Document:

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                                                                    Exhibit 10.3

                                AMENDMENT NO. 2
                                       to
                         RECEIVABLES PURCHASE AGREEMENT
                           Dated as of July 13, 2001

          THIS AMENDMENT NO. 2 ("Amendment") is entered into as of July 13, 2001
                                 ---------
by and among New School, Inc., as Seller ("Seller"), School Specialty, Inc., as
                                           ------
Servicer ("SSI"), Falcon Asset Securitization Corporation ("Falcon"), the
           ---                                              ------
Financial Institutions party hereto, and Bank One, NA (Main Office Chicago), as
agent (the "Agent").
            -----

                             PRELIMINARY STATEMENT

          A.  Seller, SSI, Falcon, the Financial Institutions and the Agent are
parties to that certain Receivables Purchase Agreement dated as of November 22,
2000 and amended by that certain Amendment No. 1 dated as of January 1, 2001 (as
the same may be further amended, restated, supplemented or otherwise modified
from time to time, the "Purchase Agreement").  Capitalized terms used herein and
                        ------------------
not otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.

          B.  Seller, SSI, Falcon, the Financial Institutions and the Agent have
agreed to amend Article IX to the Purchase Agreement, subject to the terms and
conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of the premises set forth above, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

          SECTION 1.  Amendment.   Effective as of the date hereof, subject to
                      ---------
the satisfaction of the condition precedent set forth in Section 2 below, the
                                                         ---------
Purchase Agreement is hereby amended as follows:

          1.1  Section 9.1(k)(i) is hereby deleted in its entirety and replaced
with the following therefor:

               (i)  the Consolidated Leverage Ratio shall exceed (A) 5.15:1.0
          for each fiscal quarter ending on the last Saturday in July of each
          year or (B) 4.40:1.0 for each fiscal quarter other than the fiscal
          quarter ending on the last Saturday in July of each year.

          1.2  Section 9.1(k) is hereby amended to add the following clause (iv)
at the end thereof:

               (iv)  the Consolidated Senior Leverage Ratio (as defined in the
          SSI Loan Agreement) shall exceed (A) 3.75:1.0 for each fiscal quarter
          ending on the last
<PAGE>

          Saturday in July of each year or (B) 3.00:1.0 for each fiscal quarter
          other than the fiscal quarter ending on the last Saturday in July of
          each year.

          SECTION 2.  Conditions Precedent.  This Amendment shall become
                      --------------------
effective and be deemed effective, as of the date first above written, upon (i)
receipt by the Agent of one copy of this Amendment duly executed by each of the
parties hereto and (ii) the issuance of the Senior Subordinated Notes (as
defined in the SSI Loan Agreement).

          SECTION 3.  Covenants, Representations and Warranties of the Seller
                      -------------------------------------------------------
and the Servicer.
----------------

          3.1  Upon the effectiveness of this Amendment, each of Seller and SSI
hereby reaffirms all covenants, representations and warranties made by it, to
the extent the same are not amended hereby, in the Purchase Agreement and agrees
that all such covenants, representations and warranties shall be deemed to have
been re-made as of the effective date of this Amendment.

          3.2  Each of Seller and SSI hereby represents and warrants as to
itself (i) that this Amendment constitutes the legal, valid and binding
obligation of such party enforceable against such party in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general principles of equity which may limit the
availability of equitable remedies and (ii) upon the effectiveness of this
Amendment, no event shall have occurred and be continuing which constitutes an
Amortization Event or a Potential Amortization Event.

          SECTION 4.  Reference to and Effect on the Investor Agreement.
                      -------------------------------------------------

          4.1  Upon the effectiveness of this Amendment, each reference in the
Purchase Agreement to "this Agreement," "hereunder," "hereof," "herein,"
"hereby" or words of like import shall mean and be a reference to the Purchase
Agreement as amended hereby, and each reference to the Purchase Agreement in any
other document, instrument or agreement executed and/or delivered in connection
with the Purchase Agreement shall mean and be a reference to the Purchase
Agreement as amended hereby.

          4.2  Except as specifically amended hereby, the Purchase Agreement and
other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.

          4.3  The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Falcon, the
Financial Institutions or the Agent under the Purchase Agreement or any of the
other Transaction Documents, nor constitute a waiver of any provision contained
therein, except as specifically set forth herein.

          SECTION 5.  GOVERNING LAW.  THIS AMENDMENT SHALL BE CONSTRUED IN
                      -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

                                       2
<PAGE>

          SECTION 6.  Execution in Counterparts.  This Amendment may be executed
                      -------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.

          SECTION 7.  Headings.  Section headings in this Amendment are included
                      --------
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

                                   * * * * *

                                       3
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed on the date first set forth above by their respective officers
thereto duly authorized, to be effective as hereinabove provided.

                                     NEW SCHOOL, INC., as Seller

                                     By:  /s/ Mary M. Kabacinski
                                        ---------------------------
                                        Name:  Mary M. Kabacinski
                                        Title: Treasurer

                                     SCHOOL SPECIALTY, INC., as Servicer

                                     By:  /s/ Mary M. Kabacinski
                                        ---------------------------
                                        Name:  Mary M. Kabacinski
                                        Title: CFO

                                     FALCON ASSET SECURITIZATION CORPORATION

                                     By:  /s/ Elizabeth Chung
                                        ---------------------------
                                     Name:  Elizabeth Chung
                                     Title: Authorized Signatory

                                     BANK ONE, NA (MAIN OFFICE CHICAGO),
                                     as a Financial Institution and as Agent

                                     By:  /s/ Elizabeth Chung
                                        ---------------------------
                                        Name:  Elizabeth Chung
                                        Title: Authorized Signatory

                       Signature Page to Amendment No. 2ex10-2

	Petersen Employment Agreement	
Page 1 of 7

EMPLOYMENT AGREEMENT

            
This Agreement is made and entered into, effective as of March 1, 2001, by and
between National Rural Utilities Cooperative Finance Corporation, a District of
Columbia cooperative corporation (“CFC”) and Sheldon C. Petersen (“the
Executive”).

            
WHEREAS, CFC desires to retain the Executive as its Governor and Chief Executive Officer
under this Agreement for the period provided for in this Agreement, and the
Executive is willing to serve in the employ of CFC on a full-time basis for
such period, upon such terms and conditions as are provided herein;

            
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the parties hereby
agree as follows:

            
1.      Employment. Subject to and upon the terms and conditions
herein provided, CFC hereby agrees to employ the Executive and the Executive
hereby agrees to be employed by CFC for the Term of Employment, as defined in
Section 3 hereof.

            
2.      Position and Responsibilities. During the Term of Employment hereunder, the
Executive shall be employed as the Chief Executive Officer of CFC, and/or in
such other senior executive capacity or capacities as may be mutually
satisfactory to the Executive and CFC. The Executive will be the senior executive officer of CFC, reporting
only to the Board of Directors of CFC (“the Board”), and all other officers of
CFC shall report to the Executive or to other officers designated by the
Executive. The Executive shall, at the
request of the Board, serve as an officer or director of any subsidiary or
affiliated entity of CFC.

            
During the Term of Employment, except as hereinafter provided and except for vacation,
holidays observed by CFC and periods of illness, the Executive agrees to devote
substantially all of his business time and attention to carrying out his duties
and responsibilities under this Agreement and shall use his best efforts,
skills and abilities to further the interests of CFC. The Executive shall be permitted, to the extent such activities
do not substantially interfere with the performance of the Executive’s
responsibilities and duties hereunder, (i) to manage his personal, financial
and legal affairs and (ii) to serve on civic, charitable, religious or
educational boards or committees. However, the Executive may not serve on the board of directors of any
other business entities without the prior express written consent of the Board
and subject to such reasonable limitations as may be imposed by the Board in
granting such consent.

            
3.      Term of Employment. The Term of Employment under this Agreement
shall commence as of March 1, 2001, and shall terminate on February 29, 2004
unless earlier terminated as provided in Section 6 below or extended as
provided in the following sentence (“the Term of Employment”).
 The Term of Employment shall automatically
be extended on March 1, 2004 and each subsequent March 1 for an additional
year unless, not later than 6 months prior to any such date, either party to
this Agreement shall have given written notice to the other party that he or it
does not wish to extend or further extend the Term of Employment.

            
4.      Compensation. For all services rendered by the Executive
during the Term of Employment, CFC shall pay the Executive as compensation (i)
a base salary, in periodic installments in

	Petersen Employment Agreement	
Page 2 of 7

accordance with CFC’s usual payroll
practice for its senior executives, at an annual rate of no less than $430,000
(“the Base Salary”), and (ii) such bonus, if any, as may be awarded to the Executive
under any incentive bonus compensation plan or plans that may be maintained by
CFC from time to time. During the Term
of Employment, the Executive’s Base Salary shall be reviewed for possible
increase at least annually, and the term Base Salary shall thereafter refer
to the Base Salary as so increased.

            
5.      Executive Benefits, Perquisites
and Expenses.

            
      5.1      CFC Plans. The Executive shall be
entitled to participate in all CFC health, accident, life insurance, savings,
retirement, disability and other benefit plans, programs or practices from time
to time in effect for senior executives of CFC at least to the same extent as
other senior executives (or, where applicable, retired senior executives) of
CFC, including, without limitation, CFC’s Pension Restoration Deferred
Compensation Plan and Pension Restoration Severance Pay Plan.

            
      5.2      Vacations.

The Executive shall be entitled to an amount
of paid vacation during each twelve-month period during the Term of Employment
equal to the maximum amount of vacation allowed for any full-time employee of
CFC (but not less than five weeks of paid vacation earned uniformly during each
such period), plus such holidays, sick leave and other time off as are
established by the policies of CFC. Unused days of vacation may be settled in cash or carried over to
subsequent years. The Executive shall
receive within thirty (30) days after his employment terminates, a payment
(based on the Executive’s Base Salary in effect on the date the Executive
terminated employment with CFC) for any accrued but unused vacation at the
termination but not in excess of 12 weeks regardless of the reason for such
termination of employment of the Executive.

            
      5.3      Perquisites: Expenses.

During the Term of
Employment, the Executive shall be entitled to receive such perquisites as CFC
may determine to provide to its senior executive officers, and CFC shall
reimburse the Executive for all reasonable and documented expenses incurred by
the Executive in connection with the performance of the Executive’s duties
hereunder, including, without limitation, expenses incurred as a result of the
attendance by the Executive’s wife at a function or meeting where the Executive
determines that her attendance is appropriate for business purposes.

            
      5.4      Automobile.

During the Term of Employment, CFC shall
provide the Executive with, and shall pay all reasonable expenses (including,
without limitation, insurance, repairs, maintenance, fuel and oil) for, an
automobile. The monthly lease payment or allowance for such automobile shall be
determined by and in the sole discretion of the Board.

            
6.      Payments to the Executive Upon
Termination of Employment.

            
      6.1      Termination by CFC.

            
      (a)      CFC shall have the right to terminate the Executive’s employment at any time during
the Term of Employment with or without Cause, as defined in Section
6.5(a). If, during the Term of
Employment, CFC terminates the employment of the Executive under this Section 6
without Cause, the Term of Employment shall terminate immediately thereafter,
and:

            
            (i) CFC shall pay the Executive such Base Salary
provided herein as he may be entitled to receive for services rendered prior to
the date of such termination;

            
            (ii) CFC shall pay the Executive for any accrued
but unused vacation as set forth in Section 5.2 and for any properly-documented
unreimbursed expenses;

	Petersen Employment Agreement	
Page 3 of 7

            
            (iii) CFC shall pay the Executive the benefits
which the Executive is entitled to receive under the terms and conditions of
such CFC plans as are in effect from time to time; and

            
            (iv) CFC shall pay the Executive a single
lump-sum payment equal to the product of (a) three and (b) the sum of (1) his
annual Base Salary at the rate in effect on the date of such termination, and
(2) the annual bonus, if any, awarded to the Executive for the year prior to
the year in which such termination occurs.

            
      (b)      If, during the Term of Employment, CFC terminates the employment of the Executive
for “Cause”, as defined below, the Term of Employment shall terminate immediately
thereafter, and CFC shall pay the Executive such compensation as is set forth
in Section 6.1(a)(i), (ii) and (iii) herein.

            
      6.2      Termination by the Executive.

            
      (a)      The Executive has the right to terminate his employment hereunder at any time during
the Term of Employment upon not less than 90 days prior written notice to CFC,
provided, however, that if the Executive wishes to terminate his employment for
“Good Reason” as defined in Section 6.5(b), the Executive must notify CFC in
writing of such intent within 30 days of the event or events that he believes
constitute Good Reason and such notice must specify such events in reasonable
detail. If during the Term of
Employment the Executive’s employment is terminated for Good Reason, as
defined below, the Term of Employment shall terminate immediately thereafter,
and CFC shall pay the Executive such compensation as is set forth in Section
6.1(a)(i)–(iv).

            
      (b)      If during the Term of Employment the Executive terminates his employment for other
than Good Reason, as defined below, the Term of Employment shall terminate
immediately thereafter, and CFC shall pay the Executive such compensation as is
set forth in Section 6.1(b).

            
      6.3      Disability.
Upon the Disability , as defined in Section
6.5(c), of the Executive during the Term of Employment, and for the period of
Disability, in addition to any other benefits to which he may be entitled
pursuant to this Agreement, but in lieu of his Base Salary and any bonus, the
Executive shall receive through the end of the Term of Employment or, if
earlier, the Executive’s date of recovery, actual termination of employment (in
which case the applicable provisions of Section 6.1 or 6.2 shall apply and this
Section 6.3 shall cease to apply) or death (in which case Section 6.4 and
any other relevant provisions shall apply) an annual Disability Benefit equal
to 60% of the Base Salary the Executive was receiving at the commencement of
the Disability and 60% of his target annual bonus, if any, for the year in
which the Executive became disabled. Payment of the Disability Benefit shall be in equal monthly
installments, and such payments shall be reduced by the monthly payments
received by the Executive under any other CFC–sponsored disability plan or
program and the monthly disability benefits received by the Executive pursuant
to the applicable provisions of the Social Security Act.
 During the period that Disability Benefits
are payable to the Executive, he shall continue to participate in CFC’s plans
described in Section 5.1 as if he had continued to be an active CFC employee
and as if he had received 60% of the Base Salary then in effect under Section 4
(and, if applicable, 60% of his target annual bonus).

            
      6.4      Death.

In the event of the termination of the
Executive’s employment by reason of death during the Term of Employment, the
Executive’s “Designated Beneficiary”, as defined below, shall be entitled to
receive:

	Petersen Employment Agreement	
Page 4 of 7

            
            (i) payment of the Executive’s unpaid Base
Salary through the date of death;

            
            (ii) payment of a pro-rated annual bonus, if any,
for the year of the Executive’s death (at 100% of the target award);

            
            (iii) the lesser of (a) a lump sum payment equal
to one year’s Base Salary at the rate in effect on the date of death or (b) the
Base Salary that would have been paid to the Executive in the remaining period
of the Term of Employment prior to death (but in no case less than the Base
Salary that would have been paid to the
Executive for a 6 month period);

            
            (iv) reimbursement for expenses paid but not yet
reimbursed; and

            
            (v) such survivor benefits and payments for the
Executive’s family or with respect to the Executive that are provided under
CFC’s plans described in Section 5.1 determined in accordance with the then
applicable provisions of such plans, programs or arrangements.

            
      6.5      Definitions.

            
      (a)      “Cause”. For purposes of this Agreement, Cause shall
mean (i) the willful and continued failure by the Executive, as determined in
good faith by two–thirds of the members of the Board (after notice to the
Executive and providing the Executive an opportunity to meet with the Board),
to perform his duties under this Agreement or comply with written policies of
CFC, or (ii) willful conduct materially injurious to CFC or (iii) conviction of
a felony involving moral turpitude; provided, however, that any act or omission
by the Executive shall not fall within the scope of this Section 6.5(a)(i) and
(ii) if it was done or omitted to be done by the Executive in good faith and
with a reasonable belief that such action or omission was in the best interests
of CFC.

            
      (b)      “Good Reason”. For purposes of this
Agreement, Good Reason shall mean, without the prior written consent of the
Executive, (i) a reduction in the rate of the Executive’s Base Salary, (ii) a
decrease in the Executive’s titles, duties or responsibilities hereunder or the
assignment of new responsibilities hereunder which, in either case, is
materially less favorable to the Executive when compared to the Executive’s
titles, duties and responsibilities which were in effect immediately prior to
such assignment, or (iii) the relocation of CFC’s principal office or the
relocation of the Executive to a location more than 50 miles from the principal
office of CFC on the date of this Agreement; provided, however, that the term
Good Reason shall not include the occurrence of any of the above if such
occurrence is remedied by CFC within 20 business days after receipt by CFC of
the Executive’s written notice of resignation for Good Reason under Section
6.2(a) setting forth in specific detail the facts and circumstances resulting
in the Good Reason upon which his resignation is based.

            
      (c)      “Disability”.
 For purposes of this Agreement, Disability
shall mean that the Executive has not performed his full-time duties with CFC
for three consecutive months as a result of his incapacity due to physical or
mental illness and within thirty (30) days after written notice of such
incapacity is given to the Executive he shall not have returned to the
full-time performance of his duties hereunder.

            
      (d)      “Designated
Beneficiary”. For purposes of this
Agreement the Designated Beneficiary shall be any person designated by the
Executive in a written instrument signed by the Executive and delivered to CFC
to be the beneficiary of payments to be made by CFC hereunder upon the death of
the Executive if such person survives the Executive. Any Designated Beneficiary may be changed by the Executive at any
time and from time to time by a written instrument signed by the

	Petersen Employment Agreement	
Page 5 of 7

Executive and
delivered to CFC. If no Designated
Beneficiary survives the Executive, the Designated Beneficiary shall be the
estate of the Executive.

            
7.      No Mitigation.
 CFC agrees that if the Executive’s
employment is terminated during the Term of Employment, the Executive is not
required to seek other employment or to attempt in any way to reduce the
amounts payable and the benefits to be provided to the Executive by CFC under
this Agreement. Further, the amount or
nature of any such payment or benefit to be paid to or with respect to the
Executive shall not be reduced by any compensation earned by the Executive as a
result of employment by another employer, by retirement benefits, or offset
against any amount claimed to be owed by the Executive to CFC or any of its
subsidiaries or otherwise.

            
8.      Confidential Information .
The Executive shall not at any time during his employment with CFC or
following termination or expiration of this Agreement, directly or indirectly,
disclose, publish or divulge to any person (except in the regular course of
CFC’s business or as required by law or regulations), or appropriate, use or
cause, permit or induce any person to appropriate or use, any proprietary,
secret or confidential information of CFC including, without limitation,
knowledge or information relating to its copyrights, trade secrets, business
methods, the names or requirements of its customers, vendors, contractors,
agents, dealers and distributors or the prices, credit or other terms extended
or granted to any of such persons, all of which the Executive agrees are and
will be of great value to CFC and shall at all times be kept confidential.
 Upon the termination of the Term of
Employment hereunder, the Executive shall promptly deliver or return to CFC all
materials of a proprietary, secret or confidential nature relating to CFC
together with any other property of CFC which may have theretofore been
delivered to or may then be in the possession or control of the Executive.
 CFC and the Executive agree that the
provisions of this Section shall survive the termination of the Executive’s
employment hereunder.

            
9.      Indemnification.
CFC agrees that if the Executive is made, or
is threatened to be made, a party to any action or proceeding, whether civil or
criminal, by reason of the fact that he is or was a director or officer of CFC
or any of its subsidiaries or, at the request of CFC, serves or served any
other corporation, partnership, joint venture, trust or other enterprise in any
capacity, CFC shall indemnify him to the fullest extent permitted by the
Charter and By-Laws of CFC or, if greater, by the applicable laws of the State
of Virginia, against all costs, expenses, liabilities and losses reasonably
incurred or suffered by the Executive in connection therewith.
 CFC shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with any such
proceeding upon receipt of an itemized list of such costs and expenses.

            
10.      Legal Fees and Expenses.
 In the event that a claim for payment or
benefits under this Agreement is disputed, the Executive shall be reimbursed
for all reasonable attorney fees and expenses incurred by the Executive in
pursuing such claim, provided that the Executive is successful as to at least
part of the disputed claim by reason of litigation, arbitration or settlement.

            
11.      Amendment; Waiver.
 This Agreement contains the entire agreement
of the parties with respect to the matters set forth herein, and may only be
amended by subsequent written agreement of the parties hereto.
 All prior agreements between the Executive
and CFC, whether in writing or not, relating to terms and conditions of
employment are hereby canceled. No
waiver by CFC of any breach by the Executive of any term, condition or
provision of this Agreement to be performed by the Executive shall be deemed a
waiver of a similar or dissimilar condition or provision at the same or prior
or subsequent time.

            
12.      Binding Effect.
 The Executive’s rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, such
rights shall not be subject to commutation,

	Petersen Employment Agreement	
Page 6 of 7

encumbrance, or the claims of the
Executive’s creditors, and any attempt to do any of the foregoing shall be null
and void. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Executive and
his heirs, beneficiaries and personal representatives, and shall be binding
upon and inure to the benefit of CFC and its successors or assigns.

            
13.      Governing Law; Severability.
 Except as otherwise set forth herein, this
Agreement is governed by and is to be construed and enforced in accordance with
the laws of the State of Virginia without regard to principles of conflicts of
law. If any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement shall
be unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.

            
14.      Withholding of Taxes.
 CFC may withhold from any compensation
payable under this Agreement all federal, state, city, or other taxes as shall
be required pursuant to any law, regulation or ruling.

            
15.      Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

            
16.      Headings. The headings contained in this Agreement are
for reference purposes only and shall not be deemed to be part of the Agreement
or to affect the meaning or interpretation of this Agreement.

            
17.      Notices. Any notice given to either party hereto
shall be in writing and shall be deemed to have been given when delivered
personally or sent by certified or registered mail, postage prepaid, return
receipt requested, duly and properly addressed to the party concerned at the
address indicated below or to such changed address as party may subsequently
give notice of:

If to CFC:

            
National Rural Utilities

            
Cooperative Finance Corporation

            
Woodland Park

            
2201 Cooperative Way

            
Herndon, Virginia 22071

            
Attn: President

If to the Executive:

            
Mr. Sheldon C. Petersen

            
510 Fortress Circle S.E.

            
Leesburg, Virginia 22075

            
18.      Enforcement of Agreement. The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement or the Term of Employment for any
reason to the extent necessary to obtain the intended provision of such rights
and the intended performance of such obligations.

            
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date

	Petersen Employment Agreement	
Page 7 of 7

and year first above written.

            
            
            
NATIONAL RURAL UTILITIES COOPERATIVE

            
            
            
FINANCE CORPORATION

            
            
            
By:<R.B. SLOAN>                                   

            
         
            
            
President

            
            
            
<SHELDON C. PETERSEN>                   

            
            
            
Sheldon C. Petersen

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