EXECUTION VERSION

   
SECURITY AGREEMENT

 
Dated as of November 29, 2010
 
among
 
PALM HARBOR HOMES, INC.,
AND
THE OTHER GRANTORS NAMED HEREIN,

 
each as a Grantor
 
and, collectively,
as the Grantors
 
and
 
FLEETWOOD HOMES, INC.
 
as Secured Party
 

 
 

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TABLE OF CONTENTS
(continued)

ARTICLE I
DEFINITIONS
2
     
Section 1.01
Definitions
2
Section 1.02
Certain Terms
4
     
ARTICLE II
Grant of Security Interest
4
     
Section 2.01
Collateral
4
Section 2.02
Grant of Security Interest in Collateral
5
     
ARTICLE III
Representations and Warranties
5
     
Section 3.01
Title; No Other Liens
5
Section 3.02
Perfection and Priority
6
Section 3.03
Jurisdiction of Organization; Chief Executive Office
6
Section 3.04
Locations of Books and Records
6
Section 3.05
Pledged Collateral
6
Section 3.06
Instruments and Tangible Chattel Paper Formerly Accounts
7
Section 3.07
Intellectual Property
7
Section 3.08
Commercial Tort Claims
8
Section 3.09
Specific Collateral
8
Section 3.10
Enforcement
8
Section 3.11
Representations and Warranties of the Credit Agreement
8
     
ARTICLE IV
Covenants
8
     
Section 4.01
Maintenance of Perfected Security Interest; Further Documentation and Consents
8
Section 4.02
Changes in Locations, Name, Etc
9
Section 4.03
Pledged Collateral
9
Section 4.04
Accounts
11
Section 4.05
Delivery of Instruments and Tangible Chattel Paper and Control of Investment
Property, Letter-of-Credit Rights and Electronic Chattel Paper
11
Section 4.06
Intellectual Property
12
Section 4.07
Notices
13
Section 4.08
Notice of Commercial Tort Claims
13
Section 4.09
Compliance with Credit Agreement
13
     
ARTICLE V
Remedial Provisions
13
     
Section 5.01
Code and Other Remedies
13
Section 5.02
Control Account and Collections
16
Section 5.03
Pledged Collateral
17
Section 5.04
Registration Rights
18
Section 5.05
Deficiency
19
     
ARTICLE VI
Subordination
19
     
Section 6.01
Subordination
19
Section 6.02
Restrictions on Payment and Transfer
20

 
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ARTICLE VII
The Administrative Secured Party
20
     
Section 7.01
The Secured Party’s Appointment as Attorney-in-Fact
20
Section 7.02
Authorization to File Financing Statements
22
     
ARTICLE VIII
Miscellaneous
22
     
Section 8.01
Reinstatement
22
Section 8.02
Independent Obligations
22
Section 8.03
No Waiver by Course of Conduct
22
Section 8.04
Amendments in Writing
23
Section 8.05
Additional Grantors; Additional Pledged Collateral
23
Section 8.06
Notices
23
Section 8.07
Benefit of Agreement
24
Section 8.08
Cumulative Remedies, Etc
24
Section 8.09
Amendments, Waivers and Consents
25
Section 8.10
Waiver
25
Section 8.11
Governing Law
25
Section 8.12
Consent to Jurisdiction; Service of Process; Waiver of Jury Trial
25
Section 8.13
Interpretation; Headings
26
Section 8.14
Severability of Provisions
26
Section 8.15
Counterparts
26
ANNEXES AND SCHEDULES
 
ANNEX 1
Form of Pledge Amendment
 
ANNEX 2
Form of Joinder Agreement
 

SCHEDULE I-A
Grantors
SCHEDULE I-B
Initial Limited Pledgors
SCHEDULE I-C
Initial Pledged Entities
SCHEDULE II
Commercial Tort Claims
SCHEDULE III
Jurisdiction of Organization; Chief Executive Offices
SCHEDULE IV
Location of Books and Records
SCHEDULE V
Control Agreements
SCHEDULE VI
Pledged Collateral
SCHEDULE VII
Intellectual Property

 
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This SECURITY AGREEMENT (this “Agreement”) is made as of November 29, 2010 by
and among Palm Harbor Homes, Inc., a Florida corporation (as referred to herein,
the “PHH”) and each of the direct and indirect Subsidiaries of PHH set forth on
Schedule I-A hereto (PHH or any such Subsidiary individually being a “Grantor”
and collectively being the “Grantors”) in favor of Fleetwood Homes, Inc., a
Delaware corporation (the “Secured Party”).
 
WITNESSETH
 
WHEREAS, on November 29, 2010 (the “Petition Date”), the Grantors each filed a
voluntary petition for relief under title 11 of chapter 11 of the United States
Code, 11 U.S.C. §§ 101, et. seq. (as amended, the “Bankruptcy Code”) with the
United States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”); and
 
WHEREAS, from and after the Petition Date, the Grantors continue to operate
their respective businesses as debtors and debtors-in-possession pursuant to
sections 1107 and 1108 of the Bankruptcy Code; and
 
WHEREAS, each of the Grantors has an immediate need for funds to continue to
operate its respective businesses and the Grantors have not been able to obtain
sufficient credit or to incur sufficient debt from any other source sufficient
to continue their business operations; and
 
WHEREAS, pursuant to the Debtor-in-Possession Revolving Credit Agreement dated
as of the date hereof (as the same may be modified from time to time, the
“Credit Agreement”) among each of the Grantors and the Secured Party, the
Secured Party has agreed to provide certain financial accommodations to the
Grantors upon the terms and subject to the conditions set forth therein; and
 
WHEREAS, each Grantor will derive substantial direct and indirect benefits from
the financial accommodations provided by the Secured Party under the Credit
Agreement; and
 
WHEREAS, it is a condition precedent to the obligation of the Secured Party to
provide such financial accommodations under the Credit Agreement that the
Grantors shall have executed and delivered this Agreement to the Secured Party;
and
 
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 
 

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ARTICLE I
DEFINITIONS
 
Section 1.01          Definitions.
 
“Additional Pledged Equity Interests” means any and all interest in (a) any and
all additional interests in any Person owned by any Grantor that is a Pledged
Subsidiary hereafter acquired by such Grantor, including any Additional Pledged
Equity Interests in any such Pledged Subsidiary, any and all of Grantor’s other
additional rights and interests in and to such Pledged Subsidiary and any and
all of Grantor’s rights to and interests in any proceeds and distributions under
or pursuant to any Pledged Collateral Agreements of or with respect to such
Pledged Subsidiary or otherwise, including (i) warrants, options or other rights
entitling such Grantor to acquire any interest in capital stock or other Equity
Interests in such Pledged Subsidiary, (iii) securities, property, interest,
dividends and other payments and distributions issued as an addition to, in
redemption of, in renewal or exchange for, in substitution or upon conversion
of, or otherwise on account of, the Pledged Equity Interests of such Pledged
Subsidiary or such additional capital stock or other equity securities or other
interests in such Pledged Subsidiary, (iii) all rights of such Grantor to
receive moneys in repayment of loans made to such Pledged Subsidiary pursuant to
any Pledged Collateral Agreement or otherwise, (iv) all rights of such Grantor
to receive proceeds of any insurance, indemnity, warranty or guaranty with
respect to the Pledged Equity Interests in such Pledged Subsidiary, (v) all
claims of such Grantor for damages arising out of or for breach of or default or
misrepresentation under any Pledged Collateral Agreement or any documents,
instruments or opinions delivered pursuant thereto, (vi) any right of Grantor to
terminate any Pledged Collateral Agreement, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (vii) all rights
of such Grantor to vote and give appraisals, consents, decisions and directions
and exercise any other similar rights with respect to any lawful action of such
Pledged Subsidiary, and (b) to the extent not included in the foregoing, all
cash and non-cash proceeds and Support Obligations of or with respect to the
Pledged Equity Interests in such Pledged Subsidiary and any such Additional
Pledged Equity Interests, in each case from time to time received or receivable
by, or otherwise paid or distributed to or acquired by, such Grantor.
 
“Agreement” means this Security Agreement, together with all Exhibits and
Schedules hereto, as the same may be amended, supplemented or otherwise modified
from time to time.
 
“Applicable IP Office” means the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency within or outside
the United States.
 
“Collateral” has the meaning specified in Section 2.01(b).
 
“Control Agreements” means, with respect to any deposit account, any securities
account, commodity account, securities entitlement or commodity contract, an
agreement, in form and substance satisfactory to the Secured Party, among the
Secured Party, the financial institution or other Person at which such account
is maintained or with which such entitlement or contract is carried and the
Grantor maintaining such account, effective to grant “control” (as defined in
the applicable UCC) over such account to the Secured Party.
 
“Liabilities” means all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, taxes, commissions, charges, disbursements and expenses, in each case of
any kind or nature (including interest accrued thereon or as a result thereto
and fees, charges and disbursements of financial, legal and other advisors and
consultants), whether joint or several, whether or not indirect, contingent,
consequential, actual, punitive, treble or otherwise.
 
“Limited Pledgors” means each of the entities set forth on Schedule I-B, in its
capacity as a Grantor.
 
“Pledged Certificated Equity Interests” means all certificated securities and
any other Equity Interests or Equivalent Equity Interests of any Person
evidenced by a certificate, instrument or other similar document (as defined in
the UCC), in each case owned by any Grantor, and any distribution of property
made on, in respect of or in exchange for the foregoing from time to time,
including all Equity Interests and Equivalent Equity Interests listed on
Schedule VI.

 
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“Pledged Collateral” means, collectively, the Pledged Equity Interests and the
Pledged Debt Instruments.
 
“Pledged Collateral Agreement” means any shareholders agreement, operating
agreement, partnership agreement, voting trust, proxy agreement or other
agreement or understanding with respect to any Pledged Collateral.
 
“Pledged Debt Instruments” means all right, title and interest of any Grantor in
instruments evidencing any indebtedness for borrowed money owed to such Grantor
or other obligations, and any distribution of property made on, in respect of or
in exchange for the foregoing from time to time, including all indebtedness
described on Schedule VI, issued by the obligors named therein.
 
“Pledged Entity” means each entity set forth on Schedule I-C hereto and each
entity listed as a Subsidiary on a Pledge Amendment (as defined in Section
8.05).
 
“Pledged Investment Property” means any investment property of any Grantor, and
any distribution of property made on, in respect of or in exchange for the
foregoing from time to time, other than any Pledged Equity Interests or Pledged
Debt Instruments.
 
“Pledged Equity Interests” means all Additional Pledged Equity Interests, all
Pledged Certificated Equity Interests and all Pledged Uncertificated Equity
Interests.
 
“Pledged Subsidiary” means each Subsidiary of a Grantor, the Equity Interests in
which is required to be pledged hereunder, including each Subsidiary of a
Grantor listed on Schedule VI.
 
“Pledged Uncertificated Equity Interests” means any Equity Interest or
Equivalent Equity Interest of any Person that is not Pledged Certificated Equity
Interest, including all right, title and interest of any Grantor as a limited or
general partner in any partnership not constituting Pledged Certificated Equity
Interests or as a member of any limited liability company, all right, title and
interest of any Grantor in, to and under any certificate or articles of
incorporation, bylaws or other organizational document of any partnership or
limited liability company to which it is a party, and any distribution of
property made on, in respect of or in exchange for the foregoing from time to
time, including in each case those interests set forth on Schedule VI, to the
extent such interests are not certificated.
 
“Secured Obligations” has the meaning set forth in Section 2.02.
 
“Secured Party” has the meaning set forth in the Preamble.

 
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Section 1.02          Certain Terms.
 
(a)           The following terms have the meanings given to them in the UCC and
terms used herein without definition that are defined in the UCC have the
meanings given to them in the UCC:  “account”, “account debtor”, “as-extracted
collateral”, “certificated security”, “chattel paper”, “commercial tort claim”,
“commodity contract”, “deposit account”, “electronic chattel paper”,
“equipment”, “farm products”, “fixture”, “general intangible”, “goods”,
“health-care-insurance receivable”, “instruments”, “inventory”, “investment
property”, “letter-of-credit right”, “proceeds”, “record”, “securities account”,
“security” and “tangible chattel paper”.
 
(b)           Initially capitalized terms used herein without definition are
used as defined in the Credit Agreement including, “Business Day”, “Capital
Lease”, “Closing Date”, “Collections”, “Computer Software”, “Contractual
Obligation”, “Control Account”, “Copyrights”, “Credit Document”, “Default”,
“Event of Default”, “Governmental Body”, “Intellectual Property”, “Knowledge”,
“Law”, “Lien”, “Marks”, “Note”, “Obligations”, “Patents”, “Permits”, “Person”,
“Permitted Lien”, “Subsidiary”, “Textron Agent”, “Textron Facility”, “Textron
Lenders”, “Support Obligations”, “UCC” and “Weekly Budget”.
 
ARTICLE II
GRANT OF SECURITY INTEREST
 
Section 2.01          Collateral.
 
(a)           For the purposes of this Agreement, all assets (other than the
Equity Interests of and in Countryplace Acceptance Corporation) of any Grantor
(other than a Limited Pledgor), whether presently existing or owned or hereafter
arising or acquired, of any kind or nature and wherever located, in which a
Grantor (other than a Limited Pledgor) now has or at any time in the future may
acquire any right, title or interests, including all of the following property,
is collectively referred to as the “All Assets Collateral”:
 
(i)           all accounts, chattel paper (including electronic chattel paper),
deposit accounts, documents (as defined in the UCC), equipment, general
intangibles, instruments, inventory, investment property and any Support
Obligations related thereto;
 
(ii)          the commercial tort claims described on Schedule II and on any
supplement thereto received by the Secured Party pursuant to Section 4.08;
 
(iii)         all property of such Grantor held by the Secured Party, including
all property of every description, in the custody of or in transit to the
Secured Party for any purpose, including safekeeping, collection or pledge, for
the account of such Grantor or as to which such Grantor may have any right or
power, including but not limited to cash;
 
(iv)         all other goods (including but not limited to fixtures) and
personal property of such Grantor, whether tangible or intangible and wherever
located;
 
(v)          all books, records and other documentation pertaining to the other
property described in this Section 2.01; and

 
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(vi)         to the extent not otherwise included, all proceeds of the
foregoing;
 
(b)           For the purposes of this Agreement, all of the following property,
whether presently existing or owned or hereafter arising or acquired and
wherever located, by a Limited Pledgor, or in which a Limited Pledgor now has or
at any time in the future may acquire any right, title or interests is
collectively referred to as the “Limited Collateral” and, together with the All
Assets Collateral, the “Collateral”:
 
(i)           all Pledged Equity Interests in each Pledged Entity;
 
(ii)          all rights, interests and claims with respect to the Pledged
Equity Interests in each Pledged Entity, including under any and all Pledged
Collateral Agreement with respect to such Pledged Entity;
 
(iii)         all books, records and other documentation pertaining to the other
property described in this Section 2.01(b);
 
(iv)         to the extent not otherwise included, all proceeds of the
foregoing;
 
Section 2.02          Grant of Security Interest in Collateral.  Each Grantor,
as collateral security for the prompt and complete payment and performance when
due (whether at stated maturity, by acceleration or otherwise) of the
Obligations of such Grantor (the “Secured Obligations”), hereby mortgages,
pledges and hypothecates to the Secured Party, and grants to the Secured Party a
Lien on and security interest in, all of its right, title and interest in, to
and under the Collateral of such Grantor.
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES
 
To induce the Secured Party to enter into the Credit Documents, each Grantor
hereby, jointly and severally, represents and warrants to the Secured Party on
the date hereof and on each date that a Weekly Budget is delivered pursuant to
the Credit Agreement, that:
 
Section 3.01          Title; No Other Liens.  Except for Permitted Liens (other
than those not permitted to exist on any Collateral), such Grantor has good and
marketable title to all properties and assets, tangible and intangible, owned by
it, and each Grantor has rights in and power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder free and clear of
any and all Liens other than the Liens created and permitted in favor of the
Secured Party by the Credit Documents and the Permitted Liens.  No Grantor is in
possession of any equipment or other tangible asset that is owned by another
Person.  None of the assets of any Grantor is in the possession or under the
control of any other Person.

 
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Section 3.02          Perfection and Priority.  The security interest granted
pursuant to this Agreement constitutes a valid and continuing perfected security
interest in favor of the Secured Party in all Collateral.  Such security
interest is prior to all other Liens on the Collateral (except for Permitted
Liens).  Except as set forth in this Section 3.02, all actions by such Grantor
necessary or desirable to protect and perfect the Lien granted hereunder on the
Collateral have been duly taken.  No authorization, approval or consent is
required to obtained from any Governmental Body or other Person for the grant of
the security interest herein, the perfection thereof or the exercise by the
Secured Party of its rights and remedies hereunder (other than the exercise by
the Secured Party of any rights or remedies with respect to the Initial Limited
Pledgors and Subsidiaries which would result in a change of control requiring
prior insurance regulatory approval from applicable insurance regulatory
agencies having jurisdiction over such Initial Limited Pledgors and
Subsidiaries).
 
Section 3.03          Jurisdiction of Organization; Chief Executive
Office.  Such Grantor’s jurisdiction of organization, legal name and
organizational identification number, if any, and the location of such Grantor’s
chief executive office or sole place of business, in each case as of the date
hereof, is specified on Schedule III and such Schedule III also lists all
jurisdictions of incorporation, legal names and locations of such Grantor’s
chief executive office or sole place of business for the five years preceding
the date hereof.
 
Section 3.04           Locations of Books and Records.  On the date hereof, such
Grantor’s books and records concerning the Collateral are kept at the locations
listed on Schedule IV.
 
Section 3.05           Pledged Collateral.
 
(a)           The Pledged Equity Interests pledged by such Grantor hereunder (i)
is listed on Schedule VI and constitutes that percentage of the issued and
outstanding equity of all classes of each issuer thereof as set forth on
Schedule VI, (ii) has been duly authorized, validly issued and is fully paid and
nonassessable (other than Pledged Equity Interests in limited liability
companies and partnerships) and (iii) constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms.
 
(b)           As of the Closing Date, all Pledged Collateral (other than Pledged
Uncertificated Equity Interests) and all Pledged Investment Property
constituting Collateral consisting of instruments and certificates has been
delivered to the Secured Party in accordance with Section 4.03(a).
 
(c)           Upon the occurrence and during the continuance of an Event of
Default, the Secured Party shall be entitled to exercise all of the rights of
the Grantor granting the security interest in any Pledged Equity Interests
constituting Collateral, and a transferee or assignee of such Pledged Equity
Interests shall become a holder of such Pledged Equity Interests to the same
extent as such Grantor and be entitled to participate in the management of the
issuer of such Pledged Equity Interests and, upon the transfer of the entire
interest of such Grantor, such Grantor shall, by operation of law, cease to be a
holder of such Pledged Equity Interests; provided that Lender shall not exercise
this remedy with respect to the Initial Limited Pledgors and their direct
Subsidiaries to the extent (and only for so long as) the exercise of the remedy
granted in this Section 3.05(c) would require insurance regulatory approval from
any applicable insurance regulatory agency having jurisdiction over such Initial
Limited Pledgor or Subsidiary; provided further that the Secured Party shall be
entitled to pursue all such regulatory approvals including, by using the powers
granted it in Section 7.01.

 
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(d)           Except as set forth in Schedule VI and any certificate or articles
of incorporation, bylaws or other organizational document of any Grantor, there
are no (i) Pledged Collateral Agreements which affect or relate to the voting or
giving of written consents with respect to any of the Pledged Collateral and
(ii) restrictions on the transferability of the Pledged Collateral to Secured
Party or with respect to the foreclosure, transfer or disposition thereof by
Secured Party.  Each Pledged Collateral Agreement contains the entire agreement
between the parties thereto with respect to the subject matter thereof, has not
been amended or modified, and is in full force and effect in accordance with its
terms.  To the best Knowledge of such Grantor, there exists no material
violation or material default under any Pledged Collateral Agreement by such
Grantor or the other parties thereto.  Such Grantor has not knowingly waived or
released any of its material rights under or otherwise consented to a material
departure from the terms and provisions of any Pledged Collateral Agreement.
 
(e)           No control agreements exist with respect to any Collateral other
than Control Agreement in favor of the Secured Party and Control Agreements in
favor of the Textron Agent and the Textron Lenders in connection with the
Textron Facility.
 
Section 3.06          Instruments and Tangible Chattel Paper Formerly
Accounts.  No amount payable to such Grantor under or in connection with any
account constituting Collateral is evidenced by any instrument or tangible
chattel paper that has not been delivered to the Secured Party, properly
endorsed for transfer, to the extent delivery is required by Section 4.05(a).
 
Section 3.07          Intellectual Property.
 
(a)           Schedule VII sets forth a true and complete list of the following
Intellectual Property constituting Collateral such Grantor owns, licenses or
otherwise has the right to use:  (i) Intellectual Property that is registered or
subject to applications for registration, (ii) Internet domain names and (iii)
Intellectual Property and material Computer Software, separately identifying
that owned and licensed to such Grantor and including for each of the foregoing
items (A) the owner, (B) the title, (C) the jurisdiction in which such item has
been registered or otherwise arises or in which an application for registration
has been filed, (D) as applicable, the registration or application number and
registration or application date and (E) any licenses and sublicenses held by
any Grantor as licensee pertaining to Intellectual Property of any other Person
or other rights (including franchises) granted by the Grantor with respect
thereto.
 
(b)           On the Closing Date, all Intellectual Property constituting
Collateral owned by such Grantor is valid, in full force and effect, subsisting,
unexpired and enforceable, and no Intellectual Property constituting Collateral
has been abandoned.  No breach or default of any material license or sublicense
held by any Grantor as licensee pertaining to Intellectual Property of any other
Person or other right (including franchises) constituting Collateral shall be
caused by any of the following, and none of the following shall limit or impair
the ownership, use, validity or enforceability of, or any rights of such Grantor
in, any Intellectual Property constituting Collateral:  (i) the consummation of
the transactions contemplated by any Credit Document or (ii) any holding,
decision, judgment or order rendered by any Governmental Body.  There are no
pending (or, to the Knowledge of such Grantor, threatened) actions,
investigations, suits, proceedings, audits, claims, demands, orders or disputes
challenging the ownership, use, validity, enforceability of, or such Grantor’s
rights in, any Intellectual Property constituting Collateral of such
Grantor.  To such Grantor’s Knowledge, no Person has been or is infringing,
misappropriating, diluting, violating or otherwise impairing any Intellectual
Property constituting Collateral of such Grantor.  Such Grantor, and to such
Grantor’s Knowledge each other party thereto, is not in material breach or
default of any material license or sublicense held by any Grantor as licensee
pertaining to Intellectual Property of any other Person or other right
(including franchises) constituting Collateral.

 
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Section 3.08          Commercial Tort Claims.  The only commercial tort claims
of the Grantors existing on the date hereof (regardless of whether the amount,
defendant or other material facts can be determined and regardless of whether
such commercial tort claim has been asserted, threatened or has otherwise been
made known to the obligee thereof or whether litigation has been commenced for
such claims) are those listed on Schedule II.
 
Section 3.09          Specific Collateral.  None of the Collateral is, or is
proceeds or products of, farm products, as-extracted collateral,
health-care-insurance receivables or timber to be cut.
 
Section 3.10          Enforcement.  No Permit, notice to or filing with any
Governmental Body or any other Person or any consent from any Person is required
for the exercise by the Secured Party of its rights (including voting rights)
provided for in this Agreement or the enforcement of remedies in respect of the
Collateral pursuant to this Agreement, including the transfer of any Collateral,
except as may be required in connection with the disposition of any portion of
the Pledged Collateral by laws affecting the offering and sale of securities
generally or any approvals that may be required to be obtained from any bailees
or landlords to collect the Collateral.
 
Section 3.11          Representations and Warranties of the Credit
Agreement.  The representations and warranties made by each Grantor in ARTICLE
IV of the Credit Agreement (all of which are hereby incorporated herein by
reference) are true and correct on each of the dates as required by the Credit
Agreement.
 
ARTICLE IV
COVENANTS
 
Each Grantor agrees with the Secured Party to the following, as long as any
Secured Obligation remains outstanding:
 
Section 4.01          Maintenance of Perfected Security Interest; Further
Documentation and Consents.
 
(a)           Generally.  Such Grantor shall (i) not use or permit any
Collateral to be used unlawfully or in violation of any provision of any Credit
Document, any Related Document, any requirement of law or any policy of
insurance covering the Collateral and (ii) not enter into any Contractual
Obligation or undertaking restricting the right or ability of such Grantor or
the Secured Party to dispose of any Collateral if such restriction would have a
Material Adverse Effect.
 
(b)           Such Grantor shall maintain the security interest created by this
Agreement as a perfected security interest having at least the priority
described in Section 3.02 and shall defend such security interest and such
priority against the claims and demands of all Persons (other than holders of
Permitted Liens).

 
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(c)           Grantor shall furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other documents in connection with the Collateral as the Secured Party may
reasonably request, all in reasonable detail and in form and substance
satisfactory to the Secured Party.
 
(d)           At any time and from time to time, upon the written request of the
Secured Party, such Grantor shall, for the purpose of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein granted,
(i) promptly and duly execute and deliver, and have recorded, such further
documents, including an authorization to file (or, as applicable, the filing) of
any financing statement or amendment under the UCC (or other filings under
similar requirements of law) in effect in any jurisdiction with respect to the
security interest created hereby and (ii) take such further action as the
Secured Party may reasonably request, including (A) using its commercially
reasonable efforts to secure all approvals necessary or appropriate for the
assignment to or for the benefit of the Secured Party of any Contractual
Obligation, including any license or sublicense held by any Grantor as licensee
pertaining to Intellectual Property of any other Person or other right
(including franchises), held by such Grantor and to enforce the security
interests granted hereunder and (B) executing and delivering any Control
Agreements with respect to deposit accounts and securities accounts.
 
(e)           No Grantor shall, without the prior written consent of the Secured
Party, take any action or cause any party to take any action to terminate, amend
or otherwise modify any financing statement, or other security filing.
 
Section 4.02          Changes in Locations, Name, Etc.  Except upon 30 days’
prior written notice to the Secured Party and delivery to the Secured Party of
all documents reasonably requested by the Secured Party to maintain the
validity, perfection and priority of the security interests provided for herein,
such Grantor shall not do any of the following:
 
(i)           change its jurisdiction of organization or its location, in each
case from that referred to in Section 3.03; or
 
(ii)           change its legal name or organizational identification number, if
any, or corporation, limited liability company, partnership or other
organizational structure to such an extent that any financing statement filed in
connection with this Agreement would become misleading.
 
Section 4.03          Pledged Collateral.
 
(a)           Delivery of Pledged Collateral.  Such Grantor shall (i) deliver to
the Secured Party, in suitable form for transfer and in form and substance
satisfactory to the Secured Party, (A) all Pledged Certificated Equity Interests
constituting Collateral of such Grantor, (B) all Pledged Debt Instruments
constituting Collateral of such Grantor (other than intercompany Pledged Debt
Instruments by a Grantor to another Grantor) and (C) all certificates and
instruments evidencing Pledged Investment Property constituting Collateral of
such Grantor and (ii) maintain all other Pledged Investment Property
constituting Collateral of such Grantor in a securities account that is the
subject of an effective Control Agreement maintained with a securities
intermediary approved by the Secured Party.

 
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(b)           Event of Default.  During the continuance of an Event of Default,
the Secured Party shall have the right, at any time in its discretion and
without notice to the Grantor, to transfer to or to register in its name or in
the name of its nominees any Pledged Collateral or any Pledged Investment
Property constituting Collateral of such Grantor.
 
(c)           Exchange and Issuance of Certificates.  The Secured Party shall
have the right, at any time in its discretion and without notice to the Grantor,
to exchange any certificate or instrument representing or evidencing any Pledged
Collateral or any Pledged Investment Property constituting Collateral for
certificates or instruments of smaller or larger denominations.  Upon the
request of the Secured Party, such Grantor shall cause certificates to be issued
in respect of any Pledged Uncertificated Equity Interests constituting
Collateral.
 
(d)           Cash Distributions with respect to Pledged Collateral.  As
provided in ARTICLE V, such Grantor shall be entitled to receive all cash
distributions paid in respect of the Pledged Collateral.
 
(e)           Voting Rights.  Except as provided in ARTICLE V, such Grantor
shall be entitled to exercise all voting, consent and corporate, partnership,
limited liability company and similar rights with respect to the Pledged
Collateral; provided, however, that no vote shall be cast, consent given or
right exercised or other action taken by such Grantor that would impair the
Collateral or be inconsistent with or result in any violation of any provision
of any Credit Document.
 
(f)           Certification of Pledged Equity Interests.
 
(i)           Such Grantor shall comply with all of its obligations under any
Pledged Collateral Agreements to which it is a party and shall enforce all of
its rights thereunder.
 
(ii)          If requested by Lender, such Grantor will take all actions
necessary to cause each Pledged Collateral Agreement relating to Collateral
consisting of any and all limited, limited liability and general partnership
interests and limited liability company interests of any type or nature
(“Partnership and LLC Collateral”) to provide specifically at all times that:
(A) the Partnership and LLC Collateral shall be securities and shall be governed
by Article 8 of the applicable UCC; (B) each certificate of membership or
partnership representing the Partnership and LLC Collateral shall bear a legend
to the effect that such membership interest or partnership interest is a
security and is governed by Article 8 of the applicable UCC; and (C) no consent
of any member, manager, partner or other Person shall be a condition to the
admission as a member or partner of any transferee that acquires ownership of
the Partnership and LLC Collateral as a result of the exercise by Secured Party
of any remedy hereunder or under applicable law.

 
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(iii)         Such Grantor shall not vote to enable or take any other action to
amend or terminate, or waive compliance with any of the terms of, any Pledged
Collateral Agreement, certificate or articles of incorporation, bylaws or other
organizational documents, or otherwise cast any vote or grant or give any
consent, waiver or ratification in respect of the Pledged Collateral, in any way
that materially changes the rights of such Grantor with respect to any such
Pledged Collateral in a manner adverse to the Secured Party or that adversely
affects the validity, perfection or priority of the Secured Party’s security
interest therein.
 
Section 4.04          Accounts.  Such Grantor shall not, other than in the
ordinary course of business, (i) grant any extension of the time of payment of
any account constituting Collateral, (ii) compromise or settle any such account
for less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any such account, (iv) allow any credit or
discount on any such account or (v) amend, supplement or modify any such account
in any manner that could adversely affect the value thereof.
 
Section 4.05          Delivery of Instruments and Tangible Chattel Paper and
Control of Investment Property, Letter-of-Credit Rights and Electronic Chattel
Paper.
 
(a)           If any amount payable under or in connection with any Collateral
owned by such Grantor shall be or become evidenced by an instrument or tangible
chattel paper other than such instrument delivered in accordance with Section
4.03(a) and in the possession of the Secured Party, such Grantor shall mark all
such instruments and tangible chattel paper with the following legend:  “This
writing and the obligations evidenced or secured hereby are subject to the
security interest of Fleetwood Homes, Inc., as Lender” and, at the request of
the Secured Party, shall immediately deliver such instrument or tangible chattel
paper to the Secured Party, duly indorsed in a manner satisfactory to the
Secured Party.
 
(b)           Such Grantor shall not grant “control” (within the meaning of such
term under Article 47-9106 of the UCC) over any investment property constituting
Collateral to any Person.
 
(c)           If such Grantor is or becomes the beneficiary of a letter of
credit constituting Collateral that is not a Support Obligation of any
Collateral, such Grantor shall promptly, and in any event within two Business
Days after becoming a beneficiary, notify the Secured Party thereof and enter
into a Contractual Obligation with the Secured Party, the issuer of such letter
of credit or any nominated Person with respect to the letter-of-credit rights
under such letter of credit.  Such Contractual Obligation shall assign such
letter-of-credit rights to the Secured Party and such assignment shall be
sufficient to grant control for the purposes of section 47-9107 of the UCC (or
any similar section under any equivalent UCC).  Such Contractual Obligation
shall also direct all payments thereunder to a Control Account.  The provisions
of the Contractual Obligation shall be in form and substance reasonably
satisfactory to the Secured Party.
 
(d)           If any Collateral owned by such Grantor shall be or become
evidenced by electronic chattel paper, such Grantor shall take all steps
necessary to grant the Secured Party control of all such electronic chattel
paper for the purposes of section 9-105 of the UCC (or any similar section under
any equivalent UCC) and all “transferable records” as defined in each of the
Uniform Electronic Transactions Act and the Electronic Signatures in Global and
National Commerce Act.

 
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Section 4.06          Intellectual Property.
 
(a)           Within 60 days after any change to Schedule VI for such Grantor,
such Grantor shall provide the Secured Party notification thereof and the
short-form intellectual property agreements and assignments and other documents
that the Secured Party reasonably requests with respect thereto.
 
(b)           Such Grantor shall (and shall cause all its licensees to) (i) (A)
continue to use each Mark included in the Intellectual Property constituting
Collateral in order to maintain such Mark in full force and effect with respect
to each class of goods for which such Mark is currently used, free from any
claim of abandonment for non-use, (B) maintain at least the same standards of
quality of products and services offered under such Mark as are currently
maintained, (C) use such Mark with the appropriate notice of registration and
all other notices and legends required by applicable requirements of law, (D)
not adopt or use any other Mark that is confusingly similar or a colorable
imitation of such Mark unless the Secured Party shall obtain a perfected
security interest in such other Mark pursuant to this Agreement and (ii) not do
any act or omit to do any act whereby (A) such Mark (or any goodwill associated
therewith) may become destroyed, invalidated, impaired or harmed in any material
way, (B) any material Patent included in the Intellectual Property constituting
Collateral may become forfeited, misused, unenforceable, abandoned or dedicated
to the public, (C) any portion of the material Copyrights included in the
Intellectual Property constituting Collateral may become invalidated, otherwise
impaired or fall into the public domain or (D) any trade secret that is material
Intellectual Property constituting Collateral may become publicly available or
otherwise unprotectable.
 
(c)           Such Grantor shall notify the Secured Party immediately if it
knows, or has reason to know, that any application or registration relating to
any Intellectual Property constituting Collateral may become forfeited, misused,
unenforceable, abandoned or dedicated to the public, or of any adverse
determination or development regarding the validity or enforceability or such
Grantor’s ownership of, interest in, right to use, register, own or maintain any
Intellectual Property constituting Collateral (including the institution of, or
any such determination or development in, any proceeding relating to the
foregoing in any Applicable IP Office).  Such Grantor shall take all actions
that are necessary or reasonably requested by the Secured Party to maintain and
pursue each application (and to obtain the relevant registration or recordation)
and to maintain each registration and recordation included in the Intellectual
Property constituting Collateral.
 
(d)           In the event that any Intellectual Property of such Grantor
constituting Collateral is or has been infringed, misappropriated, violated,
diluted or otherwise impaired by a third party, such Grantor shall take such
action as it reasonably deems appropriate under the circumstances in response
thereto, including promptly bringing suit and recovering all damages therefor.

 
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(e)           Each Grantor shall take all actions, deliver all documents and
provide all information necessary or reasonably requested by the Secured Party
to ensure any Internet domain name constituting Collateral is registered.
 
Section 4.07          Notices.  Such Grantor shall promptly notify the Secured
Party in writing and with reasonable detail of its acquisition of any interest
hereafter in property constituting Collateral that is of a type where a security
interest or lien must be or may be registered, recorded or filed under, or
notice thereof given under, any federal statute or regulation.  Such Grantor
agrees to notify the Secured Party of any other event which could reasonably be
expected to have a Material Adverse Effect on the aggregate value of the
Collateral or on the Liens created hereunder or under any other Credit Document.
 
Section 4.08          Notice of Commercial Tort Claims.  Such Grantor agrees
that, if it shall acquire any interest in any commercial tort claim (whether
from another Person or because such commercial tort claim shall have come into
existence) constituting Collateral, (i) such Grantor shall, immediately upon
such acquisition, deliver to the Secured Party, in each case in form and
substance satisfactory to the Secured Party, a notice of the existence and
nature of such commercial tort claim and a supplement to Schedule II containing
a specific description of such commercial tort claim, (ii) Section 2.01(a) shall
apply to such commercial tort claim and (iii) such Grantor shall execute and
deliver to the Secured Party, in each case in form and substance satisfactory to
the Secured Party, any document, and take all other action, deemed by the
Secured Party to be reasonably necessary or appropriate for the Secured Party to
obtain a perfected security interest having at least the priority set forth in
Section 3.02 in all such commercial tort claims.  Any supplement to Schedule II
delivered pursuant to this Section 4.08 shall, after the receipt thereof by the
Secured Party, become part of Schedule II for all purposes hereunder other than
in respect of representations and warranties made prior to the date of such
receipt.
 
Section 4.09          Compliance with Credit Agreement.  Such Grantor agrees to
comply with all covenants and other provisions applicable to it under the Credit
Agreement (all of which are hereby incorporated herein by reference) and agrees
to the same submission to jurisdiction as that agreed to by each Grantor in the
Credit Agreement.
 
ARTICLE V
REMEDIAL PROVISIONS
 
Section 5.01          Code and Other Remedies.
 
(a)           UCC Remedies.  During the continuance of an Event of Default, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to any Secured Obligation, all rights and remedies of a
secured party under the UCC or any other applicable law.

 
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(b)           Disposition of Collateral.  Without limiting the generality of the
foregoing, the Secured Party may, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code and other
applicable law), during the continuance of any Event of Default (personally or
through its agents or attorneys), (i) enter upon the premises where any
Collateral is located, without any obligation to pay rent, through self-help,
without judicial process, without first obtaining a final judgment or giving any
Grantor or any other Person notice or opportunity for a hearing on the Secured
Party’s claim or action, (ii) take possession of, collect, receive, assemble,
process, appropriate, remove and realize upon any Collateral, or any part
thereof, and (iii) sell, lease, license, assign, dispose of, grant option or
options to purchase and deliver any Collateral (enter into Contractual
Obligations to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker’s board or office of the Secured
Party or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk.  The Secured Party shall have the right,
upon any such public sale or sales and, to the extent permitted by the UCC and
other applicable requirements of law, upon any such private sale, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption of any Grantor, which right or equity is hereby waived and released.
 
(c)           Management of the Collateral.  Each Grantor further agrees, that,
during the continuance of any Event of Default, (i) at the Secured Party’s
request, it shall assemble the Collateral and make it available to the Secured
Party at places that the Secured Party shall reasonably select, whether at such
Grantor’s premises or elsewhere, (ii) without limiting the foregoing, the
Secured Party also has the right to require that each Grantor store and keep any
Collateral pending further action by the Secured Party and, while any such
Collateral is so stored or kept, provide such guards and maintenance services as
shall be necessary to protect the same and to preserve and maintain such
Collateral in good condition, (iii) until the Secured Party is able to dispose
of any Collateral, the Secured Party shall have the right to hold or use such
Collateral to the extent that it deems appropriate for the purpose of preserving
the Collateral or its value or for any other purpose deemed appropriate by the
Secured Party and (iv) the Secured Party may, if it so elects, seek the
appointment of a receiver or keeper to take possession of any Collateral and to
enforce any of the Secured Party’s remedies, with respect to such appointment
without prior notice or hearing as to such appointment.  The Secured Party shall
not have any obligation to any Grantor to maintain or preserve the rights of any
Grantor as against third parties with respect to any Collateral while such
Collateral is in the possession of the Secured Party.
 
(d)           Application of Proceeds.  The Secured Party shall apply the cash
proceeds of any action taken by it pursuant to this Section 5.01, after
deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any Collateral or in any
way relating to the Collateral or the rights of the Secured Party hereunder,
including reasonable attorneys’ fees and disbursements, to the payment in whole
or in part of the Secured Obligations, as set forth in the Credit Agreement, and
only after such application and after the payment by the Secured Party of any
other amount required by any requirement of law, need the Secured Party account
for the surplus, if any, to any Grantor.

 
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(e)           Direct Obligation.  The Secured Party shall not be required to
make any demand upon, or pursue or exhaust any right or remedy against, any
Grantor or any other Person with respect to the payment of the Secured
Obligations or to pursue or exhaust any right or remedy with respect to any
Collateral therefor or any direct or indirect guaranty thereof.  All of the
rights and remedies of the Secured Party under any Credit Document shall be
cumulative, may be exercised individually or concurrently and not exclusive of
any other rights or remedies provided by any requirement of law.  To the extent
it may lawfully do so, each Grantor absolutely and irrevocably waives and
relinquishes the benefit and advantage of, and covenants not to assert against
the Secured Party, any valuation, stay, appraisement, extension, redemption or
similar laws and any and all rights or defenses it may have as a surety, now or
hereafter existing, arising out of the exercise by them of any rights
hereunder.  If any notice of a proposed sale or other disposition of any
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least ten days before such sale or other disposition.
 
(f)           Commercially Reasonable.  To the extent that applicable
requirements of law impose duties on the Secured Party to exercise remedies in a
commercially reasonable manner, each Grantor acknowledges and agrees that it is
not commercially unreasonable for the Secured Party to do any of the following:
 
(i)           fail to incur significant costs, expenses or other Liabilities
reasonably deemed as such by the Secured Party to prepare any Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition;
 
(ii)          fail to obtain Permits, or other consents, for access to any
Collateral to dispose of or for the collection or disposition of any Collateral,
or, if not required by other requirements of law, fail to obtain Permits or
other consents for the collection or disposition of any Collateral;
 
(iii)         fail to exercise remedies against account debtors or other Persons
obligated on any Collateral or to remove Liens on any Collateral or to remove
any adverse claims against any Collateral;
 
(iv)         advertise dispositions of any Collateral through publications or
media of general circulation, whether or not such Collateral is of a specialized
nature or to contact other Persons, whether or not in the same business as any
Grantor, for expressions of interest in acquiring any such Collateral;
 
(v)          exercise collection remedies against account debtors and other
Persons obligated on any Collateral, directly or through the use of collection
agencies or other collection specialists, hire one or more professional
auctioneers to assist in the disposition of any Collateral, whether or not such
Collateral is of a specialized nature or, to the extent deemed appropriate by
the Secured Party, obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Secured Party in the
collection or disposition of any Collateral, or utilize Internet sites that
provide for the auction of assets of the types included in the Collateral or
that have the reasonable capacity of doing so, or that match buyers and sellers
of assets to dispose of any Collateral;
 
(vi)         dispose of assets in wholesale rather than retail markets;

 
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(vii)        disclaim disposition warranties, such as title, possession or quiet
enjoyment; or
 
(viii)       purchase insurance or credit enhancements to insure the Secured
Party against risks of loss, collection or disposition of any Collateral or to
provide to the Secured Party a guaranteed return from the collection or
disposition of any Collateral.
 
Each Grantor acknowledges that the purpose of this Section 5.01 is to provide a
non-exhaustive list of actions or omissions that are commercially reasonable
when exercising remedies against any Collateral and that other actions or
omissions by the Secured Party shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section 5.01.  Without
limitation upon the foregoing, nothing contained in this Section 5.01 shall be
construed to grant any rights to any Grantor or to impose any duties on the
Secured Party that would not have been granted or imposed by this Agreement or
by applicable requirements of law in the absence of this Section 5.01.
 
(g)           License.  For the purpose of enabling the Secured Party to
exercise rights and remedies under this Section 5.01 (including in order to take
possession of, collect, receive, assemble, process, appropriate, remove, realize
upon, dispose of or grant options to purchase any Collateral) at such time as
the Secured Party shall be lawfully entitled to exercise such rights and
remedies, each Grantor hereby grants to the Secured Party an irrevocable,
nonexclusive, worldwide license (exercisable without payment of royalty or other
compensation to such Grantor), including in such license the right to
sublicense, use and practice any Intellectual Property constituting Collateral
now owned or hereafter acquired by such Grantor and access to all media in which
any of the licensed items may be recorded or stored and to all Computer Software
and programs used for the compilation or printout thereof.
 
Section 5.02          Control Account and Collections.
 
(a)           From and after the Closing Date, each Grantor shall cause all
Collections and any other payments in respect of the Collateral to be remitted
to the Control Account in accordance with the requirements of the Credit
Agreement.  Until so remitted, such funds shall be held by such Grantor in trust
for the Secured Party, segregated from other funds of such Grantor.  All
proceeds being held by the Secured Party in a Control Account (or by such
Grantor in trust for the Secured Party) shall continue to be held as collateral
security for the Secured Obligations and shall not constitute payment thereof
until released as provided in the Credit Agreement.  Each Grantor hereby
authorizes Secured Party to collect all payments, checks, drafts and other
instruments addressed to such Borrower and to withdraw and hold in reserve or
release such funds pursuant to the terms of the Credit Agreement and, during the
occurrence and continuance of an Event of Default, to apply such funds against
the Secured Obligations.  Each Grantor acknowledges and agrees that the Secured
Party shall have sole and exclusive control of the Control Account until the
Secured Obligations have been paid in full.

 
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(b)           Each Grantor shall, upon the Secured Party’s request, deliver to
the Secured Party all original and other documents evidencing, and relating to,
the Contractual Obligations constituting Collateral and transactions that gave
rise to any account constituting Collateral or any payment in respect of general
intangibles constituting Collateral, including all original orders, invoices and
shipping receipts and notify account debtors that such accounts or general
intangibles have been collaterally assigned to the Secured Party and that
payments in respect thereof shall be made directly to the Secured Party.
 
(c)           The Secured Party may, without notice, at any time, in its own
name or in the name of others, communicate with account debtors or and any other
payors in respect of general intangibles constituting Collateral or obligors
with respect thereto to verify with them to the Secured Party’s satisfaction the
existence, amount and terms of any such Collateral or direct such account
debtors or obligors to make all payments directly to the Secured Party or as the
Secured Party shall direct.  Upon request of the Secured Party, Grantors shall
provide to the Secured Party signed, undated notices, on such Grantor’s
letterhead, notifying account debtors or obligors of the Grantors that all
future payments shall be made to the Control Account and such account debtors
and obligors shall no longer to make payment to such Grantor, but to make
payment directly to the Secured Party or as the Secured Party shall direct.
 
(d)           Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each account and each payment in respect of general
intangibles to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise thereto.  The Secured Party shall not have any obligation
or liability under any agreement giving rise to an account or a payment in
respect of a general intangible by reason of or arising out of any Credit
Document or the receipt by the Secured Party of any payment relating thereto,
nor shall the Secured Party be obligated in any manner to perform any obligation
of any Grantor under or pursuant to any agreement giving rise to an account or a
payment in respect of a general intangible, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts that may have been assigned to it or to which it may be
entitled at any time or times.
 
Section 5.03          Pledged Collateral.
 
(a)           Voting Rights.  During the continuance of an Event of Default,
upon notice by the Secured Party to the relevant Grantor or Grantors, the
Secured Party or its nominee may exercise (A) any voting, consent, corporate and
other right pertaining to the Pledged Collateral at any meeting of shareholders,
partners or members, as the case may be, of the relevant issuer or issuers of
such Pledged Collateral or otherwise and (B) any right of conversion, exchange
and subscription and any other right, privilege or option pertaining to the
Pledged Collateral as if it were the absolute owner thereof (including the right
to exchange at its discretion any such Pledged Collateral upon the merger,
amalgamation, consolidation, reorganization, recapitalization or other
fundamental change in the corporate or equivalent structure of any issuer of
Pledged Equity Interests constituting Collateral, the right to deposit and
deliver any such Pledged Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Secured Party may determine), all without liability except to account for
property actually received by it; provided, however, that the Secured Party
shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.

 
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(b)           Proxies.  During the occurrence and continuance of an Event of
Default, in order to permit the Secured Party to exercise the voting and other
consensual rights that it may be entitled to exercise pursuant hereto and to
receive all dividends and other distributions that it may be entitled to receive
hereunder, (i) each Grantor shall promptly execute and deliver (or cause to be
executed and delivered) to the Secured Party all such proxies, dividend payment
orders and other instruments as the Secured Party may from time to time
reasonably request and (ii) without limiting the effect of clause (i) above,
such Grantor hereby revokes all previous proxies with respect to the Pledged
Collateral and grants to the Secured Party an irrevocable proxy to vote all or
any part of the Pledged Collateral and to exercise all other rights, powers,
privileges and remedies to which a holder of such Pledged Collateral would be
entitled (including giving or withholding written consents of shareholders,
partners or members, as the case may be, calling special meetings of
shareholders, partners or members, as the case may be, and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any such Pledged Collateral
on the record books of the issuer thereof) by any other Person (including the
issuer of such Pledged Collateral or any officer or agent thereof) during the
continuance of an Event of Default and which proxy shall only terminate upon the
payment in full of the Secured Obligations.
 
(c)           Authorization of Grantors.  Each Grantor hereby expressly
irrevocably authorizes and instructs, without any further instructions from such
Grantor, each issuer of any Pledged Collateral pledged hereunder by such Grantor
to (i) comply with any instruction received by it from the Secured Party in
writing that states that an Event of Default is continuing and is otherwise in
accordance with the terms of this Agreement and each Grantor agrees that such
issuer shall be fully protected from Liabilities to such Grantor in so complying
and (ii) unless otherwise expressly permitted hereby, pay any dividend or make
any other payment with respect to such Pledged Collateral directly to the
Secured Party.
 
(d)           Liability. Anything herein to the contrary notwithstanding, (i)
each Grantor shall remain liable under any Pledged Collateral Agreement and any
other contracts, agreements and other documents to which it is a party included
in the Collateral, to the extent set forth therein, to perform all of its duties
and obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Secured Party of any of the rights hereunder
shall not release any Grantor from any of its duties or obligations under any
such Pledged Collateral Agreement or other contracts, agreements and other
documents, and (iii) the Secured Party shall not have any obligation or
liability under any such Pledged Collateral Agreements or other contracts,
agreements and other documents by reason of this Agreement, nor shall the
Secured Party be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any Pledged
Collateral Agreements or other such contract, agreement or other document.
 
Section 5.04         Registration Rights.
 
(a)           If, in the opinion of the Secured Party, it is necessary or
advisable to dispose of any portion of the Pledged Collateral by registering
such Pledged Collateral under the provisions of the Securities Act of 1933 (the
“Securities Act”), each relevant Grantor shall cause the issuer thereof to do or
cause to be done all acts as may be, in the opinion of the Secured Party,
necessary or advisable to register such Pledged Collateral or that portion
thereof to be disposed of under the provisions of the Securities Act, all as
directed by the Secured Party in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto and in compliance with the securities or “Blue
Sky” laws of any jurisdiction that the Secured Party shall designate.
 
 
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(b)           Each Grantor recognizes that the Secured Party may be unable to
effect a public sale of any Pledged Collateral by reason of certain prohibitions
contained in the Securities Act and applicable state or foreign securities laws
or otherwise or may determine that a public sale is impracticable, not desirable
or not commercially reasonable and, accordingly, may resort to one or more
private sales thereof to a restricted group of purchasers that shall be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof.  Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.  The Secured Party
shall be under no obligation to delay a sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register such
securities for public sale under the Securities Act or under applicable state
securities laws even if such issuer would agree to do so.
 
(c)           Each Grantor agrees to use its commercially reasonable efforts to
do or cause to be done all such other acts as may be necessary to make such sale
or sales of any portion of the Pledged Collateral pursuant to this Section 5.04
valid and binding and in compliance with all applicable requirements of
law.  Each Grantor further agrees that a breach of any covenant contained in
this Section 5.04 will cause irreparable injury to the Secured Party, that the
Secured Party has no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 5.04 shall
be specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defense against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Credit Agreement.
 
Section 5.05        Deficiency.  The Grantors, jointly and severally, shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of any Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorney employed by the Secured Party to
collect such deficiency.
 
ARTICLE VI
SUBORDINATION
 
Section 6.01         Subordination.  Each Grantor agrees that all payments on
account of any indebtedness for borrowed money owing to such Grantor by any
other Grantor (“Intercompany Debt”) shall be subject, subordinate and junior, in
right of payment and exercise of remedies, to the indefeasible payment and
satisfaction in full of all Secured Obligations, and all Liens (if any) now or
hereafter existing in favor of any Grantor in respect of any Collateral shall be
subject, subordinate and junior in all respects and at all times to the Liens
now or hereafter existing of the Secured Party therein.  The Secured Party shall
be deemed to have acquired the Secured Obligations in reliance upon this ARTICLE
VI.
 
 
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Section 6.02         Restrictions on Payment and Transfer.  Each Grantor agrees
(i) not to collect, or to receive payment upon, by setoff or in any other
manner, all or any portion of the Intercompany Debt owing to it, except as
expressly permitted by the Credit Documents, and (ii) not to sell, assign,
transfer, pledge, or grant a Lien on any such Intercompany Debt.
 
ARTICLE VII
THE ADMINISTRATIVE SECURED PARTY
 
Section 7.01         The Secured Party’s Appointment as Attorney-in-Fact.  (a)
Each Grantor hereby irrevocably constitutes and appoints the Secured Party and
its officers, directors, employees, representatives and agents, with full power
of substitution, during the occurrence and continuance of an Event of Default,
as its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of such Grantor and in the name of such Grantor
or in its own name, for the purpose of carrying out the terms of the Credit
Documents, to take any appropriate action and to execute any document or
instrument that may be necessary or desirable to accomplish the purposes of the
Credit Documents, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Secured Party and its officers, directors, employees,
representatives and agents the power and right, on behalf of such Grantor,
without notice to or assent by such Grantor, to do any of the following when an
Event of Default shall be continuing:
 
(i)           in the name of such Grantor, in its own name or otherwise, take
possession of and indorse and collect any check, draft, note, acceptance or
other instrument for the payment of moneys due under any account or general
intangible constituting Collateral or with respect to any other Collateral and
file any claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Secured Party for the purpose of
collecting any such moneys due under any account or general intangible
constituting Collateral or with respect to any other Collateral whenever
payable;
 
(ii)          in the case of any Intellectual Property constituting Collateral
owned by or licensed to the Grantors, execute, deliver and have recorded any
document that the Secured Party may request to evidence, effect, publicize or
record the Secured Party’s security interest in such Intellectual Property and
the goodwill and general intangibles of such Grantor relating thereto or
represented thereby;
 
(iii)         pay or discharge taxes and Liens levied or placed on or threatened
against any Collateral, effect any repair or pay any insurance called for by the
terms of the Credit Agreement (including all or any part of the premiums
therefor and the costs thereof);
 
(iv)         execute, in connection with any sale provided for in Sections
Section 5.01 or Section 5.04, any document to effect or otherwise necessary or
appropriate in relation to evidence the disposition of any Collateral; or
 
 
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(v)          (A) direct any party liable for any payment under any Collateral to
make payment of any moneys due or to become due thereunder directly to the
Secured Party or as the Secured Party shall direct, (B) ask or demand for, and
collect and receive payment of and receipt for, any moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral, (C) sign and indorse any invoice, freight or express bill, bill of
lading, storage or warehouse receipt, draft against debtors, assignment,
verification, notice and other document in connection with any Collateral, (D)
commence and prosecute any suit, action or proceeding at law or in equity in any
court of competent jurisdiction to collect any Collateral and to enforce any
other right in respect of any Collateral, (E) defend any actions, suits,
proceedings, audits, claims, demands, orders or disputes brought against such
Grantor with respect to any Collateral, (F) settle, compromise or adjust any
such actions, suits, proceedings, audits, claims, demands, orders or disputes
and, in connection therewith, give such discharges or releases as the Secured
Party may deem appropriate, (G) assign any Intellectual Property constituting
Collateral owned by the Grantors or any license or sublicense held by any
Grantor as licensee pertaining to Intellectual Property of any other Person or
other right (including franchises)  constituting Collateral of the Grantors
throughout the world on such terms and conditions and in such manner as the
Secured Party shall in its sole discretion determine, including the execution
and filing of any document necessary to effectuate or record such assignment and
(H) generally, dispose of, grant a Lien on, make any Contractual Obligation with
respect to and otherwise deal with, any Collateral as fully and completely as
though the Secured Party were the absolute owner thereof for all purposes and
do, at the Secured Party’s option, at any time or from time to time, all acts
and things that the Secured Party deems necessary to protect, preserve or
realize upon any Collateral and the Secured Party’s security interests therein
and to effect the intent of the Credit Documents, all as fully and effectively
as such Grantor might do.
 
(b)           If any Grantor fails to perform or comply with any Contractual
Obligation contained herein, the Secured Party, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such Contractual Obligation.
 
(c)           The expenses of the Secured Party incurred in connection with
actions undertaken as provided in this Section 7.01, together with interest
thereon at a rate set forth in Section 2.09 of the Credit Agreement, from the
date of payment by the Secured Party to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Secured Party on demand. None
of the Secured Party, its respective affiliates, officers, directors, employees,
agents or representatives shall be responsible to any Grantor for any act or
failure to act under any power of attorney or otherwise, except in respect of
damages attributable solely to their own gross negligence or willful misconduct
as finally determined by a court of competent jurisdiction, nor for any
punitive, exemplary, indirect or consequential damages.
 
(d)           Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue of this Section 7.01.  All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.
 
 
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Section 7.02         Authorization to File Financing Statements.  Each Grantor
authorizes the Secured Party and its officers, directors, employees,
representatives and agents, at any time and from time to time, to file or record
financing statements, amendments thereto, and other filing or recording
documents or instruments with respect to any Collateral in such form and in such
offices as the Secured Party reasonably determines appropriate to perfect the
security interests of the Secured Party under this Agreement, and such financing
statements and amendments may described the Collateral covered thereby (other
than the Limited Collateral, which description will be specifically drafted) as
“all assets of the debtor”.  A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any
jurisdiction.  Such Grantor also hereby ratifies its authorization for the
Secured Party to have filed any initial financing statement or amendment thereto
under the UCC (or other similar laws) in effect in any jurisdiction if filed
prior to the date hereof.
 
ARTICLE VIII
MISCELLANEOUS
 
Section 8.01         Reinstatement.  This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor’s assets.  Moreover, each Grantor agrees that, if any payment made by
any Grantor or other Person and applied to the Secured Obligations is at any
time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of any Collateral are required to be returned by the Secured Party
to such Grantor, its estate, trustee, receiver or any other party, including any
Grantor, under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, any Lien or other
Collateral securing such liability shall be and remain in full force and effect,
as fully as if such payment had never been made.  If, prior to any of the
foregoing, (i) any Lien or other Collateral securing such Grantor’s liability
hereunder shall have been released or terminated by virtue of the foregoing or
(ii) any provision of the Guaranty hereunder shall have been terminated,
cancelled or surrendered, such Lien, other Collateral or provision shall be
reinstated in full force and effect and such prior release, termination,
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligations of any such Grantor in respect of any Lien or
other Collateral securing such obligation or the amount of such payment.
 
Section 8.02         Independent Obligations.  The obligations of each Grantor
hereunder are independent of and separate from the Secured Obligations.  If any
Secured Obligation is not paid when due, or upon any Event of Default, the
Secured Party may, at its sole election, proceed directly and at once, without
notice, against any Grantor and any Collateral to collect and recover the full
amount of any Secured Obligation then due, without first proceeding against any
other Grantor or any other Collateral and without first joining any other
Grantor in any proceeding.
 
Section 8.03         No Waiver by Course of Conduct.  The Secured Party shall
not by any act (except by a written instrument executed by it), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default.  No failure
to exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof.  No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  A waiver by the Secured Party of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Secured Party would otherwise have on any future occasion.
 
 
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Section 8.04         Amendments in Writing.  No amendment or waiver of any
provision of this Agreement and no consent to any departure by any party thereto
shall be effective unless the same shall be in writing and signed (i) in the
case of an amendment, consent or waiver to cure any ambiguity, omission, defect
or inconsistency or granting a new Lien for the benefit of the Secured Party or
extending an existing Lien over additional property, by the Secured Party and
the Grantors or (ii) in the case of any other waiver or consent.
 
Section 8.05         Additional Grantors; Additional Pledged Collateral.  
 
(a)           Joinder Agreements.  If, after the date hereof, any of the
Grantors create or otherwise acquire any Subsidiary, such Grantor shall promptly
cause such Subsidiary that is not a Grantor to become a Grantor hereunder, such
Subsidiary shall execute and deliver to the Secured Party a Joinder Agreement
substantially in the form of Annex 2 and shall thereafter for all purposes be a
party hereto and have the same rights, benefits and obligations as a Grantor
party hereto on the Closing Date.
 
(b)           Pledge Amendments.  To the extent any Grantor or Limited Pledgor
acquires any Pledged Collateral comprising a direct or indirect interest in any
Equity Interests, such Grantor or Limited Pledgor shall deliver a pledge
amendment duly executed by the Grantor in substantially the form of Annex 1
(each, a “Pledge Amendment”) with respect to such Pledged Collateral.  Each
Grantor and Limited Pledgor authorizes the Secured Party to attach each Pledge
Amendment to this Agreement.
 
Section 8.06         Notices.  Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) on the day of delivery if delivered in person, (b) on the day of
delivery if delivered by facsimile upon confirmation of receipt (provided that
if delivery is completed after the close of business, then the next Business
Day), (c) on the first Business Day following the date of dispatch if delivered
using a next-day service by a nationally recognized express courier service, or
(d) on the earlier of confirmed receipt or the fifth Business Day following the
date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid.  All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated by
notice given in accordance with this Section 8.06 by the party to receive such
notice:
 
if to the Grantors:
 
c/o Palm Harbor Homes, Inc.
15303 Dallas Parkway, Suite 800
Addison, Texas  75001-4600
Attention:  Larry H. Keener, Chairman, President & CEO
Facsimile:  (972) 764-9020

 
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with a copy (which does not constitute notice) to:
 
Locke Lord Bissell & Liddell LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attention:  Gina Betts
Facsimile:  (214) 756-8515

If to Secured Party:
Fleetwood Homes, Inc.
c/o Cavco Industries, Inc.
1001 North Central Avenue, Suite 800
Phoenix, Arizona  85004-1935
Attention:  James P. Glew, General Counsel
Facsimile:  (602) 256-6189
 
and

 
Robert F. Jordan
Third Avenue Management, LLC
622 Third Avenue
32nd Floor
New York, NY 10017
Facsimile:  (212) 735-0003
 
with a copy (which does not constitute notice) to:
 
Garth D. Stevens, Esq.
Snell & Wilmer L.L.P.
One Arizona Center
400 East Van Buren
Phoenix, Arizona 85018
Facsimile:  (602) 382-6070
 
Section 8.07         Benefit of Agreement.  This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that, except in connection with an
assignment of the Credit Agreement by Grantors expressly permitted by the terms
of the Credit Agreement, the Grantors may not assign or transfer any of its
interests without prior written consent of the Secured Party.
 
Section 8.08         Cumulative Remedies, Etc.  No failure or delay on the part
of the Secured Party in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between the Secured
Party and the Grantors shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege hereunder or under any
other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder.  The
rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Secured Party would otherwise have.  No notice to
or demand on the Grantors in any case shall entitle the Grantors to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Secured Party to any other or further action in any
circumstances without notice or demand.

 
 
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Section 8.09         Amendments, Waivers and Consents.  No amendment or waiver
of any provision of this Agreement nor consent to any departure by the Grantors
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Secured Party, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
 
Section 8.10         Waiver.  Each party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto, (c) waive
compliance with any of the agreements of the other party contained herein, or
(d) waive satisfaction of any condition to its obligations hereunder.  Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby.  No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.  All remedies, rights, undertakings,
obligations, and agreements contained herein shall be cumulative and not
mutually exclusive.
 
Section 8.11         Governing Law. This Agreement and all claims with respect
thereto shall be governed by and construed in accordance with the federal
bankruptcy law, to the extent applicable, and, where state law is implicated,
the laws of the State of Delaware without regard to any conflict of laws rules
thereof that might indicate the application of the laws of any other
jurisdiction.
 
Section 8.12         Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial.
 
The parties hereto irrevocably and unconditionally consent to submit to the
jurisdiction of the Bankruptcy Court for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agree
not to commence any litigation relating hereto except in the Bankruptcy Court).
 
Any and all service of process and any other notice in any such claim shall be
effective against any party if given personally or by registered or certified
mail, return receipt requested, or by any other means of mail that requires a
signed receipt, postage prepaid, mailed to such party as herein
provided.  Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by Law or to commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction.
 
If any claim is brought by any party hereto to enforce its rights or another
party’s obligations under this Agreement or any other agreement, document or
instrument to be delivered by such party on the Closing Date in connection
herewith, the substantially prevailing party in such claim shall be entitled to
recover its reasonable attorneys’ fees and expenses and other costs incurred in
such claim, in addition to any other relief to which it may be entitled.
 
 
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EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.
 
Section 8.13         Interpretation; Headings.  All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.  All terms defined in this Agreement in their singular or
plural forms have correlative meanings when used herein in their plural or
singular forms, respectively.  Unless otherwise expressly provided, the words
“include,” “includes” and “including” do not limit the preceding words or terms
and shall be deemed to be followed by the words “without limitation.”  All
references herein to “Sections” shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.  All references herein to
“Schedules” and “Exhibits” shall mean the Schedules and Exhibits attached to
this Agreement and forming a part hereof.  The Section headings in this
Agreement are for reference only and shall not affect the interpretation of this
Agreement.  The parties acknowledge and agree that (a) each party and its
counsel reviewed and negotiated the terms and provisions of this Agreement and
have contributed to its revision, (b) the rule of construction to the effect
that any ambiguities are resolved against the drafting party shall not be
employed in the interpretation of this Agreement, and (c) the terms and
provisions of this Agreement shall be construed fairly as to all parties,
regardless of which party was generally responsible for the preparation of this
Agreement.  Dates and times set forth in this Agreement for the performance of
the parties’ respective obligations hereunder or for the exercise of their
rights hereunder shall be strictly construed, time being of the essence of this
Agreement.  If the date specified or computed under this Agreement for the
performance, delivery, completion or observance of a covenant, agreement,
obligation or notice by any party, or for the occurrence of any event provided
for herein, is a day other than a Business Day, then the date for such
performance, delivery, completion, observance or occurrence shall automatically
be extended to the next Business Day following such date.
 
Section 8.14         Severability of Provisions.  If any provision or any
portion of any provision of this Agreement shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement shall not be affected thereby.  If the application
of any provision or any portion of any provision of this Agreement to any Person
or circumstance shall be held invalid or unenforceable, the application of such
provision or portion of such provision to Persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby.
 
Section 8.15         Counterparts.  This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts together shall
constitute one and the same instrument.  Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all, of the parties hereto.
 
[SIGNATURE PAGES FOLLOW]
 
 
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IN WITNESS WHEREOF, each of the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
 
Palm Harbor Homes, Inc., a Florida corporation,
as a Grantor
 
By:
/s/ Larry H. Keener
Name:
Larry H. Keener
Title:
President and Chief Executive Officer
 
Palm Harbor GenPar, LLC, a Nevada limited liability company, as a Grantor
 
By:
/s/ Larry H. Keener 
Name:
Larry H. Keener 
Title:
President
 
Palm Harbor Mfg., L.P., a Texas limited partnership, as a Grantor
 
By:
/s/ Larry H. Keener
Name:
Larry H. Keener
Title:
President
 
Palm Harbor Real Estate, LLC, a Texas limited liability company, as a Grantor
 
By:
/s/ Larry H. Keener
Name:
Larry H. Keener
Title:
President of Sole Member
 
Nationwide Homes, Inc., a Delaware corporation, as a Grantor
 
By:
/s/ Larry H. Keener
Name:
Larry H. Keener
Title:
Chairman

 
[SIGNATURE PAGE TO SECURITY AGREEMENT] 
 

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Palm Harbor Albemarie, LLC, a Delaware corporation, as a Grantor
 
By:
/s/ Larry H. Keener
Name:
Larry H. Keener
Title:
President

 
ACKNOWLEDGED AND AGREED
as of the date first above written:

 
Fleetwood Homes, Inc., a Delaware
corporation, as Secured Party
  
By:
/s/ Joseph H. Stegmayer
Name:
Joseph H. Stegmayer
Title:
Vice President

 
[SIGNATURE PAGE TO SECURITY AGREEMENT]
 

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