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EXHIBIT 10(a)(4)  

 K2 Inc.  

 FOURTH AMENDMENT TO NOTE AGREEMENTS  

 Dated as of March 27, 2002  

 Re:  

 Note Agreement dated as of October 15, 1992  

 and  

 $40,000,000 Senior Notes

Due November 30, 2004  

 
 

TABLE OF CONTENTS    
  

	 
	 	 
	 	Heading
	 	Page

	Section 1.	 	 	 	Description of Notes and Commitment	 	2
	

Section 2.	
 	

 	
 	

Effective Date	
 	

2
	

Section 3.	
 	

 	
 	

Amendment to the Note Agreement	
 	

3
	 	Section 3.1.	 	 	 	Amendment to Section 1 (Description of Notes and Commitment)	 	3
	 	 	Section 1.4.	 	Security for the Notes	 	3
	 	Section 3.2.	 	 	 	Amendment to Section 2.2. (Optional Prepayments)	 	3
	 	Section 3.3.	 	 	 	Amendment of Section 5 (Company Covenants)	 	3
	 	 	Section 5.1.	 	Corporate Existence, Etc.	 	3
	 	 	Section 5.2.	 	Insurance	 	4
	 	 	Section 5.3.	 	Taxes, Claims for Labor and Materials, Compliance with Laws	 	4
	 	 	Section 5.4.	 	Maintenance, Etc.	 	4
	 	 	Section 5.5.	 	Nature of Business	 	5
	 	 	Section 5.6.	 	Foreign Pledges	 	5
	 	 	Section 5.7.	 	Further Assurances	 	5
	 	 	Section 5.8.	 	Collateral Matters	 	6
	 	 	Section 5.9.	 	Amendment to Agreements	 	6
	 	 	Section 5.10.	 	Leverage Ratio	 	6
	 	 	Section 5.11.	 	Limitations on Indebtedness	 	7
	 	 	Section 5.12.	 	Interest Coverage Ratio	 	8
	 	 	Section 5.13.	 	Fixed Charges Coverage Ratio	 	8
	 	 	Section 5.14.	 	Limitation on Liens	 	9
	 	 	Section 5.15.	 	Restricted Payments	 	10
	 	 	Section 5.16.	 	Loans and Investments	 	11
	 	 	Section 5.17.	 	Mergers, Consolidations and Sales of Assets	 	12
	 	 	Section 5.18.	 	Guaranties	 	14
	 	 	Section 5.19.	 	Repurchase of Notes	 	15
	 	 	Section 5.20.	 	Transactions with Affiliates	 	15
	 	 	Section 5.21.	 	Termination of Pension Plans	 	15
	 	 	Section 5.22.	 	Reports and Rights of Inspection	 	16
	 	 	Section 5.23.	 	Consolidated Net Worth	 	19
	 	 	Section 5.24.	 	No Restrictions on Subsidiaries	 	19
	 	 	Section 5.25.	 	Acquisitions	 	19
	 	 	Section 5.26.	 	Junior Capital	 	20
	 	 	Section 5.27.	 	Leases	 	20
	 	 	Section 5.28.	 	Post-Closing Deliveries	 	21
	 	Section 3.4.	 	 	 	Amendment to Section 6 (Events of Default)	 	21
	 	 	Section 6.1.	 	Events of Default	 	21
	 	 	Section 6.2.	 	Notice to Holders	 	23
	 	 	Section 6.3.	 	Acceleration of Maturities	 	23
	 	 	Section 6.4.	 	Rescission of Acceleration	 	23
	 	Section 3.5.	 	 	 	Amendment to Section 9.4 (Expenses, Stamp Tax Indemnity)	 	24
	 	 	Section 9.4.	 	Expenses, Stamp Tax Indemnity	 	24
	 	Section 3.6.	 	 	 	New Definitions	 	25
	

Section 4.	
 	

 	
 	

Representations and Warranties	
 	

41

 

	

Section 5.	
 	

 	
 	

Conditions Precedent to Effectiveness of Agreement	
 	

44
	

Section 6.	
 	

 	
 	

Waiver	
 	

44
	 	Section 6.1.	 	 	 	Waiver of Compliance with Section 5.6	 	44
	 	Section 6.2.	 	 	 	Waiver of Compliance with Section 5.7	 	44
	 	Section 6.3.	 	 	 	Waiver of Compliance with Section 5.8	 	45
	

Section 7.	
 	

 	
 	

Miscellaneous	
 	

45
	 	Section 7.1.	 	 	 	Effect of Agreement and Reaffirmation	 	45
	 	Section 7.2.	 	 	 	Release of Claims	 	45
	 	Section 7.3.	 	 	 	Successors and Assigns	 	45
	 	Section 7.4.	 	 	 	Expenses	 	45
	 	Section 7.5.	 	 	 	Counterparts	 	45
	 	Section 7.6.	 	 	 	Governing Law	 	46
	 	Section 7.7.	 	 	 	Approval of Amendment to Guaranty Agreement	 	46
	 	Section 7.8.	 	 	 	GE Securitization	 	46
	

Schedule I—Names and Addresses of Noteholders	
 	

 
	

Schedule II—Closing Conditions	
 	

 
	

Schedule III—Post-Closing Requirements	
 	

 
	

Schedule IV—Indebtedness of Company and its Subsidiaries	
 	

 
	

Schedule V—Subsidiaries of Company, Investments, Affiliates	
 	

 
	

Schedule VI—Liens of Company and its Subsidiaries	
 	

 
	

Exhibit A—Form of Amended and Restated Note	
 	

 
	

Exhibit B—Intercreditor Agreement	
 	

 
	

Exhibit C—Amendment to Guaranty Agreement	
 	

 
	

Exhibit D—Cash Flow Forecasts	
 	

 

ii

K2 Inc.

4900 South Eastern Avenue

Los Angeles, California 90040  

Dated
as of March 27, 2002 

	 
	 	 

	Re:	 	Note Agreement dated as of October 15, 1992

and

$40,000,000 Senior Notes

Due November 30, 2004

To
the Noteholders named in

Schedule I hereto 

Ladies
and Gentlemen: 

        This
Fourth Amendment to Note Agreements (this "Agreement") is entered into as of March 27, 2002 by and among K2 Inc., a
Delaware corporation (the "Company"), and the purchasers named in Schedule I attached hereto (the  "Noteholders," or as alternatively referred to
herein, the "Original Noteholders"). 

 
 

PRELIMINARY STATEMENT    
  

        The Company and the Original Noteholders are party to separate Note Agreements dated as of October 15, 1992 (the "Original Note
Agreement"), as amended by the First Amendment dated as of May 1, 1996 (the "First Amendment"), the Second Amendment to
Note Agreements dated as of December 1, 1999 (the "Second Amendment"), and the Third Amendment and Waiver dated as of December 14, 2001
(the "Third Amendment") (the Original Note Agreement as so amended by the First Amendment, the Second Amendment and the Third Amendment, the  "Existing Note
Agreement"). Under and pursuant to the Existing Note Agreement, the Company sold to the Original Noteholders its 8.39% Senior Notes due
November 30, 2004 in the original aggregate principal amount of $40,000,000 (such notes as heretofore amended, the "Existing Notes"). The Company
has requested that the Original Noteholders amend the Existing Note Agreement, all on and subject to the terms and conditions set forth below. Accordingly, this Agreement is executed and delivered by
the Company to the Original Noteholders to amend certain portions of the Existing Note Agreement and in so doing set forth and confirm the terms and conditions applicable thereto and the covenants,
representations and warranties to be made by the Company in connection therewith. Upon the execution hereof by the Company and the Original Noteholders, the Existing Note Agreement, together with the
Exhibits and Schedules thereto, as amended by this Agreement, shall be referred to as the "Note Agreements." Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in the Note Agreement, as amended by this Agreement. 

        The
Company hereby agrees with each of you as follows: 

Section 1.    Description of Notes and Commitment.  

        Upon the effectiveness of this Agreement, automatically, and without further action on the part of either the Original Noteholders or the Company, the Existing
Notes shall be amended and restated in their entirety to read as set forth in Exhibit A hereto (and the form of Note attached as Exhibit 1 to the Original Note Agreement shall be amended
in its entirety to read as set forth in Exhibit A) and the amended and restated Notes shall be issued in renewal of, and evidence the same indebtedness formerly evidenced by, the Existing
Notes. If any accrued and unpaid interest is outstanding in respect of any of the Existing Notes as of the date that the Existing Notes become evidenced by the amended and restated Notes, such accrued
interest on each such Existing Note shall be due and payable on the first interest payment date applicable to such amended and restated Note. Each Note will be dated the date to which interest has
been paid on the Existing Note surrendered therefor, will bear interest from such date at the Applicable Interest Rate, payable semiannually on the thirtieth day of May and 

 

November in each year (commencing May 30, 2002), to be expressed to mature on November 30, 2004, and otherwise substantially in the form attached hereto as Exhibit A. The term  "Notes" as
used herein and in the Note Agreement shall include each such amended and restated Note delivered pursuant to this Agreement to replace the
Existing Notes and any such notes issued in substitution therefore pursuant to Section 13 of the Note Agreement. Upon the effectiveness of this Agreement, the Existing Notes shall be returned
to the Company. 

Section 2.    Effective Date.  

        Delivery of the Notes to be exchanged for the Existing Notes shall occur at the offices of Chapman and Cutler, 111 West Monroe, Chicago, Illinois, at
10:00 a.m. Chicago time, on March 27, 2002 or such other date as shall be mutually agreed upon by the Company and the Noteholders (the "Effective
Date"). On the Effective Date, the Company will deliver to each Noteholder the Note to be delivered to such Noteholder in the form of a single Note for the full amount of the
Existing Note held by such Noteholder (unless different denominations are specified by such Noteholder), dated the date through which interest has been paid on the corresponding Existing Note and
registered in each Noteholder's name (or in the name of such Noteholder's nominee). If on the Effective Date the Company shall fail to tender such Note to each Noteholder as provided above in this
Section 2, or any of the conditions specified in Section 5 shall not have been fulfilled to each Noteholder's satisfaction, each Noteholder shall, at its election, be relieved of all
further obligations under this Agreement, without thereby waiving any rights such Noteholder may have by reason of such failure or such nonfulfillment. 

        If
for any reason the Existing Note held by a Noteholder is not delivered to the Company on the Effective Date, the Company shall deposit the Note to be delivered to such Noteholder with
the Noteholders' special counsel, Chapman and Cutler, for delivery against receipt of the Existing Note held by such Noteholder. 

Section 3. Amendment to the Note Agreement.  

        Section 3.1.    Amendment to Section 1 (Description of Notes and Commitment).    Section 1 of the
Note Agreements shall be and is hereby amended by inserting a new subsection at the end thereof to read as follows: 

        Section 1.4.    Security for the Notes.    (a) The payment of the Notes and the performance by the Company and
its Subsidiaries of their respective obligations under this Agreement and the Guaranty Agreement will be secured in accordance with the terms of (i) the Amended and Restated Intercreditor
Agreement dated as of March 27, 2002 (the "Intercreditor Agreement") (in substantially the form attached as Exhibit B to the Fourth
Amendment) among the Collateral Agent and the holders of certain
outstanding Indebtedness of the Company, including the Noteholders and the Bank Lenders, and (ii) the Security Documents. 

        (b)  If
at any time the Company or any Subsidiary shall grant to any one or more of the Collateral Agent or the Bank Lenders additional security of any kind or provide any
one or more of the Collateral Agent or the Bank Lenders with additional guaranties or other credit support of any kind pursuant to the requirements of the Bank Credit Agreement, then the Company or
such Subsidiary shall grant to the holders of the Notes the same security or guaranty so that the holders of the Notes shall at all times be secured on an equal and pro rata basis with the Bank
Lenders. 

        Section 3.2.    Amendment to Section 2.2. (Optional Prepayments).    Section 2.2 of the Note
Agreements shall be and is hereby amended by the addition of a new sentence at the end of such Section which shall read as follows: 

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"Notwithstanding
the foregoing, (i) the Notes may be redeemed in accordance with the provisions of §5.26 without the payment of any
Make Whole Amount and (ii) so long as no Default or Event of Default shall exist, the Notes may be redeemed from the proceeds of insurance or condemnation with respect to property of the
Company or any Subsidiary which is subject to the Lien of the Security Documents without the payment of any Make-Whole Amount." 

        Section 3.3.    Amendment of Section 5 (Company Covenants).    Section 5 of the Note Agreements
shall be and is hereby amended in its entirety to read as follows: 

From
and after the Closing Date and continuing so long as any amount remains unpaid on any Note: 

        Section 5.1.Corporate Existence, Etc.    The Company will preserve and keep in full force and effect, and will cause each
Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business; provided,
however, that the foregoing shall not prevent any transaction permitted by §5.17. 

        Section 5.2.Insurance.    The Company will maintain, and will cause each Subsidiary to maintain, insurance coverage by
financially sound and reputable insurers accorded a rating by A. M. Best Company, Inc. of A:X or higher at the time of issuance of any such policy and in such forms and amounts and against such
risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties; provided,
however, that if during the term of any such insurance policy, the rating accorded the insurer shall be less than A:X, the Company, on the date
of renewal of any such policy (or, if such change in rating shall occur within 90 days prior to such renewal date, within 90 days of the date of such change in rating), will obtain such
insurance policy from an insurer accorded such a rating. 

        Section 5.3.    Taxes, Claims for Labor and Materials, Compliance with Laws.    The Company will prosmptly pay
and discharge, and will cause each Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Subsidiary, respectively,
or upon or in respect of all or any part of the property or business of the Company or such Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims
for work, labor or materials, which if unpaid might become a Lien upon any property of the Company or such Subsidiary; provided, however, that the
Company or such Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested
in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Subsidiary or any material interference with the use thereof by the
Company or such Subsidiary, and the Company or such Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto in accordance with GAAP or (ii) the
failure to pay any such tax, assessment, charge, levy, account payable or claim could not reasonably be expected to (A) materially and adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Company or such Subsidiary or (B) impair the ability of the Company to perform its obligations hereunder. Neither the Company nor any
Subsidiary shall violate any law, ordinance or governmental rule and regulation to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA
and all laws, ordinances, governmental rules and regulations relating to environmental protection in all applicable jurisdictions, if such violation could reasonably be expected to materially and
adversely affect the properties, business, prospects, profits or condition of the Company and its Subsidiaries or would result in any Lien not permitted under  §5.14. 

        Section 5.4.    Maintenance, Etc.    The Company will maintain, preserve and keep, and will cause each
Subsidiary to maintain, preserve and keep (subject to sale in the ordinary course of 

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business), its material properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order (ordinary wear and tear
excepted) and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. 

        Section 5.5.    Nature of Business.    Neither the Company nor any Subsidiary will engage in any business if,
as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Subsidiaries on the date of this Agreement. No transaction or series of transactions permitted under  §5.17 or constituting Ordinary Course
Investments shall be deemed to violate this  §5.5. 

        Section 5.6.    Foreign Pledges.    The Company will cause to be delivered to the Collateral Agent (to the
extent not previously delivered) within the time period specified on Schedule III to the Fourth
Amendment, agreements executed by the Company and each Domestic Subsidiary of the Company pledging 65% of the stock or other equity interests of each Foreign Subsidiary owned by the Company or such
Domestic Subsidiary, together with all documents necessary to perfect the security interest of the Collateral Agent for the equal and ratable benefit of the Benefited Parties in such stock or other
equity interests; provided that neither the Company nor any Subsidiary shall have an obligation to perfect the security interest of the Collateral Agent
in the shares of any Foreign Subsidiary (other than any Foreign Subsidiary listed on Schedule III of the Fourth Amendment) under the laws of the jurisdiction of such Foreign Subsidiary's
organization so long as the aggregate book value of (A) all assets owned by such Foreign Subsidiary does not exceed $8,000,000 and (B) all assets owned by all Foreign Subsidiaries with
respect to which the security interest of the Collateral Agent has not been perfected under the laws of such Foreign Subsidiaries' respective jurisdictions of organization does not exceed $20,000,000. 

        Section 5.7.    Further Assurances.    The Company and its Subsidiaries shall, at their expense and without
expense to any holder of Notes, do, execute and deliver such further acts and documents as are necessary, or as the Required Holders (or the Required Holders acting through the Collateral Agent) may
reasonably request, from time to time (including the execution and delivery of guaranties, security agreements, pledge agreements, financing statements, mortgages, deeds of trust, bailee consents,
landlord waivers or other third party agreements and other documents, the filing or recording of any of the foregoing, the delivery of stock certificates and other collateral with respect to which
perfection is obtained by possession, and the delivery of opinions of counsel with respect to any of such documents) to (a) assure and confirm to the holders of Notes, or the Collateral Agent
acting for the equal and ratable benefit of the holders of Notes and the Bank Lenders, the rights created by this Agreement and the Security Documents and (b) ensure that (i) the
obligations of the Company under this Agreement and under any of the Intercreditor Agreement, the Security Documents and the Notes; and (ii) the obligations of each Subsidiary Guarantor under
the Guaranty Agreement and the Security Documents are secured by a first-priority Lien (subject to any applicable exception expressly set forth herein or in any applicable Security Document) on
substantially all of the assets of the Company and each Subsidiary Guarantor. Notwithstanding the foregoing, neither the Company nor any Domestic Subsidiary shall be required to pledge more than 65%
of the stock of any Foreign Subsidiary. 

        Section 5.8.    Collateral Matters.    (a) The Noteholders shall (i) request that the Collateral Agent
release any Lien on any property granted to or held by the Collateral Agent under any Security Document for the equal and ratable benefit of the holder of Notes and the Bank Lenders (w) upon
termination of this Agreement and payment in full of all obligations of the Company hereunder and under the Notes, (x) which is sold or to be sold or disposed of as part of or in connection
with any disposition of assets permitted by §5.17 of this Agreement, (y) on or after the 

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occurrence of the Collateral Release Date (as defined in the Intercreditor Agreement) or (z) subject to §7.1, if approved,
authorized or ratified in writing by the Required Holders; or (ii) request that Collateral Agent subordinate any Lien on any property granted to or held by Collateral Agent to the holder of any
Lien on such property which is permitted by §5.14(f) and (j)and any extension or renewal of
such Liens permitted by §5.14(k). 

        Section 5.9.    Amendment to Agreements.    The Company will not, and will permit any Subsidiary to, enter into
any amendment or modification of any agreement relating to any Permitted Accounts Receivable
Financing Facility in any manner which would (a) reduce advance rates with respect to accounts receivable purchased under such facility, or (b) shorten the maturity date of such
facility. The Company shall, and shall cause each of its applicable Subsidiaries to, promptly (and, in any event, within three Business Days) deliver to each holder of the Notes a copy of any
amendment or modification to any agreement relating to any termination event, event of default or similar event under any Permitted Accounts Receivable Financing Facility. Nothing in this  §5.9
shall prevent (i) General Electric Capital Corporation from exercising the discretion granted to it under any GECC Document (as
defined in Section 7.8 of the Fourth Amendment) to (x) modify reserves or (y) take any action which would modify the effective advance rates with respect to accounts receivable
purchased under such facility or (ii) the Company or any Subsidiary from entering into a replacement for any Permitted Accounts Receivable Financing Facility so long as such replacement has
terms which are not less favorable to the interests of the holders of the Notes in any material respect than the terms of the Permitted Accounts Receivable Financing Facility being replaced. 

        Section 5.10.    Leverage Ratio.    (a) The Company will not permit the Leverage Ratio at any time during any
period set forth below to be greater than the ratio set forth below opposite such period: 

	Period
	 	Maximum Leverage Ratio

	Prior to 6/29/02	 	7.80 to 1
	6/30/02-9/29/02	 	7.30 to 1
	9/30/02-12/30/02	 	6.75 to 1
	12/31/02-3/30/03	 	5.50 to 1
	3/31/03-6/29/03	 	5.00 to 1
	6/30/03-9/29/03	 	4.75 to 1
	9/30/03-12/30/03	 	4.25 to 1
	12/31/03 and at all times thereafter prior to the Collateral Release Date	 	4.00 to 1

        (b)  The
Company will not permit the Adjusted Funded Leverage Ratio at any time on or after March 31, 2004 to be greater than 3.00 to 1. 

        Section 5.11.    Limitations on Indebtedness.    (a) The Company will not, and will not permit any Subsidiary
to, create, assume or incur or in any manner be or become liable in respect of any Indebtedness, except: 

        (a)  Ordinary
Course Indebtedness; 

        (b)  Indebtedness
evidenced by the Notes; 

        (c)  Indebtedness
outstanding under the Bank Credit Agreement in an aggregate principal amount not exceeding $75,000,000; 

        (d)  Indebtedness
outstanding pursuant to Permitted Accounts Receivable Financing Facilities; 

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        (e)  Indebtedness
outstanding under the 1999 Note Purchase Agreement in an aggregate principal amount not exceeding $50,000,000; 

        (f)    secured
purchase money Indebtedness, including Capitalized Lease Obligations, originally incurred to acquire fixed assets  provided that at the time of such acquisition, the aggregate amount remaining unpaid on
all such Indebtedness secured by Liens on such fixed assets,
whether or not assumed by the Company or its Subsidiaries, does not exceed an amount equal to the lesser of (i) 100%, in the case of fixed assets which are personal property (including
Capitalized Leases of fixed assets which are personal property) or (ii) 80%, in the case of fixed assets which are real property, of the lesser of the total purchase price or Fair Market Value
at the time of such acquisition as determined in good faith by the Board of Directors of the Company; 

        (g)  other
Indebtedness for borrowed money; provided that (i) at the time of incurrence thereof, no Default or Event of
Default shall exist, (ii) the aggregate outstanding principal amount of such Indebtedness plus (without duplication) the aggregate investment or
claim held by purchasers of receivables in Foreign Receivable Financing Facilities shall not exceed 15% of Consolidated Net Worth at any time, (iii) the aggregate outstanding principal amount
of all such Indebtedness of the Company or any Domestic Subsidiary (other than Indebtedness under Excluded Subsidiary Guaranties) shall not exceed 3% of Consolidated Net Worth at any time, and
(iv) the aggregate outstanding principal amount of all such Indebtedness of any Foreign Subsidiary plus (without duplication) the aggregate
investment or claim held by purchasers of receivables in Foreign Receivable Financing Facilities shall not exceed 15% of Consolidated Net Worth at any time; 

        (h)  Indebtedness
under any Swap Contract with a term not greater than 184 days entered into in the ordinary course of business for bona fide hedging purposes and not
for speculation; 

        (i)    Indebtedness
of the Company which is not required to be redeemed, repurchased or otherwise prepaid by the Company (except on account of a default thereunder) on or prior
to March 1, 2010, and which Indebtedness is subordinated to other Indebtedness of the Company (including the Notes) on terms which are reasonably satisfactory to the holders of the Notes (such
Indebtedness, "Subordinated Indebtedness"); and 

        (j)    Indebtedness
refinancing or extending Indebtedness permitted above on terms and conditions no less favorable than the Indebtedness being refinanced;  provided, however, that the principal amount of such new
Indebtedness shall not exceed the outstanding principal amount of Indebtedness being refinanced
immediately prior to such refinancing and that at the time of incurrence of such Indebtedness and after giving effect thereto no Default or Event of Default shall exits under this Agreement; and 

        (b)  Any
corporation which becomes a Subsidiary after the date hereof shall for all purposes of this §5.11 be
deemed to have created, assumed or incurred at the time it becomes a Subsidiary all Indebtedness of such corporation existing immediately after it becomes a Subsidiary. 

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        Section 5.12.    Interest Coverage Ratio.    The Company will not permit the Interest Coverage Ratio as of the
last day of any fiscal quarter set forth below to be less than the ratio set forth below opposite such day: 

	Fiscal Quarter(s) Ending
	 	Minimum Interest

Coverage Ratio

	December 31, 2001	 	2.50 to 1
	March 31, 2002 and June 30, 2002	 	1.75 to 1
	September 30, 2002	 	1.90 to 1
	December 31, 2002	 	2.25 to 1
	March 31, 2003, June 30, 2003 and September 30, 2003	 	2.50 to 1

        Section 5.13.    Fixed Charges Coverage Ratio.    The Company will not permit the ratio of Consolidated Income
Available for Fixed Charges to Fixed Charges for the period consisting of the four immediately preceding fiscal quarters ending on the last day of each fiscal quarter set forth below to be less than
the ratio set forth below opposite such day: 

	Fiscal Quarter(s) Ending
	 	Minimum Fixed

Coverage Ratio

	December 31, 2001	 	1.25 to 1
	March 31, 2002	 	0.70 to 1
	June 30, 2002	 	0.80 to 1
	September 30, 2002	 	0.95 to 1
	December 31, 2002	 	1.25 to 1
	March 31, 2003	 	1.35 to 1
	June 30, 2003	 	1.45 to 1
	September 30, 2003	 	1.55 to 1
	December 31, 2003 and thereafter	 	1.75 to 1

        Section 5.14.    Limitation on Liens.    The Company will not, and will not permit any Subsidiary to, create or
incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for
the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Subsidiary to acquire, any
property or assets upon conditional sales agreements or other title retention devices, except: 

        (a)  Liens
for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of carriers, warehousemen, landlords, mechanics and
materialmen, provided payment thereof is not at the time required by §5.3; 

        (b)  Liens
of or resulting from any judgment or award the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or
a Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have
been secured; 

        (c)  Liens
incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with worker's compensation, unemployment insurance
and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations,
surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided in 

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each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; 

        (d)  survey
exceptions or encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or
zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Subsidiaries or which customarily exist on properties of
corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Subsidiaries; 

        (e)  Liens
securing Indebtedness of a Subsidiary to the Company or to another Wholly-Owned Subsidiary; 

        (f)    Liens
securing Indebtedness (including Capitalized Leases) permitted under §5.11(f),(g) and  (j); provided, however that Liens permitted under  §5.11(f) shall attach solely to the assets financed by such purchase money Indebtedness; 

        (g)  Liens
resulting from or consisting of operating leases; 

        (h)  Liens
arising in connection with non-exclusive licenses of Securitization Software and Hardware; 

        (i)    Liens
in favor of the Collateral Agent for the equal and ratable benefit of the Benefited Parties under the Intercreditor Agreement; 

        (j)    Liens
created in connection with Permitted Accounts Receivable Financing Facilities provided, that such Liens shall
extend only to property or items of property which constitute Excluded Assets; and 

        (k)  extensions
and renewals of Liens described above, provided that (i) such Liens shall not be extended to other
property of the Company or any of its Subsidiaries, and (ii) the principal amount of Indebtedness secured thereby shall not be increased over the principal amount thereof outstanding
immediately prior to such extension or renewal. 

        Section 5.15.    Restricted Payments.    The Company will not, and will not permit any of its Subsidiaries to,
make any Restricted Payments except: 

        (a)  Restricted
Payments not exceeding $9,000,000 in the aggregate in respect of any fiscal year; and 

        (b)  Restricted
Payments in any fiscal year in an amount equal to Investments that can be made under §5.16(j) in
such fiscal year, but which are not made; 

provided that, in each instance, after giving effect to any Restricted Payments, no Event of Default shall have occurred and be continuing; and  provided, further, that no Restricted Payment shall be made when the Funded Leverage Ratio (determined on a pro forma basis both before and after giving
effect to such Restricted Payment) is greater than 3.25 to 1.0. 

        For
the purposes of this §5.15, (a) the amount of any Restricted Payment declared, paid or distributed in property
shall be deemed to be the greater of the book value or Fair Market Value (as determined in
good faith by the Board of Directors of the Company) of such property at the time of the making of the Restricted Payment in question and (b) on the date which is twelve months after the date
on which a corporation becomes a Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Subsidiary, at such time and such Investments
will not be taken into account for purposes of this §5.15 prior to such time. 

        Section 5.16.    Loans and Investments.    The Company will not, and will not permit any of its Subsidiaries
to, make any Investment in any Person including any Affiliate of the Company, except: 

-8-

 

        (a)  Ordinary
Course Investments; 

        (b)  Investments
existing as of the date hereof and set forth on Schedule V of the Fourth Amendment, including reinvestments of the same amounts in the same
instruments; 

        (c)  Investments
in, or Guarantees with respect to Indebtedness of, joint ventures which respect to which the Company or its Subsidiaries is a partner not exceeding
$2,000,000 in the aggregate at any time; 

        (d)  loans
or advances in the usual and ordinary course of business to officers, directors and employees for expenses (including moving and relocation expenses related to a
transfer) incidental to carrying on the business of the Company or any of its Subsidiaries not exceeding $2,000,000 in the aggregate at any time outstanding; 

        (e)  loan
and advances to officers, directors and employees to exercise stock options of such employees to purchase stock of the Company, if, after giving effect thereto and
to the application of the proceeds thereof, such loan does not increase Consolidated Net Worth or Consolidated Net Income (other than an increase due to interest on such loan or advance); 

        (f)    advances
on commissions in the ordinary course of business to employees or subcontractors of the Company or its Subsidiaries in an aggregate amount not exceeding
$5,000,000 at any time outstanding; 

        (g)  loans,
guarantees, or other extensions of credit to the Company's employee stock ownership plan existing as of the Effective Date of the Fourth Amendment; 

        (h)  [Intentionally
omitted]; 

        (i)    notes
taken in connection with any asset sales permitted pursuant to §5.17; 

        (j)    additional
Investments in any fiscal year in an amount equal to Restricted Payments that can be made under  §5.15(a) in respect of such fiscal year, but which are not made, provided that after giving
effect to such Investments, no Event of Default shall have occurred and be continuing; and 

        (k)  additional
Investments not exceeding $3,000,000 in the aggregate in any fiscal year, provided that after giving effect to
such Investments, no Event of Default shall have occurred and be continuing; provided that the aggregate amount of all Investments (other than
(x) Ordinary Course Investments described in clauses (a) and (e) of the definition of "Ordinary Course Investments" and (y) Investments permitted by clauses (b), (c), (d),
(e), (f) and (i) above) and cash (in deposit accounts or otherwise, but excluding cash in disbursement accounts to the extent bona fide checks have been issued thereon) of the Company
and its Subsidiaries does not exceed $10,000,000 for any four consecutive Business Days. 

        Section 5.17.    Mergers, Consolidations and Sales of Assets.    (a) The Company will not, and will not permit
any Subsidiary to, (i) consolidate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of (including by means of merger or consolidation)
all or any substantial part (as defined in paragraph (e) of this §5.17) of the assets of the Company and the Subsidiaries;  provided, however,
that: 

        (1)  any
Subsidiary may merge or consolidate (i) with or into the Company or any Wholly-owned Subsidiary so long as in any merger or consolidation involving the
Company, the Company shall be the surviving or continuing corporation or (ii) with any other Person provided that such merger or consolidation
does not constitute a sale, lease or other disposition of a substantial part of the assets of the Company and the Subsidiaries; 

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        (2)  the
Company may consolidate or merge with any other corporation if (i) the Company shall be the surviving or continuing corporation, (ii) at the time of
such consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing, and (iii) after giving effect to such consolidation or merger
the Company would be permitted to incur at least $1.00 of additional Indebtedness under the provisions of §5.11; and 

        (3)  any
Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Company or any Wholly-Owned Subsidiary. 

        (b)  The
Company will not permit any Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this  §5.17, any warrants, rights or options to purchase or
otherwise acquire stock or other Securities exchangeable for or convertible into
stock) of such Subsidiary to any Person other than the Company or a Wholly-Owned Subsidiary, except for (i) the purpose of qualifying directors, (ii) in satisfaction of the validly
pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Company and/or a Subsidiary whereby the Company and/or such Subsidiary
maintain their same proportionate interest in such Subsidiary or (iii) any such issuance or sale if an amount equal to the net proceeds of which are used to prepay Indebtedness of the Company
or any Subsidiary (with a pro rata portion of such proceeds offered to prepay the Notes). 

        (c)  The
Company will not sell, transfer or otherwise dispose of any shares of stock of any Subsidiary (except to qualify directors) or any Indebtedness of any Subsidiary,
and will not permit any Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a Wholly-owned Subsidiary) any shares of stock or any Indebtedness of any other Subsidiary,
unless: 

        (1)  simultaneously
with such sale, transfer, or disposition, all shares of stock and all Indebtedness of such Subsidiary at the time owned by the Company and by every other
Subsidiary shall be sold, transferred or disposed of an entirety; 

        (2)  the
Board of Directors of the Company shall have determined, as evidenced by a resolution thereof, that the proposed sale, transfer or disposition of said shares of
stock and Indebtedness is in the best interests of the Company; 

        (3)  said
shares of stock and Indebtedness are sold, transferred or otherwise disposed of to a Person on terms reasonably deemed by the Board of Directors to be adequate and
satisfactory; 

        (4)  the
Subsidiary being disposed of shall not have any continuing investment in the Company or any other Subsidiary not being simultaneously disposed of; and 

        (5)  such
sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Company and its Subsidiaries. 

        (d)  Neither
the Company nor any Subsidiary will sell, transfer or otherwise dispose of any receivables other than any sale, lease or other disposition of receivables
pursuant to the Permitted Accounts
Receivable Financing Facility; provided that the net proceeds from any such Permitted Accounts Receivable Financing Facility shall be applied to the
prepayment of Indebtedness of the Company or any Subsidiary which for purposes of this §5.17(d) and  §5.17(e), shall include a temporary reduction
in Indebtedness outstanding under the Bank Credit Agreement. 

        (e)  As
used in this §5.17, a sale, lease or other disposition of assets shall be deemed to be a  "substantial part"of the assets of the Company and its
Subsidiaries if the book value of such assets, when added to the book value of all other assets
sold, leased or otherwise disposed of by the Company and its Subsidiaries (other than in the ordinary course of business) during the 12-month period ending with the date of such sale,
lease or other disposition, exceeds 15% of Consolidated 

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Total Assets, determined as of the end of the immediately preceding fiscal year. For purposes of making any determination of "substantial part", a sale, lease or other disposition of assets shall be
excluded from any computation thereof if the Net Proceeds of such sale, lease or other disposition are applied within four Business Days after such sale, lease or other disposition to prepay Senior
Indebtedness (including temporary reductions of revolving credit facilities) of the Company or any Subsidiary; provided that except in the case of
proceeds from Permitted Accounts Receivable Financing Facilities, any such application of proceeds shall be made pro rata among all Benefited Parties under the Intercreditor Agreement (based on the
principal amount of Indebtedness outstanding on the date of such prepayment but assuming for purposes of such calculation that the maximum commitment under the Bank Credit Agreement is outstanding). 

        Section 5.18.    Guaranties.    (a) The Company will not, and will not permit any Subsidiary to, become or be
liable in respect of any Guaranty except (i) Guaranties by the Company which are limited in amount to a stated maximum dollar exposure or which constitute Guaranties of obligations incurred by
any Subsidiary in compliance with the provisions of this Agreement and (ii) Guaranties which constitute Excluded Subsidiary Obligations. 

        (b)  The
Company will cause any Person which becomes a Subsidiary after December 1, 1999 and which is (i) required by the terms of the Bank Credit Agreement to
become a party to, or otherwise Guaranty, Indebtedness outstanding under the Bank Credit Agreement or (ii) is an active Domestic Subsidiary (other than a special purpose bankruptcy remote
financing entity in connection with a Permitted Accounts Receivable Financing Facility) to enter into the Guaranty Agreement, and deliver within three Business Days thereafter to each of the holders
of the Notes the following items: 

        (i)    a
Guaranty Supplement in respect of the Guaranty Agreement; 

        (ii)  a
certificate signed by the President, a Vice President or another authorized Responsible Officer of the Company making representations and warranties to the effect of
those contained in Exhibit A to the Second Amendment, with respect to such Subsidiary and the Guaranty Agreement, as applicable; 

        (iii)      such
documents and evidence with respect to such Subsidiary as any holder of the Notes may reasonably request in order to establish the existence and
good standing of such Subsidiary; 

        (iv)  an
opinion of counsel addressed to each of the holders of the Notes satisfactory to the holders of 662/3% in aggregate principal amount of the Notes, to
the effect that the Guaranty Agreement has been duly authorized, executed and delivered and constitutes the legal, valid and binding contract and agreement of such Subsidiary enforceable in accordance
with its terms, except as an enforcement of such terms may be limited by bankruptcy, insolvency, fraudulent conveyance and similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles; 

        (v)  If
at any time one or more Subsidiaries which shall have guaranteed the Indebtedness outstanding under the Bank Credit Agreement shall have been released from its
obligations under such Guaranty, then upon delivery to the holders of the Notes of evidence of such release (which evidence shall be reasonably satisfactory to holders of 662/3%
aggregate principal amount of the Notes), such Subsidiary shall be released from its obligations under the Guaranty Agreement. 

        Section 5.19.    Repurchase of Notes.    Neither the Company nor any Subsidiary or Affiliate, directly or
indirectly, may repurchase or make any offer to repurchase any Notes unless an offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same
terms. In case the Company repurchases or otherwise acquires any Notes, such 

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Notes shall immediately thereafter be canceled and no Notes shall be issued in substitution therefor. Without limiting the foregoing, upon the repurchase or other acquisition of any Notes by the
Company, any Subsidiary or any Affiliate, such Notes shall no longer be outstanding for purposes of any section of this Agreement relating to the taking by the holders of the Notes of any actions with
respect hereto, including, without limitation, §6.3, §6.4 and  §7.1. 

        Section 5.20.    Transactions with Affiliates.    The Company will not, and will not permit any Subsidiary to,
enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service
by or for, any Affiliate), except (i) employment, consulting and other compensation arrangements with the current chairman of the board of directors of the Company and (ii) in the
ordinary course of and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon terms no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate. 

        Section 5.21.    Termination of Pension Plans.    The Company will not and will not permit any ERISA Affiliate
to withdraw from any Multiemployer Plan if such withdrawal would result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) which is currently owing which could
materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. The Company and any ERISA
Affiliate will not
permit any employee benefit plan maintained by it to be terminated if such termination could result in the imposition of a Lien on any property of the Company or any ERISA Affiliate pursuant to
Section 4068 of ERISA. 

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        Section 5.22.    Reports and Rights of Inspection.    The Company will keep, and will cause each Subsidiary to
keep, proper books of record and account in sufficient detail to enable the preparation of consolidated and consolidating financial statements in accordance with GAAP consistently applied, and will
furnish (or with respect to clause (g) below, will use its best efforts to furnish) to you so long as you are the holder of any Note and to each other Institutional Holder of the then
outstanding Notes (in duplicate if so specified below or otherwise requested): 

        (a)    Quarterly Statements.    As soon as available and in any event within 50 days after the end of each
quarterly fiscal period (except the last) of each fiscal year, copies of: 

        (1)  consolidated
and consolidating balance sheets of (i) the Company and the Subsidiaries and (ii) the Company and its Subsidiaries as of the close of such
quarterly fiscal period, setting forth in comparative form the consolidated figures for the fiscal year then most recently ended, 

        (2)  consolidated
and consolidating statements of income of (i) the Company and the Subsidiaries and (ii) the Company and its Subsidiaries for such quarterly
fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding periods of
the preceding fiscal year, and 

        (3)  consolidated
and consolidating statements of cash flows of (i) the Company and the Subsidiaries and (ii) the Company and its Subsidiaries for each
quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the
preceding fiscal year, 

all
in reasonable detail and certified as complete and correct by an authorized financial officer of the Company; 

        (b)    Annual Statements.    As soon as available and in any event within 105 days after the close of each
fiscal year of the Company, copies of: 

        (1)  consolidated
and consolidating balance sheets of (i) the Company and its Subsidiaries and (ii) the Company and its Subsidiaries as of the close of such
fiscal year, and 

        (2)  consolidated
and consolidating statements of income and retained earnings and cash flows of (i) the Company and its Subsidiaries and (ii) the Company and
its Subsidiaries for such fiscal year, 

in
each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied, with respect to the Company and its Subsidiaries, by a
report thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company and its Subsidiaries as of the end of the fiscal year being reported on and the consolidated results of operations and cash flows
for said year in conformity with GAAP and that the audit of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards; 

        (c)    Audit Reports.    Promptly upon receipt thereof, one copy of each interim or special audit made by independent
accountants of the books of the Company or any Subsidiary and any management letter received from such accountants; 

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        (d)    SEC and Other Reports.    Promptly upon their becoming sent or filed, one copy of each financial statement,
report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any
Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency, and copies of any orders in any material proceedings to which the Company or any of its
Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Company or any of its Subsidiaries; 

        (e)    ERISA Reports.    As soon as practicable and in any event within 60 days after the Company knows that
any of the following events has occurred, written notice of (i) a Reportable Event with respect to any Plan; (ii) the Company's receipt of notice from the PBGC stating its intention to
terminate any Plan under Section 4042 of ERISA; (iii) the provision by the administrator of any Plan of a notice of intent to terminate such Plan; (iv) the imposition of
withdrawal liability by a Multiemployer Plan under Section 4202 of ERISA; (v) a "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan
other than a transaction for which a statutory exemption is available or an administrative exemption has been obtained; or (vi) any material increase in the contingent liability of the Company
or any Subsidiary with respect to any post-retirement welfare liability (exceeding $1,500,000,) calculated in accordance with FASB 106 and required to be reported under FASB 106; 

        (f)    Officer's Certificates.    Within the periods provided in paragraphs (a) and (b) above, a
certificate of an authorized financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in
sufficient detail) required in order to establish whether the Company was in compliance with the requirements of §5.9 through  §5.13, inclusive,
and §5.15, §5.16, §5.17,
§5.23 and §5.25 at the end of the period covered by the financial statements then being furnished, and
(ii) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time
during the period covered by such financial statements any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of
existence thereof and the action the Company is taking and proposes to take with respect thereto; 

        (g)    Accountant's Certificates.    Within the period provided in paragraph (b) above, a certificate of the
accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further whether, in making their audit, such accountants have
become aware of any Default or Event of Default under any of the terms or provisions of this Agreement insofar as any such terms or provisions pertain to or involve accounting matters or
determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; 

        (h)    Intentionally Omitted;    

        (i)    Requested Information.    With reasonable promptness, such other data and information as you or any such
Institutional Holder may reasonably request and which may be furnished without unreasonable expense to the Company; 

        (j)    Cash Flow Forecasts.    On the second Business Day of each week on or prior to the Collateral Release Date, a
13-week rolling cash flow forecast substantially in the form of Exhibit D to the Fourth Amendment; and 

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        (k)    Intercreditor Agreement.    (i) Concurrently with the delivery to the Collateral Agent, the Company
shall deliver to each Institutional Holder copies of all notices, schedules, certificates and reports delivered to the Collateral Agent pursuant to or in connection with any Security Document or with
respect to the Collateral, (ii) not less than 10 Business Days prior to execution thereof, a copy of (x) each proposed amendment to the Collateral Documents, (y) each document or
agreement which, if executed and delivered would become an additional Collateral Document, (iii) promptly following execution thereof, one copy of each of the documents referred to in the
preceding clause (ii), and (iv) the items specified by such holder pursuant to Section 5 of the Security Agreement. 

Without
limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each Institutional Holder of the then outstanding Notes (or such agents or representatives
as either you or such Institutional Holder may designate), to visit and inspect, under the Company's guidance, any of the properties of the Company or any Subsidiary, to examine all of their books of
account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and
independent public accountants (and by this provision the Company authorizes said accountants to discuss with you the finances and affairs of the Company and its Subsidiaries) all on such reasonable
notice and at such reasonable times and as often as may be reasonably requested. The Company shall not be required to pay or reimburse you or any such holder for expenses which you or any such holder
may incur in connection with any such visitation or inspection, except that if such visitation or inspection is made during any period when a Default or Event of Default shall have occurred and be
continuing, the Company agrees to reimburse you or such holder for all such expenses promptly upon demand. 

Section 5.23.    Consolidated Net Worth.    The Company will not at any time permit Consolidated Net Worth to be less than
$170,000,000 plus 50% of each fiscal quarter's Consolidated Net Income (with no deduction for losses) commencing on January 1, 1999  plus 75% of any
Net Issuance Proceeds after January 1, 1999. 

Section 5.24.    No Restrictions on Subsidiaries.    The Company will not, nor will it permit any of its Subsidiaries to,
enter into, or commit to enter into, any agreement or understanding that could limit or restrict any of its Subsidiaries making or declaring any dividends, either in cash or property, to the Company,
repaying or prepaying any Indebtedness (other than for amounts loaned by the Company to its Subsidiaries on a subordinated basis in connection with Permitted Accounts Receivable Financing Facilities
and the minimum net worth required to be maintained by a Subsidiary which is a special purpose entity pursuant to a Permitted Accounts Receivable Financing Facility) owing to the Company, or making
any Investment in the Company. 

Section 5.25.    Acquisitions.    The Company will not, nor will it suffer or permit any of its Subsidiaries to, make any
Acquisition unless, after giving effect to such Acquisition (the "subject Acquisition"), all of the following requirements are satisfied: 

        (a)  during
the 12-month period ending on the last day of the month prior to the closing of the subject Acquisition, the aggregate consideration paid (including,
without limitation, Indebtedness for borrowed money incurred or assumed) for all Acquisitions during such period (including, on a pro forma basis, the subject Acquisition) does not exceed 50% of
Consolidated Tangible Net Worth as of the last day of such period (including all Acquisitions during such period including, on a pro forma basis, the subject Acquisition); 

        (b)  the
total consideration paid (including, without limitation, Indebtedness for borrowed money incurred or assumed, but excluding secured purchase money Indebtedness,
including Capitalized Lease Obligations permitted under §5.14(f) for any one Acquisition or series of related Acquisitions does not
exceed $75,000,000; provided, however,that the cash consideration and all Indebtedness incurred or assumed in any one Acquisition (excluding secured
purchase 

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money Indebtedness, including Capitalized Lease Obligations permitted under §5.14(f) shall not exceed an amount equal to the sum of
(i) $25,000,000, (ii) the net cash proceeds received from asset dispositions (other than Permitted Accounts Receivable Financing
Facilities) within the prior 12 months (excluding any such proceeds counted towards prior Acquisitions), and (iii) the net cash proceeds
received from any equity offering; 

        (c)  at
the time of any Acquisition and after giving effect thereto no Default or Event of Default shall have occurred and be continuing; and 

        (d)  such
Acquisitions are not opposed by the board of directors or management of any Person or business to be acquired. 

        Notwithstanding
the foregoing, the Company will not, nor will it permit any of its Subsidiaries to, make any Acquisition with the proceeds of any Indebtedness if the Funded Leverage
Ratio (determined on a pro forma basis both before and after giving effect to such Acquisition) is greater than 3.25 to 1.0. For purposes hereof, (a) Consolidated EBITDA may be adjusted by the
Company in connection with such Acquisition to the extent approved by the Required Holders and (b) the Funded Debt of any Person to be acquired by the Company or any Subsidiary shall be
included in the calculation of the Funded Leverage Ratio as if such Person were a Subsidiary as of the date of such Acquisition. 

        Section 5.26.    Junior Capital.    If, at any time prior to the date upon which the Company obtains an
Investment Grade Rating, the Company shall sell or issue any Junior Capital, 40% of the net cash proceeds from the sale or issuance of such Junior Capital shall be applied by the Company within one
Business Day from the date of receipt of such proceeds to the prepayment of Senior Indebtedness of the Company on a pro rata basis based on the unpaid principal amount of Senior Indebtedness
outstanding on the date of such prepayment (assuming for purposes of such calculation that the maximum commitment under the Bank Credit Agreement is outstanding). At any time prior to the date upon
which the Company obtains an Investment Grade Rating, any prepayment of the Notes with the proceeds from the sale of Junior Capital shall be made pursuant to  §2.2, except that no Make-Whole Amount
shall be required to be paid in connection with such prepayment. 

        Any
prepayment of the Notes with the proceeds from the sale of Junior Capital, on or after the date upon which the Company obtains an Investment Grade Rating shall be made in accordance
with §2.2, including payment of the applicable Make-Whole Amount. 

        Section 5.27.    Leases.    The Company shall, and shall cause each of its Subsidiaries to, (a) pay all
obligations with respect to leases of real property by the Company and its Subsidiaries, (b) at the request of
Required Holders, provide copies of receipts or similar documents evidencing the current nature of payments under such leases and (c) promptly notify the holders of the Notes of any delinquent
payment under any such lease. 

        Section 5.28.    Post-Closing Deliveries.    The Company will deliver each of the documents
described in Schedule III to the Fourth Amendment on or prior to the date required for delivery of such document in Schedule III. 

        Section 3.4.    Amendment to Section 6 (Events of Default).    Section 6 of the Note Agreements
shall be and is hereby amended in its entirety to read as follows: 

        Section 6.1.    Events of Default.    Any one or more of the following shall constitute an  "Event of Default" as such term
is used herein: 

        (a)  Default
shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than three business days; or 

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        (b)  Default
shall occur in the making of any required prepayment on any of the Notes as provided in §2.1; or 

        (c)  Default
shall occur in the making of any other payment of the principal of any Note or premium, if any, thereon at the expressed or any accelerated maturity date or at
any date fixed for prepayment; or 

        (d)  Default
shall occur in the observance or performance of any other provision of this Agreement which is not remedied within 10 business days after the earlier of
(i) the day on which a Responsible Officer of the Company first obtains actual knowledge of such default, or (ii) the day on which notice thereof is given to the Company by the holder of
any Note; or 

        (e)  (i) The
Company or any Subsidiary (x) defaults in any payment when due of principal of or interest on any Indebtedness (other than Indebtedness hereunder)
or (y) defaults in the observance or performance of any other agreement or condition relating to any Indebtedness (other than Indebtedness hereunder) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee
or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, Indebtedness having an aggregate principal amount in excess of $5,000,000 to be demanded or become due
(automatically or otherwise) prior to its stated maturity, or any Guaranty in such amount to become payable or cash collateral in respect thereof to be demanded; or (ii) the occurrence under
any Swap Contract of an Early Termination Date (as defined in such Swap Contract) resulting from (x) any event of default under such Swap Contract as to which the Company or any Subsidiary is
the Defaulting Party (as defined in such Swap Contract) or (y) any Termination Event occurs under any Swap Contract (as defined therein) as to which the Company or any Subsidiary is an Affected
Party (as so defined), which, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $5,000,000; or 

        (f)    Any
representation or warranty made by the Company herein, or made by the Company in any statement or certificate furnished by the Company in connection with the
consummation of the issuance and delivery of the Notes or furnished by the Company pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or 

        (g)  Final
judgment or judgments for the payment of money aggregating in excess of $1,000,000 is or are outstanding against the Company and/or any Subsidiary or against any
property or assets of either and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of 10 business days from the date of entry; or 

        (h)  A
custodian, liquidator, trustee or receiver is appointed for the Company or any Subsidiary or for the major part of the property of either and is not discharged within
30 days after such appointment; or 

        (i)    The
Company or any Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or
the Company or any Subsidiary applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for the Company or such Subsidiary or for the major part of the property of
either; or 

        (j)    Bankruptcy,
reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, 

-17-

 

are instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary, are consented to or are not dismissed within 60 days after such
institution; or 

        (k)  (i) any
Security Document shall cease to be in full force and effect with respect to the Company or any Subsidiary Guarantor (other than as a result of a
transaction permitted hereunder); (ii) the Company or any Subsidiary Guarantor shall fail to comply with or to perform any applicable provision of any Security Document to which it is a party
and such failure (x) has a material adverse effect on Collateral Agent's rights with respect to any material portion of the Collateral granted thereunder or
(y) continues unremedied for 10 days after the earlier of the date on which (1) a Responsible Officer obtains knowledge of such failure or (2) Collateral Agent delivers
notice of such failure to the Company; or (iii) the Company or any Subsidiary Guarantor (or any Person by, through or on behalf of the Company or such Subsidiary Guarantor) shall contest in any
manner the validity, binding nature or enforceability of any Security Document; or 

        (l)    any
Event of Default shall occur under (and as defined in) the Bank Credit Agreement, or under the 1999 Note Purchase Agreement; or 

        (m)  any
representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in the Fourth Amendment or in any writing furnished in
connection with the transactions contemplated by the Fourth Amendment, including, without limitation, the representations and warranties of the Company and certain of its Subsidiaries set forth in or
relating to the Security Documents, proves to have been false or incorrect in any Material respect on the date as of which made. 

        Section 6.2.    Notice to Holders.    When any Default or Event of Default described in the foregoing  §6.1 has
occurred, or if the holder of any Note or of any other evidence of Indebtedness of the Company in a principal amount greater than
$1,000,000 gives any notice of or takes any other remedial action with respect to, a claimed default, the Company agrees to give notice within three business days of such event to all holders of the
Notes then outstanding. 

        Section 6.3.    Acceleration of Maturities.    When any Event of Default described in paragraph (a),
(b) or (c) of §6.1has happened and is continuing, any holder of any Note may, and when any Event of Default described in
paragraphs (d) through (g), inclusive, and paragraphs (k) through (m), inclusive, of said §6.1 has happened and is continuing,
the holder or holders of 25% or more of the principal amount of Notes at the time outstanding may, by notice to the Company, declare the entire principal and all interest accrued on all Notes to be,
and all Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraph (h), (i) or (j) of §6.1 has occurred, then all outstanding Notes shall immediately
become due and payable without presentment, demand or notice of any kind. Upon the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Notes the entire principal and interest accrued on the Notes and, to the extent not prohibited by applicable law, an amount as liquidated damages for the loss of the bargain
evidenced hereby (and not as a penalty) equal to the Make-Whole Amount, determined as of the date on which the Notes shall so become due and payable. No course of dealing on the part of
the holder or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any
Notes upon any default hereunder or thereon, including 

-18-

 

reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. 

        Section 6.4.    Rescission of Acceleration.    The provisions of  §6.3 are subject to the condition that if the
principal of and accrued interest on all or any outstanding Notes have been declared
immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (g), inclusive, and paragraphs (k) through (m), inclusive, of  §6.1, the
holders of 662/3% in aggregate principal amount of the Notes then outstanding may, by written instrument filed with
the Company, rescind and annul such declaration and the consequences thereof, provided that at the time such declaration is annulled and rescinded: 

        (a)  no
judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; 

        (b)  all
arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes
which has become due and payable solely by reason of such declaration under §6.3) shall have been duly paid; and 

        (c)  each
and every other Default and Event of Default shall have been made good, cured or waived pursuant to  §7.1; 

and
provided further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right
consequent thereto. 

        Section 3.5.    Amendment to Section 9.4 (Expenses, Stamp Tax Indemnity).    Section 9.4 of the
Note Agreement shall be and is hereby amended to read in its entirety as follows: 

        Section 9.4.    Expenses, Stamp Tax Indemnity.    (a) Whether or not the transactions contemplated hereby are
consummated, the Company will pay all reasonable costs and expenses (including reasonable attorneys' fees of one special counsel and, if reasonably required, local or other counsel) incurred by the
Noteholders and the holders of Notes in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Guaranty Agreement, the
Security Documents, the Intercreditor Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the reasonable costs and
expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Guaranty Agreement, the Guaranty Supplement, the Security
Documents, the Intercreditor Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand by any Governmental Authority issued in connection with
this Agreement, the Guaranty Agreement, the Guaranty Supplement, the Security Documents, the Intercreditor Agreement or the Notes, or by reason of being a holder of any Note, and (b) the
reasonable costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and
will save each Noteholder and each other holder of a Note harmless from, all claims in respect of any reasonable fees, costs or expenses if any, of brokers and finders (other than those retained by
the Noteholders). The Company also agrees that it will pay and save the Noteholders and each holder of Notes harmless against any and all liability with respect to stamp and other similar taxes not
related to income, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement, the Guaranty Agreement, the Guaranty
Supplement, the Security Documents, the Intercreditor Agreement or the Notes, whether or not any Notes are then outstanding. 

        (b)  Without
limiting the foregoing, the Company agrees to pay all fees of the Collateral Agent in connection with the preparation, execution and delivery of the
Intercreditor Agreement 

-19-

 

and the Security Documents and the transactions contemplated thereby, including but not limited to reasonable attorneys fees; to pay to the Collateral Agent from time to time reasonable compensation
for all services rendered by it under the Intercreditor Agreement and the Security Documents; to indemnify the Collateral Agent for, and to hold it harmless against, any loss, liability or expense
incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Intercreditor Agreement and Security Documents,
including, but not limited to, the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties thereunder. 

        Section 3.6.    New Definitions.    Section 8.1 of the Note Agreements shall be and is hereby amended in
its entirety to read as follows: 

        "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests or equity of any Person or otherwise causing any Person to become a Subsidiary of the Company, or (c) a merger or consolidation or any other combination with another
Person (other than a Person that is a Subsidiary of the Company) provided that the Company or the Company's Subsidiary is the surviving entity;  provided, however, that "Acquisition" shall not include any of the foregoing transactions between the Company and any Subsidiary that is a Subsidiary
Guarantor prior to such transaction or between companies that are Subsidiary Guarantors prior to such transaction; provided, further, that "Acquisition"
shall not include Investments. 

        "Adjusted Funded Debt" means all Indebtedness of the Company and its Subsidiaries determined on a consolidated basis, other than
(a) Indebtedness of the type described in clause (c) of the definition of "Indebtedness", (b) contingent obligations under letters of credit, (c) Ordinary Course
Indebtedness, and (d) Indebtedness in respect of banker's acceptances. 

        "Adjusted Funded Leverage Ratio" means, as of any date of determination, the ratio of (a) Adjusted Funded Debt on such date to
(b) Consolidated EBITDA for the most recently ended period of four consecutive fiscal quarters of the Company. 

        "Affiliate" shall mean any Person (other than a Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the Company, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Company or (iii) 5%
or more of the Voting Stock (or in the case of a Person which is not a corporation 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term  "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting Stock, by contract or otherwise. 

        "Applicable Interest Rate" means the rate of 8.89% per annum; provided that if the ratio
of Consolidated Income Available for Fixed Charges to Fixed Charges for the period of four consecutive fiscal quarters ending on the last day of any fiscal quarter set forth below is  less than the
minimum ratio set forth opposite such day, then, except as provided in the next succeeding sentence, the Applicable Interest Rate shall be
9.64% per annum at all times thereafter: 

	Fiscal Quarter Ending
	 	Minimum Ratio

	September 30, 2002	 	1.10 to 1
	December 31, 2002	 	1.50 to 1
	March 31, 2003	 	1.55 to 1
	June 30, 2003 and thereafter	 	1.75 to 1

-20-

 

        The
Applicable Interest Rate shall be 8.89% per annum at all times from and after the date on which the Company obtains an Investment Grade Rating. Any increase in the Applicable
Interest Rate shall be effective retroactive to the first day of the fiscal quarter in which the Company first falls below the minimum ratio set forth above. 

        "Bank Credit Agreement" shall mean the credit agreement between the Company and its bank lenders dated as of December 21, 1999, as
amended by the First Amendment to Credit Agreement dated as of March 27, 2002, and as hereafter amended, restated, refinanced, replaced, increased or reduced from time to time and any successor
bank credit agreement. 

        "Bank Lenders" shall mean the financial institutions that are party to the Bank Credit Agreement. 

        "Benefited Parties" shall have the meaning set forth in the Intercreditor Agreement. 

        "Capital Expenditures" means any expenditure that is considered a capital expenditure under GAAP, including any amount which is required
to be treated as an asset subject to a Capital Lease. 

        "Capitalized Lease" shall mean any lease the obligation for Lease Rentals with respect to which is required to be capitalized on a
consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. 

        "Capitalized Lease Obligation" means any rental obligation which, under generally accepted accounting principles, is or will be required
to be capitalized on the books of the Company or any Subsidiary, taken at the amount thereof accounted for as indebtedness (net of interest expense) in accordance with such principles. 

        "Code" shall mean the Internal Revenue Code of 1986, as amended. 

        "Collateral" means all Property from time to time subject to the Liens granted to the Collateral Agent by the Security Documents. 

        "Collateral Agent" means Bank of America, N.A., as collateral agent under the Security Documents and the Intercreditor Agreement, and its
successors and assigns in such capacity acting for the ratable benefit of the Benefited Parties. 

        "Collateral Release Date" means the first date on which (a) the Company has delivered financial statements pursuant to
Section 7.1(a) and (b) and a related certificate of compliance demonstrating that the Funded Leverage Ratio as of the end of a fiscal quarter was less than 3.25 to 1, (b) no
Default or Event of Default exists and (c) the Company has obtained an Investment Grade Rating. 

        "Company" shall mean K2 Inc., a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets and
business of K2 Inc. 

        "Computer Hardware and Software" means (i) all computer and other electronic data processing hardware, whether now or hereafter
owned, licensed or leased by the Company or any Subsidiary, including, without limitation, all integrated computer systems, central processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other
related computer hardware; (ii) all software programs, whether now or hereafter owned, licensed or leased by the Company or any Subsidiary, designed for use on the computers and electronic data
processing hardware described in clause (i) above, including, without limitation, all operating system software, utilities and application programs in whatsoever form (source code and object
code in magnetic tape, disk or hard copy format or any other listings whatsoever); (iii) all firmware associated with the foregoing, whether 

-21-

 

now or hereafter owned, licensed or leased by the Company or any Subsidiary; and (iv) all documentation for the hardware, software and firmware described in the preceding clauses (i),
(ii) and (iii) above, whether now or hereafter owned, licensed or leased by such Company, including, without limitation, flow charts, logic diagrams manuals, specifications, training
materials, charts and pseudo codes. 

        "Consolidated EBITDA" means, for the period of the four fiscal quarters ending on any date of determination (the  "measurement period"), for the Company and its
Subsidiaries on a consolidated basis, an amount equal to (i) the sum of (a) Consolidated
Net Income for such measurement period, (b) Consolidated Interest Expense for such measurement period, (c) the amount of taxes, based on or measured by income, used or included in the
determination of such Consolidated Net Income for such measurement period, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income for such
measurement period and (e) non-cash nonrecurring charges and expenses included in the determination of Consolidated Net Income for such measurement period to the extent relating to
items originally purchased in periods prior to the measurement period; provided, however, that charges and expenses related to inventory excluded from
the determination of Consolidated EBITDA by this clause (e) shall not exceed $5,000,000 in any measurement period, less (ii) noncash
nonrecurring gains included in the determination of Consolidated Net Income for such measurement period to the extent relating to items originally purchased in periods prior to the measurement period;  provided, further,
 that, with respect to the Acquisition of a Subsidiary within such measurement period which would have added at least $3,000,000 to
Consolidated EBITDA had it been included in the calculation thereof for such measurement period, the Company may also include items (i) and (ii) above for such Subsidiary for such
measurement period in Consolidated EBITDA if the Company has provided to all holders of Notes (x) the most recent year-end audited financial statements for that Subsidiary (which
audited statements must be as of a date occurring within five fiscal quarters prior to the date of such Acquisition (even if such date is prior to the measurement period and, therefore, such audited
statements are not actually used in computing Consolidated EBITDA for such measurement period)) and (y) Company-prepared financial statements for that Subsidiary for any portion of such
measurement period to be included; provided, further, that the items in the foregoing proviso may only be included if the items set forth in the proviso
to Consolidated Interest Expense relating to such Subsidiary are also included when determining any covenant hereunder; provided,
further, that Consolidated EBITDA shall not be reduced by any portion of the $18,000,000 charge taken by the Company in the third fiscal quarter of 2001. 

        "Consolidated Income Available for Fixed Charges" means for any period the sum of (i) Consolidated Net Income, (ii) income
tax expense, determined in accordance with GAAP, (iii) non-cash, non-recurring charges deducted from Consolidated Net Income during such period, and (iv) Fixed
Charges; provided that Consolidated Income shall not be reduced by any portion of the $18,000,000 charge taken by the Company in the third fiscal
quarter of 2001. 

        "Consolidated Indebtedness" means, as of any date of determination, the total of all Indebtedness of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP. 

        "Consolidated Interest Expense" means, for the period of the four fiscal quarters ending on any date of determination (the  "measurement period"), the sum, without
duplication, of (a) total interest expense (including that portion attributable to Capitalized Leases in
conformity with GAAP) of the Company and its Subsidiaries for such measurement period on a consolidated basis and (b) fees, commissions and interest related to Permitted Accounts Receivable
Financing Facilities for such measurement period; provided, however, that, with respect to the Acquisition of a Subsidiary within such measurement
period which would have added at least $3,000,000 to 

-22-

 

Consolidated EBITDA had it been included in the calculation thereof for such measurement period, the Company may also include items (a) and (b) above for such Subsidiary for such
measurement period in Consolidated Interest Expense if the Company has provided to Administrative Agent (who shall promptly deliver the same to all Lenders) (i) the most recent
year-end audited financial statements for that Subsidiary (which audited statements must be as of a date occurring within five fiscal quarters prior to the date of such Acquisition (even
if such date is prior to the measurement period and, therefore, such audited statements are not actually used in computing Consolidated Interest Expense for such measurement period)) and
(ii) company-prepared financial statements for that Subsidiary for any portion of such measurement period to be included. 

        "Consolidated Net Income" for any period shall mean the net income of the Company and its Subsidiaries for such period, determined in
accordance with GAAP, but excluding in any event: 

        (a)  any
extraordinary gains or losses as defined in APBO Nos. 11, 16 and 30 and FASB Statement No. 4; 

        (b)  net
earnings and losses of any Subsidiary accrued prior to the date it became a Subsidiary; 

        (c)  net
earnings and losses of any corporation (other than a Subsidiary), substantially all the assets of which have been acquired in any manner by the Company or any
Subsidiary, realized by such corporation prior to the date of such acquisition; 

        (d)  net
earnings and losses of any corporation (other than a Subsidiary) with which the Company or a Subsidiary shall have consolidated or which shall have merged into or
with the Company or a Subsidiary prior to the date of such consolidation or merger; 

        (e)  net
earnings of any business entity (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest unless such net earnings shall have
actually been received or are receivable by the Company or such Subsidiary in the form of cash distributions; 

        (f)    any
portion of the net earnings of any Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Subsidiary except to the
extent applied to the repayment of Indebtedness of such Subsidiary to the Company or any other Subsidiary; 

        (g)  earnings
or amortization resulting from any reappraisal, revaluation or write-up of assets (other than pursuant to any purchase account adjustments made to
the book value of assets of an acquired Person in connection with an Acquisition); 

        (h)  any
deferred or other credit or amortization thereof representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested
in such Subsidiary; and 

        (i)    any
gain arising from the acquisition of any Securities of the Company or any Subsidiary. 

        "Consolidated Net Worth" shall mean as of the date of any determination thereof the total assets of the Company and its Subsidiaries less
the total liabilities of the Company and its Subsidiaries determined in accordance with GAAP. 

        "Consolidated Tangible Net Worth" means at any date Consolidated Net Worth less the
intangible assets of the Company and its Subsidiaries on a consolidated basis, all determined as of such date. For purposes of this definition, "Intangible Assets" means the amount (to the extent
reflected in determining such Consolidated Net Worth) of all unamortized debt discount and expense, unamortized deferred charges (other than deferred employee benefit liabilities), goodwill, 

-23-

 

patents, trademarks, service marks, trade names, copyrights, organization or development expenses and other intangible items. 

        "Current Debt" of any Person shall mean as of the date of any determination thereof (i) all Indebtedness of such Person for
borrowed money other than Indebtedness of such Person and (ii) Guaranties by such Person of Current Debt of others. 

        "Default" shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both,
constitute an Event of Default. 

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. 

        "ERISA Affiliate" shall mean any corporation, trade or business that is, along with the Company, a member of a controlled group of
corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. 

        "ESOP" shall mean the Employee Stock Ownership Plan of the Company. 

        "Event of Default" shall have the meaning set forth in §6.1. 

        "Excluded Assets" shall have the meaning set forth in the Security Agreement as in effect on the date of this Agreement. 

        "Excluded Subsidiary Guaranties" shall mean the Guaranty Agreement and any other Guaranty of Indebtedness of the Company by a Subsidiary
Guarantor which shall be a party to the Guaranty Agreement; provided that each creditor which is a beneficiary of an Excluded Subsidiary Guaranty shall
have become a party to the Intercreditor Agreement. 

        "Fair Market Value" means, at any time and with respect to any property, the sale value of such property that would be realized in an
arm's length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under any compulsion to buy or sell). 

        "FASB 106" shall mean Statement No. 106 of the Financial Accounting Standards Board. 

        "Fixed Charges" means, with respect to any period, the sum of (i) Interest Expense and (ii) Lease Rentals for such period. 

        "Foreign Receivable Financing Facilities" means one or more facilities involving the sale or discount of undivided ownership interests in
foreign accounts receivable and related property of the Company and one or more of its Foreign Subsidiaries. 

        "Foreign Subsidiaries" means those Subsidiaries of the Company which are not Domestic Subsidiaries. 

        "Fourth Amendment" shall mean that certain Fourth Amendment to Note Agreements dated as of March 27, 2002 among the Company and the
Purchasers named therein. 

        "Funded Debt" means all Indebtedness of the Company and its Subsidiaries determined on a consolidated basis, other than
(a) Indebtedness of the type described in clause (c) of the definition of "Indebtedness" and (b) contingent obligations under letters of credit. 

        "Funded Leverage Ratio" means, as of any date of determination, the ratio of (a) Funded Debt on such date to
(b) Consolidated EBITDA for the most recently ended period of four consecutive fiscal quarters of the Company. 

-24-

 

        "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant
segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. If at any time any change in GAAP would affect the computation of
any financial ratio or requirement set forth in any of this Agreement and the Notes, the Guaranty Agreement, the Intercreditor Agreement, the Security Documents or any other instrument or document in
connection therewith, and either the Company or the Required Holders shall so request, the Noteholders and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of reflect such change in GAAP (subject to the approval of the Required Holders), provided that, until so amended,
(a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) the Company shall provide to the Noteholders financial statements
and other documents
required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change
in GAAP. 

        "Guaranty" by any Person shall mean any obligation (other than an endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any obligation incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness
or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (iii) to lease property
or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the
Indebtedness or obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which
has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend. 

        "Guaranty Agreement" shall mean that certain Guaranty Agreement dated as of December 1, 1999 as amended and supplemented from time
to time. 

        "Guaranty Obligations" means, as to any Person, any (a) guaranty by that Person of Indebtedness of, or other obligation payable or
performable by, any other Person or (b) assurance, agreement, letter of responsibility, letter of awareness, undertaking or arrangement given by that Person to an obligee of any other Person
with respect to the payment or performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement
covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item of such other Person or any "keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such
obligee against loss with respect to any obligation of such other Person; provided, however, that the term Guaranty Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of 

-25-

 

business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, covered by such
Guaranty Obligation or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. 

        "Guaranty Supplement" means a Guaranty Supplement in substantially the form attached as Exhibit A to the Guaranty Agreement. 

        "Indebtedness" means, as to any Person at a particular time, all of the following, without duplication: 

        (a)  all
obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; 

        (b)  any
direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker's acceptances, bank guaranties, surety
bonds and similar instruments; 

        (c)  net
obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such
Swap Contract has not been closed out, the mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in Swap
Contracts of the same type; 

        (d)  all
obligations of such Person to pay the deferred purchase price of property or services (excluding trade and other accounts payable in the ordinary course of business
in accordance with customary trade terms and which are not overdue for a period of more than 60 days or which are subject to a bona fide dispute) and all indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in recourse, including, without limitation, any Permitted Accounts Receivable Financing Facility; 

        (e)  all
Capitalized Lease Obligations and Synthetic Lease Obligations of such Person; and 

        (f)    all
Guarantees of such Person in respect of any of the foregoing. 

        For
all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, unless such Indebtedness
is expressly made non-recourse to such Person except for customary exceptions acceptable to the Required Holders. 

-26-

  

        "Institutional Holder" shall mean any insurance company, bank, savings and loan association, trust company, investment company, charitable
foundation, employee benefit plan (as defined in ERISA) or other institutional investor or financial institution. 

        "Intercreditor Agreement" is defined in §1.4. 

        "Interest Coverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four
prior fiscal quarters ending on such date to (b) Consolidated Interest Expense during such period. 

        "Interest Expense" means, with respect to any period, the sum (without duplication) of the following: (i) all interest expense in
respect of Indebtedness of the Company and its Subsidiaries (including imputed interest on Capitalized Leases) deducted in determining Consolidated Net Income for such period, (ii) all
Indebtedness discount and expense amortized in such period and (iii) fees, commissions and interest expense related to Permitted Accounts Receivable Financing Facilities for such period. 

        "Investment Grade Rating" means a rating by at least one Nationally Recognized Rating Agency of (a) in the case of Moody's, "Baa3"
or better, (b) in the case of S&P, "BBB-" or better, or (c) in the case of Fitch, "BBB-" or better for the long term senior, unsecured, non-credit
enhanced debt of the Company. 

        "Investments" shall mean all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by
acquisition of shares of capital stock, indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; provided,
however, that "Investments" shall not include Acquisitions. In valuing any Investment for purposes of this Agreement, such Investments shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. 

        "Junior Capital" means (i) common stock of the Company, (ii) preferred stock of the Company which is not subject to
mandatory redemption or repurchase or otherwise required to be redeemed on or prior to March 1, 2010, and (iii) Subordinated Indebtedness. 

        "Lease Rentals" means, with respect to any period, the sum of the minimum amount of rental and other obligations required to be paid
during such period by the Company or its Subsidiaries as lessee under all leases of real or personal property (other than Capitalized Leases), excluding any amounts required to be paid by the lessee
(whether or not designated as rental) which are (i) on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges, or (ii) which are based on
profits, revenues or sales realized by the lessee from all leased property or otherwise based on the performance of the lessee. 

        "Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Indebtedness of the Company and its
Subsidiaries (other than Indebtedness of the type described in clause (c) of the definition of "Indebtedness") to (b) Consolidated EBITDA for the most recently ended period of four
consecutive fiscal quarters of the Company. 

        "Lien" shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements) affecting property. For the 

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purposes of this Agreement, the Company or a Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or
other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien. 

        "Make-Whole Amount" shall mean in connection with any prepayment of the Notes the excess, if any, of (i) the aggregate
present value as of the date of such prepayment of each dollar of principal being prepaid (taking into account the application of such prepayment required by  §2.1) and the amount of interest
(exclusive of interest accrued to the date of prepayment) that would have been payable in respect of such
dollar if such prepayment had not been made, determined by discounting such amounts at the Reinvestment Rate from the respective dates on which they would have been payable, over (ii) 100% of
the principal amount of the outstanding Notes being prepaid. If the Reinvestment Rate is equal to or higher than the Applicable Interest Rate, the Make-Whole Amount shall be zero. For
purposes of any determination of the Make-Whole Amount: 

        "Reinvestment Rate" shall mean .50%, plus the arithmetic mean of the yields under the respective headings "This
Week" and "Last Week" published in the Statistical Release under the caption "Treasury Constant
Maturities" for the maturity (rounded to the nearest month) corresponding to the Weighted Average Life to Maturity of the principal being prepaid (taking into account the
application of such prepayment required by §2.1). If no maturity exactly corresponds to such Weighted Average Life to
Maturity, yields for the published maturity next longer than the Weighted Average Life to Maturity and for the published maturity next shorter than the Weighted Average Life to Maturity shall be
calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated from such yields on a straight-line basis, rounding in each of such relevant
periods to the nearest month. For the purposes of calculating the Reinvestment Rate, the most recent Statistical Release published prior to the date of determination of the Make-Whole
Amount shall be used. 

        "Statistical Release" shall mean the then most recently published statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Federal Reserve System and which establishes yields on actively traded U.S. Government Securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination hereunder, then such other reasonably comparable index which shall be designated by the holders of 662/3% in aggregate principal amount of
the outstanding Notes. 

        "Weighted Average Life to Maturity" of the principal amount of the Notes being prepaid shall mean, as of the time of any determination
thereof, the number of years obtained by dividing the then Remaining Dollar-Years of such principal by the aggregate amount of such principal. The term "Remaining Dollar-
Years" of such principal shall mean the amount obtained by (i) multiplying (x) the remainder of (1) the amount of principal that would have become due on
each scheduled payment date if such prepayment had not been made, less (2) the amount of principal on the Notes scheduled to become due on such date after giving effect to such prepayment and
the application thereof in accordance with the provisions of §2.1, by (y) the number of years (calculated to the nearest
one-twelfth) which will elapse between the date of determination and such scheduled payment date, and (ii) totaling the products obtained in (i). 

        "Membership Pledge Agreement" means the membership pledge agreement dated as of March 27, 2002 among the Company, various
Subsidiary Guarantors and Collateral Agent. 

        "Mortgage" means a mortgage, deed of trust, leasehold mortgage or similar instrument granting Collateral Agent a Lien on real property
owned or leased by the Company or any Subsidiary Guarantor. 

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        "Multiemployer Plan" shall have the same meaning as in ERISA. 

        "Nationally Recognized Rating Agency" means Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Rating Group, a division of McGraw Hill, Inc. ("S&P") or
Fitch/IBCA Duff & Phelps Ltd. ("Fitch"). 

        "Net Issuance Proceeds" means, in respect of any issuance of equity, the cash proceeds and non-cash proceeds received or
receivable in connection therewith, net of reasonable costs and expenses and underwriting discounts and commissions paid or incurred in connection therewith in favor of any Person not an Affiliate of
the Company. 

        "Net Proceeds" means, with respect to any sale, lease or other disposition of any property by an Person, an amount equal to the  difference of 

        (a)  the
aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such sale, lease or other disposition
but net of applicable taxes) received by such Person in respect of such disposition, minus

        (b)  all
ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such disposition. 

        "1999 Note Purchase Agreement" shall mean that certain Note Purchase Agreement dated as of December 1, 1999 between the Company and
the institutional investors named therein, as heretofore amended and as hereafter amended from time to time. 

        "Ordinary Course Indebtedness" means: 

        (a)  intercompany
Guaranty Obligations of the Company or any of its Subsidiaries guarantying Indebtedness otherwise permitted hereunder of the Company or any Wholly-Owned
Subsidiary of the Company; 

        (b)  Indebtedness
arising from the honoring of a check, draft or similar instrument against insufficient funds so long as such Indebtedness is paid within three Business Days
after the incurrence thereof; 

        (c)  Indebtedness
of a Subsidiary to the Company or to a Wholly-Owned Subsidiary; 

        (d)  Indebtedness
of the Company to a Subsidiary Guarantor; and 

        (e)  Indebtedness
in connection with letters of credit issued in the ordinary course of business. 

        "Ordinary Course Investments" means Investments of the Company and its Subsidiaries, consisting of: 

        (a)  Investments
in and to Subsidiaries and the Company and in any Person that is a Subsidiary after giving effect to such Investment; 

        (b)  Investments
in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or its Subsidiaries, is
accorded the highest rating by a Nationally Recognized Rating Agency; 

        (c)  Investments
in direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which
constitutes a full faith and credit obligation of the United States of America, in either case, maturing in 12 months or less from the date of acquisition thereof; 

        (d)  Investments
in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the
United 

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States or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit are, at the time of acquisition
thereof by the Company or its Subsidiaries, rated A or better by S&P or A or better by Moody's; 

        (e)  receivables,
including negotiable instruments and letters of credit in respect of which the Company or its Subsidiaries is the beneficiary, arising from the sale of
goods and services in the ordinary course of business of the Company and its Subsidiaries; 

        (f)    Investments
in repurchase agreements or bankers acceptances, having terms of less than 30 days, with a United States bank or trust company meeting the
requirements of paragraph (d) hereof, which Investments mature within one year and which are fully secured by obligations of the type described in paragraphs (c) and (d) hereof;
and 

        (g)  Investments
in offshore certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company having capital, surplus and
undivided profits aggregating at least $1,000,000,000 and whose long term offshore certificates of deposit are at the time of acquisition thereof by the Company or its Subsidiaries, accorded a rating
of A or better by S&P or Moody's. 

        "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. 

        "Permitted Accounts Receivable Financing Facilities" means one or more facilities involving the sale or discount of undivided ownership
interests in accounts receivable and related property of the Company and one or more of its Subsidiaries; provided that the aggregate investment or
claim held by purchasers of such assets does not exceed $75,000,000 in the case of receivables owned by Domestic Subsidiaries, and in the case of Foreign Receivable Financing Facilities the aggregate
outstanding principal amount of Indebtedness for borrowed money of Foreign Subsidiaries plus the aggregate investment or claim held by purchasers of
receivables in Foreign Receivable Financing Facilities shall not exceed 15% of Consolidated Net Worth at any time. 

        "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political
subdivision thereof. 

        "Plan" shall mean a "pension plan," as such term is defined in Section 3(2) of ERISA that is subject to Title IV of ERISA,
established, maintained or contributed to by the Company or any ERISA Affiliate except shall not include a Multiemployer Plan. 

        "Pledge Agreement" means the pledge agreement dated as of March 27, 2002 among the Company, various Subsidiary Guarantors and
Collateral Agent. 

        "Purchasers" shall have the meaning set forth in §1.1. 

        "Reportable Event" shall have, with respect to any Plan, the same meaning as in Section 4043 of ERISA except shall not include
reportable events with respect to which the 30-day notice requirement has been waived by the PBGC (provided that the loss of qualification of a Plan and the failure to meet the minimum
funding standards of Section 412 of the Code or Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any waiver of the notice requirement by the PBGC). 

        "Required Holders" means, at any time, the holders of at least 662/3% in principal amount of the Notes at the time
outstanding; provided that in the case of any release of all or substantially all of the Collateral (other than on account of the occurrence of the
Collateral Release Date), "Required Holders" shall mean the holders of 100% in principal amount of the Notes then outstanding (exclusive in each case of Notes then owned by the Company or any of its
Affiliates). 

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        "Responsible Officer" shall mean the President, any Vice President, or Treasurer of the Company or any other officer of the Company who in
the normal performance of his or her duties would have knowledge of this Agreement and the provisions hereof. 

        "Restricted Payments" means: 

        (a)  the
declaration or payment of any dividend by the Company, either in cash or property, on any shares of the capital stock of any class of the Company (except dividends
or other distributions payable solely in shares of capital stock of the Company); 

        (b)  the
purchase, redemption or retirement by the Company of any shares of the capital stock of any class of the Company or any warrants, rights or options to purchase or
acquire any shares of its capital stock, whether directly or indirectly, or through any Subsidiary; and 

        (c)  any
other payment or distribution by the Company in respect of its capital stock, either directly or indirectly or through any Subsidiary. 

        "Second Amendment" shall mean that certain Second Amendment dated as of December 1, 1999 among the Company and the Purchasers named
therein. 

        "Securitization Hardware and Software" means the Computer Hardware and Software used to service and/or monitor the accounts and payments
intangibles of the Company and its Subsidiaries; the Computer Hardware and Software and other computer materials otherwise relating to the Excluded Assets; and the printouts and other computer
materials, technical knowledge or processes, data bases, customer lists, credit files, correspondence and advertising materials or any property of a similar nature relating to the Excluded Assets. 

        "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. 

        "Security Agreement" means the security agreement dated as of March 27, 2002 among the Company, the Subsidiary Guarantors and
Collateral Agent. 

        "Security Documents" means the Security Agreement, the Membership Pledge Agreement, the Mortgages, the Pledge Agreement and all other
documents pursuant to which the Company or any Subsidiary grants Collateral to Collateral Agent. 

        "Senior Indebtedness" means, as of any date of determination thereof, all Consolidated Indebtedness, other than Subordinated Indebtedness. 

        "Subordinated Indebtedness" is defined in Section 5.11. 

        The
term "subsidiary" shall mean as to any particular parent corporation any corporation of which more than 50% (by number of votes) of
the Voting Stock shall be beneficially owned, directly or indirectly, by such parent corporation. The term "Subsidiary" shall mean a subsidiary of the
Company. 

        "Subsidiary Guarantor" shall mean each Subsidiary of the Company which shall be a party to the Guaranty Agreement. 

        "Swap Contract" means (a) any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, foreign exchange contracts or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject to 

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any master agreement, or (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc., or any other master agreement (any such master agreement, together with any related schedules, as amended, restated,
extended, supplemented or otherwise modified in writing from time to time, a "Master Agreement"), including any such obligations or liabilities under
any Master Agreement. 

        "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for
such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any
Bank Lender). 

        "Synthetic Lease Obligation" means all monetary obligations of a Person under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment). 

        "Voting Stock" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons performing similar functions). 

        "Wholly-Owned" when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of
stock (except shares required as directors' qualifying shares) and all Indebtedness shall be owned by the Company and/or one or more of its Wholly-Owned Subsidiaries. 

Section 4.    Representations and Warranties.  

        The Company represents and warrants that as of the date hereof and as of the date of execution and delivery hereof and after giving effect hereto (and to the
amendment of the Bank Credit Agreement, the 1999 Note Purchase Agreement and the Permitted Accounts Receivable Financing Facility referred to in Schedule II hereto): 

        (a)  No
Default or Event of Default exists under the Note Agreement. 

        (b)  In
connection with the solicitation of an amendment to the Bank Credit Agreement, the 1999 Note Purchase Agreement and the Permitted Accounts Receivable Financing
Facility or in connection with any other agreement pursuant to which Indebtedness of the Company is outstanding and relating to the subject matter of this Agreement, or any other amendment or
modification required under any such agreement, the Company has paid no fees or other consideration (other than routine fees of counsel for such lenders and except as disclosed to the Noteholders and
their special counsel, Chapman and Cutler) in connection with the review and/or execution and delivery of any such amendment or modification. 

        (c)  The
execution and delivery of the Agreement and each of the Security Documents to which it is a party by the Company and the compliance by the Company with all of the
provisions of the Note Agreement, as amended hereby, and each of the Security Documents to which it is a party: 

        (i)    is
within the corporate powers of the Company; and 

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        (ii)  will
not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under the Articles of Incorporation or By-laws of the Company or any indenture or other agreement or instrument to which the
Company is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any property of the Company (other than such Liens, security interests and encumbrances
contemplated and otherwise created by virtue of the Security Documents). 

        (d)  The
execution and delivery of this Agreement and each of the Security Documents have been duly authorized by all proper corporate action on the part of the Company (no
action by the stockholders of the Company being required by law, by the Articles of Incorporation or By-laws of the Company or otherwise); and this Agreement and each of the Security
Documents have been executed and delivered by the Company, and the Note Agreement and the Notes, as amended by this Agreement, and the Security Documents constitute the legal, valid and binding
obligations, contracts and agreements of the Company enforceable in accordance with their respective terms. 

        (e)  The
execution and delivery of the Amendment to Guaranty Agreement dated of even date herewith (the "Amendment to
Guaranty") in substantially the form set forth in Exhibit C hereto or a Guaranty Supplement, as the case may be, and each of the Security Documents by the Subsidiary
Guarantors and the compliance by each Subsidiary Guarantor with the provisions of the Security Documents to which such Subsidiary Guarantor is a party: 

        (i)    is
within the corporate powers of each such Subsidiary Guarantor; and 

        (ii)  will
not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under the Articles of Incorporation or By-laws of such Subsidiary Guarantor or any indenture or other agreement or
instrument to which such Subsidiary Guarantor is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any property of the Company (other than such Liens,
security interests and encumbrances contemplated and otherwise created by virtue of the Security Documents). 

        (f)    The
execution and delivery of the Amendment to Guaranty or the Guaranty Supplement, as the case may be, and each of the Security Documents to which each Subsidiary
Guarantor is a party have been duly authorized by all proper corporate action on the part of each Subsidiary Guarantor (no action by the stockholders of such Subsidiary Guarantor being required by
law, by the Articles of Incorporation
or By-laws of such Subsidiary Guarantor or otherwise); and the Amendment to Guaranty or the Guaranty Supplement, as the case may be, and each of the Security Documents to which each
Subsidiary Guarantor is a party have been executed and delivered by such Subsidiary Guarantor and constitute the legal, valid and binding obligations, contracts and agreements of each such Subsidiary
Guarantor enforceable in accordance with their respective terms. 

        (g)  No
consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery
or performance by the Company or any Subsidiary Guarantor of this Agreement or any Security Document to which the Company or any Subsidiary Guarantor is a party. 

        (h)  There
are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of
the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect. 

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        (i)    Neither
the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws)
of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 

        (j)    Schedule IV
hereto sets forth a complete and correct list of all outstanding Indebtedness (including Guaranties) of the Company and its Subsidiaries as of
March 5, 2002, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or
such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit)
one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. 

        (k)  Except
as set forth in the Security Documents, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 5.15 of the Note Agreements. Schedule VI hereto
sets forth a complete and correct list of all Liens on Property of the Company and its Subsidiaries which secure Indebtedness. 

        (l)    Schedule V
hereto contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other
Subsidiary, and all other Investments of the Company and its Subsidiaries and (ii) of the Company's Affiliates known to the Company, other than Subsidiaries. 

Section 5.    Conditions Precedent to Effectiveness of Agreement.  

        This Agreement shall become effective as of the date hereof upon the satisfaction of each of the following, unless waived by the Required Holders, in their sole
discretion: 

        (a)  The
Required Holders on the date hereof shall have delivered an executed counterpart of this Agreement; 

        (b)  No
Event of Default shall have occurred and be continuing; 

        (c)  The
Company shall have delivered to the Noteholders in form and substance satisfactory to such Noteholders and their special counsel, Chapman and Cutler, the items
listed or described in Schedule II hereto; 

        (d)  The
Company shall have paid the fees, costs, expenses and disbursements of Chapman and Cutler, special counsel to the Noteholders, incurred in connection with the
consummation of the transactions contemplated by this Agreement and the Security Documents; and 

        (e)  The
Company shall have paid a fee to each Noteholder in an amount equal to 11.25 basis points of the unpaid principal amount of the Notes. 

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Section 6.    Waiver.  

        Section 6.1.    Waiver of Compliance with Section 5.6.    The Noteholders hereby waive compliance by the
Company with Section 5.6 of the Existing Note Agreement for the fiscal quarter ended on December 31, 2001 on account of the Company's inability to maintain the minimum ratio of
Consolidated Current Assets to Consolidated Current Liabilities (as each such term is defined in the Existing Note Agreement) as of such date. 

        Section 6.2.    Waiver of Compliance with Section 5.7.    The Noteholders hereby waive compliance by the
Company with Section 5.7 of the Existing Note Agreement for the fiscal quarters ended on September 30, 2001 and December 31, 2001 on account of Current Debt (as defined in the
Existing Note Agreement) of the Company and the Restricted Subsidiaries being in excess of 80% of Consolidated Accounts Receivable (as defined in the Existing Note Agreement) as of each such date. 

        Section 6.3.    Waiver of Compliance with Section 5.8.    The Noteholders hereby waive compliance by the
Company with Section 5.8 of the Existing Note Agreement for the fiscal quarters ended on September 30, 2001 and December 31, 2001 on account of the Company's inability to maintain
the minimum ratio of Cash Flow Available for Fixed Charges to Fixed Charges (as each such term is defined in the Existing Note Agreement) as of each such date. 

Section 7.    Miscellaneous.  

        Section 7.1.    Effect of Agreement and Reaffirmation.    Except as expressly amended by this Agreement, the
Company acknowledges and agrees that the Note Agreements, the Notes and all other documents and agreements executed by the Company in connection with the Note Agreements in favor of the Noteholders
shall remain unchanged and are hereby ratified and confirmed and shall remain in full force and effect. The Company further acknowledges and agrees that it has no defenses to its obligations under the
Note Agreements and the Notes, as amended hereby, and that the Company has no claim against the Noteholders arising from or in connection with the Note Agreements and the Notes, as amended hereby. 

        Section 7.2.    Release of Claims.    In further consideration of the Noteholders' execution of this Agreement,
the Company hereby releases each Noteholder and its respective affiliates, officers, employees, directors, trustees, agents and attorneys (collectively, the  "Releasees") from any and all claims, demands,
 liabilities, responsibilities, disputes, causes of action (whether at law or in equity) and obligations
of every nature whatsoever, whether liquidated or unliquidated, known or unknown, matured or unmatured, fixed or contingent that the Company may have against the Releasees which arise from or relate
to any actions which the Releasees may have taken or omitted to take prior to the date hereof with respect to the Notes, the Note Agreement, any Collateral, the Guaranty Agreement, and any Security
Documents and any third parties liable in whole or in part for the obligations under the Notes and the Note Agreement. For purposes of the release contained in this paragraph, the term  "Company" shall
mean and include such party's successors and assigns, including, without limitation, any trustees acting on behalf of such party and any
debtor-in-possession in respect of such party. 

        Section 7.3.    Successors and Assigns.    This Agreement shall be binding upon the Company and its successors
and assigns and shall inure to the benefit of the Noteholders and to the benefit of the Noteholders' successors and assigns. 

        Section 7.4.    Expenses.    The Company hereby agrees to pay all out-of-pocket
expenses incurred by the Noteholders in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the reasonable fees, expenses and
disbursements of Chapman and Cutler. 

        Section 7.5.    Counterparts.    This Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement. 

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        Section 7.6.    Governing Law.    This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without giving effect to choice of law principles that would result in the application of the laws of any other jurisdiction. 

        Section 7.7.    Approval of Amendment to Guaranty Agreement.    Each Noteholder hereby consents to the terms of
the Amendment to Guaranty dated of even date herewith and attached hereto as Exhibit C in respect of the Subsidiary Guaranty. 

        Section 7.8.    GE Securitization.    The Noteholders hereby consent to (i) the execution, delivery and
performance by the Company, Stearns Inc. ("Stearns"), Shakespeare Company, LLC ("Shakespeare"),
K-2 Corporation ("K-2 Corp."), K2 Receivables Corporation ("K2 SPV") and K2
Finance Company, LLC ("K2 LLC") of the GECC Securitization Transactions. Notwithstanding anything to the contrary in this Agreement or the Note
Agreement, as amended hereby, the Notes, the Subsidiary Guaranties, the Security Documents and the Intercreditor Agreement (collectively the "Transaction
Documents"), the GECC Securitization Transactions and the execution and delivery of, and performance under, the GECC Securitization Documents by the Company and it subsidiaries
party thereto shall not be deemed to violate or contravene any provision of the Transaction Documents. 

        "GECC Securitization Documents" shall mean (i) that certain Receivables Sale and Contribution Agreement, dated as of
March 28, 2002, among the Company as parent guarantor, Stearns, Shakespeare and K-2 Corp. as originators and K2 LLC as buyer (the "Sale and Contribution
Agreement"), (ii) the Receivables Purchase and Servicing Agreement, dated as of March 28, 2002, among K2 LLC as seller,
Company as master servicer, Stearns, Shakespeare and K-2 Corp. as servicers, K2 SPV, Redwood Receivables Corporation as the conduit purchaser (the "Conduit
Purchaser"), General Electric Capital Corporation as committed purchaser (the "Committed Purchaser") and as administrative agent
(the "Agent") for the Committed Purchaser and the Conduit Purchaser (the "Receivables Purchase
Agreement"), and (iii) each Originator Performance Guaranty dated as of March 28, 2002, from the Company, Stearns, Shakespeare and K-2 Corp. in each
case in the form delivered to the Noteholders on March 28, 2002. 

        "GECC Securitization Transactions" shall mean the transactions under the GECC Securitization Documents. 

-36-

        In Witness Whereof, the Company has executed this Fourth Amendment to Note Agreements as of the day and year first above written. 

	 	 	K2 Inc.
	

 	
 	

By:	
 	

	 	 	 	 	Its:	 	

        This
Fourth Amendment to Note Agreements is accepted and agreed to as of the day and year first above written. 

	 	 	C.M. Life Insurance Company
	 	 	 	 	 	 	 
	 	 	By:	 	David L. Babson & Company Inc.,

as Investment Sub-Advisor
	

 	
 	

By:	
 	

	 	 	 	 	Its:	 	

        This
Fourth Amendment to Note Agreements is accepted and agreed to as of the day and year first above written. 

	 	 	Principal Life Insurance Company
	 	 	 	 	 	 	 
	 	 	By:	 	Principal Capital Management, LLC,

a Delaware limited liability company,

its authorized signatory
	 	 	 	 	 	 	 
	 	 	By:	 	

	 	 	 	 	Its:	 	

	 	 	 	 	 	 	 
	 	 	By:	 	

	 	 	 	 	Its:	 	

        This
Fourth Amendment to Note Agreements is accepted and agreed to as of the day and year first above written. 

	 	 	Life Investors Insurance Company of America
	

 	
 	

By:	
 	

	 	 	 	 	Its:	 	

        This
Fourth Amendment to Note Agreements is accepted and agreed to as of the day and year first above written. 

	 	 	Monumental Life Insurance Company
	

 	
 	

By:	
 	

	 	 	 	 	Its:	 	

Massachusetts Mutual Life Insurance Company

1295 State Street

Springfield, Massachusetts 01111-0001 

Principal
Life Insurance Company

c/o Principal Capital Management, LLC

801 Grand Avenue

Des Moines, Iowa 50392-0800 

Life
Investors Insurance Company of America

c/o Aegon USA Investment Management, Inc.

1111 North Charles Street

Baltimore, Maryland 21201 

Monumental
Life Insurance Company

c/o Aegon USA Investment Management, Inc.

1111 North Charles Street

Baltimore, Maryland 21201 

Schedule
I

(to Fourth Amendment to Note Agreements) 

 
 

CLOSING CONDITIONS    
  

        1.    Amendment to Guaranty.    Each Subsidiary Guarantor shall have executed and delivered the Amendment to Guaranty. 

        2.    Secretary Certificate of Company.    The Company shall have delivered to the Noteholders a certificate of an
authorized officer, dated as of the Effective Date, with respect to its Articles of Incorporation and By-laws, certifying as to resolutions authorizing the execution and delivery of this
Agreement and the Notes and the Security Documents, and the incumbency and signature of officers. 

        3.    Officer's Certificate of Company.    The Company shall have delivered to the Noteholders a certificate of an
authorized officer, dated as of the Effective Date, to the effect that the representations and warranties set forth in Section 4 of this Agreement and in the Security Documents are true and
correct. 

        4.    Subsidiary Secretary's Certificate.    Each Subsidiary which is a party to a Security Document or a Guaranty
Supplement shall have delivered to the Noteholders a certificate of an authorized officer, dated as of the Effective Date, with respect to its Articles of Incorporation and By-laws,
certifying as to resolutions authorizing the execution and delivery of the Security Documents or Guaranty Supplement to which such Subsidiary is a party, and the incumbency and signature of officers. 

        5.    Subsidiary Officer's Certificate.    Each Subsidiary which is a party to the Security Documents shall have
delivered to the Noteholders a certificate of an authorized officer, dated as of the Effective Date, certifying that the representations and warranties of such Subsidiary set forth in Section 4
of this Agreement in the Security Documents or Guaranty Supplement are true and correct. 

        6.    Performance by the Company and each Subsidiary.    The Company and each Subsidiary which is a party to the
Security Documents shall have performed and complied with all agreements and conditions contained in the Security Documents to which it is a party, required to be performed and complied with by it
prior to or as of the Effective Date. 

        7.    Security Documents.    The Security Documents shall be in form and substance satisfactory to the Noteholders and
the Noteholders' special counsel, shall have been duly authorized, executed and delivered by the parties thereto and shall be in full force and effect, and the Noteholders shall have received true,
correct and complete copies of each thereof. 

        8.    Insurance.    Certificates of insurance evidencing the insurance policies and endorsements required to be
delivered pursuant to the Security Documents shall have been delivered to the Collateral Agent and the Noteholders and their special counsel. 

        9.    Bank Credit Agreement.    The Company shall have entered into an Amendment to the Bank Credit Agreement with the
Bank Lenders which amendment shall be reasonably satisfactory to the Noteholders. 

Schedule
II

(to Fourth Amendment to Note Agreements) 

 

        10.    1999 Note Purchase Agreement.    The Company shall have entered into an amendment to the 1999 Note Purchase
Agreement. 

        11.    Securitization Facility.    The Company shall have furnished you with a true and correct copy of the
Receivables Purchase and Servicing Agreement dated as of March 28, 2002 among the Company, certain Subsidiaries and General Electric Capital Corporation, and all related Exhibits thereto and
the Receivables Sale and Contribution Agreement dated as of March 28, 2002 among the Company and certain of its Subsidiaries and all related Exhibits thereto which shall be reasonably
satisfactory to the Noteholders. 

        12.    Intercreditor Agreement.    The Noteholders shall have entered into the Intercreditor Agreement with the Bank
Lenders, the holders of the Notes under the 99 Note Agreement and the Collateral Agent. 

        13.    Guaranty Supplement.    Shakespeare Conductive Fibers, LLC shall have delivered a Guaranty Supplement. 

        14.    Notes.    The Company shall have delivered the amended and restated Notes, executed by a duly authorized
officer of the Company. 

        15.    Legal Opinion.    Gibson, Dunn & Crutcher LLP, counsel for the Company, shall have delivered an opinion
in form and substance reasonably satisfactory to the Noteholders and their special counsel and otherwise in substantially the form of legal opinion delivered in connection with the amendment to the 99
Note Purchase Agreement but with respect to the Note Agreements, as amended, the Notes delivered on the Effective Date, the Guaranty Supplement and the Security Documents. 

        16.    Title Insurance.    The Collateral Agent shall have received a loan title insurance policy issued by a title
insurance company reasonably acceptable to the Noteholders and their special counsel (or, in the alternative, a commitment to issue a loan title insurance policy issued by a title insurance company
reasonably acceptable to the Noteholders and their special counsel and marked and initialed by an authorized agent of such title insurance company to show changes to be made in connection with the
actual issuance of such title insurance policy) in respect of each mortgage and deed of trust executed and delivered in connection with the transactions contemplated by this Agreement (collectively,
the "Title Insurance Policies"), in form and substance satisfactory to the Noteholders and their special counsel, and all premiums in respect of the
Title Insurance Policies shall have been paid in full. 

        17.    Letter re Consultants.    The Company shall have delivered to you a letter regarding the retention of a
financial advisor and consultant and related matters in form and substance satisfactory to you. 

-2-

 
 

POST CLOSING REQUIREMENTS    
  

        1.    Pledge Agreements pledging 65% of the outstanding stock of the following Foreign Subsidiaries by the applicable dates set forth below: 

	Foreign Subsidiary (Domicile)
 
	 	Pledgor(s)
 
	 	Delivery Date

	Shakespeare (Hong Kong) Ltd. (Hong Kong)	 	Shakespeare Company LLC	 	June 30, 2002
	Shakespeare International Ltd. (U.K.)	 	K2 Inc.	 	 
	 	 	Shakespeare Company LLC	 	April 12, 2002
	K2 Ski Sport und Mode GmbH (Germany)	 	Shakespeare Company LLC	 	April 5, 2002
	K2 Japan Corporation (Japan)	 	K-2 Corporation	 	June 30, 2002
	Madshus A.S. (Norway)	 	K-2 Corporation	 	June 30, 2002
	K2 Corporation of Canada (Canada)	 	Ride, Inc.	 	April 12, 2002

        2.    Each
mortgage, deed of trust and financing statement required to be filed, registered or recorded in connection with the transactions contemplated by the Security
Documents shall have been properly filed, registered or recorded in each office required in order to create in favor of the Collateral Agent, for the equal and ratable benefit of the Noteholders and
the Bank Lenders, a valid perfected first priority Lien on the Collateral subject only to the Liens permitted by Section 5.9 of the Existing Note Agreement not more than 10 days
following the Effective Date. In addition, the Collateral Agent and the Noteholders shall have received, to the extent available, acknowledgment copies of all of such filings, registrations and
recordations stamped by the appropriate filing, registration or recordation officer (or, in lieu thereof, other evidence satisfactory to the Collateral Agent that all such filings,
registrations and recordations have been made); and all necessary filing, registration and other similar fees, and all taxes and other charges related to such filings, registrations and recordations
(including such other taxes and charges requested by the Noteholders), shall have been paid in full. 

        3.    The
Company shall use its best efforts to deliver to the Collateral Agent (a) not later than April 26, 2002, Collateral Access Agreements executed by owners
of the properties located in (i) Fife, Washington, (ii) Lincolnwood, Illinois and (iii) Vista, California which are leased by the Company or a Subsidiary, and (b) not later
than May 24, 2002, Collateral Access Agreements executed by owners of each other property leased by the Company or any Subsidiary. 

Schedule
III

(to Fourth Amendment to Note Agreements) 

 
 

INDEBTEDNESS OF COMPANY AND ITS SUBSIDIARIES    
  

        Outstanding Indebtedness of Company and Subsidiaries: 

	Subsidiary
 
	 	Description
	 	Amount Outstanding as of

March 5, 2002 (US$)

	K2 Inc.	 	Bank of America et al.—Revolver	 	$	40,829,000
	K2 Inc.	 	Bank of America—LC's	 	 	20,714,000
	K2 Inc.	 	Senior Notes—'92 Placement	 	 	13,336,000
	K2 Inc.	 	Senior Notes—'99 Placement	 	 	50,000,000
	K2 Inc.	 	Bank of America—Asset Securitization	 	 	45,979,000
	K2 Japan	 	Union Bank	 	 	6,500,000
	K2 Japan	 	Dai Ichi Kangyo Bank	 	 	4,195,000
	K2 Japan	 	Dai Ichi Kangyo Bank—LC's	 	 	333,000
	K2 GmbH	 	Bank of America	 	 	7,427,000
	Shakespeare Hong Kong	 	Wells Fargo Bank/Norwest	 	 	2,968,000
	Stearns Inc.	 	Norwest Bank—LC's	 	 	435,000
	Shakespeare Fishing Tackle U.K.	 	Bank of America	 	 	460,000
	Shakespeare Hengelsport B.V.	 	ING Bank	 	 	0
	Shakespeare Australia	 	National Australia Bank	 	 	0
	 	 	Recourse obligations in respect of the discounted promissory notes in Japan	 	 	4,361,000

        Capitalized
Leases: 

	Subsidiary
 
	 	Description
	 	Amount Outstanding as of

March 5, 2002 (US$)

	Ride Inc.	 	Key Bank	 	$	96,000
	Morrow Inc.	 	Flow International	 	$	32,000

Schedule IV

(to Fourth Amendment to Note Agreements) 

 
 

SUBSIDIARIES OF COMPANY, INVESTMENTS, AFFILIATES    
  

	Subsidiaries
	 	Subsidiary

Guarantor
	 	Percentage of Each

Class Outstsanding

Owned by Company

and Each Other

Subsidiary

	Shakespeare Conductive Fibers, LLC, a Delaware limited liability company	 	Yes	 	100%
	Shakespeare Company, LLC, a Delaware limited liability company	 	Yes	 	100%
	Shakespeare (Hong Kong) Ltd., a Hong Kong corporation	 	No	 	99%*
	Pacific Rim Metallic Products Limited, a Hong Kong corporation	 	No	 	99%*
	Shakespeare International Ltd., a British corporation	 	No	 	100%
	Shakespeare Hengelsport, B.V., a Dutch corporation	 	No	 	100%
	Shakespeare (Australia) Pty. Ltd., an Australian corporation	 	No	 	99%*
	K2 Ski Sport und Mode GmbH, a German corporation	 	No	 	100%
	Sitca Corporation, a Washington corporation	 	Yes	 	100%
	K-2 Corporation, an Indiana corporation	 	Yes	 	100%
	Planet Earth Skateboards, Inc., a California corporation	 	Yes	 	100%
	K-2 International, Inc., an Indiana corporation	 	Yes	 	100%
	K2 Japan Corporation, a Japanese corporation	 	No	 	100%
	Madshus A.S., a Norwegian corporation	 	No	 	100%
	SMCA, Inc., a Minnesota corporation	 	Yes	 	100%
	Stearns Inc., a Minnesota corporation	 	Yes	 	100%
	Ride, Inc., a Washington corporation	 	Yes	 	100%
	Anthony Sales (Barbados), Ltd., a Barbados corporation**	 	No	 	100%
	K2 Worldwide Company, a Cayman Island limited company	 	No	 	100%
	Katin, Inc., a Delaware corporation	 	Yes	 	100%
	Morrow Snowboards, Inc., a Delaware corporation	 	Yes	 	100%
	K2 Bike, Inc., a Delaware corporation	 	Yes	 	100%
	K2 Funding Inc., a Delaware corporation	 	No	 	100%
	Shakespeare Industries Inc., a Delaware corporation	 	No	 	100%
	Shakespeare Company (UK) Ltd., a United Kingdom company	 	No	 	100%
	Shakespeare Monofilament UK Ltd., a United Kingdom company	 	No	 	100%
	K2 (UK) Limited, a United Kingdom company	 	No	 	100%
	Ride Snowboard Company, a Washington company	 	No	 	100%
	Ride Manufacturing Inc., a California corporation	 	No	 	100%
	Smiley Hats, Inc., a Nevada corporation	 	No	 	100%
	K2 Corporation of Canada, a Canadian corporation	 	No	 	100%
	Preston Binding Co., a Washington company	 	No	 	100%
	Carve Inc., a Washington corporation	 	No	 	100%
	SMP Clothing Inc., a Washington corporation	 	No	 	100%
	K2 Outdoor Products (NZ) Ltd., a New Zealand corporation	 	No	 	100%
	K2 Finance Company, LLC, a Delaware limited liability company	 	No	 	100%
	K2 Receivables Corporation, a Delaware corporation	 	No	 	100%

	*
	One
share owned by a director.

	**
	Presently
being dissolved. 

Schedule
V

(to Fourth Amendment to Note Agreements) 

 

        Investments
of the Company and Its Subsidiaries: 

	Common Stock Investments
 
	 	Number of

Shares

	Albany International Corporation	 	10
	Bell Sports Company	 	10
	Brunswick Corporation	 	20
	Cascade Industries, Incorporated	 	10
	Centuri, Inc.	 	100
	Champion International Corporation	 	2
	Coleco Industries	 	4
	Coleman Company, Inc.	 	10
	Escalade, Inc.	 	120
	Figgie International	 	16
	First Team Sports	 	15
	Glassmaster	 	10
	Hallwood Industries Incorporated	 	2,760
	Huffy	 	10
	Johnson Worldwide Associates	 	10
	Major Pool Equipment Corp.	 	11
	Metromedia International Group	 	10
	Mossimo Inc.	 	10
	Nike, Inc.	 	40
	Pro-Group	 	10
	Quiksilver	 	10
	Reebok International, Ltd.	 	10
	Seatrain Lines, Inc.	 	3
	Skis Rossignol	 	10
	Starter Corporation	 	10
	The Mead Corporation	 	4

        Company's
Affiliates (other than Subsidiaries): 

Hilton
Corporate Casuals—Division of K2 Inc. 

Shakespeare
Fishing Tackle (South Carolina)—Division of Shakespeare LLC 

Shakespeare
Monofilament (South Carolina)—Division of Shakespeare LLC 

Shakespeare
Composites & Electronics (South Carolina)—Division of Shakespeare LLC 

V-2

 
 

LIENS OF COMPANY AND ITS SUBSIDIARIES    
  

Liens:  

Collateral
Description

A= Accounts

E(S) = Equipment (specified items only)

E(C)= Equipment (all items sold, leased or financed under specific contract)

E(A)= Equipment (all equipment)

B = Blanket

O = Other 

	Debtor
	 	Office/

Agency

Searched
	 	Search

Valid

Through
	 	Secured

Party
	 	File No./

File Date
	 	Collateral

Description
	 	Comment

	Anthony Industries	 	CA Sec. of State	 	1/9/02	 	Enterprise Funding Corporation	 	9601960459/

1/19/96	 	A	 	Assigned to NationsBank (BofA)
	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

K2 Funding Inc. substituted as Debtor
	

Hilton Corporate Casuals1	
 	

IL Sec. of State	
 	

1/3/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Hilton Corporate Casuals	
 	

AL Sec. of State	
 	

12/26/01	
 	

 	
 	

 	
 	

 	
 	

 
	K2 Corp.	 	Washington Dept. of Licensing	 	2/15/02	 	Anthony Industries	 	00960190045/

1/19/96	 	A	 	Assigned to NationsBank (BofA) then K2 Funding substituted as Secured Party and further assigned to Bank of America; Continued 11/13/2000
	

K2 Corp.	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

K2 Funding	
 	

00970730026/

3/14/97	
 	

A	
 	

Assigned to NationsBank (BofA)

	1
	a
division of K2 Inc. 

Schedule
VI

(to Fourth Amendment to Note Agreements) 

 

	Debtor
	 	Office/

Agency

Searched
	 	Search

Valid

Through
	 	Secured

Party
	 	File No./

File Date
	 	Collateral

Description
	 	Comment

	K2 Corp.	 	Washington Dept. of Licensing	 	2/15/02	 	American Technologies Credit	 	00971390035/

5/19/97	 	E(S)	 	 
	

K 2 Corporation	
 	

CA Sec. of State	
 	

3/6/02	
 	

Associates Commercial Corporation	
 	

0020160680/

7/13/2000	
 	

E(C)	
 	

 
	

K-2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

PrimeSource Corp.	
 	

00982670197/

9/24/98	
 	

E(C)	
 	

 
	

K-2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

Flow International Corp.	
 	

00993560217/

11/22/99	
 	

E(S)	
 	

 
	

K2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

SAFECO Credit Company, Inc.	
 	

20011090161/

4/19/01	
 	

E(S)	
 	

 
	

K2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

Magid Glove & Safety Mfg. Co.	
 	

20011490078/

5/29/01	
 	

O (Inventory)	
 	

 
	

K2 Corporation	
 	

AL Sec. of State	
 	

12/26/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Corporation	
 	

IL Sec. of State	
 	

1/3/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Corporation	
 	

IN Sec. of State	
 	

2/19/02	
 	

Bankers/

Softech Divisions of EAB Leasing Corp.	
 	

200100007508

528/10/4/01	
 	

E(C)	
 	

 
	

K2 Corporation	
 	

IN Sec. of State	
 	

2/19/02	
 	

Bank of America, N.A., as Agent	
 	

200200000631

256/1/22/02	
 	

 	
 	

 
	

K2 Funding	
 	

CA Sec. of State	
 	

1/9/02	
 	

Enterprise Funding Corporation	
 	

9707360241/

3/7/97	
 	

A	
 	

Assigned to NationsBank
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

12/7/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

 	
 	

K-2 Corporation	
 	

 	
 	

A	
 	

Pending filing
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

 	
 	

Shakespeare Company, LLC	
 	

 	
 	

A	
 	

Pending filing
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

 	
 	

Stearns Inc.	
 	

 	
 	

A	
 	

Pending filing
	

K2 Inc.	
 	

DE Sec. of State	
 	

1/25/02	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Inc.	
 	

CA Sec. of State	
 	

3/6/02	
 	

K2 Funding, Inc.	
 	

9709460920/

4/3/97	
 	

A	
 	

 
	

K2 Inc.	
 	

AL Sec. of State	
 	

12/26/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Inc.	
 	

IL Sec. of State	
 	

1/3/02	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Inc. dba Simplex	
 	

OH Sec. of State	
 	

 	
 	

General Electric Capital Corporation	
 	

AP0204752/

1/4/00	
 	

E(S)	
 	

 
	

K2 Inc.	
 	

MI Sec. of State	
 	

 	
 	

Caterpillar Financial Services Corporation	
 	

9501612016/

12/7/98	
 	

E(S)	
 	

 
	

K2 Inc., Shakespeare Monofilament Division	
 	

SC Sec. of State	
 	

 	
 	

NEC America, Inc.	
 	

981110-

114259A	
 	

E(S)	
 	

 
	

K2 Inc., Shakespeare Monofilament Division	
 	

CA Sec. of State	
 	

 	
 	

NEC America, Inc.	
 	

9832060787/

11/10/98	
 	

E(S)	
 	

 
	

K-2 International	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K-2 International, Inc.	
 	

IN Sec. of State	
 	

1/7/02	
 	

 	
 	

 	
 	

 	
 	

 

VI-2

 

	

K2 Worldwide Company	
 	

CA Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Morrow Snowboards	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

Flow International Corp.	
 	

00993560217/

11/22/99	
 	

E(S)	
 	

 
	

Planet Earth Skateboards, Inc.	
 	

CA Sec. of State	
 	

1/9/02	
 	

Hawthorne Machinery Co.	
 	

9922460390/

7/30/99	
 	

E(S)	
 	

 
	

Preston Binding Company	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981100505/

4/20/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981100506/

4/20/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981100507/

4/20/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981130231/

4/23/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981910124/

7/10/98	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

CA Sec. of State	
 	

3/4/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Company	
 	

CA Sec. of State	
 	

 	
 	

Bank of America, N.A., as Agent	
 	

9707360252/

3/13/97	
 	

 	
 	

 
	

Shakespeare Company	
 	

CA Sec. of State	
 	

 	
 	

Bank of America, N.A., as Agent	
 	

9601960446	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

DE Sec. of State	
 	

1/25/02	
 	

Wells Fargo Financial	
 	

200111125330/

9/10/01	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

DE Sec. of State	
 	

1/25/02	
 	

Bank of America, N.A., as Agent	
 	

20162291/

1/18/02	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

DE Sec. of State	
 	

1/25/02	
 	

Bank of America, N.A., as Agent	
 	

20118376/

1/15/02	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Citicorp Vendor Finance, Inc.	
 	

104812A/

3/20/01	
 	

E(C)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

124716A/

3/6/98	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Midland Clarklift, Inc.	
 	

084426A/

4/16/99	
 	

E(S)	
 	

Assigned to Associates Commercial Corp.
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

National Vendor Supply Co.	
 	

133749A/

1/28/99	
 	

E(S)	
 	

Assigned to Industrial Credit
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

100110A/

6/22/99	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

100054A/

6/22/99	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

113047A/

8/19/98	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Southland Equipment	
 	

163229B/

1/15/97	
 	

E(S)	
 	

Assigned to Associates Leasing
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Barloworld Handling	
 	

092851A/

5/31/01	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

OH Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 

VI-3

 

	

Shakespeare Company, LLC	
 	

NJ Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

FL Sec. of State	
 	

3/1/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Conductive Fibers, LLC	
 	

CA Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Conductive Fibers, LLC	
 	

DE Sec. of State	
 	

11/20/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics2	
 	

SC Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

CA Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

FL Sec. of State	
 	

3/1/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

NJ Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

OH Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Fishing Tackle2	
 	

SC Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Fishing Tackle	
 	

NJ Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Monafilament2	
 	

SC Sec. of State	
 	

1/10/02	
 	

WB Group LP dba Wrenn Handling	
 	

142821A/

4/7/99	
 	

E(S)	
 	

Assigned to Hyster Credit Co.
	

Shakespeare Monafilament	
 	

SC Sec. of State	
 	

1/10/02	
 	

WB Group LP dba Wrenn Handling	
 	

120328A/

1/18/99	
 	

E(S)	
 	

Assigned to Hyster Credit Co.
	

Shakespeare Monafilament	
 	

NC Sec. of State	
 	

12/20/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Sitca Corporation	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Smiley Hats, Inc.	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

SMP Clothing, Inc.	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

IBM Credit Corp.	
 	

2191501/

1/06/99	
 	

E(C)	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

IBM Credit Corp.	
 	

1984766/

10/30/97	
 	

E(C)	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

Hirsch International Corp.	
 	

2066713/

9/8/98	
 	

E(S)	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

Green Tree Vendor Services Group	
 	

21102881/

3/1/99	
 	

E(S)	
 	

Assigned to Wells Fargo Leasing

VI-4

 

	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

Minnesota Lift Truck	
 	

2286596/

1/2/01	
 	

E(S)	
 	

Assigned to Toyota Motor Credit Corporation
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

K2 Funding	
 	

2216955/

4/06/00	
 	

A	
 	

Assigned to Bank of America
	

Stearns Manufacturing	
 	

MN Sec. of State	
 	

3/18/02	
 	

Northern States Power Co.	
 	

1508906/

6/12/92	
 	

E(S)	
 	

Search date
	

Stearns Manufacturing Co.	
 	

MN Sec. of State	
 	

3/20/02	
 	

IBM Credit Corporation	
 	

1929884/

4/3/97	
 	

E(S)	
 	

Search date
	

Stearns Manufacturing Company	
 	

MN Sec. of State	
 	

3/20/02	
 	

MacPherson Meistergram	
 	

1993039/

12/2/97	
 	

E(S)	
 	

Search date

	2
	a
division of Shakespear Company LLC 

VI-5

 
 

[Form of Amended and Restated Note]
  K2 Inc.    

Senior
Note due November 30, 2004 

	 
	 	 

	No. [            ]	 	[Date]
	$[                        ]	 	PPN [                        ]

        K2 Inc.,
a Delaware corporation (the "Company"), for value received, hereby promises to pay to 

or
registered assigns

on the thirtieth day of November, 2004

the principal amount of 

Dollars
($                        ) 

and
to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the Applicable
Interest Rate from the date hereof until maturity, payable semiannually on the thirtieth day of each May and November in each year (commencing with the May 30 or November 30 next
succeeding the date hereof) and at maturity.
The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue
installment of interest, at a rate per annum, after the due date, whether by acceleration or otherwise, until paid, equal to the higher of (i) 2% over the Applicable Interest Rate and
(ii) the annual rate of interest announced from time to time by Citibank, N.A., or its successors, as its "prime rate" plus 2% per annum. Both the principal hereof and interest hereon are
payable at the principal office of the Company in Los Angeles, California in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of
public and private debts. 

        This
Note is one of the Senior Notes due November 30, 2004 (the "Notes") of the Company in the aggregate principal amount of
$40,000,000 issued pursuant to the terms and provisions of the separate Note Agreement dated as of October 15, 1992 (as from time to time amended, supplemented or modified, including a Fourth
Amendment to Note Agreements dated as of March 27, 2002, the "Note Agreements"), entered into by the Company with the respective Noteholders
named therein, and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby
or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. 

        This
Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates and certain prepayments are required to be made thereon,
all in the events, on the terms and in the manner and amounts as provided in the Note Agreements. 

Exhibit
A

(to Fourth Amendment to Note Agreements) 

 

        The
Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with
the premium, if any, set forth in the Note Agreements. 

        This
Note is registered on the books of the Company and is transferable, subject to the provisions of Section 9.1 of the Note Agreements, only by surrender thereof at the
principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment
of or on account of principal,
premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. 

	 	 	K2 Inc.
	

 	
 	

By:	
 	

	 	 	 	 	Name:	 	

	 	 	 	 	Title:	 	

-2-

 
 

INTERCREDITOR AGREEMENT    
  

Exhibit
B

(to Fourth Amendment to Note Agreements) 

 
 

AMENDMENT TO GUARANTY AGREEMENT    
  

Exhibit
C

(to Fourth Amendment to Note Agreements) 

 
 

CASH FLOW FORECASTS    
  

Exhibit
D

(to Fourth Amendment to Note Agreements) 

QuickLinks

TABLE OF CONTENTS

PRELIMINARY STATEMENT

CLOSING CONDITIONS

POST CLOSING REQUIREMENTS

INDEBTEDNESS OF COMPANY AND ITS SUBSIDIARIES

SUBSIDIARIES OF COMPANY, INVESTMENTS, AFFILIATES

LIENS OF COMPANY AND ITS SUBSIDIARIES

[Form of Amended and Restated Note] K2 Inc.

INTERCREDITOR AGREEMENT

AMENDMENT TO GUARANTY AGREEMENT

CASH FLOW FORECASTSQuickLinks
 -- Click here to rapidly navigate through this document

EXHIBIT 10(b)(1)  

K2 INC. 

THIRD
AMENDMENT TO NOTE PURCHASE AGREEMENT 

DATED
AS OF MARCH 27, 2002 

Re: 

Note
Purchase Agreement dated as of December 1, 1999 

and 

$50,000,000
Senior Notes 

Due
December 1, 2009 

 
 

Table of Contents    
  

	Section
 
	 	Heading
 
	 	Page
 

	SECTION 1.	 	DESCRIPTION OF NOTES AND COMMITMENT	 	2
	SECTION 2.	 	EFFECTIVE DATE	 	2
	SECTION 3.	 	AMENDMENT TO THE NOTE AGREEMENT	 	2
	 	Section 3.1.	 	Amendment to Section 1	 	2
	 	 	Section 1.2.	 	Security for the Notes	 	3
	 	Section 3.2.	 	Amendment of Section 7 (Reporting Information)	 	3
	 	 	Section 7.1.	 	Financial and Business Information	 	3
	 	 	Section 7.2.	 	Officer's Certificate	 	6
	 	 	Section 7.3.	 	Inspection	 	7
	 	Section 3.3.	 	Amendment to Section 8.2 (Optional Prepayments)	 	7
	 	Section 3.4.	 	Amendment of Section 9 (Affirmative Covenants)	 	8
	 	 	Section 9.1.	 	Compliance with Law	 	8
	 	 	Section 9.2.	 	Insurance	 	8
	 	 	Section 9.3.	 	Maintenance of Properties	 	8
	 	 	Section 9.4.	 	Payment of Taxes	 	8
	 	 	Section 9.5.	 	Corporate Existence, Etc	 	9
	 	 	Section 9.6.	 	Guaranty by Subsidiaries	 	9
	 	 	Section 9.7.	 	Rating for the Notes	 	10
	 	 	Section 9.8.	 	Foreign Pledges	 	10
	 	 	Section 9.9.	 	Further Assurances	 	10
	 	 	Section 9.10.	 	Collateral Matters	 	11
	 	 	Section 9.11.	 	Junior Capital	 	11
	 	 	Section 9.12.	 	Amendments to Agreements	 	11
	 	 	Section 9.13.	 	Leases.	 	12
	 	 	Section 9.14.	 	Post-Closing Deliveries.	 	12
	 	Section 3.5.	 	Amendment to Section 10 (Negative Covenants)	 	12
	 	 	Section 10.1.	 	Consolidated Net Worth	 	12
	 	 	Section 10.2.	 	Leverage Ratio	 	12
	 	 	Section 10.3.	 	Limitations on Indebtedness	 	13
	 	 	Section 10.4.	 	Interest Coverage Ratio	 	14
	 	 	Section 10.5.	 	Fixed Charges Coverage Ratio	 	14
	 	 	Section 10.6.	 	Limitation on Liens	 	15
	 	 	Section 10.7.	 	Sales of Assets	 	16
	 	 	Section 10.8.	 	Merger, Consolidation and Sale of Stock	 	17
	 	 	Section 10.9.	 	Nature of Business	 	18
	 	 	Section 10.10.	 	Transactions with Affiliates	 	18
	 	 	Section 10.11.	 	No Restrictions on Subsidiaries	 	19
	 	 	Section 10.12.	 	Acquisitions	 	19
	 	 	Section 10.13.	 	Loans and Investments	 	20
	 	 	Section 10.14.	 	Restricted Payments	 	21
	 	Section 3.6.	 	Amendment to Section 11 (Events of Default)	 	21
	 	Section 3.7.	 	Amendment to Section 15 (Expenses, Etc.)	 	25
	 	 	Section 15.1.	 	Transaction Expenses	 	25
	 	Section 3.8.	 	New Definitions	 	26
	

SECTION 4.	
 	

Representations and Warranties	
 	

43
	

SECTION 5.	
 	

Conditions Precedent to Effectiveness of Agreement	
 	

46
	

SECTION 6.	
 	

Waiver	
 	

47
	 	Section 6.1.	 	Waiver of Compliance with Section 10.5	 	47
	

SECTION 7.	
 	

Miscellaneous	
 	

47

 

	 	Section 7.1.	 	Effect of Agreement and Reaffirmation	 	47
	 	Section 7.2.	 	Release of Claims	 	47
	 	Section 7.3.	 	Successors and Assigns	 	47
	 	Section 7.4.	 	Expenses	 	47
	 	Section 7.5.	 	Counterparts	 	48
	 	Section 7.6.	 	Governing Law	 	48
	 	Section 7.7.	 	Approval of Amendment to Guaranty Agreement	 	48
	 	Section 7.8.	 	GE Securitization	 	48

Schedule I
— Names and Addresses of Noteholders 

Schedule II
— Closing Conditions 

Schedule III
— Post-Closing Requirements 

Schedule IV
— Indebtedness of the Company and its Subsidiaries 

Schedule V
— Subsidiaries of Company, Investments, Affiliates 

Schedule VI
— Liens of Company and its Subsidiaries 

Exhibit A—
Form of Amended and Restated Note 

Exhibit B—
Intercreditor Agreement 

Exhibit C—
Amendment to Guaranty Agreement 

Exhibit D—
Cash Flow Forecasts 

2

EXHIBIT 10(b)(1)  

 
 

K2 Inc.
  4900 South Eastern Avenue Los Angeles, California 90040    
  

        Dated as of March 27, 2002  

	Re:
	 Note Purchase Agreement dated as of December 1, 1999 and $50,000,000 Senior Notes Due December 1, 2009  

To the Noteholders named in

Schedule I hereto 

        Ladies
and Gentlemen: 

        This
Third Amendment to Note Purchase Agreement (this "Agreement") is entered into as of March 27, 2002 by and among
K2 Inc., a Delaware corporation (the "Company"), and the purchasers named in Schedule I attached hereto (the  "Noteholders," or as alternatively
referred to herein, the "Original Noteholders"). 

 
 

Preliminary Statement    
  

        The Company and the Original Noteholders are party to the Note Purchase Agreement dated as of December 1, 1999 (the "Original Note
Purchase Agreement"), as amended by the Amendment and Waiver dated as of December 15, 2001 (the "First Amendment") and
the Amendment and Waiver dated as of January 15, 2002 (the "Second Amendment") (the Original Note Purchase Agreement, as so amended by the First
Amendment and the Second Amendment, the "Existing Note Agreement"). Under
and pursuant to the Existing Note Agreement, the Company sold to the Original Noteholders its 8.41% Senior Notes due December 1, 2009 in the original aggregate principal amount of $50,000,000
(such notes as heretofore amended, the "Existing Notes"). The Company has requested that the Original Noteholders amend the Existing Note Agreement, all
on and subject to the terms and conditions set forth below. Accordingly, this Agreement is executed and delivered by the Company to the Original Noteholders to amend certain portions of the Existing
Note Agreement and in so doing set forth and confirm the terms and conditions applicable thereto and the covenants, representations and warranties to be made by the Company in connection therewith.
Upon the execution hereof by the Company and the Original Noteholders, the Existing Note Agreement, together with the Exhibits and Schedules thereto, as amended by this Agreement, shall be referred to
as the "Note Agreement." Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Note Agreement,
as amended by this Agreement. 

        The
Company hereby agrees with each of you as follows: 

Section 1. Description of Notes and Commitment.  

        Upon the effectiveness of this Agreement, automatically, and without further action on the part of either the Original Noteholders or the Company, the Existing
Notes shall be amended and restated in their entirety to read as set forth in Exhibit A hereto (and the form of Note attached as Exhibit 1 to the Original Note Agreement shall be amended
in its entirety to read as set forth in Exhibit A) and the amended and restated Notes shall be issued in renewal of, and evidence the same indebtedness formerly evidenced by, the Existing
Notes. If any accrued and unpaid interest is outstanding in respect of any of the Existing Notes as of the date that the Existing Notes become evidenced by the amended and restated Notes, such accrued
interest on each such Existing Note shall be due and payable on the first interest payment date applicable to such amended and restated Note. Each Note will be dated the date to which interest has
been paid on the Existing Note surrendered therefor, will bear interest from such date at the Applicable Interest Rate, payable semiannually on the first day of June and December in each year
(commencing June 1, 2002), to be expressed to mature on December 1, 2009, and otherwise substantially in the form attached hereto as Exhibit A. The term  "Notes" as used herein and

 

in the Note Agreement shall include each such amended and restated Note delivered pursuant to this Agreement to replace the Existing Notes and any such notes issued in substitution therefore pursuant
to Section 13 of the Note Agreement. Upon the effectiveness of this Agreement, the Existing Notes shall be returned to the Company. 

Section 2. Effective Date.  

        Delivery of the Notes to be exchanged for the Existing Notes shall occur at the offices of Chapman and Cutler, 111 West Monroe, Chicago, Illinois, at
10:00 a.m. Chicago time, on March 27, 2002 or such other date as shall be mutually agreed upon by the Company and the Noteholders (the "Effective
Date"). On the Effective Date, the Company will deliver to each Noteholder the Note to be delivered to such Noteholder in the form of a single Note for the full amount of the
Existing Note held by such Noteholder (unless different denominations are specified by such Noteholder), dated the date through which interest has been paid on the corresponding Existing Note and
registered in each Noteholder's name (or in the name of such Noteholder's nominee). If on the Effective Date the Company shall fail to tender such Note to each Noteholder as provided above in this
Section 2, or any of the conditions specified in Section 5 shall not have been fulfilled to each Noteholder's satisfaction, each Noteholder shall, at its election, be relieved of all
further obligations under this Agreement, without thereby waiving any rights such Noteholder may have by reason of such failure or such nonfulfillment. 

        If
for any reason the Existing Note held by a Noteholder is not delivered to the Company on the Effective Date, the Company shall deposit the Note to be delivered to such Noteholder with
the Noteholders' special counsel, Chapman and Cutler, for delivery against receipt of the Existing Note held by such Noteholder. 

Section 3. Amendment to the Note Agreement.  

        Section 3.1.Amendment to Section 1.    Section 1 of the Note Agreement shall be and is hereby amended
(i) by inserting a new subsection to read as "Section 1.1. Description of the Notes." immediately after the caption heading of such
Section 1 and immediately before the phrase "The Company will authorize...," and (ii) by the deletion of the last paragraph of Section 1 and by the addition thereto of a new
Section 1.2 in lieu thereof to read as follows: 

        Section 1.2. Security for the Notes. (a) The payment of the Notes and the performance by the Company and its Subsidiaries of their
respective obligations under this Agreement and the Guaranty Agreement will be secured in accordance with the terms of (i) the Amended and Restated Intercreditor Agreement dated as of
March 27, 2002 (the "Intercreditor Agreement") (in substantially the form attached as Exhibit B to the Third Amendment) among the
Collateral Agent and the holders of certain outstanding Indebtedness of the Company, including the Noteholders and the Bank Lenders, and (ii) the Security Documents. 

        (b)  If
at any time the Company or any Subsidiary shall grant to any one or more of the Collateral Agent or the Bank Lenders additional security of any kind or provide any
one or more of the Collateral Agent or the Bank Lenders with additional guaranties or other credit support of any kind
pursuant to the requirements of the Bank Credit Agreement, then the Company or such Subsidiary shall grant to the holders of the Notes the same security or guaranty so that the holders of the Notes
shall at all times be secured on an equal and pro rata basis with the Bank Lenders. 

        Section 3.2.Amendment of Section 7 (Reporting Information).    Section 7 of the Note Agreement shall be and
is hereby amended in its entirety to read as follows: 

-2-

 

Section 7. Information as to Company.  

        Section 7.1. Financial and Business Information.    The Company shall deliver to each holder of Notes that is an
Institutional Investor: 

        (a)
Quarterly Statements—within 60 days after the end of each quarterly fiscal period in each fiscal year of the
Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, 

        (i)
a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and 

        (ii)
consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third
quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from normal, recurring year-end adjustments,  provided that delivery
within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in
compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); 

        (b)
Annual Statements—within 105 days after the end of each fiscal year of the Company, duplicate copies of, 

        (i)
a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and 

        (ii)  consolidated
statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by 

        (A)
an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination
of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such
opinion in the circumstances, and 

        (B)
a certificate of such accountants stating that they have reviewed Sections 10.1 through 10.5, inclusive, and Section 10.7 (with respect to calculations of the book value of
asset dispositions, the Net Proceeds received from such dispositions and the book value of Consolidated Total Assets), Section 10.12(a) and (b), Section 10.13(j) and Section 10.14
of this Agreement and stating further whether, in making their audit, they have become aware of any condition or event under such Sections that then constitutes a Default or an Event of Default, and,
if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or
indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally
accepted auditing standards or did not make such an audit), 

-3-

 

 provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the
Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); 

        (c)
SEC and Other Reports—promptly upon their becoming available, one copy of (i) each financial statement, report,
notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits
except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; 

        (d)
Notice of Default or Event of Default—promptly, and in any event within five days after a Responsible Officer becoming
aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any
notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the
Company is taking or proposes to take with respect thereto; 

        (e)
ERISA Matters—promptly, and in any event within five days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: 

        (i)
with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or 

        (ii)
the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan; or 

        (iii)
any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to
Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have
a Material Adverse Effect; 

        (f)
Notices from Governmental Authority—promptly, and in any event within 30 days of receipt thereof, copies of any
notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a
Material Adverse Effect; 

        (g)
Supplements—promptly and in any event within 10 Business Days after the execution and delivery of any Supplement, a copy
thereof; 

        (h)
[Intentionally Omitted]; 

        (i)
Requested Information—with reasonable promptness, such other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the 

-4-

 

Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such
holder of Notes; 

        (j)
Cash Flow Forecasts—on the second Business Day of each week on or prior to the Collateral Release Date, a
13-week rolling cash flow forecast substantially in the form of Exhibit D to the Third Amendment; and 

        (k)
Intercreditor Agreement—(i) concurrently with delivery to the Collateral Agent, copies of all notices, schedules,
certificates and reports delivered to the Collateral Agent pursuant to or in connection with any Security Document or with respect to the Collateral, (ii) not less than 10 Business Days prior
to execution thereof, a copy of (x) each proposed amendment to the Collateral Documents, (y) each document or agreement which, if executed and delivered would become an additional
Collateral Document, (iii) promptly following execution thereof, one copy of each of the documents referred to in the preceding clause (ii), and (iv) the items specified by such
holder pursuant to Section 5 of the Security Agreement. 

        Section 7.2. Officer's Certificate.    Each set of financial statements delivered to a holder of Notes pursuant to
Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: 

        (a)
Covenant Compliance—the information (including detailed calculations) required in order to establish whether the Company
was in compliance with the requirements of Section 10.1 through Section 10.5 hereof, inclusive, and Section 10.7 and Section 10.12, Section 10.13 and
Section 10.14 during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and 

        (b)
Event of Default—a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or,
if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 

        Section 7.3. Inspection.    The Company shall permit the representatives of each holder of Notes that is an Institutional
Investor: 

        (a)
No Default—if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and 

        (b)
Default—if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the
offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts 

-5-

 

therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 

        Section 3.3.Amendment to Section 8.2 (Optional Prepayments).    Section 8.2 of the Note Agreement shall be
and is hereby amended by the addition of a new sentence at the end of such Section which shall read as follows: 

        "Notwithstanding
the foregoing, (i) the Notes may be redeemed in accordance with the provisions of Section 9.11 without the payment of any Make Whole Amount and
(ii) so long as no Default or Event of Default shall exist, the Notes may be redeemed from the proceeds of insurance or condemnation with respect to property of the Company or any Subsidiary
which is subject to the Lien of the Security Documents without the payment of any Make-Whole Amount." 

        Section 3.4.Amendment of Section 9 (Affirmative Covenants).    Section 9 of the Note Agreement shall be and
is hereby amended in its entirety to read as follows: 

 Section 9. Affirmative Covenants.  

        The
Company covenants that so long as any of the Notes are outstanding: 

        Section 9.1. Compliance with Law. The Company will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to
ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and
other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 

        Section 9.2. Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and
reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated. 

        Section 9.3. Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, maintain and keep, or cause
to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. 

        Section 9.4. Payment of Taxes. The Company will, and will cause each of its Subsidiaries to, file all tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on 

-6-

 

properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or
claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a
Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the
aggregate could not reasonably be expected to have a Material Adverse Effect. 

        Section 9.5. Corporate Existence, Etc. Subject to Sections 10.7 and 10.8 and as permitted by such Sections, the Company will at all
times preserve and keep in full force and effect its corporate existence, and will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless
merged into the Company or a Wholly-Owned Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure
to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 

        Section 9.6. Guaranty by Subsidiaries. The Company will cause any Person which becomes a Subsidiary after the Closing and which is
(i) required by the terms of the Bank Credit Agreement to become a party to, or otherwise Guaranty, Indebtedness outstanding under the Bank Credit Agreement or (ii) is an active Domestic
Subsidiary (other than a special purpose bankruptcy remote financing entity created in connection with a Permitted Accounts Receivable Financing Facility), to enter into the Guaranty Agreement, and
deliver within three Business Days thereafter to each of the holders of the Notes the following items: 

        (a)
a Guaranty Supplement in respect of the Guaranty Agreement; 

        (b)
a certificate signed by the President, a Vice President or another authorized Responsible Officer of the Company making representations and warranties to the effect of those
contained in Sections 5.4, 5.6 and 5.7, with respect to such Subsidiary and the Guaranty Agreement, as applicable; 

        (c)
such documents and evidence with respect to such Subsidiary as any holder of the Notes may reasonably request in order to establish the existence and good standing of such
Subsidiary; and 

        (d)
an opinion of counsel addressed to each of the holders of the Notes satisfactory to the Required Holders, to the effect that the Guaranty Agreement has been duly authorized, executed
and delivered and constitutes the legal, valid and binding contract and agreement of such Subsidiary enforceable in accordance with its terms, except as an enforcement of such terms may be limited by
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. 

        Section 9.7. Rating for the Notes. Promptly following a request by the holders of a majority in aggregate principal amount of the
Series 1999-A Notes, the Company will obtain a rating for the Notes from a Nationally Recognized Rating Agency; provided that the
Company shall not have to obtain a rating pursuant to any such request on more than 2 occasions prior to the maturity of the Series 1999-A Notes. 

        Section 9.8. Foreign Pledges. The Company will cause to be delivered to the Collateral Agent (to the extent not previously
delivered) within the time period specified on Schedule III to the Third Amendment, agreements executed by the Company and each Domestic Subsidiary of the Company pledging 65% of the stock or
other equity interests of each Foreign Subsidiary owned by the Company or such Domestic Subsidiary, together with all documents necessary to perfect the security interest of the Collateral Agent for
the equal and ratable benefit of the Benefited Parties 

-7-

 

in such stock or other equity interests; provided that neither the Company nor any Subsidiary shall have an obligation to perfect the security interest
of the Collateral Agent in the shares of any Foreign Subsidiary (other than any Foreign Subsidiary listed on Schedule III of the Third Amendment) under the laws of the jurisdiction of such
Foreign Subsidiary's organization so long as the aggregate book value of (A) all assets owned by such Foreign Subsidiary does not exceed $8,000,000 and (B) all assets owned by all
Foreign Subsidiaries with respect to which the security interest of the Collateral Agent has not been perfected under the laws of such Foreign Subsidiaries' respective jurisdictions of organization
does not exceed $20,000,000. 

        Section 9.9. Further Assurances. The Company and its Subsidiaries shall, at their expense and without expense to any holder of
Notes, do, execute and deliver such further acts and documents as are necessary, or as the Required Holders (or the Required Holders acting through the Collateral Agent) may reasonably request, from
time to time (including the execution and delivery of guaranties, security agreements, pledge agreements, financing statements, mortgages, deeds of trust, bailee consents, landlord waivers or other
third party agreements and other documents, the filing or recording of any of the foregoing, the delivery of stock certificates and other collateral with respect to which perfection is obtained by
possession, and the delivery of opinions of counsel with respect to any of such documents) to (a) assure and confirm to the holders of Notes, or the Collateral Agent acting for the equal and
ratable benefit of the holders of Notes and the Bank Lenders, the rights created by this Agreement and the Security Documents and (b) ensure that (i) the obligations of the Company under
this Agreement and under any of the Intercreditor Agreement, the Security Documents and the Notes; and (ii) the obligations of each Subsidiary Guarantor under the Guaranty Agreement and the
Security Documents are secured by a first-priority Lien (subject to any applicable exception expressly set forth herein or in any applicable Security Document) on substantially all of the assets of
the Company and each Subsidiary Guarantor. Notwithstanding the foregoing, neither the Company nor any Domestic Subsidiary shall be required to pledge more than 65% of the stock of any Foreign
Subsidiary. 

        Section 9.10. Collateral Matters. (a) The Noteholders shall (i) request that Collateral Agent release any Lien on any
property granted to or held by the Collateral Agent under any Security Document for the equal and ratable benefit of the holder of Notes and the Bank Lenders (w) upon termination of this
Agreement and payment in full of all obligations of the Company hereunder and under the Notes, (x) which is sold or to be sold or disposed of as part of or in connection with any disposition of
assets permitted by Section 10.7 of this Agreement, (y) on or after the occurrence of the Collateral Release Date (as defined in the Intercreditor Agreement) or (z) subject to
Section 17.1, if approved, authorized
or ratified in writing by the Required Holders; or (ii) request that Collateral Agent subordinate any Lien on any property granted to or held by Collateral Agent to the holder of any Lien on
such property which is permitted by Section 10.6(g), (h) and (k) and any extension or renewal of such Liens permitted by Section 10.6(m). 

        Section 9.11. Junior Capital. If, at any time prior to the date upon which the Company obtains an Investment Grade Rating, the
Company shall sell or issue any Junior Capital, 40% of the net cash proceeds from the sale or issuance of such Junior Capital shall be applied by the Company within one Business Day from the date of
receipt of such proceeds to the prepayment of Senior Indebtedness of the Company on a pro rata basis based on the unpaid principal amount of Senior Indebtedness outstanding on the date of such
prepayment (assuming for purposes of such calculation that the maximum commitment under the Bank Credit Agreement is outstanding). At any time prior to the date upon which the Company obtains an
Investment Grade Rating, any prepayment of the Notes with the proceeds from the sale of Junior Capital shall be made pursuant to Section 8.2, except that no Make-Whole Amount shall
be required to be paid in connection with such prepayment. Any prepayment of the Notes with the proceeds from the sale of Junior Capital, 

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on or after the date upon which the Company obtains an Investment Grade Rating shall be made in accordance with Section 8.2, including payment of the applicable Make-Whole Amount. 

        Section 9.12. Amendments to Agreements. The Company will not, and will permit any Subsidiary to, enter into any amendment or
modification of any agreement relating to any Permitted Accounts Receivable Financing Facility in any manner which would (a) reduce advance rates with respect to accounts receivable purchased
under such facility, or (b) shorten the maturity date of such facility. The Company shall, and shall cause each of its applicable Subsidiaries to, promptly (and, in any event, within three
Business Days) deliver to each holder of the Notes a copy of any amendment or modification to any agreement relating to any termination event, event of default or similar event under any Permitted
Accounts Receivable Financing Facility. Nothing in this Section 9.12 shall prevent (i) General Electric Capital Corporation from exercising the discretion granted to it under any GECC
Securitization Document (as defined in Section 7.8 of the Third Amendment) to (x) modify reserves or (y) take any action which would modify the effective advance rates with
respect to accounts receivable purchased under such facility or (ii) the Company or any Subsidiary from entering into a replacement for any Permitted Accounts Receivable Financing Facility so
long as such replacement has terms which are not less favorable to the interests of the holders of the Notes in any material respect than the terms of the Permitted Accounts Receivable Financing
Facility being replaced. 

        Section 9.13. Leases. The Company shall, and shall cause each of its Subsidiaries to, (a) pay all obligations with respect
to leases of real property by the Company and its Subsidiaries, (b) at the request of Required Holders, provide copies of receipts or similar documents evidencing the current nature of payments
under such leases and (c) promptly notify the holders of the Notes of any delinquent payment under any such lease. 

        Section 9.14. Post-Closing Deliveries. The Company will deliver each of the documents described in Schedule III
to the Third Amendment on or prior to the date required for delivery of such document in such Schedule III. 

        Section 3.5.Amendment to Section 10 (Negative Covenants).    Section 10 of the Note Agreement shall be and
is hereby amended in its entirety to read as follows: 

 Section 10. Negative Covenants.  

        The
Company covenants that so long as any of the Notes are outstanding: 

        Section 10.1. Consolidated Net Worth. The Company will not at any time permit Consolidated Net Worth to be less than $170,000,000  plus 50% of each fiscal quarter's
Consolidated Net Income (with no deduction for losses) commencing on January 1, 1999  plus 75% of any Net Issuance Proceeds after January 1, 1999. 

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        Section 10.2. Leverage Ratio. (a) The Company will not permit the Leverage Ratio at any time during any period set forth below to
be greater than the ratio set forth below opposite such period:   

	Period
	 	Maximum Leverage Ratio

	

 	
 	

 
	Prior to 6/29/02	 	7.80 to 1
	6/30/02-9/29/02	 	7.30 to 1
	9/30/02-12/30/02	 	6.75 to 1
	12/31/02-3/30/03	 	5.50 to 1
	3/31/03-6/29/03	 	5.00 to 1
	6/30/03-9/29/03	 	4.75 to 1
	9/30/03-12/30/03	 	4.25 to 1
	12/31/03- and at all times thereafter prior to the Collateral Release Date	 	4.00 to 1

        (b)
The Company will not permit the Adjusted Funded Leverage Ratio at any time on or after March 31, 2004 to be greater than 3.00 to 1. 

        Section 10.3. Limitations on Indebtedness. The Company will not, and will not permit any Subsidiary to, create, assume or incur or
in any manner be or become liable in respect of any Indebtedness, except: 

        (a)
Ordinary Course Indebtedness; 

        (b)
Indebtedness evidenced by the Series 1999-A Notes; 

        (c)
Indebtedness outstanding under the Bank Credit Agreement in an aggregate principal amount not exceeding $75,000,000; 

        (d)
Indebtedness outstanding pursuant to Permitted Accounts Receivable Financing Facilities; 

        (e)
Indebtedness outstanding under the 1992 Note Agreements in an aggregate principal amount not exceeding $13,336,000; 

        (f)
secured purchase money Indebtedness, including Capital Lease Obligations, originally incurred to acquire fixed assets providedthat at
the time of such acquisition, the aggregate amount remaining unpaid on all such Indebtedness secured by Liens on such fixed assets, whether or not assumed by the Company or its Subsidiaries, does not
exceed an amount equal to the lesser of (i) 100%, in the case of fixed assets which are personal property (including Capital Leases of fixed assets which are personal property), or
(ii) 80%, in the case of fixed assets which are real property, of the lesser of the total purchase price or Fair Market Value at the time of such acquisition as determined in good faith by the
Board of Directors of the Company; 

        (g)
other Indebtedness for borrowed money; provided that (i) at the time of incurrence thereof, no Default or Event of Default
shall exist, (ii) the aggregate outstanding principal amount of such Indebtedness plus (without duplication) the aggregate investment or claim
held by purchasers of receivables in Foreign Receivable Financing Facilities shall not exceed 15% of Consolidated Net Worth at any time, (iii) the aggregate outstanding principal amount of all
such Indebtedness of the Company or any Domestic Subsidiary (other than Indebtedness under Excluded Subsidiary Guaranties) shall not exceed 3% of Consolidated Net Worth at any time, and
(iv) the aggregate outstanding principal amount of all such Indebtedness of any Foreign Subsidiary plus (without duplication) the aggregate
investment or claim held by purchasers of receivables in Foreign Receivable Financing Facilities shall not exceed 15% of Consolidated Net Worth at any time; 

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        (h)
Indebtedness under any Swap Contract with a term not greater than 184 days entered into in the ordinary course of business for bona fide hedging purposes and not for
speculation; 

        (i)
Indebtedness of the Company which is not required to be redeemed, repurchased or otherwise prepaid by the Company (except on account of a default thereunder) on or prior to
March 1, 2010, and
which Indebtedness is subordinated to other Indebtedness of the Company (including the Notes) on terms which are reasonably satisfactory to the holders of the Notes (such Indebtedness,
"Subordinated Indebtedness"); and 

        (j)
Indebtedness refinancing or extending Indebtedness permitted above on terms and conditions no less favorable than the Indebtedness being refinanced; provided,
however, that the principal amount of such new Indebtedness shall not exceed the outstanding principal amount of Indebtedness being refinanced immediately prior to such
refinancing and that at the time of incurrence of such Indebtedness and after giving effect thereto no Default or Event of Default shall exits under this Agreement. 

        Section 10.4. Interest Coverage Ratio. The Company will not permit the Interest Coverage Ratio as of the last day of any fiscal
quarter set forth below to be less than the ratio set forth below opposite such day: 

	Fiscal Quarter(s) Ending
	 	Minimum Interest Coverage Ratio

	December 31, 2001	 	2.50 to 1
	March 31, 2002 and June 30, 2002	 	1.75 to 1
	September 30, 2002	 	1.90 to 1
	December 31, 2002	 	2.25 to 1
	March 31, 2003, June 30, 2003 and September 30, 2003	 	2.50 to 1

        Section 10.5. Fixed Charges Coverage Ratio. The Company will not permit the ratio of Consolidated Income Available for Fixed
Charges to Fixed Charges for the period consisting of the four immediately preceding fiscal quarters ending on the last day of each fiscal quarter set forth below to be less than the ratio set forth
below opposite such day: 

	Fiscal Quarter(s) Ending
	 	Minimum Fixed Charges Ratio

	December 31, 2001	 	1.25 to 1
	March 31, 2002	 	0.70 to 1
	June 30, 2002	 	0.80 to 1
	September 30, 2002	 	0.95 to 1
	December 31, 2002	 	1.25 to 1
	March 31, 2003	 	1.35 to 1
	June 30, 2003	 	1.45 to 1
	September 30, 2003	 	1.55 to 1
	December 31, 2003 and thereafter	 	1.75 to 1

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        Section 10.6. Limitation on Liens. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly
create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Company or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits, except: 

        (a)
Liens for taxes, assessments or other governmental charges which are not yet due and payable or the payment of which is not at the time required by Section 9.4; 

        (b)
Liens of or resulting from any judgment or award the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or its
Subsidiaries shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have
been secured; 

        (c)
Liens incidental to the conduct of business or the ownership of properties and assets (including landlords', carriers', warehousemen's, mechanics', materialmen's and other similar
Liens) and Liens to secure the performance of bids, tenders, leases, or trade contracts, or to secure statutory obligations (including obligations under workers compensation, unemployment insurance
and other social security legislation), surety or appeal bonds or other Liens incurred in the ordinary course of business and not in connection with the borrowing of money; 

        (d)
leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to the
ownership of property or assets or the ordinary conduct of the business of the Company or any of its Subsidiaries, provided that such Liens do not, in
the aggregate, materially detract from the value of such property; 

        (e)
Liens incidental to minor survey exceptions and similar Liens, provided that such Liens do not, in the aggregate, materially detract
from the value of such Property; 

        (f)
Liens securing Indebtedness of a Subsidiary to the Company or to another Wholly-Owned Subsidiary; 

        (g)
Liens securing Indebtedness (including Capitalized Leases) permitted under Section 10.3(f), (g) and (j); provided,
however that Liens permitted under Section 10.3(f) shall attach solely to the assets financed by such purchase money Indebtedness; 

        (h)
any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Company or a Subsidiary or its becoming a Subsidiary, or any Lien
existing on any property acquired by the Company or any Subsidiary at the time such property is so acquired (whether or not the Indebtedness secured thereby shall have been assumed),  provided that
(i) no such Lien shall have been created or assumed in contemplation of such consolidation or merger or such Person's becoming a
Subsidiary or such acquisition of property, (ii) each such Lien shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument originally
creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property, (iii) at the time such Person is consolidated with or
merged into the Company or a Subsidiary or such property is acquired, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such property, whether or not assumed by the Company
or a Subsidiary, shall not exceed an amount equal to the lesser of the total purchase price (or cost of construction) or Fair Market Value at the time of acquisition or construction of such property
(as determined in good faith by one or more officers to whom authority to enter into the transaction has been delegated by the Board of Directors of the Company), and (iv) the 

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aggregate principal amount of all Indebtedness secured by such Liens shall be permitted by the limitations set forth in Sections 10.3(g); 

        (i)
Liens resulting from or consisting of operating leases; 

        (j)
Liens arising in connection with non-exclusive licenses of Securitization Software and Hardware; 

        (k)
Liens created in connection with Permitted Accounts Receivable Financing Facilities provided, that such Liens shall extend only to
property or items of property which constitute Excluded Assets; 

        (l)
Liens in favor of the Collateral Agent for the equal and ratable benefit of the Benefited Parties under the Intercreditor Agreement; and 

        (m)
extensions and renewals of Liens described above, provided that (i) such Liens shall not be extended to other property of the
Company or any of its Subsidiaries, and (ii) the principal amount of Indebtedness secured thereby shall not be increased over the principal amount thereof outstanding immediately prior to such
extension or renewal. 

        Section 10.7. Sales of Assets. The Company will not, and will not permit any Subsidiary to, sell, lease or otherwise dispose of any
substantial part (as defined below) of the assets of the Company and its Subsidiaries; provided, however, that the Company or any Subsidiary may sell,
lease or otherwise dispose of assets constituting a substantial part of the assets of the Company and its Subsidiaries if such assets are sold for Fair Market Value and, at such time and after giving
effect thereto, no Default or Event of Default shall have occurred and be continuing and an amount equal to the Net Proceeds received from such sale, lease or other disposition shall be used within
four Business Days of such sale, lease or disposition to prepay or retire Senior Indebtedness (including temporary reductions of revolving credit facilities) of the Company and/or its Subsidiaries;  provided that except in the case of proceeds from Permitted Accounts Receivables Financings, any such application of proceeds shall be made pro rata
among all Benefited Parties under the Intercreditor Agreement (based on the principal amount of Indebtedness outstanding on the date of such prepayment but assuming for purposes of such calculation
that the maximum commitment under the Bank Credit Agreement is outstanding). Any amount prepaid on the Notes pursuant to this Section 10.7 will be prepaid, in compliance with
Section 8.2. 

        As
used in this Section 10.7, a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets
of the Company and its Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Company and its Subsidiaries (other
than in transactions (i) in the ordinary course of business, (ii) in which the purchaser is the Company or a Subsidiary, or (iii) which are Excluded Sale and Leaseback
Transactions, (x) during the immediately preceding 12-month period, exceeds 15% of the book value of Consolidated Total Assets, determined as of the end of the fiscal year
immediately preceding such sale, lease or other disposition, or (y) during the period beginning on the date of Closing and ending on the date of such sale, lease or other disposition, exceeds
30% of the book value of Consolidated Total Assets, determined as of the fiscal year immediately preceding such sale lease or other disposition. For purposes of determining whether assets sold by the
Company and its Subsidiaries during any period constitute a "substantial part" of the assets of the Company, to the extent that the Net Proceeds from the disposition of such assets shall be applied in
accordance with the terms of the preceding paragraph, the book value of such assets shall be excluded from the calculation of a "substantial part" of the assets of the Company. In addition, if the
disposition of any assets (after giving effect to the disposition of all other assets previously disposed of during the applicable period and the application of the Net Proceeds from such disposition
in accordance with the previous sentence) would cause the Company to exceed 

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the limitation on the sale of assets set forth herein, only the Net Proceeds from the most recent asset disposition or dispositions which would cause such limitation to be exceeded shall be required
to be applied in accordance with the preceding paragraph. 

        Section 10.8. Merger, Consolidation and Sale of Stock. (a) The Company will not, and will not permit any Subsidiary to, consolidate
with or be a party to a merger with any other corporation; provided, however, that: 

        (1)
any Subsidiary may merge or consolidate with or into the Company or any other Person, so long as in any merger or consolidation involving the Company, the Company shall be the
surviving or continuing corporation and in any merger involving a Subsidiary, such Subsidiary or another Subsidiary is the surviving or continuing entity; and 

        (2)
the Company may consolidate or merge with any other Person if (i) either (x) the Company shall be the surviving or continuing corporation, or (y) if the
surviving or continuing entity is other than the Company, (A) such entity is organized under the laws of the United States or any jurisdiction thereof, (B) such entity expressly assumes,
by written agreement satisfactory in scope and form to the Required Holders in aggregate principal amount of the outstanding Notes, all obligations of the Company under the Notes and this Agreement,
(C) such entity shall cause to be delivered to each holder of Notes an opinion of independent counsel to the effect that all agreements or instruments effecting such assumption are enforceable
in accordance with their terms and comply with the provisions of this Section 10.8 and otherwise satisfactory in scope and form to the Required Holders in aggregate principal amount of the
outstanding Notes, (ii) at the time of such consolidation or merger and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, and (iii) at
the time of such consolidation or merger and after giving effect thereto, the Company could incur $1.00 of additional Consolidated Indebtedness pursuant to Section 10.2. 

        (b)
The Company will not permit any Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section 10.9(b), any warrants,
rights or options to purchase or otherwise acquire stock or other securities exchangeable for or convertible into stock) of such Subsidiary to any Person other than the Company or Wholly-Owned
Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the
simultaneous issuance of stock to the Company and/or a Subsidiary whereby the Company and/or such Subsidiary maintain their same proportionate interest in such Subsidiary. 

        (c)
The Company will not sell, transfer or otherwise dispose of any shares of stock of any Subsidiary (except to qualify directors), and will not permit any Subsidiary to sell, transfer
or otherwise dispose of (except to the Company or another Subsidiary) any shares of stock of any other Subsidiary, unless such sale or other disposition can be made within the limitations of
Section 10.7. 

        Section 10.9. Nature of Business. Neither the Company nor any Subsidiary will engage in any business if, as a result, the general
nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Subsidiaries would be substantially changed from the general nature of the business engaged
in by the Company and its Subsidiaries on the date of this Agreement. 

        Section 10.10. Transactions with Affiliates. The Company will not and will not permit any Subsidiary to enter into directly or
indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any
service) with any Affiliate (other than the Company or another Subsidiary), except pursuant to the reasonable conduct of the Company's or such Subsidiary's 

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business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. 

        Section 10.11. No Restrictions on Subsidiaries. The Company will not, nor will it permit any of its Subsidiaries to, enter into, or
commit to enter into, any agreement or understanding that could limit or restrict any of its Subsidiaries making or declaring any dividends, either in cash or property, to the Company, repaying or
prepaying any Indebtedness (other than for amounts loaned by the Company to its Subsidiaries on a subordinated basis in connection with Permitted Accounts Receivable Financing Facilities and the
minimum net worth required to be maintained by a Subsidiary which is a special purpose entity pursuant to a Permitted Accounts Receivable Financing Facility) owing to the Company, or making any
Investment in the Company. 

        Section 10.12. Acquisitions. The Company will not, nor will it suffer or permit any of its Subsidiaries to, make any Acquisition
unless, after giving effect to such Acquisition (the "subject Acquisition"), all of the following requirements are satisfied: 

        (a)
during the 12-month period ending on the last day of the month prior to the closing of the subject Acquisition, the aggregate consideration paid (including, without
limitation, Indebtedness for borrowed money incurred or assumed) for all Acquisitions during such period (including, on a pro forma basis, the subject Acquisition) does not exceed 50% of Consolidated
Tangible Net Worth as of the last day of such period (including all Acquisitions during such period including, on a pro forma basis, the subject Acquisition); 

        (b)
the total consideration paid (including, without limitation, Indebtedness for borrowed money incurred or assumed, but excluding secured purchase money Indebtedness, including Capital
Lease Obligations permitted under Section 10.6(g) for any one Acquisition or series of related Acquisitions does not exceed $75,000,000; provided,
however, that the cash consideration and all Indebtedness incurred or assumed in any one Acquisition (excluding secured purchase money Indebtedness, including Capital Lease
Obligations permitted under Section 10.6(g) shall not exceed an amount equal to the sum of (i) $25,000,000, (ii) the net cash proceeds received from asset dispositions
(other than Permitted Accounts Receivable Financing Facilities) within the prior 12 months
(excluding any such proceeds counted towards prior Acquisitions), and (iii) the net cash proceeds received from any equity offering; 

        (c)
at the time of any Acquisition and after giving effect thereto no Default or Event of Default shall have occurred and be continuing; and 

        (d)
such Acquisitions are not opposed by the board of directors or management of any Person or business to be acquired. 

        Notwithstanding
the foregoing, the Company will not, nor will it permit any of its Subsidiaries to, make any Acquisition with the proceeds of any Indebtedness if the Funded Leverage
Ratio (determined on a pro forma basis both before and after giving effect to such Acquisition) is greater than 3.25 to 1.0. For purposes hereof, (a) Consolidated EBITDA may be adjusted by the
Company in connection with such Acquisition to the extent approved by the Required Holders and (b) the Funded Debt of any Person to be acquired by the Company or any Subsidiary shall be
included in the calculation of the Funded Leverage Ratio as if such Person were a Subsidiary as of the date of such Acquisition. 

        Section 10.13. Loans and Investments. The Company will not, and will not permit any of its Subsidiaries to, make any Investment in
any Person including any Affiliate of the Company, except: 

        (a)
Ordinary Course Investments; 

        (b)
Investments existing as of the date hereof and set forth on Schedule V of the Third Amendment, including reinvestments of the same amounts in the same instruments; 

-15-

 

        (c)
Investments in, or Guarantees with respect to Indebtedness of, joint ventures which respect to which the Company or its Subsidiaries is a partner not exceeding $2,000,000 in the
aggregate at any time; 

        (d)
loans or advances in the usual and ordinary course of business to officers, directors and employees for expenses (including moving and relocation expenses related to a transfer)
incidental to carrying on the business of the Company or any of its Subsidiaries not exceeding $2,000,000 in the aggregate at any time outstanding; 

        (e)
loan and advances to officers, directors and employees to exercise stock options of such employees to purchase stock of the Company, if, after giving effect thereto and to the
application of the proceeds thereof, such loan does not increase Consolidated Net Worth or Consolidated Net Income (other than an increase due to interest on such loan or advance); 

        (f)
advances on commissions in the ordinary course of business to employees or subcontractors of the Company or its Subsidiaries in an aggregate amount not exceeding $5,000,000 at any
time outstanding; 

        (g)
loans, guarantees, or other extensions of credit to the Company's employee stock ownership plan existing as of the Effective Date of the Third Amendment; 

        (h)
[Intentionally omitted]; 

        (i)
notes taken in connection with any asset sales permitted pursuant to Section 10.8; 

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        (j)
additional Investments in any fiscal year in an amount equal to Restricted Payments that can be made under Section 10.14(a) in respect of such fiscal year, but which are not
made, provided that after giving effect to such Investments, no Event of Default shall have occurred and be continuing; and 

        (k)
additional Investments not exceeding $3,000,000 in the aggregate in any fiscal year, provided that after giving effect to such
Investments, no Event of Default shall have occurred and be continuing; provided that the aggregate amount of all Investments (other than
(x) Ordinary Course Investments described in clauses (a) and (e) of the definition of "Ordinary Course Investments" and (y) Investments permitted by clauses (b), (c), (d),
(e), (f) and (i) above) and cash (in deposit accounts or otherwise, but excluding cash in disbursement accounts to the extent bona fide checks have been issued thereon) of the Company
and its Subsidiaries does not exceed $10,000,000 for any four consecutive Business Days. 

        Section 10.14. Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to, make any Restricted
Payments except: 

        (a)
Restricted Payments not exceeding $9,000,000 in the aggregate in respect of any fiscal year; and 

        (b)
Restricted Payments in any fiscal year in an amount equal to Investments that can be made under Section 10.13(j) in such fiscal year, but which are not made; 

provided that, in each instance, after giving effect to any Restricted Payments, no Event of Default shall have occurred and be continuing; and  provided, further, that no Restricted Payment shall be made when the Funded Leverage Ratio (determined on a pro forma basis both before and after giving
effect to such Restricted Payment) is greater than 3.25 to 1.0. 

        For
the purposes of this Section 10.14, (a) the amount of any Restricted Payment declared, paid or distributed in property shall be deemed to be the greater of the book
value or Fair Market Value (as determined in good faith by the Board of Directors of the Company) of such property at the time of the making of the Restricted Payment in question and (b) on the
date which is twelve months after the date on which a corporation becomes a Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a
Subsidiary, at such time and such Investments will not be taken into account for purposes of this Section 10.14 prior to such time. 

        Section 3.6.Amendment to Section 11 (Events of Default).    Section 11 of the Note Agreement shall be and
is hereby amended in its entirety to read as follows: 

 Section 11. Events of Default.  

        An  "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: 

        (a)
the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise; or 

        (b)
the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or 

        (c)
the Company defaults in the performance of or compliance with any term contained in Section 10 and such default is not remedied within 10 days after the earlier of
(i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company 

-17-

 

receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (c) of
Section 11); or 

        (d)
the Company defaults in the performance of or compliance with any term contained herein or in any Supplement (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and
(ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this
paragraph (d) of Section 11); or 

        (e)
any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or any Supplement or in any writing furnished in
connection with the
transactions contemplated hereby proves to have been false or incorrect in any Material respect on the date as of which made; or 

        (f)
(i) the Company or any Subsidiary (x) defaults in any payment when due of principal of or interest on any Indebtedness (other than Indebtedness hereunder) or
(y) defaults in the observance or performance of any other agreement or condition relating to any Indebtedness (other than Indebtedness hereunder) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee
or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, Indebtedness having an aggregate principal amount in excess of $5,000,000
to be demanded or become due (automatically or otherwise) prior to its stated maturity, or any Guaranty in such amount to become payable or cash collateral in respect thereof to be demanded; or
(ii) the occurrence under any Swap Contract of an Early Termination Date (as defined in such Swap Contract) resulting from (x) any event of default under such Swap Contract as to which
the Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (y) any Termination Event occurs under any Swap Contract (as defined therein) as to which the Company
or any Subsidiary is an Affected Party (as so defined), which, in either event, the Swap Termination Value owed by the Company or such Subsidiary as a result thereof is greater than $5,000,000; or 

        (g)
the Company or any Significant Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents
by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or 

        (h)
a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Significant Subsidiary, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of the Company or any of its Significant Subsidiaries, or any such 

-18-

 

petition shall be filed against the Company or any of its Significant Subsidiaries and such petition shall not be dismissed within 60 days; or 

        (i)
a final judgment or judgments for the payment of money aggregating in excess of $1,000,000 are rendered against one or more of the Company or any Subsidiary and which judgments are
not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within
60 days (or such lesser period of time as applicable law or rules of court allow a judgment creditor to levy on such judgments) after the expiration of such stay; or 

        (j)
If (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any
amortization period is sought or granted under Section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC
or the PBGC shall have instituted proceedings under Section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA
Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of Section 4001(a)(18) of ERISA)
under all Plans, determined in accordance with Title IV of ERISA, shall exceed $8,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that
would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with
any other such event or events, could reasonably be expected to have a Material Adverse Effect. 

As
used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan"
shall have the respective meanings assigned to such terms in Section 3 of ERISA; or 

        (k)
Default shall occur in the observance or performance of any provision of the Guaranty Agreement or the Guaranty Agreement shall cease to be in full force and effect for any reason
whatsoever, including, without limitation, a final and nonappealable determination by any governmental body or court that the Guaranty Agreement is invalid, void or unenforceable as to one or more
Subsidiaries, or any Subsidiary shall contest or deny in writing the validity or enforceability of any provision of, or obligation under, the Guaranty Agreement; or 

        (l)
(i) any Security Document shall cease to be in full force and effect with respect to the Company or any Subsidiary Guarantor (other than as a result of a transaction permitted
hereunder); (ii) the Company or any Subsidiary Guarantor shall fail to comply with or to perform any applicable provision of any Security Document to which it is a party and such failure
(x) has a material adverse effect on Collateral Agent's rights with respect to any material portion of the Collateral granted thereunder or (y) continues unremedied for 10 days
after the earlier of the date on which (1) a Responsible Officer obtains knowledge of such failure or (2) Collateral Agent delivers notice of such failure to the Company; or
(iii) the Company or any Subsidiary Guarantor (or any Person by, through or on behalf of the Company or such Subsidiary Guarantor) shall contest in any manner the validity, binding nature or
enforceability of any Security Document; or 

        (m)
any Event of Default shall occur under (and as defined in) the Bank Credit Agreement or under the 1992 Note Agreements; or 

-19-

 

        (n)
any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in the Third Amendment or in any writing furnished in connection with
the transactions contemplated by the Third Amendment, including, without limitation, the representations and warranties of the Company and certain of its Subsidiaries set forth in or relating to the
Security Documents, proves to have been false or incorrect in any Material respect on the date as of which made. 

        Section 3.7.Amendment to Section 15 (Expenses, Etc.).    Section 15.1 of the Note Agreement shall be and is
hereby amended to read in its entirety as follows: 

        Section 15.1. Transaction Expenses. (a) Whether or not the transactions contemplated hereby are consummated, the Company will pay
all reasonable costs and expenses (including reasonable attorneys' fees of one special counsel and, if reasonably required, local or other counsel) incurred by the Noteholders and the holders of Notes
in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Guaranty Agreement, the Security Documents, the Intercreditor
Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the reasonable costs and expenses incurred in enforcing or
defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Guaranty Agreement, the Security Documents, the Intercreditor Agreement or the Notes or in
responding to any subpoena or other legal process or informal investigative demand by any Governmental Authority issued in connection with this Agreement, the Guaranty Agreement, the Security
Documents, the Intercreditor Agreement or the Notes, or by reason of being a holder of any Note, and (b) the reasonable costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes.
The Company will pay, and will save each Noteholder and each other holder of a Note harmless from, all claims in respect of any reasonable fees, costs or expenses if any, of brokers and finders (other
than those retained by the Noteholders). 

        (b)
Without limiting the foregoing, the Company agrees to pay all fees of the Collateral Agent in connection with the preparation, execution and delivery of the Intercreditor Agreement
and the Security Documents and the transactions contemplated thereby, including but not limited to reasonable attorneys fees; to pay to the Collateral Agent from time to time reasonable compensation
for all services rendered by it under the Intercreditor Agreement and the Security Documents; to indemnify the Collateral Agent for, and to hold it harmless against, any loss, liability or expense
incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of the Intercreditor Agreement and Security Documents,
including, but not limited to, the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties thereunder. 

        Section 3.8.New Definitions.    Schedule B to the Note Agreement shall be and is hereby amended in its entirety to
read as follows: 

        As
used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: 

        "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock,
partnership interests or equity of any Person or otherwise causing any Person to become a Subsidiary of the Company, or (c) a merger or consolidation or any other combination with another
Person (other than a Person that is a Subsidiary of the Company) provided that the 

-20-

 

Company or the Company's Subsidiary is the surviving entity; provided, however, that "Acquisition" shall not include any of the foregoing transactions
between the Company and any Subsidiary that is a Subsidiary Guarantor prior to such transaction or between companies that are Subsidiary Guarantors prior to such transaction,  provided, further, that
"Acquisition" shall not include Investments. 

        "Additional Notes" is defined in Section 2.2. 

        "Additional Purchasers" means purchasers of Additional Notes. 

        "Adjusted Funded Debt" means all Indebtedness of the Company and its Subsidiaries determined on a consolidated basis, other than
(a) Indebtedness of the type described in clause (c) of the definition of "Indebtedness", (b) contingent obligations under letters of credit, (c) Ordinary Course
Indebtedness, and (d) Indebtedness in respect of banker's acceptances. 

        "Adjusted Funded Leverage Ratio" means, as of any date of determination, the ratio of (a) Adjusted Funded Debt on such date to
(b) Consolidated EBITDA for the most recently ended period of four consecutive fiscal quarters of the Company. 

        "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly,
10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate,
directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition,  "Control" means the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an  "Affiliate" is a reference to an Affiliate of the
Company. 

        "Applicable Interest Rate" means the rate of 9.01% per annum; provided that if the ratio
of Consolidated Income Available for Fixed Charges to Fixed Charges for the period of four consecutive fiscal quarters ending on the last day of any fiscal quarter set forth below is  less than the
minimum ratio set forth opposite such day, then, except as provided in the next succeeding sentence, the Applicable Interest Rate shall be
9.76% per annum at all times thereafter: 

	Fiscal Quarter Ending
	 	Minimum Ratio

	September 30, 2002	 	1.10 to 1
	December 31, 2002	 	1.50 to 1
	March 31, 2003	 	1.55 to 1
	June 30, 2003 and thereafter	 	1.75 to 1

The
Applicable Interest Rate shall be 9.01% per annum at all times from and after the date on which the Company obtains an Investment Grade Rating. Any increase in the Applicable Interest Rate shall
be effective retroactive to the first day of the fiscal quarter in which the Company first falls below the minimum ratio set forth above. 

        "Bank Credit Agreement" means the credit agreement between the Company and its bank lenders, dated as of December 21, 1999, as
amended by the First Amendment to Credit Agreement dated as of March 27, 2002, and as hereafter amended, restated, refinanced, replaced, increased or reduced from time to time and any successor
bank credit agreement. 

        "Bank Lenders" shall mean the financial institutions which are party to the Bank Credit Agreement. 

        "Benefited Parties" shall have the meaning set forth in the Intercreditor Agreement. 

-21-

 

        "Business Day" means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City, New York or Los Angeles, California are required or authorized to be closed. 

        "Capital Expenditures" means any expenditure that is considered a capital expenditure under GAAP, including any amount which is required
to be treated as an asset subject to a Capital Lease. 

        "Capital Lease" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP. 

        "Capital Lease Obligation" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person, as the
lessee under the Capital Lease, which would appear as a liability on a balance sheet of such Person in accordance with GAAP. 

        "Change in Control" has the meaning set forth in Section 8.7. 

        "Closing" is defined in Section 3. 

        "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from
time to time. 

        "Collateral" means all Property from time to time subject to the Liens granted to the Collateral Agent, by the Security Documents. 

        "Collateral Agent" means Bank of America, N.A., as collateral agent under the Security Documents and the Intercreditor Agreement, and its
successors and assigns in such capacity acting for the ratable benefit of the Benefited Parties. 

        "Collateral Release Date" means the first date on which (a) the Company has delivered financial statements pursuant to
Section 7.1(a) and (b) and a related certificate of compliance demonstrating that the Funded Leverage Ratio as of the end of a fiscal quarter was less than 3.25 to 1, (b) no
Default or Event of Default exists and (c) the Company has obtained an Investment Grade Rating. 

        "Company" means K2 Inc., a Delaware corporation. 

        "Computer Hardware and Software" means (i) all computer and other electronic data processing hardware, whether now or hereafter
owned, licensed or leased by the Company or any Subsidiary, including, without limitation, all integrated computer systems, central processing units, memory units, display terminals, printers,
features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other
related computer hardware; (ii) all software programs, whether now or hereafter owned, licensed or leased by the Company or any Subsidiary, designed for use on the computers and electronic data
processing hardware described in clause (i) above, including, without limitation, all operating system software, utilities and application programs in whatsoever form (source code and object
code in magnetic tape, disk or hard copy format or any other listings whatsoever); (iii) all firmware associated with the foregoing, whether now or hereafter owned, licensed or leased by the
Company or any Subsidiary; and (iv) all documentation for the hardware, software and firmware described in the preceding clauses (i), (ii) and (iii) above, whether now or
hereafter owned, licensed or leased by such Company, including, without limitation, flow charts, logic diagrams manuals, specifications, training materials, charts and pseudo codes. 

-22-

 

        "Confidential Information" is defined in Section 20. 

        "Consolidated EBITDA" means, for the period of the four fiscal quarters ending on any date of determination (the  "measurement period"), for the Company and its
Subsidiaries on a consolidated basis, an amount equal to (i) the sum of (a) Consolidated
Net Income for such measurement period, (b) Consolidated Interest Expense for such measurement period, (c) the amount of taxes, based on or measured by income, used or included in the
determination of such Consolidated Net Income for such measurement period, (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income for such
measurement period and (e) non-cash nonrecurring charges and expenses included in the determination of Consolidated Net Income for such measurement period to the extent relating to
items originally purchased in periods prior to the measurement period; provided, however, that charges and expenses related to inventory excluded from
the determination of Consolidated EBITDA by this clause (e) shall not exceed $5,000,000 in any measurement period, less (ii) noncash
nonrecurring gains included in the determination of Consolidated Net Income for such measurement period to the extent relating to items originally purchased in periods prior to the measurement period;  provided, further,
 that, with respect to the Acquisition of a Subsidiary within such measurement period which would have added at least $3,000,000 to
Consolidated EBITDA had it been included in the calculation thereof for such measurement period, the Company may also include items
(i) and (ii) above for such Subsidiary for such measurement period in Consolidated EBITDA if the Company has provided to all holders of Notes (x) the most recent
year-end audited financial statements for that Subsidiary (which audited statements must be as of a date occurring within five fiscal quarters prior to the date of such Acquisition (even
if such date is prior to the measurement period and, therefore, such audited statements are not actually used in computing Consolidated EBITDA for such measurement period)) and
(y) Company-prepared financial statements for that Subsidiary for any portion of such measurement period to be included; provided, further, that
the items in the foregoing proviso may only be included if the items set forth in the proviso to Consolidated Interest Expense relating to such Subsidiary are also included when determining any
covenant hereunder; provided, further, that Consolidated EBITDA shall not be reduced by any portion of the $18,000,000 charge taken by the Company in
the third fiscal quarter of 2001. 

        "Consolidated Income Available for Fixed Charges" means for any period the sum of (i) Consolidated Net Income, (ii) income
tax expense, determined in accordance with GAAP, (iii) non-cash, non-recurring charges deducted from Consolidated Net Income during such period, and (iv) Fixed
Charges; provided that Consolidated Income Available for Fixed Charges shall not be reduced by any portion of the $18,000,000 charge taken by the
Company in the third fiscal quarter of 2001. 

        "Consolidated Indebtedness" means as of any date of determination, the total of all Indebtedness of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP. 

        "Consolidated Interest Expense" means, for the period of the four fiscal quarters ending on any date of determination (the  "measurement period"), the sum, without
duplication, of (a) total interest expense (including that portion attributable to Capitalized Leases in
conformity with GAAP) of the Company and its Subsidiaries for such measurement period on a consolidated basis and (b) fees, commissions and interest related to Permitted Accounts Receivable
Financing Facilities for such measurement period; provided, however, that, with respect to the Acquisition of a Subsidiary within such measurement
period which would have added at least $3,000,000 to Consolidated EBITDA had it been included in the calculation thereof for such measurement period, the Company may also include items (a) and
(b) above for such Subsidiary for such measurement period in Consolidated Interest Expense if the Company has provided to the holders 

-23-

 

of the Notes (i) the most recent year-end audited financial statements for that Subsidiary (which audited statements must be as of a date occurring within five fiscal quarters
prior to the date of such Acquisition (even if such date is prior to the measurement period and, therefore, such audited statements are not actually used in computing Consolidated Interest Expense for
such measurement period)) and (ii) company-prepared financial statements for that Subsidiary for any portion of such measurement period to be included. 

        "Consolidated Net Income" for any period shall mean the net income of the Company and its Subsidiaries for such period, determined in
accordance with GAAP, but excluding in any event: 

        (a)
any extraordinary gains or losses as defined in APBO Nos. 11, 16 and 30 and FASB Statement No. 4; 

        (b)
net earnings and losses of any Subsidiary accrued prior to the date it became a Subsidiary; 

        (c)
net earnings and losses of any corporation (other than a Subsidiary), substantially all the assets of which have been acquired in any manner by the Company or any Subsidiary,
realized by such corporation prior to the date of such acquisition; 

        (d)
net earnings and losses of any corporation (other than a Subsidiary) with which the Company or a Subsidiary shall have consolidated or which shall have merged into or with the
Company or a Subsidiary prior to the date of such consolidation or merger; 

        (e)
net earnings of any business entity (other than a Subsidiary) in which the Company or any Subsidiary has an ownership interest unless such net earnings shall have actually been
received or are receivable by the Company or such Subsidiary in the form of cash distributions; 

        (f)
any portion of the net earnings of any Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Subsidiary except to the extent applied to
the repayment of Indebtedness of such Subsidiary to the Company or any other Subsidiary; 

        (g)
earnings or amortization resulting from any reappraisal, revaluation or write-up of assets (other than pursuant to any purchase accounting adjustments made to the book
value of assets of an acquired Person in connection with an Acquisition); 

        (h)
to the extent not otherwise excluded pursuant to clause (a) above, any aggregate net gain (or any aggregate net loss) during such period arising from the sale, conversion,
exchange or other disposition of capital assets (such term to include, without limitation, (i) all non-current assets and, without duplication, (ii) the following, whether or
not current: all fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets, and all securities); 

        (i)
any deferred or other credit or amortization thereof representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such
Subsidiary; and 

        (j)
any gain arising from the acquisition of any securities of the Company or any Subsidiary. 

        "Consolidated Net Worth" means the consolidated stockholders' equity of the Company and its Subsidiaries, as defined according to GAAP. 

        "Consolidated Tangible Net Worth" means at any date Consolidated Net Worth less the
intangible assets of the Company and its Subsidiaries on a consolidated basis, all determined as of such date. For purposes of this definition, "Intangible Assets" means the amount (to the extent 

-24-

 

reflected in determining such Consolidated Net Worth) of all unamortized debt discount and expense, unamortized deferred charges (other than deferred employee benefit liabilities), goodwill, patents,
trademarks, service marks, trade names, copyrights, organization or development expenses and other intangible items. 

        "Consolidated Total Assets" means, as of the date of any determination thereof, the total amount of all assets of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP. 

        "Current Indebtedness" means, without duplication, all Indebtedness other than Funded Indebtedness. 

        "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both,
become an Event of Default. 

        "Default Rate" means that rate of interest that is the greater of (i) 2% per annum above the Applicable Interest Rate or
(ii) 2% over the rate of interest publicly announced by Bank of America, N.A. in New York, New York as its "base" or "prime" rate. 

        "Domestic Subsidiaries" means those Subsidiaries of the Company which are incorporated under the laws of any State of the United States
and which are engaged in business primarily in the United States, other than Subsidiaries which are Subsidiaries of a Foreign Subsidiary. 

        "Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials
into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. 

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect. 

        "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code. 

        "Event of Default" is defined in Section 11. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        "Excluded Assets" shall have the meaning set forth in the Security Agreement as in effect on the date of this Agreement. 

        "Excluded Sale and Leaseback Transaction" shall mean any sale or transfer of property acquired by the Company or any Subsidiary after the
date of this Agreement to any Person within 365 days following the acquisition or construction of such property by the Company or any Subsidiary if the Company or a Subsidiary shall
concurrently with such sale or transfer, lease such property, as lessee. 

        "Excluded Subsidiary Guaranties" shall mean the Guaranty Agreement and any other Guaranty of Indebtedness of the Company by a Subsidiary
Guarantor which shall be a party to the Guaranty Agreement; provided that each creditor which is a beneficiary of an Excluded Subsidiary Guaranty shall
have become a party to the Intercreditor Agreement. 

        "Fair Market Value" means, at any time and with respect to any Property, the sale value of such Property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell). 

-25-

 

        "Fixed Charges" means, with respect to any period, the sum of (i) Interest Expense and (ii) Lease Rentals for such period. 

        "Foreign Receivable Financing Facilities" means one or more facilities involving the sale or discount of undivided ownership interests in
foreign accounts receivable and related property of the Company and one or more of its Foreign Subsidiaries. 

        "Foreign Subsidiaries" means those Subsidiaries of the Company which are not Domestic Subsidiaries. 

        "Funded Debt" means all Indebtedness of the Company and its Subsidiaries determined on a consolidated basis, other than
(a) Indebtedness of the type described in clause (c) of the definition of "Indebtedness" and (b) contingent obligations under letters of credit. 

        "Funded Leverage Ratio" means, as of any date of determination, the ratio of (a) Funded Debt on such date to
(b) Consolidated EBITDA for the most recently ended period of four consecutive fiscal quarters of the Company. 

        "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant
segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. If at any time any change in GAAP would affect the computation of
any financial ratio or requirement set forth in any of this Agreement and the Notes, the Guaranty Agreement, the Intercreditor Agreement, the Security Documents or any other instrument or document in
connection therewith, and either the Company or the Required Holders shall so request, the Noteholders and the Company shall negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of reflect such change in GAAP (subject to the approval of the Required Holders), provided that, until so amended,
(a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) the Company shall provide to the Noteholders financial statements
and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP. 

        "Governmental Authority" means 

        (a)
the government of 

        (i)
the United States of America or any State or other political subdivision thereof, or 

        (ii)
any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary,
or 

        (b)
any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. 

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        "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: 

        (a)
to purchase such Indebtedness or obligation or any property constituting security therefor; 

        (b)
to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition
or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; 

        (c)
to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to
make payment of the Indebtedness or obligation; or 

        (d)
otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. 

In
any computation of the Indebtedness or other liabilities of the obligor under any Guaranty, the Indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor. 

        "Guaranty Agreement" is defined in Section 1 and shall mean and include such Guaranty Agreement as amended and supplemented from
time to time. 

        "Guaranty Obligations" means, as to any Person, any (a) guaranty by that Person of Indebtedness of, or other obligation payable or
performable by, any other Person or (b) assurance, agreement, letter of responsibility, letter of awareness, undertaking or arrangement given by that Person to an obligee of any other Person
with respect to the payment or performance of an obligation by, or the financial
condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to
provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person or any
"keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person;  provided, however,
 that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, covered by such
Guaranty Obligation or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. 

        "Guaranty Supplement" means a Guaranty Supplement in substantially the form attached as Exhibit A to the Guaranty Agreement. 

        "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release,
discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam
insulation and polychlorinated biphenyls). 

-27-

 

        "holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company
pursuant to Section 13.1. 

        "Indebtedness" means, as to any Person at a particular time, all of the following, without duplication: 

        (a)
all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; 

        (b)
any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker's acceptances, bank guaranties, surety bonds and
similar instruments; 

        (c)
net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such Swap
Contract has not been closed out, the
mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in Swap Contracts of the same type; 

        (d)
all obligations of such Person to pay the deferred purchase price of property or services (excluding trade and other accounts payable in the ordinary course of business in accordance
with customary trade terms and which are not overdue for a period of more than 60 days or which are subject to a bona fide dispute) and all indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; including, without limitation, any Permitted Accounts Receivable Financing Facility; 

        (e)
all Capital Lease Obligations and Synthetic Lease Obligations of such Person; and 

        (f)
all Guaranty Obligations of such Person in respect of any of the foregoing. 

        For
all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership in which such Person is a general partner, unless such Indebtedness
is expressly made non-recourse to such Person except for customary exceptions acceptable to the Required Holders. 

        "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than $2,000,000
of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. 

        "Intercreditor Agreement" is defined in Section 1.2. 

        "Interest Coverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated EBITDA for the period of the four
prior fiscal quarters ending on such date to (b) Consolidated Interest Expense during such period. 

        "Interest Expense" means, with respect to any period, the sum (without duplication) of the following: (i) all interest expense in
respect of Indebtedness of the Company and its Subsidiaries (including imputed interest on Capital Leases) deducted in determining Consolidated Net Income for such period, (ii) all Indebtedness
discount and expense amortized in such period and (iii) fees, commissions and interest expense related to Permitted Accounts Receivable Financing Facilities for such period. 

        "Investment Grade Rating" means a rating by at least one Nationally Recognized Rating Agency of (a) in the case of Moody's, "Baa3"
or better, (b) in the case of S&P, "BBB-" or better, 

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and (c) in the case of Fitch, "BBB-" or better for the long term senior, unsecured, non-credit enhanced debt of the Company. 

        "Investments" shall mean all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by
acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise; provided
however, that "Investments" shall not include Acquisitions. In valuing any Investment for purposes of this Agreement, such Investments shall be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. 

        "Junior Capital" means (i) common stock of the Company, (ii) preferred stock of the Company which is not subject to
mandatory redemption or repurchase or otherwise required to be redeemed on or prior to March 1, 2010, and (iii) Subordinated Indebtedness. 

        "Lease Rentals" means, with respect to any period, the sum of the minimum amount of rental and other obligations required to be paid
during such period by the Company or its Subsidiaries as lessee under all leases of real or personal property (other than Capital Leases), excluding any amounts required to be paid by the lessee
(whether or not designated as rental) which are (i) on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges, or (ii) which are based on
profits, revenues or sales realized by the lessee from all leased property or otherwise based on the performance of the lessee. 

        "Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Indebtedness of the Company and its
Subsidiaries (other than Indebtedness of the type described in clause (c) of the definition of "Indebtedness") to (b) Consolidated EBITDA for the most recently ended period of four
consecutive fiscal quarters of the Company. 

        "Lien" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or
title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). 

        "Make-Whole Amount" shall have the meaning (i) set forth in Section 8.6 with respect to any
Series 1999-A Note and (ii) set forth in the applicable Supplement with respect to any other series of Notes. 

        "Material" means material in relation to the business, operations, affairs, financial condition, assets or properties of the Company and
its Subsidiaries taken as a whole. 

        "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or
properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement (including any Supplement), the Security
Documents and the Notes, or (c) the validity or enforceability of this Agreement (including any Supplement), the Security Documents or the Notes. 

        "Membership Pledge Agreement" means the membership pledge agreement dated as of March 27, 2002 among the Company, various
Subsidiary Guarantors and Collateral Agent. 

        "Memorandum" is defined in Section 5.3. 

        "Mortgage" means a mortgage, deed of trust, leasehold mortgage or similar instrument granting Collateral Agent a Lien on real property
owned or leased by the Company or any Subsidiary Guarantor. 

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        "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA). 

        "Nationally Recognized Rating Agency" means Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Rating Group, a division of McGraw Hill, Inc. ("S&P"), or
Fitch/IBCA Duff & Phelps Ltd. ("Fitch")". 

        "Net Issuance Proceeds" means, in respect of any issuance of equity, the cash proceeds and non-cash proceeds received or
receivable in connection therewith, net of reasonable costs and expenses and underwriting discounts and commissions paid or incurred in connection therewith in favor of any Person not an Affiliate of
the Company. 

        "Net Proceeds" means, with respect to any sale, lease or other disposition of any property by any Person, an amount equal to the  difference of 

        (a)
the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such sale, lease or other disposition but net of
applicable taxes) received by such Person in respect of such disposition, minus

        (b)
all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such disposition. 

        "1992 Note Agreements" means the separate Note Agreements dated as of October 15, 1992 between the Company and the Institutional
Investors named therein, as from time to time amended, renewed, restated or replaced. 

        "Notes" is defined in Section 1. 

        "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities
extend to the subject matter of such certificate. 

        "Ordinary Course Indebtedness" means: 

        (a)
intercompany Guaranty Obligations of the Company or any of its Subsidiaries guarantying Indebtedness otherwise permitted hereunder of the Company or any Wholly-Owned Subsidiary of
the Company; 

        (b)
Indebtedness arising from the honoring of a check, draft or similar instrument against insufficient funds so long as such Indebtedness is paid within three Business Days after the
incurrence thereof; 

        (c)
Indebtedness of a Subsidiary to the Company or to a Wholly-Owned Subsidiary; 

        (d)
Indebtedness of the Company to a Subsidiary Guarantor; and 

        (e)
Indebtedness in connection with letters of credit issued in the ordinary course of business. 

        "Ordinary Course Investments" means Investments of the Company and its Subsidiaries, consisting of: 

        (a)
Investments in and to Subsidiaries and the Company and in any Person that is a Subsidiary after giving effect to such Investment; 

        (b)
Investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or its Subsidiaries, is accorded the
highest rating by a Nationally Recognized Rating Agency; 

        (c)
Investments in direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which 

-30-

 

constitutes a full faith and credit obligation of the United States of America, in either case, maturing in 12 months or less from the date of acquisition thereof; 

        (d)
Investments in certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company organized under the laws of the United States or
any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit are, at the time of acquisition thereof by
the Company or its Subsidiaries, rated A or better by S&P or A or better by Moody's; 

        (e)
receivables, including negotiable instruments and letters of credit in respect of which the Company or its Subsidiaries is the beneficiary, arising from the sale of goods and
services in the ordinary course of business of the Company and its Subsidiaries; 

        (f)
Investments in repurchase agreements or bankers acceptances, having terms of less than 30 days, with a United States bank or trust company meeting the requirements of
paragraph (d) hereof, which Investments mature within one year and which are fully secured by obligations of the type described in paragraphs (c) and (d) hereof; and 

        (g)
Investments in offshore certificates of deposit maturing within one year from the date of issuance thereof, issued by a bank or trust company having capital, surplus and undivided
profits aggregating at least $1,000,000,000 and whose long term offshore certificates of deposit are at the time of acquisition thereof by the Company or its Subsidiaries, accorded a rating of A or
better by S&P or Moody's. 

        "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. 

        "Permitted Accounts Receivable Financing Facilities" means one or more facilities involving the sale or discount of undivided ownership
interests in accounts receivable and related property of the Company and one or more of its Subsidiaries; provided that the aggregate investment or
claim held by purchasers of such assets does not exceed $75,000,000 in the case of receivables owned by Domestic Subsidiaries, and in the case of Foreign Receivable Financing Facilities the aggregate
outstanding principal amount of Indebtedness for borrowed money of Foreign Subsidiaries plus the aggregate investment or claim held by purchasers of
receivables in Foreign Receivable Financing Facilities shall not exceed 15% of Consolidated Net Worth at any time. 

        "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof. 

        "Plan" means an "employee benefit plan" (as defined in Section 3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the
Company or any ERISA Affiliate may have any liability. 

        "Pledge Agreement" means the pledge agreement dated as of March 27, 2002 among the Company, various Subsidiary Guarantors and
Collateral Agent. 

        "property" or "properties" means, unless otherwise specifically limited, real or personal
property of any kind, tangible or intangible, choate or inchoate. 

        "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. 

        "Required Holders" means, at any time, the holders of at least 50% in principal amount of the Notes of each series at the time
outstanding; provided that in the case of any release of all or substantially all of the Collateral (other than on account of the occurrence of the
Collateral 

-31-

 

Release Date), "Required Holders" shall mean the holders of 100% in principal amount of the Notes of each series then outstanding; (exclusive in each case of Notes then owned by the Company or any of
its Affiliates). 

        "Responsible Officer" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration
of the relevant portion of this Agreement. 

        "Restricted Payments" means: 

        (a)
the declaration or payment of any dividend by the Company, either in cash or property, on any shares of the capital stock of any class of the Company (except dividends or other
distributions payable solely in shares of capital stock of the Company); 

        (b)
the purchase, redemption or retirement by the Company of any shares of the capital stock of any class of the Company or any warrants, rights or options to purchase or acquire any
shares of its capital stock, whether directly or indirectly, or through any Subsidiary; and 

        (c)
any other payment or distribution by the Company in respect of its capital stock, either directly or indirectly or through any Subsidiary. 

        "Securitization Hardware and Software" means the Computer Hardware and Software used to service and/or monitor the accounts and payments
intangibles of the Company and its Subsidiaries; the Computer Hardware and Software and other computer materials otherwise relating to the Excluded Assets; and the printouts and other computer
materials, technical knowledge or processes, data bases, customer lists, credit files, correspondence and advertising materials or any property of a similar nature relating to the Excluded Assets. 

        "Security Agreement" means the security agreement dated as of March 27, 2002 among the Company, the Subsidiary Guarantors and
Collateral Agent. 

        "Security Documents" means the Security Agreement, the Membership Pledge Agreement, the Mortgages, the Pledge Agreement and all other
documents pursuant to which the Company or any Subsidiary grants Collateral to Collateral Agent. 

        "Securities Act" means the Securities Act of 1933, as amended from time to time. 

        "Senior Indebtedness" means, as of the date of any determination thereof, all Consolidated Indebtedness, other than Subordinated
Indebtedness. 

        "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. 

        "Significant Subsidiary" means at any time any Subsidiary that accounts for more than (i) 10% of the Consolidated Total Assets or
(ii) 10% of consolidated revenue of the Company and its Subsidiaries. 

        "Simplex Products Disposition" means any sale or transfer of assets of the Simplex Products Division of the Company or refinancing or
recapitalization of the assets or operation of the Simplex Products Division, whether in the form of a sale of stock, borrowing, issuance of debt or equity securities or otherwise, as a result of
which (i) the Company ceases to own directly substantially all of the assets of the Simplex Products Division, (ii) the Company ceases to be liable directly or indirectly for any
Indebtedness or trade payables of the Simplex Products Division (other than pursuant to any indemnification provision for the benefit of the transferee of the assets of the Simplex Products Division
or any affiliate of such transferee contained in the agreements memorializing such transaction), and (iii) the Company receives in such transaction, by way of sale proceeds, refinancing
proceeds, dividend proceeds, proceeds of the issuance of securities or otherwise, at least $20 million in cash. 

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        "Subordinated Indebtedness" is defined in Section 10.3. 

        "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such
Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of
such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. 

        "Subsidiary Guarantor" shall mean each Subsidiary of the Company which shall be a party to the Guaranty Agreement. 

        "Subsidiary Guaranty Agreements" shall mean the Guaranty Agreement and any other Guaranty of Indebtedness of the Company by a Subsidiary
which shall be a party to the Guaranty Agreement;  provided that each creditor which is a beneficiary of a Subsidiary Guaranty Agreement shall have become a party to the Intercreditor Agreement.

        "Supplement" is defined in Section 2.2. 

        "Swap Contract" means (a) any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, foreign exchange contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject to any master agreement, or (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms
and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., or any other master agreement (any such master agreement,
together with any related schedules, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, a "Master
Agreement"), including any such obligations or liabilities under any Master Agreement. 

        "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance
therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for
such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any
Bank Lender). 

        "Synthetic Lease Obligation" means all monetary obligations of a Person under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of such Person but
which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment). 

        "Third Amendment" means the Third Amendment to Note Purchase Agreement dated as of March 27, 2002 between the Company and the
Noteholders. 

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        "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors'
qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. 

Section 4. Representations and Warranties.  

        The Company represents and warrants that as of the date hereof and as of the date of execution and delivery hereof and after giving effect hereto (and to the
amendment of the Bank Credit Agreement, the 1992 Note Agreements and the Permitted Accounts Receivable Financing Facility referred to in Schedule II hereto): 

        (a)
No Default or Event of Default exists under the Note Agreement. 

        (b)
In connection with the solicitation of an amendment to the Bank Credit Agreement, the 1992 Note Agreement and the Permitted Accounts Receivable Financing Facility or in connection
with any other agreement pursuant to which Debt of the Company is outstanding and relating to the subject matter of this Agreement, or any other amendment or modification required under any such
agreement, the Company has paid no fees or other consideration (other than routine fees of counsel for such lenders and except as disclosed to the Noteholders and their special counsel, Chapman and
Cutler) in connection with the review and/or execution and delivery of any such amendment or modification. 

        (c)
The execution and delivery of the Agreement and each of the Security Documents to which it is a party by the Company and the compliance by the Company with all of the provisions of
the Note Agreement, as amended hereby, and each of the Security Documents to which it is a party: 

        (i)
is within the corporate powers of the Company; and 

        (ii)
will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under the Articles of Incorporation or By-laws of the Company or any indenture or other agreement or instrument to which the Company is
a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any property of the Company (other than such Liens, security interests and encumbrances contemplated and
otherwise created by virtue of the Security Documents). 

        (d)
The execution and delivery of this Agreement and each of the Security Documents have been duly authorized by all proper corporate action on the part of the Company (no action by the
stockholders of the Company being required by law, by the Articles of Incorporation or By-laws of the Company or
otherwise); and this Agreement and each of the Security Documents have been executed and delivered by the Company, and the Note Agreement and the Notes, as amended by this Agreement, and the Security
Documents constitute the legal, valid and binding obligations, contracts and agreements of the Company enforceable in accordance with their respective terms. 

        (e)
The execution and delivery of the Amendment to Guaranty Agreement dated of even date herewith (the "Amendment to Guaranty") in
substantially the form set forth in Exhibit C hereto or a Guaranty Supplement, as the case may be, and each of the Security Documents by the Subsidiary Guarantors and the compliance by each
Subsidiary Guarantor with the provisions of the Security Documents to which such Subsidiary Guarantor is a party: 

        (i)
is within the corporate powers of each such Subsidiary Guarantor; and 

        (ii)
will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, 

-34-

 

conditions or provisions of, or constitute a default under the Articles of Incorporation or By-laws of such Subsidiary Guarantor or any indenture or other agreement or instrument to which
such Subsidiary Guarantor is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any property of the Company (other than such Liens, security interests and
encumbrances contemplated and otherwise created by virtue of the Security Documents). 

        (f)
The execution and delivery of the Amendment to Guaranty or the Guaranty Supplement, as the case may be, and each of the Security Documents to which each Subsidiary Guarantor is a
party have been duly authorized by all proper corporate action on the part of each Subsidiary Guarantor (no action by the stockholders of such Subsidiary Guarantor being required by law, by the
Articles of Incorporation or By-laws of such Subsidiary Guarantor or otherwise); and the Amendment to Guaranty or the Guaranty Supplement, as the case may be, and each of the Security
Documents to which each Subsidiary Guarantor is a party have been executed and delivered by such Subsidiary Guarantor and constitute the legal, valid and binding obligations, contracts and agreements
of each such Subsidiary Guarantor enforceable in accordance with their respective terms. 

        (g)
No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or
performance by the Company or any Subsidiary Guarantor of this Agreement or any Security Document to which the Company or any Subsidiary Guarantor is a party. 

        (h)
There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company
or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 

        (i)
Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental
Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 

        (j)
Schedule IV hereto sets forth a complete and correct list of all outstanding Debt (including Guaranties) of the Company and its Subsidiaries as of March 5, 2002, since
which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event
or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause
such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. 

        (k)
Except as set forth in the Security Documents, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.6 of the Note Agreement. Schedule VI hereto sets forth a
complete and correct list of all Liens on Property of the Company and its Subsidiaries which secure Indebtedness. 

-35-

 

        (l)
Schedule V hereto contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary,
and all other Investments of the Company and its Subsidiaries and (ii) of the Company's Affiliates known to the Company, other than Subsidiaries. 

Section 5. Conditions Precedent to Effectiveness of Agreement.  

        This Agreement shall become effective as of the date hereof upon the satisfaction of each of the following, unless waived by the Required Holders, in their sole
discretion: 

        (a)
The Required Holders on the date hereof shall have delivered an executed counterpart of this Amendment; 

        (b)
No Event of Default shall have occurred and be continuing after giving effect to this Amendment; 

        (c)
The Company shall have delivered to the Noteholders in form and substance satisfactory to such Noteholders and their special counsel, Chapman and Cutler, the items listed or
described in Schedule II hereto; 

        (d)
The Company shall have paid the fees, costs, expenses and disbursements of Chapman and Cutler, special counsel to the Noteholders, incurred in connection with the consummation of the
transactions contemplated by this Agreement and the Security Documents; and 

        (e)
The Company shall have paid a fee to each Noteholder in an amount equal to 11.25 basis points of the unpaid principal amount of the Notes. 

Section 6. Waiver.  

        Section 6.1. Waiver of Compliance with Section 10.5.    The Purchasers hereby waive compliance by the Company with
Section 10.5 of the Existing Note Agreement for the fiscal quarters ended on September 30, 2001 and December 31, 2001; provided
that the ratio of Consolidated Income Available for Fixed Charges (as such term is defined in the Existing Note Agreement) to Fixed Charges shall have been not less than .75 to 1.0 as of either of
such dates. 

Section 7. Miscellaneous.  

        Section 7.1.Effect of Agreement and Reaffirmation.    Except as expressly amended by this Agreement, the Company
acknowledges and agrees that the Note Agreement, the Notes and all other documents and agreements executed by the Company in connection with the Note Agreement in favor of the Noteholders shall remain
unchanged and are hereby ratified and confirmed and shall remain in full force and effect. The Company further acknowledges and agrees that it has no defenses to its obligations under the Note
Agreement and the Notes, as amended hereby. 

        Section 7.2.Release of Claims.    In further consideration of Noteholders' execution of this Amendment, the Company
hereby releases each Noteholder and its respective affiliates, officers, employees, directors, trustees, agents and attorneys (collectively, the  "Releasees") from any and all claims, demands,
liabilities, responsibilities, disputes, causes of action (whether at law or in equity) and obligations
of every nature whatsoever, whether liquidated or unliquidated, known or unknown, matured or unmatured, fixed or contingent that the Company may have against the Releasees which arise from or relate
to any actions which the Releasees may have taken or omitted to take prior to the date hereof with respect to the Notes, the Note Agreement, any Collateral, the Guaranty Agreement, and any Security
Documents and any third parties liable in whole or in part for the obligations under 

-36-

 

the Notes and the Note Agreement. For purposes of the release contained in this paragraph, the term "Company" shall mean and include such party's
successors and assigns, including, without limitation, any trustees acting on behalf of such party and any debtor-in-possession in respect of such party. 

        Section 7.3.Successors and Assigns.    This Agreement shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of the Noteholders and to the benefit of the Noteholders' successors and assigns. 

        Section 7.4.Expenses.    The Company hereby agrees to pay all out-of-pocket expenses incurred by
the Noteholders in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the reasonable fees, expenses and disbursements of Chapman and
Cutler. 

        Section 7.5.Counterparts. This Agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all together only one agreement. 

        Section 7.6.Governing Law.    This Agreement shall be governed by and construed in accordance with the internal laws of
the State of New York without giving effect to choice of law principles that would result in the application of the laws of any other jurisdiction. 

        Section 7.7.Approval of Amendment to Guaranty Agreement.    Each Noteholder hereby consents to the terms of the Amendment
to Guaranty dated of even date herewith and attached hereto as Exhibit C in respect of the Subsidiary Guaranty. 

        Section 7.8. GE Securitization.    The Noteholders hereby consent to (i) the execution, delivery and performance
by the Company, Stearns Inc. ("Stearns"), Shakespeare Company, LLC ("Shakespeare"),
K-2 Corporation ("K-2 Corp."), K2 Receivables Corporation ("K2 SPV") and K2
Finance Company, LLC ("K2 LLC") of the GECC Securitization Transactions. Notwithstanding anything to the contrary in this Agreement or the Note
Agreement, as amended hereby, the Notes, the Subsidiary Guaranties, the Security Documents and the Intercreditor Agreement (collectively the "Transaction
Documents"), the GECC Securitization Transactions and the execution and delivery of, and performance under, the GECC Securitization Documents by the Company and its
Subsidiaries party thereto shall not be deemed to violate or contravene any provision of the Transaction Documents. 

        "GECC Securitization Documents" shall mean (i) that certain Receivables Sale and Contribution Agreement, dated as of
March 28, 2002, among the Company as parent guarantor, Stearns, Shakespeare and K-2 Corp. as originators and K2 LLC as buyer (the "Sale and Contribution
Agreement") and (ii) the Receivables Purchase and Servicing Agreement, dated as of March 28, 2002, among K2 LLC as seller, Company as master servicer, Stearns,
Shakespeare and K-2 Corp. as servicers, K2 SPV, Redwood Receivables Corporation as the conduit purchaser (the "Conduit Purchaser"), General
Electric Capital Corporation as committed purchaser (the "Committed Purchaser") and as administrative agent (the  "Agent") for the Committed Purchaser and
the Conduit Purchaser (the "Receivables Purchase Agreement"),
and (iii) each Originator Performance Guaranty dated as of March 28, 2002, from the Company, Stearns, Shakespeare and K-2 Corp. in each case in the form delivered to the
Noteholders on March 28, 2002. 

        "GECC Securitization Transactions" shall mean the transactions under the GECC Securitization Documents. 

-37-

EXHIBIT 10(b)(1)  

        IN
WITNESS WHEREOF, the Company has executed this Third Amendment to Note Purchase Agreement as of the day and year first above written. 

	 	 	K2 INC.
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Its	 	 
	 	 	 	 	

Third Amendment to Note Purchase Agreement 

K2
Inc. 

        This
Third Amendment to Note Purchase Agreement is accepted and agreed to as of the day and year first above written. 

	 	 	THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Its	 	 
	 	 	 	 	

Third Amendment to Note Purchase Agreement 

K2
Inc. 

        This
Third Amendment to Note Purchase Agreement is accepted and agreed to as of the day and year first above written. 

	 	 	CONNECTICUT GENERAL LIFE INSURANCE COMPANY
	

 	
 	

By	
 	

Cigna Investments, Inc.
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Its	 	 
	 	 	 	 	

Third Amendment to Note Purchase Agreement 

K2
Inc. 

        This
Third Amendment to Note Purchase Agreement is accepted and agreed to as of the day and year first above written. 

	 	 	THE CANADA LIFE ASSURANCE COMPANY, AS BENEFICIAL OWNER
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Its	 	 
	 	 	 	 	

The
Northwestern Mutual Life Insurance Company

720 East Wisconsin Avenue

Milwaukee, Wisconsin 53202 

Connecticut
General Life Insurance Company

c/o Cigna Investments, Inc.

280 Trumbull Street

Hartford, Connecticut 06103 

The
Canada Life Assurance Company

330 University Avenue, SP-11

Toronto, Ontario, Canada M5G 1R8 

SCHEDULE
I

(to Third Amendment to Note Purchase Agreement) 

 
 

Closing Conditions    
  

        1.  Amendment to Guaranty. Each Subsidiary Guarantor shall have executed and delivered the Amendment to Guaranty. 

        2.
Secretary Certificate of Company. The Company shall have delivered to the Noteholders a certificate of an authorized officer, dated as
of the Effective Date, with respect to its Articles of Incorporation and By-laws, certifying as to resolutions authorizing the execution and delivery of this Agreement and the Notes and
the Security Documents, and the incumbency and signature of officers. 

        3.  Officer's Certificate of Company. The Company shall have delivered to the Noteholders a certificate of an authorized officer, dated as
of the Effective Date, to the effect that the representations and warranties set forth in Section 4 of this Agreement and in the Security Documents are true and correct. 

        4.
Subsidiary Secretary's Certificate. Each Subsidiary which is a party to a Security Document or a Guaranty Supplement shall have
delivered to the Noteholders a certificate of an authorized officer, dated as of the Effective Date, with respect to its Articles of Incorporation and By-laws, certifying as to resolutions
authorizing the execution and delivery of the Security Documents or Guaranty Supplement to which such Subsidiary is a party, and the incumbency and signature of officers. 

        5.
Subsidiary Officer's Certificate. Each Subsidiary which is a party to the Security Documents or a Guaranty Supplement shall have
delivered to the Noteholders a certificate of an authorized officer, dated as of the Effective Date, certifying that the representations and warranties of such Subsidiary set forth in Section 4
of this Agreement and in the Security Documents or Guaranty Supplement are true and correct. 

        6.
Performance by the Company and each Subsidiary. The Company and each Subsidiary which is a party to the Security Documents shall have
performed and complied with all agreements and conditions contained in the Security Documents to which it is a party, required to be performed and complied with by it prior to or as of the Effective
Date. 

        7.
Security Documents. The Security Documents shall be in form and substance satisfactory to the Noteholders and the Noteholders' special
counsel, shall have been duly authorized, executed and delivered by the parties thereto and shall be in full force and effect, and the Noteholders shall have received true, correct and complete copies
of each thereof. 

        8.
Insurance. Certificates of insurance evidencing the insurance policies and endorsements required to be delivered pursuant to the
Security Documents shall have been delivered to the Collateral Agent and the Noteholders and their special counsel. 

        9.
Bank Credit Agreement. The Company shall have entered into an Amendment to the Bank Credit Agreement with the Bank Lenders which
amendment shall be reasonably satisfactory to the Noteholders. 

SCHEDULE
II

(to Third Amendment to Note Purchase Agreement) 

 

        10.
1992 Note Agreement. The Company shall have entered into an amendment to the 1992 Note Agreement which amendment shall be reasonably
satisfactory to the Noteholders. 

        11.
Securitization Facility. The Company shall have furnished you with a true and correct copy of the Receivables Purchase and Servicing
Agreement dated as of March 28, 2002 among the Company, certain Subsidiaries and General Electric Capital Corporation, and all related Exhibits thereto and the Receivables Sale and Contribution
Agreement dated as of March 28, 2002 among the Company and certain of its Subsidiaries and all related Exhibits thereto which shall be reasonably satisfactory to the Noteholders. 

        12.
Intercreditor Agreement. The Noteholders shall have entered into the Intercreditor Agreement with the Bank Lenders, the holders of the
Notes under the Senior Note Agreement and the Collateral Agent. 

        13.
Guaranty Supplement. Shakespeare Connective Fibers, LLC shall have executed and delivered a Guaranty Supplement. 

        14.  Notes. The Company shall have delivered the amended and restated Notes, executed by a duly authorized officer of the Company.

        15.
Legal Opinion. Gibson, Dunn & Crutcher LLP, counsel for the Company shall have delivered an opinion in form and substance
reasonably satisfactory to the Noteholders and their special counsel and otherwise in substantially the form of legal opinion delivered in connection with the Original Note Purchase Agreement but with
respect to the Note Agreement, as amended, the Notes delivered on the Effective Date, the Guaranty Supplement and the Security Documents. 

        16.  Title Insurance. The Collateral Agent shall have received a loan title insurance policy issued by a title insurance company reasonably
acceptable to the Noteholders and their special counsel (or, in the alternative, a commitment to issue a loan title insurance policy issued by a title insurance company reasonably acceptable to the
Noteholders and their special counsel and marked and initialed by an authorized agent of such title insurance company to show all changes to be made in connection with the actual issuance of such
title insurance policy) in respect of each mortgage and deed of trust executed and delivered in connection with the transactions contemplated by this Agreement (collectively, the
"Title Insurance Policies"), in form and substance satisfactory to the Noteholders and their special counsel, and all premiums in respect of the Title
Insurance Policies shall have been paid in full. 

        17.
Letter re Consultants. The Company shall have delivered to you a letter regarding the retention of a financial advisor and consultant
and related matters in form and substance satisfactory to you. 

2

 
 

Post Closing Requirements    
  

        1.
Pledge Agreements pledging 65% of the outstanding stock of the following Foreign Subsidiaries by the applicable dates set forth below: 

	Foreign Subsidiary (Domicile)
 
	 	Pledgor(s)
 
	 	Delivery Date
 

	Shakespeare (Hong Kong) Ltd. (Hong Kong)	 	Shakespeare Company LLC	 	June 30, 2002
	Shakespeare International Ltd. (U.K.)	 	K2 Inc.

Shakespeare Company LLC	 	April 12, 2002
	K2 Ski Sport und Mode GmbH (Germany)	 	Shakespeare Company LLC	 	April 19, 2002
	K2 Japan Corporation (Japan)	 	K-2 Corporation	 	June 30, 2002
	Madshus A.S. (Norway)	 	K-2 Corporation	 	June 30, 2002
	K2 Corporation of Canada (Canada)	 	Ride, Inc.	 	April 12, 2002

        2.
Each mortgage, deed of trust and financing statement required to be filed, registered or recorded in connection with the transactions contemplated by the Security Documents shall have
been filed, registered or recorded in each office required in order to create in favor of the Collateral Agent, for the equal and ratable benefit of the Noteholders and the Bank Lenders, a valid
perfected first priority Lien on the Collateral subject only to Liens permitted by Section 10.6 of the Existing Note Agreement
not more than 10 days following the Effective Date. In addition, the Collateral Agent and the Noteholders shall have received, to the extent available, acknowledgment copies of all of such
filings, registrations and recordations stamped by the appropriate filing, registration or recordation officer (or, in lieu thereof, other evidence satisfactory to the Collateral Agent that all such
filings, registrations and recordations have been made); and all necessary filing, registration and other similar fees, and all taxes and other charges related to such filings, registrations and
recordations (including such other taxes and charges requested by the Noteholders), shall have been paid in full. 

        3.
The Company shall use its best efforts to deliver to the Collateral Agent (a) not later than April 26, 2002, Collateral Access Agreements executed by owners of the
properties located in (i) Fife, Washington, (ii) Lincolnwood, Illinois and (iii) Vista, California which are leased by the Company or a Subsidiary, and (b) not later than
May 24, 2002, Collateral Access Agreements executed by owners of each other property leased by the Company or any Subsidiary. 

SSCHEDULE
III

(to Third Amendment to Note Purchase Agreement) 

 
 

Indebtedness of Company and Its Subsidiaries    
    

 Outstanding Indebtedness of Company and Subsidiaries:  

	Subsidiary
 
	 	Description
	 	Amount Outstanding as of March 5, 2002 (US$)

	K2 Inc.	 	Bank of America et al. — Revolver	 	$	40,829,000
	K2 Inc.	 	Bank of America — LC's	 	 	20,714,000
	K2 Inc.	 	Senior Notes — '92 Placement	 	 	13,336,000
	K2 Inc.	 	Senior Notes — '99 Placement	 	 	50,000,000
	K2 Inc.	 	Bank of America — Asset Securitization	 	 	45,979,000
	K2 Japan	 	Union Bank	 	 	6,500,000
	K2 Japan	 	Dai Ichi Kangyo Bank	 	 	4,195,000
	K2 Japan	 	Dai Ichi Kangyo Bank — LC's	 	 	333,000
	K2 GmbH	 	Bank of America	 	 	7,427,000
	Shakespeare Hong Kong	 	Wells Fargo Bank/Norwest	 	 	2,968,000
	Stearns Inc.	 	Norwest Bank — LC's	 	 	435,000
	Shakespeare Fishing Tackle U.K.	 	Bank of America	 	 	460,000
	Shakespeare Hengelsport B.V.	 	ING Bank	 	 	0
	Shakespeare Australia	 	National Australia Bank	 	 	0
	 	 	Recourse obligations in respect of the discounted promissory notes in Japan	 	 	4,361,000

Capitalized Leases:  

	Subsidiary
	 	Description
	 	Amount Outstanding as of March 5, 2002 (US$)

	Ride Inc.	 	Key Bank	 	$	96,000
	Morrow Inc.	 	Flow International	 	$	32,000

SCHEDULE
IV

(to Third Amendment to Note Purchase Agreement) 

 
 

Subsidiaries of Company, Investments, Affiliates    
  

	Subsidiaries
	 	Subsidiary

Guarantor
	 	Percentage of Each Class Outstanding Owned by Company and Each Other Subsidiary

	Shakespeare Conductive Fibers, LLC, a Delaware limited liability company	 	Yes	 	100%
	Shakespeare Company, LLC, a Delaware limited liability company	 	Yes	 	100%
	Shakespeare (Hong Kong) Ltd., a Hong Kong corporation	 	No	 	99%*
	Pacific Rim Metallic Products Limited, a Hong Kong corporation	 	No	 	99%*
	Shakespeare International Ltd., a British corporation	 	No	 	100%
	Shakespeare Hengelsport, B.V., a Dutch corporation	 	No	 	100%
	Shakespeare (Australia) Pty. Ltd., an Australian corporation	 	No	 	99%*
	K2 Ski Sport und Mode GmbH, a German corporation	 	No	 	100%
	Sitca Corporation, a Washington corporation	 	Yes	 	100%
	K-2 Corporation, an Indiana corporation	 	Yes	 	100%
	Planet Earth Skateboards, Inc., a California corporation	 	Yes	 	100%
	K-2 International, Inc., an Indiana corporation	 	Yes	 	100%
	K2 Japan Corporation, a Japanese corporation	 	No	 	100%
	Madshus A.S., a Norwegian corporation	 	No	 	100%
	SMCA, Inc., a Minnesota corporation	 	Yes	 	100%
	Stearns Inc., a Minnesota corporation	 	Yes	 	100%
	Ride, Inc., a Washington corporation	 	Yes	 	100%
	Anthony Sales (Barbados), Ltd., a Barbados corporation**	 	No	 	100%
	K2 Worldwide Company, a Cayman Island limited company	 	No	 	100%
	Katin, Inc., a Delaware corporation	 	Yes	 	100%
	Morrow Snowboards, Inc., a Delaware corporation	 	Yes	 	100%
	K2 Bike, Inc., a Delaware corporation	 	Yes	 	100%
	K2 Funding Inc., a Delaware corporation	 	No	 	100%
	Shakespeare Industries Inc., a Delaware corporation	 	No	 	100%
	Shakespeare Company (UK) Ltd., a United Kingdom company	 	No	 	100%
	Shakespeare Monofilament UK Ltd., a United Kingdom company	 	No	 	100%
	K2 (UK) Limited, a United Kingdom company	 	No	 	100%
	Ride Snowboard Company, a Washington company	 	No	 	100%
	Ride Manufacturing Inc., a California corporation	 	No	 	100%
	Smiley Hats, Inc., a Nevada corporation	 	No	 	100%
	K2 Corporation of Canada, a Canadian corporation	 	No	 	100%
	Preston Binding Co., a Washington company	 	No	 	100%
	Carve Inc., a Washington corporation	 	No	 	100%
	SMP Clothing Inc., a Washington corporation	 	No	 	100%
	K2 Outdoor Products (NZ) Ltd., a New Zealand corporation	 	No	 	100%
	K2 Finance Company, LLC, a Delaware limited liability company	 	No	 	100%
	K2 Receivables Corporation, a Delaware corporation	 	No	 	100%

	*
	One
share owned by a director.

	**
	Presently
being dissolved. 

SCHEDULE
V

(to Third Amendment to Note Purchase Agreement) 

 

Investments of the Company and Its Subsidiaries:  

	Common Stock Investments
	 	Number of Shares

	Albany International Corporation	 	10
	Bell Sports Company	 	10
	Brunswick Corporation	 	20
	Cascade Industries, Incorporated	 	10
	Centuri, Inc.	 	100
	Champion International Corporation	 	2
	Coleco Industries	 	4
	Coleman Company, Inc.	 	10
	Escalade, Inc.	 	120
	Figgie International	 	16
	First Team Sports	 	15
	Glassmaster	 	10
	Hallwood Industries Incorporated	 	2,760
	Huffy	 	10
	Johnson Worldwide Associates	 	10
	Major Pool Equipment Corp.	 	11
	Metromedia International Group	 	10
	Mossimo Inc.	 	10
	Nike, Inc.	 	40
	Pro-Group	 	10
	Quiksilver	 	10
	Reebok International, Ltd.	 	10
	Seatrain Lines, Inc.	 	3
	Skis Rossignol	 	10
	Starter Corporation	 	10
	The Mead Corporation	 	4

Company's Affiliates (other than Subsidiaries):  

        Hilton
Corporate Casuals—Division of K2 Inc. 

        Shakespeare
Fishing Tackle (South Carolina)—Division of Shakespeare LLC 

        Shakespeare
Monofilament (South Carolina)—Division of Shakespeare LLC 

        Shakespeare
Composites & Electronics (South Carolina)—Division of Shakespeare LLC 

2

 
 

LIENS OF COMPANY AND ITS SUBSIDIARIES    
  

Liens:  

Collateral
Description

A= Accounts

E(S) = Equipment (specified items only)

E(C)= Equipment (all items sold, leased or financed under specific contract)

E(A)= Equipment (all equipment)

B = Blanket

O = Other 

	Debtor
	 	Office/

Agency

Searched
	 	Search

Valid

Through
	 	Secured

Party
	 	File No./

File Date
	 	Collateral

Description
	 	Comment

	Anthony Industries	 	CA Sec. of State	 	1/9/02	 	Enterprise Funding Corporation	 	9601960459/

1/19/96	 	A	 	Assigned to NationsBank (BofA)
	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

 	
 	

K2 Funding Inc. substituted as Debtor
	

Hilton Corporate Casuals1	
 	

IL Sec. of State	
 	

1/3/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Hilton Corporate Casuals	
 	

AL Sec. of State	
 	

12/26/01	
 	

 	
 	

 	
 	

 	
 	

 
	K2 Corp.	 	Washington Dept. of Licensing	 	2/15/02	 	Anthony Industries	 	00960190045/

1/19/96	 	A	 	Assigned to NationsBank (BofA) then K2 Funding substituted as Secured Party and further assigned to Bank of America; Continued 11/13/2000
	

K2 Corp.	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

K2 Funding	
 	

00970730026/

3/14/97	
 	

A	
 	

Assigned to NationsBank (BofA)

	1
	a
division of K2 Inc. 

Schedule
VI

(to Third Amendment to Note Purchase Agreement) 

 

	Debtor
	 	Office/

Agency

Searched
	 	Search

Valid

Through
	 	Secured

Party
	 	File No./

File Date
	 	Collateral

Description
	 	Comment

	K2 Corp.	 	Washington Dept. of Licensing	 	2/15/02	 	American Technologies Credit	 	00971390035/

5/19/97	 	E(S)	 	 
	

K 2 Corporation	
 	

CA Sec. of State	
 	

3/6/02	
 	

Associates Commercial Corporation	
 	

0020160680/

7/13/2000	
 	

E(C)	
 	

 
	

K-2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

PrimeSource Corp.	
 	

00982670197/

9/24/98	
 	

E(C)	
 	

 
	

K-2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

Flow International Corp.	
 	

00993560217/

11/22/99	
 	

E(S)	
 	

 
	

K2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

SAFECO Credit Company, Inc.	
 	

20011090161/

4/19/01	
 	

E(S)	
 	

 
	

K2 Corporation	
 	

Washington Dept. of Licensing	
 	

2/15/02	
 	

Magid Glove & Safety Mfg. Co.	
 	

20011490078/

5/29/01	
 	

O (Inventory)	
 	

 
	

K2 Corporation	
 	

AL Sec. of State	
 	

12/26/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Corporation	
 	

IL Sec. of State	
 	

1/3/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Corporation	
 	

IN Sec. of State	
 	

2/19/02	
 	

Bankers/

Softech Divisions of EAB Leasing Corp.	
 	

200100007508

528/10/4/01	
 	

E(C)	
 	

 
	

K2 Corporation	
 	

IN Sec. of State	
 	

2/19/02	
 	

Bank of America, N.A., as Agent	
 	

200200000631

256/1/22/02	
 	

 	
 	

 
	

K2 Funding	
 	

CA Sec. of State	
 	

1/9/02	
 	

Enterprise Funding Corporation	
 	

9707360241/

3/7/97	
 	

A	
 	

Assigned to NationsBank
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

12/7/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

 	
 	

K-2 Corporation	
 	

 	
 	

A	
 	

Pending filing
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

 	
 	

Shakespeare Company, LLC	
 	

 	
 	

A	
 	

Pending filing
	

K2 Funding Inc.	
 	

DE Sec. of State	
 	

 	
 	

Stearns Inc.	
 	

 	
 	

A	
 	

Pending filing
	

K2 Inc.	
 	

DE Sec. of State	
 	

1/25/02	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Inc.	
 	

CA Sec. of State	
 	

3/6/02	
 	

K2 Funding, Inc.	
 	

9709460920/

4/3/97	
 	

A	
 	

 
	

K2 Inc.	
 	

AL Sec. of State	
 	

12/26/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Inc.	
 	

IL Sec. of State	
 	

1/3/02	
 	

 	
 	

 	
 	

 	
 	

 
	

K2 Inc. dba Simplex	
 	

OH Sec. of State	
 	

 	
 	

General Electric Capital Corporation	
 	

AP0204752/

1/4/00	
 	

E(S)	
 	

 
	

K2 Inc.	
 	

MI Sec. of State	
 	

 	
 	

Caterpillar Financial Services Corporation	
 	

9501612016/

12/7/98	
 	

E(S)	
 	

 
	

K2 Inc., Shakespeare Monofilament Division	
 	

SC Sec. of State	
 	

 	
 	

NEC America, Inc.	
 	

981110-

114259A	
 	

E(S)	
 	

 
	

K2 Inc., Shakespeare Monofilament Division	
 	

CA Sec. of State	
 	

 	
 	

NEC America, Inc.	
 	

9832060787/

11/10/98	
 	

E(S)	
 	

 
	

K-2 International	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

K-2 International, Inc.	
 	

IN Sec. of State	
 	

1/7/02	
 	

 	
 	

 	
 	

 	
 	

 

VI-2

 

	

K2 Worldwide Company	
 	

CA Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Morrow Snowboards	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

Flow International Corp.	
 	

00993560217/

11/22/99	
 	

E(S)	
 	

 
	

Planet Earth Skateboards, Inc.	
 	

CA Sec. of State	
 	

1/9/02	
 	

Hawthorne Machinery Co.	
 	

9922460390/

7/30/99	
 	

E(S)	
 	

 
	

Preston Binding Company	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981100505/

4/20/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981100506/

4/20/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981100507/

4/20/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981130231/

4/23/98	
 	

E(S)	
 	

 
	

Ride, Inc.	
 	

Washington Dept. of Licensing	
 	

1/31/02	
 	

Key Corp Leasing	
 	

00981910124/

7/10/98	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

CA Sec. of State	
 	

3/4/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Company	
 	

CA Sec. of State	
 	

 	
 	

Bank of America, N.A., as Agent	
 	

9707360252/

3/13/97	
 	

 	
 	

 
	

Shakespeare Company	
 	

CA Sec. of State	
 	

 	
 	

Bank of America, N.A., as Agent	
 	

9601960446	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

DE Sec. of State	
 	

1/25/02	
 	

Wells Fargo Financial	
 	

200111125330/

9/10/01	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

DE Sec. of State	
 	

1/25/02	
 	

Bank of America, N.A., as Agent	
 	

20162291/

1/18/02	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

DE Sec. of State	
 	

1/25/02	
 	

Bank of America, N.A., as Agent	
 	

20118376/

1/15/02	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Citicorp Vendor Finance, Inc.	
 	

104812A/

3/20/01	
 	

E(C)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

124716A/

3/6/98	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Midland Clarklift, Inc.	
 	

084426A/

4/16/99	
 	

E(S)	
 	

Assigned to Associates Commercial Corp.
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

National Vendor Supply Co.	
 	

133749A/

1/28/99	
 	

E(S)	
 	

Assigned to Industrial Credit
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

100110A/

6/22/99	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

100054A/

6/22/99	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Associates Leasing, Inc.	
 	

113047A/

8/19/98	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Southland Equipment	
 	

163229B/

1/15/97	
 	

E(S)	
 	

Assigned to Associates Leasing
	

Shakespeare Company, LLC	
 	

SC Sec. of State	
 	

1/10/02	
 	

Barloworld Handling	
 	

092851A/

5/31/01	
 	

E(S)	
 	

 
	

Shakespeare Company, LLC	
 	

OH Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 

VI-3

 

	

Shakespeare Company, LLC	
 	

NJ Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Company, LLC	
 	

FL Sec. of State	
 	

3/1/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Conductive Fibers, LLC	
 	

CA Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Conductive Fibers, LLC	
 	

DE Sec. of State	
 	

11/20/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics2	
 	

SC Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

CA Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

FL Sec. of State	
 	

3/1/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

NJ Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Composites & Electronics	
 	

OH Sec. of State	
 	

1/9/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Fishing Tackle2	
 	

SC Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Fishing Tackle	
 	

NJ Sec. of State	
 	

1/10/02	
 	

 	
 	

 	
 	

 	
 	

 
	

Shakespeare Monafilament2	
 	

SC Sec. of State	
 	

1/10/02	
 	

WB Group LP dba Wrenn Handling	
 	

142821A/

4/7/99	
 	

E(S)	
 	

Assigned to Hyster Credit Co.
	

Shakespeare Monafilament	
 	

SC Sec. of State	
 	

1/10/02	
 	

WB Group LP dba Wrenn Handling	
 	

120328A/

1/18/99	
 	

E(S)	
 	

Assigned to Hyster Credit Co.
	

Shakespeare Monafilament	
 	

NC Sec. of State	
 	

12/20/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Sitca Corporation	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Smiley Hats, Inc.	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

SMP Clothing, Inc.	
 	

Washington Dept. of Licensing	
 	

12/10/01	
 	

 	
 	

 	
 	

 	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

IBM Credit Corp.	
 	

2191501/

1/06/99	
 	

E(C)	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

IBM Credit Corp.	
 	

1984766/

10/30/97	
 	

E(C)	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

Hirsch International Corp.	
 	

2066713/

9/8/98	
 	

E(S)	
 	

 
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

Green Tree Vendor Services Group	
 	

21102881/

3/1/99	
 	

E(S)	
 	

Assigned to Wells Fargo Leasing

VI-4

 

	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

Minnesota Lift Truck	
 	

2286596/

1/2/01	
 	

E(S)	
 	

Assigned to Toyota Motor Credit Corporation
	

Stearns, Inc.	
 	

MN Sec. of State	
 	

2/19/02	
 	

K2 Funding	
 	

2216955/

4/06/00	
 	

A	
 	

Assigned to Bank of America
	

Stearns Manufacturing	
 	

MN Sec. of State	
 	

3/18/02	
 	

Northern States Power Co.	
 	

1508906/

6/12/92	
 	

E(S)	
 	

Search date
	

Stearns Manufacturing Co.	
 	

MN Sec. of State	
 	

3/20/02	
 	

IBM Credit Corporation	
 	

1929884/

4/3/97	
 	

E(S)	
 	

Search date
	

Stearns Manufacturing Company	
 	

MN Sec. of State	
 	

3/20/02	
 	

MacPherson Meistergram	
 	

1993039/

12/2/97	
 	

E(S)	
 	

Search date

	2
	a
division of Shakespear Company LLC 

VI-5

 
 

[Form of Amended and Restated Note]
  K2 Inc.    

Series 1999-A
Senior Note due December 1, 2009 

	 
	 	 

	No. [            ]	 	[Date]
	$[                        ]	 	PPN 482732 A* 5

        For Value Received, the undersigned, K2 Inc. (herein called the "Company"), a
corporation organized and existing under the laws of the State of Delaware, hereby promises to pay to [                        ]
or registered assigns, the principal sum of
[                        ] Dollars on December 1, 2009 with interest (computed on the basis of a 360-day year of twelve
30-day months) (a) on the
unpaid balance thereof at the Applicable Rate from the date hereof, payable semi-annually, on the first day of June and December in each year, commencing with the June 1 or
December 1 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable
semi-annually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 2% over the Applicable
Interest Rate or (ii) 2% over the rate of interest publicly announced by Bank of America, N.A. from time to time in New York, New York as its "base" or "prime" rate. 

        Payments
of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal
office of Bank of America, N.A. in New York, New York or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase
Agreement referred to below. 

        This
Note is one of a series of Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreement, dated as of
December 1, 1999 (as from time to time amended, supplemented or modified, including a Third Amendment to Note Purchase Agreement dated as of March 27, 2002, the  "Note Purchase Agreement"),
between the Company and the respective Noteholders named therein and is entitled to the benefits thereof. Each holder of
this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have
made the representation set forth in Section 6.2 of the Note Purchase Agreement. 

        This
Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. 

Exhibit
A

(to Third Amendment to Note Purchase Agreement) 

 

        The
Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in
whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. 

        The
interest rate borne by this Note and the other Notes issued pursuant to the Note Purchase Agreement may be changed upon the terms and conditions set forth in the Note Purchase
Agreement. 

        If
an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner,
at the
price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement. 

        All
amounts of principal, interest and Make-Whole Amount payable with respect to the Notes are unconditionally guaranteed by all Subsidiaries under and pursuant to that
certain Guaranty Agreement dated as of December 1, 1999 from said Subsidiaries. 

        This
Note shall be construed and enforced in accordance with, and the rights of the issuer and holder hereof shall be governed by, the law of the State of New York excluding
choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 

	 	 	K2 Inc.
	

 	
 	

By:	
 	

	 	 	 	 	Name:	 	

	 	 	 	 	Title:	 	

VI-2

 
 

INTERCREDITOR AGREEMENT    
  

Exhibit
B

(to Third Amendment to Note Purchase Agreement) 

 
 

AMENDMENT TO GUARANTY AGREEMENT    
  

Exhibit
C

(to Third Amendment to Note Purchase Agreement) 

 
 

CASH FLOW FORECASTS    
  

Exhibit
D

(to Third Amendment to Note Purchase Agreement) 

QuickLinks

Table of Contents

K2 Inc. 4900 South Eastern Avenue Los Angeles, California 90040

Preliminary Statement

Closing Conditions

Post Closing Requirements

Indebtedness of Company and Its Subsidiaries

Subsidiaries of Company, Investments, Affiliates

LIENS OF COMPANY AND ITS SUBSIDIARIES

[Form of Amended and Restated Note] K2 Inc.

INTERCREDITOR AGREEMENT

AMENDMENT TO GUARANTY AGREEMENT

CASH FLOW FORECASTS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]