GENMAR HOLDINGS INC, S-1, 1999-08-18

GENMAR HOLDINGS INC
S-1, 1999-08-18
SHIP & BOAT BUILDING & REPAIRING

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------------------

GENMAR HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 3732 41-1778106
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>

100 SOUTH FIFTH STREET
SUITE 2400
MINNEAPOLIS, MINNESOTA 55402
(612) 339-7900
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

MARY P. MCCONNELL, ESQ.
GENMAR HOLDINGS, INC.
100 SOUTH FIFTH STREET
SUITE 2400
MINNEAPOLIS, MINNESOTA 55402
(612) 339-7900

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

--------------------------

COPIES TO:

STEPHEN M. BESEN, ESQ. H. WATT GREGORY, III, ESQ.
WEIL, GOTSHAL & MANGES LLP GIROIR, GREGORY, HOLMES & HOOVER, PLC
767 FIFTH AVENUE 111 CENTER STREET, SUITE 1900
NEW YORK, NEW YORK 10153 LITTLE ROCK, ARKANSAS 72201
(212) 310-8000 (501) 372-3000

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

--------------------------

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ________________

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share............................................ $100,000,000.00 $27,800.00
</TABLE>

(1) Includes shares that the underwriters have the option to purchase from us
solely to cover over-allotments, if any. Estimated pursuant to Rule 457(o)
under the Securities Act of 1933, as amended, solely for the purpose of
computing the amount of the registration fee.

--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 18, 1999
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS

[LOGO]

COMMON STOCK

------------------

Genmar Holdings, Inc. is offering shares of its common stock. This is
our initial public offering and no public market currently exists for our
shares. We intend to apply to have our common stock listed on the Nasdaq
National Market under the symbol "GNMR." We estimate that the initial public
offering price will be between $ and $ per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE .

---------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public Offering Price................................................. $ $
Underwriting Discount................................................. $ $
Proceeds to Genmar.................................................... $ $
</TABLE>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Genmar has granted the underwriters a 30-day option to purchase up to an
additional shares of common stock at the public offering price less the
underwriting discount above, solely to cover over-allotments, if any. Stephens
Inc. expects to deliver the shares of common stock on , 1999.

STEPHENS INC. U.S. BANCORP PIPER JAFFRAY

The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 6
Special Note Regarding Forward-Looking
Statements................................... 12
Use of Proceeds................................ 13
Dividend Policy................................ 13
Capitalization................................. 14
Dilution....................................... 15
The Company.................................... 16
Selected Financial Data........................ 18
Unaudited Pro Forma Financial Data............. 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 22

<CAPTION>
PAGE
-----
<S> <C>
Business....................................... 33
Management..................................... 47
Certain Transactions........................... 55
Principal Stockholders......................... 57
Description of Capital Stock................... 59
Shares Eligible for Future Sale................ 62
Underwriting................................... 63
Legal Matters.................................. 65
Experts........................................ 65
Additional Information......................... 65
Index to Consolidated Financial Statements..... 66
</TABLE>

------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

------------------------

Until 1999, all dealers effecting transactions in the common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

------------------------

Unless otherwise indicated, all information in this prospectus:

- Reflects a -for-1 split of our common stock;

- Reflects the issuance of shares of common stock in exchange for
outstanding warrants;

- Assumes a price to public of $ per share;

- Assumes the filing of our amended and restated certificate of
incorporation, which, among other things, will authorize 200,000,000
shares of common stock; and

- Assumes no exercise of the underwriters' over-allotment option.

[ART WORK]
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS, WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. IN THIS PROSPECTUS, "GENMAR HOLDINGS,
INC.," "GENMAR," "WE," AND "OUR" REFER TO GENMAR HOLDINGS, INC., A DELAWARE
CORPORATION, AND ITS CONSOLIDATED SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE
REQUIRES.

GENMAR HOLDINGS, INC.

OVERVIEW

We are the second largest manufacturer of motorized recreational boats in
the world. We produce boats under the leading brand names of AQUASPORT, CARVER,
CRESTLINER, GLASTRON, LARSON, LOGIC, LUND, NOVA, RANGER, SCARAB, TROJAN and
WELLCRAFT. We sell our products through an established network of approximately
1,300 independent authorized dealers in all 50 states and approximately 30
foreign countries. We have recently introduced new manufacturing processes that
allow us to produce higher quality boats more efficiently and with substantially
fewer regulated air emissions. We believe these innovations have positioned us
to enter new markets and substantially increase our market share in the
recreational boating industry.

Since 1996, when we installed our current management team, we have focused
on improving our operations and profitability. Our management team has improved
our manufacturing efficiency, refined our current products and evaluated future
product offerings. We have also increased coordination among our business units
and incentivized our entire management team to accomplish key strategic goals.
As a result of these initiatives, our net revenues and operating profit have
increased to $704.7 million and $37.5 million, respectively, for the year ended
June 30, 1999 from $574.8 million and $13.5 million, respectively, for the
twelve months ended June 30, 1997, representing compound annual growth of 10.7%
and 66.7%, respectively.

OUR NEW TECHNOLOGIES

Over the past several years, we have been exploring new technologies to
improve the traditional boat manufacturing process. Recently, we have acquired
and developed new technologies to reduce manufacturing and warranty costs,
improve plant working conditions, enhance product quality and potentially
establish new standards for manufacturing in the recreational boat industry.
These technologies are:

- VEC-TM-. Virtual Engineered Composites-TM-, or VEC technology, is an
innovative closed-mold fiberglass manufacturing process that improves
production efficiency and substantially reduces regulated air emissions
relative to traditional processes. We believe the VEC technology
introduces a new level of automation and quality control to boat
manufacturing. Early in 1999, we began producing boats using our VEC
technology, and we plan to integrate VEC systems into most of our
fiberglass operations over the next two years, marketing these boats as
premium products.

- ROPLENE-TM- CONSTRUCTION. Roplene construction is a closed rotational mold
technology, proprietary to our Logic division, that uses advanced
recyclable polyethylene materials and produces minimal regulated air
emissions in the manufacturing process. This technology allows us to
produce highly durable boats, which we market as the World's Toughest
Boats-TM- to entry-level buyers at a lower cost than comparable fiberglass
boats. This technology was awarded the New Product Award (Small Company
Category) in 1998 by the National Society of Professional Engineers.
<PAGE>
INDUSTRY

Total U.S. retail sales of new motorized recreational boats were
approximately $7.5 billion in 1998, an increase from $4.1 billion in 1992. This
increase in sales has been fueled by the overall strength of the U.S. economy,
rapid growth in the number and wealth of consumers in the 35 to 54 years age
range, our target age group, and by demand for boats from the estimated 35
million adult anglers in the United States. Despite recent growth in the
recreational boat industry, we believe we are uniquely positioned to take
advantage of the following challenges that our industry faces:

- Labor-intensive manufacturing processes which remain largely unautomated;

- Increasingly strict environmental standards derived from governmental
regulations and customer sensitivities;

- A lack of focus on comprehensive customer service and support by many
dealers and manufacturers; and

- A high degree of fragmentation and competition among more than 3,700
domestic recreational boat manufacturers.

STRATEGY

OUR OPERATING STRATEGY emphasizes our proprietary technologies while:

- Delivering a superior quality product;

- Lowering unit costs through increased automation in our plants;

- Leveraging our buying power through economies of scale;

- Exceeding current environmental quality standards for manufacturers in our
industry; and

- Exploring opportunities to license or apply our technologies in other
marine and non-marine industries, such as the construction industry and
automotive aftermarket.

OUR MARKETING STRATEGY seeks to increase market share by:

- Leveraging our brand names through innovative marketing initiatives with
strategic partners;

- Expanding our international presence by continuing to build dedicated
sales, marketing and distribution systems; and

- Strengthening our dealer organization by expanding our network and
providing superior customer service and support.

From time to time we also consider and make strategic acquisitions in order
to complement our existing product lines, expand our geographic presence and
strengthen our technological capabilities.

2
<PAGE>
OPERATING RESULTS WITHOUT HATTERAS

Hatteras is a luxury yacht construction company that we have historically
operated as a separate division. As we have refined the focus of our business,
we have determined that Hatteras does not fit strategically with our other
operations. Accordingly, we will spin off Hatteras to our current stockholders
immediately prior to the completion of this offering. The results of our
recreational boat segment, representing our operations without Hatteras, are
summarized below.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
----------------------------------
1997 1998 1999
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net revenues............................................. $ 490,313 $ 505,910 $ 614,406
Gross profit............................................. 81,754 98,356 121,872
Operating profit......................................... 16,930 27,601 35,948

-------------------

Backlog at July 31....................................... $ 111,400 $ 118,800 $ 228,400
</TABLE>

------------------------

Our principal executive offices are located at 100 South Fifth Street, Suite
2400, Minneapolis, Minnesota 55402. Our telephone number at that location is
(612) 339-7900 and our web site address is WWW.GENMAR.COM. WE DO NOT INTEND FOR
INFORMATION CONTAINED ON OUR WEB SITE TO CONSTITUTE PART OF THIS PROSPECTUS.

3
<PAGE>
THE OFFERING

The number of shares of common stock outstanding after this offering
includes the issuance of shares in exchange for outstanding warrants,
shares issued in connection with the acquisition of Pyramid Operating Systems,
Inc. and shares issued under employee stock awards, and excludes shares
issuable upon the exercise of stock options to be granted concurrently with this
offering.

<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock outstanding after this shares
offering...................................
Use of proceeds.............................. We intend to use the net proceeds from this
offering to repay outstanding indebtedness,
to build and equip a new manufacturing
facility and for general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol....... GNMR
</TABLE>

4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following summary historical and pro forma consolidated financial
information should be read in conjunction with our consolidated financial
statements and the notes thereto appearing elsewhere in this prospectus and the
sections of this prospectus captioned "Unaudited Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The balance sheet data as of June 30, 1999 and the statement of
operations data for the years ended June 30, 1998 and June 30, 1999 have been
derived from our audited consolidated financial statements included elsewhere in
this registration statement. The unaudited statement of operations data for the
twelve months ended June 30, 1997 were derived from our unaudited consolidated
financial statements which are not included in this prospectus. In our opinion,
all adjustments, consisting of only normal recurring adjustments, necessary for
a fair presentation of the statement of operations data for the twelve months
ended June 30, 1997 have been reflected therein. The summary pro forma
consolidated financial information as of and for the year ended June 30, 1999
were derived from our unaudited pro forma financial data which are included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
FOR THE TWELVE FOR THE YEAR ENDED PRO FORMA FOR
MONTHS ENDED JUNE 30, THE YEAR ENDED
JUNE 30, 1997 -------------------- JUNE 30, 1999
(UNAUDITED) 1998 1999 (UNAUDITED)(A)
--------------- --------- --------- ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 574,802 $ 585,943 $ 704,656 $ 614,406
Gross profit.......................... 88,526 105,292 137,409 121,872
Operating profit...................... 13,467 23,598 37,468 35,948
Income (loss) before income taxes and
extraordinary item.................. (8,764) 4,592 21,445 25,930
Income tax benefit (provision)........ (635) (550) 19,500 19,500(b)
Net income (loss)..................... $ (9,399) $ 2,858 $ 40,945 $ 45,430
Basic and diluted earnings per
share............................... $ $
--------- ---------------
--------- ---------------
Basic and diluted weighted average
shares outstanding(c)...............
--------- ---------------
--------- ---------------
ADDITIONAL DATA:
EBITDA(d)............................. $ 21,488 $ 32,372 $ 46,419 $ 43,169
Gross profit margin................... 15.4% 18.0% 19.5% 19.8%
Operating profit margin............... 2.3% 4.0% 5.3% 5.9%
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------------------------
PRO FORMA AS
PRO FORMA ADJUSTED
HISTORICAL (UNAUDITED)(A) (UNAUDITED)
----------- --------------- ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................... $ 41,544 $ 28,972
Total assets...................................................................... 320,763 256,987
Long-term debt, net of current maturities......................................... 116,129 101,540
Stockholders' equity(b)(c)........................................................ 42,202 26,783
</TABLE>

- ----------------------------------
(a) Reflects the spin-off of Hatteras and reduced interest expense from our debt
refinancing and the repayment of $20.0 million of debt using spin-off
proceeds. When we determine the midpoint of the pricing range for this
offering, the pro forma amounts will also include the acquisition of
Pyramid, which owns the VEC technology, and reduced interest expense
associated with the repayment of debt using our net proceeds from this
offering. The pro forma statement of operations amounts do not reflect
non-recurring charges we will incur relating to the offering for awards
under our phantom stock plan and the issuance of shares to non-management
employees, and extraordinary charges related to the early retirement of our
debt. The pro forma balance sheet amounts do not reflect interest savings.

(b) During 1999, we recorded a reduction in our valuation allowance against our
deferred tax assets, resulting in an overall tax benefit of $19.5 million.
Tax expense assuming a statutory rate of 40% would have been $10.4 million
and pro forma net income would have been $15.5 million, or $ per share.

(c) Reflects the for 1 stock split. The pro forma amounts also reflect the
shares issued in this offering, the shares issued in exchange for
outstanding warrants, the shares issued to acquire Pyramid and the shares
issued to non-management employees.

(d) EBITDA represents operating income plus depreciation and goodwill
amortization expense. EBITDA data, which is not a measure of financial
performance under generally accepted accounting principles, should not be
construed as a substitute for operating income, net income or cash flows
from operations in analyzing our operating performance, financial position
and cash flows. We have included EBITDA data because we believe that this
data is commonly used by certain investors to evaluate a company's
performance. Not all companies calculate non-GAAP measures in the same
manner; accordingly, the EBITDA presentation herein may not be comparable to
similarly titled measures reported by other companies.

5
<PAGE>
RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS AND OTHER INFORMATION
DESCRIBED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE.
ADDITIONAL RISKS AND UNCERTAINTIES THAT WE DO NOT PRESENTLY KNOW ABOUT OR THAT
WE CURRENTLY BELIEVE ARE IMMATERIAL MAY ALSO ADVERSELY IMPACT OUR BUSINESS
OPERATIONS. NEGATIVE CONSEQUENCES ASSOCIATED WITH THE FOLLOWING RISKS WOULD
LIKELY CAUSE OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS TO
SUFFER. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND
YOU COULD LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.

THE MOTORIZED RECREATIONAL BOAT INDUSTRY IS CYCLICAL.

Our operations are highly dependent upon the health of the overall economy
and a number of cyclical economic factors relating to or affecting consumer
spending. Boats compete for consumers' disposable leisure time dollars with
other substantial discretionary purchases. Sales of our products are influenced
by local, national and international economic conditions, and are particularly
vulnerable to increases in interest rates, shortages or increases in the price
of fuel and the imposition of or increases in sales and excise taxes. During
times of economic downturn, consumer discretionary spending levels decrease.
This may result in disproportionately large declines in the sale of expensive
items, including motorized recreational boats. For example, following a general
economic recession and the imposition of a luxury tax on certain recreational
boats, annual boating sales of new motorized recreational boats declined from
their peak of $8.0 billion in 1988 to a low of $4.1 billion in 1992. Since that
time, sales have increased each year and rose to $7.5 billion in 1998. See
"Business--Industry Overview."

Additionally, rising or volatile interest rates or shrinking availability of
credit could have a negative impact on consumers' or dealers' ability or
willingness to obtain financing from lenders to purchase our products. This
could also adversely affect our ability to sell our products.

IF OUR NEW TECHNOLOGIES DO NOT YIELD COMMERCIALLY VIABLE PRODUCTS OR EFFECTIVELY
COMPETE WITH OTHER NEW TECHNOLOGIES, WE MAY NOT BE ABLE TO IMPLEMENT
SUCCESSFULLY OUR BUSINESS STRATEGY.

Our business strategy depends on, among other things, our successful
development and implementation of our VEC and Roplene technologies. We are
currently using these technologies in connection with the production of certain
boats. To date we have achieved desired performance criteria in extensive
laboratory and field tests for boats constructed with VEC technology. However,
the VEC technology and related processes will require further development and
modification to be applied successfully across our fiberglass product lines, and
we cannot be certain that boats built with the VEC technology will achieve broad
commercial acceptance in the marketplace.

The VEC technology represents a new approach to the manufacture of
fiberglass products, with potential application in both marine and non-marine
industries. We cannot assure you, however, that we will be able to expand its
potential applications. We have previously experimented with other closed-mold
technologies in our manufacturing processes, but have found them to be
unacceptable for commercial production of large parts. Other closed-mold
technologies could be further developed, however, and could outperform our VEC
technology in the marketplace, in which case our profitability could suffer. In
addition, we are currently manufacturing and selling boats constructed with
Roplene technology. We cannot, however, assure you that these boats will gain
widespread acceptance among dealers and consumers.

Our development of the VEC and Roplene technologies is subject to the risks
generally inherent in the development of new manufacturing technologies. These
risks include:

- Delays and unplanned expenditures in product development;

- Emergence of equivalent or superior competing technologies;

6
<PAGE>
- High unit costs for production runs; and

- Competition between new and existing product lines.

If either the products made from, or the manufacturing processes based upon,
the VEC or Roplene technology fail to meet our expectations, the implementation
of our business strategy could be materially and adversely affected. See
"Business--Technology."

WE RELY ON PROPRIETARY RIGHTS TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, THE
FAILURE OR LIMITATION OF WHICH COULD MATERIALLY HARM OUR BUSINESS.

Our success and ability to implement our business strategy is partially
dependent on our proprietary technology and processes. We rely primarily on a
combination of U.S. patents, trademarks, trade secrets, operating know-how and
license and confidentiality agreements with third parties to protect our
proprietary rights. See "Business--Patents and Trademarks." When legally
permissible and appropriate, we file applications to obtain patents and register
our trademarks and service marks in the United States and in foreign countries
where we currently sell our products or reasonably expect to sell our products
in the near future. We cannot assure you that any patents will issue as a result
of our pending or future patent applications, or that existing or future patents
will afford adequate protection against competitors. Our protective efforts may
not be sufficiently broad to exclude others from adopting and practicing our
technologies, or independently developing similar technologies. We cannot assure
you that any of our patents or trademarks will not be invalidated, or
circumvented or found to infringe the rights of others. In the event of
infringement, we may be required to modify our technology or processes, obtain
licenses or pay license fees. We may not be able to do so in a timely manner or
upon acceptable terms and conditions, which could have a material adverse effect
on our operations.

THE MOTORIZED RECREATIONAL BOAT INDUSTRY IS HIGHLY COMPETITIVE.

Competition within the motorized recreational boat industry is intense. We
face competition at the local, regional, national and international levels. Our
largest competitors and their principal lines include:

- Brunswick Corporation (Bayliner, Sea Ray and Boston Whaler); and

- Outboard Marine Corporation (Four Winns, Stratos and Lowe).

Brunswick may have greater financial and other resources than our company,
and both Brunswick and Outboard Marine are vertically integrated operations that
manufacture engines as well as boats. Although we believe our customers benefit
from being able to choose from a wide variety of engines, our vertically
integrated competitors may be better positioned than our company to allocate
costs and enhance the marketing of their products because they also manufacture
and sell engines along with their boats. We also compete directly with smaller
boat manufacturers and the used boat market and indirectly with other
recreational products and activities. Although we believe that our products are
well recognized in the market and that we can compete effectively, we cannot
assure you that we can continue to increase or maintain our current market share
or profit margins. See "Business-- Competition."

7
<PAGE>
WE RELY ON CERTAIN THIRD-PARTY ENGINE SUPPLIERS.

We purchase our engines from third parties. We also pre-rig certain boats
with specified engine controls so the dealer can install the appropriate engine.
By purchasing or pre-rigging engines from third parties, including Brunswick and
Outboard Marine, we are subject to the following risks:

- Delays in shipments;

- Work stoppages; and

- Termination of supply agreements.

The occurrence of any of these events or the loss of any of these suppliers
could adversely affect our business until alternative supply arrangements are
secured. Although we believe that engines of comparable quality and cost are
available from other suppliers if our engine supply is disrupted, we cannot
assure you that we will be able to obtain engines from other suppliers in
sufficient quantities to meet our near-term production schedules or on
substantially similar terms to our current engine purchase arrangements. In
addition, engines obtained from alternative sources may not meet customer
preferences. See "Business--Suppliers."

WE ARE VULNERABLE TO FLUCTUATIONS IN THE COST AND SUPPLY OF COMMODITY RAW
MATERIALS.

We purchase commodity raw materials, such as aluminum, fiberglass and resin,
from various suppliers. Although all of the commodity raw materials that we use
are available from numerous independent suppliers, commodity raw material prices
are subject to fluctuations in price. We do not engage in hedging activities,
although at times we enter into contracts which are subject to quarterly price
adjustments. We generally secure our commodity raw material requirements through
fixed-price supply agreements which run for one- to three-year periods. If the
prices of our raw materials increase, we may not be able to pass these increases
along to our customers. This would reduce our profits and could have a material
adverse effect on our results of operations. See "Business--Suppliers."

WE ARE SUBJECT TO PRODUCT LIABILITY AND WARRANTY CLAIMS.

We are exposed to potential product liability risks inherent in the
manufacturing, marketing and use of our boats. Product failures, flaws or
defects, or inadequate disclosure of product-related risks could result in
product failure or injury to, or death of, consumers. The occurrence of any of
these conditions or events could result in product liability claims or a recall
of, or safety alerts relating to, our products, any of which could have a
material adverse effect on our business, results of operations or financial
condition. Additionally, although we maintain product liability insurance that
we believe is sufficient to cover any claims relating to these conditions or
events, we cannot assure you that our insurance will be available or sufficient
to satisfy all claims that may be made against us or that we will be able to
continue to obtain insurance in the future at satisfactory rates, in adequate
amounts or at all. Future product liability claims, regardless of their ultimate
outcome, or future product recalls, could result in costly litigation and could
have a material adverse effect on our business, results of operations and
financial condition, and to our reputation and ability to attract and retain
customers.

We are also subject to warranty risks. All of our boats are subject to
standard limited warranties. We do not maintain insurance to cover warranty
claims, and we cannot assure you that future warranty claims and related costs
would not have a material adverse effect on our business, results of operations
or financial condition. See "Business--Legal Proceedings." We intend to provide
a limited lifetime warranty for boats constructed with our VEC and Roplene
technologies. If these technologies do not prove to be as successful as we
expect, these extended warranties could result in significant increases in
warranty costs with potentially negative effects on our business, results of
operations or financial condition.

8
<PAGE>
OUR OPERATIONS ARE SUBJECT TO NUMEROUS LOCAL, STATE AND FEDERAL REGULATIONS
RELATING TO SAFETY AND THE ENVIRONMENT.

Our operations are subject to regulation, supervision and licensing under
various local, state and federal statutes, ordinances and regulations. We are
required to maintain various permits, relating principally to air emissions,
which are subject to renewal, modification and, in some instances, revocation.
While we believe that we are in substantial compliance with environmental laws
and regulations and permit requirements applicable to our business, our failure
to satisfy those regulations and requirements could have a material adverse
effect on our business, results of operations or financial condition.
Furthermore, limitations on air emissions imposed by our current permits may
restrict our ability to expand production at certain of our existing facilities.
See "Business--Regulation and Environmental."

Certain materials used in boat manufacturing are toxic, flammable, corrosive
or reactive and classified by state and federal governments as "hazardous
materials." Control of hazardous materials is regulated by the U.S.
Environmental Protection Agency and state environmental protection agencies. If
it is ever determined that our operations have resulted in hazardous waste
contamination, the costs of cleaning up those wastes could be substantial and
could have a material adverse effect on our business, financial condition and
results of operations. We cannot predict our future regulatory compliance costs
with precision and we cannot be certain of any costs that we may be forced to
incur in connection with our historical on-site or off-site waste disposal.

In connection with our WELLCRAFT facilities in Florida, we have agreed to
conduct certain remedial action related to soil and groundwater contamination.
We are also subject to potentially significant remedial requirements with
respect to certain formerly owned or operated properties for which we have
retained liability for any contamination. Although it is impossible to predict
the ultimate cost of any penalties or required remedial action, we believe that
we have established adequate reserves to cover those expenses.

We must certify that our motorized recreational boats meet the
specifications of the United States Coast Guard. In addition, boat safety is
subject to federal regulation under the Federal Boat Safety Act of 1971. That
act requires boat manufacturers to recall products for replacement of parts or
components that demonstrate defects affecting safety. We have conducted product
recalls in the past to correct safety-related defects, none of which has had a
material adverse effect on our company. However, we cannot assure you that
future recalls will not result in a material adverse effect on our business.

Certain states have required or are considering requiring a license to
operate a recreational boat. These licensing requirements are not expected to be
unduly restrictive. They may, however, discourage potential first-time buyers,
which could, in turn, adversely affect our business. In addition, certain state
and local governmental authorities are contemplating regulatory efforts to
restrict boating activities on certain inland bodies of water. While the scope
of these potential regulations is not yet known, their adoption and enforcement
could have a material adverse effect on our business.

Laws and regulations protecting the environment may, in certain
circumstances, impose "strict liability." This means that we could be held
liable for environmental damage without regard to our negligence or fault. In
addition, changes in existing regulations or the adoption of new regulations in
the future could require us to make material capital expenditures or could have
a material adverse effect on our company.

THE MOTORIZED RECREATIONAL BOAT INDUSTRY IS SEASONAL.

The motorized recreational boat industry is seasonal, with seasonality
varying in different geographic markets. During the fiscal year ended June 30,
1999, net revenues for the quarterly periods

9
<PAGE>
ended September 30, December 31, March 31 and June 30 represented 20.7%, 23.4%,
26.0% and 29.9%, respectively, of our net revenues for the year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality and Fluctuations in Quarterly Results of Operations."

Our business can also be affected by weather patterns. For example, drought
conditions, reduced rainfall levels or excessive rain, may force particular
boating areas to close or render boating dangerous or inconvenient in those
areas. This could curtail customer demand for our products. We believe our
geographic diversity should reduce the overall impact of these factors on our
company in any single market area, but these factors could represent potential
material adverse risks to us and our future operating performance.

OUR SUCCESS DEPENDS ON THE CONTINUED SERVICE OF OUR KEY EXECUTIVES.

Our success over the past three years has been primarily the result of a
manufacturing and marketing strategy implemented by our senior management team,
particularly Irwin L. Jacobs, the Chairman of our Board of Directors, Grant E.
Oppegaard, our President and Chief Executive Officer, and Roger R. Cloutier II,
our Executive Vice President and Chief Financial Officer. Our loss of the
services of any of these individuals could have a material adverse effect on our
results of operations and financial condition. Mr. Jacobs is a non-executive
Chairman and devotes a significant portion of his time to other activities,
including Jacobs Management Corporation, unrelated to our company. Mr. Cloutier
is also employed by Jacobs Management, and in the past has devoted a portion of
his time to the activities of Jacobs Management. None of these individuals has
an employment agreement with our company, although Messrs. Oppegaard and
Cloutier each would be subject to non-competition restrictions if he left our
employment.

OUR COMPANY IS CONTROLLED BY CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS.

Upon completion of the offering, our directors, executive officers and
persons associated with them will own beneficially an aggregate of approximately
% of the issued and outstanding shares of common stock (approximately % if
the underwriters' over-allotment option is exercised in full). As a result of
this ownership, those persons will have the power effectively to control our
company, including:

- The election of directors,

- The determination of matters requiring stockholder approval; and

- Other matters pertaining to corporate governance.

This concentration of ownership also may have the effect of delaying or
preventing a change in control of our company. We have engaged in various
transactions with our stockholders or their affiliates in the past and may
continue to do so in the future. We have a policy requiring that all material
affiliate transactions be approved by a majority of our disinterested directors
and be conducted on terms no less favorable than could be obtained in a
transaction with an unaffiliated third party. See "Certain Transactions."

A SIGNIFICANT INCREASE IN FUEL PRICES OR TAXES COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.

Almost all of the boats sold by us are powered by diesel or gasoline
engines. A significant increase in the price or tax on the sale, or an
interruption in the supply of diesel or gasoline fuel on a regional, national or
international basis could adversely affect our sales and operating results. At
various times in the past, diesel or gasoline fuel has been difficult to obtain,
and we cannot assure you that the supply of those fuels will not be interrupted.

10
<PAGE>
WE COULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR SUPPLIERS
ARE NOT Y2K COMPLIANT.

As the end of the century nears, there is a widespread concern that many
existing computer programs that use only the last two digits to refer to a year
will not properly recognize a year that begins with digits "20" instead of "19."
If not corrected, many computer applications could fail, create erroneous
results, or cause unanticipated systems failures, among other problems. Our
failure, or the failure of one or more of our key suppliers, customers or
distributors, to successfully address Y2K issues could have a material adverse
effect on our business, results of operations, financial condition and
prospects. For more information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."

WE WILL GUARANTEE CERTAIN OBLIGATIONS OF HATTERAS, OUR FORMER LUXURY YACHT
DIVISION.

Immediately prior to the completion of this offering, we will spin off the
operations of Hatteras to our current stockholders. Under the terms of that
transaction, we will guarantee for a period of one-year an aggregate of $5.0
million of Hatteras' obligations under its new $25.0 million credit facility.
See "The Company" and "Certain Transactions." If Hatteras is unable to fulfill
its obligations under its credit facility, we could be required to perform under
our guarantee and have to pay out funds that would otherwise be applied to
maintaining or improving our own operations. In addition, our funds may be
insufficient for these purposes. The lenders or other parties to whom Hatteras
may now or in the future be indebted could also seek to establish claims against
us for repayment of funds owed by Hatteras. If the Hatteras creditors were
successful in their claims against us, these events could have a material
adverse effect on our business, results of operations or financial condition.

YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT.

The initial public offering price per share will exceed our net tangible
book value per share. If you purchase shares in this offering, you will incur
immediate and substantial dilution in your investment. See "Dilution" for a
calculation of the extent to which your investment will be diluted.

FUTURE SALES BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK.

Following this offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the market following
this offering, or the perception that these sales could occur. These sales also
might make it more difficult for us to sell equity securities in the future at a
time and at a price that we consider appropriate. Also, the shares issued to
acquire Pyramid are subject to registration rights, which become effective nine
months following this offering. In connection with this offering, our directors
and officers and certain of our stockholders, who hold a total of shares
of common stock, have agreed, subject to certain exceptions, not to sell their
shares for 180 days after the date of this prospectus without the consent of
Stephens Inc. See "Shares Eligible for Future Sale" and "Underwriting."

THERE HAS BEEN NO PRIOR MARKET FOR OUR STOCK, AND OUR STOCK PRICE IS LIKELY TO
BE HIGHLY VOLATILE.

Prior to the offering, there has been no public market for our common stock.
We cannot predict the extent to which investor interest in us will lead to the
development of an active trading market in our stock or how liquid that market
might become. The initial public offering price for the shares will be
determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in any future
trading market. Recent market conditions for newly public companies indicate
that we are likely to experience significant fluctuations in the market price of

11
<PAGE>
our common stock. Future public announcements concerning our company could also
cause the market price of the common stock to fluctuate, including announcements
regarding:

- Quarterly operating results or expectations;

- Changes in earnings estimates published by analysts;

- Changes in governmental regulations;

- Events within or affecting the recreational boat industry;

- Events relating to our suppliers or competitors; or

- Acquisitions.

From time to time the stock market experiences significant price and volume
fluctuations. The volatility of the overall market could adversely affect the
market price of our common stock and our future ability to raise equity in the
public markets. These fluctuations, as well as general economic, political and
market conditions, such as recessions, could adversely affect the market price
of our stock. See "Underwriting."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus are forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, or those of our industry,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by those forward-looking statements. These risks and uncertainties are
discussed in "Risk Factors" and elsewhere in this prospectus.

In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue" or the negative of those terms
or comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of those
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform those statements to actual results.

12
<PAGE>
USE OF PROCEEDS

The net proceeds we will receive from the sale of the shares of
common stock offered by this prospectus, assuming an initial public offering
price of $ per share, are estimated to be $ ($
if the underwriters' over-allotment option is exercised in full),
after deducting the estimated underwriting discount and offering expenses.
Immediately prior to the completion of this offering, we expect to receive $20.0
million from the spin-off of Hatteras as repayment of intercompany indebtedness
owed to us at the time of the spin-off.

We intend to use the offering proceeds and the Hatteras spin-off proceeds,
as follows:

- $ million to repay in full our new senior term loan;

- $ million to repay in part our subordinated term loan;

- $ million to build and equip a new manufacturing facility utilizing
our VEC technology and other new process equipment; and

- the remainder for other general corporate purposes, including working
capital and capital expenditures.

Our new senior term loan is due on June 30, 2002 and bears interest at an
annual rate based on the interbank eurodollar market rate plus 2.5%. On August
16, 1999, the interest rate on our senior term loan was 7.8%. Our subordinated
term loan is due on October 21, 2002 and bears interest at an alternate base
rate on any particular date equal to the greater of the interbank eurodollar
market rate in effect on that date or the federal funds rate in effect on that
date plus 0.5%. On August 16, 1999, the interest rate on our subordinated term
loan, adjusted to reflect our full cash borrowing cost, was 7.4%. The weighted
average interest rate on all of our borrowings outstanding as of August 16, 1999
was 8.6%.

In August 1999, we borrowed $25.0 million under our new senior term loan to
repay a $25.0 million subordinated note held by Irwin L. Jacobs, our Chairman.
We will borrow an additional $20.0 million under our new senior term loan and
approximately $7.0 million under our new revolving credit facility to redeem the
remaining $25.6 million of our 13.5% notes due 2001 at 106.5% of par, on
September 7, 1999.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock since
inception and we do not expect to pay any cash dividends in the foreseeable
future. We currently intend to retain any future earnings to support the growth
and development of our business and technologies. Any future declaration of
dividends will be subject to the discretion of our board of directors.

13
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999:

- On a historical basis;

- On a pro forma basis to reflect our debt refinancing and the spin-off of
Hatteras with the $20.0 million of spin-off proceeds used to repay our
debt; and

- On a pro forma basis as adjused to reflect the effects of this offering at
per share, the mid-point of the price range set forth on the cover
of this prospectus, and the application of the estimated net proceeds and
the following transactions which will occur concurrently with this
offering:

- Our acquisition of Pyramid;

- $ of awards related to our phantom stock plan;

- shares issued in exchange for outstanding warrants; and

- shares issued to non-management employees.

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA(A) AS ADJUSTED(B)
---------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
DEBT:
Revolving credit facility.......................................... $ -- $ 8,297 $
Senior term loan................................................... -- 25,000
Subordinated term loan............................................. 60,000 60,000
Senior subordinated notes....................................... 25,584 --
Stockholder notes.................................................. 25,406 4,104
Other debt obligations............................................. 6,161 5,161
---------- ------------- --------------
Total debt....................................................... 117,151 102,562
STOCKHOLDERS' EQUITY:
Common stock....................................................... 17 17
Paid-in capital.................................................... 117,945 117,945
Accumulated deficit................................................ (75,256) (90,675)
Accumulated other comprehensive income (loss)...................... (504) (504)
---------- ------------- --------------
Total stockholders' equity....................................... 42,202 26,783
---------- ------------- --------------
Total capitalization................................................. $ 159,353 $ 129,345 $
---------- ------------- --------------
---------- ------------- --------------
</TABLE>

- ------------------------

(a) Excludes shares issuable upon the exercise of senior executive,
director and employee stock options to be granted concurrently with this
offering.

(b) See "Unaudited Pro Forma Financial Data" elsewhere in this prospectus for
specific details.

14
<PAGE>
DILUTION

As of June 30, 1999, we had a net tangible book value of $ , or $
per share of common stock. Net tangible book value represents the amount of
tangible assets less total liabilities, divided by the number of shares of
common stock outstanding. Our pro forma net tangible book value as of June 30,
1999, taking into account the sale of the shares offered by this prospectus at
an assumed offering price of $ per share, the spin-off of Hatteras and the
issuance of shares of our common stock in connection with the acquisition of
Pyramid, shares issued in exchange for outstanding warrants and shares issued to
our non-management employees, would have been $ , or $ per share. The
pro forma net tangible book value assumes that the proceeds to us, net of
offering expenses and underwriting discount, will be approximately $ . This
represents an immediate increase in pro forma net tangible book value to
existing stockholders attributable to new investors of $ per share and the
immediate dilution of $ per share to new investors. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................... $
Pro forma net tangible book value per share at June 30, 1999............ $
Increase per share attributable to new investors........................
---------
Pro forma net tangible book value per share after this offering...........
---------
Dilution per share to new investors....................................... $
---------
---------
</TABLE>

15
<PAGE>
THE COMPANY

Genmar Holdings, Inc. is a Delaware corporation that was organized in March
1994 to combine the operations of Minstar, Inc. and Miramar Marine Corporation.
Both Minstar and Miramar were private boat manufacturers under the control of
investor groups led by Irwin L. Jacobs, our Chairman. Many of our operating
divisions have been manufacturing boats under our various brand names since the
1940s and 1950s.

RECENT ACQUISITIONS

PYRAMID OPERATING SYSTEMS, INC. In March 1999, we acquired 9.8% of the
outstanding shares of Pyramid Operating Systems, Inc. On June 18, 1999, we
entered into an agreement to purchase the remaining shares of Pyramid for a net
purchase price of $11.0 million, payable in shares of our common stock. We will
complete the acquisition of Pyramid at the same time that we close the offering.
Assuming an initial public offering price of $ per share, approximately
shares of our common stock will be issued to Pyramid stockholders. As a result
of this transaction, Pyramid will become our wholly-owned subsidiary and we will
own all rights to the VEC technology and process. We have also entered into a
management agreement with Pyramid under which we presently oversee the
operations of Pyramid. Since June 30, 1999, we have provided $750,000 of
short-term working capital financing to Pyramid and expect to continue to fund
approximately $350,000 per month through the closing. Prior to our agreement to
acquire Pyramid, Pyramid had invested over $12.0 million in the development of
VEC technology.

We have granted registration rights to the Pyramid stockholders. The
purchase agreement provides that, within nine months after the closing of the
transaction, we are required to file a registration statement with the
Commission covering the shares of common stock received by Pyramid stockholders
in the acquisition. We are obligated to maintain the effectiveness of that
registration statement for two years.

For a period of 20 years after the closing of the acquisition, the purchase
agreement provides, among other things, that the former Pyramid stockholders
will have the right to participate in the non-marine application of the VEC
technology, as follows:

- If we determine to spin-out a new entity that will use non-marine
applications of the VEC technology as a core technology of its business,
the current Pyramid stockholders will have a right to acquire an aggregate
of 5% of the equity ownership of the new entity at a 25% discount from the
equity value established in the spin-out. This right will be exercisable
for 30 days from notification of the completion of the spin-out.

- If we sell or license non-marine applications of the VEC technology to
third parties instead of spinning-out a new entity, the Pyramid
stockholders will be entitled to receive an aggregate of 5% of the sales
or licensing proceeds.

LOGIC MARINE CORPORATION. On May 11, 1999, we acquired substantially all of
the assets of Logic Marine Corporation, a manufacturer of fishing and
recreational boats, for consideration consisting of $500,000 in cash at closing,
a promissory note for $500,000 payable in May 2000, $597,000 in assumed
liabilities and an earn-out of up to $450,000 over three years based on net
revenues from sales of LOGIC boats. Prior to this acquisition, Logic Marine had
invested $10.5 million in the development of the Roplene technology. The LOGIC
product line is now manufactured by our subsidiary, Genmar Logic LLC, utilizing
Roplene technology. These boats are currently produced at the LOGIC facilities
in North Carolina. See "--Technology--Roplene Construction Manufacturing."

HORIZON MARINE, L.C. On December 21, 1998, we acquired substantially all of
the assets of Horizon Marine, L.C., an aluminum boat manufacturer, for
consideration consisting of $2.3 million in cash at closing and the assumption
of approximately $3.5 million in liabilities of which $2.7 million

16
<PAGE>
were paid at or immediately subsequent to closing. There is also a five-year
earn-out of up to $5.2 million, $200,000 of which was pre-paid at closing. The
earn-out is based on gross revenues from sales of products produced at this
facility and can be adjusted for the achievement of certain gross profit
percentages and for the value of warranty claims, from sales of products
produced at this facility.

We manufacture and market the range of products that we acquired from
Horizon through our subsidiary, Genmar Manufacturing of Kansas, LLC, under the
brand name NOVA, including fish and cruise pontoon and bass boats, as well as
trailers, and parts and accessories. We intend to centralize the production and
distribution of our aluminum products sold in the southern United States through
this subsidiary.

HATTERAS SPIN-OFF

Hatteras is a luxury yacht construction company, which we have owned since
1985. Hatteras' large custom-made luxury yachts have an average sales price of
approximately $1.6 million. Hatteras targets a narrow market of very wealthy
individuals who can afford large luxury yachts. Hatteras is fundamentally
different from our recreational boat operations which operate as production line
manufacturing companies. We believe that Hatteras does not fit strategically
with our other operations. As a result, immediately prior to the completion of
this offering, we will spin off Hatteras to our current stockholders. Under the
terms of that transaction, $21.9 million of tangible net assets and $7.8 million
of unamortized goodwill associated with Hatteras will be distributed to our
current stockholders. Hatteras will borrow $20.0 million from a new credit
facility and will pay us $20.0 million in cash to repay intercompany debt owed
to us. The Hatteras spin-off will reduce our stockholders' equity before the
offering by $9.7 million. In addition, for a period of one year, we will
guarantee an aggregate amount of $5.0 million of Hatteras' obligations under its
new credit facility. For a discussion of our plans to use these funds, see "Use
of Proceeds."

17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected historical and pro forma consolidated financial
information should be read in conjunction with our consolidated financial
statements and the notes thereto appearing elsewhere in this prospectus and the
sections of this prospectus captioned "Unaudited Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The balance sheet data as of December 31, 1994, 1995, 1996 and June
30, 1997 and the statement of operations data for the years ended December 31,
1994 and 1995 were derived from our audited consolidated financial statements
not included in this prospectus. The balance sheet data as of June 30, 1998 and
1999 and the statement of operations data for the years ended December 31, 1996,
June 30, 1998 and June 30, 1999 and the six months ended June 30, 1997 have been
derived from our audited consolidated financial statements included elsewhere in
this prospectus. The selected pro forma consolidated financial information as of
and for the year ended June 30, 1999 were derived from our unaudited pro forma
financial data which are included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
FOR THE SIX
------------------------------- MONTHS ENDED ------------------------------
1994 1995 1996 JUNE 30, 1997 1998 1999
--------- --------- --------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 499,435 $ 548,559 $ 618,056 $ 260,848 $ 585,943 $ 704,656
Cost of products and services......... 417,072 468,270 521,663 222,448 480,651 567,247
--------- --------- --------- --------------- -------------- --------------
Gross profit.......................... 82,363 80,289 96,393 38,400 105,292 137,409
New product and technology
development......................... 8,942 11,347 8,537 5,012 11,292 10,996
Selling and administrative expenses... 58,829 66,171 64,653 31,888 70,402 88,945
--------- --------- --------- --------------- -------------- --------------
Operating profit...................... 14,592 2,771 23,203 1,500 23,598 37,468
Interest expense...................... (22,674) (23,862) (22,190) (11,026) (18,702) (16,098)
Investment and other income (loss),
net................................. (8,834) 15,477 122 (176) (304) 75
--------- --------- --------- --------------- -------------- --------------
Income (loss) before income taxes and
extraordinary item.................. (16,916) (5,614) 1,135 (9,702) 4,592 21,445
Income tax benefit (provision)........ (1,040) (2,090) (860) (246) (550) 19,500
--------- --------- --------- --------------- -------------- --------------
Income (loss) before extraordinary
item................................ (17,956) (7,704) 275 (9,948) 4,042 40,945
Extraordinary loss on extinguishment
of debt............................. (6,624) -- -- -- (1,184) --
--------- --------- --------- --------------- -------------- --------------
Net income (loss)..................... $ (24,580) $ (7,704) $ 275 $ (9,948) $ 2,858 $ 40,945
--------- --------- --------- --------------- -------------- --------------
--------- --------- --------- --------------- -------------- --------------
Basic and diluted earnings (loss) per
share............................... $
--------------
--------------
Basic and diluted weighted average
shares outstanding(c)...............
--------------
--------------
ADDITIONAL DATA:
EBITDA(d)............................. $ 22,596 $ 11,036 $ 31,297 $ 5,563 $ 32,372 $ 46,419
Gross profit margin................... 16.5% 14.6% 15.6% 14.7% 18.0% 19.5%
Operating profit margin............... 2.9% 0.5% 3.8% 0.6% 4.0% 5.3%
BALANCE SHEET DATA:
Working capital....................... $ 73,568 $ 75,267 $ 48,418 $ 47,764 $ 29,712 $ 41,544
Total assets.......................... 345,572 306,678 271,203 258,279 244,622 320,763
Long-term debt, net of current
maturities.......................... 164,161 151,445 124,552 135,238 117,778 116,129
Stockholders' equity (deficit)........ 14,232 6,618 6,869 (3,133) 1,293 42,202

PRO FORMA FOR
THE YEAR ENDED
JUNE 30, 1999
(UNAUDITED)(a)
---------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 614,406
Cost of products and services......... 492,534
---------------
Gross profit.......................... 121,872
New product and technology
development......................... 9,592
Selling and administrative expenses... 76,332
---------------
Operating profit...................... 35,948
Interest expense...................... (10,151)
Investment and other income (loss),
net................................. 133
---------------
Income (loss) before income taxes and
extraordinary item.................. 25,930
Income tax benefit (provision)........ 19,500(b)
---------------
Income (loss) before extraordinary
item................................ 45,430
Extraordinary loss on extinguishment
of debt............................. --
---------------
Net income (loss)..................... $ 45,430
---------------
---------------
Basic and diluted earnings (loss) per
share............................... $
---------------
---------------
Basic and diluted weighted average
shares outstanding(c)...............
---------------
---------------
ADDITIONAL DATA:
EBITDA(d)............................. $ 43,169
Gross profit margin................... 19.8%
Operating profit margin............... 5.9%
BALANCE SHEET DATA:
Working capital....................... $ 28,972
Total assets.......................... 256,987
Long-term debt, net of current
maturities.......................... 101,540
Stockholders' equity (deficit)........ 26,783(b)(c)
</TABLE>

- ----------------------------------
(a) Reflects the spin-off of Hatteras and reduced interest expense from our debt
refinancing and the repayment of $20.0 million of debt using spin-off
proceeds. When we determine the mid-point of the pricing range for this
offering, the pro forma amounts will also include the acquisition of Pyramid
and reduced interest expense associated with the repayment of debt using our
net proceeds from this offering. The pro forma statement of operations
amounts do not reflect non-recurring charges we will incur relating to the
offering for awards under our phantom stock plan and the issuance of
shares to non-management employees, and extraordinary charges related to the
early retirement of our debt. The pro forma balance sheet amounts do not
reflect interest savings.

(d) EBITDA represents operating income plus depreciation and goodwill
amortization expense. EBITDA data, which is not a measure of financial
performance under generally accepted accounting principles, should not be
construed as a substitute for operating income, net income or cash flows
from operations in analyzing our operating performance, financial position
and cash flows. We have included EBITDA data, because we believe that this
data is commonly used by certain investors to evaluate a company's
performance. Not all companies calculate non-GAAP measures in the same
manner; accordingly, the EBITDA presentation herein may not be comparable to
similarly titled measures reported by other companies.

18
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA

The unaudited pro forma consolidated statement of operations for the year
ended June 30, 1999 and the unaudited pro forma consolidated balance sheet as of
June 30, 1999, include our historical operations. The pro forma financial
statements give effect to the spin-off of Hatteras and the effects of our debt
refinancing, as if they had occurred on July 1, 1998 for the statement of
operations and as of June 30, 1999 for the balance sheet. This information has
been prepared by our management and derived from our historical statements of
operations and balance sheets.

The pro forma as adjusted amounts reflect the effects of the offering and
include the acquisition of Pyramid which will be completed at the time of the
offering and the reduction in interest expense to give effect to the application
of our estimated net offering proceeds. See "Use of Proceeds."

The unaudited pro forma consolidated statement of operations is not designed
to represent what our results of operations actually would have been had these
transactions been completed as of the dates indicated, or to project our results
of operations for any future period. This information should be read in
conjunction with "Capitalization," "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," our consolidated
financial statements and accompanying notes and other financial information
included elsewhere in this prospectus.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PRO FORMA EFFECTS OF PRO FORMA AS
AS REPORTED ADJUSTMENTS(A) PRO FORMA OFFERING(B) ADJUSTED
----------- -------------- ----------- ------------- ---------------
Net revenues................................ $ 704,656 $ (90,250) $ 614,406 $ $
Cost of products and services............... 567,247 (74,713 492,534
----------- -------------- ----------- ----- -----
Gross profit................................ 137,409 (15,537) 121,872
New product and technology development...... 10,996 (1,404) 9,592
Selling and administrative.................. 88,945 (12,613) 76,332
----------- -------------- ----------- ----- -----
Operating profit............................ 37,468 (1,520) 35,948
----------- -------------- ----------- ----- -----
Interest expense............................ (16,098) 5,947 (10,151)
Investment and other income................. 75 58 133
----------- -------------- ----------- ----- -----
Income before income taxes.................. 21,445 4,485 25,930
Income tax benefit(d)....................... 19,500 -- 19,500
----------- -------------- ----------- ----- -----
Net income excluding extraordinary
charges................................... $ 40,945 $ 4,485 $ 45,430 $ $
----------- -------------- ----------- ----- -----
----------- -------------- ----------- ----- -----
Basic and diluted earnings per share as
reported.................................. $ --
-----------
-----------
Basic and diluted weighted average shares
outstanding............................... --
-----------
-----------
Basic and diluted pro forma earnings per
share(c).................................. $ $
----------- -----
----------- -----
Basic and diluted weighted average shares
outstanding(c)............................
----------- -----
----------- -----
</TABLE>

19
<PAGE>
PRO FORMA ADJUSTMENTS:

(a) Reflects the spin-off of Hatteras and reduced interest expense from our debt
refinancing and repayment of debt from Hatteras' spin-off proceeds. The
adjustments do not include an extraordinary charge of $5.7 million resulting
from our debt refinancing as it is nonrecurring in nature.

(b) Includes Pyramid's operating loss of $ , and $ of additional
amortization of goodwill assuming an amortization period of 25 years.
Reflects a reduction of interest expense of $ related to using
proceeds from this offering to repay debt.

Excludes the following nonrecurring charges which will be recorded
concurrently with this offering:

- A $ charge for awards under our phantom stock plan triggered by this
offering;

- A charge of approximately $ resulting from the issuance of shares to
non-management employees; and

- An extraordinary charge of $ resulting from the early extinguishment of
debt using proceeds from this offering.

<TABLE>
<S> <C>
Stock outstanding before offering....................... 1,737
---------
---------
Effects of for 1 stock split...........................
Shares issued in exchange for outstanding warrants......
Shares issued to acquire Pyramid........................
Shares issued to non-management employees...............
Shares issued to public.................................
---------
---------
---------
</TABLE>

(d) During 1999, we recorded a reduction in our valuation allowance against our
deferred tax assets, resulting in an overall tax benefit of $19.5 million.
Tax expense assuming a statutory rate of 40% would have been $10.4 million
and pro forma net income would have been $15.5 million, or $ per share.

20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999

(IN THOUSANDS)
<TABLE>
<CAPTION>
HATTERAS
PRO FORMA DEBT ACQUISITION EFFECTS OF
AS REPORTED ADJUSTMENTS(A) REFINANCING(B) PRO FORMA OF PYRAMID(C) OFFERING(D)
----------- --------------- --------------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS

Current assets:
Cash and cash
equivalents.......... $ 24,856 $ -- $ $ 24,856 $ $
Accounts receivable,
net.................. 41,339 (825) -- 40,514
Inventories............ 113,931 (45,172) -- 68,759
Prepaid expenses....... 2,939 (343) -- 2,596
Deferred tax asset..... 8,000 -- -- 8,000
----------- --------------- ------- ----------- ----- -----
Total current
assets............. 191,065 (46,340) 144,725
Property and equipment,
net.................. 65,537 (10,390) -- 55,147
Other assets........... 19,454 -- 740 20,194
Goodwill............... 44,707 (7,786) -- 36,921
----------- --------------- ------- ----------- ----- -----
$ 320,763 $ (64,516) $ 740 $ 256,987 $ $
----------- --------------- ------- ----------- ----- -----
----------- --------------- ------- ----------- ----- -----

LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable....... $ 56,241 $ (10,606) $ -- $ 45,635 $ $
Accrued liabilities.... 80,091 (14,034) -- 66,057
Customer deposits...... 9,783 (9,128) -- 655
Accrued income taxes... 2,384 -- -- 2,384
Current maturities of
long-term debt....... 1,022 -- -- 1,022
----------- --------------- ------- ----------- ----- -----
Total current
liabilities........ 149,521 (33,768) -- 115,753
Long-term debt........... 116,129 (21,000) 6,411 101,540
Other noncurrent
liabilities............ 12,911 -- -- 12,911
----------- --------------- ------- ----------- ----- -----

Stockholders' equity:
Common stock........... 17 -- -- 17
Paid-in capital........ 117,945 -- -- 117,945
Accumulated deficit.... (75,256) (9,748) (5,671) (90,675)
Cumulative translation
adjustment........... (504) -- -- (504)
----------- --------------- ------- ----------- ----- -----
Total stockholders'
equity............. 42,202 (9,748) (5,671) 26,783
----------- --------------- ------- ----------- ----- -----
$ 320,763 $ (64,516) $ 740 $ 256,987 $ $
----------- --------------- ------- ----------- ----- -----
----------- --------------- ------- ----------- ----- -----

PRO FORMA
AS ADJUSTED
---------------
<S> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $
Accounts receivable,
net..................
Inventories............
Prepaid expenses.......
Deferred tax asset.....
-----
Total current
assets.............
Property and equipment,
net..................
Other assets...........
Goodwill...............
-----
$
-----
-----
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....... $
Accrued liabilities....
Customer deposits......
Accrued income taxes...
Current maturities of
long-term debt.......
-----
Total current
liabilities........
Long-term debt...........
Other noncurrent
liabilities............
-----
Stockholders' equity:
Common stock...........
Paid-in capital........
Accumulated deficit....
Cumulative translation
adjustment...........
-----
Total stockholders'
equity.............
-----
$
-----
-----
</TABLE>

- ------------------------------

(a) Reflects the spin-off of Hatteras and our repayment of debt from Hatteras'
spin-off proceeds. See "The Company."

(b) Reflects our debt refinancing and the related extraordinary loss of $5.7
million, for early extinguishment of debt.

(d) Reflects the issuance of the shares offered hereby and use of the proceeds
from this offering to repay debt with the resulting extraordinary loss of
$ due to early extinguishment of debt.

Includes the following transactions which will be recorded concurrently with
this offering:

- Awards triggered under our phantom stock plan of $ .

- The issuance of shares in exchange for outstanding warrants.

- The issuance of shares to nonmanagement employees and the
corresponding $ charge.

21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion of our financial condition and results of
operations should be read together with the consolidated financial statements
included in this prospectus. This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ
significantly from those anticipated in these forward-looking statements as a
result of various factors including, but not limited to, those set forth under
"Risk Factors" and included in other portions of this prospectus. Our fiscal
year ends June 30. When we refer to years it means the twelve months ended June
30, unless otherwise indicated.

We manufacture motorized recreational boats, and sell our products through a
network of over 1,300 dealers throughout the world. We currently conduct and
report our business in two segments, the recreational boat segment and the
luxury yacht segment. Following the spin-off of Hatteras, we will operate only
in the recreational boat segment.

RECREATIONAL BOAT SEGMENT

Our recreational boat segment is comprised of our various high volume
production line manufacturing operations. We generate revenues primarily from
the sale of boats with inboard, stern drive and outboard engines. Certain of our
outboard boats are sold with engines purchased from others and installed at our
factories, and we refer to these as "packaged" sales. Certain other of our
outboard boats are sold without the engine installed, and we refer to these
sales as "non-packaged" sales. Typically these non-packaged boats are sold with
engine controls and cabling, known as rigging, pre-installed at our factories.
In exchange for equipping a boat in this manner, we receive a fee from the
engine manufacturer whose controls and cabling we have pre-installed in the
boat. For a packaged sale, our revenues and cost of products reflect the sale
and related cost of the outboard engine, while for a non-packaged sale, our
revenues reflect only the rigging fee. Consequently, comparable outboard boats
sold packaged generate higher total revenues but a lower margin as a percentage
of revenues than those sold non-packaged. Accordingly, shifts in our outboard
sales mix between packaged and non-packaged can affect our revenues and margins.

The size of the products we sell also affects our revenues and margins. Our
margins generally increase as the size of the product increases. Product sales
mix can also affect our margins in other ways. In a given size category,
outboard products generally produce higher margins than stern drive or inboard
products. In terms of revenues generated in 1999, substantially all of our
aluminum product sales, and approximately one-third of our fiberglass product
sales, were outboard products. Also, on a relative basis, certain of our models
command premium pricing in the market, and generally produce higher margins, as
compared to our other models.

We also generate revenues from the sale of parts, accessories and clothing,
and in certain circumstances from product delivery fees. Such items, however, do
not have a significant impact on changes in our revenues from year to year, nor
are revenues related to these items material to our total revenues.

Cost of products and services consists of all costs related to the
manufacture and assembly of our products, including material, labor and overhead
costs, as well as production tooling and related tooling maintenance costs for
models already in production. Also included are costs related to warranty,
customer service, transportation and engineering.

New product and technology development consists of all costs related to
developing new product offerings, including all developmental engineering and
tooling costs. Also included are costs related to

22
<PAGE>
the development of new manufacturing technologies, such as our VEC and Roplene
technologies. We believe the development of new product and manufacturing
technologies is a key element of our future business strategy, and with the
acquisition of the VEC technology, we expect to significantly increase our new
product and technology development expenses, and potentially, our expenses
related to developing the non-marine commercial aspects of our new technology.

Selling and administrative expenses consist of salaries, commissions and
other costs for our sales and marketing personnel, expenses related to the
development and execution of marketing concepts and materials and costs to
participate in various industry retail trade shows. Also included are
compensation and other expenses related to our executive, administrative,
finance and management information systems personnel, fees for professional
services and amortization of goodwill. We expect selling and administrative
expenses to change based on our sales levels and operating performance. Under
our current management incentive plan, if our operating performance exceeds
targeted operating profits, our management compensation costs can increase
significantly.

In July 1999, we refinanced certain senior bank debt. With a portion of the
proceeds, we repaid a $25.0 million subordinated note payable to Irwin L. Jacobs
at par and on September 7, 1999, we will use additional proceeds to redeem the
remaining $25.6 million of our 13.5% notes at 106.5% of par. At the time of
issuance, the subordinated note payable to Irwin L. Jacobs was deemed to have a
below-market interest rate, and a debt discount of $8.6 million was recorded at
issuance to impute a market yield to maturity. In connection with these
transactions, we will record an extraordinary loss of $5.7 million on early
extinguishment of debt, including $3.7 million of unaccreted discount associated
with the subordinated note. Upon completion of this offering, we will incur an
additional extraordinary loss of $ million on early extinguishment of debt
resulting from applications of proceeds from this offering to repay debt and
charges to our operating earnings in the amounts of $ million, related to a $
million payout which will be triggered under our existing senior management
phantom stock option plan and $ million, related to a stock grant planned for
all of our non-management employees. See "Management--Executive Compensation."

LUXURY YACHT SEGMENT

The luxury yacht segment consists solely of Hatteras. Immediately prior to
the completion of this offering, we will spin off Hatteras to our current
stockholders. Hatteras builds 55 to 65 yachts per year, the average sale price
of which is approximately $1.6 million. Hatteras sells these yachts to very
wealthy customers who usually are sophisticated and experienced in yachting.
Unlike our recreational boat segment, which we view in terms of a production
line manufacturing company, we view this segment to be much like a custom
construction company. Historically, Hatteras has recognized revenue on most of
its products at the time it ships a completed luxury yacht. On larger products,
over 75 feet in length, Hatteras uses the percentage of completion method of
revenue recognition if a retail customer has specifically ordered the yacht.
Given the high cost of each yacht, the timing of product completions and
shipments can have a material impact on our periodic results of operations.

23
<PAGE>
RESULTS OF OPERATIONS

CONSOLIDATED BASIS

The following table sets forth our operating results on a consolidated basis
for the periods indicated. In early 1997, we changed our fiscal year end from
December 31 to June 30 to better correspond with the industry's model cycle.
Accordingly, the comparison of our fiscal year ended June 30, 1998 to the six
month period ended June 30, 1997 is not meaningful. Information presented for
the twelve months ended June 30, 1997 is unaudited.

<TABLE>
<CAPTION>
FOR THE TWELVE MONTHS FOR THE YEAR ENDED JUNE 30,
ENDED JUNE 30, 1997 ------------------------------------------------------
(UNAUDITED) 1998 1999
------------------------------ -------------------------- --------------------------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues.............................. $ 574,802 100.0% $ 585,943 100.0% $ 704,656 100.0%
Cost of products and services............. 486,276 84.6 480,651 82.0 567,247 80.5
------------- ----- ----------- ----- ----------- -----
Gross profit.......................... 88,526 15.4 105,292 18.0 137,409 19.5
New product and technology development.... 8,372 1.5 11,292 2.0 10,996 1.6
Selling and administrative expenses....... 66,687 11.6 70,402 12.0 88,945 12.6
------------- ----- ----------- ----- ----------- -----
Operating profit...................... 13,467 2.3 23,598 4.0 37,468 5.3
Interest expense.......................... (21,937) (3.8) (18,702) (3.2) (16,098) (2.3)
Investment and other income (loss), net... (294) -- (304) -- 75 --
------------- ----- ----------- ----- ----------- -----
Income (loss) before income taxes and
extraordinary item.................. (8,764) (1.5) 4,592 0.8 21,445 3.0
Income tax benefit (provision)............ (635) (0.1) (550) (0.1) 19,500 2.8
------------- ----- ----------- ----- ----------- -----
Income (loss) before extraordinary item... (9,399) (1.6) 4,042 0.7 40,945 5.8
Extraordinary loss on extinguishment of
debt.................................... -- -- (1,184) (0.2) -- --
------------- ----- ----------- ----- ----------- -----
Net income (loss)..................... $ (9,399) (1.6)% $ 2,858 0.5% $ 40,945 5.8%
------------- ----- ----------- ----- ----------- -----
------------- ----- ----------- ----- ----------- -----
</TABLE>

REVENUES for 1999 and 1998 increased by 20.3% and 1.9%, respectively, over
prior year comparable periods. Net revenues in 1999 were favorably affected by
strong economic and industry conditions and a higher mix of packaged sales. Net
revenue growth in 1998 was lower due to the discontinuation of one of our
fiberglass brands.

GROSS PROFIT MARGIN increased to 19.5% for 1999, from 18.0% for 1998 and
15.4% for 1997. These improvements were a result of higher margins in the mix of
sales and increased manufacturing efficiencies. In addition, operating profit
for 1999 and 1998 increased by 58.8% and 75.2%, respectively, over comparable
prior year periods, and improved as a percentage of revenues to 5.3% for 1999,
from 4.0% for 1998 and 2.3% for 1997.

INTEREST EXPENSE for fiscal 1999 decreased by $2.6 million, or 13.9%, to
$16.1 million from $18.7 million for 1998. The decrease in interest expense
resulted from reduced average borrowings outstanding under our revolving credit
facility, and the full year impact of the October 1997 refinancing of $74.4
million of our 13.5% notes. Interest expense for fiscal 1998 decreased by $3.2
million, or 14.7%, to $18.7 million from $21.9 million for 1997. This decrease
in interest expense resulted from the October 1997 refinancing of $74.4 million
of our 13.5% notes, and reduced debt discount accretion costs, partially offset
by increased average borrowings outstanding under our revolving credit facility.

INCOME TAX for 1999 reflects a benefit of $19.5 million. Excluding our $22.0
million reduction in the deferred tax asset valuation allowance, we would have
had a tax provision of $2.5 million, resulting in an effective tax rate of
11.7%. Based on 1999 and projected future operating results, we determined it
more likely than not that a portion of our deferred tax assets would be
realized, and therefore reduced the related valuation allowance by $22.0
million, which is reflected in our statement of operations as an income tax
benefit. We recorded no such valuation adjustments in prior periods presented.
The effective tax rates for 1998 and 1997 were 12.0% and 7.3%, respectively. The
effective rates differed

24
<PAGE>
from the statutory rates primarily as a result of net operating loss
carryforwards available as offsets to otherwise due federal income tax
obligations.

NET INCOME for 1999 increased by $38.0 million to $40.9 million, from income
of $2.9 million for 1998 and a net loss of $9.4 million for 1997. The
improvements in our net income were primarily attributable to the recorded tax
benefits for 1999 along with the increase in operating profits. Net income
excluding the impact of the tax benefit would have been $18.9 million.

RECREATIONAL BOAT SEGMENT

The following table sets forth operating results of our recreational boat
segment for the periods indicated.

<TABLE>
<CAPTION>
FOR THE TWELVE
MONTHS FOR THE YEAR ENDED JUNE 30,
ENDED JUNE 30, 1997 ------------------------------------------
(UNAUDITED) 1998 1999
-------------------- -------------------- --------------------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................... $ 490,313 100.0% $ 505,910 100.0% $ 614,406 100.0%
Cost of products and services... 408,559 83.3 407,554 80.6 492,534 80.2
--------- --------- --------- --------- --------- ---------
Gross profit................ 81,754 16.7 98,356 19.4 121,872 19.8
New product and technology
development................... 7,607 1.5 9,224 1.8 9,592 1.5
Selling and administrative
expenses...................... 57,217 11.7 61,531 12.1 76,332 12.4
--------- --------- --------- --------- --------- ---------
Operating profit............ $ 16,930 3.5% $ 27,601 5.5% $ 35,948 5.9%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>

YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998

REVENUES for 1999 increased by $108.5 million, or 21.4%, to $614.4 million
from $505.9 million for 1998, reflecting solid increases across all of our
brands both in terms of boats sold and average price per boat sold. Revenues in
1999 from sales of fiberglass products increased 17.9% from 1998, while revenues
from sales of aluminum products increased 36.1%. The increase in our average
price per boat sold was primarily the result of an increase in sales of products
greater than 30 feet in length. In addition, our overall increase in the number
of boats sold included a greater percentage of packaged outboard boats being
sold compared to 1998, a trend which also contributed to our revenue increase
for 1999.

COST OF PRODUCTS AND SERVICES for 1999 increased by $84.9 million, or 20.9%,
to $492.5 million from $407.6 million for 1998, but decreased as a percentage of
revenues to 80.2% for 1999 from 80.6% for 1998. The increase in dollars was a
direct result of increased sales as well as a higher percentage of sales of
packaged outboard boats. The improvement in the percentage resulted primarily
from improved margins related to a more favorable product mix, partially offset
by the effect of our increased sales of packaged outboard boats.

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1999 increased by $400,000,
or 4.0%, to $9.6 million from $9.2 million for 1998, and were 1.5% of revenues
for 1999, a decrease from 1.8% for 1998. This decrease in percentage was
attributable to particularly high expenses in 1998 related to development of new
product offerings over 30 feet in length. These costs in 1999 related primarily
to various new product development initiatives, and to the development of our
VEC technology. We expect product and technology development costs to increase
further in 2000 as we continue our development of the VEC and Roplene
technologies.

SELLING AND ADMINISTRATIVE EXPENSES for 1999 increased by $14.8 million, or
24.1%, to $76.3 million from $61.5 million for 1998, and increased as a
percentage of revenues to 12.4% for 1999, from 12.1% for 1998. This increase was
attributable primarily to management incentive compensation and bonus

25
<PAGE>
awards that increased by $14.5 million over the prior year, as a result of
significantly exceeding our operating performance goals for the year.

OPERATING PROFIT for 1999 increased by $8.3 million, or 30.2%, to $35.9
million from $27.6 million for 1998, and increased as a percentage of revenues
to 5.9% for 1999, from 5.5% for 1998. This increase was attributable to a 21.4%
increase in sales, favorable product mix and improved margins, offset by
increased management compensation costs.

YEAR ENDED JUNE 30, 1998 COMPARED TO UNAUDITED TWELVE MONTHS ENDED JUNE 30, 1997

Effective June 2, 1997, we changed our fiscal year end from December 31 to
June 30, and reported a transitional audited fiscal year covering the six month
period from January 1 to June 30, 1997. As a result, the comparison of our
fiscal year ended June 30, 1998 to the six month period ended June 30, 1997 is
not meaningful. For purposes of the following discussion, we will compare our
results of operations for 1998 to our unaudited results of operations for the
twelve months ended June 30, 1997.

REVENUES for 1998 increased by $15.6 million, or 3.2%, to $505.9 million
from $490.3 million for 1997. The increase in revenues was attributable to an
increase in the average price per boat sold. Excluding net revenues of $10.3
million of a fiberglass product line which we closed in 1997, the increase in
revenues for 1998 would have been 5.4%.

COST OF PRODUCTS AND SERVICES for 1998 decreased by $1.0 million, or 0.2%,
to $407.6 million from $408.6 million for 1997, and decreased as a percentage of
revenues to 80.6% for 1998 as compared to 83.3% for 1997. This decrease resulted
primarily from improved margins related to product mix. Excluding costs
associated with the discontinued fiberglass product line, the costs would have
increased by $11.5 million and would have compared to costs as a percentage of
revenues of 82.5% for 1997.

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1998 increased by $1.6
million, or 21.3%, to $9.2 million from $7.6 million for 1997, and at 1.8% of
revenues for 1998, were increased from 1.5% for 1997. This increase was
attributable to particularly high expenses in 1998 related to increased
development of new products over 30 feet in length.

SELLING AND ADMINISTRATIVE EXPENSES for 1998 increased by $4.3 million, or
7.5%, to $61.5 million from $57.2 million for 1997, and at 12.1% of revenues for
1998, were increased from 11.7% for 1997. This increase was attributable to
increased variable selling and marketing expenses and increased management
incentive compensation. Excluding costs associated with the discontinued
fiberglass product line, these costs would have increased by $6.3 million and
would have compared to costs as a percentage of revenues of 11.5% for 1997.

OPERATING PROFIT for 1998 increased by $10.7 million, or 63.0%, to $27.6
million from $16.9 million for 1997, and increased as a percentage of revenues
to 5.5% for 1998, from 3.5% for 1997. Excluding the impact of the product line
discontinuation, operating profit would have increased by $6.5 million and would
have compared to operating profit as a percentage of revenues of 4.4% for 1997.
This increase was attributable to increased sales, and improved product margins.

SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS

Various factors, including seasonality, can contribute to fluctuations in
our revenues and costs for our recreational boat segment and in our operating
earnings by quarter.

As is typical in the boating industry, we undergo a model year changeover
during the period from June to August, during which time we convert our
manufacturing facilities to production of new models. Margins during our first
fiscal quarter are adversely affected by the additional costs and

26
<PAGE>
production inefficiencies associated with this model year changeover. We have
begun to introduce certain new models throughout the year to minimize the impact
of model year changeover costs.

On a relative basis, our revenues reach their highest levels during the
third and fourth quarters of the year, due primarily to the onset of the peak
retail selling season for our products. However, we attempt to smooth our
production levels by offering financial incentives to our dealers to take
delivery of our product at a relatively constant rate throughout the year. Costs
related to such dealer incentives are generally heaviest during the first and
second quarters of our fiscal year.

We host various dealer conferences during the period from July to August to
introduce our new product offerings. In addition, we provide financial
assistance, in the form of cooperative marketing incentives earned on their
purchases of our product, to our dealers who participate in various retail trade
shows throughout the year. These retail trade shows are most heavily
concentrated in the months of January to March, or directly preceding the peak
spring retail season. Selling and marketing expenses related to these efforts
are more significant during our first and third fiscal quarters.

The following table sets forth certain quarterly historical financial
information for the past three fiscal years. Operating results achieved for any
quarter do not necessarily indicate what operating results for any future period
may be.

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED,
--------------------------------------------------
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30
------------ ------------ ---------- ----------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C>
1997
Net revenues................................................. $ 128,419 $ 126,075 $ 114,085 $ 121,734
Percent of total annual segment revenues..................... 26.2% 25.7% 23.3% 24.8%
Gross profit................................................. 19,343 21,179 18,016 23,216
Operating profit............................................. 3,452 4,331 1,551 7,596

1998
Net revenues................................................. $ 115,203 $ 118,284 $ 132,354 $ 140,069
Percent of total annual segment revenues..................... 22.8% 23.4% 26.2% 27.6%
Gross profit................................................. 19,795 20,610 25,915 32,036
Operating profit............................................. 4,793 4,552 6,484 11,772

1999
Net revenues................................................. $ 127,115 $ 143,571 $ 159,670 $ 184,050
Percent of total annual segment revenues..................... 20.7% 23.4% 26.0% 29.9%
Gross profit................................................. 21,994 26,529 30,760 42,589
Operating profit............................................. 3,428 9,727 9,134 13,659
</TABLE>

27
<PAGE>
LUXURY YACHT SEGMENT

The following table sets forth operating results for the periods indicated
of our luxury yacht segment, which we will spin-off to our current stockholders
immediately prior to the consummation of this offering.

<TABLE>
<CAPTION>
FOR THE TWELVE
MONTHS ENDED FOR THE YEAR ENDED JUNE 30,
JUNE 30, 1997 --------------------------------------------
(UNAUDITED) 1998 1999
-------------------- -------------------- --------------------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenues......................................... $ 84,489 100.0% $ 80,033 100.0% $ 90,250 100.0%
Cost of products and services........................ 77,717 92.0 73,097 91.3 74,713 82.8
---------- ------ ---------- ------ ---------- ------
Gross profit....................................... 6,772 8.0 6,936 8.7 15,537 17.2
New product and technology development............... 765 0.9 2,068 2.6 1,404 1.5
Selling and administrative expenses.................. 9,470 11.2 8,871 11.1 12,613 14.0
---------- ------ ---------- ------ ---------- ------
Operating profit (loss)............................ $ (3,463) (4.1)% $ (4,003) (5.0)% $ 1,520 1.7%
---------- ------ ---------- ------ ---------- ------
---------- ------ ---------- ------ ---------- ------
</TABLE>

YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998

REVENUES for 1999 increased by $10.3 million, or 12.8%, to $90.3 million
from $80.0 million for 1998. The increase in revenues was primarily attributable
to an increase in the average price per boat, due largely to the elimination of
product offerings in this segment under 50 feet in length.

COST OF PRODUCTS AND SERVICES for 1999 increased by $1.6 million, or 2.2%,
to $74.7 million from $73.1 million for 1998, but decreased as a percentage of
revenues to 82.8% for 1999 from 91.3% for 1998. The improvement over 1998 was
attributable to reduced overhead, improved efficiencies and less product
discounting.

NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1999 decreased by $700,000,
or 32.1%, to $1.4 million from $2.1 million for 1998, and at 1.5% of revenues
for 1999, were decreased from 2.6% for 1998. This decrease was attributable to a
narrowing of our product offerings resulting in lower expenditures.

SELLING AND ADMINISTRATIVE EXPENSES for 1999 increased by $3.7 million, or
42.2%, to $12.6 million from $8.9 million for 1998, and increased as a
percentage of revenues to 14.0% for 1999, from 11.1% for 1998. This increase was
attributable primarily to increased costs related to the testing of a new
marketing initiative for luxury yacht ownership, incentive compensation
resulting from exceeding our operating performance goals for 1999, increased
legal expenses, expenses related to Y2K preparation efforts and increased
variable selling and marketing costs.

OPERATING PROFIT for 1999 increased by $5.5 million, to $1.5 million from a
loss of $4.0 million for 1998. The improvement resulted from increased revenues
and improved margins, partially offset by increased selling and administrative
expenses.

YEAR ENDED JUNE 30, 1998 COMPARED TO UNAUDITED TWELVE MONTHS ENDED JUNE 30, 1997

REVENUES for 1998 decreased by $4.5 million, or 5.3%, to $80.0 million from
$84.5 million for 1997. The decrease in revenues, on unit sales that were
essentially even between years, was primarily attributable to increased dealer
incentives intended to reduce product in our dealer pipeline.

COST OF PRODUCTS AND SERVICES for 1998 decreased by $4.6 million, or 5.9%,
to $73.1 million from $77.7 million for 1997, and decreased as a percentage of
revenues to 91.3% for 1998 as compared to 92.0% for 1997. This decrease resulted
primarily from improved margins related to product mix.

28
<PAGE>
NEW PRODUCT AND TECHNOLOGY DEVELOPMENT costs for 1998 increased by $1.3
million, to $2.1 million from $800,000 for 1997, and at 2.6% of revenues for
1998, were increased from 0.9% for 1997. This increase was attributable to
particularly high expenses in 1998 related to increased development of new
products, and to the capitalization of certain of these expenditures in 1997.

SELLING AND ADMINISTRATIVE EXPENSES for 1998 decreased by $600,000, or 6.3%,
to $8.9 million from $9.5 million for 1997, and at 11.1% of revenues for 1998,
were decreased from 11.2% for 1997. The decrease was attributable to decreased
variable selling and marketing expenses and decreased incentive compensation
costs.

OPERATING PROFIT for 1998 decreased by $500,000, or 15.6%, to a loss of $4.0
million from a loss of $3.5 million for 1997. The change between years was
primarily attributable to increased dealer incentive costs as mentioned above.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities for 1999 increased by $35.2 million,
to $50.7 million from $15.5 million for 1998. Total cash provided by operating
activities for 1999 consisted of $28.2 million generated by our operating
results, net of non-cash charges and other items, and $22.5 million generated
from changes in working capital items. Working capital at June 30, 1999 totaled
$41.5 million, including cash and cash equivalents of $24.9 million, as compared
to working capital of $29.7 million at June 30, 1998, including cash and cash
equivalents of $2.7 million. The change in working capital, excluding cash,
represented a decrease of $10.4 million for fiscal 1999, and resulted primarily
from increased accounts payable and accrued liabilities.

Cash used in investing activities for 1999 increased by $16.5 million, to
$20.3 million from $3.8 million for 1998. The increase for 1999 was primarily
attributable to the cash component of the total consideration paid for
acquisitions and increased capital expenditures. We used $500,000 for Logic
Marine, $5.2 million for Horizon, and $2.2 million for our initial investment in
Pyramid. In addition, we realized $900,000 from the sale of a closed
manufacturing facility and certain other equipment in 1999, and in 1998 we
realized $4.2 million from the sale of a note receivable.

Capital expenditures for 1999 increased by $4.8 million, to $12.9 million,
from $8.1 million for 1998, and included approximately $2.1 million of
incremental expenditures related to computer hardware and software primarily
related to our Y2K preparations. We anticipate that capital expenditures for
2000 will be approximately $25.0 million, including approximately $12.0 million
to construct and equip our new manufacturing facility, including the purchase of
certain robotic equipment and computerized tooling and design equipment related
to our VEC technology. The remaining expenditures will be principally for the
purchase of manufacturing and transportation equipment. We expect to fund these
expenditures through operations and available bank borrowings.

Cash used in financing activities for 1999 decreased by $5.1 million, to
$8.3 million from $13.4 million for 1998. We repaid $12.0 million under our old
senior bank term loan during 1999, $6.0 million of which was a voluntary
pre-payment under that agreement. In addition, we completed a $4.0 million
industrial development bond financing arrangement in connection with our
acquisition of and certain planned improvements for our newly acquired NOVA
facility.

During 1999, our old senior bank credit facility, which was due to expire in
June 2000, consisted of a $35.0 million revolving credit facility, a $15.0
million term loan facility and a $23.0 million letter of credit facility.
Weighted average borrowings outstanding under the old revolving credit facility
during 1999 were approximately $14.5 million. At June 30, 1999, we had $35.0
million of availability under the old revolving credit facility, approximately
$3.6 million of availability under the old letter of credit facility and we had
prepaid and terminated the old term loan facility in its entirety. As of June
30, 1999, we were in compliance with all covenants under our credit facility,
except the capital expenditure

29
<PAGE>
requirement, with such non-compliance effectively being waived upon our
arrangement of our new senior bank credit facility. See Note 5 to our
Consolidated Financial Statements.

On July 30, 1999, we arranged a new senior bank credit facility, which
expires in June 2002, consisting of a $29.0 million revolving credit facility, a
$45.0 million term loan facility and a $21.0 million letter of credit facility,
secured by substantially all of our assets. Borrowings under the new revolving
credit facility are intended for general corporate and working capital purposes
and to redeem $5.6 million of our remaining 13.5% notes. We borrowed $25.0
million under our new senior term loan and immediately repaid a $25.0 million
subordinated note held by Irwin L. Jacobs, our Chairman. We will borrow an
additional $20.0 million under our new senior term loan and approximately $7.0
million under our new revolving credit facility, which will be used to redeem
the remaining $25.6 million of our 13.5% notes due 2001 at 106.5% of par, on
September 7, 1999. Aggregate borrowings and outstanding letters of credit under
the new senior credit facility are limited to eligible receivables, eligible
inventories and eligible property, plant and equipment.

Our new senior credit facility contains covenants which, among other things,
restrict or limit our ability to incur other indebtedness, engage in
transactions with affiliates, incur liens, make certain restricted payments, and
enter into certain business combinations and asset sale transactions. The new
senior credit facility also requires that we satisfy certain financial tests and
ratios and restricts capital expenditures. In addition, the new senior credit
facility contains provisions which may require accelerated repayment of our
borrowings and/or limit our access to the facility upon the incurrence of
specific events or significant changes in our financial condition, business,
properties, prospects or operations.

We also have $60.0 million currently outstanding under our subordinated term
loan facility, which expires in October 2002. We used borrowings under this
facility to repurchase $60.0 million aggregate principal amount of our 13.5%
notes in October 1997. Borrowings under the subordinated term loan facility are
secured by a second interest in our assets, and by letters of credit backed by
certain of our stockholders. In consideration for providing these letters of
credit, we issued warrants to the stockholders providing the letters of credit.
We issued a total of warrants with a fair value at the date of
issuance of approximately $1.7 million. This has been reflected as debt issuance
costs and as additional paid-in capital in the accompanying balance sheets. This
debt issuance cost is being amortized over a period extending through October
2002. It is expected that these warrants will be exchanged for an aggregate of
shares of common stock at the time of the offering. In addition, we
reimburse these stockholders for the costs they incur in maintaining these
letters of credit. Such amount was approximately $1.0 million in 1999.

Immediately prior to the completion of this offering, we plan to divest
Hatteras through a spin-off to our current stockholders. Hatteras will borrow
$ million under a separate bank credit facility to repay its intercompany debt
to us. We will use such proceeds to repay $ million of the $45.0 million
outstanding under our new senior term loan. In connection with this transaction,
we will provide a one-year guarantee, in the amount of $5.0 million, in support
of Hatteras' credit facility.

We anticipate net proceeds from this offering to be approximately
$ million. Among other uses, we plan to use such proceeds to repay the
remaining $ million outstanding under our new senior term loan and $
million outstanding our subordinated term loan facility. These repayments will
substantially reduce our leverage, decrease our interest expense and reduce our
risk related to future increases in interest rates.

As a result of our historical operating losses, we have net operating loss
carry-forwards of approximately $146.0 million available as of June 30, 1999 to
offset against future income tax obligations.

30
<PAGE>
We participate in certain dealer inventory floor plan financing arrangements
with various financial institutions pursuant to which we may be required to
repurchase products previously sold to a particular dealer in the event of
default by that dealer. Repurchased inventory totaled $1.4 million during the
six months ended June 30, 1997, $4.5 million in the year ended June 30, 1998 and
$3.4 million in the year ended June 30, 1999. As of June 30, 1999, we were
contingently liable under these agreements to repurchase products in the
aggregate amount of $13.8 million. Historically we have been successful in
reselling substantially all repurchased products at a slight discount to our
repurchase costs.

We attempt to comply with existing and/or new regulations and requirements
regarding environmental matters prior to mandated dates of compliance. We are
currently conducting site remediation and site investigations, where necessary.
We have provided reserves, where appropriate, in amounts we believe to be
adequate to cover estimated costs related to such regulatory compliance.

We continuously evaluate our existing operations and investigate possible
strategic acquisitions to complement existing product lines, expand geographic
penetration in the marketplace and strengthen technological capabilities.
Accordingly, while we do not have any arrangement, commitment or understanding
with respect to any particular transaction, future acquisitions, investments and
changes in operations are possible.

We require substantial cash flow to fund our seasonal working capital and
capital spending requirements, and the repayment of our various debt
obligations. Our operating performance continues to be critical in meeting these
cash flow requirements. We believe that cash flow generated from operations,
borrowing capacity under our senior revolving credit facility and proceeds from
this offering will provide sufficient liquidity to fund these obligations in the
foreseeable future.

YEAR 2000

We initiated a project in early 1998 to identify and remediate potential
Year 2000 problems. The project included an extensive review of our operations,
encompassing both information technology and non-IT systems, as well as our
vendor, supplier and customer/dealer networks. The purpose of the project was to
safeguard us from any potential, material adverse impact caused by Y2K,
including any significant disruption of our operations or any failure or
malfunction of our products due to Y2K-related defects.

Although there can be no assurance that a currently unforeseen Y2K-related
issue will not arise and generate a material adverse impact on our operations or
products, we believe that we have identified all potential, significant Y2K
issues and have implemented appropriate remedial action. We further believe that
our internal operating systems, including both IT and non-IT systems, are either
currently Y2K compliant or that the corrective actions remaining to bring such
systems into compliance will be completed appropriately in advance of January 1,
2000.

Like most manufacturing companies, we depend on an extensive network of
third parties for critical supplies, raw materials and services. Similarly, our
products are sold through an extensive network of third party dealers. We have
contacted our most important vendors and dealers, specifically those vendors and
dealers which could exert a material adverse impact on us if they were to have
Y2K-related problems. Although there can be no assurance that these vendors and
dealers have adequately assessed all of their potential Y2K issues, we have
received assurance from all of our engine suppliers and most of our other major
vendors that Y2K does not present a significant risk. In those instances where
we have not received reasonable assurance that a particular vendor or dealer
will be Y2K compliant, contingency plans, including alternative sources or
stockpiling in anticipation of future requirements, have been or are being
developed.

At the inception of our Y2K project in 1998, we engaged the services of an
outside consulting firm specializing in Y2K compliance efforts to review and
assess our Y2K efforts. We have upgraded or

31
<PAGE>
replaced hardware and software systems, including non-IT systems with embedded
chip technology, where necessary. Additional costs have been incurred to test
both existing and newly installed or upgraded systems. We estimate that the cost
of our Y2K-related activities, beginning in early 1998 and extending into the
current year, will be approximately $3.3 million. Of the total estimated cost,
approximately $2.6 million has been spent to date.

We believe that we have identified and corrected potential Y2K problems
throughout our key operating systems and that we will not experience any
material adverse impact as a result of Y2K. We further believe that our most
likely worst case Y2K scenario is a temporary disruption (defined as ranging
from several hours to less than one week) of our production capability. The
economic consequences of such a temporary production disruption, while
undesirable, would not be material. However, because of the complexity and
potential unforeseen ramifications of the Y2K issue, and our necessary reliance
on third party vendors and dealers, there can be no assurance that the actual
consequences of Y2K-related problems will not be material to our operations.

MARKET RISK

We are exposed to various market risks, including changes in interest rates
and pricing on certain commodity raw materials. We do not enter into derivatives
contracts or other financial instruments for trading or speculative purposes.

INTEREST RATES

We rely on long-term variable and fixed rate debt in our capital structure.
We do not currently have in place interest rate caps in connection with the
floating-rate balance of our interest-sensitive liabilities. Our outstanding
interest-sensitive financial instruments as of June 30, 1999, are reflected in
Note 5 of the Notes to the Consolidated Financial Statements.

At June 30, 1999, the carrying value of our fixed rate debt was
approximately $5.8 million less than its fair value. Market risk related to our
fixed rate debt is estimated as the potential increase in fair value resulting
from a hypothetical one-half percent decrease in interest rates, and amounts to
approximately $1.5 million. Market risk related to our variable rate debt is
estimated as the potential decrease in pre-tax earnings resulting from a
hypothetical one-half percent increase in interest rates. If interest rates rise
immediately by one-half percent, pre-tax earnings will decrease by approximately
$500,000 in 2000.

MATERIALS

Certain commodity raw materials, such as aluminum, fiberglass and resin,
used in the manufacture of our products are subject to pricing volatility. We do
not engage in hedging activities, although at times we enter into contracts
which are subject to quarterly price adjustments. We generally secure our
commodity raw material requirements through fixed-price supply agreements which
run for one- to three-year periods.

32
<PAGE>
BUSINESS

OVERVIEW

We are the second largest manufacturer of motorized recreational boats in
the world. We produce boats under the leading brand names of AQUASPORT, CARVER,
CRESTLINER, GLASTRON, LARSON, LOGIC, LUND, NOVA, RANGER, SCARAB, TROJAN and
WELLCRAFT. We sell our products through an established network of approximately
1,300 independent authorized dealers in all 50 states and approximately 30
foreign countries. We have recently introduced new technologies to our
manufacturing processes that allow us to produce higher quality boats more
efficiently and with fewer regulated air emissions. We believe our innovations
have positioned us to enter new markets and substantially increase our market
share in the recreational boating industry.

INDUSTRY OVERVIEW

Total U.S. retail sales of new motorized recreational boats were
approximately $7.5 billion in 1998 increasing from $4.1 billion in 1992. We
believe that sales of recreational power boats have grown steadily since 1971,
except for the 1989 to 1992 time frame. During that four-year period, the
effects of a recession, the imposition of a luxury tax, and other adverse
political and economic events had a material adverse impact on sales of all
boats, but particularly in the upper end of the segment including cruisers and
luxury yachts.

Sales trends in the recreational boating industry are influenced by several
factors, including general economic growth, consumer confidence, spending habits
and household income and net worth levels. Interest rates and fuel prices also
have a direct impact on boat sales, as well as demographic trends at the local,
regional and national level. Competition from other leisure and recreational
activities, such as vacation properties and travel, can also affect sales of
recreational boats.

We believe the upturn in the industry from 1992 to 1998 has been fueled by
the overall strength of the U.S. economy and the rapid growth in the wealth and
number of consumers from the baby-boomer generation, as well as demand for boats
from the estimated 35 million adult anglers in the U.S. Our target market is the
35 to 54 age group, which overlaps with the baby-boomer population. Although
individuals in our target age group account for only 36% of the U.S. population
over age 16, they account for over 50% of the discretionary income and represent
the fastest growing segment of the U.S. population, growing at a 2.5% annual
rate.

We believe that we are uniquely positioned to take advantage of the
following conditions, which continue to characterize the industry, despite its
recent growth:

- Labor-intensive manufacturing processes which remain largely unautomated;

- Increasingly strict environmental standards derived from governmental
regulations and customer sensitivities;

- A lack of focus on coordinated customer service and support by dealers and
manufacturers; and

- A high degree of fragmentation and competition among more than 3,700
recreational boat manufacturers.

33
<PAGE>
STRATEGY

Our operating strategy emphasizes our new proprietary technologies, allowing
us to:

- DELIVER A SUPERIOR QUALITY PRODUCT. Our commitment to building high
quality boats has resulted in our acquiring new manufacturing technologies
that we believe will yield boats of increased durability, structural
integrity and consistency. We began producing VEC boats on a limited basis
in early 1999, and we expect to integrate VEC systems into all our
fiberglass operations for boats under 30 feet over the next two years. We
plan to use our VEC process to produce premium quality boats carrying a
limited lifetime warranty. Our Roplene construction technology has enabled
us to produce high quality recyclable polyethylene boats, which also carry
a limited lifetime warranty. We market these boats as the World's Toughest
Boat-TM-, at a discount to the typical sales price of comparable
entry-level fiberglass boats.

- LOWER UNIT COSTS THROUGH INCREASED AUTOMATION IN OUR PLANTS. Based on our
experience to date, we expect the increased automation and process
controls associated with our new manufacturing processes to significantly
reduce our labor, quality control and warranty costs. We also hope to
reduce costs by shortening our product changeover and new product
development time frames.

- EXCEED CURRENT ENVIRONMENTAL QUALITY STANDARDS FOR MANUFACTURERS IN OUR
INDUSTRY. Our new VEC and Roplene technologies enable us to produce boats
with significantly less regulated air emissions than traditional
processes. Traditional open-mold processes produce air emissions,
particularly styrene, that are regulated by the government. Boat
production can be limited by these regulations. Our new technologies
eliminate a substantial amount of these emissions, thereby producing a
cleaner and safer work environment, which will allow us to produce more
boats at existing facilities. We believe that consumers and governmental
regulators alike will react positively toward these advances in
manufacturing, and that our facilities which operate with these
technologies will be among the leaders in creating cleaner and safer work
environments in our industry.

- LEVERAGE OUR BUYING POWER THROUGH ECONOMIES OF SCALE. We are the largest
motorized recreational boat manufacturer that does not manufacture its own
engines. We believe this positions us as the largest third party customer
of our major engine suppliers. We intend to continue seeking the most
advantageous purchasing arrangements from these suppliers, while
continuing to expand and maintain strong relationships with other engine
suppliers from whom we purchase engines. We are also a significant
consumer of fiberglass materials, and we intend to capitalize on our
relationships with fiberglass suppliers to help us commercialize the VEC
technology in areas outside our own uses. As we grow, our production
volume should allow us to continue to seek additional benefits from
suppliers.

- EXPLORE OPPORTUNITIES TO LICENSE OR DEVELOP OTHER APPLICATIONS OF VEC
TECHNOLOGY. We believe the VEC technology has broad potential for
commercial application in areas other than fiberglass boat construction.
We intend to market the technology for application to other marine
products that do not compete with our business, and to develop its use,
through licensing arrangements or with other partners, in areas outside
the marine industry, including the transportation, automotive aftermarket,
building and construction and other recreation industries.

Our marketing strategy seeks to increase market share by enabling us to:

- LEVERAGE OUR BRAND NAMES THROUGH INNOVATIVE MARKETING INITIATIVES WITH
STRATEGIC PARTNERS. We have developed unique marketing programs with
strategic partners to increase our exposure in the boating industry. These
programs are designed to assist our dealers and each of our manufacturing
facilities by promoting our products, and cross-marketing other products
with companies that market to a similar customer base. Our RANGER boats,
for example, serve as the manufacturer sponsor for the Wal-Mart FLW
Tournament, a leading professional bass fishing

34
<PAGE>
tour that is televised nationally on ESPN. We will also sponsor the Ranger
Boats Millenium Tournament (M1)(SM), scheduled for a live nationwide
broadcast on the Fox Television Network in November 1999. We believe our
participation in these tournaments has helped establish RANGER as the
premier bass fishing boat product. We intend to apply the RANGER strategy
to certain other boat products such as Lund and Crestliner. Accordingly,
we will sponsor the RLC (Ranger, Lund, Crestliner) tournament in June
2000. We also partner with others, including CITGO, various engine
manufacturers, dealer finance companies and other organizations, to
supplement our sales efforts through cross-marketing efforts and
promotions.

- EXPAND OUR INTERNATIONAL PRESENCE BY CONTINUING TO BUILD DEDICATED SALES,
MARKETING AND DISTRIBUTION SYSTEMS. Historically, our international sales
have not been significant in relation to our overall sales, and we have
traditionally relied on independent sales representatives to market our
products. In 1998, recognizing the opportunity for international growth,
we appointed a director of international sales and added a dedicated
international sales and support department. We currently have
relationships with more than 200 international dealers. We have arranged
for floor plan financing agreements or credit insurance in most of the
foreign markets we serve. We believe that our dedicated sales force, a
stronger international dealer network and our increased commitment to the
international market for motorized recreational boats will enable us to
substantially increase our presence in the international market place.

- STRENGTHEN OUR DEALER ORGANIZATION THROUGH EXPANDING OUR NETWORK AND
PROVIDING SUPERIOR CUSTOMER SERVICE AND SUPPORT. We have a distribution
network of over 1,300 dealers located throughout the United States and
internationally. We also seek to capitalize on our strong dealer network
by educating our dealers on the sales and servicing of our products and
helping them provide more comprehensive customer service, with the goal of
increasing customer satisfaction, customer retention and future sales. We
provide promotional and incentive programs to help our dealers increase
product sales. We intend to continue to strengthen our dealer network and
build brand loyalty with both dealers and customers.

As part of our overall strategy, we will also consider and make strategic
acquisitions in order to:

- COMPLEMENT OUR EXISTING PRODUCT LINES, EXPAND OUR GEOGRAPHIC PRESENCE IN
THE MARKETPLACE AND STRENGTHEN OUR TECHNOLOGICAL CAPABILITIES.
Historically, we have expanded our business and product lines through
strategic acquisitions, including three during the past year. As a result
of our recent acquisitions, we have expanded into a new market for
entry-level boats with our Roplene technology, positioned our company to
exploit the VEC technology in the fiberglass business, and gained the
opportunity to expand our aluminum boat manufacturing presence in the
southern United States with our Horizon acquisition. We will continue to
evaluate acquisition opportunities that allow us to expand our geographic
reach, improve our technology, or strengthen our brand offerings.

35
<PAGE>
PRODUCTS

We believe that we offer the most comprehensive range of product lines of
motorized recreational boats in the industry. In particular, we seek to
distinguish ourselves by offering a wide range of products to the fishing boat
market and the family recreational market, as well as many smaller niche
markets.

The following table provides a brief description of each of our brands and
its particular market focus:

<TABLE>
<CAPTION>
BRAND
AND YEAR NUMBER OF OVERALL APPROXIMATE RETAIL
ESTABLISHED MODELS LENGTH PRICE RANGE DESCRIPTION
- -------------------- ----------- ---------- ----------------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Aquasport (1964) 12 16'-27' $12,700 to $93,000 Fiberglass offshore fishing boats. Designed for
offshore and big-inland water use by dedicated
experienced fishermen and promoted through our
sponsorship of professional offshore fishing teams.

Carver (1954) 13 32'-53' $125,000 to $750,000 Fiberglass, wide-beam, accommodation-focused
cruisers. Marketed to experienced boat owners
through trade magazines and boat show exhibitions.

Crestliner (1946) 43 12'-24' $500 to $35,000 Aluminum fish'n ski, narrow-beam sportfishing
cruisers, utility, bass and fishing boats, pontoons
and deckboats. Marketed to entry-level family
fishing and boating enthusiasts with
industry-leading warranty.

Glastron (1956) 21 16'-24' $6,000 to $49,000 Fiberglass runabouts, narrow-beam cruisers and
performance boats. Encompasses affordable,
entry-level to mid-range sportboats. Marketed as
high value runabouts for family groups.

Larson (1913) 23 16'-33' $6,000 to $150,000 Fiberglass runabouts, wide-beam and narrow-beam
cruisers and deckboats. Marketed to the high-end of
the largest segment of the powerboat market.

Logic (1994) 16 12'-21' $1,800 to $25,000 Low-cost, entry-level polyethylene fishing and
utility boats. Marketed as the World's Toughest
Boats-TM- to entry-level boat buyers.

Lund (1948) 60 12'-22' $1,000 to $35,000 Premium aluminum fishing boats ranging from basic
utility models to tournament models. Marketed
through alliances with professional fishing
community.

Nova (1999) 45 10'-25' $500 to $22,000 Aluminum utility boats, bass boats, pontoons and
deck boats. Marketed to price-conscious and
first-time boat buyers.
</TABLE>

36
<PAGE>
<TABLE>
<CAPTION>
BRAND
AND YEAR NUMBER OF OVERALL APPROXIMATE RETAIL
ESTABLISHED MODELS LENGTH PRICE RANGE DESCRIPTION
- -------------------- ----------- ---------- ----------------------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Ranger (1968) 47 16'-25' $10,000 to $60,000 Fiberglass and aluminum bass, multi-species and
saltwater fishing boats. Marketed to professional
and other experienced fishermen through sponsorship
of fishing tournaments and alliances with
professional fishing circuits.

Trojan (1961) 4 32'-44' $100,000 to $450,000 Fiberglass express cruisers. Marketed to youthful,
affluent boaters.

Wellcraft (1955) 38 16'-45' $11,500 to $395,000 Fiberglass runabouts, wide-beam sport and
performance cruisers, SCARAB performance boats and
fiberglass offshore fishing boats. Promoted through
sponsorship of professional offshore racing
competitions and drivers.
</TABLE>

TECHNOLOGY

FIBERGLASS MANUFACTURING TECHNOLOGY AND PROCESSES

For the past fifty years, essentially the same technologies and processes
have been used to produce fiberglass boats. The most common method is open-face
molding which is usually a labor-intensive, manual process whereby employees
hand spray and apply fiberglass and resin in layers on open molds to create boat
hulls, decks, stringers and other smaller fiberglass components. This process
can result in inconsistencies in the size and weight of parts, which may lead to
high warranty costs. Open-face molding is typically capable of producing one
hull per mold during a work day.

The hand spraying of the resin and fiberglass in the open-face molding
method creates styrene emissions and is subject to regulation by OSHA and the
U.S. EPA and its state counterparts. OSHA standards limit the amount of styrene
emissions to which an employee may be exposed without the need for respiratory
protection or upgraded plant ventilation systems. The EPA and its state
counterparts restrict the approved levels of styrene emissions in a particular
plant's air emissions facility permit.

Since the early 1990s, we have been exploring new technologies to improve
labor efficiencies, product quality and plant working conditions. Eighteen
months ago, we combined efforts with Pyramid Operating Systems, Inc. to continue
the development of a new injection molding manufacturing process, called Virtual
Engineered Composites-TM- or VEC-TM-, in which Pyramid had already invested over
$12.0 million. We have spent an additional $1.7 million to help develop the VEC
technology. We currently own a minority interest in Pyramid and will acquire the
remaining shares of Pyramid when we complete this offering.

The VEC technology is designed to improve all major aspects of the existing
fiberglass open-faced molding process currently used by numerous industries,
including the boat manufacturing industry. In the VEC process, the production of
the fiberglass parts is accomplished through a closed-mold process which
substantially reduces styrene emissions. The VEC manufacturing process provides
a high degree of automated manufacturing of fiberglass products with relatively
low capital investment. We believe that the VEC technology, has the potential to
become the standard for fiberglass manufacturing in both marine and non-marine
industries.

The VEC operating system consists of integrated software and hardware that
manage the entire lamination process, including equipment, resins and process.
Each facility that contains a VEC cell will be connected by dedicated digital
phone lines to a remote monitoring facility where our technical

37
<PAGE>
experts are available 24 hours a day, 7 days a week to provide advice and
technical assistance as necessary. The VEC operating process also includes a
patented low-cost flexible mold system enabling us to produce a variety of parts
economically. This mold system utilizes a thin composite skin in the shape of
the part mounted on a water-filled pressure vessel. This composite skin can be
rapidly fabricated and is readily changeable, thereby significantly improving
the speed and cost of prototyping new parts. The essential advantages of the VEC
operating system are that it enables the manufacturer to control the key
elements of the molding process, lower unit manufacturing costs through labor
savings, eliminate structural inconsistencies and variances, produce stronger
products, and substantially reduce styrene emissions inherent in the open-faced
lamination process.

The following table illustrates the potential advantages of the new VEC
technology compared to a typical open-faced molding process:

<TABLE>
<CAPTION>
VEC-TM- VERSUS
CHARACTERISTIC OPEN-FACE MOLDING IMPLICATION
- --------------------------------------------- ------------------- ---------------------------------------------
<S> <C> <C>
Tensile Modulus (overall strength)(psi)...... 15% Stronger(1) Stronger composite, allowing for lower weight
parts and reduced warranty costs; uses less
resin reducing materials cost

Part Weight Variability (lbs.)............... 80% Less(2) Increased product consistency, easier to
assemble, helps reduce warranty costs

Designed Part Weight (lbs.).................. 20% Lighter(3) Lower weight parts, less resin so lower
materials costs

Styrene Emissions--Lamination Only (lb. 75% Less(4) More capacity in plant throughput because of
Styrene per lb. Laminate).................. greater capacity in air emissions permits,
better work environment

Factory Floor Space (ft.)(2)................. 75% Less(2) Reduces overhead and need for additional
plant capacity

Cycle Time (minutes)......................... 75% Less(2) Increases production efficiency and increases
plant capacity
</TABLE>

- ------------------------

(1) Tested at Product Design Center, Westerville, Ohio.

(2) Substantiated at our manufacturing/test site.

(3) Internal calculation for engineering-designed part.

(4) Compilation from U.S. Environmental Protection Agency Air Pollutant
Emissions Factors AP-42 Section 4.4 "Polyester Resin Plastic Products
Fabrication."

We have conducted extensive testing of the VEC-produced boat hulls. These
tests include on-water endurance testing in a variety of conditions and
aggressive operations for 200 hours per hull. At various stages in the design
process, VEC-produced hulls or panel samples have been tested by independent
third parties for blister resistance and ultra-violet resistance (Cook
Composites); thermoshock (Enviro Lab); and tensile, flexural and impact strength
(Reichhold Chemical and Product Design Center). The results of these tests
validate our confidence in the quality of VEC-produced boats, enabling us to
provide our customers with a limited lifetime warranty instead of the more
traditional 5-year structural warranty.

38
<PAGE>
We believe that closed-molding technology for fiberglass manufacturing, such
as the VEC technology, is likely to become the new standard for the fiberglass
boat building industry. For us, we expect it will:

- Reduce manufacturing costs and increase efficiency;

- Substantially reduce fiberglass warranty issues while allowing us to issue
limited lifetime structural warranties on VEC-produced hulls;

- Improve our ability to produce lower cost tooling in less time than with
conventional methods;

- Dramatically reduce our styrene emissions associated with the traditional
fiberglass lamination process; and

- Provide products of a uniform interior and exterior quality.

EXPANSION OF VEC

We are building an estimated $12.0 million manufacturing facility that will
utilize our VEC technology and other new process equipment. This facility will
be located adjacent to our current Larson/Glastron facility in Little Falls,
Minnesota. We expect to complete this facility by June 2000. Over the next two
years, we plan to expand the use of the VEC process in our fiberglass
manufacturing activities to include hulls, decking, stringers (internal
structural supports) and smaller fiberglass components.

OTHER VEC OPPORTUNITIES

Based on fiberglass manufacturing industry research, we believe that the VEC
technology and processes offer significant opportunities to both marine and
non-marine industries. As we develop this technology, we plan to expand its
application to other marine products that do not compete with our business, such
as ski boats and sail boats. We plan to fully optimize the structural and
financial benefits of the VEC process in marine applications by licensing the
technology to other boat manufacturers. We plan to expand the VEC technology to
non-marine applications and explore licensing opportunities with third parties
in non-marine industries. We believe potential markets for VEC technology
outside of the marine industry include transportation, building and construction
and recreation. Target markets in transportation include truck, bus, heavy
equipment and automotive after market parts. The target markets in building and
construction include exterior doors, tubs and showers. The target markets in
recreation include golf carts, RV components and water slides. We estimate the
potential total global market for VEC-produced products could be approximately
$10.0 billion.

ROPLENE CONSTRUCTION MANUFACTURING

Our newly-acquired subsidiary, Genmar Logic, LLC, employs Roplene
construction using polyethylene and patented rotational molding manufacturing
technology to produce our highly-durable line of LOGIC boats at low cost. This
technology received the National Society of Professional Engineers' award for
Best New Product of 1998 in the small company category and the Governor's New
Product Award in 1997 from the Professional Engineers of North Carolina. At the
time we acquired the Roplene manufacturing operations, approximately $10.5
million had been invested in the development of the technology.

Polyethylene is five times stronger than fiberglass and significantly less
expensive. This material in similar form has received broad acceptance in the
manufacture of products such as canoes and kayaks. Rotational molding involves
loading pre-measured polyethylene into a mold. The mold can be configured to
form internal structural parts that connect the upper and lower surfaces of the
molded item. The mold is then placed into an oven where it is rotated about both
its vertical and horizontal axes. The melting polyethylene adheres to the hot
mold and selectively coats the inner surface of the mold. The mold continues to
rotate during the cooling cycle so that the part retains an even thickness

39
<PAGE>
throughout the process. Once the parts are cooled, they are released from the
mold. The rotational speed and heating and cooling times are all controlled
throughout the process. In addition to being stronger and less expensive than
fiberglass, the polyethylene materials used in making LOGIC boats are
recyclable.

MARKETING AND DISTRIBUTION

MARKETING

Our products are marketed worldwide through independent dealer networks. In
our industry, independent dealers are the primary means by which motorized
recreational boats are marketed to retail consumers. Because the boating
industry is highly competitive, we are continually focused on developing unique
marketing programs to assist our dealers and their sales efforts. Our internal
sales force supplements our dealers' marketing efforts with various initiatives
and strategies, including:

- Advertising in regional, national and international boating and other
recreation magazines;

- Furnishing promotional assistance at regional, national or international
boat shows;

- Working with dealers to identify new design features for our products;

- Participating in special promotional programs with other producers of
consumer goods and certain retailers; and

- Providing company-sponsored retail finance and other programs designed to
assist our dealers in selling and marketing our products.

Internationally, all brands are positioned as Genmar products under a
super-brand concept to maximize leverage, expand sales for our less-established
brands, and distinguish ourselves from competitors.

RETAILER ALLIANCES. We use marketing programs across the United States with
gas stations, marinas and high-traffic retail locations to achieve successful
marketing results. We have developed exclusive or preferential relationships
with CITGO, Wal-Mart Stores, Inc. (Sam's Club), Amway and Boater's World to
offer complimentary or discounted items to customers and/or employees of these
organizations who purchase our boats through authorized dealers. CITGO, a
leading convenience store operator with 17,000 U.S. locations, promotes our
products with banners, posters and other point-of-sale items for one month each
spring. We have developed a marketing partnership with the Sam's Club division
of Wal-Mart Stores, Inc., which has afforded our dealers the preferential right
to display and sell boats from Sam's Club locations. The Amway and Boater's
World relationships provide specific benefits to purchasers of our boats when
the sale results from a joint promotion.

TOURNAMENT SPONSORSHIP. We believe one of our primary strengths is the
manufacturing and marketing of fishing boats. Approximately 35 million adult
Americans participate in recreational fishing. RANGER fiberglass fishing boats
and LUND and CRESTLINER aluminum fishing boats are leaders in their respective
market niches. Historically, these brand names have gained visibility through
the sponsorship of fishing tournaments. However, beginning in 1996, through
Operation Bass, Inc., an entity owned and controlled by some of our stockholders
and officers, RANGER became the exclusive boat manufacturer sponsor of the
Wal-Mart FLW Tournament. Broadcast on ESPN and ESPN2, this tournament is the
mostly widely televised fishing tournament in the world. The tournament is also
supported by other sponsors such as VISA, Coca-Cola, Chevrolet, Wal-Mart Stores,
Inc., Coleman Outdoor Recreation, Fuji Photo USA, Black & Decker and Timex. We
believe the tournament has generated significant media attention and has further
established our RANGER boats as the leading bass-fishing product. We see this
growth in fishing and tournaments as an important opportunity for marketing our
fishing boat products. We will sponsor the Ranger Boats Millennium Tournament
(M1)(SM), a bi-annual event scheduled for a live nationwide broadcast on the Fox
Television Network in November 1999, and the RLC (Ranger, Lund, Crestliner)
Tournament in June 2000, with money payouts of approximately

40
<PAGE>
$3.5 million and $1.5 million, respectively. In order to qualify for these
events, a participant is required to own the appropriate Genmar fishing boat and
be in the highest winning position of the various qualifying tournaments.
Further expansion of tournaments, including those for salt-water fishing, are
also contemplated.

DISTRIBUTION

Our sales are made through more than 1,300 independent authorized dealers.
Our boat brand success can be directly associated with the quality of our dealer
organizations. Many of these dealers carry only one or two of our product lines
and most are not exclusive to us.

Although we have long-standing relationships with many of our dealers,
dealer agreements generally are non-exclusive and for a term of one year. No
single dealer accounted for more than 5% of our net revenues in the fiscal year
ended June 30, 1999.

We sponsor various programs to provide our dealers with marketing and
financial assistance and to encourage them to offer broader lines of our
products. Under these programs, we offer dealers marketing discounts for early
delivery and bulk sales, as well as interest-free floor plan inventory financing
for certain periods. In most cases, our boats are sold to dealers under
third-party floor plan financing arrangements or cash on delivery. Foreign sales
are financed primarily under letter of credit terms or with credit insurance. In
a typical floor plan financing arrangement, an institutional lender agrees to
provide a dealer with a line of credit in a specified amount for the purchase of
inventory that secures that credit. We, in turn, agree to indemnify the lender
against loss up to a specified aggregate amount arising from defaults by dealers
financed by that lender. This indemnification is generally made through our
repurchase of boats that have been repossessed by the lender. For the fiscal
year ended June 30, 1999, 67.3% of our net revenues were financed through these
floor plan financing arrangements. We do not provide financing to retail
consumers.

Through the use of special incentive programs, we encourage dealers to place
orders for products on a consistent and continuous basis throughout the year.
These programs facilitate earlier movement of our inventory into distribution,
enable our plants to manufacture at a relatively constant rate throughout the
year and eliminate the need to maintain a large stock of products in inventory.
This reduces the impact of seasonal factors on our operations. We hold various
annual dealer meetings, at which we promote our new product offerings for the
new model year, which commences on July 1. We have ongoing programs aimed at
maintaining inventories at the lowest possible levels. Sales are made to dealers
by our own sales personnel and by independent manufacturers' representatives.

Over the last two years, dealers have begun to consolidate and bring more
sophistication to the sales, customer service and management areas. Throughout
our organization, we have taken the opportunity to strengthen existing
dealership arrangements and secure new dealer relationships.

Beginning in 1998, we revised our approach to conducting our international
business. Historically, we used outside organizations to manage our
international distribution activities. Sales outside the United States and
Canada during 1999 accounted for only 5.1% of our total revenues. Our strategy
for expanding international sales combines a centralized approach to sales of
individual brands, a shift in branding philosophy and the development of sales
support programs customized to foreign markets. We have established a dedicated
and experienced staff to conduct sales and initiate dealer relationships
throughout the world. A corporate international department is responsible for
sales of our individual brands, providing dealers a single, cost-efficient
source of products across our entire range of offerings.

We are seeking to build long-term partnerships with international dealers
through in-market specialists, a multi-lingual staff and a customized approach
to finance, credit, marketing and dealer support.

41
<PAGE>
MANUFACTURING OPERATIONS

Our motorized recreational boats are manufactured at 10 principal locations
in Arkansas, Florida, Kansas, Minnesota, North Carolina, Wisconsin and Manitoba,
Canada. We intend to increase operating efficiency and improve product quality
by maximizing our manufacturing capacity and by utilizing our new manufacturing
technologies. We also seek further cost-savings and improved plant capacity
utilization by having certain of our plants manufacture boats under several
different brand names. Our recent acquisitions of operations such as Logic and
Nova have increased our manufacturing capacity.

MANUFACTURING PROCESSES

Our fiberglass and aluminum manufacturing processes are designed to ensure
the quality and durability of our products. All of our boats undergo continuous
quality control inspection during assembly and again at the end of the
production line. When the boat has been completed, it is loaded on our company
trucks, or a common carrier's vehicle, and delivered to the dealer.

FIBERGLASS. The fiberglass manufacturing process begins with the
establishment of design parameters. Boats are then designed and a plug, or
reverse mold, is constructed. Molds used in the boatbuilding process are cast
from the plug. Prototype boats are built in the initial mold. If the prototype
performs to established test criteria, additional molds are created for
production. The manufacturing process begins with the application of the outside
finish, or gelcoat, directly into the mold. Layers of fiberglass and resin are
then applied during the lamination process over the gelcoat. After curing, the
hulls and decks are removed from the molds and are trimmed and ready for final
assembly which will include the installation of electrical and plumbing systems,
engines, upholstery, accessories and graphics. In some operations, some items
like vinyl upholstery may be outsourced to outside vendors. Our VEC technology
manufacturing processes are discussed in "--Technology."

ALUMINUM. In our aluminum operations, we cut the aluminum into various part
patterns, bend the aluminum in accordance with design specifications, then
assemble the parts by riveting or welding. We then install the electrical and
plumbing systems, engines, upholstery, accessories and graphics.

ROPLENE CONSTRUCTION. The Roplene construction technology offers many
advantages in the boat manufacturing process. The entire hull, deck and stringer
system is manufactured in a single manufacturing operation resulting in low
manufacturing costs and low floor space requirements. A number of the attachment
fittings for components and accessories are also assembled in this single
manufacturing step. The attachment of the various components and accessories
during the final stages of completion requires minimal operations. The
computerized rotational molding operation minimizes the need for significant
amounts of highly skilled labor. The plant contains computer control of the
rotational molding operation and finishing operations, maximizing product flow
and minimizing unnecessary movement of components and product.

ENVIRONMENTAL ASPECTS

Since the early 1990's we have been aggressive in our efforts to employ
technologies to reduce regulated air emissions and the historical dependence on
regulated chemicals in the manufacturing process. We have led the industry in
the incorporation of low-emission resins and gelcoats into our open-face molding
processes. We also employ a variety of closed-molding techniques in our
operations to produce small parts. In addition, we have tested other
technologies for large parts. In the past, we have not been able to convert
these technologies to a production scale for large parts because of high cost,
labor inefficiencies and sub-standard part quality. We believe that our new VEC
and Roplene technologies will address many of these problems.

We have been aggressive in removing flammable and other regulated substances
from the workplace, such as cleaners and adhesives, and replacing them with
environmentally friendly materials that are not regulated.

42
<PAGE>
AUTOMATION

We currently use robotic cutters and welders in some of our fiberglass and
aluminum boat manufacturing operations. We have been exploring the use of
robotics in our remaining facilities to further automate our manufacturing
process. Many aspects of the VEC operating system are particularly well-suited
to automation, which we plan to introduce to our operations as we increase
production of VEC boats. Our new manufacturing facility will feature four VEC
cells capable of operating around the clock. These cells will use robotics to
spray gelcoat and remove parts from the mold. The parts will then move to the
cut-and-trim area where robotic water jet cutters will trim the parts and make
the necessary borings for the assembly process. The assembly area will feature a
conveyor system designed to facilitate engine installation and advanced work
aids for final boat assembly, and to minimize materials.

MANAGEMENT INFORMATION SYSTEMS

We use computer systems to help schedule production, manage our inventory
and order supplies. Seven of our ten manufacturing facilities are supported by
purchased or internally developed integrated enterprise resource planning
systems. Our two newly acquired and our Canadian manufacturing facilities
utilize certain limited systems to support their manufacturing and financial
operations.

BACKLOG

We work closely with our dealers to monitor their monthly inventory levels
and retail sales, in order to allow us to better manage our production and
shipping requirements. Dealer sales are made pursuant to purchase orders rather
than long-term contracts. Our backlog consists of purchase orders on hand,
generally having delivery dates scheduled over the following six months. Our
backlog for the recreational boat segment increased 92.3% to $228.4 million at
July 31, 1999, compared to $118.8 million at July 31, 1998. Although customers
may cancel or reschedule deliveries without penalty until the production of the
order is started, we believe our backlog has historically been a reliable
indicator of future revenue results.

SUPPLIERS

We do not manufacture the engines installed on our boats. Engines are
generally specified by dealers at the time of ordering, usually on the basis of
anticipated customer preference or actual customer orders. We have entered into
outboard supply, pre-rig or package agreements with Mercury Marine, a division
of Brunswick Corp., and Outboard Marine Corporation, as well as Yamaha, Honda
and Suzuki. We believe we are the largest third-party customer of both Mercury
Marine and Outboard Marine Corporation. We have also entered into gasoline
inboard and sterndrive supply agreements with Mercury Marine as well as a diesel
and gasoline inboard and sterndrive supply agreement with Volvo Penta of the
Americas. Each of these long-term supply agreements contain incentive and/or
discount provisions, effectively reducing the cost of our engine purchases if we
achieve specified unit or dollar volumes. If we fail to achieve certain unit or
dollar volumes as specified in these agreements, we may lose certain such
discounts or incur penalties.

Although inboard, inboard/outdrive and outboard engines of comparable
quality and cost are available from other manufacturers, in the event of a
sudden interruption in the supply of engines from our principal suppliers, we
could be unable to obtain engines from other suppliers in sufficient quantities
to meet our near-term production schedules and customer preferences.

We have agreements with suppliers of raw materials, including glass,
fiberglass resin and aluminum, electronics and other parts and accessories.
Although we contract for raw material supplies on a bid basis, numerous
alternative raw materials suppliers exist. However, commodity raw material

43
<PAGE>
prices are subject to price fluctuations. If we are not able to pass along price
increases to our customers, these fluctuations could have a material adverse
effect on our results of operations.

COMPETITION

Competition within the recreational boat industry is intense, with more than
3,700 boat manufacturers operating at the national and regional levels. Our
nationally recognized domestic competitors include, among others,

- Brunswick, including its Bayliner, Sea Ray and Boston Whaler operations;
and

- Outboard Marine, including its Four Winns, Stratos and Lowe operations.

Brunswick may have greater financial and other resources than our company,
and both Brunswick and Outboard Marine are vertically integrated and manufacture
engines as well as boats. We believe, however, that our sales are enhanced by
the flexibility our customers have in selecting from the wide range of engines
with which our boats may be fitted. Boat manufacturers also compete directly
with the used boat market and indirectly with other recreational products and
activities.

Our boats currently compete with those of other manufacturers primarily on
the basis of their reputation for performance, durability and stability, as well
as for their styling and price. Pricing of boats at retail is determined solely
by the dealer.

PATENTS AND TRADEMARKS

Historically, patents have not been significant in the motorized
recreational boat industry. Trademarks and trade names do carry importance, but
are generally associated with the name of a particular company or product. We
own trademarks for each of our brand names, all of which have received federal
registration, except LOGIC, for which our application is pending. Other
registered trademarks, such as SCARAB, together with certain styling features
associated with them are licensed exclusively to us by their owners. We are also
a licensee of certain hull designs developed and/or patented by others.

We have applied for patent protection of certain aspects of our VEC
technology. Notices of allowances have been received from the United States
Patent and Trademark Office for applications covering a specific version of a
mold for use in the VEC operating system and a method of forming a molded
article having a marbleized appearance. There are currently three pending United
States patent applications seeking broader protection of the overall VEC
process, on the mold used in the process and on the remote control and
monitoring aspects of the VEC operating system. We also own nine United States
patents covering various aspects of the Roplene construction. These patents
cover various molded boat hull and internal structure and reinforcement
configurations, methods for making such structures and tooling for the Roplene
construction.

REGULATION AND ENVIRONMENTAL

Our operations are subject to numerous federal, state and local laws and
regulations related to the safety and protection of the environment. Certain
materials used in boat manufacturing are toxic, flammable, corrosive or reactive
and are classified by federal and state governments as "hazardous materials."
Control of these substances is regulated by the U.S. Environmental Protection
Agency and state environmental protection agencies, which require reports and
inspect facilities to monitor compliance. In addition, under CERCLA, any
generator of hazardous waste sent to a particular disposal site is potentially
responsible for the cleanup, remediation and response costs required for the
site if the site is not properly closed by the owner or operator, irrespective
of the amount of waste the generator actually sent to the site.

44
<PAGE>
We believe that we are in substantial compliance with all existing
environmental laws and regulations. In 1995, we signed a final consent order
with the Florida Department of Environmental Protection to settle all
outstanding issues with respect to an acetone release at our Wellcraft plant in
Sarasota, Florida. The remaining estimated cost of remediation activities
required at this site ranges from $1.7 million to $2.0 million. Based on
available information, we believe that our reserves as of June 30, 1999 are
adequate to cover these costs.

Historically, our facilities have used underground storage tanks for storing
certain materials associated with our operations, including petroleum, acetone
and resins. We have removed or closed in place all underground storage tanks
according to applicable laws. No material issues related to soil or groundwater
contamination were encountered.

In addition to our current regulatory obligations, we face the risk that the
past practices of some of our current and divested operations may have created
conditions that give rise to liability under CERCLA and comparable state laws.
With respect to these potential liabilities, we have been identified as a
potentially responsible party at approximately 12 active sites. In certain
instances, we also have a duty to indemnify the current owners for environmental
matters related to divested operations, including those of AMF Incorporated.
Excluding the matters with Wellcraft discussed above, we currently anticipate
total environmental-related costs associated with our current and divested
operations at approximately $2.3 million, which include CERCLA-type liabilities.
These costs are likely to be incurred over a period of up to ten years. We made
payments relating to environmental matters in connection with current and
divested businesses of approximately $500,000 in each of the fiscal years ended
June 30, 1999, June 30, 1998 and June 30, 1997. As of June 30, 1999, based on
available information, we have adequate reserves to account for any potential
exposure with respect to current and divested operations, and we believe that
these reserves are adequate to cover any potential costs. Nevertheless, the
nature and extent of CERCLA proceedings is that cleanup estimates, the allocated
financial responsibilities of potentially responsible parties and the degree of
regulatory scrutiny may change over time and therefore we are not certain that
these estimates will ultimately reflect our exposure.

Although capital expenditures related to compliance with environmental laws
are expected to increase in the coming years, we do not currently anticipate
that any material expenditures will be required to continue to comply with
existing environmental or safety laws or regulations in connection with our
ongoing operations. However, we cannot predict future costs for compliance with
certainty with respect to any costs we may be forced to incur in connection with
our historical on-site or off-site waste disposal. In certain circumstances laws
and regulations impose "strict liability," rendering a person liable for
environmental damage regardless of negligence or fault on the part of that
person. In addition, modifications of existing regulations or the adoption of
new regulations in the future, particularly with respect to environmental
standards, could require material capital expenditures or otherwise have a
material adverse effect on our operations.

Motorized recreational boats must be certified by their manufacturer as
meeting U.S. Coast Guard specifications. In addition, boat safety is subject to
federal regulation under the Federal Boat Safety Act of 1971. The Boat Safety
Act requires boat manufacturers to recall products for replacement of parts or
components that have demonstrated defects affecting safety. We have conducted
product recalls in the past to correct safety-related defects. None of the
recalls has had a material adverse effect on us and we believe that our recall
experience is consistent with prevailing industry experience.

Certain states have required or are considering requiring a license to
operate a recreational boat. These licensing requirements are not expected to be
unduly restrictive. They may, however, discourage potential first-time buyers,
which could affect our business. In addition, certain state and local
governmental authorities are contemplating regulatory efforts to restrict
boating activities on certain inland bodies of water. While we cannot assess the
impact that these regulations would have on our

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<PAGE>
business until we know the scope of the regulations, they may have a material
adverse effect on our business.

EMPLOYEES

At June 30, 1999, we had approximately 4,600 employees, none of whom were
subject to a collective bargaining agreement. Approximately 4,100 of these
employees were engaged in our manufacturing operations. We consider our employee
relations to be good. We do not conduct significant manufacturing operations
outside the United States.

PROPERTIES

Our corporate headquarters are located in Minneapolis, Minnesota in leased
facilities. We lease or own the following manufacturing facilities:

<TABLE>
<CAPTION>
PLANT SIZE (SQ.
BRAND LOCATION FT.) OWNED/LEASED
- ---------------------- ------------------------------- ----------------- -------------
<S> <C> <C> <C>
Carver/Trojan Pulaski, Wisconsin 461,000 Owned
Crestliner Little Falls, Minnesota 217,000 Owned
Larson/Glastron Little Falls, Minnesota 351,000 Owned
Logic Durham, North Carolina 69,000 Leased
Lund New York Mills, Minnesota 198,000 Owned
Lund Steinbach, Manitoba 86,000 Owned
Nova Junction City, Kansas 26,000 Leased
Nova Junction City, Kansas 106,000 Owned
Ranger Flippin, Arkansas 457,000 Owned
Wellcraft/Aquasport Sarasota, Florida 760,000 Owned
Wellcraft Avon Park, Florida 157,000 Leased
-----------------
Total 2,888,000
</TABLE>

In connection with our acquisition of Pyramid, we will acquire an additional
56,000 square foot manufacturing facility located in Greenville, Pennsylvania.

We believe that our properties are well maintained and in good operating
condition. Generally, our plants are of reasonably modern, single-story
construction providing for efficient manufacturing and distribution operations.

LEGAL PROCEEDINGS

We are parties to legal proceedings, including product liability and other
claims that are considered to be incidental to our business. In light of
insurance coverage and established reserves, such litigation is not, in the
opinion of management, likely to have a material adverse effect on our financial
position or results of operations. We and our Aquasport, Wellcraft and Genmar
Industries subsidiaries have been named as defendants in COUGLAN V. AQUASPORT,
ET AL., a class action suit filed in the U.S. District Court for the Southern
District of Texas on June 17, 1999. The suit alleges certain claims in
connection with the marketing of AQUASPORT boats from 1996 to 1999, and seeks
monetary damages. We are currently disputing class certification and believe
that we have valid defenses to the liability and damages claims. Although we
plan to vigorously defend this claim, we cannot predict the ultimate resolution
of this case or whether it could have a material adverse effect on our results
of operations. See "--Regulation and Environmental" for a discussion of
administrative proceedings involving environmental laws and regulations.

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Our board of directors currently consists of eight members. We plan to add
an additional independent director in the near future.

Our executive officers and directors, and their ages, positions and brief
biographies, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- -----------------------------------------------------------------------------
<S> <C> <C>
Irwin L. Jacobs.............. 58 Chairman of the Board and Director
Grant E. Oppegaard........... 56 President, Chief Executive Officer and Director
Roger R. Cloutier II......... 46 Executive Vice President, Chief Financial Officer and Director
Steven J. Kubisen............ 47 Senior Vice President--Technology and Corporate Development
Mary P. McConnell............ 46 Senior Vice President, General Counsel and Secretary
John S. Rosendahl............ 35 Senior Vice President--Business Development
George E. Sullivan........... 55 Senior Vice President--Marketing
David H. Vigdal.............. 57 Senior Vice President--Operations
Mark W. Peters............... 37 Vice President and Controller
Ronald V. Purgiel............ 45 Vice President--Purchasing
Daniel W. Schuette........... 52 Vice President--Information Systems
Bjorn Ahlstrom............... 65 Director
Daniel G. DeVos.............. 41 Director
Daniel T. Lindsay............ 55 Director
William W. Nicholson......... 56 Director
Carl R. Pohlad............... 83 Director
</TABLE>

IRWIN L. JACOBS has served as Chairman and a director of Genmar and its
predecessor entities since 1982. Mr. Jacobs was also Chief Executive Officer of
Genmar from April 1994 through December 1995. Mr. Jacobs served as President and
Chief Executive Officer of Minstar and our other predecessor entities from 1982
to 1994. Mr. Jacobs also holds the following positions: President and a director
of Jacobs Management Corporation, a management company, since 1981; Chairman of
Watkins, a company engaged in direct marketing of household and health products,
since 1978; Chairman of Jacobs Trading Company, a company engaged in wholesale
and retail sale of close-out merchandise, since 1989; and Chairman of Operation
Bass, Inc., a tournament fishing management company, since July 1996. Since
March 1997, Mr. Jacobs has been Director of IPI, Inc., a public company engaged
in the franchising of business printing centers. Mr. Jacobs will serve on the
board of directors of Hatteras. Mr. Jacobs served as a principal of IMR Fund,
L.P., a private equity fund, from 1992 through 1999. Mr. Jacobs was a director
of MEI Diversified Inc., a company associated with the management of
professional beauty salons.

GRANT E. OPPEGAARD has served as President and Chief Executive Officer of
Genmar since January 1996 and as a director since 1997. Prior to that time, Mr.
Oppegaard served our company in various capacities, including as a consultant,
President of Sam's Club Boat Buying Program and as Vice Chairman of Genmar.
Prior to 1995, Mr. Oppegaard was Executive Vice President and Senior Operations
Officer of Fingerhut, Inc., a direct marketing company. He also was retained as
a consultant by MEI Diversified Inc. to evaluate the company's operations and
financial condition. In January 1994, he served as Chief Operating Officer of
MEI. Mr. Oppegaard's background includes general management experience in
retailing, television and direct mail marketing, and manufacturing. Mr.
Oppegaard will serve on the board of directors of Hatteras.

ROGER R. CLOUTIER II has served as Executive Vice President and Chief
Financial Officer of Genmar since February 1996 and as a director since 1997. In
addition, since April 1990, Mr. Cloutier

47
<PAGE>
has been employed by and served as Senior Vice President of Jacobs Management
Corporation. Mr. Cloutier has provided and intends to continue to provide his
services primarily to us and, to a much lesser extent, to Jacobs Management.
From 1992 through 1999, Mr. Cloutier actively served as a Vice President of
Jacobs Investors, Inc. and with the general partner to IMR Fund, L.P. Mr.
Cloutier was principally responsible for the overall management of IMR Fund's
investments in portfolio companies, as well as due diligence and negotiation
activities relative to potential acquisitions. Mr. Cloutier was also actively
involved in the management of certain of these portfolio companies. From May
1994 through October 1996, Mr. Cloutier served as a director, and eventually,
Chairman of Accent Software International Ltd., a company that designed and
developed multilingual word processing and intelligent agent software products.
Mr. Cloutier will serve on the board of directors of Hatteras. Mr. Cloutier
began his career with Arthur Andersen & Co., and is a certified public
accountant.

DR. STEVEN J. KUBISEN has served as Senior Vice President--Technology and
Corporate Development of Genmar since July 1999. Prior to joining Genmar, Dr.
Kubisen was Director of Marketing for Alcoa's Corporate Technical Center from
1997 to 1999. From 1994 to 1996, Dr. Kubisen was Vice President--New Business
Development for the management-consulting firm Werner-- Gershon Associates. From
1987 to 1994, Dr. Kubisen held a number of senior management positions with GE
Plastics including General Manager of GE Electromaterials and General Manager--
Technology of GE Silicones. Dr. Kubisen has a Ph.D. in Organic Chemistry from
Harvard University and a B.A. from Cornell University.

MARY P. MCCONNELL has served as Senior Vice President, Secretary and General
Counsel of Genmar since November 1996 and as Vice President, Secretary and
General Counsel from December 1995 through October 1996. From January to
December 1995, Ms. McConnell was Vice President, Director of Environmental and
Regulatory Affairs and Assistant General Counsel of Genmar. Prior to joining
Genmar in 1995, Ms. McConnell was a partner with the law firm of Lindquist &
Vennum, where she practiced since 1988.

JOHN S. ROSENDAHL has served as Senior Vice President--Business Development
of Genmar since August 1998. Mr. Rosendahl served as our Vice
President--Operations from July 1997 to July 1998, Vice President--Finance from
December 1995 to July 1997, and Vice President and Controller from March 1995 to
December 1995. Prior to joining Genmar in December 1994, Mr. Rosendahl worked
for ADC Telecommunications, Inc., a telecommunication equipment company, from
1991 to December 1994, and as a certified public accountant with Arthur Andersen
& Co. from 1986 until 1991.

GEORGE E. SULLIVAN has served as Senior Vice President--Marketing of Genmar
since November 1996. From May 1995 to November 1996, Mr. Sullivan served as Vice
President and General Manager of Genmar's Sam's Club Boat Buying Program. From
June 1990 to May 1995, Mr. Sullivan served in various capacities at an indirect
subsidiary of Genmar, Wellcraft Marine Corp., most recently as Senior Vice
President of Marketing and Planning. Prior to joining Genmar, Mr. Sullivan
served as Vice President of Marketing and Communications of Brunswick's Bayliner
division.

DAVID H. VIGDAL has served as Senior Vice President of Operations of Genmar
since July 1997. Mr. Vigdal served in various positions with Fingerhut
Corporation during a 23-year period, including Vice President of Administration.
From 1993 to 1996, Mr. Vigdal was Executive Vice President of Administration for
Premier Salons, prior to which he served as Vice President of Administration for
CVN Companies, Inc. From May 1993 to December 1993, he served as Vice
President-Administration of MEI Diversified Inc.

MARK W. PETERS has served as Vice President and Controller of Genmar since
July 1997. From December 1995 to July 1997, Mr. Peters served as our Corporate
Controller. Prior to December 1995, Mr. Peters served our company in a variety
of financial management capacities, commencing in 1984.

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<PAGE>
RONALD V. PURGIEL has served as Vice President--Purchasing of Genmar since
1996. Prior to joining Genmar in 1996, Mr. Purgiel was Joint Procurement Manager
for Outboard Marine Corporation Boat Group from 1985 to April 1996.

DANIEL W. SCHUETTE has served as Vice President--Information Systems of
Genmar since February 1997 and as Director of Information Systems from December
1995 to February 1997. Prior to joining Genmar in 1995, Mr. Schuette was Manager
of Operations at Burlington Northern Railroad from September 1992 to December
1995 and Manager of Strategic Planning for Grand Metropolitan-- Pillsbury from
June 1990 to September 1992.

BJORN AHLSTROM has served as a director of Genmar and its predecessor
entities since 1987. Mr. Ahlstrom has been a director of United Jersey Bank
since 1980, director of Volvo GM Heavy Truck Corporation since 1981, director of
Nederman Corporation since 1990, a director of Summit Bank since 1980 and a
director of CTC Industries, Inc. since 1998. Mr. Ahlstrom serves as an
independent consultant to various companies, and is a special limited partner of
IMR Management Partners, L.P. and IMR Fund L.P. Mr. Ahlstrom is a former
President of Volvo North America Corporation, serving in that capacity from 1970
to 1991.

DANIEL G. DEVOS has served as a director of Genmar since April 1994. Mr.
DeVos also holds the following positions: Chairman and Chief Executive Officer
of the Georgian International Group of Companies Ltd., the holding company for
Ontario Regional Airline, a regional passenger shuttle company; President/CEO of
Capital DP Fox Ventures, a real estate development and sports management firm;
Vice President-Corporate Affairs, since 1993, member of the Policy Board, since
1989 and Executive Committee, since 1992 of Amway Corporation, a company engaged
in the direct sale of consumer products; and trustee of First Union Real Estate
Investments, a real estate investment trust. Mr. DeVos previously held other
vice president positions at Amway Corporation.

DANIEL T. LINDSAY has served as a director of Genmar and its predecessor
entities since April 1982. Mr. Lindsay has served as Secretary and director of
Jacobs Industries, Inc. since 1977; Secretary and director of Watkins since
1979; Executive Vice President, Secretary and director of Jacobs Management
Corporation since 1981; and as Secretary and director of Jacobs Investors, Inc.
and IMR General, Inc. since 1992. Mr. Lindsay has been a director of IPI, Inc.
since March 1997 and was a director of Mountain Parks Financial Corporation, a
company engaged in banking services, from 1980 to 1996.

WILLIAM W. NICHOLSON has served as a director of Genmar since April 1996.
Mr. Nicholson is a private investor and served as a consultant to Amway
Corporation. Mr. Nicholson is also a limited partner of IMR Fund, L.P. Mr.
Nicholson also serves as director of the following public companies: INTL
Isotopes Inc., a manufacturer of radio chemistry and pharmaceutical isotopes,
since 1997 and Colorado Prime Inc., a direct seller of meat products, since
1996.

CARL R. POHLAD has served as a director of Genmar and its predecessor
entities since April 1988. Mr. Pohlad has been President and a director of
Marquette Bancshares, Inc., a multi-bank holding company, since 1993. Prior to
1993, Mr. Pohlad was President and Chief Executive Officer of Marquette Bank
Minneapolis and Bank Shares Incorporated. Mr. Pohlad is currently a director and
chairman of Mesaba Holdings, Inc., a regional airline, and owner, director and
president of CRP Sports, Inc.; the managing general partner of the Minnesota
Twins, a major league baseball franchise. Mr. Pohlad formerly served as Chairman
of MEI Corporation from 1972 to 1986, and of MEI Diversified Inc. from 1986 to
1994.

MEI Diversified Inc., a company in which Messrs. Jacobs and Pohlad served as
directors and Messrs. Vigdal and Oppegaard served as officers, was reorganized
under Chapter 11 of the Bankruptcy Code in 1994.

49
<PAGE>
BOARD COMPOSITION

Upon completion of this offering, our board of directors will consist of
three classes that serve staggered three-year terms as follows:

<TABLE>
<CAPTION>
CLASS EXPIRATION MEMBERS
- ------------------------------- ---------- --------------------------------------------------------------------
<S> <C> <C>
Class I........................ 2000 Daniel T. Lindsay, Carl R. Pohlad
Class II....................... 2001 Daniel G. DeVos, William W. Nicholson, Grant E. Oppegaard
Class III...................... 2002 Irwin L. Jacobs, Bjorn Ahlstrom, Roger R. Cloutier II
</TABLE>

BOARD COMMITTEES

There is no nominating committee of the Board; nominees for director are
selected by the board of directors.

EXECUTIVE COMMITTEE. The executive committee provides oversight to our
operations and has all the authority of the Board of Directors, except with
respect to items requiring stockholder approval or submission. The executive
committee members are Bjorn Ahlstrom, Daniel G. DeVos, William W. Nicholson and
Irwin L. Jacobs.

COMPENSATION COMMITTEE. The compensation committee administers the issuance
of stock options under our stock option plans, makes recommendations to the
board of directors regarding the various incentive programs and benefit plans,
and determines salaries and incentive compensation for the executive officers.
The compensation committee members are Daniel T. Lindsay, William W. Nicholson
and Carl R. Pohlad.

AUDIT COMMITTEE. The audit committee recommends to the board of directors
the engagement of independent public accountants, reviews the scope and results
of our audits, reviews our internal accounting controls and reviews the
professional services furnished to us by our independent public accountants. The
audit committee members are Bjorn Ahlstrom, Daniel G. DeVos and William W.
Nicholson.

DIRECTOR COMPENSATION

In fiscal year 1999, we paid each of our outside directors annual
compensation of $15,000 in addition to $2,500 for each committee meeting
attended in person.

Under our 1999 Director Stock Option Plan, we will grant stock options to
our outside directors annually in lieu of cash fees. Initially, each director
will receive a grant of options at the offering price, and following each
subsequent annual meeting will receive an automatic grant of options at
fair market value. Messrs. Jacobs, Cloutier and Oppegaard do not receive any
director compensation.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee is responsible for establishing our policies
relating to and the components of executive officer compensation. None of our
executive officers has served as a director or member of the compensation
committee of another entity that had any executive officer who served on any of
our committees or as a director of our company.

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<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the compensation paid for services rendered
in all capacities to our company during each of our last three fiscal years to
the Chief Executive Officer of Genmar and to the four most highly compensated
executive officers.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
----------------------------------
BONUS PAID
NAME AND PRINCIPAL POSITION YEAR SALARY OR EARNED
- --------------------------------------------------------------------------------- --------- ---------- -----------
<S> <C> <C> <C>
Grant E. Oppegaard............................................................... 1999 $ 459,000 $
Chief Executive Officer and President 1998 425,000 474,030
1997 350,000 275,917

Roger R. Cloutier II(2).......................................................... 1999 286,000
Executive Vice President and Chief 1998 260,000 221,214
Financial Officer 1997 220,000 126,462

David H. Vigdal(3)............................................................... 1999 186,750
Senior Vice President--Operations 1998 168,474 94,016
1997 -- --

Mary P. McConnell,............................................................... 1999 189,250
Senior Vice President, Secretary and 1998 174,250 94,016
General Counsel 1997 155,000 64,381

George Sullivan.................................................................. 1999 181,750
Senior Vice President--Marketing 1998 174,250 94,016
1997 165,000 73,578
</TABLE>

- ------------------------

(1) Compensation totals represent amounts paid or earned for the twelve months
ended June 30, 1999, 1998 and 1997.

(2) Compensation amounts reflect amounts paid by Jacobs Management Corporation
to Mr. Cloutier, for which we reimburse Jacobs Management.

(3) Mr. Vigdal joined our company in July 1997.

In July 1999, we hired Steven J. Kubisen as our Senior Vice President--
Technology and Corporate Development. Dr. Kubisen's base salary is currently
$200,000 per annum. Dr. Kubisen also participates in our Management
Incentive Plan.

CERTAIN STOCK-BASED COMPENSATION

On the date of the offering, we will grant stock options or awards to
certain of our officers, directors and employees:

- Options to purchase an aggregate of up to shares will be
granted to Messrs. Jacobs, Oppegaard and Cloutier and Jacobs Management
Corporation of which the grant of shares will be subject to
meeting certain stock price performance targets. See "--Senior Executive
Option Grants" below.

- Options to purchase an aggregate of shares will be granted to
our other officers and key employees. See "--Stock Award Plans--1999 Stock
Incentive Plan" below.

- Options to purchase an aggregate of shares will be granted to
our outside directors. See "--Director Compensation" above.

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<PAGE>
- An aggregate of shares of stock will be issued to all other
employees who are not eligible to participate in our option plan. See
"--Stock Award Plans--Employee Stock Award" below.

RETENTION BONUS AGREEMENTS

On October 31, 1998, Messrs. Oppegaard and Cloutier entered into
substantially identical retention bonus agreements with Jacobs Management
Corporation. Under the retention bonus agreements, each individual agreed to
remain employed by us in his current capacity until at least August 4, 1999, in
return for which Jacobs Management agreed to fund a retention bonus for each
individual in the amount of $ . The retention bonus agreements also
provide that the retention bonus payments were to be instead of any benefits
that these individuals would be entitled to receive under our executive
severance plan unless the individual remains employed by us for at least one
year after August 4, 1999. Each of these individuals has also agreed that upon
receipt of the retention bonus payment, he will not participate in the
recreational boat industry for a period of three years following the termination
of his employment with our company, nor divulge or use any proprietary
information related to us which has been obtained during his employment with our
company. On August 3, 1999, our board of directors approved our assumption of
these agreements from Jacobs Management and on August 4, 1999 we made the
retention bonus payments described above.

MANAGEMENT INCENTIVE PLAN

Under our Management Incentive Plan, certain key employees receive a cash
bonus up to a designated percentage of their annual base salary. The amount of
the bonus is tied to a budgeted operating performance and average assets to be
utilized in the business, subject to approval by our board of directors. A
minimum bonus is paid out only upon achievement of the target budget. The amount
of the bonus accelerates according to a scale of performance milestones, which
are established annually. We measure our performance levels on an annual basis.
We pay bonuses at the end of this annual period, after completion of the year
end audit and approval of our board of directors. Approximately $ was paid
under this plan during the fiscal year ended June 30, 1999, including an
aggregate of $ to Messrs. Oppegaard, Cloutier, Vigdal and Sullivan, and Ms.
McConnell.

SENIOR EXECUTIVE OPTION GRANTS

We will make the option grants described below to each of Messrs. Jacobs,
Oppegaard and Cloutier, and Jacobs Management Corporation. The options will be
exercisable for a period of five years from the date of grant and will vest over
a two-year period with half vesting on the first anniversary of the date of
grant and the remaining amount vesting on the second anniversary of the date of
grant.

- An initial grant on the date of the offering of options to purchase
shares to Mr. Jacobs, shares to each of Messrs. Oppegaard
and Cloutier, and shares to Jacobs Management, exercisable at the
offering price.

- A second grant if our common stock trades at an average of 150% of the
offering price over a period of 30 consecutive trading days at any time
within three years of the date of the offering, a grant of options to
purchase shares to Mr. Jacobs, shares to each of Messrs.
Oppegaard and Cloutier, and shares to Jacobs Management
exercisable at the fair market value on the date of the grant.

- A third grant if our common stock trades at 150% of the price described
immediately above over a period of 30 consecutive trading days at any time
within three years of the date of the offering, a grant of options to
purchase shares to Mr. Jacobs, shares to each

52
<PAGE>
of Messrs. Oppegaard and Cloutier, and shares to Jacobs Management
exercisable at the fair market value on the date of the grant.

The options granted to Jacobs Management may be assigned to individual
employees of Jacobs Management.

STOCK AWARDS AND PLANS

1999 STOCK INCENTIVE PLAN

Prior to this offering our board of directors will adopt and submit for
approval of our stockholders the 1999 Stock Incentive Plan. The following
summary of the plan is not intended to be complete and is qualified in its
entirety by reference to the copy of the plan filed as an exhibit to this
registration statement. We intend for the plan to provide incentives which will
attract, retain and motivate highly competent persons as officers, key employees
and consultants of our company. The maximum number of shares of common stock
that may be delivered under the plan is an aggregate of shares.

The plan is administered by the compensation committee. The compensation
committee is authorized, subject to the provisions of the plan, to interpret the
provisions and supervise the administration of the plan. This includes
determining, subject to the provisions of the plan, to whom options or other
awards will be granted and the terms of each option grant or award.

Our officers, key employees and consultants are eligible to participate in
the plan. The selection of participants from eligible persons is within the
discretion of the committee. The estimated number of officers and key employees
who are eligible to participate in the plan is .

Stock options may be granted under the plan on the terms and conditions as
the compensation committee approves, and generally may be exercised for a period
of up to ten years from the date of grant. Generally, stock options will be
granted with an exercise price equal to the fair market value on the date of
grant and will vest ratably over a three-year period on each anniversary of the
date of grant. At the compensation committee's discretion, however, options may
be made exercisable at any other time or upon the occurrence of certain events
or the achievement of certain performance targets. The plan also provides for
stock appreciation rights, stock awards, performance awards and stock units.

Stock options granted under the plan may be "incentive stock options" within
the meaning of the Internal Revenue Code or non-qualified options. The benefits
listed above may be granted singly, in combination or in tandem as determined by
the committee.

In connection with the offering, we granted stock options under this plan
representing an aggregate of shares to our officers and other employees at
exercise prices equal to the initial public offering price. Messrs. Vigdal and
Sullivan, Dr. Kubisen and Ms. McConnell were granted options to purchase ,
and shares, respectively, of common stock at the offering price.

PHANTOM STOCK PLAN

We adopted the Phantom Stock Plan in December 1997 for the benefit of
members of our senior management. As of August 13, 1999, phantom stock
units were outstanding, and 95% of those had vested. The initial value of the
currently outstanding phantom stock units is $ . This value was determined at
the time of issuance by assigning a gross valuation to each of our subsidiaries,
reducing that amount by a pro rata share of our company's net liabilities, then
dividing that total by the number of outstanding shares of common stock of our
company.

The compensation committee of the Board of Directors administers and
interprets the plan. In the event of certain triggering events, awards are made
to the employee's account representing either an increase or decrease in the
value of the employee's phantom stock units. An increase in value results in

53
<PAGE>
a credit to the employee's account, whereas a decrease results in a debit to the
employee's account. No awards will be made for a triggering event that occurs
after December 31, 2001.

This offering is a triggering event under the plan. Assuming an initial
offering price of $ , approximately $ will be awarded, of which
$ million is expected to be paid upon completion of the offering and the
remainder of which will be deferred under the plan to a date not later than
December 31, 2001. No further awards will be made under this plan, and following
the distribution of all award amounts this plan will cease to exist.

EMPLOYEE STOCK AWARD

In connection with this offering, we will issue shares of our common stock
to each of our employees who is not eligible to participate in our 1999 Stock
Incentive Plan. We anticipate an aggregate of approximately shares of
our common stock will be granted to approximately 4,500 employees upon
completion of the offering.

RETIREMENT PLANS AND INSURANCE

We have a retirement plan, qualified under Section 401(k) of the Internal
Revenue Code of 1954, that consists of a deferred savings program which allows
employees to contribute up to 15% of their pre-tax earnings and up to 10% of
their after-tax earnings to the retirement plan. At the discretion of our board
of directors, we may make matching contributions of up to one half of the first
6% of each participant's pre-tax contribution, subject to certain limits. The
retirement plan also contains a profit sharing program whereby we, based on our
profits, are permitted to make an annual contribution for the benefit of
eligible employees. In addition, other retirement plans are maintained by Ranger
and Carver for the benefit of their respective employees. Substantially all of
our salaried and hourly employees in the United States are eligible to
participate in the retirement plan. Our contributions to the deferred savings
program and the profit sharing programs are vested over a five-year period.

EXECUTIVE SEVERANCE PLAN

We have a severance pay plan under which we make severance payments to our
former employees according to a formula based on the job title and length of
service to our company of each former employee. Our employees become eligible
for payments under the plan upon completing 12 continuous months of full-time
employment with us. Under our severance plan, upon termination each of our
Senior Vice Presidents would be entitled to receive one year of compensation.
Messrs. Oppegaard and Cloutier are not currently eligible to participate in this
plan. Subsequent to August 4, 2000, they will be eligible to participate, and
determination of severance to each of Messrs. Oppegaard and Cloutier will be at
the discretion of our board of directors.

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<PAGE>
CERTAIN TRANSACTIONS

We are a party to numerous transactions with Irwin L. Jacobs and his
affiliates. Our board of directors has adopted a policy, effective upon
completion of this offering, requiring that all material affiliate transactions
be approved by a majority of disinterested directors, and that these affiliate
transactions be conducted on terms no less favorable than could be obtained from
an unaffiliated third party.

We are a party to a management services agreement with Jacobs Management,
one of our stockholders and an affiliate of Irwin L. Jacobs. Our director,
Daniel T. Lindsay, is also an Executive Vice President and director of Jacobs
Management. Under the management services agreement Jacobs Management provides
us with general management, financial management, employee benefit and human
resource services, insurance and risk management services, acquisition
evaluation and support and other financial and administrative services for an
annual fee currently set at $1.95 million. In addition, we reimburse Jacobs
Management the annual compensation of Roger R. Cloutier II and bonus earned in
connection with his services to us. Jacobs Management has agreed to direct its
employees, and its employees have agreed to continue providing such management
services as currently provided by such employees to us, or as are customary for
executives serving in such positions, as well as such services as our board of
directors may determine are necessary from time to time. The management services
agreement also provides for the payment of an additional special fee for any
business opportunities presented to us by Jacobs Management. No additional
special fees have ever been paid under the management services agreement.

On July 21, 1986, we entered into a sublease arrangement with Jacobs
Management Corporation for office and storage space located at our headquarters
in Minneapolis, Minnesota. During the fiscal year ended June 30, 1999, Jacobs
Management Corporation made lease payments to us in the amount of $478,000 which
equaled the proportionate share of our cost of the leased space based on the
amount of square feet occupied by Jacobs Management Corporation.

Roger R. Cloutier II, our Executive Vice President, Chief Financial Officer
and one of our directors, also performs services for Jacobs Management
Corporation, by whom he has been employed since 1990. Mr. Cloutier's duties and
functions for Jacobs Management involve his participation in certain
executive-level matters. Mr. Cloutier has provided and intends to continue to
provide his services primarily to us and, to a much lesser extent, to Jacobs
Management.

In October 1997, we repurchased a portion of our outstanding 13.5% notes
with the proceeds of our subordinated term loan credit facility. To assist us in
obtaining this financing, three of our stockholders, Irwin L. Jacobs, Daniel T.
Lindsay and RDV Capital Management L.P. II, an affiliate of Daniel G. DeVos, one
of our directors, obtained letters of credit, aggregating $63.1 million; each of
which guarantee a portion of our obligations under the subordinated term loan
credit facility. We reimburse those stockholders for the costs they incur in
maintaining these letters of credit. During the fiscal year ended June 30, 1999,
we reimbursed an aggregate of $1.0 million of these costs. In addition, in
consideration of the commitment by those stockholders to provide letters of
credit in the aggregate amount of $78.8 million, including the $63.1 million of
letters of credit that were ultimately issued, we issued the following warrants
to purchase our common stock at $ per share:

- A warrant to purchase shares issued to Irwin L. Jacobs;

- A warrant to purchase shares issued to RDV Capital Management L.P.
II; and

- A warrant to purchase shares issued to Daniel T. Lindsay.

Subsequent to the issuance of these warrants, Mr. Jacobs transferred
warrants to purchase an aggregate of shares to certain other persons.
Also subsequent to the issuance of these warrants, RDV Capital Management L.P.
II transferred warrants to purchase an aggregate of shares to Grand Bank,
Trustee of the RDV Corporation Supplemental Executive Retirement Plan, and

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<PAGE>
warrants to purchase an aggregate of shares to RDV Corporation.
Simultaneous with this offering, we have agreed to exchange of a share of our
common stock for each share of common stock issuable under the warrants, or an
aggregate of shares in exchange for all outstanding warrants.

Pursuant to a First Amended and Restated Note and Stock Purchase Agreement,
dated August 31, 1998, between Mr. Jacobs and the State of Wisconsin Investment
Board (SWIB), SWIB purchased a $25.0 million demand promissory note originally
issued by us at par to Mr. Jacobs in 1994. On June 17, 1999, Mr. Jacobs
repurchased that note from SWIB. We used a portion of the proceeds of our new
senior credit facility to repay this note in full in August 1999.

On November 24, 1993, Irwin L. Jacobs loaned to Minstar, Inc., one of our
wholly-owned subsidiaries, approximately $4.1 million pursuant to a subordinated
promissory note. Under the terms of the note, as amended, principal and any
outstanding interest, calculated at the prime rate plus 1.5% per annum are due
on August 3, 2000.

We and Irwin L. Jacobs are parties to a split-dollar insurance agreement
dated April 15, 1996. Under the agreement, we pay that portion of premium
amounts not paid by the owner of the policy, the Irwin L. Jacobs 1996
Irrevocable Trust. We would be reimbursed for all premiums paid under this
policy upon or Mr. Jacobs' death. We would also be reimbursed for our premiums
paid if the policy were terminated and the cash value of the policy at that time
were sufficient to cover all or a portion of the premiums paid. In fiscal 1999,
we paid $79,503 in premiums under this agreement.

Immediately prior to the consummation of this offering, we will spin off
Hatteras to our current stockholders. Under the terms of that transaction, we
will guarantee the obligations of Hatteras under its new credit facility in the
aggregate amount of $5.0 million. Subsequent to completion of the transaction
and until Hatteras retains additional professional employees, we and Jacobs
Management Corporation will provide corporate services to Hatteras, including
legal and other management services, for which we will receive $100,000 and
Jacobs Management Corporation will receive $100,000. Messrs. Jacobs, Oppegaard
and Cloutier will serve on the board of directors of Hatteras.

We sponsor certain professional bass fishing tournaments of Operation Bass,
Inc., an affiliate of Mr. Jacobs and certain of our executive management and
directors. These fishing tournaments include the Wal-Mart FLW Tour, Operation
Bass EverStart Series and Red Man Tournament Trail and will be televised on ESPN
and ESPN2. The arrangement calls for RANGER to make cash payments and provide a
specified number of boats to Operation Bass. We paid approximately $132,000 in
net sponsorship costs related to these activities, including cash payments and
product provided, for the year ended June 30, 1999.

In November 1999, Operation Bass will conduct the Ranger Boats M1
Tournament. This event will be limited to Ranger owners and televised on the Fox
Television Network. In fiscal year 1999, we accrued $300,000 towards an
estimated total of $600,000 we will contribute to the $3.5 million purse in
fiscal year 2000. We are also obligated to pay Operation Bass certain per unit
amounts based upon incremental sales improvements. We expect to conduct similar
events with Operation Bass in future years, but specific terms have yet to be
determined.

From time to time, we record revenues from boat sales to affiliates. We
believe that the terms of those sales are consistent with the terms of sales to
dealers. For the year ended June 30, 1999, we recorded revenues of approximately
$500,000 in connection with sales to affiliates.

Under the Genmar Employee Boat Purchase Program, we offer certain of our
employees the opportunity to purchase our boats and accessories at discounted
prices. Under the terms of the program, full-time employees who we have employed
continuously for a minimum of six months may purchase one of our boats every two
years. The program is subject to change at any time at the discretion of our
Chief Executive Officer.

56
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table provides information regarding beneficial ownership of
our common stock as of , 1999, and as adjusted to reflect the sale of
shares offered by this prospectus, by

- Each of our directors,

- Each person (or group of affiliated persons) known by us to beneficially
own more than 5% of our common stock and

- All directors and executive officers as a group.

Unless otherwise indicated, each person named in the table has sole voting
power and investment power or shares that power with his or her spouse with
respect to all shares of capital stock listed as owned by that person.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The number of shares of common stock outstanding used
in calculating the percentage for each listed person includes any shares the
person has the right to acquire within 60 days. Unless otherwise indicated, the
address for each person is 100 South Fifth Street, Minneapolis, Minnesota 55402.

<TABLE>
<CAPTION>
PERCENT OF COMMON STOCK
OWNED
AMOUNT ------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
GROUP CONSISTING OF: .................................................... (1) %
Irwin L. Jacobs
Jacobs Industries, Inc.
Jacobs Management Corporation
Watkins, Incorporated

RDV Capital Management L.P. II .......................................... (2) %
126 Ottawa, N.W.
Grand Rapids, Michigan 49503

GROUP CONSISTING OF: .................................................... ( (4) %
Carl R. Pohlad, individually and as Trustee of Revocable Trust No. 2
Robert C. Pohlad
William M. Pohlad
James O. Pohlad
PEP-SQ Limited Partnership
Jacobs Industries, Inc.
Watkins, Incorporated
3880 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402

State of Wisconsin Investment Board ..................................... %
121 East Wilson Street
Madison, Wisconsin 53702
</TABLE>

57
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF COMMON STOCK
OWNED
AMOUNT ------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Orekron Holding AB ...................................................... %
c/o Incentive AB
PO Box 7373
S-103 91 Stockholm
Sweden

Bjorn Ahlstrom........................................................... (4)
Roger R. Cloutier II.....................................................
Daniel G. DeVos.......................................................... ( (4)
Daniel T. Lindsay........................................................ (4)
Grant E. Oppegaard.......................................................
William W. Nicholson..................................................... (4)

ALL OFFICERS AND DIRECTORS AS A GROUP ( PERSONS)........................ (6) %
</TABLE>

- ------------------------

(1) Irwin L. Jacobs beneficially owns approximately 67% of the issued and
outstanding capital shares of Jacobs Industries, Inc., while members of the
Pohlad Group beneficially own the remaining shares. Watkins is a
wholly-owned subsidiary of Jacobs Industries. Irwin L. Jacobs, Carl R.
Pohlad, as trustee of Revocable Trust No. 2, Jacobs Industries, PEP-SQ
Limited Partnership and Watkins have entered into an agreement that grants
Carl R. Pohlad the effective right to vote the percentage of shares of our
common stock held by Jacobs Industries and Watkins as is equal to the
percentage of equity interest in Jacobs Industries and Watkins held by all
members of the Pohlad Group. Accordingly, of the shares owned by
Jacobs Industries, ownership of shares has been attributed to Mr.
Jacobs and ownership of shares has been attributed to the Pohlad
Group. Of the shares owned by Watkins, ownership of shares has
been attributed to Mr. Jacobs and ownership of shares has been
attributed to the Pohlad Group.

(2) All of the outstanding shares are owned by RDV Capital Management L.P. II.
Mr. Daniel G. DeVos disclaims beneficial ownership of the common stock owned
by RDV. Mr. DeVos is a stockholder of an affiliate of RDV.

(3) Includes shares of common stock beneficially owned by a trust, of
which Carl R. Pohlad is the trustee.

(4) Includes options to purchase shares of our common stock.

(5) Daniel T. Lindsay is Executive Vice President and a director of Jacobs
Management and Secretary and a director of Jacobs Industries. Mr. Lindsay
disclaims beneficial ownership of the common stock owned by these entities.

(6) Includes options to purchase shares of our common stock.

58
<PAGE>
DESCRIPTION OF CAPITAL STOCK

THE FOLLOWING SUMMARY DESCRIPTION OF OUR CAPITAL STOCK IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION,
A COPY OF WHICH HAS BEEN INCLUDED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF
WHICH THIS PROSPECTUS IS A PART. ALL CAPITALIZED TERMS USED AND NOT DEFINED
BELOW HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.

COMMON STOCK

We are authorized to issue up to 200,000,000 shares of common stock, $0.01
par value per share. As of the date of this prospectus, there were shares
of common stock issued and outstanding.

Holders of common stock are entitled to one vote for each share held, are
not entitled to cumulative voting for the purpose of electing directors and have
no preemptive or similar right to subscribe for, or to purchase, any shares of
common stock or other securities to be issued by us in the future. Accordingly,
the holders of more than a majority of the voting power of the shares of common
stock voting generally for the election of directors will be able to elect all
of our directors.

Holders of shares of common stock have no exchange or conversion rights and
those shares are not subject to redemption. All outstanding shares of common
stock are, and upon issuance the shares of common stock offered by this
prospectus will be, duly authorized, validly issued, fully paid and
nonassessable. Subject to the prior rights, if any, of holders of any
outstanding class or series of capital stock having a preference in relation to
the common stock as to distributions upon the dissolution, liquidation and
winding-up of our company and as to dividends, holders of common stock are
entitled to share ratably in all of our assets which remain after payment in
full of all of our debts and liabilities, and to receive ratably dividends, if
any, as may be declared by our Board of Directors from time to time out of funds
and other assets legally available for the payment of dividends. See "Dividend
Policy" and "Capitalization."

PREFERRED STOCK

Our Board of Directors is authorized, without action by the holders of
common stock, to issue up to 2,000,000 shares of preferred stock, $0.01 par
value, in one or more series, to establish the number of shares to be included
in each series and to fix the designations, preferences, relative,
participating, optional and other special rights of the shares of each series
and the qualifications, limitations and restrictions of those shares. These
rights may include, among others, voting rights, conversion and exchange
privileges, dividend rates, redemption rights, sinking fund provisions and
liquidation rights that could be superior and prior to the common stock.

The issuance of one or more series of the preferred stock could, under
certain circumstances, adversely affect the voting power of the holders of the
common stock and could have the effect of discouraging or making more difficult
any attempt by a person or group to effect a change in control of our company.

REGISTRATION RIGHTS

For a discussion of certain registration rights we have granted to the
former stockholders of Pyramid Operating Systems, see "Business--Recent
Acquisitions--Pyramid Operating Systems, Inc."

59
<PAGE>
DELAWARE BUSINESS COMBINATION STATUTE

We are a Delaware corporation and are subject to Section 203 of the Delaware
General Corporation Law. In general, Section 203 prevents any "interested
stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as therein defined) with a Delaware corporation for three years
following the time that such person became an interested stockholder, unless:

- Before such person became an interested stockholder, the board of
directors of the corporation approved the business combination in question
or the transaction which resulted in such person becoming an interested
stockholder;

- Upon consummation of the transaction that resulted in the interested
stockholder's becoming such, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time such
transaction commenced (excluding stock held by directors who are also
officers of the corporation and by employee stock plans that do not
provide employees with rights to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer);
or

- At or following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of not less than 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder.

Under Section 203, the restrictions described above do not apply to certain
business combinations proposed by an interested stockholder following the
announcement (or notification) of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the preceding three years or who became an interested
stockholder with the approval of the corporation's directors or at a time when
the restrictions imposed by Section 203 did not apply in accordance with the
terms thereof, and which transactions are approved or not opposed by a majority
of the members of the board of directors then in office who were directors prior
to any person becoming an interested stockholder during the previous three years
or were recommended for election or elected to succeed such directors by a
majority of such directors.

CLASSIFIED BOARD OF DIRECTORS

Our amended and restated certificate of incorporation divides our board of
directors into three classes, with regular three-year staggered terms and
initial terms of one year for the class I directors, two years for the class II
directors and three years for the class III directors. This could prevent a
party who acquires control of a majority of our outstanding voting stock from
obtaining control of the board of directors.

Our stockholders do not have the right to cumulative voting in the election
of directors.

AMENDMENTS TO OUR CERTIFICATE AND BYLAWS

Our certificate of incorporation may be amended only by the affirmative vote
of the holders of at least a majority of the shares of our common stock, except
for provisions relating to stockholder action by written consent and the
staggered board, which may only be amended by an affirmative vote of two-thirds
of the shares of our common stock. Our bylaws may be amended only by either the
affirmative vote of the holders of at least a majority of the shares of our
common stock or the affirmative vote of at least a majority of the board of
directors.

60
<PAGE>
STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

Our amended and restated certificate of incorporation provides that
stockholders may not take action by written consent, but only at duly called
annual or special meetings of stockholders. The bylaws further provide that
special meetings of our stockholders may be called only by the board of
directors or by stockholders holding a majority of the shares entitled to vote
at the meeting.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

Our bylaws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide advance notice to
us in writing. These provisions may preclude stockholders from bringing matters
before or from making nominations for directors at an annual meeting of
stockholders.

LIMITATION ON LIABILITY

Our amended and restated certificate of incorporation provides that none of
our directors will be personally liable to us or our stockholders for monetary
damages for any breach of fiduciary duty as a director except for liability for
breach of the director's duty of loyalty to us or our stockholders, for acts or
omissions which are not in good faith or which involve intentional misconduct or
knowing violations of law and for actions leading to improper personal benefit
to the director. This provision does not affect the directors' responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.

INDEMNIFICATION

Section 145 of the Delaware General Corporation Law provides for the power
to indemnify any directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers.
The indemnification provisions are not exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of the stockholders or otherwise.

Our amended and restated certificate of incorporation provides a right to
indemnification to the maximum extent permitted by Delaware law to all persons
whom we may indemnify pursuant thereto.

At present, there is no pending litigation or proceeding, and we are not
aware of any threatened litigation or proceeding, that may result in a claim for
such indemnification involving any director, officer, employee or agent as to
which indemnification will be required or permitted under the certificate of
incorporation.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is .

61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been any public market for our common
stock. Future sales of substantial amounts of common stock in the public market,
or the prospect of such sales, could adversely affect prevailing market prices.

Upon completion of this offering, shares of common stock will be
outstanding, assuming no exercise of the underwriters' over-allotment option. Of
these shares, all of the shares sold in this offering will be freely tradeable
without restriction under the Securities Act, unless purchased by an "affiliate"
of ours, as that term is defined in Rule 144. The remaining shares
outstanding after completion of this offering are "restricted securities" as
defined in Rule 144 and may be sold in the public market only in accordance with
Rule 144. The following table sets forth the resale restrictions on the
currently outstanding shares of our common stock other than those set forth
under "Underwriting--Lock Up Agreements".

<TABLE>
<CAPTION>
NUMBER OF SHARES MANNER OF HOLDING AVAILABILITY FOR RESALE
- ----------------- ---------------------------------------------- ----------------------------------------------
<S> <C> <C>
Held by non-affiliates , 1999 under Rule 144(k)

Held by affiliates , 1999 under Rule 144

Held by current Pyramid stockholders Available for resale pursuant to registration
rights agreement in , 2000.

Held by grantees under employee stock awards Subject to one-year holding requirement and
available for resale , 2000.
</TABLE>

In general, under Rule 144, a person, including an "affiliate" of ours, who
has beneficially owned restricted shares for at least one year is entitled to
sell within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of common stock (approximately
shares immediately following this offering) or the average weekly
trading volume of the common stock during the four calendar weeks preceding the
sale. Sales under Rule 144 are subject to certain manner of sale limitations,
notice requirements and the availability of current public information about us.
Rule 144(k) provides that a person who is not an "affiliate" of the issuer at
any time during the three months preceding a sale and who has beneficially owned
shares for at least two years is entitled to sell those shares at any time
without compliance with the public information, volume limitation, manner of
sale and notice provisions of Rule 144.

Additionally, in general, under Rule 701 of the Securities Act as currently
in effect, any of our employees, consultants or advisors who purchase shares
from us in connection with a compensatory stock or option plan or other written
agreement is eligible to resell such shares 90 days after the effective date of
this offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in Rule 144.

62
<PAGE>
UNDERWRITING

GENERAL

We are offering the shares of common stock described in this prospectus
through a number of underwriters. Stephens Inc. and U.S. Bancorp Piper Jaffray
Inc. are the representatives of the underwriters. We have entered into an
underwriting agreement with the representatives dated the date of this
prospectus. Each underwriter has agreed to purchase the number of shares of
common stock opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Stephens Inc.....................................................................
U.S. Bancorp Piper Jaffray Inc...................................................
----------
Total........................................................................
----------
----------
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to take and to pay for all shares of common stock
offered by this prospectus (other than those covered by the over-allotment
option described below) if any of those shares are taken.

U.S. Bancorp, the parent of U.S. Bancorp Piper Jaffray, owns shares of
our common stock and warrants which are being exchanged for shares of our
common stock. of the currently owned shares of common stock are subject to
a put option in favor of U.S. Bancorp whereby U.S. Bancorp has the right to put
the shares of common stock to Irwin L. Jacobs at any time prior to a public
offering of our common stock, at a formula-derived put price equal to $ per
share. U.S. Bancorp is currently evaluating whether or not it will exercise the
put option which expires concurrently with the offering.

U.S. Bank, N.A., as subsidiary of U.S. Bancorp, participates as a lender in
connection with our new senior term loan and our subordinated term loan. U.S.
Bank also provides one of the letters of credit discussed in "Certain
Transactions." Further, it is anticipated that U.S. Bank or one of its
affiliates will be the lead lender for the new Hatteras credit facility
discussed in "The Company-- Hatteras Spin-Off." All of these banking
arrangements have been on an arms-length basis and on market terms.

COMMISSIONS AND EXPENSES

The underwriters propose to offer part of the shares directly to the public
at the public offering price stated on the cover page of this prospectus and
part of the shares to certain dealers at a price that represents a concession
not in excess of $ per share under the public offering price. The underwriters
may allow, and those dealers may reallow, a concession not in excess of $ per
share to certain other dealers. After the offering, the public offering price
and any concessions may be changed by the underwriters. The representatives have
advised us that the underwriters do not intend to confirm any shares to any
accounts over which they exercise discretionary authority.

The following summarizes the underwriting discounts we will pay:

<TABLE>
<CAPTION>
TOTAL
--------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
----------- --------------- ---------------
<S> <C> <C> <C>
Underwriting discounts..................
----------- ------ ------
</TABLE>

We estimate that our share of the total expenses of the offering, excluding
underwriting discounts, will be approximately $ .

63
<PAGE>
OVER-ALLOTMENT OPTION

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares of common
stock at the price to the public stated on the cover page of this prospectus
minus the underwriting discounts and commissions. The underwriters may exercise
this option solely for the purpose of covering over-allotments, if any, in
connection with the offering. If the underwriters exercise the option, each
underwriter will purchase additional shares approximately in proportion to the
amounts specified in the table above.

STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

In connection with the offering, the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the shares of common stock. Syndicate short positions
involve the sale by the underwriters of a greater number of shares of common
stock than they are required to purchase from us in the offering.

The underwriters may also impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.

These activities may stabilize, maintain or otherwise affect the market
price of the shares of common stock, which may be higher than the price that
might otherwise prevail in the open market and may be discontinued at any time.
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

LOCK-UP AGREEMENTS

We, and our officers, directors and certain stockholders, including U.S.
Bancorp, have entered into lock-up agreements with the underwriters. Under those
agreements, we and those holders may not offer, sell, contract to sell or
otherwise dispose of any shares of common stock or any securities convertible
into any class of common stock for a period of 180 days after the date of this
prospectus, except with the prior consent of Stephens Inc.

OFFERING PRICE DETERMINATION

Prior to the offering, there was no public market for our common stock.
Consequently, the initial public offering price for the shares of common stock
included in the offering has been determined by negotiations between us and the
underwriters. Among the factors considered were:

- The history of and prospects for our business and our industry;

- An assessment of our management and the present state of our company's
development;

- Our past and present revenues and earnings;

- The prospects for growth of our revenues and earnings;

- The current state of the United States economy;

- The current level of economic activity in the industry in which we compete
and in related or comparable industries; and

- Currently prevailing conditions in the United States securities markets,
including current market valuations of comparable publicly traded
companies.

64
<PAGE>
INDEMNIFICATION

Pursuant to the underwriting agreement, we and the underwriters have agreed
to indemnify each other against certain liabilities, including liabilities under
the Securities Act.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for Genmar Holdings, Inc. by Weil, Gotshal & Manges LLP, New
York, New York. Certain members of Weil, Gotshal & Manges own an aggregate of
shares of common stock of Genmar Holdings, Inc. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Giroir, Gregory, Holmes & Hoover, PLC, Little Rock, Arkansas.

EXPERTS

The consolidated balance sheets as of June 30, 1998 and 1999, and the
consolidated statements of operations, stockholders' equity and cash flows for
the year ended December 31, 1996, the six months ended June 30, 1997 and the
years ended June 30, 1998 and June 30, 1999 of Genmar Holdings, Inc. included in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.

ADDITIONAL INFORMATION

We have filed with the Commission a registration statement on Form S-1 under
the Securities Act with respect to the common stock offered by this prospectus.
This prospectus, which constitutes part of the registration statement, does not
contain all of the information set forth in the registration statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information about us and the common stock offered
hereby, reference is made to the registration statement. Statements contained in
this prospectus as to the contents of any contract or other document filed as an
exhibit to the registration statement are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference. The registration statement and all amendments, exhibits and
schedules thereto may be obtained as follows:

- Copies may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part thereof may
be inspected and copied at the public reference facilities maintained by
the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549 (1-800-SEC-0330), and
at the Securities and Exchange Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New York 10048;

- Copies of such material can also be obtained at prescribed rates by mail
from the Public Reference Section of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and

- Our filings may be viewed over the Internet at HTTP://WWW.SEC.GOV, a web
site which that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission.

65
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-1
Consolidated Balance Sheets as of June 30, 1998 and 1999................................................... F-2
Consolidated Statements of Operations for the Year Ended December 31, 1996;
Six Months Ended June 30, 1997 and Years Ended June 30, 1998 and 1999.................................... F-3
Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 1996;
Six Months Ended June 30, 1997 and Years Ended June 30, 1998 and 1999.................................... F-4
Consolidated Statements of Cash Flows for the Year Ended December 31, 1996; Six Months Ended June 30, 1997
and Years Ended June 30, 1998 and 1999................................................................... F-5
Notes to Consolidated Financial Statements................................................................. F-7
Supplemental Schedule...................................................................................... F-22
</TABLE>

66
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Genmar Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Genmar
Holdings, Inc. (a Delaware corporation) and Subsidiaries as of June 30, 1998 and
1999 and the related consolidated statements of operations, stockholders' equity
and cash flows for the year ended December 31, 1996, the six months ended June
30, 1997 and the years ended June 30, 1998 and June 30, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Genmar
Holdings, Inc. and Subsidiaries as of June 30, 1998 and 1999, and the results of
their operations and their cash flows for the year ended December 31, 1996, the
six months ended June 30, 1997 and the years ended June 30, 1998 and June 30,
1999, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index of consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
August 2, 1999

F-1
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1998 1999
----------- ----------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents.............................................................. $ 2,736 $ 24,856
Accounts receivable, net of allowances of $1,460 and $1,647............................ 35,914 41,339
Inventories, net....................................................................... 97,570 113,931
Prepaid expenses....................................................................... 3,327 2,939
Deferred tax assets.................................................................... -- 8,000
----------- ----------
Total current assets................................................................. 139,547 191,065
Property and equipment:
Land................................................................................... 8,088 7,218
Buildings.............................................................................. 62,941 68,059
Operating equipment.................................................................... 56,304 65,883
Accumulated depreciation............................................................... (72,759) (75,623)
----------- ----------
Net property and equipment............................................................. 54,574 65,537

Other assets............................................................................. 6,407 19,454
Goodwill................................................................................. 44,094 44,707
----------- ----------
$ 244,622 $ 320,763
----------- ----------
----------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable....................................................................... $ 36,931 $ 56,241
Accrued liabilities.................................................................... 66,117 89,874
Accrued income taxes................................................................... 761 2,384
Current maturities of long-term debt................................................... 6,026 1,022
----------- ----------
Total current liabilities............................................................ 109,835 149,521
Long-term debt........................................................................... 117,778 116,129
Other noncurrent liabilities............................................................. 15,716 12,911
----------- ----------

Commitments and contingencies (Note 8)

Stockholders' equity:
Common stock, $.01 par, 2,000 shares authorized;
1,737 issued and outstanding......................................................... 17 17
Additional paid-in capital............................................................. 117,945 117,945
Accumulated deficit.................................................................... (116,201) (75,256)
Accumulated other comprehensive loss................................................... (468) (504)
----------- ----------
Total stockholders' equity........................................................... 1,293 42,202
----------- ----------
$ 244,622 $ 320,763
----------- ----------
----------- ----------
</TABLE>

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

F-2
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE
FOR THE SIX MONTHS FOR THE YEAR ENDED
YEAR ENDED ENDED JUNE 30,
DECEMBER 31, JUNE 30, ----------------------
1996 1997 1998 1999
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues.................................................. $ 618,056 $ 260,848 $ 585,943 $ 704,656
Cost of products and services................................. 521,663 222,448 480,651 567,247
------------ ----------- ---------- ----------
Gross profit................................................ 96,393 38,400 105,292 137,409
New product and technology development........................ 8,537 5,012 11,292 10,996
Selling and administrative expenses........................... 64,653 31,888 70,402 88,945
------------ ----------- ---------- ----------
Operating profit............................................ 23,203 1,500 23,598 37,468
Interest expense.............................................. (22,190) (11,026) (18,702) (16,098)
Investment and other income (loss), net....................... 122 (176) (304) 75
------------ ----------- ---------- ----------
Income (loss) before income taxes and extraordinary item.... 1,135 (9,702) 4,592 21,445
Income tax benefit (provision)................................ (860) (246) (550) 19,500
------------ ----------- ---------- ----------
Income (loss) before extraordinary item....................... 275 (9,948) 4,042 40,945
Extraordinary loss on extinguishment of debt (Note 5)......... -- -- (1,184) --
------------ ----------- ---------- ----------
Net income (loss)........................................... $ 275 $ (9,948) $ 2,858 $ 40,945
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------

Basic and diluted net income (loss) per share--
Income (loss) per share before extraordinary item............. $ 0.16 $ (5.73) $ 2.33 $ 23.57
Extraordinary loss per share.................................. -- -- (0.68) --
------------ ----------- ---------- ----------
Net income (loss) per share................................... $ 0.16 $ (5.73) $ 1.65 $ 23.57
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
Basic and diluted weighted average shares outstanding....... 1,737 1,737 1,737 1,737
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
</TABLE>

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

F-3
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1996;
SIX MONTHS ENDED JUNE 30, 1997 AND YEARS ENDED JUNE 30, 1998 AND 1999

(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
------------------------ PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT LOSS TOTAL
----------- ----------- ---------- ------------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995......................... 1,737 $ 17 $ 116,234 $ (109,386) $ (247) $ 6,618

Net income....................................... -- -- -- 275 -- 275
Translation adjustment........................... -- -- -- -- (24) (24)
----- --- ---------- ------------ ----- ---------

Balance, December 31, 1996......................... 1,737 17 116,234 (109,111) (271) 6,869
----- --- ---------- ------------ ----- ---------

Net loss......................................... -- -- -- (9,948) -- (9,948)
Translation adjustment........................... -- -- -- -- (54) (54)
----- --- ---------- ------------ ----- ---------

Balance, June 30, 1997............................. 1,737 17 116,234 (119,059) (325) (3,133)
----- --- ---------- ------------ ----- ---------

Net income....................................... -- -- -- 2,858 -- 2,858
Issuance of warrants (Note 5).................... -- -- 1,711 -- -- 1,711
Translation adjustment........................... -- -- -- -- (143) (143)
----- --- ---------- ------------ ----- ---------

Balance, June 30, 1998............................. 1,737 17 117,945 (116,201) (468) 1,293
----- --- ---------- ------------ ----- ---------

Net income....................................... -- -- -- 40,945 -- 40,945
Translation adjustment........................... -- -- -- -- (36) (36)
----- --- ---------- ------------ ----- ---------

Balance, June 30, 1999............................. 1,737 $ 17 $ 117,945 $ (75,256) $ (504) $ 42,202
----- --- ---------- ------------ ----- ---------
----- --- ---------- ------------ ----- ---------
</TABLE>

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

F-4
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE SIX JUNE 30,
FOR THE YEAR ENDED MONTHS ENDED --------------------
DECEMBER 31, 1996 JUNE 30, 1997 1998 1999
------------------ ------------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................... $ 275 $ (9,948) $ 2,858 $ 40,945
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities, net of
acquisitions:
Depreciation and amortization......................... 11,618 6,211 11,470 11,565
Write-down of property and trademark.................. -- 1,124 -- --
Extraordinary loss on extinguishment of debt.......... -- -- 1,354 --
Deferred tax valuation adjustment..................... -- -- -- (22,000)
Net changes in operating assets and liabilities, per
accompanying schedule............................... 27,707 (19,025) 2,884 22,529
Payment of noncurrent liabilities..................... (3,900) (1,326) (4,110) (3,205)
Other, net............................................ 398 88 1,032 897
-------- ------------- --------- ---------

Net cash provided by (used in) operating activities,
net of acquisitions............................... 36,098 (22,876) 15,488 50,731
-------- ------------- --------- ---------

INVESTING ACTIVITIES:
Property and equipment additions........................ (5,511) (5,088) (8,118) (12,858)
Proceeds from sales of property......................... 3,966 306 111 933
Proceeds from the sale of a note receivable............. -- -- 4,208 --
Acquisitions, net of cash acquired...................... -- -- -- (6,142)
Investment in Pyramid Operating Systems, Inc............ -- -- -- (2,203)
-------- ------------- --------- ---------

Net cash used in investing activities............... (1,545) (4,782) (3,799) (20,270)
-------- ------------- --------- ---------

FINANCING ACTIVITIES:
Proceeds (repayments) under revolving credit facility... (28,231) 10,000 (10,000) --
Proceeds from senior term loan.......................... -- -- 15,000 --
Repayments of senior term loan.......................... -- -- (3,000) (12,000)
Proceeds from subordinated term loan.................... -- -- 60,000 --
Repayments of senior subordinated notes................. -- -- (72,149) --
Proceeds from IRB financing............................. -- -- -- 4,000
Repayments of other long-term debt...................... (916) (221) (358) (38)
Financing and option costs.............................. (360) (825) (2,879) (303)
-------- ------------- --------- ---------

Net cash provided by (used in) financing
activities........................................ (29,507) 8,954 (13,386) (8,341)
-------- ------------- --------- ---------

Increase (decrease) in cash and cash equivalents...... 5,046 (18,704) (1,697) 22,120
-------- ------------- --------- ---------

CASH AND CASH EQUIVALENTS:
Balance, beginning of period............................ 18,091 23,137 4,433 2,736
-------- ------------- --------- ---------
Balance, end of period.................................. $ 23,137 $ 4,433 $ 2,736 $ 24,856
-------- ------------- --------- ---------
-------- ------------- --------- ---------
</TABLE>

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

F-5
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
FOR THE SIX JUNE 30,
FOR THE YEAR ENDED MONTHS ENDED --------------------
DECEMBER 31, 1996 JUNE 30, 1997 1998 1999
------------------ ------------- --------- ---------
<S> <C> <C> <C> <C>
Changes in operating assets and liabilities, net of
acquisitions, consist of:
Accounts receivable..................................... $ 5,742 $ (689) $ 723 $ (5,179)
Inventories............................................. 20,895 (6,296) 6,211 (14,952)
Prepaid expenses........................................ 1,806 417 (592) 878
Accounts payable, accrued liabilities and accrued income
taxes................................................. (736) (12,457) (3,458) 41,782
-------- ------------- --------- ---------

Net changes......................................... $ 27,707 $ (19,025) $ 2,884 $ 22,529
-------- ------------- --------- ---------
-------- ------------- --------- ---------

Supplemental cash flow information:
Interest paid during the period......................... $ 18,608 $ 8,315 $ 19,406 $ 14,547
Income taxes paid during the period..................... 1,108 587 67 864
-------- ------------- --------- ---------
-------- ------------- --------- ---------

Schedule of noncash financing and investing activities:
Property and equipment additions from capital leases.... $ 362 $ -- $ -- $ --
Sale of property in exchange for notes receivable....... -- 4,594 -- --
-------- ------------- --------- ---------
-------- ------------- --------- ---------
</TABLE>

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

F-6
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BACKGROUND

Genmar Holdings, Inc. (the "Company") was organized in March 1994 to combine
the operations of IJ Holdings Corp. ("IJ Holdings") including its wholly-owned
subsidiary, Minstar, Inc. ("Minstar"), and Miramar Marine Corporation
("Miramar"), each of which had been under the control of investor groups led by
Irwin L. Jacobs, principal stockholder and Chairman of the Board of the Company.

The Company is the second largest manufacturer of motorized recreational
boats in the world. The Company is focused on using innovative technologies and
marketing strategies to produce and sell boats under leading brand names such as
AQUASPORT, CARVER, CRESTLINER, GLASTRON, LARSON, LOGIC, LUND, NOVA, RANGER,
SCARAB, TROJAN and WELLCRAFT. The Company sells its products through an
established network of independent authorized dealers in the United States and
internationally.

The Company operates in the recreational powerboat industry which has been
subject to periodic cyclical industry downturns. The Company's ability to meet
its debt service and other obligations depends on its future performance, which,
in turn, is subject to general economic conditions, financial performance and
business factors, including factors beyond the Company's control.

2. UNAUDITED STATEMENT OF OPERATIONS

Effective June 2, 1997, the Company changed its fiscal year end from
December 31 to June 30. In order to provide a meaningful comparison of current
year results to a comparable prior year period, set forth below are the
Company's unaudited comparative results of operations for the twelve months
ended June 30, 1997 as compared to the Company's audited results of operations
for the years ended June 30, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
FOR THE 12 FOR THE YEAR
MONTHS ENDED ENDED JUNE 30,
JUNE 30, 1997 ----------------------------
(UNAUDITED) 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Net revenues........................................................ $ 574,802 $ 585,943 $ 704,656
Cost of products and services....................................... 486,276 480,651 567,247
------------- ------------- -------------
Gross profit...................................................... 88,526 105,292 137,409
New product and technology development.............................. 8,372 11,292 10,996
Selling and administrative expenses................................. 66,687 70,402 88,945
------------- ------------- -------------
Operating profit.................................................. 13,467 23,598 37,468
Interest expense.................................................... (21,937) (18,702) (16,098)
Investment and other income (loss), net............................. (294) (304) 75
------------- ------------- -------------
Income (loss) before income taxes and extraordinary item.......... (8,764) 4,592 21,445
Income tax benefit (provision)...................................... (635) (550) 19,500
------------- ------------- -------------
Income (loss) before extraordinary item........................... (9,399) 4,042 40,945
Extraordinary loss on extinguishment of debt........................ -- (1,184) --
------------- ------------- -------------
Net income (loss)................................................. $ (9,399) $ 2,858 $ 40,945
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

F-7
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany accounts and transactions have been eliminated.

FISCAL YEAR:

Effective June 2, 1997, the Company changed its fiscal year end from
December 31 to June 30. Accordingly, all general references to years relate to
fiscal years, unless otherwise noted.

RECLASSIFICATIONS:

Certain amounts for the year ended December 31, 1996, the six months ended
June 30, 1997 and the year ended June 30, 1998 in the accompanying consolidated
financial statements have been reclassified to conform to the year ended June
30, 1999 presentation. Such reclassifications had no effect on previously
reported net income (loss) or stockholders' equity.

REVENUE RECOGNITION AND WARRANTY ACCRUALS:

Revenue for products and services, reported net of dealer and other
discounts, is recognized at the time of shipment, or when services have been
performed.

Through its dealers, the Company warrants its products under normal use and
maintains warranty reserves pursuant to this policy. Major components, including
engines, drive units and appliances, are warranted by their suppliers and not
the Company.

USE OF ESTIMATES:

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Estimates are used for such items as depreciable lives,
uncollectible accounts, environmental and legal loss contingencies, the
valuation of deferred income tax assets, self-insurance reserves and future
warranty costs. As better information becomes available or actual amounts are
determinable, the recorded estimates are revised. Consequently, operating
results can be affected by revisions to prior accounting estimates.

EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS:

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS No. 133"). SFAS No. 133 is effective for financial
statements for fiscal years beginning after June 15, 2000. The Company
anticipates implementing the reporting provisions required under SFAS No. 133
for the fiscal year beginning July 1, 2000. Management does not expect
implementation of these reporting provisions to have a material impact on the
Company's disclosures or results of operations.

F-8
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS:

Cash includes cash equivalents consisting principally of short-term
investments in commercial paper with original maturities of three months or less
and are recorded at cost, which approximates fair value.

INVENTORIES:

Inventories are stated at the lower of cost or market and include materials,
labor and overhead costs. The Company uses the first-in, first-out cost method
in determining cost for substantially all of its inventories. Inventories
consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
--------- ----------
<S> <C> <C>
Raw materials.......................................................... $ 34,124 $ 38,813
Work in process........................................................ 42,315 59,460
Finished goods......................................................... 25,173 19,181
Reserves............................................................... (4,042) (3,523)
--------- ----------
$ 97,570 $ 113,931
--------- ----------
--------- ----------
</TABLE>

PRODUCTION TOOLING:

The costs associated with the development of certain large-scale molds and
processes are capitalized as operating equipment and amortized over three years
using the straight-line method. The costs associated with mold maintenance and
the development of all other molds and production tooling are charged to cost of
products and services as incurred.

PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost. Depreciation and amortization for
financial reporting purposes are generally provided on the straight-line method
over the estimated useful lives. Useful lives of buildings are estimated at 32
to 40 years, while land improvements and building improvements are estimated at
10 to 15 years. Leasehold improvements are depreciated at the lesser of 10 years
or the remaining lease term. Operating equipment has a useful life of 3 to 10
years with computer hardware and software at 3 years and certain machinery at 10
years. Major repairs and improvements are capitalized and depreciated.
Maintenance, supplies and accessories are charged to expense as incurred. The
cost and accumulated depreciation of property and equipment retired or otherwise
disposed of are removed from the related accounts, with any residual balances
charged or credited to earnings.

OTHER ASSETS:

Other assets, as of June 30, 1999 consist primarily of long-term deferred
tax assets, deferred debt financing costs and the Company's investment in
Pyramid Operating Systems, Inc. ("Pyramid").

GOODWILL:

Goodwill is amortized on a straight-line basis over various periods not
exceeding 40 years. The Company periodically evaluates whether events and
circumstances have occurred that indicate the

F-9
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance of goodwill may not be recoverable. This evaluation utilizes
an undiscounted future operating cash flows computation method and compares such
anticipated future cash flows to the related carrying value of goodwill.
Weighted average remaining amortization period is 26 years as of June 30, 1999.
Accumulated amortization was $20.1 million and $21.8 million at June 30, 1998
and 1999, respectively.

ACCRUED LIABILITIES:

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
--------- ---------
<S> <C> <C>
Payroll and incentive related........................................... $ 13,313 $ 30,019
Sales incentives........................................................ 10,683 15,065
Insurance............................................................... 9,265 10,328
Warranty................................................................ 12,238 12,554
Interest................................................................ 3,013 2,015
Customer deposits....................................................... 11,108 9,783
Other................................................................... 6,497 10,110
--------- ---------
$ 66,117 $ 89,874
--------- ---------
--------- ---------
</TABLE>

ENVIRONMENTAL MATTERS:

Environmental expenditures which relate to the Company's boat manufacturing
operations are charged to expense or capitalized in accordance with generally
accepted accounting principles. Environmental matters that relate to conditions
arising from previously divested businesses were generally recorded as
liabilities prior to or at the time of divestiture and are periodically
reassessed for adequacy based on current information. Liabilities relating to
environmental matters are generally recorded when environmental assessments
and/or remedial efforts are probable and the related costs can be reasonably
estimated. Generally, the timing of these accruals coincides with the completion
of a feasibility study or the Company's commitment to a formal plan of action.

NET EARNINGS (LOSS) PER COMMON SHARE:

Basic net earnings (loss) per common share is computed by dividing net
earnings (loss) applicable to common stockholders by the weighted-average number
of common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares which might be issued upon exercise of common
stock warrants. In periods where losses are reported, the weighted-average
number of common shares outstanding excludes common stock equivalents, since
their inclusion would be anti-dilutive.

COMPREHENSIVE INCOME(LOSS):

Comprehensive income and its components is reported in the Consolidated
Statements of Stockholders' Equity. Comprehensive income (loss) is defined as
changes in the equity excluding

F-10
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
changes resulting from investments by and distributions to the stockholders. The
Company's only component of comprehensive loss is its cumulative translation
adjustment for foreign currencies.

4. ACQUISITIONS

PYRAMID OPERATING SYSTEMS, INC.:

On June 18, 1999, the Company entered into an agreement to purchase the
remaining shares of Pyramid for a net purchase price of $11.0 million, payable
either in shares of the Company's common stock upon completion of a public
offering of common stock, or on April 30, 2000 in the form of a subordinated
note payable. Under this agreement, the Company has agreed to provide short-term
financing to fund Pyramid's interim working capital requirements until the
acquisition date. The Company has also entered into a management agreement with
Pyramid under which the Company oversees the management of Pyramid until the
closing of the transaction.

LOGIC MARINE CORPORATION:

On May 11, 1999, the Company acquired substantially all of the assets of
Logic Marine Corporation ("Logic"), a manufacturer of fishing and recreational
boats, for consideration consisting of $500,000 in cash at closing, a promissory
note for $500,000 due in May 2000, $597,000 in assumed liabilities, and an
earn-out of up to $450,000 over three years based on net sales revenues from
sales of Logic boats. The acquisition was accounted for as a purchase and
resulted in goodwill in the amount of $1.6 million, which represented the
purchase price plus net liabilities acquired. Goodwill will be amortized over a
25-year period. Logic's results of operations since the date of acquisition are
included in the accompanying consolidated financial statements.

HORIZON MARINE, L.C.:

On December 3, 1998, the Company acquired substantially all of the assets
and certain liabilities of Horizon Marine, L.C. ("Nova"), a Kansas aluminum boat
manufacturer, for consideration consisting of $2.3 million in cash at closing
and the assumption of approximately $3.5 million in liabilities of which $2.7
million were paid at or immediately subsequent to closing. There is also a
five-year earn-out of up to $5.2 million of which $200,000 were pre-paid at
closing. The earn-out is based on gross revenues from sales of products produced
at this facility and can be adjusted for the achievement of certain gross profit
percentages and for the value of warranty claims, from sales of products
produced at this facility. The acquisition was accounted for as a purchase and
resulted in goodwill in the amount of $700,000, which represented the purchase
price in excess of net assets acquired. Goodwill will be amortized over a
25-year period. Nova's results of operations since the date of acquisition are
included in the accompanying consolidated financial statements.

F-11
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT

At the year end dates indicated below, long-term debt, net of related
discounts, consisted of the following (in thousands):

<TABLE>
<CAPTION>
INTEREST RATE,
AS OF
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999
----------------- ---------- ----------
<S> <C> <C> <C>
Revolving credit facility, variable rate............................... n/a $ -- $ --
Senior term loan, variable rate........................................ n/a 12,000 --
Subordinated term loan, variable rate.................................. 7.3% 60,000 60,000
Senior subordinated notes, fixed rate.................................. 13.5% 25,584 25,584
Stockholder notes, net of unamortized discount of $3.7 million as of
June 30, 1999, variable rate......................................... 8.8% to 9.3% 4,104 25,406
Note payable to State of Wisconsin Investment Board, net of unamortized
discount of $5.1 million as of June 30, 1998, variable rate.......... n/a 19,917 --
Other debt obligations, due in varying installments through 2005, fixed
rate................................................................. 3.4% to 12.4% 2,199 6,161
---------- ----------
Total debt......................................................... 123,804 117,151
Less-current maturities................................................ (6,026) (1,022)
---------- ----------
Total long-term debt............................................... $ 117,778 $ 116,129
---------- ----------
---------- ----------
</TABLE>

Aggregate maturities of long-term debt are approximately $4.1 million in the
year ending June 30, 2001, $25.6 million in the year ending June 30, 2002, $81.4
million in the year ending June 30, 2003, none in the year ending June 30, 2004
and $5.0 million thereafter. At June 30, 1999, the carrying value of long-term
debt was approximately $5.8 million less than its fair value.

In July 1994, the Company issued $100.0 million aggregate principal amount
of 13.5% Senior Subordinated Notes due 2001 (the "13.5% Notes").

F-12
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT (CONTINUED)

During fiscal year 1999, the Company's old credit facility (the "Old Credit
Facility"), which would have expired in June 2000, consisted of a $35.0 million
revolving credit facility, a $15.0 million term loan facility and a $23.0
million letter of credit facility. At June 30, 1999, the Old Credit Facility, as
amended, consisted of a $35.0 million revolving credit facility and a $23.0
million letter of credit facility. Weighted average borrowings outstanding under
the revolving credit facility during 1999 were $14.5 million. Aggregate
borrowings and outstanding letters of credit under the Old Credit Facility were
limited to eligible receivables and eligible inventories, as defined. Borrowings
under the revolving credit facility were intended for general corporate and
working capital purposes. At June 30, 1999, the Company had $35.0 million of
availability under the revolving credit facility, $3.6 million of availability
under letter of credit facility and had prepaid the term loan facility in its
entirety. In addition, as of June 30, 1999, the Company was in compliance with
all covenants under the Old Credit Facility, except the capital expenditure
requirement. Such non-compliance was effectively waived upon the arrangement of
the Company's new credit facility.

Effective July 30, 1999, the Company arranged a new credit facility (the
"New Credit Facility"), which expires in June 2002, consisting of a $29.0
million revolving credit facility, a $45.0 million term loan facility and a
$21.0 million letter of credit facility. Aggregate borrowings and outstanding
letters of credit under the new Credit Facility are limited to eligible
receivables, eligible inventories and eligible property, plant and equipment, as
defined. Borrowings under the revolving credit facility are intended for general
corporate and working capital purposes and for the purchase of approximately
$5.6 million aggregate principal amount of the Notes. Borrowings under the term
loan facility are designated solely for the purchase of a stockholder note in
the amount of $25.0 million, which was repaid on August 13, 1999, and for the
purchase of approximately $20.0 million aggregate principal amount of the 13.5%
Notes, which the Company anticipates to occur on September 7, 1999. At the time
of original issuance the stockholder note was deemed to have a below-market
interest rate, and a debt discount was recorded to impute a market yield to
maturity. The repayment of the stockholder note and the 13.5% Notes will result
in an extraordinary loss of $5.7 million, including $3.7 million of unaccreted
discount associated with the stockholder note.

The New Credit Facility contains restrictive covenants which, among other
things, limit the ability of the Company to incur other indebtedness, engage in
transactions with affiliates, incur liens, make certain restricted payments, and
enter into certain business combination and asset sale transactions. The New
Credit Facility also requires the Company to satisfy certain financial tests and
ratios and restricts capital expenditures. In addition, the New Credit Facility
contains provisions which may require accelerated repayment of amounts
outstanding thereunder and/or limit the Company's access to borrowings
thereunder upon the incurrence of specific obligations or significant changes in
the financial condition, business, properties, prospects or operations of the
Company.

On January 21, 1997, the Company paid $800,000 for an option agreement (the
"Option"), with an affiliate of RDV Holdings, Inc., a stockholder of the
Company, pursuant to which the Company was granted an option to purchase up to
$25.0 million aggregate principal amount of the 13.5% Notes at par. The Option
was exercisable at any time or from time to time, in whole or in part, through
January 19, 1998.

On July 1, 1997, the Company entered into an agreement (the "Tender
Agreement"), with an unrelated third party, pursuant to which the third party
agreed to tender certain of the 13.5% Notes held by such party, with an
aggregate face value of $32.0 million, for purchase by the Company at a

F-13
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. DEBT (CONTINUED)
price equal to 99.0% of par. In consideration of entering into the Tender
Agreement, the Company paid the third party a fee of $960,000 (3% of par). As a
condition to the Tender Agreement, the holder also agreed to consent to certain
proposed amendments to the indenture governing the 13.5% Notes ("Indenture").

On July 10, 1997, the Company commenced an offer to purchase and a consent
solicitation (the "Tender Offer and Consent"), for to up to $75.0 million
aggregate principal amount of the 13.5% Notes, including those subject to the
Tender Agreement, but excluding those subject to the Option. Terms of the Tender
Offer and Consent provided for the purchase of all validly tendered 13.5% Notes,
as defined and subject to certain conditions, at a price equal to 99.0% of par.
In addition, holders submitting valid tenders of 13.5% Notes would have, as a
condition to tendering, provided their consent with respect to certain proposed
amendments to the Indenture, for which consent the holder would receive a fee
equal to 3.0% of par (the "Consent Fee") of the 13.5% Notes tendered by such
holder.

On October 20, 1997, the Company arranged a $60.0 million subordinated bank
credit facility (the "Subordinated Facility"), expiring in October 2002,
consisting of a $60.0 million term loan facility. These proceeds were designated
solely for the purchase of up to $60.0 million aggregate principal amount of the
13.5% Notes. Borrowings under the Subordinated Facility are collateralized by a
second security interest in the Company's assets and by letters of credit issued
by certain stockholders of the Company.

On October 20, 1997, the Company accepted for purchase $49.4 million
aggregate principal amount of the 13.5% Notes tendered by holders in connection
with the Tender Offer and Consent. In addition, the Company exercised the Option
and purchased an additional $25.0 million aggregate principal amount of the
13.5% Notes. The purchase of the 13.5% Notes and the payment of the related
Consent Fee was funded through proceeds from the Credit Facility and the
Subordinated Facility. In connection with the purchase of these 13.5% Notes, the
Company incurred an extraordinary loss on early extinguishment of debt of
approximately $1.2 million.

Pursuant to the First Amended and Restated Note and Stock Purchase
Agreement, dated August 31, 1998, by and between Irwin L. Jacobs and the State
of Wisconsin Investment Board (SWIB), SWIB purchased a $25.0 million demand
promissory note payable by the Company to Mr. Jacobs. On June 17, 1999, Mr.
Jacobs repurchased that note from SWIB. The Company used a portion of the
proceeds of its new credit facility to repay this note in full in August 1999.

In consideration of providing letters of credit to collateralize the
Company's Subordinated Facility, the Company issued warrants to certain existing
stockholders providing such letters of credit. A total of 731,182 warrants were
issued in connection therewith. The fair value of the warrants issued
approximated $1.7 million and has been reflected as debt issuance costs and an
addition to equity in the accompanying June 30, 1998 balance sheet. This debt
issuance cost is being amortized over a period extending through October 2002.
In addition, the Company reimburses the stockholders for their costs incurred in
maintaining these letters of credit.

F-14
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES

The Company utilizes the liability method to account for income taxes. The
liability method requires that deferred assets and liabilities be recognized for
the expected future tax effects of the temporary differences between the tax and
book bases of the assets and liabilities.

Components of the provision for income taxes were as follows for the year
ended December 31, 1996, the six months ended June 30, 1997 and the years ended
June 30, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
FOR THE FOR THE YEAR ENDED
FOR THE YEAR SIX MONTHS JUNE 30,
ENDED ENDED ------------------------------
DECEMBER 31, 1996 JUNE 30, 1997 1998 1999
------------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Current:
Federal....................... $ -- $ -- $ 60 $ 470
State and foreign............. 860 246 490 2,030
----- ----- ----- -------------
Total current............... 860 246 550 2,500
Change in valuation
allowance................... -- -- -- (22,000)
----- ----- ----- -------------

Total......................... $ 860 $ 246 $ 550 $ (19,500)
----- ----- ----- -------------
----- ----- ----- -------------
</TABLE>

At June 30, 1999, the Company had total net operating loss carryforwards of
approximately $146.0 million. Net operating losses of $58.0 million, $53.0
million, $23.0 million and $12.0 million expire in the years ended June 30,
2006, June 30, 2007, June 30, 2008 and June 30, 2012, respectively. Realization
of $16.0 million of certain net operating loss carryforwards is limited annually
under Section 382 of the Internal Revenue Code, as amended. The Company also had
unused alternative minimum tax credits of approximately $5.0 million that may be
available to offset future federal income tax liabilities.

Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities consist of the following as of June 30, 1998 and 1999 (in
thousands):

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
---------- ----------
<S> <C> <C>
Loss carryforwards.................................................... $ 62,545 $ 56,090
Liabilities retained related to previously divested businesses........ 3,202 2,194
Warranty reserves..................................................... 4,670 4,709
Insurance reserves.................................................... 4,091 4,027
Accrued rebates....................................................... 2,902 3,995
Inventory reserves.................................................... 1,294 2,207
Other................................................................. 10,007 9,343
---------- ----------
Total deferred tax assets........................................... 88,711 82,565
Valuation allowance................................................... (86,725) (58,523)
---------- ----------
Deferred tax liability--depreciation.................................. (1,986) (2,042)
---------- ----------
Net deferred tax assets............................................... 1,986 24,042

Net deferred taxes.................................................. $ -- $ 22,000
---------- ----------
---------- ----------
</TABLE>

F-15
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)
Prior to 1999 the Company had determined that the realization of the loss
carryforwards and net deferred tax assets did not meet the recognition criteria
under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109") and, accordingly, valuation allowances had been
established for the entire tax benefit of these loss carryforwards and the net
deferred tax assets. During 1999, the Company determined it more likely than not
that a portion of the deferred tax assets would be realizable because the
Company had two consecutive years of profits and future projected profits. As a
result, in accordance with SFAS 109, the Company recorded a reduction in the
valuation allowance of $22.0 million.

The differences between income taxes computed using the federal statutory
rate and the effective tax rate were as follows for the year ended December 31,
1996, the six months ended June 30, 1997 and the years ended June 30, 1998 and
1999:

<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR MONTHS FOR THE YEAR ENDED
ENDED ENDED JUNE 30,
DECEMBER 31, JUNE 30, ---------------------------
1996 1997 1998 1999
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Federal statutory rate............. 34% 34% 34% 35%
State income taxes, net of federal
tax benefits..................... (76) 3 3 5
Nondeductible amortization &
other............................ 0 0 22 5
Current utilization of NOL's....... (34) (34) (43) (31)
Change in valuation allowance...... 0 0 0 (105)
--- --- --- ---

Effective tax rate................. (76)% 3% 16% (91)%
--- --- --- ---
--- --- --- ---
</TABLE>

7. EMPLOYEE BENEFIT PLANS

The Company and certain of its subsidiaries maintain defined contribution
retirement plans covering substantially all full-time employees. Under certain
of these plans, eligible participants may make voluntary contributions up to 25%
of their compensation, as permitted by plan provisions. The plans provide for
the Company to make matching and other contributions to eligible participants at
the Company's discretion. The Company made contributions to these plans
aggregating $1.1 million for the year ended December 31, 1996, $400,000 for the
six months ended June 30, 1997, $1.2 million for the year ended June 30, 1998
and $1.4 million for the year ended June 30, 1999.

8. COMMITMENTS AND CONTINGENCIES

DEALER INVENTORY FLOOR PLAN FINANCING:

The Company and its subsidiaries are parties to certain dealer inventory
floor plan financing arrangements with various financial institutions pursuant
to which the Company may be required, in the event of default by a financed
dealer, to repurchase products previously sold to such dealer. The Company
repurchased $3.2 million of such dealer inventory in the year ended December 31,
1996, $1.4 million in the six months ended June 30, 1997, $4.5 million in the
year ended June 30, 1998 and $3.4 million in the year ended June 30, 1999. As of
June 30, 1999, the Company and certain

F-16
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
subsidiaries were contingently liable under these agreements for repurchase in
the amount of $13.8 million.

The Company generally has not provided reserves, other than immaterial
reserves at certain subsidiaries, for losses and costs which may result should
the Company be required to repurchase product from a defaulting dealer. Although
the ultimate loss which may be incurred as a result of such contractual
obligation is uncertain, the Company believes that any such losses that may be
incurred would not have a material effect on its consolidated operating results
or financial position.

INSURANCE MATTERS:

The Company and its subsidiaries have insurance for workers' compensation,
employee health, general and auto liability losses in excess of predetermined
loss limits. A provision has been made in the consolidated financial statements
for estimated losses resulting from claims incurred prior to the balance sheet
date, which were below the amounts of the predetermined loss limits.

LEASES AND COMMITMENTS:

The Company, through its subsidiaries, leases certain facilities and
equipment under operating lease arrangements which expire at various dates
through 2004. These leases generally contain renewal options and require the
Company to pay the maintenance, insurance, taxes and other expenses in addition
to the minimum annual rentals. Rent expense related to operating leases was $2.2
million for the year ended December 31, 1996, $1.0 million for the six months
ended June 30, 1997, $2.5 million for the year ended June 30, 1998 and $3.1
million for the year ended June 30, 1999. The Company has future lease
commitments of approximately $3.6 million in 2000, $2.6 million in 2001, $1.6
million in 2002 and $600,000 thereafter.

LEGAL AND ENVIRONMENTAL:

The Company and its subsidiaries are defendants in legal proceedings arising
in the ordinary course of business. Although the outcome of these matters cannot
be determined, in the opinion of management and outside counsel, disposition of
these proceedings will not have a material effect on the Company's consolidated
financial position or results of operations.

Historically, the Company's facilities have used underground storage tanks
for storing certain materials associated with its operations, including
petroleum, acetone and resins. The Company has removed or closed in place all
underground storage tanks according to applicable laws. No material issues
related to soil or groundwater contamination were encountered.

CURRENT AND DIVESTED BUSINESSES:

The Company believes it is in substantial compliance with all existing
environmental laws and regulations. In 1995, The Company signed a final consent
order with the Florida Department of Environmental Protection to settle all
outstanding issues with respect to an acetone release at our Wellcraft plant in
Sarasota, Florida. The remaining estimated cost of remediation activities
required at this site ranges from $1.7 million to $2.0 million. Based on
available information, reserves as of June 30, 1999 are adequate to cover these
costs.

F-17
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In addition, the past practices of some of the Company's current and
divested operations may have created conditions that give rise to liability
under CERCLA and comparable state laws. With respect to these potential
liabilities, the Company has been identified as a potentially responsible party
at approximately 12 active sites. In certain instances, the Company has a duty
to indemnify the current owners for environmental matters related to divested
operations including AMF Incorporated. Excluding the matters with Wellcraft
discussed above, the Company currently anticipates total environmental-related
costs associated with current and divested operations at approximately $2.3
million, which include CERCLA-type liabilities. These costs are likely to be
incurred over a period of up to ten years. Payments relating to environmental
matters in connection with current and divested businesses were approximately
$1.9 million for the year ended December 31, 1996, $300,000 in the six months
ended June 30, 1997 and $500,000 in each of the years ended June 30, 1998 and
1999. As of June 30, 1999, based on available information, reserves to account
for any potential exposure with respect to current and divested operations are
adequate to cover any potential costs. Nevertheless, the nature and extent of
CERCLA proceedings is that cleanup estimates, the allocated financial
responsibilities of potentially responsible parties and the degree of regulatory
scrutiny may change over time and therefore the Company is not certain that
these estimates will ultimately reflect its actual exposure.

Other non-current liabilities consist of the following (in thousands):

Post-retirement benefits................................................ $ 1,525 $ 1,440
Insurance............................................................... 3,286 2,465
Legal and environmental................................................. 5,230 2,131
Other................................................................... 5,675 6,875
--------- ---------

Total other noncurrent liabilities.................................... $ 15,716 $ 12,911
--------- ---------
--------- ---------
</TABLE>

LETTERS OF CREDIT:

At June 30, 1999, the Company had outstanding letters of credit aggregating
$19.4 million for which approximately $13.7 million collateralized various
Company insurance programs. The remainder principally related to an industrial
development revenue bond financing arrangement and to liabilities retained by
the Company in connection with divested operations.

9. SEGMENT REPORTING

The Company conducts and reports its business in two segments, the
recreational boat segment and the luxury yachts segment, which consists solely
of the Hatteras Yachts division. The segments are managed and reported
separately because the recreational boats are manufactured in a high-volume
assembly line environment whereas Hatteras is a custom yacht builder, similar to
a construction company environment. The Company measures the success of segments
by monitoring operating profit. The Company does not allocate nonoperating gains
and losses, interest expense and taxes to the segments.

F-18
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. SEGMENT REPORTING (CONTINUED)
Both segments follow accounting policies described in Note 3, and no
transactions occur between the segments.

The following table illustrates information about the Company's reported
operating profit or loss and segment assets. The Company does not allocate
income taxes or unusual items to segments.

Segment information as of and for the year ended December 31, 1996, the six
months ended June 30, 1997 and the years ended June 30, 1998 and 1999 consisted
of the following (in thousands):

<TABLE>
<CAPTION>
RECREATIONAL RECREATIONAL
BOATS LUXURY YACHTS TOTALS BOATS LUXURY YACHTS TOTALS
----------- ------------- --------- ----------- ------------- ---------

YEAR ENDED DECEMBER 31, 1996 SIX MONTHS ENDED JUNE 30, 1997
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.............................. $ 521,199 $ 96,857 $ 618,056 $ 235,819 $ 25,029 $ 260,848
Depreciation and goodwill amortization.... 6,747 1,347 8,094 3,360 703 4,063
Operating profit (loss)................... 19,573 3,630 23,203 9,147 (7,647) 1,500
Other significant noncash items........... 3,524 -- 3,524 3,272 -- 3,272
Segment assets............................ 223,645 47,558 271,203 203,584 54,695 258,279
Expenditures for segment assets........... 3,730 1,781 5,511 3,781 1,307 5,088
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998 YEAR ENDED JUNE 30, 1999
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.............................. $ 505,910 $ 80,033 $ 585,943 $ 614,406 $ 90,250 $ 704,656
Depreciation and goodwill amortization.... 7,138 1,636 8,774 7,221 1,730 8,951
Operating profit (loss)................... 27,601 (4,003) 23,598 35,948 1,520 37,468
Other significant noncash items........... -- -- -- 2,614 -- 2,614
Segment assets............................ 192,346 52,276 244,622 265,379 55,384 320,763
Expenditures for segment assets........... 6,773 1,345 8,118 11,270 1,588 12,858
</TABLE>

The following table reconciles operating profit to net income for the year
ended December 31, 1996, the six months ended June 30, 1997 and the years ended
June 30, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1996 1997 1998 1999
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total operating profit for reportable
segments................................. $ 23,203 $ 1,500 $ 23,598 $ 37,468
Interest expense........................... (22,190) (11,026) (18,702) (16,098)
Other income (loss)........................ 122 (176) (304) 75
Income tax benefit (provision)............. (860) (246) (505) 19,500
Extraordinary loss on extinguishment of
debt..................................... -- -- (1,134) --
------------ ---------- ---------- ----------
Net income (loss).......................... $ 275 $ (9,948) $ 2,853 $ 40,495
------------ ---------- ---------- ----------
------------ ---------- ---------- ----------
</TABLE>

F-19
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. RELATED-PARTY TRANSACTIONS

In addition to the matters discussed in Note 5, the Company pays a
management fee to Jacobs Management Corporation ("JMC"), a stockholder of the
Company and an affiliate of Irwin L. Jacobs, for certain consulting and
management services and subleases certain office facilities to JMC. Net payments
under these arrangements aggregated approximately $1.5 million for the year
ended December 31, 1996, $700,000 for the six months ended June 30, 1997, $1.4
million for the year ended June 30, 1998 and $1.3 million for the year ended
June 30, 1999.

The Company pays interest in connection with two stockholder notes payable
to Irwin L. Jacobs. These notes bear interest at the published prime rate, plus
1.0% and plus 1.5%, respectively. Payments of interest under these note
agreements aggregated approximately $400,000 for the year ended December 31,
1996, $200,000 for the six months ended June 30, 1997, $400,000 for each of the
years ended June 30, 1998 and 1999.

From time to time the Company has recorded revenues from boat sales to
affiliates. Management believes the terms of such sales were consistent with
terms of sales to non-affiliated parties. Revenues recorded in connection with
such sales aggregated approximately $1.4 million for the year ended December 31,
1996, none for the six months ended June 30, 1997, and $500,000 for each of the
years ended June 30, 1998 and 1999.

The Company sponsors certain professional bass fishing tournament activities
of Operation Bass, Inc., an affiliate of Irwin L. Jacobs and certain executive
management of the Company. Net sponsorship costs, including cash paid or accrued
and product provided, incurred by the Company for the year ended June 30, 1999
related to these activities approximated $432,000. No such costs were incurred
in prior periods.

11. SUBSEQUENT EVENTS (UNAUDITED)

The Company has filed an initial registration statement with the SEC to
offer shares of its common stock to the public. In connection with this
offering, the Company has committed to: (1) splitting the Company's common
stock, (2) spinning off Hatteras, the Company's luxury yacht segment, (3)
acquiring Pyramid, (4) issuing shares of common stock in exchange for
outstanding warrants, (5) issuing shares of common stock to nonmanagement
employees, and (6) recording expense under the Company's phantom stock plan.

F-20
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. SUPPLEMENTAL STATEMENTS OF OPERATIONS INFORMATION (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- ---------- ---------- ---------- ----------

<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------
Net revenues......................................... $ 150,492 $ 153,610 $ 145,562 $ 168,392 $ 618,056
Gross profit......................................... 22,419 23,848 21,386 28,740 96,393
Operating profit..................................... 3,711 7,525 3,256 8,711 23,203
Net income (loss).................................... (1,966) 1,692 (2,252) 2,801 275

SIX MONTHS ENDED JUNE 30, 1997
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ 120,023 $ 140,825 n/a n/a $ 260,848
Gross profit......................................... 16,557 21,843 n/a n/a 38,400
Operating profit (loss).............................. (2,799) 4,299 n/a n/a 1,500
Net loss............................................. (9,220) (728) n/a n/a (9,948)
<CAPTION>

YEAR ENDED JUNE 30, 1998
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ 132,739 $ 140,389 $ 145,986 $ 166,829 $ 585,943
Gross profit......................................... 20,257 21,830 27,616 35,589 105,292
Operating profit..................................... 3,060 2,830 5,277 12,431 23,598
Extraordinary loss................................... -- (1,184) -- -- (1,184)
Net income (loss).................................... (2,593) (3,270) 796 7,925 2,858
<CAPTION>

YEAR ENDED JUNE 30, 1999
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ 142,754 $ 169,822 $ 181,838 $ 210,242 $ 704,656
Gross profit......................................... 23,291 29,577 35,997 48,544 137,409
Operating profit..................................... 1,644 9,925 10,942 14,957 37,468
Net income (loss).................................... (2,607) 4,911 6,031 32,610 40,945
</TABLE>

F-21
<PAGE>
GENMAR HOLDINGS, INC. AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

<TABLE>
<CAPTION>
CHARGE FOR
BALANCE PROVISION PURPOSE THAT BALANCE
BEGINNING OF CHARGED TO RESERVE WAS END OF
YEAR OPERATIONS ESTABLISHED YEAR
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Reserve for doubtful accounts

For the year ended December 31, 1996....................... $ 3,488 $ 2,297 $ (1,677) $ 4,108
------ ----------- ------------ ------
------ ----------- ------------ ------

For the six months ended June 30, 1997..................... $ 4,108 $ 166 $ (25) $ 4,249
------ ----------- ------------ ------
------ ----------- ------------ ------

For the year ended June 30, 1998........................... $ 4,249 $ 2,489 $ (5,278) $ 1,460
------ ----------- ------------ ------
------ ----------- ------------ ------

For the year ended June 30, 1999........................... $ 1,460 $ 1,180 $ (993) $ 1,647
------ ----------- ------------ ------
------ ----------- ------------ ------
</TABLE>

F-22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

[LOGO]

COMMON STOCK

------------

PROSPECTUS

------------------

STEPHENS INC.
U.S. BANCORP PIPER JAFFRAY

, 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
the common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee.............................................................. $ 27,800
NASD filing fee................................................................... 10,500
Nasdaq National Market listing fee................................................
Legal fees and expenses...........................................................
Accounting fees and expenses......................................................
Printing and engraving............................................................
Transfer agent fees...............................................................
Miscellaneous.....................................................................
----------
Total....................................................................... $
----------
----------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our amended and restated certificate of incorporation in effect as of the
date hereof provides that, except to the extent prohibited by the Delaware
General Corporation Law, as amended, our directors shall not be personally
liable to our company or our stockholders for monetary damages for any breach of
fiduciary duty. Under the DGCL, the directors have a fiduciary duty to our
company which is not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to our company for acts or omissions which are found by a court
of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. We have
applied for liability insurance for its officers and directors.

Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The amended and restated certificate eliminates
the personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the DGCL and provides that we may fully indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that such person is or was a director or
officer, or is or was serving at our request as a director or officer of

II-1
<PAGE>
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the amended and restated certificate. We are not
aware of any threatened litigation or proceeding that may result in a claim for
such indemnification.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Simultaneously with the consummation of this offering, we will issue
shares of our common stock in exchange for all the remaining outstanding
common stock of Pyramid Operating Systems, Inc. pursuant to Section 4(2) of the
Securities Act of 1933.

In October 1997, in connection with our subordinated term loan credit
facility, we issued warrants to purchase shares of our common stock.
Simultaneously with the completion of this offering, we will exchange
share of our common stock issuable under these warrants, or shares in
the aggregate for all outstanding warrants, pursuant to Section 4(2) of the
Securities Act of 1933.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amended and Restated Bylaws.
*4.1 Specimen Common Stock Certificate.
*5.1 Opinion of Weil, Gotshal & Manges LLP.
10.1 Agreement of Purchase and Sale of Assets by and among Horizon Marine, LC, Genmar Manufacturing of
Kansas, L.L.C. and the Sole Member of Horizon Marine, LC, dated December 3, 1998.
10.2 Agreement of Purchase and Sale of Assets by and among Logic Marine Corporation, Genmar Logic LLC and the
parents and stockholders of Logic Marine Corporation, dated as of May 11, 1998.
10.3 Agreement and Plan of Reorganization by and among Genmar Holdings, Inc., POS Acquisition Corporation,
Pyramid Operating Systems, Inc. and the Stockholders of Pyramid Operating Systems, Inc., dated as of
June 18, 1999.
10.4 Third Amended and Restated Credit Agreement among Genmar Holdings, Inc., the financial institutions
named therein, The Bank of New York, as Agent and BNY Capital Markets, Inc., dated as of July 30, 1999.
10.5 Subordinated Term Loan Credit Agreement among Genmar Holdings, Inc., the financial institutions named
therein, The Bank of New York, as Agent, and BNY Capital Markets, Inc. dated as of October 20, 1997.
*10.6 Genmar Holdings, Inc. 1999 Stock Incentive Plan.
*10.7 Genmar Holdings, Inc. 1999 Stock Option Plan for Non-Employee Directors.
*10.8 Management Services Agreement by and between Genmar Holdings, Inc. and Jacobs Management Corporation,
dated , 1999.
*10.9 Retention Bonus Agreement, dated as of October 31, 1998, by and between Jacobs Management Corporation
and Grant E. Oppegaard.
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
*10.10 Retention Bonus Agreement, dated as of October 31, 1998, by and between Jacobs Management Corporation
and Roger R. Cloutier II.
*11.1 Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page to the Registration Statement).
*27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* To be supplied by amendment.

(b) Financial Statement Schedules.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person of the registrant in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to rule 424(b)(1) or (4), or 497(h)
under the Act, shall be deemed to be part of this registration statement as of
the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.

(3) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in Minneapolis, Minnesota, on this 18th
day of August 1999.

<TABLE>
<S> <C> <C>
GENMAR HOLDINGS, INC.

By: /s/ ROGER R. CLOUTIER, II
-----------------------------------------
Name: Roger R. Cloutier, II
Title:
</TABLE>

POWER OF ATTORNEY

We, the undersigned directors and/or officers of Genmar Holdings, Inc.,
hereby severally constitute and appoint Roger R. Cloutier II and Mary P.
McConnell, and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and each
of them to sign for us, in our names and in the capacities indicated below, the
registration statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said registration statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933 in connection with the registration
under the Act of equity securities of Genmar, and to file or cause to be filed
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this Power
of Attorney.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ IRWIN L. JACOBS
- ------------------------------ Chairman of the Board of August 18, 1999
Irwin L. Jacobs Directors

President, Chief Executive
/s/ GRANT E. OPPEGAARD Officer and Director
- ------------------------------ (principal executive August 18, 1999
Grant E. Oppegaard officer)

Executive Vice President,
/s/ ROGER R. CLOUTIER II Chief Financial Officer
- ------------------------------ and Director (principal August 18, 1999
Roger R. Cloutier II financial officer)

/s/ MARK W. PETERS Vice President and
- ------------------------------ Controller (principal August 18, 1999
Mark W. Peters accounting officer)
</TABLE>

S-1
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ BJORN AHLSTROM
- ------------------------------ Director August 18, 1999
Bjorn Ahlstrom

/s/ DANIEL G. DEVOS
- ------------------------------ Director August 18, 1999
Daniel G. DeVos

/s/ DANIEL T. LINDSAY
- ------------------------------ Director August 18, 1999
Daniel T. Lindsay

/s/ WILLIAM W. NICHOLSON
- ------------------------------ Director August 18, 1999
William W. Nicholson

/s/ CARL R. POHLAD
- ------------------------------ Director August 18, 1999
Carl R. Pohlad

/s/ JAMES O. POHLAD
- ------------------------------ Director August 18, 1999
James O. Pohlad

/s/ JERRY L. TUBERGEN
- ------------------------------ Director August 18, 1999
Jerry L. Tubergen
</TABLE>

S-2
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amended and Restated Bylaws
*4.1 Specimen Common Stock Certificate.
*5.1 Opinion of Weil, Gotshal & Manges LLP.
10.1 Agreement of Purchase and Sale of Assets by and among Horizon Marine, LC, Genmar Manufacturing of
Kansas, L.L.C. and the Sole Member of Horizon Marine, LC, dated December 3, 1998.
10.2 Agreement of Purchase and Sale of Assets by and among Logic Marine Corporation, Genmar Logic LLC and the
parents and stockholders of Logic Marine Corporation, dated as of May 11, 1998.
10.3 Agreement and Plan of Reorganization by and among Genmar Holdings, Inc., POS Acquisition Corporation,
Pyramid Operating Systems, Inc. and the Stockholders of Pyramid Operating Systems, Inc., dated as of
June 18, 1999.
10.4 Third Amended and Restated Credit Agreement among Genmar Holdings, Inc., the financial institutions
named therein, The Bank of New York, as Agent and BNY Capital Markets, Inc., dated as of July 30, 1999.
10.5 Subordinated Term Loan Credit Agreement among Genmar Holdings, Inc., the financial institutions named
therein, The Bank of New York, as Agent, and BNY Capital Markets, Inc. dated as of October 20, 1997.
*10.6 Genmar Holdings, Inc. 1999 Stock Incentive Plan
*10.7 Genmar Holdings, Inc. 1999 Stock Option Plan for Non-Employee Directors
*10.8 Management Services Agreement by and between Genmar Holdings, Inc. and Jacobs Management Corporation,
dated , 1999
*10.9 Retention Bonus Agreement, dated as of October 31, 1998, by and between Jacobs Management Corporation
and Grant E. Oppegaard.
*10.10 Retention Bonus Agreement, dated as of October 31, 1998, by and between Jacobs Management Corporation
and Roger R. Cloutier II.
*11.1 Statement re: Computation of Basic and Diluted Net Loss Per Share.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page to the Registration Statement).
*27.1 Financial Data Schedule.
</TABLE>

- ------------------------

* To be supplied by amendment.

S-3

<PAGE>

AGREEMENT OF PURCHASE AND SALE OF ASSETS

BY AND AMONG

HORIZON MARINE, LC

GENMAR MANUFACTURING OF KANSAS, L.L.C.

AND

THE SOLE MEMBER OF HORIZON MARINE, LC

DECEMBER 3, 1998

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purchase of Assets and Assumption of Liabilities . . . . . . . . . . . .1
1.2 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Other Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

ARTICLE II PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1 Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 Earn-Out Consideration . . . . . . . . . . . . . . . . . . . . . . . . .3
2.3 Allocation of Purchase Price.. . . . . . . . . . . . . . . . . . . . . 11

ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE IV PARTIES' CLOSING OBLIGATIONS. . . . . . . . . . . . . . . . . . . 12
4.1 Seller's Obligations at Closing; Further Assurances. . . . . . . . . . 12
4.2 Purchaser's Obligations at Closing . . . . . . . . . . . . . . . . . . 14

ARTICLE V SELLER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 15
5.1 Organization, Standing and Qualification . . . . . . . . . . . . . . . 16
5.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Transactions with Certain Persons. . . . . . . . . . . . . . . . . . . 16
5.4 Execution, Delivery and Performance of Agreement; Authority. . . . . . 16
5.5 Prior Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6 Ownership of Membership Interests. . . . . . . . . . . . . . . . . . . 17
5.7 Financial Statements.. . . . . . . . . . . . . . . . . . . . . . . . . 17
5.8 Absence of Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . 17
5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10 Absence of Changes or Events.. . . . . . . . . . . . . . . . . . . . . 18
5.11 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Compliance with Laws and Other Instruments.. . . . . . . . . . . . . . 20
5.13 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.15 Patents and Other Intellectual Property. . . . . . . . . . . . . . . . 23
5.16 No Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.18 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.19 Business Description.. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.20 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.21 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.22 Absence of Certain Business Practices. . . . . . . . . . . . . . . . . 28
5.23 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.24 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 30
5.25 Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

i
<PAGE>

5.26 Relationship with Related Persons. . . . . . . . . . . . . . . . . . . 32
5.27 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.28 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ARTICLE VI PURCHASER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . 34
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Authorization and Approval of Agreement. . . . . . . . . . . . . . . . 34
6.3 Execution Delivery and Performance of Agreement. . . . . . . . . . . . 34
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE VII PRECLOSING COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . . 34
7.2 Access to Information and Documents. . . . . . . . . . . . . . . . . . 36
7.3 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Directors and Member Authorization; Change of Seller Name. . . . . . . 36
7.5 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . . . 36
7.6 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 Pay Increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 Restrictions on New Contracts. . . . . . . . . . . . . . . . . . . . . 37
7.9 Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . 37
7.10 Payment and Performance of Obligations . . . . . . . . . . . . . . . . 37
7.11 Restrictions on Sale of Assets . . . . . . . . . . . . . . . . . . . . 37
7.12 Prompt Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.13 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.14 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.15 No Solicitation of Other Offers. . . . . . . . . . . . . . . . . . . . 37
7.16 Accounts Receivable and Payable. . . . . . . . . . . . . . . . . . . . 38
7.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.19 Filing Reports and Making Payments . . . . . . . . . . . . . . . . . . 38
7.20 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.21 Monthly Financial Statements . . . . . . . . . . . . . . . . . . . . . 38
7.22 Title Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.23 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.24 Discontinued Operations and Environmental Conditions
Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.25 Physical Inventory as of October 31, 1998. . . . . . . . . . . . . . . 39
7.26 Notification of Misrepresentation. . . . . . . . . . . . . . . . . . . 40

ARTICLE VIII CONDITIONS TO PURCHASER'S OBLIGATIONS . . . . . . . . . . . . . . 40
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . 40
8.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . 40
8.3 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Approval by Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.6 Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

<PAGE>

8.7 Environmental Audit. . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.8 Title Matters; Surveys . . . . . . . . . . . . . . . . . . . . . . . . 41
8.9 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.10 Purchaser Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.11 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . . 42
8.12 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.13 Consents and Removal of Liens. . . . . . . . . . . . . . . . . . . . . 42
8.14 Governmental Assistance. . . . . . . . . . . . . . . . . . . . . . . . 42
8.15 Perimeter Real Estate Option and Other Rights with Respect to
Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.16 Physical Inventory and Seller Financial Condition. . . . . . . . . . . 43
8.17 Member Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.18 Employee Confidentiality and Non-disclosure Agreement. . . . . . . . . 43
8.19 Asset Acquisition Statement. . . . . . . . . . . . . . . . . . . . . . 43

ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS. . . . . . . . . . . . . . . . 43
9.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . 43
9.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . 43
9.3 Approval by Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.1 Indemnification by Seller. . . . . . . . . . . . . . . . . . . . . . . 44
10.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . 46
10.3 Nature and Survival of Representations, Warranties and Covenants . . . 46
10.4 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . . . 47
10.5 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . 48

ARTICLE XI TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.2 Return of Documents and Nondisclosure. . . . . . . . . . . . . . . . . 50

ARTICLE XII POST-CLOSING COVENANTS. . . . . . . . . . . . . . . . . . . . . . 51
12.1 Further Acts and Assurances. . . . . . . . . . . . . . . . . . . . . . 51
12.2 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . . . 51
12.3 Non-Solicitation Agreement . . . . . . . . . . . . . . . . . . . . . . 51
12.4 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 Reasonableness of Covenants. . . . . . . . . . . . . . . . . . . . . . 52
12.6 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.7 Blue Pencil Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.8 Maintenance and Payment of Insurance . . . . . . . . . . . . . . . . . 52
12.9 Performance of Seller's Warranty Work. . . . . . . . . . . . . . . . . 52
12.10 Performance of Seller's Contracts. . . . . . . . . . . . . . . . . . . 52
12.11 Member and Kansas Department of Commerce & Housing Debt. . . . . . . . 52
12.12 Agreed Upon Financial Procedures for Final Balance Sheet . . . . . . . 53

iii
<PAGE>

ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13.2 Legal and Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . 54
13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.6 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.9 Preservation of and Access to Records. . . . . . . . . . . . . . . . . 55
13.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.11 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.13 Scope of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.14 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.16 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.17 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

ARTICLE XIV DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

EXHIBIT A BILL OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
EXHIBIT B LIABILITIES UNDERTAKING. . . . . . . . . . . . . . . . . . . . . . . .B-1
EXHIBIT C EXECUTIVE EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . .C-1
EXHIBIT D NON-COMPETITION AND CONTINUITYOF BUSINESS DEALINGS UNDERTAKING . . . .D-1
</TABLE>

iv
<PAGE>

AGREEMENT OF PURCHASE AND SALE OF ASSETS

This Agreement of Purchase and Sale of Assets ("Agreement") is dated
December 3, 1998, by and among HORIZON MARINE, LC, a Kansas limited liability
company ("Seller") and GENMAR MANUFACTURING OF KANSAS, L.L.C., a Delaware
limited liability company ("Purchaser"), and GEOFFREY T. PEPPER, an individual
and resident of the State of Kansas who, as of the Closing Date, will be the
sole Member of Seller (hereinafter collectively called the "Member").

RECITALS

A. Seller is engaged in the design, manufacture, distribution and sale
of marine industry products, including aluminum jon, marine fish and cruise
pontoon and bass boats, trailers, pre-rigging and parts and accessories (the
"Business").

B. Purchaser is a wholly-owned subsidiary of Genmar Industries, Inc.,
a Delaware corporation ("Genmar Industries"), which is a wholly-owned subsidiary
of Genmar Holdings, Inc., a Delaware corporation ("Genmar Holdings"), both of
which design, manufacture and distribute various marine industry boating
products worldwide.

C. Purchaser desires to purchase the Business, and all associated
operating assets of Seller, and assume certain liabilities and obligations of
Seller as set forth hereinbelow.

D. Seller desires to sell its Business, and all its associated
operating assets and to be relieved of certain of its liabilities and
obligations as set forth hereinbelow.

In consideration of the foregoing Recitals, the mutual covenants and
agreements hereinafter set forth, and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged by the parties, the
parties hereby agree as follows:

ARTICLE I

PURCHASE AND SALE

1.1 PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES. Subject to the
exceptions and upon the terms and conditions set forth in this Agreement, (a)
Seller will sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser will purchase, at the Closing (as defined below), substantially all
of the Business, Assets (as defined below), properties, goodwill and rights
of Seller as a going concern, of every nature, kind and description, tangible
and intangible, wheresoever located and whether or not carried on or
reflected in the books and records of Seller, and (b) Purchaser shall assume
certain and only those liabilities of Seller that are specifically set forth
herein.

1.2 ASSETS.

(a) ASSETS. Purchaser will purchase (i) the assets set forth
on SCHEDULE 1.2(a) hereto which include without limitation, cash,
accounts receivable, inventory (raw materials,

<PAGE>

work in process and finished goods), furniture, fixtures, equipment,
real estate (excluding the approximately eighty (80) acres outside of
the fenced area of Seller's operating facility set forth and more
particularly and legally described in an exhibit to SCHEDULE 1.2(b)
hereof (the "Excluded Real Estate")), all Patents and other Intellectual
Property and applications, all rights in and to all insurance policies,
Seller's documents and records, prepaid expenses, goodwill and other
rights or interests that may accrue to or constitute the Business (or
are used in the Business) of Seller, and (ii) and assume Seller's
contractual rights, licenses, sales, brokerage and marketing supply,
freight and floor plan contracts and arrangements, Intellectual Property
rights, permits and approvals, and any and all intangible rights and
interests set forth on SCHEDULE 1.2(b)(1) hereto, all of which shall be
assigned to Purchaser at the Closing, if such rights and interests are
by their terms assignable (the "Assets"). The Assets shall be sold to
Purchaser free and clear of all liens, Encumbrances and other interests,
excepting permitted liens and security interests which secure and
collateralize the lender debt to be assumed or extinguished at Closing
by Purchaser.

(b) EXCLUDED ASSETS. Purchaser shall not purchase or assume:
(i) the Excluded Real Estate, (ii) any breaches or defaults of Seller
under any contract, (iii) any infringement associated with Intellectual
Property, (iv) any Benefit Plan or other benefit arrangement or
agreement, and (v) the contracts and agreements of Seller set forth on
SCHEDULE 1.2(b)(2) HERETO.

1.3 LIABILITIES.

(a) ASSUMED LIABILITIES. With the exception of all Excluded
Liabilities, as additional consideration for the transfer and delivery
of the Assets to Purchaser, it is the understanding of the parties that
Purchaser shall assume and agree to perform and pay when due (i) the
Liabilities set forth on the Final Balance Sheet, which includes all
trade payables, accrued expenses and other Liabilities incurred by
Seller in the Ordinary Course of Business and Debt Instruments,
including prepayment penalties (which may be incurred by Seller in the
event Purchaser determines to extinguish Seller's Debt Instruments),
(ii) all of Seller's contractual obligations, commitments and similar
arrangements (except for breaches or defaults of, or violations of
Applicable Law with respect to, such obligations or arrangements) which
are set forth on Schedule 1.3(a) and are assigned to Purchaser pursuant
to its purchase and sale of the Assets, (iii) the pending claim of
Carson & Carson, Inc. which claim is presently estimated at $68,000,
(iv) Seller's liability, if any, under the pending worker's compensation
claim disclosed on Schedule 5.11, if such schedule disclosure is
materially complete and accurate, and (v) Seller's obligations under
warranty for products sold by Seller (which Purchaser has agreed to
assume and perform pursuant to Section 12.9) (the "Assumed Liabilities").

(b) EXCLUDED LIABILITIES. Purchaser shall not assume any (i)
Debt Instruments (including accrued interest thereon), debts, trade
payables, accrued expenses, contractual obligations, commitments or
similar arrangements or other Liabilities to (x) any of Seller's past or
present member ownership group or professional advisors, or (y) the
$75,000 loan and any interest accruing thereon to the Kansas Department
of Commerce & Housing, which loan and interest shall be paid in full or
otherwise satisfied by Seller to the extent the same

2
<PAGE>

becomes due and owing, (ii) pending claims, contingent liabilities
(whether known or unknown), income or franchise Tax or similarly based
Tax liabilities (except properly accrued but unpaid payroll, sales and
property taxes or payments in lieu thereof), (iii) obligations under any
employee Benefit Plan or arrangement, unless accrued as a payable on the
face of the Final Balance Sheet, (iv) obligations that arise from any
Environmental Conditions of any Real Estate not purchased by and
transferred to Purchaser hereunder, (v) any pending or Threatened claims
arising from any claim, Proceeding or Order, except that Purchaser will
assume the pending claim of Carson & Carson, Inc. and the workers
compensation claim described in Section 1.3(a) above, (vi) any
contractual obligations, commitments and similar arrangements not
specifically set forth on Schedule 1.3(a), (vii) breaches and/or
defaults and violations of Applicable Laws under or pursuant to any
contractual obligation, commitment or similar arrangement of Seller (the
"Excluded Liabilities"). Purchaser and Seller agree that Purchaser shall
either assume or satisfy and extinguish Seller's non-member Debt
Instruments (including interest thereon) at the Closing. Seller shall
extinguish its Debt Instruments and all other Liabilities to its member
ownership group at or prior to the Closing, except for obligations
Seller has to Member.

1.4 OTHER CHARGES. Seller shall pay any charges imposed for the
purchase, assumption, assignment, transfer or other transactions arising from or
in connection with the purchase or assumption of the Assets or of any lease or
other contract, including any additional rent, transfer Tax or sales and use
Tax. The foregoing shall not include any prepayment charges, assumption fees or
other similar charges imposed by Seller's lender(s) on any non-member Debt
Instruments assumed or extinguished by Purchaser.

ARTICLE II

PURCHASE PRICE

2.1 CASH CONSIDERATION. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Seller's Assets by Seller to
Purchaser, and in reliance upon the representations and warranties, covenants
and other agreements made herein by Seller, Purchaser will, in full payment
thereof, remit to Seller at the Closing $2,300,000, (the "Cash Consideration").
The Cash Consideration shall be payable by cashier's or certified check or by
wire transfer of immediately available funds to a bank account to be designated
by Seller in writing at least three (3) business days prior to the Closing Date.
The Cash Consideration and the Earn-Out Consideration described in Section 2.2
below are referred to in this Agreement in the aggregate as the "Purchase
Price."

2.2 EARN-OUT CONSIDERATION.

(a) EARN-OUT CONSIDERATION. For a period of five (5) years
from and after the Closing, Purchaser agrees to remit to Seller as
additional consideration and part of the aggregate Purchase Price
hereunder an amount equal to a percentage of all annual gross revenues
("Annual Gross Revenues"), subject to achieving certain gross profit
percentages set forth in this Agreement below, from the sale of (i)
Seller's Horizon (or any direct successor) brand boats, trailers,
pre-rigging, parts and accessories (collectively the "Seller Products")
and (ii) the manufacture of Purchaser's boats (Genmar Holdings' brands)
in Seller's

3
<PAGE>

Junction City, Kansas plant facility after the Closing Date, in each
case of (i) and (ii) above based upon the annual published dealer list
price to a maximum of $5,200,000 (the "Earn-Out Consideration"), as
follows:

The Tables below determine the percentage of Gross Revenues to
be earned by Seller in the Earn-Out Consideration period. The following
computation rules and Tables shall apply with respect to the specific
years during Earn-Out Consideration period:

(x) In Year 1, follow the higher Earn-Out
Consideration percentage set forth in Table 1 or Table 2;
PROVIDED, HOWEVER, that the Gross Profit percentage must
equal or exceed 13% in Year 1 in order to earn Earn-Out
Consideration;

(y) In Year 2, follow the higher Earn-Out
Consideration percentage set forth in Table 1 or Table 3;
PROVIDED, HOWEVER, that the Gross Profit percentage must
equal or exceed 14% in Year 2 in order to earn Earn-Out
Consideration;

(z) In Years 3, 4 and 5 follow the Earn-Out
Consideration percentage set forth in Table 1; PROVIDED,
HOWEVER, that the Gross Profit percentage must equal or
exceed 14% in Years 3, 4 and 5, respectively, in order to
earn Earn-Out Consideration for that year (each year to be
considered separately).

"Gross Profit" as used herein shall mean Gross Revenues meaning
the annual published dealer list price of each boat, trailer and
accessory (excluding pre-rigging) less Cost of Goods Sold. "Cost of
Goods Sold" as used herein shall be determined in accordance with
Generally Accepted Accounting Principles as consistently applied by
Purchaser (Genmar Holdings) and shall mean (i) cost at standard for
materials, labor and overhead, and (ii) standard cost variances for
labor-rate, labor-efficiency, overhead, purchase price and material
usage, and (iii) an accrual for warranty, and (iv) engineering costs,
new model tooling costs, transportation costs (freight-in and
freight-out if not specifically charged on the invoice to the customer)
and other similar manufacturing cost items.

Overhead, as used above, shall include such costs as indirect
labor, indirect supervisory labor, direct labor benefits, manufacturing
supplies, machinery and building repairs, utilities, allocable portions
of real estate taxes, insurance and depreciation (the parties agree that
depreciation or cost recovery computations shall be made on a straight
line basis for periods not less than (i) with respect to real property,
30 years, (ii) with respect to manufacturing equipment, 7 years, and
(iii) with respect to tooling and jigs, not less than 3 years).
Overhead, as used above, shall exclude interest expense, amortization of
goodwill or other intangible assets, all salaries or commissions of
sales or marketing personnel and all other expenses of selling and
marketing product, all salaries and other compensation of management
personnel which are allocable to sales and marketing efforts by such
management personnel and any overhead expenses incurred by or accruing
to Purchaser, Genmar Holdings or any Genmar Holdings Affiliate at any
plant or facility other than Seller's Junction City, Kansas plant
facility (in Purchaser's hands).

<PAGE>

TABLE 1:

<TABLE>
<CAPTION>
THEN THE ANNUAL EARN-OUT
IF THE TOTAL CONSIDERATION PERCENTAGE APPLIED
ANNUAL GROSS REVENUE IS TO SUCH ANNUAL GROSS REVENUE IS
----------------------- --------------------------------
<S> <C>
$0 - $17.999 Million 1.00%

$17.999 or more 2.00%
and less than $24.999
Million

$24.999 or more 2.50%
and less than $29.999
Million

$30 Million or more 3.00%
</TABLE>

<PAGE>

TABLE 2:

<TABLE>
<CAPTION>
IF THE YEAR 1 THEN THE YEAR 1 EARN-OUT
GROSS PROFIT PERCENTAGE IS CONSIDERATION PERCENTAGE IS
-------------------------- ---------------------------
<S> <C>
Less than 13% 0%

13% or more but 2%
less than 14.5%

14.5% or more but 5%
less than 16%

16% or more but 6%
less than 17%

17% or more but 7%
less than 18%

18% or more 8%
</TABLE>

TABLE 3:

<TABLE>
<CAPTION>
IF THE YEAR 2 THEN THE YEAR 2 EARN-OUT
GROSS PROFIT PERCENTAGE IS CONSIDERATION PERCENTAGE IS
-------------------------- ---------------------------
<S> <C>
Less than 14% 0%

14% or more but 2.5%
less than 15%

15% or more but 4%
less than 16%

16% or more but 5%
less than 17%

17% or more but 5.5%
less than 18%

18% or more 6%
</TABLE>

<PAGE>

For example: (i) if in Year 1 Annual Gross Revenue is $20 million
and the Gross Profit percentage is 14.5%, then the Earn-Out Consideration
percentage shall be 5%, (ii) if in Year 2 Annual Gross Revenue is $18
million and the Gross Profit percentage is 15%, then the Earn-Out
Consideration percentage shall be 4%, (iii) if in Year 3 Annual Gross
Revenue is $18 million and the Gross Profit percentage is 12%, then the
Earn-Out Consideration percentage shall be 0%.

Annual Gross Revenues from the sale of Seller's Horizon (or any
direct successor) brand boats will include the annual published dealer
list price of the engine only if the boat is sold with an engine. In the
event that the Junction City, Kansas plant facility, in Purchaser's
hands, manufactures any Genmar Holdings branded (as opposed to Seller's
Horizon (or any direct successor) branded) boats, such boats shall be
valued solely at the annual published dealer list price of the Genmar
Holdings' boat (excluding the dealer list price value of the engine).
Notwithstanding the foregoing, the Earn-Out Consideration that is
computed in accordance with the above formula shall be reduced for the
cumulative, aggregate dollar value of valid warranty claims made in
connection with any marine products, including Horizon (or any direct
successor) or Genmar Holdings branded product, that are produced in the
Junction City, Kansas plant facility as a percentage of Annual Gross
Revenue, as follows:

<TABLE>
<CAPTION>
THEN THE EARN-OUT
CONSIDERATION SHALL BE
REDUCED BY THE
IF THE VALUE OF WARRANTY CLAIMS AS A FOLLOWING PERCENT OF THE
PERCENT OF GROSS REVENUE IS EARN-OUT CONSIDERATION
------------------------------------ ------------------------
<S> <C>
0% to 1.3% 0%

over 1.3% to 1.7% 10%

over 1.7% to 2.0% 15%

over 2.0% to 2.3% 20%

over 2.3% to 2.6% 25%

over 2.6% to 3.0% 30%

over 3.0% to 3.5% 35%

over 3.5% to 4.0% 40%

over 4.0% 45%
</TABLE>

<PAGE>

The collection, retention and reporting of product warranty claim
information by Purchaser shall be classified by the year and the serial
number of the boat product manufactured. Product warranty claims for a
particular boat product shall include all warranty work, including
without limitation (A) replacement product, parts, labor, shipping and
similar costs paid, expended or incurred by Purchaser to third parties,
and (B) replacement product, parts, labor, shipping and similar costs of
Purchaser. Warranty work on engines that is paid by the engine
manufacturer shall not be included in the computation of warranty claims.
Purchaser shall maintain and make available to Seller all documentation
supporting the product warranty claims for the applicable Annual Periods
of the Earn-Out Consideration described in this Section 2.2.

The dollar value of product warranty claims shall be cumulative
and determined in the aggregate based on product manufactured within each
Annual Period (as defined below). The applicable Annual Period
reduction, if any, of Earn-Out Consideration for product warranty claims
shall be valued as of the end of each Annual Period during the term that
the Earn-Out Consideration is to be earned under this Agreement. Product
warranty claims shall be isolated by the product produced during an
applicable Annual Period of production and compared on an annual basis in
the aggregate to the Annual Period to which such production relates as a
percentage of Annual Gross Revenue for each of the five (5) years of the
Earn-Out Consideration period. Notwithstanding the foregoing, year 1
product warranty claims shall include all such claims for the year 1
Annual Period AND all Seller Products manufactured prior to the Closing
Date. For example, if in year 1 Annual Gross Revenues are $20 million,
and the Gross Profit is 13% and there are no year 1 product warranty
claims at the end of year 1 arising from year 1 production, then the year
1 Earn-Out Consideration to be paid to Seller will be $400,000 ($20
million (x) 2.0%). If in year 2, the dollar value of year 1 product
warranty claims is $300,000 (or 1.5% of the year 1 $20 million Annual
Gross Revenues) then the Earn-Out Consideration for year 1 will be
retroactively adjusted to reduce the year 1 Earn-Out Consideration amount
by 10% or $40,000, which amount shall be, at Purchaser's option, (i)
payable by Seller to Purchaser, or (ii) offset by Purchaser in
calculating and remitting the applicable year Earn-Out Consideration to
Seller. If in year 3, the cumulative aggregate dollar value of year 1
product warranty claims rises to $400,000 (or 2.0% of year 1 Annual Gross
Revenues) then the Earn-Out Consideration for year 1 will be
retroactively adjusted so that the year 1 Earn-Out Consideration is
reduced in the aggregate by 15% or $60,000; which amount shall be subject
to any prior adjustment, at Purchaser's option (i) payable by Seller to
Purchaser, or (ii) offset by Purchaser in calculating and remitting the
applicable year Earn-Out Consideration to Seller. For purposes of this
example, if the $40,000 reduction calculated in year 2 was directly paid
by Seller or offset by Purchaser, then the amount payable by Seller to
Purchaser or available for offset by Purchaser in year 3 would be
$20,000, for an aggregate reduction of 15% ($60,000) of year 1 Annual
Gross Revenues. The foregoing calculations shall be applied for and
applicable to each Annual Period of the five (5) year Earn-Out
Consideration period.

(b) PAYMENT OF EARN-OUT CONSIDERATION. At Closing, Purchaser
shall make an advance payment of $200,000 of Earn-Out Consideration to
Seller, which amount shall be deducted from Earn-Out Consideration
payments due to Seller after the second quarter of 1999. Thereafter,
Purchaser shall be entitled to deduct from the Earn-Out Consideration in

<PAGE>

all future quarters (and year end) until the advance is fully recovered
by Purchaser. In all other cases, the Earn-Out Consideration will be
paid on an annual basis in arrears, commencing 45 days after the first
anniversary date of the Closing and continuing each year thereafter for a
period of five (5) years. The Earn-Out Consideration shall be paid by
cashiers or certified check or by wire transfer of immediately available
funds to an account designated by Seller in writing at least three (3)
days prior to the payment due date. The measurement period for
determination of the Earn-Out Consideration Annual Gross Revenues shall
be each one-year period commencing on the first day after the Closing
Date and ending upon each one-year period thereafter; PROVIDED, HOWEVER,
that in the event the Closing Date does not fall on the last day of the
month in which the Closing occurs, then the measurement period for
determination of the Earn-Out Consideration Annual Gross Revenues shall
be the last day of the month closest to the Closing Date (the "Annual
Period"). Purchaser shall provide to Seller monthly statements of gross
revenue earned and warranty claims paid pertaining to the applicable
marine products produced in the Junction City, Kansas plant facility
during each month during each Annual Period within thirty (30) days after
the previous month-end, accompanied by supporting documentation thereto
(the "Monthly Gross Revenue Statement"). Seller acknowledges and agrees
that Purchaser utilizes a 4/4/5 week/monthly/quarterly accounting system
whereby the monthly/quarterly accounting cut-off date is the last Sunday
of each month (whether or not such Sunday is, in fact, the last day of
the month). Based on the foregoing, the anniversary date used for
measurement of the Annual Period and the applicable month ends hereunder
shall be the accounting month end date closest to (i) the anniversary of
the Closing Date and (ii) the actual calendar month end, as applicable.
Purchaser shall compile each of the monthly statements prepared during
each Annual Period (except for the final Annual Period, as set forth
below) and make any required or necessary year-end adjustments to gross
revenue and/or warranty claims to produce a year-end Annual Gross Revenue
statement (the "Year-End Statement"), which statement shall accompany the
payment of the Earn-Out Consideration, if any, or of statement of any
amount payable by Seller to Purchaser, if any, within forty-five (45)
days after the Annual Period. In the event warranty claims which arise
in connection with product manufactured in any Annual Period (or prior
periods in the case of year 1 product warranty claims) exceed 1.3% of
Gross Revenue, Purchaser shall have the right to project and estimate in
good faith further product warranty claims in any Annual Period during
the five (5) year Earn-Out Consideration Period to avoid substantial
overpayment of Earn-Out Consideration in any Annual Period. At the end
of the five (5) year Earn-Out Consideration period, Purchaser shall
prepare a good faith estimate of warranty claims (based upon prior
trends) for each Annual Period and adjust the year 5 Year-End Statement
to reflect such estimates, which statement shall be transmitted to Seller
within the required forty-five (45) day period and accompanied by all
supporting documentation and by the payment of Earn-Out Consideration, if
any, or a statement of any amount payable by Seller to Purchaser, if any.
Purchaser shall have a period of nine (9) months subsequent to the end of
the five (5) year Earn-Out Consideration period to continue to accumulate
product warranty data for the purpose of preparing an adjusted and final
Year-End Statement. Such statement shall be provided to Seller, and
accompanied by (i) either a payment, if any, or a statement of any amount
payable by Seller to Purchaser, if any, and (ii) supporting documentation
thereto, within forty-five (45) days after the end of such nine (9) month
period.

<PAGE>

Upon and after receipt of any Monthly Gross Revenue Statement or
any Year-End Statement, Seller shall have not more than thirty (30) days
after receipt of any such statement to review Purchaser's books and
records pertinent to the computations arising under this Section 2.2 and
dispute the accuracy of such statement by written notice of dispute to
Purchaser in accordance with the notice provisions of this Agreement. In
the event that Seller does not dispute such statement, Seller shall be
deemed to have irrevocably waived its right to contest the statement,
notwithstanding any contrary provision of this Agreement (including
Section 13.17 hereof). In the event that Seller and Purchaser are unable
to resolve the disputed matter within fifteen (15) days after the Seller
notice is received, the parties shall submit the matter to the
Independent Accountants described in Section 2.2(c) for a final
determination under the rules and procedures set forth in that Section,
which determination shall be final, nonappealable and irrevocably binding
upon the parties.

(c) TERMINATION OF EARN-OUT CONSIDERATION. Seller's right to
receive the Earn-Out Consideration shall cease upon Geoffrey Pepper's
voluntary termination of employment (including death or disability) from
Purchaser. Voluntary termination of employment shall not include
expiration of Mr. Pepper's executive employment agreement at the end of
its four (4) year term. If such voluntary termination takes place during
any Annual Period, no Earn-Out Consideration shall be accrued, owing or
paid with respect to such Annual Period unless Mr. Pepper is employed by
Purchaser for at least six (6) months of the Annual Period, unless due to
death or disability in which case no period of employment will be
required, and even in such cases the Annual Gross Revenues in such year
shall be measured only to and including the date of (x) a voluntary
resignation (excluding death or disability), or (y), in the case of death
or disability, three months subsequent to the date of death or disability
(but not beyond the last day of the Annual Period). Notwithstanding the
cut-off date of Mr. Pepper's employment in any Annual Period, (i)
warranty claims through the end of the Annual Period shall be computed
for determination of any final Earn-Out Consideration to be paid, if any,
for all Annual Periods prior to and in which such voluntary termination
takes place, and (ii) the Year-End Statement will be prepared, and any
amounts due thereunder shall not be reportable or payable earlier than is
specified herein.

(d) DISPUTE RESOLUTION FOR EARN-OUT CONSIDERATION. Purchaser
and the Seller shall use good faith efforts to jointly resolve the
properly noticed objections and discrepancies arising from any Monthly
Gross Revenue Statement or any Year End Statement within fifteen (15)
days of the receipt of a written statement of objections and
discrepancies sent in writing by Seller to Purchaser, which resolution,
if achieved, shall be fully and completely binding upon all parties to
this Agreement and not subject to further review, appeal, or dispute. If
Purchaser and the Seller are unable to resolve Seller's objections and
discrepancies to their mutual satisfaction within such fifteen (15) day
period, then the matter shall be promptly submitted to a mutually
acceptable accounting firm of national reputation with experience in the
marine industry (the "Independent Accountants"). In submitting a dispute
to the Independent Accountants, each of the parties shall concurrently
furnish, at its own expense, to the Independent Accountants and the other
party such documents and information as the Independent Accountants may
request. Each party may also furnish to the Independent Accountants such
other information and documents as it deems relevant, with the
appropriate copies and notification being concurrently given to the other
party. Neither party shall have

<PAGE>

or conduct any communication, either written or oral, with the
Independent Accountants without the other party either being present
or receiving a concurrent copy of any written communication. The
Independent Accountants may conduct a conference concerning the
objections and disagreements between the Seller and Purchaser, at
which conference each party shall have the right to (i) present its
documents, materials and other evidence (previously provided to the
Independent Accountants and the other party) and (ii) to have present
its or their advisors, accountants and/or counsel. The Independent
Accountants shall promptly (but not to exceed thirty (30) days from
the date of engagement of the Independent Accountants) render a
decision on the issues presented, and such decision shall be final,
nonappealable and irrevocably binding upon the parties.

(e) RIGHT OF SET-OFF AND RECOUPMENT. In the event Purchaser
makes any claim for a Loss pursuant to Article X of this Agreement, or
any amount becomes owing from Seller to Purchaser hereunder (including
pursuant to Section 7.24 hereof), Purchaser shall be irrevocably entitled
and is hereby instructed by Seller hereunder to offset (and exercise any
other equitable rights, including recoupment) the full dollar amount of
any such claimed amount so owing or any Loss paid by Purchaser, or which
Purchaser becomes, or may become, legally obligated to pay, against the
Earn-Out Consideration that would otherwise be due and payable under this
Section 2.2. Notwithstanding the foregoing, in the event there is any
unresolved claimed Loss made by Purchaser at the end of the five (5) year
Earn-Out Consideration period, Purchaser shall be entitled to withhold
the full dollar amount of the claimed Loss from the final Earn-Out
Consideration payment due to Seller from Purchaser. In the event the
claimed Loss is fully and finally resolved, Purchaser shall promptly
remit to Seller the excess of any offset over the amount paid or legally
owing by Purchaser.

(f) GENMAR HOLDINGS GUARANTY. In the event that Purchaser does
not remit the Earn-Out Consideration to Seller pursuant to the terms of
this Agreement, Genmar Holdings shall guaranty such payment performance
of Purchaser pursuant to a guaranty delivered to Seller at the Closing.

2.3 ALLOCATION OF PURCHASE PRICE. On or promptly following the
Closing Date, Purchaser and Seller shall, in a reasonable manner after
appropriate consultation, determine the fair market value of the Assets, and
Purchaser and Seller shall allocate in writing the Purchase Price among the
Assets in accordance with the parties' determination and Section 1060 of the
Code. The Purchaser and Seller, as appropriate, shall file an Asset Acquisition
Statement on Form 8594 in accordance with Section 1060 of the Code (which
conforms with the parties' allocation) with their federal income Tax Returns for
the Tax year in which the Closing occurs and shall contemporaneously provide the
other party with a copy of the Form 8594 being filed. Each party agrees not to
assert, in connection with any Tax Return, claim, audit or similar Proceeding,
any allocation of the Purchase Price which differs from the allocation
determined by the parties hereunder.

<PAGE>

ARTICLE III

CLOSING

The closing ("Closing") shall take place at 10:00 A.M., local time, on
the 31st day of December, 1998 at the offices of legal counsel to Seller (as set
forth in Section 13.1 hereof) or at such other time and place as the parties may
agree. The day on which the Closing takes place is herein referred to as the
"Closing Date."

ARTICLE IV

PARTIES' CLOSING OBLIGATIONS

4.1 SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.

(a) CLOSING DELIVERABLES. At the Closing, Seller and Member
will deliver to Purchaser:

(i) a cashier's or certified check drawn by Seller to
the order of Purchaser in the aggregate amount of all of Seller's
cash on hand and in banks less an amount equal to all uncleared
checks which have been drawn by Seller prior to the Closing in
payment of liabilities of Seller which are assumed by Purchaser
hereunder (and Seller agrees to retain in such banks an amount
equal to such uncleared checks until such checks are cleared) or,
at Purchaser's option, an assignment of all of Seller's bank
accounts in form and substance satisfactory to Purchaser;

(ii) a Bill of Sale duly executed by Seller in the form
of Exhibit A annexed hereto;

(iii) such other good and sufficient instruments of
conveyance, assignment and transfer, in form and substance
satisfactory to Purchaser's counsel, as shall be effective to vest
in Purchaser good and marketable title to Seller's Assets
including;

(1) deed(s) with respect to any Owned Real Estate
to be purchased hereunder;
(2) Trademark or trade name assignment(s);
(3) Patent and other Intellectual Property
assignment(s);
(4) vehicle title and valid assignment(s)
thereof.

(iv) all contracts, files and other data and documents
pertaining to Seller's Assets, except Seller's minute books and
member or other ownership ledger records (which may be delivered
at the offices of Seller);

(v) the executed employment agreements described in
Section 7.3 hereof;

<PAGE>

(vi) the executed assignment and assumption agreements
transferring all contracts and agreements of Seller to be assumed
by Purchaser;

(vii) all consents required to convey, assign and
transfer, in a form and substance satisfactory to Purchaser's
counsel, all contracts and agreements of Seller to be assumed by
Purchaser;

(viii) a certificate signed by the Seller dated as of the
Closing Date, to the effect that the representations and
warranties made by the Seller in this Agreement and in any
document, instrument and/or agreements to be executed and/or
delivered by Seller pursuant to this Agreement are true and
correct in all material respects at and as of the Closing with the
same force and effect as those representations and warranties made
on the date hereof and that Seller has conformed and complied with
all of their respective covenants, agreements, and obligations
under this Agreement which are to be performed and complied with
by the Seller at or prior to the Closing;

(ix) the Seller's affidavits for each parcel of Owned
Real Estate to be purchased hereunder in a form sufficient to
permit the title insurance company to delete the exceptions to
title relating to parties in possession;

(x) the duly executed written opinion letter of counsel
to Seller and Member as contemplated by Section 8.5 of this
Agreement, dated as of the Closing Date, addressed to Purchaser;

(xi) a Release by the Seller and the Member in favor of
Purchaser in a form acceptable to the parties and their respective
counsel;

(xii) executed non-competition agreements of all employees
entering into employment contracts with the Purchaser in a form
acceptable to Purchaser and its counsel;

(xiii) [This subsection intentionally omitted]

(xiv) pay-off letters and the form(s) of termination or
assumption of all Debt Instruments (excluding debt to past or
present members constituting Seller's ownership group) of Seller;

(xv) Seller's letter of undertaking regarding the pay-off
of Seller debt to its past members;

(xvi) Seller's undertaking to obtain the title insurance
policy or policies taken in favor of Purchaser by Seller for all
Owned Real Estate of Seller conveyed pursuant to this Agreement;

(xvii) a copy certified by the secretary of Seller of the
duly adopted resolutions of the management committee of Seller
approving this Agreement and

<PAGE>

authorizing the execution and delivery of this Agreement,
including the documents, instruments and agreements to be
executed and/or delivered by the Seller pursuant hereto, and
the consummation of the transactions contemplated hereby and
thereby;

(xviii) [This subsection intentionally omitted.]

(xix) the executed option and right of first refusal on
the Perimeter Property, as more fully described in SECTION 8.15
hereof.

(xx) such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under
local law.

(b) ADDITIONAL ASSURANCES. At any time and from time to time
after the Closing, at Purchaser's request and without further
consideration, Seller and Member will execute and deliver such other
instruments of sale, transfer, conveyance, assignment and confirmation
and take such action as Purchaser may reasonably deem necessary or
desirable in order to more effectively transfer, convey and assign to
Purchaser, and to confirm Purchaser's title to, the Assets, to put
Purchaser in actual possession and operating control thereof and to
assist Purchaser in exercising all rights with respect thereto. After
the Closing, at reasonable times and on reasonable notice, Seller shall
have access to the books and records pertaining to its operations prior
to the Closing, and Purchaser shall retain such books and records for a
period of three (3) years after the Closing.

(c) COLLECTION OF RECEIVABLES. Seller agrees that Purchaser
shall have the right and authority to collect for its own account all
receivables and other items which shall be transferred to Purchaser as
provided herein and to endorse with the name of Seller any checks
received on account of any such receivables or other items. Seller
agrees that it will promptly transfer and deliver to Purchaser any cash
or other property which Seller may receive in respect of such receivables
or other items.

4.2 PURCHASER'S OBLIGATIONS AT CLOSING.

(a) CLOSING DELIVERABLES. At the Closing, Purchaser shall
deliver to Seller:

(i) a cashier's or certified check or wire transfer of
immediately available funds in the amount of the Cash
Consideration;

(ii) a certificate signed by a duly authorized officer of
Purchaser, dated as of the Closing Date, to the effect that the
representations and warranties made by Purchaser in this Agreement
and in any document, instrument and/or agreement to be executed
and/or delivered by Purchaser pursuant to this Agreement are true
and correct in all material respects at and as of the Closing Date
with the same force and effect as those representations and
warranties made on the date hereof and that Purchaser has
performed and complied with all of its covenants, agreements and

<PAGE>

obligations under this Agreement which are to be performed and
complied with by Purchaser on or prior to the Closing;

(iii) a copy certified by the secretary of Purchaser of
the duly adopted resolutions of the board of directors of
Purchaser approving this Agreement and authorizing the execution
and delivery of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the
Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;

(iv) a duly executed written opinion letter of counsel to
the Purchaser as contemplated by Section 9.4 of this Agreement,
dated as of the Closing Date, addressed to the Seller;

(v) executed assignment and assumption agreements
transferring all contracts and agreements of Seller to be assumed
by Purchaser;

(vi) either (i) any assumption, pay-off documents and
instruments, and cancellation or return of guarantee(s) received
from Seller's lenders (other than Seller's past or former members)
concerning pay-off or assumption of Seller debt and the full
release of Member or any past member of Seller from any further
obligation for repayment (including guarantees) of such debt or
(ii) Purchaser's agreement in writing to defend, indemnify and
hold Seller, Member and any past member of Seller harmless from
such lender debt;

(vii) executed agreement of Purchaser regarding its
liabilities undertaking;

(viii) executed employment agreements as contemplated by
Section 7.3 hereof;

(ix) executed guaranty of Genmar Holdings as contemplated
by Section 2.2(f); and

(x) such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under
federal or local law or regulations.

ARTICLE V

SELLER REPRESENTATIONS AND WARRANTIES

As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and warrants
to Purchaser that each and all of the following representations and warranties
are true and correct as of the date of this Agreement and will be true and
correct as of the Closing Date:

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<PAGE>

5.1 ORGANIZATION, STANDING AND QUALIFICATION. Seller is a limited
liability company duly organized, validly existing and in good standing under
the laws of Kansas; it has all requisite power and authority and is entitled to
carry on its business as now being conducted and to own, lease or operate its
properties as and in the places where such business is now conducted and such
properties are now owned, leased or operated; and it is duly qualified, licensed
or domesticated and in good standing as a foreign company authorized to do
business in the jurisdictions listed on SCHEDULE 5.1 annexed hereto, which are
the only jurisdictions where the nature of the activities conducted by it or the
character of the properties owned, leased or operated by it require such
qualification, licensing or domestication. Seller has delivered to Purchaser
true and complete copies of Seller's articles of organization and all amendments
thereto, certified by the Secretary of State of the State of Kansas, and the
operating agreement of Seller as presently in effect, certified as true and
correct by Seller's Secretary.

5.2 SUBSIDIARIES. Seller has no subsidiaries except those listed on
SCHEDULE 5.2. Seller has no interest, direct or indirect, and has no commitment
to purchase any interest, direct or indirect, in any other corporation or in any
partnership, joint venture or other business enterprise or entity other than as
set forth on SCHEDULE 5.2. The Business carried on by Seller has not been
conducted through any other direct or indirect subsidiary or Affiliate of
Seller.

5.3 TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth on
SCHEDULE 5.3, Seller has not since its inception, directly or indirectly,
purchased, leased from others or otherwise acquired any property or obtained any
services from, or sold, leased to others or otherwise disposed of any property
or furnished any service, or otherwise dealt with (except with respect to
remuneration for services rendered as a manager, officer or employee of Seller),
in the Ordinary Course of Business or otherwise, (i) any member of Seller or
(ii) any Person who, directly or indirectly, alone or together with others,
controls, is controlled by or is under common control with Seller or any past or
present member of Seller. Except as set forth on SCHEDULE 5.3, Seller does not
owe any amount to, or have any contract with or commitment to, any of its
members, managers, officers, employees or consultants (other than compensation
for current services not yet due and payable and reimbursement of expenses
arising in the Ordinary Course of Business), and none of such Persons owes any
amount to Seller. Except as set forth on SCHEDULE 5.3, no part of the property
or assets of any past or present member or any direct or indirect subsidiary or
Affiliate of any member has, since Seller's inception, been used by Seller.

5.4 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT; AUTHORITY.
Subject to obtaining the consent of the holders of Seller's lender debt to be
assumed by Purchaser, neither the execution, delivery nor performance of this
Agreement by Seller or Member will, with or without the giving of notice or the
passage of time, or both, conflict with, result in a default, right to
accelerate or loss of rights under, or result in, cause or create any Liability,
reassessment or revaluation of assets, lien, charge or Encumbrance pursuant to,
any provision of Seller's articles of organization or operating agreement or any
franchise, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule, regulation, Order, Proceeding, judgment, decree or other
legal or contractual requirement to which Seller or Member is a party or by
which any of them or the Seller's Assets may be bound or affected. Seller and
Member have the full power and authority to enter into this Agreement and to
carry out the transactions contemplated hereby, all Proceedings and other
actions required to be taken to authorize the execution, delivery and
performance of this Agreement and the

16
<PAGE>

agreements relating hereto have been properly taken and this Agreement
constitutes a valid and binding obligation of Seller and Member, enforceable
against them in accordance with its terms.

5.5 PRIOR MEMBERS. SCHEDULE 5.5 lists the names and addresses of all
Persons who now have or have ever had any ownership interest in Seller from
Seller's organization and inception to the Closing Date.

5.6 OWNERSHIP OF MEMBERSHIP INTERESTS. Except as set forth in
SCHEDULE 5.6, as of the Closing, Member will be the lawful record and beneficial
owner of all member interests of, in and to Seller, free and clear of any liens,
claims, Encumbrances or restrictions of any kind, and all of such interests are
validly issued and outstanding, fully paid and nonassessable. Seller shall
provide to Purchaser in writing at least ten (10) business days prior to the
Closing a full, complete and correct list of (a) all past and current members of
Seller, including the dates of such members period of ownership, the amount
invested by member, the amount at which such member's interest was purchased or
redeemed, whether the transaction was a redemption or a third party purchase and
any amount owing to such member for any closed purchase(s) by either Seller or a
third party purchaser (including Member), and (b) any and all documents and
correspondence arising from or related thereto.

5.7 FINANCIAL STATEMENTS. Seller has delivered to Purchaser copies of
the following financial statements (hereinafter collectively called the
"Financial Statements"), all of which are complete and correct, have been
prepared and presented in accordance with the properly kept books and records of
Seller, have been maintained throughout the periods indicated and fairly
present the financial condition of Seller as at their respective dates and the
results of its operations for the periods covered thereby:

(a) unaudited balance sheet of Seller as at December 31, 1997,
and Seller's unaudited statements of earnings and cash flow for all
periods from inception of Seller to December 31, 1997; and

(b) unaudited balance sheets of Seller as at the end of each of
the ten (10) months commencing January 31, 1998, and ending on October
31, 1998 and Seller's unaudited statement of earnings and cash flows for
the months then ended.

Such statements of earnings do not contain any items of special or nonrecurring
income or any other income not earned in the Ordinary Course of Business except
as expressly specified therein.

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<PAGE>

on or before the Final Balance Sheet Date, whether or not then known, due or
payable. None of the Seller's employees is now or, will by the passage of
time hereafter become, entitled to receive any severance pay attributable to
services rendered prior to the Final Balance Sheet Date except as disclosed
on the face of the Final Balance Sheet (excluding the notes thereto).
Without in any way limiting the Excluded Liabilities hereunder, Seller and
Purchaser acknowledge and agree that Purchaser does not and shall not assume,
or become in any way obligated for, the payment of any Tax of Seller based on
income, franchise or any other similarly imposed Liability for Taxes of any
Governmental Body.

5.9 TAXES. All taxes, including, without limitation, income,
property, sales, use, franchise, value added, employees' income withholding and
social security taxes, imposed by the United States or by any foreign country or
by any state, municipality, subdivision or instrumentality of the United States
or of any foreign country, or by any other taxing authority and all interest and
penalties thereon ("Taxes" or "Tax"), which are due and presently payable by
Seller, whether disputed or not, have been paid in full, all Tax Returns
required to be filed in connection therewith have been accurately prepared and
duly and timely filed and all deposits required by law to be made by Seller with
respect to employees' withholding and other Taxes have been duly made. Seller
has not been delinquent in the payment of any foreign or domestic Tax,
assessment or governmental charge or deposit and has no Tax deficiency or claim
outstanding, proposed or assessed against it, and there is no basis for any such
deficiency or claim. Seller's federal income Tax Returns have been filed timely
with the Internal Revenue Service for all of its fiscal years through the year
ended December 31, 1997, there is not now in force any extension of time with
respect to the date on which any Tax Return was or is due to be filed by or with
respect to Seller, or any waiver or agreement by it for the extension of time
for the assessment of any Tax, and Seller is not a "consenting corporation"
within the meaning of Section 341(f)(1) of the Code. Seller is not the subject
of or party to any Tax or Tax related claim, audit or Proceeding.

5.10 ABSENCE OF CHANGES OR EVENTS. Except as set forth in SCHEDULE
5.10 annexed hereto, since December 31, 1997, Seller has conducted its Business
only in the Ordinary Course of Business consistent with its prior practices and
has not:

(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except for capital
expenditures described in subparagraph (k) of this Section 5.10 and
current liabilities for trade or business obligations incurred in
connection with the purchase of goods or services in the Ordinary Course
of Business and consistent with its prior practice, none of which
Liabilities, in any case or in the aggregate, materially and adversely
affects the Business, liabilities or financial condition of Seller;

(b) discharged or satisfied any lien, charge or Encumbrance
other than those then required to be discharged or satisfied, or paid any
obligation or Liability, absolute, accrued, contingent or otherwise,
whether due or to become due, other than current liabilities shown on the
Final Balance Sheet and current liabilities incurred since the Final
Balance Sheet Date in the Ordinary Course of Business and consistent with
its prior practice;

18
<PAGE>

(c) declared or made any distribution to its past or present
members or upon or in respect of any member interests, or purchased,
retired or redeemed, or obligated itself to purchase, retire or redeem,
any of its member interests or other securities;

(d) mortgaged, pledged or subjected to lien, charge, security
interest or any other Encumbrance or restriction any of its property,
Business or assets, tangible or intangible, except for the existing
mortgages, liens and security interests or any other Encumbrances that
are listed and described on SCHEDULE 5.10;

(e) sold, transferred, leased to others or otherwise disposed
of any of its assets, except for inventory sold in the Ordinary Course of
Business, without Purchaser's prior written consent, or canceled or
compromised any debt or claim or waived or released any right of
substantial value;

(f) received any notice of termination of any contract, lease
or other agreement or suffered any damage, destruction or loss (whether
or not covered by insurance) which, in any case or in the aggregate, has
had a Material Adverse Effect on the Assets, operations or prospects of
Seller;

(g) encountered any labor union organizing activity, had any
actual or Threatened employee strikes, work stoppages, slow-downs or
lock-outs, or had any material change in its relations with its
employees, agents, customers or suppliers or with any governmental
authorities or self-regulatory organizations;

(h) transferred or granted any rights under, or entered into
any settlement regarding the breach or infringement of, any United States
or foreign license, Patent, Copyright, Trademark, trade name, invention
or similar Intellectual Property rights, or modified any existing rights
with respect thereto;

(i) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed
or orally promised to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any member,
manager, officer, employee, salesman, distributor or other agent of
Seller;

(j) issued or sold any member interests or other securities, or
issued, granted or sold any options, rights or warrants with respect
thereto, or acquired any capital stock or other securities of any Person
or any interest in any business enterprise, or otherwise made any loan or
advance to or investment in any Person,

(k) made any capital expenditure. or capital additions or
betterments in excess of an aggregate of $25,000;

(l) changed its banking or safe deposit arrangements;

19
<PAGE>

(m) without Purchaser's prior consent, instituted, settled or
agreed to settle any litigation, action or Proceeding before any court or
Governmental Body relating to Seller or its property;

(n) failed to replenish its inventories and supplies in a
normal and customary manner consistent with its prior practice and
prudent business practices prevailing in the industry, or made any
purchase commitment in excess of the normal, ordinary and usual
requirements of its Business or at any price in excess of the then
current market price or upon terms and conditions more onerous than those
usual and customary in the industry, or made any material change in its
selling, pricing, advertising or personnel practices inconsistent with
its prior practice and prudent business practices prevailing in the
industry;

(o) suffered any Material Adverse Change;

(p) entered into any transaction, contract or commitment or
paid or agreed to pay, other than in the Ordinary Course of Business, any
brokerage, finder's fee, Taxes or other expense in connection with, or
incurred any severance pay obligations by reason of, this Agreement or
the transactions contemplated hereby; or

(q) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a) through (p)
above.

5.11 LITIGATION. Except as set forth in SCHEDULE 5.11 annexed hereto,
there is no claim, Proceeding, Order, decree or judgment in progress, pending
or in effect, or to the Knowledge of Seller or the Member Threatened, against or
relating to Seller, its officers, directors or employee, its properties, assets
or Business or the transactions contemplated by this Agreement, and neither
Seller nor the Member knows or has reason to be aware of any basis for the same.

5.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set forth
in SCHEDULE 5.12 annexed hereto, Seller has complied with all existing laws,
rules, regulations, ordinances, Orders, judgments and decrees now or hereafter
applicable to its Business, properties or operations as presently conducted.
Neither the ownership nor use of Seller's properties nor the conduct of its
Business conflicts with the rights of any other Person, or violates, or with or
without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of rights
under, any terms or provisions of its certificate of incorporation or by-laws as
presently in effect, or any lien, Encumbrance, mortgage, deed of trust, lease,
license, agreement, understanding, law, ordinance, rule or regulation, or any
Order, judgment or decree to which Seller is a party or by which it may be bound
or affected. Neither Seller nor Member has Knowledge of any Applicable Laws,
Proceedings or Orders which would be applicable to its Business, operations or
properties and which could have a Material Adverse Effect on or cause a Material
Adverse Change to Seller or the Business either before or within one (1) year
after the Closing.

5.13 TITLE TO PROPERTIES. Except for the leaseholds listed and
described on SCHEDULE 5.14(a), Seller has good, marketable and insurable title
to all the properties and assets it owns or uses in its Business or purports to
own, including, without limitation, those reflected in its books and records and
in the Balance Sheet (except inventory sold after the Balance Sheet Date in the
Ordinary

20
<PAGE>

Course of Business). Except as set forth on SCHEDULE 5.13, none of such
properties and assets are subject to any mortgage, pledge, lien, charge,
security interest, Encumbrance, restriction, lease, license, easement,
liability or adverse claim of any nature whatsoever, direct or indirect,
whether accrued, absolute, contingent or otherwise, except (i) mortgages or
security interests shown on the Balance Sheet as securing specific
liabilities or obligations or (ii) those imperfections of title and
Encumbrances, if any, which, individually or in the aggregate, (A) are not
substantial in character, amount or extent and do not, materially detract
from the value of the properties subject thereto, (B) do not interfere with
either the present and continued use of such property or the conduct of
Seller's normal operations and (C) have arisen only in the Ordinary Course of
Business. All of the properties and assets owned, leased or used by Seller
are in good operating condition and repair, are suitable for the purposes
used, are adequate and sufficient for all current operations of Seller and
are directly related to the Business of Seller described in Schedule 5.19.

5.14 SCHEDULES. Attached hereto as SCHEDULE 5.14 is a separate
schedule containing an accurate and complete list and description of:

(a) All Real Estate owned by Seller or in which Seller has a
leasehold or other interest or which is used by Seller in connection with
the operation of its Business, together with a description of each lease,
sublease, license, or any other instrument under which Seller claims or
holds such leasehold or other interest or right to the use thereof or
pursuant to which Seller has assigned, sublet or granted any rights
therein, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.

(b) As of a date no earlier than August 31, 1998, all of
Seller's receivables (which shall include accounts receivable, loans
receivable and any advances), together with detailed information as to
each such listed receivable which has been outstanding for more than 30
days.

(c) All machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than inventory and
supplies), owned, leased or used by Seller, except for items having value
of less than $500 and which do not, in the aggregate, have a total value
of more than $25,000, setting forth with respect to all such listed
property a summary description of all leases, Encumbrances, charges,
restrictions, covenants and conditions relating thereto, identifying the
parties thereto, the rental or other payment terms, expiration date and
cancellation and renewal terms thereof.

(d) All Patents, Patent applications, licenses, Trademarks,
Trademark registrations, service marks, service names, trade names,
Copyrights and Copyright registrations, and applications for any of the
foregoing, wholly or partially owned or held by Seller or used in the
operation of Seller's Business.

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<PAGE>

policies are with reputable insurers, provide adequate coverage
for all normal risks incident to Seller's assets, properties and
Business operations and are in character and amount at least
equivalent to that carried by Persons engaged in a business
subject to the same or similar perils or hazards.

(f) All sales agency or route distributorship agreements or
franchises or agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound.

(g) All contracts, agreements, commitments or licenses relating
to Intellectual Property to which Seller is a party or by which it is
bound.

(h) All loan agreements, indentures, mortgages, pledges,
conditional sale or title retention agreements, security agreements,
equipment obligations, guaranties, leases or lease purchase agreements to
which Seller is a party or by which it is bound.

(i) All contracts, agreements, and commitments, whether or not
fully performed, in respect of the issuance, sale or transfer of member
interests, bonds or other securities of Seller or pursuant to which
Seller has acquired any substantial portion of its Business or assets.

(j) All contracts, agreements, commitments or other
understandings or arrangements to which Seller is a party or by which it
or any of its property is bound or affected but excluding (i) purchase
orders and commitments for raw materials, parts (including motors) and
supplies made in the Ordinary Course of Business involving payments or
receipts by Seller of less than $50,000 in any single case but not more
than $100,000 in the aggregate, (ii) contracts entered into in the
Ordinary Course of Business and involving payments or receipts by Seller
of less than $2,500 in the case of any single contract but not more than
$10,000 in the aggregate, (iii) contracts entered into in the Ordinary
Course of Business which are terminable by Seller on less than 30 days'
notice without any penalty or consideration and involving payments or
receipts by Seller of less than $2,500 in the case of any single contract
but not more than $10,000 in the aggregate, and (iv) sales orders or
commitments for the sale of manufactured boats, parts or accessories made
in the Ordinary Course of Business upon Seller's normal price and terms.

(k) All collective bargaining agreements, employment and
consulting agreements, executive compensation plans, bonus plans,
deferred compensation agreements, employee pension plans or retirement
plans, employee stock options or stock purchase plans and group life,
health and accident insurance and other employee benefit plans
agreements, arrangements or commitments, whether or not legally binding,
including, without limitation, holiday, vacation, Christmas and other
bonus practices, to which Seller is a party or is bound or which relate
to the operation of Seller's Business.

(l) The names and current annual salary rates of all Persons
(including independent commission agents) whose annual compensation
(direct or indirect) from Seller

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<PAGE>

is currently at the rate of more than $30,000 per annum and showing
separately for each such Person the amounts paid or payable as
salary, bonus payments and any indirect compensation for the year
ended; and

(m) The name of each bank in which Seller has an account or
safe deposit box and the names of all Persons authorized to draw thereon
or have access thereto; and the names of all Persons, if any, holding Tax
or other powers of attorney from Seller and a summary of the terms
thereof.

All of the contracts, agreements, leases, licenses and commitments required to
be listed on SCHEDULE 5.14 (other than those which have been fully performed)
are valid and binding, enforceable in accordance with their respective terms, in
full force and effect and, except as otherwise specified in SCHEDULE 5.14,
validly assignable to Purchaser without the consent of any other party so that,
after the assignment thereof to Purchaser pursuant hereto, Purchaser will be
entitled to the full benefits thereof. Except as disclosed in SCHEDULE 5.14,
none of the payments required to be made under any such contract, agreement,
lease, license or commitment has been prepaid more than 30 days prior to the due
date of such payment thereunder, and there is not thereunder any existing
default, or event which, after notice or lapse of time, or both, would
constitute a default or a basis for force majeure or other claim of excusable
delay or non-performance thereunder or result in a right to accelerate or loss
of rights, and none of such contracts, agreements, leases, licenses or
commitments is, either when considered singly or in the aggregate with others,
unduly burdensome, onerous or materially adverse to Seller's Business,
properties, assets, earnings or prospects or likely, either before or after the
Closing, to result in any material loss or liability. None of Seller's existing
or completed contracts is subject to renegotiation with any Governmental Body.
True and complete copies of all such contracts, agreements, leases, licenses and
other documents listed on SCHEDULE .5.14 (together with any and all amendments
thereto) have been delivered to Purchaser and initialed by Seller's Secretary
and identified with a reference to this Section 5.14 of this Agreement.

5.15 PATENTS AND OTHER INTELLECTUAL PROPERTY.

(a) DEFINITION OF INTELLECTUAL PROPERTY. "Intellectual
Property" shall mean (i) all inventions, whether Patentable or
unpatentable (and whether or not reduced to practice), all
improvements thereto, and all "Patents" including all Patents and
Patent disclosures and applications, and registered design and
registered design applications, together with all reissuance,
continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (ii) all "Trademarks," including registered
or unregistered Trademarks, registered or unregistered servicemarks,
and all translations, adaptations, deviations, combinations,
applications, registrations and renewals in connection with any
registered or unregistered Trademark or servicemark, and all trade
names, trade dress and logos, (iii) all "Copyrights," meaning all
registered Copyrights, Copyright applications, Copyrightable works,
and unregistered Copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection therewith,
(v) all Confidential Information, (vi) all computer software and
software licenses (including data and related documentation), (vii)
all other similar proprietary rights, and (viii) all copies and
tangible embodiments of the foregoing, in whatever form or medium.

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(b) POSSESSION, RIGHTS AND OWNERSHIP. To the Knowledge of
Seller, with an obligation of investigation, Seller possesses all
Intellectual Property necessary for the conduct of its Business as
presently conducted, including all licenses and rights to use any
Intellectual Property necessary for the Business as presently conducted.
Seller is the sole and exclusive owner of all right, title and interest
in and to the Intellectual Property owned by it, free and clear of all
Encumbrances, other than as set forth on SCHEDULE 5.15 hereof. Except as
set forth on SCHEDULE 5.15, no right of the Purchaser in the Intellectual
Property used in the Business will be impaired or encumbered in any
material way by reason of the consummation of the transactions
contemplated hereby.

(c) NO PROCEEDINGS, DISCLOSURE OR INFRINGEMENT. Seller has not
received any notice of any event, inquiry, investigation or Proceeding
Threatening the validity or exclusivity, where applicable, of any
Intellectual Property. Except as set forth on SCHEDULE 5.15, Seller has
taken all reasonable and prudent steps to protect the Intellectual
Property from infringement by any other Person. Except as set forth on
SCHEDULE 5.15 no other Person (i) has the right (including a license) to
use any of the Intellectual Property with respect to the goods and
services on which they are now being used in Seller's Business either in
identical form or in such near resemblance thereto as to be likely, when
applied to the goods of any such Person, to cause confusion with such
Intellectual Property, or cause a mistake or to deceive, (ii) has
notified the Seller that it claims any ownership or right to use such
Intellectual Property, or (iii) to Seller's or Member's Knowledge, is
infringing on any Intellectual Property in any material respect. Except
as set forth in SCHEDULE 5.15, Seller has full ownership rights and
interests in and to all of the trade secrets used in the Business of
Seller, which trade secrets have not been disclosed to or to Seller's
Knowledge appropriated or used by any Person other than Seller. The use
of the Intellectual Property utilized in the Seller's Business has not
conflicted and does not now conflict with, infringe upon or otherwise
violate in any material respect, the rights of any third party. Except
as set forth on SCHEDULE 5.15, no legal Proceeding has been instituted
against, or notice or claim received by Seller, that alleges that the use
by Seller of the Intellectual Property (or any Intellectual Property or
process) used in Seller's Business infringes upon or otherwise violates
the rights of a third party, other than any such Proceeding or notice or
claim that has been disposed of without the imposition of any continuing
adverse event on the Seller's Business.

(d) PROPRIETARY RIGHTS. Schedule 5.15 identifies each Patent,
Trademark and Copyright owned or used by the Seller. SCHEDULE 5.15 also
sets forth: (i) for each Patent, the issue number, issue date, normal
expiration date (if applicable) and subject matter for each country in
which such Patent has been issued, or, if applicable, the application
number and date of filing for each country, (ii) for each Trademark (A)
the description, the application, serial number or registration number,
the class of goods covered and the issue and expiration or renewal (as
applicable) date for each country in which the Trademark has been applied
for or registered, (B) the description of each Trademark for which
registration has not been sought, (iii) for each registered Copyright,
the application or issue number and the date of filing for each country
in which a Copyright has been registered. True and correct copies of all
Patents, Trademarks and Copyrights (including all pending applications)
evidencing Intellectual Property which have been registered or issued by
a governmental agency to or for the Seller have been provided to the
Purchaser. Except as to applications pending, all of the

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Patents, registered Trademarks and registered Copyrights have been
duly and validly issued. All of the pending Patent applications have
been duly filed. SCHEDULE 5.15 also identifies all material licenses
and license rights to which the Seller is a party or pursuant to which
it is bound.

5.16 NO GUARANTIES. Except for the personal guarantees given by
Robert Weary and Member of certain of Seller's Debt Instruments, none of the
obligations or liabilities of Seller is guaranteed by, or subject to a
similar contingent liability to, any other Person, nor has Seller or Member
guaranteed, or otherwise become contingently liable for, the obligations or
liabilities of any other Person in connection with the Business.

5.17 INVENTORY. Seller conducted a physical inventory on or about
October 31, 1998 in a manner contemplated to properly compile an accurate and
complete inventory count as of such date. All items of Seller's inventory and
related supplies (including raw materials, work-in-process and finished
goods) so counted and included for valuation as of such date are (a)
merchantable, or suitable and usable for the production or completion of
merchantable products, for sale in the Ordinary Course of Business as first
quality goods at normal mark-ups, (b) not obsolete or below standard quality,
(c) reflected on the basis of a complete physical count, and (d) valued at
the lower of cost (on a first-in, first-out basis) or market in accordance
with Generally Accepted Accounting Principles. Seller's Assets include a
sufficient but not an excessive quantity of each type of such inventory and
supplies in order to meet the normal requirements of Seller's Business and
operations for a period of not less than one (1) nor more than three (3)
months.

5.18 RECEIVABLES. All receivables of Seller (including accounts
receivable, loans receivable and advances) which are reflected in the Final
Balance Sheet, and all such receivables which will have arisen since the date
thereof, shall have arisen only from bona fide transactions in the ordinary
course of Seller's Business and shall be (or have been) fully collected when
due, net of any amount of allowance for doubtful accounts (bad debt reserve),
without resort to litigation and without offset or counterclaim, in the
aggregate face amounts thereof except to the extent of the normal allowance
for doubtful accounts with respect to accounts receivable computed as a
percentage of sales consistent with marine industry standards.

5.19 BUSINESS DESCRIPTION. Schedule 5.19 contains an accurate and
substantially complete summary description of the name of each material
customer and supplier of Seller, the loss of which might materially and
adversely affect Seller's Business.

5.20 RECORDS. The books of account and other records of Seller are
complete and correct in all material respects and have been maintained in
accordance with sound business practices, and there have been no transactions
involving the Business of Seller which properly should have been set forth
therein and which have not been accurately so set forth. The foregoing does
not apply to or otherwise supplement the representation regarding the
financial statements of Seller.

5.21 REAL ESTATE. SCHEDULE 5.14(a) contains a list of all easements
under which the Seller is benefitted (the "Easements"). With respect to each
parcel of real estate owned by the Seller (the "OWNED REAL ESTATE"), and each
parcel of real estate leased by the Seller (the "LEASED REAL ESTATE")

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(the Owned Real Estate and the Leased Real Estate are collectively referred
to herein as the "Real Estate") :

(a) SCHEDULE 5.14(a) contains a complete and accurate legal
description of each parcel of Owned Real Estate and a description of each
written or oral lease regarding Leased Real Estate;

(b) Except as set forth on SCHEDULE 5.21 hereto, there are no
public improvements affecting any parcel of Owned Real Estate or Leased
Real Estate including, but not limited to, water, sewer, sidewalk,
street, alley, curbing, landscaping or related improvements, which have
been commenced and/or completed and for which an assessment has not been
levied against the Real Estate or, to Seller's Knowledge, which may be
levied against the Real Estate after the date of this Agreement;

(c) There are no deferred property Taxes or assessments with
respect to the Real Estate which may or will become due and payable as a
result of the consummation of the transaction contemplated hereby;
PROVIDED, HOWEVER, that certain property tax exemptions described in
SCHEDULE 5.14 granted to Seller by Governmental Bodies may lapse and
expire by reason of this transaction unless renewed or extended by such
Governmental Body pursuant to the application and request of Purchaser.

(d) The Seller is the sole owner in fee simple title of each
parcel of Owned Real Estate and each such parcel is free and clear of any
and all Encumbrances, except (i) those Encumbrances set forth in SCHEDULE
5.21 hereto, (ii) municipal zoning ordinances, recorded Easements for
public utilities and recorded building and use restrictions and
covenants, (iii) general real estate Taxes and installments of special
assessments payable in the year of Closing, and (iv) minor survey
exceptions, licenses, Easements or reservations of, or rights of others
for, oil, gas minerals, ores or metals, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions on the use of real property, minor defects
in title or other similar charges not interfering in any material respect
with the Ordinary Course of Business of the Seller or with the use or
ownership of the Owned Real Estate (collectively the "PERMITTED
ENCUMBRANCES"). The Permitted Encumbrances and those Encumbrances set
forth in SCHEDULE 5.21 hereto do not individually or in the aggregate
materially impair or prohibit the Seller's current use of the Owned Real
Estate;

(e) Except as set forth in SCHEDULE 5.21 hereto, there are no
condemnation Proceedings pending or, to which the Seller has Knowledge,
Threatened with respect to all or any part of any parcel of Real Estate;

(f) To the Seller's Knowledge, except for the Permitted
Encumbrances and those Encumbrances set forth in SCHEDULE 5.21 hereto,
there are no private restrictions, covenants, or reservations which
materially and adversely affect the use or occupancy of all or any part
of any parcel of Owned Real Estate or any of the Easements;

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(g) To Seller's Knowledge, and except as set forth on Schedule
5.21 hereto, there are no Applicable Laws requiring repair, alteration or
correction of any existing condition on any parcel of Real Estate and
there are no conditions that could give rise to the same;

(h) To the Seller's Knowledge, except as set forth in SCHEDULE
5.21 hereto, (a) there are no structural, mechanical or other defects of
material significance in any of the buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, located on any parcel
of Real Estate, and (b) all such buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, will be until the
Closing Date, maintained in good repair, working order and condition,
ordinary wear and tear excepted;

(i) Except as set forth in SCHEDULE 5.21 hereto, the
improvements on each parcel of Real Estate and the Seller's use thereof
comply in all material respects with any and all building, zoning,
subdivision, traffic, parking, land use, occupancy, health and other
Applicable Laws (excluding Environmental Laws which are subject to the
representations set forth in Section 5.24) pertaining to the Real Estate
or to the development, construction, management, use and operations of
the improvements thereon;

(j) Except as set forth in SCHEDULE 5.21 hereto, the
improvements located on each parcel of Real Estate, including fences,
driveways and other structures occupied, used or claimed by the Seller,
are wholly within the boundary lines of such parcels of Real Estate and
such improvements and the Seller's present uses thereof do not in any
material respect infringe upon the rights of any other Person;

(k) Except as set forth in SCHEDULE 5.21 hereto, no buildings,
fences, driveways or other structures of any adjoining owner encroach
upon any part of any parcel of Real Estate or any of the Easements; and

(l) Except as set forth in SCHEDULE 5.21 hereto, to the
Knowledge of Seller, the Seller has all operating permits necessary for
the operation of the Business, and all such permits are current, except
where the failure to have any such current operating permit in good order
would not have a Material Adverse Effect on the Seller. To the Knowledge
of Seller, except as set forth in SCHEDULE 5.21, the Seller has all
Easements, or access through public utility easements, on to private
property, construction permits, highway crossing licenses and permits
(and other similar licenses and permits) and right-of-way-licenses
reasonably necessary to conduct the Business, except where the failure to
have any such easement on to private property, construction permits,
highway crossing licenses and permits (and other similar licenses and
permits), and right-of-way licenses would not have a Material Adverse
Effect.

5.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Seller nor any
officer, employee or agent of Seller, nor any other Person acting on its
behalf, has, directly or indirectly, since inception given or agreed to give
any gift or similar benefit to any customer, supplier, governmental employee
or other Person who is or may be in a position to help or hinder the Business
of Seller (or assist Seller

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in connection with any actual or proposed transaction) which (a) might
subject Seller to any damage or penalty in any civil, criminal or
governmental litigation or Proceeding, (b), if not given in the past, might
have had an adverse effect on the Assets, Business or operations of Seller as
reflected in the Financial Statement or (c), if not continued in the future,
might adversely affect Seller's assets, Business, operations or prospects or
which might subject Seller to suit or penalty in any private or governmental
litigation or Proceeding.

5.23 EMPLOYEE BENEFITS.

(a) BENEFIT PLANS. Except as described in SCHEDULE 5.23
hereto, the Seller does not maintain or contribute to any Benefit
Plans. Without limiting the generality of the foregoing provision of
this Section, except as described in SCHEDULE 5.23 hereto, there are
no pension plans, welfare plans or employee benefit plans qualified
under Section 401(a) of the Code to which the Seller is required to
contribute. The Seller does not and will not have any unfunded
Liability for services rendered prior to the Closing Date under any
Benefit Plans. The Seller is not in any material default under any
Benefit Plan. Except as set forth in Schedule 5.23, neither the
Seller, nor any entity now or formerly part of a controlled group with
the Seller, within the meaning of Section 412(c)(11)(B)(ii) of the
Code, maintains or has ever maintained a "defined benefit plan," as
defined in Section 3(35) of ERISA, that is subject to Section 412 of
the Code and Section 302 of ERISA. Except as set forth in SCHEDULE
5.23 hereto, neither the Seller nor any of its "subsidiaries"
contributes to or has any Liability (including but not limited to
withdrawal Liability) with respect to any multi-employer plan (as
defined in Section 4064(a) of ERISA or Section 4001(a)(3) of ERISA).
Other than claims for benefits in ordinary course, there are no
actions, suits, disputes, arbitrations or other material claims
pending or, to Seller's' Knowledge, Threatened with respect to any
Benefit Plan. For purposes of this Section, "subsidiaries" shall
include all corporations and all trades or businesses (whether or not
incorporated) which may be liable for any income Tax, loss of Tax
deduction, excise Taxes, penalties or other similar consequences under
ERISA (as hereinafter defined) or under the Code by reason of its
ownership affiliation with the Seller.

(b) OTHER PLANS. The Seller have made available to the
Purchaser information relating to deferred compensation, incentive
compensation and other fringe benefit plans, if any, sponsored or
maintained by the Seller. Except as set forth in SCHEDULE 5.23, there
are no present or former employees of the Seller who are entitled to
(i) any pensions or other benefits to be paid after termination of
employment, including termination on account of disability (except as
otherwise required under Section 601 of ERISA) or (ii) deferred
compensation payments.

(c) BENEFIT PLAN DOCUMENTS. The Seller has made available to
the Purchaser the following documents, as they may have been amended to
the date hereof, embodying or relating to each Benefit Plan listed in
SCHEDULE 5.23 hereto: (i) all written plan documents for each such
Benefit Plan, including all amendments to each such Benefit Plan, any
related trust agreements, group annuity contracts, insurance policies or
other funding agreements or arrangements; (ii) the most recent
determination letter received from the Internal Revenue Service, if any,
as to the qualified status of any such Benefit Plan under Section 401(a)
of the Code; (iii) the current summary plan description, if any, for each
such Benefit Plan; and

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(iv) the most recent annual return/report on form 5500, 5500-C or
5500-R, if any, for each such Benefit Plan.

(d) PROHIBITED TRANSACTIONS. The Seller has not, nor, to the
Seller's Knowledge, has any other "disqualified person" or "party in
interest", as defined in Section 4975(e)(2) of the Code and Section 3(14)
of ERISA, respectively, engaged in a "prohibited transaction," as such
term is defined in Section 4975 of the Code and Section 406 of ERISA,
with respect to any Benefit Plan listed on SCHEDULE 5.23 hereto subject
to ERISA, which could reasonably be expected to subject the Seller to a
material Tax or penalty on prohibited transactions imposed by either
Section 502(i) of ERISA or Section 4975 of the Code. The execution and
delivery by the Seller of this Agreement and the consummation of the
transactions contemplated hereby will not (i) involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Code with respect to any Benefit Plan listed on SCHEDULE 5.23 hereto,
or (ii) accelerate the payment of any benefits under any Benefit Plan
listed on SCHEDULE 5.23 hereto.

(e) FIDUCIARY DUTY. To the Seller's Knowledge, any other
fiduciary of any Benefit Plan listed on SCHEDULE 5.23 hereto engaged in
any transaction with respect to such Benefit Plan or failed to act in a
manner with respect to such Benefit Plan which could reasonably be
expected to subject the Seller to any material Liability for a breach of
fiduciary duty under ERISA or any other Applicable Law.

(f) COBRA. The Seller has complied in all material respects
with the coverage continuation requirements of Sections 601 through 609
of ERISA, Section 5980B of the Code, and the requirements of any similar
state law regarding continued insurance coverage, and the Seller has
incurred no material Liability with respect to its failure to offer or
provide continued coverage in accordance with the foregoing requirements,
nor is there any suit pending, or to the Seller's Knowledge, Threatened,
with respect to such requirements.

(g) TRIGGERING OF OBLIGATION AND OTHER BINDING COMMITMENTS.
Except as set forth in SCHEDULE 5.23, the consummation of the
transactions contemplated by this Agreement will not entitle any current
or former employee of the Seller to severance pay, unemployment
compensation or any other payment, or accelerate the time of payment or
vesting, or increase the amount of compensation due to any such employee
(other than Member, which amount if any shall not be payable by
Purchaser) or former employee. Notwithstanding the foregoing, Purchaser
acknowledges and agrees that it will enter into an employment agreement
with Geoffrey T. Pepper on the Closing Date and shall be obligated
pursuant to the terms contained therein.

5.24 ENVIRONMENTAL MATTERS.

(a) Except as set forth in SCHEDULE 5.24 hereto, to the
Knowledge of Seller, the Seller has never generated, transported, stored,
handled, disposed of or contracted for the disposal of any Hazardous
Materials. Except as set forth in SCHEDULE 5.24 hereto, to the Knowledge
of Seller, no employee of the Seller has, in the course and scope of
employment with the Seller, been exposed to any Hazardous Materials in
such a manner as to be harmed

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thereby (whether such harm is now known to exist or will be discovered
in the future). Except as set forth on SCHEDULE 5.24 hereto, the
Seller is not listed as a potentially responsible party under CERCLA
or any comparable or similar U.S. federal or state statute, the Seller
has not received notice of such a listing and the Seller have no
Knowledge of any facts or circumstances which could give rise to such
a listing.

(b) Except as set forth on SCHEDULE 5.24 hereto, the Real
Estate has been operated by the Seller and to Seller's Knowledge is in
compliance in all material respects with all Applicable Laws, including
Environmental Laws and all Applicable Laws relating to underground and/or
above ground petroleum storage tanks. Except as set forth on SCHEDULE
5.24 hereto, the Seller otherwise complies in all material respects with
all Environmental Laws. Seller has obtained or has taken appropriate
steps, as required by Environmental Laws and Applicable Laws, to obtain
all environmental, health and safety permits, consents, approvals,
licenses and other authorizations necessary for the ownership and
operation of the Business, all of the permits and other such
authorizations are in good standing, and the Seller is in compliance in
all material respects with such permits and other such authorizations.
Except as set forth in SCHEDULE 5.24, and to Seller's Knowledge, the Real
Estate is free of any and all Environmental Conditions and Hazardous
Materials and is not subject to any Environmental Claim or "Super-Fund"
type Encumbrances by any Person arising from the release or Threatened
release of any Hazardous Materials in, on, about or under the Real
Estate.

(c) All of the third parties with which the Seller has
arranged, engaged or contracted to accept, treat, transport, store,
dispose or remove any pollutant generated or present at the Real Estate,
or which otherwise participate or have participated in activities or
conduct related to the Real Estate or the Business, were properly
permitted at the relevant time to perform the foregoing activities or
conduct.

(d) There are not currently and never have been any wells or
underground and/or above ground storage tanks (whether or not currently
in use) on any parcel of Real Estate and, to the extent such wells or
tanks are described in SCHEDULE 5.24, all such wells and tanks are, in
sound condition and are not leaking.

(e) No part of any parcel of Real Estate is now being used, nor
to Seller's Knowledge has any parcel of Real Estate ever been used, as a
landfill, dump or other disposal, storage, transfer, treating or handling
area for any Hazardous Materials, or as a gasoline service station or a
facility for selling, dispensing, storing, transferring, treating or
handling Hazardous Materials.

(f) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, Seller is not subject to any investigation, nor has the
Seller received any written notification within the past two years of
any judicial or administrative Proceeding, notice, Order, judgment,
decree or settlement, alleging or addressing (i) any violation of
Environmental Laws or (ii) any Environmental Claims or liabilities and
costs arising from the release or Threatened release of any Hazardous
Materials. To the Knowledge of Seller, there has been no release of
any

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Hazardous Materials in a reportable quantity under Environmental Laws
at, to or from the Real Estate.

(g) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, there is not constructed, placed, deposited, stored, disposed
or located on the Real Estate any asbestos in any form.

(h) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, there is not constructed, placed, deposited, stored, disposed
nor located on the Real Estate any polychlorinated biphenyls ("PCBs") or
transformers, capacitors, ballasts, or other equipment which contain
dielectric fluid containing PCBs.

(i) Except as set forth in SCHEDULE 5.24 hereto, there is not
constructed, placed, deposited, stored, disposed nor located on the Real
Estate any insulating material containing urea formaldehyde.

(j) As used in this Agreement including Section 12.8 hereof,
the terms "Environmental Claims", "Environmental Conditions",
"Environmental Laws" and "Hazardous Materials" shall be defined as
follows:

(i) "Environmental Claims" shall mean administrative,
regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation,
investigations or Proceedings, consent decrees, judgments,
administrative Orders or agreements, arising under any
Environmental Law or any permit issued under any such Law,
including (A) Environmental Claims by Governmental Agencies for
enforcement, cleanup, removal, response, remedial or other actions
or Damages pursuant to any applicable Environmental Law, and (B)
Environmental Claims by any third party seeking Damages or
injunctive relief resulting from Environmental Conditions or
arising from alleged injury or threat of injury to health, safety
or the environment.

(ii) "Environmental Conditions" shall mean the presence
or introduction into the environment of any Hazardous Materials
(and any resulting air, soil, groundwater or surface water
contamination without regard to location to which such resulting
contamination has migrated or spread) as a result of which the
Seller has or may become liable to any Person or by reason of
which the Seller or any assets of the Seller may suffer or be
subjected to any Encumbrance or Losses.

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without limitation CERCLA; RCRA; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251 ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.;
the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.; the Safe
Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; and the
Occupational Safety and Health Act of 1970, as amended, as it
applies to an effect upon the natural environment, 29 U.S.C.
Section 651 ET SEQ.; or any other federal, state or local law
of similar effect, each as amended from time to time.

(iv) "Hazardous Materials" shall mean (A) any petroleum
or petroleum products, asbestos in any form, and polychlorinated
biphenyls; (B) any radioactive substance; (C) any toxic,
infectious, reactive, corrosive, ignitible or flammable chemical
or chemical compound; and (D) any chemicals, materials or
substances, whether solid, liquid or gas defined as or included in
the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," or
words of similar import, under any applicable Environmental Law.

5.25 DEBT INSTRUMENTS. SCHEDULE 5.25 is a true, correct and complete
list showing the names of the parties and outstanding indebtedness as of the
respective dates set forth on SCHEDULE 5.25 under all mortgages, indentures,
notes, guarantees and other obligations for or relating to borrowed money,
purchase money debt (including conditional sales contract and capital leases) or
covenants not to compete (the "Debt Instruments") for which the Seller is
primarily or secondarily obligated. The Seller has previously delivered to
Purchaser true, complete and correct copies of each of the Debt Instruments.
Except as described in SCHEDULE 5.25, Seller has performed all of the material
obligations required to be performed by it, and is not in material breach or
default under any of the provisions of any of the Debt Instruments, and there
has not occurred any event which, (with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a breach or
default.

5.26 RELATIONSHIP WITH RELATED PERSONS. Except as set forth in
SCHEDULE 5.26 hereto, the Member, members of any governing body, officers,
and employees of the Seller and their Related Persons do not have any
interest in any of the properties or assets of the Seller (other than the
interest conferred under law solely as a consequence of a Person's status as
a member of Seller) and, to the Seller's Knowledge, do not own, of record or
as a beneficial owner, an equity interest or any other financial or profit
interest in any Person that (i) has had business dealings or a material
financial interest in any transaction with the Seller or, (ii) has engaged or
is engaged in competition with the Seller with respect to any line of
products or services of the Seller in any market presently served by the
Seller (a "Competing Business") (except for less than five percent (5%) of
the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market). To the
Knowledge of the Seller, and except as set forth on SCHEDULE 5.26 hereto, no
Member, member of a governing body, or officer of the Seller and none of
their Related Persons is a party to any Contract with, or has any claim or
right against, the Seller, other than the rights officer and members of a
governing body of the Seller have with respect to indemnification under state
law. All money owed by the Seller to its Member, member of a governing body,
or officers, or their Related Persons, (other than for salary) are for bona
fide debts and are set forth in SCHEDULE 5.26 hereto.

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5.27 LABOR MATTERS. SCHEDULE 5.14 contains a list of all collective
bargaining agreements to which the Seller is a party. Except as set forth in
SCHEDULE 5.27, since inception of Seller, Seller has not experienced any
attempt to organize any of its employees of collectively bargaining or
entering into a labor contract on behalf of such employees. As of the date
hereof, there is no employee activity which may be adverse to Seller,
including labor strikes or disturbances, pending or, to the Knowledge of
Seller, Threatened against Seller. Except as set forth on SCHEDULE 5.27,
there are no disputes or grievances subject to any grievance procedure,
unfair labor practice proceedings, arbitration or litigation under such
agreements, or as a result of such attempts to organize, which have not been
finally resolved, settled or otherwise disposed of. Seller is in compliance
in all material respects with all Applicable Laws respecting employment
practices, employment documentation, terms and conditions of employment and
wages and hours. There are no labor practice charges or complaints against
or affecting Seller pending before any applicable Governmental Body and, to
the Knowledge of Seller, there are no material facts or information which
would have a reasonable probability of giving rise thereto.

5.28 YEAR 2000 COMPLIANCE. All software used or developed by Seller
in the Business, third party software, computer, communications, electronic
or other hardware or equipment, including any imbedded software or firmware,
used in the Business will correctly recognize, calculate, sort, store,
display or otherwise process data involving dates prior to, during or after
the year 2000, and no operation or functionality problems will exist with
respect to the approach, occurrence or passing of the calendar date January
1, 2000.

5.29 DISCLOSURE. No representation or warranty by Seller contained
in this Agreement, nor any statement or certificate furnished or to be
furnished by Seller or Member to Purchaser or its representatives in
connection herewith or pursuant hereto, contains or will contain any untrue
statement of a material fact, or omit or will omit to state any material fact
required to make the statements herein or therein contained not misleading or
necessary in order to provide a prospective purchaser of the Business of the
Seller with adequate information as to Seller and its condition (financial
and otherwise), properties, assets, liabilities, Business and prospects, and
Seller and Member have disclosed to Purchaser in writing all material adverse
facts known to them relating to the same. The representations and warranties
contained in this Article V or elsewhere in this Agreement or any document
delivered pursuant hereto shall not be affected or deemed waived by reason of
the fact that Purchaser and/or its representatives knew or should have known
that any such representation or warranty is or might be inaccurate in any
respect.

ARTICLE VI

PURCHASER'S REPRESENTATIONS AND WARRANTIES

REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:

6.1 ORGANIZATION. Purchaser is a limited liability company
organized, existing and in good standing under the laws of Delaware and has
full power and authority to enter into this Agreement and the related
agreements referred to herein and to carry out the transactions contemplated
by this

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Agreement and to carry on its Business as now being conducted and to own,
lease or operate its properties.

6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. All Proceedings or
action required to be taken by Purchaser relating to the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been taken at or prior to the Closing.

6.3 EXECUTION DELIVERY AND PERFORMANCE OF AGREEMENT. Neither the
execution, delivery nor performance of this Agreement by Purchaser will, with
or without the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any lien, charge or Encumbrance pursuant to, any
provision of Purchaser's certificate of incorporation or by-laws or any
franchise, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule or regulation or any Order, judgment or decree to which
Purchaser is a party or by which it may be bound or affected. Purchaser has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, all Proceedings required to be taken by
Purchaser to authorize the execution, delivery and performance of this
Agreement and the agreements relating hereto, have been properly taken and
this Agreement constitutes a valid and binding obligation of Purchaser.

6.4 LITIGATION. There is no legal action, suit, arbitration,
governmental investigation or other legal or administrative Proceeding, nor
any Order, decree or judgment in progress, pending or in effect, or to the
Knowledge of Purchaser Threatened, against or relating to Purchaser in
connection with or relating to the transactions contemplated by this
Agreement, and Purchaser does not know or have any reason to be aware of any
basis for the same.

ARTICLE VII

PRECLOSING COVENANTS

7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING.

(a) Prior to the Closing, Seller shall conduct its Business and
affairs only in the ordinary course and consistent with its prior
practice and shall maintain, keep and preserve its assets and properties
in good condition and repair and maintain insurance thereon in accordance
with present practices, and Seller and Member will use their best efforts
(i) to preserve the Business and organization of Seller intact, (ii) to
keep available to Purchaser the services of Seller's present officers,
employees, agents and independent contractors, (iii) to preserve for the
benefit of Purchaser the goodwill of Seller's suppliers, customers,
landlords and others having business relations with it, (iv) to cooperate
with Purchaser and use reasonable efforts to assist Purchaser in
obtaining the consent of any landlord or other party to any lease or
contract with Seller where the consent of such landlord or other party
may be required by reason of the transactions contemplated hereby and (v)
to cooperate with Purchaser in its efforts to obtain the financing of the
Cash Consideration. Without limiting the generality of the foregoing,
prior to the Closing Seller will not without Purchaser's prior written
approval:

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(i) change its certificate of organization or other
governing documents or merge or consolidate or obligate itself to
do so with or into any other entity;

(ii) enter into any contract, agreement, commitment or
other understanding or arrangement except for those of the type
which would not have to be listed and described under subparagraph
(j) of Section 5.14 above; or

(iii) with the exception of the redemption or purchase of
the interests of certain members of Seller, perform, take any
action or incur or permit to exist any of the acts, transactions,
events or occurrences of the type (A) described in subparagraphs
(a), (b), (c), (d), (e), (h), (i), (j), (k), (l), (m), (n), (p) or
(q) of Section 5.10 of this Agreement which would have been
inconsistent with the representations and warranties set forth
therein had the same occurred after the Balance Sheet Date and
prior to the date hereof or (B) described in Section 5.3 of this
Agreement which would be required to be set forth on SCHEDULE 5.3
hereof.

(b) Seller shall give Purchaser prompt written notice of any
change in any of the information contained in the representations and
warranties made in Article V or elsewhere in this Agreement or the
Schedules referred to herein which occurs prior to the Closing.

(c) Seller shall, and Member will cause Seller to, consult with
and follow the recommendations of Purchaser with respect to (i) the
cancellation of contracts, agreements; commitments or other
understandings or arrangements to which Seller is a party, including,
without limitation, purchase orders for any item of inventory and
commitments for capital expenditures or improvements, (ii) the
commencement in one or more of Seller's locations of the orderly and
gradual discontinuance of particular items or operations and (iii)
purchasing, pricing or selling policy including, without limitation,
selling merchandise at discounts; PROVIDED, HOWEVER, that nothing
contained in this subsection (c) shall require Seller to take or fail to
take any action that, in Seller's reasonable judgment, is likely to give
rise to a substantial penalty or a claim for damages by any third party
against Seller, or is likely to result in losses or reduced profits to
Seller, or is otherwise likely to prejudice in any material respect or
unduly interfere with the conduct of Seller's Business and operations in
the ordinary course consistent with prior practice, or is likely to
result in a breach by Seller of any of its representations, warranties or
covenants contained in this Agreement (unless any much breach is first
waived in writing by Purchaser).

7.2 ACCESS TO INFORMATION AND DOCUMENTS. Upon reasonable notice
and during regular business hours, Seller will give Purchaser and Purchaser's
attorneys, accountants and other representatives full access to Seller's
personnel and all properties, documents, contracts, books and records of
Seller and will furnish Purchaser with copies of such documents (certified as
complete and correct by Seller's officers if so requested) and with such
information with respect to the affairs of Seller as Purchaser may from time
to time request, and Purchaser will not improperly disclose the same prior to
the Closing. Any such furnishing of such information to Purchaser or any
investigation by Purchaser shall not affect Purchaser's right to rely on any
representations and warranties made in this Agreement or in connection
herewith or pursuant hereto.

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7.3 EMPLOYMENT AGREEMENTS. At the Closing, Purchaser will execute
and deliver, and Seller and Member will make best efforts to cause certain
employees of Seller to execute and deliver, the employment agreements with
Geoffrey T. Pepper (in the form of Exhibits C) and certain other management
employees mutually agreed upon by the parties.

7.4 DIRECTORS AND MEMBER AUTHORIZATION; CHANGE OF SELLER NAME.

(a) At or prior to the Closing, Seller will deliver to
Purchaser a copy of the resolutions of its management committee and the
resolutions or consents of the Member, together with any and all required
resolutions or consents of the shareholders thereof, approving the
execution and delivery of this Agreement and the consummation of all of
the transactions contemplated hereby, duly certified by an officer of
Seller.

(b) At least ten (10) days prior to the Closing, Seller and the
Member will deliver to Purchaser a duly executed and acknowledged
certificate of amendment to Seller's Articles of Organization or other
appropriate document which is required to change Seller's corporate name
to a new name bearing no resemblance to its present name so as to make
Seller's present name available to Purchaser. Purchaser is hereby
authorized to file such certificate or other document (at Seller's
expense) in order to effectuate such change of name at or after the
Closing as Purchaser shall elect.

7.5 NON-COMPETITION AGREEMENT. Seller and Member shall execute and
deliver to Purchaser at or prior to the Closing a Non-Competition and
Continuity of Business Dealings Undertaking in the form of Exhibit D annexed
hereto.

7.6 ENCUMBRANCES. Seller shall not, directly or indirectly,
perform or fail to perform any act which could reasonably be expected to
result in the creation or imposition of any Encumbrance on any of the
properties or assets of Seller or otherwise adversely affect the
marketability of the Seller's title to any of its properties or assets.

7.7 PAY INCREASES. Except normal increases in the Ordinary Course
of Business, the Seller shall not, without the prior written consent of
Purchaser, grant any increase in the salaries or rate of pay to any of its
employees, grant any increase in any benefits or establish, adopt, enter
into, make any new grants or awards under, or amend any collective bargaining
agreement, employment agreement or Benefit Plan for the benefit of any of its
employees.

7.8 RESTRICTIONS ON NEW CONTRACTS. Except with the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld,
delayed or conditioned, the Seller shall not enter into any contract, incur
any Liability, assume, guarantee or otherwise become liable or responsible
for any Liability of any other Person, make any loans, advances or capital
contributions to any other Person (except for extensions of credit to its
customers in the Ordinary Course of Business), or waive any right or enter
into any other transaction, in each case other than in the Ordinary Course of
Business and consistent with the Seller's normal business practices. Without
limiting the foregoing, for the purposes of this Agreement, any contract
involving the sum of $25,000 or more shall be deemed to be outside the
Ordinary Course of Business.

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7.9 PRESERVATION OF BUSINESS. Seller shall use reasonable efforts
to preserve its Business organization intact, to keep available to Purchaser
the present employees of Seller and to preserve for Purchaser the present
goodwill and relationship of Seller with its vendors, suppliers, customers
and others having business relationships with Seller.

7.10 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Seller shall timely pay
and discharge all invoices, bills and other monetary Liabilities when due.

7.11 RESTRICTIONS ON SALE OF ASSETS. Seller shall not sell, assign,
transfer, lease, sublease, pledge or otherwise encumber or dispose of any of
its properties or assets, except for the sale of inventory in the Ordinary
Course of Business and at regular prices.

7.12 PROMPT NOTICE. Seller shall promptly notify Purchaser in
writing upon becoming aware of any of the following: (i) any claim, demand
or other Proceeding that may be brought, Threatened, asserted or commenced
against Seller, its officers or directors; (ii) any changes in the accuracy
of the representations and warranties made by Seller or any Member in this
Agreement; (iii) any Injunction or any complaint praying for an Injunction
restraining or enjoining the consummation of the transactions contemplated
hereby; or (iv) any notice from any Person of its intention to institute an
investigation into, or institute a Proceeding to restrain or enjoin the
consummation of the transactions contemplated hereby or to nullify or render
ineffective this Agreement or such transactions if consummated.

7.13 CONSENTS. As soon as reasonably practicable and in any event
on or before the Closing Date, Seller will use reasonable efforts to obtain
or cause to be obtained all of the consents and approvals of all Persons
necessary for the Seller to consummate the transactions contemplated hereby,
including the consents and approvals required under any contract or agreement.

7.14 COPIES OF DOCUMENTS. Seller agrees that as soon as reasonably
possible following the execution hereof, it shall furnish or make available
to Purchaser a true, complete and accurate copy of each Operating Contract
and any additional Contract listed on SCHEDULE 5.14 hereto.

7.15 NO SOLICITATION OF OTHER OFFERS. Seller will not, and will not
permit its Member, representatives, investment bankers, agents and
Affiliates to, directly or indirectly, (i) solicit or encourage submission of
or any inquiries, proposals or offers by, (ii) participate in any
negotiations with, (iii) afford any access to the properties, books or
records of the Seller to, (iv) accept or approve, or (v) otherwise assist,
facilitate or encourage, or enter into any Contract with, any Person or group
(other than Purchaser and its Affiliates, agents and representatives), in
connection with any Acquisition Proposal. In addition, the Seller will not,
and will not permit its Member, representatives, investment bankers, agents
and Affiliates to, directly or indirectly, make or authorize any statement,
recommendation or solicitation in support of any Acquisition Proposal made by
any Person or group (other than Purchaser). In addition, Seller will
immediately cease any and all existing activities, discussions or
negotiations with any parties with respect to any of the foregoing.
"Acquisition Proposal" means any proposal relating to the possible
acquisition of the Seller either by way of merger, purchase of capital stock
of Seller, purchase of all or substantially all of the assets of Seller, or
otherwise.

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7.16 ACCOUNTS RECEIVABLE AND PAYABLE. Seller shall not accelerate
the collection of its accounts receivable or delay the payments of its
accounts payable or other Liabilities, in each case arising out of the
operation of the Business in a manner which would be inconsistent with past
practice.

7.17 INVENTORY. Seller shall maintain the levels of inventory,
materials and supplies used in the Business consistent with past practice.

7.18 INSURANCE. Seller shall maintain in full force and effect all
insurance coverages for the Seller's properties and assets substantially
comparable to coverages existing on the date hereof.

7.19 FILING REPORTS AND MAKING PAYMENTS. Seller shall timely file
all required reports and notices with each and every applicable Governmental
Body and timely make all payments due and owing to each such Governmental
Body, including, but not by way of limitation, any filings, notices and/or
payments required by reason of the transactions contemplated by this
Agreement.

7.20 CAPITAL EXPENDITURES. Seller shall not make any capital
expenditures in excess of $10,000 individually or $25,000 in the aggregate
without the Purchaser's prior written consent, which consent shall not be
unreasonably withheld, delayed or conditioned.

7.21 MONTHLY FINANCIAL STATEMENTS. Within thirty (30) days of the
close of each month, Seller shall deliver to Purchaser a balance sheet and
income statement for disclosing the financial position and results of
operations of Seller for the preceding month and year-to-date which shall be
prepared on a basis consistent with the Financial Statements identified on
SCHEDULE 5.7 hereof and consistent with the prior months and year-to-date
Financial Statements.

7.22 TITLE REVIEW. As of the Closing Date, the Purchaser shall
have, and in proceeding to close has, reviewed and approved, except for its
reasonable objections thereto described in Schedule 5.21 hereof, which shall
be prepared at or prior to the Closing and after the execution date of this
Agreement, the preliminary title commitments and surveys with respect to the
condition and status of the Real Estate. Seller shall cure and/or indemnify
to the reasonable satisfaction of Purchaser, in accordance with the
provisions of Article VIII of this Agreement, such reasonable objections to
title which Purchaser has designated for such cure under Article VIII of this
Agreement.

7.23 LITIGATION. From the date hereof and through the Closing Date,
the Seller will notify the Purchaser in writing of any actions or Proceedings
of the type required to be described in Section 5.11 of this Agreement, that,
from the time hereof, are, to the Seller's Knowledge, Threatened or commenced
against the Seller or against any officer, director or employee of the Seller
relating to the Business or the Seller.

7.24 DISCONTINUED OPERATIONS AND ENVIRONMENTAL CONDITIONS INSURANCE
COVERAGE.

(a) DISCONTINUED OPERATIONS (TAIL) INSURANCE COVERAGE.
Purchaser shall purchase and maintain a discontinued operations (tail)
insurance policy or policies for a period of time to be determined in its
discretion at such coverages and coverage levels and with an insurer to
be determined by Purchaser, which policy or policies shall insure
Purchaser against any and

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all liability, including products liability, for, at a minimum, all
acts, occurrences and omissions of Seller arising from, in connection
with or incident to, without limitation, the design, manufacture,
marketing, product branding, distribution or sale of any and all
Seller Products, or Seller workmanship, prior to and including the
Closing Date. Such policy or policies of insurance shall be
applicable to direct Losses and Losses arising from or in connection
with any and all third party claim(s). Seller and Purchaser agree
that (i) Seller shall be responsible and liable for any and all Losses
arising from such claims and Proceedings the factual basis for which
arose in any way from the manufacture of Seller Product on or prior to
the Closing Date and (ii) Purchaser shall be responsible and liable
only for Losses arising from claims and Proceedings the factual basis
of which arises only from Purchaser's manufacture of products after
the Closing Date.

(b) ENVIRONMENTAL CONDITIONS INSURANCE COVERAGE. Purchaser
shall purchase and pay all premiums arising from an environmental
conditions insurance policy or policies which will insure Purchaser for a
period of at least two (2) years following the Closing Date against
certain insurable losses, to be determined by Purchaser in its sole
discretion, from any Environmental Condition that arises from, in
connection with or incident to the ownership and/or operation by
Purchaser of the Owned Real Estate transferred to Purchaser pursuant to
this Agreement.

7.25 PHYSICAL INVENTORY AS OF OCTOBER 31, 1998. On or about October
29 and 30, 1998 Seller shall have conducted a comprehensive physical
inventory of all inventory items and supplies of Seller (the "Physical
Inventory"). Seller shall have accurately counted and properly priced and
costed the Physical Inventory in accordance with Generally Accepted
Accounting Principles. Purchaser and its representatives will review and test
the Physical Inventory count and shall test the pricing, extension and final
calculation of the Physical Inventory. The Physical Inventory shall be
determined and valued in accordance with Generally Accepted Accounting
Principles and shall include only those inventory items of Seller that are
good, useable and merchantable quality, and shall not include obsolete,
damaged or discontinued items, nor shall any inventory be valued if such
inventory does not meet quality control standards applicable to Seller's
Business or the marine industry. Purchaser shall determine, in its sole
discretion, whether it is satisfied with the value, quantity and quality of
the Physical Inventory and Seller's report, which report shall include all
necessary or required supporting documentation used, prepared or obtained in
connection with the Physical Inventory.

7.26 NOTIFICATION OF MISREPRESENTATION. Member and Seller agree to
promptly notify the Purchaser in writing of any material inaccuracy or
misrepresentation made by Seller in this Agreement of which Member or the
Seller becomes aware prior to the Closing Date and which could result in a
Material Adverse Effect with respect to the Seller. Purchaser agrees to
promptly notify the Seller in writing of any material inaccuracy or
misrepresentation made by the Purchaser in this Agreement of which the
Purchaser becomes aware prior to the Closing Date and which could result in a
Material Adverse Effect with respect to the Purchaser.

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ARTICLE VIII

CONDITIONS TO PURCHASER'S OBLIGATIONS

Unless waived by Purchaser in writing, each and every obligation of
Purchaser to be performed at the Closing shall be subject to the satisfaction
at or prior thereto of each and all of the following conditions precedent:

8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by Seller in this Agreement, including
the documents, instruments and agreements to be executed and/or delivered by
Seller pursuant to this Agreement, shall be true and correct in all material
respects at and as of the Closing with the same force and effect as though
such representations and warranties had been made or given at and as of the
Closing.

8.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Seller and Member
shall have performed and complied with all of their respective covenants,
agreements and obligations under this Agreement which are to be performed or
complied with by them at or prior to the Closing, including the execution
and/or delivery of the documents, instruments and agreements specified in
Section 4.1 hereof, or in such documents, instruments and agreements, all of
which shall be reasonably satisfactory in form and substance to counsel for
Purchaser.

8.3 NO MATERIAL ADVERSE EFFECT. As of the Closing Date, nothing
shall have occurred which, in the sole judgment of Purchaser could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

8.4 APPROVAL BY COUNSEL. All actions, Proceedings, instruments and
documents required of Seller or Member to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related
legal matters shall have been reasonably satisfactory to and approved by
counsel for Purchaser, and such counsel shall have been furnished with such
certified copies of actions and Proceedings and such other instruments and
documents as they shall have reasonably requested.

8.5 LEGAL OPINION. Purchaser shall have received an opinion from
the counsel for the Seller and its Member, dated as of the Closing Date, in
form and substance satisfactory to the Purchaser in Purchaser's reasonable
commercial discretion.

8.6 COMPANY ACTION. Purchaser shall have received (a) a
certificate of the Secretary of Seller as to the incumbency and signatures of
the officers and directors, and (b) a good standing certificate of existence
issued by the Secretary of State of the State of Kansas and any other
jurisdiction in which Seller is qualified to or required to be qualified to
do business and (c) if available from any Governmental Body, of the State of
Kansas, a Tax clearance certificate in a form acceptable to counsel to
Purchaser.

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"AUDIT") of the Real Estate prior to Closing. Beginning immediately after
the execution hereof, the Environmental Auditor shall have full and free
access to the Real Estate, upon reasonable notice. Purchaser shall pay all
fees and expenses of the Environmental Auditor. Purchaser shall have the
right to conduct soil borings, install monitoring wells and to otherwise test
the Real Estate to its sole satisfaction. Purchaser shall have the
undisputed and sole right, in its absolute discretion, to terminate this
Agreement if the Audit discloses facts or conditions (i) that purportedly
violate or with substantial likelihood could violate any Applicable Laws or
that disclose a material Environmental Condition, (ii) which could reasonably
be expected to have a Material Adverse Effect on the Seller or Purchaser, or
(iii) that are inconsistent in any material respect with the representations
and warranties of the Seller set forth herein. In the event Purchaser
receives a written Audit report(s), and any supplements or amendments
thereto, full and complete copies of such Audit report and its supplements or
amendments, if any, shall be promptly provided to Seller.

8.8 TITLE MATTERS; SURVEYS.

(a) As soon as practicable following the execution hereof,
Seller shall provide to Purchaser A.L.T.A. Form 1992 title insurance
commitments from Chicago Title Insurance Company for each parcel of Owned
Real Estate to be purchased by Purchaser hereunder agreeing to insure
title of owner as the case may be, in an amount equal to the value of
each such parcel (however, in any case, not to exceed $2 million) as set
forth in the Asset Acquisition Statement schedule prepared by the parties
in accordance with Section 2.3 hereof, with standard exceptions waived,
together with copies of all documents mentioned in said title insurance
commitments. In each case, the amounts purchased shall be increased as
necessary to comply with co-insurance provisions of the policies or to
qualify for waivers or "agreed-amount" endorsements. Seller also agrees
to procure for Purchaser Owner's policies of title insurance, as
applicable, on A.L.T.A. Form 1992 for each parcel of such Owned Real
Estate. Seller shall bear the cost of obtaining the title insurance
commitments and Seller shall pay the cost of the title insurance
policies. The policies shall include waivers of the co-insurance clause
reasonably acceptable to Purchaser. Purchaser shall be allowed twenty
(20) business days after receipt of complete commitments (including
copies of documents mentioned therein and surveys relating thereto, if
applicable) for the examination thereof and the making and delivering of
any written objections to the marketability of title. If no title
objections are made within such period, such objections shall be deemed
to have been waived by Purchaser. If any written reasonable objections
to the marketability of title to any parcel of Real Estate are made by
Purchaser within said twenty (20) day period, Seller shall use its
reasonable best efforts, at its sole cost and expense, to cure said
marketable title objections within thirty (30) days after said objections
have been raised. If title to the Real Estate is not made marketable to
Purchaser's reasonable satisfaction within such thirty (30) day period
then Purchaser shall have the right for a period of ten (10) business
days to terminate this Agreement by giving written notice of termination
to Seller. If no such termination notice is provided by Purchaser,
Purchaser's right of termination hereinabove shall be deemed waived.

(b) Seller shall provide, at its expense, surveys of each
parcel of Real Estate. Purchaser shall have the right to make written
objections to title based upon any such survey within twenty (20) days
after delivery of a copy of the survey to Purchaser, and any such
objections to title shall be treated in the same manner as objections to
title.

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8.9 DUE DILIGENCE. Purchaser shall (a) have received all due
diligence information and documentation requested from Seller and/or the
Member, (b) have completed all due diligence investigation (including,
without limitation those related to title and Environmental Conditions) and
(c) be satisfied, in its sole discretion, with its investigation of the
Seller.

8.10 PURCHASER FINANCING. Purchaser shall have received a firm
commitment for financing of the transactions contemplated hereunder and the
consent of its lender(s) to enter into the transactions, if required under
any lender loan documents.

8.11 DELIVERIES AT CLOSING. Seller and/or the Member, as
applicable, shall have delivered all documents and instruments, and all other
written matter, required pursuant to the terms of this Agreement to be
delivered at or prior to the Closing.

8.12 PROCEEDINGS. No Proceeding before any Governmental Body or
other Person shall be pending, challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly (a) restrain or prohibit
the consummation of the transactions contemplated hereby, or (b) seeks
material damages or adverse conditions.

8.13 CONSENTS AND REMOVAL OF LIENS. Seller shall have obtained
consents to the assignment and continuation of all contracts and agreements
which, in the reasonable judgment of Purchaser or its counsel, require such
consents, including appropriate binders or consents as to policies of
insurance to be assigned to Purchaser under this Agreement. The Seller shall
have obtained satisfaction and discharge of all Encumbrances, and shall have
obtained all governmental and private authorizations that Purchaser deems
necessary or desirable in order to own and operate and conduct the Business
of Seller, in Purchaser's hands, substantially on the basis heretofore owned,
operated and conducted, and as proposed to be owned, operated and conducted
by Purchaser.

8.14 GOVERNMENTAL ASSISTANCE. All commitments and other
assurances regarding the Industrial Revenue Development Bonds desired by
Purchaser from the applicable Governmental Body of the Junction City, Kansas
(or any quasi governmental authorities) shall be, to Purchaser's
satisfaction, granted or otherwise obtained, preserved or transferred, as
applicable, in their entirety to Purchaser in a writing legally sufficient,
in the opinion of Purchaser's counsel, to bind such authority.

8.15 PERIMETER REAL ESTATE OPTION AND OTHER RIGHTS WITH RESPECT TO
REAL ESTATE. Seller shall execute an agreement (the terms of which shall be
acceptable to counsel to Purchaser) that provides, at a minimum, Purchaser
with the exclusive right (a) to lease and/or purchase the eighty (80) acres
of (or any part thereof) perimeter property adjacent to Seller's Junction
City, Kansas operating facility legally described in an exhibit to SCHEDULE
1.2(b) hereof to this Agreement (the "Perimeter Property") at a monthly lease
rate of $1.00 per month or an aggregate purchase price of $10.00 for a period
of three (3) years subsequent to the Closing Date, and (b) of first refusal
to purchase and/or lease the Perimeter Property for a period of seven (7)
years after the expiration date of the expiration of the lease option
described above.

8.16 PHYSICAL INVENTORY AND SELLER FINANCIAL CONDITION. Purchaser
shall have received and accepted, in its sole and absolute discretion, the
Physical Inventory and Purchaser's accountants shall

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have completed, and Purchaser shall be satisfied in it sole discretion with
the results reported to it, the agreed upon procedures report regarding
Seller's Physical Inventory as of October 31, 1998.

8.17 MEMBER DEBT. Seller shall have extinguished and obtained a
full release with respect to any indebtedness (and interest thereon) to any
current or former member of Seller, other than Member, or shall have provided
to Purchaser adequate assurance, to Purchaser's satisfaction, that such debt
has been fully extinguished and released at or prior to the Closing.

8.18 EMPLOYEE CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT.
Purchaser shall have received executed confidentiality and non-disclosure
agreements of all other employees of Seller who will or may become employed
by Purchaser upon the Closing.

8.19 ASSET ACQUISITION STATEMENT. Purchaser shall have received the
completed Asset Acquisition Statement described in Section 2.3 hereof, or a
schedule thereof acceptable to Purchaser, in either or each case executed by
Seller.

ARTICLE IX

CONDITIONS TO SELLER'S OBLIGATIONS

Unless waived by Seller in writing, each and every obligation of
Seller or the Member to be performed at the Closing shall be subject to the
satisfaction at or prior thereto of each and all of the following conditions
precedent:

9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by Purchaser in this Agreement, including
the documents, instruments and agreements to be executed and/or delivered by
Purchaser pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing with the same force and effect as
though such representations and warranties had been made or given at and as
of the Closing.

9.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Purchaser shall have
performed and complied with all of its covenants, agreements and obligations
under this Agreement which are to be performed or complied with by it at or
prior to the Closing, including the execution and/or delivery of the
documents, instruments and agreements specified in Section 4.2 hereof, or in
such documents, instruments and agreements, all of which shall be reasonably
satisfactory in form and substance to counsel for Seller.

9.3 APPROVAL BY COUNSEL. All actions, Proceedings, instruments and
documents required of Purchaser to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters
shall have been reasonably satisfactory to and approved by counsel for
Seller, and such counsel shall have been furnished with such certified copies
of actions and Proceedings and such other instruments and documents as they
shall have reasonably requested.

9.4 LEGAL OPINION. Seller shall have received an opinion from the
counsel for the Purchaser, dated as of the Closing Date, in form and
substance satisfactory to the Seller in the Seller's reasonable commercial
discretion.

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9.5 PURCHASE PRICE. Purchaser shall have (i) delivered to the
Seller the Cash Consideration and (ii) either arranged for or effected
Purchaser's assumption or extinguishment of Seller's lender debt and obtained
the release (or indemnified) of Seller and all guarantors from any further
liability therefore, in each case to the reasonable satisfaction of Counsel
to Seller.

ARTICLE X

INDEMNIFICATION

10.1 INDEMNIFICATION BY SELLER. Seller hereby agrees to defend,
indemnify and hold Purchaser and its Affiliates harmless from, against and in
respect of (and shall on demand reimburse Purchaser for):

(a) any and all losses, costs, expenses (including without
limitation, reasonable attorneys fees and disbursements of counsel),
liabilities, damages, fines, penalties, charges, assessments, judgments,
settlements, claims, causes of action, Proceedings, Orders and other
obligations of any nature (individually a "Loss" and collectively
"Losses") arising from, in connection with, or suffered or incurred by
Purchaser (i) by reason of any untrue representation, breach of warranty
or nonfulfillment of any covenant or other agreement by Seller or Member
contained herein or in any certificate, document or instrument delivered
to Purchaser pursuant hereto or in connection herewith, or (ii) which
would not have been suffered or incurred if such representation or
warranty were true and not breached or if such covenant or other
agreement were fully performed;

(b) any and all Losses suffered or incurred by Purchaser in
respect of or in connection with any Liabilities of Seller not expressly
assumed by Purchaser pursuant to the terms of this Agreement and/or the
Liabilities Undertaking;

(c) any and all Liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
date of the Closing hereunder or which arise after the Closing but which
are based upon or arise from any act, omission, transaction,
circumstance, production or sale of goods or services, state of facts or
other condition which occurred or existed on or before the date of the
Closing, whether or not then known, due or payable, except to the extent
(i) reflected or reserved against on the face of the Final Balance Sheet
(excluding the notes thereto) or incurred after the Final Balance Sheet
Date in connection with the purchase of goods or service in the Ordinary
Course of Business and in conformity with the representations, warranties
and covenants of Seller contained in this Agreement (or a Schedule
hereto), (ii) expressly assumed by Purchaser pursuant to the terms of
this Agreement and/or the Liabilities Undertaking, (iii) the Liability
involves warranty work performed by Purchaser pursuant to Section 12.9
hereof, or (iv) and only to the extent covered by an applicable policy of
insurance from which Purchaser has been paid or will be paid a specific
amount;

(d) the amount of any and all receivables (net of applicable
reserves) of the Seller which are not collected in accordance with the
provisions contained in Section 5.18 hereof;

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(e) any and all Losses suffered or incurred by Purchaser by
reason of or in connection with any claim for a finder's fee or brokerage
or other commission arising by reason of any services alleged to have
been rendered to or at the instance of Seller or any Member with respect
to this Agreement or any of the transactions contemplated hereby;

(f) any and all Losses suffered or incurred by Purchaser (i) by
reason of any claim for severance pay or unpaid wages or salaries
accruing or incurred or triggered by a discharge at any time prior to
upon the Closing or (ii) relating to any claim or Proceeding of any
Seller employee arising from any act, occurrence or event the basis of
which is dated at any time prior to or on attributable to services
performed the Closing;

(g) any and all Losses suffered or incurred by Purchaser which
arise from, are incurred in connection with or are incident to any
products liability claim not fully covered by an applicable policy of
insurance paid or payable to Purchaser that in any way arises from,
without limitation, Seller products designed, manufactured, distributed
or sold on or prior to the Closing Date;

(h) any and all Losses from any matter arising from Seller's
creation, operation of, maintenance or other association with any Benefit
Plans;

(i) any and all Losses incurred in connection with or arising
from third party claims concerning Seller's Intellectual Property
transferred to Purchaser pursuant to this Agreement;

(j) any and all Losses incurred in connection with or that
arises from any claim or Proceeding by any former or future member of
Seller; and

(k) any and all Proceedings, Orders, claims, demands,
assessments, judgments, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this indemnity.

Notwithstanding the foregoing, neither the Seller or Member shall be liable
to Purchaser for any misrepresentations or breaches of warranty (i) if the
aggregate amount of all the Losses of Purchaser based thereon or resulting
therefrom is less than $25,000 (the "Liability Exception"); PROVIDED,
HOWEVER, that such Liability Exception shall not apply to or include any
Losses in excess of $25,000 in the aggregate or those in respect of
misrepresentations or breaches of warranty contained in Sections 5.9, 5.13
and 5.23 hereof, as to which Seller and the Member shall be liable in full
hereunder, or (ii) for any amount that exceeds, in the aggregate, the
Purchase Price under this Agreement (but only to the extent of such excess).

10.2 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify, defend, and hold Seller and each Member harmless from, against and
in respect of (and shall on demand reimburse them for):

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(a) Any and all Losses resulting from any untrue
representation, breach of warranty or non-fulfillment of any covenant or
agreement by Purchaser contained herein or in any certificate, document
or instrument delivered to Seller hereunder;

(b) Any and all liabilities or obligations of Seller
specifically assumed by Purchaser pursuant to this Agreement; and

(c) Any and all actions, suits, Proceedings, claims, demands,
assessments, judgements, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose
the imposition thereof, or in enforcing this indemnity.

10.3 NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Each of the representations and warranties of the parties
contained in this Agreement and in any Exhibit, Schedule, certificate,
instrument or document delivered by or on behalf of any of the parties hereto
pursuant to this Agreement and the transactions contemplated hereby shall
survive the Closing of the transactions contemplated hereby and any
investigation made by the parties or their agents for a period of thirty (30)
months after the Closing, after which no claim for indemnification for any
misrepresentation, or for the breach of any representation or warranty under
this Agreement, may be brought, and no action with respect thereto may be
commenced, and no party shall have any Liability or obligation with respect
thereto, unless (i) the Indemnified Party gave written notice to the
Indemnifying Party specifying with particularity the misrepresentation or a
breach of representation or warranty claimed on or before the expiration of
such period; (ii) the claim relates to a breach of any representation or
warranty contained in Sections 5.9, 5.11 or 5.23, in which case the right to
indemnification shall survive until the expiration of the applicable statute
of limitations, plus sixty (60) days thereafter, for each and any of the
foregoing whether for breach of contract or the Loss cause of action arising
in connection with any third party Proceeding; or (iii) the claim relates to
any representation or warranty in Sections 5.1, 5.4, 5.6 and 5.13, in which
case the right to indemnification shall survive indefinitely. The
representations and warranties set forth in Section 5.24 shall expire and
terminate upon the later of (x) the Closing Date, or (y) the effective date
of the environmental insurance coverage described in Section 7.24 of this
Agreement. The covenants and agreements (exclusive of representations and
warranties, or any agreement contained within a representation or warranty,
set forth in Article V hereof) set forth in this Agreement shall survive
indefinitely.

10.4 PROCEDURE FOR INDEMNIFICATION. In the event a party intends to
seek indemnification pursuant to the provisions of Sections 10.1 or 10.2
hereof (the "INDEMNIFIED PARTY"), the Indemnified Party shall promptly give
notice hereunder to the other party (the "INDEMNIFYING PARTY") after
obtaining written notice of any claim, investigation, or the service of a
summons or other initial or continuing legal or administrative process or
Proceeding in any action instituted against the Indemnified Party as to which
recovery or other action may be sought against the Indemnifying Party because
of the indemnification provided for in Section 10.1 or 10.2 hereof, and, if
such indemnity shall arise from the claim of a third party, the Indemnified
Party shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting from such claim; PROVIDED, HOWEVER, that
the Indemnified Party shall not be required to permit such an assumption of
the defense of any claim or litigation which, if not first paid, discharged
or otherwise complied with, would with

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substantial certainty result in a material interruption or disruption of the
Business of the Indemnified Party, taken as a whole, or any material part
thereof. Notwithstanding the foregoing, the right to indemnification
hereunder shall not be affected by any failure of the Indemnified Party to
give such notice (or by delay by the Indemnified Party in giving such notice)
unless, and then only to the extent that, the rights and remedies of the
Indemnifying Party shall have been prejudiced as a result of the failure to
give, or delay in giving, such notice. Failure by the Indemnifying Party to
notify the Indemnified Party of its election to defend any such claim or
action by a third party within twenty (20) days after notice thereof shall
have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to defend such claim or action.

If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the obligations of the
Indemnifying Party hereunder as to such claim, investigation or Proceeding
shall include taking all steps necessary in the defense or settlement of such
claim, investigation or Proceeding and holding the Indemnified Party harmless
from and against any and all damages caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment entered in
connection with such claim, investigation or Proceeding, except where, and
only to the extent that, the Indemnifying Party has been prejudiced by the
actions or omissions of the Indemnified Party. The Indemnifying Party shall
not, in the defense of such claim or any Proceeding resulting therefrom,
consent to entry of any judgment (other than a judgment of dismissal on the
merits without costs) except with the written consent of the Indemnified
Party (which consent shall not be unreasonably withheld, delayed or
conditioned) or enter into any settlement (except with the written consent of
the Indemnified Party)(which consent shall not be unreasonably withheld,
delayed or conditioned) unless (i) there is no finding or admission of any
violation of law and no material effect on any claims that could reasonably
be expected to be made against the Indemnified Party (ii) the sole relief
provided is monetary damages and (iii) the settlement shall include the
giving by the claimant or the plaintiff to the Indemnified Party a release
from all Liability in respect to such claim or litigation.

If the Indemnifying Party assumes the defense of such claim,
investigation or Proceeding resulting therefrom, the Indemnified Party shall
be entitled to participate in the defense of the claim, but solely by
observation and comment to the Indemnifying Party, and the counsel selected
by the Indemnified Party shall not appear on its behalf in any Proceeding
arising hereunder. The Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it to participate in its defense unless
any of the following shall apply: (i) the employment of such counsel shall
have been authorized in writing by the Indemnifying Party; or (ii) the
Indemnifying Party's legal counsel shall advise the Indemnifying Party in
writing, with a copy to the Indemnified Party, that there is a conflict of
interest that would make it inappropriate under applicable standards of
professional conduct to have common counsel. If clause (i) or (ii) in the
immediately preceding sentence is applicable, then the Indemnified Party may
employ separate counsel at the expense of the Indemnifying Party to represent
the Indemnified Party, but in no event shall the Indemnifying Party be
obligated to pay the costs and expenses of more than one such separate
counsel for any one complaint, claim, action or Proceeding in any one
jurisdiction.

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unless the Indemnifying Party shall deposit with the Indemnified Party a sum
equivalent to the total amount demanded in such claim or litigation plus the
Indemnified Party's estimate of the cost (including attorneys' fees) of
defending the same, the Indemnified Party may settle such claim or Proceeding
on such terms as it may reasonably deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of such
settlement and for all costs (including attorneys' fees), expenses and
damages incurred by the Indemnified Party in connection with the defense
against or settlement of such claim, investigation or litigation, or if any
such claim or litigation is not so settled, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of any judgment
rendered with respect to any claim by a third party in such litigation and
for all costs (including attorneys' fees), expenses and damage incurred by
the Indemnified Party in connection with the defense against such claim or
litigation, whether or not resulting from, arising out of, or incurred with
respect to, the act of a third party.

Each party shall cooperate in good faith and in all respects with each
Indemnifying Party and its representatives (including without limitation its
counsel) in the investigation, negotiation, settlement, trial and/or defense
of any Proceedings (and any appeal arising therefrom) or any claim. The
parties shall cooperate with the other in any notifications to and
information requests of any insurers. No individual representative of any
Person, or their respective Affiliates shall be personally liable for any
Loss under this Agreement, except as specifically agreed to by said
individual representative.

10.5 DISPUTE RESOLUTION. In the event a dispute arises under this
Agreement, except with respect to matters arising under SECTIONS 2.2(c) AND
12.12 hereof, such disputes shall be resolved in the manner set forth in this
SECTION 10.5.

(a) If a dispute arises under this Agreement, including any
question regarding the existence, validity, interpretation or termination
hereof, which is not described as an exception in this SECTION 10.5,
Purchaser and Seller may invoke the dispute resolution procedure set
forth in this SECTION 10.5 by giving written notice to the other party.
The parties shall enter into discussions concerning this dispute. If the
dispute is not resolved as a result of such discussions within ten (10)
days, an attempt will be made to resolve the matter by a formal
nonbinding mediation with an independent neutral mediator agreed to by
the parties. If the parties cannot agree on a mediator within a period
of ten (10) days after expiration of the ten (10) day period for
resolution by discussion, then either party may apply to any court of
competent jurisdiction for appointment of a mediator, which appointment
shall be binding and nonappealable. Upon commencement of the mediation
process, the parties shall promptly communicate with respect to a
procedure and schedule for the conduct of the Proceeding and for the
exchange of documents and other information related to the dispute. The
mediation process shall be deemed ended if the dispute has not been
resolved within thirty (30) days after appointment of the mediator.

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of the date of this Agreement ("AAA Rules"), except to the extent
those rules are inconsistent with this SECTION 10.5. Any arbitration
must be held in Minneapolis, Minnesota by a single arbitrator mutually
selected by the parties hereto or, if the parties hereto cannot agree
on the appointment of such arbitrator within ten (10) days following
the date notice of the dispute is given by a party to the adverse
party, an arbitrator selected according to the AAA Rules. The
arbitrator's award shall be final, conclusive and binding upon all
parties to this Agreement, and judgment may be entered upon it in
accordance with the Federal Arbitration Act any court of general
jurisdiction in Minnesota, or in any United States District Court
having jurisdiction in Minnesota. The arbitrator shall be required to
provide in writing to the parties the basis for the award or Order of
such arbitrator, and a court reporter shall record all hearings
(unless otherwise agreed to by the parties), with such record
constituting the official transcript of such Proceedings. Seller and
Purchaser specifically desire this Arbitration clause to be governed
by the United States Federal Arbitration Act, and not by the
arbitration laws of any state.

(c) Seller and Purchaser agree and consent that any legal
action, suit or Proceeding seeking to enforce this Section 10.5 or to
confirm or contest any arbitration award shall be instituted and
adjudicated solely and exclusively in any court of general jurisdiction
in Minnesota, or in the United States District Court having jurisdiction
in Minnesota and Seller and Purchaser agree that venue will be proper in
such courts and waive any objection which they may have now or hereafter
to the venue of any such suit, action or Proceeding in such courts, and
irrevocably consents and agrees to the jurisdiction of said courts in any
such suit, action or Proceeding. Seller and Purchaser further agree to
accept and acknowledge service of any and all process which may be served
in any such suit, action or Proceeding in said courts, and also agree
that service of process or notice upon them shall be deemed in every
respect effective service of process or notice upon them, in any suit,
action, Proceeding or arbitration demand, if given or made: (i) according
to Applicable Law; (ii) according to the AAA Rules; (iii) by a person
over the age of eighteen who personally serves such notice or service of
process on Seller or Purchaser, as the case may be; or (iv) by certified
mail, return receipt requested, mailed to Seller or Purchaser, as the
case may be, at their respective addresses set forth in this Agreement.

(d) In the event of arbitration filed or instituted between the
parties pursuant to this Section 10.5, the prevailing party will be
entitled to receive from the adverse party all costs, damages and
expenses, including reasonable attorney's fees, incurred by the
prevailing party in connection with that action or Proceeding whether or
not the controversy is reduced to judgment or award. The prevailing
party will be that party who is determined by the arbitrator to have
prevailed on the major disputed issues.

ARTICLE XI

TERMINATION

11.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned after the date of this
Agreement, but not later than the Closing:

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(a) by mutual written consent of all parties hereto;

(b) by Purchaser if any of the conditions provided for in
Article VIII of this Agreement have not been met and have not been waived
in writing by Purchaser on or before the Date of Closing;

(c) by Seller if any of the conditions provided for in Article
IX of this Agreement have not been met and have not been waived in
writing by Seller on or before the Date of Closing; and

(d) by either Purchaser or Seller if the Closing shall not have
occurred on or before January 15, 1998.

In the event of termination or abandonment by any party as provided in this
Section 11.1, written notice shall forthwith be given to the other party and,
except as otherwise provided herein, each party shall pay its own expenses
incident to preparation or consummation of this Agreement and the
transactions contemplated hereunder and neither party shall have any
Liability to the other hereunder, except such Liability as may arise as a
result of a breach hereof.

11.2 RETURN OF DOCUMENTS AND NONDISCLOSURE. If this Agreement is
terminated for any reason pursuant to Section 11.1 hereto, each party shall
return all documents and materials which shall have been furnished by or on
behalf of the other party, and each party hereby covenants that it will not
disclose to any Person any confidential or proprietary information about the
other party or any information about the transactions contemplated hereby,
except insofar as may be necessary to assert its rights hereunder or to
comply with Applicable Laws or pursuant to the distraint of an Order or
Proceeding.

ARTICLE XII

POST-CLOSING COVENANTS

12.1 FURTHER ACTS AND ASSURANCES. The parties agree that, at any
time and from time to time, on and after the Closing Date, upon the
reasonable request of the other party, they will do or cause to be done all
such further acts and things and execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered any and all papers, documents,
instruments, agreements, assignments, transfers, assurances and conveyances
as may be necessary or desirable to carry out and give effect to the
provisions and intent of this Agreement. In addition, from and after the
Closing Date, the Purchaser will afford to the Seller and its attorneys,
accountants and other representatives access, during normal business hours,
to such personnel, books and records relating to the Seller as may reasonably
be required in connection with the preparation of financial information or
the filing of Tax Returns and will cooperate in all reasonable respects in
connection with claims, Orders and Proceeding asserted by or against third
parties, relating to the transactions contemplated hereby.

12.2 NON-COMPETITION AGREEMENT. During the period of four (4) years
from and after the Closing Date, Seller covenants and agrees that it
(including all Affiliates of Seller) will not, without the Purchaser's prior
written consent, directly or indirectly, or individually or collectively lend
its

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credit, advice or assistance, or engage in any activity or act in any manner
(including but not limited to, as an individual, owner, sole proprietor,
founder, associate, promoter, partner, joint venturer, shareholder, officer,
director, trustee, manager, employer, employee, licensor, licensee,
principal, agent, salesman, broker, representative, consultant, advisor,
investor or otherwise for the purpose of establishing, operating or managing
any Person that is engaged in competitive activities) competitive with the
present or future Business of the Purchaser, including Seller's Business
therein.

12.3 NON-SOLICITATION AGREEMENT. During the period of thirty-six
(36) months from and after the Closing Date, the Seller covenants and agrees
that it will not, whether for its own account or for the account of any other
Person, directly or indirectly interfere with Purchaser's relationship with
or endeavor to divert or entice away from the Purchaser any Person who or
which at any time during the term of such Person's prior employment by or
affiliation with the Seller is or was an employee, vendor, supplier or
customer of or otherwise in the habit of dealing with the Seller.

12.4 CONFIDENTIAL INFORMATION. The Member and Seller understand and
agree that the Business of Seller is based upon specialized work and that as
officers, directors, employees or members of the Seller they received, had
access to and/or contributed to Confidential Information. The Member and the
Seller agree that at all times from and after the Closing Date, they shall
keep secret all such Confidential Information and that they will not directly
or indirectly Use or Disclose the same to any Person without first obtaining
the written consent of the Purchaser. At any time the Purchaser may so
request, the Member and Seller shall turn over to the Purchaser all books,
notes, memoranda, manuals, notebooks, tables, drawings, calculations, records
and other documents made, compiled by or delivered to any Member or the
Seller and containing or concerning any Confidential Information, including
copies thereof, in their possession, it being agreed that the same and all
information contained therein are at all times the exclusive property of
Purchaser.

12.5 REASONABLENESS OF COVENANTS. Member and Seller acknowledge and
agree that the geographic scope and period of duration of the restrictive
covenants contained in Sections 12.2, 12.3 and 12.4 of this Agreement are
both fair and reasonable and that the interests sought to be protected by the
Purchaser are legitimate business interests entitled to be protected. Member
and Seller further acknowledge and agree that the Purchaser would not have
purchased the Assets and assumed the Liabilities pursuant to this Agreement
unless the Member and Seller agree to the covenants contained in such
Sections.

12.6 INJUNCTIVE RELIEF. The parties agree that the remedy of
damages at law for the breach by any party of any of the covenants contained
in Sections 12.2, 12.3 or 12.4 is an inadequate remedy. In recognition of
the irreparable harm that a violation by any party of any of the covenants,
agreements or obligations arising under Sections 12.2, 12.3 or 12.4 would
cause the Purchaser or the other party, each party agrees that in addition to
any other remedies or relief afforded by law, an Injunction against an actual
or Threatened violation or violations may be issued against them and every
other Person concerned thereby, it being the understanding of the parties
that both damages and Injunction shall be proper modes of relief and are not
to be considered alternative remedies.

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too extensive in any other respect, then such restrictive covenant shall be
deemed modified to the minimum extent necessary to make it reasonable and
enforceable under the circumstances.

12.8 MAINTENANCE AND PAYMENT OF INSURANCE. Seller shall cooperate
with and have a continuing obligation to Purchaser to assist Purchaser in
obtaining and maintaining, the insurance policies described in Section 7.24.

12.9 PERFORMANCE OF SELLER'S WARRANTY WORK. After the Closing,
Purchaser shall perform or cause there to be performed on Seller's behalf,
but without obligation on the part of Seller to pay or reimburse Purchaser
therefor, any and all repairs to or replacements of products manufactured by
Seller and sold prior to Closing for which Seller is responsible under any
standard product warranty or guarantee extended by Seller in the normal
course of Seller's business to dealers or purchasers of Seller's products.

12.10 PERFORMANCE OF SELLER'S CONTRACTS. Purchaser shall either fully
and timely perform each of the contracts it has assumed pursuant to this
Agreement after the Closing or cause the same to be terminated without liability
to Seller or its guarantors (or shall otherwise cause Seller and its guarantors
to be relieved and released from any further obligation or liability
thereunder), excepting those liabilities arising from any breach or default by
Seller prior to Closing which Purchaser shall not have otherwise affirmatively
agreed to assume, including any obligation of Seller arising after the Closing
to repurchase any products sold by Seller under any commitments or arrangements
made by Seller with any parties providing floor plan or similar financing for
Seller's dealers.

12.11 MEMBER AND KANSAS DEPARTMENT OF COMMERCE & HOUSING DEBT. Seller
shall (a) to the extent not fully extinguished at or prior to the Closing, fully
extinguish and obtain full releases with respect to any indebtedness (and
interest thereon) to any current or former member of Seller, and (b) make full
and faithful payment of or otherwise satisfy, to the extent the same becomes due
and owing, all amounts due in connection with the $75,000 debt owed by Seller to
the Kansas Department of Commerce.

12.12 AGREED UPON FINANCIAL PROCEDURES FOR FINAL BALANCE SHEET.
Promptly following the Closing (but in any event within ninety (90) days after
the Closing Date) Purchaser shall, at its expense, cause the books and records
of Seller to be reviewed as of the Closing Date by its independent Accountant
(the "Accountant") and the Accountant shall prepare a balance sheet as of the
Closing Date (the "Final Balance Sheet Date") in accordance with Generally
Accepted Accounting Principles, except that such balance sheet shall exclude all
assets and liabilities of Seller that will not be sold or assigned, as
applicable, to Purchaser pursuant to the terms of this Agreement (the "Final
Balance Sheet"). The Accountant shall perform an inventory roll forward
calculation from the date of the Physical Inventory described in Section 7.25
consistent with Generally Accepted Accounting Principles in lieu of taking a
Closing Date physical inventory. Purchaser shall provide the draft Final
Balance Sheet to Seller promptly following its delivery by the Accountant.
Seller shall be entitled to review all workpapers and supplemental documents and
data used or utilized by the Accountant in connection with the preparation of
the Final Balance Sheet. If Seller concludes that any material matter reported
in the Final Balance Sheet is not correct, Seller shall, within fifteen (15)
days after receipt of the Final Balance Sheet (the "Response Period"), deliver
to Purchaser a written statement setting for a specific description of each of
its objections and each of any discrepancies believed to

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exist. If Seller does not provide such a written notice of objection within
the Response Period, the Final Balance Sheet shall be controlling for all
purposes under this Agreement. In the event Purchaser and Seller are unable
to resolve any disputed matters within fifteen (15) days after receipt by
Purchaser of Seller's objections, the matter shall be referred to the
Independent Accountants for resolution in accordance with the procedures and
binding effect of Section 2.2(c).

ARTICLE XIII

MISCELLANEOUS

13.1 NOTICES. All notices, demands and other communications provided
for hereunder shall be in writing and shall be given by either personal
delivery, via facsimile transmission (receipt telephonically confirmed), by
nationally recognized overnight courier (prepaid), or by certified or registered
first class mail, postage prepaid, return receipt requested, sent to each party,
at its/his address as set forth below or at such other address or in such other
manner as may be designated by such party in written notice to each of the other
parties. All such notices, demands and communications shall be effective when
personally delivered, one (1) business day after delivery to the overnight
courier, upon telephone confirmation of facsimile transmission or upon receipt
after dispatch by mail to the party to whom the same is so given or made:

If to Seller: Horizon Marine, LC
2321 North Jackson Street
Junction City, Kansas 66441

Attention: Geoffrey T. Pepper

with copy to: Weary, Davis, Henry, Struebing, Troup & Kaus, LC
819 North Washington Street
P.O. Box 187
Junction City, Kansas 66441

Attention: Steven R. Struebing

If to Purchaser: Genmar Manufacturing of Kansas, L.L.C.
c/o Genmar Holdings, Inc.
Suite 2400
100 South Fifth Street
Minneapolis, Minnesota 55402

Attention: Roger R. Cloutier, II

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with copy to: Briggs and Morgan P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402

Attention: Michael J. Grimes

13.2 LEGAL AND OTHER COSTS.

(a) In the event that any party (the "Defaulting Party")
defaults in his or its obligations under this Agreement and, as a result
thereof, the other party (the "Non-Defaulting Party") seeks to legally
enforce his or its rights hereunder against the Defaulting Party, then,
in addition to all damages and other remedies to which the Non-Defaulting
Party is entitled by reason of such default, the Defaulting Party shall
promptly pay to the Non-Defaulting Party an amount equal to all costs and
expenses (including reasonable attorneys' fees) paid or incurred by the
Non-Defaulting Party in connection with such enforcement.

(b) In the event that the Non-Defaulting Party is entitled to
receive an amount of money by reason of the Defaulting Party's default
hereunder, then, in addition to such amount of money, the Defaulting
Party shall promptly pay to the Non-Defaulting Party a sum equal to
interest on such amount of money accruing at the rate of 2% per month
(but if such rate is not permitted under the laws of the State of
Delaware, then at the highest rate which is permitted to be paid under
the laws of the State of Delaware) during the period between the date
such payment should have been made hereunder and the date of the actual
payment thereof.

13.3 ENTIRE AGREEMENT. This writing constitutes the entire agreement
of the parties with respect to the subject matter hereof and may not be
modified, amended or terminated except by a written agreement specifically
referring to this Agreement signed by all of the parties hereto.

13.4 GOVERNING LAW. This Agreement, including all the documents,
instruments and agreements to be executed and/or delivered by the parties
hereto, shall be construed, governed by and enforced in accordance with the
internal laws of the state of Delaware, without giving effect to the principles
of comity or principles of conflicts of laws thereof; PROVIDED, HOWEVER, that
all employment contracts arising hereunder shall be governed by the internal
laws of the state of Kansas for all purposes.

13.5 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of each corporate party hereto, its successors and assigns, and each
individual party hereto and his heirs, personal representatives, successors and
assigns.

13.6 COOPERATION. Each party hereto shall cooperate, shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.

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13.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed one and the same original.

13.8 AMENDMENTS. No purported amendment, modification or waiver of any
provision of this Agreement, or any of the documents, instruments or agreements
to be executed by the parties pursuant hereto shall be effective unless in a
writing specifically referring to this Agreement and signed by all of the
parties and all amendments thereof shall be governed by and construed in
accordance with the law of the State of Delaware applicable to contracts made
and to be performed therein.

13.9 PRESERVATION OF AND ACCESS TO RECORDS. The Purchaser shall
preserve all books and records of the Seller for a period of six (6) years after
the Closing Date; PROVIDED, HOWEVER, Purchaser may destroy any part or parts of
such records upon obtaining written consent of Seller for such destruction,
which consent shall not be unreasonably withheld. Such records shall be made
available to Seller and their representatives at all reasonable times during
normal business hours of the Seller during said six-year period with the right
at their expense to make abstracts from and copies thereof.

13.10 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the consummation
of the transactions contemplated hereby shall be approved by both Purchaser and
Seller prior to the release of such public announcements, and each party agrees
to cooperate with the other party as appropriate to comply with all Applicable
Laws. Subsequent to the date of receipt of all consents and approvals of each
Governmental Body necessary to consummate this transaction, Purchaser may make
such announcements and/or advertisements as Purchaser, in its sole discretion,
deems necessary.

13.11 COSTS. Except as otherwise provided in this Agreement, each party
hereto shall pay their own costs and expenses incurred in connection with
negotiating and preparing this Agreement and consummating the transactions
contemplated hereby, including but not limited to fees and disbursements of
their attorneys, accountants and investment bankers.

13.12 HEADINGS. The headings of the articles, sections and subsections
of this Agreement are intended for the convenience of the parties only and shall
in no way be held to explain, modify, construe, limit, amplify or aid in the
interpretation of the provisions hereof. The terms "this Agreement," "hereof,"
"herein," "hereunder," "hereto" and similar expressions refer to this Agreement
as a whole and not to any particular article, section, subsection or other
portion hereof and include the Schedules and Exhibits hereto and any document,
instrument or agreement executed and/or delivered by the parties pursuant
hereto.

13.13 SCOPE OF AGREEMENT. Unless the context otherwise requires, all
references in this Agreement or in any Schedule or Exhibit hereto, to the
assets, properties, operations, Business, financial statements, employees, books
and records, accounts receivable, accounts payable, Contracts or other
attributes of the Business of the Seller shall mean such items or attributes as
they are used in, apply to, or relate to all Businesses of the Seller.

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13.14 NUMBER AND GENDER. Unless the context otherwise requires, words
importing the singular number shall include the plural and vice versa and words
importing the use of any gender shall include all genders.

13.15 SEVERABILITY. In the event that any provision of this Agreement
is declared or held by any court of competent jurisdiction to be invalid or
unenforceable, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement, unless such invalid or unenforceable provision
goes to the essence of this Agreement, in which case the entire Agreement may be
declared invalid and not binding upon any of the parties.

13.16 PARTIES IN INTEREST. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer any rights or remedies
under or by reason of this Agreement upon any Person other than Purchaser,
Seller and the Member and their respective heirs, personal representatives,
successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the Liabilities of any third Person to Purchaser or Seller.

13.17 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may be
waived only by a written instrument executed by the party waiving compliance.
Any such waiver shall only be effective in the specific instance and for the
specific purpose for which it was given and shall not be deemed a waiver of any
other provision hereof or of the same breach or default upon any recurrence
thereof. No failure on the part of a party hereto to exercise and no delay in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.

13.18 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The word "including" shall mean including
without limitation. The parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.

ARTICLE XIV

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings
specified:

"AAA RULES" - has the meaning set forth in Section 10.5(b) of this
Agreement.

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"ACCOUNTANT" - has the meaning set forth in Section 12.12 of this
Agreement.

"ACQUISITION PROPOSAL" - means any proposal relating to the possible
acquisition of Seller whether by way of merger, purchase of capital stock of
Seller representing fifty percent (50%) or more of the voting power or equity of
Seller, purchase of all or substantially all of the assets of Seller, or
otherwise.

"AFFILIATE" - when used in reference to a specified Person, means any
Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with the specified
Person.

"AGREEMENT" - has the meaning set forth in the introductory paragraph
hereof.

"ANNUAL GROSS REVENUES" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"ANNUAL PERIOD" - has the meaning set forth in Section 2.2(b) of this
Agreement.

"APPLICABLE LAW" OR "APPLICABLE LAWS" - means any and all laws,
ordinances, constitutions, regulations, statutes, treaties, rules, codes,
licenses, certificates, franchises, permits, requirements and Injunctions
adopted, enacted, implemented, promulgated, issued, entered or deemed applicable
by or under the authority of any Governmental Body having jurisdiction over a
specified Person or any of such Person's properties or assets. Unless used in
either Section 5.24 or Section 8.7 hereof, the foregoing definition shall not
include Environmental Laws.

"ASSET ACQUISITION STATEMENT" - has the meaning set forth in Section 2.3
of this Agreement.

"ASSETS" - has the meaning set forth in Section 1.2(a) of this Agreement.

"ASSUMED LIABILITIES" - has the meaning set forth in Section 1.3(a) of
this Agreement.

"AUDIT" - has the meaning set forth in Section 8.7 of this Agreement.

"BENEFIT PLANS" - means any and all bonus, stock option, restricted
stock, stock purchase, stock appreciation, phantom stock, profit participation,
profit-sharing, deferred compensation, severance, pension, retirement,
disability, medical, dental, health, life or dental insurance, death benefit,
incentive, welfare and/or other benefit, compensation and/or retirement plan,
policy, arrangement and/or Contract maintained, sponsored or participated in by
the Company.

"BUSINESS" - has the meaning set forth in the recitals to the Agreement.

"CASH CONSIDERATION" - has the meaning set forth in Section 2.1 of this
Agreement.

"CLOSING" - has the meaning set forth in Article III of this Agreement.

"CLOSING DATE" - has the meaning set forth in Article III of this
Agreement.

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"CODE" - means the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Internal Revenue
Code or any successor law.

"COMPETING BUSINESS" - has the meaning set forth in Section 5.26 of this
Agreement.

"CONFIDENTIAL INFORMATION" - means any information or compilation of
information not generally known to the public or the industry or which the
Seller has not disclosed to third parties without a written obligation of
confidentiality, which is proprietary to the Seller, relating to the Seller's
procedures, techniques, methods, concepts, ideas, affairs, products, processes
and services, including, but not limited to, information relating to marketing,
merchandising, selling, research, development, manufacturing, purchasing,
accounting, engineering, financing, costs, customers, plans, pricing, billing,
needs of customers and products and services used by customers, all lists of
customers and their addresses, prospects, sales calls, products, services,
prices and the like as well as any specifications, formulas, plans, drawings,
accounts or sales records, sales brochures, code books, manuals, trade secrets,
knowledge, know-how, pricing strategies, operating costs, sales margins, methods
or operations, invoices or statements and the like.

"COPYRIGHTS" - has the meaning set forth in Section 5.15(a) of this
Agreement.
"COST OF GOODS SOLD" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"DEBT INSTRUMENTS" - has the meaning set forth in Section 5.25 of this
Agreement.

"DEFAULTING PARTY" - has the meaning set forth in Section 13.2(a) of this
Agreement.

"EARN-OUT CONSIDERATION" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"EASEMENTS" - has the meaning set forth in Section 5.21 of this
Agreement.

"ENCUMBRANCE" - means and includes:

(i) with respect to any personal property, any intangible property or
any property other than real property, any security or other
property interest or right, claim, lien, pledge, option, charge,
security interest, contingent or conditional sale, or other title
claim or retention agreement or lease or use agreement in the
nature thereof whether voluntarily incurred or arising by
operation of law, and including any agreement to grant or submit
to any of the foregoing in the future; and

(ii) with respect to any real property (whether and including Owned
Real Estate or Leased Real Estate), any mortgage, lien, easement,
interest, right-of-way, condemnation or eminent domain Proceeding,
encroachment, any building, use or other form of restriction,
Encumbrance or other claim (including adverse or prescriptive) or
right of third parties (including Governmental Bodies), any lease
or sublease (other than Seller's lease on Leased Real Estate),
boundary dispute, and agreements with respect to any real property
including: purchase, sale, right of first refusal, option,
construction, building or property service, maintenance, property
management, conditional or contingent sale, use or occupancy,
franchise or

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concession, whether voluntarily incurred or arising by
operation of law, and including any agreement to grant or
submit to any of the foregoing in the future.

"ENVIRONMENTAL AUDITOR" - has the meaning set forth in Section 8.7 of
this Agreement.

"ENVIRONMENTAL CLAIMS" - has the meaning set forth in Section 5.24(j)(i)
of this Agreement.

"ENVIRONMENTAL CONDITIONS" - has the meaning set forth in Section
5.24(j)(ii) of this Agreement.

"ENVIRONMENTAL LAWS" - has the meaning set forth in Section 5.24(j)(iii)
of this Agreement.

"EXCLUDED LIABILITIES" - has the meaning set forth in Section 1.3(b) of
this Agreement.

"EXCLUDED REAL ESTATE" - has the meaning set forth in Section 1.1(a) of
this Agreement.

"FINAL BALANCE SHEET" - has the meaning set forth in Section 12.12 of
this Agreement.

"FINAL BALANCE SHEET DATE" - has the meaning set forth in Section 12.12
of this Agreement.

"FINANCIAL STATEMENTS" - has the meaning set forth in Section 5.7 of this
Agreement.

"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" - shall mean generally
accepted accounting principles used and applied in the United States of America
and which are recognized as generally accepted by the American Institute of
Certified Public Accountants.

"GENMAR HOLDINGS" - has the meaning set forth in the recitals to the
Agreement.

"GENMAR INDUSTRIES" - has the meaning set forth in the recitals to the
Agreement.

"GOVERNMENTAL BODY" - any:

(i) nation, state, county, city, town, village, district or
other jurisdiction of any nature;

(ii) federal, state, local, municipal, foreign or other
government;

(iii) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board, commission,
department, instrumentality, office or other entity, and any court or
other tribunal);

(iv) multi-national organization or body; and/or

(v) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or
Taxing authority or power of any nature.

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"GROSS PROFIT" - has the meaning set forth in Section 2.2(a) of this
Agreement.

"GROSS REVENUE" - has the meaning set forth in Section 2.2(a) of this
Agreement.

"HAZARDOUS MATERIALS" - has the meaning set forth in Section 5.24(j)(iv)
of this Agreement.

"INDEMNIFIED PARTY" - has the meaning set forth in Section 10.4 of this
Agreement.

"INDEMNIFYING PARTY" - has the meaning set forth in Section 10.4 of this
Agreement.

"INDEPENDENT ACCOUNTANTS" - has the meaning set forth in Section 2.2(c)
of this Agreement.

"INJUNCTION" - means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees or
other orders adopted, enacted, implemented, promulgated, issued, entered or
deemed applicable by or under the authority of any Governmental Body.

"INTELLECTUAL PROPERTY" - means any and all (i) inventions (whether
Patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all Patents, Patent applications and Patent
disclosures, together with all reissuances, continuations, continuations in
part, revisions, extensions and reexaminations thereof, (ii) Trademarks, service
marks, trade dress, logos, trade names, assumed names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith; (iii) copyrightable works,
all Copyrights and all applications, registrations and renewals in connection
therewith; (iv) mask works and all applications, registrations and renewals in
connection therewith; (v) trade secrets and confidential business information
(including ideas, research and development, know-how, technology, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals); (vi)
computer software (including data and related software program documentation in
computer-readable and hard-copy forms); (vii) other intellectual property and
proprietary rights of any kind, nature or description; and (viii) copies of
tangible and embodiments thereof (in whatever form or medium).

"KNOWLEDGE" - An individual will be deemed to have "Knowledge" of a
particular fact or other matter if:

(a) such individual is actually aware of such fact or other matter; or

(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter with reasonable
investigation in the Ordinary Course of Business.

An entity or other Person will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner,

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member or trustee of such entity (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.

"LEASED REAL ESTATE" - has the meaning set forth in Section 5.21 of
this Agreement.

"LIABILITY" or "LIABILITIES" - means any and all debts, liabilities
and/or obligations of any type, nature or description (whether known or
unknown, asserted or unasserted, secured or unsecured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated and whether due
or to become due).

"LIABILITY EXCEPTION" - has the meaning set forth in Section 10.1 of
this Agreement.

"LOSS" or "LOSSES" - has the meaning set forth in Section 10.1(a) of
this Agreement.

"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" - means, in
connection with any Person, any event, change or effect that is materially
adverse, individually or in the aggregate, to the condition (financial or
otherwise), properties, assets, Liabilities, revenues, income, business,
operations, results of operations or prospects of such Person.

"MEMBER" - has the meaning set forth in the introductory paragraph
hereof.

"MONTHLY GROSS REVENUE STATEMENT" - has the meaning set forth in
Section 2.2(b) of this Agreement.

"NON-DEFAULTING PARTY" - has the meaning set forth in Section
13.2(a) of this Agreement.

"ORDER"- means any judgment, award, decision, consent decree,
Injunction, ruling, writ or order of any federal, state or local Governmental
Body, or authority that is binding on any Person or its property under
Applicable Law.

"ORDINARY COURSE OF BUSINESS" - means an action taken by a Person
only if

(i) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal
day-to-day operations of such Person; and

(ii) such action is not required to be authorized by the governing
body of such Person (or by any Person or group of Persons
constituting a governing body of a Person exercising similar
authority).

"OWNED REAL ESTATE" - has the meaning set forth in Section 5.21 of
this Agreement.

"PATENT" - has the meaning set forth in Section 5.15(a) of this
Agreement.

"PCBS" - has the meaning set forth in Section 5.24(h) of this
Agreement.

"PERIMETER PROPERTY" - has the meaning set forth in Section 8.15 of
this Agreement.

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<PAGE>

"PERMITTED ENCUMBRANCES" - has the meaning set forth in Section
5.21(d) of this Agreement.

"PERSON" - means any individual, corporation (including any
non-profit corporation), general, limited or limited liability partnership,
limited liability company, joint venture, estate, trust, association,
organization, or other entity or Governmental Body.

"PHYSICAL INVENTORY" - has the meaning set forth in Section 7.25 of
this Agreement.

"PROCEEDING" - means any suit, litigation, arbitration, hearing,
audit, investigation, Injunction or other action (whether civil, criminal,
administrative or investigative) commenced, brought, conducted, or heard by
or before, or otherwise involving, any Governmental Body or arbitrator.

"PURCHASE PRICE" - has the meaning set forth in Section 2.1 of this
Agreement.

"PURCHASER" - has the meaning set forth in the introductory
paragraph hereof.

"REAL ESTATE" - has the meaning set forth in Section 5.21 of this
Agreement.

"RELATED PERSON" - means, with respect to a particular individual,

(i) each other member of such individual's Family (as hereafter
defined); and

(ii) any Affiliate of one or more members of such individual's
Family.

With respect to a specified Person other than an individual:

(i) any Affiliate of such specified Person: and

(ii) each Person that serves as a director, governor, officer,
manager, general partner, executor or trustee of such specified
Person (or in a similar capacity). For purposes of this
definition, the "FAMILY" of an individual includes (a) such
individual, (b) the individual's spouse, (c) any lineal
ancestor or lineal descendant of the individual, or (d) a trust
for the benefit of any of the foregoing.

"RESPONSE PERIOD" - has the meaning set forth in Section 12.12 of this
Agreement.

"SCHEDULES" - means the Schedules to this Agreement.

"SELLER" - has the meaning set forth in the introductory paragraph of
this Agreement.

"SELLER'S PRODUCTS" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"SUPER-FUND" - is used in Section 5.24(b) of this Agreement.

"TAX" or "TAXES" - has the meaning set forth in Section 5.9 of this
Agreement.

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"TAX RETURN" - means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including
without limitation any schedule or attachment thereto, any amendment thereof,
and any estimated report or statement.

"THREATENED" - a claim, Proceeding, dispute, action, or other matter
will be deemed to be "Threatened" if any demand or statement has been made,
or any notice has been given, that would lead a reasonably prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter will
be asserted, commenced, taken or otherwise pursued in the future.

"TRADEMARKS" - has the meaning set forth in Section 5.15(a) of this
Agreement.

"YEAR-END STATEMENT" - has the meaning set forth in Section 2.2(b)
of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

HORIZON MARINE, LC

By /s/ Geoffrey T. Pepper
------------------------------------
President

GENMAR MANUFACTURING OF
KANSAS, L.L.C.

By /s/ [ILLEGIBLE]
------------------------------------
Its Member
---------------------------------

MEMBER

/s/ Geoffrey T. Pepper
---------------------------------------
Geoffrey T. Pepper

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EXHIBIT A

BILL OF SALE

Horizon Marine, LC, a Kansas limited liability company (hereinafter
called "Seller") for One Dollar ($1.00) and other valuable consideration to
it in hand paid, receipt of which is hereby acknowledged, by these presents
does sell, assign, transfer and convey unto Genmar Manufacturing of Kansas,
L.L.C., a Delaware limited liability company (hereinafter called "Assignee"),
its successors and assigns, the following described property:

All property of every kind and description and wherever situated,
tangible and intangible, owned by Seller or to which Seller has any right,
title or interest on the date hereof, and including, without limitation, all
"Assets" as defined in a certain Agreement of Purchase and Sale of Assets,
dated December ___, 1998, among Seller, Member and Assignee (the
"Agreement"), which includes the following:

(a) All cash, bank balances, monies in the possession of banks
and other depositories, term or time deposits, guaranteed investment
certificates, treasury bills, other securities and similar cash or
cash-equivalent items owned by the Seller as of the Closing Date;

(b) All trade or other accounts, credit card and other
receivables owed to the Seller;

(c) All inventories to which the Seller has title (including
supplies and samples) wherever located, including goods in transit;

(d) All Copyrights, trade names, Trademarks, service marks,
logos, trade dress, Patents and applications therefor and registration
thereof, and all licenses held or granted in connection with any of the
foregoing or other Intellectual Property, together with the goodwill of the
Seller connected with the use thereof;

(e) All Owned Real Estate (excluding the Excluded Real Estate)
set forth in Exhibit A hereto, machinery, equipment, vehicles, furniture,
furnishings, leasehold improvements, fixtures, signs, supplies, fixed assets
and other personal property;

(f) All of such leases, franchise agreements, agreements,
commitments, contracts and warranties (including prepayments and deposits,
and including any of such agreements which may have expired), to which any
Seller is a party are listed on Exhibit B hereto, excluding defaults,
breaches or other such charges occurring and/or accruing prior to or on the
Closing Date (the "Assumed Contracts"); provided, however, in no event shall
the Purchaser assume or be responsible for any termination or cancellation
costs or expenses incurred in connection with any Seller executory contracts
which are not contained on Exhibit B hereto.

(g) All Confidential Information, including without limitation
technical, processing or marketing information, including product formulae,
developments, inventions, know-how, processes, ideas and trade secrets and
documentation thereof and all claims and rights related thereto;

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(h) All files, customer records, employee records, logos,
customer lists, vendor lists, accounting books, records, ledgers and
electronic data processing materials. With respect to the foregoing and all
other materials related to the Seller's Business transferred hereunder, the
Purchaser hereby covenants and agrees that the Seller may, at its option (but
subject to the Purchaser's right to prepare copies thereof), upon the Closing
take possession of certain permanent records of the Seller, which records
shall include but not be limited to articles and certificates of
organization, by-laws, minute books and resolutions, member records, general
ledgers, journal entries, tax returns (state and federal), payroll and
payroll tax reporting forms (state and federal), W-2 employee earnings
records, workers' compensation reports, retirement, pension and other benefit
plan documents and records, and the like. The Purchaser and its employees
shall provide reasonable assistance to the Seller in the location of and
information relating to such records for five (5) years from the Closing Date.

Notwithstanding any other contrary provision in this Agreement, this
provision shall survive the Closing (and be enforceable) for the periods
specified in this paragraph (h).

In the event the Purchaser determines to destroy or otherwise dispose of any
of the Seller's records or materials subsequent to the applicable retention
period, the Purchaser will notify the Seller in writing and allow the Seller
the opportunity to take custody of such records and materials within a
commercially reasonable time after receipt of such notification;

(i) All assignable rights under agreements concerning
confidentiality, non-competition or the assignment of ideas or inventions,
including but not limited to non-competition agreements;

(j) All prepaid expenses, deposits with third parties useable by
the Purchaser and credit balances and advances to vendors;

(k) All transferable permits, licenses and governmental
agreements, waivers and authorizations of the Seller which the Purchaser
elects to assume by notice at or before the Closing;

(l) All information systems (hardware and software), programs,
manuals and documentation thereof;

(m) All interests in other entities and joint ventures;

(n) All advertising materials and arrangements;

(o) All rights of the Seller under and proceeds from insurance
policies and all rights of action or Proceedings against third persons for
damage to the Seller's property, business interruption or otherwise
(including insurance protecting the Seller from liability) arising with
respect to claims arising prior to the Closing;

(p) All other rights, property and assets of the Seller, tangible
or intangible, including contingent assets;

(q) directors' and officers' liability insurance policies
covering officers and directors of Seller;

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(r) any and all governmental refunds for income and other Taxes
previously paid to which Seller is entitled;

(s) goodwill and other rights or interests that may accrue to or
constitute Seller's Business;

Seller hereby authorizes and grants its power of attorney to
Assignee and appoints Assignee and the officers thereof as Seller's
attorney-in-fact to take any appropriate action in connection with any of
said rights, claims, causes of action and property, in the name of Seller or
in its own or any other name but at its own expense, it being understood that
this authorization and power of attorney are coupled with an interest and
irrevocable.

TO HAVE AND TO HOLD said rights, claims, causes of action, property,
assets, business and goodwill, as a going concern, unto the said Assignee,
its successors and assigns, to and for its use forever.

In furtherance of the foregoing, Seller agrees as follows:

1. Seller agrees that it will, at any time, and from time to
time after the date hereof, upon the request and at the expense of Seller,
do, execute, acknowledge and deliver or will cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and assurances as may be required
for the better assigning, transferring, granting, conveying, assuring and
confirming to Assignee the Assets assigned, transferred, conveyed and
delivered or to be assigned, transferred, conveyed and delivered to Assignee
hereunder.

2. Seller hereby names, constitutes and appoints Assignee the
true and lawful attorney of Seller, with full power of substitution in the
name of Assignee or in the name of Seller but on behalf of and for the
benefit of Assignee, its successors and assigns, to demand and receive from
time to time any and all Assets hereby assigned, transferred, conveyed and
delivered to Assignee and to give receipts, releases and acquittances for and
in respect of the same or any part thereof.

AND, Seller does hereby warrant, covenant and agree that it:

(a) has good and marketable title to the properties and
asset hereby sold, assigned, transferred, conveyed and delivered,
subject to such liens and other Encumbrances as are disclosed in the
Agreement or any schedules or exhibits thereto and except as otherwise
provided in the Agreement; and

(b) will warrant and defend the sale of said properties and
assets against all and every person or persons whomsoever claiming or
to claim against any or all of the same, subject to the terms and
provisions of the Agreement.

Any terms or phrases capitalized herein and not otherwise defined shall
have the meaning(s) ascribed to them in the Agreement.

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IN WITNESS WHEREOF, Seller has caused this instrument to be duly
executed this ________ day of December, 1998.

SELLER:

HORIZON MARINE, LC

By_____________________________________
ATTEST: Its_________________________________

_______________________________________
Secretary

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EXHIBIT B

LIABILITIES UNDERTAKING

UNDERTAKING dated December _____, 1998 by Genmar Manufacturing of
Kansas, L.L.C., a Delaware limited liability company, (hereinafter called
"Purchaser") in favor of Horizon Marine, LC, a Kansas limited liability
company (hereinafter called "Seller").

RECITALS

A. Pursuant to that certain Agreement of Purchase and Sale dated
December ___, 1998 among Purchaser, Seller and the sole Member of Seller (the
"Agreement"), Seller has concurrently herewith sold, assigned, transferred,
conveyed and delivered to Purchaser substantially all of the Business, assets,
properties, goodwill and rights of Seller as a going concern (the "Assets");
and

B. In partial consideration therefor, the Agreement requires
Purchaser to execute and deliver to Seller this Undertaking;

C. All terms capitalized but not otherwise defined herein shall
have the meaning ascribed by and in the Agreement.

NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Purchaser is hereby
acknowledged, Purchaser hereby agrees as follows:

AGREEMENT

1. Purchaser hereby undertakes, assumes and agrees, subject to
the limitations contained herein, to perform, pay or discharge any and all
Assumed Liabilities set forth in Section 1.3(a) of the Agreement.

2. The debts, liabilities and obligations assumed by Purchaser
under Paragraph l hereof shall not include:

(a) Any Excluded Liabilities set forth in Section 1.3(b) of
the Agreement;

(b) federal, state or local income, franchise, excise,
sales, use, property, payroll or similar Taxes imposed on Seller
except to the extent that (i) such Taxes constitute debts or
liabilities of Seller which would be assumed by Purchaser under the
provisions of paragraph 1 above; (ii) Purchaser receives the benefits
of all deposits, escrow accounts or other payments made or collected
by Seller on account of or with respect to such Tax liabilities; and
(iii) Seller complies with each of the following conditions:

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investigations, audits or other Proceedings, Orders
or other communications by any taxing agent or authority which
may affect the amount of the Tax liabilities being assumed
hereunder; and

(ii) Seller shall afford Purchaser the right, at its
option, to assess the entire control of any such audit or other
Proceeding insofar as it may relate to the liabilities of
Seller assumed hereunder, including the defense, compromise or
settlement thereof, and in connection therewith Seller and the
Member shall cooperate fully and make available to Purchaser
all information under their control relating thereto which
Purchaser may reasonably request and shall execute and deliver
to Purchaser such powers-of-attorney or other documents which
Purchaser may reasonably deem necessary or desirable to
effectuate the foregoing.

(c) liabilities or obligations of Seller resulting or
arising from claims for personal injury or property damage or out of
any breach or any non-performance by Seller of any contract,
commitment or obligation imposed by law or otherwise, except to the
extent covered by insurance proceeds payable to or on behalf of
Purchaser; or

(d) debts, liabilities or obligations arising under any
contract which has not been assigned to Purchaser so that Purchaser
will enjoy the full benefits thereunder or which is listed in any
Schedule to the Agreement and specifically designated thereon as
"Not Assumed"; or

(e) debts, liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
Closing or which arise after the Closing but which are based upon or
arise from any act, omission, transaction, circumstance, sale of goods
or services (excluding product warranty claims which the parties have
agreed will be the responsibility of Purchaser), state of facts or
other condition which occurred or existed on or before the date of the
Closing, whether or not then known, due or payable, except to the
extent reflected or reserved against on the face of the Final Balance
Sheet (excluding the notes thereto) or incurred after the Final
Balance Sheet date in connection with the purchase of goods or
services in the ordinary course of Seller's Business and in conformity
with the representation, warranties and covenants contained in the
Agreement.

3. Nothing contained herein shall require Purchaser to pay or
discharge any debts or obligations expressly assumed hereby in the event, and
so long as, Purchaser shall in good faith contest or cause to be contested the
amount or validity thereof.

4. Other than as specifically stated above or in the Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this
Undertaking, and it is expressly understood and agreed that all debts,
Liabilities and obligations not assumed hereunder by Purchaser shall remain the
sole obligation of Seller, its successors and assigns, and no Person other than
Seller and the Member shall have any rights under this Undertaking or the
provisions contained herein.

5. Any terms or phrases Capitalized herein and not otherwise
defined shall have the meaning(s) ascribed to them in the Agreement.

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GENMAR MANUFACTURING OF KANSAS,
L.L.C.

By_____________________________________
Its____________________________________

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EXHIBIT C

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and
entered into as of __________, 1998, by and between Genmar Manufacturing of
Kansas, L.L.C., a Delaware limited liability company ("Genmar Kansas") and
Geoffrey T. Pepper, an individual and resident of the state of Kansas
("Executive").

RECITALS

A. These Recitals shall be and hereby are incorporated as
essential terms of this Agreement, and describe (i) the general nature and
purposes of Genmar Kansas' business and (ii) Executive's rights and
obligations under this Agreement. Any interpretation or construction of this
Agreement shall be considered in light of these Recitals.

B. Genmar Kansas is a Delaware limited liability company and a
wholly owned subsidiary of Genmar Industries, Inc., a Delaware corporation,
("Genmar Industries") which is, in turn, a wholly owned subsidiary of Genmar
Holdings, Inc. ("Genmar Holdings").

C. Genmar Kansas is presently engaged in the design, manufacture
and distribution of marine industry products, including jon, marine fish and
cruise pontoon and bass boats, as well as the manufacture of marine boat
products for Genmar Industries and Genmar Holdings, and all future and
derivative business related thereto (the "Business").

D. On or about ____________, Genmar Kansas is anticipated to
acquire substantially all of the assets of Horizon Marine, LC, a Kansas
limited liability company ("Horizon Marine"), of which Executive is a member
and has ownership of or control over substantially all of the membership
interests in Horizon Marine. Executive understands that this Agreement shall
be effective only upon completion of such acquisition.

E. Executive has been engaged in and has extensive experience
and expertise in the above-designated business.

F. Genmar Kansas desires to employ Executive and Executive
desires to be employed by Genmar Kansas, on the terms and conditions, and
pursuant to the covenants, set forth in this Agreement.

G. In connection with the operation of its Business, Genmar
Kansas has acquired and develops, and will continue to acquire and develop
from time to time, confidential business data and trade secrets which it
desires to protect from disclosure to competitors. "Trade secret" means,
"without limitation", any information, formulae, patterns, computations,
programs, devices, methods, techniques, or processes relating to Genmar
Kansas' products and/or services or its research, development, manufacture,
design, marketing, merchandising, selling and servicing.

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H. Executive acknowledges that Genmar Kansas' Trade Secrets and
confidential business data, have value to Genmar Kansas to the extent that
they are not disclosed to Genmar Kansas' competitors.

I. For the purposes of this Agreement, a "competitor" shall mean
any firm, person, partnership, corporation, or any other entity, whether
legal or natural, engaged in the same or similar Business as Genmar Kansas,
Genmar Industries or Genmar Holdings, whether that particular business
comprises a part of or all of the competitor's business.

J. For the reasons set forth above, and in consideration of the
mutual promises and agreements set forth in this Agreement, Genmar Kansas and
Executive agree as follows:

ARTICLE 1

EMPLOYMENT

1.01 ENGAGEMENT. Genmar Kansas hereby employs, engages, and hires
Executive as President of Genmar Kansas, and Executive hereby accepts and
agrees to such hiring, engagement, and employment, subject to the general
supervision and pursuant to the orders, advice, and direction of Genmar
Kansas' Board of Directors, or their designee.

1.02. DUTIES. Executive shall perform such other duties as are
customarily performed by one holding the position of President in other,
same, or similar businesses or enterprises as engaged in by Genmar Kansas,
and shall also additionally render similar services and duties as may be
assigned to him from time to time by Genmar Kansas' Board of Directors or its
designee.

1.03 PRIOR EMPLOYMENT REPRESENTATIONS. Executive warrants and
represents that the Executive's performance on this Agreement will not
violate any other agreement to which the Executive is a party or create a
conflict of interest for Genmar Kansas and that Executive will not disclose
to Genmar Kansas any materials which are confidential or proprietary to a
third party without the prior written consent of such third party.

ARTICLE 2

BEST EFFORTS OF EXECUTIVE

Executive agrees that he will at all times faithfully,
industriously, and to the best of his ability, experience, and talents,
perform all of the acts, services and duties that may be assigned, delegated
or required of and from him by Genmar Kansas pursuant to the express and
implicit terms of this Agreement, to the reasonable satisfaction of Genmar
Kansas. Executive shall devote substantially all of the Executive's business
time to the performance of Executive's duties hereunder. Executive shall
devote the best efforts of Executive to the advancement of Genmar Kansas'
interests and Business.

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ARTICLE 3

TERM OF EMPLOYMENT AND AGREEMENT

3.01. TERM. The term of Executive's employment with Genmar Kansas
pursuant to provisions of this Agreement shall be a period of four (4) years,
commencing on the date that Genmar Kansas acquires by consummation of a
closing substantially all of the assets of Horizon Marine (the "Effective
Date"), SUBJECT, HOWEVER, to earlier termination pursuant to the provisions
set forth in Article 6 of this Agreement. Subject to prior consultation with
Executive, this Agreement shall not prevent Executive from being transferred,
promoted or changed to any other position, and any such transfer, promotion
or change shall not affect the term of employment under or the enforcement of
this Agreement.

3.02. EFFECTIVE DATE. This Agreement shall be binding upon
Executive and Genmar Kansas as of the Effective Date.

ARTICLE 4

COMPENSATION AND BENEFITS

4.01. BASE COMPENSATION. Executive will be paid the following
annual base salary amounts from and after the Effective Date for the
applicable years as indicated below, during the four (4) year term of this
Agreement, if not sooner terminated in accordance with Article 6 hereof:

First Year $150,000
Second Year $175,000
Third Year $200,000
Fourth Year $225,000

Executive will commence employment at the "First Year" annual base salary.
Each subsequent change in Executive's annual base salary shall be effective
on the first day following the Effective Date anniversary date in any
applicable year. Executive's compensation shall be payable in accordance with
Genmar Kansas company policies applied to all management/non-hourly employees
similarly situated.

4.02. BENEFITS. In addition to cash compensation, Executive shall
be eligible to receive such fringe benefits as are, and may be, made
available to all other management employees of Genmar Kansas from time to
time, which benefits shall be and are granted, maintained and revised in the
exclusive discretion of Genmar Kansas' Board of Directors. Such benefits
shall include, but are not limited to, (i) a management car allowance, (ii)
use of a demonstration boat not to exceed 26 feet in length manufactured by
any division of Company, consistent with Genmar's policies from time-to-time,
(iii) payment of monthly dues for executive's local country club, (iv) a
medical and dental plan, disability plan, life insurance plan, and 401(k)
plan and (v) the management incentive plan described in Section 4.04. In the
event business conditions require, Genmar Kansas is not obligated to provide
or continue any of these benefits and may, without any prior notice,
discontinue any uniform benefit

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already provided or as may be provided in the future, within the exclusive
discretion of Genmar Kansas' Board of Directors.

4.03. EXPENSE REIMBURSEMENT. Executive shall be reimbursed for
authorized travel and other out-of-pocket business expenses, provided that
such expenses have been reasonably incurred by Executive in the performance
of his duties for or on behalf of Genmar Kansas. Executive shall submit to
Genmar Kansas an itemized account detailing the expenses desired to be
reimbursed accompanied by receipts. Genmar Kansas reserves the right to
reject reimbursement of any expense reimbursement submission that is not in
compliance with the terms set forth in this Section 4.03 or which is not
otherwise in compliance with Internal Revenue Service statutes, rules,
regulations or other controlling or interpretive authority.

4.04. MANAGEMENT INCENTIVE PROGRAM. Executive shall be eligible to
participate in Genmar Holdings' annual Management Incentive Program (referred to
herein as either the "MIP Program" or "MIP Compensation") in accordance with the
terms thereof, a copy of which is attached hereto and incorporated by reference
herein as Schedule 1, for each fiscal year during the term of Executive's
employment hereunder.

ARTICLE 5

VACATION AND LEAVE OF ABSENCE

Executive is entitled to three (3) weeks (15 days) of vacation per year.
Vacation time will be scheduled taking into account the Executive's duties and
obligations at Genmar Kansas. Sick leave, holiday pay and all other leaves of
absence will be in accordance with the personnel policies of Genmar Kansas in
effect from time-to-time.

ARTICLE 6

TERMINATION

6.01 VOLUNTARY RESIGNATION. Executive may resign his position and
terminate his employment by giving Genmar Kansas one (1) month written notice
of his intention to resign. If requested by Genmar Kansas, Executive agrees
to cooperate in training his successor following receipt of Executive's
notice of intention to resign until the actual termination date. With the
exception of the severance pay described in Section 6.04 hereof, any
resignation under this Section shall terminate Executive's rights to all
further compensation, bonuses or benefits as set forth in this Agreement
effective as of the last day of Executive's employment with Genmar Kansas.
Such termination by voluntary resignation shall also discontinue any earn-out
consideration under Section 2.2 of the Agreement of Purchase and Sale of
Assets (the "Earn-Out Consideration") between Genmar Kansas and Horizon
Marine, LC.

6.02. TERMINATION BY GENMAR KANSAS (DISABILITY). Genmar Kansas may
terminate this Agreement by giving Executive three (3) months written notice if
Executive incurs or suffers from a condition that prevents him from carrying out
his essential job functions for a period of six (6) months or longer.

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6.03. TERMINATION BY GENMAR KANSAS (WITH CAUSE). Any other provision
of this Agreement notwithstanding, Genmar Kansas may terminate Executive's
employment without notice and without paying severance pay if the termination
is based on a material violation of this Agreement, or on fraud,
embezzlement, securities law violation, sexual harassment of fellow
employees, or other gross misconduct involving moral turpitude (the foregoing
may be referred to herein as termination event for cause).

6.04. SEVERANCE.

(a) In the event Executive voluntarily resigns his
employment after the first anniversary date of this Agreement, this
Agreement shall terminate, and Executive shall be entitled to one (1)
year of severance pay at the base salary Executive is earning on the
date of such resignation. In the event of Executive's voluntary
resignation, Executive's right to MIP Compensation, if any, shall be
determined in accordance and consistent with the MIP Program terms.

(b) In the event Genmar Kansas terminates Executive's
employment for any reason other than those listed above in 6.03 as a
termination event for cause, prior to termination under Sections 6.05
or 6.06 below, Executive shall be entitled to one (1) year of
severance pay at the base salary Executive is earning on the date of
such severance. In the event of a termination under this Section
6.04(b) Executive's right to MIP Compensation, if any, shall be
determined in accordance and consistent with the MIP Program terms.

(c) In the event Executive is terminated in accordance with
Section 6.03 hereof, no severance, MIP Compensation or other
compensation or benefits, other than required by applicable law, shall
be due to or paid to Executive. Executive will be paid, however, base
compensation to the date of and including such termination.

6.05. DEATH. Executive's employment and this Agreement will be
deemed terminated upon the death of the Executive, and no severance shall be
due of Executive or his estate.

6.06. EXPIRATION OF AGREEMENT. Upon the expiration of the term of
this Agreement as set forth in Section 3.01, Genmar Kansas may consider a
renewal of this Agreement for an additional term or negotiating a new agreement
with Executive, but shall be under no obligation to do so. If this Agreement
is not renewed or a new agreement is not entered into, Executive's employment
will be deemed terminated upon the expiration of the term of this Agreement.

ARTICLE 7

PROTECTION OF TRADE SECRETS AND
CONFIDENTIAL BUSINESS DATA

7.01. TRADE SECRETS AND CONFIDENTIAL INFORMATION. In the
performance of his duties, Executive may be promised and/or become aware of,
either directly or indirectly, information regarding or belonging to Genmar
Kansas, Genmar Industries or Genmar Holdings which constitutes Trade Secrets
or confidential information and business data ("Confidential Information").

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Confidential Information shall include Trade Secrets and is defined herein,
without limitation, as any information or compilation of information relating
to Genmar Kansas' procedures, techniques, methods, concepts, ideas, affairs,
products, processes and services, including but not limited to, information
related to marketing, merchandising, selling, research, development,
manufacturing, purchasing, accounting, engineering, financing, costs,
customers, plans, pricing, billing, needs of customers and products and
services used by customers, all lists of customers and their addresses,
prospects, sales calls, products, services, prices and the like as well as
any specifications, formulas, plans, drawings, accounts or sales records,
sales brochures, codebooks, manuals, trade secrets, knowledge, know-how,
pricing strategies, operating costs, sales margins, methods or operations,
invoices or statements and the like.

The foregoing list of Confidential Information is not intended to be
exclusive. From time to time during the term of his employment, Executive
may gain and has gained access to other Confidential Information concerning
the Business or which may be of commercial value to Genmar Kansas, Genmar
Industries or Genmar Holdings, which Confidential Information shall be
included in the definitions under Section 7.01 above and even though not
specifically listed. Genmar Kansas and Executive acknowledge and agree that
such Confidential Information in part constitutes Trade Secret information
because Genmar Kansas, Genmar Industries and Genmar Holdings derive economic
value from the fact that such information is not generally known or readily
ascertainable by proper means by competitors of Genmar Kansas, Genmar
Industries and Genmar Holdings or potential competitors who may obtain
economic value by its disclosure or use. The provisions of this Article 7
apply to any form in which the Confidential Information may appear, whether
written, oral or any other form of recording or storage.

7.02. COVENANTS. Executive covenants and agrees that both during
and after his employment with Genmar Kansas, the foregoing Confidential
Information will not be communicated or disclosed by him (directly or
indirectly) to any person or entity, including but not limited to, other
business concerns, including competitors of Genmar Kansas, Genmar Industries
and Genmar Holdings, the press, other professionals, corporations,
partnerships or the public. Executive further agrees to never use such
information, directly or indirectly, for Executive's benefit or the benefit
of any other person, firm, corporation or entity. Executive agrees to take
reasonable security measures to prevent accidental disclosure and industrial
espionage. Executive further covenants and agrees that he will faithfully
abide by all rules and regulations established by Genmar Kansas, Genmar
Industries and Genmar Holdings for insuring the confidentiality of the
foregoing Confidential Information, including, but not limited to, rules and
regulations:

(a) Limiting access to authorized personnel;

(b) Limiting copying of any writing or recording;

(c) Requiring storage of documents in secure facilities
provided by Genmar Kansas and limiting safe or vault lock
combinations or keys to authorized personnel; and

(d) Checkout and return or other procedures or regulations
promulgated by Genmar Kansas from time to time.

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The obligations of this Section 7.02 shall indefinitely survive Executive's
employment with Genmar Kansas and continue until the applicable Confidential
Information is no longer confidential and becomes generally publicly known,
other than as a direct or indirect result of the breach of this Agreement by
Executive or a breach of a confidentiality obligation owed to Genmar Kansas
by any other person or entity.

7.03. RETURN OF GENMAR KANSAS PROPERTY UPON TERMINATION. Upon
termination of Executive's employment with Genmar Kansas, whether voluntary
or involuntary, Executive will return to Genmar Kansas any and all written or
other recorded form of the Confidential Information, and upon leaving Genmar
Kansas' place of business, will not have in his possession at any location or
have any entitlement to take any Confidential Information, in any form, which
may have been entrusted to him during the course of his employment or to
which he had access or possession.

ARTICLE 8

INVENTIONS OR DISCOVERIES

8.01. COVENANTS. Executive acknowledges that inventions or other
discoveries may be developed, conceived or otherwise made by Executive during
employment with Genmar Kansas. Executive agrees that all such inventions or
other discoveries shall be the exclusive property of Genmar Kansas. With
respect to all such inventions or other discoveries, Executive agrees to:

(a) Keep accurate, complete and timely records, which
shall be Genmar Kansas' property and be retained on Genmar
Kansas' premises; and

(b) Promptly and fully disclose and describe all such
inventions or other discoveries to Genmar Kansas; and

(c) Assign (and Executive does hereby assign) to Genmar
Kansas all of Executive's rights to these inventions or other
discoveries, and to application for letters patent or copyrights
in all countries and to letters patent or copyrights granted upon
these inventions or other discoveries in all countries; and

(d) To do such other acts as may be necessary in the
opinion of Genmar Kansas to preserve property rights to these
inventions or other discoveries against forfeiture, abandonment
or loss and to obtain and maintain letters patent or copyrights
and to vest the entire right and title thereto exclusively in
Genmar Kansas.

8.02. SURVIVAL OF COVENANTS. The obligations of this Article 8
shall indefinitely survive the termination of Executive's employment with
Genmar Kansas with respect to inventions or other discoveries conceived or
otherwise developed during Executive's employment and shall be binding upon
any and all of Executive's assigns, executors, administrators and other legal
representatives.

8.03. EXCLUSIONS. Genmar Kansas hereby notifies Executive, and
Executive understands and agrees, that the foregoing terms of this Article 8
do not apply to any invention or other discovery for which no equipment,
supplies, facility, or Confidential Information of Genmar Kansas were used
and

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which was developed entirely on Executive's own time, and (a) that does not
relate (1) directly or indirectly to Genmar Kansas' Business or (2) to Genmar
Kansas' actual or demonstrably anticipated business research or development,
or (b) that does not directly or indirectly result from any work performed by
Executive for Genmar Kansas.

ARTICLE 9

COVENANT NOT TO COMPETE

In view of the substantial economic benefit Executive is receiving
from Genmar Kansas' acquisition of substantially all of the assets of Horizon
Marine, along with the compensation and benefits set forth herein, as well as
Executive's participation in the Genmar MIP, Executive agrees that at no time
during the term of this Agreement and Executive's employment with Genmar
Kansas and for a period determined by the later to occur of either of the
following: (i) twenty-four (24) months following the termination of
Executive's employment (whether voluntary or involuntary), or (ii)
twenty-four (24) months following Executive's last payment by Genmar Kansas
of the Earn-Out Consideration, will Executive, directly or indirectly,
without the prior written consent of the Genmar Kansas Board of Directors,
(a) solicit or do competitive business with any person or entity that is or
was a customer or vendor of Genmar Kansas within the twelve (12) months prior
to the date of termination, or (b) engage within the United States or Canada
in any similar or related business in competition with Genmar Kansas or have
any direct or indirect interest, whether as a proprietor, partner, employee,
shareholder, lender, principal, agent, consultant, director, officer or in
any other capacity or manner whatsoever, in any enterprise that shall so
competitively engage. Executive irrevocably agrees that the time period and
geographic scope of this restriction is reasonable because Genmar Kansas'
Business is conducted on a national and international scale and is not
limited to a particular geographic area within the United States or Canada.
Notwithstanding the foregoing, in the event this Agreement expires in
accordance with its terms at the end of the initial four (4) year term, and
is not extended beyond such date, then the period of the covenant applicable
in such instances shall be reduced FROM twenty-four (24) months following the
applicable event TO six (6) months following the applicable event.

ARTICLE 10

INJUNCTIVE RELIEF

10.01. COVENANT AND SURVIVAL PERIOD. The parties acknowledge that
Genmar Kansas will suffer substantial and material irreparable harm if
Executive breaches or threatens to breach this Agreement, either during or
after its term. Accordingly, Genmar Kansas shall be entitled, in addition to
any other rights and remedy it may have, at law or equity, to any injunction,
without the posting of a bond or other security, enjoining or restraining
Executive from any violation or potential violation of this Agreement, and
Executive hereby consents to Genmar Kansas' right to the issuance of such
injunction. In any proceeding by Genmar Kansas to enforce any provision of
Articles 7, 8 or 9 hereof, Genmar Kansas shall, in addition to any injunctive
relief to which it may be entitled, be awarded damages to be determined by a
court of competent jurisdiction as well as all court costs, disbursements,
expenses and attorneys' fees incurred by Genmar Kansas.

C-8
<PAGE>

10.02. EXTENSION OF COVENANT PERIOD. In the event Executive
violates the terms of Article 9, the period of the restrictive covenant shall
be extended for two (2) years from and after the later of:

(a) The date which Executive ceases any violation; or

(b) The date on which a court issues an order or judgment
enforcing the terms of the covenant.

10.03. REFORMATION. In furtherance and not in limitation of the
foregoing, should any duration or geographical restriction on business
activities covered under this Agreement or any other provision of this
Agreement be found by any court of competent jurisdiction to be less than
fully enforceable due to its breadth of restrictiveness or otherwise,
Executive and Genmar Kansas intend that such court will enforce this
Agreement to the full extent that the court may find permissible by
construing such provisions to cover only that duration, extent or activity
which may be enforceable. Executive and Genmar Kansas acknowledge the
uncertainty of the law in this respect and intend that this Agreement will be
given the construction that renders its provisions valid and enforceable to
the maximum extent permitted by law.

ARTICLE 11

MISCELLANEOUS

11.01. GOVERNING LAW. This Agreement shall be governed according to
the laws of the State of Kansas.

11.02. ASSIGNMENT AND SURVIVAL. This Agreement is binding upon
Genmar Kansas and Executive and their respective heirs, personal
representatives, successors and assigns. The obligations of Articles 6, 7,
8, 9, 10 and 11 of this Agreement will survive the termination of this
Agreement; provided, however, that the services rendered by Executive to
Genmar Kansas under this Agreement are personal in nature and, therefore,
Executive may not delegate the Executive's duties or obligations under this
Agreement. Genmar Kansas may assign its rights and delegate its duties and
obligations under this Agreement.

11.03. NO WAIVER. The failure of either Genmar Kansas or Executive
to object to any conduct or violation of any of the covenants made by the
other under this Agreement will not be deemed a waiver of any rights or
remedies. No waiver of any right or remedy arising under this Agreement will
be valid unless set forth in an appropriate writing signed by both Genmar
Kansas and Executive. This Agreement shall not give Executive any right to be
employed for any specific time or limit Genmar Kansas' right to terminate
Executive's employment at any time, with or without cause.

11.04. MODIFICATION. This Agreement supersedes and replaces any and
all prior and written understandings, if any, between the parties relating to
the subject matter of this Agreement, including any previous employment
contract which is hereby revoked. The parties agree that this Agreement (a)
is the entire understanding and agreement between the parties and (b) is the
complete and exclusive statement of the terms and conditions thereof, and
there are no other written or oral

C-9
<PAGE>

agreements in regard to the subject matter of this Agreement. This Agreement
shall not be changed or modified except by a written document signed by the
parties hereto.

11.05. UNIQUE NATURE OF AGREEMENT. The covenants made in, and the
rights conveyed by, this Agreement are of a unique and special nature. Any
violation of this Agreement by Executive will result in immediate and
irreparable to Genmar Kansas. In such event, Executive acknowledges that
this Agreement entitles Genmar Kansas to an injunction or decree of specific
performance from a court of equity in addition to other rights or remedies
which Genmar Kansas may have at law or in equity. Executive hereby waives
the right to assert the defense that any such breach or violation can be
adequately compensated in damages and in an action at law.

11.06 SEVERABILITY. The covenants, provisions, and sections of
this Agreement are severable. If any portion of this Agreement is held to be
unlawful or unenforceable, the same will not affect any other portion of this
Agreement, and the remaining terms and conditions or portions thereof will
remain in full force and effect. This Agreement will be construed in such
case as if such unlawful or unenforceable portion had never been contained in
this Agreement, in order to effectuate the intentions of Genmar Kansas and
the Executive in executing this Agreement.

11.07 NOTICES. All notices, demands and other communications
provided for hereunder shall be in writing and shall be given either by
personal delivery, via facsimile transmission (receipt telephonically
confirmed), by nationally recognized overnight courier (prepaid), or by
certified or registered first class mail, postage prepaid, return receipt
requested, sent to each party at its/his address as set forth below or such
other address or in such other manner as may be designated by such party in
written notice to each of the other parties. All such notices, demands and
communications shall be effective when personally delivered, one (1) business
day after delivery to the overnight courier, upon telephone confirmation of
facsimile transmission or upon receipt after dispatch by mail to the party to
whom the same is given or made:

If to Executive: Geoffrey T. Pepper
2321 N. Jackson Street
Junction City, Kansas 66441

with copy to: Weary, Davis, Henry, Struebing & Troup, LLP
819 N. Washington Street
P. O. Box 187
Junction City, Kansas 66441
Attention: Steven R. Struebing

If to Genmar Kansas: Genmar Manufacturing of Kansas, L.L.C.
c/o Genmar Holdings, Inc.
Suite 2400
100 S. Fifth Street
Minneapolis, Minnesota 55402
Attention: Roger R. Cloutier, II

with copy to: Briggs and Morgan, P.A.

C-10
<PAGE>

2400 IDS Center
80 S. 8th Street
Minneapolis, Minnesota 55402
Attention: Michael J. Grimes

IN WITNESS WHEREOF the following parties have executed the above
instrument the day and year first above written.

GENMAR MANUFACTURING OF KANSAS, L.L.C.

By____________________________________
Its______________________________

EXECUTIVE:

______________________________________
Geoffrey T. Pepper

C-11
<PAGE>

SCHEDULE 1

GENMAR MIP

1999 MANAGEMENT INCENTIVE PLAN

1. Management Incentive Plan ("MIP") will be based on three criteria,
namely: (a) operating profits at your subsidiary or division ("Division
Profit"); (b) Genmar consolidated operating profit ("Genmar Profit"); and
(c) asset management achieved as compared to goals established for your
subsidiary or division ("Asset management").

2. Total bonus will be based 85% on Division Profit and 15% on Genmar
Profit. The Asset Management criteria will be measured on an annual
basis. This criteria will increase your OVERALL bonus by up to 15% for
exceeding your company or division goal or reduce your total bonus by up
to 25%, for underperforming your company/division goal.

3. The Genmar Profit criteria is $______ million below which there will be
no bonus on the basis of that criteria. Your Division Profit criteria is
as set forth in the attached schedule.

4. If net revenues exceed plan then the Asset Management targets will be
adjusted by a percentage equal to one-half (1/2) of the percentage by
which revenues exceed plan.

5. The bonus must be self-funded. That is to say, Division Profit and
Genmar Profit must be after reserve for bonus.

6. You must be employed on June 30, 1999 to earn a bonus. There will be no
pro rata or partial payments. Bonuses are computed from current salary
on June 30, 1999.

7. Division Profit and Genmar Profit will be determined on the basis of
Generally Accepted Accounting Principles consistently applied and will be
finally determined by the Genmar Board of Directors or Executive
Committee ("Board") following completion of the annual audit.

8. Any significant extraordinary occurrence (positive or negative) which
impacts the bonus will be taken into account in a manner which assures
fair administration of the Plan.

9. No participant in the Plan shall expect to receive a discretionary bonus
in addition to the bonus.

10. There will be a significant partial distribution of bonus in early August
1999 with the balance to be paid upon completion of the audit and Board
approval.

11. Any company actions outside of the MIP Program requested by corporate or
company President must be documented and signed by the corporate
President and Chief Financial Officer and the company President and then
will be taken into consideration when computing

C-12
<PAGE>

the final MIP payments. Basically, agreements should be approved in
advance and in writing in both files so there is no confusion since
the decision affects a number of people.

Genmar President ____________________________________

Genmar CFO ____________________________________

C-13
<PAGE>

GENMAR HOLDINGS, INC.
MIP PARTICIPANT PAYOUT COMPUTATION EXAMPLE
FISCAL 1999

Assumptions -

(1) Division operating profit achieved at a 143% accelerator level.

(2) Division capital employed achieved at a 113% accelerator level.

(3) Corporate-wide operating profit achieved at a 126% accelerator level.

(4) Corporate-wide capital employed achieved at a 95% (penalty) accelerator level.

(5) Participant at $60,000 Base Salary & 25% Base Goal Objective.

-------------------------------------
ACCELERATORS
Base Goal -------------------------------------
Weighting Salary Objective Operating Profit Capital Employed Earned MIP
--------- ------ --------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Division 85.0% 51,000 25.0% 143.0% 113.0% 20,603
Corporate 15.0% 9,000 25.0% 126.0% 95.0% 2,693
------- ----------------------------------------------
---------------------------------------------------------------------------------------------------------
Total 60,000 23,296
-------- --------
-------- --------
</TABLE>

C-14
<PAGE>
- --------------------------------------------------------------------------------
1999 MIP INDEXES

CORPORATE (CONSOLIDATED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Base Accelerator 100%

Budget -
- --------------------------------------------------------------------------------

Operating Profit Accelerator
- --------------------------------------------------------------------------------
100%
TO BE DETERMINED 109%
117%
126%
134%
143%
171%
200%
229%
257%
286%
314%
343%
371%
400%
429%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OVER $________ DISCRETIONARY
- --------------------------------------------------------------------------------

</TABLE>

C-15
<PAGE>

GENMAR HOLDINGS, INC.
Average Capital Employed
1999 Budget MIP Program Targets & Accelerator Computations

<TABLE>
<CAPTION>
-----------------------------
-----------------------------
MIP % Consolidated
Accelerator/ (Corporate
Decelerator Goal)
-----------------------------
<S> <C> <C>
1999 budgeted average capital employed N/A -
-----------------------------
-----------------------------
Variations from 1999 budget:
Capital employed INCREASE - level 10 -25.0% -
-----------------------------
Capital employed INCREASE - level 9 -22.5% -
-----------------------------
Capital employed INCREASE - level 8 -20.0% -
-----------------------------
Capital employed INCREASE - level 7 -17.5% -
-----------------------------
Capital employed INCREASE - level 6 -15.0% -
-----------------------------
Capital employed INCREASE - level 5 -12.5% -
-----------------------------
Capital employed INCREASE - level 4 -10.0% -
-----------------------------
Capital employed INCREASE - level 3 -7.5% -
-----------------------------
Capital employed INCREASE - level 2 -5.0% -
-----------------------------
Capital employed INCREASE - level 1 -2.5% -
-----------------------------
1999 budgeted average capital employed 0.0% -
-----------------------------
Capital employed REDUCTION - level 1 1.0% -
-----------------------------
Capital employed REDUCTION - level 2 2.0% -
-----------------------------
Capital employed REDUCTION - level 3 3.0% -
-----------------------------
Capital employed REDUCTION - level 4 4.0% -
-----------------------------
Capital employed REDUCTION - level 5 5.0% -
-----------------------------
Capital employed REDUCTION - level 6 6.0% -
-----------------------------
Capital employed REDUCTION - level 7 7.0% -
-----------------------------
Capital employed REDUCTION - level 8 8.0% -
-----------------------------
Capital employed REDUCTION - level 9 9.0% -
-----------------------------
Capital employed REDUCTION - level 10 10.0% -
-----------------------------
Capital employed REDUCTION - level 11 11.0% -
-----------------------------
Capital employed REDUCTION - level 12 12.0% -
-----------------------------
Capital employed REDUCTION - level 13 13.0% -
-----------------------------
Capital employed REDUCTION - level 14 14.0% -
-----------------------------
Capital employed REDUCTION - level 15 15.0% -
-----------------------------
-----------------------------
-----------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
MAX PENALTY -

BUDGET ALL BLANK AREAS ARE TO BE DETERMINED -

MAX BENEFIT -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

NOTE: This scale will be subject to adjustment on the basis of
the % increase/decrease in actual 1999 revenues vs. budgeted 1999
revenues. The % adjustment applied to this scale will be equal to
one-half of this % increase/decrease in revenues.

C-16
<PAGE>

EXHIBIT D

NON-COMPETITION AND CONTINUITY
OF BUSINESS DEALINGS UNDERTAKING

UNDERTAKING dated ______________, 19___ by _____________________ in
favor of ____________________, a Delaware limited liability Company
(hereinafter called the "Company").

RECITALS

A. The Company has entered into an Agreement of Purchase and Sale
of Assets, dated _______________, 1998 (the "Agreement"), with
________________, a limited liability company, having its principal office at
____________________, _____________________, (hereinafter called "Seller")
and the shareholders of Seller, pursuant to which the Company is to Purchase
from Seller, and Seller is to sell to the Company, all of the business,
assets, properties, goodwill and rights of Seller (the "Seller's Assets"); and

B. The undersigned is one of the parties referred to in the
Agreement as being required to execute and deliver this Undertaking.

NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which by the undersigned is hereby
acknowledged, and in order to induce the Company to purchase the Seller's
Assets pursuant to the terms of the Agreement, the undersigned hereby
undertakes and agrees as follows:

1. The undersigned will not, for a period of twenty-four (24)
months from the date of the closing of the transactions contemplated by the
Agreement (hereinafter called the "Closing"), or, if the undersigned shall be
or become an employee of the Company, for a period of (i) two (2) years after
the termination of undersigned's employment, or (ii) two (2) years after the
last payment of the earn-out consideration under Section 2.2 of the
Agreement, whichever is later (the "Limited Period"), directly or indirectly,
anywhere in the United States or Canada or within the geographical area or
territory where the Business of Seller is presently being conducted or may
from time to time be conducted by the Company during the Limited Period, own,
manage, operate or control, or participate in the ownership, management,
operation or control of, or be connected with or have any interest in, as a
stockholder, director, officer, employee, agent, consultant, partner or
otherwise, (a) any business which designs, manufactures, produces, sells or
distributes product the same or similar to the Business, or any other
products which have been manufactured, produced, sold or distributed by
Seller or which are competitive therewith or (b) any other business which is
competitive with the Business conducted by Seller or any of its Affiliates
during the Limited Period; PROVIDED, HOWEVER, that nothing contained herein
shall prohibit the undersigned from owning less than 5% of any class of
securities listed on a national securities exchange or traded publicly in the
over-the-counter market. If any of the provisions of this paragraph is held
to be unenforceable because of the scope, duration or area of its
applicability, the court making such determination shall have the power to
modify such scope, duration or area or all of them, and such provision shall
then be applicable in such modified form.

D-1
<PAGE>

2. The undersigned will use his or its best efforts to preserve
the business organization of Seller, to keep available to the Company the
services of Seller's present officers, employees and agents and to preserve
for the Company Seller's present business relations with its suppliers,
distributors, customers and others, and the undersigned shall not, either
before or after the Closing, commit any act, or in any way assist others to
commit any act, which will injure the Company or the business heretofore
conducted by Seller, and, without limiting the generality of the foregoing,
the undersigned will not divulge any Confidential Information or make
available to any others any documents, files or other papers concerning the
business or financial affairs of Seller.

3. Since the Company will be irreparably damaged if the provisions
hereof are not specifically enforced, the Company shall be entitled to an
injunction restraining any violation of this Undertaking by the undersigned
(without any bond or other security being required), or any other appropriate
decree of specific performance. Such remedies shall not be exclusive and
shall be in addition to any other remedy which the Company may have.

4. Any terms or phrases capitalized herein and not otherwise
defined shall have the meaning(s) ascribed to them in the Agreement.

This Undertaking shall inure to the benefit of the Company and its
successors and assigns, shall be binding upon the undersigned and his or its
successors and assigns and may not be modified or terminated orally.

-----------------------------------
[Type or Print Name]

-----------------------------------
[Signature]

D-2

<PAGE>

AGREEMENT OF PURCHASE AND SALE OF ASSETS

BY AND AMONG

LOGIC MARINE CORPORATION

GENMAR LOGIC, LLC

AND

THE PARENT AND STOCKHOLDERS OF LOGIC MARINE CORPORATION

AS OF APRIL 30, 1999

<PAGE>

TABLE OF CONTENTS

PAGE
----

<S> <C> <C>
ARTICLE I PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purchase of Assets and Assumption of Liabilities . . . . . . . . . . . .1
1.2 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Other Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

ARTICLE II PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1 Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.2 Earn-Out Consideration . . . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Allocation of Purchase Price.. . . . . . . . . . . . . . . . . . . . . .7
2.4 Determination of and Procedures for Net Asset Adjustment; Payment. . . .7
2.5 Regulated Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE III CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE IV PARTIES' CLOSING OBLIGATIONS . . . . . . . . . . . . . . . . . . 11
4.1 Seller's Obligations at Closing; Further Assurances. . . . . . . . . . 11
4.2 Purchaser's Obligations at Closing . . . . . . . . . . . . . . . . . . 14

ARTICLE V SELLER REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 15
5.1 Organization, Standing and Qualification . . . . . . . . . . . . . . . 15
5.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Transactions with Certain Persons. . . . . . . . . . . . . . . . . . . 15
5.4 Execution, Delivery and Performance of Agreement; Authority. . . . . . 16
5.5 Equitable Ownership Interests. . . . . . . . . . . . . . . . . . . . . 16
5.6 Ownership of Stockholder Interests.. . . . . . . . . . . . . . . . . . 16
5.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Absence of Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . 17
5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 Absence of Changes or Events.. . . . . . . . . . . . . . . . . . . . . 17
5.11 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.12 Compliance with Laws and Other Instruments.. . . . . . . . . . . . . . 19
5.13 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.15 Patents and Other Intellectual Property. . . . . . . . . . . . . . . . 23
5.16 No Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.18 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.19 Business Description.. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.20 Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

<PAGE>

Page
----

5.21 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.22 Absence of Certain Business Practices. . . . . . . . . . . . . . . . . 27
5.23 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.24 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 29
5.25 Debt Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.26 Relationship with Related Persons. . . . . . . . . . . . . . . . . . . 32
5.27 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.28 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.29 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE VI PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 34
6.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Authorization and Approval of Agreement. . . . . . . . . . . . . . . . 34
6.3 Execution Delivery and Performance of Agreement. . . . . . . . . . . . 35
6.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE VII PRECLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1 Conduct of Business Prior to Closing . . . . . . . . . . . . . . . . . 35
7.2 Access to Information and Documents. . . . . . . . . . . . . . . . . . 36
7.3 Purchaser Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Directors and Stockholders Authorization; Change of Seller Name. . . . 37
7.5 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7 Pay Increases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.8 Restrictions on New Contracts. . . . . . . . . . . . . . . . . . . . . 38
7.9 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.10 Payment and Performance of Obligations . . . . . . . . . . . . . . . . 38
7.11 Restrictions on Sale of Assets . . . . . . . . . . . . . . . . . . . . 38
7.12 Prompt Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.13 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.14 Copies of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.15 No Solicitation of Other Offers. . . . . . . . . . . . . . . . . . . . 39
7.16 Accounts Receivable and Payable. . . . . . . . . . . . . . . . . . . . 39
7.17 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.19 Filing Reports and Making Payments . . . . . . . . . . . . . . . . . . 39
7.20 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.21 Monthly Financial Statements . . . . . . . . . . . . . . . . . . . . . 40
7.22 [THIS SECTION INTENTIONALLY OMITTED.]. . . . . . . . . . . . . . . . . 40
7.23 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.24 Discontinued Operations and Environmental Conditions Insurance
Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

<PAGE>

Page
----

7.25 Physical Inventory as of April 30, 1999. . . . . . . . . . . . . . . . 41
7.26 Brunswick Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.27 Bulk Sales Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.28 Payment of Affiliate Liabilities . . . . . . . . . . . . . . . . . . . 42
7.29 Certain Parent Company Advances. . . . . . . . . . . . . . . . . . . . 42
7.30 Notification of Misrepresentation. . . . . . . . . . . . . . . . . . . 43
7.31 Filing of Income Tax Returns . . . . . . . . . . . . . . . . . . . . . 43
7.32 Dissolution of Joint Venture . . . . . . . . . . . . . . . . . . . . . 43
7.33 Filing and Delivery of UCC-3 Termination Statements by Parent. . . . . 43
7.34 Lease Renegotiation. . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.35 Transfer of Intellectual Property. . . . . . . . . . . . . . . . . . . 43

ARTICLE VIII CONDITIONS TO PURCHASER'S OBLIGATIONS. . . . . . . . . . . . . . 44
8.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . 44
8.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . 44
8.3 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Approval by Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.5 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.6 Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.7 Environmental Audit. . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.8 [THIS SECTION INTENTIONALLY OMITTED.]. . . . . . . . . . . . . . . . . 45
8.9 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.10 Purchaser Financing. . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.11 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.12 Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.13 Consents and Removal of Liens. . . . . . . . . . . . . . . . . . . . . 46
8.14 Employee Confidentiality and Non-disclosure Agreement. . . . . . . . . 46
8.15 Asset Acquisition Statement. . . . . . . . . . . . . . . . . . . . . . 46
8.16 [THIS SECTION INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . 46
8.17 Bulk Sales Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.18 Payments to Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 46
8.19 Employee Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . 46
8.20 Purchaser Board Approval . . . . . . . . . . . . . . . . . . . . . . . 46
8.21 Filing of Income and Franchise Tax Returns . . . . . . . . . . . . . . 47
8.22 Dissolution of Joint Venture . . . . . . . . . . . . . . . . . . . . . 47
8.23 Filing and Delivery of UCC-3 Termination Statements by
Parent and Stockholders. . . . . . . . . . . . . . . . . . . . . . . . 47
8.24 Transfer of Intellectual Property. . . . . . . . . . . . . . . . . . . 47
8.25 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.26 Environmental Clean-up and Compliance. . . . . . . . . . . . . . . . . 48
8.27 OSHA Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

iii

<PAGE>

Page
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ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . 48
9.1 Accuracy of Representations and Warranties . . . . . . . . . . . . . . 48
9.2 Compliance with Covenants and Agreements . . . . . . . . . . . . . . . 48
9.3 Approval by Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

ARTICLE X INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 49
10.1 Indemnification by Seller, Parent and Stockholders . . . . . . . . . . 49
10.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . . . 51
10.3 Nature and Survival of Representations, Warranties and Covenants . . . 51
10.4 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . . . 52
10.5 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . 53

ARTICLE XI TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.2 Return of Documents and Nondisclosure. . . . . . . . . . . . . . . . . 55

ARTICLE XII POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . 56
12.1 Further Acts and Assurances. . . . . . . . . . . . . . . . . . . . . . 56
12.2 Non-Competition Agreement. . . . . . . . . . . . . . . . . . . . . . . 56
12.3 Non-Solicitation Agreement . . . . . . . . . . . . . . . . . . . . . . 56
12.4 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . 57
12.5 Reasonableness of Covenants. . . . . . . . . . . . . . . . . . . . . . 57
12.6 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.7 Blue Pencil Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.8 Maintenance and Payment of Insurance . . . . . . . . . . . . . . . . . 57
12.9 Performance of Seller's Warranty Work. . . . . . . . . . . . . . . . . 57
12.10 Performance of Seller's Contracts. . . . . . . . . . . . . . . . . . . 58
12.11 Covenant regarding Light Stability . . . . . . . . . . . . . . . . . . 58

ARTICLE XIII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.2 Legal and Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . 60
13.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.6 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

<PAGE>

Page
----

13.9 Preservation of and Access to Records. . . . . . . . . . . . . . . . . 61
13.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.11 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.13 Scope of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.14 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.16 Parties in Interest and Assignment . . . . . . . . . . . . . . . . . . 62
13.17 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
13.19 Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 63

ARTICLE XIV DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

EXHIBIT A BILL OF SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
EXHIBIT B LIABILITIES UNDERTAKING. . . . . . . . . . . . . . . . . . . . . . . .B-1
EXHIBIT C NON-COMPETITION AND CONTINUITYOF BUSINESS DEALINGS UNDERTAKING . . . .C-1
</TABLE>

<PAGE>

AGREEMENT OF PURCHASE AND SALE OF ASSETS

This Agreement of Purchase and Sale of Assets ("Agreement") is dated May
12, 1999, to be effective as of April 30, 1999 by and among LOGIC MARINE
CORPORATION, a Delaware corporation ("Seller") and GENMAR LOGIC, LLC, a Delaware
limited liability company ("Purchaser"), the STOCKHOLDERS of Seller set forth
herein as signatories to this Agreement (the stockholders are herein
individually referred to as "Stockholder" and collectively as the
"Stockholders") and the PARENT (as defined herein) of Stockholders.

RECITALS

A. Seller is engaged in the design, manufacture, distribution and
sale of marine industry products, including without limitation various models of
unsinkable and UV protected fishing, skiing and sporting boats which utilizes
(among other things) proprietary rotational molding technologies (the
"Business").

C. Purchaser desires to purchase the Business, and all associated
operating assets of Seller, and assume certain liabilities and obligations of
Seller as set forth hereinbelow.

D. Seller desires to sell its Business, and all its associated
operating assets and to be relieved of certain of its liabilities and
obligations as set forth hereinbelow.

ARTICLE I

PURCHASE AND SALE

1.1 PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES. Subject to the
exceptions and upon the terms and conditions set forth in this Agreement, (i)
Seller will sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser will purchase, at the Closing (as defined below), all of the Business,
Assets (as defined below), properties, goodwill, rights and interests of Seller
as a going concern, of every nature, kind and description, tangible and
intangible, wheresoever located and whether or not carried on or reflected in
the books and records of Seller, and (ii) Purchaser shall assume certain and
only those liabilities of Seller that are specifically set forth herein.

<PAGE>

1.2 ASSETS.

(a) ASSETS. Purchaser will purchase (i) the assets set forth
on SCHEDULE 1.2(a)(i) hereto which include without limitation, cash, cash
equivalents (including certificates of deposit), accounts receivable,
inventory (raw materials, work in process and finished goods), furniture,
fixtures, equipment, real estate, all Patents and other Intellectual
Property and applications, all rights in and to all insurance policies,
Seller's documents and records, prepaid expenses, goodwill and other
rights or interests that may accrue to or constitute the Business (or are
used or useful in the Business) of Seller, and (ii) and assume Seller's
contractual rights, licenses, sales, dealer distribution, brokerage and
marketing, supply, freight and floor plan contracts and arrangements,
Intellectual Property rights, licenses, permits and approvals, and any
and all intangible rights and interests set forth on SCHEDULE 1.2(a)(ii)
hereto, all of which shall be assigned to Purchaser at the Closing, if
such rights and interests are by their terms assignable (the "Assets").
The Assets shall be sold to Purchaser free and clear of all liens,
Encumbrances and other interests, except for any Permitted Encumbrances
set forth herein.

(b) EXCLUDED ASSETS. Purchaser shall not purchase or assume:
(i) any existing claims or litigation against Seller of any kind or
nature, (ii) any breaches or defaults of any kind or nature of Seller
under any contract, (iii) any infringement, default or breach of any kind
or nature associated with Intellectual Property, (iv) any Benefit Plan or
other benefit arrangement or agreement, (v) the contracts and agreements
of Seller set forth on SCHEDULE 1.2(b) HERETO, and (vi) any Seller
deferred tax assets.

1.3 LIABILITIES.

(a) ASSUMED LIABILITIES. With the exception of all Excluded
Liabilities, as additional consideration for the transfer and delivery of
the Assets to Purchaser, it is the understanding of the parties that
Purchaser shall assume and agree to perform and pay when due (i) the
Liabilities set forth on the Final Balance Sheet, which include all
trade payables, accrued expenses, customer prepayments and other
Liabilities incurred by Seller in the Ordinary Course of Business, (ii)
all of Seller's contractual obligations, commitments and similar
arrangements (except for breaches or defaults of, or violations of
Applicable Law with respect to, such obligations or arrangements) which
are set forth on SCHEDULE 1.3(a) and are assigned to Purchaser pursuant
to its purchase and sale of the Assets, and (iii) Seller's obligations
under warranty for products sold by Seller (which Purchaser has agreed to
assume and perform pursuant to Section 12.9) (the "Assumed Liabilities").

(b) EXCLUDED LIABILITIES. Purchaser shall not assume any (i)
Debt Instruments (including accrued interest thereon), debts, trade
payables, accrued expenses, contractual obligations, commitments or
similar arrangements or other Liabilities to Parent, or to any of
Seller's Stockholders, Affiliates or professional advisors (attorneys,
accountants and the like), except for and only to the extent of the
account payable described in Section 7.29 hereof (ii) pending claims,
contingent liabilities (whether known or unknown), income or franchise
Tax

<PAGE>

or similarly based Tax liabilities (except properly accrued but
unpaid payroll, sales and property taxes or payments in lieu thereof),
(iii) obligations under any employee Benefit Plan or arrangement, (iv)
obligations that arise from any Environmental Conditions, (v) any pending
or Threatened claims arising from any claim, Proceeding or Order, (vi)
any contractual obligations, commitments and similar arrangements not
specifically set forth on Schedule 1.3(a): notwithstanding the foregoing,
Purchaser shall assume payment responsibility for the amount owed to
Brunswick Corporation, but not the underlying promissory notes associated
therewith; (vii) breaches and/or defaults and violations of Applicable
Laws under or pursuant to any contractual obligation, commitment or
similar arrangement of Seller (viii) any obligations associated with any
letter of credit unless the collateral for such letter of credit is
included in the Assets and has been transferred to Purchaser's possession
and (ix) any deferred Tax liability (the "Excluded Liabilities").

1.4 OTHER CHARGES. Seller shall pay any charges imposed for the
purchase, assumption, assignment, transfer or other transactions arising from or
in connection with the purchase or assumption of the Assets or of any lease,
license, agreement, arrangement or other contract, including any additional
rent, transfer Tax or sales and use Tax. The foregoing shall include any
prepayment charges, assumption fees or other similar charges.

ARTICLE II

PURCHASE PRICE

(i) Five Hundred Thousand Dollars ($500,000) (the "Cash
Consideration"), and

(ii) Purchaser's unsecured subordinated non-negotiable promissory
note made payable to Seller in the principal amount of Five Hundred Thousand
Dollars ($500,000) with annual interest thereon at a rate of eight percent (8%),
which principal and interest thereon shall be due and payable in full, subject
to certain offset rights of Purchaser as described herein in Section 2.2(d)
and/or in the promissory note, on the first annual anniversary date of the
Closing (the "Note"). During the period which the Note is outstanding,
Purchaser shall not incur secured debt or other liens against the Assets, except
for (a) the Encumbrances and secured interests of Purchaser's and/or its
Affiliates' working capital lender, (b) purchase money security interests
covering after acquired property, and (c) Purchaser's guaranty of the senior and
subordinated credit facilities of Genmar Holdings. Seller acknowledges and
agrees that liens on the Assets securing such credit facilities described in the
foregoing sentences (a), (b) and (c) immediately above are expressly permitted
under this Agreement.

The Cash Consideration shall be payable by cashier's or certified check
or by wire transfer of immediately available funds to a bank account to be
designated by Seller in writing at least three

<PAGE>

(3) business days prior to the Closing Date. The Cash Consideration, the
Note and the Earn-Out Consideration (described in Section 2.2 below) are
referred to in this Agreement in the aggregate as the "Purchase Price."

Notwithstanding the foregoing, the Purchase Price shall be subject to
reduction by the amount that the Net Assets transferred to Purchaser at
Seller's historical cost (without adjustment for the effect of goodwill or a
"step-up" basis) are less than a NEGATIVE net asset amount of $589,000 (I.E.,
liabilities assumed hereunder exceed the assets purchased by Purchaser in an
amount greater than $589,000) (the "Net Asset Adjustment"). The Net Asset
Adjustment, the effect thereof, and the procedures to be followed by the
parties in relation thereto, shall be determined in accordance with Section
2.4 hereof.

2.2 EARN-OUT CONSIDERATION.

(a) EARN-OUT CONSIDERATION. For a period of three (3) years
from and after the Closing, Purchaser agrees to remit to Seller as
additional consideration and part of the aggregate Purchase Price
hereunder an amount equal to two percent (2%) of net sales revenues
(gross sales of Seller Products, less discounts, credits and returns)
("Annual Net Revenues"), from the sale of Seller's Logic (or any direct
successor) brand boats, parts and accessories, EXCLUDING the annual
published dealer list price of the engine (collectively the "Seller
Products") based upon the annual published dealer list price of the boat
(without engine) to a maximum of $450,000 (the "Earn-Out
Consideration").

Notwithstanding the foregoing, the Earn-Out Consideration that is
computed in accordance with this Agreement shall be reduced dollar for
dollar for the product warranty claims made in connection with the Seller
Products produced through the Closing Date by Seller in excess of the
$100,000 reserve to be booked to the Final Balance Sheet in accordance
with Section 2.4 hereof. The dollar value of product warranty claims
chargeable to Seller shall be cumulative and determined in the aggregate
based on product manufactured on or prior to the Closing Date (as defined
below).

The collection, retention and reporting of product warranty claim
information by Purchaser shall be classified by the year and the serial
number of the Seller Product manufactured. Product warranty claims for a
particular Seller Product shall include all warranty work, including
without limitation (A) replacement product, parts, labor, shipping and
similar costs paid, expended or incurred by Purchaser to third parties,
and (B) replacement product, parts, labor, shipping and similar costs of
Purchaser. Warranty work on engines shall not be included in the
computation of warranty claims. Purchaser shall maintain and make
available to Seller all documentation supporting the product warranty
claims described in this Section 2.2.

(b) PAYMENT OF EARN-OUT CONSIDERATION. The Earn-Out
Consideration will be paid on an annual basis in arrears, commencing 45
days after the first anniversary date of the Closing and continuing each
year thereafter for a period of three (3) years. The Earn-Out

<PAGE>

Consideration shall be paid by cashiers or certified check or by wire
transfer of immediately available funds to an account designated by
Seller in writing at least three (3) days prior to the payment due date.
The measurement period for determination of the Earn-Out Consideration
Annual Net Revenues shall be each one-year period commencing on the first
day after the Closing Date and ending upon each one-year period
thereafter; PROVIDED, HOWEVER, that in the event the Closing Date does
not fall on the last day of the month in which the Closing occurs, then
the measurement period for determination of the Earn-Out Consideration
Annual Net Revenues shall be the last day of the month closest to the
Closing Date (the "Annual Period"). Purchaser shall provide to Seller
monthly statements of net revenue earned and warranty claims paid
pertaining to the applicable marine products during each month during
each Annual Period within thirty (30) days after the previous month-end,
accompanied by supporting documentation thereto (the "Monthly Net Revenue
Statement"). Seller acknowledges and agrees that Purchaser utilizes a
4/4/5 week/monthly/quarterly accounting system whereby the
monthly/quarterly accounting cut-off date is the last Sunday of each
month (whether or not such Sunday is, in fact, the last day of the
month). Based on the foregoing, the anniversary date used for
measurement of the Annual Period and the applicable month ends hereunder
shall be the accounting month end date closest to (i) the anniversary of
the Closing Date and (ii) the actual calendar month end, as applicable.
Purchaser shall compile each of the monthly statements prepared during
each Annual Period (except for the final Annual Period, as set forth
below) and make any required or necessary year-end adjustments to net
revenue and/or warranty claims to produce a year-end Annual Net Revenue
statement (the "Year-End Statement"), which statement shall accompany the
payment of the Earn-Out Consideration, if any, or a statement of any
amount payable by Seller to Purchaser, if any, within forty-five (45)
days after the Annual Period. In the event cumulative warranty claims
which arise in connection with Seller Product manufactured on or prior to
the Closing Date exceed 1.3% of 1998 Net Revenue, Purchaser shall have
the right to project and estimate in good faith further product warranty
claims during the three (3) year Earn-Out Consideration Period to avoid
substantial overpayment of Earn-Out Consideration. At the end of the
three (3) year Earn-Out Consideration period, Purchaser shall prepare a
good faith estimate of warranty claims (based upon prior trends) for
Seller Products manufactured on or prior to the Closing Date and adjust
the year 3 Year-End Statement to reflect such estimates, which statement
shall be transmitted to Seller within the required forty-five (45) day
period and accompanied by all supporting documentation and by the payment
of Earn-Out Consideration, if any, or a statement of any amount payable
by Seller to Purchaser, if any. Purchaser shall have a period of nine
(9) months subsequent to the end of the three (3) year Earn-Out
Consideration period to continue to accumulate product warranty data for
the purpose of preparing an adjusted and final Year-End Statement. Such
statement shall be provided to Seller, and accompanied by (i) either a
payment, if any, or a statement of any amount payable by Seller to
Purchaser, if any, and (ii) supporting documentation thereto, within
forty-five (45) days after the end of such nine (9) month period.

<PAGE>

Upon and after receipt of any Monthly Net Revenue Statement or any
Year-End Statement, Seller shall have not more than thirty (30) days
after receipt of any such statement to review Purchaser's books and
records pertinent to the computations arising under this Section 2.2 and
dispute the accuracy of such statement by written notice of dispute to
Purchaser in accordance with the notice provisions of this Agreement. In
the event that Seller does not dispute such statement, Seller shall be
deemed to have irrevocably waived its right to contest the statement
within the thirty (30) day designated period, notwithstanding any
contrary provision of this Agreement (including Section 13.17 hereof).
In the event that Seller and Purchaser are unable to resolve the disputed
matter within fifteen (15) days after the Seller notice is received and
the disputed matter involves an amount that exceeds $25,000., the parties
shall submit the matter to the Independent Accountants described in
Section 2.2(c) for a final determination under the rules and procedures
set forth in that Section, which determination shall be final,
nonappealable and irrevocably binding upon the parties.

(c) DISPUTE RESOLUTION FOR EARN-OUT CONSIDERATION. Purchaser
and Seller shall use good faith efforts to jointly resolve the
properly noticed objections and discrepancies arising from any Monthly
Net Revenue Statement or any Year End Statement within fifteen (15)
days of the receipt of a written statement of objections and
discrepancies sent in writing by Seller to Purchaser, which
resolution, if achieved, shall be fully and completely binding upon
all parties to this Agreement and not subject to further review,
appeal, or dispute. If Purchaser and the Seller are unable to resolve
Seller's objections and discrepancies to their mutual satisfaction
within such fifteen (15) day period, and the conditions set forth in
Section 2.2(b) hereof are met, then the matter shall be promptly
submitted to a mutually acceptable accounting firm of national
reputation with experience in the marine industry (the "Independent
Accountants"). In submitting a dispute to the Independent
Accountants, each of the parties shall concurrently furnish, at its
own expense, to the Independent Accountants and the other party such
documents and information as the Independent Accountants may request.
Each party may also furnish to the Independent Accountants such other
information and documents as it deems relevant, with the appropriate
copies and notification being concurrently given to the other party.
Neither party shall have or conduct any communication, either written
or oral, with the Independent Accountants without the other party
either being present or receiving a concurrent copy of any written
communication. The Independent Accountants may conduct a conference
concerning the objections and disagreements between the Seller and
Purchaser, at which conference each party shall have the right to
(i) present its documents, materials and other evidence (previously
provided to the Independent Accountants and the other party) and
(ii) to have present its or their advisors, accountants and/or counsel.
The Independent Accountants shall promptly (but not to exceed thirty
(30) days from the date of engagement of the Independent Accountants)
render a decision on the issues presented, and such decision shall be
final, nonappealable and irrevocably binding upon the parties. Each
party hereto shall be responsible for its own costs, fees and expenses
in connection with any proceeding conducted in accordance with this
Section. The cost of the Independent Accountants shall be shared
equally by the parties hereto.

<PAGE>

(d) RIGHT OF SET-OFF AND RECOUPMENT. In the event Purchaser
makes any claim for a Loss pursuant to Article X of this Agreement, or
any amount becomes or is estimated to become owing from Parent, any
Stockholder or Seller to Purchaser hereunder (including without
limitation pursuant to Section 7.24 hereof), Purchaser shall be
irrevocably entitled and is hereby instructed by Seller, Parent and each
Stockholder hereunder to offset (and exercise any other equitable rights,
including recoupment) the full dollar amount of any such claimed amount
or any paid or estimated Loss paid, incurred or which is estimated to
become payable or incurred by Purchaser, or which Purchaser becomes, or
may become, obligated to pay, against (i) the Earn-Out Consideration that
would otherwise be due and payable under this Section 2.2, (ii) the Note
or (iii) under Section 7.29 hereof. Notwithstanding and in furtherance
of the foregoing, in the event there is any unresolved claimed Loss made
by Purchaser at the end of the three (3) year Earn-Out Consideration
period, Purchaser shall be entitled to withhold the full dollar amount of
the claimed Loss from the final Earn-Out Consideration payment due to
Seller from Purchaser. In the event the claimed Loss is fully and
finally resolved, Purchaser shall promptly remit to Seller the excess of
any offset over the amount paid or legally owing by Purchaser.

2.4 DETERMINATION OF AND PROCEDURES FOR NET ASSET ADJUSTMENT; PAYMENT.

(a) Promptly following the Closing Date (but in any event
within forty-five (45) days after the Closing), Purchaser shall cause to
be prepared and delivered to Seller a certification (the "Closing
Certificate") prepared by an auditor (the "Auditor") selected by
Purchaser. The Closing Certificate shall include:

(i) A closing balance sheet (the "Final Balance Sheet")
prepared in accordance with Section 2.4(d) of this Agreement;

(ii) An itemized calculation and reconciliation of the
Net Assets shown on the Final Balance Sheet and the amount payable
to Purchaser, if any, pursuant to the Net Asset requirement set
forth in Section 2.1;

<PAGE>

(iii) In the event the Net Asset calculation results in a
decrease in the Purchase Price, such amount shall be computed in
the aggregate of the Net Asset shortfall computed in accordance
with Section 2.4(f);

(iv) Copies of all supplementary documents, work papers,
and other data relating to the Closing Certificate; and

(v) Such other supplementary evidence as Seller may
require either prior to or after delivery of the Closing
Certificate.

(b) In connection with the preparation of the Final Balance
Sheet and all other matters arising under the Closing Certificate, Seller
shall afford Purchaser and its representatives complete access to the
books, records, personnel and facilities of or pertaining to the Business
to permit the Auditor to review such information as is necessary or
desirable to prepare the Final Balance Sheet and all other statements
arising under the Closing Certificate.

(c) The Final Balance Sheet shall consist of the special
procedures report of the Auditor based on the special procedures used to
prepare the balance sheet of the Seller as of the close of business on
the Closing Date in accordance with Generally Accepted Accounting
Principles and without giving effect to the consummation of the
transactions contemplated hereby. The Auditor's statement on the Final
Balance Sheet shall not be qualified, except for the modifications to
Generally Accepted Accounting Principles mandated by this Agreement for
the proper presentation and calculation of the matters required to be
included with and in the Closing Certificate. The expense of the
preparation of the Final Balance Sheet by the Auditor shall be borne by
Purchaser. The parties hereby acknowledge and agree that, regardless of
whether it is otherwise required by Generally Accepted Accounting
Principles, or whether it is inconsistent with the past accounting
practices of Seller, the Final Balance Sheet shall not contain accruals
for the expenses associated with the preparation of the Final Balance
Sheet.

In furtherance of the foregoing, the Closing Date balance sheet
used as the basis for Final Balance Sheet prepared by the Auditor shall
reflect the following adjustments to and/or departures from Generally
Accepted Accounting Principles:

(i) Accounts receivable shall be credited to reflect a
reserve appropriate for the age and collectibility of such
receivables and retained earnings shall be debited;

(ii) The investment in Logic Tools, LLC, a Limited
Liability Company, shall be eliminated by a credit to the asset
account and retained earnings will be debited;

<PAGE>

(iii) professional fees payable for the preparation of
income tax returns shall be credited in the amount of $10,000 and
a corresponding debit in the same amount shall be made to retained
earnings;

(iv) a product warranty claim reserve account will be
credited in the amount of $100,000 and a corresponding debit in
the same amount shall be made to retained earnings;

(v) an accrual for up-front floor plan interest will be
established and credited in the amount of $15,000 and a
corresponding debit in the same amount shall be made to retained
earnings;

(vi) capitalize improperly expensed overhead and labor
costs by a debit to inventory and a credit to retained earnings;

(vii) eliminate the reserve for previously expensed and
scrapped tanks by a debit to inventory and a credit to retained
earnings;

(viii) establish inventory reserve accounts for (x) 5% of
the amount of raw materials, (y) 100% of the amount of test boats
and attached engines that are not anticipated to be sold in future
period(s) and (z) 50% of the amount of all slow moving inventory,
by a credit to inventory and a corresponding debit to retained
earnings;

(ix) Deferred tax assets shall be eliminated by a credit
to the Deferred Tax Asset account and a debit to retained
earnings;

(x) Deferred tax liabilities shall be eliminated by a
debit to the Deferred Tax Liability account and a credit to
retained earnings;

(xi) Accrued liabilities shall be credited for the
premium cost of the insurance required to be obtained under
Sections 7.24(a) and (b) in an amount not less than $27,000 and
retained earnings shall be debited in the full amount of such
premium cost;

(xii) Accrued liabilities shall be credited for the
estimated cost(s) of compliance with Sections 8.26 and 8.27
hereof, with a corresponding debit to retained earnings;

(xiii) The loans, advances, accrued interest and accounts
payable to Affiliates, in particular those payable to Parent and
the Stockholders, with the exception of the advance amount
described in Section 7.29 hereof, shall be

<PAGE>

eliminated by a debit to the loan, advance or account payable
aggregate amount and a credit to retained earnings;

(xiv) Common stock, additional paid in Capital, and each
series of preferred stock shall be eliminated by a debit to all
such accounts and a credit to retained earnings; and

(xv) Retained earnings shall be eliminated.

(d) If Seller concludes that any material matter reported in
the Closing Certificate is not accurate, Seller shall, within thirty (30)
days after its receipt of the Closing Certificate (the "Response
Period"), deliver to Purchaser a written statement setting forth a
specific description of each of its objections and each of any
discrepancies believed to exist. If no notice of any objections or
discrepancies is given within the Response Period, then the calculations
set forth in the Closing Certificate shall be controlling for all
purposes of this Agreement, and Seller shall pay the Purchaser the
amount, if any, which it is obligated to pay in accordance with the
Closing Certificate pursuant to SECTION 2.5 (f) below.

(e) Purchaser and Seller shall use good faith efforts to
jointly resolve the properly noticed objections and discrepancies within
fifteen (15) days of the receipt of the written statement of objections
and discrepancies, which resolution, if achieved, shall be fully and
completely binding upon all parties to this Agreement and not subject to
further review, appeal, or dispute. If Purchaser and Seller are unable to
resolve the objections and discrepancies to their mutual satisfaction
within such fifteen (15) day period, then the matter shall be submitted
to the Independent Accountants in the manner contemplated by Section
2.2(c) herein above.

(f) Within five (5) days of the earlier to occur of (i) any
failure to object to the Closing Certificate within the Response Period,
or (ii) receipt of the Independent Accountant's decision with respect to
such dispute, if Seller is determined to owe an amount to Purchaser,
Seller shall pay such amount to Purchaser. All amounts owed by Seller to
Purchaser in accordance with this SECTION 2.4 shall be paid by certified
or bank cashier's check or by wire transfer of immediately available
funds with interest computed thereon from the Date of Closing at the
prime rate charged on the date the payment becomes due by US Bank
National Association, Minneapolis. Minnesota. In the event the amount
determined to be owing by Seller to Purchaser hereunder is not paid
within such five (5) day period, Purchaser shall have the right to
offset/recoup such amount, plus interest thereon, against any amount
owing or to be owed to Seller, any Stockholder or Parent under this
Agreement.

2.5 REGULATED PAYMENTS. Purchaser shall have the right to withhold
such amounts as may be required by Applicable Law from the Purchase Price to be
remitted to Seller hereunder and to remit such amounts to the appropriate
authority specified by such Applicable Law. The

<PAGE>

determination as to whether such withholding is required shall be made by
Purchaser's counsel and Purchaser shall have the irrevocable right to rely on
the advice of its counsel.

ARTICLE III

CLOSING

The closing ("Closing") shall take place at 10:00 A.M., local time, on
the ___ day of May, 1999, to be effective as of April 30, 1999 at the offices of
legal counsel of Seller (as set forth in Section 13.1 hereof) or at such other
time and place as the parties may agree. The day on which the Closing takes
place is herein referred to as the "Closing Date."

ARTICLE IV

PARTIES' CLOSING OBLIGATIONS

4.1 SELLER'S OBLIGATIONS AT CLOSING; FURTHER ASSURANCES.

(a) CLOSING DELIVERABLES. At the Closing, Seller and the
Stockholders will deliver to Purchaser:

(ii) a Bill of Sale and the ancillary documents set forth
as schedules thereto duly executed by Seller in the form(s) of and
set forth in Exhibit A annexed hereto;

(1) Assignment and Assumption Agreement(s) for
permits, licenses and authorizations;
(2) Trademark or trade name assignment(s);
(3) Patent and other Intellectual Property
assignment(s);
(4) vehicle title and valid assignment(s)
thereof.

<PAGE>

(iv) all contracts, files and other data and documents
pertaining to Seller's Assets, except Seller's minute books and
ownership ledger records (which may be delivered at the offices of
Seller);

(v) executed assignment and assumption agreements
transferring all contracts and agreements of Seller to be assumed
by Purchaser;

(vi) all consents required to convey, assign and
transfer, in a form and substance satisfactory to Purchaser's
counsel, all contracts and agreements of Seller to be assumed by
Purchaser;

(vii) a certificate signed by the Seller dated as of the
Closing Date, to the effect that the representations and
warranties made by the Seller in this Agreement and in any
document, instrument and/or agreements to be executed and/or
delivered by Seller pursuant to this Agreement are true, complete
and correct at and as of the Closing with the same force and
effect as those representations and warranties made on the date
hereof and that Seller has conformed and complied with all of its
respective covenants, agreements, and obligations under this
Agreement which are to be performed and complied with by the
Seller at or prior to the Closing;

(viii) Documentation as required under this Agreement with
respect to the following:

(A) filing of Seller Tax returns as set forth in
Section 7.31;

(B) the dissolution of Logic Tools, LLC as set
forth in Section 7.32;

(D) the amended lease and waivers as set forth in
Section 7.34;

(E) the matters related to the transfer and
licensing of certain Intellectual Property as
set forth in Section 7.35;

(F) the change of Seller's corporate and all
assumed names as set forth in Section 7.4(b);

(G) the appointment of the agent for service of
process as set forth in Section 7.9.

<PAGE>

(ix) the duly executed written opinion letter of counsel
to Seller as contemplated by Section 8.5 of this Agreement, dated
as of the Closing Date, addressed to Purchaser;

(x) a Release by the Seller, the Parent and each of the
Stockholders in favor of Purchaser in a form acceptable to the
parties and their respective counsel;

(xi) executed confidentiality, Non-disclosure and
non-competition agreements of certain management and
administrative employees entering into employment with the
Purchaser (or working in the Business) in a form acceptable to
Purchaser and its counsel;

(xii) a copy certified by the secretary of (i) Seller,
(ii) each Stockholder, and (iii) Parent of the duly adopted
resolutions of the Board of Directors of each such entity
approving this Agreement and authorizing the execution and
delivery of this Agreement, including the documents, instruments,
certificates and agreements to be executed and/or delivered by the
respective entity pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;

(xiii) certificates of good standing and tax clearance
certificates for Seller and each Stockholder issued by the
Secretary of State (or equivalent authority) of the state or
sovereign government of such Seller or Stockholder's
incorporation, as applicable, each dated within ten (10) days
prior to the closing;

(xiv) such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under
local law.

(b) ADDITIONAL ASSURANCES. At any time and from time to time
after the Closing, at Purchaser's request and without further
consideration, Seller and the Stockholders will execute and deliver such
other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Purchaser may reasonably deem
necessary or desirable in order to more effectively transfer, convey and
assign to Purchaser, and to confirm Purchaser's title to, the Assets, to
put Purchaser in actual possession and operating control thereof and to
assist Purchaser in exercising all rights with respect thereto. After
the Closing, at reasonable times and on reasonable notice, Seller shall
have access to the books and records pertaining to its operations prior
to the Closing, and Purchaser shall retain such books and records for a
period of three (3) years after the Closing.

<PAGE>

agrees that it will promptly transfer and deliver to Purchaser any cash
or other property which Seller or a Stockholder mayreceive in respect of
such receivables or other items.

4.2 PURCHASER'S OBLIGATIONS AT CLOSING.

(a) CLOSING DELIVERABLES. At the Closing, Purchaser shall
deliver to Seller:

(i) a cashier's or certified check or wire transfer of
immediately available funds in the amount of the Cash
Consideration;

(ii) the Note;

(iii) a certificate signed by a duly authorized officer of
Purchaser, dated as of the Closing Date, to the effect that the
representations and warranties made by Purchaser in this Agreement
and in any document, instrument and/or agreement to be executed
and/or delivered by Purchaser pursuant to this Agreement are true,
complete and correct at and as of the Closing Date with the same
force and effect as those representations and warranties made on
the date hereof and that Purchaser has performed and complied with
all of its covenants, agreements and obligations under this
Agreement which are to be performed and complied with by Purchaser
on or prior to the Closing;

(iv) a copy certified by the secretary of Purchaser of
the duly adopted resolutions of the Board of Directors of
Purchaser approving this Agreement and authorizing the execution
and delivery of this Agreement, including the documents,
instruments and agreements to be executed and/or delivered by the
Purchaser pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby;

(v) a duly executed written opinion letter of counsel to
the Purchaser as contemplated by Section 9.4 of this Agreement,
dated as of the Closing Date, addressed to the Seller;

(vi) executed assignment and assumption agreements
transferring all contracts and agreements of Seller to be assumed
by Purchaser;

(vii) certificate of good standing issued by the Secretary
of State of the state of Purchaser's organization dated within ten
(10) days prior to the Closing;

(viii) the executed agreement of Purchaser regarding its
liabilities undertaking; and

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<PAGE>

(ix) such other documents and items as are reasonably
necessary or appropriate to effect the consummation of the
transactions contemplated hereby or which may be customary under
federal or local law or regulations.

ARTICLE V

SELLER REPRESENTATIONS AND WARRANTIES

As an inducement to Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller represents and
warrants to Purchaser that each and all of the following representations and
warranties are true and correct as of the date of this Agreement and will be
true and correct as of the Closing Date:

5.1 ORGANIZATION, STANDING AND QUALIFICATION. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware; it has all requisite power and authority and is entitled to
carry on its business as now being conducted and to own, lease or operate its
properties as and in the places where such business is now conducted and such
properties are now owned, leased or operated; and it is duly qualified,
licensed or domesticated and in good standing as a foreign company authorized
to do business in the jurisdictions listed on SCHEDULE 5.1 annexed hereto,
which are the only jurisdictions where the nature of the activities conducted
by it or the character of the properties owned, leased or operated by it
require such qualification, licensing or domestication. Seller has delivered
to Purchaser true and complete copies of Seller's articles of organization
and all amendments thereto, certified by the Secretary of State of the State
of Delaware, and the bylaws of Seller as presently in effect, certified as
true and correct by Seller's Secretary.

5.2 SUBSIDIARIES. Seller has no subsidiaries except those listed
on SCHEDULE 5.2. Seller has no interest, direct or indirect, and has no
commitment to purchase any interest, direct or indirect, in any other
corporation or in any partnership, joint venture or other business enterprise
or entity other than as set forth on SCHEDULE 5.2. The Business carried on
by Seller has not been conducted through any other direct or indirect
subsidiary or Affiliate of Seller.

5.3 TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth on
SCHEDULE 5.3, Seller has not since its inception, directly or indirectly,
purchased, leased from others or otherwise acquired any property or obtained any
services from, or sold, leased to others or otherwise disposed of any property
or furnished any service, or otherwise dealt with (except with respect to
remuneration for services rendered as a manager, officer or employee of Seller),
in the Ordinary Course of Business or otherwise, (i) any Stockholder or
Affiliate of Seller or (ii) any Person who, directly or indirectly, alone or
together with others, controls, is controlled by or is under common control with
Seller or any past or present Stockholder or Affiliate of Seller. Except as set
forth on SCHEDULE 5.3, Seller does not owe any amount to, or have any contract
with or commitment to, any of its stockholders, managers, officers, employees or
consultants (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the Ordinary Course of
Business), and none of such Persons owes any amount to Seller. Except as set
forth on SCHEDULE 5.3, no part of the

15
<PAGE>

property or assets of any past or present Stockholder or any direct or
indirect subsidiary or Affiliate of any Stockholder has, since Seller's
inception, been used by Seller.

5.4 EXECUTION, DELIVERY AND PERFORMANCE OF AGREEMENT; AUTHORITY.
Neither the execution, delivery nor performance of this Agreement by Seller
or Stockholder will, with or without the giving of notice or the passage of
time, or both, conflict with, result in a default, right to accelerate or
loss of rights under, or result in, cause or create any Liability,
reassessment or revaluation of assets, lien, charge or Encumbrance pursuant
to, any provision of Seller's articles of organization or bylaws or any
franchise, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule, regulation, Order, Proceeding, judgment, decree or
other legal or contractual requirement to which Seller or Stockholder is a
party or by which any of them or the Seller's Assets may be bound or
affected. Seller and each of the Stockholders have the full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby, all Proceedings and other actions required to be taken
to authorize the execution, delivery and performance of this Agreement and
the agreements relating hereto have been properly taken and this Agreement
constitutes a valid and binding obligation of Seller and each Stockholder,
enforceable against them in accordance with its terms.

5.5 EQUITABLE OWNERSHIP INTERESTS. SCHEDULE 5.5 lists the names
and addresses of all Persons who now have or have ever had any equitable
interest in Seller from Seller's organization and inception to the Closing
Date.

5.6 OWNERSHIP OF STOCKHOLDER INTERESTS. Except as set forth in
SCHEDULE 5.6, as of the date hereof and as of the Closing, the Stockholders
are and will be the lawful record and beneficial owners of all stockholder
and equity interests of, in and to Seller, free and clear of any liens,
claims, Encumbrances or restrictions of any kind, and all of such interests
are validly issued and outstanding, fully paid and nonassessable. SCHEDULE
5.6 also sets forth a full, complete and correct list of (a) all past and
current stockholders of Seller, including the dates of such stockholder's
period of ownership, the amount invested by such stockholder, the amount at
which such stockholder's interest was purchased or redeemed, whether the
transaction was a redemption or a third party purchase and any amount owing
to such stockholder for any closed purchase(s) by either Seller or a third
party purchaser (including the Stockholders), and (b) any and all documents
and correspondence arising from or related thereto.

5.7 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.7 are: (i)
the unaudited balance sheets of Seller as of December 31, 1998, 1997 and 1996
and the unaudited statement of earnings for the respective fiscal years then
ended, including any notes thereto, and (ii) the unaudited balance sheet of
the Seller as of March 31, 1999 and the unaudited statement of earnings for
the three-month period then ended. All of the foregoing are hereinafter
collectively referred to as the "Financial Statements." The Financial
Statements have been prepared from, and are in accordance with, the books and
records of Seller and present fairly the financial position and results of
operations of Seller as of the dates and for the periods indicated, in each
case in conformity with Generally Accepted Accounting Principles,
consistently applied.

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<PAGE>

5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent reflected or reserved against on the face of the Final Balance Sheet
(excluding the notes thereto) or set forth on SCHEDULE 5.8 annexed hereto or
otherwise specifically described in Section 1.3(a) hereof, as of the Final
Balance Sheet Date Seller had no debts, liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature whatsoever,
including, without limitation, any foreign or domestic Tax liabilities or
deferred Tax liabilities incurred in respect of or measured by Seller's
income, or its period prior to the close of business on the Final Balance
Sheet Date or any other debts, liabilities or obligations relating to or
arising out of any act, omission, transaction, circumstance, sale of goods or
services, state of facts or other condition which occurred or existed on or
before the Final Balance Sheet Date, whether or not then known, due or
payable. None of the Seller's employees is now or, will by the passage of
time hereafter become, entitled to receive any severance pay attributable to
services rendered prior to the Final Balance Sheet Date except as disclosed
on the face of the Final Balance Sheet (excluding the notes thereto).
Without in any way limiting the Excluded Liabilities hereunder, Seller and
Purchaser acknowledge and agree that Purchaser does not and shall not assume,
or become in any way obligated for, the payment of any Tax of Seller based on
income, franchise or any other similarly imposed Liability for Taxes of any
Governmental Body.

5.9 TAXES. All taxes, including, without limitation, income,
property, sales, use, franchise, value added, employees' income withholding
and social security taxes, imposed by the United States or by any foreign
country or by any state, municipality, subdivision or instrumentality of the
United States or of any foreign country, or by any other taxing authority and
all interest and penalties thereon ("Taxes" or "Tax"), which are due and
presently payable by Seller, whether disputed or not, have been paid in full,
all Tax Returns required to be filed in connection therewith have been
accurately prepared and duly and timely filed and all deposits required by
law to be made by Seller with respect to employees' withholding and other
Taxes have been duly made. Seller has not been delinquent in the payment of
any foreign or domestic Tax, assessment or governmental charge or deposit and
has no Tax deficiency or claim outstanding, proposed or assessed against it,
and there is no basis for any such deficiency or claim. Seller's federal
income Tax Returns have been filed timely with the Internal Revenue Service
for all of its fiscal years through the year ended December 31, 1998, there
is not now in force any extension of time with respect to the date on which
any Tax Return was or is due to be filed by or with respect to Seller, or any
waiver or agreement by it for the extension of time for the assessment of any
Tax, and Seller is not a "consenting corporation" within the meaning of
Section 341(f)(1) of the Code. Seller is not the subject of or party to any
Tax or Tax related claim, audit or Proceeding.

5.10 ABSENCE OF CHANGES OR EVENTS. Except as set forth in SCHEDULE
5.10 annexed hereto, since December 31, 1998, Seller has conducted its
Business only in the Ordinary Course of Business consistent with its prior
practices and has not:

17
<PAGE>

consistent with its prior practice, none of which Liabilities, in any
case or in the aggregate, materially and adversely affects the
Business, liabilities or financial condition of Seller;

(c) declared or made any distribution to its past or present
stockholders or upon or in respect of any stockholder interests, or
purchased, retired or redeemed, or obligated itself to purchase, retire
or redeem, any of its stockholder interests or other securities;

(i) made any change in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable, or paid or agreed
or orally promised to pay, conditionally or otherwise, any bonus, extra
compensation, pension or severance or vacation pay, to any stockholder,
director, officer, employee, salesman, distributor or other agent of
Seller;

18
<PAGE>

(j) issued or sold any stockholder interests or other
securities, or issued, granted or sold any options, rights or warrants
with respect thereto, or acquired any capital stock or other securities
of any Person or any interest in any business enterprise, or otherwise
made any loan or advance to or investment in any Person,

(k) made any capital expenditure or capital additions or
betterments in excess of an aggregate of $25,000;

(l) changed its banking or safe deposit arrangements;

(m) without Purchaser's prior consent, instituted, settled or
agreed to settle any litigation, action or Proceeding before any court or
Governmental Body relating to Seller or its property;

(o) suffered any Material Adverse Change;

(q) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a) through (p)
above.

5.11 LITIGATION. Except as set forth in SCHEDULE 5.11 annexed hereto,
there is no claim, Proceeding, Order, decree or judgment in progress, pending
or in effect, or to the Knowledge of Seller or either of the Stockholders
Threatened, against or relating to Seller, its officers, directors or employee,
its properties, assets or Business or the transactions contemplated by this
Agreement, and neither Seller nor either of the Stockholders knows or has reason
to be aware of any basis for the same.

5.12 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as set forth
in SCHEDULE 5.12 annexed hereto, Seller has complied with all Applicable Laws
and, Orders, judgments and decrees now or hereafter applicable to its Business,
properties or operations as presently conducted. Neither the ownership nor use
of Seller's properties nor the conduct of its Business conflicts with the rights
of any other Person, or violates, or with or without the giving of notice or the
passage of time, or

19
<PAGE>

both, will violate, conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of its certificate of
incorporation or by-laws as presently in effect, or any lien, Encumbrance,
mortgage, deed of trust, lease, license, agreement, understanding, law,
ordinance, rule or regulation, or any Order, judgment or decree to which
Seller is a party or by which it may be bound or affected. Neither Seller
nor either of the Stockholders has Knowledge of any Applicable Laws,
Proceedings or Orders which would be applicable to its Business, operations
or properties and which could have a Material Adverse Effect on or cause a
Material Adverse Change to Seller or the Business either before or within one
(1) year after the Closing.

5.13 TITLE TO PROPERTIES. Except for the leaseholds listed and
described on SCHEDULE 5.14(a), Seller has good, marketable and insurable
title to all the properties and assets, including the Assets, it owns or uses
in its Business or purports to own, including, without limitation, those
reflected in its books and records and in the Financial Statements (except
inventory sold after the Financial Statements date in the Ordinary Course of
Business). Except as set forth on SCHEDULE 5.13, none of such properties and
assets are subject to any mortgage, pledge, lien, charge, security interest,
Encumbrance, restriction, lease, license, easement, liability or adverse
claim of any nature whatsoever, direct or indirect, whether accrued,
absolute, contingent or otherwise, except (i) mortgages or security interests
shown on the Balance Sheet as securing specific liabilities or obligations or
(ii) those imperfections of title and Encumbrances, if any, which,
individually or in the aggregate, (A) are not substantial in character,
amount or extent and do not, materially detract from the value of the
properties subject thereto, (B) do not interfere with either the present and
continued use of such property or the conduct of Seller's normal operations
and (C) have arisen only in the Ordinary Course of Business. All of the
properties and assets owned, leased or used by Seller are in good operating
condition and repair, are suitable for the purposes used, are adequate and
sufficient for all current operations of Seller and are directly related to
the Business of Seller described in Schedule 5.19.

5.14 SCHEDULES. Attached hereto as SCHEDULE 5.14 is a separate
schedule containing an accurate and complete list and description of:

(a) All real estate in which Seller has a leasehold or other
interest or which is used by Seller in connection with the operation of
its Business, together with a description of each lease, sublease,
license, or any other instrument under which Seller claims or holds such
leasehold or other interest or right to the use thereof or pursuant to
which Seller has assigned, sublet or granted any rights therein,
identifying the parties thereto, the rental or other payment terms,
expiration date and cancellation and renewal terms thereof.

(b) As of a date no earlier than February 28, 1999, all of
Seller's receivables (which shall include accounts receivable, loans
receivable and any advances), together with detailed information as to
each such listed receivable which has been outstanding for more than 30
days.

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<PAGE>

(c) All machinery, tools, equipment, motor vehicles, rolling
stock and other tangible personal property (other than inventory and
supplies), owned, leased or used by Seller, setting forth with respect to
all such listed property a summary description of all leases,
Encumbrances, charges, restrictions, covenants and conditions relating
thereto, identifying the parties thereto, the rental or other payment
terms, expiration date and cancellation and renewal terms thereof.

(e) All fire, theft, casualty, liability (including products
liability) and other insurance policies insuring Seller or its properties
or interests therein, specifying with respect to each such policy the
name of the insurer, the risk insured against, the limits of coverage,
the deductible amount (if any), the premium rate and the date through
which coverage will continue by virtue of premiums already paid. Except
as disclosed in SCHEDULE 5.14(e), such policies are with reputable
insurers, provide adequate coverage for all normal risks incident to
Seller's assets, properties and Business operations and are in character
and amount at least equivalent to that carried by Persons engaged in a
business subject to the same or similar perils or hazards.

(f) All sales agency, dealer or distributorship agreements or
franchises or agreements providing for the services of an independent
contractor to which Seller is a party or by which it is bound.

(g) All contracts, agreements, commitments or licenses relating
to Intellectual Property to which Seller is a party or by which it is
bound.

(i) All contracts, agreements, and commitments, whether or not
fully performed, in respect of the issuance, sale or transfer of
stockholder interests, bonds or other securities of Seller or pursuant to
which Seller has acquired any substantial portion of its Business or
assets.

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<PAGE>

involving payments or receipts by Seller of less than $2,500 in the
case of any single contract but not more than $10,000 in the
aggregate, (iii) contracts entered into in the Ordinary Course of
Business which are terminable by Seller on less than 30 days' notice
without any penalty or consideration and involving payments or
receipts by Seller of less than $2,500 in the case of any single
contract but not more than $10,000 in the aggregate, and (iv) sales
orders or commitments for the sale of manufactured boats, parts or
accessories made in the Ordinary Course of Business upon Seller's
normal price and terms.

(l) The names, title and current annual salary rates of all
Persons (including independent commission agents) acting as employees in
Seller's Business, whether or not leased from a third party vendor,
showing separately for each such Person the amounts paid or payable as
salary, bonus payments and any indirect compensation for the year ended;
and

All of the contracts, agreements, leases, licenses and commitments required
to be listed on SCHEDULE 5.14 (other than those which have been fully
performed) are valid and binding, enforceable in accordance with their
respective terms, in full force and effect and, except as otherwise specified
in SCHEDULE 5.14, validly assignable to Purchaser without the consent of any
other party so that, after the assignment thereof to Purchaser pursuant
hereto, Purchaser will be entitled to the full benefits thereof. Except as
disclosed in SCHEDULE 5.14, none of the payments required to be made under
any such contract, agreement, lease, license or commitment has been prepaid
more than 30 days prior to the due date of such payment thereunder, and there
is not thereunder any existing default, or event which, after notice or lapse
of time, or both, would constitute a default or a basis for force majeure or
other claim of excusable delay or non-performance thereunder or result in a
right to accelerate or loss of rights, and none of such contracts,
agreements, leases, licenses or commitments is, either when considered singly
or in the aggregate with others, unduly burdensome, onerous or materially
adverse to Seller's Business, properties, assets, earnings or prospects or
likely, either before or after the Closing, to result in any material loss or
liability. None of Seller's existing or completed contracts is subject to
renegotiation with any Governmental Body. True and complete copies of all
such contracts, agreements, leases, licenses and other documents listed on
SCHEDULE .5.14 (together with any and all amendments thereto) have been
delivered to Purchaser and identified with a reference to this Section 5.14
of this Agreement.

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5.15 PATENTS AND OTHER INTELLECTUAL PROPERTY.

(a) DEFINITION OF INTELLECTUAL PROPERTY. "Intellectual
Property" shall mean (i) all inventions, whether Patentable or
unpatentable (and whether or not reduced to practice), all
improvements thereto, and all "Patents" including all Patents and
Patent disclosures and applications, and registered design and
registered design applications, together with all reissuance,
continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (ii) all "Trademarks," including registered or
unregistered Trademarks, registered or unregistered servicemarks, and
all translations, adaptations, deviations, combinations, applications,
registrations and renewals in connection with any registered or
unregistered Trademark or servicemark, and all trade names, trade
dress and logos, (iii) all "Copyrights," meaning all registered
Copyrights, Copyright applications, Copyrightable works, and
unregistered Copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection therewith, (v)
all Confidential Information, (vi) all computer software and software
licenses (including data and related documentation), (vii) all other
similar proprietary rights, and (viii) all copies and tangible
embodiments of the foregoing, in whatever form or medium.

(c) NO PROCEEDINGS, DISCLOSURE OR INFRINGEMENT. Seller has not
received any notice of any event, inquiry, investigation or Proceeding
Threatening the validity or exclusivity, where applicable, of any
Intellectual Property. Except as set forth on SCHEDULE 5.15, Seller has
taken all reasonable and prudent steps to protect the Intellectual
Property from infringement by any other Person. Except as set forth on
SCHEDULE 5.15 no other Person (i) has the right (including a license) to
use any of the Intellectual Property with respect to the goods and
services on which they are now being used in Seller's Business either in
identical form or in such near resemblance thereto as to be likely, when
applied to the goods of any such Person, to cause confusion with such
Intellectual Property, or cause a mistake or to deceive, (ii) has
notified the Seller that it claims any ownership or right to use such
Intellectual Property, or (iii) to Seller's or either Stockholder's
Knowledge, is infringing on any Intellectual Property in any material
respect. Except as set forth in SCHEDULE 5.15, Seller has full ownership
rights and interests in and to all of the trade secrets used in the
Business of Seller, which trade secrets have not been disclosed to or to
Seller's Knowledge appropriated or used by any Person other than Seller.
The use of the Intellectual Property utilized in the Seller's Business
has not conflicted and does not now conflict with, infringe

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upon or otherwise violate in any material respect, the rights of any
third party. Except as set forth on SCHEDULE 5.15, no legal Proceeding
has been instituted against, or notice or claim received by Seller,
that alleges that the use by Seller of the Intellectual Property (or
any Intellectual Property or process) used in Seller's Business
infringes upon or otherwise violates the rights of a third party,
other than any such Proceeding or notice or claim that has been
disposed of without the imposition of any continuing adverse event on
the Seller's Business.

(d) PROPRIETARY RIGHTS. Schedule 5.14(d) identifies each
Patent, Trademark and Copyright owned or used by the Seller. SCHEDULE
5.14(d) sets forth: (i) for each Patent, the issue number, issue date,
normal expiration date (if applicable) and subject matter for each
country in which such Patent has been issued, or, if applicable, the
application number and date of filing for each country, (ii) for each
Trademark (A) the description, the application, serial number or
registration number, the class of goods covered and the issue and
expiration or renewal (as applicable) date for each country in which the
Trademark has been applied for or registered, (B) the description of each
Trademark for which registration has not been sought, (iii) for each
registered Copyright, the application or issue number and the date of
filing for each country in which a Copyright has been registered. True
and correct copies of all Patents, Trademarks and Copyrights (including
all pending applications) evidencing Intellectual Property which have
been registered or issued by a governmental agency to or for the Seller
have been provided to the Purchaser. Except as to applications pending,
all of the Patents, registered Trademarks and registered Copyrights have
been duly and validly issued. All of the pending Patent applications
have been duly filed. SCHEDULE 5.14(d) also identifies all material
licenses and license rights to which the Seller is a party or pursuant to
which it is bound.

5.16 NO GUARANTIES. Except as set forth in SCHEDULE 5.16, none of
the obligations or liabilities of Seller is guaranteed by, or subject to a
similar contingent liability to, any other Person, nor has Seller or any
Stockholder guaranteed, or otherwise become contingently liable for, the
obligations or liabilities of any other Person in connection with the
Business.

5.17 INVENTORY. All items of Seller's inventory and related
supplies (including raw materials, work-in-process and finished goods) so
counted and included for valuation as of such date are (a) merchantable, or
suitable and usable for the production or completion of merchantable
products, for sale in the Ordinary Course of Business as first quality goods
at normal mark-ups, (b) not obsolete or below standard quality, (c) reflected
on the basis of a complete physical count, and (d) valued at the lower of
cost (on a first-in, first-out basis) or market in accordance with Generally
Accepted Accounting Principles. Seller's Assets include a sufficient but not
an excessive quantity of each type of such inventory and supplies in order to
meet the normal requirements of Seller's Business and operations for a period
of not less than one (1) nor more than three (3) months.

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the ordinary course of Seller's Business and shall be (or have been) fully
collected when due, net of any amount of allowance for doubtful accounts (bad
debt reserve), without resort to litigation and without offset or
counterclaim, in the aggregate face amounts thereof except to the extent of
the normal allowance for doubtful accounts with respect to accounts
receivable computed as a percentage of sales consistent with marine industry
standards.

5.21 REAL ESTATE. Seller does not now and has never owned real
estate. With respect to each parcel of real estate leased by Seller (the
"LEASED REAL ESTATE"):

(a) SCHEDULE 5.14(a) contains a complete and accurate
description of each written or oral lease regarding Leased Real Estate;

(b) Except as set forth on SCHEDULE 5.21 hereto, there are no
public improvements affecting any parcel of Leased Real Estate including,
but not limited to, water, sewer, sidewalk, street, alley, curbing,
landscaping or related improvements, which have been commenced and/or
completed and for which an assessment has not been levied against the
Leased Real Estate or, to Seller's Knowledge, which may be levied against
the Leased Real Estate after the date of this Agreement;

(c) There are no deferred property Taxes or assessments with
respect to the Leased Real Estate which may or will become due and
payable as a result of the consummation of the transaction contemplated
hereby;

(d) The Leased Real Estate is free and clear of any and all
Encumbrances, except (i) those Encumbrances set forth in SCHEDULE 5.21
hereto, (ii) municipal zoning ordinances, recorded easements for public
utilities and recorded building and use restrictions and covenants,
(iii) general real estate Taxes and installments of special assessments
payable in the year of Closing, and (iv) minor survey exceptions,
licenses, easements or reservations of, or rights of others for, oil, gas
minerals, ores or metals, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions on the use of real property, minor defects in title or
other similar charges not interfering in any material respect with the
Ordinary Course of Business of the Seller or with the use of the Leased
Real Estate (collectively the "PERMITTED ENCUMBRANCES"). The Permitted
Encumbrances and those Encumbrances set forth in SCHEDULE 5.21 hereto do
not individually

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or in the aggregate materially impair or prohibit the Seller's current
use of the Leased Real Estate;

(e) Except as set forth in SCHEDULE 5.21 hereto, there are no
condemnation Proceedings pending or, to which the Seller has Knowledge,
Threatened with respect to all or any part of the Leased Real Estate;

(g) To Seller's Knowledge, and except as set forth on SCHEDULE
5.21 hereto, there are no Applicable Laws requiring repair, alteration or
correction of any existing condition on the Leased Real Estate and there
are no conditions that could give rise to the same;

(h) To the Seller's Knowledge, except as set forth in SCHEDULE
5.21 hereto, (a) there are no structural, mechanical or other defects of
material significance in any of the buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, located the Leased
Real Estate, and (b) all such buildings, improvements, fixtures and
equipment, including the roof, heating, ventilating, air conditioning,
electrical, plumbing and sanitary disposal systems, will be until the
Closing Date, maintained in good repair, working order and condition,
ordinary wear and tear excepted;

(i) Except as set forth in SCHEDULE 5.21 hereto, the
improvements on the Leased Real Estate and the Seller's use thereof
comply in all material respects with any and all building, zoning,
subdivision, traffic, parking, land use, occupancy, health and other
Applicable Laws (excluding Environmental Laws which are subject to the
representations set forth in Section 5.24) pertaining to the Leased Real
Estate or to the development, construction, management, use and
operations of the improvements thereon;

(j) Except as set forth in SCHEDULE 5.21 hereto, the
improvements located on the Leased Real Estate, including fences,
driveways and other structures occupied or used by Seller, are wholly
within the boundary lines of the Leased Real Estate and such improvements
and the Seller's present uses thereof do not in any material respect
infringe upon the rights of any other Person;

(k) To Seller's Knowledge, except as set forth in SCHEDULE 5.21
hereto, no buildings, fences, driveways or other structures of any
adjoining owner encroach upon any part of the Leased Real Estate; and

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(l) Except as set forth in SCHEDULE 5.21 hereto, to the
Knowledge of Seller, the Seller has all operating permits necessary for
the operation of the Business, and all such permits are current, except
where the failure to have any such current operating permit in good order
would not have a Material Adverse Effect on the Seller. To the Knowledge
of Seller, except as set forth in SCHEDULE 5.21, the Seller has all
easements, or access through public utility easements, on to private
property, construction permits, highway crossing licenses and permits
(and other similar licenses and permits) and right-of-way-licenses
reasonably necessary to conduct the Business, except where the failure to
have any such easement on to private property, construction permits,
highway crossing licenses and permits (and other similar licenses and
permits), and right-of-way licenses would not have a Material Adverse
Effect.

5.22 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither Seller nor any
director, officer, employee or agent of Seller, nor any other Person acting
on its behalf, has, directly or indirectly, since inception has given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help
or hinder the Business of Seller (or assist Seller in connection with any
actual or proposed transaction) which (a) might subject Seller to any damage
or penalty in any civil, criminal or governmental litigation or Proceeding,
(b), if not given in the past, might have had an adverse effect on the
Assets, Business or operations of Seller as reflected in the Financial
Statements or (c), if not continued in the future, might adversely affect
Seller's assets, Business, operations or prospects or which might subject
Seller to suit or penalty in any private or governmental litigation or
Proceeding.

5.23 EMPLOYEE BENEFITS.

(a) BENEFIT PLANS. Except as described in SCHEDULE 5.23
hereto, the Seller does not maintain or contribute to any Benefit Plans.
Without limiting the generality of the foregoing provision of this
Section, except as described in SCHEDULE 5.23 hereto, there are no
pension plans, welfare plans or employee benefit plans qualified under
Section 401(a) of the Code to which the Seller is required to contribute.
The Seller does not and will not have any unfunded Liability for services
rendered prior to the Closing Date under any Benefit Plans. The Seller
is not in any material default under any Benefit Plan. Except as set
forth in Schedule 5.23, neither the Seller, nor any entity now or
formerly part of a controlled group with the Seller, within the meaning
of Section 412(c)(11)(B)(ii) of the Code, maintains or has ever
maintained a "defined benefit plan," as defined in Section 3(35) of
ERISA, that is subject to Section 412 of the Code and Section 302 of
ERISA. Except as set forth in SCHEDULE 5.23 hereto, neither the Seller
nor any of its "subsidiaries" contributes to or has any Liability
(including but not limited to withdrawal Liability) with respect to any
multi-employer plan (as defined in Section 4064(a) of ERISA or Section
4001(a)(3) of ERISA). Other than claims for benefits in ordinary course,
there are no actions, suits, disputes, arbitrations or other material
claims pending or, to Seller's' Knowledge, Threatened with respect to any
Benefit Plan. For purposes of this Section, "subsidiaries" shall include
all corporations and all trades or businesses (whether or not
incorporated) which may be liable for any income Tax, loss of Tax
deduction, excise Taxes, penalties or other similar

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consequences under ERISA (as hereinafter defined) or under the Code by
reason of its ownership affiliation with the Seller.

(b) OTHER PLANS. The Seller have made available to the
Purchaser information relating to deferred compensation, incentive
compensation and other fringe benefit plans, if any, sponsored or
maintained by the Seller or on behalf of employees working in Seller's
Business. Except as set forth in SCHEDULE 5.23, there are no present or
former employees of the Seller who are entitled to (i) any pensions or
other benefits to be paid after termination of employment, including
termination on account of disability (except as otherwise required under
Section 601 of ERISA), (ii) deferred compensation payments, or (iii) any
other form of compensation which arises from or incident to the
transactions contemplated hereunder.

(e) FIDUCIARY DUTY. Neither Seller nor any other fiduciary of
any Benefit Plan listed on SCHEDULE 5.23 hereto has engaged in any
transaction with respect to such Benefit Plan or failed to act in a
manner with respect to such Benefit Plan which could reasonably be
expected to subject the Seller to any material Liability for a breach of
fiduciary duty under ERISA or any other Applicable Law.

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5.24 ENVIRONMENTAL MATTERS.

(a) Except as set forth in SCHEDULE 5.24 hereto, the Seller has
never generated, transported, stored, handled, disposed of or contracted
for the disposal of any Hazardous Materials. Except as set forth in
SCHEDULE 5.24 hereto, to the Knowledge of Seller, no employee of the
Seller or any individual working in Seller's business operation has, in
the course and scope of employment or engagement with the Seller, been
exposed to any Hazardous Materials in such a manner as to be harmed
thereby (whether such harm is now known to exist or will be discovered in
the future). Except as set forth on SCHEDULE 5.24 hereto, the Seller is
not listed as a potentially responsible party under CERCLA or any
comparable or similar U.S. federal or state statute, the Seller has not
received notice of such a listing and the Seller have no Knowledge of any
facts or circumstances which could give rise to such a listing.

(b) Except as set forth on SCHEDULE 5.24 hereto, the Leased
Real Estate has been operated by the Seller and is in compliance in all
material respects with all Applicable Laws, including Environmental Laws
and all Applicable Laws relating to underground and/or above ground
petroleum storage tanks. Except as set forth on SCHEDULE 5.24 hereto,
the Seller otherwise complies in all material respects with all
Environmental Laws. Seller has obtained or has taken appropriate steps,
as required by Environmental Laws and Applicable Laws, to obtain all
environmental, health and safety permits, consents, approvals, licenses
and other authorizations necessary for the ownership and operation of the
Business, all of the permits and other such authorizations are in good
standing, and the Seller is in compliance in all material respects with
such permits and other such authorizations. Except as set forth in
SCHEDULE 5.24, and to Seller's Knowledge, the Leased Real Estate is free
of any and all Environmental Conditions and Hazardous Materials and is
not subject to any Environmental Claim or "Super-Fund" type Encumbrances
by any Person arising from the release or Threatened release of any
Hazardous Materials in, on, about or under the Leased Real Estate.

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(c) All of the third parties with which the Seller has
arranged, engaged or contracted to accept, treat, transport, store,
dispose or remove any pollutant generated or present at the Leased Real
Estate, or which otherwise participate or have participated in activities
or conduct related to the Leased Real Estate or the Business, were
properly permitted at the relevant time to perform the foregoing
activities or conduct.

(d) There are not currently and to Seller's Knowledge, with the
obligation of inquiry and investigation, never have been any wells or
underground and/or above ground storage tanks (whether or not currently
in use) on any parcel of real estate (including the Leased Real Estate)
and, to the extent such wells or tanks are described in SCHEDULE 5.24,
all such wells and tanks are, in sound condition and are not leaking.

(e) No part of any parcel of Leased Real Estate is now being
used, nor to Seller's Knowledge, with the obligation of inquiry and
investigation, has any parcel of Leased Real Estate ever been used, as a
landfill, dump or other disposal, storage, transfer, treating or handling
area for any Hazardous Materials, or as a gasoline service station or a
facility for selling, dispensing, storing, transferring, treating or
handling Hazardous Materials.

(f) Except as set forth in SCHEDULE 5.24 hereto, Seller is not
subject to any investigation, nor has the Seller received any written
notification within the past two years of any judicial or administrative
Proceeding, notice, Order, judgment, decree or settlement, alleging or
addressing (i) any violation of Environmental Laws or (ii) any
Environmental Claims or liabilities and costs arising from the release or
Threatened release of any Hazardous Materials. To the Knowledge of
Seller, there has been no release of any Hazardous Materials in a
reportable quantity under Environmental Laws at, to or from the Leased
Real Estate.

(g) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, with the obligation of inquiry and investigation, there is not
constructed, placed, deposited, stored, disposed or located on the Leased
Real Estate any asbestos in any form.

(h) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, with the obligation of inquiry and investigation, there is not
constructed, placed, deposited, stored, disposed nor located on the
Leased Real Estate any polychlorinated biphenyls ("PCBs") or
transformers, capacitors, ballasts, or other equipment which contain
dielectric fluid containing PCBs.

(i) Except as set forth in SCHEDULE 5.24 hereto, to Seller's
Knowledge, with the obligation of inquiry and investigation, there is not
constructed, placed, deposited, stored, disposed nor located on the
Leased Real Estate any insulating material containing urea formaldehyde.

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(j) As used in this Agreement including Section 12.8 hereof,
the terms "Environmental Claims", "Environmental Conditions",
"Environmental Laws" and "Hazardous Materials" shall be defined as
follows:

(iii) "Environmental Laws" shall mean all Applicable Laws
and any Order that (A) regulates or relates to the protection or
clean-up of the environment; the use, treatment, generation,
storage, transportation, handling, disposal or release of
Hazardous Materials, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other
natural resources; or the health and safety of Persons or
property, including protection of the health and safety of
employees insofar as such health and safety laws may apply to
matters affecting the natural environment; or (B) imposes
Liability with respect to any of the foregoing, including without
limitation CERCLA; RCRA; the Federal Water Pollution Control Act,
as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances
Control Act, 15 U.S.C. Section 2601 ET SEQ.; the Clean Air Act, 42
U.S.C. Section 7401 ET SEQ.; the Safe Drinking Water Act, 42
U.S.C. Section 300f ET SEQ.; the Oil Pollution Act of 1990, 33
U.S.C. Section 2701 ET SEQ.; and the Occupational Safety and
Health Act of 1970, as amended, as it applies to an effect upon
the natural environment, 29 U.S.C. Section 651 ET SEQ.; or any
other federal, state or local law of similar effect, each as
amended from time to time.

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wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any
applicable Environmental Law.

5.25 DEBT INSTRUMENTS. SCHEDULE 5.25 is a true, correct and
complete list showing the names of the parties and outstanding indebtedness
as of the respective dates set forth on SCHEDULE 5.25 under all mortgages,
indentures, notes, guarantees and other obligations for or relating to
borrowed money, purchase money debt (including conditional sales contract and
capital leases) or covenants not to compete (the "Debt Instruments") for or
under which the Seller is primarily or secondarily obligated. The Seller has
previously delivered to Purchaser true, complete and correct copies of each
of the Debt Instruments. Except as described in SCHEDULE 5.25, Seller has
performed all of the material obligations required to be performed by it, and
is not in material breach or default under any of the provisions of any of
the Debt Instruments, and there has not occurred any event which, (with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute such a breach or default.

5.26 RELATIONSHIP WITH RELATED PERSONS. Except as set forth in
SCHEDULE 5.26 hereto, none of the members of the Board of Directors,
officers, and employees of the Seller, Parent or any Stockholder, nor their
Related Persons, have any interest in any of the properties or assets of the
Seller (other than the interest conferred under law solely as a consequence
of a Person's status as a stockholder of Seller) and, to Seller's, Parent's
or either of the Stockholders' Knowledge, do not own, of record or as a
beneficial owner, an equity interest or any other financial or profit
interest in any Person that (i) has had business dealings or a material
financial interest in any transaction with the Seller or, (ii) has engaged or
is engaged in competition with the Seller with respect to any line of
products or services of the Seller in any market presently served by the
Seller (a "Competing Business") (except for less than five percent (5%) of
the outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market). To the
Knowledge of the Seller, and except as set forth on SCHEDULE 5.26 hereto, no
Stockholder, member of the Board of Directors, or officer of the Seller and
none of their Related Persons is a party to any Contract with, or has any
claim or right against, the Seller, other than the rights officer and members
of the Board of Directors of the Seller have with respect to indemnification
under state law. All money owed by the Seller to its Stockholders, member of
the Board of Directors, or officers, or their Related Persons, (other than
for salary) are for bona fide debts and are set forth in SCHEDULE 5.26 hereto.

5.27 LABOR MATTERS. Seller has no employees and, as a result, has
no collective bargaining agreements to which the Seller is a party. Except
as set forth in SCHEDULE 5.27, since inception of Seller, Seller has not
employed any employees and has not experienced any attempt to organize any
employees for the purpose of collectively bargaining or entering into a labor
contract on behalf of such employees. As of the date hereof, there is no
employee or other activity by Persons working in Seller's Business which may
be adverse to Seller, including labor strikes or disturbances, pending or, to
the Knowledge of Seller, Threatened against Seller or the Person with whom
Seller contracts for labor. Except as set forth on SCHEDULE 5.27, there are
no disputes or grievances subject to any grievance procedure, unfair labor
practice proceedings, arbitration or litigation under such agreements, or as
a result of such attempts to organize, which have not been finally resolved,
settled

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or otherwise disposed of. Seller is in compliance in all material respects
with all Applicable Laws respecting employment practices, employment
documentation, terms and conditions of employment and wages and hours. There
are no labor practice charges or complaints against or affecting Seller
pending before any applicable Governmental Body and, there are no material
facts or information which would have a reasonable probability of giving rise
thereto.

5.28 YEAR 2000 COMPLIANCE.

(a) YEAR 2000. Seller has conducted an inventory (or
inventories) and/or other investigations of any and all Computer Systems
used or held for use by Seller in order to determine which parts of such
Computer Systems are not Year 2000 Compatible and to estimate the cost of
rendering such Computer Systems Year 2000 Compatible prior to January 1,
2000. A true, correct and complete copies of any written reports or
other documentation resulting from such inventory and/or other
investigations, as well as all cost estimates of compliance, are set
forth in SCHEDULE 5.28.

Except as set forth in SCHEDULE 5.28, the Computer Systems of
Seller (i) presently function properly and produce accurate and complete
calculations and data and (ii) are Year 2000 Compatible. Seller has made
inquiries of and has received responses from each of its major suppliers
and customers regarding Year 2000 Compatibility issues. True, correct
and complete copies of any correspondence and/or agreements with any
suppliers or customers relating to Year 2000 Compatibility issues are set
forth in SCHEDULE 5.28.

(b) CALENDAR FUNCTIONS. Except as set forth on SCHEDULE 5.28,
all Software, hardware and equipment used by Seller in connection with or
necessary to the conduct of Business that contains or calls on a calendar
functions, including but not limited to any function that is indexed to a
computer processing unit clock, provides specific days, dates or times,
or calculates spans of dates and times, is and will be able to record,
store, process, calculate, compare, sequence and provide true and
accurate day, date and time data from, into and between the twentieth and
twenty-first centuries, including but not limited to with respect to the
years 1999, 2000 and 2001 and leap year calculations.

(i) "Software" means all computer software, including
but not limited to, application software and system software,
including all source code and object code versions thereof, in
any and all forms and media, whether recorded on paper,
magnetic media or other electronic or non-electronic media
(including data and related documentation, user manuals,
training manuals, flow charts, diagrams, descriptive tests and
programs, computer print-outs, underlying tapes, computer
databases and similar items), integrated circuits, embedded
systems, and other electromechanical or processor based systems.

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(ii) "Year 2000 Compatible" (and variations thereof)
shall mean, with respect to any Computer System, that such
Computer Systems (i) record, store, process and provide true and
accurate dates and calculations for dates and spans of dates, (ii)
is and will be able to operate on a basis comparable to its
current operation during and after calendar year 2000 A.D.,
including, but not limited to, leap years, and (iii) shall not end
abnormally or provide invalid or incorrect results as a result of
date data which represents or references (or fails to represent or
reference) different centuries or more than one century.

(iii) "Computer System" shall, with respect to any Person,
mean any and all computer software programs, semiconductor chips,
microprocessors, embedded microcontrollers and other hardware
containing programming instructions of any kind, whether owned or
licensed or otherwise held by such Person for use.

5.29 DISCLOSURE. No representation or warranty by Seller contained
in this Agreement, nor any statement or certificate furnished or to be
furnished by Seller or Stockholder to Purchaser or its representatives in
connection herewith or pursuant hereto, contains or will contain any untrue
statement of a material fact, or omit or will omit to state any material fact
required to make the statements herein or therein contained not misleading or
necessary in order to provide a prospective purchaser of the Business of the
Seller with adequate information as to Seller and its condition (financial
and otherwise), properties, assets, liabilities, Business and prospects, and
Seller and Stockholder have disclosed to Purchaser in writing all material
adverse facts known to them relating to the same. The representations and
warranties contained in this Article V or elsewhere in this Agreement or any
document delivered pursuant hereto shall not be affected or deemed waived by
reason of the fact that Purchaser and/or its representatives knew or should
have known that any such representation or warranty is or might be inaccurate
in any respect, notwithstanding any investigation by or due diligence
materials provided to or obtained by Purchaser.

ARTICLE VI

PURCHASER'S REPRESENTATIONS AND WARRANTIES

REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller as follows:

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ARTICLE VII

PRECLOSING COVENANTS

7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING.

(a) Prior to the Closing, Seller shall conduct its Business and
affairs only in the ordinary course and consistent with its prior
practice and shall maintain, keep and preserve its assets and properties
in good condition and repair and maintain insurance thereon in accordance
with present practices, and Seller and each Stockholder will use their
best efforts (i) to preserve the Business and organization of Seller
intact, (ii) to keep available to Purchaser the services of Seller's
present officers, employees, agents and independent contractors, (iii) to
preserve for the benefit of Purchaser the goodwill of Seller's suppliers,
customers, landlords and others having business relations with it, (iv)
to cooperate with Purchaser and use reasonable efforts to assist
Purchaser in obtaining the consent of any landlord or other party to any
lease or contract with Seller where the consent of such landlord or other
party may be required by reason of the transactions contemplated hereby
and (v) to cooperate with Purchaser in its efforts to obtain the
financing. Without limiting the generality of the foregoing, prior to the
Closing Seller will not without Purchaser's prior written approval:

(i) change its certificate of organization or other
governing documents or merge or consolidate or obligate itself to
do so with or into any other entity;

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(iii) perform, take any action or incur or permit to exist
any of the acts, transactions, events or occurrences of the type
(A) described in subparagraphs (a), (b), (c), (d), (e), (h), (i),
(j), (k), (l), (m), (n), (p) or (q) of Section 5.10 of this
Agreement which would have been inconsistent with the
representations and warranties set forth therein had the same
occurred after the Balance Sheet Date and prior to the date hereof
or (B) described in Section 5.3 of this Agreement which would be
required to be set forth on SCHEDULE 5.3 hereof.

(c) Seller shall, and each Stockholder will cause Seller to,
consult with and follow the recommendations of Purchaser with respect to
(i) the cancellation of contracts, agreements; commitments or other
understandings or arrangements to which Seller is a party, including,
without limitation, purchase orders for any item of inventory and
commitments for capital expenditures or improvements, (ii) the
commencement in one or more of Seller's locations of the orderly and
gradual discontinuance of particular items or operations and (iii)
purchasing, pricing or selling policy including, without limitation,
selling merchandise at discounts; PROVIDED, HOWEVER, that nothing
contained in this subsection (c) shall require Seller to take or fail to
take any action that, in Seller's reasonable judgment, is likely to give
rise to a substantial penalty or a claim for damages by any third party
against Seller, or is likely to result in losses or reduced profits to
Seller, or is otherwise likely to prejudice in any material respect or
unduly interfere with the conduct of Seller's Business and operations in
the ordinary course consistent with prior practice, or is likely to
result in a breach by Seller of any of its representations, warranties or
covenants contained in this Agreement (unless any much breach is first
waived in writing by Purchaser).

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7.3 PURCHASER LOANS. Seller acknowledges and agrees that Purchaser
may, at its sole option, advance funds to Seller to facilitate payment of
Seller trade accounts payable that are negotiated and compromised to
Purchaser's satisfaction prior to or on the date of Closing. In the event
such advances are remitted to Seller by Purchaser, Seller shall execute a
secured promissory note payable to Purchaser, Uniform Commercial Code
financing statements, a pledge agreement and such other documents and
instruments deemed reasonable, customary and necessary by Purchaser to secure
the advance. Any and all advances remitted by Purchaser shall be used solely
for the payment of trade accounts payable approved in advance in writing by
Purchaser. The promissory note given by Seller in exchange for Purchaser's
advance(s) shall (i) not be subordinated to any other debt of Seller, (ii)
bear interest at 8% per annum with a due date of May 31, 1999, (iii) be
secured by a blanket lien on Seller's assets and (iv) be guaranteed by
Seller's Shareholders and the Parent. In the event the transaction does not
close on or before May 31, 1999, or this Agreement is terminated for any
reason pursuant to Article XI hereof, the promissory note shall become
immediately due and payable as of such date, along with a service charge
equal to 5% of the savings on the difference between the trade account
payable at the gross amount and the amount actually paid, and Seller shall
immediately remit the entire unpaid principal balance of the promissory note,
the service charge and accrued interest on the promissory note to Purchaser
by wire transfer of immediately available funds.

7.4 DIRECTORS AND STOCKHOLDERS AUTHORIZATION; CHANGE OF SELLER NAME.

(a) At or prior to the Closing, Seller will deliver to
Purchaser a copy of the resolutions of its Board of Directors and the
resolutions or consents of Parent and each Stockholder, together with any
and all required resolutions or consents of the Board of Directors
thereof, approving the execution and delivery of this Agreement and the
consummation of all of the transactions contemplated hereby, duly
certified by an officer of Seller, Parent and each of the Stockholders,
as applicable.

(b) At least ten (10) days prior to the Closing, Seller and the
Stockholders will deliver to Purchaser a duly executed and acknowledged
certificate of amendment to Seller's Certificate of Incorporation and all
other appropriate documents which are required, necessary or desirable to
change Seller's corporate name (or any assumed name) to a new name
bearing no resemblance to its present name so as to make Seller's present
name available to Purchaser. Purchaser is hereby authorized to file such
certificates or other documents (at Seller's expense) in order to
effectuate such change of name at or after the Closing as Purchaser shall
elect.

7.5 NON-COMPETITION AGREEMENT. Seller, Parent and each Stockholder
shall execute and deliver to Purchaser at or prior to the Closing a
Non-Competition and Continuity of Business Dealings Undertaking in the form
of Exhibit C annexed hereto.

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7.7 PAY INCREASES. Except normal increases in the Ordinary Course
of Business, the Seller or its agent or contractor shall not, without the
prior written consent of Purchaser, grant any increase in the salaries or
rate of pay to any of its employees, grant any increase in any benefits or
establish, adopt, enter into, make any new grants or awards under, or amend
any collective bargaining agreement, employment agreement or Benefit Plan for
the benefit of any of its employees.

7.9 SERVICE OF PROCESS. Seller, Parent and each Stockholder shall
each appoint and maintain for a minimum period of four (4) years, paid in
advance, an agent for service of process within the State of North Carolina.
Seller shall provide evidence satisfactory to Purchaser and its counsel of
such appointment at the Closing.

7.10 PAYMENT AND PERFORMANCE OF OBLIGATIONS. Seller shall timely pay
and discharge all invoices, bills and other monetary Liabilities in a manner
presently customary to Seller's present business practices.

7.12 PROMPT NOTICE. Seller shall promptly notify Purchaser in
writing upon becoming aware of any of the following: (i) any claim, demand
or other Proceeding that may be brought, Threatened, asserted or commenced
against Seller, its officers or directors; (ii) any changes in the accuracy
of the representations and warranties made by Seller or any Stockholder in
this Agreement; (iii) any Proceeding or any complaint praying for an
Injunction restraining or enjoining the consummation of the transactions
contemplated hereby; or (iv) any notice from any Person of its intention to
institute an investigation into, or institute a Proceeding to restrain or
enjoin the consummation of the transactions contemplated hereby or to nullify
or render ineffective this Agreement or such transactions if consummated.

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7.13 CONSENTS. As soon as reasonably practicable and in any event
on or before the Closing Date, Seller will to obtain or cause to be obtained
all of the consents and approvals of all Persons necessary for the Seller to
consummate the transactions contemplated hereby, including the consents and
approvals required under any contract, agreement, license, permit or
governmental grant.

7.15 NO SOLICITATION OF OTHER OFFERS. Seller will not, and will not
permit its Stockholders, representatives, investment bankers, agents and
Affiliates to, directly or indirectly, (i) solicit or encourage submission of
or any inquiries, proposals or offers by, (ii) participate in any
negotiations with, (iii) afford any access to the properties, books or
records of the Seller to, (iv) accept or approve, or (v) otherwise assist,
facilitate or encourage, or enter into any Contract with, any Person or group
(other than Purchaser and its Affiliates, agents and representatives), in
connection with any Acquisition Proposal. In addition, the Seller will not,
and will not permit its Stockholders, representatives, investment bankers,
agents and Affiliates to, directly or indirectly, make or authorize any
statement, recommendation or solicitation in support of any Acquisition
Proposal made by any Person or group (other than Purchaser). In addition,
Seller will immediately cease any and all existing activities, discussions or
negotiations with any parties with respect to any of the foregoing. In the
event Seller receives any Acquisition Proposal, such proposal shall be
immediately forwarded in its entirety to Purchaser. "Acquisition Proposal"
means any proposal relating to the possible acquisition of the Seller either
by way of merger, purchase of capital stock of Seller, purchase of all or
substantially all of the assets of Seller, or otherwise.

7.17 INVENTORY. Seller shall maintain the levels of inventory,
materials and supplies used in the Business consistent with past practice.

7.18 INSURANCE. Seller shall maintain in full force and effect all
insurance coverages for the Seller's properties and assets substantially
comparable to coverages existing on the date hereof.

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7.21 MONTHLY FINANCIAL STATEMENTS. Within twenty-one (21) days of
the close of each month, Seller shall deliver to Purchaser a balance sheet
and income statement for disclosing the financial position and results of
operations of Seller for the preceding month and year-to-date which shall be
prepared on a basis consistent with the Financial Statements identified on
SCHEDULE 5.7 hereof and consistent with the prior months and year-to-date
Financial Statements.

7.22 [THIS SECTION INTENTIONALLY OMITTED.]

7.24 DISCONTINUED OPERATIONS AND ENVIRONMENTAL CONDITIONS INSURANCE
COVERAGE.

(a) DISCONTINUED OPERATIONS (TAIL) INSURANCE COVERAGE. Seller
shall purchase and maintain a discontinued operations (tail) insurance
policy or policies for a period of six (6) years on and after the Closing
Date at such coverages and coverage levels (not less than $1 million per
occurrence and $5 million in the aggregate) and with an insurer
reasonably acceptable to Purchaser, which policy or policies shall insure
Seller (and Purchaser as an additional insured) against any and all
liability, including products liability, for, at a minimum, all acts,
occurrences and omissions of Seller arising from, in connection with or
incident to, without limitation, the design, manufacture, marketing,
product branding, distribution or sale of any and all Seller Products, or
Seller workmanship, prior to and including the Closing Date. Such policy
or policies of insurance shall be applicable to direct Losses of Seller
and Losses arising from or in connection with any and all third party
claim(s). Seller and Purchaser agree that (i) Seller shall be
responsible and liable for any and all Losses arising from such claims
and Proceedings the factual basis for which arose in any way from the
manufacture of Seller Product on or prior to the Closing Date and (ii)
Purchaser shall be responsible and liable only for Losses arising from
claims and Proceedings the factual basis of which arises only from
Purchaser's manufacture of products after the Closing Date. In the
event that Purchaser purchases and maintains the insurance policy or
policies required by this Section 7.24(a), the payment provisions and
offset rights described in Section 7.24(b) below shall be applicable to
and govern the provisions of this Section 7.24(a); PROVIDED, HOWEVER,
that notwithstanding the foregoing, Seller and Purchaser have agreed that
Purchaser shall be responsible for payment of the premium cost of the
insurance described herein above and in Section 7.24(b) below pursuant to
an accrual in the approximate amount of a $27,000 liability which will be
reported on the Final Balance Sheet.

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Any amounts in excess of the $27,000 accrual shall be subject to
Purchaser's offset and recoupment rights.

(b) ENVIRONMENTAL CONDITIONS INSURANCE COVERAGE. Purchaser
shall, at its option, purchase and maintain an environmental conditions
insurance policy or policies which is anticipated to insure Purchaser in
the post-Closing period following the Closing Date against certain
insurable losses from any Environmental Condition that arises from, in
connection with or incident to the ownership and/or operation by
Purchaser of the Leased Real Estate transferred to Purchaser pursuant to
this Agreement. The coverage amount of any such policy or policies shall
not exceed, individually or in the aggregate, $3 million. The method of
and party responsible for payment of the insurance policy premiums due
under such policy or policies is set forth in Section 7.24(a) above.

(c) MISCELLANEOUS INSURANCE MATTERS. The following shall apply
equally to Sections 7.24(a) and (b) above. Each of the policy or
policies described in Section 7.24(a) and (b) shall provide for advance
written notice of at least thirty (30) days to both Seller and Purchaser
of any expiration or termination of the policy or policies required or
described hereunder. Any amount of a deductible that becomes or may
become payable or is paid by Purchaser under such insurance policy or
policies, where such payable or paid amount arises from, in connection
with or is incident to any coverage claim pertaining to the first or
second year of such policy or policies' coverage, shall be, at
Purchaser's option, deducted from any Earn-Out Consideration, the Note or
any other amounts that may be owed or owing between Purchaser on the one
hand and either Seller, any Stockholder or Parent on the other hand;
otherwise such deductible amount shall be promptly remitted to Purchaser
by Seller in cash in the manner prescribed for payments elsewhere in this
Agreement. In the event Seller, who is charged with the responsibility
to maintain the insurance required hereunder fails to do so, for any
reason, Purchaser may, at its election, purchase and/or pay for such
insurance coverage at the expense of and chargeable to Seller. Seller
shall provide to Purchaser at the Closing, and each anniversary thereof,
and at any other time upon the reasonable request of Purchaser, evidence
of such past and current coverage and the policy or policies issued.

7.25 PHYSICAL INVENTORY AS OF APRIL 30, 1999. On or about April 30,
1999, in any event as of April 30, 1999, Seller shall have conducted a
comprehensive physical inventory of all inventory items and supplies of
Seller (the "Physical Inventory"). Seller shall have accurately counted and
properly priced and costed the Physical Inventory in accordance with
Generally Accepted Accounting Principles. Purchaser and its representatives
will review and test the Physical Inventory count and shall test the pricing,
extension and final calculation of the Physical Inventory. The Physical
Inventory shall be determined and valued in accordance with Generally
Accepted Accounting Principles and shall include only those inventory items
of Seller that are good, useable and merchantable quality, and shall not
include obsolete, damaged or discontinued items, nor shall any inventory be
valued if such inventory does not meet quality control standards applicable
to Seller's Business or the marine industry. Purchaser shall determine, in
its sole discretion, whether it is satisfied with the value, quantity and
quality of the Physical Inventory and Seller's report, which report shall
include all necessary or required supporting documentation used, prepared or
obtained

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in connection with the Physical Inventory. In the event the physical
inventory is conducted prior to April 30, 1999, the parties acknowledge and
agree that the Auditor shall perform an inventory roll-forward in accordance
with Generally Accepted Accounting Principles in order to prepare the Final
Balance Sheet.

7.26 BRUNSWICK NOTE. Seller has made, executed and delivered to
Brunswick Corporation that certain promissory note dated January 9, 1997 in
the principal amount of $500,000 (the "Brunswick Note"). As of February 28,
1999 the unpaid principal amount of the Brunswick Note was approximately
$354,120. On or about November, 1997, the terms of the Brunswick Note were
renegotiated and Brunswick Corporation proposed a revised promissory note
dated November 29, 1997 in the principal amount of approximately $449,150
(the "Renegotiated Brunswick Note"). The Renegotiated Brunswick Note was not
executed or delivered by Seller and, notwithstanding this fact, Seller has
remitted payments to Brunswick on the Brunswick Note under the terms of the
unexecuted Renegotiated Brunswick Note. Seller shall, prior to the Closing,
continue to perform in accordance with the terms of the Renegotiated Note.
Purchaser shall not assume either the Brunswick Note nor the Renegotiated
Note; provided, however, that Purchaser covenants and agrees to assume the
underlying amount due to Brunswick Corporation as of the effective date of
this Agreement.

7.27 BULK SALES ACT. Seller shall comply with any and all
requirements and Applicable Laws pertaining to or arising under the Uniform
Bulk Sales Act as adopted and effective in the State of North Carolina and
all jurisdictions that regulate Seller's Business activities to the
satisfaction of Purchaser and its counsel.

7.28 PAYMENT OF AFFILIATE LIABILITIES. Seller shall not make any
payment or transfer of any Assets, or accrue any form of Liability of any
kind or nature, to Parent or any Stockholder or any Affiliate of Parent,
Seller or any Stockholder from the date hereof through the Closing Date. In
furtherance (but not in limitation) and in clarification of the foregoing,
Seller shall not make any repayment of the Liabilities characterized on
Seller's February 28, 1999 unaudited financial statement entitled "Loan
payable Sumberdaya" (account 2305), "PT Sumberdaya New Logic" (account 2306)
or "Loan Shareholder" (account 2310).

7.29 CERTAIN PARENT COMPANY ADVANCES. As of the date hereof, Seller
represents and warrants that Parent has advanced $250,000 to Seller for
working capital to be used in the continuing operations of Seller. In the
event that the transactions described hereunder proceed to a Closing and the
transactions are closed, upon the Closing Purchaser shall assume the advances
made by Parent as a trade account payable to a maximum aggregate amount of
$250,000. Subject to the following sentence of this Section 7.29, such
account payable shall be payable to Parent within one-hundred twenty (120)
days after the Closing Date. Parent hereby irrevocably waives any and all
rights it may have as a creditor or otherwise under any Bulk Sale or transfer
law of any state, including North Carolina, and Parent further acknowledges
and agrees that it shall be estopped from asserting any rights to payment,
collection or other action with respect to its advances except as set forth
in (and subject to the provisions of ) this Agreement. In the event
Purchaser makes any claim for a Loss pursuant to Article X of this Agreement,
or any amount becomes or is estimated to become owing

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from Seller, Parent or any Stockholder to Purchaser hereunder, Purchaser
shall be irrevocably entitled and is hereby instructed by Seller to offset
(and exercise other equitable rights, including recoupment) the full dollar
amount of any such claimed amount so owing of any Loss paid or estimated by
Purchaser, or which Purchaser becomes, or may become, legally obligated to
pay, against the account payable to Parent described in this Section 7.29.

7.30 NOTIFICATION OF MISREPRESENTATION. Each Stockholder and Seller
agree to promptly notify the Purchaser in writing of any material inaccuracy
or misrepresentation made by Seller in this Agreement of which either
Stockholder or the Seller becomes aware prior to the Closing Date and which
could result in a Material Adverse Effect with respect to the Seller.

7.31 FILING OF INCOME TAX RETURNS. Seller shall engage its
independent accountants for the purpose of properly filing all income and
franchise Tax returns, and pay all Taxes and associated charges thereto, if
any, for all Federal, state and local authorities for all years prior to
December 31, 1998 prior to the Closing. Such returns shall be filed not
later than thirty (30) days following the Closing Date. Seller shall provide
documentary evidence of such filings and payment(s) to Purchaser in a form
satisfactory to Purchaser and its counsel.

7.32 DISSOLUTION OF JOINT VENTURE. Seller shall properly and
lawfully dissolve the joint venture entity Logic Tools, LLC, a Delaware
limited liability company, prior to the Closing. Seller shall provide
documentary evidence of such dissolution and the disposition of any assets of
such joint venture to Purchaser in a form satisfactory to Purchaser and its
counsel. All Intellectual Property of Logic Tools, LLC shall be transferred
to Seller free of any Encumbrances.

7.33 FILING AND DELIVERY OF UCC-3 TERMINATION STATEMENTS BY PARENT.
Any and all UCC-1 financing statements, and all similar documents or
instruments of any kind or nature, filed by Parent and any Stockholder shall
be terminated by appropriate and effective filings with the applicable
Governmental Body and/or by delivery to Seller of such other documents or
instruments which effectively cancel and terminate any interest or
encumbrance within ten (10) days prior to the Closing. Documentary evidence
of such filings satisfactory to Purchaser and its counsel shall have been
provided to Purchaser at least three (3) business days prior to the Closing.

7.34 LEASE RENEGOTIATION. The Lease Agreement dated November 1,
1995 by and between Barrie Bergman, Lane Golden and William Golden and Seller
shall be amended to the satisfaction of Purchaser and its counsel, and such
amendment shall include at a minimum (i) a reduction of rent under such
lease, (ii) the compromise of past due rents due and payable to the landlord,
(iii) landlord's written waiver of estoppel certificate with respect to all
prior defaults, and (iv) landlord's affirmation of Seller's and Purchaser's
right of quiet enjoyment of the leased property.

7.35 TRANSFER OF INTELLECTUAL PROPERTY. All Intellectual Property
that is owned or licensed by the Stockholder Allied Plastics International,
Ltd. ("Allied") which pertains to, is used or arises in connection with or is
incident to Seller's Business (in particular all Intellectual Property that
is the subject of that certain Technology and Patent License Agreement by and
between Seller and Allied dated November 12, 1994, the "IP License
Agreement") shall be transferred to Purchaser hereunder.

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In furtherance of the foregoing (i) Allied shall transfer all of its
Intellectual Property to Seller at the Closing, (ii) Seller and Allied shall
enter into a license agreement pursuant to which Allied shall be licensed
solely for use of the licensed Intellectual Property in Asia, and (iii)
Seller and Allied will terminate the IP License Agreement and, in connection
with such termination, Allied shall waive all unpaid royalties, fees and
other charges that are, may be or may in the future become owing by Seller to
Allied (and/or any successor, assignee, transferee or Affiliate of Allied).
Seller shall (i) provide documentary evidence of the foregoing to Purchaser
and its counsel at least three (3) business days prior to the Closing and
(ii) obtain the approval of Purchaser and its counsel of the documents and
instruments used to accomplish the foregoing prior to the execution of
binding documents and instruments.

ARTICLE VIII

CONDITIONS TO PURCHASER'S OBLIGATIONS

8.2 COMPLIANCE WITH COVENANTS AND AGREEMENTS. Seller and
Stockholder shall have performed and complied with all of their respective
covenants, agreements and obligations under this Agreement which are to be
performed or complied with by them at or prior to the Closing, including the
execution and/or delivery of the documents, instruments and agreements
specified in Section 4.1 hereof, or in such documents, instruments and
agreements, all of which shall be reasonably satisfactory in form and
substance to counsel for Purchaser.

8.4 APPROVAL BY COUNSEL. All actions, Proceedings, instruments and
documents required of Seller or a Stockholder to carry out the transactions
contemplated by this Agreement or incidental thereto and all other related
legal matters shall have been reasonably satisfactory to and approved by
counsel for Purchaser, and such counsel shall have been furnished with such
certified copies of actions and Proceedings and such other instruments and
documents as they shall have reasonably requested.

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8.5 LEGAL OPINION. Purchaser shall have received an opinion from
the counsel for the Seller and its Stockholders, dated as of the Closing
Date, in form and substance satisfactory to the Purchaser in Purchaser's
reasonable commercial discretion. Such opinion shall be addressed to
Purchaser and The Bank of New York, the agent under Genmar Holdings' senior
and subordinated credit facilities.

8.6 COMPANY ACTION. Purchaser shall have received (a) a
certificate of the Secretary of Seller as to the incumbency and signatures of
the officers and directors, and (b) a good standing certificate of existence
issued by the Secretary of State of the State of Delaware and any other
jurisdiction in which Seller is qualified to or required to be qualified to
do business and (c) if available from any Governmental Body of the State of
Delaware, a Tax clearance certificate in a form acceptable to counsel to
Purchaser.

8.7 ENVIRONMENTAL AUDIT. Subject to the other provisions contained
in this Section, Seller shall permit Purchaser or any reasonably qualified
environmental consultant designated by Purchaser (the "ENVIRONMENTAL
AUDITOR") to conduct a Phase I environmental audit, and, if determined by the
Purchaser, in its sole discretion, to be necessary, a Phase II environmental
audit (collectively, the "AUDIT") of the Leased Real Estate prior to Closing.
Beginning immediately after the execution hereof, the Environmental Auditor
shall have full and free access to the Leased Real Estate, upon reasonable
notice. Purchaser shall pay all fees and expenses of the Environmental
Auditor. Purchaser shall have the right to conduct soil borings, install
monitoring wells and to otherwise test the Leased Real Estate to its sole
satisfaction. Purchaser shall have the undisputed and sole right, in its
absolute discretion, to terminate this Agreement if the Audit discloses facts
or conditions (i) that purportedly violate or with substantial likelihood
could violate any Applicable Laws or that disclose a material Environmental
Condition, (ii) which could reasonably be expected to have a Material Adverse
Effect on the Seller or Purchaser, or (iii) that are inconsistent in any
material respect with the representations and warranties of the Seller set
forth herein. In the event Purchaser receives a written Audit report(s), and
any supplements or amendments thereto, full and complete copies of such Audit
report and its supplements or amendments, if any, shall be promptly provided
to Seller.

8.8 [THIS SECTION INTENTIONALLY OMITTED.]

8.9 DUE DILIGENCE. Purchaser shall (a) have received all due
diligence information and documentation requested from Seller and/or the
Stockholders, (b) have completed all due diligence investigation (including,
without limitation those related to title and Environmental Conditions) and
(c) be satisfied, in its sole discretion, with its investigation of the
Seller.

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8.11 DELIVERIES AT CLOSING. Seller and/or the Stockholders, as
applicable, shall have delivered all documents and instruments, and all other
written matter, required pursuant to the terms of this Agreement to be
delivered at or prior to the Closing.

8.13 CONSENTS AND REMOVAL OF LIENS. Seller shall have obtained
consents to the assignment and continuation of all contracts and agreements
which, in the reasonable judgment of Purchaser or its counsel, require such
consents, including appropriate binders or consents as to policies of
insurance to be assigned to Purchaser under this Agreement. Seller shall
have obtained satisfaction and discharge of all Encumbrances, and shall have
obtained all governmental and private authorizations that Purchaser deems
necessary or desirable in order to own and operate and conduct the Business
of Seller, in Purchaser's hands, substantially on the basis heretofore owned,
operated and conducted, and as proposed to be owned, operated and conducted
by Purchaser.

8.14 EMPLOYEE CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT.
Purchaser shall have received executed confidentiality and non-disclosure
agreements of all exempt (management and administrative) employees of Seller
who will or may become employed by Purchaser upon the Closing.

8.15 ASSET ACQUISITION STATEMENT. Purchaser shall have received the
completed Asset Acquisition Statement described in Section 2.3 hereof, or a
schedule thereof acceptable to Purchaser, in either or each case executed by
Seller.

8.16 [THIS SECTION INTENTIONALLY OMITTED]

8.17 BULK SALES ACT. Seller shall have complied with all Applicable
Laws pertaining to or arising under the bulk sales laws of the jurisdictions
which regulate Seller's Business activities.

8.18 PAYMENTS TO AFFILIATES. Seller shall not have transferred or
remitted any Assets or other property, including cash, to Parent any
Stockholder or any Affiliate of Parent or a Stockholder for any purpose from
or after November 30, 1998.

8.19 EMPLOYEE ARRANGEMENTS. Purchaser shall be satisfied, in its
sole discretion, that adequate arrangements have been made at a reasonable
cost to retain and continue the services of substantially all of the
individuals working in Seller's Business (either as leased employees or
otherwise).

8.20 PURCHASER BOARD APPROVAL. Purchaser shall receive the consent
of its Board of Directors to consummate the transactions contemplated herein.

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8.21 FILING OF INCOME AND FRANCHISE TAX RETURNS. Seller shall
properly file all income and franchise Tax returns, and pay all Taxes and
associated charges thereto, if any, for all federal, state and local
authorities for all years prior to December 31, 1998 prior to the Closing.
Seller shall provide documentary evidence of such filings and payment(s) to
Purchaser in a form satisfactory to Purchaser and its counsel.

8.22 DISSOLUTION OF JOINT VENTURE. Seller shall properly and
lawfully dissolve the joint venture entity Logic Tools, LLC, a Delaware
limited liability Company, prior to the Closing. Seller shall provide
documentary evidence of such dissolution and the disposition of any assets of
such joint venture to Purchaser in a form satisfactory to Purchaser and its
counsel. All Intellectual Property of Logic Tools, LLC shall be transferred
to Seller free of any Encumbrances.

8.23 FILING AND DELIVERY OF UCC-3 TERMINATION STATEMENTS BY PARENT
AND STOCKHOLDERS. Any and all UCC-1 financing statements, and all similar
documents or instruments of any kind or nature, filed by Parent and any
Stockholder shall be terminated by appropriate and effective filings with the
applicable Governmental Body and/or by delivery to Seller of such other
documents or instruments which effectively cancel and terminate any interest
or other encumbrance within ten (10) days prior to the Closing. Documentary
evidence of such filings satisfactory to Purchaser and its counsel shall be
promptly provided to Purchaser at least three (3) business days prior to the
Closing.

8.24 TRANSFER OF INTELLECTUAL PROPERTY. All Intellectual Property
that is owned or licensed by Allied which pertains to, is used or arises in
connection with or is incident to Seller's Business (in particular all
Intellectual Property that is the subject of the IP License Agreement) shall
be transferred to Purchaser hereunder. In furtherance of the foregoing (i)
Allied shall transfer all of its Intellectual Property to Seller at the
Closing, (ii) Seller and Allied shall enter into a license agreement pursuant
to which Allied shall be licensed solely for use of the licensed Intellectual
Property in Asia, and (iii) Seller and Allied will terminate the IP License
Agreement and, in connection with such termination, Allied shall waive all
unpaid royalties, fees and other charges that are, may be or may in the
future become owing by Seller to Allied (and/or any successor, assignee,
transferee or Affiliate of Allied). Seller shall (i) provide documentary
evidence of the foregoing to Purchaser and its counsel at least three (3)
business days prior to the Closing and (ii) obtain the approval of Purchaser
and its counsel of the documents and instruments used to accomplish the
foregoing prior to the execution of binding documents and instruments.

8.25 SERVICE OF PROCESS. At or before the Closing, Seller, Parent
and each Stockholder shall each appoint an agent for service of process
within the State of North Carolina for a period of four (4) years immediately
after the Closing. All fees for such service shall be prepaid in advance.
Seller, Parent and each Stockholder covenant, pledge and agree that such
agent after the Closing shall be its authorized agent for service of process
whether or not (i) such fees remain paid or current, or (ii) the agent
notifies Seller, Parent or any Stockholder that such relationship is
terminated for any reason.

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8.26 ENVIRONMENTAL CLEAN-UP AND COMPLIANCE. Seller shall (i) cause
to have tested and properly dispose of the water-filled floatation chemical
drums located outside of Seller's plant operating facility, (ii) properly
dispose of all foam chemicals no longer used in Seller's Business operations,
and (iii) obtain all necessary authorizations and documentation evidencing
Seller's compliance and authority with Applicable Laws regulating industrial
waste discharge.

8.27 OSHA COMPLIANCE. Seller shall adopt, implement and maintain an
OSHA compliance program that conforms to Applicable Law satisfactory to
Purchaser.

ARTICLE IX

CONDITIONS TO SELLER'S OBLIGATIONS

Unless waived by Seller in writing, each and every obligation of
Seller or the Stockholder to be performed at the Closing shall be subject to
the satisfaction at or prior thereto of each and all of the following
conditions precedent:

9.5 PURCHASE PRICE. Purchaser shall have (i) delivered to the
Seller the Cash Consideration and (ii) the Note.

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ARTICLE X

INDEMNIFICATION

10.1 INDEMNIFICATION BY SELLER, PARENT AND STOCKHOLDERS. Seller,
Parent and each Stockholder jointly and severally hereby agree to defend,
indemnify and hold Purchaser and its Affiliates harmless from, against and in
respect of (and shall on demand reimburse Purchaser for):

(a) any and all losses, costs, expenses (including without
limitation, reasonable attorneys fees and disbursements of counsel),
liabilities, damages, fines, penalties, charges, assessments, judgments,
settlements, claims, causes of action, Proceedings, Orders and other
obligations of any kind or nature (individually a "Loss" and collectively
"Losses") arising from, in connection with, or suffered or incurred by
Purchaser (i) by reason of any untrue representation, breach of warranty
or nonfulfillment of any covenant or other agreement by Seller or a
Stockholder contained herein or in any certificate, document or
instrument delivered to Purchaser pursuant hereto or in connection
herewith, or (ii) which would not have been suffered or incurred if such
representation or warranty were true and not breached or if such covenant
or other agreement were fully performed;

(d) the amount of any and all receivables (net of applicable
reserves) of the Seller which are not collected in accordance with the
provisions contained in Section 5.18 hereof;

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(e) any and all Losses suffered or incurred by Purchaser by
reason of or in connection with any claim for a finder's fee or brokerage
or other commission arising by reason of any services alleged to have
been rendered to or at the instance of Seller or any Stockholder with
respect to this Agreement or any of the transactions contemplated hereby;

(g) any and all Losses suffered or incurred by Purchaser which
arise from, are incurred in connection with or are incident to any
products liability claim not fully covered by an applicable policy of
insurance paid or payable to Purchaser that in any way arises from,
without limitation, Seller or Stockholder products designed,
manufactured, distributed or sold on or prior to the Closing Date;

(h) any and all Losses from any matter arising from Seller's
creation, operation of, maintenance or other association with any Benefit
Plans;

(i) any and all Losses incurred in connection with or arising
from third party claims, including those concerning Seller's Intellectual
Property transferred or to be transferred to Purchaser pursuant to this
Agreement;

(j) any and all Losses incurred in connection with or that
arises from any claim or Proceeding by any former or future stockholder
of Seller;

(l) any and all Losses incurred in connection with Seller
Product warranty claims relating to Seller Products produced prior to the
Closing Date incurred by Purchaser in excess of $100,000; PROVIDED,
HOWEVER, this right of indemnification shall not limit or otherwise
affect Purchaser's right of offset, recoupment or proper calculation as
set forth in this Agreement;

(m) any and all Losses incurred in connection with the
operation or dissolution of Logic Tools, LLC; and

(n) any and all Losses arising from or in connection with any
Intellectual Property of Seller, Allied or Logic Tools, LLC, including
all incidental, consequential and other Losses arising from an inability
to use or exploit any Intellectual Property.

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Notwithstanding the foregoing, neither the Seller or the Stockholders shall
be liable to Purchaser for any breaches of representations or warranties (i)
if the aggregate amount of all the Losses of Purchaser based thereon or
resulting therefrom is less than $5,000 (the "Liability Exception");
PROVIDED, HOWEVER, that such Liability Exception shall not apply to or
include any Losses in excess of $5,000 in the aggregate or those in respect
of misrepresentations or breaches of warranty contained in Sections 5.9,
5.13, 5.23, 5.24, 5.28, 5.29 and/or 7.29 hereof, as to which Seller, Parent
and the Stockholders shall be jointly and severally liable in full hereunder,
or (ii) for any amount that exceeds, in the aggregate, the Purchase Price
under this Agreement (but only to the extent of such excess).

10.2 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify, defend, and hold Seller harmless from, against and in respect of
(and shall on demand reimburse them for):

(b) Any and all liabilities or obligations of Seller
specifically assumed by Purchaser pursuant to this Agreement; and

10.3 NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Each of the representations and warranties of the parties
contained in this Agreement and in any Exhibit, Schedule, certificate,
instrument or document delivered by or on behalf of any of the parties hereto
pursuant to this Agreement and the transactions contemplated hereby shall
survive the Closing of the transactions contemplated hereby and any
investigation made by the parties or their agents for a period of forty-five
(45) months after the Closing, after which no claim for indemnification for
any misrepresentation, or for the breach of any representation or warranty
under this Agreement, may be brought, and no action with respect thereto may
be commenced, and no party shall have any Liability or obligation with
respect thereto, unless (i) the Indemnified Party gave written notice to the
Indemnifying Party specifying with particularity the misrepresentation or a
breach of representation or warranty claimed on or before the expiration of
such period; (ii) the claim relates to a breach of any representation or
warranty contained in Sections 5.9, 5.11, 5.23 or 5.24, in which case the
right to indemnification shall survive until the expiration of the applicable
statute of limitations, plus sixty (60) days thereafter, for each and any of
the foregoing whether for breach of contract or the Loss cause of action
arising in connection with any third party Proceeding; or (iii) the claim
relates to any representation or warranty in Sections 5.1, 5.4, 5.6 and 5.13,
in which case the right to indemnification shall survive indefinitely. The
covenants and agreements (exclusive of representations and warranties, or any
agreement contained within a representation or warranty, set forth in Article
V hereof) set forth in this Agreement shall survive indefinitely.

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10.4 PROCEDURE FOR INDEMNIFICATION. Subject to rights of offset,
recoupment or calculation set forth in this Agreement, in the event a party
intends to seek indemnification pursuant to the provisions of Sections 10.1
or 10.2 hereof (the "INDEMNIFIED PARTY"), the Indemnified Party shall
promptly give notice hereunder to the other party (the "INDEMNIFYING PARTY")
after obtaining written notice of any claim, investigation, or the service of
a summons or other initial or continuing legal or administrative process or
Proceeding in any action instituted against the Indemnified Party as to which
recovery or other action may be sought against the Indemnifying Party because
of the indemnification provided for in Section 10.1 or 10.2 hereof, and, if
such indemnity shall arise from the claim of a third party, the Indemnified
Party shall permit the Indemnifying Party to assume the defense of any such
claim and any litigation resulting from such claim; PROVIDED, HOWEVER, that
the Indemnified Party shall not be required to permit such an assumption of
the defense of any claim or litigation which, if not first paid, discharged
or otherwise complied with, would with substantial certainty result in a
material interruption or disruption of the Business of the Indemnified Party,
taken as a whole, or any material part thereof. Notwithstanding the
foregoing, the right to indemnification hereunder shall not be affected by
any failure of the Indemnified Party to give such notice (or by delay by the
Indemnified Party in giving such notice) unless, and then only to the extent
that, the rights and remedies of the Indemnifying Party shall have been
prejudiced as a result of the failure to give, or delay in giving, such
notice. Failure by the Indemnifying Party to notify the Indemnified Party of
its election to defend any such claim or action by a third party within
twenty (20) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its
right to defend such claim or action.

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Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it to participate in its defense unless any of the following
shall apply: (i) the employment of such counsel shall have been authorized in
writing by the Indemnifying Party; or (ii) the Indemnifying Party's legal
counsel shall advise the Indemnifying Party in writing, with a copy to the
Indemnified Party, that there is a conflict of interest that would make it
inappropriate under applicable standards of professional conduct to have
common counsel. If clause (i) or (ii) in the immediately preceding sentence
is applicable, then the Indemnified Party may employ separate counsel at the
expense of the Indemnifying Party to represent the Indemnified Party, but in
no event shall the Indemnifying Party be obligated to pay the costs and
expenses of more than one such separate counsel for any one complaint, claim,
action or Proceeding in any one jurisdiction.

If the Indemnifying Party does not assume the defense of any such
claim by a third party or litigation resulting therefrom after receipt of
notice from the Indemnified Party, the Indemnified Party may defend against
such claim or litigation in such manner as it reasonably deems appropriate,
and unless the Indemnifying Party shall deposit with the Indemnified Party a
sum equivalent to the total amount demanded in such claim or litigation plus
the Indemnified Party's estimate of the cost (including attorneys' fees) of
defending the same, the Indemnified Party may settle such claim or Proceeding
on such terms as it may reasonably deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of such
settlement and for all costs (including attorneys' fees), expenses and
damages incurred by the Indemnified Party in connection with the defense
against or settlement of such claim, investigation or litigation, or if any
such claim or litigation is not so settled, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of any judgment
rendered with respect to any claim by a third party in such litigation and
for all costs (including attorneys' fees), expenses and damage incurred by
the Indemnified Party in connection with the defense against such claim or
litigation, whether or not resulting from, arising out of, or incurred with
respect to, the act of a third party.

10.5 DISPUTE RESOLUTION. In the event a dispute involving a
monetary amount in excess of $50,000 arises under this Agreement, except with
respect to matters arising under SECTIONS 2.2(c), 2.4 OR 12.12 hereof, such
disputes shall be resolved in the manner set forth in this SECTION 10.5.

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a result of such discussions within ten (10) days, an attempt will be
made to resolve the matter by a formal nonbinding mediation with an
independent neutral mediator agreed to by the parties. If the parties
cannot agree on a mediator within a period of ten (10) days after
expiration of the ten (10) day period for resolution by discussion,
then either party may apply to any court of competent jurisdiction for
appointment of a mediator, which appointment shall be binding and
nonappealable. Upon commencement of the mediation process, the
parties shall promptly communicate with respect to a procedure and
schedule for the conduct of the Proceeding and for the exchange of
documents and other information related to the dispute. The mediation
process shall be deemed ended if the dispute has not been resolved
within thirty (30) days after appointment of the mediator.

(b) All claims, disputes or other matters in question between
the parties to this Agreement arising out of or relating to this
Agreement which are not resolved by mediation in accordance with SECTION
10.5(a) within thirty (30) days after appointment of the mediator shall
be submitted for, subject to and decided by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association currently in effect as of the date of this Agreement ("AAA
Rules"), except to the extent those rules are inconsistent with this
SECTION 10.5. Any arbitration must be held in Minneapolis, Minnesota by
a single arbitrator mutually selected by the parties hereto or, if the
parties hereto cannot agree on the appointment of such arbitrator within
ten (10) days following the date notice of the dispute is given by a
party to the adverse party, an arbitrator selected according to the AAA
Rules. The arbitrator's award shall be final, conclusive and binding
upon all parties to this Agreement, and judgment may be entered upon it
in accordance with the Federal Arbitration Act any court of general
jurisdiction in Minnesota, or in any United States District Court having
jurisdiction in Minnesota. The arbitrator shall be required to provide
in writing to the parties the basis for the award or Order of such
arbitrator, and a court reporter shall record all hearings (unless
otherwise agreed to by the parties), with such record constituting the
official transcript of such Proceedings. Seller and Purchaser
specifically desire this Arbitration clause to be governed by the United
States Federal Arbitration Act, and not by the arbitration laws of any
state.

(c) Seller and Purchaser agree and consent that any legal
action, suit or Proceeding seeking to enforce this SECTION 10.5 or to
confirm or contest any arbitration award shall be instituted and
adjudicated solely and exclusively in any court of general jurisdiction
in Minnesota, or in the United States District Court having jurisdiction
in Minnesota and Seller and Purchaser agree that venue will be proper in
such courts and waive any objection which they may have now or hereafter
to the venue of any such suit, action or Proceeding in such courts, and
irrevocably consents and agrees to the jurisdiction of said courts in any
such suit, action or Proceeding. Seller and Purchaser further agree to
accept and acknowledge service of any and all process which may be served
in any such suit, action or Proceeding in said courts, and also agree
that service of process or notice upon them shall be deemed in every
respect effective service of process or notice upon them, in any suit,
action, Proceeding or arbitration demand, if given or made: (i) according
to Applicable Law; (ii) according to the AAA Rules; (iii) by a person
over the age of eighteen who personally

<PAGE>

serves such notice or service of process on Seller or Purchaser, as the
case may be; or (iv) by certified mail, return receipt requested, mailed
to Seller or Purchaser, as the case may be, at their respective
addresses set forth in this Agreement.

(d) In the event of arbitration filed or instituted between the
parties pursuant to this SECTION 10.5, the prevailing party will be
entitled to receive from the adverse party all costs, damages and
expenses, including reasonable attorney's fees, incurred by the
prevailing party in connection with that action or Proceeding whether or
not the controversy is reduced to judgment or award. The prevailing
party will be that party who is determined by the arbitrator to have
prevailed on the major disputed issues.

ARTICLE XI

TERMINATION

11.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned after the date of this
Agreement, but not later than the Closing:

(a) by mutual written consent of all parties hereto;

(b) by Purchaser if any of the conditions provided for in
Article VIII of this Agreement have not been timely met and have not been
waived in writing by Purchaser on or before the Date of Closing;

(c) by Seller if any of the conditions provided for in Article
IX of this Agreement have not been timely met and have not been waived in
writing by Seller on or before the Date of Closing; and

(d) by either Purchaser or Seller if the Closing shall not have
occurred on or before May 31, 1999.

In the event of termination or abandonment by any party as provided in this
Section 11.1, written notice shall forthwith be given to the other party and,
except as otherwise specifically provided herein, including the provisions of
Section 7.3, each party shall pay its own expenses incident to preparation or
consummation of this Agreement and the transactions contemplated hereunder
and neither party shall have any Liability to the other hereunder, except
such Liability as may arise as a result of a breach hereof.

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to assert its rights hereunder or to comply with Applicable Laws or pursuant
to the distraint of an Order or Proceeding.

ARTICLE XII

POST-CLOSING COVENANTS

12.2 NON-COMPETITION AGREEMENT. During the period of four (4) years
from and after the Closing Date, Seller, Parent and each of the Stockholders
on behalf of themselves and all their Affiliates covenant and agree that they
(and their respective Affiliates) will not, without the Purchaser's prior
written consent, directly or indirectly, or individually or collectively lend
its credit, advice or assistance, or engage in any activity or act in any
manner (including but not limited to, as an individual, owner, sole
proprietor, founder, associate, promoter, partner, joint venturer,
shareholder, officer, director, trustee, manager, employer, employee,
licensor, licensee, principal, agent, salesman, broker, representative,
consultant, advisor, investor or otherwise for the purpose of establishing,
operating or managing any Person that is engaged in competitive activities)
competitive with the present or future Business of the Purchaser, including
Seller's Business therein. Seller, Parent and each Stockholder acknowledge
and agree that this Section 12.2 shall be geographically applicable to
worldwide competition.

12.3 NON-SOLICITATION AGREEMENT. During the period of thirty-six
(36) months from and after the Closing Date, Seller , Parent and each of the
Stockholders covenant and agree that they (including their respective
Affiliates) will not, whether for their own account or for the account of any
other Person, directly or indirectly interfere (including the hiring of any
employee) with Purchaser's relationship with or endeavor to divert or entice
away from the Purchaser any Person (i) who or which at any time during the
term of such Person's prior employment by or affiliation with the Seller, is
or was an employee, vendor, supplier or customer of or otherwise in the habit
of dealing with the Seller or (ii) who is an employee, vendor, supplier or
customer of, or otherwise is in the habit of dealing with the Purchaser.

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12.4 CONFIDENTIAL INFORMATION. Seller and each of the Stockholders
understand and agree that the Business of Seller is based upon specialized
work and that as officers, directors, employees or Stockholders of Seller
they received, had access to and/or contributed to Confidential Information
and trade secrets. The Stockholders and Seller agree that at all times from
and after the Closing Date, they shall keep secret all such Confidential
Information and that they will not directly or indirectly Use or Disclose the
same to any Person without first obtaining the written consent of the
Purchaser. At any time the Purchaser may so request, the Stockholders and
Seller shall turn over to the Purchaser all books, notes, memoranda, manuals,
notebooks, tables, drawings, calculations, records and other documents made,
compiled by or delivered to any Stockholder or the Seller and containing or
concerning any Confidential Information, including copies thereof, in their
possession, it being agreed that the same and all information contained
therein are at all times the exclusive property of Purchaser.

12.5 REASONABLENESS OF COVENANTS. Stockholders and Seller each
acknowledge and agree that the geographic scope and period of duration of the
restrictive covenants contained in Sections 12.2, 12.3 and 12.4 of this
Agreement are both fair and reasonable and that the interests sought to be
protected by the Purchaser are legitimate business interests entitled to be
protected. Stockholders and Seller further each acknowledge and agree that
the Purchaser would not have purchased the Assets and assumed the Liabilities
pursuant to this Agreement unless each Stockholder and Seller had agreed to
be irrevocably bound by the covenants contained in such Sections.

12.7 BLUE PENCIL DOCTRINE. In the event that any of the restrictive
covenants contained in this Article shall be found by a court of competent
jurisdiction to be unreasonable by reason of its extending for too great a
period of time or over too great a geographic area or by reason of its being
too extensive in any other respect, then such restrictive covenant shall be
deemed modified to the minimum extent necessary to make it reasonable and
enforceable under the circumstances.

12.8 MAINTENANCE AND PAYMENT OF INSURANCE. Seller shall cooperate
with and have a continuing obligation to Purchaser to obtain and maintain,
the insurance policies described in Section 7.24.

12.9 PERFORMANCE OF SELLER'S WARRANTY WORK. After the Closing,
Purchaser shall perform or cause there to be performed on Seller's behalf,
but without obligation on the part of Seller to pay or reimburse Purchaser
therefor except as specifically set forth in (and as limited by) this
Agreement, any and all repairs to or replacements of products manufactured by
Seller and sold prior to Closing

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for which Seller is responsible under any standard product warranty or
guarantee extended by Seller in the normal course of Seller's Business to
dealers or purchasers of Seller's products.

12.10 PERFORMANCE OF SELLER'S CONTRACTS. Purchaser shall either
fully and timely perform each of the contracts it has assumed pursuant to
this Agreement after the Closing or cause the same to be terminated without
liability to Seller or its guarantors (or shall otherwise cause Seller and
its guarantors to be relieved and released from any further obligation or
liability thereunder), excepting those liabilities arising from any breach or
default by Seller prior to Closing which Purchaser shall not have otherwise
affirmatively agreed to assume, including any obligation of Seller arising
after the Closing to repurchase any products sold by Seller under any
commitments or arrangements made by Seller with any parties providing floor
plan or similar financing for Seller's dealers.

12.11 COVENANT REGARDING LIGHT STABILITY. Seller covenants that
Seller's Products meet all UV-8 type protection light stability
characteristics and specifications for LL-8460/8461 pellet power (polly
formulated) such that the chemical changes to and degradation of Seller's
Products as a result of exposure to the ultraviolet (UV) portion of light
will not change or degrade any Seller Product. Purchaser is presently
conducting such tests. In the event Purchaser's testing of Seller's Products
results in a determination that Seller's products do not meet the required
standards, and it can be reasonably anticipated such that the Seller Product
will incur product warranty, product liability or return sale claims,
Purchaser shall have the right to accrue the estimated amount anticipated to
be incurred in connection therewith and offset such accrual against the
Earn-out Consideration, the Note, the amount due to Parent under 7.29 hereof
or any other amount that may be owed OR owing or to become owing to any of
Seller, Parent of the Stockholders. The foregoing accrual, however, shall
not limit Purchaser's claims for Losses hereunder or pursuant to any
ancillary document or instrument hereto. In the event any such claims are
made against Purchaser as a result of Seller's breach of the foregoing
covenant (i) the $100,000 reserve for product warranty claims described in
Section 2.2 hereof shall not apply and (ii) Purchaser shall be indemnified
for any and all such claims, losses and any costs of remediation (including
incidental or consequential damages) arising from, in connection with or
incident to such breach.

ARTICLE XIII

MISCELLANEOUS

13.1 NOTICES. All notices, demands and other communications
provided for hereunder shall be in writing and shall be given by either
personal delivery, via facsimile transmission (receipt telephonically
confirmed), by nationally recognized overnight courier (prepaid), or by
certified or registered first class mail, postage prepaid, return receipt
requested, sent to each party, at its address as set forth below or at such
other address or in such other manner as may be designated by such party in a
written notice to each of the other parties. All such notices, demands and
communications shall be effective when personally delivered, one (1) business
day after delivery to the overnight courier, upon telephone confirmation of
facsimile transmission or upon receipt after dispatch by mail to the party to
whom the same is so given or made:

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If to Seller: Logic Marine Corporation
c/o P. T. Sumberdaya Pacific Corporation
10 Jalan Riau, Menteng
Jakarta 10310, Indonesia

Attention: Ario Mahendra, Chairman

If to Stockholders: Allied Plastics International, Ltd. or
Cheshire Holdings, Ltd.
c/o P. T. Sumberdaya Pacific Corporation
10 Jalan Riau, Menteng
Jakarta 10310, Indonesia

Attention: Ario Mahendra, Chairman

with copy to: The Sanford Holshouser Law Firm PLLC
One Exchange Plaza
219 Fayetteville Street
Suite 100
Raleigh, North Carolina 27601

Attention: Ernest C. Pearson

If to Parent: P. T. Sumberdaya Pacific Corporation
10 Jalan Riau, Menteng
Jakarta 10310, Indonesia

Attention: Ario Mahendra, Chairman

If to Purchaser: Genmar Logic, LLC
c/o Genmar Holdings, Inc.
Suite 2400
100 South Fifth Street
Minneapolis, Minnesota 55402

Attention: Mary P. McConnell, Esq.

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with copy to: Briggs and Morgan P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402

Attention: Michael J. Grimes

13.2 LEGAL AND OTHER COSTS.

(b) In the event that the Non-Defaulting Party is
entitled to receive an amount of money by reason of the Defaulting
Party's default hereunder, then, in addition to such amount of money, the
Defaulting Party shall promptly pay to the Non-Defaulting Party a sum
equal to interest on such amount of money accruing at the rate of 2% per
month (but if such rate is not permitted under the laws of the State of
Delaware, then at the highest rate which is permitted to be paid under
the laws of the State of Delaware) during the period between the date
such payment should have been made hereunder and the date of the actual
payment thereof.

13.3 ENTIRE AGREEMENT. This writing constitutes the entire
agreement of the parties with respect to the subject matter hereof and may
not be modified, amended or terminated except by a written agreement
specifically referring to this Agreement signed by all of the parties hereto.

13.4 GOVERNING LAW. This Agreement, including all the documents,
instruments and agreements to be executed and/or delivered by the parties
hereto, shall be construed, governed by and enforced in accordance with the
internal laws of the state of Delaware, without giving effect to the
principles of comity or principles of conflicts of laws thereof.

13.5 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of each corporate party hereto, its successors and assigns,
and each individual party hereto and his heirs, personal representatives,
successors and assigns.

13.6 COOPERATION. Each party hereto shall cooperate, shall take
such further action and shall execute and deliver such further documents as
may be reasonably requested by any other party in order to carry out the
provisions and purposes of this Agreement.

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13.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
taken together shall be deemed one and the same original.

13.8 AMENDMENTS. No purported amendment, modification or waiver of
any provision of this Agreement, or any of the documents, instruments or
agreements to be executed by the parties pursuant hereto shall be effective
unless in a writing specifically referring to this Agreement and signed by
all of the parties and all amendments thereof shall be governed by and
construed in accordance with the law of the State of Delaware applicable to
contracts made and to be performed therein.

13.9 PRESERVATION OF AND ACCESS TO RECORDS. The Purchaser shall
preserve all books and records of the Seller for a period of six (6) years
after the Closing Date; PROVIDED, HOWEVER, Purchaser may destroy any part or
parts of such records upon obtaining written consent of Seller for such
destruction, which consent shall not be unreasonably withheld. Such records
shall be made available to Seller and their representatives at all reasonable
times during normal business hours of the Seller during said six-year period
with the right at their expense to make abstracts from and copies thereof.

13.10 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the
consummation of the transactions contemplated hereby shall be approved by
both Purchaser and Seller prior to the release of such public announcements,
and each party agrees to cooperate with the other party as appropriate to
comply with all Applicable Laws. Subsequent to the date of receipt of all
consents and approvals of each Governmental Body necessary to consummate this
transaction, Purchaser may make such announcements and/or advertisements as
Purchaser, in its sole discretion, deems necessary.

13.11 COSTS. Except as otherwise provided in this Agreement, each
party hereto shall pay their own costs and expenses incurred in connection
with negotiating and preparing this Agreement and consummating the
transactions contemplated hereby, including but not limited to fees and
disbursements of their attorneys, accountants and investment bankers.

13.12 HEADINGS. The headings of the articles, sections and
subsections of this Agreement are intended for the convenience of the parties
only and shall in no way be held to explain, modify, construe, limit, amplify
or aid in the interpretation of the provisions hereof. The terms "this
Agreement," "hereof," "herein," "hereunder," "hereto" and similar expressions
refer to this Agreement as a whole and not to any particular article,
section, subsection or other portion hereof and include the Schedules and
Exhibits hereto and any document, instrument or agreement executed and/or
delivered by the parties pursuant hereto.

61
<PAGE>

or other attributes of the Business of the Seller shall mean such items or
attributes as they are used in, apply to, or relate to all Businesses of the
Seller.

13.14 NUMBER AND GENDER. Unless the context otherwise requires,
words importing the singular number shall include the plural and vice versa
and words importing the use of any gender shall include all genders.

13.15 SEVERABILITY. In the event that any provision of this
Agreement is declared or held by any court of competent jurisdiction to be
invalid or unenforceable, such provision shall be severable from, and such
invalidity or unenforceability shall not be construed to have any effect on,
the remaining provisions of this Agreement, unless such invalid or
unenforceable provision goes to the essence of this Agreement, in which case
the entire Agreement may be declared invalid and not binding upon any of the
parties.

13.16 PARTIES IN INTEREST AND ASSIGNMENT. Nothing expressed or
implied in this Agreement is intended or shall be construed to confer any
rights or remedies under or by reason of this Agreement upon any Person other
than (i) Purchaser, Purchaser's Affiliates and Genmar Holdings' lenders under
the senior and subordinated credit facilities of Genmar Holdings, (ii)
Seller, (iii) the Stockholders and (iv) Parent and their respective heirs,
personal representatives, successors and permitted assigns. Nothing in this
Agreement is intended to relieve or discharge the Liabilities of any third
Person to Purchaser or Seller. This Agreement and any rights or interests
arising from or in connection with this Agreement shall (i) not be assignable
by Seller, Parent or the Stockholders and any such purported assignment shall
be null and void and of no force or effect, (ii) be assignable by Purchaser
in its sole discretion, including any assignment to Genmar Holdings' lenders
under the senior and subordinated credit facilities of Genmar Holdings.

13.17 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the parties pursuant hereto, may
be waived only by a written instrument executed by the party waiving
compliance. Any such waiver shall only be effective in the specific instance
and for the specific purpose for which it was given and shall not be deemed a
waiver of any other provision hereof or of the same breach or default upon
any recurrence thereof. No failure on the part of a party hereto to exercise
and no delay in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.

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<PAGE>

same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that
the party is in breach of the first representation, warranty or covenant.

13.19 FACSIMILE SIGNATURES. Due to the parties' geographic
locations, the parties hereto have agreed that signatures for execution of
this Agreement and any certificate, instrument and other document entered
into and/or delivered pursuant to or in connection with this Agreement, may
be provided by facsimile; and upon receipt of such facsimile signature, the
party accepting such signature shall be entitled to rely on the execution
thereof and such signature will be binding and effective as if the original
counterpart had been transmitted and/or delivered.

ARTICLE XIV

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings
specified:

"AAA RULES" - has the meaning set forth in Section 10.5(b) of this
Agreement.

"ACCOUNTANT" - has the meaning set forth in Section 2.4 of this
Agreement.

"ACQUISITION PROPOSAL" - means any proposal relating to the possible
acquisition of Seller whether by way of merger, purchase of capital stock of
Seller representing fifty percent (50%) or more of the voting power or equity
of Seller, purchase of all or substantially all of the assets of Seller, or
otherwise.

"AGREEMENT" - has the meaning set forth in the introductory paragraph
hereof.

"ALLIED" - has the meaning set forth in Section 7.35 of this Agreement.

"ANNUAL NET REVENUES" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"ANNUAL PERIOD" - has the meaning set forth in Section 2.2(b) of this
Agreement.

"APPLICABLE LAW" OR "APPLICABLE LAWS" - means any and all laws,
ordinances, constitutions, regulations, statutes, treaties, rules, codes,
licenses, certificates, franchises, permits, requirements and Injunctions
adopted, enacted, implemented, promulgated, issued, entered or deemed
applicable by or under the authority of any Governmental Body having
jurisdiction over a specified Person or any of such Person's properties or
assets. Unless used in either Section 5.24 or Section 8.7 hereof, the
foregoing definition shall not include Environmental Laws.

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<PAGE>

"ASSET ACQUISITION STATEMENT" - has the meaning set forth in Section
2.3 of this Agreement.

"ASSETS" - has the meaning set forth in Section 1.2(a) of this
Agreement.

"ASSUMED LIABILITIES" - has the meaning set forth in Section 1.3(a) of
this Agreement.

"AUDIT" - has the meaning set forth in Section 8.7 of this Agreement.

"AUDITOR" - has the meaning set forth in Section 2.4 of this Agreement.

"Benefit Plans" - means any and all bonus, stock option, restricted
stock, stock purchase, stock appreciation, phantom stock, profit
participation, profit-sharing, deferred compensation, severance, pension,
retirement, disability, medical, dental, health, life or dental insurance,
death benefit, incentive, welfare and/or other benefit, compensation and/or
retirement plan, policy, arrangement and/or Contract maintained, sponsored or
participated in by Seller.

"BRUNSWICK NOTE" - has the meaning set forth in Section 7.26 of this
Agreement.

"BUSINESS" - has the meaning set forth in the recitals to the
Agreement.

"CASH CONSIDERATION" - has the meaning set forth in Section 2.1 of
this Agreement.

"CLOSING" - has the meaning set forth in Article III of this Agreement.

"CLOSING CERTIFICATE" - has the meaning set forth in Section 2.4 of
this Agreement.

"CLOSING DATE" - has the meaning set forth in Article III of this
Agreement.

"CODE" - means the Internal Revenue Code of 1986, as amended, or any
successor law and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.

"COMPETING BUSINESS" - has the meaning set forth in Section 5.26 of
this Agreement.

"COMPUTER SYSTEM" has the meaning set forth in Section 5.28 of this
Agreement.

"CONFIDENTIAL INFORMATION" - means any information or compilation of
information not generally known to the public or the industry or which the
Seller has not disclosed to third parties without a written obligation of
confidentiality, which is proprietary to the Seller, relating to the Seller's
procedures, techniques, methods, concepts, ideas, affairs, products,
processes and services, including, but not limited to, information relating
to marketing, merchandising, selling, research, development, manufacturing,
purchasing, accounting, engineering, financing, costs, customers, plans,
pricing, billing, needs of customers and products and services used by
customers, all lists of customers and their addresses, prospects, sales
calls, products, services, prices and the like as well as any specifications,
formulas, plans, drawings, accounts or sales records, sales brochures, code

<PAGE>

books, manuals, trade secrets, knowledge, know-how, pricing strategies,
operating costs, sales margins, methods or operations, invoices or statements
and the like.

"COPYRIGHTS" - has the meaning set forth in Section 5.15(a) of this
Agreement.

"COST OF GOODS SOLD" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"DEBT INSTRUMENTS" - has the meaning set forth in Section 5.25 of this
Agreement.

"DEFAULTING PARTY" - has the meaning set forth in Section 13.2(a) of this
Agreement.

"EARN-OUT CONSIDERATION" - has the meaning set forth in Section 2.2(a) of
this Agreement.

"ENCUMBRANCE" - means and includes:

(ii) with respect to any real property (including Leased Real Estate),
any mortgage, lien, easement, interest, right-of-way, condemnation
or eminent domain Proceeding, encroachment, any building, use or
other form of restriction, Encumbrance or other claim (including
adverse or prescriptive) or right of third parties (including
Governmental Bodies), any lease or sublease (other than Seller's
lease on Leased Real Estate), boundary dispute, and agreements
with respect to any real property including: purchase, sale, right
of first refusal, option, construction, building or property
service, maintenance, property management, conditional or
contingent sale, use or occupancy, franchise or concession,
whether voluntarily incurred or arising by operation of law, and
including any agreement to grant or submit to any of the foregoing
in the future.

"ENVIRONMENTAL AUDITOR" - has the meaning set forth in Section 8.7 of
this Agreement.

"ENVIRONMENTAL CLAIMS" - has the meaning set forth in Section 5.24(j)(i)
of this Agreement.

"ENVIRONMENTAL CONDITIONS" - has the meaning set forth in Section
5.24(j)(ii) of this Agreement.

"ENVIRONMENTAL LAWS" - has the meaning set forth in Section 5.24(j)(iii)
of this Agreement.

"EXCLUDED LIABILITIES" - has the meaning set forth in Section 1.3(b) of
this Agreement.

<PAGE>

"FINAL BALANCE SHEET" - has the meaning set forth in Section 2.4 of this
Agreement.

"FINAL BALANCE SHEET DATE" - has the meaning set forth in Section 2.4 of
this Agreement.

"FINANCIAL STATEMENTS" - has the meaning set forth in Section 5.7 of this
Agreement.

"GENMAR HOLDINGS" - has the meaning set forth in the recitals to the
Agreement.

"GENMAR INDUSTRIES" - has the meaning set forth in the recitals to the
Agreement.

"GOVERNMENTAL BODY" - any:

(a) nation, state, county, city, town, village, district or
other jurisdiction of any nature;

(b) federal, state, local, municipal, foreign or other
government;

(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, board,
commission, department, instrumentality, office or other
entity, and any court or other tribunal);

(d) multi-national organization or body; and/or

(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police,
regulatory or Taxing authority or power of any nature.

"HAZARDOUS MATERIALS" - has the meaning set forth in Section 5.24(j)(iv)
of this Agreement.

"IP LICENSE AGREEMENT" - has the meaning set forth in Section 7.35 of
this Agreement.

"INDEMNIFIED PARTY" - has the meaning set forth in Section 10.4 of this
Agreement.

"INDEMNIFYING PARTY" - has the meaning set forth in Section 10.4 of this
Agreement.

"INDEPENDENT ACCOUNTANTS" - has the meaning set forth in Section 2.2(c)
of this Agreement.

"INJUNCTION" - means any and all writs, rulings, awards, directives,
injunctions (whether temporary, preliminary or permanent), judgments, decrees or
other orders adopted, enacted,

<PAGE>

implemented, promulgated, issued, entered or deemed applicable by or under
the authority of any Governmental Body.

"KNOWLEDGE" - An individual will be deemed to have "Knowledge" of a
particular fact or other matter if:

(i) such individual is actually aware of such fact or other matter; or

(ii) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter with reasonable
investigation.

An entity or other Person will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a stockholder, director, officer, partner, member or trustee
of such entity (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.

"LEASED REAL ESTATE" - has the meaning set forth in Section 5.21 of this
Agreement.

"LIABILITY" or "LIABILITIES" - means any and all debts, liabilities
and/or obligations of any type, nature or description (whether known or unknown,
asserted or unasserted, secured or unsecured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due).

"LIABILITY EXCEPTION" - has the meaning set forth in Section 10.1 of this
Agreement.

"LOSS" or "LOSSES" - has the meaning set forth in Section 10.1(a) of this
Agreement.

<PAGE>

"MONTHLY NET REVENUE STATEMENT" - has the meaning set forth in Section
2.2(b) of this Agreement.

"NET ASSETS" - shall mean the assets less the liabilities set forth on
the Final Balance Sheet.

"NET ASSET ADJUSTMENT" - has the meaning set forth in Section 2.1 of this
Agreement.

"NET REVENUE" - has the meaning set forth in Section 2.2(a) of this
Agreement.

"NON-DEFAULTING PARTY" - has the meaning set forth in Section 13.2(a) of
this Agreement.

"ORDER"- means any judgment, award, decision, consent decree, Injunction,
ruling, writ or order of any federal, state or local Governmental Body, or
authority that is binding on any Person or its property under Applicable Law.

"ORDINARY COURSE OF BUSINESS" - means an action taken by a Person only if

(i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day
operations of such Person; and

(ii) such action is not required to be authorized by the governing body
of such Person (or by any Person or group of Persons constituting
a governing body of a Person exercising similar authority).

"PARENT" means Seller's ultimate corporate parent and Affiliate, PT
Sumberdaya Pacific Corporation, an Indonesian corporation.

"PATENT" - has the meaning set forth in Section 5.15(a) of this
Agreement.

"PCBS" - has the meaning set forth in Section 5.24(h) of this Agreement.

"PERMITTED ENCUMBRANCES" - has the meaning set forth in Section 5.21(d)
of this Agreement.

"PERSON" - means any individual, corporation (including any non-profit
corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or
other entity or Governmental Body.

"PHYSICAL INVENTORY" - has the meaning set forth in Section 7.25 of this
Agreement.

<PAGE>

"PROCEEDING" - means any suit, litigation, arbitration, hearing, audit,
investigation, Injunction or other action (whether civil, criminal,
administrative or investigative) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.

"PURCHASE PRICE" - has the meaning set forth in Section 2.1 of this
Agreement.

"PURCHASER" - has the meaning set forth in the introductory paragraph
hereof.

"RELATED PERSON" - means, with respect to a particular individual,

(i) each other member of such individual's Family (as hereafter
defined); and

(ii) any Affiliate of one or more members of such individual's Family.

With respect to a specified Person other than an individual:

(i) any Affiliate of such specified Person: and

(ii) each Person that serves as a director, governor, officer, manager,
general partner, executor or trustee of such specified Person (or
in a similar capacity). For purposes of this definition, the
"FAMILY" of an individual includes (a) such individual, (b) the
individual's spouse, (c) any lineal ancestor or lineal descendant
of the individual, or (d) a trust for the benefit of any of the
foregoing.

"RENEGOTIATED BRUNSWICK NOTE" - has the meaning set forth in Section 7.26
of this Agreement.

"RESPONSE PERIOD" - has the meaning set forth in Section 2.4 of this
Agreement.

"SCHEDULES" - means the Schedules to this Agreement.

"SELLER" - has the meaning set forth in the introductory paragraph of
this Agreement.

"SELLER'S PRODUCTS" - has the meaning set forth in Section 2.2(a) of this
Agreement.

"STOCKHOLDER" or "STOCKHOLDERS" - each have the meaning(s) set forth in
the introductory paragraph hereof.

"SOFTWARE" has the meaning set forth in Section 5.28 of this Agreement.

"SUPER-FUND" - is used in Section 5.24(b) of this Agreement.

"TAX" or "TAXES" - has the meaning set forth in Section 5.9 of this
Agreement.

<PAGE>

"TAX RETURN" - means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including without limitation
any schedule or attachment thereto, any amendment thereof, and any estimated
report or statement.

"THREATENED" - a claim, Proceeding, dispute, action, or other matter will
be deemed to be "Threatened" if any demand or statement has been made, or any
notice has been given, that would lead a reasonably prudent Person to conclude
that such a claim, Proceeding, dispute, action, or other matter will be
asserted, commenced, taken or otherwise pursued in the future.

"TRADEMARKS" - has the meaning set forth in Section 5.15(a) of this
Agreement.

"YEAR-END STATEMENT" - has the meaning set forth in Section 2.2(b) of
this Agreement.

"YEAR 2000 COMPLIANT" has the meaning set forth in Section 5.28 of this
Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

LOGIC MARINE CORPORATION

By /s/ Robert N. Anderson
--------------------------------

Its Pres.
--------------------------

GENMAR LOGIC, LLC

By /s/ Roger R. Cloutier, II
--------------------------------
Its Ex. Vice President
--------------------------

SHAREHOLDERS:

ALLIED PLASTICS INTERNATIONAL, LTD.

By [ILLEGIBLE]
--------------------------------
Its Pres.
--------------------------

CHESHIRE HOLDINGS, LTD.

By [ILLEGIBLE]
--------------------------------
Its Pres.
--------------------------

PARENT:

PT SUMBERDAYA PACIFIC CORPORATION

By [ILLEGIBLE]
--------------------------------
Its Pres.
--------------------------

<PAGE>

EXHIBIT A

BILL OF SALE

Logic Marine Corporation, a Delaware corporation (hereinafter called
"Seller") for One Dollar ($1.00) and other valuable consideration to it in hand
paid, receipt of which is hereby acknowledged, by these presents does sell,
assign, transfer and convey unto Genmar Logic, LLC, a Delaware limited liability
company,(hereinafter called "Assignee"), its successors and assigns, the
following described property:

All property of every kind and description and wherever situated,
tangible and intangible, owned by Seller or to which Seller has any right,
title or interest on the date hereof, and including, without limitation, all
"Assets" as defined in a certain Agreement of Purchase and Sale of Assets,
dated April ___, 1999, among, INTER ALIA, Seller and Assignee (the
"Agreement"), which includes the following:

1. All cash, cash equivalents (including all certificates of deposit)
bank balances, monies in the possession of banks and other depositories, term or
time deposits, guaranteed investment certificates, treasury bills, other
securities and similar cash or cash-equivalent items owned by the Seller as of
the Closing Date;

2. All trade or other accounts, credit card and other receivables
owed to the Seller;

3. All inventories to which the Seller has title (including supplies
and samples) wherever located, including goods in transit;

4. All Copyrights, trade names, Trademarks, service marks, logos,
trade dress, Patents and applications therefor and registration thereof, and all
licenses held or granted in connection with any of the foregoing or other
Intellectual Property, together with the goodwill of the Seller connected with
the use thereof;

5. All real estate, machinery, equipment, vehicles, furniture,
furnishings, leasehold improvements, fixtures, signs, supplies, fixed assets and
other personal property;

6. All of such leases, franchise agreements, agreements, commitments,
contracts and warranties (including prepayments and deposits, and including any
of such agreements which may have expired), to which any Seller is a party are
listed on Exhibit B hereto, excluding defaults, breaches or other such charges
occurring and/or accruing prior to or on the Closing Date (the "Assumed
Contracts"); provided, however, in no event shall the Assignee assume or be
responsible for any termination or cancellation costs or expenses incurred in
connection with any Seller executory contracts;

7. All Confidential Information, including without limitation trade
secrets, technical, processing or marketing information, including product
formulae, developments, inventions, know-

A-1

<PAGE>

how, processes, ideas and trade secrets and documentation thereof and all
claims and rights related thereto;

8. All files, customer records, employee records, logos, customer
lists, vendor lists, accounting books, records, ledgers and electronic data
processing materials. With respect to the foregoing and all other materials
related to the Seller's Business transferred hereunder, the Purchaser hereby
covenants and agrees that the Seller may, at its option (but subject to the
Assignee's right to prepare copies thereof), upon the Closing take possession
of certain permanent records of the Seller, which records shall include but
not be limited to articles and certificates of organization, by-laws, minute
books and resolutions, stockholder records, general ledgers, journal entries,
tax returns (state and federal), payroll and payroll tax reporting forms
(state and federal), W-2 employee earnings records, workers' compensation
reports, retirement, pension and other benefit plan documents and records,
and the like. Assignee and its employees shall provide reasonable assistance
to the Seller in the location of and information relating to such records for
five (5) years from the Closing Date;

Notwithstanding any other contrary provision in this Agreement, this provision
shall survive the Closing (and be enforceable) for the periods specified in this
paragraph (h);

In the event the Purchaser determines to destroy or otherwise dispose of any of
the Seller's records or materials subsequent to the applicable retention period,
the Purchaser will notify the Seller in writing and allow the Seller the
opportunity to take custody of such records and materials within a commercially
reasonable time after receipt of such notification;

9. All assignable rights under agreements concerning confidentiality,
non-competition or the assignment of ideas or inventions, including but not
limited to non-competition agreements;

10. All prepaid expenses, deposits with third parties useable by the
Purchaser and credit balances and advances to vendors;

11. All transferable permits, licenses and governmental agreements,
waivers and authorizations of the Seller which the Purchaser elects to assume by
notice at or before the Closing;

12. All information systems (hardware and software), programs, manuals
and documentation thereof;

13. All interests in other entities and joint ventures;

14. All advertising materials and arrangements;

15. All rights of the Seller under and proceeds from insurance
policies and all rights of action or Proceedings against third persons for
damage to the Seller's property, business interruption or otherwise (including
insurance protecting the Seller from liability) arising with respect to claims
arising prior to the Closing;

A-2

<PAGE>

16. All other rights, property and assets of the Seller, tangible or
intangible, including the Seller's corporate and assumed names used or useful in
the conduct of its Business and any and all contingent assets;

17. directors' and officers' liability insurance policies covering
officers and directors of Seller;

18. any and all governmental refunds for income and other Taxes
previously paid to which Seller is entitled;

19. goodwill and other rights or interests that may accrue to or
constitute Seller's Business;

Seller hereby authorizes and grants its power of attorney to Assignee and
appoints Assignee and the officers thereof as Seller's attorney-in-fact to take
any appropriate action in connection with any of said rights, claims, causes of
action and property, in the name of Seller or in its own or any other name but
at its own expense, it being understood that this authorization and power of
attorney are coupled with an interest and irrevocable.

TO HAVE AND TO HOLD said rights, claims, causes of action, property,
assets, business and goodwill, as a going concern, unto the said Assignee, its
successors and assigns, to and for its use forever.

In furtherance of the foregoing, Seller agrees as follows:

1. Seller agrees that it will, at any time, and from time to time
after the date hereof, upon the request and at the expense of Seller, do,
execute, acknowledge and deliver or will cause to be done, executed,
acknowledged and delivered all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be required for the better
assigning, transferring, granting, conveying, assuring and confirming to
Assignee the Assets assigned, transferred, conveyed and delivered or to be
assigned, transferred, conveyed and delivered to Assignee hereunder.

2. Seller hereby names, constitutes and appoints Assignee the true
and lawful attorney of Seller, with full power of substitution in the name of
Assignee or in the name of Seller but on behalf of and for the benefit of
Assignee, its successors and assigns, to demand and receive from time to time
any and all Assets hereby assigned, transferred, conveyed and delivered to
Assignee and to give receipts, releases and acquittances for and in respect of
the same or any part thereof.

A-3

<PAGE>

AND, Seller does hereby warrant, covenant and agree that it:

(a) has good and marketable title to the properties and assets
hereby sold, assigned, transferred, conveyed and delivered, subject to
such liens and other Encumbrances as are disclosed in the Agreement or
any schedules or exhibits thereto and except as otherwise provided in the
Agreement; and

(b) will warrant and defend the sale of said properties and
assets against all and every person or persons whomsoever claiming or to
claim against any or all of the same, subject to the terms and provisions
of the Agreement.

Any terms or phrases capitalized herein and not otherwise defined shall
have the meaning(s) ascribed to them in the Agreement.

IN WITNESS WHEREOF, Seller has caused this instrument to be duly executed
this ________ day of April, 1999.

SELLER:

LOGIC MARINE CORPORATION

By
---------------------------------

Its
-----------------------------

ATTEST:

- ----------------------------------
Secretary

A-4

<PAGE>

EXHIBIT B

LIABILITIES UNDERTAKING

UNDERTAKING dated April, 1999 by GENMAR LOGIC, LLC, a Delaware limited
liability company (hereinafter called "Purchaser") in favor of LOGIC MARINE
CORPORATION, a Delaware corporation (hereinafter called "Seller").

RECITALS

A. Pursuant to that certain Agreement of Purchase and Sale dated as
of April ____, 1999, among, INTER ALIA, Purchaser and Seller (the "Agreement"),
Seller has concurrently herewith sold, assigned, transferred, conveyed and
delivered to Purchaser substantially all of the Business, assets, properties,
goodwill and all other rights and interests of Seller as a going concern (the
"Assets"); and

B. In partial consideration therefor, the Agreement requires
Purchaser to execute and deliver to Seller this Undertaking;

C. All terms capitalized but not otherwise defined herein shall have
the meaning ascribed by and in the Agreement.

NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which by Purchaser is hereby
acknowledged, Purchaser hereby agrees as follows:

AGREEMENT

1. Purchaser hereby undertakes, assumes and agrees, subject to the
limitations contained herein, to perform, pay or discharge any and all Assumed
Liabilities set forth in Section 1.3(a) of the Agreement.

2. The debts, liabilities and obligations assumed by Purchaser under
Paragraph l hereof shall not include:

(a) Any Excluded Liabilities set forth in Section 1.3(b) of the
Agreement and any other liabilities, debts and obligations assigned to
the Seller under the Agreement;

(b) federal, state or local income, franchise, excise, sales,
use, property, payroll or similar Taxes imposed on Seller except to the
extent that (i) such Taxes constitute debts or liabilities of Seller
which would be assumed by Purchaser under the provisions of paragraph 1
above; (ii) Purchaser receives the benefits of all deposits, escrow
accounts or other payments made or collected by Seller on account of or
with respect to such Tax liabilities; and (iii) Seller complies with each
of the following conditions:

B-1

<PAGE>

(i) Seller shall afford Purchaser the right, at its
option, to assume the entire control of the preparation and filing
of all non-income based Tax returns with respect thereto, and
Seller shall keep Purchaser fully advised as to any and all
investigations, audits or other Proceedings, Orders or other
communications by any taxing agent or authority which may affect
the amount of the Tax liabilities being assumed hereunder; and

(ii) Seller shall afford Purchaser the right, at its
option, to assess the entire control of any such audit or other
Proceeding insofar as it may relate to the liabilities of Seller
assumed hereunder, including the defense, compromise or settlement
thereof, and in connection therewith Seller and the Stockholders
shall cooperate fully and make available to Purchaser all
information under their control relating thereto which Purchaser
may reasonably request and shall execute and deliver to Purchaser
such powers-of-attorney or other documents which Purchaser may
reasonably deem necessary or desirable to effectuate the
foregoing.

(c) liabilities or obligations of Seller resulting or arising
from claims for personal injury or property damage or out of any breach
or any non-performance by Seller of any contract, commitment or
obligation imposed by law or otherwise, except to the extent covered by
insurance proceeds payable to or on behalf of Purchaser; or

(d) debts, liabilities or obligations arising under any
contract which have not been assigned to Purchaser so that Purchaser will
enjoy the full benefits thereunder or which is listed in any Schedule to
the Agreement and specifically designated thereon as "Not Assumed"; or

(e) debts, liabilities or obligations of Seller, direct or
indirect, fixed, contingent or otherwise, which exist at or as of the
Closing or which arise after the Closing but which are based upon or
arise from any act, omission, transaction, circumstance, sale of goods or
services (excluding product warranty claims of $100,000 or less which the
parties have agreed will be the responsibility of Purchaser), state of
facts or other condition which occurred or existed on or before the date
of the Closing, including products liability claims whether or not then
known, due or payable, except to the extent reflected or reserved against
on the face of the Final Balance Sheet (excluding the notes thereto) or
incurred after the Final Balance Sheet date in connection with the
purchase of goods or services in the ordinary course of Seller's Business
and in conformity with the representation, warranties and covenants
contained in the Agreement.

3. Nothing contained herein shall require Purchaser to pay or
discharge any debts or obligations expressly assumed hereby in the event, and so
long as, Purchaser shall in good faith contest or cause to be contested the
amount or validity thereof.

B-2

<PAGE>

4. Other than as specifically stated above or in the Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this
Undertaking, and it is expressly understood and agreed that all debts,
Liabilities and obligations not assumed hereunder by Purchaser shall remain the
sole obligation of Seller, its successors and assigns, and no Person other than
Seller shall have any rights under this Undertaking or the provisions contained
herein.

5. Any terms or phrases Capitalized herein and not otherwise defined
shall have the meaning(s) ascribed to them in the Agreement.

GENMAR LOGIC, LLC

By
---------------------------------

Its
------------------------------

B-3

<PAGE>

EXHIBIT C

NON-COMPETITION AND CONTINUITY
OF BUSINESS DEALINGS UNDERTAKING

THIS UNDERTAKING dated ______________, 1999 by _____________________ in
favor of ____________________, a Delaware limited liability Company (hereinafter
called the "Company").

RECITALS

A. The Company has entered into an Agreement of Purchase and Sale of
Assets, dated _______________, 1999 (the "Agreement"), with ________________, a
limited liability company, having its principal office at ____________________,
_____________________, (hereinafter called "Seller") and the Stockholders of
Seller, pursuant to which the Company is to purchase from Seller, and Seller is
to sell to the Company, all of the business, assets, properties, goodwill and
rights of Seller (the "Seller's Assets"); and

B. The undersigned is one of the parties referred to in the Agreement
as being required to execute and deliver this Undertaking.

NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration, the receipt of which is hereby acknowledged by the
undersigned, and in order to induce the Company to purchase the Seller's Assets
pursuant to the terms of the Agreement, the undersigned hereby undertakes and
agrees as follows:

1. The undersigned will not, for a period of (i) forty-eight (48)
months from the date of the closing of the transactions contemplated by the
Agreement (hereinafter called the "Closing"), or (ii) two (2) years after the
last payment of the earn-out consideration under Section 2.2 of the Agreement,
whichever is later (the "Limited Period"), directly or indirectly, anywhere in
the world (except the continent of Asia [and other locations as agreed by the
parties in the final version]) or within the geographical area or territory
where the Business of Seller is presently being conducted or may from time to
time be conducted by the Company during the Limited Period, own, manage, operate
or control, or participate in the ownership, management, operation or control
of, or be connected with or have any interest in, as a stockholder, member,
director, officer, employee, agent, consultant, lender, partner or otherwise,
(a) any business which designs, manufactures, produces, sells or distributes
product the same or similar to the Business, including without limitation boats
and marine products, or any other products which have been manufactured,
produced, sold or distributed by Seller or which are competitive therewith or
(b) any other business which is competitive with the Business conducted by
Seller or any of its Affiliates during the Limited Period; PROVIDED, HOWEVER,
that nothing contained herein shall prohibit the undersigned from owning less
than 5% of any class of securities listed on a national securities exchange or
traded publicly in the over-the-counter market. If any of the provisions of this
paragraph is held to be unenforceable

C-1

<PAGE>

because of the scope, duration or area of its applicability, the court making
such determination shall have the power to modify such scope, duration or
area or all of them, and such provision shall then be applicable in such
modified form.

4. This Undertaking and any rights or interests arising from or in
connection with this Undertaking or the Agreement shall (i) not be assignable by
Seller, Parent or the Stockholders and any such purported assignment shall be
null and void and of no force or effect, (ii) be assignable by Company in its
sole discretion, including any assignment to Genmar Holdings, Inc.'s lenders
under the senior and subordinated credit facilities of Genmar Holdings, Inc.

5 Any terms or phrases capitalized herein and not otherwise defined
shall have the meaning(s) ascribed to them in the Agreement.

-----------------------------------
[Type or Print Name]

-----------------------------------
[Signature]

C-2

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

BY AND AMONG

GENMAR HOLDINGS, INC.

POS ACQUISITION CORPORATION

PYRAMID OPERATING SYSTEMS, INC.

AND

THE STOCKHOLDERS OF PYRAMID OPERATING SYSTEMS, INC.

DATED AS OF JUNE 18, 1999

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Action by Stockholders of the Company. . . . . . . . . . . . . . . . . .2
1.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.4 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.5 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.6 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . .5
1.7 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.8 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . .5
1.9 Waiver(s) Under and Termination of Stockholders' Agreement . . . . . . .6
1.10 Subsequent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . .6

ARTICLE II. CONVERSION OF SECURITIES AND EXCHANGE . . . . . . . . . . . . . . .7
2.1 Alternative Consideration. . . . . . . . . . . . . . . . . . . . . . . .7
2.2 Effect of Merger on Company Common Stock . . . . . . . . . . . . . . . .9
2.3 Warrants and Options . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.4 Unregistered Shares. . . . . . . . . . . . . . . . . . . . . . . . . . .9
2.5 Stock Certificate Legends. . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . 12
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . 12
3.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . 14
3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 Environmental and Safety Matters . . . . . . . . . . . . . . . . . . . 15
3.13 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15 Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Absence of Certain Business Practices. . . . . . . . . . . . . . . . . 18
3.20 Relationship with Related Persons. . . . . . . . . . . . . . . . . . . 19
</TABLE>

-i-

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
3.21 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Title to Company Common Stock. . . . . . . . . . . . . . . . . . . . . 20
4.3 No Conflicts; Required Filings and Consents. . . . . . . . . . . . . . 20

ARTICLE V. REPRESENTATIONS AND WARRANTIES OF GENMAR AND THE MERGER
SUBSIDIARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . 21
5.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 No Conflicts; Required Filings and Consents. . . . . . . . . . . . . . 21
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5 Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 No Disposition of the Company Assets . . . . . . . . . . . . . . . . . 22

ARTICLE VI. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Agreement to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Assignment of Contracts and Rights . . . . . . . . . . . . . . . . . . 22
6.4 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Standstill Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . 24
6.7 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Release from Personal Guarantees . . . . . . . . . . . . . . . . . . . 24
6.9 Future Investment Opportunity. . . . . . . . . . . . . . . . . . . . . 25
6.10 Interim Working Capital Funding. . . . . . . . . . . . . . . . . . . . 25
6.11 Representations by Stockholders of the Company . . . . . . . . . . . . 26
6.12 Suspension of the Operating Agreement of Pyramid Marine, LLC . . . . . 26
6.13 Release of Partnership by the Company. . . . . . . . . . . . . . . . . 26

ARTICLE VII. CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . 27

7.1 Conditions to the Obligations of Each Party to Effect the Merger . . . 27
7.2 Conditions to Obligations of Genmar and the Merger Subsidiary. . . . . 27
7.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . . 29
7.4 Actions Regarding Conditions . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . 30
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Effect of Investigation. . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>

-ii-

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
ARTICLE IX. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 Indemnification by the Company and Stockholders of the Company . . . . 32
9.2 Indemnification by Genmar and Merger Subsidiary. . . . . . . . . . . . 33
9.3 Nature and Survival of Representations and Warranties. . . . . . . . . 33
9.4 Procedure for Indemnification. . . . . . . . . . . . . . . . . . . . . 33

ARTICLE X. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

ARTICLE XI. MISCELLANEOUS AND GENERAL . . . . . . . . . . . . . . . . . . . . 40
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Legal and Other Costs. . . . . . . . . . . . . . . . . . . . . . . . . 41
11.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.6 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.9 Preservation of and Access to Records. . . . . . . . . . . . . . . . . 42
11.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.11 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.13 Scope of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.14 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.16 Parties in Interest and Assignment . . . . . . . . . . . . . . . . . . 43
11.17 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.19 Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>

EXHIBITS
Exhibit A - Delaware Certificate of Merger (Section 1.4)
Exhibit B - Certificate of Incorporation of Surviving Corporation
(Section 1.6)
Exhibit C - Genmar Note (Section 2.1)
Exhibit D - List of Company Warrants and Options (Section 2.3)
Exhibit E - List of Critical Employees (Section 7.2(f))
Exhibit F - List of Company Record Date Stockholders of the Company (Last
Clause-Signature Page)

-iii-

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization ("Agreement") is dated as of
June 18, 1999, by and among GENMAR HOLDINGS, INC., a Delaware corporation,
("Genmar"), POS ACQUISITION CORPORATION, a Delaware corporation and a first
tier wholly owned subsidiary of Genmar (the "Merger Subsidiary"), PYRAMID
OPERATING SYSTEMS, INC., a Delaware corporation (the "Company") and the
STOCKHOLDERS set forth on the execution page hereof who join in this
Agreement (on or after the date hereof) specifically to represent, warrant
and covenant as to certain matters as set forth herein (the "Stockholders").

RECITALS

A. The Company and Merger Subsidiary have agreed to carry out a
business combination transaction upon the terms and subject to the conditions
of this Agreement and in accordance with the general corporation law of the
State of Delaware, (the "DBCL"), pursuant to which the Company will merge
with and into the Merger Subsidiary (the "Merger") and the stockholders of
the Company will convert their equity holdings in the Company in accordance
with the provisions of Article II hereof.

B. The Board of Directors of the Company has determined that the
Merger is in the best interests of the Company and the stockholders of the
Company and has approved and adopted this Agreement, the Merger and the
Transactions as a convenient means to accomplish the transactions contemplated
herein and to cause the stockholders of the Company to surrender their Company
Common Stock in exchange for the right to receive the Merger Consideration.

C. The Board of Directors of the Company has approved this Agreement,
the Merger, and the Transactions, and will recommend approval and adoption of
this Agreement, the Merger and the Transactions by the stockholders of the
Company.

D. The Stockholders have, pursuant to Section 1.2(a) of this
Agreement, each covenanted and agreed to vote affirmatively for adoption and
approval of this Agreement and shall take all additional actions as may be
necessary to adopt and approve this Agreement pursuant to any special meeting
of, or written consent action by, the stockholders of the Company.

E. The Board of Directors of Genmar has (i) approved and adopted this
Agreement on behalf of Genmar, and (ii) approved the Merger and the Transactions
as the sole Stockholder of the Merger Subsidiary.

F. The Board of Directors of the Merger Subsidiary has approved and
adopted this Agreement.

<PAGE>

AGREEMENT

In consideration of the foregoing Recitals and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:

ARTICLE I.

THE MERGER

1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the laws of the State of
Delaware, and the specific provisions of the DBCL, upon the time when the
certificate of Merger is filed with the Secretary of State of the State of
Delaware, or at such other time as the parties may agree upon in writing,
pursuant to Applicable Law (the "Effective Date") the Company will be merged
with and into the Merger Subsidiary. As a result of the Merger, the separate
existence of the Company will cease and the Merger Subsidiary will continue as
the surviving corporation of the Merger (the "Surviving Corporation").

1.2 ACTION BY STOCKHOLDERS OF THE COMPANY.

a) APPROVAL BY STOCKHOLDERS. The Company, acting through its
Board of Directors, will, in accordance with Applicable Law and its
Organizational Documents: (i) as soon as practicable, duly call, give notice
of, convene and hold a special meeting of the stockholders of the Company
holding Company Common Stock (including the Company Common Stock held by Genmar)
on the "record date" established by the Company's Board of Directors for the
purpose of adopting and approving this Agreement, the Merger and the
Transactions (the "Special Meeting"), which approval shall require, by agreement
of the Parties, at least 90% of such Company Common Stock, and (ii) use its best
efforts to obtain the 90% approval necessary for adoption of this Agreement, the
Merger, and the Transactions by the stockholders of the Company at or pursuant
to the Special Meeting, all in accordance with the DBCL. The Special Meeting
and the adoption and approval described herein, shall take place and be obtained
respectively, not later than July 15, 1999. The Stockholders who are
signatories to this Agreement covenant and agree that they will each, severally,
(i) vote all of their Company Common Stock in favor of approval and adoption of
this Agreement, the Merger and the Transactions, and (ii) shall not exercise
Dissenter's Rights.

b) APPROVAL BY COMPANY BOARD OF DIRECTORS. The Company
represents that its Board of Directors has (i) determined that this Agreement,
the Merger and the Transactions are in the best interest of the Company and the
stockholders of the Company, (ii) approved this Agreement, the Merger, and the
Transactions, which approval satisfies in full the requirements of the Company's
Organizational Documents and applicable requirements of the DBCL, and
(iii) resolved to recommend approval and adoption by the stockholders of the
Company of this Agreement, the Merger and the Transactions to the extent and in
a manner required by Applicable Law.

c) APPROVAL BY MERGER SUBSIDIARY STOCKHOLDER. (i) Genmar has
approved and adopted this Agreement, the Merger and the Transactions, on behalf
of itself and on behalf of the Merger Subsidiary as the sole stockholder of the
Merger Subsidiary, and (ii) the Board of Directors

<PAGE>

of the Merger Subsidiary has approved and adopted this Agreement, the Merger
and the Transactions, in each case in accordance with Applicable Law.

d) APPROVAL DATES. The approvals required by (i) Section
1.2(a) shall occur on or before July 15, 1999, and (ii) Sections 1.2(b) and (c)
occurred prior to the execution of this Agreement.

1.3 CLOSING. Unless this Agreement is terminated pursuant to the
provisions of Article VIII hereof and the Merger and the Transactions have
been abandoned, and subject to the satisfaction or, if possible, waiver of
the conditions set forth in Article VII hereof, the closing of the Merger
(the "Merger Closing") will take place at the alternative times set forth in
Sections 1.3(a) or 1.3(b) below.

a) GENMAR INITIAL PUBLIC OFFERING. In the event Genmar
completes an initial public offering pursuant to an Underwriting Agreement
and issues and sells Genmar stock in a firm commitment public offering (the
"Public Offering") registered on Form S-1 in accordance with the requirements
of the Securities Act of 1933 as amended (the "Act"), on or before March 31,
2000, the Merger Closing will take place within ten (10) business days (such
date to be selected by Genmar in its discretion) subsequent to the closing of
the Public Offering at the offices of Briggs and Morgan, P.A., 2400 IDS
Center, Minneapolis, Minnesota at 10:00 a.m. local time, or on such other
date or such other place and time as determined by Genmar (the "Public
Offering Closing Date"), subject to the termination provisions of Article
VIII of this Agreement.

b) NO PUBLIC OFFERING.

(i) In the event that a Public Offering of Genmar Common
Stock is not closed on or before March 31, 2000, the
Merger Closing shall take place at the offices of
Briggs and Morgan, P.A. at the address set forth
above at 10:00 a.m. local time on April 1, 2000, or
within thirty (30) days thereafter, such exact date
to be established in the sole discretion of Genmar
(the "Secondary Closing Date"), subject to the
termination provisions of Article VIII of this
Agreement. Notwithstanding the foregoing, in the
event that Genmar determines in good faith that a
Public Offering is unlikely to occur on or before
March 31, 2000 and such determination is made prior
to December 15, 1999, then the Company may request
that the Secondary Closing Date be scheduled, and
the Merger Closing occur prior to the end of
business on December 31, 1999.

(ii) In the event that the transaction described in
Section 1.3(b)(i) above and 2.1(b) occurs, the
Parties hereto and the stockholders of the Company
(upon approval and adoption of this Agreement) agree
that the following alternative (mutually exclusive)
transaction structures shall be utilized to effect
the transfer of the Company Common Stock, in each
case with the alternative details and consequences
of such alternative structure to be satisfactory to
Genmar and its counsel, as compared to the Merger:

<PAGE>

A) the stockholders of the Company will effect a
direct transfer of the Company Common Stock
to Genmar in exchange for the Notes. The
purchase price for each share of Company
Common Stock shall be Note Merger
Consideration computed in accordance with the
formula set forth in Section 2.1(b)
hereinbelow. The alternative set forth in
this Section shall not be available under
this Agreement unless every share of Company
Common Stock participates in the transfer.
In the event this stock sale alternative is
selected by the Company (i) the Company and
the shareholders of the Company shall provide
written notice of the selection under this
Section to Genmar not less than fourteen (14)
days prior to any anticipated Closing Date,
(ii) the Merger will not take effect, and
(iii) the stockholders of the Company shall
be required hereunder to deliver their stock
certificates representing the Company Common
Stock to be transferred, along with executed
stock powers endorsed in blank. All other
provisions of this Agreement necessary to
effect the provisions of this Section shall
remain in full force and effect, except to
the extent that a provision of this Agreement
is inconsistent with this Section and must
be, and hereby is, conformed by the operation
of this Agreement and the terms of this
Section, to be consistent with the direct
stock sale described hereinabove.

B) the Merger form under this Agreement will be
changed from a "forward" merger to a
"reverse" merger with the following
attributes: (i) Genmar shall liquidate the
Merger Subsidiary and a new subsidiary of
Genmar will be formed (the "New Merger
Subsidiary") and will be merged with and into
the Company, which shall change the
definition of "Merger" under this Agreement,
(ii) as a result of the Merger, the separate
existence of the New Merger Subsidiary will
cease and the Company will continue as
Surviving Corporation, and (iii) the Note
Merger Consideration will be determined in
accordance with Section 2.1(b). In the event
that this "reverse" merger alternative is
selected by the Company, the Company shall
provide notice to Genmar not less than
fourteen (14) days prior to any anticipated
Closing Date. All other provisions of this
Agreement necessary to effect the provisions
of this Section shall remain in full force
and effect, except to the extent that a
provision of this Agreement is inconsistent
with this Section and must be, and hereby is,
conformed by the operation of the terms of
this Section to be consistent with the
reverse merger described herein.

<PAGE>

The other provisions of this Agreement shall be interpreted and
construed to reasonably implement the foregoing provisions, including without
limitations references to the effect of the Merger on the parties to this
Agreement.

In connection with any Merger Closing with no Public Offering, Genmar
shall deliver to the stockholders of the Company, at addresses provided by
the Company, at least fifteen (15) days prior to the Merger Closing, audited
financial statements for its fiscal year ended June 30, 1999 and quarterly
unaudited financial statements for the most recent fiscal quarter, together
with narrative information that is comparable to that provided to Genmar's
significant vendors.

c) CLOSING DATE DEFINITION. The term "Closing Date" shall
refer in the alternative to the Public Offering Closing Date or the Secondary
Closing Date, both of which shall be deemed a "Merger Closing", as applicable
to the particular circumstances of the closing of this Agreement, the Merger
and the Transactions.

1.4 EFFECTIVE DATE. On the Closing Date, the parties will cause
the Merger to be consummated by filing a Certificate of Merger with the
Secretary of State of the State of Delaware, pursuant to and in accordance
with the DBCL, substantially in the form attached hereto as EXHIBIT A. The
Merger will become effective on the Effective Date.

1.5 EFFECT OF THE MERGER. From and after the Effective Date, the
Surviving Corporation will possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties
of the Company, and the Merger Subsidiary and the Merger will otherwise have
the effects as provided under the DBCL. The outstanding shares of Company
Common Stock (other than the Company Common Stock held by Genmar , which
shall be canceled) shall be converted into the Merger Consideration, and the
outstanding shares of the capital stock of the Merger Subsidiary shall be
unaffected by the Merger, all on the basis, terms and conditions described in
Article II hereof.

1.6 CERTIFICATE OF INCORPORATION. From and after the Effective
Date, the Certificate of Incorporation of the Surviving Corporation will be
substantially in the form attached hereto as EXHIBIT B until amended in
accordance with Applicable Law, and the name of the Surviving Corporation
shall be the name of the Company or such other name as Genmar may elect.

1.7 BYLAWS. From and after the Effective Date, the bylaws of the
Surviving Corporation shall be the bylaws of the Merger Subsidiary in effect
immediately prior to the Effective Date.

1.8 DIRECTORS AND OFFICERS. From and after the Effective Date, until
successors are duly elected or appointed and qualified (or their earlier
resignation or removal) in accordance with Applicable Law, the directors and
officers of the Surviving Corporation shall be as follows:

DIRECTORS

Grant E. Oppegaard
Roger R. Cloutier II
John S. Rosendahl

<PAGE>

OFFICERS

Grant E. Oppegaard President
Roger R. Cloutier II Vice President
Mary P. McConnell Vice President, Secretary
John S. Rosendahl Vice President
Mark W. Peters Vice President

From and after the Effective Date, the officers and directors of the
Company prior to the Effective Date shall be deemed resigned for all purposes,
except as may be necessary or desirable pursuant to the provisions of Section
1.10 hereof.

1.9 WAIVER(S) UNDER AND TERMINATION OF STOCKHOLDERS' AGREEMENT. By
virtue of the respective approvals of this Agreement, the Merger and the
Transactions (i) by the stockholders of the Company (including Genmar)
pursuant to Section 1.2(a), and/or (ii) by the Stockholders by execution of
this Agreement, and (iii) by Genmar, the Company, the stockholders of the
Company, the Stockholders and the Company covenant and agree that any
provision(s) of the Stockholders' Agreement by and among the Company, Genmar
and the Pyramid Investors (as defined by the Stockholders' Agreement) made
and entered into on March 23, 1999 (the "Stockholders' Agreement") which
require or prohibit certain acts, omissions or procedures in connection with
the execution and approval of this Agreement, the Merger or the Transactions
are hereby irrevocably waived and/or amended to conform with or to otherwise
allow the operation of this Agreement, the Merger or the Transactions without
violation of, or the giving a right of action with respect to any stockholder
of the Company under, the Stockholders' Agreement. Upon the Effective Date,
the stockholders of the Company, including Genmar, by their approval of this
Agreement, the Merger and the Transactions, hereby agree that the
Stockholders' Agreement shall be terminated with no further action of the
stockholders of the Company or the Company, and upon such termination the
Stockholders' Agreement shall be null, void and of no further force or
effect.

1.10 SUBSEQUENT ACTIONS. If, at any time after the Effective Date,
the Surviving Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary
or desirable to perfect or confirm of record or otherwise vest in the
Surviving Corporation its right, title or interest in, to, or under any of
the rights, properties or assets of the Company or the Merger Subsidiary
acquired or to be acquired by the Surviving Corporation, as a result of, or
in connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation are authorized to execute
and deliver, in the name and on behalf of the Company and the Merger
Subsidiary, as applicable, all such deeds, bills of sale, assignments and
assurances, and to take and do, in the name and on behalf of the Company or
the Merger Subsidiary, and all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this
Agreement.

<PAGE>

ARTICLE II.

CONVERSION OF SECURITIES AND EXCHANGE

2.1 ALTERNATIVE CONSIDERATION. The parties acknowledge and agree
that in the event the Merger is consummated subsequent to the Public Offering
of Genmar stock (the "Genmar Public Shares") in accordance with Section
1.3(a), the consideration for the Merger shall be the right to receive shares
of Genmar Common Stock and the other consideration as set forth in Section
2.1(a) below. In the event, however, that the Merger is consummated prior to
any Public Offering in accordance with Section 1.3(b), the consideration for
the Merger shall be non-negotiable unsecured, subordinated interest bearing
notes, substantially in the form attached hereto as EXHIBIT C, issued by
Genmar dated as of the Effective Date in accordance with Section 2.1(b) below
(the "Notes"). The Notes shall have a maturity at least two (2) years beyond
Genmar's longest term debt maturity date and bear interest at one percent
(1%) over Genmar's effective borrowing rate under its revolving line of
credit facility at the Effective Date, as determined by Genmar.

a) MERGER PURSUANT TO PUBLIC OFFERING. In the event that
the Merger takes place pursuant to the Public Offering, at the Effective Date
by virtue of the Merger each share of Company Common Stock (excluding Company
Common Stock held by Genmar, which shall cease to exist upon the Merger at
the Effective Date) will be converted into the right to receive shares of
Genmar Common Stock (such Genmar Common Stock, the "Stock Merger
Consideration") pursuant to the following formula:

$12,275,000 the number of shares of Company Common
--------------------- DIVIDED BY Stock (excluding Company Common Stock held
Public Offering Price by Genmar)

After taking into account the set-off pursuant to Section 2.1(e) below, which
is anticipated to amount to $1,275,000, fractional shares of Genmar Common
Stock shall be issued, and in lieu thereof stockholders of the Company shall
be paid cash by Genmar equal to such fractional share multiplied by the
Public Offering Price.

"Public Offering Price" is the initial offering price in the Public Offering of
the Genmar Public Shares.

b) MERGER WITHOUT PUBLIC OFFERING. In the event that the
Public Offering has not taken place on or before March 31, 2000, each share of
Company Common Stock (excluding Company Common Stock held by Genmar) will, after
taking into account the set-off pursuant to Section 2.1(e) below, which is
anticipated to amount to $1,275,000, be converted into the right to receive a
dollar value which represents a portion of principal of a Note to be issued to
each stockholder of the Company (other than Genmar) (the "Note Merger
Consideration"), determined by dividing (after application of the set-off
provision in Section 2.1(e)):

(x) $12,275,000, BY

<PAGE>

(y) the total number of Company Common Stock shares (excluding
Company Common Stock held by Genmar).

c) DISSENTING SHARES. Notwithstanding anything to the
contrary in this Agreement, Dissenting Shares (as defined below) shall not be
converted into the right to receive Merger Consideration (as defined in
paragraph (d) below), but holders of such shares shall be entitled to receive
payment of the appraised value of such shares in accordance with the
provisions of Section 262 of the DBCL, except that any Dissenting Shares held
by a stockholder of the Company who shall thereafter withdraw such demand for
appraisal of such shares, or shall lose the right of appraisal as provided in
such Section 262, shall thereupon be deemed to have been converted at the
Effective Date into the right to receive the Merger Consideration, without
interest thereon. In the event the aggregate Dissenting Shares of Company
Common Stock equals two and one-half percent (2 1/2%) or less of the shares
held by the stockholders of the Company (determined by reference to the
stockholder record date established by the Company Board of Directors with
respect to this Agreement and the Transactions, Genmar shall direct, at its
own cost and expense all negotiations and proceedings with respect to demands
for appraisals under the DBCL and shall be responsible for paying any and all
amounts required to be paid to the holders of Dissenting Shares thereunder
and any other amounts due to Dissenting Shares as a result of this Agreement
and the consummation of the Transactions). In the event such Dissenting
Shares exceed two and one-half percent (2 1/2%) of such Company Common Stock,
(i) the non-dissenting stockholders of the Company shall direct, at their
sole cost and expense, all negotiations and proceedings with respect to
demands for appraisals under the DBCL and shall be responsible for paying any
and all amounts required to be paid to the holders of Dissenting Shares as a
result of this Agreement and the Transactions, and (ii) Genmar shall have the
right to withhold the Merger Consideration associated with such Dissenting
Shares plus $500,000 of Merger Consideration which shall be used for the
costs and expenses of the Dissenting Shareholder action. The non-dissenting
stockholders of the Company shall share all such costs, expenses and payments
pro rata in accordance with their right to receive the Merger Consideration
(after application of the set-off provision in Section 2.1(e)). Subsequent
to settlement or disposal of the matters relating to Dissenting Shares, the
balance, if any, of such withheld Merger Consideration shall be distributed
pro-rata to the non-dissenting stockholders of the Company in accordance with
the previous sentence. For purposes of this Agreement, "Dissenting Shares"
shall mean common stock of the Company held by any stockholder of the Company
who properly demands appraisal rights pursuant to Section 262 of the DBCL and
who may thereby become entitled to the payment of the fair value of such
common stock shares held by such stockholder under the DBCL.

d) MERGER CONSIDERATION. The Stock Merger Consideration,
the Note Merger Consideration and the cash payments for fractional shares may
also be referred to herein, either individually or collectively, as the
"Merger Consideration."

e) RIGHT OF SETOFF. To the extent that any stockholder of
the Company is indebted to the Company at the Effective Date, whether or not
such debt is then due and owing, (i) Genmar shall reduce the Merger
Consideration otherwise transferable and/or payable to such stockholder by
the full amount of such debt, (ii) the debt shall be canceled, to the extent
and amount of the offset, and (iii) the reduction of debt shall be recorded
as a contribution of capital by Genmar in the records of the Surviving
Corporation. The debt described herein that is not currently due on

<PAGE>

the date hereof but which is accelerated pursuant to the foregoing provision,
shall be discounted by 9% from the date hereof (to reflect the time value of
money). The Parties acknowledge and agree that $1,275,000 of the $12,275,000
amount set forth above shall be offset pursuant to the terms hereof.

2.2 EFFECT OF MERGER ON COMPANY COMMON STOCK. Each share of Company
Common Stock issued and outstanding immediately prior to the Effective Date
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to exist and shall be canceled.

2.3 WARRANTS AND OPTIONS. All of the Company's Warrants and Options
are set forth on EXHIBIT D hereto.

a) WARRANTS HELD BY STOCKHOLDERS. Any Warrants held by any
Stockholder shall, by operation of this Agreement, and without further action,
be canceled and terminated as of the Effective Date. Any Warrants held by any
other stockholder of the Company following approval of this Agreement, the
Merger and the Transactions by such stockholder either by execution or approval
of this Agreement pursuant to Section 1.2(a), shall, without further action, be
canceled and terminated as of the Effective Date.

b) WARRANTS HELD BY OTHERS. Unless canceled or exercised
prior to the Effective Date by the holders thereof, all Warrants of the Company
held by any Person not a stockholder of the Company shall, by virtue of the
Merger, become Warrants to purchase that amount of Merger Consideration as would
have been issuable to the holder of any such Warrants upon the Effective Date,
if the Warrant had been exercised immediately prior to the Effective Date, with
the same aggregate exercise price for the Warrants for the Merger Consideration
as exists immediately prior to the Effective Date.

c) COMPANY STOCK OPTION PLAN. In accordance with the terms of
the Company's Stock Option Plan of 1999, all Options issued thereunder may be
exercised in accordance with their terms by the Option holders during the period
from the scheduling of the Closing and the provision of notice of such scheduled
Closing Date until 5:00 p.m. one (1) day prior to the scheduled Merger Closing.
Unless Genmar in its sole discretion elects to assume or substitute other
options for any unexercised Options to acquire common stock of the Company, all
such unexercised options shall by virtue of the Merger be without further action
canceled and terminated as of the Effective Date.

2.4 UNREGISTERED SHARES. The stockholders of the Company have been
informed by Genmar that the Merger Consideration (either in the form of Genmar
Common Stock or the Notes) has not been registered under the Act, and that (i)
such Genmar Common Stock must be held for the time required by SEC Rule 144,
unless (a) the distribution for sale of the Genmar Common Stock has been
registered under the Act in accordance with Section 2.6 hereof or otherwise, (b)
a sale of the Genmar Common Stock is made in conformity with the provisions of
SEC Rule 144 or (c) in the opinion of counsel, which opinion is reasonably
acceptable to Genmar, some other exemption from registration is available with
respect to any other sale, transfer or other disposition of such Genmar Common
Stock, and (ii) the Notes are nonnegotiable, subordinated and unsecured, and may
not be sold or otherwise transferred under any circumstances (except to Genmar).

<PAGE>

2.5 STOCK CERTIFICATE LEGENDS. Each stockholder of the Company
acknowledges and understands that stock transfer instructions will be given to
Genmar's transfer agent with respect to the Merger Consideration and that there
will be placed on the certificates for the Genmar Common Stock, or any
substitution therefor, the following legend:

"The securities represented by this Certificate have
been issued without registration under the
Securities Act of 1933, (the "Act") or any State
securities laws. They may not be sold, assigned,
pledged or otherwise transferred for value unless
they are registered under the Act and any applicable
state securities laws or the Company receives an
opinion of counsel satisfactory to it, or otherwise
satisfies itself, that registration is not
required."

2.6 REGISTRATION.

a) REQUIRED REGISTRATION. In the event that Genmar Common
Stock is issued in connection with the Merger, within nine (9) months after the
Effective Date, Genmar shall prepare and file one registration statement under
the Act, covering the shares of Genmar Common Stock issued in connection with
the Merger and shall use commercially reasonable efforts to cause such
registration statement to become effective. Genmar shall be obligated to
prepare, file and cause to become effective only one registration statement
pursuant to this paragraph and to pay the expenses associated with such
registration statement. Genmar's obligation to keep such registration statement
effective shall cease (i) two (2) years after the date upon which it is first
declared effective by the SEC, or (ii) upon the replacement of such registration
statement by an effective registration of the Genmar Common Stock on Form S-3 as
described in Section 2.6(b) below.

b) FORM S-3 REGISTRATION. Any time that Genmar is eligible to
use Form S-3, and Genmar desires to use Form S-3 for registration hereunder,
Genmar shall prepare and file one registration statement under the Act, covering
the remaining shares of Genmar Common Stock which are the subject of the prior
Form S-1 registration statement that have not been sold pursuant thereto and
shall use reasonable commercial efforts to cause such registration statement to
become effective. Genmar shall be obligated to prepare, file and cause to
become effective only one registration statement pursuant to this paragraph and
to pay the expenses associated with such registration statement. Genmar's
obligation to keep such registration statement effective shall cease two (2)
years after the date the first registration of the Genmar Common Stock was first
declared effective by the SEC.

c) COOPERATION FOR RULE 144 TRANSFERS. After the expiration
of the effectiveness of any and all registration statements in Section (a) or
(b) above, Genmar shall provide reasonable assistance to facilitate the sale
under SEC Rule 144 of any remaining Genmar Common Stock not sold pursuant to
such registration statements.

d) OTHER REGISTRATION MATTERS. The stockholders of the
Company shall provide to Genmar all additional information that is not otherwise
available to Genmar pursuant to the transactions contemplated hereby as Genmar
deems necessary (in conformity with Applicable Laws) for the preparation and
filing of a registration statement. Genmar may (i) suspend sales of the

<PAGE>

Genmar Common Stock pursuant to the registration statement filed pursuant to
this Section 2.6 if it determines in good faith that it contains statements
that are materially misleading or omits to state material information
required to be included therein or necessary to make the registration
statement not misleading until such time as the misleading statement(s) or
omission(s) have been corrected by Genmar acting with all reasonable
diligence, and (ii) delay registration for a period of up to ninety (90) days
if it determines, in good faith, that such registration would have a material
adverse effect on Genmar.

2.7 INDEMNITY.

a) INDEMNIFICATION BY STOCKHOLDERS. If Genmar Common Stock
is registered pursuant to Section 2.6 hereof, each stockholder of the Company
will severally, in accordance with each such shareholder's pro rata ownership
interest in the Genmar Common Stock which was registered pursuant to the
registration statement(s) set forth in Section 2.6 above, indemnify and hold
harmless Genmar, each officer of Genmar who signs a registration statement
filed pursuant to Section 2.6 and each director of Genmar, against all
losses, claims, damages or liabilities to which Genmar or such officer or
director may become subject arising out of any untrue statement of any
material fact contained in the registration statement, any final prospectus
contained therein or any amendment or supplement thereof, or arising out of
the omission to state therein the material fact required to be stated therein
or necessary therein not misleading; PROVIDED, HOWEVER, that the stockholders
of the Company shall have such obligation to indemnify only in each case to
the extent that such untrue statement or omission was made by Genmar in
reliance upon, and in strict conformity with, accurately described written
information furnished by the stockholders of the Company specifically for use
in preparation of the registration statement. The stockholders of the
Company shall have the right to review and approve, through their counsel,
any such registration statement, or part thereof, which describes the
stockholders of the Company, the transactions contemplated by this Agreement
or the Company and its operations within three (3) business days prior to its
submission to the SEC. Notwithstanding the foregoing provisions of this
Section 2.7, the stockholders of the Company shall have no liability or other
indemnification obligation with respect to any financial projections or other
such forward looking information disclosed in the registration statement by
Genmar, whether or not such information pertains to the Company or was
provided or prepared by the stockholders of the Company.

b) INDEMNIFICATION BY GENMAR. Genmar agrees to indemnify and
hold harmless each stockholder of the Company selling Genmar Common Stock that
is registered pursuant to Section 2.6 against all losses, claims, damages or
liabilities to which such stockholder of the Company may become subject arising
out of any untrue statement of material fact contained in the registration
statement and final prospectus contained therein or any amendment or supplement
thereof arising out of the omission to state therein the material fact required
to be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that Genmar shall have no such obligation to
indemnify to the extent that such untrue statement or omission was made in
reliance upon, in strict conformity with, accurately described information
furnished by the stockholders of the Company specifically for use in the
preparation of the registration statement.

<PAGE>

c) LIMITATION ON LIABILITY OF THE HOLDERS OF GENMAR COMMON
STOCK. The liability of each holder of Genmar Common Stock in respect of any
indemnification or contribution obligation of such holder arising under this
Section shall not in any event exceed an amount equal to such holder's pro-rata
portion of the Merger Consideration.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to Genmar and Merger Subsidiary to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
represents and warrants to Genmar and Merger Subsidiary that the following
representations and warranties are true and correct:

3.1 ORGANIZATION AND GOOD STANDING. The Company is duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own its
properties and to carry on its business as now conducted. True and correct
copies of the Certificate of Incorporation and By-laws of the Company as
currently in effect have been delivered to Genmar. The Company is qualified
to do business as a foreign corporation and is in good standing in each other
jurisdiction where the conduct of its business or the ownership, leasing or
occupancy of its properties requires such qualification, licensing or good
standing, except where the failure to be so qualified, licensed or in good
standing could not, individually or in the aggregate, have a material adverse
effect on (i) the business, operations, condition (financial or otherwise) or
prospects of the Company, or (ii) the ability of the Company to enter into,
deliver, and perform this Agreement and/or any of the Transactions, or
otherwise effect the Merger.

3.2 POWER AND AUTHORITY. The Company has all requisite power and
authority to enter into this Agreement, the Merger and the Transactions and to
perform fully its obligations hereunder and thereunder and to consummate the
Transactions. The execution and delivery of this Agreement and the performance
and completion of the Transactions by the Company and its obligations hereunder
and thereunder have been duly and validly authorized by all necessary action on
the part of the Company and its stockholders. Each of the Agreement and the
Transactions is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.

3.3 CONSENTS AND APPROVALS. Except as disclosed in SCHEDULE 3.3, no
filings with, notices or reports to, authorizations, registrations, consents or
approvals of, or exemptions from, any governmental or regulatory authority,
agency, court, commission or other similar entity, domestic (either national,
state or local) or foreign ("Governmental Entity") or any other person are
required to be made or obtained by the Company or the Partnership in connection
with the execution and delivery of this Agreement by the Company or the
Transactions contemplated hereby or thereby, the failure to obtain which is
likely to have a material adverse effect.

3.4 NO VIOLATIONS. Except as disclosed in SCHEDULE 3.4, the execution
and delivery of this Agreement by the Company and the performance of its
obligations hereunder and the consummation of the Transactions (a) do not and
shall not conflict with or violate any provision of the Certificate of
Incorporation or By-laws of the Company and (b) do not and shall not (i)
conflict

<PAGE>

with or result in a breach of the terms, conditions or provisions of, (ii)
constitute, with or without the passage of time or the giving of notice or
both, a default under, (iii) result in the creation of any lien, mortgage,
charge, encumbrance, interest or restriction (each, an "Encumbrance") upon
any interests in or assets of the Company pursuant to, (iv) give any third
party the right to modify, terminate, cancel or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization,
registration, consent or approval of, exemption from, or other action by, or
notice or report to, any court pursuant to, any agreement, commitment,
Contract, instrument, lease, obligation, decree, judgment or order to which
the Company or the Partnership, or any of their respective assets are subject
or by which any of them is bound.

3.5 EQUITY INTERESTS. The Company has one class of common stock, par
value $.00001 per share ("Common Stock"), which is currently held by the Persons
and in the amounts shown on SCHEDULE 3.5, and are duly authorized, validly
issued and outstanding, fully paid and non-assessable. Except as disclosed on
SCHEDULE 3.5, there shall be no outstanding subscriptions, options, warrants or
other rights to acquire from the Company any shares of Company Common Stock or
other securities of the Company, no outstanding securities that are convertible
into, exercisable for or exchangeable for any Common Stock or other securities,
and no stock appreciation, phantom stock or similar rights relating to the
Company.

3.6 FINANCIAL STATEMENTS. Each of the financial statements of the
Company previously delivered to Genmar and the related notes and schedules,
including, without limitation, the balance sheet and income statement for each
period prior to and ending on May 31, 1999 (the "Financial Information"), all of
which are free of material misstatement and fairly present the financial
position of the Company as of their respective dates in accordance with
generally accepted accounting principles consistently applied ("GAAP"). The
books of account and other records of the Company are complete and correct in
all material respects and have been maintained in accordance with sound business
practices, and there have been no transactions involving the business of the
Company which properly should have been set forth therein and which have not
been accurately so set forth.

3.7 REAL PROPERTY. SCHEDULE 3.7 contains a legal description of
the real property currently owned, used or leased by the Company
(collectively, the "Real Property"). The Company has the right to quiet
enjoyment of all Real Property leased by it for the full term, including all
renewal rights, of the lease or similar agreement relating thereto. Except
as set forth in SCHEDULE 3.7, no default under or right of the lessor to
terminate any lease or other written or oral agreement under which the
Company has the right to use any of the Real Property presently exists or
shall occur as a result of the execution of this Agreement or the
consummation of the Transactions, including the Merger. Notwithstanding
disclosure of such default or right of the lessor to terminate any lease, the
Company shall be obligated hereunder as an additional covenant of this
Agreement to cure all such defaults and/or obtain a waiver of any right to
terminate that may now exist or exists on the Closing Date. All structures
and other improvements on all Real Property are within the lot lines and do
not encroach on the properties of any other Person, and the use and operation
of all Real Property conform to all Applicable Laws, including all material
applicable building, zoning, safety and subdivision laws and Environmental
and Safety Requirements, and all restrictive covenants and restrictions
conditions affecting title. Neither the Company nor the Partnership has
received written or oral notice of assessments for public improvements or
condemnation against any Real Property.

<PAGE>

3.8 CONTRACTS. Except as set forth on SCHEDULE 3.8, the Company is
not in breach of any of the Contracts and no event has occurred or circumstance
exists that (with or without notice or lapse of time) may contravene, conflict
with, or result in a violation or breach of any Contract, nor, to the best of
the Company's knowledge, is any third party in breach of any such Contract.
Each Contract of the Company is in full force and effect and is enforceable in
accordance with its terms. True and complete copies of all Contracts have
previously been made available to Genmar.

3.9 INTELLECTUAL PROPERTY. The Company owns and possesses all right,
title and interest in and to, or has the right to acquire a written, enforceable
license to use, all of its Intellectual Property free and clear of all
Encumbrances and other interests, except as set forth on SCHEDULE 3.9. The
Company owns and possesses all right, title and interest in and to all
Intellectual Property necessary or required for the ownership, license and other
use and operation of the Company's Personal Property (as defined in Section 3.13
below), including the right to license or lease such Intellectual Property
and/or Personal Property to third parties. The Company has full ownership
rights and interests in and to all of the trade secrets used in connection with
its Personal Property, which trade secrets have not been used, disclosed or
appropriated by any individual or entity not subject to an enforceable
confidentiality/non-disclosure agreement or obligation. Except as set forth on
SCHEDULE 3.9, no claim by any third party contesting the validity,
enforceability, use or ownership of any Intellectual Property has been made or
is threatened against the Company or any Affiliate of the Company, and there are
no grounds for any such claim. The Company has not infringed or misappropriated
any Intellectual Property and no such claim has been made or threatened against
the Company or the Partnership, and there are no grounds for any such claim. The
operation of the Company's business will not result in the infringement or
misappropriation of any Intellectual Property rights of third parties. The
Company has taken reasonable and prudent steps to protect the Intellectual
Property from infringement by any other individual or entity. "Intellectual
Property" means: all patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice);
all trade names, trademarks, trade dress, logos and all goodwill associated
therewith; all copyrights, copyrightable work, and mask works; all registrations
and applications and renewals for any of the foregoing; all trade secrets,
manufacturing and production processes and techniques, technical and computer
data, documentation and software, software licenses, financial, business and
marketing plans, customer and supplier lists and all tangible embodiments
thereof.

3.10 LITIGATION. Except as set forth on SCHEDULE 3.10 hereto: (i)
there are no civil, criminal or administrative claims, actions, suits,
investigations or proceedings pending or threatened against the Company or any
affiliate of the Company before or by any court or other Governmental Entity,
and (ii) the Company is not subject to any injunction, order or other decree of
any court or other Governmental Entity of competent jurisdiction.

3.11 COMPLIANCE WITH LAWS. The Company is and has been in material
compliance with all Applicable Laws. Except where failure to do so would not
have a material adverse effect, the Company possesses, and is in compliance
with, all licenses, permits, approvals and other governmental authorizations
necessary to the conduct of its business, and such licenses, permits, approvals
and authorizations shall not be affected, directly or indirectly, by the
consummation of this Agreement, the Merger or the Transactions.

<PAGE>

3.12 ENVIRONMENTAL AND SAFETY MATTERS.

a) DEFINITIONS. "Environmental and Safety Requirements" means
all federal, state and local laws, ordinances, rules, regulations and similar
provisions having the force or effect of law, all judicial and administrative
permits, orders and determinations, all Contractual Obligations and all other
Applicable Laws concerning public health and safety, worker health and safety,
and pollution or protection of the environment.

b) COMPLIANCE. The Company has complied, and is in material
compliance, with all applicable Environmental and Safety Requirements, and
neither the Company nor the Partnership has received any notice, report or
information regarding any liabilities (whether absolute, accrued, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under Environmental and Safety Requirements.

c) PERMITS, LICENSES AND AUTHORIZATION. Except as set forth
in SCHEDULE 3.12 hereto, there are no permits, licenses and other authorizations
required pursuant to Environmental and Safety Requirements for the operation of
the business in the manner contemplated by the Company.

d) HANDLING OF MATERIALS. The Company and the Partnership
have generated, transported, stored, handled, disposed of or contracted for the
disposal of hazardous materials only in accordance with all Environmental and
Safety Requirements. To the Knowledge of the Company, no employee of the
Company has, in the course and scope of employment with the Company or the
Partnership, been exposed to any hazardous materials in such a manner as to be
materially harmed thereby (whether such harm is now known to exist or will be
discovered in the future). The Company and the Partnership are not listed as a
potentially responsible party under CERCLA or any comparable or similar federal
or state statute, and neither the Company nor any of its Affiliates has received
notice of such listing and no Knowledge of any facts or circumstances which
could give rise to such a listing. As used in this Section 3.12, "hazardous
materials" means the storage, transportation, disposal or treatment of hazardous
materials, as defined and regulated by applicable Environmental and Safety
Requirements.

e) STATUS OF REAL PROPERTY. All owned and leased real
property used by the Company has been operated and is in compliance with all
material respects with all Environmental and Safety Requirements, including all
Applicable Laws related to underground and/or above ground petroleum storage
tanks. The Company and its Affiliates have complied in all material respects
with all Applicable Laws, including Environmental and Safety Requirements, and
have obtained or taken appropriate steps, as required by such laws, to obtain
all environmental, health and safety permits, consents, approvals, licenses and
other authorizations necessary for the ownership, lease and operation of the
Company's business. To the Knowledge of the Company, all Real Property on which
operations of the Company are conducted are free of any and all environmental
conditions and hazardous materials and is not subject to any environmental claim
or "super fund"-type Encumbrances arising from the release or threatened release
of any hazardous materials in, on, about or under such Real Property.

<PAGE>

f) THIRD PARTY DISPOSALS. To the Knowledge of the Company,
all third parties with which the Company has arranged, engaged or contracted to
accept, treat, transport, store, dispose or remove any pollutant or hazardous
materials generated or present in any real estate operated by the Company or the
Partnership, or which otherwise participates or has participated in activities
or conduct related to the Real Property or the business, were properly
permitted at the relevant time to perform the foregoing activities or conduct.

g) WELLS AND TANKS. Any wells or underground and/or above
ground storage tanks (whether or not currently in use) on any parcel of Real
Property used by the Company are in sound condition, are not leaking and comply
in all material respects with all applicable Environmental and Safety
Requirements.

h) PROHIBITED USAGE. No part of any parcel of the Real
Property used by the Company is now being used, nor to the Company's Knowledge
has any parcel of such Real Property ever been used as a landfill, dump or other
disposal, storage, transfer, treating or handling area for any hazardous
materials, or as a facility for selling, dispensing, storing, transferring,
treating or handling hazardous materials.

i) PENDING INVESTIGATIONS. The Company has no Knowledge of
either itself or any Affiliate being subject to any investigation (and have not
received any written notification) of any judicial or administrative proceeding,
notice, order, judgment, decree or settlement alleging or addressing (i) any
violation of Environmental and Safety Requirements, or (ii) any environmental
claims or liabilities and costs arising from the release or threatened release
of any hazardous materials.

3.13 PROPERTY. The Company has good and marketable title to all
Personal Property owned by it, free and clear of all Encumbrances, other than
Encumbrances reflected on SCHEDULE 3.13 hereto. Except for defaults under
certain Contracts due to late payments, the Company has the right to quiet
enjoyment of all tangible Personal Property leased by it for the full term,
including all renewal rights, of the lease or similar agreement relating
thereto. All personal property owned or leased by the Company is referred to
herein as the "Personal Property". Except as reflected on SCHEDULE 3.3, no
default under or right of the lessor to terminate any lease or other written or
oral agreement under which the Company or the Partnership has the right to use
any Personal Property shall occur as a result of the execution of the Agreement
or the consummation of the Transactions.

3.14 TAX MATTERS.

a) DEFINITIONS. The term "Tax" (or "Taxes" where applicable)
means any federal, state, local or foreign income, gross receipts, withholding,
sales, AD VALOREM or transfer tax, including any interest, penalties or
additions to tax in respect of the foregoing, whether disputed or not, and the
term "Tax Liability" means any liability (whether absolute or contingent,
whether liquidated or unliquidated, and whether due or to become due) with
respect to Taxes.

b) TAX FILINGS. The Company has timely filed all required Tax
reports and returns, and all such Tax reports and returns are correct and
complete. Except as indicated in SCHEDULE 3.14 hereto, all Taxes arising from
the operations of the Company or the Partnership have

<PAGE>
been paid or adequately reserved for, whether or not such Taxes are shown on
any Tax report or return. Neither the Company nor the Partnership has any
obligation to indemnify or otherwise assume or succeed to the Tax Liability
of any other Person.

c) WITHHOLDINGS. The Company has withheld and paid all Tax
Liabilities required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party.

3.15 FINDERS. No broker's, finder's or any similar fee has been or
shall be incurred by or on behalf of the Company in connection with the origin,
negotiation, execution or delivery of any of the Collateral Documents or the
consummation of the transactions contemplated hereby or thereby.

3.16 INSURANCE. All insurance policies taken out by or on behalf of
the Company are valid, enforceable and in full force and effect. All
premiums with respect to such policies covering all periods up to and
including the date as of which this representation, and as of the Effective
Date, have been paid or properly accrued and no written notice of late
payment, cancellation or termination has been received with respect to any
such policy. The insurance policies and risk management policies of the
Company are sufficient for compliance with all requirements of Applicable Law
and agreements to which the Company is a party and provide insurance for the
risks and in the amounts and types of coverage usually obtained by persons
using or holding similar properties in similar businesses. Except as set
forth in SCHEDULE 3.16 hereto, there have been no claims made for insurance
payment under any of the insurance policies by the Company or the Partnership
preceding the date of this Agreement. Complete and accurate copies of
insurance policies of the Company and all endorsements thereto have been
delivered to Genmar. Except as set forth in SCHEDULE 3.16, the Company has
not been refused any insurance coverage and no insurance coverage has been
canceled.

3.17 EMPLOYEE BENEFIT MATTERS.

a) Except as set forth on SCHEDULE 3.17, the Company does
not maintain or contribute and has no actual or potential liability with
respect to any (i) deferred compensation or bonus or retirement plans or
arrangement, (ii) qualified or nonqualified defined contribution or defined
benefit plans or arrangement which are employee pension benefit plans (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), or (iii) employee welfare benefit plans, (as
defined in Section 3(1) of ERISA), stock option or stock purchase plans, or
material fringe benefit plans or programs whether in writing or oral and
whether or not terminated. The Company has never contributed to any
multiemployer pension plan (as defined in Section 3(37) of ERISA), and the
Company has never maintained or contributed to any defined benefit plan (as
defined in Section 3(35) of ERISA). The plans, arrangement, programs and
agreements referred to the preceding two sentences are referred to
collectively as the "Plans." The Company does not maintain or contribute to
any Plan which provides health, accident or life insurance benefits to former
employees, their spouses or dependents, other than in accordance with Section
4980B of the Code ("COBRA") or similar state law.

<PAGE>

b) The Plans (and related trusts and insurance contracts) set
forth on SCHEDULE 3.17 hereto comply in form and in operation with the
requirements of Applicable Laws, including ERISA and the Code and the
nondiscrimination rules thereof. All contributions, premiums or payments which
are due on or before the date hereof and as of the Closing Date under each Plan
have been paid. Each Plan which is intended to be qualified under Section
401(a) of the Code (i) has been amended on a timely basis in compliance with the
Code and (ii) has received form the Internal Revenue Service a favorable
determination letter which considers the terms of such Plan and its material
amendments.

c) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports and Summary Plan Descriptions) with
respect to the Plans have been properly and timely filed with the appropriate
government agency as required and distributed to participants, as required. The
Company has complied with the requirements of COBRA.

d) To the Knowledge of the Company (i) there have been no
prohibited transactions as defined in Section 406 of ERISA or Section 4975 of
the Code and (ii) no fiduciary (as defined in Section 3(21) of ERISA) has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets thereof (other
than routine claims for benefits) are pending or threatened.

e) The Company has not incurred and has no reason to expect
that it will incur, any liability to the Pension Benefit Guaranty Corporation
(other than routine premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Code with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) that the
Company or any member of a "controlled group" (within the meaning of Code
Section 414) maintains or ever has maintained or to which any of them
contributes, ever has contributed, or ever has been required to contribute.

3.18 YEAR 2000 COMPLIANCE. To the Knowledge of the Company, after due
inquiry, the Computer Systems (defined below) of the Company are Year 2000
Compatible (defined below). For purposes of this Agreement, "Year 2000
Compatible" shall mean, with respect to any Computer System, that such Computer
System (i) records, stores, processes and provides true and accurate dates and
calculations for dates and spans of dates, (ii) is and will be able to operate
on a basis comparable to its current operation during and after calendar year
2000 A.D., including, but not limited to, leap years, and (iii) shall not end
abnormally or provide invalid or incorrect results as a result of date data
which represents or references (or fails to represent or reference) different
centuries or more than one century. For purposes of this Agreement, "Computer
System" shall mean any and all computer software programs, semiconductor chips,
microprocessors, embedded microcontrollers and other hardware containing
programming instructions of any kind, whether owned or licensed or otherwise
held by the Company.

3.19 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company, the
Partnership nor any officer, partner, employee, representative or other agent of
the Company has, directly or indirectly, since inception of the Company or the
Partnership given or agreed to give any gift or similar benefit to any customer,
supplier, governmental employee or other person or entity who is or may be in a
position to help or hinder the business of either the Company or the Partnership
(or assist either the

<PAGE>

Company or the Partnership in connection with any actual or proposed
transaction) which (i) might subject the Company or its Affiliates to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had an adverse effect
on the assets, business or operations of the Company or its Affiliates as
reflected in its historical financial statements, or (iii) if not continued
in the future, might adversely affect the Company's assets, business,
operations or prospects or which might subject the Company to suit or penalty
in any private or governmental litigation or proceeding.

3.20 RELATIONSHIP WITH RELATED PERSONS. Since December 31, 1998,
excluding Genmar, the shareholders of the Company nor any of its directors,
officers and employees and their Related Persons (as defined below) have not
had any interest in any of the properties or assets of the Company and do not
own, of record or as a beneficial owner, any equity interest or other
financial or profit interest in any entity that (i) has had business dealings
or a material financial interest in any transaction with the Company (other
than as an employee, consultant, or legal counsel of the Company) or (ii) has
engaged or is engaged in competition with the Company with respect to any
line of products or services of the Company in any market presently served or
proposed to be served by the Company (a "Competing Business") (except for
less than five percent (5%) of the outstanding capital stock of any Competing
Business that is publicly traded on any recognized exchange or in the
over-the-counter market). Except as set forth on SCHEDULE 3.20, no
shareholder, officer or member of the Board of Directors of the Company, and
none of their Related Persons has any claim or right against, the Company,
other than the rights that individuals serving the Company have with respect
to indemnification under state law. "Related Persons" means with respect to
any Person, their Affiliates.

3.21 LABOR MATTERS. The Company has not experienced any attempt to
organize any of its employees for collective bargaining or entering into a
labor contract on behalf of such employees. The Company has not experienced
any employee activity which may be adverse to the Company, including labor
strikes or disturbances. There are no disputes or grievances subject to any
grievance procedure, unfair labor practice proceedings, arbitration or
litigation under such agreements, or as a result of such attempts to
organize, which have not been finally resolved, settled or otherwise disposed
of. The Company is in compliance in all material respects with all
Applicable Laws respecting employment practices, employment documentation,
terms and conditions of employment and wages and hours. There are no labor
practice charges or complaints against or affecting the Company pending
before any applicable Governmental Entity and there are no material facts or
information which would have a reasonable probability of giving rise thereto.

3.22 DISCLOSURE. No representation or warranty by the Company
contained in this Agreement, nor any statement or certificate furnished or to be
furnished by the Company, or their respective representatives, in connection
herewith or pursuant hereto, contains or will contain any untrue statement of
material fact, or omit or will omit to state any material fact required to make
the statements herein or therein contained not misleading. The Company
disclosed to Genmar in writing all material adverse facts known to it relating
to the same.

<PAGE>

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS OF THE COMPANY

As an inducement to Genmar and the Merger Subsidiary to enter into
this Agreement and to consummate the transactions contemplated hereby, each
stockholder of the Company (other than Genmar) severally, but not with
respect to any other stockholder of the Company, by approval and adoption (or
execution, as applicable) of this Agreement, the Merger and the Transactions
pursuant to Section 1.2(a), represent and warrant to Genmar and the Merger
Subsidiary that the following representations and warranties are true and
correct:

4.1 ENFORCEABILITY. This Agreement has been duly executed and
delivered by each Party hereto and constitutes, and each Collateral Document
executed or required to be executed by or on behalf of any stockholder of the
Company (other than Genmar) pursuant hereto or thereto when so executed and
delivered will constitute, the legal, valid and binding obligations of the
stockholders of the Company (other than Genmar), enforceable in accordance with
their respective terms.

4.2 TITLE TO COMPANY COMMON STOCK. Except as set forth on SCHEDULE
4.2, each stockholder of the Company, representing and warranting only as to
his or its Company Common Stock, owns and has good and merchantable title to
the Company Common Stock in his or its name in the records of the Company,
free and clear of all Encumbrances or other interests. Notwithstanding any
disclosure on SCHEDULE 4.2 hereof, each stockholder of the Company shall be
obligated on the Effective Date to have removed any Encumbrances and other
interests on his or its Company Common Stock prior to or contemporaneously
with the Merger.

4.3 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. Neither the
execution nor delivery of this Agreement, the Merger or any Collateral
Document executed or required to be executed pursuant hereto or thereto, nor
the consummation of the Merger and the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by the respective
stockholders of the Company (other than Genmar) (i) will conflict with, or
result in a breach or violation of, or constitute a default under, any
Applicable Law or result in a material breach or violation of, or constitute
a default in the performance, observance or fulfillment of, or permit the
acceleration of any obligation or liability in, but for any requirements of
notice or passage of time or both would constitute such a conflict with, any
Contractual Obligation of the stockholders of the Company (ii) will result in
or permit the creation or imposition of any Encumbrance or other interest
upon any property or asset of a stockholder of the Company used or now
contemplated to be used by the Company, or (iii) will require any
governmental authorization or governmental filing, except for filing
requirements in connection with the Merger, the Transactions, and the Act or
applicable state securities laws which may apply to compliance by a
stockholder of the Company.

<PAGE>

ARTICLE V.

REPRESENTATIONS AND WARRANTIES OF GENMAR
AND THE MERGER SUBSIDIARY

Genmar and the Merger Subsidiary represent and warrant to the Company as
follows:

5.1 ORGANIZATION AND QUALIFICATION. Each of Genmar and the Merger
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware.

5.2 POWER AND AUTHORITY. Except for receiving lender consents, which
is a condition precedent to the obligations of Genmar and the Merger Subsidiary
to consummate the transactions contemplated by this Agreement, Genmar and the
Merger Subsidiary have all requisite power and authority (corporate and other)
and have in full force and effect all authorizations necessary or desirable in
order to enable them, respectively, to execute and deliver, and to perform their
respective obligations under, this Agreement and each Collateral Document
executed or required to be executed pursuant hereto or thereto and to consummate
the Merger and the Transactions. The execution, delivery and performance of
this Agreement and each Collateral Document executed or required to be executed
pursuant hereto or thereto have been duly authorized by all requisite corporate
or other action. This Agreement has been duly executed and delivered by each of
Genmar and the Merger Subsidiary and constitutes, and each Collateral Document
executed or required to be executed pursuant hereto or thereto when executed and
delivered by it will constitute the legal, valid and binding obligations of
Genmar and the Merger Subsidiary, respectively, enforceable in accordance with
their respective terms.

5.3 NO CONFLICTS; REQUIRED FILINGS AND CONSENTS. Except for
receipt of the consent of Genmar's lenders, as may be necessary in connection
with the consummation of this Agreement and the Transactions, neither the
execution nor delivery of this Agreement or any Collateral Document executed
or required to be executed pursuant hereto or thereto, nor the consummation
of the Merger or the Transactions nor compliance with the terms, conditions
and provisions hereof or thereof by each of Genmar and Merger Subsidiary (i)
will conflict with, or result in a breach or violation of, or constitute a
default under, any Applicable Law on the part of Genmar or the Merger
Subsidiary or will conflict with, or result in a breach or violation of, or
constitute a default under, or permit the acceleration of any obligation or
liability in, or but for any requirement of giving of notice or passage of
time or both would constitute such conflict with, breach or violation of, or
default under, or permit any acceleration in any Contractual Obligation of
Genmar or the Merger Subsidiary, or (ii) will require any authorization,
except for filing requirements under Applicable Law in connection with the
Merger and the Transactions and as the Act and applicable securities laws may
apply to compliance by Genmar with the provisions of this Agreement relating
to the Public Offering.

5.4 FINANCIAL STATEMENTS. Any financial statements of Genmar
delivered to the stockholders of the Company pursuant to Section 1.3 hereof,
shall be free of material misstatement and fairly present the financial position
of Genmar as of their respective dates in accordance with GAAP.

<PAGE>

5.5 INVESTIGATION. Genmar and the Merger Subsidiary have
investigated and become generally familiar with the Company and its
operations, including the present condition (financial and otherwise) of the
Company, including the condition of the Company's assets, the level of
protection and documentation (excluding infringement issues and compliance
with the Company's representations and warranties with respect to
Intellectual Property) currently in place with regard to the Company's
Intellectual Property and the current status of the Company with regard to
its loan guarantee obligations and Contractual Obligations to its and the
Partnership's creditors.

5.6 NO DISPOSITION OF THE COMPANY ASSETS. Neither Genmar, nor the
Merger Subsidiary has any agreement, current plan or current intention to
dispose of any substantial portion of the Company's assets following the
Effective Date; provided, however, as a matter of business development or as
circumstances arising after the Effective Date may evolve, the Surviving
Corporation may dispose of any or all of its assets.

ARTICLE VI.

ADDITIONAL COVENANTS

6.1 ACCESS TO INFORMATION. The Company will afford to Genmar and
representatives of Genmar full access during normal business hours throughout
the period prior to the Effective Date to all of the Company's properties,
books, Contracts, commitments and records and, during such period, will
promptly furnish upon request such reports, schedules, filings under
Applicable Law (including without limitation federal or state securities
laws), work papers and other sources of financial information processed or
controlled by the Company or its accountants, and such other information
concerning the Company and stockholders of the Company as Genmar may
reasonably request.

6.2 AGREEMENT TO COOPERATE. The Company and the stockholders of
the Company (upon and after their approval of this Agreement) will use
commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable
under Applicable Law to consummate this Agreement and the Merger and to make
effective the Transactions, including commercially reasonable efforts to (i)
prepare and file all requisite applications and amendments thereto, (ii) to
obtain all necessary appropriate waivers, consents and approvals, including
approvals of stockholders of the Company, and (iii) to lift any injunction or
other legal bar to the Merger and the Transactions. In addition to the
foregoing, the Company covenants to use best reasonable commercial efforts at
or prior to the Effective Date to obtain timely consents of its or the
Partnership's lenders and the administrative agencies affiliated with such
lenders with respect to this Agreement and the Transactions.

6.3 ASSIGNMENT OF CONTRACTS AND RIGHTS. Anything in this Agreement to
the contrary notwithstanding, to the extent allowed by Applicable Law, this
Agreement will not constitute an agreement to assign any claim, Contract,
Contractual Obligation, governmental authorization, lease, private
authorization, commitment, sales, service or purchase order, or any claim, right
or benefit arising thereunder or resulting therefrom, if the Merger or the
Transactions would be deemed an attempted assignment thereof without the
required consent of a third party thereto and would

<PAGE>

constitute a breach thereof or in any way affect the rights of Genmar, the
Merger Subsidiary or the Company thereunder.

6.4 CONDUCT OF BUSINESS.

a) Subject to the terms of the Management Agreement made by
and between Genmar and the Company as of June 18, 1999 (the "Management
Agreement"), prior to the Effective Date or the date, if any, on which this
Agreement is earlier terminated, the Company will (i) use its best reasonable
commercial efforts to preserve intact its business organization and goodwill,
keep available the services of its officers and employees as a group and
maintain satisfactory relationships with suppliers, distributors, customers and
others having business relationships with it, (ii) confer on a regular and
frequent basis with one or more representatives of Genmar to report operational
matters of materiality and the general status of ongoing operations, and (iii)
notify Genmar of any emergency or other change in the normal course of its
business and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would be material to the business,
operations or financial condition of the Company.

b) Except with the written permission of Genmar and subject to
Genmar's actions taken pursuant to the terms of the Management Agreement, the
Company agrees that the Company (i) will not make, declare or pay any dividends
or other distributions on any Company Common Stock (except cancellation,
modification or reissuance of Options and Warrants), (ii) will not enter into or
terminate any employment arrangement or agreement with any director, officer or
key employee, (iii) will not incur any obligation or liability (absolute or
continuing), except current liabilities incurred, and obligations under
Contracts enter into, in the ordinary course of business, (iv) will not
discharge or satisfy any Encumbrance or pay any obligation or liability
(absolute or contingent) other than the current liabilities shown on its
financial statements, and current liabilities incurred since those dates in the
ordinary course of business, (v) will not mortgage, pledge, create a security
interest in, or subject to lien or other Encumbrance any of its assets, tangible
or intangible, (vi) will not sell or transfer any of its tangible assets or
cancel any debts or claims except in each case in the ordinary course of
business, (vii) will not sell, assign, license or otherwise transfer or grant
any rights in or to any trademark, trade name, patent, or other Intellectual
Property to any third party other than Genmar, (viii) will not waive any right
of any substantial value, (ix) will not make any material change in the tax
procedures or practices followed by the Company, (x) will not make any change in
credit terms offered by or to the Company, (xi) will not make any capital
expenditure or material commitment for any additions or improvements to its
property, plant or equipment, (xii) will not amend its capitalization, or issue
any stocks, bonds or other securities, except that the Company may reissue
options and warrants upon the advice and consent of Genmar and shall issue a
note to Genmar as provided in Section 6.10, (xiii) will not enter into, modify
or extend, or promise any bonus or incentive compensation program that was not
in place prior to June 1, 1999, (xiv) will not terminate the Management
Agreement unless pursuant to a specific right of termination granted therein and
(xv) will otherwise conduct its operations according to its ordinary and usual
course of business.

<PAGE>

6.5 STANDSTILL AGREEMENT. Without the written consent of Genmar, the
Company, the Stockholders and the other stockholders of the Company (pursuant to
the approval described in Section 1.2(a)) will not, nor will they permit any of
their respective representatives (including, without limitation, any investment
banker, attorney or accountant) to initiate, or solicit, directly or indirectly,
any inquiries or the making of any proposal with respect to any Other
Transaction (as defined below), engage in any discussions or negotiations
concerning, or provide to any other person any information or data relating to
it or otherwise cooperate in any way with or assist or participate in, the
making of any proposal which constitutes, or may reasonably be expected to lead
to, a proposal to seek or effect an Other Transaction, or agree to or endorse
any Other Transaction; provided, further, the Company and the Stockholders shall
discontinue any currently active discussions regarding an Other Transaction.
The Company will promptly advise Genmar of, and communicate the material terms
of, any proposal it may receive, or any inquiries it receives which may be
reasonably be expected to lead to such a proposal relating to an Other
Transaction, and the identity of the Person making it. The Company will further
advise Genmar of the status and changes in the material terms of any such
proposal or inquiry (or any amendment to any of them). During the term of this
Agreement, the Company will not enter into any agreement, oral or written, and
whether or not legally binding, with any Person that provides for an Other
Transaction, or affects any other obligation of the Company under this
Agreement. For the purpose of this Section 6.5, "Other Transaction" means (i)
any investment in, sale or merger by, or joint venture with, the Company and
(ii) any sale of or the granting of any interest in the Company Common Stock, in
each case other than with or to Genmar or the Merger Subsidiary.

6.6 NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt
notice to Genmar, and Genmar will give prompt notice to the Company, of (a) any
event which would be likely to cause in any material respect (i) any
representation or warranty of the Company or Genmar contained in this Agreement
to be or likely to be untrue or inaccurate, or (ii) in the case of the Company
or the stockholders of the Company, any change to be made in any disclosure
schedule, and (b) any failure of the Company or Genmar, as the case may be, to
comply with or satisfy, or be able to comply with or satisfy, any material
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement.

6.7 PUBLIC ANNOUNCEMENTS. The Company, its stockholders and the
Stockholders shall not issue any press release or otherwise make any public
statement or announcement with respect to this Agreement, the Merger or any
Transaction (including the termination of this Agreement) without the prior
written consent of Genmar. The Company, the Stockholders and the stockholders
of the Company (upon their approval of this Agreement) each acknowledge and
agree that Genmar may, without the prior written consent of the Company, the
Stockholders or the stockholders of the Company, issue such press release or
make such public statements as it deems reasonable or necessary in its sole
discretion. Genmar will not make any statements attributable to the
stockholders of the Company without the prior consent of such stockholders.

6.8 RELEASE FROM PERSONAL GUARANTEES. At or promptly following the
Effective Date, Genmar will obtain releases of the personal guarantees of Gene
Kirila, II to the Company's or the Partnership's lenders and associated
administrative agencies. In the event Genmar is unable to obtain such releases
at or prior to the Effective Date, Genmar shall indemnify and hold Mr. Kirila,
the Partnership and its general partner harmless from such personal guarantees
or obligations; PROVIDED,

<PAGE>

HOWEVER, the foregoing covenant shall become effective and enforceable ONLY
in the event of a Merger Closing. Notwithstanding the foregoing, Genmar
covenants and agrees that during the period from the date hereof to the
termination of this Agreement or the Merger Closing, whichever is earlier,
Genmar shall timely make or cause to be made the regular monthly loan
payments to the Partnership lenders (at the present level) or the lease
payments under the Lease Agreement dated March 23, 1999 between the Company
and the Partnership. In the event this Agreement is terminated in accordance
with the provisions of Article VIII hereof, the preceding sentence shall be
null, void, of no further force or effect and shall be wholly unenforceable
with respect to any period from and after the date of such termination.

6.9 FUTURE INVESTMENT OPPORTUNITY. In the event the Surviving
Corporation is successful in the commercialization of VEC-TM- technology and
processes in the marine industry and Genmar or the Surviving Corporation
determines to spin-out one, or more than one, additional non-marine related
business that utilizes VEC-TM- as a core technology of such business, Genmar
and the Merger Subsidiary covenant and agree that they will grant, or cause
to be granted, to the stockholders of the Company (other than Genmar) an
aggregate one time right, on a pro rata basis without right of transfer or
replacement, at the time of the organization of the new spin-off entity to
purchase a total of five percent (5%) (i.e., the stockholders as a group have
the right to purchase five percent (5%), but only on a pro rata basis) of
each such new entity (or entities) at seventy-five percent (75%) of their
five percent (5%) interest in the spin-out entity's value determined by an
independent investment banker or the public markets. The term of the right
shall be thirty (30) days from notification of the completion of the spin-out
and the form of ownership will be voting common stock, or its equivalent in
noncorporate entities. In addition to the foregoing, any sale or license of
the VEC-TM- core technology to a third party shall be treated as a "spin-out"
in which no investment is required, such that the stockholders of the Company
(other than Genmar) shall be entitled to receive in the aggregate five
percent (5%) of such sales or licensing proceeds within thirty (30) days
following receipt of such revenues by Genmar or the Merger Subsidiary, which
proceeds shall be payable in accordance with the pro-rata interest of the
stockholders of the Company in the Merger Consideration received by each such
stockholder. Except as waived and released by any stockholder of the
Company, this future investment opportunity obligation of Genmar shall expire
twenty (20) years after the Effective Date; PROVIDED, HOWEVER, the economic
interests established for each of the shareholders of the Company prior to
the expiration of said twenty (20) year period shall continue thereafter.

6.10 INTERIM WORKING CAPITAL FUNDING. Upon execution of the
Management Agreement by the Company, Genmar covenants and agrees to advance
funds to the Company pursuant to a senior subordinated note (with interest at
nine percent (9%) which will become immediately due and payable on June 30,
2000) to provide working capital and to assist in accomplishing the Company's
project focuses during the term of the Management Agreement. Genmar shall
provide such funds on at least a monthly basis as are projected by Genmar to
be needed for the next month based on the "rolling" three month forecast
prepared by Genmar and presented to the Company from time-to-time pursuant to
the Management Agreement. In the event Genmar (i) does not advance funds, and
does not cure a default in advancing funds within ten (10) days after written
notice by the Company under the Management Agreement, in accordance with the
net expenditures set forth in the monthly forecast (but based on actual
expenditures) or (ii) significantly reduces the project focuses pursuant to
the Management Agreement, where such reductions are not specifically approved
by the

<PAGE>

Company's Board of Directors, such uncured non-payment of funds or
significant reduction shall be considered a "Funding Default" hereunder. For
the purposes of this Agreement and the Management Agreement (to the extent it
refers to a Funding Default), a "significant reduction" will be considered to
occur if the current average monthly forecast for project operations (as
opposed to general and administrative costs and factory overhead) is less
than fifty percent (50%) of the previous average monthly forecast presented
by Genmar to the Company, and such reduction is scheduled to continue for the
succeeding two months after presentation. Any such Funding Default based on
a "significant reduction" must be noticed to Genmar in writing by the
Company within five (5) business days of such Funding Default in order to be
defined as such hereunder; otherwise such Funding Default will be deemed
waived.

6.11 REPRESENTATIONS BY STOCKHOLDERS OF THE COMPANY. By (i)
execution of this Agreement; or (ii) approval and adoption of this Agreement,
the Merger and the Transactions, each stockholder of the Company shall be
deemed to make, on a continuing basis to and after the date of such
occurrence, the representations and warranties contained in Article IV, and
Genmar and Merger Subsidiary may rely on such continuing representations from
and after the date(s) thereof, subject to the survival provisions of Section
9.3.

6.12 SUSPENSION OF THE OPERATING AGREEMENT OF PYRAMID MARINE, LLC. The
Company and GPV, Inc., a wholly-owned subsidiary of Genmar, entered into that
certain Operating Agreement of Pyramid Marine, LLC, dated March 23, 1999.
Genmar (on behalf of GPV, Inc.) and Pyramid each confirm and acknowledge that
the terms of said Operating Agreement have not to date been implemented, and
each of Genmar (on behalf of GPV, Inc.) and the Company agree to waive any and
all claims against the other and their respective Affiliates with respect to
such non-implementation and to further suspend any requirements for delivery of
funds, equipment, licenses or sales initiative, or decisions from March 23, 1999
until such time as this Agreement is terminated in accordance with the terms
hereof; PROVIDED, HOWEVER, that the obligations of confidentiality, restrictions
on activities, non-disclosure and similar matters shall continue without
interruption. Upon the Effective Date, Genmar, in its sole discretion, may
terminate, amend, restate or otherwise continue said Operating Agreement.

6.13 RELEASE OF PARTNERSHIP BY THE COMPANY. Immediately prior to the
Closing, the Company (i) may release the Partnership from any and all
liabilities under the Capital Contribution Agreement dated March 23, 1999 and
all related agreements, as well as pursuant to the Equipment and Leased Premises
Lease dated March 23, 1999, and (ii) join with the Partnership in the
termination of such lease agreement. In consideration for such release, as well
as for the obligations set forth in Section 6.8 to release or indemnify the
Partnership and its general partner from liabilities, the Company shall receive
from the Partnership that certain Non-Recourse Term Note and Security Agreement
issued by Gene Kirila, II to the Partnership dated February 28, 1998 in the
principal amount of $1,102,000, and the right to interest accrued or accruing
thereunder.

<PAGE>

ARTICLE VII.

CLOSING CONDITIONS

7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger will be
subject to the satisfaction of the condition that no proceeding before any
Authority or any claim by any Person shall be pending, challenging or seeking
to make illegal, to delay materially or to otherwise directly or indirectly
restrain or prohibit the consummation of the Merger or seeking material
damages or imposing any adverse conditions in connection therewith. The
foregoing shall not apply to stockholders of the Company who assert their
rights with respect to Dissenting Shares. In addition, the foregoing
condition may be waived, in whole or in part, to the extent permitted by
Applicable Law.

7.2 CONDITIONS TO OBLIGATIONS OF GENMAR AND THE MERGER SUBSIDIARY.
The obligations of Genmar and the Merger Subsidiary to effect the Merger will be
subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by Applicable Law:

a) The Company and the stockholders of the Company shall have
complied in all material respects with the agreements contained in this
Agreement;

b) Genmar and its counsel shall have received all information
and copies of all documents, including records of corporate proceedings, which
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper corporate officers;

c) The Company and the stockholders of the Company (other than
Genmar) shall have furnished Genmar and the Merger Subsidiary with favorable
legal opinions customary for transactions of this type and size, dated the
Effective Date, of their legal counsel;

d) The representations and warranties of the Company contained
in this Agreement or otherwise made in writing by the Company, or on its behalf,
pursuant to this Agreement or otherwise made in connection with the Merger and
the Transactions shall not have been Knowingly false as of the date hereof and
shall be materially true and correct at and as of the Effective Date with the
same force and effect as though made on and as of such date except those which
speak as of a certain date which shall continue to be true and correct as of
such date and the Effective Date. Each and all of the agreements to be
performed are satisfied by the Company or stockholders of the Company under this
Agreement at or prior to the Effective Date shall have been duly performed or
satisfied in all material respects, and the Company and the stockholders of the
Company shall have furnished Genmar with such certificates and other documents
evidencing the truth of such representations and warranties and the performance
of such agreements as Genmar shall have reasonably requested;

e) All actions taken by the stockholders of the Company to
approve and adopt this Agreement, the Merger, and the Transactions (including
the required share percentage to approve) shall (i) comply in all respects
with the provisions of this Agreement, the Merger and the Transactions, and
(ii) be legal, valid, binding, enforceable and effective under Applicable
Laws, the

<PAGE>

Company's Certificate of Organization and By-laws and all material
agreements to which the Company is a party or by which it or any of its
property or assets is bound;

f) Between the date of this Agreement and the Effective Date,
there shall not have occurred and be continuing any material changes affecting
the Company which Genmar reasonably determines are materially and fundamentally
adverse, including without limitation:

(i) the loss, or the anticipated loss, of the services
of (i) either Gene Kirila II or Robert McCullom or
(ii) any three (3) of the individuals set forth on
EXHIBIT E to this Agreement, unless, in the case of
any such individual(s), Gene Kirila II and Robert
McCullom have timely and fully informed Genmar of
specific employment related issues of which they
have Knowledge with respect to any such
individual(s) and Genmar has had a reasonable and
appropriate period of time to address such issues
prior to the loss of such individual(s); or

(ii) more than five percent (5%) of the Company Common
Stock on the record date set by the Board of
Directors of the Company become Dissenting Shares
and such Dissenting Shares shall not be reduced to
five percent (5%) or less on or before August 31,
1999; or

(iii) any injunction or similar action brought by a
third-party materially limiting the use or
value of the Intellectual Property of the
Company for Genmar, or in the marine industry; or

(iv) other significant events that will with substantial
likelihood materially and fundamentally prevent the
Surviving Corporation from pursuing the exploitation
of VEC-TM- Technology or Genmar realizing a return
on its investment.

g) Each of the stockholders of the Company (other than
stockholders who at the Effective Date hold Dissenting Shares) shall have
delivered to Genmar a release satisfactory to Genmar's counsel, dated the
Effective Date, releasing Genmar, the Company and their respective Affiliates
from any and all claims; PROVIDED, HOWEVER, that any Dissenting Shares that
cancel their demand for appraisal shall, in order to receive Merger
Consideration, deliver the same release to Genmar;

h) The representations and warranties of the Stockholders
contained in this Agreement or otherwise made in writing or deemed to have been
made pursuant to this Agreement, by or on behalf of the stockholders of the
Company pursuant to this Agreement or otherwise made in connection with the
Merger and the Transactions shall be true and correct in all material respects
as of the date hereof and at and as of the Effective Date with the same force
and effect as though made on and as of such date except those which speak as of
a certain date which shall continue to be true and correct in all material
respects, as of such date. Each and all of the agreements and conditions to be
performed or satisfied by the stockholders of the Company under this Agreement
at or prior to the Effective Date shall have been duly performed or satisfied in
all material respects;

<PAGE>

i) The real estate and equipment leased by the Company from
the Partnership pursuant to the lease agreement dated March 23, 1999 are
transferred to the Company at and only upon Genmar's request (which shall state
the date of transfer) at or prior to the Effective Date, in accordance with the
Genmar request and such lease is terminated PROVIDED, HOWEVER, that Genmar shall
advance to the Company the funds required to pay applicable transfer taxes and
fees and other charges imposed by the Commonwealth of Pennsylvania as well as
any title insurance and closing costs, including reasonable attorney fees as a
direct result of or as needed to complete such transfer. In addition to the
foregoing the Partnership hereby, pursuant to its execution of this Agreement
consents to and pledges to assist in the transfer of such real estate and
equipment;

j) all equity interests held by stockholders of the Company in
the Company shall be determined to the reasonable satisfaction of Genmar's
counsel to be extinguished, including all Company stock, Warrants and Options;

k) the Management Agreement shall be in full force and effect;
PROVIDED, HOWEVER, this Section shall have no force or effect in the event the
Management Agreement was terminated by (i) Genmar without right under the
Management Agreement, or (ii) the Company due to a material breach by Genmar
under the terms of the Management Agreement, including pursuant to an uncured
Funding Default hereunder;

l) each of the consents disclosed by the Company in SCHEDULE
3.3 shall have been obtained prior to the Closing Date; and

m) any and all defaults under any lender debt of the
Partnership or the Company shall be either waived in writing or otherwise
remedied to the reasonable satisfaction of Genmar and its counsel.

7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the Merger will be subject to the satisfaction at or prior to
the Effective Date of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by Applicable Law:

a) Each of Genmar and the Merger Subsidiary shall have
complied in all material respects with their respective agreements contained in
this Agreement, and the certificates to be furnished to the Company pursuant to
this section, shall be true, correct and complete;

b) Genmar and Merger Subsidiary shall have furnished the
Company with favorable legal opinion customary for transactions of this type and
size, dated the Effective Date, of their legal counsel;

c) The representations and warranties of Genmar and the Merger
Subsidiary contained in this Agreement shall be true and correct in all material
respects as of the date hereof and at and as of the Effective Date with the same
force and effect as though made on and as of such date, except those which speak
as of a certain date, which shall continue to be true and correct in all
material respects as of such date. Each and all of the agreements to be
performed or satisfied by each of Genmar and the Merger Subsidiary under this
Agreement at or prior to the Effective Date shall

<PAGE>

have been duly performed or satisfied in all material respects, and
each of Genmar and the Merger Subsidiary shall have furnished the Company
with such certificates and other documents evidencing the truth of such
representations and warranties, and the performance of such agreements as the
Company shall have reasonably requested;

d) All actions taken by Genmar or the Merger Subsidiary,
respectively, to approve and adopt this Agreement, the Merger and the
Transactions shall comply in all respects with and shall be legal, valid,
binding, enforceable and effective under the laws of the state of Delaware,
their respective Organizational Documents and all Material Agreements to which
they are party or by which any of their respective property or assets are bound;

e) There exists as of the Effective Date no uncured Funding
Default which would result in personal liability to any stockholder of the
Company;

f) If the Closing Date occurs without a Public Offering, the
stockholders of the Company shall have received the financial and narrative
information required in Section 1.3(b); and

g) The Company shall have received from Genmar, based solely
on its activities under the Management Agreement, from the date of the
Management Agreement through the Effective Date ( or until such earlier date
that the Management Agreement was terminated in accordance with its terms), a
certificate that to its Knowledge that each of the representations and
warranties in Article III remain true and correct (to the extent true and
correct on the date hereof) as of the Effective Date (or such earlier
termination date), except those which speak as of a certain date, which shall
continue to be true and correct as of such date and the Effective Date (or such
earlier termination date); PROVIDED, HOWEVER, the certificate shall not contain
any reference to and shall not be relied upon with respect to Sections 3.1, 3.2,
3.3, 3.4, 3.5, 3.7, 3.9, 3.13, 3.15, 3.17, 3.18, 3.19 or 3.20.

7.4 ACTIONS REGARDING CONDITIONS. In the event a Party hereto
prevents the satisfaction of a condition by the taking of an action or omitting
to act where such action or omission would reasonably be anticipated with
substantial certainty to prevent the consummation of this Agreement and the
Transactions, such Party shall not have the benefit of such condition under this
Agreement with respect to the action or omission in question. Notwithstanding
the foregoing, in the event such action or omission was taken pursuant to any
right under this Agreement, under any other agreement or within such Party's
rights (without violation of this Agreement or any other agreement), such
Party's rights hereunder shall not give rise, in and of itself, to any claim for
breach or default hereunder.

ARTICLE VIII.

TERMINATION, AMENDMENT AND WAIVER

8.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Date, whether before or after approval of this Agreement, the
Merger and the Transactions:

<PAGE>

a) by mutual consent of the Company, Genmar and the Merger
Subsidiary;

b) by the Company, at any time following an uncured Funding
Default, or in the event of material breach of this Agreement by Genmar or the
Merger Subsidiary that has not been cured, or if any representation or warranty
of Genmar or the Merger Subsidiary shall have become untrue in any material
respect, in either case such that such breach or untruth is incapable of being
cured by the Effective Date or will prevent or delay the consummation of the
Merger by or beyond May 31, 2000 or if any condition to the Company's obligation
to close under this Agreement shall not have been satisfied by such date;

c) by Genmar and the Merger Subsidiary:

(i) if this Agreement, the Merger and Transactions fail
to receive (x) approval as required under Applicable
Law or (y) the required vote of the stockholders of
the Company necessary to approve this Agreement, the
Merger and the Transactions pursuant to this
Agreement on or before July 15, 1999; or

(ii) in the event of a material breach of this Agreement
by the Company or the stockholders of the Company
that has not been cured, or if any representation or
warranty of the Company or the stockholders of the
Company shall have been knowingly false or shall
become untrue in any material respect, so that such
breach or untruth is incapable of being
substantially cured by the Effective Date or will
prevent or delay consummation of the Merger by or
beyond May 31, 2000; or

(iii) in the event Genmar's lender fails to approve this
Agreement, the Merger or the Transactions upon and
after Genmar exerts reasonable commercial efforts to
obtain such approval; or

(iv) in the event the Partnership or the Company receive
notice (written or otherwise) from the Partnership's
lenders (a) that they will not, individually or
collectively, continue to forebear under the present
forbearance agreement(s) or refuse to extend any
forbearance period, (b) that there will be an
acceleration of collection or a change in the
present payment schedule(s) with respect to any
lender debt or the loan(s), (c) of a default under
any lender debt that cannot reasonably be cured; or
(d) that the terms and conditions of the loan(s), or
the lending relationship, will be revised or
proposed to be revised in any manner detrimental to
the Company, Genmar or the Surviving Corporation; or

(v) in the event that the Management Agreement is
terminated based: (A) on an uncured material breach
by the Company, or (B) pursuant to the provisions
of Section 7 of the Management Agreement, or (C) by

<PAGE>

the Company pursuant to a notice of termination that
is not in accordance with the terms of the
Management Agreement; or

(vi) five percent (5%) or more of the shares held by
stockholders of the Company (determined by reference
to the stockholder record date established by the
Company Board of Directors with respect to this
Agreement and the Transactions) properly demand
appraisal rights in accordance with the DBCL and
thereby become Dissenting Shares under this
Agreement, and such Dissenting Shares are not
reduced to below five percent (5%) on or before
August 31, 1999; or

(vii) the conditions to the obligations of Genmar and the
Merger Subsidiary set forth in Section 7.2 are not
satisfied, or shall be deemed to be incapable of
satisfaction, at the Effective Date or May 31, 2000,
whichever is later.

8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void,
there shall be no liability on the part of any Party, or their respective
officers and directors, to the other and all rights and obligations of any Party
shall cease; PROVIDED, HOWEVER, that such termination will not relieve any Party
from liability for the breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.

8.3 EFFECT OF INVESTIGATION. The right of any Party to terminate this
Agreement pursuant to Section 8.1 will remain operative and in full force and
effect regardless of any of investigation made by or on behalf of any party, any
person controlling any such party or any of their respective representatives
whether prior to or after the execution of this Agreement.

ARTICLE IX.

INDEMNIFICATION

9.1 INDEMNIFICATION BY THE COMPANY AND STOCKHOLDERS OF THE COMPANY.
The Company and the stockholders of the Company, jointly, but each of them
severally in accordance with their respective pro-rata interests in the Merger
Consideration, shall indemnify and hold harmless Genmar, Merger Subsidiary and
their officers, directors, representatives, employees and agents against any and
all losses, costs, expenses (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever), liabilities,
damages, fines, penalties, charges, assessments, judgements, settlements,
claims, causes of action, proceedings, orders, and other obligations of any
nature (individually "Loss" and collectively "Losses") arising out of or based
upon any false representation or warranty or breach of any covenant or agreement
made by the Company or, with respect to each, the stockholders of the Company by
such stockholder herein or in any certificate, instrument, exhibit or schedule
delivered by the Company, or such stockholder of the Company as

<PAGE>

the case may be, in connection with this Agreement, the Merger or
Transactions, subject in any event to the provisions of Section 9.3.

9.2 INDEMNIFICATION BY GENMAR AND MERGER SUBSIDIARY. Genmar and the
Merger Subsidiary, jointly and severely, shall indemnify and hold harmless the
Company and stockholders of the Company against any and all Losses arising out
of or based upon any false representation or warranty or breach of any covenant
or agreement made by Genmar or the Merger Subsidiary herein.

9.3 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company in this Agreement shall
terminate on and as of the Effective Date, except that the representations
and warranties set forth in Sections 3.1 and 3.2 shall survive the Effective
Date indefinitely. The representations and warranties of the stockholders of
the Company shall terminate as of the Effective Date, except that the
representations and warranties set forth in Sections 4.1 and 4.2 shall
survive the Effective Date indefinitely. The representations and warranties
of Genmar and the Merger Subsidiary shall survive the Effective Date
indefinitely.

9.4 PROCEDURE FOR INDEMNIFICATION. Subject to the rights of offset
in this Agreement, in the event a party intends to seek indemnification
pursuant to the provisions of Section 9.1 or 9.2 hereof (the "INDEMNIFIED
PARTY"), the Indemnified Party shall promptly give notice hereunder to the
other party (the "INDEMNIFYING PARTY") after obtaining written notice of any
claim, investigation, or the service of a summons or other initial or
continuing legal or administrative process or proceeding in any action
instituted against the Indemnified Party as to which recovery or other action
may be sought against the Indemnifying Party because of the indemnification
provided for in Section 9.1 or 9.2 hereof, and, if such indemnity shall arise
from the claim of a third party, the Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim and any litigation
resulting from such claim; PROVIDED, HOWEVER, that the Indemnified Party
shall not be required to permit such an assumption of the defense of any
claim or litigation which, if not first paid, discharged or otherwise
complied with, would with substantial certainty result in a material
interruption or disruption of the business of the Indemnified Party, taken as
a whole, or any material part thereof. Notwithstanding the foregoing, the
right to indemnification hereunder shall not be affected by any failure of
the Indemnified Party to give such notice (or by delay by the Indemnified
Party in giving such notice) unless, and then only to the extent that, the
rights and remedies of the Indemnifying Party shall have been prejudiced as a
result of the failure to give, or delay in giving, such notice. Failure by
the Indemnifying Party to notify the Indemnified Party of its election to
defend any such claim or action by a third party within twenty (20) days
after notice thereof shall have been given to the Indemnifying Party shall be
deemed a waiver by the Indemnifying Party of its right to defend such claim
or action.

If the Indemnifying Party assumes the defense of such claim,
investigation or proceeding resulting therefrom, the obligations of the
Indemnifying Party hereunder as to such claim, investigation or proceeding shall
include taking all steps necessary in the defense or settlement of such claim,
investigation or proceeding and holding the Indemnified Party harmless from and
against any and all damages caused by or arising out of any settlement approved
by the Indemnifying Party or any judgment entered in connection with such claim,
investigation or proceeding, except where, and only to the extent that, the
Indemnifying Party has been prejudiced by the actions or omissions of the
Indemnified Party. The Indemnifying Party shall not, in the defense of such
claim or any

<PAGE>

proceeding resulting therefrom, consent to entry of any judgment (other than
a judgment of dismissal on the merits without costs) except with the written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld, delayed or conditioned) or enter into any settlement (except with
the written consent of the Indemnified Party)(which consent shall not be
unreasonably withheld, delayed or conditioned) unless (i) there is no finding
or admission of any violation of law and no material effect on any claims
that could reasonably be expected to be made against the Indemnified Party,
(ii) the sole relief provided is monetary damages, and (iii) the settlement
shall include the giving by the claimant or the plaintiff to the Indemnified
Party a release from all liability in respect to such claim or litigation.

If the Indemnifying Party assumes the defense of such claim,
investigation or proceeding resulting therefrom, the Indemnified Party shall
be entitled to participate in the defense of the claim, but solely by
observation and comment to the Indemnifying Party, and the counsel selected
by the Indemnified Party shall not appear on its behalf in any proceeding
arising hereunder. The Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it to participate in its defense unless
either of the following shall apply: (i) the employment of such counsel shall
have been authorized in writing by the Indemnifying Party; or (ii) the
Indemnifying Party's legal counsel shall advise the Indemnifying Party in
writing, with a copy to the Indemnified Party, that there is a conflict of
interest that would make it inappropriate under applicable standards of
professional conduct to have common counsel. If clause (i) or (ii) in the
immediately preceding sentence is applicable, then the Indemnified Party may
employ separate counsel at the expense of the Indemnifying Party to represent
the Indemnified Party, but in no event shall the Indemnifying Party be
obligated to pay the costs and expenses of more than one such separate
counsel for any one complaint, claim, action or proceeding in any one
jurisdiction.

If the Indemnifying Party does not assume the defense of any such
claim by a third party or litigation resulting therefrom after receipt of
notice from the Indemnified Party, the Indemnified Party may defend against
such claim or litigation in such manner as it reasonably deems appropriate,
and unless the Indemnifying Party shall deposit with the Indemnified Party a
sum equivalent to the total amount demanded in such claim or litigation plus
the Indemnified Party's estimate of the cost (including attorneys' fees) of
defending the same, the Indemnified Party may settle such claim or proceeding
on such terms as it may reasonably deem appropriate and the Indemnifying
Party shall promptly reimburse the Indemnified Party for the amount of such
settlement and for all costs (including attorneys' fees), expenses and
damages incurred by the Indemnified Party in connection with the defense
against or settlement of such claim, investigation or litigation, or if any
such claim or litigation is not so settled, the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of any judgment
rendered with respect to any claim by a third party in such litigation and
for all costs (including attorneys' fees), expenses and damage incurred by
the Indemnified Party in connection with the defense against such claim or
litigation, whether or not resulting from, arising out of, or incurred with
respect to, the act of a third party.

<PAGE>

ARTICLE X.

DEFINITIONS

As used in this Agreement, unless the context otherwise requires, the
following terms (or any variant in the form thereof) shall have the following
respective meanings. Terms defined in the singular will have a comparable
meaning when used in the plural and vice versa, and the reference to any gender
will be deemed to include all genders. Any reference to any statutory or
regulatory provision will be deemed to be a reference to any successor statutory
or regulatory provision. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided in this Agreement will
have such meaning when used in each Collateral Document, notice, certificate,
communication, opinion or other document executed or required to be executed
pursuant hereto or thereto or otherwise delivered, from time to time, pursuant
hereto or thereto.

"Act" shall have the meaning set forth in Section 1.3(a) of this Agreement.

"Affiliate" means, with respect to any Person, (a) any other Person at the
time directly or indirectly controlling, controlled by or under direct or
indirect common control with such Person, (b) any other Person of which such
Person at the time owns, or has the right to acquire, directly or indirectly,
twenty percent (20%) or more of any class of capital stock or beneficial
interest, (c) any other Person which at the time owns, or has the right to
acquire, directly or indirectly, twenty percent (20%) or more of any class of
the capital stock or beneficial interest of such Person, (d) any executive
officer or director or such Person, (e) with respect to any partnership,
joint venture or similar entity, any general partner thereof, and (f) when
used with respect to an individual, will include any member of such
individual's immediate family or a family trust.

"Agreement" shall have the meaning set forth in the preamble to this Agreement
and Plan of Reorganization.

"Applicable Law" means any Law of any Authority, whether domestic or foreign,
including without limitation all federal and state securities laws and
environmental laws, to or by which a Person or any of its business or operations
is subject or any of its property or assets is bound.

"Authority" means any governmental or quasi-governmental authority, whether
administrative, executive, judicial, legislative or other, or any combination
thereof, including without limitation any federal, state, territorial, county,
municipal or other government or governmental or quasi-governmental agency,
arbitrator, authority, board, body, branch, bureau, central bank or comparable
agency or entity, commission, corporation, court, department, instrumentality,
master, mediator, panel, referee, system or other political unit or subdivision
or any other entity of any of the foregoing, whether domestic or foreign.

"Closing Date" shall have the meaning set forth in Section 1.3(c) of this
Agreement.

"COBRA" shall have the meaning set forth in Section 3.17(a) of this Agreement.

"Code" shall have the meaning set forth in Section 2.3 of this Agreement.

<PAGE>

"Collateral Document" means any agreement, instrument, certificate, opinion,
memorandum, schedule or other document delivered by a Party or a Stockholder or
a stockholder of the Company pursuant to this Agreement or in connection with
the Merger and the Transactions. For purposes of the representations,
warranties, covenants and agreements of the Company and the Stockholders of the
Company, on the one hand, or Genmar and the Merger Subsidiary on the other,
under this Agreement and with respect to opinions to be delivered to this
Agreement, except to the extent of a Party's actual knowledge, the Company and
the Stockholders of the Company, Genmar and the Merger Subsidiary, as the case
may be, assume no responsibility for the authority of or genuineness of
signatures relating to the others as counterparts or their representations,
warranties, covenants and agreements.

"Common Stock" shall have the meaning set forth in Section 3.5 of this
Agreement.

"Company" shall have the meaning set forth in the preamble to this Agreement.

"Company Common Stock" means all shares of the common stock of the Company, par
value $.0001 per share, that are (i) issued and outstanding on the "record date"
established pursuant to Section 1.2(a), or (ii) issued and outstanding
immediately prior to or on the Effective Date, as the context of the usage
within this Agreement dictates.

"Competing Business" shall have the meaning set forth in Section 3.20 of this
Agreement.

"Computer Systems" shall have the meaning set forth in Section 3.18 of this
Agreement.

"Contract" or "Contractual Obligation" means any term, condition, provision,
representation, warranty, agreement, covenant, undertaking, commitment,
indemnity or other obligations set forth in the Organizational Documents of the
obligee or which is outstanding or existing under any instrument, contract,
lease or other contractual undertaking (including without limitation any
instrument relating to or evidencing any indebtedness) to which the obligee is a
party or by which it or any of its business is subject or property or assets is
bound.

"Defaulting Party" shall have the meaning set forth in Section 11.2 of this
Agreement.

"Dissenting Shares" shall have the meaning set forth in Section 2.1(c) of this
Agreement.

"Dissenter's Rights" means exercising the right(s) of appraisal under the DBCL.

"DBCL" shall have the meaning set forth in the Recitals to this Agreement.

"Effective Date" shall have the meaning set forth in Section 1.1 of this
Agreement.

"Encumbrance" shall have the meaning set forth in Section 3.4 of this Agreement.

"Environmental and Safety Requirements" shall have the meaning set forth in
Section 3.12(a) of this Agreement.

<PAGE>

"ERISA" shall have the meaning set forth in Section 3.17 of this Agreement.

"Financial Information" shall have the meaning set forth in Section 3.6 of This
Agreement.

"Funding Default" shall have the meaning set forth in Section 6.10 of this
Agreement.

"GAAP" shall have the meaning set forth in Section 3.6 of this Agreement.

"Genmar" shall have the meaning set forth in the preamble to this Agreement.

"Genmar Common Stock" means the common stock of Genmar, par value $ .01 per
share, issued by Genmar in exchange for Company Common Stock pursuant to the
Merger.

"Genmar Public Shares" shall have the meaning set forth in Section 2.1 of this
Agreement.

"Governmental Entity" shall have the meaning set forth in Section 3.3 of this
Agreement.

"Indemnified Party" and "Indemnifying Party" shall each have the meaning set
forth in Section 9.4 hereof.

"Intellectual Property" shall have the meaning set forth in Section 3.9 of this
Agreement.

"Knowledge." For purposes of this Agreement, an individual will be deemed to
have "Knowledge" of a particular fact or other matter if: (a) such
individual is actually aware of such fact or other matter; or (b) a prudent
individual should reasonably be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting business in
the ordinary course. An entity will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has
at any time served, as director, officer, general partner, management or
supervisory employee or trustee of such entity (or in any similar capacity)
has, or at any time had, Knowledge of such fact or other matter.

"Law" means any (a) administrative, judicial, legislative or other action,
code, consent decree, constitution, decree, directive, enactment, finding,
guideline, law, injunction, interpretation, judgement, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirements, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ of
any Authority, domestic or foreign; (b) the common law, or other legal or
quasi-legal precedence; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation, including without limitation, in each
such case or instance, any interpretation, directive, guideline or request,
whether or not having the force of law including, in all cases, any
particular section, part or provisions thereof.

"Loss" or "Losses" shall have the meaning set forth in Section 9.1 of this
Agreement.

"Management Agreement" shall have the meaning set forth in Section 6.4 of this
Agreement.

"Merger" shall have the meaning set forth in the Recitals to this Agreement.

37
<PAGE>

"Merger Closing" shall have the meaning set forth in Section 1.3 of this
Agreement.

"Merger Consideration" shall have the meaning set forth in Section 2.1(d) of
this Agreement.

"Merger Subsidiary" shall have the meaning set forth in the preamble to this
Agreement.

"Non-Defaulting Party" shall have the meaning set forth in Section 11.2 of this
Agreement.

"Note" or "Notes" shall have the meaning set forth in Section 2.1 of this
Agreement.

"Note Merger Consideration" shall have the meaning set forth in Section 2.1(b)
of this Agreement.

"Options" means all rights, options (excluding warrants), all calls or
commitments evidencing the right to subscribe for, purchase or otherwise
acquire Company Common Stock, whether or not the right to subscribe for,
purchase or otherwise acquire, is immediately exercisable or is conditioned
upon the passage of time, the occurrence or nonoccurrence of the existence or
nonexistence of some other event.

"Organizational Documents" means, with respect to a Person, which is a
corporation, its charter, its by-laws, and all voting trusts and similar
arrangements applicable to any of its capital stock, and, with respect to a
Person that is a Partnership, its agreement and certificate of partnership,
any agreement among partners, and any management and similar agreements
between the partnership and any general partners (or any Affiliate thereof).

"Other Transaction" shall have the meaning set forth in Section 6.5 of this
Agreement.

"Partnership" means Pyramid Composites Manufacturing Limited Partnership, a
limited partnership organized and existing under the laws of the Commonwealth of
Pennsylvania.

"Party" or "Parties" means any Person that is named as a party or who is a
signatory to this Agreement; PROVIDED, HOWEVER, that each stockholder of the
Company shall be deemed a Party to this Agreement and the Transactions upon the
adoption and approval of this Agreement in accordance with Section 1.2 hereof.

"Person" means any natural individual or any entity, which shall include any
corporation, firm, unincorporated organization, association, partnership,
limited liability company, trust (intro vivos or testamentary), estate of a
deceased, insane or incompetent individual, business trust, joint stock company,
joint venture or other organization, entity or business, whether acting in an
individual, fiduciary or other capacity, or any Authority.

"Personal Property" shall have the meaning set forth in Section 3.13 of this
Agreement.

"Plan" shall have the meaning set forth in Section 3.17(a) of this Agreement.

"Public Offering" (i) shall have the meaning set forth in Section 1.3(a), or
(ii) means the offering of the Common Stock of Genmar pursuant to the
Underwriting Agreement pursuant to which Genmar

38
<PAGE>

will issue and sell such stock in a firm commitment public offering pursuant
to the Registration Statement in accordance with the requirements of the Act,
as the context of usage in this Agreement dictates.

"Public Offering Closing Date" shall have the meaning set forth in Section
1.3(a) of this Agreement.

"Public Offering Price" shall have the meaning set forth in Section 2.1(a)(i) of
this Agreement.

"Real Property" shall have the meaning set forth in Section 3.7 of this
Agreement.

"Registration Statement" means the registration statement (including the
prospectus, exhibits, financial statements and schedules included therein,
and all amendment thereof, including post-effective amendments and any
registration statement filed under Rule 462(b) with respect to the Public
Offering), filed under the Act registering the shares of Genmar to be sold in
the Public Offering in accordance with the terms and conditions of the
Underwriting Agreement.

"Related Persons" shall have the meaning set forth in Section 3.20 of this
Agreement.

"SEC" means the United States Securities and Exchange Commission.

"Secondary Closing Date" shall have the meaning set forth in Section 1.3(b) of
this Agreement.

"Special Meeting" shall have the meaning set forth in Section 1.2(a)(i) of this
Agreement.

"Stock Merger Consideration" shall have the meaning set forth in Section 2.1(a)
of this Agreement.

"Stockholders" shall refer to and mean the stockholders of the Company set forth
on the execution page hereof who join in this Agreement by execution of this
Agreement specifically to covenant as to certain matters as set forth herein.

"Stockholders Agreement" shall have the meaning set forth in Section 1.9 of this
Agreement.

"Surviving Corporation" shall have the meaning set forth in Section 1.1 of this
Agreement.

"Tax" shall have the meaning set forth in Section 3.14 of this Agreement.

"Tax Liability" shall have the meaning set forth in Section 3.14 of this
Agreement.

"Transactions" means the other transactions contemplated by this Agreement or
the Merger by any Collateral Document executed or required to be executed in
connection herewith or therewith.

"Underwriter" means the lead underwriters and any other Person who executes the
Underwriting Agreement as an underwriter of Genmar Common Stock in the Public
Offering.

39
<PAGE>

"Underwriting Agreement" means the firm commitment underwriting agreement
between Genmar and the Underwriter to be filed as an exhibit to the
Registration Statement and to be executed on or about the commencement of the
Public Offering.

"Warrants" means all rights related to warrants issued by the Company to
purchase or otherwise acquire Company Common Shares, whether or not the right
to subscribe for, purchase or otherwise acquire is immediately exercisable or
is conditioned upon the passage of time, the occurrence or nonoccurrence or
the existence or nonexistence of some other event.

"Year 2000 Compatible" shall have the meaning set forth in Section 3.18 of this
Agreement.

ARTICLE XI.

MISCELLANEOUS AND GENERAL

11.1 NOTICES. All notices, demands and other communications
provided for hereunder shall be in writing and shall be given by either
personal delivery, via facsimile transmission (receipt telephonically
confirmed), by nationally recognized overnight courier (prepaid), or by
certified or registered first class mail, postage prepaid, return receipt
requested, sent to each Party, at its address as set forth below or at such
other address or in such other manner as may be designated by such party in a
written notice to each of the other parties. All such notices, demands and
communications shall be effective when personally delivered, one (1) business
day after delivery to the overnight courier, upon telephone confirmation of
facsimile transmission or upon receipt after dispatch by mail to the party to
whom the same is so given or made:

<TABLE>

<C> <S>
If to Company and the
Stockholders: Pyramid Operating Systems, Inc.
639 Keystone Road
Greenville, PA 16125
Attention: Board of Directors

with copy to: Gefsky and Lehman, P.C.
One PPG Place
Suite 2301
Pittsburgh, Pennsylvania 15222
Attention: H. Arnold Gefsky, Esq.

If to Genmar: Genmar Holdings, Inc.
100 South Fifth Street, Suite 2400
Minneapolis, Minnesota 55402
Attention: Roger R. Cloutier, II
Mary P. McConnell, Esq.

40
<PAGE>

with copy to: Briggs and Morgan P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Michael J. Grimes, Esq.

</TABLE>

11.2 LEGAL AND OTHER COSTS.

a) In the event that any party defaults (the "Defaulting
Party") in his or its obligations under this Agreement (which shall
specifically exclude a Funding Default under Section 6.10(ii)) and, as a
result thereof, the other party (the "Non-Defaulting Party") seeks to legally
enforce his or its rights hereunder against the Defaulting Party, then, in
addition to all damages and other remedies to which the Non-Defaulting Party
is entitled by reason of such default, the Defaulting Party shall promptly
pay to the Non-Defaulting Party an amount equal to all costs and expenses
(including reasonable attorneys' fees) paid or incurred by the Non-Defaulting
Party in connection with such enforcement.

b) In the event that the Non-Defaulting Party is entitled
to receive an amount of money by reason of the Defaulting Party's default
hereunder, then, in addition to such amount of money, the Defaulting Party
shall promptly pay to the Non-Defaulting Party a sum equal to interest on
such amount of money accruing at the rate of 2% per month (but if such rate
is not permitted under the laws of the State of Delaware, then at the highest
rate which is permitted to be paid under the laws of the State of Delaware)
during the period between the date such payment should have been made
hereunder and the date of the actual payment thereof.

11.3 ENTIRE AGREEMENT. This writing constitutes the entire
agreement of the Parties with respect to the subject matter hereof and may
not be modified or amended except pursuant to Section 11.8 hereof.

11.4 GOVERNING LAW. This Agreement, including all the documents,
instruments and agreements to be executed and/or delivered by the parties
hereto, shall be construed, governed by and enforced in accordance with the
internal laws of the State of Delaware, without giving effect to the
principles of comity or principles of conflicts of laws thereof.

11.5 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of each corporate party hereto, its successors and assigns,
and each individual party hereto and his heirs, personal representatives,
successors and assigns.

11.6 COOPERATION. Each Party hereto shall cooperate, shall take
such further action and shall execute and deliver such further documents as
may be reasonably requested by any other Party in order to carry out the
provisions and purposes of this Agreement.

11.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
taken together shall be deemed one and the same original.

41
<PAGE>

11.8 AMENDMENTS. No purported amendment, modification or waiver of
any provision of this Agreement, or any of the documents, instruments or
agreements to be executed by the Parties pursuant hereto shall be effective
unless in a writing specifically referring to this Agreement and signed by
all of the Parties and all amendments thereof shall be governed by and
construed in accordance with the law of the State of Delaware applicable to
Contracts made and to be performed therein; notwithstanding the foregoing,
any amendment, modification or waiver of any provision of this Agreement that
does not directly affect a stockholder's liability for indemnification
hereunder may be amended, modified or waived by the Parties to this Agreement
without the signatures of the stockholders of the Company, including the
Stockholders, and shall be effective and binding on all Parties and the
stockholders of the Company.

11.9 PRESERVATION OF AND ACCESS TO RECORDS. The Surviving
Corporation shall preserve all books and records of the Company for a period
of six (6) years after the Closing Date; PROVIDED, HOWEVER, the Surviving
Corporation may destroy any part or parts of such records upon obtaining
written consent of Company for such destruction, which consent shall not be
unreasonably withheld. Such records shall be made available to Company and
their representatives at all reasonable times during normal business hours of
the Company during said six-year period with the right at their expense to
make abstracts from and copies thereof.

11.10 PUBLIC ANNOUNCEMENTS. The timing and content of all public
announcements relating to the execution of this Agreement and the
consummation of the transactions contemplated hereby shall be approved by
both the Company and Genmar prior to the release of such public
announcements, and each Party agrees to cooperate with the other party as
appropriate to comply with all Applicable Laws. Subsequent to the date of
receipt of all consents and approvals of each Governmental Entity necessary
to consummate this transaction, Genmar may make such announcements and/or
advertisements as Genmar, in its sole discretion, deems necessary.

11.11 COSTS. Except as otherwise provided in this Agreement, Genmar
and the Company shall pay their own costs and expenses incurred in connection
with negotiating and preparing this Agreement and consummating the
transactions contemplated hereby, including but not limited to fees and
disbursements of their attorneys, accountants and investment bankers. Except
as otherwise provided in this Agreement, any costs or expenses incurred on
behalf of the stockholders of the Company (other than Genmar) for the
services of Gefsky and Lehman, P.C., Cohen and Grigsby, P.C. (not to exceed
$10,000) and Cornerstone Capital Advisors, Ltd. in their representation of
the Company shall be considered costs and expenses of the Company.

11.12 HEADINGS. The headings of the articles, sections and
subsections of this Agreement are intended for the convenience of the parties
only and shall in no way be held to explain, modify, construe, limit, amplify
or aid in the interpretation of the provisions hereof. The terms "this
Agreement," "hereof," "herein," "hereunder," "hereto" and similar expressions
refer to this Agreement as a whole and not to any particular article,
section, subsection or other portion hereof and include the schedules and
exhibits hereto and any document, instrument or agreement executed and/or
delivered by the parties pursuant hereto.

42
<PAGE>

11.13 SCOPE OF AGREEMENT. Unless the context otherwise requires, all
references in this Agreement or in any schedule or Exhibit hereto, to the
assets, properties, operations, business, financial statements, employees,
books and records, accounts receivable, accounts payable, Contracts or other
attributes of the business of the Company shall mean such items or attributes
as they are used in, apply to, or relate to all businesses of the Company.

11.14 NUMBER AND GENDER. Unless the context otherwise requires,
words importing the singular number shall include the plural and vice versa
and words importing the use of any gender shall include all genders.

11.15 SEVERABILITY. In the event that any provision of this
Agreement is declared or held by any court of competent jurisdiction to be
invalid or unenforceable, such provision shall be severable from, and such
invalidity or unenforceability shall not be construed to have any effect on,
the remaining provisions of this Agreement, unless such invalid or
unenforceable provision goes to the essence of this Agreement, in which case
the entire Agreement may be declared invalid and not binding upon any of the
parties.

11.16 PARTIES IN INTEREST AND ASSIGNMENT. Nothing expressed or
implied in this Agreement is intended or shall be construed to confer any
rights or remedies under or by reason of this Agreement upon any Person other
than (i) Genmar, Affiliates and Genmar's lenders under the senior and
subordinated credit facilities of Genmar, (ii) the Company, and (iii) the
stockholders of the Company, and their permitted successors and assigns.
This Agreement and any rights or interests arising from or in connection with
this Agreement shall (i) not be assignable by the Company or the stockholders
of the Company and any such purported assignment shall be null and void and
of no force or effect, (ii) be assignable by Genmar and/or the Merger
Subsidiary in their sole discretion, including any assignment to Genmar's
lenders under the senior and subordinated credit facilities of Genmar.

11.17 WAIVER. The terms, conditions, warranties, representations and
indemnities contained in this Agreement, including the documents, instruments
and agreements executed and/or delivered by the Parties pursuant hereto, may
be waived only by a written instrument executed by the Party waiving
compliance. Any such waiver shall only be effective in the specific instance
and for the specific purpose for which it was given and shall not be deemed a
waiver of any other provision hereof or of the same breach or default upon
any recurrence thereof. No failure on the part of a Party hereto to exercise
and no delay in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.

11.18 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. The word "including"
shall mean including without limitation. The Parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the

43
<PAGE>

same subject matter (regardless of the relative levels of specificity) which
the Party has not breached shall not detract from or mitigate the fact that
the Party is in breach of the first representation, warranty or covenant.

11.19 FACSIMILE SIGNATURES. Due to the Parties' geographic
locations, the Parties hereto have agreed that signatures for execution of
this Agreement and any certificate, instrument and other document entered
into and/or delivered pursuant to or in connection with this Agreement, may
be provided by facsimile; and upon receipt of such facsimile signature, the
Party accepting such signature shall be entitled to rely on the execution
thereof and such signature will be binding and effective as if the original
counterpart had been transmitted and/or delivered.

[SIGNATURE PAGES TO FOLLOW]

44
<PAGE>

SIGNATURE PAGE COUNTERPART SUMMARY
FOR
PLAN AND AGREEMENT OF REORGANIZATION

THE FOLLOWING IS A SUMMARY OF THE COUNTERPART SIGNATURE PAGES TO THE
MERGER AGREEMENT WHICH WERE EXECUTED AND DELIVERED ON JUNE 18, 1999, SET
FORTH IN ORDER AS FOLLOWS:

GENMAR HOLDINGS, INC.

POS ACQUISITION CORPORATION

PYRAMID OPERATING SYSTEMS, INC.

GENE KIRILA, II

PYRAMID COMPOSITES MANUFACTURING LIMITED PARTNERSHIP

PYRAMID COMPOSITES MANUFACTURING, INC.

AWATTO LIMITED PARTNERSHIP

CARL A. SNYDER

JOHN W. ROSE

HOWELL A. BREEDLOVE, JR.

HOWELL A. BREEDLOVE, JR. IRREVOCABLE TRUST FBO ALAN MERKLE BREEDLOVE

HOWELL A. BREEDLOVE, JR. IRREVOCABLE TRUST FBO JOHN ADAMS BREEDLOVE

HOWELL A. BREEDLOVE, JR. IRREVOCABLE TRUST FBO MARK HOWELL BREEDLOVE

HOWELL A. BREEDLOVE, JR. IRREVOCABLE TRUST FBO MARY HELEN BREEDLOVE

HOWELL A. BREEDLOVE, JR. IRREVOCABLE TRUST FBO WILLIAM PARKER BREEDLOVE

HOWELL A. BREEDLOVE, JR. IRREVOCABLE TRUST FBO ANN MARIE GARBIN

RAYMOND D. TRAVAGLINI REVOCABLE TRUST

SANRAY CORPORATION

CARL AND ANN SNYDER IRREVOCABLE TRUST FBO CHRISTINA L. SNYDER

CARL AND ANN SNYDER IRREVOCABLE TRUST FBO ELIZABETH A. SNYDER

CARL AND ANN SNYDER IRREVOCABLE TRUST FBO JEFFREY C. SNYDER

GEFSKY AND LEHMAN INVESTMENT PARTNERSHIP III

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written. By adoption of this
Agreement, the stockholders of the Company, as set forth on EXHIBIT F hereto,
have approved the terms and conditions of this Agreement.

GENMAR HOLDINGS, INC.

By /s/ Roger R. Cloutier II
---------------------------------
Its EVP & CFO
------------------------------

POS ACQUISITION CORPORATION

By /s/ [ILLEGIBLE]
---------------------------------
Its VP
------------------------------

PYRAMID OPERATING SYSTEMS, INC.

By /s/ [ILLEGIBLE]
---------------------------------
Its
------------------------------

STOCKHOLDERS: STOCKHOLDERS:

/s/ Gene Kirila, II
PYRAMID COMPOSITES MANUFACTURING -----------------------------------
LIMITED PARTNERSHIP Gene Kirila, II
By: Pyramid Composites Manufacturing, Inc.
/s/ Carl A. Snyder
-----------------------------------
Carl A. Snyder
By /s/ [ILLEGIBLE]
----------------------------------- /s/ John W. Rose
Its----------------------------- -----------------------------------
John W. Rose

PYRAMID COMPOSITES MANUFACTURING, INC.
/s/ Howell A. Breedlove
-----------------------------------
Howell A. Breedlove, Jr. (Personally)
By /s/ [ILLEGIBLE]
------------------------------------
Its
------------------------------

AWATTO LIMITED PARTNERSHIP HOWELL A. BREEDLOVE, JR. IRREVOCABLE
TRUST FBO ALAN MERKLE BREEDLOVE
By: /s/ [ILLEGIBLE]
-----------------------------------
Its /s/ [ILLEGIBLE]
--------------------------------
By /s/ [ILLEGIBLE] By /s/ Howell A. Breedlove
------------------------------ ---------------------------------
Its /s/ [ILLEGIBLE] Its Trustee
--------------------------- ------------------------------

[CONTINUED ON NEXT PAGE]

45
<PAGE>

[SIGNATURE PAGE CONTINUED]

RAYMOND D. TRAVAGLINI REVOCABLE TRUST HOWELL A. BREEDLOVE, JR. IRREVOCABLE
TRUST FBO JOHN ADAMS BREEDLOVE

By: /s/ Raymond D. Travaglini By /s/ Howell A. Breedlove
----------------------------------- ---------------------------------
Its Trustee Its Trustee
-------------------------------- ------------------------------

SANRAY CORPORATION HOWELL A. BREEDLOVE, JR. IRREVOCABLE
TRUST FBO MARK HOWELL BREEDLOVE
By: /s/ Raymond D. Travaglini
-----------------------------------
Its President By /s/ Howell A. Breedlove
-------------------------------- ---------------------------------
Its Trustee
------------------------------

CARL AND ANN SNYDER IRREVOCABLE TRUST HOWELL A. BREEDLOVE, JR. IRREVOCABLE
FBO CHRISTINA L. SNYDER TRUST FBO MARY HELEN BREEDLOVE

By /s/ Carl A. Snyder By /s/ Howell A. Breedlove
--------------------------------- ---------------------------------
Its G.P. Its Trustee
--------------------------------- ------------------------------

CARL AND ANN SNYDER IRREVOCABLE TRUST
FBO ELIZABETH A. SNYDER HOWELL A. BREEDLOVE, JR. IRREVOCABLE
TRUST FBO WILLIAM PARKER BREEDLOVE
By /s/ Carl A. Snyder
--------------------------------- By /s/ Howell A. Breedlove
Its G.P. ---------------------------------
--------------------------- Its Trustee
---------------------------
CARL AND ANN SNYDER IRREVOCABLE TRUST
FBO JEFFREY C. SNYDER
HOWELL A. BREEDLOVE, JR. IRREVOCABLE
By /s/ Carl A. Snyder TRUST FBO ANN MARIE GARBIN
------------------------------------
Its G.P. By /s/ Howell A. Breedlove
------------------------------ ---------------------------------
Its Trustee
---------------------------
GEFSKY AND LEHMAN INVESTMENT
PARTNERSHIP III

By /s/ [ILLEGIBLE]
------------------------------------
Its Managing Partner
------------------------------

46
<PAGE>

[CONTINUED ON NEXT PAGE]

[SIGNATURE PAGE CONTINUED]

STOCKHOLDERS:

------------------------------------

47
<PAGE>

EXHIBIT A

REORGANIZATION AGREEMENT

<PAGE>

EXHIBIT A

CERTIFICATE OF MERGER

PYRAMID OPERATING SYSTEMS, INC.

(A DELAWARE CORPORATION)

WITH AND INTO

POS ACQUISITION CORPORATION

(A DELAWARE CORPORATION)

The undersigned corporations organized and existing under and by virtue
of the General Corporation Law of Delaware,

DOES HEREBY CERTIFY:

FIRST: That the name and state of incorporation of each of the
constituent corporations (the "Constituent Corporations") of the merger is as
follows:

NAME STATE OF INCORPORATION

Pyramid Operating Systems, Inc. Delaware

POS Acquisition Corporation Delaware

SECOND: That an agreement of merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of section 251 of
the General Corporation Law of Delaware.

THIRD: That the name of the surviving corporation of the merger is POS
ACQUISITION CORPORATION (the "Surviving Corporation").

FOURTH: That the Certificate of Incorporation of POS ACQUISITION
CORPORATION, a Delaware corporation, which will survive the merger, shall be the
Certificate of Incorporation of the Surviving Corporation.

A-1
<PAGE>

FIFTH: That the executed agreement of merger is on file at an office of
the Surviving Corporation, the address of which is Pyramid Operating Systems,
Inc., c/o Genmar Holdings, Inc., 100 South Fifth Street, Suite 2400,
Minneapolis, Minnesota 55402.

SIXTH: That a copy of the agreement of merger will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of either
Constituent Corporation.

SEVENTH: That this Certificate of Merger shall be effective on

- ---------------.

POS ACQUISITION CORPORATION

Dated: By:
-------------------------------- ---------------------------------
Its:
-----------------------------

PYRAMID OPERATING SYSTEMS, INC.

Dated: By:
-------------------------------- ---------------------------------
Its:
-----------------------------

A-2
<PAGE>

EXHIBIT B

REORGANIZATION AGREEMENT

<PAGE>

EXHIBIT B

CERTIFICATE OF INCORPORATION
OF
POS ACQUISITION CORPORATION

THE UNDERSIGNED, being a natural person for the purpose of organizing a
corporation under the General Corporation Law of the State of Delaware, hereby
certifies that:

FIRST: The name of the corporation is POS Acquisition Corporation
(the "Corporation").

SECOND: The address of the registered office of the Corporation
in the State of Delaware is c/o CT Corporation System, 1209 Orange Street,
City of Wilmington, County of New Castle, State of Delaware. The registered
agent of the Corporation in the State of Delaware at such address is CT
Corporation System.

THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware, as from time to time
amended (the "DGCL").

FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 10,000, all of which shares shall
be common stock having a par value of $0.01 per share.

FIFTH: The name and mailing address of the incorporator is
Michael J. Grimes, Briggs and Morgan, P.A., 2400 IDS Center, 80 South Eighth
Street, Minneapolis, Minnesota 55402.

SIXTH: In furtherance and not in limitation of the powers
conferred by law, the Bylaws of the Corporation may be adopted, amended or
repealed by the Board of Directors of the Corporation; PROVIDED, HOWEVER,
that, any Bylaws adopted by the Board of Directors may be amended or repealed
by the shareholders entitled to vote thereon.

SEVENTH: Election of member of the Board of Directors need not be by
written ballot.

EIGHTH: The Corporation shall indemnify, to the full extent
permitted by Section 145 of the DGCL, all persons whom it may indemnify pursuant
thereto.

NINTH: No director shall be personally liable to the
Corporation or to any stockholder for monetary damages for breach of
fiduciary duty as a director, except for any matter in respect of which such
director shall be liable under Section 174 of the DGCL or shall be liable by
reason that, in addition to any and all other requirements for such
liability, such director (i) shall have breached his or her duty of loyalty
to the Corporation or its stockholders, (ii) shall not have acted in good
faith or, in failing to act, shall not have acted in good faith, (iii) shall
have acted in a manner involving intentional misconduct or a knowing
violation of law or (iv) shall have derived an improper personal

B-1
<PAGE>

benefit. Neither the amendment nor repeal of this Article nor the adoption
of any provision of the Certificate of Incorporation inconsistent with this
Article, shall eliminate or reduce the effect of this Article in respect of
any matter occurring, or any cause of action, suit or claim that, but for
this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.

IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Incorporation as of the _____ day of June, 1999.

----------------------
Michael J. Grimes
Sole Incorporator

B-2
<PAGE>

EXHIBIT C

REORGANIZATION AGREEMENT

<PAGE>

EXHIBIT C

THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR ANY STATE SECURITIES LAW. THIS DEBENTURE MAY NOT BE TRANSFERRED OR
SOLD OR OFFERED FOR TRANSFER OR SALE OR OTHERWISE DISTRIBUTED EXCEPT (1) IN
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
STATE LAWS, OR (2) PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.

GENMAR HOLDINGS, INC.
NON-NEGOTIABLE, UNSECURED SUBORDINATED DEBENTURE ("DEBENTURE")

REGISTERED SHARES: _______________________

ORIGINAL ISSUE DATE: June __, 1999

MATURITY DATE: [__________]
INTEREST RATE: [___] interest to be paid semi-annually

Genmar Holdings, Inc., a Delaware corporation (the "Issuer"), for value
received, hereby promises to pay to the registered owner specified above on the
maturity date specified above, unless this Debenture shall have been previously
prepaid in whole or in part, upon surrender hereof, the principal amount
advanced hereunder and interest thereon from the original issue date specified
above (the "Original Issue Date") until payment of said principal amount has
been made in full with simple interest accruing and paid semi- annually at the
annual rate of [___%]. All principal and interest payments on this Debenture
shall be payable by check mailed to the registered owner of this Debenture at
such owner's address as it appears on the face of this Debenture or as shall be
provided in writing by the owner hereof to the Issuer. All amounts payable with
respect to this Debenture shall be paid in currency of the United States of
America. Interest on the unpaid principal amount of this Debenture shall be paid
semi-annually on or before the last day of June and December of each year during
which this Debenture remains unpaid. The principal and any unpaid interest
payable pursuant to this Debenture is payable in arrears on the Maturity Date.

SUBORDINATION

This Debenture is subordinated to all indebtedness of Issuer and
guarantees by Issuer, including without limitation such indebtedness and
guarantees in favor of (i) Issuer's affiliates, including its officers,
directors and affiliated companies, and (ii) lenders and the Bank of New York,
or any successor lender, pursuant to one or more credit agreements with such
lenders and the Bank of New York, as agent, including each such agreement, as
amended or refinanced from time to time,

C-1
<PAGE>

it being understood and agreed that pursuant to such subordination no payment
shall be made on this Non-Negotiable, Unsecured Senior Subordinated Debenture
at any time that a default or event of default shall have occurred and be
continuing under any such credit agreement.

The indebtedness evidenced by this Debenture shall be senior in right of
payment to all short term debt (but not the current portion of long term
indebtedness) and accounts payable and accrued expenses of the Issuer.

OPTIONAL PREPAYMENT

At any time prior to the Maturity Date and so long as no Default exists,
and assuming the Issuer obtains all necessary consents from its lenders, the
Issuer may, at its sole election, prepay without premium or penalty, all of the
outstanding principal balance of this Debenture together with accrued interest.

DEFAULT

Each of the following events or circumstances shall constitute an event
of Default, upon written notice from the Holder to the Issuer:

(i) The non-payment, when and as due, of any interest or principal
with respect to this Debenture; and

(ii) The institution of a proceeding, which remains undismissed and
unstayed for a period in excess of thirty (30) days, seeking to have an order
for relief entered against the Issuer entailing a finding of insolvency or a
similar declaration, seeking similar relief under any law relating to
bankruptcy, insolvency, relief of debtors or protection from creditors or
seeking appointment of a receiver, trustee, custodian, liquidator or other
similar official for all or any substantial part of the Issuer's property.

REMEDIES

In the event a Default occurs, subject to the subordination provisions
herein, the holder of this Debenture shall have the right to demand payment of
the principal amount and accrued interest of this Debenture, plus recovery of
all costs and expenses, including reasonable legal fees incurred in pursuing
collection of any unpaid amounts due pursuant to this Debenture or in pursuing
any other rights of the Holder as well as any other rights afforded by law,
including without limitation specific performance.

ASSIGNMENT

This Debenture and any interest herein shall be non-negotiable,
non-assignable and non-transferable (except to Issuer or POS Acquisition
Corporation, or by the laws of descent and distribution). Any purported
negotiation, assignment or transfer of this Debenture, or any interest herein
shall be null, void and of no force or effect.

C-2
<PAGE>

IN WITNESS WHEREOF, Genmar Holdings, Inc. has caused this Debenture to be
executed and attested in its name by the signatures of its duly authorized
officers.

GENMAR HOLDINGS, INC.

By: _________________________________

Title: ______________________________

ATTEST:

_____________________________________

_____________________________________
Secretary

C-3
<PAGE>

EXHIBIT D

REORGANIZATION AGREEMENT

<PAGE>

EXHIBIT D

LIST OF COMPANY WARRANTS AND OPTIONS

1. WARRANTS

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Holder # of Shares Price per Share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C>
PYRAMID INVESTORS:
- --------------------------------------------------------------------------------

AWATTO Limited Partnership 2,159,016 $ .3058
- --------------------------------------------------------------------------------
Howell A. Breedlove, Jr. 33,734 .3058
- --------------------------------------------------------------------------------
Howell A. Breedlove, Jr. Irrevocable Trust
for the benefit of:
- --------------------------------------------------------------------------------
Alan Merkle Breedlove 151,806 .3058
- --------------------------------------------------------------------------------
John Adams Breedlove 151,806 .3058
- --------------------------------------------------------------------------------
Mark Howell Breedlove 151,806 .3058
- --------------------------------------------------------------------------------
Mary Helen Breedlove 151,806 .3058
- --------------------------------------------------------------------------------
William Parker Breedlove 151,806 .3058
- --------------------------------------------------------------------------------
Ann Marie Garbin 151,806 .3058
- --------------------------------------------------------------------------------
Carl A. Snyder 337,346 .3058
- --------------------------------------------------------------------------------
Carl and Ann Snyder Irrevocable Trust for
the benefit of:
- --------------------------------------------------------------------------------
Christina Snyder 1/31/94 25,301 .3058
- --------------------------------------------------------------------------------
Elizabeth A. Snyder 1/31/94 29,518 .3058
- --------------------------------------------------------------------------------
Jeffrey C. Snyder 1/31/94 29,518 .3058
- --------------------------------------------------------------------------------
Raymond D. Travaglini Revocable Trust 590,356 .3058
- --------------------------------------------------------------------------------
Jack R. Mennis 36,060 .3058
- --------------------------------------------------------------------------------
John W. Rose 506,019 .3058
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cornerstone Capital Advisors, Ltd. 794,425 $ .0013685
- --------------------------------------------------------------------------------
Verne C. Harnish 30,303 .2645
- --------------------------------------------------------------------------------
Richard E. Morley 13,130 .2645
- --------------------------------------------------------------------------------
TOTAL 5,495,562
- --------------------------------------------------------------------------------
</TABLE>

D-1
<PAGE>

2. EMPLOYEE OPTIONS

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Optionee Number of Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
Aquaro, David J. 16,978
- -------------------------------------------------------------------------------
Baggiossi, Rocco J. 3,531
- -------------------------------------------------------------------------------
Baldoff, Mary L. 10,914
- -------------------------------------------------------------------------------
Beck, Phillip D. 14,068
- -------------------------------------------------------------------------------
Birch, Duane D. 5,549
- -------------------------------------------------------------------------------
Brasko, Thomas J. 10,914
- -------------------------------------------------------------------------------
Burns, Mark R. 5,045
- -------------------------------------------------------------------------------
Cassell, Laureen M. 4,036
- -------------------------------------------------------------------------------
DeMoss, Susan L. 5,549
- -------------------------------------------------------------------------------
Dorff, Andrew M. 5,423
- -------------------------------------------------------------------------------
Dunmire, Ronald C. 4,540
- -------------------------------------------------------------------------------
Eaton, Gary 18,191
- -------------------------------------------------------------------------------
Eckard, Steven R. 5,045
- -------------------------------------------------------------------------------
Eckman, Gregory M. 5,045
- -------------------------------------------------------------------------------
Fisher, Thomas A. 12,612
- -------------------------------------------------------------------------------
Germano, David P. 5,423
- -------------------------------------------------------------------------------
Gundaker, Kenneth A. 6,457
- -------------------------------------------------------------------------------
Hammond, Albert P. 9,585
- -------------------------------------------------------------------------------
Harris, Michaelene M. 8,004
- -------------------------------------------------------------------------------
Hobaugh, Douglas H. 6,432
- -------------------------------------------------------------------------------
Hofius, David L. 5,297
- -------------------------------------------------------------------------------
Hudson, Scott D. 6,558
- -------------------------------------------------------------------------------
Hunt, Randall E. 6,054
- -------------------------------------------------------------------------------
Kirila, Gene II 32,307
- -------------------------------------------------------------------------------
Lapikas, James S. 18,569
- -------------------------------------------------------------------------------
Leiphemer, Jay B. 21,829
- -------------------------------------------------------------------------------
</TABLE>
D-2

<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name of Optionee Number of Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
McCollum, Robert P. 661,318
- --------------------------------------------------------------------------------
Mild, Donald J. 4,540
- --------------------------------------------------------------------------------
Mosconi, Jr., James A. 6,457
- --------------------------------------------------------------------------------
Myers, Todd A. 6,558
- --------------------------------------------------------------------------------
Nelson, James C. 7,567
- --------------------------------------------------------------------------------
Nelson, Michael R. 14,819
- --------------------------------------------------------------------------------
Nugent, Bettie L. 6,558
- --------------------------------------------------------------------------------
O'Brien, Lonnie J. 9,702
- --------------------------------------------------------------------------------
O'Hara, Jeff J. 10,914
- --------------------------------------------------------------------------------
Pocza, Lon S. 5,045
- --------------------------------------------------------------------------------
Pond, Leonard A. 12,127
- --------------------------------------------------------------------------------
Potase, Shirley J. 5,045
- --------------------------------------------------------------------------------
Richards, Michael D. 5,802
- --------------------------------------------------------------------------------
Roberts, Richard R. 4,919
- --------------------------------------------------------------------------------
Rossi, Renee D. 21,829
- --------------------------------------------------------------------------------
Sampson, Kenneth E. 6,558
- --------------------------------------------------------------------------------
Sidi, Shiraz 18,191
- --------------------------------------------------------------------------------
Sprinkle, Terri L. 5,423
- --------------------------------------------------------------------------------
Vasko, George III 7,063
- --------------------------------------------------------------------------------
Ward, Erik M. 6,558
- --------------------------------------------------------------------------------
Wertz, William J. 7,063
- --------------------------------------------------------------------------------
Zaboroski, Mark A. 3,531
- --------------------------------------------------------------------------------
TOTAL 1,091,542
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>

3. PURCHASE RIGHT

Genmar Holdings, Inc. has the right to purchase 945,515 Shares of the Company's
Common Stock (and certain warrants) for $250,000.

D-3
<PAGE>

EXHIBIT E

REORGANIZATION AGREEMENT
<PAGE>

EXHIBIT E

LIST OF CRITICAL EMPLOYEES

<TABLE>
<CAPTION>
NAME TITLE
<S> <C>
Gene Kirila, II Chief Executive Officer
Robert McCollum Director of Work Systems Group
Jay Leipheimer Director of Manufacturing
James Lapikas Director of R&D
Michael Nelson Solution Center Manager
Leonard Pond Manager
Jeffrey O'Hara Project Engineer
George Vasko, III Group Leader
</TABLE>

E-1
<PAGE>

EXHIBIT F

REORGANIZATION AGREEMENT
<PAGE>

EXHIBIT F

STOCKHOLDERS OF RECORD
<TABLE>
<CAPTION>
STOCKHOLDER SHARES %
- ----------- ------ -
<S> <C> <C>
Pyramid Composites Manufacturing Limited Partnership 6,243,385 8.16%
Pyramid Composites Manufacturing, Inc. 16,640,000 21.74%
Genmar Holdings, Inc. 6,659,158 8.70%
AWATTO Limited Partnership 15,182,320 19.84%
Howell A Breedlove, Jr. 842,467 1.10%
Howell A. Breedlove, Jr. Irrevocable Trust fbo Alan Merkle Breedlove 1,061,411 1.39%
Howell A. Breedlove, Jr. Irrevocable Trust fbo John Adams Breedlove 1,061,411 1.39%
Howell A. Breedlove, Jr. Irrevocable Trust fbo Mark Howell Breedlove 1,061,411 1.39%
Howell A. Breedlove, Jr. Irrevocable Trust fbo Mary Helen Breedlove 1,061,411 1.39%
Howell A. Breedlove, Jr. Irrevocable Trust fbo William Parker Breedlove 1,061,411 1.39%
Howell A. Breedlove, Jr. Irrevocable Trust fbo Ann Marie Garbin 1,061,411 1.39%
Albert F. Dombrowski 911,615 1.19%
Mr. and Mrs. Charles F. Fetterolf 781,385 1.02%
James E. Howe 1,454,143 1.90%
Gene Kirila, II 2,499,394 3.27%
Thomas A. McConomy 1,502,736 1.96%
Carl A. Snyder 3,432,287 4.49%
Carl and Ann Snyder Irrevocable Trust fbo Christina L. Snyder 134,291 0.18%
Carl and Ann Snyder Irrevocable Trust fbo Elizabeth A. Snyder 156,673 0.20%
Carl and Ann Snyder Irrevocable Trust fbo Jeffrey C. Snyder 156,673 0.20%
Raymond D. Travaglini Revocable Trust 3,330,863 4.35%
Sanray Corporation 814,498 1.06%
Jack R. Mennis 2,916,345 3.81%
John W. Rose 3,560,606 4.65%
James E. Feeney 159,307 0.21%
Cyril J. Batten 187,402 0.24%
Gefsky and Lehman Investment Partnership III 347,104 0.45%
Carlos Menendez 990,360 1.29%
Melvin Pirchesky 261,640 0.34%
Jose Trujillo 990,360 1.29%
------- -----
TOTAL 76,523,478 100.00%
</TABLE>

F-1

<PAGE>

THIRD AMENDED AND RESTATED

CREDIT AGREEMENT

among

GENMAR HOLDINGS, INC.,

THE FINANCIAL INSTITUTIONS NAMED HEREIN

THE BANK OF NEW YORK

As Agent

and

BNY CAPITAL MARKETS, INC.

As Sole Lead Arranger and Book Runner

Dated as of July 30, 1999

$95,000,000

- --------------------------------------------------------------------------------

<PAGE>

THIRD AMENDED AND RESTATED CREDIT AGREEMENT (hereinafter the
"Agreement"), dated as of July 30, 1999, among GENMAR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), the Lenders (as hereinafter defined), THE BANK OF
NEW YORK, acting in its capacity as agent for the Lenders and as Issuing Bank
(as hereinafter defined) and BNY CAPITAL MARKETS, INC., as Sole Lead Arranger
(the "Arranger").

W I T N E S S E T H

WHEREAS, the Borrower, the Lenders and the Agent are parties to
the Second Amended and Restated Credit Agreement dated as of July 1, 1997, as
amended by Amendment No. 1, dated as of October 27, 1997, by Amendment No. 2,
dated as of December 18, 1998, by Amendment No. 3, dated as of March 18, 1999
and by Amendment No. 4, dated as of May 6, 1999 (as so amended and as otherwise
in effect immediately prior to the Effective Date, the "Existing Credit
Agreement"), pursuant to which the Lenders agreed to make and have made certain
credit facilities available to the Borrower;

WHEREAS, the Borrower has requested that the Existing Credit
Agreement be amended and restated in its entirety to provide, among other
things, that (a) the Lenders extend credit in order to enable the Borrower (i)
to borrow on a revolving basis from time to time an aggregate principal amount
not to exceed $29,000,000, and (ii) to borrow on a term loan basis an aggregate
principal amount not to exceed $45,000,000 and (b) the Issuing Bank issue
standby letters of credit in an aggregate face amount not to exceed $21,000,000
outstanding at any time; and

WHEREAS, (a) the proceeds of the revolving loans and the term
loans shall be used solely for general corporate purposes, to fund ongoing
working capital needs of the Borrower and its Subsidiaries, to redeem and repay
all of Borrower's outstanding 13.5% Subordinated Notes (including accrued
interest and call premiums) and to repay the Subordinated Demand Note and (b)
the letters of credit will be used to support contingent liabilities related to
the Borrower's insurance needs and for general corporate purposes.

NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the Borrower, the
Lenders, and the Agent hereby agree that, upon the satisfaction of the
conditions precedent set forth in SECTION 4.1 hereof, the Existing Credit
Agreement is hereby amended and restated in its entirety to read as follows:

SECTION 1. DEFINITIONS.

SECTION 1.1. DEFINITIONS. As used herein, the following terms shall have
the meanings herein specified unless the context otherwise requires. Defined
terms in this

<PAGE>

Agreement shall include in the singular number the plural and in the plural
number the singular.

"ACCOUNTS" shall mean all accounts, accounts receivable, other
receivables, contract rights, chattel paper, instruments, documents and notes,
whether now owned or hereafter acquired by the Borrower or any of its
Subsidiaries.

"ACCOUNT DEBTOR" shall mean any Person who is or who may become
obligated to the Borrower or any of its Subsidiaries under, with respect to, or
on account of, an Account.

"AFFILIATE" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power to (i)
vote 5% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) direct or cause the direction of the
management an policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.

"AGENT" shall mean The Bank of New York acting in its capacity as
agent for the Lenders and any successor agent appointed in accordance with
SECTION 9.9.

"AGENT'S OFFICE" shall mean the office of the Agent located at One
Wall Street, New York, New York 10286, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.

"AGREEMENT" shall mean this Credit Agreement as the same may from
time to time hereafter be modified, restated, supplemented or amended.

"ALTERNATE BASE RATE" shall mean, at any particular date, the
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the greater of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Rate in effect on such day plus 1/2%. For purposes hereof, the
term "PRIME RATE" shall mean the prime commercial lending rate of The Bank of
New York as publicly announced from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
The term "FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York or, if such rate
is not so published for any day that is a Business Day, the average of the
quotations for the day of such transaction received by the Agent from three
Federal funds brokers of recognized standing selected by it. If the Agent shall
have determined that it is unable to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms hereof,

<PAGE>

the Alternative Base Rate shall be determined with regard to clause (a) of
the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate, respectively.

"ARRANGER" shall have the meaning provided in the preamble to this
Agreement.

"ASSIGNMENT OF RENTS AND LEASES" shall mean the assignment of
rents and leases which have been executed and delivered by the Loan Parties
under and in connection with the Original Agreement (as any such assignment of
rents and leases have been, are being or hereafter may be amended, modified or
supplemented from time to time).

"BANKRUPTCY CODE" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.

"BASE RATE LOANS" shall mean Revolving Loans and Term Loans made
and/or being maintained at a rate of interest based upon the Alternate Base
Rate.

"BORROWER" shall have the meaning provided in the first paragraph
of this Agreement.

"BORROWING" shall mean the incurrence of one Type of Revolving
Loan or Term Loans from all the Lenders on a given date (or resulting from
conversions or continuations on a given date), having in the case of Eurodollar
Loans the same Interest Period.

"BORROWING BASE" shall mean during any month the sum of (i) 95% of
Eligible Financed Receivables, (ii) 80% of Eligible Other Receivables, (iii) 30%
of net property and equipment of the Borrower and its Subsidiaries and (iv) the
lesser of (x) 50% of the Eligible Inventory and (y) $55,000,000. The applicable
Borrowing Base for any given day shall be the Borrowing Base set forth in the
Borrowing Base Certificate most recently delivered pursuant to SECTION 6.9.

"BORROWING BASE CERTIFICATE" shall mean a certificate in the form
attached hereto as EXHIBIT 1.1, signed by a senior financial officer of the
Borrower and stating the amount of the Borrower's Borrowing Base.

"BRITISH POUNDS" shall mean the lawful currency of the United
Kingdom.

<PAGE>

"BUSINESS DAY" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in New York City, Milwaukee or Minneapolis a legal holiday or a
day on which banking institutions are authorized or required by law or other
government actions to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, any day which is a Business Day described in clause (i) and
which is also a day for trading by and between banks for U.S. dollar deposits in
the relevant interbank Eurodollar market.

"CAPITAL EXPENDITURES" shall mean, for any period, the sum of
expenditures (whether paid in cash or accrued as a liability, including the
portion of Capitalized Leases originally incurred during such period that is
capitalized on the consolidated balance sheet of the Borrower and its
Subsidiaries) by the Borrower and its Subsidiaries during such period that, in
conformity with GAAP, are included in "capital expenditures", "additions to
property, plant, tooling or equipment" or comparable items in the consolidated
financial statements of the Borrower and its Subsidiaries.

"CAPITAL STOCK" shall mean as to any Person, all shares,
interests, partnership interests, limited liability company interests,
membership interests, rights in or other equivalents (however designated) of
such Person's equity (however designated).

"CAPITALIZED LEASE" shall mean (i) any lease of property, real or
personal, the obligations under which are capitalized on the consolidated
balance sheet of the Borrower and its Subsidiaries, and (ii) any other such
lease to the extent that the then present value of the minimum rental commitment
thereunder should, in accordance with GAAP, be capitalized on a balance sheet of
the lessee.

"CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations of the
Borrower and its Subsidiaries under or in respect of Capitalized Leases.

"CARVER" shall mean Carver Boat Corporation, a Delaware
corporation.

"CASH EQUIVALENTS" shall mean (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 90 days from the date of acquisition, (ii) time deposits and certificates
of deposit of any Lender or any domestic commercial bank of recognized standing
having capital and surplus in excess of $500,000,000 with maturities of not more
than 90 days from the date of acquisition, (iii) fully secured repurchase
obligations with a term of not more than seven (7) days for underlying
securities of the types described in clause (i) entered into with any bank
meeting the qualifications specified in clause (ii) above, and (iv) commercial
paper issued by the parent corporation of any Lender or any domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
and commercial paper or master notes of issuers, rated at least A-2 or the
equivalent thereof by Standard & Poor's

<PAGE>

Corporation or at least P-2 or the equivalent thereof by Moody's Investor
Services, Inc. and in each case maturing within 90 days after the date of
acquisition.

"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute.

"COLLATERAL" shall mean all property and interests in property now
owned or hereafter acquired in or upon which a Lien has been or is purported or
intended to have been granted to the Agent or any Lender under any of the
Security Documents.

"COLLATERAL AGENT" has the meaning assigned to that term in the
Security Agreement.

"COMMITMENT" shall mean, for each Lender at any given time, the
sum of such Lender's Revolving Loan Commitment, Term Loan Commitment and its
Standby Letter of Credit Commitment.

"COMMITMENT FEE" shall have the meaning provided in SECTION
2.16(b).

"CONSOLIDATED CASH FLOW" shall mean, on any determination date,
for the period of the four (4) consecutive fiscal quarters ending on or
immediately prior to such date, the sum of (i) Consolidated Operating Income for
such period, PLUS (ii) depreciation and amortization deducted in determining
Consolidated Operating Income for such period, all determined on a consolidated
basis for the Borrower and its Subsidiaries in accordance with GAAP.

"CONSOLIDATED FUNDED DEBT" shall mean Indebtedness of the types
referred to in subclauses (i), (ii) and (iii) of the definition of
"Indebtedness," as determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.

"CONSOLIDATED INTEREST EXPENSE" shall mean on any determination
date, for the period of the four (4) consecutive fiscal quarters ending on or
immediately prior to such date, the total cash interest expense (including,
without limitation, interest expense attributable to Capitalized Leases in
accordance with GAAP) of the Borrower and its Subsidiaries accrued for such
period determined on a consolidated basis in accordance with GAAP.

"CONSOLIDATED NET WORTH" shall mean, at any time, the sum of the
amount by which the total consolidated assets (as determined in accordance with
GAAP) of the Borrower and its Subsidiaries exceeds the Consolidated Total
Liabilities of the Borrower and its Subsidiaries (as determined in accordance
with GAAP) at such time, excluding any write-downs for goodwill, provided that,
in order for any write-downs of goodwill to be excluded for purposes of this
definition, the Borrower shall have informed

5
<PAGE>
the Agent and the Lenders of its intention to take any such write-downs at
least 45 days prior to any such write-downs.

"CONSOLIDATED OPERATING INCOME" shall mean, for on any
determination date, for the period of the four (4) consecutive fiscal quarters
ending on or immediately prior to such date, the operating income of the
Borrower and its Subsidiaries on a consolidated basis for such period (taken as
a single accounting period) determined in accordance with GAAP.

"CONSOLIDATED SENIOR DEBT" shall mean, at any time, Funded Debt
MINUS the principal amount of the outstanding Subordinated Debt at such time.

"CONSOLIDATED TOTAL LIABILITIES" shall mean, at any time, all
indebtedness of the Borrower and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.

"CONTINGENT OBLIGATION" as to any Person shall mean any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

"CREDIT EXPOSURE" shall have the meaning provided in SECTION
10.4(c).

"CREDIT SUISSE L/C" means the Standby Letter of Credit issued by
the Issuing Bank for the benefit of Credit Suisse.

"DEALER ACCOUNTS" shall mean Accounts resulting from the sale of
Inventory by the Borrower or one of its Restricted Subsidiaries to a dealer of
pleasure boats, secured by a Lien on Inventory so sold and with a Due Date
greater than 60 days

<PAGE>

and no later than 12 months from the invoice date of any such Account;
provided that such Dealer Accounts shall not include Accounts, generated from
any dealer of pleasure boats whose primary place of business is located
outside the United States of America, with terms greater than 60 days which
are secured by an irrevocable letter of credit, credit insurance or
acceptance terms.

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

"DEFAULT RATE" shall have the meaning provided in SECTION 2.6(c).

"DESIGNATED SUBSIDIARY" shall mean those Subsidiaries of the
Borrower listed as such on Schedule 1.1(d).

"DIVIDENDS" shall have the meaning provided in SECTION 7.7.

"DOMESTIC LENDING OFFICE" shall mean, as to any Lender, the office
of such Lender designated as such on Annex I, or such other office designated by
such Lender from time to time by written notice to the Agent and the Borrower.

"DUE DATE" shall mean the date on which payment is due with
respect to an Account, as indicated on the invoice or statement of Account
rendered to the Account Debtor.

"EFFECTIVE DATE" shall mean the date on which all conditions to
effectiveness set forth in SECTIONS 4.1 AND 4.2 have been satisfied or have
been effectively waived by the Lenders.

"ELIGIBLE FINANCED RECEIVABLES" shall mean Eligible Receivables
that have been authorized for purchase by Bombardier Credit Corp., Transamerica
Credit Corp., Newcourt Credit Group, Inc., TFC and any other finance companies
which have been approved in writing by the Agent.

"ELIGIBLE INVENTORY" shall mean the first-in, first-out cost of
such of the Inventory of the Borrower and its Subsidiaries in which the
Collateral Agent has a perfected first priority security interest as the Agent,
in its sole discretion exercised in a professional manner, shall deem eligible,
less such reserves as the Agent, in its sole discretion, shall from time to time
deem appropriate. The Agent does not intend to treat an item of Inventory as
eligible if (i) any warranty or representation contained in this Agreement or
any of the Loan Documents applicable either to Eligible Inventory in general or
to any such specific Inventory has been breached with respect to such Inventory
or (ii) such Inventory is slow moving or obsolete.

"ELIGIBLE OTHER RECEIVABLES" shall mean all Eligible Receivables
except Eligible Financed Receivables.

<PAGE>

"ELIGIBLE RECEIVABLES" shall mean the gross outstanding balance,
less all finance charges, late fees and other fees which are unearned, of
Accounts arising out of the lease or sale of goods or services by the Borrower
or its Subsidiaries in the ordinary course of their business in which the
Collateral Agent has a perfected first priority security interest which the
Agent, in its sole discretion exercised in a professional manner, shall deem
eligible, and less such reserves as the Agent, in its sole discretion, shall
deem appropriate. Without in any way limiting the discretion of the Agent to
deem an Account eligible or ineligible, the Agent does not currently intend to
treat an Account as eligible if:

(a) any warranty or representation contained in this Agreement,
or any of the Loan Documents applicable either to Accounts in general or to any
such specific Account has been breached with respect to such Account;

(b) twenty-five percent (25%) or more of the outstanding
Accounts from the Account Debtor which constituted Eligible Receivables at the
time they arose have become, or been determined by the Agent to be, ineligible;

(c) the Account Debtor has filed a petition for relief under
the Bankruptcy Code (or similar action under any successor law), made a general
assignment for the benefit of creditors, had filed against it any petition or
other application for relief under the Bankruptcy Code (or similar action under
any successor law), failed, suspended business operations, become insolvent,
called a meeting of its creditors for the purpose of obtaining any financial
concession or accommodation, or had or suffered a receiver or a trustee to be
appointed for all or a significant portion of its assets or affairs;

(d) it has remained unpaid for a period exceeding 60 days after
the Due Date;

(e) the sale represented by such Account is to an Account
Debtor outside the United States, unless the sale is on letter of credit, credit
insurance or acceptance terms, and the issuer, the insurer and such terms are
acceptable to the Agent;

(f) the Account Debtor is an Affiliate or employee of the
Borrower or any of its Subsidiaries;

(g) the Account Debtor is a supplier or creditor of the
Borrower or any of its Subsidiaries (excluding an Account Debtor who is (x) an
engine supplier or (y) a creditor solely by reason of its participation in a
joint cooperative advertising arrangement with the Borrower or any of its
Subsidiaries, in each such event such Account will be deemed ineligible to the
extent of the amount owed by the Borrower or any of its Subsidiaries to such
Account Debtor);

(h) the Account is denominated in other than United States or
Canadian dollars or is payable outside the United States or Canada;

<PAGE>

(i) the sale represented by such Account is on a bill-and-hold,
undelivered sale, guaranteed sale, sale or return, consignment, or sale on
approval basis;

(j) the sale represented by such Account is on terms longer
than 30 days unless such Account (x) is a Dealer Account, provided the aggregate
outstanding amount of Dealer Accounts to be included in Eligible Receivables
shall not exceed $2.5 million or (y) is to an Account Debtor outside the United
States on letter of credit, credit insurance or acceptance terms, and the
issuer, the insurer or such terms are acceptable to the Agent;

(k) the Agent has reason to believe that such Account may not
be paid;

(l) it is subject to any material claim or dispute by the
Account Debtor;

(m) it is subject to any set-off by the Account Debtor, in
which event such Account will be deemed ineligible to the extent of such
set-off;

(n) it is subject to any Lien whatsoever, other than Liens
in favor of the Agent and Liens permitted pursuant to SECTION 7.3(b), (c) and
(d);

(o) the Account is not evidenced by an invoice or other writing
in form acceptable to the Agent in its sole discretion;

(p) the Borrower or any of its Subsidiaries, in order to be
entitled to collect the Account, is required to perform any additional service
for, or perform or incur any additional obligation to, the Account Debtor (it
being understood that warranty obligations arising in the ordinary course of
business are not such obligations), except for Accounts of the Hatteras Yacht
division of the Borrower subject to "percentage of completion" accounting
treatment under GAAP; or

(q) the Account is an account of the United States government,
the government of any state of the United States or any political subdivision
thereof, or any agency or instrumentality of any of the foregoing, and the Agent
is not able to perfect a first priority security interest in such Account. The
Agent shall have discretion to classify Accounts into any of the foregoing
categories or such other categories as the Agent, in its sole discretion, deems
appropriate in determining the eligibility of Accounts.

"ENVIRONMENTAL AFFILIATE" shall mean, with respect to any Person,
any other Person whose liability for any Environmental Claim such Person has or
may have retained, assumed or otherwise become liable for (contingently or
otherwise), either contractually or by operation of law.

<PAGE>

"ENVIRONMENTAL APPROVALS" shall mean any permit, license,
approval, ruling, variance, exemption or other authorization required under
applicable Environmental Laws.

"ENVIRONMENTAL CLAIM" shall mean, with respect to the Borrower,
any notice, claim, demand or similar written communication made upon the
Borrower or any of its Subsidiaries by any other Person (including any
Environmental Affiliate) alleging potential liability in connection with
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned by such Person or (ii) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.

"ENVIRONMENTAL LAWS" shall mean all Federal, state, local and
foreign laws and regulations relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.

"ENVIRONMENTAL LIEN" shall mean any Lien imposed pursuant to any
Environmental Law with respect to any of the Properties.

"EQUITY ISSUANCE" shall mean the public or private issuance of any
Capital Stock of the Borrower, provided, however, "Equity Issuance" shall not
include capital contributions to the Borrower, not to exceed $5,000,000 in the
aggregate, made from time to time by the Existing Shareholders.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

"ERISA CONTROLLED GROUP" means a group consisting of any ERISA
Person and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such Person
that, together with such Person, are treated as a single employer under
regulations of the PBGC.

"ERISA PERSON" shall have the meaning set forth in Section 3(9) of
ERISA for the term "person."

<PAGE>

"ERISA PLAN" means any Plan that (i) is not a Multiemployer Plan
and (ii) has Unfunded Benefit Liabilities in excess of $250,000.

"EUROCURRENCY RESERVE REQUIREMENTS" shall mean, with respect to
each day during an Interest Period for Eurodollar Loans, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Federal Reserve Board or other governmental authority or agency having
jurisdiction with respect thereto for determining the maximum reserves
(including, without limitation, basic, supplemental, marginal and emergency
reserves) for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D) maintained by a member bank of the Federal Reserve
System.

"EURODOLLAR BASE RATE" shall mean, with respect to each day during
an Interest Period for Eurodollar Loans, the rate per annum (rounded upwards to
the nearest whole multiple of one-sixteenth of one percent) equal to the offered
quotation to first class banks in the interbank eurodollar market by The Bank of
New York two Business Days prior to the beginning of such Interest Period at or
about 10:00 A.M., New York City time, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Loan of The Bank of New York to be
outstanding during such Interest Period.

"EURODOLLAR LENDING OFFICE" shall mean, as to any Lender, the
office of such Lender designated as such on Annex I, or such other office
designated by such Lender from time to time by written notice to the Agent and
the Borrower.

"EURODOLLAR LOANS" shall mean Revolving Loans and Term Loans made
and/or being maintained at a rate of interest based upon the Eurodollar Rate.

"EURODOLLAR RATE" shall mean with respect to each day during an
Interest Period for Eurodollar Loans, a rate per annum determined for such day
in accordance with the following formula (rounded upwards to the nearest whole
multiple of 1/100th of one percent): Eurodollar Base Rate/1.00 - Eurocurrency
Reserve Requirements

"EXISTING CREDIT AGREEMENT" shall have the meaning provided in the
preamble to this Agreement.

"EVENT OF DEFAULT" shall have the meaning provided in SECTION 8.

"EXISTING NOTES" shall mean, collectively, the Subordinated
Shareholder Note and the Subordinated Demand Note.

"EXISTING SHAREHOLDERS" shall mean Mr. Irwin L. Jacobs (or, upon
his death, his estate) and his Affiliates, Mr. Carl R. Pohlad (or, upon his
death, his estate) and his Affiliates and RDV (AJL) Holdings, Inc.

<PAGE>

"FAIR MARKET VALUE" shall mean, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by a majority of the members of the board of
directors of the Borrower and a majority of the disinterested members of such
board of directors, if any, acting in good faith and shall be evidenced by a
duly and properly adopted resolution of the board of directors; except that any
determination of Fair Market Value made with respect to any real property or
personal property which is customarily appraised shall be made by an independent
qualified appraiser acceptable to the Agent and the Required Lenders.

"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the
Federal Reserve System as constituted from time to time.

"FEES" shall have the meaning provided in SECTION 2.16(e).

"FINAL MATURITY DATE" shall mean June 30, 2002.

"FLOOR PLAN FINANCING" shall mean that certain floor planning
arrangement among the Borrower and/or any of its Subsidiaries and one or more
financial institutions pursuant to which any such financial institution provides
credit to retail dealers and wholesale distributors which purchase goods from
the Borrower and any of its Subsidiaries.

"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date hereof and consistent with those utilized in
the preparation of the financial statements referred to in SECTION 5.5.

"GENMAR LOGIC" shall mean Genmar Logic, L.L.C., a Delaware limited
liability company and a wholly-owned Subsidiary of GII.

"GENMAR MANUFACTURING" shall mean Genmar Manufacturing of Kansas,
L.L.C., a Delaware limited liability company and a wholly-owned Subsidiary of
the Borrower.

"GPV, INC." shall mean GPV, Inc., a Delaware corporation and a
wholly-owned Subsidiary of GII.

"GII" shall mean Genmar Industries, Inc., a Delaware corporation
and a wholly-owned indirect subsidiary of the Borrower.

"GUARANTORS" shall mean the Restricted Subsidiaries and each other
Person who executes and delivers to the Agent an agreement to become a Guarantor
in the form of Annex B to the Guaranty.

<PAGE>

"GUARANTY" shall mean each guaranty which has been executed and
delivered by each Guarantor under and in connection with the Original Agreement
and the Existing Credit Agreement, together with each other guaranty required to
be executed in accordance with the terms and provisions hereof (as any such
guaranty have been, are being or hereafter may be amended, modified or
supplemented from time to time).

"HATTERAS BUSINESS" shall mean the tangible and intangible assets
of, and all obligations and liabilities arising out of or associated with, the
Hatteras Division.

"HATTERAS DISPOSITION CORP." shall mean a wholly owned subsidiary
of the Borrower or GII into which the Hatteras Business shall be transferred in
anticipation of and in order to effect the Hatteras Disposition.

"HATTERAS DIVISION" shall mean the division of GII that
manufacturers boats under the tradename "Hatteras."

"HATTERAS DISPOSITION" shall mean a sale, transfer or other
disposition of the Hatteras Business by Hatteras Disposition Corp. or the sale
of the Capital Stock of Hatteras Disposition Corp.

"HATTERAS INTERNAL TRANSFER" shall mean the transfer of the
Hatteras Business to Hatteras Disposition Corp.

"HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts and other similar
agreements.

"HORIZON ACQUISITION" shall mean the acquisition by Genmar
Manufacturing of the Business (as defined in the Horizon Acquisition Agreement)
pursuant to the terms of the Horizon Acquisition Agreement.

"HORIZON ACQUISITION AGREEMENT" shall mean that certain Agreement
of Purchase and Sale of Assets, dated December 3, 1998, by and among Horizon
Marine, LC, a Kansas limited liability company, Genmar Manufacturing and
Geoffrey T. Pepper, as sole member of Horizon Marine, LC, as in effect on
December 3, 1998.

"HORIZON IRB ASSETS" shall mean the real property, plant,
equipment and other fixed assets acquired in the Horizon Acquisition.

"IMPROVEMENTS" shall mean have the meaning set forth therefor in
the Mortgages.

"INACTIVE SUBSIDIARIES" means Hatteras Yachts-High Point, Inc.,
Hatteras Yachts-New Bern, Inc. and Yachtscape LLC.

<PAGE>

"INDEBTEDNESS" of any Person shall mean, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, other than (x) trade payables on terms of 90 days
or less incurred in the ordinary course of business of such Person and (y) notes
issued in connection with insurance premiums payable in the ordinary course of
business of such Person in an aggregate principal amount not to exceed $750,000
outstanding at any time, (ii) all indebtedness of such Person evidenced by a
note (other than such notes referred to in subclause (i)(y) of this definition),
bond, debenture or similar instrument, (iii) the principal component of all
Capitalized Lease obligations of such Person, (iv) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all unreimbursed amounts drawn thereunder, (v) all indebtedness of
any other Person secured by any Lien on any property owned by such Person,
whether or not such indebtedness has been assumed, (vi) all Contingent
Obligations of such Person, and (vii) all Hedging Agreements and currency swaps
and similar agreements of such Person in accordance with GAAP.

"INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor
Agreement, dated as of October 20, 1997, by and among the Borrower, the Agent
and the Subordinated Agent.

"INTEREST PERIOD" shall have the meaning provided in SECTION 2.7.

"INTERNAL FINANCIALS" shall have the meaning provided in
SECTION 5.5.

"INVENTORY" shall mean any and all now owned or hereafter acquired
inventory, goods, merchandise, and other tangible personal property intended for
sale or lease, in the custody or possession, actual or constructive, of the
Borrower or any of its Subsidiaries, or in transit to the Borrower or any of its
Subsidiaries, including such inventory as is on consignment to third parties,
leased to customers of the Borrower or any of its Subsidiaries, or otherwise
temporarily out of the custody or possession of the Borrower or any of its
Subsidiaries.

"ISSUING BANK" shall mean The Bank of New York acting in its
capacity as issuing bank of the Standby Letters of Credit and any successor
issuing bank appointed in accordance with SECTION 3.7.

"LC DISBURSEMENT" shall mean any payment or disbursement made by
the Issuing Bank under or pursuant to a Standby Letter of Credit.

"LC EXPOSURE" shall mean, at any time of determination, the sum of
(a) the aggregate undrawn amount of all Standby Letters of Credit outstanding at
such time and (b) the aggregate amount that has been drawn under any Standby
Letters of Credit but for which the Issuing Bank or the Lenders, as the case may
be, have not been reimbursed by the Borrower at such time.

<PAGE>

"LENDERS" shall mean the financial institutions listed on Annex I
hereto and the financial institutions which from time to time become a party
hereto in accordance with SECTION 10.4(c).

"LETTER OF CREDIT APPLICATION" shall mean a standby letter of
credit application in the Issuing Bank's customary form, as such form may be
modified from time to time by the Issuing Bank.

"LEVERAGE RATIO" shall mean, for any period of determination, the
ratio of Consolidated Funded Debt to Consolidated Cash Flow.

"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same effect as any of
the foregoing and the filing of any financing statement or similar instrument
under the Uniform Commercial Code or comparable law of any jurisdiction,
domestic or foreign.

"LOAN DOCUMENTS" shall mean this Agreement, the Revolving Notes,
the Term Notes, the Guaranties, the Security Documents, the Subordination
Agreements, Intercreditor Agreement and Hedging Agreements entered into by the
Borrower or its Subsidiaries, as applicable, with one or more Lenders.

"LOAN PARTY" shall mean and include the Borrower and the
Restricted Subsidiaries.

"LOANS" shall mean the Revolving Loans and the Term Loans.

"LOGIC" shall mean Logic Marine Corporation, a Delaware
corporation.

"LOGIC ACQUISITION" shall mean the acquisition by Genmar Logic of
the Business (as defined in the Logic Acquisition Agreement) pursuant to the
terms of the Logic Acquisition Agreement.

"LOGIC ACQUISITION AGREEMENT" shall mean that certain Agreement of
Purchase and Sale of Assets, dated May 6, 1999, by and among Logic, Genmar
Logic, PT Sumberdaya, Allied Plastics International, LTD. and Cheshire Holdings,
LTD.

"LOGIC ASSETS" shall mean all tangible and intangible assets
acquired by Genmar Logic pursuant to the Logic Acquisition Agreement.

"MARGIN PERCENTAGE" shall mean at any time that percentage (a) to
be added to the ABR Rate pursuant to SECTION 2.6(a), for purposes of determining
the

<PAGE>

per annum rate of interest applicable from time to time to Base Rate Loans,
(b) to be added to the Eurodollar Rate pursuant to SECTION 2.6(b), for purposes
of determining the per annum rate of interest applicable from time to time to
Eurodollar Loans, and (c) to be used in computing the Commitment Fee pursuant to
SECTION 2.16(b), which in each case on any date shall be the applicable
percentage set forth under the appropriate column below opposite the category in
which the Borrower's Leverage Ratio, determined as of the end of the most recent
fiscal quarter for which financial statements are required to have been
delivered under SECTION 6.1(b) (whether or not such statements or statements for
any subsequent quarter shall in fact have been delivered, subject to the proviso
set forth below), shall fall (or which shall otherwise be applicable as provided
below):

<TABLE>
<CAPTION>
WHEN THE
LEVERAGE AND LESS EURODOLLAR ABR
RATIO IS THAN OR REVOLVING REVOLVING COMMITMENT
LEVEL GREATER THAN EQUAL TO MARGIN MARGIN FEE
----- ------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
I 3.00:1.00 2.75% 1.50% 0.500%

II 2.50:1.00 3.00:1.00 2.50% 1.25% 0.375%

III 2.00:1.00 2.50:1.00 2.25% 1.00% 0.375%

IV 1.50:1.00 2.00:1.00 2.00% 0.75% 0.300%

V 1.50:1.00 1.75% 0.50% 0.300%
</TABLE>

provided that, notwithstanding the foregoing (i) with respect to borrowings from
the Effective Date until the date on which the compliance certificate and
financial statements for the fiscal quarter ended March 31, 2000 are delivered
to the Agent the Margin Percentage shall be determined by reference to Level II
or to Level I if any compliance certificate and financial statements delivered
for any fiscal quarter between the Effective Date and the fiscal quarter ended
March 31, 2000 indicate that the Leverage Ratio is greater than or equal to
3:00:1:00 and (ii) at any time during which the Borrower has failed to deliver
the financial statements and the certificates described in SECTION 6.1(b) with
respect to a fiscal quarter in accordance with the provisions thereof, or at any
time during which an Event of Default shall have occurred and shall be
continuing, the Margin Percentage shall be determined by reference to Level I
and (iv) any decrease in the Margin Percentage resulting from a change in the
Leverage Ratio shall be effective only after being requested pursuant to the
certificate of the Borrower delivered in accordance with SECTION 6.1(f)(iii).
Except as set forth in subsection (ii) of this Definition, changes in the Margin
Percentage shall become effective on the first day on which the compliance
certificate and financial statements covering the quarter-end date as of which
such ratios are computed have been delivered to the Agent.

<PAGE>

"MARGIN STOCK" shall have the meaning provided such term in
Regulation U of the Federal Reserve Board.

"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
upon (i) the business, operations, properties, assets, prospects or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole,
or (ii) the ability of any Loan Party to perform, or of the Agent or any of the
Lenders to enforce, any of the Obligations.

"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean and include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products.

"MORTGAGE AMENDMENTS" shall have the meaning provided in SECTION
4.1(d) hereof.

"MORTGAGED PROPERTIES" shall mean each Property set forth on
Schedule 1.1(a) hereto.

"MORTGAGES" shall mean the mortgages and/or deeds of trust
encumbering the Mortgaged Property which have been executed and delivered to the
Agent by the Loan Parties party thereto under and in connection with the
Original Agreement, the Existing Credit Agreement and this Agreement (as any
such mortgages have been, are being or hereafter may be amended, modified or
supplemented from time to time).

"MULTIEMPLOYER PLAN" shall mean a Plan which is a "multiemployer
plan" as defined in SECTION 4001(a)(3) of ERISA.

"NEW SUBORDINATED CREDIT AGREEMENT" shall mean the Subordinated
Term Loan Credit Agreement, dated as of October 20, 1997, by and among the
Borrower, the financial institutions party thereto and The Bank of New York, as
agent, providing Term Loans in an aggregate principal amount not to exceed
$60,000,000 outstanding at any time, as the same may be amended, modified,
restated or supplemented only in accordance with the terms and provisions
hereof.

"NOTICE OF BORROWING" shall have the meaning provided in
SECTION 2.3(a).

"NOTICE OF CONVERSION OR CONTINUATION" shall have the meaning
provided in SECTION 2.9(b).

"OBLIGATIONS" shall mean all obligations, liabilities and
indebtedness of every nature of the Borrower and the Guarantors from time to
time owing to the

<PAGE>

Agent, the Issuing Bank or any Lender under or in connection with this
Agreement or any other Loan Document.

"ORIGINAL AGREEMENT" shall mean the Credit Agreement, dated as of
July 19, 1994, among the Borrower, the Lenders party thereto, and the Agent, as
in effect prior to its amendment and restatement pursuant to the Existing Credit
Agreement.

"OUTSTANDING STANDBY LETTERS OF CREDIT" shall mean at any time the
Standby Letters of Credit outstanding at such time.

"PARTICIPANT" shall have the meaning provided in SECTION 10.4(b).

"PAYMENT DATE" shall mean the last day of each September,
December, March and June of each year.

"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.

"PERMITTED LIENS" shall have the meaning provided in SECTION
7.3(a).

"PERMITTED ORGANIZATIONAL CHANGES" shall mean changes to the
ownership of Subsidiaries and the transfer of assets among the Loan Parties (i)
described in Schedule 1.1(b) and (ii) required to effect the Hatteras Internal
Transfer and the Hatteras Disposition.

"PERSON" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.

"PLAN" shall mean any employee benefit plan as to which the
Borrower or a member of its ERISA Controlled Group has any liability under Title
IV of ERISA (whether or not assessed), the funding requirements of which:

(i) are, as of the date of determination, the
responsibility of the Borrower or a member of its ERISA Controlled Group,
or

(ii) was the responsibility of the Borrower or a member of
its ERISA Controlled Group at any time within the five years preceding
the date of determination and was terminated or the responsibility for
which was transferred to a Person other than the Borrower or a member of
its ERISA Controlled Group.

"PLEDGE AGREEMENT" shall mean the pledge agreement which has been
executed and delivered by the Loan Parties party thereto under and in connection

<PAGE>

with the Original Agreement (as such pledge agreement has been, is being or
hereafter may be amended, modified or supplemented from time to time).

"POS ACQUISITION" shall mean POS Acquisition Corporation, a
Delaware corporation and a wholly owned Subsidiary of the Borrower.

"PROPERTIES" shall mean the real properties, and the
improvements thereon, listed on Schedule 5.21(a)(i).

"PRO RATA SHARE" as to any Lender shall mean a fraction
(expressed as a percentage), the numerator of which shall be the aggregate
amount of such Lender's Commitments and the denominator of which shall be the
Total Commitment.

"PT SUMBERDAYA" shall mean PT Sumberdaya Pacific Corporation,
an Indonesian corporation.

"PURCHASING LENDERS" shall have the meaning provided in
SECTION 10.4(c).

"PYRAMID ACQUISITION AGREEMENT" shall mean the Agreement and Plan
of Reorganization, dated as of June 18, 1999, among the Borrower, POS
Acquisition, Pyramid Operating, and the shareholders of Pyramid Operating.

"PYRAMID ACQUISITION" shall mean the transactions contemplated by
the Pyramid Acquisition Agreement pursuant to which POS Acquisition will
acquire, by merger, all of the Capital Stock of Pyramid Operating.

"PYRAMID CAPITAL EXPENDITURES" shall mean Capital Expenditures (a)
related to the construction of a new boat manufacturing facility in Little
Falls, Minnesota and all equipment and fixtures related thereto; and (b) to
purchase a computerized router to be used in connection with the manufacture of
boat molds (the "Router") at a facility owned by the Pyramid Composites
Manufacturing Limited Partnership in Greenville, Pennsylvania (the "Greenville
Facility") provided (i) the Agent shall have received (1) confirmation that the
Borrower has title to the Router, free and clear of all Liens, except a security
interest in favor of the Agent for the benefit of the Lenders, (2) UCC-1
financing statements and such other documents as the Agent may request to
perfect the security interest of the Agent (for the benefit of the Lenders) in
the Router, (3) confirmation that the Router has been leased to Pyramid Marine
on terms satisfactory to the Agent (for the benefit of the Lenders), (4)
acknowledgment from Pyramid Marine that the Router is subject to the first
priority security interest in favor of the Agent, (5) confirmation that the
Router is not and will not become a fixture under local law, and (6)
acknowledgments and waivers from any landlord of and any party holding a Lien on
or security interest in the Greenville Facility confirming that the Router is
not subject to any claims or liens of such landlord or such secured parties and
(ii) the Capital Expenditures for the Router shall not exceed $1,500,000.

19
<PAGE>

"PYRAMID MARINE" shall mean Pyramid Marine, LLC, a Delaware
limited liability company.

"PYRAMID MANAGEMENT AGREEMENT" shall mean the Management
Agreement, dated June 18, 1999 between the Borrower and Pyramid Operating.

"PYRAMID OPERATING" shall mean Pyramid Operating Systems Inc.,
a Delaware corporation organized by Pyramid Composites Manufacturing Limited
Partnership that owns 50% of Pyramid Marine.

"RECOURSE OBLIGATIONS" shall mean the recourse and repurchase
obligations of the Borrower and any of its Subsidiaries pursuant to a
Repurchase Agreement.

"REDEMPTION DATE" shall mean the date fixed in the Redemption
Notice for the repayment and redemption of the outstanding Subordinated Notes.

"REDEMPTION NOTICE" shall have the meaning provided in SECTION
4.3(f).

"REGULATION D" shall mean Regulation D of the Federal Reserve
Board as from time to time in effect and any successor to all or any portion
thereof.

"REPORTABLE EVENT" has the meaning set forth in SECTION 4043(b)
of ERISA (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations), or is the
occurrence of any of the events described in SECTION 4063(a) of ERISA.

"REPURCHASE AGREEMENT" shall mean that certain Manufacturer's
Repurchase Agreement to which the Borrower and any of its Subsidiaries is a
party with one or more financial institutions in the form heretofore provided
to the Agent, together with any similar agreement with any other vendors
providing transactions substantially similar to the agreement attached as
Annex II to this Agreement.

"REQUIRED LENDERS" shall mean Lenders holding more than 74% of
the principal amount of Loans outstanding or, if no Loans are outstanding,
more than 74% of the Total Commitments.

"RESPONSIBLE OFFICER" of any Person shall mean the chief
executive officer, the chief operating officer, the chief financial officer
or the general counsel of such Person.

20
<PAGE>

"RESTRICTED SUBSIDIARIES" shall mean those Subsidiaries of the
Borrower set forth on Schedule 1.1(c) and each Person required to become a
Guarantor pursuant to SECTION 6.13.

"REVOLVING LOAN COMMITMENT" shall mean at any time, for any
Lender, the amount set forth opposite such Lender's name on Annex I hereto
under the heading "Revolving Loan Commitment," as such amount may be reduced
from time to time pursuant to SECTIONS 2.10, 2.11, OR 2.14 OR ADJUSTED
PURSUANT TO SECTION 10.4(c).

"REVOLVING LOANS" shall have the meaning provided in SECTION
2.1(a).

"REVOLVING NOTES" shall have the meaning provided in SECTION
2.5(a).

"SECURITY AGREEMENT" shall mean the security agreement which
has been executed and delivered by the Loan Parties party thereto under and
in connection with the Original Agreement, together with each other security
agreement required to be executed in accordance with the terms and provisions
of the Original Agreement, the Existing Credit Agreement and this Agreement
(as any such security agreement have been, are being or hereafter may be
amended, modified or supplemented from time to time).

"SECURITY DOCUMENTS" shall mean and include the Security
Agreement, the Pledge Agreement, the Trademark Security Agreement, the
Mortgages and the Assignments of Rents and Leases.

"SOLVENT" as to any Person shall mean that (i) the sum of the
assets of such Person, both at a fair valuation and at present fair salable
value, will exceed its liabilities, including contingent liabilities, (ii)
such Person will have sufficient capital with which to conduct its business
as presently conducted and as proposed to be conducted and (iii) such Person
has not incurred debts, and does not intend to incur debts, beyond its
ability to pay such debts as they mature. For purposes of this definition,
"debt" means any liability on a claim, and "claim" means (x) a right to
payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (y) a right to an equitable
remedy for breach of performance if such breach gives rise to a payment,
whether or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured, or
unsecured. With respect to any such contingent liabilities, such liabilities
shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can
reasonably be expected to become an actual or matured liability.

21
<PAGE>

"STANDBY LC PROVIDERS" shall mean the issuer or issuers of
standby letters of credit in favor of the Subordinated Lenders under with the
New Subordinated Credit Agreement.

"STANDBY LETTER OF CREDIT" shall have the meaning provided in
SECTION 3.1.

"STANDBY LETTER OF CREDIT COMMITMENT" shall mean at any time,
for any Lender, the amount set forth opposite such Lender's name on Annex I
hereto under the heading "Standby Letter of Credit Commitment," as such
amount may be reduced from time to time pursuant to SECTIONS 2.10, 2.11 OR
10.4(c).

"SUBORDINATED AGENT" shall mean The Bank of New York in its
capacity as agent for the Subordinated Lenders under the New Subordinated
Credit Agreement, or any such successor thereto in such capacity under the
terms of the New Subordinated Credit Agreement.

"SUBORDINATED CREDIT FACILITY DOCUMENTS" shall mean the New
Subordinated Credit Agreement, the Subordinated Collateral Documents and all
other documents and agreements in connection with the Subordinated
Refinancing Transaction.

"SUBORDINATED CREDIT LETTERS OF CREDIT" shall mean those
Standby Letters of Credit issued by the Standby LC Providers for the benefit
of the Subordinated Lenders.

"SUBORDINATED COLLATERAL" shall mean the collateral securing
the obligations under the New Subordinated Credit Agreement pursuant to the
terms of the Subordinated Collateral Documents.

"SUBORDINATED COLLATERAL DOCUMENTS" shall mean the agreements
and documents pursuant to which a lien and security interest in favor or for
the benefit of the Subordinated Lenders is granted.

"SUBORDINATED DEBT" shall mean the Indebtedness (a) in the
principal amount not to exceed $60,000,000 in the aggregate incurred pursuant
to the New Subordinated Credit Agreement, (b) under the Subordinated Notes
issued pursuant to the Subordinated Debt Financing Documents, (c) under the
Subordinated Demand Note and (d) under the Subordinated Shareholder Note.

"SUBORDINATED DEBT FINANCING DOCUMENTS" shall mean the
Indenture, dated as of July 1, 1994, among the Borrower, the parties listed
as "Guarantors" therein and First Trust National Association, as Trustee, and
the Purchase Agreement, dated July 12, 1994, among Wertheim Schroder & Co.
Incorporated, the

22
<PAGE>

Borrower and the "Guarantors" as defined therein together with the New
Subordinated Credit Agreement and the Subordinated Collateral Documents.

"SUBORDINATED DEMAND NOTE" shall mean the $25,000,000 demand
note dated March 31, 1994 payable to Irwin L. Jacobs or any replacement
thereof made in accordance with the terms of the applicable Subordination
Agreement.

"SUBORDINATED LENDERS" shall mean the financial institutions
party to the New Subordinated Credit Agreement.

"SUBORDINATED LOANS" shall mean the loans made to the Borrower
pursuant to the New Subordinated Credit Agreement in an aggregate principal
amount not to exceed $60,000,000 outstanding at any time.

"SUBORDINATED NOTES" shall mean the 13.5% Series A Senior
Subordinated Notes of the Borrower due 2001.

"SUBORDINATED SHAREHOLDER NOTE" shall mean the $4,104,422.12
shareholder note dated November 24, 1993 payable to Irwin L. Jacobs.

"SUBORDINATION AGREEMENTS" shall mean those certain
Subordination Agreements, each dated as of the Effective Date, between Irwin
L. Jacobs and The Bank of New York, as agent for the Lenders, as amended,
modified or supplemented in accordance with the terms hereof.

"SUBSIDIARY" of any Person shall mean and include (i) any
corporation 50% or more of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person, directly or
indirectly through Subsidiaries, is either a general partner or has a 50% or
more equity interest at the time.

"TAXES" shall have the meaning provided in SECTION 2.20.

"TERMINATION EVENT" shall mean (i) a Reportable Event with
respect to an ERISA Plan, or (ii) the initiation of any action by the
Borrower, any member of the Borrower's ERISA Controlled Group or any ERISA
Plan fiduciary to terminate an ERISA Plan or the treatment of an amendment to
an ERISA Plan as a termination under ERISA, or (iii) the institution of
proceedings by the PBGC under SECTION 4042 of ERISA to terminate an ERISA
Plan or to appoint a trustee to administer any ERISA Plan.

23
<PAGE>

"TERM LOANS" shall have the meaning provided in SECTION 2.2.

"TERM LOAN ADVANCE" shall have the meaning provided in SECTION
2.2.

"TERM LOAN BORROWING DATE" shall mean a date on which the
Borrower has borrowed a Term Loan Advance as provided by Section 2.3.

"TERM LOAN BORROWING PERIOD" shall have the meaning provided in
SECTION 2.2.

"TERM LOAN COMMITMENT" shall mean at any time, for any Lender,
the amount set forth opposite such Lender's name on Annex I hereto under the
heading "Term Loan Commitment", as such amount may be reduced from time to
time pursuant to SECTIONS 2.10, 2.14 OR 10.4(c).

"TERM LOAN MATURITY DATE" shall mean June 30, 2002.

"TERM NOTE" shall have the meaning provided in SECTION 2.2.

"TITLE COMPANY" shall have the meaning provided in SECTION 4.1.

"TFC" shall mean Textron Financial Corporation.

"TOTAL COMMITMENT" shall mean, at any time, the sum of the
Commitments of all of the Lenders at such time.

"TOTAL REVOLVING LOAN COMMITMENT" shall have the meaning
provided in SECTION 2.1(a).

"TOTAL TERM LOAN COMMITMENT" shall have the meaning provided in
SECTION 2.2(a).

"TOTAL STANDBY LETTER OF CREDIT COMMITMENT" shall mean the sum
of the Standby Letter of Credit Commitments of all Lenders, which on the
Effective Date shall be $21,000,000.00.

"TRADEMARK SECURITY AGREEMENT" shall mean that certain
trademark security agreement which was entered into in connection with the
Original Agreement, between the Loan Parties party thereto and the Collateral
Agent, together with each other trademark security agreement required to be
executed in accordance with the terms and provisions of the Original
Agreement, the Existing Credit Agreement and this Agreement (as any such
trademark security agreement have been, are being or hereafter may be
amended, modified or supplemented from time to time).

24
<PAGE>

"TRANSACTION DOCUMENTS" shall mean the Loan Documents and the
Subordinated Debt Financing Documents.

"TRANSACTIONS" shall mean each of the transactions contemplated
by the Loan Documents including the payment of the Subordinated Demand Note
and the repurchase and redemption of the outstanding Subordinated Notes.

"TRANSFEREE" shall have the meaning provided in SECTION 10.4(d)

"TRANSFER SUPPLEMENT" shall have the meaning provided in
SECTION 10.4(c).

"TYPE" shall mean any type of Revolving Loan or Term Loans
determined with respect to the interest option applicable thereto, i.e., a
Base Rate Loan or a Eurodollar Loan.

"UNFUNDED BENEFIT LIABILITIES" means with respect to any ERISA
Plan at any time, the amount (if any) by which (i) the present value of all
benefit liabilities under such Plan as defined in SECTION 4001(a)(16) of
ERISA, exceeds (ii) the fair market value of all assets of such Plan
allocable to such benefits, all determined as of the then most recent
valuation date for such Plan (on the basis of reasonable assumptions used by
the actuary for such Plan for funding purposes in the most recent actuarial
valuation with respect to such Plan.

"YEAR 2000 ISSUE" means the failure of computer software,
hardware and firmware systems and equipment containing embedded computer
chips to properly receive, transmit, process, manipulate, store, retrieve,
re-transmit or in any other way utilize data and information due to the
occurrence of the year 2000.

SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES.

SECTION 2.1. REVOLVING LOANS. (a) Subject to and upon the terms and
conditions herein set forth, each Lender severally and not jointly agrees, at
any time and from time to time on and after the Effective Date and prior to the
Final Maturity Date, to make revolving loans (collectively, "REVOLVING LOANS")
to the Borrower, which Revolving Loans shall not exceed in aggregate principal
amount at any time outstanding the Revolving Loan Commitment of such Lender at
such time; PROVIDED, HOWEVER, that such Lender shall not have any obligation to
make any Revolving Loan if the sum of (x) the aggregate principal amount of
outstanding Revolving Loans, before and after such Revolving Loan is made, (y)
the aggregate principal amount of the outstanding Term Loans and (z) the LC
Exposure exceeds the Borrowing Base as then in effect. The sum of the Revolving
Loan Commitments of all of the Lenders (the "TOTAL REVOLVING LOAN COMMITMENT")
on the Effective Date is $29,000,000.00. On the Final Maturity Date the Total
Revolving Loan Commitment shall terminate, expire

25
<PAGE>

and be reduced to zero. The Revolving Loans of each Lender may be maintained
at the option of the Borrower as a Base Rate Loan or a Eurodollar Loan, in
accordance with the provisions hereof.

(b) Revolving Loans may be voluntarily prepaid pursuant to
SECTION 2.12, and, subject to the other provisions of this Agreement, any
amounts so prepaid may be reborrowed. Each Lender's Revolving Loan Commitment
shall expire, and each Revolving Loan shall mature on, the Final Maturity
Date, without further action on the part of the Lenders or the Agent.

(c) Each Borrowing of Revolving Loans shall be in the
aggregate minimum amount of $1,000,000 or any integral multiple of $1,000,000
in excess thereof.

SECTION 2.2. TERM LOAN. (a) Subject to and upon the terms and
conditions hereof, each Lender severally and not jointly agrees to make term
loans (each a "TERM LOANS ADVANCE" and collectively the "TERM LOANS") to the
Borrower in an aggregate principal amount not to exceed such Lender's Term
Loans Commitment; PROVIDED, HOWEVER, that such Lender shall not have any
obligation to make any Term Loan Advances if the sum of (x) the aggregate
principal amount of the outstanding Term Loans, before and after such Term
Loan Advance is made, (y) the aggregate principal amount of outstanding
Revolving Loans and (z) the LC Exposure exceeds the Borrowing Base then in
effect. The sum of the Term Loan Commitments of all of the Lenders is
$45,000,000 (the "TOTAL TERM LOAN COMMITMENT"). The Term Loan Advances will
be available to be borrowed on any Business Day during the period from the
Effective Date to and including the Redemption Date but in no event later
than August 31, 1999 (such period, the "TERM LOAN BORROWING PERIOD"),
provided that in no event shall there be more than two (2) borrowings of Term
Loan Advances. Each Borrowing of Term Loan Advances shall be in the aggregate
minimum amount of $1,000,000 or any integral multiple of $1,000,000 in excess
thereof.

(b) The Term Loans shall be payable in quarterly
installments in the following amounts on the following dates:

<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
December 31, 1999 $2,000,000
March 31, 2000 $2,000,000
June 30, 2000 $2,000,000
September 30, 2000 $2,000,000
December 31, 2000 $2,000,000
March 31, 2001 $2,000,000
June 30, 2001 $2,000,000
September 30, 2001 $7,750,000
December 31, 2001 $7,750,000
March 31, 2002 $7,750,000
</TABLE>

26
<PAGE>

together with accrued and unpaid interest in accordance with SECTION 2.6(d),
with the entire unpaid principal amount together with all accrued and unpaid
interest being due and payable on the Term Loan Maturity Date.

(c) The Borrower's obligation to pay the principal of, and
interest on, each Lender's Term Loans will be evidenced by a promissory note
(collectively, the "TERM NOTES") duly executed and delivered by the Borrower
in the form of Exhibit 2.2 hereto in a principal amount equal to such
Lender's Term Loans, with blanks appropriately completed in conformity
herewith. Each Term Note issued to a Lender shall (w) bear interest as
provided in SECTION 2.6, (x) be payable to the order of such Lender, (y) be
dated the initial Term Loan Borrowing Date and (z) mature on the Term Loan
Maturity Date.

Each Lender is hereby authorized, at its option, either (i) to
endorse on the schedule attached to its Term Note (or on a continuation of
such schedule attached to such Term Note and made a part thereof) an
appropriate notation evidencing the date and amount of each principal and
interest payment in respect thereof, or (ii) to record such payments in its
books and records; PROVIDED that the failure of any Lender to make such
notation or any error therein shall not affect the obligation of the Borrower
to repay the Term Loans made by such Lender in accordance with the terms of
this Agreement and the other Loan Documents. Such schedule or such books and
records, as the case may be, shall constitute prima facie evidence of the
accuracy of the information contained therein.

SECTION 2.3. NOTICE OF BORROWING. (a) Whenever the Borrower desires
to borrow Loans hereunder, it shall give the Agent at the Agent's Office
prior to 12:00 noon, New York City time, on the day of each requested Base
Rate Loan prior telex, telecopy or telephonic notice (promptly confirmed in
writing) of each Base Rate Loan, and at least three Business Days' prior
telex, telecopy or telephonic notice (promptly confirmed in writing) of each
Eurodollar Loan to be made hereunder. Each such notice (a "NOTICE OF
BORROWING") shall be irrevocable and shall specify (i) the aggregate
principal amount of the requested Loans, (ii) the date of Borrowing (which
shall be a Business Day), and (iii) whether such Loans shall consist of Base
Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest
Period to be applicable thereto (provided, that no Eurodollar Loans may be
requested or made when any Default or Event of Default has occurred and is
continuing).

(b) Promptly after receipt of a Notice of Borrowing, the
Agent shall provide each Lender with a copy thereof and inform each Lender as
to its Pro Rata Share of the Loans requested thereunder.

SECTION 2.4. DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M., New
York City time, on the date specified in each Notice of Borrowing, each
Lender will make available its Pro Rata Share of the Loans requested to be
made on such date, in U.S. dollars and immediately available funds, at the
Agent's office. After the Agent's receipt of

27
<PAGE>

the proceeds of such Loans, the Agent will make available to the Borrower by
depositing in the Borrower's account at the Agent's Office the aggregate of
the amounts so made available in the type of funds actually received. After
the end of the Term Loan Borrowing Period, the balance, if any, of the Term
Loan Commitment of each Lender shall be reduced to zero.

(b) Unless the Agent shall have been notified by any Lender
prior to the date of a Borrowing that such Lender does not intend to make
available to the Agent its portion of the Loans to be made on such date, the
Agent may assume that such Lender has made such amount available to the Agent
on such date and the Agent in its sole discretion may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such
Lender and the Agent has made such amount available to the Borrower, the
Agent shall be entitled to recover such corresponding amount on demand from
such Lender. If such Lender does not pay such corresponding amount forthwith
upon the Agent's demand therefor, the Agent shall promptly notify the
Borrower and the Borrower shall immediately repay such corresponding amount
to the Agent. The Agent shall also be entitled to recover from such Lender or
the Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding amount
is recovered by the Agent, at a rate per annum equal to (i) in the case of
the Borrower, the then applicable rate of interest, calculated in accordance
with SECTION 2.6, for the respective Loans and (ii) in the case of such
Lender, at the Federal Funds Rate until the day three (3) Business Days from
such date and thereafter at the then applicable rate of interest, calculated
in accordance with SECTION 2.6, for the respective Loans. Nothing herein
shall be deemed to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights which the Borrower may have
against any Lender as a result of any default by such Lender hereunder.
Notwithstanding anything contained herein or in any other Loan Document to
the contrary, the Agent may apply all funds and proceeds of Collateral
available for the payment of any Obligations first to repay any amount owing
by any Lender to the Agent as a result of such Lender's failure to fund its
Loans hereunder.

SECTION 2.5. REVOLVING NOTES. (a) The Borrower's obligation to pay
the principal of, and interest on, each Lender's Revolving Loans is evidenced
by a promissory note (collectively, the "REVOLVING NOTES") duly executed and
delivered by the Borrower in the form of Exhibit 2.5 hereto in a principal
amount equal to such Lender's Revolving Loan Commitment, with blanks
appropriately completed in conformity herewith. Each Revolving Note issued to
a Lender shall (w) bear interest as provided in SECTIONS 2.6 (x) be payable
to the order of such Lender, (y) be dated the Effective Date and (z) mature
on the Final Maturity Date.

(b) Each Lender is hereby authorized, at its option, either
(i) to endorse on the schedule attached to its Revolving Note (or on a
continuation of such

28
<PAGE>

schedule attached to such Revolving Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Revolving Loan
evidenced thereby and the date and amount of each principal and interest
payment in respect thereof, or (ii) to record such Revolving Loans and such
payments in its books and records; PROVIDED that the failure of any Lender to
make such notation or any error therein shall not affect the obligation of
the Borrower to repay the Revolving Loans made by such Lender in accordance
with the terms of this Agreement and the other Loan Documents. Such schedule
or such books and records, as the case may be, shall constitute prima facie
evidence of the accuracy of the information contained therein.

SECTION 2.6. INTEREST. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan from the date
of the making of such Loan until such Loan shall be paid in full at a rate
per annum which shall be equal to the sum of the Alternate Base Rate in
effect from time to time plus the Margin Percentage, such rate to change as
and when the Alternate Base Rate changes, such interest to be computed (i) if
calculated by reference to the Federal Funds Rate, on the basis of a 360-day
year, and (ii) if calculated by reference to the Prime Rate, on the basis of
a 365- or 366-day year, as applicable.

(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan from the date of the making
of such Eurodollar Loan until such Eurodollar Loan shall be paid in full at a
rate per annum which shall be equal to the sum of the relevant Eurodollar
Rate plus the Margin Percentage, such interest to be computed on the basis of
a 360-day year.

(c) In the event that, and for so long as, any Event of
Default shall have occurred and be continuing, the outstanding principal
amount of all Loans and, to the extent permitted by law, overdue interest in
respect of all Loans, shall bear interest at a rate per annum (the "DEFAULT
RATE") equal to the sum of two percent (2%) plus the interest rate otherwise
applicable hereunder to such principal amount in effect from time to time.

(d) Interest on each Loan shall accrue from and including
the date of the Borrowing thereof to but excluding the date of any repayment
thereof (provided that any Revolving Loan borrowed and repaid on the same day
shall accrue one day's interest) and shall be payable (i) in respect of each
Base Rate Loan, quarterly in arrears on each Payment Date, (ii) in respect of
each Eurodollar Loan, on the last day of each Interest Period applicable to
such Loan and, in the case of an Interest Period of six months, on the date
occurring three months from the first day of such Interest Period and on the
last day of such Interest Period, and (iii) in the case of all Loans, on any
prepayment or conversion (on the amount prepaid or converted), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.

(e) The Agent shall, upon determining the Eurodollar Rate
for any Interest Period, promptly notify the Borrower and the Lenders
thereof.

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<PAGE>

SECTION 2.7. INTEREST PERIODS. (a) The Borrower shall, in each Notice
of Borrowing or Notice of Conversion or Continuation in respect of the making
of, conversion into or continuation of a Eurodollar Loan, select the interest
period (each an "INTEREST PERIOD") applicable to such Eurodollar Loan, which
Interest Period shall, at the option of the Borrower, be either a one-month,
two-month, three-month or six-month period, provided that:

(i) the initial Interest Period for any Eurodollar Loan
shall commence on the date of the making of such Eurodollar Loan
(including the date of any conversion from a Base Rate Loan) and each
Interest Period occurring thereafter in respect of such Eurodollar Loan
shall commence on the date on which the next preceding Interest Period
ends;

(ii) if any Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day; PROVIDED, HOWEVER, that if any Interest Period
would otherwise end on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall end on the next preceding Business Day;

(iii) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;

(iv) no Interest Period in respect of the Term Loans (or
portion thereof) the principal of which is required to be repaid prior to
the Term Loan Maturity Date shall extend beyond the date on which such
principal is required to be repaid; and

(v) no Interest Period in respect of any Revolving Loan
shall extend beyond the Final Maturity Date and no Interest Period in
respect of the Term Loans shall extend beyond the Term Loan Maturity
Date.

(b) If upon the last day of any Interest Period, the
Borrower has failed to elect a new Interest Period to be applicable to the
respective Eurodollar Loan as provided above, the Borrower shall be deemed to
have elected to convert such Eurodollar Loans into Base Rate Loans effective
as of the last day of such current Interest Period.

SECTION 2.8. MINIMUM AMOUNT OF EURODOLLAR LOANS. All borrowings,
conversions, continuations, payments, prepayments and selection of Interest
Periods hereunder shall be made or selected so that, after giving effect
thereto, (i) the aggregate principal amount of any Borrowing comprised of
Eurodollar Loans shall not be less than $3,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (ii) there shall be no more than 6
Borrowings comprised of Eurodollar Loans outstanding at any time.

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<PAGE>

SECTION 2.9. CONVERSION OR CONTINUATION. (a) Subject to the other
provisions hereof, the Borrower shall have the option (i) to convert at any
time all or any part of outstanding Base Rate Loans which comprise part of
the same Borrowing to Eurodollar Loans, (ii) to convert all or any part of
outstanding Eurodollar Loans which comprise part of the same Borrowing to
Base Rate Loans, on the last day of the Interest Period applicable thereto,
or (iii) to continue all or any part of outstanding Eurodollar Loans which
comprise part of the same Borrowing as Eurodollar Loans for an additional
Interest Period, on the last day of the Interest Period applicable thereto;
PROVIDED that no Loan may be continued as, or converted into, a Eurodollar
Loan when any Default or Event of Default has occurred and is continuing.

(b) In order to elect to convert or continue a Loan under
this SECTION 2.9, the Borrower shall deliver an irrevocable notice thereof (a
"NOTICE OF CONVERSION OR CONTINUATION)" to the Agent no later than 12:00
noon, New York City time, (i) at least one Business Day in advance of the
proposed conversion date in the case of a conversion to a Base Rate Loan and
(ii) at least three Business Days in advance of the proposed conversion or
continuation date in the case of a conversion to, or a continuation of, a
Eurodollar Loan. A Notice of Conversion or Continuation shall specify (w) the
requested conversion or continuation date (which shall be a Business Day),
(x) the amount of the Loan to be converted or continued, (y) whether a
conversion or continuation is requested, and (z) in the case of a conversion
to, or a continuation of, a Eurodollar Loan, the requested Interest Period.
Promptly after receipt of a Notice of Conversion or Continuation under this
Section 2.9, the Agent shall provide each Lender with a copy thereof.

SECTION 2.10. VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three
Business Days' prior irrevocable written notice (or telephonic notice
promptly confirmed in writing) to the Agent (which notice the Agent shall
promptly transmit to each of the Lenders), the Borrower shall have the right,
without premium or penalty, to permanently reduce each Lender's Pro Rata
Share of all or part of the unused Total Revolving Loan Commitment, unused
Total Term Loan Commitment or the unused Total Standby Letter of Credit
Commitment, provided that any such partial reduction shall be in the minimum
aggregate amount of $1,000,000 or any integral multiple of $1,000,000 in
excess thereof.

SECTION 2.11. MANDATORY REDUCTIONS. The Total Revolving Loan
Commitment or Revolving Loans, as the case may be, shall be reduced as
follows:

(a) For a period of 30 consecutive calendar days during the
period between April 1 through June 30 of each year, the outstanding amounts
of Revolving Loans shall be reduced to, and shall not at any time during such
30 day period exceed the following amounts during the following periods:

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<PAGE>

<TABLE>
<CAPTION>
PERIOD AMOUNT
<S> <C>
April 1 to June 30, 2000 $15,000,000

April 1 to June 30, 2001 $10,000,000

April 1 to June 30, 2002 $10,000,000
</TABLE>

The obligations of the Borrower under the preceding sentence are in
addition to, and shall not in any manner limit, any other obligation of the
Borrower hereunder to prepay or repay Loans.

(b) [Intentionally Omitted - 1999].

(c) The Total Revolving Loan Commitment shall be reduced
permanently by an amount equal to proceeds of any payments on casualty
insurance or condemnation awards in respect of any of the assets of the
Borrower or any of its Subsidiaries; PROVIDED that so long as no Default or
Event of Default has occurred and is continuing, no such mandatory reduction
shall be required if (i) the aggregate amount of insurance or condemnation
proceeds received by the Borrower and its Subsidiaries in connection with the
event that resulted in the loss, damage, destruction or taking of such assets
is less than $1,000,000 or (ii) the Agent receives written notice in form and
substance satisfactory to it within 60 days of receipt of any such proceeds
from the Borrower describing how such proceeds are to be promptly reinvested
in equipment, vehicles or other assets used in the Borrower's principal lines
of business.

(d) The Total Revolving Loan Commitment shall be reduced at
any time the amount of aggregate proceeds (cash or otherwise) of sales of
assets made pursuant to SECTIONS 7.5(b) and (c), net of reasonable,
documented expenses and withholding taxes arising from such sale (PROVIDED
that any amounts subsequently recovered, or any amounts received as a result
of credits earned, with respect to such withholding taxes shall be additional
proceeds from such sale at the time such amount is received by a Loan Party),
exceeds $7,500,000, permanently by an amount equal to such excess amount
(less the amount of any reductions of the Revolving Loan Commitments
previously made pursuant to this clause (d)); PROVIDED that (i) no such
reduction shall be required pursuant to this clause (d) unless such reduction
would be of at least $1,000,000, (ii) sales of assets listed on Schedule
7.5(c) sold pursuant to Section 7.5(c) shall not be included for the purposes
of this subsection (d) to the extent, and only to the extent, the aggregate
amount of proceeds pursuant to such sales is equal to or less than $9,000,000
and (iii) [Intentionally Omitted 1999].

In the event that, after giving effect to the reductions in the
Total Revolving Loan Commitment set forth in SECTIONS 2.11(c) OR (d), the
Total Revolving Loan Commitment has been reduced to zero, then any excess
amounts shall be applied to the permanent reduction of the Total Standby
Letter of Credit Commitment.

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<PAGE>

SECTION 2.12. VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay the Loans in whole or in part from time to time on the following
terms and conditions: (a) the Borrower shall give the Agent written notice
(or telephonic notice promptly confirmed in writing), which notice shall be
irrevocable, of its intent to prepay the Loans at least three Business Days
prior to a prepayment of Eurodollar Loans and at least one Business Day prior
to a prepayment of Base Rate Loans, which notice shall specify the amount of
such prepayment and what Types of Loans are to be prepaid and, in the case of
Eurodollar Loans, the specific Borrowing(s) pursuant to which such Eurodollar
Loan was made, and which notice the Agent shall promptly transmit to each of
the Lenders and (b) each prepayment shall be in an aggregate principal amount
of $1,000,000 or any integral multiple of $1,000,000 in excess thereof. All
prepayments shall be accompanied by accrued interest on the principal amount
being prepaid to but excluding the day of payment. Notwithstanding anything
to the contrary set forth herein, Term Loans, once repaid, may not be
reborrowed.

SECTION 2.13. Mandatory Prepayments.

(a) [Intentionally Omitted].

(b) On each day on which the Total Revolving Loan Commitment
or Total Standby Letter of Credit Commitment, as the case may be, is reduced
pursuant to SECTION 2.11, the Borrower shall prepay the Revolving Loans and,
in the case of reductions in the Total Standby Letter of Credit Commitment,
cash collateralize outstanding Standby Letters of Credit, to the extent, if
any, that such aggregate outstanding principal amount exceeds the reduced
Total Revolving Loan Commitment or Total Standby Letter of Credit Commitment,
as the case may be.

(c) On each day that the sum of (x) the aggregate principal
amount of outstanding Loans and (y) the LC Exposure exceeds the Borrowing
Base as then in effect, the Borrower shall immediately repay its then
outstanding Loans in such amount as may be necessary to eliminate such
excess.

(d) On each date after the Effective Date on which the
Borrower or any of its Subsidiaries receives any proceeds from any capital
contribution or from any Equity Issuance, in each case, utilizing or
facilitated by one or more underwriters, placement agents or similar Persons,
the Borrower shall prepay the outstanding Loans in an amount equal to 50% of
such proceeds (net of any underwriting discounts or commissions and any other
reasonable costs or expenses directly attributable to such incurrence or
issuance), in accordance with the provisions of SECTION 2.14.

(e) On each day after the Effective Date on which the
Borrower or any of its Subsidiaries receives any proceeds from any sale of
any assets, the Hatteras Disposition, the sale and leaseback of any asset or
the mortgaging of any real property other than pursuant to a Mortgage by the
Borrower or any of its Subsidiaries permitted by the terms of this Agreement
or a refinancing thereof permitted by SECTION 7.2(b), or a

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<PAGE>

sale and leaseback transaction permitted by SECTION 7.14, the Borrower shall
prepay the Loans in an amount equal to 100% of such proceeds (net of
reasonable costs or expenses directly attributable to such transaction), in
accordance with the provisions of SECTION 2.14. All prepayments shall be
accompanied by accrued interest on the principal amount being prepaid to but
excluding the day of payment.

SECTION 2.14. APPLICATION OF PREPAYMENTS. All prepayments of the Loans
required by SECTION 2.13 (other than subparagraph (c) thereof) shall be
applied FIRST, to all fees and expenses then due and payable to the Agent or
the Lenders pursuant to the terms of this Agreement and the other Loan
Documents, SECOND, to any interest then due and payable on the Term Loans,
THIRD, to prepay the Term Loans until the Term Loans shall have been repaid
in full, together with accrued and unpaid interest thereon, FOURTH, to any
interest then due and payable on the Revolving Loans, FIFTH, to prepay the
Revolving Loans until such Revolving Loans shall have been repaid in full,
together with accrued and unpaid interest thereon, and SIXTH, to all other
outstanding Obligations then due and payable. Simultaneously with any
prepayment of the principal amount of the Term Loans pursuant to the
preceding sentence, each Lender's Term Loan Commitment shall be permanently
reduced by such Lender's Pro Rata Share of such prepayment. Prepayments of
the Revolving Loans made pursuant to this Section shall not affect any
Lender's Revolving Loan Commitment. All prepayments of the Term Loans shall
be applied to the installment thereof due on the Term Loan Maturity Date and
then to the remaining installments thereof in inverse order of maturity.

SECTION 2.15. METHOD AND PLACE OF PAYMENT. (a) Except as otherwise
specifically provided herein, all payments and prepayments under this
Agreement and the Revolving Notes and the Term Notes shall be made to the
Agent for the account of the Lenders entitled thereto not later than 12:00
noon, New York City time, on the date when due and shall be made in lawful
money of the United States of America in immediately available funds at the
Agent's office, and any funds received by the Agent after such time shall,
for all purposes hereof (including the following sentence), be deemed to have
been paid on the next succeeding Business Day. Except as otherwise
specifically provided herein, the Agent shall thereafter cause to be
distributed on the date of receipt thereof to each Lender in like funds its
Pro Rata Share of payments so received.

(b) Whenever any payment to be made hereunder or under any
Revolving Note or any Term Note shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable at the applicable rate during such extension.

(c) All payments made by the Borrower hereunder and under
the other Loan Documents shall be made irrespective of, and without any
reduction for, any setoff or counterclaims.

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<PAGE>

SECTION 2.16. FEES.(a) The Borrower agrees to pay the fees in the
amounts and on the dates specified in the separate fee letters between the
Borrower and the Agent and the Borrower and each of the other Lenders.

(b) The Borrower agrees to pay to the Agent for the account
of each Lender a commitment fee (the "Commitment Fee"), computed at the per
annum rate set forth in the definition of Margin Percentage, in each case on
the basis of a 360-day year for the actual number of days elapsed, payable on
the average daily unused portion of the Revolving Loan Commitment, the Term
Loan Commitment and the Standby Letter of Credit Commitment, from and
including the Effective Date to the Final Maturity Date, payable quarterly in
arrears on each Payment Date and on the Final Maturity Date or such earlier
date, if any, on which the Revolving Loan Commitment, the Term Loan
Commitment or the Standby Letter of Credit Commitment shall be terminated in
accordance with the terms hereof.

(c) The Borrower agrees to pay to the Agent for the account
of each Lender a Standby Letter of Credit fee computed at the per annum rate
of the Margin Percentage applicable to Eurodollar Loans on the daily
aggregate LC Exposure, payable quarterly in arrears on each Payment Date and
upon termination of the Standby Letter of Credit Commitment.

(d) In addition to the Commitment Fee and such Standby
Letter of Credit fee referred to in this Section 2.16, the Borrower (i)
acknowledges that certain commitment fees and fees with respect to Standby
Letters of Credit issued under the Existing Credit Agreement and payable, in
each case, pursuant to Section 2.15 of the Existing Credit Agreement have
accrued through the Effective Date and agrees to pay such fees on the Payment
Date next succeeding the Effective Date and (ii) agrees to pay to the Issuing
Bank its customary fees for the issuance, amendment and processing of the
Standby Letters of Credit.

(e) The fees described in subsections (a) through (d) of
this Section 2.16 and any other fees payable under this Agreement are
collectively referred to herein as the "Fees."

SECTION 2.17. INTEREST RATE UNASCERTAINABLE, INCREASED COSTS,
ILLEGALITY. (a) In the event that the Agent, in the case of clause (i) below,
or any Lender, in the case of clauses (ii) and (iii) below, shall have
determined (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto):

(i) on any date for determining the Eurodollar Rate for
any Interest Period, that by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of the Eurodollar Rate; or

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<PAGE>

(ii) at any time, that the relevant Eurodollar Rate
applicable to any of its Eurodollar Loans shall not represent the
effective pricing to such Lender for funding or maintaining a Eurodollar
Loan, or such Lender shall incur increased costs or reductions in the
amounts received or receivable hereunder in respect of any Eurodollar
Loan (other than by reason of a tax, or an increased tax, on the net
income of such Lender), in any such case because of (x) any change since
the date of this Agreement in any applicable law or governmental rule,
regulation, guideline or order or any interpretation thereof and
including the introduction of any new law or governmental rule,
regulation, guideline or order (such as for example but not limited to a
change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate), whether or not having the force of
law and whether or not failure to comply therewith would be unlawful,
and/or (y) other circumstances affecting such Lender or the interbank
Eurodollar market or the position of such Lender in such market; or

(iii) at any time, that the making or continuance by it of
any Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any law or governmental rule, regulation, guideline or
order (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) or has become impracticable as a
result of a contingency occurring after the date of this Agreement which
materially and adversely affects the interbank Eurodollar market;

then, and in any such event, the Agent or such Lender shall, promptly after
making such determination, give notice (by telephone promptly confirmed in
writing) to the Borrower and (if applicable) the Agent of such determination
(which notice the Agent shall promptly transmit to each of the other
Lenders). Thereafter (x) in the case of clause (i) above, the Borrower's
right to request Eurodollar Loans shall be suspended, and any Notice of
Borrowing or Notice of Conversion or Continuation given by the Borrower with
respect to any Borrowing of Eurodollar Loans which has not yet been made
shall be deemed cancelled and rescinded by the Borrower, (y) in the case of
clause (ii) above, the Borrower shall pay to such Lender, upon such Lender's
delivery of written demand therefor to the Borrower with a copy to the Agent,
such additional amounts (in the form of an increased rate of interest, or a
different method of calculating interest, or otherwise, as such Lender in its
sole discretion exercised in a professional manner shall determine) as shall
be required to compensate such Lender for such increased costs or reduction
in amounts received or receivable hereunder and (z) in the case of clause
(iii) above, the Borrower shall take one of the actions specified in clause
(b) below as promptly as possible and, in any event, within the time period
required by law. The written demand provided for in clause (y) shall, absent
manifest error, be final and conclusive and binding upon all of the parties
hereto.

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<PAGE>

(b) In the case of any Eurodollar Loan or requested
Eurodollar Loan affected by the circumstances described in clause (a)(ii)
above, the Borrower may, and in the case of any Eurodollar Loan affected by
the circumstances described in clause (a)(iii) above the Borrower shall,
either (i) if any such Eurodollar Loan has not yet been made but is then the
subject of a Notice of Borrowing or a Notice of Conversion or Continuation,
be deemed to be a request for a Base Rate Loan with respect to the affected
Lender, or (ii) if any such Eurodollar Loan is then outstanding, require the
affected Lender to convert each such Eurodollar Loan into a Base Rate Loan at
the end of the applicable Interest Period or such earlier time as may be
required by law, in each case by giving the Agent notice (by telephone
promptly confirmed in writing) thereof on the Business Day that the Borrower
was notified by the Lender pursuant to clause (a) above; PROVIDED, HOWEVER,
that all Lenders whose Eurodollar Loans are affected by the circumstances
described in clause (a) above shall be treated in the same manner under this
clause (b).

(c) In the event that the Agent determines at any time
following its giving of notice based on the conditions described in clause
(a)(i) above that none of such conditions exist, the Agent shall promptly
give notice thereof to the Borrower and the Lenders, whereupon the Borrower's
right to request Eurodollar Loans from the Lenders and the Lenders'
obligation to make Eurodollar Loans shall be restored.

(d) In the event that a Lender determines at any time
following its giving of a notice based on the conditions described in clause
(a)(iii) above that none of such conditions exist, such Lender shall promptly
give notice thereof to the Borrower and the Agent, whereupon the Borrower's
right to request Eurodollar Loans from such Lender and such Lender's
obligation to make Eurodollar Loans shall be restored.

SECTION 2.18. FUNDING LOSSES. The Borrower shall compensate each
Lender, upon such Lender's delivery of a written demand therefor to the
Borrower, with a copy to the Agent (which demand shall, absent manifest
error, be final and conclusive and binding upon all of the parties hereto),
for all reasonable losses, expenses and liabilities (including, without
limitation, any loss, expense or liability incurred by such Lender in
connection with the liquidation or reemployment of deposits or funds required
by it to make or carry its Eurodollar Loans) that such Lender sustains or may
sustain: (i) if for any reason (other than a default by such Lender) a
Borrowing of, or conversion from or into, or a continuation of, Eurodollar
Loans does not occur on a date specified therefor in a Notice of Borrowing or
Notice of Conversion or Continuation (whether or not rescinded, cancelled or
withdrawn or deemed rescinded, cancelled or withdrawn, pursuant to SECTION
2.17(a) OR 2.17(b) or otherwise), (ii) if any repayment (including, without
limitation, payment after acceleration) or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of the Interest
Period applicable thereto, (iii)if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by
the Borrower, or (iv) as a consequence of any default by the Borrower in
repaying its Eurodollar Loans or any other amounts owing hereunder in

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<PAGE>

respect of its Eurodollar Loans when required by the terms of this Agreement.
Calculation of all amounts payable to a Lender under this SECTION 2.18 shall
be made on the assumption that such Lender has funded its relevant Eurodollar
Loan through the purchase of a Eurodollar deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan with
a maturity equivalent to the Interest Period applicable to such Eurodollar
Loan, and through the transfer of such Eurodollar deposit from an offshore
office of such Lender to a domestic office of such Lender in the United
States of America, provided that each Lender may fund its Eurodollar Loans in
any manner that it in its sole discretion chooses and the foregoing
assumption shall only be made in order to calculate amounts payable under
this SECTION 2.18. Such compensation may include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a
failure to borrow, convert or continue, the interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein over (ii) the amount of interest
(as reasonably determined by such Lender) which would have accrued to such
Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank eurodollar market.

SECTION 2.19. INCREASED CAPITAL. If the Issuing Bank or any Lender
shall have determined that compliance with any applicable law, rule,
regulation, guideline, request or directive (whether or not having the force
of law) of any governmental authority, central bank or comparable agency
(other than by reason of a tax or an increased tax, on the net income of such
Lender), has or would have the effect of reducing the rate of return on the
capital or assets of the Issuing Bank or such Lender as the case may be, or
any Person Controlling the Issuing Bank or such Lender as the case may be, as
a consequence of its commitments or obligations hereunder, then from time to
time, upon the Issuing Bank's or such Lender's, as the case may be,
delivering a written demand therefor to the Agent and the Borrower, the
Borrower shall pay to the Issuing Bank or such Lender, as the case may be,
such additional amount or amounts as will compensate the Issuing Bank, such
Lender or Person, as the case may be, for such reduction.

SECTION 2.20. TAXES. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without reduction or
withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any governmental authority excluding, in the case of the Agent,
the Issuing Bank and each Lender, net income and franchise taxes imposed on
the Agent, the Issuing Bank or such Lender by the jurisdiction under the laws
of which the Agent, the Issuing Bank or such Lender is organized or any
political subdivision or taxing authority thereof or therein, or by any
jurisdiction in which such Lender's Domestic Lending office or Eurodollar
Lending Office, as the case may be, is located or any
38
<PAGE>

political subdivision or taxing authority thereof or therein or by reason of
such Lender's failure to comply with SECTION 2.20(b) hereof (all such
non-excluded taxes, levies, imposts, deductions, charges or withholdings
being hereinafter called "TAXES"). If any Taxes are required to be withheld
from any amounts payable to the Agent, the Issuing Bank or any Lender
hereunder or under the Revolving Notes or under the Term Notes, the amounts
so payable to the Agent, the Issuing Bank or such Lender shall be increased
to the extent necessary to yield to the Agent, the Issuing Bank or such
Lender (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement
and the Revolving Notes and the Term Notes. Whenever any Taxes are payable by
the Borrower, as promptly as possible thereafter, the Borrower shall send to
the Agent for its own account or for the account of the Issuing Bank or such
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof or other evidence thereof
reasonably satisfactory to the Agent. If the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the Agent
the required receipts or other documentary evidence, the Borrower shall
indemnify the Agent, the Issuing Bank, and the Lenders for any incremental
taxes, interest or penalties that may become payable by the Agent, the
Issuing Bank, or any Lender as a result of any such failure. The agreements
in this SECTION 2.20 shall survive the termination of this Agreement and the
payment of the Revolving Notes and the Term Notes and all other Obligations
and the expiration of the Standby Letters of credit.

(b) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof (including each Purchasing
Lender that becomes a party to this Agreement pursuant to SECTION 10.4(c))
agrees that, prior to the first date on which any payment is due to it
hereunder, it will deliver to the Borrower and the Agent (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224
or successor applicable form, as the case may be, certifying in each case
that such Lender is entitled to receive payments under this Agreement and the
Revolving Notes and the Term Notes payable to it, without deduction or
withholding of any United States Federal income taxes, and (ii) an Internal
Revenue Service Form W-8 or W-9 or successor applicable form, as the case may
be, to establish an exemption from United States backup withholding tax. Each
Lender which delivers to the Borrower and the Agent a Form 1001 or 4224 and
Form W-8 or W-9 pursuant to the preceding sentence further undertakes to
deliver to the Borrower and the Agent two further copies of the said letter
and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of certification, as the case may be, on or before the date that
any such letter or form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent letter and form previously
delivered by it to the Borrower, and such extensions or renewals thereof as
may reasonably be requested by the Borrower, certifying in the case of a Form
1001 or 4224 that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States Federal
income taxes, unless there has been a change in law (including, without
limitation, any change in treaty, statute, regulation or official
interpretation) prior to the

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date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such letter or form with respect to it and such
Lender advises the Borrower that it is not capable of receiving payments
without any deduction or withholding of United States Federal income tax, and
in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax.

SECTION 2.21. CHANGE OF OFFICE, ETC. Any of the Agent, the Issuing
Bank or any Lender claiming any additional amounts payable pursuant to
SECTIONS 2.17(a)(iii) OR 2.20 shall use reasonable efforts (consistent with
legal and regulatory restrictions) (including reasonable efforts to change
the jurisdiction of its applicable lending office) to avoid the need for or
reduce the amount of any such additional amounts that may thereafter accrue,
provided that such efforts would not, in the sole determination of such
Lender, the Agent or the Issuing Bank, as the case may be, be otherwise
disadvantageous to such Lender, the Agent or the Issuing Bank.

SECTION 2.22. USE OF PROCEEDS. The proceeds of the Revolving Loans
and the Term Loans shall be used for the Borrower's working capital, for
general corporate purposes, to repay and redeem the outstanding Subordinated
Notes (including accrued interest and call premiums) and to repay the
Subordinated Demand Note.

SECTION 2.23. ADJUSTMENTS IN COMMITMENTS AND OUTSTANDING LOANS.

(a) TOTAL COMMITMENTS. From and after the Effective Date,
the Total Commitment of each Lender shall be the sum of the amounts set forth
opposite each Lender's name in Annex 1, as such Commitments may be reduced
pursuant to the terms of this Agreement, and, with respect to each Lender,
such amount shall supersede and be deemed to amend the amount of its
respective Total Commitment as set forth in Annex 1 to the Existing Credit
Agreement.

(b) (i) ADJUSTMENT OF OUTSTANDING LOANS. If any Loans and
Standby Letters of Credit are outstanding under the Existing Credit Agreement
on the date hereof, the Lenders shall on the date hereof, at the direction of
the Agent, make appropriate adjustments among themselves in order to insure
that the amount (and Type) of the Loans outstanding to the Borrower from any
Lender and Standby Letters of Credit issued for the account of Borrower under
this Agreement (as of the date hereof) are proportionate to the aggregate
amount of all of the Total Commitments, after giving effect to the increased
amount of the aggregate Total Commitments and the reallocation of the amounts
of the Total Commitments of the Lenders.

(ii) The Borrower (1) agrees and consents to the terms of
SECTION 2.23(b)(i) and (2) agrees (unless on the date of such adjustments and
prepayments all outstanding Loans are Base Rate Loans) to pay to the
applicable Lender, upon any Lender's delivery of a written demand therefor,
any amounts due under SECTION 2.18

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arising from the adjustments and prepayments of any Loans required to effect
the reallocations of the Loans and the Commitments under this SECTION 2.23.

SECTION 3. STANDBY LETTERS OF CREDIT

SECTION 3.1. ISSUANCE OF STANDBY LETTERS OF CREDIT. (a) The Issuing
Bank (i) agrees, within five (5) Business Days of the receipt of an
appropriately completed and properly authorized Letter of Credit Application,
in a form and containing terms and conditions that are reasonably acceptable
to the Issuing Bank and consistent with the terms hereof, and on the terms
and subject to the conditions hereinafter set forth, to issue irrevocable
letters of credit ("STANDBY LETTERS OF CREDIT") under which the Issuing Bank
agrees to make payments for the account of the Borrower in respect of ongoing
contingent obligations of the Borrower and/or one or more of its Subsidiaries
related to insurance, performance bonds and fuel bonds, to replace existing
standby letters of credit and for other general corporate purposes acceptable
to the Issuing Bank and the Agent, at any time and from time to time on and
after the Effective Date until the termination of the Total Standby Letter of
Credit Commitment in accordance with SECTION 2.10 hereof and (ii) issued on
the Original Effective Date the Standby Letters of Credit set forth on
Schedule 3.1 of the Original Agreement, PROVIDED, HOWEVER, that any Standby
Letter of Credit shall be issued only if, and each request by the Borrower
for the issuance of any Standby Letter of Credit shall be deemed a
representation and warranty of the Borrower that, immediately following the
issuance of any such Standby Letter of Credit, (x) the LC Exposure at such
time shall not exceed the Total Standby Letter of Credit Commitment in effect
at such time and (y) (A) the sum of (I) the aggregate principal amount of
outstanding Loans and (II) the LC Exposure, before or after such Standby
Letter of Credit is issued, does not exceed (B) the Borrowing Base as then in
effect.

(b) Each Standby Letter of Credit shall be (1) in a minimum
amount of $100,000 (other than in respect of the renewal of the Existing
Standby Letter of Credit, which may be in a minimum amount of $50,000) and
(2) shall be denominated in United States dollars, provided, however, that
the Borrower may maintain the Credit Suisse L/C that was issued and
denominated in British Pounds.

(c) No Standby Letter of Credit shall be issued with a
stated expiration date later than the earlier of (i) ten Business Days prior
to the Final Maturity Date and (ii) the close of business on the date that is
12 months after the date of issuance of such Standby Letter of Credit.

(d) [Intentionally omitted 1999].

(e) Each Standby Letter of Credit may, in the absolute
discretion of the Issuing Bank, include a provision whereby such Standby
Letter of Credit shall be renewed automatically for additional consecutive
periods of 12 months or less (but not

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beyond the Final Maturity Date) unless the Issuing Bank notifies the
beneficiary thereof at least 60 days (or such shorter period as is acceptable
to the Issuing Bank) prior to the then-applicable expiry date that such
Standby Letter of Credit will not be renewed.

(f) The Borrower may request the extension or renewal of a
Standby Letter of Credit that is not automatically renewed in accordance with
its terms by giving written notice to the Issuing Bank at least five Business
Days prior to the then-current expiry date of such Standby Letter of Credit.
If no Default or Event of Default has occurred and is continuing, the Issuing
Bank shall promptly issue such extension or renewal; PROVIDED, HOWEVER, that
the Issuing Bank shall have no obligation to extend or renew any Standby
Letter of Credit (i) for a period in excess of 12 months or (ii) to any
expiry date beyond the Final Maturity Date.

(g) Each request for the issuance of a Standby Letter of
Credit shall be made on five (5) Business Days' prior electronic, written or
facsimile authenticated Letter of Credit Application from the Borrower to the
Issuing Bank specifying the date on which such Standby Letter of Credit is to
be issued, the date on which such Standby Letter of Credit is to expire, the
amount of such Standby Letter of Credit, the name and address of the
beneficiary of such Standby Letter of Credit and such other information as
may be necessary or desirable to complete such Standby Letter of Credit.

SECTION 3.2. PARTICIPATIONS; UNCONDITIONAL OBLIGATIONS. (a) By the
issuance of a Standby Letter of Credit and without any further action on the
part of the Issuing Bank or the Lenders in respect thereof, the Issuing Bank
hereby grants to each Lender, and each Lender hereby agrees to acquire from
the Issuing Bank, a participation in such Standby Letter of Credit, equal to
such Lender's Pro Rata Share of the face amount of such Standby Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Agent, on behalf
of the Issuing Bank, such Lender's Pro Rata Share of each LC Disbursement
made by the Issuing Bank; PROVIDED, HOWEVER, that the Lenders shall not be
obligated to make any such payment to the Issuing Bank with respect to any
wrongful payment or disbursement made under any Standby Letter of Credit as a
result of the gross negligence or willful misconduct of the Issuing Bank.

(b) Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to paragraph (a) above in respect of
Standby Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of an Event of Default or Default hereunder, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

SECTION 3.3. AGREEMENT TO REPAY LETTER OF CREDIT DISBURSEMENTS. (a)
If the Issuing Bank shall pay any draft presented under a Standby Letter of
Credit, the Borrower shall pay on the date of such payment by the Issuing
Bank to the Issuing Bank an amount equal to the amount of such draft
(PROVIDED that for drafts requiring

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payment in British Pounds, the Borrower shall pay the U.S. dollar equivalent
as calculated by the Agent at the British Pound Reference Rate on the date
any such draft was paid by the Issuing Bank). If the Borrower receives notice
after 3:00 p.m., New York City time, of the payment by the Issuing Bank of a
draft presented under a Standby Letter of Credit, it shall repay such LC
Disbursement no later 11:00 a.m., New York City time, on the next Business
Day; PROVIDED that if such next Business Day is not the next succeeding
calendar day, then the Borrower shall pay interest, on demand, on the amount
of such LC Disbursement from the date it was made by the Issuing Bank until
it is reimbursed by the Borrower at the rate set forth in clause (b) below.

(b) The Borrower agrees to pay interest on LC Disbursements
which are not paid to the Issuing Bank as set forth in clause (a) above, on
demand, at a rate per annum equal to the sum of the Alternate Base Rate then
in effect plus three and one half percent (3.5%).

(c) The Borrower's obligation to pay the Issuing Bank for LC
Disbursements under the Outstanding Standby Letters of Credit shall be
absolute, unconditional and irrevocable under any and all circumstances and
irrespective of:

(i) any lack of validity or enforceability of any
Standby Letter of Credit;

(ii) the existence of any claim, setoff, defense or other
right that the Borrower or any other person may at any time have against
the beneficiary under any Standby Letter of Credit, the Issuing Bank, the
Agent, any Lender or any other Person (other than the defense of payment
in accordance with the terms of this Agreement or a defense based on the
gross negligence or willful misconduct of the Issuing Bank) or any other
Person in connection with this Agreement or any other agreement or
transaction;

(iii) any draft or other document presented under a
Standby Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, PROVIDED that payment by the Issuing Bank
under such Standby Letter of Credit against presentation of such draft or
document shall not have constituted gross negligence or willful
misconduct of the Issuing Bank;

(iv) payment by the Issuing Bank under a Standby Letter
of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit, PROVIDED that such
payment shall not have constituted gross negligence or willful misconduct
of the Issuing Bank; and

(v) other circumstances or event whatsoever, whether or
not similar to any of the foregoing, PROVIDED that such other
circumstance or event

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shall not have been the result of gross negligence or willful misconduct
of the Issuing Bank.

It is understood that in making any payment under a Standby
Letter of Credit (i) the Issuing Bank's exclusive reliance on the documents
presented to it under such Standby Letter of Credit as to any and all matters
set forth therein, including reliance on the amount of any draft presented
under such Standby Letter of Credit, whether or not the amount due to the
beneficiary equals the amount of such draft and whether or not any document
presented pursuant to such Standby Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and
whether or not any other statement or any other document presented pursuant
to such Standby Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect
whatsoever, and (ii) any noncompliance in any immaterial respect of the
documents presented under a Standby Letter of Credit with the terms thereof
shall, in each case, not be deemed willful misconduct or gross negligence of
the Issuing Bank.

SECTION 3.4. LETTER OF CREDIT OPERATIONS. The Issuing Bank shall,
within a reasonable time after its receipt thereof, examine all documents
purporting to represent a demand for payment under an Outstanding Letter of
Credit to ascertain that the same appear on their face to be in conformity
with the terms and conditions of such Outstanding Letter of Credit. The
Issuing Bank shall promptly give electronic or facsimile notification or
telephonic notification, confirmed by electronic or facsimile notice, to the
Borrower of such demand of payment and of the determination by the Issuing
Bank as to whether such demand for payment was in conformity with the terms
and conditions of such Outstanding Letter of Credit and whether the Issuing
Bank has made or will make a LC Disbursement thereunder, provided that the
failure to give such notice shall not relieve the Borrower of its obligation
to reimburse the Issuing Bank with respect to any such LC Disbursement.

SECTION 3.5. CASH COLLATERALIZATION. If any Event of Default shall
occur and be continuing, the Borrower shall on the Business Day it receives
notice from the Agent or the Required Lenders therefor, deposit in an account
with the Collateral Agent, for the benefit of the Lenders, an amount in cash
equal to the LC Exposure as of such date. Such deposit shall be held by the
Collateral Agent as collateral for the payment and performance of the
Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than
any interest earned on the investment of such deposits in Cash Equivalents,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall (a) automatically be applied by the Agent to reimburse the
Issuing Bank for LC Disbursements, (b) be held for the satisfaction of the
reimbursement obligations of the Borrower of the LC Exposure at such time and
(c) if the maturity of the Revolving Loans has been accelerated, be applied
to

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satisfy the Obligations. If the Borrower is required to provide an amount of
cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be
returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.

SECTION 3.6. INDEMNIFICATION. The Lenders agree to indemnify the
Issuing Bank and its officers, directors, employees, representatives and
agents (to the extent not reimbursed by the Loan Parties and without limiting
the obligation of the Loan Parties to do so), ratably according to their Pro
Rata Shares, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for the Issuing Bank or
such Person in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not the Issuing Bank or such
Person shall be designated a party thereto) that may at any time (including,
without limitation, at any time following the payment of the Obligations) be
imposed on, incurred by or asserted against the Issuing Bank or such Person
as a result of, or arising out of, or in any way related to or by reason of
the issuing of any Standby Letter of Credit or the Issuing Bank acting in its
capacity as Issuing Bank (but excluding any such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the gross negligence or willful
misconduct of the Issuing Bank or such Person as finally determined by a
court of competent jurisdiction).

SECTION 3.7. RESIGNATION OF THE ISSUING BANK. (a) The Issuing Bank
may resign by giving five Business Days' prior written notice to the Agent,
the Lenders and the Borrower and upon the appointment of any Lender as
successor Issuing Bank. Subject to paragraph (b) below, upon the acceptance
of any appointment as the Issuing Bank hereunder by a successor Issuing Bank,
such successor shall succeed to and become vested with all the interests,
rights and obligations of the retiring Issuing Bank and the retiring Issuing
Bank shall be discharged from its obligations to issue additional Standby
Letters of Credit hereunder. Notwithstanding such resignation, the Borrower
shall pay all accrued and unpaid fronting fees when such fees would otherwise
become due hereunder. The acceptance of any appointment as the Issuing Bank
hereunder by a Lender shall be evidenced by an agreement entered into by such
successor, in a form satisfactory to the Borrower and the Agent, and, from
and after the effective date of such agreement, (i) such Issuing Bank shall
have all the rights and obligations of the previous Issuing Bank under this
Agreement and the other Loan Documents and (ii) references herein and in the
other Loan Documents to "Issuing Bank" shall be deemed to refer to such
successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require.

(b) After the resignation of the Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have
all the rights and obligations of the Issuing Bank under this Agreement and
the other Loan Documents

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with respect to Standby Letters of Credit issued by it prior to such
resignation, but shall not be required to issue additional Standby Letters of
Credit and shall be entitled to all accrued and unpaid fronting fees due and
owing to it through and including the date of resignation.

SECTION 4. CONDITIONS PRECEDENT.

SECTION 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement
shall become effective as of the date hereof when the following conditions
precedent have been satisfied:

(a) THIRD AMENDED AND RESTATED CREDIT AGREEMENT. The
Borrower, the Agent, the Arranger and the Lenders shall have executed and
delivered this Agreement to the other parties hereto.

(b) REVOLVING NOTES. The Borrower shall have executed and
delivered to each of the Lenders the appropriate Revolving Notes in the
amount, maturity and as otherwise provided herein.

(i) Acknowledgements of Loan Parties. Each of the Loan
Parties shall have acknowledged that the Existing Credit Agreement has
been amended and restated and superseded in its entirety by this
Agreement.

(ii) Confirmation of Parties To The Security Documents.
Each of the parties to the Security Documents shall have executed and
delivered to the Agent the acknowledgement in the form of Exhibit
4.1(c)(i) hereto.

(iii) Acknowledgement of Guarantors. Each of the
Guarantors shall have executed and delivered to the Agent the
Acknowledgement in the form of Exhibit 4.1(c)(ii) hereto.

(iv) Acknowledgement of Subordination Agreements. Mr.
Irwin L. Jacobs shall have executed and delivered to the Agent the
Acknowledgement in the form of Exhibit 4.1(c)(iii) hereto.

(v) Waiver of Subordinated Lenders. The Subordinated
Lenders shall have executed a Waiver to permit repayment and redemption
of the Subordinated Demand Note.

(d) MORTGAGE AMENDMENTS. Each of the Loan Parties party
thereto shall have executed and delivered to the Agent an amendment to each
of the

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Mortgages, each substantially in the form set forth as Exhibit 4.1(d)(as
amended, modified or supplemented from time to time, each a "MORTGAGE
AMENDMENT" and collectively, the "MORTGAGES AMENDMENTS").

(e) ASSIGNMENT AMENDMENTS. To the extent that any Lender
shall have been advised by special counsel that the same is legally required
in such jurisdiction, the Loan Parties party thereto shall have executed and
delivered to the Lender an amendment to each of the Assignment of Rents and
Leases relating to each applicable Property substantially in the form set
forth as Exhibit 4.1(e) (as amended, modified or supplemented from time to
time, the "ASSIGNMENT AMENDMENTS".

(f) OPINIONS OF COUNSEL.

(i) The Agent shall have received a legal opinion, dated
the Effective Date, from Weil, Gotshal & Manges LLP, special New York
counsel to the Loan Parties, substantially in the form set forth as
Exhibit 4.1(f)(i).

(ii) The Agent shall have received a legal opinion, dated
the Effective Date, from Mary McConnell, general counsel of the Borrower,
substantially in the form set forth as Exhibit 4.1(f)(ii).

(g) INSURANCE. The Agent shall have received a certificate
of insurance demonstrating insurance coverage in respect of each of the Loan
Parties of types, in amounts, with insurers and with other terms satisfactory
to the Lenders, which certificate shall indicate that the Agent and the
Lenders are named additional insured as their interests may appear and shall
contain a lenders loss payee endorsement in favor of the Agent in form and
substance satisfactory to the Agent.

(h) LIEN SEARCH REPORTS. The Agent shall have received
satisfactory reports of UCC, tax lien, judgment and litigation searches
conducted by a search firm acceptable to the Agent and the Lenders with
respect to the Loan Parties in each of the locations set forth in Schedule
4.1(h).

(i) UCC-1 FINANCING STATEMENTS. The Agent shall have
received signed copies of each UCC-1 financing statement signed by a Loan
Party as debtor naming the Agent as secured party in form suitable for filing
in the jurisdictions set forth in Schedule 1 to the Security Agreement, to
the extent requested by the Agent.

(j) RECORDATION OF AMENDMENTS. The Agent shall have received
(x) the Borrower's written instructions to the Title Company authorizing the
recordation of the Mortgage Amendments and Assignment Amendments in the
appropriate real estate records of the applicable jurisdiction in which each
and every Mortgaged Property is located and (y) evidence (including, without
limitation, payment instructions given by the Borrower) that all mortgage or
intangible taxes or recording charges required to be paid in connection with
the execution, delivery or recording of the

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Security Documents (including, without limitation, the Mortgage Amendments
and the Assignment Amendments) as well as all title premiums and other title
and survey charges have been deposited with the Title Company.

(k) TITLE REPORTS. The Agent shall have received a title
report or title insurance commitment (a "TITLE REPORT") issued by Chicago
Title Insurance Company (or other title insurance company reasonably
satisfactory to the Agent and the Lenders) (the "TITLE COMPANY") wherein such
Title Company certifies to the Agent that an examination of title to each of
the Mortgaged Properties has been made in accordance with the Title Company's
usual procedures for the issuance of a lender's form of title insurance
policy and such examination shows the lien of each Mortgage as a first
priority mortgage and/or deed of trust and good and marketable title to each
of the Mortgaged Properties being vested in the Loan Party which granted the
Mortgage relating thereto, in each case free and clear of all Liens except
the Liens permitted pursuant to SECTION 7.3 (hereinafter collectively
referred to as "PERMITTED LIENS"). The Borrower shall be responsible for
paying the full amount of all charges due in connection with the issuance of
the Title Reports.

(l) ENVIRONMENTAL MATTERS. The Agent shall be satisfied that
neither the Borrower nor any of its Subsidiaries is subject to any present or
contingent environmental liability or potential Environmental Claim which
could reasonably be expected to have a Material Adverse Effect.

(m) CERTIFIED RESOLUTIONS, ETC. The Agent shall have
received (1) a certificate of the secretary or assistant secretary of each of
the Loan Parties and dated the Effective Date certifying (i) the names and
true signatures of the incumbent officers of such Person authorized to sign
the applicable Loan Documents, (ii) the resolutions of such Person's Board of
Directors approving and authorizing the execution, delivery and performance
of all Transaction Documents executed by such Person, (iii) that there have
been no changes in the by-laws of such Person since March 27, 1996, except as
otherwise set forth in such certificate, and, to the extent of any such
changes, a copy thereof and (iv) that there have been no changes in the
certificate of incorporation of such Person since March 27, 1996, except as
otherwise set forth in such certificate, and, to the extent of any such
changes, a copy thereof certified by the Secretary of State of incorporation
of such Loan Party and (2) a good standing certificate from the Secretary of
State of incorporation of the Borrower dated not more than ten Business Days
prior to the Effective Date.

(n) FEES AND EXPENSES. The Agent shall have received, for
its account and for the account of each Lender, as applicable, all Fees and
other fees and expenses due and payable hereunder on or before the Effective
Date to the extent statements therefor have been delivered to the Agent and
the Borrower, including, without limitation, the fees and expenses accrued
through the Effective Date, of Emmet, Marvin & Martin, LLP, counsel to the
Agent.

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(o) CONSENTS, LICENSES, APPROVALS, ETC. The Agent shall have
received copies of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by the Loan Parties
or any of their respective Subsidiaries, and the validity and enforceability,
of the Transaction Documents, or in connection with any of the Transactions,
and such consents, licenses and approvals shall be in full force and effect.

(p) PROJECTIONS. The Agent shall have received projections
prepared by the Borrower demonstrating the projected consolidated financial
condition and results of operations of the Borrower and its Subsidiaries for
the period from the Effective Date through the fiscal quarter of the Borrower
ending June 30, 2002, which projections shall be accompanied by a written
statement of assumptions underlying the projections, and all the foregoing
shall be satisfactory to the Agent and the Lenders.

(q) INDEBTEDNESS. The Existing Notes shall be subordinated
to the Loans and the Standby Letters of Credit on terms and conditions
satisfactory to the Agent and the Lenders.

SECTION 4.2. CONDITIONS PRECEDENT TO EACH TERM LOAN ADVANCE. The
obligation of each Lender to make each Term Loan Advance is subject to the
satisfaction on the date the initial Term Loan Advance is made of the
following conditions precedent:

(a) TERM NOTES. The Borrower shall have executed and
delivered to each of the Lenders the appropriate Term Notes in the amount,
maturity and as otherwise provided herein.

(b) OPINIONS OF COUNSEL.

(i) The Agent shall have received a legal opinion, dated
the date the initial Term Loan Advance is made from Weil, Gotshal &
Manges LLP, special New York counsel to the Loan Parties, substantially
in the form set forth as Exhibit 4.1(f)(i).

(ii) The Agent shall have received a legal opinion, dated
the date the initial Term Loan Advance is made from Mary McConnell,
general counsel of the Borrower, substantially in the form set forth as
Exhibit 4.1(f)(ii).

(c) ADDITIONAL MATTERS. The Agent shall have received such
other certificates, opinions, documents and instruments relating to such Term
Loan as may have been reasonably requested by the Agent or Required Lenders.

SECTION 4.3. CONDITIONS PRECEDENT TO ALL REVOLVING LOANS, THE TERM
LOAN ADVANCES AND ISSUANCES OF LETTERS OF CREDIT. The obligation of each
Lender to make any Revolving Loan or Term Loan Advance, or the Issuing Bank
to issue any Standby Letter of Credit, is subject to the satisfaction on the
date such Revolving Loan or Term

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Loan Advance is made or Standby Letter of Credit is issued of the
following conditions precedent:

(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the other Loan Documents (other than
representations and warranties which expressly speak only as of a different
date) shall be true and correct in all material respects on such date both
before and after giving effect to the making of such Revolving Loans, the
Term Loan Advances or issuing of such Standby Letter of Credit.

(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of
Default shall have occurred and be continuing on such date either before or
after giving effect to the making of such Revolving Loans, Term Loan Advances
or issuing of such Standby Letter of Credit.

(c) NO INJUNCTION. No law or regulation shall have been
adopted, no order, judgment or decree of any governmental authority shall
have been issued, and no litigation shall be pending or threatened, which in
the judgment of the Required Lenders would enjoin, prohibit or restrain, or
impose or result in the imposition of any material adverse condition upon,
the making or repayment of the Revolving Loans, the Term Loan Advances or the
consummation of the Transactions.

(d) NO MATERIAL ADVERSE CHANGE. No event, act or condition
shall have occurred after June 30, 1998 which, in, the judgment of the
Required Lenders, has had or could have a Material Adverse Effect.

(e) NOTICE OF BORROWING. The Agent shall have received a
fully executed Notice of Borrowing in respect of the Loans to be made on such
date.

(f) NOTICE OF REDEMPTION. The Borrower shall have issued a
notice under the Subordinated Debt Financing Documents to repurchase and
redeem all of the outstanding Subordinated Notes (the "Redemption Notice").

(g) AUTHORIZATIONS AND DIRECTIONS REGARDING SUBORDINATED
DEMAND NOTE. The Agent shall have received (i) an irrevocable written
authorization and direction from the Borrower to disburse proceeds of the
Revolving Loans and Term Loans (in amounts selected by the Borrower) to or
for the benefit of Mr. Irwin L. Jacobs in an amount sufficient to repay the
Subordinated Demand Note and (ii) irrevocable written authorization and
direction from Mr. Irwin L. Jacobs to remit such proceeds directly to The
Bank of New York in payment of the indebtedness of Irwin L. Jacobs to The
Bank of New York which is secured by the Subordinated Demand Note.

(h) ADDITIONAL MATTERS. The Agent shall have received such
other certificates, opinions, documents and instruments relating to the
Transactions as

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may have been reasonably requested by the Agent or Required Lenders. The
acceptance of the proceeds of each Revolving Loan, each Term Loan Advance and
the issuance of each Standby Letter of Credit shall constitute a
representation and warranty by the Borrower to each of the Lenders and the
Issuing Bank that all of the conditions required to be satisfied under this
SECTION 4 in connection with the making of such Revolving Loan or such Term
Loan Advance or issuance of such Standby Letter of Credit have been
satisfied. All of the Revolving Notes, the Term Notes, if any, certificates,
agreements, legal opinions and other documents and papers referred to in this
Section 4, unless otherwise specified, shall be delivered to the Agent for
the account of each of the Lenders and, except for the Revolving Notes and
the Term Notes, if any, in sufficient counterparts for each of the Lenders,
and shall be satisfactory in form and substance to each Lender in its sole
discretion.

SECTION 5. REPRESENTATIONS AND WARRANTIES

In order to induce the Lenders to enter into this Agreement and
to make the Revolving Loans, the Term Loans and the Issuing Bank to issue the
Standby Letters of Credit, the Borrower makes the following representations
and warranties, which shall survive the execution and delivery of this
Agreement and the Revolving Notes and the making of the Revolving Loans, the
Term Loans and the issuing of the Standby Letters of Credit:

SECTION 5.1. CORPORATE STATUS; INACTIVE SUBSIDIARIES. (i) Each Loan
Party (1) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its incorporation, (2) has the
corporate power and authority to own its property and assets and to transact
the business in which it is engaged or presently proposes to engage and (3)
except where the failure to do so would not, in the aggregate, result in a
Material Adverse Effect, has duly qualified and is authorized to do business
and is in good standing as a foreign corporation in every jurisdiction in
which it owns or leases real property or in which the nature of its business
requires it to be so qualified and (ii) none of the Inactive Subsidiaries
conducts or transacts any business or owns any material assets and none of
the Inactive Subsidiaries will receive any transfer of property from the
Borrower or any Restricted Subsidiary.

SECTION 5.2. CORPORATE POWER AND AUTHORITY. Each Loan Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Transaction Documents to which it is a party and
has taken all necessary corporate action to authorize the execution, delivery
and performance by it of such Transaction Documents. Each Loan Party has duly
executed and delivered each of the Transaction Documents to which it is
party, and each such Transaction Document constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms.

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SECTION 5.3. NO VIOLATION. Neither the execution, delivery or
performance by any Loan Party of the Transaction Documents to which it is a
party, nor compliance by it with the terms and provisions thereof nor the
consummation of the Transactions, (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality or (ii) will conflict or
be inconsistent with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the property or
assets of any Loan Party pursuant to the terms of any indenture, mortgage,
deed of trust, agreement or other instrument to which such Loan Party is a
party or by which it or any of its property or assets is bound or to which it
may be subject, or (iii) will violate any provision of the certificate of
incorporation or by-laws of any Loan Party.

SECTION 5.4. LITIGATION. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened (i) with
respect to any of the Transactions or Transaction Documents or (ii) that
could, individually or in the aggregate, result in a Material Adverse Effect.

SECTION 5.5. FINANCIAL STATEMENTS; FINANCIAL CONDITION; ETC. The
internally prepared financial statements of the Borrower and its Subsidiaries
dated as of May 31, 1999 (the "INTERNAL FINANCIALS") delivered to the Agent
and the Lenders in connection with this Agreement were prepared in accordance
with GAAP consistently applied and fairly present the financial condition and
the results of operations of the entities covered thereby on the dates and
for the periods covered thereby and subject to normally recurring year-end
adjustments. No Loan Party has any material liability (contingent or
otherwise) other than those reflected on the Internal Financials or as set
forth on Schedule 5.5.

SECTION 5.6. SOLVENCY. On the Effective Date and after and giving
effect to the Transactions, (x) the Borrower and (y) the Borrower and its
Subsidiaries, on a consolidated basis, will be Solvent.

SECTION 5.7. PROJECTIONS. The projections delivered to the Agent and
the Lenders in connection with this Agreement have been prepared on the basis
of the assumptions accompanying them, and such projections and assumptions,
as of the date of preparation thereof, are reasonable and represent the
Borrower's good faith estimate of its future financial performance, it being
understood that nothing contained in this SECTION shall constitute a
representation or warranty that such future financial performance or results
of operations will in fact be achieved.

SECTION 5.8. MATERIAL ADVERSE CHANGE. Since the date of the most
recent audited consolidated financial statements of the Borrower dated June
30, 1998, there has occurred no event, act or condition which has or could
have resulted in a Material Adverse Effect.

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SECTION 5.9. USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds of
each Revolving Loan, the Term Loans and each Standby Letter of Credit will be
used by the Borrower only in accordance with the provisions of SECTIONS 2.22
and 3.1. No part of the proceeds of any Revolving Loan, the Term Loans or any
Standby Letter of Credit will be used by the Borrower to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing
or carrying any Margin Stock. Neither the making of any Revolving Loan or the
Term Loans nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulation U of the Federal Reserve
Board.

SECTION 5.10. GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with (i) the execution, delivery and performance of
any Transaction Document or the consummation of any of the Transactions or
(ii) the legality, validity, binding effect or enforceability of any
Transaction Document, except those listed on Schedule 5.10 that have already
been duly made or obtained and remain in full force and effect.

SECTION 5.11. SECURITY INTERESTS AND LIENS. The Security Documents
create, as security for the Obligations, valid and enforceable security
interests in and Liens on all of the Collateral, in favor of the Agent for
the ratable benefit of the Lenders, and subject to no other Liens other than
those Liens permitted pursuant to SECTION 7.3 and such security interests in
and Liens on the Collateral shall be superior to and prior to the rights of
all third parties (except as disclosed on Schedule 5.11), and no further
recordings or filings are or will be required in connection with the
creation, perfection or enforcement of such security interests and Liens,
other than the filing of continuation statements in accordance with
applicable law.

SECTION 5.12. TAX RETURNS AND PAYMENTS. Each Loan Party has filed all
tax returns required to be filed by it and has paid all taxes and assessments
payable by it which have become due other than those not yet delinquent or
those that are adequately reserved against in accordance with GAAP which are
being diligently contested in good faith by appropriate proceedings.

SECTION 5.13. ERISA. The Borrower has no Plans other than those listed
on Schedule 5.13. No accumulated funding deficiency (as defined in Section
412 of the Code or Section 302 of ERISA) or, Reportable Event has occurred
with respect to any ERISA Plan as to which there remains any liabilities
under Title IV of ERISA. There are no Unfunded Benefit Liabilities under any
ERISA Plan. The Borrower and each member of its ERISA Controlled Group have
complied with the requirements of Section515 of ERISA with respect to each
Multiemployer Plan and is not in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan. The aggregate
potential total withdrawal liability, and the aggregate potential annual
withdrawal liability payments of the Borrower and the members of its ERISA
Controlled

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Group as determined in accordance with Title IV of ERISA as if the Borrower
and the members of its ERISA Controlled Group had completely withdrawn from
all Multiemployer Plans is not greater than $250,000 and $100,000,
respectively. To the best knowledge of the Borrower and each member of its
ERISA Controlled Group, no Multiemployer Plan is or is likely to be in
reorganization (as defined in Section 4241 of ERISA or Section 418 of the
Code) or is insolvent (as defined in Section 4245 of ERISA). No material
liability to the PBGC (other than required premium payments), the Internal
Revenue Service, any Plan or any trust established under Title IV of ERISA
has been, or is expected by the Borrower or any member of its ERISA
Controlled Group to be, incurred by the Borrower or any member of its ERISA
Controlled Group. Except as otherwise disclosed on Schedule 5.13 hereto,
neither the Borrower nor any member of its ERISA Controlled Group has any
contingent liability with respect to any post-retirement benefit under any
"welfare plan" (as defined in Section 3(l) of ERISA), other than liability
for continuation coverage under Part 6 of Title I of ERISA. No lien under
Section 412(n) of the Code or 302(f) of ERISA or requirement to provide
security under Section 401(a)(29) of the Code or Section 307 of ERISA has
been or is reasonably expected by the Borrower or any member of its ERISA
Controlled Group to be imposed on the assets of the Borrower or any member of
its ERISA Controlled Group.

SECTION 5.14. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Borrower nor any of its Subsidiaries is (x) an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended, (y) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate"
of either a "holding company" or a "subsidiary company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended, or (z) subject to
any other Federal or state law or regulation which purports to restrict or
regulate its ability to borrow money.

SECTION 5.15. REPRESENTATIONS AND WARRANTIES IN TRANSACTION DOCUMENTS.
All representations and warranties made by any Loan Party in the Transaction
Documents (other than the Loan Documents) are true and correct in all
material respects. None of such representations and warranties are
inconsistent in any material respect with the representations and warranties
of any Loan Party made herein or in any other Loan Document.

SECTION 5.16. TRUE AND COMPLETE DISCLOSURE; FINANCIAL STATEMENTS. All
factual information (taken as a whole) furnished by or on behalf of any Loan
Party in writing to the Agent or any Lender for purposes of or in connection
with this Agreement or any of the Transactions is true and accurate in all
material respects on the date as of which such information is dated or
furnished and not incomplete by omitting to state any material fact necessary
to make such information (taken as a whole) not misleading at such time. All
of the financial statements of the Borrower and its Subsidiaries furnished by
or on behalf of any Loan Party to the Agent or any Lender for purposes of or
in connection with the Transactions were prepared in accordance with GAAP and
fairly present the

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<PAGE>

financial condition and results of operations of the appropriate Loan Parties
at the dates and for the periods respectively covered thereby. As of the
Effective Date, there are no facts, events or conditions known to the
Borrower which, individually or in the aggregate, have or could be expected
to have a Material Adverse Effect.

SECTION 5.17. CORPORATE STRUCTURE; CAPITALIZATION. Schedule 5.17
hereto sets forth the number of authorized and issued shares of Capital Stock
of the Borrower and each of its Subsidiaries, the par value thereof and the
registered owner(s) thereof as of the Effective Date and prior to any changes
resulting from any Equity Issuance. All of such Capital Stock has been duly
and validly issued and is fully paid and non-assessable. Neither any Loan
Party nor any such Subsidiary has outstanding any securities convertible into
or exchangeable for its Capital Stock nor does any Loan Party or any such
Subsidiary have outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its Capital Stock.

SECTION 5.18. ENVIRONMENTAL MATTERS. Except for matters which in the
aggregate would not reasonably be expected to give rise to a Material Adverse
Effect:

(a) (i) each of the Loan Parties is in compliance with all
applicable Environmental Laws, (ii) each of the Loan Parties has all
Environmental Approvals required to operate their businesses as presently
conducted or as reasonably anticipated to be conducted, (iii) none of the
Loan Parties has received any communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that such Loan
Party is not in compliance with all Environmental Laws, and (iv) to the
Borrower's best knowledge after due inquiry, there are no circumstances that
may prevent or interfere with such compliance in the future;

(b) there is no Environmental Claim pending or threatened
against any Loan Party;

(c) there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any Material of
Environmental Concern, that could form the basis of any Environmental Claims
against any of the Loan Parties; and

(d) (i) there are no on-site or off-site locations in which
any Loan Party has stored, disposed or arranged for the disposal of materials
of Environmental Concern, (ii) there are no underground storage tanks located
on property owned or leased by any Loan Party, (iii) there is no friable
asbestos contained in or forming part of any building, building component,
structure or office space owned or leased by any Loan Party, and (iv) no
polychlorinated biphenyls (PCB's) are used or stored at any property owned or
leased by any Loan Party.

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<PAGE>

SECTION 5.19. SENIOR INDEBTEDNESS. All of the Obligations constitute
"Senior Indebtedness" within the meaning ascribed to such term in the
Subordinated Debt Financing Documents and the Subordination Agreements,
including, without limitation, in the New Subordinated Credit Agreement.

SECTION 5.20. PATENTS, TRADEMARKS, ETC. Schedule 5.20 is a complete
list of all patents and copyrights owned by the Loan Parties and each of the
Loan Parties has obtained and holds in full force and effect, free from
burdensome restrictions, all patents, trademarks, servicemarks, trade names,
copyrights and other such rights, in each case which are necessary for the
operation of its business as presently conducted. No product, process,
method, substance, part or other material presently manufactured by any Loan
Party in connection with such business infringes any patent, trademark,
service mark, trade name, copyright, license or other right owned by any
other Person, which infringement could result in a Material Adverse Effect.
There is not pending or overtly threatened any claim or litigation against or
affecting any Loan Party contesting its right to sell or use any such
product, process, method, substance, part or other material.

SECTION 5.21. OWNERSHIP OF PROPERTY.(a) Schedule 5.21(a)(i) sets forth
all the real property owned or leased by the Loan Parties and used or held
for use in connection with the business of the Loan Parties and identifies
the street address (or a legal description of such property), the current
owner (and current record owner, if different) and whether such property is
leased or owned. The Loan Parties have good and marketable fee simple title
to or valid and subsisting leasehold interests in all of such real property
free and clear of all liens, claims, encumbrances, restrictions, rights of
way, easements, encroachments and charges or adverse claims or interests of
any nature other than Liens permitted by Section 7.3, and good and valid
title to all of their personal property other than such immaterial real
property set forth on Schedule 5.21(a)(ii) subject to no Lien of any kind
except Liens permitted hereby. The Loan Parties enjoy peaceful and
undisturbed possession under all of their respective leases.

(b) Except as set forth on Schedule 5.21(b), all buildings,
structures, heating and air conditioning equipment, plumbing, electrical and
other mechanical systems and equipment and the roofs, walls and other
structural components included in the Properties are in good operating
condition and repair (normal wear and tear excepted), do not require any
material repairs and are adequate for the uses for which they are currently
utilized and comply in all material respects with all applicable laws,
building, fire, health and safety codes, ordinances and zoning rules and
zoning ordinances. There are no pending or, to the Loan Parties' knowledge,
threatened material suits, actions or proceedings, including, without
limitation, condemnation or eminent domain proceedings, affecting the
Mortgaged Property or any part thereof.

(c) Except as otherwise disclosed to the Agent, to the best
knowledge of the Borrower, based on the Flood Hazard Certificates prepared by
the Central Flood

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Hazard Agency, none of the Properties are located in a flood hazard area as
defined by the Federal Insurance Administration.

(d) Except as disclosed in the surveys or Title Insurance
Policies delivered to the Agent hereunder as of the Effective Date, all
Improvements comprising a portion of any Property lie wholly within the
boundary and building restriction lines of such Property and no improvements
on adjoining properties encroach upon any Property.

SECTION 5.22. NO DEFAULT. No Loan Party is in default under or with
respect to any Transaction Document or any other agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound in any respect which could result in a Material Adverse Effect. No
Default or Event of Default exists.

SECTION 5.23. LICENSES, ETC. The Loan Parties have obtained and hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.

SECTION 5.24. COMPLIANCE WITH LAW. Each Loan Party is in compliance
with all laws, rules, regulations, orders, judgments, writs and decrees other
than such non-compliance which, individually or in the aggregate, could not
have a Material Adverse Effect.

SECTION 5.25. NO BURDENSOME RESTRICTIONS. No Loan Party is a party to
any agreement or instrument or subject to any other obligation or any charter
or corporate restriction or any provision of any applicable law, rule or
regulation which, individually or in the aggregate, could have a Material
Adverse Effect.

SECTION 5.26. BROKERS' FEES. Other than as set forth in the Offering
Memorandum, none of the Loan Parties has any obligation to any Person in
respect of any finder's, broker's, investment banking or other similar fee in
connection with any of the Transactions (other than with respect to the Agent
and the Lenders).

SECTION 5.27. LABOR MATTERS. There is no presently existing dispute or
controversy between the Borrower or any of its Subsidiaries and any of their
respective employees which has had or is likely to have, and the Borrower has
no reason to believe that the relationship of the Borrower and its
Subsidiaries with their unions or employees is likely to have, a Material
Adverse Effect. The Borrower and each of its Subsidiaries are in compliance
in all material respect with all federal and state laws with respect to
non-discrimination in employment and the payment of wages.

SECTION 5.28. DEALER ACCOUNT FINANCING. The Borrower and its
Subsidiaries do not have in the aggregate in excess of $2,500,000 outstanding
of Dealer Accounts or any other Accounts with payment terms of greater than
12 months.

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SECTION 5.29. YEAR 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's and
its Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
the Borrower's or its Subsidiaries' systems interact) and the testing of all
such systems and equipment, as so reprogrammed, in a manner sufficient to
permit the Borrower and its Subsidiaries to conduct their business without
Material Adverse Effect, will be completed by October 31, 1999. The cost to
the Borrower and its Subsidiaries of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 to the Borrower and its
Subsidiaries (including reprogramming errors and the failure of others'
systems or equipment) will not result in a Default or a Material Adverse
Effect. Except for such of the reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems
of the Borrower and its Subsidiaries are and, with ordinary course upgrading
and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrower and its Subsidiaries to conduct their
business without Material Adverse Effect.

SECTION 6. AFFIRMATIVE COVENANTS.

The Borrower covenants and agrees that on and after the
Effective Date and until the Total Commitment has terminated and the
Obligations are paid in full:

SECTION 6.1. INFORMATION COVENANTS. The Borrower will furnish to the
Agent and each Lender:

(a) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the
close of each fiscal year of the Borrower, commencing with the fiscal year
ending June 30, 1999, the consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating statements of income and consolidated
cash flow and retained earnings for such fiscal year setting forth
comparative figures for the preceding fiscal year disclosing all loss
contingencies of a type requiring disclosure under standards promulgated by
FASB and, with respect to such consolidated financial statements, audited by
Arthur Andersen & Co. or other independent certified public accountants of
recognized national standing reasonably acceptable to the Required Lenders,
and accompanied by an opinion of such accountants (which shall not be
qualified) to the effect that such consolidated financial statements fairly
present the financial condition and result of operations of the Borrower and
its Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied.

(b) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the
close of each quarterly accounting period in each fiscal year of the
Borrower, the consolidated and consolidating balance sheet of the Borrower
and its Subsidiaries as at the end of such quarterly period and the related
consolidated and consolidating statements

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of income and consolidated cash flow and retained earnings for such quarterly
period and for the elapsed portion of the fiscal year ended with the last day
of such quarterly period disclosing all material changes in loss
contingencies of a type requiring disclosure under standards promulgated by
FASB, in each case setting forth comparative figures for the related periods
in the prior fiscal year and accompanied by a certificate of the chief
financial officer of the Borrower which certifies that such consolidated
financial statements fairly present the financial condition and result of
operations of the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end
adjustments.

(c) MONTHLY FINANCIAL STATEMENTS. Within 30 days after the
end of each monthly reporting period in each fiscal year of the Borrower, the
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such monthly reporting period and the related
consolidated and consolidating statements of income and consolidated cash
flow and retained earnings for such monthly reporting period and for the
elapsed portion of the fiscal year ended on the last day of such monthly
reporting period disclosing all material changes in loss contingencies of a
type requiring disclosure under standards promulgated by FASB, in each case
setting forth comparative figures for the related periods in the prior fiscal
year and accompanied by a certificate of the chief financial officer of the
Borrower which certifies that such consolidated financial statements fairly
present the financial condition and result of operations of the Borrower and
its Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end and quarter-end adjustments.

(d) MANAGEMENT LETTERS. Promptly after the Borrower's
receipt thereof, a copy of any "management letter" or other material report
received by the Borrower from its certified public accountants.

(e) FINANCIAL PROJECTIONS. Within 60 days after the first
day of each fiscal year of the Borrower, commencing with the fiscal year
beginning July 1, 1999, a financial forecast of results of operations and
sources and uses of cash (in the form of the projections provided to the
Agent and the Lenders in connection with this Agreement) prepared by the
Borrower for the period extending through the quarterly period ending with
June 30, 2002, which financial forecast shall include calculations showing
PRO FORMA compliance with the financial covenants set forth in Section 7.1
for such period, accompanied by a written statement of the assumptions used
in connection therewith, together with a certificate of the chief financial
officer of the Borrower to the effect that such budget and financial forecast
and assumptions, taken as a whole, are reasonable and represent the
Borrower's good faith estimate of its future financial requirements and
performance. The financial statements required to be delivered pursuant to
clauses (a), (b) and (c) above shall be accompanied by a comparison of the
actual financial results set forth in such financial statements to those
contained in the forecasts delivered pursuant to this clause (e) together,
upon request of

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<PAGE>

the Agent or any Lender, with an explanation of any material variations from
the results anticipated in such forecasts.

(f) CERTIFICATES. At the time of the delivery of the
financial statements under clauses (a), (b) and (c) above, a certificate of
the accounting firm or the chief financial officer of the Borrower which
opines or certifies with respect to such financial statements (i) that after
due investigation and reasonable inquiry, no Default or Event of Default has
occurred during the period commencing at the beginning of the accounting
period covered by the financial statements accompanied by such certificate
and ending on the date of such certificate or, if any Default or Event of
Default has occurred, specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in respect thereof, (ii)
setting forth the calculations required to establish whether the Borrower was
in compliance with the provisions of SECTION 7.1 during and as at the end of
the accounting period covered by the financial statements accompanied by such
certificate and (iii) with respect to the delivery of the financial
statements set forth in clause (b) above, specifying the Leverage Ratio and
the category (as set forth in the definition of Margin Percentage) for which
reference to the applicable Margin Percentage shall be determined.

(g) NOTICE OF DEFAULT OR LITIGATION. Promptly and in any
event within three (3) Business Days after any Loan Party obtains knowledge
thereof, notice of (i) the occurrence of any Default or Event of Default,
(ii) any litigation or governmental proceeding pending or threatened against
the Borrower or any or its Subsidiaries which could result in a Material
Adverse Effect and (iii) any other event, act or condition which could result
in a Material Adverse Effect.

(h) ERISA. (i) As soon as possible and in any event within
10 days after the Borrower or any member of its ERISA Controlled Group knows,
or has reason to know, that:

(A) any Termination Event with respect to an ERISA Plan
has occurred or will occur, or

(B) any condition exists with respect to an ERISA Plan
which presents a material risk of termination of the ERISA Plan
or imposition of an excise tax or other material liability on the
Borrower or any member of its ERISA Controlled Group, or

(C) the Borrower or any member of its ERISA Controlled
Group has applied for a waiver of the minimum funding standard
under Section 412 of the Code or Section 302 of ERISA, or

(D) the Borrower or any member of its ERISA Controlled
Group has engaged in a "prohibited transaction," as defined in
Section

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4975 of the Code or as described in Section 406 of ERISA,
that is not exempt under Section 4975 of the Code and Section 408
of ERISA, or

(E) the aggregate present value of the Unfunded Benefit
Liabilities under all ERISA Plans has in any year increased by
$100,000 or to an amount in excess of $250,000, or

(F) any condition exists with respect to a
Multiemployer Plan which presents a material risk of a partial or
complete withdrawal (as described in Section 4203 or 4205 of
ERISA) by the Borrower or any member of its 75 ERISA Controlled
Group from a Multiemployer Plan, or

(G) the Borrower or any member of its ERISA Controlled
Group is in "default" (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan, or

(H) a Multiemployer Plan is in "reorganization" (as
defined in Section 418 of the Code or Section 4241 of ERISA) or
is "insolvent" (as defined in Section 4245 of ERISA), or

(I) the potential withdrawal liability (as determined
in accordance with Title IV of ERISA) of the Borrower and the
members of its ERISA Controlled Group with respect to all
Multiemployer Plans has in any year increased by $100,000 or to
an amount in excess of $250,000, or

(J) there is an action brought against the Borrower or
any member of its ERISA Controlled Group under Section 502 of
ERISA with respect to its failure to comply with Section 515
of ERISA,

a certificate of the president or chief financial officer of the
Borrower setting forth the details of each of the events
described in clauses (A) through (J) above as applicable and the
action which the Borrower or the applicable member of its ERISA
Controlled Group proposes to take with respect thereto, together
with a copy of any notice or filing from the PBGC or which may
be required by the PBGC or other agency of the United States
government with respect to each of the events described in
clauses (A) through (J) above, as applicable.

(ii) As soon as possible and in any event within two
Business Days after the receipt by the Borrower or any member of its
ERISA Controlled Group of a demand letter from the PBGC notifying the
Borrower or such member of its ERISA Controlled Group of its final
decision finding liability and 76 the date by which such liability must
be paid, a copy of such letter, together with a certificate of the
president or chief financial officer of the Borrower setting forth

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the action which the Borrower or such member of its ERISA Controlled
Group proposes to take with respect thereto.

(i) SEC FILINGS. Promptly upon transmission thereof, copies
of all regular and periodic financial information, proxy materials and other
information and reports, if any, which any Loan Party shall file with the
Securities and Exchange Commission or any governmental agencies substituted
therefor or which any Loan Party shall send to its stockholders.

(j) ENVIRONMENTAL. Promptly upon knowledge of a Responsible
Officer of the Borrower of any of the following conditions (if such condition
could reasonably give rise to a Material Adverse Effect), notice from the
Borrower specifying the nature of such condition and the applicable Loan
Party's proposed response thereto: (i) the receipt by any Loan Party of any
written communication, whether from a governmental authority, citizens group,
employee or otherwise, that alleges that such Loan Party is not in compliance
with applicable Environmental Laws, (ii) any Loan Party shall obtain actual
knowledge that there exists any Environmental Claim pending or threatened
against such Loan Party, (iii) any release, emission, discharge or disposal
of any Material of Environmental Concern that could form the basis of any
Environmental Claim against any Loan Party; (iv) actual knowledge of a
Responsible Officer of the Borrower that the Borrower or any of its
Subsidiaries is subject to investigation by any governmental authority
evaluating whether any Remedial Action is needed to respond to the Release or
threatened Release of any Material of Environmental Concern into the
environment; or (v) actual knowledge that would make the representation in
SECTION 5.18(c) false as of the time such knowledge is obtained by a
Responsible Officer of the Borrower.

(k) REFINANCINGS. No later than five (5) Business Days prior
to any extension, refinancing or refunding of Indebtedness pursuant to
Section 7.2(b), shall deliver to the Agent copies of the documentation
relating to such extension, refinancing or refunding together with such other
information related thereto as the Agent may reasonably request.

(l) CHARTER DOCUMENTS. No later than five (5) Business Days
prior to any change therein, the proposed changes to the certificate of
incorporation or the by-laws of the Borrower or any of its Subsidiaries.

(m) NOTICE OF DISSOLUTION. Promptly upon any dissolution of
a Designated Subsidiary, notice thereof.

(n) [Intentionally Omitted - 1999].

(o) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) as the Agent or any Lender
may reasonably request.

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SECTION 6.2. BOOKS, RECORDS AND INSPECTIONS. The Borrower shall, and
shall cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and
all requirements of law shall be made of all dealings and transactions in
relation to its business and activities. The Borrower shall, and shall cause
each of its Subsidiaries to, permit officers and designated representatives
of the Agent or any Lender to visit and inspect any of the properties of the
Borrower or any of its Subsidiaries, and to examine the books of record and
account of the Borrower or any of its Subsidiaries, and discuss the affairs,
finances and accounts of the Borrower or any of its Subsidiaries with, and be
advised as to the same by, its and their officers and independent
accountants, all upon reasonable notice to the Borrower and at such
reasonable times as the Agent or such Lender may desire.

SECTION 6.3. MAINTENANCE OF INSURANCE. The Borrower shall, and shall
cause each of its Subsidiaries to, (a) maintain with financially sound and
reputable insurance companies insurance on itself and its properties in at
least such amounts and against at least such risks as are customarily insured
against in the same general area by companies engaged in the same or a
similar business, which insurance shall in any event not provide for
materially less coverage than the insurance in effect on the Original
Effective Date and (b) furnish to the Agent and each Lender from time to
time, upon written request, the policies under which such insurance is
issued, certificates of insurance (which shall indicate that the Agent (for
the benefit of the Lenders) is named as additional insured as its interests
may appear) and such other information relating to such insurance as the
Agent or such Lender may request.

SECTION 6.4. TAXES. (a) The Borrower shall pay or cause to be paid,
and shall cause each of its Subsidiaries to pay or cause to be paid, prior to
becoming past due, all taxes, charges and assessments and all other lawful
claims required to be paid by the Borrower or such Subsidiaries, except as
contested in good faith and by appropriate proceedings diligently conducted,
if adequate reserves have been established with respect thereto in accordance
with GAAP.

(b) Except to the extent required by applicable law, the
Borrower shall not, and shall not permit any of its Subsidiaries to, file or
consent to the filing of any consolidated, combined or unitary tax return
with any Person (other than the Borrower and/or its Subsidiaries).

SECTION 6.5. CORPORATE FRANCHISES. The Borrower shall, and shall
cause each of its Subsidiaries to, do or cause to be done, all things
necessary to preserve and keep in full force and effect its existence and its
patents, trademarks, servicemarks, tradenames, copyrights, franchises,
licenses, permits, certificates, authorizations, qualifications,
accreditations, easements, rights of way and other rights, consents and
approvals other than those which (a) the board of directors of the Borrower
has determined that the preservation thereof is no longer desirable in the
conduct of the Borrower and its

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Subsidiaries taken as a whole and (b) individually or in the aggregate, could
not have a Material Adverse Effect.

SECTION 6.6. COMPLIANCE WITH LAW. The Borrower shall, and shall cause
each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, statutes, regulations, decrees and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of their business and the ownership of
their property, including, without limitation, all Environmental Laws, other
than those which, individually or in the aggregate, could not have a Material
Adverse Effect.

SECTION 6.7. PERFORMANCE OF OBLIGATIONS. The Borrower shall, and
shall cause each of its Subsidiaries to, perform all of its obligations in
all material respects under the terms of each mortgage, indenture, security
agreement, debt instrument, lease, undertaking and contract by which it or
any of its properties is bound or to which it is a party except where such
non-performance could not have a Material Adverse Effect and shall perform
all of its obligations to make payment when due of all amounts payable
pursuant to the Subordinated Debt Financing Documents to the extent permitted
by the subordination terms thereof.

SECTION 6.8. MAINTENANCE OF PROPERTIES. The Borrower shall, and shall
cause each of its Subsidiaries to, ensure that its properties used or useful
in its business are kept in good repair, working order and condition, normal
wear and tear excepted, and make all repairs, renewals, replacements,
additions, betterments and improvements thereto, as shall be reasonable
necessary for the proper conduct of the Borrower and its subsidiaries taken
as a whole.

SECTION 6.9. BORROWING BASE CERTIFICATE. The Borrower shall deliver
(i) on or prior to the twentieth day of each month (or if such day is not a
Business Day, the first Business Day thereafter), a Borrowing Base
Certificate showing the Borrowing Base as of the last Business Day of the
prior month, (ii) within thirty (30) days after the consummation of any sale
of any assets requiring a prepayment of Loans as a result of a reduction in
the Total Revolving Loan Commitment pursuant to SECTION 2.11, an updated
Borrowing Base Certificate which shall reflect any reduction in the Borrowing
Base as a result of such asset sale(s), and (iii) within ten (10) Business
Days after a request by the Agent, an updated Borrowing Base Certificate
showing the Borrowing Base then in effect adjusted to reflect the projected
effects of any event (other than an asset sale covered by clause (ii) hereof)
identified by the Agent in such request and deemed reasonably likely to have
a material effect on the Borrowing Base by the Agent.

SECTION 6.10. LICENSES, PERMITS, ETC. The Borrower shall obtain and
maintain in full force and effect, or cause each of its Subsidiaries on
behalf of the Borrower and its Subsidiaries to obtain and maintain in full
force and effect, all licenses, permits, governmental approvals, franchises,
authorizations or other rights necessary for the operation of its respective
business; and notify the Agent in writing, promptly after any

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Loan Party learns thereof, of the suspension, cancellation, revocation or
discontinuance of or any pending or threatened action or proceeding seeking
to suspend, cancel, revoke or discontinue any such license, permit,
governmental approval, franchise authorization or right.

SECTION 6.11. ENVIRONMENTAL REPORTS. Upon the reasonable written
request by the Agent, the Borrower shall promptly submit to the Agent and the
Lenders a report providing an update of the status of each environmental,
health or safety compliance, hazard or liability issue identified in any
notice or report required pursuant to SECTION 6.1(j) above and any other
environmental, health and safety compliance obligation, remedial obligation
or liability that could have a Material Adverse Effect.

SECTION 6.12. APPRAISALS AND COLLATERAL AUDITS. Within ninety (90)
days after a request by the Agent, the Borrower shall deliver to the Agent at
the Borrower's cost and expense (a) appraisals of the Mortgaged Property in
the event that the Agent determines such appraisals are required by
applicable law (including, without limitation, the regulations promulgated
under the Financial Institutions Reform, Recovery and Enforcement Act of
1989, as amended), which appraisals shall be in form and substance
satisfactory to the Agent, and conducted by appraisers selected or approved
by the Agent and (b) audits of the Lenders' Collateral, which audits shall be
in form and substance satisfactory to the Agent and be conducted by auditors
selected or approved by the Agent.

SECTION 6.13. ADDITIONAL GUARANTORS. If (i) any Person becomes a
Subsidiary of the Borrower after the Effective Date, including, without
limitation, any Person that becomes a Subsidiary pursuant to the Pyramid
Acquisition or the Hatteras Internal Transfer, (ii) the Borrower or any
Subsidiary of the Borrower that is a Guarantor transfers or causes to be
transferred, in one transaction or a series of related transactions, property
or assets (including, without limitation, businesses, divisions, real
property, assets or equipment) which in the aggregate have a value equal to
or greater than the lesser of $1,000,000 and 5% of the Borrower's total
assets determined on a consolidated basis as of the time of transfer to any
Subsidiary or Subsidiaries of the Borrower that is not a Guarantor or are not
Guarantors (other than AMF Insurance Company of Bermuda Ltd.), or (iii) any
Subsidiary (other than AMF Insurance Company of Bermuda Ltd.) of the Borrower
which is not a Guarantor has a value equal to or greater than the lesser of
$1,000,000 and 5% of the Borrower's total assets determined on a consolidated
basis as of the time of determination, the Borrower shall cause such
Subsidiary or Subsidiaries to execute and deliver to the Agent an agreement
to become a Guarantor in the form of Annex B to the Guaranty and such other
documents, including Security Documents, as the Agent shall require.

SECTION 6.14. AMF INSURANCE COMPANY OF BERMUDA LTD. As of June 30,
1999, the principal asset of AMF Insurance Company of Bermuda Ltd. is a
promissory note from Minstar, Inc. on which $1,085,319.00 is outstanding.
The Borrower shall cause that neither it nor any of its Subsidiaries make any
other loan, advance, investment or

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<PAGE>

payment of any kind whatsoever to, nor incur or permit to exist any other
obligation, contingent or otherwise, to or on behalf of, AMF Insurance
Company of Bermuda Ltd., other than (i) payments on such promissory note to
meet insurance claims payable by AMF Insurance Company of Bermuda Ltd. as
they are due, (ii) additional payments with respect to the operating expenses
of AMF Insurance Company of Bermuda Ltd. in an aggregate yearly amount not to
exceed $100,000 and (iii) reimbursement of fees paid by AMF Insurance Company
of Bermuda Ltd. with respect to letters of credit with an aggregate face
amount outstanding at any time not to exceed $3,285,000.

SECTION 6.15. [Intentionally Omitted 1999].

SECTION 6.16. NOTICES UNDER NEW SUBORDINATED CREDIT AGREEMENT, ETC.
Immediately after receiving any notice or communication by the Subordinated
Agent or the Subordinated Lenders under the New Subordinated Credit
Agreement, the Borrower shall provide copies of the same to the Agent and
each Lender.

SECTION 6.17. HEDGING AGREEMENTS. Within six months of the Effective
Date, the Borrower shall enter into and obtain, and thereafter maintain, one
or more Hedging Agreements with respect to interest rate risk for the term of
the Term Loans, satisfactory to the Agent, for not less than 50% of the then
outstanding principal balance of the Term Loans.

SECTION 6.18. YEAR 2000 ISSUE. The Borrower shall, and shall cause
each of its Subsidiaries to, take all necessary action to complete by October
31, 1999, the reprogramming of computer software, hardware and firmware
systems and equipment containing embedded microchips owned or operated by or
for the Borrower and the Subsidiaries or used or relied upon in the conduct
of their business (including systems and equipment supplied by others or with
which such systems of the Borrower and the Subsidiaries interface) required
as a result of the Year 2000 Issue to permit the proper functioning of such
computer systems and other equipment and the testing of such systems and
equipment, as so reprogrammed, except where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect. At the
request of the Agent, the Borrower will, and will cause each of the
Subsidiaries to, provide to the Agent reasonable assurance of its compliance
with the preceding sentence.

SECTION 6.19. SUBORDINATED NOTES. The Borrower shall redeem and repay
the outstanding Subordinated Notes on or before the Redemption Date.

SECTION 7. NEGATIVE COVENANTS.

The Borrower covenants and agrees that on and after the
Effective Date until the Total Commitment has terminated and the Obligations
are paid in full:

SECTION 7.1. FINANCIAL COVENANTS.

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(a) INTEREST COVERAGE RATIO. The Borrower shall not permit
the ratio of Consolidated Cash Flow to Consolidated Interest Expense to be
less than 2.50 to 1:00 at anytime.

(b) CAPITAL EXPENDITURES. The Borrower shall not make or
incur and shall not permit any of its Subsidiaries to make or incur any
Capital Expenditures in an amount exceeding $15,000,000 in the aggregate
during any fiscal year of the Borrower, provided however, during the fiscal
year ending June 30, 2000, in the event (a) an Equity Issuance is consummated
which yields $30,000,000 or more to the Borrower or (b) the Consolidated Cash
Flow of the Borrower is at least $48,000,000 for two consecutive fiscal
quarters following the Effective Date, then the Borrower and/or its
Subsidiaries may make Capital Expenditures (during the fiscal year ending
June 30, 2000) of up to $27,000,000, of which additional $12,000,000, not
more than $5,000,000 may be used for Capital Expenditures other than Pyramid
Capital Expenditures, subject, to the extent applicable, in the case of
Pyramid Capital Expenditures, to the conditions set forth in the definition
of "Pyramid Capital Expenditures." In addition, such amount of Capital
Expenditures in any fiscal year may be increased by an amount, not to exceed
$5,000,000 in any such fiscal year, equal to the excess of (a) $15,000,000
over (b) the amount of Capital Expenditures actually made or incurred in the
immediately preceding year.

(c) MINIMUM CONSOLIDATED NET WORTH. The Borrower shall not
permit Consolidated Net Worth at the end of each fiscal quarter to be less
than the sum of (i) $8,000,000 PLUS (ii) for each fiscal quarter of the
Borrower ending after the Effective Date, an amount equal to 50% of the
Consolidated Net Income (if positive) for such fiscal quarter and (without
duplication) each previous fiscal quarter following the Effective Date PLUS
for each Equity Issuance, an amount equal to 100% of the amount by which
Consolidated Net Worth is increased on account of such Equity Issuance.

(d) LEVERAGE RATIO. The Borrower shall not permit its
Leverage Ratio to exceed the following during each of the following periods:

Period Leverage Ratio
------ --------------
<S> <C>
Effective Date to June 29, 2000 3.25:1.00

June 30, 2000 to June 29, 2001 3.00:1.00

June 30, 2001 and thereafter 2.50:1.00

</TABLE>

SECTION 7.2. INDEBTEDNESS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume, suffer to exist or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, other than:

<PAGE>

(a) Indebtedness hereunder and under the other Loan Documents
(other than Hedging Agreements);

(b) Indebtedness outstanding on the Effective Date and set
forth on Schedule 7.2 hereto and any extension, refinancing or refunding
thereof, PROVIDED that the principal amount of the Indebtedness so extended,
refinanced or refunded shall not be increased above the principal amount thereof
outstanding immediately prior to such extension, refinancing or refunding, the
final maturity of the Indebtedness so extended, refinanced or refunded shall not
be changed to an earlier date, nor shall the amortization schedule be changed in
a manner which results in a shorter average life to maturity, nor shall the
terms (financial and otherwise) of such extension, refinancing or refunding be
less favorable to the Borrower or its Subsidiary, as the case may be;

(c) Indebtedness comprising Subordinated Debt, provided that
(i) the principal amount outstanding under the New Subordinated Credit Agreement
shall not exceed $60,000,000, (ii) all outstanding Subordinated Notes shall be
redeemed and repurchased on or before the Redemption Date and (iii) the
Subordinated Demand Note shall be repaid with proceeds of the first Advances of
the Revolving Loans or the Term Loans;

(d) [Intentionally Omitted]

(e) Indebtedness permitted under SECTION 7.6;

(f) Indebtedness with respect to Capital Leases and other
purchase money Indebtedness, in each case incurred to finance Capital
Expenditures permitted under Section 7.1, not in excess of $5,000,000 in the
aggregate at any one time outstanding; provided that any such Indebtedness shall
not exceed the lesser of the purchase price or the initial fair market value of
the asset so financed;

(g) in the case of the Borrower, Indebtedness to any of the
Restricted Subsidiaries and, in the case of any Subsidiary (other than AMF
Insurance Company of Bermuda Ltd.), Indebtedness to the Borrower or any of the
Restricted Subsidiaries (but only so long as such indebtedness is held by the
Borrower or a Restricted Subsidiary);

(h) Indebtedness of the Borrower in respect of Hedging
Agreements entered into with one or more Lenders on terms and conditions
satisfactory to the Agent; and

(i) Indebtedness of Minstar, Inc. to AMF Insurance Company of
Bermuda Ltd. described in SECTION 6.14;

(j) Indebtedness of the Borrower or Genmar Manufacturing in
respect of an industrial revenue bond financing of $5,000,000;

<PAGE>

(k) the Earn-Out Consideration (as defined in the Horizon
Acquisition Agreement);

(l) [Intentionally omitted 1999];

(m) Indebtedness of Genmar Logic in respect of the Earn-Out
Consideration (as defined in the Logic Acquisition Agreement) not in excess of
$450,000;

(n) Indebtedness of Genmar Logic in respect of an unsecured
subordinated non-negotiable promissory note made payable to Logic in the
principal amount of $500,000 with annual interest thereon at a rate of 8%;

(o) Indebtedness of Genmar Logic in respect of advances made by
PT Sumberdaya to Logic, not in excess of $250,000 in the aggregate and assumed
by Genmar Logic as a trade account payable pursuant to Section 7.29 of the Logic
Acquisition Agreement; and

(p) Indebtedness of Genmar Logic in respect of advances made by
Brunswick Corporation to Logic, not in excess of $347,000 in the aggregate
pursuant to the Logic Acquisition Agreement.

(q) Indebtedness of Hatteras Disposition Corp. incurred
concurrently with the Hatteras Disposition, with respect to which neither the
Borrower nor any Subsidiary has any liability except to the extent permitted
under Section 7.6(f).

(r) Indebtedness of POS Acquisition incurred in connection with
the Pyramid Acquisition, provided such Indebtedness does not exceed $5,000,000.

(s) Indebtedness of the Borrower under the note required to be
delivered under the Pyramid Acquisition Agreement to pay the purchase price due
thereunder, provided that (i) a public Equity Issuance has not been completed by
the date required under the Pyramid Acquisition Agreement, (ii) such note is
subordinated to all obligations and indebtedness of the Borrower to the Agent,
the Issuer and the Lenders (including obligations and indebtedness hereunder and
under the New Subordinated Credit Agreement) on terms and conditions
satisfactory to the Agent and (iii) the principal amount of such note shall not
exceed the net amount of $11,000,000.

SECTION 7.3. LIENS. The Borrower shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any of its property now owned or hereafter acquired,
other than:

(a) Liens existing on the Effective Date and set forth on
Schedule 7.3 hereto ("Permitted Liens");

<PAGE>

(b) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves are being maintained in accordance with GAAP;

(c) Statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law (other than any Lien
imposed by ERISA or an Environmental Lien) created in the ordinary course of
business for amounts not yet due or which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
bonds have been posted;

(d) Liens (other than any Lien imposed by ERISA or an
Environmental Lien) incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);

(e) Easements, rights-of-way, zoning and similar restrictions
and other similar charges or encumbrances of record listed in Schedule B II of
the title insurance policies issued by the Title Company to the Agent in
connection with the Original Agreement and other such charges or encumbrances
not interfering with the ordinary conduct of the business of the Borrower or any
of its Subsidiaries and which do not detract materially 86 from the value of the
property to which they attach or impair materially the use thereof by the
Borrower or any of its Subsidiaries or materially adversely affect the security
interests of the Agent or the Lenders therein;

(f) Liens granted to the Agent for the benefit of the Lenders
pursuant to the Security Documents securing the Obligations;

(g) Liens created pursuant to Capital Leases and to secure
other purchase-money Indebtedness permitted pursuant to SECTION 7.2(f), PROVIDED
that such Liens are only in respect of the property or assets subject to, and
secure only, the respective Capital Lease or other purchase-money Indebtedness
and attach within sixty (60) days of the construction or acquisition of such
property or asset; and

(h) Liens securing progress payments made by customers of the
Hatteras Yacht division (i) for yachts of at least 50 feet in length with a
price of no less than $1,000,000, (ii) so long as the amount of the progress
payments at all times exceeds or is approximately comparable to the cost of time
and materials then completed on such yacht, and (iii) such Lien is solely on the
yacht for which such progress payments were made and does not extend to any
other asset or property of any Loan Party.

(i) Liens granted to the Subordinated Agent for the benefit of
the Subordinated Lenders under the Subordinated Collateral Documents securing
the

<PAGE>

Subordinated Loans and the other obligations thereunder; PROVIDED that all
such Liens are subordinate and junior to the Liens granted to secure the
Obligations pursuant to the Security Documents and are subject to the terms and
provisions of the Intercreditor Agreement.

(j) Purchase Money Liens existing on the date of the Horizon
Acquisition on certain equipment acquired in the Horizon Acquisition securing
Indebtedness in a principal amount not exceeding $75,000; and

(k) Liens on any or all of the Horizon IRB Assets existing on
the date of the Horizon Acquisition.

SECTION 7.4. RESTRICTION ON FUNDAMENTAL CHANGES.

(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, in a single transaction or through a series of related
transactions, enter into any merger or consolidation, or liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution), discontinue its business or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of its business or property,
whether now or hereafter acquired, except (i) as otherwise permitted under
SECTION 7.5, (ii) any direct or indirect wholly-owned Subsidiary of the Borrower
may merge into or convey, sell, lease or transfer all or substantially all of
its assets to, the Borrower or any other direct or indirect wholly-owned
Subsidiary of the Borrower in a transaction in which no Person other than the
Borrower or its direct or indirect wholly-owned Subsidiaries receives any
consideration, PROVIDED that immediately following such transaction, the Agent
shall have a perfected security interest in all of the assets and properties
which were Collateral prior to such transaction, and such security interest in
such Collateral (other than the stock of a corporation which was not a survivor
of a merger) shall be of the same priority as existed prior to such transaction,
and the survivor of such transaction shall execute and deliver any Security
Documents requested by the Agent, and (iii) pursuant to any Permitted
Organizational Changes; PROVIDED that (x) no Permitted Organizational Change
shall take place during the continuance of a Default or an Event of Default, and
(y) prior to the occurrence of any Permitted Organizational Change, the Borrower
shall deliver to the Agent an officer's certificate in the form of Exhibit
7.4(a).

(b) Except as set forth in SECTION 7.8, the Borrower shall not,
and shall not permit any of its Subsidiaries to, (i) acquire by purchase or
otherwise any property or assets of, or stock or other evidence of beneficial
ownership of, any Person, except purchases of inventory, equipment, materials
and supplies in the ordinary course of the Borrower's or such Subsidiary's
business, (ii) during the continuance of any Default or Event of Default, create
any Subsidiary, or (iii) enter into any partnership or joint venture.

<PAGE>

(c) Borrower shall not, and shall not permit any of its
Subsidiaries to, amend its certificate of incorporation, by-laws or other
organizational documents, provided that so long as no Default or Event of
Default has occurred and is continuing, the Borrower and its Subsidiaries may
make changes to their respective certificates of incorporation and by-laws
other than (i) those changes which, individually or in the aggregate, could
have a Material Adverse Effect or (ii) those changes that would effect an
election pursuant to which an interest in a partnership or limited liability
company shall be a security governed by Article 8 of the Uniform Commercial
Code in any jurisdiction (A) that has adopted revisions to Article 8 of the
Uniform Commercial Code substantially consistent with the 1994 revisions to
Article 8 adopted by the American Law Institute and the National Conference
of Commissioners on Uniform State Laws and (B) the laws of which may be
applicable, from time to time, to the issues of perfection, the effect of
perfection or non-perfection and the priority of a security interest in an
interest in a partnership or limited liability company (except to the extent
the Borrower shall have delivered, or shall have caused to be delivered to
the Agent, duly executed stock powers in blank with respect to such
partnership or membership interests).

SECTION 7.5. SALE OF ASSETS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, convey, lease, sell, transfer or otherwise
dispose of (or agree to do so at any future time) all or any part of its
property or assets, except (a) sales of inventory in the ordinary course of
business, (b) sales of property which is uneconomic, obsolete or no longer
useful in its business provided that the aggregate net book value of all
property so sold does not exceed $4,000,000 per fiscal year; PROVIDED, HOWEVER,
that the Borrower or such Subsidiary, as the case may be, may only make sales
permitted pursuant to clause (b) above if it receives consideration at the time
of such sale at least equal to the Fair Market Value of the property sold, and
at least 50% of the consideration therefor received by the Borrower or such
Subsidiary, as the case may be, is in the form of cash; PROVIDED, FURTHER, that
the amount of (i) any liabilities of the Borrower or such Subsidiary (as shown
on the Borrower's or such Subsidiary's most recent balance sheet or in the notes
thereto), as the case may be, that are assumed by the purchaser in such
transactions (other than securities which are subordinated to the Obligations)
and (ii) any cash equivalents, notes or other obligations received by the
Borrower or such Subsidiary, as the case may be, from such transferee that are
immediately (and in any event within ninety (90) days) converted by the Borrower
or such Subsidiary, as the case may be, into cash, shall be deemed to be cash
for purposes of this Section, (c) in addition to the sales permitted pursuant to
clause (b) above, the sales of assets listed in Schedule 7.5(c) hereof, (d)
Intentionally Omitted - 1999, (e) subject in each case to the review and written
approval of the Agent (which approval shall be in the Agent's sole discretion)
leases of Real Property during such periods that such Real Property is not being
used in the business of the Borrower, PROVIDED, HOWEVER, that any such lease
shall not be for a period longer than 24 months, and (f) a sale, transfer or
disposition of the Hatteras Business pursuant to the Hatteras Internal Transfer
and the Hatteras Disposition.

<PAGE>

SECTION 7.6. CONTINGENT OBLIGATIONS. The Borrower shall not, and
shall not permit any of its Subsidiaries to, create or become or be liable
with respect to any Contingent Obligation, except:

(a) pursuant to the Guaranty or any other Transaction
Document;

(b) obligations (other than any such obligations permitted
pursuant to Sections 7.6(d) and 7.6(e))incurred by dealers of pleasure boats
selling products of the Borrower or one or more of its Subsidiaries in the
ordinary course of business in an aggregate amount at any one time
outstanding not to exceed $5,000,000;

(c) Contingent Obligations which were in existence on the
Effective Date which are set forth on Schedule 7.6(c) hereof, and
continuations or replacements of any such Contingent Obligation so long as
the amount in respect of any such Contingent Obligation so continued or
replaced has not been and will not be increased, or which are either (i)
disclosed in the audited financial statements of the Borrower and its
consolidated Subsidiaries dated as of June 30, 1998, (ii) disclosed in the
internally prepared financial statements of the Borrower and its Subsidiaries
for the eleven month period ending May 31, 1999 or (iii) are immaterial to
the Borrower and its Subsidiaries taken as a whole or to such Subsidiary;

(d) [Intentionally Omitted - 1999];

(e) notwithstanding subsections (a) through (c) of this
Section 7.6, solely to permit the Recourse Obligations of the Borrower and
any of its Subsidiaries in connection with the Floor Plan Financing, pursuant
to the terms of the Repurchase Agreement, PROVIDED that the Recourse
Obligations shall not exceed an aggregate amount of $20,000,000 for any
annual period of July 1 through June 30, of which an aggregate amount not to
exceed $20,000,000 during each such annual period may constitute obligations
on the part of the Borrower and any of its Subsidiaries to repurchase goods
which were financed by the financial institutions pursuant to the Floor Plan
Financing and an aggregate amount not to exceed $3,000,000 during each such
annual period may constitute indemnity payments by the Borrower and any of
its Subsidiaries relating to losses incurred by the financial institutions
resulting from the financial institutions' financing or refinancing of goods
to Dealers; and

(f) Contingent Obligations not to exceed $5,000,000 in the
aggregate in respect of indebtedness incurred by Hatteras Disposition Corp.,
provided that, (i) the indebtedness in respect of which such Contingent
Obligations have been incurred does not have a term of more than five years,
(ii) concurrent with the incurrence of such Contingent Obligations, the
Hatteras Disposition to the Existing Shareholders shall have been
consummated, (iii) a public Equity Issuance shall have been consummated or
will be consummated within one (1) Business Day thereafter, and (iv) the
Borrower and its Subsidiaries shall have been irrevocably released from any
and all liabilities and obligations with respect to the Hatteras Division.

<PAGE>

SECTION 7.7. DIVIDENDS. The Borrower shall not, and shall not permit any
of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock), or return any capital to, its stockholders or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any class of its Capital Stock
now or hereafter outstanding (or any options or warrants issued with respect to
its Capital Stock), or set aside any funds for any of the foregoing purposes
(all the foregoing "DIVIDENDS"), except (1) that Dividends may be made to the
Borrower or any of its Subsidiaries by any of its wholly-owned Subsidiaries and
(2) to the extent that the Hatteras Disposition is treated as or is deemed to be
a Dividend, the Hatteras Disposition may be made.

SECTION 7.8. ADVANCES, INVESTMENTS AND REVOLVING LOANS. The Borrower
shall not, and shall not permit any of its Subsidiaries to, lend money or credit
or make advances to, any Person, or directly or indirectly purchase or acquire
any stock, obligations or securities of, or any other interest in, or make any
capital contribution to any Person, except that the following shall be
permitted:

(a) accounts receivable owned by the Borrower and its
Subsidiaries, if created in the ordinary course of the business of the Borrower
and its Subsidiaries and payable or dischargeable in accordance with customary
trade terms;

(b) loans and advances to the Borrower by any of its
Subsidiaries and capital contributions by the Borrower or any Subsidiary to any
Restricted Subsidiary;

(d) investments pursuant to any Permitted Organizational
Changes; PROVIDED that (x) no Permitted Organizational Change shall take place
during the continuance of a Default or an Event of Default, and (y) prior to the
occurrence of any Permitted Organizational Change, the Borrower shall deliver to
the Agent an officer's certificate in the form of Exhibit 7.4(a);

(e) Contingent Obligations permitted pursuant to Section 7.6;

(f) promissory notes received in connection with sales of
assets of the Borrower or its Subsidiaries sold pursuant to Section 7.5 (b) or
(c), PROVIDED that such promissory notes are secured with the assets so sold;

(g) [Intentionally omitted];

(h) up to an aggregate investment of $5,000,000 in connection
with minority interests in foreign companies, joint ventures or partnerships on
terms acceptable to the Agent and the Required Lenders;

<PAGE>

(i) [Intentionally omitted];

(j) loans to directors and employees of the Borrower or its
Subsidiaries in an aggregate amount outstanding at any time not to exceed
$500,000;

(k) the Borrower and its Subsidiaries may acquire and hold Cash
Equivalents;

(l) [Intentionally omitted - 1999];

(m) [Intentionally omitted];

(n) the Recourse Obligations of the Borrower and its
Subsidiaries in connection with the Floor Plan Financing pursuant to the terms
of a Repurchase Agreement, to the extent permitted under Section 7.6(e); and

(o) the Pyramid Acquisition, provided the consideration
therefor is paid by the Borrower and its Subsidiaries solely in Capital Stock or
by Indebtedness to the extent and on the conditions set forth in Section 7.2(s),
or, if the Pyramid Acquisition is not closed on or before March 31, 2000,
investments in the senior subordinated note required under Section 6.10 of the
Pyramid Acquisition Agreement.

SECTION 7.9. TRANSACTIONS WITH AFFILIATES. Borrower shall not, directly
or indirectly, enter into any transaction or series of related transactions with
or for the benefit of any of its Affiliates, except on an arm's-length basis
and, except for sales of Inventory in the ordinary course of business, (x)(i) in
the case of any such transactions in which the aggregate rental value,
remuneration or other consideration (including the value of a loan) together
with the aggregate rental value, remuneration or other consideration (including
the value of a loan) of all such other transactions consummated in the year
during which such transaction is proposed to be consummated, exceeds $500,000,
the board of directors and the independent directors of the Borrower that are
disinterested, each have (by a majority vote) determined in good faith that the
aggregate rental value, remuneration or other consideration (including the value
of any loan) inuring to the benefit of such Affiliates from any such transaction
is not greater than that which would be charged to or extended by the Borrower
or its Subsidiary, as the case may be, on an arm's-length basis for similar
properties, assets, rights, goods or services by or to a Person not affiliated
with the Borrower or its Subsidiaries, as the case may be, and (ii) in the case
of any such transaction in which the aggregate rental value, remuneration or
other consideration (including the value of any loan), together with the
aggregate rental value, remuneration or other consideration (including the value
of any loan) of all such other transactions consummated in the year during which
such transaction proposed to be consummated, exceeds $5,000,000, the board of
directors of the Borrower and the independent directors of the Borrower that are
disinterested (each a majority vote), and a nationally recognized investment
banking firm, unaffiliated with the Borrower and the Affiliate which is party to
such transaction has determined that the

<PAGE>

aggregate rental price, remuneration or other consideration (including the
value of a loan) inuring to the benefit of such Affiliate from any such
transaction is not greater than that which would be charged to or extended by
the Borrower or its Subsidiary, as the case may be, on an arm's-length basis
for similar properties, assets, rights, goods or services by or to a Person
not affiliated with the Borrower or its Subsidiaries, as the case may be, and
that (y) in the case of all such transactions referred to in clauses (x)(i)
and (ii) are entered into in good faith. Any transaction required to be
approved by independent directors pursuant to this SECTION shall be approved
by at least one such independent director; PROVIDED that the foregoing
restrictions shall not apply to the payment of an annual fee to Jacobs
Management Corporation for rendering of management consulting and financial
services to the Borrower and its Subsidiaries in an aggregate amount not in
excess of $2,250,000 and except for repurchases of the Subordinated Notes
from Affiliates at par or less than par, provided such repurchases of
Subordinated Notes would be permitted under Section 7.10 hereof.

SECTION 7.10. LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
CERTAIN DOCUMENTS. The Borrower shall not, and shall not permit any of its
Subsidiaries to, (a) make any sinking fund payment or voluntary or optional
payment or prepayment on or redemption or acquisition for value of (including,
without limitation, by way of depositing with the trustee with respect thereto
money or securities before due for the purpose of paying when due) or exchange
of any Subordinated Debt or make any payment in respect of the Subordinated Debt
(including, without limitation, payments in respect of options to repurchase any
Subordinated Debt), or (b) amend, modify or waive, or permit the amendment,
modification or waiver of, any provision of any Transaction Document (other than
the Loan Documents), including without limitation, the New Subordinated Credit
Agreement, the Subordinated Loan Documents, the Subordinated Collateral
Documents or any other document or agreement relating thereto; PROVIDED that, in
accordance with this Agreement, the Borrower may, with the proceeds of the
Revolving Loans and/or the Term Loans (i) repay and redeem all outstanding
Subordinated Notes and (ii) repay the Subordinated Demand Note.

SECTION 7.11. CHANGES IN BUSINESS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, engage in any business other than the
manufacturing or selling of pleasure boats or in lines of business reasonably
related thereto.

SECTION 7.12. CERTAIN RESTRICTIONS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction, or enter into any agreement (other than the Transaction Documents
as in effect on the Effective Date and other than the Subordinated Credit
Facility Documents as in effect on the Effective Date), which restricts the
ability of the Borrower or any of its Subsidiaries to (a) enter into amendments,
modifications or waivers of the Loan Documents, (b) sell, transfer or otherwise
dispose of its assets, (c) create, incur, assume or suffer to exist any Lien
upon any of its property, (d) create, incur, assume, suffer to exist or
otherwise become liable

<PAGE>

with respect to any Indebtedness, or (e) pay any Dividend, provided that
Capital Leases or agreements governing purchase money Indebtedness which
contain restrictions of the types referred to in clauses (b) or (c) with
respect to the property covered thereby shall be permitted.

SECTION 7.13. LEASE PAYMENTS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, incur, assume or suffer to exist, any
obligation for payments under Capital Leases and operating leases whether for
real or personal or mixed property (including, without limitation, rental
payments and payments of taxes thereunder), except that the Borrower and its
Subsidiaries may incur rental payment obligations not to exceed $6,000,000 in
the aggregate during each fiscal year of the Borrower.

SECTION 7.14. SALES AND LEASEBACKS. From and after the date hereof, the
Borrower shall not, and shall not permit any of its Subsidiaries to, become
liable, directly or indirectly, with respect to any lease (other than any such
lease entered into in connection with a sale of any real property permitted
hereunder, which lease is necessary or desirable to wind down the operations of
such property so sold), whether an operating lease or a Capital Lease, of any
property (whether real or personal or mixed) whether now owned or hereafter
acquired, (i) which the Borrower or such Subsidiary has sold or transferred or
is to sell or transfer to the purchaser thereof, or (ii) which the Borrower or
such Subsidiary intends to use for substantially the same purposes as any other
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to the purchaser thereof in connection with such Lease.

SECTION 7.15. PLANS. The Borrower shall not, nor shall it permit any
member of its ERISA Controlled Group to, take any action which would increase
the aggregate present value of the Unfunded Benefit Liabilities under all Plans
to an amount in excess of $250,000.

SECTION 7.16. FISCAL YEAR; FISCAL QUARTER. The Borrower shall not, and
shall not permit any of its Subsidiaries to, change its fiscal year or any of
its fiscal quarters.

SECTION 7.17. DEALER ACCOUNTS. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, have in the aggregate Dealer Accounts, or any
other Accounts with payment terms of greater than 12 months, in excess of
$2,500,000 outstanding at any time from the Effective Date through and including
the Final Maturity Date.

SECTION 7.18. INACTIVE SUBSIDIARIES. The Borrower shall not permit any of
the Designated Subsidiaries from owning or acquiring any property or assets
other than such property or assets owned as of the Effective Date, provided that
the Permitted Organizational Changes shall be permitted.

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SECTION 8. EVENTS OF DEFAULT

SECTION 8.1. EVENTS OF DEFAULT. Each of the following events, acts,
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to
or as a result of compliance by any Person with any judgment, decree, order,
rule or regulation of any court or administrative or governmental body:

(a) FAILURE TO MAKE PAYMENTS. The Borrower shall (i) default
in the payment when due of any principal of the Loans or LC Disbursement or
(ii) default and such default shall continue unremedied for two or more
Business Days, in the payment when due of any interest on the Loans or in the
payment when due of any Fees or any other amounts owing hereunder.

(b) BREACH OF REPRESENTATION OR WARRANTY. Any representation
or warranty made by any Loan Party herein or in any other Loan Document or in
any certificate or statement delivered pursuant hereto or thereto shall prove
to be false or misleading on the date as of which made or deemed made.

(c) BREACH OF COVENANTS. (i) The Borrower shall fail to
perform or observe any agreement, covenant or obligation arising under
SECTIONS 6.1(g), 6.5, 6.13, 6.19 OR 7.1 THROUGH 7.18, inclusive; (ii) the
Borrower shall fail to perform or observe any agreement, covenant or
obligation arising under this Agreement (except those described in
subsections (a), (b) and (c)(i) above), and such failure shall continue for
30 days; or (iii) any Loan Party shall fail to perform or observe any
agreement, covenant or obligation arising under any provision of the Loan
Documents other than this Agreement, which failure shall continue after the
end of the applicable grace period, if any, provided therein.

(d) DEFAULT UNDER OTHER AGREEMENTS. The Borrower or any of
its Subsidiaries shall default in the payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) of any
amount owing in respect of any Indebtedness (other than the Obligations) in
the aggregate principal amount in excess of $500,000; or the Borrower or any
of its Subsidiaries shall default in the performance or observance of any
obligation or condition with respect to any such Indebtedness or any other
event shall occur or condition exist, if the effect of such default, event or
condition is to accelerate the maturity of any such Indebtedness or to permit
(without regard to any required notice or lapse of time) the holder or
holders thereof, or any trustee or agent for such holders, to accelerate the
maturity of any such Indebtedness, or any such Indebtedness shall become or
be declared to be due and payable prior to its stated maturity other than as
a result of a regularly scheduled payment.

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(e) BANKRUPTCY, ETC. (i) Any Loan Party shall commence a
voluntary case concerning itself under the Bankruptcy Code; or (ii) an
involuntary case is commenced against any Loan Party and the petition is not
controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or (iii) a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of any Loan Party or any Loan Party commences any other proceedings
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to any Loan Party or there is
commenced against any Loan Party any such proceeding which remains
undismissed for a period of 60 days; or (iv) any order of relief or other
order approving any such case or proceeding is entered; or (v) any Loan Party
is adjudicated insolvent or bankrupt; or (vi) any Loan Party suffers any
appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 60 days; or
(vii) any Loan Party makes a general assignment for the benefit of creditors;
or (viii) any Loan Party shall fail to pay, or shall state that it is unable
to pay, or shall be unable to pay, its debts generally as they become due; or
(ix) any Loan Party shall call a meeting of its creditors with a view to
arranging a composition or adjustment of its debts; or (x) any Loan Party
shall by any act or failure to act consent to, approve of or acquiesce in any
of the foregoing; or (xi) any corporate action is taken by any Loan Party for
the purpose of effecting any of the foregoing.

(f) SUBORDINATED DEBT FINANCING DOCUMENTS. The Borrower or
any of its Subsidiaries (i) does not redeem and repay all outstanding
Subordinated Notes on or before the Redemption Date, (ii) does not pay when
due (x) whether at maturity, upon redemption or otherwise, any payment of
principal, or premium, due under the New Subordinated Credit Agreement or (y)
any interest due under the New Subordinated Credit Agreement, and such
interest remains unpaid for a period of ten (10) Business Days; or (ii)
denies or disaffirms any of its obligations under any Subordinated Debt
Financing Document.

(g) RESTRICTED SUBSIDIARIES. Any Person becomes a
"Restricted Subsidiary", as such term is defined in the Subordinated Debt
Financing Documents, unless such Person is also a Guarantor.

(h) ERISA. (i) Any Termination Event shall occur, or (ii)
any ERISA Plan shall incur an "accumulated funding deficiency" (as defined in
SECTION 412 of the Code or Section 302 of ERISA), whether or not waived or
(iii) the Borrower or a member of its ERISA Controlled Group shall have
engaged in a transaction which is prohibited under Section 4975 of the Code
or Section 406 of ERISA which could reasonably be expected to result in the
imposition of liability in excess of $2,000,000 on the Borrower or any member
of its ERISA Controlled Group, or (iv) the Borrower or any member of its
ERISA Controlled Group shall fail to pay when due an amount which it shall
have become liable to pay to the PBGC, any Plan or a trust established under
Title IV of

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ERISA, or (v) a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that an ERISA Plan must be
terminated or have a trustee appointed to administer any ERISA Plan, or (vi)
the Borrower or a member of its ERISA Controlled Group suffers a partial or
complete withdrawal from a Multiemployer Plan or is in "default" (as defined
in SECTION 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
Plan, or (vii) a proceeding shall be instituted against the Borrower or any
member of its ERISA Controlled Group to enforce Section 515 of ERISA, or
(viii) any other event or condition shall occur or exist with respect to any
Plan which could subject the Borrower or any member of its ERISA Controlled
Group to any tax, penalty or other liability in excess of $2,000,000.

(i) SECURITY DOCUMENTS. Any of the Security Documents shall
for any reason cease to be in full force and effect, or shall cease to give
the Agent the Liens, rights, powers and privileges purported to be created
thereby including, without limitation, a perfected first priority security
interest in, and Lien on, all of the Collateral in accordance with the terms
thereof other than as a result of a release of Collateral by the Agent
pursuant to the terms of this Agreement and the Security Documents.

(j) GUARANTY. Any Guaranty or any provision thereof shall
cease to be in full force and effect, or the Guarantor or any Person acting
by or on behalf of the Guarantor shall deny or disaffirm all or any portion
of the Guarantor's obligations under such Guaranty.

(k) CHANGE OF CONTROL. (i) [Intentionally Omitted - 1999],
(ii) the Existing Shareholders shall in the aggregate cease to beneficially
own and control at least 50.1%, prior to a public Equity Issuance, and,
thereafter, at least 30%, of the issued and outstanding shares of each class
of Capital Stock of the Borrower entitled (without regard to the occurrence
of any contingency) to vote for the election of members of the board of
directors of the Borrower, (iii) so long as the applicable Subordinated Debt
is outstanding, a "Change of Control" as defined in any of the Subordinated
Debt Financing Documents shall occur or (iv) any party other than any of the
Existing Shareholders shall control any class of Capital Stock of the
Borrower entitled to vote for the election of the members of the Board of
Directors of the Borrower.

(l) JUDGMENTS. One or more judgments or decrees in an
aggregate amount (i) in excess of $250,000 shall be entered by a court or
courts of competent jurisdiction against the Loan Parties (other than any
judgment as to which, and only to the extent, a reputable insurance company
has acknowledged coverage of such claim in writing) and (x) any such
judgments or decrees shall not be stayed, discharged, paid, bonded or vacated
within 30 days or (y) enforcement proceedings shall be commenced by any
creditor on any such judgments or decrees or (ii) in excess of $5,000,000 and
such judgment or judgments shall not be stayed, discharged or bonded within
60 days.

(m) ENVIRONMENTAL MATTERS. (i) Any Environmental Claim shall
have been asserted against any Loan Party which, if determined adversely,
could have a

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Material Adverse Effect, (ii) any release, emission, discharge or disposal of
any Material of Environmental Concern shall have occurred, and such event
could form the basis of an Environmental Claim against any Loan Party which,
if determined adversely, could have a Material Adverse Effect, or (iii) any
Loan Party shall have failed to obtain any Environmental Approval necessary
for the management, use, control, ownership, or operation of its business,
property or assets or any such Environmental Approval shall be revoked,
terminated, or otherwise cease to be in full force and effect, in each case,
if the existence of such condition could have a Material Adverse Effect.

(n) USE OF PROCEEDS. The Borrower shall use the proceeds of
any Loan for a purpose other than that set forth in SECTION 2.22.

(o) LICENSES AND PERMITS. Any Loan Party shall lose, or
shall fail to obtain or maintain, any necessary license or permit, which loss
or failure to maintain would, in each case, have a Material Adverse Effect.

(p) NEGATIVE PLEDGE. Any Person controlling the Borrower
shall enter into any agreement (other than the Transaction Documents as in
effect on the Effective Date) which restricts the ability of the Borrower or
any of its Subsidiaries to (i) enter into amendments, modifications or
waivers of the Loan Documents, (ii) sell, transfer or otherwise dispose of
its assets, (iii) create, incur, assume or suffer to exist any Lien upon any
of its property, (iv) create, incur, assume, suffer to exist or otherwise
become liable with respect to any Indebtedness, or (v) except with respect to
the Borrower, pay any Dividend, provided that Capital Leases or agreements
governing purchase money Indebtedness which contain restrictions of the types
referred to in clauses (ii) or (iii) with respect to the property covered
thereby shall be permitted.

(q) MATERIAL ADVERSE CHANGE. The occurrence of any material
adverse change in the financial condition, business, properties, prospects or
operations of the Borrower and its Subsidiaries on a consolidated basis.

(r) EVENT OF DEFAULT UNDER NEW SUBORDINATED CREDIT
AGREEMENT. An Event of Default (or similar event, howsoever phrased) shall
have occurred under and as defined in the New Subordinated Credit Agreement
or the Subordinated Collateral Documents.

SECTION 8.2. RIGHTS AND REMEDIES. Upon the occurrence of any Event of
Default described in SECTION 8.1(e), the Commitments shall automatically and
immediately terminate and the unpaid principal amount of and any and all
accrued interest on the Revolving Loans, the Term Loans and any and all
accrued Fees and other Obligations shall automatically become immediately due
and payable, with all additional interest from time to time accrued thereon
and without presentation, demand, or protest or other requirements of any
kind (including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower, and
the

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obligation of each Lender to make any Revolving Loan, or the Term Loans or
issue any Standby Letter of Credit hereunder shall thereupon terminate; and
upon the occurrence and during the continuance of any other Event of Default,
the Agent shall at the request, or may with the consent, of the Required
Lenders, by written notice to the Borrower, (i) declare that the Commitments
are terminated, whereupon the Commitments and the obligation of each Lender
to make any Revolving Loan, or the Term Loans or issue any Standby Letter of
Credit hereunder shall immediately terminate, (ii) declare the unpaid
principal amount of and any and all accrued and unpaid interest on the
Revolving Loans, and the Term Loans and any and all accrued Fees and other
Obligations to be, and the same shall thereupon be, immediately due and
payable with all additional interest from time to time accrued thereon and
without presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower,
(iii) require cash collateral as contemplated by SECTION 3.5 hereof and (iv)
exercise any remedies available under any Loan Document or otherwise.

SECTION 9. THE AGENT

SECTION 9.1. APPOINTMENT. Each Lender hereby irrevocably designates
and appoints The Bank of New York as the Agent of such Lender under this
Agreement and each other Loan Document, and each such Lender irrevocably
authorizes The Bank of New York as the Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and each
other Loan Document, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
in this Agreement, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Agent shall be read into this
Agreement or otherwise exist against the Agent. The provisions of this
SECTION 9 are solely for the benefit of the Agent and the Lenders and no Loan
Party shall have any rights as a third party beneficiary or otherwise under
any of the provisions hereof. In performing its functions and duties
hereunder and under the other Loan Documents, the Agent shall act solely as
the agent of the Lenders and does not assume nor shall be deemed to have
assumed any obligation or relationship of trust or agency with or for any
Loan Party or any of their respective successors and assigns.

SECTION 9.2. DELEGATION OF DUTIES. The Agent may execute any of its
duties under this Agreement or the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning
all matters pertaining to such duties. The Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.

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SECTION 9.3. EXCULPATORY PROVISIONS. The Agent shall not be (i)
liable for any action lawfully taken or omitted to be taken by it or any
Person described in SECTION 9.2 under or in connection with this Agreement or
any other Loan Document (except for its or such Person's own gross negligence
or willful misconduct), or (ii) responsible in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by
any Loan Party contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided
for in, or received under or in connection with, this Agreement or any other
Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any other Loan Document
or for any failure of any Loan Party to perform its obligations hereunder or
thereunder. Without limiting the duties and responsibilities of the Agent set
forth in the Loan Documents, the Agent shall not be under any obligation to
103 any Lender to ascertain or to inquire as to the observance or performance
of any of the agreements of any Loan Party contained in, or conditions of,
this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party. This SECTION is intended solely to govern
the relationship between the Agent, on the one hand, and the Lenders, on the
other.

SECTION 9.4. RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Revolving Note, any Term
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation,
counsel to any Loan Party), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any
Revolving Note or any Term Note as the owner thereof for all purposes unless
the Agent shall have received an executed Transfer Supplement in respect
thereof. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of
the Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders
of the Revolving Notes and all future holders of the Term Notes.

SECTION 9.5. NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
unless the Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating
that such notice is a "notice of default." In the event that the Agent
receives such a notice, the Agent shall promptly give notice 104 thereof to
the Lenders. The Agent shall take such action with respect to such

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Default or Event of Default as shall be directed by the Required Lenders;
PROVIDED that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as
the Agent shall deem advisable and in the best interests of the Lenders.

SECTION 9.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Loan
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Lender represents and warrants to the Agent that it has,
independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of
the Loan Parties and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, prospects, financial and other condition and
creditworthiness of the Loan Parties. Except for notices, reports and other
documents expressly required under the Loan Documents to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
business, operations, property, prospects, financial and other condition or
creditworthiness of the Loan Parties which may come into the possession of
the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.

SECTION 9.7. INDEMNIFICATION. The Lenders agree to indemnify the
Agent, the Arranger and their respective officers, directors, employees,
representatives and agents (to the extent not reimbursed by the Loan Parties
and without limiting the obligation of the Loan Parties to do so), ratably
according to their Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for the Agent, the
Arranger or such Person in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not the Agent, the
Arranger or such Person shall be designated a party thereto) that may at any
time (including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Agent, the
Arranger or such Person as a result of, or arising out of, or in any way
related to or by reason of, the execution, delivery or performance of any
Loan Document or any other Transaction Document (but excluding any such
liabilities,

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obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Agent, the Arranger or such Person as finally
determined by a court of competent jurisdiction and excluding the actions of
the Agent when acting solely in its capacity as a Lender).

SECTION 9.8. AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Loan Parties as though the Agent were not the
Agent hereunder. With respect to Loans made or renewed by it and any
Revolving Note or Term Note issued to it, the Agent shall have the same
rights and powers under this Agreement as any Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders"
shall include the Agent in its individual capacity.

SECTION 9.9. SUCCESSOR AGENT. The Agent may resign as Agent upon 30
days' notice to the Borrower and the Lenders. If the Agent shall resign as
Agent under this Agreement, then the Required Lenders during such 30-day
period shall appoint from among the Lenders a successor agent, whereupon such
successor agent, upon its acceptance, shall succeed to the rights, powers and
duties of the Agent and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or deed
on the part of such former Agent or any of the parties to this Agreement or
any holders of the Revolving Notes or any holders of the Term Notes. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
SECTION 9 and SECTION 10.1 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.

SECTION 10. MISCELLANEOUS

SECTION 10.1. PAYMENT OF EXPENSES, INDEMNITY, ETC. The Borrower shall:

(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of the Agent
in connection with the negotiation, preparation, execution and delivery of
the Loan Documents and the documents and instruments referred to therein, the
creation, perfection or protection of the Agent's Liens in the Collateral
(including, without limitation, fees and expenses for title and lien searches
and filing and recording fees), and any amendment, waiver or consent relating
to any of the Loan Documents (including, without limitation, as to, each of
the foregoing, the reasonable fees and disbursements of Emmet, Marvin &
Martin, LLP, special counsel to the Agent and any other attorneys retained by
the Agent) and of the Agent and each Lender in connection with the
preservation of rights under, and enforcement of, the Loan Documents and the
documents and instruments referred to therein or in connection with any
restructuring or

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rescheduling of the Obligations (including, without limitation, the
reasonable fees and disbursements of counsel for the Agent and for each of
the Lenders);

(b) pay the fees and disbursements of any independent
accountant or consultant retained by the Agent to audit the composition of
the Accounts and Inventory which are part of the Borrowing Base and to
prepare and deliver to the Agent such reports and information as the Agent
requests with respect thereto;

(c) pay, and hold the Agent and each of the Lenders harmless
from and against, any and all present and future stamp, excise and other
similar taxes with respect to the foregoing matters and hold the Agent and
each Lender harmless from and against any and all liabilities with respect to
or resulting from any delay or omission (other than to the extent
attributable to such Lender) to pay such taxes; and

(d) indemnify the Agent, the Arranger, the Issuing Bank and
each Lender, and their respective officers, directors, employees,
representatives and agents (each an "INDEMNITEE") from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements of
any kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto, but
excluding any tax or an increased tax on the net income of such Lender) that
may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, asserted against or incurred by
any Indemnitee as a result of, or arising out of, or in any way related to or
by reason of, (i) any of the Transactions or the execution, delivery or
performance of any Loan Document or any other Transaction Document, (ii) any
violation by any Loan Party of any applicable Environmental Law, (iii) any
Environmental Claim arising out of the management, use, control, ownership or
operation of property or assets by any of the Loan Parties, including,
without limitation, all on-site and off-site activities involving Materials
of Environmental Concern, (iv) the breach of any environmental representation
or warranty set forth in Section 5.18, (v) the grant to the Agent, the
Collateral Agent and the Lenders of any Lien in any property or assets of any
of the Loan Parties or any stock or other equity interest in any of the Loan
Parties, and (vi) the exercise by the Agent and the Lenders of their rights
and remedies (including, without limitation, foreclosure) under any
agreements creating any such Lien (but excluding, in each case, as to any
Indemnitee, any such losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements
incurred solely by reason of the gross negligence or willful misconduct of
such Indemnitee as finally determined by a court of competent jurisdiction).
The Borrower's obligations under this Section shall survive the termination
of this Agreement and the payment of the Obligations.

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SECTION 10.2. RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any
kind to any Loan Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special, time or demand, provisional or final) and any
other indebtedness at any time held or owing by such Lender (including,
without limitation, by branches and agencies of such Lender wherever located)
to or for the credit or the account of any Loan Party against and on account
of the Obligations of the Loan Parties to such Lender under this Agreement or
under any of the other Loan Documents, including, without limitation, all
interests in Obligations purchased by such Lender pursuant to Section 10.7,
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Loan Document, irrespective of whether or
not such Lender shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.

SECTION 10.3. NOTICES. Except as otherwise expressly provided herein,
all notices, requests and demands to or upon the respective parties hereto to
be effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States
mail, postage prepaid, or, in the case of telex notice, when sent, answerback
received, or, in the case of telecopy notice, when sent, or, in the case of a
nationally recognized overnight courier service, one Business Day after
delivery to such courier service, addressed, in the case of each party
hereto, at its address specified opposite its signature below or on the
appropriate Transfer Supplement, or to such other address as may be
designated by any party in a written notice to the other parties hereto,
provided that notices and communications to the Agent shall not be effective
until received by the Agent.

SECTION 10.4. SUCCESSORS AND ASSIGNS; PARTICIPATION; ASSIGNMENTS.

(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Lenders, the Agent, all
future holders of the Revolving Notes and their respective successors and
assigns, all future holders of the Term Notes and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent
of each Lender. No Lender may participate, assign or sell any of its Credit
Exposure (as defined in clause (c) below) except as required by operation of
law, in connection with the merger, consolidation or dissolution of any
Lender or as provided in this Section 10.4.

(b) PARTICIPATION. Any Lender may at any time sell to one or
more Persons (each a "PARTICIPANT") participating interests in any Loan owing
to

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such Lender, any Standby Letter of Credit issued by the Issuing Bank, any
Revolving Note held by such Lender, any Term Notes held by such Lender, any
Commitment of such Lender or any other interest of such Lender hereunder.
Notwithstanding any such sale by a Lender of participating interests to a
Participant, such Lender's rights and obligations under this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such
Revolving Note or Term Note for all purposes under this Agreement (except as
expressly provided below), and the Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. The Borrower agrees that if any
Obligations are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence and during the continuance of an
Event of Default, each Participant shall be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement and any Revolving Note or Term Note to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement or any Revolving Note or Term Note, provided that such
right of setoff shall be subject to the obligations of such Participant to
share with the Lenders, and the Lenders agree to share with such Participant,
as provided in Section 10.7. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.17, 2.18 and 2.19; PROVIDED
that the Borrower shall not be required to pay any amounts pursuant to such
Sections in excess of the amount the Borrower would have been obligated to
pay but for such sale of a participating interest to such Participant. Each
Lender agrees that any agreement beween such Lender and any such Participant
in respect of such participating interest shall not restrict such Lender's
right to agree to any amendment, supplement, waiver or modification to this
Agreement or any other Loan Document, other than amendments, supplements,
modifications and waivers requiring the written consent of all of the Lenders
pursuant to Section 10.5.

(c) ASSIGNMENTS. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to any
Lender or any affiliate thereof or, with the consent of the Agent, to any
other Person (each a "PURCHASING LENDER") all or any part of any Revolving
Loan owing to such Lender, any part of the Term Loans owing to such Lender,
any Standby Letter of Credit issued by the Issuing Bank, the Revolving Note
held by such Lender, the Term Note held by such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder (in respect of
such Lender, its "CREDIT EXPOSURE") pursuant to a supplement to this
Agreement, substantially in the form of Exhibit 10.4(c) hereto (a "TRANSFER
SUPPLEMENT"), executed by such Purchasing Lender, such transferor Lender and
the Agent; PROVIDED, that any assignment to any Purchasing Lender must be in
a minimum amount of $5,000,000 and any such partial assignment shall be an
assignment of an identical percentage of the transferor Lender's Revolving
Loans, Term Loans, L/C Exposure and Commitments. Upon (i) such execution of
such Transfer Supplement, (ii) delivery of an executed copy thereof to the
Borrower and the Agent, (iii) payment by such Purchasing Lender to such
transferor Lender of an amount equal to the

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purchase price agreed between such transferor Lender and such Purchasing
Lender and (iv) payment to the Agent of a processing fee of $3,500, such
transferor Lender shall be released from its obligations hereunder to the
extent of such assignment and such Purchasing Lender shall for all purposes
be a Lender party to this Agreement and shall have all the rights and
obligations of a Lender under this Agreement to the same extent as if it were
an original party hereto, and no further consent or action by the Borrower,
the Lenders or the Agent shall be required. Such Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender as a Lender and
the rsulting adjustment of the Commitments, if any, arising from the purchase
by such Purchasing Lender of all or a portion of the Credit Exposure of such
transferor Lender. Promptly after the consummation of any transfer to a
Purchasing Lender pursuant hereto, the transferor Lender, the Agent and the
Borrower shall make appropriate arrangements so that a replacement Revolving
Note is issued to such transferor Lender and a new Revolving Note is issued
to such Purchasing Lender, in each case in principal amounts reflecting such
transfer.

(d) DISCLOSURE OF INFORMATION. The Borrower authorizes each
Lender to disclose, on a confidential basis, to any Participant or Purchasing
Lender (each, a "TRANSFEREE") and any prospective Transferee any and all
financial and other information in such Lender's possession concerning the
Borrower which has been delivered to such Lender by the Borrower pursuant to
this Agreement or which has been delivered to such Lender by the Borrower in
connection with such Lender's credit evaluation of the Borrower prior to
entering into this Agreement.

(e) The provisions of this SECTION 10.4 shall not apply to
the assignment and pledge for collateral purposes, of any Lender's rights
hereunder or under any Revolving Note or under any Term Note to any Federal
Reserve Bank pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank; PROVIDED that such assignment and pledge shall not relieve such
Lender of any of its obligations hereunder.

SECTION 10.5. AMENDMENTS AND WAIVERS. Neither this Agreement, any
Revolving Note, any Term Note, any other Loan Document to which the Borrower
is a party nor any terms hereof or thereof may be amended, supplemented,
modified or waived except in accordance with the provisions of this Section.
The Required Lenders and the Borrower may, from time to time, enter into
written amendments, supplements, modifications or waivers for the purpose of
adding, deleting, changing or waiving any provisions to this Agreement, the
Revolving Notes, the Term Notes, or the other Loan Documents to which the
Borrower is a party, PROVIDED, that no such amendment, supplement,
modification or waiver shall (a) extend either the Final Maturity Date or any
Term Loans Maturity Date or any installment or required prepayment of any
Obligations or reduce the rate or extend the time of payment of interest on
any Obligations, or reduce the principal amount of any Obligations or reduce
any fee payable to all the Lenders

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hereunder, or release all or substantially all of the Collateral (except as
expressly contemplated by the Loan Documents) or foreclose or otherwise
enforce any remedies with respect to any real property Collateral or change
the amount of any Commitment of any Lender, or amend, modify or waive any
material condition precedent to the making of any Revolving Loan or Term
Loans or the issuing of any Standby Letter of Credit, or amend, modify or
waive any term of subordination of the Subordinated Debt Financing Documents,
or release any Guarantor or amend, modify or waive any material term of any
Guaranty, or modify the manner in which the Lenders share in any payment
received by the Agent or any Lender with respect to any Obligation, or modify
the several nature of the Commitments and the other obligations of the Agent
and the Lenders pursuant to the Loan Documents, or amend, modify or waive any
provision of this SECTION 10.5 or the definition of Required Lenders, or
consent to or permit the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement or any other Loan Document, in
each case without the written consent of all the Lenders, or (b) amend,
modify or waive any provision of SECTION 9 or any other provision of any Loan
Document if the effect thereof is to affect the rights or duties of the
Agent, without the written consent of the then Agent. Any such amendment,
supplement, modification or waiver shall apply to each of the Lenders equally
and shall be binding upon the Borrower, the Lenders, the Agent, all future
holders of the Revolving Notes and all future holders of the Term Notes. In
the case of any waiver, the Borrower, the Lenders and the Agent shall be
restored to their former position and rights hereunder and under the
outstanding Revolving Notes and Term Notes, and any Default or Event of
Default waived shall be deemed to be cured and not continuing, but no such
waiver shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon.

SECTION 10.6. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Agent or any Lender or any holder of a Revolving Note or any
holder of a Term Note in exercising any right, power or privilege hereunder
or under any other Loan Document and no course of dealing between any Loan
Party and the Agent or any Lender or the holder of any Revolving Note or the
holder of any Term Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
under any other Loan Document preclude any other or further exercise thereof
of the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative
and not exclusive of any rights or remedies which the Agent or any Lender or
the holder of any Revolving Note or the holder of any Term Note would
otherwise have. No notice to or demand on any Loan Party in any case shall
entitle any Loan Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent, the
Lenders or the holder of any Revolving Note or the holder of the Term Note to
any other or further action in any circumstances without notice or demand.

SECTION 10.7. SHARING OF PAYMENTS. Each of the Lenders agrees that if
it should receive any amount hereunder (whether by voluntary payment, by
realization upon

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security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the Loan
Documents, or otherwise) which is applicable to the payment of any
obligations, of a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total of such Obligation
then owed and due to such Lender bears to the total of such Obligation then
owed and due to all of the Lenders immediately prior to such receipt, then
such Lender receiving such excess payment shall purchase for cash without
recourse or warranty from the other Lenders an interest in such Obligations
owing to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount; provided that if all or
any portion of such excess amount is thereafter recovered from such Lender,
such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.

SECTION 10.8. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New
York, and, by execution and delivery of this Agreement, the Borrower hereby
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. The Borrower irrevocably consents to the
service of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Borrower at its address set forth opposite its
signature below. The Borrower hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Loan Document brought in the courts referred to above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought
in an inconvenient forum. Nothing herein shall affect the right of the Agent,
any Lender or any holder of a Revolving Note or any holder of a Term Note to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower in any other
jurisdiction.

SECTION 10.9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.

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SECTION 10.10. EFFECTIVENESS. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a counterpart
hereof and shall have delivered the same to the Agent which delivery, in the
case of the Lenders, may be given to the Agent by telecopy (with the
originals delivered promptly to the Agent via overnight courier service) and
the conditions precedent set forth in Section 4.1 have been satisfied.

SECTION 10.11. HEADINGS DESCRIPTIVE. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.

SECTION 10.12. MARSHALLING; RECAPTURE. Neither the Agent nor any
Lender shall be under any obligation to marshal any assets in favor of any
Loan Party or any other party or against or in payment of any or all of the
Obligations. To the extent any Lender receives any payment by or on behalf of
any Loan Party, which payment or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to such Loan Party or its estate, trustee, receiver, custodian
or any other party under any bankruptcy law, state or Federal law, common law
or equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of such Loan Party to such Lender as of the
date such initial payment, reduction or satisfaction occurred.

SECTION 10.13. SEVERABILITY. In case any provision in or obligation
under this Agreement or the Revolving Notes or the Term Note or the other
Loan Documents shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

SECTION 10.14. SURVIVAL. All indemnities set forth herein including,
without limitation, in SECTIONS 2.17, 2.18, 2.19, 2.20, 9.7 and 10.1 shall
survive the execution and delivery of this Agreement and the Revolving Notes
and the Term Note and the making and repayment of the Loans hereunder.

SECTION 10.15. DOMICILE OF LOANS. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Lender.

SECTION 10.16. LIMITATION OF LIABILITY. No claim may be made by any
Loan Party or any other Person against the Agent or any Lender or the
Affiliates, directors, officers, employees, attorneys or agents of any of
them for any special, indirect, consequential or punitive damages in respect
of any claim for breach of contract or any other theory of liability arising
out of or related to the transactions contemplated by this Agreement or any
other Transactions, or any act, omission or event occurring in connection
therewith; and each Loan Party hereby waives, releases and agrees not to sue
upon any claim for

92
<PAGE>

any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.

SECTION 10.17. CALCULATIONS; COMPUTATIONS. The financial statements to
be furnished to the Agent and the Lenders pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved and consistent with GAAP as used in the preparation of the financial
statements referred to in SECTION 5.5, and, except as otherwise specifically
provided herein, all computations determining compliance with SECTION 7.1
hereof shall utilize GAAP.

SECTION 10.18. WAIVER OF TRIAL BY JURY. EACH OF THE BORROWER, THE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER OR
THEREUNDER.

SECTION 10.19. RELEASE OF SECURITY INTERESTS. The Agent and Lenders
agree to release their security interests in the assets of the Hatteras
Division and in the Capital Stock of Hatteras Disposition Corp. upon the
closing of the Hatteras Disposition, provided (a) no Default has occurred and
is continuing and (b) the Agent and the Lenders shall have received any
payment required under Section 2.13(e).

93
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date
first above written.

GENMAR HOLDINGS, INC.

By: /s/ Roger R. Cloutier II
--------------------------------
Executive Vice President
and Chief Financial Officer
Genmar Holdings, Inc.
100 South Fifth Street
Suite 2400
Minneapolis, Minnesota 55402
Telephone: (612) 339-7900
Facsimile: (612) 337-1930

94
<PAGE>

THE BANK OF NEW YORK, as Agent,
Issuing Bank and a Lender

By: /s/ Richard A. Raffetto
---------------------------------
Vice President
The Bank of New York
One Wall Street
U.S. Commercial Banking
Central Division
19th Floor
New York, New York 10286
Attn: Richard A. Raffetto
Telephone: (212) 635-8044
Facsimile: (212) 635-1208

BNY CAPITAL MARKETS, INC.,

as Sole Lead Arranger and
Book Runner

By: /s/ Jeffrey D. Landau
--------------------------------
Managing Director
BNY Capital Markets Inc.
One Wall Street
New York, New York 10286
Attn: Jeffrey D. Landau
Telephone: (212) 635-8260
Facsimile: (212) 635-8268

95
<PAGE>

U.S. BANK NATIONAL ASSOCIATION
By: /s/ Michael Harter
----------------------------------
Vice President
U.S. Bank Place
8th Floor
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attn: Michael Harter
Vice President
Telephone: (612) 973-0849
Facsimile: (612) 973-0824

96
<PAGE>

BANK ONE, WISCONSIN

By: /s/ James W. Engel
---------------------------------
Vice President
Bank One, Wisconsin
Main Office
11 East Wisconsin Avenue
Milwaukee, Wisconsin 53201
Attn: James W. Engel
Telephone: (414) 765-2766
Facsimile: (414) 765-2176

<PAGE>

EXECUTION COPY

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

SUBORDINATED TERM LOAN CREDIT AGREEMENT

among

GENMAR HOLDINGS, INC.

THE FINANCIAL INSTITUTIONS NAMED HEREIN

THE BANK OF NEW YORK

As Agent

and

BNY CAPITAL MARKETS, INC.

As Arranger

Dated as of October 20, 1997

$60,000,000

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>

SUBORDINATED TERM LOAN CREDIT AGREEMENT (hereinafter the "Agreement"),
dated as of October 20, 1997, among GENMAR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), the Lenders (as hereinafter defined), THE BANK OF
NEW YORK, acting in its capacity as agent for the Lenders (the "Agent") and BNY
CAPITAL MARKETS, INC., as Arranger (the "Arranger").

SECTION 1 DEFINITIONS.

Section 1.1 DEFINITIONS. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural number the singular.

"ACCOUNT DEBTOR" shall mean any Person who is or who may become obligated
to the Borrower or any of its Subsidiaries under, with respect to, or on account
of, an Account.

"ADVANCE" shall have the meaning provided in Section 2.1.

"AFFILIATE" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to (i) vote 5% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.

"AGENT" shall mean The Bank of New York acting in its capacity as agent
for the Lenders and any successor agent appointed in accordance with Section
9.9.

"AGENT'S OFFICE" shall mean the office of the Agent located at One Wall
Street, New York, New York 10286, or such other office as the Agent may
hereafter designate in writing as such to the other parties hereto.

"AGREEMENT" shall mean this Subordinated Term Loan Credit Agreement as
the same may from time to time hereafter be modified, restated, supplemented or
amended.

"AGREEMENT DATE" means the date set forth as such on the signature pages
hereof, which date is the date the executed copies of this Agreement were
delivered by all parties hereto and, accordingly, the date this Agreement became
effective and the Lenders first became committed to make the Loans and other
extensions of credit contemplated by this Agreement. If no such

<PAGE>

date is there set forth, the Agreement Date shall be the date as of which
this Agreement is dated.

"ALTERNATE BASE RATE" shall mean, at any particular date, the interest
rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Rate in effect on such day plus 1/2%. For purposes hereof, the term
"PRIME RATE" shall mean the prime commercial lending rate of The Bank of New
York as publicly announced from time to time, such rate to be adjusted
automatically, without notice, on the date of any change in such rate. The
Prime Rate is not necessarily The Bank of New York's lowest rate of interest.
The term "FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York or, if such rate
is not so published for any day that is a Business Day, the average of the
quotations for the day of such transaction received by the Agent from three
Federal funds brokers of recognized standing selected by it. If the Agent shall
have determined that it is unable to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms hereof, the Alternative Base Rate shall
be determined with regard to clause (a) of the first sentence of this
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Prime Rate or the Federal Funds Rate shall be effective on the
date of such change in the Prime Rate or Federal Funds Rate, respectively.

"ARRANGER" shall have the meaning provided in the preamble to this
Agreement.

"ASSIGNMENT OF RENTS AND LEASES" shall mean an assignment of rents and
leases which have been executed and delivered to the Agent by the Loan Parties
party thereto under and in connection with this Agreement (as any such
assignment of rents and leases may be amended, modified or supplemented from
time to time).

"AVERAGE LIFE" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal (or redemption) payment of such security or
instrument multiplied by the amount of such principal (or redemption) payment by
(ii) the sum of all such principal (or redemption) payments.

"BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time, and any successor statute or
statutes.

"BASE RATE LOANS" shall mean the Loan made and/or being maintained at a
rate of interest based upon the Alternate Base Rate.

"BNY INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement
dated as of October 20, 1997 between the Agent and The Bank of New York, as
agent under the BNY Senior Credit Agreement (as such intercreditor agreement may
be amended, modified, supplemented or restated from time to time).

<PAGE>

"BNY SENIOR CREDIT AGREEMENT" means the Second Amended and Restated
Credit Agreement dated as of July 1, 1997 among the Borrower, the financial
institutions named therein and The Bank of New York, as Agent (as such credit
agreement may be amended, modified, supplemented, refinanced or restated from
time to time; PROVIDED that, in the event of any amendment, modification,
supplement, refinancing or restatement, the principal amount of the Indebtedness
under such credit agreement shall not be increased to a principal amount in
excess of $100,000,000).

"BORROWER" shall have the meaning provided in the first paragraph of this
Agreement.

"BORROWING" shall mean the incurrence of one Type of Loan from all the
Lenders on a given date (or resulting from conversions or continuations on a
given date), having in the case of Eurodollar Loans the same Interest Period.

"BORROWING DATE" shall mean a date on which the Borrower has borrowed an
Advance as provided by Section 2.1.

"BORROWING PERIOD" shall have the meaning provided in Section 2.1.

"BUSINESS DAY" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in New York City or Minneapolis a legal holiday or a day on which banking
institutions are authorized or required by law or other government actions to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day which
is a Business Day described in clause (i) and which is also a day for trading by
and between banks for U.S. dollar deposits in the relevant interbank Eurodollar
market.

"CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations of the
Borrower and its Subsidiaries under or in respect of Capitalized Leases.

"CASH EQUIVALENTS" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that

<PAGE>

the full faith and credit of the United States of America is pledged in
support thereof) having maturities of not more than 90 days from the date of
acquisition, (ii) time deposits and certificates of deposit of any Lender or
any domestic commercial bank of recognized standing having capital and
surplus in excess of $500,000,000 with maturities of not more than 90 days
from the date of acquisition, (iii) fully secured repurchase obligations with
a term of not more than seven (7) days for underlying securities of the types
described in clause (i) entered into with any bank meeting the qualifications
specified in clause (ii) above, and (iv) commercial paper issued by the
parent corporation of any Lender or any domestic commercial bank of
recognized standing having capital and surplus in excess of $500,000,000 and
commercial paper or master notes of issuers, rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investor Services, Inc. and in each case
maturing within 90 days after the date of acquisition.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute.

"COLLATERAL" shall mean all property and interests in property now owned
or hereafter acquired in or upon which a Lien has been or is purported or
intended to have been granted to the Agent or any Lender under any of the
Security Documents.

"COLLATERAL ACCOUNT" means (i) the account of the Issuing Banks in the
name of the Agent maintained at The Bank of New York and designated by the Agent
as the "Collateral Account" (ii) each deposit, custody or other account
(whether, in any case, time or demand or interest or non-interest bearing and
whether maintained at a branch or office located within or without the United
States) that is a successor to (A) the account referred to in clause (i) or (B)
a Collateral Account which is such by virtue of this clause (ii), (iii) all
amounts from time to time credited to the Collateral Account, (iv) all cash,
securities, instruments, documents, chattel paper, general intangibles, accounts
and other property (A) from time to time credited to the Collateral Account or
(B) representing investments and reinvestments of amounts from time to time
credited to the Collateral Account, and (v) (A) dividends (whether or not
payable in cash), interest, principal payments and other distributions
(including cash and securities payable in connection with calls, conversions,
redemptions and the like), on, and all rights, contractual and otherwise,
(whether such dividends, interest, principal payments and other distributions
and rights constitute accounts, contract rights, or general intangibles),
arising under, connected with or in any way related to, and (B) proceeds
(including cash and securities receivable in connection with tender and other
offers) of, the Collateral Account.

"COLLATERAL ACCOUNT AGREEMENT" shall mean a collateral account agreement,
among the Agent and an Issuing Bank in the form attached as Annex D to the
Letters of Credit (as such collateral account agreement may be amended, modified
or supplemented from time to time).

"COLLATERAL ACCOUNT COLLATERAL" means the following, IN EACH CASE WHETHER
NOW OR HEREAFTER EXISTING AND WHETHER OR NOT THE SAME IS NOW CONTEMPLATED,
ANTICIPATED OR FORESEEABLE, is subject to Article 8 or 9 of the Uniform
Commercial Code or constitutes Collateral Account Collateral by reason of one or
more

<PAGE>

than one of the following clauses:

(i) the Collateral Account;

(ii) all rights (contractual and otherwise and whether
constituting accounts, contract rights or general intangibles) arising under,
connected with or in any way related to the Collateral Account;

(iii) all claims (including the right to sue or otherwise recover
on such claim) (A) to items referred to in the definition of Collateral, (B)
under warranties relating to any of the Collateral, and (C) against third
parties that in any way arise under or out of or are related to or connected
with any or all of the Collateral; and

(iv) all products and proceeds of Collateral in whatever form.
The inclusion of "proceeds" of Collateral in the definition of "Collateral"
shall not be deemed a consent by the Agent to any sale or other disposition of
any Collateral not otherwise specifically permitted by the terms of a Collateral
Account Agreement.

"COLLATERAL AGENT" has the meaning assigned to that term in the Security
Agreements.

"COMMITMENT" shall mean, for each Lender at any given time, the amount
set forth opposite such Lender's name on Annex I hereto under the heading
"Commitment", as such amount may be reduced from time to time pursuant to
Sections 2.10, 2.14 or 10.4(c).

"CONTINGENT OBLIGATION" as to any Person shall mean any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of such primary obligation against loss in respect thereof; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

"CREDIT EXPOSURE" shall have the meaning provided in Section 10.4(c).

"DEALER ACCOUNT TRANSACTION" shall mean the sale by the Borrower and any
of its

<PAGE>

Subsidiaries of their respective dealer account financing business at a
price of not less than the face value of the assets sold thereby to one or more
financial institutions and for an aggregate purchase price of up to $20,000,000
and which transaction or transactions may permit, during the months of February
through August, inclusive, only of each calendar year, an aggregate outstanding
amount of receivables so sold or from time to time guaranteed by the Borrower
and any of its Subsidiaries not to exceed $25,000,000 in the aggregate during
such period.

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

"DEFAULT RATE" shall have the meaning provided in Section 2.4(c).

"DESIGNATED SUBSIDIARY" shall mean those Subsidiaries of the Borrower
listed as such on Schedule 1.1(b), Annex A, paragraph 3 through 6 thereof.

"DIVIDENDS" shall have the meaning provided in Section 7.6.

"DOMESTIC LENDING OFFICE" shall mean, as to any Lender, the office of
such Lender designated as such on Annex I, or such other office designated by
such Lender from time to time by written notice to the Agent and the Borrower.

"DRAWING EVENT" has the meaning ascribed to that term in the Letters of
Credit.

"DUE DATE" shall mean the date on which payment is due with respect to an
Account, as indicated on the invoice or statement of Account rendered to the
Account Debtor.

"ENVIRONMENTAL AFFILIATE" shall mean, with respect to any Person, any
other Person whose liability for any Environmental Claim such Person has or may
have retained, assumed or otherwise become liable for (contingently or
otherwise), either contractually or by operation of law.

"ENVIRONMENTAL CLAIM" shall mean, with respect to the Borrower, any
notice, claim, demand or similar written communication made upon the Borrower or
any of its Subsidiaries by any other Person (including any Environmental
Affiliate) alleging potential liability in connection with investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, fines or penalties arising out of, based on or
resulting from (i) the presence, or release into the environment, of any
Material of Environmental Concern at any location, whether or not owned by such
Person or (ii) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.

"ENVIRONMENTAL LAWS" shall mean all Federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the

<PAGE>

manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.

"ENVIRONMENTAL LIEN" shall mean any Lien imposed pursuant to any
Environmental Law with respect to any of the Properties.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

"EUROCURRENCY RESERVE REQUIREMENTS" shall mean, with respect to each day
during an Interest Period for Eurodollar Loans, that percentage (expressed as a
decimal) which is in effect on such day, as prescribed by the Federal Reserve
Board or other governmental authority or agency having jurisdiction with respect
thereto for determining the maximum reserves (including, without limitation,
basic, supplemental, marginal and emergency reserves) for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D) maintained
by a member bank of the Federal Reserve System.

"EURODOLLAR BASE RATE" shall mean, with respect to each day during an
Interest Period for Eurodollar Loans, the rate per annum (rounded upwards to the
nearest whole multiple of one-sixteenth of one percent) equal to the offered
quotation to first class banks in the interbank eurodollar market by The Bank of
New York two Business Days prior to the beginning of such Interest Period at or
about 10:00 A.M., New York City time, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Loan of The Bank of New York to be
outstanding during such Interest Period.

"EURODOLLAR LENDING OFFICE" shall mean, as to any Lender, the office of
such Lender designated as such on Annex I, or such other office designated by
such Lender from time to time by written notice to the Agent and the Borrower.

"EURODOLLAR LOANS" shall mean Loans made and/or being maintained at a
rate of interest based upon the Eurodollar Rate.

"EURODOLLAR RATE" shall mean with respect to each day during an Interest
Period for Eurodollar Loans, a rate per annum determined for such day in
accordance with the following formula (rounded upwards to the nearest whole
multiple of 1/100th of one percent):

EURODOLLAR BASE RATE
--------------------

1.00 - Eurocurrency Reserve Requirements

"EVENT OF DEFAULT" shall have the meaning provided in Section 8.

"EXISTING NOTES" shall mean, collectively, the Subordinated Shareholder
Note and the

<PAGE>

Subordinated Demand Note.

"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the Federal
Reserve System as constituted from time to time.

"FEES" shall mean all amounts payable pursuant to Section 2.13.

"FINAL MATURITY DATE" shall mean October 21, 2002.

"FIRST BANK" shall mean First Bank National Association, its successors
and assigns, and, if a Letter of Credit replacing part or all of its Letters of
Credit shall have been issued, the issuer of (a) such replacement Letter of
Credit and (b) each Letter of Credit (a "Replacing Letter of Credit") replacing
such Replacement Letter of Credit or any other Replacing Letter of Credit.

"FLOOR PLAN FINANCING" shall mean that certain floor planning arrangement
among the Borrower and/or any of its Subsidiaries and one or more financial
institutions pursuant to which any such financial institution provides credit to
retail dealers and wholesale distributors which purchase goods from the Borrower
and any of its Subsidiaries.

"GAAP" shall mean United States generally accepted accounting principles
as in effect on the date hereof and consistent with those utilized in the
preparation of the financial statements referred to in Section 5.5.

"GII" shall mean Genmar Industries, Inc., a Delaware corporation and a
wholly-owned indirect subsidiary of the Borrower.

"GOVERNMENTAL APPROVAL" has the meaning ascribed to that term in Section
5.10.

"GUARANTORS" shall mean the Restricted Subsidiaries and each other Person
who executes and delivers to the Agent an agreement to become a Guarantor in the
form of Annex B to the Guaranty.

"GUARANTY" shall mean each guaranty which has been executed and delivered
by each Guarantor under and in connection with this Agreement, together with
each other guaranty required to be executed in accordance with the terms and
provisions hereof, in each case in the form of Exhibit 1.1(b) hereto, (as any
such guaranty have been, are being or hereafter may be amended, modified or
supplemented from time to time).

"HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts and other similar
agreements.

"IMPROVEMENTS" shall mean have the meaning set forth therefor in the
Mortgages.

<PAGE>

course of business of such Person in an aggregate principal amount not to
exceed $750,000 outstanding at any time, (ii) all indebtedness of such Person
evidenced by a note (other than such notes referred to in subclause (i)(y) of
this definition), bond, debenture or similar instrument, (iii) the principal
component of all Capitalized Lease obligations of such Person, (iv) the face
amount of all letters of credit issued for the account of such Person and,
without duplication, all unreimbursed amounts drawn thereunder, (v) all
indebtedness of any other Person secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed, (vi) all
Contingent Obligations of such Person, and (vii) all Hedging Agreements and
currency swaps and similar agreements of such Person in accordance with GAAP.

"INSTRUMENT OF ASSIGNMENT" has the meaning ascribed to that term in the
Letter of Credit.

"INTEREST PERIOD" shall have the meaning provided in Section 2.5.

"INTERNAL FINANCIALS" shall have the meaning provided in Section 5.5.

"ISSUING BANK" shall mean an issuer of a Letter of Credit.

"JUNIOR SECURITIES" of any Person means securities (including capital
stock) issued by such Person to a Lender on account of the Obligations payable
to such Lender pursuant to an order or decree of a court of competent
jurisdiction in a reorganization proceeding under any applicable bankruptcy or
reorganization law, which securities (i) have a maturity, mandatory redemption
obligation or put right, if any, longer than, or occurring after the final
maturity date of, all Senior Indebtedness, of such Person outstanding on the
date of issuance of such Junior Securities (and to any securities issued in
exchange for any such Senior Indebtedness), (ii) are unsecured, (iii) have an
Average Life longer than the securities for which such Junior Securities are
being exchanged, (iv) in the case of debt securities, do not provide for terms
and conditions, and in the case of equity securities do not provide for
covenants, more onerous to such Person than those provided in this Agreement and
(v) by their terms or by law are subordinated to Senior Indebtedness of such
Person outstanding on the date of issuance of such Junior Securities (and to any
securities in exchange for any such Senior Indebtedness), at least to the same
extent as the Subordinated Indebtedness.

"LENDERS" shall mean the financial institutions listed on Annex I hereto
and the financial institutions which from time to time become a party hereto in
accordance with Section 10.4(c).

"LETTER OF CREDIT" shall mean a letter of credit substantially in the
form of Exhibit 1.1(a) to this Agreement, issued by Persons acceptable at time
of issuance to all Lenders (as such letter of credit may be amended, modified or
supplemented from time to time). The initial Letters of

<PAGE>

Credit shall be issued by First Bank and Northern Trust Company, respectively.

"LOAN" shall have the meaning provided in Section 2.1.

"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Security
Documents, the BNY Intercreditor Agreement and the Subordination Agreements
entered into by the Borrower or its Subsidiaries, as applicable, with one or
more Lenders.

"LOAN PARTY" shall mean and include the Borrower and the Restricted
Subsidiaries.

"MARGIN PERCENTAGE" shall mean at any time 0.45%.

"MARGIN STOCK" shall have the meaning provided such term in Regulation U
and Regulation G of the Federal Reserve Board.

"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect upon (i)
the business, operations, properties, assets, prospects or condition (financial
or otherwise) of the Borrower and its Subsidiaries, taken as a whole, or (ii)
the ability of any Loan Party to perform, or of the Agent or any of the Lenders
to enforce, any of the Obligations.

"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean and include chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.

"MORTGAGED PROPERTIES" shall mean each Property set forth on Schedule
1.1(a).

"MORTGAGES" shall mean the mortgages and/or deeds of trust encumbering
the Mortgaged Property which have been executed and delivered to the Agent by
the Loan Parties party thereto under and in connection with this Agreement (as
any such mortgages have been, are being or hereafter may be amended, modified or
supplemented from time to time).

"NON-PAYMENT DEFAULT" means any event (other than a Payment Default) upon
the occurrence of which the maturity of the Senior Indebtedness may be
accelerated.

"NOTE" shall have the meaning provided in Section 2.1.

"NOTICE OF BORROWING" shall have the meaning provided in Section 2.2(a).

"NOTICE OF CONVERSION OR CONTINUATION" shall have the meaning provided in
Section 2.7(b).

<PAGE>

"OBLIGATIONS" shall mean all obligations, liabilities and indebtedness of
every nature of the Borrower and the Guarantors from time to time owing to the
Agent, or any Lender under or in connection with this Agreement or any other
Loan Document.

"OBLIGOR" shall have the meaning provided in Section 11.2.

"OFFICER'S CERTIFICATE" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President, Chief Financial Officer or a Vice
President (regardless of vice presidential designation) of the Borrower.

"PARTICIPANT" shall have the meaning provided in Section 10.4(b).

"PAYMENT DATE" shall mean the last day of each January, April, July and
October of each year.

"PAYMENT DEFAULT" means any default (beyond any applicable grace period)
in the payment of principal of, or interest on, any Senior Indebtedness or of
any other amount in excess of $100,000 of any Senior Indebtedness.

"PERMITTED LIENS" shall have the meaning provided in Section 7.2(a).

"PERMITTED ORGANIZATIONAL CHANGES" shall mean the changes to the
ownership of Subsidiaries and the transfer of assets among the Loan Parties
described in Schedule 1.1(b).

"PLEDGE AGREEMENT" shall mean a pledge agreement substantially in the
form of Exhibit 1.1(c) hereto (as such pledge agreement may be amended, modified
or supplemented from time to time).

"PROPERTIES" shall mean the real properties, and the improvements
thereon, listed on Schedule 5.21(a)(i).

"PRO RATA SHARE" as to any Lender shall mean a fraction (expressed as a
percentage), the numerator of which shall be the amount of such Lender's
Commitment and the denominator of which shall be the Total Commitment.

"PURCHASING LENDERS" shall have the meaning provided in Section 10.4(c).

"RECOURSE OBLIGATIONS" shall mean the recourse and repurchase obligations
of the Borrower and any of its Subsidiaries pursuant to a Repurchase Agreement.

"RECOVERABLE AMOUNT" has the meaning ascribed to that term in the Letter
of Credit.

"RECOVERABLE EXPOSURE" means the Liability of a Lender to return any
amount received

<PAGE>

by it that constitutes a Recoverable Amount or to pay an amount
equal to or measured by any such amount, and, for this purpose, "Liability"
means any indebtedness, liability, obligation or duty of or binding upon a
Lender or any of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, arising under applicable law, whether now existing
or hereafter arising.

"REGULATION D" shall mean Regulation D of the Federal Reserve Board as
from time to time in effect and any successor to all or any portion thereof.

"REPURCHASE AGREEMENT" shall mean that certain Manufacturer's Repurchase
Agreement to which the Borrower and any of its Subsidiaries is a party with one
or more financial institutions in the form heretofore provided to the Agent,
together with any similar agreement with any other vendors providing
transactions substantially similar to the agreement attached as Annex II to the
Existing Credit Agreement (as defined in the BNY Senior Credit Agreement).

"REQUIRED LENDERS" shall mean Lenders holding more than 75% of the
principal amount of Loans outstanding or, if no Loans are outstanding, more than
75% of the Total Commitments, PROVIDED that, for purposes of Sections 3.1 and
8.2, "Required Lenders" shall mean Lenders holding more than 40% of the
principal amount of Loans outstanding or, if no Loans are outstanding, more than
40% of the Total Commitments.

"RESPONSIBLE OFFICER" of any Person shall mean the chief executive
officer, the chief operating officer, the chief financial officer or the general
counsel of such Person.

"RESTRICTED SUBSIDIARIES" shall mean those Subsidiaries of the Borrower
set forth on Schedule 1.1(c) and each Person required to become a Guarantor
pursuant to Section 6.12.

"SECURED PARTIES" has the meaning ascribed to that term in the Security
Agreement.

"SECURED OBLIGATIONS" has the meaning ascribed to that term in the
Security Agreement.

"SECURITY AGREEMENT" shall mean a security agreement substantially in the
form of Exhibit 1.1(d) hereto (as any such security agreement may be amended,
modified or supplemented from time to time).

"SECURITY DOCUMENTS" shall mean and include the Security Agreement, the
Pledge Agreement, the Trademark Security Agreement, the Mortgages and the
Assignments of Rents and Leases.

"SENIOR AGENT" means (a) The Bank of New York, in its capacity as "Agent"
under the BNY Senior Credit Agreement, or any successor thereto as such Agent,
or (b) any Person from time to time acting as "Agent" under any other Senior
Credit Agreement; provided that for purposes of Section 11 the Agent shall not
be required to recognize any Person other than The Bank of New York as a Senior
Agent unless the predecessor Senior Agent and such successor Senior Agent shall
have notified the Agent of the appointment of such successor Senior Agent under
the Senior Credit Agreement.

<PAGE>

"SENIOR CREDIT AGREEMENT" means (a) the BNY Senior Credit Agreement and
(b) any credit agreement entered into in connection with a refinancing of
amounts outstanding under the BNY Senior Credit Agreement, but only if (i) the
maximum principal amount of the credit available thereunder is not more than the
aggregate principal amount of the Total Commitment under (and as defined in) the
BNY Senior Credit Agreement immediately before such refinancing, (ii) the terms
of such credit agreement are no more onerous to the Borrower and its
Subsidiaries than the terms of the BNY Senior Credit Agreement immediately
before such refinancing, and (iii) the lenders under such credit agreement (or
the agent thereunder for such lenders) enter into an intercreditor agreement,
containing terms substantially similar to the terms of the BNY Intercreditor
Agreement; PROVIDED, HOWEVER, that no credit agreement referred to in clause (b)
hereof shall constitute a "Senior Credit Agreement" unless (x) a copy thereof
shall have been furnished to the Agent at least 15 days prior to the execution
thereof and (y) the Agent shall not have advised the Borrower, within 15 days
after the Agent's receipt of such copy, that such credit agreement does not
qualify as a Senior Credit Agreement under the criteria set forth in clause (b)
above and the proviso thereto.

"SENIOR INDEBTEDNESS" means all Indebtedness (including, without
limitation, interest and interest which would have accrued at the rate specified
in the Senior Loan Documents after the filing of a petition initiating any
proceeding under any bankruptcy law but for the commencement of such proceeding
whether or not allowable as a claim in such proceeding) of the Borrower or any
Subsidiary under the Senior Loan Documents.

"SENIOR LOAN DOCUMENTS" means collectively the Senior Credit Agreement
and each note, guaranty, mortgage, pledge agreement, security agreement and
other instrument and document entered into pursuant thereto, in each case (i) as
in effect on the date hereof or on the date the BNY Senior Credit Agreement is
refinanced by such Senior Credit Agreement or (ii) as amended, or which are
entered into, from time to time hereafter or thereafter.

"SOLVENT" as to any Person shall mean that (i) the sum of the assets of
such Person, both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (ii) such Person will
have sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (iii) such Person has not incurred
debts, and does not intend to incur debts, beyond its ability to pay such debts
as they mature. For purposes of this definition, "debt" means any liability on
a claim, and "claim" means (x) a right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y)
a right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.

"SUBORDINATED CREDITOR" means the Agent, each Lender and each holder from
time to time of any of the Obligations or of any promissory notes or other
instruments evidencing any of the

<PAGE>

Obligations.

"SUBORDINATED DEBT FINANCING DOCUMENTS" shall mean and include the
Offering Memorandum, the Subordinated Notes Indenture, and the Purchase
Agreement, dated July 12, 1994, among Wertheim Schroder & Co. Incorporated, the
Borrower and the "Guarantors" as defined therein.

"SUBORDINATED DEMAND NOTE" shall mean the $25,000,000 demand note dated
March 31, 1994 payable to Irwin L. Jacobs or any replacement thereof made in
accordance with the terms of the applicable Subordination Agreement.

"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness of the Borrower or a
Guarantor expressly subordinated in right of payment to the Obligations.

"SUBORDINATED NOTE" shall mean a 13.5% Series A Senior Subordinated Note
of the Borrower due 2001.

"SUBORDINATED NOTES INDENTURE" shall mean the Indenture, dated as of July
1, 1994 among the Borrower, the parties listed as "Guarantors" therein and First
Trust National Association, as Trustee.

"SUBORDINATED SHAREHOLDER NOTE" shall mean the $4,104,422.12 shareholder
note dated November 24, 1993 payable to Irwin L. Jacobs.

"SUBORDINATION AGREEMENTS" shall mean subordination agreements
substantially in the form of Exhibits 1.1(e) (as any such subordination
agreement may be amended, modified or supplemented from time to time).

"SUBSIDIARY" of any Person shall mean and include (i) any corporation 50%
or more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, is either a general partner or has a 50% or more equity interest
at the time.

"TAXES" shall have the meaning provided in Section 2.17.

"TFC" shall mean Textron Financial Corporation.

"TOTAL COMMITMENT" shall mean, at any time, the sum of the Commitments of
all of the Lenders at such time.

"TRADEMARK SECURITY AGREEMENT" shall mean a trademark security agreement
substantially in the form of Exhibit 1.1(f) hereto (as such trademark security
agreement has been, is being or hereafter may be amended, modified or
supplemented from time to time).

<PAGE>

"TRANSACTION DOCUMENTS" shall mean the Loan Documents and the
Subordinated Debt Financing Documents.

"TRANSACTIONS" shall mean each of the transactions contemplated by the
Transaction Documents.

"TRANSFEREE" shall have the meaning provided in Section 10.4(d)

"TRANSFER SUPPLEMENT" shall have the meaning provided in Section 10.4(c).

"TYPE" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or a Eurodollar Loan.

SECTION 2 AMOUNT AND TERMS OF CREDIT FACILITY.

Section 2.1 TERM LOAN. (a) Subject to and upon the terms and
conditions hereof, each Lender severally and not jointly agrees to make term
loans (each an "ADVANCE" and collectively the "LOAN") to the Borrower in an
aggregate principal amount not to exceed such Lender's Commitment. The Total
Commitment is $60,000,000. The Advances will be available to be borrowed on any
Business Day during the period from October 20, 1997 to and including October
23, 1997 (such period, the "BORROWING PERIOD"), provided that in no event shall
there be more than one (1) Borrowing of Advances. The Borrowing of Advances
shall be in the aggregate minimum amount of $1,000,000 or any integral multiple
of $1,000,000 in excess thereof.

(b) The Loans shall be due and payable together with accrued
and unpaid interest in accordance with Section 2.4(d) on the Final Maturity
Date.

(c) The Borrower's obligation to pay the principal of, and
interest on, each Lender's Loan will be evidenced by this Agreement, the records
of such Lender, and a promissory note (a "NOTE") duly executed and delivered by
the Borrower in the form of Exhibit 2.1 hereto in a principal amount equal to
such Lender's Loan, with blanks appropriately completed in conformity herewith.
Each Note issued to a Lender shall (w) bear interest as provided in Section 2.4,
(x) be payable to the order of such Lender, (y) be dated the initial Borrowing
Date and (z) mature on the Final Maturity Date.

Each Lender is hereby authorized, at its option, either (i) to endorse on
the schedule attached to its Note (or on a continuation of such schedule
attached to such Note and made a part thereof) an appropriate notation
evidencing the date and amount of each Advance and each principal and interest
payment in respect thereof, or (ii) to record such Advance and payments in its
books and records, PROVIDED that the failure of any Lender to make such notation
or any error therein shall not affect the obligation of the Borrower to repay
the Loan made by such Lender in accordance with the terms of this Agreement and
the other Loan Documents. Such schedule or such books and records, as the case
may be, shall constitute prima facie evidence of the accuracy of the information
contained therein.

<PAGE>

Section 2.2 NOTICE OF BORROWING. (a) When the Borrower desires to
borrow Loans hereunder, it shall give the Agent at the Agent's Office prior to
12:00 noon, New York City time, on the day of a requested Base Rate Loan prior
telex, telecopy or telephonic notice (promptly confirmed in writing) of such
Base Rate Loan, and at least three Business Days' prior telex, telecopy or
telephonic notice (promptly confirmed in writing) of a Eurodollar Loan to be
made hereunder. Any such notice (a "NOTICE OF BORROWING") shall be irrevocable,
be in the form of Exhibit 2.2 and shall specify (i) the aggregate principal
amount of the requested Loans, (ii) the date of Borrowing (which shall be a
Business Day), and (iii) whether such Loans shall consist of Base Rate Loans or
Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be
applicable thereto (provided, that no Eurodollar Loans may be requested or made
when any Default or Event of Default has occurred and is continuing).

(b) Promptly after receipt of the Notice of Borrowing, the
Agent shall provide each Lender with a copy thereof and inform each Lender as to
its Pro Rata Share of the Loans requested thereunder.

Section 2.3 DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M., New
York City time, on the date specified in the Notice of Borrowing, the Lender
will make available the amount of its Advance requested to be made on such date,
in U.S. dollars and immediately available funds, at the Agent's office. After
the Agent's receipt of the proceeds of such Advance, the Agent will make
available to the Borrower by depositing in the Borrower's account at the Agent's
Office the aggregate of the amounts so made available in the type of funds
actually received. After the end of the Borrowing Period, the balance, if any,
of the Commitment of each Lender shall be reduced to zero.

(b) Unless the Agent shall have been notified by any Lender
prior to the date of the Borrowing that such Lender does not intend to make
available to the Agent its Advance to be made on such date, the Agent may assume
that such Lender has made such amount available to the Agent on such date and
the Agent in its sole discretion may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such corresponding amount
is not in fact made available to the Agent by such Lender and the Agent has made
such amount available to the Borrower, the Agent shall be entitled to recover
such corresponding amount on demand from such Lender. If such Lender does not
pay such corresponding amount forthwith upon the Agent's demand therefor, the
Agent shall promptly notify the Borrower and the Borrower shall immediately
repay such corresponding amount to the Agent. The Agent shall also be entitled
to recover from such Lender or the Borrower, as the case may be, interest on
such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to the date
such corresponding amount is recovered by the Agent, at a rate per annum equal
to (i) in the case of the Borrower, the then applicable rate of interest,
calculated in accordance with Section 2.4, for the respective Loans and (ii) in
the case of such Lender, at the Federal Funds Rate until the day three (3)
Business Days from such date and thereafter at the then applicable rate of
interest, calculated in accordance with Section 2.4, for the respective Loans.
Nothing herein shall be deemed to relieve any Lender from its obligation to
fulfill its commitments hereunder or to prejudice any rights which the Borrower
may have against any Lender as a result of any default by such Lender
hereunder. Notwithstanding

<PAGE>

anything contained herein or in any other Loan Document to the contrary, the
Agent may apply all funds and proceeds of Collateral available for the
payment of any Obligations first to repay any amount owing by any Lender to
the Agent as a result of such Lender's failure to fund its Loans hereunder.

Section 2.4 INTEREST. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan from the date of
the making of such Loan until such Loan shall be paid in full at a rate per
annum which shall be equal to the Alternate Base Rate in effect from time to
time, such rate to change as and when the Alternate Base Rate changes, such
interest to be computed (i) if calculated by reference to the Federal Funds
Rate, on the basis of a 360-day year, and (ii) if calculated by reference to the
Prime Rate, on the basis of a 365- or 366-day year, as applicable.

(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan from the date of the making of
such Eurodollar Loan until such Eurodollar Loan shall be paid in full at a rate
per annum which shall be equal to the sum of the relevant Eurodollar Rate plus
the Margin Percentage, such interest to be computed on the basis of a 360-day
year.

(c) In the event that, and for so long as, any Event of Default
shall have occurred and be continuing or a Drawing (as defined in a Letter of
Credit) shall have occurred under such Letter of Credit, the outstanding
principal amount of all Loans and, to the extent permitted by law, overdue
interest in respect of all Loans, shall bear interest at a rate per annum (the
"DEFAULT RATE") equal to the sum of two percent (2%) plus the interest rate
otherwise applicable hereunder to such principal amount in effect from time to
time.

(d) Interest on each Loan shall accrue from and including the
date of the Borrowing thereof to but excluding the date of any repayment thereof
and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears
on each Payment Date, (ii) in respect of each Eurodollar Loan, on the last day
of each Interest Period applicable to such Loan and, in the case of an Interest
Period of six months, on the date occurring three months from the first day of
such Interest Period and on the last day of such Interest Period, and (iii) in
the case of all Loans, on any prepayment or conversion (on the amount prepaid or
converted), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.

(e) The Agent shall, upon determining the Eurodollar Rate for
any Interest Period, promptly notify the Borrower and the Lenders thereof.

Section 2.5 INTEREST PERIODS. (a) The Borrower shall, in the Notice
of Borrowing or Notice of Conversion or Continuation in respect of the making
of, conversion into or continuation of a Eurodollar Loan, select the interest
period (each, an "INTEREST PERIOD") applicable to such Eurodollar Loan, which
Interest Period shall, at the option of the Borrower, be either a one-month,
two-month, three-month or six-month period, provided that:

(i) the initial Interest Period for any Eurodollar Loan
shall commence on the date of the making of such Eurodollar Loan
(including the date of any conversion from

17
<PAGE>

a Base Rate Loan) and each Interest Period occurring thereafter in
respect of such Eurodollar Loan shall commence on the date on which
the next preceding Interest Period ends;

(iv) no Interest Period shall extend beyond the Final
Maturity Date.

(b) If upon the last day of any Interest Period, the Borrower
has failed to elect a new Interest Period to be applicable to the respective
Eurodollar Loan as provided above, the Borrower shall be deemed to have elected
to convert such Eurodollar Loans into Base Rate Loans effective as of the last
day of such current Interest Period.

Section 2.6 MINIMUM AMOUNT OF EURODOLLAR LOANS. All borrowings,
conversions, continuations, payments, prepayments and selection of Interest
Periods hereunder shall be made or selected so that, after giving effect
thereto, (i) the aggregate principal amount of any Borrowing comprised of
Eurodollar Loans shall not be less than $10,000,000 or an integral multiple of
$5,000,000 in excess thereof, and (ii) there shall be no more than six
Borrowings comprised of Eurodollar Loans outstanding at any time.

Section 2.7 CONVERSION OR CONTINUATION. (a) Subject to the other
provisions hereof, the Borrower shall have the option (i) to convert at any time
all or any part of outstanding Base Rate Loans which comprise part of the same
Borrowing to Eurodollar Loans, (ii) to convert all or any part of outstanding
Eurodollar Loans which comprise part of the same Borrowing to Base Rate Loans,
on the last day of the Interest Period applicable thereto, or (iii) to continue
all or any part of outstanding Eurodollar Loans which comprise part of the same
Borrowing as Eurodollar Loans for an additional Interest Period, on the last day
of the Interest Period applicable thereto, PROVIDED that no Loan may be
continued as, or converted into, a Eurodollar Loan when any Default or Event of
Default has occurred and is continuing.

(b) In order to elect to convert or continue a Loan under this
Section 2.7, the Borrower shall deliver an irrevocable notice thereof (a "NOTICE
OF CONVERSION OR CONTINUATION") to the Agent no later than 12:00 noon, New York
City time, (i) at least one Business Day in advance of the proposed conversion
date in the case of a conversion to a Base Rate Loan and (ii) at least three
Business Days in advance of the proposed conversion or continuation date in the
case of a conversion to, or a continuation of, a Eurodollar Loan. A Notice of
Conversion or Continuation shall specify (w) the requested conversion or
continuation date (which shall be a Business Day), (x) the amount of the Loan to
be converted or continued, (y) whether a

<PAGE>

conversion or continuation is requested, and (z) in the case of a conversion
to, or a continuation of, a Eurodollar Loan, the requested Interest Period.
Promptly after receipt of a Notice of Conversion or Continuation under this
Section 2.7, the Agent shall provide each Lender with a copy thereof.

Section 2.8 VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three
Business Days' prior irrevocable written notice (or telephonic notice promptly
confirmed in writing) to the Agent (which notice the Agent shall promptly
transmit to each of the Lenders), the Borrower shall have the right, without
premium or penalty, to permanently reduce each Lender's Pro Rata Share of all or
part of the unused Total Commitment, provided that any such partial reduction
shall be in the minimum aggregate amount of $1,000,000 or any integral multiple
of $1,000,000 in excess thereof.

Section 2.9 VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay the Loans in whole or in part from time to time on the following terms
and conditions: (a) the Borrower shall give the Agent written notice (or
telephonic notice promptly confirmed in writing), which notice shall be
irrevocable, of its intent to prepay the Loans at least three Business Days
prior to a prepayment of Eurodollar Loans and at least one Business Day prior to
a prepayment of Base Rate Loans, which notice shall specify the amount of such
prepayment and what Types of Loans are to be prepaid and, in the case of
Eurodollar Loans, the specific Borrowing(s) pursuant to which such Eurodollar
Loan was made, and which notice the Agent shall promptly transmit to each of the
Lenders and (b) each prepayment shall be in an aggregate principal amount of
$1,000,000 or any integral multiple of $1,000,000 in excess thereof. All
prepayments shall be accompanied by accrued interest on the principal amount
being prepaid to but excluding the day of payment. Notwithstanding anything to
the contrary set forth herein, Term Loans, once repaid, may not be reborrowed.

Section 2.10 [This Section deliberately left blank]

Section 2.11 [This Section deliberately left blank]

Section 2.12 METHOD AND PLACE OF PAYMENT. (a) Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
the Notes shall be made to the Agent for the account of the Lenders entitled
thereto not later than 12:00 noon, New York City time, on the date when due and
shall be made in lawful money of the United States of America in immediately
available funds at the Agent's office, and any funds received by the Agent after
such time shall, for all purposes hereof (including the following sentence), be
deemed to have been paid on the next succeeding Business Day. Except as
otherwise specifically provided herein, the Agent shall thereafter cause to be
distributed on the date of receipt thereof to each Lender in like funds its Pro
Rata Share of payments so received.

(b) Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable at the applicable rate
during such extension.

19
<PAGE>

(c) All payments made by the Borrower hereunder and under the
other Loan Documents shall be made irrespective of, and without any reduction
for, any setoff or counterclaims.

Section 2.13 FEES. (a) The Borrower agrees to pay to the Agent on each
anniversary of the Agreement Date an administrative fee and other fees described
in the letter agreement dated October 17, 1997 between the Borrower and the
Agent, which fees shall be non-refundable.

(b) The Borrower agrees to pay to the Agent for the account
of each Lender a commitment fee, computed at the per annum rate of 0.15%, in
each case on the basis of a 360-day year for the actual number of days
elapsed, payable on the average daily unused portion of the Commitment of
such Lender, from and including the day next succeeding the Agreement Date to
the date of the Advances hereunder, payable on the date of such Advances.

Section 2.14 INTEREST RATE UNASCERTAINABLE, INCREASED COSTS,
ILLEGALITY. (a) In the event that the Agent, in the case of clause (i)
below, or any Lender, in the case of clauses (ii) and (iii) below, shall have
determined (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto):

(i) on any date for determining the Eurodollar Rate for any
Interest Period, that by reason of any changes arising after the date of
this Agreement affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of the Eurodollar Rate; or

(ii) at any time, that the relevant Eurodollar Rate applicable
to any of its Eurodollar Loans shall not represent the effective pricing
to such Lender for funding or maintaining a Eurodollar Loan, or such
Lender shall incur increased costs or reductions in the amounts received
or receivable hereunder in respect of any Eurodollar Loan (other than by
reason of a tax, or an increased tax, on the net income of such Lender),
in any such case because of (x) any change since the date of this
Agreement in any applicable law or governmental rule, regulation,
guideline or order or any interpretation thereof and including the
introduction of any new law or governmental rule, regulation, guideline
or order (such as for example but not limited to a change in official
reserve requirements, but, in all events, excluding reserves required
under Regulation D to the extent included in the computation of the
Eurodollar Rate), whether or not having the force of law and whether or
not failure to comply therewith would be unlawful, and/or (y) other
circumstances affecting such Lender or the interbank Eurodollar market or
the position of such Lender in such market; or

(iii) at any time, that the making or continuance by it of any
Eurodollar Loan has become unlawful by compliance by such Lender in good
faith with any law or governmental rule, regulation, guideline or order
(whether or not having the force of law and whether or not failure to
comply therewith would be unlawful) or has become impracticable as a
result of a contingency occurring after the date of this Agreement which
materially and adversely affects the interbank Eurodollar market;

<PAGE>

then, and in any such event, the Agent or such Lender shall, promptly after
making such determination, give notice (by telephone promptly confirmed in
writing) to the Borrower and (if applicable) the Agent of such determination
(which notice the Agent shall promptly transmit to each of the other Lenders).
Thereafter (x) in the case of clause (i) above, the Borrower's right to request
Eurodollar Loans shall be suspended, and any Notice of Borrowing or Notice of
Conversion or Continuation given by the Borrower with respect to any Borrowing
of Eurodollar Loans which has not yet been made shall be deemed cancelled and
rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower
shall pay to such Lender, upon such Lender's delivery of written demand therefor
to the Borrower with a copy to the Agent, such additional amounts (in the form
of an increased rate of interest, or a different method of calculating interest,
or otherwise, as such Lender in its sole discretion exercised in a professional
manner shall determine) as shall be required to compensate such Lender for such
increased costs or reduction in amounts received or receivable hereunder and (z)
in the case of clause (iii) above, the Borrower shall take one of the actions
specified in clause (b) below as promptly as possible and, in any event, within
the time period required by law. The written demand provided for in clause (y)
shall, absent manifest error, be final and conclusive and binding upon all of
the parties hereto.

(b) In the case of any Eurodollar Loan or requested Eurodollar
Loan affected by the circumstances described in clause (a)(ii) above, the
Borrower may, and in the case of any Eurodollar Loan affected by the
circumstances described in clause (a)(iii) above the Borrower shall, either (i)
if any such Eurodollar Loan has not yet been made but is then the subject of a
Notice of Borrowing or a Notice of Conversion or Continuation, be deemed to be a
request for a Base Rate Loan with respect to the affected Lender, or (ii) if any
such Eurodollar Loan is then outstanding, require the affected Lender to convert
each such Eurodollar Loan into a Base Rate Loan at the end of the applicable
Interest Period or such earlier time as may be required by law, in each case by
giving the Agent notice (by telephone promptly confirmed in writing) thereof on
the Business Day that the Borrower was notified by the Lender pursuant to clause
(a) above; PROVIDED, HOWEVER, that all Lenders whose Eurodollar Loans are
affected by the circumstances described in clause (a) above shall be treated in
the same manner under this clause (b).

(c) In the event that the Agent determines at any time
following its giving of notice based on the conditions described in clause
(a)(i) above that none of such conditions exist, the Agent shall promptly give
notice thereof to the Borrower and the Lenders, whereupon the Borrower's right
to request Eurodollar Loans from the Lenders and the Lenders' obligation to make
Eurodollar Loans shall be restored.

(d) In the event that a Lender determines at any time following
its giving of a notice based on the conditions described in clause (a)(iii)
above that none of such conditions exist, such Lender shall promptly give notice
thereof to the Borrower and the Agent, whereupon the Borrower's right to request
Eurodollar Loans from such Lender and such Lender's obligation to make
Eurodollar Loans shall be restored.

Section 2.15 FUNDING LOSSES. The Borrower shall compensate each Lender,
upon such Lender's delivery of a written demand therefor to the Borrower, with a
copy to the Agent (which demand shall, absent manifest error, be final and
conclusive and binding upon all of the parties

<PAGE>

hereto), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by such Lender in
connection with the liquidation or reemployment of deposits or funds required
by it to make or carry its Eurodollar Loans) that such Lender sustains or may
sustain: (i) if for any reason (other than a default by such Lender) a
Borrowing of, or conversion from or into, or a continuation of, Eurodollar
Loans does not occur on a date specified therefor in a Notice of Borrowing or
Notice of Conversion or Continuation (whether or not rescinded, cancelled or
withdrawn or deemed rescinded, cancelled or withdrawn, pursuant to Section
2.14(a) or 2.14(b) or otherwise), (ii) if any repayment (including, without
limitation, payment after acceleration) or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of the Interest
Period applicable thereto, (iii)if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by
the Borrower, or (iv) as a consequence of any default by the Borrower in
repaying its Eurodollar Loans or any other amounts owing hereunder in respect
of its Eurodollar Loans when required by the terms of this Agreement.
Calculation of all amounts payable to a Lender under this Section 2.15 shall
be made on the assumption that such Lender has funded its relevant Eurodollar
Loan through the purchase of a Eurodollar deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan with
a maturity equivalent to the Interest Period applicable to such Eurodollar
Loan, and through the transfer of such Eurodollar deposit from an offshore
office of such Lender to a domestic office of such Lender in the United
States of America, provided that each Lender may fund its urodollar Loans in
any manner that it in its sole discretion chooses and the foregoing
assumption shall only be made in order to calculate amounts payable under
this Section 2.15. Such compensation may include an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a
failure to borrow, convert or continue, the interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein over (ii) the amount of interest
(as reasonably determined by such Lender) which would have accrued to such
Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank eurodollar market.

Section 2.16 INCREASED CAPITAL. If any Lender shall have determined
that compliance with any applicable law, rule, regulation, guideline, request or
directive (whether or not having the force of law) of any governmental
authority, central bank or comparable agency (other than by reason of a tax or
an increased tax, on the net income of such Lender), has or would have the
effect of reducing the rate of return on the capital or assets of such Lender,
or any Person Controlling such Lender, as a consequence of its commitments or
obligations hereunder, then from time to time, upon such Lender's delivering a
written demand therefor to the Agent and the Borrower, the Borrower shall pay to
such Lender such additional amount or amounts as will compensate such Lender for
such reduction.

Section 2.17 TAXES. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without reduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any

<PAGE>

governmental authority excluding, in the case of the Agent and each Lender,
net income and franchise taxes imposed on the Agent or such Lender by the
jurisdiction under the laws of which the Agent or such Lender is organized or
any political subdivision or taxing authority thereof or therein, or by any
jurisdiction in which such Lender's Domestic Lending office or Eurodollar
Lending Office, as the case may be, is located or any political subdivision
or taxing authority thereof or therein or by reason of such Lender's failure
to comply with Section 2.17(b) hereof (all such non-excluded taxes, levies,
imposts, deductions, charges or withholdings being hereinafter called
"TAXES"). If any Taxes are required to be withheld from any amounts payable
to the Agent or any Lender hereunder or under the Notes, the amounts so
payable to the Agent or such Lender shall be increased to the extent
necessary to yield to the Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Notes. Whenever any Taxes are
payable by the Borrower, as promptly as possible thereafter, the Borrower
shall send to the Agent for its own account or for the account of such Lender
a certified copy of an original official receipt received by the Borrower
showing payment thereof or other evidence thereof reasonably satisfactory to
the Agent. If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or
other documentary evidence, the Borrower shall indemnify the Agent and the
Lenders for any incremental taxes, interest or penalties that may become
payable by the Agent or any Lender as a result of any such failure. The
agreements in this Section 2.17 shall survive the termination of this
Agreement and the payment of the Notes and all other Obligations.

(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof (including each Purchasing Lender
that becomes a party to this Agreement pursuant to Section 10.4(c)) agrees that,
prior to the first date on which any payment is due to it hereunder, it will
deliver to the Borrower and the Agent (i) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, certifying in each case that such Lender is entitled to
receive payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States Federal income taxes, and (ii) an
Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the
case may be, to establish an exemption from United States backup withholding
tax. Each Lender which delivers to the Borrower and the Agent a Form 1001 or
4224 and Form W-8 or W-9 pursuant to the preceding sentence further undertakes
to deliver to the Borrower and the Agent two further copies of the said letter
and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of certification, as the case may be, on or before the date that
any such letter or form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent letter and form previously
delivered by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower, certifying in the case of a Form 1001
or 4224 that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States Federal income taxes,
unless there has been a change in law (including, without limitation, any change
in treaty, statute, regulation or official interpretation) prior to the date on
which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such letter or form with respect to it and such Lender advises
the Borrower that it is not capable of receiving

<PAGE>

payments without any deduction or withholding of United States Federal income
tax, and in the case of a Form W-8 or W-9, establishing an exemption from
United States backup withholding tax.

Section 2.18 CHANGE OF OFFICE, ETC. Any of the Agent or any Lender
claiming any additional amounts payable pursuant to Sections 2.14(a)(iii) or
2.17 shall use reasonable efforts (consistent with legal and regulatory
restrictions) (including reasonable efforts to change the jurisdiction of its
applicable lending office) to avoid the need for or reduce the amount of any
such additional amounts that may thereafter accrue, provided that such efforts
would not, in the sole determination of such Lender or the Agent, as the case
may be, be otherwise disadvantageous to such Lender or the Agent.

Section 2.19 USE OF PROCEEDS. The proceeds of the Loans shall be used
solely by the Borrower to finance the repurchase of up to $75,000,000 aggregate
principal amount of the Borrower's Subordinated Notes, including payment of
consent and other fees and related expenses.

SECTION 3 LETTERS OF CREDIT.

Section 3.1 DRAWING UNDER LETTERS OF CREDIT. Upon occurrence of a
Drawing Event, the Agent may, and upon the instruction of the Required Lenders
shall, draw under the Letters of Credit. Such drawings shall be made under each
Letter of Credit PRO RATA on the basis of the relative undrawn amounts thereof.
The Agent shall promptly notify each Lender of a drawing under the Letters of
Credit.

Section 3.2 CASH COLLATERAL. Drawings under the Letters of Credit that
are on account of Recoverable Amounts shall be deposited by the Agent in the
Collateral Account to be held in accordance with the Collateral Account
Agreements.

Section 3.3 INSTRUMENTS OF ASSIGNMENT. Each Lender hereby authorizes
the Agent to execute and deliver, in its name and on its behalf, an Instrument
of Assignment and to execute and deliver Collateral Account Agreements.

Section 3.4 REPLACEMENT OF LETTERS OF CREDIT. Upon the request of the
Borrower, the Agent shall accept (a) at any time following 120 days after any
prepayment of the Loans, one or more replacement or amended Letters of Credit
with an aggregate drawable amount reasonably acceptable to the Agent but in any
event no less than the outstanding principal amount of the Loan, together with
interest accruing for a six-month period computed on the basis used for the
Letters of Credit issued on the Agreement Date and (b) any replacement Letter of
Credit with an aggregate drawable amount equal to the original Letter of Credit
that is being replaced by such replacement Letter of Credit, PROVIDED that, in
each case, such replacement Letter of Credit is issued by a Person acceptable at
the time of issuance to all Lenders. The Agent agrees that, upon receipt of a
replacement Letter of Credit in accordance herewith, it will promptly surrender
the original Letter of Credit that is being replaced.

<PAGE>

SECTION 4 CONDITIONS PRECEDENT.

Section 4.1 CONDITIONS PRECEDENT TO INITIAL ADVANCES. The obligation
of each Lender to make its initial Advance is subject to the determination of
each Lender, in its sole and absolute discretion, that each of the following
conditions has been fulfilled:

(a) the Agent shall have received each of the following, in
form and substance and, in the case of the materials referred to in clauses (i)
and (v), certified in a manner satisfactory to the Agent:

(i) a certificate of the Secretary or an Assistant
Secretary of each Loan Party, dated the requested date for the making
of such Advance, certifying (1) the names and true signatures of the
incumbent offices of such Person authorized to sign the applicable Loan
Documents, (2) the resolutions of such Person's Board of Directors
approving and authorizing the execution, delivery and performance of
all Loan Documents executed by such Person, (3) that there have been
no changes in the by-laws of such Person since March 27, 1996, except
as otherwise set forth in such certificate, and, to the extent of any
such changes, a copy thereof and (4) that there have been no changes
in the certificate of incorporation of such Person since March 27, 1996,
except as otherwise set forth in such certificate, and, to the extent of
any such changes, a copy thereof certified by the Secretary of State of
incorporation of such Loan Party;

(ii) a legal opinion, dated the requested date for the
making of such Advance, from Weil, Gotshal & Manges LLP, special New York
counsel to the Loan Parties;

(iii) a legal opinion, dated the requested date for the
making of such Advance, from Mary McConnell, general counsel of the
Borrower;

(iv) a legal opinion of counsel for the Agent, dated the
requested date for the making of such Advance;

(v) a copy of each Governmental Approval listed on
Schedule 5.10;

(vi) a duly executed Note for each Lender;

(vii) a duly executed copy of the Guaranties;

(viii) a duly executed copy of the Security Documents;

(ix) a duly executed copy of the BNY Intercreditor
Agreement;

(x) such instruments and other documents as the Agent
may request, the possession of which is necessary or appropriate in the
Agent's determination to create or perfect a security interest in the
Collateral under Applicable Law; and

<PAGE>

(xi) evidence that fees payable on or prior to the
requested date of such Advance, and all amounts payable pursuant to
Section 10.1 for which invoices have been delivered to the Borrower on or
prior to such date, have been paid in full or will be paid in full
concurrently with the disbursement of the proceeds of the Advances to be
made on such date.

(b) Letters of Credit with total drawable amount of at least
$63,135,000 shall have been duly issued and delivered to the Agent.

(c) Subordinated Notes of at least $62,500,000 principal amount
shall have been accepted for purchase by the Borrower and shall be repurchased
with the proceeds of the Loans.

(d) Schedule 4.1(d) shall list any present or contingent
environmental liability or potential Environmental Claim to which either the
Borrower or any of its Subsidiaries is subject to which could reasonably be
expected to have a Material Adverse Effect of which the Lenders shall not have
been notified pursuant to the BNY Senior Credit Agreement.

Section 4.2 CONDITIONS TO EACH ADVANCE. The obligation of each Lender
to make each Advance requested to be made by it, including its initial Advance,
is subject to the determination of such Lender, in its sole and absolute
discretion, that each of the following conditions has been fulfilled:

(a) the Agent shall have received a Notice of Borrowing with
respect to such Advance complying with the requirements of Section 2.2;

(b) each representation and warranty made or deemed made under
any Loan Document shall be true and correct at and as of the time such Advance
is to be made, both with and without giving effect to such Advance and all other
Advances to be made at such time and to the application of the proceeds thereof;

(c) no Default shall have occurred and be continuing at the
time such Advance is to be made or would result from the making of such Advance
and all other Advances to be made at such time or from the application of the
proceeds thereof;

(d) such Lender shall have received such information as it may
have requested pursuant to Section 6.1(o); and

(e) such Advance will not contravene any Applicable Law
applicable to such Lender.

Except to the extent that the Borrower shall have disclosed in the notice
of borrowing, or in a subsequent notice given to the Lenders prior to 5:00 p.m.
on the Business Day before the requested date for the making of the requested
Advances, that a condition specified in clause (b) or (c) above will not be
fulfilled as of the requested time for the making of such Advances, the Borrower
shall be deemed to have made a representation and warranty as of the time of the
making of such Advances that the conditions specified in such clauses have been
fulfilled as of

<PAGE>

such time. No such disclosure by the Borrower that a condition specified in
clause (b) or (c) above will not be fulfilled as of the requested time for
the making of the requested Advances shall affect the right of each Lender to
not make the Advances requested to be made by it if, in such Lender's
determination, such condition has not been fulfilled at such time.

Section 4.3 METHOD OF DELIVERY. All of the Notes, if any,
certificates, agreements, legal opinions and other documents and papers referred
to in this Section 4, unless otherwise specified, shall be delivered to the
Agent for the account of each of the Lenders and, except for the Notes, if any,
in sufficient counterparts for each of the Lenders, and shall be satisfactory in
form and substance to each Lender in its sole discretion.

SECTION 5 REPRESENTATIONS AND WARRANTIES.

In order to induce the Lenders to enter into this Agreement and to make
the Loan, the Borrower makes the following representations and warranties,
which shall survive the execution and delivery of this Agreement and the Notes
and the making of Loan:

Section 5.1 CORPORATE STATUS. Each Loan Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and authority to
own its property and assets and to transact the business in which it is engaged
or presently proposes to engage and (iii) except where the failure to do so
would not, in the aggregate, result in a Material Adverse Effect, has duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in every jurisdiction in which it owns or leases real property or in
which the nature of its business requires it to be so qualified.

Section 5.2 CORPORATE POWER AND AUTHORITY. Each Loan Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Transaction Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of such Transaction Documents. Each Loan Party has duly
executed and delivered each of the Transaction Documents to which it is party,
and each such Transaction Document constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms.

Section 5.3 NO VIOLATION. Neither the execution, delivery or
performance by any Loan Party of the Transaction Documents to which it is a
party, nor compliance by it with the terms and provisions thereof nor the
consummation of the Transactions, (i) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality or (ii) will conflict or be inconsistent
with or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except pursuant
to the Security Documents) upon any of the property or assets of any Loan Party
pursuant to the terms of any indenture, mortgage, deed of trust, agreement or
other instrument to which such Loan Party is a party or by which it or any of
its property or assets is bound or to

<PAGE>

which it may be subject, or (iii) will violate any provision of the
certificate of incorporation or by-laws of any Loan Party.

Section 5.4 LITIGATION. There are no actions, suits or proceedings
pending or, to the best knowledge of the Borrower, threatened (i) with respect
to any of the Transactions or Transaction Documents or (ii) that could,
individually or in the aggregate, result in a Material Adverse Effect.

Section 5.5 FINANCIAL STATEMENTS; FINANCIAL CONDITION; ETC. The
internally prepared financial statements of the Borrower and its Subsidiaries
dated as of August 31, 1997 (the "INTERNAL FINANCIALS") delivered to the Agent
and the Lenders in connection with this Agreement were prepared in accordance
with GAAP consistently applied and fairly present the financial condition and
the results of operations of the entities covered thereby on the dates and for
the periods covered thereby and subject to normally recurring year-end
adjustments. No Loan Party has any material liability (contingent or otherwise)
other than those reflected on the Internal Financials or as set forth on
Schedule 5.5.

Section 5.6 SOLVENCY. On the Agreement Date and after and giving
effect to the Transactions, (x) the Borrower and (y) the Borrower and its
Subsidiaries, on a consolidated basis, will be Solvent.

Section 5.7 [This Section deliberately left blank]

Section 5.8 MATERIAL ADVERSE CHANGE. Since the date of the most recent
audited consolidated financial statements of the Borrower dated June 30, 1997,
there has occurred no event, act or condition which has or could have resulted
in a Material Adverse Effect.

Section 5.9 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds of Loan
will be used by the Borrower only in accordance with the provisions of Section
2.19. No part of the proceeds of the Loan will be used by the Borrower to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulations G, T, U or X of the Federal Reserve Board.

Section 5.10 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof (a "Governmental Approval"), is required to authorize, or is
required in connection with (i) the execution, delivery and performance of any
Transaction Document or the consummation of any of the Transactions or (ii) the
legality, validity, binding effect or enforceability of any Transaction
Document, except (x) those listed on Schedule 5.10 that have already been duly
made or obtained and remain in full force and effect and (y) filings necessary
to perfect the security interests granted or to be granted by the Security
Documents.

Section 5.11 SECURITY INTERESTS AND LIENS. The Security Documents
create, or, in the case of the Mortgages and the Assignments of Rents and
Leases, will create, as security for the

<PAGE>

Secured Obligations, valid and enforceable security interests in and Liens on
all of the Collateral, and subject to no other Liens other than Liens
permitted pursuant to Section 7.2(a), (b), (c), (d) or (e).

Section 5.12 TAX RETURNS AND PAYMENTS. Each Loan Party has filed all
tax returns required to be filed by it and has paid all taxes and assessments
payable by it which have become due other than those not yet delinquent or those
that are adequately reserved against in accordance with GAAP which are being
diligently contested in good faith by appropriate proceedings.

Section 5.13 [This Section deliberately left blank]

Section 5.14 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither the Borrower nor any of its Subsidiaries is (x) an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended, (y) a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate"
of either a "holding company" or a "subsidiary company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended, or (z) subject to
any other Federal or state law or regulation which purports to restrict or
regulate its ability to borrow money.

Section 5.15 REPRESENTATIONS AND WARRANTIES IN TRANSACTION DOCUMENTS.
All representations and warranties made by any Loan Party in the Transaction
Documents (other than the Loan Documents) are true and correct in all material
respects. None of such representations and warranties are inconsistent in any
material respect with the representations and warranties of any Loan Party made
herein or in any other Loan Document.

Section 5.16 TRUE AND COMPLETE DISCLOSURE; FINANCIAL STATEMENTS. All
factual information (taken as a whole) furnished by or on behalf of any Loan
Party in writing to the Agent or any Lender for purposes of or in connection
with this Agreement or any of the Transactions is true and accurate in all
material respects on the date as of which such information is dated or furnished
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time. All of the
financial statements of the Borrower and its Subsidiaries furnished by or on
behalf of any Loan Party to the Agent or any Lender for purposes of or in
connection with the Transactions were prepared in accordance with GAAP and
fairly present the financial condition and results of operations of the
appropriate Loan Parties at the dates and for the periods respectively covered
thereby. As of the Agreement Date, there are no facts, events or conditions
known to the Borrower which, individually or in the aggregate, have or could be
expected to have a Material Adverse Effect.

Section 5.17 CORPORATE STRUCTURE; CAPITALIZATION. Schedule 5.17 hereto
sets forth the number of authorized and issued shares of capital stock of the
Borrower and each of its Subsidiaries, the par value thereof and the registered
owner(s) thereof. All of such stock has been duly and validly issued and is
fully paid and non-assessable. Neither any Loan Party nor any such Subsidiary
has outstanding any securities convertible into or exchangeable for its capital
stock nor does any Loan Party or any such Subsidiary have outstanding any
rights to

<PAGE>

subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.

Section 5.18 [This Section deliberately left blank.]

Section 5.19 [This Section deliberately left blank.]

Section 5.20 PATENTS, TRADEMARKS, ETC. Each of the Loan Parties has
obtained and holds in full force and effect, free from burdensome restrictions,
all patents, trademarks, servicemarks, trade names, copyrights and other such
rights, in each case which are necessary for the operation of its business as
presently conducted. No product, process, method, substance, part or other
material presently manufactured by any Loan Party in connection with such
business infringes any patent, trademark, service mark, trade name, copyright,
license or other right owned by any other Person, which infringement could
result in a Material Adverse Effect. There is not pending or overtly threatened
any claim or litigation against or affecting any Loan Party contesting its right
to sell or use any such product, process, method, substance, part or other
material.

Section 5.21 OWNERSHIP OF PROPERTY. (a) Schedule 5.21(a)(i) sets forth
all the real property owned or leased by the Loan Parties and used or held for
use in connection with the business of the Loan Parties and identifies the
street address (or a legal description of such property), the current owner (and
current record owner, if different) and whether such property is leased or
owned. The Loan Parties have good and marketable fee simple title to or valid
and subsisting leasehold interests in all of such real property free and clear
of all liens, claims, encumbrances, restrictions, rights of way, easements,
encroachments and charges or adverse claims or interests of any nature other
than Liens permitted by Section 7.2, and good and valid title to all of their
personal property other than such immaterial real property set forth on Schedule
5.21(a)(ii) subject to no Lien of any kind except Liens permitted hereby. The
Loan Parties enjoy peaceful and undisturbed possession under all of their
respective leases.

(b) Except as set forth on Schedule 5.21(b), all buildings,
structures, heating and air conditioning equipment, plumbing, electrical and
other mechanical systems and equipment and the roofs, walls and other structural
components included in the Properties are in good operating condition and repair
(normal wear and tear excepted), do not require any material repairs and are
adequate for the uses for which they are currently utilized and comply in all
material respects with all applicable laws, building, fire, health and safety
codes, ordinances and zoning rules and zoning ordinances. There are no pending
or, to the Loan Parties' knowledge, threatened material suits, actions or
proceedings, including, without limitation, condemnation or eminent domain
proceedings, affecting the Mortgaged Property or any part thereof.

(c) Except as otherwise disclosed to the Agent, to the best
knowledge of the Borrower, based on the Flood Hazard Certificates prepared by
the Central Flood Hazard Agency, none of the Properties are located in a flood
hazard area as defined by the Federal Insurance Administration.

<PAGE>

(d) Except as disclosed in the surveys or title insurance
policies delivered to the lenders under the BNY Senior Credit Agreement, all
Improvements comprising a portion of any Property lie wholly within the boundary
and building restriction lines of such Property and no improvements on adjoining
properties encroach upon any Property.

Section 5.22 NO DEFAULT. No Loan Party is in default under or with
respect to any Transaction Document or any other agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound in any respect which could result in a Material Adverse Effect. No
Default or Event of Default exists.

Section 5.23 LICENSES, ETC. The Loan Parties have obtained and hold in
full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.

Section 5.24 COMPLIANCE WITH LAW. Each Loan Party is in compliance with
all laws, rules, regulations, orders, judgments, writs and decrees other than
such non-compliance which, individually or in the aggregate, could not have a
Material Adverse Effect.

Section 5.25 NO BURDENSOME RESTRICTIONS. No Loan Party is a party to
any agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which, individually or in the aggregate, could have a Material Adverse Effect.

Section 5.26 [This Section deliberately left blank].

Section 5.27 LABOR MATTERS. There is no presently existing dispute or
controversy between the Borrower or any of its Subsidiaries and any of their
respective employees which has had or is likely to have, and the Borrower has no
reason to believe that the relationship of the Borrower and its Subsidiaries
with their unions or employees is likely to have, a Material Adverse Effect.
The Borrower and each of its Subsidiaries are in compliance in all material
respect with all federal and state laws with respect to non-discrimination in
employment and the payment of wages.

SECTION 6 AFFIRMATIVE COVENANTS.

The Borrower covenants and agrees that on and after the Agreement Date
and until the Total Commitment has terminated and the Obligations are paid in
full:

Section 6.1 INFORMATION COVENANTS. The Borrower will furnish to the
Agent and each Lender:

(a) ANNUAL FINANCIAL STATEMENTS. Within 120 days after the
close of each fiscal year of the Borrower, the consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal
year and the related consolidated and consolidating statements of income and
consolidated cash flow and retained earnings for such fiscal year

<PAGE>

setting forth comparative figures for the preceding fiscal year disclosing
all loss contingencies of a type requiring disclosure under standards
promulgated by FASB and, with respect to such consolidated financial
statements, audited by Arthur Andersen & Co. or other independent certified
public accountants of recognized national standing reasonably acceptable to
the Required Lenders, and accompanied by an opinion of such accountants
(which shall not be qualified) to the effect that such consolidated financial
statements fairly present the financial condition and result of operations of
the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied.

(b) QUARTERLY FINANCIAL STATEMENTS. Within 60 days after the
close of each quarterly accounting period in each fiscal year of the Borrower,
the consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly period and the related consolidated
and consolidating statements of income and consolidated cash flow and retained
earnings for such quarterly period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period disclosing all material
changes in loss contingencies of a type requiring disclosure under standards
promulgated by FASB, in each case setting forth comparative figures for the
related periods in the prior fiscal year and accompanied by a certificate of the
chief financial officer of the Borrower which certifies that such consolidated
financial statements fairly present the financial condition and result of
operations of the Borrower and its Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end
adjustments.

(d) MANAGEMENT LETTERS. Promptly after the Borrower's receipt
thereof, a copy of any "management letter" or other material report received by
the Borrower from its certified public accountants.

(e) FINANCIAL PROJECTIONS. Within 90 days after the first day
of each fiscal year of the Borrower, commencing with the fiscal year beginning
July 1, 1998, a financial forecast of results of operations and sources and uses
of cash (in the form of the projections provided to the Agent and the Lenders in
connection with this Agreement) prepared by the Borrower for the period
extending through the quarterly period ending with June 30, 2001, accompanied by
a written statement of the assumptions used in connection therewith, together
with a certificate of the chief financial officer of the Borrower to the effect
that such budget and financial forecast and assumptions, taken as a whole, are
reasonable and represent the Borrower's good faith estimate of its future
financial requirements and performance. The financial statements required to be
delivered pursuant to clauses (a), (b) and (c) above shall be accompanied by a
comparison of the actual financial results set forth in such financial
statements to those contained in the forecasts delivered pursuant to this clause
(e) together, upon request of the Agent or any Lender, with an explanation of
any material variations from the results anticipated in such forecasts.

(f) CERTIFICATES. At the time of the delivery of the financial
statements under clauses (a) and (b) above, a certificate of the accounting firm
or the chief financial officer of the Borrower which opines or certifies with
respect to such financial statements that after due

<PAGE>

investigation and reasonable inquiry, no Default or Event of Default has
occurred during the period commencing at the beginning of the accounting
period covered by the financial statements accompanied by such certificate
and ending on the date of such certificate or, if any Default or Event of
Default has occurred, specifying the nature and extent thereof and, if
continuing, the action the Borrower proposes to take in respect thereof.

(g) NOTICE OF DEFAULT OR LITIGATION. Promptly and in any event
within ten (10) Business Days after any Loan Party obtains knowledge thereof,
notice of (i) the occurrence of any Default or Event of Default, (ii) any
litigation or governmental proceeding pending or threatened against the Borrower
or any or its Subsidiaries which could result in a Material Adverse Effect and
(iii) any other event, act or condition which could result in a Material Adverse
Effect.

(h) [This Section deliberately left blank].

(i) SEC FILINGS. Promptly upon transmission thereof, copies of
all regular and periodic financial information, proxy materials and other
information and reports, if any, which any Loan Party shall file with the
Securities and Exchange Commission or any governmental agencies substituted
therefor or which any Loan Party shall send to its stockholders.

(j) [This Section deliberately left blank]

(k) REFINANCINGS. No later than ten (10) Business Days prior
to any extension, refinancing or refunding of Indebtedness pursuant to Section
7.1(b), shall deliver to the Agent copies of the documentation relating to such
extension, refinancing or refunding together with such other information related
thereto as the Agent may reasonably request.

(l) CHARTER DOCUMENTS. No later than ten (10) Business
Days prior to any change therein, the proposed changes to the certificate of
incorporation or the by-laws of the Borrower or any of its Subsidiaries.

(m) NOTICE OF DISSOLUTION. Promptly upon any dissolution of a
Designated Subsidiary, notice thereof.

(n) [This Section deliberately left blank.]

(o) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) as the Agent or any Lender may
reasonably request.

Section 6.2 BOOKS, RECORDS AND INSPECTIONS. The Borrower shall, and
shall cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities. The Borrower shall, and shall cause each of its
Subsidiaries to, permit officers and designated representatives of the Agent or
any Lender to visit and inspect any of the properties of the Borrower or any of
its Subsidiaries, and to examine the books of record and account of the Borrower
or any of its Subsidiaries, and discuss the

<PAGE>

affairs, finances and accounts of the Borrower or any of its Subsidiaries
with, and be advised as to the same by, its and their officers and
independent accountants, all upon reasonable notice to the Borrower and at
such reasonable times as the Agent or such Lender may desire.

Section 6.3 MAINTENANCE OF INSURANCE. The Borrower shall, and shall
cause each of its Subsidiaries to, (a) maintain with financially sound and
reputable insurance companies insurance on itself and its properties in at least
such amounts and against at least such risks as are customarily insured against
in the same general area by companies engaged in the same or a similar business,
which insurance shall in any event not provide for materially less coverage than
the insurance in effect on the Original Effective Date (as defined in the BNY
Senior Credit Agreement) and (b) furnish to the Agent and each Lender from time
to time, upon written request, the policies under which such insurance is
issued, certificates of insurance and such other information relating to such
insurance as the Agent or such Lender may request.

Section 6.4 TAXES. (a) The Borrower shall pay or cause to be paid,
and shall cause each of its Subsidiaries to pay or cause to be paid, prior to
becoming past due, all taxes, charges and assessments and all other lawful
claims required to be paid by the Borrower or such Subsidiaries, except as
contested in good faith and by appropriate proceedings diligently conducted, if
adequate reserves have been

(b) Except to the extent required by applicable law, the
Borrower shall not, and shall not permit any of its Subsidiaries to, file or
consent to the filing of any consolidated, combined or unitary tax return with
any Person (other than the Borrower and/or its Subsidiaries).

Section 6.5 CORPORATE FRANCHISES. The Borrower shall, and shall cause
each of its Subsidiaries to, do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its patents,
trademarks, servicemarks, tradenames, copyrights, franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other rights, consents and approvals other than those which (a) the
board of directors of the Borrower has determined that the preservation thereof
is no longer desirable in the conduct of the Borrower and its Subsidiaries taken
as a whole and (b) individually or in the aggregate, could not have a Material
Adverse Effect.

Section 6.6 COMPLIANCE WITH LAW. The Borrower shall, and shall cause
each of its Subsidiaries to, comply in all material respects with all applicable
laws, rules, statutes, regulations, decrees and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of their business and the ownership of their property,
including, without limitation, all Environmental Laws, other than those which,
individually or in the aggregate, could not have a Material Adverse Effect.

Section 6.7 PERFORMANCE OF OBLIGATIONS. The Borrower shall, and
shall cause each of its Subsidiaries to, perform all of its obligations in
all material respects under the terms of each mortgage, indenture, security
agreement, debt instrument, lease, undertaking and contract by which it or
any of its properties is bound or to which it is a party except where such
non-performance could not have a Material Adverse Effect and shall perform
all of its obligations to

<PAGE>

make payment when due of all amounts payable pursuant to the Subordinated
Debt Financing Documents to the extent permitted by the subordination terms
thereof.

Section 6.8 MAINTENANCE OF PROPERTIES. The Borrower shall, and shall
cause each of its Subsidiaries to, ensure that its properties used or useful in
its business are kept in good repair, working order and condition, normal wear
and tear excepted, and make all repairs, renewals, replacements, additions,
betterments and improvements thereto, as shall be reasonable necessary for the
proper conduct of the Borrower and its subsidiaries taken as a whole.

Section 6.9 LICENSES, PERMITS, ETC. The Borrower shall obtain and
maintain in full force and effect, or cause each of its Subsidiaries on behalf
of the Borrower and its Subsidiaries to obtain and maintain in full force and
effect, all licenses, permits, governmental approvals, franchises,
authorizations or other rights necessary for the operation of its respective
business; and notify the Agent in writing, promptly after any Loan Party learns
thereof, of the suspension, cancellation, revocation or discontinuance of or any
pending or threatened action or proceeding seeking to suspend, cancel, revoke or
discontinue any such license, permit, governmental approval, franchise
authorization or right.

Section 6.10 ENVIRONMENTAL REPORTS. Upon the reasonable written request
by the Agent, the Borrower shall promptly submit to the Agent and the Lenders a
report providing an update of the status of each environmental, health or safety
compliance, hazard or liability issue identified in any notice or report
required pursuant to Section 6.1(j) above and any other environmental, health
and safety compliance obligation, remedial obligation or liability that could
have a Material Adverse Effect.

Section 6.11 APPRAISALS. Within ninety (90) days after a request by the
Agent, the Borrower shall deliver to the Agent appraisals of the Mortgaged
Property in the event that the Agent determines such appraisals are required by
applicable law (including, without limitation, the regulations promulgated under
the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as
amended), which appraisals shall be in form and substance satisfactory to the
Agent, and conducted by appraisers selected or approved by the Agent.

Section 6.12 ADDITIONAL GUARANTORS. If (i) any Person becomes a
Subsidiary of the Borrower after the Agreement Date, (ii) the Borrower or any
Subsidiary of the Borrower that is a Guarantor transfers or causes to be
transferred, in one transaction or a series of related transactions, property or
assets (including, without limitation, businesses, divisions, real property,
assets or equipment) which in the aggregate have a value equal to or greater
than the lesser of $1,000,000 and 5% of the Borrower's total assets determined
on a consolidated basis as of the time of transfer to any Subsidiary or
Subsidiaries of the Borrower that is not a Guarantor or are not Guarantors
(other than AMF Insurance Company of Bermuda Ltd.), or (iii) any Subsidiary
(other than AMF Insurance Company of Bermuda Ltd.) of the Borrower which is not
a Guarantor has a value equal to or greater than the lesser of $1,000,000 and 5%
of the Borrower's total assets determined on a consolidated basis as of the time
of determination, the Borrower shall cause such Subsidiary or Subsidiaries to
execute and deliver to the Agent an

<PAGE>

agreement to become a Guarantor in the form of Annex B to the Guaranty and
such other documents, including Security Documents, as the Agent shall
require.

Section 6.13 AMF INSURANCE COMPANY OF BERMUDA LTD. As of March 31,
1997, the principal asset of AMF Insurance Company of Bermuda Ltd. is a
promissory note from Minstar, Inc. in the amount of $3,000,000. The Borrower
shall cause that neither it nor any of its Subsidiaries make any other loan,
advance, investment or payment of any kind whatsoever to, nor incur or permit to
exist any other obligation, contingent or otherwise, to or on behalf of, AMF
Insurance Company of Bermuda Ltd., other than (i) payments on such promissory
note to meet insurance claims payable by AMF Insurance Company of Bermuda Ltd.
as they are due, (ii) additional payments with respect to the operating expenses
of AMF Insurance Company of Bermuda Ltd. in an aggregate yearly amount not to
exceed $100,000 and (iii) reimbursement of fees paid by AMF Insurance Company of
Bermuda Ltd. with respect to letters of credit with an aggregate face amount
outstanding at any time not to exceed $3,285,000.

Section 6.14 COVENANT TO GIVE SECURITY. The Borrower shall deliver to
the Agent within sixty (60) days following the date hereof, at the expense of
Borrower, (a) duly executed mortgages and deeds of trust encumbering the
Mortgaged Property and an Assignment of Rents and Leases in form and substance
satisfactory to the Agent, securing payment of all the Obligations of the
Borrower and the Guarantors under the Loan Documents and constituting Liens on
all such properties, and (b)(i) the Borrower's written instructions to Chicago
Title Insurance Company (or other title insurance company satisfactory to the
Agent and the Lenders) authorizing the recordation of such mortgages and deeds
of trust and Assignment of Rents and Leases in the appropriate real estate
records of the applicable jurisdiction in which each and every Mortgaged
Property is located and (ii) evidence (including, without limitation, payment
instructions given by the Borrower) that all mortgage or intangible taxes or
recording charges required to be paid in connection with the execution, delivery
or recording of the mortgages and deeds of trust and Assignment of Rents and
Leases. The Borrower shall, and shall cause each of its Subsidiaries to, take
whatever action (including, without limitation, the recording of mortgages, the
filing of Uniform Commercial Code financing statements, the giving of notices
and the endorsement of notices on title documents) may be reasonably necessary
or advisable in the opinion of the Agent to vest in the Agent (or in any
representative of the Agent designated by it) valid and subsisting Liens on the
properties purported to be subject to the mortgagee or deeds of trust and
Assignment of Rents and Leases, as applicable, delivered pursuant to Section
6.14, enforceable against all third parties in accordance with their terms.

Section 6.15 COVENANT TO PROVIDE CERTIFICATE OF INSURANCE. The Borrower
shall deliver to the Agent within ten (10) days following the date hereof, at
the expense of the Borrower, a certificate of insurance demonstrating insurance
coverage in respect of each of the Loan Parties of types, in amounts, with
insurers and with other terms satisfactory to the Lenders, which certificate
shall indicate that the Agent and the Lenders are named additional insured as
their interests may appear and shall contain a lenders loss payee endorsement in
favor of the Agent in form and substance satisfactory to the Agent.

<PAGE>

Section 6.16 COVENANT TO PROVIDE FINANCING STATEMENTS. The Borrower
shall deliver to the Agent within six (6) days following the date hereof such
duly executed UCC-1 financing statements and other documents as the Agent may
request, the filing or recordation of which is necessary or appropriate in the
Agent's determination to create or perfect a security interest in the Collateral
under applicable law.

Section 6.17 COVENANT TO PROVIDE SUBORDINATION AGREEMENTS. The Borrower
shall deliver to the Agent within forty-five (45) days following the date hereof
duly executed copies of the Subordination Agreements.

SECTION 7 NEGATIVE COVENANTS.

The Borrower covenants and agrees that on and after the Agreement Date
until the earlier of (a) the termination of the Total Commitment and the payment
in full of the Obligations and (b) (i) with respect to any Lender (other than
First Bank), the delivery of the Instrument of Assignment to the Issuing Banks,
and (ii) with respect to First Bank, if at such time First Bank is an Issuing
Bank and a lender under the BNY Senior Credit Agreement with a Commitment (as
defined therein) in excess of $10,000,000 (or, if the Commitments shall have
been terminated, with Loans outstanding thereunder in a like principal amount),
the delivery of an instrument of transfer, as referred to in Section
10.4(c)(ii), by First Bank to the Person for whose account the Letter of Credit
was issued by First Bank:

Section 7.1 INDEBTEDNESS. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume, suffer to exist or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, other than:

(a) Indebtedness hereunder and under the other Loan Documents and
under the BNY Senior Credit Agreement and the Guaranties (as defined in the BNY
Senior Credit Agreement);

(b) Indebtedness outstanding on the Agreement Date and set forth
on Schedule 7.1 hereto and any extension, refinancing or refunding thereof;
PROVIDED that (i) the principal amount of the Indebtedness so extended,
refinanced or refunded shall not be increased above the principal amount thereof
outstanding immediately prior to such extension, refinancing or refunding, (ii)
the final maturity of the Indebtedness so extended, refinanced or refunded shall
not be changed to an earlier date, (iii) the amortization schedule shall not be
changed in a manner which results in a shorter average life to maturity, and
(iv) the terms (financial and otherwise) of such extension, refinancing or
refunding shall not be less favorable to the Borrower or its Subsidiary, as the
case may be;

(d) [Intentionally Omitted];

(e) Contingent Obligations not otherwise prohibited hereunder;

<PAGE>

(f) Indebtedness with respect to Capital Leases and other
purchase money Indebtedness, in each case incurred to finance Capital
Expenditures, not in excess of $30,000,000 in the aggregate at any one time
outstanding, PROVIDED that any such Indebtedness shall not exceed the lesser of
the purchase price or the initial fair market value of the asset so financed;

(h) Indebtedness of the Borrower in respect of Hedging Agreements
entered into with one or more Lenders (as defined in the BNY Senior Credit
Agreement) on terms and conditions satisfactory to the Agent; and

(i) Indebtedness of Minstar, Inc. to AMF Insurance Company of
Bermuda, Ltd., described in Section 6.13.

Section 7.2 LIENS. The Borrower shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any of its property now owned or hereafter acquired,
other than:

(a) Liens existing on the Agreement Date and set forth on
Schedule 7.2 hereto ("Permitted Liens");

<PAGE>

detract materially from the value of the property to which they attach or
impair materially the use thereof by the Borrower or any of its Subsidiaries
or materially adversely affect the security interests of the Agent or the
Lenders therein;

(f) Liens granted to the Agent for the benefit of the Lenders
pursuant to the Security Documents securing the Obligations and Liens securing
the BNY Senior Credit Agreement and the Guaranties (as defined in the BNY Senior
Credit Agreement);

(g) Liens created pursuant to Capital Leases and to secure
other purchase-money Indebtedness permitted pursuant to Section 7.1(f), PROVIDED
that such Liens are only in respect of the property or assets subject to, and
secure only, the respective Capital Lease or other purchase-money Indebtedness
and attach within sixty (60) days of the construction or acquisition of such
property or asset; and

(h) Liens securing progress payments made by customers of the
Hatteras Yacht division (i) for yachts of at least 50 feet in length with a
price of no less than $500,000, (ii) so long as the amount of the progress
payments at all times exceeds or is approximately comparable to the cost of time
and materials then completed on such yacht, and (iii) such Lien is solely on the
yacht for which such progress payments were made and does not extend to any
other asset or property of any Loan Party.

Section 7.3 RESTRICTION ON FUNDAMENTAL CHANGES. (a) The Borrower
shall not, and shall not permit any of its Subsidiaries to, in a single
transaction or through a series of related transactions, enter into any merger
or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), discontinue its business or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or series of transactions, all or any
substantial part of its business or property, whether now or hereafter acquired,
except (i) dispositions of assets or property not otherwise expressly prohibited
hereunder, including any dispositions permitted under the BNY Senior Credit
Agreement and (ii) any direct or indirect wholly-owned Subsidiary of the
Borrower may merge into or convey, sell, lease or transfer all or substantially
all of its assets to, the Borrower or any other direct or indirect wholly-owned
Subsidiary of the Borrower in a transaction in which no Person other than the
Borrower or its direct or indirect wholly-owned Subsidiaries receives any
consideration, PROVIDED that immediately following such transaction, the Agent
shall have a perfected security interest in all of the assets and properties
which were Collateral prior to such transaction, and such security interest in
such Collateral (other than the stock of a corporation which was not a survivor
of a merger) shall be of the same priority (subject to the BNY Intercreditor
Agreement) as existed prior to such transaction, and the survivor of such
transaction shall execute and deliver any Security Documents requested by the
Agent, and (ii) pursuant to any Permitted Organizational Changes, PROVIDED that
(x) no Permitted Organizational Change shall take place during the continuance
of a Default or an Event of Default, and (y) prior to the occurrence of any
Permitted Organizational Change, the Borrower shall deliver to the Agent an
officer's certificate in the form of Exhibit 7.3(a).

(b) Except as set forth in Section 7.7, the Borrower shall not,
and shall not permit any of its Subsidiaries to, (i) acquire by purchase or
otherwise any property or assets of,

<PAGE>

or stock or other evidence of beneficial ownership of, any Person, except
purchases of inventory, equipment, materials and supplies in the ordinary
course of the Borrower's or such Subsidiary's business, (ii) during the
continuance of any Default or Event of Default, create any Subsidiary, or
(iii) enter into any partnership or joint venture, except in the case of
(iii), as permitted by the BNY Senior Credit Agreement.

(c) Borrower shall not, and shall not permit any of its
Subsidiaries to, amend its certificate of incorporation or by-laws, PROVIDED
that so long as no Default or Event of Default has occurred and is continuing,
the Borrower and its Subsidiaries may make changes to their respective
certificates of incorporation and bylaws other than those changes which,
individually or in the aggregate, could have a Material Adverse Effect.

Section 7.4 [This Section deliberately left blank.]

Section 7.5 [This Section deliberately left blank.]

Section 7.6 DIVIDENDS. The Borrower shall not, and shall not permit
any of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock), or return any capital to, its stockholders or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any class of its capital stock
now or hereafter outstanding (or any options or warrants issued with respect to
its capital stock), or set aside any funds for any of the foregoing purposes
(all the foregoing "DIVIDENDS"), except that Dividends may be made to the
Borrower or any of its Subsidiaries by any of its wholly-owned Subsidiaries.

Section 7.7 ADVANCES AND INVESTMENTS. The Borrower shall not, and
shall not permit any of its Subsidiaries to, lend money or credit or make
advances to, any Person, or directly or indirectly purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to any Person, except that the following shall be
permitted:

(b) loans and advances to the Borrower by any of its
Subsidiaries and capital contributions by the Borrower or any Subsidiary to any
Restricted Subsidiary;

(d) investments pursuant to any Permitted Organizational
Changes, PROVIDED that (x) no Permitted Organizational Change shall take place
during the continuance of a Default or an Event of Default, and (y) prior to the
occurrence of any Permitted Organizational Change, the Borrower shall deliver to
the Agent an officer's certificate in the form of Exhibit 7.3(a);

<PAGE>

(e) Contingent Obligations not otherwise prohibited hereunder;

(f) promissory notes received in connection with sales of
assets of the Borrower or its Subsidiaries sold, PROVIDED that such promissory
notes are secured with the assets so sold;

(g) [Intentionally omitted];

(h) up to an aggregate investment of $10,000,000 in connection
with minority interests in foreign companies, joint ventures or partnerships on
terms acceptable to the Agent and the Required Lenders;

(i) [Intentionally omitted];

(j) loans to directors and employees of the Borrower or its
Subsidiaries in an aggregate amount outstanding at any time not to exceed
$2,000,000;

(k) the Borrower and its Subsidiaries may acquire and hold Cash
Equivalents;

(l) recourse on account of a Dealer Account Transaction to the
Borrower or any of its Subsidiaries;

(m) [Intentionally omitted]; and

(n) the Recourse Obligations of the Borrower and its
Subsidiaries in connection with the Floor Plan Financing pursuant to the terms
of a Repurchase Agreement, provided that the Recourse Obligations shall not
exceed an aggregate amount of $15,000,000 for any annual period of July 1
through June 30, of which an aggregate amount not to exceed $10,000,000 during
each such annual period may constitute obligations on the part of the Borrower
and its Subsidiaries to repurchase goods which were financed by the financial
institution providing such financing pursuant to the Floor Plan Financing and an
aggregate amount not to exceed $5,000,000 during each such annual period may
constitute indemnity payments by the Borrower and its Subsidiaries relating to
losses incurred by such financial institution resulting from such financial
institution's financing or refinancing of goods to dealers.

Section 7.8 TRANSACTIONS WITH AFFILIATES. Borrower shall not, directly
or indirectly, enter into any transaction or series of related transactions with
or for the benefit of any of its Affiliates, except on an arm's-length basis
and, except for sales of Inventory in the ordinary course of business, (x)(i) in
the case of any such transactions in which the aggregate rental value,
remuneration or other consideration (including the value of a loan) together
with the aggregate rental value, remuneration or other consideration (including
the value of a loan) of all such other transactions consummated in the year
during which such transaction is proposed to be consummated, exceeds $500,000,
the board of directors and the independent directors of the Borrower that are
disinterested, each have (by a majority vote) determined in good faith that the
aggregate rental value, remuneration or other consideration (including the value
of any loan) inuring to the benefit of such Affiliates from any such transaction
is not greater than that which would be charged to or extended by the Borrower
or its Subsidiary, as the case may be, on an

<PAGE>

arm's-length basis for similar properties, assets, rights, goods or services
by or to a Person not affiliated with the Borrower or its Subsidiaries, as
the case may be, and (ii) in the case of any such transaction in which the
aggregate rental value, remuneration or other consideration (including the
value of any loan), together with the aggregate rental value, remuneration or
other consideration (including the value of any loan) of all such other
transactions consummated in the year during which such transaction proposed
to be consummated, exceeds $5,000,000, the board of directors of the Borrower
and the independent directors of the Borrower that are disinterested (each a
majority vote), and a nationally recognized investment banking firm,
unaffiliated with the Borrower and the Affiliate which is party to such
transaction has determined that the aggregate rental price, remuneration or
other consideration (including the value of a loan) inuring to the benefit of
such Affiliate from any such transaction is not greater than that which would
be charged to or extended by the Borrower or its Subsidiary, as the case may
be, on an arm's-length basis for similar properties, assets, rights, goods or
services by or to a Person not affiliated with the Borrower or its
Subsidiaries, as the case may be, and that (y) in the case of all such
transactions referred to in clauses (x)(i) and (ii) are entered into in good
faith. Any transaction required to be approved by independent directors
pursuant to this Section shall be approved by at least one such independent
director, PROVIDED that the foregoing restrictions shall not apply to the
payment of an annual fee to Jacobs Management Corporation for rendering of
management consulting and financial services to the Borrower and its
Subsidiaries in an aggregate amount not in excess of $5,000,000 and except
for repurchases of the Subordinated Notes from Affiliates at par or less than
par.

Section 7.9 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
CERTAIN DOCUMENTS. The Borrower shall not, and shall not permit any of its
Subsidiaries to, (a) make any sinking fund payment or voluntary or optional
payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto money or securities before due for the purpose of paying when
due) or exchange of any Existing Note or make any payment in respect of any
Existing Note (including, without limitation, payments in respect of options
to repurchase any Existing Note), or (b) amend, modify or waive, or permit
the amendment, modification or waiver of, any provision of any Existing Note.

Section 7.10 CHANGES IN BUSINESS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, engage in any business other than the
manufacturing or selling of pleasure boats or in lines of business reasonably
related thereto.

Section 7.11 CERTAIN RESTRICTIONS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction, or enter into any agreement (other than the BNY
Senior Credit Agreement and the Transaction Documents as in effect on the
Agreement Date), which restricts the ability of the Borrower or any of its
Subsidiaries to (a) enter into amendments, modifications or waivers of the
Loan Documents, (b) sell, transfer or otherwise dispose of its assets, (c)
create, incur, assume or suffer to exist any Lien upon any of its property,
(d) create, incur, assume, suffer to exist or otherwise become liable with
respect to any Indebtedness, or (e) pay any Dividend, provided that Capital
Leases or agreements governing

<PAGE>

purchase money Indebtedness which contain restrictions of the types referred
to in clauses (b) or (c) with respect to the property covered thereby shall
be permitted.

Section 7.12 LEASE PAYMENTS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, incur, assume or suffer to exist, any
obligation for payments under Capital Leases and operating leases whether for
real or personal or mixed property (including, without limitation, rental
payments and payments of taxes thereunder), except that the Borrower and its
Subsidiaries may incur rental payment obligations not to exceed $15,000,000
in the aggregate during each fiscal year of the Borrower.

Section 7.13 SALES AND LEASEBACKS. From and after the date hereof,
the Borrower shall not, and shall not permit any of its Subsidiaries to,
become liable, directly or indirectly, with respect to any lease (other than
any such lease entered into in connection with a sale of any real property
permitted hereunder, which lease is necessary or desirable to wind down the
operations of such property so sold), whether an operating lease or a Capital
Lease, of any property (whether real or personal or mixed) whether now owned
or hereafter acquired, (i) which the Borrower or such Subsidiary has sold or
transferred or is to sell or transfer to the purchaser thereof, or (ii) which
the Borrower or such Subsidiary intends to use for substantially the same
purposes as any other property which has been or is to be sold or transferred
by the Borrower or such Subsidiary to the purchaser thereof in connection
with such Lease.

Section 7.14 [This Section deliberately left blank.]

Section 7.15 [This Section deliberately left blank.]

Section 7.16 [This Section deliberately left blank.]

Section 7.17 INACTIVE SUBSIDIARIES. The Borrower shall not permit
any of the Designated Subsidiaries from owning or acquiring any property or
assets other than such property or assets owned as of the Agreement Date,
PROVIDED that the Permitted Organizational Changes shall be permitted.

SECTION 8 EVENTS OF DEFAULT.

Section 8.1 EVENTS OF DEFAULT. Each of the following events, acts,
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to
or as a result of compliance by any Person with any judgment, decree, order,
rule or regulation of any court or administrative or governmental body:

(a) FAILURE TO MAKE PAYMENTS. The Borrower shall (i)
default in the payment when due of any principal of the Loans or (ii) default
and such default shall continue unremedied for ten (10) or more Business
Days, in the payment when due of any interest on the Loans or in the payment
when due of any Fees or any other amounts owing hereunder.

<PAGE>

(b) BREACH OF REPRESENTATION OR WARRANTY. Any
representation or warranty made by any Loan Party herein or in any other Loan
Document or in any certificate or statement delivered pursuant hereto or
thereto shall prove to be false or misleading on the date as of which made or
deemed made.

(i) The Borrower shall fail to perform or observe any
agreement, covenant or obligation arising under Sections 6.1(g), 6.5,
6.12, 6.14, 6.15, 6.16, 6.17 or 7.1 through 7.17, inclusive.

(ii) The Borrower shall fail to perform or observe any
agreement, covenant or obligation arising under this Agreement (except
those described in subsections (a), (b) and (c)(i) above), and such
failure shall continue for 45 days.

(iii) Any Loan Party shall fail to perform or observe any
agreement, covenant or obligation arising under any provision of the Loan
Documents other than this Agreement, which failure shall continue after
the end of the applicable grace period, if any, provided therein.

(d) ACCELERATION UNDER OTHER AGREEMENTS. Any Event of
Default under and as defined in the Senior Credit Agreement shall have
occurred or the Borrower or any of its Subsidiaries shall default in the
performance or observance of any obligation or condition with respect to any
Indebtedness (other than the Obligations and the Senior Indebtedness) in the
aggregate principal amount in excess of $500,000 or any other event shall
occur or condition exist, if the effect of such Event of Default, default,
event or condition is to accelerate the maturity of any such Indebtedness or
to permit (without regard to any required notice or lapse of time) the holder
or holders thereof, or any trustee or agent for such holders, to accelerate
the maturity of any such Indebtedness, or any such Indebtedness shall become
or be declared to be due and payable prior to its stated maturity other than
as a result of a regularly scheduled payment.

<PAGE>

it is unable to pay, or shall be unable to pay, its debts generally as they
become due; or (ix) any Loan Party shall call a meeting of its creditors with
a view to arranging a composition or adjustment of its debts; or (x) any Loan
Party shall by any act or failure to act consent to, approve of or acquiesce
in any of the foregoing; or (xi) any corporate action is taken by any Loan
Party for the purpose of effecting any of the foregoing.

(f) SUBORDINATED DEBT FINANCING DOCUMENTS. The Borrower or
any of its Subsidiaries (i) does not pay when due (x) whether at maturity,
upon redemption or otherwise, any payment of principal, or premium, due under
any Subordinated Debt Financing Document or (y) any interest due under any
Subordinated Debt Financing Document, and such interest remain unpaid for a
period of thirty (30) days, or (ii) denies or disaffirms any of its
obligations under any Subordinated Debt Financing Document.

(g) RESTRICTED SUBSIDIARIES. Any Person becomes a
"Restricted Subsidiary", as such term is defined in the Subordinated Debt
Financing Documents, unless such Person is also a Guarantor.

(h) LETTERS OF CREDIT; COLLATERAL ACCOUNT AGREEMENTS. Any
Issuing Bank or any Person for whose account a Letter of Credit has been
issued, or any Affiliate of any such Issuing Bank or Person, shall assert, or
any Person institutes any proceeding seeking to establish, that any Letter of
Credit or any provision of any thereof is invalid, not binding or
unenforceable.

(i) [This Section deliberately left blank.]

(j) SECURITY DOCUMENTS. Any of the Security Documents shall
for any reason cease to be in full force and effect, or shall cease to give
the Agent the Liens, rights, powers and privileges purported to be created
thereby (subject to the terms of the BNY Intercreditor Agreement) including,
without limitation, a perfected security interest in, and Lien on, all of the
Collateral in accordance with the terms thereof other than as a result of a
release of Collateral by the Agent pursuant to the terms of this Agreement
and the Security Documents.

(k) GUARANTY. Any Guaranty or any provision thereof shall
cease to be in full force and effect, or the Guarantor or any Person acting
by or on behalf of the Guarantor shall deny or disaffirm all or any portion
of the Guarantor's obligations under such Guaranty.

(l) CHANGE OF CONTROL. (i) Mr. Irwin L. Jacobs (or,
upon his death, his estate) and his Affiliates shall cease to beneficially
own and control at least 90% of the number of shares of any class of capital
stock of the Borrower entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the board of directors of
the Borrower owned by Mr. Jacobs (or, upon his death, his estate) and his
Affiliates on the Original Effective Date (as defined in the BNY Senior
Credit Agreement), (ii) Mr. Irwin L. Jacobs (or, upon his death, his estate)
and his Affiliates, Mr. Carl R. Pohlad (or, upon his death, his estate) and
his Affiliates and RDV Capital Management L.P.II and its Affiliates shall in
the aggregate cease to beneficially own and control at least 50.1%, of the
issued and outstanding shares of each class of capital stock of the Borrower
entitled (without regard to the occurrence of any contingency) to vote for
the

<PAGE>

election of members of the board of directors of the Borrower, or (iii) a
"Change of Control" as defined in the Subordinated Debt Financing Documents
shall occur.

(m) JUDGMENTS. One or more judgments or decrees in an
aggregate amount (i) in excess of $1,000,000 shall be entered by a court or
courts of competent jurisdiction against the Loan Parties (other than any
judgment as to which, and only to the extent, a reputable insurance company
has acknowledged coverage of such claim in writing) and (x) any such
judgments or decrees shall not be stayed, discharged, paid, bonded or vacated
within 30 days or (y) enforcement proceedings shall be commenced by any
creditor on any such judgments or decrees or (ii) in excess of $5,000,000 and
such judgment or judgments shall not be stayed, discharged or bonded within
60 days.

(n) [This Section deliberately left blank.]

(o) USE OF PROCEEDS. The Borrower shall use the proceeds of
any Loan for a purpose other than that set forth in Section 2.19.

Section 8.2 RIGHTS AND REMEDIES. Upon the occurrence of any Event
of Default described in Section 8.1(e), the Commitments shall automatically
and immediately terminate and the unpaid principal amount of and any and all
accrued interest on the Loan and any and all accrued Fees and other
Obligations shall automatically become immediately due and payable, with all
additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower, and
the obligation of each Lender to make any Advances hereunder shall thereupon
terminate; and upon the occurrence and during the continuance of any other
Event of Default, the Agent shall at the request, or may with the consent, of
the Required Lenders, by written notice to the Borrower, (i) declare that the
Commitments are terminated, whereupon the Commitments and the obligation of
each Lender to make any Advances hereunder shall immediately terminate, (ii)
declare the unpaid principal amount of and any and all accrued and unpaid
interest on the Loan any and all accrued Fees and other Obligations to be,
and the same shall thereupon be, immediately due and payable with all
additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower, and
(iii) exercise any remedies available under any Loan Document or otherwise.

SECTION 9 THE AGENT.

Section 9.1 APPOINTMENT. Each Lender hereby irrevocably designates
and appoints The Bank of New York as the agent and representative (within the
meaning of Section 9-105(m) of the Uniform Commercial Code) of such Lender
under this Agreement and each other Loan Document, and each such Lender
irrevocably authorizes The Bank of New York as the Agent for such Lender to
execute and deliver and perform its obligations under the BNY Intercreditor

<PAGE>

Agreement and each Collateral Account Agreement, to take such action on its
behalf under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and each other Loan
Document, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement or in the other Loan Documents, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein or in the other
Loan Documents, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities on
the part of the Agent shall be read into this Agreement or in the other Loan
Documents or otherwise exist against the Agent. The provisions of this
Section 9 are solely for the benefit of the Agent and the Lenders and no Loan
Party shall have any rights as a third party beneficiary or otherwise under
any of the provisions hereof. In performing its functions and duties
hereunder and under the other Loan Documents, the Agent shall act solely as
the agent and representative of the Lenders and does not assume nor shall be
deemed to have assumed any obligation or relationship of trust or agency with
or for any Loan Party or any of their respective successors and assigns.

Section 9.2 DELEGATION OF DUTIES. The Agent may execute any of its
duties under this Agreement or the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning
all matters pertaining to such duties. The Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected
by it with reasonable care.

Section 9.3 EXCULPATORY PROVISIONS. The Agent shall not be (i)
liable for any action lawfully taken or omitted to be taken by it or any
Person described in Section 9.2 under or in connection with this Agreement or
any other Loan Document (except for its or such Person's own gross negligence
or willful misconduct), or (ii) responsible in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by
any Loan Party contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided
for in, or received under or in connection with, this Agreement or any other
Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any other Loan Document
or for any failure of any Loan Party to perform its obligations hereunder or
thereunder. Without limiting the duties and responsibilities of the Agent
set forth in the Loan Documents, the Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance
of any of the agreements of any Loan Party contained in, or conditions of,
this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party. This Section is intended solely to
govern the relationship between the Agent, on the one hand, and the Lenders,
on the other.

Section 9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Notes, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to any
Loan Party), independent accountants and other

<PAGE>

experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless the Agent shall have
received an executed Transfer Supplement in respect thereof. The Agent shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.

Section 9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
unless the Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default and stating
that such notice is a "notice of default." In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be directed by the Required Lenders, PROVIDED that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as the Agent shall
deem advisable and in the best interests of the Lenders.

Section 9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Loan
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Lender represents and warrants to the Agent that it has,
independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of
the Loan Parties and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, prospects, financial and other condition and
creditworthiness of the Loan Parties. Except for notices, reports and other
documents expressly required under the Loan Documents to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
business, operations, property, prospects, financial and other condition or
creditworthiness of the Loan Parties which may come into the possession of
the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.

<PAGE>

Section 9.7 INDEMNIFICATION. The Lenders agree to indemnify the
Agent, the Arranger and their respective officers, directors, employees,
representatives and agents (to the extent not reimbursed by the Loan Parties
and without limiting the obligation of the Loan Parties to do so), ratably
according to their Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including,
without limitation, the fees and disbursements of counsel for the Agent, the
Arranger or such Person in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not the Agent, the
Arranger or such Person shall be designated a party thereto) that may at any
time (including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Agent, the
Arranger or such Person as a result of, or arising out of, or in any way
related to or by reason of, the execution, delivery or performance of any
Loan Document or any other Transaction Document (but excluding any such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Agent, the Arranger or such Person as
finally determined by a court of competent jurisdiction and excluding the
actions of the Agent when acting solely in its capacity as a Lender).

Section 9.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Loan Parties as though the Agent were not the
Agent hereunder. With respect to Loans made or renewed by it and any Note
issued to it, the Agent shall have the same rights and powers under this
Agreement as any Lender and may exercise the same as though it were not the
Agent, and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacity.

Section 9.9 SUCCESSOR AGENT. (i) The Agent may resign as Agent and
Collateral Agent upon 30 days' notice to the Borrower and the Lenders. If
the Agent shall resign as Agent, then the Required Lenders during such 30-day
period shall appoint from among the Lenders a successor agent, whereupon such
successor agent, upon its acceptance, shall succeed to the rights, powers and
duties of the Agent and Collateral Agent and the term "Agent" and "Collateral
Agent" shall mean such successor agent, effective upon its appointment, and
the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or
any of the parties to this Agreement or any holders of the Notes. A
successor to the Collateral Agent (other than First Bank as successor to The
Bank of New York as Collateral Agent) shall not be the "Collateral Agent"
under the Security Documents and shall not be entitled to the Liens created
thereunder until it shall have executed and delivered an intercreditor
agreement substantially on the same terms as the BNY Intercreditor Agreement.

(ii) Notwithstanding any provision to the contrary elsewhere
in this Agreement or in any of the Loan Documents, upon the execution and
delivery of the Instruments of Assignment to the Issuing Banks, The Bank of
New York, if at such time it shall be serving as the Agent or the Collateral
Agent, shall be deemed to have resigned as, and First Bank shall be deemed
appointed as successor, Agent and Collateral Agent without any further notice
or acceptance. As such successor, First Bank shall succeed to the rights,
powers and duties of the Agent and the Collateral Agent under the Loan
Documents and the terms "Agent" and

<PAGE>

"Collateral Agent" thereunder shall mean First Bank as such successor.
Effective upon the execution and delivery of the Instruments of Assignment,
The Bank of New York's rights, powers and duties as Agent and Collateral
Agent shall terminate, without any other or further act or deed on the part
of The Bank of New York or any of the parties to this Agreement or any
holders of the Notes. The Bank of New York shall execute and deliver such
amendments to UCC filings and mortgage recordings as may be appropriate to
reflect its resignation and First Bank's succession as Agent and Collateral
Agent.

(iii) After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 9 and Section 10.1 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.

Section 9.10 INTERPRETATION. As used in this Section 9, the term
"Agent" as applied to a Person that is acting both as Agent and Collateral Agent
shall be deemed a reference to such Person both in its capacity as Agent and
Collateral Agent.

SECTION 10 MISCELLANEOUS.

Section 10.1 PAYMENT OF EXPENSES, INDEMNITY, ETC. The Borrower
shall:

(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of the Agent in
connection with the negotiation, preparation, execution and delivery of the Loan
Documents and the documents and instruments referred to therein, the creation,
perfection or protection of the Agent's Liens in the Collateral (including,
without limitation, fees and expenses for title and lien searches and filing and
recording fees), and any amendment, waiver or consent relating to any of the
Loan Documents (including, without limitation, as to, each of the foregoing, the
reasonable fees and disbursements of Winthrop, Stimson, Putnam & Roberts,
special counsel to the Agent and any other attorneys retained by the Agent) and
of the Agent and each Lender in connection with the preservation of rights
under, and enforcement of, the Loan Documents and the documents and instruments
referred to therein or in connection with any restructuring or rescheduling of
the Obligations (including, without limitation, the reasonable fees and
disbursements of counsel for the Agent and for each of the Lenders);

(b) pay the fees and disbursements of any independent
accountant or consultant retained by the Agent to audit the composition of the
Accounts and Inventory which are part of the Borrowing Base and to prepare and
deliver to the Agent such reports and information as the Agent requests with
respect thereto;

(c) pay, and hold the Agent and each of the Lenders harmless
from and against, any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and hold the Agent and each Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and

<PAGE>

(d) indemnify the Agent, the Arranger and each Lender, and
their respective officers, directors, employees, representatives and agents
(each, an "INDEMNITY") from, and hold each of them harmless against, any and
all losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of
counsel for such Indemnity in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
such Indemnity shall be designated a party thereto, but excluding any tax or
an increased tax on the net income of such Lender) that may at any time
(including, without limitation, at any time following the payment of the
Obligations) be imposed on, asserted against or incurred by any Indemnity as
a result of, or arising out of, or in any way related to or by reason of, (i)
any of the Transactions or the execution, delivery or performance of any Loan
Document or any other Transaction Document, (ii) any violation by any Loan
Party of any applicable Environmental Law, (iii) any Environmental Claim
arising out of the management, use, control, ownership or operation of
property or assets by any of the Loan Parties, including, without limitation,
all on-site and off-site activities involving Materials of Environmental
Concern, (iv) the breach of any environmental representation or warranty set
forth in Section 5.18, (v) the grant to the Agent, the Collateral Agent and
the Lenders of any Lien in any property or assets of any of the Loan Parties
or any stock or other equity interest in any of the Loan Parties, and (vi)
the exercise by the Agent and the Lenders of their rights and remedies
(including, without limitation, foreclosure) under any agreements creating
any such Lien (but excluding, in each case, as to any Indemnity, any such
losses, liabilities, claims, damages, expenses, obligations, penalties,
actions, judgments, suits, costs or disbursements incurred solely by reason
of the gross negligence or willful misconduct of such Indemnity as finally
determined by a court of competent jurisdiction). The Borrower's obligations
under this Section shall survive the termination of this Agreement and the
payment of the Obligations.

Section 10.2 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance
of any Event of Default, each Lender is hereby authorized at any time or from
time to time, without presentment, demand, protest or other notice of any
kind to any Loan Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all
deposits (general or special, time or demand, provisional or final) and any
other indebtedness at any time held or owing by such Lender (including,
without limitation, by branches and agencies of such Lender wherever located)
to or for the credit or the account of any Loan Party against and on account
of the Obligations of the Loan Parties to such Lender under this Agreement or
under any of the other Loan Documents, including, without limitation, all
interests in Obligations purchased by such Lender pursuant to Section 10.7,
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Loan Document, irrespective of whether or
not such Lender shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.

Section 10.3 NOTICES. Except as otherwise expressly provided herein,
all notices, requests and demands to or upon the respective parties hereto to
be effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly

<PAGE>

given or made when delivered by hand, or five days after being deposited in
the United States mail, postage prepaid, or, in the case of telex notice,
when sent, answerback received, or, in the case of telecopy notice, when
sent, or, in the case of a nationally recognized overnight courier service,
one Business Day after delivery to such courier service, addressed, in the
case of each party hereto, at its address specified opposite its signature
below or on the appropriate Transfer Supplement, or to such other address as
may be designated by any party in a written notice to the other parties
hereto, provided that notices and communications to the Agent shall not be
effective until received by the Agent.

Section 10.4 SUCCESSORS AND ASSIGNS; PARTICIPATION; ASSIGNMENTS. (a)
SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the Borrower, the Lenders, the Agent, all future holders of
the Notes and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender. No Lender
may participate, assign or sell any of its Credit Exposure (as defined in
clause (c) below) except as required by operation of law, in connection with
the merger, consolidation or dissolution of any Lender or as provided in this
Section 10.4.

(b) PARTICIPATION. Any Lender may at any time sell to one
or more Persons (each a "PARTICIPANT") participating interests in any Loan
owing to such Lender, any Notes held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder. Notwithstanding any
such sale by a Lender of participating interests to a Participant, such
Lender's rights and obligations under this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Note for all purposes under this
Agreement (except as expressly provided below), and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement.
The Borrower agrees that if any Obligations are due and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence and
during the continuance of an Event of Default, each Participant shall be
deemed to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement and any Note to the same extent as if
the amount of its participating interest were owing directly to it as a
Lender under this Agreement or any Note, provided that such right of setoff
shall be subject to the obligations of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
Section 10.7. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.17, 2.18 and 2.19, PROVIDED that the
Borrower shall not be required to pay any amounts pursuant to such Sections
in excess of the amount the Borrower would have been obligated to pay but for
such sale of a participating interest to such Participant. Each Lender
agrees that any agreement between such Lender and any such Participant in
respect of such participating interest shall not restrict such Lender's right
to agree to any amendment, supplement, waiver or modification to this
Agreement or any other Loan Document, other than amendments, supplements,
modifications and waivers requiring the written consent of all of the Lenders
pursuant to Section 10.5.

<PAGE>

(c) ASSIGNMENTS. (i) Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time assign to
any Lender or any affiliate thereof or, with the consent of the Agent, to any
other Person (each a "PURCHASING LENDER") all or any part of the Loan owing
to such Lender, the Note held by such Lender, any Commitment of such Lender
or any other interest of such Lender hereunder (in respect of such Lender,
its "CREDIT EXPOSURE") pursuant to a supplement to this Agreement,
substantially in the form of Exhibit 10.4(c) hereto (a "TRANSFER
SUPPLEMENT"), executed by such Purchasing Lender, such transferor Lender and
the Agent, PROVIDED that any assignment to any Purchasing Lender must be in a
minimum amount of $5,000,000 and any such partial assignment shall be an
assignment of an identical percentage of the transferor Lender's Loan and
Commitment. Upon (i) such execution of such Transfer Supplement, (ii)
delivery of an executed copy thereof to the Borrower and the Agent, (iii)
payment by such Purchasing Lender to such transferor Lender of an amount
equal to the purchase price agreed between such transferor Lender and such
Purchasing Lender and (iv) payment to the Agent of a processing fee of
$3,500, such transferor Lender shall be released from its obligations
hereunder to the extent of such assignment and such Purchasing Lender shall
for all purposes be a Lender party to this Agreement and shall have all the
rights and obligations of a Lender under this Agreement to the same extent as
if it were an original party hereto, and no further consent or action by the
Borrower, the Lenders or the Agent shall be required. Such Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender as a
Lender and the resulting adjustment of the Commitments, if any, arising from
the purchase by such Purchasing Lender of all or a portion of the Credit
Exposure of such transferor Lender. Promptly after the consummation of any
transfer to a Purchasing Lender pursuant hereto, the transferor Lender, the
Agent and the Borrower shall make appropriate arrangements so that a
replacement Note is issued to such transferor Lender and a new Note is issued
to such Purchasing Lender, in each case in principal amounts reflecting such
transfer.

(ii) Notwithstanding any provision to the contrary elsewhere
in this Agreement, upon the delivery of the Instrument of Assignment to the
Issuing Banks, and the payment to the Agent of the amount of the drawings
requested under that Letter of Credit and under the other Letter of Credits
under which drawing are then being requested, the Lenders that are
signatories to such Instrument of Assignment shall be released from their
obligation hereunder and the Issuing Banks shall for all purposes be Lenders
party to this Agreement and shall have all the rights and obligations of a
Lender under this Agreement to the same extent as if it was an original party
hereto, and no consent or action by the Borrower or the Agent shall be
required. Such Instrument of Transfer shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
substitution of the Issuing Banks as Lenders. The provisions of this
subsection (c)(ii) shall be equally applicable to any transfer by an Issuing
Bank to the Persons for whose accounts the Letters of Credit have been issued
or to their designees and such transfer may be effected by the delivery of an
instrument of transfer such Issuing Bank and such person deemed appropriate.
Promptly after the consummation of any transfer pursuant to subsection
(c)(ii), the transferor, the Agent and the Borrower shall make appropriate
arrangements so that a new Note is issued to such transferee, in each case in
a principal amount reflecting such transfer.

<PAGE>

(e) The provisions of this Section 10.4 shall not apply to
the assignment and pledge for collateral purposes, of any Lender's rights
hereunder or under any Note to any Federal Reserve Bank pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve Bank, PROVIDED that such
assignment and pledge shall not relieve such Lender of any of its obligations.

Section 10.5 AMENDMENTS AND WAIVERS. Neither this Agreement, any
Note, any other Loan Document to which the Borrower is a party nor any terms
hereof or thereof may be amended, supplemented, modified or waived except in
accordance with the provisions of this Section. The Required Lenders and the
Borrower may, from time to time, enter into written amendments, supplements,
modifications or waivers for the purpose of adding, deleting, changing or
waiving any provisions to this Agreement, the Notes, or the other Loan
Documents to which the Borrower is a party, PROVIDED that no such amendment,
supplement, modification or waiver shall (a) extend either the Maturity or
reduce the rate or extend the time of payment of interest on any Obligations,
or reduce the principal amount of any Obligations or reduce any fee payable
to all the Lenders hereunder, or release all or substantially all of the
Collateral (except as expressly contemplated by the Loan Documents) or
foreclose or otherwise enforce any remedies with respect to any real property
Collateral or change the amount of any Commitment of any Lender, or amend,
modify or waive any material condition precedent to the making of any the, or
amend, modify or waive any term of subordination of the Subordinated Debt
Financing Documents, or release any Guarantor or amend, modify or waive any
material term of any Guaranty, or modify the manner in which the Lenders
share in any payment received by the Agent or any Lender with respect to any
Obligation, or modify the several nature of the Commitments and the other
obligations of the Agent, the Collateral Agent and the Lenders pursuant to
the Loan Documents, or amend, modify or waive any provision of Section 3.1 or
this Section 10.5 or the definition of Required Lenders, or consent to or
permit the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or any other Loan Document, in each case
without the written consent of all the Lenders, (b) amend, modify or waive
any provision of Section 9 or any other provision of any Loan Document if the
effect thereof is to affect the rights or duties of the Agent or the
Collateral Agent, without the written consent of the Person then serving as
such, or (c) amend, modify or waive any provision of the Collateral Account
Agreement, without the written consent of the Issuing Banks. Any such
amendment, supplement, modification or waiver shall apply to each of the
Lenders equally and shall be binding upon the Borrower, the Lenders, the
Agent, and all future holders of the Notes. In the case of any waiver, the
Borower, the Lenders and the Agent shall be restored to their former position
and rights hereunder and under the outstanding Notes, and any Default or
Event of Default waived shall be deemed to be cured and not continuing, but
no such waiver shall

<PAGE>

extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.

Section 10.6 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Agent or any Lender or any holder of a Note in exercising any
right, power or privilege hereunder or under any other Loan Document and no
course of dealing between any Loan Party and the Agent or any Lender or the
holder of any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any
other Loan Document preclude any other or further exercise thereof of the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Agent or any Lender or the
holder of any Note would otherwise have. No notice to or demand on any Loan
Party in any case shall entitle any Loan Party to any other or further notice
or demand in similar or other circumstances or constitute a waiver of the
rights of the Agent, the Lenders or the holder of any Note to any other or
further action in any circumstances without notice or demand.

Section 10.7 SHARING OF PAYMENTS. Each of the Lenders agrees that if
it should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under
the Loan Documents, or otherwise) which is applicable to the payment of any
obligations, of a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total of such Obligation
then owed and due to such Lender bears to the total of such Obligation then
owed and due to all of the Lenders immediately prior to such receipt, then
such Lender receiving such excess payment shall purchase for cash without
recourse or warranty from the other Lenders an interest in such Obligations
owing to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount; provided that if all or
any portion of such excess amount is thereafter recovered from such Lender,
such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.

Section 10.8 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).

<PAGE>

postage prepaid, to the Borrower at its address set forth opposite its
signature below. The Borrower hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Loan Document brought in the courts referred to above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought
in an inconvenient forum. Nothing herein shall affect the right of the
Agent, any Lender or any holder of a Note to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.

Section 10.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.

Section 10.10 EFFECTIVENESS. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a counterpart
hereof and shall have delivered the same to the Agent which delivery, in the
case of the Lenders, may be given to the Agent by telecopy (with the
originals delivered promptly to the Agent via overnight courier service) and
the conditions precedent set forth in Section 4.1 have been satisfied.

Section 10.11 HEADINGS DESCRIPTIVE. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.

Section 10.12 MARSHALLING; RECAPTURE. Neither the Agent nor any
Lender shall be under any obligation to Marshall any assets in favor of any
Loan Party or any other party or against or in payment of any or all of the
Obligations. To the extent any Lender receives any payment by or on behalf of
any Loan Party, which payment or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to such Loan Party or its estate, trustee, receiver, custodian
or any other party under any bankruptcy law, state or Federal law, common law
or equitable cause, then to the extent of such payment or repayment, the
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of such Loan Party to such Lender as of the
date such initial payment, reduction or satisfaction occurred.

Section 10.13 SEVERABILITY. In case any provision in or obligation
under this Agreement or the Notes or the other Loan Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

Section 10.14 SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 2.14, 2.15, 2.16, 2.17, 9.7 and 10.1 shall
survive the execution and delivery of this Agreement and the Notes and the
making and repayment of the Loans hereunder.

<PAGE>

Section 10.15 DOMICILE OF LOANS. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Lender.

Section 10.16 LIMITATION OF LIABILITY. No claim may be made by any
Loan Party or any other Person against the Agent or any Lender or the
Affiliates, directors, officers, employees, attorneys or agents of any of
them for any special, indirect, consequential or punitive damages in respect
of any claim for breach of contract or any other theory of liability arising
out of or related to the transactions contemplated by this Agreement or any
other Transactions, or any act, omission or event occurring in connection
therewith; and each Loan Party hereby waives, releases and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.

Section 10.17 CALCULATIONS; COMPUTATIONS. The financial statements to
be furnished to the Agent and the Lenders pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved and consistent with GAAP as used in the preparation of the financial
statements referred to in Section 5.5 shall utilize GAAP.

Section 10.18 WAIVER OF TRIAL BY JURY. EACH OF THE BORROWER, THE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER OR
THEREUNDER.

SECTION 11 SUBORDINATION OF OBLIGATIONS.

Section 11.1 OBLIGATIONS SUBORDINATE TO SENIOR INDEBTEDNESS. The
Borrower, each Guarantor, the Lenders and the Agent covenant and agree, and
each holder from time to time of any of the Obligations, or any promissory
note or other instrument evidencing any of the Obligations, by its acceptance
thereof likewise covenants and agrees, that (a) the Obligations, including,
without limitation, the obligations of the Borrower to pay principal and
interest hereunder or under any promissory note or other instrument issued
pursuant hereto and the obligations of each Guarantor under its Guaranty
shall be, and are hereby expressly made, subordinate and subject in right of
payment as provided in this Section 11 to the prior payment in full of the
Senior Indebtedness, and (b) all Liens on the assets of the Borrower or the
Guarantors securing the Obligations shall be, and are hereby expressly made,
subject and subordinate to the Liens on the assets of the Borrower or the
Guarantors securing the Senior Indebtedness as provided in this Section 11.

This Section 11.1 shall constitute a continuing offer to all Persons
who, in reliance upon the provisions hereof, become holders of, or continue
to hold, Senior Indebtedness; such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder
and they or each of them may enforce such provisions.

Section 11.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or

<PAGE>

other similar case or proceeding in connection therewith, relative to the
Borrower or any Guarantor (each, an "OBLIGOR") or to its assets, or (b) any
liquidation, dissolution or other winding up of any Obligor, whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshaling of assets or liabilities of any Obligor, then and in any such
event:

(1) the holders of Senior Indebtedness of such Obligor shall
be paid in full all amounts due on or in respect of all such Senior
Indebtedness, before the Lenders are entitled to receive any payment or
distribution of any kind or character (excluding Junior Securities) on
account of the principal of, premium, if any, or interest on the Obligations
of such Obligor;

(2) any payment or distribution of assets of such Obligor of
any kind or character, whether in cash, property or securities (excluding
Junior Securities), by set-off or otherwise, to which the Lenders would be
entitled but for the provisions of this Section 11.2 shall, subject to clause
(4) below, be paid by the liquidating trustee or agent or other Person making
such payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness of such Obligor or to the Senior Agent, ratably according to the
aggregate amounts remaining unpaid on account of such Senior Indebtedness
held by such holder, to the extent necessary to make payment in full of all
such Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness, whether such concurrent payment or distribution represents a
payment on account of such Senior Indebtedness or a payment or distribution
to such holders pursuant to Section 1407 of the Subordinated Note Indenture
or any Existing Note;

(3) in the event that, notwithstanding the foregoing
provisions of this Section, any Lender shall have received any direct or
indirect payment or distribution of assets of such Obligor of any kind or
character, whether in cash, property or securities, in respect of principal,
premium, if any, and interest on the Obligations of such Obligor before all
Senior Indebtedness of such Obligor is paid in full, then and in such event
such payment or distribution (excluding Junior Securities) shall, subject to
clause (4) below, be held in trust for the benefit of, and shall be promptly
paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making
payment or distribution of assets of such Obligor for application to the
payment of all Senior Indebtedness of such Obligor remaining unpaid, to the
extent necessary to pay all Senior Indebtedness of such Obligor in full after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Indebtedness, whether such concurrent payment or distribution
represents a payment on account of such Senior Indebtedness or a payment or
distribution to such holders pursuant to Section 1407 of the Subordinated
Note Indenture or any Existing Note; and

(4) notwithstanding any provision to the contrary contained in
this Section 11.2, the payments and distributions to the Lenders shall not be
required to be paid over as provided in clauses (2) and (3), except to the
extent that the holders of the Senior Indebtedness, or the Senior Agent, as
the case may be, have not been paid in full after giving effect to all
amounts then or thereafter required to be paid to such holders pursuant to
Section 1407 of the Subordinated Note

<PAGE>

Indenture or any Existing Note.

The consolidation of an Obligor with, or the merger of an Obligor with
or into, another Person or the liquidation or dissolution of an Obligor
following the sale, assignment, conveyance, transfer, lease or other disposal
of all or substantially all of such Obligor's properties or assets to another
Person upon the terms and conditions set forth in Section 7.3 shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities of such
Obligor for the purposes of this Section if the Person formed by such
consolidation or the surviving entity of such merger or the Person which
acquires by sale, assignment, conveyance, transfer, lease or other disposal
of all or substantially all of such Obligor's properties or assets, as the
case may be, shall, as a part of such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposal, comply with the
conditions set forth in Section 7.3.

Section 11.3 SUSPENSION OF PAYMENT WHEN SENIOR INDEBTEDNESS IN
DEFAULT. (a) Unless Section 11.2 shall be applicable, upon the occurrence
of a Payment Default, no direct or indirect payment or distribution of any
assets of any Obligor of any kind or character shall thereafter be made on
account of principal of, premium, if any, or interest on, the Obligations or
on account of the purchase, redemption or other acquisition of or in respect
of the Notes unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist and any acceleration of Senior
Indebtedness has been rescinded or the Senior Indebtedness with respect to
which such Payment Default shall have occurred shall have been discharged or
paid in full, after which each Obligor shall resume making any and all
required payments in respect of the Obligations, including any missed
payments.

(b) Unless Section 11.2 shall be applicable, upon (1) the
occurrence of a Non-payment Default and (2) receipt by the Agent and by the
Borrower from the Senior Agent of written notice of such occurrence (a
"PAYMENT BLOCKAGE NOTICE") no payment or distribution of any assets of the
Borrower of any kind or character (other than with funds deposited for such
purpose with the Agent pursuant to Section 2.12 prior to the receipt by the
Agent of such Payment Blockage Notice) shall thereafter be made on account of
any principal of, premium, if any, or interest on, the Obligations or on
account of the purchase, redemption, retirement or other acquisition of or in
respect of Notes for a period ("PAYMENT BLOCKAGE PERIOD") commencing on the
date of receipt by the Agent of such notice and ending on the earliest of
(subject to any blockage of payments that may then or thereafter be in effect
under subsection (a) of this Section 11.3) (x) 179 days having elapsed since
receipt of such written notice by the Agent (provided any Senior Indebtedness
shall theretofore have not been accelerated), (y) the date such Non-payment
Default and all other Non-payment Defaults as to which notice is also given
after such period is initiated shall have been cured or waived or shall have
ceased to exist or the Senior Indebtedness related thereto shall have been
discharged or paid in full or (z) the date on which such Payment Blockage
Period (and all Non-payment Defaults as to which notice is given after such
Payment Blockage Period is Initiated) shall have been terminated by written
notice to the Borrower and the Agent from the Senior Agent, after which, in
each such case, the Obligors shall resume making any and all required
payments in respect of the Obligations, including any missed payments.
Notwithstanding any other provision of this Agreement, in no event shall a
Payment

<PAGE>

Blockage Period extend beyond 179 days from the date of the receipt by the
Borrower or the Agent of the notice referred to in clause (2) of this
paragraph (b) (the "INITIAL BLOCKAGE PERIOD"). Any number of notices of
Non-payment Defaults may be given during the Initial Blockage Period,
PROVIDED that during any 360-day consecutive period only one Payment Blockage
Period during which payment of the Obligations may not be made may commence
and the duration of the Payment Blockage Period may not exceed 179 days. No
Non-payment Default with respect to Senior Indebtedness which existed or was
continuing on the date of the commencement of any Payment Blockage Period
will be, or can be, made the basis for the commencement of a second Payment
Blockage Period, whether or not within a period of 360 consecutive days,
unless such default shall have been cured or waived for a period of not less
than 90 consecutive days.

(c) In the event that, notwithstanding the foregoing, the
Agent or the holder of any Obligations shall receive any payment or
distribution prohibited by the foregoing provisions of this Section 11.3.,
then and in such event such payment or distribution shall be held in trust
for the benefit of, and shall be promptly paid over and delivered forthwith
to, the Senior Agent.

Section 11.4 APPLICATION OF MONIES DEPOSITED. Nothing contained in
this Section 11.4, elsewhere in this Agreement or in any of the Notes shall
(i) affect the obligation of each Obligor to make, or prevent any Obligor
from making, at any time except as specified in Section 11.2 or 11.3 to the
extent provided therein, payments pursuant to this Agreement or (ii) prevent
the application to the Obligations by the Agent (and retention by the
Subordinated Creditors) of any monies received by the Agent from any Obligor
or its assets for the account of the Subordinated Creditors if, at the time
such money was received by the Agent, a payment by such Obligor of the
Obligations would not have been prohibited by the foregoing provisions of
this Section 11.

Section 11.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the prior payment in full of all Senior Indebtedness, the Lenders
shall be subrogated, to the extent of the aggregate payments, if any,
received by holders of Senior Indebtedness pursuant to the terms of Section
11.2 and 11.3, to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities
applicable to the Senior Indebtedness until the principal of, premium, if
any, and interest on the Obligations shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Subordinated
Creditors would be entitled except for the provisions of this Section 11.5,
and no payments over pursuant to the provisions of this Section 11.5 to the
holders of Senior Indebtedness by the Lenders or the Agent, shall, as among
the Obligors, their creditors other than holders of Senior Indebtedness, and
the Subordinated Creditors, be deemed to be a payment or distribution by the
Obligors to or on account of the Senior Indebtedness.

Section 11.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Section 11.6 are intended solely for the purpose of
defining the relative rights of the holders of the Obligations on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Section 11.6 or elsewhere in this Agreement or in the Notes
is intended to or shall (a) impair, as among the Obligors, their creditors
other than holders of Senior Indebtedness and the holders of the Obligations,
the obligation of the Obligors, which is absolute

<PAGE>

and unconditional, to pay to the holders of the Obligations as and when the
same shall become due and payable in accordance with its terms; or (b) affect
the relative rights against the Obligors of the holders of the Obligations
and creditors of the Borrower other than the holders of Senior Indebtedness;
or (c) prevent the Agent or the holder of any Obligations from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Section 11.6 of the
holders of Senior Indebtedness (1) in any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Borrower referred to in
Section 11.2, to receive, pursuant to and in accordance with such Section,
cash, property and securities otherwise payable or deliverable to the Agent
or such holder, or (2) under the conditions specified in Section 11.3, to
prevent any payment prohibited by such Section or enforce their rights
pursuant to Section 11.3(c).

Section 11.7 AGENT TO EFFECTUATE SUBORDINATION. Each Subordinated
Creditor authorizes and directs the Agent, on behalf of such Subordinated
Creditor, to take such action as may be necessary or appropriate to
effectuate the subordination provided in Section 11 and appoints the Agent
its attorney-in-fact for any and all such purposes, including, in the event
of any dissolution, winding-up, liquidation or reorganization of any Obligor
whether in bankruptcy, insolvency, receivership proceedings, or otherwise,
the timely filing of a claim for the unpaid balance of the Obligations of
such Obligor owing to such Subordinated Creditor in the form required in such
proceedings and the causing of such claim to be approved.

Section 11.8 NO WAIVER OF SUBORDINATION PROVISIONS. (a) No right of
any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of any Obligor or by any
act or failure to act by any such holder, or by any non-compliance by any
Obligor with the terms, provision and covenants of this Agreement, regardless
of any knowledge thereof any such holder may have or be otherwise charged
with.

(b) Without limiting the generality of Subsection (a) of
this Section and notwithstanding any other provision contained herein, but
subject to the provisions of the Intercreditor Agreement, the holders of
Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Agent or the Subordinated Creditors, without
incurring responsibility to the Subordinated Creditors and without impairing
or releasing the subordination provided in this Section 11.8 or the
obligations hereunder of the holders of the Obligations to the holders of
Senior Indebtedness, do any one or more of the following: (1) change the
manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior Indebtedness or any instrument evidencing the same or any
agreement under which the Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (3) release any Person liable in any
manner for the collection or payment of Senior Indebtedness; (4) exercise or
refrain from exercising any rights against the Borrower and any other Person;
and (5) otherwise deal freely and in good faith with the Borrower and each
Guarantor; PROVIDED, HOWEVER, that in no event shall any such actions by the
holders of Senior Indebtedness limit the right of the holders of the
Obligations to take any action to accelerate the maturity of the Obligations
in accordance

<PAGE>

with the provisions set forth in Section 8 or to pursue any rights or
remedies under this Agreement or under applicable laws. No provision in any
amendment to this Agreement which affects the superior position of the
holders of Senior Indebtedness will be effective against the holders of
Senior Indebtedness who have not consented thereto.

Section 11.9 NOTICE TO AGENT. (a) The Borrower shall give prompt
written notice to the Agent of any fact known to the Borrower which would
prohibit the making of any payment to or by the Agent in respect of the
Obligations. Notwithstanding the provisions of this Section 11.9 or any
provision of this Agreement, neither the Agent nor any Subordinated Creditor
shall be charged with knowledge of the existence of any facts which would
prohibit the making of any payment in respect of the Obligations, unless and
until the Agent or such Subordinated Creditor, as the case may be, shall have
received written notice thereof from the Borrower, a holder of Senior
Indebtedness or the Senior Agent; and, prior to the receipt of any such
written notice, the Agent and each Subordinated Creditor shall be entitled in
all respects to assume that no such facts exist; PROVIDED, HOWEVER, that if
the Agent shall not have received the notice provided for in this Section
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal
of, premium, if any, or interest on any Obligations), then, anything herein
contained to the contrary notwithstanding but without limiting the rights and
remedies of the holders of Senior Indebtedness or any trustee, fiduciary or
agent thereof, the Agent shall have full power and authority to receive such
money and to apply the same to the purpose for which such money was received
(and each Subordinated Creditor shall be entitled to retain the money so paid
to it by the Agent) and neither the Agent nor any Subordinated Creditor shall
be affected by any notice to the contrary which may be received by it after
such date; nor shall the Agent be charged with knowledge of the curing of any
such default or the elimination of the act or condition preventing any such
payment unless and until the Agent shall have received an Officer's
Certificate to such effect.

(b) The Agent and each Subordinated Creditor shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be the Senior Agent or a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor or duly authorized
officer thereof) to establish that such notice has been given by the Senior
Agent or a holder of Senior Indebtedness (or a trustee, fiduciary or agent
therefor or duly authorized officer thereof). In the event that the Agent or
any Subordinated Creditor determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Section 11.9, the Agent or such Subordinated Creditor may request such Person
to furnish evidence to the reasonable satisfaction of the Agent or such
Subordinated Creditor as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Section 11.9, and if such evidence is not furnished, the
Agent or such Subordinated Creditor may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.

Section 11.10 RIGHTS OF AGENT AS A HOLDER OF SENIOR INDEBTEDNESS,
PRESERVATION OF AGENT'S RIGHTS. The Agent in its individual capacity and
each Subordinated Creditor shall be

<PAGE>

entitled to all the rights set forth in this Section 11 with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent
as any other holder of Senior Indebtedness, and nothing in this Agreement
shall deprive the Agent or any Subordinated Creditor of any of its rights as
such holder. Nothing in this Section 11 shall apply to claims of, or
payments to, the Agent under or pursuant to Section 9.7.

Section 11.11 NO SUSPENSION OF REMEDIES. Nothing contained in this
Section 11 shall limit the right of the Agent or the holders of Obligations
to take any action to accelerate the maturity of the Obligations pursuant to
Section 8 hereof and as set forth in this Agreement or to pursue any rights
or remedies hereunder or under applicable law, subject to the rights, if any,
under this Section 11 of the holders, from time to time, of Senior
Indebtedness to receive the cash, property or securities receivable upon the
exercise of such rights and remedies.

Section 11.12 RELATION OF HOLDERS OF SENIOR INDEBTEDNESS. With
respect to the holders of Senior Indebtedness, the Agent and each
Subordinated Creditor undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Section 11,
and no implied covenants or obligations with respect to the holders of Senior
Indebtedness shall be read into this Section 11 against the Agent or any
Subordinated Creditor. Neither the Agent nor any Subordinated Creditor shall
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
neither the Agent nor any Subordinated Creditor shall be liable to any holder
of Senior Indebtedness if it shall mistakenly in the absence of gross
negligence or willful misconduct pay over or deliver to Subordinated
Creditors, the Borrower or any other Person moneys or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Section 11
or otherwise.

[Remainder of Page Intentionally Left Blank]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.

GENMAR HOLDINGS, INC.

By: /s/ Roger R. Cloutier II
-----------------------------------
Executive Vice President
Genmar Holdings, Inc.
100 South Fifth Street
Suite 2400
Minneapolis, Minnesota 55402
Telephone: (612) 339-7900
Facsimile: (612) 337-1930

THE BANK OF NEW YORK,
as Agent and a Lender

By: /s/ Richard A. Raffetto
-----------------------------------
Vice President
The Bank of New York
One Wall Street
U.S. Commercial Banking
Central Division
19th Floor
New York, New York 10286
Attn: Richard A. Raffetto
Telephone: (212) 635-8044
Facsimile: (212) 635-1208

<PAGE>

FIRST BANK NATIONAL ASSOCIATION

By: /s/ Michael Harter
-----------------------------------
Vice President
First Bank Place
8th Floor
601 Second Avenue South
Minneapolis, Minnesota 55402-4302
Attn: Michael Harter
Assistant Vice President
Telephone: (612) 973-0849
Facsimile: (612) 973-0824

Agreement Date: October 20, 1997

Solely for purposes of acknowledging
its agreement to be successor Agent as
provided in Section 9.9,

FIRST BANK NATIONAL
ASSOCIATION

By:
- -----------------------------------
Vice President

<PAGE>

Annex I to
CREDIT AGREEMENT

LENDERS AND COMMITMENTS

Name Of Lender Committment
- -------------- ----------

The Bank of New York $30,000,000
First Bank National Association $30,000,000
-----------
$60,000,000

<PAGE>

EXHIBIT 1.1(a)

FORM OF LETTER OF CREDIT

<PAGE>

EXHIBIT 1.1(b)

FORM OF GUARANTY

<PAGE>

EXHIBIT 1.1(c)

FORM OF PLEDGE AGREEMENT

<PAGE>

EXHIBIT 1.1(d)

FORM OF SECURITY AGREEMENT

<PAGE>

EXHIBIT 1.1(e)

FORMS OF SUBORDINATION AGREEMENTS

<PAGE>

EXHIBIT 1.1(f)

FORM OF TRADEMARK SECURITY AGREEMENT

<PAGE>

EXHIBIT 2.1

FORM OF NOTE

GENMAR HOLDINGS, INC.

$_________________ New York, New York
[Date of Initial Term Loan Advance]

FOR VALUE RECEIVED, the undersigned, GENMAR HOLDINGS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
_________________ (the "Lender"), at the office of The Bank of New York (the
"Agent") at One Wall Street, New York, New York 10286, on the Final Maturity
Date (as defined in the Subordinated Term Loan Credit Agreement dated as of
October 20, 1997 (as amended from time to time, the "Credit Agreement")), the
principal sum of ____________________ Dollars ($___________) or, if less, the
aggregate unpaid principal amount of all Advances (as defined in the Credit
Agreement) made to the Borrower by the Lender pursuant to the Credit Agreement,
in lawful money of the United States of America in immediately available funds,
and to pay interest from the date hereof on the principal amount hereof from
time to time outstanding, in like funds, at said office, at the rate or rates
per annum and payable on the dates provided in the Credit Agreement.

The Borrower promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at the rate or rates provided in the Credit Agreement.

The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.

All borrowings evidenced by this Note and all payments and prepayments of
the principal hereof and interest hereon and the respective dates and maturity
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof or on a continuation thereof that shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; PROVIDED, HOWEVER, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not affect the
obligations of the Borrower under this Note.

This Note is the Note referred to in the Credit Agreement, which, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events, for optional prepayment of the principal
hereof prior to the maturity hereof and for the amendment or waiver of certain
provisions of the Credit Agreement, all upon the terms and conditions therein
specified. This Note is secured as provided in the Credit Agreement. This Note
shall be governed by, and construed in accordance with, the laws of the State of
New York. GENMAR HOLDINGS, INC.,

By:
--------------------------

<PAGE>

Name:
------------------------
Title:
-----------------------

8
<PAGE>

LOANS AND PAYMENTS
------------------
AMOUNT AND MATURITY UNPAID NAME OF PERSON
DATE TYPE OF LOAN DATE PRINCIPAL MAKING NOTATION
BALANCE OF
NOTE

PAYMENTS
--------
PRINCIPAL INTEREST
- --------------------------------------------------------------------------------

<PAGE>

EXHIBIT 2.2

FORM OF NOTICE OF BORROWING

Bank of New York, as Agent
for the Lenders parties
to the Credit Agreement
referred to below
One Wall Street
New York, New York 10286

Attention:
-------------------------

Ladies and Gentlemen:

The undersigned, Genmar Holdings, Inc., refers to the Subordinated Term
Loan Credit Agreement, dated as of October 20, 1997 (the "CREDIT AGREEMENT", the
terms defined therein being used herein as therein defined), among the
undersigned, certain Lenders parties thereto, The Bank of New York, as Agent for
said Lenders and BNY Capital Markets, Inc., as Arranger, and hereby gives you
notice, irrevocably, pursuant to Section 2.3 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"PROPOSED BORROWING") as required by Section 2.3 of the Credit Agreement:

(i) The Business Day of the Proposed Borrowing is __________,
19__.

(ii) The aggregate amount of the Proposed Borrowing is
$___________.

[(iii) The Type of Loans comprising the Proposed Borrowing is
[Base Rate Loans] [Eurodollar Loans].]

[(iv) The initial Interest Period for such Eurodollar Loan made
as part of the Proposed Borrowing is _____ month[s].]

<PAGE>

The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:

(A) Each representation and warranty made or deemed made under
any Loan Document shall be true and correct at and as of the time such
Advance is to be made, both with and without giving effect to such
Advance and all other Advances to be made at such time and to the
application of the proceeds thereof.

11
<PAGE>

(B) No Default shall have occurred and be continuing at the
time such Advance is to be made or would result from the making of such
Advance and all other Advances to be made at such time or from the
application of the proceeds thereof.

Very truly yours,

GENMAR HOLDINGS, INC.

By:
-------------------------
Title:

12
<PAGE>

EXHIBIT 7.3(a)

GENMAR HOLDINGS, INC.

FORM OF PERMITTED ORGANIZATIONAL CHANGE CERTIFICATE

Reference is made to the Subordinated Term Loan Credit Agreement
dated as of October 20, 1997, as the same may be amended, modified or restated
from time to time (the "Credit Agreement"), among Genmar Holdings, Inc. (the
"Borrower"), the lenders identified therein, the Bank of New York, acting in its
capacity as agent for such lenders and BNY Capital Markets, Inc. as Arranger.
Terms defined in the Credit Agreement and not otherwise defined herein are used
with the meaning as so defined.

Reference is also made to [the relevant document] governing the
transaction to which this certificate pertains (the "Transaction").

I, ____________, the duly qualified and elected __________ of the
Borrower, do hereby certify in such capacity on behalf of the Borrower that:

1. The Transaction is a Permitted Organizational Change.

2. The representations and warranties contained in the Credit
Agreement and in the other Loan Documents (other than representations and
warranties which expressly speak only as of a different date) are true and
correct in all material respects both before and after giving effect to the
transaction.

3. No Default or Event of Default has occurred and is
continuing either before or after giving effect to the Transaction.

4. Every Loan Party involved in the Transaction was Solvent
immediately prior to and will continue to be Solvent after giving effect to the
Transaction.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
seal of the Borrower this __th day of ____, 199_.

GENMAR HOLDINGS, INC.

By:
---------------------------
Name:
Title:

<PAGE>

EXHIBIT 10.4(c)

FORM OF TRANSFER SUPPLEMENT

TRANSFER SUPPLEMENT DATED AS OF ____________________________________
_______________, 199__________(this "TRANSFER SUPPLEMENT") between____________
_______________,a __________________(the "ASSIGNOR"), and ____________________
_______________, a__________________ (the "ASSIGNEE").

R E C I T A L S:

WHEREAS, this Transfer Supplement is being executed and delivered in
accordance with Section 10.4 (c) of the Subordinated Term Loan Credit Agreement
dated as of October 20, 1997 (as the same may from time to time be amended,
supplemented, restated or otherwise modified in accordance with its terms, the
"Credit Agreement") among Genmar Holdings, Inc., a Delaware corporation (the
"Borrower"), the financial institutions party hereto (the "Lenders"), The Bank
of New York, acting in its capacity as agent for the Lenders (in such capacity,
the "Agent") and BNY Capital Markets, Inc., as Arranger;

WHEREAS, capitalized terms defined in the Credit Agreement which are not
otherwise defined herein are used herein as therein defined;

WHEREAS, the Assignee wishes to purchase all of the Assignor's rights and
obligations under the Credit Agreement;

WHEREAS, the Assignor is willing to assign and delegate to the Assignee
such rights and obligations on the terms and conditions set forth herein; and

WHEREAS, the Agent has, to the extent required by the Credit Agreement,
consented to such assignment;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. For the good and valuable consideration, the receipts and
sufficiency of which is hereby acknowledged, the Assignor hereby assigns,
transfers and delegates to the Assignee, and the Assignee hereby purchases,
takes and assumes from the Assignor, [all of] the Assignor's rights and
obligations under the Credit Agreement and the other Loan Documents as of the
Transfer Date (as defined below), including, without limitation, all of the
Assignor's Credit Exposure, together with all instruments, documents and
collateral security pertaining thereto.

2. The assignment, transfer and delegation hereunder is made
without recourse, representation or warranty, except that the Assignor
represents and warrants that: (a) as of the date hereof, the outstanding
aggregate principal of all Loans made by it and its Commitment (without
giving effect to assignments thereof which have not yet become effective) is
US$______________and US$______________, respectively; and (b) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any

<PAGE>

adverse claim or other Lien. Without limiting the generality of the
foregoing, the Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any other instrument or document furnished pursuant thereto, and
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any of the Guarantors,
or the performance or observance by the Borrower or any of the Guarantors, of
any of their respective obligations under the Loan Documents or any
instrument or document furnished pursuant thereto.

3. The Assignee hereby: (a) confirms that it has received a copy of
the Loan Documents, together with copies of financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter in this Transfer Supplement; (b) agrees that it
will, independently and without reliance upon the Assignor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents; (c) agrees that it will perform all of the obligations which by the
terms of the Loan Documents are required to be performed by it as a Lender; and
(d) specifies as its address for notices the offices and telecopy and telex
numbers set forth beneath its name on the signature page hereof.

4. The effective date for this Transfer Supplement shall be _
_____________, 199_____(the "Transfer Date").

5. As of the Transfer Date, (a) the Assignee shall be a party to the
Credit Agreement and shall have the rights and obligations of a Lender
thereunder and under the other Loan Documents, and (b) the Assignor shall, to
the extent provided in this Transfer Supplement and the Credit Agreement,
relinquish its rights and be released from its obligations under the Loan
Documents.

6. From and after the Transfer Date, the Assignee shall be entitled
to all payments in respect of the interest assigned hereby made by the Agent
pursuant to the Credit Agreement. Upon the Transfer Date, delivery of an
executed copy of this Transfer Supplement shall constitute instructions by the
Assignor to the Agent to make all such payments to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Transfer Date directly between themselves.

7. Notwithstanding anything to the contrary contained herein, the
Assignor shall continue to be entitled to the benefits of the indemnities made
in favor of the Lenders under the Loan Documents.

8. THIS TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

15
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Transfer Supplement to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.

[NAME OF ASSIGNOR]

By:
--------------------------
Name:
Title:

[NAME OF ASSIGNEE]

By:
--------------------------
Name:
Title:

Address for notices:
[Address, including]
telecopy and telex numbers]

Accepted and Agreed to as of
the date first written above:

THE BANK OF NEW YORK,
as Agent

By:
--------------------------
Name:
Title:

<PAGE>

TABLE OF CONTENTS

PAGE
----
<S> <C>

SECTION 1 DEFINITIONS

SECTION 1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2 AMOUNT AND TERMS OF CREDIT FACILITY

SECTION 2.1 TERM LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . .14

SECTION 2.2 NOTICE OF BORROWING. . . . . . . . . . . . . . . . . . . . . .15
SECTION 2.3 DISBURSEMENT OF FUNDS. . . . . . . . . . . . . . . . . . . . .15
SECTION 2.4 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 2.5 INTEREST PERIODS . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 2.6 MINIMUM AMOUNT OF EURODOLLAR LOANS . . . . . . . . . . . . . .17
SECTION 2.7 CONVERSION OR CONTINUATION . . . . . . . . . . . . . . . . . .18
SECTION 2.8 VOLUNTARY REDUCTION OF COMMITMENTS . . . . . . . . . . . . . .18
SECTION 2.9 VOLUNTARY PREPAYMENTS. . . . . . . . . . . . . . . . . . . . .18
SECTION 2.10 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .18
SECTION 2.11 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .19
SECTION 2.12 METHOD AND PLACE OF PAYMENT. . . . . . . . . . . . . . . . . .19
SECTION 2.13 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 2.14 INTEREST RATE UNASCERTAINABLE, INCREASED COSTS,
ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 2.15 FUNDING LOSSES . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 2.16 INCREASED CAPITAL. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 2.18 CHANGE OF OFFICE, ETC. . . . . . . . . . . . . . . . . . . . .23
SECTION 2.19 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . .23

SECTION 3 LETTERS OF CREDIT

SECTION 3.1 DRAWING UNDER LETTERS OF CREDIT. . . . . . . . . . . . . . . .23

SECTION 3.2 CASH COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 3.3 INSTRUMENTS OF ASSIGNMENT. . . . . . . . . . . . . . . . . . .23
SECTION 3.4 REPLACEMENT OF LETTERS OF CREDIT . . . . . . . . . . . . . . .23

SECTION 4 CONDITIONS PRECEDENT

SECTION 4.1 CONDITIONS PRECEDENT TO INITIAL ADVANCES . . . . . . . . . . .24
SECTION 4.2 CONDITIONS TO EACH ADVANCE . . . . . . . . . . . . . . . . . .25
SECTION 4.3 METHOD OF DELIVERY . . . . . . . . . . . . . . . . . . . . . .26

<PAGE>

<S> <C>
SECTION 5 REPRESENTATIONS AND WARRANTIES

SECTION 5.1 CORPORATE STATUS . . . . . . . . . . . . . . . . . . . . . . .26

SECTION 5.2 CORPORATE POWER AND AUTHORITY. . . . . . . . . . . . . . . . .26
SECTION 5.3 NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 5.4 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 5.5 FINANCIAL STATEMENTS; FINANCIAL CONDITION; ETC . . . . . . . .27
SECTION 5.6 SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 5.7 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .27
SECTION 5.8 MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . .27
SECTION 5.9 USE OF PROCEEDS; MARGIN REGULATIONS. . . . . . . . . . . . . .27
SECTION 5.10 GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . .27
SECTION 5.11 SECURITY INTERESTS AND LIENS . . . . . . . . . . . . . . . . .27
SECTION 5.12 TAX RETURNS AND PAYMENTS . . . . . . . . . . . . . . . . . . .28
SECTION 5.13 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .28
SECTION 5.14 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT. . . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 5.15 REPRESENTATIONS AND WARRANTIES IN TRANSACTION
DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 5.16 TRUE AND COMPLETE DISCLOSURE; FINANCIAL STATEMENTS . . . . . .28
SECTION 5.17 CORPORATE STRUCTURE; CAPITALIZATION. . . . . . . . . . . . . .28
SECTION 5.18 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .29
SECTION 5.19 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .29
SECTION 5.20 PATENTS, TRADEMARKS, ETC . . . . . . . . . . . . . . . . . . .29
SECTION 5.21 OWNERSHIP OF PROPERTY. . . . . . . . . . . . . . . . . . . . .29
SECTION 5.22 NO DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 5.23 LICENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 5.24 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . .30
SECTION 5.25 NO BURDENSOME RESTRICTIONS . . . . . . . . . . . . . . . . . .30
SECTION 5.26 BROKERS' FEES. . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 5.27 LABOR MATTERS. . . . . . . . . . . . . . . . . . . . . . . . .30

SECTION 6 AFFIRMATIVE COVENANTS

SECTION 6.1 INFORMATION COVENANTS. . . . . . . . . . . . . . . . . . . . .30
(a) Annual Financial Statements . . . . . . . . . .30
(b) Quarterly Financial Statements. . . . . . . . .31
(c) [This Section deliberately left blank]. . . . .31
(d) Management Letters. . . . . . . . . . . . . . .31
(e) Financial Projections . . . . . . . . . . . . .31
(f) Certificates. . . . . . . . . . . . . . . . . .31
(g) Notice of Default or Litigation . . . . . . . .32
(h) [This Section deliberately left blank]. . . . .32
(i) SEC Filings . . . . . . . . . . . . . . . . . .32
(j) [This Section deliberately left blank]. . . . .32
(k) Refinancings. . . . . . . . . . . . . . . . . .32
(l) Charter Documents . . . . . . . . . . . . . . .32
(m) Notice of Dissolution . . . . . . . . . . . . .32

<PAGE>

<S> <C>
(n) [This Section deliberately left blank]. . . . .32
(o) Other Information . . . . . . . . . . . . . . .32
SECTION 6.2 BOOKS, RECORDS AND INSPECTIONS . . . . . . . . . . . . . . . .32
SECTION 6.3 MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . .32
SECTION 6.4 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 6.5 CORPORATE FRANCHISES . . . . . . . . . . . . . . . . . . . . .33
SECTION 6.6 COMPLIANCE WITH LAW. . . . . . . . . . . . . . . . . . . . . .33
SECTION 6.7 PERFORMANCE OF OBLIGATIONS . . . . . . . . . . . . . . . . . .33
SECTION 6.8 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . . . .33
SECTION 6.9 LICENSES, PERMITS, ETC . . . . . . . . . . . . . . . . . . . .34
SECTION 6.10 ENVIRONMENTAL REPORTS. . . . . . . . . . . . . . . . . . . . .34
SECTION 6.11 APPRAISALS . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 6.12 ADDITIONAL GUARANTORS. . . . . . . . . . . . . . . . . . . . .34
SECTION 6.13 AMF INSURANCE COMPANY OF BERMUDA LTD . . . . . . . . . . . . .34
SECTION 6.14 COVENANT TO GIVE SECURITY. . . . . . . . . . . . . . . . . . .35
SECTION 6.15 COVENANT TO PROVIDE CERTIFICATE OF INSURANCE . . . . . . . . .35
SECTION 6.16 COVENANT TO PROVIDE FINANCING STATEMENTS . . . . . . . . . . .35
SECTION 6.17 COVENANT TO PROVIDE SUBORDINATION AGREEMENTS . . . . . . . . .35

SECTION 7 NEGATIVE COVENANTS

SECTION 7.1 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . .36

SECTION 7.2 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 7.3 RESTRICTION ON FUNDAMENTAL CHANGES . . . . . . . . . . . . . .38
SECTION 7.4 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .38
SECTION 7.5 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .38
SECTION 7.6 DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 7.7 ADVANCES AND INVESTMENTS . . . . . . . . . . . . . . . . . . .39
SECTION 7.8 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . .40
SECTION 7.9 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
CERTAIN DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . .41
SECTION 7.10 CHANGES IN BUSINESS. . . . . . . . . . . . . . . . . . . . . .41
SECTION 7.11 CERTAIN RESTRICTIONS . . . . . . . . . . . . . . . . . . . . .41
SECTION 7.12 LEASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 7.13 SALES AND LEASEBACKS . . . . . . . . . . . . . . . . . . . . .41
SECTION 7.14 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .41
SECTION 7.15 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .41
SECTION 7.16 [THIS SECTION DELIBERATELY LEFT BLANK] . . . . . . . . . . . .42
SECTION 7.17 INACTIVE SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . .42

SECTION 8 EVENTS OF DEFAULT

SECTION 8.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . .42
(a) Failure to Make Payments . . . . . . . . . . .42
(b) Breach of Representation or Warranty. . . . . .42
(c) Breach of Covenants . . . . . . . . . . . . . .42
(d) Acceleration Under Other Agreements . . . . . .42

iii

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(e) Bankruptcy, etc . . . . . . . . . . . . . . . .43
(f) Subordinated Debt Financing Documents . . . . .43
(g) Restricted Subsidiaries . . . . . . . . . . . .43
(h) Letters of Credit; Collateral Account
Agreements. . . . . . . . . . . . . . . . . . .43
(i) [This Section deliberately left blank]. . . . .43
(j) Security Documents. . . . . . . . . . . . . . .43
(k) Guaranty. . . . . . . . . . . . . . . . . . . .44
(l) Change of Control . . . . . . . . . . . . . . .44
(m) Judgments . . . . . . . . . . . . . . . . . . .44
(n) [This Section deliberately left blank]. . . . .44
(o) Use of Proceeds . . . . . . . . . . . . . . . .44

SECTION 8.2 RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . .44

SECTION 9 THE AGENT

SECTION 9.1 APPOINTMENT. . . . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 9.2 DELEGATION OF DUTIES . . . . . . . . . . . . . . . . . . . . .45
SECTION 9.3 EXCULPATORY PROVISIONS . . . . . . . . . . . . . . . . . . . .45
SECTION 9.4 RELIANCE BY AGENT. . . . . . . . . . . . . . . . . . . . . . .46
SECTION 9.5 NOTICE OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . .46
SECTION 9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. . . . . . . . . . . .46
SECTION 9.7 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 9.8 AGENT IN ITS INDIVIDUAL CAPACITY . . . . . . . . . . . . . . .47
SECTION 9.9 SUCCESSOR AGENT. . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 9.10 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . .48

SECTION 10 MISCELLANEOUS

SECTION 10.1 PAYMENT OF EXPENSES, INDEMNITY, ETC. . . . . . . . . . . . . .48
SECTION 10.2 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 10.3 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 10.4 SUCCESSORS AND ASSIGNS; PARTICIPATION; ASSIGNMENTS . . . . . .50
(a) Successors and Assigns. . . . . . . . . . . . .50
(b) Participation . . . . . . . . . . . . . . . . .50
(c) Assignments . . . . . . . . . . . . . . . . . .51
(d) Disclosure of Information . . . . . . . . . . .52
SECTION 10.5 AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . .52
SECTION 10.6 NO WAIVER; REMEDIES CUMULATIVE . . . . . . . . . . . . . . . .53
SECTION 10.7 SHARING OF PAYMENTS. . . . . . . . . . . . . . . . . . . . . .53
SECTION 10.8 GOVERNING LAW; SUBMISSION TO JURISDICTION. . . . . . . . . . .53
SECTION 10.9 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 10.10 EFFECTIVENESS. . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 10.11 HEADINGS DESCRIPTIVE . . . . . . . . . . . . . . . . . . . . .54
SECTION 10.12 MARSHALLING; RECAPTURE . . . . . . . . . . . . . . . . . . . .54
SECTION 10.13 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 10.14 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 10.15 DOMICILE OF LOANS. . . . . . . . . . . . . . . . . . . . . . .54

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SECTION 10.16 LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . .55
SECTION 10.17 CALCULATIONS; COMPUTATIONS . . . . . . . . . . . . . . . . . .55
SECTION 10.18 WAIVER OF TRIAL BY JURY. . . . . . . . . . . . . . . . . . . .55

SECTION 11 SUBORDINATION OF OBLIGATIONS

SECTION 11.1 OBLIGATIONS SUBORDINATE TO SENIOR INDEBTEDNESS . . . . . . . .55
SECTION 11.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC . . . . . . . .55
SECTION 11.3 SUSPENSION OF PAYMENT WHEN SENIOR INDEBTEDNESS IN
DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 11.4 APPLICATION OF MONIES DEPOSITED. . . . . . . . . . . . . . . .58
SECTION 11.5 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. . . .58
SECTION 11.6 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. . . . . . . . . .58
SECTION 11.7 AGENT TO EFFECTUATE SUBORDINATION. . . . . . . . . . . . . . .59
SECTION 11.8 NO WAIVER OF SUBORDINATION PROVISIONS. . . . . . . . . . . . .59
SECTION 11.9 NOTICE TO AGENT. . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 11.10 RIGHTS OF AGENT AS A HOLDER OF SENIOR INDEBTEDNESS,
PRESERVATION OF AGENT'S RIGHTS . . . . . . . . . . . . . . . .60
SECTION 11.11 NO SUSPENSION OF REMEDIES. . . . . . . . . . . . . . . . . . .60
SECTION 11.12 RELATION OF HOLDERS OF SENIOR INDEBTEDNESS . . . . . . . . . .61

</TABLE>
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ANNEXES
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<S> <C>
I Lenders and Commitments

SCHEDULES
- ---------

1.1(a) Mortgaged Property
1.1(b) Permitted Organizational Changes
1.1(c) Restricted Subsidiaries
4.1(d) Environmental Liabilities
5.5 Contingent Liabilities
5.10 Governmental Approvals
5.11 Prior Security Interest
5.17 Corporate Structure
5.21(a)(i) Real Property
5.21(a)(ii) Immaterial Real Property
5.21(b) Property Conditions
7.1 Indebtedness
7.2 Permitted Liens
7.7 Investments

EXHIBITS
- --------

<CAPTION>
<S> <C>
1.1(a) Form of Letter of Credit
1.1(b) Form of Guaranty
1.1(c) Form of Pledge Agreement
1.1(d) Form of Security Agreement
1.1(e) Forms of Subordination Agreements
1.1(f) Form of Trademark Security Agreement
2.1 Form of Note
2.2 Form of Notice of Borrowing
7.3(a) Form of Permitted Organizational Change Certificate
10.4(c) Form of Transfer Supplement

</TABLE>

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our report
dated August 2, 1999 and to all references to our Firm included in Genmar
Holdings, Inc.'s registration statement, on Form S-1.

/s/ ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
August 17, 1999