if introduced, that any such products will be
commercially  successful.

      Our  company-sponsored  research  and  product development expenditures in
fiscal years 2001, 2000, and 1999 were approximately $2.3 million, $3.6 million,
and  $4.9  million,  respectively.  Our  reductions  in research and development
expenditures  are primarily due to headcount reductions and consolidation of our
facilities  surrounding  our  move  to  Colorado.


MANUFACTURING

     The  manufacturing of our branded products was divided into three locations
for  the  Model  year  2001.  The higher price point products, Judy, SID, Psylo,
Boxxer,  were  assembled at the San Jose facility. For the first three quarters,
all  seat  post  and  rear  shock absorbers were assembled in San Jose, and then
transitioned  to  Colorado  Springs in the last quarter of fiscal year 2001. The
Jett C was assembled in Taiwan pursuant to a strategic relationship that we have
developed  with  one  of  our  vendors,  Spinner,  Inc.,  while  the Judy TT was
assembled in both the U.S. and Taiwan. We have a one year contract with Spinner,
Inc.  This  contract  provides  for  our  annual  review  and audit of Spinner's
operations.  The  current Spinner contract expired in May 2001, and the contract
provides  for  monthly  renewals  until a new contract is signed. The Company is
currently  negotiating  a  new  contract with Spinner, which we anticipate to be
signed  by  July  2001.

     Product  assembly  at  San  Jose  and  Colorado  Springs  is carried out on
multiple  continuous  flow  lines, which incorporate Statistical Process Control
(SPC)  and  error-proofing  devices for improved product quality.  The lines are
designed  to  have  a  daily  output which can be flexed by changing the station
staffing,  in  response  to  the  seasonal  nature  of the bicycle market.  Most
component  parts  are  procured  from  a  supply base that is being continuously
developed  to  meet  our  needs  for  quality,  timely  delivery  and  cost.  We
established  some  in-house  manufacturing  of  critical components, achieving a
level  of  vertical  integration  especially  for the telescoping upper tubes of
front  forks  and  the  shafts  for  rear  shock absorbers.  We worked to assure
quality  for surface finish and hardening by nitriding of steel and anodizing of


                                        8
<PAGE>
aluminum, which has contributed to improve durability and functional consistency
for  our  products.

     As  of  March  31,  2001,  we  employed  approximately  120  non-unionized
employees,  and  approximately 77 temporary hires for manufacturing.  Additional
temporary  employees  are  recruited as the seasonal nature of the market demand
builds  to  its peak, typically from June through January.  The San Jose factory
operated  two  working  shifts throughout the year on some product lines, and we
add  a second shift on others as needed.  Extensive training, especially for new
hires, and for critical changes for new product launch, is carried out.  We have
formal  release  of  written  work  instructions,  including  detailed  exploded
drawings  to  easily  show  the  sequence  of  assembly.  We are also developing
supplemental  training  with  video.  We  believe  that  we  have  significantly
strengthened SPC and error proofing during Model Year 2001.   In-Process Quality
Assurance routinely assesses the daily output of the manufacturing lines, and we
routinely  audit  functional  and  durability using our Product Test Center.  We
track  and  reduce  the  "cost  of quality" measurable every month, and actively
document  and  track  all  quality  concerns  for effective Permanent Corrective
Action.

     We work closely with our supply base, and depend upon certain key suppliers
to  provide  key  core  competencies,  such  as forgings and castings and molded
polymers  that  have  been  optimized for weight, structural integrity, wear and
cost.  We have neither long term supply contracts with any vendors, nor multiple
vendors  for  all  of  our component parts.  While we have developed a strategic
relationship  with  Spinner,  Inc.  ("Spinner")  for some low price points forks
assembled in Taiwan, we have also started to explore off-shore sources for parts
where  reduced  cost  can be selectively achieved without compromise to quality,
performance,  or  timely  delivery. The Spinner contract provides for our annual
review  and  audit  of  Spinner's operations.  We track all vendors for quality,
delivery  and  cost  reduction  opportunities,  and  we  have  an  active vendor
improvement  plan.

     In  January  1999  we  changed  to  a  new Oracle-based Enterprise Resource
Planning  (ERP)  system.  This  system  allows  initial  model year forecasting,
continuously updated as the production year develops, to drive material planning
and  procurement.  We  intend  to  continue  leveraging our ERP system's on-time
delivery  as  we  move  into  Model  Year  2002.  We  also intend to continue to
significantly  reduce  our  overall  inventory  levels.

     We  generally  require  firm  purchase  orders  from  OEM  customers, which
represent  the majority of our orders. We manage our stock levels over the model
year  to maximize availability during the peak season, and minimize overstocking
as the model year changes. Our "backlog" of unfulfilled orders on March 31, 2001
was  $3.8  million,  compared to $6.0 million on March 31, 2000. We expect to be
able  to  fill the entire backlog during the first quarter of the current fiscal
year.


SALES  AND  DISTRIBUTION

     Our  products  are primarily sold to OEMs, which incorporate our components
as  part  of  new,  fully-assembled  mountain  bikes sold worldwide, and through
distributors  or, in some cases, directly to IBDs, each of whom serve the retail
accessory market. For the fiscal year ended March 31, 2001, approximately 77% of
our  net sales were to OEMs and approximately 23% were to distributors and IBDs.
OEM  customers are important to us, since bicycle suspension has evolved from an


                                        9
<PAGE>
accessory  niche  component  into  standard  equipment  found  on higher quality
mountain  bikes.  The following table demonstrates the historical pattern in our
customer  base  and  product  distribution:



                                  Years Ended March 31,
                 -------------------------------------------------------------
(in thousands)          2001               2000                   1999
                 -------------------  -------------------  -------------------
                             % of                 % of                 % of
                    Net       Net        Net       Net        Net       Net
                   Sales     Sales      Sales     Sales      Sales     Sales
                 ---------  --------  ---------  --------  ---------  --------

OEMs............  $ 57,089      77%   $ 55,495       79%   $ 73,999        85%

Distributors
  and IBDs......    16,956      23%     14,768       21%     12,864        15%
                 ---------  --------  ---------  --------  ---------  --------
      Total..... $  74,045     100%   $ 70,263      100%   $ 86,863       100%
                 =========  ========  =========  ========  =========  ========


     We believe that our products play an important role in the sale of bikes by
OEMs, and that OEMs are aware of the influence that our brand and name have on a
consumer's  selection  of a mountain bike. In addition to our strong brand name,
we  believe  that  OEMs  also  choose  our  products  for  product  innovation,
reliability  and  quality. We have seen growth in our aftermarket channel in the
last  few seasons, primarily due to our release of new model year product to the
aftermarket  earlier  in  the season, and a maturing mountain biking market, who
have  proved  more  willing  to upgrade their existing bicycles with new shocks.

     We currently sell to over 266 OEM accounts worldwide. A substantial portion
of  our  sales  flow  from  the export of our products, a significant portion of
which  includes  products  shipped  to  Asian  manufacturing  subcontractors for
certain  U.S.-based  OEMs.

     The  sales  process  for OEM customers generally runs from December through
May,  and  during  this  period, we do presentations of our product line for the
coming  model  year.  Typically, we learn between April and June if our products
have  been  specified  on various OEM bike models and of OEM volume expectations
per  model,  although  such  estimates  are  subject  to  significant adjustment
throughout  the  year.  Shipments  are  then  made  directly to OEMs or to their
subcontractors  (typically  bicycle  frame manufacturers mostly located in Asia)
beginning  in the first quarter of the fiscal year (June quarter) and peaking in
the  second  and  third quarters (July through December). OEM sales slow down in
the  fourth  quarter  of  our  fiscal  year and are principally comprised of OEM
reorders,  which  we  believe  primarily reflect the popularity and sell-through
rates  of  various  OEM  mountain  bikes  that  incorporate  our  components.

     Sales  to distributors and IBDs generally trail the OEM process, with sales
to  distributors  at  their highest during the middle of our fiscal year (August
and  September)  and  sales  to  dealers  peaking during the following March and
April. We currently have four distributors in the United States, two of whom are
owned  by OEM customers, and approximately 64 additional distributors worldwide.
We  believe  that  sales  of  our products through OEM-owned distributors are an
important  revenue source for OEMs and further strengthen our relationships with
our  major customers. Distributors generally purchase our products for resale to
IBDs  and  generally  also provide worldwide servicing and marketing support for


                                       10
<PAGE>
all  of  our  products.  In the U.S., we generally sell directly to IBDs product
quantities  that  are  too  small  for  third-party  distributors  to  process.

     As of March 31, 2001 we had approximately 29 employees performing sales and
customer  service  functions.  Our  principal  sales activities are based in the
United  States.  In  addition,  we  have  a  sales  representative office with 7
contract employees based in Bern, Switzerland. We also have five employees based
in  our Taiwan branch office. Our customer service activities include a warranty
program  managed  by  an in-house technical support department in the U.S. and a
distributor  network  of  technicians  outside  the  U.S.

     In  fiscal 2001, approximately 52% of our sales represented sales to our 10
largest  customers,  such  as Trek, Merida, and Giant, several of which purchase
product as both an OEM customer and a distributor. Sales to our largest customer
represented  11%  of  our  net  sales  in  fiscal  2001.  At March 31, 2001, our
OEM  customer  with  the  largest  accounts  receivable  balances  accounted for
approximately  11%  of  our accounts receivable. As of March 31, 2001, we had no
long-term  contracts  with  any  of  our  customers.


MARKETING

     We  believe  that  our  brand  image,  in  combination with the performance
features  of  our  products, is an important element in a consumer's decision to
purchase  our  suspension  as  an  accessory  product and that our OEM customers
recognize  the  strength  of  our  brand  name  as  a  contributing  factor in a
consumer's  choice  of  mountain  bikes.

     We  promote  and  maintain  our  brand  name  in numerous countries through
focused  marketing  efforts  such  as sponsorship of mountain bike racing teams,
magazine  advertising  and  editorial  programs, IBD packaging and point of sale
materials, participation in tradeshows and promotional clothing and merchandise.
Our  marketing  department oversees all aspects of the promotion of our products
and  brand  name.

     The  principal user of our products is the mountain bike enthusiast between
19  and  34  years  of  age.  To  appeal  to  this market, we emphasize the high
performance  features  of our products as well as our affinity with the mountain
biking  culture.  The  goal  of  our  marketing  efforts  is to communicate both
technical  information  and  an  offbeat  and  irreverent  image.

     The  sponsorship  of  mountain bike racing teams and racers is an important
part  of  our  research and product development efforts as well as our marketing
strategy. We believe that the association of our products with successful racers
enhances our product development efforts and increases consumer awareness of and
demand  for  our  suspension  products. We currently co-sponsor approximately 20
world-class  and  over 70 junior and amateur race teams, many of which also have
affiliations  with  OEMs. Our sponsorship agreements with racing teams generally
are  for a one-year term, and provide for a retainer plus contingent performance
payments.  We  also  provide product and technical support for sponsored racers,
including  access  to our technical service trucks that attend many of the major
races  in  the U.S. and Europe. There can be no assurance that such racing teams
will  continue  to  be  sponsored  by  us  and use our products on terms we deem
acceptable, or that we will be able to attract new mountain bike racing teams to
use  our  products  in  the  future.


                                       11
<PAGE>
     We  advertise  our products in a variety of U.S. and international consumer
and  trade  bicycle  publications, including BICYCLING, BIKE, DIRT RAG, MOUNTAIN
BIKE,  MOUNTAIN BIKE ACTION, MOUNTAIN BIKING, VELO NEWS and BICYCLE RETAILER, as
well as on the World Wide Web. Our goal is to expand awareness of our brand name
and to support product line segmentation with advertising campaigns built around
the  SID,  PSYLO,  JUDY,  and  other product lines. We also seek to increase our
editorial  exposure  in  bicycle  print  media  by working closely with magazine
editors  in  the U.S. and Europe. We believe that our focus on editorial content
has  helped  maintain  high  visibility  for  our  brand  name and our products.

     We  currently support our brand name in the retail bike market by providing
brochures  that  are designed to help explain the technical performance features
of  our  products.  We  generally  provide  brochures  at  cost  or  for free to
distributors  and  IBDs.  We  believe that we also maintain a strong presence at
national  and international tradeshows. As part of our retail marketing efforts,
we market a line of mountain bike clothing. The clothing line includes T-shirts,
cotton  jerseys and hats. We sell our clothing line to distributors and directly
to  consumers  at  race  events.

     Our  sales  and  marketing expenditures totaled approximately $5.6 million,
$6.2  million,  and  $5.3  million  in  fiscal  years  2001,  2000,  and  1999,
respectively.  Future  sales and marketing expenditures are expected to decrease
slightly,  as  we  settle  in  to  our  Colorado  operations.


COMPETITION

     The  markets  for  bicycle  components,  in general, and bicycle suspension
products,  in  particular, are highly competitive. We compete with other bicycle
component  companies  that  produce  suspension  products  for  sale  to  OEMs,
distributors  and  IBDs as well as with bicycle OEMs that produce their own line
of  suspension  products for their own use and for sale through distributors and
IBDs.

     We  compete  with  several  component  companies  that  manufacture  front
suspension  products, including, among others, Answer Products, Inc., a division
of  LDI,  Ltd., which manufactures Manitou products, Rapid Suspension Technology
USA,  Inc.  (RST),  Marzocchi SpA, and SR Suntour USA, Inc. We also compete with
several  component  companies  that  manufacture  rear  shocks, including, among
others,  Fox  Factory,  Inc., RST, Risse Racing Technology, Inc., Amp, Marzocchi
and  Girvin,  Inc. We believe that we currently have the leading market share in
front  suspension  forks,  and  that  we are the second largest producer of rear
suspension  in  the  global  bicycle  industry.

     Today,  Cannondale Corporation is the only major OEM that has its own brand
of  suspension products. Cannondale also makes its suspension products available
to  the  retail  accessory  market.

     In  order to build or retain market share, we must continue successfully to
compete  in areas that influence the purchasing decisions of OEMs, distributors,
IBDs  and consumers, including design, price, quality, technology, distribution,
marketing,  style,  brand  image and customer service. We cannot assure you that
any  number  of  bicycle  component  manufacturers,  OEMs  or  other  companies,
including  those  that  are larger and have greater resources than we do and who
currently  do  not  provide  bicycle  suspension  products or do so on a limited
basis,  will  not  become  direct  or  more  significant  competition for us. In
addition,  OEMs  frequently  design  their bicycles to meet certain retail price


                                       12
<PAGE>
points,  and,  as  a  result,  may choose not to use a suspension product or may
select  a  lower  priced  product  of  ours  or  a competing product in order to
incorporate  other  components  in  a  bicycle's  specifications  that  the  OEM
perceives  as  being  desirable  to the consumer. We could face competition from
existing  or  new  competitors that introduce and promote suspension products or
other bicycle components perceived by the bicycle industry or consumers to offer
price  or  performance  advantages to, or otherwise have greater consumer appeal
than,  our  products.


INTELLECTUAL  PROPERTY

     We  rely  on  a  combination of patents, trademarks, trade names, licensing
arrangements,  trade  secrets,  know-how  and proprietary technology in order to
secure  and  protect our intellectual property rights. Several patents have been
issued  covering aspects of many of our suspension products in the United States
and  abroad.  These  patents specifically cover internal oil damping components,
structural  components,  adjustment  methods,  and  numerous  items specifically
related  to  bicycle fork and shock performance. None of the patents that we are
currently  using  to  enforce our property rights have an expiration date before
2007.  We  cannot  assure  you, however, that our present or future patents will
adequately   protect   our  technologies,  or  that  patents  relating  to  such
technologies will not be successfully challenged or circumvented by competitors.

     We  believe  that  our  brand  name,  "ROCKSHOX,"  offers  us a significant
competitive  advantage.  We  hold  several trademark registrations in the United
States  and abroad for the ROCKSHOX mark and other marks in connection with many
of  our  products.  We  may  file  additional  applications for U.S. and foreign
trademark  protection  in  the  future. However, we cannot assure you that third
parties  have  not  or  will  not  adopt  or register marks that are the same or
substantially  similar  to  our  marks,  or  that such third parties will not be
entitled to use such marks to our exclusion. Selecting new trademarks to resolve
such  situations could involve significant costs, including the loss of goodwill
already  gained  by  the  marks  we  previously  used  or  are  using.

     We  cannot  assure you that our patents, trademarks, trade names, licensing
arrangements, trade secrets, know-how and proprietary technology will adequately
protect  us from potential infringement or misappropriation by third parties. We
intend  to  enforce  our  intellectual  property  rights, and may be required to
undertake  litigation  to do so. Any such litigation could result in substantial
cost  to  and  diversion  of  effort  by  us. In addition, due to considerations
relating  to,  among  other  things, cost, delay or adverse publicity, we cannot
assure  you  that  we  will elect to enforce our intellectual property rights in
every  instance.

     We  have  received,  and  may  receive  in  the  future,  claims  asserting
infringement  by  us  of  intellectual property rights held by third parties. We
have recently been named defendant in two pending lawsuits, Halson Designs, Inc.
                                                          ----------------------
v.  RockShox,  Inc.,  Civil Action No. 00-1578-PA, in the United States District
-------------------
Court  for  the District of Oregon, and Answer Products, Inc. v. RockShox, Inc.,
                                        ---------------------------------------
Case  No.  CV  01-02635  ER  (RZx),  in the United States District Court for the
Central  District  of  California.  The  Company  is  vigorously  defending both
lawsuits.  Such  lawsuits  may  result  in  substantial cost to and diversion of
effort  by  us,  and  could  have  a  material  adverse  effect  on  us.


ENVIRONMENTAL  MATTERS


                                       13
<PAGE>
     We are subject to federal, state and local laws, regulations and ordinances
that  (i)  govern  activities  or operations that may have adverse environmental
effects  (such  as  emissions  to  air, discharges to water, and the generation,
handling, storage, transportation, treatment and disposal of solid and hazardous
wastes)  or  (ii)  impose  liability for cleaning up or remediating contaminated
property  (or  the  costs therefor), including damages from spills, disposals or
other  releases  of  hazardous  substances  or  wastes, in certain circumstances
without  regard  to  fault.  Our  manufacturing operations routinely involve the
handling  of  chemicals  and  wastes,  some  of which are or may be regulated as
hazardous  substances.  We  have  not  incurred, and do not expect to incur, any
significant  expenditures or liabilities for environmental matters. As a result,
we  believe  that our environmental obligations will not have a material adverse
effect  on  our  operations  or  financial  position.


GOVERNMENT  REGULATION

     Bicycle  suspension  products  sold  in  the  United  States are within the
jurisdiction  of the United States Consumer Product Safety Commission (CPSC) and
other  federal,  state  and foreign regulatory bodies. Under CPSC regulations, a
manufacturer  of consumer goods is obligated to notify the CPSC, if, among other
things,  the  manufacturer  becomes  aware that one of its products has a defect
that  could  create  a  substantial  risk of injury. If the manufacturer has not
already  undertaken  to  do  so, the CPSC may require a manufacturer to recall a
product,  which  may  involve  product  repair,  replacement  or  refund.

     In  1996,  the  CPSC  sent a letter to major manufacturers and importers of
mountain  bikes as well as several suspension component manufacturers, including
us, expressing concern about reports of injuries and recall activity relating to
failures  of  mountain  bike  suspension  forks  and  urging  manufacturers  to
participate  in  the  development  of voluntary safety performance standards for
such  suspension products through the American Society of Testing and Materials,
or  ASTM.  These  standards  are  expected  to  be implemented in the future. In
anticipation  of  the  standards  implementation  by  the ASTM, we are currently
testing  our  products  in  the manner proposed by the ASTM. These standards, if
adopted, could increase the development and manufacturing costs of our products,
make  our products less desirable (by, for example, increasing the weight of our
products)  or  favor a competitor's product. We cannot predict whether standards
relating  to our products or otherwise affecting the bicycle suspension industry
will be adopted, nor can we assure you that the implementation of such standards
will  not  have  a  material  adverse  effect  on  us.

     Several  local,  state  and federal authorities have considered substantial
restrictions  or  closures  of public trails to biking use, citing environmental
concerns  and  disputes between mountain bikers and other trail users, including
hikers.  Such  restrictions  or  closures,  if  implemented  in  a  regional  or
widespread manner, could lead to a decline in the popularity of mountain biking,
which  could  have  a  material  adverse  effect  on  us.


PRODUCT  RECALL

     Bicycles  and  bicycle  components,  including  suspension  products,  are
frequently  subject  to  product  recalls, corrective actions and manufacturers'
bulletins.  Prior  to  2001,  RockShox  had  conducted five voluntary corrective
actions.  None of these five corrective actions has been financially material to


                                       14
<PAGE>
us.  In  fiscal  year  2001,  RockShox,  in voluntary cooperation with the CPSC,
conducted  a  recall  of  the  2001  model  year  Metro,  Jett and Judy TT model
suspension  forks.  Following  up  on  reports  of  failures  in  the  field, we
determined that there was a potential for failure of a structural component, the
compression  rod,  under  a  unique set of conditions. To protect our customer's
health  and  safety,  RockShox  immediately  contacted  the CPSC and initiated a
program to retrofit over 220,000 forks in 26 countries. The recall was announced
on  October  12,  2000  and all retrofit kits were shipped and forks reworked by
November  30,  2000.  The  cost  for  this  recall  and  retrofit  program  was
approximately  $1.9  million.

     The  number  of  suspension  products sold by us has dramatically increased
since  we  were  founded  in  1989.  New  product  introductions  are  occurring
frequently,  and  our  products may not have been used by riders for a period of
time  sufficient  to  determine  all  of  the  effects  of prolonged use and the
environment  on such products. As a result, we cannot assure you that there will
not  be  recalls,  corrective  actions  or  other  activity  voluntarily  or
involuntarily  undertaken by us or involving the CPSC or other regulatory bodies
on  a  more frequent basis or at a higher cost than in the past, involving past,
current  or  future  products,  including  those  products previously subject to
voluntary corrective action, any of which could have a materially adverse effect
on  us  or  our  prospects.


SEASONALITY

     See  "Selected  Quarterly  Financial  Data; Seasonality" under Item 7 for a
discussion  regarding  seasonality.


FINANCIAL  INFORMATION  ABOUT  GEOGRAPHIC  AREAS

     See  Note  12  to the Notes to the Consolidated Financial  Statements for a
discussion  regarding  our  foreign  operations.


EMPLOYEES

     As  of  March 31, 2001, a seasonal low point, we employed approximately 287
full-time  employees.  As  we  continued  to close the California operations, we
employed  approximately  240  full-time employees on May 31, 2001. As we move to
our  seasonal  high  production  demands,  we  plan  to employ approximately 300
full-time employees by July 2001. We are not a party to any labor agreements and
none  of  our  employees  are  represented  by  a  labor  union. We consider our
relationship  with  our  employees  to be good and have never experienced a work
stoppage.


CERTAIN  FACTORS  THAT  MAY  AFFECT  THE  COMPANY'S  BUSINESS AND FUTURE RESULTS

      This report contains various forward-looking statements within the meaning
of  Section  27A  of the Securities Act of 1933, as amended, and Section 21E of
the  Securities  Exchange  Act  of  1934,  as  amended,  that  involve risks and
uncertainties.  Forward-looking  statements  may  also be contained in our other
reports  filed  under the Securities Exchange Act of 1934, in our press releases
and  in  other  documents.  In  addition,  from  time  to  time,  we through our
management  may make oral forward-looking statements. Forward-looking statements


                                       15
<PAGE>
generally refer to future plans and performance, and are identified by the words
"believe",  "expect",  "anticipate",  "optimistic", "intend", "aim", "will", the
negative  thereof  and  similar  expressions.  We caution you not to place undue
reliance on these forward-looking statements, which speak only as of the date of
which  they  are  made and may be affected by numerous factors. Because of these
factors,  which  may  affect  our  operating results, past financial performance
should  not  be  considered as an indicator of future performance, and investors
should  not  use  historical  trends  to  anticipate results or trends in future
periods.   We   undertake  no  obligation  to  update  publicly  or  revise  any
forward-looking  statements.

      Important  factors  that  could  affect  our  ability to achieve financial
and  other  goals  and  cause  actual  results  to  differ  materially  from our
forward-looking  statements  include,  but  are  not  limited to, the following:

  --  The loss of or substantial decline in purchases of our products by, or the
      financial  insolvency  of, any of our largest customers individually, or a
      number  of  our  other customers in the aggregate, could have  a  material
      adverse effect  on  us.

  --  Any misjudgment by us or any of our OEM customers of the demand for any of
      its  respective  products  could  have  a  material  adverse effect on us.

  --  Unexpected  difficulties  encountered during relocation, risk of operating
      in  two  cities,  or  management's  inability  to  respond effectively to,
      or  plan  for  such relocation could have a material adverse effect on us.

  --  Product  recalls,  corrective  actions  or  other  activity voluntarily or
      involuntarily  undertaken  by us or involving the CPSC or other regulatory
      bodies  could  have  a  material  adverse  effect  on  us.

  --  The  loss  of  any  member  of  our  senior  management team and other key
      personnel,  including  certain members of our product development team, or
      the  inability to attract, retain and motivate key personnel, could have a
      material  adverse  effect  on  us.

  --  Our  failure  to  introduce  sufficient  technological advances or lack of
      timely  introduction  of  sufficient new  products,  or if introduced, the
      lack of commercial success of such products, could have a material adverse
      effect  on  us.

  --  Competition  from  existing  or new competitors that introduce and promote
      suspension  products  or other bicycle components perceived by the bicycle
      industry  or consumers to offer price or performance advantages to or that
      otherwise  have  greater  consumer  appeal  than our products could have a
      material  adverse  effect  on  us.

  --  The  costs attendant to our defense  of, or an adverse judgment regarding,
      the  patent  lawsuits  brought  by  Halson or Answer Products could have a
      material adverse  effect  on  us.

  --  The  assertion  by  any  person of rights in, or ownership of, any of  our
      patents,  trademarks  or other  proprietary  rights,  unless  successfully
      defended by us could have a material adverse effect on  us.  In  addition,
      the laws  of certain foreign countries do  not protect proprietary  rights
      to the same  extent  as  do  the  laws  of  the  United  States.


                                       16
<PAGE>
  --  The failure of a key supplier to meet our product needs on a timely basis,
      the loss of a key supplier or any significant disruption in our production
      or  distribution  activities for any other reason, including an earthquake
      or  other  catastrophic event, could have a material adverse effect on us.

  --  Because the bicycle industry is, and many of our OEM customers are, highly
      dependent on manufacturing in and selling to  overseas  locations, changes
      in economic conditions, currency exchange rates, tariff regulations, local
      content  laws  or  other trade restrictions or political instability could
      adversely  affect  the cost  or availability of products sold by or to the
      bicycle industry as a whole and to our OEM customers in particular, any of
      which  could  have  a  material  adverse  effect  on  us.

  --  Due  to  the  uncertainty  as to the number of product liability claims or
      the  nature  and  extent of liability for personal injuries and changes in
      the historical or future levels of insurance coverage or the terms or cost
      thereof,  our product liability insurance may not be adequate or available
      to  cover  product  liability  claims or the applicable insurer may not be
      at  the  time  of  any  covered  loss,  any of which could have a material
      adverse  effect  on  us.

  --  Adverse  publicity relating to mountain bike suspension or mountain biking
      generally,  or publicity  associated  with  actions  by the CPSC or others
      expressing  concerns about  the  safety or function of our products, other
      suspension products or mountain  bikes,  could  have  a  material  adverse
      effect  on  us.

  --  Any  decline  in  general  economic  conditions,  uncertainties  regarding
      economic  prospects  or  changes  in  other  economic  factors that affect
      consumer  spending  could  have  a  material  adverse effect on our direct
      customers  (OEMs,  distributors,  IBDs)  and,  therefore,  on  us.


ITEM  2.    PROPERTIES

     Our  headquarters  are  located  in  an  approximately  102,500 square foot
building  in  Colorado  Springs,  Colorado,  pursuant to a lease that expires in
2011.  Approximately  25,000  square feet of the former headquarters building in
San  Jose,  California has been sublet to a third party for the remainder of the
master  lease. We lease two other facilities of approximately 15,000 and 100,000
square  feet  in the San Jose area pursuant to a lease that expires in 2002. The
larger  facility  in  San Jose includes 50,000 square feet that is not currently
being  used  by  us, and we continue to attempt to sublease this unused portion.
The  15,000 square-foot facility is not currently being used by us, and has been
subleased  in  its entirety until the end of the lease term. We believe that our
existing  facilities  are  adequate  to  meet  our  existing  requirements.


ITEM  3.    LEGAL  PROCEEDINGS

      We  are  involved  in  certain  legal  matters  in  the ordinary course of
business, including the alleged infringement of patents in the Halson and Answer
Products  cases.  No  provision  for  any  liability  that  may  result upon the
resolution  of  these  matters  has  been  made  in  the  accompanying financial
statements  nor  is  the  amount  or  range of possible loss, if any, reasonably
estimable.  See  "Certain  Factors  That  May  Affect the Company's Business and
Future  Results."


                                       17
<PAGE>
ITEM  4.    SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

      No  matters were submitted to a vote of security holders during the fourth
quarter  of  fiscal  2001.


                                    PART II

ITEM  5.    MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
            MATTERS

     From  September  26,  1996  through  October 30, 2000, our common stock was
listed  on The NASDAQ Stock Market under the symbol "RSHX." On October 30, 2000,
we  received  notice  from  the  NASDAQ  Stock  Market  that  our stock would be
de-listed  and  would be automatically eligible to be traded on the OTC Bulletin
Board effective October 31, 2000. Our minimum bid price per share had been below
$1.00  for over 30 consecutive days, and we were not able to evidence reasonably
certain  ongoing  compliance  with  the NASDAQ National Market listing standards
requirement  regarding  minimum  bid  price.

     The following table sets forth, for the periods indicated, the high and low
sales  prices  of  our  common  stock,  as  reported.

                                                High      Low
                                              --------  -------
     Year  ended  March  31,  2000
     -------------------------------
     First  quarter . . . . . . . . . . .      $1.66     $0.94
     Second  quarter. . . . . . . . . . .      $1.31     $0.88
     Third  quarter . . . . . . . . . . .      $2.06     $0.44
     Fourth  quarter. . . . . . . . . . .      $2.00     $0.95

     Year  ended  March  31,  2001
     -------------------------------
     First  quarter . . . . . . . . . . .      $1.16     $0.50
     Second  quarter. . . . . . . . . . .      $1.00     $0.50
     Third  quarter . . . . . . . . . . .      $0.81     $0.34
     Fourth  quarter. . . . . . . . . . .      $0.91     $0.41


     On  June 27, 2001, the closing sales price per share of our common stock as
reported  on  the  OTC  Bulletin  Board  was $0.60. On June 25, 2001, there were
1,769  shareholders  of  our  common  stock.

     During our past three fiscal years, our Board of Directors has not declared
a  cash  dividend  on  our  common  stock.  We currently intend to retain future
earnings  for  use  in our business and, therefore, do not anticipate paying any
cash  dividends  in  the  foreseeable  future.


ITEM  6.    SELECTED  FINANCIAL  DATA

      The  selected  financial  data  set forth below have been derived from our
audited  consolidated  financial  statements  and the related notes thereto. The
following  selected  financial  data  should  be  read  in  conjunction with our
consolidated  financial  statements  and  the  related notes thereto and Item 7,


                                       18
<PAGE>
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
                                                               Years Ended March 31,
                                               -----------------------------------------------------
                                                 2001        2000      1999        1998       1997
                                               -------      -------   -------    --------   --------
<S>                                            <C>          <C>       <C>        <C>         <C>
STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA):

Net sales ............................         $74,045      $70,263   $86,863    $102,203   $106,212
Cost of sales ........................          60,076       62,446    71,000      73,183     67,115
                                               -------      -------   -------    --------   --------
   Gross profit ......................          13,969        7,817    15,863      29,020     39,097
                                               -------      -------   -------    --------   --------
Selling, general and administrative
   expenses ..........................          13,351       15,850    14,163      13,363     12,137
Research, development and
   engineering expense ...............           2,346        3,594     4,907       4,873      4,801
Restructuring and non-recurring
  charges ............................           3,990          ---      (541)      3,326      6,580
                                               -------      -------   -------    --------   --------
      Income (loss) from operations ..          (5,718)     (11,627)   (2,666)      7,458     15,579
Interest expense (income) and other
   expense, net ......................              67           45      (277)       (606)     2,205
                                               -------      -------   -------    --------   --------
      Income (loss) before income
        taxes ........................          (5,785)     (11,672)   (2,389)      8,064     13,374
Provisions for (benefit from)
   income taxes ......................             308          789      (669)      2,944      5,149
                                               -------      -------   -------    --------   --------
      Income (loss) before
        extraordinary loss ...........          (6,093)     (12,461)   (1,720)      5,120      8,225
Extraordinary loss, net of tax
   benefit of $885,000 ...............             ---          ---       ---         ---      1,328
                                               -------      -------   -------    --------   --------
      Net income (loss) before
        accretion ....................          (6,093)     (12,461)   (1,720)      5,120      6,897
Accretion for dividends on
   mandatorily redeemable.............             ---          ---       ---         ---        185
                                               -------      -------   -------    --------   --------
      Net income (loss) available
         to common stockholders ......         $(6,093)    ($12,461)  ($1,720)     $5,120     $6,712
                                               =======      =======   =======    ========   ========
Income (loss) per share before
   extraordinary loss - basic.........          ($0.44)      ($0.91)   ($0.13)      $0.37      $0.71
Loss per share from extraordinary
   item - basic.......................             ---          ---        ---         ---     (0.12)
                                               -------      -------   -------    --------   --------
     Net income (loss) per share -
         basic........................          ($0.44)      ($0.91)   ($0.13)      $0.37      $0.59
                                               =======      =======   =======    ========   ========
Cash dividend per share...............              --           --        --          --         --
                                               =======      =======   =======    ========   ========
Shares used in per share
   calculation - basic................          13,761       13,761    13,761      13,717     11,430
                                               =======      =======   =======    ========   ========

Income (loss) per share before
   extraordinary loss - diluted.......          ($0.44)      ($0.91)   ($0.13)      $0.36      $0.69
Loss per share from extraordinary
   item - diluted.....................              --           --        --          --      (0.11)
                                               -------      -------   -------    --------   --------
     Net income (loss) per share -
         diluted......................          ($0.44)      ($0.91)   ($0.13)      $0.36      $0.58
                                               =======      =======   =======    ========   ========
Shares used in per share
   calculation - diluted..............          13,761       13,761    13,761      14,030     11,641
                                               =======      =======   =======    ========   ========
</TABLE>


                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                Years Ended March 31,
                                               -----------------------------------------------------
                                                 2001         2000       1999      1998       1997
                                               -------      -------    -------   --------   --------
<S>                                            <C>          <C>       <C>        <C>         <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital ...................            $7,848       $10,647    $20,067    $22,372    $23,722
Total assets ......................            29,783        35,804     48,765     52,259     45,875
Total debt ........................             1,183            --         --         --         --
</TABLE>


ITEM  7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL CONDITION AND
           RESULTS  OF  OPERATIONS

GENERAL

     We  are a worldwide leader in the design, manufacture and marketing of high
performance  bicycle  suspension  products.  Substantially all of our historical
revenues  have  been  attributable  to  sales  of mountain bike front suspension
forks.  Our  two  principal  channels of distribution are: (i) sales to OEMs and
(ii)  sales  to distributors and IBDs, which we refer to as the retail accessory
market.  A  large  portion  of  our sales are to a small group of OEM customers.

     We  have  substantial  export sales, a significant portion of which include
products  shipped  to  Asian manufacturing subcontractors for certain U.S.-based
OEMs.  We  believe  that  a substantial portion of these products are ultimately
shipped  back  to  the  U.S. and sold domestically by OEMs. We recognize revenue
upon  shipment  of  the  product and transfer of title. To date, product returns
have  not  been  material.

     While  our  gross  margins  are generally higher on retail accessory market
sales compared to OEM sales, OEM sales generate higher unit volume, which allows
us  an  opportunity  to  capitalize  on  manufacturing  efficiencies.  Research,
development  and  engineering  costs  are  expensed  as  incurred.

RESULTS  OF  OPERATIONS

     The following table sets forth operations data as a percentage of net sales
for  the  periods  indicated.

                                                      Years Ended March 31,
                                               --------------------------------
                                                    2001      2000       1999
                                               ----------  ---------  ---------

Net sales.....................................     100.0%    100.0%     100.0%
Cost of sales.................................      81.2%     88.9%      81.7%
   Gross profit...............................      18.8%     11.1%      18.3%
Selling, general and administrative expense...      18.0%     22.5%      16.3%
Research, development and engineering expense.       3.2%      5.1%       5.6%
Restructuring and non-recurring charges.......       5.4%      0.0%      (0.6%)
   Income(loss)from operations................      (7.8%)   (16.5%)     (3.1%)


FISCAL  YEAR  ENDED  MARCH  31, 2001 (FISCAL 2001) COMPARED TO FISCAL YEAR ENDED
MARCH  31,  2000  (FISCAL  2000)

     NET SALES. Net sales for the year ended March 31, 2001 increased by 5.4% to
approximately $74.0 million compared to approximately $70.3 million for the year
ended  March  31,  2000.  OEM  sales  increased  in  fiscal  2001  by  2.7%  to
approximately  $57.0  million  compared to approximately $55.5 million in fiscal
2000.  Aftermarket  sales  increased  by  14.9%  to  approximately $17.0 million
compared  to  approximately  $14.8  million  in  fiscal  2000.  The  increase in
aftermarket  sales  was  due  primarily  to more timely fulfillment of orders in
2001.  Also,  the  Psylo product was well-received by the aftermarket, filling a
new  niche  in  the  marketplace.

     Export  sales,  a significant portion of which included products shipped to
Asian  manufacturing  subcontractors  for certain U.S.-based OEMs, accounted for
approximately  73.6%  and  approximately  70.1%  of net sales in fiscal 2001 and
2000,  respectively.


                                       20
<PAGE>
     GROSS  MARGIN. Gross margin (gross profit as a percentage of net sales) for
fiscal  2001, increased to 18.9% compared to approximately 11.1% in fiscal 2000.
The  gross  margin  improvement  is  due  to  fixed  overhead costs being better
absorbed  through  higher  sales  volumes, manufacturing efficiencies and better
management  of inventories in fiscal 2001, offset by $1.9 million in cost due to
the  2001  product  recall.  In  fiscal year 2000, RockShox incurred a charge of
$2,900,000  relating to inventory obsolescence reserve, compared to a net charge
of  $740,000  in  2001.

     SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSE.  Selling,  general  and
administrative  ("SG&A")  expenses  before  relocation  charges  for fiscal 2001
decreased  by  approximately  15.8%  to  approximately  $13.4  million  (or
approximately  18.0% of net sales) from $15.9 million, or 22.5% of net sales for
the prior year. The decrease in these costs is primarily a function of headcount
reductions  as a result of the relocation, and curtailed discretionary spending.

     RESEARCH,  DEVELOPMENT  AND  ENGINEERING EXPENSE. Research, development and
engineering  ("R&D")  expense  for  fiscal 2001 decreased approximately 34.7% to
approximately  $2.3  million  (or  approximately  3.2%  of  net sales) from $3.6
million, or 5.1% of net sales for the prior year. This cost decrease corresponds
with  a  32%  headcount  reduction  in  R&D  staff  from  2000  to  2001.

     RESTRUCTURING  AND  NON-RECURRING  EXPENSES.  In  March  2000,  the Company
approved a plan to relocate its headquarters and domestic assembly operations to
Colorado  Springs,  Colorado.  During  fiscal  year  2001,  the Company recorded
charges totaling $4.0 million related to these one-time relocation expenses. The
sales, marketing, research and development, information technology, finance, and
human  resources divisions moved from the San Jose area, to a leased location in
Colorado  Springs in the summer of 2000. The Company's assembly and distribution
operations  remained  at  its  San  Jose  until  they were relocated to Colorado
Springs in April 2001. The Company expects to complete its planned relocation by
the  summer  of  2001,  at  a  total  cost  of  approximately  $5.0  million.

     During  fiscal year 1999, the Company reversed a $541,000 accrued liability
primarily  related  to  lower  than  expected  severance  costs  and  equipment
write-downs.  This  reversal  represents  the unused portion of the $2.7 million
recorded  during fiscal year 1998 for the restructuring program of that year. No
such  charges  or  credits  were  recorded  during  2000.

     INTEREST INCOME/EXPENSE. For the year ended March 31, 2001, the Company had
net  interest  expense  of  approximately $148,000. For the year ended March 31,
2000, the Company had interest expense of approximately $45,000. The increase of
interest  expense is due to higher average line of credit balances during fiscal
2001  compared to the prior year, due in part to relocation expenses and related
capital  expenditures  totaling  over  $5  million.

     INCOME  TAX  BENEFIT/EXPENSE.  Our effective tax rate for fiscal 2001 was a
5.3%  expense  compared  to  a 6.8% expense for fiscal 2000. The sole income tax
liability  for  the  fiscal  year  2001  was related to a tax rate of 25% of the
profits  of the Taiwanese branch operations, after a proportionate allocation of
head office and recall expenses. RockShox Taiwan began operations in 2001, hence
all  Taiwan  taxes  were  incurred  for 2001 only. For fiscal 2000, the tax rate
relates  to an increase in the reserve for our deferred tax assets that had been
recorded  in previous years. During 2001, all tax net operating losses have been
fully  valued  for  financial  reporting  purposes.


                                       21
<PAGE>
FISCAL  YEAR  ENDED  MARCH  31, 2000 (FISCAL 2000) COMPARED TO FISCAL YEAR ENDED
     MARCH  31,  1999  (FISCAL  1999)

     NET  SALES.  Net sales for the year ended March 31, 2000 decreased by 19.1%
to  approximately  $70.3 million compared to approximately $86.9 million for the
year  ended  March  31,  1999.  OEM  sales  decreased  in  fiscal 2000 by 25% to
approximately  $55.5  million  compared to approximately $74.0 million in fiscal
1999.  Aftermarket  sales  increased  by  12.7%  to  approximately $14.8 million
compared  to  approximately  $12.9  million  in fiscal 1999. We believe that the
decrease  in OEM sales is primarily due to increased competition in the mountain
bike  suspension  market and delay in start up of OEM customers 2000 model year.

     Export  sales,  a significant portion of which included products shipped to
Asian  manufacturing  subcontractors  for certain U.S.-based OEMs, accounted for
approximately  70.1%  and  approximately  64.5%  of net sales in fiscal 2000 and
1999,  respectively.

     GROSS  MARGIN. Gross margin (gross profit as a percentage of net sales) for
fiscal  2000, decreased to 11.1% compared to approximately 18.3% in fiscal 1999.
We believe that the decrease in gross margin was primarily due to fixed overhead
costs  not  being  fully  absorbed  due  to  lower  than  anticipated  sales,
manufacturing inefficiencies and provisions for excess and obsolete inventory in
fiscal  2000. Partially offsetting these costs was an increase in IBD sales as a
percentage  of  total  sales compared to fiscal 1999. IBD sales generally have a
higher gross margin than OEM sales due to discounts given to OEM customers. Also
in  fiscal  year  2000,  RockShox  incurred a charge of $2,900,000 relating to a
writedown  of  inventory.

     SELLING,   GENERAL   AND   ADMINISTRATIVE  EXPENSE.  Selling,  general  and
administrative  ("SG&A")  expenses  for  fiscal  2000 increased by approximately
11.9%  to approximately $15.9 million (or approximately 22.5% of net sales) from
14.2 million or 16.3% of net sales for the prior year. The year-to-year increase
over  the  same period last year is primarily a result of approximately $450,000
for  disposals of fixed assets, $150,000 for severance charges, and $500,000 for
changes  in  senior  management.

     RESEARCH,  DEVELOPMENT  AND  ENGINEERING EXPENSE. Research, development and
engineering  ("R&D")  expense  for  fiscal 2000 decreased approximately 26.8% to
approximately $3.6 million (or approximately 5.1% of net sales) from 4.9 million
or  5.6% of net sales for the prior year. As a percentage of sales, R&D remained
constant  when  compared  to  fiscal 1999 when R&D was approximately 5.6% of net
sales.  R&D  remained  relatively  constant  when  compared to fiscal net sales.

     INTEREST INCOME/EXPENSE. For the year ended March 31, 2000, the Company had
interest  expense  of  approximately $45,000. For the year ended March 31, 1999,
the  Company  had  interest  income  of  approximately $277,000. The decrease of
interest  income  and increase of interest expense is due to lower cash balances
from  lower  revenue  during  fiscal  2000  compared  to  the  prior  year.

     INCOME  TAX  BENEFIT/EXPENSE.  Our effective tax rate for fiscal 2000 was a
6.8%  expense  compared  to a 28.0% benefit for fiscal 1999. The decrease in the
effective  tax  rate was primarily due to the change in the valuation allowance,
partially  offset by the reversal of previously recorded tax liability under the
statute  of  limitations.


                                       22
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

     For  the  year  ended  March  31,  2001,  net  cash  provided  by operating
activities  was  approximately  $939,000, which was comprised of the net loss of
approximately  $6.1  million, decreased by non-cash charges for depreciation and
amortization  of  approximately  $4.9 million, $2.0 million in disposal of fixed
assets,  $1.4  million  in income tax refunds received and $740,000 in provision
for  obsolete  inventories.  The  loss  was  offset  by $1.0 million increase in
payables  and  other  liabilities,  $936,000 decrease in inventories, as well as
other smaller adjustments to net cash provided by operating activities. Accounts
receivable  at  March  31,  2001 decreased to approximately $12.4 million net of
allowance  for  doubtful  accounts,  compared  to approximately $12.6 million at
March  31,  2000.  Inventories at March 31, 2001 increased to approximately $5.8
million  net  of  inventory  reserves, compared to approximately $5.6 million at
March  31,  2000.

     Net cash used in investing activities was approximately $3.4 million, which
principally  consisted  of acquisitions of property and equipment. Net financing
proceeds  from  borrowings against our line of credit in 2001 were $1.2 million.

     Capital expenditures totaled approximately $3.7 million for fiscal 2001 and
approximately $2.4 million for fiscal 2000. The increase in capital expenditures
was  principally  due  to  capital expenditures related to the relocation. As of
March 31, 2001, we had purchase commitments of approximately $618,000, primarily
for tooling, direct parts and machinery to be used in manufacturing beginning in
fiscal  2002,  which  commitments  are  expected  to be funded by cash flow from
operations  or  available  cash  balances.

     On  June 29, 2000 we amended our security agreement with Wells Fargo, which
provides  for  borrowings up to $5.0 million at a base interest rate (as defined
therein)  plus  1.375%,  and  which  expires  in  December 2001. All outstanding
amounts  under  the  facility  are  collateralized  by  our accounts receivable,
inventory,  equipment  and  intangibles.  We  had  borrowings against the credit
facility  of  $1.2  million  at  March  31,  2001, and there were no outstanding
borrowings  against  the  credit  facility  as  of  March  31,  2000.

     Our  total  line  of credit with Wells Fargo Business Credit is $5 million,
and  the  availability  is  reduced  by a $1 million letter of credit pledged as
security  through  the  term  of our facilities lease. We obtained a waiver from
Wells  Fargo  for  being  out  of  compliance on our quarterly debt covenants at
December  31, 2000 and March 31, 2001, due primarily to expenses associated with
the  2001  recall  that  were not anticipated at the time the original covenants
were  set.  We  are  currently negotiating a new $10 million line of credit with
Wells  Fargo under terms substantially similar to our current facility, which we
anticipate  to  be  executed  by  July  2001. We recently entered a $1.2 million
subfacility  through  August  2001, to increase our borrowing base capacity as a
function  of  our  inventory  balances.

     We  have  cash  and cash equivalents of $1.1 million at March 31, 2001, and
outstanding  debt  of  $1.2 million. Effective June 28, 2001 we have closed on a
new,  expanded,  credit facility with our existing lender, Wells Fargo Bank (the
New  Facility).  The  New  Facility  and the previous credit agreement are asset
based  facilities, that is, the borrowings on the related facility is limited to
a  percentage  of  our accounts receivable balances, and the borrowings are also
secured  by  those  same  receivables.

     At  March 31, 2001, we were in default of certain financial covenants under
our  previous credit agreement, and have received a waiver of such default as of
that  date. Our New Facility includes renegotiated financial covenants, and as a
result, we are no longer in violation of any of our financial covenants or other
covenants. Additionally, based upon our forecasted results for fiscal year 2002,
we  will  continue  to  remain  in  compliance  with  our  new revised financial
covenants  throughout  this  year. However, there is no assurance the forecasted
results  will  be  achieved.

     Management  estimates  that  based  upon  our  current forecasts, including
anticipated  funds received from the New Facility, we will require no additional
funding  through  the  end  of fiscal year 2002 for the execution of our current
business  plan,  including the financing of our anticipated capital expenditures
and  short-term  operating  losses.  Should  we  require  additional funding, we
believe  we  have  the  ability  to  obtain this funding from one or more of the
following  sources:

     1.   Additional  asset  based  lending  facility,  including leveraging our
          unencumbered  inventory  and  fixed  assets;
     2.   Subordinated  debt  facility;
     3.   Sale  of  assets

RECENT  ACCOUNTING  PRONOUNCEMENTS

    In  June  1998, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standard  No.  133,  or  FAS  No.  133,  "Accounting  for


                                       23
<PAGE>
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting  standards for derivative instruments and hedging activities.  FAS 133
requires  that all derivatives be recognized at fair value in the balance sheet,
and  that  the  corresponding  gains  or  losses  be  reported as a component of
comprehensive  income.  We adopted FAS 133, as amended, in the fiscal year ended
March  31,  2001, and that adoption of FAS 133 did not have a material impact on
our  financial  position  or  results  of  operations.

     In  December  1999,  the  Securities  and  Exchange Commission issued Staff
Accounting  Bulletin, or SAB 101, "Revenue Recognition in Financial Statements".
The adoption of SAB 101 did not have a material impact on our financial position
or  results  of  operations.

     In  March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation  No.  44,  "Accounting  for  Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25." This interpretation has
provisions  that  are  effective  on  staggered dates, some of which began after
December  15,  1998  and  others  that become effective after June 30, 2000. The
adoption  of this interpretation did not have a material impact on our financial
position  or  results  of  operations.

SELECTED  QUARTERLY  FINANCIAL  DATA;  SEASONALITY

     The  following  table  presents  selected  quarterly  financial information
(expressed  in  thousands,  except  per  share  data)  for the last eight fiscal
quarters.  We  have  prepared  this  information  on a basis consistent with our
audited  financial  statements  and  it  includes all adjustments, consisting of
normal recurring adjustments, that we consider necessary for a fair presentation
of  the  results of such quarters. The operating results for any quarter are not
necessarily  indicative  of  the  results  for  any  entire  year.


                                            Quarter Ended
                           -------------------------------------------------
                            March 31,  December 31, September 30,  June 30,
                               2001        2000         2000         2000
                           -----------  ----------   ----------  -----------
                               (in thousands, except per share amounts)

Net sales ...............    $18,082      $20,332      $23,429     $ 12,202
Gross profit.............      2,534        4,986        5,146        1,303
Operating income (loss)..     (3,639)         484          724       (3,287)
                           -----------  ----------   ----------  -----------
Net income (loss) .......    $(3,391)        $387         $178     $ (3,267)
                           ===========  ==========   ==========  ===========
Net income (loss) per
 share - basic and diluted    ($0.24)       $0.03        $0.01       ($0.24)
                           ===========  ==========   ==========  ===========
Shares used in per share
 calculations - basic and
 diluted  ...............     13,761       13,761       13,761       13,761
                           ===========  ==========   ==========  ===========


                                       24
<PAGE>
                                            Quarter Ended
                           -------------------------------------------------
                            March 31,  December 31, September 30, June 30,
                              2000         1999        1999        1999
                           -----------  ----------   ----------  ----------
                                (in thousands, except per share amounts)

Net sales ...............    $19,278      $25,500      $15,961      $ 9,524
Gross profit (loss)......        397        5,510        2,887      (   977)
Operating income (loss)..    ( 4,686)       1,115       (1,167)     ( 6,889)
                           -----------  ----------   ----------  -----------
Net income (loss) .......   $( 4,757)    $( 1,628)     $(1,123)    $( 4,953)
                           ===========  ==========   ==========  ===========
Net income (loss) per
 share - basic and diluted    ($0.35)      ($0.12)      ($0.08)      ($0.36)
                           ===========  ==========   ==========  ===========
Shares used in per share
 calculations - basic and
 diluted  ...............      13,761      13,761       13,761       13,761
                           ===========  ==========   ==========  ===========


     Because of our fluctuation in sales, historical quarterly operating results
do  not  necessarily  reflect  management's  expectations  of  future  quarterly
operating  results.  Management  believes  that  future  operating  results will
fluctuate  on  a  quarterly  basis  due  to  a  variety  of  factors, including:

  --   Seasonal  cycles  associated  with  the  bicycle  industry,
  --   the  effects  of  weather  conditions  on  consumer  purchases,
  --   the  timing  of  orders  from  OEMs,  distributors,  and  IBDs,
  --   the  number  and  timing  of  new  product  introductions,
  --   changes  in  the  mix  of  products  ordered  and  re-ordered  by  OEMs,
       distributors,  and  IBDs.

     Management  anticipates that our sales will normally be lowest in our first
and  fourth  fiscal  quarters,  which end on June 30 and March 31, respectively.


INFLATION

      We  do  not  believe inflation has had a material impact on the Company in
the  past,  although there can be no assurance that this will be the case in the
future.


ITEM  7A.   QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

      We  considered  the  provision  of  Financial  Reporting  Release  No. 48,
"Disclosure  of  Accounting  Policies  for  Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information  about  Market  Risk  Inherent  in Derivative Financial Instruments,
Other  Financial  Instruments  and Derivative Commodity Instruments".  We had no
holdings  of derivative financial or commodity instruments at March 31, 2001. We
are  exposed  to financial market risks, including changes in interest rates and
foreign  currency exchange rates.  We believe that an increase in interest rates
would  not  significantly  affect  our net loss. The majority of our revenue and
capital  spending  is  transacted  in U.S. dollars, the exception being domestic
Taiwan  sales  from  our  Taiwanese  subsidiary.


ITEM  8.   FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

      See "Index to Consolidated  Financial Statements" on page 29 for a listing
of  the  consolidated  financial  statements  submitted  as part of this report.


                                       25
<PAGE>
ITEM  9.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL  DISCLOSURE

     None.

                               PART  III


ITEM  10.   DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     The  information  required  by  this  item  will  be contained in our Proxy
Statement  for  our Annual Meeting of Stockholders to be held on August 21, 2001
to  be  filed  with the Securities and Exchange Commission within 120 days after
March  31,  2001,  and  is  incorporated  herein  by  reference.


ITEM  11.   EXECUTIVE  COMPENSATION

     The  information  required  by  this  item  will  be contained in our Proxy
Statement  for  our Annual Meeting of Stockholders to be held on August 21, 2001
to  be  filed  with the Securities and Exchange Commission within 120 days after
March  31,  2001,  and  is  incorporated  herein  by  reference.


ITEM  12.   SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND MANAGEMENT

     The  information  required  by  this  item  will  be contained in our Proxy
Statement  for  our Annual Meeting of Stockholders to be held on August 21, 2001
to  be  filed  with the Securities and Exchange Commission within 120 days after
March  31,  2001,  and  is  incorporated  herein  by  reference.


ITEM  13.   CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     The  information  required  by  this  item  will  be contained in our Proxy
Statement  for  our Annual Meeting of Stockholders to be held on August 21, 2001
to  be  filed  with the Securities and Exchange Commission within 120 days after
March  31,  2001  and  is  incorporated  herein  by  reference.


                                    PART  IV


ITEM 14. EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES,  AND  REPORTS ON FORM 8-K

(a)(1)   See  page 28 for a listing of financial statements submitted as part of
         this  report.

(a)(2)   The  financial  statements  listed  on  the  accompanying  Index  to
         Consolidated  Financial Statements and Financial Statement Schedule are
         filed  as  part  of  this  report.

(a)(3)   The  following  exhibits  are  included  in  this  report:

  2      Form  of  Agreement  and  Plan of Merger between RSx Holdings, Inc. and
         RockShox,  Inc.  (1)

  3.1    Form  of Amended and Restated Certificate of Incorporation of RockShox,
         Inc.  (1)


                                       26
<PAGE>
  3.2    Form  of  Amended  and  Restated  Bylaws  of  RockShox,  Inc.  (1)

  4      Form  of  Common  Stock  Certificate  of  RockShox,  Inc.  (1)

 10.1    Management  Consulting  Agreement,  dated as of March 24, 1995, between
         TJC  Management  Corporation  and  RSx  Holdings,  Inc.  (1)

 10.2    Form  of  Registration  Rights  Agreement among RockShox, Inc., Stephen
         Simons,  Debra  Simons,  Paul  Turner  and  other  stockholders  named
         therein.  (1)

 10.3    Noncompetition  Agreement,  dated March 24, 1995, between RSx Holdings,
         Inc.  and  Stephen  Simons.  (1)

 10.4    Noncompetition  Agreement,  dated March 24, 1995, between RSx Holdings,
         Inc.  and  Debra  Simons.  (1)

 10.5    Noncompetition  Agreement,  dated March 24, 1995, between RSx Holdings,
         Inc.  and  Paul  Turner.  (1)

 10.6    Form  of  Indemnity  Agreement.  (1)

 10.7    Form  of Lease, dated as of March 7, 1997, between S. Stephen Nakashima
         and  RockShox,  Inc.  (2)

 10.8    Amended  and  Restated  RSx  Holdings,  Inc.  1996  Stock  Plan.  (1)

 10.9    Form  of First Amendment to Standard Industrial/Commercial Multi-Tenant
         Lease-modified  net,  dated  November  4,  1997,  between  S.  Stephen
         Nakashima  and  Sally  S.  Nakashima  and  RockShox,  Inc.  (3)

10.10    Standard Industrial Sublease, dated December 8, 1997, between RockShox,
         Inc.  and  First  American  Records  Management,  Inc.(4)

10.11    RockShox,  Inc.  1998  Stock  Option  Plan.(4)

10.12    Credit  agreement, dated December 10, 1999, between RockShox, Inc. and
         the  Wells  Fargo  Business  Credit.  (5)

10.13    Employment  agreement, dated December 23, 1999, between RockShox, Inc.
         and  Bryan  Kelln.  (5)

10.14    Revised  Credit  Agreement with Wells Fargo, dated June 29, 2000.  (6)

10.15    Lease  for  Colorado  Springs  facility,  dated  July  1,  2000.  (6)

10.16    Subfacility  Agreement  with  Wells  Fargo,  dated  June  15,  2001.

10.17    Lease  Termination  Agreement  for  San  Jose facility, dated April 30,
         2001.

10.18    Second  Amended  and  Restated Credit and Security Agreement with Wells
         Fargo,  dated  June  28,  2001

10.19    Export-Import  Bank  of  the  United  States  working Capital Guarantee
         Program  Borrower  Agreement  with  Wells  Fargo  dated  June 28, 2001.

10.20    Credit and Security Agreement with Wells Fardo Dated June 28, 2001.

 21      List  of  Subsidiaries  of  RockShox,  Inc.  (1)

 23      Consent  of  Ernst  &  Young  LLP.


                                       27
<PAGE>
 23.1    Report  of  PricewaterhouseCoopers LLP on Financial Statement Schedule.

 23.2    Consent  of  PricewaterhouseCoopers  LLP.
-----------------

     (1)  Previously  filed  with  the  Registration  Statement  on  Form S-1 of
          ROCKSHOX,  INC.  (Registration  No.  333-8069).

     (2)  Previously  filed  with Form 10-K of RockShox, Inc. for the year ended
          March  31,  1997.

     (3)  Previously  filed  with  Form  10-Q  of RockShox, Inc. for the quarter
          ended  December  31,  1997.

     (4)  Previously  filed  with Form 10-K of RockShox, Inc. for the year ended
          March  31,  1998.

     (5)  Previously  filed  with  Form  10-Q  of RockShox, Inc. for the quarter
          ended  December  31,  2000.


    (12)      (6)  Previously  filed  with  Form  10-Q of RockShox, Inc. for the
          quarter  ended
          June  30,  2000.

  (a)     Reports  on  Form  8-K

  (b)     No  reports  on  Form  8-K were filed by the Company during the fourth
          quarter  of  the  Company's  fiscal  year  ended  March  31,  2001.

  (c)     See  (a)(3) above for a listing of exhibits included as a part of this
          report.


                                       28
<PAGE>
                                 ROCKSHOX, INC.

                                    FORM 10-K

                           ITEMS 8, 14 (a) AND 14 (d)



INDEX  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  AND FINANCIAL STATEMENT SCHEDULE

1.    Consolidated  Financial  Statements


      Report  of  Ernst  &  Young  LLP,  Independent  Auditors . . . . . . .  30


      Report  of  PricewaterhouseCoopers  LLP,  Independent  Accountants . .  31

      Consolidated  Balance  Sheets  at  March  31,  2001  and  2000 . . . .  32

      Consolidated  Statements  of  Operations  for  the  Years  Ended
          March  31,  2001,  2000  and  1999 . . . . . . . . . . . . . . . .  33

      Consolidated  Statements  of  Stockholders'  Equity  for
          the  Three  Years  in  the  Period  Ended  March  31,  2001. . . . .34

      Consolidated  Statements  of  Cash  Flows  for  the  Years  Ended
          March  31,  2001,  2000  and  1999 . . . . . . . . . . . . . . . .  35

      Notes  to  Consolidated  Financial  Statements . . . . . . . . . . . .  37


2.    Consolidated  Financial  Statement  Schedule

      Schedule  II  Valuation  and  Qualifying  Accounts . . . . . . . . . .  51


                                       29
<PAGE>
                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Stockholders  and  Board  of  Directors
RockShox,  Inc.

We  have  audited the accompanying consolidated balance sheets of RockShox, Inc.
and  subsidiary  ("the  Company") as of March 31, 2001 and 2000, and the related
consolidated  statements of operations, stockholders' equity, and cash flows for
the  years  then ended. Our audits included the financial statement schedule II.
These  financial statements and schedule are the responsibility of the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  and  schedule  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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,  the financial statements referred to above present fairly, in
all  material respects, the consolidated financial position of RockShox, Inc. at
March  31, 2001 and 2000, and the consolidated results of its operations and its
cash  flows  for  the years then ended, in conformity with accounting principles
generally  accepted  in  the  United  States.  Also, in our opinion, the related
financial   statement  schedule,  when  considered  in  relation  to  the  basic
financial statements taken as a whole, presents fairly in all material respects,
the  information  set  forth  therein.

The accompanying financial statements have been prepared assuming that RockShox,
Inc.  will  continue as a going concern. As more fully described in Note 2 under
"Management's  Plans",  the  Company has incurred recurring operating losses. In
addition,  the  Company's  credit  facility has certain financial covenants that
must  be met during the term of the facility. These conditions raise substantial
doubt  about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future effects
on  the  recoverability  and  classification  of  assets  or  the  amounts  and
classification  of  liabilities  that  may  result  from  the  outcome  of  this
uncertainty.

                              /s/  Ernst  &  Young  LLP

Denver,  Colorado
May  10,  2001, except for footnote 13 as to which the date is June 28, 2001


                                       30
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS

To  the  Stockholders  and  Board of Directors of
RockShox,  Inc.:

In  our  opinion,  the  accompanying  consolidated  statements of operations, of
stockholders' equity and of cash flows for the year ended March 31, 1999 present
fairly,  in  all  material respects, the results of operations and cash flows of
RockShox,  Inc. and subsidiaries for the year ended March 31, 1999 in conformity
with  accounting  principles generally accepted in the United States of America.
These  financial  statements are the responsibility of the Company's management;
our  responsibility is to express an opinion on these financial statements based
on  our  audit.  We  conducted  our audit of these statements in accordance with
auditing  standards  generally  accepted  in the United States of America, which
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, assessing the accounting principles
used  and  significant  estimates made by management, and evaluating the overall
financial  statement  presentation.  We  believe  that  our  audit  provides  a
reasonable  basis  for  our  opinion.  We  have  not  audited  the  consolidated
financial  statements  of  RockShox, Inc. for any period subsequent to March 31,
1999.


/s/PricewaterhouseCoopers  LLP


San  Jose,  California
April  27,  1999


                                       31
<PAGE>
<TABLE>
<CAPTION>
                                 ROCKSHOX, INC.

                          CONSOLIDATED BALANCE SHEETS
              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                                               March 31,
                                                         ---------------------
                                                            2001        2000
                                                         ----------  ---------
<S>                                                      <C>         <C>
                          ASSETS
Current assets:
   Cash and cash equivalents...........................    $ 1,148      $2,832
   Accounts receivable, net of allowance for doubtful
      accounts $955 in 2001 and $1,132 in 2000.........     12,444      12,623
   Inventories.........................................      5,810       5,614
   Prepaid expenses and other current assets...........        801         380
   Deferred income taxes...............................         --       1,400
                                                         ----------  ----------
      Total current assets.............................     20,203      22,849
Property and equipment, net............................      9,309      12,567
Loan to related party..................................         15         200
Other assets...........................................        256         188
                                                         ----------  ----------
      Total assets.....................................    $29,783     $35,804
                                                         ==========  ==========


         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable....................................     $5,658      $6,207
   Accrued liabilities.................................      5,514       5,995
   Line of credit......................................      1,183          --
                                                         ----------  ----------
      Total current liabilities........................     12,355      12,202

Commitments and contingencies (Note 8)

Stockholders' equity:
Preferred stock, $0.01 par value:
   Authorized:  10,000,000 shares
   Issued and outstanding:  none                                --          --
Common stock, $0.01 par value:
   Authorized:  50,000,000 shares
   Issued and outstanding: 13,761,147 shares...........        138         138
Additional paid-in capital.............................     65,928      65,928
Distributions in excess of net book value..............    (45,422)    (45,422)
Retained earnings (accumulated deficit)................     (3,135)      2,958
Accumulated other comprehensive loss...................        (81)        --
                                                         ----------  ----------
      Total stockholders' equity.......................     17,428      23,602
                                                         ----------  ----------
      Total liabilities and stockholders' equity.......    $29,783     $35,804
                                                         ==========  ==========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       32
<PAGE>
<TABLE>
<CAPTION>
                                ROCKSHOX, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                       Years Ended March 31,
                                               ----------------------------------
                                                  2001       2000        1999
                                               ----------  ----------  ----------
<S>                                            <C>         <C>         <C>
Net sales.....................................   $74,045     $70,263    $ 86,863
Cost of sales.................................    60,076      62,446      71,000
                                               ----------  ----------  ----------
   Gross profit...............................    13,969       7,817      15,863
                                               ----------  ----------  ----------

Selling, general and administrative expense...    13,351      15,850      14,163
Research, development and engineering expense.     2,346       3,594       4,907
Restructuring and non-recurring...............     3,990          --        (541)
                                               ----------  ----------  ----------
   Operating expenses.........................    19,687      19,444      18,529
                                               ----------  ----------  ----------
   Loss from operations.......................    (5,718)    (11,627)     (2,666)
Interest income...............................        50          --         277
Interest expense..............................      (198)        (45)         --
Foreign currency gain.........................        81          --          --
                                               ----------  ----------  ----------
   Loss before income taxes...................    (5,785)    (11,672)     (2,389)
Provision for (benefit from)income taxes......       308         789        (669)
                                               ----------  ----------  ----------
   Net loss...................................   ($6,093)   ($12,461)    ($1,720)
                                               ==========  ==========  ==========

Net loss per share - basic and diluted........    ($0.44)     ($0.91)     ($0.13)
                                               ==========  ==========  ==========

Shares used in per share calculations - basic
            and diluted.......................    13,761      13,761      13,761
                                               ==========  ==========  ==========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       33
<PAGE>
<TABLE>
<CAPTION>
                                 ROCKSHOX,  INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN  THOUSANDS)



                                                            Distribu-
                                                             tions
                                                   Addi-    in Excess   Retained   Accumulated
                                 Common Stock     tional     of Net     Earnings     Other
                               -----------------  Paid-In     Book    (Accumulated Comprehensive
                                Shares   Amount   Capital     Value      Deficit)      Loss        Total
                               -------- -------- --------- ---------- ------------ ------------- ---------
<S>                            <C>      <C>      <C>       <C>        <C>          <C>           <C>

Balances, March 31, 1998.......  13,757 $    138   $65,910  $(45,422)     $17,139   $        --   $37,765
 Proceeds from exercise of
   stock options ..............       4       --        17        --           --            --        17
Tax benefits from
   disqualifying dispositions
   of common stock.............      --       --         1        --           --            --         1
Net loss and comprehensive
    loss.......................      --       --        --        --       (1,720)           --    (1,720)
                               -------- -------- --------- ---------- ------------ ------------- ---------
Balances, March 31, 1999.......  13,761      138    65,928   (45,422)      15,419            --    36,063

Net loss and comprehensive
     loss......................      --       --        --        --      (12,461)           --   (12,461)
                               -------- -------- --------- ---------- ------------ ------------- ---------
Balances, March 31, 2000.......  13,761      138    65,928   (45,422)       2,958            --    23,602

Net loss.......................                                            (6,093)                 (6,093)
Currency translation adjustment                                                             (81)      (81)
                                                               ---------
Comprehensive loss.............                                                                    (6,174)
                                ------- -------- --------- ---------- ------------ ------------- ---------
Balances, March 31, 2001 ......  13,761     $138 $  65,928  ($45,422)     ($3,135)         ($81)  $17,428
                               ======== ======== ========= ========== ============ ============= =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       34
<PAGE>
                                ROCKSHOX, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
                                                   Years Ended March 31,
                                               -----------------------------
                                                 2001       2000      1999
                                               --------- --------- ---------
Cash flows from operating activities:
   Net loss...................................  ($6,093) ($12,461)  ($1,720)
Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
   Reversal of restructuring and non-recurring
      charges.................................      --        --       (541)
   Depreciation ..............................    4,937     4,951     5,783
   Loss on disposal of fixed assets...........    1,963       531        --
   Provision for doubtful accounts............       23       500       226
   Provision for excess and obsolete
      inventories.............................      740     2,200     3,041
   Non-cash compensation......................      200        --        --
   Valuation allowance established against and
      changes in deferred income tax assets...       --     2,662       477
Changes in operating assets and liabilities:
   Income tax refunds received................    1,400
   Accounts receivable........................      156     1,989    (6,108)
   Inventories................................     (936)    1,360      (634)
   Prepaid expenses and other current assets..     (421)      287       296
   Accounts payable and accrued liabilities...   (1,030)     (500)     (958)
                                               --------- --------- ---------
    Net cash provided by (used in)
     operating activities.....................      939     1,519      (138)
                                               --------- --------- ---------
Cash flows from investing activities:
   Purchase of property and equipment.........   (3,655)   (2,442)   (6,643)
   Other long-term assets.....................      (83)       --        --
   Proceeds from disposal of fixed assets.....       13       200       (36)
   Loan to related party......................       --      (200)       --
                                               --------- --------- ---------
    Net cash used in investing activities.....   (3,725)   (2,442)   (6,679)
                                               --------- --------- ---------
Cash flows from financing activities:
   Proceeds from exercise of stock options ...       --        --        17
   Tax benefits from disqualifying
     dispositions of common stock.............       --        --         1
   Proceeds from short-term borrowings........    3,782     4,000     2,000
   Repayment of short-term borrowings and
     bank debt................................   (2,599)   (4,000)   (2,000)
                                               --------- --------- ---------
Net cash provided by financing activities.        1,183        --        18
                                               --------- --------- ---------
Effects of exchange rate on cash                    (81)       --        --
Net decrease in cash and cash equivalents.....   (1,684)     (923)   (6,799)
Cash and cash equivalents, beginning of
  period......................................    2,832     3,755    10,554
                                               --------- --------- ---------
Cash and cash equivalents, end of period......   $1,148    $2,832   $ 3,755
                                               ========= ========= =========


                                       35
<PAGE>
Supplemental disclosure of cash flow information:
     Income taxes paid..........................     $243       $--     $--
     Interest paid..............................     $198       $45     $21



              The  accompanying  notes  are  an  integral  part  of  these
                       consolidated  financial  statements.


                                       36
<PAGE>
                                ROCKSHOX,  INC.

              NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

1.    NATURE  OF  OPERATIONS:

      ROCKSHOX,  INC.  ("the  Company")  designs,  manufactures and markets high
performance  bicycle  suspension  products. The Company's products are primarily
sold  to  bicycle  manufacturers  ("OEMs"),  who  incorporate  ROCKSHOX  branded
components  as  part  of new, fully assembled mountain bikes sold worldwide, and
directly  to  independent  bicycle  dealers  ("IBDs")  and  through distributors
(together  with  IBDs, "the retail accessory market"). For the years ended March
31,  2001,  2000,  and  1999 approximately 77%, 79% and 85% respectively, of the
Company's  total  net  sales were to OEMs and the balance of the Company's total
net  sales  were  to  the  retail  accessory  market.

     MANAGEMENT'S  PLANS

     The  accompanying  consolidated  financial  statements  have  been prepared
assuming  the Company will continue as a going concern. The Company has incurred
a  net  loss  of  approximately  $6.1 million for the year ended March 31, 2001.
Continuation  of the Company as a going concern is dependent upon its ability to
generate  sufficient cash flow to fund working capital and to ultimately sustain
profitability.  The  consolidated  financial  statements  do  not  include  any
adjustments  that  might  be necessary if the Company is unable to continue as a
going  concern.

     The  Company  is  positioning itself to be able to generate sufficient cash
flow  to  fund  working capital by the end of fiscal year 2002 primarily through
continuing  cost  reduction  plans  and  borrowings  under  its  secured  credit
agreement. Should the Company require additional funding, management believes it
could obtain this funding from one or more of the following: a) additional asset
based  lending  facility;  b)  subordinated  debt  facility;  c) sale of assets.

     Management  believes these resources will be adequate to fund its operating
and  capital  requirements  through  the  end  of  fiscal  2002. There can be no
assurance  financing  will be available in amounts or on terms acceptable to the
Company,  if  at all. Should the Company be unsuccessful in its efforts to raise
capital,  management  may  be  required  to  modify  or  curtail  its  plans.

2.    SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

      PRINCIPLES  OF  CONSOLIDATION:

      The  consolidated financial statements include the accounts of the Company
and  its  wholly  owned  subsidiaries. All intercompany transactions and amounts
have  been  eliminated.

      USE  OF  ESTIMATES:

      The  preparation  of  financial  statements  in conformity with accounting
principles  generally  accepted in the United States requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and the 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.

      RISKS  AND  UNCERTAINTIES:

      Substantially  all  of  the  Company's  historical  revenues  have  been
attributable  to  sales of mountain bike suspension products and, therefore, any
material  decline  or  prolonged  lack of growth in the popularity of, or market
demand  for,  mountain  bike suspension forks or rear shocks, in general, or the
Company's  products,  in particular, could have a material adverse effect on the
Company  or  its  prospects. The markets for bicycle components, in general, and
bicycle  suspension products, in particular, are highly competitive. In order to
build  or  retain  its  market  share, the Company must continue to successfully
compete  in  the  areas  that  influence  the  purchasing  decisions  of  OEMs,
distributors,  IBDs and consumers, including design, price, quality, technology,
distribution,  marketing,  style,  brand  image  and  customer  service.

      The  Company  does  not currently have long-term contracts with any of its
vendors,  nor  does  the  Company currently have multiple vendors for all parts,
tooling, supplies or services critical to the Company's manufacturing processes.
Failure of a key supplier to meet the Company's product needs on a timely basis,
loss  of a key supplier or significant disruption in the Company's production or
distribution  activities  for any other reason, including an earthquake or other
catastrophic  event,  could have a material adverse effect on the Company or its
prospects.


                                       37
<PAGE>
      The  company  manufactures  product  in the United States, in addition the
Company  subcontracts  to  have  certain of its low-end products manufactured in
Taiwan.  The  bicycle  industry is, and many of the Company's OEM customers are,
highly  dependent  on  manufacturing  in overseas locations. Changes in economic
conditions,  currency  exchange rates, tariff regulations, local content laws or
other  trade  restrictions or political instability ("International Conditions")
could  adversely  affect  the cost or availability of products sold by or to the
bicycle  industry  as a whole and the Company's OEM customers in particular, any
of  which  could have a material adverse effect on the Company or its prospects.
In  addition,  insufficient international consumer demand for mountain bikes and
related  products,  including  the Company's products, whether due to changes in
International  Conditions,  consumer  preferences or other factors, could have a
material  adverse  effect  on  the  Company  or  its  prospects.

      CONCENTRATIONS OF CREDIT RISK AND CARRYING VALUE OF FINANCIAL INSTRUMENTS:

      Financial  instruments  that  potentially  expose  the  Company  to
concentrations  of  credit risk consist principally of trade accounts receivable
and  cash  and  cash  equivalents.  The  carrying  amounts  for  cash  and  cash
equivalents,  accounts  receivable,  accounts  payable  and  accrued liabilities
approximate  their  estimated  fair  values.

       The  Company, which performs ongoing credit evaluations of its customers,
generally  does  not  require collateral, and maintains allowances for potential
credit  losses.  At  March 31, 2001 and 2000, one OEM customer accounted for 11%
and  23%,  respectively, of accounts receivable. At March 31, 2001 and 2000, one
OEM  customer accounted for 11% and 15%, respectively, of revenues. For the year
ended  March  31,  1999 two customers accounted for 17% and 16% of the Company's
revenue.

      CASH  AND  CASH  EQUIVALENTS:

      The Company considers all investments purchased with original or remaining
maturities  of  three  months  or  less  at  the  date  of  purchase  to be cash
equivalents.  Substantially  all  cash  balances  are held in either a financial
institution  domiciled  in  the  United  States,  or  an  affiliated  financial
institution  in  Taiwan.

     The  financial  statements  of the Company's subsidiary located outside the
United  States are measured using the local currency as the functional currency.
Assets  and  liabilities  of  this  subsidiary  are  translated  at the rates of
exchange  at  the  balance sheet date. The resultant translation adjustments are
included  in  equity  adjustment  from  translation,  a  separate  component  of
stockholders'  equity.  Income and expense items are translated at average rates
of  exchange.  Gains  and  losses  on  foreign  currency  transactions  of  this
subsidiary  are  included  in  net  earnings  (loss).

      INVENTORIES:

      Inventories  are  stated  at  the lower of cost, determined on a first-in,
first-out  basis,  or  at  market.

      PROPERTY  AND  EQUIPMENT:

      Property and equipment are recorded at cost and are depreciated over their
estimated  useful  lives  using  the  straight  line method. Major additions and
betterments are capitalized, while replacements, maintenance and repairs that do


                                       38
<PAGE>
not improve or extend the life of the assets are charged to expense as incurred.
Leasehold  improvements  are  amortized  over  the  length of the lease or their
estimated  useful  life,  whichever is less. In the period assets are retired or
otherwise  disposed  of,  the  costs  and  related  accumulated depreciation and
amortization  are removed from the accounts, and any gain or loss on disposal is
included  in  results  of  operations.

                                                Depreciable
                                                  life
                                                -----------
Computer  equipment,
  furniture  and  fixtures . . . . . . . . . .  3-7  years
Machinery  and  equipment. . . . . . . . . . .  3-10 years
Tooling  . . . . . . . . . . . . . . . . . . .  1-2  years
Leasehold  improvements  . . . . . . . . . . .  up to 7 years

      LONG-LIVED  ASSETS:

      The  Company  periodically  evaluates  the  recoverability  of  long-lived
assets. The Company recognizes an impairment charge when the future undiscounted
cash  flows  from  each  asset  is  estimated  to be insufficient to recover its
related  carrying  value.

     REVENUE  RECOGNITION:

      The  Company  recognizes revenue, net of allowances for estimated returns,
when  title  transfers,  upon  shipment  of  product, and when collectibility is
reasonably  assured.

      RESEARCH,  DEVELOPMENT  AND  ENGINEERING:

      Research,  development  and engineering expenses are charged to operations
as  incurred.

      WARRANTY:

      All of the Company's suspension products are covered by a one-year limited
warranty.  Estimated  future  costs  of  repair,  replacement  or  customer
accommodation  are  accrued and charged to cost of sales based upon estimates of
future  product  returns  and repair costs derived from historical product sales
information and analyses of historical data. In estimating the level of accrual,
the  Company's  management  makes  assumptions  relating to the level of product
returns  and  costs  of  repair.  Management  performs  quarterly reviews of the
adequacy of these assumptions based on historical experience, adjusting warranty
reserves  for any warranty matters whose warranty period have lapsed, or matters
that have become inactive, as well as repair trends indicating that new warranty
accruals  are  required.

     On October 5, 2000, the Company issued a stop sell notice for 2001 Judy TT,
Judy  TT  Special,  Jett  and  Metro  front  suspension forks.  Working with the
Consumer  Product  Safety  Commission,  the  Company  subsequently implemented a
recall  for  these  forks.  The  accrued  recall costs of $2.0 million, recorded
within  cost  of  sales for the second quarter of fiscal 2001, were subsequently
adjusted  to  a  cumulative  total  of  $1.9  million  in  the  fourth  quarter.


                                       39
<PAGE>
      ADVERTISING  COSTS:

      Advertising costs are charged to operations as incurred. Advertising costs
were  $1,475,000, $1,871,000, and $1,701,000 for the years ended March 31, 2001,
2000,  and  1999,  respectively.

      INCOME  TAXES:

      The Company accounts for income taxes in accordance with the provisions of
Statement  of  Financial  Accounting  Standards  No. 109, "Accounting for Income
Taxes"  ("SFAS  109"),  which  requires  the  use  of  the  liability  method in
accounting  for  income  taxes.  Under  this  method,  deferred  tax  assets and
liabilities  are measured based upon differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes using enacted tax rates and laws that will be in effect when
the  differences  are  expected  to  reverse.

      COMPREHENSIVE  INCOME:

      Statement  of  Financial  Accounting  Standards (SFAS) No. 130, "Reporting
Comprehensive  Income"  establishes  standards  for  reporting  and  display  of
comprehensive income and its components (revenue, expenses and gains and losses)
in  a  full  set  of financial statements.  There was no impact on the Company's
financial  position,  results  of  operations  or cash flows for the years ended
March 31, 2000 and 1999; comprehensive and net loss were the same.  For the year
ended March 31, 2001, comprehensive loss included the net loss of $6,093,000 and
a  foreign  currency  translation  adjustment  of  $81,000.

     RECENT  ACCOUNTING  PRONOUNCEMENTS:

     In  June 1998, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standard  No.  133,  or  FAS  No.  133,  "Accounting  for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting  standards for derivative instruments and hedging activities.  FAS 133
requires  that all derivatives be recognized at fair value in the balance sheet,
and  that  the  corresponding  gains  or  losses  be  reported as a component of
comprehensive  income.  The  Company  adopted FAS 133, as amended, in the fiscal
year  ended  March  31,  2001;  that adoption of FAS 133 did not have a material
impact  on  our  financial  position  or  results  of  operations.

     In  December  1999,  the  Securities  and  Exchange Commission issued Staff
Accounting  Bulletin, or SAB 101, "Revenue Recognition in Financial Statements".
The  Company  adopted  SAB  101  in  the  fiscal year ended March 31, 2001. This
adoption  of  SAB  101 did not have a material impact on the Company's financial
position  or  results  of  operations.

    In  March  2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation  No.  44,  "Accounting  for  Certain Transactions Involving Stock
Compensation  -  an  interpretation of APB Opinion No. 25." The adoption of this
interpretation  did  not  have  a  material  impact  on  the Company's financial
position  or  results  of  operations.

     EARNINGS  PER  SHARE:

     Basic  and  diluted  earnings  per share ("EPS") are computed in accordance
with  SFAS  128,  "Earnings Per Share". Basic EPS is computed by dividing income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for that period. Diluted EPS is computed giving effect to all


                                       40
<PAGE>
dilutive  potential  common  shares  that  were  outstanding  during the period.
Dilutive  potential  common  shares, of which there were none in the years ended
March  31,  2001,  2000  and 1999, consist of incremental common shares issuable
upon  exercise  of  stock  options and warrants for all periods. As of March 31,
2001,  2000,  and  1999  options  to  purchase 1,939,380, 918,686, and 1,200,069
shares, respectively, were not included in the earnings per share calculation as
the  effect  was  anti-dilutive.

STOCK-BASED  COMPENSATION

      The  Company accounts for employee stock options under APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and provides pro forma disclosure in
Note  9 to the financial statements as if the measurement provisions of SFAS No.
123  ("SFAS  123")  "Accounting for Stock-Based Compensation," had been adopted.

3.     RESTRUCTURING  AND  NON-RECURRING:

      Restructuring  and  non-recurring expenses (income) comprise the following
(IN  THOUSANDS):

                                             Years Ended March 31,
                                       --------------------------------
                                          2001       2000       1999
                                       ---------  ----------  ---------

Relocation expenses .................. $   3,014  $       --  $     --

Reversal of restructuring plan charges        --          --      (541)
Write down of equipment related to
  relocation..........................       976          --        --
                                       ---------  ---------- ----------
                                       $   3,990          --     ($541)
                                       =========  ========== ==========


     During fiscal year 2001, the Company recorded charges totaling $4.0 million
related  to  the  one-time relocation expenses incurred for moving the Company's
operations  to  Colorado  Springs,  Colorado. The sales, marketing, research and
development,  information  technology,  finance,  and  human resources divisions
moved  from  the  San Jose area, to a leased location in Colorado Springs in the
summer  of 2000.  The Company's assembly and distribution operations remained at
its  San  Jose  until they were relocated to Colorado Springs in April 2001. The
Company  expects  to complete its planned relocation by the summer of 2001, at a
total  cost  of  approximately  $5.0  million.

   During  fiscal  year  1999, the Company reversed a $541,000 accrued liability
primarily  related  to  lower  than  expected  severance  costs  and  equipment
write-downs.  This  reversal  represents  the unused portion of the $2.7 million
recorded during fiscal year 1998 for the restructuring program of that year.  No
such  charges  or  credits  were  recorded  during  2000.

4.     INVENTORIES, NET OF ALLOWANCE FOR EXCESS AND OBSOLESCENCE (IN THOUSANDS):


                                              March 31,
                                       ----------------------
                                           2001       2000
                                       ----------  ----------
     Raw materials ..................  $    4,678  $    3,779
     Finished goods .................       1,132       1,835
                                       ----------  ----------
                                       $    5,810  $    5,614
                                       ==========  ==========


                                       41
<PAGE>
     Any  misjudgment  by  the Company or any of its OEM customers of the demand
for  any  of its respective products may cause the Company's excess and obsolete
inventory  to  exceed  estimated  allowances for such inventory. The reserve for
excess  inventory and obsolescence at March 31, 2001 and March 31, 2000 was $2.6
million  and  $3.9  million,  respectively.

5.    PROPERTY  AND  EQUIPMENT,  NET  (IN  THOUSANDS):


                                            March 31,
                                      ---------------------
                                         2001        2000
                                      ---------- ----------

 Computer equipment,
   furniture and fixtures............    $5,769     $6,045
 Machinery and equipment.............    12,097     12,685
 Tooling.............................    10,689      9,610
 Leasehold improvements..............       675      1,460
                                      ---------- ----------
                                         29,230     29,800
 Less: accumulated depreciation
   and amortization..................   (20,736)   (18,035)
 Construction in progress............       815        802
                                      ---------- ----------
                                        $ 9,309    $12,567
                                      ========== ==========

     Depreciation  and  amortization  expense  on property and equipment for the
years  ended  March  31,  2001,  2000  and  1999 was $4,937,000, $4,951,000, and
$5,783,000,  respectively.

6.    ACCRUED LIABILITIES (IN THOUSANDS):

                                            March 31,
                                      ---------------------
                                         2001        2000
                                      ---------- ----------

   Accrued payroll and benefits......    $1,629     $1,525
   Accrued warranty..................     1,676      1,861
   Accrued expenses..................       670        832
   Legal and professional accruals...       365        266
   Product liability insurance.......       348        278
   Foreign taxes payable.............       300         --
   Accrued royalties.................       296        244
   Deposits owed to sublessees.......       221        221
   Accrued rebates...................         9        768
                                      ---------- ----------
                                         $5,514     $5,995
                                      ========== ==========


                                       42
<PAGE>
      The  Company  had  $1,676,000  and $1,861,000 in accrued warranty costs at
March  31,  2001  and  2000,  respectively.  There can be no assurance that such
accrued  liabilities  may not change in the future or that future warranty costs
for  sales  made through such dates will not be greater than the amounts accrued
by  the  Company on its consolidated financial statements, either of which could
have a material adverse effect on the Company or its prospects. No provision for
these  possible  excess  warranty  costs  has  been recorded in the accompanying
financial  statements.

7.     RELATED  PARTY  TRANSACTIONS:

LOAN  TO  RELATED  PARTY:

     Pursuant  to  his  employment  contract,  on  January  24, 2000 the Company
granted  President  and  Chief   Executive  Officer,  Bryan  Kelln,  a  $200,000
interest-free  loan for a three-year period. Forgiveness of the loan from fiscal
year  to  fiscal  year  was at the discretion of the Board of Directors based on
performance.  On February 10, 2001, the Board approved forgiveness of the entire
principal  balance  and the taxes associated with the loan, totaling $361,000 in
compensation.  The  forgiveness  was  in  recognition  of  Mr.  Kelln's  overall
leadership.  Specifically,  the immediate recognition of the need to restructure
the  business,   the   planning   and  execution  of  the  business  relocation,
restructuring  and  downsizing  from  California  to  Colorado, the planning and
execution  of the global product recall, and for the bottom line, year-over-year
improvement  of nearly $12 million (before the recall and restructuring charges)
during  his  first  year  of  leadership

     The remaining loan to related party is a $15,000 interest-bearing loan to a
Vice  President  in  association  with  his  move to Colorado Springs, which the
Company  anticipates  to  be  repaid  within  the  following  year.

     CONSULTING  AND  EMPLOYMENT  AGREEMENTS:

     Prior  to  its initial public offering, the Company had entered into annual
employment  agreements  (the  "Employment Agreements") with the Company's former
President  and  its former Vice President of Advanced Research, and a management
consulting  agreement  (the  "Consulting  Agreement")  with  The  Jordan Company
("Jordan"),  whose  principals are stockholders of the Company.  Pursuant to his
respective  Employment  Agreement,  each  of the former President and the former
Vice  President  of  Advanced  Research  received  an  annual salary of $250,000
through  March  31,  2000,  the  final  termination  date  of  each  agreement.

     The  Consulting  Agreement  expired  April  1, 2000. Under the terms of the
Consulting  Agreement,  an  affiliate  of  Jordan  was  entitled  to a quarterly
consulting  fee  of  $62,500,  potential  fees  relating  to  certain  future
transactions  and  reimbursement  for  any  reasonable  expenses.

The  Company  has  no  further  obligations  related  to  either  the Employment
Agreement  or  the  Consulting  Agreement.

      INVENTORY  PURCHASES:

      For  the  years  ended  March  31,  2001,  2000 and 1999, the Company paid
$851,000,  $1,622,000,  and  $1,796,000,  respectively,  to  a  supplier  of raw
materials.  Prior  to  March 18, 1994, the former President of the Company owned
50%  of  the common stock of this supplier. The former President sold such stock
on  March  18,  1994.  The former President provides consulting services to this
supplier,  in consideration of which the former President is entitled to receive
certain  payments  through  2002.


                                       43
<PAGE>
8.    COMMITMENTS  AND  CONTINGENCIES:

      COMMITMENTS:

      The  Company  leases its manufacturing and sales facilities and certain of
its  equipment under noncancelable operating leases that expire at various times
through  2011.  Certain of these leases require escalating monthly payments and,
therefore,  periodic  rent expense is being recognized on a straight-line basis.
Under  these leases, the Company is responsible for maintenance costs, including
real  property  taxes,  utilities and other costs. Also, certain of these leases
contain  renewal  options.  The  Company had subleased their former headquarters
facility  starting in August 2000, as the company relocated to Colorado Springs.
The  lease  and  respective  sublease  for  that facility expired in April 2001.

      Total  rent  expense  for these leases for the years ended March 31, 2001,
2000  and  1999  was  $1,762,000,  $1,490,000  and  $1,555,000,  respectively.
Additionally,  the  Company  has  a $1.0 million letter of credit outstanding as
collateral  for  the  Colorado  Springs  facility  lease.  This letter of credit
reduces  the  Company's borrowing availability on its existing line of credit by
the  full  amount  outstanding.

     Following  is  a  summary, by fiscal year, of future minimum lease payments
under  operating  leases  at  March  31,  2001  (in  THOUSANDS):


                                       Operating
                                         Lease
 Fiscal Year                            Payments
                                       ---------
  2002...............................    $1,012
  2003...............................     1,189
  2004...............................       712
  2005...............................       714
  2006...............................       748
  Thereafter.........................     3,978
                                       ---------
  Total minimum lease payments.......    $8,353
                                       =========

     As of March 31, 2001, the Company had purchase commitments of approximately
$600,000,  primarily  for  tooling  and  machinery  to  be used in manufacturing
beginning  in  fiscal  2002.

      LEGAL  PROCEEDINGS:

      The Company is involved in certain legal matters in the ordinary course of
business  including  the  alleged  infringement  of  a  competitor's  patent. No
provision for any liability that may result upon the resolution of these matters
has  been  made  in  the  accompanying financial statements nor is the amount or
range of possible loss, if any, reasonably estimable.  Accordingly, the ultimate
resolution  of these matters may have a material adverse effect on the Company's
financial  position,  results  of  operations  and  cash  flows.


                                       44
<PAGE>
9.    STOCKHOLDERS'  EQUITY:

      STOCK  OPTION  PLAN:

      In  May  1996,  the Company adopted the Amended and Restated RSx Holdings,
Inc.  1996  Stock  Plan (such plan, as amended, the "1996 Stock Plan"). The 1996
Stock  Plan  provides for the issuance of up to a maximum of 1,279,020 shares of
common  stock pursuant to awards under the 1996 Stock Plan. Under the 1996 Stock
Plan, incentive stock options may be granted only to employees of the Company or
any  parent  or  subsidiary  thereof,  and non-statutory stock options and stock
purchase  rights  may  be granted to employees and directors of, and consultants
to,  the  Company  or  any  parent  or  subsidiary  thereof.

      In  February  1998, the Company's Board of Directors adopted the ROCKSHOX,
INC.  1998 Stock Option Plan (the "1998 Stock Plan," and, together with the 1996
Stock  Plan,  the  "Plans"),  which  was  subsequently approved by the Company's
stockholders in August 1998. The 1998 Stock Plan provides for the issuance of up
to a maximum of 300,000 shares of common stock pursuant to awards under the 1998
Stock  Plan.  Under  the 1998 Stock Plan, incentive stock options may be granted
only  to  employees  of  the  Company  or  any parent or subsidiary thereof, and
non-statutory  stock  options  and  stock  purchase  rights  may  be  granted to
employees  and  directors  of,  and consultants to, the Company or any parent or
subsidiary  thereof.

      Under  the  Company's  stock  option  plans, options become exercisable at
dates and in amounts as specified by the Board of Directors and generally expire
ten  years from the date of grant. Options are generally granted to employees at
prices  not  less  than  fair  market  value  on  the  date  of grant and become
exercisable  over  a  period  of  between  three  to  five  years.

     The  following  is  a  summary  of  activity  of  the  Plans:

                               Shares      Number                     Weighted
                              Available      of                        Average
Outstanding Options           for Grant    Shares    Exercise  Price    Price
--------------------------  -----------  ----------  ---------------  ---------

Balances, March 31, 1998..     290,171   1,151,613   $4.39 -  $15.00      $7.87
Options granted...........    (623,524)    623,524   $1.88 -  $ 7.13      $3.87
Options exercised.........         --       (3,916)       $4.39           $4.39
Options cancelled.........     571,152    (571,152)  $1.88 -  $15.14      $8.98
                            -----------  ----------  ---------------  ---------
Balances, March 31, 1999..     237,799   1,200,069   $1.88 -  $15.14      $5.28
Options granted...........    (625,001)    625,001   $1.02 -  $ 1.78      $1.71
Options exercised.........         --          --          --               --
Options cancelled.........     906,384    (906,384)  $1.02 -  $15.00      $5.39
                            -----------  ----------  ---------------  ---------
Balances, March 31, 2000       519,182     918,686   $1.02 -  $15.14      $2.74
Options reserved               998,000
Options granted...........  (1,263,633)  1,263,633   $0.47  -  $0.84      $0.79
Options exercised.........         --          --          --               --
Options cancelled.........     242,939    (242,939)  $0.47 -  $15.14      $3.17
                            -----------  ----------  ---------------  ---------
Balances, March 31, 2001       496,488   1,939,380   $0.47 -  $15.00      $1.38
                            ===========  ==========  ===============  =========


                                       45
<PAGE>
     During  the  quarter  ended  June  30,  1998, the Board of Directors of the
Company  approved  the cancellation of the majority of outstanding stock options
held  by  mid-  and  lower-level  employees  with an exercise price ranging from
$13.06 to $15.14 per share and the re-grant of options to purchase an equivalent
number  of  shares at $4.75 per share.  A total of 252,975 options were canceled
and  re-granted.

     At  March  31,  2001,  2000,  and  1999,  278,716,  99,596,  and  350,014,
outstanding  options  were  exercisable  under  the  Plans,  at weighted average
exercise  prices  of  $2.59,  $4.89,  and  $5.57,  respectively.

      As  discussed  in  Note  2, the Company continues to account for the Plans
in  accordance  with APB 25. Consistent with the provisions of SFAS No. 123, the
Company's  net  loss  and net loss per share would have been adjusted to the pro
forma  amounts  indicated  below  (IN  THOUSANDS,  EXCEPT  PER  SHARE  AMOUNTS):


                                                       Years Ended March 31,
                                                  -----------------------------
                                                    2001       2000      1999
                                                  --------- --------- ---------

Net (loss)available to common stockholders -
  as reported....................................  ($6,093) ($12,461)   ($1,720)
 Net (loss)available to common stockholders -
  pro forma......................................  ($7,161) ($13,317)   ($3,428)
Net (loss) per share - basic as reported.........   ($0.44)   ($0.91)    ($0.13)
Net (loss) per share - diluted as reported.......   ($0.44)   ($0.91)    ($0.13)
Net (loss) per share - basic pro forma...........   ($0.52)   ($0.97)    ($0.25)
Net (loss) per share - diluted pro forma.........   ($0.52)   ($0.97)    ($0.25)


      The  above pro-forma disclosures are not necessarily representative of the
effects on reported net income (loss) for future years. The aggregate fair value
and  weighted average fair value per share of options granted in the years ended
March 31, 2001, 2000, and 1999 were $1.1 million, $424,000, and $1.7 million and
$.84,  $1.44,  and  $3.69,  respectively. The fair value of each option grant is
estimated  on the date of grant using the Black-Scholes model with the following
weighted  average  assumptions:

                                                   Years Ended March 31,
                                             -----------------------------------
                                                2001         2000        1999
                                             ----------- ----------- -----------

Risk-free interest rate...................       4.5%        6.0%    4.34%-5.58%
Expected life.............................       3.5         3.5         3.5
Dividend rate.............................        --          --          --
Expected volatility.......................       187%        109%        125%


     The  options  outstanding  and  currently  exercisable by exercise price at
March  31,  2001  were  as  follows:


                                       46
<PAGE>
                                                           Options Currently
                           Options Outstanding                 Exercisable
                    -----------------------------------  ----------------------
                                  Weighted
                                   Average    Weighted                Weighted
                                  Remaining    Average                 Average
    Range of          Number     Contractual  Exercise     Number     Exercise
  Exercise Prices   Outstanding  Life (Years)   Price    Exercisable    Price
------------------- -----------  -----------  ---------  -----------  ---------

  $0.47  -   $0.84   1,196,118         9.16      $0.80           --      $  --
  $1.02  -   $1.88     567,001         8.61       1.76      187,417       1.77
  $2.28  -   $3.84      72,500         7.65       2.80       36,250       2.80
  $4.75  -   $4.75      91,586         7.18       4.75       45,859       4.75
  $7.13  -  $15.00      12,175         6.83       7.92        9,190       7.96
                    -----------                          -----------
                     1,939,380         8.88      $1.38      278,716      $2.59
                    ===========                          ===========



10.   INCOME  TAXES:

      The  components  of  the  provision for (benefit from) income taxes, which
arise  from  domestic  and  Taiwanese  income,  are  summarized  as  follows (IN
THOUSANDS):


                                               Years Ended March 31,
                                         -------------------------------
                                            2001       2000       1999
                                         ---------  ---------  ---------
Current:
      State.........................     $     --   $     --   $     --
      Federal.......................           --     (1,873)    (1,146)
      Foreign.......................          308         --         --
                                         ---------  ---------  ---------
                                              308     (1,873)    (1,146)
                                         ---------  ---------  ---------
Deferred:
      State.........................         (260)    (  346)       153
      Federal.......................       (1,003)    (3,967)       324
                                          --------  ---------  ---------
                                           (1,263)    (4,313)       477
      Change in valuation allowance         1,263      6,975         --
                                         ---------  ---------  ---------
                                               --      2,662        477
                                         ---------  ---------  ---------
                                         $    308   $    789     ( $669)
                                         =========  =========  =========

      The  principal  items  accounting  for the difference between income taxes
computed  at the U.S. statutory rate and the provision for (benefit from) income
taxes  reflected  in  the  statements  of  operations  are  as  follows:


                                       47
<PAGE>
                                               Years Ended March 31,
                                         -------------------------------
                                            2001      2000       1999
                                         ---------  ---------  ---------

United States statutory rate............   (34.0%)    (34.0%)    (34.0%)

States taxes, net of federal
    benefit ............................     0.3%      (2.0%)      4.9%
Foreign tax rate, Taiwan................     5.3%        --          --
Reversal of tax liability under statute
    of limitations......................      --      (14.4%)        --
Change in valuation allowance...........    33.3%      59.8%         --
Other ..................................     0.4%      (2.6%)      1.1%
                                         ---------  ---------  ---------
                                             5.3%       6.8%     (28.0%)
                                         =========  =========  =========

Deferred  income  taxes  reflect  the  net  tax effects of temporary differences
between  the  carrying amounts of assets and liabilities for financial reporting
purposes  and  the  amounts  used  for  income  tax purposes. The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets  and  liabilities  are  as  follows  (IN  THOUSANDS):

                                                          March 31,
                                                    -------------------
                                                      2001      2000
Deferred tax assets:                                --------  ---------

Allowance for doubtful accounts...................  $   312   $    396
Allowance for excess and obsolete inventory.......      931      1,461
Accrued warranty..................................      704        671
Accrued liabilities...............................      107      1,000
Net operating loss carryovers and tax credits.....    6,418      4,928
                                                     -------  ---------
Total deferred tax asset..........................    8,472      8,456
Valuation allowance...............................   (8,238)    (6,975)
Deferred tax liabilities..........................     (234)       (81)
                                                    --------  ---------
Net deferred tax asset............................  $    --   $  1,400
                                                    ========  =========

     Deferred  tax assets have been offset by a valuation allowance due to risks
and  uncertainties  surrounding the Company's ability to generate future taxable
income.  The valuation allowance has been established to the extent net deferred
tax  assets,  which consist primarily of net operating losses, cannot be carried
back and utilized against prior year taxable income, and increased by $1,263,000
for  the  year  ended  March  31,  2001  to  $8,238,000.

     At  March  31,  2001,  the  Company  has  net operating loss carryovers for
federal  and  state  income tax purposes of approximately $18.5 million and $7.5
million, respectively, which expire in 2004 through 2006 for state purposes, and
2020  through  2021,  for  federal  purposes.

     Because  of  the  "change  in ownership" provisions of the Internal Revenue
Code of 1986, a portion of the Company's net operating loss carryforwards may be
subject  to  an  annual  limitation  regarding their utilization against taxable
income  in  future  periods.  As a result of the annual limitation, a portion of
these  carryforwards  may  expire before ultimately becoming available to reduce
future  income  tax  liabilities.

     Undistributed  earnings  of  the  Company's  foreign subsidiary amounted to
approximately  $2.0  million  at  March  31,  2001.  Because  those earnings are
considered  to  be permanently invested, no provision for U.S. federal and state
income  taxes  on  those  earnings has been provided. Upon distribution of those


                                       48
<PAGE>
earnings  in the form of dividends or otherwise, the Company would be subject to
both  U.S.  income  taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to the various foreign countries. Determination of the
amount  of  unrecognized  deferred  U.S. income tax liability is not practicable
because  of  the  complexities  associated  with  its  hypothetical calculation.
However,  unrecognized  foreign  tax  credit carryforwards would be available to
reduce  some  portion  of  the  U.S.  liability.

11.   EMPLOYEE  BENEFIT  PLAN:

      The Company has established a defined contribution retirement plan that is
intended to qualify under Section 401 of the Internal Revenue Code ("the Plan").
The Plan covers substantially all officers and employees of the Company. Company
contributions  to  the  Plan  are  determined  at the discretion of the Board of
Directors.  For  the  years  ended  March  31,  2001,  2000,  and  1999, Company
contributions  amounted  to  approximately  $75,000,  $94,000,  and  $87,000,
respectively.

12.   BUSINESS  SEGMENT  AND  GEOGRAPHICAL  INFORMATION:

      The  Company  currently  operates  in  one  industry  segment, the bicycle
industry,  for  financial  reporting  purposes,  and  uses  one  measure  of
profitability for its business. The Company markets its products to customers in
the  United  States,  Europe  and Asia.  Substantially all long-lived assets are
maintained in the United States.  Revenue information by geographic area, all of
which  are  denominated  in  U.S.  dollars,  are  as  follows  (IN  THOUSANDS):


                                              Years Ended March 31,
                                         --------------------------------
                                            2001        2000       1999
                                         ---------- ---------- ----------

Asia .................................     $29,041    $26,881    $32,176
Europe ...............................      21,754     23,475     25,165
United States.........................      19,556     17,364     27,604
Other ................................       3,694      2,543      1,918
                                         ---------- ---------- ----------
                                           $74,045    $70,263    $86,863
                                         ========== ========== ==========


13.   LINE  OF  CREDIT:

      On  June  29,  2000,  the  Company entered into a revised credit agreement
providing  for  borrowings  up  to  $5.0  million.  Any  outstanding amounts are
collateralized  primarily  by  the  Company's  accounts  receivables, inventory,
equipment  and  intangibles,  and  bearing interest at a base interest rate plus
1.375%  annually  (9.375% at March 31, 2001).  The terms of the credit line also
restricts the payment of cash dividends.  The outstanding borrowings against the
credit  facility  as  of  March  31,  2001  were $1.2 million, and there were no
outstanding  borrowings  as  of March 31, 2000.  Additionally, the Company has a
$1.0 million letter of credit outstanding as collateral for the Colorado Springs
facility  lease.  This  letter  of  credit  reduces  the  Company's  borrowing
availability  by  the  full  amount  outstanding.  The  existing  line of credit
terminates  on  December  10,  2001.

     The  Company  obtained a waiver from the lender for being out of compliance
on  its  quarterly  debt  covenants at December 31, 2000 and March 31, 2001, due


                                       49
<PAGE>
primarily  to expenses associated with the 2001 recall that were not anticipated
at  the  time the original covenants were set.  The waiver was for each of those
periods  on  a  stand-alone  basis,  and  no  waiver  exists for future periods.

     Effective  June  28,  2001, the  Company  entered into an amended, expanded
credit  facility in  the amount of $10 million with the existing lender (the New
Facility)  under  terms  substantially  similar  to  the  previous facility. Any
outstanding  amounts  bear interest at a base interest rate plus .725% annually.
The  New  Facility  terminates  on  December  10,  2003.

14.  QUARTERLY FINANCIAL DATA - UNAUDITED (in thousands, except per share data):


                            ---------------------------------------------------
                             March 31,  December 31,  September 30,   June 30,
 Quarter Ended                  2001       2000           2000          2000
                            ----------  ------------  -------------  ----------
                                (in thousands, except per share amounts)

Net sales ...............   $  18,082   $    20,332   $     23,429   $  12,202
Gross profit.............       2,534         4,986          5,146       1,303
Operating income (loss)..      (3,639)          484            724      (3,287)

Net income (loss) .......   $  (3,391)  $       387   $        178   $  (3,267)
                            ==========  ============  =============  ==========
Net income (loss) per
 share - basic and diluted     ($0.24)  $      0.03   $       0.01      ($0.24)
                            ==========  ============  =============  ==========
Shares used in per share
 calculations - basic and
 diluted ................      13,761        13,761         13,761      13,761
                            ==========  ============  =============  ==========

                            ----------------------------------------------------
Quarter Ended                March 31,   December 31,  September 30,    June 30,
                               2000         1999         1999            1999
                            -----------  ------------  -------------  ----------
                                  (in thousands, except per share amounts)

Net sales ...............   $   19,278   $    25,500   $     15,961   $   9,524
Gross profit (loss)......          397         5,510          2,887        (977)
Operating income (loss)..      ( 4,686)        1,115         (1,167)     (6,889)

Net (loss)...............   $  ( 4,757)  $    (1,628)  $     (1,123)  $  (4,953)
                            ===========  ============  =============  ==========
Net (loss) per share -
  basic and diluted......       ($0.35)       ($0.12)        ($0.08)     ($0.36)
                            ===========  ============  =============  ==========
Shares used in per share
 calculations - basic and
 diluted.................       13,761        13,761         13,761      13,761
                            ===========  ============  =============  ==========


     During  the  fourth  quarter  of fiscal year 2001, the Company recorded two
significant adjustments.  One adjustment related to underburdened standard labor
rates  and  related  overhead. This adjustment reduced fourth quarter results by
approximately  $317,000.  The  other  adjustment  related  to the overaccrual of
anticipated  bonus  payouts  that  were recorded throughout the fiscal year at a
higher  rate  than  the  actual payout amount.  As a result, the accrued bonuses
were  reduced  in the fourth quarter of fiscal year 2001, which increased fourth
quarter  results  by  approximately  $407,000.


                                       50
<PAGE>
SCHEDULE  II
                               ROCKSHOX,  INC.

                      VALUATION  AND  QUALIFYING  ACCOUNTS

                  YEARS  ENDED  MARCH  31,  1999,  2000  AND  2001
                               (IN  THOUSANDS)


                                                        Deduc-
                              Balance at  Charged       tions
                              Beginning   to Costs       and     Balance at
                                  of        and         Write      End of
Description                     Period    Expenses       Offs      Period
----------------------------  ----------  ----------  ---------  ----------

As of March 31, 1999:
Allowance for excess and
   obsolete inventory .....   $   2,989   $  3,041    $(2,721)   $  3,309
Allowance for doubtful
   accounts ...............       1,037        226       (563)        700

As of March 31, 2000:
Allowance for excess and
   obsolete inventory .....      $3,309   $  2,835    $(2,207)   $  3,937
Allowance for doubtful
   accounts ...............         700        500        (68)      1,132

As of March 31, 2001:
Allowance for excess and
   obsolete inventory .....      $3,937    $   740    $(2,060)   $  2,617
Allowance for doubtful
   accounts ...............       1,132         23       (200)        955



                                       51
<PAGE>
                                   SIGNATURES

      Pursuant  to the requirements of Section 13 or 15(d) of the Securities Act
of  1934,  the Registrant has duly caused this report to be signed on its behalf
by  the  undersigned,  thereunto  duly  authorized.

                                           ROCKSHOX,  INC.


      Date:  June  28,  2001            By:   /s/  Chris  Birkett
                                           ---------------------------------
                                                Chris  Birkett
                                                Vice  President,
                                                Chief Financial Officer and
                                                Secretary

      Pursuant  to  the  requirements of the Securities Act of 1934, this report
has  been  signed  by  the  following persons in the capacities and on the dates
indicated.

          Signature                          Title                     Date
-----------------------------  ----------------------------------  -------------

By: /s/ Bryan Kelln            Chief Executive Officer, President  June 28, 2001
   --------------------------    and Director
        Bryan Kelln            (Principal Executive Officer)


By: /s/ STEPHEN W. SIMONS      Chairman of the Board and Director  June 28, 2001
   --------------------------
        Stephen W. Simons


By: /s/ Chris Birkett          Vice President, Chief Financial     June 28, 2001
   --------------------------    Officer and Secretary
        Chris Birkett


By: /s/ JOHN W. JORDAN II      Director                            June 28, 2001
   --------------------------
        John W. Jordan II


By: /s/ ADAM E. MAX            Director                            June 28, 2001
   --------------------------
        Adam E. Max


By:   /s/ MICHAEL R. GAULKE    Director                            June 28, 2001
   --------------------------
          Michael R. Gaulke


By:  /S/ EDWARD POST           Director                            June 28, 2001
   --------------------------
        Edward Post


                                       52
<PAGE>


                 ______________________________________________
                 ==============================================
                           SECOND AMENDED AND RESTATED
                          CREDIT AND SECURITY AGREEMENT
                                 BY AND BETWEEN
                                 ROCKSHOX, INC.
                                       AND
                        WELLS FARGO BUSINESS CREDIT, INC.
                           Dated as of: June 28, 2001
                  _____________________________________________
                  =============================================


<PAGE>
                           SECOND AMENDED AND RESTATED
                          CREDIT AND SECURITY AGREEMENT
                            Dated as of June 28, 2001


This Second Amended and Restated Credit and Security Agreement (the "Agreement")
                                                                     ----------
is  entered  into  as  of  June  28,  2001  between  ROCKSHOX,  INC., a Delaware
corporation  (the "Borrower") and WELLS FARGO BUSINESS CREDIT, INC., a Minnesota
                   --------
corporation  (the  "Lender").
WHEREAS,  Borrower has previously entered into a Amended and Restated Credit and
Security  Agreement  with Lender dated as of June 28, 2000 (the "Existing Credit
Agreement");
WHEREAS, Borrower has requested certain changes to the existing credit facility;
WHEREAS,  Lender  is  willing to amend and restate the Existing Credit Agreement
pursuant to which Lender will continue to make loans and provide other financial
accommodations  to  Borrower;
NOW, THEREFORE, in consideration of the promises and of the mutual covenants and
agreements  contained  herein,  the  parties  hereto  hereby  agree to amend and
restate  the  Existing  Credit  Agreement  as  follows:

                                    ARTICLE I

                                   Definitions
                                   -----------
Section  1.1     Definitions.  For  all  purposes  of  this Agreement, except as
                 -----------
          otherwise expressly provided or unless the context otherwise requires:

(a)  the  terms  defined  in  this Article have the meanings assigned to them in
          this  Article,  and  include  the  plural as well as the singular; and

(b)  all  accounting  terms  not  otherwise  defined  herein  have  the meanings
          assigned  to  them  in  accordance  with  GAAP.

"Accounts"  means all of the Borrower's accounts, as such term is defined in the
 --------
UCC,  including without limitation the aggregate unpaid obligations of customers
and  other  account  debtors to the Borrower arising out of the sale or lease of
goods  or  rendition  of services by the Borrower on an open account or deferred
payment  basis.
"Advance"  means  a  Revolving  Advance.
 -------
"Affiliate"  or  "Affiliates"  means  any  Person  controlled by or under common
 ---------        ----------
control  with the Borrower, including (without limitation) any Subsidiary of the
Borrower.  For purposes of this definition, "control," when used with respect to
                                             -------
any  specified  Person, means the power to direct the management and policies of
such  Person,  directly  or  indirectly, whether through the ownership of voting
securities,  by  contract  or  otherwise.
"Agreement"  means  this  Second  Amended  and  Restated  Credit  and  Security
 ---------
Agreement, as amended, restated, supplemented or otherwise modified from time to
time.
"Availability"  means  the difference of (i) the Borrowing Base and (ii) the sum
 ------------
of  (A) the then outstanding principal balance of the Revolving Note and (B) the
L/C  Amount.
"Availability  Reserve"  means  as  of any date of determination, such amount or
 ---------------------
amounts  as  Lender may from time to time establish and revise in good faith and
in its reasonable judgment reducing the amount of Revolving Advances which would


<PAGE>
otherwise  be  available  to  Borrower under the lending formula(s) provided for
herein:  (a)  to  reflect  events,  conditions, contingencies or risks which, as
determined  by  Lender  in  good faith and in its reasonable judgment, do or may
affect  either  (i)  the  Collateral  or its value, (ii) the assets, business or
prospects  of  Borrower,  or  (iii)  the  security interests and other rights of
Lender  in the Collateral (including the enforceability, perfection and priority
thereof),  or  (b)  to  reflect  Lender's  good faith belief that any collateral
report  or financial information furnished by or on behalf of Borrower to Lender
is  or  may  have  been  incomplete,  inaccurate  or  misleading in any material
respect, or (c) in respect of any state of facts which Lender determines in good
faith  constitutes an Event of Default or may, with notice or passage of time or
both,  constitute  an Event of Default; provided however, that in no event shall
                                        -------- -------
the  rebate  reserves  established  by  Borrower,  from time to time, reduce the
amount  of  Revolving  Advances.
"Banking  Day"  means  a day other than a Saturday, Sunday or other day on which
 ------------
banks  are  generally  not  open  for  business  in  Pasadena,  California.
 -
"Base  Rate"  means the rate of interest publicly announced from time to time by
 ----------
Wells  Fargo  Bank,  N.A., San Francisco, California, as its "prime rate" (which
"prime  rate"  shall  not deviate from the Wall Street Journal Prime Rate except
for time lag in adjustments which shall not exceed five (5) Banking Days) or, if
such  bank  ceases  to announce a rate so designated, any similar successor rate
designated  by  the  Lender.
"Book  Net  Worth"  means  the difference between (i) the book value of tangible
 ----------------
assets  of  the  Borrower,  which,  in accordance with GAAP are tangible assets,
after deducting adequate reserves in each case where, in accordance with GAAP, a
reserve  is  proper  and  (ii)  all  Debt  of  the  Borrower.
"Borrowing  Base"  means,  at  any  time  the  lesser  of:
 ---------------
          (a)  the  Maximum  Line  minus  any amounts then outstanding under the
     Wells  Facility;  or

(b)     subject  to  change  from  time  to  time  in  the  Lender's  reasonable
discretion,  the  sum  of:

(6)     eighty  five  percent  (85%)  of  Eligible  Accounts;  and

(7)     minus  any  Availability  Reserves.

"Capital  Expenditures"  for  a  period  means  any expenditure of money for the
 ---------------------
lease,  purchase  or  other  acquisition  of  any  fixed  or  capital  asset.
"Collateral"  means  all  current  or  hereafter  acquired  or arising Accounts,
 ----------
Inventory,  Receivables  and  other  rights  of  payment,  Equipment,  General
Intangibles,  Investment  Property,  commercial  tort  claims,  farm  products,
as-extracted,  collateral,  timber,  crops, deposit accounts, letters of credit,
proceeds  of  letters of credit, chattel paper, electronic chattel paper and all
sums  on  deposit  in  any  Collateral  Account,  and  any items in any Lockbox;
together  with (i) all substitutions and replacements for and products of any of
the  foregoing; (ii) proceeds of any and all of the foregoing; (iii) in the case
of all tangible goods, all accessions; (iv) all accessories, attachments, parts,
equipment  and  repairs  now  or  hereafter  attached  or  affixed to or used in
connection  with any tangible goods; (v) all warehouse receipts, bills of lading
and other documents of title now or hereafter covering such goods; (vi) all sums
on  deposit  in  the  Special  Account;  and  (vii)  the  Life Insurance Policy.


<PAGE>
"Collateral  Account"  means  the  "WFBCI  Account" as defined in the Collection
 -------------------                                                  ----------
Account  Agreement and the "Lender Account" as defined in the Lockbox Agreement.
------------------                                            -----------------
"Collection  Account Agreement" means the Collection Account Agreement, dated as
 -----------------------------
of  December  10,  1999,  by  and among the Borrower, Wells Fargo Bank, National
Association  and  the  Lender.
"Commitment"  means  the  Lender's  commitment to make Advances and to cause the
 ----------
Issuer  to  issue Letters of Credit to or for the Borrower's account pursuant to
0.
"Credit Facility" means the credit facility being made available to the Borrower
 ---------------
by  the  Lender  pursuant  to  0.
"Deactivation  Period"  has  the  same  meaning  specified  in  Section  2.18.
 --------------------
"Debt"  of  any  Person means, without duplication, all items of indebtedness or
 ----
liability  which  in accordance with GAAP would be included in determining total
liabilities  as  shown on the liabilities side of a balance sheet of that Person
as  at  the  date  as  of  which  Debt  is  to  be  determined.  For purposes of
determining a Person's aggregate Debt at any time, "Debt" shall also include the
                                                    ----
aggregate  principal  payments  required  to  be made by such Person at any time
under  any  lease  that  is  considered  a  capitalized  lease  under  GAAP.
"Default" means an event that, with giving of notice or passage of time or both,
 -------
would  constitute  an  Event  of  Default.
"Default  Period"  means  any  period  of time beginning on the day a Default or
 ---------------
Event  of  Default  has  occurred and ending on the date the Lender notifies the
Borrower  in  writing  that  such  Default  or Event of Default has been waived.
"Default  Rate"  means  an  annual  rate  equal  to  three percent (3%) over the
 -------------
Floating  Rate,  which  rate shall change when and as the Floating Rate changes.
"EBITDA"  for  a  period  means,  the sum of (i) pretax earnings from continuing
 ------
operations  before deductions for Interest Expense, depreciation, depletion, and
amortization  of  tangible  and intangible assets extraordinary gains or losses,
and  expenses  related  to  the  relocation  of  the  Borrower's operations from
California  to  Colorado,  recognized in fiscal year 2002, in each case for such
period,  computed  and  calculated  in  accordance  with  GAAP.
"Eligible  Accounts"  means  all unpaid Accounts, net of any credits, except the
 ------------------
following  shall  not  in  any  event  be  deemed  Eligible  Accounts:
(i)  That  portion of Accounts unpaid 90 days or more after the invoice date (in
          the  event  the Accounts have trade terms beyond 30 days, that portion
          of  Accounts  unpaid  30 days after the due date or 120 days after the
          invoice  date,  whichever  is  shorter);

(ii) That  portion  of Accounts that is disputed or subject to a claim of offset
          or  a  contra  account;

(iii) That portion of Accounts not yet  earned by the final delivery of goods or
          rendition of services, as applicable, by the Borrower to the customer;

(iv) Accounts  owed  by  any  federal  unit  of  government,  whether foreign or
          domestic  (provided, however, that there shall be included in Eligible
          Accounts that portion of Accounts owed by such units of government for
          which  the  Borrower  has provided evidence satisfactory to the Lender
          that  (A)  the Lender has a first priority perfected security interest
          and  (B)  such Accounts may be enforced by the Lender directly against
          such  unit of government under all applicable laws, including, without
          limitation,  the Federal Assignment of Claims Act of 1940, as amended,
          or  any  similar  law);


<PAGE>
(v)  Accounts  owed by an account debtor located outside the United States which
          are  not  (A)  backed  by a bank letter of credit naming the Lender as
          beneficiary  or assigned to the Lender, in the Lender's possession and
          acceptable  to  the Lender in all respects, in its sole discretion, or
          (B)  covered  by  a foreign receivables insurance policy acceptable to
          the  Lender  in  its  reasonable  discretion;

(vi) Accounts  owed  by  an  account  debtor  that  is insolvent, the subject of
          bankruptcy  proceedings  or  has  gone  out  of  business;

(vii) Accounts owed by a shareholder, Subsidiary, Affiliate, officer or employee
          of  the  Borrower;

(viii) Accounts  not  subject  to  a  duly  perfected  security interest in the
          Lender's  favor or which are subject to any lien, security interest or
          claim  in  favor of any Person other than the Lender including without
          limitation  any  payment  or  performance  bond;

(ix) That  portion  of Accounts that has been restructured, extended, amended or
          modified  which  exceeds an aggregate amount of Fifty-Thousand Dollars
          ($50,000);

(x)  That  portion  of  Accounts  that constitutes advertising, finance charges,
          service  charges  or  sales  or  excise  taxes;

(xi) Accounts  owed  by  an  account  debtor,  regardless  of  whether otherwise
          eligible, if twenty-five percent (25%) or more of the total amount due
          under  Accounts  from  such  debtor is ineligible under clauses (i) or
          (ix)  above;

(xii) That  portion  of  Accounts  of  a  single  debtor or its affiliates which
          constitute  more  than twenty-five percent (25%), (forty percent (40%)
          for  Trek Bicycles subject to credit checks satisfactory to Lender) of
          all  otherwise  Eligible  Accounts;  and

               (xiii) Accounts, or portions thereof, otherwise deemed ineligible
          by  the  Lender  in  its  reasonable  discretion.

 "Environmental  Laws"  has  the  meaning  specified  in  0.
  -------------------
"Equipment"  means  all  of the Borrower's equipment, as such term is defined in
 ---------
the  UCC,  whether now owned or hereafter acquired, including but not limited to
all  present  and future machinery, vehicles, furniture, fixtures, manufacturing
equipment,  shop  equipment,  office  and recordkeeping equipment, parts, tools,
supplies, and including specifically (without limitation) the goods described in
any  equipment schedule or list herewith or hereafter furnished to the Lender by
the  Borrower.
"ERISA"  means  the Employee Retirement Income Security Act of 1974, as amended.
 -----
"Event  of  Default"  has  the  meaning  specified  in  0.
 ------------------
"Floating  Rate"  means  an  annual  rate equal to the sum of the Base Rate plus
 --------------
seven  hundred twenty-five thousandths percent (0.725%), which annual rate shall
change  when and as the Base Rate changes; provided, however, such Floating Rate
                                           --------  -------
shall  be adjusted as follows: if (i) no Event of Default exists or has occurred
and  is  continuing, and (ii) Borrower's Net Income is not less than Two Million
Dollars  ($2,000,000) for the fiscal year ending on March 31, 2002, the Floating


<PAGE>
Rate  shall  be reduced to an annual rate equal to the sum of the Base Rate plus
three  hundred  seventy five thousandths percent (0.375%).  Such reduction shall
become  effective  upon  Lenders  receipt  of  financial  statements pursuant to
Section  6.1  reflecting  the  required  Net  Income  amount as set forth above.
"Funding  Date"  has  the  meaning  specified  in  0.
 -------------
"GAAP"  means  generally  accepted  accounting  principles,  applied  on a basis
 ----
consistent  with  the  accounting  practices applied in the financial statements
described  in  0,  except  for  any change in accounting practices to the extent
that, due to a promulgation of the Financial Accounting Standards Board changing
or implementing any new accounting standard, the Borrower either (i) is required
to implement such change, or (ii) for future periods will be required to and for
the  current  period  may  in  accordance  with  generally  accepted  accounting
principles  implement  such  change,  for  its  financial  statements  to  be in
conformity  with  generally  accepted  accounting principles (any such change is
herein  referred to as a "Required GAAP Change"), provided that (1) the Borrower
                          --------------------
shall  fully disclose in such financial statements any such Required GAAP Change
and  the  effects of the Required GAAP Change on the Borrower's income, retained
earnings  or  other  accounts,  as  applicable, and (2) the Borrower's financial
covenants  set  forth  in  Sections  6.12,  6.13  and  7.10 shall be adjusted as
necessary  to  reflect  the  effects  of  such  Required  GAAP  Change.
"General  Intangibles"  means all of the Borrower's general intangibles, as such
 --------------------
term  is  defined in the UCC, whether now owned or hereafter acquired, including
(without  limitation)  all  present  and  future  patents,  patent applications,
copyrights,  trademarks,  trade names, trade secrets, customer or supplier lists
and  contracts,  manuals, operating instructions, permits, franchises, the right
to  use  the  Borrower's  name,  and  the  goodwill  of the Borrower's business.
"Hazardous  Substance"  has  the  meaning  specified  in  0.
 --------------------
"Interest Expense" means, for a fiscal year-to-date period, the Borrower's total
 ----------------
gross  interest  expense  with  respect  to the Debt of the Borrower during such
period  (less  interest income during such period) determined in accordance with
GAAP.
"Inventory"  means  all  of the Borrower's inventory, as such term is defined in
 ---------
the  UCC,  whether  now owned or hereafter acquired, whether consisting of whole
goods,  spare parts or components, supplies or materials, whether acquired, held
or  furnished  for sale, for lease or under service contracts or for manufacture
or  processing,  and  wherever  located.
"Investment  Property"  means all of the Borrower's investment property, as such
 --------------------
term  is  defined in the UCC, whether now owned or hereafter acquired, including
but  not  limited to all securities, security entitlements, securities accounts,
commodity  contracts,  commodity  accounts,  stocks,  bonds, mutual fund shares,
money  market  shares  and  U.S.  Government  securities.
"Issuer"  means  the  issuer  of  any  Letter  of  Credit.
 ------
"L/C  Amount"  means  the sum of (i) the aggregate face amount of any issued and
 -----------
outstanding  Letters  of  Credit and (ii) the unpaid amount of the Obligation of
Reimbursement.
"L/C  Application" means an application and agreement for letters of credit in a
 ----------------
form  acceptable  to  the  Issuer  and  the  Lender.
"Letter  of  Credit"  has  the  meaning  specified  in  0.
 ------------------
"Loan  Documents"  means  this  Agreement,  the Note and the Security Documents.
 ---------------
"Lockbox"  has  the  meaning  given  in  the  Lockbox  Agreement.
 -------


<PAGE>
"Lockbox  Agreement"  means  the Lockbox and Collection Account Agreement by and
 ------------------
among the Borrower, Wells Fargo Bank, National Association, Regulus West LLC and
the  Lender,  dated  as  of  December  10,  1999.
"Maturity  Date"  has  the  meaning  specified  in  Section  2.10.
 --------------
"Maximum  Line"  means  Ten Million Dollars ($10,000,000), unless said amount is
 -------------
reduced  pursuant  to  Section 2.11, in which event it means the amount to which
said  amount  is  reduced.
"Minimum  Interest  Charge"  has  the  meaning  specified  in  0.
 -------------------------
"Net  Income"  has  the  meaning  defined  by  GAAP.
 -----------
"Note"  means  the  Revolving  Note.
 ----
"Obligations"  means  the  Note  and  each  and  every other debt, liability and
 -----------
obligation  of  every  type and description which the Borrower may now or at any
time  hereafter  owe  to  the  Lender  under  this  Agreement and the other Loan
Documents, whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is direct or indirect, due or to become due,
absolute  or  contingent,  primary  or secondary, liquidated or unliquidated, or
sole,  joint,  several  or joint and several and including specifically, but not
limited to, the Obligation of Reimbursement and all indebtedness of the Borrower
arising  under  this  Agreement,  the Note, any L/C Application completed by the
Borrower, or any other loan or credit agreement or guaranty between the Borrower
and  the  Lender,  whether  now  in  effect  or  hereafter  entered  into.
"Obligation  of  Reimbursement"  has  the  meaning  given  in  0.
 -----------------------------
"Patent  and  Trademark  Security  Agreement"  means  the  Patent  and Trademark
 -------------------------------------------
Security  Agreement by the Borrower in favor of the Lender, dated as of December
10,  1999.
"Permitted  Lien"  has  the  meaning  specified  in  0.
 ---------------
"Person"  means any individual, corporation, partnership, joint venture, limited
 ------
liability  company,  association,  joint-stock  company,  trust,  unincorporated
organization  or  government  or  any  agency  or political subdivision thereof.
"Plan"  means  an  employee  benefit  plan  or  other  plan  maintained  for the
 ----
Borrower's  employees  and  covered  by  Title  IV  of  ERISA.
"Premises"  means  all premises where the Borrower conducts its business and has
 --------
any  rights  of  possession, including (without limitation) the premises legally
described  in  Exhibit  C  attached  hereto.
               ----------
"Receivables"  means  each  and  every  right  of the Borrower to the payment of
 -----------
money,  whether  such  right  to payment now exists or hereafter arises, whether
such  right to payment arises out of a sale, lease or other disposition of goods
or  other  property,  out  of a rendering of services, out of a loan, out of the
overpayment  of  taxes  or  other  liabilities,  or  otherwise  arises under any
contract  or  agreement,  whether such right to payment is created, generated or
earned  by  the Borrower or by some other person who subsequently transfers such
person's  interest  to  the Borrower, whether such right to payment is or is not
already  earned  by  performance,  and  howsoever  such  right to payment may be
evidenced, together with all other rights and interests (including all liens and
security  interests) which the Borrower may at any time have by law or agreement
against  any  account debtor or other obligor obligated to make any such payment
or  against  any property of such account debtor or other obligor; all including
but  not  limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax  refunds  and  rights  to  payment  in  the  nature  of general intangibles.
"Reportable  Event"  shall have the meaning assigned to that term in Title IV of
 -----------------
ERISA.
"Revolving  Advance"  has  the  meaning  specified  in  0.
 ------------------


<PAGE>
"Revolving  Note" means the Borrower's revolving promissory note, payable to the
 ---------------
order  of  the Lender in substantially the form of Exhibit A hereto, as the same
                                                   ---------
may hereafter be amended, restated, supplemented otherwise modified from time to
time,  and  any  note  or notes issued in substitution therefor, as the same may
hereafter  be  amended,  restated,  supplemented otherwise modified from time to
time.
"Security Documents" means this Agreement, the Collection Account Agreement, the
 ------------------
Lockbox  Agreement,  the  Patent  and Trademark Security Agreement and any other
document delivered to the Lender from time to time to secure the Obligations, as
the  same  may  hereafter  be amended, restated, supplemented otherwise modified
from  time  to  time.
"Security  Interest"  has  the  meaning  specified  in  0.
 ------------------
"Special  Account"  means  a  specified  cash collateral account maintained by a
 ----------------
financial  institution  acceptable  to  the Lender in connection with Letters of
Credit,  as  contemplated  by  0.
"Subsidiary" means any corporation of which more than fifty percent (50%) of the
 ----------
outstanding  shares  of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective  of  whether or not at the time stock of any other class or classes
shall  have  or  might  have  voting  power  by  reason  of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower  and  one  or  more  other  Subsidiaries,  or  by  one  or  more  other
Subsidiaries.
"Termination  Date"  means  the earliest of (i) the Maturity Date, (ii) the date
 -----------------
the  Borrower  terminates  the  Credit  Facility,  or  (iii) the date the Lender
demands  payment  of  the  Obligations  after an Event of Default pursuant to 0.
"UCC"  means  the  Uniform Commercial Code as in effect from time to time in the
 ---
state designated in 0 as the state whose laws shall govern this Agreement, or in
any  other  state  whose  laws  are held to govern this Agreement or any portion
hereof.
"Wells  Facility"  means the credit facility extended to Borrower by Wells Fargo
 ---------------
Bank,  N.A.  in  order  to provide financing for Borrower's foreign receivables.
"Wells  Fargo"  means  Wells  Fargo  Bank,  N.A.
 ------------

Section 1.2     Cross References.  All references in this Agreement to Articles,
                ----------------
          Sections  and  subsections,  shall  be  to  Articles,  Sections  and
          subsections  of  this Agreement unless otherwise explicitly specified.

                                   ARTICLE II

                     Amount and Terms of the Credit Facility
                     ---------------------------------------

Section 2.1     Revolving Advances.  The Lender agrees, on the terms and subject
                ------------------
          to  the  conditions herein set forth, to make advances to the Borrower
          from  time  to time from the date all of the conditions set forth in 0
          are  satisfied  (the  "Funding  Date")  to  the  Termination Date (the
                                 -------------
          "Revolving  Advances").  The Lender shall have no obligation to make a
           -------------------
          Revolving  Advance if, after giving effect to such requested Revolving
          Advance,  the  sum  of  the  outstanding and unpaid Revolving Advances
          would  exceed  the  Borrowing Base less the L/C Amount. The Borrower's
          obligation  to  pay  the  Revolving Advances shall be evidenced by the
          Revolving  Note  and shall be secured by the Collateral as provided in
          0.  Within  the  limits  set forth in this 0, the Borrower may borrow,


<PAGE>
          prepay  pursuant  to Section 2.11 and reborrow. The Borrower agrees to
          comply  with the following procedures in requesting Revolving Advances
          under  this  0:

(a)  The  Borrower shall make each request for a Revolving Advance to the Lender
          before  10:30  a.m.  (California  time)  of  the  day of the requested
          Revolving  Advance.  Requests  may  be made in writing or by telephone
          (promptly  confirmed in writing), specifying the date of the requested
          Revolving Advance and the amount thereof. Each request shall be by (i)
          any  officer  of  the  Borrower;  or (ii) any person designated as the
          Borrower's agent by any officer of the Borrower in a writing delivered
          to the Lender; or (iii) any person whom the Lender reasonably believes
          to  be  an  officer  of  the  Borrower  or  such  a  designated agent.

(b)  Upon  fulfillment  of  the applicable conditions set forth in 0, the Lender
          shall  disburse  the  proceeds  of  the requested Revolving Advance by
          crediting the same to the Borrower's demand deposit account maintained
          with Wells Fargo Bank, National Association, unless the Lender and the
          Borrower  shall  agree  in  writing to another manner of disbursement.
          Upon  the  Lender's  request, the Borrower shall promptly confirm each
          telephonic  request  for  an  Advance  by  executing and delivering an
          appropriate confirmation certificate to the Lender. The Borrower shall
          repay  all  Advances  even  if  the  Lender  does  not  receive  such
          confirmation  and  even if the person requesting an Advance was not in
          fact  authorized to do so. Any request for an Advance, whether written
          or  telephonic, shall be deemed to be a representation by the Borrower
          that  the conditions set forth in 0 have been satisfied as of the time
          of  the  request.

     Section  2.2     Letters  of  Credit.
                      -------------------

               (a) The Lender agrees, on the terms and subject to the conditions
          herein  set  forth, to cause an Issuer to issue, from the Funding Date
          to  the  Termination  Date,  one  or  more  irrevocable  standby  or
          documentary  letters  of  credit  (each, a "Letter of Credit") for the
          Borrower's  account.  The  Lender shall have no obligation to cause an
          Issuer  to issue any Letter of Credit if the face amount of the Letter
          of  Credit  to  be  issued  would  exceed  the  lesser  of:

(i)  Two  Million  Dollars  ($2,000,000)  less  the  L/C  Amount,  or

(ii) the Borrowing Base less the sum of (A) all outstanding and unpaid Revolving
          Advances  and  (B)  the  L/C  Amount.

          Each  Letter of Credit, if any, shall be issued pursuant to a separate
          L/C  Application  entered  into by the Borrower and the Lender for the
          benefit  of  the  Issuer,  completed  in  a manner satisfactory to the
          Lender and the Issuer. The terms and conditions set forth in each such
          L/C  Application shall supplement the terms and conditions hereof, but
          if  the  terms  of  any  such  L/C  Application  and the terms of this
          Agreement  are  inconsistent,  the  terms  hereof  shall  control.

               (b) No Letter of Credit shall be issued with an expiry date later
          than  the  Termination  Date  in  effect  as  of the date of issuance.


<PAGE>
               (c)  Any  request  to cause an Issuer to issue a Letter of Credit
          under  this  0  shall be deemed to be a representation by the Borrower
          that  the conditions set forth in 0 have been satisfied as of the date
          of  the  request.

     Section  2.3     Payment  of  Amounts  Drawn  Under  Letters  of  Credit;
                      --------------------------------------------------------
Obligation  of  Reimbursement.  The  Borrower  acknowledges  that the Lender, as
-----------------------------
co-applicant,  will  be  liable  to  the Issuer for reimbursement of any and all
draws  under  Letters  of  Credit  and for all other amounts required to be paid
under  the  applicable L/C Application.  Accordingly, the Borrower agrees to pay
to  the  Lender any and all amounts required to be paid under the applicable L/C
Application, when and as required to be paid thereby, and the amounts designated
below,  when  and  as  designated:

               (a)  The  Borrower  hereby  agrees to pay the Lender on the day a
          draft is honored under any Letter of Credit a sum equal to all amounts
          drawn  under such Letter of Credit plus any and all reasonable charges
          and  expenses  that the Issuer or the Lender may pay or incur relative
          to  such draw and the applicable L/C Application, plus interest on all
          such  amounts, charges and expenses as set forth below (the Borrower's
          obligation  to  pay  all  such  amounts  is  herein referred to as the
          "Obligation  of  Reimbursement").

               (b)  Whenever  a  draft  is  submitted  under a Letter of Credit,
          except  during a Deactivation Period, Issuer shall notify the Borrower
          and  the Lender thereof, and the Lender shall make a Revolving Advance
          in  the  amount of the Obligation of Reimbursement and shall apply the
          proceeds  of  such  Revolving  Advance thereto. Such Revolving Advance
          shall  be  repayable  in  accordance  with and be treated in all other
          respects  as  a  Revolving  Advance  hereunder.

               (c)  If  a  draft  is submitted under a Letter of Credit during a
          Deactivation  Period,  the  Borrower  shall  either (i) deposit to the
          Special  Account  an  amount, in immediately available funds, equal to
          the Obligation of Reimbursement (such deposit shall be made within one
          (1)  Banking  Day from the date the draft is honored), or (ii) request
          the Lender to make a Revolving Advance in the amount of the Obligation
          of  Reimbursement  and  apply  the  proceeds of such Revolving Advance
          thereto,  provided  that,  such  Revolving Advance by the Lender shall
          constitute  a  reactivation of the Credit Facility and all charges and
          fees  under  Section  2  of  this Agreement. If the Credit Facility is
          reactivated  pursuant  to  this  Section  2.3(c), all fees pursuant to
          Section  2.7(b)  for  the  thirty  (30)  day  period  prior  to  such
          reactivation  shall  become  immediately  due  and  payable.

               (d)  If  a  draft  is submitted under a Letter of Credit when the
          Borrower  is  unable,  because a Default Period then exists or for any
          other  reason,  to obtain a Revolving Advance to pay the Obligation of
          Reimbursement,  the  Borrower shall pay to the Lender on demand and in
          immediately  available  funds,  the  amount  of  the  Obligation  of
          Reimbursement  together  with  interest,  accrued from the date of the
          draft  until  payment in full at the Default Rate. Notwithstanding the
          Borrower's inability to obtain a Revolving Advance for any reason, the
          Lender  is  irrevocably  authorized, in its sole discretion, to make a
          Revolving  Advance in an amount sufficient to discharge the Obligation
          of  Reimbursement  and  all  accrued  but  unpaid  interest  thereon.


<PAGE>
               (e)  The  Borrower's obligation to pay any Revolving Advance made
          under  this  0,  shall  be  evidenced by Revolving Note and shall bear
          interest  as  provided  in  Section  2.6.

     Section  2.4  Special Account. If the Credit Facility is terminated for any
                   ----------------
reason  whatsoever while any Letter of Credit is outstanding, the Borrower shall
thereupon  pay  the  Lender  in  immediately  available funds for deposit in the
Special  Account an amount equal to the L/C Amount. The Special Account shall be
an  interest  bearing  account  maintained  for  the  Lender  by  any  financial
institution  acceptable  to the Lender. Any interest earned on amounts deposited
in  the  Special  Account  shall  be credited to the Special Account. Amounts on
deposit  in the Special Account may be applied by the Lender at any time or from
time  to  time to the Obligations in the Lender's sole discretion, and shall not
be  subject  to  withdrawal  by  the  Borrower so long as the Lender maintains a
security  interest  therein.  The  Lender  agrees to transfer any balance in the
Special  Account  to  the  Borrower  at  such  time as the Lender is required to
release  its security interest in the Special Account under applicable law or at
such  time  as  no  Letters  of  Credit  remain  outstanding.

     Section  2.5 Obligations Absolute. The Borrower's obligations arising under
                  --------------------
0  shall  be absolute, unconditional and irrevocable, and shall be paid strictly
in accordance with the terms of 0, under all circumstances whatsoever, including
(without  limitation)  the  following  circumstances:

          (a)  any lack of validity or enforceability of any Letter of Credit or
     any  other  agreement  or  instrument  relating  to  any  Letter  of Credit
     (collectively  the  "Related  Documents");

          (b) any amendment or waiver of or any consent to departure from all or
     any  of  the  Related  Documents;

          (c)  the  existence of any claim, setoff, defense or other right which
     the  Borrower  may  have  at  any  time,  against  any  beneficiary  or any
     transferee of any Letter of Credit (or any persons or entities for whom any
     such  beneficiary or any such transferee may be acting), or other person or
     entity,  whether  in  connection  with  this  Agreement,  the  transactions
     contemplated  herein  or  in  the  Related  Documents  or  any  unrelated
     transactions;

          (d)  any statement or any 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
     whatsoever;

          (e)  payment  by  or  on  behalf of the Issuer or the Lender under any
     Letter  of Credit against presentation of a draft or certificate which does
     not  strictly  comply  with  the  terms  of  such  Letter  of  Credit;  or

          (f)  any  other  circumstance  or happening whatsoever, whether or not
     similar  to  any  of  the  foregoing.


<PAGE>
     Section  2.6  Interest;  Minimum  Interest  Charge;  Default  Interest;
                   ---------------------------------------------------------
Participations;  Usury.
----------------------

(a)  REVOLVING  NOTE.  Except  as  set  forth in Sections 2.6(c) and 2.6(e), the
          outstanding  principal  balance  of  the  Revolving  Note  shall  bear
          interest  at  the  Floating  Rate.

(b)  MINIMUM  INTEREST  CHARGE. Notwithstanding the interest payable pursuant to
          0,  the Borrower shall pay to the Lender interest of not less than Two
          Hundred Thousand Dollars ($200,000) per year on a pro rated basis (the
          "Minimum  Interest Charge") during the term of this Agreement, and the
           ------------------------
          Borrower  shall pay any deficiency between the Minimum Interest Charge
          and  the amount of interest otherwise calculated under Sections 2.6(a)
          and  2.6(d)  on  the  date  and  in  the  manner  provided  in  0.

(c)  DEFAULT  INTEREST  RATE.  At  any  time  during  any Default Period, in the
          Lender's  sole  discretion and without waiving any of its other rights
          and  remedies,  the principal of the Advances outstanding from time to
          time  shall  bear  interest  at  the  Default  Rate, effective for any
          periods designated by the Lender from time to time during that Default
          Period.

(d)  PARTICIPATIONS. If any Person shall acquire a participation in the Advances
          under this Agreement, the Borrower shall be obligated to the Lender to
          pay the full amount of all interest calculated under 0, along with all
          other  fees,  charges  and  other  amounts  due  under this Agreement,
          regardless  if  such  Person elects to accept interest with respect to
          its participation at a lower rate than the Floating Rate, or otherwise
          elects  to  accept  less than its pro rata share of such fees, charges
          and  other  amounts  due  under  this  Agreement.

(e)  USURY.  In  any  event  no rate change shall be put into effect which would
          result  in  a  rate  greater  than  the highest rate permitted by law.
          Notwithstanding  anything  to  the  contrary  contained  in  any  Loan
          Document,  all  agreements  which either now are or which shall become
          agreements  between  the Borrower and the Lender are hereby limited so
          that  in  no contingency or event whatsoever shall the total liability
          for  payments in the nature of interest, additional interest and other
          charges  exceed  the applicable limits imposed by any applicable usury
          laws.  If  any payments in the nature of interest, additional interest
          and  other  charges  made  under  any  Loan Document are held to be in
          excess  of  the  limits  imposed  by  any applicable usury laws, it is
          agreed  that  any such amount held to be in excess shall be considered
          payment  of principal hereunder, and the indebtedness evidenced hereby
          shall  be  reduced  by  such  amount  so  that the total liability for
          payments  in  the  nature  of  interest, additional interest and other
          charges  shall  not  exceed  the  applicable  limits  imposed  by  any
          applicable  usury laws, in compliance with the desires of the Borrower
          and the Lender. This provision shall never be superseded or waived and
          shall  control  every  other  provision  of the Loan Documents and all
          agreements  between  the  Borrower and the Lender, or their successors
          and  assigns.

Section  2.7     Fees.
                 ----

(a)  UNUSED  LINE  FEE. For the purposes of this Section 2.7(b), "Unused Amount"
                                                                  -------------
          means  the  Maximum Line reduced by (1) outstanding Revolving Advances
          under  this  Agreement  and  the  "Revolving Advances" under the Wells
          Facility  (as  that term is defined in the Wells Facility) and (2) the
          L/C  Amount.  The  Borrower agrees to pay to the Lender an unused line
          fee at the rate of one-quarter of one percent (0.25%) per annum on the
          average  monthly  Unused Amount from the date of this Agreement to and
          including  the Termination Date, due and payable quarterly in arrears.


<PAGE>
(b)  LETTER  OF  CREDIT  FEES.  The Borrower agrees to pay the Lender a fee with
          respect  to  each  Letter of Credit, if any, accruing on a daily basis
          and  computed  at the annual rate of two percent (2%) of the aggregate
          amount that may then be drawn on all issued and outstanding Letters of
          Credit  assuming compliance with all conditions for drawing thereunder
          (the "Aggregate Face Amount"), from and including the date of issuance
          of  such  Letter  of  Credit  until such date as such Letter of Credit
          shall  terminate  by  its  terms or be returned to the Lender, due and
          payable  monthly  in  advance  on  the  first  day  of each month. The
          foregoing  fee  shall  be in addition to any and all fees, commissions
          and  charges of any Issuer of a Letter of Credit with respect to or in
          connection  with  such  Letter  of  Credit.

(c)  LETTER  OF  CREDIT  ADMINISTRATIVE  FEES.  The  Borrower  agrees to pay the
          Lender,  on  written  demand,  the  administrative fees charged by the
          Issuer  in  connection with the honoring of drafts under any Letter of
          Credit,  amendments  thereto, transfers thereof and all other activity
          with  respect  to  the  Letters  of  Credit  at the then-current rates
          published  by  the  Issuer  for  such  services  rendered on behalf of
          customers  of  the  Issuer  generally.

(d)  AUDIT  FEES.  The  Borrower  hereby  agrees  to  pay the Lender, on demand,
          reasonable  audit  fees in connection with any standard bank audits or
          inspections  conducted  by  the  Lender  of  any  Collateral  or  the
          Borrower's  operations  or business at the rates established from time
          to  time  by  the  Lender  as its audit fees, together with all actual
          out-of-pocket costs and expenses incurred in conducting any such audit
          or inspection provided, however, that unless an Event of Default shall
          have  occurred, the Borrower shall be required to pay for no more than
          three  (3)  audits  in  any  calendar  year.

Section 2.8     Computation of Interest and Fees; When Interest Due and Payable.
                ---------------------------------------------------------------
          Interest accruing on the outstanding principal balance of the Advances
          and  fees hereunder outstanding from time to time shall be computed on
          the  basis  of  actual  number  of days elapsed in a year of 360 days.
          Interest  shall be due and payable in arrears on the first day of each
          month  and  on  the  Termination  Date.

Section  2.9     Capital Adequacy.  If any Related Lender determines at any time
                 ----------------
          that  its Return has been reduced as a result of any Rule Change, such
          Related Lender may require the Borrower to pay it the amount necessary
          to  restore  its  Return  to what it would have been had there been no
          Rule  Change.  For  purposes  of  this  0:

(a)     "Capital  Adequacy  Rule"  means  any  law, rule, regulation, guideline,
         -----------------------
          directive,  requirement  or request regarding capital adequacy, or the
          interpretation  or  administration  thereof  by  any  governmental  or
          regulatory  authority,  central  bank or comparable agency, whether or
          not  having the force of law, that applies to any Related Lender. Such
          rules include rules requiring financial institutions to maintain total
          capital  in  amounts  based  upon  percentages  of  outstanding loans,
          binding  loan  commitments  and  letters  of  credit.


<PAGE>
               (b)  "L/C  Rule"  means  any  law,  rule,  regulation, guideline,
                     ---------
          directive,  requirement or request regarding letters of credit, or the
          interpretation  or  administration  thereof  by  any  governmental  or
          regulatory  authority,  central  bank or comparable agency, whether or
          not  having the force of law, that applies to any Related Lender. Such
          rules  include  rules imposing taxes, duties or other similar charges,
          or  mandating  reserves,  special  deposits  or  similar  requirements
          against  assets  of,  deposits  with  or for the account of, or credit
          extended  by  any  Related  Lender,  on  letters  of  credit.

(c)  "Return",  for  any  period, means the return as determined by such Related
      ------
          Lender  on  the  Advances  and  Letters of Credit based upon its total
          capital  requirements  and a reasonable attribution formula that takes
          account  of  the  Capital  Adequacy  Rules  then in effect and cost of
          issuing  or maintaining any Letter of Credit. Return may be calculated
          for  each  calendar quarter and for the shorter period between the end
          of  a  calendar  quarter  and the date of termination in whole of this
          Agreement.

(d)  "Rule  Change"  means  any  change in any Capital Adequacy Rule or L/C Rule
      ------------
          occurring  after  the  date  of  this Agreement, but the term does not
          include  any  changes  in  applicable requirements that at the Closing
          Date  are  scheduled to take place under the existing Capital Adequacy
          Rules  or  L/C  Rules or any increases in the capital that any Related
          Lender  is  required  to maintain to the extent that the increases are
          required  due  to a regulatory authority's assessment of the financial
          condition  of  such  Related  Lender.

(e)  "Related  Lender"  includes (but is not limited to) the Lender, the Issuer,
      ---------------
          any parent corporation of the Lender or the Issuer and any assignee of
          any  interest of the Lender hereunder and any participant in the loans
          made  hereunder.

Certificates  of  any  Related  Lender  sent  to  the Borrower from time to time
claiming  compensation  under  this  0,  stating the reason therefor and setting
forth  in  reasonable detail the calculation of the additional amount or amounts
to  be  paid  to  the  Related  Lender  hereunder to restore its Return shall be
conclusive  absent  manifest  error.  In  determining  such amounts, the Related
Lender  may  use  any  reasonable  averaging  and  attribution  methods.

Section  2.10     Maturity  Date.  This  Agreement  and the other Loan Documents
                  --------------
          shall  become  effective  as  of  the date set forth on the first page
          hereof  ("Effective Date") and shall continue in full force and effect
          for  a  term ending on December 10, 2003 (the "Maturity Date"), unless
                                                         -------------
          earlier terminated by Lender or Borrower pursuant to the terms hereof.
          Upon  the  Termination Date, Borrower shall immediately pay to Lender,
          in full, all outstanding and unpaid Obligations and shall furnish cash
          collateral  to  Lender  in  such  amounts  as  Lender  determines  are
          reasonably  necessary  to  secure  Lender  from  loss, cost, damage or
          expense,  including  attorneys' fees and legal expenses, in connection
          with  any  contingent Obligations, including checks and other payments
          provisionally  credited  to  the Obligations and/or as to which Lender
          has  not  yet  received final and indefeasible payment. Upon final and
          indefeasible payment in full, Lender shall promptly refund to Borrower
          any  cash  collateral  then  held  by  Lender,  if  any.

Section  2.11     Voluntary  Prepayment;  Reduction  of  the  Maximum  Line;
                  ----------------------------------------------------------
          Termination  of  the  Credit  Facility  by  the  Borrower.  Except  as
          ---------------------------------------------------------
          otherwise  provided  herein,  the  Borrower may prepay the Advances in


<PAGE>
          whole  at  any  time  or  from  time to time in part. The Borrower may
          terminate  the  Credit  Facility  or reduce the Maximum Line if it (i)
          gives  the  Lender  at least thirty (30) days prior written notice and
          (ii)  pays the Lender termination or line reduction fees in accordance
          with  0.

Section  2.12     Termination and Line Reduction Fees; Waiver of Termination and
                  --------------------------------------------------------------
          Line  Reduction  Fees.
          ---------------------

(a)  TERMINATION  AND  LINE REDUCTION FEES. If the Credit Facility is terminated
          for  any  reason  as  of  a  date other than the Maturity Date, or the
          Borrower  reduces  the Maximum Line for any reason other than due to a
          reduction  in  availability  in  the  Wells Facility due to a material
          change  in  the  lending  policies  or countries listed on the Country
          Limitation  Schedule of Eximbank, the Borrower shall pay to the Lender
          a  fee  in an amount equal to one percent (1%) of the Maximum Line (or
          the  reduction,  as  the  case  may  be).

(b)  WAIVER  OF  TERMINATION  AND  LINE REDUCTION FEES. The Borrower will not be
          required  to  pay the termination or line reduction fees otherwise due
          under  this 0 if such termination or line reduction is made because of
          refinancing  by a commercial lending unit of Wells Fargo Bank, N.A. or
          an  affiliate  thereof.

     Section  2.13     Mandatory  Prepayment.  Without  notice or demand, if the
                       ---------------------
sum  of the outstanding principal balance of the Revolving Advances plus the L/C
Amount  shall  at  any  time  exceed  the Borrowing Base, the Borrower shall (i)
first,  immediately  prepay  the  Revolving  Advances to the extent necessary to
eliminate  such excess; and (ii) if prepayment in full of the Revolving Advances
is  insufficient  to  eliminate  such  excess,  pay to the Lender in immediately
available  funds  for  deposit  in  the  Special  Account an amount equal to the
remaining excess.  Any payment received by the Lender under this Section 2.13 or
under  0 may be applied to the Obligations, in such order and in such amounts as
the  Lender,  in  its  discretion,  may  from  time  to  time  determine.

     Section  2.14  Payment. For purposes of calculating the amount of Revolving
                    -------
Advances  available  to Borrower, each payment will be applied (conditional upon
final  collection) to the outstanding principal balance of the Revolving Note on
the  Banking  Day  of  receipt by Lender of advices of deposit in the Collateral
Account, if such advices are received within sufficient time (in accordance with
Lender's usual and customary practices as in effect from time to time) to credit
Borrower's  loan  account on such day, and if not, then on the next Banking Day.
Such payment shall be applied in any order or manner of application satisfactory
to  Lender.  For  purposes  of calculating interest, Lender shall be entitled to
charge  Borrower  for  one (1) Calendar Day of clearance at the Floating Rate on
all payments deposited into the Collateral Account, whether or not such payments
are  applied  to reduce the outstanding principal balance of the Revolving Note.
This  clearance  charge  is  acknowledged  to constitute an integral part of the
pricing of the loans and financial accommodations contemplated herein, and shall
apply  whether  or  not the amount of payments deposited exceeds the obligations
outstanding.  Notwithstanding  anything in 0, the Borrower hereby authorizes the
Lender,  in  its  discretion  at  any  time  or  from  time  to time without the
Borrower's  request  and  even  if  the  conditions  set forth in 0 would not be
satisfied,  to make a Revolving Advance in an amount equal to the portion of the
Obligations  from  time  to  time  due  and  payable.  At  Lender's  option, all


<PAGE>
principal,  interest,  fees,  costs,  expenses and other charges provided for in
this  Agreement  or the other Loan Documents may be charged directly to the loan
account(s)  of  Borrower.

     Section  2.15     Payment  on Non-Banking Days.  Whenever any payment to be
                       ----------------------------
          made  hereunder  shall  be  stated  to  be due on a day which is not a
          Banking  Day,  such payment may be made on the next succeeding Banking
          Day,  and such extension of time shall in such case be included in the
          computation  of interest on the Advances or the fees hereunder, as the
          case  may  be.

     Section 2.16     Use of Proceeds.  All Advances made to Borrower and each
                      ---------------
          Letter of Credit shall be used by Borrower only for general operating,
          working  capital  and  other  proper  corporate  purposes  of Borrower
          (including  without  limitation, stock and asset acquisitions, mergers
          and stock repurchases with the prior approval of Lender) not otherwise
          prohibited  by  the  terms  hereof.

     Section  2.17     Liability Records.  The Lender may maintain from time to
                       -----------------
          time,  at its discretion, liability records as to the Obligations. All
          entries  made  on  any such record shall be presumed correct until the
          Borrower  establishes  the  contrary.  Upon  the  Lender's demand, the
          Borrower will admit and certify in writing the exact principal balance
          of  the  Obligations that the Borrower then asserts to be outstanding.
          Any  billing  statement  or accounting rendered by the Lender shall be
          conclusive and fully binding on the Borrower unless the Borrower gives
          the  Lender  specific  written  notice of exception within thirty (30)
          days  after  receipt  or  in  the  case  of  manifest  error.

     Section 2.18     Deactivation of Credit Facility. So long as no Obligations
                 -------------------------------
          are  outstanding,  Borrower  may  deactivate  the Credit Facility (any
          period  during  which  the  Credit Facility is deactivated pursuant to
          this Section 2.18 shall hereinafter be referred to as, a "Deactivation
          Period");  provided  that,  if  a Deactivation Period commences within
                     --------------
          thirty  (30)  days  after  the date hereof, Borrower shall give Lender
          prior  written  notice  of  its  intention  to  deactivate  the Credit
          Facility  promptly upon knowledge thereof and if a Deactivation Period
          commences  after  thirty  (30) days of the date hereof, Borrower shall
          give  Lender thirty (30) days prior written notice of its intention to
          deactivate the Credit Facility. During a Deactivation Period, Lender's
          Commitment  shall  not  be  in  effect,  and  the  charges pursuant to
          sections  2.6(b)  and  2.7(b)  and the clearance charge referred to in
          section  2.14  shall not be applied. Notwithstanding any provisions in
          the  Collection  Account  Agreement or the Lockbox Agreement, Borrower
          may  receive  all  payments  on  Receivables  or payments constituting
          proceeds  of  other  Collateral  directly  (rather  than depositing or
          directing  its account debtors or other obligors to remit such payment
          or  proceeds  to  the  Lockbox  or  the Collateral Account). Except as
          provided  in  Section  2.3(c) of this Agreement, a Deactivation Period
          shall  remain  in  effect  until  the  date thirty (30) days after the
          Borrower  notifies the Lender that it desires to reactivate the Credit
          Facility. No more than three (3) Deactivation Periods may be initiated
          by  Borrower  within  a  calendar  year. During a Deactivation Period,
          Borrower  shall continue to comply with the reporting requirements set
          forth  in  Section  6.1  of  this  Agreement.


<PAGE>
                                   ARTICLE III

                      Security Interest; Occupancy; Setoff
                      ------------------------------------

Section  3.1     Grant  of  Security  Interest.  The  Borrower  hereby  pledges,
                 -----------------------------
          assigns  and  grants  to  the Lender a security interest (collectively
          referred to as the "Security Interest") in the Collateral, as security
                              -----------------
         for  the  payment  and  performance  of  the  Obligations.

Section  3.2     Notification  of  Account Debtors and Other Obligors.  Upon the
                 ----------------------------------------------------
          occurrence  of  an Event of Default, the Lender may notify any account
          debtor or other person obligated to pay the amount due that such right
          to payment has been assigned or transferred to the Lender for security
          and  shall  be  paid directly to the Lender. The Borrower will join in
          giving  such  notice  if the Lender so requests. At any time after the
          Borrower or the Lender gives such notice to an account debtor or other
          obligor,  the Lender may, but need not, in the Lender's name or in the
          Borrower's  name, (a) demand, sue for, collect or receive any money or
          property at any time payable or receivable on account of, or securing,
          any  such  right  to  payment,  or  grant  any  extension to, make any
          compromise  or  settlement  with  or otherwise agree to waive, modify,
          amend  or change the obligations (including collateral obligations) of
          any  such  account  debtor or other obligor; and (b) as the Borrower's
          agent and attorney in fact, notify the United States Postal Service to
          change  the address for delivery of the Borrower's mail to any address
          designated by the Lender, otherwise intercept the Borrower's mail, and
          receive,  open  and dispose of the Borrower's mail for purposes of the
          collection  of  Collateral, applying all Collateral as permitted under
          this  Agreement  and holding all other mail for the Borrower's account
          or  forwarding  such  mail  to  the  Borrower's  last  known  address.

Section 3.3     Assignment of Insurance.  As additional security for the payment
                -----------------------
          and performance of the Obligations, the Borrower hereby assigns to the
          Lender  any and all monies (including, without limitation, proceeds of
          insurance  and  refunds  of  unearned  premiums)  due or to become due
          under,  and  all other rights of the Borrower with respect to, any and
          all  policies  of  insurance now or at any time hereafter covering the
          Collateral or any evidence thereof or any business records or valuable
          papers  pertaining thereto, and the Borrower hereby directs the issuer
          of  any  such policy to pay all such monies directly to the Lender. At
          any  time, whether or not a Default Period then exists, the Lender may
          (but  need  not),  in  the  Lender's  name  or in the Borrower's name,
          execute  and  deliver  proof  of  claim,  receive  all such monies and
          endorse  checks  and  other  instruments  representing payment of such
          monies.  Following  the  occurrence of an Event of Default, the Lender
          may  (but  need  not), in the Lender's name or in the Borrower's name,
          adjust,  litigate,  compromise or release any claim against the issuer
          of  any  such  policy.

Section  3.4     Occupancy.
                 ---------

(a)   The  Borrower  hereby  irrevocably  grants to the Lender the right to take
          possession  of the Premises at any time following the occurrence of an
          Event  of  Default.


<PAGE>
(b)  The  Lender  may use the Premises only to hold, process, manufacture, sell,
          use, store, liquidate, realize upon or otherwise dispose of goods that
          are  Collateral  and  for  other  purposes that the Lender may in good
          faith  deem  to  be  related  or  incidental  purposes.

(c)  The  Lender's right to hold the Premises shall cease and terminate upon the
          earlier  of  (i)  payment in full and discharge of all Obligations and
          termination  of  the Commitment, (ii) final sale or disposition of all
          goods  constituting  Collateral  and  delivery  of  all  such goods to
          purchasers  and  (iii)  the  waiver  of  such  Event  of  Default.

(d)  The  Lender  shall not be obligated to pay or account for any rent or other
          compensation  for  the  possession,  occupancy  or  use  of any of the
          Premises;  provided,  however,  that if the Lender does pay or account
          for  any  rent  or other compensation for the possession, occupancy or
          use  of  any  of the Premises, the Borrower shall reimburse the Lender
          promptly  for  the full amount thereof. In addition, the Borrower will
          pay,  or  reimburse  the Lender for, all taxes, fees, duties, imposts,
          charges  and  expenses  at  any  time  incurred by or imposed upon the
          Lender  by  reason of the execution, delivery, existence, recordation,
          performance or enforcement of this Agreement or the provisions of this
          0.

Section  3.5     License.  Without  limiting  the  generality  of the Patent and
                 -------
          Trademark Security Agreement, the Borrower hereby grants to the Lender
          a  non-exclusive,  worldwide  and  royalty-free  license  to  use  or
          otherwise  exploit all trademarks, franchises, trade names, copyrights
          and  patents  of  the  Borrower for the purpose of selling, leasing or
          otherwise  disposing  of  any  or  all  Collateral  during any Default
          Period.

Section  3.6     Financing  Statement.  A  carbon,  photographic  or  other
                 --------------------
          reproduction  of  this Agreement or of any financing statements signed
          by  the  Borrower  is  sufficient  as a financing statement and may be
          filed  as  a  financing statement in any state to perfect the security
          interests  granted hereby. For this purpose, the following information
          is  set  forth:

                     Name  and  address  of  Debtor:

                     Rockshox,  Inc.
                     1610  Garden  of  the  Gods  Road
                     Colorado  Springs,  Colorado  80907

                     Federal  Tax  Identification  No.  77-0396555
                     Name  and  address  of  Secured  Party:

                     Wells  Fargo  Business  Credit,  Inc.
                     245  South  Los  Robles  Avenue,  Suite  600
                     Pasadena,  California  91101

Section  3.7     Setoff.  The  Borrower  agrees  that, upon the occurrence of an
                 ------
          Event  of  Default, the Lender may, at its sole discretion and without
          demand  and without notice to anyone, setoff any liability owed to the
          Borrower  by  the  Lender, whether or not due, against any Obligation,
          whether  or  not  due.  In  addition,  each  other  Person  holding  a
          participating  interest  in  any  Obligations  shall have the right to
          appropriate or setoff any deposit or other liability then owed by such
          Person  to the Borrower, whether or not due, and apply the same to the
          payment of said participating interest, as fully as if such Person had
          lent  directly  to  the  Borrower  the  amount  of  such participating
          interest.


<PAGE>
                                   ARTICLE IV

                              Conditions of Lending
                              ---------------------

Section  4.1     Conditions  Precedent  to the Initial Revolving Advance and the
                 ---------------------------------------------------------------
          Initial  Letter of Credit. The Lender's obligation to make the initial
          -------------------------
          Revolving  Advance  or  to  cause  to  be issued the initial Letter of
          Credit  hereunder shall be subject to the condition precedent that the
          Lender  shall  have  received  all  of the following, each in form and
          substance  satisfactory  to  the  Lender:

(a)  This  Agreement,  properly  executed  by  the  Borrower.

(b)  A  certificate  of  an  officer  of  the  Borrower  confirming  that  the
          representations  and warranties set forth in 0 are true and correct in
          all  material  respects.

(c)  Current searches of appropriate filing offices showing that (i) no state or
          federal  tax  liens  have  been filed and remain in effect against the
          Borrower,  (ii)  no  financing  statements  or assignments of patents,
          trademarks  or copyrights have been filed and remain in effect against
          the  Borrower  except  those  financing  statements and assignments of
          patents,  trademarks  or  copyrights relating to Permitted Liens or to
          liens  held by Persons who have agreed in writing that upon receipt of
          proceeds  of  the  Advances,  they  will  deliver  UCC releases and/or
          terminations  and  releases of such assignments of patents, trademarks
          or  copyrights  satisfactory  to  the Lender, and (iii) the Lender has
          duly  filed all financing statements necessary to perfect the Security
          Interest,  to  the  extent  the  Security Interest is capable of being
          perfected  by  filing.

(d)  All  agreements required By Wells Fargo with respect to the Wells Facility,
          properly  executed  by the Borrower and satisfactory to Lender in form
          and  content.

(e)  Evidence  that  Borrower  has  entered  into  the  Wells  Facility on terms
          acceptable  to  Lender  in  its  sole  discretion.

(f)  Receipt by Lender of an executed intercreditor agreement between Lender and
          Wells  Fargo  Bank,  N.A.  on  terms  acceptable to Lender in its sole
          discretion.

(g)  Receipt by Lender of an executed participation agreement between Lender and
          Wells  Fargo  Bank,  N.A.  on  terms  acceptable to Lender in its sole
          discretion

(h)  Payment  of  the  fees  and commissions due through the date of the initial
          Advance  under 0 and expenses incurred by the Lender through such date
          and  required to be paid by the Borrower under 0, including reasonable
          legal  expenses  incurred  through  the  date  of  this  Agreement.

(i)  Such  other  documents  as  the  Lender  may  reasonably  require.

Section 4.2     Conditions Precedent to All Advances and Letters of Credit.  The
                ----------------------------------------------------------
          Lender's  obligation  to  make  each Advance or to cause the Issuer to
          issue  any Letter of Credit shall be subject to the further conditions
          precedent  that  on  such  date:

(a)  the  representations  and  warranties  contained  in  0  are correct in all
          material respects on and as of the date of such Advance or issuance of
          Letter  of Credit as though made on and as of such date, except to the
          extent  that  such  representations and warranties relate solely to an
          earlier  date;

(b)  no material adverse change, as determined by Lender, shall have occurred in
          the  financial  condition  or  business  of  Borrower nor any material
          decline,  as  determined  by  Lender,  in  the  market  value  of  any
          Collateral  or  a  substantial  or  material  portion of the assets of
          Borrower  since  the date of the latest financial statements delivered
          to  Lender  prior  to  the  Funding  Date;  and

(c)  no  event has occurred and is continuing, or would result from such Advance
          or  the  issuance  of such Letter of Credit, as the case may be, which
          constitutes  a  Default  or  an  Event  of  Default.

                                    ARTICLE V

                         Representations and Warranties
                         ------------------------------

The  Borrower  represents  and  warrants  to  the  Lender  as  follows:
Section  5.1     Corporate  Existence  and  Power; Name; Chief Executive Office;
                 ---------------------------------------------------------------
          Inventory  and  Equipment  Locations;  Tax  Identification Number. The
          -----------------------------------------------------------------
          Borrower  is  a  corporation,  duly organized, validly existing and in
          good  standing  under  the  laws  of the State of Delaware and is duly
          licensed  or qualified to transact business in all jurisdictions where
          the  character  of  the  property owned or leased or the nature of the
          business  transacted  by  it  makes  such  licensing  or qualification
          necessary.  The  Borrower  has  all  requisite  power  and  authority,
          corporate or otherwise, to conduct its business, to own its properties
          and  to  execute  and  deliver,  and to perform all of its obligations
          under, the Loan Documents. During its existence, the Borrower has done
          business  solely under the names set forth in Schedule 5.1 hereto. The
                                                        ------------
          Borrower's  chief  executive office and principal place of business is
          located  at  the  address set forth in Schedule 5.1 hereto, and all of
                                                 ------------
          the  Borrower's records relating to its business or the Collateral are
          kept  at that location. All Inventory and Equipment is located at that
          location  or  at  one of the other locations set forth in Schedule 5.1
                                                                    ------------
          hereto.  The  Borrower's  tax  identification  number is correctly set
          forth  in  0  hereto.

Section 5.2     Authorization of Borrowing; No Conflict as to Law or Agreements.
                ---------------------------------------------------------------
          The  execution,  delivery  and performance by the Borrower of the Loan
          Documents  and  the  borrowings  from time to time hereunder have been
          duly  authorized by all necessary corporate action and do not and will
          not  (i)  require  any  consent  or  approval  of  the  Borrower's
          stockholders;  (ii) require any authorization, consent or approval by,
          or  registration,  declaration  or  filing  with,  or  notice  to, any
          governmental  department,  commission,  board,  bureau,  agency  or
          instrumentality,  domestic or foreign, or any third party, except such
          authorization, consent, approval, registration, declaration, filing or
          notice  as  has been obtained, accomplished or given prior to the date
          hereof;  (iii)  violate  any  provision of any law, rule or regulation
          (including, without limitation, Regulation X of the Board of Governors
          of  the  Federal  Reserve System) or of any order, writ, injunction or


<PAGE>
          decree  presently in effect having applicability to the Borrower or of
          the  Borrower's  articles of incorporation or bylaws; (iv) result in a
          breach  of  or  constitute  a  default  under any indenture or loan or
          credit  agreement or any other material agreement, lease or instrument
          to  which the Borrower is a party or by which it or its properties may
          be  bound  or  affected; or (v) result in, or require, the creation or
          imposition  of  any  mortgage,  deed  of trust, pledge, lien, security
          interest  or other charge or encumbrance of any nature (other than the
          Security  Interest)  upon or with respect to any of the properties now
          owned  or  hereafter  acquired  by  the  Borrower.

Section  5.3     Legal  Agreements.  This  Agreement  constitutes  and, upon due
                 -----------------
          execution  by  the  Borrower, the other Loan Documents will constitute
          the  legal, valid and binding obligations of the Borrower, enforceable
          against  the  Borrower  in  accordance  with  their  respective terms.

Section  5.4          Subsidiaries.  Except  as  set  forth in Schedule 5.4, the
                      ------------                             ------------
          Borrower  has  no  Subsidiaries.

Section  5.5     Financial  Condition;  No  Adverse  Change.  The  Borrower  has
                 ------------------------------------------
          heretofore furnished to the Lender audited financial statements of the
          Borrower  for  its  fiscal  year  ended  March  31, 2000 and unaudited
          financial  statements  of  the  Borrower  as of and for the ten months
          ended  January  31,  2001,  and  those  statements  fairly present the
          Borrower's financial condition on the dates thereof and the results of
          its  operations  and  cash  flows  for the periods then ended and were
          prepared  in  accordance  with GAAP (subject, in the case of unaudited
          financial  statements,  to  the  absence  of  footnotes  and  year-end
          adjustments).  Since the date of the most recent financial statements,
          there  has been no material adverse change in the Borrower's business,
          properties  or  condition  (financial  or  otherwise).

Section  5.6     Litigation.  There are no actions, suits or proceedings pending
                 ----------
          or,  to  the Borrower's knowledge, threatened against or affecting the
          Borrower or any of its Affiliates or the properties of the Borrower or
          any  of  its  Affiliates  before any court or governmental department,
          commission,  board,  bureau,  agency  or  instrumentality, domestic or
          foreign, which could reasonably be expected to have a material adverse
          effect  on  the  financial  condition, properties or operations of the
          Borrower  or  any  of  its  Affiliates.

Section  5.7     Regulation  U.  The  Borrower is not engaged in the business of
                 -------------
          extending  credit  for  the  purpose  of purchasing or carrying margin
          stock (within the meaning of Regulation U of the Board of Governors of
          the  Federal  Reserve System, as amended), and no part of the proceeds
          of  any  Advance will be used to purchase or carry any margin stock or
          to  extend  credit to others for the purpose of purchasing or carrying
          any  margin  stock  or to retire any indebtedness which was originally
          incurred  to  purchase  or  carry  any  margin  stock or for any other
          purpose  which  might  cause  any  of  the Advances to be considered a
          "purpose  credit"  within  the meaning of Regulation U of the Board of
          Governors  of  the  Federal  Reserve  System,  as  amended.

Section  5.8     Taxes.  The  Borrower and its Affiliates have paid or caused to
                 -----
          be  paid  to  the  proper  authorities when due all federal, state and
          local  taxes required to be withheld by each of them. The Borrower and


<PAGE>
          its  Affiliates  have  filed  all federal, state and local tax returns
          reflecting tax liabilities in excess of $50,000 which to the knowledge
          of  the officers of the Borrower or any Affiliate, as the case may be,
          are  required  to  be  filed, and the Borrower and its Affiliates have
          paid  or  caused  to  be paid to the respective taxing authorities all
          taxes as shown on said returns or on any assessment received by any of
          them  to  the  extent  such taxes have become due except such taxes or
          assessments,  if  any,  as are being contested in good faith and as to
          which  adequate  reserves  have been provided in accordance with GAAP.

Section 5.9          Titles and Liens.  The Borrower has good and absolute title
                     ----------------
          to  all Collateral described in the collateral reports provided to the
          Lender  at  the  time  of  delivery  hereof  and all other Collateral,
          properties  and  assets  reflected  in the latest financial statements
          referred  to  in  0  and  all  proceeds thereof, free and clear of all
          mortgages,  security  interests,  liens  and  encumbrances, except for
          Permitted  Liens. No financing statement naming the Borrower as debtor
          is  on  file  in  any  office  except to perfect only Permitted Liens.

Section  5.10     Plans.  Except  as disclosed to the Lender in writing prior to
                  -----
          the  date  hereof,  neither  the  Borrower  nor  any of its Affiliates
          maintains  or  has  maintained  any Plan. Neither the Borrower nor any
          Affiliate  has  received any notice or has any knowledge to the effect
          that  it  is  not  in  full compliance with any of the requirements of
          ERISA.  No  Reportable  Event  or other fact or circumstance which may
          have  an  adverse  effect on the Plan's tax qualified status exists in
          connection  with  any  Plan.  Neither  the  Borrower  nor  any  of its
          Affiliates  has:

(a)  Any  accumulated  funding  deficiency  within  the  meaning  of  ERISA;  or

(b)  Any  liability  or knows of any fact or circumstances which could result in
          any  liability  to  the  Pension  Benefit  Guaranty  Corporation,  the
          Internal  Revenue  Service, the Department of Labor or any participant
          in  connection  with  any  Plan  (other than accrued benefits which or
          which  may become payable to participants or beneficiaries of any such
          Plan).

Section  5.11     Default.  The Borrower is in compliance with all provisions of
                  -------
          all agreements, instruments, decrees and orders to which it is a party
          or  by  which  it  or its property is bound or affected, the breach or
          default  of  which  could  have  a  material  adverse  effect  on  the
          Borrower's  financial  condition,  properties  or  operations.

Section  5.12     Environmental  Matters.
                  ----------------------

(a)  Definitions.  As used in this Agreement, the following terms shall have the
     -----------
          following  meanings:

(i)  "Environmental  Law"  means any federal, state, local or other governmental
      ------------------
          statute,  regulation,  law or ordinance dealing with the protection of
          human  health  and  the  environment.


<PAGE>
(ii) "Hazardous  Substances"  means  pollutants,  contaminants,  hazardous
      ---------------------
          substances, hazardous wastes, petroleum and fractions thereof, and all
          other chemicals, wastes, substances and materials listed in, regulated
          by  or  identified  in  any  Environmental  Law.

(b)  Except  as  would  not  reasonably  be  expected to have a material adverse
          effect, to the Borrower's best knowledge, there are not present in, on
          or  under  the  Premises  any  Hazardous  Substances  in  such form or
          quantity  as  to  create  any  liability  or obligation for either the
          Borrower  or  the Lender under common law of any jurisdiction or under
          any  Environmental  Law,  and  no  Hazardous Substances have ever been
          stored,  buried,  spilled, leaked, discharged, emitted or released in,
          on  or  under  the  Premises  in  such  a  way  as  to create any such
          liability.

(c)  To  the  Borrower's  best  knowledge,  the  Borrower  has  not  disposed of
          Hazardous  Substances  in  such  a  manner  as to create any liability
          exceeding  $100,000,  individually  or  in  the  aggregate,  under any
          Environmental  Law.

(d)  Except  as  would  not  reasonably  be  expected to have a material adverse
          effect,  there  are  not  now  and,  since Borrower's occupancy of the
          Premises,  there  never  have  been  any  requests,  claims,  notices,
          investigations,  demands,  administrative  proceedings,  hearings  or
          litigation,  relating  in  any  way  to  the Premises or the Borrower,
          alleging  liability  under,  violation  of,  or noncompliance with any
          Environmental Law or any license, permit or other authorization issued
          pursuant  thereto. To the Borrower's best knowledge, no such matter is
          threatened  or  impending.

(e)  To the Borrower's best knowledge, the Borrower's businesses are and have in
          the  past  always  been conducted in accordance with all Environmental
          Laws  and  all  licenses,  permits  and  other authorizations required
          pursuant  to  any  Environmental  Law and necessary for the lawful and
          efficient  operation  of  such  businesses  are  in  the  Borrower's
          possession  and  are in full force and effect except, in each case, as
          would  not  reasonable  be  expected  to  result in a material adverse
          effect.

(f)  To  the Borrower's best knowledge, the Premises are not and never have been
          listed  on  the  National  Priorities  List,  the  Comprehensive
          Environmental  Response, Compensation and Liability Information System
          or  any similar federal, state or local list, schedule, log, inventory
          or  database.

               (g)  The Borrower has delivered to Lender, to the extent Borrower
          has  such  items  in  its  possession,  all environmental assessments,
          audits,  reports,  permits  and licenses describing or relating in any
          way  to  the  Premises  or  Borrower's  businesses.

Section  5.13     Submissions  to  Lender.  All  financial and other information
                  -----------------------
          provided  to  the Lender by or on behalf of the Borrower in connection
          with  the  Borrower's  request  for the credit facilities contemplated
          hereby  is  true  and  correct  in  all  material  respects and, as to
          projections, valuations or proforma financial statements, are based on
          assumptions  made  in  good faith (it being acknowledged by the Lender
          that  no  assurance can be given that such projections, valuations, or
          proforma  results  will  be  realized).


<PAGE>
Section  5.14     Financing Statements.  The Borrower has provided to the Lender
                  --------------------
          signed  financing  statements  sufficient  when  filed  to perfect the
          Security  Interest  and  the  other  security interests created by the
          Security  Documents.  When  such financing statements are filed in the
          offices  noted  therein,  the  Lender  will have a valid and perfected
          security interest in all Collateral and all other collateral described
          in  the  Security  Documents  which  is  capable of being perfected by
          filing  financing  statements.  None  of  the  Collateral  or  other
          collateral  covered  by  the  Security  Documents  is or will become a
          fixture  on  real  estate,  unless  a  sufficient fixture filing is in
          effect  with  respect  thereto.

Section  5.15     Rights to Payment.  Each right to payment and each instrument,
                  -----------------
          document, chattel paper and other agreement constituting or evidencing
          Collateral  or  other  collateral covered by the Security Documents is
          (or,  in  the  case of all future Collateral or such other collateral,
          will  be  when  arising  or  issued)  the  valid,  genuine and legally
          enforceable obligation, subject to no defense, setoff or counterclaim,
          of  the  account  debtor  named  therein  or in the Borrower's records
          pertaining  thereto  as  being  obligated  to  pay  such  obligation.

                                   ARTICLE VI

                        Borrower's Affirmative Covenants
                        --------------------------------

So  long  as  the  Obligations shall remain unpaid, or the Credit Facility shall
remain  outstanding,  the  Borrower will comply with the following requirements,
unless  the  Lender  shall  otherwise  consent  in  writing:

Section  6.1     Reporting Requirements.  The Borrower will deliver, or cause to
                 ----------------------
          be  delivered,  to the Lender each of the following, which shall be in
          form  and  detail  acceptable  to  the  Lender:

(a)  as  soon  as  available, and in any event within ninety (90) days after the
          end  of  each  fiscal  year  of  the  Borrower, the Borrower's audited
          financial  statements  with  the  unqualified  opinion  of independent
          certified  public  accountants selected by the Borrower and acceptable
          to  the  Lender,  which  annual financial statements shall include the
          Borrower's  balance  sheet  as  at the end of such fiscal year and the
          related  statements  of  the  Borrower's income, retained earnings and
          cash  flows for the fiscal year then ended, prepared, if the Lender so
          requests, on a consolidating (if applicable) and consolidated basis to
          include  any  subsidiaries  of  Borrower, all in reasonable detail and
          prepared  in  accordance  with  GAAP,  together with (i) copies of all
          management  letters  prepared  by  such  accountants;  and  (ii)  a
          certificate  of  the  Borrower's  chief financial officer stating that
          such  financial  statements have been prepared in accordance with GAAP
          and whether or not such officer has knowledge of the occurrence of any
          Default  or  Event  of  Default  hereunder  and,  if  so,  stating  in
          reasonable  detail  the  facts  with  respect  thereto;

(b)  as soon as available and in any event within thirty (30) days after the end
          of  each month, financial statements, unaudited internal balance sheet
          and  statements  of income and retained earnings of the Borrower as at
          the  end  of  and  for such month and for the year to date period then
          ended,  prepared,  if  the  Lender so requests, on a consolidating (if
          applicable)  and  consolidated  basis  to  include any subsidiaries of
          Borrower,  in  reasonable  detail  and stating in comparative form the
          figures  for  the corresponding date and periods in the previous year,


<PAGE>
          all  prepared  in  accordance  with  GAAP,  subject  to year-end audit
          adjustments;  and accompanied by a certificate of the Borrower's chief
          financial  officer,  substantially  in  the  form  of Exhibit B hereto
          stating  (i)  that  such  financial  statements  have been prepared in
          accordance  with  GAAP,  subject  to  year end audit adjustments, (ii)
          whether  or  not  such  officer has knowledge of the occurrence of any
          Default  or  Event  of  Default hereunder not theretofore reported and
          remedied  and,  if  so,  stating  in  reasonable detail the facts with
          respect  thereto, and (iii) all relevant facts in reasonable detail to
          evidence,  and  the computations as to, whether or not the Borrower is
          in  compliance  with the requirements set forth in Sections 6.12, 6.13
          and  7.10;

(c)  within  ten  (10)  days  after  the  end  of each month and weekly during a
          Deactivation  Period when one or more Letter of Credit has been issued
          and  remains  outstanding or more frequently if the Lender so requires
          after  the occurrence of an Event of Default, agings of the Borrower's
          accounts  receivable and its accounts payable and a calculation of the
          Borrower's  Accounts and Eligible Accounts as at the end of such month
          or  shorter  time  period;

(d)  at  least  thirty (30) days before the beginning of each fiscal year of the
          Borrower,  the projected balance sheets and income statements for each
          month  of  such  year,  each  in  reasonable  detail, representing the
          Borrower's  good  faith  projections  and  certified by the Borrower's
          chief financial officer as being the most recent projections available
          and  identical  to  the  projections used by the Borrower for internal
          planning  purposes,  together  with  such  supporting  schedules  and
          information  as  the  Lender  may  reasonably  require;

(e)  as soon as possible and in any event within 10 days after receipt of notice
          thereof  by  the  Borrower, notice in writing of all litigation and of
          all proceedings before any governmental or regulatory agency affecting
          the  Borrower  of  the  type  described  in 0 or which seek a monetary
          recovery  in  excess  of  One  Hundred  Thousand  Dollars  ($100,000).

(f)  as  promptly  as  practicable  (but in any event not later than ten Banking
          Days)  after  an  officer  of  the  Borrower  obtains knowledge of the
          occurrence  of  any  breach,  default  or  event  of default under any
          Security Document or any event which constitutes a Default or Event of
          Default hereunder, notice of such occurrence, together with a detailed
          statement  by a responsible officer of the Borrower of the steps being
          taken  by  the  Borrower to cure the effect of such breach, default or
          event;

(g)  as  soon  as  possible  and  in any event within thirty (30) days after the
          Borrower  knows  or  has reason to know that any Reportable Event with
          respect  to  any  Plan  has  occurred, the statement of the Borrower's
          chief  financial  officer  setting forth details as to such Reportable
          Event  and the action which the Borrower proposes to take with respect
          thereto,  together  with a copy of the notice of such Reportable Event
          to  the  Pension  Benefit  Guaranty  Corporation;

(h)  as  soon  as  possible,  and  in  any  event within ten (10) days after the
          Borrower  fails  to  make  any  quarterly  contribution  required with
          respect  to any Plan under Section 412(m) of the Internal Revenue Code
          of  1986,  as amended, the statement of the Borrower's chief financial
          officer  setting forth details as to such failure and the action which


<PAGE>
          the  Borrower  proposes  to take with respect thereto, together with a
          copy  of  any  notice  of  such failure required to be provided to the
          Pension  Benefit  Guaranty  Corporation;

(i)  promptly  upon  knowledge  thereof, notice of (i) any disputes or claims by
          the  Borrower's  customers  in  which  the  disputed amount or amounts
          exceeds  an aggregate amount of $100,000; (ii) credit memos; (iii) any
          goods  returned  to  or  recovered  by  the Borrower other than in the
          ordinary  course  of  business  ;  and  (iv) any change in the persons
          constituting  the  Borrower's senior executive officers and directors;

(j)  promptly  upon  knowledge thereof, notice of any loss of or material damage
          to  any  Collateral  or  other  collateral  covered  by  the  Security
          Documents  or  of  any substantial adverse change in any Collateral or
          such other collateral or the prospect of payment thereof to the extent
          the  value  of  such loss, damage or adverse change or any combination
          thereof  exceeds  $100,000;

(k)  within  ten  (10)  days  of  their  distribution,  copies  of all financial
          statements, reports and proxy statements which the Borrower shall have
          sent  to  its  stockholders;

(l)  within  ten  (10)  days of sending or filing thereof, copies of all regular
          and periodic reports which the Borrower shall file with the Securities
          and  Exchange  Commission  or  any  national  securities  exchange;

(m)  promptly  upon knowledge thereof, notice of the Borrower's violation of any
          law,  rule  or  regulation,  the  non-compliance  with  which  could
          materially  and  adversely  affect  the  Borrower's  business  or  its
          financial  condition;  and

(n)  from  time  to  time,  with  reasonable promptness, any and all receivables
          schedules,  collection  reports, deposit records, equipment schedules,
          copies of invoices to account debtors, shipment documents and delivery
          receipts  for goods sold, and such other material, reports, records or
          information  as  the Lender may reasonably request, including, without
          limitation,  weekly  borrowing  base  certificates.

Section  6.2     Books  and  Records;  Inspection and Examination.  The Borrower
                 ------------------------------------------------
          will  keep  accurate books of record and account for itself pertaining
          to  the  Collateral  and  pertaining  to  the  Borrower's business and
          financial condition in which true and complete entries will be made in
          accordance  with  GAAP and, upon the Lender's request, will permit any
          officer,  employee,  attorney  or  accountant for the Lender to audit,
          review, make extracts from or copy any and all corporate and financial
          books  and  records  of  the  Borrower  at  all  times during ordinary
          business  hours  and  upon reasonable notice, to send and discuss with
          account  debtors  and  other  obligors  requests  for  verification of
          amounts  owed  to  the Borrower, and to discuss the Borrower's affairs
          with any of its directors, officers, employees or agents. The Borrower
          will  permit  the  Lender, or its employees, accountants, attorneys or
          agents,  to  examine  and  inspect  any  Collateral,  other collateral
          covered  by  the  Security  Documents  or  any  other  property of the
          Borrower  at  any  time  during  ordinary  business  hours  and  upon
          reasonable  notice.

Section  6.3     Account Verification.  The Lender may at any time and from time
                 --------------------
          to time send or require the Borrower to send requests for verification
          of  accounts  or  notices  of  assignment to account debtors and other


<PAGE>
          obligors.  The  Lender  may  also  at  any  time and from time to time
          telephone  account  debtors  and  other  obligors  to verify accounts.

Section  6.4     Compliance  with  Laws.
                 ----------------------

(a)  The  Borrower  will (i) comply with the requirements of applicable laws and
          regulations,  the  non-compliance  with  which  would  materially  and
          adversely  affect its business or its financial condition and (ii) use
          and  keep  the  Collateral,  and  require that others use and keep the
          Collateral,  only  for  lawful  purposes,  without  violation  of  any
          federal,  state  or  local  law,  statute  or  ordinance.

(b)  Without  limiting  the  foregoing  undertakings,  the Borrower specifically
          agrees  that it will comply with all applicable Environmental Laws and
          obtain  and  comply  with  all permits, licenses and similar approvals
          required  by  any  Environmental  Laws,  and  will  not generate, use,
          transport, treat, store or dispose of any Hazardous Substances in such
          a manner as to create any liability or obligation under the common law
          of  any  jurisdiction  or  any  Environmental  Law except as would not
          reasonably  be  expected  to  have  a  material  adverse  effect.

Section  6.5     Payment  of  Taxes  and Other Claims.  The Borrower will pay or
                 ------------------------------------
          discharge,  when  due,  (a)  all  material  taxes,  assessments  and
          governmental  charges  levied or imposed upon it or upon its income or
          profits,  upon  any  properties  belonging  to  it (including, without
          limitation,  the  Collateral)  or  upon  or  against  the  creation,
          perfection  or continuance of the Security Interest, prior to the date
          on  which  penalties  attach thereto, (b) all federal, state and local
          taxes  required  to  be  withheld by it, and (c) all lawful claims for
          labor,  materials and supplies which, if unpaid, might by law become a
          lien or charge upon any properties of the Borrower; provided, that the
          Borrower shall not be required to pay any such tax, assessment, charge
          or claim whose amount, applicability or validity is being contested in
          good  faith  by  appropriate proceedings and for which proper reserves
          have  been  made.

Section  6.6     Maintenance  of  Properties.
                 ---------------------------

(a)  The  Borrower  will  keep and maintain the Collateral, the other collateral
          covered  by  the  Security  Documents  and all of its other properties
          necessary  or  useful  in  its  business in good condition, repair and
          working  order  (normal  wear and tear excepted) and will from time to
          time  replace or repair any worn, defective or broken parts; provided,
          however,  that  nothing  in  this  0  shall  prevent the Borrower from
          discontinuing  the  operation and maintenance of any of its properties
          if  such  discontinuance  is, in the Borrower's judgment, desirable in
          the  conduct of the Borrower's business and not disadvantageous in any
          material  respect  to  the  Lender.


(b)  The  Borrower  will  defend the Collateral against all claims or demands of
          all  persons  (other  than  the Lender and holders of Permitted Liens)
          claiming  the  Collateral  or  any  interest  therein.

(c)  The  Borrower  will keep all Collateral and other collateral covered by the
          Security Documents free and clear of all security interests, liens and
          encumbrances  except  Permitted  Liens.


<PAGE>
Section  6.7     Insurance.  The  Borrower will obtain and at all times maintain
                 ---------
          insurance with insurers believed by the Borrower to be responsible and
          reputable,  in such amounts and against such risks as may from time to
          time  be  reasonably required by the Lender, but in all events in such
          amounts  and  against  such  risks  as is usually carried by companies
          engaged  in similar business and owning similar properties in the same
          general  areas  in  which  the Borrower operates. Without limiting the
          generality  of  the foregoing, the Borrower will at all times maintain
          business  interruption  insurance including coverage for force majeure
          and  keep  all  tangible  Collateral  insured  against  risks  of fire
          (including  so-called  extended  coverage),  theft,  collision  (for
          Collateral  consisting  of motor vehicles) and such other risks and in
          such  amounts  as  the  Lender  may  reasonably request, with any loss
          payable  to the Lender to the extent of its interest, and all policies
          of  such  insurance  shall contain a lender's loss payable endorsement
          for  the  Lender's  benefit  acceptable to the Lender. All policies of
          liability  insurance  required  hereunder  shall name the Lender as an
          additional  insured.

Section  6.8     Preservation  of  Existence.  The  Borrower  will  preserve and
                 ---------------------------
          maintain  its  existence  and  all  of  its  rights,  privileges  and
          franchises  necessary  or  desirable  in  the  normal  conduct  of its
          business  and  shall conduct its business in an orderly, efficient and
          regular  manner.

Section  6.9     Delivery  of Instruments, etc.  Upon request by the Lender, the
                 -----------------------------
          Borrower  will  promptly  deliver  to  the  Lender  in  pledge  all
          instruments,  documents  and  chattel  papers constituting Collateral,
          duly  endorsed  or  assigned  by  the  Borrower.

Section  6.10     Collateral  Account.
                  -------------------

(a)  If,  notwithstanding  the  instructions  to debtors to make payments to the
          Lockbox,  the  Borrower  receives  any  payments  on  Receivables, the
          Borrower  shall  deposit  such  payments  into the Collateral Account.
          Until so deposited, the Borrower shall hold all such payments in trust
          for  and  as  the  property of the Lender and shall not commingle such
          payments  with  any  of  its  other  funds  or  property.

(b)  Amounts  deposited  in  the  Collateral Account shall not bear interest and
          shall  not be subject to withdrawal by the Borrower, except after full
          payment  and  discharge  of  all  Obligations.  All  deposits  in  the
          Collateral  Account  shall constitute proceeds of Collateral and shall
          not  constitute  payment  of  the  Obligations.

(c)  All  items  deposited  in  the Collateral Account shall be subject to final
          payment.  If  any such item is returned uncollected, the Borrower will
          immediately  pay the Lender, or, for items deposited in the Collateral
          Account,  the  bank maintaining such account, the amount of that item,
          or  such bank at its discretion may charge any uncollected item to the
          Borrower's  commercial account or other account. The Borrower shall be
          liable  as  an  endorser  on  all  items  deposited  in the Collateral
          Account,  whether  or  not  in  fact  endorsed  by  the  Borrower.

Section  6.11     Performance  by  the  Lender.  Following  the occurrence of an
                  ----------------------------
          Event of Default, the Lender may, but need not, perform or observe any
          covenant which the Borrower has failed to perform on behalf and in the


<PAGE>
          name,  place and stead of the Borrower (or, at the Lender's option, in
          the  Lender's  name)  and  may,  but  need not, take any and all other
          actions  which  the  Lender  may  reasonably deem necessary to cure or
          correct  such  failure  (including, without limitation, the payment of
          taxes,  the satisfaction of security interests, liens or encumbrances,
          the  performance  of  obligations  owed  to  account  debtors or other
          obligors,  the procurement and maintenance of insurance, the execution
          of  assignments, security agreements and financing statements, and the
          endorsement  of  instruments); and the Borrower shall thereupon pay to
          the  Lender  on demand the amount of all monies expended and all costs
          and expenses (including reasonable attorneys' fees and legal expenses)
          incurred  by  the  Lender  in  connection  with  or as a result of the
          performance  or  observance  of  such agreements or the taking of such
          action  by  the  Lender,  together with interest thereon from the date
          expended  or incurred at the Floating Rate. To facilitate the Lender's
          performance  or observance of such covenants of the Borrower following
          the occurrence of an Event of Default, the Borrower hereby irrevocably
          appoints  the  Lender,  or the Lender's delegate, acting alone, as the
          Borrower's  attorney  in  fact  (which  appointment is coupled with an
          interest)  with  the  right  (but  not  the duty) from time to time to
          create,  prepare,  complete,  execute, deliver, endorse or file in the
          name and on behalf of the Borrower any and all instruments, documents,
          assignments,  security  agreements, financing statements, applications
          for  insurance  and  other  agreements  and  writings  required  to be
          obtained,  executed,  delivered or endorsed by the Borrower under this
          0.

Section  6.12     Minimum  Book  Net  Worth.  The Borrower will maintain, during
                  -------------------------
          each  period described below, its Book Net Worth, determined as at the
          end  of  each  month,  at an amount not less than the amount set forth
          opposite  such  period:

                        Period                    Minimum Book Net Worth
                        ------                    ----------------------
                         April 30, 2001                $15,000,000
                          May 31, 2001                 $13,500,000
                          June 30, 2001                $12,000,000
                          July 31, 2001                $11,500,000
                         August 31, 2001               $12,500,000
                       September 30, 2001              $15,000,000
                        October 31, 2001               $15,500,000
                        November 30, 2001              $16,000,000
                        December 31, 2001              $18,000,000
                        January 31, 2002               $17,500,000
                        February 28, 2002              $17,500,000
                  March 31, 2002 and thereafter        $18,500,000


Section  6.13     Minimum  EBITDA.  The Borrower will achieve during each period
                  ---------------
described  below, EBITDA, measured quarterly on a rolling 12 month basis, of not
less  than  the  amount  set  forth  opposite  such  period:


<PAGE>
                     First Quarter Ending              Minimum EBITDA
                     --------------------              --------------
                         June 30, 2001                  ($2,500,000)
                      September 30, 2001                     $0
                       December 31, 2001                 $2,500,000
            March 31, 2002 and each fiscal quarter-      $7,000,000
                        end thereafter

Section  6.14     New  Covenants.  On  or before March 31, 2002 Lender shall set
                  --------------
          new covenant levels for Sections 6.12, 6.13 and 7.10 for periods after
          such  date.  The  new  covenant levels will be based on the Borrower's
          projections  for  such  periods received by Lender pursuant to Section
          6.1(c)  and  shall  be  no  less  stringent  than  the present levels.

Section  6.15     Premises.  The Borrower agrees to provide the Lender with true
                  --------
          and correct copies of leases pursuant to which the Borrower is leasing
          the Premises, and to use its best efforts to obtain and provide to the
          Lender  a  landlord's disclaimer and consent with respect to each such
          lease.

Section  6.16     Off-Site  Inventory.  In  the  event Inventory at any location
                  -------------------
          other  than  those  listed  in  Schedule 5.1 hereto, exceeds an amount
                                          ------------
          equal  to  Two Hundred and Fifty Thousand Dollars ($250,000), Borrower
          shall  (i)  notify  Lender  of  such  location,  and  (ii) execute UCC
          financing  statements  sufficient  to  protect  the Borrower's and the
          Lender's  interests  in  such  Inventory.

                                   ARTICLE VII

                               Negative Covenants

So  long  as  the  Obligations shall remain unpaid, or the Credit Facility shall
remain outstanding, the Borrower agrees that, without the Lender's prior written
consent:

Section  7.1     Liens.  The  Borrower will not create, incur or suffer to exist
                 -----
          any  mortgage,  deed  of  trust,  pledge,  lien,  security  interest,
          assignment  or  transfer  upon  or  of any of its assets, now owned or
          hereafter  acquired,  to  secure any indebtedness; excluding, however,
                                                             ---------  -------
          from  the  operation  of  the  foregoing, the following (collectively,
          "Permitted  Liens"):
           ----------------
(a)  in  the  case  of any of the Borrower's property which is not Collateral or
          other  collateral  described  in  the  Security  Documents, covenants,
          restrictions,  rights,  easements  and  minor  irregularities in title
          which  do  not  materially  interfere  with the Borrower's business or
          operations  as  presently  conducted;

(b)  mortgages,  deeds  of  trust,  pledges,  liens,  security  interests  and
          assignments in existence on the date hereof and listed in Schedule 7.1
                                                                    ------------
          hereto;

(c)  the  Security  Interest  and  liens  and  security interests created by the
          Security  Documents;

(d)  purchase  money security interests relating to the acquisition of machinery
          and  equipment  of  the Borrower not exceeding the cost or fair market
          value  thereof  and  so long as no Default Period is then in existence
          and  none  would  exist  immediately  after  such  acquisition.


<PAGE>
(e)  liens  for  taxes,  assessments  or  governmental  charges or levies on the
          Borrower's property if the same shall not at the time be delinquent or
          thereafter can be paid without penalty, or are being contested in good
          faith  and  by appropriate proceedings and for which adequate reserves
          in  accordance  with  GAAP shall have been set aside on the Borrower's
          books;

               (f)  liens  imposed by law, such as carriers', warehousemen's and
          mechanics'  liens  and  other  similar  lines  arising in the ordinary
          course  of  business which secure payment of obligations not more than
          60  days  past  due  or  which  are  being  contested in good faith by
          appropriate  proceedings  and  for  which adequate reserves shall have
          been  set  aside  on  its  books;

               (g)  liens  arising  out  of  pledges  or deposits under worker's
          compensation  laws, unemployment insurance, old age pensions, or other
          social  security  or  retirement  benefits,  or  similar  legislation;

               (h)  liens  securing  capitalized  leases  permitted  pursuant to
          Section  7.2;

               (i)  the  replacement, extension or renewal of any lien permitted
          hereunder so long as the Debt secured by such lien is not increased by
          such  replacement,  extension  or  renewal;  and

(j)  liens  of  Wells  Fargo  in  connection  with  the  Wells  Facility.

Section  7.2     Indebtedness.  The  Borrower  will not incur, create, assume or
                 ------------
          permit  to  exist any indebtedness or liability on account of deposits
          or  advances  or  any  indebtedness  for  borrowed money or letters of
          credit  issued  on the Borrower's behalf, or any other indebtedness or
          liability  evidenced  by  notes,  bonds,  debentures  or  similar
          obligations,  except:

(a)  indebtedness  arising  hereunder  or  under  the  Wells  Facility;

(b)  indebtedness  of the Borrower in existence on the date hereof and listed in
          Schedule  7.2  hereto  and  all  refundings  and refinancings thereof;
          -------------
          provided, however, that the dollar amount of such indebtedness may not
          be  increased;

(c)  indebtedness  relating  to  liens  permitted  in  accordance  with  0;

(d)  obligations  in respect of capitalized leases in an aggregate amount not to
          exceed  $1,200,000  at  any  time  outstanding,  and

               (e)  indebtedness  in  respect  of  performance  bonds,  bankers
          acceptances,  letter of credit and surety or appeal bonds entered into
          by  the  Borrower  in  the  ordinary  course  of  business.


<PAGE>
Section 7.3     Guaranties.  The Borrower will not assume, guarantee, endorse or
                ----------
          otherwise  become  directly  or contingently liable in connection with
          any  obligations  of  any  other  Person,  except:

(a)  the  endorsement  of  negotiable instruments by the Borrower for deposit or
          collection or similar transactions in the ordinary course of business;
          and

(b)  guaranties,  endorsements  and  other  direct  or contingent liabilities in
          connection  with the obligations of other Persons, in existence on the
          date  hereof  and  listed  in  Schedule  7.2  hereto.
                                         -------------

Section  7.4     Investments  and  Subsidiaries.
                 ------------------------------

(a)  The  Borrower  will  not  purchase  or hold beneficially any stock or other
          securities  or  evidences  of indebtedness of, make or permit to exist
          any  loans  or  advances  to,  or  make  any investment or acquire any
          interest  whatsoever  in, any other Person, including specifically but
          without  limitation  any  partnership  or  joint  venture,  except:

(i)  investments  in  direct  obligations of the United States of America or any
          agency  or  instrumentality  thereof whose obligations constitute full
          faith  and credit obligations of the United States of America having a
          maturity  of  one  year  or  less,  commercial  paper  issued  by U.S.
          corporations  rated  "A-1" or "A-2" by Standard & Poors Corporation or
                                ---      ---
          "P-1" or "P-2" by Moody's Investors Service or certificates of deposit
           ---      ---
         or  bankers'  acceptances having a maturity of one year or less issued
          by  members of the Federal Reserve System having deposits in excess of
          One  Hundred  Million  Dollars  ($100,000,000)  (which certificates of
          deposit  or  bankers'  acceptances  are  fully  insured by the Federal
          Deposit  Insurance  Corporation);


(ii) travel  advances  or  loans  to  the  Borrower's officers and employees not
          exceeding at any one time an aggregate of Twenty Five Thousand Dollars
          ($25,000);

(iii) advances  in  the  form  of progress payments, prepaid rent not exceeding
          three  (3)  months  or  security  deposits;

(iv) investments  existing  on  the  date  hereof and described in Schedule 7.4;

                    (v)  accounts  receivable;

                    (vi) investments  received  in  settlement  of  arms length
               disputes;  and

                    (vii)  any endorsement of a check or other medium of payment
               for  deposit  or  collection,  or  any similar transaction in the
               ordinary  course  of  business.

(b)     The  Borrower  will  not  create  or  permit  to  exist  any Subsidiary.

Section  7.5     Dividends.  The  Borrower will not declare or pay any dividends
                 ---------
          (other  than dividends payable solely in stock of the Borrower) on any


<PAGE>
          class  of  its  stock  or make any payment on account of the purchase,
          redemption or other retirement of any shares of such stock or make any
          distribution  in  respect  thereof,  either  directly  or  indirectly.

Section  7.6     Sale  or Transfer of Assets; Suspension of Business Operations.
                 --------------------------------------------------------------
          Without  the  prior  written  consent  of  Lender  (which shall not be
          unreasonably  withheld),  the  Borrower  will not sell, lease, assign,
          transfer or otherwise dispose of (i) the stock of any Subsidiary, (ii)
          all  or  a  substantial part of its assets, or (iii) any Collateral or
          any  interest  therein  (whether  in one transaction or in a series of
          transactions)  to any other Person other than the sale of Inventory in
          the  ordinary  course  of  business,  or  any  other property which is
          obsolete, worn out or no longer useful in the Borrower's business, and
          will  not  liquidate,  dissolve  or  suspend  business  operations.

Section 7.7     Consolidation and Merger; Asset Acquisitions.  Without the prior
                --------------------------------------------
          written  consent of Lender (which shall not be unreasonably withheld),
          the  Borrower  will  not consolidate with or merge into any Person, or
          permit any other Person to merge into it, or acquire (in a transaction
          analogous  in  purpose  or effect to a consolidation or merger) all or
          substantially  all  the  assets  of  any  other  Person.

Section  7.8     Sale  and  Leaseback.  The  Borrower  will  not  enter into any
                 --------------------
          arrangement, directly or indirectly, with any other Person whereby the
          Borrower shall sell or transfer any real or personal property, whether
          now  owned or hereafter acquired, and then or thereafter rent or lease
          as  lessee  such  property  or  any part thereof or any other property
          which  the  Borrower intends to use for substantially the same purpose
          or  purposes  as  the  property  being  sold  or  transferred.

Section  7.9     Restrictions  on  Nature  of  Business.  The  Borrower will not
                 --------------------------------------
          engage  in  any  line  of  business  materially  different  from  that
          presently  engaged  in by the Borrower and will not purchase, lease or
          otherwise  acquire  assets  not  related  to  its  business.

Section  7.10     Capital Expenditures.  The Borrower will not incur or contract
                  --------------------
          to  incur  Capital Expenditures of more than Three Million Six Hundred
          Thousand Dollars ($3,600,000) in the aggregate during any fiscal year.

Section 7.11     Accounting.  The Borrower will not adopt any material change in
                 ----------
          accounting  principles  other  than  as required by GAAP. The Borrower
          will  not  adopt,  permit or consent to any change in its fiscal year.

Section  7.12     Discounts,  etc.  The Borrower will not, after notice from the
                  ---------------
          Lender, grant any discount, credit or allowance to any customer of the
          Borrower  or  accept any return of goods sold, or at any time (whether
          before  or  after  notice from the Lender) modify, amend, subordinate,
          cancel  or  terminate  the  obligation  of any account debtor or other
          obligor  of  the  Borrower other than in accordance with its customary
          business  practice.

Section  7.13     Defined  Benefit  Pension Plans.  The Borrower will not adopt,
                  -------------------------------
          create,  assume or become a party to any defined benefit pension plan,
          unless  disclosed  to  the  Lender  pursuant  to  0.


<PAGE>
Section  7.14     Other  Defaults.  The  Borrower  will  not  permit any breach,
                  ---------------
          default  or  event of default to occur under any note, loan agreement,
          indenture,  lease,  mortgage, contract for deed, security agreement or
          other  contractual  obligation  binding  upon  the  Borrower.

Section  7.15     Place of Business; Name.  Without providing 30 days' notice to
                  -----------------------
          the  Lender,  (a)  the  Borrower will not transfer its chief executive
          office  or  principal  place  of business, or move, relocate, close or
          sell  any  business  location;  (b)  the  Borrower will not permit any
          tangible  Collateral or any records pertaining to the Collateral to be
          located  in any state or area in which, in the event of such location,
          a  financing  statement  covering such Collateral would be required to
          be,  but  has not in fact been, filed in order to perfect the Security
          Interest;  and  (c)  the  Borrower  will  not  change  its  name.

Section  7.16     Organizational  Documents.  The  Borrower  will  not amend its
                  -------------------------
          certificate of incorporation, articles of incorporation or bylaws in a
          manner  which  would  adversely  affect  the  Lender.

Section 7.17      Salaries.  The Borrower will not pay excessive or unreasonable
                 ---------
          salaries,  bonuses, commissions, consultant fees or other compensation
          or  excessively  increase  the  salary, bonus, commissions, consultant
          fees  or other compensation of any director, officer or consultant, or
          any  member  of  their  families,  either individually or for all such
          persons  in  the  aggregate.

Section  7.18     Change  in Ownership.  The Borrower will not issue or sell any
                  --------------------
          stock  of  the  Borrower  so as to change the percentage of voting and
          non-voting  stock  owned by each of the Borrower's shareholders (other
          than  through  issuances  of  stock  pursuant  to  options  granted to
          directors  and  employees  of  the Borrower pursuant to a stock option
          plan).

Section  7.19     Transactions  with  Affiliates.  Borrower shall not enter into
                  ------------------------------
          any  transaction for the purchase, sale or exchange of property or the
          rendering  of  any  service  to  or  by  any  Affiliate, except in the
          ordinary  course  of  and  pursuant  to the reasonable requirements of
          Borrower's  business  and  upon  fair  and  reasonable  terms  no less
          favorable  to Borrower than Borrower would obtain in a comparable arms
          length  transaction  with  an  unaffiliated  Person.

                                  ARTICLE VIII

                     Events of Default, Rights and Remedies
                     --------------------------------------

Section  8.1     Events  of  Default.  "Event of Default", wherever used herein,
                 -------------------    ----------------
          means  any  one  of the following events, which Event of Default shall
          exist  or  continue  or  be  continuing until such Event of Default is
          waived  in  accordance  with  Section  9.2  hereof:

(a)     Default  in  the  payment  of  the  Obligations when they become due and
payable;

               (b) Failure to pay when due any amount specified in 0 relating to
          the  Borrower's  Obligation  of  Reimbursement,  or  failure  to  pay
          immediately  when  due  or upon termination of the Credit Facility any
          amounts required to be paid for deposit in the Special Account under 0
          or;


<PAGE>
(c)  An  "Event  of  Default" (as defined by the Wells Facility) under the Wells
          Facility;

(d)  Default in the payment of any fees, commissions, costs or expenses required
          to  be  paid  by  the  Borrower  under  this  Agreement;

(e)  Default  in the performance, or breach, of any covenant or agreement of the
          Borrower  contained in this Agreement and such default or breach shall
          continue  for  ten  (10)  Banking  Days;  provided, that such ten (10)
          Banking Day cure period shall not apply in the case of (i) any default
          or  event  addressed  in  any  other  provision  or  paragraph of this
          Section,  (ii)  the  failure to comply with the covenants set forth in
          Sections  6.12, 6.13 or 7.10, (iii) any default in the performance, or
          breach,  of  any  such  covenant  or agreement which is not capable of
          being cured at all or within such ten (10) Banking Day period or which
          has previously been the subject of a previous default or breach within
          the  prior  twelve  (12) month period or (iv) an intentional breach by
          Borrower  of  such  covenant  or  agreement;

(f)  The  Borrower  shall  be  or  become  insolvent,  or  admit  in writing its
          inability  to  pay its debts as they mature, or make an assignment for
          the  benefit  of creditors; or the Borrower shall apply for or consent
          to the appointment of any receiver, trustee, or similar officer for it
          or  for all or any substantial part of its property; or such receiver,
          trustee  or similar officer shall be appointed without the application
          or  consent  of  the  Borrower  and  not  dismissed in 60 days; or the
          Borrower shall institute (by petition, application, answer, consent or
          otherwise)  any  bankruptcy,  insolvency, reorganization, arrangement,
          readjustment  of  debt, dissolution, liquidation or similar proceeding
          relating to it under the laws of any jurisdiction and not dismissed in
          60  days;  or  any  such  proceeding shall be instituted (by petition,
          application or otherwise) against the Borrower and not dismissed in 60
          days;  or  any  judgment,  writ, warrant of attachment or execution or
          similar  process  shall be issued or levied against a substantial part
          of  the  property  of  the  Borrower  and  not  dismissed  in 60 days;

(g)  A  petition  shall  be  filed  by  or against the Borrower under the United
          States  Bankruptcy Code naming the Borrower as debtor and, in the case
          of  petitions  filed  against  Borrower, not dismissed within 60 days;
          provided, Borrower shall not receive an Advance prior to the dismissal
          of  any  such  petition  filed  against  the  Borrower;

(h)  Any  representation  or warranty made by the Borrower in this Agreement, or
          by  the  Borrower  (or  any  of  its  officers)  in  any  agreement,
          certificate,  instrument  or  financial  statement  or other statement
          contemplated by or made or delivered pursuant to or in connection with
          this  Agreement  shall  prove  to  have been incorrect in any material
          respect  when  deemed  to  be  effective;

(i)  The rendering against the Borrower of a final judgment, decree or order for
          the  payment  of  money  in  excess  of  One  Hundred Thousand Dollars
          ($100,000)  and  the  continuance  of  such  judgment, decree or order
          unsatisfied  and  in  effect for any period of thirty (30) consecutive
          days  without  a  stay  of  execution;


<PAGE>
(j)  A default under any bond, debenture, note or other evidence of indebtedness
          (excluding  trade  payables)  in  excess  of  Twenty  Thousand Dollars
          ($20,000)  of the Borrower owed to any Person other than the Lender or
          Wells  Fargo,  or  under any indenture or other instrument under which
          any  such  evidence  of indebtedness has been issued or by which it is
          governed,  or  under  any  lease  of  any  of  the  Premises,  and the
          expiration  of  the  applicable  period of grace, if any, specified in
          such  evidence  of indebtedness, indenture, other instrument or lease;

(k)  Any  Reportable  Event,  which  the  Lender  determines in good faith might
          constitute  grounds  for  the  termination  of  any  Plan  or  for the
          appointment  by  the  appropriate  United  States  District Court of a
          trustee  to administer any Plan, shall have occurred and be continuing
          thirty  (30)  days after written notice to such effect shall have been
          given  to  the  Borrower  by  the Lender; or a trustee shall have been
          appointed by an appropriate United States District Court to administer
          any  Plan;  or  the  Pension  Benefit  Guaranty Corporation shall have
          instituted  proceedings  to terminate any Plan or to appoint a trustee
          to  administer  any  Plan;  or  the  Borrower  shall  have filed for a
          distress  termination  of  any  Plan  under  Title IV of ERISA; or the
          Borrower shall have failed to make any quarterly contribution required
          with  respect to any Plan under Section 412(m) of the Internal Revenue
          Code  of  1986,  as amended, which the Lender determines in good faith
          may  by  itself,  or  in  combination  with any such failures that the
          Lender  may determine are likely to occur in the future, result in the
          imposition  of  a  lien on the Borrower's assets in favor of the Plan;

(l)  An  event  of  default shall occur under any Security Document or under any
          other security agreement, mortgage, deed of trust, assignment or other
          instrument  or  agreement  securing  any  obligations  of the Borrower
          hereunder  or  under  any  note and such event of default shall not be
          cured  or waived within ten (10) Banking Days; provided, that such ten
          (10)  Banking  Day  cure period shall not apply in the case of (i) any
          default or event addressed in any other provision or paragraph of this
          Section, (ii) any event of default which is not capable of being cured
          at  all  or  within  such  ten  (10)  Banking  Day period or which has
          previously been the subject of a previous default or breach within the
          prior  twelve  (12)  month  period  or  (iv) an intentional default by
          Borrower;

(m)  The  Borrower  shall liquidate, dissolve, terminate or suspend its business
          operations  or  otherwise fail to operate its business in the ordinary
          course,  or  sell  all or substantially all of its assets, without the
          Lender's  prior  written  consent;

Section  8.2     Rights  and  Remedies.  Following the occurrence of an Event of
                 ---------------------
          Default,  the  Lender  may exercise any or all of the following rights
          and  remedies:

(a)  the  Lender  may,  by  notice to the Borrower, declare the Commitment to be
          terminated,  whereupon  the  same  shall  forthwith  terminate;

(b)  the  Lender  may,  by notice to the Borrower, declare the Obligations to be
          forthwith  due and payable, whereupon all Obligations shall become and
          be forthwith due and payable, without presentment, notice of dishonor,
          protest  or  further  notice  of  any  kind, all of which the Borrower
          hereby  expressly  waives;


<PAGE>
(c)  the  Lender may, without notice to the Borrower and without further action,
          apply  any  and  all  money owing by the Lender to the Borrower to the
          payment  of  the  Obligations;

               (d)  the  Lender may make demand upon the Borrower and, forthwith
          upon  such  demand, the Borrower will pay to the Lender in immediately
          available  funds  for  deposit in the Special Account pursuant to 0 an
          amount  equal  to  the  aggregate maximum amount available to be drawn
          under all Letters of Credit then outstanding, assuming compliance with
          all  conditions  for  drawing  thereunder;

(e)  the  Lender  may  exercise  and  enforce  any  and  all rights and remedies
          available  upon  default  to a secured party under the UCC, including,
          without limitation, the right to take possession of Collateral, or any
          evidence  thereof,  proceeding without judicial process or by judicial
          process (without a prior hearing or notice thereof, which the Borrower
          hereby  expressly  waives)  and  the right to sell, lease or otherwise
          dispose of any or all of the Collateral, and, in connection therewith,
          the  Borrower  will  on  demand  assemble  the  Collateral and make it
          available  to  the  Lender  at  a place to be designated by the Lender
          which  is  reasonably  convenient  to  both  parties;

(f)  the  Lender may exercise and enforce its rights and remedies under the Loan
          Documents;  and

(g)  the  Lender  may  exercise any other rights and remedies available to it by
          law  or  agreement.

Notwithstanding  the  foregoing,  upon  the  occurrence  of  an Event of Default
described  in  subsections (f) or (g) of 0, the Obligations shall be immediately
due  and payable automatically without presentment, demand, protest or notice of
any  kind.

Section  8.3     Certain  Notices.  If  notice  to  the Borrower of any intended
                 ----------------
          disposition  of Collateral or any other intended action is required by
          law in a particular instance, such notice shall be deemed commercially
          reasonable  if  given (in the manner specified in 0) at least ten (10)
          calendar days before the date of intended disposition or other action.

                                   ARTICLE IX

                                  Miscellaneous
                                  -------------

Section  9.1     No  Waiver;  Cumulative  Remedies.  No  failure or delay by the
                 ---------------------------------
          Lender  in  exercising  any  right,  power  or  remedy  under the Loan
          Documents  shall  operate as a waiver thereof; nor shall any single or
          partial exercise of any such right, power or remedy preclude any other
          or  further exercise thereof or the exercise of any other right, power
          or  remedy under the Loan Documents. The remedies provided in the Loan
          Documents are cumulative and not exclusive of any remedies provided by
          law.

Section  9.2     Amendments,  Etc.  No  amendment,  modification, termination or
                 ----------------
          waiver  of  any  provision  of  any  Loan  Document  or consent to any
          departure  by  the  Borrower  therefrom  or  any release of a Security
          Interest  shall  be  effective unless the same shall be in writing and
          signed  by  the  Lender,  and  then  such  waiver  or consent shall be
          effective  only  in the specific instance and for the specific purpose
          for  which  given.  No notice to or demand on the Borrower in any case
          shall entitle the Borrower to any other or further notice or demand in


<PAGE>
         similar  or  other  circumstances. No amendment or modification of any
          Loan  Document  shall  be effective unless the same shall be signed by
          the  Borrower.

Section  9.3     Addresses  for  Notices,  Etc.  Except  as  otherwise expressly
                 -----------------------------
          provided  herein,  all  notices,  requests,  demands  and  other
          communications  provided  for  under  the  Loan  Documents shall be in
          writing and shall be (a) personally delivered, (b) sent by first class
          United  States  mail,  (c)  sent  by  overnight  courier  of  national
          reputation,  or (d) transmitted by telecopy, in each case addressed or
          telecopied  to  the party to whom notice is being given at its address
          or  telecopier  number  as  set  forth  below:

                 If  to  the  Borrower:

                 Rockshox,  Inc.
                 1610  Garden  of  the  Gods  Road
                 Colorado  Springs,  Colorado  80907
                 Telecopier:     _________________
                 Attention:     Chris  Birkett
                 If  to  the  Lender:

                 Wells  Fargo  Business  Credit,  Inc.
                 245  South  Los  Robles  Avenue,  Suite  600
                 Pasadena,  California  91101
                 Telecopier:  (626)  844-9063
                 Attention:  Account  Executive

or,  as  to  each  party,  at  such  other  address  or telecopier number as may
hereafter  be  designated  by  such party in a written notice to the other party
complying  as  to  delivery  with  the terms of this Section.  All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered  by  mail,  (c) the date sent if sent by overnight courier, or (d) the
date  of  transmission if delivered by telecopy, except that notices or requests
to  the  Lender  pursuant  to  any of the provisions of 0 shall not be effective
until  received  by  the  Lender.

Section  9.4     Further Documents.  The Borrower will from time to time execute
                 -----------------
          and  deliver  or  endorse  any  and  all  instruments,  documents,
          conveyances,  assignments,  security  agreements, financing statements
          and  other  agreements  and  writings  that  the Lender may reasonably
          request  in  order to secure, protect, perfect or enforce the Security
          Interest  or  the  Lender's  rights  under the Loan Documents (but any
          failure  to  request or assure that the Borrower executes, delivers or
          endorses  any  such  item  shall  not  affect  or impair the validity,
          sufficiency  or  enforceability of the Loan Documents and the Security
          Interest, regardless of whether any such item was or was not executed,
          delivered  or  endorsed  in a similar context or on a prior occasion).

Section  9.5     Collateral.  This  Agreement  does  not  contemplate  a sale of
                 ----------
          accounts,  contract  rights or chattel paper, and, as provided by law,
          the  Borrower  is  entitled to any surplus and shall remain liable for
          any  deficiency.  The Lender's duty of care with respect to Collateral
          in  its possession (as imposed by law) shall be deemed fulfilled if it
          exercises reasonable care in physically keeping such Collateral, or in
          the  case  of  Collateral  in the custody or possession of a bailee or
          other  third person, exercises reasonable care in the selection of the
          bailee  or  other  third  person,  and  the  Lender need not otherwise


<PAGE>
          preserve, protect, insure or care for any Collateral. The Lender shall
          not  be obligated to preserve any rights the Borrower may have against
          prior  parties,  to  realize  on  the  Collateral  at  all  or  in any
          particular  manner  or  order  or  to  apply  any cash proceeds of the
          Collateral  in  any  particular  order  of  application.

Section  9.6     Costs  and  Expenses.  The Borrower agrees to pay on demand all
                 --------------------
          reasonable  costs  and  expenses,  including  (without  limitation)
          attorneys'  fees,  incurred  by  the  Lender  in  connection  with the
          Obligations, this Agreement, the Loan Documents, any Letters of Credit
          and any other document or agreement related hereto or thereto, and the
          transactions  contemplated  hereby,  including  without limitation all
          such  costs,  expenses  and  fees  incurred  in  connection  with  the
          negotiation,  preparation,  execution,  amendment,  administration,
          performance,  collection  and  enforcement  of the Obligations and all
          such  documents  and  agreements  and  the  creation,  perfection,
          protection,  satisfaction,  foreclosure or enforcement of the Security
          Interest.

Section  9.7     Indemnity.  In  addition to the payment of expenses pursuant to
                 ---------
          0,  the  Borrower  agrees  to  indemnify, defend and hold harmless the
          Lender,  and  any of its parent corporations, subsidiary corporations,
          affiliated  corporations,  successor corporations, and all present and
          future  officers,  directors,  employees,  attorneys and agents of the
          foregoing  (the  "Indemnitees")  from and against any of the following
                            -----------
          except  to  the  extent  arising  from the gross negligence or willful
          misconduct  of  Lender  or  Wells Fargo or the breach by Lender of any
          Loan  Document  (collectively,  "Indemnified  Liabilities"):
                                           ------------------------

(i)  any  and all transfer taxes, documentary taxes, assessments or charges made
          by  any governmental authority by reason of the execution and delivery
          of  the  Loan  Documents  or  the  making  of  the  Advances;

(ii) any  claims, loss or damage to which any Indemnitee may be subjected if any
          representation  or  warranty  contained in 0 proves to be incorrect in
          any  respect or as a result of any violation of the covenant contained
          in  0;  and

(iii)  any  and  all  other  liabilities, losses, damages, penalties, judgments,
          suits,  claims,  costs  and  expenses of any kind or nature whatsoever
          (including,  without limitation, the reasonable fees and disbursements
          of  counsel)  in  connection  with  the  foregoing  and  any  other
          investigative,  administrative or judicial proceedings, whether or not
          such  Indemnitee  shall  be  designated  a party thereto, which may be
          imposed  on,  incurred  by or asserted against any such Indemnitee, in
          any  manner  related  to  or  arising out of or in connection with the
          making  of  the Advances and the Loan Documents or the use or intended
          use  of  the  proceeds  of  the  Advances.

If  any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the  Borrower,  or  counsel  designated  by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and  in  the manner directed by the Indemnitee, at the Borrower's sole costs and
expense.  Each  Indemnitee will use its best efforts to cooperate in the defense
of  any  such  action,  suit  or  proceeding.  If  the  foregoing undertaking to
indemnify,  defend  and hold harmless may be held to be unenforceable because it


<PAGE>
violates  any  law  or  public  policy, the Borrower shall nevertheless make the
maximum  contribution to the payment and satisfaction of each of the Indemnified
Liabilities  which  is  permissible  under  applicable  law.  The  Borrower's
obligation  under this 0 shall survive the termination of this Agreement and the
discharge  of  the  Borrower's  other  obligations  hereunder.

Section  9.8     Participants.  The Lender and its participants, if any, are not
                 ------------
          partners  or  joint  venturers,  and  the  Lender  shall  not have any
          liability or responsibility for any obligation, act or omission of any
          of its participants. All rights and powers specifically conferred upon
          the  Lender  may  be  transferred  or delegated to any of the Lender's
          participants,  successors  or  assigns.


Section  9.9     Execution  in  Counterparts.  This  Agreement  and  other  Loan
                 ---------------------------
          Documents may be executed in any number of counterparts, each of which
          when  so  executed and delivered shall be deemed to be an original and
          all  of  which  counterparts, taken together, shall constitute but one
          and  the  same  instrument.

Section  9.10     Binding  Effect;  Assignment;  Complete  Agreement; Exchanging
                  --------------------------------------------------------------
          Information. The Loan Documents shall be binding upon and inure to the
          -----------
          benefit of the Borrower and the Lender and their respective successors
          and  assigns,  except  that  the  Borrower shall not have the right to
          assign  its  rights  thereunder  or  any  interest therein without the
          Lender's prior written consent. This Agreement, together with the Loan
          Documents,  comprises  the  complete  and  integrated agreement of the
          parties  on  the  subject  matter  hereof  and  supersedes  all  prior
          agreements,  written  or  oral,  on the subject matter hereof. Without
          limiting  the  Lender's  right  to  share  information  regarding  the
          Borrower  and  its  Affiliates  with  the  Lender's  participants,
          accountants,  lawyers  and other advisors involved in the transactions
          subject  to  this  Agreement, the Lender, Wells Fargo Corporation, and
          all  direct  and indirect subsidiaries of Wells Fargo Corporation, may
          exchange  any  and  all  information they may have in their possession
          regarding  the  Borrower  as  may  be  reasonably  necessary  in  the
          administration of this Agreement, and the Borrower waives any right of
          confidentiality  it  may  have  with  respect to such exchange of such
          information.

Section  9.11     Severability  of  Provisions.  Any provision of this Agreement
                  ----------------------------
          which  is  prohibited  or  unenforceable  shall  be ineffective to the
          extent  of  such  prohibition or unenforceability without invalidating
          the  remaining  provisions  hereof.

Section  9.12     Headings.  Article  and Section 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.

Section 9.13     Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.  This
                 --------------------------------------------------------
          Agreement  and  the  other  Loan  Documents  shall  be governed by and
          construed in accordance with the substantive laws (other than conflict
          laws)  of  the  State of California. Each of the parties hereto hereby
          (i)  consents  to  the  personal jurisdiction of the state and federal
          courts  located  in  the  State  of  California in connection with any
          controversy  related  to  this  Agreement or the other Loan Documents;
          (ii)  waives  any  argument  that  venue  in  any  such  forum  is not
          convenient,  (iii)  agrees that any litigation initiated by the Lender


<PAGE>
          or  the  Borrower  in connection with this Agreement or the other Loan
          Documents  shall be venued in either the State Courts of the County of
          Los  Angeles, State of California, or the United States District Court
          for  the  Central District of California; and (iv) agrees that a final
          judgment  in  any  such suit, action or proceeding shall be conclusive
          and  may be enforced in other jurisdictions by suit on the judgment or
          in  any  other  manner provided by law. THE PARTIES WAIVE ANY RIGHT TO
          TRIAL  BY  JURY  IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO
          THIS  AGREEMENT.

Section  9.14     Release of Collateral.     Upon a sale or other disposition of
                  ---------------------
          assets  of the Borrower constituting Collateral which was consented to
          or  otherwise approved by Lender or is permitted under this Agreement,
          the  Lender,  at the request of the Borrower, will execute and deliver
          to  the  Borrower  the  proper  instruments (including UCC termination
          statements)  acknowledging  the  release  of  the  Lender's  Security
          Interest  in  such  Collateral.

Section 9.15     Termination, Release.  This Agreement and the Lender's Security
                 --------------------
          Interest shall terminate upon satisfaction in full of the Obligations.
          Upon  such  termination,  the  Lender, at the request of the Borrower,
          will  execute  and  deliver  to  the  Borrower  the proper instruments
          (including  UCC  termination statements) acknowledging the termination
          of  this  Agreement  and will duly assign, transfer and deliver to the
          Borrower  such  of  the  Collateral as may be in the possession of the
          Lender  and has not theretofore been disposed of, applied or released.

Section  9.16     Confidentiality.  The  Lender  agrees to keep confidential all
                  ---------------
          information  provided  by  the Borrower under this Agreement except as
          required  by  applicable  law  or  if  such  information  is otherwise
          publicly  available (other than as a result of actions by the Lender).

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by  their  respective  officers  thereunto  duly authorized as of the date first
above  written.

WELLS  FARGO  BUSINESS CREDIT, INC., a       ROCKSHOX,  INC.,
Minnesota corporation                        a Delaware corporation
By______________________________________     By_________________________________
Name:___________________________________     Name:______________________________
Its:____________________________________     Its:_______________________________


<PAGE>
                         TABLE OF EXHIBITS AND SCHEDULES

Exhibit  A         Form  of  Revolving  Note

Exhibit  B         Compliance  Certificate

Exhibit  C         Premises
--------------------------------------------------------------------------------
Schedule  5.1      Trade  Names,  Chief  Executive  Office,  Principal  Place of
                   Business,  and  Locations  of  Collateral

Schedule  5.4      Subsidiaries

Schedule  7.1      Permitted  Liens

Schedule  7.2      Permitted  Indebtedness  and  Guaranties

Schedule  7.4      Investments
--------------------------------------------------------------------------------


<PAGE>
                                      Exhibit A to Credit and Security Agreement

                                 REVOLVING NOTE

$10,000,000                                           Colorado Springs, Colorado
                                                                   June __, 2001

For value received, the undersigned, ROCKSHOX, INC., a Delaware corporation (the
"Borrower"),  hereby  promises  to  pay on the Termination Date under the Credit
 --------
Agreement  (defined below), to the order of WELLS FARGO BUSINESS CREDIT, INC., a
Minnesota  corporation  (the  "Lender"),  at  its  main  office  in  Pasadena,
                               ------
California,  or  at any other place designated at any time by the holder hereof,
in  lawful  money  of  the United States of America and in immediately available
funds,  the  principal sum of Ten Million Dollars ($10,000,000) or, if less, the
aggregate  unpaid  principal amount of all Revolving Advances made by the Lender
to  the  Borrower  under  the  Credit  Agreement  (defined  below) together with
interest  on  the principal amount hereunder remaining unpaid from time to time,
computed  on  the basis of the actual number of days elapsed and a 360-day year,
from the date hereof until this Note is fully paid at the rate from time to time
in  effect under the Credit and Security Agreement of even date herewith (as the
same may hereafter be amended, restated, supplemented or otherwise modified from
time  to  time,  the  "Credit  Agreement")  by  and  between  the Lender and the
                       -----------------
Borrower.  The  principal  hereof and interest accruing thereon shall be due and
payable  as  provided in the Credit Agreement.  This Note may be prepaid only in
accordance  with  the  Credit  Agreement.
This  Note  is  issued  pursuant, and is subject, to the Credit Agreement, which
provides,  among  other  things,  for  acceleration  hereof.  This  Note  is the
Revolving Note referred to in the Credit Agreement.  This Note is secured, among
other  things,  pursuant  to  the Credit Agreement and the Security Documents as
therein  defined,  and  may  now  or  hereafter  be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or  agreements.
The  Borrower hereby agrees to pay all costs of collection, including reasonable
attorneys'  fees and legal expenses in the event this Note is not paid when due,
whether  or  not  legal  proceedings  are  commenced.
Presentment  or  other  demand  for  payment, notice of dishonor and protest are
expressly  waived.
                                        ROCKSHOX,  INC.,
                                        a  Delaware  corporation

                                        By __________________________________
                                           Name:_____________________________
                                           Title:____________________________



<PAGE>
                                      Exhibit B to Credit and Security Agreement

                             COMPLIANCE CERTIFICATE

To:          Wells  Fargo  Business  Credit,  Inc.
             -------------------------------------
Date:        _____________________

Subject:     Financial  Statements
             ---------------------

In accordance with our Second Amended and Restated Credit and Security Agreement
dated  as  of June __, 2001 (the "Credit Agreement"), attached are the financial
                                  ----------------
statements  of  ROCKSHOX,  INC. (the "Borrower") as of and for ________________,
                                      --------
_____  (the  "Reporting  Date")  and  the  year-to-date  period  then ended (the
              ---------------
"Current  Financials").  All  terms  used  in this certificate have the meanings
 -------------------
given  in  the  Credit  Agreement.
I  certify  that  the  Current  Financials have been prepared in accordance with
GAAP,  subject,  in  the  case  of quarterly or interim financial statements, to
year-end  audit adjustments and the absence of footnotes, and fairly present the
Borrower's  financial condition and the results of its operations as of the date
thereof.
Events  of  Default.  (Check  one):
           [ ] The  undersigned  does  not have knowledge of the occurrence of a
               Default  or  Event  of  Default  under  the  Credit  Agreement.

           [ ] The  undersigned  has knowledge of the occurrence of a Default or
               Event  of  Default under the Credit Agreement and attached hereto
               is  a  statement  of  the  facts  with  respect  to  thereto.

I  hereby  certify  to  the  Lender  as  follows:

           [ ] The Reporting Date does not mark the end of one of the Borrower's
               fiscal  quarters,  hence I am completing only paragraph __ below.

           [ ] The  Reporting Date marks the end of one of the Borrower's fiscal
               quarters,  hence  I  am  completing  all  paragraphs below except
               paragraph  __.

           [ ] The  Reporting  Date marks the end of the Borrower's fiscal year,
               hence  I  am  completing  all  paragraphs  below.


Financial  Covenants.  I  further  hereby  certify  as  follows:
--------------------
1.     Minimum Book Net Worth.  Pursuant to 0 of the Credit Agreement, as of the
       ----------------------
Reporting Date the Borrower's Book Net Worth was $____________ which   satisfies
does  not  satisfy  the  requirements  of  Section  6.12.
2.     Minimum  EBITDA.  Pursuant  to  Section 6.13 of the Credit Agreement, the
       ---------------
Borrower's  EBITDA  for  the  ________  period ending on the Reporting Date, was
$___________,  which   satisfies   does  not satisfy the requirements of Section
6.13.
3.     Capital  Expenditures.  Pursuant  to  0  of the Credit Agreement, for the
       ---------------------
year-to-date  period  ending on the Reporting Date, the Borrower has expended or
contracted  to  expend  during the _____________ year ended ______________, ___,
for  Capital  Expenditures,  $__________________  in  the  aggregate,  which [ ]


<PAGE>
satisfies   does  not  satisfy  the  requirements  of  Section  7.10.
4.     Salaries.  As  of  the  Reporting  Date,  the  Borrower   is   is  not in
       --------
compliance  with  0  of  the  Credit  Agreement  concerning  salaries.
Attached hereto are all relevant facts in reasonable detail to evidence, and the
computations  of  the financial covenants referred to above.  These computations
were  made  in  accordance  with  GAAP.

                                       ROCKSHOX,  INC.,
                                       a  Delaware  corporation


                                       By___________________________________
                                       [Name]
                                       Its  Chief  Financial  Officer


<PAGE>
                                      Exhibit C to Credit and Security Agreement

                                    PREMISES
The  Premises  referred  to  in  the  Credit  and Security Agreement are legally
described  as  follows:
1)     San  Jose  California:
All  that  certain Real Property in the City of San Jose, County of Santa Clara,
State  of  California,  described  as  follows:
All  of Parcel "A", as shown upon that certain Map entitled, "Parcel Map being a
Resubdivision  of Parcel 1 shown on the Parcel Map recorded in Book 316 of Maps,
at  Page  21, Santa Clara County Records", which Map was filed for record in the
Office  of  the  Recorder  of the County of Santa Clara, State of California, on
February  3,  1976  in  Book  367  of  Maps,  at  Pages  27  and  28.
2)     Colorado  Springs,  Colorado:
Parcel  A:

That portion of Lot 1, Block 1, Kaman Sciences Subdivision No. 2, in the City of
Colorado  Springs,  El Paso County, Colorado, Described as follows: Beginning at
the  most  northerly corner of said Kaman Sciences Subdivision No. 2 ;  Thence S
51  38' 33" E along the Northeasterly boundary thereof 587.24', Thence S 89  37'
30"  W,  752.80  ,  Thence  N 38  21' 27" E along the Northwesterly line of said
Kaman  Sciences  Subdivision  No.  2  ,  471-.02'  to  the  Point  of Beginning.

Parcel  B:

That portion of Lot 1, Block 1, Kaman Sciences Subdivision No. 2, in the City of
Colorado Springs, El Paso County, Colorado, described as follows: Beginning at a
point  on  the Northwesterly line of said Kaman Sciences Subdivision No. 2, from
whence  the most Northerly corner thereof bears N 38  21' 27" E, 471.02'; Thence
N.  89  37'  30"  E, 440.26', Thence S 00 22'30" E, 241.09'; Thence 89 37'30" W,
481.71';  Thence  S 00 22'30" E, 77.29'; to the Northwest corner of Lot 1, Block
1,  Kaman  Sciences  Subdivision No. 1 Thence S 89 37'30" W, 80.00' Thence along
the  Northwesterly  boundary  of said Lot 1, Block 1, Kaman Sciences Subdivision
NO.  2  for  the  following  two (2) courses; (1) Thence on a curve to the right
having  a  central angle of 38 43'57"/ a Radius 475.00', and a length of 321.10'
(2)  Thence  N  38  21'27"  E,  Tangent  to  said  curve, 27.14' to the point of
beginning.


Parcel  C:

Non-Exclusive easements for ingress and egress purposes over and across portions
of Lots 1, 2, and 3 in Centennial Technology Center Filing No. 1, in the City of
Colorado  Springs, El Paso County, Colorado as set forth and described in Access
Agreement  recorded  June  24,  1998  at  reception  No.  98087006.


Parcel  E:

Non-Exclusive  easements  for  ingress, egress and utility service line purposes
over  and across portions of Lot 1 in Block 1 in Kaman Sciences Subdivision No 1
and  over  and across portions of Lot 1 in Block 1 in Kaman Sciences Subdivision
No.  2  as  set  forth and described in easement agreement recorded December 16,
1998  at  reception  No.  98185885.


<PAGE>
                                 Schedule  5.1

                  Schedule 5.1 to Credit and Security Agreement
             TRADE NAMES, CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
                      BUSINESS, AND LOCATIONS OF COLLATERAL


               CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS
               --------------------------------------------------
                          1610 GARDEN OF THE GODS ROAD
                           COLORADO SPRINGS, CO 80907


                       ADDITIONAL LOCATIONS OF COLLATERAL
                       ----------------------------------

                       1)     1989  LITTLE  ORCHARD  ROAD
                              SAN  JOSE,  CALIFORNIA  95125

                       2)     ROCKSHOX  TAIWAN  BRANCH
                              NO.  34  CHA-CHA  ROAD
                              LIU  FANG  TUNE  WAUPUN
                              TEACHING,  TAIWAN,  I.E.



<PAGE>
                  Schedule 5.4 to Credit and Security Agreement
                                  SUBSIDIARIES

                         ROCKSHOX TAIWAN (BRANCH OFFICE)


<PAGE>
                                 Schedule  7.1
                  Schedule 7.1 to Credit and Security Agreement

                                 PERMITTED LIENS

  Creditor     Collateral     Jurisdiction     Filing Date     Filing No.
  --------     ----------     ------------     -----------     ----------
AT&T  Credit                 CA Secretary of    12/28/95       9536360859
Corporation                  State
AT&T  Credit                 CA Secretary of    07/18/96       9620160442
Corporation                  State




<PAGE>
                  Schedule 7.2 to Credit and Security Agreement
                      PERMITTED INDEBTEDNESS AND GUARANTIES


                                      NONE.



<PAGE>
<TABLE>
<CAPTION>

<S>                                                                                                 <C>
ARTICLE I     DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
     Section 1.1     Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
     Section 1.2     Cross References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
ARTICLE II     AMOUNT AND TERMS OF THE CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . .  10
     Section 2.1     Revolving Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
     Section 2.2     Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
     Section 2.3     Payment of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement  11
     Section 2.4     Special Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     Section 2.5     Obligations Absolute. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12
     Section 2.6     Interest; Minimum Interest Charge; Default Interest; Participations; Usury. .  13
     Section 2.7     Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
     Section 2.8     Computation of Interest and Fees; When Interest Due and Payable . . . . . . .  15
     Section 2.9     Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
     Section 2.10    Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
     Section 2.11    Voluntary Prepayment; Reduction of the Maximum Line;
               Termination of the Credit Facility by the Borrower. . . . . . . . . . . . . . . . .  16
     Section 2.12    Termination and Line Reduction Fees; Waiver of Termination and
               Line Reduction Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     Section 2.13    Mandatory Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     Section 2.14    Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
     Section 2.15    Payment on Non-Banking Days . . . . . . . . . . . . . . . . . . . . . . . . .  17
     Section 2.16    Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     Section 2.17    Liability Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
     Section 2.18    Deactivation of Credit Facility . . . . . . . . . . . . . . . . . . . . . . .  18
ARTICLE III     SECURITY INTEREST; OCCUPANCY; SETOFF . . . . . . . . . . . . . . . . . . . . . . .  18
     Section 3.1     Grant of Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . .  18
     Section 3.2     Notification of Account Debtors and Other Obligors. . . . . . . . . . . . . .  18
     Section 3.3     Assignment of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
     Section 3.4     Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
     Section 3.5     License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
     Section 3.6     Financing Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
     Section 3.7     Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20


<PAGE>
                                          TABLE OF CONTENTS
                                             (CONTINUED)

ARTICLE IV     CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     Section 4.1     Conditions Precedent to the Initial Revolving Advance and the
                Initial Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
     Section 4.2     Conditions Precedent to All Advances and Letters of Credit. . . . . . . . . .  21
ARTICLE V     REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
     Section 5.1     Corporate Existence and Power; Name; Chief Executive Office;
                Inventory and Equipment Locations; Tax Identification Number . . . . . . . . . . .  22
     Section 5.2     Authorization of Borrowing; No Conflict as to Law or Agreements . . . . . . .  22
     Section 5.3     Legal Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
     Section 5.4     Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
     Section 5.5     Financial Condition; No Adverse Change. . . . . . . . . . . . . . . . . . . .  23
     Section 5.6     Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
     Section 5.7     Regulation U. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
     Section 5.8     Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
     Section 5.9     Titles and Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
     Section 5.10    Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
     Section 5.11    Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
     Section 5.12    Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
     Section 5.13    Submissions to Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
     Section 5.14    Financing Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
     Section 5.15    Rights to Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
ARTICLE VI     BORROWER'S AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . .  26
     Section 6.1     Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
     Section 6.2     Books and Records; Inspection and Examination . . . . . . . . . . . . . . . .  28
     Section 6.3     Account Verification. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
     Section 6.4     Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
     Section 6.5     Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . .  29
     Section 6.6     Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . .  29
     Section 6.7     Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
     Section 6.8     Preservation of Existence . . . . . . . . . . . . . . . . . . . . . . . . . .  30
     Section 6.9     Delivery of Instruments, etc. . . . . . . . . . . . . . . . . . . . . . . . .  30
     Section 6.10    Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
     Section 6.11    Performance by the Lender . . . . . . . . . . . . . . . . . . . . . . . . . .  30


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     Section 6.12    Minimum Book Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . .  31
     Section 6.13    Minimum [Adjusted Net Income] . . . . . . . . . . . . . . . . . . . . . . . .  31
     Section 6.14    New Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
     Section 6.15    Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
     Section 6.16    Off-Site Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
ARTICLE VII     NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
     Section 7.1     Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
     Section 7.2     Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  33
     Section 7.3     Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  34
     Section 7.4     Investments and Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .  34
     Section 7.5     Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
     Section 7.6     Sale or Transfer of Assets; Suspension of Business Operations . . . . . . . .  35
     Section 7.7     Consolidation and Merger; Asset Acquisitions. . . . . . . . . . . . . . . . .  35
     Section 7.8     Sale and Leaseback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
     Section 7.9     Restrictions on Nature of Business. . . . . . . . . . . . . . . . . . . . . .  35
     Section 7.10    Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
     Section 7.11    Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
     Section 7.12    Discounts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
     Section 7.13    Defined Benefit Pension Plans . . . . . . . . . . . . . . . . . . . . . . . .  36
     Section 7.15    Place of Business; Name . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
     Section 7.16    Organizational Documents. . . . . . . . . . . . . . . . . . . . . . . . . . .  36
     Section 7.17    Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
     Section 7.18    Change in Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
ARTICLE VIII     EVENTS OF DEFAULT, RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . .  36
     Section 8.1     Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
     Section 8.2     Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  39
     Section 8.3     Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  39
ARTICLE IX     MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
     Section 9.1     No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . .  40
     Section 9.2     Amendments, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
     Section 9.3     Addresses for Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . .  40


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     Section 9.4     Further Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
     Section 9.5     Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
     Section 9.6     Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
     Section 9.7     Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
     Section 9.8     Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
     Section 9.9     Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . .  42
     Section 9.10    Binding Effect; Assignment; Complete Agreement; Exchanging
               Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
     Section 9.11    Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . . . . .  43
     Section 9.12    Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
     Section 9.13    Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. . . . . . . . . . .  43
     Section 9.14    Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
     Section 9.15    Termination, Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
     Section 9.16    Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
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