FINANCIAL SERVICES


                      REVOLVING LOAN AND SECURITY AGREEMENT




FIRSTAR   BANK   MILWAUKEE,  N.A.  ("Lender"),  through  its  Financial Services
Division, and Featherlite, Inc. ("Debtor") agree as follows:

                                NATURE OF CREDIT

For good and valuable  consideration and upon the security of the Collateral (as
defined below),  Lender may lend to Debtor such amounts as Lender  determines in
its SOLE AND  ABSOLUTE  DISCRETION,  and Debtor  promises to repay to Lender any
amounts so lent at such times and in such  manner as provided  herein  ("Line of
Credit").  This is an  asset-based  revolving  Line of Credit under which Lender
may, among other things: establish, without obligation for payment to any party,
such reserves from Qualified Accounts and/or Qualified Inventory as Lender deems
necessary to preserve the value of the Collateral and/or protect Lender's rights
and interest in the Collateral;  reduce the percentage  advance ratios set forth
in Section 3. COLLATERAL-OBLIGATION RATIO below; advance funds in excess of such
percentage  advance  ratios;  decline to advance  funds at any time  against any
particular Qualified Accounts or Qualified Inventory; and, in order to determine
potential  borrowing  availability  but not the  calculation  of interest,  give
credit  against  Debtor's  Loan Account  Ledger for  Collections  (as defined in
Section 4.  COLLECTIONS  below) before Lender  determines that such  Collections
constitute good funds.  Notwithstanding Lender's discretion and as consideration
from Lender, Lender agrees with Debtor that Lender shall at all times while this
Revolving Loan and Security Agreement  ("Agreement") is in effect,  maintain its
own borrowing  capability to meet Debtor's  daily  borrowing  requests up to the
maximum  amount set forth herein and staff its  operation  through the scheduled
term  of this  Agreement  with  sufficient  personnel  and  systems  to  process
Debtor's loan  requests in order to  administer on a daily basis this  revolving
Line of Credit and any other  credit  facilities  extended  by Lender to Debtor.
Debtor  acknowledges  that  Lender  is  furnishing  valuable   consideration  by
undertaking the foregoing covenants.

                         1. LOANS AND SECURITY INTEREST

(a) Loans and  Interest  Rate.  Lender and Debtor  intend that all  indebtedness
incurred hereunder shall be governed exclusively by the terms of this Agreement.
Such  indebtedness  shall not be  evidenced  by  separate  notes but by Lender's
computer  and/or book entries ("Loan Account  Ledger");  and each month,  Lender
shall  render  to  Debtor  a  statement  of  account  as of the  last day of the
preceding  month. As provided  herein,  DEBTOR PROMISES TO PAY LENDER all or any
part of the Obligations (as defined in Section 2. DEFINITIONS below) at any time
outstanding  on Debtor's  Loan Account  Ledger,  together  with all expenses and
accrued interest thereon computed on the basis of the daily balance of such Loan
Account Ledger during such month.  The interest rate hereunder shall be computed
at an annual rate equal to .75% below  the rate  announced  from time to time by
Lender as its "prime rate",  which may or may not be the best rate  available at
said bank. (In the event of a participation,  see Section 7(a).  PARTICIPATIONS,
PARTICIPANT INTEREST RATE.) Such interest rate does not reflect additional costs
payable by Debtor including,  without limitation: wire transfer charges or other
charges  pertaining  to the transfer of funds to Debtor or to Lender from Debtor
or  from  Debtor's   depository  banks;   lock  box,  demand  deposit,   control
disbursement  fees and other fees described in this or other agreements  between
Debtor and Lender;  charges arising from any returned or dishonored checks of an
account debtor;  accrual of interest pending the "clearance" of checks described
in Section 4.  COLLECTIONS  below:  and interest upon unpaid interest debited as
principal to Debtor's  Loan Account  Ledger.  Interest  shall be computed on the
basis of actual days elapsed and a year of 360 days.  Interest for each calendar
month  shall  be due and  payable  by  Debtor  as of the  first  day of the next
succeeding  month and,  at  Lender's  option,  may be debited  as  principal  to
Debtor's Loan Account Ledger on the first day of each month or thereafter.

<PAGE>

(b) Daily  Advances.  Debtor may make daily  telephonic  or written  requests to
Lender for advances under the Agreement for deposit into Debtor's demand deposit
account(s) at a permitted depository  institution.  Any requests for advances to
be  disbursed  elsewhere  shall  be  made in  writing  signed  by an  authorized
representative of Debtor.  Debtor agrees not to hold Lender  responsible for any
errors or  misunderstandings in complying with any telephonic or oral directions
for  advance  requests;  and Debtor has the  responsibility  for  ensuring  that
representatives of Debtor contacting Lender to request advances are authorized.

(c) Minimum Monthly Charge.  Notwithstanding  the principal  amount of the debit
balance of the Loan Account Ledger, and in addition to fees or charges for items
other than interest  described  herein,  Debtor agrees to pay Lender,  as of the
first   day  of  the  next   succeeding   month,   at  least   $25,000.00*   per
calendar  month for every  calendar  month  during  the  scheduled  term of this
Agreement  including  any  renewal  terms,  as stated in Section 9.  TERMINATION
hereof (but discounted in the event of an earlier  termination of this Agreement
as requested by Debtor),  which monthly  amount shall be reduced by any interest
paid to Lender for such month only, and not reduced by the  cumulative  interest
paid to Lender during the term of this Agreement  (hereinafter  "Minimum Monthly
Charge").  Lender may debit as  principal  any unpaid  portion of such charge to
Debtor's Loan Account  Ledger.  Such Minimum  Monthly  Charge shall  constitute,
among other things,  partial  compensation  for Lender's benefit of its bargain,
including,  without limitation, loss of future interest income to Lender if this
Agreement  were to be terminated by Debtor before the end of that term set forth
in Section 9.  TERMINATION  below,  and partial  remuneration  of Lender's fixed
costs associated with Lender's business (which costs may be amortized during the
full  term  of this  Agreement).  Unless  otherwise  specifically  expressed  in
writing,  only  one  Minimum  Monthly  Charge  applies  to all  Obligations  and
agreements between Debtor,  Debtor's affiliated companies (where applicable) and
Lender.

* (combined limit with Featherlite Credit Corporation)

(d) Security Interest, Assignment and Cross-Collateralization. To secure payment
of  Debtor's  Obligations,  Debtor  grants to Lender a security  interest in the
Collateral, and Debtor collaterally assigns to Lender its rights under any lease
of personal  or real  property  and its  interests  in all general  intangibles,
including,  without limitation,  trademarks,  trade names, patents,  copyrights,
licenses,  franchises,  insurance  claims and claims or rights of action against
third parties, however arising. The intent of the parties hereto is that all the
Collateral plus all other property,  rights and claims pledged to Lender secures
all Obligations of Debtor to Lender, whether or not such Obligations exist under
this or other  agreements  and while  such  Obligations  are due under any other
agreement, whether or not the loans under this Agreement have been paid in full.

<PAGE>

                                 2. DEFINITIONS

The terms set forth in this  Agreement  shall have the meanings set forth in the
Uniform  Commercial Code as adopted in the State of Wisconsin  unless  otherwise
defined herein.

(a)  "Collateral"  means all of the  following  whether now owned or existing or
hereafter  created  or  acquired  by Debtor,  wherever  located,  including  all
documents,  general  intangibles,  additions  and  accessions,  spare and repair
parts, special tools, replacements,  returned or repossessed goods and books and
records  relating  to the  following;  and  all  proceeds  and  products  of the
following:  all  accounts,   instruments,   documents,  chattel  paper,  general
intangibles,  contract rights, securities,  certificates of deposit and funds on
deposit with and all property in  possession  of Lender or any other  depository
institutions; all inventory; all equipment and all fixtures.

(b)  "Qualified  Account"  means an account  owing to Debtor  which meets all of
these specifications on a continuing basis, as determined by Lender:

          (1) Sale of Goods or Services Rendered.  It arose from the performance
     of services by Debtor,  or from a bona fide sale or lease of goods on terms
     in  effect  as of the date of this  Agreement  as  disclosed  by  Debtor to
     Lender;  which services have been fully  performed for an account debtor or
     which goods have been delivered or shipped to an account debtor residing in
     the United States or a foreign account debtor acceptable to Lender; and for
     which  Debtor has genuine and  complete  invoices,  shipping  documents  or
     receipts;

          (2) Age  and  Due  Date.   It  is  payable  not  more  than  30   days
     from the date of invoice, and is not more than 60 days past due;

          (3)  Ownership.  It is owned  and  assignable  by  Debtor  free of all
     claims,  encumbrances and security  interests  (except  Lender's  paramount
     security interest);

          (4) No Defenses.  It is  enforceable  by Debtor and Lender against the
     account debtor for the amount shown as owing in the statements furnished by
     Debtor to Lender;  it and the transaction out of which it arose comply with
     all  applicable  laws and  regulations;  it is not  subject to any  setoff,
     credit allowance or adjustment except discount for prompt payment,  nor has
     the account debtor returned the goods or disputed liability; and it did not
     arise from a conditional sale,  guaranteed sale, sale on approval,  sale or
     return or sale on consignment;

          (5) Financial  Condition of Account Debtor.  Neither Debtor nor Lender
     has any notice or  knowledge  of  anything  which  might  impair the credit
     standing of the account  debtor or the  prospect of payment of the account,
     nor does the dollar  amount of past-due  invoices as a portion of the total
     dollar amount due from an account debtor exceed 50%,  which  limitation may
     change from time to time;

          (6) Satisfaction of Lender.  Lender has not notified Debtor, orally or
     in writing, that the account or account debtor is unsatisfactory;

          (7) Affiliates.  It is not due from an Affiliate of Debtor, including,
     without  limitation,  a  parent  corporation,   subsidiary  corporation  or
     corporation owned in part or in whole by any controlling  shareholder(s) of
     Debtor,  or any  officer,  director  or  shareholder  of  Debtor  or of any
     Affiliate (collectively "Affiliate");

<PAGE>

          (8) Other Provisions.   Qualified  Account  shall  not  include, among
     other  things,  finance  charges,  deposits,  dealer holdbacks and dilution
     reserve.


(c)   "Qualified   Inventory"   means   inventory   which  meets  all  of  these
specifications on a continuing basis, as determined by Lender:

          (1)  Ownership.  It is owned  and  assignable  by  Debtor  free of all
     claims,  encumbrances and security  interests  (except  Lender's  paramount
     security  interest);  it is  not  stored  with  any  bailee,  warehouseman,
     Affiliate  or other party  without a written  agreement in favor of Lender;
     and it is not with  Debtor nor put in the field by Debtor as a  conditional
     sale,  guaranteed  sale,  sale  on  approval,  sale  or  return  or sale on
     consignment;

          (2) Condition. It is in good condition; it has not materially declined
     in value; it is of an age, type and quantity  acceptable to Lender; and, in
     the case of goods held for sale, it is new and unused (except as Lender may
     otherwise consent in writing);

          (3) Satisfaction of Lender.  Lender has not notified Debtor, orally or
     in writing, that any of the inventory is unsatisfactory;

          (4) Other Provisions.  Qualified  Inventory  shall  not include, among
     other  things,  reserve for obsolescence/slow moving inventory, promotional
     items,   outside  processors,  prepaid  intransit,  at  shows/dealers/sales
     representatives, leased, drivers using, used trailers, test count reserves,
     new and used motorcoaches.

(d) "Obligations" means all Debtor's debts,  covenants,  warranties,  duties and
liabilities to Lender  (including the Financial  Services Division and any other
division of Lender) whether liquidated or unliquidated,  absolute or contingent,
whether arising under this Agreement,  any lease,  any charge card program,  any
other service or credit extended by Lender,  any mortgage or deed of trust,  any
guaranty, any letter of credit or bankers acceptance, any reserve established by
Lender to support any letter of credit,  bankers acceptance or other undertaking
by Lender for the benefit of Debtor  and/or its  Affiliates,  any account with a
balance due Lender,  any term  indebtedness  (installment,  demand or promissory
note),  and/or  under  any other  agreements  of  whatever  nature  with  Lender
(together and individually, the "Loan Documents") and including fees and charges
related to any of the foregoing;  and whether  arising out of past,  existing or
future  credit  granted by Lender to  Debtor,  to Debtor  and  others,  to other
guaranteed   or   endorsed   by  Debtor  or  to  any   debtor-in-possession   or
successor-in-interest of Debtor.

<PAGE>

                         3. COLLATERAL-OBLIGATION RATIO


Without  Lender's  prior  written  consent,  Debtor  shall not  permit  advances
(including  accrued  interest,  expenses,  fees and reserves)  against Qualified
Accounts and Qualified Inventory at any time outstanding to exceed the lesser of
$23,000,000.00; or

See Exhibit A attached hereto for subsections (a), (b) and (c).


In addition to other  required  payments  herein,  Debtor shall at all times pay
Lender such sums as may be necessary from time to time to maintain the foregoing
ratios or limits ("Ratios").  Such  Ratios  are stated  only for the  purpose of
establishing  advances  under  this  Agreement  and  not  for  valuation  of the
Collateral.  Notwithstanding  Debtor's  obligation  to  maintain  the  foregoing
Ratios, Lender, in its sole discretion, may make advances to Debtor in excess of
the foregoing Ratios, which advances shall be payable to Lender ON DEMAND unless
otherwise  agreed to in  writing  by  Lender.  Where  Debtor  has  exceeded  the
foregoing  Ratios or any Excess Line of Credit (as defined below),  Debtor shall
be assessed a daily service fee as a cost in addition to the interest designated
in Section 1. LOANS AND SECURITY INTEREST above.  Furthermore,  where Lender has
consented  to an  additional  line of credit in excess of the  foregoing  Ratios
("Excess Line of Credit"), Debtor shall be assessed a daily service fee for such
Excess  Line of Credit  whether or not Debtor  draws  upon such  Excess  Line of
Credit. Nothing herein, however, shall be construed as a commitment by Lender to
make or allow advances against  Qualified  Accounts and/or  Qualified  Inventory
(including  accrued  interest,  expenses,  fees and  reserves)  in excess of the
foregoing Ratios; nor shall this section be a waiver of any default by Debtor if
it exceeds such Ratios without Lender's prior written consent.

                                 4. COLLECTIONS

(a)  Payment  of  Collections.   Debtor  promises  to  continuously   repay  the
Obligations upon Debtor's  receipt of any proceeds of the Collateral,  including
all checks,  drafts, cash and other remittances and proceeds received in part or
full payment of or with respect to the Collateral ("Collections").  Debtor shall
deposit  or  cause  to be  deposited  all  Collections  in  accordance  with the
provisions marked with an 'x' below.

[X]       Lender's/Remote Lock Box Service;  Restricted Account. Prior to Lender
     making any advances  hereunder,  Debtor  hereby agrees to enter into a lock
     box arrangement  with   Lender to which Collections shall be sent by Debtor
     ("Depository    Bank").  All Collections shall constitute  a payment to and
     the  property  of Lender and be  processed in accordance with such lock box
     arrangement.  Once  processed,  the  amount  of  any  such  Collections  at
     Depository  Bank shall be placed in a restricted account in the  sole  name
     and  control  of  Lender  (if  not  otherwise immediately  wire-transferred
     to  Lender).  Any charges relating to such restricted  account which Lender
     elects  to  pay  shall  be  charged  to  Debtor's  Loan Account Ledger. Any
     Collections inadvertently received by Debtor shall be immediately delivered
     to  Lender  or  to  Lender's  restricted  account  at  Depository   Bank in
     precisely   the  form  received  (but  endorsed by Debtor if necessary  for
     collection),  and  until  such   delivery,  Debtor  shall not commingle any
     such  Collections with any other funds or property of Debtor and shall hold
     the Collections upon an express trust for Lender.

<PAGE>

[ ]       Direct  Deliver/Restricted  Account.  Immediately upon receipt, Debtor
     shall     (1)     deliver     to    Lender     or    (2)     deliver     to
     ___________________________________________________________    ("Depository
     Bank")  [strike as  appropriate]  all  Collections  in  precisely  the form
     received  (but  endorsed  by  Debtor if  necessary  for  collection).  Said
     Collections  shall  constitute a payment to and the property of Lender and,
     until such delivery,  Debtor shall not commingle any  Collections  with any
     other funds or property  of Debtor and shall hold the  Collections  upon an
     express  trust  for  Lender.  Once  delivered,   the  amount  of  any  such
     Collections at Depository Bank shall be immediately  placed in a restricted
     account  in  the  sole  name  and  control  of  Lender  (if  not  otherwise
     immediately  wire-transferred  to  Lender).  Any  charges  relating to such
     restricted  account which Lender elects to pay shall be charged to Debtor's
     Loan Account Ledger.

(b) Credit for  Collections.  For calculating the amount available for borrowing
hereunder,  the  amount  of any  Collections  in the form of  cash,  immediately
payable  checks,  drafts or other  instruments  received by Lender in Milwaukee,
Wisconsin,  prior to 12:00 Noon of each banking day will be immediately credited
to Debtor's Loan Account Ledger. As consideration, in part, for Collections that
may not be immediately  available for use by Lender,  interest shall continue to
be charged on the amount so credited at Lender's  rate of interest  for a period
of  -2-   business  days  after  such  receipt.  The  amount  of any Collections
in the form of a wire transfer received by Lender at Milwaukee, Wisconsin, prior
to 1:30 P.M. of each  banking  day,  will be credited  that same day to Debtor's
Loan Account Ledger for borrowing and interest  purposes unless otherwise agreed
to in writing by Debtor and Lender. In the event that any such Collections,  the
amount  of  which  has  been  credited  to  Debtor's  Loan  Account  Ledger,  is
subsequently dishonored or otherwise returned unpaid to Lender, Lender may debit
Debtor's  Loan  Account  Ledger  for such  amount,  including  any  charges  for
dishonored items, retroactively to the date that the amount was credited against
the  Obligations.  Except as provided in any  account  agreement  and except for
Lender's  willful  misconduct,  Lender  shall not be  liable  for any of its own
errors or errors by any other  financial  institution in the  processing  and/or
transfer of funds or Collections to or from Lender, and Lender may retroactively
debit Debtor's Loan Account Ledger for any lost interest or principal  resulting
therefrom.

(c)  Verification  and  Notification.  Lender  may  verify  accounts  and  other
Collateral  in any manner,  and Debtor  shall  assist  Lender in so doing.  Upon
default by Debtor or termination of this Agreement, Lender may (or Debtor shall,
upon  request of Lender)  notify  account  debtors to make  payment  directly to
Lender;  and Lender may enforce  collection  of, settle,  compromise,  extend or
renew the  indebtedness  of such account  debtors,  all without notice to or the
consent  of  Debtor.  Lender  shall  have the right to  exercise  all rights and
remedies  available to Debtor  relating to account debtors  (including,  without
limitation,  enforcing any mechanic or construction lien rights),  and Debtor is
hereby deemed to have assigned to Lender all such rights and remedies.



<PAGE>

                      5. DEBTOR'S WARRANTIES AND COVENANTS

During  the term of this  Agreement  or while  any  Obligations  are  unpaid  or
outstanding   under  this  Agreement  or  the  other  Loan   Documents,   Debtor
continuously warrants, represents and agrees as follows:

(a) Accuracy of Information.  All information,  certificates or statements given
to Lender  pursuant  to this  Agreement  and the other Loan  Documents  shall be
accurate and complete when given.

(b)  Organization,  Authority,  Validity  of  Obligations.  Debtor  is a validly
existing  corporation or partnership  (as applicable) in good standing under the
laws of its state of  organization,  and has all requisite  power and authority,
corporate or  otherwise,  to perform  under this  Agreement,  and  possesses all
necessary  licenses,  to  conduct  its  business  and  own its  properties.  The
execution,  delivery  and  performance  of this  Agreement  and the  other  Loan
Documents  with  Lender  are within  Debtor's  authority,  are legal,  valid and
binding  obligations of Debtor,  enforceable  against Debtor in accordance  with
their terms, and do not require the consent of others.

(c) Existence;  Business Activities;  Adverse Change;  Litigation.  Debtor will:
preserve its corporate or partnership  existence (as  applicable) and its rights
and  franchises;  not make any  material  change in the  nature or manner of its
business activities,  and not suffer any material adverse change in its business
operation,  its  financial  condition  or in  the  value  or  condition  of  the
Collateral.  Further,  there  is  no  litigation  or  administrative  proceeding
threatened or pending against Debtor which would, if adversely determined,  have
a material adverse affect on Debtor's business operation, financial condition or
the Collateral.

(d) Acquisitions,  Investments,  Dividends, Corporate Changes. Without the prior
written consent of Lender, Debtor shall not: acquire any other business (whether
by stock or asset  acquisition);  make any loan,  advance or extension of credit
to, or investment in, any other person,  corporation or other entity (except for
extensions of credit to account debtors for goods and/or services purchased from
Debtor in the  ordinary  course of business and except for loans up to $5,000 at
any time outstanding to individual employees);  pay any cash dividends;  pay any
management,  administration,  consulting  fees  or the  like  to any  Affiliate,
director or  shareholder;  purchase,  redeem or otherwise  acquire,  directly or
indirectly,  any shares of any class of its stock or any other stock; merge with
or into or  consolidate  with  or into  any  other  corporation  or  entity;  or
liquidate or dissolve.

(e) Other Agreements,  Laws and Regulations.  Debtor is not in default under any
material  agreement  for the payment of money  which would give any  creditor of
Debtor  the right to  accelerate  indebtedness  of Debtor  to such  creditor  or
terminate such agreement to which Debtor is a party; nor is Debtor delinquent in
the payment of any tax,  payroll or withholding  obligation or of any obligation
under  any  federal  or state law which  could  impose a lien or claim  upon the
Collateral as a result of such default. Furthermore, Debtor's Affiliates are not
in default under any agreement between such Affiliates and Lender.

(f)  Debtor's   Name,   Locations;   Notice  of  Changes.   Debtor's   name  and
organizational  structure have remained the same during the past 5 years. Debtor
will continue to use only the name set forth on the first page of this Agreement
unless  Debtor  gives Lender prior  written  notice of any change.  Furthermore,
Debtor shall not do business  under  another name nor use any trade name without
giving 10 days prior  written  notice to Lender.  The  address  appearing  below
Debtor's  signature is Debtor's chief  executive  office and principal  place of
business; and such office, place of business and all Collateral shall be at such
address  except to the extent Debtor has provided prior written notice to Lender
of any change of  address/new  location.  Further,  Debtor will promptly  notify
Lender in writing of any change,  death or  disability  of any of its  principal
officers,  directors and key employees;  death of any  guarantor;  and any other
material change in the structure, business or financial affairs of Debtor or the
Collateral.

<PAGE>

(g) Use of  Proceeds,  Speculation.  Advances  by  Lender  under  this and other
agreements shall be used exclusively by Debtor for working capital purposes.  No
part of any of the proceeds shall be used for speculative  investment  purposes,
including, without limitation,  speculating or hedging in the commodities and/or
futures market without the prior written consent of Lender.

(h) Ownership, Maintenance of Collateral, Restriction on Liens and Dispositions.
Debtor is the sole owner of the Collateral free of all claims,  encumbrances and
security  interests,  except as  permitted in writing by Lender.  Debtor  shall:
maintain the Collateral in good condition and repair  (reasonable  wear and tear
excepted), and not permit its value to be impaired; not permit waste, removal or
loss of identity of the  Collateral,  nor shall  Debtor,  by action or inaction,
cause  Lender in good faith to fear  waste,  removal or loss of  identity of the
Collateral;  keep the Collateral free from all claims, encumbrances and security
interests (other than Lender's paramount security  interest);  defend it against
all claims and legal proceedings by persons other than Lender; pay and discharge
when due all taxes,  levies and other charges or fees upon the Collateral except
for  payments  of  taxes  contested  by  Debtor  in good  faith  by  appropriate
proceedings so long as no levy or lien has been imposed upon the Collateral; not
lease,  sell or  transfer  the  Collateral  to any party or to any new  location
outside of the ordinary course of business;  not permit the Collateral to become
a fixture or accession to other goods;  not permit the  Collateral to be used in
violation of any applicable law,  regulation or policy of insurance;  and, as to
the Collateral  consisting of instruments and chattel paper,  preserve  Lender's
rights in it against all other parties.  Notwithstanding  the above,  Debtor may
sell or lease inventory in the ordinary course of its business provided that (1)
no sale or lease shall include any transfer or sale in satisfaction  (partial or
complete)  of a debt  owed by  Debtor;  (2) title  will not pass to buyer  until
Debtor  physically  delivers the goods to buyer or Debtor ships the goods F.O.B.
to buyer's destination; and (3) sales and/or leases to Debtor's Affiliates shall
be for its fair market value,  cash on delivery,  with the proceeds  remitted to
Lender.

(i) Maintenance of Security  Interest/Purchase Money Security Interests.  Debtor
shall take any action  requested  by Lender to preserve  the  Collateral  and to
establish  priority of,  perfect,  continue  perfection  of or enforce  Lender's
interest in the Collateral and Lender's rights under this  Agreement;  and shall
pay all costs and expenses related thereto. Debtor and Lender intend to maintain
the full effect of any  purchase  money  security  interest  granted in favor of
Lender notwithstanding the fact that the Collateral so purchased is also pledged
as  security  for other  Obligations  under  this  Agreement  and the other Loan
Documents.

(j) Collateral  Inspections,  Modifications,  Changes and Returns. At reasonable
times,  Lender may examine the Collateral and Debtor's records pertaining to it,
wherever  located,  and make  copies of such  records at Debtor's  expense;  and
Debtor shall assist Lender in so doing.  Without Lender's prior written consent,
Debtor  shall  not  alter,  modify,  discount,   extend,  renew  or  cancel  any
Collateral,  except  for  ordinary  discounts  for prompt  payment on  accounts,
physical  modifications to the inventory occurring in the manufacturing  process
or alterations to equipment  which do not  materially  affect its value.  Debtor
shall  promptly  notify Lender if any Qualified  Account or Qualified  Inventory
ceases to be qualified,  and notify Lender of any change in the condition of the
Collateral.

(k) Collateral Records/Reports.  Debtor shall keep accurate and complete records
respecting the  Collateral in such form as Lender may approve.  At such times as
Lender may require,  Debtor shall  furnish to Lender  information  regarding the
Collateral,  certified  by Debtor as complete  and accurate and in such form and
substance  as required by Lender,  including,  without  limitation:  the current
status and value of the Collateral; a schedule of all inventory showing the cost
and  wholesale  market value  thereof;  a periodic  appraisal  of equipment  and
fixtures (if applicable)  and by the 10th day of each month, a detailed  listing
of accounts  according to age and address,  identifying those which are current,
those which are past due (including the extent to which they are past due) and a
reconciliation  of such aging of accounts.  Upon  request,  Debtor shall provide
Lender with copies of applicable  account  invoices and  conclusive  evidence of
shipment of goods to such accounts.


<PAGE>


(l)  Accounting  Records/Reports;  Controller.  Debtor  shall  maintain a modern
system of  accounting  in  accordance  with  generally  accepted  principles  of
accounting  consistently applied throughout all accounting periods. Debtor shall
furnish  Lender such reports and financial  statements  respecting the business,
assets,  income  and  financial  condition  of Debtor as Lender  may  reasonably
request (at least within 30 days of the end of each monthly  interim  accounting
period);  all of which  reports and financial  statements  shall be certified as
complete and accurate by a principal officer of Debtor, and annually,  within 90
days of fiscal year end Debtor shall  provide  Lender a certified  audit,  by an
independent public accountant  satisfactory to Lender with a reliance letter for
the benefit of Lender. Furthermore, Debtor shall cause and hereby authorizes its
accountants to deliver to Lender a copy of any letters, memoranda or advice such
accountants  direct to Debtor's  management.  At Debtor's expense,  Lender shall
have the right at any time during normal  business hours to verify,  inspect and
make   extracts  of  all  of  Debtor's   books,   accounts,   records,   orders,
correspondence and such other papers as Lender may desire. Debtor shall employ a
full-time controller whose experience and training are acceptable to Lender.

(m)  Insurance.  Debtor shall keep the  Collateral  and Lender's  interest in it
insured  against all risks and under  policies  with such  provisions,  for such
amounts and with such  insurers as shall be  satisfactory  to Lender,  and shall
furnish evidence of such insurance  satisfactory to Lender. Insurer or its agent
shall endorse the policy of insurance  naming  Lender as "Lender's  Loss Payee",
and shall  agree to notify  Lender of any  changes in the policy  coverage  with
respect to the  Collateral  or the  addition  of any other loss payees as to the
Collateral.  Debtor  hereby  assigns all insurance  proceeds to and  irrevocably
directs,  while any Obligations  remain unpaid, any insurer to pay to Lender the
proceeds of all such insurance and any premium refund,  and authorizes Lender to
endorse Debtor's name to effect the same; to make, adjust or settle, in Debtor's
name, any claim on any insurance policy relating to the Collateral;  and, at the
option of  Lender,  to apply such  proceeds  and  refunds to any  balance of the
Obligations and/or to restoration of the outstanding  Collateral,  returning any
excess to Debtor.

(n) Environmental Matters. Except as disclosed in a written schedule attached to
this  Agreement  (if no schedule is attached,  there are no  exceptions),  there
exists no  uncorrected  violation by Debtor of any federal,  state or local laws
(including,  without  limitation,  statutes,  regulations,  ordinances  or other
governmental  restrictions  and  requirements)  relating to the discharge of air
pollutants, water pollutants or process waste water or otherwise relating to the
environment or hazardous  substances as hereinafter  defined,  whether such laws
currently  exist  or are  enacted  in the  future  (collectively  "Environmental
Laws").  The term  "Hazardous  Substances"  shall  mean any  hazardous  or toxic
wastes, chemicals or other substances,  the generation,  possession or existence
of which is  prohibited  or governed by any  Environmental  Laws.  Debtor is not
subject to any judgment, decree, order or citation, or a party to (or threatened
with) any litigation or administrative proceeding, which asserts that Debtor (1)
has violated any Environmental Laws; (2) is required to clean up, remove or take
remedial or other action with respect to any Hazardous Substances  (collectively
"Remedial  Action");  or (3) is  required to pay all or a portion of the cost of
any Remedial Action, as a potentially  responsible party. There are not now, nor
to Debtor's knowledge after reasonable investigation,  have there ever been, any
Hazardous  Substances (or tanks or other facilities for the storage of Hazardous
Substances) stored, deposited,  recycled or disposed of on, under or at any real
estate  owned or occupied  by Debtor  during the  periods  that Debtor  owned or
occupied  such real estate,  which if present on the real estate or in the soils
or ground water, could require Remedial Action. To Debtor's knowledge, there are
no  proposed or pending  changes in  Environmental  Laws which  would  adversely
affect Debtor or its business, and there are no conditions existing currently or
likely to exist during the term of this Agreement  which would subject Debtor to
Remedial  Action or other  liability.  Debtor  currently  complies with and will
continue  to timely  comply with all  applicable  Environmental  Laws;  and will
provide Lender, immediately upon receipt, copies of any correspondence,  notice,
complaint,  order or other  document  from any source  asserting or alleging any
circumstance or condition which requires or may require a financial contribution
by Debtor or Remedial Action or other response by or on the part of Debtor under
any  Environmental  Laws, or which seeks damages or civil,  criminal or punitive
penalties from Debtor for an alleged violation of any Environmental Laws.

<PAGE>

(o) Chattel Paper, Instruments, Etc. Chattel Paper, instruments,  drafts, notes,
acceptances,  and other documents which constitute  Collateral shall be on forms
satisfactory to Lender. Debtor shall promptly mark all original chattel paper to
indicate conspicuously Lender's security interest therein, shall not deliver any
chattel paper or instruments to any other entity and, upon request,  deliver all
original  chattel  paper,  instruments,  drafts,  notes,  acceptances  and other
documents which constitute collateral to Lender.

(p) United States Government Contracts. If any accounts or contract rights arose
out of contracts with the United States or any of its  departments,  agencies or
instrumentalities,  Debtor shall promptly notify Lender and execute any writings
required  by Lender so that all money due or to become due under such  contracts
shall be assigned to Lender under the Federal Assignment of Claims Act.

(q)  Expenses  and Fees.  Debtor  shall be  responsible  for the  payment of all
expenses  and  fees of  Lender  and its  personnel,  Lender's  corporate  inside
counsel,  retained  outside  counsel and other  third  parties,  (including  any
Participant)  in  connection  with  the  Loan  Documents,   including,   without
limitation:   perfecting  Lender's  security  interest  in  the  Collateral  and
confirming its priority;  the internal reviews of Debtor's  business  operations
and  the  Collateral;   appraisals  and  environmental   audits;   the  closing,
administration,  modification,  defense of or  enforcement of this Agreement and
the other Loan Documents; and the preservation, collection and/or liquidation of
the Collateral;  in each case regardless of whether such expenses and fees arise
after  termination  of this  Agreement or as part of a judicial or  non-judicial
proceeding.  Such  expenses  and fees may,  at  Lender's  option,  be debited to
Debtor's  Loan  Account  Ledger and be in addition to the  interest  and Minimum
Monthly Charge referred to in Section 1. LOANS AND SECURITY INTEREST.

                         6. RIGHTS AND DUTIES OF LENDER

(a) Authority to Perform for Debtor. To facilitate application of the Collateral
against the  Obligations,  Debtor  presently  appoints  any officer of Lender as
Debtor's  attorney-in-fact  (coupled with an interest and irrevocable  while any
Obligations  remain  unpaid):  to endorse  the name of Debtor on any  invoice or
document of title  relating to accounts,  drafts or notices to account  debtors,
notes, acceptances,  assignments of government contracts, instruments, financing
statements, checks, insurance claims or payments or other evidence of payment or
security interest related to the transactions  under this Agreement or the other
Loan Documents; to perfect, protect and/or realize upon Lender's interest in the
Collateral;  and to do all such  other acts and  things  necessary  to carry out
Debtor's  obligations  under  this  Agreement  and  the  other  Loan  Documents,
including,  upon default, to receive,  open and dispose of all mail addressed to
Debtor, to notify the Post Office authorities to change the address for delivery
of mail  addressed  to Debtor to an address  designated  by Lender and to notify
(and Debtor hereby directs) each of Debtor's depository institutions to remit to
Lender,  without liability to Debtor, all of Debtor's funds on deposit with such
institutions.  All acts by Lender are hereby  ratified and approved,  and Lender
shall not be liable for any acts of commission  or omission,  nor for any errors
of judgment or mistakes of fact or law.

(b) Collateral Preservation. Lender shall use reasonable care in the custody and
preservation  of any  Collateral in its physical  possession  but in determining
such standard of reasonable care, Debtor expressly  acknowledges that Lender has
no duty to: insure the Collateral  against  hazards;  ensure that the Collateral
will not cause  damage to property or injury to third  parties;  protect it from
seizure,  theft or conversion by third parties, third parties' claims or acts of
God; give to Debtor any notices  received by Lender  regarding  the  Collateral;
perfect or  continue  perfection  of any  security  interest in favor of Debtor;
perform any services,  complete any  work-in-process or take any other action in
connection  with the  management or maintenance  of the  Collateral;  nor sue or
otherwise  effect  collection upon any accounts even if Lender shall have made a
demand for payment upon individual account debtors.  Notwithstanding any failure
by Lender to use  reasonable  care in preserving the  Collateral,  Debtor agrees
that Lender shall not be liable for  consequential  or special  damages  arising
therefrom.

<PAGE>

(c) Setoffs. As additional  security for the payment of the Obligations,  Debtor
hereby  grants  to  Lender a  security  interest  in,  a lien on and an  express
contractual right to set off against all depository  account balances,  cash and
any other  property  of Debtor now or  hereafter  in the  possession  of Lender.
Lender  may,  at  any  time   upon  the  occurrence  of   a  default   hereunder
(notwithstanding  any  notice  requirements  or  grace/cure  periods  under this
Agreement or the other Loan Documents) set off against the  Obligations  whether
or not the Obligations (including future installments) are then due or have been
accelerated,  all without any advance or contemporaneous notice or demand of any
kind to Debtor, such notice and demand being expressly waived.

                            7. OTHER LOAN PROVISIONS

(a)  Participations,  Participant  Interest  Rate.  Debtor  recognizes  that  an
integral part of the financing  under this  Agreement is Lender's  participation
with    ________________________________________________________________________
("Participant"),  and Debtor consents to such participation, the extent of which
shall  not  exceed  50%  of the  advances  under this  Agreement  or such dollar
limit as Lender and Participant may agree. Such  participation is subject to the
execution of a participation  agreement in a form  satisfactory  to Lender.  The
annual  rate  of  interest   charged  to  Debtor  on  any  advances  subject  to
participation  shall be  _____%  plus the rate  announced  from  time to time by
Lender as its  "prime  rate".  Minor  deviations  above  and below  such rate of
interest will result from costs and fees provided for in this Agreement,  timing
of the settlement with Participant on any particular day,  clearance factors and
the time of day of the  application  of  Collections.  The time  and  manner  of
settlement of any participation shall be within the sole determination of Lender
and Participant.  In the event a participation is terminated for any reason, the
rate of interest  charged Debtor by Lender on any advances in replacement of the
participated  advances  shall  revert to that rate set forth in Section 1. LOANS
AND  SECURITY  INTEREST  hereof;  and  Lender  shall  not be  obligated  to fund
Participant's  prior share of the advances.  Notwithstanding the existence of or
lack of any participation,  Lender shall not at any time lend funds to Debtor in
excess of Lender's  lending  limits.  Lender may  distribute to  Participant  or
potential  participants any information  Lender may obtain regarding Debtor, the
Collateral,  this  Agreement and the Loan  Documents  between Debtor and Lender.
Debtor also agrees to furnish  Participant,  upon request,  the same information
Debtor provides to Lender.

(b) Letters of  Credit/Banker's  Acceptances.  From time to time, and subject to
execution of appropriate  agreements,  Debtor may request Lender's International
Banking Division,  or another  institutional lender (either hereinafter referred
to as "Issuer") to issue letters of credit and /or create  banker's  acceptances
for the account of Debtor (either hereinafter  referred to as "Credit") in favor
of various  beneficiaries.  In order to support  the  issuance of such Credit by
Issuer and at Lender's  option,  Lender  shall reduce the amount of funds Lender
may   make    available    for    borrowing   by   Debtor   under   Section   3.
COLLATERAL-OBLIGATION  RATIO of this  Agreement  to the  extent of the  Issuer's
liability  under such Credit or such lesser  amount as Lender and the Issuer may
determine is required ("Collateral  Reservation").  This Collateral  Reservation
shall be deemed an "Obligation" under this Agreement,  and at any time Lender is
called  upon to advance  funds to Issuer  under any such  Credit,  the amount of
funds so advanced  shall be charged  against  Debtor's Loan Account  Ledger as a
loan,  and interest will be charged  thereon at the rate set forth under Section
1. LOANS AND SECURITY  INTEREST of this Agreement.  Lender shall charge Debtor a
fee for such Collateral Reservation in an amount and on terms mutually agreeable
to Lender and Debtor. Any fee for Collateral Reservation shall be in addition to
any fees or charges  imposed by Issuer.  Debtor shall not hold Lender liable nor
shall any advance made by Lender to any Issuer be subject to any contest, offset
or  defense by virtue of  Issuer's  failure to comply  with its  obligations  to
Debtor.

<PAGE>

(c) Return of Documents, Account Stated. Any documents,  schedules,  invoices or
other  papers  delivered  to Lender  by Debtor  may be  destroyed  or  otherwise
disposed of by Lender unless Debtor immediately  requests in writing, the return
of said documents,  schedules,  invoices or other papers and makes  arrangements
for such return,  at Debtor's  expense.  Any  statement  of account  rendered by
Lender to Debtor,  including,  without limitation,  statements of balance owing,
accrued  interest,  expenses  and  costs,  shall be  deemed  to be  correct  and
constitute an account  stated  unless,  within 30 days after receipt  thereof by
Debtor, Debtor shall deliver to Lender, by registered or certified mail, written
objection thereto specifying the errors, if any, contained in such statement.

(d) Loan  Administration  and Closing Fee. In addition to interest,  the Minimum
Monthly  Charge and other costs and fees referred to in this Agreement and while
this  Agreement  is in effect,  Debtor * shall be assessed a loan administration
fee  of  $3,500.00  per  quarter,  and  Debtor  shall  remit  to  Lender a  loan
closing fee, payable at the initial funding, of $ N/A.

* and Featherlite Credit Corporation, in aggregate.

(e) Initial  Funding.  Initial funding under this and other  agreements  between
Debtor and Lender is, among other things,  contingent  upon (1)  maintenance  of
Debtor's  business,  financial  condition and  Collateral  such that no material
adverse change will have occurred from the date hereof until the time of initial
funding;  (2) no material change in the structure of the transaction under which
Lender might provide financing; (3) appropriate perfection of Lender's paramount
security  interest  in  the  Collateral;  and  (4)  completion  of  all  closing
requirements   and  execution  of  all  closing   documentation   necessary  and
satisfactory to Lender.

                               SECTION 8. DEFAULT

(a) Default. Debtor shall immediately notify the Lender, in writing, when Debtor
obtains knowledge of the occurrence of any default  specified below.  Regardless
of whether Debtor has given Lender the required notice, the occurrence of one or
more of the following shall constitute a default:

          (1) Nonpayment. Debtor fails to pay when due any of the Obligations.

          (2) Nonperformance. Debtor or any guarantor of Debtor's Obligations to
     Lender ("Guarantor") shall fail to perform or observe any agreement,  term,
     provision,  condition,  or covenant  (other than a default  occurring under
     (1),  (3),  (4),  (5) or (6) of this  section)  required to be performed or
     observed  by  Debtor or any  Guarantor  hereunder  or under any other  Loan
     Document or other agreement with or in favor of Lender.

          (3)   Misrepresentation.   Any   financial   information,   statement,
     certificate,  representation  or warranty  given to Lender by Debtor or any
     Guarantor  (or  any of  their  representatives)  in  connection  with  this
     Agreement or the other Loan Documents and/or any borrowing  thereunder,  or
     required to be  furnished  under the terms  thereof,  shall prove untrue or
     misleading in any material respect (as determined by Lender in the exercise
     of its judgment) as of the time when given.

          (4) Default on Other Obligations.  Debtor or any Guarantor shall be in
     default  under the other Loan  Documents or any  indebtedness  in excess of
     $10,000  owing by Debtor to any third  party,  and the period of grace,  if
     any, to cure said default shall have passed.


<PAGE>


          (5) Judgments.  Any judgment  shall be obtained  against Debtor or any
     Guarantor which, together with all other outstanding  unsatisfied judgments
     against  Debtor (or such  Guarantor),  shall  exceed the sum of $10,000 and
     shall  remain  unvacated,  unbonded  or  unstayed  for a period  of 30 days
     following the date of entry thereof.

          (6)  Inability  to Perform;  Bankruptcy/Insolvency.  (i) Debtor or any
     Guarantor  shall die or cease to exist; or (ii) any Guarantor shall attempt
     to revoke any guaranty of the Obligations described herein, or any guaranty
     becomes  unenforceable  in whole or in part for any  reason;  or (iii)  any
     bankruptcy,  insolvency or receivership  proceedings,  or an assignment for
     the benefit of creditors, shall be commenced under any federal or state law
     by or against  Debtor or any  Guarantor;  or (iv)  Debtor or any  Guarantor
     shall become the subject of any out-of-court settlement with its creditors;
     or (v) Debtor or any Guarantor is unable or admits in writing its inability
     to pay its debts as they mature.

(b) Termination of Loans;  Additional  Lender Rights.  Upon  termination of this
Agreement as provided in Section 9.  TERMINATION  below or the occurrence of any
default  identified  above and in the  exercise  of its  discretion  under  this
Agreement,  Lender may at any time (1) immediately cease making additional loans
to Debtor;  (2) set off; and/or (3) take such other steps to protect or preserve
Lender's interest in the Collateral,  including,  without limitation,  notifying
account debtors to make payment  directly to Lender,  advancing funds to protect
or preserve the Collateral and insuring the Collateral at Debtor's expense;  ALL
WITHOUT DEMAND OR NOTICE OF ANY KIND, all of which are hereby waived.

(c) Acceleration, Expenses and Lender's Cumulative Remedies. Upon the occurrence
of any one of the above defaults or termination of this Agreement as provided in
Section 9.  TERMINATION  below,  then at the  option of Lender and upon  written
notice to Debtor,  all of the Obligations  shall become  immediately  payable by
Debtor and fully  accelerated  and this Agreement  shall be  terminated.  Debtor
shall also pay Lender  all  expenses  incurred  by  Lender,  including,  without
limitation,  those  described in Section 5.  DEBTOR'S  WARRANTIES  AND COVENANTS
above.  Any  termination of this Agreement  shall also effect an acceleration of
all Obligations  owed Lender  (including,  without  limitation,  any installment
obligations  and other  agreements  between  Debtor and Lender even if scheduled
payments  thereunder would otherwise remain  outstanding).  Furthermore,  Lender
shall  have  all  rights  and  remedies  for  default  provided  by the  Uniform
Commercial  Code,  as well as any  other  applicable  law  and  this  Agreement,
INCLUDING,  WITHOUT LIMITATION,  THE RIGHT TO REPOSSESS,  RENDER UNUSABLE AND/OR
DISPOSE OF THE  COLLATERAL  WITHOUT  JUDICIAL  PROCESS.  The rights and remedies
specified  herein are cumulative and are not exclusive of any rights or remedies
which Lender would otherwise have. With respect to such rights and remedies:

          (1)  Assembling  Collateral,   Storage,  Use  of  Debtor's  Name/Other
     Property.  Lender may require Debtor to assemble the Collateral and to make
     it available to Lender at any convenient place designated by Lender. Debtor
     recognizes  that  Lender  will not have an  adequate  remedy in law if this
     obligation is breached and,  accordingly,  Debtor's  obligation to assemble
     the Collateral  shall be  specifically  enforceable.  Lender shall have the
     right  to  take  immediate  possession  of  said  Collateral;   and  Debtor
     irrevocably  authorizes  Lender to enter any of the  premises  of Debtor or
     wherever  said  Collateral  shall be  located,  and to  store  (rent-free),
     repair,  maintain,  assemble,  manufacture,  advertise  and sell,  lease or
     dispose of (by public sale or otherwise)  the same on said  premises  until
     sold.  Lender is hereby  granted an  irrevocable  license  to use,  without
     charge,  Debtor's  equipment,   inventory,   labels,  patents,  copyrights,
     franchises,  names, trade secrets, trade names,  trademarks and advertising
     matter and any property of a similar nature;  and Debtor's rights under all
     licenses and franchise agreements shall inure to Lender's benefit. Further,
     Debtor  releases Lender from obtaining a bond or surety with respect to any
     repossession and/or disposition of the Collateral.

          (2) Notice of Disposition.  Written notice, when required by law, sent
     to any  address  of Debtor in this  Agreement,  at least 10  calendar  days
     (counting the day of sending) before the date of a proposed  disposition of
     the Collateral is reasonable  notice.  Notification  to account  debtors by
     Lender shall not be deemed a disposition of the Collateral.

<PAGE>

          (3) Possession of Collateral; Commercial Reasonableness.  Lender shall
     not,  at any time,  be  obligated  to either take or retain  possession  or
     control of the Collateral.  With respect to Collateral in the possession or
     control  of  Lender,  Debtor  and  Lender  agree  that  as a  standard  for
     determining commercial reasonableness,  Lender need not liquidate, collect,
     sell or otherwise  dispose of any of the Collateral if Lender believes,  in
     good faith,  that  disposition of the Collateral  would not be commercially
     reasonable, would subject Lender to third-party claims or liability or that
     other potential purchasers could be attracted or a better price obtained if
     Lender held the  Collateral  for up to 1 year; and Lender shall not then be
     deemed to have retained the Collateral in satisfaction of the  Obligations.
     Furthermore,  Lender  may sell the  Collateral  on credit  (and  reduce the
     Obligations  only when  payment is received  from the buyer),  at wholesale
     and/or with or without an agent or broker;  and Lender  need not  complete,
     process or repair the Collateral prior to disposition.

          (4) Interest After Maturity and Expenses.  Upon maturity of any or all
     of the Obligations, whether by default or otherwise, the unpaid Obligations
     shall bear  interest from and after  maturity  until paid at an annual rate
     equal to 2% plus that rate of interest  payable  under Section 1. LOANS AND
     SECURITY INTEREST.

(d) Waiver by Lender.  Lender may permit Debtor to attempt to remedy any default
without  waiving  its rights and  remedies  hereunder,  and Lender may waive any
default  without  waiving  any other  subsequent  or prior  default  by  Debtor.
Furthermore,  delay on the part of  Lender in  exercising  any  right,  power or
privilege  hereunder or at law shall not operate as a waiver thereof,  nor shall
any single or partial exercise of such right,  power or privilege preclude other
exercise  thereof or the exercise of any other right,  power or  privilege.  For
purposes of this  subsection,  delays may include,  but shall not be limited to,
Lender's  failure to  immediately  enforce any warranty or covenant or to demand
immediate  repayment  of any  Obligation  in excess of the  ratios  set forth in
Section  3.  COLLATERAL-OBLIGATION   RATIO  above,  or  of  any  other  past-due
Obligation.  No Waiver or  suspension  shall be deemed to have  occurred  unless
Lender has expressly agreed in writing specifying such waiver or suspension.

                                 9. TERMINATION

(a) Term, Termination,  Repayment. Absent a termination by default under Section
8.  DEFAULT,  this  Agreement  may be  terminated at any time upon 90 days prior
written notice from Lender to Debtor. While this Agreement is in effect,  Debtor
agrees to borrow funds and pay, at minimum, to Lender the Minimum Monthly Charge
specified  in  Section  1. LOANS  AND  SECURITY INTEREST of this Agreement for 4
years from the date of this Agreement, and from year to year thereafter,  unless
Debtor  notifies  Lender  that it does not  intend to extend the  Agreement  for
another  year by giving  Lender  written  notice  at least 90 days  prior to the
expiration  of the then existing term of this  Agreement.  In any event,  Debtor
shall always have the  unchallengeable  right to fully prepay its Obligations to
Lender  prior  to the end of the  term of this  Agreement  or any  renewal  term
provided,  however,  that  Debtor  gives  Lender at least 90 days prior  written
notice of such prepayment and pays Lender,  in addition to all other Obligations
(including,  without limitation,  prepayment charges on fixed rate Obligations),
the Minimum Monthly Charge  specified in Section 1. LOANS AND SECURITY  INTEREST
above for each and every month from the month of prepayment until the expiration
of the then  existing  term of this  Agreement.  Said  payment of the  aggregate
Minimum  Monthly Charge shall be discounted to its "present value" at a discount
rate  equal to that  price  reported  in The Wall  Street  Journal as the "Asked
(Discount)"  price of 13-week  United States  Treasury Bills as sold in the most
current  Monday  auction  preceding  the date of prepayment by Debtor of all its
Obligations to Lender.

<PAGE>

(b)  Survival  of  Security  Interest,  Duties and  Warranties.  Notwithstanding
termination  of this  Agreement  by  either  Debtor or  Lender,  by  default  or
otherwise,  Lender's  security  interest and all Debtor's  duties,  liabilities,
representations and warranties under this Agreement shall survive termination of
this  Agreement and shall continue  while any  Obligation  remains  unsatisfied,
whether such Obligation  arises under this Agreement or the other Loan Documents
or whether  such  Obligation  is an advance  made by Lender to Debtor  following
either (1) a temporary zero credit balance in Debtor's Loan Account  Ledger,  or
(2) termination of this Agreement.

           10. DEBTOR'S INDEMNIFICATION; WAIVER; LIMITATION OF DAMAGES

(a)   Indemnification.   Except  for  damages  arising  from  Lender's   willful
misconduct,  Debtor  hereby  indemnifies  and agrees to defend  and hold  Lender
harmless  from any and all losses,  costs,  damages,  claims and expenses of any
kind suffered by or asserted  against Lender relating to claims by third parties
arising  out of the  financing  provided  by Lender to Debtor or  related to the
Collateral.  This  indemnification and hold harmless provision shall survive the
termination  of this  Agreement  and the  satisfaction  of the  Obligations  due
Lender.

(b) Notice of Claim; Waiver;  Limitation of Damages. In order to allow Lender to
mitigate any alleged  breach of this  Agreement by Lender or its other duties to
Debtor,  if any,  Debtor  agrees to give Lender  written  notice of any claim or
defense it has  against  Lender,  whether in tort or  contract,  relating to any
action or inaction by Lender under this Agreement,  or the transactions  related
thereto, or of any defense to payment of the Obligations for any reason.  Debtor
agrees to  provide  such  notice  to Lender  within  60 days  after  Debtor  has
knowledge of such action or inaction by Lender or has  knowledge of such defense
to payment.  The  requirement  of  providing  such  notice to Lender  represents
Debtor's  agreed-to  standard of performance.  If Debtor does not timely deliver
such  notice to  Lender,  Debtor  shall not  assert  and shall be deemed to have
waived any such claim or defense. Notwithstanding any claim that Debtor may have
against  Lender,  Lender  shall not be liable to Debtor  for  consequential  and
special damages arising therefrom.

                                11. MISCELLANEOUS

(a)  Relationship  to other  Documents.  The  warranties,  covenants  and  other
obligations  of Debtor (and the rights and remedies of Lender) that are outlined
in this Agreement and the other Loan  Documents are intended to supplement  each
other.  In the  event of any  inconsistencies  between  any of the terms in this
Agreement  and the other Loan  Documents,  all terms shall be construed so as to
give Lender the most favorable  rights set forth in the  conflicting  documents,
except  that if there is a direct  conflict  between  any  preprinted  terms and
specifically  negotiated  terms (whether  included in an addendum or otherwise),
the specifically negotiated terms will control.


<PAGE>

(b)  Notices.  Although  any  notice  required  to be given  hereunder  might be
accomplished by other means,  notice to Debtor shall always be deemed given when
placed in the United  States Mail,  with postage  prepaid,  or sent by overnight
delivery service, or sent by telex or facsimile; in each case to the address set
forth below or as amended.

(c)  Successors.  The  rights,  options,  powers  and  remedies  granted in this
Agreement  shall  extend  to  Lender  and to its  successors,  Participants  and
assigns,  shall be binding upon Debtor and its  successors and assigns and shall
be applicable and to all renewals, amendments and/or extensions hereof.

(d) Order of  Payment/Application  of Proceeds.  All payments received by Lender
under this  Agreement or to other Loan  Documents  with Debtor,  any  Guarantor,
third parties or from the Collateral,  may be applied against the Obligations in
any order and manner which Lender may choose.

(e) Applicable  Law and  Jurisdiction;  Interpretation  and  Modification.  This
Agreement and all other Loan Documents  shall be governed by and  interpreted in
accordance with the laws of the State of Wisconsin.  Invalidity of any provision
of this  Agreement  shall not affect the  validity of any other  provision.  The
provisions of the other Loan Documents  shall not be altered,  amended or waived
without the express  written consent of Lender (and Debtor,  when  appropriate).
DEBTOR  HEREBY  CONSENTS TO THE EXCLUSIVE  JURISDICTION  OF ANY STATE OR FEDERAL
COURT SITUATED IN MILWAUKEE COUNTY, WISCONSIN, AND WAIVES ANY OBJECTION BASED ON
FORUM  NON  CONVENIENS,   WITH  REGARD  TO  ANY  ACTIONS,  CLAIMS,  DISPUTES  OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE COLLATERAL, ANY OTHER LOAN DOCUMENT,
OR ANY TRANSACTIONS ARISING THEREFROM,  OR ENFORCEMENT AND/OR  INTERPRETATION OF
ANY OF THE  FOREGOING.  Nothing  herein  shall affect  Lender's  rights to serve
process  in any  manner  permitted  by law,  or  limit  Lender's  right to bring
proceedings  against Debtor in the competent courts of any other jurisdiction or
jurisdictions.  This  Agreement,  the other Loan  Documents  and any  amendments
hereto (regardless of when executed) will be deemed effective only upon Lender's
receipt  and  acceptance  of  the  executed   originals  thereof  in  Milwaukee,
Wisconsin.

(f) Waiver of Jury Trial.  DEBTOR AND LENDER HEREBY JOINTLY AND SEVERALLY  WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING  RELATING TO THIS
AGREEMENT, THE LOAN DOCUMENTS, THE OBLIGATIONS THEREUNDER, THE COLLATERAL OR ANY
TRANSACTION  ARISING  THEREFROM  OR  CONNECTED  THERETO.  DEBTOR AND LENDER EACH
REPRESENTS TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY
GIVEN.

                              12. ADDITIONAL TERMS


                         See Exhibit A attached hereto.




<PAGE>

Signed in Milwaukee, Wisconsin, on September 24, 1998.


LENDER:                                    DEBTOR:

FIRSTAR FINANCIAL SERVICES,                FEATHERLITE, INC.
a division of Firstar Bank Milwaukee, N.A.



By: /s/ John H. Sturm                      By: /s/ Conrad D. Clement
Title: Vice President                      Title: President

777 East Wisconsin Avenue                  Address:
Milwaukee, Wisconsin  53202                  Hwy. 63 & 9
                                             Cresco, IA  52136
     




FIRSTAR





<PAGE>

                                   EXHIBIT A
                                     TO THE
                     REVOLVING LOAN AND SECURITY AGREEMENT
                                 BY AND BETWEEN
                         FIRSTAR BANK MILWAUKEE, N.A.,
                    THROUGH ITS FINANCIAL SERVICES DIVISION,
                                      AND
                               FEATHERLITE, INC.
                          DATED: _____________________



1.   The  following are subsections (a), (b) and  (c) of Section 3.  COLLATERAL-
     OBLIGATION RATIO:

     (a)    up  to  85%  of  the  amount  owing  on  Qualified  Accounts for the
            Featherlite  Manufacturing  Division  (minus  payments  on Qualified
            Accounts  which  are  in the  process of collection by Lender); plus

     (b)    up to the lesser of $15,000,000.00 or those percentages of Qualified
            Inventory,  valued  at  cost or wholesale market value, whichever is
            lower as reflected below:

     Type of           Featherlite Manufacturing        Vantare         Vogue 
Qualified Inventory            Division                 Division       Division

Raw Materials                   60%                       50%            50%

Work-In-Process                 20%                       15%            20%
Sub Assembly

Finished Goods                  60%                        0              0

            The  inventory  advances  of  all  Work-In-Process should not exceed
            $4,000,000.00; plus

     (c)    Up  to  $3,000,000.00,  which  amount may be subject to modification
            as   determined  by  Lender  on  or  about  each anniversary date of
            this Agreement.

2.   Notwithstanding the limitations upon obtaining additional secured financing
     provided  in this  Agreement,  Debtor  may  obtain real estate and fixtures
     financing in  Florida from the Huntington National Bank in an amount not to
     exceed $6,000,000.00.

3.   In addition to the financing contemplated by this Agreement and the related
     installment  term  obligations,  Lender will provide Debtor a $1,000,000.00
     term facility for future construction for the building addition to existing
     real estate of the Debtor.  Such financing, to be provided upon  completion
     of  the  building  addition,  will  be  subject to satisfaction of Lender's
     normal   requirements   for   construction  financing,  including,  without
     limitation,  a completed facility free and clear of all liens, encumbrances
     and encroachments.

<PAGE>

4.   Section 12., ADDITIONAL TERMS.:

     (a)    Authorization  to  Accept  Electronic  Transmissions.  In  the event
            Debtor   or   Lender   transmits    any   information,   directions,
            authorizations  and/or  documents  to  each   other  via  electronic
            transmission,  including via facsimile, modem, computer and the like
            ("Electronic Communications"), Debtor and Lender agree that each may
            rely  and accept  such Electronic  Communications in lieu of written
            communication  and  without  any further written confimation, unless
            requested   in   writing.    Lender   may  rely  on  any  Electronic
            Communications transmitted, regardless of whether the transmitter of
            such  information  is  unauthorized to do so on behalf of Debtor and
            regardless  of  any mistake, omission or transmission error.  Due to
            the  potentially  large amount of Electronic Communications received
            and  transmitted  by  Lender,  and unless caused by Lender's willful
            misconduct, Debtor agrees not to hold Lender liable for any error in
            the  transmission  or contents of any Electronic Communications, and
            Lender  may  retroactively  correct  or  adjust such errors.  Debtor
            indemnifies  Lender  from  any  costs,  liability, suits, actions or
            other  claims  brought  against  Lender  by  others  as  a result of
            Lender's  reliance  on  such electronically transmitted information.
            Lender  may  rely  on  any  Electronic  Communications regardless of
            whether other resolutions or documents provide otherwise, or require
            authorizations  from  persons  other  than  the  transmitter of such
            Electronic Communications.

     (b)    Except  as  limited  by  the  maximum  limit  of the Line of Credit,
            Debtor shall use its best efforts to maintain a minimum availability
            of $1,200,000.00 at all times, which amount Debtor may borrow unless
            Lender,  in  its  good  faith  business  judgment,  determines  that
            Debtor's  current  financial  performance or changes in its business
            do not support such additional borrowing.

Accepted by Initialing:         CDC
                                JHS