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EXHIBIT 10(c)(1)  

 
 

FIRST AMENDMENT TO CREDIT AGREEMENT    
  

        THIS FIRST AMENDMENT TO CREDIT AGREEMENT dated as of March 28, 2002 (this "Amendment") is among
K2 INC. (the "Borrower"), the other signatories hereto and BANK OF AMERICA, N.A., as Administrative Agent, Issuing Lender and Swing Line Lender
(the "Administrative Agent"), and amends the Credit Agreement dated as of December 21, 1999 (the "Credit
Agreement"). 

 
 

RECITALS    
  

        WHEREAS, the parties hereto desire to amend the Credit Agreement in certain respects as more fully set forth herein; 

        NOW,
THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows: 

        1.    Terms.    All terms used herein have the same meanings as in the Credit Agreement unless otherwise defined
herein. 

        2.    Amendments.    Subject to the satisfaction of the conditions precedent set forth in Section 5, the Credit
Agreement is hereby amended as follows: 

        2.1    Amendments to Section 1.01.    

        (a)  The
following definitions are added to Section 1.01 in appropriate alphabetical sequence: 

        "Collateral Agent"    means Bank of America in its capacity as collateral agent under the Intercreditor Agreement, and any successor
thereto in such
capacity. 

         "Consolidated Income Available for Fixed Charges"    means, for any measurement period, the sum of (i) Consolidated Net Income,
(ii) income tax expense, determined in accordance with GAAP, (iii) non-cash, nonrecurring 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 Borrower in the third fiscal quarter of 2001. 

         "Covenant Change Date"    means the first date on which (a) Borrower has delivered financial statements pursuant to  Section 6.01(a) or (b) and a related Compliance Certificate demonstrating that the Funded
Leverage Ratio as of the end of a fiscal quarter was less than 3.25 to 1 and (b) no Default or Event of Default exists. 

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

         "Funded Debt"    means all Indebtedness of Borrower 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 Borrower. 

         "Lease Rentals"    means, with respect to any measurement period, the sum of the minimum amount of rental and other obligations required
to be paid
during such period by Borrower or its Subsidiaries as lessee under all leases of real or personal property (other than Capitalized Leases), 

1

 

excluding any amounts required to be paid by the lessee (whether or not designated as rentals) 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. 

         "Lender Percentage"    means the quotient, expressed as a percentage, of (a) the combined Commitments (or after termination of the
Commitments,
the Outstanding Obligations at such time) divided by (b) the sum of (i) the combined Commitments (or after termination of the Commitments, the Outstanding Obligations) plus
(ii) the aggregate outstanding principal amount of the Senior Notes plus (iii) the aggregate outstanding principal amount of loans under the UB Agreement (as defined in the Intercreditor
Agreement) plus (iv) the sum of the aggregate outstanding principal amount of loans and the stated amount of outstanding letters of credit under the BofA Agreements (as defined in the
Intercreditor Agreement) plus (v) the unused amount of the commitment to make loans under the BofA Agreements plus (vi) the outstanding principal amount of credit extensions under the
Additional Financing Agreements. 

        "Membership Pledge Agreement"    means the membership pledge agreement dated as of March 28, 2002 among Borrower, 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 Borrower or any Subsidiary Guarantor. 

         "Net Debt Proceeds"    means, with respect to any issuance of Subordinated Indebtedness by Borrower or any of its Subsidiaries, the
aggregate cash
proceeds received by Borrower or such Subsidiary pursuant to such issuance, net of the direct costs relating to such issuance (including sales and underwriter's discounts and commissions and legal,
accounting and investment banking fees). 

         "Pledge Agreement"    means the pledge agreement dated as of March 28, 2002 among Borrower, various Subsidiary Guarantors and
Collateral Agent. 

         "Security Agreement"    means the security agreement dated as of March 28, 2002 among Borrower, 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 Borrower or any Subsidiary grants collateral to Collateral Agent. 

         "Senior Notes"    means the notes issued by Borrower pursuant to the Senior Note Agreements. 

         "Subordinated Indebtedness"    means Indebtedness of Borrower which is not required to be redeemed, repurchased or otherwise prepaid by
Borrower (except
on account of a default thereunder) on or prior to March 1, 2010, and which Indebtedness is subordinated to other Indebtedness of Borrower (including the Loans) on terms which are reasonably
satisfactory to the Lenders. 

2

 

        (b)  The
definition of "Applicable Margin" is amended by (i) deleting each reference to "Leverage Ratio" contained
therein and substituting "Funded Leverage Ratio" therefor and (ii) amending the pricing grid set forth therein in its entirety to read as follows: 

	Level
	 	Funded

Leverage

Ratio
	 	Offshore Rate

Loans/

Financial Letter

of Credit Fees/

Drafts Accepted

under

Commercial

Letters of Credit
	 	Base Rate

Loans
	 	Performance

Letter of

Credit Fees
	 	Commitment

Fee
	 
	7	 	35.00:1	 	3.250	%	2.000	%	1.625	%	.500	%
	

6	
 	

34.50:1 but

<5.00:1	
 	

2.750	
%	

1.500	
%	

1.375	
%	

..500	
%
	

5	
 	

34.00:1 but

<4.50:1	
 	

2.250	
%	

1.000	
%	

1.125	
%	

..500	
%
	

4	
 	

33.50:1 but

<4.00:1	
 	

2.000	
%	

0.750	
%	

1.000	
%	

..500	
%
	

3	
 	

33.00:1 but

<3.50:1	
 	

1.500	
%	

0.250	
%	

0.750	
%	

..325	
%
	

2	
 	

32.50:1 but

<3.00:1	
 	

1.250	
%	

0.000	
%	

0.625	
%	

..275	
%
	

1	
 	

<2.50:1	
 	

1.000	
%	

0.000	
%	

0.500	
%	

..225	
%

        (c)  The
definition of "Applicable Payment Date" is amended by (i) redesignating clause (b) as clause "(c)" and
(ii) inserting the following new clause (b): "(b) as to any Base Rate Loan, the last Business Day of each month,". 

        (d)  The
definition of "Basket Total Debt" is deleted in its entirety. 

        (e)  The
definition of "Consolidated EBITDA" is amended by inserting the following proviso before the period at the end
thereof: 

;
provided, further, that Consolidated EBITDA shall not be reduced by any portion of the $18,000,000 charge taken by Borrower in the third fiscal
quarter of 2001. 

        (f)    The
definition of "Indebtedness" is amended in its entirety to read as follows: 

        "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; 

3

 

        (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; 

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

        (f)    all
obligations of such Person under Permitted Accounts Receivable Financing Facilities; and 

        (g)  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 Requisite Lenders). 

        (g)  The
definition of "Intercreditor Agreement" is amended in its entirety to read as follows: 

         "Intercreditor Agreement"    means an intercreditor agreement among the purchasers party to the Senior Note Agreements, various other
creditors of
Borrower and the Subsidiary Guarantors and Collateral Agent. 

        (h)  The
definition of "Letter of Credit" is amended in its entirety to read as follows: 

        "Letter of Credit"    means any letter of credit issued for the account of Borrower (or jointly for the account of Borrower and any
Subsidiary)
hereunder. A Letter of Credit may be a Commercial Letter of Credit, a Performance Letter of Credit or a Financial Letter of Credit. 

        (i)    The
definition of "Leverage Ratio" is amended in its entirety to read as follows: 

        "Leverage Ratio"    means, as of any date of determination, the ratio of (a) consolidated Indebtedness of Borrower 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 Borrower. 

        (j)    The
definition of "Loan Documents" is amended by inserting the phrase ", the Security Documents" immediately before the
phrase "and any Note" contained therein. 

        (k)  The
definition of "Maturity Date" is amended by deleting the reference to "September 30, 2004" therein and
substituting "December 31, 2003" therefor. 

        (l)    The
definition of "Obligations" is amended by inserting the phrase ", or but for operation of any provision of any Debtor
Relief Law, would accrue" after the phrase "interest that accrues" contained therein. 

        (m)  Clause (b)
of the definition of "Ordinary Course Indebtedness" is amended by inserting the phrase ", so long as
such Indebtedness is paid within three Business Days after the incurrence thereof" before the semicolon at the end thereof. 

        (n)  The
definition of "Ordinary Course Liens" is amended by (i) deleting the word "and" at the end of
clause (d), (ii) redesignating clause (e) as clause "(g)" and (iii) inserting the following new clauses (e) and (f): 

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

4

 

        (f)    Liens
on assets of Foreign Subsidiaries securing Indebtedness of one or more Foreign Subsidiaries permitted under  Section 7.02; and. 

        (o)  The
definition of "Permitted Accounts Receivable Financing Facilities" is amended in its entirety to read as follows: 

         "Permitted Accounts Receivable Financing Facilities"    means one or more facilities involving the sale or discount of undivided ownership
interests in
(a) domestic accounts receivable and related property of Borrower and one or more of its Domestic Subsidiaries; provided that the aggregate
investment or claim held by purchasers of such assets does not exceed $75,000,000 (or, if the Covenant Change Date has occurred, $100,000,000); or (b) foreign accounts receivable and related
property of one or more Foreign Subsidiaries; provided that the aggregate investment or claim held by purchasers of such assets does not exceed
$20,000,000 (or, if the Covenant Change Date has occurred, $30,000,000). 

        (p)  The
definition of "Subsidiary" is amended in its entirety to read as follows: 

         "Subsidiary"    of a Person means any corporation, partnership, joint venture, limited liability company or other business entity of which
more than 50%
of the total voting power of shares of stock or other equity interests having ordinary voting power for the election of directors or other governing body is at the time owned or controlled, directly
or indirectly by such Person, one or more of the other Subsidiaries of such Person or a combination thereof. 

        (q)  The
definition of "Swap Contract" is amended by inserting the phrase ", foreign exchange contracts" after the phrase
"currency options" contained therein. 

        2.2    Amendment to Section 2.02.    Section 2.02(a) is amended by inserting the following phrase at the
end of the first sentence thereof immediately before the period: 

and,
in the case of any request for an Extension of Credit, so long as the Covenant Change Date has not occurred, a certificate of a Responsible Officer of Borrower certifying that (i) such
Extension of Credit will be used by Borrower solely for working capital purposes and the making of capital expenditures, in each case in the ordinary course of business consistent with past practices
and (ii) the statement contained in the proviso to Section 7.08 is true and correct after giving effect to the making of such Extension of
Credit and the application of the proceeds thereof. 

        2.3    Amendments to Section 2.03.    

        (a)  The
penultimate sentence of Section 2.03(a) is amended in its entirety to read as follows: 

        No
Letter of Credit may expire later than (i) in the case of a Commercial Letter of Credit, the earlier of (x) 60 days after the date of its issuance or last renewal
and (y) the Letter of Credit Expiration Date and (ii) in the case of any other Letter of Credit, the Letter of Credit Expiration Date; and no banker's
acceptance issued under a Letter of Credit may be payable later than the earlier of (1) 180 days after the issuance thereof and (2) the Maturity Date. 

        (b)  The
last sentence of Section 2.03(j) is amended in its entirety to read as follows: 

        In
addition, Borrower shall pay directly to Issuing Lender for its account a fronting fee in an amount (i) with respect to Performance Letters of Credit and Financial Letters of
Credit, equal to 1/8 of 1% per annum on the face amount thereof, payable quarterly in arrears on each Applicable Payment Date and (ii) with respect to Commercial Letters of
Credit, equal to the greater of (A) $400 and (B) 1/8 of 1% of the face amount thereof, payable on the issuance thereof. 

5

 

        2.4    Amendment to Section 2.06.    Section 2.06 is amended in its entirety to read as follows: 

        2.06    Reduction or Termination of Commitments.    

        (a)  Upon
Requisite Notice to Administrative Agent not later than the Requisite Time therefor, Borrower may at any time and from time to time, without premium or penalty,
(i) permanently and irrevocably reduce the Commitments in a Minimum Amount therefor to an amount not less than the Outstanding Obligations at such time or (ii) terminate the Commitments. 

        (b)  Concurrently
with the receipt by Borrower or any Subsidiary of any Net Issuance Proceeds or Net Debt Proceeds, the Commitments shall be permanently and irrevocably
reduced by an amount (rounded up, if necessary, to an integral multiple of $100,000) equal to the Lender Percentage of 40% of all such Net Issuance Proceeds and Net Debt Proceeds received since
March 28, 2002 minus the aggregate amount previously applied to reduce the Commitments pursuant to this Section 2.06(b). 

        (c)  At
the time that any prepayment of the Senior Notes is (or would be) required to be made pursuant to Section 10.7 of the Senior Note Agreement dated as of
December 1, 1999 or Section 5.17 of the Senior Note Agreement dated as of October 15, 1992 (in each case without giving effect to any modification or amendment after the date
hereof to, or waiver under, or termination of, the applicable Senior Note Agreement), the Commitments shall be permanently and irrevocably reduced by an amount equal to the Lender Percentage of the
total amount of net disposition proceeds from the asset sale which gave rise to such prepayment. 

        (d)  Any
reduction or termination of the Commitments pursuant to clause (a), (b) or (c) above shall be accompanied by payment of all accrued and unpaid
commitment fees with respect to the portion of the Commitments being reduced or terminated. Administrative Agent shall promptly notify Lenders of any request for voluntary reduction or termination of
the Commitments. Each Lender's Commitment shall be reduced by an amount equal to such Lender's Pro Rata Share times the amount of any reduction of the Commitments. 

        2.5    Amendment to Section 2.08.    The parenthetical clause contained in Section 2.08(a) is amended in
its entirety to read "(excluding Swing Line Loans and Commercial Letters of Credit)". 

        2.6    Amendment to Section 5.13.    The first sentence of Section 5.13 is amended in its entirety to
read as follows: 

Borrower
shall use the proceeds of the Loans solely (a) for working capital purposes and for capital expenditures in the ordinary course of business consistent with past practices (including
making regularly-scheduled payments of principal and interest on Indebtedness) and not in contravention in any material respect of any material Law and (b) following the Covenant Change Date,
for making Restricted Payments and for other general corporate purposes. 

        2.7    Amendment to Section 6.01(j).    The following new Section 6.01(j) shall be added to the Credit
Agreement in appropriate numerical sequence: 

        (j)    Cash Flow Forecasts.    On the second Business Day of each week on or prior to the
Covenant Change Date, a 13-week rolling cash flow forecast substantially in the form of Exhibit G.

        2.8    Amendment to Section 6.02(c).    Section 6.02(c) is amended by deleting the word "litigation" the
second time such word appears therein. 

6

 

        2.9    Addition of New Sections 6.11, 6.12 and 6.13.    The following new Sections 6.11, 6.12 and 6.13 are added to
the Credit Agreement in appropriate numerical sequence to read as follows: 

        6.11    Fixed Charges Coverage Ratio.    Borrower will not permit the ratio of Consolidated
Income Available for Fixed Charges to Fixed Charges for the most recently ended period of four consecutive fiscal
quarters of Borrower 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

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.

        6.12    Accounts Receivable Financing Facilities.    Borrower will at all times maintain, and
use reasonable efforts to maximize the usage of, one or more Permitted Accounts Receivable Financing Facilities. 

        6.13    Foreign Pledges.    Borrower will cause to be delivered to Collateral Agent (to the
extent not previously delivered) within the time period specified on Schedule 2 to the First Amendment to this Agreement, agreements executed by Borrower and each Domestic Subsidiary of
Borrower pledging approximately but not less than 65% of the stock or other equity interests of each Foreign Subsidiary owned by Borrower or such Domestic Subsidiary, together with all documents
necessary to perfect the security interest of Collateral Agent in such stock or other equity interests. 

        2.10    Amendments to Section 7.01.    Section 7.01 is amended by: 

        (a)  deleting
the reference to "Sections 7.02" in clause (c) and substituting "Section 7.02" therefor; 

        (b)  adding
the following phrase at the end of clause (d) immediately before the semicolon: "; provided that such Liens
shall extend only to property or items of property which constitute Excluded Assets under and as defined in the Security Agreement as in effect on the date of the First Amendment to this Agreement";
and 

        (c)  (i) deleting
the word "and" after clause (f), (ii) redesignating clause (g) as clause "(h)", and (iii) adding the following new
clause (g): "(g) Liens in favor of Collateral Agent; and". 

        2.11    Amendments to Section 7.02.    Section 7.02 is amended as follows: 

        (a)  Clause (b)
is amended in its entirety to read as follows: 

        (b)  Indebtedness
outstanding under the Senior Note Agreements not exceeding in aggregate principal amount $63,336,000,  provided that such Indebtedness shall at all times be pari
passu with (and, if secured, equally and
ratably secured with) the Obligations; 

        (b)  Clause (f)
is redesignated as clause "(h)"; 

        (c)  Clause (e)
is redesignated as clause "(f)" and is restated in its entirety to read as follows: 

        (f)    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 shall not exceed 15% of Consolidated Net Worth at any time, (iii) the 

7

 

aggregate outstanding principal amount of all such Indebtedness which is secured by any assets of Borrower or any Domestic Subsidiary (other than Indebtedness that is entitled to the benefits of the
Intercreditor Agreement) shall not exceed 3% of Consolidated Net Worth at any time, and (iv) the aggregate outstanding principal amount of all such Indebtedness which is secured by any assets
of any Foreign Subsidiary shall not exceed 15% of Consolidated Net Worth at any time; and 

        (d)  The
following new clauses (e) and (g) are added to Section 7.02 in proper sequence: 

        (e)  Indebtedness
hereunder; 

        (g)  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; 

        2.12    Amendment to Section 7.03.    Section 7.03 is amended by inserting the following at the end of
that section immediately before the period: "; provided that any Subsidiary of Borrower which is a special purpose entity pursuant to a Permitted
Accounts Receivable Financing Facility may enter into agreements which restrict its ability to do any of the foregoing if (a) its net worth is or would be below a minimum level or (b) an
event has occurred which would (or, with the giving of notice or lapse of time, would) permit the lenders or purchasers under such Permitted Accounts Receivable Financing Facility to terminate such
Permitted Accounts Receivable Financing Facility". 

        2.13    Amendment to Section 7.04.    Clause (c) of Section 7.04 is amended in its entirety to
read as follows: "(c) any of its Subsidiaries may sell, lease or otherwise dispose of (i) all or any substantial part of its assets to Borrower or any wholly-owned Domestic Subsidiary (other
than a special purpose entity in connection with a Permitted Accounts Receivable Financing Facility) or (ii) all or any substantial part of its accounts receivable in connection with a
Permitted Accounts Receivable Financing Facility". 

        2.14    Amendment to Section 7.06.    Section 7.06 is amended by adding the following sentence to the
end of the section: 

        Notwithstanding
the foregoing, Borrower will not, nor will it permit any of its Subsidiaries to, make any Acquisition with the proceeds of any Debt 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 Borrower
in connection with such Acquisition to the extent approved by the Requisite Lenders and (b) the Funded Debt of any Person to be acquired by Borrower 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. 

        2.15    Amendment to Section 7.07.    Section 7.07 is amended in its entirety to read as follows: 

        7.07    Operating Leases.    Borrower will not, nor will it permit any of its Subsidiaries to,
create or suffer to exist obligations for the payment of rent under Operating Leases in excess of $12,000,000 in the aggregate for Borrower and its Subsidiaries at any time after the effectiveness of
the First Amendment to this Agreement. 

        2.16    Amendment to Section 7.08.    Section 7.08 is amended as follows: 

        (a)  Clauses
(g) and (h) of Section 7.08 are amended in their entirety to read as follows: 

        (g)  loans,
guarantees or other extensions of credit to Borrower's employee stock ownership plan existing on the date of the First Amendment to this Agreement; 

        (h)  [Intentionally
omitted]; 

        (b)  The
period at the end of clause (k) is replaced with a semicolon followed by the following: 

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 

8

 

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 Borrower and its Subsidiaries does not exceed
$10,000,000 for any four consecutive Business Days. 

        2.17    Amendment to Section 7.09.    Section 7.09 is amended by inserting the following clause before
the period at the end of the first paragraph thereof: 

;
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. 

        2.18    Amendment to Section 7.12.    Section 7.12 is amended by replacing the number "$30,000,000" in
the last sentence of that section with the number "$20,000,000". 

        2.19    Amendment to Section 7.14.    Section 7.14 is amended in its entirety to read as follows: 

        7.14    Leverage Ratio.    Borrower shall 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 and thereafter	 	4.25 to 1.

        2.20    Amendment to Section 7.15.    Section 7.15 is amended in its entirety to read as follows: 

        7.15    Interest Coverage Ratio.    Borrower shall 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 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 and thereafter	 	2.50 to 1.

        2.21    Amendment to Section 8.01.    Section 8.01 is amended by (i) deleting the period at the
end of clause (m), (ii) inserting "; or" at the end of clause (m), and (iii) inserting a new clause (n) to read as follows: 

        (n)  (i) any
Security Document shall cease to be in full force and effect with respect to Borrower or any Subsidiary Guarantor (other than as a result of a transaction
permitted hereunder); (ii) Borrower 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 

9

 

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 Borrower; or (iii) Borrower or any
Subsidiary Guarantor (or any Person by, through or on behalf of Borrower or such Subsidiary Guarantor) shall contest in any manner the validity, binding nature or enforceability of any Security
Document. 

        2.22    Amendment to Section 10.01.    Clause (d) of Section 10.01 is amended by inserting the
following phrase immediately before the semicolon at the end of that clause: "or all or substantially all of the collateral granted under the Security Documents". 

        2.23    Amendment to Section 10.04.    Clause (i) of the proviso set forth in Section 10.04(b) is
amended by deleting the reference to "a Lender or an Affiliate of the assigning Lender" therein and substituting "an Eligible Assignee" therefor. 

        2.24    Amendment to Section 10.18.    Section 10.18 is amended in its entirety to read as follows: 

        10.18    Further Assurances.    Borrower and its Subsidiaries shall, at their expense and
without expense to Lenders or Administrative Agent, do, execute and deliver such further acts and documents as are necessary, or as Administrative Agent (or the Requisite Lenders acting through
Administrative 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 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 unto Lenders or Administrative Agent of the rights hereby created and (b) ensure that
(i) the obligations of Borrower hereunder and under the other Loan Documents and any obligations of Borrower owing to any Lender or any Affiliate of any Lender under any Swap Agreement are
secured by substantially all of the assets of Borrower and guaranteed by all of its Subsidiaries (including, promptly upon the acquisition or creation thereof, any Subsidiary acquired or created after
the date hereof but excluding any special purpose Subsidiary acquired or created in connection with a Permitted Accounts Receivable Financing Facility) by execution of a counterpart of the Master
Subsidiary Guaranty; provided that (x) no Foreign Subsidiary shall have an obligation to execute a counterpart of the Master Subsidiary Guaranty and (y) neither Borrower 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 2 of
the First Amendment to this Agreement) 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; and (ii) the obligations of each Subsidiary Guarantor under the Master Subsidiary
Guaranty and any obligations of such Subsidiary Guarantor owing to any Lender or any Affiliate of any Lender under any Swap Agreement are secured by substantially all of the assets of such Subsidiary
Guarantor. Notwithstanding the foregoing, neither Borrower nor any Domestic Subsidiary shall be required to pledge more than 65% of the stock of any Foreign Subsidiary. 

        2.25    Addition of New Sections 10.26, 10.27 and 10.28.    The following new Sections 10.26, 10.27 and 10.28 are
added to the Credit Agreement in appropriate numerical sequence: 

        10.26    Collateral Matters.    (a) Administrative Agent shall, and Lenders irrevocably
authorize Administrative Agent to, (i) request that Collateral Agent release any Lien on any property granted to or held by Collateral Agent under any Security Document (w) upon
termination of the Commitments and payment in full of all Loans and other obligations of Borrower hereunder and 

10

 

the expiration or termination of all Letters of Credit; (x) which is sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder, (y) on or
after the occurrence of the Collateral Release Date (as defined in the Intercreditor Agreement) or (z) subject to Section 10.01, if
approved, authorized or ratified in writing by the Requisite Lenders; 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 subsection 7.01(b), 7.01(d) or 7.01(e), any
Lien
securing Indebtedness permitted by subsection 7.02(d) (subject to the limitations set forth in subsection  7.01(c)), and any extension or renewal of the
Liens described above permitted by subsection 7.01(h).
Upon request by Administrative Agent at any time, the Requisite Lenders will confirm in writing Administrative Agent's authority to request that Collateral Agent release or subordinate Collateral
Agent's interest in particular types or items of property. Without limiting the foregoing, Borrower will deliver each of the documents described in Schedule 2 to the First Amendment to this
Agreement on or prior to the date required for delivery of such document in such Schedule 2. 

        10.27    Amendments to Agreements.    Borrower shall not, and shall not 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. Borrower shall, and shall cause each of its applicable Subsidiaries to, promptly (and, in
any event, within three Business Days) deliver to Administrative Agent and each Lender 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 10.27 shall prevent (i) General Electric
Capital Corporation from exercising the discretion granted to it under any GECC Securitization Document (as defined in Section 6.8 of the First Amendment to this Agreement) 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) Borrower 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 Lenders in any material
respect than the terms of the Permitted Accounts Receivable Financing Facility being replaced. 

        10.28    Leases.    Borrower shall, and shall cause each of its Subsidiaries to,
(a) pay all obligations with respect to leases of real property by the Borrower and its Subsidiaries, (b) at the request of Administrative Agent, provide copies of receipts or similar
documents evidencing the current nature of payments under such leases and (c) promptly notify Administrative Agent or any delinquent payment under any such lease. Administrative Agent shall
have the right to make any delinquent lease payment directly to the applicable lessor and to charge Borrower the amount of such payment as a Loan. 

        2.26    Amendment to Exhibit B.    Exhibit B to the Credit Agreement is amended in its entirety to read
as set forth on Exhibit B hereto. 

        2.27    Addition of New Exhibit G.    Exhibit G hereto is added to the Credit Agreement as  Exhibit G thereto.

        3.    Waivers.    The Requisite Lenders hereby waive any Event of Default under Sections 7.14 and 7.15 of the Credit
Agreement for the fiscal quarters ended September 30, 2001 and December 31, 2001. 

11

 

        4.    Representations and Warranties.    The Borrower represents and warrants to the Administrative Agent and the
Lenders that, on and as of the date hereof, and after giving effect to this Amendment: 

        4.1    Authorization.    The execution, delivery and performance by the Borrower of this Amendment has been duly
authorized by all necessary corporate action, and this Amendment has been duly executed and delivered by the Borrower. 

        4.2    Binding Obligation.    This Amendment constitutes the legal, valid and binding obligation of the Borrower,
enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability. 

        4.3    No Legal Obstacle to Amendment.    The execution, delivery and performance of this Amendment will not
(a) contravene the Organization Documents of the Borrower; (b) constitute a breach or default under any contractual restriction or violate or contravene any law or governmental
regulation or court decree or order binding on or affecting the Borrower which individually or in the aggregate does or could reasonably be expected to have a Material Adverse Effect; or
(c) result in, or require the creation or imposition of, any Lien on any of the Borrower's properties, except any Lien pursuant to the Collateral Documents as defined in the Credit Agreement as
amended hereby (as so amended, the "Amended Credit Agreement"). No approval or authorization of any governmental authority is required to permit the
execution, delivery or performance by the Borrower of this Amendment. 

        4.4    Incorporation of Certain Representations.    After giving effect to the terms of this Amendment, the
representations and warranties of the Borrower set forth in Section 5 of the Credit Agreement are true and correct in all respects on and as of the date hereof as though made on and as of the
date hereof, except as to such representations made as of an earlier specified date. 

        4.5    Default.    No Default or Event of Default has occurred and is continuing after giving effect to the terms of
this Amendment. 

        5.    Conditions to Effectiveness.    The effectiveness of this Amendment is subject to the compliance by the Borrower
with its agreements herein contained and the conditions set forth on Schedule 1, and to the delivery to the Administrative Agent, in form and satisfactory to the Administrative Agent, of the
following: 

        5.1    Counterparts.    Counterparts hereof signed by the Borrower and the Requisite Lenders and consented to by each
Subsidiary Guarantor. 

        5.2    Amendment Fee.    Payment of (a) an amendment fee for the account of each Lender approving this
Amendment by 5:00 p.m. PST on March 28, 2002, equal to 30 basis points of such Lender's Commitment, and (b) all fees set forth in a separate fee letter among the Borrower, the
Administrative Agent, the Collateral Agent and the Arranger. 

        5.3    List of Subsidiaries.    A list showing the true legal name of each Subsidiary of the Borrower and designating
which Subsidiaries are Subsidiary Guarantors. 

        6.    Miscellaneous.    

        6.1    Effectiveness of the Credit Agreement.    Except as hereby expressly amended hereby, the Credit Agreement shall
remain in full force and effect, and is hereby ratified and confirmed in all respects on and as of the date hereof. After the effectiveness of this Amendment, all references in the Credit Agreement
and the other Loan Documents to "Credit Agreement" or similar terms shall refer to the Credit Agreement as amended hereby. 

        6.2    Counterparts.    This Amendment may be executed in any number of counterparts, and all of such counterparts
taken together shall be deemed to constitute one and the same instrument. All 

12

 

provisions of this Amendment shall become effective when the Borrower, the Administrative Agent and the Requisite Lenders shall have signed a copy hereof and the same shall have been delivered to the
Administrative Agent and the conditions in Section 4 shall have been satisfied. 

        6.3    Governing Law.    This Amendment shall be governed by and construed in accordance with the laws of the State of
California. 

        6.4    Successors and Assigns.    This Amendment shall be binding upon the Borrower, the Lenders and the
Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Lenders and the Administrative Agent and the respective successors and assigns of
the Lenders and the Administrative Agent. 

        6.5    Certain Collateral Matters.    The Requisite Lenders acknowledge that the Administrative Agent will enter into,
and Bank of America will act as collateral agent (in such capacity, the "Collateral Agent") under, an Amended and Restated Intercreditor Agreement substantially in the form of  Exhibit C among the
purchasers under the Senior Note Agreements and various other creditors of the Borrower and/or its Subsidiaries (the
"Intercreditor Agreement"). The Requisite Lenders authorize (i) the Administrative Agent to enter into the Intercreditor Agreement on behalf of the Lenders and to execute and deliver
such documents as may reasonably be required or appropriate in connection therewith, (ii) Bank of America to act as Collateral Agent on behalf of the Lenders and various other creditors under
the Intercreditor Agreement and (iii) Bank of America to enter into collateral access agreements with General Electric Capital Corporation substantially in the form of Exhibits B-1
and B-2 to the Intercreditor Agreement. 

        6.6    Certain Real Estate Matters.    The Borrower hereby acknowledges that, subsequent to the recordation of the
Mortgages in the appropriate county recorder's office for each of the real properties encumbered thereby, the Collateral Agent will be obtaining a real property appraisal for substantially all of such
real properties for purposes of determining current appraised values (the "Current Appraised Values") for such real properties. The Borrower hereby
acknowledges that the Current Appraised Values of the real properties encumbered by the Mortgages were not available to the Collateral Agent prior to the effectiveness of this Amendment and,
accordingly, the Borrower hereby agrees as follows: 

        (a)  With
respect to any Mortgage recorded in the State of Alabama or Minnesota, to the extent enforcement of such Mortgage is limited to a debt amount that is less than the
Current Appraised Value of the real property encumbered by such Mortgage, the Borrower agrees to enter into, or to cause the applicable Subsidiary Guarantor to enter into, an amendment to such
Mortgage, in form and substance reasonably satisfactory to the Collateral Agent and the Borrower (or the applicable Subsidiary), to increase the enforcement amount of such Mortgage to an amount not
less than 110% of the Current Appraised Value of such real property. Any such amendment to a Mortgage shall be in recordable form and shall be promptly recorded in the applicable county recorder's
office where the applicable encumbered real property is located. 

        (b)  With
respect to any Title Insurance Policy issued in connection with any Mortgage for any real property for which a Current Appraised Value was obtained, if either
(i) the liability amount of such Title Insurance Policy is less than the Current Appraised Value of the real property encumbered by such Mortgage or (ii) the liability amount of such
Title Insurance Policy exceeds 110% of the Current Appraised Value, the Borrower will cause the applicable issuing title insurance company for such Title Insurance Policy to reissue such Title
Insurance Policy (or otherwise supplement the existing Title Insurance Policy) in order to (x) include the amendment to Mortgage entered into in accordance with  Section 10.28(a) as part of the
insured Mortgage, (y) in the case of clause (i)
above, increase the liability amount of such Title Insurance Policy to an amount not less than 110% of the Current Appraised Value of the applicable encumbered real property and (y) in the case
of clause (ii) above, decrease the liability amount of such Title Insurance Policy to an amount equal to 110% of the Current 

13

 

Appraised Value of the applicable encumbered real property. Such reissued or supplemented Title Insurance Policy shall not reflect any exception to title other than as reflected in Schedule B
of the originally issued Title Insurance Policy for such Mortgage. 

        (c)  The
Borrower will pay all costs and expenses (subject only to the limitation set forth in Section 9(m) of the Intercreditor Agreement with respect to costs
associated with appraisals of certain real property), including reasonable attorneys' fees and expenses, incurred in connection with the drafting, negotiation,
closing and recording of the Mortgage amendments referred to above, as well as any additional mortgage taxes, recording costs and title insurance premiums incurred in connection with the foregoing. 

        6.7    Release; Covenant not to Sue.    In consideration of the agreements and understandings in this Amendment, the
Borrower and (by their execution of the Consent to this Amendment) the Subsidiary Guarantors, for themselves and, to the extent that any of the following is claiming by, through, or otherwise on
behalf of (including, without limitation, on any derivative basis) either the Borrower or any Subsidiary Guarantor, for their respective employees, officers, agents, executors, heirs, successors and
assigns, jointly and severally, hereby release each of the Administrative Agent and each Lender, and its employees, officers, participants, agents, affiliates, subsidiaries, successors and assigns
from any claim, right or cause of action which now exists, in any way related to facts in existence as of the date hereof, whether known or unknown. By way of example and not limitation, the foregoing
includes any claims in any way related to the Loan Documents and the business relationship with the Administrative Agent and the Lenders. The Borrower and the Subsidiary Guarantors hereby covenant
that they will refrain from commencing any action or suit or prosecuting any action or suit, in law or in equity, against each of the Administrative Agent and each Lender, and its employees, officers,
agents, participants, affiliates, subsidiaries, successors and assigns, on account of any claim, action or cause of action which now exists in the Borrower's or any Subsidiary Guarantor's favor based
upon facts existing as of the date of this Agreement. In addition to the other liability which shall accrue upon the breach of this covenant, the breaching party shall be liable to the Administrative
Agent and the Lenders for all reasonable attorneys' fees and costs incurred by such party in the defense of such action or suit. 

        The
Borrower and each Subsidiary Guarantor understand and have been advised by their legal counsel of the provisions of Section 1542 of the California Civil Code, which provides
as follows: 

        "A
general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor." 

        Each
of the Borrower and each Subsidiary Guarantor understands and hereby waives the provisions of Section 1542 of the California Civil Code and declares that it realizes that it
may have damages it presently knows nothing about and that, as to it, such damages have been released pursuant to this Section 6.8. Each of the
Borrower and each Subsidiary Guarantor also declares that it understands that the Administrative Agent and the Lenders would not agree to enter into this Amendment if this  Section 6.8 did not cover
damages and their results which may not yet have manifested themselves or may be unknown to or not anticipated at the
present by the Borrower or any Subsidiary Guarantor. 

        6.8    GE Securitization.    The Requisite Lenders hereby (a) consent to the execution, delivery and
performance by the Borrower, 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 Documents and (b) confirm that the facility being provided pursuant to the GECC Securitization Documents constitutes a Permitted
Accounts Receivable Financing Facility. 

14

 

        As
used herein, "GECC Securitization Documents" means the following documents, each in the form delivered to the Lenders on March 27, 2002: (i) the Receivables Sale and
Contribution Agreement dated as of March 28, 2002 among the Borrower, 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, the Borrower, 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 the committed purchaser
(the "Committed Purchaser") and as administrative agent (the "Agent") for the Committed Purchaser and the Conduit Purchaser; (iii) the Parent Performance Guaranty dated as of March 28,
2002 among the Borrower, the Conduit Purchaser, K2 LLC, the Committed Purchaser and the Agent and (iv) the Performance Guaranties each dated as of March 28, 2002 among Stearns,
Shakespeare and K-2 Corp., respectively, and K2 LLC, the Conduit Purchaser, the Committed Purchaser and the Agent. 

15

 

        Delivered
as of the day and year first above written. 

	 	 	K2 INC.
	

 	
 	

By	
 	

 John J. Rangel

Senior Vice President, Finance
	

 	
 	
BANK OF AMERICA, N.A.,

as Administrative Agent
	

 	
 	

By	
 	

 Gina Meador

Vice President
	

 	
 	
BANK OF AMERICA, N.A.,

as Issuing Lender, a Lender and

Swing Line Lender
	

 	
 	

By	
 	

 Timothy C. Hintz

Managing Director
	

 	
 	
BANK ONE, N.A.
	

 	
 	

By	
 	

	 	 	Title	 	

	

 	
 	
UNION BANK OF CALIFORNIA, N.A.
	

 	
 	

By	
 	

	 	 	Title	 	

	

 	
 	
COMERICA WEST INCORPORATED
	

 	
 	

By	
 	

	 	 	Title	 	

16

 
 
 

CONSENT OF SUBSIDIARY GUARANTORS    
  

        The undersigned Subsidiary Guarantors, as party to the Master Subsidiary Guaranty dated as of December 21, 1999 (the "Master
Subsidiary Guaranty"), hereby consent to the foregoing First
Amendment to Credit Agreement dated as of even date herewith to which this consent is attached and confirm that the Master Subsidiary Guaranty remains in full force and effect after giving effect
thereto and represent and warrant that there is no defense, counterclaim or offset of any type or nature under the Master Subsidiary Guaranty. 

	 	 	Subsidiary Guarantors:
	

 	
 	
SHAKESPEARE COMPANY, LLC

SITCA CORPORATION

K2 CORPORATION

KATIN, INC.

PLANET EARTH SKATEBOARDS, INC.

K-2 INTERNATIONAL, INC.

MORROW SNOWBOARDS INC.

SMCA, INC.

STEARNS INC.

K2 BIKE INC.

RIDE, INC.
	

 	
 	
By	
 	

	 	 	Name	 	

	 	 	Title	 	

Date:
March 28, 2002 

17

 
 
 

SCHEDULE 1
  
    CLOSING CONDITIONS    
  

        1.    Acknowledgement and Consent of Subsidiary Guarantors.    Each Subsidiary Guarantor shall have executed and
delivered the Consent of Subsidiary Guarantors. 

        2.    Secretary Certificate of Borrower.    The Borrower shall have delivered to the Administrative Agent a
certificate of an authorized officer, dated as of the date hereof, with respect to its Articles of Incorporation and By-laws, certifying as to resolutions authorizing the execution and
delivery of this Amendment and the Security Documents, and the incumbency and signature of officers. 

        3.    Officer's Certificate of Borrower.    The Borrower shall have delivered to the Administrative Agent 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 Amendment 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 which will
execute a counterpart of the Master Subsidiary Guaranty shall have delivered to the Administrative Agent a certificate of an authorized officer, dated as of the date hereof, with respect to its
Articles of Incorporation and By-laws, certifying as to resolutions authorizing the execution and delivery of the Security Documents or Master Subsidiary Guaranty 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 will execute
a counterpart to the Master Subsidiary Guaranty shall have delivered to the Administrative Agent a certificate of an authorized officer, dated as of the date hereof, certifying that the
representations and warranties of such Subsidiary set forth in Section 4 of this Amendment and in the Security Documents or Master Subsidiary
Guaranty are true and correct. 

        6.    Performance by the Borrower and each Subsidiary.    The Borrower 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 date hereof. 

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

        8.    Filings.    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 delivered to the Collateral Agent. 

        9.    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 Administrative Agent. 

        10.    Bank Credit Agreement.    The Borrower shall have entered into amendments to the Senior Note Agreements, in
each case in form and substance reasonably satisfactory to the Requisite Lenders. 

        11.    Securitization Facility.    The Borrower shall have furnished the Lenders with true and correct copies of
(a) the Receivables Purchase and Servicing Agreement dated as of March 28, 2002 among the Borrower, certain of its Subsidiaries and General Electric Capital Corporation, and all related
Exhibits thereto, and (b) the Receivables Sale and Contribution Agreement dated as of March 28, 2002 among the Borrower and certain of its Subsidiaries, and all related Exhibits thereto,
each in form and substance reasonably satisfactory to the Lenders. 

18

 

        12.    Amended and Restated Intercreditor Agreement.    The Collateral Agent shall have entered into an Amended and
Restated Intercreditor Agreement substantially in the form of Exhibit C.

        13.    Counterpart to Master Subsidiary Guaranty.    Shakespeare Connective Fibers, LLC shall have executed and
delivered a counterpart to the Master Subsidiary Guaranty. 

        14.    Legal Opinion.    Gibson, Dunn & Crutcher LLP, counsel for the Borrower and the Subsidiary Guarantors,
shall have delivered an opinion in form and substance reasonably satisfactory to the Administrative Agent and the Requisite Lenders. 

        15.    Title Insurance.    The Collateral Agent shall have received a loan title insurance policy issued by a title
insurance company reasonably acceptable to the Administrative Agent and the Requisite Lenders (or, in the alternative, a commitment to issue a loan title insurance policy issued by a title insurance
company reasonably acceptable to the Administrative Agent and the Requisite Lenders 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
Amendment (collectively, the "Title Insurance Policies"), in form and substance satisfactory to the Administrative Agent and the Requisite Lenders, and all premiums in respect of the Title Insurance
Policies shall have been paid in full. 

19

 
 
 

SCHEDULE 2
  POST-CLOSING DELIVERIES    
  

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 + 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.    The
Borrower 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 Borrower or a Subsidiary, and (b) not later than
May 24, 2002, Collateral Access Agreements executed by owners of each other property leased by the Borrower or any Subsidiary. 

20

 
 
 

EXHIBIT B
  
    FORM OF AMENDED COMPLIANCE CERTIFICATE    
  

21

 
 
 

EXHIBIT C
  
    FORM OF AMENDED AND RESTATED INTERCREDITOR AGREEMENT    
  

22

 
 
 

EXHIBIT G
  
    FORM OF CASH FLOW FORECAST    
  

23

QuickLinks

FIRST AMENDMENT TO CREDIT AGREEMENT

RECITALS

CONSENT OF SUBSIDIARY GUARANTORS

SCHEDULE 1 CLOSING CONDITIONS

SCHEDULE 2 POST-CLOSING DELIVERIES

EXHIBIT B FORM OF AMENDED COMPLIANCE CERTIFICATE

EXHIBIT C FORM OF AMENDED AND RESTATED INTERCREDITOR AGREEMENT

EXHIBIT G FORM OF CASH FLOW FORECASTQuickLinks
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EXHIBIT 10(e)  

RECEIVABLES PURCHASE AND SERVICING AGREEMENT  

 Dated as of March 28, 2002,  

 by and among  

 K2 FINANCE COMPANY, LLC  

 as Seller,  

 REDWOOD RECEIVABLES CORPORATION,  

 as Conduit Purchaser,  

 K2 INC.,  

 as Master Servicer,  

 K-2 CORPORATION,

SHAKESPEARE COMPANY, LLC, and

STEARNS INC.  

 each as a Servicer  

 K2 RECEIVABLES CORPORATION  

 and  

 GENERAL ELECTRIC CAPITAL CORPORATION,  

 as Committed Purchaser and as Administrative Agent  

  

 
 

TABLE OF CONTENTS    
  

	 
	 	 
	 	Page

	ARTICLE I. DEFINITIONS AND INTERPRETATION	 	1
	 	Section 1.01.	 	Definitions	 	1
	 	Section 1.02.	 	Rules of Construction	 	1
	

ARTICLE II. AMOUNTS AND TERMS OF PURCHASES	
 	

2
	 	Section 2.01.	 	Purchases	 	2
	 	Section 2.02.	 	Optional Changes in Maximum Purchase Limit	 	2
	 	Section 2.03.	 	Notices Relating to Purchases and Reductions in Capital Investment	 	2
	 	Section 2.04.	 	Conveyance of Receivables	 	3
	 	Section 2.05.	 	Facility Termination Date	 	4
	 	Section 2.06.	 	Daily Yield	 	4
	 	Section 2.07.	 	Fees	 	4
	 	Section 2.08.	 	Time and Method of Payments	 	5
	 	Section 2.09.	 	Capital Requirements; Additional Costs	 	5
	 	Section 2.10.	 	Breakage Costs	 	6
	 	Section 2.11.	 	Purchase Excess	 	6
	

ARTICLE III. CONDITIONS PRECEDENT	
 	

7
	 	Section 3.01.	 	Conditions to Effectiveness of Agreement	 	7
	 	Section 3.02.	 	Conditions Precedent to All Purchases	 	8
	

ARTICLE IV. REPRESENTATIONS AND WARRANTIES	
 	

9
	 	Section 4.01.	 	Representations and Warranties of the Seller	 	9
	 	Section 4.02.	 	Representations and Warranties of the Servicer	 	15
	

ARTICLE V. GENERAL COVENANTS OF THE SELLER	
 	

16
	 	Section 5.01.	 	Affirmative Covenants of the Seller	 	16
	 	Section 5.02.	 	Reporting Requirements of the Seller	 	17
	 	Section 5.03.	 	Negative Covenants of the Seller	 	17
	

ARTICLE VI. COLLECTIONS AND DISBURSEMENTS	
 	

19
	 	Section 6.01.	 	Establishment of Accounts	 	19
	 	Section 6.02.	 	Funding of Collection Account	 	21
	 	Section 6.03.	 	Daily Disbursements From the Collection Account and Related Sub-Accounts; Revolving Period	 	22
	 	Section 6.04.	 	Disbursements From the Retention Account; Settlement Date Procedures; Revolving Period	 	23
	 	Section 6.05.	 	Liquidation Settlement Procedures	 	25
	 	Section 6.06.	 	Investment of Funds in Accounts	 	25
	 	Section 6.07.	 	Termination Procedures	 	25
	

ARTICLE VII. SERVICER PROVISIONS	
 	

26
	 	Section 7.01.	 	Appointment of the Servicer	 	26
	 	Section 7.02.	 	Duties and Responsibilities of the Servicer	 	26
	 	Section 7.03.	 	Collections on Receivables	 	26
	 	Section 7.04.	 	Authorization of the Servicer	 	27
	 	Section 7.05.	 	Servicing Fees	 	27
	 	Section 7.06.	 	Representations and Warranties of the Servicer	 	28
	 	Section 7.07.	 	Covenants of the Servicer	 	29
	 	Section 7.08.	 	Reporting Requirements of the Servicer	 	29

i

 

	

ARTICLE VIII. GRANT OF SECURITY INTERESTS	
 	

30
	 	Section 8.01.	 	Seller's Grant of Security Interest	 	30
	 	Section 8.02.	 	Seller's Certification	 	31
	 	Section 8.03.	 	Consent to Assignment	 	31
	 	Section 8.04.	 	Delivery of Collateral	 	31
	 	Section 8.05.	 	Seller Remains Liable	 	32
	 	Section 8.06.	 	Covenants of the Seller and the Servicer Regarding the Seller Collateral	 	32
	

ARTICLE IX. TERMINATION EVENTS	
 	

35
	 	Section 9.01.	 	Termination Events	 	35
	 	Section 9.02.	 	Events of Servicer Termination	 	37
	

ARTICLE X. REMEDIES	
 	

40
	 	Section 10.01.	 	Actions Upon Termination Event	 	40
	 	Section 10.02.	 	Exercise of Remedies	 	41
	 	Section 10.03.	 	Power of Attorney	 	41
	 	Section 10.04.	 	Continuing Security Interest	 	41
	

ARTICLE XI. SUCCESSOR SERVICER PROVISIONS	
 	

41
	 	Section 11.01.	 	Servicer Not to Resign	 	41
	 	Section 11.02.	 	Appointment of the Successor Servicer	 	42
	 	Section 11.03.	 	Duties of the Servicer	 	42
	 	Section 11.04.	 	Effect of Termination or Resignation	 	42
	

ARTICLE XII. INDEMNIFICATION	
 	

42
	 	Section 12.01.	 	Indemnities by the Seller	 	42
	 	Section 12.02.	 	Indemnities by the Servicer	 	44
	 	Section 12.03.	 	Limitation of Damages; Indemnified Persons	 	44
	

ARTICLE XIII. AGENT	
 	

45
	 	Section 13.01.	 	Authorization and Action	 	45
	 	Section 13.02.	 	Reliance	 	45
	 	Section 13.03.	 	GE Capital and Affiliates	 	45
	

ARTICLE XIV. MISCELLANEOUS	
 	

46
	 	Section 14.01.	 	Notices	 	46
	 	Section 14.02.	 	Binding Effect; Assignability	 	46
	 	Section 14.03.	 	Termination; Survival of Seller Secured Obligations Upon Facility Termination Date	 	47
	 	Section 14.04.	 	Costs, Expenses and Taxes	 	47
	 	Section 14.05.	 	Confidentiality	 	48
	 	Section 14.06.	 	No Proceedings	 	49
	 	Section 14.07.	 	Complete Agreement; Modification of Agreement	 	49
	 	Section 14.08.	 	Amendments and Waivers	 	49
	 	Section 14.09.	 	No Waiver; Remedies	 	49
	 	Section 14.10.	 	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	 	49
	 	Section 14.11.	 	Counterparts	 	51
	 	Section 14.12.	 	Severability	 	51
	 	Section 14.13.	 	Section Titles	 	51
	 	Section 14.14.	 	Limited Recourse	 	51
	 	Section 14.15.	 	Further Assurances	 	51

ii

 
 
 

EXHIBITS, SCHEDULES AND ANNEXES    
  

	Exhibit 2.02(a)	 	Form of Commitment Reduction Notice
	Exhibit 2.02(b)	 	Form of Commitment Termination Notice
	Exhibit 2.03(a)	 	Form of Investment Base Certificate
	Exhibit 2.03(b)	 	Form of Capital Purchase Request
	Exhibit 2.03(c)	 	Form of Repayment Notice
	Exhibit 2.04(a)	 	Form of Purchase Assignment
	Exhibit 3.01(a)(i)	 	Form of Solvency Certificate
	Exhibit 3.01(a)(ii)(A)	 	Form of Seller/SPC Certificate (Closing)
	Exhibit 3.01(a)(ii)(B)	 	Form of Seller/SPC Certificate (Post-Closing)
	Exhibit 3.01(a)(iii)(A)	 	Form of Servicer's Certificate (Closing)
	Exhibit 3.01(a)(iii)(B)	 	Form of Servicer's Certificate (Post-Closing)
	Exhibit 3.01(a)(iv)	 	Form of Monthly Report
	Exhibit 10.03	 	Form of Power of Attorney
	Exhibit A	 	Credit and Collection Policy
	Exhibit B-1	 	First Amendment to Credit Agreement
	Exhibit B-4	 	Fourth Amendment to 1992 Note Agreement
	Exhibit B-3	 	Third Amendment to 1999 Note Agreement
	Exhibit C	 	Credit Facility Intercreditor Agreement
	Exhibit D	 	Pledge Agreement
	Exhibit E	 	Membership Interest Pledge Agreement
	Exhibit F	 	Security Agreement
	Schedule 4.01(b)	 	Executive Offices; Collateral Locations; Corporate or Other Names; FEIN/Seller
	Schedule 4.01(d)	 	Litigation
	Schedule 4.01(h)	 	Ventures, Subsidiaries and Affiliates; Outstanding Stock and Debt/Seller
	Schedule 4.01(i)	 	Tax Matters/Seller
	Schedule 4.01(r)	 	Deposit and Disbursement Accounts/Seller
	Schedule 5.01(b)	 	Trade Names/Seller
	Schedule 5.03(b)	 	Existing Liens/Seller
	Annex 5.02(a)	 	Reporting Requirements of the Seller
	Annex 7.07	 	Reporting Requirements of the Servicers
	Annex X	 	Definitions

iii

        THIS RECEIVABLES PURCHASE AND SERVICING AGREEMENT (as amended, supplemented or otherwise modified and in effect from time to time, the
"Agreement") is entered into as of March 28, 2002, by and among K2 FINANCE COMPANY, LLC, a Delaware limited liability company (the
"Seller"), K2 INC., a Delaware corporation (the "Parent"), in its capacity as master servicer
hereunder (in such capacity, the "Master Servicer"), K-2 CORPORATION, an Indiana corporation ("K-2
Corp.") in its capacity as a servicer hereunder, SHAKESPEARE COMPANY, LLC, a Delaware limited liability company ("Shakespeare")
in its capacity as a servicer hereunder, STEARNS INC., a Minnesota corporation ("Stearns") in its capacity as a servicer hereunder, K2
Receivables Corporation, a Delaware corporation ("SPC"), REDWOOD RECEIVABLES CORPORATION, a Delaware corporation (the "Conduit
Purchaser"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as a Committed Purchaser (the "Committed
Purchaser") and as administrative agent for the Conduit Purchaser and the Committed Purchaser hereunder (in such capacity, the "Administrative
Agent"). 

 
 

RECITALS    
  

        A.    The
Seller is a special purpose entity owned by the Originators (as defined below) and SPC. 

        B.    The
Seller has been formed for the purpose of purchasing, or otherwise acquiring by capital contribution, all trade receivables of the Originators. 

        C.    The
Seller intends to sell, and subject to the terms and conditions hereof, the Conduit Purchaser and the Committed Purchaser intend to purchase, undivided percentage
interests in such trade receivables, from time to time, as described herein. 

        D.    The
Administrative Agent has been requested and is willing to act as administrative agent on behalf of each of the Conduit Purchaser and the Committed Purchaser in
connection with the making and financing of such purchases. 

        E.    In
order to effectuate the purposes of this Agreement, the Conduit Purchaser and the Committed Purchaser each desires to appoint the Parent to service, administer and
collect the receivables acquired
by the Purchasers pursuant to this Agreement and the Parent is willing to act in such capacity as Master Servicer hereunder on the terms and conditions set forth herein. 

        F.    In
order to effectuate the purposes of this Agreement, the Conduit Purchaser and the Committed Purchaser each desires to appoint each of K-2 Corp.,
Shakespeare and Stearns to service, administer and collect the receivables originated by it and subsequently acquired by the Purchasers pursuant to this Agreement and each of K-2 Corp.,
Shakespeare and Stearns is willing to act in such capacity as a Servicer hereunder on the terms and conditions set forth herein. 

 
 

AGREEMENT    
  

        NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

 
 

ARTICLE I.    
    
    DEFINITIONS AND INTERPRETATION    
  

        Section 1.01.    Definitions.    Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in Annex X. 

        Section 1.02.    Rules of Construction.    For purposes of this Agreement, the rules of construction set forth
in Annex X shall govern. All Appendices hereto, or expressly identified to this Agreement, are incorporated herein by reference and, taken together with
this Agreement, shall constitute but a single agreement. 

 

 
 

ARTICLE II.    
    
    AMOUNTS AND TERMS OF PURCHASES    
  

        Section 2.01.    Purchases.    From and after the Closing Date and until the Facility Termination Date and
subject to the terms and conditions hereof, the Conduit Purchaser and the Committed Purchaser severally agree to purchase Purchaser Interests (each such purchase hereunder, a
"Purchase") from the Seller from time to time and the Seller agrees to sell such Purchaser Interests to the Purchasers. The obligation of the Conduit
Purchaser to make Purchases hereunder shall be from the Closing Date until the occurrence of either a Committed Purchaser Funding Event or the Facility Termination Date. The obligation of the
Committed Purchaser to make Purchases hereunder shall be from and after the occurrence of a Committed Purchaser Funding Event until the Facility Termination Date. Under no circumstances shall a
Purchaser be obligated to make any Purchase if, after giving effect thereto, a Purchase Excess would exist. Each purchase of undivided percentage ownership interests in the Receivables by the
Purchasers hereunder shall consist of either (i) a purchase made by the applicable Purchasers with new funds provided by such Purchasers (each, a "Capital
Purchase") or (ii) a purchase made by the applicable Purchasers with funds consisting of Collections allocated to the Purchaser Interests pursuant to the terms of this
Agreement (each, a "Reinvestment Purchase"). On each Business Day following the Closing Date until the Facility Termination Date, but subject to  Section 3.02 hereof, each Purchaser holding a Purchaser Interest at such time shall be automatically deemed to have made a Reinvestment Purchase
with the amount of funds to be distributed to the Seller pursuant to Section 6.03(c), if any. 

        Section 2.02.    Optional Changes in Maximum Purchase Limit.    

        (a)  The
Seller may reduce the Maximum Purchase Limit permanently; provided, that (i) the Seller shall give thirty
days' prior written notice of any such reduction to the Administrative Agent substantially in the form of Exhibit 2.02(a) (each such notice, a
"Commitment Reduction Notice"), (ii) any partial reduction of the Maximum Purchase Limit shall be in a minimum amount of $5,000,000 or an
integral multiple thereof, and (iii) no such reduction shall reduce the Maximum Purchase Limit below the greater of (x) Capital Investment at such time and (y) $50,000,000. 

        (b)  The
Seller may at any time on at least 30 days' prior written notice by the Seller to the Administrative Agent irrevocably terminate the Maximum Purchase Limit;  provided, that (i) such notice of
termination shall be substantially in the form of  Exhibit 2.02(b) (the "Commitment Termination Notice"), and (ii) the Seller shall reduce
the Capital Investment to zero and make all payments required by Section 2.03(c) at the time and in the manner specified therein. Upon such
termination, the Seller's right to request that any Purchaser make Purchases hereunder shall simultaneously terminate and the Facility Termination Date shall automatically occur. 

        (c)  Each
written notice required to be delivered pursuant to Sections 2.02(a) and  (b) shall be irrevocable and shall be effective (i) on the day of receipt if
received by the Administrative Agent and the Purchasers not later
than 4:00 p.m. (New York time) on any Business Day and (ii) on the immediately succeeding Business Day if received by the Administrative Agent and the Purchasers after such time on such
Business Day or if any such notice is received on a day other than a Business Day (regardless of the time of day such notice is received). Each such notice of termination or reduction shall specify,
respectively, the amount of, or the amount of the proposed reduction in, the Maximum Purchase Limit. 

        Section 2.03.    Notices Relating to Purchases and Reductions in Capital Investment.    

        (a)  Not
later than 1:00 p.m. (New York time) on each Wednesday (or, if such day is not a Business Day, the immediately following Business Day), the Seller shall
deliver to the Purchasers and the Administrative Agent an Officer's Certificate substantially in the form of Exhibit 2.03(a) (each, an
"Investment Base Certificate"); provided, that if (i) an Incipient Termination Event or a 

2

 

Termination Event shall have occurred and be continuing or (ii) the Administrative Agent, in good faith, believes that an Incipient Termination Event or a Termination Event is imminent or
deems any Purchaser's rights or interests in the Transferred Receivables or the Seller Collateral insecure, the Seller shall deliver an Investment Base Certificate to the Purchasers and the
Administrative Agent at such more frequent intervals as the Administrative Agent may request from time to time. Capital Investment Available shall be determined by the Administrative Agent based on
information related to the Seller Collateral available to it, including (A) any information obtained in connection with any audit or reflected in the most recent Investment Base Certificate or
any other Investment Report delivered to the Purchasers and the Administrative Agent or (B) any other information that may be available to the Purchasers and the Administrative Agent. 

        (b)  Each
Purchase resulting in an increase in Capital Investment shall be made upon the provision of notice by the Seller to the Administrative Agent in the manner provided
herein. Any such notice must be given in writing so that it is received no later than 4:00 p.m. (New York time) on the Business Day immediately preceding the proposed Purchase Date set forth
therein. Each such notice (a "Capital Purchase Request") shall (i) be substantially in the form of  Exhibit 2.03(b) and shall attach an Investment
Base Certificate as of no more than three (3) Business Days prior to the date on which such
Capital Purchase Request is delivered, (ii) be irrevocable and (iii) specify the amount of the requested increase in Capital Investment (which shall be in an amount not less than
$1,000,000) and the proposed Purchase Date (which shall be a Business Day), and shall include such other information as may be reasonably required by the Purchasers and the Administrative Agent. 

        (c)  The
Seller may at any time reduce the Capital Investment; provided, that (i) the Seller shall give one Business
Day's prior written notice of any such reduction to the Administrative Agent substantially in the form of Exhibit 2.03(c) (each such notice, a
"Repayment Notice"), (ii) each such notice shall be irrevocable, (iii) each such notice shall specify the amount of the requested
reduction in the Capital Investment and the proposed date of such reduction (which shall be a Business Day) and (iv) any such
reduction must be accompanied by payment of (A) all Daily Yield accrued and unpaid on the Capital Investment being reduced through but excluding the date of such reduction and (B) the
costs, if any, required by Section 2.10. Any such notice of reduction must be received by the Administrative Agent no later than 4:00 p.m.
(New York time) on the Business Day immediately preceding the date of the proposed reduction in Capital Investment. 

        Section 2.04.    Conveyance of Receivables.    

        (a)    Purchase Assignment.    On or prior to the Closing Date, the Seller shall complete, execute and deliver to the
Administrative Agent for the benefit of the Purchasers an assignment substantially in the form of Exhibit 2.04(a) (the
"Purchase Assignment") in order to evidence the Purchases. 

        (b)    Funding of Collection Account; Increases in Capital Investment.    

        (i)    Funding of Collection Account by Purchaser.    Following receipt of any Capital Purchase Request, and subject
to satisfaction of the conditions set forth in Section 3.02, the Applicable Purchaser shall make available to or on behalf of the Seller on the
Purchase Date specified therein the lesser of the requested increase in Capital Investment specified in such Capital Purchase Request and Capital Investment Available by depositing such amount in same
day funds into the Collection Account. 

        (ii)    Payment of Purchase Price.    The Applicable Purchaser shall, or shall cause the Administrative Agent to,
deposit into the Seller Account on each Business Day during the Revolving Period, in same day funds, all amounts on deposit in the Collection Account that 

3

 

are to be disbursed to or on behalf of the Seller pursuant to Section 6.03(c) as payment for the Purchaser Interests. 

        (c)    Vesting of Ownership.    

          (i)  Effective
on and as of each Purchase Date (A) prior to the occurrence of the Committed Purchaser Funding Event, the Conduit Purchaser shall own the Purchaser
Interests sold by the Seller hereunder on such Purchase Date, and (B) on and after the occurrence of the Committed Purchaser Funding Event, the Committed Purchaser shall own the Purchaser
Interests sold by the Seller hereunder on such Purchase Date. The Seller shall not take any action inconsistent with such ownership and shall not claim any ownership interest in such Purchaser
Interests. 

        (ii)  The
Seller shall indicate in its Records that interests in the Transferred Receivables have been sold hereunder and that ownership of such interests is vested in the
Administrative Agent on behalf of the Purchasers. In addition, the Seller shall respond to any inquiries with respect to the ownership of any Transferred Receivable by stating that interests therein
have been sold hereunder and that ownership of such interests is vested in the Purchasers. The Seller and the Servicers shall hold all Contracts and other documents and incidents relating to such
Transferred Receivables in trust for the benefit of the Administrative Agent on behalf of the Conduit Purchaser and the Committed Purchaser, as the owner thereof, and for the sole purpose of
facilitating the servicing of such Transferred Receivables. The Seller and the Servicers hereby acknowledge that their retention and possession of such Contracts and documents shall at all times be at
the sole discretion of the Administrative Agent and in a custodial capacity for the Administrative Agent's (on behalf of the Purchasers) benefit only. 

        (d)    Repurchases of Transferred Receivables.    If any Originator is required to repurchase Transferred Receivables
from the Seller pursuant to Section 4.04 of the Sale and Contribution Agreement, the Applicable Purchaser shall sell and reconvey its Purchaser
Interests in such Transferred Receivables to the Seller either (i) through a transfer of such Purchaser Interests in exchange for Purchaser Interests in other Transferred Receivables with an
Outstanding Balance equal to the Outstanding Balance of the Receivables being repurchased or (ii) if and to the extent a Purchase Excess exists or would exist pursuant to such sale and
reconveyance, for cash in an amount equal to the Outstanding Balance of the Receivables being repurchased. 

        Section 2.05.    Facility Termination Date.    Notwithstanding anything to the contrary set forth herein, no
Purchaser shall have any obligation to purchase any additional Purchaser Interests from and after the Facility Termination Date. 

        Section 2.06.    Daily Yield.    

        (a)  The
Seller shall pay Daily Yield to the Administrative Agent, for the account of the Purchasers, for each day on which any Capital Investment is outstanding, in the
manner and at the times specified in Sections 6.03, 6.04 and  6.05. 

        (b)  Notwithstanding
the foregoing, the Seller shall pay interest at the applicable Daily Yield Rate on unpaid Daily Yield and on any other amount payable by the Seller
hereunder (to the extent permitted by law) that shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise) for the period commencing on the due date thereof to (but
excluding) the date the same is indefeasibly paid in full. 

        Section 2.07.    Fees.    

        (a)  On
or prior to the Closing Date, the Seller shall pay to the Administrative Agent, for the account of itself and the Purchasers, the fees set forth in the Fee Letter
that are payable on the Closing Date. 

4

 

        (b)  On
each Settlement Date, the Seller shall pay to the Master Servicer or to its Successor Servicer, as applicable, the Servicing Fee and/or the Successor Servicing Fees
and Expenses, respectively, in each case to the extent of available funds therefor as provided in Section 6.04. On each Settlement Date, the
Master Servicer or its Successor Servicer shall pay to each other Servicer or Successor Servicer the Applicable Servicing Fee. 

        Section 2.08.    Time and Method of Payments.    

        (a)  Subject
to the provisions of Sections 6.02, 6.03,  6.04 and 6.05, all
payments in reduction of Capital Investment and all payments of yield, fees and other
amounts payable by the Seller hereunder shall be made in Dollars, in immediately available funds, to the Administrative Agent (for its account or the account of the applicable Purchasers, Affected
Parties or Indemnified Persons) not later than 1:00 p.m. (New York time) on the due date therefor. Any such payment made on such date but after such time shall be deemed to have been made on,
and Daily Yield shall continue to accrue and be payable thereon until, the next succeeding Business Day. If any such payment becomes due on a day other than a Business Day, the maturity thereof will
be extended to the next succeeding Business Day and Daily Yield, solely with respect to the Capital Investment outstanding during such period, shall be payable during such extension. 

        (b)  Any
and all payments by the Seller hereunder shall be made in accordance with this Section 2.08 without setoff or
counterclaim and free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, excluding taxes imposed on or measured by the
net income of any Affected Party by the jurisdictions under the laws of which such Affected Party is organized, or in which it maintains an office through which it engages in the transactions
contemplated hereby, or by any political subdivisions thereof (such non-excluded taxes, levies, imposts, deductions, charges and withholdings being "Indemnified
Taxes"). If the Seller shall be required by law to deduct any Indemnified Taxes from or in respect of any sum payable hereunder, (i) the sum payable shall be increased
as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this  Section 2.08) the Affected Party entitled to
receive any such payment receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Seller shall make such deductions, and (iii) the Seller shall pay the full amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within 30 days after the date of any payment of Indemnified Taxes, the Seller shall furnish to the Administrative Agent the original or a certified copy of a receipt evidencing
payment thereof. The Seller shall indemnify any Affected Party from and against, and, within ten days of demand therefor, pay any Affected Party for, the full amount of Indemnified Taxes (together
with any taxes imposed by any jurisdiction on amounts payable under this Section 2.08) paid by such Affected Party and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally asserted. 

        Section 2.09.    Capital Requirements; Additional Costs.    

        (a)  If
the Administrative Agent on behalf of any Affected Party shall have determined that the adoption after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by such Affected Party with any request or directive
regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law) from any central bank or other Governmental Authority increases or would have the
effect of increasing the amount of capital, reserves or other funds required to be maintained by such Affected Party against commitments made by it under this Agreement, any other Related Document or
any Program Document and thereby reducing the rate of return on such Affected Party's capital as a consequence of its commitments hereunder or thereunder, then the Seller shall 

5

 

from time to time upon demand by the Administrative Agent pay to the Administrative Agent on behalf of such Affected Party additional amounts sufficient to compensate such Affected Party for the
Seller's Share of such reduction together with interest thereon from the date of any such demand until payment in full at the applicable Daily Yield Rate. A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by the Administrative Agent to the Seller shall be final, binding and conclusive on the parties hereto (absent manifest error) for
all purposes. 

        (b)  If,
due to any Regulatory Change, there shall be any increase in the cost to any Affected Party of agreeing to make or making, funding or maintaining any commitment
hereunder, under any other Related Document or under any Program Document, including with respect to any Purchases, Capital Investment, LOC Draws or Liquidity Loans, or any reduction in any amount
receivable by such Affected Party hereunder or thereunder, including with respect to any Purchases, Capital Investment, LOC Draws or Liquidity Loans (any such increase in cost or reduction in amounts
receivable are hereinafter referred to as "Additional Costs"), then the Seller shall, from time to time upon demand by the Administrative Agent, pay to
the Administrative Agent on behalf of such Affected Party additional amounts sufficient to compensate such Affected Party for the Seller's Share of such Additional Costs together with interest thereon
from the date demanded until payment in full thereof at the applicable Daily Yield Rate. Such Affected Party agrees that, as promptly as practicable after it becomes aware of any circumstance referred
to above that would result in any such Additional Costs, it shall, to the extent not inconsistent with its internal policies of general application, use reasonable commercial efforts to minimize costs
and expenses incurred by it and payable to it by the Seller pursuant to this Section 2.09(b). 

        (c)  Determinations
by any Affected Party for purposes of this Section 2.09 of the effect of any Regulatory Change on
its costs of making, funding or maintaining any commitments hereunder, under any other Related Document or under any Program Document or on amounts receivable by it hereunder or thereunder or of the
additional amounts required to compensate such Affected Party in respect of any Additional Costs shall be set forth in a written notice to the Seller in reasonable detail and shall be final, binding
and conclusive on the Seller (absent manifest error) for all purposes. 

        Section 2.10.    Breakage Costs.    The Seller shall pay to the Administrative Agent for the account of either
Purchaser, upon request of such Purchaser, such amount or amounts as shall compensate such Purchaser for any loss, cost or expense incurred by such Purchaser (as determined by such Purchaser) as a
result of any reduction by the Seller in Capital Investment (and accompanying loss of Daily Yield thereon) other than on the maturity date of the Commercial Paper (or other financing source) funding
such Capital Investment, which compensation shall include an amount equal to any loss or expense incurred by such Purchaser during the period from the date of such reduction to (but excluding) the
maturity date of such Commercial Paper (or other financing source) if the rate of interest obtainable by such Purchaser upon the redeployment of funds in an amount equal to such reduction is less than
the interest rate applicable to such Commercial Paper (or other financing source) (any such loss, cost or expense, "Breakage Costs"). The determination
by such Purchaser of the amount of any such loss or expense shall be set forth in a written notice to the Seller in reasonable detail and shall be final, binding and conclusive on the Seller (absent
manifest error) for all purposes. 

        Section 2.11.    Purchase Excess.    On each Business Day during the Revolving Period and after completion of
the disbursements specified in Section 6.03, the Administrative Agent shall notify the Seller and the Master Servicer of any Purchase Excess on
such day, and the Seller shall deposit the amount of such Purchase Excess in the Collection Account by 1:00 p.m. (New York time) on the immediately succeeding Business Day. 

6

 

 
 

ARTICLE III.    
    
    CONDITIONS PRECEDENT    
  

        Section 3.01.    Conditions to Effectiveness of Agreement.    Neither the Conduit Purchaser nor the Committed
Purchaser shall be obligated to purchase Purchaser Interests hereunder on the occasion of the initial Purchase, nor shall any Purchaser or the Administrative Agent be obligated to take, fulfill or
perform any other action hereunder, until the following conditions have been satisfied, in the sole discretion of, or waived in writing by, the Purchasers and the Administrative Agent: 

        (a)    Purchase Agreement; Other Related Documents.    This Agreement shall have been duly executed by, and delivered
to, the parties hereto and the Purchasers and the Administrative Agent shall have received such other documents, instruments, agreements and legal opinions as each Purchaser and the Administrative
Agent shall request in connection with the transactions contemplated by this Agreement, including all those listed in the Schedule of Documents, each in form and substance satisfactory to each
Purchaser and the Administrative Agent. 

        (b)    Approvals.    The Purchasers and the Administrative Agent shall have received (i) satisfactory evidence
that the Seller and each Servicer have obtained all required consents and approvals of all Persons, including all requisite Governmental Authorities, to the execution, delivery and performance of this
Agreement and the other Related Documents and the consummation of the transactions contemplated hereby or thereby or an Officer's Certificate from each of the Seller and each Servicer in form and
substance satisfactory to the Purchasers and the Administrative Agent affirming that no such consents or approvals are required, and (ii) written consent of the credit facility providers under
the Credit Facilities, in form and substance satisfactory to the Administrative Agent, to the execution, delivery and performance of this Agreement and the other Related Documents and the consummation
of the transactions contemplated hereby or thereby. 

        (c)    Compliance with Laws.    The Seller and each Servicer shall be in compliance in all respects with all
applicable foreign, federal, state and local laws and regulations, including those specifically referenced in Section 5.01(a) other than
violations that could not reasonably be expected to have a Material Adverse Effect. 

        (d)    Payment of Fees.    The Seller shall have paid all fees required to be paid by it on the Closing Date,
including all fees required hereunder and under the Fee Letter, and shall have reimbursed each Purchaser for all fees, costs and expenses of closing the transactions contemplated hereunder and under
the other Related Documents, including each Purchaser's reasonable legal, Rating Agency and audit expenses, and other document preparation costs. 

        (e)    Representations and Warranties.    Each representation and warranty by the Seller contained herein and in each
other Related Document shall be true and correct as of the Closing Date, except to the extent that such representation or warranty expressly relates solely to an earlier date. 

        (f)    No Termination Event.    No Incipient Termination Event or Termination Event hereunder shall have occurred and
be continuing or would result after giving effect to any of the transactions contemplated on the Closing Date. As of the Closing Date, no "default" or "event of default" exists under the Credit
Facilities. 

        (g)    Confirmation of Commercial Paper Ratings.    The Administrative Agent shall have received written confirmation
from each Rating Agency that the then current rating of the Commercial Paper shall not be withdrawn or downgraded after giving effect to this Agreement and the transactions contemplated thereby. 

7

 

        (h)    Servicing Software Rights.    The Administrative Agent shall have received, (i) in form and substance
satisfactory to the Administrative Agent, written authorization of the licensor of the Servicing Software to use such Servicing Software for the purpose of obtaining information about and servicing
the Transferred Receivables, or evidence that Seller and its Affiliates have exercised best efforts to obtain such written authorization, or (ii) shall have received written documentation
confirming that an Originator or the Seller owns such Servicing Software. 

        (i)    Credit Facilities' Documents.    The Administrative Agent shall have received, in form and substance
satisfactory to the Administrative Agent, the following fully executed documents and satisfactory evidence that all transactions contemplated thereby have been consummated or will be consummated
simultaneously with the closing hereunder: (i) the "First Amendment to Credit Agreement" relating to the Parent Revolver attached as  Exhibit B-1 hereto, (ii) the "K2 Inc. Fourth
Amendment to Note Agreements" relating to the 1992 Note Agreement attached
as Exhibit B-2 and the "K2 Inc. Third Amendment to Note Purchase Agreement" relating to the 1999 Note Agreement attached as  Exhibit B-3,
(iii) the Credit Facility Intercreditor Agreement, and (iv) the Credit Facilities' Security Documents. 

        Section 3.02.    Conditions Precedent to All Purchases.    No Purchaser shall be obligated to purchase
Purchaser Interests hereunder on any Purchase Date if, as of the date thereof: 

        (a)  any
representation or warranty of the Seller or any Servicer contained herein or in any of the other Related Documents shall be untrue or incorrect as of such date,
either before or after giving effect to the Purchase of Purchaser Interests on such date and to the application of the proceeds therefrom, except to the extent that such representation or warranty
expressly relates to an earlier date and except for changes therein expressly permitted by this Agreement; 

        (b)  any
event shall have occurred, or would result from the Purchase of Purchaser Interests on such Purchase Date or from the application of the proceeds therefrom, that
constitutes an Incipient Termination Event, a Termination Event, an Incipient Servicer Termination Event, or an Event of Servicer Termination; 

        (c)  the
Seller shall have failed to timely deliver an Investment Base Certificate as most recently required pursuant  Section 2.03(a) or (b) hereof, or
the Seller shall otherwise not be in compliance with any
of its covenants or other agreements set forth herein; 

        (d)  the
Facility Termination Date shall have occurred; 

        (e)  either
before or after giving effect to such Purchase and to the application of the proceeds therefrom, a Purchase Excess would exist; 

        (f)    the
Purchaser Interests sold hereunder would, after giving effect to such purchase, exceed 100%; 

        (g)  any
Originator, the Seller or any Servicer shall fail to have taken such other action, including delivery of approvals, consents, opinions, documents and instruments to
the Purchasers and the Administrative Agent, (i) as any Purchaser or the Administrative Agent may reasonably request, or (ii) as either Rating Agency may request; or 

        (h)  the
Administrative Agent shall have determined that any event or condition has occurred that has had, or could reasonably be expected to have or result in, a Material
Adverse Effect; 

8

  

provided, that if an involuntary bankruptcy proceeding is filed against any Originator and such proceeding has not been dismissed, the Purchasers shall
cease to purchase Purchaser Interests hereunder and the Seller shall cease to purchase Receivables under the Sale and Contribution Agreement; provided, further, that the Purchasers may resume
purchasing Purchaser Interests hereunder and the Seller may resume purchasing Transferred Receivables under the Sale and Contribution Agreement if, within ten days after any such filing,
(i) the applicable Originator, the Seller, the Administrative Agent or any Purchaser shall have obtained an order from the court conducting such involuntary bankruptcy proceeding
(A) authorizing the Originator to continue to make the transfers of Transferred Receivables under the Sale and Contribution Agreement and (B) confirming that such sales, and any security
interest related thereto, will not be voidable as a postpetition transaction under Section 549 of the Bankruptcy Code or in any other similar proceedings and (ii) counsel to the
applicable Originator and to the Seller shall have reaffirmed the conclusions of the true sale and nonconsolidation opinions delivered pursuant to Section 3.01(a) of the Purchase Agreement,
which reaffirmation shall be reasonably acceptable to the Administrative Agent and the Purchasers. 

        The
delivery by the Seller of a Capital Purchase Request and the acceptance by the Seller of the funds from such Capital Purchase on any Purchase Date shall be deemed to constitute, as
of any such Purchase Date, a representation and warranty by the Seller that the conditions in this Section 3.02 have been satisfied. 

 
 

ARTICLE IV.    
    
    REPRESENTATIONS AND WARRANTIES    
  

        Section 4.01.    Representations and Warranties of the Seller and SPC.    To induce each Purchaser to purchase
the Purchaser Interests and the Administrative Agent to take any action hereunder, each of SPC (only with respect to itself) and the Seller makes the following representations and warranties to each
Purchaser and the Administrative Agent as of the Closing Date and, except to the extent provided otherwise below, as of each Purchase Date, each and all of which shall survive the execution and
delivery of this Agreement. 

        (a)    Corporate Existence; Compliance with Law.    The Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization, the state of Delaware (which is Seller's only state of organization), and SPC is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of incorporation, the state of Delaware. Each of the Seller and SPC (i) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification; (ii) has the requisite power and authority and the legal
right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business, in each case, as now, heretofore and
proposed to be conducted; (iii) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having
jurisdiction, to the extent required for such ownership, operation and conduct; (iv) is in compliance with its Charter Documents; and (v) subject to specific representations set forth
herein regarding ERISA, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. 

        (b)    Executive Offices; Collateral Locations; Corporate or Other Names; FEIN.    As of the Closing Date, the current
location of the Seller's chief executive office, principal place of business, other offices, the warehouses and premises within which any Seller Collateral is stored or located, and the locations of
its records concerning the Seller Collateral (including originals of the Seller 

9

 

Assigned Agreements) are set forth in Schedule 4.01(b) and none of such locations has changed within the past 12 months (or such shorter
time as the Seller has been in existence). During the prior five years (or such shorter time as the Seller has been in existence), except as set forth in  Schedule 4.01(b), the Seller has not been
known as or used any corporate, fictitious or trade name. In addition,  Schedule 4.01(b) lists the organizational identification number issued by Seller's state of organization or states that no
such number has been
issued and lists the federal employer identification number of the Seller. 

        (c)    Corporate Power, Authorization, Enforceable Obligations.    The execution, delivery and performance by each of
SPC and the Seller of this Agreement and the other Related Documents to which it is a party, the creation and perfection of all Liens and ownership interests provided for therein: (i) are
within such Person's power; (ii) have been duly authorized by all necessary or proper action (corporate, shareholder or otherwise); (iii) do not contravene any provision of such Person's
Charter Documents; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to
which SPC, the Seller or any Originator is a party or by which SPC, the Seller or any Originator or any of the property of SPC, the Seller or any Originator is bound; (vi) do not result in the
creation or imposition of any Adverse Claim upon any of the property of SPC, the Seller or any Originator; and (vii) do not require the consent or approval of any Governmental Authority or any
other Person, except those which have been duly obtained, made or complied with prior to the Closing Date as provided in Section 3.01(b). The
exercise by SPC, each of the Seller, the Purchasers or the Administrative Agent of any of its rights and remedies under any Related Document to which it is a party, do not require the consent or
approval of any Governmental Authority or any other Person (other than consents or approvals solely relating to or required to be obtained by a Purchaser or the Administrative Agent, and subject to
the Bankruptcy Code), except those which will
have been duly obtained, made or complied with prior to the Closing Date as provided in Section 3.01(b). On or prior to the Closing Date, each of
the Related Documents to which SPC or the Seller is a party shall have been duly executed and delivered by such Person and each such Related Document shall then constitute a legal, valid and binding
obligation of such Person enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights and by general principles of equity. 

        (d)    No Litigation.    No Litigation is now pending or, to the knowledge of SPC or the Seller, threatened against
such Person that (i) challenges the such Person's right or power to enter into or perform any of its obligations under the Related Documents to which it is a party, or the validity or
enforceability of any Related Document or any action taken thereunder, (ii) seeks to prevent the transfer, sale, pledge or contribution of any Receivable or the consummation of any of the
transactions contemplated under this Agreement or the other Related Documents, or (iii) if determined adversely to the Seller, could reasonably be expected to have a Material Adverse Effect.
Except as set forth on Schedule 4.01(d), as of the Closing Date there is no Litigation pending or threatened that seeks damages or injunctive
relief against, or alleges criminal misconduct by, the Seller. 

        (e)    Solvency.    Both before and after giving effect to (i) the transactions contemplated by this Agreement
and the other Related Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, each of SPC and Seller is and will be Solvent. 

        (f)    Material Adverse Effect.    Since the date of each of SPC's and the Seller's organization, (i) such
Person has not incurred any obligations, contingent or non-contingent liabilities, liabilities for charges, long-term leases or unusual forward or long-term
commitments that, alone or in the 

10

 

aggregate, could reasonably be expected to have a Material Adverse Effect, (ii) no contract, lease or other agreement or instrument has been entered into by such Person or has become binding
upon such Person's assets and no law or regulation applicable to such Person has been adopted that has had or could reasonably be expected to have a Material Adverse Effect and (iii) such
Person is not in default and no third party is in default under any material contract, lease or other agreement or instrument to which such Person is a party that alone or in the aggregate could
reasonably be expected to have a Material Adverse Effect. Since the date of each of SPC's and the Seller's organization, no event has occurred that alone or together with other events could reasonably
be expected to have a Material Adverse Effect. 

        (g)    Ownership of Property; Liens.    No Transferred Receivable is subject to any Adverse Claim, none of the other
properties and assets of the Seller are subject to any Adverse Claims other than Permitted Seller Encumbrances, and there are no facts, circumstances or conditions known to the Seller or SPC that may
result in (i) with respect to the Transferred Receivables, any Adverse Claims (including Adverse Claims arising under Environmental Laws) and (ii) with respect to Seller's or SPC's other
properties and assets, any Adverse Claims (including Adverse Claims arising under Environmental Laws) other than Permitted Seller Encumbrances. The Seller has received all assignments, bills of sale
and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect the Seller's right, title and interest in and to the Transferred
Receivables and its other
properties and assets. The Seller has rights in and the power to transfer the Transferred Receivables. The Seller has rights in and the power to transfer each item of the Seller Collateral upon which
it purports to grant a Lien hereunder free and clear of any and all Liens other than Permitted Seller Encumbrances. The Liens granted to the Purchaser pursuant to  Section 8.01 will at all times be
fully perfected first priority Liens in and to the Seller Collateral other than Permitted Seller Encumbrances.
 

        (h)    Ventures, Subsidiaries and Affiliates; Outstanding Stock and Debt.    Except as set forth in  Schedule 4.01(h), each of
the Seller and SPC has no Subsidiaries, is not engaged in any joint venture or partnership with any other Person, and
is not an Affiliate of any other Person. As of the Closing Date, all of the issued and outstanding Stock of each of SPC and the Seller is owned by each of the Stockholders in the amounts set forth on  Schedule 4.01(h)
. There are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which the Seller or
SPC may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Debt of the Seller and
SPC as of the Closing Date is described in Section 5.03(i). 

        (i)    Taxes.    All tax returns, reports and statements, including information returns, required by any Governmental
Authority to be filed by the Seller and each of its Affiliates included in the Parent Group have been filed with the appropriate Governmental Authority and all charges shown thereon to be due have
been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid),
excluding charges or other amounts being contested in accordance with Section 5.01(e). Proper and accurate amounts have been withheld by the
Seller or such Affiliate from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely
paid to the respective Governmental Authorities. Schedule 4.01(i) sets forth as of the Closing Date (i) those taxable years for which the
Seller's or such Affiliates' tax returns are currently being audited by the IRS or any other applicable Governmental Authority and (ii) any assessments or threatened assessments in connection
with any such audit or otherwise currently outstanding. Except as described on Schedule 4.01(i), neither the Seller nor any such Affiliate has
executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any charges.
The Seller is 

11

 

not liable for any charges: (A) under any agreement (including any tax sharing agreements) or (B) to the best of the Seller's knowledge, as a transferee. As of the Closing Date, neither
the Seller nor any of its Affiliates included in the Parent Group has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or
otherwise, that would have a Material Adverse Effect. 

        (j)    Full Disclosure.    All information contained in this Agreement, any Investment Base Certificate or any of the
other Related Documents, or any written statement furnished by or on behalf of SPC or the Seller to either Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the
other Related Documents is true and accurate in every material respect, and none of this Agreement, any Investment Base Certificate or any of the other Related Documents, or any written statement
furnished by or on behalf of SPC or the Seller to either Purchaser or the Administrative
Agent pursuant to the terms of this Agreement or any of the other Related Documents is misleading as a result of the failure to include therein a material fact. 

        (k)    ERISA.    Each of SPC and the Seller is in compliance with ERISA and has not incurred and does not expect to
incur any liabilities (except for premium payments arising in the ordinary course of business) payable to the PBGC under ERISA. 

        (l)    Brokers.    No broker or finder acting on behalf of the Seller was employed or utilized in connection with this
Agreement or the other Related Documents or the transactions contemplated hereby or thereby and the Seller has no obligation to any Person in respect of any finder's or brokerage fees in connection
therewith. 

        (m)    Margin Regulations.    The Seller is not engaged in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin security," as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being
referred to herein as "Margin Stock"). The Seller owns no Margin Stock, and no portion of the proceeds of the purchase price for Transferred Receivables
sold hereunder will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Debt that was originally incurred to
purchase or carry any Margin Stock or for any other purpose that might cause any portion of such proceeds to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal
Reserve Board. The Seller will not take or permit to be taken any action that might cause any Related Document to violate any regulation of the Federal Reserve Board. 

        (n)    Nonapplicability of Bulk Sales Laws.    No transaction contemplated by this Agreement or any of the Related
Documents requires compliance with any bulk sales act or similar law. 

        (o)    Securities Act and Investment Company Act Exemptions.    Each Purchase of Purchaser Interests under this
Agreement will constitute (i) a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act and (ii) a purchase or other acquisition of notes, drafts,
acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the
Investment Company Act. 

        (p)    Government Regulation.    Neither SPC nor the Seller is an "investment company" or an "affiliated person" of,
or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act. The Purchase of Purchaser Interests by the Purchasers hereunder, the
application of the proceeds thereof and the consummation of the transactions contemplated by this Agreement and the other Related Documents will not violate any provision of any such statute or any
rule, regulation or order issued by the Securities and Exchange Commission. 

12

 

        (q)    Nonconsolidation.    Each of SPC and the Seller is operated in such a manner that the separate corporate
existence of each of the Seller and SPC, on the one hand, and any member of the Parent Group, on the other hand, would not be disregarded in the event of the bankruptcy or insolvency of any member of
the Parent Group and, without limiting the generality of the foregoing: 

          (i)  the
Seller is a limited purpose entity whose activities are restricted in its Charter Documents to those activities expressly permitted hereunder and under the other
Related Documents; SPC is a limited purpose entity whose activities are restricted in its Charter Documents to owning Stock in the Seller and activities related thereto; and neither the Seller nor SPC
has engaged, and does presently engage, in any activity other than those activities expressly permitted hereunder and under the other Related Documents, nor has the Seller or SPC entered into any
agreement other than this Agreement, the other Related Documents to which it is a party and, with the prior written consent of the Purchasers and the Administrative Agent, any other agreement
necessary to carry out more effectively the provisions and purposes hereof or thereof, and; 

        (ii)  no
member of the Parent Group or any individual at the time he or she is acting as an officer of any such member is or has been involved in the
day-to-day management of the Seller or SPC (but nothing in this subclause (ii) shall prohibit any Person from holding
positions with any member of the Parent Group, the Seller and/or the SPC simultaneously); 

        (iii)  other
than the purchase and acceptance through capital contribution of Transferred Receivables, the payment of dividends or distributions and the return of capital to
the Originators, the payment of Servicing Fees (including Applicable Servicing Fees) to the Servicers under this Agreement and the transactions evidenced by the Ancillary Services and Lease Agreement,
the Seller engages and has engaged in no intercorporate transactions with any member of the Parent Group; 

        (iv)  other
than the execution and delivery of this Agreement, SPC engages and has engaged in no intercorporate transactions with any member of the Parent Group; 

        (v)  each
of the Seller and SPC maintains corporate records and books of account separate from that of each member of the Parent Group, holds regular corporate meetings and
otherwise observes corporate formalities and has a business office separate from that of each member of the Parent Group; 

        (vi)  the
financial statements and books and records of the Seller, SPC and the Originators reflect the separate corporate existence of the Seller and SPC; 

      (vii)  (A)
each of the Seller and SPC maintains its assets separately from the assets of each member of the Parent Group (including through the maintenance of separate bank
accounts and except for any Records to the extent necessary to assist the Servicers in connection with the servicing of the Transferred Receivables), (B) each of the Seller's and SPC's funds
(including all money, checks and other cash proceeds) and assets, and records relating thereto, have not been and are not commingled with those of any member of the Parent Group and (C) the
separate creditors of each of SPC and the Seller will be entitled to be satisfied out of the SPC's or Seller's, respectively, assets prior to any value in SPC or the Seller, respectively, becoming
available to SPC's or the Seller's Stockholders, respectively; 

      (viii)  except
as otherwise expressly permitted hereunder and as provided in the Ancillary Services and Lease Agreement, under the other Related Documents and under the SPC's
and Seller's Charter Documents, no member of the Parent Group (A) pays either SPC's or the Seller's expenses, (B) guarantees either SPC's or the Seller's obligations, or
(C) advances funds to either SPC or the Seller for the payment of expenses or otherwise; 

13

 

        (ix)  all
business correspondence and other communications of each of SPC and the Seller are conducted in such Person's own name, on its own stationery and through a
separately-listed telephone number; 

        (x)  neither
SPC nor the Seller acts as agent for any member of the Parent Group, but instead each presents itself to the public as an entity separate from each such member
and independently engaged in the business of purchasing and financing Receivables; 

        (xi)  the
Seller maintains at least two independent directors or managers, as applicable, each of whom (A) is not a Stockholder, director, officer, employee or
associate, or any relative of the foregoing, of any member of the Parent Group (other than the Seller), all as provided in its Charter Documents, (B) has (1) prior experience as an
independent director for a corporation whose Charter Documents required the unanimous consent of all independent directors or managers, as applicable, thereof before such corporation could consent to
the institution of bankruptcy or insolvency proceedings against it or could file a petition seeking relief under any applicable federal or state law relating to bankruptcy and (2) at
least three years of employment experience with one or more entities that provide, in the ordinary course of their respective businesses, advisory, management or placement services to issuers of
securitization or structured finance instruments, agreements or securities, and (C) is otherwise acceptable to the Purchasers and the Administrative Agent; 

      (xii)  the
Charter Documents of the Seller require (A) the affirmative vote of each independent director and of SPC before a voluntary petition under
Section 301 of the Bankruptcy Code may be filed by the Seller, and (B) the Seller to maintain (1) correct and complete books and records of account and (2) minutes of the
meetings and other proceedings of its Stockholders and board of directors or managers, as applicable; 

      (xiii)  SPC
maintains at least two independent directors each of whom (A) is not a Stockholder, director, officer, employee or associate, or any relative of the
foregoing, of any member of the Parent Group (other than the Seller), all as provided in its Charter Documents, (B) has (1) prior experience as an independent director for a corporation
whose Charter Documents required the unanimous consent of all independent directors thereof before such corporation could consent to the institution of bankruptcy or insolvency proceedings against it
or could file a petition seeking relief under any applicable federal or state law relating to bankruptcy and (2) at least three years of employment experience with one or more entities
that provide, in the ordinary course of their respective businesses, advisory, management or placement services to issuers of securitization or structured finance instruments, agreements or
securities, and (C) is otherwise acceptable to the Purchasers and the Administrative Agent; and 

      (xiv)  the
Charter Documents of SPC require (A) the affirmative vote of each independent director before a voluntary petition under Section 301 of the
Bankruptcy Code may be filed by SPC and before SPC may vote, in its capacity as a Stockholder of the Seller, in favor of a voluntary petition under Section 301 of the Bankruptcy Code being
filed by the Seller, and (B) SPC to maintain (1) correct and complete books and records of account and (2) minutes of the meetings and other proceedings of its Stockholders and
board of directors. 

        (r)    Deposit and Disbursement Accounts.    Schedule 4.01(r)
lists all banks and other financial institutions at which the Seller maintains deposit or other bank accounts as of the Closing Date, including any Lockbox Accounts, and such schedule correctly
identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor. 

14

 

        (s)    Transferred Receivables.    

        (i)    Transfers.    Each Transferred Receivable was purchased by or contributed to the Seller on the relevant
Transfer Date pursuant to the Sale and Contribution Agreement. 

        (ii)    Eligibility.    Each Transferred Receivable designated as an Eligible Receivable in each Investment Base
Certificate constitutes an Eligible Receivable as of the date specified in such Investment Base Certificate. 

        (iii)    No Material Adverse Effect.    As of the date of delivery of the most recent Investment Base Certificate, the
Seller has no knowledge of any fact (including any defaults by the Obligor thereunder on any other Receivable) that would cause it or should have caused it to expect that any payments on each
Transferred Receivable designated as an Eligible Receivable in such Investment Base Certificate will not be paid in full when due or to expect any other Material Adverse Effect. 

        (iv)    Nonavoidability of Transfers.    The Seller shall (A) have received each Contributed Receivable as a
contribution to the capital of the Seller by an Originator and (B) (1) have purchased each Sold Receivable from the Originators for cash consideration and (2) have accepted assignment of
any Eligible Receivables transferred pursuant to clause (b) of Section 4.04 of the Sale
and Contribution Agreement, in each case in an amount that constitutes fair consideration and reasonably equivalent value therefor. Each Sale of a Sold Receivable effected pursuant to the terms of the
Sale and Contribution Agreement shall not have been made for or on account of an antecedent debt owed by any Originator to the Seller and no such Sale is or may be avoidable or subject to avoidance
under any bankruptcy laws, rules or regulations. 

        (t)    Representations and Warranties in Other Related Documents.    Each of the representations and warranties of the
Seller contained in the Related Documents (other than this Agreement) is true and correct in all respects and the Seller hereby makes each such representation and warranty to, and for the benefit of,
the Purchasers and the Administrative Agent as if the same were set forth in full herein. 

        (u)    Servicing Software.    The Seller has all necessary licenses and rights to use the Servicing Software. 

        Section 4.02.    Representations and Warranties of the Servicers.    To induce the Purchasers to purchase the
Purchaser Interests and the Administrative Agent to take any action required to be performed by it hereunder, each Servicer represents and warrants to the Purchasers and the Administrative Agent,
which representation and warranty shall survive the execution and delivery of this Agreement, that each of the representations and warranties of each Servicer (whether made by such Servicer in its
capacity as an Originator or as Servicer) contained in any Related Document is true and correct and, if made by such Servicer in its capacity as an Originator, applies with equal force to such
Servicer in its capacity as Servicer, and each Servicer hereby makes each such representation and warranty to, and for the benefit of, the Purchasers and the Administrative Agent as if the same were
set forth in full herein. 

15

  

 
 

ARTICLE V.    
    
    GENERAL COVENANTS OF THE SELLER AND SPC    
  

        Section 5.01.    Affirmative Covenants of the Seller and SPC.    Each of the Seller and SPC (with respect to
itself only) covenants and agrees that from and after the Closing Date and until the Termination Date: 

        (a)    Compliance with Agreements and Applicable Laws.    Each of SPC and the Seller shall perform each of its
obligations under this Agreement and the other Related Documents and comply with all federal, state and local laws and regulations applicable to it and the Transferred Receivables, including those
relating to truth in lending, retail installment sales, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, licensing, taxation, ERISA and
labor matters and Environmental Laws and Environmental Permits. The Seller shall comply in all respects with the Credit and Collection Policies with respect to each Transferred Receivable and the
Contract therefor. 

        (b)    Maintenance of Existence and Conduct of Business.    Each of SPC and the Seller shall: (i) do or cause
to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; (ii) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder and in accordance with (1) the terms of its Charter Documents, (2) Sections 4.01(q) and  (r) and (3) the assumptions set forth in each legal opinion of Gibson Dunn & Crutcher LLP or other counsel to SPC or the Seller
from time to time delivered pursuant to Section 3.02(d) of the Sale and Contribution Agreement with respect to issues of substantive consolidation and true sale and absolute transfer;
(iii) at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, including all licenses, permits, charters and registrations,
and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary
or appropriate repairs, replacements and improvements thereto consistent with industry practices; and (iv) transact business only in such corporate and trade names as are set forth in  Schedule 5.01(b). Each of SPC and the Seller shall keep adequate books and records with respect to its business activities in which proper
entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the financial statements delivered pursuant to  Section 5.02(a). 

        (c)    Deposit of Collections.    The Seller shall deposit or cause to be deposited promptly into a Lockbox Account,
and in any event no later than the first Business Day after receipt thereof, all Collections Seller may receive with respect to any Transferred Receivable. 

        (d)    Use of Proceeds.    The Seller shall utilize the proceeds of the Purchases made hereunder solely for
(i) the purchase of Receivables from the Originators pursuant to the Sale and Contribution Agreement, (ii) the payment of dividends or other distributions to its Stockholders, and
(iii) the payment of administrative fees or Servicing Fees (including Applicable Servicing Fees) or expenses to the Servicers or routine administrative or operating expenses, in each case only
as expressly permitted by and in accordance with the terms of this Agreement and the other Related Documents. 

        (e)    Payment, Performance and Discharge of Obligations.    

          (i)  Subject
to Section 5.01(e)(ii), each of SPC and the Seller shall pay, perform and discharge or cause to be paid,
performed and discharged promptly all charges payable by it, including (A) charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all charges with
respect to tax, social security and unemployment 

16

 

withholding with respect to its employees, and (B) lawful claims for labor, materials, supplies and services or otherwise. 

        (ii)  Each
of SPC and the Seller may in good faith contest, by appropriate proceedings, the validity or amount of any charges or claims described in  Sections 4.01(i) and 5.01(e)(i)
; provided, that
(A) adequate reserves with respect to such contest are maintained on the books of such Person, in accordance with GAAP, (B) such contest is maintained and prosecuted continuously and
with diligence, (C) none of the Seller Collateral becomes subject to forfeiture or loss as a result of such contest, (D) no Lien shall be imposed to secure payment of such charges or
claims other than inchoate tax liens and (E) none of the Purchasers or the Administrative Agent has advised the Seller or SPC, as applicable, in writing that such Affected Party reasonably
believes that failure to pay or to discharge such claims or charges could have or result in a Material Adverse Effect. 

        (f)    ERISA and Environmental Laws.    Each of SPC and the Seller shall give the Administrative Agent prompt written
notice of any event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA. Each of SPC and the Seller shall give the Administrative
Agent prompt written notice of receipt by Seller of any material notice relating to Environmental Laws or Environmental Permits. 

        Section 5.02.    Reporting Requirements of the Seller.    

        (a)  The
Seller hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Purchasers, the
Administrative Agent and, in the case of paragraph (g) therein only, to the Rating Agencies, the financial statements, notices and other
information at the times, to the Persons and in the manner set forth in Annex 5.02(a). 

        (b)  As
soon as available, and in any event no later than 1:00 p.m. (New York time) on each Wednesday (or if such day is not a Business Day, the immediately following
Business Day) of each week, an Investment Base Certificate, which shall be prepared by the Seller or any of the Servicers as of the last day of the previous week;  provided, that if (A) an Incipient
Termination Event or a Termination Event shall have occurred and be continuing or (B) the
Administrative Agent, in good faith, believes that an Incipient Termination Event or a Termination Event is imminent or deems any Purchaser's rights or interests in the Transferred Receivables or the
Seller Collateral insecure, then such report shall be delivered for such periods and as frequently as the Administrative Agent shall request an Investment Base Certificate. 

        (c)  The
Seller hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Purchasers and the
Administrative Agent such other reports, statements and reconciliations with respect to the Investment Base or Seller Collateral as any Purchaser, the Administrative Agent or the Collateral Agent
shall from time to time request in its reasonable discretion. 

        Section 5.03.    Negative Covenants of the Seller and SPC.    Each of SPC (with respect to itself only) and the
Seller covenants and agrees that, without the prior written consent of the Purchasers and the Administrative Agent, from and after the Closing Date until the Termination Date: 

        (a)    Sale of Stock and Assets.    Neither SPC nor the Seller shall sell, transfer, convey, assign or otherwise
dispose of, or assign any right to receive income in respect of, any of its properties or other assets, including its capital Stock (whether in a public or a private offering or otherwise), any
Transferred Receivable or Contract therefor or any of its rights with respect to any Lockbox or any Lockbox Account, the Collection Account, the Retention Account or any other deposit account in which
any Collections of any Transferred Receivable are deposited, except as otherwise expressly permitted by this Agreement or any of the other Related Documents. 

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        (b)    Liens.    Neither SPC nor the Seller shall create, incur, assume or permit to exist (i) with respect to
the Seller, any Adverse Claim on or with respect to its Transferred Receivables or (ii) any Adverse Claim on or with respect to its other properties or assets (whether now owned or hereafter
acquired) except for
the Liens set forth in Schedule 5.03(b) and other Permitted Seller Encumbrances. In addition, neither SPC nor the Seller shall become a party to
any agreement, note, indenture or instrument or take any other action that would prohibit the creation of a Lien on any of its properties or other assets in favor of the Purchasers as additional
collateral for the Seller Secured Obligations, except as otherwise expressly permitted by this Agreement or any of the other Related Documents. 

        (c)    Modifications of Receivables, Contracts or Credit and Collection Policies.    The Seller shall not, without the
prior written consent of the Administrative Agent and with respect to clause (iii) only, upon provision of written notice to the Rating Agencies,
(i) extend, amend, rescind, forgive, discharge, compromise, waive, cancel or otherwise modify the terms of any Transferred Receivable, provided,
that the Seller may authorize each Servicer to take such actions as are expressly permitted by the terms of the Credit and Collection Policies as such Servicer deems appropriate to maximize
Collections thereof so long as such extension or adjustment does not alter any Receivable's classification as a Defaulted Receivable or result in such Receivable being required to be paid more than
364 days from the Billing Date thereof, (ii) amend, modify or waive any term or condition of any Contract related thereto to the extent such amendment, modification, or waiver materially
impairs the collectibility of the Receivables, or (iii) amend, modify or waive any term or provision of the Credit and Collection Policies. 

        (d)    Changes in Instructions to Obligors.    The Seller shall not make any change in its instructions to Obligors
regarding the deposit of Collections with respect to the Transferred Receivables without the prior written consent of the Administrative Agent. 

        (e)    Capital Structure and Business.    Neither SPC nor the Seller shall (i) make any changes in any of its
business objectives, purposes or operations that could have or result in a Material Adverse Effect, (ii) make any change in its capital structure as described on  Schedule 4.01(h), including
the issuance of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms
of its outstanding Stock, (iii) reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof
without the prior written consent of Administrative Agent, or (iv) amend its Charter Documents. Neither SPC nor the Seller shall engage in any business other than as provided in its Charter
Documents and the Related Documents. 

        (f)    Mergers, Subsidiaries, Etc.    Neither SPC nor the Seller shall directly or indirectly, by operation of law or
otherwise, (i) form or acquire any Subsidiary, or (ii) merge with, consolidate with, acquire all or substantially all of the assets or capital Stock of, or otherwise combine with or
acquire, any Person. 

        (g)    Sale Characterization; Sale and Contribution Agreement.    The Seller shall not make statements or disclosures,
prepare any financial statements or in any other respect account for or treat the transactions contemplated by the Sale and Contribution Agreement (including for accounting, tax and reporting
purposes) in any manner other than (i) with respect to each Sale of each Sold Receivable effected pursuant to the Sale and Contribution Agreement, as a true sale and absolute assignment of the
title to and sole record and beneficial ownership interest of the Transferred Receivables by the Originators to the Seller and (ii) with respect to each contribution of Contributed Receivables
thereunder, as an increase in the stated capital of the Seller. 

        (h)    Restricted Payments.    Neither SPC nor the Seller shall enter into any lending transaction with any other
Person. Neither SPC nor the Seller shall at any time (i) advance credit to any Person or (ii) declare any dividends, repurchase any Stock, return any capital, or make any other 

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payment or distribution of cash or other property or assets in respect of such Person's Stock if, after giving effect to any such advance or distribution, a Purchase Excess, Incipient Termination
Event or Termination Event would exist or otherwise result therefrom. 

        (i)    Debt.    Neither SPC nor the Seller shall create, incur, assume or permit to exist any Debt, except
(i) Debt of the Seller to any Affected Party, Indemnified Person, any Servicer or any other Person expressly permitted by this Agreement or any other Related Document, (ii) deferred
taxes, (iii) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, and (iv) indorser
liability in connection with the indorsement of negotiable instruments for deposit or collection in the ordinary course of business. 

        (j)    Prohibited Transactions.    Neither SPC nor the Seller shall enter into, or be a party to, any transaction with
any Person except as expressly permitted hereunder or under any other Related Document. 

        (k)    Investments.    Except as otherwise expressly permitted hereunder or under the other Related Documents, neither
SPC nor the Seller shall make any investment in, or make or accrue loans or advances of money to, any Person, including any Stockholder, director, officer or employee of the Seller, the Originators or
any Originators' other Subsidiaries, through the direct or indirect lending of money, holding of securities or otherwise, except with respect to Transferred Receivables, Permitted Investments and
SPC's investment in the Seller. 

        (l)    Commingling.    The Seller shall not deposit or permit the deposit of any funds that do not constitute
Collections of Transferred Receivables into any Lockbox Account. If such funds are nonetheless deposited into a Lockbox Account and the Seller so notifies the Administrative Agent, the Administrative
Agent shall promptly remit any such amounts to the applicable Originator. 

        (m)    ERISA.    Neither SPC nor the Seller shall, nor shall cause or permit any of its ERISA Affiliates to, cause or
permit to occur an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA. 

        (n)    Related Documents.    The Seller shall not amend, modify or waive any term or provision of any Related Document
without the prior written consent of the Administrative Agent. 

        (o)    Board Policies.    Neither SPC nor the Seller shall modify the terms of any policy or resolutions of its board
of directors or managers, as applicable, if such modification could have or result in a Material Adverse Effect. 

 
 

ARTICLE VI.    
    
    COLLECTIONS AND DISBURSEMENTS    
  

        Section 6.01.    Establishment of Accounts.    

        (a)    The Lockbox Accounts.    

          (i)  The
Seller has established with each Lockbox Account Bank one or more Lockbox Accounts. The Seller agrees that the Administrative Agent shall have exclusive dominion
and control of each Lockbox Account and all monies, instruments and other property from time to time on deposit therein. The Seller shall not make or cause to be made, or have any ability to make or
cause to be made, any withdrawals from any Lockbox Account except as provided in Section 6.01(b)(ii). 

        (ii)  The
Seller and each Servicer have instructed all existing Obligors of Transferred Receivables, and shall instruct all future Obligors of such Receivables, to make
payments in 

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respect thereof only (A) by check or money order mailed to one or more lockboxes or post office boxes under the control of the Administrative Agent (each a
"Lockbox" and collectively the "Lockboxes") or (B) by wire transfer or moneygram directly to a
Lockbox Account. Schedule 4.01(r) lists all Lockboxes and all Lockbox Account Banks at which the Seller maintains Lockbox Accounts as of the
Closing Date, and such schedule correctly identifies (1) with respect to each such Lockbox Account Bank, the name, address and telephone number thereof, (2) with respect to each Lockbox
Account, the name in which such account is held and the complete account number therefor, and (3) with respect to each Lockbox, the lockbox number and address thereof. The Seller and each
Servicer shall endorse, to the extent necessary, all checks or other instruments received in any Lockbox so that the same can be deposited in the Lockbox Account, in the form so received (with all
necessary endorsements), on the first Business Day after the date of receipt thereof. In addition, each of the Seller and each Servicer shall deposit or cause to be deposited into a Lockbox Account
all cash, checks, money orders or other proceeds of Transferred Receivables or Seller Collateral received by it other than in a Lockbox or a Lockbox Account, in the form so received (with all
necessary endorsements), not later than the close of
business on the first Business Day following the date of receipt thereof, and until so deposited all such items or other proceeds shall be held in trust for the benefit of the Collateral Agent.
Neither the Seller nor any Servicer shall make any deposits into a Lockbox or any Lockbox Account except in accordance with the terms of this Agreement or any other Related Document. 

        (iii)  If,
for any reason, a Lockbox Account Agreement terminates or any Lockbox Account Bank fails to comply with its obligations under the Lockbox Account Agreement to
which it is a party, then the Seller shall promptly notify all Obligors of Transferred Receivables who had previously been instructed to make wire payments to a Lockbox Account maintained at any such
Lockbox Account Bank to make all future payments to a new Lockbox Account in accordance with this Section 6.01(a)(iii). The Seller shall not
close any such Lockbox Account unless it shall have (A) received the prior written consent of the Administrative Agent, (B) established a new account with the same Lockbox Account Bank
or with a new depositary institution satisfactory to the Administrative Agent, (C) entered into an agreement covering such new account with such Lockbox Account Bank or with such new depositary
institution substantially in the form of such Lockbox Account Agreement or that is satisfactory in all respects to the Administrative Agent (whereupon, for all purposes of this Agreement and the other
Related Documents, such new account shall become a Lockbox Account, such new agreement shall become a Lockbox Account Agreement and any new depositary institution shall become a Lockbox Account Bank),
and (D) taken all such action as the Administrative Agent shall require to grant and perfect a first priority Lien in such new Lockbox Account to the Purchaser under  Section 8.01 of this
Agreement. Except as permitted by this Section 6.01(a), neither the
Seller nor any Servicer shall open any new Lockbox or Lockbox Account without the prior written consent of the Administrative Agent. 

        (b)    Collection Account.    

          (i)  The
Purchasers have established and shall maintain the Collection Account with the Depositary. The Collection Account shall be registered in the name of the
Administrative Agent and the Administrative Agent shall, subject to the terms of this Agreement, have exclusive dominion and control thereof and of all monies, instruments and other property from time
to time on deposit therein. 

        (ii)  Pursuant
to Section 6.02, the Seller shall instruct each Lockbox Account Bank at which Lockboxes or Lockbox
Accounts are held to transfer, and the Seller hereby grants the Administrative Agent the authority to instruct each such Lockbox Account Bank to transfer, on each Business Day in same day funds, all
available funds in each such Lockbox Account to 

20

 

the Collection Account. The Purchasers and the Administrative Agent may deposit into the Collection Account from time to time all monies, instruments and other property received by any of them as
proceeds of the Transferred Receivables. On each Business Day prior to the Facility Termination Date the Administrative Agent shall instruct and cause the Depositary (which instruction may be in
writing or by telephone confirmed promptly thereafter in writing) to release funds on deposit in the Collection Account in the order of priority set forth in  Section 6.03. On each Business Day from
and after the Facility Termination Date the Administrative Agent shall apply all amounts when received in
the Collection Account in the order of priority set forth in Section 6.05. 

        (iii)  If,
for any reason, the Depositary wishes to resign as depositary of the Collection Account or fails to carry out the instructions of the Administrative Agent, then
the Administrative Agent shall promptly notify the Purchasers. Neither the Purchasers nor the Administrative Agent shall close the Collection Account unless (A) a new deposit account has been
established with the Depositary, (B) the Purchasers and the Administrative Agent have entered into an agreement covering such new account with such new depositary institution satisfactory in
all respects to the Administrative Agent (whereupon such new account shall become the Collection Account for all purposes of this Agreement and the other Related Documents), and (C) the
Purchasers and the Administrative Agent have taken all such action as the Administrative Agent shall require to grant and perfect a first priority Lien in such new Collection Account to the
Administrative Agent on behalf of the Purchasers and to the Collateral Agent on behalf of the Conduit Purchaser under the Collateral Agent Agreement. 

        (c)    Retention Account.    The Administrative Agent has established and shall maintain the Retention Account with
the Depositary. The Retention Account shall be registered in the name of the Administrative Agent and the Administrative Agent shall, subject to the terms of this Agreement, have exclusive dominion
and control thereof and of all monies, instruments and other property from time to time on deposit therein. 

        Section 6.02.    Funding of Collection Account.    

        (a)  As
soon as practicable, and in any event no later than 1:00 p.m. (New York time) on each Business Day: 

          (i)  the
Administrative Agent shall transfer or cause to be transferred, to the extent then available, all Collections deposited in each Lockbox Account prior to such
Business Day to the Collection Account; 

        (ii)  the
Applicable Purchaser or the Administrative Agent shall deposit in the Collection Account the amount, if any, required pursuant to  Section 2.04(b)(i); 

        (iii)  if,
on the immediately preceding Business Day, the Administrative Agent shall have notified the Seller of any Purchase Excess, then the Seller shall deposit cash in
the amount of such Purchase Excess in the Collection Account; 

        (iv)  if
on such Business Day the Seller is required to make other payments under this Agreement not previously retained out of Collections (including Additional Amounts and
Indemnified Amounts not previously paid), then the Seller shall deposit an amount equal to such payments in the Collection Account; 

        (v)  if,
on the immediately preceding Business Day, any Originator made a capital contribution or repurchased a Transferred Receivable pursuant to  Section 4.04 of the Sale and Contribution Agreement or made
a payment as a result of any Dilution Factors pursuant to  Section 4.02(o) of the Sale and Contribution Agreement, then the Seller shall deposit in the 

21

 

Collection Account cash in the amount so received from such Originator for such contribution or for such repurchase or payment; 

        (vi)  each
Servicer shall deposit in the Collection Account the Outstanding Balance of any Transferred Receivable such Servicer elects to pay pursuant to  Section 7.04; and 

      (vii)  the
Seller shall deposit in the Collection Account the Outstanding Balance of any Transferred Receivable the Seller elects to pay pursuant to  Section 8.06(d). 

        (b)  If,
on or before the second Business Day immediately preceding any Settlement Date, the Administrative Agent shall have notified the Seller of any Retention Account
Deficiency pursuant to Section 6.04(b), then the Seller shall deposit cash in the amount of such deficiency in the Collection Account no later
than 12:00 noon (New York time) on such Settlement Date. 

        (c)  From
and after the Facility Termination Date, the Administrative Agent shall transfer all amounts on deposit in the Retention Account as of that date and all amounts on
deposit in any of Seller's other deposit accounts as of that date to the Collection Account. 

        Section 6.03.    Daily Disbursements From the Collection Account; Revolving Period.    On each Business Day no
later than 1:00 p.m. (New York time) during the Revolving Period, and following the transfers made pursuant to Section 6.02, the
Administrative Agent shall disburse the amount of all Collections then on deposit in the Collection Account and its related subaccounts in the following priority: 

        (a)  (x) prior
to the occurrence of a Committed Purchaser Funding Event, to the Retention Account and (y) after the occurrence of a Committed Purchaser Funding
Event, to the Administrative Agent: 

          (i)  an
amount equal to any Retention Account Deficiency, first from amounts deposited pursuant to  Section 6.02(b) and second from Collections then on deposit in the Collection Account; and 

        (ii)  an
amount equal to the sum of: 

        (A)  Daily
Yield; 

        (B)  the
Yield Shortfall, if any, as of the close of business on the immediately preceding Business Day; 

        (C)  the
Servicing Fee (calculated assuming that the Servicing Fee Rate is the applicable rate); provided,  however, that if the Parent Guarantor or any Affiliate of
the Parent Guarantor is the Master Servicer then such amount will not be deposited in the
Retention Account on such day but the Seller shall pay the Servicing Fee in accordance with the provisions of Section 7.05(b);  provided, further, that if any Affiliate of the Parent Guarantor is a Servicer other than the Master
Servicer, such amount shall be reduced by the Applicable Servicing Fee due such Servicer but the Master Servicer shall pay such Applicable Servicing Fee in accordance with the provisions of  Section 7.05(b); 

        (D)  the
Servicing Fee Shortfall, if any, as of the close of business on the immediately preceding Business Day; provided,  however, that if the Parent Guarantor or
any Affiliate of the Parent Guarantor is a Servicer, then the amount of such Servicing Fee Shortfall
attributable to such Servicer will not be deposited in the Retention Account on such day but the Seller shall pay the Servicing Fee in accordance with the provisions of  Section 7.05(b); 

        (E)  the
Unused Commitment Fee for such day; 

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        (F)  the
Unused Commitment Fee Shortfall, if any, as of the close of business on the immediately preceding Business Day; and 

        (G)  any
Additional Amounts or Indemnified Amounts as to which any Indemnified Person has made a demand on the Seller and which remains unpaid for five (5) or more
Business Days; 

        (b)  to
the Purchasers: 

          (i)  an
amount equal to any Purchase Excess to be applied in reduction of Capital Investment, to the Purchasers ratably based on the amount of their respective Capital
Investments; 

        (ii)  an
amount equal to the deposits made in the Collection Account pursuant to Section 6.02(a)(iv) and not
otherwise disbursed pursuant to Section 6.03(a), to be disbursed ratably based on the amounts owed to the applicable Purchasers; 

        (iii)  if,
pursuant to a Repayment Notice, the Seller has requested a reduction of the Capital Investment of the Purchasers, then to the Purchasers, ratably based on the
amount of their respective Capital Investments, the lesser of (A) the amount of such requested reduction of Capital Investment and (B) such balance remaining on deposit in the Collection
Account; 

        (c)  to
the Seller Account, the balance of any amounts remaining in the Collection Account after making the foregoing disbursements. 

        Section 6.04.    Disbursements From the Retention Account; Settlement Date and Daily Procedures; Revolving
Period.    

        (a)  During
the Revolving Period, (x) on each Settlement Date prior to the occurrence of a Committed Purchaser Funding Event and (y) on each Business Day after
the occurrence of a Committed Purchaser Funding Event, the amounts on deposit in the Retention Account or transferred to the Administrative Agent pursuant to  Section 6.03(a) shall be disbursed or
retained by the Administrative Agent in the following priority: 

          (i)  to
the applicable Purchasers (or, if applicable, any Indemnified Person or Affected Party), an amount equal to: 

        (A)  if
such Settlement Date occurs on or prior to the occurrence of a Committed Purchaser Funding Event, an amount equal to: 

        (1)  the
accrued and unpaid Accrued Monthly Yield as of the end of the immediately preceding Settlement Period; 

        (2)  the
accrued and unpaid Unused Commitment Fee as of the end of the immediately preceding Settlement Period; 

23

  

        (3)  all
Additional Amounts incurred and payable to any Affected Party as of the end of the immediately preceding Settlement Period; 

        (4)  all
other amounts accrued and payable under the Agreement (including Indemnified Amounts incurred and payable to any Indemnified Person) as of the end of the immediately
preceding Settlement Period to the extent not already transferred pursuant to Section 6.03(b)(ii); and 

        (5)  if
a Purchase Excess exists on such date, an amount equal to such excess to the extent not already transferred pursuant to  Section 6.03(b)(i), to be applied in reduction of Capital Investment;

        (B)  if
such Business Day occurs after the occurrence of a Committed Purchaser Funding Event, an amount equal to: 

        (1)  the
accrued and unpaid Daily Yield as of such date; 

        (2)  the
accrued and unpaid Unused Commitment Fee as of such date; 

        (3)  all
Additional Amounts as to which any Affected Party has made a demand on the Seller and which remain unpaid for five (5) or more Business Days; 

        (4)  all
other amounts accrued and payable under this Agreement (including Indemnified Amounts as to which any Indemnified Person has made a demand on the Seller to the
extent not already transferred pursuant to Section 6.03(b)(ii); and 

        (5)  if
a Purchase Excess exists on such date, an amount equal to such excess to the extent not already transferred pursuant to  Section 6.03(b)(i), to be applied in reduction of Capital Investment;

        (ii)  to
the extent any funds have been deposited in the Retention Account in accordance with Section 6.03(a)(ii)(C)
and (D), to any Servicer or the Successor Servicer, as applicable, on behalf of the Seller, an amount equal to the accrued and unpaid Servicing Fee or
Successor Servicing Fees and Expenses payable to such Servicer or Successor Servicer as of (x) the end of the immediately preceding Settlement Period (if such Settlement Date occurs on or prior
to the occurrence of a Committed Purchaser Funding Event) or (y) such date (if such date occurs after the occurrence of a Committed Purchaser Funding Event);  provided, however, that any such amount shall be paid net of any amounts paid, or that should have been
paid, as provided in Section 7.05(b); 

        (iii)  to
be retained in the Retention Account, if such Settlement Period occurs prior to the occurrence of a Committed Purchaser Funding Event, an amount equal to the
Accrued Monthly Daily Yield, Accrued Unused Commitment Fee and, to the extent any funds have been deposited in the Retention Account pursuant to Sections
6.03(a)(ii)(C) and (D), Accrued Servicing Fee as of such date; and 

        (iv)  to
the Seller Account, the balance of any funds remaining after retaining or disbursing the foregoing amounts (and, prior to the occurrence of a Committed Purchaser
Funding Event, the Administrative Agent shall transfer to the Seller Account on such date any and all interest earned on, and paid by the Depository with respect to, any funds on deposit in the
Retention Account during the preceding Settlement Period). 

        (b)  No
later than the second Business Day immediately preceding each Settlement Date, the Administrative Agent shall determine and notify the Seller of any Retention Account
Deficiency for the preceding Settlement Period, and the Seller shall deposit cash in the amount of such Retention Account Deficiency to the Collection Account pursuant to  Section 6.02(b).

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        Section 6.05.    Liquidation Settlement Procedures.    On each Business Day from and after the Facility
Termination Date until the Termination Date, the Administrative Agent shall, as soon as practicable, (A) to the extent the Seller has any deposit accounts (other than any Lockbox Account)
holding Collections or the proceeds thereof, shall transfer all amounts on deposit therein to the Collection Account, (B) shall transfer all amounts then on deposit in the Retention Account to
the Collection Account, and (C) shall transfer all amounts in the Collection Account (including amounts transferred from the Retention Account pursuant to  Section 6.02(c) and amounts which are
not allocable to the Purchaser Interests), in the following priority: 

        (a)  if
an Event of Servicer Termination has occurred and a Successor Servicer has assumed the responsibilities and obligations of any Servicer in accordance with  Section 11.02, then to such Successor
Servicer an amount equal to its accrued and unpaid Successor Servicing Fees and Expenses; 

        (b)  to
the Purchasers, ratably, an amount equal to accrued and unpaid Daily Yield through and including the date of maturity (if any) of the Commercial Paper (or other
funding source) maintaining the Capital Investment; 

        (c)  to
the Purchasers, an amount equal to the unpaid Capital Investment; 

        (d)  to
the Administrative Agent, an amount equal to accrued and unpaid Unused Commitment Fees; 

        (e)  all
Additional Amounts incurred and payable to any Affected Party and Indemnified Amounts incurred and payable to any Indemnified Person; and 

        (f)    if
an Event of Servicer Termination shall not have occurred, to the Master Servicer in an amount equal to the accrued and unpaid Servicing Fee; and 

        (g)  to
the Seller Account, the balance of any funds remaining after payment in full of all amounts set forth in this  Section 6.05. 

        Section 6.06.    Investment of Funds in Accounts.    Prior to a Committed Purchaser Funding Event, to the
extent uninvested amounts are on deposit in the Retention Account on any given day during the Revolving Period, the Administrative Agent shall invest all such amounts in Permitted Investments selected
by the Administrative Agent that mature no later than the immediately succeeding Settlement Date. From and after the Facility Termination Date, any investment of such amounts shall be solely at the
discretion of the Administrative Agent, subject to the restrictions described above. All proceeds of any such investment shall be deposited upon receipt into the Retention Account. 

        Section 6.07.    Termination Procedures.    

        (a)  On
the earlier of (i) the first Business Day after the Facility Termination Date on which the Capital Investment has been reduced to zero or (ii) the Final
Purchase Date, if the obligations to be paid pursuant to Section 6.05 have not been paid in full, the Seller shall immediately deposit in the
Collection Account an amount sufficient to make such payments in full. 

        (b)  On
the Termination Date, all amounts on deposit in the Collection Account and the Retention Account shall be disbursed to the Seller and all ownership interests or Liens
of the Purchasers in and to all Transferred Receivables and all Liens of the Purchasers and the Administrative Agent in and to
the Seller Collateral shall be released by each Purchaser and the Administrative Agent. Such disbursement shall constitute the final payment to which the Seller is entitled pursuant to the terms of
this Agreement. 

        (c)  Seller
acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the
written 

25

 

consent of Administrative Agent and agrees that it will not do so without the prior written consent of Administrative Agent, subject to Seller's rights under Section 9-509(d)(2) of
the UCC. 

 
 

ARTICLE VII.    
    
    SERVICER PROVISIONS    
  

        Section 7.01.    Appointment of the Servicers.    Each of the Conduit Purchaser and the Committed Purchaser
hereby appoints the Master Servicer as its agent, and the Seller hereby acknowledges such appointment, to service the Transferred Receivables and enforce its (and the applicable Originator's) rights
and interests in and under each Transferred Receivable and Contract therefor and to serve in such capacity until the termination of its responsibilities pursuant to Sections
9.02 or 11.01. Each of the Conduit Purchaser and the Committed Purchaser hereby appoints each other Servicer as its agent, and
the Seller hereby acknowledges such appointment, to service the Transferred Receivables originated by such Servicer and enforce its rights and interests in and under each Transferred Receivable and
Contract therefor and to serve in such capacity until the termination of its responsibilities pursuant to Sections 9.02 or  11.01. In connection therewith,
the Master Servicer and each other Servicer hereby accepts such appointment and agrees to perform the duties and
obligations set forth herein. Each Servicer may, with the prior written consent of each Purchaser and the Administrative Agent, subcontract with a Sub-Servicer for the collection,
servicing or administration of the Transferred Receivables; provided, that (a) the Master Servicer and such assigning Servicer shall remain
liable for the performance of the duties and obligations of such Sub-Servicer pursuant to the terms hereof and (b) any Sub-Servicing Agreement that may be entered into
and any other transactions or services relating to the Transferred Receivables involving a Sub-Servicer shall be deemed to be between the Sub-Servicer and such Servicer alone,
and the Purchasers and the Administrative Agent shall not be deemed parties thereto and shall have no obligations, duties or liabilities with respect to the Sub-Servicer. 

        Section 7.02.    Duties and Responsibilities of the Servicers.    Subject to the provisions of this Agreement,
the Master Servicer shall conduct the servicing, administration and collection of the Transferred Receivables and shall take, or cause to be taken, all actions that (i) may be necessary or
advisable to service, administer and collect each Transferred Receivable from time to time, (ii) the Master Servicer
would take if the Transferred Receivables were owned by such Servicer, and (iii) are consistent with industry practice for the servicing of such Transferred Receivables. Subject to the
provisions of this Agreement, each other Servicer shall conduct the servicing, administration and collection of the Transferred Receivables originated by it and shall take, or cause to be taken, all
actions that (i) may be necessary or advisable to service, administer and collect such Transferred Receivables from time to time, (ii) such Servicer would take if the Transferred
Receivables were owned by such Servicer, and (iii) are consistent with industry practice for the servicing of such Transferred Receivables. 

        Section 7.03.    Collections on Receivables.    

        (a)  In
the event that any Servicer is unable to determine the specific Transferred Receivables on which Collections have been received from the Obligor thereunder, the
parties agree for purposes of this Agreement only that such Collections shall be deemed to have been received on such Receivables in the order in which they were originated with respect to such
Obligor. In the event that any Servicer is unable to determine the specific Transferred Receivables on which discounts, offsets or other non-cash reductions have been granted or made with
respect to the Obligor thereunder, the parties agree for purposes of this Agreement only that such reductions shall be deemed to have been granted or made (i) if no Termination Event has
occurred and is continuing, on such Receivables as determined by such Servicer, and (ii) from and after the 

26

 

occurrence and during the continuation of a Termination Event, in the reverse order in which they were originated with respect to such Obligor. 

        (b)  If
any Servicer determines that amounts unrelated to the Transferred Receivables (the "Unrelated Amounts") have been
deposited in the Collection Account, then such Servicer shall provide written evidence thereof to the Purchasers and the Administrative Agent no later than the first Business Day following the day on
which such Servicer had actual knowledge thereof, which evidence shall be provided in writing and shall be otherwise satisfactory to each such Affected Party. Upon receipt of any such notice, the
Administrative Agent shall segregate the Unrelated Amounts and the same shall not be deemed to constitute Collections on Transferred Receivables and shall not be subject to the provisions of  Article VI. 

        Section 7.04.    Authorization of the Servicers.    Each of the Conduit Purchaser and the Committed Purchasers
hereby authorizes each Servicer, and the Seller acknowledges such authorization, to take any and all reasonable steps in its name and on its behalf necessary or desirable and not inconsistent with the
ownership of the Purchaser Interests purchased by such Purchaser hereunder and the pledge of the Conduit's Purchaser Interest by the Conduit Purchaser to the Collateral Agent pursuant to the
Collateral Agent Agreement, in the determination of such Servicer, to (a) collect all amounts due under any Transferred Receivable (or, with respect to each Servicer other than the Master
Servicer, any Transferred Receivable originated by it), including endorsing its name on checks and other instruments representing Collections on such Receivable, and execute and deliver any and all
instruments of satisfaction or cancellation or of partial or full release or discharge and all other comparable instruments with respect to any such Receivable and (b) after any Transferred
Receivable (or, with respect to each Servicer other than the Master Servicer, any Transferred Receivable originated by it)
becomes a Defaulted Receivable and to the extent permitted under and in compliance with applicable law and regulations, commence proceedings with respect to the enforcement of payment of any such
Receivable and the Contract therefor and adjust, settle or compromise any payments due thereunder, in each case to the same extent as the applicable Originator could have done if it had continued to
own such Receivable. Each Originator, the Seller, the Administrative Agent and each Purchaser shall furnish each Servicer with any powers of attorney and other documents necessary or appropriate to
enable such Servicer to carry out its servicing and administrative duties hereunder. Notwithstanding anything to the contrary contained herein, the Purchasers and the Administrative Agent shall have
the absolute and unlimited right to direct the Servicers (whether such Servicer is the Parent or otherwise) (i) to commence or settle any legal action to enforce collection of any Transferred
Receivable or (ii) to foreclose upon, repossess or take any other action that the Administrative Agent deems necessary or advisable with respect thereto;  provided, that in lieu of commencing any
such action or taking other enforcement action, such Servicer may, at its option, elect to (x) pay to
the Applicable Purchaser, the Capital Investment with respect to its Purchaser Interest in such Transferred Receivable or (y) replace such Transferred Receivable with an Eligible Receivable(s)
of equal or greater amount to the Capital Investment with respect to the Purchasers' Purchaser Interest in such Transferred Receivable. In no event shall any Servicer be entitled to make any Affected
Party a party to any Litigation without such Affected Party's express prior written consent, or to make the Seller a party to any Litigation without the Administrative Agent's consent. 

        Section 7.05.    Servicing Fees.    

        (a)  As
compensation for its servicing activities and as reimbursement for its reasonable expenses in connection therewith, the Master Servicer shall be entitled to receive
the Servicing Fees in accordance with Sections 6.04 and 6.05, and each other Servicer shall be entitled
to receive the Applicable Servicing Fees in accordance with Section 2.07(b). Each Servicer shall be required to pay for all expenses incurred by
it in connection with its activities hereunder (including any payments to accountants, counsel or any other Person) and shall not be entitled to any payment therefor other than the Servicing Fees or
the Applicable Servicing Fees. 

27

 

        (b)  For
any period that the Parent or any Affiliate of the Parent is the Master Servicer, the Seller agrees that it shall pay to the Master Servicer on each Settlement Date
the applicable Servicing Fee, to the extent of funds available to the Seller on such Settlement Date. The Seller agrees that it will pay the Servicing Fee to the Master Servicer prior to using any
funds available to it on such Settlement Date for any other purpose, including, without limitation, the purchase of additional Receivables. If the Seller does not have sufficient funds available to so
pay the Servicing Fee in full on any Settlement Date, the shortfall shall be paid on the next Business Day on which the Seller does have available funds but only to the extent that funds are then
available to the Seller in accordance with the provisions of Article VI. Each Servicer waives any right it has or may at any time have to demand
payment and/or take any action to or in furtherance of payment of any shortfall in the payment of the Servicing Fee and agrees that it shall not have a "claim" under Section 101(5) of the
Bankruptcy Code for the payment of any such shortfall, except for, and only to the extent of, any excess available funds, as described above. 

        (c)  On
each Settlement Date, an Authorized Officer of the Seller shall deliver to the Administrative Agent a certificate certifying that the Servicing Fee payable for the
preceding Settlement Period has been paid in accordance with this Section 7.07. 

        Section 7.06.    Representations and Warranties of the Servicers.    To induce the Purchasers to purchase the
Purchaser Interests and the Administrative Agent to take any action required to be performed by it hereunder, each Servicer represents and warrants to the Purchasers and the Administrative Agent,
which representation and warranty shall survive the execution and delivery of this Agreement: 

        (a)    Corporate Existence; Compliance with Law.    Each Servicer (i) is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization; (ii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification; (iii) has the requisite power and authority and the legal right to own and operate its properties, to lease the property
it operates under lease, and to conduct its business as now, heretofore and proposed to be conducted; (iv) has all licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except where the failure to have received any
such license, permit, consent or approval or to have given any such notice, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect; (v) is in
compliance with its Charter Documents; and (vi) subject to specific representations set forth herein regarding ERISA, tax and other laws, is in compliance with all applicable provisions of law,
except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 

        (b)    Corporate Power, Authorization, Enforceable Obligations.    The execution, delivery and performance by each
Servicer of this Agreement and the other Related Documents to which it is a party and, solely with respect to clause (vii) below, the exercise by
each of the Seller, the Purchasers or the Administrative Agent of any of its rights and remedies under any Related Document to which it is a party: (i) are within each Servicer's power;
(ii) have been duly authorized by all necessary or proper action (corporate, shareholder or otherwise); (iii) do not contravene any provision of such Servicer's Charter Documents;
(iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Servicer is a party or
by which such Servicer or any of the property of such Servicer is bound; (vi) do not result in the creation or imposition of any Adverse Claim upon any of the property of such Servicer; and
(vii) do not require the consent or 

28

 

approval of any Governmental Authority or any other Person, except those referred to in Section 3.01(b), all of which will have been duly
obtained, made or complied with prior to the Closing Date. On or prior to the Closing Date, each of the Related Documents to which any Servicer is a party shall have been duly executed and delivered
by such Servicer and each such Related Document shall then constitute a legal, valid and binding obligation of such Servicer enforceable against it in
accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights and by general principles of
equity. 

        (c)    No Litigation.    Except as set forth on Schedule 4.01(d), no Litigation is now pending or, to the
knowledge of any Servicer, threatened against any Servicer that (i) challenges any Servicer's right or power to enter into or perform any of its obligations under the Related Documents to which
it is a party, or the validity or enforceability of any Related Document or any action taken thereunder, (ii) seeks to prevent the transfer, sale, pledge or contribution of any Receivable or
the consummation of any of the transactions contemplated under this Agreement or the other Related Documents, or (iii) if determined adversely to any Servicer, could reasonably be expected to
have a Material Adverse Effect. 

        (d)    Full Disclosure.    No information contained in this Agreement, any Investment Base Certificate or any of the
other Related Documents, or any written statement furnished by or on behalf of any Servicer to either Purchaser or the Administrative Agent pursuant to the terms of this Agreement or any of the other
Related Documents contains any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made. 

        (e)    Other Representations and Warranties.    Each of the representations and warranties of each Servicer (whether
made by such Servicer in its capacity as an Originator or as a Servicer) contained in any Related Document is true and correct and, if made by any Servicer in its capacity as an Originator, applies
with equal force to such Servicer in its capacity as a Servicer. 

        Section 7.07.    Covenants of the Servicers.    Each Servicer covenants and agrees that from and after the
Closing Date and until the Termination Date: 

        (a)    Ownership of Transferred Receivables.    Each Servicer shall identify the Transferred Receivables clearly and
unambiguously in its Servicing Records to reflect that such Transferred Receivables have been sold or contributed to the Seller and, following the Purchase of Purchaser Interests in such Transferred
Receivables under this Agreement, are owned by the Conduit Purchaser or Committed Purchaser, as applicable. 

        (b)    Compliance with Credit and Collection Policies.    Each Servicer shall comply in all respects with the Credit
and Collection Policies with respect to each Transferred Receivable and the Contract therefor. No Servicer shall amend, waive or modify any term or provision of the Credit and Collection Policies
without the prior written consent of the Administrative Agent. 

        (c)    Covenants in Other Related Documents.    Each Servicer shall perform, keep and observe all covenants applicable
to it in its capacity as an Originator under the Sale and Contribution Agreement and the other Related Documents (including those covenants set forth in Sections
4.02 and 4.03 of the Sale and
Contribution Agreement) and each Servicer hereby agrees to be bound by such covenants in its capacity as Servicer hereunder for the benefit of the Purchasers and the Administrative Agent as if the
same were set forth in full herein. 

        Section 7.08.    Reporting Requirements of the Servicers.    Each Servicer hereby agrees that, from and after
the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the 

29

 

Purchasers and the Administrative Agent the financial statements, notices, and other information at the times, to the Persons and in the manner set forth in Annex
5.02(a). 

 
 

ARTICLE VIII.    
    
    GRANT OF SECURITY INTERESTS    
  

        Section 8.01.    Seller's Grant of Security Interest.    The parties hereto intend that each Purchase of
Purchaser Interests to be made hereunder shall constitute a purchase and sale of undivided percentage ownership interests in the Transferred Receivables and not a loan. Notwithstanding the foregoing,
in addition to and not in derogation of any rights now or hereafter acquired by any Purchaser or the Administrative Agent hereunder, the parties hereto intend that this Agreement shall constitute a
security agreement under applicable law. In such regard and, in any event, to secure the prompt and complete payment, performance and observance of all Seller Secured Obligations, and to induce the
Conduit Purchaser and the Committed Purchaser to enter into this Agreement and perform the obligations required to be performed by it hereunder in accordance with the terms and conditions thereof, the
Seller hereby grants, assigns, conveys, pledges, hypothecates and transfers to the Administrative Agent, for the benefit of itself, the Conduit Purchaser and the Committed Purchaser, a Lien upon and
security interest in all of its right, title and interest in, to and under, but none of its obligations arising from, the following property, whether now owned by or owing to, or hereafter acquired by
or arising in favor of, the Seller (including under any trade names, styles or derivations of the Seller), and regardless of where located (all of which being hereinafter collectively referred to as
the "Seller Collateral"): 

        (a)  all
Receivables, Contracts therefor and Collections thereon; 

        (b)  the
Sale and Contribution Agreement, all Lockbox Account Agreements and all other Related Documents now or hereafter in effect relating to the purchase, servicing or
processing of Receivables (collectively, the "Seller Assigned Agreements"), including (i) all rights of the Seller to receive moneys due and to
become due thereunder or pursuant thereto, (ii) all rights of the Seller to receive proceeds
of any insurance, indemnity, warranty or guaranty with respect thereto, (iii) all claims of the Seller for damages or breach with respect thereto or for default thereunder and (iv) the
right of the Seller to amend, waive or terminate the same and to perform and to compel performance and otherwise exercise all remedies thereunder; 

        (c)  all
of the following (collectively, the "Seller Account Collateral"): 

          (i)  all
deposit accounts, including the Lockbox Accounts, the Lockboxes, and all funds on deposit therein and all certificates and instruments, if any, from time to time
representing or evidencing any deposit account, the Lockbox Accounts, the Lockboxes or such funds, 

        (ii)  the
Collection Account, the Retention Account and all funds on deposit therein and all certificates and instruments, if any, from time to time representing or
evidencing the Collection Account, the Retention Account or such funds, 

        (iii)  all
Investments from time to time of amounts in the Collection Account and the Retention Account, and all certificates, instruments and investment property, if any,
from time to time representing or evidencing such Investments, 

        (iv)  all
notes, certificates of deposit and other instruments from time to time delivered to or otherwise possessed by any Purchaser or any assignee or agent on behalf of
any Purchaser in substitution for or in addition to any of the then existing Seller Account Collateral, and 

30

 

        (v)  all
interest, dividends, cash, instruments, investment property and other property from time to time received, receivable or otherwise distributed with respect to or in
exchange for any and all of the then existing Seller Account Collateral; 

        (d)  all
software and Computer Hardware; 

        (e)  all
other property that may from time to time hereafter be granted and pledged by the Seller or by any Person on its behalf under this Agreement, including any deposit
with any Purchaser or the Administrative Agent of additional funds by the Seller; and 

        (f)    to
the extent not otherwise included, all proceeds and products of the foregoing and all accessions to, substitutions and replacements for, and profits of, each of the
foregoing Seller Collateral (including proceeds that constitute property of the types described in Sections 8.01(a) through  (e). 

        Section 8.02.    Seller's Certification.    The Seller hereby certifies that (a) the benefits of the
representations, warranties and covenants of each Originator and Parent Guarantor to the Seller under the Sale and Contribution Agreement have been assigned by the Seller to the Administrative Agent
on behalf of the Purchasers hereunder; (b) the rights of the Seller to require a capital contribution from the Originators or to require payment of a Rejected Amount from an Originator under
the Sale and Contribution Agreement may be enforced by the Purchasers and the Administrative Agent; and (c) the Sale and Contribution Agreement provides that the representations, warranties and
covenants described in Sections 4.01, 4.02 and 4.03
thereof, the indemnification and payment provisions of Article V thereof and the provisions of Sections
4.03(j), 8.03 and 8.14 thereof shall survive the sale of the Transferred
Receivables (and undivided percentage ownership interests therein) and the termination of the Sale and Contribution Agreement and this Agreement. The Seller hereby acknowledges that the Conduit
Purchaser has assigned to the Collateral Agent under the Collateral Agent Agreement the benefits of the representations, warranties and covenants certified in  Section 8.02(a) to have been assigned
to the Conduit Purchaser. 

        Section 8.03.    Consent to Assignment.    Each of the Seller and the Servicers acknowledges and consents to
the grant by the Conduit Purchaser to the Collateral Agent pursuant to the Collateral Agent Agreement of a Lien upon all of the Conduit Purchaser's rights, title and interest in, to and under the
Seller Collateral and acknowledges the rights of the Collateral Agent thereunder and the covenants made by the Conduit Purchaser in favor of the Collateral Agent set forth therein, and further
acknowledges and consents that, upon the occurrence and during the continuance of an Incipient Termination Event or a Termination Event prior to a Committed Purchaser Funding Event, the Collateral
Agent shall be entitled to enforce the provisions of the Seller Assigned Agreements and shall be entitled to all the rights and remedies of the Conduit Purchaser thereunder. In addition, each of the
Seller and the Servicers hereby authorizes the Collateral Agent to rely on the representations and warranties made by it in the Seller Assigned Agreements to which it is a party and in any other
certificates or documents furnished by it to any party in connection therewith. 

        Section 8.04.    Delivery of Collateral.    All certificates or instruments representing or evidencing the
Seller Collateral shall be delivered to and held by or on behalf of the Administrative Agent and shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to the Administrative Agent. The Administrative Agent shall have the right (a) at any time to exchange certificates or
instruments representing or evidencing Seller Collateral for certificates or instruments of smaller or larger denominations and (b) at any time in its discretion following the occurrence and
during the continuation of a Termination Event and without notice to the Seller, to transfer to or to register in the name of the Administrative Agent or its nominee any or all of the Seller
Collateral. The Seller will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with a legend describing
the Administrative Agent's interest (on behalf of the Purchasers) in the Receivables and (B) segregate (from all other receivables then owned or being serviced by the Seller) all contracts
relating to each Receivable. 

31

  

        Section 8.05.    Seller Remains Liable.    It is expressly agreed by the Seller that, anything herein to the
contrary notwithstanding, the Seller shall remain liable under any and all of the Transferred Receivables, the Contracts therefor, the Seller Assigned Agreements and any other agreements constituting
the Seller Collateral to which it is a party to observe and perform all the conditions and obligations to be observed and performed by it thereunder. The Purchasers, the Administrative Agent, the
Collateral Agent and the other Conduit Purchaser Secured Parties shall not have any obligation or liability under any such Receivables, Contracts or agreements by reason of or arising out of this
Agreement or the Collateral Agent Agreement or the granting herein or therein of a Lien thereon or the receipt by the Administrative Agent, Purchasers, the Collateral Agent or any Purchaser Secured
Party of any payment relating thereto pursuant hereto or thereto. The exercise by any Purchaser or the Administrative Agent of any of its respective rights under this Agreement shall not release any
Originator, the Seller or any Servicer from any of their respective duties or obligations under any such Receivables, Contracts or agreements. None of the Purchasers, the Administrative Agent, the
Collateral Agent or any of the Conduit Purchaser Secured Parties shall be required or obligated in any manner to perform or fulfill any of the obligations of any Originator, the Seller or any Servicer
under or pursuant to any such Receivable, Contract or agreement, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of
any performance by any party under any such Receivable, Contract or agreement, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any
amounts that may have been assigned to it or to which it may be entitled at any time or times. 

        Section 8.06.    Covenants of the Seller and the Servicers Regarding the Seller Collateral.    

        (a)    Offices and Records.    The Seller shall maintain its principal place of business and chief executive office
and the office at which it stores its Records at the respective locations specified in Schedule 4.01(b) or, upon 30 days' prior written
notice to the Administrative Agent, at such other location in a jurisdiction where all action requested by the Administrative Agent pursuant to Section 14.15 shall have been taken with respect to
the Seller Collateral. Each of the Seller and each Servicer shall, at its own cost and expense, maintain adequate and
complete records of the Transferred Receivables and the Seller Collateral, including records of any and all payments received, credits granted and merchandise returned with respect thereto and all
other dealings therewith. Each of the Seller and each Servicer shall mark conspicuously with a legend, in form and substance satisfactory to the Administrative Agent, its books and records, computer
tapes, computer disks and credit files pertaining to the Seller Collateral, and its file cabinets or other storage facilities where it maintains information pertaining thereto, to evidence this
Agreement and the assignment and Liens granted pursuant to this Article VIII. Upon the occurrence and during the continuance of a Termination
Event, the Seller and each Servicer shall deliver and turn over such books and records to the Administrative Agent or its representatives at any time on demand of the Administrative Agent. Prior to
the occurrence of a Termination Event and upon notice from the Administrative Agent, the Seller and each Servicer shall permit any
representative of the Administrative Agent to inspect such books and records and shall provide photocopies thereof to the Administrative Agent as more specifically set forth in  Section 8.06(b).

        (b)    Access.    Each of the Seller and each Servicer shall, at its own expense, during normal business hours, from
time to time upon five Business Days' prior notice as frequently as the Administrative Agent determines to be appropriate: (i) provide the Purchasers, the Administrative Agent and any of their
respective officers, employees and agents access to its properties (including properties utilized in connection with the collection, processing or servicing of the Transferred Receivables),
facilities, advisors and employees (including officers) and to the Seller Collateral, (ii) permit the Purchasers, the Administrative Agent and any of their respective officers, employees and
agents to inspect, audit and make extracts from its books and records, including all Records, (iii) permit the Purchasers or the Administrative Agent and their respective officers, employees 

32

 

and agents to inspect, review and evaluate the Transferred Receivables and the Seller Collateral and (iv) permit the Purchasers or the Administrative Agent and their respective officers,
employees and agents to discuss matters relating to the Transferred Receivables or its performance under this Agreement or the other Related Documents or its affairs, finances and accounts with any of
its officers, directors, and, so long as the Purchasers or the Administrative Agent notifies the Seller or the applicable Servicer, as the case may be, and gives the Seller or the applicable Servicer
the opportunity to participate in any such communications, with its employees, representatives or agents (in each case, with those persons having knowledge of such matters), and, so long as the
Purchasers or the Administrative Agent notifies the Seller or the applicable Servicer, as the case may be, and gives the Seller or the applicable Servicer the opportunity to participate in any such
communications, with its independent certified public accountants. If (A) an Incipient Termination Event or a Termination Event shall have occurred and be continuing or (B) the
Administrative Agent, in good faith, believes that an Incipient Termination Event or a Termination Event is imminent or deems any Purchaser's rights or interests in the Transferred Receivables, the
Seller Assigned Agreements or any other Seller Collateral insecure, then each of the Seller and each Servicer shall, at its own expense, provide such access at all times and without advance notice and
provide the Purchasers or the Administrative Agent with access to its customers (other than customers of K2 Inc. that are not also customers of the other Servicers), and, so long as the
Purchasers or the Administrative Agent notifies the Seller or the applicable Servicer, as the case may be, and gives the Seller or the applicable Servicer the opportunity to be present, with its
suppliers. Each of the Seller and each Servicer shall make available to the Administrative Agent and its counsel, as quickly as is possible under the circumstances, originals or copies of all books
and records, including Records, that the Administrative Agent may reasonably request. Each of the Seller and each Servicer shall deliver any document or instrument necessary for the Administrative
Agent, as the Administrative Agent may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains records for the Seller or any Servicer, and shall
maintain duplicate records or supporting documentation on media, including computer tapes and disks owned by the Seller or such Servicer. 

        (c)    Communication with Accountants.    So long as the Purchasers or the Administrative Agent notifies the Seller or
the applicable Servicer, as the case may be, and gives the Seller or the applicable Servicer the opportunity to participate in any such communications, each of the Seller and each Servicer authorizes
the Purchasers and the Administrative Agent to communicate directly with its independent certified public accountants and authorizes and shall instruct those accountants and advisors to disclose and
make available to the Purchasers and the Administrative Agent any and all financial statements and other supporting financial documents, schedules and information relating to the Seller or any
Servicer
(including copies of any issued management letters) with respect to its business, financial condition and other affairs. 

        (d)    Collection of Transferred Receivables.    Except as otherwise provided in this Section 8.06(d), each Servicer shall
continue to collect or cause to be collected, at its sole cost and expense, all amounts due or to become due to the Seller under the
Transferred Receivables (or, with respect to any Servicer other than the Master Servicer, the Transferred Receivables originated by it), the Seller Assigned Agreements and any other Seller Collateral.
In connection therewith, the Seller and each Servicer shall take such action as it, and from and after the occurrence and during the continuance of a Termination Event, the Administrative Agent, may
deem necessary or desirable to enforce collection of the Transferred Receivables, the Seller Assigned Agreements and the other Seller Collateral; provided, that the Seller or any Servicer may, rather
than commencing any such action or taking any other enforcement action, at its option, elect to pay to the Administrative
Agent, for the account of the Applicable Purchaser (in accordance with its Purchaser Interests), the Outstanding Balance of any such Transferred Receivable; provided
further, that if (i) an Incipient Termination Event or a Termination Event shall have occurred and be 

33

 

continuing or (ii) the Administrative Agent, in good faith believes that an Incipient Termination Event or a Termination Event is imminent or deems any Purchaser's rights or interests in the
Transferred Receivables, the Seller Assigned Agreements or any other Seller Collateral insecure, then the Administrative Agent may, without prior notice to the Seller or the Servicers, notify or cause
the Servicers to notify any Obligor under any Transferred Receivable or obligors under the Seller Assigned Agreements of the assignment of such Transferred Receivables or Seller Assigned Agreements,
as the case may be, to the Administrative Agent on behalf of the Purchasers hereunder and direct that payments of all amounts due or to become due to the Seller thereunder be made directly to the
Administrative Agent or any Servicer, collection agent or lockbox or other account designated by the Administrative Agent and, upon such notification and at the sole cost and expense of the Seller and
the Servicers, the Administrative Agent may enforce collection of any such Transferred Receivable or the Seller Assigned Agreements and adjust, settle or compromise the amount or payment thereof.
Notwithstanding the foregoing, no Servicer shall extend, amend, rescind, forgive, discharge, compromise, waive, cancel or otherwise modify the terms of any Transferred Receivable or amend, modify or
waive any term or condition of any Contract related thereto, provided, that such Servicer may take such actions as are expressly permitted by the Credit and Collection Policies as such Servicer deems
appropriate to maximize Collections thereof so long as such extension or adjustment does not alter any classification of a Receivable as a Defaulted Receivable or result in any Receivable being
required to be paid more than 364 days from the Billing Date thereof. 

        (e)    Performance of Seller Assigned Agreements.    Each of the Seller and each Servicer shall (i) perform and
observe all the terms and provisions of the Seller Assigned Agreements to be performed or observed by it, maintain the Seller Assigned Agreements in full force and effect, enforce the Seller Assigned
Agreements in accordance with their terms and take all action as may from time to time be requested by the Administrative Agent in order to accomplish the foregoing, and (ii) upon the request
of and as directed by the Administrative Agent, make such demands and requests to any other party to the Seller Assigned Agreements as are permitted to be made by the Seller or any Servicer
thereunder. 

        Section 8.07.    License for Use of Software and Other Intellectual Property.    Unless expressly prohibited by
the licensor thereof or any provision of applicable law, if any, the Seller hereby grants to the Administrative Agent and the Purchasers a non-exclusive license to use, without charge: 

        (a)  such
Seller's computer programs, software, printouts and other computer materials, technical knowledge or processes, data bases, materials, and licenses thereto, and 

        (b)  such
Seller's owned or licensed trademarks, registered trademarks, trademark applications, service marks, registered service marks, service mark applications, patents,
patent applications, trade names, rights of use of any name, labels fictitious names, inventions, designs, trade secrets, goodwill, registrations, copyrights, copyright applications, permits,
franchises, customer lists, credit files, correspondence, and advertising materials or any property of a similar nature, 

in
each case, as it pertains to the Seller, or any rights to any of the foregoing, in the advertising for sale, and selling any of the Seller Collateral, or exercising of any other remedies hereto.
The Seller agrees that the Seller's rights under all licenses and franchise agreements shall inure to the Administrative Agent's and Purchasers' benefit. To the extent the grant of the aforesaid
license described is expressly prohibited by the licensor thereof, the Seller shall exercise its best efforts to obtain the consent of such licensor to the Seller's grant to the Administrative Agent
and the Purchasers of such license. Each of the Administrative Agent and the Purchasers agrees not to use any such license without giving the Seller and Master Servicer prior notice and unless a
Termination Event has occurred and is continuing. 

34

 
 
 

ARTICLE IX.
  
    TERMINATION EVENTS    
  

        Section 9.01.    Termination Events.    If any of the following events (each, a
"Termination Event") shall occur (regardless of the reason therefor): 

        (a)  (i) the
Seller shall fail to make any payment of any Seller Secured Obligation when due and payable and the same shall remain unremedied for two Business Days or
more, (ii) the Seller shall fail to deliver the Investment Base Certificate as required pursuant to Section 2.03 or the reports as and
when required in clauses (a), (b), (c) or (d) of Annex
5.02(a) and, in each case, such failure shall remain
unremedied for two (2) Business Days or more, or (iii) the Seller or SPC shall fail or neglect to perform, keep or observe any other provision of this Agreement or the other Related
Documents (other than any provision embodied in or covered by any other clause of this Section 9.01) and the same shall remain unremedied for
five (5) Business Days or more after written notice thereof shall have been given by the Administrative Agent to the Seller; or 

        (b)  a
default or breach (after giving effect to applicable cure periods, if any) shall occur under any other agreement, document or instrument to which the Parent Guarantor,
any Originator, or any other Subsidiary of the Parent Guarantor is a party or by which any such Person or its property is bound, and such default or breach (i) involves the failure to make any
payment when due in respect of any Debt to GE Capital or any of its Affiliates, (ii) permits any holder of Debt or a trustee or agent under the Credit Facilities or any foreign credit facility
of Parent Guarantor or any of its Subsidiaries to cause such Debt or a portion thereof to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or
(iii) permits any holder of Debt or a portion thereof which is in excess of a principal amount of $5,000,000 in the aggregate to cause such Debt or a portion thereof to become due prior to its
stated maturity or prior to its regularly scheduled dates of payment; in each case, regardless of whether such default is waived, or such right is exercised, by such holder, trustee or agent; or 

        (c)  a
case or proceeding shall have been commenced against the Parent Guarantor, any Subsidiary of Parent Guarantor, the SPC, the Seller or any Originator seeking a decree
or order in respect of any such Person (i) under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person's assets, or (iii) ordering the
winding-up or liquidation of the affairs of any such Person and, other than with respect to the Seller, any such proceedings or case shall not be dismissed within 60 days after
commencement thereof; or 

        (d)  the
Parent Guarantor, the SPC, the Seller, any Originator or any other Subsidiary of Parent Guarantor shall (i) file a petition seeking relief under the
Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consent or fail to object in a timely and appropriate manner to the institution of
proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for any such Person or for any substantial part of such Person's assets, (iii) make an assignment for the benefit of creditors, or (iv) take any corporate action in furtherance of any of
the foregoing; or 

        (e)  (i) Parent
Guarantor, any Originator, the SPC, the Seller or any Servicer generally does not pay its debts as such debts become due or admits in writing its
inability to, or is generally unable to, pay its Debts as such Debts become due or (ii) the fair market value of the Parent Guarantor's, the SPC's, any Originator's, any Servicer's or the
Seller's liabilities exceeds the fair market value of its assets; or 

35

 

        (f)    a
final judgment or judgments for the payment of money in excess of $5,000,000 (exclusive of judgments to the extent covered by insurance) in the aggregate at any time
outstanding shall be rendered against Parent Guarantor or any of its Subsidiaries and the same shall not, within 30 days after the entry thereof, have been discharged or execution thereof
stayed or bonded pending appeal, or shall not have been discharged prior to the expiration of any such stay; or 

        (g)  a
judgment or order for the payment of money shall be rendered against the Seller or SPC; or 

        (h)  (i) any
information contained in any Investment Base Certificate is untrue or incorrect in any respect, or (ii) any representation or warranty of Parent
Guarantor or any of its Subsidiaries, any Originator, SPC or the Seller herein or in any other Related Document or in any written statement, report, financial statement or certificate (other than an
Investment Base Certificate) made or delivered by or on behalf of such Person to any Affected Party hereto or thereto is untrue or incorrect in any material respect as of the date when made or deemed
made, except to the extent that any Originator has complied with Section 4.04 of the Sale and Contribution Agreement with respect to such breach;
or 

        (i)    any
Governmental Authority (including the IRS or the PBGC) shall file notice of a Lien with regard to any assets of any Originator (other than a Lien (i) limited
by its terms to assets other than Receivables and (ii) not materially adversely affecting the financial condition of such Originator or the ability of the Parent to perform as Master Servicer
hereunder); or 

        (j)    any
Governmental Authority (including the IRS or the PBGC) shall file notice of a Lien with regard to any of the assets of the Seller or SPC; or 

        (k)  the
Administrative Agent shall have determined (and so notified the Seller) that (i) there shall have occurred any event which materially impairs the
collectibility of the Receivables, or (ii) any event or condition that has had or could reasonably be expected to have or result in a Material Adverse Effect has occurred; or 

        (l)    (i) a
default or breach shall occur under any provision of Section 4.03(l) of the Sale and Contribution
Agreement, (ii) a default or breach shall occur under any provision of Sections 4.02(o), 4.04, 5.01 or  8.14 of the Sale and Contribution Agreement and
the same shall remain unremedied for two Business Days or more after the occurrence thereof,
(iii) a default or breach shall occur under any other provision of the Sale and Contribution Agreement and the same shall remain unremedied for five Business Days or more after written notice
thereof shall have been given by the Administrative Agent to the Seller or (iv) the Sale and Contribution Agreement shall for any reason cease to evidence the transfer to the Seller of the
legal and equitable title to, and ownership of, the Transferred Receivables; or 

        (m)  except
as otherwise expressly provided herein, any Lockbox Account Agreement or the Sale and Contribution Agreement shall have been modified, amended or terminated
without the prior written consent of the Purchasers and the Administrative Agent; or 

        (n)  an
Event of Servicer Termination shall have occurred; or 

        (o)  (i) with
respect to the Transferred Receivables, (A) prior to the Purchase of Purchaser Interests therein hereunder, the Seller shall cease to hold valid
and properly perfected title to and sole record and beneficial ownership in such Transferred Receivables or (B) after the Purchase of Purchaser Interests hereunder, (1) the
Administrative Agent (on behalf of the Purchasers) shall cease to hold either (a) valid and properly perfected title to and sole record and beneficial ownership in the related Transferred
Receivables or (b) a first priority, perfected Lien in the related Transferred Receivables or any of the Seller Collateral; or 

36

 

        (p)  a
Change of Control with respect to the Parent, SPC, the Seller or any Originator; or 

        (q)  the
Seller or SPC shall amend its Charter Documents without the express prior written consent of the Purchasers and the Administrative Agent; or 

        (r)  the
Seller shall have received an Election Notice from any Originator pursuant to Section 2.01(d) of the Sale and
Contribution Agreement; or 

        (s)  (i) the
Default Ratio shall exceed 11.0%; (ii) the Delinquency Ratio shall exceed 3.0%; (iii) the Dilution Trigger Ratio shall exceed 7.5%;
(iv) the Receivables Collection Turnover shall exceed 110 days; or (v) the Seller's Net Worth Percentage shall be less than 5.0%; or 

        (t)    the
Parent Revolver, the 1992 Note Agreement or the 1999 Note Agreement shall (i) terminate without being refinanced as set forth in clause (iii) below,
(ii) fail to have its maturity date extended beyond the Final Purchase Date or other period reasonably satisfactory to the Administrative Agent, or (iii) if the Parent Revolver, the 1992
Note Agreement or the 1999 Note Agreement is to be refinanced, (A) Seller shall fail to deliver to the Administrative Agent at least sixty (60) days prior to the maturity date of such
Debt, a letter of intent with respect to the refinancing between Parent and the lenders thereunder or similar replacement lenders in form and substance reasonably satisfactory to the Administrative
Agent, (B) Seller shall fail to deliver to the Administrative Agent at least thirty (30) days prior to the maturity date of such Debt, a binding commitment letter with respect to such
refinancing between Parent and such refinancier in form and substance reasonably satisfactory to the
Administrative Agent, or (C) if such refinancier is secured, Seller shall fail to deliver to the Administrative Agent a Satisfactory Intercreditor Agreement executed by such refinancier; or 

        (u)  any
material provision of any Related Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms (or any Originator or the
Seller shall challenge the enforceability of any Related Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Related
Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms); or 

        (v)  to
the extent that the Credit Facilities' Security Documents prohibit amendment, supplement, restatement or other modification thereof without the consent of the
Administrative Agent, the failure to obtain the Administrative Agent's consent to any such amendment, supplement, restatement or modification; 

then,
and in any such event, the Administrative Agent shall, at the request of, or may, with the consent of, the Purchaser or the Administrative Agent, by notice to the Seller, declare the Facility
Termination Date to have occurred without demand, protest or further notice of any kind, all of which are hereby expressly waived by the Seller; provided, that the Facility Termination Date shall
automatically occur (i) upon the occurrence of any of the Termination Events described in
Sections 9.01(c), (d), (e) or (r) or (ii) three days after the occurrence of the Termination Event described
in Section 9.01(a)(i) if the same shall not have been remedied by such time, in each case without demand, protest or any notice of any kind, all
of which are hereby expressly waived by the Seller. 

        Section 9.02.    Events of Servicer Termination.    If any of the following events (each, an
"Event of Servicer Termination") shall occur (regardless of the reason therefor): 

        (a)  any
Servicer shall (i) fail to make any payment or deposit required to be made by it under this Agreement or any other Related Document, (ii) fail to
deliver any reports required to be delivered by it under clauses (a), (b), or (c)
of Annex 5.02(a) or Section 5.02(b) of this Agreement and such failure shall remain unremedied
for two (2) Business Days or more, (iii) fail to deliver any other reports required to be delivered by it under this Agreement or any other 

37

 

Related Document and such failure shall remain unremedied for five (5) Business Days or more, or (iv) fail or neglect to perform, keep or observe any other provision of this Agreement
or the other Related Documents (whether in its capacity as an Originator or as Servicer) and the same shall remain unremedied for five (5) Business Days or more after written notice thereof
shall have been given by the Purchasers or the Administrative Agent to such Servicer or the Master Servicer; or 

        (b)  a
default or breach shall occur (after giving effect to applicable cure periods, if any) under any other agreement, document or instrument to which any Servicer is a
party or by which any such Person or its
property is bound, and such default or breach (i) involves the failure to make any payment when due in respect of any Debt to GE Capital or any of its Affiliates, (ii) permits any holder
of Debt or a trustee or agent under the Credit Facilities or any foreign credit facility of any Servicer to cause such Debt or a portion thereof to become due prior to its stated maturity or prior to
its regularly scheduled dates of payment, or (iii) permits any holder of Debt or a portion thereof which is in excess of a principal amount of $5,000,000 in the aggregate to cause such Debt or
a portion thereof to become due prior to its stated maturity or prior to its regularly scheduled dates of payment; in each case, regardless of whether such default is waived, or such right is
exercised, by such holder, trustee or agent; or 

        (c)  a
case or proceeding shall have been commenced against any Servicer or any Affiliate thereof which acts as a Sub-Servicer seeking a decree or order in
respect of any such Person (i) under the Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for any substantial part of such Person's assets, or (iii) ordering the winding-up or
liquidation of the affairs of any such Person; or 

        (d)  any
Servicer or any Affiliate thereof which acts as a Sub-Servicer shall (i) file a petition seeking relief under the Bankruptcy Code or any
other applicable federal, state or foreign bankruptcy or other similar law, (ii) consent or fail to object in a timely and appropriate manner to the institution of proceedings thereunder or to
the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for any such Person or for
any substantial part of such Person's assets, (iii) make an assignment for the benefit of creditors, or (iv) take any corporate action in furtherance of any of the foregoing; or 

        (e)  (i) any
Servicer generally does not pay its debts as such debts become due or admits in writing its inability to, or is generally unable to, pay its Debts as such
Debts become due or (ii) the fair market value of any Servicer's liabilities exceeds the fair market value of its assets; or 

        (f)    a
final judgment or judgments for the payment of money in excess of $5,000,000 in the aggregate at any time outstanding (exclusive of judgments to the extent covered by
insurance) shall be rendered against any Servicer or any Affiliate thereof which acts as a Sub-Servicer and the same shall not, within 30 days after the entry thereof, have been
discharged or execution thereof stayed or bonded pending appeal, or shall not have been discharged prior to the expiration of any such stay; or 

        (g)  any
representation or warranty of any Servicer herein or in any other Related Document or in any written statement, report, financial statement or certificate (other
than an Investment Base Certificate) made or delivered by any Servicer to any Affected Party hereto or thereto is untrue or incorrect in any material respect as of the date when made or deemed made,
except to the extent that any Originator has complied with Section 4.04 of the Sale and Contribution Agreement with respect to such breach; or 

38

 

        (h)  the
Administrative Agent shall have determined that any event or condition that materially adversely affects the ability of any Servicer to collect the Transferred
Receivables or to otherwise perform hereunder has occurred; or 

        (i)    a
Termination Event shall have occurred or this Agreement shall have been terminated; or 

        (j)    a
deterioration has taken place in the quality of servicing of Transferred Receivables or other Receivables serviced by any Servicer that the Administrative Agent, in
its sole discretion, determines to be material, and such material deterioration has not been eliminated within 30 days after written notice thereof shall have been given by the Administrative
Agent to such Servicer or the Master Servicer; or 

        (k)  any
Originator shall, or any Servicer shall, assign or purport to assign any of their respective obligations hereunder or under the Sale and Contribution Agreement
without the prior written consent of the Administrative Agent; or 

        (l)    a
Change of Control shall occur with respect to any Servicer; or 

        (m)  if
the Master Servicer is the Parent and the Parent ceases to own 100%, directly or indirectly, of the outstanding Stock of the Originators, and if the Servicers are the
Originators, the Servicers, together with the SPC, cease to own 100% of the outstanding Stock of the Seller; or 

        (n)  the
Seller's board of directors or managers, as applicable, shall have determined that it is in the best interests of the Seller to terminate the duties of any Servicer
hereunder and shall have given such Servicer or the Master Servicer, the Purchasers and the Administrative Agent at least 30 days' written notice thereof; 

then,
and in any such event, the Administrative Agent shall, at the request of, or may, with the consent of, the Purchasers or the Administrative Agent, terminate the servicing responsibilities of any
or all of the Servicers hereunder by delivery of a Servicer Termination Notice to the Seller and the applicable Servicer(s), without demand, protest or further notice of any kind, all of which are
hereby waived by the Servicers. Upon the delivery of any such notice, all authority and power of the Servicer(s) being terminated under this Agreement and the Sale and Contribution Agreement shall
pass to and be vested in its or their Successor Servicer(s) acting pursuant to Section 11.02; provided, that notwithstanding anything to the contrary
herein, each terminated Servicer agrees to continue to follow the procedures set forth in Section 7.02 with respect to Collections on the Transferred Receivables until its Successor Servicer has
assumed the responsibilities and obligations of such Servicer in
accordance with Section 11.02. 

39

  

 
 

ARTICLE X.    
    
    REMEDIES    
  

        Section 10.01.    Actions Upon Termination Event.    If any Termination Event shall have occurred and be
continuing and the Administrative Agent shall have declared the Facility Termination Date to have occurred or the Facility Termination Date shall be deemed to have occurred pursuant to  Section 9.01,
 then the Administrative Agent may exercise in respect of the Seller Collateral, in addition to any and all other rights and
remedies granted to it hereunder, under any other Related Document or under any other instrument or agreement securing, evidencing or relating to the Seller Secured Obligations or otherwise available
to it, all of the rights and remedies of a secured party upon default under the UCC (such rights and remedies to be cumulative and nonexclusive), and, in addition, may take the following actions: 

        (a)  The
Administrative Agent may, without notice to the Seller except as required by law and at any time or from time to time, charge, offset or otherwise apply amounts
payable to the Seller from the Collection Account, any Lockbox Account, the Retention Account or any part of such accounts in accordance with the priorities set forth in  Sections 6.05 and 6.07 against all or any part of the Seller Secured Obligations.
 

        (b)  The
Administrative Agent may, without notice except as specified below, solicit and accept bids for and sell the Seller Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange, broker's board or any of the Purchasers', or Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially reasonable. The Administrative Agent shall have the right to conduct such sales on the Seller's premises or elsewhere and shall have the
right to use any of the Seller's premises without charge for such sales at such time or times as the Administrative Agent deems necessary or advisable. The Seller agrees that, to the extent notice of
sale shall be required by law, at least ten Business Days' notice to the Seller of the time and place of any public sale or the time after which any private sale is to be made shall constitute
reasonable notification. The Administrative Agent shall not be obligated to make any sale of Seller Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any
public or private sale from time to time by announcement at the time and place fixed for such sale, and such sale may, without further notice, be made at the time and place to
which it was so adjourned. Every such sale shall operate to divest all right, title, interest, claim and demand whatsoever of the Seller in and to the Seller Collateral so sold, and shall be a
perpetual bar, both at law and in equity, against each Originator, the Seller, any Person claiming the Seller Collateral sold through any Originator or the Seller, and their respective successors or
assigns. The Administrative Agent shall deposit the net proceeds of any such sale in the Collection Account and such proceeds shall be disbursed in accordance with  Section 6.05. 

        (c)  Upon
the completion of any sale under Section 10.01(b), the Seller or any Servicer shall deliver or cause to be
delivered to the purchaser or purchasers at such sale on the date thereof, or within a reasonable time thereafter if it shall be impracticable to make immediate delivery, all of the Seller Collateral
sold on such date, but in any event full title and right of possession to such property shall vest in such purchaser or purchasers upon the completion of such sale. Nevertheless, if so requested by
the Administrative Agent or by any such purchaser, the Seller shall confirm any such sale or transfer by executing and delivering to such purchaser all proper instruments of conveyance and transfer
and releases as may be designated in any such request. 

        (d)  At
any sale under Section 10.01(b), the Purchasers, the Administrative Agent or any other Purchaser Secured Party
may bid for and purchase the property offered for sale and, upon compliance with the terms of sale, may hold, retain and dispose of such property without further accountability therefor. 

40

 

        (e)  The
Administrative Agent may exercise, at the sole cost and expense of the Seller, any and all rights and remedies of the Seller under or in connection with the Seller
Assigned Agreements or the other Seller Collateral, including any and all rights of the Seller to demand or otherwise require payment of any amount under, or performance of any provisions of, the
Seller Assigned Agreements. 

        Section 10.02.    Exercise of Remedies.    No failure or delay on the part of the Administrative Agent in
exercising any right, power or privilege under this Agreement and no course of dealing between any Originator, Parent Guarantor, the Seller or any Servicer, on the one hand, and the Administrative
Agent, on the other hand, shall operate as a waiver of such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other
or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. The rights and remedies under this Agreement are cumulative, may be exercised singly or
concurrently, and are not exclusive of any rights or remedies that the Administrative Agent would otherwise have at law or in equity. No notice to or demand on any party hereto shall entitle such
party to any other or further notice or demand in similar or other circumstances, or constitute a waiver of the right of the party providing such notice or making such demand to any other or further
action in any circumstances without notice or demand. 

        Section 10.03.    Power of Attorney.    On the Closing Date, each of the Seller and each Servicer shall execute
and deliver a power of attorney substantially in the form attached hereto as Exhibit 10.03 (each, a
"Power of Attorney"). The power of attorney granted pursuant to each Power of Attorney is a power coupled with an interest and shall be irrevocable
until all of the Seller Secured Obligations are indefeasibly paid or otherwise satisfied in full. The powers conferred on the Administrative Agent under each Power of Attorney are solely to protect
the Purchaser's Liens upon and interests in the Seller Collateral and shall not impose any duty upon the Administrative Agent to exercise any such powers. The Administrative Agent shall not be
accountable for any amount other than amounts that it actually receives as a result of the exercise of such powers and none of the Administrative Agent's officers, directors, employees, agents or
representatives shall be responsible to the Seller or any Servicer for any act or failure to act, except in respect of damages attributable solely to their own gross negligence or willful misconduct
as finally determined by a court of competent jurisdiction. 

        Section 10.04.    Continuing Security Interest.    This Agreement shall create a continuing Lien in the Seller
Collateral until the conditions to the release of the Liens of the Purchaser and the Administrative Agent thereon set forth in Section 6.07(b)
have been satisfied. 

 
 

ARTICLE XI.    
    
    SUCCESSOR SERVICER PROVISIONS    
  

        Section 11.01.    Servicer Not to Resign.    No Servicer shall resign from the obligations and duties hereby
imposed on it except upon a determination that (a) the performance of its duties hereunder has become impermissible under applicable law or regulation and (b) there is no reasonable
action that such Servicer could take to make the performance of its duties hereunder become permissible under applicable law. Any such determination shall (i) with respect to  clause (a) above,
be evidenced by an opinion of counsel to such effect and (ii) with respect to  clause (b) above, be evidenced by an Officer's Certificate to such effect, in each case delivered to the Purchaser
and the Administrative Agent.
No such resignation with respect to the Master Servicer shall become effective until a Successor Servicer shall have assumed the responsibilities and obligations of the Master Servicer in accordance
with Section 11.02, and no such resignation with respect to any Servicer other than the Master Servicer shall become effective until the Master
Servicer shall have assumed the responsibilities and obligations of such Servicer. 

41

 

        Section 11.02.    Appointment of a Successor Servicer.    In connection with the termination of any Servicer's
responsibilities pursuant to Section 9.02 or the resignation by the Master Servicer under this Agreement pursuant to  Section 11.01, the
Administrative Agent shall (a) succeed to and assume all of such Servicer's responsibilities, rights, duties and
obligations as a Servicer (but not in any other capacity, it being specifically understood that the Administrative Agent shall not assume any of the obligations of the
Servicer set forth in Section 12.02) under this Agreement (and except that the Administrative Agent makes no representations and warranties
pursuant to Section 4.02) and (b) may at any time appoint a successor servicer to such Servicer that shall be acceptable to the
Administrative Agent, that shall have satisfied the Rating Agency Condition in respect thereof and shall succeed to all rights and assume all of the responsibilities, duties and liabilities of such
Servicer under this Agreement (the Administrative Agent, in such capacity, or such successor servicer to a Servicer being referred to as a "Successor
Servicer"); provided, that a Successor Servicer shall have no responsibility for any actions of any Servicer prior to the date
of its appointment or assumption of duties as a Successor Servicer. In selecting a Successor Servicer, the Administrative Agent may obtain bids from any potential Successor Servicer and may agree to
any bid it deems appropriate. A Successor Servicer shall accept its appointment by executing, acknowledging and delivering to the Administrative Agent an instrument in form and substance acceptable to
the Administrative Agent. In connection with the termination of any Servicer's responsibilities pursuant to Section 9.02 or the resignation by
the Master Servicer under this Agreement pursuant to Section 11.01, any Sub-Servicing Agreement to which such Servicer is a party
shall be terminated. 

        Section 11.03.    Duties of the Servicers.    Each Servicer covenants and agrees that, following the
appointment of, or assumption of duties by, its Successor Servicer: 

        (a)  Such
Servicer shall terminate its activities as a Servicer hereunder in a manner that facilitates the transfer of servicing duties to its Successor Servicer and is
otherwise acceptable to each Purchaser and the Administrative Agent and, without limiting the generality of the foregoing, shall timely deliver (i) any funds to the Administrative Agent that
were required to be remitted to the Administrative Agent for deposit in the Collection Account and (ii) all Servicing Records and other information with respect to the Transferred Receivables
to its Successor Servicer at a place selected by its Successor Servicer. Such Servicer shall account for all funds and shall execute and deliver such instruments and do such other things as may be
required to vest and confirm in its Successor Servicer all rights, powers, duties, responsibilities, obligations and liabilities of such Servicer. 

        (b)  Such
Servicer shall terminate each existing Sub-Servicing Agreement and its Successor Servicer shall not be deemed to have assumed any of such Servicer's
interests therein or to have replaced such Servicer as a party thereto. 

        Section 11.04.    Effect of Termination or Resignation.    Any termination of or resignation by any Servicer
hereunder shall not affect any claims that the Seller, the Purchasers, or the Administrative Agent may have against any Servicer for events or actions taken or not taken by any Servicer arising prior
to any such termination or resignation. 

 
 

ARTICLE XII.    
    
    INDEMNIFICATION    
  

        Section 12.01.    Indemnities by the Seller.    

        (a)  Without
limiting any other rights that the Conduit Purchaser, the Committed Purchaser, the Administrative Agent, the Collateral Agent, the Liquidity Agent, any Liquidity
Lender, the Letter of Credit Agent or any Letter of Credit Provider or any of their respective officers, directors, employees, attorneys, agents or representatives (each, an
"Indemnified Person") may have 

42

 

hereunder or under applicable law, the Seller hereby agrees to indemnify and hold harmless each Indemnified Person from and against any and all Indemnified Amounts that may be claimed or asserted
against or incurred by any such Indemnified Person in connection with or arising out of the transactions contemplated under this Agreement or under any other Related Document or any actions or
failures to act in connection therewith, including any and all legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Related
Documents; provided, that the Seller shall not be liable for any indemnification to a Indemnified Person to the extent that any such Indemnified Amount
(x) results from (i) with respect to any Indemnified Person other than the Conduit Purchaser, such Indemnified Person's gross negligence or (ii) with respect to any Indemnified
Person, such Indemnified Person's willful misconduct, in each case as finally determined by a court of competent jurisdiction or (y) constitutes recourse for uncollectible or uncollected
Transferred Receivables. Without limiting the generality of the foregoing, the Seller shall pay on demand to each Indemnified Person any and all Indemnified Amounts relating to or resulting from: 

          (i)  reliance
on any representation or warranty made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement or any other Related
Document or on any other information delivered by the Seller pursuant hereto or thereto that shall have been incorrect in any material respect when made or deemed made or delivered; 

        (ii)  the
failure by the Seller to comply with any term, provision or covenant contained in this Agreement, any other Related Document or any agreement executed in connection
herewith or therewith, any applicable law, rule or regulation with respect to any Transferred Receivable or the Contract therefor, or the nonconformity of any Transferred Receivable or the Contract
therefor with any such applicable law, rule or regulation; or 

        (iii)  (1)
the failure to vest and maintain vested in the Seller or the Purchasers valid and properly perfected title to and sole record and beneficial ownership of the
Receivables that constitute Transferred Receivables, together with all Collections in respect thereof, free and clear of any Adverse Claim, (2) the failure to maintain or transfer to the
Purchasers a first priority perfected Lien in the Seller Collateral and (3) the failure to maintain or transfer to the Administrative Agent a first priority perfected Lien therein; 

        (iv)  any
dispute, claim, offset or defense of any Obligor (other than its discharge in bankruptcy to the payment of any Transferred Receivable that is the subject of a
Purchase hereunder (including a defense based on such Receivable or the Contract therefor not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its
terms), or any other claim resulting from the sale of the merchandise or services giving rise to such Receivable or the furnishing of or failure to furnish such merchandise or services or relating to
collection activities with respect to such Receivable (if such collection activities were performed by any of its Affiliates acting as Servicer), except to the extent that such dispute, claim, offset
or defense results solely from any action or inaction on the part of any Indemnified Person; 

        (v)  any
products liability claim or other claim arising out of or in connection with merchandise, insurance or services that is the subject of any Contract with respect to
any Transferred Receivable; 

        (vi)  the
commingling of Collections with respect to Transferred Receivables by the Seller at any time with its other funds or the funds of any other Person; 

      (vii)  any
failure by the Seller to cause the filing of, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or any other applicable laws with respect to any Transferred Receivable that is the 

43

 

subject of a Purchase hereunder, whether at the time of any such Purchase or at any subsequent time; or 

      (viii)  any
failure of a Lockbox Account Bank to comply with the terms of the applicable Lockbox Account Agreement. 

        (b)  Any
Indemnified Amounts subject to the indemnification provisions of this Section 12.01 not paid in accordance
with Article VI shall be paid by the Seller to the Indemnified Person entitled thereto within five Business Days following written demand
therefor. 

        Section 12.02.    Indemnities by the Servicers.    

        (a)  Without
limiting any other rights that an Indemnified Person may have hereunder or under applicable law, each Servicer hereby agrees to indemnify and hold harmless each
Indemnified Person from and against any and all Indemnified Amounts that may be claimed or asserted against or incurred by any such Indemnified Person in connection with or arising out of any breach
by any Servicer of its obligations hereunder or under any other Related Document; provided, that no Servicer shall be liable for any indemnification to
an Indemnified Person to the extent that any such Indemnified Amount (x) results solely from (i) with respect to any Indemnified Person other than the Conduit Purchaser, such Indemnified
Person's gross negligence or (ii) with respect to any Indemnified Person, such Indemnified Person's willful misconduct, in each case as finally determined by a court of competent jurisdiction,
or (y) constitutes recourse for uncollectible or uncollected Transferred Receivables. Without limiting the generality of the foregoing, each Servicer shall pay on demand to each Indemnified
Person any and all Indemnified Amounts relating to or resulting from: 

          (i)  reliance
on any representation or warranty made or deemed made by any Servicer (or any of its officers) under or in connection with this Agreement or any other Related
Document or on any other information delivered by any Servicer pursuant hereto or thereto that shall have been incorrect in any material respect when made or deemed made or delivered; 

        (ii)  the
failure by any Servicer to comply with any term, provision or covenant contained in this Agreement, any other Related Document or any agreement executed in
connection herewith or therewith, any applicable law, rule or regulation with respect to any Transferred Receivable or the Contract therefor, or the nonconformity of any Transferred Receivable or the
Contract therefor with any such applicable law, rule or regulation; 

        (iii)  the
imposition of any Adverse Claim with respect to any Transferred Receivable or the Seller Collateral as a result of any action taken by any Servicer; or 

        (iv)  the
commingling of Collections with respect to Transferred Receivables by any Servicer at any time with its other funds or the funds of any other Person. 

        (b)  Any
Indemnified Amounts subject to the indemnification provisions of this Section 12.02 not paid in accordance
with Article VI shall be paid by the Servicers to the Indemnified Person entitled thereto within five Business Days following demand therefor. 

        Section 12.03.    Limitation of Damages; Indemnified Persons.    NO INDEMNIFIED PERSON
SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH
SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

44

 
 
 

ARTICLE XIII.    
    
    AGENT    
  

        Section 13.01.    Authorization and Action.    

        (a)  The
Administrative Agent may take such action and carry out such functions under this Agreement as are authorized to be performed by it pursuant to the terms of this
Agreement, any other Related Document or otherwise contemplated hereby or thereby or are reasonably incidental thereto; provided, that the duties of the
Administrative Agent hereunder shall be determined solely by the express provisions of this Agreement, and, other than the duties set forth in  Section 13.02, any permissive right of the
Administrative Agent hereunder shall not be construed as a duty. 

        Section 13.02.    Reliance.    None of the Administrative Agent, any of its Affiliates or any of their
respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or the other Related
Documents, except for damages solely caused by its or their own gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. Without limiting the generality of
the foregoing, and notwithstanding any term or provision hereof to the contrary, the Seller, each Servicer, the Conduit Purchaser and the Committed Purchaser hereby acknowledge and agree that the
Administrative Agent (a) acts as agent hereunder for the Conduit Purchaser and the Committed Purchaser and has no duties or obligations to, shall incur no liabilities or obligations to, and
does not act as an agent in any capacity for, the Seller (other than, with respect to the Administrative Agent, under the Power of Attorney with respect to remedial actions) or the Originators,
(b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts, (c) makes no representation or warranty hereunder to any Affected Party and shall not be responsible to any such Person for
any statements, representations or warranties made in or in connection with this Agreement or the other Related Documents, (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this Agreement, or the other Related Documents on the part of the Seller, any Servicer, the Conduit Purchaser or the Committed
Purchaser or to inspect the property (including the books and records) of the Seller, the Servicers, the Conduit Purchaser or the Committed Purchaser, (e) shall not be responsible to the
Seller,
any Servicer or any Purchaser for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Related Documents or any other instrument or
document furnished pursuant hereto or thereto, (f) shall incur no liability under or in respect of this Agreement or the other Related Documents by acting upon any notice, consent, certificate
or other instrument or writing believed by it to be genuine and signed, sent or communicated by the proper party or parties and (g) shall not be bound to make any investigation into the facts
or matters stated in any notice or other communication hereunder and may rely on the accuracy of such facts or matters. Notwithstanding the foregoing, the Administrative Agent acknowledges that it has
a duty to transfer funds between and among the Accounts and the Collection Account, and make investments of funds on deposit in the Retention Account, in accordance with  Article VI and the
instructions of the Master Servicer. 

        Section 13.03.    GE Capital and Affiliates.    GE Capital and its Affiliates may generally engage in any kind
of business with any Obligor, the Originators, the Seller, any Servicer, the Conduit Purchaser or the Committed Purchaser, any of their respective Affiliates and any Person who may do business with or
own securities of such Persons or any of their respective Affiliates, all as if GE Capital were not the Administrative Agent and without the duty to account therefor to any Obligor, any Originator,
the Seller, any Servicer, any Purchaser or any other Person. 

45

 

 
 

ARTICLE XIV.    
    
    MISCELLANEOUS    
  

        Section 14.01.    Notices.    Except as otherwise provided herein, whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires
to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing
and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three Business Days after deposit in the United States Mail, registered or
certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by facsimile (with such facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 14.01), (c) one Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or
facsimile number set forth under its name on the signature page hereof or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person
(other than the Conduit Purchaser, the Committed Purchaser and the Administrative Agent) designated in any written notice provided hereunder to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or other communication. Notwithstanding the foregoing, whenever it is provided herein that a notice is to be given to any
other party hereto by a specific time, such notice shall only be effective if actually received by such party prior to such time, and if such notice is received after such time or on a day other than
a Business Day, such notice shall only be effective on the immediately succeeding Business Day. 

        Section 14.02.    Binding Effect; Assignability.    

        (a)  This
Agreement shall be binding upon and inure to the benefit of the Seller, the Servicers, the Conduit Purchaser, the Committed Purchaser and the Administrative Agent
and their respective successors and permitted assigns. Neither the Seller nor any Servicer may assign, transfer, hypothecate or otherwise convey any of their respective rights or obligations hereunder
or interests herein without the express prior written consent of the Conduit Purchaser, the Committed Purchaser and the Administrative Agent and unless the Rating Agency Condition shall have been
satisfied with respect to any such assignment. Any such purported assignment, transfer, hypothecation or other conveyance by the Seller or any Servicer without the prior express written consent of the
Conduit Purchaser, the Committed Purchaser and the Administrative Agent shall be void. 

        (b)  The
Conduit Purchaser, the Committed Purchaser or the Administrative Agent may, at any time, assign any of its rights and obligations hereunder or interests herein to
any Person which has a short-term debt rating of at least A-1 by S&P and P-1 by Moody's, and any such assignee may further assign at any time its rights and
obligations hereunder or interests herein (including any rights it may have in and to the Purchaser Interests and the Seller Collateral and any rights it may have to exercise remedies hereunder), in
each case without the consent of any Originator, the Seller or any Servicer so long as such assignee is a Person which has a short-term debt rating of at least A-1 by S&P and
P-1 by Moody's. The Seller acknowledges and agrees that, upon any such assignment, the assignee thereof may enforce directly, without joinder of any Purchaser, all of the obligations of
the Seller hereunder. 

        (c)  The
Seller hereby acknowledges that in accordance with the provisions of the LAPA, on the day of the Committed Purchaser Funding Event, (A) the Liquidity Lenders
may purchase from 

46

 

the Conduit Purchaser all or any part of the Purchaser Interests sold by the Seller hereunder on each Purchase Date prior to the Committed Purchaser Funding Event, and (B) the Conduit
Purchaser may assign all or any part of its rights and interest in the Seller Collateral to the Liquidity Lenders. 

        Section 14.03.    Termination; Survival of Seller Secured Obligations Upon Facility Termination Date.    

        (a)  This
Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until
the Termination Date. 

        (b)  Except
as otherwise expressly provided herein or in any other Related Document, no termination or cancellation (regardless of cause or procedure) of any commitment made
by any Affected Party under this Agreement shall in any way affect or impair the obligations, duties and liabilities of the Seller or the rights of any Affected Party relating to any unpaid portion of
the Seller Secured Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, the performance of
which is required after the Facility Termination Date. Except as otherwise expressly provided herein or in any other Related Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Seller or any Servicer, and all rights of any Affected Party hereunder, all as contained in the Related Documents, shall not terminate or expire, but rather
shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that the rights and
remedies provided for herein with respect to any breach of any representation or warranty made by the Seller or any Servicer pursuant to  Article IV, the indemnification and payment provisions of
Article XII and  Sections 14.04, 14.05 and 14.06
shall be
continuing and shall survive the Termination Date. 

        Section 14.04.    Costs, Expenses and Taxes.    (a) The Seller shall reimburse each Purchaser and the
Administrative Agent for all out-of-pocket expenses incurred in connection with the negotiation and preparation of this Agreement and the other Related Documents (including all
out-of-pocket expenses of the Administrative Agent and the Purchasers incurred in connection with their field audit and due diligence and the reasonable fees and expenses of
all of its special counsel, advisors, consultants and auditors retained in connection with the transactions contemplated thereby and advice in connection therewith). The Seller shall reimburse the
Conduit Purchaser, the Committed Purchaser and the Administrative Agent for all fees, costs and expenses, including the reasonable fees, costs and expenses of counsel or other advisors (including
management consultants and appraisers, and, so long as notice is given prior to the use of environmental consultants and an itemized bill is provided at the time the Conduit Purchaser, the Committed
Purchaser, or the Administrative Agent seeks reimbursement for the fees, costs and expenses related to the use of such consultants, environmental consultants) for advice, assistance, or other
representation in connection with: 

          (i)  the
forwarding to the Seller or any other Person on behalf of the Seller by any Purchaser of any payments for Purchases made by it hereunder; 

        (ii)  any
amendment, modification or waiver of, consent with respect to, or termination of this Agreement or any of the other Related Documents or advice in connection with
the administration thereof or their respective rights hereunder or thereunder; 

        (iii)  any
Litigation, contest or dispute (whether instituted by the Seller, the Conduit Purchaser, the Committed Purchaser, the Administrative Agent or any other Person as a
party, witness, or otherwise) in any way relating to the Seller Collateral, any of the Related Documents or any other agreement to be executed or delivered in connection herewith or therewith,
including any Litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case
commenced by or against the Seller or any other Person that may be obligated to the Purchaser or the Administrative Agent by virtue of the Related Documents, including any such Litigation, contest,
dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the transactions contemplated hereby during the pendency of one or more Termination Events; 

47

  

        (iv)  any
attempt to enforce any remedies of the Conduit Purchaser, the Committed Purchaser or the Administrative Agent against the Seller or any other Person that may be
obligated to them by virtue of any of the Related Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the transactions
contemplated hereby during the pendency of one or more Termination Events; 

        (v)  any
work-out or restructuring of the transactions contemplated hereby during the pendency of one or more Termination Events; and 

        (vi)  efforts
to (A) monitor the Purchases or any of the Seller Secured Obligations, (B) evaluate, observe or assess any Originator, the Seller or any Servicer
or their respective affairs, and (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Seller Collateral; 

including
all reasonable attorneys' and other professional and service providers' fees arising from such services, including those in connection with any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel and others in connection with or relating to any of the events or actions described in this  Section 14.04, all of which shall be payable,
promptly on demand, by the Seller to the Conduit Purchaser, the Committed Purchaser or the
Administrative Agent, as applicable. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, environmental
advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or facsimile charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the
performance of such legal or other advisory services. 

        (b)  In
addition, the Seller shall pay promptly on demand any and all stamp, sales, excise and other taxes (excluding income taxes) and fees payable or determined to be
payable in connection with the execution, delivery, filing or recording of this Agreement or any other Related Document, and the Seller agrees to indemnify and save each Indemnified Person harmless
from and against any and all liabilities with respect to or resulting from any delay or failure to pay such taxes and fees. 

        Section 14.05.    Confidentiality.    

        (a)  Except
to the extent otherwise required by applicable law, as required to be filed publicly with the Securities and Exchange Commission, or unless the Administrative
Agent shall otherwise consent in writing, the Seller and each Servicer agree to maintain the confidentiality of this Agreement (and all drafts hereof and documents ancillary hereto) in its
communications with third parties other than any Affected Party or any Indemnified Person and otherwise and not to disclose, deliver or otherwise make available to any third party (other than its
directors, officers, employees, accountants or counsel) the original or any copy of all or any part of this Agreement (or any draft hereof and documents ancillary hereto) except to an Affected Party
or an Indemnified Person. 

        (b)  The
Seller and each Servicer each agrees that it shall not (and shall not permit any of its Subsidiaries to) issue any news release or make any public announcement
pertaining to the transactions contemplated by this Agreement and the other Related Documents without the prior written consent of the Conduit Purchaser, the Committed Purchaser and the Administrative
Agent (which consent shall not be unreasonably withheld) unless such news release or public announcement is required by law, in which case the Seller or such Servicer, as applicable, shall consult
with the Conduit Purchaser, the Committed Purchaser and the Administrative Agent prior to the issuance of such news release or public announcement. The Seller may, however, disclose the general terms
of the transactions contemplated by this Agreement and the other Related 

48

 

Documents to trade creditors, suppliers and other similarly-situated Persons so long as such disclosure is not in the form of a news release or public announcement. 

        Section 14.06.    No Proceedings.    Each of the Seller and each Servicer hereby agrees that, from and after
the Closing Date and until the date one year plus one day following the date on which the Commercial Paper with the latest maturity has been paid in full in cash, it will not, directly or indirectly,
institute or cause to be instituted against the Conduit Purchaser or the Committed Purchaser any proceeding of the type referred to in Sections 9.01(c)
and 9.01(d). This Section 14.06 shall survive the termination of this Agreement. 

        Section 14.07.    Complete Agreement; Modification of Agreement.    This Agreement and the other Related
Documents constitute the complete agreement among the parties hereto with respect to the subject matter here of and thereof, supersede all prior agreements and understandings relating to the subject
matter hereof and thereof, and may not be modified, altered or amended except as set forth in Section 14.08. 

        Section 14.08.    Amendments and Waivers.    No amendment, modification, termination or waiver of any provision
of this Agreement or any of the other Related Documents, or any consent to any departure by the Seller or any Servicer therefrom, shall in any event be effective unless the same shall be in writing
and signed by each of the parties hereto or thereto and by the Collateral Agent; provided, that (i) the Administrative Agent shall notify each of
the Rating Agencies concurrently with the execution of
any amendment to any provision of this Agreement or any of the other Related Documents, and (ii) it shall be a condition precedent to the effectiveness of any material amendment to any
provision of this Agreement or any of the other Related Documents that the Rating Agency Condition shall have been satisfied in respect thereof. 

        Section 14.09.    No Waiver; Remedies.    The failure by the Conduit Purchaser, the Committed Purchaser or the
Administrative Agent, at any time or times, to require strict performance by the Seller or any Servicer of any provision of this Agreement or any Purchase Assignment shall not waive, affect or
diminish any right of any Purchaser or the Administrative Agent thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of any breach or default
hereunder shall not suspend, waive or affect any other breach or default whether the same is prior or subsequent thereto and whether the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of the Seller or any Servicer contained in this Agreement or any Purchase Assignment, and no breach or default by the Seller or any Servicer
hereunder or thereunder, shall be deemed to have been suspended or waived by any Purchaser or the Administrative Agent unless such waiver or suspension is by an instrument in writing signed by an
officer of or other duly authorized signatory of the Conduit Purchaser, the Committed Purchaser, the Collateral Agent and the Administrative Agent and directed to the Seller or such Servicer, as
applicable, specifying such suspension or waiver. The rights and remedies of the Conduit Purchaser, the Committed Purchaser, the Collateral Agent and the Administrative Agent under this Agreement
shall be cumulative and nonexclusive of any other rights and remedies that the Conduit Purchaser, the Committed Purchaser, the Collateral Agent and the Administrative Agent may have under any other
agreement, including the other Related Documents, by operation of law or otherwise. Recourse to the Seller Collateral shall not be required. 

        Section 14.10.    GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.    

        (a)  THIS AGREEMENT AND EACH OTHER RELATED DOCUMENT (EXCEPT TO THE EXTENT THAT ANY RELATED DOCUMENT EXPRESSLY PROVIDES TO THE CONTRARY) AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION  

49

 

 5-1401 OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR PRIORITY OF THE
INTERESTS OF THE ADMINISTRATIVE AGENT IN THE RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

        (b)  EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THEM PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT; PROVIDED, THAT
EACH PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF MANHATTAN IN NEW YORK CITY; PROVIDED
FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ANY PURCHASER OR THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE SELLER COLLATERAL OR ANY OTHER SECURITY FOR THE SELLER SECURED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE CONDUIT PURCHASER, THE
COMMITTED PURCHASER OR THE ADMINISTRATIVE AGENT. EACH PARTY HERETO SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY HERETO HEREBY
WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE
SIGNATURE PAGES HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL, PROPER POSTAGE
PREPAID. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

        (c)  BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

50

 

        Section 14.11.    Counterparts.    This Agreement may be executed in any number of separate counterparts, each
of which shall collectively and separately constitute one agreement. 

        Section 14.12.    Severability.    Wherever possible, each provision of this Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or
the remaining provisions of this Agreement. 

        Section 14.13.    Section Titles.    The section titles and table of contents contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 

        Section 14.14.    Limited Recourse.    The obligations of the Conduit Purchaser and the Committed Purchaser
under this Agreement and all Related Documents are solely the corporate obligations of each such Purchaser. No recourse shall be had for the payment of any amount owing in respect of Purchases or for
the payment of any fee hereunder or any other obligation or claim arising out of or based upon this Agreement or any other Related Document against any Stockholder, employee, officer, director, agent
or incorporator of such Purchaser. Any accrued obligations owing by the Conduit Purchaser or the Committed Purchaser under this Agreement shall be payable by such Purchaser solely to the extent that
funds are available therefor from time to time in accordance with the provisions of Article VI of this Agreement, and, with respect to the
Conduit Purchaser, in accordance with Article VI of the Collateral Agent Agreement (and such accrued obligations shall not be extinguished until
paid in full). The Conduit Purchaser shall not, and shall not be obligated to, pay any amount pursuant to the Related Documents unless (i) the Conduit Purchaser has received funds which may be
used to make such payment pursuant to the Program Documents, and (ii) after giving effect to such payment, either (A) the Conduit Purchaser could issue Commercial Paper to refinance all
outstanding Commercial Paper (assuming such outstanding Commercial Paper matured at such time) without violating the Program Documents, or (B) all Commercial Paper is paid in full. Any amount
which the Conduit Purchaser does not pay pursuant to the operation of the preceding sentence shall not constitute a claim (as defined in Section 101 of the Bankruptcy Code) against or an
obligation of the Conduit Purchaser for any insufficiency unless and until the Conduit Purchaser satisfies the provisions of such preceding sentence. This  Section 14.14 shall survive the
termination of this Agreement. 

        Section 14.15.    Further Assurances.    

        (a)  Each
of the Seller and each Servicer shall, at its sole cost and expense, upon request of the Conduit Purchaser, the Committed Purchaser or the Administrative Agent,
promptly and duly execute and deliver any and all further instruments and documents and take such further action that may be necessary or desirable or that the Conduit Purchaser, the Committed
Purchaser or the Administrative Agent may request to (i) perfect, protect, preserve, continue and maintain fully the Purchases made and the right, title and interests (including Liens) granted
to such Purchaser under this Agreement, (ii) enable the Conduit Purchaser, the Committed Purchaser or the Administrative Agent to exercise and enforce its rights under this Agreement or any of
the other Related Documents or (iii) otherwise carry out more effectively the provisions and purposes of this Agreement or any other Related Document. Without limiting the generality of the
foregoing, the Seller shall, upon request of the Conduit Purchaser and the Committed Purchaser or the Administrative Agent, (A) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or notices that may be necessary or desirable or that the Purchasers or the Administrative Agent may request to perfect, protect
and preserve the Purchases made and the Liens granted pursuant to this Agreement, free and clear of all Adverse Claims, (B) mark conspicuously, or cause each Servicer
to mark conspicuously, its master data processing records evidencing such Transferred Receivables, with a 

51

 

legend acceptable to the Administrative Agent evidencing that the Purchasers have purchased an undivided percentage ownership interest in all right and title thereto and interest therein as provided
herein, (C) notify or cause each Servicer to notify Obligors of the sale of undivided percentage ownership interests in the Transferred Receivables effected hereunder, (D) so mark the
original copy of each purchase money security agreement relating to a Receivable that consists of chattel paper or an instrument with any appropriate endorsement or assignment, (E) take all
steps necessary to grant the Administrative Agent control of all electronic chattel paper in accordance with the UCC, (F) execute an endorsement to the Seller for each instrument representing a
Receivable, and (G) hold in trust and safely keep all invoices constituting chattel paper and all other instruments constituting Receivables in separate filing cabinets or other suitable
containers at the branch locations of the Originator thereof and all purchase money security agreements constituting chattel paper in filing cabinets or other suitable containers at the location or
locations specified by the Administrative Agent. 

        (b)  Without
limiting the generality of the foregoing, the Seller hereby authorizes the Conduit Purchaser, the Committed Purchaser and the Administrative Agent, and each of
the Conduit Purchaser and the Committed Purchaser hereby authorizes the Administrative Agent, to file one or more financing or continuation statements, or amendments thereto or assignments thereof,
relating to all or any part of the Transferred Receivables, including Collections with respect thereto, or the Seller Collateral without the signature of the Seller or, as applicable, the Conduit
Purchaser or the Committed Purchaser, as applicable, to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Agreement or of any notice or financing statement
covering the Transferred Receivables, the Seller Collateral or any part thereof shall be sufficient as a notice or financing statement where permitted by law. 

52

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

	 	 	K2 FINANCE COMPANY, LLC,

as the Seller
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	John J. Rangel
	 	 	Title:	 	Vice President
	

 	
 	
Address:

4900 South Eastern Avenue, #200

Los Angeles, CA 90040

Attention: John J. Rangel

Facsimile: (323) 724-0355
	

 	
 	

K2 RECEIVABLES CORPORATION,

as the SPC
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	John J. Rangel
	 	 	Title:	 	Vice President
	

 	
 	
Address:

4900 South Eastern Avenue, #200

Los Angeles, CA 90040

Attention: John J. Rangel
	

 	
 	

K2 INC.,

as the Master Servicer
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	John J. Rangel
	 	 	Title:	 	Senior Vice President—Finance
	

 	
 	
Address:

4900 South Eastern Avenue, #200

Los Angeles, California 90040

Attention: John J. Rangel

Facsimile: (323) 724-0470

	

 	
 	

K-2 CORPORATION,

as a Servicer
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	John J. Rangel
	 	 	Title:	 	Senior Vice President
	

 	
 	
Address:

19215 Vashon Highway, SW

Vashon, Washington 98070

Attention: John J. Rangel

Facsimile: (323) 724-0470
	

 	
 	
With a copy to:

4900 South Eastern Avenue, #200

Los Angeles, California 90040

Attention: John J. Rangel
	

 	
 	

SHAKESPEARE COMPANY, LLC,

as a Servicer

By: K2 INC., its Manager
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	John J. Rangel
	 	 	Title:	 	Senior Vice President—Finance
	

 	
 	
Address:

4900 South Eastern Avenue, #200

Los Angeles, California 90040

Attention: John J. Rangel

Facsimile: (323) 724-0470
	

 	
 	

STEARNS INC.,

as a Servicer
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	John J. Rangel
	 	 	Title:	 	Senior Vice President
	

 	
 	
Address:

1100 Stearns Drive

Sauk Rapids, Minnesota 56379

Attention: John J. Rangel

Facsimile: (323) 724-0470
	

 	
 	
With a copy to:

4900 South Eastern Avenue, #200

Los Angeles, California 90040

Attention: John J. Rangel

	

 	
 	

REDWOOD RECEIVABLES CORPORATION, as the

Conduit Purchaser
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	Brian P. Schwinn
	 	 	 	 	Assistant Secretary
	

 	
 	
Address:

c/o General Electric Capital Corporation

3001 Summer Street, 2nd Floor

Stamford, Connecticut 06927

Telephone: (203) 602-9330

Facsimile: (203) 961-2953
	

 	
 	

GENERAL ELECTRIC CAPITAL CORPORATION,

as Committed Purchaser
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	Craig Winslow
	 	 	 	 	Duly Authorized Signatory
	

 	
 	
Address:

201 High Ridge Road

Stamford, Connecticut 06927

Attention: Vice President—Portfolio/K2

Telephone: (203) 316-7607

Facsimile: (203) 316-7821
	

 	
 	

GENERAL ELECTRIC CAPITAL CORPORATION,

as Administrative Agent
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	Craig Winslow
	 	 	 	 	Duly Authorized Signatory
	

 	
 	
Address:

201 High Ridge Road

Stamford, Connecticut 06927

Attention: Vice President—Portfolio/K2

Telephone: (203) 316-7607

Facsimile: (203) 316-7821

	

 	
 	

ACKNOWLEDGED AND AGREED:
	

 	
 	

GENERAL ELECTRIC CAPITAL CORPORATION,

as Collateral Agent
	

 	
 	

By	
 	

 
	 	 	 	 	

	 	 	Name:	 	Craig Winslow
	 	 	 	 	Duly Authorized Signatory
	 	 	Address:

201 High Ridge Road

Stamford, Connecticut 06927

Attention: Vice President

Telephone: (203) 316-7607

Facsimile: (203) 316-7821

QuickLinks

TABLE OF CONTENTS

EXHIBITS, SCHEDULES AND ANNEXES

RECITALS

AGREEMENT

ARTICLE I. DEFINITIONS AND INTERPRETATION

ARTICLE II. AMOUNTS AND TERMS OF PURCHASES

ARTICLE III. CONDITIONS PRECEDENT

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

ARTICLE V. GENERAL COVENANTS OF THE SELLER AND SPC

ARTICLE VI. COLLECTIONS AND DISBURSEMENTS

ARTICLE VII. SERVICER PROVISIONS

ARTICLE VIII. GRANT OF SECURITY INTERESTS

ARTICLE IX. TERMINATION EVENTS

ARTICLE X. REMEDIES

ARTICLE XI. SUCCESSOR SERVICER PROVISIONS

ARTICLE XII. INDEMNIFICATION

ARTICLE XIII. AGENT

ARTICLE XIV. MISCELLANEOUS

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