<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997 Commission File No. 1-4290
K2 INC.
(exact name of registrant as specified in its charter)
DELAWARE 95-2077125
(State of Incorporation) (I.R.S. Employer Identification No.)
4900 South Eastern Avenue
Los Angeles, California 90040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (213) 724-2800
Former name, former address and former fiscal year, if changed since last
report:
Not applicable
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X)
-
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1997.
Common Stock, par value $1 16,542,121 Shares
<PAGE>
FORM 10-Q QUARTERLY REPORT
PART - 1 FINANCIAL INFORMATION
Item 1. Financial Statements
STATEMENTS OF CONSOLIDATED INCOME (condensed)
(Dollars in thousands, except for per share figures)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
--------------------
1997 1996
--------------------
(Unaudited)
<S> <C> <C>
Net sales $171,541 $158,853
Cost of products sold 125,160 117,470
-------- --------
Gross profit 46,381 41,383
Selling expenses 22,391 19,132
General and administrative expenses 13,270 13,074
-------- --------
Operating income 10,720 9,177
Interest expense 2,519 2,432
Other income, net (291) (297)
-------- --------
Income before provision for income taxes 8,492 7,042
Provision for income taxes 2,630 2,255
-------- --------
Net income $ 5,862 $ 4,787
======== ========
Per share data:
Net income $ 0.35 $ 0.29
Cash dividend $ 0.11 $ 0.11
Average shares outstanding 16,727 16,731
</TABLE>
See notes to consolidated condensed financial statements.
1
<PAGE>
CONSOLIDATED BALANCE SHEETS (condensed)
(Dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Assets
------
Current Assets
Cash and cash equivalents $ 5,559 $ 10,860
Accounts receivable, net 114,285 94,079
Inventories
Finished goods 105,933 111,989
Work in process 11,664 10,810
Raw materials 38,857 37,041
-------- --------
156,454 159,840
Less LIFO reserve 4,513 4,464
-------- --------
151,941 155,376
Deferred taxes 6,765 8,195
Prepaid expenses and other current assets 5,839 5,899
-------- --------
Total current assets 284,389 274,409
Property, Plant and Equipment 162,845 157,371
Less allowance for depreciation and amortization 92,386 89,848
-------- --------
70,459 67,523
Intangibles, principally goodwill 16,502 16,346
Investments 6,408 6,408
Other 3,200 3,145
-------- --------
Total Assets $380,958 $367,831
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
2
<PAGE>
CONSOLIDATED BALANCE SHEETS (condensed)
(Dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
----------- ----------
(Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Bank loans $ 7,022 $ 7,307
Accounts payable 26,238 26,639
Accrued payroll and related 18,793 20,410
Other accruals 15,782 15,012
Current portion of long-term debt 4,887 4,882
-------- --------
Total current liabilities 72,722 74,250
Long-Term Debt 100,983 89,096
Deferred Taxes 15,494 15,497
Shareholders' Equity
Preferred Stock $1 par value, authorized
12,500,000 shares, none issued
Common Stock, $1 par value, authorized
40,000,000 shares, issued shares -
17,149,174 in 1997 and 17,131,662 in 1996 17,149 17,132
Additional paid-in capital 131,933 131,627
Retained earnings 59,087 55,047
Employee Stock Ownership Plan and
stock option loans (6,479) (7,087)
Treasury shares at cost, 603,987 shares in 1997
and 575,928 shares in 1996 (7,537) (6,719)
Cumulative translation adjustments (2,394) (1,012)
-------- --------
Total Shareholders' Equity 191,759 188,988
-------- --------
Total Liabilities and Shareholders' Equity $380,958 $367,831
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS (condensed)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
--------------------
1997 1996
--------------------
Operating Activities (Unaudited)
<S> <C> <C>
Net income $ 5,862 $ 4,787
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,255 2,525
Deferred taxes 1,427 343
Changes in operating assets and liabilities:
Accounts receivable (15,481) (11,605)
Inventories 3,435 8,603
Prepaid expenses and other current assets 60 339
Accounts payable (401) (2,120)
Payrolls and other accruals (847) (835)
-------- --------
Net cash (used in) provided by operating activities (2,690) 2,037
Investing Activities
Property, plant and equipment expenditures (6,209) (4,670)
Disposals of property, plant and equipment 9 12
Other items, net (1,471) (201)
-------- --------
Net cash used in investing activities (7,671) (4,859)
Financing Activities
Borrowings under long-term debt 12,000 4,500
Payments of long-term debt (4,833) (100)
Net decrease in short-term bank loans (285) (1,816)
Dividends paid (1,822) (1,825)
-------- --------
Net cash provided by financing activities 5,060 759
-------- --------
Net decrease in cash and cash equivalents (5,301) (2,063)
Cash and cash equivalents at beginning of year 10,860 7,357
-------- --------
Cash and cash equivalents at end of period $ 5,559 $ 5,294
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 1,920 $ 1,367
Income taxes paid 1,203 220
-------- --------
$ 3,123 $ 1,587
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
K2 INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1997
NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1997, are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. For further information, refer to the Consolidated
Financial Statements and Notes to Financial Statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996.
NOTE 2 - Summary of Significant Accounting Policies
Name Change
On June 3, 1996, the Company changed its name from Anthony Industries, Inc. to
K2 Inc.
Accounts Receivable and Allowances
Accounts receivable are net of allowances for doubtful accounts of $6,017,000 at
March 31, 1997 and $6,120,000 at December 31, 1996.
Newly Issued Accounting Standard
On January 1, 1997, the Company adopted the requirements of Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." Accordingly, the
Company has modified several agreements to meet the new requirements to enable
it to continue recognizing transfers of certain receivables to a special purpose
entity as sales. As a result, the impact of adoption did not have a material
effect on the Company's consolidated financial statements.
NOTE 3 - Borrowings and Other Financial Instruments
On April 18, 1997, the Company amended it principal long-term borrowing facility
to increase amounts available from $75 million to $100 million. All other
material terms remained unchanged. This credit facility is subject to an
agreement which, among other things, restricts amounts available for payment of
cash dividends by the Company. As of March 31, 1997, $13.6 million of retained
earnings were free of such restrictions.
At March 31, 1997, $42 million of accounts receivable were sold under the
existing $50 million accounts receivable purchase facility.
5
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
A. Comparative First Quarter Results of Operations
Net sales for the three months ended March 31, 1997 advanced 7.9% to $171.5
million compared to $158.9 million in the year-earlier period. Net income for
the first quarter of 1997 increased 22.9% to $5.9 million, or $.35 per share,
from $4.8 million, or $.29 per share, in the first quarter of 1996.
Net Sales. In the sporting goods and other recreational products group, net
sales grew 12.8% to $121.7 million in the 1997 quarter compared to $107.9
million in the year-earlier period. K2 in-line skates led the growth. Sales of
K2 skates increased nearly 150% from the prior year, reflecting continued growth
in the European market and increased domestic distribution. Modest sales gains
of snowboards, full-suspension mountain bikes and back packs also contributed
favorably to the quarters' sales performance. Sales of Shakespeare fishing
tackle declined due to the effect of a special one-year promotional program in
effect a year ago. First quarter sales of Stearns active water sports products
also decreased due to shifts in the ordering patterns of several large
customers, and sales of Hilton active apparel products declined due to the
impact of lower jacket sales during the quarter.
Net sales of the industrial products group decreased slightly to $49.8 million
in the 1997 first quarter from $51.0 million in the prior-year quarter. Improved
shipments of building products were offset by declines in cutting line and
fiberglass pole sales.
Gross profit. Gross profit rose 12.1% to $46.4 million, or 27.1% of net sales,
in the first quarter of 1997 as compared to $41.4 million, or 26.1% of net
sales, in the comparable 1996 quarter. The increase in gross profit as a
percentage of net sales resulted from a sales mix that included a larger
proportion of higher margin products and manufacturing efficiency gains,
particularly at Shakespeare's fiberglass pole operation. Partially offsetting
the improvement was the impact of closeout sales of mountain bikes and
snowboards and increased raw material costs in the manufacture of residential
building products.
Costs and Expenses. In the first quarter of 1997, selling expenses increased
17.3% to $22.4 million, or 13.1% of net sales, from $19.1 million, or 12.0% of
net sales, in the first quarter of 1996. The increase was attributable to the
higher sales volume and to increased marketing and promotional activities.
General and administrative expenses increased slightly to $13.3 million in the
first quarter of 1997 compared to $13.1 million in the year-earlier period but
declined as a percentage of net sales from 8.2% to 7.8%.
Operating Income. Operating income grew 16.3% to $10.7 million, or 6.2% of net
sales, in the first quarter of 1997, compared to $9.2 million, or 5.8% of net
sales, in the comparable 1996 period. The percentage increase was attributable
to the improvement in gross profit percentage and to lower general and
administrative expenses net of the increase in selling expenses as a percentage
of net sales.
6
<PAGE>
Interest Expense. Interest expense increased slightly in the first quarter of
1997 compared to the year-earlier period. Higher average borrowings to support
the growth in sales increased interest expense by $.4 million, which was offset
by a reduction of $.3 million of interest due to lower interest rates.
B. Financial Condition
The Company's operating activities used $2.7 million of cash during
the three months ended March 31, 1997, as compared to $2.0 million of cash
provided during the first three months ended March 31, 1996. The net use of cash
in the 1997 period was primarily due to financing higher levels of working
capital arising from the growth of sales of in-line skates and shifts in the
ordering patterns of several large customers which require manufacturers to
carry higher inventory levels.
An increase over the prior year's period of $2.8 million in net cash used for
investing activities arose from capital expenditures necessary to increase
manufacturing capacity in the recreational products group and improve
manufacturing efficiencies in the industrial products group. The impact of the
strong dollar on the net assets of European subsidiaries also contributed to the
increase. There were no material commitments for capital expenditures at March
31, 1997.
Net cash provided by financing activities increased $4.3 million over the prior
year due to an increase in long-term borrowings to support growth in sales. The
Company increased its primary long term-borrowing facility from $75 million to
$100 million.
The Company anticipates its remaining cash needs in 1997 will be provided from
operations and borrowings under existing credit lines.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(c ) At the Annual Meeting of the Stockholders of the Company held May
8, 1997, the following actions were taken:
(1) The following directors were elected:
Bernard I. Forester - 14,431,873 voted for and 190,469
votes were withheld;
Richard J. Heckmann - 14,296,919 voted for and 325,423
votes were withheld;
Stewart M. Kasen - 14,266,942 voted for and 355,400 votes
were withheld.
(2) The selection by the Board of Directors to approve Ernst &
Young as the Company's independent auditors for the 1997 year
was ratified as follows:
14,442,693 voted for, 43,512 voted against and 136,137
votes abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 Amended and restated By-Laws of K2 Inc.
10.01 First Amendment to Receivables Purchase Agreements and
Transfer and Administration Agreement dated as of March
15, 1997.
10.02 Second Amendment to Credit Agreement dated as of April 18,
1997.
27 Financial Data Schedule
(b) Reports on Form 8-K filed in the first quarter ended March 31,
1997
None
8
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
K2 INC.
(registrant)
Date: May 13, 1997 /s/ RICHARD M. RODSTEIN
--------------------------
Richard M. Rodstein
President and Chief Executive
Officer
Date: May 13, 1997 /s/ JOHN J. RANGEL
---------------------------
John J. Rangel
Senior Vice President - Finance
9
<PAGE>
EXHIBIT 3
BY-LAWS
OF
K2 INC.
ARTICLE I
OFFICES
-------
The Corporation shall maintain a registered office in the State of Delaware
as required by law. The Corporation may also have offices at other places,
within and without the State of Delaware.
ARTICLE II
STOCKHOLDERS
------------
SECTION 1. Annual meetings of stockholders shall be held at such times and
such places, within or without the State or Delaware, as may be fixed from time
to time by the Board of Directors.
SECTION 2. Except as otherwise required by statute or the Corporation's
Certificate of Incorporation, special meetings of stockholders may be called by
the Board of Directors or the Chairman of the Board. Special meetings of
stockholders shall be held on such dates and at such times and such places,
within or without the State of Delaware, as shall be stated in the notices of
such meetings. Notice of any special meeting shall state the purpose or
purposes for which the meeting is to be held and no other business shall be
transacted except as stated in such notice.
-1-
<PAGE>
SECTION 3. The holders of a majority of the issued and outstanding shares
of the capital stock of the Corporation entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business at all meetings of stockholders.
SECTION 4. Except as otherwise required by statute, the Corporation's
Certificate of Incorporation or these By-Laws, all matters coming before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the shares of capital stock of the Corporation present in person or
represented by proxy at such meeting and voting thereon, a quorum being present.
SECTION 5. The Board of Directors, or, if the Board shall not have made
the appointment, the chairman presiding at any meeting of stockholders, shall
have power to appoint two or more persons to act as inspectors, to receive,
canvass and report the votes cast by the stockholders at such meeting.
SECTION 6. The Chairman of the Board shall preside at all meetings of
stockholders; and in his absence, the Board of Directors may appoint a person to
act as chairman of the meeting.
SECTION 7. The Secretary or an Assistant Secretary shall act as secretary
at all meetings of stockholders; and in their absence, the chairman of the
meeting shall appoint a person to act as secretary of the meeting.
SECTION 8. At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board or (ii) by any stockholder of the Corporation who
complies with the notice
-2-
<PAGE>
procedures set forth in this Section 8 and Section 9 of Article II. For business
to be properly brought before any meeting of the stockholders by a stockholder,
the stockholder must have given notice thereof in writing to the Secretary of
the Corporation not less than 90 days in advance of such meeting or, if later,
the tenth day following the first public announcement of the date of such
meeting, and such business must be a proper matter for stockholder action under
the General Corporation Law of the State of Delaware. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the meeting (1) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (2) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business, (3) the class and number of shares of
the Corporation that are beneficially owned by the stockholder, and (4) any
material interest of the stockholder in such business. In addition, the
stockholder making such proposal shall promptly provide any other information
reasonably requested by the Corporation. The chairman of any such meeting shall
have the power and the duty to determine whether any business proposed to be
brought before the meeting has been made in accordance with the procedure set
forth in these By-Laws and shall direct that any business not properly brought
before the meeting shall not be considered. Notwithstanding anything in these
By-Laws to the contrary, no business shall be conducted at any meeting of the
stockholders except in accordance with the procedures set forth in this Section
8 and Section 9 of Article II. For purposes of this Section 8 and Section 9 of
Article II, "public announcement" shall
-3-
<PAGE>
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or
any successor provision.
SECTION 9. Nominations for the election of directors may be made by the
Board or by any stockholder entitled to vote in the election of directors;
provided, however, that a stockholder may nominate a person for election as a
director at a meeting only if written notice of such stockholder's intent to
make such nomination has been given to the Secretary of the Corporation not
later than 90 days in advance of such meeting or, if later, the tenth day
following the first public announcement of the date of such meeting. Each such
notice shall set forth: (i) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting and nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (iv) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to
-4-
<PAGE>
be nominated, by the Board; and (v) the consent of each nominee to serve as a
director of the Corporation if so elected. In addition, the stockholder making
such nomination shall promptly provide any other information reasonably
requested by the Corporation. Notwithstanding the foregoing provisions of this
Section 9 of Article II, in the event that the number of directors to be elected
to the Board is increased and there is no public announcement naming either all
of the nominees for director or specifying the size of the increased Board made
by the Corporation at least 100 days in advance of such meeting, a stockholder's
notice required by this Section 9 of Article II shall be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary of the Corporation not later than the
tenth day following the day on which such public announcement is first made by
the Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 9 of Article II. The chairman of any meeting of stockholders shall have
the power and the duty to determine whether a nomination has been made in
accordance with the procedure set forth in this Section 9 of Article II and
shall direct that any nomination not made in accordance with these procedures be
disregarded.
ARTICLE III
BOARD OF DIRECTORS
------------------
SECTION 1. The business and affairs of the Corporation shall be managed by
or under direction of the Board of Directors. The directors shall elect one of
their members to be Chairman of the Board, who shall perform such duties as are
provided
-5-
<PAGE>
in these By-Laws or are from time to time assigned by the Board. The Chairman of
the Board may, but need not, be an officer of the Corporation.
SECTION 2. Regular meetings of the Board of Directors shall be held on
such dates and at such times and such places, within or without the State of
Delaware, as shall be fixed from time to time by the Board.
SECTION 3. Special meetings of the Board of Directors may be called by the
Chairman of the Board and shall be called by the Chairman of the Board or the
Secretary upon a request in writing by any four directors. Notice shall be
given of the date, time and place of each special meeting (i) by mailing the
same at least three days before the meeting to each director via first-class
mail, (ii) by telephone, facsimile transmission or personal delivery of the
same at least 24 hours before the meeting to each director or (iii) by sending
the same at least two days before the meeting to each director via overnight
courier for next-day delivery. Except as otherwise specified in the notice
thereof, or as required by statute, any and all business may be transacted at
any special meeting of the Board of Directors.
SECTION 4. The Chairman of the Board shall preside at all meetings of the
Board of Directors; and in his absence, the Board of Directors may appoint any
other person to act as chairman of the meeting. Less than a quorum of the
Board may adjourn any meeting from time to time until a quorum shall be present,
whereupon the meeting may be held, as adjourned, without further notice.
SECTION 5. With the consent of the Chairman or a majority of the Board of
Directors, any director may participate in a meeting of the Board of Directors
by
-6-
<PAGE>
telephone, and a meeting of the Board of Directors may be conducted entirely by
telephone, provided that all of the directors can speak and hear one another.
ARTICLE IV
COMMITTEES
----------
SECTION 1. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate from among its own members such committees as the
Board may determine. Each such committee shall have such powers of the Board of
Directors, not prohibited by statute, as the Board shall from time to time
authorize.
SECTION 2. A majority of a committee shall constitute a quorum for the
transaction of business. Each committee shall keep regular minutes of its
meetings and shall report the same to the Board of Directors when requested.
The Board of Directors may discharge any committee or any member thereof either
with or without cause at any time.
ARTICLE V
OFFICERS
--------
SECTION 1. The Board of Directors shall elect the following officers:
Chief Executive Officer, President, one or more Vice Presidents, Treasurer and
Secretary and such other officers as it may from time to time determine.
SECTION 2. The term of office of all officers shall be for one year and
until their respective successors are elected and qualified. The Board of
Directors may remove any officer either with or without cause at any time.
-7-
<PAGE>
SECTION 3. The Chief Executive shall be the chief executive officer of the
Corporation and shall have such powers and duties as generally pertain to the
responsibilities of chief executive officer, including the management of the
business and affairs of the Corporation, subject only to the Board of Directors.
The President (if he is not the Chief Executive Officer) subject and reporting
to the Chief Executive Officer, shall be the chief operating officer of the
Corporation, and shall have such powers and duties as generally pertain to the
responsibilities of chief operating officer as may be determined from time to
time by the Chief Executive Officer. The other officers of the Corporation,
subject and reporting to the Chief Executive Officer and/or the President, as
determined from time to time by the Chief Executive Officer, shall each have
such powers and duties as generally pertain to their respective offices. Any
officer of the Corporation shall in addition have such powers and duties as may
be conferred by the Board of Directors.
SECTION 4. Unless otherwise ordered by the Board of Directors, the Chief
Executive Officer and any other officer whom he may designate shall have full
power and authority on behalf of the Corporation to attend and to vote at any
meetings of stockholders of any corporation in which this Corporation may hold
stock, and may exercise on behalf of this Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, and
shall have power and authority to execute and deliver proxies, waivers and
consents on behalf of the Corporation in connection with the exercise by the
Corporation of the rights and powers incident to the
-8-
<PAGE>
ownership of such stock. The Board of Directors may from time to time confer
like powers upon any other person or persons.
ARTICLE VI
CAPITAL STOCK
-------------
SECTION 1. Certificates for stock of the Corporation shall be in such form
as the Board of Directors may from time to time prescribe.
SECTION 2. The Board of Directors shall have power to appoint one or more
transfer agents and/or registrars for the transfer and/or registration of
certificates for shares of stock of any class or series and may require that
stock certificates shall be countersigned and/or registered by one or more of
such transfer agents and/or registrars.
SECTION 3. Shares of capital stock of the Corporation shall be
transferable on the books of the Corporation only by the holder of record
thereof in person or by his duly authorized attorney, upon surrender and
cancellation of certificates for a like number of shares, with an assignment or
power of transfer endorsed thereon or delivered therewith, duly executed, and
with such proof of the authenticity of the signature and of authority to
transfer, and of payment of transfer taxes, as the Corporation or its agents may
require.
SECTION 4. In case any certificate for the capital stock of the
Corporation shall be lost, stolen or destroyed, the Corporation may require such
proof of the fact and such indemnity to be given to it and/or to its transfer
agent and/or registrar, if any, as it shall deem necessary or advisable.
-9-
<PAGE>
SECTION 5. The Corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder thereof in fact, and shall not be
bound to recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise expressly provided by law.
ARTICLE VII
MISCELLANEOUS
-------------
SECTION 1. The seal of the Corporation shall be circular in form and
shall contain the name of the Corporation and the year and state of
incorporation.
SECTION 2. The Board of Directors shall have the power to fix, and from
time to time to change, the fiscal year of the Corporation.
ARTICLE VIII
AMENDMENT
---------
The Board of Directors shall have the power to adopt, alter and repeal By-
Laws of the Corporation at any regular or special meeting of the Board, subject
to the power of the stockholders to alter or repeal any By-Law adopted or
altered by the Board of Directors. By-Laws may be adopted, altered or repealed
by the stockholders by the vote of the holders of a majority of the outstanding
shares entitled to vote thereon provided that notice of the proposed adoption,
alteration or repeal shall have been given in the notice of such meeting of
stockholders.
-10-
<PAGE>
EXHIBIT 10.01
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENTS
AND TRANSFER AND ADMINISTRATION AGREEMENT
This FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENTS AND
TRANSFER AND ADMINISTRATION AGREEMENT (this "Amendment"), dated as of March 15,
1997, is among K-2 CORPORATION, an Indiana corporation ("K-2"), SHAKESPEARE
COMPANY, a Delaware corporation ("Shakespeare", and together with K-2,
individually, a "Seller" and collectively, the "Sellers"), K2 INC. (formerly
known as Anthony Industries, Inc.), a Delaware corporation ("K2 Inc."), K2
FUNDING, INC., a Delaware Corporation ("K2F"), ENTERPRISE FUNDING CORPORATION, a
Delaware corporation (the "Company"), and NATIONSBANK, N.A., a national banking
association ("NationsBank") .
PRELIMINARY STATEMENTS:
1. K-2 and K2 Inc. have entered into the Receivables Purchase
Agreement (together with the schedules and exhibits thereto, the "K-2
Receivables Purchase Agreement"), dated as of January 24, 1996;
2. Shakespeare and K2 Inc. have entered into the Receivables
Purchase Agreement (together with the schedules and exhibits thereto, the
"Shakespeare Receivables Purchase Agreement" and together with the K-2
Receivables Purchase Agreement, the "Receivables Purchase Agreements"), dated as
of January 24, 1996;
3. The Company, K2 Inc. and NationsBank have entered into the
Transfer and Administration Agreement (together with the schedules and exhibits
thereto, the "Transfer and Administration Agreement" and together with the
Receivables Purchase Agreements, the "Agreements"), dated as of January 24,
1996;
4. K2 Inc. desires to assign to K2F, a newly created
subsidiary of K2 Inc. and a special purpose corporation, its rights and
obligations as purchaser under the Receivables Purchase Agreements and as
Transferor under the Transfer and Administration Agreement, and to make other
modifications to the Agreements; and
5. Each of the Sellers, the Company and NationsBank are, on
the terms and conditions stated below, willing to agree to such assignment and
to make such modifications.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. ANTHONY NAME CHANGE. All references to "Anthony
-------------------
Industries, Inc.", "Anthony" or "AII" in each of the Transaction Documents (as
defined in Section 2 hereof) shall be deemed to refer to K2 Inc.
SECTION 2. ASSIGNMENT. K2 Inc. hereby sells, assigns and
----------
transfers to K2F all its right, title and interest, and duties and obligations
(a) under the Receivables Purchase Agreements, (b) as Transferor under the
Transfer and Administration Agreement and (c) all other agreements, documents
and instruments executed or to be executed in connection therewith, and any
amendments, supplements or modifications thereto now existing or hereafter
created (together with the agreements, the "Transaction Documents"); provided
--------
that all rights and obligations of K2 Inc. As Master Servicer under the
- ----
Transaction Documents shall be retained and continued to be performed by K2 Inc.
K2F hereby accepts and assumes the foregoing assignment and agrees to be bound
by the terms and provisions of the Transaction Documents, applicable to it. From
and after the date hereof, all references to K2 Inc. in the Transaction
Documents (except in its capacity as Master Servicer) shall be deemed to refer
to K2F.
<PAGE>
SECTION 3. AMENDMENTS TO RECEIVABLES PURCHASE AGREEMENTS. Each
---------------------------------------------
of the Receivables Purchase Agreements are hereby amended as follows:
(a) Section 5 of each of the Receivables Purchase Agreements is
amended by adding the following new subparagraph thereunder:
"(e) Any payment by an Obligor in respect of any amounts
owed by it to the Seller shall, except as otherwise specified by such
Obligor or otherwise required by contract or law and unless otherwise
instructed by K2F, be remitted to the Master Servicer as a Collection
of any Receivable of such Obligor included in the Transferred Interest
(starting with the oldest such Receivable) to the extent of any
amounts then due and payable thereunder before being applied to any
other receivable or other indebtedness of such Obligor."
(b) Section 5(d) of each of the Receivables Purchase Agreements
is amended by deleting "Article III" from the first line thereof and adding in
its place the following: "Section 6".
(c) Section 7(a) of each of the Receivables Purchase Agreements
is amended by adding the following as a new subparagraph thereunder:
"(xi) Separateness Covenants. The Seller shall do all
----------------------
things necessary to maintain its existence separate and apart from
K2F, including, without limitation:
(A) practicing and adhering to corporate formalities, such as
maintaining appropriate books and records;
(B) refraining from (1) guaranteeing or otherwise becoming liable
for any obligations of K2F, (2) having obligations guaranteed by
K2F, and (3) holding itself out as responsible for debts of K2F
or for decisions or actions with respect to the affairs of K2F;
(C) maintaining all of its deposit and other bank accounts and all of
its assets separate from those of K2F;
(D) maintaining all of its financial records separate and apart from
those of K2F;
(E) reimbursing K2F out of the Seller's own funds for any services
provided to the Seller by employees, officers, consultants, and
agents of K2F;
(F) maintaining office space separate and apart from that of K2F or
allocating fairly and reasonably any overhead for shared office
space;
(G) maintaining a telephone number separate from K2F's telephone
number that will not be answered in K2F's name;
(H) accounting for and managing all of its liabilities separately
from K2F, including, without limitation, payment directly by the
Seller of all payroll, accounting and other administrative
expenses and taxes;
(I) allocating, on an arm's-length basis, all corporate operating
services, leases and expenses shared between the Seller and K2F
including, without limitation, those associated with the services
of shared consultants and agents and shared computer equipment
and software;
(J) refraining from filing or otherwise initiating or supporting the
filing of a motion in any bankruptcy or other insolvency
proceeding involving K2F to substantively consolidate the assets
and liabilities of the Seller with the assets and liabilities of
K2F;
(K) maintaining adequate capitalization in light of its business and
purpose;
-2-
<PAGE>
(L) refraining from commingling assets with those of K2F;
(M) refraining from acquiring obligations or securities of K2F
(N) using separate stationery, invoices, and checks from K2F; and
(O) correcting any known misunderstanding regarding the separate
identity of K2F."
(d) The following are added as new sections to the end of each of the
Receivables Purchase Agreements:
"13. Taxes. All payments made hereunder by the Seller to K2F shall be
-----
made free and clear of, and without deduction for, any present or
future income, excise, stamp or franchise taxes and any other taxes,
fees, duties, withholdings or other charges of any nature whatsoever
imposed by any taxing authority on any recipient (or any assignee of
such parties) (such non-excluded items being called "Taxes"), but
excluding franchise taxes and taxes imposed on or measured by the
recipient's net income or gross receipts ("Excluded Taxes"). In the
event that any withholding or deduction from any payment made by the
Seller hereunder is required in respect of any Taxes, then the Seller
shall:
(a) pay directly to the relevant authority the full amount required to be
so withheld or deducted;
(b) promptly forward to K2F an official receipt or other documentation
satisfactory to K2F evidencing such payment to such authority; and
(c) pay to K2F such additional amount or amounts as is necessary to ensure
that the net amount actually received by K2F will equal the full
amount K2F would have received had no such withholding or deduction
been required.
Moreover, if any Taxes are directly asserted against K2F with respect
to any payment received by K2F hereunder, K2F may pay such Taxes and
the Seller will promptly pay such additional amounts (including any
penalties, interest or expenses) as shall be necessary in order that
the net amount received by K2F after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount
K2F would have received had such Taxes not been asserted.
If the Seller fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to K2F the required receipts or
other required documentary evidence, the Seller shall indemnify K2F
for any incremental Taxes, interest, or penalties that may become
payable by K2F as a result of any such failure.
14. Indemnification; Expenses; Related Matters.
-------------------------------------------
(a) Indemnity by the Seller. Without limiting any other rights
-----------------------
which K2F may have hereunder or under applicable law, the Seller hereby
agrees to indemnify K2F and any permitted assigns and their respective
officers, directors and employees (collectively, "Indemnified Parties")
from and against any and all damages, losses, claims, liabilities, costs
and expenses, including, without limitation, reasonable attorneys' fees
(which such attorneys may be employees of the Indemnified Parties) and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them in any
action or proceeding between the Seller and any of the Indemnified Parties
or between any of the Indemnified Parties and any third party or otherwise,
arising out of or as a result of this Agreement or the ownership, either
directly or indirectly, by K2F of the Transferred Interest excluding,
however, (i) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of an Indemnified Party or
(ii) recourse (except as otherwise specifically provided in this Agreement)
for uncollectible Receivables. Without limiting the generality of the
foregoing, the Seller shall indemnify each Indemnified Party for
Indemnified Amounts relating to or resulting from:
-3-
<PAGE>
(i) reliance on any representation or warranty made by the
Seller (or any officers of the Seller) under or in connection with
this Agreement, any Investor Report or any other information or report
delivered by the Seller pursuant hereto, which shall have been false
or incorrect in any material respect when made or deemed made;
(ii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Receivable or the related
Contract, or the nonconformity of any Receivable or the related
Contract with any such applicable law, rule or regulation;
(iii) the failure to vest and maintain vested in K2F title to
the Transferred Interest and the Receivables included therein free and
clear of any Adverse Claim;
(iv) the failure to file, or any delay in filing, financing
statements, continuation statements, or other similar instruments or
documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivable included in the
Transferred Interest;
(v) any dispute, claim, offset or defense (other than discharge
in bankruptcy) of the Obligor to the payment of any Receivable
included in the Transferred Interest (including, without limitation, a
defense based on such Receivable or the related Contract not being
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 merchandise or services related to such Receivable or
the furnishing or failure to furnish such merchandise or services;
(vi) any failure of the Seller to perform its duties or
obligations in accordance with the provisions of Section 7 hereof; or
(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable;
(b) Indemnity for Taxes, Reserves and Expenses. (i) If
------------------------------------------
after the date hereof, the adoption of any Law or bank regulatory
guideline or any amendment or change in the interpretation of any
existing or future Law or bank regulatory guideline by any Official
Body charged with the administration, interpretation or application
thereof, or the compliance with any directive of any Official Body (in
the case of any bank regulatory guideline, whether or not having the
force of Law):
(A) shall subject any Indemnified Party to any tax, duty or
other charge (other than Excluded Taxes) with respect to this
Agreement, the Transferred Interest, the Receivables or payments of
amounts due hereunder, or shall change the basis of taxation of
payments to any Indemnified Party of amounts payable in respect of
this Agreement, the Transferred Interest, the Receivables or payments
of amounts due hereunder or otherwise in respect of this Agreement,
the Transferred Interest or the Receivables (except for changes in the
rate of general corporate, franchise, net income or other income tax
imposed on such Indemnified Party by the jurisdiction in which such
Indemnified Party's principal executive office is located);
(B) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System) against assets of, deposits with or for the account
of, or credit extended by, any Indemnified Party or shall impose on
any Indemnified Party or on the United States market for certificates
of deposit or the London interbank market any other condition
affecting this Agreement, the Transferred Interest, the Receivables or
payments of amounts due hereunder or otherwise in respect of this
Agreement, the Transferred Interest or the Receivables; or
(C) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and
expenses, and expenses of litigation or preparation therefor in
contesting any of the foregoing) with respect to this Agreement, the
Transferred Interest, the Receivables or payments of amounts due
hereunder or
-4-
<PAGE>
otherwise in respect of this Agreement, the Transferred Interests or
the Receivables, and the result of any of the foregoing is to increase
the cost to such Indemnified Party with respect to this Agreement, the
Transferred Interest, the Receivables, the obligations hereunder or
the funding of any purchases hereunder, by an amount deemed by such
Indemnified Party to be material, then, within ten (10) days after
demand by K2F, the Seller shall pay to K2F such additional amount or
amounts as will compensate such Indemnified Party for such increased
cost or reduction.
(ii) If any Indemnified Party shall have determined that
after the date hereof, the adoption of any applicable Law or bank
regulatory guideline regarding capital adequacy, or any change
therein, or any change in the interpretation thereof by any Official
Body, or any directive regarding capital adequacy (in the case of any
bank regulatory guideline, whether or not having the force of law) of
any such Official Body, has or would have the effect of reducing the
rate of return on capital of such Indemnified Party (or its parent) as
a consequence of such Indemnified Party's obligations hereunder or
with respect hereto to a level below that which such Indemnified Party
(or its parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Indemnified
Party to be material, then from time to time, within ten (10) days
after demand by K2F, the Seller shall pay to K2F such additional
amount or amounts as will compensate such Indemnified Party (or its
parent) for such reduction.
(iii) K2F will promptly notify the Seller of any event
of which it has knowledge, occurring after the date hereof, which will
entitle an Indemnified Party to compensation pursuant to this Section.
A notice by K2F claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In determining
such amount, K2F may use any reasonable averaging and attributing
methods.
(c) Other Costs, Expenses and Related Matters. (i) The
-----------------------------------------
Seller agrees, upon receipt of a written invoice, to pay or cause to
be paid, and to save K2F harmless against liability for the payment
of, all reasonable out-of-pocket expenses (including, without
limitation, attorneys', accountants' and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or
employees of K2F) incurred by or on behalf of K2F (A) in connection
with the negotiation, execution, delivery and preparation of this
Agreement and any documents or instruments delivered pursuant hereto
and the transactions contemplated hereby (including, without
limitation, the perfection or protection of the Transferred Interest)
and (B) from time to time (1) relating to any amendments, waivers or
consents under this Agreement, (2) arising in connection with K2F's or
its agent's enforcement or preservation of rights (including, without
limitation, the perfection and protection of the Transferred Interest
under this Agreement), or (3) arising in connection with any audit,
dispute, disagreement, litigation or preparation for litigation
involving this Agreement, excluding any dispute, audit, disagreement,
litigation or preparation for litigation between K2F on the one hand
and the Collateral Agent or the holders of the Commercial Paper on the
other (all of such amounts, collectively, "Transaction Costs").
-----------------
(ii) Seller shall pay K2F on demand an Early Collection Fee
due on account of the reduction of a Tranche on a day prior to the
last day of its Tranche Period.
(d) Reconveyance Under Certain Circumstances. Seller agrees
----------------------------------------
to accept the reconveyance from K2F of the Transferred Interest if K2F
notifies Seller of a material breach of any representation or warranty
made or deemed made pursuant to Section 6 of this Agreement and Seller
shall fail to cure such breach within 15 days (or, in the case of the
representations and warranties in Sections 6(d) and 6(j), 3 days) of
such notice. The reconveyance price shall be paid by the Seller to
K2F in immediately available funds on such 15th day (or 3rd day, if
applicable) in an amount equal to the purchase price originally paid
by K2F to Seller for the Transferred Interest being reconveyed.
15. No Bankruptcy Petition Against Purchaser. The Seller hereby
----------------------------------------
covenants and agrees (which covenant and agreement shall, pursuant to
the terms of this Agreement, be binding upon their successors and
assigns) that it shall not institute against, or join any other Person
in instituting against, K2F any bankruptcy, reorganization,
arrangement, insolvency, or liquidation proceeding, or other
proceeding under any federal, state or foreign bankruptcy or
-5-
<PAGE>
similar law, for one year and a day after payment in full of the
Aggregate Unpaids and Servicing Fees under the Transfer and
Administration Agreement.
16. Amendments. This Agreement shall not be amended unless such
----------
amendment is in writing and agreed to by each of the parties hereto."
17. Facility Fee. The Seller hereby agrees to pay to K2F, on the
------------
last business day of each calendar month commencing with March 31,
1997, a Facility Fee to K2F in an amount equal to 35 basis points per
annum on the average Net Investment during such calendar month.
SECTION 4. AMENDMENTS TO THE K-2 RECEIVABLES PURCHASE AGREEMENT.
------------------------------------------------------
The K-2 Receivables Purchase Agreement is hereby amended as follows:
(a) The second line of the K-2 Receivables Purchase Agreement is
amended by deleting "(`K-2')" and replacing it with "(`K-2' or `Seller')".
(b) The following new definition shall be added to Section 1 of the
K-2 Receivables Purchase Agreement:
"`K-2 Subordinated Note' shall mean the subordinated note, dated
---------------------
March 27, 1997, from K2F payable to K-2, as the same may be
amended, modified or supplemented from time to time."
(c) Section 3(a) of the K-2 Receivables Purchase Agreement shall be
amended by adding the following at the end thereof:
"If, on any day, the amount of cash available to pay for a
purchase of the Transferred Interest to be made on such day is
less than the purchase price owing therefor, then K2F shall, with
notice to the Seller, pay such remaining part of the purchase
price by borrowing a revolving loan (each a "Seller Loan") under
the K-2 Subordinated Note, and the Seller shall have irrevocably
agreed to advance, and shall be deemed to have advanced, a Seller
Loan in the amount so specified by K2F, provided, however, that
-------- -------
no such Seller Loan shall be made to K2F to the extent that,
after giving effect thereto, K2F's net worth (calculated (i)
after giving effect to all such purchases and Seller Loans to be
made on such date and (ii) without giving effect to any
Receivables in any Transferred Interest that are not included in
the Net Receivables Balance at such time) would be less than 8%
of the aggregate outstanding balance of all Receivables at such
time. The Seller Loans shall be subordinated to the prior right
and payment in full of the Aggregate Unpaids and any other
obligations of K2F arising under the Transfer and Administration
Agreement, as further set forth in the K-2 Subordinated Note.
The Seller Loans advanced by the Seller shall be evidenced by,
and payable in accordance with the terms and provisions of the
K-2 Subordinated Note."
(d) Section 3 of the K-2 Receivables Purchase Agreement shall be
amended by adding the following new subsection at the end thereof:
"(d) If, after giving effect to all allocations of cash and
Seller Loans provided for in Section 3(a), the purchase price
payable by K2F to the Seller on any Business Day is not paid in
full as a result of the limitation on the amount of the K-2
Subordinated Note, then a Termination Date shall be deemed to
have occurred hereunder and under the Transfer and Administration
Agreement."
(e) The following is added as a new section to the K-2 Receivables
Purchase Agreement:
"18. Notices.
--------
(a) Except as provided below, all communications and
notices provided for hereunder shall be in writing (including bank
wire, telex, telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice
to such party. Each such notice or other communication shall
-6-
<PAGE>
be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and
confirmation is received, (ii) if given by mail 3 Business Days
following such posting, or (iii) if given by any other means, when
received at the address specified in this Section. The Seller agrees
to deliver promptly to K2F a written confirmation of each telecopied
notice signed by an authorized officer of Seller. However, the absence
of such confirmation shall not affect the validity of such notice. If
the written confirmation differs in any material respect from the
action taken by K2F, the records of K2F shall govern absent manifest
error.
If to K2F:
K2 Funding, Inc.
4900 South Eastern Avenue, Suite 200
Los Angeles, CA 90040
Attention: Chief Financial Officer
Telephone: (213) 890-5830
Telecopy: (213) 724-0470
Payment Information:
Bank of America
ABA #: 121000358
Account #: 12333-24234
Reference: K2 Funding
(with a copy to Controller)
If to the Seller:
K-2 Corporation
19215 Vashon Highway SW
Vashon, WA 98070-5236
Attention: Controller
Telephone: (206) 463-3631
Telecopy: (206) 463-2861
Payment Information:
Bank of America NorthWest
ABA #: 125000024
Account #: 1235704
Reference: K-2"
SECTION 5. AMENDMENTS TO THE SHAKESPEARE RECEIVABLES PURCHASE
--------------------------------------------------
AGREEMENT. The Shakespeare Receivables Purchase Agreement is hereby amended as
- ---------
follows.
(a) The third line of the Shakespeare Receivables Purchase Agreement
is amended by deleting "(`Shakespeare')" and replacing it with "(`Shakespeare'
or `Seller')".
(b) The following new definition shall be added to Section 1 of the
Shakespeare Receivables Purchase Agreement:
"`Shakespeare Subordinated Note' shall mean the subordinated
-----------------------------
note, dated March 27, 1997, from K2F payable to Shakespeare, as
the same may be amended, modified or supplemented from time to
time."
(c) Section 3(a) of the Shakespeare Receivables Purchase Agreement
shall be amended by adding the following at the end thereof:
"If, on any day, the amount of cash available to pay for a
purchase of the Transferred Interest to be made on such day is
less than the purchase price owing therefor, then K2F shall, with
notice to the Seller, pay such remaining part of the purchase
price by borrowing a revolving loan (each a "Seller Loan") under
the Shakespeare Subordinated
-7-
<PAGE>
Note, and the Seller shall have irrevocably agreed to advance,
and shall be deemed to have advanced, a Seller Loan in the amount
so specified by K2F, provided, however, that no such Seller Loan
-------- -------
shall be made to K2F to the extent that, after giving effect
thereto, K2F's net worth (calculated (i) after giving effect to
all such purchases and Seller Loans to be made on such date and
(ii) without giving effect to any Receivables in any Transferred
Interest that are not included in the Net Receivables Balance at
such time) would be less than 8% of the aggregate outstanding
balance of all Receivables at such time. The Seller Loans shall
be subordinated to the prior right and payment in full of the
Aggregate Unpaids and any other obligations of K2F arising under
the Transfer and Administration Agreement, as further set forth
in the Shakespeare Subordinated Note. The Seller Loans advanced
by the Seller shall be evidenced by, and payable in accordance
with the terms and provisions of the Shakespeare Subordinated
Note."
(d) Section 3 of the Shakespeare Receivables Purchase Agreement shall
be amended by adding the following new subsection at the end thereof:
"(d) If, after giving effect to all allocations of cash and
Seller Loans provided for in Section 3(a), the purchase price
payable by K2F to the Seller on any Business Day is not paid in
full as a result of the limitation on the amount of the
Shakespeare Subordinated Note, then a Termination Date shall be
deemed to have occurred hereunder and under the Transfer and
Administration Agreement."
(e) The following is added as a new section to the Shakespeare
Receivables Purchase Agreement:
"18. Notices.
--------
(a) Except as provided below, all communications and
notices provided for hereunder shall be in writing (including bank
wire, telex, telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice
to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section and confirmation is
received, (ii) if given by mail 3 Business Days following such
posting, or (iii) if given by any other means, when received at the
address specified in this Section. The Seller agrees to deliver
promptly to K2F a written confirmation of each telecopied notice
signed by an authorized officer of Seller. However, the absence of
such confirmation shall not affect the validity of such notice. If the
written confirmation differs in any material respect from the action
taken by K2F, the records of K2F shall govern absent manifest error.
If to K2F:
K2 Funding, Inc.
4900 South Eastern Avenue, Suite 200
Los Angeles, CA 90040
Attention: Chief Financial Officer
Telephone: (213) 890-5830
Telecopy: (213) 724-0470
Payment Information:
Bank of America
ABA #: 121000358
Account #: 12333-24234
Reference: K2 Funding
(with a copy to Controller)
-8-
<PAGE>
If to the Seller:
Shakespeare Company
4900 South Eastern Avenue, Suite 200
Los Angeles, CA 90040
Attention: Chief Financial Officer
Telephone: (213) 890-5832
Telecopy: (213) 724-0470
Payment Information:
Bank of America NorthWest
ABA #: 121000358
Account #: 12334-53576
Reference: Shakespeare"
SECTION 6. AMENDMENTS TO TRANSFER AND ADMINISTRATION AGREEMENT
-----------------------------------------------------
The Transfer and Administration Agreement is hereby amended as follows:
(a) The definition of "Eligible Receivable" in Section 1.1 of the
Transfer and Administration Agreement is amended by deleting the phrase
"provided, further, Receivables backed by the Letter of Credit Banks up to the
Letter of Credit Bank Concentration Factor may be included as Eligible
Receivables;" in the sixth line of subsection (ii) thereof.
(b) The definition of "Letter of Credit Bank Concentration Factor" in
Section 1.1 of the Transfer and Administration Agreement is deleted in its
entirety.
(c) Section 2.14 of the Transfer and Administration Agreement shall
be deleted in its entirety.
(d) Section 5.1 of the Transfer and Administration Agreement shall be
amended by adding the following at the end thereof:
"(l) Separateness Covenants. The Transferor shall do all things
----------------------
necessary to maintain its existence and keep its operations separate
and apart from the Sellers and the Master Servicer, including, without
limitation:
(A) practicing and adhering to corporate formalities, such
as maintaining appropriate books and records;
(B) refraining from (1) guaranteeing or otherwise becoming
liable for any obligations of the Sellers or the Master Servicer,
(2) having obligations guaranteed by the Sellers or the Master
Servicer, and (3) holding itself out as responsible for debts of
the Sellers the Master Servicer or for decisions or actions with
respect to the affairs of the Sellers or the Master Servicer;
(C) maintaining all of its deposit and other bank accounts
and all of its assets separate from those of the Sellers and the
Master Servicer;
(D) maintaining all of its financial records separate and
apart from those of the Sellers and the Master Servicer;
(E) reimbursing the Sellers or the Master Servicer, as the
case may be, out of the Transferor's own funds for any services
provided to the Transferor by employees, officers, consultants,
and agents of the Sellers or the Master Servicer, as the case may
be;
(F) maintaining office space separate and apart from that of
the Sellers and the Master Servicer or allocating fairly and
reasonably any overhead for shared office space;
-9-
<PAGE>
(G) maintaining a telephone number separate from the
Sellers' or the Master Servicer's telephone number that will not
be answered in the either of the Sellers' or the Master
Servicer's name;
(H) accounting for and managing all of its liabilities
separately from the Sellers and the Master Servicer, including,
without limitation, payment directly by the Transferor of all
payroll, accounting and other administrative expenses and taxes;
(I) allocating, on an arm's-length basis, all corporate
operating services, leases and expenses shared between the
Transferor, the Sellers and the Master Servicer including,
without limitation, those associated with the services of shared
consultants and agents and shared computer equipment and
software;
(J) refraining from filing or otherwise initiating or
supporting the filing of a motion in any bankruptcy or other
insolvency proceeding involving the Sellers or the Master
Servicer to substantively consolidate the assets and liabilities
of the Sellers or the Master Servicer with the assets and
liabilities of the Sellers or the Master Servicer;
(K) maintaining adequate capitalization in light of its
business and purpose;
(L) refraining from commingling assets with those of the
Sellers and the Master Servicer;
(M) refraining from acquiring obligations or securities of
the Sellers or the Master Servicer;
(N) using separate stationery, invoices, and checks from the
Sellers and the Master Servicer; and
(O) correcting any known misunderstanding regarding the
separate identity of the Sellers and the Master Servicer.
(m) Amendment of Subordinated Notes. The Transferor shall not
-------------------------------
amend either the K-2 Subordinated Note or the Shakespeare Subordinated
Note without the prior written consent of the Company."
(e) Section 5.1(a)(i) of the Transfer and Administration Agreement
shall be amended by deleting such Section in its entirety and adding in its
place the following:
"(i) Annual Reporting. Within 105 days after the close of each
----------------
of its fiscal years, financial statements, prepared in accordance
with generally accepted accounting principles, for itself,
including a balance sheet as of the end of such period, and
related statements of operations, shareholder's equity and cash
flows.
(f) Section 5.1(a)(ii) of the Transfer and Administration Agreement
shall be amended by deleting "and its Subsidiaries" from the second line thereof
and deleting "consolidated and consolidating" in each place where it appears in
the third and fourth lines thereof.
(g) Section 5.1(b) of the Transfer and Administration Agreement shall
be amended by deleting the first sentence thereof and replacing it in its
entirety as follows:
"The Transferor's business shall be limited to (i) purchasing
Transferred Interests under the Receivables Purchase Agreements, (ii)
selling Receivables, Related Securities and Collections under this
Agreement and (iii) all activities incidental thereto".
(h) Section 5.2 of the Transfer and Administration Agreement shall be
amended by adding the following at the end thereof:
"(h) No Amendments. The Transferor will not amend the
-------------
Receivables Purchase Agreements, its by-laws or its articles of
incorporation.
-10-
<PAGE>
(i) No Ownership of Stock. The Transferor will not own or
---------------------
control, directly or indirectly, any outstanding stock of any other
Person.
(j) No Indebtedness. Except as provided for in the Shakespeare
---------------
Subordinated Note, as defined in the Shakespeare Receivables Purchase
Agreement, and the K-2 Subordinated Note, as defined in the K2
Receivables Purchase Agreement, the Transferor will not create or
permit to exist any Indebtedness."
(i) The following are added as new sections under Article V of the
Transfer and Administration Agreement:
"SECTION 5.4. Affirmative Covenants of Master Servicer. At all
----------------------------------------
times from the date hereof to the later to occur of (i) the
Termination Date or (ii) the date on which the Company's Transferred
Interest shall be equal to zero, unless the Company shall otherwise
consent in writing:
(a) Financial Reporting. The Master Servicer will maintain,
-------------------
for itself and each Subsidiary, a system of accounting established and
administered in accordance with generally accepted accounting
principles, and furnish to the Administrative Agent:
(i) Annual Reporting. Within 105 days after the close of
----------------
each of its fiscal years, audited financial statements (except that
the financial statements of the Transferor need not be audited),
on a consolidated and consolidating basis (consolidating statements
need not be audited by such accountants) for itself and its
Subsidiaries, including balance sheets as of the end of such period,
related statements of operations, shareholder's equity and cash flows,
accompanied by an unqualified audit report certified by independent
certified public accountants, acceptable to the Administrative Agent,
prepared in accordance with generally accepted accounting principles
and any management letter prepared by said accountants and by a
certificate of said accountants that, in the course of the foregoing,
they have obtained no knowledge of any Termination Event or Potential
Termination Event under Section 5.3, or if, in the opinion of such
accountants, any Termination Event or Potential Termination Event
shall exist, stating the nature and status thereof.
(ii) Quarterly Reporting. Within 50 days after the close of
-------------------
the first three quarterly periods of each of its fiscal years, for
itself and its Subsidiaries, consolidated and consolidating unaudited
balance sheets as at the close of each such period and consolidated
and consolidating related statements of operations, shareholder's
equity and cash flows for the period from the beginning of such fiscal
year to the end of such quarter, all certified by its chief financial
officer.
(iii) Compliance Certificate. Together with the financial
----------------------
statements required hereunder, a compliance certificate signed by its
chief financial officer stating that no Termination Event or Potential
Termination Event exists, or if any Termination Event or Potential
Termination Event exists, stating the nature and status thereof and
showing the computation of, and showing compliance with, each of the
financial ratios and restrictions set forth in Section 5.3.
(iv) Shareholders Statements and Reports. Promptly upon the
-----------------------------------
furnishing thereof to the shareholders of the Master Servicer, copies
of all financial statements, reports and proxy statements so
furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof,
--------------
copies of all registration statements and annual, quarterly, monthly
or other regular reports which the Master Servicer or any Subsidiary
files with the Securities and Exchange Commission.
(vi) Notice of Termination Events or Potential Termination
-----------------------------------------------------
Events. As soon as possible and in any event within two (2) days
------
after the occurrence of each Termination Event or each Potential
Termination Event, a statement of the chief financial officer or chief
accounting officer of the Master Servicer setting forth details of
such Termination Event
-11-
<PAGE>
or Potential Termination Event and the action which the Master
Servicer proposes to take with respect thereto
.
(vii) Other Information. Such other information (including
-----------------
non-financial information) as the Administrative Agent may from time
to time reasonably request.
(b) Good Standing. The Master Servicer will, and will cause
-------------
each of its Subsidiaries to, do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(c) Compliance with Laws. The Master Servicer will, and will
--------------------
cause each of its Subsidiaries to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards
to which it may be subject.
(d) Furnishing of Information and Inspection of Records.
---------------------------------------------------
The Master Servicer will furnish to the Company from time to time such
information with respect to the Receivables as the Company may
reasonably request, including, without limitation, listings
identifying the Obligor and the Outstanding Balance for each
Receivable. The Master Servicer will at any time and from time to
time during regular business hours, upon reasonable advance notice to
the Master Servicer, permit the Company, or its agents or
representatives, (i) to examine and make copies of and abstracts from
all Records and (ii) to visit the offices and properties of the Master
Servicer for the purpose of examining such Records, and to discuss
matters relating to Receivables or the Master Servicer's performance
hereunder with any of the officers, directors, employees or
independent public accountants of the Master Servicer having knowledge
of such matters.
(e) Keeping of Records and Books of Account. The Master
---------------------------------------
Servicer will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents, books,
records and other information reasonably necessary or advisable for
the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing
Receivable). The Master Servicer will give the Company notice of any
material change in the administrative and operating procedures
referred to in the previous sentence.
(f) Collections. All Obligors relating to K-2 Receivables
-----------
shall be instructed to cause all Collections to be deposited directly
to an Account. All Obligors relating to Shakespeare Receivables shall
be instructed to cause all Collections to be deposited to Shakespeare,
which shall remit such Collections immediately, but in any event with
forty-eight (48) hours of receipt, to an Account.
(g) Collections Received. The Master Servicer shall hold in
--------------------
trust, and deposit, immediately, but in any event not later than
forty-eight (48) hours of its receipt thereof, to an Account all
Collections received from time to time by the Master Servicer
(including without limitation all Collections deemed to have been
received by the Master Servicer under Section 2.9).
SECTION 5.5 Negative Covenants of Master Servicer. During the
-------------------------------------
term of this Agreement, unless the Company shall otherwise consent in
writing:
(a) No Extension or Amendment of Receivables. Except as
----------------------------------------
otherwise permitted in Section 6.2, the Master Servicer will not
extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Contract related
thereto.
(b) No Mergers, Etc. The Master Servicer will not (i)
---------------
consolidate or merge with or into any other Person, or (ii) sell,
lease or transfer all or substantially all of its assets to any other
person.
-12-
<PAGE>
(c) Change in Payment Instructions to Obligors. The Master
------------------------------------------
Servicer will not add or terminate any bank as an Account Bank or any
account as an Account to or from those listed in Exhibit C hereto or
make any change in its instructions to Obligors regarding payments to
be made to any Account, unless (i) such instructions are to deposit
such payments to another existing Account or (ii) the Administrative
Agent shall have received written notice of such addition, termination
or change at least 30 days prior thereto and the Administrative Agent
shall have received an Account Agreement executed by each new Account
Bank or an existing Account Bank with respect to each new Account, as
applicable.
(d) Deposits to Accounts. The Master Servicer will not
--------------------
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Account cash or cash proceeds other than Collections
of Receivables."
(j) Section 7.1(c) of the Transfer and Administration Agreement shall
be amended by replacing "or" before "Section 5.3" in the fifth line thereof with
a comma, and adding after "5.3" the following: ", Section 5.4(a)(vi), (b), (f)
and (g), or Section 5.5.".
(k) Section 7.1(l) of the Transfer and Administration Agreement shall
be amended by deleting "11%" and replacing it with "9%".
(l) The percentage "95%," as it appears in the definition of "Maximum
Percentage Facote" and Section 7.1 (k) of the Transfer and Administration
Agreement, shall be changed to 98%.
SECTION 7. CONDITIONS TO EFFECTIVENESS. This Amendment shall be
---------------------------
effective from and after the date (the "Effective Date") which is the later of
March 27, 1997 and the date upon which all of the following conditions precedent
have been satisfied:
(a) Each party hereto shall have executed this Amendment and received
counterparts of this Amendment executed by each other party hereto;
(b) Each of K-2, Shakespeare, K2 Inc. and K2F shall have received all
consents and approvals (including, without limitation, the First Amendment to
the Credit Agreement, dated as of May 21, 1996, among K2 Inc., certain financial
institutions (the "Banks") and Bank of America National Trust and Savings
Association, as agent for the Banks) necessary to effectuate the transactions
described hereunder without any violation or breach of any agreements,
instruments or documents to which it is a party, and copies of all such consents
and approvals shall have been given to the Administrative Agent;
(c) The Company and the Administrative Agent shall have received an
opinion of Gibson, Dunn & Crutcher LLP regarding (i) the enforceability of this
Amendment against K-2, K2 Inc., Shakespeare and K2F (the "Amendment Parties"),
(ii) the nature of the assignment in Section 2 herein and the sales from K-2 and
Shakespeare Company to K2F as true sales, (iii) general corporate matters
concerning each of the Amendment Parties, (iv) the transfer of the ownership
interests under the Transfer and Administration Agreement creating either a true
sale or a first priority security interest in the Receivables transferred and
(v) non-consolidation between each of (A) the Sellers and K2 Inc. and (B) K2F;
(d) K2F will have been created and capitalized to the satisfaction of
the Administrative Agent;
(e) All representations and warranties of the Amendment Parties as
set forth in the Receivables Purchase Agreements and the Transfer and
Administration Agreement, as applicable, shall be true and correct (other than
any such representations or warranties that relate specifically to an earlier
date), each of the Amendment Parties shall be in compliance with all its
respective obligations under the Receivables Purchase Agreements and the
Transfer and Administration Agreement, as applicable, no Termination Event shall
have occurred and be continuing and the Administrative Agent shall have received
the certificate of an Authorized Officer of each of the Amendment Parties to
such effect; and
(f) UCC-1 financing statements shall have been filed by (i) K2F
against each of the Sellers with respect to the Receivables Purchase Agreements
and (ii) Enterprise Funding against K2F with respect to the Transfer and
Administrative Agreement.
-13-
<PAGE>
SECTION 8. REPRESENTATIONS AND WARRANTIES. Each of the Amendment
------------------------------
Parties represents and warrants as follows:
(a) Authority. It has the requisite corporate power and authority to
---------
execute and deliver this Amendment and to perform its obligations hereunder and
under the Agreements (as modified hereby) to which it is a party. The
execution, delivery and performance by it of this Amendment and the performance
of the Agreements (as modified hereby) have been duly approved by all necessary
corporate action and no other corporate proceedings are necessary to consummate
such transactions.
(b) Enforceability. This Amendment has been duly executed and
--------------
delivered by it. This Amendment is its legal, valid and binding obligation
enforceable against it in accordance with its terms, and is in full force and
effect.
(c) Representations and Warranties. The representations and
------------------------------
warranties contained in the Agreements (other than any such representations or
warranties that, by their terms, are specifically made as of a date other than
the date hereof) are correct on and as of the date hereof as though made on and
as of the date hereof.
SECTION 9. REPLACEMENT OF CERTIFICATES.
---------------------------
(a) The Transfer Certificates, in the forms attached as Exhibit A to
the K-2 Receivables Purchase Agreement, Exhibit A to the Shakespeare Receivables
Purchase Agreement, and Exhibit F to the Transfer and Administration Agreement,
shall be replaced, respectively, in their entireties by the Transfer
Certificates attached hereto as Exhibits A, B and C.
(b) The Company Certificate, in the form attached as Exhibit L to the
Transfer and Administration Agreement, shall be replaced in its entirety by the
Company Certificate attached hereto as Exhibit D.
SECTION 10. SUBORDINATED NOTES.
-------------------
(a) The forms of the K-2 Subordinated Note and the Shakespeare
Subordinated Note, defined above in Sections 4(b) and 5(b), respectively, shall
be attached hereto as Exhibits E and F.
SECTION 11. EXTENSION OF FACILITY. Each of the Company, K2
---------------------
Inc., K2F and Nationsbank hereby consents to the extension, effective on May 20,
1997 (provided that the Annual Renewal Fee, as set forth in the fee letter, is
paid to the Administrative Agent prior to such date), of the date set forth in
clause (v) of the definition of "Termination Date" in Section 1.1 of the
Transfer and Administration Agreement from May 20, 1997 to May 20, 1998.
SECTION 12. REFERENCE TO AND EFFECT ON THE AGREEMENTS.
------------------------------------------
(a) Except as specifically amended and modified above, the Agreements
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment shall
not operate as waiver of any right, power or remedy under, or of any provision
of, the Agreements.
SECTION 13. 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 agreement. Delivery of an executed counterpart of a signature
page to this Amendment by facsimile shall be effective as delivery of a manually
executed counterpart of this Amendment.
SECTION 14. GOVERNING LAW. This Amendment shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York.
-14-
<PAGE>
[Signature Pages Follow]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
K-2 CORPORATION
By: _________________________________
Name:
Title:
SHAKESPEARE COMPANY
By: _________________________________
Name:
Title:
K2 INC.
By: _________________________________
Name:
Title:
K2 FUNDING, INC.
By: ___________________________________
Name:
Title:
ENTERPRISE FUNDING CORPORATION
By: ___________________________________
Name:
Title:
NATIONSBANK, N.A.
By: ___________________________________
Name:
Title:
-16-
<PAGE>
EXHIBIT 10.02
SECOND AMENDMENT TO
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
dated as of April 18, 1997, and is entered into by among K2 Inc., a Delaware
corporation ( the "Borrower" ), the financial institutions listed on the
signature pages hereto (the "Banks") , and Bank of America National Trust and
Savings Association, as the agent for the Banks (the "Agent") amends that
certain credit Agreement dated as of May 21, 1996 among the Borrower, the Banks
and the Agent, as amended by a First Amendment to Credit Agreement dated as of
March 10, 1997 (as so amended, the "Agreement").
RECITALS
--------
A. The Borrower has requested the Banks and the Agent to increase
the combined commitments from $75,000,000 to $100,000,000, and the Banks and
Agent are willing to do so on the terms and conditions set forth herein.
B. The Borrower, Banks and Agent desire to confirm the extension of
the Termination Date pursuant to section 2.15 of the Agreement to May 20, 2002.
C. Separately, Citicorp, U.S.A. assigned its Commitments to Union
Bank of California, N.A. prior to the date of this Second Amendment.
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 shall have the same meanings as in the
-----
agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. Amendments to Agreement.
------------------------
2.1 The Definition of "Termination Date" in section 1.1 of the
Agreement is amended by deleting "May 20, 2001" and inserting "May 20, 2002" in
lieu thereof.
- 1 -
<PAGE>
2.2 Schedule 2.1 to the Agreement is amended and restated in its
entirety in the form of schedule 2.1 hereto.
3. Representation and Warranties. The Borrower represents and warrants
-----------------------------
to Banks and Agent that, on and as of the date hereof, after giving effect to
this Second Amendment:
3.1 Authorization. The execution, delivery and performance of this
-------------
Second Amendment have been duly authorized by all necessary corporate action by
the Borrower and this Second Amendment has been duly executed and delivered by
the Borrower.
3.2 Binding Obligation. This Second Amendment is the legal, valid
------------------
and binding obligation of Borrower, enforceable against the Borrower 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.
3.3 No Legal Obstacle to Amendment. The execution, delivery and
------------------------------
performance of this Second Amendment will not (a) contravene the terms of the
Borrower's certificate of incorporation, by-laws or other organization document;
(b) conflict with or result in any breach or contravention of the provisions of
any contract to which the Borrower is a party, or the violation of any law,
judgment, decree or governmental order, rule or regulation applicable to
Borrower, or result in the creation under any agreement or instrument of any
security interest, lien, charge, or encumbrance upon any of the assets of the
Borrower. No approval or authorization of any governmental authority is
required to permit the execution, delivery or performance by the Borrower of
this Second Amendment, or the transactions contemplated hereby.
3.4 Incorporation of Certain Representations. The representations
----------------------------------------
and warranties of the Borrower set forth in Section 7 of the 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.
3.5 Default. No Default or Event of Default under the Agreement
-------
has occurred and is continuing.
4. Conditions, Effectiveness. The effectiveness of this Second Amendment
-------------------------
shall be subject to the compliance by the Borrower with its agreements herein
contained, and to the
- 2 -
<PAGE>
delivery of the following to the Agent in form and substance satisfactory to
the Agent:
4.1 Corporate Resolutions. A copy of a resolution or resolutions
---------------------
passed by the executive committee of the Board of Directors of the Borrower,
certified by the Secretary or an Assistant Secretary of the Borrower as being in
full force and effective on the effective date of this Second Amendment,
authorizing the amendments to the Agreement herein provided for and the
execution, delivery and performance of this Second Amendment and any note or
other instrument required hereunder.
4.2 Authorized Signatories. A certificate, signed by the Secretary
----------------------
or an Assistant Secretary of the Borrower dated the date of this Second
Amendment, as to the incumbency of the person or persons authorized to execute
and deliver this Second Amendment and any instrument or agreement required
hereunder on behalf of the Borrower.
4.3 New Committed Notes. Replacement Committed Notes reflecting the
-------------------
new Commitment of each Bank Substantially in the form of Exhibit G hereto.
4.4 Other Evidence. Such other evidence with respect to the
--------------
Borrower or any other person as the Agent or any Bank may reasonably request in
connection with this Second Amendment and the compliance with the conditions set
forth herein.
5. Miscellaneous.
--------------
5.1 Special Provisions Relating to Outstanding Offshore Rate Loans.
---------------------------------------------------------------
Under the increased Commitments becoming effective with this Second Amendment,
the Pro Rata Share of each Bank will be different than its Pro Rata Share Under
the Agreement before giving hereto. However, the Borrower has requested that
the Banks continue to hold the Offshore Rate Loans outstanding on the date
hereof in their current Pro Rata Share until such Offshore Rate Loans continued,
converted or repaid to avoid either break funding or increased interest costs.
Accordingly, from and after the date hereof, continuations and conversations of
such outstanding Offshore Rate Loans, Borrowings of new Committed Loans and
participations in Letters of Credit will be made ratably in accordance with
each Bank's new Pro Rata Share of the increased combined Commitments; provided,
--------
however, that until all such outstanding Offshore Rate Loans have been so
- -------
continued, converted or repaid payments of the commitment fee and distributions
of payments on account of such Offshore Rate Loans shall be in accordance with
each Bank's actual unused
- 3 -
<PAGE>
Commitment and its actual outstanding Offshore Rate Loans, respectively, not
in accordance with such new Pro Rata Share.
5.2 Effectiveness of Agreement. Except as hereby expressly amended
--------------------------
the Agreement and each other Loan Document shall each remain in full force and
effect, and are hereby ratified and confirmed in all respects on and as of the
date hereof.
5.3 Waivers. This Second Amendment is specific in time and in intent
-------
and does not constitute, nor should it be construed as, a waiver of any other
right, power or privilege under the Loan Documents, or under any agreement,
contract, indenture, document or instrument mentioned in the Documents; nor does
it preclude any exercise thereof or the exercise of any other right, power or
privilege, nor shall any future waiver of any right, power, privilege or default
hereunder, or under any agreement, contract, indenture, document or instrument
mentioned in the Loan Documents, constitute a waiver of any other default of the
same or of any other term or provision.
5.4 Counterparts. This Second 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. This Second Amendment shall
not become effective until the Borrower, the Banks and the Agent shall have
signed a copy hereof, whether the same or counterparts, and the same shall have
been delivered to the Agent.
5.5 Jurisdiction. This Second Amendment shall be governed by and
------------
construed under the laws of the State of California.
5.6 Committed Notes. Each Bank shall deliver its prior Committed
---------------
Note against receipt of this replacement Committed Note hereunder.
- 4 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered as of the date first written above.
K2 Inc.
By:
----------------------------
Title:
-------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:
----------------------------
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
and Issuing Bank
By:
---------------------------
Yvonne Dennis
Vice President
NATIONSBANK OF TEXAS, N.A.
By:
---------------------------
Title:
------------------------
WACHOVIA BANK
By:
---------------------------
Title:
------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
---------------------------
Title:
------------------------
- 5 -
<PAGE>
SCHEDULE 2.1
------------
COMMITMENTS
AND PRO RATA SHARES
Letter
of Credit Pro Rata
Bank Commitment Commitment Share
---- ---------- ---------- -----
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Bank of America
National Trust and
Savings Association $ 6,600,000 $ 33,000,000 33%
NationsBank of
Texas, N.A. 5,200,000 26,000,000 26
Wachovia Bank 4,600,000 23,000,000 23
Union Bank of
California, N.A. 3,600,000 18,000,000 18
============== ============ ===
TOTAL $20,000,000.00 $100,000,000 100%
</TABLE>
<PAGE>
SCHEDULE G
----------
FORM OF COMMITTED LOAN NOTE
---------------------------
$_____________ May ___, 1996
FOR VALUE RECEIVED, the undersigned K2 INC. (formerly named Anthony
Industries, Inc.), a Delaware corporation (the "Borrower"), hereby promises to
--------
pay to the order of ________________ (the "Bank") the principal sum of
----
_____________________ Dollars ($______________) or, if less, the aggregate
unpaid principal amount of all Committed Loans made by the Bank to the Borrower
pursuant to that certain Credit Agreement dated as of May 21, 1996 (as from time
to time amended, extended, restated, modified or supplemented, the "Credit
Agreement;" capitalized terms used herein shall have the meanings assigned to
them in the Credit Agreement), among the Borrower, the banks named therein (the
"Banks") and Bank of America National Trust and Savings Association, as Agent
(the "Agent"). The Borrower further promises to pay interest on the unpaid
principal amount of the Committed Loans evidenced hereby from time to time at
the rates, on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on which each
Committed Loan is made, the maturity date therefor and each payment of principal
with respect thereto on the schedules annexed hereto and made a part hereof, or
on continuations thereof which shall be attached hereto and made a part hereof;
provided, that any failure to endorse such information on such schedule or
continuation thereof shall not in any manner affect any obligation of the
Borrower under the Credit Agreement and this Promissory Note (the "Note").
----
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified. If
a prior committed note had been delivered to the Bank under the Credit
Agreement, this Note amends and restates and supersedes such Note, and any
Committed Loans evidenced by such prior committed note are deemed evidenced by
this Note.
- 1 -
<PAGE>
This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of California applicable to contracts made and to be
performed entirely within such State.
K2 INC. (formerly named Anthony
Industries, Inc.)
By: ___________________________
Title: ________________________
<PAGE>
Schedule A to Committed Loan Note
<TABLE>
<CAPTION>
(3)
(2) End of (4) (5)
(1) Amount Interest Principal Notation
Date of Loan Period Amount Made By
- ---------------- ------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
- ---------------- ------------- ------------- --------------- ------------
</TABLE>
(4056854.02)
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,559
<SECURITIES> 0
<RECEIVABLES> 120,532
<ALLOWANCES> (6,247)
<INVENTORY> 151,941
<CURRENT-ASSETS> 284,389
<PP&E> 162,845
<DEPRECIATION> 92,386
<TOTAL-ASSETS> 380,958
<CURRENT-LIABILITIES> 72,722
<BONDS> 0
0
0
<COMMON> 17,149
<OTHER-SE> 174,610
<TOTAL-LIABILITY-AND-EQUITY> 380,958
<SALES> 171,541
<TOTAL-REVENUES> 171,832
<CGS> 125,160
<TOTAL-COSTS> 125,160
<OTHER-EXPENSES> 35,121
<LOSS-PROVISION> 540
<INTEREST-EXPENSE> 2,519
<INCOME-PRETAX> 8,492
<INCOME-TAX> 2,630
<INCOME-CONTINUING> 5,862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,862
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
